Cotton's Week: October 10, 2008

In its October crop report, USDA projects a ’08-09 US crop of 13.71 million bales, down 140,000 bales from its September report.

Upland production was estimated at 13.26 million bales and extra long staple (ELS) production at 451,000 bales. Harvested area was estimated at 7.76 million acres, implying a non-harvested area of 1.66 million acres based on USDA’s revised acreage report. The resulting abandonment rate is roughly 17.62%. The national average yield per harvested acre was estimated to be roughly 849 pounds, 28 pounds above the five-year average.

On a regional basis, the Southeast crop is estimated at 3.16 million bales, based on harvested acres of 1.93 million and a regional average yield of 788 pounds, 33 pounds above their five-year average. In the Mid-South, expected production is 3.66 million bales. Harvested area is estimated at 1.85 million acres and the expected yield is 951 pounds per harvested acre.

The Southwest upland crop is an estimated 5.60 million bales. Expected harvested area is 3.53 million acres and the regional average yield is 761 pounds, 75 pounds above their five-year average. Upland production in the West is an estimated 838,000 bales with harvested area of 279,000 acres and a regional average yield of 1,442 pounds, 95 pounds higher than the region’s five-year average. The ELS crop is an estimated 451,000 bales. Harvested area is pegged at 170,000 acres, with an average yield of 1,273 pounds per harvested acre.

State-level results are shown in the following table.

Net export sales for the week ending Oct. 2 were 280,900 bales (480-lb). This brings total ’08-09 sales to approximately 6.0 million bales. Total sales at the same point in the ’07-08 marketing year were approximately 5.6 million bales. Total new crop (’09-10) sales are 72,200 bales.

Shipments for the week were 256,500 bales, bringing total exports to date to 2.3 million bales, compared with the 2.8 million bales at the comparable point in the ’07-08 marketing year.

USDA’s National Agricultural Statistics Service reports that the final US marketing year average (MYA) price for ’07 upland cotton is 59.3 cents per pound, an increase of 12.8 cents from ’06. The final estimate is based on revised estimates of monthly prices and marketings from the ’07 crop. US and state price information will be published in the October Agricultural Prices, to be released Oct. 31, ’08.

The final MYA price is used in the determination of the ’07 counter-cyclical payment (CCP). Pending an official announcement by USDA, the price of 59.3 cents gives an estimated total CCP for the ’07 crop of 6.43 cents. Based on this unofficial estimate, producers who took the advance CCP of 3.09 cents in February will receive an additional 3.34 cents.

Rep. Rangel (D-NY), chairman of the House Committee on Ways and Means, formally asked the US International Trade Commission (ITC) to initiate an investigation to monitor certain US textile and apparel imports from China beginning in ’09. His request is designed to help prevent a repeat of the disruptive surge of Chinese textile and apparel exports to the United States following the discontinuation of quotas in January ’05.

The Committee will use the data to evaluate whether the imposition of safeguards are appropriate once the remaining quotas are removed. The US-China bilateral agreement limiting the growth of certain categories of US textile and apparel imports from China expires at the end of ’08.

NCC President and CEO Mark Lange said, "This monitoring program does not break new ground. As Chairman Rangel noted in his letter, the ITC has been asked on numerous occasions to generate reports for agricultural products such as the one being requested on textiles and apparel. We thank the Chairman for using the tools at his disposal to monitor the U.S. market for potential disruption."

Chairman Rangel’s request follows a Sept. 26 letter to President Bush signed by 73 Representatives led by Textile Caucus Co-Chairs Coble (R-NC) and Spratt (D-SC). That letter urged the Bush Administration to extend and expand the Textile Monitoring Program to cover US textile and apparel imports from China beginning on Jan. 1, ’09. On Sept. 29, 10 textile and fiber industry trade associations, including the NCC, and the labor union UNITE HERE followed the congressional letter with their own letter to US Secretary of Commerce Carlos Gutierrez and US Trade Representative Susan Schwab making the same request (see 10/3 Cotton’s Week).

In its October report, USDA sees ’08-09 US mill use unchanged from its September report at 4.40 million bales while exports were reduced 1.50 million bales to 13.00 million bales due to lower world import demand. This generates a total ’08-09 offtake of 17.40 million bales. Ending stocks for ’08-09 are projected at 6.20 million bales for an ending stocks-to-use ratio of 35.6%.

For the ’07-08 crop year, USDA gauged US cotton production at 19.21 million bales. Mill use increased 10,000 bales from the September report to 4.61 million bales. Exports were unchanged at 13.65 million bales. Total offtake for the ’07-08 crop year is estimated at 18.26 million bales. Ending stocks were lowered to 9.89 million bales – for a stocks-to-use ratio for the ’07-08 marketing year of 54.2%.

USDA raised its ’08-09 world production estimate 1.59 million bales from the September report to 113.76 million bales. World mill use was lowered 1.39 million bales to a projected 122.31 million bales due to deteriorating world economic conditions and their impact on textile demand. Consequently, world ending stocks for ’08-09 are projected to be 55.45 million bales for a stocks-to-use ratio of 45.3%.

For the ’07-08 marketing year, USDA puts world production at 120.59 million bales, up 230,000 bales from the September report. World mill use was lowered 450,000 bales to 123.37 million bales. Estimated world ending stocks on July 31, ’08 are now pegged at 61.50 million bales, a corresponding stocks-to-use ratio of 49.9%.

Agriculture Secretary Ed Schafer announced that USDA will distribute $1.8 billion in Conservation Reserve Program (CRP) rental payments for FY09. Producers holding about 766,000 contracts on 430,000 farms will receive an average of $50.93 per acre.

Currently, enrollment stands at 34.7 million acres, making CRP the largest US public-private partnership for conservation and wildlife habitat. Producers enroll in CRP and plant long-term, resource-conserving covers to improve water quality, control soil erosion and enhance habitats for waterfowl and wildlife. In return, USDA provides producers with annual rental payments over a contract duration ranging from 10-15 years.

A table at http://www.fsa.usda.gov/Internet/FSA_File/enroll.pdf, provides enrollment statistics by state. For more CRP information, contact your local Farm Service Agency office or visit http://www.fsa.usda.gov.

Dr. Keith Menchey, NCC’s manager of Science and Environmental Issues, told USDA of the US cotton industry's concern over the adverse impact that any incorrect interpretation of amendments in the Research Title of the Food, Conservation, and Energy Act of 2008 would have on Smith-Lever 3(d) funds -- specifically to the integrated pest management (IPM) and cotton pest management funds.

The NCC’s comments were provided at a USDA-CSREES Listening Session held in Washington, DC, earlier this week regarding Smith-Lever 3(d) funding of IPM and cotton pest management funds. The NCC stated that because of IPM and cotton pest management programs' critical need and successful history, it is deeply concerned that a hasty transition to a competitive grant system of awarding funding will destabilize or destroy these programs' established infrastructure. Even if current programs are fully funded at current levels, the uncertainty of year-to-year awards will disrupt the operation of IPM programs, which require stable and predictable support.

NCC asked USDA-CSREES to consider these options: 1) support a legislative solution as the IPM/cotton pest management programs must continue to receive formula funding in order to maintain their stability and reliability to US farmers; or 2) provide a transition time of one year or more rather than immediately changing to competitive funding thereby providing temporary stability for the cotton IPM infrastructure in order to minimize producer risks and allowing the current structure to seek alternative measures to ensure its existence. If neither of these recommendations is feasible, the NCC stated it supports the Southern Region Extension directors’ recommendations for the competitive grants’ administration.

The comments emphasized that US cotton is particularly susceptible to a myriad of insect pests. For the '07 growing season, producers estimated insect damage loss was more than 908,000 bales at a cost of more than $260 million. These losses occurred even with implementation of the latest IPM techniques. The comments also noted that cotton is highly vulnerable to weed competition, which plays a major role in reducing cotton yields by an average of 30%. Because of the impact of weeds on cotton production and their ever-present nature, US producers rapidly adopted biotechnology. About 85% of all US cotton is genetically modified for herbicide tolerance or insect resistance.

The comments noted the IPM/cotton pest management programs have established a network of IPM specialists who have developed and delivered highly effective programs. Breeding, conventional crop protection products and genetic engineering provide valuable approaches and technologies to protect crops from pests and diseases. IPM programs aim for an optimal use of these different products to reduce damage by pests with the least undesirable impact. As environmental stewards, producers have both an economic and environmental incentive to use and preserve the best available technologies.

USDA announced the allocation of $234 million in FY08 funding to promote exports of US agricultural products.

More than 65 organizations received funding under the Market Access Program (MAP), while more than 20 organizations received funding under the Foreign Market Development (FMD) program.

Cotton Council International (CCI) received $20,660,669 in MAP funds, the largest allocation among all MAP recipients. These funds will support CCI's export promotion programs for the period from July 1, ’08 through June 30, ’09. In addition, CCI had received $4,491,078 in FMD funds for the year that ends Sept. 30, ’08 -- which represents an increase of nearly 6% over the prior fiscal year.