The cotton marketing loan resulted in much lower prices for U.S. cotton when it first became effective on August 1, 1986. In response, exports have increased dramatically from very low 1985 levels and mill purchases are up moderately. The marketing loan assures that U.S. cotton will be competitive over the life of the farm act. As a result, both exports and mill use of cotton should continue strong. Net costs of the cotton marketing loan for 1986/87 are estimated to be around $450 million. Benefits of increased cotton sales accrue not only to cotton producers, but also to upstream suppliers of inputs to producers and to downstream firms that transform raw cotton into finished products.