Cotton's Week: June 24, 2005

NCC Chairman Woods Eastland, in a presentation at the China International Cotton Conference in Shanghai, stressed the importance of promoting cotton and enhancing demand on a global basis. He was joined on the trip by NCC/CEO President Mark Lange and Jeff Coey, CCI’s Director for China and South East Asia.

While in China, Eastland, Lange and Coey met with officials of China’s National Development and Reform Commission, the Fiber Inspection Bureau, and the China National Textile and Apparel Council. The group also met with officials from the Ministry of Commerce to discuss the recent imposition of safeguards on textile imports from China and the ability to negotiate a settlement.

USDA issued proposed regulations to implement the cottonseed disaster assistance program that was funded in the emergency hurricane supplemental appropriations act signed on Oct. 13, ’04.

The legislation authorized USDA to provide $10 million in assistance to producers and first-handlers of the ’04 crop of cottonseed in counties with a Presidential disaster declaration due to hurricanes and tropical storms in ’04.

The regulation proposes that the assistance programs be operated “somewhat” like the ’02 cottonseed program, which provided payments to gins who in turn distributed payments or equivalent benefits to eligible producers.

According to the proposed regulation, the ’04 disaster assistance would be provided for cottonseed losses in eligible counties based on a comparison of a producer’s production in ’03 to production in ’04. The disaster program would differ from previous programs, which made payments on all production to compensate for economic losses due to low prices.

The regulation sets out a procedure for gins to apply for cottonseed disaster assistance; for calculation of a payment rate for eligible losses; and, for distribution of benefits to and by gins. The regulation also establishes that a limitation on benefits payable to individual gins will be determined by multiplying the total eligible losses at the gin by the ’04 national average price of $112 per short ton.

The proposed regulation differs substantially from industry’s recommendations in that it places a significant burden for data collection and program administration on gins by requiring them to calculate losses and distribute benefits to individual growers. Further, the regulation establishes a limitation on benefits, which has not been a provision of previous cottonseed assistance programs.

NCC staff met with USDA officials concerning proposals to modify the procedure by which producers designate merchants as agents for the purpose of redeeming cotton from the CCC loan.

Current procedure involves the execution by producers of a CCC Form-605 agency designation. Efforts are underway that would enable the CCC to recognize electronic agency designations without the necessity of a paper CCC Form-605.

NCC is reviewing the proposals under consideration at USDA and briefing ginner and producer representatives on the proposed process.

The Senate Appropriations Committee approved the Senate’s version of the FY06 agriculture appropriations measure following approval by the subcommittee on Agriculture, Rural Development and Related Agencies. The bill includes $17.348 billion in discretionary spending and $82.81 billion in mandatory spending.

Subcommittee Chairman Bennett (R-UT) indicated that any amendments to change funding during floor debate would have to have offsets. The full Senate likely will debate the legislation when Congress returns from the July 4 recess.

The Senate bill does not include funding for the new specialty crop block grant programs authorized by legislation approved in ’04 nor does it include a provision to delay implementation of the country-of-origin labeling program for meat and meat products. While full line-item details are not available, reports indicate that Market Access Program (MAP) funding, scheduled to rise to $200 million under a provision of the ’03 farm law, is not changed by the appropriations measure.

The Administration formally submitted the CAFTA-DR implementing legislation to Congress.

The formal submission follows “mock mark-ups” in the Senate Finance and the House Ways and Means committees. The Ways and Means Committee approved draft legislation on June 15 by a 25-16 vote following approval by the Senate Finance Committee on June 14 by an 11-9 vote.

Under trade promotion authority procedures (“fast track”), once the implementing legislation is submitted, the Ways and Means Committee has 45 legislative days to act on the legislation and the House has an additional 15 days to vote on it, without amendments. The Finance Committee then has an additional 15 days to act on the legislation after which the Senate has 15 days to vote.

Congressional leaders have expressed interest in moving the legislation prior to the July 4 recess, but it appears more likely that the legislation will be considered when Congress returns from the July 4 break.

July 1 is the deadline for industry members to apply for entry into the ’05-06 Cotton Leadership Program. Applicants are encouraged to visit http://leadership.cotton.org to review program curriculum, eligibility requirements and download the application. Contact NCC’s Member Services at 901-274-9030 or your local Member Services Representative for additional information.

The program is supported by a grant to The Cotton Foundation from DuPont Crop Protection.

The Commodity Credit Corp. (CCC) has decided to change the regulations governing how payment rates are calculated under its Extra Long Staple (ELS) Cotton Competitiveness Payment Program. The interim final rule, effective Aug. 5, ’05, provides that the “U.S. spot quotes” currently used in the payment formula will be replaced by the “American Pima c.i.f. Northern Europe quote.”

The current ELS payment rate is determined by the difference between US spot prices, as reported by USDA/AMS and the lowest foreign quote, c.i.f. Northern Europe, as published by Cotton Outlook, adjusted to US location and quality. The payment rate under the new rule will be determined by the difference between the American Pima c.i.f. Northern Europe price and the lowest foreign quote in the Northern Europe market adjusted for quality. According to CCC analysis, this rule change would have reduced the ELS competitiveness payment rate during the first week of April by about three-fourths, to 20.69 cents per pound.

Escalating ELS competitiveness payments prompted NCC earlier this year to join with Supima, American Cotton Shippers Assoc., AMCOT and the National Council of Textile Organizations in a request to USDA for a change in the administration of the ELS Competitiveness Program.

While the rule change announced by CCC is not precisely what the industry organizations jointly recommended, it relies on the same fundamental price comparisons for payment calculations and is expected to deliver essentially the same results.

Written comments by letter, facsimile or internet must be received before July 20, ’05 in order to be assured consideration. Email to Steve.Neff@usda.gov; fax to 202-690-2186; mail to Steve Neff, Economic and Policy Analysis Staff, Farm Service Agency, USDA, 1400 Independence Ave., SW., Ag STOP 0515, Washington, DC20250-0515.

As part of the review of the Particulate Matter (PM) National Ambient Air Quality Standards (NAAQS), EPA staff has prepared a paper that proposes a new coarse PM standard for the indicator PM_10-2.5 and changing the fine PM NAAQS for PM_2.5.

The issuing of a new coarse PM_10-2.5 standard at the suggested levels will have significant, far-reaching implications for production agriculture, ginning and animal agriculture. The EPA staff intends to finalize the SP by June 30, ’05.

Because of the uncertainty of the science to support a new standard and the potential serious consequences to agriculture, the USDA Agricultural Air Quality Task Force recommended to Secretary of Agriculture Mike Johanns that he convey to EPA Administrator Steven Johnson, “that a coarsePM NAAQS not be promulgated unless and until sufficient research findings justify one.”

According to the Commerce Dept., May (4-week month) total cotton consumption in domestic mills was 230.5 million pounds for a seasonally adjusted annualized rate of 6.09 million 480-pound bales. Last year’s May annualized rate was 6.21 million bales.

The April (4-week month) estimate of domestic mill use of cotton was raised by 3.4 million pounds to 233.5 million. The revised seasonally adjusted annualized rate of consumption for April is 6.20 million (480-lb) bales compared with last year’s April annualized rate of 6.08 million.

Based on Commerce estimates from Aug. 1, ’04, through May 28, ’05, projected total pounds consumed during crop year ’04-05 would be 3.0 billion pounds or 6.3 million bales. USDA’s latest estimate of ’04-05 crop year mill use is 6.3 million. Preliminary June and revised May figures will be released by Commerce on July 28.

Net export sales for the week ending June 16 were 148,600 bales (480-lb). This brings total ’04-05 sales to about 15.1 million bales. Total sales at the same point in the ’03-04 marketing year were about 14.3 million. Total new crop (’05-06) sales are 1.2 million bales.

Shipments for the week were 277,900 bales, bringing total exports to date to 11.3 million bales, compared with the 12.0 million at the comparable point in the ’03-04 marketing year.

On June 24, Cotton Outlook designated the Memphis/Eastern c.i.f. Northern Europe price as a “No-Quote.” The loss on the Memphis/Eastern quote causes the CA/AZ quote to be used in the determination of the Step 2 payment for upland cotton.

Based on current price relationships, the use of the CA/AZ quote would increase the Step 2 rate to about 9 cents/lb. The CA/AZ quote will be used to determine Step 2 rates payable starting on July 1. The current Step 2 rate, payable for June 24-30, is 4.93 cents.