Cotton's Week: December 2, 2005

Cotton's Week: December 2, 2005

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WTO Ministerial Prep Continues

NCC staff participated in a number of meetings in Washington, DC, in preparation for the World Trade Organization (WTO) Ministerial scheduled for Dec. 13-18 in Hong Kong. Visits to the staff of both the Senate and House Agricultural committees focused on sustained efforts by the European Union (EU) to use the cotton-producing W. African countries to obtain concessions on cotton beyond the single undertaking.

Additionally, meetings with Administration officials provided an opportunity to receive updates on the latest developments in the negotiations leading up to the Hong Kong meeting. There are indications that expectations for establishment of specifics in market access, export subsidies and disciplines on domestic support in the agricultural negotiations appear to be waning. Lack of general success in the negotiations could bring the unfortunate aspect that some countries will seek to make judgment of success or failure of the Ministerial entirely based on decisions involving cotton.



Lamy Produces Damaging Text

WTO Director General Pascal Lamy offered new text that is extraordinarily damaging to US cotton, and places the overall agricultural negotiations in an entirely new context. The text is part of the draft ministerial text on agriculture and is posted on the WTO web site. 

The text reads:  [We reaffirm our commitment to ensure prioritization of the cotton issue and to establish modalities which are in full conformity with the terms of the August 2004 Decision.] [We reaffirm our commitment to ensure having an explicit decision on cotton on an "early harvest" basis and we adopt the following modalities [...].]. 

As a practice in WTO texts, brackets identify text where no agreement has been reached. However, the first draft text included the first sentence with no brackets, and the second draft has introduced even more onerous language into the debate -- language that specifically states that “early harvest” for cotton is a goal of the Doha Round. In this context, “early harvest” means requiring cotton to make more concessions on a faster pace than the rest of agriculture. The NCC repeatedly has indicated that the inclusion of any provision in the final agreement requiring cotton to make more rapid or different adjustments than other commodities would force the US cotton industry to oppose the Round.

The imbalance in the Director General’s approach is clearly seen in the draft. His text on agricultural negotiation covering such complex issues as calculation of Aggregate Measures of Support in domestic subsidies, disciplines on domestic subsidies, export subsidies and credit programs, market access as well as special and differential treatment issues takes a grand total of 417 words. The Director General’s text specific only to cotton takes 314 words.

The NCC will continue to work closely with the US negotiating team and Congressional leaders to counter the Director General’s attempt to misguide the Hong Kong ministerial session. By focusing attention on cotton, the Director General’s text is attempting to sidestep the fact that little has been obtained in agreement on overall agricultural commitments due to the EU’s intransigence. The Director General also is doing a disservice to less developed countries by ignoring credible economic analyses that indicate the US farm program is not the primary reason poor farmers cannot obtain a fair market price for their cotton. Lack of competition, infrastructure and market access in their countries – along with low per capita consumption in developed countries outside the US - all contribute to the problems experienced by farmers in truly less developed countries.



Funds Released for Conservation Programs

Secretary of Agriculture Mike Johanns announced the release of nearly $2.7 billion in FY06 for voluntary conservation programs on working lands.

The funds' early release ensures farmers and ranchers have more time to make sound decisions regarding their conservation practices. States will receive their allocations much earlier than in the past. FY06 allocations include nearly $1.3 billion in technical assistance and about $1.4 billion in financial assistance for Natural Resources Conservation Service (NRCS) voluntary conservation programs and other activities.

Key voluntary conservation programs and allocations include: 1) Conservation Security Program (CSP): $259,000,000. (This will fund existing contracts. Funds for CSP signups will be allocated to the states at a later date.); 2) Environmental Quality Incentives Program (EQIP): $994,705,524; 3) Ground and Surface Water Conservation (GSWC): $70,093,458; 4) Wetlands Reserve Program (WRP): $245,795,302; and 5) Wildlife Habitat Incentives Program (WHIP): $43,000,000.

Following is a list of states’ initial FY06 allocations across the Cotton Belt: Alabama ($34,715,372), Arizona ($43,035,444), Arkansas ($64,179,236), California ($107,278,383), Florida ($54,822,511), Georgia ($47,764,204), Kansas ($64,429,356), Louisiana ($47,161,030), Mississippi ($71,107,235), Missouri ($81,788,648), New Mexico ($43,374,596), North Carolina ($43,546,112), Oklahoma ($60,233,023), South Carolina ($29,214,537), Tennessee ($30,184,501), Texas ($160,159,186) and Virginia ($33,188,956).

Additional information about conservation programs administered by the NRCS is available at http://www.nrcs.usda.gov/programs or through local USDA Service Centers.



Southwest Storage Concerns Addressed

A NCC storage task force met in Dallas to identify areas of concern for storing second consecutive record cotton crop in Texas, Oklahoma and Kansas region.

All interests recognize that the combination of increased harvest acreage and yield places a premium on available approved storage and may force the short term storage of baled cotton outside. In the face of these challenges, the US cotton industry is attempting to craft a satisfactory agreement with Commodity Credit Corp. (CCC) that will allow producers to maintain loan eligibility, maintain integrity of cotton lint quality, ensure that cotton bales move into conventional storage as quickly as possible and not damage the region’s reputation for expeditious cotton shipments.



Sales Surge, Shipments Steady

Net export sales for the week ending Nov. 24, ’05 were 335,600 bales (480-lb). This brings total ’05-06 sales to about 8.6 million. Total sales at the same point in the ’04-05 marketing year were about 7.5 million bales. Total new crop (’06-07) sales are 149,600 bales.

Shipments for the week were 146,400 bales, bringing total exports to date to 3.5 million bales, compared with the 2.3 million bales at the comparable point in the ’04-05 marketing year.



CCC Says Fax Signature Okay

Effective immediately, CCC has eliminated its requirement that a witnessed or notarized original signature must be on file before CCC can act on a request bearing a facsimile (faxed) signature. Under the prior policy, cotton merchants who faxed a CCC-605 to a CountyOffice as part of a loan redemption request had to assure CCC that any signatures on the CCC-605 were previously provided on form FSA-237, Facsimile Signature Authorization and Verification.

Under the new policy, the FSA Price Support Division (PSD) on-line registry will no longer display signature images. However, the registry still will be maintained by PSD to identify individuals authorized by cotton merchants to redeem cotton on their behalf. Questions about this policy change should be referred to Gene Rosera at 202-720-8481 or by email at gene.rosera@usda.gov.



Quesenberry Named USTR Special Textile Negotiator

USTR Rob Portman announced that Scott Quesenberry will join USTR as the Special Textile Negotiator.

Quesenberry, whose position does not go through the Senate confirmation process, will be responsible for supervising US trade negotiations involving textiles and apparel and working to expand American industry access to overseas markets. He will travel to Hong Kong for the WTO Ministerial Conference.

“Scott comes on board just in time to participate in the Ministerial in Hong Kong," Ambassador Portman said. "The U.S. textile industry has gone through a lot of changes over the past decade, as Scott has seen first hand working for Senator Dole, and he will play a key role in helping USTR and the industry face future challenges and in exploring new markets overseas."

For the past three years, Quesenberry has worked for Sen. Elizabeth Dole (R-NC) most recently as the legislative director and before that as the chief counsel and the policy director. Prior to this position, he worked in various capacities on campaigns and in the private sector. He is a ’93 graduate of DartmouthCollege and received a law degree from Emory U. School of Law in ’96.


Beltwide Registration Urged

Those planning to attend the 2006 Beltwide Cotton Conferences, are encouraged to complete their registration online by going to the Beltwide web site at http://beltwide.cotton.org.

Deadline for discounted registration is midnight Dec. 2. Thereafter, credit card registration can be made online or attendees may register on-site at the registration kiosks, but must pay the full registration fee. Mailed or faxed registration forms received after Dec. 2 will be processed only if the appropriate (non-discounted) registration fee is included. Conferees also are encouraged to make their housing reservations at the Beltwide web site. Some conference hotels still are reporting room availability.

“Strategies for Success” is the theme for the NCC-coordinated conferences, Jan. 4-6, at the Marriott Rivercenter/Riverwalk hotels in San Antonio. The three-day format will feature the latest cotton technology at The Cotton Foundation technical exhibits. Chemical, equipment, seed suppliers and other agribusiness firms staffing these booths will update conferees on products and services designed to increase profitability. Many of these Foundation member booths also will have project investigators and coordinators to answer questions on Foundation special projects ranging from seedling diseases to the Cotton Leadership Program.

The Exhibits complement the annual New Developments From Industry seminar which will include reports on new products and results from agribusiness that show promise for cotton production, harvesting and processing. That program is divided into sessions highlighting the latest development in New Cotton Varieties (and Hybrids), Agricultural Chemicals (Crop Protection Tools and Fertilizers), and Equipment (and Related Technologies).



Mill Cotton Consumption Steady

According to the Commerce Dept., October (4-week month) total cotton consumption in domestic mills was 235.0 million pounds for a seasonally adjusted annualized rate of 6.15 million (480-lb) bales. Last year’s October annualized rate was estimated at 6.24 million bales.

The September (5-week month) estimate of domestic mill use of cotton was raised 16.3 million pounds to 286.0 million. The revised seasonally adjusted annualized rate of consumption for September is 6.07 million bales. This is lower than last year’s September annualized rate of 6.30 million.

This month’s Commerce report contained corrections to previously reported monthly data for cotton consumption from Aug. ’04 to Aug. ’05. Complete revised data will be reported by the Commerce Dept. in their “Consumption on the Cotton System and Stocks” annual summary for ’05 - scheduled for release in the spring of ’06. Based on the revised data, Commerce’s estimate of both upland and ELS consumption of cotton by US mills, when adjusted to represent the complete ’04-05 crop year, is about 6.7 million bales.

Preliminary November domestic mill use of cotton and revised October figures will be released by Commerce on Dec. 23, ’05.



Prices Effective December 2-8, 2005

Adjusted World Price, SLM 11/16

40.54 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

 3.93 cents

Marketing Loan Gain Value

11.46 cents

Import Quotas Open

 0

Step 3 Quotas (480-lb. bales)

 0

ELS Payment Rate

0.00 cents

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

56.02 cents

Forward 3135 c.i.f. Northern Europe

 No Quote

Coarse Count c.i.f. Northern Europe

54.72 cents

Current US c.i.f. Northern Europe

59.95 cents

Forward US c.i.f. Northern Europe

No Quote

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

44.72 cents

**

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

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