NCC Provides Details of US/Brazil Framework
Agreement In WTO Cotton Dispute

Friday, June 25, 2010                                 By Shawn Wade

      The big news late last week was that U.S. and Brazil trade negotiators had found common ground on a framework agreement that suspends the threat of Brazilian trade sanctions.

      This was good news for the cotton industry, which will have the time to deal with the issue within context of overall U.S. farm policy, and for other U.S. industries that faced the possibility of trade sanctions being imposed by Brazil.

      Officials at the National Cotton Council (NCC) note that the agreement indicates that both sides agree that a mutually agreed outcome in the next farm bill would provide the best opportunity to create a long-term settlement of the dispute.

      "The framework agreement between the U.S. and Brazil reflects a significant effort by the Administration to forestall the imposition of damaging retaliatory trade action by Brazil while preserving the normal policy process in the United States," NCC Chairman Eddie Smith stated. "It was a difficult agreement to negotiate, and we commend the Administration for its determination to find common ground with Brazil."

      NCC Chairman Eddie Smith was clear in a conference call with cotton industry groups June 23, to point out that the framework agreement is NOT a final solution to the nearly decade long Brazil-U.S. trade dispute. In fact, both the U.S. and Brazil characterize the agreement as providing a process and actions to occur during a "transition" period that would end with enactment of the 2012 farm bill.

      As long as the Framework is in place, Brazil agrees not to impose trade sanctions. However, Brazil reserved its rights to terminate the framework agreement at any time.

      The Framework also includes plans for quarterly meetings between the United States and Brazil to discuss progress in the 2012 farm bill debate.

      Smith explained to the industry groups that when and if a final resolution is reached it would only occur when the Brazilians are satisfied that the U.S. has done enough to eliminate or modify U.S. support programs they believe harm the competitive position of the Brazilian cotton industry.

      A Brazilian government press release indicated that the basis for the discussion on US cotton policy would be an annual limit on trade distorting cotton subsidies that would be "significantly lower" than the average for the years 1999-2005 (the years covered by the WTO dispute).

      The Framework also provides benchmarks for changes to the US export credit guarantee program that would affect all participating US commodities.

      According to the NCC, Brazil also said the export credit guarantee changes would focus on a reduction in the length of the guarantees (maximum length of 16 months) along with potential increases in risk-based premiums to be charged. The increase in premiums would be tied to the overall level of use of the export credit guarantee program.

      "We will work with Congress and the Administration on the 2012 farm bill," Smith stated, "in order to develop cotton policy that will continue to provide the safety net needed by U.S. farmers while helping assure our trading partners that U.S. cotton programs do not cause unfair trade distortions in the world cotton market."

 

June 25 Upland Cotton
Adjusted World Price (AWP) Announcement

      NOTE: USDA is determining this week's loan repayment rate and associated adjustments based on those days for which sufficient old crop (current) price quotes are available. Beginning Friday, June 25, and for the remainder of the current crop year, USDA expects to base program determinations on new crop (forward) prices.

      The Department of Agriculture's Commodity Credit Corporation announced the adjusted world price (AWP) for Strict Low Middling (SLM) 1-1/16 inch (leaf grade 4, micronaire 3.5-3.6 and 4.3-4.9, strength 25.5-29.4 grams per tex, length uniformity of 79.5-82.4 percent) upland cotton (base quality), adjusted to U.S. quality and location, the fine count adjustment (FCA), the coarse count adjustment (CCA), and the loan deficiency payment rate that will be in effect from 12:01 a.m., Eastern Time, Friday, June 25, 2010, through midnight, Eastern Time, Thursday, July 1, 2010.

      The next announcement of the AWP, FCA, CCA, and LDP rate for upland cotton will be on Thursday, July 1, 2010, at 4:00 p.m., Eastern Time.

 

Upland Cotton Adjusted World Price Calculation

Effective June 25-July 1, 2010

Adjusted World Price, SLM 11/16                77.84 cents*

Fine Count Adjustment ('09 Crop)                       0.71 cents

Fine Count Adjustment ('10 Crop)                       0.81 cents

Coarse Count Adjustment                                     0.00 cents

Marketing Loan Gain Value                             0.00 cents

      *No Adjustment Made Under Step I

 

This week's AWP, FCA, and CCA are determined as follows:

      Far East (FE) Price                                           94.88

Adjustments:

            Avg. costs to market                                    -13.74

            SLM 1-1/16 inch cotton                               - 3.30

            Sum of Adjustments                                   -17.04

ADJUSTED WORLD PRICE                              77.84

 

                                                          2009         2010

Loan Schedule Premium for:

      SM 1-1/8" Cotton                              1.55                1.65

 

Market Premium for SM 1-1/8" Cotton:

FE Fine Count Price                                                      95.72

FE Price                                                               -94.88

Less Market Premium

(cannot be less than zero)                               0.84         0.84

FINE COUNT ADJUSTMENT                 0.71         0.81
(cannot be less than zero)

 

FE Price                                                               94.88
FE Coarse Count Price                                                NA

      Adjustment to SLM

      1-1/32 inch cotton                                              -5.30
COARSE COUNT ADJUSTMENT                           0.00
(cannot be less than zero)                        

 

      If sufficient data are not available to determine a CCA for the week, regulations governing the CCA require that the latest available CCA will remain in effect. Thus, the current CCA of 0.00 cents per pound will remain in effect through midnight, July 1, 2010.

      The Food, Conservation, and Energy Act of 2008 provides that the AWP may be further adjusted if the Secretary determines adjustment is necessary to 1) minimize potential loan forfeitures, 2) minimize accumulation of Government stocks, 3) ensure free and competitive marketing of upland cotton, both domestically and internationally, and 4) ensure an appropriate transition between current-crop and forward-crop price quotations. No adjustment has been made this week.

      Because the AWP for the period exceeds 52.00 cents per pound, which is the base quality loan rate, the loan repayment rate during this period is equal to the loan rate, adjusted for the specific quality and location plus applicable interest and storage charges.

 

THE HAND THAT FEEDS U.S.

http://www.thehandthatfeedsus.org/

 

NCC Information Portal To Help Growers
Compare USDA Conservation Programs

Friday, June 18, 2010                           from Cotton's Week

      The NCC created "Conservation in Cotton Production," a portal on its website to help its producer members determine which federal conservation programs would be beneficial to their operations and to better understand the programs' requirements and enrollment process.

      "With conservation programs expected to account for almost 30% of total spending on agricultural programs, the National Cotton Council is encouraging producers to learn more about the various programs available," said NCC Chairman Eddie Smith. "The Council believes that quality conservation efforts not only improve the environment but can improve a producer's bottom line."

      The portal can be accessed from the NCC website at http://www.cotton.org/econ/govprograms/conservation-programs.cfm The NCC site provides a central information venue with conservation program fact sheets and short educational videos outlining the various conservation programs.

      The videos contain commentary from Bruce Knight, former chief of USDA's Natural Resources Conservation Service, along with cotton producers who have utilized the different programs.

      The portal also will be continually updated with information ranging from additional educational videos to the latest conservation news regarding sign-up deadlines and new programs offered through USDA. The NCC also is exploring adding a "Fieldprint Calculator" tool that would allow growers to see how their conservation performance compares to national and state averages.