Cotton's Week: October 16, 2009

Excessive rainfall in September/October is plaguing harvest efforts in the Mid-South and portions of the Southeast.

USDA’s latest estimates indicate that as of Oct. 11, only a very small percentage of the Mid-South crop had been harvested. Mississippi shows the largest delay, with only 2% of cotton acres harvested, well below the five-year average of 61%. Similar results are found in the other Mid-South states with Tennessee’s harvest only 2% complete, compared to a five-year average of 41%; Arkansas farmers have gathered 5% of the acres, down from the average pace of 50%; and Missouri stands at 1% complete, as compared to a normal pace of 46%. Only Louisiana has reached double-digits in their harvest with 23% complete. However, at this time of year, Louisiana normally would have harvested two-thirds of their crop.

Though not as pronounced, delays are evident in some of the Southeast. Alabama’s harvest is 5% complete, compared with the 32% average. In Georgia, 6% of the acres have been picked, down from the five-year pace of 19%.

In the Mid-South, the ’09 crop began under difficult conditions as a cool, wet spring delayed planting. Despite the challenging start, the crop generally progressed well through the summer months, but yield and quality losses are mounting in the face of a continued wet period that began in early September. Precipitation totals between Sept. 1 and mid-October are running well above normal in most locations in the Mid-South, with some areas having received four to five times their normal rainfall. The wet weather has been accompanied by cooler temperatures, further hindering the development of the crop.

In conjunction with state and regional producer interest organizations, the NCC is continuing to monitor the harvest situation. The full extent of the damage is difficult to assess until weather conditions improve to allow harvest to continue.

USDA began issuing final ’08-crop counter-cyclical payments (CCPs) for upland cotton. The final CCP payment rate for upland cotton is 12.58 cents per pound - the statutory maximum level. Producers who received a partial payment will receive 7.55 cents per pound, which is the final rate of 12.58 cents adjusted for the partial payment rate of 5.03 cents per pound.

The ’08 farm law requires ’08 final counter-cyclical payments to be paid as soon as practical following the end of the marketing year, but not sooner than Oct. 1, ’09. The National Agricultural Statistics Service (NASS) announced the final market year average price for upland cotton on Oct. 9, ’09 of 47.8 cents per pound.

USDA also announced it will not issue final ’08 counter-cyclical payments to farmers for peanuts, corn, grain sorghum, soybeans and oats because average prices for those commodities remain above levels that trigger these payments. An announcement on the final CCP for rice will not be made until Jan. 29, ’10 when NASS announces long-grain and medium and short-grain rice prices.

NCC members and Cotton Foundation members wanting to attend the '10 Beltwide Cotton Conferences Jan. 4-7 in New Orleans are urged to consider making early housing reservations online before the Oct. 23 deadline.

Housing reservations for all other attendees will begin on Nov. 3. To make housing reservations at either the New Orleans Marriott or the Sheraton New Orleans, go to the Beltwide home page, www.cotton.org/beltwide, and click on the housing link. Attendees also can complete "early" discounted registration for the '10 meetings by clicking on the registration link at www.cotton.org/beltwide.

Among the other areas on this site are: 1) the "2010 Program Overview," including a tentative meeting schedule that can be printed to help attendees with travel plans, 2) the '10 Beltwide Details that includes information on top attractions in New Orleans and 3) the Spouse Programs area with details on how to make plans for three spouse tours, "Riches on the River," "Cooking the Creole Way," and "Grand Manor and Garden District."

Agriculture Secretary Vilsack announced that USDA will distribute about $1.7 billion in Conservation Reserve Program (CRP) rental payments to participants across the country in FY10.

Producers holding about 758,000 contracts on 424,000 farms will receive an average of $51.52 per acre. The number of contracts is higher than the number of farms because producers may have multiple contracts on a single farm.

Currently, enrollment stands at approximately 31 million acres, making CRP the largest public-private partnership for conservation and wildlife habitat in the United States. Complete enrollment data are available at www.fsa.usda.gov/Internet/FSA_File/apportstate.pdf.

On Oct. 15, the House Financial Services Committee approved H.R. 3795 -- the Over-the-Counter Derivatives Markets Act of 2009. Before being considered by the entire House, the measure must be approved by the Agriculture Committee which has scheduled a business meeting for Oct. 21 to mark up its version of the legislation. A draft was released by the Agriculture Committee on Oct. 9.

The legislation approved by the Financial Services Committee would require for the first time that derivatives used to speculate or to hedge a financial position be traded on an exchange and cleared. Until now, derivatives have been traded privately, free of almost all regulation. The market for the products has grown dramatically and some experts now value their worth at nearly $600 trillion.

The bill also would give oversight authority of derivatives to the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC). Specifically, the SEC would have jurisdiction over securities-based contracts and the CFTC over the rest. The agencies would have 180 days to interpret that approach to joint regulation, after which the Treasury Dept. would be responsible for issuing final rules. The legislation allows contracts purchased by “end-users” to mitigate commercial risk to be traded over-the-counter but be subject to reporting requirements. Derivatives traded between dealers and “large market participants” also known as a "major swap participant" would be required to be traded on an exchange and settled through a central clearinghouse.

The bill defines a major swap participant as any party that maintains a substantial net position in swaps for reasons other than hedging commercial-business risk. A major swap participant also would include parties whose positions create “such significant exposure to others that [they] require monitoring.” Swap dealers and major swap participants would have to register either with the SEC or the CFTC, or possibly with both. Trades not accepted by a clearinghouse would be subject to higher reserves and margins than cleared transactions. Non-cleared transactions also would have to be reported to a “trade repository.”

The SEC and the CFTC would be charged with setting capital requirements for nonbanks in such transactions. Banking regulators would set the levels for banks. The levels set by the CFTC and SEC would have to be “as strict or stricter” than those set by the banking regulators, according to the bill. Regulators would not be required to set margins for trades in which one counter-party is neither a dealer nor major swap participant, and clearing would not be mandated for such transactions. If one counter-party is an “end-user,” a commercial entity seeking to hedge business risk, the use of non-cash collateral must be allowed.

At a meeting of the Pesticide Program Dialogue Committee (PPDC), EPA officials presented ideas for a prototype permit for certain pesticide applications under the Clean Water Act (CWA).

In Jan. ’09, the Sixth Circuit Court of Appeals vacated an EPA rule which exempted such pesticide applications from permitting and later issued a stay of the mandate so that permitting will not be required until April ’11. EPA plans to publish its prototype in April ’10 for public comment and to release the final permit in December of that year in preparation for the effective date.

EPA’s Office of Water is taking a narrow interpretation of the court’s ruling in saying that permits will be required only for applications made directly to water (e.g. mosquito larvicides), or over water (e.g. forestry uses), including near water (e.g. ditch bank vegetation control). EPA is evaluating at least the following pesticide use categories which it believes fall under the ruling:

• Mosquito control
• Aquatic weed control
• Vegetation control along ditch banks/irrigation canals
• Pesticides used in wide area insect suppression (e.g. boll weevil eradication) or aquatic invasive plant species
• Pesticides used in forestry programs when applied over water; and
• Products applied to water to kill fish, mussels or other invasive aquatic species.

The Agency is claiming that production agriculture will not be affected by this ruling because the CWA specifically exempts agricultural stormwater runoff and irrigation return flow.  However, two of the above-listed categories already will include some agricultural activities.

EPA estimates that approximately 5.6 million such applications are performed annually by 365,000 applicators. These permits will result in a significant increase in workload for federal and state regulatory programs which currently issue about 15,000 permits per year.

EPA is the permitting authority for Maine, Idaho, New Hampshire, Alaska and New Mexico as well as most territories, tribal lands, and certain federal facilities. All other states have been authorized to issue their own CWA permits. State-issued permits must meet all CWA requirements but can be more stringent as the state determines.

EPA also is considering a general permitting process. Under a general permit, a person intending to be involved in one or more of the regulated activities would file a Notice of Intent (NOI) and would be covered starting 10 days after receipt of a complete form. The NOI provides coverage for all future pesticide applications for that category and in that geographic area for the life of the General Permit (five years). Emergency applications can be performed in advance of a NOI submission, provided all other conditions are met in the permit.

The prototype permit contains conditions for: its scope; NOIs; effluent limits, including provisions to minimize pesticide discharges such as non-chemical alternatives; monitoring for signs of adverse effects on non-target organisms; reporting including pesticides used, locations treated, quantities, and pests targeted; and record keeping.

To view the presentations from the meeting, go to http://www.epa.gov/pesticides/ppdc/2009/october/october09.html.

The PPDC, originally established in 1995, is a forum which includes environmental and public interest groups, pesticide manufacturers, user and commodity groups, public health and academic institutions, Federal and State agencies, and the general public. Its mission is to provide feedback to the pesticide program on various pesticide regulatory, policy and program implementation issues. Cannon Michael, a Los Banos, CA, producer, is the NCC representative on this advisory board.

Net export sales for the week ending Oct. 8 were 74,800 bales (480-lb). This brings total ‘09-10 sales to slightly more than 3.8 million bales. Total sales at the same point in the ’08-09 marketing year were about 6.4 million bales. Total new crop (’10-11) sales are 88,900 bales.

Shipments were 227,900 bales, bringing total exports to date to 1.9 million bales, compared with the 2.5 million bales at the comparable point in the ’08-09 marketing year.