Starting today, the USDA's Commodity Credit Corp. will calculate the adjusted world price for cotton in accordance with the new 2008 Farm Bill using regulations completed Thursday by the U.S. Department of Agriculture.
The changes will mean dollars for producers, accordign to the National Cotton Council.
"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 National Cotton Council says in a new release applauding the regulations. "Beginning [today], any loan deficiency payments, available to producers who choose to forego the loan, will be based on the AWP as calculated in accordance with the new law."
In addition to the AWP, these 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 a new program of economic assistance payments to domestic cotton users for upland cotton bales used retroactive to Aug. 1, 2008.
These regulations implement new statutory requirements for the ongoing MAL and LDP programs. 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 new law also mandates that USDA makes storage credits available whenever the AWP is below the loan. However, to reduce program costs, the new law also requires that the maximum storage credit be reduced by 10% for the 2008-11 crops and 20% 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.
The adjustments in the calculation of the weekly AWP were made to enhance competitiveness and the NCC points out that "the modest projected costs were totally offset by changes in other provisions of the cotton program".
Further, 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", for loan repayments processed starting today. The FCA will be calculated and announced separately for each crop of upland cotton.
Starting with the upland cotton AWP that becomes effective today, 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.
NCC Chairman Larry McClendon says USDA's announcement is good news for producers, warehouses, manufacturers and merchandisers who are struggling to compete in a difficult and volatile market. Vienna, Georgia-based grower Chuck Coley, Chairman of the NCC's American Cotton Producers, said special appreciation is due to Sen. Saxby Chambliss, R-Ga., for his effective leadership in drafting the legislation, shepherding it through the legislative process and working with the Administration to ensure that the cotton program was implemented in accordance with Congressional intent.
"Thanks to Sen. 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," Coley adds. "Sen. 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."
For further information, contact Gene Rosera, Price Support Division, Farm Service Agency: telephone, 202-720-8481; fax, 202 690-3307; e-mail, email@example.com. Persons with disabilities who require alternative means for communication (Braille, large print, audiotape, etc.) should contact the USDA Target Center, 202-720-2600, voice and TDD.