TTU Analysis Shows U.S. Cotton Producers To Be
Net Losers Under U.S. WTO Proposal

Friday,June 2, 2006                                  By Shawn Wade

      An analysis of aU.S. proposal designed to jump-start the stalled WTO Doha Round Agriculturalnegotiations shows that U.S. cotton producers would be net losers in the longrun regardless of whether the rest of the world eventually chooses to get onboard and make concessions of their own.

      Economists at theTTU Cotton Economics Research Institute evaluated the current U.S. proposal,which would cut American domestic agriculture support programs by 60 percent inexchange for significant gains in market access for U.S. agricultural goods.

      The TTU resultsshow that, even if the rest of the world eventually accepted the provisions ofthe U.S. proposal "as-is", the ultimate effect is a 19 percent drop in the netfarm income of U.S. cotton producers by the 2010-11 marketing year.

      It would seemunthinkable that the U.S. Congress would unilaterally adopt the proposed cutsto U.S. domestic support programs with no requirement that the rest of theworld provide commensurate changes in market access. However, if Congress choseto do the unthinkable the TTU study shows the effects would be even moresevere, dropping net farm income by 2010-11 a devastating 26 percent.

      For cottongrowers, the study provides further evidence that the utopian dream offree-trade advocates fails to ultimately provide real world benefits to U.S.agriculture.

      There is agrowing feeling within U.S. agriculture groups and the U.S. Congress that assuringU.S. farmers ultimately accrue real benefits from these WTO negotiations mustbe the over-riding goal of U.S. negotiators in the Doha trade talks.

      In order torealize that goal, U.S. trade negotiators and Congress would do well to takeinto account the dismal prospects for U.S. cotton under the current proposaland rethink the current concept of giving up more than we gain.

      That sentimentwas communicated to President George Bush in a June 1 letter from major agriculturegroups, including the National Cotton Council, that reiterated the concerns ofU.S. agriculture regarding the current WTO negotiations and the need for thenegotiations to yield real benefits for American farmers.

      In the letter,the groups noted that other countries have so far been unwilling to seriouslyconsider the market access reforms suggested in the U.S. proposal andconcluded, "If negotiators are forced to scale back the level of ambition fromthe U.S. proposal on agricultural market access in order to reach an agreement,the level of ambition in cutting trade-distorting domestic support must becommensurately reduced from the U.S. proposal."

      The full TexasTech analysis, "U.S. Proposal for Doha Round WTO Negotiations: What's atStake for the U.S. Cotton Industry," is available at: http://www.aaec.ttu.edu/CERI/policy/

      A powerpointpresentation discussing the TTU CERI results is also available and providesadditional insight into the study's results. Those interested in viewing thepresentation can access it from the PCG website at: www.plainscotton.org

2005-cropUpland Cotton Average Price
Received by Growers Through April 2006

Friday, June 2, 2006                                  By Shawn Wade

      According toinformation released May 31 by the USDA National Agricultural StatisticsService Upland cotton marketed during the month of April totaled 516,000 baleswith an average price received by growers of 48.6 cents per pound.

      April marketingswere down considerably from the number of bales marketed during the month ofMarch but did push the cumulative marketings for the year to 13.044 millionbales. The preliminary mid-month price reported for May 2006 was 47.2 cents perpound.

      Based on thesenumbers the 2005 Upland Cotton Weighted Average Price calculated through April2006 stands at 47.82 cents per pound. Using this figure the 2005Counter-cyclical payment rate should be the maximum 13.73-cent payment rateallowed by current program rules.

      The calculated2005 Weighted Average Price is 4.18 cents below the 52-cent threshold whereCounter-cyclical payment rates begin to decline.

      The 2005Counter-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 2005marketing year. The 2005 cotton marketing year began on August 1, 2005 and endsJuly 31, 2006.

      Thefollowing table shows the average price received each month by farmers and thecalculated weighted average price based on estimated cumulative marketings andprices reported by the National Ag Statistics Service through April 2006.

Monthly Average Price Receivedfor

2005-crop Upland Cotton ThroughApril 2006

(Weighted by Marketings)

 

Marketings

Prices

 

(000's of Running bales)

(cents/Lb.)

 

Monthly

Cum.

Monthly

Weighted

August

1,233

1,233

42.10

42.10

September

518

1,751

44.30

42.75

October

911

2,662

48.50

44.72

November

1,831

4,493

48.50

46.26

December

3,264

7,757

47.90

46.95

January

2,420

10,177

48.60

47.34

February

1,182

11,359

49.00

47.51

March

1,169

12,528

50.40

47.78

April

516

13,044

48.60

47.82

May

na

na

47.20*

na

Source: National AgriculturalStatistics Service; * = preliminary

 

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