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:
AA00013000:00020

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


This item is only available as the following downloads:


Full Text
A/&,. 45


THE E




SITUATION


BUREAU OF AGRICULTURAL ECONOMICS
UNITED STATES DEPARTMENT OF AGRICULTURE

C.-43 an


MAY 29, 1940


RELATIVE GOLD VALUES OF SPECIFIED CURRENCIES. LONDON, 1927-39*
AUGUST 1927-JULY 1928=100
PERCENT

Egyptian pound
100 a.

\ \ United States dollar

80
Brazilian Indian rupee
milreis \ 1
60 -- --.
Official at
Chinese yuan xc ra
..,..-exchanger
40 .......
Rate used in foreign t .-- \,* .
sales of Brazilian cotton \' -.-
20



1927 1929 1931 1933 1935 1937 1939
YEAR BEGINNING AUGUST
*SINCE SEPTEMBER 2. 1939. BASED ON OFFICIAL RATE OF BRITISH POUND RATHER THAN ON FREE MARKET RATE


U. S. DEPARTMENT OF AGRICULTURE


NEG 28527


BUREAU OF AGRICULTURAL ECONOMICS


SINCE 1927 THE GOLD VALUES OF THE CURRENCIES OF MOST COUNTRIES HAVE DECLIN-
ED. SUCH DECLINES HAVE HAD AN IMPORTANT BEARING ON COTTON PRICES IN THE VARIOUS
PRODUCING AND CONSUMING COUNTRIES, SINCE DECLINE IN THE VALUE OF A NATION'S CUR-
RENCY RELATIVE TO THAT OF OTHER NATIONS USUALLY INCREASES COTTON PRICES WITHIN
THAT COUNTRY COMPARED WITH THOSE IN OTHER COUNTRIES. FOLLOWING THE SHARP DECLINES
IN THE VALUES OF THE CURRENCIES OF CHINA, BRAZIL, EGYPT, AND INDIA BETWEEN 1929
AND 1931, COTTON PRICES IN EACH OF THESE COUNTRIES ALMOST IMMEDIATELY ADVANCED
RELATIVE TO COTTON PRICES IN THE UNITED STATES. (SEE APRIL ISSUE OF THE COTTON
SITUATION,) IN 1933, LIKEWISE, WHEN THE UNITED STATES DOLLAR DROPPED IN VALUE,
COTTON PRICES IN THIS COUNTRY MATERIALLY INCREASED RELATIVE TO THOSE IN THE ABOVE
COUNTRIES. DURING THE 8 MONTHS ENDED MARCH 1940 THE VALUE OF THE CHINESE YUAN HAS
AVERAGED ABOUT ONE-FOURTH ITS VALUE IMMEDIATELY PRIOR TO THE SINO-JAPANESE WAR,
AND PRICES OF CHINESE COTTON IN SHANGHAI HAVE AVERAGED ABOUT THREE TIMES AS HIGH
AS IN THE 1936-37 COTTON MARKETING SEASON. WITHIN THE PAST 12 MONTHS THE CURREN-
CIES OF INDIA, EGYPT, AND BRAZIL HAVE AGAIN DECLINED, AND THESE DECLINES HAVE BEEN
ACCOMPANIED BY HIGHER COTTON PRICES IN THOSE COUNTRIES RELATIVE TO COTTON PRICES
IN THE UNITED STATES.





- 2 -


-- - -- - -
THE CO TTON S I TUATI ON


Summary

The recent extension and intensification of the war has been a de-

cidedly unfavorable development from the standpoint of world demand for cot-

ton. The important manufacturing markets of Belgium, Holland, and northern

France may now be shut off for an indefinite period. In Belgium and Holland

combined, mill consumption of all cotton has averaged about 600,000 bales

during the past few years. Should Italy declare war on the side of Germany,

the markets in the Mediterranean area also might be lost. The Italian mills

alone have consumed about 700,000 bal:s of cotton in each of the past 2 season

Weekly exports of American cotton continued substantially higher than

a year earlier through the first week of May. Following the extension of the

war into Belgium and Holland, however, exports declined sharply and in the

third week of May were 25 to 71 percent less thrn the unusually small exports

in the corresponding week of last year and the year before. Total exports

for the year should, however, approximate 6 million bales, since up to May 23

approximately 5,800,000 bales had already been exported.

Cotton mill activity in kurope outside the German-occupied area re-

mained high during April but probably on a slightly lower level than at the

beginning of 1940. In the United Kingdom and France a shortage of skilled

labor was reported. In Italy, activity -:as apparently slackened somewhat,

owing to a shortage of substitute fibers required for mixture with cotton in

the production of goods for the home market. In May the small export demand

for British cotton textiles caused English authorities to remove the restrictit

(Invoked in April) on sales of cotton textiles for non-military purposes in

the home market.


OS-43





cs-43


In China and Japan, cotton mill consumption in April r-maineo steady.

In India, cotton mills Wver3 somewhat n.ore active on the average than in March,

apparently on account of the settlemrrnt on April 15 of the Emboay textile

strike which began in er.-ly March. Japanese cloth exports declined still fur-

ther in April ond vxere the lowest for any April sincu 1932.

Cotton mill activity in the United States continued materia.!ly, above

last year during April and the first 3 weeks of May. Activity from March to

April, however, declined somewhat more than seasonally. During the first 3

weeks of May the seasonally adjusted rate of consumption aprarc;tly roruTined

about unchanged to slightly lower.

Since the second week of April, domestic m,nufacturers' "vEekly sales of

cotton textil-s j.pp3ar to have continued blow production, as in most weeks

since late 1939. Consequently, unfilled orders in manufacturers1 hands are

believed to be relatively small, but trade reports do not indicate that unsold

stocks are particularly large. With little changE in the seasonally adjusted

rate of activity during May, June, .-nd July, United States mill consumption for

the season would total about 7-3/4 million bales. Last season the total was

6,858,000 balos, including 122,000 bales of foreign cotton. The record high

consumption was 7,950,000 bales in 1936-37.

Requests for the release of Government-loan cotton have declined

appreciably with the decline in cotton prices since early May. With cotton

prices at recent levels, comparatively little additional Government-loan

cotton may become available for domestic consumption and export this season.

As of the end of April, domestic stocks of cotton not under Govurnment loan

or ownership were approximately 150,000 b.les larger than the exceptionally

-small stocks as of the end of Anril 1939. Stocks in the hands of domestic manu-

facturers on April 30 this year were 180,000 bales larger than a year earlier.


- 3 -




- 4 -


PRIrFES

Domestic oriccs drop 1-1/4 cents then make partial recovery.
largely as a result of war developments

From M.ay 1 to May 18 the ten-market average of riddling 7/8 dropped
from 10.52 to 9.21 cents per pound. The price on the latter date was the
lowest in approximately 6 months and about the sane as in the third week
of May last year. The recent sharp decline is apparently attributable to
developments in the European W'ar ind the acccmpanyinf decline in the
prices of a number of other comnoditifEs ad cf securities. The spread of
the war into the Low Countries on Hay 10 *and. Laore recently into northern
France, together with the increased air' raids, las materially reduced the
outlcok for cctton consumption in Eurcpe. In Bel-iuan and Holland combined,
where mill operations have been severel.c. C '-rupted by military activities,
mill consumption of all cotton totaled close to 600,000 bales in each of
the past 4 seasons.

From 1lay 13 to May 27 domestic spot prices recovered cZ: c. tC:e
decline which occurred after the European battle fronts spreaL. i.'to
Holland, Pel:yium and northern Prance. Middling 7/,-iLncn in t.e ten mar-
kets, which averaged 10.07 cents on the latter date, was onl; slih]tl.y
less than just before the invasion of the Lov; Ccuntrics '.ut nearly 1/2
cent lower than at the end of April and the be-inning of MLay. The recov-
ery during this period was apparently' influenced by the less rapid pro-
gress of the German army and the prospective marked increase in the United
States Government's expenditures for narion.'. defense. With the announce-
ment of surrender of the Beltinum army on May 2T, nowever, the average in
the ten markets dropped somewhat to 10.02 cents.

The recent decline in domestic cotton prices followed a period of
4-1/2 months when prices fluctuated within a rather n:irrow range. From
the riddle of December to the end of April the daily average price of
Middlin- 7/8 in tne ten markets v.-.ried between 10.16 and 10.93 cents per
pound. For the most part, these prices were approximately 2 cents higher
than durin- the corresponding period last season. ,.The more favorable
prices during this period than a year earlier may be attributed largely to
the admestic export parent prorar:, the increased Gove-rnaent-loan stocks,
increased fcreimn purchases i.flluenc-a 'r n -art by wJar preparations and
anticipation of increase transr-orta'.ion '.ificultiJs ind. costs, and the
hi-,her industrial production air,- cottCr coG. co..:U -ticn in the United States.

Liverpool prices also drop s!ha:_ly

Followring t-he spread of war into the Low Countries and th; invasion
of France, spot prices of the inore important rrcvrths quoted in Liverpool
dropped 1 to 1-1/4 cents per nound when converted at the official "t ruling
excharire rate. American I.iddlin- and Brazilian Sao Paulo Fair droie:pd
from 13.65 cents on I'ay 10 to 12.44 cents on May 17. Tile pr.-e of Anrl-
ican iiddlin- on the latter date was 3.13 cents above tie prcc JiU '11,w
Orleans. This spread was more nearly in line with that existing as of
Friday in ?, of the preceding 5 weeks. The ratio of the price of Indian
and Brazilian cotton to the price of American I.iddlin. in Liverpool has
remained comparatively steady: during the past few w.eeks. The Liverpool


CS-43





-5-

Cotton: Spot price per pound, specified growths at Liverpool
and INTe- Orleans, specified periods


: Amer


Season,
month
or day



10-yr. av.
1927-28
to 1936-37:
1936-37
1937-38
1938-39

1938-39 -
Feb. ....:
Mar. ....:
Apr. ....:
May .....:
June ....
July ....:
1939-40 -
Aug. ....
Sept. ...:
Oct. ....:
Nov ..* :
Dec. ....
Jan. ...
Feb. ....:
Mar, ....
Apr. ....
Feb. 2 ....
9 *0...
16 ....
23 ....
Mar. 1 ....
8 ....:
15 ....:
21 ....:
29 ....:
Apr. 5 ..5 .
12 ....:
19 .....
26 ....:
May 3 .
10 ....
17 ....:


Mid-
dling
7/8"


Ct.

14.50o
14.62
10.71
10.15


10.02
10.17
9-67
10.55
11.o4
10.61

10.16
11.21
10.65
11.66
14.14
14.81
13.74
13.o6
13.' 7
13.90
13 92
17.Q2
13.62
13.48
13.4 o
13.47
12.88
12.66
12.91
13.15
13.62
13.57
13.53
13.72
13.65
112414


L verMool : New Orleans
*ican : Irdian : Eg-p ian : Brazilian : American
:Fine 0OnmVr.,l: F.G.F. Lnpcrs:Fair,Sao Parlo:Middling 7/8"
: As a : : As a : : s a: :Spread
:Low : % of : : of : : of : :Liver-
Ac- Ac- Ac- Ac-
Mid- :- :Ameri-: :Amri-: t :Ameri-: : pool
tual tual tual tual
:dling can :: can :: can : :over
:Mid- : Mid- : : Mid- : : New
: : :dling : :dling : :dling : :Orleans
Ct. Ct. Pct. Ct. Pct. Ct. Pct. Ct. Ct.


13.60
13.16
8.78
8.71


8.55
8.71
8.21

9.8 3
90,8
8.95

8.53
9.79
9.41
10.79
13.32
14.12
13.11
12.53
12.88
13.23
13.33
13.03
12.90
12.90
12.88
12.38
12.16
12.33
12.5b
13.03
12.98
12.95
13.13
13.o0
11 h


11.19
10.87
7.96
7.14


6.95
6.85
7.02
7.45
7.61
7.31


7-38
8.56
8.41
9.46
11.69
12.31
11.09
10.68
10.70
11.29
11.25
10.90
10.90
10.90
10.90
10.62
10.245

10.46
10.88
10.78
10.67
10.77
10.85
0 qL1


1 4. a 9 1 :7. 0 7. LVVoU i )*L-


78.0
74.4
77.1
70.4


69.4
67.4
72.6
70.6
68.9
68.9


72.6
76.4
79.0
81.1
82.7
83.1
80.7
81.8
79.4
81.2
80.8
80.0
80.9
81.3
go80.9
82.5
82.5
81.6
79.5
79.9
79.4
78.9
78.5
79.5
7 1


17.12
17.o40
13.10
11.80


11.56
11.58
10.90
11.08
11.47
II .-43


11.35
12.49
12.03
12.70
15.80
17.50
17.14
17.17
17.64
17.29
17.11
17.01
17.14
16.90o
16.99
17.22
17.42
17.32
17.42
17.84
17.69
17.64
18.03
18.15
1 01


117.9
119.0
126.7
116.5


115.4
11-3.8
112.7
105.0
103.9
107.7


111.7
111.4
ll .O
111.7
118.2
124.7
151.5
131.0
124.4
122.9
124.9
127.2
126.1
126.1
133-7
137.6
134.2
132.5
131.0
13o.4
130.4
131.4
133.0
1 -


14.08o
14.12
10.18
9.63


9.53
9.68
9.19
9.83
10.18
9.85


9.37
10.71
10.45
11.59
1).14
14.87
13.94
17.27
13.47
13.99
i4.i7
13.87
13.74
13.74
13.55
13.05
12.83
1-i.00
13.15
13.62
13.57
13.53
13.72
13.65
1) )I


97.7
9.6 b
98.7
94.9


95.1
95.2.
95.0
93.2
92.2
92.8


92.2
95.5
98.1
99.4
100.0
100.4
101.5
101.3
100.0
1oo.6
101.8
101.8
101.9
102.5
ioo.6
101.3
101.3
100.7
100.0
100.0
100.0
100.0
100.0
100.


12.65
12.79
8.79
8.73


8.60
8.69
8.61
9.30
9.45
9.37


8.95
9.02
8.92
9.40
10.64
10.79
10.67
10.43
10.54
10.40
10.72
10.74
10.80
10.80
o1055
10.44
10,40
10.37
10.47
10.55
10.582
10.53
9.97
"> 7"


1.85
1.83
1.52
1.42


1,42
1.48
1.06
1.25
1.59
1.24


1.21
2.19
1.73
2.26
3.50
4.02
3.07
2.63
2.93
3.50
3.20
2.88
2.68
2.60
2.92
2.44
2.26
2.54
2.68
3.07
3.05
2.95
3.19
3.68
"7 "I'*


Compiled from reports of the Livernool Cotton Exchange except for the last 4 weeks,
which are from cables to the Bureau of Agricultural Economics or from reports of
the New York Cotton Exchange. Prices were re-orted in -ence per pound and converted
to cents per pound at current official rates of exchange.


L




CS-43


price of Egyptian Uppers increased somewhat in relation to the price of
American. On May 17 the price of Egyptian Uppers was 37 percent higher
than the price of American Middling 7/8, whereas a month earlier it was on-
ly 30 percent higher. This increase may have resulted frcm uncertainties
as to possible war developments in the Mediterranean.

Developments of significance since early May includethe closing of
the important cotton futures markets of Alexandria and Liverpool. The
Alexandria market closed on May 13 for an indefinite period. This was at-
tributed in part to the uncertainty; as to military developments in the
Mediterran.ean, which might check exports of Egyptian cotton in the event
Italy enters the war. The Liverpool futures market was temporarily closed
on May 20 but reopened on May 28 with trading permitted only at settlement
prices as of May 16.

EXPORTS

Domestic exports fairly large in April
but exceptionally small in May

The 345,000 running bales of American cotton exported in April ex-
ceeded the unusually small exports of April last year by 94 percent but
were nearly 10 percent smaller than in April 1938. They were almost 15
percent smaller than the April average for the 10 years ended 1938. 'Total
exports for the 9 months (August through April), of 5,695,000 bales, ex-
ceeded th. total for the like period last season by 92 percent and the to-
tal for the first 9 months of 1937-38 by 12 percent. The 9-month total for
the current season was only 153,000 bales smaller (3 percent) than the av-
era-e from August through April during the 10 years ended 1937-38.

During the first week of May, exports of American cotton were only
about one-third larger than the exceptionally small exports in the corre-
sponding week of last year and 5 percent smaller than in the corresponding
week of 1938. Following the spread of the war to Belgium and Holland, ex-
ports to these countries ceased, and total exports for the week ended'May
16, 1940 were only 18 percent larger than in the'similar week of 1939 and
35 percent smaller than in the similar week of 1938. Despite the continued
large gains in exports to Great Britain, total exports to all countries
during the wee': ended May 23 vere 25 to 30 percent less than the unusually
small exports in the corresponding week last year and the year before. To-
tal exports up to May 23 amounted to 5,759,000 bales compared with 3,103,000
bales to the corresponding date last season.

The rapid changes in the European military" situation during recent
weeks have had an important influence on prospective cotton exports for the
weeks and months ahead. Should Italy enter the conflict within the next
few weeks, exports would be further restricted. This would materially re-
duce the prospects fbr exports reaching 6 million bales during the 12 months
ended July 1940. They may'now fail to reach this figure anyway.

April export's of Egyptian down 27 percent;
9-mbnth total up slightly

The approximately 132,000 bales (bales of 478 pounds) of Egyptian
cotton exported in April were 27 percent smaller than those of April 1939


- 6 -





CS-43


Cotton: Exports from specified countries, average 1928-29
to 1937-38, and seasons 1937-38 to date


: April : August to April
Country of :10-yr.av.: :1940 :10-yr.av.: : :1939-40
origin and' :1928-29 : : 9:1 :as a :1928-29 :1937-:1938-:1939-: as a
destination to 193: :4 of : to :38 : 39 : 40 : of
:1937-38 : : : :1939 :1937-38 : : : :1938-39
: 1,000 1,000 1,000 1,000 1,000 1,CO0 1,000 1,CO
:running run. run. run. Per- running run. run. run. Per-


: bales


bales bales bales cent


bales bales bales bales cent


United States tc
Germany .......
United Kingdom
France ........
Italy .........
Spain .........
Belgium .......
Canada ........
Japan .........
China .........
Other countries
Total ......



Mgypt to:
United Kingdom
France ........
,United States
Germany 2/ ....
4iItaly .........
Japan .........
British India
'Other countries
Total ......

razil to:
Japan .........
United Kingdom
Germany ......
France ........
Italy .........
Netherlands ...
Belgium .......
Other countries
Total ......


66
70
29
38
14
8
17
92
16
48
398


26 15 0 -
79 20 112 560.0
21 7 33 471.4
29 14 47 335.7
0 1/ 21 ---
12 4 11 275.0
14 14 29 207.1
121 57 54 94.7
8 17 11 64.7
67 30 27 90.0
377 178 345 193.8


1,078
1,150
643
479
180
134
182
1,264
227
511
5,848


61
1,473
634
438
0
171
197
559
19
870
5,034


271
371
326
243
16
80
166
777
77
537
2,961


19
1 ,748
702
490
258 1
200
322
804
390
762
5,695


7.0
471.2
215.4
201.6
,612.5
250.0
194.0
103.5
506.5
119.6
192.1


:1,000 :1,000 :1,000 :1,000 : :1,000 :1,000 :1,00U :1,000 :
:bales :bales :biles :bales : Per-:bales :baleles :bles :bnles : Per-
:478 Ib.:478 lb.:4781b.:478 lb.: cent:4781b.:478 1b.:471lb.:4781b.: cent

37 38 78 45 57.7 446 471 463 506 109.3
15 16 21 45 214.3 165 196 149 279 187.2
11 2 5 6 120.0 79 31 27 47 174.1
:14 15 14 0 --- 123 165 154 12 7.8
S7 7 6 11 183.3 92 92 90 90 100.0
: 7 12 12 6 50.0 90 67 120 129 107.5
6 8 11 8 72.7 57 109 71 102 143.7
26 24 31 11 32.4 262- 296 302 237 78.5
:123 122 181 132 72.3 1,314 1,428 1,376 1,402 101.9
: Mfrch : August to LI1Irch

3/ 4 28 1 3.6 3/ 59 198 84 42.4
:8 3 10 333.3 139 150 178 118.7
:39 35 0 --- 3~ 151 70 46.4
6 5 i/ 33 84 55 65.5
S 3 0 --- 4 39 17 43.6
: --- 8 20 26 130.0
:1 1/ --- 15 18 18 100.0
S2 7 8 114.3 46 111 84 75.7
S 25 59 82 19 23.2 268 608 771 532 69.0


Compiled frcm official


sources.


Less than 500 bales.
Includes Austria beginning January 1938.
/ Not available by countries.


- 7 -


i:






but lar-Cer than in April 193 or the 10-year (1929-38) April av:Lrage. The
decline as compared with last year occurred despite large increases in exports
to France, Italy, and the United States. Exports to the United Kingdom,
Japan, and a number of other countries amounted to less than 60 percent of
those of April. 1939.

DELiND AN'D C'TD jSTErPTION

UNITED STATES: 1.ill activity, further reduced in Arril,
still above last year

There wasr some seasonal decline in th.. daily rate of mill consumption
in April, but the 62z,'G00 bales consumed for the month exceeds that of
April last year by 15 percent. With more working days in April this year,
the daily rate of consu;iptiorn, of approxiaLely 23,400 bales, was, however,
only 3-1/3 percent above that of Anril 193%. The seasonally adjusted index
of cotton con:unption for April, of 113 (1923-25 = 100), was A points lower
than the index for March but 8 points above April 193?. The decline from
IL5 in December to 113 in April represents an unusually sharp decline for a
4-month period. Despite the sharn decline in -ill activity since December,
how--'ever, do.:testic manufacturers' sales of unfinished cotton roods appear to
have been materially below production throug-out most of this period.

The position of domestic manufacturers with respect to unfilled orders
and stoc':s o' cotton goods is believed to be such that a somewhat further
cdcline in the seasonally adjusted rate of consumption may occur during the
next 2 or 3 months unless cotton tcrtile sales im~rove. The recent weakness
in cotton prices has been accompanic 'yr declines in domestic wholesale
prices of cotton textiles. Declining: prices arc frequently conducive to
relatively small sales and a reduction in stocks of cotton textiles in chan-
nels of distribution. On the other nand, following a period of declining
prices, sales often increase materially, particularly in the event traders
feel that prices minht be ex ected to remain firm or increase. The expanded
Govern .,nt rcariainent program .-ay, either directly or indirectly, increase
th., de..and for rany types of cotton cods, if not this season, then later on.

For the 9 months (August to April), domestic nill consumption totaled
5,955,000 bales compared with 5,153,000 bales .nd !.,430,000 bales, respec-
tivel;- in the corresponding periods of last season anc the season before.
This representX,' increases of Io and 34 percent, respectively, and was second
onl,- to the record consum,:ption of 6,01. .D0 bal.es in the l:'ike periodd of
1936-37. If the April rate of mil] consi.uipt.ion wore maintained during the
remainder of the 1939-40 season, consu:-.otion for the season would total a
little over 7-3/4 million bales. Last season, consumption totaled 6,860,000
bales and in the 10 y ars (1'92-37) evera-ed 6,060,000 bales. Should mill
activity decline seasonally or sor:.ew.;at mo.-e than seasonally during the re-
rainder of t!,e season, consur.iption for the 1.2 months ended July 31, 1940
would drop somewhat below 7-3/4 million bales.

consumption n of imported Egyptian cotton (mainly 1-1/4 inches and
longer) sees likely to approxi-late the 53,000 bales consumed in 1939-40,
which was only about one-half the 10-year (1929-38) average of 109,000 bales.
Consumption of American-Egyptian averagingg 1-9/1-: inches) was running


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CS-43 9 -

considerably ahead of last sensor. ard r'sy eq1.al, or slightly e::ceed, 20,000
bales compared with 13,6)0 bales last season and the 1O-year average of
14,300.

EUROFE 1/: S read of iar reduces mj:ll activity

The e-ftensio', or the combat zone to H.illnd, Belgium, an, northern
France, alonI with the large amount of property which has been destroyed in
these areas, has undoubtedly mattri~all. affect d cotton, i.:ll activity and
cotton conssumption in these regions. I'h.3 e::tent to which cotton mills in
these areas ha-r beeer. destroyed or mi-nuLfacturing otherwise disrupted, however,
is not ;.no.-n. Fron the standpoint of the next several months or lcnger,
this m.ay prove to be of less significance to American cotton producers than
the probabilit:,- or possibilit- that these mills an.d consuirers in these areas
may be lost as r.isri:ets for Arerican cttLon and competing foreign gro-ths.
Should the war coininue with the Gormris occupy.,ng about the sale area as at
the present tile, it miTjht well nmean that no more cotton from the United
States or other important exporting countriies wculrc reach these mills for the
duration of t.he v.a-i. In each of the r.:-st fev: seasons the mills of Belgium
and Holla:nd combined h ,-, consume. d fbout 600,000 bales of all cotton, in-
cluding 220,0)00 to 275;.0C0 bales of A-erican cotton. These developments and
the inten-mification of tnce wvarr see:- c.. -Etain to materially reduce -ruropean
cotton consn:-Fpt'i.on. Last. ,.o-.th adJ....t'.onal. wartime control measures were
initiated in Creat Britain to. restrci: cotton textile consumption by British
civilians. This wLs des.-ned to : nJ,:e larsr supplies of cotton textiles
available for military c;:rDoses anci for e:.cirts. The recent intensification
of the war, however, with its g-eater c :!an_: for' manpower and other resources,
may mean that the British :7rill raakc l ss effort to maintain their expert
trade. In :'ay thl-1 restricticn cn salcs to British civilians was withdrawn.
This was apparently due tc t.ie drop in foreign demand for British goods
growing out cf military ."evclcpments.

Ctton mill ac-ivity in Eurcpe outside the Gen an-cont:rolled-area Pe---
mainer. high during April but prcbaL.7l.. on J.ightly lower levels than obtained
at the behgirming of 1!0-. I-. the U:ni~te Kind-Ior and France a shortage of
skilled labtr was reported. In Ital:., activity was apparently slackened
somewhat, owirng to a sho:'tage of sustitute fiber.s required for mixture with
cotton in the production of goods for .he. home market.

In Great B.ritain, manufactir ers' sales of cotton goods apparently
continued sr.~:ll during~ Ari:. Up to tihe anl.onceri.ent of the new margins on
April 16, spinners were reluctant to cuote, thus iu.pairinrg the ability of
weavers and others manufacturers to b:ook- n-.vl business. On the 6ther hand,
for a ri:ornth followin- thu announceir.ent of the re'w margins, sales of yarn and
piece goods for civilian home use ..are rcsLricted b: the Gover'nment restric-
tion of civilian consumption o.r cotton rcods. However, export sales and
Government orders were placed in increase volume in the last half ,f April,
but the impression wac ;j.ven that export sales of riece goo:s were none toe
encoura-in-, even up to the end of Aoril. It was reported that Japanese,
Indian, and Italiar. compe-tition in the Far East ar.d South America re:.ained
keen, and the number of recent trade agrcer.ent. such as between Japan and
Argentina, and Japan and E. ryt have ria.:e it :are difficult for British
i/ Based in part on a report from the office cf the A:.rican Agricultural
Attache, London, dated May ]..






- 10 -


export~ to be maintained. Unsatisfactory foreign demand is said to have re-
sulted in the withdrawal in lMay of the restriction on sales to British
civilians.

The anr.ouncei.ent of increased spinners' margins'for cotton yarns,
which came late" than had been expected,, did not bring any widening of net
profit margins but apparently- brcsdl,- provided for coverage of increased
spinners' costs. These increased costs include higher wages, higher prices
of accessories and services used by s-iinner3, aid the contribution of 25
pence per bale of raw cotton collected frora. spinners under the Cotton Indus-
try Act (1940).

Mill consumption of raw cotton during the 7 months, September to
1.arch 1937-40, has been roughly est.in.te:' as equivalent to an average annual
rate of a out 2,700,000 to 2,800,000 :unnil-: bales. Of this total, some-
thing like 1,300,) 00 bales would. be th'e annual rate for American cotton.
Estimated total consumir.tion in those months on an annual basis is at. a
rate a little higher than the : stii.tated consuim tior. of last season or the
season before. Despite the increase in consu1imption, stocks of cotton in
Great Britain appear to have shown a vc:--y marrede. increase. It is estimated
that raw cotton stocks in Great 'Brit.ain ct the l gininnin of A-pril probably
a,,ounted to from 1,700,000 to .1,00,000 bal.-s. COf this, approximately
950,000 to 1 million bales rcprese:.ted A.ier.'_can cotton. Compared with stocks
on September 1, 1939 the total as of i-.. ril 1 is believed to show an increase
of roughly 1 million bales.

Effective .ay 30 all cottoii, cotton linerss and waste; and yarn and
thread wholly or mainly of cotton ii-,rorted into Gr:eat Britain is subject to
import licensing. T'his armou.nce::e-.t, made public on M.ay 23 by the British
Board of Trade and Miinistr'y of Suppliv, is designed to insure "the most ad-
vantageous use of the frci!ht space. ,ind fo-.eign exchange available". It was
announced at the same tir..e that the Board had. issued an open general license
for ii.iports of the 2ocds covered b.y the order exceptt yarn anc thread) from
any: part of the British E:Lmire, Fra ice and French possessions, Egypt and the
Anglo-Eg. ,ptian Sudan.

Cotton i-ill activity ini France during April remained on a high level.
A larae percenta7ju of the mills' capacity was reported as working for defense
requirements- and colonial exports. Civil. needs continued neglected, and a
large bac':log of domestic trade :-ecuiroj;e'ntls is thcu-ht to have accumulated.
Civilian trade demand had not nearly been satisfit.d since the outbreak of
war. Raw rnaterial supplies for military and export contracts were said to
be of satisfactory volume, but a shortage of skilled labcr continued to be
reported.

As from larch 29, 19LO, the price of Ar.ie;'can cotton, basis strict
Middling, to spinners in France wns rai-ed from '50 fi-ncs per 50 kilograms
to 825 francs, or by 10 percent. Trade comment indicates that the extent of
this increase was doteri.tined sc as to leave a price martin sufficient to
maintain, or increase, relative consumption of Indian cotton. With the ap-
proval of the Price Supervision Committee, yarn prices were raised accordingly.


CS-43





CS-43


- 11 -


Some n'urchases of American cotton from Liverpool in April were re-
ported affected Ly the Frerch i..mort organization, and the trade expected
increasing Anglo-French coill~bona.tion in .ec-ring and distributing raw
cotton supplies.

The spread of the combat zone to northern France has lJ-doubotedly
reduced cotton mill activity in that important consuming area. It may
also mean that those mills will be unable to obtain fresh supplies of raw
cotton until after th3 end of the war. If so it has no doubt considerably
reduced prospective mill consumption in France during the duration of the
war even if operations in other regions of France are increased.

Italian cotton mills are reported to have maintained activity dur-
ing March at 115 percent of the 1928 average, ar.d to have been practically
as busy as in the preceding 2 months. Some reports, however, indicated a
slackening of activity in certain mills, owing to a shortage of substitute
fibers required for hone market prodration. Activity is believed to have
continued high in April even though some further slackening ray have
occurred.

Production costs wore raised by a wago increase of from 12 to 15
percent for all workers in the cotton industry, effective March 25. Sus-
tained business prevailed on the home market in March, much of it for
governmental requirements; now oexort orders, on the other hand, nhouod a
decline : in re-cont months. Japan, as a result of agreements concluded or
still negotiated, is expected in some Italian quarters to moke good hood-
way in her cotton goods export to Argentina and Egypt. British comroti-
tion was also reported as slightly keener in some markets. Italian ex-
porters are said to complain of an inability to quote attractive erport
prices on the basis of their present production costs and the exchange
rate of the lira.

Germany' s recent invasion of Donmark, Norway, Holland, Belgium,
and northern France -may provide her cotton textile industry with consider-
able additional ra7 cotton. Tho quantities involved, however, are not
known. Such cotton obtained by GcrmaoVr will not ll represent an increase
in the supply of cotton available to the populace of the former Germn'n-
centrolled area. A part of it will no doubt be required in'the production
of goods for the people occupying these newly invaded areas. Hcr.ovcr, the
Consumption of cotton textiles by these people will no doubt be greatly
restricted and most of this cotton used for other purposes.

Neutral reports indicate that some time ago almost no raw cotton
was available for the cotton mills of Czechoslovokia. Polish mills, it
was said, were being lightly supplied with raw cotton from stocks seized
in the port of Gdynia. No further information as to prospective supplies
of Russian cotton for the German-controlled area has become available.

Recent estimates for 1940 again place the prospective German out-
put of cell-wool (staple fiber) at 300,000 metric tons, or not quite
1,400,000 boles of 478 pounds net, an increase of about 50 percent over
1939. Raycn filmnent yarn production in 1940 is scheduled to total about





CS-43


- 12 -


100,000 metric tons or approximately 460,000 bales. The "W" or wool types of
staple fiber were recently priced at from 1.80 to 2.00 marks per kilo'rnm,
while the I"B" or cotton typos of standard quality cost about 1.45 mars.
Apart from pine and boochwcod, straw and dried potato tops are reported as
becoming more important as rn.w materials in cell-wool production. It was
further reported recently that a rnv! ?-na=Lr.y had. b-:en formed at Vienna,
Austria, with the object of promoting th" .plLn ting of Arundc Donox (the
largest of Europoon reds) as a soulrco of ccllul.ce for staple fiber produo-
tion. According to the April 19 issue of the Mandic-ter Guardian, the
Italian rayon ccncorn of Snia Viscosa is using Arus:do Donex extensively
and expect to obtain two-thirds of its 1941 cellulose requirements for
staple fib. : from this plant.

Mill activity in S.ain has prob,.bly been materially curtailed since
the lr-t w7.,]: of A-ril. After April 28 a reduction of 50 percent in the
allot.-nont of raw cotton to the Catalan Textile L.ills was tc have tracen
place according to on annnuncomont 1y the Subcomision Reguladcra dol
Algodon, reported by the Anerican Consulate at Barcelona. Theoretically,
this stop would prnmit the nills to operate 3 dnys a woek, but some plants
nay have ceased oporatins entirely. paw cotton purchases and in transit
are reported to have tot-lod c.pprc.ximatcly 33,000 bales at the end of
April, which is said to hr.v. constituted the entire reserves of the Sanich
Government at that tino, since credit iron the Export-Irport Bank had been
used up. No credit or barter agreoncnt providing a supply of raw cotton
had up to th-.t tire boon concluded, so far as could be learned in Barcelona.

ORIENT: April mill consumption stecd. in China and Jaan,
makes recovery in India

In China, including Manchuria, cotton nill consumption in Ap;ril was
estimated at about 140,000 bales, according to a radiogr.p. from the office
of the American Agricultural Attache in Shanghai. This was only slight-
ly less than the estimated 145,000 bales consumed in 'March but apparently
somewhat smaller than a year earlier. Since last October, monthly mill
consumption in Chin .has flustuatcd within the narrow range nf 135,000
to 145,000 bales. The estimated c-nsunpticn fron-August through April,
of approximately 1,200,000 bales, is oono:-hat less than for the similar
period last season. The slight decline in April was apparently due to
a material decline in nill activity in Tientsin. In Shanghai, activity
is reported to have remained high, in other places to have shovn little
change.

3ro, greit change in the nill consumption situation is expected
within the ne:-r future unless a collapse should occur in yarn and piece
goods, -.:hich did not seen likely about the middle of May when infor-
nation was last received from Shanrghai by radio. High prices of yarn
beyond the limited purchasing .ower of a large number of the people and
heavy accu-iulrztirn of spccul.ti-ve stocks are expected, however, to cause
a reduction in cotton mill consumption within the next few months. It
is estimated that in early May yarn anld piece goods stocks were consider-
ably larger than normal, being osti:ictcd .t equivalent to at least
400,000 bales of raw cotton and nore than twice as large as at the be-
ginning of the season. The Shanghai yarn market was under heavy






0S-43


- 13 -


speculative influence during much of March and Anril, on account of fur-
ther depreciation of Ch.inese currecLcy and the preference for yarn over the
rapidly depreciating currncy-.

Because of large p-rcfits cbr in-ble f-.om yarn a.nd anticipation of
a shor'cqge of shipping ,ion.co, s-imn.-rs in China have been buying new
cotton from abroad quite h-avily. DC s~ite the drastic depreciation of
the Chinese currency, Lu~ch b-'yit,- continued on a moderate scclo up to
the tino tle renprt from Shanghai js, received .aout the middle of M:y.
In early :iy a now record hi]h price for yarn was established .-hen a
price of 1.715 yuan prevailed on 20-count spot yarn, but declined there-
after. Sore heavy purchases of piece goods fo-,.Pquth and West China
contrib-:tod. to t.he increase in yarn --wicos as/comparatively heavy purchases
for expert, w] iic] have beon stimulated byr the markcd depreciation in the
Chinese currency.

Cotton mills in In,-ia ..cro sonO(,hat more active on the average in
April than in March. The 210,000 bales (of 400 pounds net weight) of
Indian cotton consumed by In(cian mills in April represented an increase of
about 6 percent over consumption in March. Consumption in each of those
2 months, ho-.oveCr, Vas thmi enDrlost for any other month since about the
middle of 1935 oand some 14 to I- perce-t smaller than the year earlier.
In vioe of the drop in consumption fronm 245,000 bales to approximately
200,000 boles in March resulting l.rg-ly fror the Bonbay textile strike
which bog-a in e.rly March, it soo:;s lilcly that the increased conmrmption
in April over M.-'ch was due a.t least in part to the settlement of the
strike on April 15. This would su':-ost t-.r.t activity and consumption
during the last half of A'-ril 'and i;- May probably morc nearly approolchod
the February rato. Dccpito t'.o lo,'wr consumption in Ilarch and April, the
total for the 9 monthss (A-gu-;t through April) was only slightly less than
the reccrd high consumption for the cjrrcs.ond'ing period last season.

Janrossc production of pure cotton yarn in April, of 211,000 b.les
(of 400 pounds), '.-as almost coq.'.l to that for Mv.rch indicatir-g that cot-
ton mill consumption al.;o rc-ainod abeo.'.t ic'.C:anv-cd. For the 9 months
(August through April) co-:is-~.miTtior. of :'ll cotton by mills of the Japanese
Cotton Spi-ners' Association totr~,l13 a-'proximately 1, 30,000 bales. This
was slightly snallor thr.n in the corrcpolrding period last scascn and
nearly ono-third smaller than in the first 9 rarnth3 of 1937-38. It was
the smallest fcr jany corresfponin;g cricd since 1930-31, due largely to
the Govu'rnment restriction on cotton consumption by Ja-,anose civilians.

Japarese cloth exrts in April totaled 146 trillion square yards
compared with 194 million in 'March axnd 173 million in April 1939. They
were the smallest for April since 1932. Despite sall cxcprts fcr April,
the 9-month total (August through A.ril), cf 1,771 million square yards,
was 5 percent higher than during the corresponding months last season,
altho-gh smaller than in any other ccrresonding period since 1933-34.
The decline in Japanese cotton goods exports app.ears to be duo in large
ace.sure to vx.rtinc foreign tr.:de restrictions in British ard Frorch
territories, deprociati',n in the value of pound Sterling, restrained
b-i.ing in some areas due to uncertainty as to the course of the Zurcpean
War, and increased manufacturing costs in Japan.





CS-43


- 14 -


Stocks of unsold piece goods in Japan are reported as having become
alarmingly large and cotton cloth sales in May continued inactive. The
large unsold cloth stocks together with the large stocks of raw cotton which
have not been paid for have recently been investigated by officials of the
Finance and Commerce and Industry Ministries. Following this the authorities
requested merchants to temporarily suspend purchases of raw cotton. Japanese
spinners agreed in April or early May to voluntarily plan to curtail output
about 10 percent for the 3 months May, June and July. Producers of one type
of cloth (jeans) are reported to have agreed to reduce production by 30
percent.

ACREAGE, PRODUCTION, STOCKS. AFD SUPPLY

Increased Chinese crop expected

It is expected that the 1940 cotton crop in China will show a signi-
ficant increase this season unless weather conditions are unusually unfavora-
ble, according to a recent report from the American Agricultural Attache at
Shanghai. It is now expected that the crop may be something like 20 to 25
percent larger than the present estimate of the 1939 crop, of 1,900,000 balest
This increase is expected to be offset in part by a decrease in the carry-over
of unmanufactured Chinese cotton.

Cotton acrnege expansion pl.ns are being pushed both in the Chinese-
controlled territory "nd in Japanrse-occupied areas. Acreage expansions are
expected to be limited in some a.rcLs due to further shifts to food production
in view of the unsettled conditions. The Japanese are encouraging cotton pro
duction through a distribution of free seed and by loans extended for the
digging of irrigation wells. Plans are being carried out by a Japanese Speci
Service Section to increase plantings in occupied areas of central China,
especially in Kiangsu province. Greater success there than in North China
is expected because of comparatively less serious handicaps.

If the sharp rise in cotton prices recorded in Shanghai (see cover pa
of April issue of The Cotton Situation) is reflected to any considerable ex-
tent in prices in the interior of China, this may prove of some importance
in encouraging an expansion in Chinese cotton acreage-. It is recognized,
however, that prices of most other commodities in Shanghai have also increase
greatly and that the interior prices of most of these commodities may have
increased somewhat in line with the advance in cotton prices. Furthermore,
it is reported that in at least many area.s the producers have to sell their
cotton to Japanese buyers at fixed prices below the "world" market level.

Private estimates of United States acreage rsnge from
slightly lower to somewhat above last yes-r

The private estimates of the United States cotton acreage released in
May which have come to our attention show considerable variation in the in-
dicated area to be planted this yer. These estimates vary from slightly
below to about 8 percent above the revised official estimates of acreage in
cultivation July 1, 1939, of 24,683,000 acres. The first official estimate
of 1940 acreage will be released on July 8.






CS-43


- 15 -


Domestic stocks of free cotton again smaller

United States stocks of "free" American cotton on April 30 this year
were only slightly larger than those a year earlier and nearly one-third
less than the 10 year (1928-37) April 30 vwe-agE.. The total United States
supply of American for the current season was about 11 million bales larger
than that of last season and Ot the end of April stocks of Government owned
or financed cotton were nearly 2- million bales caller than last year.
These increases, however, were almost offset by the increase in domestic con-
sumption and exports. Consequently United States stocks of "free" American
cotton at the beginning of Miary w-re only approximately 150,000 bales larger
than the 3,C50,00 bales of such stocks as of the corresponding date last
yrar.

With the drop in cotton prices the first 18 days of May, requests to
the Departmnt for release of 1938 loan stocks dropped sharply and continued
low through "'ay 23 despite a substantial recovery in spot prices.

1940-41 cotton marketing
quota regulations

Cotton marketing quota regulations for the 1940-41 season, practically
identical with those in effect for the past two years, were announced 'Yay 23
by the Agricultural Adjustment Administration. The cotton marketing quota
for each farm is the normal or actual production of cotton on the fann's
allotted rncrtge, whichever is great' r, plus the amount of any carry-over
of penalty-free cotton.

In accora~cne with the Form Act, the regulations provide for collection
of a pen-lty of 3 cents n, pound on 1940 cotton sold in excess of the farm mar-
keting quota. Psnnlties will be collected rlso on cotton produced in 1938 or
1939 which would nhve been subject to penalty if mo.rikt--;d in those years,
provided this cannot be marketed v'ithin the 1940 quota. The penalty is 2
cents a pound on 1938 cotton, a.nd 3 cents on 1939 cotton.




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