Cotton's Week: June 23, 2006

Cotton's Week: June 23, 2006

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Senate Panel Approves ’07 Ag Appropriations

The Senate Appropriations Committee, chaired by Sen. Cochran (R-MS), approved the FY07 Agriculture Appropriations bill after Sen. Bennett (R-UT), chairman of the Agriculture Appropriations Subcommittee, passed it out of that panel. The measure heads to the Senate floor as early as the week of June 26 for a final vote.

The bill includes $18.2 billion in discretionary spending to fund USDA and the Food and Drug Administration, among other agencies. The House passed their version of the bill last month.

During the full committee markup, an amendment regarding disaster assistance for farmers was offered and accepted. This provision is much like the provision that was included in the Senate’s version of the Supplemental Appropriations bill. It would provide a traditional disaster program for producers who have incurred a loss of at least 35% in ’05 and would include funds to provide all farmers supplemental payment of 30% of their direct payment to offset increased production costs.

If this provision is included in the final version of the bill, which will have to be passed by the full Senate, it is still unclear as to whether it would be included in the House-Senate Conference. The provision that was included in the Supplemental Appropriations bill was not included in the final Conference Report of that bill.

Also included in the bill was funding for the Boll Weevil Eradication program at $38.2 million and funding for the Pink Boll Worm Eradication Program at $7.169 million. The bill also funds many agricultural research and foreign market access programs beneficial to the cotton industry.



WTO Status Text Submitted

Crawford Falconer, chairman of the Agriculture Negotiating Group in the Doha Round of WTO negotiations, submitted draft possible modalities on the agricultural text stating “there will never be any prospect of bridging differences if one does not have a sober and realistic view of them to begin with.”

The text is an attempt to put on paper the negotiations’ current status. As such, all issues considered by the Chairman to be unresolved are in brackets, often with two or three different solutions to the specific issue also in brackets.

Chairman Falconer indicated he did not offer solutions “where none has so far emerged.” The document, therefore, is significant due to the sheer volume of differences which still remain in the negotiations and for those few areas where there are a minimal number of brackets. Previously discussed positions on domestic support, export competition and market access are reflected in the document, with market access clearly the area where there is least agreement and the widest divergence of opinion. 

The text calls for cotton specific reductions in domestic support and export competition and cotton specific concessions on market access, although much of the cotton text also remains in brackets. Cotton support is supposed to be reduced over a shorter time (not specified) than for other commodities. The text also states, un-bracketed, that “all forms of export subsidies for cotton shall be eliminated by developed countries in 2006” and includes additional bracketed material regarding whether and how countries are to report on their cotton specific measures and concerning how export credit guarantees fall within this commitment on export subsidies.

NCC Chairman Allen Helms said the draft text “reflects a sobering evaluation” of the WTO negotiations.

“The gulf that exists in the full range of key areas under discussion in the agricultural negotiations indicates that even more difficult days could lie ahead for U.S. negotiators,” Helms said. “We will continue to work closely with Congress and USTR to ensure a balanced and ambitious agreement can be reached.”


NCC Task Force Achieves Accord on Flow Issues

The NCC’s Performance and Standards Task Force, chaired by Robert W. Greene, met in Memphis to discuss USDA’s proposed cotton flow rule.

The Task Force developed and unanimously adopted a comprehensive report addressing the proposed rule. Subsequently, the NCC’s Executive Committee met by conference call and unanimously approved the report. Kenneth Hood, chairman of the NCC’s Bale Moisture Task Force, joined Greene and NCC staff in Washington, DC, to brief USDA officials on the NCC’s position.

The Task Force’s report as approved by the Executive Committee is available at http://www.cotton.org/issues/members/2006/cotflowrec.cfm.

Comments on USDA’s proposed rule are due by the close of business Monday, June 26, ’06 to gene.rosera@wdc.usda.gov.


Supreme Court Rules on Wetlands Protection Case

The Supreme Court ruled on two cases involving Michigan property owners who had been prevented by federal regulators from building a shopping mall and condos on wetlands. The 5-4 vote addresses the regulatory reach of the Clean Water Act and said lower courts must reconsider whether ditches and drains near wetlands are waterways.

Prior to this decision, federal agencies had claimed extensive jurisdiction over any and all waters. Now, the federal government must prove beyond “speculative or insubstantial” evidence that the area or activity the federal government proposes to regulate must have a “significant effect on the chemical, physical and biological integrity” of the water that is designated a “navigable” water.  

The Clean Water Act prohibits the discharge of dredged or fill material into “navigable waters” without a permit and defines “navigable waters” as “the waters of the United States, including the territorial seas.”

The Court held that the US Army Corps of Engineer’s interpretation of its jurisdictional reach over certain bodies of water was impermissibly overbroad. In an opinion authored by Justice Scalia and joined by three other justices, the decision stated that in order to bring a wetland under federal regulatory jurisdiction, it is necessary to show (1) that the adjacent water is a relatively permanent body of water (such as a river, ocean, lake or stream), and (2) that the wetland has a continuous surface connection with that water, “making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.”


’07 BWCC: Equipping for Excellence

The Beltwide technical conferences’ chairmen met in New Orleans to make plans for their sessions at the ’07 Beltwide Cotton Conferences (BWCC). The forum, to be conducted under the theme, “Equipping for Excellence,” will be at the New Orleans Marriott and Sheraton New Orleans hotels Jan. 9-12.

Potential conferees are reminded to check a “Frequently Asked Questions” page as part of the BWCC web site at http://www.cotton.org/beltwide/faqs.cfm. Go to http://www.neworleanscvb.com for other updates on New Orleans and the city’s events and attractions such as the National World War II Museum, which was renamed from the NationalD-DayMuseum earlier this month.



Trade Fair, Buyer’s Tour Successful

Cotton Council International’s COTTON USA Sourcing Program hosted a trade fair in the Dominican Republic last week.

Participants included 40 apparel manufacturers from six Caribbean Basin Initiative region countries, including Costa Rica, the Dominican Republic, El Salvador, Guatemala, Haiti and Honduras, as well as Colombia and Peru in the Andean region. They met with 15 US brand/retailers and 15 member US mills of the COTTON USA Sourcing Program.

The event’s highlight was the private Sourcing Fair which included more than 450 one-on-one business meetings that provided US brands/retailers with sourcing options in the Western Hemisphere in addition to their current Asia-based manufacturers. This approach to more balanced sourcing by US brands/retailers has received high marks in early evaluations.

The US brands/retailers included Adidas, American Eagle Outfitters, Benetton, Dick’s Sporting Goods, Dillards, Gap, Lilly Pulitzer, Nordstrom, Paul Davril, Perry Ellis International, QVC, Sara Lee, TJ Maxx, Tommy Hilfiger and VF Corp.

Meanwhile, CCI conducted its second COTTON USA Fabric and Apparel Buyers Tour to Turkey on June 6-8. The event brought together 11 retailers (10 from Europe and one from Japan) and brands representing more than $1 billion in annual sales with Turkish mill suppliers. To date, about $10 million worth of U.S. cotton-rich items have been purchased during these two Turkish tours.

Turkey, currently the second largest export market for US cotton, also ranks fourth worldwide in the supply of garments and 12th worldwide in the supply of textiles. Its industry supplies 18% of all garments sold in the German market and 11% of garments in the UK market. 

Among the three-day event’s highlights were retailer executives’ visits to 20 showrooms in Istanbul where they viewed each company’s full collection and met with company representatives. The retailers also met one-on-one with 26 different Turkish suppliers during a private trade fair to continue discussion on company requirements and identification of samples. A full range of cotton wovens, denims, shirtings, knitwear, sportswear and garments were shown.



Mill Use Seen Near 6 Million Bales

According to the Commerce Dept., May (4-week month) total cotton consumption in domestic mills was 210.20 million pounds for a seasonally adjusted annualized rate of 5.55 million bales (480-lb). Last year’s May annualized rate was 6.43 million bales. The April (4-week month) estimate of domestic mill use of cotton was raised by 48,000 pounds to 214.10 million. The revised seasonally adjusted annualized rate of consumption for April is 5.67 million bales. This is lower than last year’s April annualized rate of 6.55 million bales.

Based on Commerce estimates from Aug. 1, ’05-May 27, ’06, projected total pounds consumed during crop year ’05-06 would be 2.86 billion pounds or 5.95 million bales. USDA’s latest estimate of ’05-06 crop year mill use is 6.0 million bales.

Preliminary June domestic mill use of cotton and revised May figures will be released by the Commerce Dept. on July 27.



Shipments Stay Strong, Sales Steady

Net export sales for the week ending June 15 were 196,400 bales (480-lb). This brings total ’05-06 sales to about 17.7 million bales. Total sales at the same point in the ’04-05 marketing year were almost 15.0 million bales. Total new crop (’06-07) sales are 639,300 bales.

Shipments for the week were 409,800 bales, bringing total exports to date to 14.4 million bales, compared with the 11.2 million at the comparable point in the ’04-05 marketing year.

With about six weeks remaining in the marketing year, weekly shipments must average roughly 370,000 bales to reach the USDA projection of 16.8 million bales.



Prices Effective June 23-29, 2006

Adjusted World Price, SLM 11/16

43.94 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

3.20 cents

Marketing Loan Gain Value

8.06 cents

Import Quotas Open

 1

Step 3 Quotas (480-lb. bales)

 113,839

ELS Payment Rate

0.00 cents

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

56.50 cents

Forward 3135 c.i.f. Northern Europe

61.00 cents

Coarse Count c.i.f. Northern Europe

54.15 cents

Current US c.i.f. Northern Europe

59.70 cents

Forward US c.i.f. Northern Europe

66.20 cents

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

47.82 cents

**

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