The Rupp Report: News From The Cotton Front

For certain, the last 18 to 24 months will become a time to remember in the history books. The
worst financial crisis since 1929 pushed the world economy into unexpected problems.

Volatile Cotton Season 2008-09

The same period was also volatile for the cotton industry. According to the International
Cotton Advisory Committee (ICAC), 2008-09 was a remarkable season for the world cotton industry in
many respects. According to ICAC, there were at least eight reasons this season was different:

•    World cotton mill use fell for the first time in a decade, due to a drop
in demand for textile products caused by the global economic and financial crisis. The estimated
13-percent drop was the largest registered since World War II.

•    World cotton area declined after a large increase in cotton prices during
the preceding season. Cotton remained less attractive for farmers than competing crops, partly due
to higher production costs and partly due to less interesting prices.

•    Production declined to the lowest levels in many years in a number of
countries, including the United States, Turkey, Greece, Egypt, Mali, Peru, Spain, Paraguay, Togo,
Israel and South Africa.

•    Extra-fine cotton production dropped by 42 percent to 430,000 metric
tons, the smallest crop in at least six decades.

•    World cotton trade declined sharply. The 24-percent annual decline was
the largest registered since World War II. The drop in imports was driven by China and Pakistan.
The drop in exports was driven by India. US exports declined only slightly, and their share of
world exports reached 45 percent.

•    The Cotlook A Index declined for the first time since 2004-05. It
declined from an 11-year high of 73 cents per pound in 2007-08 to 61 cents per pound in 2008-09,
driven by an increase in the stocks-to-mill use ratio in the world not including China.

•    International cotton prices were very volatile. The Cotlook A Index
fluctuated between 50 and 80 cents per pound during the season, an interval equal to 50 percent of
the season average. The Cotlook A Index had not been as volatile in more than 20 years.

•    Government support to cotton farmers increased significantly. Combined
government purchases in China, India and the United States, at support prices, accounted for 20
percent of the 2008-09 crop. Large portions of these purchases have since been sold back to the

More Cotton In Demand

On the other hand, the Bremen Cotton Report reports that along with the ending of the work
holidays in most areas, spinning mill demand perked up. Virtually all growths for which offers were
available were traded. The delivery terms were not only fixed for short term, but also for the
second quarter of 2010. The cotton quotations in New York had shown a slightly weaker tendency
during the reporting period, however without having been indicative. At the end, they had returned
to the level of the previous week.

In the Upland range, the conclusion of contracts was registered as follows: Central Asian
sorts for prompt, further in the third and fourth quarters of 2009, and in the first quarter of
2010; Greek descriptions for the same period of time; West African styles for prompt, for the
fourth quarter of 2009, and for dates in the first and second quarters of 2010; Brazilian cotton
and Israel Acala for prompt, and for the fourth quarter of 2009.

In the long-staple and extra-long-staple range trading was as follows: Egyptian Giza 86 and
88 for prompt, and further in the fourth quarter of 2009; Israel Pima and US Pima for the fourth
quarter of 2009, and for the first quarter of 2010; and Sudan Barakat for the fourth quarter of

Giant Merger

Allenberg Cotton Co., one of the world’s leading cotton trading houses, is planning to merge
with Dunavant Enterprises Inc. Several news agencies, including Bremen Cotton Report, state that
Joseph T. Nicosia, CEO of Allenberg, as well as William B. Dunavant III, president and CEO of
Dunavant, confirmed they are in negotiations. In case of settlement, the continuously existing
business entity would carry on under the name Louis Dreyfus and Allenberg.

Allenberg Cotton is a division of Louis Dreyfus Corp. Its head office, Louis Dreyfus S.A.S.,
is located in France. The cotton trading company is based in Cordova, Tenn., near Memphis, Tenn.
Annual sales are projected at more than 1.5 million metric tons, or 7 million bales. Dunavant, one
of the largest privately owned cotton trading companies, is also based in Memphis. Its annual sales
amount to approximately 1.3 million metric tons, or 6 million bales.

September 1, 2009