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

2. 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

3. U.S. Crude Oil Spot Price

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

5. U.S. Cotton Production & Use

6. Southeast2,956 3,008 1.8 Mid-South 3,430 3,880 13.1 Southwest6,155 6,120 -0.6 West868 795 -8.4 ALL UPLAND 13,409 13,803 2.9 ALL ELS250 266 6.6 ALL COTTON13,659 14,069 3.0 Southeast2,956 3,008 1.8 Mid-South 3,430 3,880 13.1 Southwest6,155 6,120 -0.6 West868 795 -8.4 ALL UPLAND 13,409 13,803 2.9 ALL ELS250 266 6.6 ALL COTTON13,659 14,069 3.0 2005 U.S. Cotton Acreage 20042005% Actual Estimate Change Actual Estimate Change 20042005% Actual Estimate Change Actual Estimate Change Thousand Acres

7. U.S. Cotton Crop Condition Index Based on Ratings 10-Yr Hi 10-Yr Lo ‘03 (730 #/ac) ‘04 (855 #/ac) ‘05 (USDA @ 748 #/ac)

8. U.S. Cotton Supply

9. U.S. Cotton Demand

10. U.S. Cotton Retail Consumption 2005 2004

11. U.S. Cotton Textile Imports from China 2005 2004

12. 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, 20051606% Cotton Trousers100%July 8, 20051765% Cotton & MMF Underwear100%July 5, 2005515% Combed Cotton Yarn19.9%Aug. 8, 200526% M&B Cotton & MMF Shirts, Not Knit 95.6%Aug. 8, 2005343% MMF Knit Shirts100%July 12, 2005489% MMF Trousers100%Aug. 3, 2005369%

13. U.S. Cotton Textile Imports from ROW 2005 2004

14. U.S. Cotton Mill Use 2005 2004

15. U.S. Cotton Mill Use

16. The Int’l Market & Trade

17. Foreign Cotton Production & Use

18. Change in ‘05 Production

19. Change in ‘05 Mill Use

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

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

22. Ending Stocks & Prices

23. U.S. Cotton Ending Stocks

24. World Cotton Ending Stocks

25. Cotton Price

26. 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

27. Merchants Ginners Cottonseed Producers Cooperatives Warehouses Manufacturers