Cotton's Week: July 20, 2007

After deliberating more than three days and considering numerous amendments, House Agriculture Committee members voted unanimously to favorably report HR 2419. The legislation is scheduled to be debated in the House on Thursday, July 26.

NCC Chairman John Pucheu, Vice Chairman Larry McClendon and President/CEO Mark Lange were joined in Washington by NCC leaders during the debate by the Committee.

The Chairman advised cotton, rice and peanut leaders that while he personally opposes payment limitations, he believed it necessary to include a package of modifications to current law in order to move the legislation through Committee and the full House. He indicated he would ask House leaders to recognize that the Committee’s provisions would constitute significant reform and to advise critics that further changes would be opposed by the Committee and leadership.

The new legislation’s provisions extend the marketing loan and direct and counter-cyclical payments. Producers would be provided an option to continue to participate in the current target price program or a revenue program similar to that proposed by the Administration. The cotton provisions continue the marketing loan with a base loan of 52 cents, a direct payment of 6.67 cents and a target price of 70 cents. Bases and yields used to make direct and counter-cyclical payments are unchanged from current law.

The Committee included a majority of adjustments to the cotton program to improve competitiveness and flow by modifying the way the weekly adjusted world price is calculated. Provisions to provide assistance to domestic mills and to modify the calculation of premiums and discounts also are included. A provision to provide additional flexibility in loan redemptions is not currently in the bill and efforts to add it will continue.

The package of changes to payment limitations include modification of the current AGI test from $2.5 to $1 million per individual; a provision to require direct attribution of payments; a provision to clarify spouse eligibility for benefits and the elimination of certificates coupled with the elimination of limits on MLGs and LDPs. The new limitations are $60,000/individual for direct payments and $65,000 for counter-cyclical payments.

NCC Chairman Pucheu expressed appreciation to the Committee and its leaders for extending the cotton program and for including modifications recommended by the industry. He expressed concern about the impact of the changes in payment limits and urged the Chairman to work to ensure the changes in the legislation are not further tightened and to work for fair and reasonable implementation.

NCC Vice Chairman McClendon also complimented the Chairman for his leadership but expressed concern about the impact of the changes in payment limits on Mid-South operations and urged the Chairman to resist further changes and to work to minimize the impact on cotton growers.

Pucheu and McClendon both expressed appreciation to General Farm Commodities Subcommittee Chairman Etheridge (D-NC) for his leadership on the commodity title as well as the Cotton Belt members of the Committee who worked in a bipartisan manner to ensure cotton was treated fairly.

Pucheu and McClendon pledged to work with the Committee and agriculture groups to urge members of the House to expeditiously approve the Committee’s bill and to oppose damaging amendments, including the expected one being offered by Reps. Kind (D-WI) and Flake (R-AZ).

NCC leaders will be in Washington the week of July 23 to contact members.

The chairman of the Doha Round Agriculture negotiations, Crawford Falconer, issued a draft text that would require the United States to slash so-called amber box spending for cotton by more than 90% from recent spending levels. The text also contained other provisions targeting cotton subsidies more than any other type of domestic support.

The draft language, also known as modalities, contained higher reductions in overall trade distorting domestic support than the United States has indicated it would agree to, while providing for less market access gains than previously demanded by the United States. The text contains significant market access loopholes for so-called sensitive and special products, particularly for developing countries. 

The draft modalities contained several provisions specifically targeting cotton domestic support and requiring dramatic reductions in cotton support in developed countries. Many of the cotton-specific provisions were adopted from proposals put forward by the Cotton-4 countries of W. Africa. Under the submitted text, amber-box spending caps for US agricultural support would have to be reduced by 60%, while cotton amber-box spending caps would have to be reduced by 82.2%. However, because of the base periods proposed in the draft text, amber-box spending for cotton in the United States would have to be reduced by more than 90% from recent spending levels. The text also calls for additional cotton cuts under the new blue box category of domestic support (essentially equivalent to the US counter-cyclical program) that significantly exceed cuts that would be required of other commodities.

Immediately upon reviewing the draft modalities, the NCC urged the US Administration to strongly oppose the cotton-specific language contained in the draft and not to accept any set of modalities or any agreement that contains similar language. The NCC stated that without this type of assurance, the US cotton industry undoubtedly will oppose any extension of Trade Promotion Authority.

NCC Counsel William Gillon stated that “traditionally it has been very difficult to make any major changes in a draft modalities text. The cotton language was not even placed in brackets, indicating that the Agricultural Chairman believes there is agreement on the C-4 language and other cotton-specific provisions that were included in the proposal.” 

NCC President Mark Lange stated, “The draft modalities text issued by the WTO on Tuesday contains cotton-specific reductions that simply cannot be agreed to by the U.S. cotton industry.”

Farm Policy Facts (FPF), a non-profit group of farmers and commodity organizations that includes the NCC, has launched an online petition drive aimed at preventing the enactment of proposals to radically overhaul the current farm bill.

NCC members are urged to sign the petition by July 26. Located at http://www.farmpolicyfacts.org/petition.cfm, the petition specifically urges Congress to "soundly reject any legislation that would destroy current farm policies and/or raid money budgeted for farmers and ranchers," including rejection of the “Food and Agriculture Risk Management for the 21st Century Act or Farm 21,” an amendment introduced by Reps. Kind (D-WI) and Flake (R-AZ). That proposal seeks to replace the current law with low-level and restrictive risk management accounts.

The NCC earlier (see July 13 Cotton’s Week) had asked members to call their Congressional members or their ag legislative assistants and urge opposition to the amendment. Similar alerts have been sent by other commodity groups to farmers across the country.

“The petition supports a strong farm policy in the United States because it ensures that America has the safest, most affordable, and most abundant food and fiber supply in the world,” according to a FPF statement. The petition notes that current law has saved US taxpayers $25 billion over the life of the current farm bill; supports an industry that employs 20% of the US workforce and contributes $3.5 trillion a year to the US economy; increases the country’s food security; and gives US producers a chance against foreign competitors.

FPF, which was created to educate Congress and Americans about agriculture's contribution to a strong and vibrant United States, also has initiated a weekly e-newsletter that can be accessed at http://www.enewsbuilder.net/farmpolicyfacts.

As part of the ’07 Policy Education Program (PEP), 11 cotton producers traveled to Washington, DC, where they got an update on NCC operations and industry issues. They also met with USDA officials and staffers with the House and Senate ag committees. Earlier, the group received communications training during a visit to the Greensboro, NC, headquarters of Syngenta, the sponsor of this Cotton Foundation special project.

The participants included Nathan Arp of Casa Grande, AZ; Coleman Bailey, Jr., Coffeeville, MS; Jay Barrett, Farwell, TX; Steve Brown, Lake Providence, LA; Jordan Denning, Burgaw, NC; Graydon Flowers, Dublin, MS; Justin Jones, Albany, GA; Charlie Myer, Stratford, CA; Farnsworth Pugh III, Halls, TN; Jonathon Spruell, Mt. Hope, AL; and Luke Winsett, Elmer, OK.

PEP provides its participants the opportunity to learn more about the NCC’s policy development and implementation process, including attending the NCC’s annual meeting. Up to four producers from each of the four major Cotton Belt regions are chosen annually to participate.

US cotton phytosanitary measures were emphasized during July 9-12 when an Ecuadorian phytosanitary team saw and heard about US cotton pest control programs and cotton pest survivability research during their tour of the US Cotton Belt.

The team was accompanied by USDA-APHIS representatives. The tour included stops and presentations at the USDA-ARS gin lab in Stoneville, MS; boll weevil eradication offices in Arkansas and Texas; cotton warehouses and a commercial gin. Among topics discussed were boll weevil/pink bollworm eradication program progress and cotton pest survivability during and after harvesting/ginning.

Presentations emphasized that: 1) boll weevil numbers are so low that the possibility of weevils making it to gins are extremely remote; 2) drying, ginning and lint cleaning eliminates weevils (and other cotton pests) at each of these stages; 3) bale compression and packaging requirements prevent cotton pest survival prior to and during storage; and 4) for decades the U.S.  has successfully moved cotton from production areas to mills without fear of reintroducing cotton pests. Following the tour, the Ecuadorian team members agreed to review and re-write Ecuador’s phytosanitary regulations for baled cotton. The process should take no more than two months.

Net export sales for the week ending July 12 were 35,500 bales (480-lb). This brings total ’06-07 sales to approximately 14.6 million bales. Total sales at the same point in the ’05-06 marketing year were approximately 18.4 million bales. Total new crop (’07-08) sales are 1.2 million bales.

Shipments for the week were 450,800 bales, bringing total exports to date to 11.8 million bales, compared with the 16.0 million bales at the comparable point in the ’05-06 marketing year. With less than one month remaining in the marketing year, weekly shipments must average roughly 480,000 bales to reach the USDA projection of 13.0 million bales.

Adjusted World Price, SLM 11/16	56.82 cents	*
Coarse Count Adjustment	0.00 cents
Marketing Loan Gain Value	0.00 cents
Import Quotas Open	NA
Step 3 Quotas (480-lb. bales)	NA
ELS Payment Rate	3.39 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 3135 c.i.f. Northern Europe	71.31 cents
Forward 3135 c.i.f. Northern Europe	73.23 cents
Coarse Count c.i.f. Northern Europe	NA
Current US c.i.f. Northern Europe	70.60 cents
Forward US c.i.f. Northern Europe	74.60 cents
2006-07 Weighted Marketing-Year Average Farm Price
Year-to-Date (August-May)	47.39 cents	**
**August-July average price used in determination of counter-cyclical payment