Cotton's Week September 28, 2001

Uncertainties Do Not Diminish Need for ‘Sound Farm Policy’

In report to NCC Board at fall meeting in Memphis, Chairman James Echols said current political, economic and national security uncertainties do not diminish US cotton’s need for new farm policy that holds promise for restoring economic health to all industry segments.

"Indeed, economic viability of the US cotton and textile industries is essential to our nation’s national security, and we will need to drive that point home with policymakers," he stated.

Echols said NCC has operated under assumption that House will proceed with consideration of new farm legislation in weeks immediately ahead and Senate will do so shortly thereafter.

He reminded directors that NCC has cautioned throughout farm policy deliberations that maintaining and possibly improving on provisions of House bill would be uphill battle because of budget constraints plus "an altogether different set of priorities among a number of influential Senate Ag Committee leaders."

Memphis merchant noted that while Congress has signaled willingness to authorize deficit spending for what whole nation would affirm is very high priority ($40 billion for terrorist victims), he did not know where Congress will place agriculture on scale of national priorities.

Dr. Mark Lange, NCC’s vice president, policy analysis and program coordination, provided US cotton economic outlook.

Lange noted that latest USDA estimates of net farm income continue to reflect importance of government payments in averting financial disaster for US agricultural sector. Crop receipts and income of principal row crops are not expected to increase in ’01, he said, and decrease in government payments will translate into decrease in net farm income for commodity crops.

Regarding world cotton situation, Lange said latest ’01 world cotton production estimate of 96.2 million bales and ’01 world cotton mill use forecast of 92.6 million bales would be records.

In US, Lange said that USDA’s export estimate of 9 million bales, which has been controversial since its first announcement in May of this year, would leave US ending stocks at 8.7 million bales, with corresponding stocks-to-use ratio of 50.3%.

Board received report from Rep. Berry (D-AR), relaying status of farm bill debate in House. Mark Keenum, chief of staff to Sen. Cochran (R-MS), briefed Board on Senate consideration of bill.

Cotton Council International President William Dunavant, III, reviewed activities of CCI and efforts to assist industry in exporting 9 million bales of ’01 crop, and John Maguire, NCC Washington Operations vice president, delivered Washington update.

Board Resolutions Address Farm Policy Response, TPA

Board adopted 2 resolutions providing authority to Executive Committee to respond quickly to farm policy questions affecting US cotton industry and to improve operation of Step 1 if there is unanimous agreement by Executive Committee.

In report to Board, Committee Chairman Bob McLendon said limited window of time for action on farm bill in next several months "could require quick response by the Council to questions of policy."

Board also approved Executive Committee resolution that noted NCC’s "serious concerns about granting Trade Promotion Authority unless legislation included: 1) policy statements that describe damage caused to US cotton and cotton textiles by unfair textile and apparel imports from countries with protected markets; 2) negotiating objective to provide equitable market access so that all markets for cotton and cotton textiles achieve similar degree of openness as current US market has for these products; and 3) negotiating rule that requires all major textile exporting countries to reduce textile and apparel tariffs to levels comparable to US tariffs.

In addition, resolution requested no further cuts in US textile tariffs.

Board passed resolution seeking federal government’s assistance in restoration of trading facility for New York Board of Trade, which was destroyed in Sept. 11 attack.

House Sets Farm Bill Debate

H.R. 2646, Farm Security Act of ’01, is likely to be scheduled for consideration by House Oct. 2 or 3. In preparation for debate, NCC prepared and delivered letter of support for legislation and background documents to Cotton Belt representatives. Information also is posted at http://www.cotton.org/gov/index.cfm.

NCC’s Washington staff continued to brief Congress and work closely with committee staff and other farm organizations. NCC and major farm organizations earlier urged Congress to schedule action on legislation, which has been in development for nearly 2 years. While sensitive to need for Congress to focus on matters of national security, groups asked Congressional leaders to schedule action on H.R. 2646 which represents ready-made package of improved policy that will provide economic stimulus to struggling sector of economy.

During debate on new farm bill, Reps. Kind (D-WI), Boehlert (R-NY), Gillcrest (R-MD) and Dingle (D-MI) intend to offer amendment that will move $1.9 billion per year from commodity programs to conservation programs even though bill already increases conservation programs by more than 75%.

Every major commodity and livestock organization is urging Congress to reject amendment, which clearly is designed to gut commodity title of H.R. 2646. Key members of Congressional Sportsmen’s Caucus, Reps. Pickering (R-MS), Chambliss (R-GA), Hayes (R-NC) and Berry (D-AR), have written colleagues urging support for provisions of H.R. 2646, which includes already strong conservation measures.

Other Congressional members have announced intention to offer amendments that would reduce payment limitations and eliminate marketing certificates. NCC is urging defeat of these amendments. Administration is expected to issue Statement of Administration Policy (SAP) prior to floor consideration. For additional information, NCC members can consult NCC’s web site.

Textile Industry Hit by Worst Downturn in 50 Years

Combination of currency devaluation, drop in world consumption and cyclical slowdown are contributing to worst downturn in 50 years for US textile industry, NCC Director Stephen Felker said in "Domestic Textile Situation and Outlook" report to Board.

Industry efforts to remain competitive with investment in new plants and technology, new products and expanded export base were negated when currencies of major textile exporting countries in Asia collapsed in ’97-98, Felker said.

"This caused artificially low-priced textile and apparel products to hit the US. Textile imports from Asia jumped 80% over the next four years as Asian currencies dropped by an average of 40%. As a result, prices for US textile products have plummeted, causing US textile profits to evaporate and, last year, turn sharply negative."

Felker said US government must move to readjust competitive situation or risk loss of one of largest manufacturing sectors in US. Emergency actions to curb import surges, opening closed export markets in Asia and commitment not to reduce textile and apparel tariffs in next World Trade Organization trade round are among remedies American Textile Manufacturers Institute is proposing.

Administration Unveils Farm Policy Blueprint

USDA Secretary Ann Veneman appeared before Senate Agriculture Committee to discuss Administration’s policy blueprint titled Food and Agricultural Policy: Taking Stock for the New Century, available on USDA web site, www.usda.gov/news/pubs/farmpolicy01/fpindex.htm.

She expressed hope that Congress would take "the long view, step back and determine as best we can the future requirements of our food system."

Chairman Harkin (D-IA) reiterated his support for conservation programs and applauded Administration for supporting expansion of them. Sen. Conrad (D-ND), chairman of Senate Budget Committee, asked Veneman if Administration continues to support $73.5 billion included in FY02 budget resolution for agriculture. Secretary stated that, due to recent events, budget outlook is uncertain and urged discussion.

Cotton Belt committee members, Lincoln (D-AR), Miller (D-GA) and Hutchinson (R-AR), stressed need for farm bill action this year. Secretary Veneman reminded committee that current farm law does not expire until ’02, but stated she looks forward to working with committee as farm policy is crafted. Sen. Lugar (R-IN), Senate Ag Committee Ranking Member, voiced serious concerns over crafting farm bill in ’01. He urged Administration to discourage House from taking up farm bill Oct. 2-3 and stated, "it is irresponsible, in my judgment," for House to bring up farm bill while nation considers "important war issues."

Following hearing, Sen. Lugar (R-IN) sent "Dear Colleague" letter to all members of Senate urging them to take "thoughtful and reasoned approach" to farm bill process. He also stated that current farm bill does not expire until ’02 crop is harvested and that consideration of farm bill is not immediate national security issue. No additional farm bill hearings have been scheduled in Senate at this time.

Court Upholds NRDC Consent Decree

US District Court for Northern District of California decided in favor of consent decree which was developed in last days of Clinton Administration between National Resources Defense Council (NRDC) and several other environmental groups and EPA.

Agreement’s legality has been in question since Judge Charles Legge ruled in April that settlement between NRDC and EPA was negotiated in very short time, "without an opportunity for meaningful comment by even interested parties who have already appeared in this case." Legge ordered EPA to publish consent decree on its web site and to allow for public comment period.

Judge Legge since has retired and new judge has been appointed. Decision was made despite more than 450 negative comments filed during comment period and EPA Scientific Advisory Panel report, which validated that EPA could not meet mandated deadlines of Food Quality Protection Act using sound scientific methodology.

Consent decree requires EPA to: 1) complete aggregate reassessments by certain dates for 11 specific pesticides, 2) assess by August ’02 cumulative risks of all organophosphate insecticides and 3) determine whether carbamates, triazines and chloracetanilides can be grouped for cumulative assessments.

US Mill Consumption Estimated at 7.89 Million Bales

Estimate for August (4-week month) cotton consumption in domestic mills was 305.84 million pounds for seasonally adjusted annualized rate of 7.89 million 480-pound bales, according to Commerce Department.

Revised July (4-week month) estimate was up slightly to 253.73 million pounds, approximately 4.97 million pounds above previous estimate of 248.76. Seasonally adjusted annualized rate of consumption for July is 7.85 million bales.

Effective Sept. 28-Oct. 4, ’01

Adjusted World Price, SLM 1 1/16                    26.29 cents*
Coarse Count Adjustment                              0.00 cents
Current Step 2 Certificate Value                     3.14 cents
Marketing Loan Gain Value                           25.63 cents
*No Adjustment Made Under Step I

Five-Day Average

Current 3135 c.i.f. N. Europe                        40.36 cents
Forward 3135 c.i.f. N. Europe                           No Quote
Coarse Count c.i.f. N. Europe                        38.28 cents
Current US c.i.f. N. Europe                          44.75 cents
Forward US c.i.f. N. Europe                             No Quote