Cotton's Week: October 20, 2006

Cotton's Week: October 20, 2006

Support Expressed for Peru, Colombia FTAs

The US cotton industry expressed support for Congressional approval of Free Trade Agreements (FTAs) with Peru and Colombia. The National Council of Textile Organizations (NCTO) Board of Directors voted unanimously to support approval of both agreements. The NCC’s resolutions authorize support of FTAs that meet specific criteria which benefit the US cotton industry.

NCTO President Cass Johnson added, “At $16 billion a year in exports, the U.S. textile industry is the third largest exporter of textile products in the world. These exports depend on trade agreements like the Colombia and Peru FTAs…  As the unanimous NCTO vote indicates, the textile provisions of these agreements represent a template for future trade agreements which can garner wide industry support.”

The terms of the Colombian and Peruvian agreements include rules of origin that are virtually identical to those outlined in NCC policy and will serve to benefit US cotton farmers and textile manufacturing employees. Colombia and Peru are strong and growing markets for US textile products and both countries also import US cotton fiber.

The NCC and NCTO have joined other industries supporting the FTAs and are encouraging Congress to act quickly to approve the legislation necessary to implement the FTAs when they return Nov. 13. The organizations also have asked Congress to take the steps necessary to ensure there is no disruption in trade due to a possible lapse in benefits during a transition from the current trade preference program authorized by legislation which expires Dec. 31 and the date the FTAs can take effect.

IRS Issues Ruling on Conservation Security Payments

The IRS, on Sept. 25, ’06, issued Revenue Ruling 2006-46 which holds that all or a portion of the cost-share payments received under the Conservation Security Program (CSP) may be eligible for exclusion from gross income to the extent permitted by section 126 of the Internal Revenue Code.

Section 126 of the Internal Revenue Code provides that gross income does not include the excludable portion of payments received under “any program of … the United States … under which payments are made to individuals primarily for the purpose of conserving soil, protecting or restoring the environment ….”

The Secretary of Agriculture certified to the IRS that payments under the CSP are primarily for the purpose of conserving soil and water resources or protecting and restoring the environment.

The IRS, in Rev. Ruling 2006-46, primarily agreed with the Secretary of Agriculture and held that cost-share payments received under the existing practice and new practice components of the CSP may be eligible to be excluded from gross income.

Likewise, payments under the enhancement component of CSP may qualify as cost-share payments if they are based on the activity’s cost rather than on its expected conservation benefits. Payments under the stewardship component are not cost-share payments and would not be excludable from gross income under section 126 of the Internal Revenue Code.

CSP participants should be aware that there are restrictions within section 126 that limit the excludability of such cost-share payments. Participants in CSP should ensure their tax preparers are aware of this new Revenue Service Ruling. The NCC does not give tax advice. Therefore, members are urged to consult a tax professional regarding the effect of this ruling on their operation.

Water Quality Incentives Offered

EPA and USDA jointly announced a market-based incentives program to enable farmers and ranchers to earn credits by practicing soil and water conservation measures that reduce water pollution. These credits, in turn, can be traded with industrial or municipal facilities. Known as water quality trading, price-per-credit incentives will be determined by market forces of supply and demand.

Growers can engage in the program by implementing conservation practices such as stabilizing stream beds, limiting sediment loading in streams and planting trees along river beds. These efforts combine to reduce sediment, nitrogen and phosphorus runoff from farming.

While the program already has gone into effect, a timetable and specific guidelines still are being finalized. More information on the program is available at

BWCC Registration Running Strong

Registration for the ’07 Beltwide Cotton Conferences in New Orleans is running ahead of the ’06 conferences’ early registration pace, and potential conferees are encouraged to register online by going to the BWCC web site,

Also at that site, NCC members, Cotton Foundation members and certified cotton interest organizations’ executive officers may request early housing at the New Orleans Marriott and Sheraton New Orleans hotels until Monday, Oct. 30. A NCC-recognized user ID and password is needed to use the early housing link.

Meanwhile, programming is being finalized for the ’07 BWCC, which is set for Jan. 9-12. The Cotton Production Conference’s general session will cover such timely topics as normal/deficit irrigation strategies, herbicide resistance management and farming with high input costs. It also will provide updates on bio-fuels, transgenic varieties developments and sustainability as well as farm and trade policy. The forum’s Technical Conferences’ chairmen have finished organizing their sessions and will provide attendees staying for the technical conferences with in-depth presentations on numerous cotton-related topics.

CLC Completes Mid-South Session

The NCC’s ’06-07 cotton leadership class recently completed the first of five week-long development sessions.

In Memphis, the 10-member group received an orientation to the NCC and communications training and visited Cargill and DuPont Crop Protection offices. While in W. Tennessee, they toured Producers Mid-South Company in Covington, the Milan Compress Company and the Milan Experiment Station, and saw cotton harvesting at Crescent Farms in Alamo.

Key activities in the Mississippi Delta were tours of the Delta Oil Mill in Jonestown and the Bobo-Mosely Gin in Lyon and a look at cotton and soybean production at Maud Farms in Tunica. They were updated on precision agriculture technology at InTime, Inc., in Clarksdale.

Class members are: Producers – David Cochran, Greenville, MS; Patrick Johnson Jr., Tunica, MS; Tammy Leonards, Lettsworth, LA; and Clint Webb, Boston, GA; Ginner – Scott Matlock, Sebastian Cotton & Grain, Sebastian, TX; Warehouser – Eric Wanjura, Plainview Coop Compress,  Plainview, TX; Merchant – Rick Stone, Cargill Company, Lubbock, TX; Marketing Cooperative – Wayne Boseman, Carolinas Cotton Growers, Garner, NC; Cottonseed – Brandon Winters, Producers Coop Oil Mill, Oklahoma City, OK; and Manufacturer – Bryan Gregory, American Cotton Growers Denim Mill, Littlefield, TX.

Over the next year, the class will visit with industry leaders, tour production and processing operations, and observe research activities. They will attend the NCC’s ’07 Annual Meeting, visit with lawmakers in Washington, DC, and participate in orientation sessions at Cotton Incorporated, the New York Board of Trade and the headquarters of DuPont, which supports the program with a grant to The Cotton Foundation.

Coley Named to USDA Advisory Board

Agriculture Secretary Mike Johanns named Chuck Coley, a Vienna, GA, Georgia cotton producer, as one of 12 new members to serve on the National Agricultural Research, Extension, Education, and Economics Advisory Board. The board advises the secretary of agriculture and land-grant colleges and universities on national priorities/policies for food and agricultural research, education programs, extension outreach efforts and economic research programs.

In addition to providing policy guidance to USDA, board members meet with Ccongress, hold stakeholder listening sessions, review competitive-grant programs, and conduct an annual review of USDA research and education activities for relevance to national priorities and adequacy of funding adequacy.

The board is made up of 31 members, each of whom represents a specific category of US agriculture. Each new member generally serves a three-year appointment. Terms for members overlap so every year a third of the Board is newly appointed.

FSA Redesigns Web Site

Teresa Lasseter, administrator for USDA's Farm Service Agency (FSA) announced the introduction of the newly designed FSA, customer-focused web site at

The site improves the delivery of information and services to web site visitors and employees and meets USDA's eGovernment strategic goals prompted by the President's Management Agenda.

"It is our goal to be more efficient and responsive to the needs of our customers and employees," Lasseter said. "This new Web site moves us in the right direction by providing continuous, uninterrupted global access around the clock."

In January 2004, USDA began an aggressive initiative to enhance its agencies' electronic government capabilities as part of the President's Management Agenda. The FSA Web Design Team adopted standards, applied content management tools and implemented a common look and feel consistent with USDA's site. The new FSA site meets conditions set forth by the eGovernment Act of ’02. It complies directly with policies issued by the Office of Management and Budget for federal agency public web sites.

The Web site now provides information about FSA programs and services in both English and Spanish. In addition, FSA has added a more effective search-tool engine for finding specific information. Other new features include "Hot Links," and "I Want To" sections that provide users quick links to popular FSA functions. Site visitors also can visit "Ask FSA," an online knowledge-based program designed to answer general questions about FSA programs and services.

"Our revamped Web site will give customers immediate access to information needed to help them make important decisions about their farming operations," Lasseter said.

As with any new system, FSA anticipates the transition will be an adjustment for many users but is confident that the new site will serve its customers more effectively and efficiently. The agency welcomes and encourages feedback.

Sales Steady, Shipments Lag

Net export sales for the week ending Oct. 12 were 177,800 bales (480-lb). This brings total ’06-07 sales to about 3.9 million. Total sales at the same point in the ’05-06 marketing year were slightly more than 7.0 million bales.

For ’06/07 exports, Mexico currently ranks as the leading international buyer of US cotton with purchases of 916,000 bales, or 24% of the total. China follows closely with 769,000 bales of purchases, or 20% of the total. Turkey, Indonesia and Taiwan complete the list of the top five customers.

Total new crop (’07-08) sales are 137,500 bales. Mexico accounts for 74% of the new crop sales.

Shipments for the week were 117,400 bales, bringing total exports to date to 1.4 million bales, compared with the 2.5 million at the comparable point in the ’05-06 marketing year.

Prices Effective Oct. 20-26, '06

Adjusted World Price, SLM 11/16

41.30 cents


Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

10.70 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

57.40 cents

Forward 3135 c.i.f. Northern Europe


Coarse Count c.i.f. Northern Europe


Current US c.i.f. Northern Europe


Forward US c.i.f. Northern Europe


'05-06 Weighted Marketing-Year Average Farm Price  
Final Marketing-Year Average Price)

47.70 cents


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