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Abstract

Few empirical basis studies have examined the basis in multiple regions and few have concentrated on cotton. This paper addresses this topic, examining consumption market factors that affect the cotton basis in five U.S. cotton production regions. The seemingly unrelated regression results indicate that the following factors are significant in explaining the basis: total U.S. cotton stocks and the ratio of foreign cotton stocks to foreign mill use in the Southeast and North Delta regions; regional stocks, the opportunity cost of storage and the foreign stocks to use ratio in the West Texas region; and regional stocks, total U.S. stocks, the opportunity cost of storage, and the foreign stocks to use ratio in the Desert Southwest and San Joaquin Valley regions. All significant coefficients have the hypothesized signs except the coefficient for the opportunity cost of storage and the coefficient for the ratio of foreign stocks to foreign mill use in two regions. The results indicate that the cotton basis in different regions is typically affected by different factors.

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