Cotton's Week: December 16, 2005

The Hong Kong ministerial meeting continues with a primary focus of obtaining sufficient progress to justify another round of talks in the next few months. An impasse appears to have been reached on market access talks with the EU unable to move toward the access levels sought by the US or the developing countries. With little progress on market access, negotiators have been unable to reach agreement on reductions in domestic support. International aid has also become a subject of debate in the negotiations. The EU continues to accuse the US of using food aid as a distribution tool for surplus commodities instead of humanitarian aid and insists that food aid be 100% cash for local markets. The US has countered, noting that it is the largest donor of food aid and cash programs where local markets do not exist ultimately results in diminished aid.

In the midst of the struggling negotiations, there continues to be unrelenting press coverage on efforts by African countries to force the US to agree to an “early harvest” of its cotton program. The African countries continue to blame low world cotton prices on the US cotton program and have threatened to walk out of the talks if their demands to end the US cotton program within three years are not met.

US Trade Representative Robert Portman proposed duty free, quota free access to cotton imports from poor W. African cotton producing countries, but so far he has refused to agree to an early harvest for cotton. In remarks made at the end of a special session concerning cotton, Ambassador Portman stated that problems with profitability in W. Africa were much broader than US cotton subsidies. He stated that it would be irresponsible to African cotton farmers to tell them that eliminating subsidies would solve their problems when so much more needed to be done. The Ambassador stated that claims of injury resulting from the US program appeared to be significantly exaggerated. He made it clear that to resolve the cotton issue, the negotiations must move agriculture forward.  

NCC Chairman Woods Eastland responded by voicing concern about the US access proposal. He said, “This appears to be unilateral action by the U.S. in what should be multi-lateral negotiations. If improved market access for cotton produced in the truly least developed countries will provide meaningful economic gains then all cotton importing countries should be expected to match the reported U.S. proposal.”

Eastland noted that many recent studies show very small price impacts attributable to the US program. He stated that the US cotton program is not responsible for poverty in Africa and criticized the monopolistic, parastatal marketing system in Africa that deprives producers of a fair return for their product and has led to lower yields, lower costs and lower returns.

Eastland stated that, “The U.S. has tabled an aggressive, comprehensive proposal that significantly reduces trade distorting domestic support while opening world markets for agricultural products. Now, that has been supplemented by a unilateral offer of unprecedented market access unmatched by any other cotton importing country. If the developing world wants to see progress in agricultural markets, it should support the U.S. efforts in the WTO.”

Senate Agriculture Committee Chairman Chambliss (R-GA), said the ministerial meeting’s focus on issues such as cotton and food aid is distracting ministers from the real task at hand.

“We must eliminate export subsidies and have substantial and meaningful reductions in tariffs for both developing and developed countries alike,” Chambliss said. “I am disappointed that the European Union continues to distract the attention of this important meeting. However, I am encouraged by Ambassador Portman’s statements at the opening session and his strong and courageous defense of the U.S. cotton program.”

Chambliss and other congressional leaders have reminded the Bush Administration that any agreement reached in Hong Kong or subsequent locations must be ratified by Congress.

Dr. Andy Jordan, NCC’s vice president, Technical Services was part of a delegation that included USAID, Tuskegee U. and USDA officials visiting Mali to formulate the next phases of the C-4 West African Cotton Improvement Program. They are working with USAID and the Integrated Pest Management (IPM) participants from the earlier program conducted in August.

Jordan said the project garnered much interest from farmers to C-4 government officials, including those from the Commission of Rural Development and Environment, who want a three-year plan. The delegation agreed to formulate proposals to the respective institutions. The plan includes a three-tiered training effort with the eventual end-point of having producer training conducted in ’06 (or before the ’07 crop). It would consist of:

1.      Train-the-trainer session of four to five experts from each C-4 country in a six-day regional training program as soon in ’06 as possible. 

2.      In-country sessions for extension specialists (or cotton sector specialists) led by those trained in Step 1)

3.      Farmer to field training led by the Extension (cotton sector) specialists. Ideally all should be accomplished in ’06.

Jordan’s trip is a follow-up to intensive training workshops involving scientists and researchers from four West and Central African cotton producing countries (Benin, Burkina Faso, Mali and Chad – the C-4 Countries) in August. That effort came at the request of USDA/FAS, USAID and Tuskegee U. The workshops were the result of recommendations made by a US fact-finding technical assessment team and a high level US government delegation, following visits to the C-4 countries. Priority production challenges identified for action included: soil degradation, cotton classing, declining soil fertility, pest and disease resistance, IPM, and plant breeding for ginning, spinning or weaving.

Congress moved toward Christmas recess with significant issues unresolved. Chances for passage of a budget reconciliation measure may have improved with a decision to drop a provision to allow drilling in the Artic National Wildlife Refuge, which has been one of the major points of contention. Instead, leaders are considering adding the provision to a bill which provides funding for the military and which is viewed as virtual must-pass legislation, making it difficult for members to oppose. Negotiators continued to work to reach agreement on savings in Medicare and Medicaid as well as cuts to the food stamp program.

House and Senate agricultural negotiators also are reportedly at odds over how to achieve savings in commodity programs and whether to extend the program authority in order to preserve the budget resources for writing the next farm bill. The Senate provisions extended the commodity programs while the House extended nutrition and conservation programs.

A group of 17 farm, commodity and financial organizations wrote the Chairmen of the respective agriculture committees suggesting that, given the high costs of production experienced in ’05 and the delay in reaching agreement on legislation, conferees should consider making no cuts to ’06 programs or making a series of small cuts over multiple years. The letter also cautioned that significant reductions in the availability of Advance Direct Payments should be carefully considered to ensure crop financing is not jeopardized. Finally, the groups emphasized that the ’02 farm law was a product of successful balance between programs and that authority for all programs should be extended to ensure a level playing field between commodity, conservation and nutrition programs when the ’07 farm law is debated. Congress is expected to add hurricane disaster assistance funds to the defense appropriations measure which is likely to be the last measure debated prior to the recess.

The House of Representatives began debate on a bill intended to toughen border security and strengthen immigration enforcement within the country. The House Judiciary passed the bill last week on a party line vote.

During floor debate, an amendment will be offered expressing House support for "guest worker" legislation, although no amendments on specific guest worker legislation are expected. A provision in the bill that significantly affects agriculture would: 1) force all employers to check workers’ status through a national computer data base and 2) increase fines for employers who hire illegal workers. 

The House approved legislation (HR 4473) reauthorizing the Commodity Futures Trading Commission (CFTC) through ’10. According to a summary prepared by the House Agriculture Committee, the legislation “will provide additional tools for the CFTC and the self-regulatory organizations under its purview to police the markets and bring enforcement actions for fraudulent business practices aimed at the unsuspecting public.”

The legislation also includes a provision added by an amendment by Rep. Barrow (D-GA) to “clarify the surveillance and recordkeeping authorities of CFTC to ensure the transparency of the natural gas futures markets.”

The legislation now goes to a Conference Committee to resolve differences between the House and Senate versions.

Net export sales for the week ending Dec. 8, ’05 were 444,900 bales (480-lb). This brings total ’05-06 sales to about 9.5 million bales. Total sales at the same point in the ’04-05 marketing year were about 8.1 million. Total new crop (’06-07) sales are 185,700 bales.

The American Cotton Shippers Assn. (ACSA) has entered into a partnership with the U of Memphis to train future leaders in the global cotton industry.

The ACSA International Cotton Institute will be held May 31-July 18 at the Fogelman Executive Center on the U. of Memphis campus. The eight-week residential program is designed to provide a basic education in all aspects of the cotton industry and the international business environment. Some 40 participants are expected to attend. They are involved in all facets of the cotton industry and typically represent several US states as well as foreign countries such as Australia and Zimbabwe.

Students will learn the cotton trade from field to fabric. Coursework covers manual classing and the use of high volume instruments for classing raw cotton along with buying, transportation, fiber manufacturing, risk management, and the basics of price protection. In addition to classroom instruction, field trips are planned to cotton fields, classing and shipping facilities, a warehouse, and a textile mill.

“This is a great development for ACSA and the young men and women from over 40 countries who will come here for intensive training in all aspects of the cotton industry,” said ACSA President John D. Mitchell. “The Fogelman Executive Center is a world-class facility, and that’s appropriate for our caliber of students.”