In the ongoing efforts to resolve the trade dispute with Brazil, US officials announced the signing of a Memorandum of Understanding (MOU) between the two governments. With the conclusion of the MOU ahead of the April 22 deadline, Brazil announced that countermeasures will not be imposed for at least 60 days.
The MOU establishes a fund for technical assistance and capacity building related to the cotton sector in Brazil. Under the MOU, the fund also may be used for activities related to international cooperation in the cotton sector in countries in sub-Saharan Africa, in Mercosur member and associate member countries, in Haiti, or any other developing country as the parties may agree upon. The MOU also includes procedures to ensure transparency and auditing of the fund’s expenditures. In addition, the United States has insisted that no funds be used to make direct payments to Brazilian farmers.
The NCC welcomed continued progress along the previously agreed path to resolve the dispute. The US cotton industry will continue to support engagement and consultation between the affected/interested parties.
Farm Bill Hearing Schedule Announced
A schedule has been released of upcoming House Agriculture Committee field hearings to review US agriculture policy in advance of the ’12 farm bill.
The hearings, which are subject to change, include:1) Friday, April 30 - 1 pm (CDT) at the Iowa State Fair Grounds, Penningroth Sale Center in Des Moines, IA; 2) Saturday, May 1 - 1 pm (MDT) at Northwest Nazarene U., Old Science Lecture Hall in Nampa, ID; 3) Monday, May 3 - 9 am (PDT) at Fresno City Hall Council Chambers, 2nd Floor in Fresno, CA; and 4) Tuesday, May 4 - 8 am (MDT) Laramie County Community College Center for Conferences and Institutes, Centennial Room 130 in Cheyenne, WY.
ACP Hears Issues, Challenges
At the initial ’10 meeting of the American Cotton Producers (ACP), chaired by Robstown, TX, producer Jimmy Dodson, producer leadership heard several interesting presentations on cotton issues.
NCC Chairman Eddie Smith addressed the Dallas meeting and reviewed some of the near-term challenges facing the NCC, including the Brazil WTO case and the initiation of farm policy discussions. Smith reported that the NCC recently had re-appointed its Farm Policy Task Force which would be meeting as needed to provide input to the NCC Board as the farm policy debated progressed.
David Hastings, CEO of Mt. Vernon Mills and newly-elected chairman of the National Council of Textile Organizations, addressed several important textile industry policy priorities, including concerns about Haitian preference legislation affecting textile imports. He also reported on his company’s operation including some new yarn products that could have military applications.
Darryl Earnest and other USDA Agricultural Marketing Service staff provided a detailed report on USDA classing activities, including discussion of the ’10 classing fees which are expected to remain unchanged from ’09 and new spot price reporting categories. Scott Sanford, with USDA’s Farm Service Agency, presented the ’10 schedule of loan premiums and discounts and discussed the possible implications of the spot price reporting changes on the loan schedule.
Gary Adams, NCC vice president of Economics & Policy Analysis, reported on the recent meeting of the NCC’s Quality Task Force which recently discussed the spot price reporting changes and the potential loan schedule implications (see web version of 4-16 Cotton’s Week).
NCC President Mark Lange reviewed the status of the Brazil WTO case and reported on the bi-lateral agreement between Brazil and the United States. He also discussed the longer term implications of the Brazil case on farm policy discussions.
John Maguire, NCC senior vice president of Washington Operations, reported on the status of the farm policy debate, including the recently held House Agriculture Committee farm bill hearing where testimony was presented by Agriculture Secretary Vilsack. Maguire also reviewed on the remaining field hearing schedule.
The ACP discussed some of the external factors that will impact the next farm bill debate. Chairman Dodson reported that he would re-appoint an ACP Farm Policy Task Force to advise the ACP.
The ACP also discussed cotton futures delivery points and agreed to contact the Intercontinental Exchange (ICE) as a follow-up to last year’s request for consideration of a Dallas delivery point. It was noted that ICE had recently received the results of an Informa study on this issue.
Support Conveyed for Borrower Eligibility Bill
The NCC, along with other agricultural organizations, sent a letter to Sen. Kohl (D-WI) to express support for legislation that would protect eligibility for farmer borrowers participating in Farm Service Agency (FSA) guaranteed farm loan programs.
The ’08 farm law suspended borrower term limits on FSA guaranteed farm loan programs through the end of ’10. However, without action by Congress, those term limits would resume on Jan. 1, ’11, immediately making many producers ineligible for additional credit through these programs.
FSA-guaranteed farm loan programs are designed to serve those producers who generally would not otherwise qualify for credit. The price downturns in several farm sectors and the recent widespread weather disasters have placed increasing financial hardship on many producers.
The letter noted that continued access to FSA credit programs is a critical issue – and if abruptly made ineligible for the FSA-guaranteed farm loan programs, many of these producers may simply be unable to continue farming.
Senate Panel Approves Budget Resolution
The Senate Budget Committee approved, on a 12-10 vote, a FY11 budget resolution that outlines tax and spending policies and determines the amount that Congress can allocate through the 12 appropriations bills.
The measure would set the spending cap at $1.122 trillion, which is $4 billion below the President’s request. Budget Committee Chairman Conrad ( D-ND) said his proposal “begins to put the nation back on a sound fiscal course” by reducing the deficit from $1.4 trillion, or 9.8% of gross domestic product, in FY10 to $545 billion, or 3% of GDP, in FY15. It would freeze non-security discretionary spending for three years, and would cut taxes by $780 billion.
After the markup, Sen. Conrad said it was too early to gauge whether he has the votes to adopt the budget resolution in the Senate, but added, “I feel very good about it.”
House leaders have not decided when to begin consideration of a budget resolution.
Senate Ag Committee Passes Derivatives Bill
The Senate Agriculture, Nutrition & Forestry Committee approved a bill designed to bring transparency to derivatives trading.
The Wall Street Transparency and Accountability Act is expected to be folded into a larger financial reform bill and subjected to a procedural vote by the Senate on April 26. One Republican, Sen. Grassley (IA), joined 12 Democrats in recommending the bill’s approval.
Derivatives currently trade virtually unregulated and with no reporting requirements. Critics argue that derivatives, which in theory are risk-management tools, also are traded by speculators and are lucrative for the firms that deal them and were responsible for much of the damage resulting from the near collapse of the financial system in ’08.
The bill approved by the Agriculture Committee would require a certain segment of derivatives to be cleared by a central repository and traded on a registered exchange or “swap execution facility.” Exemptions from the clearing requirement would be available for entities hedging a commercial risk and also for contracts deemed to be so customized that no clearinghouse would accept them. There is no definitive data for how much of the $600 trillion-plus total of derivatives that exemption would cover.
The bill also contains a clause that would prohibit federal assistance, including federal deposit insurance and access to the Federal Reserve discount window, for banks that act as derivatives dealers. Banks that want to create the products and make a market for them would have to spin off that activity which, in theory, lessens the “systemic risk” to the entity and the economy if the bank is large enough.
Committee Chairman Lincoln (D-AR) said after the vote that “banks need to decide if they want to be banks or if they want to engage in the risky trading that caused the collapse of firms such as AIG.” The Agriculture Committee has jurisdiction because it has oversight of futures trading, which initially involved agricultural commodities and the Commodity Futures Trading Commission (CFTC).
If the bill is passed by the Senate, however, it still must be reconciled by a conference committee with legislation passed by the House last December. The Committee voted along party lines to reject an amendment offered by ranking member Sen. Chambliss (R-GA) who said his amendment had several differences with Chairman Lincoln's proposal: a broader exemption for end-users from clearing and exchange trading requirements, no denial of federal provisions for banks that deal swaps, and less stringent capital requirements for uncleared swaps.
Sen. Chambliss said one of his concerns was “unintended consequences” if the end-user exemption were too narrow. “I am not referring to large dealers … they would not get an exemption from clearing. I am talking about entities like those in each of our states that actually use derivatives to hedge their interest rate risk,” he said at the hearing. Chambliss cited Farm Credit System institutions as one such entity. But he also said that “the handful of remaining issues that stand between us and a bipartisan bill do not constitute some stark choice. We probably generally agree on 90 percent of the specifics.”
CFTC Chairman Gensler was present at the committee markup and told reporters the measure was “overall a very strong package.”
Treasury Secretary Geithner called the action “another step towards comprehensive financial reform.” He said in a statement that the bill would “bring derivatives trading out of the dark, provide strong oversight of market participants, and combat fraud, abuse, and manipulation.”
Also, Rep. Lucas (R-OK), ranking member of the House Agriculture Committee, said he was “disappointed” in his Senate counterpart's product. Lucas said that “if the bill adopted by the Senate Agriculture Committee becomes law, it will make it too costly for end-users to manage risk.” He said he and his House colleagues, who passed a bill with a broader concept of which end-users would get exemptions, “widely agreed that the end-users did not cause the financial crisis and should not be regulated like they did.”
June 1 Deadline for DCP,
ACRE
Signup
USDA’s Farm Service Agency (FSA) is reminding producers that June 1 is the deadline to complete signup for the ’10 direct and counter-cyclical payment programs (DCP) and the Average Crop Revenue Election Program (ACRE) for program crops. CCC-509 must be completed by June 1, ’10 for program eligibility including all signatures from shareholders. There is no provision for late signup.
Producers are urged to contact their FSA county office for more information regarding signup for these programs.
Producers Reminded to File Annual Report of Acreage
USDA Farm Service Agency (FSA) is reminding producers to submit their annual report of acreage to their countyFSA office to meet FSA program eligibility requirements.
Accurate acreage reports are necessary to determine and maintain eligibility for various programs, such as the Direct and Counter-Cyclical Program and newer programs authorized in the ’08 farm law. These include the Supplemental Revenue Assistance Payments Program (SURE); Average Crop Revenue Election Program (ACRE); Livestock Forage Disaster Program (LFP); Tree Assistance Program (TAP); and Emergency Assistance for Livestock, Honeybees, and Farm Raised Fish Program (ELAP).
Acreage reports are considered to have been filed on time when they are completed by the applicable final crop reporting deadline, which may vary from state to state. Prevented acreage must be reported within 15 calendar days after the final planting date. Failed acreage must be reported before the disposition of the crop. Producers should contact their countyFSA office if they are uncertain about reporting deadlines.
Late-filed provisions may be available to producers who are unable to meet the reporting deadline as required. Reports filed after the established deadline must meet certain requirements to be accepted and may be charged late fees.
Producers should visit their countyFSA office to complete acreage reporting. For questions on this or any FSA program, including specific crop reporting deadlines and planting dates, producers should contact their countyFSA office. More information on FSA programs is at: www.fsa.usda.gov.
USDA Releases ’10 Crop Loan Schedule
USDA’s Farm Service Agency (FSA) released the premium and discount schedules for the ’10 upland and extra long staple (ELS) cotton crop. The schedules are used by the Commodity Credit Corp. (CCC) in making nonrecourse marketing assistance loans to cotton producers and include factors such as grade, staple length, color and leaf qualities.
The ’10 crop schedule of differentials is applicable to CCC base-quality loan rates of 52.00 cents per pound for the base grade of upland cotton and 79.77 cents per pound for ELS cotton.
With producers and merchandisers currently making planting and marketing decisions for the ’10 crop, the NCC appreciates FSA’s prompt publication of the schedule -- which can be found in the Price Support section of FSA’s website, www.fsa.usda.gov. A full schedule is posted in the Economics section of the NCC’s website, www.cotton.org. In addition, the NCC will be distributing copies of the loan schedule poster to its member gins.
Warehousers Sent Central Contractor Registration Notice
Earlier in April, all warehouse operators with a Cotton Storage Agreement (CSA) should have received an email from the Kansas City Commodity Office (KCCO) informing them of the May 1 deadline for Central Contractor Registration (CCR).
The email stated that “CCR is the primary registrant database for the U.S. Federal Government” and that “all current and potential federal government registrants are required to register in CCR in order to be awarded contracts by the federal government.” The email referenced a March 29 letter from Steven L. Standers, director, KCCO, regarding warehouse registration. That letter is at http://www.fsa.usda.gov/Internet/FSA_File/ccr.pdf.
The email also included a request for cotton warehouse operators with a CSA to notify the KCCO at (816) 926-6662 when registration is complete or if the warehouse operator has questions about the CCR requirement. For technical questions about the registration process, warehouse operators may contact the CCR desk at 866-606-8220 (option 1, then option 2).
Cotton Lifecycle Inventory/Analysis Launched
The US cotton industry is examining itself from field to fabric under an initiative called “Vision 21.”
One of the Vision 21 efforts involves a comprehensive cotton lifecycle inventory that will be compiled and will serve as a foundation for global cotton lifecycle evaluations -- ultimately providing a credible foundation for sustainable textile operations. The project will use data from the top cotton-producing countries of India, China and the United States. Similarly, a sampling of key cotton textile-producing countries, including India, China, the United States, Turkey and in Latin America, will be used for manufacturing benchmarking.
Expected to take about a year, the effort is a Cotton Foundation project with initial financial support provided by Monsanto and John Deere. It is being jointly managed by the NCC, Cotton Council International and Cotton Incorporated.
PE Americas, a recognized leader in the field of lifecycle inventory collection and lifecycle analysis tool development, was selected to conduct the studies. Lifecycle assessment is a recognized method of objectively and scientifically evaluating the resource requirements of a given product and the product’s potential environmental impact during its production, use and disposal.
March Consumption Greater Than Year Ago
According to the Commerce Dept., March (five-week month) total cotton consumption in domestic mills was 155.4 million pounds for a seasonally adjusted annualized rate of 3.35 million bales (480-lb). Last year’s March annualized rate was 3.19 million bales.
The February (four-week month) estimate of domestic mill use of cotton was lowered by 4.1 million pounds to 128.9 million pounds. The revised seasonally adjusted annualized rate of consumption for February is 3.45 million bales -- still higher than last year’s February annualized rate of 3.09 million bales.
Based on Commerce estimates from Aug. 2, ’09-April 3, ’10, projected total pounds consumed during the ’09-10 crop year would be 1.6 billion pounds or 3.36 million bales. USDA’s latest estimate of ’09-10 crop year mill use is 3.50 million bales.
Preliminary April domestic mill use of cotton and revised March figures will be released by Commerce on May 27.
Sales Strong, Shipments Hit Marketing Year High
Net export sales for the week ending April 15 were 363,200 bales (480-lb). This brings total ’09-10 sales to approximately 11.1 million bales. Total sales at the same point in the ’08-09 marketing year were approximately 12.6 million bales. Total new crop (’10-11) sales are 708,200 bales.
Shipments for the week were 350,800 bales – a marketing year high – bringing total exports to date to 7.6 million bales, compared with the 8.4 million bales at the comparable point in the ’08-09 marketing year.
Effective April 23-29, ’10
Adjusted World Price, SLM 11/16
70.81 cents
*
Fine Count Adjustment ('08 Crop)
0.68 cents
Fine Count Adjustment ('09 Crop)
0.48 cents
Coarse Count Adjustment
0.00 cents
Marketing Loan Gain Value
0.00 cents
Import Quotas Open
13
Special Import Quota (480-lb bales)
891,726
ELS Payment Rate
0.00 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East
87.18 cents
Forward 5 Lowest 3135 CFR Far East
82.03 cents
Coarse Count CFR Far East
NA
Current US CFR Far East
89.00 cents
Forward US CFR Far East
84.50 cents
'09-10 Weighted Marketing-Year Average Farm Price
Year-to-Date (August-February)
61.27 cents
**
**August-July average price used in determination of counter-cyclical payment