Cotton's Week: April 18, 2003

USDA’s Commodity Credit Corp. (CCC) announced the availability of differential schedules for the ’03 crops of upland and extra long staple (ELS) cotton. The schedules are used in calculating CCC loans that are made to producers.

The same procedures used for the ’02 crop were used to develop the ’03 schedules. The schedule of differentials is applicable to CCC marketing assistance loan rates of 52.00 cents per pound (same rate as ’02) for the base grade of upland cotton and 79.77 cents per pound for ELS cotton. Loan rates for the base grade of upland cotton at each approved warehouse location also will be issued.

Tables of upland and ELS cotton differentials and the schedule of loan rates for individual qualities for ’03 ELS cotton are available at Farm Service Agency’s (FSA) web site, www.fsa.usda.gov/dafp/psd/LoanRate.htm, and also from Thomas Fink, USDA-FSA-PSD, STOP 0512, Room 4089A, 1400 Independence Ave., SW, Washington, DC, 20250-0512, (202) 720-8701 (voice), (202) 690-3307 (fax), or via email at tom_fink@wdc.usda.gov.

The US and Vietnam reached a tentative agreement on a quota-setting bilateral textile and apparel agreement, and officials will continue to work out the final details.

Jim Leonard, deputy assistant secretary of textiles, apparel and consumer goods industries at the Commerce Department, said the agreement covers a number of categories but did not say how many and at what levels the quotas have been set.

"We are talking about (quota) numbers, text, circumvention, market access and labor issues and we just want to make sure we have a clear understanding with the Vietnamese on what the issues are," said Leonard. "I don’t think there are any major (outstanding) problems but we just want to make sure we are clear on what we agreed upon."

Meanwhile, importers made a final push in a letter to US Trade Representative Zoellick to increase quota levels on cotton knit shirts and cotton knit trousers and shorts, 2 high-volume import categories.

Recent imports from Vietnam have increased by more than 1000% in several textile categories compared to the previous 12-month period. There is concern that basing quota growth for Vietnam on recent trade data will provide unparalleled access to the US textile and apparel retail market. The damage to the US cotton industry from soaring imports could continue unabated if Vietnamese quotas are increased.

Promulgation of final rules for implementing China-specific textile trade safeguards has been stalled due to Congressional concerns. The American Textile Manufacturers Institute has sought the safeguards for more than 7 months.

Grant Aldonas, Under Secretary for International Trade at the Commerce Department, announced April 3 that the safeguard rules were complete and would be published April 11. Since Jan. 1, ’02 when quotas were lifted on several cotton textile items, imports of Chinese product have risen more than 600%. US textile interests have been severely damaged by this surge in imports and have sought relief under safeguards that were stipulated in the agreement with China on its World Trade Organization accession.

The delay in implementing the safeguard rules assures Chinese imports of higher sustained levels even if the safeguards are eventually enacted.

The California Public Utilities Commission decided that a group of 33 cotton ginners was entitled to a $4.8 million refund and should be switched to a cheaper agricultural power rate offered by Pacific Gas & Electric Co., California's biggest utility.

The ginners group persuaded the Commission that cotton gins should pay a lower electricity rate than the one paid by commercial operations like slaughter houses and fruit canning plants. The group said the cotton gin merely separates cotton fiber from cottonseed without damaging or altering either of them.

The utility, a subsidiary of San Francisco-based PG&E Corp., had argued that ginning indeed changes the form of raw cotton because it "invades the corpus" of the cotton boll, meaning the group must pay more for its electricity.

Under a final rule published April 17 (68 FR 18890), non-transportation-related onshore or offshore facilities that store oil (above-ground storage 1,320 gallons or greater), such as cottonseed oil mills, will have an additional 18 months to comply with spill prevention and response plan requirements. This responds to industry concerns that EPA did not allow enough time for compliance with changes published last July (67 FR 47041) to the Spill Prevention Control and Countermeasure (SPCC) requirements under the Clean Water Act.

These rules, originally issued in ’73, are designed to prevent spills from facilities that store oil near navigable waters. Facilities will now have until Aug. 17, ’04, to amend their SPCC plans and must implement the plans no later than Feb. 18, ’05 (instead of Aug. 18). These rules cover oil of any kind (i.e., vegetable oil/animal fats are regulated like petroleum oils).

In the ’02 amended rule, EPA set forth new requirements for facilities storing various classes of oils, including vegetable oils/animal fats, as required by the Edible Oil Regulatory Reform Act, but unfortunately did not tailor the requirements to make them more appropriate for facilities handling vegetable oils/animal fats. Thus, EPA fails to provide requirements that are remotely appropriate for these oils.

Meetings between the industry coalition and EPA continue in efforts to resolve the issue. The extension gives more time to get a separate rulemaking to get EPA to differentiate vegetable oil/ animal fats requirements from those for petroleum oils.

Under a proposed rule announced April 15 by EPA, non-road diesel engines used in agriculture, construction and other industries would be required to reduce emissions of particulate matter (PM) and oxides of nitrogen (NOx) from current levels by more than 90% by ’14, and the sulfur content of diesel fuel would be required to have 99% less sulfur by ’10.

If finalized as proposed, the rule would take effect for new engines in ’08 and be fully phased in by ’14, while the sulfur content in diesel fuel will be reduced in 2 phases, from 3,400 parts per million (ppm) currently to 500 ppm by ’07 and to 15 ppm by ’10. Comments are due by Aug. 20.

The proposal would apply to tractors, portable generators and forklifts as well as other diesel engines, and the engines would be subject to new emission standards for PM and NOx based on horsepower.

EPA said non-road engines contribute 44% of all mobile PM emissions and 12% of the NOx emissions, with agriculture and construction accounting for greater than 80% of this. EPA claims an annual savings of over $80 billion versus an estimated annual program cost of $1.5 billion. Industry said meeting the standard would be challenging, but both industry and environmental groups appear to support the proposal.

Cotton experts in Mississippi, Louisiana and Arkansas asked EPA for a Section 18 emergency exemption for use of Valor herbicide to control pigweed and other weeds at layby in cotton. Growers need the exemption because the canceled production of cyanazine products, including Bladex, leaves a shortage of acceptable, economical alternatives for the requested use, according to the label request.

Produced by Valent, Valor (flumioxazin) has a shorter residual than any of the alternatives and is only slightly higher in cost than the lowest cost, but longest residual, alternative of diuron, says Charles Ed Snipes of the Delta Research and Extension Center at Stoneville. Another reason cotton growers need Valor for the control of cotton weeds at layby, Snipes says, is that pigweed is not easily controlled with the commercial products that are currently available to farmers, with the exception of cyanazine, which is expected to be in short supply.

Net export sales for the week ending April 10 were 241,600 bales (480-lb.), resulting in total ’02-03 sales of almost 11.5 million. Total sales at the same point in the ’01-02 marketing year were approximately 11.5 million bales. Total new crop (’03-04) sales are 866,600 bales (480-lb.).

Shipments for the week were 389,400 bales, bringing total exports to date to 7.5 million bales, down from 7.9 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.

Representatives from NCC leadership, the Cotton Board and NCC and Cotton Council International (CCI) staff met with representatives of textile manufacturers in Sao Paulo and toured cotton farms and ginning facilities in the state of Mato Grosso on a 10-day tour of Brazil’s cotton and textile industries. The group concluded its trip in Brasilia by meeting with officials from the US embassy and trade policy representatives from Brazil’s Ministry of Agriculture.

The trip was designed to acquire information from production and manufacturing industry representatives, foster relationships between the two strategic markets, observe technological advances within the Brazilian cotton industry and develop background information in light of regional and global trade and trade policy developments.

Participating in the tour were Bobby Greene, NCC chairman and a Courtland, AL ginner; Woody Anderson, NCC vice chairman and producer from Colorado City, TX; Craig Shook, producer from Corpus Christi, TX; Gary Adams, NCC vice president of Economic and Policy Aanalysis; and Robert Miller, CCI manager of South American operations. Jois Alaby, CCI consultant in Brazil, and Kim Svec, a US AG attache to Brazil, joined the group.

Adjusted World Price, SLM 1 1/16       48.84 cents*
Coarse Count Adjustment                 0.00 cents
Current Step 2 Certificate Value        6.18 cents
Marketing Loan Gain Value               3.16 cents
Import Quotas Open                               4
Step 3 Quotas as of 4/17 (480-lb. bales)   437,672
* No Adjustment Made Under Step I

Five-Day Average

Weighted Marketing-Year Average Farm Price

Year-to-Date (August-February)          42.03 cents**
**August-July average price will be used in determination of counter-cyclical payment