The Cotton situation

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The Cotton situation
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United States -- Dept. of Agriculture. -- Economic Research Service
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United States -- Bureau of Agricultural Economics
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UNITED STATES DEPARTMENT OF AGRICULTURE ...
Bureau of Agricultural Economics
Washington ___

CS-27 January 35, 1939

THE COTTON SITUATION

Summary

The domestic cotton textile situation changed very little during

December and the first half of January, re-orts the Bureau of Agricultural

Economics. Prices of spot cotton in both domestic and foreign markets were

rather stable.

Sales of cotton textiles by domestic mills continued nearly equal to

the relatively high level of output. The 565,000 "bales of raw cotton consumed

by domestic mills in December exceeded consumption in December 1937 by 31 Per-

cent and with the exception of 1936 was the largest for the month in 12 years.

Consumption from August through December was 6 percent larger than in the

corresponding 5 months last season, and with the exception of 1936-37 was

also the largest for any like period in more than a decade.

In contrast with the comparatively high level ef domestic consumption,

domestic cotton exports in December were the lowest for the month since prior

to 1i81 and less than half as large as the comparatively lew experts of

december 1937. Experts of American cotton from August 1 to December 31

this season were only six-tenths as large as in the corresponding period a

year earlier and the smallest for the period since the World War. This ex-

tremely low level of exports is largely attributable to the lowest level

of cotton consumption in foreign countries in 3 years, to the further sub-

stitution of foreign cotton for American, and to the fact tha.t some foreign

users of cotton have been reducing their stocks of American cotton and

others have increased stocks very little. Ordinarily foreign stocks of




CS-27 2 -

Amerrican cotton Tncrease sharply from Aur'ust 1 to Decembper 31. It is expected.

thati later in the season foreign srinners may find it necessary to purchase

ALeerican cotton more freely, especially in relation to a year earlier, but the

relation between prices of cotton for early delivery and those for more distant

c.elivery is likely to continue to encourage spinners to restrict thair immediate

purchases to a .2liPm'.m..

Exports of ?nrdan cotton in the 5 months from August t-rough December

this season were twice as large as during the same period last season, and. in

December were 2- times as large as in December 1937. Cotton exports from Egypt

from August through Lezrfrr of the current season were the smallest since 1932.

Exports of Brazilian cotton during the first q' .rter were the largest for the

period on record and exceeded those of the same period last season by 20 percent.

The general cotton textile situation in foreign countries aponears to have

shown relatively little net change during recent weeks as compared with con-

ditions in TTovember. In the British cotton textile industry manufacturers'

sales of cotton textiles were aD-narently smaller thnn production, despite the

reduced mill activity. In Fr-ncc, on the other hpnd, mill sales of cotton tex-

tiles are reported to have shown some improvement duringg December and early

January. At the end of December reliable reports indicate that French sinners

and manufacturers rather generally had orders sufficient to maintain their ex-

isting rate of output through March and in some instances as far as through June,

In Germany, cotton mills continued to operate at a high rate, but German mills

use large quantities of artificial fiber. In Italy the developments during

December are reported to have continued very unsatisfactory and the outlook for

the new year was considered even less promising at least from the standpoint of

raw cotton. Beginning January 1, Italian cotton mills have been prohibited from

making pure cotton textiles for sale to domestic consumers. Mill activity and the

ratio of sales to output in the Orient appear to have shown little change since

November.






CS-27


-3-


PRICES

Domestic prices of spot cotton as well as Liverpool prices of American
cotton continued to fluctuate within a comparatively narrow range during the past
month. The daily average price of Middling 7/8 inch in the 10 designated southern
markets held between 8.414 and 8.65 cents from December 23 to January 24. These
prices were a little abcve the 8.3-cent loan value for that quality of cotton,
but on the average about the same as the 8.54-cent average of January 1938. From
August 1 to January 24 the daily average price of Middling 7/8 inch in the 10
designated markets fluctuated from 7.92 to 8.75 cents, a maximum change of only
approximately 10 percent. While domestic cotton prices were rather steady during
most of last season, the first quarter of that season saw a change in these daily
quotations of more than 40 percent.

The average spot prices in the principal southern markets so far this sea-
son have averaged slightly lower than in the first 6 months of the 1937-38 season
despite the much larger quantity of the current season's supply held by the United
States Government against loans. This is apparently largely accounted for by the
larger world supply of cotton this season than last, And the lower rate of world
mill consumption during the first 5 months of this season. It should also be
recalled that in the first months of the 1937-38 season when the forecast of the
domestic crop was more than 3,000,000 bales less than either the December estimate
or the final outturn and when domestic business activity was still near its
1936-37 high prices averaged 101 cents.

In addition to the increase in Government-lnan stocks, a factor tending to
support prices is the fact that at least since October the annual rate of world
mill consumption has been considerably above actual mill consumption for the
1937-38 season. If this rate is about maintained or is increased, as seems reason-
able to expect, consumption in the last half of this season will exceed the restrict.
ed consumption of a year earlier by more than enough to offset the unfavorable
showing made during the early months of the current season.

EXPORTS
Domestic exports continue tn lose ground:
lowest in December since prior to 1g81
Even though exonrts of American cotton in December 1937 were exceptionally
low, the 361,000 running bales exported in December 1938 represented a decline
of 39 percent from a year earlier and were the lowest for the month since prior
to 1881. The total of 1,896,000 bales exportedfrom August through December was
a little more than 40 percent smaller thn'n in the like period last season and
the smallest for the period since prior to 1899.

Exports of American cotton to Japan continued exceptionally large in com-
parison with the very small exports of last season. In December they were three
times those of a year earlier and from August through December were nearly four
times as large as in the corresponding oericd last season, but 40 percent
smaller than the average for the past 10 years. With the exception of Japan and
a few of the smaller European countries, exports of American cotton to practically
all other countries have been much smaller so far this season than a year earlier.





4 1
From August through December, exports to the United Kingdom totaled only 242,000
bales compared with 989,000 a year earlier, a decline of 75 percent. Similar
comparisons for some of the other important countries are: Germany 169,000 bales
v- -agai.njt 504.000, a decline of 66 percent; France 273,000 against 539,000, a 9-
percent decline; and Italy 151,000 against 280,000, a 46-percent decline.

Trade reports for the first 23 days of January indicate that exports were
even less favorable in relation to a year earlier than in the -period from August
through December. The reported total exports during this 23-day period were 49
percent smaller than a year earlier and the total for the season up to January 23
was 1,600,000 bales, or 42 percent below a year earlier.

Indian exports crease markedly

In rather direct contrast with the extremely low exports from the United
States, reports from India show a marked increase in exports of cotton. For
December, such exports of Inditn cotton were about 21 times as large as in Decem-
ber 1937. From August through December, total exports of Indian cotton were more
than twice as large as a year earlier when cotton exports were unusually small,
and considerably larger than the average exports during this 5-month period.
From August through December, exports from Egypt were 17 percent smaller than in
the like period last season and the smallest since 1932. From August through
October exports from Brazil established a new high and exceeded those of a year
earlier by 7 percent.

DfMAND AND CMSOHPTION
UNTITED STATES: Mill activity continues at comparatively high level

Domestic mill activity in December and the first 3 weeks of January was
approximately equal to or above activity in November. The daily rate of cotton
consumption in December, estimated at 28,300 bales, was slightly larger than in
..Tovember and 38 percent higher than in December 1937. The 565,000 bales consumer.
by domestic mills in December were, with the exception of December 1936, the -
largest for the month in 12 years. The 2,800,000 bales used by mills from August
through December exceeded consumption in the like period last season by 160,000
bales or 6 percent and the average for the -neriod during the past 10 years by 13
percent.

During at least a considerable part of December the indications are that
sales of cotton textiles by domestic mills were somewhat less than the nroductloA
of cotton textiles. In the second anri third weeks of January, however, aggre-
gate sales are said to have about equaled production, with sales of some types
of goods reported as having exceeded production. Should general business con-
ditions continue at about presentt levels or show an increase, domestic cotton eon-
sumption would continue at a relatively high rate and greatly exceed consumption
during the last half of last season.

ETROPE: Il General situation continues unfavorable

As is usual in December, holidays and year-end stock-taking combined to
slow the pace of European textile markets. In the free exchange countries, the
uncertainties of the international political situation on the one hand and of
the cotton price structure on the other, continued to discourage long-term

I/ Based largely upon reports from the Bureau's London office, dated January 11.


CS-27


- 4.




- 5 -


ionmitments anO so to exercise a restraining influence on the textile markets. De-
spite heavily curtailed mill o-etivity in Great Britain sales are reTnorted to have
been below -Droduction throughout December and early January. Some of the smaller
cotton consuming countries report somewhat similar conditions, but apparently not
luite so unfavorable.

The raw cotton situation remained little changed. Import volume continued to
lag and price relationships were still generally unfavorable. Though French spinners
'.re said to have bought more liberally, spinner buying has been generally of a cau-
tious nature, especially so far as American cotton is concerned. The intensive com.-
oetition for yarn orders has tended to induce spinners to cut costs where possible by
the use of cheaper cottons. At the same time in an effort to assure themselves of
needed supplies, spinners apparently have been willing to make longer forward com-
:iitments for low-priced exotics than for American. That spinners will find it neces-
sary to enter the market for American cotton more freely as the season advances is
taken for granted. Present indications however, are that the volume may be held
to a minimum.

United Kingdom

The cotton situation in December and early January was somewhat obscured by
holidays and year-end stock-taking which combined to slow the tempo of activity in
the last 10 days of the month. From certain points of view it is possible to see
modest signs of improvement, notably in cotton mill. employment near the middle of
the month, in for-ardings of cotton to mills, and in more positive yarn price poli-
cies of spinners. On the other hand, a great deal of difficulty is reported in
booking new orders, and trnde reports indicate that despite the restricted output
sales were generally running below production. Business in all departments is
characterized by caution which it is said was inspired by the unsettled state of
international political relations and by uncertainty as to the future movement of
spots and futures cotton prices. Present relationships between prices of cotton
for early delivery and those for delivery later in the present or early in the next
season continue to discourage extended commitments and to encourn.ge the reduction of
stc.'.ks at the expense of new activity in all sections of the trade. Business thus
folno.-'s n hand-to-mouth pattern, new orders tending to be for small quantities and
net.-c-itern 0,liveries. Price spreads between different -growths of cotton are still
for T:e m'x part to the disadvantage of American, though the carry-over of mill
cont-'.?tt. f..om last season has so far helped to sustain the share of American in
mill coi-- .tion. Devopments in some of the factors basic to general economic ac-
tivity i .- -rat Britain have been of a favorable nature and may later stimulate an
impro-ement in the cotton textile industry and raw cotton dr.iaPnd. For the present,
however, their influence appears to be outweighed by other factors.

Export de:iand for piece goods, according to reports, has been only moderate
and rain:l; for small lots. The Indian trade, which remains as the backbone of
British textile exports decnite its huge post-war shrinkage, has been disappointing,
due in part to a r.":.:rrcnce of Far-Eastern competition. West Africa, although re-
porting better clez.r-Y.13s of old! orders, hns not reentered the market on an important
scale. Other ma-'.ce-.,s have boht only sparingly, Although total exports of piece
goods in the c-eI:d.r rear 193-' were 28 percent below those in 1937, the volume
increased consioerably from Ji.me to November. Exports of roundly 120 million square
yards in Novemler 'ere the largest for any month since March and about 25 percent
greater than those of June. As is usually the case, a substantial decline occurred
from November to December,.




C3S-27


In the home trade, some disappointment was expressed with the retail turnover
In November, lahich for the first time since May showed n decline in total value.
Retail sales of piece goods, household textiles and dress materials were all between
5 and 6 percent below the value of sales in November 1937. But with a decrease in
the same 12 months of about 5 percent in the wholesale rice index of cotton textilfn
(ten items), it seems probable that volume decreased somev-hat less than the value
figures. Christmas trade, hampered to some extent by extreme weather, was definite-
ly below expectations. Although official figures for December are not yet available
the drop from a year before is unofficially estimated at from 5 to 10 percent.

The continued low level of demand for yarn in the United Kingdom has reduced
the rT-nufn.cturing-activity margins materially. Margins on some types of American
yarns are narrower than they ,were a year ago by a third or more. The yarn market is
confronted, moreover, with the possibility of labor difficulties in the knitting
industry which normall:r takes 6 percent or more of the British cotton yarn produc-
tion. Nevertheless, the position of spinners still seemons to be sufficiently strong
to permit a more aggressive price policy. On December 19 the raestallishment was
announced of the 42's weft agreement, which was threatened with breakdown, and the
extension of its operation to March 31 next. Likoeise on December 30, it was voted
to withdraw, after 3 months, a 5 percent price discount on Egyptian type yarns which
for some time has been allowed manufacturers purchasing exclusively of firms partic.
pating in the yarn margin maintenance schemes. Mea:-whilo P. pl-In for n single agree-
ment to control prices on the entire output of *Americ-.n yarns has been formulated in
anticipation of the enactment of a. Cotton Industry Enabling Bill whichh would presum-
ably generalize it and give it statutory force.

Noting the facts thp.t business activity, -.s reflected in the Economist index,
has levelled off since May- at about 9 to 11 percent below its high point of 113 in
September 1937 (1935 100), nnd th;%t the declines both in comnmodity prices and em-
ployment appear to have been checked, a leading banking institution concludes that
the recession which began a little more than a year ago may now be supposed to hP.ve
bout run its course. Reviewing the basic factors in the British general economic
position, a number of favorable develoonents suggests a a possibility of improvement
in 1939. A-iong these, in addition to the commodity ,nd employment situn.tion, are:
(1) the course of recovery in the United States, (2) the Anglo-Americn.n trade agree-
ment, and (3) the improved competitive position in world markets of British pro-
ducers resulting from the decline of the pound. The cheapening of sterling in the
year amounts to about 7 percent in terms of lire, Reichsmarks and United States
dollars, and about 61 percent in terms of Belg.s.

Mill takings of rt.w cotton of all kinds so far in the present season have
been running at about four-fifths of those of a year ago. Takings of American,
sustained by the carry-over of mill contra-.cts made for the 1937-38 season, have thus
far fallen off but little more. New mill buying of Americn cotton, however, has not
been on Pn important scale so far this season, n.lthou.-h merchants holding stocks in
British warehouses are reported to hnve been offering it at concessions. That spin-
ners will find it necessary to come into the market more freely for American cotton
in the near future seems to be taken for granted, but the present -orospect is that
buying will be held to bare necessities. Brazilians and West African have, however,
continued to enjoy a fair demand. With competition for yarn orders as severe as it
was through 1939, spinners were under pressure to -are their costs to meet competi-
tors' prices, and those who could use the cheaper cottons have bought them more free-
ly than usual. The share of Brazilians in the mill takings has been rising sharply
and, with the seasonal peak movement of Ep.st Indians just ahead, prospects for main-
tenance of the Anerican share through the remainder of the season are doubtful.


- 6 -






Between Augist 1 and December 30, im-oorts of cotton of all kinds were
about three-fifths as large as in the same months of 1937, though East Indian
showed an increase of g7 percent over the same period last season and more
modest increases were recorded for Brazilians, Peruvian, Sutdanese of both
Sakel and American tyoes and for Ec.st and West Afric an. Imnnorts of 263,500bales
of American were blbut 2S percent of those "n the first 5 months of last season,
though a slight increase in the cotton at sea suggests that this figure may
later be increa-ed somewhat. The excess of mill takings of American over
imports since Auguast 1 totaled about 180,000 bales, 'leaving the port stocks
at the eid of December at just over 500,000 bales equal at this season's
rate of consumption to about 5 months requirements aft-.r allowance for a
minimum residue. Stocks of American have been declining since May, and
total stocks of all kinds have declined since February 1938, though at a
slower rate than American. At the end of December the American stocks were
only about three-quarters as great while stocks of all kinds were about 9g
percent as great as a year earlier. Relative to the recent years, however,
total stocks ar- still large.

France

Reports with respect to sales of cotton textiles by French mills
in December are somewhat contradictory but trade reports considered reliable
indicate some improveront. The improvemccnt a-Ti.rently continued into the
first nart of January. Reports at the ond of December indicated that sT)inriers,
and manufacturers rather generally had orders sufficient to occupy them through
March and in some instances as far ahead a.s June. Sales to the colonies, the
bulk of which ordinarily takes place in December and January and which regular-
ly accounts for about 15 percent of French mill consumntio:n of raw cotton,
were expected to be at least as large as usual, if not a little larger. Textile
prices tended to hold firm though in some instances a slight easing was re-
ported coincident with a moderate strengthening of the franc.

Decenter's developments in French national economy, pointed in the
direction of ultimate improvement. Within 30 days from the government's pro-
mulgation of its 4-year plan of national rehabilitation, it was possible to
record the repatriation of French funds in substantial amounts, recovery in
the prices of government and other public bonds, and the refunr.ding of certain
French railway obligations in the Netherlands and Switzerland at materially
lower rates of interest. These evidences of reviving confidence are suffi-
cient to suggest that if France can re-iain at peace and the program can be
spared interruption from within, the last 2 months of 1938 may be looked
upon as marking a decisive turn in French economic conditions.

Although current operations in the French textile industry appear to
be returning very little profit, potentially at least the position appears
to have strengthened materially, especially in the export field. During 1939
the value of the franc declined by about 17 percent in terms of the pound ster-
ling which in turn declined some 7 percent in terms of dollars and other cur-
rencies remaining unchanged in value. French wholesale prices are now generally
lower than British by a substantial margin. Althoughfihc textile exports,
other than those to the colonies, are relatively small, French spinners have
recently found themselves able to export to markets in which heretofore they
have been little able to compete. Exports of yarn to Belgium in particular
have increased, and with the curtailment ofCzccho-eslovakian exports it is
thought that some part of Czecho-Slovakiats former external markets may now be


CS-27


- 7 -




0S-27


shifted to France.

Imports and withdrawals from stock at Havre between August 1 and December 29
and stocks on hand December 29, with comparisons for 1937, are given in the follow-
ing table:

S Imports : Withdrawals Stocks
:1938 : 1937 13: 9g : 1937 : 19 : 1937
1,000 1,000 1,000 1,000 1,000 1,000
: bales b.bales bales bales bales bales
Anm eric .n .......... 230.5 393.2 154,5 240.4 260.2 265.8
S-gyptian ............. 2,3 .7 24 ,2
Brazilian .............: 74.5 18.1 41.3 20.1 51.3 4.
Indian ................ 9.0 4.7 9.4 10.0 5.1 6.6
French West African ... 10.9 5.. 8.5 4.6 17.2 5.8
Other French Colonial..: 28.1 5.4 17.6 6.2 15.7 1.7
Miscellaneous .........: 5.7 6.9 12.2 6.1 8.0 7.3
Totals ..............: 358.7 436.0 254.2 289.8 357.5 292.2


Germany 2/

The German "cotton textile" industry, which now uses large quantities of
artificial fiber, closed the year 1938 9rith mill operations at the highest level in
years and with a record production. Tr-.de reports indicate thn.t the 1938 output -
on the basis of raw cotton, staple fiber, waste cotton, regenerated cotton, etc. -
exceeded 1937 production by around 7 percent xand, fo- the second successive year,
exceeded the penk production of 1928.

This continued rise in production -R'as based, in part, unon somewhat larger
imports and utilization of raw cotton, but even riro upon the stedil. rro-,ing
substitution of domestic staple fiber, and cotton waste and. regenerated cotton,
the latter mainly from domestic sources.

The year closed, however, with the industry confronted by a considerable
number of problems, some of them old and some new. The most iroortant are those
arising from the incorporation into Germany of the Sudeten textile industry, with
some 1,800,000 cotton spindles and a wide variety of other cott,'n textile estab-
lishments. Germany is thus faced in 1939 with the necessity ,-f supplying r.aw
material for about 25 percent more spindles (1,800,000 in Sudetenland and 742,000
in Austria) than existed in the first -onart of 1938. This noroblem -rises at P.
time when the balance of trade is bcon:inr, more and more unfav-rnble, and with
demands for foreign exchange increasing rather than decreasing. The latest trade
figures already point to some though possibly only temporary deterioration in
raw cotton supplies, inasmuch as YTovenrber net imports of all cotton fibers (raw,
waste and regenerated) dropped sharply to about 23,600 tons, approximately 109,000
equivalent bales of 478 pounds, as conpa red with 31,200 tons (14,000 bales) in
October and 33,300 tons (154,000 bales) in November 1937. The December movement
of cotton at Bremen, moreover, continued to be a declining one. It is too early
2/ Information relating to Germany, Czecho-Slovakia, Poland, Switzerland,
Finland and Rumania supplied by Agricultural Attache, Lloyd V. Steere, Berlin.


- g -




-9-


to forecast future developments, but a continuation of this tendency would certainly
necessitate a reduction in the allocation of spinning materinls to cotton mills, if
it has not already.been necessitated by the recent increase in the number of spin-
dles to be supplies.

The grent bulk. of German cotton textile production continues to be for the
domestic market, where demand has been climbing steadily for the past 2 or 3 years.
Textile market reports frankly indicate a widespread "goods hunger" for many types
of products, but more especially the common household textiles. Retail sales of
textiles and clothing in the first 10 months of 1938 were 12 percent (in value)
above those of 1937 "da 60 percent above 1933. Of the 12 percent increase ever
1937, about 7 percent represented larger volume, and 5 percent higher prices.
Reports indicate a noticeable drift toward better quality goods.

Recently renewed interest in the raw material problem has been accompanied
by reviews of the principal achievements in -erfecting staple fibers during 1938.
Especially emphasized is: the production of a fiber called Vistra-Hochnassfest,
which is claimed to have- an even greater wet strength than cotton. Vistrolan
fiber, it is sp.id, can be dyed, .in a single process,, the same color as wool with
which it is mixed. Dura-flox is a new type of fiber which will stand hard wear
Lnd boiling. Paraflox, one that is water-repellent, 'Yrshable, and impervious to
rain and dirt. Floxolan fiber ip reported as a very recent and important develop-
ment of a fiber for mixing -rith wools of var-rin.; fineness, one that is oven revo-
lutionary. Allowing for a considerable amount of over-appr.isenent of these develop-
ments, it is nonetheless evident that technical progress continues to be made in
the production and the use of substitute fibers, and that 1939 will brin- a re-
newed emphasis upon expansion of their production, particularly to supply the
Sudeten and Austrian mills. It is stated that productive capacity for staple
fibers will reach 200,000 tons (equivalent to 922,000 bales of 47S pounds net on
a pound-for-pound basis) annually in the spring- of 1939.

Nevertheless an acute need for additional supplies of raw cotton continues.
From reliable sources it was indicated about the middle of December that an offer
to take some 300,000 bales of Egyptian cotton ovor and above Germany's usual pur-
chases of this growth, in exchange for German machinery, arms, ammunition and
other goods, had bee$ reected by the Egyptian government. A somevrhat similar
elan to take 1COCO,!C/add tional of Indian cotton in exchange for German machinery
is stated to be in process of negotiation with fair prospects of being arranged.
If consummated, German takings of Indian cotton would be increased by roughly two-
thirds over the average of the last three seasons.

Reports from both the Sudeten and Austrian textile industry have indicated
a marked revival of activity in 1938, particularly in the Sudeten industry in.the
past 2 months. A number of Reichenberg plants are reported booked up to the end
of 1939, and some plants are working extra shifts. Many mills have taken on a
large number of new workers, and textiles, instead of being the industry with the
greatest amount of unemployment in Sudetenland, now report a certain dearth of
skilled workers, many of whom had drifted into other occupations.

Government regulation of the German cotton trade and industry has now been
extended to Austria and Sudetenland as the result of an order, issued December 10,
by the Cotton Control Office (Ueberwachungsstelle fur Bnumwolle), under which pur-
chases, stocks and orocessinr of raw cotton in Austria and the Sudeten territory
come under the s.-ne controls as those which apply to Germany proper.





CS-27


- 10 -


December novenecnts of cotton in P.nd out of Brenen were strikingly small,
as compp.red both with November and with Dece-ber 1937 and 1936. The principal
factor was the receipt of only some 28,000 bales of Americ-'n cotton in the 4
weeks ending December 24, 1938, .s compared with 72,000 bales in th3 preceding
4 weeks, and 102,000 in the correspondin.-g 4 weeks of last season. Receipts of all
growvths totaled only 55,000 bales as against shipments of 87,000 bales, with a
resultant net decline of 32,000 bales in total stocks, which h are no"w r-.idly drop-
ping down toi-ard the levels of last year, after holding well above a year earlier
all darin.-, the past fall. The snall supplies afloat seen to make -. further de-
cline inevitable in the reeks irinedi-tely ahead.

Bremen receipts and reshipments of cotton between August 1 and December 24, and
stocks on hand on December 24, 1938, 1937, and 1936


Receipts : Reshipments : Stocks
1936 : 1937 7 1938 .1936 1937 1938 .1936 1937 : 1938
1,000 1,000 1,000 :1,000 1,000 1,000 1,000 1,000 1,000
: bales bales bales *bales bales bales bales bale bales
American .. 313 417 220 : 293 357 203 : 135 163 165
East Indian: 13 g 15 : 25 12 19: 8 2 4
All other : 176 203 224 : 171 218 241 : 46 32 70


Total .. 502 628 459,: 489 587 463

Bremer Baumwellborse.


S 18g9 197 239
*197


German imports of raw cotton in November were strikingly lower, drop-oing
to 80,0CC0 bales from 106,000 in October and 122,000 bales in November 1937. This
decline brings the total for the 4 months since August 1 to 432,000 bales, or
but little above the 428,000 bales for the same months last year. Imports of
raw cotton ran considerably larger than in 1937 during much of 1938.

The most striking change in the origin of imports continues to be that
for the United States, which during the first 4 months of the season supplied
less than half as much to Germany as in the corresponding -.eriod last season.
Takings of Peruvian and Russian cotton also rpn behind a yo.r earlier, but takings
from other imoort,'nt sources of supply were equal or larger. Egypt, Brazil and
Argentina supplied more cotton than in the sn.me months of the 1937-38 season.
Argentina, for the first time, in fact, has reached an equal footing with the
United States, and Egypt has joined Brazil as an even larger source of supply.




- 11 -


Germany:


Imports of raw cotton, total, and by specified


countries


Countries


United States ......:
British India ....:
Egypt ................... :
Brazil . ........ .
Argentina ..........:
Peru..,.....
Turkey ..... ... ..
Iran .............
Soviet Russia .....:
Belgian Congo.....:
French West Africa.:
China .............
Mexic ............ :
British West Africa:
(Nigeria) ......
Total all coun- :
tries ......... :


I November
* 1937
Bales


22,856
8 020
20,659
42,440
4, 124
12,105
2,447

4.8g45
767
138
768
717

135


121, 802


October
1938
Bales

15,780
8,052
16,865
25,159
19,543
:7,882
999
5,s64

796

1,087
2,982


105,955


november
1938
B l e'
B .les

13,585
5,080
14,929
18,695
9,984
6,522
2,268
4, 542

273
56
1,521
1,748.


August
1937
Bale s


110,704
36,110
59,207
125,622
13,907
44,o41
10, 1833

8,1483
1,719
2,408g
4,013
4,329

365


427,597


to ITovember
: 1938
Bales


52,850
35, 108
69,225
139,523
52,579
28,018
11, l118l
14,731

1,855
56
4,372
14,394

187


431,937


German Foreign Trade Statistics.

C zecho-Slovakia


Late ITovember and mid-Decerrmber reports from Czecho-Slovakia have begun to
reflect a certain amount of readjustment and revival in the disorganized cotton
textile industry. The spinning mills, of which the country lost a relatively
larger share of its capacity than it did. cloth-making plants, have been the first
to recover. An extremely active demand for yarn is indicated. Many mills which
had to reduce operations for lack of cotton, due to interruption of buying and of
communication, have recently been enabled to increase activity as a result of the
arrival of new raw material supplies. Weavers, on the other hand, are still
suffering from a lack of orders, though some improvement has been noted. Textile
export business seems to be reviving very slowly under present intensely com-
petitive conditions, but the domestic market is very active in most textile lines,
especially clothing. This seems to be arising, at least to some degree, from a
certain uneasiness about currency values and fear of higher -prices.

Recent weeks have also brought a number of indications as to some of the
fundamental changes that may result from the cutting in two of Czecho-Slovakia's
highly intricate cotton textile industry. The Minister of Economics recently
declared t,-'.t nf',v industries must be built up to take the place of those- lost in
the terrUL-pyF .-ed to Germany, and great activity in this direction is already
reported. ? -'-mber 26 dispatch from Prygue states that the Ministry has already
had requew r f.::- i-r-itr to start nearly 200 new industrial n m.1 rt.kinfs, of which
about 70 T)-rc -t "erc i. the textile branch. Enigrants f',cT the S-.. an area have
been especial].;- active in this respect. These new enterprises will include a vide
range of produc-., among them clith gloves, k-it-goods and cotton spinning.
Unfavorable reports, too, are not lacking. A number of firms are reported
to have shut down on grounds of loss of most of their business with the Sideten


I I


I III




OS- 27


- 12 -


area. Others are threatened by lack of chemicals, paper and other products needed.
in textile manufacture.

Poland

Poland is now reported to be preparing a program for the gradual curtail-
ment of iminrts of textile raw materials and their replacement by substitute
fibers of domestic origin 3J/.

The Polish government is desirous of seeing imports of textile raw material
reduced by 25 to 30 percent during the next 3 years. Domestically-produced fibers
are to be usr.e_ in place of the decreased raw materials imported, according to in-
formation emanating from the Raw Material Office of the Polish Ministry of Uom-
merce, where a meeting of representatives of the textile industry and the govern-
ment was held to discuss the textile raw material situation. During the discus-
sions, it is reported, stress was laid upon the fact that the use of "Kotonin",
which is produced from hemp and flax, has not yet leen profitable for the cotton
industry, and that it is not yet being produced in sufficient quantities to meet
the needs of the textile industry and to be utilized with success.

The Vice Minister of Commerce, however, stressed the importance of build-
ing-up an artificial fiber production industry, and stated that the Polish tex-
tile industry's utilization of artificial fibers was too low, that the industry
seemed to lack initiative in founding the necessary new synthetic products indus-
tries which the State considered necessary for national defense, and that the
P-lish government will, accordingly, be obliged to take up the matter in an
active manner. As the next step, it is reported, the government intends to make
compulsory, in 1939, the use of 40o tons of Kotonin per month as compared with
20@ tons since August 1939.

Switzerland

The fear of unfa-,rable developments in the Swiss cotton textile trade with
Germany, which had been engendered by the declining Swiss trade with Germany,
has now been somewhat allayed.

In recent trade negotiations with Germany, the Swiss have made arrangements
for increasing the scope of the textile processing trade between Switzerland and
Greater Germany. There is not ruch optimism, however, about the longer time ex-
port outlook. Government authorities in the Federation have given up hone of
prospects for a return of much of the former market for Swiss embroidery, and the
less profitable units of this specialized industry are being scraped and the
embroiderers are being retrained and transferred to other trades.

Finland
The textile industry, particularly the cotton t:-xtile industry, has become
of increasing importance to the economic life of Finland in recent years. It now
covers the major portion of the country's textile goods requirements, and for a
number of yea..rs t'iere has been an increasing volume of exports, especially of.
cotton goods. Cotton is the most important branch of the textile industry, fel-
lcwed in value of output by the wool, knitting, clothing and linen industries.

The Finnish cotton industry works entirely with imported raw materials.
The raw material requirements of the wool and linen industries are covered by

i/ From a report of the American Embassy, Warsaw, dated December 5, 1939. and
Frankfurter Zeitung, December 19, 193S.




CS-27


- 13 -


irmorts up t C 7rerccnt, and the clothing industry imports from 30 to 50 percent
of its ran.w material neeis.
Within a. relatively short -neriod of tine, Finland's textile prouction has
been more then doubled; in the clothing and knitting industries it has been in-
creased fivefold. Alsr characteristic of the development of the industry is the
--Tact that orrductirn in recent years has 'ecome more and more rl.nifold. The
domestic n-rn1'uction of the more i:!.ipnortAnt articles covers the largest share of
the country's requirements, in the case of cotton goods about 75 percent of total
needs, the inrorts being chiefly specialties. The relation bet'-reen the domnestic
production and i.-r..nrts is shown in the following tabulation:

1926-30 1931-35 1936 1937
Mil, lb. Mil. lb. Mil.lb. Mil.lb.

Citten cloth
Production ............ 12.7 13.9 16.2 19.0
Iir.orts ................ 3.2 2.3 4.9 7.9

W1olen fcbrics'
Production ............. 4.2 5.7 6. 7.9
Imrorrts ................ 3.6 1.7 2.5 3.3

Finland's irTprts of textile goods have increased in recent years due to
the favorable ecnnomnic situation and to the fact that the expansion of doniestic
production has fallen behind the strong up-:'ard swing of domestic demand. During
the period 1921-25, total Finnish imports of textile goods were valued at
4gC,OGG0,OCC Finnish Marks, equivalent to $9,600,000 v.hen converted at current
rates of exch-nge, annually. Theyr rose to 733,A00,000 Finnish Marks or about
$19,500,OCC-, on the average, in the years 1926-30, but drowned to 325,000,000
Finnish Marks, less than $7,OCC,O00o, during the 5-year.period 1931-35. In 1936,
imports w-ere valued at 507,OC'C.,00C Finnish Marks, or $11,100,000, "nd in 1937
they rose to 731,000,000 Finnish Marks, or $16,000,OOC.

Early in 1939 a decline in the imports of textile gcnds took place, but
this decline kept within narro"' limits. From January through September 193S,
however, the total imrerrts of textiles 7ere slightly larger than in the corre-
sponding period of 1937.
Rumania
According to reports received .v the Reichsnahrstand (The rnnmn Food
Estate), te 2o otton acreage in Rumania is to be increased to 74,130 acres. The
plan '>:.u 7' ye cotton acreage has received a favorable r ception in Rumnnia,
: .... K t crop has been increasingly difficult to market, and profitable
s'" -."' r- .. hjrid to find, In 1937 only 4,44g acres were pointed to cotton, but
in l'133 l4,g26 acrPs -'ere seeded, and now l-Jns call for increasing this area
fivefold.

Ruriania today is far from being self-sufficient in cotton, the -resent
crqp only providing for something in the neighbcrhrnd of one-twentieth of total
domestic requirements. The Runanian government, however, is encouraging such a
shift to cotton pro.ucticn, and there has I-een placed at the disposal of the
competent Rumanian authorities a credit of 5,000,000 Lei,(equivalent to $36,000)
according to reports, which will 'be used for the purpose of obtaining first class
cottonseed for planting purposes.




oCS-27 14 -
Italy 4/

Develorpmrnts in the Italian cotton trade aid industry during December 1938
were fully as unsatisfactory. as had bec--. expected in the immediately receding
months, and the outlook for the ner, -e'.r was considered even loss promising. Un-
certain prospects in the domestic market, further loss of foreign m-rkets, increas-
ing government control of the trado, -insatisfactory returns and, underlying all
these causes rr. nrcbnably responsible for nrnv of then, a repl fear of wmar in the
near future, all tended to destroy initiative and to increase the difficulties of
-anufacturers and. I1.ers in trying to lay plans for future trade.

A slightly better d.ennd in the domestic market for nrixed gooc.s appears to
have followed the depletion of old stocks of textiles and the r.ccetn-r.ce by the
public of the nixed f-brics to which the cotton mills rust limit their nrvOuction
for domestic consumption from January 1, 1939. Apparently less sales resistance
is beiri- met than had been anticipated and producers point out that, in n-any
respects, the change is more one of theory than of practice since the admixture
of cotton substitutes has gro-m materially during the nst 2 or 3 years and the
bulk of the cotton fabrics offered to Italiman consumers in the -,ast ye.r has been
made of mixe(_ fibers.

Foreign cotton textile markets do not seem to have improved. In fact,
the balance would! seem to have gone aga-inst Italian producers through the loss of
a large portion of the Egyptian nark.?t and a failure to find other outlets to
replace it. The latest action of the Italizan 7ovu.- --It W.s been the issuance
by the National Facist Federation of Cotton Ir.d'?+'-:*i tc nf Mil.-n on December
29, 1939, of an order to p-oracticallyr susn,-nrl eXort-o 1 J-lian cotton goods to
Egypt pendir.,n an adjustment of the difficulties betrn h,? two countries with
respect to this trade. Cotton brokers assert that this :.,ill be .r-ccorpmanied by
a suspension mf all purchases of Egyptian cotton, although such action will work
consider-ble hardship upon Italian cotton spinners and weavers v'ho soecialize in
the use of E-yptian cotton.

That a considerable amount of trade is involved in this controversy is
auparent frnm the fact that, during the first 11 months of 1937, Egypt imeorted
20 percent of total Italian e>xpo.rts of cotton products, and exoorted to Italy
26,741 tons, about 123,0C0 bales of 47e pounds, of cotton. During the sane rionths
in 1939, Italian exoorts of cotton nrofucts to .,yot constituted 17.6 percent of
Italy's total exports of these goo',.s; while Italian imports of .gyprtian cotton
amounted to 23,491 tons (10g,000 bales). It is estimated tha.t unrider the new
reciprocal quota plan of the E-yptian ;',overn-ient, Italian textile e.oorts to
Egypt in 1939 will have to be curtailed by al'out 75 percent from the totals of 1937

Practically no increase in the Odemanid for rawv cotton was roaorte,1 to have
occurred in Italy during December, but a little betternient was oxrected Ouring
January by the distribution of an import quota for the use of -"anufn.cturers of
goods intended for the domestic "-prket. Deliveries of raw cotton in Docember were
said to have been made on old contracts while new orders were usually small and
intended for nrornt delivery, in-.:icatin-" a lack of confidence in the market for
Italian cotton .::cnds durin.- the ir.nediate future.

Dealers report th.t recent sales of Amcric.nn cotton have declined
materially for two reo-sons: First, the slack'c deT.i-nd. of Italian buyers and,
second, the rer'ucn' offers of Anerican cotton. The:? assert that the grades
and qualities of Americnn cotton which they na' offer to prospective Italian
buyers are being reduced almost 3aily by the Aneric-n correspondentJ
!a Based largely upon information received from the Americ-n Consul General
at Milan.





- 15 -


On the nthei hand, Bxazilian cotton of satisfactory quality is available to
the buyers at prices lower than they would have to cay for similar grades of
American cotton.

About the end of December it was reported that there had been much dis-
cussion in newspaper and trade circles in previous weeks of extensive plans
under consideration by the Italian government to assume complete control of
foreign trade in various commodities, among them being the imports of cotton
and exports of cotton goods.t Up to that time it had not yet been decided
whether the plan would be adopted.

Practically speaking, the Italian irmarts of raw cotton are completely
controlled by the Italian government through the Cotton Institute in Milan and
the Foreign Exchange authorities. Apparently the principal change which the
nronosed new control would bring about is the severance of direct contact be-
tween cotton brokers representing foreign exporters and the cotton spinners to
whom they now sell. The new &&ency that may be created would probably place all
orders for cotton without giving brokers any intimation as to the concern for
which the orders are intended.

UI. S. S. R. /

The 193g plan of the U.S.S.R. provided for the production of 1,120 million
pounds of cotton yarn and 4,000 million yards of cotton fabrics, which compares
with 9,656 million pounds and 3,400 million yards respectively, manufactured
in 1937. During the first 9 months of 1939, however, the output of the cotton
textile industry was 13.5 percent behind planned levels.Though improvement
occurred in October and November, total 193g production, while above 1937,
no doubt fell behind the level provided for by the plan.

This unsatisfactory development of cotton textile production has numerous
causes, most Imoortant of which seems to be a general disorganization in the
industry. There is still a disproportion between spinning and weaving capacitie,
which already existed before the war when the cotton industry of present Russia
supplemented its yarn output by takings from the Baltic s-ninning mills as well
as by imports of yarn from abroad. The spindle deficit has become a serious
problem, since the present capacity for yarn production is not adequate to cope
with the increase in domestic raw cotton output or to satisfy yarn requirements
of the loom capacity of the weaving mills 6/. It is, therefore, hardly sur-
prising that the authorities are anxious to increase the number of spindles in
the industry, notably since a large share of the present equipment is apparent-
ly ar.tiquated and inefficient. According to an announcement by the Soviet trade
delegation to the United Kingdorm, plans for 1939 have called for the installation?
of half a million now spinning spindles, compared with an installation of only
90,000 in 1937.

5/ Based largely upon information supplied by L. Orina of the Bureau's Belgrade
Office.
6/ It has recently been reported that looms arc not utilized to full capacity
and could, given the necessary yarn, increase their output by at least 15 per-
cent. In addition, yarn requirements of the knitting mills and Ather indus-
tries are not fully met.


CS-27





CS-27


Inadeouate utilization of the available equipment and poor organ-
izatirn of labor is also said to account for the unsatisfactory situation in
the cotton textile industry. Fifty percent of the cotton textile workers,
it is reported, are not fulfilling their working norms. Current repairs as
well as replacements of machinery, handicapped by a shortage of qualified
personnel and by delivery difficulties in the machinery industries, are re-
ported to be insufficient. Stoppage of equipment has become a sore snot in
the cotton industry, and has been on the increase in recent yaars. In the
case of spindles it was 6.73 percent in 1936, but rose to 9.96 percent in
1937, and in the case of looms even increased to 11.3 percent in 1937, as
compared with a stoppage of 7.2 percent in 1936. There has been further in-
creases in stoppage during the first half of 1939, compared with the corre-
sponding period a year ago. I/ It is reported that certain shifts.in yarn
counts and qualities produced in factories long accustomed to their previous
assortments is also largely responsible for the stoppage of equipment.

All this, apart from its quantitative effects, could naturally not
remain without influence upon the qualitative outturn of the goods produced.
The share of second-grade and defective goods averaged as much as 24 percent
of the total during the first half of 193g, compared with 19.4 percent dur-
ing the corresponding period a year ago.

In view of this situation in the manufacturing stages of the Soviet
cotton industry, domestic raw cotton supplies from the large crops harvested
in recent years by far exceeded the quantities which the industry'was able
to absorb. Since exports of raw cotton were less than imports, a consider-
able reserve has accumulated, and there is a probability that these stocks
will continue to rise in the current campaign. The 193S manufacturing plan
was indicated to require only a total of over 2,767,000 .bales of 478 pounds
of ginner cotton (and will actually require less because the plan was not
fully executed), compared with a reported harvest of 3,7gO,O00 bales in
1937. Carry-over stocks at the beginning of the 1938-39 season are report-
ed to have surpassed 1,380,000 bales of ginned cotton, compared with carry-
overs of 876,000 and 217,000 bales 1 and 2 years earlier 8/.

Low grade cotton is reported to constitute a considerable share in
the total carry-over. It amounted 'to 37 percent of the total in 1937 and
is estimated to make up about half of this seasons carry-over stocks, which,
in absolute quantity, means the doubling of last year's stocks of low grades.
This is partly due to the relatively unfavorable qualitative outturn of the
1937 crop.

J/ Stoppages in 1928-29 were as low as 4.5 percent in the case of spindles,
and 2.88 percent in the case of looms.
_/ There are indications that the actual carry-overs in the ppst several
years were even larger than the above figures indicate, since the available
data on crop production, foreign trade, yarn output by the industry and
estimates of "other consinmotion" of raw cotton do not account for a dis-
appearance equal to reported seasonal supplies less reported end-of-season
carry-overs. An over-estimation of crop production in recent years is, of
course, also possible.




- -7 -


SUPPLY

Domestic stocks of "free" cotton sharply reduced

Even though exports of American cotton from August to December were
1,290,000 bales less than in the corresponding period last season, the large
increase in Government-loan stocks has materially reduced the domestic supply
of so-called "free" cotton. Although the estimated total supply of American
cotton remaining in the United States on December 31, 1938, including the
unpicked portion of the crop, exceeded stocks as at the end of December 1937
by about 1,00,000 bales, domestic stocks of "free" American cotton at the
end of 1939 were smaller than a year earlier by about 2,900,000 bales or 27
percent. Total domestic stocks at the end of December this season were larger
than the previous December 31 record high of 1931; by about 1,700,000 bales
but when Government-loan stocks are deducted, stocks of free American cotton
as of December 31 this season totaled 5-,600,000 bales less than at the end of
1931. With the exception of 1934 and 1935, December 31 domestic stocks of
"free" American cotton were the smallest this season since 1923.

Estimated 193$ foreign production 19 percent
below previous crop

The 193g-39 total production of foreign cotton is now placed at
l6,400,r00 bales of 479 pounds net which is 15 percent less than the
19,280,CO bale (revised) estimate of production in 1937-39. These estimates
anmi the others included in the table below pertain to the "agricultural crop" 5/
which, at least theoretically, includes both that cotton which is consumed or
manufactured in commercial establishments and that consumed on hand spindles
or in other ways without entering commercial channels. Despite the rather sub-
stantial decline in the estimated foreign production, the 1939-39 crop, as now
estimated, is the third largest in history and 16 percent larger than the
average for the past 10 years.

The present estimate of foreign production plus the latest (December)
estimate of the United States crop gives an estimated 1939-39 world production
of 2g,o400,0C0O bales. This is 9,900,000 bales or one-fourth less than the
. record crop of last season and 2,900,000 bales or 9 percent less than that of
1936-37. It is, however, 500,000C bales or 2 percent lanrer than the average
annual world production during the past 10 years.

f/ These estimates of the "agricultural crop" should be distinguished from
estimates of the production of commercial cotton. In some countries large
proportions of the crop, and particularly in India and China, large quantities
of cotton do not enter commercial channels. This should cause the annual
total production of cotton to materially exceed the averag-e estimate of the
commercial production, but in some instances the two sets of estimates are not
comparable. The Indian Government's estimates of cotton production in India,
which are used in making these estimates of the "agricultural crop", are
apparently considerably too small. While this is quite generally recognized
even by the Indian Government (see Statistical Bulletins 4 and 6 of the Indian
Central Cotton Committee), they are used rather extensively because other
available estimates are less satisfactory for one or more reasons.


OS-27




UNIVERSITY OF FLORIDA
05-27 W III II IIIMI I II 11111111111 111111111I
3 1262 08900 4286
Cotton: Production in specified locations, 1920-21 to 1938-39

t Foreign countries___ World
Crop year : United :Total exclud- : :Total exclud- :
: States :ing China and : Total :ing China and : Total.
:____ : Russia ____ ______ Russia ___ __
1,000 1,000 1,000 1,000 1,000
bales bales bales bales bales
4h78 lbs. 478 lbs. 4y8 lbs. 478 lbs. 478 lbs.
1920-21 : 13,429 5,457 7,921 18,886 21,350
1921-22 7t945 5,785 8,025 13.730 15,970
1922-23 9,755 6,980 99545 16,735 19,300
1923-24 : 10,140 7,277 9880 17,:417 20,020
1924-25 : 13,630 8,567 11,530 22,197 25,160
1925-26 16,105 8,895 12,135 25.o000oo 28,24o0
1926-27 : 17,978 7.811 10,942 25,789 28,920
1927-28 : 12,956 8g,014 11,934 20,970 24,890
1928-29 : 14,477 8,509 12,403 22,986 26,880
1929-30 : 14,825 8,3g8 12,035 23,173 26,860
1930-51 : 13,932 8,096 12,298 22,028 26,230
1931-32 : 17,097 6,786 10,723 23,883 27,820
1932-33 : 13,003 6,821 119357 19,824 24,360
1933-34 : 13,0147 8,975 13,g843 22,022 26,S90
193-35 : 9.636 9.223 14,204 18,859 23,840
1935-36 : 10,638 11,195 16,112 21,833 26,750
1936-37 : 12,399 11,801 18,921 24,200 31,320
1937-38 1/ : 18,946 12.179 19.279 31.125 38,225
1938-39 1/ : 12,008 10,492 16,392 22,500 28,400
United States production compiled from reports of the Crop Renorting Board,
others estimated very largely from data compiled from official publications of
foreign Governments and from the International Institute of Agriculture.
l/ Preliminary.