1. Southern Regional Outlook Conference Atlanta, Georgia September 27, 2000 Cotton Situation and Outlook by Carl G. Anderson Professor and Extension Economist-Cotton Marketing Texas Agricultural Extension Service Texas A&M University College Station, Texas 77843-2124

2. NextPrevious World Cotton 2000/01 “A” Index is up 11 cents from September a year ago. “A” Index is up 11 cents from September a year ago. Production is the same. Production is the same. Consumption is up 5 million bales. Consumption is up 5 million bales. World stocks are down 7 million bales. World stocks are down 7 million bales. More use, less stocks implies higher prices. More use, less stocks implies higher prices.

3. NextPrevious World Cotton Supply and Demand Million Bales

4. NextPrevious Economic Issues U.S. has strong economy and dollar U.S. has strong economy and dollar More textile imports More textile imports Asian economies - improving slowly Asian economies - improving slowly Europe weak Europe weak Polyester price up Polyester price up Implies strong demand for cotton Implies strong demand for cotton

5. NextPrevious Cotton: World Stocks/Use Vs. “A” Index August 1990 - September 2000

6. NextPrevious Cotton: World Production, Consumption, Stocks/Use, and “A” Index

7. NextPrevious Foreign Cotton Production, Use, % Stocks/Use and “A” Index, 1980/81-2001/2002

8. NextPrevious Foreign Cotton Area and “A” Index

9. NextPrevious “A” Index Versus Exporting Nations Stocks to Domestic Use Percent

10. NextPrevious China: Production, Consumption, Imports, Exports, and Ending Stocks

11. NextPrevious China: “A” Index and Ending Stocks

12. NextPrevious Cotton: World Ending Stocks Showing China Ending Stocks, 1990/91 - 2000/01

13. NextPrevious China Cotton Supply and Demand Million Bales

14. NextPrevious Cotton: U.S. and Foreign Stocks/Use, Nearby Futures, and “A” Index, Aug. 1989/90 - Aug. 1993/94, and Aug. 99/00 - Sept. 00/01

15. NextPrevious U.S. Cotton Production, Use, % Stocks/Use and North Delta Price, 1980/81-2001/2002

16. NextPrevious U.S. Cotton Domestic Use, Exports, and “A” Index

17. NextPrevious U.S. Mill Consumption, Net Domestic Consumption and U.S. Share, 1972-1999

18. NextPrevious Cotton Futures: December 1992 and 2000 Settlement Prices

19. NextPrevious Cotton Futures: December 1993 and 2000 Settlement Prices

20. NextPrevious World Cotton Prices: “A” Index, Nearby Futures, AWP and U.S. Loan Rate

21. NextPrevious Weekly “A” Index Versus Nearby Futures Settlement Price

22. NextPrevious December 2000 Cotton Futures Settlement Price, U.S. Ending Stocks/Use, and Foreign Ending Stocks/Use

23. NextPrevious Net Bale Commitments of Speculative Traders in Cotton Futures Average Nearby Futures Price, January 1, 1994 - September 15, 2000

24. NextPrevious World: Historical Supply/Demand Price

25. NextPrevious Futures Prices September20, 2000

26. NextPrevious Pricing Strategies Puts for price insurance Puts for price insurance Buy puts, sell out-of-the-money calls Buy puts, sell out-of-the-money calls Forward contracts - problems with deep discounts, financial security Forward contracts - problems with deep discounts, financial security Join marketing association or gin pool Join marketing association or gin pool

27. NextPrevious Keys to Profitable Cotton Industry Industry teamwork Technological advances Production costs under 65 cents/lb. Risk versus alternative crops Increase yields/acre Reduce cost/pound Producer performance accounting Expand world demand

28. NextPreviousSummary 2000/01: Less world supply More use Higher price 2001/02: World production near use U.S. production more than use U.S. supply up Price implications: “A” Index = 65-75 cents ? December ‘01 futures = 62-72 cents ?