Cotton's Week November 16, 2001

Cotton's Week November 16, 2001

Cotton's Week: November 16, 2001

Senate Ag Committee Bill Has Potential to Restore Cotton Profitability

NCC Chairman James E. Echols says farm bill commodity title passed by Senate Agriculture Committee includes priorities with potential to restore US cotton industry profitability.

Offered by Chairman Harkin (D-IA) with principal co-sponsors Sens. Daschle (D-SD) and Conrad (D-ND), title passed on 12-9 vote, with Sen. Hutchinson (R-AR) joining with Democrat members in voting for final passage. Alternative measure offered by Sen. Roberts (R-KS) and endorsed by Ag Secretary Veneman failed on party line vote, with Sen. Lugar (R-IN) abstaining.

"We commend Chairman Harkin for moving ahead with the farm policy agenda so as to provide producers and lenders with a more stable outlook for US agriculture for the ’02 crop year and beyond," Echols said. "The goal now is to work in a bipartisan manner to get a bill passed by the Senate, through conference and signed by the President in time for next year’s crop."

Echols noted that several provisions, which were high NCC priorities, are incorporated in bill. Those include retention of marketing loan, with redemption keyed to prevailing world market price; retention of cotton’s 3-step competitiveness program; procedure for computing base acres that does not penalize growers who have opted to use FAIR Act’s flexibility provisions to under-plant their crop bases; payment eligibility provisions that enable commercially viable family farming operations to benefit from farm program participation; and safety net that helps producers better manage income and risk.

"Senators Lincoln (D-AR) and Miller (D-GA) provided critical leadership in getting these major provisions included in the bill," Echols said. "In particular, Sen. Lincoln worked to ensure that payment eligibility provisions and base acreage adjustments were incorporated into the final version. Senators Cochran (R-MS), Helms (R-NC) and Hutchinson worked hard to make the Republican alternative as viable as possible for US cotton and to draw the Administration into the debate.

"We look forward to working with the Senate to ensure that these cotton industry principles are retained in the bill that is finally enacted. The industry also will continue to work for other important but low-cost provisions that were not included, among which are elimination of the 1.25-cent threshold in the industry’s Step 2 competitiveness provision and income protection for cottonseed."

NCC analysts said bill includes number of improvements making it much more acceptable than earlier Senate versions. Importantly, payment limit provisions were adjusted to much more reasonable levels for commercially viable family farming operations.

Majority Leader Daschle expressed his intention to bring bill to Senate floor sometime after Thanksgiving recess.

Key bill provisions include: 1) 55-cent marketing loan with redemption at prevailing world market price; 2) safety net price of 68 cents/lb. paid on 100% of eligible pounds; 3) fixed decoupled payment of 13 cents/lb. for ’02-03, 6.5 cents for ’04-05 and 3.25 cents for ’06; 4) $100,000 per person limitation on combination of fixed and counter-cyclical payments; 5) continuation of 3-entity rule; 6) continuation of marketing certificates; and 7) ELS loan of 79.65 cents/lb. and continuation of competitiveness program.

Provisions of Republican alternative included: 1) 51.92-cent marketing loan with redemption at prevailing world market price; 2) continuation of 3-step competitiveness program; 3) 9.18-cents/lb. fixed, decoupled payment; 4) continuation of 3-entity rule and marketing certificates; and 5) Farm Counter-Cyclical Savings Account with matching contribution of up to 2% of average adjusted gross revenue.

New WTO Round Launched

Trade ministers meeting in Doha, Qatar, completed work on Ministerial declaration that will launch new round of trade negotiations. Agriculture section of declaration commits countries to negotiations aimed at "substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support."

Agriculture language in declaration meets many of goals of US Administration. Ag Secretary Veneman praised results of meeting, stating that "expanding global markets for our farmers is vital to the long-term prosperity of our highly productive agriculture and food sector."

NCC Chairman James E. Echols congratulated US delegation on success on agriculture text, stating, "The goals set out in the declaration - improving market access; reducing export subsidies; and reducing trade-distorting subsidies - if achieved, will enhance the export opportunities for US cotton, cottonseed and cotton products around the world."

Doha declaration sets out negotiating agenda for next 3 years in areas such as agriculture, services, industrial tariffs, investment and intellectual property. Initial deadline for completion of negotiations is Jan. 1, ’05.

Ministers also approved separate political declaration regarding patent rules and public health and documents on implementation issues. Importantly, this meeting also completed WTO membership process for China and Taiwan.

Despite success in agriculture, NCC voiced concern about some aspects of declaration regarding trade in manufactured goods, including textiles. Language on market access suggests developing countries will not have to make reciprocal tariff concessions. Declaration also commits US to more negotiations involving US application of countervailing duty and antidumping laws.

Echols stated that "the NCC believes strongly in reciprocal market access. This is particularly important with respect to trade in textiles and apparel. We urge our negotiators to insist on full reciprocity in market access in these negotiations."

Effort to Cut Tariffs for Pakistan Apparel on Hold

Administration curtailed efforts to extend tariff and quota concessions to Pakistan in connection with its cooperation in US anti-terrorism campaign after its proposals met with opposition from US textile and cotton interests.

House Ways and Means Committee Chairman Thomas (R-CA) reportedly argued that concessions of type Administration proposed would cause backlash among members from textile states that could increase difficulty of passing Trade Promotion Authority bill in House this year. Sources said Administration had not completely given up on idea of cutting tariffs and expanding quotas on selected textile and apparel products from Pakistan, but its proposals appeared to be on shelf for time being.

Package of benefits US has extended to Pakistan so far includes some modest concessions on textiles but reportedly fall far short of what Pakistan had been seeking. Administration has sought legislation to extend duty free treatment under Generalized System of Preferences (GSP) to 2 categories of products not currently covered by GSP - hand-knotted or hand-woven carpets and leather gloves.

In addition, Administration has agreed to adjust ’01 quotas on several products in order to account for discrepancies between how Pakistan and US calculated quota-fill rates from ’98-00.

Ag Appropriations Conference Report Approved

House and Senate approved FY02 Ag Appropriations Bill conference report. Bill awaits President's signature.

Sen. Cochran (R-MS), ranking member of Senate Ag Appropriations subcommittee, and Rep. Bonilla (R-TX), chairman of House Ag Appropriations subcommittee, played key roles in funding Cotton Belt priorities. Highlights include $77 million for Boll Weevil Eradication Program and $1.8 million for Pink Bollworm Program. Other Highlights include increased funds for Farm Service Agency salaries, increased agricultural credit programs and increased funds for conservation and research programs.

House Passes Andean Trade Pact

House approved by voice vote renewal of Andean Trade Preference Agreement. In letter to Cotton Belt members of House, NCC Chairman James E. Echols had called attention to several cotton industry concerns with bill, which expand preferences to include apparel and other products.

NCC concerns, he noted, include: 1) quota for apparel products manufactured in region - established initially at 3% of total US apparel imports and growing to 6% by ’06 - would adversely affect already struggling US textile industry; 2) doubling of cap on regional fabrics from African nations would have similar adverse impact on US textile industry; and 3) clarification of interim customs regulations defining eligibility for preferential treatment under Caribbean Basin Parity Initiative and African Growth and Opportunity Act do not fully address implementation uncertainties that have reduced benefits otherwise expected from these agreements.

"The economic health of the US cotton industry is closely linked to the economic health of the US textile industry," Echols noted in letter. "The ever-increasing volume of textile imports has placed both industries in economic jeopardy."

Letter stated that NCC must oppose bill in its current form and suggested 6-month extension to facilitate careful and thorough review.

Lorsban Re-Registration Imminent

Dow AgroSciences announced that Lorsban insecticides have cleared major regulatory hurdle now that interim re-registration eligibility decision (IRED) for these products, which are used on cotton, has been signed by EPA. By law, all pesticides registered prior to ’84 must undergo re-registration.

Dow official said IRED signing means health and environmental aspects of these products have been thoroughly evaluated by EPA, and farmers and professional applicators can continue to use products with confidence.

New labeling provides use requirements, introduces buffer zones and re-entry intervals for added environmental protection and contains provisions to further reduce potential exposures to agricultural workers.

Beltwide Panel to Address Cultural Practices, Costs

Eight cotton producers from across Cotton Belt will address question of when changes are needed in sometimes long-standing cultural practices in panel discussion at ’02 Beltwide Cotton Production Conference, Jan. 9-10, in Atlanta, GA.

Moderated by Arizona producer Ron Rayner, group will explore profitable ways to use conservation tillage, areawide insect management, irrigation, row spacing and control of pathogens, nematodes and weeds, as well as new technologies such as herbicide-resistant varieties and precision ag tools.

Panelists include: Dan Burns and Brock Taylor of California; Jerry Rovey, Arizona; Dan Davis, Oklahoma; Jerry Hoelscher, Texas; Jon Hardwick, Louisiana; Mike Newberry, Georgia; and Gill Rogers, South Carolina.

Sampling of reduced airline fares and other information regarding ’02 Beltwide Cotton Conferences is now on line at Find out more about what will be presented, register for conference and make travel plans.

Cotton Sales More than Double Previous Week

Net export sales for week ending Nov. 8 were 479,600 bales (480 lb.), more than double previous week’s sales of 231,000 bales, raising total ’01-02 sales to almost 7.76 million. Total sales at same point in ’00-01 marketing year were approximately 4.3 million bales. Shipments for week were 167,200 bales.

In last 70 years, exports have reached current forecast of 9.4 million bales only once, in ’94-95 marketing year. Accumulated exports for current year are almost 2.6 million bales, about 27% of forecast, which is over twice year-ago level.

Effective Nov. 16-22, ’01

Adjusted World Price, SLM 1 1/16           23.08 cents*
Coarse Count Adjustment                     0.00 cents
Current Step 2 Certificate Value            4.50 cents
Marketing Loan Gain Value                  28.84 cents
*No Adjustment Made Under Step I

Five-Day Average

Current 3135 c.i.f. Northern Europe        37.15 cents
Forward 3135 c.i.f. Northern Europe           No Quote
Coarse Count c.i.f. Northern Europe        34.85 cents
Current US c.i.f. Northern Europe          42.90 cents
Forward US c.i.f. Northern Europe             No Quote