Cotton's Week: March 3, 2006

Cotton's Week: March 3, 2006

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African Proposal Untimely Diversion

The C-4 W. African cotton producing countries issued a new proposal for disciplines on domestic cotton support in the Doha negotiations.

The proposal: 1) unveils a formula tying increased cotton disciplines to any overall level of reduction in agricultural support, 2) seeks very specific limiting caps on blue box support and a much faster timeframe for implementation of cotton disciplines and 3) repeats the call for a commitment by donor countries to a “safety net” fund for the four W. African countries.

NCC Chairman Allen Helms said, “this proposal is an unfortunate diversion from the important work of the world’s trade ministers. The ministers’ self-imposed April 30 deadline for comprehensive modalities is fast approaching.” 

The NCC has made clear to US negotiators that continued insistence by some on unfair treatment for cotton only serves to erode US farmers’ confidence in the WTO and that can have important political ramifications.

Helms, a Clarkedale, AR, producer, in discussing the WTO problems, noted “a single commodity focus is misplaced if gains for the majority of the world’s farmers are a standard for success. It is abundantly clear that the most effective action for the developing world for all commodities will be completing comprehensive agricultural negotiations. No one has yet matched the ambition of the US on agricultural market access. That level of ambition, in both developed and developing markets, is necessary for this Round to be a success.”



NCC Positioned to Tackle Challenges

NCC Chairman Allen Helms said US cotton’s central organization will continue to pursue the US cotton industry’s priorities – both domestically and internationally – in ’06.

In an address at the Mid-South Farm & Gin Show in Memphis, Helms said the NCC already is working with other agricultural groups and with Congressional members to protect producer eligibility for farm program benefits and reinforce the message that the ’02 farm law is a multi-year contract that provides stability for US agriculture, US consumers and rural businesses.

Helms said the NCC also will work closely with all cotton interest organizations to maintain funding for the critical research programs targeted for elimination or reduction in the Administration’s budget.

“This is certainly not the time to cut back on critical research, and we are particularly alarmed at the prospect of USDA closing the Lubbock and Las Cruces gin labs at a time when fiber quality and air quality issues are critically important to cost and competitiveness,” he said. “And we are working to urge Congress to provide much needed emergency disaster assistance to producers who suffered severe financial losses due to hurricanes, drought and upwardly spiraling costs of production due to fuel and input costs.”

On the trade front, Helms said the NCC is deeply concerned with the ramifications of the text from the latest WTO Doha Round talks because “despite our best efforts,” the WTO, led by the EU, is attempting to move away from a comprehensive negotiating strategy covering all commodities to singling out cotton for separate treatment. Cotton is being asked to give up more than others and we anticipate pressure for further concessions.”

He said the NCC will continue to work very closely with the US Trade Representative’s office, USDA and Congress to counter any efforts to further isolate cotton.

“We are working with other agricultural groups to ensure US negotiators insist that countries commit to meaningful and permanent market access for US agricultural products before discussing reductions in US domestic support programs,” Helms said. He said that during Congressional farm bill hearings this year, the NCC’s testimony will continue to stress the importance of maintaining current law to its scheduled expiration with the ’07 crop and to base the new farm bill on current law.

“An extension may be necessary to eliminate uncertainty if the WTO negotiations have not made sufficient progress,” Helms noted.

He emphasized that the extraordinary volume of export trade is bringing a number of new pressures on the US cotton industry infrastructure. “Our infrastructure is being tested and increasing costs are squeezing the production, processing and marketing sectors,” Helms said. “This industry has a well-earned reputation for producing top quality cotton, making timely delivery and honoring contracts. We must renew our commitment to those principles to remain competitive.”



Current Farm Law Working Well; Sound Basis for Future Policy

NCC Vice Chairman John Pucheu told the House Agriculture Committee that a significant majority of California’s upland and pima cotton producers strongly support current farm law and see it as a sound basis for future farm policy.

Testifying at that panel’s farm policy review hearing in Stockton, CA, the Tranquillity, CA, cotton producer said current farm law must continue to operate without major modification through its scheduled expiration with the ’07 crop because “producers have made substantial long-term investments and cropping and marketing decisions based on current farm law. He said California cotton producers support using current law as the basis for “future farm policy” noting that: 1) the combination of a marketing loan, counter-cyclical payment when prices are low and a direct payment are a sound foundation, 2) there should not be limits on loan eligibility or on marketing loan gains because that would disrupt orderly marketing and 3) payment limitations, which already unfairly penalize growers in the San Joaquin Valley and across the Sunbelt, should not be reduced any further and current eligibility requirements should be maintained.

Pucheu stressed that it is critically important that farm policy is balanced between commodities because a significant number of California cotton producers also produce specialty crops. “Even slight acreage shifts from row crops to specialty crops will cause market disruption,” he said. The state’s cotton producers do not oppose programs that benefit specialty crops but adequate resources are needed to ensure that there are no significant shifts in funding between program and specialty crops. He also explained that the Pima and upland cotton programs must be carefully balanced to ensure there are no unintended, program driven shifts in acreage planted to ELS cotton and upland cotton.

Pucheu pointed out that if the Doha round negotiations do not progress to the point that the impact on future U.S. farm policy is clear, California cotton producers would support continuation of the current farm bill for at least one additional crop year.

He said that cotton producers are deeply concerned that the language in the recent Hong Kong Ministerial agreement will be used to single cotton out for special and differential treatment.

Pucheu, who also expressed to the Committee the need for science-based regulations and an effective immigration policy, said conservation programs continue to be an important component of farm policy but are not a substitute for the safety net provided by commodity programs. He also testified that California cotton producers strongly support continuation of the successful public-private partnership fostered by the Market Access Program and urge continued funding for the Foreign Market Development program as well as a WTO-compliant export credit guarantee program.

Buttonwillow cotton producer Bill Tracy, a former California Cotton Growers Assoc. chairman, echoed Pucheu’s points and added that farm programs are needed to: 1) defray a portion of the costs California producers face in complying with regulations related to air and water quality, energy usage, and pesticide applications, 2) provide producers with the planting flexibility necessary to react to market signals, 3) deliver benefits in times of low prices without distorting overall planting decisions and 4) enhance producers’ ability to secure financing and help young people get into farming. Also testifying was Earl Perez, a Crows Landing, CA, producer of cotton and other crops.


Sign-Up Underway for ’04 Cottonseed Disaster Program

Eligible gins are urged to sign-up for the ’04 Cottonseed Payment Program (CPP) by the March 27 deadline. Information for the program, including a fact-sheet, eligibility requirements, applications, instructions and a list of eligible counties, are available at http://www.fsa.usda.gov/dafp/psd/cottonseed.htm or by contacting local USDA Farm Service Agency offices.

First handlers of cottonseed, defined as gins that have eligible payment quantities, may apply for CPP funds. The quantity eligible for payment is based on losses by cotton producers in eligible counties due to hurricanes or tropical storms. The loss determination is to be calculated on a producer-by-producer and farm-by-farm basis using producer certification, ginning records and other relevant information. The basis for calculating a producer’s losses is a comparison of lint deliveries in ’03 and ’04 for eligible farms to all gins. The difference is adjusted to reflect changes in planted acres on the eligible farms for ’03 and ’04.

When submitting the application form, gins are required to include supporting documentation used to calculate eligible losses. Incomplete applications will not be accepted by USDA. Applications must be submitted by March 27 by fax to 202-690-1536 or by overnight mail to USDA/FSA/PSD, Attn:  Chris Kyer, 1400 Independence Ave., SW, Stop 0512-Room 4089, Washington, DC  20250-0512. For additional information, contact Chris Kyer at 202-720-7935 or by e-mail at chris.kyer@wdc.usda.gov.



Task Force Addresses Bale Moisture
The NCC’s Executive Committee approved recommendations from the NCC’s Bale Moisture Task Force for dealing with high moisture and water-packed bales.

NCC Chairman Allen Helms appointed the task force, chaired by Kenneth Hood, producer from Gunnison, MS.

That panel’s recommendations place the burden of responsibility for establishing each bale’s eligibility for the marketing assistance loan program on the gins operating direct water spray moisture restoration systems. The Executive Committee also approved an amendment offered by National Cotton Ginners Assoc., which seeks from USDA the denial of loan eligibility for bales processed at gins with direct water spray moisture restoration systems following the ’07-08 crop year. 

Hood and task force member Bill Winburne, merchant from Phoenix, AZ, were accompanied by Bill Norman, NCC vice president of Ginners Services, in a meeting with USDA’s Commodity Credit Corp. officials. USDA officials sought a meeting with NCC representatives following the discovery of water-packed bales in several Mid-South warehouses.



Colombia Trade Pact Completed

US and Colombian negotiators completed a free trade agreement after almost two years of talks.  While details of the agreement have not been fully disclosed, the Office of the United States Trade Representative (USTR) reports that the agreement calls for immediate duty-free trade in cotton.

NCC had expressed its support for such an arrangement, provided the agreement included a yarn forward rule for textiles products with no Tariff Preference Levels (TPLs). These conditions were also met, according to USTR officials. There are no TPLs, and the only exception to the yarn forward rule reportedly applies to brassieres, for which single transformation is the eligibility criterion for duty-free trade.



Shipments Strong, Sales Lag

Net export sales for the week ending Feb. 23 were 196,500 bales (480-lb.). This brings total ’05-06 sales to about 13.2 million. Total sales at the same point in the ’04-05 marketing year were almost 11.2 million bales. Total new crop (’06-07) sales are 316,000 bales.

Shipments for the week were 466,500 bales, bringing total exports to date to 7.4 million bales, compared with the 5.8 million bales at the comparable point in the ’04-05 marketing year.



Prices Effective March 3-9, 2006

Adjusted World Price, SLM 11/16

44.60 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

2.36 cents

Marketing Loan Gain Value

7.40 cents

Import Quotas Open

 0

Step 3 Quotas (480-lb. bales)

 0

ELS Payment Rate

12.64 cents

*No Adjustment Made Under Step I
 
Five-Day Average
 
Current 3135 c.i.f. Northern Europe

60.04 cents

Forward 3135 c.i.f. Northern Europe

No Quote

Coarse Count c.i.f. Northern Europe

57.73 cents

Current US c.i.f. Northern Europe

62.40 cents

Forward US c.i.f. Northern Europe

No Quote

 
2005-06 Weighted Marketing-Year Average Farm Price  
 
Year-to-date (August-January)

47.34 cents

**

**August-July average price used in determination of counter-cyclical payment

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