Macroeconomic Environment

U.S. and World Cotton Economic Outlook

June 2010

Prepared by:Economic Services

National Cotton Council

U.S. and World Cotton Economic Outlook

June 2010

Prepared by:Economic Services

National Cotton Council

Macroeconomic Environment

U.S. Real GDP Growth

Percent

-10

-8

-6

-4

-2

0

2

4

6

8

10

05 06 07 08 09 10

Dollars per Barrel

2030405060708090

100110120130140150160

Ja

n-0

4M

ar-

04

Ju

n-0

4S

ep

-04

De

c-0

4F

eb

-05

Ma

y-0

5A

ug

-05

No

v-0

5J

an

-06

Ap

r-0

6J

ul-

06

Oc

t-0

6J

an

-07

Ap

r-0

7J

un

-07

Se

p-0

7D

ec

-07

Ma

r-0

8J

un

-08

Se

p-0

8D

ec

-08

Fe

b-0

9M

ay

-09

Au

g-0

9N

ov

-09

Fe

b-1

0M

ay

-10

U.S. Crude Oil Spot Price

Cents per Gallon

80110140170200230260290320350380410440

Jan

-04

Mar

-04

Jun

-04

Sep

-04

Dec

-04

Mar

-05

Jun

-05

Sep

-05

No

v-05

Feb

-06

May

-06

Au

g-0

6N

ov-

06F

eb-0

7M

ay-0

7A

ug

-07

Oct

-07

Jan

-08

Ap

r-08

Jul-

08O

ct-0

8Ja

n-0

9A

pr-

09Ju

n-0

9S

ep-0

9D

ec-0

9M

ar-1

0Ju

n-1

0

U.S. #2 Diesel, Gulf Coast

Percent

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

99 00 01 02 03 04 05 06 07 08 09 10

Percent

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

99 00 01 02 03 04 05 06 07 08 09 10

Civilian Unemployment Rate

$ Billions

-1,800

-1,400

-1,000

-600

-200

200

09 10 11 12 13 14 15 16 17 18

Aug-09 10-Jan

U.S. Federal Budget Surplus(CBO Projection)

$ Billion

02468

1012141618202224262830

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Upland Cotton Other Commodity Programs Conservation

$ Billion

02468

1012141618202224262830

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Upland Cotton Other Commodity Programs Conservation

CBO Ag Baseline Spending

Percent

-4

-2

0

2

4

6

8

10

12

14

16W

orld US

Indi

a

Chi

na

2008 2009 2010 2011

Real GDP Growthin Selected Countries

0.55

0.65

0.75

0.85

0.95

1.05

1.15

1.25

Jan

-97

Jul

Jan

-98

Jul

Jan

-99

Jul

Jan

-00

Jul

Jan

-01

Jul

Jan

-02

Jul

Jan

-03

Jul

Jan

-04

Jul

Jan

-05

Jul

Jan

-06

Jul

Jan

-07

Jul

Jan

-08

July

Jan

-09

July

Jan

-10

Euro(Currency per U.S. Dollar)

95

100

105

110

115

120

125

130

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Real Exchange Rate Index (Other Important Trade Partners, Source – Federal Reserve )

8090

100110120130140150160170180190200

Jan

-95

Jul

Jan

-96

Jul

Jan

-97

Jul

Jan

-98

Jul

Jan

-99

Jul

Jan

-00

Jul

Jan

-01

Jul

Jan

-02

Jul

Jan

-03

Jul

Jan

-04

Jul

Jan

-05

Jul

Jan

-06

Jul

Jan

-07

Jul

Jan

-08

Jul

Jan

-09

Jul

Jan

-10

Crops Livestock

Ag Prices Received Index

$ Billion

0

10

20

30

40

50

60

70

80

90

100

99 00 01 02 03 04 05 06 07 08 09p 10f

Market Government Emergency

U.S. Net Farm Income

U.S. Cotton Supply

30

40

50

60

70

80

90

100

110

Au

g

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Dec 09 Dec-10

December Cotton FuturesCents per Pound

275

325

375

425

475

525

575

625

675

725

775

825

Au

g

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

l

Se

p

No

v

Dec 09 Dec-10

December Corn FuturesCents per Bushel

580

680

780

880

980

1080

1180

1280

1380

1480

1580

1680

Au

g

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

l

Se

p

No

v

Nov 09 Nov-10

November Soybean FuturesCents per Bushel

SoutheastSoutheast 1,891 1,891 2,390 2,390 26.426.4Mid-SouthMid-South 1,627 1,627 1,730 1,730 6.3 6.3 SouthwestSouthwest 5,243 5,243 5,875 5,875 12.1 12.1 WestWest 247 247 320 320 29.5 29.5

ALL UPLANDALL UPLAND 9,0089,008 10,31510,315 14.514.5

ALL ELSALL ELS 141 141 190 190 34.4 34.4

ALL COTTONALL COTTON 9,150 9,150 10,505 10,505 14.814.8

SoutheastSoutheast 1,891 1,891 2,390 2,390 26.426.4Mid-SouthMid-South 1,627 1,627 1,730 1,730 6.3 6.3 SouthwestSouthwest 5,243 5,243 5,875 5,875 12.1 12.1 WestWest 247 247 320 320 29.5 29.5

ALL UPLANDALL UPLAND 9,0089,008 10,31510,315 14.514.5

ALL ELSALL ELS 141 141 190 190 34.4 34.4

ALL COTTONALL COTTON 9,150 9,150 10,505 10,505 14.814.8

2010 U.S. Cotton Plantings

20092009 20102010 %% Actual Actual Estimated* Estimated* ChangeChange

20092009 20102010 %% Actual Actual Estimated* Estimated* ChangeChange

Thousand AcresThousand AcresThousand AcresThousand Acres

*USDA-NASS Prospective Plantings Report *USDA-NASS Prospective Plantings Report

SoutheastSoutheast 765 765 967 967 26.426.4Mid-SouthMid-South 658 658 700 700 6.3 6.3 SouthwestSouthwest 2,122 2,122 2,378 2,378 12.1 12.1 WestWest 100 100 130 130 29.5 29.5

ALL UPLANDALL UPLAND 3,6453,645 4,1744,174 14.514.5

ALL ELSALL ELS 57 57 77 77 34.4 34.4

ALL COTTONALL COTTON 3,703 3,703 4,251 4,251 14.814.8

SoutheastSoutheast 765 765 967 967 26.426.4Mid-SouthMid-South 658 658 700 700 6.3 6.3 SouthwestSouthwest 2,122 2,122 2,378 2,378 12.1 12.1 WestWest 100 100 130 130 29.5 29.5

ALL UPLANDALL UPLAND 3,6453,645 4,1744,174 14.514.5

ALL ELSALL ELS 57 57 77 77 34.4 34.4

ALL COTTONALL COTTON 3,703 3,703 4,251 4,251 14.814.8

2010 U.S. Cotton Plantings

20092009 20102010 %% Actual Actual Estimated* Estimated* ChangeChange

20092009 20102010 %% Actual Actual Estimated* Estimated* ChangeChange

Thousand HectaresThousand HectaresThousand HectaresThousand Hectares

*USDA-NASS Prospective Plantings Report*USDA-NASS Prospective Plantings Report

0

4

8

12

16

20

24

28

96 97 98 99 00 01 02 03 04 05 06 07 08 09e 10p

Mill

ion

Ba

les

0

1

2

3

4

5

6

Mill

ion

Me

tric

To

ns

U.S. Cotton Production

0

5

10

15

20

25

30

35

96 97 98 99 00 01 02 03 04 05 06 07 08 09e 10p

Mill

ion

Ba

les

0

1

2

3

4

5

6

7

Mill

ion

Me

tric

To

ns

Beg Stocks Imports Production

U.S. Cotton Supply

U.S. Cotton Demand

Fiber Equivalents

0

10

20

30

40

50

60

98 99 00 01 02 03 04 05 06 07 08 09 10f

Mill

ion

Bal

es

0

2

4

6

8

10

12

Mill

ion

Met

ric

To

ns

Cotton Other

Net Domestic Fiber Consumption

Percent

38

39

40

41

42

43

44

45

97 98 99 00 01 02 03 04 05 06 07 08 09

Cotton’s Share of Fiber Consumption

Fiber Equivalents

0

4

8

12

16

20

24

28

98 99 00 01 02 03 04 05 06 07 08 09 10f

Mill

ion

Ba

les

0

1

2

3

4

5

6

Mill

ion

Me

tric

To

ns

Retail Imported

Components of Retail Cotton Consumption

Fiber Equivalents

0

5

10

15

20

25

98 99 00 01 02 03 04 05 06 07 08 09 10f

Mill

ion

Ba

les

0

1

2

3

4

5

Mill

ion

Me

tric

To

ns

U.S. Cotton Textile Imports

U.S. Cotton Content in Textile ImportsFiber Equivalents

0

3

6

9

12

15

18

21

24

98 99 00 01 02 03 04 05 06 07 08 09

Mill

ion

Bal

es

0

1

2

3

4

5

Mill

ion

Met

ric

To

ns

CBINAFTAROWNon-U.S. Cotton

U.S. Trade With Mexico

0

1

2

3

4

00 01 02 03 04 05 06 07 08 09

Mill

ion

Ba

les

0

0.2

0.4

0.6

0.8

Mill

ion

Me

tric

To

ns

Imports Exports

U.S. Trade with CBI

0

1

2

3

4

00 01 02 03 04 05 06 07 08 09

Mill

ion

Ba

les

0

0.2

0.4

0.6

0.8

Mill

ion

Me

tric

To

ns

Imports Exports

U.S. Imports from China

0

1

2

3

4

5

6

00 01 02 03 04 05 06 07 08 09

Mill

ion

Ba

les

0

0.2

0.4

0.6

0.8

1

1.2

Mill

ion

Me

tric

To

ns

U.S. Cotton Mill Use(Calendar Year, Million Bales)

0

2

4

6

8

10

12

98 99 00 01 02 03 04 05 06 07 08 09 10f

Mill

ion

Ba

les

0.0

0.4

0.8

1.2

1.6

2.0

2.4

Mill

ion

Me

tric

To

ns

U.S. Cotton Mill Use(Crop Year, Million Bales)

0

2

4

6

8

10

12

98 99 00 01 02 03 04 05 06 07 08 09e 10p

Mill

ion

Ba

les

0

0.4

0.8

1.2

1.6

2

2.4

Mill

ion

Me

tric

To

ns

0

5

10

15

20

25

30

98 99 00 01 02 03 04 05 06 07 08 09e 10p

Mill

ion

Ba

les

0

1

2

3

4

5

6

Mill

ion

Me

tric

To

ns

Exports Mill Use Production

U.S. Cotton Production & Use

The World Market & U.S. Cotton Exports

-10

0

10

20

30

40

50

60

70

98 99 00 01 02 03 04 05 06 07 08 09e 10p

Mill

ion

Ba

les

-2.2

-0.2

1.8

3.8

5.8

7.8

9.8

11.8

13.8

Mill

ion

Me

tric

To

ns

Net Imports Production Use Stocks

China Cotton Supply & Use

World Cotton Production

0

25

50

75

100

125

98 99 00 01 02 03 04 05 06 07 08 09e 10p

Mill

ion

Ba

les

0

5

10

15

20

25

Mill

ion

Me

tric

To

ns

0

20

40

60

80

100

120

140

160

98 99 00 01 02 03 04 05 06 07 08 09e 10f

Mill

ion

Ba

les

0

5

10

15

20

25

30

Mill

ion

Me

tric

To

ns

Cotton Polyester

World Fiber Mill Use

*PCI

Cents per Pound

3035404550556065707580859095

100

Ja

n-0

4

Ap

r-0

4

Au

g-0

4

No

v-0

4

Ma

r-0

5

Ju

n-0

5

Se

p-0

5

Ja

n-0

6

Ap

r-0

6

Au

g-0

6

No

v-0

6

Ma

r-0

7

Ju

n-0

7

Oc

t-0

7

Ja

n-0

8

Ma

y-0

8

Au

g-0

8

No

v-0

8

Ma

r-0

9

Ju

n-0

9

Oc

t-0

9

Ja

n-1

0

Ma

y-1

0

"A" FE Index

Asian Polyester Staple

Fiber Prices

World Cotton Mill Use

0

20

40

60

80

100

120

140

98 99 00 01 02 03 04 05 06 07 08 09e 10p

Mill

ion

Ba

les

0

5

10

15

20

25

30

Mill

ion

Me

tric

To

ns

40

50

60

70

80

90

100

110

120

130

98 99 00 01 02 03 04 05 06 07 08 09e 10p

Mill

ion

Bal

es

9

12

15

18

21

24

27

Mill

ion

Met

ric

To

ns

Stocks Production Use

Foreign Cotton Production & Use

U.S. Cotton Exports

0

2

4

6

8

10

12

14

16

18

20

98 99 00 01 02 03 04 05 06 07 08 09e 10p

Mill

ion

Ba

les

0

1

2

3

4

Mill

ion

Me

tric

To

ns

World Cotton Ending Stocks

0

10

20

30

40

50

60

70

98 99 00 01 02 03 04 05 06 07 08 09e 10p

Mill

ion

Ba

les

0

2

4

6

8

10

12

14

Mill

ion

Me

tric

To

ns

U.S. ROW China

4143

60

394444

52

58

4446

6158

56

0

10

20

30

40

50

60

70

80

98 99 00 01 02 03 04 05 06 07 08 09 10

Percent

Cotton Stocks/Use (World less China)

U.S. Supply and DemandMillion Bales

Beginning StocksBeginning Stocks 6.346.34 2.902.90ProductionProduction 12.1912.19 16.7016.70ImportsImports 0.010.01 0.000.00

Total SupplyTotal Supply 18.5318.53 19.6019.60

Mill UseMill Use 3.403.40 3.303.30ExportsExports 12.2512.25 13.5013.50

Total OfftakeTotal Offtake 15.6515.65 16.8016.80

Ending StocksEnding Stocks 2.902.90 2.802.80Stocks-to-Use RatioStocks-to-Use Ratio 18.5%18.5% 16.7%16.7%

2009/10e 2010/11p

U.S. Supply and DemandMillion Metric Tons

Beginning StocksBeginning Stocks 1.381.38 0.630.63ProductionProduction 2.662.66 3.643.64ImportsImports 0.000.00 0.000.00

Total SupplyTotal Supply 4.044.04 4.274.27

Mill UseMill Use 0.740.74 0.720.72ExportsExports 2.672.67 2.942.94

Total OfftakeTotal Offtake 3.413.41 3.663.66

Ending StocksEnding Stocks 0.630.63 0.610.61Stocks-to-Use RatioStocks-to-Use Ratio 18.5%18.5% 16.7%16.7%

2009/10e 2010/11p

Beginning Stocks 62.70 52.21Production 102.89 114.32Imports 35.70 36.12

Mill Use 116.43 119.49Exports 35.26 36.14

Ending Stocks 52.21 49.59Stocks-to-Use Ratio 44.8% 41.5%

Beginning Stocks 62.70 52.21Production 102.89 114.32Imports 35.70 36.12

Mill Use 116.43 119.49Exports 35.26 36.14

Ending Stocks 52.21 49.59Stocks-to-Use Ratio 44.8% 41.5%

World Supply and DemandMillion Bales

2009/10e 2010/11p

Beginning Stocks 13.66 11.37Production 22.42 24.91Imports 7.78 7.87

Mill Use 25.37 26.03Exports 7.68 7.87

Ending Stocks 11.37 10.80Stocks-to-Use Ratio 44.8% 41.5%

Beginning Stocks 13.66 11.37Production 22.42 24.91Imports 7.78 7.87

Mill Use 25.37 26.03Exports 7.68 7.87

Ending Stocks 11.37 10.80Stocks-to-Use Ratio 44.8% 41.5%

World Supply and DemandMillion Metric Tons

2009/10e 2010/11p

MerchantsMerchantsGinnersGinners CottonseedCottonseed

ProducersProducers

CooperativesCooperatives

WarehousesWarehousesManufacturersManufacturers