Cotton's Week: May 11, 2007

Cotton's Week: May 11, 2007

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Farm Bill Markup Scheduled

House Agriculture Committee ChairmanPeterson (D-MN) indicated the mark-up of the ’07 farm bill will begin the week of May 21.

He said he plans to release his recommendations and set a schedule in an announcement to be made on May 17, and expects three subcommittees to mark-up their respective titles the week of May 21 and the remaining subcommittees to mark-up the week of June 4 when Congress returns from the Memorial Day recess. He indicated the subcommittees’ work would be considered by the full Committee in mid-to-late June and by the House in July.

Chairman Peterson also indicated he intends to retain the structure of current law, direct and counter-cyclical payments and the marketing loan but that there may be adjustments within the structure. He indicated he would oppose moving funds from the commodity programs to other titles.



Conservation Views Expressed

NCC joined 13 other national commodity and livestock groups in a letter of jointly held views on conservation.

The letter stated that none of the groups could support shifting baseline funding for commodity programs to other titles of the bill. In addition, the letter addressed the need for locally-led programs that recognize the needs of a particular state or region while operating under general national priorities.

The letter had a heavy emphasis on working lands conservation programs including the Environmental Quality Incentives Program. The groups noted support for the Conservation Security Program, but emphasized that programmatic changes must be made to the program to make it more accessible to producers and simplified. Support for the Conservation Reserve Program, as well as wetlands programs, were identified. Also noted was the need for adequate technical assistance and easing the use of Technical Service Providers (TSPs) by allowing financial assistance funds to be used for TSPs instead of technical assistance funds.



House Approves Disaster Package

The House approved a disaster assistance package (HR 2207) by a vote of 302-120. The provision originally was included in a supplemental appropriations measure providing funds for the war in Iraq, which was recently vetoed.

The package will provide an estimated $3.5 billion to assist producers who have suffered qualifying weather-related crop and livestock losses for ’05, ’06 and ’07 in counties that received a disaster designation.

The NCC joined a coalition, including most commodity and livestock organizations, in urging the House to approve the measure. The coalition’s letter, which was sent House Members prior to the vote on the measure, is on the NCC’s web site at http://www.cotton.org/issues/2007/disaslet510.cfm.

Prior to the vote, the White House communicated its objections to the legislation. The Administration said the measure circumvented pay-go rules by declaring the spending an emergency and not including spending offsets.


Final ’06 Crop Estimates Released

In its final estimate of the ’06-07 US cotton crop, USDA dropped total production to 21.59 million bales, down from the previous January estimate of 21.73 million. The upland crop estimate was lowered 151,000 bales to 20.82 million bales while the ELS estimate increased 9,000 bales to 765,000.

Final planted area is estimated to be 15.27 million acres and final harvested area is estimated to be 12.73 million acres. The ’06-07 national upland yield is an estimated 806 pounds per harvested acre, 57 pounds above the five-year average of 749 pounds. The estimated national average ELS yield of 1,136 pounds per harvested acre represents a 134-pound decrease from the five-year average. State-level estimates are available at http://www.cotton.org/econ/cropinfo/production/estimates.cfm.


Door Open to FTA Consideration

White House and top Congressional leaders have announced an agreement on labor and environmental provisions that could open the way to Congressional consideration of at least two pending free trade agreements.

The agreement would provide for inclusion of “core international labor and environmental protection standards” in free trade agreements. Countries that lower standards would be subject to sanctions. The agreement also would make it easier for countries to produce generic drugs and creates new training and education programs for US workers who lose jobs due to trade.

Democrats indicated the agreement ensures their support for the pending agreements with Peru and Panama, but the agreements negotiated with Korea and Colombia still face opposition for other reasons – Colombia because of continued labor violence and Korea because of barriers to beef and automobiles.

Administration officials indicated they hoped the agreement also would pave the way for renewal of Trade Promotion Authority (TPA) but Congressional leaders indicated they see no need to extend TPA unless there is a breakthrough in the Doha negotiations.

The NCC has joined with a coalition, including the National Council of Textile Organizations, in urging prompt passage of the U.S.-Peru and U.S.-Colombia Free Trade Agreements before the end of June. That effort includes a letter to President Bush, which is on the NCC’s web site at http://www.cotton.org/issues/2007/andeanlet.cfm.

The Andean Trade Promotion and Drug Eradication Act (ATPDEA) was extended to June 30 and would be extended automatically to Dec. 31, ’07 if the FTAs are approved. The approval of the FTAs and extension of ATPDEA would ensure that there is no gap in access for products produced in the region using US components.


US, World Stocks Seen Falling in ’08

In its May report, USDA gauged US ’06-07 cotton production at 21.59 million bales. Both mill use and exports were lowered from the April report. Mill use was lowered 50,000 bales to 4.90 million bales while exports were lowered 250,000 to 13.25 million bales. The estimated total offtake now stands at 18.15 million bales, generating ending stocks of 9.50 million bales, the largest since ’66-67. The estimated ending stocks-to-use ratio is 52.3%.

For the ’07-08 crop year, USDA projects a US crop of 18.80 million bales. Mill use is set at 4.40 million bales while exports are reported to reach 17.50 million bales. That estimated total offtake would be 21.90 million bales, resulting in ending stocks of 6.40 million bales.

The USDA report sees world production for the ’06-07 marketing year at 117.05 million bales, up 260,000 bales from the April report. World mill use was lowered 280,000 bales to 122.16 million bales. Consequently, world ending stocks are estimated to be 55.41 million bales for a stocks-to-use ratio of 45.4%.

For the ’07-08 crop year, USDA projects world production to reach 116.00 million bales. Mill use is set at 127.00 million bales. World ending stocks are estimated to be 50.71 million bales for a stocks-to-use ratio of 39.9%.


Concern Voiced on Chemical Restrictions

The NCC submitted comments to the Department of Homeland Security (DHS) regarding Chemical Facility Anti-Terrorism proposed regulations released in April. As written, the proposal would require a facility storing certain chemicals to complete a screening process to be used in modeling an initial assessment of the damage level that could result from a terrorist incident at the facility.

Because the DHS definition of “facility” includes on-farm chemical storage, there is considerable concern among the agricultural community. Restrictions on chemicals that DHS contends could be used to make explosive devices or contaminants would apply to nearly all US farms because the appendix lists approximately 400 chemicals and the allowed quantities are, in many cases, too low. 

NCC Chairman John Pucheu’s letter to DHS explained that if the rule were to go into effect, farms applying urea, for example, would exceed the threshold in Appendix A on less than 10 acres worth of product. Therefore, the current thresholds with no allowances for timely application of a chemical would result in essentially 100% of cotton farms meeting federal oversight requirements. Appendix A as written could unnecessarily encompass almost all 25,000 US cotton farms and more than 500,000 farms in the nation. 

The NCC’s comments urged DHS to reconsider and revise the chemical of interest list and thresholds in Appendix A to reflect real chemical security risks. Specifically, NCC asked that urea, anhydrous ammonia, aqua ammonia, potassium nitrate, sodium nitrate and propane be removed from Appendix A. The NCC also asked for a 30-day application period for producers procure and to apply ammonium nitrate and sodium chlorate. The NCC recommended that the threshold for sodium chlorate be increased from 2,000 to 10,000 pounds. In addition, the NCC further recommended that DHS waive fees for screenings of farming operations.

The NCC continues to closely monitor the development of the DHS rule in cooperation with the Agricultural Security Coalition made up of the American Farm Bureau Federation, CropLife America, The Fertilizer Institute and others.



Chili Thrips Monitored

The NCC continues to monitor issues related to the introduction of exotic pest species and potential impacts on US cotton – including the introduction of Chili thrips, Scirtothrips dorsalis, in Florida.

Although this pest species was detected in the early ’90s, it previously had not demonstrated establishment and population dispersal. In ’05, Chili thrips was identified on a residential plant and by the end of that year, specimens had been confirmed in 15 Florida counties.

Currently, residential landscapes and nurseries appear to be the primary site of confirmed infestations and damage, but NCC staff is cooperating with USDA’s Animal and Plant Health Inspection Service (APHIS) to monitor reports regarding this pest.


NE Asia Promotion Successful

Hundreds of consumers and trade representatives in Japan, Korea and Taiwan celebrated Cotton Day, an annual event sponsored by Cotton Council International (CCI) and Cotton Incorporated to promote cotton and US cotton.

CCI President Michael Adams joined CCI and Cotton Incorporated representatives at Cotton Day events throughout the region. Major print and television journalists reported on Cotton Day events in all three countries.



Forward A Index Quote Being Published

On May 11, Cotton Outlook began publishing a forward “A” Index quote, which enables USDA to begin the six-week blending of the current and forward “A” Index quotes for calculation of the adjusted world price (AWP). The six week blending process is used to transition the AWP from old crop to new crop.

The formula during the first two weeks is two times the current quote plus the forward quote divided by three. For weeks three and four, the formula is the current quote plus the forward quote divided by two. For weeks five and six, the formula is the current quote plus two times the forward quote divided by three. After the transition period and until the end of the ’06-07 crop year, the forward “A” will be used exclusively in calculating the AWP.

Based on current values, the forward “A” Index is 3.95 cents above the current “A” quote.



Sales Surge, Shipments Strong

Net export sales for the week ending May 3 were 549,800 bales (480-lb). This brings total ’06-07 sales to approximately 12.6 million. Total sales at the same point in the ’05-06 marketing year were approximately 16.4 million bales. Total new crop (’07-08) sales are 684,400 bales.

Shipments for the week were 364,600 bales, bringing total exports to date to 7.6 million bales, compared with the 11.9 million at the comparable point in the ‘05-06 marketing year.


Prices Effective May 11-17, '07

Adjusted World Price, SLM 11/16

40.12 cents

*

Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

11.88 cents

Import Quotas Open

 9

Step 3 Quotas (480-lb. bales)

878,541

ELS Payment Rate

0.00 cents

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

56.53 cents

Forward 3135 c.i.f. Northern Europe

NA

Coarse Count c.i.f. Northern Europe

NA

Current US c.i.f. Northern Europe

55.38 cents

Forward US c.i.f. Northern Europe

60.50 cents

 
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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