Cotton's Week: May 16, 2003

Cotton's Week: May 16, 2003

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Farm Bill Implementation Reviewed in Senate Ag Hearing

Agriculture Secretary Veneman, accompanied by Under Secretary Penn, Natural Resources Conservation Service Chief Knight and Chief Economist Collins, reviewed the USDA’s activities related to implementation of the provisions of the new farm law, with emphasis on commodity and conservation programs, at a Senate Agriculture Committee hearing. Secretary Veneman also provided a brief review of the status of implementation of the disaster assistance program for ’01 and ’02-crop weather-related losses.

In response to a question from Chairman Cochran (R-MS), Secretary Veneman reported that about 50% of producers enrolling in the new farm programs have exercised their option to update bases and yields. In general, virtually every member of the committee acknowledged the heavy workload in state and county Farm Service Agency (FSA) offices and complimented FSA employees for their efforts to complete signup for the new farm bill as well as beginning signup for the disaster program. A number of Senators expressed concern about the delays in implementing the new Conservation Security Program (CSP). NCC joined commodity, specialty crop and general farm organizations in a letter urging USDA to implement the CSP as soon as possible.

Members complimented Secretary Veneman for initiating a formal complaint in the World Trade Organization over the European Union’s de facto ban on imports of biotech products (see related article). USDA and USTR jointly announced that a request for consultations would be filed May 14.

Dr. Collins, in response to questions, reported that the outlook for farm income is improved, that export volume is expected to increase by 7% to $57 billion and that farmland values continue to increase - up 4% in ’02 and projected to increase 1.5% in ’03. He also reported there is no evidence of any significant increases in the number of non-performing loans.





Final ’02 Estimate Puts Crop at 17.21 Million Bales

In its final estimate of the ’02-03 US cotton crop, USDA increased total production to 17.21 million bales, up from the previous estimate of 17.15 million. The upland crop estimate was increased 34,000 bales to 16.53 million and the ELS estimate was up 29,000 bales to 678,000.

Final planted area is estimated to be 13.96 million acres, while final harvested area is estimated to be 12.43 million acres. The ’02-03 national average upland yield is an estimated 651 pounds per harvested acre, slightly above the 5-year average of 641 pounds. The estimated national average ELS yield of 1,342 pounds per harvested acre represents a 247-pound increase from the 5-year average.





U.S. Cotton Crop, ’02-03

Planted Acres Thou.

Harv. Acres Thou.

Yield Per Harv. Acre Lb.

5-Year Avg. Yield Lb.

480-Lb. Bales Thou.

UPLAND

SOUTHEAST

3,490

3,233

486

634

3,276

AL

590

540

507

586

570

FL

120

115

401

539

96

GA

1,450

1,360

557

626

1,578

NC

940

920

421

687

806

SC

290

200

314

601

131

VA

100

98

465

744

95

MID-SOUTH

3,595

3,463

800

699

5,771

AR

960

920

871

752

1,669

LA

520

495

717

644

739

MS

1,170

1,150

808

732

1,935

MO

380

368

796

658

610

TN

565

530

741

628

818

SOUTHWEST

5,880

4,748

538

475

5,325

KS

80

68

539

369

76

OK

200

180

557

496

209

TX

5,600

4,500

538

474

5,040

WEST

749

740

1,400

1,196

2,158

AZ

215

213

1,381

1,244

613

CA

480

477

1,469

1,222

1,460

NM

54

50

816

722

85

TOTAL UPLAND

13,714

12,184

651

641

16,530

TOTAL ELS

244

243

1,342

1,095

678

AZ

8

8

1,013

868

17

CA

210

209

1,386

1,158

603

NM

7

7

1,041

709

15

TX

19

18

1,110

818

42

ALL COTTON

13,958

12,427

665

650

17,209





Senate Approves $350 Billion Tax Cut Package

The Senate approved a scaled-back $350 billion tax cut package that includes President Bush’s proposal to eliminate taxes on dividends but only temporarily. The bill was approved on a 51-49 vote, with 3 Democrats joining the Republican majority to support it. Three Republicans voted against it.

The bill eliminates taxes on all dividends in 2 steps. In ’03, 50% of dividend earnings would be tax free, and then 100% from ’04 through ’06. But the tax cut would expire in ’07, and dividends would again be taxed at regular income tax rates with a top rate of 35%.

The Senate bill contains other elements of Bush's original plan, including accelerating planned income tax cuts, removal of the tax penalty for married couples and increases in the child tax credit. It also includes breaks for businesses to encourage more investment in new equipment.

The Senate will have to work out its differences with the House, which approved a $550 billion 10-year tax cut. The House bill does not repeal dividend taxes. It lowers the top rate on dividends and capital gains to 15%. Most capital gains are now taxed at 20% and dividends are taxed at normal income tax rates.

In all, the bill calls for more than $440 billion in new tax cuts and aid for states. To stay within the $350 billion limit set by the Senate, more than $90 billion of its cost to the Treasury would be offset by revenue-raising measures, such as a $35 billion provision that would eliminate tax breaks for Americans working overseas.





US Seeks WTO Consultations on Europe’s Biotech Ban

The US, Argentina, Canada and Egypt formally requested consultations in the World Trade Organization on the anti-biotechnology moratorium, enacted by European countries in ’98. The request is a first step in a challenge by the 4 countries asserting that the ban violates fundamental free-trade principles.

At least 9 other countries - Australia, Chile, Colombia, El Salvador, Honduras, Mexico, New Zealand, Peru and Uruguay - have agreed to join in support of the case as third parties, US officials said.

US Trade Representative Zoellick and Agriculture Secretary Veneman announced the move in Washington. American farmers and, to a lesser degree, biotechnology companies have been calling for such a move for months. Zoellick said the government's patience had run out after years of promises from the EU that the moratoriums imposed by its member states would be lifted.





US, Brazil Disagree on Procedural Issues Surrounding WTO Challenge

The US and Brazil continue to spar over procedural issues surrounding Brazil’s World Trade Organization challenge of the US cotton program. A dispute panel was established on March 18, but panel members have not yet been named.

Also, at a meeting in mid-April, the US blocked the appointment of an information-gathering facilitator. The role of the facilitator would be to gather information about the US cotton sector as well as the cotton industries in Brazil and selected 3rd-party countries. The US claims that appointment of the facilitator runs afoul of the "peace clause."

NCC staff continues to monitor developments and work closely with USDA and Office of the US Trade Representative.





USDA Will Not Conduct Objective Yield Survey for ’03 Cotton

Citing budget cuts during the appropriations process, USDA’s National Agricultural Statistics Service (NASS) has decided that it will not conduct the Objective Yield surveys for this year’s cotton crop. In past years, the survey was based on randomly selected cotton fields in seven states that were visited monthly from August through harvest to obtain boll counts and measurements. NASS will continue to survey producers via phone and mail about their expected yields. However, data from the Objective Yield survey have historically been viewed as a better indicator of final yield potential than the producer phone surveys.

NCC staff has met with USDA officials to express disappointment about the decision and impress upon them the additional uncertainty it creates for various industry segments and will push for the restoration of the survey for the ’04 crop.





Van Duyn to Manage Environmental, Biotech Issues for NCC

Gerret Van Duyn joined the NCC's Washington staff to manage environmental and biotechnology policy issues. Van Duyn is a graduate of North Carolina State U., with degrees in chemistry and political science and has most recently worked for EDEN Bioscience in the Raleigh, NC, area. He is a native of Edenton, NC.





FSA Names Head of External Affairs

USDA's Farm Service Agency (FSA) Administrator James R. Little has announced the appointment of J. Burton Eller as director of the Office of External Affairs.

Eller will be responsible for overseeing the daily operations of FSA's Executive Secretariat, Public Affairs, Communications and Legislative Liaison offices. He will also assist Little in communicating the importance and benefits of FSA programs to producers and landowners.

Most recently, Eller served as president and CEO of the Textile Rental Services Assn. of America, an international trade organization. He held several positions at the National Cattlemen's Assn., including senior vice president of Government Affairs and executive vice president/chief operating officer, from ’75 to ’96.





Sales Match Previous Year; Shipments at 8.7 Million Bales

Marketing-year export sales in the week ending May 8 were 321,800 480-lb. bales, putting 02-03 sales at 12.2 million bales, equaling sales at the same point in the previous year. Total new crop (’03-04) sales are 1.1 million bales.

Shipments for the week were 371,800 bales, bringing total exports to date to 8.7 million bales, down from 8.8 million at the comparable point in the ’01-02 marketing year. At the current pace, exports for the marketing year will reach USDA’s projection of 11 million bales.





Prices Effective May 16-22, 2003

Adjusted World Price, SLM 1 1/16

46.80 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

4.99 cents

Marketing Loan Gain Value

5.20 cents

Import Quotas Open

1

Step 3 Quotas as of 5/13 (480-lb. bales)

142,210

*No Adjustment Made Under Step I
 
Five-Day Average
 
Blended 3135 c.i.f. Northern Europe

59.89 cents

Current 3135 c.i.f. Northern Europe

57.71 cents

Forward 3135 c.i.f. Northern Europe

60.98 cents

Coarse Count c.i.f. Northern Europe

58.16 cents

Current US c.i.f. Northern Europe

62.70 cents

Forward US c.i.f. Northern Europe

64.70 cents

 
Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-March)

42.47 cents

**

**August-July average price used in determination of counter-cyclical payment



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