2010 cottons week header
PHYTOGEN_CMYK_275x77px
twitter
October 14, 2011
 

CAAG2PHYG085_PhytoGen_Harvests_National_289x640_STATIC_200K_03-15

™ ®Trademarks of Corteva Agriscience and its affiliated companies. ©2024 Corteva.




 
PAST ISSUES/ARCHIVES
 
Cotton's Week: March 22, 2024
Cotton's Week: March 15, 2024
Cotton's Week: March 8, 2024
Cotton's Week: March 1, 2024
 
 


 
House and Senate Ag Panels Suggest $23 Billion in Cuts

The Chairmen and Ranking Members of the House and Senate Agriculture Committees reportedly will send the Joint Committee on Deficit Reduction a letter offering support for a reduction of $23 billion in farm bill spending over 10 years. In exchange, the Agriculture Committees would write the legislation necessary to achieve the savings in a way that preserves an effective safety net.

The Joint Committee is required to develop a plan to reduce the deficit by $1.5 trillion over 10 years (see 8/12/11 Cotton's Week). Committees, including the House and Senate Agriculture Committees, are allowed to provide recommendations to the Joint Committee by Oct. 14. The Joint Committee is to develop and vote on its deficit reduction plan by Nov. 23, and the House and Senate are to vote on the Committee's plan by Dec. 23.

Reports indicate that the $23 billion in agricultural cuts is a net number. The total savings would be $27 billion but $4 billion would be used to cover disaster losses because the current law terminated assistance under SURE and other programs on Sept. 30. Cuts from commodity programs would be $15 billion, with the balance of the reductions from conservation and nutrition.

 
Senate Leaders Announce Spending Bill Plans

Senate leaders announced plans to begin combining unfinished annual spending bills into packages. Senate Majority Leader Reid (D-NV) said “bundling” is necessary, given the few legislative days left to complete work on FY12 appropriations measures. A Continuing Resolution (CR) funding the federal government expires on Nov. 18.

Majority Leader Reid said the first mini-package will include three bills: Agriculture, Transportation and Housing and Urban Development, and Commerce-Justice-Science.

With the CR scheduled to expire in less than 40 days and none of the 12 regular appropriations bills enacted, there are concerns about the threat of a government shutdown before Thanksgiving. Adding to the pressure, the House is scheduled to be in recess during the week of Oct. 17 and the Senate the week of Oct. 24.

Debate on the first package of bills is expected to take most of the week of Oct. 17. Reid and McConnell both said that they have agreed to a process that will allow members to offer numerous amendments.

The NCC is closely monitoring the debate because when the House considered the agricultural appropriations bill earlier this year, there were proposed amendments to: (1) reduce annual payment limitations to $125,000 per legal entity and include marketing loan gains and LDPs, (2) reduce the Adjusted Gross Income (AGI) used to determine program eligibility to $250,000; (3) eliminate funding for the Market Access Program; and (4) prohibit the transfer of funds to Brazil, as agreed to by the US and Brazilian governments as a way to head-off retaliation against US exports as authorized in the Brazil WTO case. All failed except the amendment to terminate the transfer of funds to Brazil.

Given current price levels, a reduction in limitations that also re-establishes the limit on marketing loan gains or reducing the AGI eligibility test might not seem as critical as in the past but a significant amount of cotton is processed through the loan and the AGI test is used to determine eligibility for loans and for direct payments. Thus, a change in the AGI test could seriously disrupt marketing practices and financing.

If an amendment to terminate the transfer of funds to Brazil is approved by the Senate, it will be difficult to keep out of the final bill because the House already has approved the same amendment. If the prohibition is enacted, the United States would be in violation of the US-Brazil Framework Agreement and Brazil could immediately retaliate by applying prohibitively high tariffs to a wide variety of US products. That would re-activate the Chamber of Commerce, National Association of Manufacturers, the pharmaceutical industry and others who would insist on a modification of the cotton program to resolve the Brazil case.

During the Senate committee mark-up, none of the above listed amendments were offered and the NCC is not aware of any Senators circulating similar amendments at this time. However, the announcement to schedule floor action was only recently announced so amendments could emerge prior to or even during floor consideration, which will last several days.

 
FTA Implementing Legislation Approved

The House and Senate approved legislation necessary to implement free trade agreements (FTAs) with Panama, Korea and Colombia. The President is expected to sign the legislation.

The approval came more than four years after the FTAs were first signed by President George W. Bush and after additional negotiations by the current administration.

The House also voted to extend the Generalized System of Preferences (GSP) and to renew Trade Adjustment Assistance (TAA) for employees adversely affected by trade. TAA currently operates at ’02 levels because the ’09 expansion covering more people and providing a higher tax credit for health care coverage expired in February.

In action on another trade issue, the Senate -- by a strong bipartisan vote of 63 to 35 -- approved legislation that would impose severe penalties on China and other countries for currency manipulation. However, the bill is not expected to be considered by the House even though supporters are pressing for a vote on a similar House bill that has 225 bipartisan co-sponsors even as reports indicate that House Republican leaders are against bringing the bill to the floor. President Obama further jeopardized the bill’s chances last week when he raised concerns about the measure’s compliance with World Trade Organization rules.

The Senate measure could result in the imposition of punitive tariffs against Chinese imports. It also would require the Commerce Dept. to consider currency manipulation an illegal subsidy under US trade remedy law, allowing companies to petition the government for relief against imports alleged to be under-priced because of currency manipulation. The bill also would force the Treasury Dept. to take on the currency manipulation issue.

 
Risk Management Importance Conveyed

Texas cotton producer Jimmy Dodson told a Farm Foundation forum audience that risk management tools, particularly crop insurance, "are extremely important to cotton producers." Dodson, chairman of the NCC's American Cotton Producers, was a participant in a panel discussion on "The Future Role of the Federal Government in Agricultural Risk Management" held at the National Press Club.

Dodson said that in many parts of the Cotton Belt, "purchasing adequate crop insurance is often a requirement for securing financing for production costs. In today's environment, we do not see that requirement changing. As such, it is our hope that crop insurance products can be enhanced to further protect producers from events beyond their control."

Dodson said that while USDA's Risk Management Agency (RMA) has made some recent beneficial changes to crop insurance products, the US cotton industry believes there are areas for improvement.

RMA should continue to look for ways to move toward rate-setting procedures that recognize those investments a grower makes that reduce their individual risk such as improved irrigation practices and adoption of seed varieties that incorporate crop protection traits.

Regarding RMA's proposed rule for Area Risk Protection Insurance, Dodson said cotton producers also are very supportive of Federal Crop Insurance Corp. (FCIC) efforts to expand the offering of area-wide insurance products covering revenue and yield losses. Producers also agreed with FCIC's decision to incorporate their own yield data, as well as other USDA sources – a move that should enhance the yield estimates' accuracy/reliability and ultimately program performance.

He expressed appreciation for RMA's efforts to improve the cotton quality loss adjustment provision, based on the Commodity Credit Corp.'s Loan Premium and Discount schedule and said the industry is continuing to look at further enhancements in quality adjustments.

He urged the reauthorization in the new farm law of a pilot program aimed at encouraging producers to insure enterprise units – insuring all of their acres in a county under one policy. Many have been able to purchase higher coverage levels with lower premiums.

Dodson also discussed the cotton industry's new risk management program recommendation that would allow a producer to purchase a crop insurance product from their insurance agent that would sit on top of their current insurance – to address shallow revenue losses. He said there are few options for producers who suffer from shallow losses, those up to 30%.

He added that this program would best utilize budget resources, respond to public criticism by directing benefits to growers who suffer losses resulting from factors beyond their control, and build on existing crop insurance programs, thus ensuring there is no duplication and offering the potential for program simplification.

 
Congress Continues to Question LightSquared

During a recent hearing, members of the House Small Business Committee questioned LightSquared Inc. executives about the company's plan to build “the nation's first wholesale-only, mobile broadband network.”

A growing number of Congressional members have questioned LightSquared's proposed network, arguing that it could interfere with global positioning system (GPS) signals. Recent test results have confirmed that use of the company's upper 10 MHz block of spectrum -- not the lower block, which LightSquared now proposes to use for initial rollout of its network -- interfered with GPS receivers used by the Coast Guard, NASA and the Federal Aviation Administration, and caused GPS receivers used by state police, fire, and ambulance crews to lose reception.

“This alarmed many small businesses as they could be required to replace or retrofit their current GPS device,” said Rep. Graves (R-MO), the committee’s chairman, in his opening statement at the hearing. “This will be an enormous cost to small businesses. Even though LightSquared has committed to spend $50 million to retrofit federal GPS devices, this does nothing for the nearly one million small businesses that are left to pay the bill that will easily cost billions of dollars.”

The company, for its part, has agreed to further reduce transmission power levels and underwrite the development of new filtering technologies to avoid interference with GPS. When questioned, LightSquared's executive vice president of regulatory affairs, said that “it shouldn't cost a cent” for small businesses that must retrofit high-precision GPS receivers to filter out the interference.

LightSquared recently entered into an agreement with Javad GNSS Inc. to develop a new system to prevent interference with GPS devices. The system can be adapted to work with high-precision GPS devices already in use by the agriculture, surveying, construction and defense industries. However, several committee members have called for further testing of a plan by the company to use a different block of spectrum that is further away from the GPS spectrum band. The concern is that LightSquared's project requires the company to deploy significantly more land-based stations to operate in the Mobile Satellite Services downlink band. These base stations, which were originally intended only as a “fill in” where mobile satellite service coverage is inadequate, emit much higher power and stand to create substantially more interference with GPS operations.

Last month, the Federal Communications Commission's (FCC) International Bureau and Office of Engineering and Technology issued a public notice concurring with the National Telecommunications and Information Administration on the need for additional testing.

The NCC has been active with the Save Our GPS coalition, which is comprised of the full range of users and technology providers. The NCC recently submitted a coalition letter to the FCC emphasizing the need to fully test new filters proposed to reduce interference, determine the cost of retrofitting existing GPS devices with the new filters and determining who will be responsible for paying for retrofits. The NCC also co-sponsored a briefing for Congressional staff to educate them regarding the risks of moving forward with LightSquared's proposal without properly vetting their technology and suggested remedial measures.

 
USDA Sees 16.61 Million Bale US Crop

In its October crop report, USDA estimated a '11-12 US crop of 16.61 million bales, up 50,000 bales from the September report. Upland production was estimated at 15.87 million bales and extra-long staple (ELS) production at 737,000 bales. Harvested area was estimated at 9.85 million acres, implying a non-harvested area of 4.87 million acres based on USDA's revised June acreage report. The resulting abandonment rate is roughly 33.09%. The national average yield per harvested acre was estimated to be roughly 809 pounds, 13 pounds less than the five-year average.

On a regional basis, the Southeast crop is estimated at 5.41 million bales, based on harvested acres of 3.30 million and a regional average yield of 787 pounds. In the Mid-South, expected production is 4.81 million bales and harvested area is estimated to be 2.41 million acres, with an expected yield of 960 pounds per harvested acre. The Southwest upland crop is estimated at 4.19 million bales and the expected harvested area is 3.37 million acres, with a regional average yield of 597 pounds. Upland production in the West is estimated at 1.47 million bales on an estimated harvested area of 492,000 acres and a regional average yield of 1,429 pounds.

The ELS crop is an estimated 737,000 bales. Harvested area is pegged at 288,000 acres with an average yield of 1,231 pounds per harvested acre.

State-by-state results are presented in the accompanying table.

US Cotton Crop, '11-12

PLANTED
ACRES
Thou. 1/

HARV.
ACRES
Thou.

YIELD PER
HARV.
ACRE
Lb.

5-YEAR
AVG.
YIELD
Lb.

480-
POUND
BALES
Thou.

UPLAND

SOUTHEAST

3,413

3,298

787

788

5,408

Alabama

460

440

731

630

670

Florida

122

120

712

772

178

Georgia

1,600

1,520

853

833

2,700

North Carolina

810

800

702

807

1,170

South Carolina

305

303

776

754

490

Virginia

116

115

835

827

200

MID-SOUTH

2,475

2,405

960

924

4,810

Arkansas

680

660

996

1,014

1,370

Louisiana

295

285

893

865

530

Mississippi

630

605

960

878

1,210

Missouri

375

365

1,131

999

860

Tennessee

495

490

823

819

840

SOUTHWEST

8,043

3,367

597

711

4,188

Kansas

78

67

595

629

83

Oklahoma

415

100

504

740

105

Texas

7,550

3,200

600

711

4,000

WEST

500

492

1,429

1,427

1,465

Arizona

250

248

1,510

1,469

780

California

182

181

1,485

1,474

560

New Mexico

68

63

952

1,064

125

TOTAL UPLAND

14,431

9,562

797

811

15,871

TOTAL ELS

289

288

1,231

1,265

737

Arizona

11

11

873

903

20

California

260

259

1,269

1,329

685

New Mexico

3

3

832

782

5

Texas

15

15

894

822

27

ALL COTTON

14,720

9,850

809

822

16,608

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

 
'11-12 US Cotton Export Estimate Lowered

In its October report, USDA sees ’11-12 US mill cotton use unchanged from the previous month at 3.80 million bales, while the export estimate was lowered 500,000 bales to 11.50 million bales due to less foreign import demand. This generates a total ’11-12 offtake of 15.30 million bales. Ending stocks for ’11-12 are projected at 3.90 million bales for an ending stocks-to-use ratio of 25.5%.

For the ’10-11 crop year, USDA gauged US cotton production at 18.10 million bales. Estimated mill use and exports were unchanged from the September report at 3.90 million bales and 14.38 million bales, respectively. Total offtake for the ’10-11 crop year is estimated at 18.28 million bales. Ending stocks were estimated at 2.60 million bales. The estimated stocks-to-use ratio for the ’10-11 marketing year is 14.2%.

In the USDA report, the ’11-12 world production estimate was raised 1.23 million bales from the September report to 124.19 million bales. World mill use was reduced 840,000 bales from the September report to a projected 114.38 million bales. Consequently, world ending stocks for ’11-12 are projected to be 54.83 million bales for a stocks-to-use ratio of 47.9%.

For the ’10-11 marketing year, USDA estimated world production at 115.08 million bales, up 520,000 bales from the September report. Estimated world mill use was lowered 70,000 bales to 114.32 million bales. Estimated world ending stocks on July 31, ’11 are now estimated at 44.87 million bales. This has a corresponding stocks-to-use ratio of 39.2%.

 
Latner Named New CCI Executive Director

The NCC announced that Kevin Latner, a veteran Foreign Agriculture Service attache, will become executive director of Cotton Council International (CCI).

Latner, who had worked for the US Grains Council in Beijing and as an independent consultant on trade issues, holds three degrees from the U. of California at Davis, including a Juris Doctor in International Trade Law. He also served 15 years in USDA's Foreign Agricultural Service, including five years in China as the attache in Beijing before serving as director of the US Agricultural Trade Office in Chengdu.

NCC President/CEO Mark Lange said Latner's government service and his experience with Asian agricultural markets and trade will be a tremendous benefit in guiding CCI's global efforts. "During the course of his career, Kevin has found his home in agriculture and agricultural trade, and we believe he will be a strong advocate for U.S. cotton and product exports," Lange said.

Latner, who begins on Dec. 1 in Washington, DC, replaces the retiring Allen Terhaar who Lange praised for his outstanding leadership.

"During Allen's tenure, CCI had unparalleled success in carrying out its mission of increasing exports of U.S. raw cotton, cottonseed and U.S. manufactured cotton products," Lange said. "Under Allen's leadership, CCI has consistently been one of the largest recipients of funding under the several export enhancement programs administered by USDA's Foreign Agricultural Service.Allen's accomplishments are exceptional as he managed CCI through some of the most turbulent and stressful periods seen in the world cotton market."

 
Sales, Shipments Steady

Net export sales for the week ending Oct. 6 were 64,900 bales (480-lb). This brings total ’11-12 sales to approximately 7.3 million bales. Total sales at the same point in the ’10-11 marketing year were approximately 10.4 million bales. Total new crop (’12-13) sales are 238,400 bales.

Shipments for the week were 92,300 bales, bringing total exports to date to 974,100 bales, compared with the 1.8 million bales at the comparable point in the ’10-11 marketing year.

 

 
Effective Oct. 14-20, ’11

Adjusted World Price, SLM 11/16

 91.33 cents

*

Fine Count Adjustment ('10 Crop)

 1.65 cents


Fine Count Adjustment ('11 Crop)

  1.70 cents


Coarse Count Adjustment

  0.00 cents


Marketing Loan Gain Value

 0.00 cents


Import Quotas Open

1


Limited Global Import Quota (480-lb bales)

204,465


ELS Payment Rate

0.00 cents


*No Adjustment Made Under Step I

 

Five-Day Average



Current 5 Lowest 3135 CFR Far East

111.89 cents


Forward 5 Lowest 3135 CFR Far East

NA


Coarse Count CFR Far East

NA


Current US CFR Far East

117.30 cents


Forward US CFR Far East

NA


 

'10-11 Weighted Marketing-Year Average Farm Price  
 

Final Marketing-Year Average Price

81.50 cents