Mill use of cotton is strongly influenced by two key variables: economic growth and the relative prices of cotton and polyester. With estimates for expansion of world economic activity close to estimates seen in 2004, world gross domestic product is likely to contribute to growth in cotton mill demand in 2005/06. The recent increase in crude oil prices has served to propel polyester prices to the highest levels in years, opening a large gap between polyester and lower-priced cotton. For these reasons, cotton consumption is forecast to expand in 2005/06, reaching a record level of demand at about 109 million bales.

China remains the key driver in growth in world mill consumption of cotton. This trend is expected to continue into the next few years, particularly in light of the recent quota phase-out.

In 2004, China enjoyed record textile and apparel shipments to a number of nations, including Japan , the European Union, the United States , Australia , Turkey and Mexico . Growth in cotton consumption, yarn production, and fabric and apparel output confirms this trend. Assuming current projections remain valid, mill demand is likely to exceed 40 million bales in 2005/06. In fact, in recent years, these mills'appetite for cotton has grown too large for China 's cotton farmers to satisfy, so China has become a major importer of cotton, particularly from the U.S. In the absence of quotas, the growth in cotton textile and apparel shipments out of China is likely to accelerate, creating increased demand for raw fiber inputs in Chinese mills to feed this export demand. China 's position as the largest mill consumer of cotton remains secure and the likelihood of Chinese mills accounting for a larger share of total world mill demand seems likely.