Devil Is In The Details: ClarifyingTransfer and
Forfeiture Rules For 2006-crop Loan Cotton

Friday, November 3, 2006                          By Shawn Wade

      Last week's articlediscussing new Commodity Credit Corporation (CCC) rules regarding loanforfeitures and loan collateral transfers sparked both questions and commentsabout how the new regulations might actually affect producers in 2006.

      On the subject of loancollateral transfers by a producer or designated agent from the originalreceiving warehouse to a secondary location, Lubbock cotton merchant andAmerican Cotton Shippers Association President Manfred Schiefer weighted inwith a thought about loan collateral transfers.

      He noted that while lastweek's comment that charges incurred in the transfer of loan cotton are theresponsibility of the producer or the designated agent is accurate, he wantedmake sure that producers understand that virtually all of the transfers thatmight be requested would be carried out by a designated agent who would beexpected to cover the associated charges at the time transfer is made.

      Schiefer added that the onlytime a producer would be in a position to be directly responsible for chargesassociated with the transfer of loan cotton would be if they personallyinitiated such a transfer.

      He also offered the opinionthat he expected that there would be very few, if any, instances where aproducer would see a need to initiate a transfer of loan collateral.

      The other aspect of last week'sarticle that spurred questions involved the new loan forfeiture rule regardingcompression charges and under what circumstances it could potentially impact agrower who sells an equity position on their cotton through an "Option toPurchase" contract.

      Last week's article includedthe following statement: "The CCC policy change has no impact on producers whosell loan cotton through an equity contract in which the merchant provides anequity bid offer that reflects any potential charges that are outstandingagainst the cotton, including compression."

      The main question that hasarisen about this wording was whether or not a producer that sells an equityinterest in their loan cotton to a buyer through an "Option to Purchase"contract is still at risk of being charged for storage, receiving and compressionif the cotton is never redeemed by the buyer and the loan collateral isultimately forfeit to CCC to satisfy the loan.

      Researching this issue furtherindicates the producer is always ultimately liable for the paymentof any charges due at loan maturity when the loan collateral is forfeit to CCCto satisfy the note. This is true even if a producer sells an equity positionon his cotton to a merchant through an "Option to Purchase" contract and alsosigns and executes a CCC-605 "Designation of Agent" form with the USDA FarmService Agency.

      Officials at the Texas StateFSA office have verified this interpretation saying that producers need to beaware that a properly filed CCC-605 form does, in fact, automatically expire onthe date of loan maturity. If the loan is not repaid and the loan collateral isforfeit to CCC at that time, CCC will bill the producer for any and all chargesassociated with the forfeiture of the cotton.

      The only way for a producerto protect his interests in this situation appears to be to be proactive andinsist that any "Option to Purchase" contract they enter into with a buyerincludes language that specifically states that the buyer agrees to reimbursethe producer for all charges that may be billed to his account by CCC if thedesignated agent fails to exercise the option to redeem the cotton prior toloan maturity and the cotton is subsequently forfeit to CCC to satisfy theloan.

 

Southwest Council of Agribusiness Gaining
Momentum As Farm Bill Debate Draws Near

Friday, November 3, 2006                          By Shawn Wade

      The recently formed SouthwestCouncil of Agribusiness has completed the process of being incorporated as a501(c)(6) business league and officially hit the ground running.

      The Southwest Council is analliance of agricultural organizations, financial institutions, and businesses,established to actively advocate for strong agricultural policy which is soimportant to the businesses and economy of Texas and the greater Southwestarea.

      The idea behind the SouthwestCouncil emanated from agricultural organizations encouraging businesses(lending institutions, implement dealers, auto dealers, etc.) to take a moreactive role in supporting producers through an alliance that would be anadvocate for strong U.S. farm policy. The SWCA's initial focus is to seekextension of the provisions of the Farm Bill of 2002.

      Among its first actions uponbeing formed was the initiation of a working relationship with Combest, Sell &Associates (CS&A), a nationally recognized government affairs firm focusedon representing the interests of rural America and agriculture in Washington,DC. Its founders, former House Agriculture Committee Chairman Larry Combest andhis partner Tom Sell anchor the CS&A group.

      Support for the SWCA effortscontinues to grow as contacts are made and new members are identified. To datea total of 32 commodity organizations, financial institutions andagribusinesses have signed up to a part of the SWCA.

      Any business or agriculturalproducer group that is committed to promoting a strong agricultural economy isinvited to be a member of the Southwest Council of Agribusiness.

      To join in this importanteffort, please call Steve Verett or Roger Haldenby from Plains Cotton Growersat (806) 792-4904, or Tom Sell, CS&A, at (806) 535-0093.

      Current members of the SWCAinclude: Plains Cotton Growers; Western Peanut Growers Assn.; Corn ProducersAssociation of Texas; Texas Grain Sorghum Producers Assn.; Panhandle PeanutGrowers Assoc.; Texas Agricultural Coop Council; AgTexas Farm Credit Services;City Bank; First Ag Credit Farm Credit Services; Plains Capital Bank; StateNational Bank; American State Bank; American Bank of Commerce; Lamesa NationalBank; Peoples Bank; Security Bank; Great Plains Ag Credit; Panhandle-PlainsLand Bank, FLCA; Agriland, Farm Credit Services; Heritage Federal Land Bank;B.E. Implement Co.; Hurst Farm Supply; South Plains Implement; Ray LeeEquipment Co.; John Roley Autocenter; Rawls Equipment; Campbell Irrigation;Plains Cotton Cooperative Assoc.; Paramount Broadcasting Corporation; HansfordImplement Company; Quality Implement Co.; and, Becknell Wholesale Company.

 

6th Texas Commodity Symposium – Nov. 29

Friday, November 3, 2006                          By Shawn Wade

      The sixth annual TexasCommodity Symposium will be held November 29, and is being hosted by CornProducers Association of Texas (CPAT), Texas Grain Sorghum Association (TGSA),Texas Wheat Producers Association (TWPA), Plains Cotton Growers, Inc. (PCG) andthe Texas Peanut Producers Board (TPPB).

      Once again, the symposiumwill be held in conjunction with the Amarillo Farm and Ranch Show in the GrandPlaza Room at the Amarillo Civic Center. Registration will begin at 8:30 a.m.and the symposium will begin at 9 a.m. The symposium is free to all and willconclude with a catered lunch at noon.

      Speakers for this year'sprogram will focus on state and national issues facing the agriculturalindustry. Topics will include updates on negotiations for the 2007 Farm Bill,the potential impact of biofuel initiatives, updates on key issues facing Texasagriculture and FSA and NRCS updates.

      Headlining this year'sspeaker list is former House Agriculture Committee Chairman Larry Combest ofLubbock. Combest will discuss the newly formed Southwest Council ofAgribusiness and the state of the Washington political landscape following theNovember elections and the ramifications the 2006 election season will have onthe 2007 Farm Bill debate.

      Other confirmed speakersinclude Texas State Senator Todd Staples, Texas FSA Executive Director JohnFuston and USDA NRCS Texas State Conservationist Larry Butler. Chris Albracht,Morning Show Host and Program Director for KGNC Radio, will serve as the Masterof Ceremonies for the event.

      All producers are encouragedto register early for a chance to win special door prizes. For moreinformation, please contact Lauri Vaughn, Director of Producer Relations &Communications for the Texas Wheat Producers at (806) 352-2191 or email(lvaughn@texaswheat.org).

 

FSA County Committee Elections Start Nov. 3

Friday, November 3, 2006                          By Shawn Wade

      Agriculture Secretary MikeJohanns announced that the 2006 Farm Service Agency (FSA) county committeeelections start November 3, 2006. The deadline for eligible voters to returnballots to their local FSA offices is Dec. 4, 2006.

      Johanns urges all eligiblefarmers and ranchers, especially minorities and women, to get involved and votein this year's elections. He notes that the county committee system allowsproducers to make important decisions concerning the local administration offederal farm programs by applying their knowledge and judgment to makedecisions on disaster and conservation payments, establishment of allotmentsand yields, producer appeals, employing FSA county executive directors andother local issues. FSA committees operate within official regulations designedto carry out federal laws.

      To be an eligible voter,farmers and ranchers must participate or cooperate in FSA programs. A personwho is not of legal voting age, but supervises and conducts the farmingoperations of an entire farm, can also vote. Agricultural producers in eachcounty submitted candidate names during the nomination period held last summer.

      Eligible voters who do notreceive ballots in the coming week can obtain ballots at their local USDAService Center. Dec. 4, 2006, is the last day for voters to submit ballots inperson to local USDA Service Centers. Ballots returned by mail must bepostmarked no later than Dec. 4. Newly elected committee members and alternatestake office Jan. 1, 2007.

      For more information aboutFSA county committees and FSA programs, visit: http://www.fsa.usda.gov

 

2006 Cotton Quality Summary

      Thefollowing is a summary of the cotton classed at the Lubbock and Lamesa USDACotton Division Cotton Classing Offices for the 2006 production season.

 

Week Ending October 26, 2006:

 

Office

Bales

Color

Leaf

Staple

Lamesa

57,988

21+ - 35%

31 - 55%

3.32

36.00

Lubbock

183,783

21+ - 32%

31 - 56%

3.57

36.20

 

Mike

Strength

Uniformity

Bark

Lamesa

4.19

29.38

80.84

10.9%

Lubbock

4.03

30.27

81.38

17.6%

 

 

Season Totals To Date:

 

Office

Bales

Color

Leaf

Staple

Lamesa

143,870

21+ 54%

31 - 36%

3.08

35.88

Lubbock

328,198

21+ - 41%

31 - 47%

3.39

36.15

 

Mike

Strength

Uniformity

Bark

Lamesa

4.27

29.09

80.81

7.1%

Lubbock

4.11

30.32

81.39

13.0%