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No more Mr. Nice Guy for U.S. cotton industry?

WALLY DARNEILLE right chairman of the National Cotton Council and Sen Jerry Moran RKansas second from right visit with Kansas cotton producers Thomas L Lahey left and Kenton A Dunn at the NCC Economic Outlook Session at its annual meeting Sen Moran was the keynote speaker for the event
<p>WALLY DARNEILLE, right, chairman of the National Cotton Council, and Sen. Jerry Moran, R-Kansas, second from right, visit with Kansas cotton producers Thomas L. Lahey, left, and Kenton A. Dunn at the NCC Economic Outlook Session at its annual meeting. Sen. Moran was the keynote speaker for the event.</p> <p> </p>
&ldquo;For years the industry remained silent on Chinese policy because the Chinese were our largest customer while its government was rebuilding its stocks,&rdquo; said Wally Darneille, outgoing chairman of the National Cotton Council, speaking at its annual meeting in Memphis, Tenn., Feb. 8.

For years, the U.S. cotton industry worked quietly at the World Trade Organization and in Washington to defend itself against charges the U.S. government unfairly subsidized its farmers and exporters.

Cotton industry leaders refrained from talking much about subsidies and unfair trading practices by other governments because they were busy trying to resolve complaints like the WTO case brought by Brazil. But those days may be coming to an end.

“For years the industry remained silent on Chinese policy because the Chinese were our largest customer while its government was rebuilding its stocks,” said Wally Darneille, outgoing chairman of the National Cotton Council, speaking at its annual meeting in Memphis, Tenn., Feb. 8.

“But when the Chinese government implemented multi-year policies which supported their farmers at almost twice the current world price, and limited our exports to China through their quota system, the industry had a change of heart.”

Darneille, a cooperative official from Lubbock, Texas, said the change has been building for some time. After dealing with the Brazil’s WTO case for nearly 10 years, the U.S. cotton industry was hit with a countervailing duty case from Peru in 2012. The Council helped defeat that claim in late 2013.

Last October, after the U.S. government signed a memorandum of understanding with Brazil, Turkey decided to file an anti-dumping investigation against U.S. cotton. While the claim must be answered by individual companies, the NCC has filed as an interested party and is providing background briefs.

United voice

“We realized that if the U.S. cotton industry does not speak in a united voice to object to the way other countries flaunt WTO rules while it seems that we alone pay attention to those rules in our agricultural policies, then those other countries’ policies threaten our very existence,” said Darneille.

“This year, during the Council’s annual trek to (WTO headquarters in) Geneva, Mark Lange and John Maguire were able to shift the global discussion from simply criticizing U.S. policies to looking realistically at the policies of countries like China, India, and Brazil.”

Darneille was delivering his last speech as chairman of the NCC, and Dr. Lange, the Council’s president and CEO, and Maguire, its senior vice president, Washington Operations, retired during the annual meeting. But the Council’s new leadership is expected to continue to stand up against predatory trade practices by other countries.

“This will be a multi-year fight,” said Darneille, a cooperative official from Lubbock, Texas, “but we are already seeing USTR (U.S. Trade Representative) begin to take a more assertive stance on cotton policies.”

He covered a number of topics in his chairman’s report, including the Council’s efforts to assist producers with implementing the provisions of the Agricultural Act of 2014.

“I used to think that was a simple concept, a routine matter of just putting into practice what had already been decided,” he said “Implementation has turned out to be a gargantuan task which may well overlap with the writing of the next farm bill (in 2018). 

Fundamental changes

“There were so many fundamental changes in the cotton portion of the farm bill that the relevant government agencies simply did not have the systems they need. With the STAX program, we first had to try to educate the industry about what was in the bill.”

The Council held 74 farm bill education meetings attended by 6,400 people from all over the Cotton Belt. The first round of meetings last spring laid out the basics, and the second round of meetings last fall gave attendees an update on new provisions, and provided some concrete examples to help producers make decisions about how to structure their coverages.

“Working together with ACSA (American Cotton Shippers Association), NCTO (National Cotton Textiles Organization), ACP (American Cotton Producers), and other grower groups, we succeeded in getting policymakers to understand the importance of getting provisions of the bill implemented in time for the 2015 crop,” said Darneille. 

“The APH adjustment was particularly important to growers in the Southwest, where climate conditions make production so variable. Payment limitations have become a very important issue under the new farm bill. With world prices under so much pressure from the burdensome world stocks caused by the cotton support policies of other countries, we now have large marketing loan gains which could potentially impact large and even medium sized producers.”

The Council has been attempting to address the problem by working with USDA on implementation of the payment limit provisions. It also appointed a Committee on Payment Limitations with representatives from the impacted segments of the industry, and a smaller sub-committee chaired by Kevin Brinkley of the Seam.

“Looking forward, several things are clear,” said Darneille. “Budget pressures will not abate, either at the government level or the NCC level due to acreage reductions. So we will continue to work on preserving appropriations, avoiding dangerous amendments, and helping technology move us to higher yields of more valuable cotton that will sustain our industry. 

Yarn forward

“We will cooperate with the National Council of Textile Organizations on preserving a strong yarn-forward rule of origin and ensuring that the terms of the proposed Trans-Pacific-Partnership agreement do not harm the U.S. textile industry. We will fight hard for policies which will not put the U.S. producer at a disadvantage on the world stage.”

He said the U.S. cotton industry has a “great story to tell, and we all need to be involved in telling that story at every opportunity. Congress has had some major shifts, and we need to be active in educating new members.”

To tell that story, NCC staff must have the resources provided by the NCC’s political action committee, the Committee for the Advancement of Cotton, he said.

“Fortunately, we can expect technology to help us move forward,” he noted. “At a recent meeting in Lamesa, Dr. Jane Devers told a group that she expects to see cotton varieties which will yield four plus bales per acre of cotton that has a digital length of 1.25 inches and strength of 38 grams per tex. That will be a quantum leap to more dollars per acre.”

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