Cotton Industry

1
Cotton Industrys Interest(s)in New Farm Law

• presented to
• the
• Cotton Economics and Marketing Conference
• January 11, 2002
• Atlanta, GA

2
COTTON INDUSTRYSINTERESTS/OBJECTIVES

• predictable/effective income safety-net
• marketing loan with AWP and competitiveness
  provisions
• combination of fixed, de-coupled payments and
  target price
• no discrimination based on size, revenue,
  organizational structure or crop mix
• WTO compliant
• equitable treatment with other crops
• preserve industry infrastructure
• adequately funded conservation, trade and
  research programs

3
Situation

• 3 emergency assistance packages
• depressed prices
• weak demand
• escalating cost of production
• strong dollar (undervalued Asian currencies)
• federal budget surplus
• more emergency assistance or new farm law

4
Early 2001

• FY02 Budget resolution
• 5.5 billion FY01
• 7.35 billion FY 02
• 66.15 billion FY03-11
• Emergency Assistance Package 2001 Crop
• 5.5 billion
• 2.0 billion retained for new farm bill

5
New Farm LegislationHouse

• Field hearings
• Washington hearings
• Concept paper
• Reactions
• Committee mark-up
• Floor debate
• Adopted HR2646 on October 3 (291-190)

6
New Farm LegislationHouse

• Key decisions
• funding allocation (49.9 billion commodity
  title)
• loan rate levels and marketing loan
• fixed, de-coupled payments continued
• counter-cyclical provision target price
• yields frozen
• bases-modified choice 85 payment base

7
New Farm LegislationHouse

• payment limitations increased 3-entity and certs
  retained
• soybeans become program crop
• peanut program modified
• conservation programs enhanced and funding
  increased

8
New Farm Law House

• Challenges
• funding allocation by title
• livestock and specialty crops
• EWG web-site and press focus on benefit
  distribution
• Amendments
• Kind-Boehlert (200-226)
• Smith (187-238)
• Lessons learned
• conservation program funding
• commodity program focus and payment distribution
• policy comprehension

9
New Farm Legislation-Senate

• Control shifts from Republicans to Democrats
• Emergency assistance package stymied in July
• September 11 then anthrax closes Hart
• Concept paper released, then modified
• Committee mark-ups
• Floor debate (Dec. 5-19)
• 3 substitutes rejected
• 3 cloture votes fail

10
New Farm Legislation- Senate

• Concept Paper I
• higher loan rates with limitation on loan
  eligibility
• de-coupled payment continued
• counter-cyclical revenue/acre target
• payment limits
• 100,000 combined
• no authority for certificates
• eliminate 3-entity
• up-date base and yields 100 payment base
• allocation of funds to conservation (CSA)

11
New Farm LegislationSenate

• Concept Paper II
• higher loan rate without limit on volume eligible
• increased fixed, de-coupled payment
• counter-cyclical target price
• payment limits 100,000 and current law
• choice to up-date bases and yields
• allocation of funds to commodities increased
• Final Modifications
• 1.25 threshold eliminated to July, 2003

12
New Farm LegislationSenate Floor Debate

• Lugar substitute
• increase funding for nutrition and decrease for
  commodities
• Roberts-Cochran (White House Proxy)
• freeze loan rates (except soybeans)
• continue fixed, de-coupled payments
• no target price---FARM Accounts (10k)
• frozen yields
• choice to up-date base, 85 payment base
• Hutchinson-Sessions
• modified House bill

13
New Farm LegislationSenate Floor Debate

• Dairy
• Conservation funding
• Loan Rates
• WTO compliance
• Concentration/Competition
• Payment Limitations, Targeting, Means- Testing

14
New Farm LegislationAdministration

• New administration-House already at work
• Concept paper released end of September
• SAP strongly criticizes HR 2646
• Select farm groups invited to White House-urged
  to delay
• Endorse Lugar proposal
• Senate Committee mark-up scheduled-Secretary
  urges delay
• Chuck Conner appointed WH liaison
• Secy. endorses Roberts-Cochran proposal

15
New Farm LegislationAdministration

• President speaks Nov. 28--oks proceeding
• SAP strongly criticizes S1731, endorses
  Roberts-Cochran substitute
• 3 cloture votes fail, consideration suspended
  Dec. 19 Daschle promises to bring-up when Senate
  returns Jan. 23
• Secy. Veneman calls for bi-partisanship
• OMB Director confirms 73.5 bil available

16
New Farm LegislationProvisions
17
New Farm LegislationProvisions
18
New Farm LegislationProvisions
19
New Farm LegislationProvisions
20
New Farm LegislationPolicy Issues

• Loan rates
• Counter-cyclical program -TP vs FARM
• WTO compliance
• Dairy
• Benefit distribution-crops and operations
• Conservation funding-working lands program
• Concentration/competition

21
New Farm Legislation-Politics

• Daschle vs Republicans
• Jeffords
• 2002 Senate elections
• Johnson-Thune (SD)
• Harkin-Ganske (IA)
• Cottonbelt
• Hutchinson, Cleland, Landrieu, Cochran, Sessions,
  Carnahan, Gramm, Helms, Thurmond
• Leverage
• Economic Stimulus Package
• Trade Promotion Authority
• Energy policy

22
New Farm Legislation-Schedule

• Key dates
• Congress returns Jan. 23
• Budget submitted new CBO baseline Feb. 20
• FY03 Budget Resolution April 15
• Latest date for implementation for 02 crops
• Transition to advocating emergency pkg
• Process
• Senate action completed
• Conference committee
• Conference Cmte Rpt apprvd by House and Senate
• Presidents signature

23
Cotton Industrys Message

• Need improved farm law in place in time to
  finance 02 crop and to retain 73.5 billion in
  new budget authority
• OR
• need timely and adequately funded emergency
  assistance package for 02 crop and new farm
  legislation in place for 03 crop

24
Textile Industry Facts

• textile manufacturing complex employs 1.0 million
  and contributes 75 billion to GDP
• textile mills employ 450,000 with annual payroll
  of 15 billion-100 plants closed, 65,000 jobs
  lost in 2001
• annual shipments valued at 47 billion
• textile industry supplies 13,000 items to US
  military
• industry has invested 25 billion over 10 years,
  productivity growth exceeds vehicles, paper,
  steel, printing and most other industries
• total exports have tripled (exports to CBI have
  doubled), now valued at 16 billion and support
  100,000 jobs
• textile-apparel trade deficit is 62.4 billion
  textile products account for 4.4 billion of
  deficit
• annual cotton consumption by US mills declined
  from 11.4 million bales in 97/98 to 8.0 million
  bales in 01/02