Cotton's Week: May 16, 2008

Cotton's Week: May 16, 2008

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Congress Overwhelmingly Approves New Farm Legislation

The conference agreement on the Food, Conservation and Energy Act of 2008 passed both the House and Senate by overwhelming margins. These margins, if sustained, could override the expected Presidential. The Senate vote was 81-15, a day after the House approved it by 318-106. The bill could be delivered to the President by May 20. He will have 10 days (excluding Sundays) from day of receipt to sign, veto or allow to become law without a signature. White House and USDA officials still are indicating he intends to veto the bill.

“I don’t know the previous numbers, but this has to be one of the biggest votes for a farm bill in a long time,” said Rep. Peterson (D-MN), chairman of the House Agriculture Committee.

Senate Agriculture Committee Chairman Tom Harkin said, “This bill benefits every American, from our smallest towns to our biggest cities, urban and rural residents, farmers and non-farmers.”

In statements, NCC Chairman Larry McClendon commended both chambers for their decisive passage of the bill and urged President Bush to reconsider a veto of this important legislation.

“The House and Senate have overwhelmingly approved this farm bill, and farmers need this bill in place now,” McClendon said. “Enacting this new farm legislation will provide a predictable safety net for farmers and their lenders. Given the prevailing budget and political considerations, this is the best option available for production agriculture. Although commodity prices are good, markets are extremely volatile and there’s never a guarantee the weather will cooperate. Farmers always will face an inordinate amount of risk, but this legislation helps mitigate that unpredictability.”

McClendon also expressed the US cotton industry’s gratitude to Cotton Belt Congressional members for their tireless efforts on the farm bill development and approval process.

“In particular, I’d like to recognize the efforts of Senator Chambliss (R-GA), who worked diligently to forge the bi-partisan, multi-regional cooperation necessary to produce sound farm legislation,” McClendon said. “We also appreciate the dedicated work by Senators Lincoln (D-AR) and Cochran (R-MS) who were members of the conference committee that hammered out the final agreement. We also appreciate the leadership of Representative Bob Etheridge (D-NC), who as chairman of the House Agriculture General Farm Commodities and Risk Management Subcommittee, guided the commodity (and cotton) title through the process. In conference he was joined by Representatives Neugebauer (R-TX), Hayes (R-NC), Lucas (R-OK), McIntyre (D-NC) and Cardoza (D-CA) in forging the compromises necessary to produce a solid policy for production agriculture. Their bi-partisan effort enabled the industry’s priorities to be maintained in this new farm bill. That includes an effective safety net; enhanced market orientation and competitiveness; assistance for domestic manufacturers; and minimization of counter-productive limitations on program eligibility.”

A summary of key farm bill provisions can be accessed by NCC members by clicking on the '08 Farm Bill icon on the NCC's home page, www.cotton.org.

Assuming the President carries through on his veto threat, McClendon emphasized the importance of maintaining the momentum necessary for an override -- two-thirds of those voting in each chamber are required to successfully override a veto.

"In my opinion, there simply isn't any other viable alternative," McClendon said.



House Panel Reviews Markets

The House Agriculture Committee’s General Farm Commodities Subcommittee, chaired by Rep. Etheridge (D-NC), held a hearing to review the “source of dramatic movements in commodity markets (agriculture and energy): a change in market fundamentals or influence of institutional investors.”

Commodity Futures Trading Commission (CFTC) Chief Economist Jeffrey Harris said that there is not much evidence that recent instability in agriculture commodity markets is due to speculation or influence of large amounts of institutional money.

However, many subcommittee members were skeptical, and most witnesses who followed, including Andy Weil, president of the American Cotton Shippers Assoc. and NCC Executive Committee member, took strong exception to CFTC’s analysis.

Weil said speculative trading, at a time when market fundamentals did not change, drove up cotton futures prices by more than 50% in late February and early March. He explained that, “the current futures market situation precludes any form of price discovery because of the potentially high margin risks. Lacking the financial ability or willingness to hedge in the futures market, the result is that merchants and cooperatives cannot offer farmers forward prices. This situation also precludes individual farmers from using the futures market. Lacking price discovery, the U.S. cotton farmer cannot adequately make production plans. The same goes for the U.S. textile mills who cannot determine what raw fiber costs will be in future months.”

Weil urged members to take appropriate action to bring transparency to the cotton market and limit disruptive speculation unrelated to market fundamentals so producers and traders once again have access to forward contracts as a risk management tool.

Chairman Etheridge said, “steps must be taken to maintain confidence in our commodity markets and to provide more stable prices for the American farmer and consumer.”

The NCC is submitting written comments to the subcommittee, reiterating many of the concerns expressed by Weil and stressing the importance to all industry segments of a well-functioning futures market.



Supplemental Appropriations Bill Passed

The Senate Appropriations Committee approved the latest supplemental appropriations bill for the wars in Iraq and Afghanistan.

During the Committee mark-up, panel members accepted an amendment by Sen. Feinstein (D-CA) that would offer temporary relief to agricultural labor shortages. The amendment would establish a five-year program to provide emergency H2-A visas for agricultural workers. Capped at 1.35 million participants, workers would have to commit to working 100 days a year in agriculture and pay a fee of $250. Their pay would be frozen at the ’07 prevailing wage level for at least three years.

Earlier this year, Sen. Feinstein worked to have the AgJobs immigration legislation included in the comprehensive immigration bill that was before the Senate, but the comprehensive legislation ultimately stalled.

The Senate is expected to debate the supplemental appropriations bill the week of May 19.



Request Made For Census Forms

Agriculture Secretary Ed Schafer reminds America's farmers and ranchers to respond to the ’07 Census of Agriculture.

"More than two million responses have already been received," said Schafer. "I sincerely thank those who have fulfilled their responsibility by completing and returning their census forms. However, a good number of producers have not been heard from, so I'm encouraging everyone to help make this the most accurate Census of Agriculture on record."

Conducted every five years, the Census of Agriculture is the only source of consistent and comprehensive agricultural data for every state and county in the nation. That information is used by town planners, policy makers, agribusinesses and others to make important growth-generating decisions that will shape rural communities for future generations.

USDA's National Agricultural Statistics Service (NASS) already sent a second reminder mailing. NASS's 46 field offices are now beginning to call and visit producers who have not responded.

"We need to hear from everyone, no matter how big or small their operation is, and no matter what they farm, where they farm or how they farm,” Schafer said. “As we say, it's your voice, your future and your responsibility.”

Whether or not they are actively engaged in agricultural activity, everyone who received a Census of Agriculture form is required by law to respond. Forms can be returned by mail or submitted online. For more information, or for assistance with completing the ’07 Census of Agriculture, call toll-free (888) 424-7828 or visit www.agcensus.usda.gov.



Sales, Shipments Steady

Net export sales for the week ending May 8 were 238,400 bales (480-lb). This brings total ’07-08 sales to approximately 14.0 million bales. Total sales at the same point in the ’06-07 marketing year were roughly 12.9 million bales. Total new crop (’08-09) sales are 694,600 bales.

Shipments for the week were 294,000 bales, bringing total exports to date to 9.9 million bales, compared with the 7.9 million bales at the comparable point in the ’06-07 marketing year.



Cotton Chosen as Best Eco Fiber

Global consumers say cotton is the most environmentally friendly fiber according to the fifth Global Lifestyle Monitor.

Conducted by Synovate, the survey queried 5,000 consumers aged 15-54 in 10 countries across Europe, South America and Asia. CCI and Cotton Incorporated sponsored the research with support from USDA.

When asked to rate the environmental friendliness of individual fabrics on a 1 to 10 scale, consumers rated cotton most highly with an average rating of 8.58. Further, 64% of consumers reported that they would pay more for clothing made from natural fibers such as cotton than for clothes made from synthetic fibers such as polyester.

The survey revealed that, by comparison, nearly half of all consumers surveyed said they would not pay more for clothing made from organic cotton than clothing made from non-organic cotton.



China Cotton Summit Successful

Cotton Council International (CCI) and Cotton Incorporated furthered knowledge of US cotton and US/China cotton trade among more than 700 global cotton industry representatives as first-time sponsors of the ’08 China Cotton Summit & International Cotton Fair.

Themed “The Chinese and Global Cotton Industry: Long Term Development and Cooperation,” the two-day event in Hangzhou focused on global cotton industry issues and trends.

The Summit attracted participants from 17 countries, representing cotton trade, textile and garment organizations. Additional invited organizations included: National Development Reform Commission, Ministry of Finance, Ministry of Agriculture, Ministry of Commerce, State Administration for Industry & Commerce, General Administration of Quality Supervision, Inspection and Quarantine of the PRC, National Bureau of Statistics, Agricultural Development Bank of China, and China National Textile and Apparel Council.

William W. Westman, the agricultural minister-counselor from the US Embassy, reported on the future of US and China cotton trade.

CCI Executive Director Allen Terhaar’s report on US and China’s cotton bilateral synergies included a US cotton outlook; expectations for the ’08 US farm bill; cotton and the Chinese consumer; trade with China; and CCI and Cotton Incorporated’s ’08 activities and goals.

Terhaar pointed out that from the viewpoint of both history and statistics, it is clear that the US represents better long-term, two-way trade than competitors such as India or Uzbekistan.

He also noted that, unlike other fiber exporting countries, through CCI and Cotton Incorporated the US supports the development of cotton and cotton product processing, trade and end consumption in the US and China. Terhaar said these efforts are in collaboration with the China Cotton Assoc. and China National Textile & Apparel Council, and in the interests of the expansion and profitability of the globalized cotton industry.



Prices Effective May 16-22, '08

Adjusted World Price, SLM 11/16

58.80 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

4.29 cents

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

76.17 cents

Forward 3135 c.i.f. Northern Europe

NA

Coarse Count c.i.f. Northern Europe

NA

Current US c.i.f. Northern Europe

75.80 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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