2 gene2007lsa

Cotton Policy Issues : Cotton Policy Issues Recent Changes


Summary of Topics : Summary of Topics Repayment Examples as AWP Increases Storage Credits for loan bales Outside storage of Loan Cotton Revised Settlement Policies Transfer of Loan Cotton Revised Forms New Barter Policy Regarding CCC Inventory


Loan Redemption Policy as AWP Increases : Loan Redemption Policy as AWP Increases Refer to examples Repay amount: (f) AWP, loan term Two General Rules: Producer/merchant never pays CCC more than P+I, as when AWP> P+I+S When AWP is < P+I+S, the total of accrued storage + CCC repayment amount = AWP


Rates Affecting Storage Credits: 2006 and 2007 : Rates Affecting Storage Credits: 2006 and 2007 Public Tariff Rate. Set by cotton storage warehouses - not negotiated. Not regulated by CCC CSA Loan Rate (insured) Established in a warehouse’s CSA. Rate at which the warehouse stores and insures cotton while pledged as collateral for a CCC loan. Negotiated annually with CCC with annual increase usually permitted. At forfeiture, paid by CCC for the entire period that the cotton was in storage, including pre-loan period.


Rates Affecting Storage Credits: 2006 and 2007 : Rates Affecting Storage Credits: 2006 and 2007 CSA Owned Rate (un-insured) Rate at which the warehouse stores but does not insure CCC-owned cotton. Storage Credit Rate Established by price-support regulations - not a provision of any CSA. The lower of the 2005 public tariff rate or $4.37 for AZ/CA locations or $2.66 for all other locations for both 2006 and 2007.


Credits Not Available to Outside-Stored Loan Bales : Credits Not Available to Outside-Stored Loan Bales Outside Storage may be approved for 2006 and 2007 loan cotton None approved for 2006-crop Bales ineligible for storage credits while outside Loan bales eligible for unlimited credits if transferred from warehouse using yard storage for loan bales.


Requirements for Warehouse Approval for Yard Storage : Requirements for Warehouse Approval for Yard Storage In a CCC-determined storage-deficit area Must report yard-storage dates per bale to Provider Weekly report of yard bales to CCC Agree to CCC yard-storage requirements: Dunnage Slip covers insurance


Determining 2007-Crop Storage Deficit Areas : Determining 2007-Crop Storage Deficit Areas Announcement likely week of 8/13 Regs: “Deficit area..where production exceeds combined inside storage capacity of CSA warehouses.” NASS estimates: state level buy by district for Texas Storage capacity: approved CSA capacities less carryin and other deductions.


Transfer vs Reconcentration : Transfer vs Reconcentration Reconcentration Means moving CCC-owned cotton inventory CCC responsible for all charges Transfer Means movement of producer-owned loan cotton Producer or merchant (never CCC) responsible for all charges


Transfer Process for Loan Bales : Transfer Process for Loan Bales Genesis: Damage to outside-stored: 2004/2005 Merchant allegations of delayed shipments Claimed by merchants as essential for marketing 2006 crop Starting point for merchants to “co-sign” loans and cotton loan collateral Effective for 2006, subsequent crops


Transfer Process Concerns : Transfer Process Concerns Producers: Requested CCC clarify merchant responsibility for charges/losses CCC-601 and 605 have been amended accordingly Warehouses: Initially concerned about being “emptied out” No complaints or problems thus far NCC request to remove the 75-day limit Other: Started along with mandatory weekly reporting by whse Use of process has been minimal Merchant complaints about delays possible lessened


Change to Forfeiture Charges Paid by Producer : Change to Forfeiture Charges Paid by Producer Previously Storage accrued prior to loan Warehouse receiving Effective with 2006 Crop: Pre-loan accrued storage Warehouse receiving Compression Loan period storage charges exceeding charges based on capped rate.


Warehouse Compression : Warehouse Compression Ranged from $2.10 to $12.00/bale Weighted Average rate = $8.35/bale Charged by 63 percent of CSA warehouses Unrelated to other warehouse tariffs Generally described as gin rebate. No service rendered by warehouse.


Rationale for Billing Compression to Producer : Rationale for Billing Compression to Producer 7 CFR 1427.12: Waivers that fully protect the interest of CCC must be obtained before loan disbursement… if there are any liens or encumbrances on the cotton… Policy changed because: Compression also component of AWP adjustment Inconsistent with other MAL commodities Inconsistent with lien requirement


Latest Revisions to CCC-605 : Latest Revisions to CCC-605 Part E: Holder ID moved here from Part F Part F (for CCC use) Removal of signature element because CCC is not signator to this agreement Part G Item 2: inserts agent agreement to be responsible for charges and losses Item 5: CCC holds producer liable for charges if unpaid by agent authorized by producer


Latest Revisions to CCC-601 : Latest Revisions to CCC-601 Item 10(e): (ii) producer charges for transferred cotton that forfeits based on receiving warehouse (iii) Transfer requestor is assumes responsibility for charges, and producer held responsible only if merchant does not pay (iv) Producer responsible for losses even if agent of producer had agreed to pay for such losses.


Barter of CCC-Owned Cotton : Barter of CCC-Owned Cotton Announced July 6, 2007 No cash sales of CCC-owned cotton CCC to tender for domestic/international foods to be paid with CCC-owned commodities Rationale: Extend food-aid budget


Amendment 35 to 7-CN : Amendment 35 to 7-CN Bale eligibility is not a function of whether the double-cropping practice used in its production was approved. In line with 1-CM, any member of general partnership may sign for such partnership and bind all members unless Articles of Partnership provide otherwise. Cotton pledged as collateral for a seed cotton loan may receive a ginned cotton loan if proceeds are jointly ayable to producer and CCC. Amended instructions provide that no date is required in item 54 of CCC-633EZ