Cotton Payments May Last Through Current Crop Year

It now appears the Phase 2 payments
made to US textile manufacturers and cotton shippers under the Cotton Competitiveness Program will
last through the current marketing year. After the World Trade Organization ruled earlier this year
such payments were illegal, there was a possibility they would be dropped immediately, in the
middle of the marketing year – something the cotton textile industry said would result in a severe
economic impact. The Senate Agriculture Committee has recommended the program be eliminated at the
end of the current marketing year, which would be July 2006. That proposal still has to be approved
by Congress and the administration, but industry officials are hopeful it will survive.

The competitiveness program provides for direct payments to US textile manufacturers when
the domestic price for raw cotton is higher than the world price. Since its inception in 1995, an
estimated $2.4 billion in payments have been made to mills and merchants.

October 2005