Washington Insider -- Monday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

U.S. Cotton Faces a New Threat

Fresh from settling the long-running cotton trade dispute with Brazil, U.S. cotton producers and shippers now face a similar threat from Turkey, according to the National Cotton Council.

The council last week reported that Turkey has started an anti-dumping investigation against U.S. cotton exporters, and has sent cotton shippers questionnaires that must be completed and returned. The probe, announced Oct. 18, gives exporters 37 days to provide Turkey with the requested information, according to an NCC statement.

Based on World Trade Organization guidelines, to apply anti-dumping duties, Turkey would have to find that U.S. cotton was dumped in the country, determine that the domestic industry has been damaged and demonstrate that any injury was a direct result of U.S. cotton imports. If it were to confirm that dumping did take place, duties could be applied for as long as five years and would be company specific, NCC says.

It is unclear at this early stage whether the allegations put forward by the government of Turkey have any merit. But a finding of dumping would create an unstable situation in both Turkey, the world's second largest cotton importer (after China), and the United States, the global leader in cotton exports.

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Froman States the Obvious: No TTP Deal in Near Term

There is no chance that the 12 Pacific Rim nations conducting Trans-Pacific Partnership trade talks will conclude their negotiations within the next several weeks, U.S. Trade Representative Michael Froman acknowledged last week.

At one time, there were hopes that a TTP agreement could be concluded in time for the Asia-Pacific Economic Cooperation (APEC) leaders' meeting in November. But, Froman said, while that won't happen, the Nov. 11-12 meeting in Beijing will provide the TPP heads of state a good chance to talk about the outstanding issues and provide impetus toward concluding the pact.

One of the hang-ups continues to be the parallel negotiations that the United States is conducting with Japan. Froman said the United States is making "good progress" on those talks, although there has not been much public evidence to support that view.

The U.S.-Japan talks are focused on U.S. access to the Japanese beef, pork, rice, dairy and sugar markets, as well as Japan's continuing campaign for increased access to the U.S. automotive market. Since both sides continue to experience intense political pressure from domestic producers, neither appears ready to give in.

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Washington Insider: Space on the Train

While the ag press and even some urban dailies have been engaging in the longest continuing crop production and marketing report in memory, other analysts have been quietly considering the potential effects of an expected bulge in commodity exports that likely will occur due to highly competitive prices once the U.S. harvest finally arrives at the bin.

At the same time, there is a familiar, discordant note being sounded in some parts of the country. The huge crop is only one of several competitors for the nation's limited rail capacity and more than a few observers suggest that means trouble for exporters competing for space on trains and ships over the coming months.

The new factor is the U.S. shale-oil boom that has energy shipments dominating rail networks at the expense of grains. The Association of American Railroads says crude moved by rail almost doubled last year, growth that will mean larger, more difficult rail bottlenecks. The Energy Department is predicting the 2015 U.S. oil output will be the largest in 45 years.

And, the experts who follow shipping news say that "If you're a [ship] owner, you're banking on a bumper season of exports," according to Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo, Norway. He also notes, however, "the fact you see a situation where grains don't come to the port: that's a negative surprise for the shipping market."

The outlook for tight transportation services is not news for grain handlers who already see increased congestion in several areas. Arthur Neal, a deputy administrator for transportation and marketing at USDA told a Senate committee during recent hearings. Since October 2013, USDA has reported growing delays, missed shipments, backlogs and higher costs for railroad services for U.S. grain shippers, Neal said, and others agreed.

For example, The Andersons recently told the press it will direct some grain to trucks to alleviate pressure on its rail cars according to Hal Reed, chief operating officer of the Maumee, Ohio-based company. The Andersons repairs, sells, manages and leases a fleet of almost 22,000 railcars and locomotives.

"Railroads have been under pressure," Steve Neelly, the vice president for grain merchandising and country elevator logistics at Minnesota-based farmer cooperative CHS Inc., reported. And rail delays in the United States could lead to ships awaiting cargo and congestion at terminals, something that certainly will boost freight costs. Exporters will still ship their cargoes eventually, according to Burak Cetinok, a consultant at Hartland Shipping Services Ltd., a shipbroker in London, but shipping costs may exceed current estimates.

Part of the pressure on grain shipments is the result of accelerating shipments of coal as well as both iron ore and grains from other regions. Ship owners also are contending with a 4% increase in global shipments of coal this year. The fuel is the biggest source of demand for ships, followed by grains.

Iron-ore cargoes are expected to expand 10% to a record 1.3 billion tons this year, observers say. Fourth-quarter grain shipments from South America will jump to 40 million tons, from 26 million last year and Black Sea loads will advance to 14 million tons from 13.6 million, observers estimate.

These developments and the management of this harvest are likely to be increasingly controversial throughout the year –– and to be taken as evidence that the overall U.S. transportation system has increasingly fallen into disrepair. Now, the fact that the demand for energy transportation is exploding and can play a growing part in bottlenecks that have the potential to significantly damage U.S. export competitiveness can no longer be ignored. This issue has long been a priority for many producers and its visibility is certain to increase sharply in coming months, Washington Insider believes.

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(GH/CZ)

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