Cotton's Week: March 6, 2009

Agriculture groups, including the NCC, were invited to meet Secretary Vilsack’s senior staff to discuss concerns about the Administration’s budget proposal which includes a new $500,000 gross revenue test to phase-out direct payments, a $250,000 cap on all program benefits and a 20% annual reduction in MAP funding.

The groups unanimously expressed disappointment that the Administration is proposing reopening the ’08 farm law even though it was passed under pay-go rules and has yet to be fully implemented. The groups also expressed opposition to the concept of a revenue-based means test which would severely penalize virtually all diversified operations and especially those producing high value crops and livestock. The groups reminded staff that revenue is not a measure of profitability.

The most serious concern conveyed by the groups was about the Secretary’s comments earlier in the week which seem to pit production agriculture against nutrition groups in competition for funding. The farm groups urged the staff to ask the Secretary to adjust his message because his comments had deeply offended farmers. The staff acknowledged the concerns.

With respect to the means test and cap on benefits, USDA staff explained that the President endorsed the Grassley-Dorgan amendment during the campaign. While not fully explaining the origin or the objective of the new revenue test, they indicated some form of means test -- either revenue or reduced adjusted gross income test -- probably will be in the detailed budget to be released in April.

Commodity and farm organizations are circulating a letter expressing opposition to the budget proposal, reminding recipients that changes to the ’08 farm law before its scheduled expiration will create uncertainty in the rural economy. Further, the agriculture budget is less than 1% of the federal budget and commodity and conservation programs are only 16% of the agriculture budget while nutrition programs receive more than 73% of the funding. Nutrition program funding was increased significantly in the ’08 farm law and received additional increases in the recently enacted “stimulus” bill.

Congress sent President Obama a bill to fund the federal government through next week while debate continues on the full spending package. The $410 billion measure will be debated in both Houses next week. Even though the government is almost halfway through the ’09 fiscal year, Obama has already submitted his budget outline for fiscal ’10.

At a hearing on proposed free trade negotiations with countries in the Trans-Pacific Partnership area (TPP), the National Council of Textile Organizations (NCTO) opposed the proposed inclusion of Vietnam in the negotiations and said the textile industry would oppose any agreement that included Vietnam. NCTO urged the Obama Administration to overturn the Bush Administrative initiative to include Vietnam.

In a statement, NCTO President Cass Johnson said, “By proposing to include Vietnam, a non-market economy, in free trade negotiations, USTR is turning long standing trade policy on its head.”

Johnson noted that the admission of Vietnam into the WTO in ’07 already had failed to produce the benefits that the Bush Administration had been promised. Instead, according to US government figures, the trade balance with Vietnam has sharply deteriorated. The trade deficit with Vietnam increased by $2.7 billion in just two years, or 35%, to reach a record $10.1 billion. Textile and apparel exports from Vietnam increased by $2.0 billion or 60% while the US textile and apparel sector has lost 97,000 jobs.

Johnson said that the textile industry was surprised that the US government would even consider granting Vietnam free trade status.

He said, “The government of Vietnam has a non convertible currency, controls the ownership of land, owns all the major banks, sets wage rates and directly subsidizes large portions of its economy, including the textile and apparel sector, which is still guided by Five Year Plans. Now the U.S. government is proposing to fling open the front door and let Vietnam do its worst. This is not only bad trade policy, but it is bad economic policy and it demonstrates why support for free trade agreements and further trade liberalization has hit historic lows among the American public.”

Net export sales for the week ending Feb. 26 were 249,000 bales (480-lb). This brings total ’08-09 sales to about 10.5 million bales. Total sales at the same point in the ’07-08 marketing year were about 10.6 million bales. Total new crop (’09-10) sales are 148,500 bales.

Shipments for the week were 260,900 bales, bringing total exports to date to 6.6 million bales, compared with the 7.2 million bales at the comparable point in the ’07-08 marketing year.

In Memphis for its 42^nd annual meeting, the Joint Cotton Industry Bale Packaging Committee (JCIBPC) re-approved the ’08 bale packaging specifications for consideration by USDA.

The JCIBPC also reviewed ’08 experimental test programs and heard NCC staff reports on packaging material use trends, NCC/China Cotton Assoc. activities aimed at encouraging China to conform with US bale standards, and a review of US and foreign mill surveys of bale packaging material preferences/contamination occurrences.

During the Committee’s executive session, it granted Maillis Strapping Systems’ request for addition to the list of approved polyethylene terphthalate (PET) strapping manufacturers. The Committee also approved experimental test program requests from: (1) IFP for a fifth year of testing of a 100% woven cotton bale bag with a 1.9 lb. tare weight; (2) Propex for a fourth year of testing of a spiral sewn woven polypropylene bale bag with a modified construction; (3) Langston Company for a second year of testing of a 100% woven cotton bale bag with a 2.2 lb. tare weight and (4) Henry W. Peabody/L.P. Brown for a first year of testing of a 100% woven cotton bale bag with a 2.5 lb. tare weight.

In a separate action, the JCIBPC strongly encouraged gins using materials approved for use in experimental test programs to recess their bale ties. Gins also were urged to record and provide testing firms with a bale tag list when experimental test products are used. The range of bale numbers are used by NCC staff to monitor the performance of tested materials. Both requests were presented initially at the Committee’s ’08 meeting and reaffirmed at this year’s meeting.

Courses are set and registration continues for the ’09 Ginner Schools: Southwest Ginners School, Lubbock, TX – March 30-April 1; Western Ginners School, Las Cruces, NM - May 12-14; and Stoneville Ginners School, Stoneville, MS - June 9-11. Registration can be completed online at http://ncga.cotton.org.

National Cotton Ginners Assoc. Executive Vice President Harrison Ashley said, “The goal of these schools is to train our gin employees on the proper operation of ginning equipment with a focus on maximizing fiber quality, ginning efficiencies and safety in the gin. He said each level of Ginner Schools’ coursework is built on the previous level of instruction, with Level I as the foundation.

Level I courses are: Introduction to Cotton Ginning and the Industry; Maintenance of Auxiliary Gin Components; Basic Hydraulics; Basic Gin Safety; Maintenance and Adjustments for Seed Cotton Cleaners, Gin Stands, and Lint Cleaners; Air Utilization and Drying; and Electricity in the Gin.

The Level II offerings include: Purpose and Operating Principles of Individual Gin Machines; Efficient Operation, Adjustment, and Maintenance of Gin Equipment; Pneumatics and Waste Collection; Electrical Systems; Hydraulic Systems; Gin Safety; Management Tips; and Roller Ginning (at the Western School only).

Level III features: Review of Functions of a Ginning System; Electrical Systems; Air Systems in the Gin; Drying and Moisture Restoration Systems; Matching Machinery Capacities in the System; Seed Cotton Unloading Systems and Management of Seed Cotton Handling Systems; Bale Presses and Hydraulic Systems; Safety Programs and Labor Regulations; Cottonseed Handling Systems; and Roller Ginning (at the Western School only).

In addition to Levels I, II and III, all schools will feature a two-day Continuing Education course.

Day one of the Continuing Education coursework will include a session on properly matching gin equipment capacities to optimize efficiencies and equipment performance. This will include the analysis of all components of the gin, from module feeder to bale press. In this session, automated gin processes will be discussed to examine how these technologies could be used. In addition, examples of systems upgrades will be discussed by ginners and practical examples will be provided.

The second day will focus on fiber quality, from harvesting to ginning, with an emphasis on ginning and maximizing quality. The Southwest School will include a tour of the Fiber and Biopolymer Research Institute at Texas Tech U. and presentations from Cotton Incorporated and Cotton Council International on meeting market demands.

The Continuing Education courses are designed for gin managers and owners, and one or both days of the sessions can be chosen depending on needs. School cooperators include the National Cotton Ginners Assoc., NCGA member associations, USDA-ARS, the NCC, Cotton Incorporated, gin machinery/equipment manufacturers/suppliers, Cooperative State Research, Education and Extension Service, and select land grant universities.

The Senate Judiciary Committee approved legislation that would empower Justice Dept. antitrust lawyers to regulate railroad mergers and rate changes.

The measure (S. 146), sponsored by Sen. Kohl (D-WI), was approved 14-0. The bill would eliminate a longstanding exemption to antitrust laws that allows railroads to gain approval from the Surface Transportation Board for rail mergers, acquisitions and collective ratemaking agreements. Other transportation industries, such as trucking and aviation, already must seek approval from the Justice Dept.

The legislation also would allow state attorney generals and individuals to sue to block mergers. Under the current system, only the federal government can do so.

The bill, which requires review by the Senate Commerce, Science and Transportation Committee, could come before the full Senate later this spring.

The House Judiciary Committee is expected to consider their nearly identical version of this bill (H.R. 233). In addition, others are exploring avenues to address deficiencies at the Surface Transportation Board.

Meanwhile, NCC members recently joined with others in the agricultural industry to participate in a webinar to review the railroad situation. This webinar was designed to facilitate a discussion regarding railroad rates, costs, volumes and recovery of fuel costs through surcharge programs.

The webinar included a confidential survey that allowed participants to relate their experience with rail carriers. A recorded version is available at http://www.railratechecker.com/EstablishingAWayForward.html.

NCC members still can participate in the survey – and their input is encouraged -- by requesting a copy of the questions referenced at the end of the webinar from Escalation Consultants. Return surveys by email to webinar@EscalationConsultants.com or by fax to 301-977-9248. Please indicate on the survey that you are an NCC member so that your responses will be included in the NCC results.