CURRENT ISSUE ARTICLES

NCC Chairman Sees Strengthening US Cotton Sector

Tight Cotton Supply/Demand Situation to Continue in ’11

USDA Lowers ’10-11 World Cotton Crop

USDA Releases Status of ’10 CCPs

Partial Deregulation for RR Sugar Beets Announced

States Ask For Pesticide Permits Delay

Shipments Hit Another Marketing Year High

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NCC Chairman Sees Strengthening US Cotton Sector

Outgoing NCC Chairman Eddie Smith told attendees at the ’11 NCC Annual Meeting in San Antonio, TX, that the coming year will present a number of challenges and opportunities for the US cotton industry but he believes it will emerge stronger and more prepared for the future.

“This will be made possible by strong leadership and exceptional staff coupled with the outstanding support and personal involvement of our members,” Smith said.

Among upcoming challenges he cited are:  1) continued preparations for the ’12 farm bill, 2) the influence of the World Trade Organization (WTO) Brazil decision on new farm legislation, 3) a strong push to conclude WTO Doha negotiations, and 4) an extremely difficult budgetary climate in Washington. In addition, US cotton also will be dealing with a dramatic change in the political landscape in Washington, which will require getting re-acquainted with the Cotton Belt Congressional Members.

“I am fully confident that the Council will successfully address these and other challenges, while taking advantage of the opportunities before us to become an even stronger industry and more effective organization,” Smith stated. “I am very encouraged by the continuing efforts to increase Council membership and involve more leaders in Texas and in other areas of the Cotton Belt.”

He said one of the most encouraging developments in ’10 was the upturn in cotton’s global demand and the fact that the world needs more cotton—particularly in rapidly developing economies like China and India. He said Cotton Council International (CCI) is well positioned and committed to capitalize on this opportunity.

Smith noted that plans have been finalized for the Vision 21 project’s industry stakeholder sessions that will guide the development of NCC, CCI and Cotton Foundation program initiatives to build markets and improve industry profitability.

“There is also optimism that U.S. cotton acreage will continue to rebound in light of the best new crop prices we have seen on the eve of the planting season,” he said.

In his report, Smith also recapped NCC’s major ’10 activities, which included maintaining constant contact with Congress and Administration officials on a host of legislative and regulatory issues among them farm bill implementation, the Administration’s budget proposal, the WTO Brazil trade dispute and new farm legislation. Details of those efforts can be found in the NCC’s ’11 Report to Members at http://www.cotton.org/about/report/2011/index.cfm. In addition, a complete listing of ’11 US cotton’s leaders along with industry award recipients is at http://www.cotton.org/news/meetings/2011annual/index.cfm.

Tight Cotton Supply/Demand Situation to Continue in ’11

In the Annual Meeting’s joint session of delegates, NCC Vice President of Economics and Policy Analysis Dr. Gary Adams said a tight overall cotton supply/demand situation coupled with continued pressure from competing crops for the coming year is consistent with cotton prices above historical norms.

He said a key issue to watch will be the ability to sustain cotton demand in the prevailing market conditions, particularly given the uncertain nature of the macroeconomic recovery. He said that consumers in developing markets such as China and India will increasingly become the drivers of global retail cotton demand.

“Growth in cotton demand bodes well for total cotton trade,” Adams said. “Increased mill use in China will require additional imports as available cotton stocks remain at low levels. In fact, for most countries, beginning stocks for the 2011 marketing year are at the lowest levels in recent years, and leave little room for further reductions during the upcoming marketing year.”

He said the increased import demand will create a positive environment for US cotton exports, forecast at 15.6 million bales for the ’11 marketing year – the second highest level after the ’05 marketing year.

“U.S. stocks that began the marketing year under 3.0 million bales will fall to 2.3 million bales by July 31, 2011,” Adams said. “When compared to the past 50 years, ending stocks for the 2010 marketing year will represent a new low. The United States will be essentially sold out of cotton as any remaining stocks will be committed to a textile mill, either in the U.S. or abroad.”

The economist said that when combined with projected US mill cotton use of 3.8 million bales, the demand base for US cotton totals 19.3 million bales for the ’11 marketing year – although with little cotton being carried forward, US cotton offtake could be dictated by the ’11 crop’s size.

“With a projected U.S. crop smaller than total offtake, U.S. cotton stocks are expected to fall to 2.1 million bales by the end of the 2011 marketing year,” Adams said. “Globally, a modest increase in stocks is projected, but the overall stocks-to-use relationship does not materially change from 2010.”

Despite the pressure caused by higher fiber prices, Adams noted the recovery in the US textile industry after more than a decade of decline. US mill use has bounced back in recent months with current monthly estimates running 10% above year-earlier levels. The US textile industry is being bolstered by the Upland Cotton Economic Adjustment Assistance Program (EAAP), which was authorized in ’08 farm law.

“EAAP funds have allowed U.S. cotton textile manufacturers to make significant investments in new textile machinery to increase efficiency, add capacity and expand into new product lines,” Adams said. “Funding has been used in the construction of new buildings and structural improvements to existing buildings. As a result, textile mills have added jobs, reduced costs, and increased their ability to be more competitive against foreign competition.” 

Additional details of the ’11 Cotton Economic Outlook, including the NCC’s Planting Intentions Survey results, are on the NCC’s website at http://www.cotton.org/econ/reports/annual-outlook.cfm.

The NCC’s 28th Annual Early Season Planting Intentions Survey results, also presented at the joint session, revealed that US all-cotton plantings in ’11 of 12.5 million acres (14% higher than ’10) should generate a crop of 19.2 million bales, 18.5 million bales of upland and 671,000 bales of extra-long staple.

Upland cotton intentions are 12.3 million acres, an increase of nearly 14% from ’10, while extra-long staple (ELS) intentions of 251,000 acres represent a 23% increase. 

Assuming an average abandonment rate of 11%, total upland and ELS harvested area would be about 11.1 million acres. Applying state-level yield assumptions to projected harvested acres generates a cotton crop of 19.2 million bales, compared with ’10’s total production of 18.3 million bales. Assuming average seed-to-lint ratios, ’11 cottonseed production is projected at 6.5 million tons, up 300,000 tons from last year’s 6.2 million tons.

The survey, mailed in mid-December to producers across the 17-state Cotton Belt, asked for intended ’11 cotton acreage and intended plantings of other ’11 crops. Responses were collected through mid-January.

Adams emphasized that, “the cotton market is currently calling for more acres. However, competing crop prices are also strong. Final acreage decisions will be sensitive to how relative prices move between now and planting time. This, along with a number of other issues, including weather, could cause actual plantings to differ from growers’ stated intentions.” (See table below for regional/state responses.)

PROSPECTIVE ’11 U.S. COTTON PLANTINGS
	’10 Actual  (Thou.) 1/	’11 Intended  (Thou.) 2/	Percent Change
SOUTHEAST	2,597	2,930	12.8%
Alabama	340	388	14.0%
Florida	92	109	18.3%
Georgia	1,330	1,410	6.0%
N. Carolina	550	694	26.1%
S. Carolina	202	225	11.2%
Virginia	83	105	26.9%
MID-SOUTH	1,920	2,283	18.9%
Arkansas	545	589	8.0%
Louisiana	255	278	8.9%
Mississippi	420	524	24.8%
Missouri	310	348	12.4%
Tennessee	390	544	39.5%
SOUTHWEST	5,886	6,585	11.9%
Kansas	51	69	34.6%
Oklahoma	285	326	14.4%
Texas	5,550	6,190	11.5%
WEST	366	465	27.0%
Arizona	195	226	15.8%
California	124	172	38.8%
New Mexico	47	67	42.5%
TOTAL UPLAND	10,769	12,263	13.9%
TOTAL ELS	204	251	23.1%
Arizona	3	4	47.2%
California	182	225	23.6%
New Mexico	3	3	28.2%
Texas	17	19	13.7%
ALL COTTON	10,973	12,514	14.0%
1/ USDA-NASS 2/ National Cotton Council

USDA Lowers ’10-11 World Cotton Crop

Lorem In its February report, USDA lowered ’10-11 world cotton production estimates by 210,000 bales from the January report to 115.25 million bales. World mill use was lowered 30,000 bales to a projected 116.55 million bales. Consequently, world ending stocks for ’10-11 are projected to be 42.81 million bales for a stocks-to-use ratio of 36.7%.

For the ’09-10 marketing year, USDA estimated world production at 101.54, unchanged from the previous month. Estimated world mill use remained unchanged at 118.52 million bales. World ending stocks on July 31, ’10 are now estimated at 43.99 million bales. This has a corresponding stocks-to-use ratio of 37.1%.

In its February report, USDA projected the ’10-11 US crop to be 18.32 million bales, unchanged from the January report. Both US mill use and exports were unchanged at 3.60 million bales and 15.75 million bales, respectively. This generates a total ’10-11 offtake of 19.35 million bales. Ending stocks for ’10-11 are projected to be 1.90 million bales for an ending stocks-to-use ratio of 9.8%.

For the ’09-10 crop year, USDA gauged US cotton production at 12.19 million bales. Estimated mill use and exports were unchanged from the January report at 3.46 million and 12.04 million bales, respectively. Total offtake for the ’09-10 crop year was estimated at 15.50 million bales. Ending stocks were 2.95 million bales and the stocks-to-use ratio was 19.0% for the ’09-10 marketing year.

USDA Releases Status of ’10 CCPs

Lorem Farm Service Agency (FSA) Administrator Jonathan Coppess announced that USDA will not issue partial ’10-crop counter-cyclical payments to producers of certain covered commodities.

Payments will not be made to producers of wheat, corn, grain sorghum, barley, oats, upland cotton, long grain rice, medium grain rice, soybeans, sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, sesame seed, dry peas, lentils, small chickpeas, large chickpeas, and peanuts. For all covered commodities and peanuts, market price projections exceed levels that would trigger these payments.

In addition to the ’10 crop information, USDA announced it will not issue final ’09-crop counter-cyclical payments for long grain rice and medium grain (including short grain) rice because their average market prices exceeded levels that would trigger these payments.

For more information on the direct and counter-cyclical payment programs, including a table displaying the target price, projected average market price, loan rate, direct payment rate, effective price and projected counter-cyclical rates, visit your local FSA office or the FSA DCP website: http://www.fsa.usda.gov/dcp.

Partial Deregulation for RR Sugar Beets Announced

USDA’s Animal and Plant Health Inspection Service (APHIS) announced its decision to partially deregulate Roundup Ready (RR) sugar beets. The purpose is to allow sugar beet growers to continue to cultivate RR sugar beets while APHIS completes a court-ordered environmental impact statement.

“After conducting an environmental assessment, accepting and reviewing public comments and conducting a plant pest risk assessment, APHIS has determined that the Roundup Ready sugar beet root crop, when grown under APHIS imposed conditions, can be partially deregulated without posing a plant pest risk or having a significant effect on the environment,” said Michael Gregoire, deputy administrator for APHIS' Biotechnology Regulatory Services. “This partial deregulation is an interim measure until APHIS is able to complete a full environmental impact statement.”

In ’05, APHIS granted non-regulated status to RR sugar beets. However, in early ’08, a lawsuit was filed challenging APHIS’ decision. On Sept. 21, ’09, the US District Court for the Northern District of California found that APHIS should have prepared an environmental impact statement (EIS) prior to making a decision to fully deregulate RR sugar beets. On Aug. 13, ’10, the same court issued a ruling which vacated APHIS’ decision to fully deregulate RR sugar beets. APHIS currently is developing an EIS prior to making any further decision on the petition for a full deregulation of RR sugar beets. APHIS expects to complete the EIS by the end of May ’12.

Pursuant to the partial deregulation, growers of RR sugar beet root crop will be required to enter into a compliance agreement that outlines mandatory requirements for how the crop can be grown. If APHIS determines that the mandatory conditions of the partial deregulation set forth in the compliance agreements are not being met, it has the discretion to revoke, withdraw or otherwise cancel the conditional partial deregulation for root crop production. Further, APHIS may use the full range of its Plant Protection Act authorities to impose civil and/or criminal penalties and remedial measures, including seizure, quarantine, and/or destruction of root crop that is in violation of the mandatory conditions of the partial deregulation. APHIS also has issued its decision to continue to regulate the seed crop through its permitting process.

States Ask For Pesticide Permits Delay

In a letter to EPA Administrator Lisa Jackson, state water pollution regulators and agriculture officials asked the EPA to seek a six-month stay of a federal appeals court order requiring that pesticide discharges to US waters be covered by Clean Water Act (CWA) permits.

The requirement for National Pollutant Discharge Elimination System (NPDES) permits was mandated by the US Court of Appeals for the Sixth Circuit, which in January ’09 vacated an EPA rule authorizing permit exemptions for farmers, public health officials, and ranchers who apply pesticides into, over, or near water bodies to control mosquitoes and other pests. Most states operate the NPDES program themselves and these states would issue their own permits.

The Sixth Circuit order has been stayed until April 9, and the state regulators want an extension of that date.

According to EPA, the permit program is estimated to affect approximately 365,000 pesticide applicators nationwide. The letter to Jackson said the number of NPDES permittees is likely to exceed this number.

A spokesman for the Assoc. of State and Interstate Water Pollution Control Administrators said that while some states already have general permits and are ready to go, many are waiting for EPA to issue its own general permit which they plan to use as a model. EPA was expected to issue its general permit in late ’10, but has not yet done so. EPA officials recently told a group of stakeholders that the permit was expected to be issued the first part of March.

While EPA has been briefing state officials regularly on the process, state regulators are saying that the delay has come to the point where they can't wait any more.

The letter states, "EPA has not finalized and circulated this permit, which will be used in jurisdictions where EPA administers the NPDES program. This delay has compromised authorized states' ability to finalize their permits, as many of these states are using the federal permit as a design and implementation template." Because the permit will apply to a large number of pesticide applicators who have never before required NPDES permit coverage, the letter said, "it is imperative" that they have sufficient time to understand how to comply with permit requirements.

EPA has not yet issued a response to this request.

Shipments Hit Another Marketing Year High

Net export sales for the week ending Feb. 3 were 124,500 bales (480-lb). This brings total ’10-11 sales to about 15.1 million. Total sales at the same point in the ’09-10 marketing year were about 8.8 million bales. Total new crop (’11-12) sales are 3.2 million bales.

Shipments for the week were 509,700 bales – a marketing year high – bringing total exports to date to 6.4 million bales compared with the 4.7 million bales at the comparable point in the ’09-10 marketing year.

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