Cotton's Week: April 25, 2003

US and Vietnam negotiators completed a 2nd round of negotiations in an effort to establish quotas on certain apparel items. Negotiations were triggered by the rapid growth of Vietnam’s shipments of apparel products to the US, which totaled $2.4 billion in the 1st quarter of ’03 compared to virtually nothing prior to ’01.

Administration officials advised US industry representatives April 21 that negotiations were complete and the US was prepared to take unilateral action to establish annual quotas based on trade data for the year ending November ’02 if Vietnam did not accept a negotiated agreement. In the categories for cotton knit shirts and woven pants, the unilateral quota would be significantly lower than the negotiated quotas that have thus far been rejected by the Vietnamese delegation.

US officials also revealed very troubling information that the US Customs Service, in a spot check of shipments, discovered a substantial volume of products listed as originating in Vietnam actually were products of China. The NCC, American Textile Manufacturers Institute and others strongly urged the Administration to move to impose unilateral quotas until actual trade data can be verified and a new negotiation initiated.

The discovery of significant volumes of misidentified products means any quotas established on recent trade volume are inflated and overly generous. The US organizations have also pointed out that the Vietnamese products are displacing products produced in Mexico and the Caribbean using US yarn and fabric, thus undermining benefits of trade legislation designed to benefit US industry and its trading partners.

NCC Chairman Robert W. Greene, Courtland, AL, said, "I am dismayed that the US government would even consider negotiating overly generous quotas with Vietnam while the US textile industry is reeling from surging imports of textiles and apparel from China. The US government has yet to establish safeguards that were guaranteed with respect to Chinese trade and is now offering doubled market access to Vietnam knowing that trade data are tainted by Chinese transshipments."

Greene further noted that "this offer seriously damages US cotton growers and textile manufacturers. US cotton and cotton products flowing to Western Hemisphere trading partners under preferential or free trade agreements have the potential to benefit all segments of the US cotton industry and our trading partners. The market access offered to Vietnam by the US negotiators could largely preclude much of the potential benefit from future Western Hemisphere trade agreements. The US government should immediately implement unilateral restraints and only renew negotiations with Vietnam when trade data can be verified."

A final decision will likely be made by Secretary of Commerce Evans, who earlier pledged to work to assist the US textile industry following Congressional approval of Trade Promotion Authority that was achieved with support of key textile-state lawmakers.

Deputy Under Secretary Floyd Gaibler, assisted by top Farm Service Agency (FSA) officials including John Johnson, Brad Karmen, Diane Sharp and others, provided Washington agriculture representatives with an update on progress toward implementation of the Agriculture Assistance Act of ’03. As previously announced by Agriculture Secretary Veneman, sign-up is scheduled to begin June 6, with sign-up for the $50 million cottonseed assistance program expected to begin in early May (see related article).

USDA officials cited instruction included in the legislation as key guidance - "the Secretary shall make assistance available in the same manner as provided (previously), including using the same thresholds for quality and quantity losses." They pointed out that the legislation does include a provision stipulating that the sum of any value of the crop harvested plus any crop insurance indemnity plus any disaster payment may not exceed 95% of the value of the crop if there had been no loss.

The officials used the disaster assistance payment calculator available on USDA’s web site (www.usda.gov) to illustrate how yield loss payments can be calculated and how the 95% rule is applied. The calculator is not final nor can it be used for quality loss calculations at this time. They stressed that the 95% rule is being implemented in a way that has been determined to deny as few benefits as possible.

Officials also confirmed the following: losses will be calculated on crop insurance units or the equivalent; insurance indemnity payments will be net of premium paid; producers may receive quantity or quality loss payments or in some cases both; quality losses will be based on a tier system that was established for the ’00 program; the quality loss threshold is 20%; State Committees will establish payment adjustment factors for prevented-planted and unharvested crops; there is an $80,000 per person limit on benefits; and a $2.5 million gross income test will apply.

Producers who suffered losses in both ’01 and ’02 will elect which year benefits will apply, and there will be no proration of benefits. A producer who did not purchase crop insurance and elects to receive a disaster payment must purchase crop insurance for the next 2 years (likely ’04 and ’05) or refund all disaster benefits received.

Regulations implementing the ’02 cottonseed assistance payment program were published April 25. The program was authorized as part of the ’03 Agriculture Assistance Act and directs the Secretary of Agriculture to use $50 million of Commodity Credit Corp. (CCC) funds to provide assistance to producers and 1st handlers of the ’02 crop of cottonseed. The regulation notes that the ’02 program will be based on ’99 and ’00 programs.

CCC will mail an application to gins for use in applying for assistance during an application period to be announced by USDA. CCC will determine the total quantity of cottonseed eligible for payment based on data provided by gins. The payment rate per ton will be determined by dividing the available $50 million by the total quantity of cottonseed for payment. Resulting payments to gins are not subject to payment limitations.

According to the regulation, "CCC plans to provide all ’02-crop cottonseed payments to cotton gins. Gins would share such payments with cotton producers to the extent that the effect of low cottonseed prices for the ’02 crop was borne by producers or to the extent that such sharing is consistent with the arrangements between producers and the gins."

The regulation is final and can be viewed at NCC’s web site, www.cotton.org. For additional information contact Gene Rosera at 202-720-8481 or at gene_rosera@wdc.usda.gov.

Agriculture Secretary Veneman announced that sign-up will begin May 5 for the Conservation Reserve Program (CRP), that USDA is releasing more than $1.8 billion for conservation assistance on working lands and that $105 million in funding for rural water and wastewater infrastructure projects has been distributed to 29 states.

The CRP general sign-up at USDA service centers will be held May 5-30. The ’02 farm bill authorized USDA to maintain CRP enrollment up to 39.2 million acres.

Aside from the general sign-up, CRP’s continuous sign-up program will be ongoing. USDA has reserved 2 million acres for the continuous sign-up program, which represents the most environmentally desirable and sensitive land.

Current participants with contracts expiring this fall - about 1.5 million - can make new contract offers. Contracts awarded under this sign-up will become effective either at the beginning of the Oct. 1 fiscal year or on Oct. 1 of ’04, whichever a producer chooses. One other general sign-up will be offered through ’07.

The Farm Service Agency will evaluate and rank eligible CRP offers using the Environmental Benefits Index (EBI) for environmental benefits to be gained from enrolling the land in CRP. Decisions on the EBI cutoff will be made after the sign-up ends and after analyzing the EBI numbers of all offers. Those who would have met previous sign-up EBI thresholds are not guaranteed a contract under this sign-up.

Veneman said the more than $1.8 billion in funding, released through the Natural Resources Conservation Service, will help producers with conservation planning and voluntary conservation programs such as the Environmental Quality Incentives Program and Wetlands Reserve Program. Special emphasis has been placed on conservation practices and programs to help landowners recover from drought.

Dow AgroSciences LLC has received a letter of approval from EPA for the Experimental Use Permit (EUP) for WideStrike^TM insect protection, the company’s first cotton insect protection trait.

The approval allows the company to move ahead with large-scale field trials of cotton varieties containing WideStrike^TM during the ’03 season.

WideStrike^TM insect protection – a combination of the Cry1F and Cry1Ac Bacillus thuringiensis (Bt) proteins – has been in development and field study for several years. Preliminary results from 75 field trials conducted in ’02 show that WideStrike^TM delivers season-long protection against a broad spectrum of lepidopteran pests such as cotton bollworm, tobacco budworm, pink bollworm, beet armyworm, fall armyworm, Southern armyworm, cabbage loopers and soybean loopers.

Full federal registration for the trait is anticipated in ’04.

Pending full federal and state registration, WideStrike^TM introduction is planned in elite varieties from Phytogen Seed Company in ’04 and in varieties from other cottonseed companies by ’05. Phytogen varieties containing WideStrike^TM stacked with the Roundup Ready® gene are also anticipated by ’05.

The use of herbicides prevents annual losses of up to $13.3 billion in food and fiber production, according to a study conducted by the National Center for Food and Agriculture Policy and funded by CropLife America. The findings were reviewed and endorsed by 27 commodity organizations, including the NCC.

The report, available on the web at www.ncfap.org, documents potential crop losses, increased labor costs and increased soil erosion that would result without the use of herbicides. For most crops studied, national herbicide-treated acreage exceeds 85%. Erosion of cropland has been reduced by two-thirds.

For cotton, the study cites USDA statistics that estimate without herbicide use, US cotton yields would decline 27%. The report includes data that indicate 90% or more cotton acreage has been treated with herbicides since ’65. Citing lower yields and high labor costs associated with increased tillage and hand weeding, the report shows organic cotton acreage declining from a high of 25,000 acres to 11,000 acres. Expansion of organic cotton acreage in the US has been stifled due to the reluctance of clothing companies to sign contracts with US growers when they can buy organic cotton much cheaper in countries such as India and Turkey, where labor costs are significantly lower."

Export sales for the week ending April 17 were 108,300 480-lb. bales, bringing total ’02-03 sales to almost 11.6 million. Total sales at the same point in the ’01-02 marketing year were approximately 11.6 million bales. Total new crop (’03-04) sales are 885,300 bales (480-lb.).

Shipments for the week were 257,600 bales, bringing total exports to date to 7.7 million bales, down from 8.1 million at the comparable point in the ’01-02 marketing year. Exports for the marketing year would reach USDA’s projection of 10.8 million bales based on the export pace of recent weeks.