Thank you Hollis and members of the American Cotton Producers for this opportunity to review some of the Council’s activities that have occurred since your meeting in Birmingham.

The goals we established at the Council's annual meeting and later during the spring Board meeting are still at the forefront of our efforts. Later on, Mark Lange will be leading you through some of the options and possible trade-off decisions our industry will face soon as we continue to pursue our goals. And, John Maguire will discuss the political climate we face in terms of our action timeline and priorities.

Council leaders have held formal and informal discussions with Congress on many occasions since our annual meeting in late January. We have presented testimony to both the House and Senate Agriculture Committees regarding short and long-term farm policy and the industry's trade policy priorities. We have also met with representatives of the White House and with other commodity organizations-- trying to establish a consensus on how best to deal with the crippling financial crisis enveloping the cotton industry and agriculture as a whole.

At the top of our list have been efforts to obtain Congressional authorization for supplemental income assistance for 2001. In this regard, I must say I am very pleased with the progress that has been made. Despite some last minute concerns, Congress managed to pass the emergency assistance package for this year just before it recessed. That assistance was absolutely necessary, and fortunately, will be timely.

Regarding another of the Council's top priorities, I am also very encouraged with the progress the House has made toward enacting a new farm bill. Chairman Combest and Mr. Stenholm have followed a bipartisan, determined path and they have reported a bill that meets many of the goals we established at the Council’s annual meeting and during the spring board meeting. It is a very positive bill for the cotton industry.

The difficulties in the Senate concerning the 2001 emergency assistance package centered on money, of course. And the question was the same one faced by the House – should they increase 2001 assistance by borrowing from 2002 funds, or was it more important to preserve 2002 funds for writing a new farm bill. In the end, the Senate had to follow the lead of the House and keep the emergency package at $5.5 billion. It was a difficult choice for many legislators. But ultimately, the Senate realized it had to act quickly to meet the budget deadline.

While we didn’t get everything we sought in the emergency package, I think it is important to note that cotton fared better than other program crops, since we got our normal share of supplemental payments plus funding for additional cottonseed assistance.

Looking to the new farm bill, the House proposal, in many respects, is tailor-made for our industry. It has:

• A marketing loan keyed to world price;
• Retention of cotton’s 3-step competitiveness plan;
• Retention of fixed, decoupled payments;
• A new counter cyclical payment program;
• An option for growers to update their payment bases;
• Retention of full planting flexibility with no mandatory supply controls; and
• Maintenance of the ELS loan rate and inclusion of the competitiveness program (Step 2) as an entitlement.

Although we would have preferred to see payment limits eliminated, the bill does provide for separate and reasonable limits established for each type of payment and continues the availability of marketing certificates. So while we didn’t get elimination, we did get our backup plan.

As positive as this bill is, we still have work to do. Among our other priorities are the elimination of the 1.25 cent threshold under step 2, permanent cottonseed assistance, and freezing the ELS loan rate. In addition, we continue to seek additional ways to help offset the negative impact on cotton of the strong U.S. dollar.

Throughout the past two months, we have communicated these objectives to Congressional leaders and Administration officials, pointing out the destructive impact the strong dollar has had on our industry, the continuing weak prices of cottonseed and the need to ensure that ELS cotton remains a viable choice for western producers.

The exchange rate situation is proving to be particularly devastating to our textile industry. Since 1995, an agricultural trade-weighted exchange rate index shows the dollar having risen by more than 30%. As a result, the United States has become a magnet for cotton textile imports, especially from Asia, and cotton farmers abroad have experienced a much better cost/price situation than American farmers.

Last month, U.S. mills consumed cotton at an annual rate of just under 8 million bales. That compares with 11.4 million a couple of years ago. Since the first of this year, 45 US textile plants have been closed with a corresponding loss of 15,000 jobs and some of the biggest names in textiles. Every week we hear of yet another mill closing, and many producer and ginner leaders are asking us, "What can we do to salvage our domestic textile industry?"

Eliminating the 1.25 cent step 2 threshold won’t be enough, but it would be a start. Beyond that, we need to find a way to help the mills offset the devastating impact of the strong dollar.

The Council’s Economic staff estimate that if the value of the dollar had not risen from its 1995 relationship to other currencies, today’s rate of US mill consumption would be 12.3 million bales-- about 4.5 million bales higher than the actual rate. Think how far that would go toward solving our price and offtake dilemma.

There are a number of ways exchange rate provisions could work. But they all cost money and the House bill already spends all of the $73.5 billion that was authorized for the farm bill. Among the options we will need to consider is the possibility that funding for exchange rate adjustments for cotton might have to come from cotton’s share of the $73.5 billion.

So, eliminating the 1.25 cent threshold or including exchange rate provisions in new farm law will almost certainly add one more tough decision to the list our industry leaders will have to make in the weeks ahead.

I know every segment will have its own "wish list" as we continue to work for the best possible farm bill. Everything I hear suggests that we may have trouble holding what we have in the House bill. Chairman Harkin has some farm policy ideas that are considerably different than ours. On the positive side, we will be able to work closely with Senators Cochran, Helms, Lincoln, Hutchinson and Miller. As we think about our priorities, I would suggest to you that elimination of the 1.25 cent threshold needs to be among our highest priorities as we seek to improve on cotton provisions. It's an understatement to say that our domestic textile industry is under very serious economic stress. We all have a stake in trying to salvage that industry. If we don’t find a way to deliver some significant assistance, we will almost certainly see many more bankruptcies and a corresponding sharp reduction in demand for U.S. cotton.

As always, it boils down primarily to decisions about money and how to allocate it. And as always, the seven segments of the cotton industry will have to consider options with a view as to what’s best for the entire industry.

Our industry will have to be both united and persistent. And we will need to muster the kind of diplomacy that has always characterized cotton leaders when push came to shove and the tough, unity-building decisions had to be made. It is that kind of willingness to make reasonable concessions that has set the Council apart from most other organizations, and I predict it will happen again.