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Loan rate continues to beset cotton industry

The National Cotton Council continues to experience difficulty finding common ground among its different segments on Commodity Credit Corporation loan rates in the next farm bill.

Recently, the American Cotton Producers, the producer segment of the NCC, restated its position favoring an increase in the marketing loan rate from the current 51.92 cents for base grade and staple length to at least 55 cents per pound.

The ACP, meeting in the home state of its chairman, Alabama producer Hollis Isbell, proposed that the NCC should agree on the 55-cent loan rate, while placing high priority on a non-encumbered marketing loan, full funding for Step 2 and elimination of payment limitations.

Prior to the meeting, the ACP had said the loan rate should be set at not less than 55 cents per pound, while the American Cotton Shippers Association, representing the merchant segment, favors a loan level of not more than 55 cents.

While that may seem like splitting hairs, it has significance for both NCC segments. Some members of the ACP, most notably representatives of Plains Cotton Growers Association, want a higher loan rate than 55 cents.

Since both the chairman and the ranking minority member of the House Agriculture Committee are from that portion of Texas, some think the Plains Cotton Growers position might carry considerable weight when it comes time to write a new farm bill.

Members of the American Cotton Shippers say they are concerned that higher loan rates (above 55 cents) would cause more production, which would push prices down further and push cotton into the loan and out of marketing channels.

“Putting more cotton into the loan would raise program costs to levels that government and taxpayers alike are not comfortable with,” an ACSA spokesman said. “A three-cent increase in the loan level for cotton could add an additional $300 million in program costs and threaten Step 2 for exports.

“It would also threaten the domestic textile industry, which if we should lose, would depress business further.”

ACSA board members could not reach a consensus on the issue, he said. “This should indicate to you that this organization has different ideas about raising the loan level. We agree producers need help due to lower prices and crop failures, and we wish to see some type of assistance for them because if they cannot produce cotton we have nothing to merchandise.”

In their meeting, ACP leaders also would support the Council seeking elimination of the 1.25-cent Step 2 threshold.

Resolving the loan rate issue has taken on new urgency because of House Ag Committee Chairman Larry Combest' announcement he intends to write a new farm bill by early August.

On the Senate side, Agriculture Committee Chairman Richard Lugar continues to be lukewarm to the idea of writing new legislation when the current law doesn't expire until 2002.

Lugar, who owns a 600-acre corn and soybean farm in Indiana, an area that has received ample rainfall during most of the last three years, doesn't think the farm bill needs a new direction.

After it resolves its loan rate dilemma, educating Lugar on the realities of the farm economy may be the Council's next big challenge.

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