The Cotton situation

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Material Information

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

Subjects

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

Notes

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
Classification:
lcc - HD9070.1 .C78
System ID:
AA00013000:00015

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Full Text



UNITED STATES DEPARTMENT OF AGRICULTURE
Bureau of Agricultural Economics
Washington

CS-32 June 27, 1939


THE C O T ON S I T UA I'ON


Summary

A combination of factors has raised domestic prices of spot cotton

to the highest figures since August 1937. Factors include the exception-

ally small stocks of "free" American cotton, relatively high domestic and

foreign mill consumption, improved domestic sales of cotton textiles,

somewhat unfavorable weather conditions, and increased prospects for an

export subsidy, according to the Bureau of Agricultural Economics.

Despite the largest total domestic stocks on record, the quantity

of "free" American cotton on hand in the United States is now 50 to 60

percent smaller than at this time last year. Foreign stocks of American

cotton are much smaller than last year. United States exports are running

much below foreign consumption of American cotton.

Domestic cotton consumption of 605,000 bales in May was 40 percent

larger than a year earlier and the second largest in 10 years. Trade re-

ports indicate that in the first half of June the seasonally adjusted con-

sumption rate was well maintained. This was somewhat contrary to earlier

expectations and was apparently .due to unusually favorable sales of un-

finished cloth in late April and early May. Although cloth sales increased

and prices advanced in June, print cloth manufacturers agreed to curtail

their output for the third quarter of the calendar year to at least 75 per-

cent of their normal production. ---


1 .*

:, ::: .-- T-".





CS-32 2-

Foreign cotton mill activity was well maintained in May and early

June. Improvement in mercantile buying of cotton textiles in Europe was

reported during May as cotton prices advanced and political anxieties

subsided somewhat. At the same time European mills were operating to an

exceptionally large degree on Government orders. Foreign consumption of

American cotton continues substantially lower than a year earlier and the

lowest in 20 ycars, while the consumption of foreign growths continues at

near record high levels.

It is now expected that the world consumption of American cotton

for the year ended July 31, 1939 will approximate 11,250,000 bales com-

pared with a little less than 10,900,000 bales during the preceding 12

months. The estimated consurition when deducted from the estimated supply

for the 1938-39 season indicates a world carry-over for this cotton on

August 1 next of roughly 14,250,000 bales. This figure is about 500,000

tales larger than the previous record high 'carry-over as of August 1, 193-8

The world carry-over of foreign cotton is expected to total around 8,000,000

to 8,250,000 bales compared with 8,900,000 bales on August 1, 1938.

PRICES

Domestic spots make slight additional
advance in oarly June

On June 8, Middling 7/8" cotton in the 10 designated markets aver-
aged 9.59 cents per pound. This was 0.17 cents above that of May 24, the
highest price for the season up to that time. For the month of June 1938
the 10-narkot average was 8.39 cents. Not since August 1977, or in nearly
2 years, has the average price in these markets exceeded 9r cents. The
further advance in early Juno raised domestic prices of spot cotton to a
point about 1 cents above those of mid-April when they were lower than at
any time since the early part of last Decenber.

Several factors contributed to the advance in domestic prices from
mid-April to the early part of June. Those include prospects for an ex-
port subsidy on American cotton, reduced stocks of "free" American cotton,
a continued high rate of domestic consurTption and some recent improvement
in domestic business conditions, unfavorable weather conditions in sub-
stantial parts of the domestic Cotton Belt during the latter part of the
period r.d somewhat less tension in Europe.




CS-32


Since early June spot prices in the 10 markets have shown com-
paratively little change, ranging from approximately 9- cents to 9.60
cents. On June 24 the average price was 9.57 cents, compared with 9.42
cents one nonth earlier and 8.79 tents a year earlier.

Domestic new crop futures show unusual discounts

On April 15 the differences between the spot prices at New Orleans
and the closing quotations for active new crop futures months on the New
Orleans Exchange ranged between 0.89 and 0.9o cents with quotations for
the nearer months generally higher than those for more distant delivery.
During the following 2 months, however, this disparity became much great-
er and on June 15 the differences ranged from 0.98 to 1.41 cents. On the
latter date July futures contracts closed at 9.24 cents, whereas October
contracts -- the first active new crop futures closed at 8.47 with
each of the more distant months successively lower, also showing wide
disparities. Following the approval by Congrcss of an appropriation bill
providing funds to be used in subsidizing cotton exports, the price of
new crop futures advanced materially in relation to prices of July con-
tracts, and spot cotton thereby clirinating some of the disparity. On
June 24, for example, the spread between the closing price of spots and
the prices of the 5 active new crop futures months ranged between 0.59
and 0.99 cents.

Liverpool spot prcos advance, new
crop futures also show large discounts I/

Prices of ALmrican cotton in Liverpool in May and early June ad-
vanced from 5.01 pence per pound on the last trading day of April to the
season's high of 5.91 on Juno 8, a net gain of 90 penny points or the
equivalent of approximately 1-3/4 cents. This advance in spot prices was
accompanied by nuch smaller advances in the quotations for futures con-
tracts deliverable after the new crop movement begins. Consequently on
June g spot prices of American Middling Fair staple was 117 to 128 penny
points above the quotations for October, December, Januarjy and March
futures contracts. The premium of spots over the quotation for these
new crop contracts therefore was equivalent to nore than 2 cents per
pound.

The natural effect of this unusual price structure on mercantile
operations is to nake the rank and file of sellers uneasy, and to cause
buyers to limit their commitments to immediate needs both for cotton or
goods. The situation is further complicated by the abnormally narrow
parities between British and American prices. On May 31 the so-called
true parity (i.e. the actual difference in simultaneous quotations at
the current rate of exchange, disregarding the netweight-grossweight
difference in trading terms) bctieen contracts in New York and in Liver-
pool was 46 American points (100 American points equals 1 cent) for July
delivery, 57 for October, 60 for December and 69 for January. When allovw-
ance is made for sale in Liverpool on netweight terms, Livcrpool prices
for these deliveries were actually about 2 Aelorican points below to 21
above New York. These parities compare with 165 to 200 LAmerican points
in the early sunner of 1937, and represent the narketts partial adjustment
to the prospect of an export subsidy.

I/ Based largely on the statements prepared by Agricultural Commissioner
Arthur W. Palmer, London, dated June 12.


- 3 -





CS-32


The recent price relationships have further accentuated the
difficulties of normal importation which :.ivc been present through
much of the season, and focuses the donr.nd for cotton to meet the
innediate needs of the mills on the unsold part of the stocks held
in the ports of Liverpool and Manchester. Information, believed to
be reliable, is that the purchascable supply of American cotton in
these ports is nor: greatly diminished, certain of the short to medium
lengths desired in the production of heavy defense-type goods having
been practically unobtainable for some tine. The physical stock of
American, including cotton for sale and cotton earmarked for appli-
cation to running contracts, totaled only 285,000 bales on June 1.
Disappearance during the 3 previous months, averaged about 50,000
bales a month. This rate, if continued, would leave on July 31, one
of the enallest carry-overs in the British ports in recent yonrs.

Under these conditions, Liverpool prices of American cotton
for delivery on the spot in contrast to deliveries from the new crop
have been lifted in relation to United States prices as well as in
their relation to futures contracts. In April the spread between spot
quotations in Liverpool and New Orleans averaged only 106 American
points but by June 16 widened to 178 American points. (Sec table 1.)

Table 1.-Cotton, American Middling 7/8": Price'per pound at
New Orleans and Liverpool, specified periods


Period


5-year raerage
1933-34 to 1937-38


Liverpool


Cent s

13.03


1938-39
Aug. to Dec. 9.93
Jan. 1 0.10
Feb. : 10.02
Mar. 10.17
Apr. : 9.67
May : 10.55
May 5 10.30
May 12 :. 10.40
May 19 10.0
May 26 10.69
June 1 : 10.71
June 9 11.26
June 16 : 11.23
June 23 : 11.04

Compiled front reports of the New Orleans
Associations and cables to this Bureau


New Orleans


Conts

11.32


g,I 3
8.62
8.60
8.69
g.61
9.30
9.os
9.20
9.47
9.52
9.40
9.50
9.45
9.45


Spea


: Spread
: (Liverpool over
: New Orleans)
Cents

1.71


1.50
i. 24
1.42
1.4s
1.06
1.25
1.22
1.20
1.33
1.17
1.31
1.76
1.78
1.59


and Liverpool Cotton
front Liverpool.


I/ Friday, June 2, being a holiday in Liverpool, the prices for
Thursday wore used..






CS-32 5 -

Table 2.- Cotton: Spot price per round, specified growths at Liverpool,
specified periods

: American : Indian Egyptian Brazilian
S n : Av. 3 types 1/ :F. G. F. Uppers :Fair, Sao Paulo
meonh :Middling: Low : : As a % : As a % : As a %
month
or day 7/8 : midd- ctual:of Ameri- ctual:cf Ameri-:Actul : of Ameri-
or day Actual Actual Actual
: inch : ling : can : : can can
S : : 2/ : :Middling : : Middling
10-yr. av. : Cents Cents Cents Percent Cents Percent Cents Percent
1927-28 to :
1936-37 : 14.50 13.60 10.88 78.3 17.12 117.9 14.08 97.7

1936-37 : 14.62 15.16 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 8.96 7.22 75.0 13.03 127.1 9.78 95.3
Nov. :10.04 8.81 7.28 77.3 12.63 125.8 9.63 95.9
Dec. :10.02 8.56 7.16 77.0 11.89 118.6 9.54 95.1
Jan. : 10.10 8.64 7.15 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. : 10.17 8.71 6.94 73.3 11.58 113.8 9.68 95.2
Apr. : 9.67 8.21 6.98 78.2 10.90 112.7 9.19 95.0
May : 10.55 8.97 7.46 7C.6 11.08 105.0 9.83 93.2
May 5 :10.30 8.74 7.45 78.0 10.84 105.3 9.71 94.3
May 12 : 10.40 8.84 7.45 77.2 10.81 103.9 9.81 94.4
May 19 :10.80 9.24 7.59 75.7 11.37 105.2 10.02 92.8
May 26 : 10.69 9.03 7.17 75.3 11.23 105.5 9.81 91.8
June 1 3/ 10.71 9.05 7.61 77.0 11.42 106.6 9.74 90.9
June 9 : 11.26 9.60 7.77 74.5 11.43 101.6 10.57 93.9
June 16 :11.23 9.58 7.68 73.7 11.53 102.6 10.36 92.2
June 23 :11.04 9.38 7.53 75.9 11.51 104.2 10.16 92.0
Compiled from reports of the Liverpool Cotton Exchange except for the last three
weeks which are from cables to the Bureau of Agricultural Economics or from
reports of the Iew York Cotton Exchange. Prices were reported in pence per
pound and converted to cents pr-r pound at current rates of exchange.

1/ Includes Fully Good Broach, Fine Oomnra #1, and Fully Good Sind.
2/ Average of American Middling and Low Middling.
SFriday, June 2, was a holiday.

Liverpool prices of other growths of cotton on the spot have not advanced
in recent weeks to the sane extent as prices of American. In the more directly
competitive category, discounts on Brazilian cotton widened in May from 25 penny
pounds to 45 points on Sao Paulos of Fair grade and from 60 to 80 on Northers.
If allowance be made for a change of standards in 1937, Sao Paulos on May 31
were the cheapest in relation to American cotton since they were first regularly
quoted in Liverpool. Northern types likewise were at a wider discount than at
any time at least since 1925. On East Indians, however, discounts widened in the





CS-32


same period even more than on Brazilians, Central Provinces of Fine grade
from 92 to 130 penny points and Punjab American Fine from 58 to a nominal 89
points. West"African Middlings went from a discount of 40 to 50 penny points
under American Middling Fair Staple.- In the longer staple category, premiums
dropped sharply to abnormally low figures. Egyptian Fully Good Fair Sakel
and Giza 7's which on April 29 were 134 points over American Middling Fair
Staple had narrowed by May 31 to 102 and 112 penny points, respectively, while
in the cuso of Uppers the change was from 48 to 31 points. Egyptian Uppers
prices are thus brought within thet range of direct competition with medium
staple Americans. Peruvian Tanguis of Good grade similarly narrowed its pre-
mium from 95 to 50 points. For certain other jand more recent comparisons see
table 2.

EXPORTS

United States exports continue small,
foreign exports large

The 143,000 running tales of American cotton exported in May were on-
ly 74 percent of exports in May last year, and only one-third the 1924-33 May
average of exports. When reduced to bales of uniform weight the May figure
is the smallest for the month since 1904. nevertheless, the comparisons for
May are more favorable than th.. comparisons for the total from August through
May. The 3,100,000 running bales exported during the 10 months ended May
were only 59 percent of the unusually small exports in the corresponding pe-
riod last season, 40 percent of the average for this period during the ten
years ended 1932-33 -and the small(.st for these months in terms of 500 pound
bales in 57 years.

During the first 20 days of Jun-r, exports continued small, totaling on-
ly 59 percent of the. exports in the like period last season. The total for
the season up through June 20 was only 3,200,000 bales according to trade re-
ports. The total for the 12 months ended July 31, therefore, will be less
than 5,300,000 balus and, in tcr-m:; of 500 pound bales, probably the smallest
for any season since 1881 or earlier.

May exportss of Egyptian cotton, of 145,000 bales of 478 pounds, were
9 percent larger than exports from Egypt in May last year. From August
through May exports from Egypt, of 1,521,000 bales, were slightly less than
in the corresponding period in either of the 2 preceding seasons, but with
the exception of these 2 seasons and 1933-34 they were the largest for the
period on record.

From August through April this season, exports of cotton from British
India were 50 percent larger tiha in the corresponding period last season but
slightly less than the 10-year ;av,.ragc-. Exports from British India in April,
the latest month available, were 76 pcr.ont larger than a year earlier and
were somewhat larger than the 10-year, 1924-33, April average.

The 1938-39 estimated Bra:zilian crop is about 200,000 bales less than
the record crop of the procediin season, but exports from Brazil from August
through March were about 25 percent larger than the previous record high ex-
ports for thesu months, established in each of the 2 preceding seasons. In
March cotton exports from Brazil were approximately 40 percent larger than
the previous record high March exports.


- 6 -





,C-532 7-

DEMAND AND CONSUMPTION

UNITED STATES: Mill activity sustained
by improved sales of cotton textiles

United States mill c consumption, of 605,000 bales in May, was about 40 per-
cent larger than in Kay last year and considerably larger than the 10-year aver-
age. Total consumption from August through May of 5,755,000 bales was approxi-
mately 900,000 bnles larger than during the first 10 months of last season. The
daily rate of consumption in May was slightly less than in April. Tr-de reports
indicate no more than the usual sea sonal decline in mill activity during the
first 3 weeks in June.

Exceptionally f-.vornble sales of unfinished cotton cloth occurred durin-;
the 2 weeks ended June 9, and for the 5-;reek period ended June 24, sales were
probably above production. This, along with the advance in cotton prices, re-
sulttd in a substantial :advance in cloth prices. Favorable sales during recent
weeks may result in a smaller reduction in activity in the near future than had
previously been indicated in somn quarters. Nevertheless, on June 21 it was an-
nounced that manufacturers of print cloth, who represent more than 95 percent of
the output of tnis section of the domestic textile industry, have agreed to re-
strict their output to at least 75 percent of (normal production for'three months"
between June and September. It seems likely that total consumption for the sea-
son will probably slightly exceed 6-3/4 million bales -- compared with 5-3/4 mil-
lion bales last season -- and will be the second largest since 1928-29. With the
total domestic consumption of foreign cotton likely to approximate 125,000
bales, domestic consumption of American cotton may reach approximately 6-3/4 mil-
lion bales.

FOREIGN COUNTRIES: Consumption of American
cotton low, consumption of foreign exceptionally high

Foreign consumption of American cotton declined about seasonally front
March to April and continued substantially below consumption a year earlier.
Foreign consumption of Americpn from August through April totaled about 3,450,000
bales, according to reports of the New York Cotton Exchange Service. This was
more than 600,000 biles l^ss th-m in the corresponding period last season and
probably the smallest for the period in 2 decades. With somewhat more than the
usual seasonal decline expected during the last quarter, the total consumption
for the season seems likely to arproxirate 4,500,000 bales. This would be ap-
proximately 750,000 balcs less than last season and the smallest since 1918-19.

Foreign mills consumed about 12,590,000 bales of cotton other than Amerii-
can during the 9 months ended April, according to estimates of the New York Cot-
ton Exchange Service. This was slightly more than in the like period a year
earlier and slightly smaller than that of 2 years earlier, but with this excep-
tion, it was the largest for the period on record. The estimated 9 months' con-
sumption, together with recent reports as to mill activity up to the middle of
June, suggests that the total foreign consumption of non-Arn.rican cotton for the
season now drawing to a close may aqual or slightly exceed 16,750,000 bales.
This would be the second largest mill consumption of non-American cotton in his-
tory, and it would exceed the 10-year, 1927-28 to 1936-37, average by 38 percent.





CS-32


Table 3.- COTTON: Exports from specified countries, average 1925-24 to
1932-33, and seasons 1936-37 to date
_: M__ay August to May
Country of :10-yr.av. : : 199 :10-yr.av. : : 1938-39
origin and :1923-24 : 1 19 19:as a %:1923-24 :1936-:1937-:1938-:as a %
destination : to : of : to : 37 : 38 : 39 : of
:1932-33 : : : : 1938 :1932-33 : : :1937-38
: 1,000 1,000 1,000 1,000 : 1,000 1,000 1,000 1,000


U.S. to
Germany .....:
United Kingdom
France ......:
Italy .......:
Spain .......:
Belgium ....:
Canada ......:
Japan .......:
China .......:
Other coun. .:


Total ......


run.
bales
95
80
34
44
17
11
15
58
14
49


:417
:*


: 1,000
: bales
Egypt to : 478 2b.
United Kingdom 38
_.rance ......: 14
United States: 10
Germany .....: 8
Italy .......: 8
Japan .......: 3
British India: 3
Other coun. .: 16


run.
bales
25
43
12
34
0
8
43
124
1
34


run.
bales
15
27
10
26
1
7
20
31
3
53


run.
bales
21
13
5
9
0
4
24
41
6
20


Per-
cent :
140.0:
48.1:
50.0:
34.6:

57.1:
120.0:
132.3:
200.0:
37.7:


run.
bales
1,680
1,637
777
609
256
170
184
1,159
250
491


run. run.
bales bales
599 628


1,069
644
347
2/
147
266
1,478
14
522


1,499
704
464
1
178
217
591
22
923


run.
bales
292
384
332
252
16
84
191
818
83
655


Per-
cent
46.5
25.6
47.2
54.3
1,600.0
47.2
88.0
138.4
377.3
71.0


324 193 143 74.1: 7,213 51086 5,227 5,107 59.4
May August to May
1 000 1 000 1 000 : 1 000 1 000 1 000 1 000


bales
478 lb.
29
13
2
6
8
4
5
25


bales
478 lb.
38
15
2
18
10
5
12
33


I
bales
478 3h
41
19
5
21
5
14
5
35


Per- :
cent :
107.9:
126.7:
250.0:
116.7:
50.0:
280.0:
41.7:
106.1:


bales
478 lb.
507
167
93
152
86
58
22
207


bales
478 lb.
574
189
126
58
97
205
81
351


bales
478 lb.
510
211
183
34
102
72
121
328


--w -9
bales
478 3b.
503
168
175
32
96
134
76
337


Per-
cent
98.6
79.6
95.6'
94.1
94.1
186.1
62.8
102.7


Total ......: 100 92 133 145 109.0: 1,292 1,681 1,561 1,521 97.4
British Indiato April : August to April
Japan .......: 109 196 98 49 50.0: 1,008 1,530 491 774 157.6
Italy .......: 28 29 7 9 128.6: 228 153 71 62 87.3
China .......: 40 1 8 122 1,525.0: 218 9 55 272 51.35
Belgium .....: 17 35 12 14 116.7: 138 226 89 85 95.5 1
Germany .....: 20 27 10 8 80.0: 143 135 94 121 128.7 i
United Kingdom 19 54 28 36 128.6: 130 381 181 236 130.4
France ......: 17 8 14 16 114.3: 105 92 59 101 171.2
Other coun. : 19 35 32 30 93.8: 115 173 177 181 102.3
Total ......: 269 383 209 284 135.9: 2,085 2,699 1,215 1,832 150.8
Brazil to : March : August to March
Japan .......: / 2 4 28 700.0: / 68 59 198 335.6
United Kingdom 2/ 12 8 3 37.5: 2/ 200 139 150 107.9
Germany .....: 28 39 35 89.7: / 197 304 151 49.7
France ......: 3/ 3 6 5 83.3: 2/ 30 33 84 254.5
Italy .......: / 8 0 3 ---: / 38 4 39 975.0
Netherlands .: 1 / ---: 2/ 15 8 20 250.0
Belgium .....: 2/ 2 1 ---: 2/ 18 15 18 120.0
Other coun..: _/ 4 2 7 350.0: 2/ 43 46 111 241.5
Total ......: 4 60 59 82 139.0: 75 609 608 771 126.8.
Compiled from official sources. / Less than 500 lb. / Not available by countries







CS-32


- 9 -


EUROPE: Textile situation imp pvcd somewhat
in May and early June 2

More favorable news of trade demand and mill occupation generally
characterized the reports from European cotton centers in May and early
June. Improvement in mercantile buying was noted, especially in early
May as prices moved upward and political anxieties tended to subside. In
May and in early June, the uninterrupted advance of preparedness measures
in a number of countries operated to maintain or even to.increase cotton
spinning and weaving activity. Current developments are affected by the
expenditures for rearmament directly in the form of large-scale Government
orders for textiles and indirectly in the form of increased civilian pur-
chasing power growing out of activity similarly stimulated in other in-
dustries.

While the cotton textile sales and mill activity situation in Europe
generally appeared somewhat improved, a drop in mill activity was reported
in Germany. This is said to be due to shortage of raw material. In fact,
there is evidence that, at least so far as American cotton is concerned,
the supply situation has become uncomfortably tight. Although cotton is
being offered freely for shipment out of the new crop, importations of old
crop cotton are almost completely impracticable under the existing structure
of prices. European stocks of American, small as they are, are said to con-
tain little cotton not already sold and earmarked for delivery. Where mill
activity has increased over earlier expectations, additional raw material
has, in many cases, had to be bought and, for such cotton required before
arrival of new crop American, buyers have inevitably been turning to other
growths. Consequently the share of American in the total European consump-
tion appears to be shrinking further during recent weeks, but probably not
to the same extent as imports.

United Kingdom

Improvement over April in the demand for cotton textiles-, increasing
mill activity, rising costs of raw materials and other items, further de-
pletion of the available supplies of American raw cotton and continuation
of confused price conditions were outstanding features of the British
cotton situation in May and early June.

Favored by the quieter tone of international news and stimulated by
a strong upward movement of cotton prices, mercantile buying of textiles
showed evidence of renewed activity. Government contracts for substantial
quantities of cloth were booked. With few exceptions, however, buyers were
reported as unwilling, because of the raw cotton price situation, to make
commitments for other than nearby deliveries. Government orders for cloth
are thought to account for a very considerable part of the current output.


2J Based largely on a report prepared by Agricultural Commissioncr, Arthur
W. Palmer, London, Englnnd and Agricultural Attache Loyd V. Steere, Berlin,
Germany. Report mailed from London June 13.





- 10 -


In consequence of the delivery requirements of both Government and
mercantile orders, nost mills, it is said, are well provided with orders
about 3 months ahead but few are believed to have much on their books to
be delivered later. This condition, at least assures a rather satisfactory
rate of mill activity for the summer at least. Some idle mill equipment
was restarted in May and there are reports of small purchases of now
machinery needed to fill Government orders on time. Mill activity has in-
creased to about 75 percent in weaving and 80-85 percent in spinning. For-
wardings of cotton to mills likewise continued their contra-seasonal up-
trend, reaching a weekly average of the 4 weeks to May 26 of 60,289 bales
(478-pound equivalents), an increase of more than 2,500 bales over April,
the previous high month of the season, and the highest since November 1937-
Compared with September, the low month of the season, May forwardings show
an increase of just over 50 percent.

The British market for cotton textiles for civilian consumption
appears to be accounting for an offtake of at least usual volume. Comment
on retail trade in May suggests there was some improvement over April and
that in general the near-term prospect for mercantile trade in Great Britain
seems to be brightening. For the fourth successive month the number of in-
sured workers not employed has decreased and xid-May the total of 1,492,282
was the lowest since October 1937. This is only 152,000 more than the best
levels of the boom year 1937.

Export trade in piece goods was reported to have improved early in
May, a modest revival doubtless representing in part the release of orders
held in suspense during the more anxious days of April as well as an en-
deavor to anticipate the advance of cotton prices with respect to goods
needed before the end of summer. Some rather substantial orders for India
were reported in the midst of a rather general increase of trade. Toward
the end of May, however, reports indicated a slowing down of buying in ox-
port circles.

France

Cotton mill activity in France, which for some time after mid-March
was largely sustained by the backlog of orders booked earlier in the season,
appears to have received a strong new impetus in May with a revival of mer-
cantile textile buying and the placing of considerable Government orders
for service types of goods. Although some slackening in the pace of business
was noted with the approach of the Whitsun holidays at the month's end, re-
ports in earlier weeks were distinctly encouraging more so perhaps with
respect to the demand for goods than for yarns. Export sales, though normally
accounting for only a minor share of French production, seems also to have
been quite good. Prices of a number of constructions were advanced with,
it is said, but little resistance from buyers. As elsewhere, emphasis appears
to be on early deliveries, with textile buyers disposed to be cautious over
the longer torn in the face of uncertainties still inherent in the internation-
al political and price situation.


CS-32






- 11 -


In the yarn trade, the second half of the nonth was generally
said to be less active than in the first half when prices :-ero rapidly
rising. Reports generally indicate, 1howevrC .tl-ht spinners hwve sufficient
orders for their full-tinc output well through August, while Govcrnnent
orders in a number of cases are necessitating double-shift operation.
Statistical evidence is not yet available, but estimates, believed to be
reliable, put the average working tien at 46 hours a week in the Vosgc
district, while the North is believed to be no loss active, and in Nor-
nandie the average working week is perhaps a little longer. By contrast,
working hours were limited by voluntary agrcemr.nt in the sunner of 1938
to 32 a wook.

Activity in the raw cotton market was also resumed on a considerable
scale in LI,-. Spot sales in Havre are said to have included some 40,000
bales of Brazilians and 10,000 bales of French Colonials. Apprcxinately
20,000 bales of American were stated also to have changed hands, partly
from nmrchanut to merchant. In addition, some reselling of American was re-
ported by well-stocked mills to 'other nills in need of cotton for innediate
use, the general disposition being to even accounts on the high basis pro-
vailing on cotton of the old crop. Substantial import buying of Brazilians
and Colonials is also reported but, although old crop Aierican was much
wanted for July-August shipment, workable offers frou the United States
were for all practical purposes unobtainatlo. The supply of American
cotton in France which can be purchased for delivery before the new crop
arrives appears to be nearing exhaustion. Cotton for shipment from the
United States in the new season, however, is being offered freely and in
spite of the general uncertainties is being purchased on call in quantity,
one estimate putting the total of such business in May as high as 250,000
bales. The price basis is reported at 40-45 francs per 50 kilos on Havre
new crop futures, which is considerably lo0r.7 than prices of nearby de-
liveries of old crop cotton.

Imports into France from August 1 to May 31 in the present and two
preceding seasons (in 478-pound net equivalent bales) have been as follows:


Cotton: luports into France, 1936-37 to 1938-39


Country of origin. 1936-37 1937-38 : 1938-39
: Bales of Boles of Bnles of
: 478 lbs. 478 lb3. 478 lbs.

United States ...: 735,718 706,059 387,795
British India ...: 176,062 113,213 164,585
Egypt ...........: 18,571 211,986 164,733
Brazil ..........: 42,689 50,558 126,153
French colonies .: 22,353 23,054 42,563
Other ...........: 43,760 36,010 52,176
Total ........: 1,209,154 1,10,1gg 938,005


C9-32








. CS-32


The revolutionary changes in the German cotton textile situation,
particularly in the raw material supply problem, foreshadowed on the taking-
over of the cotton industries of Austria and Cseohoelovakia especially the
latter have rapidly become actuality. April and May reports from various
sources indicated a marked deterioration in the outlook for meeting raw
material requirements of the cotton textile industry. The index of production
in the cotton industry just released for the month of March 1939, shows a
marked drop to 104.7 from 112.0 in February (1928 = 100), indicating that
conditions were less favorable this spring than had been indicated previously.
Later figures are not available, but recent official statements herald the
introduction of a whole series of new restrictions in the cotton industry.

Press reports of the National Convention of the German Textile Industry
at Innsbruck at the beginning of June, state that the outstanding development
was the announcement of "an extensive program that will place the future
operations of the German textile industry upon an entirely new basis". These
new measures, announced by President Kehrl of the Chamber of Commerce, who is
also "General-referent" for textile questions in the Ministry of Economies,
are grouped under five headings.

1. An increase in the entire line of cotton textile exports
to secure foreign exchange for the German economy, generally,
and for the German textile industry in particular.

2. A further increase in domestic raw material production as
the central feature of German raw material policy.

5. Improvement of quality of textiles by all possible means
consistent with optimum utilization of raw materials.

4. Rationalization and saving of labor.

5. Concentration of production upon most pressing national
needs.

President Kehrl stated that recent economic developments and political
and economic necessities as a whole required the adoption of a program in
which the textile industry must concentrate upon the radical elimination of
everything that is superfluous and, therefore, not a vital necessity, and upon
meeting only the vital needs of the country.

In regard to textile exports, which had had to face exceptionally dif-
ficult conditions in foreign markets in the past year, the results achieved
were not considered sufficient. Inducements to export are, therefore, to be
increased by a number of measures, the principle of which will be preferential
treatment for exporters on the basis of their performance. According to re-
ports, it is to be axiomatic that export business under no circumstances should
have to suffer from raw material difficulties.


- 12 -





CS-32


- 13 -


Raw material roquiromunts have increase in a- extraordinary way,
particiilnrly as a result of the no.i territorial acquisitions, and the
position has becor.e very difficult, no.t':ithstanding larigo increacos in
domestic production of various textile r-: n .terirals. As a result, still
greater effort is to be centered in bringing about additional increases
in the domestic production of various textile raw uatorials. The prod auction
of continuous filment rayon in 193S totaled 65,000 metric tons (145.5
million lbs.), is currently at the rate of 74,000 tons (163 million l1s.),
and in April 1940 is scheduled to reach a rate of 85,000 tons (187 million
lbs.). The total production of staple fiber in 1938 was 154,000 tons
(340 million lbs.); the output rill reach 200,000 tons (441 million lbs.)
during 1939 and is expected to be up to 275,000 tons (606 million lbs.)
one year hence, Y.ith the ultimate goal sot at 325,0CO tons (716 million
lbs.). Even this figure, it is stated, does not o7haj.st the possililities,
although it is the highest figure that has yet been mentioned officially
or unofficially. Raw material for staple fiber production is now definite-
ly assured, it is claimed, by the shift from spruce to beechwood pulp,
which has now been S0 percent completed, and other new sources from pine
arnd straw are in development. Frou these figures it is obvious that the
Reich authorities' ideas on staple fiber production (President Kehrl is
understood to be one of the chief exporents of a program of maximu ex-
pansion of domestic raw material production) have been definitely re-
vised upward ~n recent weeks. The acroage in flaT declined in 193S to
111,000 acres, 141,000 acres in 1937, because prices were not attractive
to farmers and because of the shortr.gr of labor for harvesting. Prices,
hovover, have been markedly increased, and it is expected that the flax
acreage for 1939 will probably be between 14S',000 acres -'d 161,000 acres
not including former CGechoslovi..ki, %dith which a total of sor0 247,000-
272,000 acres, it was thouv:ht, night be achieved. The acrearo under hemp
is expected to be increased froi 31,100 acres in 193S to 42,000-44,000
acres in 1939, which would be equivalent to some 14 million lbs. of fiber.

The problem of improvement of quality of textiles was stressed by
President Kehrl as one of the cost important for the irmodiate future.
The industry could rot merely conf'.ne itself to the production of new
fibers but must concentrate upon their utilization. Sterile fiber must
be regarded as a new and valuable rxturial requiring special utilization.
Those concerns which get the r-,ximur out of staple fiber and achieve the
Greatest progress and improvou-ent in its utilization, or which adjust
themselves to the use of stable fiber exclusively, vro to be put in a
special category raid given special preferential treatment in the allot-
nent of raw natcrials in recogniition of their con-tributions. In other
words, hoevor gets the -lost out of Gtrmar raw natcrials shall in the
future De allotted the most in raw materials.

Special effort is to be made to use pure cellwool in all products
where this is in any %.\" pjscible, with a vie:; to enabling the withdra'nal
of cotton from such products. In order to hasten this process, a pro-
hibition will be introduced, effective July 1, 1939, on the use or the
mixture of cotton for numerous products, reong them printed goods, women's
dress materials, upholstery, curtain and decorative materials, liniin!;s,
leather substitutes and almost all materials for industrial use. Anr







especially sharp restriction will be made upon the use of cotton for print-
ed goods. President Kohrl also announced that the authorities would d use
drastic measures to prevent the production of shoddy or excessively cheap
goods, i.e., products which are much better in appearance than in quality
and, therefore, are regarded as wasteful. The use of good raw material
for such articles will be regarded as a misuse of valuable resources and
will be looked upon by the authorities in the future as grounds for the
reduction of raw material allotments and even the forced closing down of
operations.

President Kehrl also stressed the necessity in the future of much
sharper rationalization; the textile industry must reckon with having to
get along with a materially reduced number of workers (who are needed
more urgently elsewhere), and this could be done with benefits in the
form of reduced costs. Finally, he emphasized the pressing necessity of
concentration upon the production of those goods most urgently needed
from a national standpoint. The difficult raw material situation, he
said, made this absolutely unavoidable, and it must be reckoned with that
there is going to be a temporary shortage of imported raw materials which
would be equally distributed over the entire German textile industry.
In all broaches of textile production, he indicated, there is no escape
from the fact that there will be a further reduction in raw material
allotments. The greatly increased number of spindles tb be supplied,
the deteriorating import possibilities, and the even more urgent need
of other raw materials left no alternative.

Mid-May reports announced the departure to the southeastern
European countries of a delegation of leading figures in Bremen business
circles, in which cotton was very hoevily represented. It is indicated
that the trip results mainly from the initiative of the Brener Baunwell
A. G., founded in March for the express purpose of developing the trade
.in cotton with southeastern and near-eastern countries.

Press reports on the trip content upon the increasing interest
of the Bremen cotton trade in trade relations with southeastern countries.
A considerable number of Bremen firms, it is indicated, have already made
new connections and important new engagements in Austria, with a view to
participating in and developing the trade with the southeastern countries.
These arrangements include the establishment of branch offices by import-
ing firms to handle cotton, and by exporting firms to engage in exports
of cotton goods to the area in question.

Italy V/

A less pessimistic attitude with respect to the state of the Italian
cotton trade was apparent among Milan cotton dealers toward the end of May
when most of then admitted that actual developments had probably not been
as unfavorable as had been feared and appeared to entertain the hope of


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


- 14 -


C0-32





CS-32


- 15 -


improvement in the not far distort future. Probably, resignation toward
the rigid control of imports of cotton imposed by the authorities in recent
months had something to do with the change of attitude, It is certain
that a lessened fear of imminent war helped considerably. Stocks of cotton
held by spinners appear to be ruch larger than has heretofore been admitted
and seen likely to last another uonth or so. By that time, the E-ch Cge
Authorities are oxpectod to release more foreign exchange to pay for in-
ports of cotton; but until they do so, little hope is entertained of sell-
ing more than occasional soall lots. Meantime, the mills are being run
at a fair rate of activity, although not as high as one year ago. The
export trade seems to be holding up unusually well considering all con-
ditions, and on improvement is expected to follow the recent signing of
the trade treaty between Italy and Argentina.

Netherlands

The price difficulties which the Dutch textile industry eopori-
enced during the fall and winter months of the present cotton season ap-
pear to have been remedied by the increased ad valorem import duties.
There has also been a better demand for cotton yarns in recent months.
The rayon industry, which suffered u 25 percent decline in export busi-
ness, also appears to be recovering losses.

Net imports of raw cotton into Holland from August 1, 1938, to
April 30, 1939 totaled 193,200 balos compared with 196,200 bales import-
ed up to that date a year ago. Cotton cloth exports continue behind last
year, with net exports of cloth from August through April totalling 251
million lbs. compared with 35.7 million lbs. during the s&ae period a
year ago, but 22.3 millionn lbs. two years ago. Net imports of yarn,
on the other hand, are still running above last year, vith totals, from
August 1, 193S to April 30, 1939, of 25 million lbs. against 19 million
lbs. last year, but 32 million lbs. two years ago.

Poland

The activity of Polish cotton spinning mills has not been steady
in recent weeks, according to reports from Lodz. Exports sales have de-
clined, the decrease being attributed to recent political tension cand
the general international situation, although Polish economists state
that it is yet little more than seasonal in nature. The United Kingdom
was the best market for Polish textile goods in April, followed by Colom-
bia, Egypt and the Netherlands,

Polish imports of raw cotton were higher in March (35,600 bales of
478 lbs.) than in February (25,200 bales) but lower than a year ago. Total
imports of ra'- cotton from August through April this season stood at
238,600 b.-les compared with 251,400 bales imported up to that date last
season,

Switzerland
The latest reports from the Swiss textile industry are more encourag-
ing than for many months. Some recovery front the export sales difficulties
of recent months is apparent. There has been a certain amount of improve-
ment in the important embroidery trade, and both the knitting and hosiery





08-32


- 16 -


industries apponr to be qui+.e vell supplied with orders from the United
States. Domestic scales have also beon better for textile goods in nost
lines.

Imports of rar cotton roso to 17,840 bales of 47C lbs. during
April, compared with impnrts of 13 ,222 bales in the preceding month, and
only 9,107 in Ap-ril lrst year.

Donn rk

Spinninn ; i rllo activity in Denrark, generally speaking, continues
hi;,h. The textile production index in March of 114, (1935 = 100) while
2 poaLits lower than in February vwas c points above December and 6 points
above March, 1938. Activity in April and Llay is believed to have been
well maintained. The general culployment situation is now better than it
hae been for some time.

Total imports of raw. cotton sinLco August 1, 193S, stood at 31,090
bales on April 30, 1939, compared vith 30,760 bales imported during; the
some period of the 1937-33 season, aid 30,6d5 bales the year previous.

Finland

Conditions in the textile industry of Finland have continued to
be generally good during the past fer months, probably because of the
sustained high level of employment in Finland. The index of general
industrial production (1935 = 1oo) rose from 132 in February to 135
in March of this year compared with 132 in March a year ago. There
have been evidences of a sli,:ht slackening of textile industry activity
in April end May, but seasonal levels have been 'well maintained.

Tot.l. Finnish imnorts of rav cotton since August 1, 1938, stood
at 63,s73 bales on May 1, 1939, compared with 54,000 bales imported
during the sane period of the 1937-38 cotton year, and around 48,430
bales in the corresponding period of each of the two preceding seasons.

Sweden

Activity in the Swedish textile industry apparently continues at
a level substantially higher than last year. The domestic and foreign
markets x.re both reported as good. The textile industry production in-
dex (1935 m 100) which stood at 109 in January advanced to 112 in Feb-
ruary and 113 in March, compar.,d with 107, 108, and 109, respectively,
last year.

Imports of raw cotton in April of 25,890 bales of 47S lbs. were
the second largest for any Tonth in several years. In March imports
totaled 13,900 bales and in April last ye-ar only 7 620 bales. This
brought the tot.:l for the season to Lay 1 up to 156,460 bales against
less than 119,920 bales in the corresponding period of each of the three
previous seasons.





- 17 -


Tha payment agreement which formerly existed between Sweden and Czecho-
slovakia has been applied to the goods traffic between Sweden and the Pro-
tectorate of Bohemia and Ioravia. The agreement provides for the use of free
devisen in the exchange of goods and takes effect on July 1, 1939.

ORIENT: Consumption continues below average
despite high lev- l in India

There is little indication of any important change in mill activity in
the Orient during recent weeks. In Japan, cotton consumption continued mater-
ially (probably one-fifth to one-sixth) below a year earlier and the smallest
for the period in 4 years. While cotton mills in China are now consuming more
cotton than a year ago, the current rate is much less than for several years
prior .to the beginning of the conflict with Japan about 2 years ago. In India,
on the other hand, cotton mill consumption is exceptionally high, the mill con-
sumption of India cotton in May, of 240,000 bales of 400 pounds, being the
second largest for the month on record. The total for the 10 months ended May
is the largest for the period in history.

To a considerable extent the low level of consumption in Japan und China
are attributable to the Sino-Japaneso conflict. In China many of the cotton
manufacturing establishments have been destroyed. The effects on cotton con-
sumption in JapLn resulted from the interruption of Japan's international
trade and the resulting difficulties in obtaining foreign exchange with which
to finance the purc-hase of cotton. This in turn contributed to the regulation
which became effective about a yoer ago prohibiting the use of pure cotton
yarn in the production of textiles to be sold to the civilian population in
Japan or to those in othcr areas where the Japanese yen was used as a medium
of exchange.

ACREAGE, PRODUCTION, STOCKS AND SUPPLIES

AMERICAN COTTON: Carry-over of about
j4- million bales seems probable

Roughly 14,250,000 running bales of American cotton now seems likely to
be carried over throughout the world on August 1 next. This figure -- derived
by deducting the estimated world consumption for the 12 months ended July 31,
1939 (see page 7) from the estimated supply for this period -- is about
500,000 bales larger than the previous record high carry-over of August 1, 1938.
It is T2 percent higher than the 1927-36 average. It is expected that roughly
1,250,000 bales of the total August 1 stocks will be located outside the United
States -- assuming little or none of the 600,000 bales involved in the cottor.-
rubber exchange agreement with Great Britain will have left the United States by
that time compared with a little over 2,250,000 bales a year earlier. This
would leave roughly 13,000,000 bales located in the United States compared with
a little less than 11,500,000 bales on August 1 last year.

On June 1, domestic stocks of American cotton, totaling a little avcr
14,300,000 bales, were nearly 700,000 bales lLrger than a year earlier and
almost twice as large as the preceding 10-year June 1 average. Stocks of




UNIVERSITY OF FLORIDA
08-3i -18 1II IIII Illll 1 IlBIlBIIil IIIIll l iIIIII
3 1262 08900 4120
so-called "free" cotton including mill stocks, of a little over 2,900,000
bales, were only about half as large as a year earlier. Excluding mill hold-
ings, "free" domestic stocks of American cotton amounted to slightly over
1,750,000 bales and were only about two-fifths as large as at the end of May
last year.

As of June 22, total reported stocks of cotton held against Government
loans were 11,240,000 bales. This represented a decline of about 130,000
bales from the peak reached about the end of April. Reports received by the
Commodity Credit Corporation up to June 22 indicate that directly or indirectly
farmers had repossessed a total of 187,000 bales of the 1938 crop on which they
had obtained loans, approximately 70,000 bales of which were reported during
the 2 weeks ended June 22. At present prios, many farmers, particularly in
the southeastern part of the Belt, aro able to obtain more than enough for
their cotton to pay off their loans, plus the accraod carrying charges.

During the 3 weeks ended June 20, reports of the Weather Bureau indi-
cato that in much of the Central and Eastern Cotton Belt excessive and inter-
mittent rains were unfavorable for the development of the crop. In many 'areaa9
cultivation is said to be "badly needed as fields are becoming grassy from con-
tinucd frequent rains conditions were favorable for weevil activity, with dry
weather and sunshine badly needed." In Texas, Oklahoma, Arkansas and Louist.ana
the progress and condition of the crop were reported as mostly fair to good.
during the week ended June 20.

FOREIGN COTTON: Carry-over of 8 to
million bales expected" -

World stocks of foreign commercial cotton as of May 1 totaled about
12,300,000 bales, according to estimates of the New York Cotton Exchange Ser-
vice. This in approximately 800,000 bales less than those of a year earlier
which together with the apparent current rate of consumption indicates that
the world carry-over of foreign cotton this year probably will be around
8,000,000 to 8,250,000 bales. The carry-over of such cotton on August 1 last
year is now estimated at 8,900,000 bales.

The 1939 Chinese cotton crop is now tentatively estimated at about
1,800,000 bales of 500 pounds not, according to a recent radiogram from
Agricultural Commissioner 0. L. Dawson at Shanghai. This estimate which in*
cludes Manchuria compares with an estimated 1938 crop of about 2,200,000
bales. The chief prospective decreases in the crop are in North China where
the spring drought situation is reported serious.

Cotton planting in the main cotton growing regions of the U.S.S.R. is .
reported to have been completed by the beginning of May. The total acreage
planted is said to be about the same as that of a year ago. The total acreage
put in by the collectives, which accounted for practically the entire cotton
acreage, was 4,883,000 acres by May 10, the latest date for which estimated
of plantings are available as compared with 4,863,000 acres planted to the
same date last year. In each case those reported plantings constituted 99.
percent of the reported plan.




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