International cotton prices, as measured by the Cotlook A Index, fluctuated around 60 Us cents per pound in May and June 2000, marking a 16-cent recovery in 6 months. With the planting in the Northern Hemisphere, which accounts for 93% of world production, virtually complete, world demand is the factor that will drive prices to new levels over the next 14 months as it did during the first part of this calendar year. With less than two months before the end of the 1999/2000 crop year, the Cotlook A Index is averaging 52 cents per pound. With demand for cotton expected to grow more rapidly than production next season, world ending stocks will likely reach a five-year-low and the Cotlook A Index is expected to exceed 60 cents per pound in 2000/01. In 1999/00, prices declined for the fifth year. In 1995/96 and 1996/97 prices declined due to increased production. Scant growth of demand in 1997-1999 and larger production (in relation to price levels) contributed to further downward pressures on prices. One factor that is likely to have contributed to lower prices is the level of direct subsidies provided to cotton production. In 1998/99, as international prices deteriorated, direct subsidies to production increased. The level of direct assistance to production worldwide increased from Us$3.7 billion in 1997/98 to Us$4.7 billion in 1998/99. Despite efforts to remove agricultural subsidies, cotton growers in 8 countries received direct government assistance in 1998/99. A partial simulation that utilizes a version of the ICAC Price Model and a measure of the supply elasticity for the USA developed by the FAO and ICAC suggests that the average Cotlook A Index would have been 3 cents higher in 1999/00 and could be 6 cents higher than currently expected in 2000/01. Nonetheless, it should be noted that the simulation does not include the full response of other producing countries to higher prices.