Cotton's Week: May 9, 2008

Cotton's Week: May 9, 2008

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NCC Action Alert Sent on Farm Bill Conference Report

After House and Senate conferees concluded their work on the Food, Conservation and Energy Act of 2008, NCC Chairman Larry McClendon issued an Action Alert to industry/ agribusiness leaders and interest organizations. The Alert urged them to: 1) contact their Representatives and Senators as soon as possible and ask them to support the conference report and 2) ask their respective Congressional members to encourage their colleagues’ support as well.

The Action Alert, which contains links to Cotton Belt Congressional members’ contact information, can be reached from the NCC’s home page, www.cotton.org. The Alert noted that the House and Senate are expected to vote on the conference report the week of May 12 with the possibility that the legislation will be considered by both bodies on May 14.

The NCC is asking members of the House and Senate to approve the conference report by a wide margin to discourage a veto. A letter to Cotton Belt Congressional members asking for their support noted that the House and Senate “have worked diligently to produce sound, balanced and predictable agriculture policy. They have significantly enhanced nutrition, conservation and renewable energy programs.”

The conference report contains many of the cotton industry’s priorities including:

  • Continuation of the target price, direct payment and marketing loan programs at or near current levels
  • Adjustments in the world price calculation and loan premiums and discounts to enhance competitiveness in domestic and international markets
  • Inclusion of a textile competitiveness payment to assist our domestic customers who are competing with heavily subsidized imports
  • Mandatory storage credits
  • Elimination of limitations on LDPs and marketing loan gains; enhancement of spousal eligibility; and expanded definition of farm income for the new means tests purposes
  • No change in beneficial interest rules used to determine loan deficiency and marketing loan gains

Effective for the ’09 crop, the conference agreement does make significant changes to payment limitations and program eligibility including elimination of the three-entity rule, direct attribution of benefits and a significant modification of the means test first enacted in ’02. The conference report includes a new optional crop revenue program beginning in ’10 and a permanent disaster program. The legislation includes increased funding for nutrition, conservation and renewable energy programs. In addition, the legislation is completely paid for without use of tax increases or revenue raisers.

The Action Alert also noted that while certainly not perfect, “this five-year bill is preferable to a one- or two-year extension that would likely include significant changes to commodity programs and payment limitations and would then require a future Congress and Administration to write a new bill under even tighter budget constraints on farm bill spending. A strong bipartisan vote on the conference report in both the House and Senate will send an important signal to the President and possibly discourage a veto. It will take a strong effort by our industry along with other commodity, conservation, nutrition and agri-businesses to ensure passage.”



NCC Issues Farm Bill Statement

The NCC also issued a statement in which NCC Chairman McClendon expressed appreciation to House and Senate Conference Committee leaders and members for their work on the ’08 farm legislation.

“While we have much to learn about the details of the legislation,” McClendon said, “we believe it is important that Congress has completed its work on new farm legislation which will provide certainty and stability to this important segment of our economy. Farmers are preparing to plant or have planted their 2008 crops in highly uncertain circumstances including rapidly escalating input costs and a futures market which is not functioning properly.

“It is important that new farm legislation be put in place as soon as possible to provide a predictable safety-net for farmers and their lenders.  While we are currently enjoying record prices for some commodities, we know markets are unpredictable so sound farm policy is important for the future. We are especially appreciative to Cotton Belt members of the House and Senate who have worked tirelessly to ensure the new legislation included the industry’s priorities to maintain an effective safety-net; enhance market orientation and competitiveness; assist domestic manufacturers and minimize counter productive limitations on program eligibility.”

McClendon did note the NCC’s concern about the potential adverse impact of the significant change made in the means test which will become effective with the ’09 crop.

“While we are anxious to learn more about the details,” he said, “we believe enactment of new legislation is a far more desirable outcome than the uncertainty of a short term extension which would result in writing legislation in even more challenging budget circumstances. Therefore, we urge Congress to act promptly to approve the legislation and urge the President to sign it.”



Sales, Shipments Strong

Net export sales for the week ending May 1 were 603,700 bales (480-lb) bringing total ’07-08 sales to about 13.8 million bales. Total sales at the same point in the ’06-07 marketing year were roughly 12.6 million bales. Total new crop (’08-09) sales are 684,000 bales.

Shipments were 300,600 bales, bringing total exports to date to 9.6 million bales, compared with the 7.6 million bales at the comparable point in the ’06-07 marketing year.



Final ’07 Crop Estimates, ’08 Projections Released

In its final estimate of the ’07-08 US cotton crop, USDA placed total production at 19.21 million bales, up from the January estimate of 19.03 million bales. The upland crop estimate was raised 147,000 bales from the January estimate to 18.36 million bales while the ELS estimate increased 27,000 bales to 852,000.

Final planted area is estimated to be 10.83 million acres and final harvested area is estimated to be 10.49 million acres.

The ’07-08 national upland yield is an estimated 864 pounds per harvested acre, 92 pounds above the five-year average of 772 pounds. The estimated national average ELS yield of 1,419 pounds per harvested acre represents an 180-pound increase from the five-year average. State-level estimates can be found at http://www.cotton.org/econ/cropinfo/production/index.cfm.

For the ’07-08 marketing year, USDA estimates mill use at 4.6 million bales and exports of 14.2 million bales. Ending stocks as of July 31, ’08 are estimated at 9.9 million bales.

The USDA report also includes initial estimates for the ’08-09 crop. US production of 14.5 million bales is projected based on applying average yields and abandonment to planted acres of 9.4 million acres.

Mill use for ’08-09 is estimated at 4.3 million bales, while US exports are pegged at 14.5 million bales. The combined offtake exceeds the expected production, leading to a decline in stocks to 5.6 million bales by the end of the ’08-09 marketing year.

Estimates and projections for the world and China can be found at http://www.usda.gov/oce/commodity/wasde/latest.pdf.



Container Shortage Frustrating US Exporters

A Wall Street Journal article notes that surging US exports are hitting a bottleneck in the nation's overloaded ports, threatening to crimp profits for US farmers … at a time when it is easier than ever for them to sell their goods abroad.

The article says the problem can be traced to a shortage of once-plentiful shipping containers and other transportation equipment, along with a lack of space on outgoing ships. Exporters' frustration is building even as US agricultural exports have jumped 20% by weight in the six months ended Feb. 29, compared with the same period last year, according to USDA.

In the article,  Peter Friedman, executive director of the Agricultural Transportation Coalition (AgTC), estimated agricultural exporters could have shipped 20% to 30% more products in the past six months if more containers were available. He says the port congestion comes as food prices are rising and grain stocks are dropping amid a surge in demand from fast-expanding nations such as India and China. As shipping lines have shifted more of their fleet to lucrative routes in Asia and between Asia and Europe, there are fewer containers available to handle grains and other commodities in the vast agricultural heartlands of the US and Canada. The container shortage also is complicating pricing. The prices that shippers quote when making deals sometimes don’t reflect the added cost of getting a container to where it is needed.

Adding to the problem is that shipping rates are steadily increasing, and shippers are boosting their fuel surcharges. In the past, rates were set for six months or even a year.

Partly to address the problem, AgTC held a conference call with 59 members, including the NCC, in late April to discuss what to do. Participants talked about getting Congress -- with the help of other industries -- to repeal parts of a shipping law that allows carriers to discuss and fix transportation rates and service. They also considered pushing federal regulators to examine shipping companies' pricing practices.

The article notes that any possible solution might come too late to help with the container shortage as US agricultural exporters are concerned their customers will start buying from other countries.



Gin School Registration Open

Registration is underway for the Stoneville Ginners School to be held on June 17-19 at the USDA ginning laboratory in Stoneville, MS. Registration information can be found at http://ncga.cotton.org. For questions, call Betty Thorne or Harrison Ashley at 901-274-9030.

Three course levels will offered including: Level I: Introduction to Cotton Ginning and the Industry; Maintenance of Auxiliary Gin Components; Basic Hydraulics; Basic Gin Safety; Maintenance and Adjustments for Seed Cotton Cleaners, Gin Stands, and Lint Cleaners; Air Utilization and Drying; and Electricity in the Gin; Level II: Purpose and Operating Principles of Individual Gin Machines; Efficient Operation, Adjustment, and Maintenance of Gin Equipment; Pneumatics and Waste Collection; Electrical Systems; Hydraulic Systems; Gin Safety; and Management Tips; and Level III: Review of Functions of a Ginning System; Electrical Systems; Air Systems in the Gin; Drying and Moisture Restoration Systems; Matching Machinery Capacities in the System; Seed Cotton Unloading Systems and Management of Seed Cotton Handling Systems; Bale Presses and Hydraulic Systems; Safety Programs and Labor Regulations; and Cottonseed Handling.

Also offered will be continuing education (CE) courses featuring in-depth discussions of advances in harvesting equipment and ginning of modules produced by on-board moduling systems; PLC controllers and electrical components; safety training; and the latest on gin waste and gin-byproducts. The CE course topics were chosen by ginners on the National Cotton Ginners Assoc. (NCGA) Technology Committee and the three USDA ginning labs. 

School cooperators include the NCC; NCGA and its member associations; USDA-ARS; USDA Extension Service; Cotton Incorporated; gin equipment manufacturers/suppliers; Cooperative State Research, Education and Extension Service; and select land grant universities.



Prices Effective May 9-15, '08

Adjusted World Price, SLM 11/16

57.77 cents

*

Coarse Count Adjustment

0.00 cents

Marketing Loan Gain Value

0.00 cents

Import Quotas Open

1

Limited Global Import Quota (480-lb bales)

409,987

ELS Payment Rate

5.89 cents

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

75.13 cents

Forward 3135 c.i.f. Northern Europe

NA

Coarse Count c.i.f. Northern Europe

NA

Current US c.i.f. Northern Europe

74.50 cents

Forward US c.i.f. Northern Europe

NA

 
'07-08 Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-March)

56.37 cents

**

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

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