The competing countries like China, Pakistan though importing large volume of cotton from India is very cautious on stock to use ratio and maintaining around 35%. Cotton being a seasonal commodity and purely depends on the monsoon, it is very essential to maintain comfortable buffer stock to manage unforeseen conditions and meet the customer requirements.An analysis of trend of cotton prices from 2004-05 to 2007-08 distinctly establishes the link between stock to use ratio and cotton prices. In the cotton season 2004-05, the stock to use ratio was 37%. Consequently, cotton prices during the season 2004-05 was stable at reasonable level. In the subsequent cotton seasons, 2005-06 to 2007-08, stock to use ratio progressively declined from 24% in 2005-06 to 21% in 2006-07 and to 18% in the current season, 2007-08. .The depletion in the stock to use ratio came about on account of rising exports of raw cotton – 47 lakh bales in 2005-06, 58 lakh bales in 2006-07 and a record exports of 85 lakh bales in 2007-08.Source: Southern India Mills’ Association.