Cotton's Week: June 27, 2003

"Boosting Africa’s Agricultural Trade" was the subject of a House International Relations Subcommittee on Africa hearing in which Subcommittee Chairman Royce (R-CA) said the US farm bill is adversely affecting developing countries.

In his opening statement, Royce said, "The US farm bill signed into law last year authorizes nearly $200 billion over 6 years. These subsidies encourage overproduction, depressing world market prices and reducing the competitiveness of African agricultural products, both domestically and as an export. US and other developed world cotton subsidies, it is estimated, cost developing-country cotton producers some $9.5 billion each year. African cotton producers are particularly hard hit."

In a written statement, the President of the Republic of Mali cited agricultural subsidies as a principal cause of depressed prices. He renewed an earlier call for ministers meeting in Cancun in September specifically to address Mali’s request that cotton subsidies be reduced and eliminated as part of the Doha World Trade Organization round agreement.

Appearing at the invitation of the subcommittee, Terry Townsend, executive director of the International Cotton Advisory Committee, discussed the world cotton situation. He reminded members that world consumption on a per capita basis has declined outside the US and that the US not only has provided demand for cotton products, but the industry also operates an aggressive and successful market promotion program designed to stimulate increased demand for cotton and cotton products.

The Senate Foreign Relations Committee, chaired by Sen. Lugar (R-IN), held a hearing to review the African Growth and Opportunity Act (AGOA). Lugar acknowledged that AGOA has yielded positive results but that sub-Saharan Africa countries continue to lag behind other developing countries. Lugar also expressed support for extension of the AGOA trade preference program beyond ’08.

"An even more immediate issue is the extension of the 3rd-country fabric provision for least-developed countries, which is due to expire in ’04," Lugar said.

The committee heard from Walter Kansteiner, Assistant Secretary of State for African Affairs, and Florizille Liser, Assistant US Trade Representative for Africa. Secretary Kansteiner referenced Sept. 30, ’04, when the 3rd-country textile provision will expire and suggested the Administration is reviewing whether to ask Congress to extend the benefits.

Legislation introduced by Senate Finance Committee Chairman Grassley (R-IA) and Ranking Member Baucus (D-MT) would require the Office of the US Trade Representative (USTR) to report on countries providing the least market access to US agriculture products. The US Agricultural Products Market Access Act of ’03 (S 1324) would create "Special 301" to require USTR to identify countries with the "most egregious practices" and that are not participating in "good faith negotiations" to end the practices. This would enable the US to take steps to eliminate barriers, such as initiating a dispute settlement at the World Trade Organization.

A companion bill was introduced in the House (HR 2579) by Reps. Camp (R-MI) and Pomeroy (D-ND). According to the co-sponsors, the legislation will require US officials to investigate and build cases rather than relying on farm groups to bear the expense of doing so. The NCC joined other major commodity, livestock and general farm groups in expressing support for the legislation.

In general, cotton’s priorities fared well in the FY04 agriculture spending bill passed by the House Appropriations Committee, which made no changes to commodity programs or payment limitations.

The measure provides $51 million for the National Boll Weevil Eradication Program and $2 million for pink bollworm eradication. The bill would require the National Agricultural Statistics Service to reinstate the Cotton Objective Yield Survey (see related article); the Agriculture Research Service to maintain cotton ginning research funding; and provides funding for Clemson U. to complete work on a marker system to assist US customs in tracking imported products to determine eligibility for trade preference programs.

The measure covers $77.4 billion in total spending, of which $17 billion is for discretionary programs. The spending levels are $393 million below the FY03 bill ($872 million below FY03 spending if the supplemental spending is included) and $136 million below the President’s budget request.

The committee approved a controversial amendment to allow re-importation of Food and Drug Administration-approved drugs sold in Canada or overseas but did not change language included by the subcommittee that prohibits USDA from implementing the country-of-origin labeling law for meat and meat products.

Faced with a significantly lower budget and greater demands for program funding, the bill includes several provisions to cut program spending, including a reduction in acreage enrollment authorized for the Wetlands Reserve Program and a prohibition on implementation of the new Conservation Security Program in FY04.

The legislation will move to the House floor when Congress returns from the July 4 district work period.

Regulations for the ’03 Agricultural Assistance Act, Crop Disaster Program and Livestock Assistance Program were published in the June 26 Federal Register, implementing provisions of the crop loss disaster assistance programs for ’01 or ’02 crops.

In addition to implementing crop and livestock disaster programs, the regulation also clarifies procedures related to succession-in-interest to a direct and counter-cyclical program contract; adds crambe and sesame seed to the list of commodities eligible for direct and counter-cyclical payments; and provides that popcorn acreage is considered corn for determining crop acreage bases and yields.

The crop disaster regulations generally require the program for ’01 or ’02 losses to be administered using similar requirements as used for ’00 crop losses. The statute requires that total assistance, plus the value of the crop, not exceed 95% of the value of the crop had there been no loss. The payment rate for insured crops is set at 50% of market price and at 45% for uninsured crops.

The dispute settlement panel that will decide Brazil’s World Trade Organization (WTO) complaint against the US cotton program decided on a procedure and an ambitious timetable for resolving the issue. The panel will consider first whether the "peace clause" precludes Brazil from going forward with its complaint against the domestic cotton program.

Initial briefs will be filed in July, with the initial hearing scheduled for later in the month. The panel hopes to reach a decision on application of the "peace clause" by early September. The schedule also calls for a 2nd hearing in early October, with an interim report scheduled by mid-December.

NCC President/CEO Mark Lange, Vice President for Economics and Policy Analysis Gary Adams and Trade Counsel Bill Gillon had several meetings with officials from USDA and the Office of the US Trade Representative who are working on the case and briefed staff of the House and Senate Agriculture committees on the dispute.

Temporary funding provided from other USDA agencies and offices will permit the National Agricultural Statistics Service (NASS) to conduct the Cotton Objective Yield Survey for the critical early-season yield forecast months of August and September. NASS previously announced that the survey would be discontinued in ’03 due to budget shortfalls.

The Objective Yield Survey data are combined with grower-reported yields and used by the USDA’s Agricultural Statistics Board to produce the cotton yield and production forecasts released in the August and September Crop Production reports. The September report also includes cumulative boll counts for the objective yield states, which are Arkansas, California, Georgia, Louisiana, Mississippi, North Carolina and Texas.

Cotton consumption by US textile mills in May (4 weeks) was an estimated 259.5 million pounds for a seasonally adjusted annualized rate of 6.78 million 480-pound bales, according to the Commerce Department. Last year’s May annualized rate was 7.71 million bales.

Commerce also raised the April (4 weeks) estimate of mill use by 102,000 pounds to 269.3 million. The revised seasonally adjusted annualized rate of consumption for April is 7.06 million bales, down from a rate of 7.50 million bales last April.

Based on Commerce estimates from Aug. 1, ’02, through May 31, ’03, projected total pounds consumed during crop year ’02-03 would be 3.59 billion pounds or 7.48 million bales. USDA’s latest estimate of ’02-03 crop year mill use is 7.4 million bales.

Applications are being accepted until July 1 for US cotton industry members seeking selection to the ’03-04 Cotton Leadership Class. The NCC’s Cotton Leadership Development Committee will choose the 10-member class, comprised of 4 producers and one participant from each of the other 6 industry segments, in July.

Those interested in applying can visit the NCC Cotton Leadership Program’s new web site at http://leadership.cotton.org to review the program curriculum, eligibility requirements and download the application or may contact the NCC’s John Gibson at (901) 274-9030.

The program seeks to identify potential industry leaders and provide developmental training through this class. During 5 sessions across the Cotton Belt, participants visit with industry leaders and observe production, processing and research. They also meet with lawmakers and government agency representatives during a visit to Washington, DC, and attend the NCC’s annual and mid-year directors meetings.

Now in its 20th year, the program is supported by a grant to The Cotton Foundation from DuPont Crop Protection.

July 1 is the deadline for cotton communities to submit applications for Cotton Town USA grants. Three $10,000 grants will be awarded to towns across the Cotton Belt for use toward community improvement. Cotton Town USA is part of Cotton Counts, a NCC consumer awareness campaign aimed at improving the understanding of and attitudes toward U.S. cotton, and is supported by a Bayer CropScience grant to The Cotton Foundation.

Cotton must be grown within a 10-mile radius of the nominated town, and the grants must be used to fund local community improvement projects. The ’03 winners will be chosen by a panel consisting of National Cotton Women’s Committee and industry representatives and announced in November.

Applications are available from NCWC members, online at http://www.cottonexperts.com/m00/m0008.asp or by contacting Cotton Town USA Headquarters at (630) 505-1100.

Export sales and shipments continued to climb past the previous marketing year during the week of June 19, with 50,100 480-lb. bales registered for sale and 234,500 bales shipped. Total marketing-year sales are now almost 12.9 million bales, compared to approximately 12.5 million at this point in the ’01-02 marketing year; and shipments reached 10.3 million bales, slightly ahead of the 10.1 million bales shipped at this point last year. Total new-crop sales are 1.4 million bales.

Exports for the marketing year will reach USDA’s projection of 11.4 million bales if the pace of recent weeks is maintained.