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:
AA00013000:00018

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
A4.o ,( i


THE


v-W SITTUATION


BUREAU OF AGRICULTURAL ECONOMICS
IINITFD STATES DEPARTMENT OF AGRICULTURE


p I


MARCH 28, 1940


COTTON: PRICES OF EGYPTIAN. INDIAN. PERUVIAN. AND BRAZILIAN. EXPRESSED
AS PERCENTAGES OF AMERICAN MIDDLING, LIVERPOOL, 1921-39


1921 1923 1925 1927 1929 1931 1933 1935 1937 1939
IAR BEGifNNING AUGUST


U.S. DEPARTMENT OF AGRICULTURE


NEC, SaB21 BuREAU OF AGRICULTURAL ECOkOMICS


OVER SHORT PERIODS, SUBSTANTIAL CHANCES IN THE RELATIVE SUPPLY OF COTTON
OF DIFFERENT GROWTHS RESULT IN MATERIAL CHANGES IN THEIR RELATIVE PRICES. OVER
LONGER PERIODS, AND AS A RESULT OF THESE PRICE CHANGES, ADJUSTMENTS ARE MADE
IN CONSUMPTION SO THAT THE QUANTITY OF EACH GROWTH CONSUMED IS BROUGHT BACK
VOHE NLAHLY IN LINE WITH THE SUPPLY OF EACH. THESE SHIFTS IN CONSUMPTION TEND
TO READJUST THE COMPARATIVE PRICES OF THESE GROWTHS IN LINE WITH THEIR COMPAR-
ATIVE QUALITY OR SPINNING UTILITY.
DURING 1937-38 AND 1938-39.LIVERPOOL PRICES OF THE FOUR IMPORTANT FOREIGN
GROWTHS SHOWN IN THIS CHART DECLINED MATERIALLY IN RELATION TO PRICES OF AMER-
ICAN COTTON. AN IMPORTANT FACTOR CONTRIBUTING TO THIS WAS AN INCREASE DURING
THIS PERIOD IN GOVERNMENT LOAN STOCKS FROM LESS THAN 1,700,000 BALES TO ABOUT
11,400,000 BALES. THE ADVANCE IN THE RELATIVE PRICES OF THESE GROWTHS DURING
THE CURRENT SEASON IS LARGELY ATTRIBUTED TO THE UNITED STATES EXPORT-PAYMENT
PROGRAM WHICH WAS DESIGNED TO HELP RESTORE THE COMPETITIVE PRICE POSITION OF
AMERICAN COTTON IN FOREIGN MARKETS.




I -


CS-41


PERCENT


160


140


I20


100


80


60


40




CS-41


THE CO TY 0 : SITUATI O N


Sur.iarv

Domestic and foreign consurptio- prospects now indicate that the

world carry-over of Americpn cotton on August 1, 19'40 is likely to be

about 1 million boles smaller than the record high carry-over of 14 million

bales on August 1, 1939. The carry-over in the United States seems likely

to be about 2 million bales less than at the beginning of the current season -

when the total was about 13 million bales but stocks of American cotton

in foreign countries are expected to increase by 1 million bales or more.

The world cprry-over will be the third largest on record and about two-fifths

larger than the 10-year (1929-38) average.

Domestic consumption of neoaly 4,600,000 bales of American cotton

during the 7 months ended February, established a record high for the period,

despite a marked decline in mill activity since December. Even with some

additional decline in mill activity, total consumption for the current season

seems likely to exceed 7,500,000 bales compared with 6,700,000 bales last

season. This, together with "-rospective e:ports, seems likely to result in

a total distribution of more than 13,500,000 bales as contrasted with

10,100,0CO bales in the preceding year,

Foreign consumption of American cotton is expected to be somewhat

larger this season than last but will be much smaller than United States ex-

ports. As a result, the foreign carry-over of American cotton will show a

marked increase over the small stocks of August 1 last yea.r. This increase

seems likely :o equal or exceed 1 million bales, thereby offsetting roughly

half or morc than half of the decrease in domestic stocks. On this basis

the foreign c.rr-.-ovr;r of American cotton on Aurgust 1 next would total about

2 million br.ls or somerthat more.


- 2 -





Cotton nill qctivitty in the All ie and neutral cc.i.tries of Europe

appears to have ch-n)I.l c parativ"ly, little in .:.'b-:-ay and early March.

In most of the-, countries mill consun-tion continued high. 1,Manufacturers'

sales, how.-ver, tre apparLrtly r-l-tively small in Gre: t Britain, r?.nce,

and at least a- fcr 3ther countries. But mills generally are saldc to h.3v2

fairly lrpce unfilled orders. The lac: of skilled mill workers rhich has

existed in FrTnrcc nd ~ Sngland is beliiovcd to have been allcvi~t'.to somewhat

in France within receLnt weeks.

In Jupor, :ill acti--ity in FLibrarry was .'--ain materially red-ced.

Mill consu ntion vps abc-ut 10 percent .r'..llor tIh-n in Jan.ary, which in

turn vas 10 r,.-c"nt less than in Decem"ber. Te .ecline in mill activity

is attributci largcl:- to n. short':o of fuel.

The decline in don--stic cottch prices ?urin,, the past few wc.-ks has

been acco-pa.nied by n. sr'.bstantially gr:'.ter decline in Licvr'oo0l. As a re-

sult the s-ot price of Pie-'ican cotton in Liverpool, converted to cents per

pound, r.s the lov.':c.t r.l.tive to domestic prices on March 21 since the

outbreak of war in Septembcr. In Liverpool, prices of American cotton con-

tinue coTparvti-:ely lcwv rl.,tive to r.ost other growths.



Domestic pric.s gF'in recroe, 'but continue
ruch hiSj.hr tL.-in last yvor

Prices of spot cotton in dome.-.stic markets sho've'd. a Eli .h doimward
tr_.nd during 'The rnor..t e.crTcd MI-.chn 25. A decline of 3/5 cent from Fcbru-nry
2C to March 2-6 r.'n--ct most of the advance Thich L--d occu~r'er between late
January rnd the lrtter r-rt of Febrluary. The average of 10.18 cents on
March 26 -.7P5 or--1. lihtl v high-r tha t that of J:;uary 23, thicih ws the low-
es.t for E.y, da.. sinc.c e_-rly, D.,cea.ibr. Despite the recent decline, the aver-
are -rice of '0.)c. ci nts from 'r.ch 1 to 26 was 21 percent him-:I.r than the
March 1939 r.v. rnc.

A n*'.unb.r of d.rv.lop;n-cnts hcon contributed to the slight twek:ess in
domestic cotton -ricj s durin.n recent weeks. Tli' :s include a materially low-
er rnt of rxports in co-.-rricon with ?. yc.r eac-lier than exist.e:d fr ?n
DcceT-ber to Febracry, further cdecli-:.s in dcmostic mill activity, -'nd pos-
sibly the inc--caz.-..: realization that the rate of forei in mill consu-mtion of





- 4 -


American cotton is rumnin.r; m'.ch beelovr. t'.t of exports. A~ong with these
may be included the further decline in domestic industrial production and
lack of strength in corodity and. security prices.

The higher prices as ccmoared with a year ago are also accounted
for by -. number of factors. Perhaps the most important is the higher rate
of domestic cotton nill consvmnption (see section headed DE:A'i'D AND CO:T-
SLUPTIOII) which is d.ue largely to the higher domestic industrial production
and consumer incomes. The higher foreign demand along with the domestic
Export Pa:ment Program also has contributed to the higher prices as com-
pared with a year gn (see section headed EPORTS).

Liveroool prices decline sharply

From early January to early March, prices of American and most
foreign cotton in Liverpool showed a rather ste.ay decline. Between March
8 and L:arch 21 there ;was a rather sharp decline, particularly in prices of
American cotton. On March 21, American Middling fair staple approximatelyy
7/8 inch) averaged 11.71 cents (converted at the open market exchange rate).
This 7as 1.4,' cents lo';er thmn on 'March 8 and 1.55 cents less than on Feb-
ruary 23. The nice of Middling 7/S at ITew Orleans on March 21 of 10.40
cents was only 0.15 c)nts rnd 0.10 cents lower than on March g and Feb-
ruary 23. From this it may be seen tnhat the spread between Liverpool and
New Orleans declined sharply. The spread of 1.31 cents on March 21 w.as the
lowest for any Fridny since prior to the outbreak of the war on the first of
September.

The decline in Liveroool prices relative to domestic prices in recent
weeks is probably due largely to reduced British demand resulting from the
increasing stocks of raw cotton on hand and the rather large purchases previ-
ously made. It seer.s likely that British buyers are now considerably less
concerned over the possibility of future increases in transportation costs,
and less optimistic as to the outlook for British mill activity over the
next year or more.

Since March 8, prices of American cotton in Liverpool have declined
somewhat moro than prices of other growths. As a result, the ratio of the
prices of those growths to American increased considerably. On March 21,
the price of Indian Oomra #1 fine was equivalent to 82.5 percent of the
price of American Middling, compared with 80.9 on March 8. Similar compari-
sons for other growths are Egyptian Unpers 138 compared with 126, and Bra-
zilian Salio Paulo, fair, 101.3 compared with 100.6. The price of Egyptian
Uppers was higher relative to A-merican Middling 7/8 on March 21 than for
more than 2-1/2 years.

EXOPOTS

AMJERICAIT: Exports for last few weeks much less
favorable but Etill much above last yoar

Since early February, weekly exports have been 18 to 100 percent
larger than luring the corresponding weeks last year, whereas for several
weeks prior thereto they wrre 300 to 400 percent larger, according to trade
data. In February, exports were officially reported at 747,000 bales or
about 1,3 per-ent larger than in February last year and the largest for the


cs-41






Cs-1


Table .- Cotton: S-ct price per pound, specified -:ro-vths at Liverpool
and' Nev, Orl'eans, -peecifiec. period ..--.--

: 'LJvcrno ol : _c_. .__j rl'ans
: A3rican : Indian : E.Lt n : Br7zilian : lmerican
:Fir.e CD.ara#1:F.G.JF.pj;:-ers:732r, Sac au.le Mi ddl.in 7 8"
Season, : : :A a %: :As a :As a : Spread
mnt h : id- : Low : : of : of :Liverpocol
or .ay :cli.n: : Mid- : Ac- :Aerier- Ac- :Ameri-: Ac- :Aeri-: Ac- : over
: 7/8" :dling :tual : can :Lual can :tual : can :tual : New
: : : L d- ?:: id- : : iid- : : r-
: : : :dl in_ ._- :Hdin : :dLnr : : leans
1:-yr. av.: Cents Cents:Cents PVtb. :'Crnts ict. :Cents Pct. :Ce.its Cents
1927-2
tc'1936-37: 14.5 13.60:11.19 78.0 :17.12 117.9:14.08 97.7:12.65 1.85
193-37 ..: 14.62 13.16:10.87 7,.4 :17.40 119.C:4.12 9o.6:12.79 1.83


1937-38 ..:
1938-39 ..

1938-39 -
Feb. ...
Ear. ..:
Apr. ...
hay .... :
Jg-Lie ... :
July ...:
July
1939-40 -
Aug. ... :
Set.. .
Oct. ...:
NIov ...
Dec ...:
Jan. ... :
Feb ....

Jan. 5 ..
12 .
19 ..:
26 ..:
Feb. 2
o
16 ..:
23 ..
Mar. ..:
8 ..:
15 ..
21 ..


8.73: 7.96
S.71: 7.14


.55: 6.95
C.71: 6.8
C.21: 7.02
8.97: 7.45



,.53: 7.33
9.69: -.47
9.30: 3.39
10.53: 9.24
13.02:11.A3
13.9.:12. 1.12
12.91i:10.92

L'P. 45:12.7c
1/..06:12.22
13.80:12.00
13.19:11.38
13.02:11.11
13.17:11.11
12.80:10.71
12.68:10.72
12.60 :10.65
12.53:10.61
11.3C: 9.76
11.24: 9.65


77.1



6c. 4
67.4
72.
7C.6
68. 9
68.9

72.6
76.3
7?.9
81.2
.2.7
,_ -
30.3


.24. .2
82.5

,2.6
31.2
C0. P
80.0
80.8
82.4
30.9
82.4
82.5


:13.10
:11.80'


:11.56
: 1i..5P
:10.90
:1..03
* -i/-- O4
: j.4.3

:11.35
:12.37
:12. 00
:12.40
:15.'44
:17.24
:16.38

:17.73
:17.13
: 1.7.2?0
:16.76
:17.02"
:16.90
: 16.71
:16.85;
:1o.52
:16.53
:15.83
: 16. 11


120.7:1.0.18
116.5: 9.63


I_:L
115.4: 9.53
113.8: 9.-'
112.7: 9.19
105.0: 9.33
103.9:10 .1
107.7: c.-5

111.7: '.37
111.4:10.C.0
112.9:10.43
108.9:11.32
1.1.7:13.02
13S.2:14.u5
.12- 9: 1.7 2

.116.8:1. .1
117.9:14.3 4

121.7:13.94

122.9:1 00
12L. 9:13.63
127. 1:13.50
126.2:13.42
126.1:13.19
133.7:11.99
137.6:11.86


92.7 8.79
94.9: .731


95.1: 8.60
95.2: 8.69
95.0: .61
93.2: '.30
92.2: 9.L5
92 .8: .37

52.2: 8.95
95.5: 9.02
c.- .: 92c
19C.4: 9'?.
1OD. :10. 4.
100.5 :10. 0

lOn. C: 11.09
1.00.0:10.75
1 '.6:10.82
101.2:10.42
100;. 6 :10.40
11.8 : 10. 72
10)1. 9: 10. '4
101.5 : 10. 80
102.5 :10.80
100.6:10.f5
101.3:10.44
101. 3:10.40


1. 52
1.42


1.42
1.48
1.06
1.25
1.59
1.24

1.21
2.08
1.71
1.93
3.18
3.79
2.85

4.09
4.03
3.64
3.35
3.29
3.03
2.9 6
2-. 6L4
2.46
2.29
2.56
1.40
1.31


Compiled from reports of the Liverpool Cotto.n Exch ;--."e excep.:. f.or the last 4
weeks, which are from -ables to the Bureaut of Ac.ri.!lt'rral Econ.omics or from
reports of the New York Cotton xlchan-e. Prices were reported in pence per
pound and converted to cents per pound at current unofficial rates of exchange.


10.31
10.15


10.02
10.17
9.67
10.55
11.04
10.61

10.16
11.10
10.63
11.33'
13.E2
14.5:3
13.52

15.18
14.81
14.46
13.77
13.69
13.75
13.38
13.26
13.09
13.11
11.84
11.71
1 -3L


- 5 -





- -


CS-41


month since 1932. The 7 months total, August through February, of 4,917,000
bLles was twice the total for the same period last season and tl-e largest
for the perio... since 1933-34.

From August 1 through March 21, domestic exports totaled 5,100,COO
bales, an increase of 55 percent over the excectionally znall exports during
the corresTonJing period last year, according to data released by the New
York Co-tor E-ch-nge. This total -ras only 11 percent larger thn in the
corresponding perio.. of 1937-38.

During the 10 years 1928-29 to 1937-39, cxnorts of American cotton
from Aula~ust through March averaged. apnroximately SO percent of the 12-month
Augutst to July total. The S-month total this year will probably be close to
5,200,000 bales. If the official fi~'ire for this S-month period should
total 5,200,000 bales and if exports during the last 4 months should equal
20 percent of the season's total, exports for the 12 months ended July 1940
would totr.l arprox:imately 6,500,000 bales. This would mean that about 1.3
million bales v;oull be exported from April to July. Such a figure would be
more than 2-1/2 times the eroorts during those 4 months last yerr. It is
evident, therefore, that exports from April through July could represent a
considerably smaller nroportion of the season's total than usual and still
have the 12 months exceed 6 million bales. At the present time the quantity
of cotton registered for export during the current season under the Govern-
nent x -ort Payment Program is approximately 5,8'0,000 bales. This figure
does not include the 217,000 bales of cotton already ex-or.ted under the cot-
ton-r.bbcr exchange agree;nent or any additional exports of such cotton should
shipments of this cotton be resu.cd before the end of the sc-son. Many ob-
servers believe that exports for the current season rill inclu-e a considerable
quantity of cotton (besides the barter cotton) which has not been registered
for export payments. At arny rate, it seems reasonable to o-pect that exports
will about equal or somewhat exceed 6 million balcs.

Up to ?:arch 21 exports of cotton and r. rcl.atively s.n-all quantity of
liners to the United Kingdom totaled c.prox;im'tely 1,700,000 bales, which
vas 4-1/6 ti:ios the eo:orts to the corresponding date last season. The
725,000 bales of cotton and linters e:x:orted to France from nAugust 1 to
March 21 o::cecded exports to the sare date last year by 93 percent. Since
early January weekly exports to France have been from 3 to nearly .10 times
the scr.ll e:xorts during the corresponding wooeks last year. Prior to that
time, ,xoorts to France ,were for the most part smaller than in the corre-
sponding period last season. The more favorable comparison during the past
3 months no doubt reflects the decision of the French and British to co-
ordinate their purchases of raw cotton and the operation of cotton mills in
each of the tw:o countries. Up to March 21 exports to Italy ware 92 percent
1'rgcr than a year earlier, and exports to Japan approximately the sane as
from August 1 to MaIrch 21 last season. Exports to China during this period
wore nearly o tir.:cs the very s:ill exports last season and ex oorts to a
number of the s.all noutrail Europomn countries were from 2 to 3 tines as
large.

FOREIGIT COTTON: Exports from Egrt, and India
below last yeur

In January (the latest month for which official data are available)
exports from India vere 1-1 p-rcont loror than in January last year. The





CS-41


- -


Cotton: Exports froi.m eL'i-r c .tLtries, average 192&-29
tc. 1-.,.7-3', "iId :e's-cns 7 ./37-q to da,' e
_: Feb'_- :_ A'Lut to Fcbrua-y?
Country of :13-yr.av.: : :-r.a.: :1939-40
origin and :1923-29: 193 1.! : 19-: as a :1928-29:1937-:193e-:1939-:as a %
destination to : : o : to : 38 : 39 : 40 : of
: 1937-38: : 193 1 :1937-38: : : :1938-39
*1, 000 1,000 1,000 1,CDO ::,OCO 1,000 1,i00) 1,00
: running; run. unn. rm-L. Per- runniTg run, run. run. Per-
bales bales bales boles cent :bales bales bales bales cent
.- .. .:-L I "


United States to:
Germany ......
United Kingdom
France .......
Italy ........
Spain ......
Belgium ......
Canada .......
Japan ........
China ........
Other coun..
Total ......


Egypt to:


S 33 24 26 0
: 9C C5 34 193 567.6:
: 50 25 10 130 1,3'0.0:
S 47 3Z. 24 74 303.3:
: 16 0 14 31 221.4:
S 13 1 5 42 840.0:
17 17 11 33 345.5
131 10S 66 92 13./4:
S 24 5 4 77 1,9?2.0
: 49 77 70 70 1J).0:
S 5?2 39c' 264 74L 233. 0:
: ,OC 1,0 1,0C lC..) 1,00'r
Sales bales bales bales Per-
: 7 b_. 47F1. 4751b. .'L!T'b. cent :


921
990
570
392
148
114-
147
1,047
194
4.05


569
1,293
640
367
0
124
160
336
6
716


226
319
304
198
15
67
142
594
44
547


19
1,526
618
385
221
178
257
675
355
682


4, 28 4,231 2,456 4,916


1,000

/,7 lb.


1,000 1,000 1,000
bales bales bales
47 1. 4781b. 4781b.


United Kingdom: 44 52 73 39 53.4: 367 33 321 392 122.1
France .......: 17 14 20 36 138.0: 133 164 102 198 194.1
United States : 9 3 4 2 50.: 57 26 19 38 200.0
Germany ...... : 17 15 17 0 ---: 9. 131 127 12 9.4
Italy......... 10 10 9 13 .4: 75 7 70 68 97.1
Japan ........ : 10 6 11 8 72.7: 74 5 93 114 122.6
British India : 8 9 4 44.4: 44 c2 52 92 176.9
Other coun. ..: 31 31 35 31 '.: 20_ 233 230 199 86.5
Tt ... .. 14- -1____ 1 _/3 .7:1..0.. .52 ____.st January,2, ,
: ,' a r e i : A .1st to fnary


2 22


79.1:
7.L.4:
27.3:


498
97
87


Belgium ......: 19 13 13 1 7.7: 71
Germany......: 20 10 22 0 ---: 78
United Kingdom: 30 3 32 44 137.5: 95
France .......: 13 5 1 4 314.3: 46
Other count. ..: 16 25 34 37 1j3.8: 68
Total ......: 291 166 230 205 .1: 1,040
Compiled from official sources.


1 4
42
29
55
51
-a2
22
E 5


552
38
65
46
86
108
48
101


3C7
18
97
13
6
156
128


71.9
47.4
149.2
28.3
7.0
144.4
191.7
126.7


564 1,0344 9"7 6.9


8.4
478.4
203.3
194.4
1,473.3
265.7
181.0
113.6
806.8
124.7


200.2

Per-
cent


British Jnc.ia to::
Japan ........:
Italy
China ........


156


. ,,,, ,,, 2 .....


I __


t





cs-41


- g -


6-month totals (August to January) wore nearly 23 percent less than in
the first half of last season, Exports from Egypt, which in January were
larger than the year earlier, were 25 percent smaller in Fetruary than in
February 1939. From August through February, 2gvptian exports, however,
totaled 10 percent larger than during the first 7 months of last season.
For the 6 or 7 months for which data are available, exports to Great
Britain from each of these two countries ware from 22 to 44 percent larger
than in the corresponding period last season. Exports from India and Egypt
to France were respectively 92 and 94 percent larger than in the corre-
sponding period last season.

DMAaND AND CONSUMPTION

UNITED STATES: Mill activity further reduced
but continues well above last year

Domestic mill consumption in February totaled 663,000 running bales,
according to data released by the Bureau of the Census. This was approxi-
mately 9 percent less than in January but 18 pnrcert above February 1939.
The daily r.to of consuTption in February was only slightly less than in
January but ordinarily the daily rate is higher in February than in Janau-
ary. Consequently, the index of cotton consumption adjusted for seasonal
variations declined to 125 in February, compared with 130 in January and
an all-time high of 145 in Dcc--mbcr. In February last year the index was
111. Trade reports indicate that mill activity showed some slight addition-
al decline during the first 3 weeks of March. Mill activity is expected to
decline somowh-J t further before thc r ad of the season.

During the '-oek ended March 9 manufacturers' sales of unfinished
cotton goods were v-pDarontly about equal to or possibly slightly larger
than output for the first woc.k in more than 3 months, according to trade
reports. In the second week of March sales were reported to have declined
sharply and to have boon loss than half as large as production. On March
20 mills were reported to have made substantial sales but for the 5 weeks
ended March 23 sales were no doubt materially below output. Trade comments
indicate tho.t manufacturers' m:.rgins ,re now so low and purchases have been
postponed to such an extent that the demand for unfinished cloth is ox-
pected to increase considerably in the near future if no unfavorable develop-ri!
ments occur in the prices of commodities and. securities.

Domestic mill consumption from August through February totaled
4,705,000 running bales compared with 3,959,000 bales in the corresponding
period last season. This was the largest consumption on record for these
months rid xcocoded the previous high of 1936-37 by nearly 200,000 bales.
The figure for .1arch will no doubt bring the total to above 5-1/4 million
bales. Although the daily rate of consumption ordinarily averages loss
during the last 4 months of the season than in February and March, a sone-
what nore than seasonal decline could occur without preventing total con-
sumption for the season from equalling 7-3/4 million bales.

Fron August 1 through February 29 domestic mills consumed 79,000
bales of foreign cotton compared with 69,000 bales during the corresponding
period last season. It seems likely that consumption of foreign cotton for
the season as a whole will probably be a little under 150,000 bales corparod
with 124,000 last season.





cs-41


- 9 -


Consumption of American Eyptian from August through February totaled
14,300 bales co raared with S,C0O bales during the corresponding months last
season. The quantity of this cotton consumed so far this season is .1,800
bales larger thu-i. was consumed during the first 7 months of 1936-37. Dur-
ing that season the total consumption amounted to 20,100 bales, the largest
for any year since 1935-36.

EUROPE: Mill activity outside German area
continues high

Except in the German-controlled, area, where cotton consumption is
greatly restricted, Earopean cotton mill consumption apparently continued
relatively high during February and early 'March. In most of these coun-
tries the consumption of American cotton is believed to be running mate-
rially higher than last year. Not only is mill activity and total cotton
consumption higher than last season, but also American cotton is believed
to now constitute a larger proportion of the total being consumed.
Scaracity of data makes it unusually difficult to determine how much Amer-
ican cotton is being consumed in the whole of Europe this season. It is
believed, however, that the increases in the allied and neutral countries
are more than offsetting the decline in the German-controlled area. Total
foreign consumption of American cotton during the first 6 months of this
season was about 280,000 bales larger than in the corresponding period last
season, according to a recent estimate "by the Now York Cotton Exchange
Service.

Recent reports indicate that in Great Britain manufacturers are
still well booked with orders, eve:; though sales are reported to have been
slow for the past several weeks. A number of uncertainties growing out
of the wartime control measures are said to have restricted sales during
the past few weeks. These include possible revisions in the regulations
pertaining to yarn and cloth margins, the possibility of subsidizing
textile exports (either through currency depreciation or direct subsidy),
and possible further increases in wage rates. Mill activity is apparently
being well maintained at relatively high levels, despite a reported short-
age of skilled labor.

Mill activity in France apparently continued at relatively high
levels during February. A shortage of skilled labor was also reported in
France, indicating that except for this, mills probably would ha-ve run at
sonmwhat higher levels. In early March, however, the New York Cotton E-
change Service received reports indicating that some French mills, not work-
ing on Government orders, wore finding it difficult to maintain their pro-
duct i on

In Italy, cotton mills are apparently running at a high level, with
unfilled orders sufficiently large to maintain the existing rate of con-
sumption for many weeks. The large shipm-ents of American cotton to Italy
so for this season hs no doubt eliminated the shortag;e f raw cotton which
was reported earlier in the season.

In a number of the neutral countries of Errope mill conu-imtion
appears to have been fairly well matantaine, with domoctic business con-
stituting a larger-than-usmIal proportion of the total. Wartime conditions





CS-41


- 1C -


have male export trade difficult for these countries. A considerable part
of the output of these mills, like that of belligerent countries, is be-
lieved to have been used in meeting requirements for military and civil
defense purposes. If it may be assumed that orders for such goods are
likely to be much smaller from now on then continued difficulties in ex-
porting cotton textiles would likely cause consumption to decline to un-
usually low levels.

ORIET: Mill activity about unchanged in China and India,
further reduced in Japan

Cotton mill activity in China was well maintain-d during February
according to a radiogram recently received from Shanghai. Even though
there wts an exceptionally long Chinese New Year holiday period, total
mill consumption in China, including Manchuria, during February was esti-
mated at 135,000 bales which is approximately the sane as consumption dur-
ing January. In Februa~ y last vyar consumption was estimated at 135,000
bales. Shanghai, Jananeco, and Chinese mills were estimated to have been
operating at about 95 percent of normal and British mills at about a nor-
mal rate. Mills at Tsientsin were operating at a rate of about 80 percent,
which represents an increase over Jnuuary duo to increased arrivals of
Chinese and foreign cotton. In Tsint ao, other occupied areas of North
China as well as occupied areas of Central China, it is estimated that cot-
ton mills 7oro operating a:t a rate of about 50 percent of normal. In Man-
churia activity was only about ono-third of normal and mills rwre using raw
material containing approximately 30 percent staple fiber. A serious cot-
ton shortage was reported in Lfanchuria, and mills wore cr.cctcd to suspend
operations unless imports wor3 allowed.

Arrivals of China cotton at Shanghai during February continued to
decrease sharply and amounted to less than 10 percent of Shanghai's month-
ly rate of concunption. The small receipts of China cotton is an in-
portant factor contributing to the relatively large imports of cotton.
The short-age of China cotton, together with the narked depreciation of the
Chinese dollar, has caused sharp price advances during the recent months.
Recently, comparatively small rises in the price of the Indian growths
have placed Indian cotton in a nore favorable position.

The 263,000 bales of 400 pounds each of Indian cotton consuncd by
Indian nills in January was about the sane as in Decenber but larger than
any other month since January last year. Conn.uiption for February which
totaled 255,000 bales was 3 percent less than in January, but 8 percent
larger than in February last year. Indian mills consumed about 4 percent
less Indian cotton during the first 7 months of the season than in the
corresponding period last season, but more than in nny other corresponding
period in history. Should the competition from Japanese textiles be re-
duced as a result of the factors described below, this should tend to in-
crease cotton nill activity in India. Unless exports of British goods are
subsidized, IndiaLn mills should further benefit, if they have not already
done so, as a result of increased costs of producing and exporting British
goods,





CS-41


Despite a rather sharp drop in Japanese cotton mill consumption
in January, data for February shov.-ed a 10 percent decline from January
and a 26 percent decline from December. A radiogram received the latter
part of February indicated that cotton consumption for February was ex-
pected to be about 30 percent below December. The planned decrease was
originally believed to have been as great as 35 or 40 percent but im-
provenent in power output made possible a moderate alleviation in the re-
striction of mill activity beginning February 20. Due to the power short-
ago cotton mill output for the year ending August 31, 1940 is expected to
be at least 10 percent below that originally planned. The reduced mill
output which is largely due to the shortage of operating power has in-
creased the overhead costs and is reported to have already resulted in
higher cotton textile prices. This is said to have reduced the competitive
position of Japxnese yarns and cloth in world markets.

ACREAGE, PRODUCTION, STOCKS, AND SUPPLY

Two-million bale decline in domestic
carry-ovecr expected

The rate of domestic consumption and exports so far this season and
the outlook for the last 4 months indicate a decline of 2 million bales or
more in the United States carry-over of cotton on August 1 next, compared
with August 1, 1939. Such a decline would still le-ve a domestic carry-
over of American of nearly 11 million bales, the third largest in history.
The average for the 10 years, 1929-38, was 6,600,000 bnles. Present indi-
cations are that domestic consumption :,nd exports will exceed 13-1/2 million
running bales compared with a domestic crop of 11,600,000 running bales. As
previously indicated, lonestic mill consumption of American cotton from
August through Feb-rury was reported at 4,626,000 bales. The August to
March figure will no doubt exceed 5-1/4 million bales. Even with a sub-
stantial further decline in mill activity, consumption for the season should
equal or exceed 7-1/2 million bales. E~2orts of American cotton up to March
25 totaled 5,100,000 bales. This is only 780,000 bales less than the quanti-
ty now registered for export during the current season under the Governiont
Export Paynent Program. Unless e::ports from April to July this year re-
preseot a considerably smaller than usual proportion of the 12-i.nth total,
exports for the year ending July 31, 1940 will exceed 6 million bales.

Carry-over of American abroad to increase

Because of the European war, dota on the foreign consumption of
American cotton arc not available but it is known that coneu-ption has been
running unusually low in relation to exports of Amorican cotton. Should
exports total only 6 million bales and foreign consumption of Aicrican in-
crease to 5 million bales (compared with 4-1/2 million bales in 193S-39)
foreign stocks of American cotton on August 1, 1940 would be about 1 million
bales larger than a year earlier. It sees quite likely, hoa-eovr, that the
increase T.ay exceed 1 million bales, thereby offsetting something like 50
percent or more of the decline in the carry-over in the United States* On
August 1 last year such stocks totaled less than 1,100,000 bales, the small-
est foreign stock of American cotton since 1918.


- 11 -




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