Cotton's Week: June 12, 2009

The House Appropriations Committee’s Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agenciesapproved the FY10 agriculture appropriations bill withoutany amendments to commodity, conservation or export promotion programs in the ’08 farm law.

According to a press release from the Subcommittee, the bill approved on June 11, which will not be publicly released until the full committee marks up on June 18, increases funding for the Food and Drug Administration and domestic and international food aid programs. The bill also provides increased funding for the Commodity Futures Trading Commission.

According to reports, the Subcommittee did not accept any of the Administration’s recommendations to modify farm bill provisions. The Administration’s budget proposal included termination of cotton storage credits, a reduction in Market Access Program funding, a new gross revenue test to determine eligibility for direct payments and changes in conservation programs.

The NCC was joined by other organizations in a letter urging the Subcommittee not to include changes in farm law. In addition, 12 Cotton Belt Representatives wrote Chairman DeLauro (D-CT) urging her not to terminate storage credits.

The full appropriations committee is scheduled to mark up the bill on June 18 and the House is scheduled to consider the bill on July 9.

The confirmation hearing for the President's nominee to chair the Consumer Products Safety Commission (CPSC) has been scheduled for June 16.

The Senate Committee on Commerce, Science and Transportation will conduct the hearing of Inez M. Tenenbaum of South Carolina to serve as CPSC chairman. Sen. Pryor (D-AR), who chairs the subcommittee on Consumer Protection, Product Safety and Insurance, will chair the hearing.

In a related development, the CPSC is seeking written comments on its agenda and priorities for FY11 and is considering revisions to its strategic plan. The current plan was prepared before enactment of the Consumer Product Safety Improvement Act, which requires certain new regulatory actions.

The agency also expects to move to more modern testing lab facilities during '10.

On Jan. 7, '09, the Sixth Circuit Court vacated an EPA rule that exempted pesticide applications to, over or near waters from the requirement of a Clean Water Act permit.

The parties in the case, NCC v. EPA, (CropLife, American Forest & Paper and American Farm Bureau) submitted two separate requests to the court – one for a stay of the mandate and the second for a full court case rehearing.

The court now has granted a two-year stay of the mandate, which results in a postponement of the court decision's effective date. This stay means that no permits will be required for two years.

The court has not ruled on the request for a rehearing and, according to attorneys familiar with the process, there is no specific timeline in which the court has to make the decision.

However, the stay's granting may not be a good sign for a positive decision on the rehearing. If a review of the case was imminent, there automatically would be a stay of the ruling until the court made its final decision. The delay in any response from the court could mean that they are still preparing a statement on the request.

House Agriculture Committee Chairman Peterson (D-MN) held a hearing on H.R. 2454, the American Clean Energy and Security Act (the Waxman/Markey bill), which was reported out of the House Energy and Commerce Committee on May 21.

The Waxman/Markey bill would establish a cap-and-trade program for certain greenhouse gases, which proponents of the theory say are responsible for global warming.  Every identified source is limited on the amount of greenhouse gas that it can emit and must have an emission allowance for every ton of carbon dioxide it releases into the atmosphere. The bill does not include agriculture as a regulated entity but also contains no provisions for agricultural offsets. Consequently, Chairman Peterson, most of the members of the Agriculture Committee and a number of agriculture/agribusiness organizations have expressed opposition to H.R. 2454 in is current form.

For more than three hours, Agriculture Committee members from both parties grilled Agriculture Secretary Tom Vilsack on the bill’s effect on US agriculture. Without exception, each member expressed the opinion that USDA must administer any agricultural offsets program instead of EPA.

Other Committee concerns included the economic impact of increased energy and input costs for farmers and resulting competitive disadvantages in international trade.

Secretary Vilsack, who would not say whether the administration supports the bill, stated, “What I support is the notion that there’s obviously work yet to be done on this bill … I believe that, at the end of the day, agriculture’s role in cap and trade will be acknowledged.”

Other hearing witnesses included representatives from the American Farm Bureau Federation, National Assoc. of Conservation Districts, National Corn Growers Assoc., National Farmers Union, National Milk Producers Federation, Fertilizer Institute and National Rural Electric Cooperative Assoc. Written testimonies are available on the Committee website at http://agriculture.house.gov/hearings/index.html.

House Democrat Leaders are pressing to bring the bill to the floor by the end of June, but there are increasing concerns about its impact on industry and agriculture. Very few rural Democrats and Republicans are expected to support the legislation without major modifications, and even then their support is doubtful.

Energy and Commerce Committee Chairman and principal co-author Waxman (D-CA) has stated that he wants to get the bill to the floor before the July Fourth recess but Speaker Pelosi (D-CA) has not set a timeline for consideration of the climate change bill though she has expressed interest in bringing the legislation to the floor before the July 4 recess.

Because the Agriculture Committee has not scheduled a bill markup, it is uncertain how agriculture’s concerns will be addressed. Reportedly, Chairman Waxman and Chairman Peterson met in Speaker Pelosi’s office after the hearing and said they were moving toward an agreement, though they did not provide any further details.

The Senate reportedly is prepared to move ahead on the climate issue this summer. Sen. Boxer (D-CA), chair of the Environment and Public Works Committee, indicated she intends to mark up legislation before the August recess, using the House bill as a starting point. 

In related news, officials from China, the world’s largest emitter of carbon dioxide, told a United Nations conference in Bonn that China would increase its emissions to develop its economy rather than sign up to mandatory cuts. The Chinese rejection of cuts emerged after talks in Beijing with Todd Stern, the US climate change envoy, who has been in Beijing to promote cooperation on a new global pact governing nations' greenhouse gas emissions that will be negotiated in Copenhagen in December.

Qin Gang, a Chinese Foreign Ministry spokesman, said that China was still a developing country and its priority was to develop its economy, alleviate poverty and raise living standards.

The refusal is a setback for President Obama’s efforts to gain support for an agreement at Copenhagen in December on a post-Kyoto Protocol treaty.

Hopes that the Copenhagen conference might result in tougher carbon reduction targets were further diminished when Japan failed to make a significant commitment to reduce emissions. Japanese Prime Minister Taro Aso said that Japan would cut greenhouse gas emissions by 15% by ’20 from levels in ’05. The Japanese commitment is only a 2% improvement on its commitment under Kyoto.

The NCC joined other agricultural and shipper groups in thanking Sens. Rockefeller (D-WV) and Kohl (D-WI) on their agreement to work together on rail legislation for consideration by the full Senate later this year. The comprehensive legislation would tackle both railroad anti-trust exemptions and Surface Transportation Board reformation.

Members on both the House and Senate side are contemplating rail legislation during this Congress. The House Judiciary Committee was scheduled to hold a markup of the House version of a bill that would eliminate the railroads anti-trust exemptions; however, the hearing was postponed to a later date.

In its June report, USDA increased US exports by 200,000 bales to 12.70 million bales. USDA left US ’08-09 cotton production and mill use unchanged at 12.82 million bales and 3.55 million bales, respectively. That estimated total offtake now stands at 16.25 million bales, generating ending stocks of 6.60 million bales and an estimated ending stocks-to-use ratio of 40.6%.

USDA projects a ’09-10 US crop of 13.25 million bales, unchanged from the May report. Mill use remains at 3.50 million while ’09-10 exports were lowered 200,000 bales to 10.80 million bales. The estimated total offtake stands at 14.30 million bales, resulting in ending stocks of 5.60 million bales. The projected ending stocks-to-use ratio is 39.2%.

For the ’08-09 marketing year, world production was lowered 790,000 bales to 107.09 million bales. World mill use was raised 420,000 bales to 110.50 million bales. Consequently, those world ending stocks are estimated to be 61.16 million bales for a stocks-to-use ratio of 55.3%.

USDA estimates ’09-10 crop year cotton production at 106.26 million bales, down 200,000 bales from last month’s estimate. Mill use is estimated at 113.42 million bales, down 120,000 bales from last month. World ending stocks are estimated to be 56.54 million bales for a stocks-to-use ratio of 49.9%.

The China Cotton Assoc. (CCA) launched a cotton promotion program during its 2009 China International Cotton Conference in Nanjing. Dr. Mark Lange, NCC president & CEO, and Allen Terhaar, executive director of Cotton Council International (CCI), were among the 700 participants from 20 countries attending. 

Called “China Cotton,” the promotion program is aimed at improving China’s cotton quality and the quality of Chinese cotton products while promoting Chinese manufactured cotton products to Chinese consumers.

The CCA acknowledged the work of CCI and Cotton Incorporated in cotton promotion and encouraged other cotton organizations to join in the promotion of cotton products. The US cotton representatives applauded the launch of the China Cotton program and offered collaboration on promotion efforts.

Net export sales for the week ending June 4 were 139,200 bales (480-lb). This brings total ’08-09 sales to about 13.6 million bales. Total sales at the same point in the ’07-08 marketing year were about 15.3 million bales. Total new crop (’09-10) sales are 821,900 bales.

Shipments were 401,700 bales, bringing total exports to date to 10.9 million bales, compared with the 11.1 million bales at the comparable point in the ’07-08 marketing year. With a little less than two months remaining in the marketing year, weekly shipments must average roughly 225,000 bales to reach the USDA projection of 12.7 million bales.

Adjusted World Price, SLM 11/16	44.46 cents	*
Fine Count Adjustment ('08 Crop)	0.21 cents
Fine Count Adjustment ('09 Crop)	0.01 cents
Coarse Count Adjustment	0.00 cents
Marketing Loan Gain Value	7.54 cents
Import Quotas Open	6
Special Import Quota (480-lb bales)	371,903
ELS Payment Rate	4.23 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East	61.23 cents
Forward 5 Lowest 3135 CFR Far East	65.98 cents
Coarse Count CFR Far East	61.20 cents
Current US CFR Far East	61.85 cents
Forward US CFR Far East	67.45 cents
'08-09 Weighted Marketing-Year Average Farm Price
Year-to-date (Aug.-April)	49.08 cents	**
** Aug.-July average price used in determination of counter-cyclical payment