USDA Says No 2nd Counter Cyclical Advancefor 2003 As Average Price Projected To Increase

Friday, February 27, 2004                          By Shawn Wade

      Oneof the most anticipated announcements of the past month finally came lateWednesday afternoon. Unfortunately for cotton, the news is something of a mixedblessing.

      USDA Secretary Ann Veneman's February 25 announcement deflated hopes for a second advance payment for cotton through the Counter-cyclical payment program. USDA's projection indicates season average prices could result in a final Upland Cotton CC payment rate of zero on the 2003 crop.

      Theprospect of rising prices should generally be considered good news since asizeable portion of the 2003 crop has still not been marketed.

      USDAloan figures through February 17 indicate 46 percent of the 10.013 millionupland cotton bales entered into the government loan, approximately 4.7 millionbales, have not been redeemed. The loan numbers correlate closely with theamount of cotton reported as sold through the end of January.

      USDA's January figures indicate approximately 47 percent (8.368 million bales) of the estimated 17.7 million upland bales produced in 2003 have officially been marketed. Normally producers have marketed 60 percent or more of the crop by the end of January.

      The followingtable shows the average price received each month by farmers and the associatedweighted average price based on cumulative marketings through January 2004.

 

Average Price Received For 2003-crop Upland Cotton
(Weighted by Marketings)

 

 

Marketings

Prices

 

(000's of Running bales)

(cents/Lb.)

 

Monthly

Cum.

Monthly

Weighted

August

420

420

46.30

46.30

September

769

1,189

55.70

52.38

October

1,783

2,972

68.00

61.75

November

1,912

4,884

63.40

62.40

December

1,938

6,822

64.10

62.88

January

1,546

8,368

62.50

62.81*

February

na

na

61.6*

na 

Source: National Agricultural Statistics Service; * = preliminary

      The downside of the announcement is that growers who lost crops in 2003 will not be able to benefit from higher prices in the short term. Many of these producers were looking toward a second counter-cyclical advance to cover expenses associated with preparing for the 2004 crop.
      For growers who received the first counter-cyclical advance payment on cotton it means USDA could eventually ask them to refund the amount of the first advance payment after the end of the 2003 marketing year if the current USDA projection is correct. The first 2003 crop CC advance payment totaled 2.01 cents per pound for cotton.
      "The fact that market changes are not easy things to predict has always meant that producers could be asked to return advance payments after calculation of a final CC payment rate." explains PCG Executive Vice President Steve Verett. "It appears that the 2003 marketing year may very well create just that scenario based on USDA's announcement."

      Producers who received the first counter-cyclical advance will be required to repay any excess payment if the final counter-cyclical rate is less than the amount of the first advance payment. If an overpayment situation exists producers will be notified after final market prices are determined and then asked to repay the amount of the overpayment, interest free.

      If USDA follows previous procedures to deal with an overpayment situation producers will be able to repay the money directly or have the necessary amount, plus interest if applicable, deducted from future Commodity Credit Corporation payments, as required by the 2002 Farm Bill.

      Producers who complete the repayment process within 60 days would likely be required to only repay the total amount of the overpayment.

      Interest charges would only be charged in the event that repayment is not completed within 60 days of the first request for payment.

 

TXDOT Makes Cotton License Plates Available

   The Texas Department of Transportation has recently made available a special cotton boll license plate for anyone who wants to identify their affiliation with the cotton industry.

      The new cotton license plates are a great way for cotton people to show the pride they have in working in one of the states oldest and most respected industries.

      To request a set of Cotton Boll license plates use TXDOT Form VTR-999, Application For A Specialty License Plate. A downloadable version of the form is available from the Plains Cotton Growers website (www.plainscotton.org) or directly from the TXDOT website (www.dot.state.tx.us). When completing the form just check the box for Cotton Boll and mail the form in with the $30 application fee.

      A majority of the proceeds from the application fee ($22 of the $30 application fee) will be credited to the general revenue fund for use only by the Texas Higher Education Coordinating Board in making grants to benefit Texas Cotton Producers, Inc., for the sole purpose of providing scholarships to students who are pursuing a degree in an agricultural field related to the cotton industry while enrolled in an institution of higher education. The remaining $8 will defray TXDOT administrative costs associated with providing the plates to the public.