Cotton's Week: October 28, 2005

The NCC praised the chairmen of the House and Senate agriculture committees saying both did a good job on their budget-cutting reconciliation packages given the differing political environments.

NCC Chairman Woods Eastland said that when the House and Senate bills are conferenced and a single set of rules and assumptions is applied, he expects the respective agriculture committee chairmen will do their best not to undermine agriculture.

“Both chairmen did a remarkable job given their circumstances, and substantial conferencing will need to take place, but the U.S. cotton industry recognizes the chairmen’s work on packages that will minimize impact on current farm law structure and on producer income,” Eastland said. “The NCC wants to see the best possible package crafted to help U.S. cotton producers compete in the world marketplace.”

House Agriculture Committee Chairman Goodlatte (R-VA) released an outline of the contents of the budget reconciliation package his panel planned to mark-up Oct. 28. The total package includes $3.7 billion in savings, a 23% increase over the $3 billion required in the reconciliation instructions from the Budget Resolution. The reductions include $617 million in ’06 and an overall reduction of $3.7 billion for FY06-10.

A breakdown of the reductions in programs within the Committee's jurisdiction shows that:  1) the total reduction in commodity programs, including direct payments and the elimination of the Step 2 cotton program, is $1.01 billion over 5 years; 2) conservation programs account for $760 million in savings, while energy programs account for $23 million in savings; 3) rural development program funding reductions account for $446 million over 5 years; 4) research programs contribute $620 million to the total reduction package; and 5) the proposed reductions for the food stamp program account for less than a half of a percent of the total food stamp budget or $844 million over 5 years.

"The Committee is committed to a fiscally responsible reconciliation package to offset the increased spending due to recent hurricanes and other natural disasters and increased national security and defense spending," Chairman Goodlatte said in a news release.

The Senate Agriculture Committee, under the guidance of Chairman Chambliss (R-GA), passed a reconciliation package last week that the Congressional Budget Office estimates will reduce outlays for mandatory programs under the Committee’s jurisdiction by $196 million in ’06 and $3.014 billion over the next 5 years, covering FY06-10.

The full Senate is expected to vote on this reconciliation bill next week, and Sens. Grassley (R-IA) and Dorgan (D-ND) are expected to offer an amendment on the floor of the Senate to limit farm program payments.

Eastland reiterated earlier statements that any changes to the payment limitation provisions of current farm law would be extremely disruptive to farmers, lenders and agribusinesses and compound the damage suffered from the 2 recent hurricanes and higher fuel costs.

By a 318-63 vote, the House adopted the conference report for HR 2744, the FY06 Agriculture appropriations bill. The legislation would deliver $17.1 billion in discretionary spending, a 1.5% increase over FY05, and $83.1 billion in mandatory spending for commodity, nutrition and conservation programs. It also would delay mandatory country-of-origin food labeling until Oct. ’08.

The conference report now awaits final action in the Senate.

The Committee for the Implementation of Textile Agreements (CITA) announced that it was extending the period for making decisions on one of the pending textile safeguard cases.

The period for making a decision on whether to request consultations with China regarding imports of cotton and MMF curtains and drapery (categories 369 part/666 part) has been extended until Nov. 30, ’05. CITA extended the determination period in order to continue evaluating production data for cotton and MMF curtains and drapery.

The US Supreme Court agreed to review two appeals court decisions reaffirming federal claims that the Clean Water Act (CWA) requires property owners and developers to obtain permits before building on wetlands that indirectly link navigable waters.

Industry welcomes the Supreme Court's decision to revisit the CWA to clearly define “navigable water.” There is much confusion over how navigable waters should be defined, and clarification is needed. A variety of interstate and intrastate water bodies are considered navigable waters, including wetlands adjacent to navigable waters. Both current cases cited the Supreme Court's ’01 ruling in Solid Waste Agency of Northern Cook County v. US Army Corps of Engineers, which ruled that isolated waters with no connection to navigable waters are outside the CWA's jurisdiction. Since the decision in ’01, there have been about 15 cases that have sought to have the Supreme Court clarify the CWA and the definition of navigable water, reinforcing that the federal government, the environmental community, and the property owners all appear to have a different interpretation of the Supreme Court's ’01 ruling.

At issue are Circuit rulings that give the Army Corps of Engineers authority to restrict development on wetlands that are not "hydrologically" linked to navigable waters, such as rivers and lakes. The Supreme Court will be asked to consider whether the Clean Water Act ban on un-permitted discharges to "navigable waters" extends to non-navigable wetlands that do not even abut navigable water. The court also will be asked if CWA jurisdiction over any intrastate wetland that has a "tenuous or remote" link to navigable water exceeds Congress's constitutional powers to regulate commerce among states.

There are many CWA and other EPA regulations that affect cotton industry sectors because of what is considered navigable water under the CWA. One example is the oil spill regulations where oil and oil products, which due to their location, could reasonably be expected to discharge oil in harmful quantities (quantity that causes a sheen on surface water or shoreline) into or upon navigable waters, i.e., “all waters such as intrastate lakes, rivers, streams (including intermittent streams), mudflats, sandflats and wetlands.” This rule has been interpreted so broadly that most cotton farms and gins are covered.

At the recent International Code Council (ICC) meeting in Detroit, a number of NCC-supported code changes were approved. One significant code change defines seed cotton as a “perishable raw agricultural commodity … which requires ginning to become a commercial product.” The Southeastern Cotton Ginners Assoc. (SCGA) had requested this change because some fire and building code authorities in their region classified the act of ginning as a commercial or industrial process, not an agricultural process.

During the meeting, the NCC testified in support of this code change, submitted earlier by NCC, based on the fact that cotton ginning, an extension of the harvest, is considered by all government rules to be an agricultural process and not a commercial or industrial operation. Now that this change has been approved, officials should treat ginning facilities as agricultural buildings in states that adopt IFC/IBC codes.

NCC was represented at the hearing by Dr. Phil Wakelyn, NCC; Barry Nevius, SCGA; and Dr. Marcelo Hirschler, GBH Int’l.

In other important ICC actions, the previously “approved in principle” new definition for "densely-packed baled cotton" was officially adopted. This means that densely-packed baled cotton (bales compressed to densities greater than 22 lbs/ft³) is not classified as a combustible fiber or a hazardous material and, therefore, avoids the special, severe requirements associated with those classifications. The new definition and several amendments relating to the storage of baled cotton will be included in the revised ICC fire (IFC) and building (IBC) codes which are scheduled for publication before the end of ’05 and become effective Jan. 1, ’06. The fire and building codes [either National Fire Protection Assoc. (NFPA) or the ICC] that are used in all states were combined and amended in ’00.

It should be noted that costly and unnecessary changes to cotton bale storage facilities would have been required had the codes not been amended. The same language and storage requirements for densely-packed baled cotton that are in the amended ICC codes were formally approved in June by NFPA for their fire, building and life safety codes (see 7/8 Cotton’s Week). Additional information about these code changes is on the NCC’s web site at http://www.cotton.org/tech/safety/firecodes.cfm.

According to the Commerce Dept., September (5-week month) total cotton consumption in domestic mills was 269.7 million pounds for a seasonally adjusted annualized rate of 5.73 million 480-pound bales. Last year’s September annualized rate was 6.38 million bales.

The August (4-week month) estimate of domestic mill use of cotton was lowered by 1.05 million pounds to 226.3 million. The revised seasonally adjusted annualized rate of consumption for August is 6.00 million bales, down from last year’s August annualized rate of 6.44 million bales.

Net export sales for the week ending Oct. 20 were 137,900 bales (480-lb.) bringing total ’05-06 sales to about 7.2 million. Total sales at the same point in the ’04-05 marketing year were about 6.4 million bales. Total new crop (’06-07) sales are 158,000 bales.

With sales of 3.3 million bales, China accounts for 46% of ’05-06 crop sales. Mexico ranks second with 1.1 million bales, or 15% of the total. Turkey, Indonesia and South Korea complete the top-5 export customers for US cotton.

Shipments for the week were 112,400 bales, bringing total exports to date to 2.6 million bales, compared with the 1.5 million bales at the comparable point in the ’04-05 marketing year.

CCI hosted its 34th annual COTTON USA Orientation Tour from Oct. 17-28.The program’s aim is to educate the overseas textile spinners and manufacturers on US cotton’s advantages and to provide opportunities for them to meet with US cotton industry members in order to develop and/or enhance future business opportunities and purchases of US cotton.

Textile executives from Thailand, Indonesia, Philippines, Bangladesh, India, Pakistan, Japan, Korea, Taiwan, Mexico, Colombia, Peru and Ecuador participated in the ’05 event, along with representatives from USDA, ITMF and CCI. The tour began in Raleigh, NC, and brought participants to major growing and trading centers in the Mid-South, Texas and California.

The 13 countries represented are expected to consume around 40.3 million bales of cotton in ’05. These countries will import 13 million bales in ’05. The 24 individual companies represented are expected to consume around 1.3 million bales in ’05. The companies import about 467,000 bales of US cotton on an annual basis.