Cotton's Week: September 22, 2006

Cotton's Week: September 22, 2006

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Efforts to Secure Emergency Disaster Assistance Continue

In testimony before House Agriculture Committee and subcommittee hearings, NCC witnesses, Chairman Allen Helms and Oklahoma producer Danny Robbins, outlined significant weather-related crop losses suffered across the Cotton Belt coupled with escalating input costs and the need for timely, emergency disaster assistance.

In his testimony, Robbins said this year’s drought conditions have caused Oklahoma farmers to abandon more than 70,000 of the 300,000 planted cotton acres. “About 75 percent of all cotton in Oklahoma is in counties with disaster declarations and over 71 percent of all acreage is either abandoned or rated poor to very poor,” he noted. “These crop losses impact growers, as well as gins, warehouses and rural businesses.”

Witnesses representing wheat growers, the National Farmers Union (NFU) and the American Farm Bureau Federation (AFBF) also emphasized the need and their support for emergency disaster assistance.

In a related move, Rep. Barrow (D-GA), a member of the House Agriculture Committee, announced he has filed a discharge petition on legislation that would provide agriculture disaster assistance. Under rules of the House, if a majority of members (218) sign the petition, legislation introduced by Agriculture Committee Ranking Member Peterson (D-MN) and others could be brought directly to the House floor without further delay.



NCC Testifies on Farm Policy

NCC Chairman Helms told the House Committee on Agriculture in Washington, DC, thatthe ’02 farm bill continues to enjoy solid support among cotton producers. The combination of direct and counter-cyclical payments provides income support, especially when prices are low, without distorting planting decisions.

“We strongly support continuation of the marketing loan with an effective world price discovery mechanism,” he testified. “It is vitally important that all production is eligible for the marketing loan and can be redeemed at the prevailing world price so farmers can make informed, orderly marketing decisions.

The cotton loan structure and world price calculation have served the industry well. There have been minimal forfeitures and robust exports, but some modification may be necessary to respond to the new emphasis on export markets and the termination of Step 2.”

In noting that an extension of the ’02 legislation will face hurdles, both domestically and internationally, the Arkansas producer/ginner said, “I am pleased to assure you and your colleagues that the cotton industry is prepared to continue to work with all interests to develop and support continuation of a balanced and effective policy for all of U.S. agriculture.”

Helms also reiterated US cotton producers’ deep concern about the decline of their longstanding customer, the US textile industry, which until recently consumed nearly 50% of annual US cotton production.

“Despite significant gains in productivity and efficiency, U.S. textile manufacturers have found it difficult to compete with imported apparel products from primarily Asian sources, Helms stated. “The loss of Step 2 compounds the fragile financial conditions of the textile industry. The remaining manufacturers have indicated strong interest in revising our Step 3 import policy and in developing a possible WTO-compliant alternative to Step 2.”

He also told the Committee that although cotton fiber is the industry’s primary product, cottonseed accounts for 12% of farm-gate value with the feed market becoming an increasingly important market.

“We ask that as policy is developed any impact on markets for cottonseed be carefully considered and mitigated if necessary and appropriate,” Helms said..

Oklahoma cotton producer Danny Robbins delivered a similar farm policy message in his testimony on behalf of NCC and the Oklahoma Cotton Council before the House Agriculture Subcommittee on Conservation, Rural Development, and Research in El Reno, OK.

Robbins noted that it is important to maintain a balance between direct payments and counter-cyclical payments – a combination that provides an effective means of income support, especially when prices are low.

The cotton, wheat and cattle producer testified, though, that a sound farm policy is of little value to the cotton industry, if arbitrary, unworkable limitations are placed on benefits.

“Frankly, we believe limitations should be eliminated, but at the very least, any limitations in future law should not be more restrictive or disruptive than those in current law,” Robbins said.

“We believe conservation programs will continue to be an important component of effective farm policy. These programs should be operated on a voluntary, cost-share basis and are a valuable complement to commodity programs. However, they are not an effective substitute for the safety net provided by commodity programs.”



Ag Groups Lay Out Farm Policy Views

During the House Committee on Agriculture hearing in Washington, DC, The AFBF called for a one-year farm bill extension until such time that the WTO talks can be completed while the NFU called for a two-year extension arguing that keeping the current bill in place allows the US negotiate in the WTO from a "position of strength."

The National Corn Growers Assoc. testimony mentioned a "preliminary" farm bill proposal that would shift to a revenue-based farm policy. Their news release about the proposal noted, "The revenue-based program would replace the marketing loan and the counter-cyclical programs and directly target producer net revenue adversely impacted by significant crop losses, escalating variable production costs and depressed commodity markets." It said there would be recourse loans under the NCGA plan -- no forfeiture. But in their release they also point out: "...the proposal will continue to be reviewed by a number of distinguished agricultural economists and will continue to undergo peer review and evaluation by other commodity groups to determine how effective the proposal addresses the risk management concerns of their producers."

The American Soybean Assoc. testified that it wants a new bill and said, "Farmers need to make long-term economic decisions, and conditions in agriculture have changed sufficiently in the last four years to justify a comprehensive review of farm policy. ASA said, though, that if the farm law is extended, "we believe adjustments are needed in oilseed support levels in the event these programs are reauthorized. We believe low oilseed support levels in the 2002 Farm Bill relative to supports for other crops and crop market values could discourage producers from planting oilseed crops." ASA also called for target prices, loan rates and other support levels to be set closer to recent market values for those crops. They also gave support to a revenue-based option, but only if "limited resources prevent addressing our concerns with current oilseed support levels."

The National Assoc. of Wheat Growers pointed out that "much of the safety net provided by the 2002 Farm Bill has not been effective for wheat growers." They detailed that since ’02, wheat growers have gotten little from either counter-cyclical or loan deficiency payments. "We are simply stating that wheat producers need a viable safety net also," NAWG stated, noting that they want to see a higher target price for wheat and also a higher direct payment level.



Maximum Advance CCP for ’06 Crop Urged

In a letter to Ag Secretary Johanns, NCC Chairman Allen Helms urged an initial advance counter-cyclical payment (CCP) for the ’06 crop of upland cotton at the maximum allowable rate of 4.81 cents/lb.

The provisions of the farm law authorize the advance payment - if any is projected - based on expected marketing year average (MYA) prices - in Oct. of the year of harvest. A second advance can be made in Feb. of the next calendar year. For cotton, the final payment (if any) would be made in Oct. ’07.

Chairman Helms urged USDA to make the announcement as soon as possible so producers and their lenders can plan accordingly.



AGOA, GSP Extension Introduced

Legislation to extend the General System of Preferences (GSP) and African Growth and Opportunity Act (AGOA) for two years with modifications was introduced by Ways and Means Committee Chairman Thomas (R-CA).

The legislation also would provide expanded duty-free, quota-free access to certain apparel products assembled in Haiti. To qualify, Haitian products are required to have 50% of the value of the finished product be provided by the US, Haiti or any US Free Trade Agreement partner of any country in AGOA, Andean or CAFTA.

The legislation would extend GSP, which is scheduled to expire Dec. 31, for two years. GSP provides duty-free entry for a number of consumer goods, excluding apparel and footwear, and raw materials from more than 100 developing countries. However, the legislation would establish new criteria which would change the program to exclude some “wealthier and larger” developing countries including Brazil, Argentina, Russia and Venezuela.

The legislation excludes countries with per capita income greater than $3,400 per year and products from countries that export more than $1.5 billion of that product in a prior year. India would remain eligible but is likely to be excluded in the near future by the new per capita income cap which India is expected to exceed within a few years.

The legislation would extend the provisions of AGOA which provide for use of non-US, non-AGOA components to Sept. ’08. However, beginning Oct. ’08, 50% of the fabric used in apparel qualifying for preferential access must be manufactured in AGOA countries. The legislation also would establish tax credits for companies with facilities in AGOA countries or that conduct business in AGOA countries.

Legislation to extend GSP and AGOA legislation without modifications for one year was earlier introduced by Ways and Means Committee Ranking Member Rangel (D-NY).



Commodity Groups Consulted on Ag Plan

Representatives from commodity organizations met with Jon Scholl, EPA’s lead advisor to the Administrator for agricultural issues, in Washington, DC, to discuss the Agency’s ’06 initiative known as the “National Strategy for Agriculture.”

The overarching themes of “National Strategy” are improving inter-Agency communication to heighten EPA employee awareness of how their actions impact farming, bettering collaboration with the agricultural industry as well as other federal agencies such as USDA, and encouraging on-farm solutions to address environmental and human health standards. 

Scholl elaborated on his charge to EPA and the agricultural community to offer ideas on how best to apply this initiative. He also pledged to continue looking to the agricultural community for guidance and feedback as the “National Strategy” is further developed and implemented.



’07 Beltwide Registration, Early Housing Opens

Those planning to attend the ’07 Beltwide Cotton Conferences in New Orleans now can pre-register for the meetings at www.beltwide.cotton.org.

Members of the Cotton Foundation and NCC also can make early housing reservations by going to that site. The deadline for making early hotel reservations is Oct. 30. Hotel confirmations will be sent via email. A room deposit of $150 is required to confirm a reservation.



Sales Strong, Shipments Lag

Net export sales for the week ending Sept. 14 were 238,500 bales (480-lb). This brings total ‘06-07 sales to slightly more than 2.8 million. Total sales at the same point in the ’05-06 marketing year were approximately 6.1 million bales. Total new crop (’07-08) sales are 110,200 bales.

Shipments for the week were 79,900 bales, bringing total exports to date to 940,300 bales, compared with the 1.8 million at the comparable point in the ’05-06 marketing year.



Prices Effective: Sept. 22-28, '06

Adjusted World Price, SLM 11/16

43.29 cents

*

Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

8.71 cents

Import Quotas Open

6

Step 3 Quotas (480-lb. bales)

 645,773

ELS Payment Rate

0.00 cents

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

59.38 cents

Forward 3135 c.i.f. Northern Europe

NA

Coarse Count c.i.f. Northern Europe

 NA

Current US c.i.f. Northern Europe

62.15 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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