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]

Subjects

Subjects / Keywords:
Cotton trade -- Statistics -- Periodicals   ( lcsh )
Cotton trade -- Periodicals   ( lcsh )
Genre:
statistics   ( marcgt )
federal government publication   ( 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:
AA00013000:00031

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
rc. ;


TH E



SITUATION


BUREAU OF AGRICULTURAL ECONOMICS
UNITED STATES DEPARTMENT OF AGRICULTURE

CS-47 K SEPTEMBER 1940




COTTON, AMERICAN: WORLD SUPPLY AND CONSUMPTION, 1920-40


RUNNING
BALES
( MILLIONS) Carr
Supply
25 -- U.s.



20



15 ----- --
15 -



10







1920 1922



U. S. DEPARTMENT OF AGRICULTURE


1924 1926 1928 1930 1932 1934 1936 1938 1940
YEAR BEGINNING AUGUST
*LOAN STOCKS ON MAY 30. 1935 A PRELIMINARY

NEG. 38598 BUREAU OF AGRICULTURAL ECONOMICS


THE 1940-41 SEASON IS THE FOURTH CONSECUTIVE YEAR THAT THE WORLD SUP-
PLY (CARRY-OVER PLUS PRODUCTION) OF AMERICAN COTTON HAS BEEN CLOSE TO 25
MILLION BALES. EXCEPT FOR 1931-33 AND 1926 THE SUPPLY NEVER BEFORE EXCEED-
ED 21 MILLION BALES. IN THE LAST 3 YEARS THE CARRY-OVER HAS CONSTITUTED
50 PERCENT OR MORE OF THE SUPPLY, WITH 50 TO 78 PERCENT OF THE CARRY-OVER
CONSISTING OF GOVERNMENT LOAN STOCKS.
THE NEAR-RECORD CONSUMPTION IN THE UNITED STATES LAST SEASON LARGELY
OFFSET THE LOW CONSUMPTION OF AMERICAN COTTON IN FOREIGN COUNTRIES, THE
WORLD TOTAL BEING ABOUT AVERAGE. WORLD CONSUMPTION DURING THE CURRENT
SEASON NOW SEEMS LIKELY TO DROP CONSIDERABLY BELOW AVERAGE EVEN WITH A
RECORD HIGH DOMESTIC UTILIZATION.


i
'' '
YEllr' -;;;;;,- ;-







CS-47


-1---,1-------------------------------
TEE COTT OF S ITUAT ION


Summary

With shipments largely confined to three countries, Great Britain,

Japan, and Canada, exports of American cotton for August and September are

likely to total only about 125,000 bales. This compares with 870,000 bales

last year and a 10-year average'of close to 1 million bales. It is the lowest

for these months for more than 60 years. Without a marked increase in the sea-i

sonally adjusted rate, exports for the season (including cotton traded to

Great Britain for rubber) will not reach 2 million bales. Through a reduction

in stocks, foreign consumption of American cotton, however, is expected to

greatly exceed exports from the United States.

In contrast with the exceptionally unfavorable export situation, con-

sumption prospects in the United States are very favorable. In August, do-

mestic mill consumption established a record all-time high for that month.

With improved manufacturers' sales and higher mill margins, consumption this

month may establish a record high for September. V'.ith large Government defense

purchases, improved business conditions, and larger Government subsidies on

cotton textiles to domestic and foreign consumers, domestic mill consumption

for the season seems likely to materially exceed 8 million bales. The record

high, established in 1936-37, is just short of 8 million bales. Last season

consumption totaled 7,750,000 bales.

Despite the high level of domestic consumption, disappearance of AmerioaSJ

cotton (consumption plus exports) in August was unusually small. The same will

also be true for September. This, and an increase of 1-1/3 million bales in

domestic crop prospects in August, contributed to the decline in spot prices. .






,


- 2 -









CS-47 3-

during August and early September. Even with innings to Scptcmbrr 16 loss

than half r.s largo as to the same date last season, innings materially exceed-

ed domestic disappearance and increased the stocks of raw cotton available to

domestic merchants and manufacturers.

Th:. September estimate of the 1940 domestic crop of 12,772,000 bales of

500 pounds gross weight is nearly 1 million bales larger than thD 1939-crop,

This ostinatc in tnerms of running bales, plus a world carry-over of just over

12-1/2 million bales, gives an indicated world supply of American cotton of

nearly 25-1/4 million bales, including 2 million bales in foreign countries on

August 1 la.st. This nakes the fourth consecutive y-ar that the world supply of

American cotton has boon close to 25 million bales, With the exception of 1931-

33 end 1926, the world supply of American cotton never before those years ex-

coed.od 21 million bales.

Such data -.s are now available indicate thc.t the 1940-41 world supply

of foreign cotton will equal or exceed that of the previous season. It prob-

ably will not be greatly different from the 23 to 25 million b-.l supply of

each of the past four seasons.

On August 1 the United States Govcrnicnt ovened or hold as collateral

against loans about 8-3/4 million bales of the 1940 carry-over. On September20,

Government holdings totaled 8,600,000 bales, including 46,000 bales from the

1940 crop. In vi w of the excoptione.lly unfavorable export outlook, Govern-

ment holdings of 1940 crop cotton are cxposted to increase greatly during the

next 3 months. This increase will be offset to some extent by the shipment of

cotton which was traded to Gro.t Britain for rubber in the: summer of 1939.

-- September 27, 1940







- 4 -


PRIC 3S

United States: Spot prices decline,
futures advance

Domestic prices of spot cotton continued to decline up to the middle of
September, as had been the case in each of the 2 preceding months. Prices of
New York futures contract, on the other hand, advanced during this period, The:
decline of approximately 1/2 cent in spot prices between mid-August and mid-
September, along vrith a slight advance in futures quotations, materially chang*
ed the spot-future price relationship. On August 16 the average spot prices
in the 10 markets averaged from 3/4 to 1-1/4 cents above hew York futures
quotations for the 6 active contract months, but on September 16 averaged only
0.07 to 0.63 cents above. Py September 25 futures quotations were 1/4 to 1/3"
cent above those of September 16, and 1/3 to 2/5 cent above those of August 16
Despite a slight increase in spot prices the 10-m arket average on September 2a
was from 0.07 cent below to 0,41 cent above New York futures.

The change in the spot-future price relationship during the past few
weeks was largely due to the adjustment of both spots and futures more nearly
to the 1940 loan rates. The average 1940 loan rate for Middling 15/16" in the
10 markets is 9.3 cents. Earlier in the season spot prices were being held
above the loan rate by the relatively small stocks of cotton in trade channels.
But, despite the exceptionally snsll innings to September 16 and the record
or near-record rate of domestic consumption, stocks of cotton not under Goverp
ment ownership or under loans v.-ere inrch larger in late September than a month:
earlier.

With the decline since early September in the possibilities of German
invasion of Great Britain and further improvements in United States business
conditions, domestic prices of securities and a number of important commoditiM
have strengthened. These developments contributed to the recent advance in
cotton futures contract prices, which occurred even though the official esti-'-
mate, released on September 8, indicated a 1940 United States crop 1-1/3
million bales larger than the August estimate.

Foreign countries: Spot prices advance
in Liverpool, Bombay, and Sao Paulo

Prices of spot cotton in Liverpool, Bombay, and Sao Paulo advanced sox
what during the past month. On September 20 American Fiddling, fair staple,-
in Liverpool averaged 14.09 cents. This was about 3/8 cent higher than a m
earlier and the highest for any Friday since last February. It was nearly 3
cents higher than the September 1939 average. The Liverpool prices of Indian."
Oomra and Brazilian Sao Faulo were also higher on September 20 than for many
weeks. Prices of Egyptian Uppers continued strong and except for the preced
few weeks were higher than for more than a decade.

Prices of Indian (Oomra) at Bombay and Brazilian (Type 5) at Sao PaulO.
were somewhat higher on September 20 than a month earlier and approximately
equal to or higher than at any time since early June. (See accompanying tabil
These advances, along with the decline in spot prices in the United States,


CS-47




Cotton: Spot ,nrice per pound, species grow"ts & Liver,:ool and0a ::::::;. -: .,: er.v;dI .
Cotton: Spot rice ner pound., specified growths at Ltveroo! and s~&Osat, 'apectfitd per.o w


10-yeor average :
1927-2' to
1936-37 .......:
1936-37 ........:
1937-39 ........:
1938-39 ........ :
1939-'1 ........:
1939-40
A .. .........:
Sent. ........ :
Oct. ......... :
Nlov. ......... :
Dec. .........:
Jan. .........:
Feb. .........:
Mar. ..........
Apr. .........
May ..........:
June ......... :
July .........:
1940-41
Aug. .........:
Aug. 2 .......:
9 .......:
16 ..... ..:
30 .......:
Sent.6 .......
13 .......:
20 .......:


Ct.

14.50
14.62
10.31
10.15
12.64

lo.16
11.21
10.65
11.66
14.14

13.74
13.06
13.47
12.95
12.61
13.25

13.50
13.11
13.15
13.74
13.72
13.80
13.97
13.94
14.09


Ct.

13.60
13.16
8.78
8.71
11.79

8.53
9.79
9.41
10.79
13.32
14.12
13.11
12.53
12. 8
12.36
12.02
12.60

13.00
12.61
12.65
13.23
13.22
13.30
13.47
13.27
13.42


Ct.

11.19
10.87
7.96
7.14
9.94

7.38
8.56
"'.41
9.46
11.69
12.31
1i.09
10.6
10.70
10. 23
9.37
9.46

9.76
9.53
9.61
9.95
9.83
9.89
10.08
9.96
10.23


Pct. Ct.


7J.O
74.4
77.1
70.4
78.4

72.6
76.4
79.0

C2.7
co. 7

S1.0
79.4
79.0
74.3
71.4

72.3
72.7
73.1
72.4
71.6
71.7
72.2
71.4
72.6


17.12
17.40
13.10
11.80
15.76

11.35
12.49
12.03
12.70
15.80o
17.50
17.14
17.17
17.64
17.4L
18.26
19.54

20.50
19.34
20.14
21.01
2C.71
21.32
21.72
20.66
20.95


Pet. Ct.


117_.9
119.0
126.7
116.5
124.1
1211-. 1

111.7
111.4
1.1.0
0l o.9
111.7
11S.2
124.7
171.5
131.0
134.7
144.8
147.5

151.9
147.5
153.2
152.9
150.9
154.5
155.5
148.2
148.7


14.0
14.12
10.18
9.63
12.49

9.37
10.71
10.45
11. I9
14.14
14.67
13.94
13.23
13.47
12.95
12.43
17.71

13.10
12.70
12.73
1.332
13.30
13.47
13.47
13.'43
13.58


Pet. Ct.


97-17
96.6
93.7
94.9
9S.6

92.2
95.5
98.1
99.4
100 .0
ioo.4
101.5
101.3
100.0
100.0
98.5
95.9

97.o0

95.8
96.9
97.6
96.4
9s.9 1

96.3
976.4
96.4

96.4


14.74
15.75
12.70
_/10. 89
1/



1/

13.23


1 o50
13. 52
12.82
12. '7
12.71


12.31


Season,
month
or day


Ct.
- 91


11.37
11.58
9.95


3/

/
17
Z/
11.29
3/
10. o
9.39

7.67
o. 9
7.-2


7711
73.5
78.3
72.2


85.3

72.6
69.0
15.7
59.
53.5
U1.5


1/12.31 4/s.37


68.0


Continru-1 -


Liverpool, England : Osoka, Janan
Ame n Indian : FJyptian : Brazi.i.rn : Aneri-: Incli n
American : ine Oomra #1_: F.G.F.Upp ers :Fair,Sao Paulo : c-n : Acola 1/
S: As a : As a : As a : :As a
: Iid- L: : of :: of : : of :Strict : : of
: Cling : I :Ac tual : A eri- :Actual :Aieri-- Ac tua :eri- : ..id- :Actual : erican
: Fair dli : : can : : can can : liz : strict
:Strole InIid- : id- : : i- : : idling
: : :c-ling : :ling : ::dlin : : .:-1. -.


--


--


---


--


--


---













recent
,d in







Cotton: Spot price per pound and spread between prices in specified markets,
10-year average 1927-28 to 1936-37 and 1936-37 to date
: American Middling: Indian : Brazilian :Fgyptian Uppers
:Spread:Spread : :Spread: : :Spread : :Spread
of :of : : of :Spread: of : of
Season : New :Liver-: Osaka : :Liver-: of : :Liver- : lx-:Liver-
month Bom- Sao Alex-
month Or- : pool : over pool : Osaka ao : pool : : pool
or day : over : bay Paulo andria
: leans: over : New : : over : over : over : : over
N:ewOr-:Orleans: :Bombay:Bombay : : Sao :: Alex-
: leansl/: 1/ : : 1/ : : :Paulo 1/_ :andrial/
10-yr. av. : Cents Cents Cents Cents Cents Cents Cents Cents Cents Cents


1927-28 to:
1936-37 ..
1936-37...
1937-38 ...
1938-39 ...:
1939-40 ...
Aug ....
Sept ...
Oct ....
Nov. ...
Dec ....
Jan.....
i Feb.
March ...
April ...
ltay .....
June ....
July ....
1940-41
Aug....
Aug. 2 .

16 .
23 .
30 .:
Sept. 6 .
13 .
20 .


12.99
13.45
9.24
9.04
10.23
9.18
9.22
9.12
9.60
10. 4
10.98
10.87
10.63
10.74
10.25
10.74
10.55

9.92
10.30
10.10
9.85
9.70
9.65
9.56
9.45
9.50


1.51
1.17
1.07
1.11
2.41
.98
1.99
1.53
2.06
3.30
3.83
2.87
2.43
2.73
2.70
1.C7
2.70


3.58
2.81
3.05
3.89
4.02
4.15
4.41
4.49
4.59


1.75
2.30
3.46
2/1.9p



2/ 99
3'


2 9
2/

2.99
2.97
2.78
?.57
2.13
2.16

2.39
2/
3/
5/2.39
3/
2/

3/


10.06
10.08
7.27
6.57
8.14
6.76
7.33
7.46
8.61
10.50
10.46
9.16
C.78
8.82
7.69
5.84
6.24


6.60
6.53
6.53
6.36
6.44
7.23
6.81
6.79


1.13
.79
.69
.57
1.80
.62
1.23
.95
.85
1.19
1.85
1.93
1.90
1.88
2.54
3.53
3.22


3.27
2.93
3.0 S
3.42
3.47
3.45
2.85
3.15
3.44


1.31
1.50
2.68
j21.38
2/
2/

2/
3/
.79
3/
O
.61
.61
.06
-.02
1.05
1.53


1.88



3/
2/
3/
3'


14.11
12.95
9.26
8.40
9.04
7.72
C.69

11. 79
9.76
11.91
11.35
10.70
o .69
6.87
7.58
6.69
6.79


6. iS
6.37
6.62
6.57
6.45
6.40
6. 44
6.64.
7.05


-.03
1.17
.92
1.23
3.45
1.65
2.02
1.72
1.33
2.23
3.52
3.24
3.54
4.60

5.74
5.92

6.62
6.33
6.11
6.75
6.85
7.07
7.03
6.79
6.53


15.34
15.46
10.96
9.92
2/
9.12
9.34
9.14
10.37
13.26
15.10
14.75
14.92
15.13
4/14.77
3/
3/


3/
3/
31

2/
3/

2/
3/
1/


1.78
1.94
2.14
1.88
3/
2.23
3.15
2.89
2.33
2.54
2.40
2.39
2.25
2.51


Prices at New Orleans are from records of t:e Aricu'ltur-1 ilar!:eting Service.
Prices at Bombay are fro.i Bombay Cotton Ann.ual and Financial News through March
1940; since then from l'ew York' Cotton Exchange report-. Th rerz converted from
rupees per candy of 784 pounds at current rates of cxchsnge (biyin- rates in recent
weeks) as reported by the Federal Reserve Board.
Prices at Sao Paulo are from official publications and cables. Prices were
converted from rilreis per 15 ':ilograms at current rates of exchange until Sept.
1934, Oct. 1934 to Feb. 10, 1935 at opon or free :nar:.bt rates, arnd from Feb. 11 to
date at compbsite averages of official and free market rates; except from Nov. 16,
1937 through Apr. 10, 1539 when free mar':et rates v.cre used. Prices at Alexandria
are from the Honthl,: Bulletin of ATricultural and Economic Statistics. Prices were
converted from tallaris per cantar at current .monthly rate of exchange through Aug.
1939; since Sept. 1939 converted at official rate of exchange.
/ See procedin b table for prices at Liverpool and Osal:a. 2/ Eased on average price
for 10 months. The 10--onth average price at New Orleans was 6.91 cents and at Bom-
bay was 6.48 cents. 3/ Not available. 4/ Price on May 9, latest date available.
S5/ Based on monthly prices.
I., Bae


CS-47


- 7 -






CS-47


reduced the spread between prices at New Orleans and those in Bonbay and Sao
Paulo. On September 20, American -riddling 15/16" at New Orleans was about *
2-3/4 cents higher than both the price of Indian Oomra at Bombay and Brazilian
at Sao Paulo. In August the spread ranged from 3-1/4 to almost 4 cents above
prices in these two foreign export markets.

Price changes in Liverpool were not in keeping with changes in these
three export markets. In Liverpool the price of Indian and Brazilian changed
almost in proportion with changes in the price of American. As a result, the
ratio of the price of American to the price of these two important competitive
growths showed little change. Prices in Liverpool have been materially af-
fected in recent weeks by the uncertainty of the war and the difficulties and
uncertainties as to future supplies. Since the beginning of the more in- .
tensified aerial warfare several weeks ago, prices of most important cottons J
in Liverpool have increased relative to prices of such growths in the export-
ing countries. On September 20 the price of American Piddling fair staple -at
Liverpool was 4-3/5 cents higher than American Middling 15/16" at New Orleans,
whereas in early August the spread was about 3 cents. During the same period
the spread of the prices of Indian and Brazilian cotton in Liverpool over the
prices of these growths in Bombay and Sao Paulo increased from 2.93 and 6.33.
cents on August 2 to 3.44 and 6.53 cents on September 20.

Recent reports from Japan and China state that prices of American cot o
are materially below normal in relation to prices of Indian and Brazilian cot-.
ton in Shanghai and Osaka. In Canada and Spain, Brazilian cotton of more or
less similar quality to American is reported to have been contracted for te-
cently at prices 10 to 15 percent lower than American.

EXPORTS

American cotton: Restricted outlets reduce
shipments 70 to 80 percent

In August exports of American cotton, which were largely confined to
Great Britain, Japan and Canada, totaled only 65,000 running bales, according
to data released by the Bureau of Foreign and Domestic Commerce. This was 70
percent less than the relatively small exports in August 1939 and 78 percent
less than the 10-year (1928-37) August average. During the first 3 weeks of
September, the 59,000 bales of American cotton exported were 80 percent below
the corresponding period last year, and lower still in relation to the average
for these weeks. It now seems likely that exports for August and September .
combined will not exceed 125,000 bales. Last year exports during these 2
months totaled 878,000 bales and during the 10 years ended 1937 averaged
966,000 bales. N'ot since 1879 have exports for these 2 months combined been
as small as this year. Unless there is a marked increase in the seasonally
adjusted rate of exports, the total for the season will fall far short of 2'
million bales including cotton traded to Great Britain for rubber. Last sea,:i
the total was 6,200,000 bales and was itself 600,000 bales less than the 19g.:3
37 average.






o
'. .. I


- 8 -







-9 -

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


Country of
,aigin and
desti-
. nation


States to-
Germany
United
Kingdom
France
Italy
Spain
:elgium
C0anada
Sap an
China
theirr
countries
Total


: Aug.
:10- : : :1940
:yrav.: : : as
:1923-: :: :a
:29 to:1938 .1939 .1940 :pet.
:1937-: : : : of
: Z9 : : :1939
:1,000 1,000 1,000 1,000
:bales bales bnles bales Pet.
Ltr r -r
9, 12 18 10
: 59 26 18 0 ---


34
294


24
22
14
1
5
15
53
0

41
201


72
33
13
11
8
9
28
3/

23
215


65.3




77.8
21.4


5 21.7
65 3C.2


: : LAu .
::10- : : :1940
: :yr.av.: : : as
.Country of :198-: : : : a
i: Seiand:29 to:1938 .1939 :1940 :pct.


i nation


:rFgyt to-
: United
: Kingdom
: France
: United
SStctes
SGermany 2/
: Italy
: Japan
British
SIndia
Other
countries
Tot ;al


i19 -: : : : oof
: 38 : : : :1939
:1,000 1,0 1,1,C0CO 1,000
:bsles bales b-les b'les Pet.
: 1,/ 1 17 1/7


0--
0 ---

17 566.7
0 ---
0 ---
1 7.7


: 2 4 5 6 120.0


: 22
: 77


26
108


24 0 ---
106 24 22.6


:__: : Aug. July
: :10-yr.a. : : : : 1939-40
S: Aug. :1928-29 : 1937-: 1938-: 1939-: as a
: to : 38 : 39 : 40 : pet.
lo :1937-38 : : ::of 1938-39
ptian
udan to
SKgdom : 4/ 14 7 8 114.3 4/ 154 212 44 20.8
Firance : / 1 1 0 --- / 17 24 24 100.0
Italy : / 3/ 1 0 --- 4/ 9 11 9 81.8
India : 4/ 6 5 22 440.0 4/ 76 52 59 113.5
'Other
countries: 4/ 1 2 4 200.0 4/ 22 42 11 26.2
Total : 8 22 16 34 212.5 165 278 341 147 43.1
Irazil to : July : Aug. July -
Japan : 4/ 60 47 40 85.1 4/ 204 406 219 53.9
United :
Kingdom : 4/ 19 29 22 75.9 4/ 203 229 295 128.8
Germany : / 48 86 0 --- 4/ 508 338 70 20.7
France : / 31 44 0 --- 8/ 88 177 56 31.6
Italy : / 4 17 0 --- 4/ 15 76 26 34.2
Netherlards: 4/ 5 11 0 -- 21 48 37 77.1
Belgium : / 1 6 0 --- / 27 32 22 68.8
Other
countries: 4/ 9 78 48 61.5 4/ 81 303 258 85.1
Total : 60 177 318 110 34.6 447 1,147 1,609 933 61.1
piled from official sources. 1/ American in running bales (counting round bales
half bales) and foreign in bales of 478 pounds. 2/ Includes Austria beginning
uary 1938. 3/ Less than 500 bales. / Not available by countries.


CS-47






CS-47 10 -

The most important factor now restricting domestic exports is the more
or less complete blockade of continental Europe, except for Russia. Last sea-
son the United States exported 2-1/3 million bales to this area, even though
parts of the region were blockaded after the beginning of the war in September.
In the 5 years ended July 1939 the mills of this area consumed an average of
2,500,000 bales of Ar.erican cotton. Furthermore, about the same amount of
other imported cotton was consumed. This means that even in the few remaining
accessible markets, American cotton is meeting increased competition from athe
exporting countries. One important indication of this increased competition
is the relatively low prices of foreign cottons, as -shown in the preceding
section. Reduced exports and civilian consumption of cotton textiles in
England and Japan, and larger stocks of raw cotton at the beginning of the seat
son in these markets, are also contributing to the reduced exports of Amerioief
and foreign cotton. Restricted freight allotments to Great Britain are also
a factor in the low level of current exports.

Foreign cotton: Egyptian and Brazilian exports
also greatly restricted

Exports of cotton from Egypt, which totaled only 24,000 bales in August
were less than one-fourth as large as in August last year or the year before.
This was true even though exports to the United States were about six to eight
times as large as in AuLust 1938 and 1939. Not only were there no Egyptian
exports to continental Europe, but the lack of shipping allotments prevented
any cotton from moving from Egypt to the United Kingdom. Recent reports state
that arrangements were being made to provide shipping space for the movement
of Egyptian cotton to Great Britain.

Exports from Brazil during July 1940 were only 35 percent as large as
in July last year, according to data recently received by cable from Sao PaulO"
From August through July Brazilian exports were two-fifths less than in the .
corresponding period last season. A scarcity of transportation facilities 1*
also restricting Brazilian exports. A recent radiogram from Shanghai states-'
that except for transportation problems Japanese buyers would be purchasing
considerably larger quantities of Brazilian cotton and less American, as a
result of the wide price disparities.

DEMAND AUD CONSUATT O ,1I0

UNITED STATES: August consumption highest on record
for the month; outlook bright

Domestic mill consumption of 655,000 bales in August was 4 percent
larger than in August last year, the largest for the month on record, and 10:i
percent above July. This increased the seasonally adjusted index of consumgp.
tion to 124, from 116 in July and 114 in August last year.

Comparatively large orders for cotton goods have been placed by Gov~rnyf
ment agencies during the past few weeks. This and expanding general bus.:in3w6 *::
conditions along with a continued high level of retail sales contributed to-ifit.
large sales of unfinished cotton goods by domestic manufacturers during .


.. :H L "#"::
: i







CS-47 11 -

September. These sales materially increased manufacturers' unfilled orders
and strengthened cotton textile prices. As a result, cotton consumption ad-
justed for seasonal variation in September will probably equal or exceed that
of August. Trade reports indicate that don.estic mills are now in a strong
statistical position from the standpoint of unfilled orders. Most mills are
said to have sufficient orders booked to insure an exceptionally high rate of
activity until the end of the calendar year.

The demand for domestically produced cotton goods is expected to con-
tinue strong and result in a new record high domestic mill consumption of
cotton during the 1940-41 season. Consumption is likely to materially exceed
8 million bales compared with 7-3/4 million bales last season and a record
high of just under 8 million in 1936-37. This is due to: (1) large Government
purchases of cotton products for defense purposes, (2) an expanded Government
cotton products export subsidy program, (3) increased incomes of domestic con-
sumers, (4) large Government subsidies to domestic consumers of cotton and
cotton textiles by such means as the Stamp Plan, Mattress Program, and the
Cotton Insulation Program, Cotton Paper Program, and Cotton Bagging for Cotton
Bales, and (5) other increased Government efforts as well as increased efforts
of private organizations to stimulate cotton consumption. These latter ef-
forts include advertising and other promotional activities, as well as in-
creased research designed to discover new or more attractive uses for cotton
and more efficient manufacturing methods.

EUROPE: Cotton consumption declines in Great Britain,
greatly restricted on the Continent

British mill activity declined somewhat further during the past month
and is now probably 10 to 12 percent lower than in June or early July. It is
still relatively high. However, because of the large output of goods for
military purposes, sales of cotton goods by British mills are reported to have
been quite small during the last few weeks, except for Government contracts.
Cotton textile export sales were reported as having been very small, with
foreign buying being retarded by the question of whether deliveries could be
made according to schedule and by talk of price reductions on cotton goods for
export. Current exports of cotton textiles are estimated not in excess of
5,500,000 pounds of yarn and 80 million square yards of cloth monthly. Dur-
ing the last full year prior to the outbreak of the war, when export data were
discontinued, monthly exports of yarn and cloth averaged 11 million pounds and
120 million yards, respectively. Textile mills were reported still losing
ground on stocks and orders during the week ended September 20.

Cottop mill consumption in continental Europe is believed to be running
at a low level, because of a shortage of raw cotton. This seems likely even
though continental European imports of raw cotton during the year ended July
1940 were quite large a development which occurred despite the blockade of
considerable proportions of the area during most of the season. With the high
rate of consumption existing last season in the importing areas, together with
the extremely small stocks at the beginning of the 1939-40 season, stocks of
raw cotton in these areas probably were not large even at the time the blockade
was extended to them. In such areas, at least a part of the stocks on hand at
the time of the extension of the blockade to the area has no doubt since been
distributed to other mills under German and Italian control.







- 12 -


In Spain reports indicate that supplies of raw cotton have recently
dwindled to a very low level. This is apparently due to the lack of foreign
exchange with which to purchase raw cotton. On September 3, however, finan-
cial arrangements were concluded for the importation of considerable quan-
tities of cotton. These arrangements are.believed to cover contracts for
100000 bales of Brazilian cotton and to allow for additional purchases up t
50,000 bales. During August the Spanish Cotton Board awarded contracts to
four Brazilian concerns covering purchases of about 100,000 bales of Brazilu
cotton at prices 10 to 15 percent lower than the existing prices of comparA
grades of American cotton, according to information cabled from Madrid in
early September. Shipments of this cotton were to begin early in September
and payments were to be made over varying periods of from 6 to 18 months.

ORIENT: Cotton mill consumption further
reduced in Japan and China

Cotton yarn production by Japanese mills in August totaled approxi
ly 170,000 bales of 400 pounds, including cotton content of the 14,000 bal
of mixed yarn produced. This was somewhat smaller than the 177,000 bales
produced in July and 20 percent less than production in August 1939. Raw o
ton consumption changed about the same as yarn production.

Exports of cotton cloth from Japan totaled 115 million square yards
August, compared with 117 million in July. This was 50 percent less than t
223 million yards exported in August 1939 and, with two exceptions, was the
smallest monthly total since February 1932.

Cotton mill activity in Shanghai was further reduced in August, as
stocks of yarn piece goods continued to increase and textile markets, both
home and abroad, remained restricted. Japaneso mills wore reported to have:'"
been operating at about 65 percent of capacity, Chinese at 70, and British |
47 percent. In July, activity in those mills was estimated at 70, 75, and
percent respectively. Mills in other parts of "occupied" China and in
Manchuria continued at about the same low rate as in July (less than 50 per*
cent), while those in Chinese controlled areas maintained operations at abo0
80 percent. Total mill consumption in China, including Manchuria, during
August was estimated at about 115,000 bales, compaerd with 122,000 bales in.
July and 120,000 bales in August 1939.

The recent declines in cotton mill consumption have been due to the
large accumulation of yarn stocks resulting from speculative hoarding inducel
by dnoreci.ation of the Chinese currency and expectations of increased export
to -.-rkets formerly supplied by Europe. More recently, considerable in-
crcesos in stocks of piece goods have occurred, following the tightening of
the blockade of important interior markets by the Japanese and by additionri
import restrictions in British, French, and Netherlands Empire areas.


___ I~_~C _


CS-47






CS-47


- 13 -


ACREAGE, FRODUCTIOIT, STOCKS, Ar'D SUPPLY

AMERICAN COTTON: 1940-41 supply about same
as in 3 preceding years

The September estimate of the 1940 domestic crop of 12,772,000 bales
(500 pounds gross weight) is 1,343,000 bales larger than the August estimate
and nearly 1 million bales larger than the crop of either of the 2 preceding
years. This estimate in terms of running bales plus a vorld carry-over of
just over 12-1/2 million bales gives an indicated 1940-41 world supply of
American cotton of nearly 25-1/4 million bales. Such a supply is about the
same as the 24-1/2 to 25-1/2 million bale supply of the three preceding sea-
sons. In only 4 years prior to 1937 (1926, 1931, 1932 and 1936) have supplies
bcon nearly as lcrge as in the last 4 years. Uith the exception of these 8
years the annual supply has nov.r Uxcceded 21 million bales,

Despite the prospective larrcr crop, ginnings to September 16 were less
than half as large as to the same date last yor, and considerably smaller
than in any year since 1924, when innings to this date were first recorded,
According to the Crop Roporting Board, "Picking bogan about 2 wcks later than
usual in the States adjacent to the Mississippi River and about a week late
in Georgia, Alabama, Oklahoma, a.nd T-xa'." This apparently accounts for the
unusually small ginning: to September 16 in relation to the eortimated produc-
tion.

FOREIGN COTTON: Supplies of Indian and
Egyptian cotton larger

Very tentative estimates of tho production and carry-over of Indian and
Egyptian cotton indicLte th.t the supply of each for 1940-41 will be larger
than in 1939-40. Recent estinm.ts rcla.sed by the Now York Cotton Exchango
Service indicate a commorcic.l supply cf Indian cotton of about 7,690,000 bales
of 478 pounds, compared with 7,310,0o0 bales for th, preceding season. The
estimated supply of Egyptian cottonras placed at 2,785,000 bales, or about
100,000 bales larger than that of 1939-40.

With the total 1940 cotton crop in China, including Manchuria, esti-
mated at about 300,000 bales lrg 'r than the unusually cmall 1939 crop, and a
larger crop expected in northern Brazil, it is q'.,it', likely that the total
supply of foreign cotton other th-.n Indian and Egyptian will also be larger
this season than last. The crop in many of these countries, however, is
harvested much later than in the United States. This, and the lack of crop
reporting or forecasting agencies similar to the United States Crop Reporting
Board, make it difficult to determine vrth a substantial degree of confidence
the probable 1940 crop at this time. From the standpoint of the probable
supply of commercial cotton, it is significant to note that in China more raw
cotton may be consumed this season than last in and about the homes for hand
spinning and weaving or for padding. This is especially likely if access to
commercial manufacturing remains restricted.

The New York Cotton Exchange Service is now estimating that the 1940-41
world supply of foreign commercial cotton will be nearly 1-1/2 million bales
larger than last season's supply of just over 23 million bales. This would
make the fifth consecutive year in which the supply of such cottonwas between
23 and 26 million bales.


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