Good afternoon, ladies and gentlemen.

It's nice to be back at the Beltwide Conference with an opportunity to share a number of thoughts with the cotton industry. As I have done in the past, I will attempt to give you my personal overview on supply, demand, competitiveness, and price for the current marketing year. I will then make some projections for the 1992-93 marketing year.

Then I would like to talk a little about the current farm legislation and my deep concern over the direction we are heading, which in the long term has a tremendous potential to damage our industry.

I said two years ago when I spoke to you that supply, demand, and competitiveness were easier to predict than price. Today I firmly believe if the Secretary of Agriculture continues to live up to the regulations of the Farm Bill of 1990, that price is also fairly predictable.

Now for a discussion of U.S. supply and demand and then a look at what the world numbers look like today.

On August 1st of 1991 we started this marketing year with an extremely low U.S. carryover of only 2.3 million bales. Yet, even with a carryover that low, we saw July 1991 futures trade from a high of 94.05 last May to a low of 68.73 last July. obviously, what broke the level of July was the tremendous volume of Arizona & SJV cotton which Calcot tendered in Galveston. When July reached those very high levels, it became a real sale for Calcot because neither foreign nor domestic mills were willing to purchase cotton at these very high prices. In fact, when July started its downward spiral, it went a lot lower than I thought possible in face of such a low year end carryover. Foreign mills found other substitutes at considerably cheaper prices. I wondered in May of last year how we would get to the new crop without some mills actually running out of cotton, but we did, with a small comfort margin.

Now I am one merchant who does not believe that we have to have a 4.5 million bale carryover to satisfy our domestic customers. I think with 4.5 million bales of U.S. carryover, that this is clearly a potential price depressant.

This year's final harvested crop in my opinion will be around 17.7 million bales, even though the last government estimate was slightly over I8 million bales. West Texas and Oklahoma just have not lived up to the government projections, but the balance of producing areas of the U.S. have really hit home runs with their yields. The supply for this season is now a known factor, so let's look at demand for U.S. cotton, which is now the key.