Macroeconomic Environment

U.S. and World Cotton Economic Outlook

May 2011

Prepared by:Economic Services

National Cotton Council

U.S. and World Cotton Economic Outlook

May 2011

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 11

Dollars per Barrel

2030405060708090

100110120130140150160

Au

g-0

5

No

v-0

5

Fe

b-0

6

Ma

y-0

6

Ju

l-0

6

Oc

t-0

6

Ja

n-0

7

Ap

r-0

7

Ju

l-0

7

Oc

t-0

7

De

c-0

7

Ma

r-0

8

Ju

n-0

8

Se

p-0

8

De

c-0

8

Ma

r-0

9

Ju

n-0

9

Au

g-0

9

No

v-0

9

Fe

b-1

0

Ma

y-1

0

Au

g-1

0

No

v-1

0

Fe

b-1

1

Ap

r-1

1

U.S. Crude Oil Spot Price

Cents per Gallon

80110140170200230260290320350380410440

Jun

-06

Sep

-06

Dec

-06

Mar

-07

May

-07

Au

g-0

7

No

v-07

Feb

-08

May

-08

Au

g-0

8

Oct

-08

Jan

-09

Ap

r-09

Jul-

09

Oct

-09

Jan

-10

Ap

r-10

Jul-

10

Sep

-10

Dec

-10

Mar

-11

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 11

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 11

Civilian Unemployment Rate

$ Billions

-1,800

-1,400

-1,000

-600

-200

200

10 11 12 13 14 15 16 17 18 19 20

10-Aug 11-Jan

U.S. Federal Budget Surplus(CBO Projection)

$ Billion

0

2

4

6

8

10

12

14

16

18

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Upland Cotton Other Commodity Programs Conservation

$ Billion

0

2

4

6

8

10

12

14

16

18

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

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

2009 2010 2011 2012

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

July

Jan

-11

Euro(Currency per U.S. Dollar)

90

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

Jan

-11

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

8090

100110120130140150160170180190200210

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

Jul

Jan

-11

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 09 10f 11f

Market Government Emergency

U.S. Net Farm Income

U.S. Cotton Supply

30405060708090

100110120130140150160

Au

g

Se

p

No

v

Jan

Ma

r

Ma

y

Ju

l

Se

p

No

v

Dec-11 Dec -10

30405060708090

100110120130140150160

Au

g

Se

p

No

v

Jan

Ma

r

Ma

y

Ju

l

Se

p

No

v

Dec-11 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-11 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-11 Nov-10

November Soybean FuturesCents per Bushel

SoutheastSoutheast 2,597 2,597 3,095 3,095 19.219.2Mid-SouthMid-South 1,920 1,920 2,280 2,280 18.8 18.8 SouthwestSouthwest 5,886 5,886 6,488 6,488 10.2 10.2 WestWest 366 366 450 450 23.0 23.0

ALL UPLANDALL UPLAND 10,76910,769 12,31312,313 14.314.3

ALL ELSALL ELS 204 204 253 253 23.7 23.7

ALL COTTONALL COTTON 10,973 10,973 12,566 12,566 14.514.5

SoutheastSoutheast 2,597 2,597 3,095 3,095 19.219.2Mid-SouthMid-South 1,920 1,920 2,280 2,280 18.8 18.8 SouthwestSouthwest 5,886 5,886 6,488 6,488 10.2 10.2 WestWest 366 366 450 450 23.0 23.0

ALL UPLANDALL UPLAND 10,76910,769 12,31312,313 14.314.3

ALL ELSALL ELS 204 204 253 253 23.7 23.7

ALL COTTONALL COTTON 10,973 10,973 12,566 12,566 14.514.5

2011 U.S. Cotton Plantings

20102010 20112011 %% Actual Actual Intended* Intended* ChangeChange

20102010 20112011 %% Actual Actual Intended* Intended* ChangeChange

Thousand AcresThousand AcresThousand AcresThousand Acres

*2011 USDA Prospective Plantings*2011 USDA Prospective Plantings

SoutheastSoutheast 1,051 1,051 1,253 1,253 19.219.2Mid-SouthMid-South 777 777 923 923 18.8 18.8 SouthwestSouthwest 2,382 2,382 2,626 2,626 10.2 10.2 WestWest 148 148 182 182 23.0 23.0

ALL UPLANDALL UPLAND 4,3584,358 4,9834,983 14.314.3

ALL ELSALL ELS 83 83 102 102 23.7 23.7

ALL COTTONALL COTTON 4,441 4,441 5,085 5,085 14.514.5

SoutheastSoutheast 1,051 1,051 1,253 1,253 19.219.2Mid-SouthMid-South 777 777 923 923 18.8 18.8 SouthwestSouthwest 2,382 2,382 2,626 2,626 10.2 10.2 WestWest 148 148 182 182 23.0 23.0

ALL UPLANDALL UPLAND 4,3584,358 4,9834,983 14.314.3

ALL ELSALL ELS 83 83 102 102 23.7 23.7

ALL COTTONALL COTTON 4,441 4,441 5,085 5,085 14.514.5

2011 U.S. Cotton Plantings

20102010 20112011 %% Actual Actual Intended* Intended* ChangeChange

20102010 20112011 %% Actual Actual Intended* Intended* ChangeChange

Thousand HectaresThousand HectaresThousand HectaresThousand Hectares

*2011 USDA Prospective Plantings*2011 USDA Prospective Plantings

0

4

8

12

16

20

24

28

97 98 99 00 01 02 03 04 05 06 07 08 09 10e 11p

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

97 98 99 00 01 02 03 04 05 06 07 08 09 10e 11p

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

99 00 01 02 03 04 05 06 07 08 09 10 11f

Mill

ion

Bal

es

0

2

4

6

8

10

12

Mill

ion

Met

ric

To

ns

Cotton Other

Net Domestic Fiber Consumption

Percent

41.0

41.5

42.0

42.5

43.0

43.5

44.0

44.5

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

Cotton’s Share of Fiber Consumption

Fiber Equivalents

0

4

8

12

16

20

24

28

99 00 01 02 03 04 05 06 07 08 09 10 11f

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

99 00 01 02 03 04 05 06 07 08 09 10 11f

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

10

20

30

40

50

60

99 00 01 02 03 04 05 06 07 08 09 10 11f

Mill

ion

Bal

es

0

2

4

6

8

10

12

Mill

ion

Met

ric

To

ns

Cotton Other

U.S. Trade With Mexico

0

1

2

3

01 02 03 04 05 06 07 08 09 10

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

01 02 03 04 05 06 07 08 09 10

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

7

8

01 02 03 04 05 06 07 08 09 10

Mill

ion

Ba

les

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

Mill

ion

Me

tric

To

ns

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

0

2

4

6

8

10

12

99 00 01 02 03 04 05 06 07 08 09 10 11f

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

99 00 01 02 03 04 05 06 07 08 09 10e 11p

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

99 00 01 02 03 04 05 06 07 08 09 10e 11p

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

99 00 01 02 03 04 05 06 07 08 09 10e 11p

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

150

99 00 01 02 03 04 05 06 07 08 09 10e 11p

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

30

50

70

90

110

130

150

170

190

210

230

250

Ja

n-0

4

Ap

r-0

4A

ug

-04

No

v-0

4

Ma

r-0

5J

un

-05

Se

p-0

5

Ja

n-0

6A

pr-

06

Au

g-0

6

No

v-0

6M

ar-

07

Ju

n-0

7

Oc

t-0

7J

an

-08

Ma

y-0

8

Au

g-0

8N

ov

-08

Ma

r-0

9

Ju

n-0

9O

ct-

09

Ja

n-1

0

Ma

y-1

0A

ug

-10

De

c-1

0

Ma

r-1

1

"A" FE Index

Asian Polyester Staple

Fiber Prices

World Cotton Mill Use

0

20

40

60

80

100

120

140

99 00 01 02 03 04 05 06 07 08 09 10e 11p

Mill

ion

Ba

les

0

5

10

15

20

25

30

Mill

ion

Me

tric

To

ns

30405060708090

100110120130140

99 00 01 02 03 04 05 06 07 08 09 10e 11p

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

99 00 01 02 03 04 05 06 07 08 09 10e 11p

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

99 00 01 02 03 04 05 06 07 08 09 10e 11p

Mill

ion

Ba

les

0

2

4

6

8

10

12

14

Mill

ion

Me

tric

To

ns

U.S. ROW China

55

52

4341

60

4444

58

49

4442

5657

0

10

20

30

40

50

60

70

80

99 00 01 02 03 04 05 06 07 08 09 10e 11p

Percent

Cotton Stocks/Use (World less China)

U.S. Supply and DemandMillion Bales

Beginning StocksBeginning Stocks 2.952.95 1.751.75ProductionProduction 18.1018.10 18.0018.00ImportsImports 0.010.01 0.010.01

Total SupplyTotal Supply 20.0620.06 19.7619.76

Mill UseMill Use 3.803.80 3.803.80ExportsExports 15.5015.50 13.5013.50

Total OfftakeTotal Offtake 19.3019.30 17.3017.30

Ending StocksEnding Stocks 1.751.75 2.502.50Stocks-to-Use RatioStocks-to-Use Ratio 9.1%9.1% 14.5%14.5%

2010/11e 2011/12p

U.S. Supply and DemandMillion Metric Tons

Beginning StocksBeginning Stocks 0.640.64 0.380.38ProductionProduction 3.943.94 3.923.92ImportsImports 0.000.00 0.000.00

Total SupplyTotal Supply 4.594.59 4.314.31

Mill UseMill Use 0.830.83 0.830.83ExportsExports 3.383.38 2.942.94

Total OfftakeTotal Offtake 4.204.20 3.773.77

Ending StocksEnding Stocks 0.380.38 0.540.54Stocks-to-Use RatioStocks-to-Use Ratio 9.1%9.1% 14.5%14.5%

2010/11e 2011/12p

Beginning Stocks 44.28 42.52Production 114.60 124.72Imports 37.00 39.86

Mill Use 116.51 119.50Exports 37.00 39.87

Ending Stocks 42.52 47.93Stocks-to-Use Ratio 36.5% 40.1%

Beginning Stocks 44.28 42.52Production 114.60 124.72Imports 37.00 39.86

Mill Use 116.51 119.50Exports 37.00 39.87

Ending Stocks 42.52 47.93Stocks-to-Use Ratio 36.5% 40.1%

World Supply and DemandMillion Bales

2010/11e 2011/12p

Beginning Stocks 9.65 9.26Production 24.97 27.17Imports 8.06 8.68

Mill Use 25.38 26.03Exports 8.06 8.69

Ending Stocks 9.26 10.44Stocks-to-Use Ratio 36.5% 40.1%

Beginning Stocks 9.65 9.26Production 24.97 27.17Imports 8.06 8.68

Mill Use 25.38 26.03Exports 8.06 8.69

Ending Stocks 9.26 10.44Stocks-to-Use Ratio 36.5% 40.1%

World Supply and DemandMillion Metric Tons

2010/11e 2011/12p

MerchantsMerchantsGinnersGinners CottonseedCottonseed

ProducersProducers

CooperativesCooperatives

WarehousesWarehousesManufacturersManufacturers