Cotton's Week: September 8, 2006

Cotton's Week: September 8, 2006

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Disaster Assistance Needed; Current Farm Law Effective

Rickey Bearden, a Plains, TX, cotton producer, told the Senate Committee on Agriculture, Nutrition & Forestry that even though last year’s favorable weather allowed Texas producers to harvest more than 8 million bales, unfavorable weather this season will cut that production in half.

“For those affected producers, emergency disaster assistance for 2006 will be critical,” he testified. “We would also encourage the Committee to consider developing a permanent disaster program and improved crop insurance programs to address similar situations in the future.”

Bearden also told Committee Chairman Chambliss (R-GA), who was joined by Reps. Neugebauer (R-TX) and Conaway (R-TX) in Lubbock at the Committee’s eighth and final field hearing, that most cotton farmers and a majority of the industry could support an extension of the current farm law with modifications.

“An extension provides a level of certainty to both growers and those providing financing to the growers,” he stated. “It also puts the U.S. in the strongest negotiating position for when the WTO negotiations resume.”

Bearden and the other commodity spokesmen in the hearing’s first panel (also representing cotton, corn, grain sorghum and wheat) all stressed the importance of the current farm law for US agriculture; the farm bill's fiscal responsibility while providing a safety net; and its balance across commodity, conservation and nutrition programs.

“The financial safety net provided by our farm policy has never been more critical and must be preserved,” Bearden said. “The combination of direct and counter-cyclical payments with the marketing loan provides an effective means of income support. It is important to maintain a balance between these three mechanisms. The marketing loan is extremely important to cotton producers. It is especially important that all production stays eligible for the loan. Contrary to popular belief these programs are not a guarantee of profit for cotton producers.”

Bearden also noted that a sound farm policy is of little value to the cotton industry if arbitrary, unworkable limitations are placed on benefits.

“With the natural consolidation of agriculture, it is inevitable that the majority of program benefits will go to the farmers who account for the majority of production,” he said. “However, it is also true that per-pound or per-bushel support is consistent across producers regardless of size. Limiting program benefits is ultimately a limitation on the producers’ ability to support themselves and their rural community.”

The Texas producer said the industry believes conservation programs will continue to be an important component of effective farm policy but “are not an effective substitute for the safety-net provided by commodity programs.”

Bearden emphasized that important to today’s export dependent agricultural economy are: 1) continuation of an adequately funded export promotion effort, including the Market Access Program and Foreign Market Development Program and 2) maintenance of a WTO-compliant export credit guarantee program. 

Regarding the Doha negotiations, Bearden commended the Committee and US negotiators for continuing to demand an ambitious result in the negotiations and refusing to allow unwarranted pressure or deadlines undermine the US position.

“We also appreciate your insistence that the agriculture negotiations be conducted as a single undertaking and that cotton not be singled out for differential treatment,” Bearden said. “Improved trade alone will not provide an adequate safety net for U.S. cotton producers. U.S. Congressional Ag Committees in Washington, DC, not international trade negotiators, must write U.S. farm policy.”


Emergency Disaster Bill Urged

NCC joined farm, commodity, livestock and rural advocacy organizations in correspondence urging Congress to act on emergency disaster assistance legislation before campaign recess is scheduled to begin on Sept. 28.

The groups cited the continued, unmet need for financial assistance related to ’05 crop losses suffered due to hurricanes and drought conditions as well as significant ’06 crop losses due primarily to drought.

The FY07 agriculture appropriations bill approved by the Senate Committee includes provisions to cover weather related ’05 crop yield and quality losses; a 30% Direct Payment (DP) for all producers who received a ’05 DP, as well as funds for livestock assistance, block grants for specialty crops, emergency conservation programs and additional funding for the Farm Services Agency to deliver the assistance. Legislation recently re-introduced by Sen. Conrad (D-ND), with significant bipartisan support, would expand coverage to include ’06 crop losses as well as ’05 crop losses.

Secretary Johanns last week announced a $780 million disaster assistance package to be made available in 20 states, but Congressional members and farm groups quickly pointed out that $700 million was for counter-cyclical payments (CCP) for ’05 crops earned under provisions of current farm law and not related to disaster losses. A number of groups pointed out that growers in hard hit drought areas will not receive CCPs for ’05 crops because prices are high due to low production. In announcing the package, Secretary Johanns indicated any additional disaster assistance would have to wait until after harvest and costs would have to be off-set.

Following the delivery of correspondence to Congress on Sept. 8, agricultural organizations will participate in press briefings scheduled by members of the House and Senate the week of Sept. 11.

NCC economists have summarized the ’06 Cotton Belt crop conditions, which can be viewed at www.cotton.org/issues/2006/upload/nccsummary06UScottonconditions.pdf. The information will be provided to Congressional members and their staff and likely will be the subject of further discussion during a hearing scheduled for Sept. 20 on future farm policy.

NCC Chairman Allen Helms will be in Washington Sept. 18-20 to present testimony on farm policy. He will be joined by American Cotton Producers Chairman Jay Hardwick in meetings with Members and their staff during which the need for emergency disaster assistance will be discussed along with other industry priorities.



AL Counties Named Disaster Areas

USDA designated 19 counties in Alabama as primary natural disaster areas due to drought and high temperatures that occurred Jan. 1, ’06, and continuing. 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). The latest declaration expands the total number of US cotton-producing counties to more than 300, covering almost 80% of US cotton production. Previous declarations cover extensive portions of many states, including Texas, Oklahoma, Georgia, Mississippi and others.

All qualified farm operators in the designated areas are eligible for EM loans, 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. FSA has a variety of programs, in addition to the EM loan program, to help eligible farmers recover from adversity.

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: http://disaster.fsa.usda.gov.



Bill Restores Negotiator’s Status

Rep. Hayes (R-NC) introduced legislation (HR 6032), which, if enacted, would restore the rank of Ambassador to the US Trade Representative’s Special Textile Negotiator and re-designate the title as Chief Textile Negotiator.

The NCC, National Council of Textile Organizations and American Apparel and Footwear Manufacturers Assoc. conveyed their support for restoring the rank of Ambassador in a letter dated Aug. 3. The letter and Rep. Hayes’ statement accompanying the legislation indicated that the rank of Ambassador is important in ensuring that the US Textile Negotiator can effectively engage his or her counterparts in textile negotiations.

Most negotiators for US trading partners hold the rank of Ambassador and a number of US negotiators, with similar responsibilities at USTR, also hold the rank of Ambassador.

“America’s domestic textile industry should have every advantage that other countries enjoy when it comes to USTR negotiations with foreign counterparts,” Rep. Hayes said.

NCC President/CEO Mark Lange said, “Textile and apparel issues play critical roles in many bilateral and multilateral trade negotiations. The U.S. and its interests should be positioned to fully engage all parties in any negotiation.”



Port Usage Fee Bill Proposed

California Governor Arnold Schwarzenegger must decide whether or not to veto a bill passed by the California Assembly that would impose a $30/TEU ($60/FEU) fee on every container moving through the ports of Los Angeles and Long Beach.

The monies from the fees would be used generally for unspecified infrastructure, health, environmental initiatives. The trade community is strongly opposed to the measure because there is no assurance that the monies would be used for infrastructure projects that will facilitate the flow of container traffic. It is also believed that for price sensitive cargoes, such as agricultural exports, this fee, on top of PierPass and other charges, can threaten export competitiveness and margins.



Sales Steady, Shipments Slip

Net export sales for the week ending Aug. 31 were 152,300 bales (480-lb). This brings total ’06-07 sales to about 2.4 million bales. Total sales at the same point in the ‘05-06 marketing year were slightly more than 5.8 million. Total new crop (’07-08) sales are 78,400 bales.

Shipments for the week were 78,900 bales, bringing total exports to date to 787,700 bales, compared with the 1.4 million bales at the comparable point in the ‘05-06 marketing year.



Step 3 Quota Announced

Competitiveness provisions triggered a Step 3 import quota based on price conditions for the week ending Sept. 7. 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 Sept. 14 and applies to upland cotton purchased no later than Dec. 12 and entered into the US no later than March 12, ’07.

Currently, there are four import quotas opened in the total amount of 431,960 bales.

Given current price conditions, additional Step 3 quotas are expected to be opened in the coming weeks.


Prices Effective: September 8-14, '06

Adjusted World Price, SLM 11/16

44.18 cents

*

Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

7.82 cents

Import Quotas Open

 4

Step 3 Quotas (480-lb. bales)

 431,960

ELS Payment Rate

0.00 cents

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

60.25 cents

Forward 3135 c.i.f. Northern Europe

NA

Coarse Count c.i.f. Northern Europe

 NA

Current US c.i.f. Northern Europe

63.50 cents

Forward US c.i.f. Northern Europe

NA

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

47.74 cents

**

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

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