FarmPolicy

September 18, 2019

Cotton Issues Persist

Recall that back in December, at a House Agriculture Subcommittee hearing on the current state of the U.S. cotton industry, Shane Stephens, the Vice Chairman of the National Cotton Council, explained that: “Current stocks-to-use ratios stand in stark contrast to historical stocks that generally ranged between 50 and 60 percent of total use. The recent increase in stocks was the direct result of policies in place in China for the 2011 through 2013 crops. During those years, China supported its cotton farmers by purchasing vast amounts of its production into government reserves at prices well above the world market.”

Rep. Rick Crawford (R., Ark.), the House Ag Subcommittee Chairman on General Farm Commodities and Risk Management, noted at the December hearing that, “In the not too distant past, we lost to China most of what was once the largest manufacturing sector in America, our textile industry. Now, I believe we are in grave danger of losing the vast majority of our production to China, India, and other countries that are employing anticompetitive trade practices that no American farmer can match.”

Lucy Craymer reported in Friday’s Wall Street Journal that, “Global cotton prices have plunged in recent weeks as speculation mounts that China is getting ready to sell some of its 11 million-metric-ton stockpile—enough to make 10 billion pairs of jeans.

“Commodity analysts expect China to conduct a cotton auction in the next few months, its first since the end of August.

“While the government sells nearly all of its cotton at home, it is such a big player in the market that unloading a chunk would depress global prices by reducing how much foreign cotton Chinese businesses buy. China holds about 60% of the world’s cotton stockpiles and is responsible for slightly less than a third of global consumption.”

The Journal article added that, “The expectation of a new round of selling by China has pushed down prices on the Zhengzhou Commodity Exchange to their lowest levels since 2004. Meanwhile, the benchmark ICE Futures U.S. exchange has cotton trading near its lowest since 2009, dropping about 12% since the beginning of the year; the May contract settled at 56.41 cents a pound on Thursday.”

Ms. Craymer explained that, “One factor putting pressure on China to sell is that cotton deteriorates, so it can’t simply hold supplies for years in hopes the price will rise.

The stockpile dates back to a government program introduced in March 2011 to improve the livelihoods of domestic cotton farmers by setting a floor for prices. But with global cotton prices dropping, China chose to store the cotton rather than sell it on the global market.

The result, according to the USDA, was a doubling of the world’s stockpiles, which further depressed prices. USDA estimates of cotton stockpiles are slightly above China’s.”

The Journal article added that: “China has since ended the price-support program for cotton. But that won’t help it with its huge stockpile—which is enough to make three times more jeans than the total sold globally in 2015, according to Euromonitor.”

Lower cotton prices for U.S. producers, and international policies, such as those implemented by China, have been an impetus for cotton farmers to ask the USDA to “use legal authority provided under the 2014 Farm Bill” to provide additional federal assistance to struggling cotton farmers.

So far, Agriculture Secretary Tom Vilsack has indicated that the USDA does not have the authority to make this change.

A backgrounder on the cotton Farm Bill issue is available here.

Keith Good

Secretary Vilasck Discusses GMO Labeling

Categories: Biotech

As the Senate considers GMO labeling legislation for food products, U.S. Secretary of Agriculture Tom Vilasck addressed the issue Friday at the Commodity Classic convention in New Orleans.

Mike McGinnis reported yesterday at Agriculture Online that, “In a reporters briefing Friday, at the Commodity Classic, Secretary Vilsack says that he is proposing mandatory labeling because in order to get anything done, 60 votes are needed in the U.S. Senate. ‘That’s the key,’ Vilsack says. ‘If you don’t get this requirement, then you create a situation where every company could decide for itself to do something, which could create confusion. Plus, you don’t want state laws that could potentially be at odds.’

“Vilsack wants to give the food industry some time to create a label. ‘You give the food industry some time to figure out how flexible the label needs to be, whether it’s a toll-free number for consumers, a website, a smart label, or something else. And then you use that time to educate people that this label is going to be available, and this is an opportunity for them to know about the food that they are buying.’

“Secretary Vilsack believes that the Senate would pass mandatory labeling if it was packaged this way. ‘I think the House will give it great consideration and the president will sign it,’ Vilsack says.”

DTN Ag Policy Editor Chris Clayton reported yesterday that, “On biotech labeling, Vilsack said he’s worried that ‘chaos ensues’ if Congress doesn’t act on biotech labeling legislation now in the Senate. His main goal is to ensure a bill gets 60 votes in the Senate that conveys consumers’ right to know what’s in their food without giving the wrong impression about the safety of biotechnology. He said food costs would rise and consumers could be unnecessarily concerned about their food if every state is allowed to create a different labeling scheme for foods with ingredients from biotech crops.

“‘I’m here today to say unequivocally they are safe to consume,’ he said. ‘There is no risk associated with them, and we need to make that clear to the consuming public.’

“Beyond generating fears among consumers, farmers and the food industry should be proud of the technology, reflecting the innovation of the country. ‘It’s something that’s going to allow producers to be more productive, but to do so with less inputs. It’s going to allow the producer to be an even better environmental steward,’ Vilsack said. Recalling a conversation he had with a biotech company executive, he said, ‘You need to aggressively market this not only to producers, but also to consumers. We need to be extraordinarily proud of American agriculture.'”

Keith Good