NCC disturbed by statements of Brazilian cotton industry

The U.S. industry shares the concerns expressed regarding China's massive stockpiles of cotton. Those stockpiles are creating tremendous uncertainty in the global cotton market. However, we strongly disagree with the characterization that STAX provides greater support in times of low prices.

There is no price guarantee; the revenue coverage is based on prevailing market prices at planting time. If futures markets move lower, then support under insurance products also moves lower. Rather than criticize the United States for authorizing a modest insurance program that might provide some assistance to growers if China does dump their stocks, it would seem more appropriate for Brazilian growers to convey their concern directly to Chinese authorities, just as U.S. growers have already done.

Today's agricultural markets, including cotton's, are entirely different from the period evaluated by the WTO Panel, which was 1999 through 2005. Renewable fuels and the emergence of the Chinese and Indian economies have brought new influences and market drivers.A comparison of the 1999-2005 period with the most recent five years (2009 to 2013) shows that U.S. upland cotton planted area is down 21 percent, U.S. upland cotton production is down 23 percent, Brazilian cotton area is up 27 percent, and Brazilian production is up 62 percent. World cotton prices averaged 88 percent higher over the past five years than during the period of the WTO challenge.

In summary, the U.S. cotton industry is prepared to accept, and in fact, has promoted major policy reforms to settle the longstanding dispute. Further, the U.S. industry is willing, on final settlement, to make good its commitment to cooperate with the Brazilian industry. In addition, the U.S. industry supports the reinstatement of the Framework Agreement. But, it is time for the Brazilian industry to acknowledge that the new cotton insurance program is substantial reform. It is time to put this matter behind us, but the reported comments by the Brazilian delegation are not a step in the right direction.

National Cotton Council of America