Cotton's Week: January 20, 2006

NCC Chairman Woods Eastland and American Cotton Producers Chairman John Pucheu, joined by NCC CEO Mark Lange and Senior Vice President John Maguire, met with Administration officials to express the cotton industry’s concerns over the Hong Kong ministerial text.

Discussions focused on the potential for additional details being added to cotton-specific language in the text and the calendar for completion of the Doha Round. Administration officials noted that some parties in the negotiation would seek further elaboration of cotton-specific commitments by the US on domestic support and an associated time table. NCC leaders expressed their belief that the general agreement on agriculture should be far more developed prior to any further cotton discussions.

Pucheu and Lange also attended a briefing conducted by American Farm Bureau on analytical work evaluating the economic trade-offs associated with agricultural negotiations in the Doha Round. The work provides an important analytical framework that will be useful to all of US agriculture as the Doha negotiations proceed.

NCC representatives also attended the initial meeting of an advisory task force created by the United Soybean Board. The task force began discussions on analysis of alternative concepts for domestic agricultural support associated with compliance on future disciplines stemming from a Doha agreement. Working with consultants, the task force will examine the potential for programs based on revenue mechanisms, as well as conservation programs, to complement or replace existing program provisions.

Brazil is likely to restart the cotton dispute remedy proceedings in the WTO by late January or early February according to several reports in the trade press.

In ’05, Brazil and the United States agreed to suspend arbitration proceedings in the cotton case, but Brazil retained discretion to restart the arbitration process at any time. Brazilian officials stated that the United States had made no changes in the marketing loan program or the counter-cyclical program, yet U.S. expenditures for the cotton program reached an all-time high in ’05.

Brazil acknowledged that the United States had proposed the elimination of Step 2 and had made changes in the export credit guarantee program, but indicated that these steps might not be enough to comply with the Panel decision. The cotton decision was divided into two main components – prohibited subsidies (Brazil has claimed about $3 billion in damages) and subsidies that cause serious prejudice (Brazil has claimed about $1 billion in damages).

Should the US Congress pass legislation eliminating Step 2 as of Aug. ’06, Brazil’s claim regarding that program would be weakened. Brazil could also renew its challenge against the export credit guarantee program – despite the administrative changes that have been made in that program. The United States made those changes in order to remove the export subsidy component from the program.

If Brazil revives its serious prejudice challenge, it likely would focus on the marketing loan program and the counter-cyclical program.

Feb. 10 is the deadline for reserving rooms at the Hilton Memphis, site of the ’06 Joint Cotton Industry Bale Packaging Committee (JCBPC) meeting set for March 1. Hotel reservations can be made by calling 901-684-6664 or 800-445-8667 and using the group name JCIBPC.

There is no meeting registration fee. Online meeting registration is encouraged by going to http://www.cotton.org/tech/bale/jcibpc-form.cfm and completing the form.

The JCIBPC, chaired by Lee Tiller, is tentatively set to conduct its general session from 10 am-1:30 pm. The executive session from 1:30-4:30 pm will include reviews of experimental test programs, the Cotton Bale Packaging Specifications and the committee's Points of Policy.

USDA issued a “Notice to Trade” to all warehouse operators approved under the Cotton Storage Agreement (CSA). The notice addresses temporary storage space in outside yards for the ’05 crop of Upland cotton in certain counties in West Texas, Oklahoma, Kansas, and New Mexico, referred to as “Eligible Counties.”

The notice said that the production of ’05-crop upland cotton has exceeded available commercial cotton storage space in Kansas, Oklahoma, New Mexico and parts of Texas. Therefore, warehouse operators in the list of counties in the notice may request Commodity Credit Corp. (CCC) approval of short-term temporary storage space in outside yards for ’05-crop upland cotton pledged as security for CCC marketing assistance loans (loan cotton). No request will be considered after April 1, ’06. CCC will grant such requests only if the warehouse operator agrees with the terms listed in the notice, which can be found at http://www.cotton.org/issues/2006/storagenotice.cfm.

Nearly $38 million in grants for certain types of conservation projects is available from USDA, Agriculture Deputy Secretary Chuck Conner said. The funds will be awarded to competitively selected proposals from state and local governments, nongovernmental organizations, federally recognized Indian tribes, and individuals for projects in four conservation emphasis areas.

Specific funding initiatives:  1) $20 million for Conservation Innovation Grants for development and adoption of innovative conservation technologies and approaches, in conjunction with agricultural production; 2) $9.5 million for Wetlands Reserve Enhancement Program partnership proposals that address wetland creation and enhancement efforts on prior-year enrolled contracts, those where cooperators will contribute significantly to the Wetlands Reserve Program delivery and technical assistance costs, and easement management projects; 3) $4 million for the Grazing Lands Conservation Initiative for proposals to control and manage invasive species affecting grazing lands; and $4 million for Cooperative Conservation Partnership Initiative (CCPI) proposals to help partners identify and solve regional, state and local natural resources concerns. CCPI offers a Conservation Priorities component that will fund watershed or airshed planning projects that address terrestrial and freshwater aquatic wildlife habitat, invasive species, livestock nutrient management, minor and specialty crop management, and agricultural air quality. CCPI also offers the new Rapid Watershed Assessments component that the USDA's Natural Resources Conservation Service will use to provide cost-effective watershed assessments quickly to stakeholders and partners.

The request for proposals can be found http://www.grants.gov/. Information is also available at http://www.nrcs.usda.gov/ or at your nearest USDAServiceCenter.

In one sweeping agreement, Dow AgroSciences and Monsanto established cross licensed property and product licenses of cotton, corn and soybean traits and dropped pending patent suits.

Specifically under this agreement, Dow and Monsanto established cross licenses of cotton technologies on a non-exclusive basis. Dow's license includes Monsanto's patent estate for cotton transformation. Monsanto's license includes the patent estate for glyphosate tolerant cotton of Mycogen Plant Sciences, Inc., an affiliate of Dow AgroSciences.

Dow receives the intellectual property licenses for the commercialization of its WideStrike insect protection technology. Monsanto receives the intellectual property licenses related to its Bollgard, Bollgard II, Roundup Ready and Roundup Ready Flex technologies. Monsanto also receives a commercial license for WideStrike technology in South America and Mexico. Dow and Monsanto also established non-exclusive cross licenses of certain enabling technologies. Dow's license includes Monsanto's patent estate for synthetic Bt technology. Monsanto's license includes the patent estate for Bt in plants owned by Mycogen.

The two companies also cross licensed intellectual property and product licenses in corn and soybeans on a non-exclusive basis. Dow received a commercial license to certain Monsanto seed stock and biotechnology traits for both corn and soybeans. In addition, Dow receives royalty-bearing rights to create and license finished hybrids, which combine Monsanto's Roundup Ready Corn 2 technology with Dow's Herculex I and Herculex XTRA technologies, to licensees of Monsanto's Roundup Ready Corn 2.  

The companies agreed to settle outstanding legal disputes. Mycogen has agreed to withdraw its appeal related to the US Patent and Trademark Office's determination that Monsanto scientists were the first to invent synthetic Bt genes. Monsanto agreed to withdraw its appeal that Mycogen scientists were first to invent the Cry1F gene.

History Channel's Modern Marvels episode about cotton will air for a third time on Jan. 21 at 7 pm (EST). The show, which includes interviews with Cotton Incorporated executives and footage of the Cary, NC, facility, portrays cotton as a fiber that has played a starring role in history, creating empires, helping launch at least one civil war, jumpstarting the Industrial Revolution and becoming the world's most ubiquitous fabric.

Net export sales for the week ending Jan. 12 were 341,300 bales (480-lb). This brings total ’05-06 sales to almost 11.0 million. Total sales at the same point in the ’04-05 marketing year were about 9.4 million bales. Total new crop (’06-07) sales are 175,700 bales.

Shipments for the week were 209,200 bales, bringing total exports to date to 5.2 million bales, compared with the 4.0 million bales at the comparable point in the ’04-05 marketing year.

Sales to China now total 5.4 million bales, or 49% of the total.  Mexico ranks as the second largest customer with sales of 1.4 million bales, while Turkey is third at just under 1 million bales.

The US Supreme Court has turned aside an effort by the pesticide industry to overturn lower court rulings putting in place no-spray buffer zones near western salmon streams and consumer warnings on certain toxic pesticides.

CropLife America, with support of agricultural chemical user groups, had petitioned the Supreme Court to review the injunction imposing the buffers and consumer warnings. The court’s refusal to hear the case means that the buffers and consumer warnings will stay in place until the Environmental Protection Agency establishes permanent, pesticide-specific measures to protect salmon.

The US District Court in Seattle originally issued the January ’04 injunction that put in place no-spray zones of 100 yards for aerial applications and 20 yards for ground applications of more than 30 pesticides. The district court’s injunction also required in-store warnings to inform consumers that seven urban-use pesticides may harm salmon. The injunction followed a ’02 decision that found EPA out of compliance with the Endangered Species Act for failing to protect salmon from harmful pesticides. The judge ordered EPA to consult with NOAA Fisheries to establish permanent restrictions needed to protect salmon from 54 pesticides, with EPA to initiate consultations over a two-and-a-half year timeline.

During ’04, the NCC and other agricultural interests filed more than 40,000 comments in support of the counterpart regulations. NCC will continue to support and advocate the development of the counterparts as a scientific means in which threats to endangered species can be determined. The counterpart regulations, finalized in August ’04, allow the EPA greater discretion in determining pesticides’ effects on endangered species.