Cotton Economic Report NCC Mid-Year Board Meeting August 17-19, 2005 Prepared by: Economic Services National Cotton Council

Macroeconomic Situation Global economic growth for ’05 forecasts at 4%Global economic growth for ’05 forecasts at 4% –Down from last year’s level of 5.1% US economy grew at 3.8% in Q1 and preliminary estimate for Q2 is 3.4%US economy grew at 3.8% in Q1 and preliminary estimate for Q2 is 3.4% –Unemployment at 5%, below year-ago level Oil prices at record levelsOil prices at record levels Global economic growth for ’05 forecasts at 4%Global economic growth for ’05 forecasts at 4% –Down from last year’s level of 5.1% US economy grew at 3.8% in Q1 and preliminary estimate for Q2 is 3.4%US economy grew at 3.8% in Q1 and preliminary estimate for Q2 is 3.4% –Unemployment at 5%, below year-ago level Oil prices at record levelsOil prices at record levels

U.S. Crude Oil Spot Price

U.S. #2 Diesel, Gulf Coast

U.S. Cotton Production & Use

Southeast2,956 3, Mid-South 3,430 3, Southwest6,155 6, West ALL UPLAND 13,409 13, ALL ELS ALL COTTON13,659 14, Southeast2,956 3, Mid-South 3,430 3, Southwest6,155 6, West ALL UPLAND 13,409 13, ALL ELS ALL COTTON13,659 14, U.S. Cotton Acreage % Actual Estimate Change Actual Estimate Change % Actual Estimate Change Actual Estimate Change Thousand Acres

U.S. Cotton Crop Condition Index Based on Ratings 10-Yr Hi 10-Yr Lo ‘03 (730 #/ac) ‘04 (855 #/ac) ‘ #/ac)

U.S. Cotton Supply

U.S. Cotton Demand

U.S. Cotton Retail Consumption

U.S. Cotton Textile Imports from China

Active China Safeguards Description% Filled As Of % Change from Year Ago Jan. – June (Official) Cotton, Wool, & MMF Socks100%May 12,200581% Cotton Knit Shirts100%July 5, % Cotton Trousers100%July 8, % Cotton & MMF Underwear100%July 5, % Combed Cotton Yarn19.9%Aug. 8, % M&B Cotton & MMF Shirts, Not Knit 95.6%Aug. 8, % MMF Knit Shirts100%July 12, % MMF Trousers100%Aug. 3, %

U.S. Cotton Textile Imports from ROW

U.S. Cotton Mill Use

U.S. Cotton Mill Use

The Int’l Market & Trade

Foreign Cotton Production & Use

Change in ‘05 Production

Change in ‘05 Mill Use

World Cotton Trade Imports by Top-10 US Cust. Total Imports

World Cotton Trade Total Imports US Exports Imports by Top-10 US Cust.

Ending Stocks & Prices

U.S. Cotton Ending Stocks

World Cotton Ending Stocks

Cotton Price

Summary Smaller world cropSmaller world crop –But not as small as originally thought Demand picture looks optimisticDemand picture looks optimistic –Should exceed production –Cotton prices relative to polyester China expected to purchase record amount from world marketChina expected to purchase record amount from world market Stocks continue to hang over the marketStocks continue to hang over the market Smaller world cropSmaller world crop –But not as small as originally thought Demand picture looks optimisticDemand picture looks optimistic –Should exceed production –Cotton prices relative to polyester China expected to purchase record amount from world marketChina expected to purchase record amount from world market Stocks continue to hang over the marketStocks continue to hang over the market

Merchants Ginners Cottonseed Producers Cooperatives Warehouses Manufacturers