Cotton's Week: July 11, 2003

Cotton's Week: July 11, 2003

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Cotton Farmers Express Concerns in ‘Farm Family’ Letter to Congress

A "Farm Family" letter signed by more than 20 Cotton Belt farmers was delivered to members of Congress expressing "deep concern over the continued attacks on the new farm law."

The letter, available online at www.cotton.org, noted that efforts to amend the farm bill, barely one year after enactment and before it is fully implemented, are already having a destabilizing effect. "If sustained, these attacks will divide the US agricultural community, mislead the American public and ultimately result in the demise of one of this nation’s most productive and valuable industries."

"There seems to be a misunderstanding about what constitutes a commercially viable farming operation. Our operations have grown only as necessary to achieve economies of scale, not to generate more government benefits. It is important to realize that program benefits are not profit. Benefits simply help us survive during periods of low prices. Cotton’s per-acre payments as a percentage of the cash cost of production are actually lower than those for feed grains and oilseeds.

"Without doubt, we are most concerned about the constant threat of amendments to apply even more restrictive limits on farm program benefits. A producer of cotton, rice and peanuts will be limited on far fewer acres than a farmer with grains and oilseeds. The limits being discussed likely would result in numerous family operations abandoning farming."

The farmers pointed out that the US textile industry has cut production and employment in the face of an avalanche of cheap imported products, while China has not provided the market access promised in its World Trade Organization accession agreement. "Many of these developments are beyond our control. Others will require the support and assistance of our government agencies and Congress."

The letter called for a stable, predictable and equitable US farm policy, noting that it is not just about loan rates and payment limits but also addresses renewable fuel policy and effective conservation programs. "All these components are necessary in order to permit US consumers continued access to the safest, most affordable and most stable supply of food and fiber in the world."

Limiting access to a financial safety net is not in the best interest of the US rural economy, production agriculture or the U.S. consumer, the letter stated. "Current farm law needs to remain intact."



NCC Joins Coalition Effort to Stem Tide of Chinese Imports

The NCC joined with 13 other fiber and textile organizations in an effort to persuade the Bush Administration to self-initiate safeguards to curb the massive flow of textile imports from China.

Authority for the Administration to self-initiate requested safeguard action is included in the accession agreement under which China gained entry into the World Trade Organization (WTO).

NCC President/CEO Dr. Mark Lange said, "The safeguard action our coalition is seeking is authorized if Chinese-origin textile or apparel products disrupt markets and threaten to impede the orderly development of trade. Members of the coalition unanimously agree that markets are being disrupted as evidenced by reduced US mill cotton consumption, textile mill bankruptcies and closings and job losses in that sector. This turmoil explains the request for the Administration to self-initiate the action."

During the first 15 months following quota removal in January ’02, China’s share of the US market for these products increased from 9% to 45%.

Some of the highest import growth rates were in 8 cotton-containing categories, where the average rate of increase over the previous year was more than 640%, noted Gaylon Booker, a NCC consultant who has been working closely with the coalition.

"China starts with a huge cost advantage due to its internal, non-market monetary policy," Lange said. "The Chinese yuan is estimated to be undervalued by 40% and pegged to the dollar, meaning this huge advantage is locked in, and the international community has not mustered the will to force China to float its currency."

Aside from the safeguard action that can provide short-term relief, the coalition is urging the Administration to take 2 other actions that can provide longer-term benefits to the US and its trading partners: 1) maintain US textile tariffs under the WTO until other nations reduce their tariff rates to US levels and 2) refuse to accept tariff preference levels (TPLs) in the Central American Free Trade Agreement (CAFTA) and similar agreements.

Including TPLs in the CAFTA and similar agreements would permit China and other 3rd countries to transship textile components through signatory countries into the US market duty free.



US, Central America Industries Join NCC in CAFTA Issues Review

Staff from US textile industry organizations joined NCC Senior Vice President John Maguire and Trade and Farm Policy Issues Consultant Gaylon Booker in discussions with representatives of Central American textile industries on issues associated with the proposed Central American Free Trade Agreement (CAFTA).

The unified message from the US industry is that Chinese-sourced imports threaten complete disruption of any potential benefits arising from an expected hemispheric trade partnership and that provisions of the agreement must avoid transferring benefits to 3rd parties.

Central American representatives expressed general support for a yarn-forward rule of origin but stressed their desire for sourcing flexibility and consideration of a structure of tariff preference levels similar to those in the North American Free Trade Agreement. A follow-up meeting is scheduled in an effort to build general agreement for the textile provisions of CAFTA.



House, Senate Schedule Action on Ag Appropriations

The House is expected to consider the FY04 agriculture appropriations bill during the week of July 14, with the Senate Agriculture Appropriations subcommittee scheduled to mark up its version of the FY04 spending bill on July 15 and the full committee likely considering the bill on July 17. (An Action Alert for NCC members is posted at www.cotton.org; click the Action Alert button.)

If recent rules for debate are used, the legislation in the House will be open to amendments during the floor debate.

As previously reported, the bill approved by the House Appropriations Committee, in compliance with the budget resolution, is $393 million below the FY03 bill and $872 million below FY03 spending if the supplemental funding for disaster assistance is included.

In addition to possible efforts to tighten payment limits or eliminate marketing certificates, there also may be amendments to restore requirements for country of origin labeling of meat and meat products and to restore funding for several conservation programs, which was cut by the committee to meet budget targets.

The Senate subcommittee will have to meet the same budget target as the House.



US, Brazil File Comments with WTO Dispute Panel

Both Brazil and the US made their first written submissions to the World Trade Organization dispute panel hearing the complaint filed by Brazil against the US cotton program.

The first submissions were to concentrate on the issue of whether the "peace clause" contained in the Uruguay Round agricultural agreement exempted the US cotton program from the Brazilian challenge. The panel has indicated it hopes to rule on this threshold issue by September.

NCC staff and its trade counsel worked cooperatively with attorneys from USDA and the Office of the US Trade Representative on issues involving the dispute.



US Crop Projected at 16.6 Million Bales in July Estimate

For the ’03-04 crop year, USDA projected the US crop to reach 16.6 million bales. US mill use was lowered 400,000 bales to 6.8 million, while exports were increased 300,000 bales to 11.8 million. Total offtake for ’03-04 is estimated at 18.6 million bales, down 100,000 bales from the June report. Ending stocks for ’03-04 are projected at 3.9 million bales, for an ending stocks-to-use ratio of 21.0%.

World production was estimated at 94.8 million bales, with world mill use projected to reach 99.1 million bales. Consequently, projected world ending stocks for ’03-04 are 32.96 million bales, for a stocks-to-use ratio of 33.2%.



Mississippi Boll Weevil Region 1 Meetings Set

Seven meetings are scheduled to discuss the boll weevil eradication program and the upcoming referenda in Mississippi’s regions 1A and 1B. Producers will vote on a 10-year program with a maximum assessment of $12/ acre. Assessments are projected to be $8 to $10 for the next 2 years and then drop to the $6 to $8 range.

Ballots will be mailed Aug. 1, with producers having from Aug. 4 to 15 to return the ballots, which will be counted Aug. 22.

Excellent progress toward achieving eradication is being reported. To date, 96.2% of the fields have had "zero" boll weevils captured through the peak overwintered emergence period in ’03. Overall, both regions 1A and 1B show a 99.9 % reduction in boll weevils trapped per acre since initiation of trapping in ’00. Cotton Insect Loss Estimate reports 0% loss of cotton to boll weevil in ’00, ’01 and ’02.

In view of the importance of this referendum on cotton production in the Delta, producers are urged to attend these meetings and participate in discussions and question-and-answer sessions. A catfish meal will be served at all meetings.

Meetings scheduled are: July 14, Tunica County Economic Development Complex, Highway 61 South, Tunica, 6 p.m.; July 15, Quitman County, Buddy Hynes Lodge-322 (Hwy 322 at Coldwater bridge), 12 noon; July 16, Tallahatchie County, Webb Community Center, 11:30 a.m.; July 17, Sunflower County, Inverness Community House, 12 noon, and Leflore County, UAP-Greenwood Industrial Park, 7 p.m.; July 28, Coahoma County Country Club, 6 p.m.; July 29, Bolivar County Extension Office, 6 p.m.; and July 31, Washington County, Twin County Conference Center, 6:30 p.m.



Food Labels Required to Include Trans Fat Content

The Food and Drug Administration announced the issuance of a final rule amending its regulations on nutrition labeling to require that trans fats be declared in the nutrition label of conventional foods and dietary supplements. The new rule takes effect Nov. 1, ’06.

Cottonseed oil is not usually hydrogenated and usually does not contain trans fats, so a separate listing for trans fats should be helpful to cottonseed oil. The NCC and the National Cottonseed Products Assn. submitted comments on the proposed rule published in November ’99 and the 2 reopenings (December ’00 and November ’02) of the rulemaking, requesting that trans fat content and saturated fat content be listed separately rather than combined as originally proposed.



Chile, Singapore Free Trade Agreements Advance

The House Ways and Means and Senate Finance committees approved draft legislation necessary to implement Chile and Singapore free trade agreements. The chairmen of both committees indicated they hope to have Congress approve implementing legislation before August.

No amendments were offered in either committee, and only one member of the Ways and Means Committee voted against the legislation. The committees considered draft language designed to provide Congressional views on implementing legislation to the White House. The Administration indicated it would submit formal legislation by July 14, which will be considered under fast-track procedures and shielded from amendment.



Sales Pass 13 Million Bales; Shipments at 10.9 Million

Net export sales for the marketing year moved past the 13 million-bale mark with sales of 77,800 bales (480-lb.) in the week ending July 3. Total sales at the same point in the ’01-02 marketing year were approximately 12.6 million bales. Total new crop (’03-04) sales are 1.5 million bales.

Shipments for the week were 294,700 bales, bringing total exports to date to 10.9 million bales, slightly ahead of the 10.5 million bales at the comparable point in the ’01-02 marketing year. If the pace of recent weeks is maintained, exports for the marketing year would reach USDA’s projection of 11.6 million bales.



Prices Effective July 11-17, 2003

Adjusted World Price, SLM 1 1/16

50.37 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

8.25 cents

Marketing Loan Gain Value

1.63 cents

Import Quotas Open

0

Step 3 Quotas as of 4/24 (480-lb. bales)

 0

*No Adjustment Made Under Step I
 
Five-Day Average
 
Current 3135 c.i.f. Northern Europe

60.70 cents

Forward 3135 c.i.f. Northern Europe

63.47 cents

Coarse Count c.i.f. Northern Europe

63.02 cents

Current US c.i.f. Northern Europe

68.95 cents

Forward US c.i.f. Northern Europe

68.10 cents

 
Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-May)

42.77 cents

**

**August-July average price used in determination of counter-cyclical payment

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