1 / 24

U.S. Cotton and Rice Policy Compatibility with WTO Commitments

U.S. Cotton and Rice Policy Compatibility with WTO Commitments And Other Trade Liberalization Efforts Mechel S. Paggi Center for Agricultural Business, California State University, Fresno Silverado Symposium on Agricultural Policy Reform / Napa, California /January 20, 2004.

mackenzie-gaines
Download Presentation

U.S. Cotton and Rice Policy Compatibility with WTO Commitments

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. U.S. Cotton and Rice Policy Compatibility with WTO Commitments And Other Trade Liberalization Efforts Mechel S. Paggi Center for Agricultural Business, California State University, Fresno Silverado Symposium on Agricultural Policy Reform / Napa, California /January 20, 2004

  2. Where Were We?Where are We?Where are we Going? • Existing Programs vs. 1996 Act • Expenditures Under 1996 Act • Potential Exposure in Low Price Scenario With New Programs • Projections of Future Expenditures Under New Programs • Suggestions for Changes Resulting from Doha Round • Potential Exposure of Existing Programs under those changes • Suggestions for alternative policies • Suggestions regarding the potential for change

  3. U.S. Cotton & Rice Program 1996 vs. 2002 Marketing Loans Direct Payments Counter Cyclical Payments Step 2 for Cotton

  4. U.S. Cotton & Rice Program 1996 vs. 2002 Marketing Loan 1996 The loan rate for upland cotton was set at the lesser of 85% of the 5-year Olympic average of spot market prices, or 90% of the Northern Europe-based average price, subject to a maximum of $0.5192 per pound and a minimum of $0.50 per pound. Rice was fixed at $6.50 per

  5. 1996 FAIR Act PFC Payments Allocations PFC Payment Levels Wheat 26.26% Corn 46.22% Sorghum 5.11% Barley 2.16 % Oats 0.15% Cotton 11.63% Rice 8.47% • $5.570 • $5.385 • $5.800 • $5.603 • $5.130 • $4.130 • $4.008 Spending caps for each crop, except rice, were adjusted for prior-year crop program payments to farmers made in FY 1996 and any 1995 crop repayments owed to the government. The amount allocated for rice was increased by $8.5 million annually for FY 1997-2002. Oilseeds were not eligible for production flexibility contract payments.

  6. Current U.S. Cotton Program Price and Income Support Levels (Cents per Lb.) Program Yield (CC Update) Direct Payment Rate (CC Rate) Marketing Loan Rate Target Price Program Acres

  7. Current U.S. Rice Program Price and Income Support Levels Program Yield (CC Update) Direct Payment Rate (CC Rate) Marketing Loan Rate Target Price Program Acres

  8. Cotton Step 2 Payments Bale Equivalents Million Dollars Season Avg. Price Price Per Bale Total expenditures for Step 2 payments were originally limited to $701 million over FY 1996-2002. The 2000 Appropriations Act removed the expenditure cap.

  9. CC Payment Rate = to 0.0 or (TP – Effective Price) Effective Price = The Higher of the National Loan Rate + Direct Payment or the Average Farm Price Max Cotton CC Payment Rate Per LB. $0.724 – ($0.52 + $0.0667) = $0.1373 $0.65.73 Max Rice CC Payment Rate Per Cwt. $10.50 – ($6.50 + $2.35) = $1.65 $8.15/cwt

  10. For Cotton In 1999 LDP & PFC Payments = 47% Of Gross Revenue Per Acre

  11. * Limit of $19.6 Billion * 1999 – 2001 Unofficial Estimates from former CBO work

  12. Limit of $9.6 Billion

  13. FAPRI Baseline Projections Government Payments Note: For feed grains, food grains, oilseeds, cotton, and dairy, figures represent the means of the results of the stochastic analysis based on 500 random draws. Figures do not include effects of the FY 2003 omnibus appropriations bill.

  14. Selected Direct Government Payments FAPRI Baseline, 2003 Note: Includes direct payments, marketing loans (loan deficiency payments and marketing loan gains) and counter-cyclical payments for feed grains, food grains, oilseeds, and upland cotton. Figures represent the means of the results of the stochastic analysis based on 500 random draws.

  15. PS AMS = Dairy, Sugar & Aggregate LDP payments NPS AMS = CCP’s and Crop Insurance PFC Payments = Green Box

  16. FAPRI 2003 Baseline Cotton Outlook

  17. Suggested Changes in Doha Round Decrease Amber Box AMS by 50% Decrease de minimis NPS Amber Payment Limit by 50% Effective limits fall to $9.8 Billion and $4.8 Billion Could Be a Problem Particularly For NPS that includes CCP’s

  18. Apparent Program Options • Increase Direct Income Support and Drop the CCP • Create Alternative Green Box Income Transfer Programs • Utilize Circuit Breaker Option if Expenditures Exceed Limits • Create Some New Box (maybe Pink) With a Justification for Product Specific Supports Tied to Prices • Develop Program to Transition Out of Income&Price Supports

  19. USTR Ominous Warning for Cotton

  20. Political Reality MayDampen Rush to Change • Election Year 2004 • Rice and Cotton Production: Texas, California, Arkansas, Louisiana, Mississippi, Missouri, New Mexico, Arizona, Tennessee, Alabama, Georgia, North Carolina, South Carolina, Florida, Virginia, Oklahoma and even Kansas and Nebraska • These Programs Date Back to 1933 • Lack of Enthusiasm for Increased Trade Liberalization Among Farm Organizations at the Expense of Domestic Price and Income Support

More Related