Disappointment Greets March 3 Release of
WTO Appellate Report On Brazil Cotton Case

Friday, March 4, 2005                                By Shawn Wade

      Plains Cotton Growersofficials echoed the disappointment and frustration expressed by the NationalCotton Council and other cotton industry groups immediately following theirinitial review of the final WTO ruling on the U.S. appeal in the Brazil cottonchallenge.

      The release of the latestruling isn’t the end of the road for this issue. The U.S. cotton industry,working primarily through the National Cotton Council, will now begin a newround of evaluation and assessment of the situation. Consultations withAdministration officials, the U.S. Trade Representative’s Office and Congresswill be one of the first steps in this new phase of the WTO process.

      Until the 311-page report isread, analyzed and finally interpreted there is not much that can be saidoutside of how disappointing the appellate body’s decision is in light ofsignificant evidence that runs contrary to the opinion rendered by the initialWTO panel, now upheld by the appellate body.

      In a statement issuedyesterday NCC officials noted that several aspects of the original WTO panel’sfindings were, in the U.S. view, inconsistent with the intent of the WTOAgriculture Agreement and change many long-standing interpretations of thatagreement as well.

      Staff from the U.S. TradeRepresentative’s Office and the NCC will be reviewing the WTO appellate bodyreport over the next week and discussing the findings at length to determinewhat, if any, differences might exist between it and the original WTO panelruling issued last year.

      For now there remains noexpectation that the WTO findings will spur immediate changes to the U.S.cotton program or to other facets of U.S. agricultural policy.

      It is quite simply far tooearly to speculate about specific changes to current U.S. farm policy as aresult of the Brazil case. It is safe to say, however, that any potentialchanges will be thoroughly evaluated and debated. Future discussions are likelyto be rolled into the development process for the next farm bill.

      The U.S. cotton program isvery important to U.S. cotton producers but, is just one part of acomprehensive farm policy that provides support to production agriculture andalso funds important conservation and nutrition programs. Current U.S. farmpolicy was carefully designed to meet the obligations agreed to in the currentWTO Agriculture Agreement.

      The U.S. cotton program hasbeen found to have no significant impact on the world cotton market in severalindependent studies conducted by numerous economic and research organizationsincluding Texas Tech University.

      These studies show the U.S.would continue to produce cotton in the absence of a program and that the currentprogram has minimal impact on production while providing stability and helpingfarmers ride out low price and weather disasters.

 

Upland Cotton Average Price Received by
Growers Through January 2005

Friday, March 4, 2005                                By Shawn Wade

      Cumulative Uplandcotton marketings increased by 50 percent during the month of January andallowed total marketings for the first half of the 2004 marketing year to reachthe 10.1 million-bale mark.

      Januarymarketings were estimated at 3.698 million bales with an average selling priceof 39.6 cents per pound. Revised figures for December 2004 indicate 2,292million bales marketed at an average price of 40.7 cents per pound.

      Based on thesesnumbers the 2004 Upland Cotton Weighted Average Price calculated throughJanuary 2005 stands at 43.72 cents per pound. This indicates that 2004Counter-cyclical payments will be based on the maximum 13.73-cent payment rateallowed by current program rules. So far the calculated 2004 Weighted AveragePrice is well below the 52-cent threshold where Counter-cyclical payment ratesbegin to drop.

      Based on thelatest figures over half of the 2004 crop cotton marketed to date was traded inDecember and January. Figuring in the level of activity being reported by HighPlains cotton warehouses, February marketings should also remain strong andprovide another significant bump to the cumulative marketing total. Thepreliminary mid-month price reported for February 2005 was 38.1 cents perpound.

      The 2004Counter-cyclical payment rate authorized under the 2002 Farm Bill will be basedon the 12-month Weighted Average Price Received by growers. For cotton the12-month Weighted Average Price will reflect price and marketings for the 2004marketing year. The 2004 cotton marketing year began on August 1, 2004 and endsJuly 31, 2005.

      The followingtable shows the average price received each month by farmers and the calculatedweighted average price based on estimated cumulative marketings and pricesreported by the National Ag Statistics Service through January 2005.

 

Monthly Average Price Receivedfor

2004-crop Upland Cotton ThroughJanuary 2005

(Weighted by Marketings)

 

Marketings

Prices

 

(000's of Running bales)

(cents/Lb.)

 

Monthly

Cum.

Monthly

Weighted

August

1,215

1,215

53.70

53.70

September

537

1,752

49.30

52.35

October

923

2,675

49.50

51.37

November

1,437

4,112

44.40

48.93

December

2,292

6,404

41.00

46.09

January

3,698

10,102

39.60

43.72

February

na

na

38.10

na 

Source:National Agricultural Statistics Service; * = preliminary