Cotton's Week: September 11, 2009

Sen. Blanche Lincoln (D-AR) was named to chair the Senate Committee on Agriculture, Nutrition, and Forestry, replacing Sen. Harkin (D-IA). She will be the first female to chair that Committee in the panel’s 184-year history.

“Senator Lincoln cares deeply about rural America and has worked diligently on behalf of production agriculture, nutrition programs and conservation initiatives,” NCC Chairman Hardwick said in a congratulatory statement. “She will be an outstanding leader of the Senate Agriculture Committee!”

Former NCC Chairman Larry McClendon, an Arkansas producer and ginner, said, “No Senator has worked harder or cares more about production agriculture, nutrition and conservation than Senator Lincoln,” McClendon said. “She will be an outstanding leader of U.S. agriculture as she demonstrated working in a bipartisan manner with Senator Saxby Chambliss (R-GA) on the 2008 Farm Bill.”

In the wake of the recent ruling in the Brazil WTO case, Sen. Chambliss (R-GA) and Rep. Neugebauer (R-TX) met separately with USTR Ambassador Kirk to discuss the implications of the Arbitration Panel’s decision. Both Congressional leaders emphasized that a new compliance panel is necessary in order to fully evaluate the market and policy changes that have occurred since ’05. Reports indicate that USTR also was encouraged to include the cotton industry in any deliberations regarding future steps in the ongoing dispute.

The NCC continues to brief members of Congress regarding the decision and urges that stability in farm programs is essential and must be maintained.

Net export sales for the week ending Sept. 3 were 149,200 bales (480-lb). This brings total ’09-10 sales to approximately 3.4 million bales. Total sales at the same point in the ’08-09 marketing year were approximately 4.8 million bales. Total new crop (’10-11) sales are 87,600 bales.

Shipments were 246,600 bales, bringing total exports to date to 928,900 bales, compared with the 1.3 million bales at the comparable point in the ’08-09 marketing year.

In its September crop report, USDA estimated a ’09-10 US cotton crop of 13.44 million bales, up 230,000 bales from the August report. Upland production was put at 13.07 million bales and ELS production at 367,000 bales. Harvested area was estimated at 7.7 million acres, implying an abandonment rate of 15.43%. The national average yield per harvested acre was estimated to be roughly 835 pounds, four pounds below the five-year average.

On a regional basis, the Southeast crop is estimated at 3.33 million bales, based on harvested acres of 1.87 million and a regional average yield of 857 pounds, 85 pounds above the five-year average for the region. In the Mid-South expected production is 3.26 million bales. Harvested area is estimated to be 1.55 million acres and an expected yield of 1,006 pounds per harvested acre. The Southwest upland crop is an estimated 5.79 million bales. Expected harvested area is 3.93 million acres and the regional average yield is 707 pounds, 14 pounds below their five-year average of 721 pounds per harvested acre. Upland production in the West is an estimated 698,000 bales with harvested area of 237,000 acres and a regional average yield of 1,414 pounds, 39 pounds higher than the region’s five-year average.

The ELS crop is an estimated 367,000 bales. Harvested area is pegged at 146,000 acres with an average yield of 1,205 pounds per harvested acre. State-level results are given in the table.

US Cotton Crop, ’09-10
	PLANTED ACRES Thou. 1/	HARV. ACRES Thou.	YIELD PER HARV. ACRE Lb.	5-YEAR AVG. YIELD Lb.	480- POUND BALES Thou.
UPLAND
SOUTHEAST	1,892	1,865	857	772	3,330
Alabama	255	250	806	668	420
Florida	82	81	830	745	140
Georgia	1,000	990	897	792	1,850
North Carolina	375	370	824	813	635
South Carolina	115	110	720	736	165
Virginia	65	64	900	867	120
MID-SOUTH	1,620	1,553	1,006	945	3,255
Arkansas	520	500	1,056	1,052	1,100
Louisiana	230	225	864	884	405
Mississippi	295	285	960	910	570
Missouri	275	263	1,132	997	620
Tennessee	300	280	960	836	560
SOUTHWEST	5,236	3,927	707	721	5,788
Kansas	36	32	720	543	48
Oklahoma	200	195	837	718	340
Texas	5,000	3,700	701	724	5,400
WEST	241	237	1,414	1,375	698
Arizona	140	139	1,450	1,412	420
California	71	70	1,495	1,414	218
New Mexico	30	28	1,029	960	60
TOTAL UPLAND	8,989	7,582	827	829	13,071
TOTAL ELS	150	146	1,205	1,267	367
Arizona	1	1	997	866	3
California	130	127	1,247	1,333	330
New Mexico	1	1	789	845	2
Texas	17	17	931	831	32
ALL COTTON	9,139	7,728	835	839	13,438
Source: USDA-NASS September Crop Production Report. 1/ Updated from June Acreage Report.

In its September report, USDA left US mill use unchanged at 3.50 million bales and raised exports 300,000 bales from the August report to 10.50 million bales due to decreased foreign competition. This generates a total ’09-10 offtake of 14.00 million bales. Ending stocks for ’09-10 are projected at 5.60 million bales for an ending stocks-to-use ratio of 40.0%.

For the ’08-09 crop year, USDA gauged US cotton production at 12.82 million bales. Estimated mill use was unchanged from the August report at 3.60 million bales. Exports were raised 80,000 bales from the August report to 13.28 million bales. Total offtake for the ’08-09 crop year is estimated at 16.88 million bales. Ending stocks were raised to 6.20 million bales, based on a survey of ’08-09 end-of-season stocks by the US Census Bureau.

The USDA September report lowered ’09-10 world production estimates 810,000 bales from the August report to 105.06 million. World mill use was lowered 20,000 bales to a projected 112.74 million bales. Consequently, world ending stocks for ’09-10 are projected to be 56.26 million bales for a stocks-to-use ratio of 49.9%.

In its first week back from August recess and immediately prior to Sen. Lincoln (D-AR) being named chairman, the Senate Agriculture, Nutrition, and Forestry Committee held a previously scheduled hearing that focused on the carbon market and trading under proposed climate change legislation.

CFTC Chairman Gensler stated that carbon contracts under a cap-and-trade plan would be “essentially the same” as those used for commodities or Treasury bills.  According to Gensler, the similarities of emissions permits to government-issued debt instruments and previous management of greenhouse-gas markets will position the CFTC to regulate carbon trading. Regulation and transparency of carbon trading were repeatedly emphasized in Gensler’s statements.

Frank Rehermann, chairman of the USA Rice Producers, was among several producers who questioned the legislation. "We are confronted with no economic upside under pending climate change legislation and plenty of economic downside," Rehermann said. The National Corn Growers Assoc. (NCGA) took a neutral position. According to past president Fred Yoder, NCGA is waiting on completion of an internal economic analysis of the Waxman/Markey bill.

Ranking Member Chambliss (R-GA) referenced a Texas A&M U. study that found that 71 of their 98 representative farms would sustain economic losses as a result of a cap and trade system. The study also concluded that carbon offsets, which are being promoted as a means for farmers to benefit from carbon caps, tend to benefit growers in northern Midwest and Plains states but do not offset higher input costs in the South and West.

Sen. Johanns (R-NE) said market volatility and higher fuel and fertilizer prices may make cap-and-trade practices a hardship for farmers. Sen. Lincoln (D-AR), who immediately following the hearing was named Agriculture Committee chairman, reiterated her concerns about passing cap-and-trade legislation this year.

The Agriculture Committee is one of more than half a dozen committees in the Senate that could weigh in on global warming legislation this fall. Chairman Lincoln brings a markedly different view of climate legislation than Sen. Harking (D-IA), the previous chairman. She affirmed that it “isn’t necessarily my preference to move forward on cap-and-trade this year.” But, she also indicated that she will want to have a hand in crafting portions of the bill, like the role of agriculture and regulation of the carbon market - two areas she’ll have more ability to shape from a role as Chairman. “If we do move forward … the regulation of carbon markets is something we need to get right,” Lincoln said.

Concerned that the cap-and-trade bill may increase costs for farmers too much, Lincoln has joined several of her Democratic colleagues in strongly recommending that the Senate proceed with renewable energy legislation by taking up the energy bill the Energy and Natural Resources Committee passed this summer. That bill does not include cap and trade provisions. She said she does not expect the Agriculture Committee to markup a climate bill. Rather, the committee will have to make recommendations to the Environment and Public Works Committee, chaired by Sen. Boxer (D-CA), which is expected to do the majority of work on the bill. Lincoln also said she would be open to more hearings on the issue.

President Obama announced his intent to nominate Harris Sherman to be undersecretary of Agriculture for Natural Resources and Environment. The undersecretary oversees the US Forest Service and the Natural Resources Conservation Service.

Sherman is currently executive director of the Colorado Dept. of Natural Resources, where he oversees the state's energy, water, wildlife, parks, forestry and state lands programs.

In the spring, Obama tapped Homer Lee Wilkes, a Mississippi state conservationist, for the agriculture post, but Wilkes declined the nomination.

President Obama announced his intent to nominate Scott O’Malia to serve as commissioner of the Commodities Futures Trading Commission (CFTC). O’Malia is currently the minority clerk of the Senate Subcommittee on Energy and Water Development, where he has focused on expanding US investment in clean energy technologies.

Prior to joining the Appropriations Committee, O’Malia served as professional staff on the Senate Energy and Natural Resources Committee where he focused on energy trading markets and enhancing domestic oil and gas production. Previously, President Obama announced his intent to nominate current Commissioners Bart Chilton and Jill Sommers to serve new terms. All nominees have to be confirmed by the Senate Agriculture Committee.

In a related development, CFTC Chairman Gensler announced the appointment of Steven Schoenfeld to serve as director of the market oversight division. Schoenfeld was president of the consulting firm Global Index Strategies.

President Obama announced the nomination of Michael Punke to serve as the deputy United States trade representative based in Geneva. Punke will serve as the lead day-to-day negotiator for the Doha round and other US interests at the WTO, including dispute settlement cases. Punke previously served at USTR in the ’90s as a senior adviser and was director for International Economic Affairs at the White House from ’93-95.

In a related development, reliable sources indicate Isi Siddiqui is the leading candidate for the position of USTR's chief agriculture negotiator. Siddiqui currently serves as vice president of Science and Regulatory affairs at CropLife America. He previously worked as a special assistant on trade issues to former Agriculture Secretary Dan Glickman during the Clinton Administration.

Adjusted World Price, SLM 11/16	46.55 cents	*
Fine Count Adjustment ('08 Crop)	0.00 cents
Fine Count Adjustment ('09 Crop)	0.00 cents
Coarse Count Adjustment	0.00 cents
Marketing Loan Gain Value	5.45 cents
Import Quotas Open	8
Special Import Quota (480-lb bales)	494,071
ELS Payment Rate	4.23 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East	62.92 cents
Forward 5 Lowest 3135 CFR Far East	NA
Coarse Count CFR Far East	65.37 cents
Current US CFR Far East	68.05 cents
Forward US CFR Far East	NA
'08-09 Weighted Marketing-Year Average Farm Price
Year-to-date (Aug.-July)	48.61 cents	**
** Aug.-July average price used in determination of counter-cyclical payment