Cotton's Week November 2, 2001

Cotton's Week November 2, 2001

Cotton's Week: November 2, 2001

NCC Conveys Urgency of Farm Law Passage to Secretary

NCC Chairman James E. Echols and delegation of cotton industry representatives met with Ag Secretary Veneman to discuss development of farm legislation. Echols stated, "We stressed to Secretary Veneman the seriousness of the situation confronting farmers all across America. We urged her to work with Congress to move forward with new farm legislation as expeditiously as possible."

Echols said that Veneman indicated willingness to work with cotton industry in developing policy, but did not commit to specific time frame.

"Secretary Veneman indicated that USDA believes more time is needed to craft a commodity support delivery system that will coordinate better with the Administration’s trade positions and will slow the capitalization of program benefits in land values," Echols said. "She expressed concern that the House bill would result in overproduction of US agricultural products and encouraged cotton leaders to consider less ‘trade distorting’ delivery mechanisms."

NCC delegation expressed willingness to consider alternative delivery mechanisms but pointed to the urgency of Congressional approval of adequate and timely support, noting that many farmers will not be able to get production loans for ’02 crop unless better income safety net is forthcoming.

NCC remains committed to farm bill process started over 2 years ago by House Agriculture Committee Chairman Combest (R-TX), said Echols. "The House has developed and passed legislation that is very beneficial to farmers all across the US. Given the budget situation now confronting the government, it is important for Congress to move forward on agricultural legislation this year. Delay will introduce many additional uncertainties into the process."

The delegation also urged Secretary to establish loan rates for ’02 crop of cotton at same level as ’01 crop, even though formulas in current law provide discretionary authority for upland cotton loan to be reduced to 50 cents. Echols indicated delegation told Secretary that "by maintaining the loan rate at the ’01 level, USDA has the opportunity to introduce a degree of stability into a very unstable sector. Conversely, a reduction in the loan rate would further undermine an already fragile financial situation."

NCC Vice Chairman Kenneth Hood, ginner from Gunnison, MS; Tom Smith, NCC Advisor-Past President and CEO of Calcot, Ltd., Bakersfield, CA; Gaylon Booker, NCC President, Memphis; and John Maguire, NCC Vice President of Washington Operations, joined Echols in meeting.

Chairman Harkin Releases Detailed Farm Legislation Proposal

Over 2-day period, Senate Ag Committee Chairman Harkin (D-IA) released details of credit, conservation and rural development components of proposed farm legislation, followed by provisions for commodity, conservation and energy programs. Overall proposal, details of which are available at, would reauthorize and extend programs for 5 years.

According to documents available at this time, which are subject to change in advance of markup, Harkin’s commodity provisions would include modest increase in loan rates, continuation of marketing loan, continuation of fixed decoupled payment and new counter-cyclical payment triggered when target revenue per planted acre falls below average based on ’98-01 base period. Cropping flexibility is continued.

Limitation of $100,000 per "individual" would apply to combination of fixed and counter-cyclical payments. Maximum quantity of each loan-eligible commodity or combination of commodities would be established. For ’02 crops, producers would have option of using current loan program or new program.

Conservation proposal includes new Conservation Security Program to provide incentive payments for farmers, based on implementation and maintenance of certain conservation practices on working lands. In addition, Conservation Reserve Program would be increased to 40 million acres; Wetlands Reserve Program would be increased by up to 250,000 acres per year; Environmental Quality Incentive Program funding would be increased to $950 million annually, with modifications on program operation; Farmland Protection would be increased to $250 million per year by FY05; Wildlife Habitat Incentive Program funding would be increased to $100 million by FY06; and new Grasslands Reserve Program would be authorized for up to 1 million acres.

NCC voiced concern with proposal. NCC Chairman James E. Echols said, "I am glad Sen. Harkin has put forth a proposal, and our industry looks forward to working with the committee in developing workable farm policy. Overall, however, the Harkin proposal is not sufficient for cotton producers and would be detrimental to virtually all commercially sized farming operations. The proposal would have a negative impact on the competitiveness of US agriculture and impose unreasonable limitations on farming operations."

Chairman Harkin announced intention to schedule daily mark-up sessions beginning Nov. 6, with objective of completing work in committee by Nov. 9.

USDA Reports Record Decline in Monthly Farm Prices

Index of average farm prices estimated for October ’01 fell 9.5% from previous month, recording largest monthly decline in 91-year history of USDA reports.

Prices for all crops fell 14% from September ’01, while livestock and other product prices declined 3.6%. Sharp decreases in commodity farm prices occurred in cotton, 11%; soybeans, 8.6%; and corn, 6.7%. Commercial vegetable prices showed greatest decline at 23%.

Average farm price for cotton was estimated at 34.4 cents/lb., down 38% from October ’00 and lowest average farm price for cotton since March ’75.

Credit Provisions of New Farm Legislation Approved

Senate Agriculture Committee approved credit provisions to be part of new farm legislation. Approval of non-controversial title was bipartisan and did not reflect intense behind-the-scenes debate over how and whether to proceed on omnibus farm legislation this year.

As reported earlier, White House and USDA officials persuaded corn, soybean, specialty crop and livestock groups to back effort to delay Senate consideration until spring ’02. Cotton, wheat, grain, sorghum, dairy and peanut groups and American Farm Bureau have urged Senate to work to craft bill which allocates funds to commodity programs and delivers same level of benefits to production agriculture as House-passed bill. Groups acknowledge that delivery system may be different from House bill, but that progress is important if funds available in FY02 budget resolution are to be preserved for agriculture and related programs.

More Trade Concessions for Pakistan Proposed

Administration asked Congress to give President authority to grant duty breaks on Pakistani textile and apparel imports until Dec. 31, ’04, for assistance in war in Afghanistan and to keep Pakistan’s economy from collapsing.

Proposed bill could provide elimination of all duties on Pakistani apparel and textiles.

According to State Department spokesman Richard Boucher, Administration plans to restore Pakistan’s Generalized System of Preferences benefits and expand market access for Pakistan textile and apparel products, which could include waiving tariffs and adjusting quotas.

Commerce Department officials have indicated interest in consulting with US textile industry in effort to build consensus for action that will "provide some help to Pakistan without hurting the interests of an industry going through some very rough times."

NCC has joined American Textile Manufacturers Institute and American Yarn Spinners Assn. in request for meeting with Commerce and State Department officials to discuss situation.

Baucus Prepares Senate Stimulus Package

Senate action on economic stimulus package is unclear as Chairman Baucus (D-MT) schedules Finance Committee meeting for Nov. 6. Baucus was considering release of proposal Nov. 2, while Sen. Breaux (D-LA) indicated he is undecided whether to offer alternative or support Baucus’ plan.

Reportedly, Republican members Grassley (IA) and Lott (MS) are working to "find middle-ground." Baucus’ plan reportedly includes following elements: extend net operating loss carry-back period from 2 to 5 years; extend tax provisions set to expire by end of ’01; allow businesses to immediately expense 10% of investments in capital and software placed in service within next 12 months; increase Section 179 expensing for small businesses from $25,000 to $35,000 for next 12 months; provide tax refunds to individuals who did not receive rebates under previous tax cut; extension of unemployment benefits; and additional funds for nutrition and feeding programs. Efforts to reach consensus between Senate Democrats and Republicans and White House are continuing.

South Texas Growers Back Weevil Eradication Program

Cotton producers and crop-sharing landowners in 26-county South Texas/Winter Garden zone overwhelmingly approved retention of boll weevil eradication program, with almost 88% of voters in favor. With approval, voters maintained zone's maximum assessment of $23.14 an acre. They also chose Mark Morris of Chapman Ranch in Nueces County as new board member.

Since inception of program, South Texas/Winter Garden zone has experienced 98.8% reduction in number of weevils in zone.

EPA Continues with Guthion Decisions

EPA negotiated with NCC and registrants for changes to Guthion (azinphos-methyl) use on cotton in ’99, having perceived concerns for drinking water residues. Agreed changes would include discontinued use of Guthion on cotton east of Mississippi River, excluding Louisiana.

Despite that agreement, EPA recently has expressed worker risk concerns and is proposing immediate cancellation of product’s use on 28 crops. Guthion use on cotton is limited. Majority of use is for boll weevil control in areas not yet participating in boll weevil eradication program.

EPA proposes 4-year phase out for Guthion use on cotton to allow those regions to join eradication program or find alternatives for weevil control. Other mitigation proposals include: limiting use to Missouri and Texas only, with limit of 3 applications of 0.5 lbs. active ingredient per year; maintaining 5-day application interval; increasing re-entry interval to 7 days for all activities; adding 50-foot buffer zone around permanent surface water; and closed mixing systems, closed cabs and maximum personal protection equipment.

Major registrant, Bayer, has refused to agree to EPA’s package of mitigation proposals, citing flawed risk calculations. EPA initiated public comment period ending on Nov. 13. More information on proposals and means to submit comments are available at

Cotton Sales Almost 20% Higher than Previous Week

Net export sales for week ending Oct. 25 were 218,400 bales (480 lb.), almost 20% higher than previous week’s sales of 182,600 bales, raising total ’01-02 sales to over 7.0 million. Total sales at same point in ’00-01 marketing year were approximately 4.1 million bales.

Shipments for week were 167,700 bales, bringing total exports to date to slightly over 2.2 million bales, up from approximately 1.13 million at comparable point in ‘00-01 marketing year.

Effective Nov. 2-8, ’01

Adjusted World Price, SLM 1 1/16              20.90 cents*
Coarse Count Adjustment                        0.00 cents
Current Step 2 Certificate Value               1.93 cents
Marketing Loan Gain Value                     31.02 cents
*No Adjustment Made Under Step I

Five-Day Average

Current 3135 c.i.f. Northern Europe           34.97 cents
Forward 3135 c.i.f. Northern Europe              No Quote
Coarse Count c.i.f. Northern Europe           32.38 cents
Current US c.i.f. Northern Europe             38.15 cents
Forward US c.i.f. Northern Europe                No Quote