Cotton's Week: September 29, 2006

Cotton's Week: September 29, 2006

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WTO Compliance Panel Approved

The WTO’s Dispute Settlement Body accepted Brazil’s request to establish a compliance panel to review whether the United States has complied with the previous ruling against certain aspects of the US cotton program and the US export credit guarantee program.

Brazil charged that in some instances the United States “has adopted no implementation measures at all and that the implementation measures it has adopted fall far short of compliance with the covered agreements…”

The US representative, Deputy Trade Envoy David Shark, responded that by eliminating the Step 2 cotton program and several export credit guarantee programs, as well as making significant modifications to the remaining export credit guarantee program, the United States had taken extraordinary steps to comply with the ruling. He asserted there was no basis for Brazil’s request for a compliance panel.

Following WTO procedures, a three-member compliance panel will be established within a short time period. That panel will then establish procedures and a timetable for consideration of Brazil’s charges. WTO dispute settlement procedures provide that a compliance panel report is to be completed within 90 days of the panel’s establishment. The NCC will continue to work with the US Trade Representative’s Office and USDA in developing a defense to the latest Brazil charges.

Storage Implementation Work Continues

A delegation of NCC staff and industry leaders met with USDA officials to review developments regarding the process for transferring loan cotton. Leading the delegation was Robert W. Greene, Courtland, AL, ginner and chairman of the NCC’s Performance and Standards Task Force, who was joined by representatives of marketing and warehousing operations.

USDA officials explained key factors affecting their decisions on managing information and receipts associated with loan cotton while in transit and upon receiving at a new warehouse. Industry representatives pledged to work with USDA to expedite finalization of the rules.

USDA also released CN 1006, which can be obtained at This notice implements portions of the final rule announced on Aug. 29, ’06.

’07 DCP Sign-Up Begins Oct. 1

Agriculture Secretary Mike Johanns announced that enrollment for the ’07 Direct and Counter-cyclical Payment Program (DCP) begins Oct. 1, ’06, and continues until June 1, ’07. He encouraged farmers to sign up for the program through the online DCP sign-up service.

Following the June 1, ’07, deadline, USDA will accept late applications through Sept. 30, ’07, with a $100 late fee. While DCP participants must sign DCP contracts annually, producers can choose not to participate in the program in any given year. Producers can visit any USDA Service Center or their administratively assigned center, to complete their ’07 DCP contract.

Additionally, sign-up can be done online, allowing producers to choose payment options, assign crop shares and sign and submit their contracts from any computer with Internet access. DCP participants can view and print out submitted contract options at any time.

The electronic service is available by going to and clicking on the Online Services tab. To access the service, producers must have an active USDA eAuthentication Level 2 account, which requires filling out an online registration form at, followed by a visit to the local USDA Service Center for identity verification.

For ’07, eligible producers may request to receive direct advance payments based on 22% of the direct payment rate for each commodity associated with the farm. USDA will issue DCP direct advance payments beginning Dec. 1, ’06.

Key Trade Issues Unresolved

As Congress recesses for campaigning, numerous trade issues remain unresolved.

House Ways & Means Committee Chairman Thomas (R-CA) introduced legislation to extend and modify provisions of legislation set to expire Dec. 31. The legislation would have extended the Generalized System of Preferences (GSP) and certain provisions of the Africa Growth and Opportunity Act (AGOA).

In extending GSP, the legislation would have established new eligibility criteria which would have “graduated” Brazil from the program and likely would result in graduating India within a few years. The AGOA provision would have extended and gradually terminated a provision which allows Sub-Saharan African countries to use textile components from non-African, non-US suppliers to produce products which then receive preferential access to the United States. The legislation also would have significantly expanded the apparel products eligible for preferential access by establishing a rule of origin based on value added.

In addition to extending and modifying GSP and AGOA, the legislation would provide textile and apparel products produced in Haiti preferential access to US markets. The provisions would allow use of non-US, non-Haitian components as well as broadly defining eligibility for Haitian products preferential access to US markets.

NCC joined the National Council of Textile Organizations in asking key Republican Congressional members to express their concern about scheduling floor consideration of the far-reaching legislation without Committee consideration. Sixteen textile and Cotton Belt members wrote Speaker Hastert (R-IL) and, as a result, the legislation will not be considered prior to the recess. However, the legislation likely will be considered when Congress returns in November in a lame duck session.

In another trade-related issue, the NCC asked members of Congress to co-sign a letter asking the Speaker to be prepared to schedule consideration of legislation to extend the provisions of Andean Trade legislation if the Colombian Free Trade Agreement (FTA) cannot be implemented before Dec. 31. The industry is concerned that if implementation of the Colombian FTA is delayed and the Andean legislation expires as scheduled, the re-imposition of tariffs will disrupt growing trade exports of US yarn and fabric to Colombia.

In another matter, Sens. Graham (R-SC) and Schumer (D-NY) have agreed not to request a vote on their legislation, which would impose punitive tariffs on Chinese products if China continues to refuse to allow the market valuation of her currency. At the request of the President, the Senators agreed to allow time for the new Secretary of Treasury to continue discussions with China. They have indicated they will join Finance Committee Chairman Grassley (R-IA) and Ranking Member Baucus (D-MT) in developing new legislation in ’07.

Chambliss Urges GSP Review

Senate Agriculture Committee Chairman Chambliss (R-GA) has urged the Administration to review eligibility criteria for Generalized System of Preferences (GSP) to ensure that duty-free access to US markets is provided to countries that need assistance “rather than rewarding advanced developing countries who threaten litigation, work against negotiators and disregard US intellectual property rights.”

In a letter to US Trade Representative Schwab, Chairman Chambliss encouraged the Administration, which currently is reviewing the GSP scheduled to expire Dec. 31, to administer the program in a manner consistent with the original objectives of providing temporary assistance to developing countries. He cited data which confirms that India and Brazil are the first and third largest beneficiaries under the GSP even though they are “competitive in agriculture export markets and are strong competitors in the international marketplace.”

He urged the Administration to “review the current criteria for program participation and consider revising them to differentiate and exclude advanced, developing countries like Brazil and India.”

Survey Participation Asked

NCC members are invited to participate in a survey about America's Heartland, the weekly television series celebrating the miracle of agriculture. The show is sponsored by Monsanto, the American Farm Bureau Federation and other commodity groups, including the NCC.

The responses will help the show’s producers understand their audience and improve the show's service to viewers. The brief survey is anonymous. Go to:

Asian Markets Get US Cotton Update

A COTTON USA Executive Delegation traveled to Bangkok, Thailand; Dhaka, Bangladesh; and New Delhi, India to meet with top cotton buyers and participate in “The Cotton Design Challenge” consumer event in Thailand. In each market, the delegation delivered presentations on US production, supply and demand as well as US cotton quality, bale packaging, farm and trade policy, Supima, and the COTTON USA Supply Chain Marketing program.

The delegation, led by AMCOT’s Hans Kretschmer of Texas, included American Cotton Shippers Assoc. president Manfred Schiefer of Texas and first vice president Andy Weil of Alabama representing the merchant segment, Bill Weaver of Arkansas and Ted Sheely of California representing the American Cotton Producers, and Supima’s Marc Lewkowitz of Arizona. Sharynne Nenon of USDA’s Foreign Agricultural Service and CCI staff also participated.

Highlights include: 1) visits with the Thai Textile Manufacturers Assoc. and Gary Meyer, US Agricultural Counselor in Thailand, and watching the COTTON USA “Cotton Design Challenge” fashion show featuring 100% cotton garments designed by university students; 2) meetings with the board of the Bangladesh Textile Mills Assoc., the Bangladesh Garment Manufacturers and Exporters Assoc. and the Bangladesh Knit Manufacturers and Exporters Assoc., for discussions on how the Bangladeshi industry can take advantage of US cotton promotion programs; and 3) a briefing in New Delhi by CCI’s consulting agency on the economic and business climates, as well as the state of the textile and cotton industries, in India and Pakistan. Among attendees on that stop were representatives of the top mills in India, including the largest mill operation in the country and many COTTON USA and Supima licensees.

Mill Cotton Use Slides

According to the Commerce Dept., August (4-week month) total cotton consumption in domestic mills was 193.5 million pounds for a seasonally adjusted annualized rate of 5.20 million (480-lb) bales. Last year’s August annualized rate was 6.29 million bales.

The July (4-week month) estimate of domestic mill use of cotton was lowered by 4.7 million pounds to 189.7 million. The revised seasonally adjusted annualized rate of consumption for July is 5.45 million bales. Last year’s July annualized rate was 6.74 million bales.

Commerce’s estimate of both upland and ELS consumption of cotton by US mills, when adjusted to represent the complete ’05-06 crop year, is about 5.9 million bales. This level, combined with USDA’s latest export number of about 17.6 million bales, would imply ending stocks of about 6.0 million bales for the ’05-06 crop year, which is in line with Commerce’s estimate of 6.0 million bales for stocks on hand as of July 31, ’06 as well as USDA’s latest estimate of ending stocks for the ’05-06 crop year.

Preliminary September domestic mill use of cotton and revised August figures will be released by Commerce on Oct. 26.

Sales Steady, Shipments Lag

Net export sales for the week ending Sept. 21, ’06 were 202,400 bales (480-lb.). This brings total ’06-07 sales to slightly more than 3.0 million. Total sales at the same point in the ’05-06 marketing year were about 6.4 million bales. Total new crop (’07-08) sales are 119,500 bales.

Shipments for the week were 83,300 bales, bringing total exports to date to 1.0 million bales, compared with the 2.0 million bales at the comparable point in the ’05-06 marketing year.

Prices Effective: Sept. 29-Oct. 5, '06

Adjusted World Price, SLM 11/16

42.84 cents


Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

9.16 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

58.94 cents

Forward 3135 c.i.f. Northern Europe


Coarse Count c.i.f. Northern Europe


Current US c.i.f. Northern Europe

61.55 cents

Forward US c.i.f. Northern Europe


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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