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Articles from 2003 In February

Lackluster world economies continue to hamper U.S. export growth

At the same time, U.S. ag exports totaled $53.3 billion in 2002, up less than $1 billion from the $52.7 billion posted in 2001. For fiscal year 2003, exports are expected to rise by $3.7 billion.

According to Carol Whitton, coordinator for the Economic Research Service, and Ernest Carter, coordinator for the Foreign Agricultural Service, most of the year-to-year growth in export value is expected to come from shipments of corn and soybeans, with "modest gains" in wheat and meat.

Since November, prospects for corn exports have been reduced because of increased foreign competition, particularly from Argentina and China. The stronger forecast for soybeans reflects a large increase in demand from China, particularly for beans to be crushed for oil.

The forecast U.S. agricultural surplus is $14, the largest since fiscal year 1998.

The U.S. and world economies "continue to be plagued by uncertainty," the analysts note, and this country’s Gross Domestic Product is expected to be unchanged in 2003. World growth, however, is projected to rise by over 2 percent, compared to 1.6 percent in 2002.

Lackluster growth

"Until some of the uncertainty can be resolved, growth in the world and the U.S. is likely to continue lackluster," they say.

Economic growth in all developing countries is expected to increase more than 4 percent this year, and in Asian developing countries by more than 5 percent. Growth rates in China and India are forecast at more than 7 percent and near 6 percent, respectively.

"Serious problems" persist in Latin America and Argentina, the latter in its fifth year of recession, with a 75 percent depreciation of its currency against the U.S. dollar since Jan. 2002.

While the dollar remains "relatively strong," it has depreciated against some currencies, chiefly the European Community’s Euro and the Japanese Yen. But, "no precipitous drop in the dollar is expected; rather, a slow decline over the rest of the year and into 2004 is likely against some currencies. With some decrease in the dollar, U.S. agricultural exports are expected to become more competitive in world markets."

Looking at specific forecasts:

Grain and feed exports are pegged at $16.1 billion, with reductions for wheat and feed grains partially offset by gains for value-added products.

Coarse grain exports are expected to be down 4.2 million tons to 52.6 million, valued at $6.2 billion. A weaker outlook for corn is due to continued strong competition from China, better prospects for South American crops, and large global supplies of feed quality wheat. Compared to 2002, little change is expected in corn export volume, but average prices will be higher. The sharply lower sorghum crop will reduce export volume.

Rice exports will be a record 3.8 million tons, but weaker average unit prices will leave the value virtually unchanged. The large U.S. crop and resulting lower prices support increased export volume, and global demand for rice remains strong.

Oilseeds and products are projected to be up, but lower average unit prices will limit value to about $6 billion. Continued strong sales to China and other countries support the gains, but increased competition from South American growers is eroding the U.S. share of global trade, estimated at 35 percent for the 2002/03 marketing year. Soybean shipments are forecast to remain below last year’s record, but higher average unit values will bring somewhat higher total value.

The outlook for livestock, poultry, and dairy product exports remains unchanged at a record $12.4 billion, with beef/pork/poultry contributing most of the increase in value.

Also unchanged is the outlook for horticultural product exports, including fresh and processed fruits, at a record $11.3 billion. Continued economic weakness in Japan, a relatively strong dollar, ongoing trade disputes with Mexico, and growing competition from China are among key factors restraining even greater export expansion for these products. The outlook for fresh and processed vegetables is for $3.1 billion, and remains positive for tree nuts.

Import gains

Growth in imports by the U.S. is largely in horticultural products, chiefly wine and malt beverages, fruits, and vegetables.

Despite moderate economic growth in the U.S., the dollar is expected to remain strong with respect to currencies of many importing countries; "thus, the foreign purchasing power of U.S. consumers will stay high. But, prospects for oil supply disruption may result in even higher energy prices, the immediate effect of which would likely be to reduce consumers’ appetite for imports, especially high value products."

Bollgard II may take worms from cotton equation

In tests at four North Carolina locations in 2002 during a heavy worm year, Bollgard gave researchers almost complete control of bollworms, John van Duyn, North Carolina State Philip Morris professor of entomology, told a group of growers at the recent Southeast Cotton Conference sponsored by the Southeast Farm Press. "We are entering the bug era of pest management."

The new Monsanto technology contains two Bt toxins, Cry1Ac plus Cry2Ab. Together, the toxins express high levels in the plant throughout the season, including the flowering parts. Monsanto received full regulatory clearance for Bollgard II in 2003. Limited seed supplies will be available this year.

Van Duyn also sees the possibility for the Environmental Protection Agency to reduce refuge requirements.

Under "acid-test conditions," Bollgard II virtually eliminated boll damage from bollworms, whether treated or untreated, van Duyn says. The treated Bollgard II plots saw less than 1 percent damage over four locations in 2002. The untreated plots saw less than 4 percent damage. One entomologist dubbed 2002 the "Year of the Worm."

The take-home message is, "Farmers are not going to have be concerned about caterpillar pests," van Duyn says.

Bollgard is also effective against budworms, beet armyworms, fall armyworms and loopers. In tests in Alabama, researchers, along with Monsanto, suppressed fall armyworm damage tremendously over both conventional and regular Bollgard.

In his tests with colleagues J.R. Bradley, Jack Bacheler, Dan Mott and graduate student Ryan Jackson, van Duyn found very little difference in yields between treated and non-treated Bollgard II.

While the second-generation Bollgard will have the same refuge requirements that growers have been following for the past years, van Duyn would like to see that refuge decline when we get Bollgard II.

A couple of factors influence resistance management, van Duyn says. One is the number of moths that don’t come from Bollgard cotton in the environment. The other factor is the number of moths produced out of Bollgard II or Bollgard. "Our refuge is probably not doing much" in the first factor.

Sprayed twice, Bollgard II eliminated moths. "This is an opportunity to perhaps convince EPA to reduce the refuge requirements," van Duyn says.

Cotton Board promotes field staff members

THE COTTON BOARD has named Johnny Pitts, director, field services-east and Michael Kelley, director, field services-west. Both will report directly to William P. Crawford, president and CEO of the Memphis-based Cotton Board.

Leah Reed, southwest field manager, will report to Kelley and Mark Bankston, southeast field manager, will report to Pitts.

“Mike and Johnny have strong relationships with our board, as well as with other industry association representatives in their respective areas, and this change will allow them to more directly nurture those relationships,” said Crawford.

Cotton market outlook: Market looking good for 2003 cotton

As Joe Nicosia wrapped up an outlook on the U.S. and world cotton situation recently, he turned up the giddy meter a couple of notches when he stated, “If I were a cotton producer, I'd be planting cotton.”

It was music to the ears of most cotton producers in the room, although the CEO of Allenberg Cotton Co. in Memphis warned that “10 things could change between now and harvest.”

Not the least of which is U.S. farmers planting cotton fence-row to fence-row or a bumper crop in China. But as of now, things are definitely looking up for cotton.

Nicosia, speaking on market conditions at the Market Outlook Conference in Memphis, said there is simply not enough acreage and production forecast in the world to satisfy demand for the natural fiber.

As a result, there is a projected deficit between foreign production and consumption (excluding the United States) amounting to over 14 million bales, which “bodes well for U.S. exports. Where's that cotton going to come from? A lot of it is going to come from this room.”

In addition, prices in other commodities have also risen, “so it's not easy for cotton to turn around and grab all the acreage it wants.”

According to Nicosia, the foreign production deficit widened significantly in 2002, when, in response to extremely low prices in 2001, world area dropped from just under 84 million acres to just under 78 million acres. “That drop was one of the largest drops we've ever seen,” he said. “In response to that, world production went from 98 million bales to 88 million bales.

“Because of that, we've had a tremendous drawdown of stocks around the world. Prices have recovered, and we're estimating 81.3 million acres for next year, which will lead us to a world crop of 93.6 million bales.”

Adding 39.1 million bales of beginning stocks and subtracting 97.5 million bales in consumption results in net world ending stocks for 2003-04 of 35.1 million bales.

“The world situation is extremely bullish, even troublesome,” Nicosia said. “Cotton prices and the net return to the grower are extremely favorable. With the chances of something else going wrong in the world and prices shooting even higher, if I were a grower, I'd be planting cotton.”

Nicosia pointed out that in 2000 “we had roughly the same acreage predicted for the year ahead. But we were only able to get 88.7 million bales of production that year. I can guarantee that the world will use a lot more than 88 million bales next year. If we have another crop like we did in 2000, we're going to be talking about $1.50 cotton.”

Allenberg projected 2003 U.S. cotton acreage at 14.5 million acres, compared to the National Cotton Council's estimate of 14.05 million acres. “We believe the acreage will respond a little more favorably all around the United States,” Nicosia said.

Allenberg projects 2003 U.S. cotton production will be roughly 17.6 million bales and domestic consumption will continue to slide down to 7.55 million bales. Adding exports of 11 million bales produces ending stocks of 5.6 million bales.

“If you plug in the NCC's production number and our usage number, carryout drops to 5.07 million bales, which is a very attractive number from a price standpoint,” he added.

Nicosia projected that December futures prices are going to rise toward a range of 63 cents to 68 cents.

World cotton use has been expanding steadily over the last five years, but the potential to expand markets for U.S. cotton producers is a lot like robbing Peter to pay Paul.

“The United States has lost roughly 4 million bales of consumption over the last five to seven years,” Nicosia said. “That's important to you because the textile industry here is the best customer there is for U.S. cotton. They're the best payer. It's a captive market. So your best customer is in a shrinking marketplace getting squeezed out by competitors around the world.”

Applying much of the pressure is China, which has increased U.S. textile apparel imports by 125 percent over the last few years,” according to Nicosia. “It comes into our country and crowds us out one for one for U.S. consumption. That's why textile companies are going bankrupt.”

On the other hand, what U.S. raw cotton producers are losing in the domestic market, they are gaining in the export market. Again, China looms as the biggest market, where fashion-conscious citizens are forsaking the drab uniforms of their past with the latest in “Western” wear.

“China's consumption has absolutely exploded,” Nicosia said. “If anything, people are underestimating the consumption in China. Some of our estimates are too scary to even say. The numbers look foolish because they're right off the chart.”

Even conservative estimates indicate that China's cotton producers can't meet demand. “Over the last five years, China has had a 2 million- to 5 million-bale deficit every single year,” Nicosia said. “That equates to somewhere between a 13 million- and 18 million-bale drawdown in Chinese stocks over the last four years, not counting what has been brought in under imports.”

At one time, it was estimated that China had close to 20 million bales in government-held stocks, which weighed heavily on prices in the late 1990s.

“As Chinese consumption continues to accelerate, it puts more pressure on this particular deficit,” Nicosia said. “This deficit is what is driving world prices.”

Next year, the deficit will again be under extreme pressure, noted Nicosia. “China will increase production substantially, but because of the rate of acceleration of consumption and because they are so behind the curve, there's no way they're going to catch up in the short term. They will remain a massive importer in the near future.”

Cotton prices are closely tied to China's import status, Nicosia noted. “China acts as a residual buyer. They take up all the excess supply around the world. When they remove those from the marketplace, that removes all the aggressive sellers out there trying to market their cotton. When you remove the aggressive sellers, all of a sudden, the market tries to go to equilibrium.

“In 2003, we believe China is going to buy somewhere near 2.5 million bales and prices will recover,” Nicosia said.

The conference was sponsored by the Ag Market Network and Bayer CropScience.


Dunavant 'pumped up' over cotton exports, prices

Dunavant, speaking at the 2003 Midsouth Farm and Gin Show Exhibit in Memphis, said the world’s dwindling cotton carryover and strong demand makes for “an exciting time for cotton merchants, both in the United States and internationally. Once again, the excitement emanates from China becoming an aggressive player in the world. World numbers are dramatic.”

The merchant noted that world cotton carryover, which started out at 46.6 million bales in 2001/02 will decline to 38 million bales in 2002/03. “That is a dramatic drop of over 8 million bales in one year. In two years, the world carryover will have dropped 10.2 million bales. That’s why we are seeing cotton prices where they are today.”

In 2002/03, China produced a huge crop of 22.5 million bales, “but they’re going to consume 27.5 million bales of cotton, and their carryover is going to drop from 12.8 million bales to 9.4 million bales.

“As of yesterday’s export report (Feb. 27), China had bought 1.125 million bales of cotton from the United States. Next week’s report will have them at 1.2 million bales. They bought more cotton last night, which will be in the following week’s report, meaning they will end up buying between 1.5 million and 1.6 million bales this season.

“They are aggressive,” he said. “Yes, they are in the WTO. Yes, they have TRQs of right at 4 million bales. But China is not importing cotton because of WTO. That’s not how they play. They are importing cotton because they need it very badly for their textile industry.

“In addition, Mexico has already bought over 2 million bales of U.S. cotton this marketing year. Turkey has bought 960,000 bales and we have them on our charts to buy slightly over 1.3 million bales of U.S. cotton.”

An impending war with Iraq “could have some impact, both positive and negative,” Dunavant said. “Two days ago, the U.S. government gave some concessions to the Turkish textile industry on tariffs and duties on their goods coming into the United States. But war with a neighboring country could impact their cotton consumption in the short term.”

Dunavant also noted that Australia, which produced 3.2 million bales last year is expected to only produce 1.4 million to 1.5 million bales this year.

U.S. growers could be in a great position if they end up holding an excess supply of cotton – a supply which the rest of the world will desperately need.

Dunavant explained that while world production will rise in 2003/04 due to higher prices, “we should also see world consumption next year increase from 96.2 million to 97.7 million. World carryover drops again to around the 36 million bale level.

“Again that’s positive for prices. Those numbers have got to get us to sit up and take note. Cotton prices for new crop are not going to head south at the current time.”

China’s production in 2003/04 will also rebound to 25 million bales. “That’s a big crop. But consumption will rise to 28.5 million, a million bale increase. China will continue to put pressure on the carryover and be force fed to be active buyers of cotton in the world. With a 6-million-bale carryover, the United States is going have cotton for sale. Those numbers really pump me up.”

The merchant expects 14.26 acres of cotton to be planted in the United States this coming season and a crop of 17.7 million to 17.8 million bales. “Our carryover is 5.5 million bales and we project exports of 11 million bales.”

As he did at last year’s meeting, Dunavant expressed concern about the quality of the Mid-South cotton crop. U.S. growers have some catching up to do.

“Five years ago, Uzbekistan, which produces 4 million bales of cotton a year, produced the lowest price cotton in the index of foreign growths. Today it is the highest price cotton of the cheapest five growths in the index. They have gone from the bottom to the top. Their government has made a dedication to the improvement of their fiber, the seed, the bagging and doing away with contamination.

“The mills in China would much rather have Uzbek cotton than California/Arizona cotton or any other growths produced in the world. The California/Arizona crop has been a real premier cotton for China over the years.”

On the other hand, “Mid-South and Southeast cotton producers have considerably damaged its reputation in the U.S. and world market because of quality – high micronaire, short staple, lower grades. Some areas produced great quality, but in genera, the Mid-South and the Southeast are the low men on the totem pole.

“This must change. We are going to export approximately 10.8 million bales of cotton, next year. Domestic consumption is drying up, as we all know, so you have to gear yourself for the export market. I understand that yield is the name of the game and I respect that.

“We are able to sell this 41-4-34, 42-4-33 to China. So we are finding a home for your cotton. But it’s sad to see Uzbek cotton selling at 64.5 cents landed China and Memphis Territory and Southeastern cotton selling at 52-53 cents landed China. That is 12.5 cents disparity and a lot of weight from your bottom line.


What's base here is discounted in foreign markets

“Over the last few years, with the collapse of the U.S. textile industry, we’ve gone from consuming the majority of the Memphis/Eastern crop to exporting it. And exporting it is a dramatically different world in terms of cotton quality,” said Ed Jernigan, chairman and CEO of Globecot, Inc.

Jernigan spoke at the Bayer CropScience 2003 Cotton Consultants Meeting in Destin, recently. Globecot computes world prices for cotton on a daily basis.

The change in quality requirements in the export market, “is not something that the farm program was designed for and the market is not prepared for,” Jernigan said. “During a two-year period when quality requirements were changing, we’ve had a lack of leadership coming from the U.S. cotton industry on knowing how to change this.”

A big problem is that the “base quality” for cotton consumed in the United States is considered discounted cotton in the export market.

“There are four basic categories when exporting cotton – discounted, par, premium and platinum, noted Jernigan. “In the discount category is a strict low middling, 1-16th (inch), which in the United States is considered the base quality.”

“The par grade is a middling, 1-3/32, the premium is a middling, 1-1/8 or higher and the platinum is pima cotton quality.

“Historically, the Memphis/Eastern crop has been grown for the domestic mills. So the only thing we exported from the Memphis/Eastern regions were low grades or anything left over. Texas style cottons also went to the export market in the discounted category. Meanwhile, the premium export market has been dominated by the San Joaquin Valley and the California/Arizona cottons.

“When the U.S. textile industry was using nearly 11 million bales, it was mostly focused on the Memphis/Eastern crop,” Jernigan said. “Seventy percent of all U.S. domestic consumption occurred in the Memphis/Eastern crop.”

With the collapse of the U.S. textile industry and the drop in domestic consumption to only 7.6 million to 7.9 million bales, “this left a large Memphis/Eastern crop to move to the export market, something it hadn’t had to do in almost 10 years.

“During the time the Memphis/Eastern crop was basically out of the export markets, the spinners around the world upgraded,” Jernigan said. “The standard became a middling 1-3/32. So it’s now a dramatically different market.”

While it appears the export market wants all the Memphis/Eastern cotton it can get its hand on, Jernigan says the market could dry up.

“Mexico is a very important market for consuming Memphis/Eastern cotton,” Jernigan said. “But Mexican consumption has stalled around 2 million bales. We don’t expect it to grow, in fact, we think it will decline in the future. That means the rest of the Memphis/Eastern crop has to move at a discount.

“This past year, 9.6 percent of the Memphis Territory crop fell below 25 in strength,” Jernigan said. “That was a highly discounted cotton. It was the certification of low strength Memphis Territory cotton against New York futures that’s actually been a drag on the market the last few years.”

There is also a shortage of premium cotton anticipated in the world next year, and Jernigan believes there are opportunities for Mid-South growers to capitalize by raising higher quality varieties.

One example, “There could be something like a FiberMax selling description,” Jernigan said. “This doesn’t come from an organized effort to sell FiberMax internationally, but mills have heard about FiberMax and how good a quality cotton it was.”

Jernigan said that overseas textile mills have begun to demand the brand primarily for its 1-1/8 staple, high fiber uniformity and high strength.

Mills also liked the brand because it proved to be a cheaper alternative to San Joaquin Valley, Australian and Zimbabwean cottons.

For example, “a San Joaquin cotton, 31-3-36 (color/leaf/staple) is offered today at almost 70 cents. A 21 is offered from 68 to 71 cents.

“The FiberMax variety is offered at 62-64 cents. That may seem like a discount to the other grades, but when you get into looking at some of the other Memphis cottons, you see the premium. The typical Texas strict low middling, one-inch cotton is selling right at 50 cents. The Memphis/Eastern strict low middling, 1-1/16, is 50-52 cents.

“There is a premium being paid for the higher grade, and it will accelerate as we go into next season.”

Jernigan noted that the world could end up with sharply depleted stocks of the higher-grade cottons, very soon.

“A major supplier of premium cotton, Australia, will be lucky to produce 1.3 million to 1.4 million bales, compared to 3.2 million bales last year. So you’ve removed from the marketplace almost 2 million bales of typically what is called a strict low middling, 1-1/8 cotton. Other premium cotton suppliers are down too.

“It’s unprecedented in my 22 years in the business,” Jernigan added. “The California/Arizona crop is sold out today. The San Joaquin Valley crop is 80 percent sold today. What that means is that we’ve entered the 2002/03 season with short supplies of the highest, premium-grade cotton.

“The challenges for the Memphis/Eastern grower are to upgrade the quality to what the export market needs.”

Jernigan says one thing that could bring a larger premium for the FiberMax brand would be if mills had access to a “solid, reliable supply” of the quality. “With the San Joaquin Valley, you have a certain amount available every year.”


Three-way partnership insures safety of food supply

“We enjoy a high level of public confidence in the U.S., which comes, in part, from the private sector’s commitment to take its responsibilities seriously,” says Betsy D. Holden, co-chief executive officer of the company and president/CEO of Kraft Foods North America.

A great deal of the credit is also due “strong leadership” in the USDA, Food and Drug Administration, and other government agencies, she said at the annual Agricultural Outlook Forum at Arlington, Va.

Noting that European confidence in the safety of the food supply over the last decade “has suffered,” with significant economic and political consequences, she cautioned “we must never allow the confidence we enjoy here to become a cause of complacency; we should always look for ways to improve safety, while continuing to maintain a healthy, vibrant marketplace.”

The search for an even safer food supply, Holden says, should be guided by five principles in the regulatory process:

  • Regulations should be based on solid risk assessment and consensus science.

    “Doing so will help us to focus scarce resources where they will do the most good, and insure that the protective measures we take are truly meaningful.”

  • Regulatory bodies should provide transparency around the safety assessments they conduct.

“There will be times when complete transparency won’t be possible; genuine trade secrets, for example, deserve protection. But in general, we should seek the fullest transparency possible, because it increases confidence — just as lack of it usually breeds suspicion (whether justified or not).”

  • Government should increase its investment in preventive technology.

    “The more we focus on preventing problems before they occur, rather than detecting them after they’ve happened, the better off we’ll be.”

  • Government must have adequate resources to get the job done.

    “This should include resources not just for research, but also for timely risk assessment and to appropriately train and equip an adequate inspection force.”

  • Everyone should continue efforts to educate consumers on the role they must play to help insure food safety.

    “The most prevalent risks to safety are still in the home,” Holden says. “The more we empower consumers to protect themselves, the greater their trust will be.”

  • Food security is a “critical trust factor, made all the more important by the 9/11 terrorist attacks,” she notes.

    “In response, USDA and the Food and Drug Administration have developed strong food security guidelines for industry, on top of the regulatory protections already in place.”

    Kraft has invested more than $30 million since 9/11 to enhance safeguards, she says, using government guidelines to conduct comprehensive assessments and identify “where we believe the risks are highest.” This resulted in adoption of a range of new procedures governing people, products, and equipment, to address the risks.

    “Each of us — from farmer to retailer — has a part to play,” Holden says. “We must all rely on each other to guard the integrity of our products as they move along the food chain. And it’s government’s role to insure that, across the board, industry is following the USDA/FDA guidelines and implementing all necessary protections.”

    Government, production agriculture, and food manufacturers working together, she says, “can insure that the most prolific agricultural nation on earth becomes even more productive. Together, we can build demand by creating products that truly fit the way people live — and that earn their trust.”


Brazil's in your face questioning disconcerting

Agriculture Secretary Ann Veneman was not exactly overwhelmed with questions when she finished her keynote address to USDA's annual Agricultural Outlook Forum in Arlington, Va., Feb. 20.

As she looked around the audience of 1,100, someone finally asked her about obesity. Then she took a couple of relatively innocuous questions about disaster aid and the European Union's ban on biotechnology products before a young man asked for the microphone.

“My name is Antonio from Brazil,” he said. “We are hoping for the Free Trade Area of the Americas, if it is going to be free. Total support was made in 2001. It was $95 billion. In Brazil, it was a half-billion dollars. What means free trade?”

Although his numbers were more than a little exaggerated, Antonio was criticizing the different levels of government support provided to farmers in the United States vs. that for farmers in Brazil.

Something about the halls of power around Washington must turn normally warm, gracious Brazilians into the “junkyard dogs of agriculture” because Antonio was not the only questioner from Brazil at the forum. Some were not as confrontational, but all challenged U.S. farm policy.

In the forum's sugar and sweeteners session, Marcia Donner Abreu, an official with the Brazilian Embassy in Washington, took exception to an American Sugar Alliance speaker's statement that Brazil was subsidizing its ethanol production and that its frequent currency devaluations amounted to a subsidy for its farmers.

“We have not subsidized our ethanol production since the early 90s, and a currency devaluation is not a subsidy,” she said. “We are competitive because the Brazilian farmer is the lowest-cost producer in the world.”

“Our studies show there has been cross-subsidization of the ethanol industry in Brazil,” Don Phillips, trade advisor to the American Sugar Alliance, shot back. “The construction of the manufacturing plants was subsidized, and the government mandate of the national use of ethanol as a fuel may not be a subsidy, but it still is a factor in its cost.”

The belligerent foreign questioning is becoming all too common. Last year, a Brazilian bank executive, invited to speak about the prospects for the Brazilian soybean industry, practically boasted that Brazilian farmers eventually would put the United States out of the soybean business.

The day before the forum, the Brazilian government requested a dispute settlement panel under the World Trade Organization to resolve the claims they began floating last summer that U.S. farm programs have harmed the Brazilian cotton industry to the tune of $600 million.

In a presentation during the cotton outlook portion of the forum, Mechel S. Paggi of California State University in Fresno said the Brazilians' choice of targets, which include domestic support for the 1999-2002 marketing years; export subsidies for those years; all programs applicable under the 2002 farm bill; and export credit guarantee programs, are puzzling.

“We've been told they originally intended to go after the soybean programs,” said Paggi. “But we lowered the soybean loan rate, which confused them, and they decided to go after cotton instead. And while Brazil is dealing with past programs, we are focused on the future.”

Domestic demand for rice increases faster than exports

Since 1979, the domestic demand for rice has increased from 55.3 million cwt. to 125 million cwt. projected use in 2002. That is an increase of 126 percent. At first I was surprised at the size of the increase until I took a look at my own consumption patterns. Today, I am eating more rice than I did when I was a boy growing up on an Iowa farm.

Looking at the grocery store shelf, the rice section has increased dramatically from the time when it consisted of bags of two brands of white long grain rice. Today's rice section still contains the bags of white rice, but they have been joined by a host of boxes with premixed spices to give the consumer the choice of Spanish rice, rice with black bean chili, yellow rice, mixed long grain and wild rice, and on and on the list goes. Not only that, most of these are available in instant and standard versions. When I look at the rice section in the grocery store I am not really surprised by what I saw in the data.

During that same period, exports have increased from 82 million cwt. to 105 million cwt. This is an increase of 27 percent. While this record is better than No. 2 yellow corn where today's exports are lower than they were in 1979, it still is much lower than the growth in domestic demand.

Most of the increase in domestic demand has been for domestically produced rice. However, demand for imported rice has increased from 0.1 million cwt in 1979 to 12 million cwt. for the 2002 crop year. Even if one excludes the imported rice from domestic demand, the domestic demand for U.S. rice has increased by 105 percent.

While exports will continue to be a significant market for U.S. grain producers, it is important to remember that the lion's share of grains are consumed domestically. For more information on rice exports, see the University of Tennessee Ag Policy Center Web-site:

Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of the UT's Agricultural Policy Analysis Center. Contact him at (865) 974-7407; Fax: (865) 974-7298; or by e-mail: