U.S. cotton basis and quality premiums during the transition to an export oriented market
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The United States is a major cotton producer and exporter. As more than 60 percent of U.S. cotton is exported, U.S. cotton confronts more competition in the export market. Quality driven price discounts and premiums are dependent on the supply and demand for each quality characteristic. In this study, we examined trends in quality premiums/discounts and quality characteristics of U.S. cotton production over the past ten crop years and examine the relationship between premiums/discounts and production. We also examined the monthly cotton basis for seven regions for the period of August 2000 - July 2006. The results indicate the same seasonal basis pattern for all seven regions and some differences between the cotton bases across the regions. Compared with the seasonal and regional differences identified by earlier research covering the period, August 1988 - July 1998, both seasonal and regional basis patterns have changed as the export market for U.S. cotton has become dominate.