To select material for rag knitting, look for 100% cotton fabric with a low thread count (such as a light weight cotton). Look for woven plaid or check. Madras is perfect. Choose a fabric that will rip easily along the grain.
For this bag you will need 5 yards of 100% cotton fabric (45" wide), a US 13, 24" Circular Needle, US 13 Double Point Needles, a large Stitch Marker, a large Tapestry Needle, and Stitch Holders.