Cotton's Week: April 24, 2009

The NCC urged the House Agriculture Committee’s Subcommittee on General Farm Commodities and Risk Management to continue its oversight of risk management, including the federal crop insurance program, to ensure a meaningful tool is available for producers.

In his testimony, Rickey Bearden, chairman of the NCC’s Crop Insurance Task Force, said, “crop insurance must be developed, delivered and administered as an effective risk management tool and innovative policies must be developed to make crop insurance more useful in various and ever-changing production conditions.”

The Texas producer told the panel that “improving the risk management options for producers has been a top priority for the cotton industry for many years.” He testified that he had been farming for 34 years and considered insurance coverage an important risk management tool, as important “as any other production input” as West Texas producers are particularly vulnerable to Mother Nature.

 Bearden, while acknowledging the RMA cotton program has improved, offered some recommendations for administering the crop insurance program. Among them were: 1) place additional focus on the refinement of policy options that allow regional differences in insurance to be recognized; 2) use rate setting procedures that recognize growers’ investments in reducing their individual risk such as planting improved varieties and employing good soil and water conservation practices – and reward reduced risk/improved productivity with lower rates; 3) consider allowing a producer to purchase different coverage levels for irrigated and non-irrigated production; and 4) structure the cotton quality loss provisions in recognition of unique bale identity.

Bearden said the NCC is supportive of conducting a ’10 growing season Cottonseed Pilot Endorsement (CPE) – a program which would offer yield coverage for cottonseed as an optional endorsement, applicable to buy-up cotton insurance policies.

Bearden testified that the RMA also should review their policies to determine how best to assist producers following large scale disasters. As an example, he cited the long delay following the ’08 hurricanes that affected farmers in Louisiana, Mississippi and Texas.

The full testimony is available in the Issues/Members Only area of the NCC website, www.cotton.org.

In testimony before the US International Trade Commission (ITC), the NCC said India’s cotton subsidies coupled with its failure to notify the World Trade Organization (WTO) of those subsidy levels is a major impediment to cotton trade. The ITC public hearing in Washington was held to investigate the effects of India’s tariff and nontariff measures on US agricultural exports.

Dr. Gary Adams, the NCC’s vice president of Economics & Policy Analysis, told that panel that the NCC is “very concerned with the ongoing and expanded subsidies for cotton that Indian farmers are receiving in violation of their WTO commitments. We are also concerned that India's stance in the Doha Round negotiations would result in no increased market access for cotton fiber into India. Further, its textile policies unfairly enhance its textile competitiveness, while contributing to a low level of U.S. imports into India.”

He noted that India recently announced increases in its Minimum Support Prices for cotton -- up 48% in some instances. Based on current exchange rates, the minimum support price equates to approximately $0.72 per pound for the most commonly-produced qualities of cotton, as compared to international prices ranging between $0.55 and $0.58 per pound. This discrepancy between Indian prices and world prices has led the Indian government to authorize the purchase of up to 11.7 million bales from India’s ’08 cotton crop.

Regarding India’s raw cotton exports, Adams testified that the country announced a new export subsidy scheme for cotton exports equal to 5% of the value. It was already the case that Indian cotton often was offered at a 3-5 cent discount to similar growths from other countries, he said, so the addition of an export subsidy allows India to increase this discount relative to their competitors.

“While India has been among those who have joined the chorus against U.S. cotton programs, “ Adams said, “it has chosen to increase its own internal subsidy levels and expand export subsidies to cotton, even though it apparently has never filed any export subsidy schedules as part of the Uruguay Round commitments within the World Trade organization and has no authority to apply cotton export subsidies without being in violation of its commitments.”

Meanwhile, he said that amid continued attacks by other cotton-producing countries on the US cotton farmer, there has been little appreciation or attention given to the changes in US production and policies.

“But, as U.S. cotton production has withdrawn, others like India have stepped into the void with increased production, exports and even increased subsidy programs,” he testified. “There has been no real, lasting price recovery. Smaller producers, like African producers, continue to suffer from a lack of profitability.”

The economist also testified about India’s increased position as a net exporter of textile and apparel products – with the United States now the destination for about a fourth of those shipments. Conversely, US cotton textile exports to India are minimal, a situation owing to India’s significant subsidization of its textile industry.

The full testimony is available in the Issues/Members Only area of the NCC website, www.cotton.org.

Agriculture Secretary Vilsack announced the appointment of Doug Caruso as administrator of USDA’s Farm Service Agency (FSA).

"As FSA State Executive Director in Wisconsin for 8 years, Doug Caruso compiled an impressive record of improving client services and enhancing outreach to historically underserved farmers," Vilsack said. "He is the right choice to serve America's farmers, ranchers, rural landowners and communities that benefit from FSA's services and to implement USDA's goals of providing a safety-net for small and mid-sized farmers while promoting a sustainable, safe, sufficient and nutritious food supply."

Caruso returns to USDA after working as CEO of Wisconsin Farmers Union Specialty Cheese. From ’93-01, Caruso was at USDA as state executive director of FSA in Wisconsin, which served approximately 100,000 farmers and rural landowners through a network of 60 county offices. While there, he participated in multi-agency USDA initiatives and worked on the initial implementation of the Milk Income Loss Contract payment program in ’00.

President Obama also announced his intent to nominate Rajiv J. Shah, MD, as USDA’s under secretary of Research, Education and Economics (REE) and chief scientist.

"Dr. Rajiv Shah is a globally recognized leader in science, health and economics ... disciplines that are critical to the missions of this department," Vilsack said. Shah is the director of the Agricultural Development Program at the Bill & Melinda Gates Foundation.

The Pesticide Policy Dialogue Committee (PPDC) met in Arlington, VA, to discuss current pesticide policy issues with EPA. PPDC was established in ’95 and its membership includes environmental and public interest groups, pesticide manufacturers and trade associations, user and commodity groups, public health and academic institutions, federal and state agencies, and the general public. Cannon Michael, Los Banos, CA, represents cotton interests on this committee.

The topics discussed included new integrated toxicology testing methods, web-distributed pesticide labeling, the 6^th Circuit Court decision on water permits for pesticide applications, endocrine disruption testing, incident data and endangered species consultations. The next PPDC meeting is tentatively set for Oct. 14-15, ’09.

EPA has published a list of 67 pesticide ingredients – both active and inert – subject to initial screening this year under the Endocrine Disruptor Screening Program (EDSP), which was mandated under the Food Quality Protection Act.

The endocrine or hormone system regulates all biological processes such as metabolism, blood sugar levels, growth and function of the reproductive system, and brain/nervous system development. This Tier 1 screening is intended to identify substances that might interact with human estrogen, androgen, or thyroid hormone systems, EPA said, adding that it intends to issue test orders this year. Substances that indicate endocrine effects would then be tested further.

“This list should not be construed as a list of known or likely endocrine disruptors,” EPA said, and that “all pesticidal chemicals will eventually be screened” for their potential to disrupt the hormone system.

On the initial list, pesticides used in cotton production include 2:4-D, acephate, carbofuran, chlorpyrifos, dimethoate, disulfoton, glyphosate, imidacloprid, malathion, methamidophos, methidathion, and methyl parathion. A positive finding for endocrine disruption could mean the loss of these products for agricultural uses.

NCC has conducted a survey to identify the pesticides currently important for cotton production. NCC staff is working with registrants to maintain these registrations.

The screening applies to basic manufacturers of active or inert pesticide ingredients; end-use formulators whose products are formulated and sold for end use but who do not necessarily manufacture or import active or inert pesticide ingredients; and manufacturers/importers of inert ingredients that do not necessarily have to hold an EPA registration for the sale of pesticide products.

Manufacturers of pesticide products for export also may be subject to the screening orders intended solely for export, as long as another company has a US pesticide registration for the chemical or an import tolerance exists for that chemical.

EPA said it will give screening order recipients 90 days to tell the agency how they intend to act on the order with the options of: stating they are not subject to the test order, voluntarily cancelling their registration, reformulating their products to exclude a chemical from the EPA list, or discontinuing the manufacture or import of the chemical.

Refusing to participate is not an option. EPA said it can suspend the sale or distribution of a product on the list by a registrant that fails to comply with a test order.

Comments on EPA's Submission to OMB for Review and Approval; Comment Request; Tier 1 Screening of Certain Chemicals Under the Endocrine Disruptor Screening Program should be identified by Docket No. EPA-HQ-OPPT-2007-1081 and submitted to http://www.regulations.gov/.

According to the Commerce Dept., March (four-week month) total cotton consumption in domestic mills was 145.2 million pounds for a seasonally adjusted annualized rate of 3.14 million bales (480-lb). Last year’s March annualized rate was 4.25 million bales.

The February (four-week month) estimate of domestic mill use of cotton was raised by 773,000 pounds to 114.56 million pounds. The revised seasonally adjusted annualized rate of consumption for February is 3.09 million 480-pound bales. This is lower than last year’s February annualized rate of 4.56 million bales.

Based on Commerce estimates from Aug. 3, ’08-April 4, ’09, projected total pounds consumed during crop year ’08-09 would be 1.77 billion pounds or 3.69 million bales. USDA’s latest estimate of ’08-09 crop year mill use is 3.65 million bales.

Preliminary April domestic mill use of cotton and revised March figures will be released on May 28.

Net export sales for the week ending April 16 were 269,300 bales (480-lb). This brings total ’08-09 sales to about 12.6 million bales. Total sales at the same point in the ’07-08 marketing year were about 12.5 million bales. Total new crop (’09-10) sales are 562,800 bales.

Shipments for the week were 246,400 bales, bringing total exports to date to 8.4 million bales, compared with the 9.1 million bales at the comparable point in the ’07-08 marketing year.