Cotton's Week: May 4, 2007

Cotton's Week: May 4, 2007

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WTO Ag Chairman Issues Challenge Paper

The chairman of the WTO agricultural negotiations, Crawford Falconer, issued a paper challenging Doha members to conclude an agricultural agreement and provided the Chairman’s opinion as to what an agreement would have to look like.Falconer covered all aspects of a potential agricultural agreement. He indicated the United States would have to provide more cuts in agricultural supports than it has so far offered and accept less in market access than it demanded in Oct. ’05.

The average tariff cuts assumed to be achievable by Falconer would be significantly less than the average tariff cuts hoped for by the United States. He declared that the current US offer of reductions in domestic support was not an effective cut in US programs. He also stated that cotton specific reductions would need to be more “ambitious” than any eventually agreed upon overall general percentage cuts. The additional cuts for cotton, according to the paper, will not be a minor or modest or marginal additional undertaking. He asserted there must be commodity specific reductions for cotton irrespective of what is ultimately determined with respect of other commodities.

NCC Chairman John Pucheu stated that the Falconer paper helps clarify where the negotiations stand today and represents a candid assessment by the agriculture negotiating Chairman.

“Unfortunately,” continued Pucheu, “the Chairman’s assessment outlines an agreement that would be damaging to U.S. agriculture as a whole and particularly damaging to U.S. cotton. U.S. agriculture, including the National Cotton Council, has consistently stated its inability to support an agreement that fails to meet the ambitious U.S. proposal. I found it particularly disconcerting that Chairman Falconer believes the current U.S. offer on domestic support is not an effective cut, when our analysis indicates that offer would cause loan rates to decline 10-15% and target prices to decline 5-10%. NCC economists have estimated the U.S. domestic support offer would reduce US agricultural spending by $2 billion per year, assuming comparable reductions in support for sugar and dairy programs.  The US has tabled a very significant offer on domestic support that would substantially reduce agriculture’s safety net and negatively impact U.S. growers, and it is incorrect and grossly inaccurate for the agriculture negotiating Chairman to indicate otherwise.”

The Falconer paper stands in contrast to an April 12 letter by 58 Senators to President Bush clearly stating “our support for an agreement depends on achieving a balanced, ambitious outcome in which new market access and the elimination of export subsidies provide net gains for U.S. agriculture in relation to reductions in trade-distorting domestic support … We cannot support a deal that directly reduces net farm income through steep cuts in farm programs in return for minimal market access gains whose effects on farm gate receipts is speculative at best.”



House Ag Subcommittee Holds Hearing

The House Agriculture Appropriations subcommittee conducted a hearing concerning the budget proposal and operations of USDA’s Farm and Foreign Agricultural Services. Under Secretary Mark Keenum and Farm Services Agency (FSA) Administrator Teresa Lasseter delivered testimony and responded to questions posed by members of the subcommittee chaired by Rep. DeLauro (D-CT).

Members on both sides of the aisle expressed concern about FSA office closures and the lack of computer capacity which has required offices to schedule appointments with growers based on rationed access to computer processing time.

Administrator Lasseter reviewed the detailed process she has put in place which is designed to allow states to develop plans for offices. She stressed that states were not given targets for office closures as was the case in past plans. She and Dr. Keenum also explained the actions that have been taken to address computer capacity shortfalls and outlined the budget proposal for FY08 operations. They indicated there would be a separate request for funds for new computer capacity.

Cotton Belt members including Rep. Kingston (R-GA), ranking member of the subcommittee, and Reps. Bishop (D-GA), Emerson (R-MO) and Boyd (D-FL) asked USDA officials why they have proposed terminating storage credits in FY08, which begins Oct. 1, ’07.

The members expressed concern that the proposal will make cotton uncompetitive and that the proposal would change the rules for the ’07 crop in a way that disadvantages any producer with a loan maturing after Oct.1. The members not only voiced their objections to the proposal on storage credits, but questioned the basis and rationale for the Administration’s proposal to include a provision in the new farm law to deny farm program benefits to any person who has an adjusted gross income above $200,000 in the previous year.

The subcommittee soon will complete its oversight hearings and may begin to markup its FY08 agriculture funding bill as soon as the week of May 21.

The NCC will continue to urge members to reject the proposal to terminate storage credits and will urge the committee to fully fund cotton research activities and provide cost-share funds for the boll weevil and pink bollworm eradication programs.



EU Applies Tariff to Selected US Textiles

As part of ongoing trade retaliation for the Byrd Amendment, the European Union (EU) announced the list of products exported from the United States to the EU that will be subject to a 15% additional duty beginning May 1, ’07 and that covers, over one year, a total value of trade that does not exceed $81.19 million.

These products include nine HTS codes containing cotton. The value of US exports to the EU for these nine cotton products in calendar year ’06 totaled approximately $10.5 million dollars.

The Byrd Amendment allowed US companies that filed successful anti-dumping and countervailing duty petitions to receive the funds raised from duties on imports that the US government determined to be subsidized or unfairly priced.

The WTO ruled the Byrd Amendment illegal in ’02 and said that countries could introduce measures to penalize the United States for up to 72% of the money raised and distributed through the Byrd Amendment. In ’04, a WTO Dispute Settlement Body granted the EU and other countries the right to impose retaliatory duties on a wide variety of US products.

In April ’05, the EU announced the first list of US paper, farm goods, textiles and machinery products that would be subject to an additional 15% duty beginning on May 1, ’05. This list was modified on May 1, ’06 and again on May 1, ’07.

On Feb. 8, ’06, President George W. Bush signed the Deficit Reduction Act of ’05 into law which repealed the Byrd Amendment. However, because anti-dumping and countervailing duties will continue to be collected by the US Treasury until Oct. 1, ’07, countries still are allowed to impose additional duties on US-originated goods.


Bale Specs Await USDA Approval

The ’07 Specifications for Cotton Bale Packaging Materials were accepted by the Joint Cotton Industry Bale Packaging Committee’s Specifications Review Committee and sent to USDA for final approval. Once approved, the ’07 specifications will be used by the Commodity Credit Corp. for loan program eligibility purposes. The published specifications also are intended for use as manufacturing guidelines for bagging and bale ties.

The ‘06 specifications can be found in the NCC web site’s Technical area at http://www.cotton.org/tech/bale/specs/index.cfm. The site also contains an archive of Cotton Bale Packaging Materials specifications for the years ’00-05. The specifications are designed to improve the quality and protection of US cotton bales and to improve the appearance and marketability of those bales in domestic and foreign markets.

The ’07 Specs include two new woven polypropylene fabric constructions. Those are:  1) a spiral sewn bag fabrication made from woven polypropylene and 2) an extrusion seam bag fabrication made from woven polypropylene.

Also, a clarification was made to the specifications for the addition of a definition for an extruded seam.


Landowner Incentives Expanded

The Natural Resources Conservation Service (NRCS) is continuing the development of a feature of USDA’s ’07 farm bill proposal -- its “ecosystem service markets” -- to protect the environment and offer financial incentives to landowners.

The agency hopes to build on the success of existing environmental credits markets such as the trading of total maximum daily loads (TMDL) pollutants and the capture of carbon in soil known as carbon sequestration. NRCS also is seeking to create new opportunities for landowners to buy or sell credits for clean water, greenhouse gas reduction, wetlands preservation, and more recently, endangered species protection. 

NRCS Chief Arlen Lancaster announced a partnership with the Fish and Wildlife Service to explore a market-driven credit trading program for landowners who provide critical habitat for endangered species. He asserts that, “Allowing landowners to earn additional revenue for their conservation efforts is the future of sound environmental stewardship.” 

This concept of “habitat banking” could, for example, involve a farmer who receives credits for setting aside a conservation bank or parcel of land containing valuable natural resources that are conserved and managed through an easement. The farmer could then sell those credits to a land developer required to mitigate the loss of habitat. Market forces would dictate the price.

Efforts in the 109th Congress to amend the Endangered Species Act (ESA) by, in part, providing tax incentives to landowners who provide habitat for at-risk or endangered species were unsuccessful in the Senate although a bill passed in the House.

Because American farms account for 75% of wildlife’s natural habitat and approximately 10% of the 1,300 species on the list have been recovered since the ESA was enacted in ’73, advocates for amending the Act believe landowners can play a critical role.


Cotton Physiology Today Posted

The first Cotton Physiology Today newsletter issued since ’01 has been distributed electronically and posted in the Technical area of the NCC’s web site (see 4/27 Cotton’s Week). The Members Only document can be accessed by going to http://www.cotton.org/tech/physiology/cpt/index.cfm.

The issue, “Planting and Replanting Decisions,” includes a focus on cotton stand establishment with information on such important areas as seed quality, water absorption, germination physiology and the impact of stress on emergence. This newsletter – as will future issues -- contains links to other available topic resources on the Internet and to contributing authors’ email addresses.

The newsletter is a key component of the Cotton Physiology Education Program, which the NCC has restored and is coordinating in conjunction with state Cooperative Extension Services. Newsletter readers are asked to subscribe or unsubscribe by clicking on either of those words located in the newsletter’s masthead.



Sales, Shipments Stay Strong

Net export sales for the week ending April 26 were 413,300 bales (480-lb). This brings total ’06-07 sales to approximately 12.1 million. Total sales at the same point in the ’05-06 marketing year were approximately 16.2 million bales. Total new crop (‘07-08) sales are 653,500 bales.

Shipments for the week were 357,000 bales, bringing total exports to date to 7.3 million bales, compared with the 11.5 million at the comparable point in the ’05-06 marketing year. With a little more than three months remaining in the marketing year, weekly shipments must average roughly 459,000 bales to reach the USDA projection of 13.5 million bales.



Prices Effective May 4-10, '07

Adjusted World Price, SLM 11/16

40.30 cents

*

Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

11.70 cents

Import Quotas Open

 10

Step 3 Quotas (480-lb. bales)

 976,157

ELS Payment Rate

0.00 cents

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

56.71 cents

Forward 3135 c.i.f. Northern Europe

 NA

Coarse Count c.i.f. Northern Europe

 NA

Current US c.i.f. Northern Europe

55.75 cents

Forward US c.i.f. Northern Europe

 NA

 
2006-07 Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-March)

47.77 cents

**

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

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