Cotton's Week: October 9, 2009

Sens. Chambliss (R-GA) and Lincoln (D-AR) were joined by fellow Senators on a letter to Commodities Futures Trading Commission (CFTC) Chairman Gary Gensler requesting information from the CFTC cotton futures market investigation of the events of February/March ’08.

The two Senators noted that many of their constituents have been negatively affected by the unexplained volatility in the cotton futures and options markets during that time and that without factual information, the US cotton industry continues to be skeptical about the futures market’s integrity.

The full letter as well as a letter sent earlier to Chairman Gensler by NCC Chairman Hardwick can be found on the NCC’s home page, www.cotton.org.

The House approved FY10 agriculture appropriations bill HR 2997, and the Senate followed after a brief delay due to a hold by Sen. Boxer (D-CA) over a dairy assistance provision.

The House approved the Conference Report on the FY10 agriculture appropriations bill 263-162. The Senate approved the measure by a vote of 76-22. The measure provides total funding of $121.2 billion, of which $23.3 billion is discretionary spending and $97.8 billion is for mandatory programs including commodities, nutrition and conservation.

The legislation provides $23.3 million in cost share funding as requested by the NCC to continue the pink bollworm and boll weevil eradication programs and authorizes the Farm Service Agency to loan up to $100 million to support eradication programs. Funding for cotton ginning research at the USDA-ARS laboratory in Lubbock is $1.7 million, the same as the previous year.

The NCC will continue efforts to secure increased funding for the laboratory but formula funding and Congressionally-directed funding will continue to be difficult to obtain as USDA reorganizes its research administration and programs as provided in the ’08 farm law to emphasize competitive grants. (see related story regarding the new National Institute for Food and Agriculture.)

During a National Press Club event regarding the role of science and research at USDA, Agriculture Secretary Tom Vilsack announced the establishment of the National Institute of Food and Agriculture (NIFA). NIFA was authorized in the ’08 farm law but its concept goes back as far as a ’72 report of the National Academy of Sciences which recommended “that USDA seek a greatly increased level of appropriations for a competitive grants program, which should include support of basic research in the sciences that underpin the USDA mission.”

NIFA will be the USDA's extramural research enterprise and will be formed from the existing Cooperative State Research, Education, and Extension Service. NIFA’s purpose seems to be to increase funding by elevating agricultural research to the levels of the National Institute of Health and the National Science Foundation. NIFA’s areas of research will include global food security and hunger, climate change, sustainable energy, childhood obesity, and food safety.

Agriculture Secretary Vilsack announced the start of enrollment for the ’10 Direct and Counter-cyclical Program (DCP) and the Average Crop Revenue Election (ACRE) program. Enrollment continues through June 1, ’10. USDA urges producers to make use of the eDCP automated website to sign up, or producers can visit any USDA Service Center to complete their ’10 DCP or ACRE contract.

The electronic service is available to all producers who are eligible to participate in DCP and ACRE and can be accessed at www.fsa.usda.gov/dcp. To access the service, producers must have an active USDA eAuthentication Level 2 account, which requires filling out an online registration form at www.eauth.egov.usda.gov followed by a visit to the local USDA Service Center for identity verification.

The June 1, ’10, deadline is mandatory for all participants. USDA will not accept any late-filed applications. For details on DCP/ACRE, visit your FSA county office or the Farm Bill Information Section of the FSA website, www.fsa.usda.gov.

In its October report, USDA estimated a ’09-10 US crop of about 13.00 million bales, down 440,000 bales from the September report. Upland production was estimated at 12.63 million bales and ELS production at 367,000 bales. Harvested area was estimated at 7.73 million acres, with a resulting abandonment rate of 15.4%. The national average yield per harvested acre was estimated to be roughly 807 pounds, 32 pounds below the five-year average.

On a regional basis, reductions in the Mid-South and Southwest more than offset slight increases in the Southeast. Regional and state-level details are provided in the accompanying table.

In its October report, USDA lowered the projected ’09-10 US mill use by 100,000 bales to 3.40 million bales. Exports were unchanged from the September report at 10.50 million bales. This generates a total ’09-10 offtake of 13.90 million bales. Ending stocks for ’09-10 are projected at 5.40 million bales for an ending stocks-to-use ratio of 38.8%.

The projected ’09-10 world production estimate was lowered 1.28 million bales from the September report to 103.78 million. World mill use was lowered 100,000 bales from the September report to a projected 112.64 million bales. Consequently, world ending stocks for ’09-10 are projected to be 56.13 million bales for a stocks-to-use ratio of 49.8%.

It should be noted that USDA increased their ’08-09 world production estimate by 910,000 bales due to an increase in China’s estimated ’08 crop. In addition, estimated world mill use for ’08-09 was lowered 260,000 bales to 110.40 million. World ending stocks on July 31, ’09 are now estimated at 62.50 million bales. This has a corresponding stocks-to-use ratio of 56.6%.

The House Agriculture Committee’s Subcommittee on Conservation, Credit, Energy and Research held a hearing to discuss the implementation of conservation programs.

Jonathan Coppess, administrator, Farm Service Agency (FSA) and Dave White, chief of the Natural Resources Conservation Service both testified.

In addition to updating the Committee on the conservation programs delivered through FSA, Coppess indicated to the Committee there likely will not be another full sign up for the Conservation Reserve Program (CRP) until ’11.

Chief White announced that the recent Conservation Security Program (CSP) signup was a success with the applications received representing about 33 million acres. He also indicated that final rules for the Environmental Quality Incentives Program, Wetlands Reserve Program, Wildlife Habitat Incentive Program and the CSP will be released early in ’10.

The Dept. of Homeland Security (DHS) rescinded its no-match rule, which was blocked by the Northern District of California court shortly after issuance and has never taken effect.

The ’07 rule would have required the Social Security Administration (SSA) to include in the mailing of its no-match letters - which are sent to employers when an employee's name and Social Security number from their W-2 form do not match SSA records - a separate insert letter from DHS explaining how employers are required to resolve such discrepancies.

After receiving public comment on the original rule, the DHS ultimately decided that there are better ways to use its resources and will focus on the E-Verify program and other initiatives.

USDA’s National Agricultural Statistics Service reports that the final US marketing year average (MYA) price for ’08 upland cotton is 47.8 cents per pound, down 11.5 cents from ’07. The lower ’08 price comes despite the sharp reduction in US cotton acres and production, which fell from ’07 levels by 13% and 33%, respectively. Relative to the ’05 peak in US production, the ’08 crop is down 45% as US cotton farmers have responded to relative market signals. In contrast to the US, countries such as India and China have maintained production above ’05 levels. The lack of acreage adjustments in other countries, coupled with weak demand due to the contraction in the global economy, contributed to the lower ’08 price.

The final MYA price is used in ’08 counter-cyclical payment (CCP) determination. Pending an official announcement by USDA, the price of 47.8 cents puts the estimated total CCP for the ’08 crop at the statutory maximum of 12.58 cents. Producers who took the advance CCP of 5.03 cents in February will receive an additional 7.55 cents.

The NCC is encouraging cotton producers to vote in a USDA-announced referendum to be conducted among US upland cotton producers and importers beginning on Oct. 13 and continuing through Nov. 10.

The ’08 farm law included a provision, supported by the NCC, which added Kansas, Virginia and Florida as separate states in the definition of “cotton-producing state” as defined in the Cotton Research and Promotion Act (Act). USDA’s Agricultural Marketing Service (AMS) is proposing to amend the Cotton Research and Promotion Order to implement that farm law section. According to the Act, a referendum among cotton producers and importers is required to amend the Order or any of its provisions. If approved, each of these states would be given representation on the Cotton Board.

The AMS is providing an opportunity for all eligible persons to vote on the amendments to the Order. Producers will have an opportunity to vote by mail or through their respective Farm Service Agency county office. All known cotton importers will be mailed a ballot and referendum instructions. Ballots also will be available on the Internet at http://www.ams.usda.gov/cotton. It should be noted that this referendum applies only to the question of adding the three states and not on the continuation of the check-off program itself.

The final referendum rules and the proposed rule and referendum order were published in the Oct. 5 Federal Register, and also can be found at: http://www.regulations.gov.

Net export sales for the week ending Oct. 1 were 140,400 bales (480-lb). This brings total ’09-10 sales to about 3.8 million bales. Total sales at the same point in the ’08-09 marketing year were about 6.0 million bales. Total new crop (’10-11) sales are 60,500 bales.

Shipments for the week were 227,200 bales, bringing total exports to date to 1.7 million bales, compared with the 2.3 million bales at the comparable point in the ‘08-09 marketing year.