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:
AA00013000:00017

Related Items

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


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Full Text

h3vio '. 3/


UiJITED STATES TDEPARTIMEIT OF AGRICULTURE
Bureau of Agri altural Economics
razhini't on

CS-36 October 30, 1939

T HE C 0 T 0 S I TUA T I 0 I




Considerable irproveieent in the cotton situation during the past month

is reported by the Bureau of Agricultural Economics. In-crerasel .omestic cot-

ton consur mtion, substantial improvement in the competitive price position of

American cotton in foreign markets, and greatly increased exports of American

cotton were important developme'ntsc during '.he month. Mill consumption of

cotton in foreign countries a.p-ears to have changed comparatively little. A

near-record world supply of neaLrl: 50 million bales of cotton is indicated

despite the reduction in the October estimrnte of the United States crop. Of

this total, about 26 million aoles are Amer'ican cotton.

The daily rate of cotton consumption in the United States in September

was 10 percent above Auguzt, :nd apparently increased still further in early

October. Consumption in Septe-.ber was the largent on record for that month.

It was equivalent to an annual rate of about 7-3/4 million bales, which is

nearly 1 million belos larger thn:-n consumption last season and nearly as

large as the record high consumption of 7,950,000 bales in 1936-37.

United States exports of cotton totaled 1,1-70,000 bales from August 1

to October 25. This was a 47-rcrcent increase over .c-:.orts to the same date

last season, about the spne as the quantit:r exported during the like period

in 1937, and considerably smaller than the 10-year (1923-32) average. Regis-

tration of sales and deliveries of cotton for Govrnr:ent ext ot pa;rnnts up

to October 25 totaled 3,026,000 boles. This was slightly.-_oa-4-han-twice-
'- .j


n '


U S.DEPOSITORY


C-.


I







cs-S -

the actual exports. Registrations luring the 4 weeks ended October 25 ex-

cocdad actual exports by about 21,000 biles or 3 percent.

Since the domestic cotton ex-ort subsidy went into effect in late

July, the Liverpool rrice of Air,.:ic?-n cottor. has declined materially in

relation to most of the imrort':nt foreign growths. Prices in the United

States, in l:.te" Octoc" r advanced. to a roint about 1/2 cent above those at

the end of AuC..tst. The recent ratios of the rice of Indian Oomra and

Brazilian. Sao Paulo to American cotton at Liverpool ha-re been the most

favorable from the standpoint of the coi.'pctitive position of American cot-

ton for rppr-oximately 1~ to 2 years. The Liveirool price of Egyptian Uppers

has recently been the highest rcl-ti-.-e to Americ-rn since last March. In

J-npan the price of American cotton is also reported to havy. declined ma-

teorial.ly in relation to the price of Indian cotton since July.

Mill consurn.tion of cotton in Eurone is apparently running at a

level not materially lowur thnr. before the outbreak of the Earopean War.

In Great Britain, It'-ly, -'_i pozsibl' some other European countries, in-

creased consumption is believ. to h:.ve lagel.y offset probable declines in

the GrLwnin-controll e areas arn.- seonea possible decline in France. Consump-

tion in the Orient has declined slightly.

The dccrcarc of nearly 500,000 bales in the October estim?.te of the

United States crop r'.i.uca d the indicated world supply of Anorican cotton

from ,lihhtly- above to slightly belor the record supply of 1932-33. The re-

c'iction in the in.cicated crop was equivalent, however, to less than 2 percent

o.' rhc. irdlic'at r7'-rld sur'ply of Anorican cotton of nearly 26 million bales.

" -r. u rcuivalnLt to only bout 1 r-..rccnt of the near-record indicated world

'.-.pp.ly f nll cotton of n.arl:.- 'S nil lon balus.


a








- 3 -


PRICES

Domestic prices relatively steady
since r:dd-Seartember

Domestic cotton prices fluctuated within a comparatively narrow range
during most of the past 4 weeks at a level about one-fourth cent above prices
as of the first of Septerber. T'i (dling 7/' inch cotton in the 10 markets for
the most part remained at around .-',/4 cents, or a little higher than in mid-
Septemlbr. This was about one-four-th cent above prices for Septombor 1 and
one-fifth cent above the Cctob.-.r 1938 averag-e, but somewhat lower than those
recorded about a week after th: outbreak of the war between Gormany and the
allies. In the third and fourth week of October prices gained about one-fourth
cent. V-':ilc th.. Europ.al V'ar has greatly disrupted export trade with Germany
th. possib:l:- rricc :ffect of this apparently has been more than offset by the
large increase ; in ce-:ports to other countries and the improved domestic con-
sumrtion outlook.

Liverpool prices of foreign growths materially
increased r.-lative to Am;rican since July

Sinc- the domestic cotton export subsidy bocamic effective in late July
the compettitive position of A;In-ric.n cotton in Groat Britain has become much
more favorable. On July 2~, prices of Indian Cc m.' 1 Fin3, Egyptian UppIrs
Fully Good Fair, and Brazilia.n Sao Paulo Fair wore equivrlont to 69,6, 108.0,
and 93.5 percent, r-sp,-,ctiv,;1y, of the prices of American "Middling 'Fair Staple
(approximately 7/8 inch). On October 20, however, these price ratios wore
79.4, 113.8, r.nd 98.5 rcspe.ctivr-ly. The rpcont price ratios of Indian Oomra
and Brazilian have boon the nost favorable from the standpoint of the competi-
tive Dosition of Amri:.ric-n cotton for ppr'oxim.tecly l]- to 2 years. The price of
Egyptian Uppers has rcc:ently b,-.:r the -.igh)st relative to American since last
March. In addition to the ::-port subsidy, the larger supplies of "freo"
American cotton r.rc a factor also tc.ndingr to lower the price of American cotton
relative to foreign grc.,wt:s v.s commarrod with the situation existing toward the
end of last scason.. It is also possible that occan freight rates and the
availability of shipring fL.cilitics since the outbreak of submarine warfare
havc boon to tha advantage of Aj.nrir;c.n cotton to some- extent. In Japan the
price of American cottcn h:Ls al.so doclinod relative to that of Indian since
July.

Shortly after the, beginning of the gonorol '.:i-rpopean 'ar, the spread bo-
twv-ocn the price of AmCelric:L.-I jiddiling 7/8 inch cotton at Livoerool and at ]w.-.w
Orloans incrc.sEzd to almost 2.5 cents per pound compared with a spread of from
1.05 to 1.50 cents during July and August. This sharp increase is .apparently
duc largely to increased freight ra.tes and thb uncertainty as to the dif-
ficulti'.s to be encountered in tra-.ns[ sorting cotton under submarine warfare,
along with the drop in the- dollar value of the Pound Sterling, Since October 6,
the spread botwvrc-n TIkew Orl-a.ns r.nd Liverpool has narrowed materially '.nd varied


CS-36







CS-36


Table 1.- Cctton: Spot price per pound, specified growths at Liverpool
and New Orleans, specified periods


___Liverpool : Nlew Orleans
S American : Indian Egyptian : Brazilian : American
Season : d: :Fine Oomra;l:F.G.F. UDpers:Fair,Sao Paulo:Middling 7/8 in.
month : : Low :As a ;: :As a .: :As a : : Spread
or day :lg d- : Ac- :of Am-: Ac- :of Am- : Ac- :of Am- : Ac- :Liverpool
S7/8 :dling :tual :erican:tual :erican :tual :erican :tual :over New
inch Mid. d._d.: Orleans
: : Mi d. : : dd. :Mid. : Orleans


Ccnts Cents Cents Percent Cents Percent Cents Percent Cents


Cents


10-yr. av
1927-28
to 36-37

1936-37
1937-38
1938-39


1938-39
Feb.
March
April
llay
June
July
Aug.
Sept.

July 28
Aug. 4
11
18
25
Sept. 1
8
15
22
29
Oct. 6
13
20


I:


:14.50

:14.62
:10.31
: 10.15


:10.02
:10.17
9.67
: 10.55
: 11.041
.: .10.61
:10.16
: 11.10

:10.53
:10.30
: 10.18
:10.02
:10.2F
:10.03
:11.88
:11.23
:11.27
:11.28
:10.80
:10.45
:10.59


13.60 11.19


13.16
8.78
8.71


8.55
8.71
8.21
8.97
9.38
8.95
8.53
9.69

8.87
8.64
8.52
8.37
8.67
8.53
10.44
9.88
9.86
9.85
9.37
9.20
9.43


10.87
7.96
7.14


6.95
6.85
7.02
7.45
7.61
7.31
7.38
8.47

7.33
7.27
7.29
7.37
7.67
7.55
8.95
8.63
8.71
8.67
8.35
8.23
8.41


78.0 17.12 117.9


74.4
77.1
70.4


69.4
67.4
72.6
70.6
68.9
68.9
72.6
76.3

69.6
70.6
71.6
73.6
74.8
75.3
75.3
76.8
77.3
76.9
77.3
78.8
79.4


17.40
13.10
11.80


11.56
11.58
10.90
11.08
11.47
11.43
11.35
12.37

11.37
11.47
11.27
.11.10
1.1.66
11.27
13.33
12.47
12.89
12.10
12.04
11,94
12.05


119.0
126.7
116.5


115.4
113.8
112.7
105.0
103.9
107.7
111.7
111.4

108.0
111.4
110,7
110.8
113.8
112.4
112.2
111.0
114.4
107.3
111,5
114.3
113.8


14.08 97.7


14.12
10.18
9.63


9.53
9.68
9.19
9.83
10.18
9.85
9.37
10.60

9.85
9.52
9.40
9.24
9.42
9.23
11.12
10.91
10,94
10,94
10.46
10.20
10.43


96.6
98.7
94.9


95.1
95.2
95.0
93.2
92.2
92.8
92.2
95.5

93.5
92.4
92.3
92.2
91.9
92.0
9.3.6
97.2
97.1
97.0
96.9
97.6
98,5


12.65 1.85


12.79
8.79
8.73


8.60
8.69
8.61
9,30
9.45
9.37
8.95.
9.02

9.35
9.21
9.01
8.92
8.76
8.66
9.42
9.10
8.89
9.01
8,97
8.87
8.82


1.83
1.52
1.42


1.42
1.48
1.06
1.25
1.59
1.24
1.21
2.08

1,18
1.09
1.17
1.10
1.49
1.37
2.46
2.13
2.38
2.27
1.83
1.58
1.77


Compiled from reports of
which are from cables to


the Liverpool Cotton Exchange except for the last 3 weeks
the Bureau of Agricultural Economics or from reports of


the New York Cotton Exchange. Prices were reported in pence per pound and convert-
ed to cents per pound at current rates of exchange.


il


--








- 5 -


between 1..55 and 1.85 cents per pound.. This seems to be accounted for, to .at
least a considerable extent, by the large British imports of American cotton
and to less concern as to the effects of the war on the future imports into
Great Britain.

EXPORT S

United States exports up about one-third

From August 1 to October 25, total exports of American cotton, of
1,470,000 running bales as reported by the Nfew York Cotton Exchange, were 47
percent above the very small exports of the corresponding period last year.
They were about the same as exports during the like period in 1937. Up to
October 25, sales and deliveries of cotton for export, as registered with the
Department of Agriculture for export payments, amounted to 3,026,00C bales,
which was slightly more than twice as large as actual exports to the same date.
During the 4 weeks ended October 25, registration of sales and deliveries for
export totaled approximately 811,000 bales and actual exports amounted to about
790,000 bales.

During the month of September, a total of 649,000 bales of American
cotton was exported compared with ?89,000 bales in September 1938, an increase
of approximately 67 percent. Despite the marked increase, September exports
were about one-ninth loss than the 10-year (1923-32) September average. From
August 1 to the end of September, exports were officially reported at 868,000
bales or 47 percent more than in the first ? months of the last season. The
largest absolute increase was in exports to the United Kingdom, the 334,000
bales exported to the United Kingdom being nearly six times as large as the
small exports a year earlier and the largest for these 2 months since 1924.
During those 2 months, exports to Italy and Belgium were respectively 48 and
138 percent larger than in the corresponding months last year. Exports to
Japan and France were 48 and 16 percent smaller.

During August, total exports from India and Brazil were 42 and 17 per-
cent, respectively, larger than in August last year while exports from Egypt
were about the same as a year c:.'lic.r. Exports from India and Egypt to Germany
in August this year wore from one-third to two-thirds loss than in August last
year, but exports from Brazil to Gcrmr.ny were nearly 50 percent larger than in
August 1938. It is quite possible, however, that a substantial portion of the
exports to Germany may fail to reach their destination as a. result of the
French and British blockade. Since the outbreak of the war, x-ports from India
have not been reported. The Liverpool Cotton Association has als:, ceased to
report imports of cotton into Great Britain.


CS-36




CS-36


t Septemter : August to September
Country of :10-yr.av.: : : 193'9 :1C-yr.ar.: : :1939-40
origin and :1923-24 : 1 : : 193:as a %:1923-24 :1937:1938:1939:as a
1937 193R 1939.
destination : to : f t : -38: -39: -40: of
:1932-33 : : : : 1938 :1932-33 : : : :1938-39
S1. 000 1.000 1. O 1.000 1.000 1.000 1. CO 15000


United States to:
Germany .....:
United Kingdom:
France.....
Italy ........:
Spain ........:
Belgium ......:
Canad-a '.....:.
Japan ........:
China ........:
SOther .croT., .
'T tal ....:


runn ing
bales
222
139
88
54
32
16
10
95
19
56
731


:1,000
:bales
British India to:478 lb.
,Japan .... ...: 73
Italy ........ 15
China '.......: 17
Bel'gium ......: 12
Germany ......: 13
Unitc'd Kingdom': 9
France .......: 9
Other coun. ..: 8
Tntal ...: 156


run.
bales
89
298P
114
68
0
20
10
25
1/
83
617


run.
bales
37
35
74
26
1
12
11
96
1
96
3R9


run.
bales
5
262
49
46
40
31
17
49
12
13A
649


August
1,000 1,000 1,000
bales bales bales
478 lb. 478 Ib.478 lb.
76 76 89


10 25
151 186


Per-
cent
13.5
748.6
66.2
176.9
4 000.0
258.3
154.5
51.0
1200.0
143.8
166.8


Per-
cent
117.1
l~-T
20.0


38.5
111.8
116.7
230.0
142.1


,r
run.
bales
298
196
133
81
46
24
16
124
33
94
1,035.


f
run. run,
bales bales
139 62


256
143
92
0
28
16
42
8
111
838


59-
96
40
2
16
26
14!9
1
139
590


run. Per-
ba sls cent
27 .43.5
334 -566.1
81 84.4
59 147.5
51 25'0.0
38 237.5
26 100.0
77 51,7
12 1200.0
163 117.3
868 147.1


1,000 1,000 1,300 1,000
bales bales bales bales Per-
478 lb478 b. 478 Ib. 478 b., cent


September August to September


Egypt to
United. Kingdom:
France .,.....
United States.:
Germany ......:
Italy .. .....
Japar .......:
British India
Other coun. .:
Total

Brazil to
J~ pan ...
United Kingdom:
Germany ......:
France .......:
Italy ........
Netherlands ..
Belgium ......:
Other c.un. ..
Total ....:


23
7
5
6
5

1
12


39
17i
2
23
13
3
8
26


27
7
1
15
10
10
"3
23


51


6
13


32
32


18..9
85.6
1200.0

20.0
6 .0
433.3
139.1


46
18
13
12
9
4
1
32.


53
.24
3
32
15
4
In
36


52
20
3
33
19
24
S
46


79
19
15'
12
10
19
218
56


151.9
95.0
500.0
36.3
52.6
79,2
225.0
121.7


, .1 128 96 122 127.1 135 17.7 205 228 111.2
August


y 40
27
26
5
1
2
3
13
4 117


53
44
34
26
9
e
4

184


56
32
50
17
11
8
4
38
216


105.7
72.7
147.1
65.4
122.2
133.3
100.0
475.0
117.4


Coillpiled fr-,m official sources. I/ Less than 500 bales. 2/ Includes Austria.
3/ Nrl available by countries.


6-

Cotton: Exports from specified countries, average 1923-24 to
1932-33, and seasons 1937-38 to date


I


-I







CS-36


-7-


DEFAIArD AND CO!:SUJMPTION

UNITED STAT S: M'ill activity and do'iestic demand
further improv e

Dcn.estic mill activity has trended upward during recent weeks and is
at an exceptionally high level. Despite comparatively small sales of cotton
te:xtil.es ." domestic manufacturers since the latter part of September, most
man-ff~cturers are s'jir' to possess orders sufficinrLt to r.Maintain the current
rate of activity for Ian wevek: ahead. This, along with the recent increase
in industrial production, payrolls and .r.plo.oy.,nt, makes it scc.:i quite like-
ly that <'c.,i'ctic cotten mill consumption will continue at exceptionally high
levels for some tiue.

Domestic mill onIwnrttion during September, of 625,000 running bales,
vwas 17 p.rcer:t la er than ron-ur.ption in September last year and the third
largest on record. Tile daily -at.. of consLumption in Scptor,.b r was about 10
percent above Au:,'-u.t and thi,; hihest. for the month of Sept.:r;b.:r on record.
Shoul14 the Septcrmber daily rate of consumption be maintained during the rest
of the current season, doerrstic cotton mill consumption will total about
7,700,000 bales. Thi:;- would be m-uch la1-rr than the 6,860,000 bales con-
sumLed la:t season an'l nearly as lar!re as the record high of 7,950, 00 bales
consumred in 1936-37. In t~he first 2 -weeks of October the Nev; York Times in-
dex of dorr.estic cotton consumption averaged 138 percent of normal compared
with 127 in Septerber.

In Scpterliber, the index of industrial production advanced to 110, the
highest for any month since Septenber 1937. Additional increases in indus-
trial r-cduction are ex, ecte'-' during the remainder of 1939 as the large or-
ders no.:; o hacnC in a :nir.;'ber of important industries are filled. A rate of
industri:1 output approxinatin- the June 1929 pea!: may be attained before
the erio of the calendar year. This should result in additional employment
and larger payrolls and co.istitute an important factor favorable to the main-
tenance or further increase in the present high rate of domestic mill con-
surmpt ion.

EUROTE: Dislocations in mid-Octob-er lJt
t.ha;', in carl Scptcmiber

European c.m tton trade d.evlopm.ent s during Septe r.ber and the first
hnlf of i.'ctober, th:7 first six weeks of war, were featured by widespread dis-
locations. Follo.I:in: a virtual standstill of traLrding in the first half cf
the month, cotton and mill busir-ss arounJ the middle of Sept..-ibcr resumed
more rner-:ly noirm'1, aspects in the United Kingdo;i. On the Continent, however,
the pcrsist,,!cre o-.' abnorrl ccnditiors is extensive.

Vj'ith the Havre cotton c::ch..-'.c clocs:d and a number of re, ilations mak-
ing trading for ordinary conT.ri'ci-.i1 chnnn3ls difficult, the French cotton in-
dustry's business entered upon a period of su.-'p.ns,:. Mill opcr-.tions, also,
seem hancicaped by the mobilization of workers. In Germany avid all of the
territory of previous Austria, Czc.choslcv-:'.i;. and Poland, civilian






CS-36


consumption of cotton -'oods by ordinance of the German authorities, or in
consequence of the campai,-n in Poland, has been curtailed to very low fig-
ures, while military reouire:lents are only partly offsetting this reduction
in ultimate offtcace. iLaw cotton supplies to this territory apparently have
been cut off to a large extent, and available stocks could not for any
length of thL.e support normal iiill activity. As a result, it is not unlike-
ly that some decline ri mill consur.ption has occurred. The loss to the tra-
diticnal cotton-e-xportin countries, if imports into this Central European
area were cut off co:rplctely, would be ir the neighborhood of 2,000,000
bales per' annum thc normal mill consumption in that territory. This is
from 25 to 3.0 percent of total European mill consumption.

There is little information available from the neutral countries, but
so far dislocations that have occurred seem to be moderate. Shipments of
Amerrican cotton to these countries in the past six weeks, and since the
first of the season, have generally been much above the corresponding pe-
riods of 1938. It is understandable that, --ith the possibility of a neutral-
ity legislation in the United States that may make it impossible for Ameri-
can mcrchantmen to enter desim-natcd European waters, even neutral countries
in Europe should endeavor to have shipped as much American cotton as pos-
sible before such restrictions are im'poscd. Italy, it seems, is likely to
benefit in s.n-me mrJasure from the dislocations to which the trade of other
European countries are subjected. If nmything', cotton mill activity there,
alone ?r.ith export sales of cotton goods, appears on the increase. Spain, on
the way to restoring her cotton textile industry to peacL-time activity, has
already registered. substantial arrivals of _american cotton, compared to none
a year ago.

.aiple arrivals of rar.w cotton in the United kingdomm since the outbreak
of \.ar have greatl. easad the tension that existed, in the first half of Sep-
t:nbeer. .iill bu '..iess wa" rcsu.meid, with a larger share of total trade di-
rectly or indirectly accounted for by gover o-ent orders, or by measures of
civil defense. Ex ort business since the riddle of September has been of
fair, thou-h reduced, volume. Increases in production costs, actual as well
as expected, have cnl;, partI. been ;.;itigated in foreign markets by the de-
preciation of sterling The -establishment of P Cotton Board on September 17
has so far not resulted in an-- momentous move of industrial and market reg-
imentation. In fact, the cotton industry and market are one of the few im-
por-tant lines of the nation's business which till now have remained free
from drastic control interference. As front September 11, price-pegging at
Liverpool has be:.n practically abandone' and the market restored to normal.
Cotton mill activity in the United Kingdom continues hih.

Some interesting moves have recently been reported regarding the dis-
posal of the Eg~'i-tia: cotton crop. The British Government is said to have
been approached b:. the E ,ptiar. authorities with a proposal that Britain
should purchase t'l: entire Egyptian crop. This, however, apparently has
been superseded b-' a modified suTg stion previously put forward in Egyptian
quarters. This surest.ion w-'s that Britain should take over a share of the








-9-


Egyptian crop, an.oluntin.; to nor..::l Brit.t', imports plus normal Egyptian ex-
ports to thl territory not urd:,r. Gcr;m..n control. On an avura I over the
five seasons n' in'- 19;,7-38, mills in thu United Kingdom corcsmcd 570,000
bales (of 4'77 pounds net) of :ptian cott.:;n. Average consumption in Ger-
i.any, Czecholc.va'.-:i, Polran; and Austria cc.r-bind was about 300,000 bales.

UNITED F:I'P0i:

To th, relief of" the L n't.,E.ire- cotter, trade, the initial wartime dif-
fic:ulties encountered at the beginning of September scon gave v:ay to mo'e
nearly normal, tradiLg rirriwnstzaces which p-r:itted the resumption of busi-
ness. Foilo-..-ng abcuc a week's po-iod of virtual st-:d still, trading ir raw
cotton, yarn rnd pic-ce--oods was resumed in substantial pro..ortion and con-
tinued family active iji1to the first half of October. The industry, both
spiinnir. a ,d weavinr., is rcoort-c. to bc .:cll occipicd at nearly 90 percent
of o!;crm.l thus shov.:n further hincr:,eas in activity from the ernhnccd mid-
year lvcls. Official r.:id-Septe:.be3 retiuun-, hc.ever) indicate a slight in-
crease in cott3o ir:,'ustry unemployment c'r-."?ared with the middle of August.
let unemr.loynet ir the cotton industry w'Qas still much below mid-September


The basic conditnin .-hich per:.itted the return to active trading in
September vas the prom the t!'roi t in t- Liverpool rwi supply situation. Arri-
vals of raw' cotton f'ur::.s for which are no longer available are judged
to have been subhtau tial, ..:t-I a rood deal. of Southern hlcdging orrovided con-
tracts for hetdes aFa.;-a.st fc.,..rd sales of yarn. Raw cotton prices at Liver-
pool, '-oth spot .,nd futu es, eas a result, eased corsider ably.

I.Liits to price fluctuations for fut ri-cs which were rigidly based on
Septe-"bcr tA 'Quotations. OE:.oted to establish maximum prices. Beginning Sep-
t:'Jber 11, limits of 2., penny -oints up or down were based on the respective
previous- closing cuot.atic.nrs. This mr..su's, in combination with an improved
su .py situation, rcstor-.d the market to nor,'-a with nrir.in-.". i(otations soon
disppe;a.i' n. As .'rc'-. ctob'-E 1 the fluctuation limits have been widened
to 50 poLnts on th.- p:"' vous close.

Somk anxiety: ha- bc!Enu ;x,.v : -,sd1 in British cotton trade quarters lest
prospects for future rav.; otton imports should be seriously interfered with
by th.j consequ.c-,ces o47 th'e :-xpe:cted neutrality l,-gislation in the United
States. So far, arrivals of r=aw -otton seem to have been rather plentiful.
Forwar-dai.-Ps to .:pinr.-rs in the United Kin.gdom have also be ,n sl.bstaintial
during S..-pteibc.r. A fir share of this cotton, however, does not reflect
mill ccns:um..p'ion, but rather shipment for storage up-countr:.' and in mills -
a divcr:-ior. cl' stoc!:s froCr. the ports in accord-ance ';ith govcmrn,.nt instruc-
tions. Forward.ings from Sep.:;; r 1 to Octo-ber 5, 1'39, were 296,000 run-
ning bles, compared t..' cnl- 2'3, 000 balos in the cor--espond.in-- period of
i93f. Fo~rarcings of Am crica-. cottcn totaled 120,000 bales in the 1939 pe-
riod, compared .,ith only 102,000 bales for 193?.


CS-3.6







- 10 -


Lncpshire War-Time Business -

The outbreak of war increased the volume of home trade which directly
or indirectly was accounted for at least to a considerable extent by govern-
ment orders. There have also been considerable sales in dark curtain mater-
ials for black-out purposes, cotton sandbags and other cloths for civil
defense. Furthermore, ordinary commercial sources increased their demand
in expectation of further rrice increases and possible future difficulties
in securing supplies. As a result, producers found themselves .u-nble to
accent all the business offered them. There ha.s been a pronounced reluctance
on the part of pro.-ncers to accept orders for delivery more th.n three or
four months _.he-d not only because machinery should be kept available for
urgent government requirenents, but also because? the position as to future
production costs is somewhat obscure. Higher costs of raw material, compul-
sory insurance of commodity stocks on hand, provision of Air Raid Precautions
at th3 mills, and the impenin7 sub;ta:ntial increase in the wages of cotton
operp.tives (who h-ve rsked for a 20 norcent increase) cornine to make a very
exter:sive further increase in -ro-iuction costs likely. Prices of yarn and
niece-goo's, as well as such charges as printing, dyeing, bleaching and pack-
ing, h-ve already been marked up considerably.

These factors naturally *were not without effect upon Lancashire's ex-
nort business, w.'ich bers the additional burden of higher marine war-risks
and fr.ciht. rntes. To some extent, however, the depreciation of about 16
percent of sterling has mitigated these influences. While India, the Near
East auid Eg-pt have bought verr little in September, business with South
America, the West Indies, Test Africa and northern Europe ,Tas larger than in
August.

Government Control -

(a) Foreign Trade Basic authority for the Board of Trade to pro-
hibit or regulate by order the importation into, or exportation from, the
United King'om of gools is laid down in the Import, Export, and Customs
Powers Defense Act (1939), dnted September 1, 1939. On the basis of this
enabling .ct, the Board of Trade h,.s -nrohibited the importation, except
under license, of' -anufactures wholly or mainly of cotton, v:ool, silk or
rayon, or mixtures thereof, other than yarns made from cotton, wool, silk,
rayon or fixtures thereof. Similar prohibition has also been placed on the
exportation of rrm cotton, cotton liners a.d cotton waste to most ports or
destinations in Europe or in the Mediterranean or Black Seas. The exporta-
tion of any kind of article to any enemy territory is, of course, disallowed
under -. g'-nerr.l. prohibition.

Those rio.sures indicate r. policy intended to restrict imports of manu-
factured articles, vhile allowing the import..tion of ra-' materials and semi-
manufactures sl.ch ns arns. Or the other hrnd, the exoortation of m.a.nufac-
tures is to "e promoted but exoortation of raw materials will be curtailed.


cs-36








CS-36 11 -

(b) Cotton Boc.rd On Snta: -l)r 17, 139, a Cotton o-rr' w".s set
Un, -. 3-.-p.ctee, 0llo.'i.-i ~rte-'dC c"-. ilitations between the Pcard! of Trnde
a.'C1 te L.nrrashir, cotton inInistry. S'f:-c'm-.ittees have tl- n'. -?ointed to
der.l "ith (1) rpo ertton s pplies, (2) nr rmuction -r.n govrrn.--nt orders,
(3) export tr.de, pr.d (4) ossontial com-nodities. The most imnort-nt object
of the Board 'i!l be the provision of all vovernnont r-qu-irenc-nts, including
home r?:"n.:- -n,' hosnit~ls. ..qu-.11- i-nort-nt, it 'as pointed out, is the
e'icour-. -n.nt of. cotton goods' exortp. It is in(licnted. th.t in the long
ru:- c. )-ulvory ro-er-' of various kindA miht be required b"0- tho Board. to
fulfil its --ss-'ntirl t_.sk, Tor .':-ano, it is envisaged tba.t r.:._1 fixing of
prices will have to t.-ke pl-1ce, and if that is the case, a regulation of raw
materiprl supplies Pnd deliveries as between the export and home trade may
become unavoidable. In view of this, large numbers of spinners and manu-
facturers, while accenting any government orders, are selling no more in
ordinary commercial channels then is necessary to maintain friendly relations
with cutom.zrs f long standing.

On October 12 the Eoard announce& that it expects shortly to issue
fixed st.-rdard margins for the spinning and doubling of American and Egyptian
yarua en that it is consViering the introduction of rice control for manu-
facturinr? an' finishin:. Control of margins in the cotton spinning industry
has been in operation on a voluntary basis for several years r:nC the exper-
ience then gained will facilitate any necessary compulsory control.

Some of the functions which the .Cotton Board is to perform will
doubtless be the supervision of tr: .To and mill operations 'uner the Priority
of TWo-.s Order, 1939, dated September 3 and made by the Minister of Supply
under tb? Defence Roeglations c,'9. According to this order, any Government
Department, notified by the Cntral Priority Department of the Ministry of
Sunply of th-; fact thpt a particular order is a priority order, may issue a
certificate to -s.ure that the execution of this order shall trke precedence
over curtrrcts not so, or less urgently, classified.

"rocosed E,-rti.nm Cotton .. -

It is reporter' that someti m. a--o -y'nptian authorities proposed to the
British GC-vernmmnt th.t Britain nurchr-.se the entire 1939 E.yptian crop, In
early October, however, this proposal -onarently had been :irop ed anc a
modified. suggestion w-.s being considered. Under this propopl Great Britain
would ta- imports nlus normal Egyptian exports to the territory now un, er German con-
trol. In this connection,: it may be noted that var-time requirements for
socci..] f-.brics or. likely to ir.crease British needs for eg:"ptian cotton. On
an -verage, over the 5 seas-ns .ending 1937-3g, mills in the United Kingdom
consumed 7.70,C00 bales (of 47e po-un.'s -rot) of Egyptinn cotton. Average con-
sumption in Germany, Czechoslovrkia, Poland, ani2 Austria combined was about
300,000 bales.







cs-36 12 -

FRAICE

Cotton mill operations and ordinary mill business since the outbreak
of war, judged from the meager information available at the present time, seem
to have suffered from a combination of impediments to normal activity. The
Havre market has been closed since the opening of hostilities and though
price quotations in the United Status and Liverpool have been available, a
precise evaluation of raw cotton costs in France was rendered extremely
difficult. The increase in freight rates, war risk insurance and exchange
depreciation combined to obscure the cost position, and the raw cotton
situation was further influenced by the scarcity of raw cotton stocks in
France at the beginning of this season. This scarcity, unlike conditions
in the United Kingdom, has not been significantly alleviated. In fact,
exports of American cotton to France from August 1 to September 30 were
equivalent to only g4 percent of the comparatively small exports during
the corresponding period last year.

Official decree regulations aiming at the establishment of priority
supplies for the fighting services and other essential war requirements seem
to have significantly interfered with the sale of cotton goods for civilian
consumption and export purposes, even though, theoretically at least, every-
thing is to be done to promote and maintain exports. These initial diffi-
culties in an economy which attempts transition from a relatively free into
a considerably controlled status arc expected to be overcome in the near
future. Meanwhile a decree law prohibiting price increases over and above
the level obtained on September 1, 1939, has also placed some obstacles in
the way of civilian business activity. For even though price increases ac-
counted for by the increase in the price of imported raw material are to
be tolerated, the exact implications of this legislation, especially in its
relation to existing stocks or forward commitments for the raw material, are
not entirely clear. In the circumstances private business, other than for
Government orders, was extremely restricted, a considerable demand meet-
ing with relucta:1ce or inability of spinners and manufacturers to sell.

It is reported that there has been some absorption of qualified tex-
tile labor into th. fighting services which necessitated some reduction in
mill operations in places. There is some dissatisfaction among operatives
with the rather severe war-ti:.ie legislation affecting wages as well as money
salaries and hours of work. It is understood that a special levy of 15
percent is to be imposed on all wages and salaries for iien between 18 and
49 who have not been drafted. An extension of weekly working hours from 40
to 45 per weuk, without any increase in weekly wages, is also authorized by
decree law and a further increase in weekly hours in industry generally up
to 60 is allowed. Only 75 percent of the normal weekly wage per hour for
this overtime is to go to the worker, while 25 percent are to be collected
into a special fund for the support of needy families of workers called to
the colors.

CENTRAL EUROPE

To gauge the significance of the previous relative importance of the
central European raw cotton market the territory at present under German








- 13 -


control it should be noted th-.t Germaniy, Czechoslovakia, Poland and Austria
on the average over a number of recent years imported and consumed a total of
roughly 2,000,000 bales per annum. About 800,000 bales, or 40 percent, were
American cotton. In a protracted war at least most of this consumption seems
likely to be lost to the traditior.al cotton exporting countries, assuming
the British and French blockade is largely successful. Moderate quantities
of cotton for central European consumption may be provided by Russia quanti-
ties which perhaps otherwise would not have entered export channels.

In a total European mill consumption excluding Russia, averaging a
little over 8 million bales during recent years, a decline by 2 million bales
would be a grave development from the standpoint of tho exporting countries.
How severely it would affect the supply of cotton-type textile goods to con-
sumers in dontral Europe may be gauged from the fact that in Germany, for
example, imported cotton and cotton waste accounted for perhaps 70 percent
of the raw material from which cotton-type textiles were produced. In Poland,
Czechoslovakia and Austria where cell-wool and reclairied fibers played only
a minor role that share was probably in the neighborhood of 90 percent.
If it is further considered thv.t r.ilitnry and civil defense requirements will
rise, it becomes obvious that the supply of cotton-type textiles for ordinary
civilian consu.:ption in Oentral Europe in a protracted war must needs be
reduced to a desperately low levcl. Existing stocks of raw cotton, yarn and
manufactures are small and will provide little alleviation of this condition.

ORIENT: Cotton consumption declines slightly in Japan;
unchanged in I:-dia and Chiia

Cotton yurn production and cotton consumption in Japan were slightly
smaller in September tha:- in August or than in September last year, and the
smallest for nearly 10 years. They were about two-fifths less than in Septem-
ber 1937 before the restrictions growing out of the conflict in China became
effective. The low level of cotton yorn production is reported to be due in
part to a shortage of electric power and fuel but perhaps to a large extent
to restrictions on the supplies of foreign exchange for the purchase of raw
cotton and restrictions on the use of cotton goods by consumers in Japan as
well as in other areas under Japaiieso control.

Japanese exports of cotton cloth in September of 226 million square
yards were the second largest since December 1938 and are said to have exceed-
ed production. The previous excess stocks are now reported to be practically
eliminated. In early September, orders for piece goods increased considerably
but to a smaller extent than the Japanese contracts for raw cotton. As a re-
sult, it is reported that the stocks of and contracts for raw cotton are the
largest for sometime in relation to current requirements. The Finance Ministry
has recently made unusual efforts to insure foreign exchange for raw cotton
imports and as a result the pa~yent situation in early October improved
perceptibly. This, along with an improved outlook for Japanese cotton textile
exports, is favorable to the maintenance or increase of cotton mill consumption
in Japan in the immediate future. The reported shortage of electric power




UNIVERSITY OF FLORIDA
l llllllilllllllllliHIII 11 I IIIII I LIIII Bill
3 1262 08900 3833
cs-36 1 -

and fuel, however, is unfavorable. Since August the price of American cotton..;i
in Japan has become more favorable relative to Indian from a competitive sta&l
point. As a result, purchases of American cotton in September are though%, tol.
have exceeded purchases of Indian by a substantial margin. During the past
season, imports of Indian cotton exceeded imports of American.

Cotton r.-ill consumption ini China, including Manchuria, apparently
continued in the neighborhood of 125,000 bales during August and September.
This is an annual r..te of about 1,500,000 bales, which is believed to be
roughly the amount consumed by Chinese mills in the past season. While ther:l-
are widely conflictin-; reports as to the size of the 1939 crop, the American
Agricultural Co::.iissioner in China is now estimating the crop at about
1,900,000 bales, which is considerably smaller than the relatively small 19i)'3
crop, This, along with large non-factory consumption and restrictions on the
movement of Chinese cotton, -ak.-s it seem likely that imports of Indian,
can, and other cotton into Cnina during the current season may equal or eCee4.'
those of 1933-39 when they were respectively 541,000, 89,000, and 144,00 Q
bales,

The approximately 255,000-bale (400-pound bales) consumption of Indian
cotton by ;..ills in India during September was approximately the sane as con-
sumptio.: in August. This nade the seventh consecutive ..Ionth in which the
consumption of such cotton by Indiar- mills was between 244,000 and 258,000
bales. While the September figure was about 3 percent below that of Septem-
ber 1938, it was con-siderably larger than in any other September in history.

ACREAGE, PRODUCTION, STOCKS, AND SUPPLY Qil

World sup ly continues at ne;r record level
despite reduction in Ancrican crop .

A world supply (carry-over on August 1, plus production or ginnings.) :
of all cotton for the current season of about 49,900,000 bales is now indi- '.!;
cated. This is only sli..htly less than that of the previous season and about ',ii
1.6 percent less than the record nigh supply of 1937-38. The indicated wr *'II
supply of American cotton is now: a little less than 26 million bales, seoad .47
only to the record 1932-33 sup-.ly of 26,200,000 bales, despite a reduction
of nearly 500,000 boles in the October esti-ate of the United States crop.
The indicated supply of American cotton is nearly 4 million bales larger. .
than the avera.re for the 10 years 1928-37. Present esti-ates of the foreign
con-ercial crop and the carry-over of foreign cotton indicate a supply for
the present season which is about 1 .million bales less than that of the pre-
ceding season, 2 million bales less than the record supply of 1937-38. It
is, however, nearly one-fourth larger than the average for the 10 years
1928-37.










__ _.,.... ~ .- ....j flE




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