Cotton's Week: October 10, 2003

A World Trade Organization (WTO) dispute settlement panel held the 2nd round of oral hearings on the Brazil complaint against the US cotton program and the US export credit guarantee program in Geneva. The hearing focused on whether the US cotton program has caused "serious prejudice" to Brazil within the meaning of the applicable WTO agreements.

NCC President and CEO Mark Lange, Vice President for Economics and Policy Analysis Gary Adams and Trade Counsel William Gillon provided support on economic and legal issues to the US dispute settlement team. The US team was led by Juan Millan from the Office of General Counsel, US Trade Representative, and Joe Glauber, Deputy Chief Economist, USDA. Assisting Brazil in presenting its case against the US were Andrew McDonald, incoming President of the Liverpool Cotton Assn. and a former Brazilian textile executive, and Prof. Daniel Sumner, Director of the Agricultural Issues Center at the U. of California-Davis and a former Assistant Secretary of Agriculture.

The US team presented its case over a 3-day period in hearings that included submissions from 3rd-party countries and questions from the 3-member panel. "This is the 2nd of 3 scheduled oral hearings," stated Gillon. "The US is working to ensure the panel understands the US cotton program and the fact that it has not caused serious prejudice to the interests of Brazil. The US team is doing an excellent job fighting the negative impressions being generated by several flawed economic studies, including ones done by the International Cotton Advisory Committee and on behalf of Oxfam International."

NCC Chairman Robert Greene stated, "Successful defense against the Brazilian claims is vital to the US cotton industry and to US agriculture in general. Among other issues, we expect the panel to make crucial decisions regarding the export credit guarantee programs and US green box domestic programs, such as the Direct Payment program. The NCC is committed to doing everything it can to help the US defend against this significant challenge."

The NCC’s Quality Task Force adopted a recommendation for moisture content of baled cotton at the gin. The task force, which is chaired by Alabama producer Jimmy Sanford, met in Memphis to discuss issues related to US cotton fiber quality.

After hearing reports on the latest moisture studies, the panel adopted the following: "As precaution against undue risk of fiber degradation and until definitive research data can support a different level of moisture addition at the cotton gin, the NCC recommends that moisture levels of cotton bales at the gin not exceed a targeted level of approximately 7.5%."

This action follows earlier NCC policy that instructed the NCC to work with industry associations and research and extension organizations, including USDA, to: 1) immediately review existing literature to determine current knowledge of appropriate moisture levels in baled lint; 2) communicate that information to the cotton industry; and 3) encourage expedited research to determine optimum moisture levels in baled lint that will preserve fiber qualities and enhance spinning ability.

The task force also heard reports on loan premiums and discounts, fiber qualities of new cotton varieties, sticky cotton detection research status, new ginning technologies and their impact on fiber quality, research on short fiber and neps measurements and continued efforts to reduce lint contamination.

USDA Agriculture Marketing Service officials provided reports on a number of initiatives, programs and procedures. They reviewed the current protocol for module averaging, in light of the NCC Board's policy adopted in August ’03 that urged USDA to discontinue the new practice of assigning the module average values to outlier bales. Outlier bales are outside USDA’s established tolerance of the single-bale test for length, strength, length uniformity and micronaire. USDA told the task force that a decision had been made to return to the previous protocol that requires all module average outliers to retain their original single-bale classification.

In a letter to NCC ginner interest organizations and NCC member gins regarding the actions of the Quality Task Force, NCC Chairman Bobby Greene is asking for prompt implementation of the bale moisture recommendation with the ’03 crop.

"I encourage ginners to implement the Quality Task Force recommendation as quickly as possible with the ’03 crop, and not allow moisture content in baled lint to exceed 7.5%," Greene said.

In its October report, USDA forecast the US ’03-04 cotton crop to reach 17.56 million bales, up 620,000 bales from the September report. Upland production was estimated at 17.12 million bales and ELS production at 441,000 bales.

US mill use and exports are projected to reach 6.40 and 12 million bales, respectively, for total ’03-04 offtake of 18.40 million bales. Ending stocks are a projected 4.6 million bales for an ending stocks-to-use ratio of 25%.

USDA estimated 02-03 production at 17.21 million bales. Both projected mill use and exports were unchanged at 7.27 million bales and 11.9 million bales, respectively. The projected total offtake of 19.17 million bales generates an ending stocks value of 5.38 million bales and an estimated ending stocks-to-use ratio of 28.1%.

Contrary to recent reports concerning the effects of bad weather on ’03-04 production in China, USDA left China production unchanged from September in its October report. However, China mill use and imports were raised from the September report by 200,000 and 500,000 bales, respectively. Consequently, China ending stocks for ’03-04 are projected to be 8.18 million bales for a stocks-to-use ratio of 26.8%.

USDA projected ’03-04 world production of 94.50 million bales, up 1.14 million bales from the September report. World mill use was lowered from the September report to 98.45 million bales. Consequently, world ending stocks are projected to be 33.73 million bales for a stocks-to-use ratio of 34.3%.

The Federal Crop Insurance Corp. (FCIC) Board voted in a Washington meeting Oct. 9 not to approve a cost-of-production insurance pilot program proposed for cotton.

The board’s vote came after evaluating responses from expert reviewers, who had received a proposal for a pilot program developed by Agrilogic, Inc. During debate on crop insurance reform legislation and in subsequent communication with USDA’s Risk Management Agency (RMA), the NCC has consistently and strongly encouraged development of a viable cost-of-production insurance policy. NCC will continue to work with the private sector and RMA in an effort to stimulate development of innovative products for offering to producers.

In separate lawsuits filed in September, the National Resources Defense Council and the states of New York, New Jersey, Connecticut and Massachusetts charge that EPA has not been properly implementing the Food Quality Protection Act (FQPA).

The plaintiffs charged that the EPA did not place a high enough safety factor for child exposure to pesticides by assigning only a "3x" factor as opposed to a full "10x" factor. These factors multiply the acceptable residue tolerances on food and feed. Should a blanket "10x" factor be applied to all chemicals as a result of these lawsuits, the tolerances would be over 3 times less than they currently are. That could potentially require EPA to remove some uses from some chemicals due to the increase in the EPA’s cumulative exposure assessment called the "risk cup."

The NCC, working with its commodity partners and CropLife America, is monitoring the progress of these proceedings and may intervene on behalf of the EPA in support of science-based decisions made in the agency’s FQPA re-evaluations.

In a briefing with the State Department in the Agricultural Biotech Forum (ABF) meeting, Carl Schonander of the Office of Biotechnology and Textile Trade Affairs informed attendees that the State Department was in negotiations with NAFTA partners to ease transition with the Sept. 11 implementation of the Cargenta Protocol on Biosafety, also known as the Biosafety Protocol (BSP). The BSP is the first international treaty governing the shipment and documentation of biotech products with Living Modified Organisms (LMOs).

The US cotton industry will be affected in its shipments of seed for planting and feed products to countries that have signed onto the BSP. While the US and Canada are not parties to the BSP, Mexico is a founding member, therefore making imports of products containing LMOs from the US and Canada subject to labeling requirements under the BSP. Specifically, the trilateral agreements are meant to define the "may contain" language of article 18.2(a) of the BSP and when this language applies to a particular shipment of commodities.

Article 18.2(a) of the BSP states: "Each party shall take measures to require that documentation accompanying living modified organisms that are intended for the direct use as food or feed, or for processing, clearly identifies that they "may contain" living modified organisms and are not intended for intentional introduction into the environment, as well as a contact point for further information."

Under the agreement, this language, when required, should appear on the commercial invoice provided by the exporter. This invoice will be retained and maintained by the importer. The "may contain" language applies to shipments that are more than 95% LMO content and only in countries that have LMO products available.

The NCC, working through the Corn, Soy, Cotton Coalition, has contracted with international attorneys to help influence and ease the transition into the BSP by assisting and commenting to negotiating US parties.

Negotiations to wrap up the Doha Round of world trade talks could last until ’06, following the collapse of the Cancun ministerial talks last month, the deputy head of the World Trade Organization (WTO) says.

"The Cancun episode has already cost us 3 to 4 months," Deputy Director General Roderick Abbott told the French business daily La Tribune in an interview. "Then in ’04 there will be the US (presidential) election campaign during which it will be difficult for Washington to make concessions on sensitive issues like cotton.

"As for Brussels, it will be very busy with (European Union) enlargement. Things won't move forward until ’05. It’s more likely that the negotiations will last until ’06, which is when the round should be wrapped up."

Abbott said the G21 group of developing countries had made their mark by opposing the US, Europe and Japan, but not all states in the group shared the same interests. However, developed countries need to make more concessions if they wanted to seal a deal, he added. "If the US, Europe and Japan want to emerge from this round with a chance of success, they must reflect on the concessions that they are ready to make, notably over agriculture."

With net export sales of 111,800 bales (480-lb.) for the week ending Oct. 2, US ’03-04 sales neared 3.9 million bales. Total sales at the same point in the ’02-03 marketing year were approximately 4.9 million bales. Total new crop (’04-05) sales are 153,600 bales.

Shipments for the week were 102,200 bales, bringing total exports to date to 1.4 million bales, ahead of the 1.3 million bales at the comparable point in the ’02-03 marketing year.