Cotton Economic ReportCotton Economic Report

NCC Mid-Year Board MeetingNCC Mid-Year Board MeetingAugust 17-19, 2005August 17-19, 2005

Prepared by:Prepared by:

Economic ServicesEconomic ServicesNational Cotton CouncilNational Cotton Council

Cotton Economic ReportCotton Economic Report

NCC Mid-Year Board MeetingNCC Mid-Year Board MeetingAugust 17-19, 2005August 17-19, 2005

Prepared by:Prepared by:

Economic ServicesEconomic ServicesNational Cotton CouncilNational Cotton Council

Macroeconomic SituationMacroeconomic Situation

• Global economic growth for ’05 Global economic growth for ’05 forecasts at 4%forecasts at 4%– Down from last year’s level of 5.1%Down from last year’s level of 5.1%

• US economy grew at 3.8% in Q1 and US economy grew at 3.8% in Q1 and preliminary estimate for Q2 is 3.4%preliminary estimate for Q2 is 3.4%– Unemployment at 5%, below year-ago levelUnemployment at 5%, below year-ago level

• Oil prices at record levelsOil prices at record levels

• Global economic growth for ’05 Global economic growth for ’05 forecasts at 4%forecasts at 4%– Down from last year’s level of 5.1%Down from last year’s level of 5.1%

• US economy grew at 3.8% in Q1 and US economy grew at 3.8% in Q1 and preliminary estimate for Q2 is 3.4%preliminary estimate for Q2 is 3.4%– Unemployment at 5%, below year-ago levelUnemployment at 5%, below year-ago level

• Oil prices at record levelsOil prices at record levels

Dollars per Barrel

30

40

50

60

70

Jan

-04

Feb

-04

Mar

-04

May

-04

Jun

-04

Au

g-0

4

Sep

-04

Oct

-04

Dec

-04

Jan

-05

Mar

-05

Ap

r-05

Jun

-05

Jul-

05

U.S. Crude Oil Spot Price U.S. Crude Oil Spot Price

Cents per Gallon

80

110

140

170

200

Jan

-04

Feb

-04

Mar

-04

May

-04

Jun

-04

Au

g-0

4

Sep

-04

Oct

-04

Dec

-04

Jan

-05

Mar

-05

Ap

r-05

Jun

-05

Jul-

05

U.S. #2 Diesel, Gulf Coast U.S. #2 Diesel, Gulf Coast

U.S. Cotton U.S. Cotton Production & UseProduction & Use

SoutheastSoutheast 2,956 2,956 3,008 3,008 1.81.8Mid-SouthMid-South 3,430 3,430 3,880 3,880 13.1 13.1 SouthwestSouthwest 6,155 6,155 6,120 6,120 -0.6 -0.6 WestWest 868 868 795 795 -8.4 -8.4

ALL UPLANDALL UPLAND 13,40913,409 13,80313,803 2.92.9

ALL ELSALL ELS 250 250 266 266 6.6 6.6

ALL COTTONALL COTTON 13,659 13,659 14,069 14,069 3.03.0

SoutheastSoutheast 2,956 2,956 3,008 3,008 1.81.8Mid-SouthMid-South 3,430 3,430 3,880 3,880 13.1 13.1 SouthwestSouthwest 6,155 6,155 6,120 6,120 -0.6 -0.6 WestWest 868 868 795 795 -8.4 -8.4

ALL UPLANDALL UPLAND 13,40913,409 13,80313,803 2.92.9

ALL ELSALL ELS 250 250 266 266 6.6 6.6

ALL COTTONALL COTTON 13,659 13,659 14,069 14,069 3.03.0

2005 U.S. Cotton Acreage2005 U.S. Cotton Acreage

20042004 20052005 %% Actual Actual Estimate Estimate ChangeChange

20042004 20052005 %% Actual Actual Estimate Estimate ChangeChange

Thousand AcresThousand AcresThousand AcresThousand Acres

50

55

60

65

70

75

80

85

Jun

-07

Jun

-14

Jun

-21

Jun

-28

Jul-

06

Jul-

12

Jul-

19

Jul-

26

Au

g-0

2

Au

g-0

9

Au

g-1

6

Au

g-2

3

Au

g-3

0

Sep

-06

Sep

-13

Sep

-20

Sep

-27

Oct

-04

Oct

-11

Oct

-11

50

55

60

65

70

75

80

85

Jun

-07

Jun

-14

Jun

-21

Jun

-28

Jul-

06

Jul-

12

Jul-

19

Jul-

26

Au

g-0

2

Au

g-0

9

Au

g-1

6

Au

g-2

3

Au

g-3

0

Sep

-06

Sep

-13

Sep

-20

Sep

-27

Oct

-04

Oct

-11

Oct

-11

U.S. Cotton Crop ConditionU.S. Cotton Crop ConditionIndex Based on RatingsIndex Based on Ratings

10-Yr Hi

10-Yr Lo

‘03 (730 #/ac)

‘04 (855 #/ac)

‘05 (USDA @ 748 #/ac)

U.S. Cotton SupplyU.S. Cotton SupplyMillion Bales

2.7 2.6 4.0 3.9 3.9 3.96.0 7.4

5.43.5

6.5

17.918.9 18.8

13.9

17.0 17.2

20.317.2

18.3

23.321.3

0

5

10

15

20

25

30

95 96 97 98 99 00 01 02 03 04 05f

Beg Stocks Imports Production

U.S. Cotton DemandU.S. Cotton Demand

Million 480 Lb Bale Equivalents

21.2

0

5

10

15

20

25

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Million 480 Lb Bale Equivalents

21.2

0

5

10

15

20

25

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

U.S. Cotton Retail ConsumptionU.S. Cotton Retail Consumption

2005

2004

Million 480 Lb Bale Equivalents

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Million 480 Lb Bale Equivalents

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

U.S. Cotton Textile Imports from ChinaU.S. Cotton Textile Imports from China

2005

2004

Active China SafeguardsActive China Safeguards

Description % Filled As Of% Change from Year Ago

Jan. – June (Official)

Cotton, Wool, & MMF Socks 100% May 12,2005 81%

Cotton Knit Shirts 100% July 5, 2005 1606%

Cotton Trousers 100% July 8, 2005 1765%

Cotton & MMF Underwear 100% July 5, 2005 515%

Combed Cotton Yarn 19.9% Aug. 8, 2005 26%

M&B Cotton & MMF Shirts, Not Knit

95.6% Aug. 8, 2005 343%

MMF Knit Shirts 100% July 12, 2005 489%

MMF Trousers 100% Aug. 3, 2005 369%

Million 480 Lb Bale Equivalents

0

2

4

6

8

10

12

14

16

18

20

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Million 480 Lb Bale Equivalents

0

2

4

6

8

10

12

14

16

18

20

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

U.S. Cotton Textile Imports from ROWU.S. Cotton Textile Imports from ROW

2005

2004

Million 480 Lb Bale Equivalents

0

1

2

3

4

5

6

7

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Million 480 Lb Bale Equivalents

0

1

2

3

4

5

6

7

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

U.S. Cotton Mill UseU.S. Cotton Mill Use

2005

2004

Million Bales

10.611.1 11.3

10.4 10.2

8.9

7.77.3

6.2 6.35.8

0

2

4

6

8

10

12

95 96 97 98 99 00 01 02 03 04 05f

Million Bales

10.611.1 11.3

10.4 10.2

8.9

7.77.3

6.2 6.35.8

0

2

4

6

8

10

12

95 96 97 98 99 00 01 02 03 04 05f

U.S. Cotton Mill UseU.S. Cotton Mill Use

The Int’l Market The Int’l Market & Trade& Trade

Million Bales

88.5

101.896.6

106.2

60

70

80

90

100

110

95 96 97 98 99 00 01 02 03 04 05f

Production Use

Million Bales

88.5

101.896.6

106.2

60

70

80

90

100

110

95 96 97 98 99 00 01 02 03 04 05f

Production Use

Foreign Cotton Production & UseForeign Cotton Production & Use

Change in ‘05 ProductionChange in ‘05 Production

-4.0 -3.0 -2.0 -1.0 0.0 1.0

China

India

Pakistan

Turkey

Australia

Uzbek

W Africa

Mexico

Million Bales

-4.0 -3.0 -2.0 -1.0 0.0 1.0

China

India

Pakistan

Turkey

Australia

Uzbek

W Africa

Mexico

Million Bales

Change in ‘05 Mill UseChange in ‘05 Mill Use

-1.0 0.0 1.0 2.0 3.0 4.0

China

India

Pakistan

B'desh

Turkey

Vietnam

Brazil

EU

Million Bales-1.0 0.0 1.0 2.0 3.0 4.0

China

India

Pakistan

B'desh

Turkey

Vietnam

Brazil

EU

Million Bales

World Cotton TradeWorld Cotton Trade

Million Bales

14.516.1

13.810.7

14.6 13.917.4 17.1

22.2 21.2

27.6

32.3

38.4

0

10

20

30

40

95 96 97 98 99 00 01 02 03 04 05f

Million Bales

14.516.1

13.810.7

14.6 13.917.4 17.1

22.2 21.2

27.6

32.3

38.4

0

10

20

30

40

95 96 97 98 99 00 01 02 03 04 05f

Imports by Top-10 US Cust.

Total Imports

World Cotton TradeWorld Cotton Trade

Million Bales

14.516.1

13.810.7

14.6 13.917.4 17.1

22.2 21.2

27.6

7.7 6.9 7.54.3

6.8 6.7

11.0 11.913.8 14.0 15.0

32.3

38.4

0

10

20

30

40

95 96 97 98 99 00 01 02 03 04 05f

Million Bales

14.516.1

13.810.7

14.6 13.917.4 17.1

22.2 21.2

27.6

7.7 6.9 7.54.3

6.8 6.7

11.0 11.913.8 14.0 15.0

32.3

38.4

0

10

20

30

40

95 96 97 98 99 00 01 02 03 04 05f

Total Imports

US Exports

Imports by Top-10 US Cust.

Ending Stocks & PricesEnding Stocks & Prices

U.S. Cotton Ending StocksU.S. Cotton Ending Stocks

Million Bales

2.6

4.0 3.9 3.9 3.9

6.0

7.4

5.4

3.5

6.57.0

0

1

2

3

4

5

6

7

8

95 96 97 98 99 00 01 02 03 04 05f

Million Bales

2.6

4.0 3.9 3.9 3.9

6.0

7.4

5.4

3.5

6.57.0

0

1

2

3

4

5

6

7

8

95 96 97 98 99 00 01 02 03 04 05f

World Cotton Ending StocksWorld Cotton Ending Stocks

Million Bales

0

10

20

30

40

50

60

95 96 97 98 99 00 01 02 03 04 05f

China All Others

Million Bales

0

10

20

30

40

50

60

95 96 97 98 99 00 01 02 03 04 05f

China All Others

Cents/Pound

40

45

50

55

60

65

70

75

80

Jan

-04

Feb

-04

Mar

-04

May

-04

Jun

-04

Au

g-0

4

Sep

-04

Oct

-04

Dec

-04

Jan

-05

Mar

-05

Ap

r-05

Jun

-05

Jul-

05

A(FE) Nearby NY

Cotton PriceCotton Price

SummarySummary

• Smaller world cropSmaller world crop – But not as small as originally thoughtBut not as small as originally thought

• Demand picture looks optimisticDemand picture looks optimistic– Should exceed productionShould exceed production– Cotton prices relative to polyesterCotton prices relative to polyester

• China expected to purchase record China expected to purchase record amount from world marketamount from world market

• Stocks continue to hang over the Stocks continue to hang over the marketmarket

• Smaller world cropSmaller world crop – But not as small as originally thoughtBut not as small as originally thought

• Demand picture looks optimisticDemand picture looks optimistic– Should exceed productionShould exceed production– Cotton prices relative to polyesterCotton prices relative to polyester

• China expected to purchase record China expected to purchase record amount from world marketamount from world market

• Stocks continue to hang over the Stocks continue to hang over the marketmarket

MerchantsMerchantsGinnersGinnersCottonseedCottonseed

ProducersProducers

CooperativesCooperatives

WarehousesWarehousesManufacturersManufacturers