New rules for USDA cotton program
Nov 3, 2008 10:21 AM,
By Forrest Laws
Farm Press Editorial Staff
The Commodity Credit Corp. has approved new regulations that could make it easier for cotton producers to redeem marketing loans on their 2007 crop and possibly return a little extra money when they do.
The new regulations were needed so that county Farm Service Agency offices could begin implementing the cotton program provisions of the Food, Conservation and Energy Act of 2008, which Congress passed last June.
National Cotton Council leaders, who had been asking USDA to release the regulations “soon,” said the new rules will incorporate adjustments to the calculation of the adjusted world price (AWP) for cotton, which are “designed to ensure U.S. cotton is available at competitive prices in domestic and international markets.”
NCC Chairman Larry McClendon welcomed USDA’s announcement as good news for producers, warehouses, manufacturers and merchandisers who are struggling to compete in a difficult and volatile market.
The new farm bill requires USDA to make storage credits available whenever the AWP is below the loan. However, to reduce program costs, the new law also required that the maximum storage credit be reduced by 10 percent for the 2008-11 crops and 20 percent beginning with the 2012 crop.
The USDA announcement clarifies that the reduced storage rate will not apply to redemptions of 2007 crop cotton. Beginning with the 2008 crop, the reductions will apply to the maximum rate established by USDA in August 2006 and not to individual warehouse rates which significantly reduces any adverse financial impact of cotton warehouses.
“This will ensure that 2007 crop loans maturing at the end of October can be redeemed at a competitive price and will return up to an additional $8 per bale to producers,” the NCC said in a press release.
The adjustments in the calculation of the weekly AWP were made to enhance competitiveness and the modest projected costs were totally offset by changes in other provisions of the cotton program, the Council said.
The regulations govern several programs for the 2008 through 2012 crops of upland and extra-long staple cotton, specifically marketing assistance loans and loan deficiency payments; recourse seed cotton loans; and the ELS cotton competitiveness payments. The regulations also provide for economic assistance payments to domestic cotton users for upland cotton bales used starting Aug. 1.
Starting with the 2008 crop, loan rate adjustments for location are eliminated for upland cotton, and other minor rate adjustments for leaf and micronaire are incorporated. The regulations also revise the calculation of the AWP transportation adjustment, and reduce by 10-percent the maximum rates used for calculating any storage payments for the 2008 through 2011 crops.
This reduction of storage-payment rates does not apply to repayments of any outstanding 2007 crop loan obligations. A 20-percent reduction from 2006 rates in maximum storage-payment rates will be effective for redemptions of the 2012 crop.
The 2008 farm bill authorizes the reduction of the upland cotton AWP for any United States premium factor for cotton qualities higher than Middling 1 3/32-inch. This change allows for an adjustment for periods when loan premiums exceed market premiums. The CCC will announce and implement this weekly adjustment, termed the “fine count adjustment” (FCA), for loan repayments processed starting Friday, Oct. 31. The FCA will be calculated and announced separately for each crop of upland cotton.
Starting with the upland cotton AWP that became effective Friday, Oct. 31, CCC will adjust the price by the average cost to market upland cotton to the Far East, including average transportation costs as determined from survey results. This adjustment will replace use of a 52-week rolling average calculation method. The new regulations provide that this transportation adjustment and the FCA also apply to loan redemption calculations of outstanding 2007-crop upland cotton.
Council leaders said special thanks are due to Sen. Saxby Chambliss, R-Ga., for his leadership in drafting the legislation, shepherding it through the legislative process and working with the Bush administration to ensure that the cotton program was implemented in accordance with Congressional intent.
“Thanks to Senator Chambliss’ tireless efforts throughout the process, we have a program that provides the industry an opportunity to be competitive and continue to make a major contribution to Georgia’s economy,” said Chuck Coley, chairman of the American Cotton Producers. “Senator Chambliss’ advocacy for a regulation that treats Georgia’s growers, warehouses, manufacturers and merchandisers in a fair and equitable manner is critical to a robust and competitive cotton industry.”
“The efforts of Senator Chambliss were instrumental in the eventual publication of the rules. In addition, the cotton industry recognizes the key role played by USDA Undersecretary Mark Keenum in the development of the regulation,” noted McClendon.
For further information, contact Gene Rosera, Price Support Division, Farm Service Agency, telephone: (202) 720-8481 or fax: (202) 690-3307; e-mail: gene.rosera@wdc.usda.gov.
email: flaws@farmpress.com
