Cotton's Week: September 5, 2003

The NCC agreed with the conclusion of a special Congressionally-appointed panel’s report that more restrictive payment limits would have a negative effect on US agriculture and cause instability in that sector’s production, financing and marketing segments.

The Commission on the Application of Payment Limits to Agriculture’s report emphasizes that there should be no legislative changes in payment limits or eligibility requirements nor any significant regulatory changes during the life of the Farm Security and Rural Investment Act of ’02.

NCC President and Chief Executive Officer Dr. Mark Lange said this and most other report recommendations reflect the testimony and input he and other production agriculture representatives provided to the 10-member panel during a public hearing earlier this year.

"Based on our initial assessment of the report, we believe the Commission, for the most part, agreed with the NCC’s assessment of impacts on land values, cropping decisions, rural communities and differential impacts on Sunbelt commodities," said Lange. He noted that during the public hearing every farmer and agriculture representative presenting testimony expressed opposition to payment limit changes.

Lange commended the insight of the commissioners, recognized the value of a fully functional marketing loan that includes the use of certificates for loan redemptions. This is especially critical for producers to be globally competitive, he said.

"The US cotton industry commends the Commission members for their hard work on a difficult policy issue," he said. "Their willingness to get input from the production segment prior to generating this report is appreciated. The Commission recognized the crucial need for stability in the agricultural production sector in emphasizing the importance of avoiding any change in current farm legislation."

Lange also noted Congress fully debated this issue for 2 years in preparation of the ’02 farm law.

The Commission was established by that law to conduct a study on the potential impacts of further payment limitations on direct payments, counter-cyclical payments and marketing assistance loan benefits on farm income, land values, rural communities, agribusiness infrastructure, planting decisions of producers affected and supply and prices of covered and other agricultural commodities.

With pivotal negotiations on agricultural trade holding center stage at the World Trade Organization (WTO) meeting in Cancun, Mexico, Sept. 10-14, US farm groups will play a major role at the meeting.

The 146 members of the WTO should "roll up their sleeves and move forward" to ensure the Jan. 1, ’05 deadline is met, Chief Agricultural Negotiator for the Office of the US Trade Representative Ambassador Allen Johnson said.

The mid-term review in Cancun is an "opportunity for the ministerial level to take stock where we are and move the process forward," said Ag Secretary Veneman. But for WTO to move forward, a consensus must be reached in Cancun where countries continue to battle out key issues.

The US continues to state it is focused on agriculture. "For US agriculture the future is in trade," explains Johnson. With 96% of the world population outside of US borders, the US’ increased agriculture production needs to be assisted by eliminating export subsidies and harmonizing market access, he said.

At a Sept. 8 news conference, representatives of the NCC, American Farm Bureau Federation, American Soybean Assn., American Sugarbeet Growers Assn., National Corn Growers Assn., National Milk Producers Federation, USA Rice Federation and Wheat Export Trade Education Committee will outline their positions and discuss their expectations for the negotiations.

NCC Trade Counsel William Gillon is serving as an advisor on agriculture and cotton issues to US negotiators at the Cancun meeting.

In a letter to Ag Secretary Veneman, NCC Chairman Bobby Greene urged an initial advance counter-cyclical payment (CCP) for the ’03 crop of upland cotton at the maximum allowable rate of 4.8 cents/lb.

"Although prices have recovered in recent months, US and international cotton prices remain below long-term average levels, and the counter-cyclical payments will provide an important financial safety net for producers and the rural economy."

The provisions of the new farm law authorize the advance payment -if any is projected based on expected marketing year average (MYA) prices - in October of the year of harvest. A 2nd advance can be made in February of the next calendar year. For cotton, the final payment (if any) would be made in October ’04. Greene also urged Secretary Veneman to make the announcement as soon as possible "so producers and their lenders can plan accordingly."

Based on 2 analytical approaches using futures prices and world fiber market conditions, NCC analysis implies a likely range for the MYA price for upland cotton of 52 to 54 cents/lb. If the MYA price falls between 52 and 54 cents, the counter-cyclical payment would be between 11.73 cents and the maximum rate of 13.73 cents. The analysis also accounts for the fact that market conditions and price relationships will change as the marketing year progresses. Based on observed market movements for the ’87-88 through ’02-03 period, the analysis indicates that the possibility of prices rising to a level necessary to reduce the CCP payment below an advance rate of 4.8 cents is remote.

NCC also has updated the program payment schedule for calendar years ’03 and ’04. That information is available at www.cotton.org/gov/Payment-Rates.cfm.

In comments filed with USDA’s Risk Management Agency (RMA), the NCC said it would be opposed to across-the-board changes to current methodology for determining bale-by-bale quality losses and subsequent adjustments in production-to-count that would reduce benefits, increase premiums and discourage participation. The comments were in response to a report, An Independent Actuarial Review of Quality Adjustment 5.6.3 Section 107 of ARPA, prepared for RMA by Milliman USA.

Milliman analyzed an alternative method of measuring quality losses regardless of whether there were yield losses but also recommended that premiums for the new program be 10% higher than current premiums. Regarding Milliman’s findings, the NCC, in its comments, agreed in principle with a recommendation to offer the alternative method as a pilot program. The NCC requested that the pilot be offered in several locations across the Cotton Belt.

In addition, the NCC suggested that the pilot option should be offered at a reasonable rate to encourage as much participation as possible. "This will allow for a more complete evaluation of the performance of the program," the comments later stated. The NCC also requested an opportunity to participate in the evaluation of the program, particularly with regard to appropriate premium levels.

The California Department of Pesticide Regulation (CA DPR) issued a crisis exemption Sept. 4 for the use of Furadan 4F for cotton aphids. A coordinated effort by the California Cotton Growers and Ginners Assn., the NCC, EPA, and CA DPR assisted the process to help prevent sticky cotton in the ’03 crop.

The request for Furadan was issued by a Section 18 request in early August, but due to immediate need for cotton aphid control CA DPR issued the exemption to provide the material to growers more quickly. The request was made because of late-season declines in the effectiveness of the current technologies. It appeared that current neonicotanoid chemistries used were not providing adequate control due to the closure of the cotton canopy, thus restricting coverage from aerial application.

NCC noted in meetings with EPA that economic losses and insect populations, coupled with the reduced effectiveness of the existing technologies, showed sufficient reason to issue the section 18. However, because of the length of time needed to process the application, and California growers’ immediate needs, the crisis exemption was issued.

According to FMC and CA DPR, Furadan 4F can be used on 200,000 acres of cotton in California and may be used only once on a particular cotton field. Furadan can be applied only by air on fields with 5% or more open bolls and cotton trash from treated fields must not be used in food or feed. The label, found at www.cdpr.ca.gov/docs/sec18/pdf/03-12.html, expires Oct. 31.

Greenleaf Technologies, Inc., manufacturer of TurboDrop and AirMix spray nozzles and other sprayer parts and accessories in Covington, LA, has joined The Cotton Foundation. For more information on the company’s products, visit www.turbodrop.com.

Export sales climbed to more than 3.4 million bales following net sales of 88,600 bales (480-lb.) during the week ending Aug. 28. Total sales at the same point in the ’02-03 marketing year were almost 4 million bales. Total new crop (’04-05) sales are 129,000 bales (480-lb.).

Shipments for the week were 141,200 bales, bringing total exports to date to 842,200 bales, ahead of the 626,400 bales at the comparable point in the ’02-03 marketing year.