The Cotton situation

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Title:
The Cotton situation
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United States -- Dept. of Agriculture. -- Economic Research Service
United States -- Agricultural Marketing Service
United States -- Bureau of Agricultural Economics
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Economic Research Service, U. S. Dept. of Agriculture. ( Washington, D.C. )
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UNITED STATES DEPARiM1T OF AGRICULTURE
Bureau of Agricultural Economics
7ashiint on


Cs-39


January 29, 19k0


_______ ___ THE COTTO:T SITUATION
|- -"---- ---- -- -- --- - -------

S. 1 Summary

:. o increasing r.-te of cotton mill consumption continued in a

number of Europen countries during the past month. A high but declining

rate in the United States,, restricted consumption in central Europe, greatly

increased exports of American cotton,' and additional sales of 1938 loan

cotton were other important developments in the cotton situation during the

month,

Domestic cotton nill activity declir.rd somewhat during January but

remained exce-otionally high. The 653,000 bales consumed by domestic mills

in December were the second largest monthly: total on record and onr-sixth

larger than in December 1939. From Autiast through Dece:!ber consumption

established a new record high. H-igh prices of competing fibers and large

cotton textile export sales are favorable to a continued high rate of con-

sunption. The downturn of domestic industrial activity which has been

evident since the latter part of December, however, r:-a;- tend to reduce cnn-

sumption during the next few months.

In Great Britain, Italy, France, and some of the other Fau-opean coun-

tries, cotton mill consumption continued at a high level or increased some-

what during December and early January. A large proportion of the output

of European cotton mills is going to fill Government orders. In the German-

controlled area, however, cotton con-sumption apparently is bein; drastically

restricted as a result of the shortage of raw cotton.





OS-39


In Janan, mill consumption has recently increased somewhat along with

a marked increase in cotton cloth exports. During the nast 5 weeks exports

of American cotton have buen l- to 4 times the exceptionally small exports

in the corresponding weeks last season. Exrorts in most of this period about

equaled or exceeded the more favorable level of 2 years earlier. From

August 1 through Jarnu-ry 25, exports of nearly 3,00,000 bales were about

three-fourths cent larger than the small exports during the corresponding

period last season. Up to January 25, registrations of sales and deliveries

of American cotton for export payments totaled 5,87C,0C0 bales. During the

4 weeks ended January 25, such registrations totaled 300,000 bales.

Up to January 25 requests for the release of more than 00g,000 bales

of the 1953 loan cotton have been received by the Commodity Credit Corporation

this season. Trnde reports indicate that farmers had sold possibly 1- to 2-

times this quantity of thoir loan cotton. Such a total would be equivalent

to a substantial prcrT.ortion of the sunply of American cotton not under Govern-

ment loan or held by the Government.

The increased supply of cotton outside of the loan stocks and the

slight decline in recent weekly trade indexes of cotton mill activity and

industrial production may have contributed to the recent decline in cotton

prices. Along with these developments, there was softening of a number of

other commodity prices and a further decline in unfilled orders for cotton

textiles. The recent decline in cotton prices to January 23 amounted to a

drop of nearly 1 cent per pound from the 21-year high reached on December 153.

By January 26 they had recovered about I cents and were nearly 2 cents above

both the average for J.anu.ry 1959 rind for rric:3s just prior to the outbreak

of war in Europe last Seotember.


- 2 -





CS-59


-3-


PRICES

Domestic prices decline but continue well
above ,rices a year earlier

Following the merk:ed fluctuations during December, domestic cotton
prices varied within a comparatively narrow range between December 26 and
January ?0. During this period, the 10-market average of Middling 7/8 inch
ranged between 10.65 and 10.93 cents. During the preceding 30 days the range
was between 9.39 rlnd 11.11 cents. On January 22 and 23, however, prices in
these riarkets' dropped more than cent, but recovered most of this loss by
January 26. The .ver'ige price in these markets on Jrnuary 26 of 10.42 cents
was almost 2 cents above the average for J-nuary last year. This net advance
wos also about the same as that which has occurred since the outbreak of the
European war, snot prices on September 1 having been :.bout the same as the
Janu:-.ry 1939 average.

A number of factors have contributed to the material net advance in
prices both as compared with a year earlier ,nd as 'comrnar-ei with the last few
days prior to the outbreak of the war'-in Se-,tember. The roro important of
these anpenr to be: (1) the large sales of cotton gooc's by domestic manu-
facturers following the outbreak of the wa.r, apparently in anticipation of
higher prices, (2) "sharply incrL.sed domestic business activity, (3) ex-
ceptionally small stocks of raw cotton on ha.-.d at the bcginnin, of the current
season in rvany foreign c.r.nsumn.,, countries, (4) the-desire of foreign countries
to accumulate above-normal stocks as a war rjserv-3, (5) the domestic export-
subsidy program, nd (6) ar '-jr6L5tly '.bstmLntial itnvcsti. nt or speculative
buying of cotton, rr-.rticularly in India and Great Brita.in, as a protective
measure against anticipated increases in commodity prices and living costs.

Liveroo1l prices show further advance, now highc:t
in 9 to FL ye-.r's

Cotton prices in the United States reach,,_! a 21-,yen r high on
December 13, and hve since been somewhat lower. In Liverpool, however, spot
oricr-s of irr.erican and most of the irrmortant foreign 7fro'.7ths as of January 5,
in terms of British currency, were hi!-.her than prices on Decerrber 13.
Despite some dIeclin3 after January 5, Liverpool prices of practically all of
these gro.'ths were higher on January 26 than at'any time prior to recent weeks
for about 10 years. They were about 1- to nearly 2 times as high as prices
in January 1939 and August 19"9.

A number of factors have contributed to these relatively high Liverpool
prices as expressed in terms of British .currency. These factors include:
(1) several of the- same factors mentioned above as contributing to the advance
in United Sta.tes cotton prices, (2) the decline in the gold or foreign ex-
change value, of the ypoulnd sterlir1n, and (3) the increased cost of transferring
cotton from .nrodu.icinr, countries to Great Britain. T-.o r--Ild value of the
British round sterling on January 19 was only about 5 r.rcent of the January
1939 average, rhich wv,- a,-nroximately the same as in Au-ust 1939. On
January 24, the ocean freighrt rates Plus ordinary marine insurance and war
risk inrsurince on cotton from New Orleans to Liverpool were 3 to 4 times as
high as in August when they amounted to about 1 cent a round which were not
materially from those existing for a number of years b,.fore that.





0S-39


Liverr-ool prices of most foreign growths have continued relatively high
in comparison with American during the -ast fev weeks. Since late December,
prices of Erntian Up-prrs have increased considerably in relation to American
1Miidling Fir Str.nle (:r'rroximately 7/8 inch). On January 19, prices of
most of the important forcing growths wvere higher in relation to American
than for many months and in some instances the highest for 4 years.

Table 1.- Cotton: Soot rice -oer round, sr'ecified growths at Liverrool
and New Orlcrjns, specified -neriods

___________ ___ Livurnool : New Orleahns
Am rican : Indian : Egyptian :Brazilitn k': Aorican__
Season : Mid- : :Fine Oomra#lC.'}.F. Uprers:Fair,Sao Paulo:_Middling 7/8 in.
month : ling Low : : a: :Ac a go: :As a % : : Spread
or day : 7/ : Mid- : Ac- :of Am-: Ac- :of Am- : ac- :of Am- : Ac- :Liverpool
:inch :dling :tual :erican:tual :erican :tual :erican :tual :over New
____________ _.______1_id. : : Mid. : : .11d. : : Orleans
: Cents Cents Ceints Percent Cents Percent Cants P recent Cents Cents


10-yr. av.:
1927-28
to 36-37 : 14.50

1936-37 : 14.62
1937-38 10.31
1938-39 : 10.15


1938-39
Feb.
Mar.
Apr.
May
June
July,
1939-40
Aug.
Sept.
Oct.
Nov.
Dec.

Dec. 1
8
15
22
29
Jan. 5
12
19


10.02
10.17
9.67
10.55

10.61


11.10
o10.63
11.38
13.82

12.90
13.33
14.--5
14.45
14.33
15.18
14.gi
14.46


78.0 17.12 117.9


13.16
8.7g
8.71


-8.55
8.71
8.21
8.97
9.38
8.95

8.53
9.69
9.39
10.53
13.02

12.17
12.59
13.32
13.71
13.59
14.4i
i4.o6
13 .'0


10.87
7.96
7.14


6.95
6.85
7.02
7.45
7.61
7.31

7.38
8.47
8.39
9.24
11.43

o10.66
11.01
11.57
11.99
11.F4
12.78
12.22
12.n-.


74.4
77.1
70.4


69.4
67.4
72.6
70.6
68.9
68.9

72.6
76.3
78.9
81.2
82.7

82.6
82.6
82.3
83.0
82.6
84.2
82.5
83.0


17.4o0
13.10
11.80


11.56
11.58
1C. _AG
11.08
11.47
11.43

11.35
12.37
12.')(,)
12.40
15.44

13.80
14. g4
15.74
16. 3Q
16.34
17.73
17.13
17.20


119.0
126.7
116.5


115.4
113.8
112.7
1c5.0
103.9
107.7

111.7
111.4
112.9
108.9
111.7

107.r
111.3
112.0
113.4
il4.o
116.0
n6. F
115.7
118.9


Com iled from reports of the Livcr,--,il Cotton Exchange exce',t for the last 3 weeks
'which are from cables to the ?uramuj. of A,-ricr'lt'rai Economics or from reports of
the New York Cotton Exchange. Prices were reported in nonce -er -nound and convert-
ed to cents ner 'round at current rat's of e.xchange.


* 97.7

96.6
98.7
94.9


95.1
95.2
95.c
93.2
q2.2
92.8
92.2
95.5
09. 1
9? .l
99.4
100j.c


10020 .''

i'0o. .
100.C

1oo. 0
IO0.0
100.6


14.08

14.12
10.18
9.63


9.53
9.68
9.19
9.83

9.85

9.37
Io.6o
10.43
11.32
13.82

12.9D
13.33
114.05
1 4 .4
14.33
15.18
14.51
14. r4


12.65

12.79
8.79
8.73


s .60
8.69
8.61
c9 40
9.45
9,37


9.02
8.92
'.40
l'D. 64

9.93
10.2b
10.99
10.92
11.12
11.09
10.78
10.82


1.*85

1.83
1-95


1.52
1.42


1.42
1.48
1i.o6
1.25
1.59
1,24

1.21
2.08
1.71
1.99
3.IS.
3-19

2.97
3.07
3 .o6
3.06
3.53
3.21
4.oQ
4.03
3.64


13.6o ll.19





CS-39" -
EX O j,,
'" "' F E PORTS L^-s" : ***


SUNITED STATES: Exports for theestb..d. e.....j...
up 75 percent -

The 3,143,000 running bales of Anericnn cotton exported from Auigust
through Dccer.ber totaled 65 percent more than in the corrospnding period last
season but slightly less th.n in the coriespordi-In .period of 1937-3" Deospite
the marked increase over.the unusually smll exports of last season, the
total for the first 5.months of the current season was C'.pprc.xir..itcly CO.,000
bales or 16 percent loss than, average exports for these months during :.e 1.0
years ended 1937-386. With the exception of Japan end Germany, exports to all-
of the larger ccttcn-iwnporting countries have boon considerably larger so .far
this season than during the.like period last season.

In D-conber, total domestic exports cf 807,000 bales werve nore"than
twice as largo as the total -for Docc.bor last season and slightly larger than
in December 1937% Trade reports. indicate that during the 5 weks 'eridoded.
January 25 export ts continued from 1-1/2 to 4 timos as large as 'it'h sam
period a year earlier. In nost of t'.:c past few weeks exports about cquJ.lod or
exceeded those cf the corresponding weeks of 1937-33, The 3,7*y', '' Valcs of
American cotton exported up t-. January 25 exceeded those of a year earlier by
75 percent. Up'to January. 25,. roc:istration of sales and deliveribs' of cotton
for export totaled 5,870,000 bales. This roprcsents an increase in such
registrations in the 4 weeks ended January 25 of 304,COO bales

FOREIr1J COTTO,,. Exports frar.Ijrdia srallcr .
fr m Egypt larger

Exports fror E.ypt during Decemiber were 15 percent largo rthbt in the
corresponding period in 1938 oand from August through Fcccnbcr -wr'l8 percent
larger than in the first 5 nr/nths of last season. The incroasefcr the'5-
month period to the United Kingdom and Franc was. grcatcr r.than the incrcaso in
the total, The incr..ase to these two countries much more.o thar. offset the re-
duced exports to the Gerhan-controlled area.

In N3ovem-,br, exports from India were 37 p.rccnt less than in Yovombor
1938, and for the 4 months, August through -cvcmbcr, total .exports from India.
were 11 percent l-ss tha:,. during th- like period the pr-ccdin_ sor.so-. Ex-
ports to tho U.'itad Kingdcm during this 4-month period, hrw.'ev.r, \rv." 53 per-
cent larger than in the first 4 months of 1938-39, As a result *oP 'the" dis-..
continuance r f exports tc Gorm-my sinco the outbreak of the vrr, r-hipiPonts to
Germany since August 1 vwre 86 percent less than shiEnironts during the first
4 ncnths cf last scascn.

From August through Ncvor-bor, t.tv.l exports from Brazil of 375tO0C
bales vore 13 percent loss than the total for the first 4 months of last sea-
son, but larger than f;.r ,ny corresponding pco.rid prior to 1937-38.' In
INovcmber exports wore- 69 percent le ss than in November 19308,


4# A .






Cotton: Exports frnm specified countries, average 1928-29 to
1937-38, and seasons 1937-38 to date
.......O.yr..
: DecemLber : August to December
Country of :10-yr.: : : 10-yr.: : :1939-
oriin nd av 93 av. *:
origin and av. : : : : av. 1937-'1938- :1939- :40 as
destination :128-29: 1937 : 1938 : 1939 i: :1923-29: : :a % of
to/ of 31 39 40 198
to :1938 : to : :1938-
1537-3P: : : -8 : : : 13: 39


: 1,000 1,000
runningc run.
: bales bales
:


1,0OC
run.
bales


1,000 : 1,000
run. Per- : run.
bales cent : bales


United States to


Germany *-o:
United Kingdom:
France *......:
Italy ........:
Spain .......*.:
Belgium ..:
Canada a.....:
Japan ........:
China ........:
Other countries:
Total .....:

Egypt to
United Kingdom:
France .......:
United States :
Germany ....:
Italy ........:
Japan ......:
British India.:
Other countries:
Total .....:


137
178
100c
70
22
21
28
190
38
67


105
244
126
62
0
28
23
36
0
127


25
51
32
37
0
9
13
113
14
74


0
163
67
94
61
41
4A
124
101
112


---
319.6:
209.4:
254.1:
--- :
455.6:
338.5:
109.7:
721.4:
151.4:


740
743
449
293
110
84
110
758
142
301


504
988
539
280
0
112
122
120
1/
520


169
244
273
151
2
52
117
457
21
416


28
954
309
243
168
121
176
422
214
508


16.6
391.0
113.2
160.9
8,400.0
232.7
1504
92.3
1,019.0
122.1


851 751 368 807 219.3:3,730 5,185 1,902 3,143 165.2
Do c embe r August-De c e mber


19


207


180


November


80 166.7:
38 237.5:
4 100.C:

15 115.4:
25 138.9:
25 277.6:
20 4n.D:
207 115.0:


: 1,00C 1,000 1,000 lCO'
: bales bales bales bales


British India to


Japan *.
Italy ........:
China .......:
Belgium ......:
Germany .....:
United Kingdom:
France .*****.....:
Other countries:
Total ....:
Brazil to
Japan .......:
United Kingdom:
Germany ,.,,,,
France .. *Y a
Italy .... ...:
Netherlands *.:
Belgium ......
Other countries:
Total .....:


268
96
38
63
54
51
26
145


741


271
131
18
96
55
25
F;5
171


832


192
66
14
95
56
69
32
163
687


285
107
33
12
42
84
81
168
812


August-November


Per-:


1,0 C
bales


1,000 1,000 1,000
bales bales bales


:478 Ib.478 Ib.478 Ib.478 lb. cent:478 Ib.478 lb.478 Ib.478 lb.
:


37.8:
3Z.3:
85.7:
28.6:

263.6:
183.3:
100.0:


241
58
50
40
45
45
26
40


118
25
22
30
27
29
11
42


354
24
20
24
43
55
22
51


252
8
84
10
6
84
19
63


148.4
162.1
235.7
12.6
75.0 1
121.7
253.1
103.1
118.2


Per-
cent

71.2
33.3
420.0
41.7
14.0
152.7
86.4
123.5


158 1 169 106 62.7: 5)45 304 593 526 87
november August -November


2/ 0 22 2
7/ 20 30 10
67 1/ 0
S3 -7 8
1z/ 17
T/ 2 1/
1 3 -13
2/ 5 15 5


9.1:
33e3:
0:
114.3
14.3

33.3:
33.3


2/





2/
. 1


42 96 86 27 31.4: 150


ompiled from ofTicial sources. / Loss


55
82
191
13
4
6
5
28


111
109
55
55
28
17
12
43


384 430 375


70.3
83,5i
101.8:
74."
57.,1
141.A
108.
130.


B7e4


-OmIIEF'es.:;
%Ta es. 21 Not ava=Jable Fy


-I


1,000
run.
bales


1,000
run.
bales


1,000
run.
bales


Per-
cent


CS-39


& 6 -


m







CS-39


DEMAND AND COISLPTTION

UMITED STATES: Mill consumption continues at
near record level

Domestic manufacturers' sales of cotton textiles apparently continued
well below production during most of the past month. Except for a brief period
in early December, this appears to have been true for the most part for many
weeks. Nevertheless, domestic cotton consumption continued at an exceptional-
ly high level through December and early January. The 653,000 bales consumed
by domestic mills in December were the second largest total for the month on
record and 15 percent above the December 1938 total. Trido reports indicate
that mill activity, adjusted for seasonal variation, declined somewhat since
mid-December, but continued high. From August through December, domestic mill
consumption of 3,312,000 bales established a new record high and exceeded that
of the corresponding period last season by 18 percent.

The high consumption so far this season was duc to improved economic
conditions, the marked increase in prices of some of the important competing
fibers, and increased cotton textile exports or sales for exports. In December
the United States index of industrial production of 128 was 25 points higher
than in August and 31 points above the average for the 12 months ended July
1939. The prices of both jute and burlap vwre about twice a.s high in December
as in August, and the prices of reprosentv.t'vo qualities of wool, silk, and
sisal, wQre from 45 to 60 percent higher. Up to Januar:' 25, sales and deliver-
ies of cotton products for export paynonts inder the Department s cotton and
cotton textile export payrcnt progrcn contained the equivalent of approximately
325,000 bales of raw cotton. During the 1938-39 season, the estimated cotton
content of the cotton textiles actually exported amounted to about 200,000
bales. The prospective increase in cotton textile exports in the current sea-
son is due in part to the Government payments on cotton textile oexp orts, in
part to increased purchases by Europea-n countries for w.r or civilian defense
purposes, and in part to reduced competition from European cotton textiles in
non-European markets.

Some of the factors contributing to the high level of cotton consumption
so far this season may continue during the remainder of the season. But should
domestic business activity decline during the next few months, as is expected,
cotton mill activity is likely to drop materially below the recent high levels,

EUROPE: Cotton consumption continues high in a number
of countries, greatly restricted in the Germwm area

In Great Britain, cotton spinning mill activity during December and the
first thrce weeks of January was naintaironed at approximately full capacity. In
late December the cotton Controller armnouncod than.t the importation of French
textiles would be permitted on a larger sca.lo than formerly, thus indicating
that British mills wore unable to moot current demands for cotton textiles.
According to trade reports, tho British and French cotton textile production is


- 7 -





CS-39


to be coordinated for the remainder of the war. This would suggest that activ-
ity in the French and British mills may tend to fluctuate more or less together
although differences in the quality of the goods produced and in the available
labor supply may influence the extent to which this is true, despite the ef-
forts on the part of the govcrnmont to coordinate the production of the indus-
try in each of these countries.

Since about the middle of December, the British Government has material-
ly extended its control- over the cotton textile industry. During this period,
the British Controller has announced regulations for the control of mill
margins on yarns. Cotton Industry Control Order No. 2 of January 4 fixed
spinners' margins for various yarns up to one-third loss than those existing
immediately prior thora,to. The Controller has recently called for wiockly re-
turns from cotton mills on the purchases, stocks, and consumption of cotton and
on the production, deliveries, and sales of cotton yarns. Cotton merchants
have boon requested to submit reports on the amount of cotton bought but still
unshipped and the amount sold but still undolivored. Those reports presumably
form the basis of the orr-ngc.mncrit mad;. vrith the Vinistry of Shipping for
freight spr.co. In the third wooeek of January, the Controller announced that an
agrcc-rTnt had bcn reached with the Ministry of Shipping to provide freight
space for 100,000 bales of Americon cotton in February. According to reports a
similar monthly allotment is oxpcctcd to be -ado available for at le-ast
sevor-al months, Since the British Govornmw.t has agreed that shipments of
cotton by the Commodity Credit Corporrtion under the Cotton-Rubber Exchange
Agreemenrit would be withhold during the months of February, 11Erch, and April,
the .allotted freight space will all be avail:.bl. for the shipment of com-
morcial cotton. Cotton bought prior to Janw<.ury 4 niay also still be shipped on
neutral st'vcners so that thanount of Ancrican cotton exported to Great
Britain will not nocessar:I.ly be restricted to the 100,000 bale freight quota,

V'anufacturers' asslos of cotton textile s during there l..st few weeks are
reported to have boon comparatively small. This is said to be due to tho
numerous unc rtainties with respect to govcrrnment regulations, and the fact
that British mills in r(encral apparently have sufficient unfilled orders al-
ready booked to cover their output for several months, British manufacturers
are roportcd to be concerned as to whether prescnt prices arc sufficiently
high to justify sales beyond the next few months because of the possibility of
additional regulations and increases in manufacturing costs.

In Fraonce, most of the cnttcn mills werc working on government orders
during November, according to a report from the American Consulate at Havro.
According to this report, an active demand for civilian consumption could not
be entirely satisfied partly because of the slovmess in releasing imported raw
materials for this purpose end possibly because a number of the mills in the
evacuated regions of Alsace were still closed. Yiost of the cotton purchases
since the outbreak of hostilities have been made by a government agency which
has also requisitior.ned existing g cotton stocks and taken over spirnnecrs' con-
tracts. This agency is no doubt operating in conjunction with the British
cotton Controller.





CS-39


Comparatively little .nfoo.o' situation in the
French cotton textile induitr'y has been received durint- the last few ,ipeks.
According to a report of the 1-e'.a York Cotton E-ch'-nre Service, French mills
recently benefited from the increased British import quota on French goods.
French mills are also re:,orted to have been booking a substantial volume of
government orders. In vie. of the recently ann-ounced plan to coordinate the
production of the French and British nills, it would seei likely that cotton
consumption in France should coon increase to a high level if such a level
has not already been attained.

In early December cotton mills in Holland and Belrium were reportLi to
have been fairly active, with man-ufacturers' margins fairly satisfactory.
At that time, as wei" -s nore recently, delays and u-certainties with respect
to the arrival of raw- cotton have restricted forward s- les of cotton textiles.
The loss of trade with the Germn area has adversely affected the industry
in these countries. Rather largo sales of cotton goods for military ,L.d
civil defense purposes, however, appear to hn.ve given mills about all of the
business that could ba handled, particularly in view of the uncertainrities
wit'. respect to the former- rav material supplies. According to a recent
report from Holland, to the New York Cotton Exchange Service, the mills of
that country are "vorking at a full rate on Goverimm.it and Colonial business,
but new orders are currently -nall."

In the Scandinavian cou_-.tries, uncertainties as to future developments
and the proepoets for raw matorial eupplioa have no ioubt restricted sales
of cotton tortiles, particularly those other than to -.ho government. It is
not unlikely, ho'-.'ever, that government purchases have been quite large
during recent weeks. It is not kno":n to x.vhat extent the war has interrupted
deliveries of raw cotton.

Cotton mills in Italy are rc-.ortcd very active, ,'ith c.xcoptionally
good demand for cotton textiles from export markets. In mid-January, trade
reports indicated that It.Lliar. mills were operating at capacity. The in-
creased export dema-'.d is due in part no doubt to rehiced competition from
British and other belligerent t.j-tiles in non-DEuropean markets.

In the German area cotton consumption is undoubtedly being jre-itly
restricted by the shortage of raw cotton. It is imr-osible to determine how
much raw cotton or cotton textiles Germaoy is importing but .very indication
points to a material shortang, of both in the Germ-.-,- controlled^ rea. As
indleated last month the ra...tioning of clothing which has been in effect
since ilJovember indicates a ver' severe reduction in the civilian con. uop-o..
of cotton-type goods.

ORIENT: Lowercotton conzurp+ion forecast for China

Difficulties in obtnii-d,'g re": cotton, the reduced buying power in
China, r.d high costs of yarn -uid cloth are import-ant factors expected to
further restrict cotton mill consumption in China during the current season.
The office of the American Agricultural Attache at Shanrhai is now estimating
that because of these f-ctors consumption of cotton b- mills in China during
the year ended Sept. mber 1i 340 -nay be reduced to about ,ICO0,O00 bales of 478


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CS-39


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pounds. This is considerablT less than thp restricted consumption of
1,800,000 balps for Octo'-r to Se!TteMb~r 133g-Y and more than 1 million
bales less than was co'nsumed i. 193C-37, the year preceding the Sino-
Japanese conflict.

Mill consumption in China during December was placed at l4o,0o00
bales. In Shanghai, activity of the Jupariose and British mills was about
90 percent of capacity ad Ythe Chinese owned mills about 70 percent. The
mills in this area are reported to be spinning a larger percentage of
finer count yarns than last year. This tends to increase activity in
relation to the quantity of cotton consumed.

In Japan, consumption in November increased slightly over October
and was the highest in 6 months. In both October and November mill
consumption was larger than a year Parlier but much smaller than in the
corresponding months of 1937. Consumption in December showed a slight
increase over November and materially exceeded December 1l-9. In view
of the decreased competition from cotton textile exports from European
countries since the outbreak of the Europeian war, cotton mill consumption
in Japan has been expect-d to increase as a result of increased exports
of cotton textiles. In November, exports of cotton cloth from Japan
increased about 6 percent over exports in October but were slightly smaller
than in November 1938. In December, however, the 268 million square yards
exported were 31 percent larger than in november and were eliphtly higher
than the previous record high exports established in December 1936 and
in May 1934. This sharp increase probably wal- largely due to the increased
demand for cotton cloth in the European countries and to reduced competition
from European produced goods in other markets.

In Docembc-r, Japlu'e-,e purchases of cotton were reported to have
been the largest since Decr;mb*r 1935. This ".:as .attributed -to the announced
reductions in the Amric-ni cotton export "subsidy pa-yments" and the pros-
pective further r edctions. Since early Docembor, the price of American
cotton in Japan has increased considerably in relation to Indian cotton. On
December 2, the price of Indian Akola .was only 2 to 3 percent less than
that of American Strict '.iddling, but in late January it was about 21 percent
less than Americean.

ACRAGiE, PRODUCTIO!I, STOCKS, AiJD SUPPLY

Reduction in Gov-rnmont-lo3n stocks

It was indicated last month that borrowing growers had probably
sold their equity in oany thousands of bales of 1938 Goverm.enut-loan
cotton in addition to that they had up to that time requested the Commodity
Credit Corporation to release. Up to January 25, requests for thy release
of nearly 325,000 bal-Ds of the 1939-loan cotton had been received by the
Commodity Credit Corporation since August 1. Bequests for nearly 640,000
bales were received between Deoember 21 and January 17. Cotton trade
estimates, however, of the total snls of 1933-loan cotton from August 1
to mid-J-i'LUary range between 1,500,?00 and 2 million bales, according to






CS-39


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the New Cotton Exchang3 Service. Little information has yet been received
as to whether tho rather sh.Lrn decline in cotton prices since the middle
of January has resulted in substantiRal additional sjles of the 193g-loan
cotton. Despite the decline in prices, farmers could still obtain
substantially more than enough for their cotton to pay the loan plus
crryirL, charges. Oonoienrtly, decliirdng prices might cause some
producers to dispose of tioir cotton for fear of still further declines.

The indicated world supplies of "free" cotton for the current
season have been incren:ed by the extent to which borro -in producers have
sold or othurmise disrosd of their 1935 loan cotton. W'ith stoc':s of
"free" cotton as of A-guurt 1 plus the present estimate of the 1939 crop
totaling about 13,700,000 bales, im increase of as much as 2 million
bales would rea'osent a material increase in the available supply of
cotton not undor rtovernment loam. It is not unlikely that the increase
which has occurred during rec-nt weeks has been a factor in the price
decline during this period.




UNIVERSITY OF FLORIDA
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