Cotton's Week March 23, 2001

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Budget Resolution Authorizes
Contingency Fund Spending

House Budget Committee approved Republican-sponsored '02 budget resolution on party line vote. According to Agriculture Committee document, "budget will allow Congress to make permanent changes to farm policy and to meet the extraordinary needs that farmers are facing in the current crop year."

During day-long debate, panel rejected several amendments offered by Democrats, including proposals to reduce Republican tax cut in favor of other priorities such as additional debt reduction and domestic spending priorities, including agriculture.

Resolution as approved provides for up to $1.6 trillion in tax cuts that Chairman Nussle (R-IA) identified as: marginal rate reduction, repealing estate tax, providing marriage penalty relief and doubling current $500-per-child tax credit. Resolution calls for $1.9 trillion budget, which generally tracks President Bush's proposals, including holding growth in domestic discretionary spending to about 4% per year.

For agriculture, resolution specifically provides $19.1 billion in budget authority for mandatory discretionary spending in FY02 as compared to $20.6 billion last year (excluding emergency spending). For FY03 and beyond, resolution provides for mandatory spending to gradually decline. However, resolution authorizes Budget Committee chairman to adjust allocation if conditions are met.

Resolution authorizes Chairman Nussle to increase spending levels for agriculture and defense later in year by tapping $517 billion contingency fund. House resolution would allow Budget Committee chairman to allocate portion of '01 surplus for short-term economic relief if deemed necessary by Congress. Budget chairman may also allocate portion of contingency fund for '02 and later years to agriculture if Agriculture Committee reports legislation modifying commodity programs by July 11. According to committee explanation, while resolution does not provide specific level of funding for possible emergency relief due to low prices and income, authority would allow chairman to adjust allocation for agriculture if conditions warrant later in year.

House is expected to begin debate on resolution week of March 26. Meanwhile, indications are that Senate Budget Committee will not hold committee mark-up as no single plan has sufficient votes on evenly divided panel. Therefore, as provided by Senate rules, full Senate will take up resolution drafted by Chairman Domenici (R-NM) sometime week of April 2.

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Budget Resolution Reviewed with Ag Groups
by Combest, Nussle

Following passage of budget resolution by House Budget Committee, House Agriculture Committee Chairman Combest (R-TX), and Budget Committee Chairman Nussle met with leaders of commodity and general farm organizations to discuss implications of resolution for agriculture.

Chairman Combest said he "could not be happier" about prospects for writing good farm legislation. He said Chairman Nussle had been most cooperative, and that President Bush continues to point to need to resolve problems confronting American agriculture. Chairman Combest said, "We have an opportunity to write a farm program that reflects good policy as opposed to one that is focused on a budget number." He pointed to crop insurance reform as recent legislation that had been developed under this concept.

Chairman Nussle used chart to illustrate how Budget Committee allocated projected $5.6 trillion surplus. He specifically called attention to $517 billion earmarked for defense and agriculture spending for 10-year period.

Rep. Combest said need to report bill out of Agriculture Committee by July 11 did not significantly alter timeline he has in mind. His goal is to complete work on commodity titles during April and deal with other titles at later date.

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Export Sales Almost 209,000 Bales for Latest Week

Net export sales for week ending March 15 were almost 209,000 bales (480-lb.), lower than previous week's marketing-year high, but higher than 4-week average, raising total '00-01 sales to about 6.7 million. Total sales at same point in '99-00 marketing year were about 6.84 million bales. Shipments for week were about 177,000 bales, bringing total exports to date to 3.66 million bales.

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House Agriculture Committee Policy Hearings Continue

US Rice Producers and US Rice Producers' Group, represented by Nolen Canon, Tunica, MS, farmer, presented testimony as House Ag Committee continued series of farm policy hearings.

Maintaining planting flexibility, continuing marketing loan program and extending authority to use certificates to redeem loans were among key recommendations presented to Committee Chairman Combest (R-TX) and other members of committee. Rice producers recommended that loan floor be maintained at not less than $6.50 per hundredweight, with authority provided Ag Secretary to raise loan rate above base level and support increase if Congress chooses to rebalance rates to align with soybeans.

Group opposed mandatory acreage reduction requirements. Testimony recommended continuing fixed, decoupled payments but with rules adjustment to better ensure payments go to those who share in risk of producing crop. Group also supported counter-cyclical income support payment triggered when national gross revenue for crop is less than base gross revenue established for that crop by averaging annual gross revenue for '96-00. Rice producers also recommended that no payment limitation be applied to these payments.

Hearings continue week of March 26, when National Corn Growers and American Soybean associations are scheduled to present testimony.

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Southern Cotton Growers Delegation Visits DC

Delegation representing Southeast cotton-growing region, led by Southern Cotton Growers President Roy Baxley of South Carolina, visited members of respective state congressional delegations to emphasize need for emergency agriculture assistance for '01. Each grower delegation also expressed support for NCC farm policy position and stressed importance of key cotton appropriations needs, including adequate funding for boll weevil eradication and Market Access Program to help fund Cotton Council International's COTTON USA program.

Growers reported favorable response from delegation as to recognition of problems and willingness to respond. During visit, growers heard presentations from Keith Collins, chief economist for USDA, and Steve Johnson, acting Assistant Administrator for EPA. Collins discussed farm bill prospects and status of ag economy. Johnson reviewed EPA staffing transition status, updated status of cotton pesticide product registration and Section 18 issues and discussed status of biotech products, including re-registration of Bollgard.

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Whitman Agrees to FQPA Deadlines

Natural Resources Defense Council (NRDC) and other environmental groups filed case against EPA in '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.

On last full day of Clinton Administration, EPA agreed to settlement of this case that would be submitted to court for entry as court order. Specifically, agreements would establish deadlines under FQPA for assessments of 11 individual pesticides and for cumulative assessments. Also, EPA 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 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.

It was hoped among ag community that, under Bush Administration, settlement would be re-negotiated. There is particular concern about deadlines for completing cumulative risk assessments. EPA is still trying to determine how to carry out adequate assessments for components of aggregate exposure like drinking water and non-occupational exposure. There are concerns that agency is far from being able to sufficiently carry out cumulative risk assessments and that deadlines will force EPA to make decisions based on inadequate data and methodologies that usually result in gross over-estimation of risk.

Legal counsel advised EPA Administrator Whitman that agency had limited flexibility to change or withdraw from consent decree. On March 19, EPA submitted amended consent decree to federal District Court in California. Amended agreement does not deal with deadlines but outlines steps to pesticide program to make its regulatory processes more participatory and transparent.

Whitman directed pesticide program to seek input from all interested parties, including Committee to Advise on Reassessment and Transition, on ways to optimize public involvement in FQPA implementation. Whitman announced that Deputy Secretary of USDA and Deputy Administrator of EPA will serve as co-chairmen of committee during this process. Directive also requires that EPA solicit advice from its Scientific Advisory Panel on critical element of conducting cumulative risk assessments. Judge in case still must approve agreement.

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Task Force Reviews Electronic Document Progress

NCC task force on electronic documents and representatives from USDA met in Memphis to discuss issues involving new US Warehouse Act and development of new regulations governing electronic warehouse receipts and other electronic documents involved in commodity transactions.

USDA officials outlined planned schedule for development of proposed regulations implementing new US Warehouse Act, establishing deadline of Aug. 1 to have final rules in place. Officials indicated department was intent on developing rules with sufficient flexibility to enable electronic commerce to continue to expand within industry. USDA officials have been meeting with cotton, grain and other interests to discuss proposals and gather information.

Group also discussed progress by USDA in developing procedure to allow centralized electronic loan redemptions, even in cases where producers have signed CCC-605, authorizing another party to redeem loan cotton. USDA is developing temporary procedure for '01 crop that may involve individuals authorizing agency to accept facsimile signatures on form CCC-605. Agency hopes to develop fully electronic method to facilitate loan redemptions in near future.

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President Nominates 3 for Top USDA Positions

J.B. Penn, senior vice president at Sparks Companies, Memphis, TN, was one of 3 persons nominated by President Bush for key USDA positions.

Penn, who served as Deputy Administrator for Economics in Carter Administration and was president of Economic Perspectives, Inc., before joining Sparks, was nominated to be Undersecretary for Farm and Foreign Agricultural Services. Penn holds Ph.D. in economics.

Tom Dorr, Iowa farmer, was nominated to serve as Undersecretary for Rural Development. He is president and CEO of agribusiness holding company, including corn and soybean farm, grain elevator and warehouse and swine finishing companies.

Eric Bost was nominated to serve as Undersecretary for Food, Nutrition and Consumer Services. He is chief executive of Texas Department of Human Services.

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Effective March 23-29, '01

Adjusted World Price, SLM 1 1/16         39.64 cents*
Coarse Count Adjustment                    0.00 cents
Current Step 2 Certificate Value           2.06 cents
Marketing Loan Gain Value                 12.28 cents
*No Adjustment Made Under Step 1

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Five-Day Average

Current 3135 c.i.f. Northern Europe       53.49 cents
Forward 3135 c.i.f. Northern Europe          No Quote
Coarse Count c.i.f. Northern Europe       51.07 cents
Current US c.i.f. Northern Europe         54.00 cents
Forward US c.i.f. Northern Europe            No Quote

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