The Cotton situation

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The Cotton situation
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United States -- Bureau of Agricultural Economics
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L.34 ^ h.


UNITED STATES DEPkARTSIT OF A.ORICULTURE
Bureau of Agricultural Eccnnmics
Washington


Cs-38


December 28, 1939


THE CO T T ON SI TU T I O N


Sumnary

A number of developments have contributed to the rapid rise in

cotton prices during the p"st month. These developments include the con-

tinued high level of domestic nill consumotion, lar.e re-oorted sales of

American cotton for export, the high or incr3.sed rate of consumption in

several important foreign countries, ?.nd ponssibly considerable investment

or speculative buying in foreign countries. The rise in domestic cotton

prices to the highest level in more; than 2 yeors has resulted in a

considerable reduction in the quantity of cotton held by the Government

as collateral on lonns.

In November domestic mill consume tion vwr,:s about one-sixth larger

than in November 193c mnd for the second consecutive month set a record high

for the month. In late iTovembc.r and early Decumbc-r mill activity declined

somewhat but continued at exceptionally hi6h lc.vuls. hiring November and

in the early cart of December manufacturers' s,.lc:s of cotton textiles con-

tinued much below production. During the secondd we.ck of Docember, however,

heavy sales of cotton goods materially imrnrovJd the -nosition of cloth

manufacturers.


The 1940 Agricultural Outlook Chart Book
for Cotton is now available to re-1.err of The
: Cotton Situation. Any re- dor who wants a cory may : U 5
: obtain it unon re-iu'st to the Division of Economic :
Information, Bur(;..u of Airicultural Econom.ics, "
Washington, D. C.:
I




ZS-3S 2 -

Recenr.t reports indicate that in Great Britain, Italy, Holland, and

Japan cotton mill activity either is continuing at a high rate or has in-

creased ccnsiaerably during the Tnast ferw "weeks. The favorable developments

ira these countries ajpe:'.r to have more than offset tha declining consumption

which appears to have taken place in the -ermnn--controlied area and in a

few other countries.

Exports of American cotton from August 1I to Dec.mr.ber 14 totaled

2,65h,0o bales a cor9.ingto trade data. This wps C, percent more than in

the same period a year earlier b'ut 9 percent less than in the like period

of 19537. Registration of sales and deliveries of cotton for export payments

frorr. August 1 to Dcce-.ber l4 totaled about 5-1/2 million bales. Such regis-

trations during the 3 weeks ended Decemcber 14 totaled 1,40O0,COC bales, under

the stimulus of the announcement in e'r.rly Decenber of reduction in the ex-

port r-.yrient rate. Ihirirng the week ended Decomb.'r 21 registrations totaled

65,C00 bales, about h;ilf the total of the smallest previous week.

Despite reduced exports to Gerrman total e"oorts from Egypt and

Brazil were lar-er in the early r'.rt of th currant sern.son than in the corres-

ponding period of 1938. Ex-rorts from Inriia uo to thn end of October were

about the .n-e as for the like -mriod l.st sertson. Exports to Great Britain

from all thr,.o of these countries were considerably larger during the early

part of the current season than in the comor'rable period l'-st season.

PF.ICOES

Domestic pricess advance 20 percent between November 1l
and Decaember 13, then decline slightly

The ten-market avereve of Middling 7/S-inch cotton rose from 9.29
to 11.11I cents .er T- ,u'd bht.-een Novembo'.r 1A cond December 1i, a gain of




-3-


approximately 20 percent. A large rart of the advance during this Treriod
occurred in the first 15 days of December. The price on December 13 was
the highest since Auglust 1937 and about 2-5/8 cents or 31 percent higher
than on September 2, just prior to the outbreak of the European War.
Following this raid advance, prices declined, and on December 26 the ten-
market average wa, 10.69 cents, boutt two-fifths cent lower than on
December 13 but still higher th}..n at an.y time b.t',?un Agust 1937 and De-
cember 1939. The avora,:'ge -.rice from Dfcember 1 to 26 of 10.34 cents,
was approximately l1.9 cents or about 2? p."rcernt above the December 1939
average.

Several factors have contributed to the recent aL v.nce in domestic
cotton nricos. T,;sc include the continued high level of domestic mill
consumption, the hip-h or increasing rate of consumption in several im-
portant foreign countries along with relatively lar:-e unfilled orders on
hand, large reported sales of American cotton for export, and possibly
considerable investment or speculative buying, especially in foreign
countries.

Price advances in Livorpool considerably greater than
in United States

Bet /'en November 13 and December 13 the Liverpool price of American
SMiddling Fair Stanle advanced from 11.41 cents a -oound to 14.76 (converted
at the current day's cxchrange rate). This was a gain of nearly 30 percent
comuoared with a gain of approximately 20 percent in domestic markets. As
a result of the greater advance in Liverpool prices, the spread of Liverpool
over New Orleans increased from 1.94 cents per pound on ITovember 13 to 3.43
cents per oound on December 13, an increase of about 1-1/2 cents. During
this period trnns-iortation costs from New Orlepans to Liverpool (ocenn
freight olus insurance) increased about 1 cent per pound, and appareL.ntly
account for most of the increase in spread of Liverpool ovor New Orleans.
Another factor tcr:dir.g to increase the spr-: ad was the announced reduction
in the United States Governmentts export poay-mnt rate from 1.50 cents to
0.20 cent per pound.

After Dcce:-nbjr 13 the Liverronl nrice of American cotton declined
somewhat more tb-n the nricze in the United States, and on December 15
American Middling in Liverpool was 14.05 cents, or 3.0 cents above the
New Orleans price. On December 22, however, Livercool at 4.l31 cents was
3.39 cents abov, Nuw Orleans.

Dusnito the sharp rise in the price of American cotton in Liverpool,
the prices of Ir.dirn Oomra No. 1 -nd Eugyptirn Fully Good Fair Uppers were
higher relative to Am'rican on December 15 than a month earlier. As com-
pared vith the situation existing immediately before the domestic Exoort
Payment Progr-m 'r:-r.t into effect, Livrr.,ool prices of Irn.ian Oomr3,
Egyptian Uopers, anc -.r- ilian Sao Paulo on December 15 were much higher
relative to America.n. For the ra.!-t few weeks Brazilian Sao Paulo has been
quoted at the sa.ne rice as Am..ricin Middling.


CS-39S




CS-38


EX-ORTS

United States ex-orts "p 5 ercunt ov-'r lg-.t s ,asor,
but under 4ho)-e i.n 113_

Exports of America4 cotton from Aulrist 1 to Novc.mber 0 were about
52-percent larger than the v -rr small xT-rts during the sane period last
season, according = to data reliav-,ed by the B'21-u of the Census. They were
somewhat smaller thoul exports during the like period in 1937-38. During the
month of Thvenmber, when exports were materially afccctcd by the ban on
shinnooing as a resrelt of the Neutrality tAct, '%mrest.c *o-rnrts were only 22
percent larger than in I'-vcmbr:r 193. Accor'-ing t- trad i reo-norts, exports
during the first 2 ,roek of December were r- r...nd 2r5 percent, respectively,
lTr..r than in the corr;'-:-)nPing weeks of last season.

From A&upust 1 to December 14 domestic exnrts totaled 2,654,000 bales,
according to trade data. This total is 50 percent l1rrpcr t.hian for the same
period a year earlier but 9 percent smaller than for the like period of 1937.
Exi-.rts to Great Britain during this 4-1/2-month r;rio ""-ore -1/2 times as
large as in the smze r.-riod last yoar but slightly lcss than in the corres-
ponding period of 1937. Reported exports to German:-, --n the other hand, were
95 percent Pmaller thn from August 1 to December 1, in 1949. Exm-rts to
Franco vwero 9 r1-rcent lz', ,r than a year earlier and t.) Itnly 45 percent
larger. Ex-orts to .r: of the other Eurojitaii countri,- also show marked
increases. During the week ended December ?1 exn .rtr, ct-re more than t-wice as
large as a year earlier. The i.ugust 1 to D,.cermbr 21 t-tal -f 2,850,000 bales
was 56 percent l:.-ger thn the total to thj crruEson.ndir.g d.ete in 1938.

Registration of sales and deliveries of cott-on f,'r exhort payments up
to December 14 totaled 5,499,000 bale-.is. This represents an increase of
Sl,400,000 bales over the reororted sv.ls uind delivuricus i'-o to ifovemb. r 30. A
large part of this increase occurred during the first 2 vec.ks of December when
the export aynment rate on the cotton rogister.- for extort was successively
reduced from 1.50 to 0.20 cents per pnun. Follor'ing the announccr'ernts that
the rate was being reduced, there was a sharr incrcp.'e in registration to fix
the rate of payment before it vw.s further reduced. But during the w-eek ended
December 21 reported sales rznd deliveries dropped to 65,C000 bales (see
table 1).

Exports of foreign. cotton also sh)w increase

Fr- a'iugust through October, e:xrjrts from Indiia -'ere aor)xi..mtely the
saric as &luri.-g the corres7,ouLding period last season, l.ut ex".rts from Egypt
vere 19 -nrrcent larger. In both instances exerts %ere eithLr about eoual to
or substantially larger than in the corresr-inding Derio. of 1937--8 aid also
lar.-er than the 1vera ce for the Lugust-Octo'hr perio-1. during the 10 years
ended 1937-3g. As was the case with Americ"n cotton, exports of Indian and
Egy&rtian cotton to Great Britain during the first nart of the current season
were considerably lar;,r than in the corresnr-niling cu-ri-d list season. Exported
both from India and E&ypt to France %:nd to Germr.h/, on the -,ther hand, were
much smaller than in the first 3 months of I..?t s,'r sn. In November, however,
ex),orts to Frruce were three times as large as a yc-.r earlier and from August
through November were 4o percent larger than in t!ie first 4 months of 1939-39-
Total ex-ports from Egypot for the 4-month peri-l excedod the total for the
same period last season by nearly 20 percent.




C3.-3? -5-


Total exports from Bro?il in Auinu-t ".nd Septe'mber were II percent
larger than the record high exrnorts in Aus-gut and. Seotenmber 1939. In this
case, too, exr-orts to Gre--t Eritain were considerably higher than in the
same period of 1939S whereas exports to Fra.nue and Crerm.any were smaller.

Table 1.- Cotton and cotton pr,-ducts export sales aL, deliveries as reported
to the Agricultural Lju.'U-tmFnt Ad'-inistration an'.der the E:xrort Payment
Program, specified rreriods l/


SWeek
ended
Thursday


Aug. 3
13
17
24
31
Sept. 7
14
21
28
Oct. 5
12
19
26
30
Nov. 2
9
16
23
30
Dec. 5
7
114
21
28
Jan. 4


C t t -,, Cott. ,, Cotton and cotton
CTtton Cotton -rmiucts rc3 u4t
: Total : _u_____ : Total ::Ola _iv Totail ucts ___ltv
: Total : 8uiaul~bive : Total : Cumaulative : Total : ,3.-Lmul'ative


Sfor : total from : for
: w ek : July 27 : -.',.ec
: Running RunnLing Runring
ba1 2s bales b3lcs


202,50~4
201,62b
224,833
218,644
253,6-0
298 ,745
272,908
270,833
227,704
205,591
197,010
164,791

20r ,79
12r,314
l87,76 b
297 ,q34
26g,cC7
60 8,952
373,985
397,953
64,545


303,539
506, : 42
707, 66
932,501
1,151,145
1.4o1,775-
1.7`3,520
1,976,428
2,2 47,261
2,474,9f'5
2, 6o0,556
2,877,566
3,142,357

3, 2 3,-236
3 363,550
3,551,156

4, 726,8t9
5, 1c(,84
,5 ,$4e8687
5,5639232


7,278
5, 14
7, 101
14,398
4,844
19 ,r.7
18,425
20,517
21,979
14,975
9,976
14,377

12,221
12,730
10,251
25,570
7, o99
6,224
6.24A
27,C88
11,193
10,129


: total from : for
: July 27 : week
Running Running
hales bales


4,411
11,689
17,530
24,631
29,029
33,873
53,780
72,205
92,722
114,701
129,676
139,652
154,029

166,250
178g,980
l.9,231
214, ni
2P2?2400
22,, 648
256,336
267,529
277,658


209,782
2r7,467
231,934
223, 142
258,474
318,652
291,333
291,350
249,683
22., 566
206,986
179,168

213,100
133, o44
197,857
2,50o4
276,4r6
615,200
401,673
409,o46
74,674


: total fr,-rm
: July 27
Ri-rnnin
bales

307,9439
517,731
725,198
957,132
1.l,] -,174
1,435,64g
1,757,300
2,o4g,633
2,339,933
2,599,666
2,810,232
3,o017,21
3,196,386

3,409,486
3,542,530
3,740,397
4,o63,891
4,340,297
4,955,*497
5,357,170
5,766,216
.5., b .990


Compiled from official records- of the Agriculturial Adjjustmert AdmininF.tration.
1/ Under the Export Payment Program exporters have or will receive payments from
the Denartment of Agricultu-ire ranging up to 1.50 cents .ner j.ound for all cotton
exported between July 27, 1139 and July 31, 1940 provided the sale or delivery
of such cotton was or is recorded with the Peoiartment during certain o'.,riods.
Somewhat comparable payments also apnly in the case of cotton products. The pay-
ment rates per pound for raw cotton thus far announced and the 0mriod during which
the rate to be received was determined by the registration of sales or de-
liveries are: July 27. to Decermber 5 inclusive, 1.50 cents; December 6 and
December 7, 0.75 cent; Docombor P to December 11, o.#4, cent; and from Pecember 11
to date 0.20 cent.


- 5 -






Table 2.- Cotton: Exports from specified countries, average 1928-29 to
1937-38, and seasons 1937-38 to date


Country of
origin and
destination


: November August to November
:10-yr.av. :: 1939 :10-yr.av.: : : :1939-
:1928-29 :19-7:1938:1939 :as a .:1928-29 :1937-:1938-:1939-:40 as
Sto : : : : of : to : 38 :39 :40 :a % of
:1937-38 : : : 1938 :1937-38 : : : :1938-39


Ur


: 1,000 1,000 1,000C 1,0C0
:running run, run. run.
ited States to: bales bales bales bales
Germany ,....: 176 119 34 0
United Kingdom: 212 269 72 158
France ....... 110 130 65 49
Italy ........: 67 59 33 31
Spain .......: 26 0 0 25
Belgium ...... 21 26 14 28
Canada.......: 33 34 32 46
Japan ........ 200 15 121 117
China .......: 4 0 6 42
Other coun. ..: 109 145 103 88
Total .....: 958 7C7 480 584


Egypt to
United Kingdom
France .......
United -States
Germany .....
Italy .......
Japan .......
British India
Other cooun.
Total ...
British India to
Japan ...
Italy ........
China ...
Belgium ..
Germany ......
United Kingdom
France .......
Other coun.
Total **s..
Brazil to
Japan .......
United Kingdom
Germany ..
France ....'..
Italy ........
Netherlands
Belgium ..
Other coun.
Total. .


Per-
cent

219.4
75.4
93.9

200.0
143.8
96.7
700.0
85.4
121.7


1,000
run.
bales
602
566
349
223
88
63
81
568
10
: 351
2,879


1,000 1,000
run, run.
bales bales
399 244
744 193
413 241
218 114
0 2
84 44
98 104
84 345
1/ 7
394 340
2,434 1,534


1,000
run.
bales
28
791
243
149
107
80
132
298
113
397
2,338


Per-
cent
19.4
409.8
100.8
130.7
5,350.0
181.8
126.9
86.4
1,614.3
116.8
152.4


1,000 1,0C00 1,000 1,000 1,000 l,OCo 1,000 1,000
bales bales bales bales Per- : bales bales bales bales Per-
:478 lb. 473 lb. 478 lb. 478 lb. cent :478 lb. 478 lb. 478 lb. 478 b. cent
: Uovember August to N'ovember
S 85 72 48 61 127.1 : 194 204 144 205 142.4
26 33 14-1 42 300.0 : 69 94 50 70 140.0
12 5 5 4 80.0: 28 14 10 29 290.0
: 16 22 14 0 -- 46 82 73 12 16.4
: 15 11 11 10 90.9 : 40 4-12 42 27 64.3
16 6 17 14 82.1 : 37 18 51 60 117.6
S 7 17 6 19 316.7 : 17 42 23 56 243.5
37 18 38 35 92.1 : 113 129 114 147 128.9
S214 214 153 185 120.9 : 544 625 507 606 119.5
:_______ October August to October
48 18 88 69 70.4 179 108 256 215 84.0
17 3 9 2 22.2: -:3 20 18 5 27.8
: 12 3 5 12 24(.O : 38 20 6 72 1200.0
S In 7 6 0 -- : 35 24 17 8 47.1
: 11 3 8 C -- 3 24 31 6 19.4
11 7 14 21 150.0 33 27 45 55 122.2
6 2 6 i/ -- : 20 8 16 8 50.0
8 7 8 9 112.5 : 31 32 34 51 150.0
* 123 50 144 113 78.5 408 263 423 420 99.3
September August to September


15
13
42
2
2
2
1
4
86


Compiled from official sources.
countries.


66.7
211.8

71.4
400.0
133.3
25r .0
62.5
97.4


/ Less than 500


2/ 55 70 68
45 61 68
68 52 50
7 33 22
3 10 15
4 12 16
4 6 9
17 17 42
72 203 261 290
bales. 2/ Not available by


97.1
111.5
96.2
66.7
150.0
133.3
150.0
247.1
111.1


CS-38


- 6 -




CS-3-


DH.EIAND AIID CONS.:UFT'IOI

TUITZD STATES: Mill consumLnption at new high level

In ;Iovember domestic mi.l consumption was about oin-siTth larger
thi n in ."ovember 1933 end for the second consecutive month set a record
high for the month. Se.les of cotton t-:xtiles by manufacturers, however,
contirA'ed much below produc ion during, November. As a result cloth prices
declined somewhat, mill margins narrowed, and unfilled orders -ere
apparently materially reduced. Duri:ig the early part of December, on the
other hand, the rv-id rise ir cotton prices resulted in rather heavy sales
of cotton cloth. TE.eSe s`.-LL- improved the position of cloth rManifacturers
and will prevent domesticc miV 1 activity from docllni'- as coon as it
otherwise would. :Tiverthel--s, it is expected that, in view of the ex-
ceptiorally high present rata of consumption and the probable decline in
business activity, cotton mill activity may decline during the next 2 or
5 mon+.Lhs. During late H4ovember mid the first 2 weeks of December, mill
activity declined somewhat, but consumption in the month of December may
also be higher than in any previous December.

One of the factors wvhich appears to be contributing to the high
rate of domestic cotton consuijnption is the sharp increase-in jute and
burlap prices whicii has occurred since the outbreak of the European War.
The heavy demand for burlap for use aa sandbags in .European countries,
together with incre.ased trai.sportation costs, -ire no doubt largely respon-
sible for the marked increase iA- domcot.ic burlap prices ri-:co August.

EUROPE 1/: Mill operations and business mostly active, _-cept in
German controlled art

The E-uropean. cotton situation during November a-d the first half of
December was featured by the v icr ecoi-_omic ramifications of the war, with
its shipping and forei '.- tri.de problems, '.:2nravw.ted'by the United States
-'eutr-lity ban which prohibits Acricra vessels from enteri:-g the zones
of war. Cotton mill activity and business, with its considerable share
of orders for military anwd civil dcfonse requL'ements, remained active
in most Europea,. countries, but Vwas further reduced in the
territory under Germ.an control. British cotton textilo exports continued
unsatisf-ictory.

As the : iar go0s on, it is ,grrduanl.y being realized by the trade
that war-time economic policy nnd policies of ecoio6'lc warfare will soon
tighter their grip upoI the control aid direction of foreign trade, and
that the cotton industry -,il not escape bein-g affected. Tfhile so far
this season -urop,-,n imports of raw cotton, notably Aerican, have been
favored by av.--i.'ty of factors, This situation is now Lo3 the verge of
a change. The gc .-:raJ oxigencies of war-time conditions in the belligerent
countries, it is -rgued, require anm economic policy ruthlessly bent on
a successful prosecution of the war anq economic policy in vhich the
consideratior.s of normal sound bo.oirnoss are of seco id.ory importance.

I/ Based largely on report from. the office of the Agricultuiral Attache,
London, dated December 5, 1939.


- 7 -




cs-39


-8-


Accordingly, in Germany aid the countries under her control con-
sumption 1:i being restricted to a very low, level. In Great Britain and
Fripnce there is a gro': i'lg tendency toward tighter control and regimentation.
The two countries havo adopted a general policy -.hereby imports are to
be largely obtained from Europe and Ally sources of supply and from such
other countries as are in a position to a&erpt British-French goods as
payment. Imports are airo to be made, on a la-rger scale, from otherwise
neglected sources, simply in order to forestall Cernany, or to compensate
some countries for the loss of the German market. The recently announced
coordination of 'r'nco-British economic policy is certain to facilitate
these procedures. In the field of raw cotton .urcharces such policies
and coordination are already visible. The British Gove.-nmmnt recently
':.,'dertook to buy an a0vdLtioral quantity of Egyptian coti on if and when
Alexandria Prices wea2l.e below a specified level. It is also said that
Britain bought the entire surplus from this year's T'ir-.-sh cotton crop,
and that this cotton is destined for the French mill-. British bulk
purchases of Brazilimo and Peruvian cotton also have been rumored, but have
not as -yet been confirmed.

An ocuto shortage of -fr-ight space for American cotton and increased
shipping L_,onrds resulted in a formidn.ble increase in the rates since the
end of OctLcb.jr. This, 2long .,ith apprehension as to the future of the
supply position, the Frnco-British buying policy, and possibly some private
speculative or investmont belying, resulted in a spectacl'lar rise of
Liverpool quotations for Amrican cotton during November s-d the first half
of December. The increase in Liverpool quotations for fiddling fair staple
from November 3 to December 1-5 oamountod to early 45 percent, compared with
a 22 percent rise in the New Orleans quotations.

UL;ITED j'?- GDO

Several factors ha-ve so far tended to increc'se British imports
and consumption of raw cotton over the unfavorable levels of the first
41 months of last season. Largo requirements fDr military and civil
defense purposes are of conrlderable importance in the initial stages
of the war, .anid a reduction in civilian consumption will not come until
a later date. Thus far it is not unlikely that there have been important
civili'-, purchases of goods against subsequent price rises. Port nr.d
aill stocz:s at the b,;g.--inc of the soson "'wvore extremely smr.ll and some
replcnifr`inmant seemed to be required, particularly u:ider War-time condi-
tions. The British Govor1 -.e:t's purchase of a substaLntia.l quantity of
American cotton under the Cot+on-Rubber agreocma-t is nLso a factor.
Iloroover, there were considersible imports of Americran cotton. in nxitici-
pation of the United St;,tes neutrality bnn on Americv-r shipping to the
zones of wcr. It is gradiall.y being realized th.-.t economic w.,,arfare will
inevit-a l be tightened up as the %var goes on, and that the general
exirencies of war-time corid!tions may not permit as free a flow of raw
cotton supplies to L'jnco.ahire as has hitherto been allo.'ed rud even
favored. This hr.s tended to increase British imports of raw cotton so
far this season. In editionn the 11-itud States Export Payment Program
and the improved relative prices have operated i-.: favor of higher takings
of American in relation to tzki!Vgs of other growtvhs.




cs-3S


-9-


It is believed that in the near future some of the above factors
may begin to affect British imports and cotton consumption adversely.
As the increased raw cotton prices (and increased labor costs) are
reflected in the retail prices of cotton textiles, sales to civilians
tend to become restricted unless their incomes have increased in a somewhat
correspor.nding manYLr, p.Lrticui-rly in the ov.-nt subsquent price rises
are expected to be relatively smoll. Also there is the possibility that
before long the goverr.mer.tal war-time economic policies l-.y become less
favorable to importation of cotton. Mill operations on Government orders
may also become less important before long.

Mill activity in both sections of the Lancashire cotton industry
continued high throughout November ,nd the first half of December. Un-
eiployoent irn the cotton industry showed a further decline to the middle
of November aid reouained considerably below a year earlier. Denend for
coarse yarns for the wide rangu of heavy cloths needed for the forces and
for civil defense in the past 3 months has been of s.ich extraordinary
proportions that a bottle-ileck has arisen in the spinning section producing
coarse counts. Goverr-,i.t requirements are generally net, but ordinary
commercial cust.-.ners have been quoted high prices and distant delivery
dates to dotcr then fro:. placing further orders. These conditions have,
of course, had unfav 'rable repercussions upon Lancashire's export business,
which remained unsatisfactory and continued to encounter successful competi-
tion from India, Japan, Italy, end the United States, in the East and in
South America.

In trade circles the suggestion has been made that additional
supplies of cotton yarn 'should be imported ever. though it would be difficult
to secure such yarn supplies.

Reported forwardi:.gs of raw cotton to spinners in Great Britain
continue to rui substantially above last year, and frog August 1 to the
end of Ulovenber amounted to almost a million running bales. This was
over 20 percent more than in the corresponding period of 1938. The in-
crease i:. for-.vardings of Anericmn and Brazilian was 17 percent each, in
Egyptian about 20 percent, and in Peruvian about 140 percent. There was
a decline in takings of East Indian cotton of about 20 percent. November
forvwardings to spinners, in bales of approximately 478 pounds, averaged
almost 64,000 bales per week, compared to only 54,000 in October and
slightly below 46,000 in NJ-veiber 1938. November forwardi-.-,gs of Arr.-rican
cotton wore particularly large at 33,700 bales conpare- to 26,200 in
October. In Noveber 1938, forwardings of Ancrican were less than 70
porcunt .f the November 1939 quantity. It should be noted that possibly
some ocf these socalled fonrwardings may represent the -L veie'-.t of cotton
to int.erior points for storage as a protection against possible air raids.

October exports of British cotton yarns and ianufactures wVero
valued at only about L3,000,000 ($12,031,55h), comp,.ired roughly to
L2,900, 00 ($11,585,,74) in Sopteuber and L4,200,000 ($20,027,662) in
October 1938.




- 10 -


Cotton control The appointment on November 10 of a Cotton Con-
troller has not affected the position of the Cotton Board, which will
continue in being. Sir Percy Ashley remains Chairman of the Board and
at the same time acts as Cotton Controller. It appears that the Cotton
Board is to operate in the closest.possible association with the work of
the Controller.

Following the appointment of a Cotton Controller, an order for the
control of the cotton industry was made on November 15 by the Minister
of Supply. The order obligates virtually all cotton mill establishments
to furnish such returns, estimates, and other information relating to
business, plant and :-achinery, or premises, as may be required by the
Minister of Supply. On the basis of this order, aind immediately upon
its release, the Cotton Controller asked 1,600 firms in the spinning,
doubling, and weaving sections to furnish, not later than November 33,
information regarding their machinery rnd number of operatives employed.
Similar information will later be obtained from the finishing sections.

Up to early December no further measures had been taken by the
Cotton Controller, but a scheme of maximum prices for yarns and possibly
manufactures is expected to be set up soon. A regulation of raw material
supKlies nd. allocation of deliveries as between the export and home trade
establishments were also envisaged.

Cotton 1eals It is rumored in the British trade that the British
Government has purchased balk quantities of Brazilian, Fe:ruvian, and Turkish
cotton, the latter possibly destined for utilization by the French cotton
mills.

The British Government on November 19 declared its willingness to
buy a total of 1,550,000 cantars (about 320,000 bales 147 pounds) -
approximately equivalent to previous average takings of Germany, Austria,
Czechoslovakia, and Pcl:nd if and when cotton prices at Alexandria
weaken "below the closing prices of Novernber 11."11 Meanwhile, Alexandria
futures have further risen. Egyt is, therefore, not satisfied by the
price provisions of the a.Trfeenet, and negotiations are still under way.
The undert-king is linked up with iecisions made by the ECtian Govern-
merit on October 26 und 30 to purchase all futures contracts at Alexandria
if and when quotations fall to the closing level of October 25. On November
29 the Gover-nucnt at Cairo announced a shift in the quotations from that on
October 25 to that on ITovember 15, thus raising the "bottom" of the Alex-
andria market by about 10 percent. This move is hoped to facilitate a
price agreement with Britain.

F-RAUICE

1Tovember r-rorts regarding the position of the French cotton in-
dustry were hardly less uncertain than those for October. 3Mill activity
in general was hitch in those establishments which were favored by Govern-
ment orders, while sales and production for civilian requirements remained




CS-3


restricted. There is a ccnsidrerble potential demand for cotton goods in
ordinary tr.A.de chx-mnels, but the iniuztry is unable to cope with it be-
cause of the priority of contracts with the military authorities and for
civil defense. Raw material supplies as well as the supply of labor,
which has been adversely affected by mobilizattion, are not at present
sufficient to fill civilian npLIds on top of Govc2nment requirements.

French nanufactu-?rs v.'re gratific!i by the announcement on
November 1S that the National Co-uittee for the Supervision of Prices had
authorized orelimin-airy price increases over September 1939 of 20 percent
for cotton -arrn and of from 12 to 15 pe-cent for cotton fabrics. Further
increases are expected.

Th"e G.I.R.C., the French war-time cotton import pool, is reported
to have m-de further purchases of American cotton, in Ncvember and early
December, w'hcreas practically no Brazilian cotton has teen bought. Some
fEgyrtian a.nd Indian cottons h?.ve been purchased direct by sinners or
Havre cotton me-charts. (Indian anid ,Sgyptian cotton may be acquired direct
by merchants and spinners, provided that an import license is grajited by
the G.I.R.C.) 2/

BELGI ITM

Mill activity and new business of the Belgian cotton industry -
which. had taken a substantial upturn in the 2 months previous during
November was hampered by factors of raw supply. Despite higher imports
of raw cotton, notably Arerican, so far this season, the mills are reluc-
tant to accept further commitments. This is "Iun to aporehersion as to
the adequacy of raw supplies, existing and to come, for the ti-.ely ful-
fillment of orders on hand. High domestic require-i!ents, including those
for defense, persist; end demand from Hollad-A continues important. The
limiting factor in Belgian cotton mill activity, therefore, seems to be
a relative scarcity of r-w no.terial.

CETTPAL 7-IROPE

The very severe reduction. whch cotton mill oper?-tions and civilicn
consumption If cotton-type textile goods are unidcrgoing in the present
German orbit is perhaps indicated by a new yrtionirig- system which has bPen
in force since the beginning of NTove-.-ber and which replaced the system ef
purchase permits adopted on AuCgust 27, 1939. TIe clothir.- c-'.rds now being
distributed. in Gcrmany cover all textile articlesof clothing (except such
as are m--'.e of pure silk and are virtually unntain-ile) and overcoats,
as vell -..s jed aid household linen (for which the previous certificate or
permit sy'steu continues). Epch person receives a card of ccuoons which
is to regulate purchases until October 31, Ir, Each card, for :-dults,
contains 100 coupons and bea.rs a list of articles with cou-cn value for
each. With thesp coupon values before him, the, holder -fust :-.ke his choice
as to the distribution of his purchases as letveen the various articles,
altogether not to exceed a tctal of 100 coupons In the next 12 months.
j/ According to information supplied by Americn Consul S. H. Wiley,
American Consulate, Le Havre, France.


- 11 -







- 12-


There is also a "time--ationing" cf th rationing coupons to the effect
that "0 coupo_..en aire -%vailable at once, 10 on January 1, 20 onr March 1,
20 on M3y 1, Ard 20 on JAugst !. R:ce-rtions from this ri.le are permissible
in the cs.se of purchl.se of an article highly coupon-con s'7L-ini, such as
a suit. The limit of 1CC co'-Lpons per year, however, remains. There are
also other inter st in provisions to safegL.a:rd against wazte nr what in
the ciraum-tances iiast be regaraoed as e::ceGsive censu-mption. Thus, for
instance, a ,.'mnan is allo.r-. a r.miixin'uLn of only six pairs of stockings a
year. F-ur of these sh: gets at the equivalent of 4 coupons per pair,
while for tthe oth:;r two she "ius-,t su.re-nder S coupons a pair. Mon are
allo-ied five pairs of zocks three at 5 coupons a pair, two at 10 coupons
a pair.
The fol3.o.7TiL ar-- a fei e-:'"-.les of coupon vallieE -cr Z nxn'ber of
textile articles.

0 MOI


Article


Art i cl P


Coupons


Handkerchief ... *.*.. ..
Stockings .................
Socks ................*..
F Lbric gloves .... ... .
Scarf

3i oz. knitting wool ......
Jacket and slacks ..........
1 meter woolen material
up tp yard .vi-e .........
1 meter othpr material
up to yard wide .........


Petticoat .......... .......
Combinations ............
Apron .............. ... ...
ryjam-,s ... ..............
Ni-,ht dr ss ............
Cani sole ..... ...*.* .. ...
Woolen Itress .. ........ .v
Dress, other material .....
B5 ous3 ....... ..... ... a ..
Skirt ................. ...e
Co tu "e ..... .... a. ..aa
Bithinr cloak .............


MET


Art i cle


Co'. -:on


Ha.nkderchief .... .....
Socks ...... ..... ......
Fabric gloves .............
Scarf ....... .............
Pullover .......... ........
Pants, long ...... ..... ..
UJnd -ervest .......... .. .
CorbiT.vtions ............. .
Shirt ... .... ...... ........
Collar .............. .
Tlirhtshirt ... ............
Pyj3 s s .. .. ... .... ....


Article!


S it ......................
Trim.uni-s for Litto if
material in han .......
Trousers ... ......... ......
JTr ucket ............ .... .
Winter jacket .... .... ..
Raincoot other than rub-
ber or dust coat .......
Bathing clonk .............
Tie ................... ....**
5 oz. kniitting w.vool ....ea


According to the "Tor:i Industriel (Lille, France) of NToveiber 1I,
1939, information received frcT' !.;?co-:. inic'ites that efforts are being


Coupons


CS-39






- 13 -


made on the part of Germany to obtain 100,000 metric tons of raw cotton
from the Soviet Unicn a quantity which equals approximately 450,000
bales of 47S pounds. The Soviet authorities are reported not to have de-
cided ret as to whether or not this much cotton will be delivered.

ORI MTT: Cotton nill consurltior slhc s sLIjt increase but is
still low in Jnrran ari China

Cotton yarn production in Japan in October increased slightly more
than 10 percent over Septe-ber mand was sonnewlhat higher than in October 193g,
A farther increase is believed to have occurred in INovember and. early
December, although the quantity actually produced has not yet been reported.
It is believed that the vigorous efforts of the Japanese spinners to obtain
substantial.lv larger allotments of po-er for operating their mills has re-
sulted in :ie-lr obtain. substantially larger allotments. Some increase
in outut is s.i to hav occurred, hoIever, as a result of increases in
the speed an, efficiency of the spinninrg operations. Shipm-nts of cloth
to Yen bloc ru'eas increr.sed so.-eehat during October, but shipments to foreign
currency areas were ler-s thanzi in September. Nevertheless, it is expected
that reduc.-'d coi.r petition from British cotton textiles nayj soon result in
substantially !a-ger exports of Japaneiose :oods. Despite the recent indi-
cated Tincr ?me in mill activity, cotton consumption n Japan is now materially
less than before the outbreak of the war with China in the summiner of 1937.

Lhirihg No-renmber mill activity in Shanghai increased slightly over
October and in Tientsin operations also increased, but they decreased in
Tsingtao. Total cotton consumption in China, including 1ianchuria, in
October is e-ti-iated at 140,O(O bales compared with 135,OCO bales in Sep-
temiber. Considerable difficulties are being encountered in obtaining raw
cotton in :ole areas. In the Japuanose-occu-ied area of north China cotton
consumption is e:-pected to be restricted as a result of export shipments to
Japan. The China Affairs Boardts North China Liason Office, however, has
formulated a plar- to increase the supply of raw cotton by hastenin,:_ and in-
creasing the nove:.- nt fro-i rural districts.

InS- LJn cotton nill consumption in October was approximately equal to
the record Octob)r high of the x.st 2 -ears and was slilitly higher than
consumntion in S.ptse.bcr. There is rone.son to believe activity was further
increased in loverbor :mdn early Deceorber. The increased vwa:ces in the British
cotton textile inclustry -and increased transport-.tion costs are believed to
have reduced the competition Indian mills are receiving from British cotton
textiles. As in-.ic-ted else-ihere, the value of the total exports of British
cotton t-:extiles has declined sharply as comp:u'ed A.ith a year go-.

SUPPLY

Total suly unchanged, "free" supply of A-.erican slightly increased

Present estiNates of the total world supply of A.erican and foreign
cotton available for the 199-40O season are essentially the sane as those
released a :.onth ago. The recent rise in don.estic cotton prices, however,


CS-39




UNIVtKbII T UP- PLUKIUA


c3g 4 3 1262 08900 3973
CS.-3 '

ha-s resulted in a considerable reduction in the quantity of cotton held.
by the Govirn :.-nt as collat oral on loans to far-iers. Up to DecouLiber 21
rec1,:.zts for zhe relcasc of only l15,000 balbs of such cotton had beet
received. b:. the Cci.Lodity Crcoit Co-.roi-ation, but frn.riers are believed, to
have re1.ea"d :..,?n- thous,"nds of *di:-. L b'.es, ,'hic&. hAnd not been re-
portcd to the Co-i::olity Crod.it Coroo'.tion un to that tine.

Esti-lnto pi' Irir crop ofo'.s & t.x.ti.l (.eclino

Thel'3 193-,. nrodxu.c'tion cf Inliixi cotton vas recently officially
estirt'-rte. .t .,_..'o:.i..,.t,3y] Jc0,COO bales of 479 pounCs, according to a
cable front the International Institute of Agriculture at Romno. This
cOstinate, w..hich is br.-sad.ed on tno *xcrc..ge plnted up to Deconmber 15, is 9
-jrcort les. than the coTp-'.r-7b1 cstiix,.te for last season. The acreage
plerrtc.i to D.ccn'bcr 15 this yp.r o7.3 estinatod at 20,460,000 -cres which
is 11 percent less than pl:.ntings to the sino date last season.




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