Cotton's Week: February 10, 2006

US cotton producers intend to plant 14.44 million acres of cotton this spring, up 1.7% from ’05, according to the NCC’s 23rd Annual Early Season Planting Intentions Survey.

Upland cotton intentions are 14.12 million acres, an increase of 1.4% from ’05 plantings of 13.93 million acres. Extra long staple (ELS) intentions of 312,000 acres represent a 15.2% increase from ’05. The results were announced at the NCC’s Annual Meeting in Tucson, AZ.

With estimated abandonment of 9%, total upland and ELS harvested area would be about 13.09 million acres. Applying state-level yield assumptions to projected harvested acres generates a crop of 21.41 million bales. This compares to ’05’s total production of 23.72 million bales. For ’06, the upland crop is projected at 20.59 million bales, while the ELS crop is pegged at 827,000 bales. Assuming average seed-to-lint ratios, cottonseed production for ’06 is projected at 7.66 million tons, down from 8.50 million last year.

The NCC survey was mailed in mid-December to about one-third of the producers across the 17-state Cotton Belt. Surveys had to be returned by mid-January.

Dr. Stephen Slinsky, the NCC’s senior economist, said final acreage decisions will be heavily influenced by expected returns of cotton and competing crops but producers are paying special attention to higher fuel and fertilizer costs and soil moisture conditions.

Based on survey results, the Southeast, Mid-South and Southwest regions show intended upland cotton planting increases of 3.3%, 6.2% and 0.3%, respectively. Decreases in upland cotton plantings of 23% were indicated for the West.

According to the survey, all Southeastern states except Alabama indicate increased acreage in ’06. The survey revealed a modest decline in Alabama’s cotton acreage, less than 0.5%, and indicated a shift into corn and soybeans. Increased cotton acres in other Southeastern states appear to be at peanuts’ expense.

For all Mid-South states, survey results indicate a shift out of corn and rice. The sharp increase in fertilizer prices are causing growers to shift away from nitrogen-intensive crops such as corn and rice, and some of those acres are moving into cotton. In addition, favorable cotton yields over the past two years have boosted expectations on cotton returns.

The Southwest shows a very modest increase of 0.3% to 6.25 million cotton acres due to increased plantings in Kansas and Oklahoma. Texas growers – lacking the moisture enjoyed last year – indicated they would plant 19,000 acres fewer acres to cotton in ’06, a 0.3% decline.

All Western states show significant declines in upland, with the region as a whole down 23% to 551,000 acres. Results indicate a shift into more favorably priced ELS cotton and specialty crops.

The NCC says the Bush Administration’s ’07 budget, as proposed, will disrupt current farm programs and undercut American agriculture, including the nation’s cotton producers.

“Agriculture should not be asked to bear a disproportionate share of the federal deficit trimming process,” NCC Chairman Woods Eastland said. “We urge Congress to carefully weigh options in the budget debate so that U.S. agriculture is not weakened.”

Eastland said a budget that significantly affects federal farm law and the multi-year contract on which thousands of farm families make their business and investment decisions also would seriously undermine the security of all Americans.

“Any reduction or weakening of the safety net provided by the ’02 farm law could result in price volatility and supply difficulties with our food and fiber markets similar to what we have experienced from our reliance on imported energy,” Eastland said.

He said the nation’s farmers already are making planting decisions for ’06, and adding uncertainty to their eligibility for program support could cause many to make decisions based on unclear, ill-defined prospective changes in federal legislation, rather than market signals.

 “Agriculture should not be asked for greater sacrifice than other federal departments, and certainly no farm sector or region should be targeted,” Eastland said. “Altering the safety net of the farm law before its scheduled expiration creates enormous uncertainty for farmers who already must contend with market instability, unpredictable weather and variable fuel, energy and other supply costs. This is not the time for major changes in U.S. farm law.”

Eastland said that the stability provided by the ’02 farm program, written to last through the ’07 crop year, has allowed unprecedented growth in farm investment, while underpinning an industry that contributes 15% of the nation’s GDP.

“Federal budget deficits adversely impact the entire American economy and efforts to address deficits should strive for equity in sharing the pain of adjustment,” Eastland said. “Spending on commodity and conservation agriculture programs account for less than 1.5% of total mandatory spending, yet commodity programs are being asked to shoulder more than eight percent of required reductions. Agriculture should not be singled out or asked for greater sacrifice than other federal departments.”

Because the WTO Doha Round talks still are underway, Eastland said that any reduction in US agricultural support prior to the completion of these international trade negotiations would be the equivalent of unilateral disarmament.

“Substantial changes in U.S. commodity programs can weaken our negotiating position, undermine current proposals, and send the wrong signal to other WTO member countries,” Eastland said. “Should the U.S. unilaterally disarm in agriculture, there will be little reason for other countries to reduce subsidies or open their markets to U.S. agricultural products.”

(Regarding the House-approved ’06 Budget Reconciliation Report, as reported in the Feb. 3 Cotton’s Week, producers will receive their full direct payments for both the ’06 and ’07 crops. For the ’06 crop, they will receive 40% of the payment as an advance, not 50%. For the ’07 crop, they will receive 22% of the payment as an advance, not 50%.)

The Administration’s proposed FY07 federal budget also proposes to close USDA cotton ginning laboratories in Lubbock, TX, and Las Cruces, NM. In addition, research, including work aimed at irrigation efficiency, improved integrated pest management and fiber quality enhancement, would receive significant cuts. These efforts are being carried out at ARS facilities from coast to coast, including Florence, SC; Clemson, SC; Tifton, GA; Auburn, AL; Stoneville, MS; College Station, TX; Lubbock, TX; and Shafter, CA.

The budget proposal would slash more than $8.3 million from USDA Agricultural Research Service (ARS) programs related to cotton – a 15% cut of the total allocation from this agency. The budget also proposes shifts of USDA funds allocated to agricultural experiment stations and Extension that could strike at the foundations of those state and regional programs.

House Ag Committee Chairman Bob Goodlatte (R-VA) conducted two field hearings on the reauthorization of farm bill legislation, which expires in ’07. The hearings were conducted in Fayetteville, NC, and Auburn, AL. The panel sought input on agriculture policy in areas such as commodity programs, conservation, trade, nutrition programs, credit, rural development, research forestry, energy and other areas such as marketing issues and biotechnology.

In addition to Rep. Goodlatte, the following Members participated in one or both hearings: (Republicans) - Everett (AL), Lucas (OK), Moran (KS), Gutnecht (MN), Hayes (NC), Bonner (AL), Rogers (AL), King (IA), Schwartz (MI) and Conaway (TX); (Democrats) – Peterson (MN), McIntyre (NC), Etheridge (NC), Butterfield (NC), Melancon (LA), Costa (CA), Salazar (CO) and Davis (TN).

The hearings, which were well attended, each had 2 panels of producer witnesses from North Carolina, Alabama and surrounding states which covered a wide variety of row crops, specialty crops, livestock and forestry. North Carolina producers David Burns and Ronnie Burleson gave cotton statements in Fayetteville. In Auburn, cotton statements were offered by Alabama producers Walt Corcoran and Jerry Newby, president, Alabama Farmers Federation.

All cotton statements, as well as those of most of the row crop witnesses, consistently supported the ’02 farm bill and urged the Committee to use it as a foundation for the next farm bill. All emphasized the importance of the marketing loan eligibility for all production and urged that new legislation include 1) no stricter regulations on payment limits and eligibility criteria and 2) maintenance of current planting flexibility provisions. Conservation programs were supported as an important component of new farm law and witnesses urged them to continue to operate on a voluntary, cost-share basis as a complement to, and not a substitute for, commodity programs.

The witnesses urged the Committee to work for adequate spending authority for new farm program legislation. They also expressed concern regarding the differential treatment cotton was receiving in the current Doha discussions and urged that the US not agree to any substantial reductions in domestic support unless accompanied by meaningful market access gains for US products. Some expressed disappointment over the Administration’s FY07 budget proposal that included unworkable limitations on loan eligibility and payment limits that penalized commercially viable operations.

Also, Reps. Butterfield (D-NC) and Peterson (D-MN), the ranking member of the House Committee on Agriculture, hosted a session in Wilson, NC, to discuss the upcoming ’07 farm bill.

In its February report, USDA projected the ’05-06 US crop to reach 23.72 million bales, unchanged from the January report. US exports were unchanged while mill use was lowered 100,000 bales to 5.90 million resulting in total offtake of 22.30 million bales. Ending stocks for ’05-06 are projected to be 7.00 million bales for a stocks-to-use ratio of 31.4%.

USDA gauged US ’04-05 cotton production at 23.25 million bales with mill use and exports unchanged from the January report at 6.69 million and 14.41 million bales, respectively. The estimated total offtake is 21.10 million bales, generating ending stocks of 5.54 million bales, while the estimated ending stocks-to-use ratio for ’04-05 is 26.3%.

USDA projects ’05-06 marketing year world production of 113.75 million bales, up 1.39 million bales from the January report. World mill use was raised 1.55 million bales to a projected 116.79 million bales. Consequently, world ending stocks on July 31, ’06 are projected to be 52.93 million bales, for a stocks-to-use ratio of 45.3%. USDA sees ’04-05 world production estimates unchanged from January’s report at 120.38 million bales. The beginning stocks estimate was raised 2.15 million bales to 42.87 million bales resulting in a world supply of 163.25 million bales. Estimated world mill use was unchanged at 108.65 million. The estimated world ending stocks for ’04-05 is now pegged at 54.12 million bales for a corresponding stocks-to-use ratio of 49.8%.

Net export sales for the week ending Feb. 2 were 488,100 bales (480-lb) bringing total ’05-06 sales to slightly more than 12.2 million. Total sales at the same point in the ’04-05 marketing year were about 10.5 million bales. Total new crop (’06-07) sales are 237,300 bales.

Shipments for the week were 358,600 bales, bringing total exports to date to 6.2 million bales, compared with the 4.9 million at the comparable point in the ’04-05 marketing year.