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June 2013 Cotton Leader

June 1st, 2013

The U.S. Department of Agriculture (USDA) has announced that, based on the USDA's Agricultural Marketing Service (AMS) Five Year Review of the 1990 amendments to the Cotton Research and Promotion Act, the amendments were successfully implemented and are operating as intended. The Secretary determined it is not necessary to conduct a referendum among producers and importers on continuation of the amendments.
The review, conducted every five years by AMS, is required by the 1990 amendments to the Cotton Research & Promotion Act which made the Cotton Research and Promotion Program (the "Program") mandatory and added importer representation on the Cotton Board. This is the fourth such review conducted by the Secretary since enactment of the 1990 amendments. Each review has concluded a referendum was not necessary. The two major changes to the Program made by these amendments were the elimination of producer assessment refunds and the establishment of an assessment on imported cotton and the cotton content of imported products. The USDA announcement noted there is a general consensus within the cotton industry that the Cotton Research and Promotion Program and the 1990 amendments to the Program are operating as intended. The announcement noted that written comments, economic data, and results from independent evaluations supported this conclusion. The most recent independent economic Analysis, conducted by Forecasting and Business Analytics, LLC in 2011, concluded the Program generates significant positive returns for U.S. cotton producers and importers of cotton products, as well as generating benefits for U.S. taxpayers. The Forecasting and Business Analytics, LLC economic analysis is available at Study%20April%202011.pdf

New crop cottonseed supplies available to dairies are expected to remain tight as U.S. farmers swap cotton acres for corn and soybeans across many parts of the Cotton Belt. For dairy producers, reduced and delayed cotton planting means potentially tighter supplies and slightly higher prices for new crop cottonseed. Despite tight supplies, there is still a strong case for keeping cottonseed in dairy cow rations. "Whole cottonseed combines protein, fiber and energy, and works well with other ration ingredients to deliver a balanced and cost-effective ration," says cottonseed merchant Larry Johnson of Cottonseed LLC, La Crosse, Wis. Cotton Incorporated suggests producers get in touch with their cottonseed merchant or feed dealer to check prices, or submit a request for cottonseed quotes through its Web site:

The latest Cotton Incorporated television advertising campaign officially launched in April. The thirty and fifteen second commercials featuring Hayden Panettiere follow the twenty-three-year-old actress in stylish cotton apparel through a series of vignettes while her country interpretation of "the touch, the feel of cotton" song plays in the background. Remembering cotton's rise in price two years ago, and eventual loss of market share from
synthetic fiber substitution, Cotton Incorporated purposefully selected her wardrobe to highlight cotton as an ingredient in high-end designer apparel. They also wanted to remind consumers that real denim is made fromcotton. The commercial was shot in Nashville, Tennessee and Hayden commented, "Off the set, I'm basically a blue jeans kind of girl – as long as they're cotton of course." Preliminary Harris tracking results for Hayden's commercial are very positive. "After only two weeks on air, the commercial earned 29% visual recognition among our target audience, women 18 to 34 years of age," says J. Berrye Worsham, President and CEO of Cotton Incorporated. This number is greater than the first quarter recognition data for the Miranda Lambert commercial which scored 16% visual recognition after her first three months on air. "We want that market share back and Hayden is helping," concludes Worsham.

USDA is seeking nominees to fill 19 member and 19 alternate member positions on the Cotton Board for vacancies in Alabama, Florida, Georgia, Kansas, Missouri/Illinois, New Mexico, Oklahoma, South Carolina, Tennessee/ Kentucky, Texas, Virginia, and for importers with terms ending December 31, 2016. Members and alternate members, as well as the consumer advisors, serve staggered three-year terms with no term limits. The CPOs in respective states and the CIOs will caucus to nominate two qualified persons for each member and alternate member position. The Secretary shall select members and alternates from the CPO and CIO nominations. USDA welcomes membership on industry boards that reflects the diversity of the individuals served by the programs.

Economic update
Cotton prices experienced volatility over the past month. After following a downward trend in the second half of May, New York futures rebounded rather sharply in June. From prices near 85 cents/lb, values for the July contract fell below 80 cents/lb before bouncing back to levels close to 90 cents/lb. The most-actively traded December contract followed a similar pattern, declining as low as 82 cents/lb before climbing to values around 90 cents/lb. A Index prices dropped from around 93 cents/lb to less than 89 cents/lb prior to increasing 95 cents/lb. Chinese prices (CC Index 328) have been stable near 143 cents/lb. Revisions to trade figures in the latest USDA report, which featured changes to Chinese imports and global exports, highlight a principal uncertainty that has been facing the cotton market for the past couple years. With a large proportion of recent Chinese harvests flowing into the government's reserve system, a major question for markets has been how will the Chinese government choose to supply mills – through releases from reserves or through imports. Ending stocks are forecast to decline outside of China in the coming crop year, and any upward revisions to 2013/14 trade figures in the next few months would pull those stocks tighter and could be expected to result in higher prices. Farther into the future, the price outlook is less certain. At a recent conference, ranking officials from the National Development and Reform Commission (NDRC), the organization charged with managing cotton policy, and the Chinese Cotton Association (CCA) indicated that reform efforts were underway and that a new set of cotton policies could be instituted in the 2014/15 crop year.

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