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November 12, 2010
 

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Budget Deficit Reduction Proposal Offered

A proposal to dramatically reduce the budget deficit was released by the co-chairs of the National Commission on Fiscal Responsibility and Reform -- Erskine Bowles, former chief of staff for President Clinton, and retired Sen. Alan Simpson (R-WY).

The proposal would require sharp spending cuts and significantly higher levels of revenue. The plan relies on a mixture of cuts in both annually appropriated spending and entitlement (mandatory spending) outlays, as well as a dramatic overhaul of the US tax code.

The panel consists of 18 members and 14 are required to approve any plan sent to Congress by the mandatory reporting date of Dec. 1. If a plan is officially sent to Congress, the House and Senate agreed to vote on the plan without amendment, which is the procedure used for base closings.

Even if the panel is unable to reach agreement on a plan, the elements of the proposal and subsequent provisions will be a basis for the incoming Congress to make cuts when drafting future Budget resolutions. The panel has scheduled two additional public meetings -- on Nov. 30 and on Dec. 1. A closed meeting is slated for the week of Nov. 15 to discuss alternatives to the proposal put forth by the co-chairs.

The proposal would reduce the deficit to about 2.2% percent of gross domestic product in ’15, significantly below the approximately 3% range that President Obama had targeted for the committee, and bring the budget into balance by ’37.

The chairs provided an “illustrative” list of potential discretionary spending cuts in ’15, split almost evenly between defense and non-defense. On the mandatory spending side, many of the proposals deal with health care. The proposal also calls for an annual reduction of $3 billion in agriculture outlays by reducing Direct Payments as well as outlays for the Conservation Reserve Program and the Market Access Program. The proposal includes changes designed to make Social Security solvent over a 75-year time period by modifying the formula by which benefits are calculated, indexing retirement ages to longer life spans, adding state and local workers to Social Security and switching cost-of-living adjustments to the “chained CPI”.

On taxes, the proposal would lower overall rates by simplifying the tax code, broaden the tax base and vastly reduce the number of tax deductions, credits, and allowances in the code. The “zero plan” option would allow for individual rates as low as 8%, 14% and 23%, but would allow no tax deductions and credits. Reinstating popular deductions, such as the home mortgage deduction or the child tax credit, would require an increase in those rates.

Rep. Spratt (D-SC), the outgoing chairman of the House Budget Committee and a panel member, said it would be “extremely difficult” to get a bill written by Dec. 1 to implement the Commission’s recommendations to be taken up in Congress.

Sen. Conrad (D-ND) said getting a vote by the end of the year could be “very difficult,” given the need for legislative language and official scoring. He said, “The first goal is to reach agreement on a plan and to write a report that lays out the agreement.”

That could be difficult given the degrees of support for the proposal. Commission members said they liked parts of the proposal but would be unable to vote for others.

The draft proposal text is at: www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf.

For more information, a slide sheet summary also is available at that site, while a list of illustrative cuts is available at www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/Illustrative_List_11.10.2010.pdf.

 
Group of 20 Pushing For WTO Doha Conclusion

Leaders from the Group of 20 will call on trade negotiators to utilize a narrow “window of opportunity” in ’11 to intensify the World Trade Organization (WTO) Doha Round of trade talks to a successful conclusion. The language provides more detailed instructions than previous G-20 communiqués but does not include a target date for concluding the negotiations.

“We direct our negotiators to engage in across-the-board negotiations to promptly bring the Doha Development Round to a successful, ambitious, comprehensive and balanced conclusion, consistent with the mandate and built on progress achieved,” the statement said.

The United States’ top official to the WTO, US Deputy Trade Representative and WTO ambassador Michael Punke, cited a “positive” tone from major trading partners in recent discussions to get the trade talks back on track. Punke said China, in particular, was becoming more engaged in discussing solutions to end the Doha deadlock.

Deep differences still remain between the United States and emerging markets such as China, India and Brazil over US demands for greater access to major developing country markets for industrial goods. The United States is seeking agreements that would eliminate or sharply cut tariffs for chemicals, industrial machinery and electronics.

On Nov. 2, WTO ambassadors from the three countries ruled out making any significant improvements in their offers, insisting that the United States will have to accept something close to what already has been offered if the negotiations are to conclude successfully.

 
USDA Lowers US Cotton Crop Estimate

In its November crop report, USDA projected the ’10-11 US cotton crop to be 18.42 million bales, down approximately 450,000 bales from the October report. Upland production was estimated at 17.92 million bales and extra long staple (ELS) production at 498,000 bales. Harvested area was estimated at 10.77 million acres, implying a non-harvested area of 265,000 acres based on USDA’s latest acreage report. The resulting abandonment rate is roughly 2.4%. The national average yield per harvested acre was estimated to be roughly 821 pounds, five pounds less than the five year average.

On a regional basis, the Southeast crop is estimated at 4.09 million bales based on harvested acres of 2.58 million and a regional average yield of 760 pounds, 32 pounds lower than the region’s five-year average. In the Mid-South, expected production is 3.93 million bales. Harvested area is estimated to be 1.91 million acres with an expected yield of 988 pounds per harvested acre, 73 pounds above its five-year average. The Southwest upland crop is estimated at 8.82 million bales. Expected harvested area is 5.71 million acres and the regional average yield is 741 pounds, 26 pounds above the five-year average for the region. Upland production in the West is an estimated 1.08 million bales with an estimated harvested area of 359,000 acres and a regional average yield of 1,437 pounds, 87 pounds higher than the region’s five-year average.

The ELS crop is an estimated 498,000 bales. Harvested area is pegged at 207,000 acres with an average yield of 1,154 pounds per harvested acre.

State-level estimates are included in the accompanying table.

US Cotton Crop, ’10-11

 

PLANTED

ACRES

Thou. 1/

HARV.

ACRES

Thou.

YIELD PER

HARV.

ACRE

Lb.

5-YEAR

AVG.

YIELD

Lb.

480-

POUND

BALES

Thou.

UPLAND

SOUTHEAST

2,602  

2,584 

760  

792 

4,092  

   Alabama

345  

343 

616  

653 

440  

   Florida

92  

89 

728  

771 

135  

   Georgia

1,330  

1,325 

779  

840 

2,150  

   North Carolina

550  

545 

793  

814 

900  

   South Carolina

202  

200 

840  

721 

350  

   Virginia

83  

82 

685  

879 

117  

MID-SOUTH

1,930  

1,910 

988  

915 

3,930  

   Arkansas

545  

540 

1,067  

1,011 

1,200  

   Louisiana

255  

250 

845  

872 

440  

   Mississippi

425  

420 

983  

859 

860  

   Missouri

315  

313 

1,073  

976 

700  

   Tennessee

390  

387 

905  

822 

730  

SOUTHWEST

5,931  

5,713 

741  

715 

8,823  

   Kansas

51  

48 

780  

602 

78  

   Oklahoma

280  

265 

806  

731 

445  

   Texas

5,600  

5,400 

738  

716 

8,300  

WEST

366  

359 

1,437  

1,350 

1,075  

   Arizona

195  

193 

1,492  

1,410 

600  

   California

124  

123 

1,483  

1,363 

380  

   New Mexico

47  

43 

1,060  

1,026 

95  

TOTAL UPLAND

10,829  

10,566 

814  

816 

17,920  

TOTAL ELS

209  

207 

1,154  

1,245 

498  

   Arizona

3  

3 

960  

891 

5  

   California

185  

184 

1,174  

1,310 

450  

   New Mexico

3  

3 

928  

825 

6  

   Texas

18  

18 

1,015  

821 

37  

ALL COTTON

11,038  

10,773 

821  

826 

18,418  

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

 
Mill Use Estimate Lowered, Exports Raised

In its November report, USDA lowered US mill cotton use by 150,000 bales to 3.45 million in response to recent higher cotton prices. Exports were raised 250,000 bales to 15.75 million bales. This generates a total ’10-11 offtake of 19.20 million bales. Ending stocks for ’10-11 are projected to be 2.20 million bales for an ending stocks-to-use ratio of 11.5%.

The USDA report also sees ’10-11 world production lower by 1.43 million bales from the October report to 115.25 million bales. World mill use was lowered 3.95 million bales from the October report to a projected 116.82 million bales. Consequently, world ending stocks for ’10-11 are projected to be 42.20 million bales for a stocks-to-use ratio of 36.1%.

USDA announced in its November report that ’10-11 beginning stocks were reduced 3.0 million bales in China due to a revised ’09-10 balance sheet reflecting shortages in mill inventories that have become apparent in recent weeks. See www.usda.gov/oce/commodity/wasde/index.htm.

 
Memorandum Affecting Ag Advisory Panel Participation

A Presidential Memorandum is affecting future participation by NCC staff in several agricultural advisory committees.

Agriculture Secretary Tom Vilsack announced that USDA is accepting nominations to re-establish the Agricultural Policy Advisory Committee for Trade (APAC) and six Agricultural Technical Advisory Committees for Trade (ATACs). To be considered for advisory committee membership, nominees should submit an affirmative statement that the applicant is not a federally registered lobbyist, and that the applicant understands that if appointed, the applicant will not be allowed to continue to serve as an advisory committee member if the applicant becomes a federally registered lobbyist. This new stipulation is a result of President Obama’s issuance earlier this year of  1) “Lobbyists on Agency Boards and Commissions,” a memorandum directing agencies and departments in the Executive Branch not to appoint or reappoint federally registered lobbyists to advisory committees and other boards and commissions;  and 2) a Presidential Memorandum that further directed the director of the Office of Management and Budget to “issue proposed guidance to implement this policy to the full extent permitted by law.”

The Presidential Memorandum is available at www.whitehouse.gov/the-press-office/presidential-memorandum-lobbyists-agency-boards-and-commissions.

The private sector advisory system was established by Congress in ’74 to ensure that US trade policy and negotiation objectives reflect US commercial and economic interests. The system's three tiers consist of the President's Advisory Committee on Trade and Policy Negotiations, five general policy advisory committees (including APAC), and 22 technical advisory committees (including six ATACs).

Previously, key staff members of commodity organizations, including the NCC, served on APAC and ATAC. However, most of these will not be able to serve under the new guidelines prohibiting federally registered lobbyists.

 
USDA Issuing Conservation Payments

USDA began issuing Conservation Stewardship and Conservation Security Program payments this month to thousands of farmers and ranchers in all 50 states to help maintain and improve the natural resources on their land. The yearly contract payments totaling $500 million are authorized under the ’02 and ’08 farm bills.

A total of $320 million in payments is associated with 20,500 new Conservation Stewardship Program contracts initiated in FY10.  In addition to the Stewardship program payments, a total of $180 million in payments will also be issued to honor the 15,000 older Conservation Security Program contracts for payments due in FY11. The majority of farmers and ranchers will receive their payments by mid-December.

USDA's Natural Resources Conservation Service (NRCS) administers both programs and provides technical assistance to landowners. A state-by-state breakdown of the Stewardship Program payments is at:  www.nrcs.usda.gov/programs/new_csp/2010contractsdollars.html. A state-by-state breakdown of the Security Program payments is at: www.nrcs.usda.gov/programs/csp/2011contractsdollars.html.

For more information, contact your local NRCS service center or visit www.nrcs.usda.gov/programs/csp/.

 
Summit Offers Unmatched Networking

The sixth biennial Sourcing USA Summit in Rancho Palos Verdes, CA, attracted 450 global cotton textile industry leaders from 24 countries.

Themed “Strengthening Enduring Partnerships,” the Summit provided ample strategic thinking and networking opportunities to overseas and US guests. NCC Chairman Eddie Smith presented opening remarks and other speakers examined issues affecting the global cotton and textile industries.

The Summit was organized by Cotton Council International and Cotton Incorporated with support from the US cotton industry and USDA.

The event was sponsored by 19 US export and 14 allied industry organizations. Exporter sponsors included: Jess Smith & Sons Cotton; Calcot, Ltd.; Allenberg Cotton Co.; White Gold Cotton LLC; PCCA; Cargill Cotton; Staplcotn; Toyoshima; San Joaquin Valley Quality Cotton Growers Association; Toyo Cotton Co.; Omnicotton, Inc.; Baco Trading; Cotton Growers Cooperative; Olam; Noble Cotton; ECOM; ACG Cotton Marketing; J.G. Boswell Company; and Supima. Allied industry sponsors included: TradeCard; Monsanto; Cotton Market and Risk Management Consulting, Inc.; Wakefield Inspection Services; SFO Commodities/L.O.G.I.C. Advisors; TransGlobal Inspections, LLC; CoBank ACB; ICE Futures U.S.; Cargo Control Group; Rabobank International; Worldwide Responsible Accredited Production (WRAP); Rieter Textile Systems; Bayer CropScience/Fibermax; and Uster Technologies.

 
Sales Continue Strong, Shipments Steady

Net export sales for the week ending on Nov. 4 were 472,900 bales (480-lb). This brings total ’10-11 sales to approximately 12.2 million bales. Total sales at the same point in the ’09-10 marketing year were approximately 4.4 million bales. Total new crop (’11-12) sales are 1.0 million bales.

Shipments for the week were 149,800 bales, bringing total exports to date to 2.2 million bales, compared with the 2.5 million bales at the comparable point in the ’09-10 marketing year.

 

 
Effective Nov. 12-18, ’10

Adjusted World Price, SLM 11/16

148.60 cents

*

Fine Count Adjustment ('09 Crop)

 0.32 cents


Fine Count Adjustment ('10 Crop)

  0.42 cents


Coarse Count Adjustment

  0.00 cents


Marketing Loan Gain Value

 0.00 cents


Import Quotas Open

12


Special Import Quota (480-lb bales)

826,654


ELS Payment Rate

0.00 cents


*No Adjustment Made Under Step I

 

Five-Day Average



Current 5 Lowest 3135 CFR Far East

165.44 cents


Forward 5 Lowest 3135 CFR Far East

NA


Coarse Count CFR Far East

NA


Current US CFR Far East

164.80 cents


Forward US CFR Far East

NA


 

'10-11 Weighted Marketing-Year Average Farm Price  
 

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

75.82 cents

**


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