Cotton's Week: August 8, 2008

World Trade Organization (WTO) Director General Lamy plans to visit India and the United States in an effort to restart WTO negotiations.

Lamy will meet with India’s Minister of Commerce and Industry Kamal Nath on Aug. 12-13 and with US Trade Representative Schwab during the week of Aug. 18.

Reports indicate Lamy will ask Nath and Schwab for their ideas on how to “preserve the gains made at the July 21-29 ministerial meeting in Geneva.” While many have deemed the end of the ministerial as a collapse, others have attempted to treat it as a “pause.”

In comments at an Aug. 7 meeting, USTR General Counsel Murayama cautioned the differences between the US, India and China that led to the breakdown in Geneva “are sufficiently complex to defy a quick solution.” He said India and China tried to construct a Special Safeguard Mechanism (SSM) that would impede normal trade flows rather than serve as a “legitimate” safeguard to be used if there was an unexpected surge in imports. He said “accepting Indian and Chinese demands during the ministerial would have meant effectively reneging on Uruguay Round tariff commitments.”

In a related development, Brazilian President Lula said he has contacted the US and Chinese presidents to discuss resuming negotiations. Lula is in Beijing for Olympic ceremonies.  He also indicated he would talk to the Prime Minister of India.

Brazil officials have expressed concern that if the negotiations are not restarted and completed in a short period, it could be years before the negotiations can be revived. US agriculture groups are concerned that the last proposal on the table outlined by Director General Lamy would require even deeper cuts in US domestic supports than previously contemplated without any corresponding gain in market access.

EPA Administrator Stephen L. Johnson denied a request for a 50% waiver of the 9-billion-gallon Renewable Fuel Standard for ’08, saying that there was no evidence that the mandate was causing "severe harm" to the economy. In April, Texas Governor Rick Perry requested the waiver to help alleviate feed costs for a struggling livestock industry.

Ethanol supporters applauded the ruling, saying it is important to the industry because it keeps ethanol on track to advance beyond corn as a feedstock. Livestock producers, who have been paying higher costs for feed, expressed their disappointment over the decision.

Johnson said he acknowledges that there has been an increase in feed prices for the livestock industry, but that it did not come as a result of the RFS. "We acknowledge in our analysis that there is an increase in feed prices," he said. "Is that the result of the RFS mandate? Our conclusion is no. Is it meeting the statute’s requirements of severe harm to the economy? Our answer is no.” The RFS, Johnson said, "is strengthening our nation's energy security and enhancing our farming communities."

EPA regulations require the administrator to follow a set of guidelines when considering waiver requests. That includes whether the RFS has caused "severe harm" to the economy or the environment.

Johnson said EPA was not asked by Governor Perry to consider the RFS effects on the environment. Part of the EPA analysis included a look at whether corn supplies will be enough to meet the RFS mandate and other needs, and Johnson said EPA concluded that there was.

Sen. Grassley (R-IA), a staunch biofuels supporter and a member of the U.S. Senate Finance Committee, said in a statement that the EPA action was important to U.S. farmers.

"Today's ruling is a victory for clean energy, rural America, and national security, and a blow to those who have used ethanol as a scapegoat for rising fuel and food prices," Grassley said in a statement.

"The EPA realized that the facts clearly stood in ethanol's corner. The bottom line is that ethanol is extending our fuel supply and actually lowering gas prices. Congress provided certainty to ethanol producers when it passed the Renewable Fuels Standard. Today's ruling will allow farmers to continue to plan for and meet the fuel and food needs of the future."

Reports indicate Brazil may file a WTO case designed to force the United States to cut its ethanol tariff.

Brazil would attempt to change the current classification of the 54 cent per gallon tariff on imported ethanol in a way that would lead to a ruling that the United States has exceeded its allowable subsidy limit for ethanol. Brazil apparently has not made a final decision in part because the case could undermine any chance that the United States might unilaterally reduce import restrictions on ethanol at some future date.

Others believe Brazil is using the threat of litigation as a way to make the Doha round more appealing. The United States currently charges 2.5% ad valorem as allowed under the Uruguay Round and a “secondary” tariff of 54 cents per gallon on fuel ethanol and fuel mixtures containing ethanol.

The ’08 Joint American Cotton Producers/Cotton Foundation Summer Meeting will be held at the Westin Hotel in Savannah, GA, on Aug. 14-15.

The keynote speaker will be USDA Farm Services Agency Administrator Teresa Lasseter, who will review farm bill implementation status. Woods Eastland, Staplcotn president/CEO, will discuss cotton futures contract issues and NCC Chairman Larry McClendon will provide an update on NCC activities, including his recent trip to Geneva for the WTO Ministerial session.

Among other topics to be discussed are NCC/Cotton Incorporated sustainability initiatives and the Doha trade talks’ status. Attendees will be asked to help identify priority topics for inclusion in the ’09 Beltwide Cotton Conferences.

The Senate Parliamentarian has advised the Senate Finance Committee that legislation implementing the US-Colombia Free Trade Agreement (FTA) could be re-introduced in the next Congress and still be considered under Trade Promotion Authority (fast track).

The informal guidance was issued as a result of concerns that if a vote on the Colombia FTA is not held this year, it would lose fast track protection against amendments. The matter is further complicated by a ruling by the House Parliamentarian that FTA legislation introduced in one Congress can’t be considered under fast-track in the next Congress.

The question about timing is critical because Speaker Pelosi (D-CA) revoked the automatic fast-track timetable after the White House submitted the legislation without reaching agreement with House leaders.

The legislation is now subject to the call of the Chair and there are no indications that House Democrat leaders intend to call-up the legislation for a vote before the Congress adjourns.

In the Senate, Republicans are insisting on a vote on the Colombia FTA before agreeing to consider an expansion of Trade Adjustment Assistance.

The Joint Cotton Industry Bale Packaging Committee’s (JCIBPC) Executive Committee, sitting as the specifications review subcommittee, adopted the recommended changes to the ’07 Specifications for Cotton Bale Packaging Materials. These changes were initiated and approved by the full JCIBPC at their annual meeting earlier this year.

The revised  specifications have been sent to USDA for approval. Currently, the ’07 specifications can be found at http://www.cotton.org/tech/bale/specs/index.cfm. The ’08 specifications be found at the same web address following notification by USDA that the revised specifications have been approved.

Producers’ responses are still being sought in Cotton Incorporated’s 20-minute, anonymous online Natural Resource Survey.

Survey results will help the organization identify the great strides producers have made in production efficiency and natural resource management – findings that can be used to develop US cotton's environmental message to global textile industry, brands, retailers and consumers.

Producers are asked to complete the questionnaire only once and only if they have production responsibility for a cotton farming operation. Following completion of the questionnaire, producers also mayrequest a “Cotton Natural” t-shirt in appreciation for their effort.

Questions about the survey, which is being extended to gather more response, should be directed to agsurvey@cottoninc.com.

According to the most recent Global Lifestyle Monitor (GLM) research, 62% of global consumers love denim or enjoy wearing it on a regular basis, up 12% from a low in ’01. Only 12% of consumers report that denim is “just not for them.”

Cotton Council International and Cotton Incorporated sponsored the research, with support from USDA. The fifth GLM, conducted by Synovate, surveyed 5,000 consumers aged 15-54 in 10 countries across Europe, South America and Asia.

The results revealed, for example, that Germans and Colombians are the greatest denim enthusiasts, owning an average of 8.63 and 8.53 pairs of jeans per person, respectively, compared to a global average of 6.25 pairs of jeans per person.

Net export sales for the week ending July 31 (end of ’07-08 marketing year) were 11,300 bales (480-lb). This brings total ’07-08 sales to approximately 15.6 million bales. Total sales at the same point in the ’06-07 marketing year were roughly 14.7 million bales.

Outstanding sales of approximately 2.1 million bales on July 31 are carried forward to the ’08-09 marketing year, resulting in total new crop (‘08-09) sales of 3.8 million bales.

Shipments for the week were 365,800 bales, bringing total exports for the ’07-08 marketing year to 13.5 million bales, compared with the 13.01 million bales for the ’06-07 marketing year.