Prepared by Economic Services Volume 43 Number 10 November 2012

Prepared by Economic Services Volume 43 Number 10 November 2012 CROP PROUCTION In its November crop report, US estimated a 2012-13 U.S. crop of 17.45 million bales (Exhibit 1). Upland production was estimated at 16.79 million bales and ELS production at 657,000 bales. Harvested area was an estimated 10.44 million acres, implying a non-harvested area of 1.92 million acres based on planted acreage revised from US s June creage Report. The resulting abandonment rate is roughly 15.51%. The national average yield per harvested acre was estimated to be roughly 802 pounds, 15 pounds lower than the 5-year average. Exhibit 1 U.S. Cotton Crop, 2012-13 PLNTE CRES Thou. 1/ HRV. CRES Thou. YIEL PER HRV. CRE Lb. 5-YER VG. YIEL Lb. 480- POUN BLES Thou. UPLN SOUTHEST 2,747 2,728 948 789 5,385 labama 380 377 840 676 660 Florida 108 105 960 760 210 Georgia 1,290 1,285 1,009 826 2,700 North Carolina 585 580 910 780 1,100 South Carolina 298 296 876 797 540 Virginia 86 85 988 811 175 MI-SOUTH 2,020 1,965 994 913 4,070 rkansas 590 580 1,051 985 1,270 Louisiana 230 220 1,004 823 460 Mississippi 470 460 1,012 924 970 Missouri 350 330 975 1,006 670 Tennessee 380 375 896 768 700 SOUTHWEST 6,962 5,127 571 702 6,095 Kansas 57 52 415 653 45 Oklahoma 305 175 411 770 150 Texas 6,600 4,900 578 700 5,900 WEST 392 386 1,542 1,467 1,240 rizona 200 198 1,624 1,502 670 California 142 141 1,617 1,537 475 New Mexico 50 47 970 1,094 95 TOTL UPLN 12,121 10,206 790 805 16,790 TOTL ELS 239 237 1,328 1,324 657 rizona 3 3 1,120 930 7 California 225 224 1,350 1,379 630 New Mexico 3 3 828 814 5 Texas 8 8 960 899 15 LL COTTON 12,360 10,443 802 817 17,447 Source: US-NSS November Crop Production Report. 1/ Updated from June creage Report. On a regional basis, the Southeast crop is estimated at 5.39 million bales based on harvested acres of 2.73 million and a regional average yield of 948 pounds, 159 pounds higher than the 5-year average for the region. In terms of yield per harvested acre, Georgia and Virginia lead all states in the region with an estimated yield of 1,009 pounds per harvested acre and 988 pounds per harvested acre, respectively. Florida leads the region in gains in yield when compared to their 5-year average (+200) followed by Georgia (+183) and Virginia with estimated yields of 988 pounds per harvested acre (+177). In the Mid-South, expected production is 4.07 million bales. Harvested area is estimated to be 1.97 million acres and the expected yield 994 pounds per harvested acre. Only Missouri is expected to see a decline in their yield when compared to their 5-year average (-31). ll remaining states are expected to exceed their 5-year average in terms of yield. The Southwest upland crop is estimated at 6.10 million bales. Expected harvested area is 5.13 million acres and the regional average yield is 571 pounds, 131 pounds lower than their 5-year average of 702 pounds per harvested acre. ll states in the region are down in terms of yield with the greatest decline expected to be seen in Oklahoma, down 359 pounds to 411 pounds per harvested acre. The Texas upland crop is estimated at 5.90 million bales. Expected harvested area is 4.90 million acres and the estimated yield is 578 pounds, down 122 pounds from their 5-year average. Upland production in the West is an estimated 1.24 million bales with an estimated harvested area of 386,000 acres and a regional average yield of 1,542 pounds, 75 pounds higher than the region s 5-year average. The greatest gains in yield are expected for rizona, up 122 pounds to an estimated 1,624 pounds per harvested acre. The ELS crop is an estimated 657,000 bales. Harvested area is pegged at 237,000 acres with an average yield of 1,328 pounds per harvested acre. GINNING PROGRESS US reports that total ginnings as of November 1 were 6.34 million running bales, roughly 1.6% lower than on the comparable date in the 2011-12 marketing year (Exhibit 2). Upland ginnings were 6.21 million running bales, down from 6.37 million running bales the previous year, while ELS ginnings were 55,150 bales higher than the previous year at 126,500 running bales. ll states in the Southeast show a decrease in ginnings when compared to the previous year. Total cotton ginnings in the Southeast were 1.11 million bales as of November 1, a decrease of roughly 454,600 bales when compared to last year. Total cotton ginnings in the Mid-South were 2.87 million bales as of November 1, an increase of approximately 186,200 bales when compared to last year. Total upland cotton ginnings

in the Southwest were 2.01 million bales, an increase of approximately 91,850 bales when compared to last year. Upland Cotton ginnings in the West were approximately 227,750 bales as of November 1, an increase of 17,950 bales when compared to last year. Exhibit 2 Cotton Ginnings s of November 1 (Running Bales) 2011 2012 SOUTHEST 1,560,250 1,105,650 labama 221,200 181,400 Florida 39,200 20,500 Georgia 684,750 564,650 North Carolina 445,000 246,450 South Carolina 112,250 61,600 Virginia 57,850 31,050 MI-SOUTH 2,687,750 2,873,950 rkansas 690,550 943,750 Louisiana 485,150 408,250 Mississippi 679,350 575,050 Missouri 361,600 468,300 Tennessee 471,100 478,600 SOUTHWEST 1,913,700 2,005,550 Kansas N 0 Oklahoma 5,550 22,450 Texas 1,908,150 1,983,100 WEST 209,800 227,750 rizona 109,100 101,950 California 92,500 120,350 New Mexico 8,200 5,450 TOTL UPLN 6,369,050 6,212,500 ELS 71,350 126,500 rizona 1/ 1/ California 68,900 126,100 New Mexico 1/ 1/ Texas 1/ 1/ LL COTTON 6,440,400 6,339,000 Source: US-NSS. Note: Regions may not add to total to avoid disclosure of individual gins. 1/ Not published to avoid disclosing individual gins, but included in U.S. totals. CROP PROGRESS Sixty-four percent of the 2012-13 crop had been harvested as of November 4 (Exhibit 3). Louisiana leads all states in terms of harvesting with 99% of their crop harvested. rkansas and Mississippi are not far behind with 97% and 90% of their crops harvested, respectively. In the Southeast, labama leads all states with 59% of the crop harvested. Roughly half the crop in the remaining states remains to be harvested with percent harvested ranging from 48% (North Carolina) to 53% (Georgia). In the West, California leads the way in terms of harvesting with 70% of the crop harvested. rizona is well behind last year s pace (47%) and their 5-year average (51%) in terms of harvesting with 33% of their crop harvested as of November 4. Oklahoma leads all states in the Southwest with 59% of the crop harvested. Texas is not far behind with 56% of their crop harvested while Kansas has harvested 45% of their crop. Exhibit 3 Weekly Cotton Crop Progress STTE 11/4/2012 10/28/2012 11/4/2011 vg.* (% Harvested) labama 59 43 58 65 rizona 33 30 47 51 rkansas 97 90 92 81 California 70 38 62 56 Georgia 53 37 59 49 Kansas 45 27 31 24 Louisiana 99 98 100 87 Mississippi 90 80 94 81 Missouri 83 70 87 79 North Carolina 48 34 70 65 Oklahoma 59 45 39 38 South Carolina 51 36 67 60 Tennessee 86 71 83 76 Texas 56 42 61 43 Virginia 49 45 74 73 U.S. verage 64 50 68 58 Source: US-NSS. * 5-year verage CROP QULITY ccording to the US, total classings through the week ending November 8 were 7.34 million bales. Nationally, 87.7% of the crop graded 41 or better, a slight decrease from the 5-year average of 87.8% (Exhibit 4). The region showing the largest decrease in color grades over their 5-year average is the Southwest. In that region, 79.9% of the crop is graded 41 or better, down from the 5-year average of 91.5%. The national average staple length thus far is 35.5, equal to the 5-year average. verage staple length is down in the Southwest and West, with the Southwest having the largest decrease (-0.8). Nationally, the average strength for the 2012-13 crop is 30.1 grams/tex, up from the 5-year average of 29.6 grams/tex. Strength is up in all regions when compared to the 5-year averages, with the largest increase occurring in the Mid-South (0.9). Micronaire is also higher in all regions when compared to their 5-year averages. National average micronaire is 46.8, up 2.5 from the 5-year average. With regards to uniformity, the 2012-13 upland cotton crop has slightly higher average uniformity, at 81.1, when compared to the 5-year average. % Grading 41 or Better Exhibit 4 Crop Quality verage Staple verage Strength verage Micronaire verage Uniformity (Through Week November 8, 2012) Southeast 87.6 35.8 29.1 47.3 81.5 (83.4) (34.9) (29.0) (46.2) (80.9) Mid-South 93.1 35.8 30.6 49.0 81.4 (84.4) (35.3) (29.7) (45.7) (81.2) Southwest 79.9 34.9 29.8 43.8 80.5 (91.5) (35.7) (29.6) (42.3) (80.7) West 92.9 36.8 31.8 44.0 81.7 (95.4) (36.9) (31.2) (44.0) (81.4) U.S. 87.7 35.5 30.1 46.8 81.1 (87.8) (35.5) (29.6) (44.3) (80.9) Source: MS, US. * 5-year season-ending averages in parentheses.

CCC LON Outstanding CCC upland cotton loan stocks as of October 31 were 1.81 million running bales, an increase of 1.49 million from the previous month (Exhibit 5). Loan stocks in the Mid-South increased by 1.18 million running bales to 1.29 million bales from the previous month. This region now accounts for 71% of all outstanding loan stocks. CCC loan stocks in the Southeast increased by 181,446 bales from the previous month to 189,140 bales, with the region accounting for 10% of the outstanding total. The Southwest accounts for 13% of the total outstanding loan stocks following an increase of 88,848 bales to 239,224 bales. Loan stocks in the West increased by 31,487 bales to 89,609 bales, leaving the region with 5% of the outstanding total. Form G (cooperative) loans account for 86% of all outstanding loan stocks while Form (producer) account for the remaining 14%. 12 10 8 6 4 2 0 2007 West 2008 Exhibit 5 CCC Loan Southwest 2009 Mid-South Southeast FRM PRICE The September 2012 upland cotton farm price was 70.70 cents/lb. according to US, a decrease of 0.70 from ugust (Exhibit 6). In comparison, the September 2011 upland cotton farm price was 93.50 cents/lb. Marketings for the month were 416,000 running bales, bringing the calendar 2012 total to 7.06 million. The marketing-weighted calendar year average farm price through September 2012 is 83.92 cents/lb. US s preliminary estimate for October is 72.60 cents/lb. The market year average farm price is used for calculating counter-cyclical payments. The counter-cyclical payment rate is determined as follows: (target price) minus (direct payment) minus (greater of 12-month market year average price received or loan rate). When the sum of the direct payments and the 12-month market year average price exceeds the target price, the corresponding counter-cyclical payment is zero. The marketing-weighted crop year average farm price through September is 71.00 cents/lb. This month s World gricultural Supply and emand Estimates (WSE) report forecasted the average price received by farmers for U.S. upland cotton for 2012/13 in a range of 64.00 72.00 cents/lb. 2010 2011 2012 Exhibit 6 Farm Prices for Upland Cotton Calendar Year 2012 (Weighted by Marketings) Marketings (Thousand Running Bales) Prices (Cents/Lb) MONTHLY CUMULTIVE MONTHLY WEIGHTE January 1,541 1,541 90.10 90.10 February 857 2,398 92.30 90.89 March 808 3,206 90.00 90.66 pril 300 3,506 90.40 90.64 May 793 4,299 84.40 89.49 June 725 5,024 77.10 87.70 July 1,300 6,324 76.60 85.42 ugust 316 6,640 71.40 84.75 September 416 7,056 70.70 83.92 October N N 72.60 N Marketing Year 2012-13 (Weighted by Marketings) Marketings (Thousand Running Bales) Prices (Cents/Lb) MONTHLY CUMULTIVE MONTHLY WEIGHTE ugust 316 316 71.40 71.40 September 416 732 70.70 71.00 October N N 72.60 N *October price preliminary estimate. Marketing-Year verage Farm Price (Cents/Lb) 2011-12 Final 88.30 2012-13 proj. 64.00-72.00 Source: US-WOB November Report. U.S. SUPPLY & OFFTKE In its November report, US projected the 2012-13 U.S. crop to reach 17.45 million bales, up 160,000 bales from the October report (Exhibit 7). U.S. mill use and exports were unchanged from the previous month at 3.40 million and 11.60 million bales, respectively. This generates a total 2012-13 offtake of 15.00 million bales. Ending stocks for 2012-13 are projected at 5.80 million bales for an ending stocks-to-use ratio of 38.7%. Exhibit 7 U.S. Cotton Supply/Offtake (Thousand 480-Lb. Bales) 2011-12e 2012-13p Beginning Stocks 2,600 3,350 Production 15,570 17,450 Imports 20 10 Supply 18,190 20,800 omestic Mill Use 3,300 3,400 Exports 11,710 11,600 Offtake 15,010 15,000 Unaccounted For -170 0 Ending Stocks 3,350 5,800 Stocks-to-Use Ratio 22.3% 38.7% Source: US-WOB November Report. e=us estimate, p=us projection.

For the 2011-12 crop year, US gauged U.S. cotton production at 15.57 million bales. Estimated mill use and exports were unchanged from the October report at 3.30 million bales and 11.71 million bales, respectively. Total offtake for the 2011-12 crop year is estimated at 15.01 million bales. Ending stocks were estimated at 3.35 million bales. The estimated stocks-to-use ratio for the 2011-12 marketing year is 22.3%. WORL SUPPLY & OFFTKE In US s November report, the projected 2012-13 world production estimate was raised 510,000 bales from the October report to 116.83 million bales (Exhibit 8). World mill use was lowered 540,000 bales from the October report to a projected 106.33 million bales. Consequently, world ending stocks for 2012-13 are projected to be 80.27 million bales for a stocks-to-use ratio of 75.5%. Exhibit 8 World Cotton Supply/Offtake (Thousand 480-Pound Bales) 2011-12e 2012-13p Beginning Stocks 48,700 69,630 Production 124,280 116,830 Imports 44,800 36,600 Supply 217,780 223,060 Mill Use 103,170 106,330 Exports 45,290 36,600 Offtake 148,460 142,930 Unaccounted For -300-130 Ending Stocks 69,630 80,270 Stocks-to-Use Ratio 67.5% 75.5% Source: US-WOB November Report. e=us estimate, p=us projection. For the 2011-12 marketing year, US estimated world production at 124.28 million bales, up 150,000 bales from the October report. Estimated world mill use was unchanged at 103.17 million. Estimated world ending stocks on July 31, 2012 are now estimated at 69.63 million bales. This has a corresponding stocks-to-use ratio of 67.5%. COMPETITIVENESS World and U.S. cotton prices decreased over the past several weeks. Since the week ending October 25, the average of the 5 lowest Far East quotes decreased 3.45 cents/lb. to 80.23 cents for the week ending November 8 (Exhibit 9). The low U.S. quote for the Far East (USFE) decreased 4.80 cents/lb. over the same period taking a value of 80.95 cents for the week ending November 8. For the week ending November 15, the WP will be valued at 59.98 cents/lb. for a corresponding marketing loan gain of 0.00 cents/lb. new provision under the Food, Conservation and Energy ct of 2008, is the Fine Count djustment. For qualities better than 31-3-35, the Fine Count djustment can further reduce the WP to reflect differences between premiums in the U.S. market and international markets. For the week end- ing November 15, the Fine Count djustment is 1.21 cents/ lb. for the 2011 crop and 1.41 cents/lb. for the 2012 crop. Exhibit 9 Competitiveness Week Ending 11/15/12 11/8/12 11/1/12 10/25/12 (Cents/Lb.) U.S. FE Low Quote -- 80.95 82.10 85.75 5 Lowest FE Quotes -- 80.23 81.35 83.68 djusted World Price 59.98 61.10 63.43 61.41 Marketing Loan Gain 0.00 0.00 0.00 0.00 Fine Count dj. ( 11 Crop) 1.21 1.07 0.96 1.26 Fine Count dj. ( 12 Crop) 1.41 1.27 1.16 1.46 ELS Comp Pymnt 0.00 0.00 0.00 0.00 (Bales) Import Quotas Open 831,790 828,260 824,732 821,204 ELS competitiveness payments are provided whenever, for 4 consecutive weeks, the lowest Friday through Thursday average adjusted price quotation for foreign growths (LFQ) is less than the Friday through Thursday average price quotation for U.S. Pima cotton, CFR Far East (USPFE); and the adjusted LFQ is less than 134 percent of the current crop year loan level for ELS cotton grade 2, staple 46, micronaire 3.5 or higher, strength 37.5 grams per tex and above (81.40 cents per pound). For the week ending November 15, the ELS competitiveness payment is 0.00 cents/lb. When the Friday through Thursday weekly average U.S. Far East price exceeds the prevailing world market price for any 4 consecutive weeks, a special import quota is triggered. Each quota is equal to one week of cotton mill use by domestic mills based on the seasonally adjusted data for the most recent 3 months for which data are available. To enter under the quota, cotton must be purchased not later than 90 days, and entered into the U.S. not later than 180 days, from the date the quota is announced. For the week ending November 15, there are 13 quotas opened in the total amount of 831,790 bales (480-lbs.). EXPORTS Total export commitments of upland and ELS cotton through the week ending November 1 were approximately 6.5 million bales, roughly 26% lower than total sales at the same point in the 2011-12 marketing year (Exhibit 10). Shipments through November 1 were 2.1 million bales, up from 1.3 million the previous year. Outstanding commitments as of November 1 were approximately 4.5 million bales, down from approximately 7.5 million the previous year. Exhibit 10 Export Summary Through week ending November 1, 2012 (Thousand 480-lb. Bales) MY12 MY11 Outstanding Sales 4,451 7,522 Shipments 2,098 1,334 Total Sales 6,549 8,856 New Crop Sales 280 345 Source: US-FS.

2011-12 World Cotton Supply & Offtake (Million 480-Lb. Bales) Beg Stocks Production Imports Supply Mill Use Exports End Stocks Stocks/Use World 48.7 124.3 44.8 217.8 103.2 45.3 69.6 67.5% U.S. 2.6 15.6 0.0 18.2 3.3 11.7 3.4 22.3% China 10.6 33.1 24.5 68.2 38.0 0.1 30.2 79.3% Pakistan 2.7 10.6 1.0 14.3 10.1 1.2 3.1 27.2% India 10.1 27.5 0.6 38.2 20.0 10.5 7.7 25.4% Central sia 2.4 6.9 0.0 9.3 2.1 4.2 3.0 47.5% ustralia 2.6 5.5 0.0 8.1 0.0 4.6 3.5 75.2% Brazil 7.9 8.7 0.0 16.6 4.0 4.8 8.0 90.9% Indonesia 0.4 0.0 2.0 2.5 1.9 0.0 0.5 25.0% Mexico 0.6 1.2 1.0 2.8 1.7 0.3 0.8 37.7% Turkey 1.7 3.4 2.4 7.5 5.6 0.3 1.7 29.2% 2012-13 World Cotton Supply & Offtake (Million 480-Lb. Bales) Beg Stocks Production Imports Supply Mill Use Exports End Stocks Stocks/Use World 69.6 116.8 36.6 223.1 106.3 36.6 80.3 75.5% U.S. 3.4 17.5 0.0 20.8 3.4 11.6 5.8 38.7% China 30.2 31.5 11.0 72.7 35.5 0.1 37.1 104.3% Pakistan 3.1 10.0 2.4 15.5 11.5 0.5 3.4 28.6% India 7.7 25.5 1.0 34.2 22.0 3.5 8.7 34.2% Central sia 3.0 6.9 0.0 10.0 2.3 4.5 3.1 46.2% ustralia 3.5 4.3 0.0 7.8 0.0 4.3 3.6 84.6% Brazil 8.0 6.5 0.1 14.5 4.1 4.0 6.6 81.4% Indonesia 0.5 0.0 2.3 2.8 2.2 0.0 0.5 24.3% Mexico 0.8 0.9 1.3 2.9 1.8 0.3 0.8 37.1% Turkey 1.7 2.8 3.5 8.0 6.0 0.2 1.9 29.8% Source: US-WOB November Report. This publication includes the latest information as of November 9, 2012. ata released later are available from the NCC home page at www.cotton.org. This publication is also available on the NCC home page in the Members Only section. Unless otherwise noted, all bale references pertain to statistical (480-lb.) bales.