Cotton's Week: September 15, 2006

Cotton's Week: September 15, 2006

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More Focus Put on Disaster Assistance

Agriculture groups organized well-attended press conferences to renew efforts to convince Congress to act on emergency disaster assistance legislation prior to recessing for elections. A number of Senators and Representatives participated in a press event on the Senate side, and Reps. Bonilla (R-TX), Conaway (R-TX) and Lucas (R-OK) were among members of the House who participated in an event on the House side.

Sens. Conrad (D-ND), Burns (R-MT) and others introduced new legislation which would provide emergency disaster assistance to producers who suffered weather related losses in ’05 and ’06. The legislation is essentially an updated version of provisions of the Senate’s agriculture appropriations bill approved by the Appropriations Committee earlier this year (see June 23 Cotton’s Week). The new version is estimated to cost $6.5 billion.

During Senate consideration of the Port Security measure, Sen. Nelson (D-NE) offered the disaster assistance measure but it was ruled out-of-order on a procedural point. Senators indicated they would look for other vehicles in coming weeks in an effort to have legislation considered before the recess scheduled for Sept. 28–Nov. 17. NCC issued a statement in support of emergency legislation and also documented significant crop losses sustained in ’06. That document is at http://www.cotton.org/news/releases/2006/disasterurge.cfm.



USDA Sees Smaller US Crop

In its September crop report, USDA projected a ’06-07 US crop of 20.3 million bales. Upland production was estimated at 19.5 million bales and ELS production at 825,000 bales. Harvested area was estimated at 12.8 million acres implying non-harvested area of 2.5 million acres based on USDA’s revised acreage number. The resulting abandonment rate is roughly 16.1% for the ’06-07 crop. The national average yield per harvested acre was estimated to be 762 pounds, three pounds above the five-year average.

On a regional basis, the Southeast crop is estimated at 4.39 million bales, based on 3.24 million harvested acres and a regional average yield of 651 pounds. In the Mid-South, estimated production is 7.98 million bales. Harvested area is estimated to be 4.19 million acres and the expected yield 915 pounds per harvested acre. The Southwest upland crop is an estimated 5.72 million bales. The estimated harvested area is 4.53 million acres and the regional average yield is 606 pounds. Upland production in the Westis an estimated 1.44 million bales with harvested area of 541,000 acres and a regional average yield of 1,273 pounds.

The ELS crop is an estimated 825,000 bales. Harvested area is estimated at 324,000 acres with an average yield 1,222 pounds per harvested acre.

U.S. Cotton Crop, 2006-07

 

PLANTED
ACRES

Thou.

HARV.
ACRES

Thou.

YIELD PER
HARV. ACRE

Lb.

5-YEAR
AVG. YIELD

Lb.

480-LB
BALES

Thou.

UPLAND

 

 

 

 

 

SOUTHEAST

3,355  

3,236 

651  

709 

4,390  

   Alabama

575  

535 

449  

696 

500  

   Florida

105  

104 

462  

599 

100  

   Georgia

1,400  

1,330 

614  

714 

1,700  

   North Carolina

870  

865 

832  

723 

1,500  

   South Carolina

300  

298 

693  

676 

430  

   Virginia

105  

104 

738  

793 

160  

MID-SOUTH

4,225  

4,185 

915  

865 

7,975  

   Arkansas

1,170  

1,160 

1,034  

946 

2,500  

   Louisiana

630  

620 

890  

778 

1,150  

   Mississippi

1,220  

1,210 

793  

856 

2,000  

   Missouri

505  

500 

1,032  

899 

1,075  

   Tennessee

700  

695 

863  

811 

1,250  

SOUTHWEST

6,830  

4,530 

606  

595 

5,720  

   Kansas

115  

110 

567  

516 

130  

   Oklahoma

315  

220 

415  

633 

190  

   Texas

6,400  

4,200 

617  

595 

5,400  

WEST

545  

541 

1,273  

1,325 

1,435  

   Arizona

210  

208 

1,338  

1,295 

580  

   California

285  

283 

1,272  

1,382 

750  

   New Mexico

50  

50 

1,008  

896 

105  

TOTAL UPLAND

14,955  

12,492 

750  

749 

19,520  

TOTAL ELS

326  

324 

1,222  

1,270 

825  

   Arizona

7  

891  

933 

13  

   California

275  

274 

1,270  

1,317 

725  

   New Mexico

13  

13 

997  

954 

27  

   Texas

31  

30 

960  

987 

60  

ALL COTTON

15,281  

12,816 

762  

759  

20,345  

Source: USDA-NASS September Crop Production Report



Farm Bill Hearings Continue

The House Agriculture Committee heard testimony from agricultural processors and the General Farm Commodities Subcommittee, chaired by Rep. Moran (R-KS), heard testimony from three former Secretaries of Agriculture.

The Subcommittee on Conservation, Credit, Rural Development, and Research, chaired by Rep. Lucas (R-OK), will hold a hearing on commodity and conservation program policy on Sept. 18 in El Reno, OK, at 10:00 am at the Redlands Community College Conference Center. At the invitation of Chairman Lucas, Danny Robbins, an Oklahoma cotton, grain and cattle raiser, will present testimony on behalf of the NCC and Oklahoma Cotton Council.

The full House Agriculture Committee will hear testimony from national commodity organizations on Sept. 20. NCC Chairman Allen Helms will present the NCC’s testimony. On Sept. 21, the General Farm Commodities Subcommittee will hear testimony from several prominent land grant university economists.


NCC Comments on Insurance Proposal

In comments submitted to USDA’s Risk Management Agency (RMA), NCC expressed general support for proposed amendments to the Common Crop Insurance Regulations, Basic Provisions, and Crop Provisions.

Under the proposal, same or similar yield protection and revenue protection features, terms and conditions would be combined into a revised Basic Provisions and applicable Crop Provisions. For each insured crop for which revenue protection is available, producers would be presented a comprehensive product plan from which to choose whether to insure the crop under the revenue protection provisions or the yield protection provisions.

NCC’s comments raised a number of specific concerns and questions about certain proposed changes. The NCC expressed particular concern over the burdensome requirements placed on producers that plant cover crops prior to dry-land cotton and numerous provisions allowing RMA to withdraw price protection or outright deny coverage.

RMA’s proposed revisions would eliminate a producer’s ability to insure non-irrigated cotton following a cover crop or small grain crop planted in the same calendar year, except through the initiation of a written agreement. NCC informed RMA that this provision will introduce inefficiencies and increase costs, forcing some producers to choose between planting a cover crop and purchasing insurance.

The NCC also opposed the proposed changes that would deny price protection whenever the Secretary of Agriculture or the RMA Administrator “believes” that exogenous shocks create unexpected market conditions; there is insufficient market information to establish a harvest price; or the harvest price exceeds 160% of the projected price. The NCC noted that producers purchasing revenue protection policies in good faith would be forced to suffer the consequences of such catastrophic exogenous market events.

After comments are reviewed, RMA will release a final rule, which would take effect with the ’09 crop. Complete NCC comments are available in the Members Only Issues area of the NCC’s web site, www.cotton.org.



Andean Preferential Access Urged

NCC joined textile and apparel groups in asking Congress to act to ensure that preferential access for products produced in the Andean region containing US cotton, yarn and fabric is not interrupted.

Legislation which provides duty-free, quota-free access to certain apparel products produced in Colombia, Peru, Ecuador and Bolivia is scheduled to expire Dec. 31, ’06, and it may not be possible for Congress to approve legislation implementing recently concluded Free Trade Agreements (FTAs) with Peru and Colombia before the legislation expires. If the legislation expires before the FTAs can be approved and implemented, preferential access could lapse, resulting in significant disruption in trade and possible permanent loss of markets to manufacturers in Asia who do not use US-made yarn and fabrics. 

US textile exports to Colombia have increased more than 17% in the last year, making it one of the bright spots for US manufacturers. In ’05, the US exported 212,000 bales of raw cotton to Colombia, up 36% over the five-year average. US exports of cotton yarn and fabrics have doubled in the last five years. US firms plan to invest in facilities that produce products for export to Colombia, and retailers source products from the region because of favorable shipping schedules.

US textile and apparel manufacturers, including Parkdale Mills and Plains Cotton Cooperative’s American Cotton Growers denim facilities, joined retailers, US manufacturers and Colombian business representatives in sessions with key members of the House and Senate to urge them to act to extend legislation if the FTAs cannot be approved before Congress adjourns. Members of Congress acknowledged they understood the economic losses that would result from a lapse and pledged to work to ensure preferences don’t lapse.



USDA Expects ’06-07 Stocks to Decline

In its September report, USDA projected the ’06-07 crop to reach 20.35 million bales, down 80,000 bales from the August report. US mill use and exports were unchanged at 5.50 million bales and 16.20 million bales, respectively -- generating a total ’06-07 offtake of 21.70 million bales. Ending stocks for ’06-07 are projected at 4.60 million bales for an ending stocks-to-use ratio of 21.2%.

USDA puts US ’05-06 cotton production at 23.89 million bales. Mill use decreased 50,000 bales from the August report to 5.90 million bales. Exports were unchanged from the August report at 17.55 million bales. As a result of the change in mill use, total offtake decreased 50,000 bales to 23.45 million bales. This generates an ending stocks value of 5.95 million bales and puts the stocks-to-use ratio for the ’05-06 marketing year at 25.4%.

In its world projection, USDA sees production for the ’06-07 marketing year at 114.94 million bales, down 650,000 bales from the August report. World mill use was raised 550,000 bales from the August report to a projected 122.24 million bales. Consequently, world ending stocks for ’06-07 are projected to be 46.73 million bales for a stocks-to-use ratio of 38.2%. USDA lowered ’05-06 world production 140,000 bales from the August report to 114.15 million. USDA increased beginning stocks to 54.03 million. World mill use was raised 660,000 bales to 117.37 million. The world ending stocks on July 31, ’06 is now pegged at 52.18 million bales. This has a corresponding stocks-to-use ratio of 44.5%.



Sales Strong, Shipments Lag

Net export sales for the week ending Sept. 7 were 237,500 bales (480-lb). This brings total ’06-07 sales to about 2.6 million bales. Total sales at the same point in the ’05-06 marketing year were almost 6.0 million. Total new crop (’07-08) sales are 84,300 bales.

Shipments for the week were 72,500 bales, bringing total exports to date to 860,400 bales, compared with the 1.6 million bales at the comparable point in the ’05-06 marketing year.



Step 3 Import Quota Announced

Competitiveness provisions triggered a Step 3 quota based on price conditions for the week ending Sept. 14. 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.

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. 21 and applies to upland cotton purchased no later than Dec. 19 and entered into the United States no later than March 19, ’07.

Currently, there are five import quotas opened totaling 538,866 bales. Given current price conditions, additional Step 3 quotas are expected to be opened in the coming weeks.



Prices Effective: September 15-21, '06

Adjusted World Price, SLM 11/16

43.53 cents

*

Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

8.47 cents

Import Quotas Open

 5

Step 3 Quotas (480-lb. bales)

 538,886

ELS Payment Rate

 0.00 cents

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

59.62 cents

Forward 3135 c.i.f. Northern Europe

 NA

Coarse Count c.i.f. Northern Europe

 NA

Current US c.i.f. Northern Europe

62.35 cents

Forward US c.i.f. Northern Europe

NA

 
'05-06 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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