Cotton's Week: May 21, 2004

Cotton's Week: May 21, 2004


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NCC Attests to Farm Bill Success

NCC Chairman Woody Anderson told the House Agriculture Subcommittee on General Farm Commodities and Risk Management that the farm law is a success and “remains vital to the structure and stability of the US cotton industry and US agriculture as a whole.” The hearing was a mid-term review of the ’02 Farm Security and Rural Investment Act and included a review of policies within the legislation as well as the programs’ performance. Testimony was offered from USDA officials and other national farm and commodity organization representatives.

Anderson commended the Agriculture Committee for developing legislation that is balanced across commodities, conservation and nutrition and noted that the farm law has an enviable track record on spending. Over the FY02-04 period, spending is $17 billion less than originally projected during the farm bill debate. He stated that the program provides an effective financial safety net with minimal impacts on overall production and prices.

He urged Congress to keep the ’02 farm law intact for the remainder of its term, a move that will provide stability in production, financing and marketing, and enable producers to react to market signals. He also reminded the Subcommittee that the Congressionally-mandated payment limit commission has reported on the negative effects of more restrictive payment limits.

In a press release, USDA noted the farm bill signing’s 2-year anniversary. Secretary Veneman pointed out the legislation’s accomplishments and that the bill “provides record funding for conservation programs on working farmlands, includes programs to create and maintain jobs in our rural communities and the first ever energy title, which supports the President's energy plan."

NCC Presents Trade Views

The NCC pledged to fight a reportedly negative WTO Panel decision against the US cotton program, but also vowed to do its part at maintaining an effective US cotton program that complies with World Trade Organization (WTO) obligations. In testimony before the House Agriculture Committee, NCC Chairman Woody Anderson said the US cotton industry would work with the Committee and the Administration on that objective as the NCC fundamentally understands the WTO’s value and “a rational, rules-based international trading system is superior to the alternative.”

He offered US cotton’s appreciation for: 1) the support offered to the industry by the House Agriculture Committee’s chairman and ranking member and Senate Agriculture Committee chairman and 2) US Trade Representative Robert Zoellick’s commitment to appeal the decision.

Anderson likened the process to a marathon, not a sprint, indicating that the appeal process will take several more months and "even then parties are given a reasonable amount of time in which to conform programs to the WTO ruling. There should be no immediate changes to the US cotton program. It is far too early to begin to speculate [on] what changes will ultimately be considered." 

Anderson also stressed that the United States must continue pushing for China – now the largest importer of US cotton - to reform its tariff rate quota system as required by the US-China WTO accession agreement.

The Committee was reminded that preferential trade arrangements and free trade agreements are having a greater impact on US cotton’s trade situation than ever before. While agreements awaiting Congressional consideration are generally acceptable from a cotton fiber perspective, many recent agreements have contained rule-of-origin exceptions that will damage US textiles.

House Passes Budget Resolution

The House passed on a mostly party-line vote, 216-213, a resolution for FY05 (Oct. 1, ’04 – Sept. 30, ’05). The bill includes reconciliation instructions for $27.5 billion in tax relief and a separate provision authorizing a $690 billion increase in the debt limit.

The measure now goes to an uncertain future in the Senate because 4 moderate Republicans have joined most Democrats in insisting that the budget include a provision that requires spending reductions to cover all tax cuts. The $27.5 billion in tax cuts in the House-passed budget are sufficient to cover extension of the $1000-per-child tax credit, marriage penalty relief and expansion of the 10% tax budget, all of which expire Dec. 31, ’04. The budget exempts the tax cuts from having to be off-set by spending cuts. The House-passed budget also does not include any instructions to the Agriculture Committee that would require modifications to current farm programs.

The House action comes after House and Senate Republicans failed to reach a compromise on a 5-year budget plan when leaders could not draft a compromise pay-go provision. House and Senate passage of a budget resolution would allow the tax cut package to be approved by majority vote. In the absence of a budget resolution, the tax cuts would be subject to a point-of-order in the Senate requiring 60 votes to proceed.

Members of the Appropriations Committees have acknowledged that the discretionary spending limits will make it difficult to produce the individual appropriations bills that would garner sufficient votes for passage standing alone. It is widely assumed that the majority of appropriation bills will have to be packaged into an omnibus measure, which may not be approved until after the elections.

Lange Discusses Trade Issues at International Forum

During the International Food and Trade Policy Conference in Brussels, Belgium, NCC President/CEO Mark Lange participated with representatives from Brazil and Africa in a panel discussion of implications of the cotton dispute panel brought by Brazil.

In a day spent mostly reviewing the outstanding WTO dispute settlement panels, Lange pointed to recent press statements about the confidential interim report. He noted a very likely outcome of the panel will be increased scrutiny of the intent and specific wording of any new agricultural agreement - thus making future agreements more difficult to obtain.

Participants also heard a report from former WTO Chairman Perez de Castillo regarding proposals for a restart of the stalled Doha Round talks and specific issues for agriculture including reciprocal moves on market access by less developed countries and elimination of developed countries’ export subsidies.

Cotton States Included in Watersheds

USDA announced the watersheds to be used for the FY04 Conservation Security Program (CSP) sign-up include Arkansas, Georgia, Kansas, Oklahoma, South Carolina and Texas. A detailed map of watershed location can be found at

The FY04 sign up announcement is expected within a few weeks. The “producer self assessment” also will be available soon so producers who operate within these priority watersheds can begin this first step in the application process. As training begins in these watersheds, NCC staff and NRCS staff will have more information available.

Senate Panel Holds Conservation Hearing

A Senate Agriculture Committee Subcommittee on Conservation, conducted by Chairman Crapo (R-ID) and Ranking Member Lincoln (D-AR), explored how the farm law’s conservation title is working. Administration officials and commodity, conservation and livestock groups testified regarding the conservation programs’ implementation.

Gordon Gallup, an Idaho wheat grower, gave testimony on behalf of the commodity groups, including NCC. He highlighted the commitment Congress made to both commodity programs and conservation programs under the farm bill and discussed the importance of voluntary incentive-based programs and the importance of having conservation programs that work well for producers.

CCI Delegation Completes South Asia Tour

The ’04 COTTON USA Executive Delegation, led by CCI President Robert Norris, completed visits to Dubai, United Arab Emirates and then to Bangkok and Ho Chi Minh City in the trip’s second leg.

The first leg included a conference for mills and trade representatives from the South Asian countries of Bangladesh, India and Pakistan. Of the 120 attendees, 60 represented spinning companies and the remainder exporters, agents or Delegation members.

The conference included American Cotton Producers Chairman John Pucheu’s review of US cotton fiber quality characteristics, trends in US fiber quality, impact of seed choices and US efforts to improve fiber quality and bale packaging. Reports from ACSA, Supima and NYBOT executives covered topics ranging from classing to contracts.

Delegation speakers fielded numerous queries on topics ranging from neps/short fiber to bale packaging/chemical residue on bales. Most questions, though, concerned contracted quality versus delivered quality, Indian arbitration and pricing methods (including future and options use).

In Bangkok, the delegation was briefed on the textile industry in Thailand, which is the world’s 11th-largest apparel exporter. The delegation also visited K. Cotton and Gauze Co., Ltd., a leading integrated manufacturer of yarn and greige fabric.

In Ho Chi Minh City, a conference for yarn spinners was attended by some 60 guests, including 42 spinners, 5 US exporter agents, and local textile association and USDA staff. The delegation received an overview of Vietnam’s textile and apparel industry. The group also visited 2 large textile manufacturers in Vietnam, which will soon submit its 8th bid package to the WTO with accession possible in ’06.

EPA Issues Toxics Details in Salmon Issue

EPA released details on water bodies affected by restrictions placed by the 9th Circuit Court system and ordered that buffer zones be placed around potential salmon habitat to protect species.

On its web site, the EPA details an extensive system of waterways that covers many cotton-producing counties in southern California. Of the listed chemicals, 18 of the 36 are used in cotton. A listing of the chemicals and the areas affected can be found at No known evidence of harm to endangered salmon species has been reported in support of this case. The Interior and Commerce departments published a joint counterpart regulation to allow EPA to make initial determinations of risks to endangered species.

Sales, Shipments Slip Some

Net export sales for the week ending May 13 were 76,000 bales (480-lb.), resulting in total ’03-04 sales of more than 13.6 million. Total sales at the same point in the ’02-03 marketing year were about 12.2 million bales. Total new crop (’04-05) sales are 1.5 million bales. Shipments for the week were 198,400 bales, bringing total exports to date to 10.3 million, ahead of the 8.9 million at the comparable point in the ’02-03 marketing year.

USDA Announces Step 3 Import Quota

USDA announced a special import quota for upland cotton that permits importation of a quantity equal to 1 week’s domestic mill use or about 119,000 bales. The import quota is established under Step 3 of the marketing loan competitiveness provisions and applies to cotton purchased between May 27 and Aug. 24 and entered into the United States no later than Nov. 22.

Step 3 provisions require an import quota be established if, for any consecutive 4-week period, the US Northern Europe price, adjusted for the value of any cotton user marketing certificate issued, exceeds the Northern Europe price. This week’s announcement is the 4th Step 3 quota established during the ’03/04 marketing year.

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Prices Effective May 21-27, 2004

Adjusted World Price, SLM 1 1/16

54.26 cents


Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

6.99 cents

Marketing Loan Gain Value

0.00 cents

Import Quotas Open


Step 3 Quotas (480-lb. bales)


ELS Payment Rate

 26.19 cents

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

 68.53 cents

Forward 3135 c.i.f. Northern Europe

 67.56 cents

Coarse Count c.i.f. Northern Europe

 66.08 cents

Current US c.i.f. Northern Europe

 77.45 cents

Forward US c.i.f. Northern Europe

 67.00 cents

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

 62.74 cents


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

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