Katrina Had Only A Marginal Impact On Cotton Production

Woods Eastland, president of the National Cotton Council (NCC), predicts hurricane Katrina will
likely result in a relatively minor loss of some 100,000 to 200,000 bales of cotton, but there was
no significant damage to gins or warehouses. He says, however, that the higher cost of fuel as a
result of the shutdown of refineries will have an impact on harvesting and transportation of the
current crop, and that could lead to higher prices.

The US Department of Agriculture said that even with the Katrina-related losses, production
nationwide this year should be at 22.3-million bales, which would be down 4 percent from last year,
but still the second highest in history.

Eastland also commented on the proposal to eliminate Step 2 of the Cotton Competitiveness
program, whereby textile mills and cotton merchants have been paid a subsidy when the cost of
domestic cotton is higher than the world price. The World Trade Organization has ruled that Step 2
is an illegal subsidy, and the US government is trying to find ways to comply with that ruling.
There is little doubt Step 2 will be eliminated, but NCC and textile manufacturers are hoping that
action will not take place until Congress enacts a new farm bill in 2006 or 2007. Eastland says the
Council is seeking other options rather than the immediate elimination of Step 2 .

September 2005