Cotton's Week: February 27, 2004

Cotton's Week: February 27, 2004


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Price Improvement Precludes 2nd CCP

USDA announced on Feb. 26 that market prices for upland cotton, wheat, corn and grain sorghum have increased significantly since last October so there will be no 2nd counter-cyclical payments (CCP) available for those crops. USDA also noted the projected effective prices for barley, oats, soybeans and other oilseeds continue to exceed their respective target prices so there will be no counter-cyclical partial payments available for those crops.

USDA announced a 2nd partial payment would be made available for ’03-crop peanuts and rice. The 2nd partial payment for producers who opted not to take the first partial payment is $51.80/ton for peanuts and 63 cents/cwt for rice.

The ’02 farm bill authorizes the Secretary of Agriculture to make CCP payments in 3 installments: the first in October up to 35% of the projected rate; the 2nd in February up to 70% of the projected rate, less any amount received under the first payment; and the final payment after the end of the marketing year. Last October, the Secretary made a 2.01 cents/lb. advance available for ’03-crop upland cotton.

Continued improvement in ’03-crop prices apparently caused USDA to re-evaluate its estimate of the total CCP payment for the ’03 crop of upland cotton and determine that the CCP payment on the ’03 crop of upland cotton may be zero. Since the ’02 farm bill specifies that producers who receive partial payments that exceed the final counter-cyclical payment for each commodity must repay the portion in excess of the final rate, USDA apparently decided not to offer a 2nd partial payment for upland cotton. In addition, since the revised projected rate is zero, USDA will not make any partial payments to producers who opted not to take the first partial payment last October.

NCC Chairman Woody Anderson wrote USDA suggesting that the department continue to offer a partial payment of 2.01 cents to those producers who did not take the first partial payment last October.

In a response to Chairman Anderson’s letter, Under Secretary for Farm and Foreign Agricultural Services Floyd Gaibler, responding for Ag Secretary Veneman, said, “Based on ’03-crop prices to date and the historical relationship between within-season forecasts and the final season average price, we foresee a significant likelihood of some repayment of the first partial ’03-crop counter-cyclical payment. Similarly, based on the current season average price estimate for (the) ’03-crop, there also is a significant likelihood that any 2nd partial payment would have to be repaid. Therefore, we do not think it prudent to make an additional payment at this time. If, of course, we should be proved wrong and a final payment be warranted, be assured that we will make it in a timely manner.”

Defending Commodity Programs Is NCC Priority

In remarks at the Mid-South Farm and Gin Supply Exhibit in Memphis, NCC Chairman Woody Anderson said that as the US cotton industry develops strategy for ’04 and beyond, “Defense of the US farm program and influencing the outcome of trade negotiations will continue to be at the top of the NCC’s priority list.”

Speaking at the Exhibit’s Ag Update meeting, the Texas producer said the NCC will continue to “effectively defend commodity programs and other key provisions of the farm law. We will help build and maintain coalitions that remind Congress that the current farm law is balanced in its approach to funding for production, conservation and nutrition programs.”

Anderson reiterated NCC’s belief that this year’s budget and appropriations measures will be crafted in a partisan environment and that election year politics will dominate debate on every issue considered by Congress. He said the industry must prepare to deal with changes that could result from several pending retirements in the Senate and re-districting issues in the House.

“Growing budget deficits will generate pressure for change in ’04,” Anderson said. “When Congress begins debating the new budget, there will be proposals to save money by modifying programs or reducing benefits. Others in Congress will work to cut funds from production agriculture in favor of more politically attractive programs.”

Noting the importance of the industry’s trade agenda, Anderson said that, “In response to our government’s recent efforts to jumpstart WTO talks, the NCC will continue discussions with the US Trade Representative’s Office (USTR) to ensure that negotiations concerning the US cotton program will be conducted in the context of the overall agricultural negotiations and not singled out from the discussions on other commodities.”

He said the NCC also will: 1) study each new bilateral trade initiative to assure it will benefit the industry and not non-signatory 3rd countries, 2) continue to work with USDA and USTR to ensure that every effort is made to successfully defend the cotton program from Brazil’s WTO challenge and 3) remain closely involved in a number of activities related to China, including making sure it opens its markets under its WTO access agreement and ensuring the US textile industry is allowed to adjust to China’s competitive force in the US textile market.

January Mill Use Annualized at 6.49 Million Bales

According to the Commerce Department, cotton consumption by domestic mills in January (4 week) was 238.2 million pounds for a seasonally adjusted annualized rate of 6.49 million 480-pound bales. Last year’s January annualized rate was 7.37 million bales.

The December (5 weeks) estimate of domestic mill use of cotton was lowered by 1.8 million pounds to 251.3 million. The revised seasonally adjusted annualized rate of consumption for December is 6.67 million bales compared to the December ’02 annualized rate of 7.80 million bales.

Using the latest figures from the Commerce Department, calendar ’03 mill use is estimated to be 3.29 billion pounds or 6.85 million bales, down from calendar year ’02’s use of 7.67 million bales.

Based on Commerce estimates from Aug. 1, ’03, through Jan. 31, projected total pounds consumed during crop year ’03-04 would be 3.0 billion pounds or 6.26 million bales. USDA’s latest estimate of ’03-04 crop-year mill use is 6.2 million bales.

Preliminary February domestic mill use of cotton and revised January figures will be released by the Department of Commerce on March 25.

EU Sets March 1 for Retaliatory Tariffs in Response to ETI

European Union (EU) Trade Commissioner Lamy confirmed on Feb. 26 that the EU will begin imposing retaliatory tariffs on US exports effective March 1 in response to the US failure to repeal the so-called extraterritorial income tax (ETI) exclusion that was ruled an illegal subsidy by the World Trade Organization (WTO).

The EU said last fall it would impose 5% duties against US exports beginning March 1 if the ETI was not repealed. The tariffs, which will be imposed against a broad range of products including agriculture, jewelry, wood and paper products, are scheduled to increase by 1 percentage point per month until they reach 17% in March ’05.

The ETI legislation was approved by Congress in ’00 to replace the foreign sales corporation regime, which had been ruled an illegal export subsidy by the WTO. ETI also was struck down by the WTO in January ’02. Legislation has been introduced in the House and Senate to repeal the ETI and replace it with tax cuts designed to compensate companies for the loss of ETI benefits. The Senate may begin consideration of its version as early as March 4.

NCC to Submit Comments on Conservation Security Program

NCC will submit comments to the Proposed Rule for the Conservation Security Program (CSP). CSP was created in the ’02 farm bill to provide a new direction in conservation by rewarding good stewards of the land for continuing and maintaining conservation practices. NCC met with industry leadership to develop the comments and also worked with other national agricultural organizations to develop separate joint comments. 

NCC’s comments focused on the rule’s broad definition of what constitutes an agricultural operation, contending that the current definition would not be viable on commercial-size operations and should reflect Farm Service Agency and other programs’ definition. NCC also discussed the proposal to implement the program through priority watersheds. This proposal would not allow adequate flexibility to implement the program on a wide geographic basis or allow for flexibility for input from state conservationists. NCC stated that to the extent allowable, a higher percentage of the rental payment should be made to producers who have accomplished conservation improvements. 

Overall, NCC commended the Natural Resources Conservation Service for implementing a far-reaching innovative new program, but changes are needed for this program to be applicable to the majority of cotton producers. 

The NCC’s comments will be available on NCC’s web site, Comments will be accepted until March 2. The quickest way to submit comments is by e-mail to

China Approves 5 Biotechnology Varieties

USDA and the Office of the US Trade Representative announced Feb. 23 that Chinese government officials have approved the use of permanent safety certificates for 5 different biotech crop events, including: Monsanto’s varieties of Roundup Ready corn, soybeans and cotton as well as the company’s Yieldgard corn and Bollgard cotton.

The safety certificates, which are registrations for biotech products issued by China’s Ministry of Agriculture (MOA), are used for shipments of food commodities and feed for consumption and do not authorize the products for planting or research.

Previously, China’s approval process was temporary, requiring importers to obtain certificates that were valid for only a few months for the importation of grains, oilseeds (including cottonseed) and processed products. Under the new regime, permanent safety certificates will be issued to Monsanto to provide to importers.

USDA’s Foreign Agriculture Services’ Biotechnology group and Monsanto have stated that the permanent certificates will be the same as the temporary certificates and are not required for fiber or linters. This is the first series of permanent approvals by the Chinese government for biotech events for agriculture. 

Export Sales for Week Ending Feb. 19

Net export sales for the week ending Feb. 19 were 208,600 bales (480-lb.), resulting in total ’03-04 sales of almost 11.6 million bales. Total sales at the same point in the ’02-03 marketing year were approximately 9.2 million bales. Total new crop (’04-05) sales are 494,500 bales (480-lb.).

Shipments for the week were 286,000 bales, bringing total exports to date to 6.0 million bales, ahead of the 5.1 million bales at the comparable point in the ’02-03 marketing year.

Prices Effective February 27-March 4, 2004

Adjusted World Price, SLM 1 1/16

60.16 cents


Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

0.00 cents

Marketing Loan Gain Value

0.00 cents

Import Quotas Open


Step 3 Quotas (480-lb. bales)


ELS Payment Rate

0.00 cents

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

73.56 cents

Forward 3135 c.i.f. Northern Europe

 No Quote

Coarse Count c.i.f. Northern Europe

71.61 cents

Current US c.i.f. Northern Europe

76.95 cents

Forward US c.i.f. Northern Europe

 No Quote

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

62.88 cents


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

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