Cotton's Week: December 5, 2003

A World Trade Organization (WTO) dispute settlement panel held the 3^rd round of oral hearings on the Brazil complaint against the US cotton program and the US export credit guarantee program in Geneva. The Dec. 2-3 hearing was the final scheduled oral presentation that will be made to the panel. Much of the discussion continues to focus on the issue of whether the US cotton program has caused “serious prejudice” to Brazil within the meaning of the applicable WTO agreements.

NCC staff continues to work closely with the US team, providing support on both economic and legal issues. The US team was led by Juan Millan from the Office of General Counsel, US Trade Representative, and Joe Glauber, Deputy Chief Economist, USDA. NCC Vice President for Economic and Policy Analysis Gary Adams traveled to Geneva to assist in preparation for this most recent hearing.

After opening statements by the US and Brazilian delegations, the remainder of the 2-day session was devoted to responding to questions from the panel. The US team remains diligent in its defense of the cotton program and is working hard to insure that the panel has a good understanding of all aspects of the US cotton program. The US team continues to address Brazil’s mischaracterizations regarding the decoupled nature of support provided under the previous and current farm bill.

While no further oral hearings are scheduled, there will be additional written submissions in December and January. The panel has indicated that no ruling in the case will be made before May. Regardless of that decision, appeals are expected, with final decisions not occurring before late summer ’04.

On the eve of the final round of Central America Free Trade (CAFTA) negotiations, the NCC joined with other fiber and textile organizations in reaffirming strong opposition to provisions that would allow 3^rd-country participation under the agreement.

Findings of a NCC-commissioned study of various potential scenarios for a Free Trade Area of the Americas (FTAA) were cited in a letter addressed to Grant Aldonas, Department of Commerce Under Secretary for International Trade Administration. The letter noted that while focused on a FTAA, “one of the study’s findings bears on scenarios under consideration for CAFTA as well – particularly the issue of 'cumulation' with non-CAFTA countries in this hemisphere.”

Noting a recent flurry of discussions about the possibility of making provisions in CAFTA for “cumulation” within North American Free Trade Agreement countries for certain fabrics, the letter cited the following excerpt from the FTAA study: “Significant US-made denim fabric is still used in Mexico jean manufacturing today, due mainly to consistency of quality, despite slightly greater pricing per yard and shipping cost. US denim fabric also is used in Central America, for a small volume of jeans, and for women’s and juniors’ fashion denim skirts and jackets.

“Given an FTAA or a CAFTA permitting use of regional fabrics from Mexico, Brazil or Colombia, the US denim fabric business would be at significant risk, due to the combined cost savings resulting from both fabric prices per yard and lower labor costs in the Central American countries.”

The letter called on the Administration to stand by the initial CAFTA policy laid down earlier this year in Cincinnati and stated that “the decision confronting US officials on the cumulation issue boils down to a choice between supporting companies that made decisions to keep investment and jobs in the US and those that made decisions to move investment and jobs to Mexico.”

Acres enrolled in the upland cotton program were 18.424 million in ’03, up from 16.41 million in ’01, the last year of the FAIR Act. The largest increase in enrolled acres occurred in the Southeast, up 1.2 million acres. The Mid-South increased enrollment by 370,000 acres, while the Southwest region increased enrolled acres by 537,000. The only region experiencing a decline in enrolled acres was the West, down 59,000.

Rice and corn also saw increased enrolled acres, while acres enrolled for other crops declined. Soybeans were added as a program crop in ’02, and growers have enrolled 52.8 million acres in ’03. Peanut quotas were converted to base acres in ’03, and growers enrolled 1.47 million acres in the peanut program. USDA reports that approximately 97% of all eligible crop acreage was enrolled in the various crop programs in ’03.

Many growers using recent planting experience to update base acres also exercised the ability to use recent yields to apply toward yield computation for the new counter-cyclical payment (CCP). The average upland cotton CCP yield is 5.6% larger than the yield applied to the direct payment. Corn averaged an 11.7% increase in CCP yield over direct payment yields, while rice is 6.4% higher.

Tables on acres and program yields are available on the Council’s web at www.cotton.org. The entire USDA enrollment report is available at www.fsa.usda.gov/pas/farmbill/2002_2003_enroll.htm.

Agriculture Secretary Veneman announced that sign-up ends Jan. 30 for the Crop Disaster Program (CDP), which provides payments for producers who suffered ’01 or ’02 crop-year losses due to a natural disaster.

USDA has issued $2.2 billion in benefits to about 325,000 farmers across the country, Veneman said.

CDP, which is authorized by the Agricultural Assistance Act of ’03, has no overall funding limitation, but each “person” is limited to $80,000. Producers are reimbursed for qualifying crop production and quality losses (other than sugar cane, sugar beets or tobacco) for either the ’01 or ’02 crop years. Payments are issued for losses exceeding 35% of expected production at 50% of the established price for crops that were covered by crop insurance; 50% of the established price for crops for which crop insurance was unavailable; and 45% of the established price to producers for crops that could have been insured but were not. Producers also are reimbursed for quality losses of at least 20% for certain crops.

Eligible producers who did not have crop insurance or Noninsured Crop Disaster Assistance Program coverage during the year of the disaster must agree to purchase coverage for each of the next 2 crop years. CDP payments will be reduced if the sum of (1) the CDP payment; (2) the net crop insurance indemnity; and (3) the value of the crop that was not lost, exceeds 95% of what the value of the crop would have been in the absence of a loss.

More information on CDP and other USDA disaster assistance programs is available at local Farm Service Agency (FSA) offices and on FSA's Web site at http://disaster.fsa.usda.gov.

Domestic textile mills consumed 241.51 million pounds of US cotton in the 4 weeks of October for a seasonally adjusted annualized rate of 6.12 million 480-pound bales, according to the Commerce Department. Last year’s October annualized rate was 7.48 million bales.

The Commerce Department also raised the September (5 weeks) estimate of mill use of cotton by 1 million pounds to 298.9 million for a seasonally adjusted annualized rate of 6.18 million bales. Last year’s September annualized rate was 7.62 million bales.

Preliminary November mill use of cotton and revised October figures will be released Dec. 24.

Partners of the Cotton Pesticide Registration and Education and Cotton Biotechnology Registration and Communication programs met in conjunction with the NCC’s Environmental Task Force meeting in Washington, DC, on Dec. 2-3.

Speakers from the Environmental Protection Agency briefed the group on the status of spray drift, endangered species, pesticide registration and re-registration and other policy issues. Jim Murphy, office of the US Trade Representative, and Phil Wall, State Department, discussed efforts in international biotech acceptance. Bobby Richey, USDA-Foreign Agriculture Service (FAS), outlined the responsibilities of the new FAS biotechnology group. Dr. John Turner, USDA-Animal and Plant Health Inspection Service, reviewed the agency’s role in biotech issues. Staff from the House and Senate Agriculture committees provided an outlook on a host of issues.

Eight Cotton Foundation member firms are contributing equally to defray project costs with the NCC. The Cotton Pesticide Registration and Education program is supported by Syngenta Crop Protection, Valent USA, BASF Corp., Monsanto, Dow AgroSciences and Bayer CropScience. The Cotton Biotechnology Registration and Communication program is underwritten by Syngenta Seeds, Emergent Genetics, Inc., Delta and Pine Land Company, Monsanto, Dow AgroSciences and Bayer CropScience.

Bayer CropScience and the NCC announced recipients of the ’03 Cotton Counts Scholarships. Stephanie Bradley, Stamford, TX; Katy Harkey, Abernathy, TX; and Veronica Palla, Bakersfield, CA, children of US cotton producers, each will receive a $2,000 scholarship to assist with tuition expenses.

The Cotton Counts Scholarship program is part of Cotton Counts, a NCC consumer awareness campaign aimed at improving the understanding of and attitudes toward US cotton led by the National Cotton Women’s Committee. This scholarship replaces the Grow Smart Scholarship offered in previous years.

This year’s scholarship program was open to ’03 graduating high school seniors who maintained a B-average and planned to enroll in a 4-year ag-related curriculum in fall ’03. Applicants were asked to write an essay on the importance of cotton to US agriculture, as well as provide a transcript and a letter of recommendation. Scholarship finalists were chosen by a panel consisting of NCC and industry representatives.

Bradley and Harkey attend Texas A&M U. and are studying biomedical science and animal science, respectively. Palla is majoring in microbiology/genetics at the U. of California Los Angeles.

“We salute the academic achievements of these students, who are the future of U.S. agriculture,” said Scott Johnson, insecticides business manager with Bayer CropScience.

Net export sales for the week ending Nov. 27 were 329,600 bales (480-lb.), resulting in total ’03-04 sales of over 8.5 million bales. Total sales at the same point in the ’02-03 marketing year were approximately 6.2 million bales. Total new crop (’04-05) sales are 324,300 bales.

Shipments for the week were 183,600 bales, bringing total exports to date to 2.7 million bales, ahead of the 2.3 million bales at the comparable point in the ’02-03 marketing year.