Cotton's Week: July 14, 2006

NCC Chairman Allen Helms told the organization’s directors that the NCC has been very effective in applying its resources to address the industry’s priority issues on a wide front, both domestically and internationally.

Among those issues are: 1) monitoring the latest developments in the WTO Doha Round negotiations; 2) conveying the cotton industry’s farm bill priorities during Congressional field hearings; 3) working with other cotton industry organizations to preserve funding for critical research programs, including the ginning laboratories in Lubbock and Las Cruces; and 4) addressing a number of important cotton quality and flow issues.

Chairman Helms praised the work of the Performance and Standards Task Force, chaired by Alabama ginner Bobby Greene. By developing a comprehensive industry position responding to USDA’s proposed rule on flow issues, Helms noted that “these efforts were in the finest Council tradition, demonstrating the capacity to achieve industry unity on difficult issues where few thought this possible.”

Cotton Council International (CCI) President David Burns told the board that by far the biggest issue the US cotton industry faces globally today is the continuing press of synthetic fibers, particularly in developing countries.

Burns noted that “more than 95 percent of the world’s consumers are outside our borders today, and some of the best opportunities for growth in consumption. The high-end, quality image implied in the COTTON USA Mark program in target overseas markets is just what we need to appeal to the growing middle class and affluent consumers. We must work hard as an industry to build underlying consumer demand for cotton overseas, and we must find ways to work with other countries, overseas industries and international organizations to make this happen. Our industry is taking the lead globally in building generic demand for cotton products, and we hope other countries cotton industries and governments will pick up the flag as well.”

Jason Hafemeister, deputy assistant US Trade Representative for Agricultural Affairs, addressed the board on several key trade topics, including the status of the WTO Doha negotiations and several regional and bi-lateral trade agreements. He detailed recent developments in the WTO negotiations and stressed the importance of an ambitious agreement on market access. 

Gary Adams, NCC’s vice president, Economics and Policy Analysis, updated the directors on the current economic situation. In his report, Adams noted the potential drag on world economies that could occur due to the record-high oil prices. Regarding the cotton market situation, prices remain under pressure due to stocks from last year’s crop and the lack of current import purchases by China. Adams noted that several regions of the Cotton Belt face dry conditions, particularly in Texas and parts of the Southeast and Mid-South. Current expectations for the ’06/07 crop year call for production to fall below consumption, leading to lower stocks.

John Maguire, NCC’s senior vice president, Washington Operations, reported on the latest policy situation and detailed the schedule facing Congress for the remainder of ’06. This included an overview of the upcoming farm bill debate. He noted a number of factors that will shape the upcoming debate: the November election, the current budget deficit, a possible agreement resulting from the WTO negotiations and the increased emphasis on renewable fuels. On the trade front, the cotton industry continues to work with other agricultural organizations to convey concerns and priorities for the ongoing trade negotiations.

Andy Jordan, NCC’s vice president, Technical Services, reported on the NCC’s joint efforts with Cotton Incorporated to develop US cotton’s sustainability message and how the message is being communicated to leading retailers. The NCC also has addressed a number of biotechnology and crop protection product re-registration issues through the actions of the Environmental Task Force and with participation in a recent EPA Scientific Advisory Panel on Bollgard registration. He also updated the board on program planning for the ’07 Beltwide Cotton Conferences in New Orleans.

Bruce Heiden, chairman of the Committee for the Advancement of Cotton, updated the Board on those activities. In addition, the graduating ’05-06 Cotton Leadership Class was recognized.

CCI celebrated 50years of dedication to increasing exports of US cotton, cottonseed and their products with a reception at Union Station in Washington, DC.

Keynote speakers at the event included: Sen. Cochran (R-MS), chairman of the Appropriations Committee, and Hunter Moorhead, special assistant to the President for Agriculture, Trade and Food Assistance.

CCI President David Burns said that at CCI’s inception in ’56, the industry was in crisis: stocks were the highest in recent memory, man-made fibers were on the move and exports were the lowest they had been in a decade. That year US cotton exporters shipped a total of only 2.2 million bales. He said the supply-demand industry crisis of the ’50’s led to the NCC signing the first “cooperator agreement” with USDA in ’55, and this led in ’56 to the incorporation of a new organization called CCI. CCI’s focus was to be – and still remains – export market development.

“Times have changed, and exports have only gotten more important -- and our support for export market development has become vital,” Burns noted. “We have big challenges ahead of us as an industry – but we also have excellent leadership and institutions in place to meet those challenges. Cotton Council International is one of those great institutions, and this year we celebrate the fact that CCI is in this business for the long run.”

The CCI Board received recognition for its 50 years of dedication to increasing exports of US cotton and cotton products from Michael Yost, administrator of USDA’s Foreign Agricultural Service, and J. Berrye Worsham, president of Cotton Incorporated.

Representatives of the 11 organizations that signed the June 1, ’06, letter to the President on the WTO agricultural negotiations met to review the negotiations’ progress since the letter was transmitted and negotiations in Geneva during June 29-30 failed to develop consensus. (see Cotton’s Week 7/9)

Reporting on the state of negotiations were Jason Hafemeister, USTR, as well as Ken Roberts and Mark Manis of USDA. They noted that differences remain in each of the three pillars of the agricultural negotiations and meetings continue in Geneva among the world’s major trading partners.

The group reaffirmed their position taken in the letter. The market access gains in any agreement must match the ambition of the proposed reductions in domestic support.

The group met with Sen. Chambliss (R-GA), chairman of the Senate Agriculture Committee. They thanked him for his support of US agriculture and his commitment to obtain the market access provisions in an agreement that are commensurate with the reductions in domestic support.

The group also met with counterparts in the livestock and poultry industries to discuss their common interests in market access gains. It was agreed that the need to achieve meaningful market access is critical and that the market access gains in the G-20 proposal are completely insufficient for livestock and poultry.

Bruce I. Knight, who currently serves as the chief of the USDA’s Natural Resources Conservation Service, was nominated by President Bush on June 30 to be Under Secretary of Agriculture for Marketing and Regulatory Programs and a member of the Commodity Credit Corp. Board of Directors.

Knight, a native of South Dakota, has previously worked as the vice president of Government Relations at the National Corn Growers Assoc. Earlier in his career, he worked as a legislative assistant for former Sens. Dole (R-KS) and Abdnor (R-SD) and former Rep. Grandy (R-IA).

USDA’s Farm Service Agency (FSA) reminds farmers, ranchers and other agricultural producers that they have until Aug. 1, ’06, to nominate eligible candidates to serve on local FSA county committees.

All nomination forms for the ’06 election must be postmarked or received in the local USDA Service Center by close of business on Aug. 1. For more information about FSA county committees, visit a local USDA Service Center or online at: http://www.fsa.usda.gov/pas/publications/elections.

In its July report, USDA sees ’06-07 US cotton production decreasing by 200,000 bales from the June report to 20.50 million bales, despite larger planted area reported in the agency’s June 30 acreage report. The decrease in production was due to an above average expected rise in abandonment in the Southwest region caused by drought.

Following normal procedure, USDA used planted area from the June 30 acreage report as the planted area in this month’s WASDE report. Harvested area for this month’s WASDE report was based on the ’96-05 average abandonment by state, with further adjustments in the Southwest to reflect drought conditions. Projected yield per harvested acre was based on ’02-05 average yields. The August WASDE report will be USDA’s first survey-based estimate of the ’06-07 crop.

Mill use was lowered 100,000 bales to 5.50 million bales. US exports are now estimated at 16.60 million bales, down 200,000 bales from the June report. As a result, projected total offtake was lowered 300,000 bales to 20.10 million bales. Ending stocks for ’06-07 are projected at 4.90 million bales, for an ending stocks-to-use ratio of 22.2%.

The report gauged ’05-06 US production at 23.89 million bales, lowered mill use 50,000 bales from the June report to 5.95 million bales while increasing exports 200,000 bales to 17.00 million. As a result, projected total offtake for the ’05-06 crop year increased 150,000 bales to 22.95 million bales generating an ending stock value of 6.50 million bales. That estimated stocks-to-use ratio is 28.3%.

The USDA report put world production for the ’06-07 marketing year at 114.36 million bales, down 280,000 bales from the June report. World mill use was lowered 710,000 bales to a projected 121.75 million bales. Consequently, world ending stocks for ’06-07 are projected to be 47.45 million bales, for a stocks-to-use ratio of 39.0%.

The report has ’05-06 world production up 30,000 bales from the June report to 114.12 million. Beginning stocks were unchanged from the previous month at 53.98 million. Estimated world mill use was lowered 310,000 bales to 116.76 million. The projected world ending stocks on July 31, ’06 is now pegged at 53.01 million bales for a corresponding stocks-to-use ratio of 45.4%.

Net export sales for the week ending July 6 were 76,200 bales (480-lb). This brings total ’05-06 sales to slightly more than 18.3 million. Total sales at the same point in the ’04-05 marketing year were about 15.8 million bales. Total new crop (’06-07) sales, though, were 711,000 bales.

Shipments for the week were 383,700 bales, bringing total exports to date to 15.6 million bales, compared with the 12.2 million bales at the comparable point in the ’04-05 marketing year.

With less than one month remaining in the marketing year, weekly shipments must average roughly 400,000 bales to reach the USDA projection of 17.0 million bales.

Adjusted World Price, SLM 11/16	42.64 cents	*
Coarse Count Adjustment	0.00 cents
Current Step 2 Certificate Value	2.80 cents
Marketing Loan Gain Value	9.36 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	55.45 cents
Forward 3135 c.i.f. Northern Europe	58.20 cents
Coarse Count c.i.f. Northern Europe	53.58 cents
Current US c.i.f. Northern Europe	58.25 cents
Forward US c.i.f. Northern Europe	61.95 cents
2005-06 Weighted Marketing-Year Average Farm Price
Year-to-Date (August-May)	47.77 cents	**
**August-July average price used in determination of counter-cyclical payment