Cotton's Week: March 19, 2004

During the final mark-up session, the House Budget Committee completed work on the FY05 Budget Resolution,rejecting an amendment offered by Rep. Kind (D-WI) that would have reduced payment limits in a similar manner proposed by Sen. Grassley (R-IA) during the Senate Budget Committee mark-up. Rep. Hulshof (R-MO) and others spoke in opposition to Kind’s amendment.

The Budget Resolution, approved on a 24-19 party-line vote, would authorize $158 billion in tax cuts over 5 years. The bill would require spending reductions to offset any future increases in mandatory spending, but would not apply so-called PAYGO rules to the tax reductions. The House resolution caps discretionary spending at $819 billion.

When the House takes-up the Resolution, Democrats are expected to offer several alternative plans and to push for a pay-as-you-go provision which would require offsets for tax legislation, as well as spending programs, similar to the way the original PAYGO provision operated from ’90 until it expired in September ’02.

The IRS is reminding producers how to report market loan gains when using CCC certificates. The IRS news release can be accessed by going to www.cotton.org/gov. The release notes that producers who pledged all or part of their production to secure a CCC loan can elect to treat loan proceeds as income in the year received and “obtain a basis in the commodity for the amount reported as income.” IRS approval is not required, but all CCC loans in that year and subsequent years must be reported in the same manner until a change in accounting method is filed with the IRS.

A producer who makes the special election should report a market loan gain as a payment on line 6a of Schedule F, but not as taxable amount on line 6b. The report of a market loan gain is the same if certificates are utilized. If the farmer did not make the special election, then the gain is reported as a payment on line 6a and as a taxable amount on line 6b. This is also the case if certificates are used and even if a Form CCC-1099-G is not issued. IRS noted that Publication 225, “Farmer’s Tax Guide,” has more information.

The NCC is launching a survey on March 24 to examine the usage and handling of bale (rack) samples to evaluate the costs/benefits of current practices and the effect of those practices on US cotton’s timely marketing and flow. Racking samples involves storing a sample of each bale entering a warehouse until that sample is requested by a buyer or the bale is shipped. The survey, developed by the NCC’s Rack Sample Study Committee, also is aimed at addressing a concern that traditional sample handling practices are no longer cost effective due to changes within the cotton marketing system.

A letter from NCC Chairman Woody Anderson will be sent to a number of warehouses, merchants and mills asking them to complete the web-based survey by April 30. Findings will be available on the NCC’s web site and at the NCC directors’ mid-year meeting in August.

Net export sales for the week ending March 11 were 480,900 bales (480-lb.), resulting in total ’03-04 sales of more than 12.3 million. Total sales at the same point in the ’02-03 marketing year were about 10.3 million bales. Total new crop (’04-05) sales are 556,700 bales (480-lb.). Shipments for the week were 338,800 bales, bringing total exports to date to 7.0 million bales, ahead of the 5.9 million bales at the comparable point in the ’02-03 marketing year.

The US and Morocco announced that a Free Trade Agreement (FTA) was reached. A fact sheet released by the Office of the US Trade Representative (USTR) stated: “Textiles and apparel trade will be duty-free if imports meet the Agreement’s rule of origin, promoting new opportunities for US and Moroccan fiber, yarn, fabric and apparel manufacturing. The Agreement requires qualifying apparel to contain either US or Moroccan yarn and fabric, and contains a temporary 30 million square meter allowance for Moroccan apparel containing 3^rd country content (i.e., textile inputs not from the US or Morocco).”

This 30 million square meter allowance for 3^rd country materials is about twice the size of current apparel trade between the US and Morocco and is yet another disappointment for US textile and fiber interests.

An agreement also has been reached to integrate the Dominican Republic into the proposed US-Central American Free Trade Agreement (CAFTA). Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua already are part of the proposed CAFTA, which faces a difficult battle for approval in Congress later this year or in ’05. 

The agreement’s text has not been released, but information released by the USTR’s office says the agreement includes the same basic yarn-forward rule of origin as was contained in the main CAFTA agreement. The agreement also permits the Dominican Republic to participate in the CAFTA cumulation provisions, which will allow woven apparel from the Dominican Republic to contain a capped amount of Mexican and Canadian inputs.

Texas Agriculture Commissioner Susan Combs declared 7 West Texas boll weevil eradication zones totaling about 4.4 million acres as suppressed. Suppressed status means fewer than 0.025 boll weevils were found per trap per week in those zones during the growing season. Zones included are Northwest Plains, Northern High Plains, Southern High Plains, Northern Rolling Plains, Western High Plains, El Paso/Trans Pecos and Permian Basin. The Southern Rolling Plains and Rolling Plains Central have been declared functionally eradicated. Eradicated and suppressed zones in Texas cover about 5 million acres, according to Texas Boll Weevil Eradication Foundation Program Director Dr. Charles Allen.

The suppressed declaration also lifts the quarantine in those zones and allows producers to freely move cotton or harvesting equipment within and among suppressed zones. Equipment, however, cannot be moved from a non-suppressed zone into a suppressed zone without being cleaned.

The application period for the ’04-05 Cotton Leadership Class is open and NCC is accepting applications from qualified US industry members through July 1. Those interested in applying can visit the Cotton Leadership Program’s web site at http://leadership.cotton.org to review the program curriculum, eligibility requirements and download the application. The site also includes a contact form which allows users to submit questions, request information and schedule a personal visit with local program alumni.

In a letter to member delegates, advisors and cotton interest organizations, NCC Chairman Anderson encouraged the recruitment of applicants to the program, which seeks to identify potential industry leaders and provide them developmental training. During 5 sessions of activity across the Cotton Belt, class participants visit with industry leaders and observe production, processing and research. They also meet with lawmakers and government agency representatives in Washington, DC, and attend the NCC’s annual meeting and its mid-year board of directors meeting. The program, now in its 21st year, is supported by a grant to The Cotton Foundation from DuPont Crop Protection.

The new class, which will be comprised of 4 producers and a participant from each of the other 6 industry segments, will be announced in August by the NCC’s Cotton Leadership Development Committee.

Committee Chairman Jimmy Sanford said, “Sound leadership will be crucial for helping move US cotton forward in a rapidly evolving global marketplace. The leadership program is an ideal training ground for those men and women who would like to embrace the challenge of guiding this outstanding industry.”

Sen. Chambliss (R-GA), chairman of the Senate Judiciary Subcommittee on Immigration, Border Security and Citizenship, introduced legislation to reform the H2-A temporary visa process. The bill would simplify agriculture’s obtaining H2-A visas by streamlining the application process, providing a prevailing wage rate and ensuring US workers won't be displaced while meeting agriculture's needs.

Rep. Goodlatte (R-VA), chairman of the House Committee on Agriculture, introduced similar legislation earlier this year. Both bills would replace the “Adverse Effect Wage Rate” with a prevailing wage and streamline the H2-A process. These bills would not allow for an adjustment of status, but would allow a 1-time waiver for workers to apply for the H2-A program from their home country.

Other immigration proposals include the AgJobs bill in both the House and Senate and broader immigration reform bills. NCC continues to work with coalitions and individual Congressional members to help craft a workable solution.

Agriculture Secretary Ann M. Veneman announced that $84 million will be available to protect farm and ranch land through USDA's Farm and Ranch Lands Protection Program (FRPP). The program provides matching funds to help purchase development rights to keep productive farm and ranchland in agricultural uses. Working through existing programs, USDA partners with state, tribal or local governments and non-governmental organizations to acquire conservation easements or other interests in land from landowners. USDA provides up to 50% of the fair market easement value.

Depending on funding availability, proposals must be submitted by the eligible entities to the appropriate Natural Resources Conservation Service office during the application window.

An electronic Customer Statement, now available as part of USDA's electronic government (eGovernment) initiative, allows USDA customers to view: 1) participation and application status in various conservation programs, 2) payments associated with commodity and conservation programs, 3) information on farm loans and 4) conservation plan and land unit information.

Agriculture Secretary Veneman said the statement will be a focal point for providing agricultural producers with access to their USDA information and facilitating online business with USDA. The agency also will launch 'MyUSDA.gov' in August to provide a customized version of the USDA homepage for individual users based on their unique needs.