Thank you, Allen, Council delegates and honored guests.
The Chairman’s report will be merged with a special video presentation covering the Council’s activities in 2005.
On a wide front, both domestically and internationally, cotton industry leaders and Council staff have pursued the industry’s farm policy and international trade priorities.
The Council’s export promotion arm, Cotton Council International, continued to play a key role in expanding foreign demand for U.S. cotton. Additional government funding for fiscal year 2005 enabled CCI to build on its successful COTTON USA promotion program. Already operating in 50 markets worldwide, CCI is elevating its promotion of U.S. cotton’s unique attributes and technical services to help the industry remain competitive.
The Council also worked to ensure the industry does not lose sight of the need to produce cotton of qualities that can compete with cotton qualities produced abroad as well as meet synthetic competition head-on in rapidly developing markets like China, India and Pakistan.
We have successfully managed a wide range of activities and programs. With more than nine million acres still under active boll weevil eradication, the necessary federal funding to continue eradication was authorized. Likewise, funding was authorized for pink bollworm eradication to keep that program moving forward.
The campaigns to reduce seed cotton and lint contamination were continued in 2005 with the goal of better pleasing the customers of U.S. cotton.
The Cotton Foundation continued to offer significant support to cotton research and education endeavors. Drawing on funds from its 70-plus agri-business members, the Foundation supported research and education projects that are aimed at improving U.S. cotton’s competitive position in the world marketplace.
Following last year’s unanimous decision by the delegate body to adopt a new finance plan for the Council and a tremendous response of early commitments prior to the 2005 convention, I am very pleased to report today that over 96 percent of the Council’s current funding base has committed to the new plan.
In addition to a host of other Council activities, the Council focused its attention on the high priorities of farm and trade policy.
Early last year, the Administration presented a budget proposal that sought significant changes in farm support programs to save $5.7 billion over 10 years. Though all crops and regions would be affected, elements of that proposal were very severe and were unfairly targeted toward the Sunbelt crops of cotton, rice and peanuts.
The Council delivered the message to Congress and the Administration that the Farm Bill is a multi-year contract that provides the necessary stability for U.S. agriculture and U.S. consumers.
The final budget resolution called for a total $3 billion in agricultural spending reductions. To their credit, the agriculture committees in both houses, worked hard to develop budget packages that minimize damage to current farm law structure and to producer income.
Senators Chambliss and Lincoln led a bi-partisan coalition including Talent, Cochran and Pryor that successfully stopped the Grassley-Dorgan payment limit amendment during the Senate’s consideration of budget reconciliation.
The final reconciliation package for agriculture contains no across-the-board cuts for commodity programs but does reduce advance direct payments for the 2006 and 2007 crops and provides for the early termination of the Step 2 program on August 1 this year.
The elimination of Step 2 addresses, in part, the appellate body’s ruling on Brazil’s challenge to the U.S. cotton program. Coupled with the administrative modifications to the export credit guarantee program the U.S. cotton industry is positioned to argue that it has responded fully to the WTO decision.
The WTO obviously continues to be a source of great concern to the U.S. cotton industry. As the Doha Round of talks has progressed, our concern has deepened. The EU and non-government organizations maneuvered to blame cotton for the failed talks in Cancun during 2003. Then a July 2004 WTO framework was announced which created a special cotton subcommittee.
Prior to the Cancun meeting, the Council was working with U.S. trade agencies and Congress to counter unfounded assertions and misrepresentation of U.S. cotton policy and the world cotton market. A close working relationship has been maintained throughout the talks as the Council attempted to forestall any language that would yield inequitable treatment for cotton.
Leading up to the WTO ministerial in Hong Kong last December, the U.S. tabled an aggressive agricultural proposal calling for significant cuts in domestic support and increases in market access.
As expectations diminished for reaching an overall agricultural agreement in Hong Kong, the European Union and others maneuvered to shift the ministerial’s focus from the EU’s unwillingness to offer increased market access to putting a spotlight on the plight of poor countries and on cotton policy.
The limited progress in agricultural negotiations in Hong Kong resulted in only one meaningful accomplishment—the agreement to end export subsidies by 2013, but the negotiations did result in text from the Director General that isolates cotton for special, discriminatory treatment.
This departure from a single undertaking in agriculture came despite a strong presence in Hong Kong by the U.S. and the Council, and effective presentations by Ambassador Portman and others during the ministerial.
The governments of West Africa participate in or enforce institutions that deprive their own cotton farmers of a significant portion of the cash value of their cotton. Representatives of those same governments then sit in international negotiations and shamelessly blame the U.S. cotton program for their own cotton producers’ difficulties.
Sometimes I find myself almost at a loss for words to describe the incongruity of the WTO. Even more disturbing is the failure of the national and international media to call attention to this travesty. Instead, they choose to blindly repeat ludicrous claims by OXFAM and other NGOs, wrongfully attacking U.S. policy while refusing to mention the cotton policies of China and other countries.
The Council’s voice has never been needed more than it is today. Only a unified concerted industry effort can effectively deal with this situation.
During 2005, USDA got an early start on the development of a new farm bill by conducting farm bill listening sessions in 40 states. Those conducted in Cotton Belt states were well-attended by cotton industry leaders who delivered a consistent message of strong support for the current farm bill.
At the conclusion of these sessions, the Council had the opportunity to present comments to USDA that emphasized our industry’s support for the current farm law and its importance to agriculture.
The House Agriculture Committee has held two field hearings and more will be scheduled. The Council coordinated industry leadership presentations at the hearings and will be prepared for further hearings by the House and Senate Agriculture Committees.
During last year’s Annual Meeting, the Council’s Board adopted policy allowing us to support CAFTA if benefits to all industry segments could be demonstrated. After the final version of the implementing agreements became clear, the Council’s Board voted to support CAFTA—under the belief that a good CAFTA is essential to preserving a viable U.S. cotton and textile industry.
In addition to the Council’s active participation in several textile and business coalitions, Council leaders promoted passage of CAFTA through Congressional testimony, personal contacts and participation in a number of press conferences.
The Council also was involved in a number of activities related to China. Mill use in China continues to grow, exceeding 43 million bales in 2005, and the U.S. has already recorded 5.6 million bales in sales to China for this marketing year.
However, there are several important cotton fiber and textile trade issues that have required the attention of the Council. These include a number of Chinese import restrictions on raw cotton, which can have the effect of lowering cotton prices outside of China, as well as China’s continued growth as a textile exporter following the expiration of the U.S.-China bilateral agreement in 2008.
At the conclusion of 2005 and into early this year, we counted our industry’s successes and took measure of the significant challenges ahead.
To more fully report on the wide scope of Council activities this past year, I invite your attention to a special video presentation. (Show video report)
As we look ahead, I believe the Council is well-positioned to successfully address the challenges facing the cotton industry. But the challenges are real and the industry’s efforts to address them must be focused and our resources must be effectively utilized.
The Council’s political action committee –CAC—has done an outstanding job of providing support for our friends in Congress. I want to thank CAC’s supporters for doing their part by providing generous contributions. I also want to encourage all cotton industry leaders to once again do their part this year in making sure everyone with a stake in our industry is helping fund CAC.
In my earlier comments, I commended the industry for its excellent response to the New Finance Plan. That said, I hope each of you will help the Council move closer to --and hopefully achieve-- 100 percent support across all industry segments.
For the 2005-06 marketing year, the U.S. is projected to export 16.4 million bales – about 70 percent of U.S. production. That is a huge change from 2.2 million bales and 15 percent of consumption exported 50 years ago—the year that CCI was founded. During that period, U.S. exports of raw cotton, cotton yarn and cotton fabric have grown strongly thanks to the promotion efforts of CCI, Cotton Incorporated and U.S. mills.
Despite the gains in that 50 year period – global demand that is four times greater than in 1956—cotton’s market share of global fiber consumption has declined relative to synthetics. We all know that cotton’s share has increased tremendously in the United States, but it has declined enough in the rest of the world to more than off-set the United States’ increase. In my opinion, cotton producers worldwide today face the situation where our capacity to increase production exceeds the current rate of consumption growth. Therefore, I strongly urge the industry to lead in developing an effort to strengthen global cotton promotion in order to increase demand. We have already proven in the United States that promotion works. I personally believe that if we fail to implement this global effort without delay, we face very serious consequences.
This time last year, the Council –along with the rest of agriculture—faced a very severe budget proposal from the Administration. Last week, the Administration unveiled an almost identical budget plan calling for nearly $9 billion in savings over 10 years in cuts to commodity programs. The Administration’s proposed payment limitation cap has already received a strong endorsement from Senator Grassley. The Administration also specifically targeted 2 gin research facilities at Lubbock, Texas and Las Cruces, New Mexico for closure and reductions in support for most other ARS cotton related research facilities.
Likewise, the U.S. cotton industry is deeply concerned about the possible ramifications of the cotton-specific references in the WTO ministerial text. Trade ministers have set a date of April 30 to finalize modalities and July 1 for tabling schedules.
An intense period of further WTO negotiations is immediately ahead. Cotton has been asked to give up more than other commodities and there will be strong pressure for even additional concessions.
We have made it clear to U.S. negotiators that should a final Doha agreement contain significant additional concessions on cotton policy, it could result in an uncertain future for an agreement in Congress.
The process of developing a new farm bill is just beginning and Congressional farm bill hearings will occur this year and continue early next year. Several factors will shape a new farm bill, including any final WTO agricultural agreement, Congressional budget authority, and the balance between nutrition/conservation and commodity spending.
In conclusion, many of the Council’s priority issues in 2005 will continue in the year ahead. We now have a better understanding of these issues and how each is interrelated. We know that we are not able to address these issues separately or in isolation from the others.
I believe our industry has taken the necessary steps to ensure that the Council has the resources, dedicated staff and committed leadership to aggressively meet these challenges and position us to take advantage of any new opportunities in the months and years ahead.
I want to express my sincere appreciation for the opportunity to serve as the Council’s chairman and convey to the officers and delegate body my thanks for your leadership and support.
