The Cotton Research and Promotion Program was created to reverse declining mill and consumer demand for cotton in the U.S. By the mid 1970s, cotton had lost nearly half of its market share to manmade fibers, which led to huge cotton inventories and declining prices. With the implementation of Cotton Incorporated-funded agricultural and textile research, combined with consumer-directed television advertising and retail promotion campaigns, by the middle '80s, cotton began to recapture many of those markets. Presently, cotton's share in apparel and home textiles is nearly the same level it was in the early 1960s, and U.S. consumer per-capita use is a record 37 pounds.

Today, there is a new concern - the loss of acreage to other commodities. Increases in corn prices, largely driven by energy issues, along with higher prices for soybeans, led to a sharp reduction in '07 cotton acreage and an additional decline is likely in 2008. Cotton Incorporated will continue to work to increase cotton demand, while simultaneously working to improve the profitability of cotton growers. Greater opportunities ultimately will lead to a reversal of our recent decline in cotton plantings.

There are already some major signs that bode well for improving the value and opportunities for U.S. cotton, and I would like provide a few thoughts on two of them.

Cotton's World Market Share
While cotton was regaining market share in the U.S. in the '80s and '90s, cotton continued to lose market share globally. The U.S. was essentially responsible for the majority of world demand growth. Weak growth in the rest of the world made higher cotton valuations difficult because the world's ability to produce cotton exceeded world demand. The collapse of the former Soviet Union in the early '90s, and the Asian financial crisis of the late '90s, were contributing factors to this weakness. In particular, cotton lost a tremendous amount of share in China and India, two important textile fiber markets.

This negative global trend appears to be ending. For example, the increase in world cotton consumption ever the past five years has been greater than at any time. China is now leading the way in overall consumer demand for textile fibers and cotton is playing a key role. The Chinese consumer is adopting western fashions, in particular jeans and t-shirts, which are cotton-dominant products. Building cotton demand in the U.S. is having a residual benefit as other countries adopt U.S. fashion trends.

Cotton Incorporated and Cotton Council International are working together to capitalize on this trend. Over the past several years, we have worked to promote cotton in both China and India. Our efforts are designed to help put a modern face on cotton during a period of rapid increases in clothing demand. This is supported with other industry efforts to promote cotton. For example, we held the first Global Denim Event in Shanghai in October, with nearly 300 attendees from all over the world. Its purpose was to promote and seek opportunities for cotton's No. 1 product - denim jeans.

The significance of cotton's turnaround in some key non-U.S. markets should not be underestimated. This is essential for increasing world demand and reducing global inventories of cotton. The stocks-to-use ratio is a key indicator of the value of cotton. Historically, if demand rises and inventories fall, cotton prices show strength. We are seeing some reductions in this ratio which bodes well for future cotton prices. The rise in energy prices will serve to put upward pressure on petroleum-based fiber prices, which should prevent switching to other fibers if cotton prices do rise.