Cotton's Week: July 29, 2005

In hailing the House passage of DR-CAFTA, NCC Chairman Woods Eastland expressed appreciation to all Cotton Belt Congressional members who listened to their constituents and voted to approve the agreement, which will preserve jobs by enabling the US cotton industry to maintain and expand a 2.7 million bale market. He cited the agreement as a significant step for US cotton in its effort to remain competitive, especially domestic textile manufacturers who now have a platform to compete with China.

The NCC was an active participant in a coalition of 10 textile and apparel trade associations as well as the Ag Trade Coalition and Business-Coalition for US-Central America in working for passage of DR-CAFTA, which includes Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic.

The NCC extended special thanks to Rep. Brady (R-TX) - the designated leader on the DR-CAFTA effort, Ways and Means Committee Chairman Thomas (R-CA), and Majority Whip Blunt (R-MO) for their leadership. Appreciation also was expressed to US Trade Representative Portman, Agriculture Secretary Johanns and Commerce Secretary Gutierrez for working closely with the cotton and textile industries and Congressional members to address industry concerns.

The NCC also expressed sincere appreciation to all Cotton Belt members who voted for the measure, particularly those representing districts with textile manufacturing and/or cotton production. They include: Reps. Bonner (AL-1), Everett (AL-2), Rogers (AL-3), Aderholt (AL-4), Bachus (AL-6), Miller (FL-1), Kingston (GA-1), Price (GA-6), Linder (GA-7), Westmoreland (GA-8), Deal (GA-10), Gingrey (GA-11), Forbes (VA-4), Goodlatte (VA-6), Hayes (NC-8), Myrick (NC-9), Brown (SC-1), Wilson (SC-2), Barrett (SC-3), Inglis (SC-4), Blackburn (TN-7), Tanner (TN-8), McCrery (LA-4), Alexander (LA-5), Wicker (MS-1), Pickering (MS-3), Emerson (MO-8), Moran (KS-1), Tiahrt (KS-4), Hall (TX-4), Barton (TX-6), Conaway (TX-11), Thornberry (TX-13), Hinojosa (TX-15), Neugebauer (TX-19), DeLay (TX-22), Bonilla (TX-23), Ortiz (TX-27), Cuellar (TX-28), Carter (TX-31), Lucas (OK-3), Cole (OK-4), Pearce (NM-2), Renzi (AZ-1), Franks (AZ-2), Hayworth (AZ-5), Kolbe (AZ-8), Radanovich (CA-19) and Nunes (CA-21).

In Washington contacts and in news briefings in the days leading up to the House vote, the NCC continued to emphasize to lawmakers that not only is the DR-CAFTA region the second largest market for US yarns and fabrics, but cotton apparel imported by the US from this region has a much higher content of US fiber than product coming from Asia. DR-CAFTA benefits will come in the form of increased cotton yarn and fabric exports to an already healthy export market that currently consumes 13% of the US cotton crop or 2.7 million US bales. That total is comprised of 200,000 bales of raw cotton and 2.5 million bale equivalents purchased as yarn and fabric manufactured by the US textile industry.

At a DC news briefing, Southern Cotton Growers President Sam Spruell said, “We are satisfied that this DR-CAFTA, with the improvements to be made as a result of cooperation between the Administration and a number of Congressional members from the Southeast, will benefit cotton producers and help stabilize the US textile industry, which traditionally has been the best customer of Southeastern cotton producers’ cotton.”

NCTO Chairman Jim Chesnutt stated, at that organization’s news briefing, that all of the major issues the textile industry has raised since the DR-CAFTA was signed had been resolved and NCTO had officially withdrawn the pledge it asked of Congressional members in ’03 to oppose CAFTA.

Ambassador Portman noted the NCC and NCTO recent joining in support of DR-CAFTA and their role in explaining the trade pact’s benefits. He also praised key Congressional members for their votes, and said the DR-CAFTA “is a great agreement for the American textile industry and American textile workers because it strengthens our relationship between yarn and fabric makers in the U.S. and apparel producers in Central America. Furthermore, it solidifies a market in our hemisphere that will enable our textile industry to compete against Asia. CAFTA-DR levels the playing field and expands export opportunities for American farmers, workers and businesses.”

The House approved HR 525 to authorize Association Health Plans (AHPs) - group health plans whose sponsors are trade, industry, Chambers of Commerce or similar business associations.

Under The Small Business Health Fairness Act of ’05, introduced by Rep. Johnson (R-TX), the AHPs are exempt, for the most part, from regulation under state health insurance laws and state consumer protection laws. Instead, they are administered federally under the Employee Retirement Income Security Act of ’74 (ERISA).

Proponents contend that allowing AHPs to be federally regulated under uniform guidelines will allow small businesses to offer affordable health coverage and reduce the number of uninsured.

House passed legislation (HR 3283), authored by Rep. English (R-PA), which will allow application of US countervailing duty law to exports from non-market economies, including China, and enhances intellectual property rights enforcement.

The legislation also includes a significant provision designed to keep exporters from circumventing trade rules by setting up new entities to avoid penalties imposed for prior violations of customs law. It would require new shippers to provide cash deposits rather than bonds.

The legislation failed to gain a two-thirds majority vote when it was brought to the floor under a special rule because Democrats complained it should have been more thoroughly debated and that it was weaker than a previous version, which would have imposed countervailing duties on Chinese imports unless China revalued her currency. The legislation faces an uncertain future in the Senate where Finance Committee Chairman Grassley (R-IA) has expressed concern about the prospects of filing countervailing duty cases against non-market economies.

As reported in July 1 Cotton’s Week, the US Senate approved 2 conflicting amendments addressing the EPA’s use of human data and research studies for pesticide risk assessments. House and Senate conferees approved a compromise between the conflicting amendments in the FY06 Interior Appropriations Bill (H.R. 2361).   The compromise   will permit the EPA to proceed promptly with rulemaking to ensure that ethical standards for human studies using pesticides are enacted.

The legislative language approved by Congress requires the EPA to complete its rulemaking within 180 days to formalize the regulatory program for codifying federal scientific and ethical standards. As a compromise, negotiators agreed to bar the agency from using the data until the rule is published. The agreement allows for a period of not less than 90 days for public comment on the Agency’s proposed rule before issuing a final rule.

A Cotton Council International (CCI)-sponsored National Cottonseed Products Assoc. (NCPA) team has found good potential for enhanced cottonseed meal exports to Mexican markets.

The team visited companies representing 173,000 metric tons of current and potential annual US cottonseed consumption. They reported that a large feed cooperative in Chihuahua plans to open a 20,000 head feedlot, which could double the amount of US cottonseed meal it uses to 15,000 metric tons. Companies in Chihuahua/Cuauhtémoc reported favorably on the availability and quality of US cottonseed meal, and feedlots in Culiacán expressed interest in switching to US cottonseed meal. Several participants from Guadalajara expressed interest in feeding US cottonseed meal to shrimp, a new market for Mexico. Several also said they may expand storage in order to increase the use of US cottonseed meal in Jalisco.

Commerce Dept., says June (5-week month) total cotton consumption in domestic mills was 288.0 million pounds for a seasonally adjusted annualized rate of 6.20 million (480-lb) bales. Last June’s annualized rate was 6.30 million bales. The ’05 May (4-week month) estimate of domestic mill cotton use was raised by 35,000 pounds to 230.5 million. The revised seasonally adjusted annualized rate of consumption for May is 6.10 million bales. This is lower than last May’s annualized rate of 6.21 million bales.

Based on Commerce estimates from Aug. 1, ’04, through July 2, ’05, projected total pounds consumed during crop year ’04-05 would be 3.0 billion pounds or 6.29 million bales.   USDA’s latest estimate of ’04-05 crop year mill use is 6.25 million bales. Preliminary July domestic mill cotton use and revised June figures will be released by Commerce on Aug. 25.

Net export sales for the week ending July 21 were 40,000 bales (480-lb) brin ging total ’04-05 sales to about 16.2 million. Total sales at the same point in the ’03-04 marketing year were about 15.0 million. Total new crop (’05-06) sales are 1.7 million bales.

Shipments for the week were 718,800 bales - a marketing year high - bringing total exports to date to slightly more than 13.3 million bales, compared with the 13.4 million at the comparable point in the ’03-04 marketing year. With slightly more than 1 week of export reporting remaining in the marketing year, exports already have exceeded USDA’s export estimate of 13.3 million bales.