Cotton's Week: August 18, 2006

NCC sent a letter to Agriculture Secretary Mike Johanns asked USDA to make the final ’05-crop counter-cyclical payment (CCP) for upland cotton as soon as possible.

Based on final monthly price data through June and the preliminary estimate for July, the weighted market-year average (MYA) price for upland cotton will be approximately 48 cents/lb., well below the national loan rate of 52 cents. Thus, the CCP for ’05 upland cotton will be at the maximum level of 13.73 cents/lb. Producers who have elected to receive the first two advance payments would receive the third and final installment of 4.12 cents (or 30% of 13.73).

The letter, from NCC Chairman Helms, states, “We understand that USDA’s normal practice is to issue the final CCP for cotton in October, once monthly prices and marketings data are finalized. This is certainly appropriate when there is any question about the exact amount of the final CCP. However, since market prices remain below the loan rate and the CCP will undoubtedly be at the maximum level, we urge you to expedite delivery of the payments. Our recommendation is not without precedent. USDA issued both the final ’02-crop and ’04-crop CCP under similar conditions and expectations for the final MYA price.”

Helms noted in the letter that “timely distribution of the final payment is especially critical” in light of increased financial pressures which include: 1) many areas in the Cotton Belt  facing crop losses as a result of drought and 2) all growers being squeezed by higher energy costs.

President Bush signed the Pension Protection Act of 2006, the most sweeping reform of America's pension laws in more than 30 years and one that strengthens the federal pension insurance system.

The Act also includes provisions addressing concerns with the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA).

Included is a change to the rule of origin for pocketing fabric and provision of 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 DR-CAFTA region will have to be made in the United States or in DR-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 Act’s provisions provide US Customs and Border Protection with the necessary authority to enforce this arrangement.

To address pension reform, the legislation:

• Requires companies that under-fund their pension plans to pay additional premiums;
• Extends a requirement that companies that terminate their pensions provide extra funding for the pension insurance system;
• Requires that companies measure the obligations of their pension plans more accurately;
• Closes loopholes that allow under-funded plans to skip pension payments;
• Raises caps on the amount that employers can put into their pension plans, so they can add more money during good times and build a cushion that can keep their pensions solvent in lean times; and
• Prevents companies with under-funded pension plans from digging the hole deeper by promising extra benefits to their workers without paying for those promises up front.

The Act also contains provisions to help American workers who save for retirement through defined contribution plans, like IRAs and 401(k)s. The legislation:

• Removes barriers that prevent companies from automatically enrolling their employees in defined contribution plans;
• Ensures that workers have more information about the performance of their accounts;
• Provides greater access to professional advice about investing for retirement;
• Gives workers greater control over how their accounts are invested; and
• Makes permanent the higher contribution limits for IRAs and 401(k)s that were passed in ’01, enabling more workers to build larger retirement nest eggs.

USDA’s Agricultural Marketing Service (AMS) issued a final rule that will maintain user fees for cotton producers for ’06 crop cotton classification services under the Cotton Statistics and Estimates Act at the same level as in ’05. This is in accordance with the formula provided in the Uniform Cotton Classing Fees Act of 1987.

The rule would maintain the fee for the ’06 crop at $1.85 per bale. The fee and the existing reserve are sufficient to cover the costs of providing classification services, including costs for administration and supervision.

For more information, contact: Darryl Earnest, Deputy Administrator, Cotton Program, AMS, USDA, Room 2641-S, STOP 0224, 1400 Independence Ave. SW., Washington, DC 20250-0224. (202) 720-2145 fx (202) 690-1718, or e-mail darryl.earnest@usda.gov.

Monsanto and Delta and Pine Land Co. announced that they have signed a definitive agreement for Monsanto to acquire Delta and Pine Land Co. for $1.5 billion in cash. The transaction was unanimously approved by the boards of directors of both companies and is subject to Delta and Pine Land shareowner approval, antitrust clearance and customary closing conditions.

The proposed acquisition requires review and approval by the appropriate regulatory authorities, including the US Department of Justice. Because of the required regulatory approvals, no time frame for the closing of the transaction has been announced. As part of the proposed agreement, Monsanto has committed to divest US assets of its Stoneville cottonseed business if required to close the transaction.

“Delta and Pine Land represents an excellent fit for our company as we look to bring value-added traits and high-quality seed to cotton growers around the world,” said Hugh Grant, chairman, president and chief executive officer of Monsanto. “Delta and Pine Land has strong cotton genetics, and we believe Monsanto’s leadership in providing the best cotton traits can improve on this already strong base.”

Tom Jagodinski, president and chief executive officer of Delta and Pine Land, said, “Monsanto is a leading agricultural products company with a strong track record of growing and integrating diversified businesses. Our companies are a natural fit that will provide a complete platform of cutting-edge seed technologies to our global farmer customer base for years to come.”

Agriculture Secretary Mike Johanns announced members to serve on the Advisory Committee on Biotechnology and 21st Century Agriculture.

Members reappointed to one-year terms beginning on Feb. 23, ’06 are: Leon C. Corzine, Assumption, IL; Carole L. Cramer, Jonesboro, AR; Michael D. Dykes, Washington, DC; and Jerome B. Slocum, Coldwater, MS.

Members reappointed to two-year terms beginning on Feb. 23, ’06 were:  Daryl D. Buss, Madison, WI; Carol T. Foreman, Chevy Chase, MD; Randal W. Giroux, Wayzata, MN; and Margaret Mellon, Washington, DC. One new member, Nicholas Kalaitzandonakes, Columbia, MO, was appointed for a two-year term beginning on Feb. 23, ’06, and another new member, Steven G. Pueppke, East Lansing, MI, was appointed to a one-year term beginning on Feb. 23, ’06.

Two new members also were appointed for two-year terms beginning on Aug. 3, ’06:  Nancy S. Bryson, Washington, DC; and Sarah K. Geisert, Minneapolis, MN.

The AC21 was established in ’03 to provide information and advice to the Secretary of Agriculture on topics related to the use of biotechnology in agriculture. The committee is charged with examining the long-term impacts of biotechnology on the US food and agriculture system and USDA, and providing guidance to USDA on pressing individual issues, identified by the Office of the Secretary, related to the application of biotechnology in agriculture.

USDA's Agricultural Air Quality Task Force (AAQTF) will meet Aug. 30-31 in Harrisburg, PA, to discuss current issues facing agriculture and agricultural operations. The meeting is open to the public.The AAQTF advises the Secretary of Agriculture on agricultural air quality issues. Its mandate is to strengthen and coordinate USDA's air quality research efforts and identify cost-effective ways to help the agriculture industry to improve air quality and meet federal and local air quality emissions requirements.  

Producers, academics, industry representatives and other experts in agriculture and air quality comprise the task force. Representatives from various USDA agencies, including Natural Resources Conservation Service; Forest Service; Economic Research Service; Agricultural Research Service and Cooperative State Research, Education, and Extension Service, also participate on the task force.

NCC Consultant Dr.Phil Wakelyn and several others from the cotton industry are members of this advisory committee. Wakelyn said that many air issues important to cotton will be discussed including: the particulate matter (PM) rulemaking, monitoring/measurement of PM in agriculture areas, ozone rulemaking, effect of ozone on agriculture, the measurement of volatile organic compounds from agriculture and pesticides, greenhouse gases and agriculture, and research needs.

"This task force has worked tirelessly to raise awareness of the importance of air quality issues," said Merlyn Carlson, USDA's deputy under secretary for Natural Resources and Environment, who will chair the meeting. "Task force members are very interested in hearing from the public about air quality issues and innovative solutions to address them."

Members of the public will be allowed up to five minutes for oral presentations. Written comments also will be accepted.

Net export sales for the week ending Aug. 10, ’06 were 85,700 bales (480-lb). This brings total ’06-07 sales to slightly more than 2.0 million. Total sales at the same point in the ’05-06 marketing year were about 4.8 million bales. Total new crop (’07-08) sales are 59,700 bales.

Shipments for the week were 257,600 bales, bringing total exports to date to 416,100 bales, compared with the 604,400 bales at the comparable point in the ’05-06 marketing year.

Competitiveness provisions triggered a Step 3 quota based on price conditions for the week ending Aug. 17. When the Friday through Thursday weekly average US Northern Europe price exceeds the Northern Europe price ("A" Index) by more than 1.25 cents per pound for any four consecutive weeks, a special Step 3 import quota is triggered. Currently, the US Northern Europe price exceeds the “A” Index by approximately 4 cents.

The quota is for 108,349 bales (480 lb.), equal to one week of upland cotton mill use based on the most recent three months’ seasonally adjusted data. The quota will be established as of Aug. 24 and applies to upland cotton purchased no later than Nov. 21 and entered into the US no later than Feb. 19, ’07.

Currently, there is one import quota open in the amount of 109,799 bales. This quota was opened on June 29, ’06 and applies to upland cotton purchased no later than Sept. 26 and entered into the US no later than Dec. 25. Given current price conditions, additional Step 3 quotas are expected to be opened in the coming weeks.

Adjusted World Price, SLM 11/16	44.70 cents	*
Coarse Count Adjustment	0.00 cents
Marketing Loan Gain Value	7.30 cents
Import Quotas Open	1
Step 3 Quotas (480-lb. bales)	109,799
ELS Payment Rate	0.00 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 3135 c.i.f. Northern Europe	60.70 cents
Forward 3135 c.i.f. Northern Europe	NA
Coarse Count c.i.f. Northern Europe	NA
Current US c.i.f. Northern Europe	64.80 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