Cotton's Week: September 23, 2005

The Senate passed the FY06 agriculture appropriations bill on a 97-2 vote. The legislation was debated over a 3-day period, with   Senators agreeing to withhold consideration of disaster assistance until more accurate damage assessments are available for a supplemental appropriations measure to be developed in October.

Sen. Grassley (R-IA) withheld offering an amendment to current farm law to reduce payment limitations, eliminate marketing certificates and tighten eligibility criteria. In anticipation that the amendment might be offered, NCC was joined by commodity, general farm organizations, farm credit, banking associations and equipment manufacturers in urging the Senate to reject the amendment. A copy of the letter is in the Issues area of the NCC’s web site, www.cotton.org.

The appropriations measure now goes to conference with the House-passed measure.  The Senate version includes nearly half a billion dollars more in spending than the House with additional funding for research, Farm Service Agency (FSA), rural development and food aid. During consideration of the legislation, Senators approved an amendment by Sen. Talent (R-MO) that would delay implementation of a plan to consolidate FSA offices by closing as many as 665 of the 2,353 offices nationwide.

USDA’s Farm Service Agency (FSA) has announced a modification to the Centralized Cotton Loan Redemption (CCR) process which involves the creation of an “Electronic-605” or Electronic Agent Designation (EAD). This EAD procedure applies to Commodity Credit Corp. (CCC) Form A cotton loans made by the producer and redeemed by the designated agent either through FSA county offices or through USDA's CCR system where cotton electronic warehouse receipts identify the agent authorized to redeem the cotton. In some cases, ginners may now be designated as the producer’s authorized agents in this new process.

A USDA fact sheet explaining how the CCR system facilitates both electronic loan processing and redemptions is being distributed to county FSA offices. For the first time, producers can designate an EAD when entering cotton into the CCC Form A loan. The EAD feature allows CCR to electronically redeem loans for producers’ agents. This centralized process significantly simplifies redemptions, eliminates paper, speeds the release of cotton for shipment and reduces administrative costs for both merchants and the CCC.

Producers who elect to identify and authorize an agent to redeem a cotton loan must still provide a paper copy of CCC-605 to his designated agent. However, the paper copy is not required to be submitted to any county office. The paper CCC-605 is the only document that validates the initial creation of the EAD used in the CCR process.

Ag Secretary Johanns announced that upland cotton farmers soon will be receiving final counter-cyclical payments (CCP) for the ’04 upland cotton crop. USDA has determined that the marketing year average price will be well below the 52-cent loan rate, thus giving the maximum CCP of 13.73 cents per pound. For producers who accepted the first and second partial CCP payments for ’04-crop upland cotton totaling 9.61 cents, they will receive an additional 4.12 cents per pound.

In early September, NCC sent a letter asking USDA to expedite delivery of the final CCP. This action by USDA will provide a needed boost to growers who are facing a tight cash flow situation due to relatively weak cotton prices and extremely high fuel costs. In the announcement, USDA also indicated that total CCP for ’04-crop peanuts is $81 per ton.

NCC Vice Chairman Allen Helms presented testimony to the Senate Agriculture Committee chaired by Sen. Chambliss (R-GA), during a hearing on the status and objectives of the Doha Development Round.

The Clarkedale, AR, producer joined a panel of private sector organizations following testimony by Agriculture Secretary Mike Johanns and US Trade Representative Rob Portman. In their prepared remarks, Secretary Johanns and Ambassador Portman stressed the importance of trade to US agriculture and their commitment to work closely to achieve a balanced and beneficial agreement.

Sen. Chambliss noted the hearing was being held on the day the WTO dispute panel set as the deadline for the US to comply with the panel’s ruling that the US cotton program caused “serious prejudice” to the Brazilian industry. He asked Amb .. Portman to comment on the US response.

Amb. Portman noted that the US took action in July to modify the operation of the GSM export credit guarantee program and has submitted legislation, which if enacted would terminate the Step 2 program. He explained that he had a meeting scheduled with Brazilian representatives and that he would urge Brazil to continue to act responsibly and to fully participate in the Doha Round, while providing the US a reasonable amount of time to comply with the WTO panel’s ruling. 

In his testimony, Vice Chairman Helms explained that the US cotton industry is willing to support US negotiators and fully participate in the Round provided cotton is treated equitably and not singled out. He also urged US negotiators to insure full participation not just by the EU, but by major cotton producing and consuming countries including China, India, Pakistan and Brazil. He noted that the efforts of African countries to single out US cotton are not constructive. He reiterated the US industry’s willingness to work with Africa in a cooperative manner including in the cotton subcommittee established in the Doha framework agreement, but emphasized that the subcommittee cannot serve as an alternative negotiating forum.

Helms said a good Doha agreement must be the product of a single undertaking; must achieve meaningful improvements in market access; must provide special treatment only to those countries that are truly less developed; and should clearly provide that if a country is in compliance with the provisions of the agriculture agreement, it should not be subject to “double jeopardy” by challenges under the subsidies code.

Chairman Chambliss said he will lead a contingent of his colleagues to Hong Kong for the Ministerial in December and he wants the Committee to be consulted and apprised of progress in the negotiations. He expressed support but cautioned that the agreement should be beneficial to US agriculture and should not limit Congress’ ability to write new farm laws.

The House Resources Committee approved legislation to update and reform the Endangered Species Act. By a bi-partisan vote of 26-12 the full committee, chaired by Rep. Pombo (R-CA), approved the Threatened and Endangered Species Recovery Act (HR 3824).

The bill establishes a definition for “best available scientific data” and would eliminate the critical habitat provisions of current law because only one-third of species listed under ESA have critical habitat and the Administration has expressed support for other actions to protect species including listings and recovery plans.

The legislation provides authority for an owner to be awarded “fair market value” if the Interior Dept. prohibits an activity because it constitutes a taking of a species. Fair market value is defined as “the foregone use of the affected portion of property, including business losses and what a willing buyer would pay a willing seller in an open market.” The bill allows owners 180 days to request financial aid if commercial activities are restricted because of a Section 9 determinations.

The legislation may be considered by the House the week of Sept. 26, and the NCC is a member of a coalition supporting the measure.

NCC joined House Agriculture Committee Chairman Goodlatte (R-VA) and his fellow co-chairs of the House Biotechnology Caucus – Reps. Berry (D-AR), Shimkus (R-IL) and Rush (D-IL) - in recognizing the significant role biotechnology has played in agriculture.

Roy Baxley, the American Cotton Producers’ South Carolina chairman, joined the Chairman, Caucus co-chairs and grower leaders from the American Soybean Assoc., American Farm Bureau Federation and National Corn Growers to announce that 1 billion acres of biotech crops have been planted and harvested worldwide in the last decade.

The Dillon, SC, producer explained that more than 80% of cotton harvested in the US is from varieties with 1 or more biotechnology traits and it is estimated that more than 35% of world cotton production is from biotech varieties. He said the combination of boll weevil eradication, pink bollworm control, conventional products and biotechnology have facilitated broader use of integrated pest management. He also noted that US farmers are looking forward to the next generation of biotech products that “will include traits to enhance food quality, improve food safety, impart stress tolerance to plants and allow plants to grow with less water and in high saline soils.”

Net export sales for the week ending Sept. 15, ’05 were 169,000 bales (480-lb). This brings total ’05-06 sales to more than 6.1 million. Total sales at the same point in the ’04-05 marketing year were about 5.5 million bales. Total new crop (’06-07) sales are 130,800 bales.

Shipments for the week were 198,500 bales, bringing total exports to date to 1.8 million bales, compared with the 997,900 bales at the comparable point in the ’04-05 marketing year.

The NCC joined with Supima, AMCOT, the American Cotton Shippers Assoc. and the Western Cotton Shippers Assoc. in a request to USDA for a change in the administration of the Extra Long Staple (ELS) Competitiveness Program. The request was made after industry members learned that Cotlook Ltd. plans to discontinue ELS quotes for the Northern Europe (NE) market.

In June, USDA issued an interim final rule proposing that the payment rate in the ELS competitiveness payment program be determined as the difference between the American Pima c.i.f. NE quote and the lowest foreign price quote, c.i.f. NE, adjusted for quality. With the pending discontinuation of the NE quotes, the industry has requested that USDA modify the interim final rule to now use the ELS quotes in the Far East (FE) market. The industry also stressed that the change should be done in a timely manner that will allow for the uninterrupted operation of the ELS competitiveness program.

On Sept. 10-22, Cotton Council International hosted the COTTON USA Special Trade Mission from China, which included a delegation of 16 textile representatives and cotton buyers.  The delegation’s tour included stops at the New York Board of Trade, Cotton Incorporated and USDA-AMS Cotton Classing Headquarters. Industry leaders and NCC staff provided briefings during the group’s visits to Memphis, Dallas, Lubbock, Fresno and Bakersfield.

Earlier, a 13-member delegation of the Chinese Chamber of Commerce for the Import and Export of Textiles (CCCT) visited Memphis on Sept. 12-13.

The delegation received briefings from industry leadership and NCC staff, and toured USDA classing facilities in Tennessee, and farming and ginning operations in Arkansas and California.