RecentMarket Trends Continue To Be
A Positive Influence In 2006 Loan Table

Friday,April 21,2006                                By Shawn Wade

      Higher premiumsand lower discounts dominate the 2006-crop Upland Cotton Loan Premium andDiscount tables issued by the United States Department of Agriculture FarmService Agency on April 17. Continuing a recent trend, the new tables reflectthe market's preference for higher quality cotton fiber and are a tangiblereminder of the benefits growers can accrue by focusing on the production ofhigh quality cotton.

      Lower discountsand higher premiums for just about every Color, Staple and Leaf combination arethe foundation for the improvements in the 2006 chart. The changes, althoughnot as large as seen in the 2005 loan chart, will still reflect positively onproducer prices in 2006. Growers should see slightly higher loan values in 2006over 2005 values for the same fiber qualities.

      The new premium anddiscount tables will also continue to encourage growers to consider quality aswell as quantity when making 2006 variety selections.

      Producers areencouraged to take extra care when making cotton variety selections in 2006.Already a daunting task with the addition of several dozen new varieties to themarket, what used to be a simple matter of matching the best yielding varietyto a particular growing location is now a complex balance between yieldpotential, fiber quality potential, and technology packages.

      Reviewing resultsfrom various 2005 High Plains variety trials and the large-scale systems testsis a good starting point for producers to consider. Final 2005 reports for allof the trials conducted by Texas Cooperative Extension and Texas AgriculturalExperiment Station personnel on the High Plains can be found online at theLubbock TAMU Research and Extension Center website (http://lubbock.tamu.edu/).

      The studies showthat, even though it means producers will have to evaluate more varieties in2006, they have lots of good options since the newest selections were near thetop of most tests in terms of overall yield and also held their ownquality-wise compared with the area's popular benchmark varieties.

      A healthyselection of varieties with good fiber and yield potential combined with theimprovements in the loan chart means growers will have two of the threeingredients necessary to make 2006 another year to remember. Hopefully, thethird piece of the puzzle, moisture, will also get added to the mix as the areamoves closer to planting season.

      Taking a closerlook at the improvements in the 2006 loan chart shows the changes range fromjust a few points to as much as 80 points, or 0.8 cents per pound, on thehigher end of the scale. Regardless of the amount, higher loan values arealways well received by growers.

      The 2006increases were measured by comparing what the same Color/Staple/Leafcombinations were valued at using the 2005 Upland Cotton Loan Premium andDiscount tables.

      According to FSA,the 2006 tables were prepared with the same procedures used to determine the2005 loan schedule, including the narrower 100 point minimum spread betweenstaple 32 and 33 cotton which was instituted in 2005 to better reflectprevailing market prices.

     Changes to the premium and discount tables for other High Volume Instrument(HVI) measured cotton quality components in 2006 where also minor.

PortmanMove Changes Landscape For Doha Talks;
Decreases Likelihood Of Completion

Friday,April 21,2006                                By Shawn Wade

      The Bush Administration'sappointment of current U.S. Trade Representative Rob Portman to take over theWhite House's Office of Management and Budget removes one of the key players inthe Doha Trade talks at perhaps the negotiations most critical juncture.

      Without Portman's influencemany Washington observers are speculating that the Bush Administration isshifting its focus away from completing the Doha trade round in order to puthis considerable talents to work on what they feel are more pressing domesticbudget issues.

      Nominated as Portman'ssuccessor was current Deputy Trade Representative Susan Schwab. Both Schwab andPortman will need Senate confirmation to officially move into their newpositions.

      With the noticeable lack ofenthusiasm that greeted Ambassador Portman's November 2005 offer to makesubstantial cuts in U.S. commodity support programs in exchange for significantmarket access gains, the next thirty days is a critical period when progressmust be made if the Doha round's agricultural negotiations are to advance.

      Without progress in thenegotiations in the next few weeks many Doha observers give the round little orno hope of producing a final agreement by the end of 2006.

      The WTO's goal was to have aset of formulas for specific cuts in subsidies and tariffs completed by the endof April. Even with Portman at the helm of the U.S. negotiating team, chancesfor meeting the April deadline were less than promising.

      With the President's"Fast-Track" trade negotiating authority set to expire in July 2007 and notlikely to be extended, most believe the only way a Doha agreement could be sentto Congress under its auspices was to have the full agreement finished byDecember 2006.

      WTO Ambassadors from aroundthe world have commented that Portman's departure will make an alreadydifficult process even more difficult to complete on time.

      In the 2006 Micronairetable producers will see cotton with Staple lengths of 32 and shorter receiveslightly higher discounts for low mike readings from 2.7-3.4, a slight decreasein the Mike discount for readings above 5.0 and a lower premium for Mikereadings from 3.7-4.2.

      Further review ofthe Micronaire table shows that Staple length 33 or greater cotton, whichconstituted the majority of High Plains production in 2005, will see a 5-10point increase in discounts for Mike readings from 2.5-2.9. Aside from a five-pointdecrease in the premium for Mike readings between 3.7 and 4.2, Staple 33 andlonger cotton will see no change at all in the table for Mike readings between3.0 and 4.9.

      Level Onediscounts for Bark in the Texas, New Mexico and Kansas production regions willincrease by 20-points in 2006 going from 200 to 220 points.

      Strengthdiscounts will increase in 2006 for readings below 25.4 g/tex. Strengthreadings from 25.5 g/tex through 29.4 will again receive no premiums ordiscounts in the loan chart.
Strengthreadings above 29.5 g/tex will see the same premiums, ranging from 25 to 50points, established in 2005.

      The CommodityCredit Corporation Premium and Discount tables provide the applicable premiumand discount figures used to determine marketing loan values for cottonproduced in the United States and supplied as collateral to the CCC.

      Base loan ratesfor specific Texas warehouse locations, also established by the CCC, remainunchanged in 2006 making the third year that no changes have been made in thelocation differentials. For cotton warehoused at Lubbock, the 2006 loan valuewill be calculated from a 51.6 cent per pound base, 40 points lower than the 52cent per pound national base loan rate for cotton.

      Producers wantingto see the 2006 Loan Premiums and Discounts first-hand can download them fromthe Plains Cotton Growers website at http://www.plainscotton.org by following the linksprovided.

      The table belowprovides comparisons between 2005 and 2006 loan values for White Grades 11-41and Light Spot grades 12-42, Staple 32 through 35.

 

 

COMPARISON OF LOAN PREMIUMS AND DISCOUNTS FOR SELECTED
GRADE, STAPLELENGTH, AND LEAF CONTENT COMBINATIONS
OF 2006-CROPAMERICAN UPLAND COTTON

Base Loan Rate: LUBBOCK = 51.60 /pound; U.S.= 52.00/pound

 

 

COMPARISON OF LOAN PREMIUMS AND DISCOUNTS FOR SELECTED
GRADE, STAPLE LENGTH, AND LEAF CONTENT COMBINATIONS
OF 2006-CROP AMERICAN UPLAND COTTON

 

Base Loan Rate: LUBBOCK = 51.60 /pound; U.S.= 52.00 /pound

 

Staple

32

33

34

35

Color

Leaf

2005

2006

Change

2005

2006

Change

2005

2006

Change

2005

2006

Change

 

 

Loan

Loan

 

Loan

Loan

 

Loan

Loan

 

Loan

Loan

 

11&21

1 & 2

-155

-125

30

35

35

0

300

320

20

500

555

55

 

3

-170

-145

25

30

25

-5

275

285

10

465

505

40

 

4

-225

-205

20

-65

-75

-10

115

110

-5

265

290

25

 

5

-355

-345

10

-245

-245

0

-110

-80

30

30

80

50

 

6

-470

-475

-5

-370

-375

-5

-330

-325

5

-255

-245

10

 

7

-620

-620

0

-520

-520

0

-475

-465

10

-420

-405

15

31

1 & 2

-175

-150

25

10

5

-5

235

255

20

440

485

45

 

3

-185

-160

25

-5

-10

-5

225

235

10

430

465

35

 

4

-240

-225

15

-95

-115

-20

100

90

-10

225

250

25

 

5

-370

-360

10

-255

-260

-5

-155

-135

20

5

40

35

 

6

-485

-490

-5

-385

-390

-5

-360

-355

5

-280

-275

5

 

7

-630

-630

0

-530

-530

0

-490

-480

10

-440

-430

10

41

1 & 2

-250

-245

5

-115

-120

-5

90

90

0

220

230

10

 

3

-260

-255

5

-125

-130

-5

80

75

-5

210

210

0

 

4

-290

-290

0

-170

-190

-20

BASE

BASE

BASE

140

140

0

 

5

-415

-410

5

-305

-305

0

-220

-220

0

-120

-115

5

 

6

-545

-545

0

-445

-445

0

-425

-425

0

-380

-375

5

 

7

-685

-690

-5

-585

-590

-5

-570

-575

-5

-545

-545

0

12&22

1 & 2

-275

-240

35

-110

-85

25

100

110

10

255

275

20

 

3

-290

-260

30

-120

-95

25

75

90

15

230

250

20

 

4

-345

-305

40

-195

-170

25

5

10

5

130

160

30

 

5

-460

-430

30

-340

-330

10

-230

-215

15

-150

-125

25

 

6

-560

-560

0

-460

-460

0

-415

-410

5

-365

-355

10

 

7

-690

-690

0

-590

-590

0

-565

-550

15

-550

-530

20

32

1 & 2

-330

-300

30

-165

-165

0

15

5

-10

130

120

-10

 

3

-340

-310

30

-170

-175

-5

-5

-15

-10

115

95

-20

 

4

-400

-380

20

-250

-250

0

-90

-110

-20

25

15

-10

 

5

-505

-500

5

-400

-400

0

-335

-325

10

-260

-250

10

 

6

-615

-625

-10

-515

-525

-10

-485

-495

-10

-450

-450

0

 

7

-755

-760

-5

-655

-660

-5

-635

-640

-5

-620

-615

5

42

1 & 2

-405

-360

45

-280

-260

20

-180

-185

-5

-95

-85

10

 

3

-415

-395

20

-290

-295

-5

-190

-205

-15

-110

-115

-5

 

4

-460

-445

15

-325

-325

0

-240

-250

-10

-165

-165

0

 

5

-575

-560

15

-450

-460

-10

-410

-425

-15

-350

-355

-5

 

6

-695

-710

-15

-595

-610

-15

-575

-580

-5

-550

-550

0

 

7

-835

-845

-10

-735

-745

-10

-715

-715

0

-705

-695

10