Cotton's Week: August 27, 2004

Cotton's Week: August 27, 2004

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Budget Reconciliation Will Present Challenge

NCC Chairman Woody Anderson told NCC directors at their mid-year meeting in Asheville, NC, that the budget and appropriations measures are being crafted in a very partisan environment, with election politics dominating every issue.

“There is serious concern that any budget reconciliation process during 2005 will adversely impact agriculture, and we could face efforts to change payment limitation rules during those budget reconciliation discussions,” he said.

 Regarding trade issues, Anderson said the NCC believes that a good Central American Free Trade Agreement (CAFTA) is essential to preserving a viable US cotton and textile industry. He noted that despite the NCC’s best efforts, the CAFTA agreement that will be presented to Congress contains several provisions granting benefits to non-signatory countries.

“While the Council’s Board adopted policy that opposes the CAFTA in its current form, we must continue to look for opportunities to negotiate improved textile provisions in any Central American agreement,” he said.

Anderson said that in addition to the Brazil challenge and the WTO framework agreement, the NCC will continue to remain closely involved with the US government on a number of issues related to China.

“While China is a very important export customer for our raw cotton, its textile imports into the US are undermining our domestic manufacturers and now damaging Western Hemisphere trading partners,” he said. “We have worked with the US textile industry to ensure appropriate textile safeguards are imposed against surging China imports. The US textile industry must be allowed to adjust to this destructive force in the US textile market.”

CCI President Robert Norris told the directors that the US cotton industry is “export dependent” and needs export programs like CCI’s COTTON USA program that “we can depend on.”

“If we are going to produce 18 to 20 million bale crops and export 12 to 14 million as fiber and another 3 or 4 million as manufactured product, then our trade policies and export promotion programs must ultimately be successful ones. As we look to the future, this level of exports is not only likely, but absolutely necessary if we are going to continue raising cotton with acreage, yields and infrastructural capacity that is anything like what we have today.”

Norris said CCI’s Export Promotion Committee is exploring an effort to promote exports of baled sliver.

“With our US manufacturers under continued pressure and facing consolidation, does it not make sense to look to retain some of our competitive mill capacity if we can use it in new ways?” Norris said. “That is where the idea of sliver export promotion comes in.”

Norris noted that in June CCI received approval from USDA to use funding to explore market development of sliver. One US company already is poised to supply those exports, and the hope is, he said, that more will join that company in the not-too-distant future. He said that CCI continues its efforts to promote other cotton products, too, including: 1) promoting cottonseed meal in livestock operations in Mexico and 2) cotton linters in China – an effort bolstered by a US cotton linters trade team to that country in May.

Cotton Foundation President Allen Helms, Jr., reported that for ’03-04, the Foundation was able to direct more than $420,000 in support of 33 general research and education projects and non-dues grants from some members have enabled the Foundation to sustain 12 special projects.

In other reports, Gary Adams, vice president of Economic and Policy Analysis, reported that current expectations suggest a record crop globally. The projected crop, which could be 10-12 million bales above last year, is keeping downward pressure on prices. Outside the US, increased production is driven by increased acreage and an expected recovery in yields. In the US, cotton acreage is only modestly higher than the ’03 level. However, favorable growing conditions have increased expectations for the US crop to exceed 20 million bales.

Adams noted that cotton mill use also is expected to be at an all-time high and should top 100 million bales. China is continuing to gain share of the world spinning, while US mill use declines. For the ’04 crop year, US mill use is expected to fall below 6 million bales. As a result, the US will continue to be dependent on exports of raw cotton.

He said current expectations for production and use suggest a recovery in stocks. If realized, the recovery will keep pressure on prices in the ’04 marketing year.



NCC Directors Adopt Finance Plan Recommendation

In the Board’s executive session, directors approved a Finance Committee recommendation endorsing and seeking NCC delegate approval of a new finance plan. Delegates are being asked to approve the plan during the NCC’s Annual Meeting in ’05. In meetings earlier this year, the New Finance Plan Steering Committee conducted a thorough review of projected future income requirements and presented their recommendations to the Finance Committee.

Directors also adopted recommendations from a cottonseed study committee to establish a cottonseed segment in place of the crushing segment along with a new dues rate covering all cottonseed consumption as well as delegate and Board representation for the new segment.

The Board approved the applications from the Association of Feed Dealers and Cottonseed Products Dealers and the National Council of Textile Organizations, both of which were certified as interest organizations eligible to name NCC delegates.

The directors also heard a report from the NCC’s Rack Sample Study Committee, which included a summary of a NCC-conducted rack sample survey. The Committee report can be found at www.cotton.org/events/board/2004midyear/rack-sample.cfm.



Bush Calls For Farmer-Government Cooperative Conservation Effort

An Executive Order signed by President Bush directs Federal agencies that oversee environmental and conservation policies and programs to promote cooperative conservation in partnership with farmers and ranchers and local governments.

The Executive Order ensures that Interior, Agriculture, Commerce, Defense and EPA “implement laws relating to the environment and natural resources in a manner that promotes cooperative conservation, with an emphasis on appropriate inclusion of local participation in Federal decision making, in accordance with their respective agency missions, policies, and regulations.”

In addition, the Order authorizes and instructs the chairman of the Council on Environmental Quality to convene, within 1 year, a White House Conference on Cooperative Conservation to facilitate the exchange of information and advice to ensure progress is being made in achieving the Executive Order’s objectives.

NCC Chairman Anderson complimented the Administration for an initiative to ensure that all Federal agencies involved in implementing conservation programs are coordinating their efforts and that farmers and ranchers will be provided an opportunity to fully participate in development of important, voluntary cost-share programs. He noted that cotton farmers have a long history of utilizing innovative practices and technology to conserve and enhance America’s natural resources including soil, water and air quality.

Secretary Veneman said during a news conference that she is instructing her colleagues at USDA to outline procedures the agency can use to implement the President’s executive order.



First CSP Contract Signings Announced

Agriculture Secretary Ann M. Veneman announced that nearly 2,200 farmers and ranchers have been selected as the first participants in the Conservation Security Program (CSP). The privately-owned land affected by the new program covers nearly 1.9 million acres in the 18 watersheds in 22 states selected for FY04 CSP sign-up.

"USDA has accepted all eligible CSP applications that were submitted during the first sign-up period," Veneman said. "The participating agricultural producers are model conservationists who have set the twin goals of productivity and conservation for their operations."

Payments will begin immediately under 3 tiers of conservation contracts capped at $20,000, $35,000 and $45,000 annually. Contracts will last for 5 years for Tier I and 5-10 years for Tiers II and III. Enrollment data show that 37% of the applicants qualify for Tier I, 40% for Tier II and 23% for Tier III.

Veneman said, “The sign-up response indicates that some of the best conservationists are willing to do even more conservation through CSP.”

Environmental enhancement activities offered by applicants include improving soil quality, water quality, wildlife habitat management, nutrient and pest management, air quality management, and on-farm energy management.

The Natural Resources Conservation Service (NRCS) self-assessment workbook helped producers identify whether their ag operation met sign-up requirements and addressed minimum soil and water quality criteria. By going through the self-assessment, producers analyzed their eligibility and learned what specific documentation to bring to their CSP interview at their local NRCS office.

According to USDA, this process marked a new beginning in NRCS client relationships by giving control of the application process to the landowner. About 4,800 producer contacts were registered at local NRCS offices and USDA Service Centers during the first sign-up that ended July 30, ’04. CSP will be available each year on a rotational basis in as many watersheds as funding allows. Additional information on CSP is at www.nrcs.usda.gov/programs/csp.



Mill Consumption Slips

According to the Commerce Department, July (4-week month) total cotton consumption in domestic mills was 222.3 million pounds for a seasonally adjusted annualized rate of 6.37 million 480-pound bales. Last year’s July annualized rate was 6.62 million bales. The June (5-week month) estimate of domestic mill use of cotton was lowered by 52,000 pounds to 290.7 million. The revised seasonally adjusted annualized rate of consumption for June is 6.26 million 480-pound bales. This is lower than last year’s June annualized rate of 6.59 million bales.

The Commerce Department’s estimate of both upland and ELS consumption of cotton by US mills, when adjusted to represent the complete ’03-04 crop year, is about 6.49 million bales. This mill use level, when combined with an export number of about 13.8 million bales, would imply ending stocks of 3.4 million bales for the ’03-04 crop year. This is lower than Commerce’s latest estimate of 3.5 million bales for stocks on hand.

USDA’s August estimate of ending stocks was 3.6 million bales. USDA’s next supply and demand estimates are scheduled to be released on Sept. 10.

Preliminary August domestic mill use of cotton and revised July figures will be released by the Department of Commerce on Sept. 30, ’04.



Sales Trimmed, Shipments Steady

USDA said net export sales for the week ending Aug. 19, ’04 were 119,600 bales (480-lb.), resulting in total ’04-05 sales of slightly more than 5.0 million. Total sales at the same point in the ’03-04 marketing year were about 3.3 million bales. Total new crop (’05-06) sales are 155,000 bales.

Shipments for the week were 169,100 bales, bringing total exports to date to 604,900 bales, below the 697,600 bales at the comparable point in the ’03-04 marketing year.



Prices Effective August 27-September 2, 2004

Adjusted World Price, SLM 1 1/16

40.66 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

0.00 cents

Marketing Loan Gain Value

 11.34 cents

Import Quotas Open

 3

Step 3 Quotas (480-lb. bales)

356,008

ELS Payment Rate

 0.00 cents

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

 55.72 cents

Forward 3135 c.i.f. Northern Europe

 No quote

Coarse Count c.i.f. Northern Europe

 55.17 cents

Current US c.i.f. Northern Europe

 56.60 cents

Forward US c.i.f. Northern Europe

 No quote

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

62.52 cents

**

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

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