Cotton's Week: March 28, 2003

Cotton's Week: March 28, 2003


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Budget Resolutions Head for Conference Committee

The Senate passed a FY04 Budget on a 56-44 vote after voting to reduce the President’s $726 billion tax cut package to $350 billion. Passage came after a week-and-a-half debate on the $2.2 trillion plan and sends it to conference with the House.

The House plan (see March 21 Cotton’s Week) includes a $726 billion tax cut as well as provisions that, if retained in the final conference agreement, would require significant spending cuts in a number of program areas, including agriculture. However, House Budget Committee Chairman Nussle (R-IA) made commitments to several members that he would work to ensure that the final resolution would not require changes to farm law in order to achieve spending reduction targets in the next 5 years.

The Senate Budget Committee does not specify spending cuts; rather it assumes a slower increase in spending over the next 10 years. Senator Grassley (R-IA) successfully added an amendment that would instruct the Senate Agriculture Committee to adjust current law to reduce projected spending for farm programs by $1.4 billion and shift the funds to the Conservation Security Program.

During Senate consideration of the Budget Resolution, Senator Cochran (R-MS), chairman of the Agriculture Committee, and Senator Nickles (R-OK), chairman of the Budget Committee, had the following colloquy:

Cochran: "Can the distinguished chairman of the Budget Committee offer me assurance that the Budget Resolution agreement will leave policy decisions regarding payment limitations to be resolved by the Senate Committee on Agriculture, Nutrition and Forestry?"

Nickles: "I provide that assurance."

Cochran: "I thank the Senator for his cooperation."

A House-Senate Conference Committee will be appointed to develop a final budget plan that likely will be presented to the House and Senate by April 11.

Key Sign-Up Dates Given for Disaster Programs

Agriculture Secretary Veneman announced key sign-up dates for programs under the Agricultural Assistance Act of ’03, including the crop disaster assistance program. Sign-up for the crop program, which will reimburse producers for qualifying crop losses in either ’01 or ’02, will begin June 6, with payments to begin shortly thereafter.

"(USDA) is committed to getting assistance into the hands of affected producers as soon as possible," Veneman said. "Our timetable is several weeks ahead of previous disaster aid packages, even though this is a more complicated bill to implement."

To expedite the process, Veneman said, the department is working to cut regulatory red tape by going directly to final rules where possible and implementing many regulations through a single, expedited "mega-regulation."

Crop disaster payments must be calculated using the same formula used for the ’00 crop year. This means crop losses for ’01 and ’02 will be valued using the price election for Actual Production History (APH) crop insurance policies, or, if that price is not available, a 5-year average.

Crop disaster payments also are subject to a formula which states that the sum of (1) the value of the crop not lost, (2) the disaster payment and (3) the crop-insurance indemnity cannot exceed 95% of what the crop’s value would have been if there had been no loss. Crop disaster payments will be reduced if the 95% limitation is exceeded. The value of the crop not lost and the 95% limitation will be valued at either the APH price election or the NASS season-average price, whichever is higher. Specific details will be available from local Farm Service Agency offices, USDA Service Centers and on the web at

Other key assistance program details include: the $50 million cottonseed program will begin after completion of the ’02 crop ginning season, which occurs around May 1; $60 million in hurricane-loss assistance for sugar cane growers and cooperatives will be provided in May; sign-up for $60 million in disaster-related assistance for the sugar beet industry will begin in June; and the $250 million Livestock Assistance Program that will reimburse producers for grazing losses will begin in July.

The Livestock Compensation Program (LCP) and the Tobacco Payment Program (TOPP) already are in place, with sign-up for TOPP underway and LCP sign-up slated to begin April 1. USDA also is issuing refunds to eligible producers who were assessed payment reductions last year for haying or grazing on lands enrolled under the Conservation Reserve Program. These refunds will total $16.4 million to producers in 28 states.

Veneman also reminded producers of the April 1 deadline to update acreage bases and yields under the Direct and Counter-Cyclical Payment Program. Nationwide, USDA expects that about 5% of eligible producers still need to visit their county offices to either make the updates or make appointments to do so.

Two other important dates include the March 31 deadline to designate peanut acreage and yields to a farm and the June 2 closing date to sign completed contracts for the ’02 and ’03 Direct and Counter-Cyclical Payment Program.

For more information on these issues, visit USDA’s web site at Information specific to disaster assistance can be found at

Greene Says Doha Negotiating Text Offers Few Benefits

NCC Chairman Bobby Greene voiced cotton industry concerns with the latest version of the negotiating text in the Agricultural Negotiating Group of the Doha Round of trade negotiations. In identical letters to US Trade Representative Zoellick and Secretary of Agriculture Veneman, Greene stated that while some aspects of the draft negotiating text were commendable, it would take a significant effort to transform the proposal into an agreement "that is beneficial to the US cotton industry and to US agriculture in general. Far from leveling the international playing field, several aspects of the modalities text would worsen the competitive situation faced by US agriculture."

The "modalities" text, drafted by the chairman of the Agricultural Group in an effort to push the negotiations forward, calls for an end to agricultural export subsidies and contains positive language regarding the administration of tariff rate quotas. However, Greene indicated the draft had several shortcomings. Tariff levels faced by cotton fiber exports worldwide would not be effectively reduced. "Countries like Brazil that maintain a 55% bound duty on cotton fiber, but apply a rate of around 9%, would not have to provide any real increase in market access under the proposal," stated Greene. He indicated that the People's Republic of China, the most significant cotton market and cotton producer in the world, also would not have to provide any increase in market access.

Greene noted that "special and differential treatment offered to developing countries with respect to market access, domestic support and other areas covered by the agreement is excessive and would be highly detrimental to the US cotton industry." With respect to reductions proposed for domestic agricultural support, Greene indicated that the cotton industry strongly opposes the proposal to reduce the de minimis category for developed countries and cannot support structuring a World Trade Organization ceiling for individual products. He also stated that proposed reductions in certain types of domestic agricultural support "will be difficult to justify given that the modalities text leaves in place current spending inequities."

Greene also commented on a proposed new set of rules concerning the use of export credit guarantees. He urged US negotiators to ensure that the term for export credit guarantees not be less than 30 months, that premiums under the program not make it cost-prohibitive to US exporters and that the designation of countries eligible for special and differential treatment under the new export credit rules not be changed.

11 Choose 3rd-Country Rights in Brazil-US Dispute

Eleven countries have chosen to reserve 3rd-country rights regarding Brazil's World Trade Organization complaint against the US. Third-country rights allow the parties to file briefs at the initial stages of the dispute, but they can do no more.

The list of countries includes Argentina, India, Pakistan, the EU, China, Chinese Taipei, Canada, Venezuela, Australia, Benin and Paraguay.

The parties to the dispute, Brazil and the US, are working with the Dispute Settlement Body to establish a 3-person Dispute Settlement Panel to hear the dispute. Information gathering and sharing between the countries continues.

February Cotton Use Runs at Annualized Rate of 7.29 Million Bales

According to the Commerce Department, total cotton consumed by domestic mills in February (4-week month) was 275.1 million pounds, a seasonally adjusted annualized rate of 7.29 million 480-pound bales. Last year’s February annualized rate was 7.64 million bales. The January (5-week month) estimate of domestic mill use of cotton was raised by 3 million pounds to 334.2 million, resulting in a revised seasonally adjusted annualized rate of consumption of 7.38 million bales. The annualized rate for January ’02 was 7.40 million bales.

Based on Commerce estimates from Aug. 1, ’02, through March 1, ’03, projected total pounds consumed during crop year ’02-03 would be 3.63 billion pounds or 7.56 million bales. USDA’s latest estimate of ’02-03 crop year mill use is 7.6 million bales.

Preliminary March domestic mill use of cotton and revised February figures will be released by Commerce April 30.

Exports Maintain Pace Necessary to Reach USDA Projection

Net export sales for the week ending March 20 were 296,800 bales (480-lb.), resulting in total ’02-03 sales of slightly over 10.7 million bales. Total sales at the same point in the ’01-02 marketing year were approximately 11.1 million bales. Total new crop (’03-04) sales are 709,900 bales (480-lb.).

Shipments for the week were 305,100 bales, bringing total exports to date to 6.3 million bales, down from 7.1 million at the comparable point in the ’01-02 marketing year. If the pace of recent weeks is maintained, exports for the marketing year would reach USDA’s projection of 10.8 million bales.

Prices Effective March 28-April 3, 2003

Adjusted World Price, SLM 1 1/16          48.38 cents*
Coarse Count Adjustment                    0.00 cents
Current Step 2 Certificate Value          5.36 cents
Marketing Loan Gain Value                 3.62 cents
Import Quotas Open                                 4
Step 3 Quotas as of 3/28(480-lb. bales)      437,672
* No Adjustment Made Under Step I

Five-Day Average

Current 3135 c.i.f. Northern Europe      61.39 cents
Forward 3135 c.i.f. Northern Europe        No Quote
Coarse Count c.i.f. Northern Europe     57.18 cents
Current US c.i.f. Northern Europe       66.75 cents
Forward US c.i.f. Northern Europe          No Quote

Weighted Marketing-Year Average Farm Price

Year-to-Date (August-January)         41.43 cents**
**Final marketing-year average price will be used in
determination of counter-cyclical payment

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