Cotton's Week: July 18, 2008

In advance of the World Trade Organization (WTO) ministerial scheduled to begin July 21, the Senate Agriculture Committee sent a letter to USTR Ambassador Schwab urging the US negotiators to reject any text that does not provide a balance between domestic support and market access.

The NCC expressed appreciation to Sen. Chambliss (R-GA) for his role in organizing the letter as well as meeting with Amb. Schwab. The industry also thanked Sens. Lincoln (D-AR), Cochran (R-MS), and Graham (R-SC) for their support on the letter. In the letter, the Senators expressed their concerns about whether the current text related to market access could produce a balanced agreement.

Hayden Milberg on the Senate agriculture committee staff, and Ted Serafini, agricultural liaison for Sen. Lincoln, will be in Geneva for the ministerial.

Prior to departing for Geneva, Amb. Schwab briefed members of the House Agriculture Committee on the current state of the negotiations. Reps. Neugebauer (R-TX) and Etheridge (D-NC) expressed their deep concerns related to the inequitable treatment of cotton in the current text.

Also, NCC joined 12 other agricultural organizations on a letter to President Bush expressing their continuing deep concern about the status and direction of the Doha Round of WTO agricultural negotiations. That concern included some remarks reportedly made by Administration officials, suggesting that concessions on US agriculture are to be traded off for gains in NAMA (Non-Agricultural Market Access) and Services.

The groups noted that the draft agricultural text now under consideration gives “scant hope” for a balanced outcome where the cuts in domestic support are met with commensurate gains in market access. “In their totality, these provisions give little promise of truly significant gains in export opportunities for American agriculture,” the letter stated.

The groups reiterated support for a Doha agreement that reforms trade distorting agricultural practices and opens world markets to expanded agricultural trade, but also urged the Administration to reject any agreement that does not deliver a balanced result.

The complete letter can be found at http://www.cotton.org/issues/2008/wtominlet.cfm.

NCC Chairman Larry McClendon will be in Geneva for the ministerial and joined by Mark Lange, NCC President, and Bill Gillon, who serves as General Counsel to the NCC.

The Senate Appropriations Committee unanimously approved the FY09 Agriculture, Rural Development, Food and Drug Administration (FDA) and Related Agencies’ appropriations legislation.

The legislation provides more than $20 billion in discretionary funds and $76 billion in mandatory funds for programs and administrative costs. The funding level is $2.5 billion above the President’s request.

The bill increases funding for several nutrition programs including WIC and increases funding for FDA by $325 million for food safety initiatives.

Several conservation programs would be reduced from funding levels authorized in the recently enacted farm bill, including EQIP, the Grasslands Reserve Program and WHIP.

The committee approved two amendments: one that places a limit on beef from Argentina due to continued concerns about foot and mouth disease and the other allows farmers to travel to Cuba to sell agricultural products.

Further consideration of the legislation is doubtful due to the crowded agenda for the remainder of the year. Most observers expect Congress to approve a continuing resolution to operate government agencies and programs until a new Administration takes office in ’09.

USDA’s Farm Service Agency announced that payment limit and eligibility provisions, including the average adjusted gross income means test provisions, for the ’08 crop year will be the same as those for ’07 as stated in 7 CFR part 1400.

These regulations will apply to direct and counter-cyclical payments, marketing assistance loans, and loan deficiency payments under Title I and CRP under Title II of the 2008 Farm Bill. However, CRP contracts will be governed by those payment limitation provisions in place when the contracts were executed.

All changes in payment eligibility, limitation and means test provisions in the ’08 farm bill will be applicable to the ’09 crops and beyond. USDA will develop these regulations in the months ahead, and NCC will monitor and provide comments during that process.

Memphis-based EWR, Inc. is introducing an enhancement to its electronic warehouse receipt process with the aim of promoting a more streamlined, accurate and cost effective process for establishing bale shipping order load dates.

This new feature, which will serve as a portal/clearinghouse for data related to the scheduling and confirmation of shipment dates, is in response to a NCC request to improve overall cotton flow, including the elimination of occasional bottlenecks in processing shipping orders.

Currently, a shipper initiates the process by sending to a warehouse an electronic shipping order (Batch 21), which may or may not include a requested load date. Now, with the addition of the new “Update Shipping Order (EWR Batch 23 file),” the merchant may electronically request a load/schedule date along with a "window" of acceptable dates. The warehouse responds by confirming the requested date or one of the window dates or by offering another load/schedule date on either side of the window.

The NCC urges merchants to utilize these enhancements, and will be communicating additional information to the US cotton shipper sector about this electronic warehouse receipt provider capability.

EWR, Inc. will conduct seminars across the Cotton Belt from July 28-Aug. 29 to train warehouse employees on the new process.

EPA released an Advance Notice of Proposed Rulemaking (ANPR) inviting public comment on the benefits and ramifications of regulating greenhouse gases (GHGs) under the Clean Air Act (CAA).

This action is in response to the Supreme Court decision in Massachusetts v. EPA. In April 2007, the Supreme Court concluded that GHGs meet the CAA definition of “air pollutant,” and that the CAA therefore authorizes regulation of GHGs subject to an EPA determination that GHG emissions may be reasonably anticipated to endanger public health or welfare. This determination is known as the endangerment test.

In its 588-page document, EPA laid out numerous options on how to reduce GHGs gases from cars, ships, trains, power plants, factories and refineries. Unintended consequences of such a regulation may significantly affect agricultural facilities and operations.

In its comments on the interagency review, USDA said that “dairy facilities with 25 cows, beef cattle operations of over 50 cattle, swine operations with over 200 hogs, and farms with over 500 acres of corn” may be subject to costly construction permits. If GHGs are classified as Hazardous Air Pollutants under the CAA, USDA says “this program would result in emission control requirements for all agricultural sources regardless of the size of the operation.” 

The Bush Administration rejected regulating GHGs, saying it would cripple the US economy. The White House has rejected EPA's suggestion that the CAA can be both workable and effective for addressing global climate change.

"If our nation is truly serious about regulating greenhouse gases, the Clean Air Act is the wrong tool for the job," EPA Administrator Stephen Johnson said. "One point is clear: The potential regulation of greenhouse gases under any portion of the Clean Air Act could result in unprecedented expansion of EPA authority that would have a profound effect on virtually every sector of the economy and touch every household in the land."

The EPA said resistance from the Departments of Agriculture, Commerce, Energy and Transportation, as well as the White House made it "impossible" to respond in a timely fashion to the Supreme Court decision. "Our agencies have serious concerns with this suggestion because it does not fairly recognize the enormous -- and, we believe, insurmountable -- burdens, difficulties, and costs, and likely limited benefits, of using the Clean Air Act" to regulate greenhouse gas emissions, the secretaries of the four agencies wrote to the White House.

The ANPR document is much more cautious than a determination made in December by EPA that found greenhouse gases endangered health and welfare, and it also appears to reverse findings of drafts released in May and June that found the CAA could be an effective tool for reducing greenhouse gases.

Southwest cotton producers will visit North Carolina and South Carolina on July 20-25 during the second ’08 Cotton Foundation Producer Information Exchange (P.I.E.) Program tour. The P.I.E. exposes US cotton producers to innovative cotton production practices in regions different than their own. The program, which is in its 20^th year, is supported by the Foundation via a grant from Bayer CropScience.

After an orientation on the 20^th, the Southwest group will tour Cotton Incorporated’s headquarters and Bayer CropScience’s  headquarters in Cary, NC, on July 21. On the 22nd, the group will travel to Scotland Neck, NC, where they will tour Josey Farms and Harvey Farms. On the 23rd, they will tour the ZV Pate operation in Laurel Hill, NC, and Domtar Paper Company and the Frank Rogers Farm in Bennettsville, SC.

On the 24^th, the participants will visit the Bayer Research Center in Sellers, SC, before returning to North Carolina for a tour of the Hanes textile operation in Sanford. The tour concludes the next day with a look at cotton and tobacco production at Denning Farms in Benson, NC.

The Southwest participants include:  Texas producers, Keith Corzine, Stamford; Jason Dobrovolny, Littlefield; Eli Droll, Miles; Chad Halfmann, Garden City; Donald Houser, Corpus Christi; and Mark Lamon, D’Hanis; Oklahoma producers, Reid Nichols, Oklahoma City; and Justin Waldroop, Hollister; and Kansas producer, Bob Kaufman, McPherson.

Cotton Incorporated is urging US cotton producers to participate in a 20-minute anonymous online Natural Resource Survey that is aimed at identifying the great strides producers have made using modern production management practices.

The organization plans to use the findings to direct its future research and to develop US cotton's environmental message to global textile industry, brands, retailers and consumers.

Individual responses are not being tracked in the survey, which is running from July 15-July 31. Producers are asked to complete the questionnaire only once and only if they have production responsibility for a cotton farming operation.

Questions about the survey should be directed to agsurvey@cottoninc.com.

Net export sales for the week ending July 10 were 59,800 bales (480-lb). This brings total ’07-08 sales to approximately 15.5 million bales. Total sales at the same point in the ’06-07 marketing year were roughly 14.6 million bales. Total new crop (’08-09) sales are 1.3 million bales.

With 5.2 million bales, China accounts for a third of total ’07-08 sales. Turkey is the second largest customer with sales of 2.0 million bales, followed closely by Mexico at 1.9 million bales. Indonesia and Thailand complete the top five with purchases of 1.3 and 0.9 million bales, respectively.

Shipments for the week were 269,800 bales, bringing total exports to date to 12.6 million bales, compared with the 11.8 million bales at the comparable point in the ’06-07 marketing year.

With less than one month remaining in the marketing year, weekly shipments must average roughly 430,000 bales to reach the USDA projection of 13.90 million bales.