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The good news in USDA CCP announcement

There was good news and good news in USDA's announcement of a second counter-cyclical program payment for 2003-crop rice and peanuts. The first good news was that — while they might be on the small side for rice — those payments could help producers continue to recover from unusually low prices in 2001 and 2002.

The second was that prices of upland cotton and other major commodities have recovered sufficiently for producers not to receive the payments and perhaps deflect some of the criticism that has been heaped on them by the New York Times and other national media outlets.

Under the 2002 farm bill, USDA is authorized to make a partial payment equal to 35 percent of the projected counter-cyclical payment each October, a second partial payment equal to 70 percent in February and the final payment at marketing year end.

Rice and peanut growers who elected not to take the first partial CC payment last October will receive payments at the rate of $51.80 per ton for peanuts and 63 cents per hundredweight for rice. Those who did take the first CCP will receive an additional payment at $15.40 per ton for peanuts and 5.25 cents per hundredweight for rice.

(The latter prompted Riceland Foods CEO Richard Bell to comment that USDA would spend more on postage sending out the second payment than rice farmers would actually receive. Bell was speaking at the Mid-South Farm and Gin Show in Memphis, Tenn.)

If there was any bad news in the USDA announcement it's a hint that upland cotton producers might have to repay the 2.01-cent partial payment they could have received last October.

In its announcement of the second payment, USDA said those would not be available for other crops. “Market prices for wheat, corn, grain sorghum, and upland cotton have increased significantly since last October, and if current market forecasts are realized some repayment of the first partial counter-cyclical payments for these crops would be required,” it said.

National Cotton Council Chairman Woody Anderson suggested that USDA offer the 2.01-cent partial CC payment to farmers who did not take the first partial. But USDA officials said that given the 2003 prices to date and the historical relationship between in-season forecasts and the final average price, it was probable both the first and second partials would have to be repaid.

Most cotton producers would rather not have to repay the 2 cents (For a grower with 1,000 acres of cotton and a program yield of 800 pounds, it would be $13,600.). But that might be a small price to pay for significantly lower farm program costs in 2004 and 2005.

With Congress preparing to draft the fiscal 2005 budget, any reduction gives that much less ammunition to farm program critics. Of course, it's probably assuming too much that the Environmental Working Group or the New York Times will take notice of the savings. But we can always hope.

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