Cotton's Week: January 9, 2009

Cotton's Week: January 9, 2009


Optimism Displayed at ’09 Beltwide Cotton Conferences

NCC Chairman Larry McClendon, in his opening address at the ’09 Beltwide Cotton Conferences in San Antonio, said he believes the US cotton industry has excellent prospects for achieving profitable cotton production and processing. He encouraged the 3,015 attendees to participate in the forum’s sessions and learn more about the wide array of scientific disciplines to lower costs and apply technology to a host of problems and opportunities.

Noting that research, education and technology transfer continue to be critically important, he said that, “I assure you that the Council will continue its longstanding commitment of its resources for technology development and transfer and bringing resolution to the technology-based priorities.”

He said that while the NCC spent much of ’08 providing Congress with information relevant to developing a workable farm bill and trying to stave off bad trade policies – the ’09 focus shifts to “protecting funding for commodity programs and continuing to work with US trade negotiators to assure a balance between market access and reduced domestic support.”

Later, in a news briefing, the Marianna, AR, producer/ginner provided an update on the current status of the World Trade Organization Doha Round negotiations and fielded questions.

He told journalists that US cotton has taken the brunt of the “bashing” in the Doha negotiations to this point but the focus could easily shift to other commodities – and that our nation was ratcheting down support and getting zero in return on market access.

“If we don’t have fair trade or access, what is happening to cotton will happen to the rest of US agriculture,” he said. “Obviously, we want to protect the cotton industry, but we also want to send a signal that no commodity will be bullet proof when it comes to trade agreements.”

McClendon also noted plans that are underway to address many of the US cotton industry’s future challenges and opportunities through “Vision 21,” a Cotton Foundation project with funding through an initial grant from Monsanto and being jointly managed by the NCC, Cotton Council International and Cotton Incorporated. Earlier, NCC President/CEO Mark Lange briefed news media on project details and the intent of sharing the studies’ findings with the industry and affiliated interests.

In other Production Conference general session reports:

NCC Vice President of Economics & Policy Analysis Gary Adams told attendees that the industry was coming off one of the most volatile cotton marketing years in history and a clear outlook is difficult due, in part, to the uncertainty in the general economy.

"Right now the cotton market is feeling pressure from the global downturn in the economy, the loss of jobs, and concern about demand," Adams said. "Overall, the latest global mill use figures show 116.5 million bales for ’08, compared with 123 million bales used the year before. Those figures are likely to be even more depressing with the next USDA report (1/12/09) of world cotton use."

Adams said the US textile industry -- now half the size it was 10 years ago -- can be counted on to consume approximately 4 million bales annually, especially since it received an economic shot in the arm with the ’08 farm bill. Still, that leaves 70% of production that must be exported to keep demand alive for US producers.

"It is imperative that we find ways to increase global use of cotton to ensure our producers have a market for their goods," he noted.

On the energy front, Adams said after a historically high year for the cost of cotton production based on fuel, fertilizer and chemical inputs tied to the price of oil, the recent drop in petroleum prices makes the coming year's cotton production cost estimate look much more like the years of ’06 and ’07.

Adams said that while competition from other crops will keep pressure on world cotton area, current cotton stock levels make short-term optimism for cotton prices difficult to find.

"However, as this past year so clearly illustrated, the landscape can and does change quickly,” he said.

Thomas Hebert, an executive with Ogilvy Government relations in Washington, DC, said although final rules are not yet completed on many of the new farm law’s conservation programs – funding for those has increased and he expects ’09 to hold many good conservation opportunities for farmers. He encouraged producers to be engaged with and convey needs to county and state NRCS staff as well as local conservation district and state fish/game personnel.

Hebert also said he expects President-elect Obama’s administration to help the conservation programs work for production agriculture with the Conservation Stewardship Program to get much attention.

Gary Taylor, President/CEO of Cargill Cotton in Cordova, TN, told attendees that the current cotton futures market has adequate, well-located delivery capacity to allow convergence and has adequate balance and participation from producers, merchants and speculators. What’s needed, he told attendees, is improved transparency of all market participants and strengthened enforcement of current regulations along with monitoring of speculative limits and daily trading limits, which must be used for margin calls.

To serve its patrons well, he said the futures market must not: 1) allow a large trader to control it and 2) become a cash market for any participant to dump cotton on the market.

Cotton Incorporated President/CEO J. Berrye Worsham provided an overview of ’08 highlights and ’09 proposed plans and noted that while cotton's market share remains strong at near 60% of the apparel market, the downturn in the economy contributed to an estimated 5% reduction in the volume of cotton consumed at retail. On a positive note, Worsham indicated that consumer attitudes toward cotton were more favorable in ’08 -- especially related to the environment. Consumers rank cotton as the most environmentally friendly fiber, well above its nearest competitor.

He said future research and promotion projects will be designed with sustainability as their backbone and supported by results from Cotton Incorporated’s recently-completed Natural Resource Survey. From working to enhance producer profitability to increasing cotton’s global consumer presence, Worsham mentioned several projects that will position cotton favorably moving forward.

“Despite ’08 being a difficult year, the Cotton Research & Promotion Program is laying a foundation for a strong and steady recovery when the economy starts its cyclical rebound,” he said.

Natural Resource Survey Results Revealed

Cotton Incorporated revealed the results of its Natural Resource Survey designed to gather information on US production practices and grower attitudes about the environment. The report was unveiled at a briefing with news media during the Beltwide Cotton Conferences. Conducted in summer/fall of ’08, letters with 77 survey questions were sent to 15,000 cotton producers across the Cotton Belt and more than 1,500 growers returned valid responses.

Leading the list of top producer concerns, according to the survey, is weed resistance to herbicides. That was followed by consumer attitudes about agriculture, the efficient use of nitrogen, insecticide resistance and adequate well water supply.

“Results from the Natural Resource Survey will literally form a foundation for, and help guide the efforts of, their research and promotion program over the next several years,” said Dr. Kater Hake, the organization’s vice president, Agricultural Research.

The survey results, which are still being analyzed, enabled Cotton Incorporated to better support the fact that US cotton is the world’s most sustainable cotton with 5 major key points:  1) US agriculture is governed by a stringent regulatory system which ensures food and fiber safety/US cotton is regulated as a food crop; 2) US cotton has a track record of continuous improvement, with respect to water, pesticides, habitat, soil preservation, etc./ the US system’s transparency allows for continuous monitoring and improvement; 3) US cotton yields are increasing and significantly higher than other countries’ average, therefore less land is required to supply a growing world demand for fiber; 4) the US is among the first adopters of the new technologies which are driving environmental improvement, such as biotech varieties, integrated pest management strategies, conservation tillage, water optimization strategies, etc./ ultimately, this is disseminated to the rest of the world; and 5) the US agriculture extension service provides continuous education and best management practices to US producers.

NCC Annual Meeting Deadlines Near

Jan. 19 is the deadline for making hotel reservations for the NCC’s ’09 Annual Meeting at the JW Marriott Hotel in Washington, DC, on Feb. 12-16. Rooms may be reserved by calling 1-800-266-9432. The deadline to pre-register for the meeting is Jan. 30. Meeting information, registration forms and hotel reservations can be found at Discounted airfare on American and Northwest airlines is available through Travelennium by calling Mary Saemenes at 800-844-4924, ext. 318 for price quotes.

The Feb. 16 general session will feature a report from NCC Chairman Larry McClendon along with a special video presentation summarizing NCC activities during ’08. Among other important convention sessions will be the Feb. 13 American Cotton Producers meeting, where the NCC’s planting intentions survey results will be announced. On Feb. 14, the delegates will hear the NCC’s Economic Outlook, a report from Cotton Incorporated President J. Berrye Worsham, and a presentation by Dr. Joseph Glauber, USDA chief economist. The National Cotton Ginners Assoc. also will hold its annual meeting that afternoon.

The Saturday luncheon will feature Stu Rothenberg, the editor and publisher of The Rothenberg Political Report.

Disaster Program Refund Possible

USDA issued a notice to county offices indicating that producers who have crops intended for grazing or of de minimis value may be eligible for a refund of the ’08 buy-in fee or ’09 Noninsured Crop Assistance Program (NAP) administrative fee if the coverage was solely bought in response to the Risk Management Purchase Requirement (RMPR) requirement and falls into one of the exempt categories. Eligibility for refunds will be determined on a case-by-case basis. Producers should contact their county office for more information regarding any potential refund.

The ’08 farm law created several new disaster programs under the title, “Supplemental Agricultural Disaster Assistance.” To be eligible for the new disaster programs, producers were required to obtain a policy or plan of insurance or NAP for any crop grazed, planted, or intended to be planted for harvest.

However, after enactment of the law, H.R. 6849 made technical corrections to the program including the RMPR. This legislation provided authority for the Secretary to exempt de minimis acreages on the farm from the risk management purchase requirement under two circumstances - if the crop in question is not of economic significance, or if the administrative fee for purchasing NAP coverage for the crop in question exceeds 10% of the coverage.

The legislation drops such acres from inclusion in the calculations of the payments. It also drops the Livestock Forage Disaster Program from the RMPR that covers other programs disaster and clarifies treatment of grazing land as this program already has its own risk management purchase requirement.

Sales, Shipments Rebound

Net export sales for the week ending Jan. 1, ’09 were 232,800 bales (480-lb). This brings total ’08-09 sales to slightly more than 8.2 million bales. Total sales at the same point in the ’07-08 marketing year were approximately 8.3 million bales. Total new crop (‘09-10) sales are 99,600 bales.

Shipments for the week were 200,600 bales, bringing total exports to date to 5.2 million bales, compared with the 5.4 million bales at the comparable point in the ’07-08 marketing year.

Prices Effective Jan. 9-15, '09

Adjusted World Price, SLM 11/16

39.03 cents


Fine Count Adjustment ('07 Crop)

  1.04 cents

Fine Count Adjustment ('08 Crop)

  0.64 cents

Coarse Count Adjustment

  0.00 cents

Marketing Loan Gain Value

 12.97 cents

Import Quotas Open


Limited Global Import Quota (480-lb bales)


ELS Payment Rate

  0.00 cents

*No Adjustment Made Under Step I


Five-Day Average


Current 5 Lowest 3135 CFR Far East

 57.62 cents

Forward 5 Lowest 3135 CFR Far East


Coarse Count CFR Far East

56.88 cents

Current US CFR Far East

59.10 cents

Forward US CFR Far East



'08-09 Weighted Marketing-Year Average Farm Price  

Year-to-date (Aug.-Nov.)

56.08 cents


** August-July average price used in determination of counter-cyclical payment 

Error in element (see logs)