Cotton's Week: February 11, 2005

Cotton's Week: February 11, 2005

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Administration Releases ’06 Budget Proposal

A White House statement regarding the Administration’s ’06 budget says it exercises responsible spending restraint in order to achieve the President's goal of cutting the deficit in half by ’09. The ’06 budget has overall discretionary spending growing by 2.1% with significant increases in defense and homeland security. Non-security discretionary spending is reduced by nearly 1%. The budget contains more than 150 reductions and terminations of non-defense discretionary programs, saving more than $20 billion in ’06. The budget also contains $137 billion in savings over 10 years in mandatory spending.

The budget proposes to reform farm support programs for savings of about $587 million in CCC outlays for FY06. Over a 10-year period, these reforms are expected to save nearly $5.7 billion. Elements of the proposed reforms include: lowering the payment limit cap for individuals to $250,000 for commodity payments, including all types of marketing loan gains; as well as eliminating the 3-entity-rule; basing output eligible for marketing loans on historical production; reducing crop and dairy payments to farmers by 5%; requiring the dairy price-support program to minimize expenditures; extending the Milk Income Loss Contract program for 2 years; and imposing a sugar marketing assessment to be paid by sugar processors on all processed sugar.

The budget also includes proposals to reduce subsidies for crop insurance premiums and reduce costs to deliver the program. Crop insurance proposals include a higher minimum coverage level and tying the receipt of direct payments to the purchase of crop insurance. According to the Administration, the combination of crop insurance changes being proposed is expected to save about $140 million per year beginning in ’07.

The President’s budget calls for Market Access Program funding to be frozen at $125 million for ’05/06. The level of funding authorized under the current farm law rises to $200 million from the current $140 million for the remainder of the bill. The proposed freeze would affect around 80 agricultural export-oriented organizations. NCC will be urging Congress to maintain sufficient funding to support effective foreign market development programs at authorized levels.

Sen. Cochran (R-MS), chairman of the Appropriations Committee, said “we always know there’s a threat of lower levels of payments to producers from some in the Congress. This farm bill is working as it was designed to work and payments are going down because prices are going up, and I will continue to work as hard as I can to oppose any changes in the farm bill payment limits to producers. The farm bill of 2002 has resulted in savings of nearly $17 billion below expected cost of the commodity programs and I think the current farm bill should remain unchanged providing that safety net without modification until it expires in 2007.”

Sen. Lincoln (D-AR) said “payment limits would be particularly unfair to cotton and rice farmers because their production costs were higher for those crops than for others.”

In stressing that farmers and ranchers made investment decisions based on the ’02 farm law, Senate Ag Committee Chairman Chambliss (R-GA) said “if they single out the farm bill then we are going to have one heck of a fight.”

The NCC issued a statement regarding the budget proposal in which NCC Chairman Woods Eastland said, “This budget outline is just the first step in a long, important budget process. Congress will be evaluating these proposals and other options as it seeks ways to trim the federal deficit. It is important to remember that this debate will be about prospective, not retrospective, program changes; and it is important that Congress evaluate its options within the context of our need to remain competitive in world markets and the impact unilateral changes can have on our position in world markets.”

The statement noted that the federal farm law acts as a multi-year contract upon which thousands of farm families make their business and investment decisions. Any reduction or weakening of the safety net provided by the ’02 farm law will negatively impact the security of all Americans. Agriculture should not be singled out or asked for greater sacrifice than other federal departments. Within agriculture, equity should be an important guide to reductions in support. No sector or region should be targeted. The complete statement can be found at www.cotton.org/issues/2005/budgetreact.cfm.





USDA to Issue 2nd Advance Counter-cyclical Payments

USDA has notified state and county offices that the 2nd advance Counter-cyclical Payment (CCP) rate for the ’04 upland cotton crop will be at the maximum allowable level of 9.61 cents/lb (70% of 13.73 cents/lb), less any amount received in the first advance payment. For those who took the full amount of the1st advance payment of 4.81 cents, they will receive 4.80 cents in the coming days. The announcement by USDA is consistent with the recommendation submitted by NCC Chairman Eastland in early February.

USDA also announced the 2nd advance CCP rates for grains and oilseeds. For recipients who took the 1st advance for other commodities, the 2nd advance rates will be as follows: corn – 14 cents/bu; sorghum – 9.45 cents/bu; barley – 5.25 cents/bu; oats – 0.56 cents/bu; rice – 2.1 cents/lb; soybeans – 9.1 cents/bu; and peanuts – 1.28 cents/lb. Wheat producers who took the 1st advance CCP of 3.5 cents are not eligible for a 2nd advance payment, but may receive 1.4 cents if no 1st advance had been taken.





Justice Asks Appeals Court to Stay Safeguard Injunction

The US Justice Department asked the US Court of Appeals for the Federal Circuit to stay a preliminary injunction by the Court of International Trade (CIT) which temporarily bars the government from further consideration of threat-based textile safeguard petitions.

Justice also asked, in a separate brief, for an expedited schedule in the disposition of an appeal it will file by Feb. 14. The brief requests that the US Assoc. of Importers of Apparel and Textiles (USA-ITA), which brought the original lawsuit, respond to the appeal by Feb. 28 on a fast-track schedule. Justice then would respond to USA-ITA’s filing by March 7. The proposed schedule would facilitate an Appeals Court ruling by mid-March and a government decision on safeguard petitions already filed by mid-April. This latest action by Justice follows the denial of its request for a stay filed earlier with CIT.





US Textile, Apparel Deficit Hits Record

Recently released Commerce Dept. data reflects a $73.1 billion textile and apparel trade deficit for ’04, up nearly 9% from ’03. Imports reached $89.3 billion compared with exports of $16.2 billion. The deficit with China alone jumped more than 25%, to $17.5 billion.

Predictably, the biggest increase in Chinese exports of textiles and apparel to the US market was in quota-free categories, which increased by 513 million square meters, or 55%, boosting China’s share of the US imports in these categories to a record 70%. Imports in the same categories from the rest of the world fell by 91 million square meters in ’04.

“This kind of US market penetration by China in unprotected textile and apparel categories should leave little doubt about the threat posed by Chinese imports in the larger volume markets for which quotas were removed on January 1, 2005,” NCC Chairman Eastland said. “It also points to the importance of the request by the Department of Justice to the US Court of Appeals for the Federal Circuit to stay a preliminary injunction which temporarily bars the government from further consideration of threat-based textile safeguard petitions. Absent the requested stay and expedited schedule for filing of briefs, substantial market share losses by US manufacturers and other trading partners seem inevitable.”





States Receive EQIP Funds

USDA awarded $22.2 million in Environmental Quality Incentives Program (EQIP) funds to 17 states, including 9 Cotton Belt states, for their high levels of performance in implementing the program during ’04.

The Cotton Belt states receiving the performance award are: Alabama, $1,315,789; Arkansas, $1,315,789; Georgia, $1,052,632; Louisiana, $1,315,789; Mississippi, $1,184,211; New Mexico, $1,052,632; Oklahoma, $1,315,789; South Carolina, $1,184,211; and Texas, $1,052,632.

EQIP is a voluntary conservation program for farmers and ranchers that promotes agricultural production and environmental quality as compatible national goals. EQIP offers financial and technical help to assist eligible participants implement structural and management practices on eligible agricultural land. The program provides a performance incentive to optimize the overall environmental benefits.

In awarding the incentive, USDA's Natural Resources Conservation Service considered factors such as efficiency in providing technical assistance for conservation system applications, strategic planning and program implementation, degree of emphasis on funding comprehensive nutrient management plans with livestock producers, use of technical service providers, and contracts with limited resource farmers and ranchers. Additional information on EQIP can be found at www.nrcs.usda.gov/programs/eqip.





Biotech Cotton Making Global Strides

An International Cotton Advisory Committee (ICAC) report is reporting rapid adoption of biotech cotton varieties since their introductin in ’96. The report estimates that biotech cotton varieties were planted on 24% of the world cotton area in ’04/05, accounting for 35% of world production and 31% of cotton traded in the international market. It said 9 countries representing 60% of the world area have commercialized biotech cotton varieties.

To address questions about the benefits and risks of biotech cotton, ICAC constituted an expert panel in ’99 to prepare a report on biotech cotton, which was published in ’00. Last year, ICAC formed the Second Expert Panel on Biotechnology of Cotton to update the first report, including specifically addressing bio-safety issues and the potential benefits and challenges for biotech cotton adoption in the developing world. That Panel included members from Australia, France, Greece, Pakistan, the United States and the International Service for the Acquisition of Agri-Biotech Applications. An Executive Summary of their report is at: http://www.icac.org/cotton_info/tis/biotech/documents/expert_panel_2/english.html

The Panel found that while insect resistance and herbicide tolerance are the only traits currently available in biotech cottons, a broad range of other traits are under development using modern biotechnology. Principal limitations to the easy and faster spread of biotechnology are identification of suitable genes, intellectual property rights and bio-safety regulations in various countries.





Mississippi State Honors Bill Gillon

Bill Gillon, the NCC’s outside general counsel, was selected as the Mississippi State U. ’05 College of Arts and Sciences Alumnus of the Year. The university’s College and School Alumni of the Year Program recognizes the achievements of outstanding alumni whose personal lives, professional accomplishments and community service best exemplify the mission of Mississippi State U.





Sales, Shipments Stay Strong

Net export sales for the week ending Feb. 3 were 452,600 bales (480-lb.). This brings total ’04-05 sales to almost 10.6 million. Total sales at the same point in the ’03-04 marketing year were about 10.7 million. Total new crop (’05-06) sales are 382,700 bales. Shipments for the week were 283,000 bales, bringing total exports to date to 4.9 million bales, compared with the 5.4 million at the comparable point in the ’03-04 marketing year.





Prices Effective February 11-17, 2005

Adjusted World Price, SLM 1 1/16

35.42 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

0.85 cents

Marketing Loan Gain Value

16.58 cents

Import Quotas Open

 0

Step 3 Quotas (480-lb. bales)

 0

ELS Payment Rate

70.51 cents

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

50.50 cents

Forward 3135 c.i.f. Northern Europe

No Quote

Coarse Count c.i.f. Northern Europe

 47.25 cents

Current US c.i.f. Northern Europe

 51.35 cents

Forward US c.i.f. Northern Europe

 No Quote

 
2004-05 Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-December)

46.01 cents

**

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



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