San Joaquin Valley and Sacramento Valley producers will be well into planting their crop before they learn what support levels they’ll receive for their cotton in a marketplace where upland prices are hovering around 40 cents and Pima prices are only marginally above loan levels.
House and Senate farm bill conferees went home for the Easter break with what Rep. Larry Combest of Texas, chairman of the House Agriculture Committee, called an agreement on a framework for speeding up the farm bill negotiations. The goal is to have a farm bill on the President Bush’s desk by April 15.
While farmers were disappointed with yet another delay, others said the two week recess would give conference members and their staffs more time to work out agreements on such contentious issues as the, conservation spending, loan rates for program crops or packer ownership of livestock.
Congressional sources said the new framework provides $48.6 billion for commodity programs, $17.1 billion for conservation, $6.4 billion to restore food stamps to aliens living in the United States and $3.3 billion for research, energy, credit and other programs.
But conference committee members still have to reconcile the differences in spending formulas in the House and Senate bill, including the $6.1 billion overrun that was discovered in the Senate-passed bill after its initial scoring.
The Congressional Budget Office says it initially underestimated the cost of the Senate bill because it assumed farm payments would be made on 85 percent of crop base acres as under the 1996 farm bill rather than on 100 percent as the Senate bill actually spells out.
Despite the remaining hurdles that must be cleared, Senate Majority Leader Tom Daschle noted that the agreement "puts us one step closer to enacting a bill that corrects the problems in the 1996 bill."
California Cotton Ginners and Growers Association (CCGGA) president Earl Williams is receiving calls daily from producers wanting to know what to expect for this season. He cannot tell them. "We have cotton in the ground and emerged in the Imperial Valley and we are ready to plant in the San Joaquin Valley," he said.
"There are all kinds of rumors floating around, but I keep telling people we do not know yet what we will have for 2002" he said. "We need to keep the pressure on to get something in place. Yes, we are disappointed in the delays."
Something should all be in place by May 14 when Western Farm Press, CCGGA, the University of California and the Supima Association of America sponsors the fifth annual Pima Production Summit at the Visalia Convention Center, Visalia, Calif.
A report on the federal farm program for 2002 for both upland and Pima will be part of the program which also will include:
--A grower panel made up of producers Jean Errotabere of Errotabere Ranches, Riverdale, Calif.; Daniel Burns of San Juan Ranch, Dos Palos, Calif.; Mark Grewal, vice president and director of J.G. Boswell Co.; and Buttonwillow, Calif., producer Tim Thompson.
--A report on the new hybrid Pima cotton, Hazera, from Israel. It was the highest yielding Pima last season.
--A date of planting research project report from Dan Munk, Fresno County farm advisor.
--A Pima marketing update and 2002 acreage estimate.
--A report on the growing problem of stickiness with SJV Pima.
--An update on Supima Association promotion and research activities.
A registration form is on this page for the free conference, which begins at 8 a.m. with registration and a continental breakfast. The first speaker is at 9 a.m.
Typically, Pima has not been dramatically affected in the farm bill, but uncertainty surrounds Extra Long Staple cotton acreage this season because of Grassley-Dorgan Amendment.
According to Matt Laughlin, Supima Association executive vice president, the "Grassley Amendment" (incorporated in the Senate bill) would cut annual payment limitations to $275,000, which is 40 percent below the current cap of $460,000, while the House version would raise it nearly 20 percent to $550,000.
The limit includes $75,000 per grower for a combination of AMTA and counter-cyclical payments - or $125,000 for a married couple - and $150,000 in combined loan deficiency payments (LDP's) and marketing loan gains, he explained.
One caveat that would have a direct impact on Pima producers is a clause that converts all commodity loans to "recourse" status once a grower reaches the $150,000 limit on LDP's and marketing loan gains, noted Laughlin.
That means that any producer who hits the payment limit would have to repay principal and related carrying charges on all outstanding CCC loans, including Pima, according to Laughlin.
If a grower collects less than $150,000 in combined marketing loan gains and LDP's, that grower could still forfeit all (or any portion of) his Pima held in USDA loan.
The Senate bill would also eliminate the three-entity rule, eliminate generic marketing certificates and introduce means testing.
ELS loan rate
Also of particular interest to Pima producers is the ELS loan rate, which is frozen at 79.65 in the Senate bill. The House version of the bill maintains the current Pima loan formula, which has no floor. The average Pima loan rate conceivably could drop by about one cent per pound for the 2003 crop under existing legislation, and another four cents in 2004.The 1996 farm bill capped the Pima loan rate at 79.65.
The formula uses the average farm prices from the previous five years (excluding the most recent), omits the high and the low, then takes 85 percent of the average from the three remaining years.
The rate reverts to 79.65 if the figure exceeds that amount. However, there is nothing in current law preventing the rate from dropping below 79.65.
The formula produces a rate higher than 79.65 for the 2002 crop, which means the rate will remain at 79.65 this season, where it has been since 1995.
Both farm bill versions include unlimited funding for the Pima Step 2 program.
This is obviously creating uncertainty with Pima this season and there was enough difference of opinion before the Grassley Amendment surfaced.
The National Cotton Council in January said its December grower survey indicated a 5 percent acreage gain. However, most industry analysts are expecting another increase this season.
Laughlin reported earlier at the California Cotton Growers annual meeting in February it estimates an increase in Pima plantings of about 15,000 acres, or about 6 percent. There could be a sharp increase in Arizona if the Grassley amendment or something similar to it passes.
Calcot reported during its January grower update meetings that it was forecasting new crop Pima acres to increase by 15 percent to 300,000 acres.
The government's first new crop cotton acreage estimate was to be released March 28.
USDA is forecasting that a stocks-to-use ratio of 56 percent at the end of this marketing year (July 31) will be at its highest mark in eight years, according to Laughlin, and ending stocks of 294,000 bales will be the most since 1965.
At the same time, Egypt is expected to increase its ending stocks this season by at least 20 percent, which would lead to an increase in world extra-long staple cotton stocks of more than 700,000 bales for a record-high 63 percent stocks-to-use ratio.
At a time when basic supply/use numbers would dictate a reduction in production, it is likely that world ELS cotton production will increase in 2002.
The USDA kept its 2001/02 offtake estimate for Pima unchanged in its Feb. 11 report.
The government is forecasting exports to fall from 437,000 bales in 2000/01 to 415,000 bales this year, and for domestic consumption to drop from 122,000 bales to 110,000 bales.
Back to the 2002 farm bill, Agriculture Secretary Ann M. Veneman says USDA could still implement a new farm bill for the 2002 season if Congress will act in early April.
"USDA stands ready to implement a new farm bill this year, and our team has been working on implementation measures during the last few months," she said. "However, each week that passes makes this formidable task ever more challenging."
Veneman said the administration was pleased with reports that the conference committee leaders had agreed to a basic framework for farm bill spending that adheres to the $73.5 billion in additional funding Congress had allocated for agriculture in its 10-year budget resolution.
Before this arduous task began, most observers said Easter recess would be the cutoff date for a new farm bill to be put on the shelf and give way to an emergency package for this season