WORLD AND U.S.

COTTON PRODUCTION,

SUPPLY AND DEMAND,

U.S. SUSTAINABILITY

PROTOCOL

2019

1

U.S. COTTON ORGANIZATIONS EXPLAINED

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COTTON

INCORPORATED

NATIONAL COTTON

COUNCIL

SUPIMA COTTON COUNCIL

INTERNATIONAL

ESTABLISHED 1972 1938 1954 1956

HEADQUARTERS Cary, NC Memphis, TN Phoenix, AZ Washington, D.C.

MISSION Increase global cotton

consumption through

promotion and

research

Ensure the ability of all

U.S. cotton industry

segments to compete

effectively and profitably

in the raw cotton, oilseed

and U.S.-manufactured

product markets at home

and abroad

Increase the

consumption of

American Pima and

awareness of the

premium quality of

SUPIMA® branded

cotton products

Funded by the U.S.

government and the U.S.

cotton industry with the

mission of driving U.S. cotton

exports globally

o We have 60 people

located in 15 offices

around the world with the

majority in Asia covering

approximately 50

countries.

o And, we have 5 technical

consultants located in 4

countries.

CCI TODAY: WHO WE ARE

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GLOBAL COTTON SUPPLY CHAIN

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Raw

Cotton

Spinning Mill

Turns it into

Yarn

Fabric Manufacturing for

Knits, Wovens, Home

Textiles

Dyeing &

FinishingCut & Sew Brands/Retailers

WORLD FIBER MILL USE

5

0

10

20

30

40

50

60

70

03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19F

MIL

LIO

N M

ET

RIC

TO

NS

Cotton Polyester

WORLD COTTON PRODUCTION

6

0

5

10

15

20

25

30

0

5

10

15

20

25

30

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19f

MIL

LIO

N M

ET

RIC

TO

NS

WORLD SUPPLY AND DEMAND

MILLION METRIC TONS

7

2018/19e 2019/20f Change

Production 25.9 27.2 +1.3

Mill Use 26.2 26.5 +0.3

Trade 9.0 9.4 +0.5

Stocks 17.6 18.2 +0.6

China 7.8 7.4 -0.4

All Others 9.8 10.9 +1.1

WORLD COTTON ENDING STOCKS

8

0

5

10

15

20

25

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18e 19f

MIL

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U.S. ROW China

o After years of destocking, China’s

reserves have reached a normal level.

o With a 12 million metric ton difference

between production and mill use,

China is projected to increase imports

in order to meet the needs of their

textile industry.

o USDA projects Chinese imports will

increase to 2.2 million metric tons in

the 2019/20 marketing year.

AS CHINA’S STOCKS FALL, IMPORTS ARE SET TO

INCREASE

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17/18 18/19 19/20f

Production 6.0 6.1 6.1

Mill Use 8.9 8.6 8.6

Imports 1.2 2.1 2.2

Stocks 8.3 7.8 7.4

Stocks/Use 93% 90% 86%

MILLION METRIC TONS

COTTON PRICES & CHINA TRADE POLICY

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11

CHINA

where to get all that cotton?

China grows less cotton than its mills consume (on average 35% less) gov’t

stocks

at end of

2013/14

were over

one and a

half years

of mill-use

Sources: Cotlook, USDA, 2018/19 forecast by Cotton Incorporated

Stabilization of reserves requires imports to equal China’s production deficit

Government reserves been filling the gap, but stocks drawn down

11.5 mil

tons >2 mil tons

gov’t

stocks

at end of

2018/19

sales will

be

less than

three

months of

mill-use

- recent imports as low as 1 million tons

- recent deficit near 3 million tons

- Chinese imports need to triple

o U.S. forecast to export near record 3.6 mil. tons in 2019/20

o Brazil forecast to export 1.9 mil. tons, cotton price will influence

acreage

o W. Africa forecast to export 1.1 mil. tons, steady at 2018/19

levels

o India forecast to export 0.9 mil. tons, weather & pest questions

o Australia forecast to export 0.4 mil. tons, drought affecting

planting

WORLD’S COTTON EXPORTERS OUTLOOK

FOR 2019/20

12

U.S. BALANCE SHEET

13

17/18 18/19 19/20 Change

Production 4.6 4.0 4.8 +0.8

Mill Use 0.7 0.7 0.7 0

Exports 3.5 3.2 3.6 +0.4

Stocks 0.9 1.0 1.6 +0.5

Stocks/Use 22% 29% 33% +4%

MILLION METRIC TONS

September 2019 USDA WASDE Estimates

THE U.S. COTTON BELT

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Southeast

Mid-South

Southwest

West

U.S. DROUGHT MONITOR

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September 4, 2018 September 3, 2019

U.S. COTTON EXPORTS

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0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,51

99

0

199

1

199

2

199

3

199

4

199

5

1996

199

7

199

8

199

9

200

0

200

1

2002

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

2019

MILLION METRIC TONS

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COTTON USA SUSTAINABILITY TASK FORCE

SETS NATIONAL GOALS

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35 YEARS OF REDUCED ENVIRONMENTAL IMPACT

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Land Use WaterSoil Loss Energy GHG

31% 44% 82% 38% 30%

Source: Field to Market 2016 Environmental and Socioeconomic

Indicators Report. Available at: www.fieldtomarket.org.

2025 GOAL –ADDITIONAL IMPACTS

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Land Use WaterSoil Loss Energy GHG

13% 50% 18% 15% 39%

U.S. COTTON NATIONAL GOALS FOR CONTINUED IMPROVEMENT

30%

Carbon

ACHIEVING 10-YEAR GOALS WOULD

DEMONSTRATE IMPROVEMENT IN KEY METRICS

Land

Water

SoilEnergy

GHG

1981-85

1991-95

2001-05

2011-15

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ACHIEVING 10-YEAR GOALS WOULD

DEMONSTRATE IMPROVEMENT IN KEY METRICS

Land

Water

SoilEnergy

GHG

1981-85

1991-95

2001-05

2011-15

10 year goal

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o New technologies

o Producer-funded research

o A continuous improvement program through the

U.S. Cotton Trust Protocol ®

HOW WILL U.S. COTTON ACHIEVE THESE GOALS?

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o Voluntary

o Supports 10-year goals

o Phase one in 2019 crop

o Implementation in 2020 crop

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KEY PRINCIPLES:

Standards

Measurement

Verification

Data provided to the supply chain

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o Checklist of practices

o FieldPrint data tool

o Continuous

improvement plan

REQUIREMENTS FOR GROWERS

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5) Harvest

6) Biodiversity & Wildlife

7) Fiber Quality & Traceability

8) Farm Worker Fairness

9) Healthy Farmstead

1) Soil Health

2) Plant Nutrition

3) Water

4) Plant Protection

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CHECKLIST

BEST MANAGEMENT PRACTICES (9 CATEGORIES -120 QUESTIONS)

o Permanent Bale

Identification

o USDA Classification

PROTOCOL FIBER QUALITY AND TRACEABILITY

REQUIREMENTS

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o Fair wages

o Fair treatment

o Safe working environment

o No forced labor

o Training

PROTOCOL FARM WORKER FAIRNESS

REQUIREMENTS

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oAnnual

quantitative

measurement

sustainability

metrics

PROTOCOL MEASUREMENT REQUIREMENT

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o Second party assurance

o Third party on-farm visit

VERIFICATION

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BEST MANAGEMENT PRACTICES HELP ACHIEVE INDUSTRY GOALS

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Industry’s 10-Year Goals For Environmental Metrics

Reduce

Land Use

by 13%

Increase

Irrigation

Efficiency

by 18%

Reduce

GHG by

39%

Reduce

Energy

Use by

15%

Reduce

Soil Loss

by 50%

Increase

Soil

Carbon by

30%

Best

Ma

na

ge

men

t P

racti

ces

En

vir

on

men

tal

Soil Health

Nutrient Management

Water Management

Crop Protection

Harvest Preparation

Wildlife/Biodiversity

So

cia

l

Worker Relations Provide a safe work place for all employees, assure fair treatment and compensation.

Farm ManagementMaintain household and farmstead operations which assure safety for family, workers, farm animals and the

environment.

Fiber

Quality/TraceabilityWork to assure fiber quality is maximized by selecting appropriate varieties, managing for fiber quality

consistent with yield goals and preserving quality during harvest and ginning.

ENVIRONMENTAL CONCERN

MICROFIBERS

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UNINTENDED CONSEQUENCES OF LAUNDERING

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MICROFIBERS IN THE NEWS

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POLYESTER & MICROPLASTICS POLLUTION

“BE PART OF THE SOLUTION” MICROFIBER

VIDEO

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ETHICAL SUSTAINABILITY

o We are supporters of the Partnership for

Sustainable Textiles.

o We encourage our customers to join

us to achieve social, ecological and

economic improvements alongside

the entire textile supply chain.

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o Brands around the globe are committed to sourcing from only sustainable raw materials.

These brands are creating lists of approved sources for cotton. And, while U.S. cotton is

widely considered sustainable, many brands have not put U.S. cotton on their lists

because of no independent verification.

o The new U.S. Cotton Trust Protocol addresses this issue and adds real quantifiable goals

and data to back up any claims. In a pilot phase now, it will roll out in early 2020.

SUSTAINABILITY AND TRACEABILITY

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o While they have their list of sustainable cotton, brands and

retailers are still struggling to prove the origin of the raw

materials in their products. They need to prove that their raw

materials are being produced sustainably, without forced labor

and under fair working conditions.

o In order to prove raw material origin, brands are looking for

solutions that will mitigate risk to their corporate claims around

their CSR goals and commitments.

SUSTAINABILITY AND TRACEABILITY

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YOUR TRUSTED PARTNER IN SCIENTIFIC TRACEABILITY

August 21st 2018

Rupert Hodges & Benjamin Tomkins

Executive Committee Board Meeting

Oritain, formed in 2008, uses forensic science to determine the origin of products.

Founded out of the University of Otago, by Professor Russel Frew, who is a world-leading expert and advisor to the UN.

Our goal is to be the world’s most trusted company at scientifically verifying origin.

Offices in London, Sao Paulo, Sydney, Dunedin and Switzerland.

Oritain Global

2. Samples of thegenuine product are collected and analysed to identify the originfingerprint.

3. We store thefingerprint in the Oritain database.

4. Samples from themarket can be collected for testing.

5. Products from the market are tested to verify theclaimed origin of the product.

6. On-pack certification and marketing opportunities can be leveraged for consumers

How it works.

We create unique profiles for our clients’ products and once this has been completed,

we can audit their product at any stage in the supply chain.

Li Al Pb Cs Rb Sr

1. The product naturally absorbs different levels of chemical elements and isotopes. This gives the product its unique origin fingerprint.

13C 2H

CD

1168

V3

Database

Proprietary and Confidential

Testing Results

o Pilot study conducted with Oritain in 2019. Cotton from 2 US

states and 3 other countries were spun into yarn and dyed fabric

and 15 blind samples were sent to Oritain.

o The country of origin for every one of the 15 samples was

correctly identified!

o Supima cotton fields have been fully mapped and offer 100%

traceability.

o U.S. Upland cotton will be mapped by the end of 2019.

ORITAIN

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KEY PRINCIPLES:

• Standards

• Measurement

• Verification

• Data provided to the supply chain

• Fully traceable

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