The US Agriculture Department proposed a rule on Friday to require most growers to store cotton indoors in order to be repaid by the government for the storage costs.
USDA's Commodity Credit Corporation said changes are needed in the cotton support program because much of the crop is exported. The proposed rule would protect cotton quality, relieve storage congestion and improve the flow of cotton to market by removing excessive incentives to store it.
"The 9-month loan term for marketing assistance loans, coupled with crediting the repayment of the loan for accrued storage charges, may create incentives to maintain the upland cotton in the loan program and adversely delay marketings," CCC said in proposing the rule in the Federal Register.
CCC said the measure would encourage cotton to be stored indoors to protect it from damage. In some cases - such as when a large crop exceeds local storage capacity - cotton could be stored outdoors and growers would be reimbursed for storage while their cotton was held as collateral on USDA loans.
Cotton and peanuts are the only commodities on which the CCC pays storage charges while the crop is under loan.
USDA said it would employ a uniform national storage-credit rate that would be no more than $2.15 per month per bale or what a grower received in 2005 if the reimbursement rate was below $2.15. Storage rates vary considerably from less than $2 to more than $5 in the United States, reducing in some cases maintenance of the bales or slowing movement of product from the warehouse.
The public has 30 days to comment on the rule.