Cotton production in South America has steadily increased for the past twenty years. Recently, the World Trade Organization (WTO) held hearings regarding the impacts of U.S. cotton farm programs on world cotton prices and the United States' competitiveness in the world market. These proceedings raised questions about the relative cotton cost of production in the United States and cotton producing countries in South America. The objective of this study was to compare the 2004 cost of production and production risks between the U.S. and five South American countries: Argentina, Bolivia, Brazil, Colombia and Paraguay. The 18 representative cotton farms maintained by the Agricultural and Food Policy Center and the 16 representative cotton farms built in South America (SA) were used to estimate and compare their cost of production and production risk. In addition, the coefficient of variation was used to measure the production risk or variability in lint cotton yield between the U.S. and SA. Cost of production in the U.S. ranges from $0.60 per pound of lint cotton produced for a representative farm in Arkansas to $0.87 per pound of lint cotton produced for a representative farm in California. Cost of production in SA ranges from $0.41 to $0.80 per pound of lint cotton produced for representative farms in Brazil and Colombia, respectively. Moreover, farms in the U.S. tend to have higher coefficient of variation for lint cotton yield than farms in SA. In other words, there is less variability in lint cotton yield in the SA farms than in the U.S. farms.