Concerns Expressed Regarding India Export Restrictions
NCC staff, along with representatives of NCTO, ACSA and AMCOT, met with Administration officials to raise concerns regarding India’s ongoing restrictions on cotton exports. Since April, India’s use of various restrictions on cotton exports has added to the volatility and uncertainty in the world cotton market.
Following the Apr. 19 announcement banning further export registrations, the difference between the world cotton price and India’s internal price grew to 13 cents. Prior to the announcement, the differential between the two prices averaged 5 cents. By introducing an artificial gap between world and internal prices, India’s export restrictions convey benefits to their textile industry at the expense of textile industries in other countries. In late September, India announced an export quota of 4.3 million (480 lb) bales for the ’10 marketing year. While shipments under the export quota are supposed to occur by Dec. 15, India’s textile industry continues to call for a delay in exports until Jan 1.
US industry representatives expressed concerns that India’s export restrictions are exacerbating an already tight market situation. US mills fear that further job losses will occur as mills face cotton shortages in the 2nd and 3rd quarter of ’11. By disrupting marketing channels and distorting relative prices, India’s export restrictions could also prove detrimental to longer-term cotton demand. Additional background and analysis of India’s export restrictions are available on the NCC website www.cotton.org.
USDA Issues Final '09 CCPs for Upland Cotton and Peanuts
Agriculture Secretary Tom Vilsack announced that USDA has issued final ‘09-crop counter-cyclical payments (CCPs) to farmers enrolled in the direct and counter-cyclical program for upland cotton and peanuts. The Food, Conservation, and Energy Act of 2008 requires 2009 final counter-cyclical payments to be made as soon as possible following the end of the marketing year, but no sooner than Oct. 1, 2010.
The final CCP rate for upland cotton is 1.68 cents per pound. Producers who accepted a partial payment of 1.03 cents per pound in March ‘10 will receive 0.65 cents per pound. The 2009 marketing year average price for upland cotton was 62.9 cents per pound. USDA announced on Oct. 4, 2010, that the final CCP rate for peanuts is $25.00 per ton. Producers who accepted a partial payment in March ‘10 received $9.20 per ton. They are due an additional $15.80 per ton.
A table displaying the target price, average market price, loan rate, direct payment rate, effective price and final counter-cyclical rate for peanuts and upland cotton is available at http://go.usa.gov/aKS.
CFTC Issues Proposed Operational Rules
The Commodity Futures Trading Commission (CFTC) has proposed rules that would: prescribe how registered entities submit new rules and products for clearing; eliminate the use of credit ratings in CFTC regulations; revamp how futures commission merchants invest segregated customer funds; and establish procedures for clearing organizations to submit swaps to the CFTC for a determination on clearing eligibility.
The CFTC also proposed expanding its authority over fraudulent and manipulative behavior and agreed to an advance notice of proposed rulemaking (ANPR) on disruptive trading practices.
The proposed rules for certifying new rules or products are similar to current procedures. The CFTC would have 10 business days to review submissions and determine if they present “novel or complex issues” or are “potentially inconsistent” with the Commodity Exchange Act (CEA) or regulations. If not, the product or rule would become effective after 10 days. Otherwise, the initial review would be expanded to 90 days and include an automatic 30-day public comment period.
The proposed rule would cover CFTC registered entities, including newly created swap execution facilities and swap data repositories. “Systemically important” derivatives clearing organizations would be required to provide the commission with 60 days advance notice of any proposed rules or procedure changes if the changes ”could materially affect the nature or level of risks presented” by the entity.
Under another proposal, any swap that is within a “group, category, type, or class” of swaps that already is cleared by a derivatives clearing organization would be presumed eligible for clearing. A derivatives clearing organization that wants to accept a new swap for clearing would be required to request a determination by the CFTC. The applicant would have to prove it had the resources to back a cleared swap if one side defaulted and the ability to manage the risks associated with the swap. The CFTC would have 90 days to make a determination on a submission, which would include a 30-day comment period.
The ANPR stems from an amendment to the CEA prohibiting certain trading practices “determined [to be] disruptive of fair and equitable trading.”
It is unlawful for any person to engage in any conduct that violates bids or offers, demonstrates “intentional or reckless disregard for the orderly execution of transactions during the closing period,” or is related to the practice known as “spoofing”—bidding or offering with the intent to cancel the bid or offer before execution. The ANPR notice seeks comment in advance of the CFTC proposing rules to address the new requirements.
Oil Spill Compliance Help Offered
USDA announced a pilot initiative in eight states to help farmers comply with revised regulations by EPA designed for prevention and mitigation of fuel and oil spills on their operations. Participating in the Natural Resource Conservation Service (NRCS)-administered pilot are the states of Idaho, Louisiana, Nevada, New York, North Dakota, Oklahoma, Texas and Utah, as well as the Caribbean area.
The program will provide up to $3 million to help farmers and ranchers comply with EPA's Spill Prevention Control and Countermeasure Program (SPCC). The NRCS will help develop or update existing spill prevention plans that avoid and mitigate on-farm oil spillage. SPCC plans must be in place no later than Nov. 10, ’11.
Due to the small amount of stored fuel and oil on most operations, up to 84% of farmers and ranchers are able to "self certify" by completing an online template. Operators with above ground storage capacity of 10,000 gallons or more are required to have a plan prepared by a registered professional engineer.
The NRCS developed an interim conservation practice standard for secondary oil and fuel containment. Technical Service Providers can use this interim practice to help them design oil/fuel containment facilities conforming to EPA regulation. NRCS funding is available to assist in developing SPCC plans and implementing the secondary oil and fuel containment conservation practices.
Farmers and ranchers in the participating states who need assistance should contact NRCS at their nearest USDA Service Center. For more information online: 1) www.nrcs.usda.gov (NRCS assistance with SPCC Plans) and 2) www.epa.gov/emergencies/spcc (SPCC rules and additional resources).
Summit Addressing Global Cotton/Textile Issues
Speakers at the ’10 Sourcing USA Summit, set for Nov. 9-12 at Terranea in Rancho Palos Verdes, CA, near Los Angeles, will examine issues affecting the global cotton and textile industries. Organized by Cotton Council International and Cotton Incorporated, the event will bring together more than 450 global cotton industry leaders for strategic thinking and networking opportunities.
The Summit Business Forums will cover US cotton fiber, the global cotton supply chain and the economic outlook for the cotton market. Among Summit presentations will be a “Bull & Bear” panel of trading experts arguing whether different scenarios indicate a bull market vs. a bear market.
Summit attendees will be able to provide immediate feedback on the current topic of discussion via an electronic voting system. Additional information can be found on the Summit website, www.sourcingusasummit.com.
Beltwide Early Housing Deadline Oct. 31
NCC and Cotton Foundation members can make early room reservations through Oct. 31 for the ’11 Beltwide Cotton Conferences. Open housing reservations can be made beginning on Nov. 1.
The forum is set for Jan. 4-7 at the Atlanta Marriott Marquis. Conference information, including instructions for early housing and registration, is available at www.cotton.org/beltwide.
Among key issues to be addressed at the forum’s Cotton Production Conference are herbicide resistance prevention/management, various insect pest concerns and irrigation. Attendees also will hear about what went right and wrong in the 2010 growing season and “what’s down the road” in terms of pricing, technology and production systems.
The Cotton Consultants Conference will be offered for the fourth consecutive year. The Conferences also include the Cotton Foundation Technical Exhibits and 11 Cotton Technical Conferences.
Expansion Sought for Clean Diesel Program
The Diesel Technology Forum (DTF), a clean diesel advocacy group, is urging Congress to extend the engine retrofit program and make it easier for farmers to participate. The Diesel Emissions Reduction Act (DERA), scheduled to expire on Sept. 30, 2011, established a voluntary national and state-level grant and loan program to reduce emissions from existing diesel engines through clean diesel retrofits. Emissions from older diesel vehicles and equipment can be reduced between 20 and 90% with cost-effective retrofit technology.
Since the program’s inception in 2005, EPA has allocated roughly $470 million in grants to states for diesel retrofit projects. Most of the money has been spent on installing cleaner-burning engines in public transportation fleets and off-road construction equipment.
DERA “has remained largely untapped by the agricultural community,” says Dawn Fenton, director of policy at DTF, because “a lot of your farming is in rural areas where generally speaking, the air quality is better.”Fenton adds that the program is “quite generous” in its funding, providing 100% funding exhaust control retrofits, 75% for repowers and 25% for new equipment purchases.
While every state receives funding under the program to switch to clean diesel technology, only four states – California, Idaho, Florida and Utah – have earmarked DERA grants for ag-related projects. For example, growers in the San Joaquin Valley of California have used funding to replace older, less-efficient irrigation pumps.
California is the only state where clean diesel upgrades are mandatory. Soon, farmers there will be required to report their use of diesel engines as state environmental officials begin the rulemaking process on regulations governing retrofits of agricultural equipment.
Farmers elsewhere are not facing the same pressure to update or replace old equipment, partly because DERA is not geared to agriculture due to individual farmers being prohibited from applying for DERA funding. Grant applications can be submitted only by a governmental entity or a non-profit agency.
The expected release by EPA of proposed tougher air quality standards for ground-level ozone by the end of October may increase the ag sector’s interest in DERA. The number of counties nationwide that are going to fall in non-attainment for ozone could double.
US Mill Cotton Use Increases
According to the Commerce Dept., September (five-week month) total cotton consumption in domestic mills was 170.6 million pounds for a seasonally adjusted annualized rate of 3.56 million bales (480-lb). Last year’s September annualized rate was 2.82 million bales.
The August (four-week month) estimate of domestic mill cotton use was increased by 399,000 pounds to 142.6 million pounds. The revised seasonally adjusted annualized rate of consumption for August is 3.66 million bales. This is higher than last year’s August annualized rate of 3.42 million bales.
Preliminary October domestic mill cotton use and revised September figures will be released by Commerce on Nov. 24.
Sales, Shipments Steady
Net export sales for the week ending on Oct. 21 were 284,300 bales (480-lb). This brings total ’10-11 sales to approximately 11.2 million bales. Total sales at the same point in the ’09-10 marketing year were approximately 4.0 million bales. Total new crop (’11-12) sales are 841,500 bales.
Shipments for the week were 125,000 bales, bringing total exports to date to 2.0 million bales, compared with the 2.1 million bales at the comparable point in the ’09-10 marketing year.
