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La. Farm Bureau/Radio Network‏

December 10, 2013

China Holds Key To Cotton Prices

China is more than just the 800-pound gorilla in the world cotton market. The Asian giant is both the world's biggest producer and importer. As such, China has tremendous market manipulating power that leaves other producers, including those in America, at its mercy.

China provides unstinting support to its cotton farmers with the end result being cotton prices in China are often found above world market prices, yet actions in China can create extreme fluctuations in world prices that affects everyone else. A few years ago, a small crop in China coupled with robust demand sparked a rally which lifted prices to their highest levels since the 1860s.

But the pendulum could easily swing the other way. Recent forecasts by the U.S. Department of Agriculture show that China currently holds half of the world's cotton stocks. Releasing too much of that surplus on the market could cripple prices for American farmers, creating uncertainty and anxiety.

Gerald Bange, a USDA official charged with estimating global supply and demand, said in a recent interview with China Daily: "Will China continue the same [cotton] policies that it has had for several years now, or will it change those policies? Obviously, that's up to China. We just have to wait and see what China does."

So far, China has shown no inclination to cut back on its support for its cotton farmers and mills in the country. A recent report by the international OECD found that China has been steadily increasing its farm support levels well above those found in the United States, and there has been some talk of the country resorting to a direct payment method to support its farmers.

Darren Hudson, the director of the Cotton Economics Research Institute at Texas Tech University, said in an interview with Farm Policy Facts that if China "abandons its reserve policy in favor of paying its producers, that could result in significant price declines leaving U.S. (cotton) producers vulnerable to low prices for no other reason than China dumping its stocks."

New Congressman Appointed To Ag Committee

Freshman 5th District U.S. Rep. Vance McAllister said he got just what he wanted when his committee assignments were posted.

McAllister, R-Swartz, who has been sleeping in his congressional office or in a friend's basement since returning to Washington following the Thanksgiving break, secured spots on the House Agriculture and House Natural Resources committees.

"Our district is all about agriculture," said McAllister, who won a special election in November to replace former U.S. Rep. Rodney Alexander, R-Ruston, who resigned to take a position in Gov. Bobby Jindal's cabinet.

"I can't imagine a more important committee for the 5th District," McAllister said. "It's the largest row-crop district in the country."

Likewise, McAllister said the 5th District and Louisiana are rich in natural resources.

"I'll give us a strong voice on the Natural Resources Committee," he said.

There was talk that McAllister might be offered a slot on the powerful Appropriations Committee on which Alexander served, but the 39-year-old congressman said he wasn't disappointed.

"I really didn't expect to get that right out of the gate," he said.

Though McAllister won't have a say on the Senate-House Conference Committee that's working on a compromise Farm Bill now, he said his position on the Agriculture Committee will allow him to influence future agriculture policy.

"There will always be adjustments that need to be made," he said.

Cotton Spinning Mill Planned In Central LA

Gulf Coast Spinning Co. LLC plans to invest $130 million in a new cotton spinning facility in Bunkie in central Louisiana , with construction beginning in mid-2014.

The plant is the second phase of a project that included the opening of a Zagis USA spinning facility that employs 79 people in Jefferson Davis Parish. The Zagis mill in Lacassine represented a cost of $20 million.

At 500,000 square feet, the Bunkie cotton spinning mill will be about four times the size of the first plant. The company targets hiring more than 200 employees by the end of 2015 and reaching full employment of 307 people in 2016.

Gulf Coast Spinning expects to ship most of its cotton yarn overseas similar to the Zagis mill, where 85 percent of the spun yarn is exported. When both mills are running, the facilities will tap about 15 percent to 20 percent of Louisiana's total cotton crop.

Including the new facility to be built on 43.5 acres at the Bunkie Industrial Park , the two mills will represent a combined capital investment of approximately $150 million - or twice the originally announced investment.

Hall of Distinction Nominees

We are accepting nominations for the 2014 Louisiana Agriculture Hall of Distinction. Nominations are open to anyone connected with Louisiana agriculture including any person who has passed away. Nomination forms can be found at our website louisianaradionetwork.com

A panel representing the Louisiana Farm Bureau Agri-News Radio Network, LSU AgCenter and the Louisiana Department of Agriculture and Forestry will select the inductees.

If you have any questions, please don't hesitate to contact me.

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