Cotton's Week: March 18, 2005

Cotton's Week: March 18, 2005


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NCC Leaders Discuss Issues With Agriculture Secretary

NCC Chairman Woods Eastland led a contingent of NCC leaders in a meeting with Secretary of Agriculture Mike Johanns.

Accompanied by NCC Vice Chairman Allen Helms, NCC Vice President Stephen Felker, NCC director Bill Winburne and immediate past NCC chairman Woody Anderson, Eastland explained that the delegation was selected to illustrate NCC membership both by industry segment and geographical interests.

Eastland told the Secretary the meeting’s primary purposes were to: 1) introduce the industry; 2) express concern about the impact of the Administration’s budget proposal; 3) reinforce the industry’s disappointment over the decision in the Brazil WTO case and 4) emphasize the industry’s appreciation for the excellent support provided by USDA and USTR during that case and indicate the industry’s interest in working with the Administration as a response to the case is formulated.

Helms explained the importance of consistent farm policy to those who have invested in the industry’s infrastructure and rural communities. Winburne explained the importance of current policy to the merchandizing sector and the adverse impact of strict payment limitations on virtually all farms in the irrigated West. Felker reviewed the situation and outlook in the textile manufacturing sector. Anderson reviewed the recent meeting in Geneva with WTO Agriculture Committee Chairman Ambassador Groser and the industry’s ongoing discussions with the West African cotton producing countries.

Secretary Johanns was accompanied by Under Secretary J.B. Penn and Foreign Agriculture Service Administrator Ellen Terpstra.

Bush Names Portman as USTR

Rep. Rob Portman (R-OH) has been named by President Bush to serve as the next US Trade Representative. Rep. Portman, 49, has served in the House since ’93 and is a member of the Ways & Means Committee’s subcommittee on trade. He worked in the elder Bush’s campaign in ’80, and was a member of the White House staff from ’89-91. He worked on the current President’s campaign in ’00 and ’04, and has served as a key White House liaison with the House leadership.

Rep. Portman will have to be confirmed by the Senate. His first assignment is expected to be convincing Congress to approve the Central American Free Trade Agreement.

Disaster Program Sign-up Begins

Eligible producers now can enroll in the Crop Disaster Program (CDP) at their local USDA service center. Producers suffering a loss in excess of 35% of production or more than 20% quality loss are eligible and may choose to receive benefits for ’03 or ’04 crop losses due to damaging weather.

The payment rate will be 65% of the established commodity price for insured crops and 60% for uninsured commodities. Benefits are subject to a limit of $80,000 per person for all CDP payments.

USDA has prepared a fact sheet at for the sign-up, which began March 14.

Shipments Strong, Sales Slip

Net export sales for the week ending March 10 were 134,700 bales (480-lb). This brings total ’04-05 sales to about 11.6 million. Total sales at the same point in the ’03-04 marketing year were about 12.3 million. Total new crop (’05-06) sales are 579,400 bales.

Shipments for the week were 338,300 bales, bringing total exports to date to 6.6 million bales, compared with the 7.0 million at the comparable point in the ’03-04 marketing year.

House, Senate Approve FY06 Budget Plans

The House and Senate approved FY06 budget plans with significantly different deficit reduction and tax provisions.

The Senate approved its version on a vote of 51-49 after voting to eliminate $14 billion in proposed Medicaid cuts, which were included in the version reported by the Senate Budget Committee. The Senate rejected an amendment offered by Sen. Baucus (D-MT) that would have eliminated $2.8 billion in cuts to agriculture programs.

The House approved its budget on a vote of 218-214. The House plan would require cuts of $69 billion in mandatory spending of which $20 billion would come from Medicaid and $5.3 billion from agriculture.

The respective budget resolutions will now go to a conference committee where members will attempt to reconcile the differences between the House and Senate. In addition to significant differences in the amount of savings from mandatory programs, the plans would have different levels of tax cuts. The level of tax cuts in the final resolution is critical because under the rules, tax cuts included in the budget can be approved by a simple majority vote. In the absence of a budget resolution, tax cuts would require a 60-vote majority in the Senate and 2/3s in the House.

The House and Senate plans include significantly different levels of cuts to agriculture spending. The House budget plan would require the Agriculture Committee to develop legislation which would reduce projected spending on commodity, conservation, nutrition and risk management mandatory spending by $5.3 billion over the next 5 years. The Senate plan would require spending reductions of $2.8 billion over the next 5 years.

Throughout the debate, Senate Agriculture Committee Chairman Chambliss (R-GA) worked with Republican leaders in an effort to ensure that the Senate’s plan would require significantly less savings than the Administration’s proposal of about $8 billion in cuts over 5 years. During the Senate debate, Chambliss also clarified, for the record, in a colloquy with Budget Committee Chairman Gregg (R-NH) that any reductions of more than $2.8 billion referenced in the budget would not have to be met by the Agriculture Committee nor would it affect any legislation brought to the floor by the committee later this year.

The House budget plan for $5.3 billion in savings is significantly less than the Administration’s plan but more than the Senate plan. Throughout the debate, Rep. Emerson (R-MO) worked with colleagues in an effort to persuade House leaders to reduce the agriculture savings to the Senate level. With the final plan exceeding the Senate level, Rep. Emerson ultimately voted against the budget resolution.

The NCC will continue to work with agriculture, nutrition and conservation groups and former Agriculture Committee chairman Combest in an effort to hold any spending reductions in the final budget plan to levels that will not require significant changes to the ’02 farm law.

If the conference committee is able to reach agreement on a compromise plan that is approved by the House and Senate, then the respective agriculture committees will be required to develop legislation to achieve the spending reductions.

CSP Sign Up Announced

Secretary Johanns announced a nationwide sign-up for the Conservation Security Program (CSP) that will be available to about 235,000 farmers and ranchers in 220 watersheds.

The 220 watersheds represent more than 185 million acres, with at least one in every state. The ’05 CSP sign-up includes the 202 watersheds announced by USDA on Nov. 2, ’04, and the 18 watersheds from the fiscal year ’04 sign-up. Producers who have a current CSP contract are not eligible for this sign-up. Sign-up will be held March 28-May 27.

Payments, which will be made using 3 tiers of conservation contracts, are capped at $20,000, $35,000 and $45,000 annually, and will last for 5 years for Tier I and 5 to 10 years for Tier II and Tier III. Payments can include 4 components: 1) an annual stewardship component for the base level of conservation treatment, 2) an annual component for maintenance of existing conservation practices, 3) a one-time new practice component for additional needed practices, and 4) an enhancement component for exceptional conservation effort.

To apply for CSP, potential participants should complete a self-assessment workbook to determine if their operations meet program requirements.

Additional information on CSP, including eligible watersheds and the self-assessment workbook, is available at

House Panel Passes Association Health Plans

Legislation long promoted by President Bush and some Congressional members to encourage small businesses to band together to buy health insurance for their workers was approved by the House Education and the Workforce Committee.

The bill, which would create association health plans (AHPs), was approved by a 25-22 party-line vote The measure would exempt association health plans from state laws that mandate insurance coverage for specific treatments and procedures.

Supporters of AHPs say the complexity of complying with many different state insurance laws has discouraged small businesses from joining together to negotiate better prices for health insurance. AHP opponents said they were concerned that insurers would have no incentive to cover preventive care or some expensive procedures if the law did not require them to do so.

This measure is similar to 2 bills the House passed during the 108th Congress. No Senate bill made it to the floor. This year, Sen. Snowe (R-ME) introduced companion legislation but prospects for Senate action do not appear to be much brighter than they were in the 108th.

Roundup Ready Flex Cotton Approved

US regulatory clearance of Roundup Ready Flex cotton by USDA and the Food & Drug Administration (FDA) was announced by Monsanto. The approvals are key steps prior to a commercial launch for the ’06 growing season.

Regulatory clearances in other key production and export countries are anticipated later this year. There are no restrictions on domestic planting or food and feed use of Roundup Ready Flex cottonseed, now that the USDA and FDA have completed their review processes. However, Monsanto indicated a continuing commitment to its stewardship program for key export markets until regulatory clearance is granted in those markets.

Rule Change Sought for ELS Program

The NCC joined with the Supima Assoc., American Cotton Shippers Assoc., AMCOT and the National Council of Textile Organizations in a request to USDA for a change in the administration of the ELS Competitiveness Program. The request was spurred by a shared concern about the sharply rising payment rate in recent weeks.

The group’s letter to Farm Service Agency Administrator James Little said, “We believe that an administrative program adjustment is needed to moderate payment rates and prevent future payments from advancing beyond levels needed to make American Pima cotton price competitive in domestic and export markets.”

Step 3 Import Quota Opened

Competitiveness provisions triggered a Step 3 quota based on price conditions for the week ending March 17. When the Friday through Thursday weekly average US northern Europe price, adjusted for the value of the cotton market user certificate (Step 2), exceeds the northern Europe price ("A" Index) for 4 consecutive weeks, a special Step 3 import quota is triggered.

The quota is for 120,143 bales (480 lb), equal to 1 week of upland cotton mill use based on the most recent 3 months’ seasonally adjusted data. The quota will be established as of March 24 and applies to upland cotton purchased no later than June 21 and entered into the US no later than Sept. 19, ’05.

Prices Effective March 18-24, 2005

Adjusted World Price, SLM 11/16

42.01 cents


Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

4.67 cents

Marketing Loan Gain Value

9.99 cents

Import Quotas Open


Step 3 Quotas (480-lb. bales)


ELS Payment Rate

81.00 cents

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

57.13 cents

Forward 3135 c.i.f. Northern Europe

No Quote

Coarse Count c.i.f. Northern Europe

 55.47 cents

Current US c.i.f. Northern Europe

61.80 cents

Forward US c.i.f. Northern Europe

No Quote

2004-05 Weighted Marketing-Year Average Farm Price  
Year-to-Date (August-January)

 43.68 cents


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