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Huge Individual Cotton Payments Contained in $728 Million Cotton Program

April 16, 1987

WASHINGTON (AP) _ Federal payments to cushion private companies against a drop in cotton prices last year soared to $728 million, with nearly $90 million paid to one Memphis merchant, according to newly released figures.

More than a dozen of about 900 merchants, mills, cooperatives and others who shared in the program received individual payments of at least $10 million to offset the goverment-engineered price drop.

″Obviously there are some very large payments there,″ Agriculture Department aide Michael Masterson said Wednesday after release of the figures, which had been kept under wraps for six months.

Intense interest focused on the program because of the size of the largest payments, providing various types of middlemen with certificates redeemable in government-owned cotton. It seemed likely they would further fuel debate in Congress over federal subsidies paid to agribusiness concerns.

The overall program did not approach the largest subsidies in the nation’s $26 billion farm program. But some individual amounts were believed to be among the largest in recent years.

Defenders of the payments say they were deserved because the 10-cent per pound drop in cotton prices was engineered by the government under the 1985 farm law to stimulate exports. Federal price-supports were lowered and the expected jump in shipments to overseas markets quickly materialized.

But the drop in prices would have victimized holders of cotton stocks by slashing the value of their holdings, and thus some payment was needed to buffer them against loss, according to the program’s supporters.

″There was no windfall,″ William Zarfoss, administrative vice president of the Allenberg Cotton Co. of Memphis, Tenn., said in a telephone interview. He declined to give 1986 sales figures for the closely held firm founded in 1921.

Allenberg received $83.56 million from the government’s Inventory Protection Program, designed to offset the price drop, and a related but much smaller First Handler Program also aimed at smoothing the transition.

The largest amount, however, went to Dunavant Enterprises Inc. of Memphis and its California subsidiary, W.B. Dunavant & Co., which received a total of $89.77 million in three payments, according to figures released by the Agricultural Stabilization and Conservation Service, which administers the Inventory Protection Program.

The service withheld publication of the figures for six months after the payments, saying early release would put the companies at an unfair competitive disadvantage in the marketplace.

Other major recipients of multimillion-dollar payments, which averaged $195 per 500-pound bale, included Calcot Ltd., Bakersfield, Calif., $54.5 million; Hohenberg Brothers Co., Memphis, $28.6 million; Conticotton, Fresno, Calif., $25.1 million; Cone Mills Corp., Greensboro, N.C., $16.5 million; Burlington Industries, Greenville, N.C., $14.8 million; the Julien Co., Memphis, $12.8 million; Esteve Brothers & Co., Dallas, $13.7 million; Westpoint-Pepperell, Valley, Ala., $12.4 million; Toyo Cotton Co., Dallas, $14.7 million; Greenwood Mills Inc., Greenwood, S.C., $11.3 million.

Those who shared in the $728 million in payments ranged from the top names in the textile and cotton industries to small-town companies that received only a few dollars. A textile subsidiary of B.F. Goodrich received $760,622 and the Texas Department of Corrections received $458,860.

The J.G. Boswell Co. of Los Angeles, closely watched after being spotlighted last year as a potential major recipient of producer and inventory protection subsidies, received $2.16 million in inventory protection payments.

Release of the figures came while Congress was in recess.

The American Textile Manufacturers Institute issued a statement seeking to answer in advance any charges of waste.

It said that ″as much as 75 percent of government expenditures for cotton inventory protection payments will be recovered″ through reduction of government stocks and other federal expenses.

The textile institute also said that ″the major benefit of the inventory protection payments was the continuous operation of cotton-textile marketing and manufacturing sectors, thereby adding hundreds of millions of dollars in wages and revenues to the national economy and increasing U.S. businesses’ share of both domestic and world markets.″

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