Cotton's Week February 23, 2001

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Efforts to Secure Immediate Assistance Reviewed in Texas Meetings

In media briefing and in presentations at Farmers Cooperative Compress and Plains Cotton Cooperative Assn. in Lubbock, TX, NCC staff and officers of Plains Cotton Growers Assn. (PCGA) reviewed industry efforts in Congress to bring immediate financial assistance to growers while addressing long-term farm policy issues.

"Specifically, the NCC stated in its testimony to the House Agriculture Committee that growers need immediate relief equal to that received in '99 and '00," said NCC Vice President for Washington Operations John Maguire. "That would be in the form of Agriculture Market Transition Act and marketing loss payments equaling about 15 cents/lb. with payment limits mitigated." That level of funding is "critically important," Maguire said, in financing growers for the coming season.

Lubbock banker Curtis Griffith said there has been "enormous deterioration" in financial condition of many of his bank's ag customers. He said bank officials are attempting to restructure as many loans as possible. "Immediate assistance will give West Texas farmers some cushion and give all of us time to work on long-term policy for agriculture."

PCGA President Ronnie Hopper, Petersburg, said, "We do not have the luxury to look long-term. West Texas farmers are in severe economic distress, and only by regional organizations such as ours working at the national level with the NCC and all segments of the industry can we hope to secure the needed assistance."

Mark Williams of Farwell, vice president of PCGA and NCC Board member, reiterated need for short-term help. "We're running out of time and need help now," Williams said, noting also that delivery of long-term assistance could be difficult because of World Trade Organization and budget restrictions.

Dr. Mark Lange, NCC vice president for policy analysis and program coordination, reviewed key points of organization's proposals made to House Ag Committee. NCC called for multi-dimensional delivery of assistance that would support growers at level not less than they received in '99 and '00, which was about 80 cents/lb.

"Our approach is driven by the need to get as much funding as possible for growers, to be as cost effective as possible and be able to comply with US obligations under the Uruguay Round of WTO regarding spending ceilings," Lange said.

NCC called for elimination of payment limits or at minimum provisions for reasonable separate limits for each category of benefits.

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Cooperation among Farm Groups Critical, Veneman Says

Ag Secretary Veneman, in first public speech since being sworn-in Jan. 20, told audience attending '01 USDA Outlook Conference that cooperation among farm groups in developing next farm bill will be critically important. Secretary complimented House Ag Committee Chairman Combest (R-TX) for conducting series of hearings on policy recommendations from commodity organizations (NCC participated in initial hearing Feb. 15).

In past, farm groups have sometimes competed with each other for farm program benefits, she said. "House Agriculture Committee Chairman Larry Combest has taken an important step by establishing a framework that encourages commodity groups to work together to develop farm bill proposals."

Veneman said " step could be a process that brings together commodity groups, general farm groups, processors, wholesalers, retailers and consumers to find the best approach for all to succeed in the new consumer-driven food and fiber system." Secretary Veneman described farm economy as "a story of optimism tempered by ongoing weaknesses" and said "farm safety-net should be consistent with a market-based farm economy."

Secretary also pledged that Administration would vigorously protect farmers against unfair competition and non-competitive markets. She repeated Bush Administration's plans to push for fast-track negotiating authority, seek new round of global trade talks and to lower trade barriers between US and South America.

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Total '00-01 Export Sales Approach 5.9 Million Bales

Net export sales for week ending Feb. 15 were almost 180,000 bales (480-lb.), raising total '00-01 sales to 5.89 million. Total commitments at comparable point in '99-00 marketing year were 6.53 million bales. Shipments for week were about 118,000 bales, bringing year-to-date exports to 2.98 million, up slightly from 2.41 million bales for comparable week in '99-00 marketing year.

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USDA Projects '01-02 US Crop of 19 Million Bales

At its annual Agricultural Outlook forum, USDA released revised baseline projections for upland cotton and other commodities through '10. For '01-02, USDA projects upland cotton plantings of about 15.75 million acres, with ELS planted area pegged at 250,000 acres. Harvested area is forecast to be 14.6 million acres, while yield assumption is 625 pounds for total '01-02 production of 19 million bales.

US mill use is projected to decline 200,000 bales to 9.5 million in '01-02, while exports are forecast to rise to 8.7 million bales, increase of 1.7 million from latest estimate for '00-01. Ending stocks would correspondingly increase by 800,000 bales to 5.3 million in '01-02, highest since 7.09 million in '88-89 marketing year.

Next Commerce Department mill use estimate will be released Feb. 28. USDA's early season planting intentions survey will be released March 31.

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Rural America Prosperity Act Re-Introduced

Senate Ag Committee Chairman Lugar (R-IN) and Rep. Boehner (R-OH), vice-chair of House Ag Committee, re-introduced Rural America Prosperity Act (S. 333, HR 627). According to statements issued during introduction, legislation is designed to fulfill promises made in '96 farm legislation to ease tax and regulatory burden, provide more risk management options and work to remove trade barriers.

Provisions include: call for fast-track negotiating authority; immediate full deduction of health insurance premiums for farmers and self employed; $500,000 exclusion from capital gain on sale of farm; assurance that farmers are not disqualified from using income averaging due to alternative minimum tax calculation; phase-out of estate and gift tax over 10 years; authority for establishment of Farm and Ranch Risk Management (FARRM) accounts to defer taxes on up to 20% of annual taxable net income; requirement that GAO study cost of compliance with federal regulations; and exemption of agriculture commodities, livestock and value-added products from unilateral economic sanctions. Sen. Roberts (R-KS) is co-sponsor of legislation that is similar to legislation introduced in 106th Congress.

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Grassley, Baucus Present Tax Relief Bill

Tax Empowerment and Relief for Farmers and Fisherman Act, S. 312, was introduced by Senate Finance Committee Chairman Grassley (R-IA) and ranking Democrat Baucus (D-MT). Original co-sponsors are Brownback (R-KS), Burns (R-MT), Conrad (D-ND), Craig (R-ID), Enzi (R-WY), Lincoln (D-AR), Lugar (R-IN), Nelson (D-DE) and Roberts (R-KS).

Provisions include: authorization of FARRM accounts; exemption of farm cash rents from 15% self-employment tax; CRP rental payments to continue to be treated as rental income not subject to self-employment tax; authority for states to issue bonds to expand low interest loans to beginning farmers; tax deductibility for food donations to hunger relief organizations; assurance farmers will not be disqualified from using income averaging due to Alternative Minimum Tax calculation and cooperative tax initiatives covering animal value-added practices; and use of ethanol production and preferred stock to raise equity capital.

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USDA Chief of Staff Named

Dale Moore, who most recently served as executive director for legislative affairs at National Cattlemen's Beef Association, has been named USDA Chief of Staff. Moore also served as legislative director for House Agriculture Committee during '96 farm bill debate. Prior to joining Agriculture Committee, he was agriculture assistant to then Rep. Roberts (R-KS).

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EPA Agrees to Settle on Environmental Lawsuit

Natural Resources Defense Council (NRDC) and other environmental groups filed case against EPA in August '99 asking court to put EPA on enforceable schedule for quicker review of "higher risk" pesticides under Food Quality Protection Act (FQPA) and to implement endocrine screening program.

EPA agreed in January to consent decree that would be submitted to court for entry as court order. Endocrine screening program is part of settlement agreement that would not subject EPA to potential judicial enforcement. Specifically, agreements would establish deadlines under FQPA for assessments of 11 individual pesticides and for cumulative assessments. Endocrine disruption is not expected to be issue for agricultural pesticides. EPA and NRDC have asked US District Court for Northern District of California to approve agreements by Feb. 23.

EPA has agreed to issue preliminary risk assessment by Dec. 1 for cumulative effects of all 39 organophosphate pesticides. Within 240 days, or by Aug. 3, '02, EPA must issue a revised cumulative risk assessment. Agreement, however, would excuse EPA from compliance on cumulative risk if Scientific Advisory Panel reports that agency's methodologies for risk assessment are "significantly flawed." EPA would then have to report in writing to NRDC and other groups to provide "reasonable schedule" of up to one year for completion.

One provision of pesticide schedule would allow Congress to replace deadlines with new ones. Other Congressional action from Senate or House Agriculture Committee or House Commerce Committee could overturn agreements.

EPA also agreed to pay environmental groups $40,000 in attorney's fees and costs.

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Chinese Government Warns Growers
to Limit Cotton Plantings

China's Ministry of Agriculture warned growers not to expand cotton area beyond 10.4 million acres for '01-02 crop, up 824,000 acres from '00-01. Rapid recovery in Chinese mill use has caused domestic cotton prices to strengthen significantly, prompting growers to consider increases in cotton acreage.

Latest data available to NCC indicates Chinese growers are looking at price of approximately 68 cents/lb. Chinese ministry forecasts '01-02 production of about 19.5 million bales based on cotton plantings of 10.4 million acres.

In related news, report released by USDA at its annual Agricultural Outlook forum indicated officials expect higher Chinese cotton acreage and production in '01-02, though USDA did not provide any actual forecasts. Expectation is based on increased Chinese plantings of Bt cotton and switch of acreage from lower value grain crops (e.g., wheat) into cotton. Separately, USDA also announced expectation of up to 1 million-bale increase in Indian production for '01-02 because of rising cotton prices and weakening grain prices. Cotton production in India for '00-01 is currently estimated at 11.5 million bales.

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More Science Called for in TMDL Issue

In January, expert panel of National Research Council (NRC) heard interested parties discuss aspects of Total Maximum Daily Load (TMDL) program. Industry critics told panel that more scientifically valid methods for determining impairment of waterbody and designing TMDL are needed.

NRC will hold another round of discussion before sending its assessments of scientific basis of TMDL program to Congress in June.

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Effective Feb. 23-March 1, '00

Adj. World Price, SLM 11/16........46.07 cents*
Coarse Count Adjustment............0.00 cents
Current Step 2 Certificate Value...4.83 cents
Marketing Loan Gain Value..........5.85 cents
*No Adjustment Made Under Step I

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Five-Day Average

Current 3135 c.i.f. N. Eur........59.92 cents
Forward 3135 c.i.f. N. Eur...........No Quote
Coarse Count c.i.f. N. Eur........56.72 cents
Current US c.i.f. N. Eur..........66.00 cents
Forward US c.i.f. N. Eur.............No Quote

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