Certificates Expedite Cotton Flow;
Reduce Price-Depressing Stock Overhang

MEMPHIS - Because of the U.S. Secretary of Agriculture's "prudent action" to allow commodity marketing certificate usage, the National Cotton Council says U.S. cotton's competitiveness and marketability have been enhanced significantly.

"The use of the certificates not only has enabled producers to realize greater marketing loan gains -- a significant benefit with agricultural prices having fallen to 25-year lows -- but saved the government significant storage costs and prevented the price-depressing action of a government auction of hundreds of thousands of bales," said National Cotton Council President Robert E. McLendon.

Producers, cooperatives and producer agents repaid loans on more than 1 million bales of upland cotton from the Commodity Credit Corporation (CCC) loan this past week after certificates were made available in county Farm Service Agency offices beginning February 22. This past week's redemptions provided for prompt shipment of some cotton and competitive pricing for immediate delivery on the remainder. Unofficial numbers obtained from USDA show that only 4,988 running bales of Form A (producer) upland cotton remained under loan on Feb. 25, down from almost 531,000 bales on Feb. 15. Virtually all cooperative-held loan stocks also have been redeemed. The use of certificates for CCC loan redemptions ensures that participants will repay CCC loans, actually facilitating a flow of money from farmers to the federal government.

"Without certificates," McLendon said, "this cotton pledged as loan collateral would have been forfeited and auctioned by CCC, probably at a loss to the government, at the very time farmers were attempting to harvest and price their new crop."

The Leary, GA, producer also noted that the Congressional and Administration actions to allow marketing certificate use should not be construed as "payments" to large farmers or "circumvention of payment limits." He said, for example, that cotton farmers in most regions of the belt with more than 450 acres would have hit payment limits on marketing loan gains and would have been forced to forfeit their loan collateral on production from acres exceeding 450.

"A 450-acre cotton farm is by no means 'large,' and, in fact, could hardly sustain a family with prices anywhere near normal levels," McLendon said. "The forfeiture and auction of commodities by the CCC at harvest time would have the effect of depressing prices for all farmers, large or small. In addition, causing commodities to be held under loan for extended periods rather than moving to market rewards U.S. agriculture's foreign competitors, most of whom already receive considerably more help from their respective governments than do American farmers."

Tom Smith, president of Calcot Ltd., a Bakersfield, CA, cotton cooperative, said Secretary of Agriculture Dan Glickman's action "has permitted us to meet sales commitments, avoid extensive forfeitures and provide timely insight to producers for new-crop (2000) planting considerations."

Cotton Council Executive Vice President Phil Burnett says, "Secretary Glickman implemented the certificate provisions authorized by Congress in conformity with 14 years of precedent and in a way that best effectuates the statutory requirement to 'enhance the competitiveness and marketability' of U.S. agricultural commodities and to 'encourage the orderly marketing of commodities pledged as collateral for loans'."