CURRENT ISSUE ARTICLES

Task Force Updated on AMS Price Reporting Changes

ICE Commissions Delivery Locations Study

Agriculture Groups Convey Estate Tax Needs

Food Safety Report Prompts New Calls for FDA Legislation

Report Outlines Benefits, Risks of GE Crop Production

China Accused of Dumping Glyphosate

Sales, Shipments Steady

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Task Force Updated on AMS Price Reporting Changes

The NCC's Quality Task Force (QTF), chaired by Chuck Coley, a Vienna, GA, producer, convened by conference call to hear reports on planned changes in spot price reporting and the possible implications of these changes on the Commodity Credit Corp. loan schedule.

Barbara Meredith, with the USDA-AMS Cotton Program, briefed the group on the planned changes to the reporting of spot prices. The changes in reporting, which are scheduled to take effect on Aug. 1, ’10, include:

• changing the color and leaf groupings to mirror the groupings currently used in the premium and discount schedule for color grades 61, 71, 42, 52, 62, 43, 53, 63, 44, and 54; and
• reporting staple 36 and 37 separately in the Southeast, North Delta and South Delta markets.   

The other changes, scheduled to take effect on Aug. 1, 11, are: 

• combining quotes for staple length 26-29, 30 and 31 into one category, category 26-31, in the East Texas, Oklahoma and West Texas markets;
• adding a category for staple 38 and longer to all markets; and
• changing the strength and uniformity categories to whole number ranges. 

Scott Sanford, with USDA’s Farm Service Agency, also provided a report on the potential implications of the above changes for future loan schedules. He indicated that some of the changes may be included with the ’11 schedule at the very earliest, with most if not all of the changes being included with the ’12 schedule.

At the meeting's conclusion, QTF Chairman Coley instructed NCC staff to plan a follow-up task force meeting in the summer to initiate more detailed discussions and seek industry consensus on loan schedule changes.

ICE Commissions Delivery Locations Study

The Intercontinental Exchange (ICE) recently commissioned Informa Economics, Inc. (“Informa”) of Memphis, TN, to analyze the adequacy of the existing cotton futures delivery points and to evaluate viable new locations.

ICE Futures U.S. cotton contracts have had five delivery locations for a number of years: Galveston and Houston, TX; New Orleans, LA; Memphis, TN; and Greenville/Spartanburg, SC. While the delivery locations have remained the same, the US cotton sector has undergone considerable changes.

Informa’s report provided the following delivery point characteristics that could stabilize the impact on the basis: 1) a large deliverable supply, 2) large capacity to receive delivery, 3) large number of accounts willing to participate in the delivery process, and 4) small set of geographic locations.

The report recommended discontinuation of certification service in New Orleans, Houston and Galveston, and Greenville. It pointed out that by centering delivery in Memphis and a new Texas location (Dallas or Lubbock), while also monitoring whether to reinstate a Southeastern delivery location in Georgia, the ICE can ensure that contract delivery is aligned with the industry.

At this time, ICE, along with its Cotton Committee comprised of industry participants, intends to analyze this study along with other analysis as it relates to current and potential new delivery points for the Cotton No. 2 contract. ICE stated, “such a study will be conducted deliberately and with great care to protect the integrity of the Cotton No. 2 contract which continues to function as an effective form of price discovery with convergence and liquidity.”

A copy of Informa’s Evaluation of Cotton Futures Delivery Locations prepared for ICE is at:  https://www.theice.com/publicdocs/futures_us/ICE_Cotton_Delivery_Locations_report.pdf.

Agriculture Groups Convey Estate Tax Needs

The NCC, along with other agricultural organizations, sent a letter to Senate Majority Leader Reid (D-NV) and Republican Leader McConnell (R-KY) expressing support for permanently raising the estate tax exemption to no less than $5 million per person and reducing the top rate to no more than 35%. The letter also noted the importance for the exemption to be indexed to inflation, provide for spousal transfers and include the stepped-up basis.

Last spring, 51 senators supported a budget amendment offered by Sens. Lincoln (D-AR) and Kyl (R-AZ) to provide a $5 million per person estate tax exemption and top estate tax rate of 35%. It likely will take 60 votes to pass permanent estate tax relief through the Senate.

If Congress fails to pass estate tax legislation, the exemption will be $1 million per person and the top rate 55% on Jan. 1, ’11. Senators are hopeful that the Senate Finance Committee will take up the estate tax changes in late Spring.

A copy of the letter is at http://www.cotton.org/upload/estatetaxes410.pdf.

Food Safety Report Prompts New Calls for FDA Legislation

Food safety legislation may have gotten a boost by a new federal report that found the Food and Drug Administration (FDA) failed to inspect most domestic food facilities over a five-year period and underscored the need for swift action on legislation designed to strengthen the agency's food safety oversight.

Sen. Harkin (D-IA), chairman of the Health, Education, Labor and Pensions (HELP) Committee, and Rep. DeLauro (D-CN), chairman of the House Agriculture Appropriations Subcommittee, said the House (H.R. 2749) and Senate (S. 510) food safety bills would revamp the way that FDA oversees the nation's food system.

The House passed its bill in July. A number of agricultural associations have expressed their concerns regarding H.R. 2749, saying that the bill would give FDA broad new powers to regulate the entire spectrum of the agricultural food system and, in many cases, without appropriate thresholds or accountability.

In the Senate, the NCC supported the bill introduced by Sen. Durbin (D-IL), which included less onerous provisions than the House bill. Harkin's committee approved S. 510 in November.

As approved by the committee, the Senate version of the food/feed safety legislation generally adopts a more science-and risk-based approach than the competing House version. Since then, the NCC, in collaboration with other agricultural organizations, has been working to include changes to a manager’s amendment that would be more favorable to production agriculture including cottonseed.

The NCC, along with 27 other associations, sent a letter to the HELP committee expressing concern for traceability or record-keeping requirements that would hinder traditional marketing on a commingled basis. In addition, NCC President Mark Lange sent Cotton Belt Members of HELP a letter outlining the cotton industry’s concerns including the traceability issue, indemnification for wrongful FDA actions, protection of proprietary business or security information, and FDA flexibility to alter the mandated inspection frequencies for facilities that are not deemed to pose a high risk.

Although the bill may go to the Senate floor the week of April 19, a new push for financial reform likely will take precedence. Sen. Harkin has been informed, though, that the manager’s amendment must be completed this week. It is expected that S. 510 will be voted on before the Memorial Day recess.

Report Outlines Benefits, Risks of GE Crop Production

In the first comprehensive report on how genetically engineered (GE) crops are affecting US farmers, the National Research Council found “substantial economic and environmental benefits - such as lower production costs, fewer pest problems, reduced use of pesticides, and better yields - compared with conventional crops.”

Improvements in water quality could prove to be the largest single benefit of GE crops, the report says. Insecticide use has declined since GE crops were introduced and farmers who grow GE crops use fewer insecticides and herbicides that may remain in soil and waterways. In addition, farmers who grow herbicide-resistant crops till less often to control weeds and are more likely to practice conservation tillage, which improves soil quality and water filtration and reduces erosion.

First introduced in ’96, GE crops now constitute more than 80% of soybeans, corn and cotton grown in the United States. A major problem identified by the panel was the potential for weed resistance in herbicide tolerant crops. GE crops could lose their effectiveness unless farmers also use other proven weed and insect management practices.

"Many American farmers are enjoying higher profits due to the widespread use of certain genetically engineered crops and are reducing environmental impacts on and off the farm," said David Ervin, professor of environmental management and economics, Portland State U., and chair of the committee that wrote the report. “However, these benefits are not universal for all farmers. And as more GE traits are developed and incorporated into a larger variety of crops, it's increasingly essential that we gain a better understanding of how genetic engineering technology will affect U.S. agriculture and the environment now and in the future.”

The higher costs associated with GE seeds are not always offset financially by lower production costs or higher yields, the report notes. The economic effects of GE crops on farmers who grow organic and conventional crops also need further study, the report says. For instance, organic farmers are profiting by marketing their crops as free of GE traits, but their crops' value could be jeopardized if genes from GE crops flow to non-GE varieties through cross-pollination or seed mingling.

Research institutions should receive government support to develop GE traits that could deliver valuable public benefits but provide little market incentive for the private sector to develop. Examples include plants that decrease the likelihood of farm runoff or plants that are resilient to changing climate conditions. For more information, visit: http://national-academies.org/studycommitteprocess.pdf.

China Accused of Dumping Glyphosate

Albaugh Inc. filed a petition with the US Dept. of Commerce and the International Trade Commission to impose anti-dumping duties on glyphosate imported from China. The privately-held manufacturer of crop protection products is headquartered in Ankeny, IA, and manufactures products in St. Joseph, MO. In ’06, Albaugh completed a $40 million glyphosate manufacturing facility in St. Joseph and tripled the size of its workforce.

Sales, Shipments Steady

Net export sales for the week ending April 8 were 289,600 bales (480-lb.). This brings total ’09-10 sales to about 10.7 million bales. Total sales at the same point in the ’08-09 marketing year were about 12.4 million bales. Total new crop (’10-11) sales are 692,800 bales.

Shipments for the week were 203,200 bales, bringing total exports to date to 7.3 million bales, compared with the 8.1 million bales at the comparable point in the ’08-09 marketing year.

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