Cotton's Week: July 3, 2008

Producers are reminded of the Sept. 30, ’08 deadline for ’08 crop Direct and Counter Cyclical (DCP) program sign-up (see 6/27 Cotton’s Week).

In addition to this sign-up deadline, USDA also has announced that the deadline for program crop acreage certification is Aug. 15, ’08.

Given the time needed to complete sign-ups, USDA’s Farm Service Agency (FSA) encourages producers to make appointments with their county offices as soon as practical. 

Regarding implementation of the ’08 farm bill, the NCC continues to accumulate questions raised during the recent round of farm bill information sessions and is reviewing responses with USDA and Congressional staff.

In the near future, common questions and responses, along with updated versions of the farm law key provisions summary, will be posted on the NCC’s home page, www.cotton.org, under the ’08 Farm Bill icon.

Net export sales for the week ending June 26 were 32,400 bales (480-lb). This brings total ’07-08 sales to about 15.4 million bales. Total sales at the same point in the ’06-07 marketing year were roughly 14.5 million bales. Total new crop (’08-09) sales are 971,500 bales.

Shipments for the week were 396,300 bales – a marketing-year high – bringing total exports to date to 12.1 million bales, compared with the 10.9 million bales at the comparable point in the ’06-07 marketing year.

With slightly more than one month remaining in the marketing year, weekly shipments must average roughly 360,000 bales to reach the USDA projection of 13.90 million bales.

In its June acreage report, USDA estimated ’08-09 US cotton plantings at 9.25 million acres, down 15% from the previous year and the lowest since the 1983 crop year. Upland planted area is estimated to have decreased 14% to 9.04 million acres and estimated extra long staple (ELS) area is down 31% to 202,000 acres.

On a regional basis, upland area in the Southeast is down 17% to 1.87 million acres. Planted acres are expected to fall to 1.96 million acres in the Mid-South in ’08, down 29% from the previous year, with all states expected to decrease plantings. In the Southwest, estimated upland area is down 4% to 4.94 million acres. Estimated upland area in the West is down 31% to 282,000 acres.

USDA sees 202,000 ELS acres, down 31% from ’07-08.

Chairs of WTO Doha-round negotiating groups in agriculture and non-agriculture market access (NAMA) have urged members to work to improve the chance for a successful Ministerial meeting tentatively scheduled to start on July 21 in Geneva.

Agriculture Committee Chairman Crawford Falconer scheduled a series of meetings for July 1-3 to be concluded with an open session with all countries invited to participate on July 4. He said it is important to narrow differences on green box subsidies; rules for “special products” that developing countries can exempt from tariff cuts; special safeguard mechanism for developing countries; and cotton subsidy reduction. He indicated progress in these areas is necessary for him to develop and release a revised negotiating text the week of July 7.

NAMA Chairman Stephenson said progress has been made in recent weeks and urged members to bring “senior officials” to Geneva to narrow gaps and make more substantial progress.

President Bush and his advisors held a news conference to outline their schedule and objectives for meetings of the G8 in Tokyo on July 9-11. They continued to express support for conclusion of a Doha round agreement in ’08 and indicated it would be discussed in Tokyo.

Trade ministers from the European Union (EU) are scheduled to meet in France on July 18 to develop a “common negotiating position” in advance of the WTO Ministerial meeting on July 21. The French Ambassador to the US told the press that the EU continues to be disappointed with the lack of proposals from emerging market members to open markets to industrial products. The French assumed presidency of the EU for six months beginning on July 1.

The House Agriculture Committee has scheduled a series of hearings for July 10, 11 and 12 to review various proposals to amend the Commodity Exchange Act (CEA).

On July 10, a panel of Congressional members will testify concerning legislation they have introduced to amend the CEA. Most are focused on strengthening regulations governing the participation of speculators in energy markets.

During hearings on July 11 and 12, witnesses will be asked to comment on a variety of topics including treatment of SWAPS and over the counter markets; Foreign Boards of Trade; participation by Pension and Index Funds in commodity markets; exemptions for Hedge Funds from speculative limits; margin requirements; and various administrative issues including reporting, etc.

Chairman Peterson (D-MN) has indicated that following the hearings, the Committee may develop legislation if there is consensus on key issues.

The NCC will submit a detailed written statement to be included in the hearings’ record.

House Agriculture Committee ranking member Goodlatte (R-VA) and 50 of his Republican colleagues have written the EPA Administrator asking the agency to reduce the amount of ethanol mandated by the ’09 Renewable Fuel Standard (RFS) “to help alleviate the pressure on rising corn prices.”

The Congressional letter cited the impact of rising feed and fuel prices on livestock producers and on food prices to consumers. The letter also states “recent flooding in the Midwest has created devastating crop losses and these record corn prices will continue to climb. There are many factors that have increased the price of corn, but the only factor that we can immediately control is the amount of the corn supply that must be dedicated to meet the RFS.” It is estimated that approximately one-third of the US corn crop will be converted to ethanol.

Among cosigners were Cotton Belt members:  Barton (R-TX); Lucas (R-OK); Boozman (R-AR); Blackburn (R-TN); Deal (R-GA); Brown (R-GA); Gingrey (R-GA); Shadegg (R-AZ); Flake (R-AZ); Radanovich (R-CA); Paul (R-TX); Everett (R-AL); Myrick (R-NC); Hall (R-TX); Linder (R-GA); Foxx (R-NC); Thornberry (R-TX); Wilson (R-SC); and Nunes (R-CA).

In addition, EPA is currently reviewing a waiver request submitted by Texas Gov. Perry seeking a 50% reduction in the RFS. States can request waivers for up to one year.

Key Senators re-affirmed their interest in pursuing legislation to reform international currency exchange regimes.

Sens. Baucus (D-MT) and Grassley (R-IA), chairman and ranking member of the Finance Committee, respectively; and Sens. Dodd (D-CT) and Shelby (R-AL), chairman and ranking member of the Banking Committee, respectively, pledged to work to develop legislation to address currency exchange rates in a manner compatible with the International Monetary Fund and WTO principles. They met on June 23 to exchange views and review legislation.

Legislation introduced by Sens. Baucus and Dodd cleared their respective committees in ’07, but has not progressed further.

Sens. Baucus, Grassley, Schumer (D-NY) and Graham (R-SC) introduced legislation (S 1607) in June ’07 which was approved by the Finance Committee. They said there is agreement that the Administration has not adequately used existing statutes on currency and effects on trade and cited Treasury’s failure to designate China as a currency manipulator. The Senators cited growing uncertainty in the global economy as signaling a need for currency reform.

The undervaluation of the Chinese currency has become a trade issue as some US manufacturers contend it makes Chinese exports artificially cheap.

NCC Vice Chairman Jay Hardwick, a Newellton, LA, producer, led a US cotton industry delegation on an 11-day tour of China’s cotton and textile industries. Also participating were producers John Lindamood, Tiptonville, TN; C.B. “Chuck” Coley, Vienna, GA; and Eddie Smith, Floydada, TX; along with warehousemen Trent Felton, Marianna, AR, and Dean Church, Lubbock, TX; ginner Sid Brough, Edroy, TX; merchant Cameron Austin, Dallas, TX; and cooperative official Jarral Neeper, Bakersfield, CA. Dr. Gary Adams, NCC’s vice president, Economics & Policy Analysis, accompanied the group.

“The trip provided an opportunity to see and hear firsthand about China’s cotton infrastructure, its standards, marketing practices, policies and their overall raw cotton needs,” Hardwick said. “Mills gave their views on both the positives and negatives of U.S. cotton. We can use that information to educate our industry with a goal of improving our industry’s competitiveness in today’s global marketplace.”

This visit was the result of an ongoing relationship with the China Cotton Assoc. and built on previous trips to China by US cotton leaders, including a fact-finding effort in Oct. ’06 and a June ’07 mission in which US cotton leaders and USDA officials updated Chinese cotton industry officials and mill buyers on US cotton quality.

Cotton Council International (CCI) coordinated the tour.

Vietnamese textile industry and government representatives reaffirmed their commitment to further increasing imports of US cotton during a meeting led by CCI President Robert S. Weil, II.

In the meeting, which took place during Prime Minister Nguyen Tan Dung’s visit to Washington, DC, and included representatives from CCI and USDA/FAS, CCI stated the importance of the Vietnamese textile industry as a market for US cotton. CCI and Cotton Incorporated have had a presence in Vietnam since the mid-’90s and continue to offer support in the form of fiber and technical servicing, trade missions and supply chain marketing.

The Vietnamese representatives had requests to enhance collaboration in five specific areas:  production expertise to assist Vietnam’s lagging highlands’ cotton program; bonded warehouse establishment for importing US cotton; import credits or credit guarantees for Vietnam; increased technical servicing; and marketing efforts to increase US cotton’s share.

CCI indicated its inability to support the first request, but assured the Vietnamese delegation that CCI and the US cotton industry would look to ways to further engage on the remaining requests.