Cotton Economic
Update
National Cotton Council
Mid-Year Board Meeting
Amelia Island, Florida
August 24-26, 2009
Has the Economy Bottomed?
• Fed Chairman Bernanke thinks so
– “After contracting sharply over the past
year, economic activity appears to be
leveling out, … ,and the prospects for a
return to growth in the near term appear
good.”
– “the economic recovery is likely to be
relatively slow at first...”
% Change in Real GDP
Percent
8
6
4
3rdQ?
2
0
-2
-4
US
World (Source: IMF)
-6
-8
06
07
08
09
Cotton & Textile Demand
Textile Trade Declined thru May
(Totals as reported by Global Trade Atlas)
Billion Dollars
60
50
40
30
20
10
0
Jan05
Jul05
Jan06
Jul06
Jan07
Jul07
Jan08
Jul08
Jan09
Jul09
US Cotton Domestic Consumption
Million Bale Equivalents
25
20
15
10
5
0
00
01
02
03
04
05
06
07
08
09f
More Modest Drop in US Spending
for Clothing & Shoes
% Change from Previous Quarter
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
05
06
07
08
09
US Cotton Mill Use
Million 480-Lb. Bales
7
Monthly Mill Use, Annualized
Crop Year Total
6
5
4
3
2
1
08-09
02-09
08-08
02-08
08-07
02-07
08-06
02-06
08-05
0
International Markets
Update on Key Countries
• W Africa – Lower production & exports
• Brazil – Some quality concerns with
current harvest; expected shift to
soybeans
• Central Asia – Smaller crops due to
reduced area
• Pakistan – No widespread concerns on
production; new support to textile
industry & some improvements in
spinning margins
China Cotton Supply & Use
Million Bales
70
Net Imports
Production
Use/Unacct
Stocks
60
50
40
30
20
10
0
02
03
04
05
06
07
08
09f
Apr-09
Jan-09
Oct-08
Jun-08
China Index
Mar-08
Nov-07
Aug-07
Apr-07
Jan-07
Sep-06
Jun-06
Mar-06
Nov-05
Aug-05
Cents/Pound
China Cotton Price vs. A Index
100
A (FE)
90
80
70
60
50
40
India’s Min Support Price
Rupees per Metric Ton
30,000
25,000
20,000
15,000
10,000
5,000
0
02
03
04
05
06
07
08
09
India Cotton Supply & Use
Million Bales
30
Net Exports
Production
Use
Stocks
25
20
15
10
5
0
-5
02
03
04
05
06
07
08
09f
Cotton Exports
Million Bales
32
U.S.
28
Rest of World
24
20
16
12
8
4
0
02
03
04
05
06
07
08
09
US Production
‘09 Cotton Acres @ 9.05 Million
Million Acres
8
SE
7
Mid-South
SW
West
6
5
4
3
2
1
0
00
01
02
03
04
05
06
07
08
09e
US Acres & Relative Prices
Cotton Area vs Relative Prices
18
0.30
Cotton/Corn
Cotton/Soy
15
0.25
12
0.20
9
0.15
6
0.10
3
0.05
0
0.00
01
02
03
04
05
06
07
08
09e
Ratio of Futures Prices
Million Acres
Planted
US Cotton Production
Million Bales
30
August Estimate
23.3
25
20
15
18.3
20.2
Final
23.9
21.6
21.3
19.2
20.4
17.3
17.1
13.8
13.2
10
12.8
5
0
03
04
05
06
07
08
09
Cotton Crop Conditions
% Rated Good & Excellent
60
55
50
45
40
35
2006
2007
2008
2009
30
6/14
6/28
7/12
7/26
8/9
8/23
9/6
9/20
US Supply & Demand
2009/10
Beg Stocks
6.10
6.0-6.2
Production
13.21
13.2-14.0
Total Supply
19.31
19.2-20.2
Mill Use
Exports
3.50
10.20
3.2-3.5
10.0-11.0
5.60
4.7-7.0
Ending Stocks
Aug-09
Apr-09
Dec-08
Nearby NY
Sep-08
May-08
Jan-08
Aug-07
Apr-07
Dec-06
Aug-06
Apr-06
Jan-06
Cents/Pound
Cotton Prices
95
A (FE)
85
75
65
55
45
35
Summary
Recovery in Mill Use?
Percent Change in World Mill Use
15%
10%
5%
0%
-5%
-10%
-15%
00
01
02
03
04
05
06
07
08
09
Drawdown in World Stocks?
Million Bales
15
Projected Stock Change at
Beginning of Year
12
9
Actual Stock Change
6
3
0
-3
-6
-9
-12
02
03
04
05
06
07
08
09
Have US Acres Bottomed?
Cotton Area vs Relative Prices
18
0.30
Cotton/Corn
Cotton/Soy
15
0.25
12
0.20
9
0.15
6
0.10
3
0.05
0
0.00
01
02
03
04
05
06
07
08
09e
’10 ratios based on current Dec & Nov ’10 futures contracts
10?
Ratio of Futures Prices
Million Acres
Planted
Producers
Cooperatives
Ginners Cottonseed Merchants
Warehouses
Manufacturers