Cotton Economic Outlook National Cotton Council Mid-Year Board Meeting July 9-12, 2006

W. Texas Crude Oil Price

Global Economy Solid performance in the first half of 2006 Weakening expected in the second half  High energy prices, rising interest rates, cooling housing market UN currently estimating ’06 growth at 3.6%  Similar to last year’s level

Change in U.S. Real GDP

US Federal Budget Surplus

2006 US Planting Intentions 2005 Actual 2006 USDA Percent Change Southeast3,0303, % Mid-South3,9504,2056.5% Southwest6,2796,8008.3% West % Total Upland13,97514,9406.9% ELS % All Cotton14,24515,2767.2%

US Cotton Condition Index 10-Yr Hi 10-Yr Lo ‘04 (855 #/ac) ‘05 (831 #/ac) ‘06

US Cotton Production

US Cotton Retail Market Domestic Imported

US Cotton Textile Imports

Monthly US Cotton Mill Use

US Export Performance Shipments Outstanding Sales

US Cotton Use Mill Use Exports

China Cotton Supply & Use

Beginning Stocks Production Imports Mill Use Exports Ending Stocks Stocks-to-Use Ratio45.4%40.0% World Supply and Demand 2005/062006/07

Beginning Stocks Production Imports Total Supply Mill Use Exports Total Offtake Ending Stocks Stocks-to-Use Ratio28.3%22.2% US Supply and Demand 2005/062006/07

Cotton Stocks-to-Use U.S. World less China

Cotton Stocks/Use vs A(NE) Index

Factors to Watch Bullish  Dry conditions in W. Texas & parts of SE and Delta  Demand in excess of 120 million bales  Declining stocks in 06/07  Uncertainty over China’s stocks Bearish  More acres in ’06  05/06 ending stocks in US  Can economic growth be sustained?  China’s trade position & quota allocations

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