US cotton industry leaders met with senior US government officials to discuss the serious financial losses accruing in all industry segments as a result of massive defaults on cotton export contracts. Industry leaders emphasized the threat these contract defaults posed to the growth of US exports and underscored the crucial importance of contract sanctity and the enforcement of arbitration awards as cornerstones of international trade.
The delegation from the NCC, the American Cotton Shippers Association (ACSA), AMCOT and the National Council of Textile Organizations (NCTO) met with USDA Secretary Tom Vilsack, US Trade Representative Ron Kirk, and Deputy Assistant Secretary of State Bill Craft. The sessions were a follow-up to previous meetings with Administration officials and leading Members of Congress in March and August.
The industry leaders reported that contracts worth nearly $1 billion, covering sales of more than 4 million bales, are either in default or are at risk of default with little sign of resolution. The delegation explained that while the industry has worked diligently to utilize the internationally recognized arbitration system, far too many foreign mills have refused to honor eventual awards. Worse, in many cases, the host governments appear to be protecting the foreign mills from the enforcement of awards, a concern exacerbated in cases in which the mills themselves are state-owned.
The delegation urged the US officials to pressure foreign government counterparts, emphasizing the crucial importance of contract sanctity as a cornerstone of international trade and warning that a failure to enforce contracts will disrupt international trading relations and undermine the support for future trade agreements. The delegation also noted that other US commodities, such as grains and oilseeds that are currently enjoying record highs in prices, could be at similar risk in the future if the United States doesn’t take a strong stand in defense of contract sanctity.
The delegation suggested that US officials use the leverage of trade preference discussions to impress on foreign government officials the importance of honoring contracts. They further suggested that if US government agencies are sourcing products from suppliers in default that future purchases from those sources should be terminated.
ACSA Chairman Ricky Clarke, a merchant with Cargill Cotton, a division of Cargill Inc., in Cordova, TN, said textile mills in several countries, including Bangladesh, Indonesia, Thailand and Vietnam, have defaulted on millions of dollars of raw cotton contracts that resulted in severe economic losses for US cotton merchants and marketing cooperatives.
"Contract sanctity is a fundamental building block of trade relations and widespread disregard of the principle should sound a loud warning to the extension of trade preferences,” Clarke said. “The U.S. government should carefully consider a foreign government’s record of enforcing commercial commitments when granting eligibility to a U.S. trade preference program.”
NCC Vice Chairman Jimmy Dodson, a Robstown, TX, producer, said, “The defaults are threatening the ability and the willingness of cooperatives and merchants to enter into forward contracts with producers, thereby reducing competition for cotton fiber and resulting in lower prices for farmers.”
AMCOT’s Mike Quinn, president of Carolinas Cotton Growers Cooperative in Garner, NC, agreed saying, “Contract defaults ultimately mean lower prices and reduced returns for producers. In addition, merchant and cooperative losses jeopardize U.S. jobs and threaten the fragile commodity banking system.”
NCTO’s Dan Nation, division president of Parkdale Mills in Gastonia, NC, noted, “U.S. textile mills honor their commitments or face quick legal action in U.S. courts. International mills operate under fewer judicial constraints and gain a competitive advantage by their ability to default without penalty, reducing their relative raw material prices and allowing them to undercut prices for yarn, fabrics, and garments offered by non-defaulting mills.”
USDA to Issue '12 Direct Payments
In a notice to state and county offices, USDA's Farm Service Agency indicates that Direct Payments (DP) for the '12 crop will be processed on or about Oct. 5. DPs for the '12 crop represent the last year authorized under the Food, Conservation, and Energy Act of 2008 ('08 farm law). DPs are available to eligible participants enrolled in either the Direct and Counter-Cyclical Payment (DCP) Program or the Average Crop Revenue Election Program.
DPs to upland cotton base acres enrolled in the DCP program will be determined by multiplying the DP rate of $0.0667 per pound by eligible payment pounds. For the '12 crop, payment pounds equal payment yield multiplied by 85% of enrolled base acres. As legislated in the '08 farm law, the percent of base receiving DPs reverts to 85% for the '12 crop, after being reduced to 83.3% for the '08-11 crops.
Contamination Prevention Posters Mailed to Gins
Posters, in both English and Spanish versions, aimed at reminding ginners and gin employees to make sure that round module wraps are properly removed from seed cotton were mailed by the NCC to all US cotton gins and the NCC's ginner interest organizations.
A memo accompanying the posters urges ginners to display the posters in prominent locations and emphasizes that "it is critically important that gins understand that round module wrap must be removed in a manner that prevents any wrap from getting into ginning systems and baled cotton."
The memo also stated that the mailing "reinforces the message that the U.S. cotton industry takes pride in providing its customers with cotton that carries little risk of being the source of contamination in yarns or other textile products."
Earlier, as part of an industrywide contamination prevention effort, NCC President/CEO Mark Lange sent gins a bulletin about foreign material contamination. The bulletin asked ginners to 1) carefully review the procedures they have in place to detect and prevent contamination from entering baled cotton lint from all sources, particularly plastic contaminants and 2) urge their farmers to increase their inspection for potential seed cotton contaminants (see 9/14/12 Cotton's Week).
Sulfoxaflor Approved For Plant Bug Control
In the 9/28/12 Federal Register, EPA announced it has approved the applications for Section 18 emergency use exemptions to allow the unregistered pesticide sulfoxaflor to be used on cotton in four states to control the tarnished plant bug.
The agency will allow the insecticide to be used in Arkansas, Mississippi, Tennessee and Louisiana after determining that emergency conditions existed in those states. The states claimed that emergency uses allowed under the Federal Insecticide, Fungicide & Rodenticide Act were necessary because growers are facing a longer control season for the pest -- which has developed resistance to alternative pesticides.
EPA established time-limited tolerances for sulfoxaflor residues on undelinted cotton seed, cotton gin byproducts and cotton hulls. Those tolerances are effective on Sept. 28 and will expire on Dec. 31, ’15.
Rat Study Raises Furor over Biotech
A research paper was recently published in the Journal of Food and Chemical Toxicology which claims that dietary exposure to glyphosate and a RoundUp Ready (RR) corn variety causes tumors, organ damage and premature death in lab rats. The mostly French research team was led by Gilles-Eric Séralini at the U. of Caen, France. Séralini is known to hold anti-biotech sentiments.
The study followed 200 rats for two years, a far longer study than the normal 90-day feeding studies required for regulatory approval of genetically engineered crops. Different groups of rats were fed either Monsanto’s NK603 strain of RR corn or different doses of Roundup in their drinking water. The 10th group (the control) was fed conventional corn and plain water.
According to the report, 50% of males and 70% of females died prematurely, compared with only 30% and 20% in the control group. The researchers also described late-developing, large mammary tumors and severe liver and kidney damage. The tumors, although not metastasizing, were said to be big enough to impede organ function in the affected rats.
Organic and anti-biotech groups immediately picked up and promoted the report. It will certainly be a point of contention in the California referendum on mandatory labeling of biotech food products (Proposition 37).
Numerous independent scientists, however, were equally quick to publicly question the study’s scientific validity. Most alarming of these criticisms is Séralini’s choice to use as the subject of his study the albino Sprague-Dawley strain of rat which has an inherent tendency to develop cancers, especially the mammary tumors reportedly seen in some of the study subjects.
Others are questioning the timing of the study results’ release considering the upcoming California vote. According to Bruce Chassy, professor emeritus of Food Science, U. of Illinois, “This is not an innocent scientific publication. It is a well-planned and cleverly orchestrated media event.”
Studies by Seralini have not always withstood peer review, including criticism from the European Food Safety Authority, Food Standards Australia New Zealand and the Public Research & Regulation Initiative, a worldwide initiative of hundreds of public sector scientists.
Organic Firms Not Unified on Biotech Labeling Initiative
In November, California voters will decide on a referendum that would mandate food products containing ingredients derived from biotech crops to be labeled within the state (see 6-15-12 Cotton's Week).
The New York Timesreported that some of the nation's leading organic brands, including Kashi, Cascadian Farm and Horizon Organic, have corporate owners who donated millions of dollars to defeat Proposition 37.
While Whole Foods endorsed Proposition 37 in a Sept. 11 news release, that support was qualified with reservations about certain provisions of the bill. One concern is use of a 0.5% total weight threshold as the trigger for the need to label, which is inconsistent with the long-established international labeling standard of 0.9%. Actually, the bill reduces the threshold to 0% by '19. Whole Foods also is concerned about enforcement.Proposition 37 has no provision to include the California Attorney General's Office to ensure objective guidance and impartial oversight; rather, enforcement will be left to private plaintiff attorneys pursuing civil litigation.
Because of the bill's problems, Whole Foods says manufacturers may choose to label products as possibly containing biotech ingredients, even if it is not the case, to avoid costly litigation.
The latest tracking poll from the California Business Roundtable and Pepperdine U., released on Sept. 13, shows support for the ballot initiative at about two-thirds of prospective voters. If the measure passes, food companies likely will reformulate their products with more costly non-biotech or organic ingredients as they have done in countries where biotech labeling is required.
Lawyers already are gearing up to gauge the impact of Proposition 37 on food companies. The Washington Legal Foundation, a conservative legal think tank, is describing Proposition 37 as "horrendous policy" that constitutes "full employment for trial lawyers."
US Yarn, Fabrics Showcased to Uniform Manufacturers
Apparel manufacturers from eight W. Hemisphere countries got a close look at US cotton yarn and fabric production as part of Cotton Council International's (CCI) '12 COTTON USA Western Hemisphere Uniform & Western Hemisphere Manufacturers Tour. The trip's focus was on the uniform industry - a new, growing and important market for US yarn and fabrics.
The participants represented companies in Colombia, Guatemala, Honduras, Nicaragua, Mexico, El Salvador, Haiti and the Dominican Republic. These countries in this market imported more than 3 million bale equivalents (480 lb) of US textiles and apparel in the '11 marketing year.
At a seminar in Asheville, NC, they heard outlooks for the cotton and US uniform markets.They also received reports on advancements in cotton technologies for the uniform market and that market's sourcing requirements. In addition, members of the group participated in a trade fair there that included seven U.S.-based uniform companies:511 Tactical, Encompass Corporate, G&K Services, New Balance Athletic Shoe, Superior Uniform Group, VF Corp., and Williamson-Dickie Manufacturing.
The tour included stops at various US textile mills, including American Denimatrix, Lubbock, TX; Alamac American Knits, Lumberton, NC; Antex Knitting Mills, Los Angeles, CA; Buhler Quality Yarns, Jefferson, GA; Carolina Cotton Works, Gaffney, SC; Contempora Fabrics, Lumberton, NC; Frontier Spinning Mills, Sanford, NC; Hamrick Mills, Gaffney, SC; Jo-Mar Spinning, Belmont, SC; Mt. Vernon Mills, Trion, GA.; Parkdale Mills, Gastonia, NC; Tuscarora Yarns, Mt. Pleasant, NC; and Zagis USA, Lafayette, LA.
"CCI is focusing on the uniform sector because it is estimated that one-fourth of all U.S. employees wear a uniform," said CCI President Jimmy Webb, a Leary, GA, producer. "We hope these companies will begin escalating their use of cotton in their uniform lines and will consider U.S.-produced cotton yarn and fabric. That's why we are giving them a firsthand look at these U.S. mills that are global leaders in quality, innovation and superior service."
Sales, Shipments Steady
Net export sales for the week ending Sept. 20 were 137,800 bales (480-lb). This brings total '12-13 sales to approximately 5.5 million bales. Total sales at the same point in the '11-12 marketing year were approximately 7.1 million bales. Total new crop ('13-14) sales are 199,800 bales.
Shipments for the week were 168,200 bales, bringing total exports to date to 1.3 million bales, compared with the 809,500 bales at the comparable point in the '11-12 marketing year.
Effective Sept. 28-Oct. 4, ’12
Adjusted World Price, SLM 11/16
61.56 cents
*
Fine Count Adjustment ('11 Crop)
0.88 cents
Fine Count Adjustment ('12 Crop)
1.08 cents
Coarse Count Adjustment
0.00 cents
Marketing Loan Gain Value
0.00 cents
Import Quotas Open
13
Special Import Quota (480-lb bales)
806,596
ELS Payment Rate
0.00 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East
81.81 cents
Forward 5 Lowest 3135 CFR Far East
NA
Coarse Count CFR Far East
NA
Current US CFR Far East
83.60 cents
Forward US CFR Far East
NA
'11-12 Weighted Marketing-Year Average Farm Price
Year-to-Date (Aug.-July)
88.32 cents
**
**Aug.-July average price used in determination of counter-cyclical payment
