Cotton's Week: March 12, 2004

Cotton's Week: March 12, 2004


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Senate Approves FY05 Budget Resolution

The Senate approved the FY05 Budget Resolution 57-45, and the House Budget Committee began its mark-up.

Over 2 days of floor debate, the Senate rejected numerous amendments calling for increased spending on domestic programs and homeland security. The Resolution (S Con Res 95) would limit FY05 discretionary spending to $821 billion, $2 billion less than the President’s budget, and provides “procedural protection” for a 5-year tax cut package. The budget also reinstates so-called “PAYGO” rules, which require that any tax cuts or spending increases be offset by revenue increases or spending cuts.

Democrats offered numerous amendments designed to call attention to a Republican budget that they contend squeezes domestic program spending in favor of healthy increases in defense spending and additional tax cuts. Though non-binding, the budget resolution does provide Appropriations committees a figure that limits total discretionary spending. That amount is allocated among 13 subcommittees, including agriculture. The resolution also establishes a total figure for tax cuts but does not specify which cuts are to be made. It is assumed the Senate would elect to extend 3 popular cuts that expire at year’s end. The Senate resolution includes a provision that will allow approval of up to $82.1 billion in cuts by a majority vote. Without the procedural protection, any legislation authorizing extension of expiring tax cuts could face a 60-vote hurdle.

The House markup was delayed when deficit hawks insisted that “PAYGO” legislation get floor consideration as a condition of supporting the Committee’s budget blueprint. The Committee is expected to complete work on its resolution the week of March 15.

The resolution before the Committee would set discretionary spending at $819 billion, freeze non-defense non-homeland security programs and includes reconciliation instructions for extending tax cuts from the ’01 and ’03 tax cut laws which expire between ’05 and ’09 at a “cost” of $137.6 billion over 5 years. The Committee’s budget would require cuts of $13.3 billion in mandatory programs over 5 years and identifies 5 committees, including Agriculture, as sources for the savings by identifying waste, fraud and abuse in programs under this jurisdiction. Agriculture would be expected to find savings of $371 million over 5 years.

Opposition Expressed to Payment Limit Provision

Senate Agriculture Committee Chairman Cochran (R-MS) and panel member Sen. Chambliss (R-GA) expressed opposition to inclusion of a payment limit provision in Senate’s FY05 Budget Resolution. During debate, Sen. Chambliss took the Senate floor to express how inequitable a proposal offered by Sen. Grassley (R-IA) would be to certain farmers and regions. Sen. Chambliss used an amendment, which would require benefits from ethanol tax subsidies to be included as benefits for purposes of applying limitations on farm program benefits, to illustrate the inequity of lower limits on crops with high production costs. Grassley successfully inserted the provision in the non-binding budget resolution which, if enacted, would cut commodity program benefits by $1.2 billion over 5 years by reducing limits on direct payments to $20,000 from $40,000; reducing limits on counter-cyclical payments from $65,000 to $30,000 and including the value of certificate redemptions and forfeitures in a $100,000 limit on marketing loan gains.

Sen. Chambliss has been a strong opponent of unreasonable, inequitable limitations on farm program benefits and used this opportunity to remind his colleagues that the substantial benefits from tax exemptions on ethanol production are not included in current limits or in Sen. Grassley’s proposal.

Chairman Cochran told his colleagues the ’02 farm law included strict limits, added a new adjusted gross income test and created a special commission which recommended that any changes to limitations not be made until the next farm bill. He also reminded his colleagues that the Budget Resolution was not an appropriate vehicle to mandate changes to current farm law.

APHIS Weighs Widestrike Deregulation

USDA’s Animal and Plant Health Inspection Services (APHIS) issued a notice of receipt of 2 petitions from Mycogen Seeds and Dow AgroSciences regarding Widestrike. The companies’ petitions seek the deregulation of the cotton lines containing the Bt proteins found in this transgenic cotton variety. Barring significant opposition to Widestrike’s deregulation by APHIS, this portion of the approvals process should be finished shortly after the May 10 deadline for comments.

NCC plans to comment in support of the deregulation, which will bring the variety one step closer to its end use by producer.

Warehouse Comments Filed

NCC submitted comments to the Commodity Credit Corporation’s (CCC) proposed rule on regulations governing the standards for approval of warehouses for CCC interest commodity storage. The proposed rule is consistent with CCC’s efforts to consolidate the commodity specific warehouse regulations into a general set of rules.

NCC stated that warehouses with cotton storage agreements should agree to adhere to industry developed minimum shipping standards. The comments urged CCC to include the cotton industry’s 4.5% minimum shipping standard in cotton storage agreements as well as obligate the warehouse to comply with industry dispute settlement procedures. The comments discussed, among other issues, the following: 1) opposing the provisions requiring audited financial statement except in special situations; 2) concerns about loss of certain notice and comment rights and opportunities when the CCC revises regulatory requirements and moves certain provisions from the regulation to applicable agreements; and 3) opposing a requirement for financial statements to be prepared by a certified public accountant which will significantly increase the cost to warehouses entering a storage agreement.

The comments also indicated the industry believes outside storage is inconsistent with safe and effective storage of CCC interest commodities. NCC worked with the Cotton Flow Committee and the various industry trade organizations to develop the comments on behalf of the industry. The comments are available in the Member Services area of the NCC’s website

Fees Bill to be Implemented

The Pesticide Registration Improvement Act (Fees Bill), effective March 23, authorizes EPA to collect additional registration and maintenance fees from registrants seeking pesticides’ registrations.

The Fees Bill, a coordinated effort between the EPA and registrants, will provide a more timely registration process for registrants by requiring a decision on the registration of the products in 24 months. The bill reinforces the ’06 and ’08 deadlines under the Food Quality Protection Act of ‘96 (FQPA) to have all registration eligibility decisions completed by their deadlines. Pesticide companies maintain that time cut from the registration process will allow them to better recoup their investment in bringing a product to market. Commodity groups supported the bill’s passage to insure FQPA deadlines were met, and to get new technologies faster.

African Nations Agree to Declaration

Trade groups representing the major textile and apparel producers in Sub-Saharan Africa joined their fellow Mexican, Turkish and US trade associations to sign the Istanbul Declaration for Fair Trade in Textiles and Clothing (see March 5 Cotton’s Week). Groups representing 13 Sub-Saharan Africa countries called upon other textile and apparel associations worldwide to join the battle to prevent global domination of this vital sector by China and a few other countries.

The groups, representing more than 90% of export trade in textile and clothing from the Sub-Saharan region, also briefed ministers of trade and commerce from Mauritius, Kenya and Tanzania who said they would bring the Declaration to their governments’ immediate attention.

In addition to endorsing the Declaration, which calls on the WTO to hold an emergency meeting by July 1 on the quota phase-out, the African groups emphasized the need for the WTO to immediately begin to address the various unfair trade practices used by China, which include currency manipulation, state subsidies, illegal tax rebates and the deliberate propagation of non-performing loans by government-controlled banks. These trade practices, they said, have enabled China to gain a chokehold on world markets in textile and apparel trade.

World Production at 92.86 Million Bales

USDA’s latest report raised world production for the ’03-04 crop year 210,000 bales to 92.86 million. Brazil (+200,000 bales) and Australia (+100,000 bales) account for this increase. Their world mill use estimate was raised 640,000 bales to 97.88 million, largely due to the expected increase in China’s mill use. With higher production and higher mill use, the estimate of world ending stocks for ’03-04 was lowered 760,000 bales to 31.73 million, for a corresponding ending stocks-to-use ratio of 32.4%. 

USDA gauged US ’03-04 cotton production at 18.22 million bales. Both mill use and exports, up from last month’s report, were put at 6.30 million bales and 13.80 million bales, respectively. The projected total offtake of 20.10 million bales generates ending stocks of 3.55 million bales. The estimated ending stocks-to-use ratio is 17.7%.

Norris Elected CCI President

In a special election this week, CCI's board of directors elected Robert W. Norris, representing the cooperative segment, as CCI president to replace David Stanford. Norris is a long-time CCI director and serves as president/CEO of Calcot, Ltd. in California. Stanford resigned his position upon leaving the industry’s cooperative segment.

Export Sales Stay Healthy

Net export sales for the week ending March 4 were 104,500 bales (480-lb.), resulting in total ’03-04 sales of almost 11.9 million. Total sales at the same point in the ’02-03 marketing year were approximately 9.9 million bales. Total new crop (’04-05) sales are 518,900 bales (480-lb.). Shipments for the week were 334,500 bales, bringing total exports to date to 6.7 million bales, ahead of the 5.6 million bales at the comparable point in the ’02-03 marketing year.

Step 3 Import Quota Opened

Competitiveness provisions triggered a Step 3 quota based on price conditions for the week ending March 11. When the Friday through Thursday weekly average US northern Europe price, adjusted for the value of the cotton market user certificate (Step 2), exceeds the northern Europe price ("A" Index) for 4 consecutive weeks, a special Step 3 import quota is triggered.

The quota is for 124,941 bales (480 lb.), equal to one week of mill use based on the most recent 3 months’ seasonally adjusted data. The quota will be established as of March 18 and applies to upland cotton purchased no later than June 15 and entered into the US no later than Sept. 13.

Vote! Let Your Voice Be Heard

Prices Effective March 12-18, 2004

Adjusted World Price, SLM 1 1/16

57.67 cents


Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

1.56 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

71.94 cents

Forward 3135 c.i.f. Northern Europe

No quote

Coarse Count c.i.f. Northern Europe

 69.72 cents

Current US c.i.f. Northern Europe

73.50 cents

Forward US c.i.f. Northern Europe

No quote

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

62.81 cents


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

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