Cotton's Week: August 4, 2006

Cotton's Week: August 4, 2006

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Leaders Review Farm Bill, Trade Negotiation Developments

At the joint meeting in San Antonio of the American Cotton Producers (ACP) and The Cotton Foundation, producer and agri-business leaders heard presentations and participated in discussions on the latest developments on farm bill and trade negotiation debates. The meeting was jointly chaired by ACP Chairman Jay Hardwick and Foundation Chairman Allen Helms.

Hayden Milberg, a trade specialist on the Senate Ag Committee staff, discussed the implications of the suspension of the Doha trade talks and how that development would affect consideration of the next farm bill. He stated that 1) the suspension would remove, for the near future, one of the primary external forces on farm bill consideration and 2) budget considerations and the outcome of the November elections would remain as primary determinants of what type legislation Congress would develop and its timing. He also noted that recent Senate Ag Committee field hearings testimony by commodity representatives seemed to signal strong support for the '02 legislation – and that consideration would be given by Congress for some type of farm bill extension.

Milberg reiterated Senate Ag Committee Chairman Chambliss' (R-GA) strong position against singling out cotton or any commodity for separate consideration in the trade negotiations.

NCC President/CEO Mark Lange provided a detailed overview of the US Doha proposal’s impact on reductions in domestic support and goals for increased market access. He also reviewed the linkage between the status of the trade negotiations and consideration of the next farm bill.

The combined leadership also had a concentrated dialogue with textile sector management representatives for Wal-Mart regarding the company’s sustainability initiative.  Producers stressed that Wal-Mart should give strong consideration to the attributes of sustainable US conventionally- and organically-grown cotton. They also urged the company to carefully consider statements that might mislead the public regarding conventionally-grown cotton, which makes up the overwhelming majority of Wal-Mart's textile inventory. They also pledged to continue the dialogue with Wal-Mart to provide constructive input into their campaign.

Based on serious concerns about the drought conditions prevalent for much of the '06 crop, growers discussed the need for effective drought assistance. Producers also identified key production and policy topics for consideration for the ’07 Beltwide Cotton Conferences set for Jan. 9-12 in New Orleans.

ACP Chairman Hardwick announced that the ACP Farm Policy Development Committee would meet in the near future to have interaction with NCC staff and other segments on the details of farm bill consideration relative to trade negotiations and other relevant factors.



ACP Task Force Reviews Insurance

The ACP Crop Insurance Task Force met prior to the joint ACP/Cotton Foundation meetings and 1) reviewed the USDA Risk Management Agency’s plan for a comprehensive appraisal of the cotton insurance product over the next year and 2) discussed revenue insurance concepts that some commodities are considering as potential farm program benefit delivery mechanisms. 

RMA’s Chief Economist Dr. Kent Lanclos told the task force that all crop insurance products are required by law to maintain a 1.0 loss ratio, which is the ratio of indemnity payments to premiums received. Crop insurance products for US upland cotton have an average loss ratio of 1.44 over the ’89-’05 period, significantly higher than other major commodity crops (1.28 for wheat, 0.87 for corn products, 0.88 for soybean products). Loss ratios on cotton insurance products vary by region; the loss ratio for the Southeast averaged 1.12, the Mid-South and Southwest both averaged a 1.45 loss ratio, while the average loss ratio for the West was 1.70. 

Lanclos said the evaluation is RMA’s effort to better understand reasons for cotton’s poor actuarial performance and to determine how to bring its insurance products into compliance. Specific objectives of the evaluation include: the characterization of risks associated with cotton production, the critical review of current policy provisions and procedures and the formulation of recommendations aimed at improving the actuarial performance of the cotton insurance program without compromising its ability to service producer needs.

As part of the evaluation, a minimum of two listening sessions in each of the four production regions will be conducted this fall and winter. NCC will communicate dates and locations, and producers are encouraged to participate. Recommendations stemming from this evaluation are not expected to be incorporated into cotton insurance provisions until the ’09 crop year.



Bill Addresses CAFTA Concerns

The Senate approved the Pension Protection Act by a vote of 93-5. The legislation includes a change to the rule of origin for pocketing fabric and provides authority to US Customs and Border Protection to effectively enforce the tariff-preference level (TPL) for Nicaragua.

Under the changes, the material for pockets going into apparel made in the CAFTA region will have to be made in the United States or in CAFTA countries for the product to enter the United States duty free. With respect to the TPL, Nicaragua already has agreed that it will increase its purchases of US trouser fabric equivalent to its use of the TPL for trouser fabric sourced outside the region. The bill’s provisions provide US Customs and Border Protection with the necessary authority to enforce this arrangement.

The House approved the measure last week on a 279-31 vote. The legislation now will be sent to President Bush who is expected to sign it into law.



NCC Responds to Storage Proposal

USDA's Commodity Credit Corp. (CCC) published proposed rules in the July 3, '06Federal Register for “storage requirements for grain security for marketing assistance loans.” The rule proposes to no longer require federally-licensed grain warehouse operators or state-licensed grain warehouse operators to execute CCC storage agreements.

The NCC’s comments, which can be found at http://www.cotton.org/issues/members/2006/storeprop.cfm, convey opposition to the proposal.



USDA, CFTC Nominations Confirmed

The Senate has confirmed the following nominations for USDA posts: Nancy Montanez-Johner as under secretary of agriculture for Food, Nutrition, and Consumer Services and as a Commodity Credit Corp. (CCC) director; Bruce I. Knight as under secretary of agriculture for Marketing and Regulatory Programs and as a CCC director; and Margo M. McKay as assistant secretary of agriculture for Civil Rights.

Michael V. Dunn was confirmed as a commissioner (reappointment) of the Commodity Futures Trading Commission for a term expiring June 19, ’11.



EPA Proposes Carbofuran Cancellation

EPA is proposing to cancel the registration of carbofuran, the active ingredient in the insecticide Furadan, for the majority of its uses - including cotton. In addition, EPA is proposing a four year phase-out for its use on certain other crops. EPA concluded from safety assessment data, which analyze chemical traces in food and water as well as environmental impacts on wildlife from pesticides, that there are “considerable risks” associated with carbofuran residues in food and water, pesticide handling and exposure to birds. 

FMC Corp., which developed and manufactures Furadan, responded to EPA’s announcement in a press release stating that, “EPA has exaggerated the risks of carbofuran and underestimated its unique benefits to agriculture in arriving at this unjustified conclusion to eliminate continued use of the product.”

NCC staff notes that until EPA’s proposal is final, growers may continue to use carbofuran for thrips control on cotton. Since 1995, NCC has urged the continuation of this product for cotton growers. Most recently, Chairman Allen Helms sent a letter to EPA on July 17, ’06 emphasizing the benefits of carbofuran to cotton and reiterated the low dietary risk and minimal ecological impact of carbofuran used in cotton. NCC will continue to work closely with FMC and the EPA as the Agency implements its proposal.


EPA Finalizing FQPA Implementation

EPA completed 99% of the pesticide tolerance reassessments required under the Food Quality Protection Act (FQPA). FQPA was signed into law in ’96. In addition to requiring the safety assessment of all food use pesticide registrations over this ten year period, FQPA mandates a single, health-based standard for pesticide residues in foods known as tolerances.

According to Jim Jones, director of EPA’s Office of Pesticide Programs, only the review of the carbamate group - which includes aldicarb - remains to be completed.

NCC Chairman Helms communicated NCC’s support for the continued registration of aldicarb in a July 12 letter to EPA. A decision on aldicarb re-registration is expected later this year.


’06-07 Leadership Class Selected

The ’06-07 cotton leadership class has been chosen by the NCC’s Cotton Leadership Committee.

The class, comprised of four cotton producers and one participant from each of the six other industry segments, includes:  Producers – David Cochran, Greenville, MS; Patrick Johnson Jr., Tunica, MS; Tammy Leonards, Lettsworth, LA; and Clint Webb, Boston, GA; Ginner – Scott Matlock, Sebastian Cotton & Grain, Sebastian, TX; Warehouser – Eric Wanjura, Plainview Coop Compress, Plainview, TX; Merchant – Felipe Esteve, ECOM, Dallas, TX; Marketing Cooperative – Wayne Boseman, Carolinas Cotton Growers, Garner, NC; Cottonseed – Brandon Winters, Producers Coop Oil Mill, Oklahoma City, OK; and Manufacturer – Bryan Gregory, American Cotton Growers Denim Mill, Littlefield, TX.

The group will begin their first training session on Sept. 24-29 in the Mid-South, including an orientation to the NCC and presentation skills training.

The leadership program is supported by a grant to The Cotton Foundation from DuPont Crop Protection and is administered by NCC’s Member Services.



Mid-South Hosting Southwest Peers

Southwest cotton producers will travel to the Mid-South region visiting operations in Arkansas, Mississippi and Tennessee on Aug. 6-11 for the third tour of the ’06 Cotton Foundation Producer Information Exchange (PIE) Program. After this year’s tours, the program will have exchanged more than 750 individual US cotton producers.

The 11 Southwest participants include Texas producers -- David Carthel, Friona; Dan Gregory, Hartley; Chris Hirt, Garden City; Matthew Huie, Beeville; Sam Lawson, Taft; Rhett Mimms, Lorenzo; John Oman, Avoca; Daryl Schniers, San Angelo; and Glenn Wilde, Lyford;  Oklahoma producers -- Michael Brown, Altus; and Lester Denny, Chattanooga; and Kansas producer -- Eldon Lawless, Belle Plains.

The group will begin their tour on Aug. 7 in W. Tennessee with visits to the USDA Classing Office and then to Burlison Gin, Kelcot Warehouse and Kelley Enterprises. They will see the WG Huxtable Pumping Station and Larry McClendon’s farm, both in Marianna, AR. The group also will travel to WashingtonCounty in the Mississippi Delta where they will visit the Delta Council to review the methods of Delta cotton production followed by tours of the Stoneville Research Complex and individual farms. The tour concludes in Greenwood, MS, with a tour of Staplcotn Cooperative and Makamson Farm.

The PIE is supported by a grant from Bayer CropScience to The Cotton Foundation. The fourth and final tour of this year’s program will bring producers from the Far West to North Carolina and Virginia on Aug. 13-18.



Shipments Reach 17.2 Million Bales

Net export sales for the week ending July 27 were 53,800 bales (480-lb). This brings total ’05-06 sales to slightly more than 18.5 million bales. Total sales at the same point in the ’04-05 marketing year were about 16.2 million. Total new crop (’06-07) sales are 932,800 bales.

Shipments for the week were 629,200 bales – a marketing year high - bringing total exports to date to 17.2 million bales, compared with the 13.7 million at the comparable point in the ’04-05 marketing year.



Prices Effective Aug. 4-10, '06

Adjusted World Price, SLM 11/16

44.42 cents

*

Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

7.58 cents

Import Quotas Open

 0

Step 3 Quotas (480-lb. bales)

 0

ELS Payment Rate

 0.00 cents

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

60.35 cents

Forward 3135 c.i.f. Northern Europe

NA

Coarse Count c.i.f. Northern Europe

NA

Current US c.i.f. Northern Europe

64.95 cents

Forward US c.i.f. Northern Europe

NA

 
2005-06 Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-June)

47.76 cents

**

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