Cotton's Week: April 29, 2005

The FY06 budget resolution was approved by narrow margins of 214-211 in the House and 52-47 in the Senate.

Congress failed to approve a budget plan in ’05. Approval of the FY06 plan was viewed as critically important to the White House as it paves the way for reconciliation bills later this year that will provide for $35 billion in cuts to mandatory spending; $70 billion in tax cuts; and an increase in the debt limit.

Without the budget resolution, the bills most likely would have required a 60-vote majority in the Senate. Approval of the budget also provides an opportunity for Congress to approve oil exploration in Alaska’s Arctic National Wildlife Refuge later this year.

The budget establishes a cap of $843 billion on discretionary spending, which will create a challenge for appropriators responsible for crafting annual spending plans for discretionary programs.

The final budget plan would require House and Senate Agriculture committees to develop legislation to reduce spending for commodity, conservation and nutrition programs by $3 billion over 5 years. The spending reductions for agriculture programs are essentially the same as adopted by the Senate earlier and are substantially lower than the Administration’s proposals and the House budget plan.

Senate Agriculture Committee Chairman Chambliss (R-GA) said the budget resolution will allow the Agriculture Committee to work with a more realistic budget to reduce spending equitably between commodity, conservation and nutrition programs. Chambliss also commended Budget Committee Chairman Gregg (R-NH) for “upholding his agreement to fight for agriculture’s fair share which was in the range of the Senate number, $2.8 billion over 5 years, rather than moving closer to the House numbers of $5.3 billion.”

Under terms of the budget plan, the Agriculture Committees are not instructed how to achieve the required savings and must report their plans to the respective Budget Committees by Sept. 16.

Comparison of House, Senate and Conference Budget Plans

*Would require majority rather than 60 votes in Senate.

The Senate confirmed Chuck Conner to serve as Deputy Secretary of Agriculture; Steve Johnson to serve as EPA Administrator; and Rob Portman to serve as US Trade Representative.

Conner leaves his position as special assistant to the President for Agriculture Policy to take the number 2 position at USDA. He formerly served as staff director for the Senate Agriculture Committee for Chairman Lugar (R-IN) and as top staff officer at the Corn Refiner’s Assoc.

Portman was in his 7^th term as Representative of Ohio’s 2^nd district. He was a member of the Ways and Means Committee and acted as a liaison between the White House and the Republican Conference.

Johnson is a career EPA scientist who has worked at EPA for 27 years. He was assistant administrator of the Office of Prevention, Pesticides and Toxic Substances before becoming acting deputy administrator in ’03. He has been acting EPA administrator since January.

NCC Chairman Eastland met with Congress members and Administration officials to discuss NCC priorities on budget, farm policy and trade issues.

During discussions with top US Trade Representative (USTR) and USDA officials, Eastland stressed the importance of their consulting with industry as a US response is developed and implemented regarding the World Trade Organization (WTO) ruling in the Brazil cotton case.

Eastland thanked Congressional members who played key roles in working for a budget plan that will not require significant changes to the programs authorized by the ’02 farm law. He met with USDA Farm Service Agency officials to discuss a number of pending program administration issues, including modifications to the Pima competitiveness program, loan processing and storage, and the $10 million cottonseed disaster assistance program provided in the ’03 disaster legislation.

During visits with House members, Eastland was frequently asked about the industry’s views on the Central American Free Trade Agreement and urged to clarify the position as soon as possible. In addition to discussions concerning the timing and content of the US response in the Brazil case, Eastland was able to discuss the importance of prompt action on China safeguards and USTR’s continued efforts to ensure that China provides access for raw cotton as required by the WTO accession agreement.

Eastland thanked Senate Agriculture Committee Chairman Chambliss (R-GA), Sen. Lincoln (D-AR) and Rep. Neugebauer (R-TX) for their prompt response to the European Union’s (EU) call for early action on the cotton program, separate and apart from the WTO-Doha negotiations. All strongly criticized EU Commissioner Mandelson for abandoning the single-undertaking approach under which all commodity programs would be negotiated collectively during the round. USTR Portman, in a response to a question from Sen. Lincoln during his confirmation hearing, reaffirmed his support for the single-undertaking approach.

The US Federal Court of Appeals has stayed the preliminary injunction issued by the Court of International Trade. The injunction, which was issued in early January, had prevented the US government from moving ahead on 12 threat-based textile safeguard cases filed by NCTO and other trade associations last fall.

Announcing the stay, the Court stated “the USA-ITA claim is not ripe and it likely will fail on its merits.” The Court also stated that “the government has made a strong showing that none of the other claims in the complaint supports the preliminary injunction.”   

NCC Chairman Woods Eastland said, “This action by the Court of Appeals is good news. It means that the Committee for the Implementation of Textile Agreements (CITA) can proceed on the 12 threat-based petitions filed last fall by NCTO and other industry organizations.” 

Shortly after the injunction was lifted, CITA announced that it has accepted for further review 7 safeguard petitions filed by the US the textile industry on April 6. CITA said it will soon initiate a 30-day comment period, after which it will have 60 days to decide whether to grant the requested safeguards.

Some of those cases overlap with the 7 petitions accepted for further consideration by CITA on April 28 or with CITA’s self-initiated safeguard procedures. It is unclear how the overlapping cases will affect each other. 

The comment period for the first 6 petitions filed by the US textile industry has ended, suggesting it would be possible for CITA to rule on them very quickly. The 6 categories include: cotton trousers (347/48), man-made fiber trousers (647/48), cotton knit shirts (338/9), man-made fiber knit shirts (638/9), men's shirts (340/640), and underwear (352/652). 

CITA reportedly is reviewing the effect of the court’s ruling on all the categories for which safeguard procedures have been initiated.

The Natural Resources Conservation Service (NRCS) announced that the agency is seeking public comment on national priorities and emerging issues for the Environmental Quality Incentives Program (EQIP). The current national resource priorities for EQIP are: reductions of non-point source pollution; reduction of emissions; reduction in soil erosion and sedimentation, and promotion of at-risk species habitat conservation. Written comments will be accepted via regular mail, fax or e-mail through June 5, ’05.

NRCS has been holding listening sessions throughout the US and will hold a national public listening session May 5, ’05 in Washington. EQIP, reauthorized in the ’02 farm law, offers financial and technical assistance to producers who face threats to soil, water, air and related natural resources on their land. This voluntary program offers up to 75% cost share to help producers reduce soil erosion, improve water use, and protect grazing land by installing conservation practices that protect natural resources.

NCC plans to submit comments to USDA and will continue to monitor changes made to the program and the effects on NCC members. Information about EQIP is available at http://www.nrcs.usda.gov/programs/eqip.

USDA’s Agricultural Marketing Service (AMS) is proposing to raise the fee for cotton classification from $1.65/bale to $1.85/bale for the ’05 crop. The proposed fee and existing reserve will be sufficient to cover costs of providing classification services, including costs for administration and supervision. The proposed fee was calculated using an established formula in the Uniform Cotton Classing Fees Act of ’87. This formula provides that a reserve not to exceed 25% of the proposed operating costs be maintained. AMS Cotton Program Acting Deputy Administrator Darryl Earnest reviewed the calculations and rationale for the increase with producer leadership at the April meeting of the American Cotton Producers.

A 5 cent/bale discount will continue to be applied to voluntary centralized billing and collecting agents. Growers or their designated agents receiving classification data will continue to incur no additional fees if classification data is requested only once. The fee for each additional retrieval and for an owner receiving classification data from the national database will remain at 5 cents/bale. The fee for review classification also will  increase to $1.85/bale. The fee for returning samples after classification will remain at 40 cents/bale. A 15-day comment period is provided for public comments.

According to the Commerce Department, March (5-week month) total cotton consumption in domestic mills was 300.2 million pounds for a seasonally adjusted annualized rate of 6.09 million bales (480-lb.). Last year’s March annualized rate was 6.30 million bales.

The February (4-week month) estimate of domestic cotton mill use was raised by 249,000 pounds to 235.2 million. The revised seasonally adjusted annualized rate of consumption for February is 6.15 million bales. This is lower than last year’s February annualized rate of 6.22 million bales.

Based on Commerce estimates from Aug. 1, ’04, through April 2, ’05, projected total pounds consumed during crop year ’04-05 would be 3.0 billion pounds or 6.30 million bales. USDA’s latest estimate of ’04-05 crop year mill use is 6.3 million bales.

Net export sales for the week ending April 21 were 215,700 bales (480-lb.). This brings total ’04-05 sales to about 12.9 million bales. Total sales at the same point in the ’03-04 marketing year were almost 13.2 million. Total new crop (’05-06) sales are 691,000 bales.

Shipments for the week were 383,100 bales, bringing total exports to date to 9.0 million bales, compared with the 9.5 million at the comparable point in the ’03-04 marketing year.