President Obama is expected to sign into law legislation to fund the federal government for the remainder of FY11. The legislation makes significant cuts in many domestic programs.
House and Senate approval of the measure (H.R. 1473) completes work on FY11 appropriations and allows congressional leaders to turn to the FY12 budget and appropriations bills.
While the continuing resolution was criticized by both conservatives and liberals, it cleared the House and Senate by wide margins -- 260 to 167 and 81-19 respectively.
The bill establishes FY11 spending at $1.050 trillion -- $78.5 billion less than the Administration requested more than a year ago. The legislation includes $3 billion in spending reductions for USDA operations and agriculture programs. While the largest cuts apply to nutrition programs, conservation programs also took significant reductions. A complete list of the spending cuts for agriculture can be found in the Issues area of the NCC’s website at www.cotton.org/issues/.
House Adopts FY12 Budget Resolution
The House adopted, 235-193, a FY12 budget blueprint that calls for $1.019 trillion in non-emergency discretionary spending, $102 billion less than requested by President Obama.
The plan, H. Con. Res. 34, proposes cutting $6.2 trillion over 10 years and reducing cumulative deficits by $4.4 trillion compared with President Obama’s budget proposal; restructuring Medicaid and Medicare; and overhauling the tax system.
The House defeated four substitute plans, including a Democratic alternative, 166-259, that would freeze non-security discretionary spending for five years. An alternative by the conservative Republican Study Committee that aimed to balance the budget within a decade was rejected 119-136.
ACP Updated on Key Industry Issues
The American Cotton Producers (ACP), chaired by Jimmy Dodson, a Robstown, TX, producer, received timely updates at its spring meeting in New Orleans.
Jerry Marshall, CEO of Yiyang Trading, provided an informative overview of the global cotton supply and demand situation with a special emphasis on China. He also provided his perspective on issues regarding the Intercontinental Exchange cotton futures market.
NCC Chairman Charles Parker reviewed a number of NCC activities, including his recent meetings in Washington with key members of Congress and administration officials. John Maguire, NCC senior vice president, Washington Operations, gave an in-depth report on Washington activities that focused on the intense budget debates in Congress. He reported on the status of the FY11 spending bill (see related story). He reported that the next major debates will be over the FY12 budget resolutions and raising the national debt ceiling. He stated that both of these debates likely would affect entitlement spending, including agriculture, which also would affect the writing of the next farm bill. Gary Adams, NCC vice president, Economics and Policy Analysis, presented an economic outlook and reviewed some of the potential impacts of the budget debate on farm program provisions. NCC President/CEO Mark Lange updated producer leaders on the status of Doha negotiations and the Brazil WTO case.
Angela Hooper and Robbie Seals from USDA’s Agricultural Marketing Service Cotton Division updated attendees on cotton classing issues. Hooper reported that the classing fee for ’11 would remain at $2.20 per bale (with 5-cent discount for consolidated billing), unchanged from ’10. She outlined the financial status of classing fee reserves and explained the USDA budgeting process. Seals reviewed the status of classing office locations across the Cotton Belt including an announcement that the Lamesa, TX, office would be closed for the ’11 season for major renovations. He also discussed the adoption of machine leaf classing for the ’11 season.
Dr. Rogers Leonard, an entomologist at the Louisiana State U. Ag Center, reported on pesticide options for control of nematodes, thrips, aphids and mites now that Temik availability would be severely limited for the ’11 crop. He updated the group on the status of the Section 18 requests for Sulfoxaflor for control of plant bugs.
ACP Chairman Dodson gave a detailed report on a February meeting of ACP, the American Cotton Shippers Assoc., AMCOT and warehouse organization representatives. His report included the announcement of the re-establishment of the NCC’s Performance and Standards Task Force to discuss warehouse incentives for expedited cotton flow, which had been one of the recommendations from the February session.
1099 Repeal Bill Awaits President’s Signature
President Obama is expected to sign into law H.R. 4, which repeals the IRS Form 1099 reporting requirements.
On April 5, the Senate voted 87 to 12 to repeal the requirement. The House adopted the measure in March, 314 to 112. Because the House and Senate have approved identical legislation, the bill went to the President who has announced he will sign it.
H.R. 4, known as the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, would repeal a requirement that small business owners, farms and ranches file a 1099 for all payments, including goods and services, totaling $600 or more in a calendar year for each vendor. The government planned to tax revenues reported on 1099 forms in order to raise money to fund health care reform. The Form 1099 provision was set to begin in ’12.
US Cotton Responds to Turkish Regulations
The NCC and Cotton Council International (CCI) have prepared a statement for use by Turkish importers that should allow US cotton to avoid genetically modified organisms (GMOs) analysis in gaining custom clearances.
A memo from the General Directorate of Protection and Control within Turkey’s Ministry of Agriculture and Rural Affairs instructed ports that GMO analysis should not be conducted on imported cotton fiber, provided that importers produce a letter of undertaking which declares that the imported cotton fiber does not contain GMOs. This approach was taken by the Directorate, because protein and DNA cannot be extracted from fiber unless there is sufficient plant material or whole seed or seed parts present in the sample.
Turkey’s law on biosafety, dated March 26, ’10 and its related regulations, require GMO analysis on “GMOs” and “GMOs and products thereof.” The law and regulations define GMOs as “living beings…” and that products thereof “partly or completely consist of GMOs.” Cotton fiber would fall under the definition of “Products obtained from GMOs” as the fiber is partly or completely obtained from GMOs but does not contain or consist of GMOs.
Based on these definitions, a statement satisfying the Directorate’s instructions to importers has been provided to Turkish importers of US cotton fiber. Additionally, as a longer term approach, the NCC is developing a technical information package to use in applying for a cotton fiber exemption from the Law on Biosafety and its associated regulations requiring GMO analysis.
Shipper “Best Practices” Developed
Member container lines of the Westbound Transpacific Stabilization Agreement (WTSA) announced a "best practices" checklist for export contracting at its website, www.wtsacarriers.org. With a purpose of assisting shippers prepare to negotiate Pacific bound export cargo contracts with carriers, the checklist was designed as a reference tool to ensure that all potential issues/concerns are negotiated.
WTSA Executive Administrator Brian Conrad said the document captures some of the key issues that have been of recent concern to carriers and shippers in the export trade.
Conrad noted that WTSA “...cannot guarantee that every shipper and every carrier will agree on each and every point contained in the checklist, but we do feel that it provides a useful ‘one stop guide’ to some of the issues that both parties need to talk about in the course of their contracting. As global supply chains become more complex, time-sensitive and price-sensitive, shippers and carriers need contracts that take us beyond simple volume discounts and more fully spell out the obligations of both parties based on real-time sharing of information.”
’11 PIE Program Tours Set
The NCC has scheduled dates and locations for the ’11 Producer Information Exchange (PIE) Program. Sponsored by Bayer CropScience through a grant to The Cotton Foundation, the program is now in its 23rd year.
This season, producers from the Mid-South will see operations in California on July 17-21; Far West producers will travel to Louisiana, Mississippi and Arkansas on July 31-Aug. 5; Southwest producers will visit Georgia, Alabama and Florida on Aug. 7-12; and Southeastern producers will travel to W. Texas and S. Texas on Aug. 21-26.
The PIE program enables cotton producers to improve yields and fiber quality along with boosting their overall operation’s efficiency by: 1) gaining new perspectives in such fundamental practices as land preparation, planting, fertilization, pest control, irrigation and harvesting; and 2) observing firsthand the unique ways in which their innovative peers are using new and existing technology.
Upon completion of this year’s four tours, the PIE program will have exposed more than 900 US cotton producers to innovative production practices in regions different than their own.
COTTON USA Sourcing Program Featured
In a Cotton Council International (CCI) COTTON USA Sourcing Program event – the two-day Western Hemisphere Sourcing Fair – seven US mills, 15 Latin American and European retailers, and 47 Andean, C. American and Mexican apparel manufacturers were brought together in Lima, Peru. Attendees held private meetings to discuss business opportunities that would move US cotton yarns and fabrics through the regional supply chain. Nearly 700 individual meetings took place.
The event included a conference session with a panel of experts who addressed textile and apparel trade issues such as an overview of textile and apparel agreements between Latin America and Europe; a review of the current cotton price situation; a discussion of W. Hemisphere textile and garment industry capabilities; and sourcing requirements for European brands and retailers.
The event enabled overseas buyers to meet all segments of the W. Hemisphere supply chain in one location. This streamlined approach to sourcing reinforced existing business relationships and fostered new relationships between US mills, their Latin American customers, and downstream buyers from their region and from Europe.
The timing of the Sourcing Fair was excellent since European brands and retailers have recently gained interest in sourcing opportunities from Latin America as increased costs in Asia and political uncertainties in N. Africa have strained usual supply channels. European and Latin American regional sourcing is positive for US cotton and cotton yarn and fabric since goods sourced in the W. Hemisphere are a high percentage US fiber.
Earlier, 10 US textile mills were showcased as part of CCI’s COTTON USA Sourcing Program during the Apparel Sourcing Show 2011 in Guatemala City.
CCI presented three fashion shows featuring garments from regional manufacturers using US yarns and fabrics. There also were two private events; a presentation by one of Cotton Incorporated’s economists on the cotton forecast, which was given to Korean textile and garment makers, as well as US importers that have offices in Guatemala. The second event was a gathering of approximately 100 representatives from companies in C. America and 10 US companies in the COTTON USA Pavilion.
Southeast Asia Buyers Tour Successful
Twenty-seven global buyers and retailers from the United States and six countries in Europe and Asia joined CCI’s COTTON USA Supply Chain Marketing Buyers Tour to Southeast Asia held in Bangkok, Thailand. The group met with US cotton textile and apparel suppliers from across Southeast Asia.
To provide sourcing options for the brands and retailers, 39 COTTON USA licensed suppliers with production facilities in five countries across Southeast Asia traveled to CCI’s private trade fair in Bangkok, where they promoted their US cotton-rich fabrics and garments. The Buyers Tour incorporated a briefing session explaining the benefits of sourcing from Thailand and the ASEAN region, a two-day trade fair and tours to fabric and garment manufacturing facilities located on the outskirts of Bangkok. Cotton Incorporated also supported the event with recruitment of participants and a presentation of their recent knit and woven product developments.
The event provided opportunities for overseas buyers to meet the entire supply chain in one location. Suppliers of cotton yarn, knit fabrics and apparel and woven fabrics and apparel suppliers from across the ASEAN region gathered at the CCI event to streamline the sourcing process and reinforce long-term business for retailers, manufacturers and the cotton industry alike. Mills and manufacturers in the ASEAN region are taking proactive steps to cooperate and form alliances to serve the needs of the apparel buyer who buys fabrics or finished garments.
This cooperation gives ASEAN suppliers a stronger competitive position. Suppliers at the trade fair indicated that the Tour provided a platform for them to meet new buyers from overseas markets and helped to enhance their business relationships with existing customers. Most participants expressed their confidence that contacts made during the trip would lead to developing business ties and consequently increase sales of US cotton.
Sales Slump, Shipments Stay Strong
Net export sales for the week ending April 7 were -95,900 bales (480-lb). This brings total ’10-11 sales to approximately 15.8 million bales. Total sales at the same point in the ’09-10 marketing year were approximately 10.7 million bales. Total new crop (’11-12) sales are roughly 5.4 million bales.
Shipments for the week were 324,500 bales, bringing total exports to date to 10.4 million bales, compared with the 7.3 million bales at the comparable point in the ’09-10 marketing year.
Effective April 15-21, ’11
Adjusted World Price, SLM 11/16
207.63 cents
*
Fine Count Adjustment ('09 Crop)
0.40 cents
Fine Count Adjustment ('10 Crop)
0.50 cents
Coarse Count Adjustment
0.00 cents
Marketing Loan Gain Value
0.00 cents
Import Quotas Open
0
Special Import Quota (480-lb bales)
0
ELS Payment Rate
0.00 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East
224.47 cents
Forward 5 Lowest 3135 CFR Far East
155.44 cents
Coarse Count CFR Far East
NA
Current US CFR Far East
224.70 cents
Forward US CFR Far East
156.05 cents
'10-11 Weighted Marketing-Year Average Farm Price
Year-to-Date (Aug.-Feb.)
81.37 cents
**
**August-July average price used in determination of counter-cyclical payment
