Cotton's Week: August 19, 2005

NCC Chairman Woods Eastland told the organization’s directors that the NCC has been very effective in applying its resources to address the industry’s priority issues but the industry still faces some serious challenges. Among those are: 1) monitoring the WTO Doha Round negotiations, particularly the cotton subcommittee, to ensure the cotton program is not singled out; 2) communicating with Congress on the Step 2 decision, especially urging against immediate elimination; 3) working with the Administration on a number of trade-related issues with China, which is now the largest importer of US cotton; and 4) conveying to the Administration and Congressional members the importance of maintaining the structure of the current farm bill.

Cotton Council International (CCI) President Gary Taylor said that “exports of cotton fiber and value-added cotton products are increasingly vital to the survival and profitability of our industry.” However, he reported that CCI’s Export Promotion Committee has determined that it will be difficult for the United States to export the requisite 14 million bales or more of cotton fiber a year unless key markets perform according to expectations. Some of those key markets, he said, are Turkey, Indonesia, India, Pakistan, Mexico and China – which is receiving CCI’s priority on activities this year because “we need a greatly stepped-up effort in China from our industry and from our export promotion organizations.”

“For those key markets, we have a variety of programs in place,” Taylor said. “These include technical and trade seminars, teams, summits, and ongoing contacts between buyers and sellers.”

NCC Counsel Bill Gillon, in an update on key trade issues, demonstrated that the WTO Doha negotiations could force significant changes in US farm policy, including changes in the marketing loan program. He reported that the upcoming Hong Kong ministerial could result in additional international pressure to change the US cotton program, particularly from the African countries which blamed low world prices on the United States. Gillon also indicated that Brazil likely would move forward with trade retaliation against the United States if it did not take steps to comply with the WTO cotton decision by the fall.

Gary Adams, NCC’s vice president, Economics and Policy Analysis, updated the directors on the current economic situation. In his report, Adams noted the potential drag on world economies that could occur due to the record-high oil prices. Regarding the cotton market situation, prices remain under pressure due to stocks from last year’s crop and the likely potential that the ’05 production will be adequate to meet expected demand. Adams also highlighted China’s role in world markets and their potential to purchase as much as 7 million bales of US cotton in the current marketing year.

John Maguire, NCC’s senior vice president, Washington Operations, reported on the latest policy situation and detailed the busy schedule facing Congress upon their return from the August recess. In particular, the agriculture committees are scheduled to complete their work on budget reconciliation by Sept. 16. Maguire noted that the cotton industry’s priorities throughout the process are: maintain the structure of the current farm bill, including current eligibility rules and payment limit provisions; any cuts to the farm bill should be done in a manner that is equitable across programs and commodities; and maintain the Step 2 program for as long as possible. The Board was reminded that there continues to be a strong push for more restrictive payment limits.

David Kavanaugh, professional staff member of the Trade subcommittee of the House Ways and Means Committee, addressed the board on several key trade topics, including CAFTA and its impact on the future trade agenda, status of the WTO Doha negotiations, and trade issues with China. Of note, Kavanaugh emphasized that cotton, or any commodity, should not be singled out in the WTO negotiations.

Agriculture Secretary Mike Johanns is urging farmers and ranchers to sign-up for the Crop Disaster Program (CDP) and other assistance programs in advance of the approaching deadlines. For the CDP ’03 and ’04, the sign-up deadline is Sept. 9, ’05. For the CDP ’05, the enrollment period ends Dec. 16, ’05.

"These programs have helped thousands of producers recover from the devastating effects of severe weather in counties that have received a Presidential disaster declaration," Johanns said. "I encourage all eligible farmers and ranchers to enroll in these programs now before the sign-up periods close in order to participate and receive this valuable assistance."

The CDP provides assistance to producers who suffered ’03, ’04 or ’05-crop losses as the result of damaging weather or related conditions. The ’05 crop losses are limited to those losses caused by a hurricane season in counties that had a Presidential disaster declaration. Nearly $2 billion has been paid to producers since sign-up began in mid-March ’05.

Producers can receive disaster benefits for crop losses for only 1 of the ’03, ’04 or ’05 crop years. However, if a producer has been paid a CDP payment for a ’03 or ’04 crop loss and subsequently is approved for a CDP payment for a greater ’05 crop loss, the amount of the ’03 or ’04 payment will be deducted from the ’05 payment and the difference will be paid to the producer.

USDA's web site, http://disaster.fsa.usda.gov/, provides producers with 1 convenient location for details on new and existing disaster assistance.

US and China negotiators initiated discussions, which could lead to a textile and apparel trade agreement. Representatives met in San Francisco and reportedly are set to resume discussion in China, possibly Aug. 29-30.

US officials have said the 2 countries are close to a deal, but several industry observers indicate the 2 sides may be further apart. The countries are discussing terms of a broad textile and apparel trade agreement, which would provide greater certainty in trade. China and Europe reached an agreement in June that limits imports from China to 8%-12.5% growth per year in 10 categories, through ’07.

The US used the “safeguard” mechanism authorized in the WTO accession agreement to limit growth in imports in 7 products in May. The safeguard mechanism allows WTO members to limit imports from China of specific products to 7.5% above most recent trade levels.

Reportedly, US officials tabled an offer on Aug. 16 and China countered Aug. 17. China’s president, Hu Jintao, is scheduled to visit the US the week of Sept. 7, so it would appear both sides would like to resolve the matter prior to that visit. However, USTR officials indicated they would prefer no agreement rather than a bad agreement. Also, industry spokesmen concurred that while a sound comprehensive agreement is desirable to provide certainty in trade, they also believe continued, aggressive use of safeguards is preferable to a bad agreement.

Senate Majority Leader Frist (R-TN) will address key agricultural issues at a  NCC-sponsored meeting Aug. 22 from 9-10 am in Brownsville, TN, at the Willie German Equipment Co., 1341 S. Dupree.

W. Tennessee farmers are urged to attend the event, which will include a question and answer session following Sen. Frist’s address.

"Tennessee's farmers form a major part of the backbone of our state's economy," Frist said. "I'm looking forward to meeting with and hearing from our West Tennessee farmers, and learning how we can best support the men and women who grow the crops that feed and clothe communities throughout Tennessee, across America and around the world."

NCC President/CEO Mark Lange said, “I strongly encourage our members and all farmers to attend. This is a great opportunity to relay concerns and ideas about the current and future state of agriculture to Tennessee’s senior Senator and the leader of the U.S. Senate.”

A New York Times story says New York City’s health dept. is urging all city restaurants to stop serving food containing trans fats, chemically modified ingredients that health officials say significantly increase the risk of heart disease.

"Trans fat clearly contributes to heart disease, but it is something that is relatively new to the consumer environment," said Dr. Sonia Angell, the dept.’s director of cardiovascular disease prevention and control. Among the alternatives available to replace partially hydrogenated oil, she said, are many common monounsaturated and polyunsaturated oils like cottonseed, olive, peanut and sunflower oils.

House and Senate staffers will see US cotton’s production and processing infrastructure during 2 tours of the NCC’s ’05 Congressional Staff Education/Orientation Program. The program, supported by a Monsanto grant to The Cotton Foundation, seeks to raise lawmakers’ awareness of an efficient US cotton sector and its contributions to this nation as well as the industry’s need to compete profitably in the global marketplace.

The first tour, Aug. 22-25, includes stops at the American Cotton Growers Denim Mill in Littlefield, TX, and an oil mill, warehouse, farm and the USDA-ARS gin lab in the Lubbock area. The 15-member group also will visit the Phoenix area where they will tour the USDA classing office and the USDA Pink Bollworm Rearing Lab and hear a presentation on the AF36 aflatoxin control project at the Arizona Cotton Research and Protection Council.

The second tour, Aug. 30-Sept. 2, will begin with presentations from Cotton Incorporated staff in Cary, NC. That 15-member group also will visit: NCC Vice Chairman Allen Helms’ Crittenden Gin in Clarkedale, AR; Dan Branton’s catfish farm in Leland, MS; the USDA-ARS and Mississippi State U. research operations in Stoneville, MS; and USDA’s Southern Regional Research Center in New Orleans.

Net export sales for the week ending Aug. 11, ’05 were 473,300 bales (480-lb). This brings total ’05-06 sales to about 4.8 million. Total sales at the same point in the ’04-05 marketing year were almost 4.9 million bales. Total new crop (’06-07) sales are 105,500 bales.

Shipments for the week were 457,000 bales, bringing total exports to date to 604,400 bales, compared with the 433,600 bales at the comparable point in the ’04-05 marketing year.