Cotton's Week: April 30, 2004

Cotton's Week: April 30, 2004

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WTO Panel Decision Unfavorable to US Cotton Program

The World Trade Organization (WTO) dispute settlement panel hearing the US/Brazil cotton dispute issued its Interim Report to the parties. While the interim report is confidential, unconfirmed press reports and statements by both Brazilian and US government officials indicate the decision is unfavorable for the United States. 

"If the published reports are accurate, the interim decision is unfortunate and, we believe, incorrect," NCC Chairman Woody Anderson said. "We are in consultation with the US government concerning the report. There will be no immediate impact on current US programs."

The United States has not commented directly on details of the confidential Interim Report, but has indicated it will appeal the decision if it is not changed. The NCC will continue to work with the Office of the US Trade Representative in order to ensure the final WTO decision is in keeping with the intent of the Uruguay Round Agricultural Agreements. 

The United States and Brazil will submit comments on the interim report. The report is scheduled to be finalized and made public on June 18. It is possible for the United States to appeal the decision at that time. Appeals in the WTO take anywhere from 3-6 months, making a final decision unlikely before November ’04.





White House, Congress Reiterate Support for US Cotton Program

The White House and Congressional members reacted strongly to the apparent negative WTO ruling in the US/Brazil cotton case. White House spokesman Scott McClellan stated that the United States "will be defending US agricultural interests in every forum we need to, and have no intention of unilaterally taking steps to disarm when it comes to this ... I would point out that there is no immediate impact on our farm programs. But we will be working closely with members of Congress and the agriculture community as we move forward." 

Senate Agriculture, Nutrition, and Forestry Committee Chairman Cochran (R-MS) said, "While this is a disappointing development, it does not change the provisions of current law. I'm sure the administration will continue to support the interests of US farmers in this WTO process."

The Chairman and Ranking Member of the House Agriculture Committee, Mr. Goodlatte (R-VA) and Mr. Stenholm (D-TX) issued a joint statement indicating support of an appeal of the WTO decision. They noted that under the WTO rules, "countries are permitted to support their farmers in ways that are the least trade distorting. WTO rules govern the amounts countries may provide their farmers. The United States abides by the WTO rules and is, and has been, in accord with its rules on agriculture." Both representatives stated that changes to countries' agricultural policies "should come through the give and take of negotiations, not through decisions that do not appear based on WTO rules."

Anderson said, “The Council is very appreciative and encouraged by the vigilant defense of the farm bill in separate statements by Senate Ag Committee Chairman Cochran, House Ag Committee Chairman Goodlatte and Ranking Member Stenholm, and the Administration."





US Trade Officials Pledge Appeal if Final WTO Decision is Unfavorable

In separate statements, US Trade Representative Robert B. Zoellick and US Ambassador for Agricultural Negotiations Allen Johnson called on other countries to avoid seeking to resolve trade disputes dealing with agriculture through litigation in the WTO and vowed to appeal an unfavorable ruling on the US cotton program.

In a hearing before the House Agriculture Committee, Zoellick stated, "we believe US farm programs are fully consistent with the WTO rules ... you can be 100% sure we're going to appeal this and press this all the way ... we're going to fight for US ag interests, whether it be litigation or negotiation."

Ambassador Johnson made similar statements, indicating that if the final ruling was not changed "we will be appealing it" and that there will be no immediate impact on US farm programs. "This is a litigation process that's going to take many months," he said.

Both officials stressed the importance of moving forward with reforms in the Doha Round of multilateral trade negotiations.





NCC Urging Action on Scheduled Quota Elimination

The NCC is supporting textile organizations by asking Cotton Belt Representatives and Senators to cosign a letter to President Bush. The letter urges the Administration to join a growing list of groups in 33 countries calling for an international meeting to consider the impact on textile producing countries should all remaining quotas be eliminated as scheduled on Jan. 1, ’05.

The NCC’s letter can be viewed at www.cotton.org/membersvcs/Bush-WTO-letter.cfm. Under the current quota system, countries including Indonesia, Philippines and Turkey – all US cotton customers – benefit from access to the US retail market. Elimination of the quota system also will undermine the benefits of regional trade agreements to many Less Developed Countries in the Andean and Caribbean regions, as well as Africa.

The letter also stresses the importance of a meeting to allow textile-producing countries to evaluate the impact of quota elimination on the orderly development of textile and apparel markets and the potential loss of jobs in the US and worldwide.





African Officials Urge Extending AGOA Trade Law

At a House Ways and Means Trade Subcommittee hearing, African trade ministers and representatives of apparel importers warned of dire consequences for the apparel sector in several African countries if Congress does not act by this summer to renew trade preferences.

Mark Levinson, chief economist at the textile union UNITE, though, said any AGOA extension would have minimal impact in the face of the expiration at the end of this year of the global quota system.

A bipartisan bill by Ways and Means Trade Subcommittee Chairman Crane (R-IL) and Rep. McDermott (D-WA) would extend the expiring provision for 3 years and renew broader Africa trade preferences through ’15.





China Petitions Rejected

The White House rejected 2 trade petitions from industry and labor groups, which would have required investigations of China’s labor practices and fixed exchange rate. If the petitions had been accepted, the Administration would have had 1 year to investigate before deciding whether to impose trade sanctions to remedy the situation.

The petition on currency value was drafted by the Fair Currency Alliance, a coalition of manufacturing, agriculture and labor groups organized by the National Association of Manufacturers. The NCC and National Council of Textile Organizations are participants in the coalition. The Alliance’s draft petition, circulated but not formally filed, argues that China’s currency, the Yuan, is undervalued by up to 40% providing China an unfair trade advantage.

Administration officials, including US Trade Representative Zoellick, Treasury Secretary Snow and Commerce Secretary Evans, said in their argument that they reject “economic isolationism” and believe it is more effective to “engage China through trade and economic integration.”

Members of the Fair Currency Alliance will meet with Treasury officials to discuss future action.





’04 Cotton Classing Fee Increased

USDA announced that fees charged to cotton producers for classification services will be changed from the level established for the ’04 crop. The fee paid by growers for new-crop classing services will be increased to $1.65 per bale and will be applicable for the entire ’04 cotton crop. The ’03 fee was $1.45 per bale.

The fees are set by a formula stipulated in the Uniform Cotton Classing Fees Act of ’87, which also requires annual adjustments of the fee. Elements of the formula include estimated volume of ’04 crop classing by USDA, the rate of inflation and the level of the operating reserve fund of the AMS cotton classing program. Fees for other cotton classification services, offered by the Cotton Program under the Cotton Futures Act and the Cotton Standards Act, will remain unchanged from the ’03 season. 

AMS officials reviewed ’04 classing costs and income source estimates with producer leadership during the recent American Cotton Producers meeting in Dallas. ACP Chairman John Pucheu, a Tranquillity, CA, cotton producer, expressed appreciation to Norma McDill, AMS deputy administrator, for discussing the classing fee situation and other issues with the industry and for seeking its input.

Details of the fees were published in the April 26 Federal Register. Comments must be received on or before May 11, ’04. Copies are available from Whitney Rick, Cotton Program, AMS, USDA, Stop 0224, Room 2641-S, 1400 Independence Ave., SW, Washington, DC20250-0224, or by calling (202) 720-2145 or visiting www.ams.usda.gov/cotton/rulemaking.htm.





February Consumption Lowered

According to the Commerce Department, March (5-week month) total cotton consumption in domestic mills was 304.8 million pounds for a seasonally adjusted annualized rate of 6.16 million 480-pound bales. Last year’s March annualized rate was 7.24 million bales. The February (4-week month) revised seasonally adjusted annualized rate of consumption is 6.22 million 480-pound bales. This is lower than last year’s February annualized rate of 7.35 million bales.

Based on Commerce estimates from Aug. 1, ’03, through April 3, ’04, projected total pounds consumed during crop year ’03-04 would be 3.0 billion pounds or 6.32 million 480-pound bales. USDA’s latest estimate of ’03-04 crop year mill use is 6.3 million 480-pound bales.

Preliminary April domestic mill use of cotton and revised March figures will be released by the Department of Commerce on May 27.





Exports on Track to Surpass ’03 Total

Net export sales for the week ending April 22 were 63,000 bales (480-lb.), resulting in total ’03-04 sales of more than 13.2 million. Total sales at the same point in the ’02-03 marketing year were about 11.5 million bales. Total new crop (‘04-05) sales are 1.3 million bales.

Shipments for the week were 371,000 bales, bringing total exports to date to 9.5 million bales, ahead of the 7.9 million bales at the comparable point in the ’02-03 marketing year.





Memphis/Eastern “A” Type a No Quote

The Memphis/Eastern Territory Middling 1-3/32” was termed a no quote April 29 by Cotlook Ltd. This designation indicates a lack of offers for cotton of this description. The designation means the California/Arizona Middling quote now will be used to determine any future Step 2 payments during the current crop year. Currently, the California/Arizona Middling quote is 72.75 cents per pound, which is 3.70 cents per pound above the current “A” index. Cotlook Ltd., forward quotes of April 30 show Memphis/Eastern at 67.50 cents per pound and the forward “A” Index at 68.05 cents.

The week ending April 29 marked the second week of the necessary 4 consecutive weeks of conditions in the world market that would restore Step 2 payments. The week ending April 29 also marked week 3 of the 6-week transition period from using current price quotations to using forward price quotations in calculating the AWP.


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Prices Effective April 30-May 6, 2004

Adjusted World Price, SLM 1 1/16

55.75 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

 1

Step 3 Quotas (480-lb. bales)

 124,941

ELS Payment Rate

 25.08 cents

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

70.02 cents

Forward 3135 c.i.f. Northern Europe

70.07 cents

Coarse Count c.i.f. Northern Europe

67.06 cents

Current US c.i.f. Northern Europe

73.40 cents

Forward US c.i.f. Northern Europe

70.45 cents

 
2003-04 Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-February)

 62.79 cents

**

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



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