Cotton's Week: August 25, 2006

Cotton's Week: August 25, 2006

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Brazil to Seek Compliance Panel

The Government of Brazil has announced its intention to request establishment of a compliance panel to evaluate whether the United States has complied with the WTO Panel decision concerning operation of the US cotton program and the US export credit guarantee program. The panel will be established at the Sept. 1 meeting of the WTO’s Dispute Settlement Body.

A compliance panel is convened when there is disagreement as to whether a country has complied with a WTO panel’s ruling. The compliance panel, likely to be comprised of the same Panel members who decided the initial dispute, is supposed to render a determination within 90 days, or by Dec. 1. It is anticipated, however, that it may take the panel from 30-60 additional days to render a decision.

Brazil has stated it believes the United States has not sufficiently changed the export credit guarantee program to eliminate the export subsidy component. Brazil also is claiming that by waiting until Aug. 1 of this year to terminate the Step 2 program, the United States has not appropriately eliminated the prohibited subsidies associated with Step 2. Finally, Brazil is claiming that the United States has not modified the operation of either the marketing loan program or the counter-cyclical payment program and has, therefore, failed to address the finding of the Panel that those programs caused serious prejudice.

The United States has countered that changes in the export credit guarantee program have eliminated the export subsidy component of that program and that elimination of Step 2 has, of course, eliminated the prohibited subsidies associated with Step 2. Further, the United States argues that eliminating Step 2 also addresses the Panel’s finding of “serious prejudice.”

Should Brazil succeed on any of these challenges, it likely will announce its decision to retaliate -- Brazil has claimed retaliation authority of $3 billion. The United States can then challenge that retaliation amount through a WTO arbitration procedure. It is likely that the entire process will be completed between Jan. and Mar. ’07.

Lancaster Named NRCS Chief

Agriculture Secretary Mike Johanns announced the selection of Arlen Lancaster as chief of the Natural Resources Conservation Service (NRCS).

Lancaster succeeds Bruce Knight at NRCS, who was recently confirmed by the Senate as under secretary of agriculture for marketing and regulatory programs. Lancaster has served as deputy assistant secretary of Congressional Relations at USDA since April ’05. Prior to his service at USDA, Lancaster served in various senior staff positions in Congress, having worked since ’99 for Sen. Crapo (R-ID) as a senior policy advisor and as the staff director for the Senate Subcommittee on Forestry, Conservation, and Rural Revitalization since ’01, where he played a key role in crafting the conservation title of the ’02 Farm Bill.

As NRCS chief, Lancaster, a U. of Utah graduate, will lead the primary federal agency that works directly with private landowners to help them conserve, maintain and improve their natural resources.

Bayer CropScience to Purchase CPCSD

Bayer CropScience and California Planting Cotton Seed Distributors (CPCSD) have signed an agreement to bring the assets of CPCSD into Bayer CropScience. The parties intend to close the transaction, which is subject to CPCSD approval, by the end of 2006.

Mike Gilbert, global cotton seed manager of Bayer CropScience, said, “Acquiring the assets of CPCSD will be an excellent fit for our cotton strategy.”

Bill Van Skike, CPCSD president, added, “We are convinced that under the roof of Bayer CropScience our research and business activities can continue towards a successful future in a profitable and growing cotton business.”

More Counties Named Disaster Areas

On Aug. 21, ’06, USDA has designated one California county, six Texas counties and 155 Georgia counties as primary natural disaster areas due to heat and/or drought. The decision makes all qualified farm operators in the designated areas eligible for low- interest emergency (EM) loans from USDA’s Farm Service Agency (FSA), provided eligibility requirements are met.

Farmers in eligible counties have eight months from the date of the declaration to apply for loans to help cover part of their actual losses. FSA will consider each loan application on its own merits, taking into account the extent of losses, security available and repayment ability. Interested farmers may contact their local USDA Service Centers for further information on eligibility requirements and application procedures for these and other programs. Additional information is also available online at:

Production Session Planning Underway

The Beltwide Cotton Conferences Steering Committee’s production conference subcommittee discussed programming for the January ’07 forum.

Among topics under consideration are updates on: new farm bill development; trade policy; US industry leadership China orientation; innovative research/technology developments; biofuel; sustainability; transgenics; herbicide resistance; and an innovative producer panel sharing energy costs-saving production practices. The topics were gleaned from input received at the American Cotton Producers/Cotton Foundation annual meeting, the Beltwide Technical Conferences’ chairmen and the ’06 post conference survey.

BWCC Steering Committee Chairman Bill Lovelady said the Committee earlier approved a number of recommendations aimed at enhancing attendance the ’07 BWCC set for Jan. 9-12 at the New Orleans Marriott and Sheraton hotels. That includes: 1) a group registration rebate program whereby one registration fee is rebated for each 10 early registrations (applies to online registrations made between Sept. 25 and Dec. 1 on one calendar day using one form of payment); 2) a revised policy enabling all NCC and Cotton Foundation members to obtain early housing and 3) conferees to make housing reservations by phone if desired.

Meanwhile, New Orleans’ officials say the city's unique blend of jazz, food, architecture and history is back with the tourist corridor “intact and repopulated” and 90% of restaurants in that corridor reopened. The city also has made significant progress in restoring its infrastructure. In the downtown area, for example, there are now 27,000 hotel rooms available.

The officials said about 90% of the business groups whose senior executives have taken inspection tours this year have decided to hold their annual meeting in New Orleans this year.

Info Sought from NCC Members

NCC members are reminded to provide information for inclusion in the NCC’s Cotton Agri-Business Data Base. There are many occasions where contacts by representatives of cotton agri-businesses, such as banks, credit associations and farm supply firms, with Cotton Belt Congressional members and the Administration are important in reinforcing issue positions taken by NCC membership. For example, the US cotton industry is facing numerous challenges in the farm program and international trade policy arenas, including the formulation of a new farm bill.

This data base will be accessed exclusively by the NCC staff and the contact information held in strictest confidence. To enter your information, go to the NCC’s web site at

NCC Hosting Weed Resistance Course

The NCC is hosting a new online Weed Resistance Learning Module to help cotton producers stay ahead of the game in fighting weed resistance.

Available at, the learning module is free to users and is sponsored by The Cotton Foundation with financial support from Monsanto, Syngenta and Dow AgroSciences. The course’s overall aim is providing producers a resource on how to prevent the occurrence of herbicide-resistant weeds, thus helping them maintain long-term stewardship of their acreage. Practical guidelines are offered such as preventing weeds from setting seed during harvest.

“Some weeds may have withstood herbicide treatments, and it is imperative that growers scout their fields for those weeds,” NCC Chairman Allen Helms said. “Particularly at harvest, it is important to prevent the weed seed from being dispersed throughout the field or to other fields. It’s also a good time to note where problems occurred throughout fields during the growing season for help in developing next season’s strategy.”

Helms said that producers will appreciate this interactive course and the around-the-clock access they have to it as they evaluate their current weed management program or consider developing a program.

Dr. Andy Jordan, vice president of the NCC’s Technical Services, said weeds that have become resistant to herbicides can cause problems for producers for years, including reduced yields and increased control costs. This course, he noted, details the fundamentals of weed resistance management practices, such as rotating herbicides and using mixtures or sequential applications of herbicides with different modes of action – steps that can prevent resistant weeds from causing havoc in the fields.

The course, which was authored by Ginger Light, a Texas Tech U. researcher, also provides general resource information on cotton herbicides and a list of contacts in each state for producers who have questions on management practices. For more information, call the NCC at 901.274.9030.

Sales Pick Up, Shipments Steady

Net export sales for the week ending Aug. 17 were 97,300 bales (480-lb). This brings total ’06-07 sales to slightly more than 2.1 million. Total sales at the same point in the ’05-06 marketing year were about 5.2 million bales. Total new crop (’07-08) sales are 60,200 bales.

Shipments for the week were 201,300 bales, bringing total exports to date to 617,300 bales, compared with the 932,800 bales at the comparable point in the ’05-06 marketing year.

Mill Consumption Slips

According to the Commerce Dept., July (4-week month) total cotton consumption in domestic mills was 194.3 million pounds for a seasonally adjusted annualized rate of 5.60 million (480-lb) bales. Last year’s July annualized rate was 6.74 million bales.

The June (5-week month) estimate of domestic mill use was lowered by 5.9 million pounds to 264.7 million. The revised seasonally adjusted annualized rate of consumption for June is 5.70 million bales. This is lower than last year’s June annualized rate of 6.94 million bales.

The Commerce Dept. estimate of both upland and ELS consumption of cotton by US mills, when adjusted to represent the complete ’05-06 crop year, is about 5.90 million bales. This level of mill use, when combined with an export number of about 17.55 million bales, would imply ending stocks of 5.95 million bales for the ’05-06 crop year. This is in line with Commerce’s latest estimate of 5.96 million bales for stocks on hand.

USDA’s Aug. estimate of ending stocks was 5.90 million bales. USDA’s next supply and demand estimates are scheduled to be released on Sept. 12. Preliminary Aug. domestic mill use of cotton and revised July figures will be released by Commerce Dept. on Sept. 28.

Step 3 Import Quota Announced

Competitiveness provisions triggered a Step 3 quota based on price conditions for the week ending Aug. 24. 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 4 consecutive weeks, a special Step 3 import quota is triggered.

The quota is for 106,906 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. 31 and applies to upland cotton purchased no later than Nov. 28 and entered into the United States no later than Feb. 26, ’07.

Currently, there are two import quotas opened in the total amount of 218,148 bales.

Prices Effective August 25, 2006

Adjusted World Price, SLM 11/16

44.74 cents


Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

 7.26 cents

Import Quotas Open


Step 3 Quotas (480-lb. bales)


ELS Payment Rate

0.00 cents

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

60.76 cents

Forward 3135 c.i.f. Northern Europe


Coarse Count c.i.f. Northern Europe


Current US c.i.f. Northern Europe

64.20 cents

Forward US c.i.f. Northern Europe


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

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