A Mixed Bag

pinners described their business outlook as a mixed bag, and expressed some uncertainty
about the effect of January’s quota phase-out.

“It’s tough to tell what will happen in the next few months with the barriers coming down on
imports in January 2005,” said an open-end (OE) spinner.

“I do think the spinners that are left should take a closer look at their pricing procedures.
It seems like we are competing more with ourselves than with imports.”

A specialty ring spinner said business has picked up recently. “We are optimistic that we
will have strong business opportunities in the first quarter, like last year,” he said.

Finishing Out 2004

Spinners are easing into the expected holiday wind-down. “We’ll gain a little bit of inventory
going into Thanksgiving and Christmas, which is not a terrible thing because our inventory has been
extremely low,” said a ring spinner.

“We will run through Thanksgiving and take five days off for Christmas. Most of our major
customers are running through Thanksgiving,” he said.

He noted his company is seeing a fair amount of weaving business, which he finds encouraging.

One OE spinner said, “Running conditions are pretty good right now. Of course, going into
December, generally things slack off a bit. Pricing is not where we want it to be.”

Yarn prices have dipped as spinners had to pass falling cotton fiber prices on to their

“We’ve pretty much given back the decrease in cotton prices,” said another spinner. “I know
that we, as well as other spinners, are probably not going to really get into [consuming] 40-cent
[per pound] cotton until probably January.”

China Safeguards

Spinners’ assessments of the value of recent China safeguard petitions were mixed. “We have been
talking to the government really hard for the last five or 10 years,” said an OE spinner. “They
have meetings with you and say they feel your pain, and then they go back to Washington and do what
they’ve been doing. I’d be amazed if [the China safeguards] have the effect we would all like to

Another spinner was upbeat about the National Council of Textile Organizations’ unifying
effect on the industry.

“I am very optimistic that we have a unified voice for the industry, speaking out and working
diligently to have a positive impact on trade legislation for our industry,” he said.

“It’s encouraging that they are trying,” added a ring spinner. “I don’t know if it will
necessarily help. I don’t know how the whole thing will shake out. We haven’t seen a lot of orders
for the first quarter, so we are a bit concerned.” He also noted yarn orders have become much more
last-minute, which may be a mitigating circumstance.

A specialty spinner had what was probably the most pragmatic view. “We need to file as many
[China safeguard petitions] as we possibly can,” he said. “We are still very concerned about 2005.
Our export business is a highlight. It is doing well, although we have seen it drop off a bit in
the last couple of months. We wonder if retailers are slacking off on their orders in the Caribbean
Basin Initiative region in anticipation of what they are going to bring in from China.”

Record Cotton Yields Expected

In its November crop report, the US Department of Agriculture (USDA) forecast US cotton
production at 22.5 million 480-pound bales, up 5 percent from October and up 23 percent from last
year’s production. Yield is expected to average a record-high 818 pounds per harvested acre, up 36
pounds from last month. If realized, the yield will be 88 pounds above the previous record-high
yield, established in 2003.

Record-high yields are expected in Arkansas, California, Mississippi, Missouri, New Mexico,
North Carolina, Oklahoma, Tennessee and Texas. Harvested area, at 13.2 million acres, is unchanged
from October, but 10 percent above 2003.

According to the USDA, total classings through early November were approximately 8.6 million
running bales. Nationally, 90.7 percent of the crop graded 41 or better, an increase from the
five-year average of 84.2 percent. All regions show an increase in color grades over their
five-year averages. The national average staple length thus far is 35.3, up slightly from the
five-year average of 34.6.

December 2004