Cotton's Week: June 9, 2006

In response to a Freedom of Information Act (FOIA) request, USDA will release information from the Permitted Entity File (PEF) as early as June 9 and from the Section 1614 Database in August.

The PEF, created in the late ’70s as a tool to administer farm program payment limitations, maintains records on the relationship between a parent entity and all embedded entities and individuals within them, but does not include information on how a parent entity distributes dollars among its members. Entities include: corporations, joint stock companies, associations, limited partnerships, limited liability partnerships, limited liability companies, irrevocable trusts, revocable trusts, estates, charitable organizations or similar organizations. Cooperatives are not considered entities and are not contained in the PEF.

Some PEF data has been released in response to previous FOIA requests, but USDA has now determined that all PEF data will be provided to the requestors.

The 1614 Database is being constructed in compliance with Section 1614 of the ’02 farm law. It includes information about the allocation of direct and indirect benefits to entities and individuals receiving payments through entities. The 1614 Database uses the PEF to allocate benefits to individuals and includes all payments made under Title I and II of farm law. Those include loan deficiency payments, marketing loan gains, certificate exchange gains, direct and counter-cyclical payments, peanut buy-out payments, milk income loss payments, as well as conservation security, conservation reserve, wetland reserve, environmental quality incentive, and grassland reserve payments.

According to USDA, the Database will include benefits issued from October ’02 – March ’06 by the Farm Service Agency, Natural Resources Conservation Service and Co-ops totaling $85 billion. The 1614 Database attributes benefits to members of an entity by apportioning the benefits according to each member’s permitted share as recorded in the PEF. There is a significant amount of work left to be done to complete the 1614 Database, thus the delay in releasing it until August.

A preliminary USDA question/answer document on the PEF is on the NCC’s web site at http://www.cotton.org/issues/members/2006/pef.cfm.

House and Senate Conferees announced they had struck a deal on the Supplemental Appropriations bill which would provide further funding for the wars in Iraq and Afghanistan, as well as fund agricultural disaster programs targeted at producers affected by last year’s hurricanes. Both the House and the Senate are expected to pass the Conference Report next week.

The House passed it’s version of the Supplemental Appropriations earlier this year with no funding for agricultural disaster. The Senate’s version of the bill included $3.9 billion for a traditional disaster program as well as a supplemental direct payment to all producers.

The Conference Report is the culmination of weeks of negotiations to craft a bill that did not exceed the overall spending cap of $94.5 billion set by President Bush. The Report included $500 million in specific programs for producers who were in declared primary and contiguous disaster counties as a result of Hurricanes Katrina, Ophelia, Rita and Wilma. This provision includes $15,000,000 to assist producers and first-handlers of the ’05 crop of cottonseed. The conference agreement includes language requiring that all eligible applicants must be located in hurricane-affected counties. The report also directs the Secretary of Agriculture to use any unexpended funds under this act to assist producers in other parts of the country who were affected by natural disasters.

The Senate confirmed Susan Schwab as the US Trade Representative (USTR).  She replaces Ambassador Rob Portman, who was confirmed and is now director of the White House Office of Management and Budget.

NCC Chairman Allen Helms said, “Susan Schwab has the experience that should enable her to be effective on a wide range of trade matters, including the ongoing World Trade Organization negotiations and on free trade agreements. The Council looks forward to continuing its close relationship with the U.S. Trade Representative and working with that office on trade concerns and opportunities affecting our industry.”

Before being nominated, Ambassador Schwab served as top deputy at USTR. Previously, she served as legislative director to former Sen. Danforth of Missouri, as chief agriculture negotiator at USTR and as director of corporate business development at Motorola, Inc. She became deputy USTR in Nov. ’05 after serving as dean of the Maryland School of Public Policy from ’95-03 and as head of the U. System of Maryland Foundation, the state public university’s fundraising arm, from ’03-05.

Agriculture Deputy Secretary Chuck Conner announced that USDA will accept one million acres offered under the Conservation Reserve Program (CRP) general sign-up and that CRP participants intend to re-enroll and extend contracts covering 13 million acres set to expire Sept. 20, ’07.

“I’m pleased to announce the selection of one million acres offered for enrollment under the Conservation Reserve Program general sign-up,” Conner said. “In addition, contracts covering 13 million of the 15.5 million acres set to expire in 2007 will be re-enrolled or extended. This enrollment helps fulfill the President’s commitment to strengthening our largest cooperative conservation partnership with farmers and ranchers.”

For the CRP general sign-up, which ran from March 27-April 28 of this year, USDA selected 1 million acres of the 1.4 million acres offered. USDA selected the most environmentally fragile of the cropland acres offered, ranking offers based on cost and the Environmental Benefits Index (EBI) factors of soil erosion, water quality, enduring benefits, air quality and wildlife enhancement.

USDA’s Farm Service Agency (FSA), which administers CRP on behalf of the Commodity Credit Corp., ranked all offers on the same basis and considered offers with an EBI score of at least 242 as acceptable for enrollment. The average EBI score for all offers this sign-up was 284. The average rental rate per acre is $53.44, and will provide annual rental payments of $54 million to participants for the 1 million acres enrolled. This additional acreage raises the total CRP acreage to 36.68 million acres.

FSA received 22,990 offers for enrollment and accepted 18,140. Offers accepted under this sign-up will become effective on Oct. 1, ’06. In addition, CRP participants with land set to expire in ’07 intend to re-enroll or extend CRP contracts covering 13 million acres, almost 84% of the 15.5 million acres set to expire.

In ’04, President Bush directed USDA to offer re-enrollments and extensions of CRP contracts set to expire ’07-10. FSA received more than 5,000 public comments on how to implement the President’s directive. FSA contacted almost 158,000 CRP participants with contracts scheduled to expire in ’07 beginning on Jan. 31, ’06, to determine their interest in voluntarily continuing in CRP.

FSA has posted tables showing state and county acreage enrollment data at: http://www.fsa.usda.gov/dafp/cepd/crp.htm.

The ’06 Sourcing USA Summit produced by Cotton Council International (CCI) and Cotton Incorporated, is set for Nov. 16-19 in Scottsdale, AZ.

Organizers estimate some 400 of the world’s leading cotton mill executives and top executives of leading US cotton export companies will attend this year’s invitation-only event – which has drawn a sponsor record of 24 US export organizations.

In MY04/05, US cotton exporters sold $76 million of US cotton (300,000 bales) during CCI’s ’04 Sourcing USA Summit and sold another $505 million (2 million US bales) within three months of the event, more than doubling sales from the ’02 Summit.

Cotton Council International (CCI) has appointed Muhammad Azhar as local representative in Pakistan. He will provide a local contact point between CCI and the Pakistani industry and manage operational aspects of CCI programs there. Working closely with CCI’s US-based staff and representatives throughout South Asia, he also will be responsible for CCI’s COTTON USA licensing program and will act as liaison for CCI’s Supply Chain Marketing program and provide logistical support for teams and delegations traveling to and/or from Pakistan to the United States.

CCI is confident that Azhar’s presence in Pakistan will facilitate better communication between the two countries’ industries and provide the additional resources needed to greatly accelerate programs and activities on behalf of U.S. cotton in the important Pakistani market.

In its June report, USDA projects a US crop of 20.70 million bales for ’06-07. Mill use was lowered 3.5% to 5.6 million bales, reflecting lost capacity from the recently-announced closing of a major mill. Exports were raised 300,000 bales to 16.80 million. The estimated total offtake stands at 22.40 million bales, resulting in ending stocks of 4.90 million bales. The estimated ending stocks-to-use ratio is 21.9%.

USDA also gauged US ’05-06 cotton production at 23.89 million bales. Mill use remained unchanged at 6.00 million bales while exports were lowered 200,000 bales to 16.80 million bales based on the recent pace of weekly shipments. The estimated total offtake now stands at 22.80 million bales, generating ending stocks of 6.60 million bales. US estimated mill use and ending stocks reflect recent revisions from the Census Bureau beginning in ’03-04. The estimated ending stocks-to-use ratio is 28.9%.

The USDA report sees world production for the ’06-07 crop year reaching 114.64 million bales. Mill use is set at 122.46 million bales. World ending stocks are estimated to be 47.09 million bales for a stocks-to-use ratio of 38.5%. For the ’05-06 crop, production was raised about 700,000 bales to 114.09 million bales as increases in India, Pakistan, Uzbekistan and Zimbabwe were partially offset by reductions for some African Franc Zone countries, Syria and Paraguay. World mill use was lowered 130,000 bales to 117.07 million bales. Consequently, world ending stocks are estimated to be 53.04 million bales for a stocks-to-use ratio of 45.3%.

Net export sales for the week ending June 1, ’06 were 291,800 bales (480-lb). This brings total ’05-06 sales to about 17.4 million. Total sales at the same point in the ’04-05 marketing year were slightly more than 14.6 million bales. Total new crop (’06-07) sales are 598,000 bales.

Shipments for the week were 296,300 bales, bringing total exports to date to 13.5 million bales, compared with the 10.6 million at the comparable point in the ’04-05 marketing year. With slightly more than two months remaining in the marketing year, weekly shipments must average roughly 388,000 bales to reach the USDA projection of 16.8 million bales.

Adjusted World Price, SLM 11/16	44.13 cents	*
Coarse Count Adjustment	0.00 cents
Current Step 2 Certificate Value	2.34 cents
Marketing Loan Gain Value	7.87 cents
Import Quotas Open	1
Step 3 Quotas (480-lb. bales)	113,839
ELS Payment Rate	0.00 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 3135 c.i.f. Northern Europe	57.36 cents
Forward 3135 c.i.f. Northern Europe	62.01 cents
Coarse Count c.i.f. Northern Europe	54.73 cents
Current US c.i.f. Northern Europe	59.70 cents
Forward US c.i.f. Northern Europe	66.90 cents
2005-06 Weighted Marketing-Year Average Farm Price
Year-to-Date (August-April)	47.82 cents	**
**August-July average price used in determination of counter-cyclical payment