Allen Helms Letter to Agriculture Secretary Johanns Regarding Advance 2005-Crop CCP

February 14, 2006

The Honorable Mike Johanns
Secretary of Agriculture
U.S. Department of Agriculture
1400 Independence Avenue, SW
200-A WhittenBuilding
Washington, DC  20250

Dear Mr. Secretary:

This letter is to respectfully request that USDA announce the second advance 2005-crop counter-cyclical payment (CCP) for upland cotton at the maximum level of 9.61 cents per pound. Based on available price information, NCC economists estimate that the marketing year average (MYA) price for upland cotton will fall below the national loan rate of 52 cents.

Final monthly price data through December give a weighted average price for the first five months of the marketing year of 46.95 cents per pound.  The average price through December reflects approximately one-third of expected marketings for the year.  For January, the preliminary mid-month price estimate is 49.60 cents.  Based on historical marketing patterns that suggest 15 percent of the crop is normally marketed in January, the weighted average price through January is estimated at 47.75 cents per pound.  New York futures currently range between 56 and 58 cents for the contracts corresponding to the remaining months of the marketing year.  An average basis of 5 to 7 cents relative to New York futures suggests monthly prices for the remainder of the marketing year between 49 and 54 cents.  Averaging expected prices for the remainder of the marketing year with observed price data through January provides a likely MYA price range of 49 to 51 cents.  As a result, the National Cotton Council expects the CCP for the 2005/06 marketing year will be at the maximum level.

For producers who did not elect to receive the first advance CCP of 4.81 cents announced in October, they would be eligible for the full amount of the second advance of 9.61 cents.  For those producers who have taken the first advance, they would be eligible for 4.80 cents, which is the remaining portion of the second advance payment.

Currently, prices of energy-related inputs such as diesel fuel and nitrogen fertilizer are 25 to 40 percent above year-ago level.  In order to ease the economic pressures caused by higher input costs, we urge USDA to make the second advance as soon as possible.  Thank you for your consideration of our recommendations.

Sincerely,

Allen Helms
Chairman

cc:      The Honorable J.B. Penn, Under Secretary
           Floyd Gaibler, Deputy Under Secretary
           Teresa Lasseter, FSA Administrator