Cotton's Week: October 30, 2009

NCC Chairman Jay Hardwick is scheduled to meet Members of Congress and staff the week of Nov. 2 to discuss a number of critical issues and concerns including disaster assistance, trade policy, farm bill implementation, climate change legislation and food safety.

He will: 1) convey the deep concerns growers, ginners, warehousers, cottonseed handlers and related agribusinesses have about the significant financial losses resulting from the rain-delayed harvest of cotton and other crops in the Mid-South, particularly Arkansas, Mississippi and Louisiana; 2) remind members that losses resulting from the ’08 hurricanes and the severe drought in S. Texas also resulted in severe financial losses which have not been addressed; and 3) express the industry's grave concerns about the regulatory drought in California which has resulted in serious financial damage to farms and related businesses as well as created massive unemployment.

In the Mid-South, excessive rains, which have resulted in historic delays in harvest, will force some acres to be abandoned completely, and on harvested acres, cause significantly reduced yields and quality for both lint and seed. Gins, warehouses and other businesses that rely on cotton production will suffer substantial financial losses due to reduced volume.

The NCC and its affiliated organizations are committed to work with local leaders, organizations and government agencies to ensure loss data are accurately collected and communicated to appropriate officials in a timely manner.

As soon as the losses can be documented, the NCC urges: 1) local officials to initiate steps to obtain Secretarial disaster declarations, thus triggering assistance programs and 2) all agencies to fully utilize existing programs and authorities to provide financial assistance to growers and related agribusinesses.

The ’08 farm law includes a permanent disaster assistance program (SURE) and NCC will continue to urge USDA to: (1) act expeditiously to implement the provisions of the new law and (2) re-evaluate the ability to make advance payments.

However, initial NCC staff evaluations, conducted in advance of publication of the necessary implementing regulations, confirm that the new disaster program has significant shortcomings, including: (1) payments for ’08 losses will not be available until early ’10 and ’09 losses can not be made until late ’10 or early ’11; (2) the payment rates based on revenue shortfalls and tied to crop insurance coverage will provide very little meaningful financial assistance to growers with significant losses and none to growers with shallow losses; and (3) there are no provisions to assist ginners, warehousers and other businesses for their disaster-related losses. These shortcomings are not a reflection of poor Congressional planning, but rather they are the result of budget constraints placed on the program drafters during the ’08 farm bill debate.

It also should be noted that in spite of continued efforts to improve the program for Sunbelt crops, including cotton, crop insurance is often too expensive for the coverage offered so many producers purchase minimum coverage only because lenders generally require it to qualify for production loans.

In advance of his meetings, Chairman Hardwick said, "The cotton industry recognizes the political, policy and budget challenges associated with requesting Congress to approve ad hoc disaster assistance, but if there is insufficient financial assistance available under existing authority, the industry will work with Congress to promote enactment of emergency disaster assistance legislation at the appropriate time. We will make every effort to insure that legislation addresses losses across the

Cotton Belt resulting from numerous natural disaster and regulatory actions. My visit next week will likely be the first in a number of efforts to convey accurate information to our friends in Congress and the Administration. I am pleased that representatives from our affiliated producer organizations in Mississippi , Louisiana and Arkansas will also be in Washington next week. I look forward to working with them and our friends in other national commodity and general farm organizations on this serious matter. I must caution, however, that the last ad hoc disaster assistance measure was approved in 2007, before the enactment of permanent disaster assistance (SURE),  and covered losses suffered in one of three years at the producer's option - 2005, 2006 and 2007.”

Due to budget constraints, the most recent assistance provided coverage only for losses in excess of 35% at 42% of the average price. Last year's effort by Sens. Landrieu (D-LA), Lincoln (D-AR), Cochran (R-MS) and others to approve assistance for hurricane losses was not successful in spite of strong support by NCC and other groups, suggesting that this year may again be a challenging environment.

The NCC submitted comments to USDA’s Natural Resource Conservation Service (NRCS) regarding the Conservation Stewardship Program (CSP). Prior to submittal, the NCC’s Conservation Task Force met via conference call to discuss the regulation and areas of concern.

NRCS recently held the first signup for the new CSP and received applications for more than 30 million acres.

While the first sign up was a success, the NCC still has some major concerns in the published regulations. These concerns include limitations on contract payments that were not included in the statutory language passed by Congress, further clarification to the resource conserving crop rotation and the inability to modify contracts after they are signed.

In addition, the NCC encouraged USDA to modify a section of the rule that only allowed the individual listed as the operator of a farm in Farm Service Agency records to apply for the CSP as other members of a joint operation should still be eligible.

NRCS plans to publish a Final Rule in early ’10, and the NCC will continue to work with NRCS as the regulations move forward.

Producers are reminded that to receive a ballot and be eligible to vote in the current Cotton Research and Promotion Act referendum, USDA is requiring a '08 sales receipt to cast an eligible ballot.

The referendum, which runs through Nov. 10, is to determine if Kansas, Virginia and Florida should be designated as separate "cotton producing states." If approved, each of these states would be given representation on the Cotton Board.Producers can obtain ballots at their local Farm Service Agency offices.

The NCC urges producers to vote in favor of the referendum.

Net export sales for the week ending Oct. 22 were 150,800 bales (480-lb). This brings total ’09-10 sales to about 4.0 million bales. Total sales at the same point in the ’08-09 marketing year were about 6.8 million bales. Total new crop (’10-11) sales are 126,700 bales (480-lb.).

Shipments for the week were 122,700 bales, bringing total exports to date to 2.1 million bales, compared with the 3.0 million bales at the comparable point in the ’08-09 marketing year.

In anticipation of Senate action on food safety legislation, the NCC and the National Cotton Ginners Assoc. have signed a letter with 24 other agricultural organizations sent to the Senate Committee on Health, Education, Labor, and Pensions.

The House previously passed H.R. 2749, the Food Safety Enhancement Act, sponsored by Rep. Dingell (D-MI) (see 7/31 Cotton’s Week). The Senate is expected to consider a companion bill offered by Sen. Durbin (D-IL) which is considered to be less onerous than the House version. Both bills would affect cotton gins and oilseed processors.

The letter lists objectionable provisions of H.R. 2749 which include facility fees, a precautionary threshold for suspension of a facility’s registration or cease distribution and quarantine authorities, FDA access to facility records, delegation of authority to the district office level, and product tracing requirements.

The letter recommends or endorses provisions of S. 510. These provisions include exemptions for: 1) farms, food, livestock and poultry intended for slaughter, 2) state-inspected meat and poultry processors, and 3) facilities regulated by the USDA under other food safety authorities; and implementation of certain provisions through rule making rather than guidance documents; an appropriate risk-based threshold for FDA to access facility records; the adoption of more science-based thresholds in provisions addressing hazard analyses; and, flexibility in inspection frequencies of facilities not deemed to be high risks. The full letter can be viewed in the Issues Members area of the NCC’s web site, www.cotton.org.

Committee Chairman Harkin (D-IA) has stated that he would like to mark up the bill before Thanksgiving, but Senate Majority Leader Reid (D-NV) has said that there is no floor time for food safety unless there is some resolution on health care.

The NCC has joined the National Council of Textile Organizations (NCTO) and other textile, apparel and fiber organizations in a second letter to Secretary of State Clinton warning that billions of dollars in textile and apparel trade between the United States and Honduras is seriously jeopardized by the continuing political crisis. Recent statistics indicate apparel imports from Honduras have fallen by 30% and US exports have declined by a similar percentage, or $165 million.

The letter explained that “credit, insurance and other financing costs associated with moving goods in and out of Honduras are at record levels as the financial sector has lost confidence that the crisis will be resolved soon.” As Cotton’s Week went to press, there were reports that negotiations between Honduras officials may lead to a positive resolution.

The NCC has joined a broad coalition, including textile and apparel firms and organizations, in urging Congress to take expeditious action to renew the Andean Trade Preference Act (ATPA), which is set to expire on Dec. 31, ’09.

Until Congress approves individual Free Trade Agreements (FTA) with all Andean countries, it is critical to extend the ATPA to avoid an unnecessary lapse in benefits which would be highly disruptive to trade between the US and the ATPA countries.

While calling for a long term extension of the ATPA to avoid disruption of trade, the letter also urges Congress to move to approve the US-Colombia FTA to provide “permanent, reciprocal treatment of products traded between the US and Colombia.”

The NCC joined a broad coalition of commodity, livestock and general farm organizations in supporting the confirmation of Dr. Isi Siddiqui, nominated to serve as chief agricultural trade negotiator in the Office of the US Trade Representative (USTR), and Michael Punke, nominated to serve as US Ambassador to the World Trade Organization (WTO) and Deputy US Trade Representative.

The Senate Finance Committee has scheduled a hearing on both nominations on Nov. 4.

Most recently, Dr. Siddiqui has been a member of the staff of CropLife America, the organization of US crop protection product manufacturers.

Punke has served on the staff of Sen. Baucus (D-MT) and as a USTR staff member. If confirmed, he will be based in Geneva and responsible for coordinating US on-site negotiating efforts during the Doha Development Round negotiations.

Adjusted World Price, SLM 11/16	51.98 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	0.02 cents
Import Quotas Open	13
Special Import Quota (480-lb bales)	822,646
ELS Payment Rate	8.97 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East	68.35 cents
Forward 5 Lowest 3135 CFR Far East	NA
Coarse Count CFR Far East	72.10 cents
Current US CFR Far East	75.60 cents
Forward US CFR Far East	NA
'08-09 Weighted Marketing-Year Average Farm Price
Final Marketing Year Average Price	47.80 cents	**