Cotton's Week: September 28, 2007

Cotton's Week: September 28, 2007

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NCC Delegation Conveys WTO Cotton Language Concerns

A delegation of industry leaders, led by NCC Chairman John Pucheu, NCC Vice Chairman Larry McClendon, and American Cotton Producers Chairman Jay Hardwick, met with USTR, USDA and Congress in Washington, DC, to convey the industry's serious concern with the cotton specific language in the negotiating text published by WTO Agriculture Chairman Crawford Falconer.

The industry leaders urged the Administration to communicate its strong objections to the language and to make clear that it would not agree to inclusion of the language in a final agreement. In meetings with Senate and House agriculture committee members and Cotton Belt delegations, the delegation outlined the industry's concerns and urged Congress to tell USTR that they would reject a final agreement that does not include significant modifications. 

The provisions currently in the Falconer text, as proposed by W. African cotton countries, would require additional draconian reductions in cotton price supports under an accelerated timetable in addition to any reductions that might be made to all US commodity programs under a general agreement.

Last week, nine Senators joined Sen. Chambliss (R-GA) on a letter to US Trade Representative Schwab expressing their intention to oppose an agreement unless the cotton provisions are significantly modified. Both Texas senators followed with a similar communication and several offices have placed calls to USTR to express their concern. A letter is now circulating in the House.

During the delegation’s meeting with the House Agriculture Committee, Chairman Peterson stopped by to express his support for the NCC effort and pledged his support in communicating his concerns to USTR.



NCC Joins Diverse Group Urging Prompt Farm Bill Development

NCC joined agricultural associations and other organizations on a letter to Senate Majority Leader Reid (D-NV), Senate Minority Leader McConnell (R-KY), and Sens. Harkin (D-IA) and Chambliss (R-GA), chairman and ranking member, respectively, of the Senate Agriculture, Nutrition & Forestry Committee. “While our organizations have differences on specific policy recommendations, we believe it is vitally important that the Senate Agriculture Committee mark up and pass a 2007 Farm Bill as soon as possible,” the letter stated. “Only a few days remain before provisions of the 2002 law expire. Farmers and ranchers need certainty on the policy environment in which they will operate next year. Several conservation and nutrition programs expire at the end of the fiscal year. These programs that conserve land resources and serve poor and hungry people must be reauthorized and adequately funded now.”

The letter noted that extension is only a short term solution that does not provide the assurances that the nutrition, agriculture and conservation communities need for efficient long-term planning.

“We are working with the Senate Agriculture Committee to develop a farm bill that addresses our priorities,” the letter stated, “but are concerned that delayed action on this legislation is lessening the chances of completing a new farm bill this year. We therefore urge a quick and favorable resolution to the funding and other outstanding issues that are holding up action on this important legislation. We look forward to working with you to move this process forward in the Senate in the coming weeks.”

The letter is on the NCC’s web site at http://www.cotton.org/issues/members/2007/senletr.cfm



Farm Program Funds Sought

The Senate Finance Committee is reportedly considering a number of provisions to generate savings that can be used to fund a permanent disaster program.

A list released this week indicates the Committee is considering changes to tax, tariff and Social Security provisions which would generate “savings” of almost $12 billion over 10 years of which $5 billion over 10 years would be used to establish a permanent disaster program to cover “shallow losses” not covered by insurance.

Funds also would be used to eliminate a requirement that self-employment tax has to be paid on certain CRP payments; to enhance so-called “Aggie Bonds”; to provide tax credits for certain conservation practices; and to support increased production of renewable fuels.

Two provisions which generate significant savings would (1) eliminate the FICA exemption for non-citizen employees and (2) establish a $250,000 limit on carry-forward losses that can be used to offset non-farming business income.

Another provision would exclude developed property as like-kind when exchanged for undeveloped land with attached farm program payments (1031 Like-Kind Exchange).


NCC Testifies on China WTO Compliance

NCC Director Mike Quinn presented testimony to the Interagency Trade Policy Staff Committee, which conducted a hearing as part of its preparation for its annual report to Congress on China’s compliance with its commitments made in connection with its accession to the World Trade Organization. He urged the panel and USTR to make market access to China a priority for the Doha Round negotiations.

The North Carolina cooperative official told the panel of representatives from USTR, USDA, Labor, State, Commerce and Treasury that China has become the “world’s largest producer, user and importer of cotton fibers and the world’s largest producer and exporter of textiles and apparel products.”

As a result, Quinn noted, market access to China is critical to all cotton-producing countries. Unfortunately, he stated, China has initiated and maintained practices which distort markets and limit access, including a variable-rate tariff on imported fiber which serves to maintain high internal prices and acts as a price support program with an estimated value of $2.76 billion in ’06 and $3.02 billion in ’05 to Chinese producers.


“Flex” Leases to Get Review

USDA published a notice of intent to review the way “combination” or “flex” leases are viewed when administering commodity and risk management programs.

The notice explains that “changes have occurred within agriculture that relate to the types of leases …….accordingly, existing program provisions may not accurately and appropriately take these new lease types into consideration.”

By issuing the ANPR, USDA is seeking comments on a series of questions about current policy and then will determine whether to issue a proposed regulation for public comment.

Comments on the ANPR, published Sept. 28, are due by Nov. 27. NCC will consult with industry representatives and others to prepare comments in response to the notice.  A copy of the notice is on the NCC web site at http://www.cotton.org/issues/members/2007/combo.cfm.



FSA/CCC to Report Market Gains

USDA’s Farm Service Agency (FSA) has issued Notice LP-2074 advising that beginning with the ’07 calendar year FSA/CCC will report “producer market gains associated with the repayment of a CCC loan, whether the producer repays the loan with cash or uses commodity certificates. The gain will be reported on IRS Form 1099-G. IRS Bulletin 2007-33, Notice 2007-63, dated Aug. 13, ’07, provides answers to frequently asked questions about the tax treatment of market gain associated with the repayment of CCC loans under the non-recourse marketing assistance loan program.”

A copy of the FSA notice and IRS bulletin are on the NCC web site at http://www.cotton.org/issues/members/2007/cccirs.cfm.



Orientation Tour Showcasing US Cotton

Textile executives from 14 countries throughout Asia and Latin America are traveling across the US Cotton Belt from Sept. 25-Oct. 3 to familiarize themselves with US cotton and how it is produced, processed and marketed as part of CCI’s COTTON USA Orientation Tour.

The 28 participants represent 26 companies in Bangladesh, China, Colombia, Ecuador, India, Indonesia, Japan, Korea, Mexico, Peru, Taiwan, Thailand, Turkey and Vietnam. Those companies are expected to consume about 3.5 million bales in ’07, and consume an average of 40% US cotton -- equal to almost 1.4 million US cotton bales annually.

The 14 representative countries are expected to consume 85.9 million bales in ’07. This represents about 75% of the total cotton consumed outside the United States. In ’06, these countries imported about 27.1 million bales of which 10.5 million were US bales. This represents 87% of US cotton’s total exports in ’06.

The participants are to visit cotton farms, gins and processing facilities throughout the Cotton Belt. They will meet with exporters in the four major Cotton Belt regions and get briefings from CCI, NCC, Cotton Incorporated, American Cotton Shippers Assoc., AMCOT and Supima.



Mill Cotton Use Slips

According to the Commerce Dept., August (four-week month) total cotton consumption in domestic mills was 183.1 million pounds for a seasonally adjusted annualized rate of 4.87 million bales (480-lb). Last year’s August annualized rate was 5.18 million bales.

The July (four-week month) estimate of domestic mill use of cotton was lowered by 2.9 million pounds to 173.6 million. The revised seasonally adjusted annualized rate of consumption for July is 4.89 million bales. This is lower than last year’s July annualized rate of 5.42 million bales.

Commerce’s estimate of both upland and ELS consumption of cotton by US mills, when adjusted to represent the complete ’06-07 crop year, is approximately 4.95 million bales. This level of mill use, when combined with USDA’s latest export number of approximately 13.0 million bales, would imply ending stocks of approximately 9.7 million bales for the ’06-07 crop year, which is in line with USDA’s latest estimate but slightly higher than Commerce’s estimate of 9.48 million bales for stocks on hand as of July 31, ’07.

Preliminary September domestic mill use of cotton and revised August figures will be released by Commerce on Oct. 25.


Sales Slip, Shipments Steady

Net export sales for the week ending Sept. 20 were 144,500 bales (480-lb). This brings total ’07-08 sales to approximately 5.4 million. Total sales at the same point in the ’06-07 marketing year were slightly more than 3.0 million bales. Total new crop (’08-09) sales are 155,300 bales.

Shipments for the week were 273,600 bales, bringing total exports to date to 2.3 million bales, compared with the 1.0 million bales at the comparable point in the ’06-07 marketing year.




Prices Effective Sept. 28-Oct. 4, '07

Adjusted World Price, SLM 11/16

55.01 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

3.89 cents

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

71.53 cents

Forward 3135 c.i.f. Northern Europe

NA

Coarse Count c.i.f. Northern Europe

69.60 cents

 
Current US c.i.f. Northern Europe

72.05 cents

Forward US c.i.f. Northern Europe

NA

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

47.25 cents

**

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

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