Cotton's Week: June 18, 2004

Cotton's Week: June 18, 2004

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US/Brazil Dispute Final Report Expected

The World Trade Organization (WTO) Panel hearing the US/Brazil cotton dispute was expected to issue its Final Report to the parties in the dispute on June 18. According to WTO procedures, the Final Report is to be treated confidentially by the parties until translations are available and the report is distributed to all WTO members.

“We have heard estimates that translation could take between two to four weeks,” NCC Chairman Woody Anderson said. “We are aware of press reports concerning the interim decision. The US government indicated it was planning on appealing the decision if it was not significantly changed. At this time, there have been no indications the final report would differ significantly from the interim decision.” 

Anderson said it is unlikely there will be any immediate impact on current US farm programs. Any changes to the cotton program that are warranted given the Panel decision, he noted, only will affect future US cotton crops.

“It is far too premature to speculate on any such changes,” he said. “We must review the actual decision and wait for the appeal process to conclude before we can begin to evaluate what, if any, changes need to be made to the US cotton program. We expect to be in consultation with the US government concerning the report and any response they intend to file.”

The Texas cotton producer reiterated the NCC’s appreciation for the Congressional and Administration encouragement offered to the US cotton industry following the release of the Interim Report. That included statements in support of the farm law by House Agriculture Committee Chairman Goodlatte (R-VA), Ranking Member Stenholm (D-TX), Senate Agriculture Committee Chairman Cochran (R-MS) and US Trade Representative Robert Zoellick’s commitment to appeal the decision.

Anderson recently testified before Congress that the US cotton program is WTO-compliant and provides an effective financial safety net with minimal impacts on overall production and prices.

The NCC will post updates concerning the decision on its web site, www.cotton.org.



House Subcommittee Holds Conservation Hearing

Rep. Lucas (R-OK), chairman of the House Agriculture Subcommittee on Conservation, Credit, Rural Development and Research, held a hearing to review implementation of the farm law’s conservation programs. Sherman Reese, vice president, National Association of Wheat Growers, testified on behalf of several commodity groups, including the NCC. 

In his testimony, Reese touched on various conservation programs including the Conservation Reserve Program and the Wildlife Habitat Incentives Program. In addition, he discussed the Conservation Security Program and highlighted the issues that commodity groups share concerning the implementation of this new program. 

Regarding technical assistance funding, he said, “The situation needs to be resolved soon.  Worthy projects are going unfunded and needs are unmet.”

Chairman Lucas spoke of his concern on this issue by encouraging the Senate to pass the budget as well as clarify language to ensure that technical assistance is executed in a fair manner.

Reese reiterated the NCC’s position that the farm law’s balance must be protected and its strong opposition to any efforts to amend or alter funding included in that law.



GAO Report Questions “Actively Engaged” Enforcement

A Government Accounting Office (GAO) report released asserts that the USDA is not effectively enforcing the requirement that farmers be "actively engaged" in farming in order to qualify for federal farm payments. Sen. Grassley (R-IA) requested the GAO study and held a hearing in the Senate Finance Committee regarding the report.

Panel member Sen. Lincoln (D-AR), who attended the hearing, highlighted the report’s flaws and said she was "confident 99.9% of farmers" are "honest, hard-working people.”  She said the farm bill is "…not about welfare," adding that "further payment limitations" are no more appropriate for farmers than for a corporation’s ability to take advantage of tax code provisions.

In response to the GAO’s finding that the Farm Service Agency (FSA) does not review a valid sample of farm operations, she reiterated her belief that FSA needs more staff and more permanent staff to operate effectively. While the GAO’s report did not make specific recommendations, the report cited that FSA needs to have a measurable standard for what constitutes a significant contribution of active personal management.



Stowe Named to Administration’s Manufacturing Council

Harding Stowe, a Belmont, NC, textile executive and NCC director, was named to serveas one of 11 members of the Bush Administration’s Manufacturing Council.

The panel is a group of industry leaders who will advise the Administration on ways to assist the US manufacturing sector, including ways to enhance manufacturing competitiveness, create growth in the sector and lower manufacturing costs, according to a fact sheet published by the Commerce Department.

A new assistant secretary for Manufacturing in the Commerce Department, Albert Frink, Jr., who is a California carpet manufacturing executive, will, once confirmed by the Senate, serve as the Manufacturing Council’s executive director.



House Bill Would Repeal Export Tax Provision

The House on a 251-178 vote passed a tax bill that would repeal a US export tax provision ruled illegal by the WTO and replace it with $145 billion in corporate tax relief.

Critics complained the bill was overloaded with special interest tax breaks, but a state sales tax deduction and a buyout for tobacco farmers appeared to win over a significant number of votes.

The Senate previously passed its version of a bill 95-2, but there are substantial differences between the House and Senate versions that could result in a long and difficult conference to resolve differences and produce a final bill. The House bill provides $145 billion in tax relief and the tobacco buyout provision adds another $10 billion. When offsets are considered, the House bill has a 10-year net cost of $34 billion, while the Senate bill is completely paid for by offsets.

The legislation is necessary because the WTO has ruled the tax benefits provided under the FSC/ETI provisions constitute an illegal export subsidy and the European Union currently is applying an 8% retaliatory tariff on a wide-range of US exports. The tariff increases 1% per month until the FSC/ETI repeal is completed.



House Approves AGOA Extension

The House approved an extension of the African Growth and Opportunity Act (AGOA), HR 4103 by voice vote. The legislation would extend the act from the current ’08 expiration to ’15 and  extend for 3 additional years a provision, set to expire Sept. 30, ’04, which allows the least-developed African countries to use third-country fabric in apparel exported to the US duty-free.

Senate Finance Committee Chairman Grassley (R-IA) indicated he would attempt to move identical legislation he introduced in the Senate with cosponsors Baucus (D-MT), Frist (R-TN), Daschle (D-SD), Lugar (R-IN) and Santorum (R-PA).



US Signs FTA With Morocco

The US signed a free trade agreement with Morocco, but Congressional leaders expressed doubt that the legislation necessary for implementation would be ready for consideration prior to the August Congressional recess.

The US textiles industry has expressed opposition to the agreement because it includes provisions which would allow use of significant volumes of third country fabrics in apparel exported to the US tariff-free.



Congressional Panels Conduct US-Australia FTA Hearings

Hearings on the US-Australia free trade agreement were conducted by the Senate Finance Committee and House Ways and Means Committee. Following the hearings, Sens. Grassley (R-IA) and Baucus (D-MT), chairman and ranking member of the Finance Committee, announced their support and predicted swift Congressional approval. Ways and Means Committee Chairman Thomas (R-CA) said he also expected “quick and favorable Congressional consideration.”

The FTA, if approved by Congress, would take effect Jan. 1, ’05.



Shipments Surge, Sales Steady

Net export sales for the week ending June 10 were 129,400 bales (480-lb.), resulting in total ’03-04 sales of more than 14.2 million. Total sales at the same point in the ’02-03 marketing year were about 12.7 million bales. Total new crop (’04-05) sales are 2.0 million bales (480-lb.). Shipments for the week were 409,100 bales, bringing total exports to date to 11.7 million bales, ahead of the 10.0 million at the comparable point in the ’02-03 marketing year.



Deadline Near for Leadership Applications

NCC will take applications through July 1 from qualified US industry members seeking entry to the ’04-05 Cotton Leadership Class. Those interested in applying can visit the Cotton Leadership Program ’s web site at to review the program curriculum, eligibility requirements and download the application. The site also includes a contact form which allows users to submit questions, request information and schedule a personal visit with local program alumni.

The program, which is supported by a grant to The Cotton Foundation from DuPont Crop Protection, seeks to identify potential industry leaders and provide them developmental training. During 5 sessions of activity across the Cotton Belt, class participants visit with industry leaders and observe production, processing and research. They also attend the NCC’s annual and mid-year directors’ meetings and visit with lawmakers and government agency representatives in Washington, DC.



Heightened Cotton Awareness in India

Cotton Gold Alliance (CGA)-sponsored research in India shows increased awareness of cotton. According to the CGA’s study, awareness of the Seal of Cotton among a target group increased to 15% over the past 12 months.

When asked to compare the attributes of cotton vs. polyester, Indian consumers gave much higher marks to cotton in the categories of comfort, quality, durability, style, manufacturer reputation and likelihood to purchase. The studies also show: 72% agree with the statement that “better quality clothes are made from 100% natural fiber;” 7 in 10 people prefer to know the fiber content of a garment, rather than brand name, before making a purchase; 65% of Indians say they’ll pay more for clothes made from natural fibers such as cotton; and 8 of 10 Indians report that they identify fiber content of a garment by touch, which bolsters the need for use of the Seal of Cotton logo by licensed brands.

The CGA is a project jointly sponsored by Cotton Council International and Cotton Incorporated devoted to the promotion of cotton fiber generically versus man-made fibers.


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Prices Effective June 18-24, 2004

Adjusted World Price, SLM 1 1/16

49.02 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

6.12 cents

Marketing Loan Gain Value

2.98 cents

Import Quotas Open

 3

Step 3 Quotas (480-lb. bales)

362,899

ELS Payment Rate

31.19 cents

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

65.43 cents

Forward 3135 c.i.f. Northern Europe

 63.34 cents

Coarse Count c.i.f. Northern Europe

61.30 cents

Current US c.i.f. Northern Europe

71.55 cents

Forward US c.i.f. Northern Europe

62.70 cents

 
2003-04 Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August-April)

62.67 cents

**

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

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