Cotton's Week: April 7, 2006

The full Senate is expected to take up agricultural disaster legislation later this month. The Senate Appropriations Committee, chaired by Sen. Cochran (R-MS), passed the legislation as part of the Supplemental Appropriations bill. If the full Senate passes the measure, it would then go to a Conference Committee with the House, which already has passed it's version of the bill. The House bill does not contain any agricultural disaster language in its bill.

The Senate bill provides crop production loss assistance in a manner similar to previous disaster programs for the ’05 crop year due to weather and for ’06 for crops that were affected by floods in California and Hawaii prior to the date of enactment. The loss threshold for eligibility is 35% and the payment rate is set at 50% of the established price for the crop. Unlike recent agricultural disaster programs, the 95% crop value cap and deduction for crop insurance indemnities have been removed.

Quality loss assistance is based on the actual, local market discounts suffered by producers based on their crop sales receipts or as established by the State Farm Services Agency (FSA) Committee. Payments are to be made on 65% of the crop quantity subject to quality discounts at a payment rate equal to 50% of the market loss sustained by the producer. It provides assistance to specialty crop, nursery crop, dairy and cottonseed producers in hurricane affected counties.

In addition to any production loss payments, all producers who received direct payments for the '05 crop will receive a supplemental direct payment equal to 30% of the direct payment paid for the ’05 crop under the provisions of the ’02 farm bill. The bill also includes funds for FSA to hire additional county office employees to implement the disaster program.

In the House, companion legislation to the disaster portion of the bill has been introduced by Reps. Peterson (D-MN) and Bonner (R-AL).

USDA officials are considering a more liberal policy regarding re-concentration of loan cotton in order to alleviate the outside storage of cotton and to improve the flow of cotton into the export market. While the Commodity Credit Corp. has the authority to re-concentrate cotton if necessary to protect it, the draft policy would broaden the instances in which re-concentration would be allowed.

Re-concentration would be conditioned on several factors, including agreement from CCC that the cotton was moving to a more marketable position, approval of the producer or the producer's agent, and participation by both the original warehouse and the receiving warehouse.

USDA officials have discussed their proposal with some cotton interest organizations, and have prepared a draft of one of the documents that would be used to implement this re-concentration policy. The draft document can be found in the members’ only area of the NCC web site at http://www.cotton.org/issues/members/2006/transferform.cfm.

USDA has not made a final decision regarding this proposed policy.

A high-level Chinese delegation will be in Memphis, TN, on April 8 to sign contracts on purchases of cotton produced in the Mid-South and Texas valued at $300 million. Based on purchases since Aug. 1, '05, China is already the single largest customer of US cotton with purchases of 7.8 million bales, valued at more than $2 billion.

Net export sales for the week ending March 30 were 240,200 bales (480-lb). This brings total ’05-06 sales to about 15.2 million. Total sales at the same point in the ’04-05 marketing year were slightly more than 12.0 million bales. Total new crop (’06-07) sales are 411,600 bales.

Shipments for the week were 433,800 bales, bringing total exports to date to 9.6 million bales, compared with the 7.7 million bales at the comparable point in the ‘04-05 marketing year.

The Senate was not able to come to consensus on sweeping immigration reform. The debate centered around three different concepts, but none moved forward.

The initial legislation offered by Majority Leader Frist (R-TN) focused solely on border security and did not address any type of guest worker program. This legislation was similar to legislation already passed in the House. Senate Judiciary Committee Chairman Specter (R-PA) offered a substitute amendment, which addressed both border security and a guest worker program including language directed at agricultural workers. Although the bill passed the Judiciary Committee, there was no consensus in the full Senate. A third proposal offered by Sens. Martinez (R-FL) and Hagel (R-NE) was put forward as a compromise that would address how to handle undocumented workers already in the United States.

None of the proposals received the 60 votes necessary to limit debate and move to a final vote. It is unclear when the Senate will return to this issue.

House Members sent a letter to the House Agriculture Appropriations Subcommittee Chairman Bonilla (R-TX) expressing their support for continued funding for the Boll Weevil Eradication program.

The Members requested that for FY07, $38.2 million be provided to USDA’s Animal Plant Health Inspection Service (APHIS) for a 30% cost share on about 9.5 million acres in Mississippi, Tennessee, Arkansas, Louisiana, Missouri, Texas, Oklahoma and New Mexico.

The letter was co-signed by the following Members:  Neugebauer (R-TX), Conaway (R-TX), Ford (D-TN), Blackburn (R-TN), Ross (D-AR), Paul (R-TX), Pickering (R-MS), Pearce (R-NM), Boozeman (R-AR), Cuellar (D-TX), Snyder (D-AR), Tanner (D-TN), Hall (R-TX), Reyes (D-TX), Thornberry (R-TX), Ortiz (D-TX), Hinojosa (D-TX), Lucas (R-OK) and Cole (R-OK).

The Members noted that six million acres in nine states are considered “weevil free” and that a significant amount of acreage in Tennessee, Mississippi, Louisiana, Arkansas, Texas and New Mexico is nearing completion.

Senate Finance Committee Chairman Grassley (R-IA) and Ranking Democrat Baucus (D-MT) introduced legislation (S. 2467) to give the Treasury Department more authority to crack down on currency manipulation by China and other countries.

The legislation was introduced in advance of Chinese President Hu Jintao’s scheduled visit to Washington April 20 and followed an announcement by Sens. Graham (R-SC) and Schumer (D-NY) that they are willing to postpone the vote they were promised on legislation (S. 295) that would impose 27.5% tariffs on imports from China in response to continued currency value manipulation.

Sens. Graham and Schumer recently visited China and indicated they are satisfied China is making efforts to revalue the Yuan, but they reserve the right to request a vote on their legislation if China fails to make satisfactory progress.

The Grassley-Baucus legislation would allow Treasury to identify currencies that are in “fundamental misalignment” instead of labeling countries as currency manipulators. The change, according to Treasury Dept. officials, will make it easier for the Administration to take action.

USDA has released 41 summary documents of the public comments submitted verbally and in writing during last year’s Farm Bill Forum listening tour. The summaries will serve as a basis for USDA policy review and analysis in preparation for the ’07 farm bill.

Each paper includes three sections: factual background data about the topic, a summary of general opinions expressed and a list of specific suggestions that were conveyed.

Industry members interested in applying to or nominating someone for the ’06-07 Cotton Leadership Class are encouraged to visit http://leadership.cotton.org. The site contains program curriculum, eligibility requirements and a downloadable application. Applicants or nominators also may contact NCC’s Member Services at 901-274-9030 or your local Member Services Representative for additional information.

The Cotton Leadership Program is geared to individuals who have the potential and desire to become leaders for the US cotton industry. Participants receive developmental training during 5 week-long sessions across the Cotton Belt. The class, comprised of 4 producers and a participant from each of the other 6 industry segments, interacts with industry leaders and visits farms, processing operations and research facilities. They also meet with lawmakers and government agency representatives during a visit to Washington, DC, and attend the NCC’s annual meeting and its mid-year board of directors meeting.

The six-week blending of the current and forward “A” Index quotes for calculation of the adjusted world price (AWP) is scheduled to begin with the AWP in effect for the week of April 21-27. The six-week blending process is used to transition the AWP from old crop to new crop.

However, as of April 7, there was no forward “A” Index quote available. For the transition period to begin as scheduled, there must be a published forward “A” for at least one day during the Friday-Thursday period of April 14-20. If no quote is available at that time, then the transition period is delayed until sufficient quotes are available.

Once the six-week process commences, then the formula during the first two weeks is two times the current quote plus the forward quote divided by three. For weeks three and four, the formula is the current quote plus the forward quote divided by two. For weeks five and six, the formula is the current quote plus two times the forward quote divided by three.

USDA has announced changes to the American Pima Spot Quotations reported by the Agricultural Marketing Service.

Beginning with the ’06/07 marketing year, USDA/AMS no longer will report individual quotes for the San Joaquin Valley and Desert Southwest values. Instead, the two quotes will be combined into an American Pima Market quote. The new format also will include changing the quotation terms to UD free, FOB warehouse, and quoting discounts for strength 37.4 and lower.