Cotton's Week: November 13, 2009

Cotton's Week: November 13, 2009

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Preliminary Retaliation List Published

In the ongoing World Trade Organization (WTO) dispute regarding export credit programs and certain aspects of the upland cotton program, Brazil has released a preliminary list of 222 products that could be subjected to higher import tariffs if originating from the United States.

Under the Aug. 31 ruling by the WTO Arbitration Panel, Brazil is authorized to invoke retaliatory measures by imposing higher tariffs and could be allowed to seek cross-retaliation in areas such as intellectual property rights. The amount of retaliation Brazil is authorized to take is $147 million annually with respect to the US cotton program and an amount for the export credit guarantee program that will vary from year to year based on the size of that program. Brazil has claimed the export credit guarantee retaliation level will be about $650 million in ’10.

Among the 222 items, which are listed based on their code under the Harmonized Tariff System (HTS), there are three cotton categories. Two of the HTS codes are raw cotton fiber imports, and the third category represents cotton that is carded or combed. The product list also includes more than 60 textile codes, including fabric, cotton socks and cotton t-shirts.

In addition to the products list publication, Brazil has placed the Arbitration Panel’s award on the agenda of the next WTO Dispute Settlement Body’s meeting on Nov. 19, a necessary prerequisite for final retaliation authorization. Even with the that Body’s approval, it is reported that Brazil is not planning to actually retaliate until January.

According to the Global Trade Atlas, the value of Brazil’s imports from the United States in those categories was $2.7 billion in ’08, consisting primarily of manufactured goods. Brazil published the list in order to give Brazilian industry an opportunity to comment. Brazil also is taking steps internally to ensure it can retaliate against intellectual property rights and services. There is uncertainty whether the Brazilian government has the necessary authority to retaliate in these additional areas without enacting additional legislation.



Changes Issued for Storage Credits After CCR Invoice Date

A recent USDA communication has alerted cotton industry members of an upcoming change to the calculation of upland cotton storage credits for redemptions processed through the Centralized Cotton Redemption (CCR) process.

From the onset of CCR, storage credits for all CCR transactions have been calculated from the bale storage-start date to two days beyond the CCR invoice date. These extra two days of credits have been provided to compensate merchants for credits not provided if bales are released after the invoice date. This practice was initiated for various reasons but primarily because at the time, it was considered impractical to develop an invoice correction process.

A recent CCR invoice processing review indicates that very few bales are released past the invoice date. As a result, USDA is taking the following actions: 1) effective for CCR redemptions processed starting Nov. 20, ’09, the storage credits provided for all CCR transactions will be calculated from the bale storage-start date to one day beyond the CCR invoice date; and 2) CCC will revise CCR, to be effective likely within the next six months or so, so that if any bales are released beyond the invoice date, a refund equal to the correct storage credits will be calculated and disbursed to the party redeeming the cotton.



Cotton’s Week Email Exclusive

Beginning on Jan. 8, ’10, the Cotton’s Week newsletter will be distributed to NCC members by email only and no longer by regular mail. NCC members who have not yet provided the NCC with their email addresses should send them to memberservice@cotton.org as soon as possible.

The newsletter will continue to be posted on the NCC’s website, www.cotton.org, under the News and Events section, but will require a password. Passwords will be provided upon completion of the short form located at http://www.cotton.org/register/request-password.cfm.

Questions or requests for assistance should be directed to memberservice@cotton.org, area membership representatives or Marjory Walker in the Memphis office at 901-274-9030.



USDA Lowers ’09 Crop Expectations

In its November report, USDA estimated a ’09 US crop of about 12.50 million bales, down 502,000 bales from its October report. Upland production was estimated at 12.13 million bales and extra long staple (ELS) production at 367,000 bales. Harvested area was estimated at 7.73 million acres, implying a non-harvested area of 1.41 million acres, based on USDA’s acreage number. The resulting abandonment rate is roughly 15.39%. The national average yield per harvested acre was estimated to be roughly 776 pounds, 63 pounds below the five-year average. State and regional estimates are included in the accompanying table.

In the report, USDA projected the ’09-10 US mill use and exports were unchanged at 3.40 million and 10.50 million bales, respectively. This generates a total ’09-10 offtake of 13.90 million bales. Ending stocks for ’09-10 are seen at 4.90 million bales for an ending stocks-to-use ratio of 35.3%.

USDA’s ’09-10 world production estimates were lowered 1.04 million bales from the October report to 102.74 million bales. World mill use was raised 880,000 bales from the October report to a projected 113.52 million bales. Consequently, world ending stocks for ’09-10 are seen at 53.72 million bales for a stocks-to-use ratio of 55.8%.

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  

1,869 

849  

772 

3,305  

   Alabama

255  

250 

710  

668 

370  

   Florida

82  

81 

741  

745 

125  

   Georgia

1,000  

990 

873  

792 

1,800  

   North Carolina

375  

370 

921  

813 

710  

   South Carolina

115  

114 

737  

736 

175  

   Virginia

65  

64 

938  

867 

125  

MID-SOUTH

1,620  

1,553 

881  

945 

2,850  

   Arkansas

520  

500 

893  

1,052 

930  

   Louisiana

230  

225 

768  

884 

360  

   Mississippi

295  

285 

842  

910 

500  

   Missouri

275  

263 

949  

997 

520  

   Tennessee

300  

280 

926  

836 

540  

SOUTHWEST

5,236  

3,927 

645  

721 

5,276  

   Kansas

36  

32 

615  

543 

41  

   Oklahoma

200  

195 

825  

718 

335  

   Texas

5,000  

3,700 

636  

724 

4,900  

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  

7,586 

767  

829 

12,129  

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  

7,732 

776  

839 

12,496  

Source: USDA-NASS November Crop Production Report. 1/ Updated from June Acreage Report.



Climate Change Bill Introduced

A bill introduced on Nov. 4 by Sen. Stabenow (D-MI), a member of the Senate agriculture committee, would establish a domestic emissions offset program that would be incorporated into the cap-and-trade program proposed in the climate change bill (S. 1733) that was introduced by Sen. Boxer (D-CA).

Sen. Stabenow’s bill includes a list of 15 categories of emissions offset projects, such as methane capture from landfills, reduced tilling of farmland to reduce the release of greenhouse gases, afforestation or reforesting of land that was not forested as of Jan. 1, ’09, and carbon capture and storage. The bill is co-sponsored by Sens. Baucus (D-MT), Klobuchar (D-MN), Brown (D-OH), Harkin (D-IA), Begich (D-AK) and Shaheen (D-NH).

The Clean Energy Partnerships Act (S. 2729) would create a Scientific Advisory Committee that would recommend additional types of projects that would be eligible to produce offsets beyond those listed in the legislation. The projects would be overseen by USDA and EPA. USDA would oversee forestry and agriculture projects and EPA would oversee all other projects.

The bill also would establish three other programs: one designed to reward landowners for reducing greenhouse gas emissions, one that would expand funding for energy programs in the farm bill, and a research program for forestry and agricultural projects.

The program for landowners would be administered by the departments of Agriculture and the Interior and would provide incentives for owners to carry out projects such as no-till farming practices that reduce greenhouse gas emissions or projects that sequester greenhouse gases below the land. It is designed to help landowners who are not eligible to produce offsets either because they had greenhouse gas reduction programs in place early and are therefore not considered to have implemented additional practices, or because the methods used to reduce or sequester greenhouse gases are not yet included on the list of eligible project types.

The rural clean-energy program would authorize expanded funding for several existing programs that aim to “accelerate the development and deployment of technologies for expeditiously expanding domestic biofuels and bioenergy production.”

The research program would provide funding for research and demonstration projects designed to find new ways to reduce emissions or to implement carbon sequestration through agricultural and forestry projects.



Sales, Shipments Slip

Net export sales for the week ending Nov. 5 were 120,800 bales (480-lb). This brings total ’09-10 sales to about 4.4 million bales. Total sales at the same point in the ’08-09 marketing year were about 7.1 million bales. Total new crop (’10-11) sales are 157,000 bales.

Shipments for the week were 160,000 bales, bringing total exports to date to 2.5 million bales, compared with the 3.5 million bales at the comparable point in the ’08-09 marketing year.



Revised Congressional Schedule Set

House Majority Leader Hoyer (D-MD) has issued a new legislative calendar which includes roll call votes up to Christmas Eve.In a notice sent to members on Nov. 12, Hoyer advised that the House will be in session the weeks of Nov. 16, Nov. 30, Dec. 7 and Dec. 14. He also told members that votes are possible the week of Christmas, on Monday Dec. 21 and on Tuesday, Dec. 22.

The announcement seems to confirm the push by Democrats to pass health care legislation this year.

The House also has other business to complete this year, including finishing work on the remaining FY10 appropriations bills, so that an omnibus spending bill is not necessary. The current stopgap appropriations bill, which funds agencies and programs not covered by appropriations measures that already have been enacted, expires on Dec. 18. The appropriations measure funding USDA and related agencies for FY10 has been passed.



Export Promotion Funding Announced

Agriculture Secretary Vilsack announced that 70 US trade organizations received more than $234 million in FY09 to help promote American food and agricultural products overseas. Cotton Council International received $20,031,257 of that total.

The funding was allocated under the Market Access Program (MAP) and the Foreign Market Development (FMD) Cooperator Program, both administered by USDA's Foreign Agricultural Service. The MAP uses funds from USDA's Commodity Credit Corp. (CCC) to share the costs of overseas market development and promotional activities with US nonprofit agricultural trade organizations, state regional trade groups and cooperatives. Activities conducted with MAP funding include market research, consumer promotions for retail products, technical capacity building and seminars to educate overseas customers.

For more information about FAS's market development programs, contact the Office of Trade Programs at (202) 720-4327, or visit www.fas.usda.gov/mos/marketdev.asp.



Prices Effective Nov. 13-19, '09

Adjusted World Price, SLM 11/16

53.68 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

 0.00 cents


Import Quotas Open

13


Special Import Quota (480-lb bales)

823,224


ELS Payment Rate

  8.77 cents


*No Adjustment Made Under Step I

 

Five-Day Average



Current 5 Lowest 3135 CFR Far East

70.05 cents


Forward 5 Lowest 3135 CFR Far East

NA


Coarse Count CFR Far East

73.45 cents


Current US CFR Far East

77.40 cents


Forward US CFR Far East

NA


 

'09-10 Weighted Marketing-Year Average Farm Price  
 

Year-to-date (Aug.-Sept.)

54.14 cents

**

** Aug.-July average price used in determination of counter-cyclical payment 

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