Cotton's Week: March 26, 2004

Cotton's Week: March 26, 2004

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House Passes Budget Resolution, Minus Pay-As-You-Go Provision

The House adopted its budget resolution by a 215-212 vote after some members won a promise of a floor vote before Memorial Day on a bill intended to strengthen enforcement of the budget.

The FY05 budget resolution now is headed to conference. One of the issues to be addressed is whether there will be reconciliation instructions to the House and Senate Agriculture Committees, requiring them to enact budget-cutting legislation.

The House resolution would require the House Agriculture Committee to achieve savings of $110 million in FY05, and a total of $371 million in FY05-09. Reductions would come from "the elimination of waste, fraud, and abuse in mandatory programs" within the Committee's jurisdiction. The Senate resolution includes no similar requirement.

The most difficult issue in conference will be whether budget enforcement rules aimed at reducing the deficit should apply to both spending and tax cuts. The Senate passed its plan only after winning a vote to restore now-expired pay-as-you-go rules requiring that the cost of additional tax cuts or new entitlement spending be offset with revenue increases or spending cuts. This requirement is strongly opposed by members who fear it would diminish their ability to eventually make tax cuts enacted over the past 3 years into permanent law.

The House budget resolution has no pay-as-you-go enforcement provision. The House budget plan basically would allocate $818.7 billion to the Appropriations Committee for the 13 annual spending bills. This would provide a 7% increase for defense spending, but a freeze on non-defense, non-homeland security spending at current levels.

The Senate budget resolution would provide $819 billion in discretionary spending, but it includes various mechanisms that could increase that total to $821 billion.



ELS Loan Schedule Additions Made, ELS Outside Storage Rule Set

USDA announced the addition of strength premiums and discounts to the Extra Long Staple (ELS) loan schedule.

The agency also published a final rule revising an interim rule published August ’03 that provided nonrecourse loans for ELS cotton stored outside. The final rule revised the interim rule by: 1) more generally stating the rainfall requirement applicable to outside storage; 2) making warehouse-receipted ELS cotton ineligible for outside-stored loan; and 3) establishing the loan rate for outside-stored ELS cotton as the national average loan rate without application of premiums and discounts.

The rule also establishes that effective for the ’04 crop of ELS cotton, ELS must be of a strength and other factors specified by CCC to be eligible for the loan. The addition of a strength factor reflects CCC’s concern that new, higher yielding, lower strength hybrid varieties may be less marketable and thus at a higher risk for forfeitures.

The new premiums and discount schedule:

35.4 and below grams/tex        - 1000

35.5 – 36.4 grams/tex              - 750

36.5 – 37.4 grams/tex              - 500

37.5 and above grams/tex        - 0

To comply with the statutory requirement to maintain the average loan rate of 79.77 cents/lb., all loans will be adjusted by adding .60 cents/lb. before discounts are applied.



NCC Chairman Anderson Takes Cotton’s Message to Capitol Hill

NCC Chairman Woody Anderson met top USDA officials including Agriculture Secretary Ann Veneman, Under Secretary J.B. Penn and Under Secretary Bill Hawks to discuss a range of issues and to convey the industry’s appreciation for the way the farm bill has been implemented and administered. He also expressed appreciation for USDA’s strong effort to assist in defense of the farm program against Brazil’s challenge and for the industry’s opportunity to participate in WTO sessions’ preparations ensuring cotton will not be singled out.

During meetings with House Agriculture Committee Chairman Goodlatte (R-VA), Appropriations Subcommittee Chairman Bonilla (R-TX) and Senate Agriculture Committee Chairman Cochran (R-MS), Anderson stressed the importance of maintaining the current farm law and discussed the industry’s interest in participating in the program’s defense. He asked them to support funding for boll weevil eradication program completion and pink bollworm eradication initiation.

During meetings with Sens. Lincoln (D-AR), Cornyn (R-TX) and Reps. Stenholm (D-TX), Emerson (R-MO), Kingston (R-GA), Boyd (D-FL), Neugebauer (R-TX) and top committee staff, Anderson conveyed industry concern about the loss of textile jobs and stressed the importance of trade agreements and legislation that will stem the flow of imports while empowering remaining textile mills to compete with China and other countries.



NCC, China Discussing Concerns

NCC President/CEO Mark Lange is participating in extensive meetings in China to discuss US cotton industry concerns regarding: 1) certain aspects of the Chinese government's implementation of its World Trade Organization commitments, 2) the need for China to open its markets and open its economic system, and 3) US manufacturing being swamped by unfairly priced China-made apparel.

“As China becomes more and more integrated into the world economy, it is imperative that our trading systems become more compatible, more open and less distorted,” Lange said. “We have many issues to discuss. I know from experience that as we better understand our mutual positions and concerns, we will have more success in reducing areas of friction between our economies.”

Lange is part of a delegation of US textile and apparel executives headed by Grant Aldonas, Under Secretary for International Trade, Department of Commerce. He also will attend the Global Textile Economic Forum and participate in several promotional events focusing on US cotton.



Western Representatives Urge Pink Bollworm Program Support

Reps. Thomas (R-CA) and Pearce (R-NM) spearheaded a coalition of Representatives that sent a letter to Agriculture Appropriations Chairman Henry Bonilla (R-TX) and Ranking Member Kaptur (D-OH) regarding funding for the Pink Bollworm Eradication Program and the Shafter Cotton Research and Extension Center.

The letter requests $7.8 million in funding, including the sterile moth rearing and release program cost share and regulatory activities conducted by USDA-APHIS. It also requests $420,000 for the Shafter Cotton Research and Extension Center.

Others joining on the letter included: Reps. Dooley (D-CA), Nunes (R-CA), Grijalva (D-AZ), Radanovich (R-CA), Pastor (D-AZ), Hayworth (R-AZ) and Cardoza (D-CA). The Members also stated their belief that it is extremely important to provide no less than the FY04 funding level.



West Tennessee Producers Approve Weevil Eradication Referendum

Producers in West Tennessee Regions 1, 2 and 3 overwhelmingly approved a plan that would restructure and extend boll weevil eradication activities. More than 50% of the 4,300 ballots were returned with a 90.4% approval.

“It shows tremendous confidence in our program,” said Allen King, a Brownsville, TN, producer serving as Tennessee Boll Weevil Foundation chairman.

The referendum approved a plan to merge the 3 West Tennessee regions and extend the program for 10 years with a maximum annual assessment of $12.25 per acre. Current assessments range from $20 to $32.25 per acre in the 3 regions. The approved plan will cover expenses required to complete eradication, refinance existing debt and conduct maintenance in the years following eradication.

“The overwhelming support is a testament to the program’s success in reducing grower reliance on pesticides and increasing cotton yields,” Tennessee Agriculture Commissioner Ken Givens said. “I think this will help position Tennessee growers to be more competitive in the marketplace.”



US Mill Cotton Consumption Slips

According to the Commerce Department, February (4-week month) total cotton consumption in domestic mills was 240.1 million pounds for a seasonally adjusted annualized rate of 6.30 million 480-pound bales. Last year’s February annualized rate was 7.35 million bales.

The January (4-week month) estimate of domestic mill use of cotton was lowered by 192,000 pounds to 238.0 million. The revised seasonally adjusted annualized rate of consumption for January is 6.46 million 480-pound bales, considerably lower than last year’s January annualized rate of 7.37 million bales.

USDA’s latest estimate of ’03-04 crop year mill use is 6.3 million 480-pound bales. Preliminary March domestic cotton mill use and revised February figures will be released on April 29.



Export Sales, Shipments on Healthy Pace

Net export sales for the week ending March 18 were 130,100 bales (480-lb.), resulting in total ’03-04 sales of almost 12.5 million. Total sales at the same point in the ’02-03 marketing year were about 10.6 million bales. Total new crop (’04-05) sales are 629,000 bales (480-lb.).

Shipments for the week were 392,500 bales, bringing total exports to date to 7.4 million bales, ahead of the 6.2 million bales at the comparable point in the ’02-03 marketing year.



Transition Period for AWP Calculation Near

USDA will begin blending the current and forward “A” Index quotes for calculation of the adjusted world price (AWP) for the week ending April 15. The 6-week blending process is used to transition the AWP from old crop to new crop.

For the weeks ending April 15 and April 22, the formula is 2 times the current quote plus the forward quote divided by 3. For the weeks ending April 29 and May 6, the formula is the current quote plus the forward quote divided by 2. For the weeks ending May 13 and May 20, the formula is the current quote plus 2 times the forward quote divided by 3.

For the week ending May 27 and thereafter until the end of the ’03-04 crop year, the forward “A” will be used exclusively in calculating the AWP, which is determined by subtracting transportation cost and quality adjustment (presently 14.27 cents/lb.) from the “A”.


Vote! Let Your Voice Be Heard

Prices Effective March 26-April 1, 2004

Adjusted World Price, SLM 1 1/16

57.84 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

1.29 cents

Marketing Loan Gain Value

 cents

Import Quotas Open

 1

Step 3 Quotas (480-lb. bales)

 124,941

ELS Payment Rate

 0.00 cents

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

72.11 cents

Forward 3135 c.i.f. Northern Europe

71.93 cents

Coarse Count c.i.f. Northern Europe

69.58 cents

Current US c.i.f. Northern Europe

73.40 cents

Forward US c.i.f. Northern Europe

73.55 cents

 
'03-04 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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