[Federal Register Volume 73, Number 102 (Tuesday, May 27, 2008)]
[Rules and Regulations]
[Pages 30274-30277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-11803]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1427

RIN 0560-AH78


Cotton World Price Determination

AGENCY: Farm Service Agency and Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Commodity Credit Corporation (CCC) is revising the Upland 
Cotton regulations to use Far East prices instead of Northern Europe 
prices in determining the upland cotton adjusted world price (AWP). The 
change is being made because of changes in the market and in the 
available price data. The AWP is used to determine repayment rates for 
marketing assistance loans (MAL) and to establish loan deficiency 
payments (LDP).

DATES: Effective Date: May 23, 2008.

FOR FURTHER INFORMATION CONTACT: Scott Sanford, Fibers, Peanuts, and 
Tobacco Analysis Director, Economic and Policy Analysis Staff, Farm 
Service Agency, United States Department of Agriculture (USDA), Stop 
0515, 1400 Independence Ave., SW., Washington, DC 20250-0515. 
Telephone: (202) 720-3392. Electronic mail: [email protected]. 
Persons with disabilities who require alternative means for 
communication (Braille, large print, audio tape, etc.) should contact 
the USDA Target Center at (202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Background

    CCC administers the commodity loan program for upland cotton. Under 
section 1204 of the Farm Security and Rural Investment Act of 2002 
(Pub. L. 107-171, 7 U.S.C. 7934), repayment of the loan is allowed at 
the AWP in lieu of what would otherwise be full repayment of the loan 
plus interest. Under section 1204, AWP is the ``prevailing world market 
price for the commodity (adjusted to United States quality and 
location), as determined by the Secretary.'' No particular formula is 
set by the statute for determining the prevailing world price; however, 
as specified in the regulation in 9 CFR 1427.25, for the 2007 and 
preceding crops CCC has used a northern Europe (NE) price. While the 
statute does not require the use of an NE price for this purpose the 
statute does require the use of an NE price for certain other purposes, 
one being in connection with an adjustment, under section 1234(e), to 
the otherwise determined AWP, and the other being in connection with 
import quotas under section 1237(b). AWP's are announced each Thursday 
and are generally based on quotes for a particular crop--that is, 
cotton in a particular crop year. The changeover from one crop to the 
next occurs in April. By regulation, there is a 6-week phase-in period 
in which the old and new crop prices are mixed progressively in favor 
of new crop prices.
    This rule changes the basic AWP determination to a Far East (FE) 
rather than NE basis. At one time, northern Europe was a center of 
cotton trade. However, in recent years much of the focus of world trade 
in cotton has moved to the Pacific Rim countries, especially China. 
Now, the vast majority of U.S. cotton exports are destined for the Far 
East, with smaller shares to South Asia, Mexico, and Turkey. Less than 
one percent of U.S. cotton exports are now bound for Northern Europe. 
Also, Cotlook, Ltd. (Cotlook), the supplier of NE quotes, has announced 
that it will not publish forward crop quotes, NE basis, for the 2008 
season. No NE quotes will be published by Cotlook at all after July 31, 
2008. By contrast, Cotlook will continue to publish Far East prices. 
There is no alternative, preferable reporting system. The coarse count 
adjustment of section 1427.25(f) of the regulations will be made on an 
FE rather than NE basis. In the two instances in which an NE basis is 
statutorily required those determinations will be made using such 
direct or indirect data as may be available.

Notice and Comment

    These regulations are exempt from the notice and comment 
requirements of the Administrative Procedure Act (5 U.S.C. 553), as 
specified in section 1601(c) of the 2002 Farm Bill, which requires that 
the regulations be promulgated and administered without regard to the 
notice and comment provisions of section 5 of title 5 of the United 
States Code or the Statement of Policy of the Secretary of Agriculture 
effective July 24, 1971, (36 FR 13804) relating to notices of proposed 
rulemaking and public participation in rulemaking.

[[Page 30275]]

Executive Order 12866

    The Office of Management and Budget (OMB) designated this rule as 
economically significant under Executive Order 12866 and, therefore, 
OMB reviewed this final rule. A cost-benefit assessment of this rule 
was completed and is available from the contact information above.

Summary of Economic Impacts

    The switch to FE as the basis for determining the cotton AWP is 
expected to generate modest savings as lower transportation costs to 
the FE. The net effect will likely raise the AWP, reducing CCC's 
exposure on marketing loan benefits.
    Counter-cyclical payments are not affected because the change to FE 
quotes does not affect the marketing year average price that triggers 
counter-cyclical payments.
    Recent survey results quantify the transportation cost savings 
associated with a shift from the NE to the FE market. Annually, CCC 
conducts a survey of transportation costs for delivering U.S. cotton to 
foreign ports. In the February 2008 survey, shippers were asked to 
estimate their costs for delivery to FE as well as NE ports, resulting 
in NE costs of 14.52 cents per pound and FE costs of 12.41 cents per 
pound. The difference, 2.11 cents per pound, more than offsets the 
historical average of 1.07 cents per pound by which FE quotes exceed NE 
quotes. As a result, the AWP on an FE basis will be 1.04 cents per 
pound higher (2.11 cents minus 1.07 cents) than it would be on an NE 
basis, and marketing loan benefits (when available) will be 1.04 cents 
per pound lower. Based on a 20-million bale crop (the average of recent 
years), marketing loan benefits (when available) would be $104 million 
per year lower using Far East quotes.
    The change recognizes the shift in world cotton trade to the FE 
market that has occurred over time. In addition, it allows the program 
to operate in the manner that provides a smooth transition between crop 
years, while reducing potential CCC budgetary outlays.

Regulatory Flexibility Act

    This rule is not subject to the Regulatory Flexibility Act since 
CCC is not required to publish a notice of proposed rulemaking for this 
rule.

Environmental Review

    The environmental impacts of this rule have been considered in a 
manner consistent with the provisions of the National Environmental 
Policy Act of 1969 (NEPA), 42 U.S.C. 4321-4347, the regulations of the 
Council on Environmental Quality (40 CFR parts 1500-1508), and the FSA 
regulations for compliance with NEPA (7 CFR part 799). The following 
final rule was determined to be Categorically Excluded. Therefore, no 
environmental assessment or environmental impact statement will be 
completed for this final rule.

Executive Order 12372

    This program is not subject to Executive Order 12372, which 
requires consultation with State and local officials. See the notice 
related to 7 CFR part 3015, subpart V, published in the Federal 
Register on June 24, 1983 (48 FR 29115).

Executive Order 12612

    This rule does not have Federalism implications that warrant the 
preparation of a Federalism Assessment. This rule will not have a 
substantial direct effect on States or their political subdivisions or 
on the distribution of power and responsibilities among the various 
levels of government.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988. This 
final rule is not retroactive and it does not preempt State or local 
laws, regulations, or policies unless they present an irreconcilable 
conflict with this rule. Before any judicial action may be brought 
regarding the provisions of this rule the administrative appeal 
provisions of 7 CFR parts 11 and 780 must be exhausted.

Unfunded Mandates

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the UMRA for State, local, and tribal 
government or the private sector. In addition, CCC was not required to 
publish a notice of proposed rulemaking for this rule. Therefore, this 
rule is not subject to the requirements of sections 202 and 205 of the 
UMRA.

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)

    Section 1601(c)(3) of the 2002 Farm Bill requires that the 
Secretary use the authority in section 808 of title 5, United States 
Code, which allows an agency to forgo SBREFA's usual 60-day 
Congressional Review delay of the effective date of a major regulation 
if the agency finds that there is a good cause to do so. Accordingly, 
this rule is effective upon publication in the Federal Register.

Paperwork Reduction Act

    These regulations are exempt from the requirements of the Paperwork 
Reduction Act (44 U.S.C. Chapter 35), as specified in section 
1601(c)(2)(A) of the 2002 Farm Bill, which provides that these 
regulations be promulgated and administered without regard to the 
Paperwork Reduction Act.

E-Government Act Compliance

    CCC is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

List of Subjects in 7 CFR Part 1427

    Cotton, Cottonseeds, Loan programs-agriculture, Packaging and 
containers, Price support programs, Reporting and recordkeeping 
requirements, Surety bonds, Warehouses.

0
Accordingly, amend 7 CFR part 1427 as follows:

PART 1427--COTTON

0
1. Revise the authority for part 1427 to read as follows:

    Authority: 7 U.S.C. 7231-7236, 15 U.S.C. 714b and 714c, Public 
Law 108-324, Public Law 108-447, and Public Law 109-234.


0
2. Amend Sec.  1427.3 as follows:
0
a. Remove the definition of ``current shipment price'' and add a new 
definition, in alphabetical order, for the term ``current northern 
Europe shipment''.
0
b. Remove the definition of ``forward shipment price'' and add a new 
definition, in alphabetical order, for the term ``Forward northern 
Europe shipment'' to read as follows.
0
c. Amend the definition of ``U.S. Northern Europe current price'' by 
removing the words ``current shipment'' and adding the words ``current 
northern Europe shipment'' in their place.
0
d. Revise the definition of ``U.S. Northern Europe forward price'' by 
removing the words ``forward shipment'' and adding the words ``forward 
northern Europe shipment'' in their place.
0
e. Add new definitions, in alphabetical order, for the following terms 
``Current Far East shipment price,'' ``Far East current price,'' ``Far 
East forward price,'' ``Far East price,'' ``Forward Far East shipment 
price,'' ``U.S. Far East current price,'' ``U.S. Far East forward 
price,'' and ``U.S. Far East price,'' as set forth below:


Sec.  1427.3  Definitions.

* * * * *

[[Page 30276]]

    Current Far East shipment price means, during the period in which 
two daily price quotations are available for the growth quoted for M 
1\3/32\ inch cotton, CFR (cost and freight) Far East, the price 
quotation for cotton for shipment no later than August/September of the 
current calendar year.
    Current northern Europe shipment means, during the period in which 
two daily price quotations are available for the growth quoted for M 
1\3/32\ inch cotton, C.I.F. northern Europe, the price quotation for 
cotton for shipment no later than August/September of the current 
calendar year.
* * * * *
    Far East current price means the average for the preceding Friday 
through Thursday of the current shipment prices for the five lowest-
priced growths of the growths quoted for M 1\3/32\ inch cotton, CFR Far 
East.
    Far East forward price means the average for the preceding Friday 
through Thursday of the forward shipment prices for the five lowest-
priced growths of the growths quoted for M 1\3/32\ inch cotton, CFR Far 
East.
    Far East price means, during the period in which only one daily 
price quotation is available for the growth quoted for M 1\3/32\ inch 
cotton, CFR Far East, the average of the price quotations for the 
preceding Friday through Thursday of the five lowest-priced growths of 
the growths quoted for M 1\3/32\ inch cotton, CFR Far East.
* * * * *
    Forward Far East shipment price means, during the period in which 
two daily price quotations are available for the growths quoted for M 
1\3/32\ inch cotton, CFR Far East, the price quotation for cotton for 
shipment no earlier than October/November of the current calendar year.
    Forward northern Europe shipment means, during the period in which 
two daily price quotations are available for the growths quoted for M 
1\3/32\ inch cotton, C.I.F. northern Europe, the price quotation for 
cotton for shipment no earlier than October/November of the current 
calendar year.
* * * * *
    U.S. Far East current price means the average for the preceding 
Friday through Thursday of the current Far East shipment prices for the 
lowest-priced U.S. growth as quoted for M 1\3/32\ inch cotton, CFR Far 
East.
    U.S. Far East forward price means the average for the preceding 
Friday through Thursday of the forward Far East shipment prices for the 
lowest-priced U.S. growth as quoted for M 1\3/32\ inch cotton, CFR Far 
East.
    U.S. Far East price means, during the period in which only one 
daily price quotation is available for the U.S. growths quoted for M 
1\3/32\ inch cotton, CFR Far East, the average of the price quotations 
for the preceding Friday through Thursday of the lowest-priced U.S. 
growth as quoted for M 1\3/32\ inch cotton, CFR Far East.
* * * * *
0
3. Amend Sec.  1427.25 as follows:
0
a. Revise the following paragraphs to read as set forth below: 
paragraphs (a)(1), (a)(2), (c)(1)(i)(B), (d)(2)(i), (f)(2)(i)(B), and 
(g).
0
b. In paragraph (a)(3), remove the words ``Northern Europe price (NE)'' 
and add, in their place the words ``Far East price (FE).''
0
c. In the following places, remove the abbreviation ``NE'' and add, in 
their place the abbreviation ``FE:''
    i. Paragraph (c) introductory text,
    ii. Paragraph (c)(1) introductory text, and
    iii. Paragraph (f)(2)(i) introductory text.
0
d. In paragraphs (f)(2)(iii) and (f)(3) introductory text, remove the 
words ``Northern Europe'' and add, in their place the words ``Far 
East.''
0
e. In the following places, remove the words ``C.I.F. northern Europe'' 
and add, in their place each time they appear, the words ``CFR Far 
East:''
    i. Paragraph (c)(1)(i)(A),
    ii. Paragraph (d)(1) introductory text,
    iii. Paragraph (d)( 2) introductory text,
    iv. Paragraph (d)(3)(i), and
    v. Paragraph (f)(2)(i)(A).
0
f. In paragraph (c)(4)(i)(B), add the abbreviation ``(NE)'' immediately 
following the words ``northern Europe.''
0
g. In paragraph (c)(4)(ii), remove the word ``shipment'' and add, in 
its place each time it appears, the words ``northern Europe shipment:''
0
h. In paragraph (c)(4)(iv)(B), remove the reference ``paragraph (a)'' 
and add, in its place, the reference ``paragraph (c).''
0
i. In paragraphs (d)(1)(i) and (ii), remove the words ``northern 
Europe'' and add, in their place each time they appear, the words ``the 
Far East:''
0
j. In paragraph (d)(2)(i), remove the words ``northern Europe 
quotation'' and add, in their place, the words ``Far East quotation.''
0
k. In paragraph (e), remove the word ``Standard'' each time it appears.


Sec.  1427.25  Determination of the prevailing world market price and 
the adjusted world price for upland cotton.

    (a) * * *
    (1) During the period when only one daily price quotation is 
available for each growth quoted for Middling one and three-thirty-
second inch (M 1\3/32\ inch) cotton, CFR (cost and freight) Far East, 
the prevailing world market price for upland cotton will be based on 
the average of the quotations for the preceding Friday through Thursday 
for the 5 lowest-priced growths of the growths quoted for M 1\3/32\ 
inch cotton, CFR Far East.
    (2) During the period when both a price quotation for cotton for 
shipment no later than August/September of the current calendar year 
(current Far East shipment price) and a price quotation for cotton for 
shipment no earlier than October/November of the current calendar year 
(forward Far East shipment price) are available for growths quoted for 
M 1\3/32\ inch cotton, CFR Far East, the prevailing world market price 
for upland cotton will be based on the following: Beginning with the 
first week covering the period Friday through Thursday that includes 
April 15 or, if both the average of the current Far East shipment 
prices for the preceding Friday through Thursday for the 5 lowest-
priced growths of the growths quoted for M 1\3/32\ inch cotton, CFR Far 
East (Far East current price (FEc)), and the average of the forward Far 
East shipment prices for the preceding Friday through Thursday for the 
5 lowest-priced growths of the growths quoted for M 1\3/32\ inch 
cotton, CFR Far East (Far East forward price (FEf)), are not available 
during that period, beginning with the first week covering the period 
Friday through Thursday after the week which includes April 15 in which 
both the FEc and FEf price are available, the prevailing world market 
price for upland cotton will be based on the result calculated by the 
following procedure:
    (i) Weeks 1 and 2: ((2 x FEc) + FEf)/3.
    (ii) Weeks 3 and 4: (FEc + FEf)/2.
    (iii) Weeks 5 and 6: (FEc + (2 x FEf))/3.
    (iv) Week 7 through July 31: FEf.
* * * * *
    (c) * * *
    (1) * * *
    (i) * * *
    (B) The average of the current Far East shipment prices for U.S. 
Memphis territory and the California/Arizona territory as quoted each 
Thursday for M 1\3/32\ inch cotton, CFR Far East, during the period 
when both current Far East shipment prices and forward Far East 
shipment prices for such growths are available; and
* * * * *
    (d) * * *
    (2) * * *
    (i) May use the available Far East quotation to determine the 
difference

[[Page 30277]]

between the average price quotations for the U.S. Memphis territory and 
the California/Arizona territory, as quoted for M 1\3/32\ inch cotton, 
CFR Far East, and the average price of M 1\3/32\ inch, leaf 3, 
(micronaire 3.5 through 3.6 and 4.3 through 4.9, strength 25.5 through 
29.4 grams per tex, length uniformity 80 through 82 percent) cotton, as 
quoted each Thursday in the designated U.S. spot markets for that week, 
or
* * * * *
    (f) * * *
    (2) * * *
    (i) * * *
    (B) During the period when both current Far East shipment prices 
and forward Far East shipment prices are available for the growths 
quoted for ``coarse count'' cotton, CFR Far East, the result calculated 
by the following procedure: Beginning with the first week covering the 
period Friday through Thursday including April 15 or, if both the 
average of the current Far East shipment prices for the preceding 
Friday through Thursday for the three lowest-priced growths of the 
growths quoted for ``coarse count'' cotton, CFR Far East (Far East 
coarse count current price (FECCc)), and the average of the forward Far 
East shipment prices for the preceding Friday through Thursday for the 
three lowest-priced growths of the growths quoted for ``coarse count'' 
cotton, CFR Far East (Far East coarse count forward price (FECCf)), are 
not available during that period, beginning with the first week 
covering the period Friday through Thursday after the week including 
April 15 in which both the Far East coarse count current price and the 
Far East coarse count forward price are available:
    (1) Weeks 1 and 2: (2 x FECCc) + FECCf)/3;
    (2) Weeks 3 and 4: (FECCc + FECCf)/2;
    (3) Weeks 5 and 6: (FECCc + (2 x FECCf))/3; and
    (4) Week 7 through July 31: The FECCf, minus:
* * * * *
    (g) If the 6-week transition period from using current Far East 
shipment prices to using forward Far East shipment prices in the 
determination of the FE under paragraph (a)(2) of this section, and the 
Far East coarse count price under paragraph (f)(2)(i)(B) of this 
section do not begin at the same time, CCC will use either current Far 
East shipment prices, forward Far East shipment prices, or any 
combination thereof to determine the FE and/or the Far East coarse 
count price used in the determination of the adjustment for upland 
cotton under paragraph (f)(1) of this section and determined under 
paragraph (f)(2) of this section to prevent distortions in such 
adjustment.
* * * * *

    Signed at Washington, DC, on May 20, 2008.
Teresa C. Lasseter,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. E8-11803 Filed 5-23-08; 8:45 am]
BILLING CODE 3410-05-P