Cotton's Week: May 6, 2005

Cotton's Week: May 6, 2005


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Commodity Groups Discuss WTO Negotiations

Representatives of several commodity groups and general farm organizations met in Washington, DC, this week, as part of a roundtable discussion on the connection between the agricultural negotiations in the World Trade Organization (WTO) and the Subsidies Code rules on serious prejudice.

An official from the US Trade Representative’s office discussed how the Subsidies Code relates to the agricultural agreements in the WTO. The Subsidies Code provides that government subsidies should not cause “serious prejudice” to another country’s interests. This provision can be enforced against a WTO member’s agricultural programs even if those programs conform to the WTO agriculture agreement.

NCC President/CEO Mark Lange stated that this “bridge between the two agreements can undermine negotiated agricultural rules by allowing countries to bring dispute settlements even though a U.S. program is in compliance with the agriculture provisions. It is a loophole that needs to be closed.”

The Uruguay Round Agricultural Agreement, negotiated in ’94, had a “peace clause” that prevented serious prejudice claims against agricultural programs that were in compliance with the agricultural agreement. The peace clause expired in January '04; however, negotiators in the Doha Round have not yet discussed a way to protect the sanctity of a new agricultural agreement from an end run around its provisions. There was a consensus within the group that the issue was important, and they agreed to meet again in the near future and seek consultations with the Administration on this issue.

House Panel Reviews Crop Insurance

Rep. Moran (R-KS), chairman of the House General Farm Commodities and Risk Management Subcommittee, chaired a hearing to review the delivery and effectiveness of the federal crop insurance system. The hearing focused on crop insurance and soybean rust and Premium Reduction Plans (PRP).

Chairman Moran stressed the need for clear instructions from Risk Management Agency (RMA) regarding good farming practices.

"Our farmers need to be correctly informed as to what production practices will be required of them in order for them to qualify for indemnity under their crop insurance policies,” he said. “I look forward to hearing from RMA about the education efforts and procedures that are in place and about the concerns the industry has for their business.”

The hearing also included discussions about Premium Reduction Plans (PRP) authorized by Congress under the Federal Crop Insurance Act of ’94 and regulated by the Federal Crop Insurance Corp. PRP allows approved insurance providers to offer reduced premiums to farmers corresponding to demonstrated efficiencies in delivering crop insurance below the administrative and operating expense reimbursement. As the Administration continues to evaluate the PRPs’ feasibility, NCC will continue to work with Congress and the Administration to ensure that the current crop insurance system meets producers’ needs.

The hearing came on the heels of an April 27 hearing to review the economic impact of soybean rust on the US farm sector. In that hearing, Subcommittee Members voiced concern about crop insurance coverage for soybean rust. Producers are preparing to battle the fungus for the first time in US history following Georgia officials’ recent discovery of the first US soybean rust occurrence for the ’05 crop season.

USDA to Conduct Farm Bill Listening Sessions

Agriculture Secretary Johanns announced USDA will conduct "listening sessions" on the ’07 farm bill. Speaking to the National Assoc. of Farm Broadcasters, Johanns said the sessions would focus on 3 questions: "Are we doing enough to encourage and support the next generation of farmers ... and people who are interested in starting out in production agriculture? Are we fostering the right kind of atmosphere for farmers and ranchers -- one in which the opportunity to succeed is always there? And ... is there more that we can do to expand this administration's groundbreaking success with cooperative conservation -- conservation that works with agriculture and not against it?"

In response to a broadcaster’s question, Johanns said, "You know, I'd hate to telegraph anything at this point in terms of administrative policy because again we are way ahead of this, and the whole idea of these listening sessions would be to start building the debate from the people that are out there where the rubber meets the road, from the people who are actually involved in the implementation of our farm programs . . . We're going to be across this country; we're going to be listening to people. We will be offering some questions that we would like folks to offer some insight on. But our goal is to make these very valuable. This is not going to be a session where we just shoot the bull. This will be a session where we really try to focus in on what's important, what's working, what's not working, the kinds of things we need to be thinking about as we develop the next Farm Bill."

Mid-South Producers Tout Farm Law’s Merits to Ag Secretary

West Tennessee cotton producers Allen King, John Lindamood, Willie German and Harris Armour had the opportunity to stress the importance of the current farm law with Agriculture Secretary Johanns.

The producers participated in a roundtable discussion with the Secretary at the USDA-AMS Cotton Program Field Complex in Bartlett, TN. Among others attending were staff from the offices of Sens. Frist (R-TN) and Alexander (R-TN) and Rep. Tanner (D-TN), Tennessee Agriculture Commissioner Ken Givens, Farm Service Agency personnel and representatives from the state’s Boll Weevil Eradication Program board.

In mentioning the WTO Brazil cotton case, Johanns said July 1 was a date by which to give some indication of what the Administration was going to do. He touted the Central American Free Trade Agreement and urged all agricultural groups to support it. The upcoming listening sessions for the ’07 farm bill would be covered by either Johanns or Deputy Secretary Chuck Conner.

Johanns emphasized the current health of the farm economy. In addition, he stressed how important exports are to US agriculture. He also expressed concern that land values and cash rents are limiting the entry of new farmers and hurting the nation’s competitive position in world markets.

China Textile/Apparel Exports Still Soaring

Data now available for the first quarter of ’05, from the Global Trade Atlas Database, show China textile and apparel exports to the US market up 133%. In several very important cotton categories the increase is even more dramatic: cotton knit shirts +1,826%, cotton trousers +1,246% and cotton bed linens +144%. The increase for cotton and manmade fiber underwear was +538%. Large increases also were recorded for manmade fiber categories, including synthetic filament fabrics +2,980% and manmade shirts and trousers at +320% and +310%, respectively.

Despite these huge increases, Chinese Commerce Minister Bo Xilai is quoted as saying, “The US and the EU do not have enough evidence of market disruption to impose restrictions on Chinese exports to those markets.”

Meanwhile, Ambassador Rob Portman characterized his bilateral meeting with Minister Bo Xilai as “very helpful adding that he explained in “unmistakable terms” (his concern) about the sharp surge in the Chinese textile exports, particularly in categories that have risen more than 1000%.

CCI Events Boost US Cotton Sales

CCI and Cotton Incorporated’s first US Cotton Symposium in Turkey set the stage for initial sales of 260,000 running bales (RB) of US cotton valued at $70.6 million. US merchants traveling in Turkey sold an additional 110,000 (RB) of US cotton valued at $29.9 million the week prior to the Symposium. Turkey’s record US cotton purchases increase its total marketing year purchases to 2 million (RB) ($543.4 million) and position Turkey second to China as US cotton’s largest customer.

Held April 24-26, the Symposium attracted 48 US merchants and their Turkish agents and 65 Turkish cotton spinning mill executives. The mills registered for the event account for 80% of cotton consumed in Turkey and 90% of imports.

Another CCI event - the COTTON USA Buyers Tour to South Asia - resulted in significant orders for samples of US cotton-rich products, with the promise of larger commercial orders. In addition, 8 European apparel companies with a combined turnover of $1.3 billion joined CCI last week in India to attend a COTTON USA mini trade fair with 12 South Asian mills; 2 mill tours; and the International Textile Apparel Conference ’05.

All participating apparel buyers said the contacts and knowledge acquired during the Tour will result in new purchases of US cotton, and that the tour expanded their knowledge of the South Asian textile industry.

NCC Participating in Milestone Biotech Event

NCC Secretary-Treasurer Craig Shook, a Corpus Christi, TX, producer, will join other farm leaders from the American Soybean Assoc. (ASA) and the National Corn Growers Assoc. (NCGA) at a news conference in Chicago May 9 to recognize the planting of the one-billionth acre of biotech-enhanced agricultural commodities.

Shook and the other producers will provide information about the benefits crop biotechnology delivers to producers, consumers and the environment.

Representatives from Truth About Trade and Technology (TATT) also will be on hand to talk about a TATT-developed biotech acreage calculator being used to track the planting of biotech acres around the world, including counting up to the day of the actual planting of the one-billionth acre, which has been estimated to closely coincide with the date of this news conference. Dr. Andy Jordan, NCC vice president of Technical Services, also will attend along with technical staff from the other commodity groups.

Sales Soar, Shipments Strong

Net export sales for the week ending April 28 were 965,700 bales (480-lb) – a marketing year high. This brings total ’04-05 sales to slightly more than 13.8 million bales. Total sales at the same point in the ’03-04 marketing year were about 13.3 million. Total new crop (’05-06) sales are 793,600 bales. Shipments for the week were 315,100 bales, bringing total exports to date to 9.3 million bales, compared with the 9.8 million at the comparable point in ’03-04.

The vast majority of the new sales were to China and Turkey. China was the largest customer with purchases of almost 690,000 bales, while Turkey accounted for more than 271,000 bales. For the ’04-05 year to date, China and Turkey are the 2 largest export customers for US cotton with accumulated purchases of 2.94 million and 2.20 million bales, respectively.

Prices Effective May 6-12, 2005

Adjusted World Price, SLM 11/16

43.65 cents


Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

4.84 cents

Marketing Loan Gain Value

8.35 cents

Import Quotas Open


Step 3 Quotas (480-lb. bales)


ELS Payment Rate

78.49 cents

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

57.54 cents

Forward 3135 c.i.f. Northern Europe

60.13 cents

Coarse Count c.i.f. Northern Europe

56.94 cents

Current US c.i.f. Northern Europe

62.38 cents

Forward US c.i.f. Northern Europe

64.94 cents

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

42.81 cents


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

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