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UNITED STATES DEPARTHEIPT OF AGRICULTURE
Bureau of Agricultural Economics '-. 'EPOSITORY
OS-7 ?aly 29, 1937
THE COTTON SITUATION
Prices of American cotton in both domestic and foreign markets, like
prices of a number of other basic commodities, declined materially during
April. In the first week of May cotton prices recovered slightly, then de-
clined again, and during the second and third weeks of May domestic prices
of Middling 7/8 inch cotton in the 10 markets fluctuated within a few points-
of 13 cents. This level was nearly 2 cents below the peak reached the-latter
part at March but about 1- cents higher than the peak in May 1936,..aceordlTg
to the Euresa of Agricultural Economics.
The decline in the prices of American cotton in Liverpoal-from early
April to the middle of May-was greater than the decline in prices -of fcreg.
cotton. As a result, American cotton is now more favorably priced in rela-
tion to foreign growths, from the standpoint of encouraging foreign spinners
to use larger proportions of it, than for many months.
Accompanying the decline in cotton prices during +.he last few weeks-
there was a substantial decline in domestic manufacturers' sales of cotton
goods. Though sales of cotton goods by domestic mills were below current
output, activity during April and early May continued at unusually high
levels. In April domestic mill consumption was 25 percent larger than in
April last year and was the largest for the month in history. Total con-
aumption for the 9 months ending with April also established a new all-time
high, and was 29 percent higher than a year earlier.
In many of the important foreign cotton-Manufacturing countries, cotton
mill activity and unfilled orders for cotton goods continued relatively high
during April, although in a number of these countries manufacturers also re-
ported a substantial decline in sales. Total mill consumption in all foreign
countries combined apparently has been running at record levels so far this
season. This is accounted for by the high consumption of foreign cotton
since the foreign consumption of Arerican cotton appears to have been the
smallest in many years.
Because of the record level of cotton consumption in the United States
thus frr this season, indic-tions are that the world consumption of American
cotton during the year ended July 1937 will exceed substantially that of
either of the two previous seasons. It now seems probable that the world
consumption of American cotton during the present season will be about one
million bales larger than the 1936-37 United States crop, resulting in a re-
duction of that quantity in the world carryover of American cotton on August
1 as com-a.red with a year earlier.
DOMESTIC PRICES DECLINE
Spot cotton prices at the 10 markets declined considerably during
April, recovered slightly in the first week of :May, and declined again during
the following 2 weeks. The high for the month of April was 14.82 cents on
April 1 and the low was 13.05 on the 29th. The average for the month was .13.91
cents compared with 14.15 in March and 11.57 in Anril 1936. The averages for
the weeks ended May 15 and 22 were 13.03 and 13.06 cents, respectively. The
abrupt decline in cotton prices during April accompanied a fall in the prices
of a number of other basic commodities.
The decline in the price of American cotton at Liverpool in April
was not accompanied by an equivalent decline in the prices of the principal
foreign cottons. In fact, prices of Egyptian Uppers and Indian were slightly
higher on the average during the month than in March. The average price of
three types of Indian expressed as a percentage of American was 80.2, the
highest price for Indian relative to American since January 1936. The ratio
of 97.4 for Brazilian Sao Paulo Fair, while only slightly higher than in
recent months, was the highest ratio since June 1936. Egyptian Uppers at
124.5 percent of American Middling were higher relative to American than
in any month since March 1933.
RELEASE OF GOVERNMENT-FINANCED COTTON VERY SMALL IN RECENT WEEKSS
The Commodity Credit Corporation announced on May 21 that requests for
the release of 1,309,000 bales were received in the period from February 1 to
May 20. Since the amount released up to May 6 was 1,300,000 bales and up to
April 23 was 1,243,000 bales, there has been a very sharp decline in the rate
at which loan cotton has moved into trade channels as compared with the rapid
rate of movement during February, March, and the first part of April. This
reflects a slowness in the demand for spot cotton as well as the discourage-
ment to release which comes from a declining cotton market (the release price
is 25 points less than the 10-market average for Middling 7/8 on the pre-
ceding day plus or minus any allowance for quality or location). The average
price for Middling 7/8 at the 10 markets has remained above the minimum re-
lease price of 12.75 cents.
EXPORTS IN APRIL ABOVE A YEAR EARLIER
Exports of cotton from the United States in April, amounting to
373,000 bales, were slightly larger than exports in the corresponding month
last year. This is the fourth consecutive month in which exports have been
about the same as or larger than a year earlier. Total exports in the
9-month period through April, however, were 8 percent less than shipments in
the corresponding period last season. In the first 9 months of the present
season as compared with the corresponding months last year, exports have
been smaller to nearly all important foreign markets except Japan. Exports
during April and the 9 months ending with April were 21 percent and 30 per-
cent, respectively, smaller than were the exports in the 10 years ended
Exports from India in March amounted to 485,600 bnles, the largest
export for the corresponding month in any year on record, :.ith the exception
of 1925. Exports in the 8 months ended March totaled 2,316,000 bales, or
25 percent more than last year and 27 percent more than the average for the
10 years ended 1932-33, and were the largest for any corresnondin period
on record. The large volume of exports so far this season compared '.ith
earlier years has been due to very heavy shipments to the United Kingdom
and Japan, especially to Japan.
- 3 -
The very active condition of the textile industries in foreign coun-
tries thus far this season and the record high lcvel of consumption of all
kinds of cotton has been accompanied by an extremely heavy movement of
Indian, Egyptian, Brazilian and other foreign cottons to mills in overseas
importing countries, and b:- shniments of large quantities of cotton from
interior growing points to domestic mills in countries such as India and
China which are both growers of raw cotton and manufacturers of cotton goods.
Exports of American cotton have been much below average, however, and
indications are that foreign mills have been consuming a smaller quantity of
American cotton than for many years. American cotton as a percentage of
total foreign consumption, and exports from the United States as a percentage
of exports from the principal exporting countries, undoubtedly compare still
more .unfavorably with previous years than do the absolute quantities of Amer-
ican cotton exported'to and consumed in foreign countries. In part, this
increased use of foreign-grown cotton in place of American is due to the fact
that prices of foreign-cotton for the last 3 years or more have been lower
relative to American than on the:average during the last 10 or 15 years. It
has also been due in part to the- increased production of foreign cotton rela-
tive to American, aside from any important influence the shift in the area
in which the cotton is-produced may havc upon the relative prices of American
Lad foreign growths 1/.
THE TEXTILr SIT'UATIOI
Domestic Mill Activity Still High
Although mill.sales of goods continue below mill output, domestic mills
conti-.-i6- to operate at a very high level during Anril. Total consumption of
719,000 bales was smaller than in March, partly because of fewer working days,
but 25 percent larger than in April last year and the largest for the month
in history. Total utilization in the 9 months ended April was 6,011,000 bales,
also the largest for the period in history. A continued high level of mill
activity was made possible by the backlog of unfilled orders which is still
comparatively large. It is reported by the New York Cotton Exchange service
that the average consumption per working day in April was somewhat less than
the record high average of 53,900 bales in March. Mill sales of goods during
April and the first half of May -ere considerably below mill output. It is
common for buyers to held off during the declining cotton market just as the
reverse is true of a strong market. It is reported that-the slight decrease
in mill activity in April was not due to the reduction in the backlog of orders
but to the fact that some mills that have been running well over SO hours per
week have decided to bring their operations down. to that level because of the
agitation for an 80-hnur per week maximum.
l/ Because of the similarity bet-.een a substantial portion of the American
and foreign crops and because over a period of years demand adjusts itselt to
changes in the relative supplies of the different qualities, it is possible
for the trends in the supplies cf t-,- or more cottons rf about the same or of
decidedly different qualities, tr. be in opposite directions and yet their rela-
tive prices show little or no trend.
- 4 -
The European Cotton Textile Situation Continues Favorable 1/
United Kingdom.- The cotton textile industry in the United Kingdom
continued active during April. Shipments of cloth and yarr.s were satis-
factory both f-r the home and export markets. A large volume of mill takings
of raw cotton reflected this favorable demand situation for cotton goods.
Imports of raw cotton increased even faster than mill takings so that stocks
of raw cotton tended upward during the month, contrary to the usual seasonal
movement. Indications.in early May pointed to a continuation of the high
rate of mill activity for at least the immediate future, although the de-
cline in prices for raw cotton has apparently been accompanied by a decline
in yarn and cloth sales and may even result in cancellation of some of the
cloth contracts making up the large volume of unfilled orders held by the
Germany.- The position of the cotton textile industry in Germany in
early May was substantially unchanged as compared with previous months. Mill
activity continued to be fairly high although based to an increasing degree
upon synthetic fibers rather than raw cotton. The expansion of artificial
fiber production was proceeding at a rather rapid rate.
Czechoslovakia.- The cotton textile industry in April showed further
signs of benefiting from a marked revival in domestic demand, and export
business also showed some improvement. During the first quarter of 1937 the
trade replenished its stock of cotton yarn and cotton goods to a considerable
extent and mill activity has increased in most of the plants in the country.
Austria.- The outlook for the cotton textile industry in Austria is
rather unfavorable at present as a result of the disruption of trade with
Rumania. Recently the Rumanian Government insisted that Austria pay for its
crude oil import from Rumania in foreign exchange rather than by exports of
cotton yarn to Rumania through a clearing arrangement. Austria has greatly
decreased its purchases of Rumanian oil and Rumania has taken retaliatory
measures against Austrian cotton yarn. The Austrian cotton textile industry
is dependent to a considerable degree upon exports of cotton yarn. almost
half of which have gone to Rumania.
France.- The relatively favorable position of the French cotton in-
dustry in recent months was maintained throughout April, although some re-
duction in yarn and cloth sales took place. The unfilled orders on hand in
spinning and weaving mills at the dnd of the month were sufficient to last
for some time, so it is highly improbable that there will be any recession
in th, activity of the industry in the near future. Any substantial further
improvement in the condition of the industry will depend upon economic con-
ditions in the country as a whole.
Italy.- Most Italian mills operated at capacity during April, largely
as a result of a marked increase in exports. An additional import quota
for raw cotton for the domestic market has recently b-en allowed, but the
IJ Prepared largely from a report from Agricultural Attache Llo-..' V. Store
at Berlin under date of May 11, 1937.
bulk of the production of cotton textiles continues to be diverted to the
export trade. The extent of the recent revival in Italian exports of
cotton textiles is indicated by the fact that during the first 2 months
of 1937 shipments of yarn to foreign markets were five times as large as
in the corresponding months of 1936. Exports of cotton cloth were three
times as large in the first 2 months of 1937 as in the corresponding months
a year earlier. Italian cotton imports in January and February of this
year were 41 percent larger than in the same months of 1936.
Russia.- The output of the cotton textile industry in the U.S.S.R.
during the first quarter of 1937 is reported to have been 6 to 7 percent
below that of the last quarter of 1936 and below the quarterly plan of
some 66 million yards of finished fabrics. This unsatisfactory progress
in textile production is attributed to the lack of timely steps to insure
increased output. The overhauling of idle equipment, the procurement of
additional parts, and the introduction of new technical devices and methods
have either been extremely slow or lacking completely. According to the
Soviet press, the 1937 plan provides for a total output of finished cotton
fabrics of 4,466 million yards, as compared with 3,516 million yards
called for in the 1936 plan. The actual 1936 production is not yet known
but it appears that a figure of around 3,280 million yards can be assumed.
Considerable difficulties will have to be overcome if the production plan
for cotton fabrics for 1937 is to be carried out.
Japanese and Chinese Consumption Extremely High 1/
Japan.- The cotton textile industry was very active during April.
Yarn production was the highest on record. This is the fifth consecutive
month in which yarn output has been at record high levels. There w-s a
brisk demand for yarn during the month nnd yarn prices increased. In the
first part of May the demand for yarn and cloth was reported as light,
but mills continued to hold a large volume of unfilled orders.
Imports of American cotton in April were slightly larger than in
March, whereas imports of most other goods, particularly Indian, were
smaller than in March. Imports of American were more than twice as large
as in April 1936. Total imports of all kinds of cotton were 459,000
bales compared with 335,000 in April a year earlier. In the 8-month period
from September to April, however, imports of American of 1,248,000 bales
were only slightly above those for the corresponding period a year earlier,
.vhile imports of all cotton totaled 3,146,000, an increase of 28 percent
over the preceding season. Imports of American are expected to continue
comparatively heavy during the next 2 or 3 months as a result of the
interruption of shipments from the United States by the shipping strike
of a few months ago and as a result of the filling of large futures con-
tracts made several months ago by Japanese merchants for American cotton
at prices below the current level.
1/ Prepared largely from cablefrorom Agricultural Commissioner Dawson at
Shanghai under date of May 12, 18, 19 and 20.
- 7 -
China.- Mills continued to operate at full capacity in April and
the demand for yarn -mnd cloth was very brisk. Unfilled orders for ya.rn
are reported to have been equal to 4 months' mill production at the current
rate of output. Arrivals of raw cotton at Shanghai during April were
considerably below the extremely heavy arrivals of recent months and 'vere
about 30 percent less than arrivals in April 1936. This slackening of
shipments is believed to be due to transportation difficulties and the
desire of farmers to hold for a time the unsold portion of their crop.
Prices of Chinese cotton did not decline in April along with the decline
in the price of other commodities, especially American cotton, in world
markets. The brisk demand for cotton yarn coupled with speculative forces
is believed to have been responsible for the strength in tne price of
LARGE 1936-37 ACREAGE AID PRODUCTION IN FOREIGN COUNTRIES
As maybe seen from the accompanying table, both the acreeae a-nd
the production of cotton in practically all of the important foreign cotton-
producing countries are materially larger than the average for the 10 years
ended 1932-33. In most instances production in the current (1936-37) se-son
was also larger than in the 1935-36 season. Among the most import--nt pro-
ducing countries the largest increase in production as compared with the
10-year average occurred in Brazil, Russia, and China, -:here the respective
percentage increases were 241, 194, and 74. Many of the smaller producing
countries have shown even larger percentage increases.
In niany instances the increase in acreage in comparison w-ith the
10-year average has been greater than the increase in production, vw'.ile in
other countries a prt of the increase in production has apparently resulted
from higher-than-average yields per acre.
In view of the fact that current reports from the U.S.S.R. place the
1936-37 crop as high as 3,500,000 bales and that procurings r.re reported tc
have exceeded 3,400,000 b-les, it now appears that c.n estimate less tlan
3 million bales would hardly be justified and perhaps a fiGcre of 3,25',C0C
is a more reasonable estimate. The latter figure, however, is substan ti ally
below the recent official estimates that have been received.
The estimate previously used by this Bureau for the 1936-37 Soviet
crop was 2,800,000 bales, and the estimate still being carried for t.-e 1935-36
crop is 2,250,000 bales. The estimates being used by this Bureau b.th for the
current season and for the 1935-36 season are smaller tl-.an ti.t-e bci:;
released by the Soviet .aencies because of the tendency in certain :e.r's in
the past for the procurings to be reported even though the cotton *-.s still
unharvested and, in the case of the 1935-36 crop, reports to t.c effect th.rt
a substantial part of the crop was ruined by wet weathere r at h.rvwst ti::e ,nd
that some of the reported procuriags that year included th.e wieict f a
substantial jcnount of excessive moisture. (See "ForeiGjn Crops a-.d .:.r:kets"
for February 3 and April 6, 1936).
- 8 -
Little information is yet av.ilble with respect to the 1937-38 crop
prospects. It is reported, however, th..t plnting of cotton began in the
U.S.S.R. toward the end of March, but was intorrapted by unfavorable weather
conditions during -.id-Arril, -7ten a sudden return of cold weather and even
snowfall was reported from the main cotton -rouinE areas. This has not only
impeded the cotton-planting campaign, but has damaged the early planted
cotton, a p:.rt of which has had to be replanted or patched up. Nonetheless,
total Mvy 1 plantings by collectives and individual peasants are reported as
3,993,000 acres, or 81.5 percent of the plan, as compa-ed with 3,768,000
planted by the sane date in 1936; rain this notwithstanding considerable
complaint that all prep-.r.tory field work is behind last year.
The 1937 plan calls for a total crop of pinned cotton of 755,000
metric tons, or 3,482,000 bales, which is about eqtal to the reported 1936
production. Since the hih figure of 46 to 47 trillion poods (3,182,000 to
3,551,000 brles) is still mentioned as the outturn in 1936, it appears either
that no effort is being made to increase output this yecr or that there is
a possibility of a later donnwmrd revision of the 1936 crop estimate.
A radiogran from the United States Agiricultural Co-rissioner's office
at Sh cnJhai, dated May 12, st-ted that continued rains with favorable
planting conditions th-roughout r.'ost cotton districts of China uas general
during the past month. As a result it is believed that soil moisture in all
North China districts is sufficient for planting and an early growth.
We-.ther conditions in the Yangtze Valley continued relatively favorable, and
the 1937 acreage is expected to be larger than in 1936.
Cotton: Acreage, yield, and production in specified countries, average for
the 10 years ended 1932-33 and 1936-37
S-Acreage : Yiold per acre / : Production
:1-year:-yar: :1936-3-year: :193 :: :196-37:10-y : : 1936-37:1936-37
Country averagee: : as a :average: : as a :average: : as a : as a
1923-24:1936-37: percent-. 1923-24:1936-37: percent- 1923-24 : 1036-37: percent-p porcent-
to : 2/ :Jaie of : to : 2/ :age of : to : 2/ :age of :age of
S- :1c3-2-33: averagee :1032-33: : average: 1932-33: : average: 1935-36
: acr s :
1,000 : :
: 1,000 : 1,00) :
: : bales : bales :
Pounds:Porcont:.478 lbs.:478 Ibs; Percent:Percent
United States ..
Rusrin .... .....
P eru ...........
Ar entina .......
Bulgr:ri a ........
*;r aCc ..........
Zyria ,." lr.jnn .
CI-t.ir-l r:r- a r ..::, 1 "
I'.'rr:- r ,.* ,' -r i ,'
: 40,509: 0,028: 74.1: 170: 198: 116.5: 11,414: 12,399: 86.0: 116.6
S25,141: 25,219: 100.3: 85: 100: 117.6: 4,466: 5,279: 118.2: 106.3
4,759: 8,547: 179.6: 212: 209: 98.6: 2,098: 3,650: 174.0: 140.4
,641: 5,023: 10.2 211: 309: 146.4: 1,106: 3,250: 293.9: 144.4
1,782: 1,781: 99.9: 400: 52b: 131.3: 1,486: 1,957: 131.7: 110.6
S1,629: ---: --- : 16: ---: --- : 530: 1,806: 341.1: 102.4
304: ---: --- : 37G: ---: --- : 240: 366: 152.: 92.0
S 390: 786: 201.5: 262: 219: 8356: 212: 361: 170.3: 143.8
261: 713: 273.2: 209: 164: 78.5: 116: 244: 210.3: 65.4
S 75: 1,488: 220.4: 108: 89: 82.4: 151: 276: 182.8: 101.5
: 268: 475: 177.2: 201: 242: 120.4: 114: 240: 210.5 119.4
: 462: 5 0: 121.2: 135: 101: 74.8: 131: 19: 90.8: 63.0
: '/ 302: 273/159.9: 3/ 105: 220:3/209.5: 80: 288: 360.U 119.5
S 11: 72: '54.5: 136: 193: 141.0: 3: 29: 966.7: 74.4
41: 138: (.336.6: 178: 201: 112.9: 15: 58: .3 (86.7: 118.4
: :'/ i 9: 176.n: 93: 155: 166.7: 10: 32 320.0: 128.0
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