Cotton Economic Update National Cotton Council Mid-Year Board Meeting Aug 22-24, 2007.

Cotton Economic Update

National Cotton CouncilMid-Year Board Meeting

Aug 22-24, 2007

0

10

20

30

40

50

60

70

80

90

100

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09

$/Barrel Forecast

W. Texas Crude Oil Price

0

50

100

150

200

250

300

Jan

-02

Jul

Jan

-03

Jul

Jan

-04

Jul

Jan

-05

Jul

Jan

-06

Jul

Jan

-07

Jul

Fertilizer Fuel

Index of Prices Paid

Southeast 3,353 2,360 -29.6Mid-South 4,235 2,730 -35.5 Southwest 6,835 5,255 -23.1 West 525 415 -21.0

ALL UPLAND 14,948 10,760 -28.0

ALL ELS 326 298 -8.6

ALL COTTON 15,274 11,058 -27.6

2007 U.S. Cotton Acreage

2006 2007 % Actual Intentions* Change

Thousand Acres

*USDA-NASS *USDA-NASS

Crop Futures Prices

’06 ’07 Ratio

Jan-Mar Avg

Cotton (Dec) $0.593 $0.588

Corn (Dec) $2.45 $4.06 6.91

Soybeans (Nov) $6.15 $7.87 13.39

Wheat (Jul) $3.92 $5.00 8.51

Ratio of Futures Prices

2

4

6

8

10

12

14

98 99 00 01 02 03 04 05 06 07 08

Corn/Cotton Soy/Cotton Wheat/Cotton

Million Bales

0

4

8

12

16

20

24

28

98 99 00 01 02 03 04 05 06 07p

U.S. Cotton Production

Million 480 Lb Bale Equivalents

0

5

10

15

20

25

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

U.S. Cotton Retail Consumption

2007

2006

Billion Dollars

$200

$250

$300

$350

$400

$450

$500

$550

$600

$650

02-I 02-III 03-I 03-III 04-I 04-III 05-I 05-III 06-I 06-III 07-I

Energy Clothing & Shoes

Consumption Expenditures

Million Bale Equivalents

0

4

8

12

16

20

24

28

98 99 00 01 02 03 04 05 06 07f

Imported Retail

U.S. Cotton Retail Consumption

U.S. Cotton Mill Use

Million Bales

0

2

4

6

8

10

12

98 99 00 01 02 03 04 05 06 07p

Million Bales

-5

0

5

10

15

20

25

98 99 00 01 02 03 04 05 06 07p

Net Exports Production Use Stocks

India Cotton Supply & Use

Million Bales

-2

0

2

4

6

8

98 99 00 01 02 03 04 05 06 07p

Net Exports Production Use

Brazil Cotton Supply & Use

Cotton Production & Use(Foreign less China)

Million Bales

40

45

50

55

60

65

70

75

98 99 00 01 02 03 04 05 06 07p

Mill Use Production

Million Bales

-10

0

10

20

30

40

50

60

98 99 00 01 02 03 04 05 06 07p

Net Imports Production Use Stocks

China Cotton Supply & Use

U.S. Cotton Exports

Million Bales

0

24

6

810

12

14

1618

20

98 99 00 01 02 03 04 05 06 07p

World Cotton Production & Use

Million Bales

80

90

100

110

120

130

140

98 99 00 01 02 03 04 05 06 07p

Mill Use Production Mill + Unnactd

Cotton Stocks-to-Use

0%

10%

20%

30%

40%

50%

60%

70%

98 99 00 01 02 03 04 05 06 07p

US World

Cents/Pound

35

45

55

65

75

Au

g-0

4

Oc

t-0

4

Ja

n-0

5

Ap

r-0

5

Ju

l-0

5

Oc

t-0

5

Ja

n-0

6

Ap

r-0

6

Ju

n-0

6

Se

p-0

6

De

c-0

6

Ma

r-0

7

Ju

n-0

7

Nearby NY A (FE)

Nearby NY and “A” (FE) Index

Looking Forward Bullish Factors

Production below use Stocks tighten Continued competition for available acres

40

50

60

70

80

Au

g

Sep

No

v

Jan

Mar

May

Ju

l

Sep

No

v

Dec 06 Dec 07 Dec 08

December Cotton Futures

Cents per Pound

175

225

275

325

375

425

475

Au

g

Oct

Dec

Feb

Ap

r

Ju

n

Au

g

Oct

Dec

Dec 06 Dec 07 Dec 08

December Corn Futures

Cents per Bushel

500

600

700

800

900

1000

Au

g

Oct

Dec

Feb

Ap

r

Ju

n

Au

g

Oct

Nov 06 Nov 07 Nov 08

November Soybean Futures

Cents per Bushel

Ratio of Futures Prices

2

4

6

8

10

12

14

98 99 00 01 02 03 04 05 06 07 08

Corn/Cotton Soy/Cotton Wheat/Cotton

Looking Forward Bullish Factors

Production below use Stocks tighten Continued competition for available acres

Bearish Factors Expanding production in other countries (India) Maintaining demand at higher price levels

Index (2005 = 100)

80

90

100

110

120

130

140

Jan

-04

Ap

r-04

Au

g-0

4

No

v-04

Mar

-05

Jun

-05

Sep

-05

Jan

-06

Ap

r-06

Au

g-0

6

No

v-06

Mar

-07

Jun

-07

A (FE) Asian Polyester Cotlook Yarn

Price Indices

Looking Forward Bullish Factors

Production below use Stocks tighten Continued competition for available acres

Bearish Factors Expanding production in other countries (India) Maintaining demand at higher price levels

Wild cards Relying on China to buy 40-50% of US crop General economic performance

MerchantsGinners Cottonseed

Producers

Cooperatives

WarehousesManufacturers