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:

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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:
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Full Text

Bureau of Agricultural Economics

CS-30 April 29 1939.
---*_-------------- -----------------


Exceptionally high domestic consumption, unusually small exports, high

spot prices of American cotton relative to futures quotations, and small stocks

of "free" American cotton in the presence of record total stocks, continue to

feature the present cotton situation, according to the Bureau of Agricultural

Economics. An important recent development is the proposed domestic export sub-

siay, which apparently has already resulted in market price adjustments which

have partly eliminated the disparity between prices of American and foreign

growths in foreign markets.

Domestic mill consumption of 649,000 bales in March, was one-fourth larger

than in March last year, the second largest for the month in 12 years, and prob-

ably the third largest March consumption in the history of the industry. Domestic

mill'oonsumption from August through March was 15 percent, or nearly 600,000 bales,

:larger than in the corresponding period last season. The total for this 8-month

period was, with one exception, the largest since 1928-29. Domestic mill activity

during the first half of April was apparently maintained at unusually high levels,

despite the fact that manufacturers' sales of cotton textiles were apparently

considerably below production during the last half of March and the first half


The 330,000 bales of American cotton exported in March were 23 percent

-less than exports in March last year and, with one exception, the smallest for

the month in 15 years. Exports, however, were relatively more favorable than

CS-30 2 -

in February, when exports were one-third less than a year earlier and the

smallest in 54 years. During the first 20 days of April, trade reports in-

dicated that exports were only about 45 percent as large as in the like pe-

riod last year,e This low level of exports may have been due in part to a

postponement of purchases because of the increased prospects for an export


Since the middle of March, the Liverpool price of American Middling

7/8 has declined materially in relation to the prices of this cotton in do-

mestic markets. On March 17 the spread between the Liverpool price and the

10-market average price was 1.62 cents per pound, but by April 24 this spread

had narrowed to 0.71 cents. This was apparently due to the increased possi-

bility of an export subsidy on American cotton, which would be expected

eventually to reduce the foreign price in relation to the domestic price by

about the full amount of the subsidy, such change taking the form of a re-

duction in the foreign price and an increase in the domestic price, compared

with what they otherwise would be. On April 27 the spread was back to 0.95


The proposals with respect to an export subsidy are, no doubt, re-

sponsible at least in part for the rather marked reversal in the movement of

the ratio of the Liverpool prices of Indian and American. On March 17 the

average price of three types of Indian (Oomra, Broach and Sind) at Liverpool

was equivalent to only 71.9 percent of the average price of American Middling

and Low Middling. By April 21, however, this ratio had increased to 78.9

and by April 24 was probably above 80. Some change in the ratio between

American and other foreign growths also occurred during this period, but for

the most part these changes were much less than between American and Indian,

- 3-


Domestic prices strengthen

From March 10 to mid-April, domestic prices of Middling 7/8 inch
cotton in the 10 designated markets declined from 8.80 cents (the highest
point of the season to date) to 8.32 cents. By April 24, however, most
of this decline had been recovered and the price in these markets on that
date as well as on April 26 and 27, averaged about 8- cents per pound.
Approximately half of the advance from April 15 to April 24 occurred on
the latter date, and was apparently due at least in part to the reported
agreement between the President and certain leaders in the Senate with
respect to a 2 cent export subsidy which would be placed in operation after
the beginning of the new fiscal year on 3Jly 1.

Spot prices of American cotton continued high relative to futures
contracts throughout the last month, especially in relation to distant
delivery months. On April 24, Middling 7/8 inch spot cotton in the 10
designated markets was 0.65 cents above the closing price for July New York
futures contracts and 0.99 cents above that of October futures. In the past
10 years the average price of Middling 7/g in the 10 markets in April has
averaged 0.20 and 0.04 cents, respectively, below the average April price
of July and October New York futures contracts.

Export proposals reduce price disparity

On Friday, March 17, the average Liverpool price of three important
types of Indian cotton was lower in relation to American Middling and Low
Middling than for any Friday for 4- years. Several other- growths were also
unusually low relative to American. By April 21,'however, the Liverpool
price of Indian had increased materially in relation to American (or Ameri-
can had declined materially in relation to Indian) so that the ratio be-
tween Indian and American was the highest for any Friday for more than 6
months. In this period of 5 weeks, the ratio of the average price of
Indian Oomra, Broach and Sind to American Middling and Low Middling in-
creased from 71.9 to 78.9 or from an unusually low ratio to one about equal
to the average for the past 10 years. In view of the reported agreements
with respect to a 2 cent export subsidy, which appeared on April 23, prices
of these growths since that date would probably show a still further in-
crease in this price ratio. A comparison of the Liverpool price of Indian
Central Province, Super Fine (the only Liverpool price of Indian available
since April 21) with American Middling shows that on'April 24 the ratio
of this type of Indian to American was 85.3 as compared with 84.8 on April 21.

This reversal in the ratio of the prices of Indian and American cotton
at Liverpool is apparently attributable at least in part to the possibility
of an export subsidy on American cotton. On March 17, the Liverpool price
of American Middling 7/8, when converted at the cuyTent rate of exchange,
was 1.62 cents per pound higher than the average price of Middling 7/8 in
the 10 designated markets. By Friday, March 31, the spread between the 10-
market average and the Liverpool price of American Middling had narrowed to


1.17 cents. By Monday, April 24, following the press reports that admin-
istrative leaders had agreed upon a 2 cent export subsidy, the spread
narrowed to 0.71 cents, then widened to 0.95 cents on April 27.


Domestic exports continued low

While exports of American cotton continued exceptionally low during
March, they showed considerable improvement in relation to the comparative
level of exports during the earlier months of the season. The 330,000 run-
ning bales of American cotton exported in March were 23 percent less than
March last year, and with one exception the smallest for the month in 15
years. In February, however, exports were one-third less than a year
earlier and the smallest in 54 years. Total exports for the 8 months ended
March, of 2,786,000 bales, were 40 percent below those of a year earlier and
the smallest for the period in 57 years. With the exception of Japan, exports
to all of the larger markets for American cotton have been much smaller so
far this season than during the corresponding period last season. The
720,000 bales exported to Japan during the first S months of the season,
however, were 64 percent larger than in the corresponding period last season
when takings by Japan were unusually small. (See table 1 for additional

Several factors have contributed to an exceptionally large degree of
hand to mouth purchasing by foreign countries this season. One of the most
important of these has been the unusually high prices of spot cotton relative
to futures, which has discouraged the hedging of raw cotton. More recently,
uncertainty regarding possible disposition of the large Government loan
stocks and the numerous legislative proposals for dealing with the cotton
situation have also further encouraged the policy of purchasing only for
immediate needs. This policy of hand to mouth purchasing would be expected
at leastto tend to iron out a considerable proportion of the usual marked
seasonal variation in the exports of American cotton since foreign con-
sumption of American cotton shows much less variation from month to month
throughout the season than do exports. Consequently, in a season such as
this, when hand to mouth purchasing is practiced to an exceptionally large
degree, there should be a distinct tendency for exports in the last few
months of the season, when exports are normally a comparatively small
portion of the season's total, to make a favorable showing relative to the
preceding months. Despite such a tendency, however, other factors may
prevent the situation from developing in this way.

For example, during the first 20 days of April, domestic exports,
of about 125,000 bales, were only 41 percent as large as in the like period
last season. The total quantity exported during this period was probably
one-third to two-fifths less than the total foreign consumption of American
cotton during this part of April with a consequent reduction in the already
small stocks of American cotton in foreign countries. The exceptionally
small exports during the first 20 days of April is probably accounted for
in part by postponement of buying, and possibly, to some extent, shipping,
because of the possibility of an export subsidy and consequently lower eaS
port prices.

- 4-


S-30 5 -


UNITED STATES: March mill consumption second largest in 12 years

The 649,000 bales of all cotton consumed by domestic mills in
March was 27 percent larger than consumption in March last year and the
second largest for the month since 1927. With the exception of 1937
and 1927, the figure for !arch this year was the largest for the month
since monthly mill consumption estimates first became available in
1912-13. In view of the upward trend in consumption and the comp&ra-
tive estimates of annual consumption, it seens quite likely that con-
sumption in March this year was the third largest for the month in the
history of the dorlestic cotton textile industry.

Total consumption by domestic mills for the S months from August
through March, of 4,600,000 running bales, was nearly 600,000 bales or
15 percent larger than consumption in the corresponding period last
season. With the exception of 1936-37, consumption front August through
March this season was larger than in any corresponding period since
1928-29. Of the total quantity used by domestic mills up to the end of
March this season, all but 81,000 bales'was American cotton. In the
corresponding period last season, domestic mills used 95,000 bales of
imported cotton.

Trade reports indicate that domestic nill consumption during the
first half of April was maintained at a level substantially higher than-
that of a yec.: earlier. With manufacturers sales of cotton textiles
apparently cr:nsiderably below production during the first 2 weeks of
April, as ~ve' as during the last half of March, there is said to be
nuch tik a domestic manufacturers with respect to the need for cur-
tailing ouL-tut. There is as yet, however, no indication of any substantial

EUROPE: Improvement in cotton textile situation in first half of
March upset by subsequent developments

The cotton situation in Europe in the early part of March seemed
for the most part to be trending moderately toward improvement, but in
the.latter half of the month was disturbed by several unfavorable develop-
ments. In the first half of the month confidence in the stability of the
international situation appeared definitely to be reviving, raw cotton
prices were rising and an idea that in any release of loan stocks the
level of prices of spot cotton was not likely to be much affected before
the sunnrer of 1940 seems to have gained wide acceptance. Under these
conditions business in the free exchange countries tended to quicken.
In contrast the latter half of the month was dominated by fresh tension
in the international political field with its usual symptoms of price
declines on the sensitive markets, heavy gold movement to London and New
York and appreciable increases in war-risk insurance rates; while at the



same tine observations of the progress of measures under consideration
for disposition of the Anerican loan stocks or for encouraging exports
subjected earlier conclusions concerning the stability of the cotton
price structure to a certain amount of doubt. Under these conditions
the normal planning of operations beyond the innediate future became
exceedingly difficult rnd an increase of caution was generally noted.
Even in Germany where, with the imports controlled and raw cotton
rationed for mill consumption at a level below that of consumer dcnand,
the situation as a rule is somewhat i=oune to the forces which affect it
elsewhere, the problem of raw cotton supplies was intensified by the in-
clusion of the Czech nills in the jurisdiction of the Reich and the
suspension concurrently of Askinark trading in Brazil. The position at
the end of :Mlrch nay thus be said to have been definitely less favorable
than at the beginning.

Str.titics of the International Cotton Federation relating to the
mill consu-,ntion of raw cotton which appeared late in March showed in
nost countries of Europe an ipprovtant in the first half of the 193--39
season over the 6-months* period $jst prooeUng. For Europe as a whole,
the increase was about 3 percent f a weight basis, though as compared
with the first half of the 1937-38 season, the first half of the present
season fell short by about the sane amount. On the Continent, however,
if Russia be excepted, the consumption of cotton of all kinds in the first
half of the 1938-39 season exceeded not only that of the latter half of
1937*3S but also by a slight margin that of the first half and was almost
equal to that of the latter half of 1936-37. In these countries the
total consuuwtion of cotton has shown little trend either way in the last
4 years front a figure of about 5 million bales per annum. The share of
American cotton in the total consumption, however, has continued its
decline, reaching a new low of 45 percent in the half year ending January.
31, 1939 for the Continent, and 46 for all of Europe, Russia being ex-.
cepted in both cases. Corresponding increases have been mainly in Sundries
which at the sane time reached a new high of 29 percent.

United Kindcn

In the United Kingdon the situation in the first half of March
was characterized by a continuation and acceleration of the improvement
apparent in February. In addition to the favorable developments generally
noted over Europe as a whole, a promise of higher prices for yarn and goods
was implied in the progress of the Cotton Industry Reorganization Bill.
Yarn prices in certain categories covered by spinners' agreements were in
fact already being advanced, while the increase of finishing charges de-
cided upon in the previous month was made effective* Moreover, there was
a certain amount of optimism both as to the international situation and
as to the cotton price level. The influence of these impending factors
was to stimulate buying. There was a tendency for yarn and cloth trans-
actions to increase in number and size and a growing disposition on the
part of the trade to extend commitments farther into the future. In



the latter half of the month, however, the situation underwent m-rked
change and while momentum appears to have carried textile buying on for a
time the markets in the last two weeks evinced uncertainty and hesitation.
The month ended on a weak note with increasing tendency for larger scale pur-
chases to be postponed and for textile buying to revert to a hand to mouth
type of operation pending a clarification of the outlook. Import buying of
cotton was especially affected and in the case of Anerican came, for the tine
being, almost to a standstill.

Although cotton textile prospects at the end of March were materially
changed from that at the beginning, surface indications suggest that the
month as a whole, in spite of its vicissitudes, must in retrospect be account-
ed a fairly good 'one if not the best, probably one of the two or three best
since 1937. A gratifying business with the Dominions, Malaya and South
America was reported. Although Indian trade has not yet shown m-rked expan-
sion and delay persists in establishing the Egyptian quota scene, scattered
trade with other export markets added to the total. Lancashire hoped also
to gain some part of the former Czechoslovakian export trade to continental

The home market, bolstered in some degree by government orders,
accounted for a very substantial offtake. The trend of wholesale trade,
according to the best available evidence, was rising, at all events up to
the middle of the month. At the same time, a further decrease of unemploy-
ment in the United Kingdom, bringing the total at last below that of March
1938, augured well both for retail trade and for the demand for cotton
goods from industrial sources.

Spinners also fared well in all departments especially in American
types and were able, it is said, not only to clear stocks of American ring
beams of which a sizeable accumulation remained from earlier months but also
to place their production for some time ahead. Prices were advanced in
four or five stages over a period of about- three weeks by a total of I pence
per pound, and in medium (42's) count American weft yarns group it was found
possible to renew for a further period of three months the margin agreement
covering some 4,000,000 spindles.

Reflecting the improved state of spinners' stock and order books,
forwardings of raw cotton to mills increased to an average of 55,600 bales
(478-pound net equivalents) per week almost the equal of M"rch 1938 and
substantially better than any month of the interval. In Febru;.ry, the
second best month of the twelve, the average weekly rate was but 51.4 thous-
and. Of the 4,200 bales increase of total forwardings per week in March
over February more than 2,750 bales represented an increase in East Indian,
rising forwardings of which are apparently tracing the seasonal pattern set
in recent years. Brazilian forwardings were slightly down on an absolute
basis and substantially so on a percentage basis. Weekly forwardings of
American cotton averaging 21,567 (478-pound equivalent) bales in March were
roundly 1,600 bales more than in February but below the figures of October
and November, and the American share in total consumption showed a further
decline. The seasonal peak expected in American forwardings has not
appeared in the present season, which in this respect at least is showing
a resemblance to 1934-35.


The French situation appears to have followed the general pattern of
that in other free exchange countries. Textile buying, although somewhat
quiet at the beginning of March, was stimulated by rising cotton prices
in the first 15 days, while mill order books were further improved with
substantial contracts placed for the French Government. In the latter half
of the month, however, buying for commercial account was sharply affected
by the turn of events and toward the end the textile market grew extra-
ordinarily quiet although it was believed that a considerable amount of
business remained to be placed and would appear with a return to more normal
conditions. The best available information indicated, however, that French
mills continued to hold a relatively strong position with orders in hand
sufficient to insure full time operation well toward the remainder of the
present season. Mill activity at the normal rate of 40 hours a week was
general, but mills in considerable number were working up to 48 hours and
some engaged with government contracts had further extended their work week
to the 60 hours permitted under the new decrees of the month. Some manu.-
facturors were reported to be finding difficulty in maintaining deliveries
on schedule, while the total volume of spinners' unfilled orders was pro-
bably larger than in any month since February, 1931.

Mill buying of actual cotton was reported as active in the early
part of the month. French spinners at the end of March were estimated to
have covered their current seasons requirements of American cotton by about
80 percent and of Brazilians by about 95 percent.

Import buying of cotton in March was generally quiet and in the
latter half of the month is said almost to have ceased. A small amount of
American cotton and a substantial quantity of Brazilian, thought to be
close on 40,000 bales, owed to French spinners are yet to arrive. But at
the current rate of depletion of Havre stocks it is estimated that at least
75,000 bales of cotton had yet to be bought to fill out spinners' require-
ments up to September. In all districts, however, spinners appear dis-
inclined to make commitments for American cotton till some definite program
for the disposition of American loan stocks could be announced. As merchants
are even less inclined to add to their stocks under the circumstances it is
expected that new import buying will be restricted to minimum current
requirements of the mills.

Germany l/

The close of the first quarter of 1939 finds the German cotton
industry in a state of unprecedented evolution, and faced with the pros-
pect of further rapid changes and adjustments of the most varied character.
The absorption in March of practically all the remaining Czechoslovakian
cotton industry following those of Austria and Sudetonland has been the
culminating event in a situation already characterized by steadily growing
difficulties in obtaining foreign raw material supplies, in developing a
domestic raw material industry, in widespread technical adjustments

1/ Information relating to Germany, Poland, Netherlands, Denmark and
Estonia supplied by Agricultural Attache, Loyd V. Steere, Berlin.

- 8 -

cs-30 9 -

necessitated by substitute materials, in maintaining export markets for
cotton goods, and by a tremendously burdensome bureaucratic control of all
the processes of production and distribution in the industry.

The cotton mills are continuing to operate at sustained high levels,
in an effort to cope with a demand for goods that still relatively outstrips
production by a good margin. The general picture of total raw material
supplies and production at least quantitatively is in fact quite favor-
able, for Germany proper, which has managed so far to maintain very well
the total volume of raw cotton (and other textile raw material) imports,
and at the same time to bring about a phenomenal increase in domestic
production of natural, artificial and regenerated fibers.

With the absorption of Austria and Czechoslovakia, however, the
situation has assumed quite a different aspect. The mills of these
two countries, combined, have consumed from 400,000 to 600,000 bales of
cotton annually in recent years, and neither has any important production
of domestic fibers or substitutes. Germany must now provide these addi-
tional quantities of raw materials, either by. importation or home production,
or resort to restriction of mill operations, either drastically in Czecho-
slovakia, or more widely throughout the Reich,


Reports from the Lodz cotton textile industry indic-ate that there
has been a decline in production and employment in recent months. Seasonal
improvement in conditions related to the demand for cotton in Poland has
also been held in check by the international political tension resulting
from the German occupation of former Czechoslovakia and of Memelland, as
well as by the strained relations between Poland and the Third Reich.

Polish imports of raw cotton declined during the first half of
the present cotton year from the high figures of 1937.38, but the present
rate of takings is till substantially greater than during the comparable
months in most seasons, Imports and exports of cotton fabrics have also
declined in recent months, but yarn imports, on the other hand, have
climbed to record levels.

The Textil-Zeitung reports that the Stata Planning Office of
the Polish Ministry of Finance has been placing the finishing touches on
plans for government initiative in expanding the Polish textile industry.
According to latest developments, major emphasis will be placed on (1)
better utilization of domestic raw materials and (2) upon increased produc-
tion of synthetic fibers (Kotonin and Textra) in order to restrict imports
of raw materials from abroad.

In addition to the plan for rendering the Polish textile industry
more independent of raw material imports, the State Planning Office pro-
poses that a far-reaching program of decentralization of the textile indus-
try be brought about (1) in order that mills may be located near raw mater-
ial supply regions, and (2) presumably for strategic reasons.

- 10 -

There are further reports front Poland reflecting the growing op-
position in Poland's official circles to the importation of the usual
quantities of American cotton. This attitude appears to have arisen mainly
front two factors: (1) Poland's increasing difficulty in obtaining sufficient
foreign exchange for both her general and military needs, and (2) that
Poland has been more and more influenced by Germany and Italy, and is en-
couraged by the success these tro countries have had with synthetic fibers.

That American cotton faces stronger competition on the Polish
market is evidenced further by (1) the inclusion of raw cotton in the
recent Polish-Argentine trade agreement, and (2) the provision in the re-
cently concluded Polish-Soviet Union trade agreement for substantial imports
of Russian cotton. The American Enbassy in Warsaw reports thnt Russia is
to export approximately 92,000 bales of 478 pounds net of cotton fiber to
Poland and Poland, in return, will ex-ort cotton fabrics to the U.S.S.R.

Despite these many obstacles to imports of American cotton by
Poland, a brighter aspect of the picture is to be found in the steadily
growing domestic demand in Poland. In textile circles it is believed
that this greater domestic demand for textile goods (which is currently
intensified by expectation of increased use of synthetic fibers) will make
it necessary for Poland to increase her cotton imports from roughly 370,000
bales (last year) to nearly 438,000 bales during the present cotton year if
demand is to be net. The State Planning Office is trying to meet the de-
mand by plans for increasing the production of domestic raw materials by


The Swiss cotton textile industry continues to report a very da-
pressed condition. Production is running mnud below a year ago, and the
outlook is regarded with considerable pessimism in view of the unfavorable
state of export trade in nearly all Swiss textile specialities. Switzer-
land's formerly important connections with Czechoslovakia in the processAng
of various goods are believed to have been seriously impaired if not nearly
destroyed. Imports and exports of cotton yarn and cloth, accordingly, are
running at very low levels, as are also the imports of raw cotton,


Reports from the Netherlands indicate that the cotton spinning
industry is continuing to operate at very high levels, following a record
consumption of raw cotton in the half-yenr ending January 31, 1939. There
has been considerable complaint about competition and prices being realized
by manufacturers, generally, but benefit has been gained frmn the recent
increases in duties on cotton goods which were maintained despite German
efforts to obtain concessions in the new treaty effective Aoril 1.



- 11 -


Reports and figures on the Danish textile situation give evidence of
more than seasonal recent gains in mill activity, although developments sur-
rounding the German occupation of Czechoslowakia and IMemelland had an unfa-
vorable influence.

The textile production index rose sharply in the early months of the
present year, with gains fror seven to fifteen points over co'rparable pe-
riods in 1938 and 1937, respectively. The clothing industry, and consump-
tion goods industries in general, have shown similar gains, as reflected in
the advances in the production indices over previous seasons. The value of
industrial exports has bo-nt less than it was in comparable months a year
ago, due largely to changes in the price level.


Activity in the Estonian textile industry is reported to be only fair-
ly satisfactory, there having been a slight recession in mill activity, com-
pared with the 1937/38 season. This recession $s attributed mainly to the
weakened market conditions abroad for the products of Estonia's important
timber and cellulose industries.

Italy /

Considering the unencouraging conditions which continued throughout
March, the activity of the Italian industry seems to have held up surpris-
ingly well. Italian cotton mills are reported to have o-eruted rather
steadily at lcvEls substan-tially lower than those that prevailed one year
ago. Domes,.c orders., appear to furnish the reaso-is for the bulk of the mill
activity, in which a larger proportion of substitute fic- and a smaller
proportion of cotton is used. Foreign trade in y rn, hovrever, has held up
fairly well, while markets for cotton textiles have declined, particularly
in value, due to the lower cost of the cotton fiber that is now going into
these products as compared with that used one year ago.

In both domestic and foreign markets, the rapidly-changing and ever-
uncertain international political outlook has played a leading role in that
it completely discourages, if not renders impossible, the making of long-
ranrq plans for production and sales, as well as for purchases of raw cotton.
Purchases, as well a. imports, of raw cotton continue small as in recent
mcnt-hs when XTnerican cotton satisfied a smaller percentage of the Italian
demand than for some years. Trade in American cotton continued depressed by
the limited offers from American dealers, as well as by the reduced Italian
demand. The outlook for this trade during the next few months is obscured
chiefly by the uncertain political situation.

/ Information received from the American Consul General at Milan.


- 12 -

Brokers, as well as buyers, of raw cotton in Italy under present con-
ditions are content to make no long-term contracts such as were formerly com-
mon in this trade, since neither party can be certain of the buyer's ability
to obtain the foreign exchange with which to pay for imports for more than a
few months in advance. Hence brokers now generally discourage requests for
deliveries more than six months in the future.

The absence of offers of many types of American cotton continues to be
regarded with astonishment and lack of understanding by Italian buyers, con-
sidering the millions of bales of cotton that are known to exist in the Unit-
ed States, and many possible sales are reported to have been lost on this ac-

Details concerning the organization of the new State-controlled con-
cern to purchase raw cotton for Italian mills approached completion during
March, and an announcement is expected early in April concerning the exact
nature of the organization and the scope of its activities.

At a meeting of the Inter-Ministerial Committee for Autarchy, held in
Rome on March 15, 1939 3/, it was decided that all yarns and textiles pro-
duced by the Italian cotton and woolen mills for domestic consumption should
contain at least 20 percent of "autarchic fibers;" that, for the years 1939
and 1940, at least 99,000,000 pounds of staple fiber and 18,000,000 pounds
of hemp fiber must be thus used by the cotton mills each year, while the
woolen mills must thus consume 10,500,000 pounds of lanital by June 30, 1940,
and 5,000,000 pounds of "Cisalfa" (a staple fiber wool substitute produced
by the CISA group of artificial fiber producers) by the end of the year,
1939; and that the textile Corporations and Associations (Enti) shall have
power to fix the regulations for the control of these yarns and textiles
from production to consumption.

No change was noted during March in the official quotations fixed by
the Cotton Institute in Milan S in prices of mixed yarns which, according
to law, must be used in the manufacture of textile products containing cot-
ton for consumption within Italy.

Italian foreign trade in raw cotton and cotton goods during January
and February, 1939 suffered a substantial reduction as compared with that of
the same period of the preceding year, due particularly to a falling off in
the importation of raw cotton. Imports of raw cotton, cotton waste and cot-
ton products of all kinds during the first two months of the year, 1939,
were 41 percent lower than during the preceding year, while exports of cot-
ton goods fell of by 12 percent in value.

3/ As reported in "Ii Sole," Milan daily newspaper, issue of March 16, 1939.
T/ As published in the "Daily List of Quotations" of the National Fascist
Federation of Cotton Industrialists of Milan.


- 13 -

U. S. S. R.

The-total number of cotton spinning spindles in the U. S. S. R.,
according to a recent statement by the Commissar of the.Textile Industry,
amounts to 8.2 million. In order to increase the spinning capacity of the
cotton textile industry as well as to'replace some of the obsolete machinery
now in place, an installation of more than 3 million spindles is envisaged
by the Third Five Year plan (1933842). Such installation, it is expected,
will do away with the present disproportion existing between spinning and
weaving, which has handicapped the expansion of cotton textile production
in recent years. It is also to enable the execution of the planned increase
in the output of cotton fabrics. Production of cotton fabrics during the
5-year period 1938-42 is to amount to 20,800 million meters, as compared with
15,150,000,000 yards actually produced during the preceding 5 years. This
would be an increase of 37 percent. The goal for the year 1942 is 5,360,000,000
yards as compared with 3,760,000,000 yards produced in 1937, or an increase
of 42 percent.

The cotton textile industry has not been successful in carrying out its
plans in recent years, with the 1938 plan nonexecuted by, 15 percent. However,
a certain improvement was evident toward the end of 1938, and a recent report
indicates that for the first time for many months past, the monthly plan had
been fully executed in February 1939.

ORIEIT: Indian mill consumption declines from record
level_ Japanese and Chinese continue relatively low

In March Indian mills consumed about 245,000 bales of Indian cotton
compared with 240,000 bales in March last year. This made the 21st consecutive
month in which Indian mills consumed as much or more Indian cotton than in
any previous corresponding month. Consumption in March, however, dropped con-
siderably below the peak consumption of 283,000 bales established in December,
but was 9,000 bales above the revised estimate for February. In view of the
greater number of days in March than in February, there was apparently some
decline in mill activity. Totoalmill consumption of 2,100,000 bales during the
8 months ended March was 7 percent larger than that of a year earlier which
was itself the largest on record up to that time. As frequently pointed out,
one of the important reasons for the high level of consumption in India is
the reduced imports of cotton textiles, especially from Great Britain and Japan.

Mill consumption of raw cotton in China, including Manchuria, during
March is estimated at 145,000 bales, according to a radiogram received from
0. L. Dawson, Agricultural Commissioner at Shanghai, This is approximately
10,000 bales larger than the estimated consumption in February, an increase
about in proportion to the larger number of days in March than in February.
It was slightly less than the 150,000 bales estimated to have been consumed in
January. It is reported that mill activity in Shanghai continues to increase
moderately in the Japanese section of the industry and that some mills in
central China have also increased operations recently under Japanese control.
The current rate of consumption is approximately two-thirds of the consumption
rate existing in the months immediately prior to the outbreak of the conflict

CS-30 14 *

with Japan in the summer of 1937. For the first S months of the season, cotton
mills in China have probably consumed about 1,100,000 bales of cotton which
is considerably larger than consumption in the corresponding period last
season, but probably the smallest with that exception in 10 years. As a result
of the reduced production of cotton in China, difficulties in getting cotton
from interior points to mill centers, and comparatively large exports of
Chinese cotton to Japan, imports of cotton into China this season are expected
to be exceptionally large. It is estimated that more than 400,000 bales of
such cotton have already been purchased this season and that the total for
the crop year may reach 600,000 bales. However, only 113,000 bales were
imported into China during the 5 months ended February. This, nevertheless,
was 3 to 19 times as large as in the corresponding periods last season and the
season before. Reported exports of 138,000 bales from October through
February were more than twice as large as a year earlier, but in February
exports totaled only 5,000 bales as compared with 37,000 in February last year.
Information indicates that some cotton is now moving to Japan which is not shoi
in the Customs statistics.

Preliminary yarn production estimates indicate that cotton consumption
by Japanese mills in March increased about 7 percent above consumption in
February and was probably the largest for any month since the latter part of
the 1937-38 season. Consumption in March, however, was materially less than
in March last year and the smallest for the month since 1931. From August
through March, total mill consumption in Japan was nearly 30 percent less than
in the corresponding period last season and also the smallest for the period
in 8 years.

Preliminary figures for cloth exports indicate that in March they were
the largest for any month since the early part of 1939, reflecting the im-
proved sales made in December and January. Smaller sales since January, howev
leads to the conclusion that the Japanese industry cannot, during the near
future, hope to maintain cloth exports at the level of March. For this reason,
reports from Japan indicate that it is difficult to explain the substantial
increase in Japanese yarn production in March. According to a report from the
American Consulate in Kobie, there was almost a complete cessation of pur-
chasing of American cotton during the latter part of March due to uncertainties
as to the effects of proposed measures on the export prices of American cotton.
This is also said to have resulted in delays in the placing of orders for
Brazilian cotton, the prices of which tend to move about in line with American


AMERICAN COTTON: April 1 domestic stocks at record high; "free" stocks
second smallest in 15 years

On April 1 there were nearly 15* million running bales of American
cotton on hand in the United States. This total was about 1/8 larger than
that of a year earlier, which up to this year was the largest for that date
in history, and was about 60 percent larger than the average for the past
10 years. Stocks of "free" American cotton as of April 1 this year on the
other hand amounted to only about 4,400000 bales. This figure was approxi-
mately 2/5 less than that of April 1, 1938 and the second smallest for this
period in 15 years.


- 15 -

Up to April 20 reports had been received of Govonrment loans on
4,409,000 bales of the 1938 crop,"excludingr 30,000 bales on which the
loans had been paid and the cotton released. This total together with
about 6,850,000 bales of loan cotton from earlier crops makes a total of
11 million bales of cotton held by the Governmnat as collateral against
Government loans as of April 20. At the end of April last year total loan
stocks amounted to 6,854,000 bales which was a new high up to that time.

With cotton planting now under way in the United States and many
foreign countries, increased interest is being centered on the prospect
for the new crop. No official estinato of the 1939 acreage planted to
cotton in the United States will be released until July 8. The national
acroago allotment for 1939 is about the saio as that for 1938 or about
271 million acres. Last year the acreage actually planted was below the
national allotment.

FOREIGN COTTON:, April 1 world stocks third largest in history

World commercial stocks of foreign cotton at the end of February
totaled a little over l4,800,000 bales of approximately 478 pounds net
weight, according to estiLates of the New York Cotton Exchange Service.
This was respectively, 300,000 and 900,000 bales below the estimates stocks
at the end of February 1937 and 1938 but with these exceptions the largest
in history. It seemed quite likely that world consumption of foreign
cotton this year will not be greatly different .from March last year and
that probably not more than 250,000 bales less than in March 1937. Con-
sequently, world stocks of foreign cotton at the beginning of April were
also less than on the corresponding date in either of the 2 previous years
but were undoubtedly larger than on April 1 of any year prior to 1937.

In most foreign countries, as in the United States, official
estimates of the acreage planted to cotton in 1939 :;ill not be available
before July. Unofficial reports however indicate that in Egypt the acreage
in 1939 probably will be loss than in 1938. According to an American
Consular report recently received from Cairo it is stated that the
Egyptian acreage for the coming season will probably be reduced because of
last years poor crop naid low price and also the difficulty experienced
in marketing the crop quickly. According to Agricultural Comnissioner
0. L. Dawson of Shanghai the general opinion in China at the present
time is that in 1939 the Chinese cotton crop will be small and the total
supply of co-juLrcial Chinese cotton will probably be no larger than that
of the present season.

08-30 -


llllI 1I 262I 08IlB lllI I BIl lB 111111111 lIll ll l llll l
3 1262 08900 4138

Table 1.- Cotton: Exports from United States, Egypt and British India to
specified countries, specified periods
SMarch : August 1 to March 51 :
Country of :10-yasu : : :;1939asz10-yr. : s1938-"
origin and :1923-24: : : :a per-:average:1936-:1937937-98-:as a periw
destination to : 1937: 1938: 1939:cent- :1923-24: 37 38 s' 39 scentae
s 1932- : : : :age of: to : : s : of
: 33 : 1938 :1932-33: : a :1937-59
: : 1.000 1.000 1.000 1.000 0 000 1.000 1.000 1.000

: bales
United States to:
Germany ,.....: 38
United Kingdomi 123
France .....: 60
Italy .......: 54
Spain .......: 22
Belgium .....: 16
Canada .....: 18
Japan .......: 119
China .......: 20
Other countries: 113
Total ,.....: 627

: 1.000

Egypt to
United Kingdom:
France ......:
United States:
Germany .....:
Italy .......:
Japan .......:
British India:
Other c antries:
Total ....:

British India g
to a
Japan ......:
Italy .......:
China .......:
Germany .....:
Belgium .....:
United Kingdom:
France .,.....
Other count ies:
Total .....:








Per- :running
cent : bales












-6 324 4 389 1,937 2,9799C
468 426 330 77. 60
March : August 1 to March 31
1 000 1 000 1 00C : 1 000 1 000 1 000 1 000

bales bales
478 lb.478 lb

bales bales
bales bales

Per-: bales
Per-:: bales

bales bales bales

478 1h478 Ib6 cent :478 lb.478 lb.478 1b478 1b,







126 173 156 181 116.0: 1,087 1,440 1,506 1,195 Q.
February : August 1 to February 28 '^






360 372 222 234 105.4: 1,427






97.7 .


113 .0

786 1,278 162 *

Compiled from official
are from cables,
I/ Less than 500 bales.

sources. Current figures on exports from Egypt and IdiT

2 Includes Austria.

I P I i

- 16 -

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