Cotton's Week: May 23, 2008

The House (315-108) and Senate (82-13-1 present) overrode the President’s veto of the farm bill, but an error by the House clerk in enrolling the bill delivered to the President created complications which required further action.

During the process, known as enrollment, the House clerk sent a version of the legislation to the White House that did not include Title III -- the trade provisions of the conference agreement as passed by the House and Senate.

House Republican leaders argued that because the version vetoed by the President and the subsequent override was not the legislation actually passed by the House and Senate, it would make the resulting law unconstitutional and subject to court challenge.

House leaders spent the evening of May 21 and much of the day May 22 discussing how to proceed to correct the error. On May 22, the Senate successfully overrode the President’s veto as Senate leaders contended that action resulted in 14 of the 15 titles becoming law. They pledged to address the trade provisions when they return from the Memorial Day recess.

Proceeding with an abundance of caution, the House passed new legislation that is identical to the previous conference report in the event the process of passing legislation and overriding a veto has to be repeated to eliminate any legal questions.

The House parliamentarian released a statement on May 22 in which he cited an 1892 Supreme Court decision in Field v. Clark saying “the law that would result from a bicameral override of the President’s veto of HR 2419 would be the text that was presented to the President on parchment, notwithstanding its omission of the Congressionally intended [trade] title.”

Predictably, the White House issued a statement reiterating its objections and Press Secretary Dana Perino said Congress should reconsider its actions.

NCC Chairman McClendon expressed appreciation to Congressional members for promptly overriding the veto and urged Congress to take any additional steps necessary to ensure the new law is fully effective as soon as possible.

A summary of the legislation’s key provisions prepared by NCC staff can be found by clicking on the ’08 Farm Bill icon on the NCC’s web site, www.cotton.org. A series of meetings to review the provisions will be announced in the near future.

The new farm bill includes a broadened transportation provision that calls for an immediate rural transportation issues study.

This is especially important as a number of transportation issues are undermining the competitiveness of today’s export-oriented US cotton industry. Specifically, cotton continues to face rail access issues, constrictions placed on exports by a shortage of cargo ships, and a lack of access to shipping containers when and where they are needed.

The NCC is encouraged by Congress’ acknowledgment in the bill that agriculture has very limited access to Federal processes for the resolution of grievances arising within various transportation modes in rural areas.

The NCC is closely monitoring an array of flow issues including port congestion, container shortages, declining port calls by some major ocean shipping lines, and calls to end the exemption from antitrust law for railroads. These affect cotton directly in the form of usage fee increases and fuel surcharges that are either absorbed by the shipper or passed back to cotton producers.

The stated reasons for imposing fee increases associated with services range from higher fuel costs and equipment shortages to the need for maintaining facility infrastructures.

Crawford Falconer, chairman of the Doha agricultural trade negotiations in the World Trade Organization (WTO), issued a revised draft negotiating text.

The text was designed to reflect the current state of the negotiations as well as to highlight areas of serious disagreement. With a draft text also issued concerning Non-Agricultural Market Access (NAMA), WTO officials were hopeful these two texts could lead to a June meeting of trade ministers to negotiate the final outstanding issues at the political level. 

Provisions requiring cuts in domestic agricultural support are largely unchanged from the previous text issued by Falconer. Provisions calling for additional, severe cuts in cotton programs are maintained as well, despite US statements that the cotton provisions must be changed. The new text contains additional details regarding agricultural market access, including several potential market access exemptions for products to be designated as “sensitive” or “special”.  The level of potential market access exemptions, particularly for developing countries, appears significant, perhaps allowing up to 28% of existing tariff lines to take less cuts than called for by the general formula and potentially allowing up to 8% of existing tariff lines to take no tariff cut at all.

US officials have expressed concerns about the level of ambition reflected in the agricultural market access provisions. 

The NAMA draft text has raised concerns from US manufacturing interests and the US government which say that it is a step backward from previous drafts and undermines hoped for gains in market access for manufactured goods.

The level of concerns being raised about both draft texts makes it uncertain whether a planned late June meeting of trade ministers in Geneva actually will occur.

The Senate removed language from the supplemental appropriations bill for the ongoing wars in Iraq and Afghanistan that would have offered temporary relief to agricultural labor shortages.

The Senate Appropriations Committee approved the latest supplemental appropriations last week and included the language, which was offered as an amendment during mark-up by Sen. Feinstein (D-CA). Upon the full Senate taking up the bill, Senate Majority Leader Reid (D-NV) split the domestic spending provisions from the rest of the bill. Sen. Menendez (D-NJ) raised a point of order against the domestic spending provisions, which was upheld, thus stripping all of those provisions, which included the H2-A provisions.

The amendment would have established 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 at least 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 AgJobs immigration legislation included in the comprehensive immigration bill that was before the Senate, but the comprehensive legislation ultimately stalled.

A CD containing proceedings from the ’05-08 Beltwide Cotton Conferences (BWCC) is being mailed to all ’08 BWCC attendees who requested the CD.

The ’08 BWCC Proceedings also now have been posted on the BWCC web site, www.beltwide.cotton.org. A username and password are required to access the proceedings. NCC and Cotton Foundation members can use the same username and password used to access the NCC web site’s Members Only area.

Questions should be directed to Debbie Richter at 901-274-9030.

Net export sales for the week ending May 15 were 157,900 bales (480-lb). This brings total ’07-08 sales to slightly more than 14.1 million. Sales to China now total 4.5 million bales, which is roughly one-third of the total. Sales to Turkey and Mexico are at similar levels of 1.86 and 1.85 million bales, respectively. Indonesia’s textile industry remains a strong customer of US cotton, with purchases of 1.27 million bales. Thailand completes the top five with purchases of 803,000 bales.

Total sales at the same point in the ’06-07 marketing year were roughly 13.3 million bales. Total new crop (’08-09) sales are 740,400 bales.

Shipments for the week were 277,000 bales, bringing total exports to date to 10.2 million bales, compared with the 8.3 million bales at the comparable point in the ‘06-07 marketing year.

With a little more than two months remaining in the marketing year, weekly shipments must average roughly 362,000 bales to reach the USDA projection of 14.20 million bales.

According to the Commerce Dept., April (four-week month) total cotton consumption in domestic mills was 176.69 million pounds for a seasonally adjusted annualized rate of 4.70 million bales (480-lb). Last year’s April annualized rate was 4.91 million bales.

The March (five-week month) estimate of domestic mill use of cotton was raised by 354,000 pounds to 200.05 million pounds. The revised seasonally adjusted annualized rate of consumption for March is 4.20 million bales. This is lower than last year’s March annualized rate of 4.78 million bales.

Based on Commerce estimates from Aug. 1, ’07 through May 3, ’08, projected total pounds consumed during crop year ’07-08 would be 2.26 billion pounds or 4.70 million bales. USDA’s latest estimate of ’07-08 crop year mill use is 4.60 million bales.

Preliminary May domestic mill use of cotton and revised April figures will be released by Commerce on June 26.

Cotton Council International (CCI) and Cotton Incorporated sponsored annual Cotton Day celebrations across northeast Asia to promote US cotton.

The consumer and trade events in Japan, Korea and Taiwan highlighted the intrinsic benefits of the world’s favorite fiber through COTTON USA Mark branded consumer events and executive interviews. Major print and television journalists reported on Cotton Day events in all three countries, and initial press results indicate this year’s events were again extremely successful.

Country-by-country highlights of Cotton Day include: 1) CCI Executive Director Allen Terhaar joining representatives from CCI and Cotton Incorporated in Tokyo to attend the 13th annual Japan Cotton Day in a ceremony which recognized Koike Eiko, Taiichi Kokubun and Maki Horikita —three famous Japanese celebrities — for their commitment to the style/comfort of

cotton products; 2) delivering a message at Cotton Day Korea through the “Cotton Hanbok Design Contest,” which included a focus on the ability to utilize cotton to represent fun and fashion; and 3) focusing on cotton as a medium for expression at Cotton Day Taiwan with CCI Taiwan partnering with Shih-Chien University to hold a design contest and fashion show for young future designers.