Cotton's share of mill fiber consumption has been increasing since the mid 1980s, due to increased consumer demand for cotton textile products. There has been major restructuring in U.S. textile mills from the 1980s, in terms of the adoption of new spinning and weaving technologies, as well as information systems. However, fluctuating and high cotton fiber prices, coupled with low prices of cotton textile products received by producers, may be leading to a margin squeeze at the intermediate textile mill level. This study uses monthly and quarterly data to analyze factors influencing mill consumption of cotton fiber, for the period 1987-97. Although factors affecting mill fiber consumption, such as relative fiber prices, have been analyzed by several researchers, the time period considered in most of these studies was prior to the mid 1980s, and/or the data used in the analyses were annual data. Consequently, the previous literature does not reflect the changed circumstances of the U.S. textile industry since the 1980s. Moreover, annual data, as used in the previous literature, cannot capture the effects of monthly fiber price variations. In this study, aggregate mill consumption of cotton fiber was modeled as a function of the prices of cotton and manufactured fiber, yarn and fabric prices, and a measure of technology adoption. Two different models were estimated. The first model contained yarn prices as the output prices, and was estimated on a monthly basis for the period October 1987 to October 1997. The second model contained fabric prices as the output prices, and was estimated on a quarterly basis for the period October 1987 to April 1996. The yarn and fabric prices were representative of apparel as well as home textiles end-uses. The results showed that, for the yarn model, mill cotton fiber consumption was positively and significantly related to the price of the yarn used for apparel end-uses, but not to fiber price. The results for the fabric model indicated that mill fiber consumption was positively and significantly related to the price of polyester fiber and to the price of blended print cloth used for apparel end-uses, but mill fiber consumption was not significantly related to cotton fiber price. Technology variables in both models showed a significant, but negative, relationship. These findings imply that mill fiber consumption is more sensitive to output price as compared to input price. Mill sensitivity to output price is apparent for those yarn and fabric types used for apparel end-uses. Yarn and fabric types used for home-textiles end-uses did not show significant coefficients. Thus, it appears that yarns and fabrics applied to apparel are more susceptible to price fluctuations at the output level than those used for home-textile end uses. The negative marginal effect results of the technology variables could mean that the new technology is utilized for the manufacture of complex fabrics used in home textiles, such as jacquards, which leads to higher value-added goods without a necessary increase in the amount of fiber input used. Since output prices (yarn and fabric prices) used for apparel are significant in explaining mill cotton fiber consumption, whereas input prices (fiber prices) are not, a price ceiling at the output level would indicate the potential for a margin squeeze at the intermediate level for textile mills. Output prices used for home textiles are not significant in explaining mill cotton fiber consumption. This implies that mills are responding to factors other than input and output prices in the case of home textiles. Thus, there is less potential for a margin squeeze at the intermediate level. There has been faster growth in production as well as exports of the home textiles segment of the U.S. textile industry in recent years as compared to other segments of the textile industry (Vida & Norton, 1997). As import liberalization continues under the terms of the World Trade Organization (WTO), U.S. textile firms may concentrate more on home furnishings, and start pulling out of the apparel fabrics segment.