Cotton's Week: February 25, 2005

Cotton's Week: February 25, 2005

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NCC Gathers Support for Farm Law Preservation

NCC is asking its members to contact their Congressional representatives and urge them to sign onto respective letters – in support of ’02 farm law preservation – that are being sent to the chairmen of the House and Senate budget committees.

Initial co-signers to the letter to House Budget Committee Chairman Nussle (R-IA) are Reps. Emerson (R-MO), Pastor (D-AZ), McMorris (R-WA), Etheridge (D-NC) and Graves (R-MO). Their letter urges Chairman Nussle – as that committee begins deliberating the House Budget Resolution for FY06 - "to stand by the commitment we have made to our nation's farmers, our rural communities, and the hungry by maintaining the baseline for agriculture.” They said examining the farm law changes proposed by the President's budget proposal, for example, reveals deep cuts to farmers who would face anywhere from a 10% to 30% cut in gross income. “Most farmers,” they said, “who must compete against foreign producers benefiting from higher subsidies and tariffs, operate at slim margins, and such deep cuts would erase profit margins for many producers. Additionally, cutting farm programs while the United States is in the midst of negotiating a multilateral trade framework in the Doha Round of the WTO could undermine our position - making it even more difficult for our farmers to compete.”

The letter also noted that the Farm Bill is a fiscally responsible alternative to the ad hoc assistance commonplace prior to adoption of the current safety net. The federal government spent an average of $24.5 billion per year for each of the 3 years preceding the farm law (including ad hoc assistance), but in the 3 years since passage of the farm law ending in ’04, spending has averaged only $15.6 billion - almost $9 billion less per year than the average for the preceding 3 years and $5.4 billion less per year than the amount provided for in the budget. Although farm spending is estimated to increase beyond levels originally projected in the farm law for FY05, the total spending under the new farm law would remain more than $13 billion less than original projections.

The letter emphasized that re-opening the farm law’s safety net, designed to last through ’07, would create more uncertainty for farmers who already must contend with market instability, unpredictable weather and variable supply costs. In addition, the Representatives said they hoped to build on the success of key conservation initiatives under US farm policy that are “unrivaled in their success in rehabilitating wetlands, wildlife and wildlife habitat, curbing soil erosion, and improving air and water quality through voluntary, incentive based practices.”

A similar letter sent to Senate Budget Committee Chairman Gregg (R-NH) and Ranking Member Conrad (D-ND), thus far has garnered co-signers Sens. Lincoln (D-AR), Roberts (R-KS), Burns (R-MT), Talent (R-MO), Vitter (R-LA), Isakson (R-GA), Specter (R-PA) and Thune (R-SD). While expressing their shared commitment to deficit reduction, they stated that it is important to consider what US farm policy already has contributed to deficit reduction - $16 billion in savings compared to the March ’02 Congressional Budget Office cost estimate. Meanwhile, mandatory funding for conservation, rural development, trade promotion, research, renewable energy and forestry initiatives all have sustained cuts in the last 2 years totaling more than $2 billion. These numbers do not include another $38 million in annual cuts to Federal Crop Insurance resulting from the renegotiation of the Standard Reinsurance Agreement with crop insurance providers.

The letter pointed out that US farm policy for commodities amounts to about one half of one percent of the total federal budget, while helping sustain an economic sector representing 17% of the nation's GDP, 25 million jobs, and $3.5 trillion in economic activity. Yet, while this area of farm policy already has saved an amount equal to 26% of the total amount proposed to be saved over the next 5 years, the most recent budget proposal contemplates yet another $7 billion in net savings over the next 10 years from both commodities and crop insurance. Additionally, these proposals actually increase the odds of Congress being forced to enact additional emergency assistance in the future. These reductions are in addition to a proposed 9.6% cut to discretionary agriculture funding. This reduced funding will cause USDA to absorb 16.5% of the cuts in federal discretionary funding, while accounting for just 2% of the total.

“The recently proposed cuts to U.S. farm policy, when added to the more than $18 billion in mandatory savings already achieved, bring to rest a disproportionate burden of deficit reduction on the shoulders of our nation's farm families, rural communities, environmental protection, and other important rural initiatives,” the letter stated.

Both letters can be found at the NCC web site’s members only area at www.cotton.org/issues/members/2005/budget-letters.cfm.





Length Uniformity Change Announced

USDA announced a change in the measurement range for length uniformity in the schedule of premiums and discounts. Beginning with the ’05 crop, USDA’s Agricultural Marketing Service will report the length uniformity measurement to the tenth of a percent.

Producers, merchants, buyers, gins, cooperatives, loan agents, government agencies and others utilizing the Commodity Credit Corp. (CCC) loan schedule must incorporate these new ranges into their business software to calculate accurate loan values for the ’05 crop. The change pertains to upland cotton eligible for non-recourse marketing assistance loans. The CCC loan schedule for extra long staple cotton does not include length uniformity. The change does not alter the loan value of upland cotton or add any other quality attributes to the upland cotton loan schedule.

Current Length
Uniformity Measurements

2005 Length
Uniformity Measurements

77 and below

77.4 and below

78

77.5-78.4

79

78.5-79.4

80

79.5-80.4

81

80.5-81.4

82

81.5-82.4

83

82.5-83.4

84

83.5-84.4

85

84.5-85.4

86 and above

85.5 and above





Bales Escape High Hazard Designation

Densely packed baled cotton is no longer listed as a high hazard under the International Code Council’s (ICC) Fire Code. NCC-proposed changes to the ICC Fire Code were approved by the ICC International Fire Code Committee (IFCC) this week in Cincinnati. Adoption of the NCC-proposed fire code changes came following testimony by a NCC consultant, NCC staff and other cotton industry representatives. Testifying on behalf of cotton warehouses was Bob Weatherford, Gulf Compress, Corpus Christi, TX. Weatherford noted that his company determined it would be cost prohibitive to build a new multi-building warehouse facility if they had been required to comply with fire codes that classified densely packed baled cotton as a hazardous material. He also noted that his firm's insurance company’s loss experience with densely packed baled cotton did not justify the fire code’s current high hazard classification.

NCC’s Dr. Phil Wakelyn explained the sound science research basis – research sponsored by The Cotton Foundation in cooperation with USDA - for not considering densely packed cotton bales as a flammable hazard. He noted this action was consistent with actions already taken by the International Maritime Org., Dept. of Transportation, and the National Fire Protection Assoc. uniform fire code based on the same information. NCC’s Dale Thompson explained that the densely packed cotton bale specifications were consistent with international standards and requirements of the Joint Cotton Industry Bale Packaging Committee. Southeastern Cotton Ginners Assoc. safety and risk management specialist Barry Nevius testified that enforcement of the old code had stymied new cotton warehouse construction in several southeastern states.

After a comment period in June, ICC membership will vote to adopt all committee approved codes changes in an up or down vote at their September Annual Conference in Detroit.

The IFCC also approved by“assembly action” a separate technical correction to the fire code to specifically list seed cotton as an agricultural product. The NCC had submitted this proposed technical correction to the fire codes to reaffirm the ginning industry’s long standing agricultural classification. This is important to the ginning industry as the classification specifically excludes agricultural processing from a number of industrial codes and standards.





ProAct Use Approved

Eden Bioscience Corp. received registration from EPA for ProAct™, a new generation of foliar-applied harpin protein designed to increase field crop yields. The company plans to register ProAct in all states except California for ’05 season use.





Cotton Mill Use Slips in January

According to the Commerce Dept., January (4-week month) total cotton consumption in domestic mills was 226.9 million pounds for a seasonally adjusted annualized rate of 6.18 million (480-lb) bales. Last year’s January annualized rate was 6.46 million.

The December (5-week month) estimate of domestic mill use of cotton was lowered by 911,000 pounds to 249.3 million. The revised seasonally adjusted annualized rate of consumption for December is 6.43 million bales. This is higher than last year’s December annualized rate of 6.17 million.

Using the latest figures from the Commerce Dept., calendar ’04 mill use is estimated to be 3.02 billion pounds or 6.29 million bales. This is lower than calendar year ’03’s use of 6.82 million bales. Based on Commerce estimates from Aug. 1, ’04, through Jan. 29, ’05, projected total pounds consumed during crop year ’04-05 would be 3.0 billion pounds or 6.22 million bales. USDA’s latest estimate of ’04-05 crop year mill use is 6.3 million 480-pound bales.

Preliminary February domestic mill use of cotton and revised January figures will be released by Commerce Dept. on March 24.





Sales Lag, Shipments Strong

Net export sales for the week ending Feb. 17 were 166,700 bales (480-lb). This brings total ’04-05 sales to more than 11.0 million bales. Total sales at the same point in the ’03-04 marketing year were about 11.5 million. Total new crop (’05-06) sales are 475,100 bales.

Shipments for the week were 327,300 bales, bringing total exports to date to 5.5 million bales, compared with the 6.0 million at the comparable point in the ’03-04 marketing year.





Prices Effective Feb. 25-March 3, 2005

Adjusted World Price, SLM 11/16

38.57 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

 2.65 cents

Marketing Loan Gain Value

 13.43 cents

Import Quotas Open

0

Step 3 Quotas (480-lb. bales)

 0

ELS Payment Rate

81.10 cents

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

 53.65 cents

Forward 3135 c.i.f. Northern Europe

 No Quote

Coarse Count c.i.f. Northern Europe

 50.77 cents

Current US c.i.f. Northern Europe

 56.30 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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