CONGRESS MULLS COTTON SUBSIDY HIKE

Byline: Joanna Ramey

WASHINGTON — Domestic cotton spinners would stand to gain as much as $100 million, totaling about $236 million, over two years — for fiscal 2003 and 2004 — in additional federal cotton subsidies, if House and Senate negotiators finalize a new formula for supporting cotton farmers.
Spinners already receive government direct-payment subsidies for cotton based on a formula designed to bridge the gap in price when U.S. cotton is costlier than the average foreign price. Last year, mills received $136 million in cotton subsidies and in 2000 they were $286.6 million. This year’s subsidies for the fiscal year that began Oct. 1 have not yet been determined, since they are based on periodic price differentials.
The cotton plan is part of a broader $171 billion farm bill being wrangled over by lawmakers. At issue is how much money farmers — facing 30-year price lows — should receive in direct federal payments to underwrite the cost of producing various U.S. commodities.
“We need to be more competitive with other countries in terms of buying raw material, so every little bit helps,” said Jim Conner, executive vice president of the American Yarn Spinners Association.
U.S. yarn spinners are part of the subsidy program because they are the cotton industry’s main customer. By law, mills can only import raw cotton when U.S. cotton is in short supply, a rare occurrence.
Both the domestic cotton and textile industries have seen massive downturns in their businesses. Textile mills have been sorely battered by low-cost import competition and cotton farmers have been squeezed by the resulting 20 percent drop in domestic mill consumption of cotton. A world cotton glut has also put downward pressure on cotton prices, which hover just under 40 cents a pound, well below the 60 cents once forecasted.
Under legislation being negotiated between House and Senate lawmakers the subsidy formula for mills would be changed, but for only two years. Details of the formula are being worked out as differences in farm subsidy legislation that’s passed each chamber are being reconciled.
Although the enhanced mill subsidy would amount to only an additional $100 million over two years, “That’s money in our pockets we can use to operate,” said an ATMI spokesman, who maintained that the entire textile industry eventually benefits from the savings.
ATMI officials are urging lawmakers to make the higher subsidy for textile mills last the entire 10-year life of the farm bill. They are also concerned some Senate farm bill negotiators are backtracking and are seeking to exclude the higher textile mill subsidy altogether.
“Our industry is already in the midst of its worst economic crisis since the Great Depression, with over 100 mills closing and over 70,000 textile workers losing their jobs last year,” wrote ATMI chairman Van May in a letter sent Monday to Senate lawmakers.
May is also chairman of the Plains Cotton Co-Cooperative Association, based in Lubbock, Tex., and owns two denim mills.
Mark Lange, vice president of policy analysis and program coordinator at the National Cotton Council, said the change in the cotton subsidy “could be critical for the near-term situation of textile mills.”
“It’s a measurable step the government can take,” Lange said. “It’s obvious we haven’t been able to stem the huge flow of textile import products, but his is something that can help mills.”

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