The Cotton situation


Material Information

The Cotton situation
Physical Description:
v. : ; 27 cm.
United States -- Dept. of Agriculture. -- Economic Research Service
United States -- Agricultural Marketing Service
United States -- Bureau of Agricultural Economics
Economic Research Service, U. S. Dept. of Agriculture.
Place of Publication:
Washington, D.C.
five no. a year
bimonthly[ former may 1961-]
irregular[ former 1945/46-mar. 1961]
monthly[ former 1936-1944]


Subjects / Keywords:
Cotton trade -- Statistics -- Periodicals   ( lcsh )
Cotton trade -- Periodicals   ( lcsh )
statistics   ( marcgt )
federal government publication   ( marcgt )


Dates or Sequential Designation:
CS-1 (Nov. 1936) -
Dates or Sequential Designation:
Nov. 1936-Apr. 1975.
Dates or Sequential Designation:
Ceased publication in Apr. 1975.
Issuing Body:
Issued by: U.S. Bureau of Agricultural Economics, 1936-Oct. 1953; by: Agricultural Marketing Service, Nov. 1953-Mar. 1961; by: Dept. of Agriculture, Economic Research Service, May 1961-Apr. 1975.
Issuing Body:
Issues for 1936-Oct. 1953 published by the U. S. Bureau of Agricultural Economics; Nov. 1953-Mar. 1961 by the Agricultural Marketing Service; May 1961-Apr. 1975 by the Dept. of Agriculture, Economic Research Service.

Record Information

Source Institution:
University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 020142316
oclc - 01768374
lccn - 63045282
lcc - HD9070.1 .C78
System ID:

Related Items

Preceded by:
World cotton prospects
Preceded by:
World cotton prospects
Succeeded by:
Cotton and wool situation
Succeeded by:
Wool situation
Succeeded by:
Wool situation
Succeeded by:
Cotton and wool situation
Related Items:
Statistics on cotton and related data

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Full Text
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Bureau of Agricultural Economics
CS-29 ,ia.rch 30, 1939.



The cotton situation during the past month, according to the Bureau of

SAgricultur-l Economics, was again characterized by continued'-high domestic mill

consumption, small exports and foreign consumption of American cotton, high spot

prices of American cotton relative to foreign growths and relative to futures

quotations, and small stocks of "free" American cotton despite the record total

domestic stocks.

Domestic mill consumption in February was one-third greater ths.n in Feb-

ruary last year and with one exception was the largest for that month since 1929.

Domestic consumption from August through February was one-eighth larger than a

year earlier and with one exception the largest for the period in 10 years. Un-

official reports indicate that mill activity during the first 3 we.:ks of March

Continued at a rate equal to or possibly higher than in February. In late Feb-

ruary and early March manufacturers' sales of unfinished cotton cloth are said

to have materially exceeded output, but in the 2 weeks ended March 23 they were

apparently less than production.

During the first 20 days of March, e-xports of American cotton were about

28 percent less than in thi corresponding period last season. In February they

were one-third less than in February last year, only one-half as largo as the

preceding 10-year February average of 551,000 tales, and the smallest for the

month in more than 50 years. For the 7 months ended February, domestic exports

were 42 percent loss than in the first 7 months of season.

Foreign consumption of Amorican cotton so far this season has baen much

smaller than usual but much larger relatively than the exports of Americ.n cotton.

- -- -- __ .- .-. .- -

CS-29 2 -

During the first 7 months of this season, foreign mills consumed about one-sixth

loss American cotton than in the corresponding period last season and the smallest

quantity for any like period in 20 years. As a result of the much greater decline

in exports than in consumption, foreign stocks of American cotton now are low for

this time of the marketing season, evon relative to the prevailing lOw rate of


Foreign mill consumption of foreign cotton from August to January this

season was somewhat smaller (when expressed in bales of uniform weight) than in the

corresponding period last season or the season before. In comparison with the

average for the past 10 years, however, there was an increase of 28 percent, ac-

cording to estimates of the New York Cotton Exchange Service. With the exception

of the past 2 years, foreign mills have upod mere non-Amoricr n cotton so far this

season than in any like period in history.

Recent reports from England and France indicate some improvement in sales

of cotton textiles and slightly higher mill activity. In the other larger European

countries conditions apparently showed little change as compared with the past

month or two. In the Orient, mill activity in February remained about the same as

in January.

During the 10 days ended March 6, a comparatively sharp advance in the

domestic price of spot cotton raised Middling 7/8 inch in the 10.designated markets.

to over S~ cents, the highest level reached thus far this season. By March 24,

however, practically all of this advance had been canceled. Snot prices continued

high relative to futures contracts, particularly new crop contracts,

In Liveroool the price of American cotton on March 17 was the highest in

relation to the price of Indian in more then 4 years even though the indicated

supply of Indian cotton is the smallest in 5 years. On the same data the price of

American Middling 7/8 inch 7nas th? highest relative to Egyptian Uppers for more

CS-29 ..- 3-

than 2 years r-ven though the indicated .total supply of Egyptian cotton for the

current seCson "'as considorrbly smaller than for either of the past 2 seasons.

The high rice of American cotton in relation to foreign growths is largely at-

tributable to the second smallest "free" world stocks (stocks other than those in

Gov-rnment loons) of American cotton in more than 15 years. Such stocks on

March 1 were n.bout one-third loss than the March 1 average for the past 10 years

of 7,400,000 bales.


Price advance of early March largely canceled

Follo"ine many weeks of exceptional stability, done stic -rices of spot
cotton advanced about I cent per pound between February 24 and March 6. On the
latter date, as well as on March 10, Middling 7/8 inch in 10 designated markets
was quoted at 8.80 cents, a nore high for the current season but only 0.05 cents
above the previous hi:-h reached on November 14. This comparatively sharp but brief
advance was followed by a slight easing of spot prices which canceled most of the
advance leaving Middling 7/8 inch in-the 10 markets on March 24 at 8.54. This
was 0.02 cent higher than one month earlier and 1/3 cent below the -verage for
March last year.

On March 24, Middling 7/8 inch cotton in the 10 designated spot markets
averaged 0.61 cent above the price of New York futures contracts for July delivery
and 9.97 cent above the nrice of October contracts. In March last year and in the
preceding 10 years the 10 market spot price averaged, respectively, 0.02 and
0.20 cent below the current orico of July Hew York futures contracts and 0.09 and
0.07 cent below New York October futures.

The stability of prices during recent months as well as the advance to
above 8g cents in early March appears to have been attributable to Government
loans. Despite the drastic decline in exports, the comparatively large domestic
consumption so far this season and the large movement of cotton into Government
loan stocks have greatly restricted current domestic stocks of "free" cotton.
On March 1, Government-loon stocks were about two-thirds of the total
United States stocKs of American cotton with the remaining domestic stocks (of
"free" cotton) the third smallest in 15 years. World stocks of "free" American
cotton were the second smallest in more than 15 years. The small "free" domestic
stocks constitute an important price strengthening factor. On the other hand,
the exceptionally large total world stocks of cotton; the increasing substitution
of synthetic fiber for cotton, especially in Germany, Japan and Italy; -nd the
uncertainties as to international politics and military developments are im-
portant factors which have tended to prevent cotton prices from rising. An ad-
ditional factor of some importance has been the possibility that very much of a
rise in domestic prices might have induced farmers to withdraw sizable quantities
of their 1938 crop from Government-lorn stocks, thereby increasing the available


"rice of American further increased relative to foreign

On March 17 the Liverpool price of American cotton w"as the highest in
relation to Indian since December 1934. The average rice nf 3 types of Indian
(Oomra, Broach and Sin6d was c,4uiivlent to only 71.9 percent of the average price
of American Middling ard Low 'i d.dling. In February, the corresponding ratio aver-
ged 75.6, in August 81.0 arc in March last year 82.5. The average for the 10
years ending July 1937 r-s 7'.3.

On March 17 the Liverpool price of Egyptian Fully Good Fair Uppers was
equivalent to 112.8 percent c.: the Drice of American Middling 7/8 as compared
-;ith 115.4 in Fe'ruary and 126 in .ugust. In March last year Egyptian Uppers
averaged 120.6 ~,crcent of the price of American and not since February 1937 has
the monthly ratio boon as low as the March 17 ratio.

The Liverpool price of Brazilian Fair Sao Paulo has sho-n little change in
relation to the Liverpool price of American Middling since the early part of the
season, fluctuating between 95.1 and 96.9 percent of the price of American Middling,
In August this rr.tio averaged 96.9 and the 10-year average,ending with July 1937,
was 97.7.

Cotton: Spct rice per nound, specified growths at Livernool,
specified periods
: Anericon : Indian E: Egyrptian Br-zilian
Season, Av. 3 types 1f/ :F G0. -es FaY-', 3T0 Paulo
month :Middl ing: Low : :As P. : :. : a %
or :7/S : ,id- : tctual:of ka.eri-:Actual:of. i--;ri-:Actu. 1: of Ameri-
day inch : dling : : can 2/ : : cn :: c.,an
.: : : : :Mi,'lin :* Middling
10-yr.av.: Cents Cents Cents Percent Cents Percent Certs Percent
1927-28 to
1936-37 : 14.50 13,60 lo,ss 78,3 17,12 117,9 14,os 97,7

1936-37 : 14.62 13.16 11.07 79.8 17.40 119.0 14.12 96.6
1937-38 : 10.31 8.78 8,02 83,9 13,10 126.7 10,18 98,7
1938-39 :
Aug. : 9,76 8.44 7.38 81.0 12,30 126.0 9.46 96,9
Sept. : 9,59 8.29 7.07 79,1 12,27 128.0 9.27 96,7
Oct. : 10.25 896 7,22 75.0 13,03 127.1 9.78 95,3
Nov. : 0.04 8.81 7.28 77.3 12,63 125,8 9,63 95,9
Dec, : 10,02 ,856 7,16 77.0 11,89 118,6 9.54 95,1
Jan. : 10.10 8,64 7.13 75.9 11.50 113,9 9,61 95,2
Feb. 10,02 8.55 7.02 75.6 11.56 115,4 9.53 95.1
Mar. 3 : 10,33 8,87 7,07 73,6 11.74 113,6 9,84 95.3
10 : 10.55 9.09 7,15 72.8 11.98 113,6 10.07 95,5
17 : 10.28 8.82 6.87 71.9 11.6o 112.8 9.79 95.2
24 :10.07 8.6o 6.89 73.8 11.51 114.3 9.58 95.1
Compiled from reports of the Liverpool Cotton Exchange except for the last two
weeks rhich ire from cables and reports of the New York Cotton Exchange. Prices
were reported in nonce per pound and converted to cents per nound at current
rates of exchange.
I/ Includes Fully Good Broach, Fine Oomra # 1, and Fully Good Sind.
2/ Average of American Middling and Low Middling.

- 4 -


As will be seen from the above table, American cotton prices declined ccn-
siderably in relation to foreign growths from Ma~rch 17 to March 24, but still
remained relatively high.

In view of numerous inquiries, r~d the fact that :'~imn people apparently
do not very clear understandin.- of the significance of comparative prices
of various growths and qualities of cotton, it is believed desirable -to indicate
the factors influencing the changes in those relative prices from time to time.
One of the important factors resulting in changes in the relative rice of Ameri-
can and foreign cotton, or in the comparative prices of any two qualities of
cotton, is the relative quantities of such cottons available in world marketing
channels. Important changes in those relative quantities from one season to
another tend to result in material changes in the comparative prices of these
growths or qualities, especially if they differ materially in quality or spinning
utility. However, as prices of cotton of one growth (or quality) increase or
decrease in relation to nricos of other growths (or qualities), the consumption
of the relatively cheap cotton tends to increase in relation to consu.Tption of
the other cottons. Such shifts in consumption tend to readjust the comparative
prices of these growths (or qualities) in line with the differences in their
quality or -pinning utility. As a result, over a period of years the proportion
of the total cotton consumed which is of a given kind or quality varies directly.
with the ratio of the supply of that cotton to the total supply, even though the
price of it shows little or no net change relative to the price of other cottons.

In other words, over short season to season periods substantial changes
in the relative sup-lies of cotton of different growths, particularly when
materially dissimilar in quality, tend to result in changes in their comparative
prices, but over longer periods adjustments are made in consumption so that both
the relative and absolute amounts of the various growths consumed become adjusted
to their corresponding sup-lies. Hence, over periods of time long enough to allow
these adjustments, the relative quantities of American and foreign cotton consumed
depend upon supplies available, whereas the average price differentials depend
upon differences in the spinning utilities. This is true not only of cottons of
different gro-ths in so far as they represent differences in quality, but also
of cottons of different quality (or spinning utility) in the American crop and in
the crop of -ny other country.

As indicated, the average differences in prices between any two cottons in
the same market are dependent uoon the comparative usefulness of these cottons.
For instance, Egyptian Fully Good Fair Uppers is longer in staple length than
American Middling 7/E inch and for this reason (and possibly others) the finished
products made fron Egyptinn Upoers are more desirable, either because of their
fineness, luster, or serviceability, than the products made from American Middling
7/8 inch cotton. Consequently, the Liverpool price of Egyptian Uppers has
almost invariably been higher than the Liverpool price of American Middling 7/8
inch, irrespective of the changes in the relative supplies of these two cottons
and during the last 10 years has averaged about 18 percent higher.

OS-29 6-


Domestic exports lowest in February since 1885

Exports of American cotton of 264,000 running bales in February were
135,000 bales, or 34 percent less than in February last year, 52 percent
less than the 10-year 1928-37 February average, and the smallest for the month
since 1885. Despite the low level in February exports were considerably
higher in relation either to the corresponding month last season or the 10-
year average for the corresponding month than were exports in December and
January. In the 2 months combined exports were 53 percent smaller than a
year earlier, 57 percent smaller than the average for those months of the
preceding 10 years and were the smallest for the period since 1872-73. Trade
reports indicate that for the period March 1 to March 20 exports were about
28 percent less than in the corresponding period last year.

Domestic exports of 2,456,000 bales from August through February were
42 percent less than the 4,231,000 bales exported in the corresponding 7
months of last season and 51 percent less than the preceding 10-year August
to February average. The total for the first 7 months of the current season
was the smallest for any corresponding period since 1881-82.

Exports from India and Brazil are larger; from Eggpt smaller

From August 1 to March 1 a total of 1,523,000 running bales(of400 pounds)
of cotton had been exported from India according to data from the New York
Cotton Exchange. This represented an increase of 62 percent over exports
during the corresponding period last season and were about one-third smaller
than the large exports of the corresponding period of 1936-37. During
February exports which totaled 276,000 bales were 5 percent larger than in
the corresponding period last season but this increase was much less than the
increase during the early part of the season when exports were being made
largely from the record high stocks of cotton in India.

The 104,900 bales (of 478 pounds) of cotton exported from Brazil
in December exceeded the 59,000 bales exported in December 1937 by 78 percent,
were 50 percent larger than exports in December 1936 and two-fifths larger
than in December 1934, the previous high for December. The large December
exports together with record high exports in August brought the total exports
for the first 5 months of the current season, of 535,300 bales, to 21 percent
above the previous record high for these months established last season.

The 103,000 running bales (f about 750 pounds)of cotton exported from
Egypt during the 4 weeks ended March 15 exceeded exports in the corresponding
period last year by about 39 percent. But total exports from August 1 to
March 15 were less than in the corresponding period last season by almost
100,000 bales, or 12 percent, and still smaller in relation to the correspond-
ing period of the 1936-37 season.




World: Consumption of American, Indian and Egyotian reduced: Sundry growths

A total of 5,639,000 running bales, regardless of weight (which
average about 500 pounds) of American cotton was consumed by mills of the
world from August through January this season, according to the report re-
leased by the International Federation of Master Cotton Spinnerst and
Manufacturers' Associations. This was slightly less than the 5,755,000 bales
reported as having been consumed in the corresponding period last season and
the second smallest for the period since 1920-21, or in 18 years.

The 2,653,000 running bales (of about 400 pounds) of Indian cotton
reported as having been consumed during the first half of the current season
represented a decline of 16 percent from the 3,16g,000 bales reported for
the corresponding period last season. This was the smallest world consumption
of Indian cotton for these months since 1933-34 despite the record high con-
sumption by mills in India.

The world consumption of Egyptian cotton for the first half of the
current season was estimated at 567,000 running bales of approximately 750
pounds. This was 8 percent less than for the corresponding period last season
and the smallest for the period since 1932-33.

The world mill consumption of other growths (the so-called sundry
growths) was reported at 4,845,000 running bales. This was about 1 million
bales or one-fourth larger than the figure reported the first half of last
season, but because of the wide variation in the weight of the various types
of cottons included in these figures the actual quantity of such cotton may
not have increased to the same extent as was indicated by these running bale

The world consumption of all growths as reported by the International
Federation iniunning bales, irrespective of weight, totaled 13,704,000 bales
compared with 13,D24,000 bales in the like period last season. Due at least
in part to the differences in bale weights those estimates differ consi-
derncbly from the preliminary estimates recently released by the New York
Cotton E-ch-nge Service. This agency estimated from August through January
the mills of the world consumed 14,034,000 bples (American running bales,
counting round as half bales and foreign in bales of apprSximately 478 pounds
net weight) compared with 14,251,000 bales in the first 6 months of last

UNITED STATES: February mill consumption second highest in 10 years

In February the mills of the United States consumed a total of 562,000
running bales of cotton compared with 592,000 bales in January and' 427,000
bales last year, according to a report of the Bureau of the Census released
on March 14. With the exception of February 1937 when consumption totaled
666,000 bales, domesticaills used more cotton in February this year than for
any February since 1929. The average daily rate of consumption in February


was nearly 28,500 bales compared with 27,200 bales in January, and was the
highest average daily rate for any month since June 1937. Unofficial reports
indicate that during the first 3 weeks of March domestic mill activity was
equal to or somewhat higher than in February. During February manufacturers'
sales of unfinished cotLon cloth were probably somewhat below production, but
toward the erd of Fibru2..r. end in the first part of Marcn such sales were
considerably larger than output. During the 2 weeks ended March 23, however,
sales were said to have dropped considerably below production.

Total domestic consumption of 3,954,000 bales from August through
February w-, 4,0,000 balec, or 13 percent, larger than in'the first 7 months
of last se ,on. It was 10 percent larger than the average for these months
during the L0 years ended 1936-37 and with the exception of 1936-37 the largest
for the period since 1928-29. Should the average rate of consumption per
working day be the snme during the lawt 5 months of this season as the average
from August through February, total consumption for the current season would
exceed 6-3/4 million bales. However, the a-erage rats per day during the
last 5 months of the season is usually somewhat smaller than that of the first
7 months. Nevertheless, it appears likely that unless there is a substantial
decline in general business conditions, domestic consumption for the season
should easily total between 6-1/2 and 6-3/4 million bales.

FOREIGN COUITRIES: Consumption of American for half year dropped 16 percent;
lowest in 20 years

All foreign countries combined consumed only 2,307,000 running bales
of American cotton during the first half of the current season according to
data released by the International Federation based on returns from cotton
mills throughout the world. This was 16 percent less than the 2,770,000
bales reported for the corresponding period last season and 37 percent less
than the average for the corresponding period during the 10 years ending
1936-37. Not since 1918-19 has the consumption of American cotton in foreign
countries during the first half of the season been as small as in the current
season. At that time Germany and her Allies consumed little or no American
cotton because of their inability to import cotton (In 1918-19 no cotton was
exported from the United States to Germany and even in 1919-20 exports of
American cotton to Germany totaled only 436,000 bales compared with more
than 1-1/4 million bales in each of the 2 following seasons.).

Of the net decline of approximately 450,000 bales in the total foreign
consumption of American indicated above, 225,000 bales occurred in Asia and
185,000 bales in Europe. The greatest absolute decline for any one country
was in Japan where consumption was reported at 390,000 bales compared with
650,000 bales last season, a decline of 40 percent. In Germany, including
Austria, consumption of American cotton was reported at 179,000 bales from
August to January this season compared with 189,000 bales in the corresponding
period last season. A somewhat similar decline occurred in Italy and France
while in Great Britain the percentage decline was about three times as great.

Directly associated with, but not entirely responsible for, the sharp
decline in foreign consumption of American cotton in recent years is the marked
increase in production and consumption of foreign growths. From August to
January this season mills outside the United States consumed about 8-1/4

- 8 -

-'S-29 9-

aillion bales (of approximately 478 pounds net weight) of cotton produced outside
the United States, according to estimates of the New York Cotton Exchange Service.
This was slightly less than in the corresponding period in each of the 2 preceding
seasons, but the largest with those exceptions in history, and 23 percent larger
than the average for the like period during the last 10 years. Consumption of
foreign cotton the first half of the present season was one-fifth larger than the
total consumption for the entire 1920-21 season, the first year for which compar-
able estimates are available. Foreign consumption of American cotton for the 6
months ending January 1939, on the other hand, was less than half as large as for
the 1920-21 season.

:UROPE: 1/ Several factors contribute to reduced. construction and imports,
especially of American cotton this season

The cotton situation in Europe: through the first half of the 1938-39 season
has, by and large, been conditioned by four factors. These are (1) the carry-over
of unused stocc of cotton and goods from the previous season, (2) the trends of
generall world trade, (3) an extraordinary raw cotton rice situation, and (4) an
anxious state of international relations. In a number of the free-exchange coun-
tries, cotton consumption in the 1936-37 season and in the first half of 1937-38
reflected something more than consumers' current requirements of cotton goods.
While in part it may have represented a restoration of depleted inventories and
wardrobes, it was unquestionably also affected to some extent by s-eculative buy-
ing of goods in anticipation of further rice advances. Very early in 1938, how-
ever, the textile demand situation especially for the exporting countries turned
sharply unfavorable, more or less concurrently with a down-turn in general world
trade following the upward trend from the third quarter of 1932 to the last quarter
of 1937. Caution became pronounced in the nlacing of new textile orders, delivery
instructions on contracts for goods oere withheld, export volume fell awa', and
production schedules in many cases had to be cut. Despite substantial reductions
in outnut in the latter part of 1937-38 the current season opened in August 1938
with considerable stocks of yarn and goods in the channels of trade.

The harsh experiences of the previous season and the doleful state of tex-
tile demand put spinners under pressure to reduce costs by all meeas possible,
includingg the use of cheap cotton in order to minimize losses and to meet competi-
tors' prices in the contest for new orders. With prices in the United States sup-
norted by Government loans and with Egyptians and East Indians also strongly held,
exotic cottons moved freely into consumption while at the same time new crop
American cotton was drawn heavily into the loan. With the emphasis being given
by spinners to competitive growths, the markets began by mid-October to show evi-
dences of belief that American loan-stocks miiht continue increasing indefinitely
unless the existing agricultural program were modified. The large and rapidly
increasing loan stocks in conjunction with the relatively high loan rates caused
current prices of spot American cotton to be considerably higher than might other-
-ise have been expected in view of the largu supplies of cotton. This and the
uncertainty as to how long Government loan stocks would be permitted to increase,
together with the unwillingness of traders to accept the risks of lower prices in
the event changes in the United States agricultural program should bring these
.bout, resulted in considerable price discounts on contracts for later deliveries,

1/ Based largely upon re-ort from Agricultural Commissioner Arthur W. Palmer,
London, dated ?aarch 17, 1939, except as noted.



- 10 -

-nd especially for deliveries in the season ahead (1939-40). Under these new
rice conditions, hedging operations became extremely difficult for persons
holdingg stocks of actual cotton and to an unusual degree, buying of textiles as
well as of raw cotton tended to become a hand to mouth operation. Stocks of
American cotton in Euro-e w'er" rressed for sale on a hesItant market and against
the competition of chc,-, exct-r-s at prices often below thoca at which they could
be replaced by fresh izPortr :-'om the United States, end imports were largely
restricted to special qualities which could be immediately arolied to mill orders.

Market caution was heightened, moreover, through the first half ef the
season by a serie- of distulr-ing episodes in th3 field of international politics
which, although c7 earlier bc;rinnings, reached ?. critical stage in September and
which have since continued '"ith lessor intensity but in almost rhythmical sequence.

Major importing countries operating under a controlled economy, notably
Germany and Italy, have found conditions unfavorable to cotton imports. In Germany
although a heavy demand for textiles is reported, the replacement of an active
balance of foreign merchandise trade by a passive balance attributable at least in
part to large oe-perditures for military p purposes and the difficulties of finding
the necessary means of uT.-yment encouraged the utilization of the stock carried
over and still further increases in the production and consumption of synthetic
fibers. In Italy a orogrnm aimed to brinro imnorts into balance with exports has
brought a tightening of restrictions on domestic sales of cotton goods unmixed
with synthetic fibers, while at the same time in cotton textile export trade, the
source of exchange for raw cotton purchases, has declined.

United Kingdom

Februar.- brought a fair measure of encourn.emont to th3 British cotton in-
dustry. While it is probably too early to say that it marks the beginning of
definite recovery, at least in a number of respects the mo:-th afforded -elcome
signs of relief from the depressed state of affairs which prevailed through the
first half of the season, and which in fact began T-r c brck in the preceding season,
Although no sta-tistical information concerning the actu.a v-l'u orf r. ew business
is pcc7-Fsible, a-, i.nression exists that in the yrnr ari c-.oth tr.-.d not only were
orders I,:ore nr.; '.--'1. "out also that there was a tc-de:nc to cdal in '7ar.gor quantities
and to ente.:l cnr. ", .-tr.-.t a little farther into the future tl--.n '.*.5 nben true for
some months. T'.. -.- CetLms to I, n "re ?x.2fnt tl.t '.'..'fLc!1nt orc:'rs been booked
to ans.;.re tho e:-' rate of activity for sole t-ine oh-ea., end reports
also indi.--:tt3 th-t s'.-e :..achinry heretofore idle h..T recently been started. By
the end. cf FJbt.r-L-', mill ..ctivity, .ccordinr:.7 t, tLro nofiial estimates, h-ad increased
to Let,-:.-. "rj aid -O percent in the wer.virg tbr.nch and to 70-75 porcect in the
spinning section. (Full-time operation of mills in -;ooring order on a single shift
of 48 hours = 100).

While the uncertainties which in recent months have been the chief
causes of concern obviously had not been removed, they seemed in February to
recede somewhat from the foreground. In particular, the anxieties growing out

- 11 -

of international political relations nopear to have been soev.what diminished,
due possibly to the more confident attitude adopted by thon nress, to the
British Gover'ncnt 's plan announced in January for insur~zce against war
hazards, or to r. combination of these and possibly other factors. With
respect to the rice situation, a good deal of confusion is evident in the
markets as to the meaning : of recent legislative developments in the United
States, but in various quarters these have been construed as indicating
that releases of lo.n cotton in significant quantities at less than the full
amount of the advances and accumulated charges are unlikely for sorin time to
come a conclusion "rhich for the time being has tended on the one hknd to
allay fears of a sudden near-tern fall in the prices of cotton and goods,
and on the other to concentrate attention on the reduced supplies of goods
in channels, aund. cn the difficulty of purchasing some of the specially
desired qualities of cotton at existing price levels. Howeever, with the
,dva::ce of so-ie 24 oenny points from the mid-February low in Liverpool
Prices of A-.erican cotton, the tendency of yarn and goods buying to expand
was especially noticeable. Buying, has possibly also been encouraged somewhat
by the implication of increasing prices to follow the enactment of the Cotton
Industry Enablin, Bill.

Whil-:- t',-re h"s b' ."-: sornme ro-.'enin-: of e-nort i.quir.r nrk` t comment
attributes the increases in cotton textile activity both of tradin,: and
nrodunti-,n nore particularly to the home section, in which general underlying
conditions remain fairly favorable. Business activity in the United Kingdon
according to the Economist Index n-.d, an encouraging -ain from 100Q in
December to 104 in January (average for 1935 = 100). Employment in February
followed vith a substantial upturn. The sustaining influence on internal
trade exerted by the rearm.anent program seems on. the way to being demonstrated.
Expenditures for Air, Army and NTval services in the current year are put
at k345 million, or just under 2 billion dollars. An incr,--se in the year
ahead to l5"O0 million, or slightly over 2.7 billion dollars, is prograrmed.
Indications that the increase of expenditures may be financed by borrowing
and with no significant increase in tax derm.ands are interpreted as generally
favorable to business and erploynmnt prospects in the near term.

In the export field, good trade with the Dominions, especially Australia,
is noted and important negotiations have been in progress on both yarn and
goods for India, but little effective contribution to piece goods demand has
apparently vet been made by India. Piece goods exports of 108.4 million
square yards in February, after i.iakin. allowance for the lesser number of
business d.,ys, were not quite up to the rate of January but about enual. in
total to those of August. Although export volume was declining precipitately
a year ago, the figure is about'10 percent under that of February, 193g.
Yarn exports of 11.6 million pounds in February, though exceeein. the total
of any month of 193S except March and Novenber,-were likewise a little
under the Ja.nuary rate. Nevertheless, in the recent more cheerful atmos-
phere, it has been possible to s.e potential betterment in the export
situ.t ion.

_ IIIIII--Y-..~-V.i-ICIL- 1-1~ i~-.~. .~....~.. i.l~--..... _.


CS-20 12 -

Qualifying somewhat the more favorable factors in the British cotton
textile situation, however, must b- set the prospect of increases in textile
costs, r-hich already bear heavily on export trade. Anticipating the early
enactment of the Cotton Industry Enabling Bill, about 100 firms in the dye-
ing section have adopted voluntarily a now minimum price agreement providing
for a general increase of about 12 percent in dyeing charges. Price control
schemes for the spinning and manufacturing sections to be instituted under
statutory authority of the bill if !nd when it is enacted, are already in
advanced stages of planning. That those contemplate increased prices of yarn
and gray cloth is patent from statements of their proponents as well as from
the very unsatisfactory margins earned on much of the yarn production and the
severity of price competition amcng leavingn g entcrurisOs. While some spec-
ulative buying in anticipation of orice advances may be set in motion, it
seems likely that permanent benefits to export trade may develop only gradually
and that in the interim, :.ncreases of cost may orove something of a handicap
to sales in comretitivj mnrkots abroad.

Reflecting the improved demrnd for yarns, total forwardings of raw
cotton rose in T7brnarr to a weOek1 avcrrge rate of 51,400 equivalent 500-lb.
bales, the hir'hect since Marrh 1. S) nd m 'c'Itt 3,600 better than the rate in
January. For ardin.-s .f ~n-ic.n zottnr. recictered an average -eekly in-
crease of lcss than 1,100C bas nn.d a..e .boult 2,000 bales less per week
than in October., The tiarc of ArbeT ca- i- tntal fo.r--.rdings thus showed a
further slight fall fror. Jraurry in ke:pi: g .it' the trend since about
November. That c.Ilr-er-t :.cti-ity in opi.e ..f ?eb~..'ar's gains is, however,
still at a re?.ati.vaely loi leI-el is app.'.rent L.: comn rison with average weekly
for,.wrdingv of 5,,200 bales (500-lb. eouivalert) in February 1938 and 62,939
in Fcbr,.ar-- 1937. The falling off of mill takings from the previous season
is shared by all of the more important growths except East Indians, forward-
ings of rhich at February 24 were about 17 percent ahead of those at the same
stage of the season before.


Developments in the cotton situation in France during the first half
of the present season, though not advantageous to American cotton, have on
the whole turned out more favorably than 'rs a nticipnted at the outset. Spin-
ning mill occupation based on normal operation of machinery on a 40-hour
single-shift -reek hr.d fallen from 73.4 percent at the beginning of 193S to
71.9 in July, vrhile in manufacturing a similar decline-from 80.7 percent to
75.1 had occurred. A voluntary but someraet flexible arrangement for short
time operation based on a 32-hour week -ns effected. Beginning about October,
however, a substantial revival set in, which continued through all of the
second quarter of the season. New orders booked in December -ore reported as
exceeding the totals of those in December of 1937 by 4h percent in spinning
and 333. in manufacturing. The index of activity had then risen to 79.5 for
spinning and 82.4 for leavingg and short-time arrangements -were no longer
operative. In most of the first quarter of 1939 the situation annears to have
continued fairly favorable. In early March trade reports indicated that many
French mills wer- booked ahead for several months.

- 13 -

Although it a-' that in their endeavor t,: restore normal operating
schedules, spinners and pos-ibly also manufacturers have accepted considerable
business at margins which are not very profitable, the position of the French
ipdustr:. at the end of the first half of the season may be regarded as moderate-
ly strong either b- comparison with that in neighboring free-exchange countries
or in relation to its own position earlier.

Buying for the larger metropolitan centers vwas said to be lagging, but
demand from the provinces and from the colonies, possibly excepting those of
Northern Africa, had been good. At the same time extort sales to foreign
countries though ordinarily taking but a small fraction of French production
were reported as showing increases. In February, although a fair flow of orders
was reported from the ITormandy,- region, new textile business in contrast with
preceding months and with February experience in the United Kingdom, was
generally quiet. Most mills, however, h7ad enough backlog of unfilled orders
to keep then oncrating on a 40-hour or longer work -eek. Taking account of
this circ'imstance and the kncr.-n textile requirements for which orders had not
yet been pl-ced, reT:orters disclosed little apprehension for the immediate
future, thougTh v.-ents in Belgium were being watched for indications of currency
devaluation measures, the effect of which would be to sharpen competition in
the export field. S me reserve on the part of the French public in the matter
of retail buying sin,-e the Mediterranean question bec-me acute has been noted.
This factor, it is thought, m:ay have contributed to +he more moderate pace of
trade buying. Basic factors, in the French economic situation are reported
to be maintaining on the whole their healthier condition.


Should the civil conflict in Spain end in the near fui.r', as is
generally expected, an earl:- resumption of mill activity and cotton con-
sumption at a considerable higher level than for many- nonthls -7-uld seem very
likely. Standing fifth among the rp. 7 cotton im.rorting countries of Europe
in the five years 1031-35, with average annual takings equivalent to about
440,C00 5Co-lb. bales of which slightly more than 300,000 were American,
and possessing at the end of that time some 2,070,000 spindles, Spain has
imported and consumed comparatively little American or other cotton since the
outbreak of hostilities in July 1936. However, with the establishment of
Nationalist military, supremacy in Catalonia, the -predominant cotton mill
region of Spain after many months of isolation has now been united with the
whole of the territory under ITntionalist control, in which at the end of
February -'ere included the major part of Snoin's land area and the chief
industrial centers. Reorganization of the cotton textile industry for normal
production in those mills of this region remaining intact was expected to be
one of the early accomplishments. Restoration of destroyed and damaged
mills and equipment is ilso said to be projected.

_ ----lli-liiiiii-i------:7--~- __~~- _-i31 ~ __

CS-29 14 -

Germany 2j

The latest reports on the German cotton textile industry in February
and early March indicate that the activity of spinning mills continues on a
high level. The textile industry employment index (193t = 100) of occupied
workers, presented in the Dresdner Bank bulletin, stood at 107.4, a record
level, in December. The index average for the calendar year 193g was 106.0,
compared with 103.3 in 1937. The German textile industry at the present time
employs about 1,200,000 E7orkers.

Wholesale and retail trade reports indicate that consumer demand
within the enlarged German Reich continues to be strong, but expert demand
for German textiles appears to be less active. The decreased value of German
textile exports in 1938, compared with previous years, is shown as follows:

German Textile Exports (all types)

Year : Million dollars

1936 ....: 204
1937 ....: 216
1938 ....: 176

World market difficulties for German foreign trade in textiles, which
again became especially noticeable in the spring of 1938, continued during the
latter half of the yeer. Certain export gains in southeastern Europe and Latin
America during this period -rere not sufficient to offset the losses in trade with
England, Belgium, Holland, the Scandinavian countries, Switzerland and the United
States. Although there was some improvement in the total raw material supply
situationin 1938, and even though staple fiber production had risen to new
peaks, the raw material problem then, as well as today, is a matter which has
continued to give the enlarged German textile industry increasing concern.

The German trade drive into eastern and southeastern Europe has received
more attention than usual in economic and trade papers recently. The "Textil-
Zeitung" of February 18, 1939, for instance, devoted an entire special issue to
the subject of past, present and future textile trade possibilities in Hungary,
Rumania, Yugoslavia, Albania, Greece, Bulgaria and Turkey. Under the title of /TeT
"70 to 0O Million Consumers" special emphasis was given to this area as a market ot-
for German textiles, though rather more attention was devoted to the historical
and statistical trade aspects than to future considerations.

The Bremen Movenent

Movements of all cotton in and out of Bremen were somewhat larger in
February than they were during the preceding month, but definitely smaller than

2/ Information relating to Germany, the Netherlands, Poland largely supplied by
the office of Loyd V. Steere, Agricultural Attache', Berlin.


in February 1938. Total receiots of American ccttcn since August 1, 1938,
totaled only 290,000 bales up to February 25, 1939, or less than half the
amount received at Bremen during the came period a year ago. There was a net
decline of 17,000 bales in total stocks of cotton during the month of February.

Bremen receipts and withdrawals of cotton between 1.u,ust 1, 1938, and
February 25, 1939, and stocks on hand on February 25, 1939,
with comparisons

ee P receipts : withdrawals : Stocks
:173?-39: 1.:37-38:1 93196-37:1938-39: 137-38:1936-37:1938-39: 137-38:19337
1,000 1,000 1,00,0 1,000 1,000 1,000 1,000 1,000 1,000
:bales bales bales bales bales bales bales bales bales

American ..: 290 582 419 293 465 388 146 220 j46
East Indian: 25 13 25 27 16 38 7 3 8
All other..: 283 268 237 311 280 238 59 35 40
Total ... 598 863 681 631 761 664 212 258 194

Total last
30) .......: 540 801 624 554 695 591 229 264 209
Bremer Baumwollborse.


The production indices of the cotton spinning mills, published in a re-
port by the Netherlands Statistical Office, indicate that production rose
slightly during the final quarter of 1938, reaching 106, from 99, the figure
during the previous quarter (1929 = 100). There were corresponding index
figure increases in the hosiery and wool industries. This improvement in
certain categories of Holland's textile industry during the final quarter of
1938 did not, however, extend upward to a level as high as that attained dur-
ing the first quarter of 1938, according to this report.

The Netherlands imported the equivalent of 25,500 478-pound bales of
raw cotton during January 1939, of which 11,500 bales were of American origin.
Net imports from August 1, 1938 to January 31, 1939 totaled 131,700 bales,
compared with 144,000 bales for the corresponding period in 1937-38 and
124,000 bales for the August-January period of 1936-37.

A news note a-peared in the February 17 issue of the "Textil-Zeitung"
to the effect that Holland has placed a' ban on the erection of any new plants
in the cotton hosiery industry.


Probably the most interesting recent news in Polish textile centers
was the official confirmation of earlier reports of the granting by the Ex-
port-Import Bank of W'ashington, D. C., through certain New York banks, of a

I --~-;2;~;;;m;~-~--~--r=---- ----- ---------- -- -

- 15 -


- 16 -

loan of $6,000,000, guaranteed by the National Economic Bank of Poland, for
the purchase of American cotton and copper. It was stated at the time that
approximately one-third of this sum had already been allocated for cotton

Greater Cern,.n-m oci --ied first place in Polish foreign trade in 1938
both as an :'-,porter a.l.d a, .Ln exporter, being follcu.ed by Great Britain and
the United Slates. The extension last fall of an industrial credit of
120,000,000 zlotys (022,800,000 at the current official rate of exchange) by
Germany to Poland, as well qs other commercial arrangements have tended to
bring Poland nmre rr.d more .nto the orbit of the closed economic system of
its western r:3ighbor, The present year may concei, b.'y see Germany account-
ing for from 0r to 50 percent of the turnover of Polish foreign trade. Poland
is, however, raking efforts to increase trade with other countries. The Polish-
Lithuanian trade agreement, which went into operation this year and which pro-
vides for the exchange of goods worth approximately $2,000,000 was followed on
February 19, 1939, by the signing of a general trade agreement between Poland
and the U.S.S,R. This now agreement with the Soviet Union provides for an
equal exchange of goods through clearing channels, and will extend over a period
of one year. It will be automatically renewed unless it is previously denounced
by one, or both, of the parties to the agreement. It is hoped by Soviet-Polish
trade authorities that trade between the two countries will be considerably ex-

According to press reports Poland is also negotiating at the present time
a timber-for-cotton barter deal with Egypt. There are intimations in the press
that Poland is considering the creation of a cotton plantation in Prazil in
order to reduce some of the difficulties, chiefly from the standp;rnt of foreign
exchange, now involved in obtaining raw cotton. The Brazilian di. :rict of Sao
Paulo is under consideration because, it is stated, there is a colony of Poles
in that region and it could furnish the required labor and management for such ar


Excec, for a alight improvement reported in some quarters in the activity:
of the Italian cotton mills, the situation in the Italian cotton trade appears
to have differed little during February from that existing in the preceding
month. The domestic market for cotton goods apparently quickened slightly and
the distribution by the Cotton Institute of a moderate allotment of foreign ex-
change for the purchase of cotton to be made into gocat for domestic consumption
offered some encouragement to brokers. Foreign markets were pursued vigorously,
Apparently, shipments of cotton goods to Egypt increased even though no settle-
ment was reached in the dispute concerning the quotas of Italian cotton goods
to be admitted into Sgypt during 1939,
A. J.

3/ Information received from the American Consul General at Milan.

_ _

- 17 -

Cotton textile exorts in January' totaled 38 percent ss in qu.ntit"
a,-d nearly 50 percent less in value tha: 'Nr.oe ycar before. '-'he chief markets
were Switzerland, Egypt, Morocco, Ger:%nvy and Albania. 'he outstandi'n reduc-
tion in this trade occurred in shi-oments to Argentina, which dropped more than
99 percent. Exports (in weight) to Egypt declined by about 60 percent -nd
shinnmnts to the United States dropped nearly 40 percent.

Cotton yarn exports increased by about 42 percent in -nour.t, And nearly
18 percent in value. They were shipped in both years chi,-,fly to Yu-l.-osl..ia
and Rumania to both of -hich destinations exports increased during the month
under review. Other large recipients were SpaTin, Turke3y, Bul.-:.ria, and

The ce-oand for raw cotton anpears not to have improved materially and
will hardly be affected by the distribution of exchange for raw cotton for
domestic consui.rtion which will be largely consumed in r,yin!.- for deliveries
on old contracts. ITew business is small ard the outlook not encouraging.
Offers from American cotton dealers continue to decline ~and brokers claim that
they are frequently unable to satisfy the demands of would-be buyers because
their AL.eric-an principals are not in position to furnish the particular t.pes
of cotton desired.

Prices of Brazilian cotton as recently quoted in the Milan mriket are
reported to be from 80 to 100 points lower than equivalent qu-lities of Americrr
cotton. This is said to be one reason for the relatively large sales of Brazil-
ian cotton to Italian spinners.

A proposal e.ianatin, from Rome appears recently to have been con-
sidered by the authorities interested in the new buying c,-.ncern to -urchase
substantial qu'an-tities of Peruvian cotton, but it is believed that it has been
dropped for the present, owing to thepreference of buyers for other types of
cotton. While details of the proposed negotiations are not known, the impres-
sion prevails that a barter deal of some kind was contemplated. Perh~ans it
may be taKen up again vhen the new concern is ready for operation.

Two allotments of foreign exchange for the purchase of raw cotton to
be used in the manufacture of textiles and other products for cnrsurntion
within Italy were nade during February, one early in the month and the other
at its close. Each totaled about $1,300,000 rand both to.7ethc'r are estimated
to be enou-h to pay for some 10,000 tons, or roughly 40,000 average bales of
raw cotton. Whila very welcome to Italian- cott.n-nill o7'ners, the development
has brou-ht, or will brinr, very little new business to cotton brokers, it is
asserted, since most of the exchange will be needed to p-..y for deliveries on
old contracts that have been del:l.yed un to this tine o'-ing to the insufficiency
of foreign oxchange with which to mny for them. The new supplies of raw
cotton -rill enable -irnufacturers to eonlarge their output of nixed textiles for
the Italian nmrket. They h-ve been, it v.ill be recalled, forbidden to produce
nure cotton goo's for consumption within Italy since January 1, 1939.



- 18 -

Details have not yet been published concerning the organization of the
new State-controlled concern to purchase raw cotton for Italian mills and brokers
assert that the arrangements for its operation have not been completed. Evidence
to this effect is seen in the recent distribution of foreign exchange to be used
in the purchase of raw cotton for domestic consumption above referred to, as it
had been assumed that this exchange would be turned over to the new concern for
its use in making these purchases. It would now seem that the actual operation
of the concern is not contemplated for some time to come.

U.S.S.R. 4/

The third 5-year plan recently submitted for official approval provides
for a considerable increase in cotton textile production. Production of cotton
fabrics is to reach 5,350,000,000 yards by 1942, which is indicated to be an in-
crease by 42 percent as compared with 1937. This increase would be larger than
that planned for raw cotton production and may be intended to correct the present
discrepancy betNeen raw cotton production and the manufacturing capacity of the
industry. Tho consiacratle organizational difficulties which have been evident
in the cotton textile industry during the past 2 years and which have prevented
the execution of the production plan in 1937 and 1938 will have to be overcome
in the near future if the .-yoar goal is to be realized.

The third 5-year plan in the cotton textile industry further aims at cor-
recting the disproportion existing between the spinning and the weaving branches.
Additional and more modern preparing, spinning and weaving machinery (including
automatic looms) is to be installed. The planned large expansion of domestic
production of textile machinery, apart from imports, will enable this enlargement
and modernization of textile plant equipment. A new large cotton textile center
will be created in Asiitic Russia which is to be supplied with cotton from Middle
Asia by way of the Turkestan-Siberian railroad ("Turksib").

A trade and clearing agreement has been concluded recently between the
U.S.S.R. and Poland providing for d-livery by the Soviet Union of various raw
materials in excn.nge for the products of Polish mining and manufacturing indus-
tries. The list of goods to be expcrtod to Poland by the U.S.s.R. is headed by
raw cotton and cotton waste, while Poland, among other items, will export to
Russia textile goods and textile machinery.

The exportation of Russian cotton as provided for by this agreement comes
hardly as a surprise, in view of the previously reported accumulation of consider-
able surpluses of raw cotton in the Soviet Union during the past 2 years.

ORIEET: Indian mill coiisumrtion continues at record high:
Jpanosj Qna Chinese unusually low

Tha 270,000 bales (of approximately 400 pounds net weight) of Indian cotton
consumed by Indian mills in February was 16 percent larger than consumption in
February last year, the previous high for the month. This made the 20th con-
secutive month in which Indian mill consumption of Indian cotton (and probably

/ Information from the Belgrade office of the Foreign Agricultural Service.


- 19 -

the consumption of all cottons) exceeded that of any previous corresponding
month and brought the total for the 7 months ended in February to 1,880,000
bales. This total was 10 percent above the previous record high established
last season. Despite the high level of consumption during the last 5 months
of last season, it is expected that Indian mills will continue to use more
cotton than a year earlier throughout most, if not all, of the last 5 months
of the season. Total mill consumption in Indian therefore should easily ex-'
ceed that of any preceding season.

In Japan, mill consumption of cotton appears to have shown a slight de-
cline from January to February due entirely to the fewer number of working days.
The reported production of cotton yarn indicates that mills belonging to the
Japanese Cotton Spinners Association (which represent 96 or 97 percent of the
total spinning capacity of all Japanese mills) consumed slightly over 200,000
equivalent bales of 478 pounds not during the month of February. This makes
the seventh consecutive month in which consumption in these mills has been be-
tween 198,000 and 208,000 bales. During this period, however, consumption has
been from one-sixth to two-fifths smaller than in the corresponding months last
season. In February consumption was about one-sixth less than a year earlier,
one-third loss than the record high February consumption of 1937 and the smallest
for the month since 1931, or in 3 years. The total from August through February
of 1,425,000 bales is almost ene-third less than a year earlier and the smallest
for the period in 9 years.

The reduced Japanese consFumption is apparently due to a combination of
several factors. Thesr include: (1) Japanese Government regulations with re-
spect to the use of and the restricted quantity of foreign exchange along with
the greater emphasis placed on products considered more essential in conducting
military activities in China; (2) Government decrees prohibiting the sale of
pure cotton goods in Japan, Manchuria and those parts of China under Japanese
control; and (3) reduced exports of cotton textiles from Japc-n apparently due
in part to anti-Japan sentiment. In February, Japan exports of cotton cloth
totaled only 118 million square yards compared with 184 million in February last
year. This was only a little over half as large as the record high February
record established in 1935 and the smallest for the month since 1932. Total
cotton cloth exports for the first 7 months of the current cotton marketing
season was about on--fifth loss than a year earlier and the smallest for the
period since 1931-32.

Imports of cotton into Jr pan during February showed little change and
continued substantially below the 5-year average for both American and Indian.
American apparently continued to bo affected by the shortage of available supply
of long staples and high grade A. Considerable quantities of old crop Brazilian
cotton continued to arrive. Much of the cotton was used as substitute for good
grade American not easily obtainable and inquiries for Brazilian by customary
users of American continued active. Trade figures indicate that 1,800 bales of
Chinese cotton arrived during the month, and it is believed that imports for the
season will not approximate the high figures which have frequently been mentioned.

Yarn production for the month was slightly less than in January due to
decrease of working days. Decrease in proportion of coarse yarns was noted in
line with the policy of promoting exports of finer grades of cloth in preference
to grey cloth. There are no indications as to whether an early reduction in
yarn output will take place.

CS-29 20 -

Serious reverses in cotton cloth quotations during the month offset gains
made during January and put prices back to levels of late November. This decline
is attributed to sales difficulties in numerous foreign markets, especially India
and Rangoon, and to an increase in stocks of consignment cotton cloth in several
countries. There appears little to warrant optimism in the Japanese cotton tex-
tile outlook. Many exporters expect a further decline unless restrictions on
shipments to those areas in the Yen bloc are removed.

Under date of February 23, the Japan Cotton Spinners Association formed
an export promotion association, the formal organization to take place in March,
The purpose is to prevent over-production of the types of low grade cloth which
threatens to demoralize the export market, control stocks of export yarn and
cloth, and advance profitable sales of Japanese cotton cloth abroad. This organi-
zation may become an integral part of the link system in the role of the sales
agent for export cloth trade. This indicates an increase in centralization of
the industry and the greater delegation of Governmental administrative powers to
Japan Cotton Spinners Association.

It is estimated that in February cotton mill consumption in China and Man-
churia totaled about 135,000 bales. This is considerably smaller than the 150,000
bale estimate for January which was the highest for any month since immediately
following the outbreak of hostilities with Japan in July 1937. The estimated
consumption for the first 7 months of the season of 965,000 bales is considerably.
larger than in the corresponding period last season but probably the smallest with
that exception since 1928-29.


"Free" American cotton small despite record high United States stocks

Or. March 1 domestic stocks of American cotton totaled a little less than
16-3/4 million running bales. This was nearly 2 million bales larger than a year
earlier, the previous record high as of that date and 54 percent larger than the
average for the past 10 years. The total this year was nearly a fourth larger
than on Parch 1, 1933. Approximately 11-1/4 million bales or 67 percent of the
tot'j .-'.`'- tic stocks of American cotton as of March 1 this year consisted of
Gove;.- rt loan stocks. Consequently, domestic stocks of "free" American cotton
on that date totaled only about 5-1/2 million bales, compared with a little less '
than 8-1/4 million bales on March 1st last year and an average of 7,350,000 bales
for the same date the last 10 years. With the exception of 1935 and 1936, cur-
rent stocks, excluding Government loan stocks are the smallest for any correspond-
ing date since 1924 or in 15 years. If stocks held by domestic consuming estab-
lishments are deducted from the so-called "free" stocks, the remaining quantity on
hand as of March 1 this year is the second smallest since prior to 1924. The
estimated total world stocks of "free" American cotton, including mill stocks,
as of March 1 this year, of about 7-1/3 million bales, was 3-3/4 million bales
less than a year earlier, the record smallest in more than 15 years and 32 per-
cent less than the March 1 average for the preceding 10 years.

The Commodities Credit Corporation received reports through March 23 of
the total of 4,384,000 bales of the 1938 crop as having been pledged on Government
loans. As of that same date repayments for about 27,000 bales has been reported.
The net increase in the reported Government loan stocks during the 4 weeks ended

_ __


- 21 -

March 23 was 76,000 bales compared with 200,000 bales in the preceding 4 weeks.
During the week ended arch 23 the increase was 20,000 bales, and the total
Gmrnment loan stocks as of March 23 were 11-1/3"million bales compared with 6-2/3
million bales at the end of Lijarch last year.

U.S.S.R. 4/: Crop at record high, plan calls for further marked increase

An estimate of the 1938 Russian crop is still not available, but the yield
per acre of irrigated cotton has been placed at 2 percent above the yield as re-
ported for 1937. This yield would on a slightly reduced acreage point to a
crop about the same or somewhat in excess of the 3,782,000 bales of 478 pounds of
ginned cotton reported as having been harvested in 1937, the largest crop ever
produced in the Soviet Union.

The third 5-ycar plan, which is only now submitted for official approval,
although its first yoar has already elapsed, provides for a further significant
increase in raw cotton production. The recently published outline of the plan
indicates that 32.9 million metric quintals of unginned cotton, 4,700,000 bales
ginned, are to be produced by 1942. This would be an increase by over 30 percent
as compared with 1937, the end of the second 5-year period. During the 5 years
1932 to 1937 ravj cotton production had doubled.

It may be of interest ti note that the officially planned increase in
cotton production, 1937 to 1942, by over 30 percent is much below the rate indi-
cated in earlier tentative discussions of the third 5-year plan. Figures of
5,700,000 bales to 8,300,000 bales of ginned cotton had been mentioned as the
possible goals for 1942, which would have meant an increase by 50 and 120 per-
cent, respectively, over production in 1937,

As yet no details of the third 5-year plan are available, and the pub-
lished outline does not contain any information as to the planned trend in cotton
acreage. Previous discussions reported in the press indicated that a large ex-
pansion in the acreage of non-irrigated cotton is to take place, and that this
acreage should reach 2,471,000 acres by 1942, compared to an area of 1,300,000
acres planted in 1937. The total acreage planted to cotton in 1937 amounted to
5,160,000 acres. However, the plans regarding yields appear to indicate that
yields and not acreage are to be the main factor in bringing about the planned
increase in the total cotton crop,

j/ Information from the Belgrade office of the Foreign Agricultural Service.

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