Cotton's Week: February 18, 2005

Appearing before the House Agriculture Appropriations Subcommittee, Agriculture Secretary Mike Johanns faced strong, bipartisan opposition to the Administration’s proposed budget cuts and farm law changes. In a related development, House Agriculture Committee members approved a letter to Budget Committee Chairman Nussle (R-IA) telling the Committee to leave the ’02 farm law intact until its scheduled expiration in ’07. The Administration’s budget would cut agriculture spending by $587 million in FY06 and by $5.7 billion over 10 years.

During Johanns’ appearance, Chairman Bonilla (R-TX) cited a Texas A&M U. study which found that rice and cotton farmers suffer disproportionately under institution of payment limits proposed in the budget. Rep. Emerson (R-MO) asked if USDA had any basis for the proposals as well as the possible unintended consequence of eliminating cropping flexibility and forcing farmers to produce for the program rather than for the market. Rep. Boyd (D-FL) questioned the impact on income during periods of low prices if programs are cut.

In his appearance before the subcommittee and a subsequent speech to the Washington Commodity Club, Secretary Johanns avoided specifics but emphasized the importance of deficit reduction and that no area of agriculture would be “left out” of cuts.

Sens. Grassley (R-IA), Dorgan (D-ND) and Hagel (D-NE) reintroducedlegislation to reduce payment limitations, eliminate the 3-entity rule, tighten eligibility criteria defining “actively engaged in farming” and eliminating certificate loan redemptions.

According to a statement accompanying the legislation, Sen. Grassley said, “The reality of farm payments is not a pretty sight and the numbers only continue to get worse. We’re now facing the fact that more than 72 percent of the payments have gone to only 10 percent of our nation’s farmers. The proposal has always been very popular and now with the President’s support, I expect good things will happen.”

The legislation limits all payments on all commodities to $250,000 annually with sub-limits of $40,000 on direct payments; $60,000 on counter-cyclical payments and $150,000 on loan deficiency payments, marketing loan gains (including gains on marketing certificates) and forfeitures. The legislation would require USDA to promulgate regulations eliminating the 3-entity rule and attribute all payments on production under the primary control of an individual to that individual.

The legislation is endorsed by: Citizens Against Government Waste, Environmental Defense, Free Enterprise Fund, Izaak Walton League, National Catholic Rural Life Conference, National Taxpayers Union, Oxfam America, Sustainable Agriculture Coalition and Taxpayers for Common Sense.

Sen. Grassley is expected to try to include his legislation in the budget resolution as instructions to the Agriculture Committee. Agriculture Committee Chairman Chambliss (R-GA) and Appropriations Committee Chairman Cochran (R-MS) repeatedly have expressed their strong opposition to any efforts to change current law.

The House Appropriations Committee announced assignments to its agriculture subcommittee. Rep. Bonilla (R-TX) will continue to chair the panel and Rep. DeLauro (D-CT) will move up to serve as ranking member replacing Rep. Kaptur (D-OH) who moves to the defense subcommittee as ranking member of another subcommittee, but will remain as a member of the agriculture subcommittee as a result of the reorganization of the House Appropriations subcommittees.

Joining Chairman Bonilla and ranking member DeLauro on the subcommittee are:  Reps. Kingston (R-GA); Latham (R-IA); Emerson (R-MO); Goode (R-VA); LaHood (R-IL); Doolittle (R-CA); Alexander (R-LA); Hinchey (D-NY); Farr (D-CA); Boyd (D-FL) and Kaptur (D-OH).

Net export sales for the week ending Feb. 10 were 266,200 bales (480-lb). This brings total ’04-05 sales to more than 10.8 million. Total sales at the same point in the ’03-04 marketing year were about 11.3 million. Total new crop (’05-06) sales are 389,500 bales. Shipments for the week were 319,400 bales, bringing total exports to date to 5.2 million bales, compared with the 5.7 million at the comparable point in the ’03-04 marketing year.

The House Agriculture Committee subcommittee assignments were announced during an organizational meeting in which the Committee also approved rules and an oversight plan. The Committee also approved a Budget Views and Estimates letter offering budget recommendations for the programs and agencies under the Committee’s jurisdiction. The letter can be found on the NCC’s web site at http://www.cotton.org/issues/members/2005/nusslelet.cfm.

Assignments to the 5 subcommittees are as follows:

Conservation, Credit, Rural Development and Research – Lucas (R-OK), Chairman; Moran (R-KS); Osborne (R-NE), Vice Chairman; Graves (R-MO); Rogers (R-AL); King (R-IA); Boustany (R-LA); Schwarz (R-MI); Fortenberry (R-NE); Holden (D-PA), Ranking Member; Cuellar (D-TX); McIntyre (D-NC); Etheridge (R-NC); Case (D-HI); Davis (D-TN); Herseth (D-SD); and Buttefield (D-NC).

Department Operations, Oversight, Dairy, Nutrition and Forestry – Gutknecht (R-MN), Chairman; Pombo (R-CA); Moran (R-KS); Bonner (R-AL), Vice Chairman; Nunes (R-CA); Foxx (R-NC); Fortenberry (R-NE); Baca (D-CA), Ranking Member; Cardoza (D-CA); Buttefield (D-NC); Holden (D-PA); Cuellar (D-TX); and, Costa (D-CA).

General Farm Commodity and Risk Management – Moran (R-KS), Chairman; Boehner (R-OH); Everett (R-AL); Lucas (R-OK); Jenkins (R-TN); Johnson (R-IL), Vice Chairman; Pence (R-IN); Graves (R-MO); Bonner (R-AL); King (R-IA); Musgrave (R-CO); Neugebauer (R-TX); Boustany (R-LA); Conaway (R-TX); Fortenberry (R-NE); Etheridge (D-NC), Ranking Member; Salazar (D-CO); Marshall (D-GA); Herseth (D-SD); Buttefield (D-NC); Melancon (D-LA); Barrow (D-GA); Pomeroy (D-ND); Boswell (D-IA); Larsen (D-WA); Chandler (D-KY); Scott (D-GA); and Costa (D-CA).

Livestock and Horticulture – Hayes (R-NC), Chairman; Boehner (R-OH); Pombo (R-CA); Osborne (R-NE); Pence (R-IN), Vice Chairman; Rogers (R-AL); King (R-IA); Nunes (R-CA); Neugebauer (R-TX); Kuhl (R-NY); Foxx (R-NC); Conaway (R-TX); Case (D-HI), Ranking Member; Scott (D-GA); Herseth (D-SD); Costa (D-CA); Cardoza (D-CA); Salazar (D-CO); Boswell (D-IA); Larsen (D-WA); Pomeroy (D-ND); and Barrow (D-GA).

Specialty Crops and Foreign Agriculture Programs – Jenkins (R-TN), Chairman; Everett (R-AL), Vice Chairman; Gutknecht (R-MN); Hayes (R-NC); Rogers (R-AL); Neugebauer (R-TX); Schwarz (R-MI); Foxx (R-NC); McIntyre (D-NC), Ranking Member; Marshall (D-GA); Melancon (D-LA); Barrow (D-GA); Scott (D-GA); Chandler (D-KY); and Cuellar (D-TX).

NCC Chairman Woods Eastland was joined by Harding Stowe of R.L. Stowe Mills and  NCC CEO Mark Lange and Senior Vice President John Maguire in a discussion of cotton industry textile issues with USTR Special Textile Negotiator David Spooner.

The talks focused on the implementation of the proposed Central American Free Trade Agreement (CAFTA) and textile safeguard issues. The NCC leaders noted that the capacity of import surges to disrupt market development in the absence of the quotas remains a serious threat to the entire US cotton industry. They stressed the importance of: 1) generating timely data on US textile imports given the elimination of import quotas and 2) finding tools to permit the US cotton textile industry to compete effectively.

The US Justice Dept. filed arguments with the US Court of Appeals stating that the preliminary injunction preventing investigation of threat-based textile safeguard petitions was “unprecedented” and based on an erroneous standard for irreparable harm.

The injunction was granted by the US Court of International Trade in a lawsuit filed by an association representing US textile and apparel importers that challenged the authority of the Committee for the Implementation of Textile Agreements (CITA) to investigate safeguard petitions based on a “threat” of injury from apparel imports from China. The preliminary injunction stopped CITA from investigating 12 safeguard petitions filed in accordance with the US-China WTO accession agreement, alleging that an imminent increase in imports of apparel from China threatened the US textile and apparel market.

In its appeal, the government argued that the Court of International Trade “erred by completely disregarding the interests of third parties, including domestic producers and workers, and it erroneously concluded that the balance of interests favored plaintiff.”

While the government had requested an expedited hearing on its appeal, oral arguments were initially set for May. However, the government also requested a stay of the preliminary injunction while the Court of Appeals reviews the legal arguments. Should the Court of Appeals stay the lower court’s injunction, CITA will be able to continue its investigation of safeguard petitions filed by US textile associations.

Monsanto announced that it signed a definitive agreement to acquire Emergent Genetics, Inc. The acquisition, subject to regulatory approvals, is expected to close as soon as practicable. Through its Stoneville and NexGen brands, Emergent Genetics is the nation’s third largest cotton seed company, holding about 12% of the US cotton seed market.

Hugh Grant, Monsanto’s chairman, president and CEO, said that building from Emergent's strong business foundation, Monsanto will work to apply its biotechnology traits and molecular breeding capabilities to accelerate the speed at which new stacked-trait and second-generation products reach cotton producers.

"This combination will pair some of the terrific biotechnology and breeding advances happening at Monsanto with the backbone of proven cotton brands," Grant said. "This will be a nice complement to our continued commitment to broadly license biotechnology traits, and the bottom line for cotton producers is we believe we'll be able to move the most innovative technology into more stacked-trait products faster, while still ensuring broad choices in a competitive market."

The Joint Cotton Industry Bale Packaging Committee will conduct its 38th annual meeting March 31 at the Hilton Memphis (not the Hyatt as reported in the 2/4 print version of Cotton’s Week). Meeting participants are urged to register online at www.cotton.org/tech/bale/jcibpc-form.cfm by March 18.

The committee will review the bale packaging specifications and evaluate experimental test programs and field trials before approving ’05 test programs. In addition, the panel will evaluate the NCC’s contamination prevention efforts, review trends in bale packaging use, including packaging performance, and how packaging materials costs may be affected by rising oil prices.

Committee Chairman Lee Tiller said, “It is important that we have an arena where both the raw cotton and textile manufacturing interests can discuss issues that relate to the cotton bale and its package. In order to protect and build markets for U.S. cotton, it is essential that we be recognized as the leader in bale packaging standards, as well as performance.”