The Cotton situation

S3G.4D V 3

UNITED STATES DEPARTM31T OF AGRICULTURE
Bureau of Agricultural Economics
Washington
CS-3 January 1337
D NIVp -h ---------- -
,; THE COTTON SITUATION


S')EPOSITORY S-ary
Mill activity and cotton consumption remained at high levels and

tended to increase in nearly all of the important cotton consuming countries

cf the world during December anl early January. Raw cotton consu-ption and

output and sales of cotton coods are at or approaching record highs in the

United States, Japan and China, and in the United Kingdom are larger than at

aWy time in recent years.

Export from the United States were less in the first 5 months of the

present season than in the corresponding period last year, and the available

data on import, conomnption, forwarding and mill takings of Anerician cotton

in foreign countries during this period indicate that total foreign consumption

of American also was lower than in the sane period in 1935-36. This reduction

in consumtion, however, was much less than it nnouled '.ave been were it not for

the very.large consumption of all kinds of cotton by foreign mills.

Spot prices at the 10 markets in the United St.tes have well maintained

the rise experienced in the first half of December. The average price for

December was 12.60 cents coriparod wvith.l2.06 for November an! 11.7T cents in

Decenbor 1935, The .verages for the weeks ended January 9 and 16 wcre 12.75

and 12.82 cents, respectively.

The supply of American cotton in trade channels may be auencnted aue

to the operation if the plan of the COomnodity Credit Corjoration to rclcase

"a reoaonable amount" of the approximately 3,oo0,r)n balen of Governnont finvncod

Cotton between robruary 1 and April 1. The nlan for its relolao in r.i:ilr to





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those un'.er which about 1,400,O00 bales were released last season. Nearly

all of this cotton is 12-cent loan cotton and will not be released if the 10-

market price on the preceding day is less than 12.75 cents.

World production in 1936-37 is placed at 30,200,900 tales of approxi-

mately 47S pounds net compared with the earlier estimate of 29,900,000 bales

an. an output of 26,50rj,,OnO bales in 1935-36. This larger estimate of world

production follows an up-'a.rd revision of the preceding cstirn.te of the crop

in foreign countries. Foreign output is now force-.st at 17,SOC,000 bales

instead of the earlier figure of 17,5EO,0 nras a result of the increase in

the estimate pf Russian production from 2,500,(00 to 2,S00,900 bales.

Cotton acreage in Argentina for the 1336-37 crop represents a record

high of over 1,,00,00O acres, but production prospects have been clouded due

to unsatisfactory woe.ther and damage from insect nests. While an Agricultural

Conservation Prnoran similar to thr-t of 1336 and affecting cotton as a soil

depleting crop will be applied in the Southern United States this coming

peason, it is difficult to determine what effect it will have on cotton

acrenge.

Domestic Prices Maintain Risoe experienced in First Half af ecember

The strength evident in spot prices during the first half of December
continued to be present throughout the month and in the first half of January.
The price of Middling spot cotton at the 10 markets averaged 12.60 cents in
December compared with 12.06 in November and 11.70 cents in December 1935.
The high was 12.88 cents on December 28 and the low 12.35 on December 5. The
averages for the week ended January 3 and 16 were 12.75 and 12.82 cents, re-
spectively.

The very high rate at which American cotton is being used by mills in
the United States and the relatively small supply of American cotton now in
private hands, together with the record level of world consumption of all
cotton,continue to be important price-strengthening factors. The price of
American Middling at Liverpool strengthened in December along with the rise
in spot prices in the United States. The ir ortant foreign growths also rose
in price so that their prices expressed as a percentage of American showed
little c-hange from November but, on the whole, continued to encourage their
ccnsumpticn at the expense of American.








Release of Government-Finaaced Stocks Mny Auonent Supplies
of American Trede Ch1nnE.ls


During the calendar year 1936 abcut 1,400,000 bales of ccttcn upon
which the Commlodity Credit Corporation and the Reconstruction Finance Corper-
ation had loaned 11 and 12 cents per pound were sold by releasing it to the
borrowing growers at 25 points less than the current 10-markret price. On
January 2, 1937, the Corporation stated that in order to maize LvaileLle "a
reasonable amount" of the 3,000,000 bales remaining, loan-stock ccttcn (near-
ly all 12-cent loan) would be released to producer-borrowers bot7:een F-bru-
ary 1 and April 1 under conditions similar to those of last year.

None of the 12-cent lean cotton will be released if the 10-market
price of Middling 7/8" on the preceding day is less than 12.75 cents. Ap-
propriate differences will be allowed so as to equalize values as between
the different qualities of cotton and as between the various locations
where the cotton is stored. Under the plans covering the disposal of the
loan cotton last season, no provision was made for differences in value
arising from differences in quality and location.

Although the minimum l0-market price at which 12-cent loan cotton can
be released is 12.75 cents, and the market has been hnverint around this
level in recent weeks, conside-able quantities of loan cotton probably will
move into trade channels, if the hiph rate of consumption by domestic mills
should continue and the foreign demand for Americar cotton imorove sc as to
maintain the 10-market price at 12.75 or above.

Exports of American Cotton Continue Below Last Year

Exports of cotton from the United States in December amounTed to
594,000 bales compared with 886,000 in December 1035. In the 10 years ended
1932-33, exports in December averaged 1,010,000 bales. ExportL. tc nearly
all of the important foreign consumers of IAmerican cotton were less than a
year ago, but declines were especially heavy with respect to Jr5p;n, Germany
and France. Shipments to these countries were 118,000, 66,003 and C99,30
bales, respectively, compared --ith exports of ::E9,000,0,116,00, an- 120,c00C
bales to these same markets in December 1935. Shipments of 3'',002' b-.les tN
Italy represented an advance over exports of 29,0,10 bales i.: PLc ?:.bI' a year
earlier.

In the first 5 months nff the present season, exports t.'saled .,1"':',300
bales or 16 percent less than thc.,e of 3,481,000 hl.:-s i:: the cT h:rre2i0 1 nl
period in 1935 ?nd, with the e;:cepticn of 1'::34, ar( the s.';ill -t f'-o th-.c
period since 1922. All of the r:ajor imnportin;- countries t:; ..:. 111i: ".1I..uji ts
than in the same August to December p]1ri'Ld in 193['.

The tables on pages 13 and 15 show tihe immportunce' L':' c-'t:.' ."',iuct: i
and income frcm cn tton to American acricultu:rc, t!IL siah:'c. \w.'i.: c ri(t': ex-
ports represent of cotton production, and t,-tal ex orts n'' :ric;ultu']al and
all products as far back as cr.-parabl.: data sr. aviio lbl. T:'-r' clearly
evident from the table trn loln-tir.i. upward trl.nd in cont 'i :r;'.:;ect i: aund
Cotton exports, especially front thu riiddle -:' the nfl .tL''ii 1,.1 ce'i..tu:t' t'o Ihe
beginning of the Wnrld Wrir rkriod. If tiic. dIatU :u:'t cr:'r ti bck ; 'j:1
further the upward trund cculd b1e s,_n t', bc o).tundin. :'r l'r thU b ;-'l!,- "' i
tho nineteenth century.


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IJ


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Poth production and -eports, especially the later, tended to de-
cline during the World War and during the period of very greet boll weevil
infestation in the early 1920's. Beginning with 1924, both production and
exports recovered and remained at u gernerarlly high le7el until the advent
of Government price and production control. The value. of cotton exports has
shown a general upwarrd trelid. Althcugh the -elue haL fluctuctec from year
to year in response to changes both in their volume and in response to
clianges in the price of cotton--as affected by the supply, the movement of
-eneral prices, and the world demand for the staple--in most seasons the
variation in the ;-alue of exports las not been as great as the change in
the volume. Generally smaller exports have been accompanied by a small crop
iand high prices, and large exports have been accompanied by a heavy crop and
relatively low prices so that quantities and prices have tended, to some
extent, to offset each other.

Apparently there has been a tendency for a somev-hat sr.aller proportion
of the crop to be exported. With the exception of the period from 1860 to
1869, in most of the years up u..til the World War, from two-thirds to three-
fourths of American production was'exported each season. In most of the
./cars since 1914 the proportion of the crop shipped abroad has ranged from
a Aalf to less than two thirds.

Cotton exports as a percentage of total agricultural exports and
total exports of all corimoities were very large from 1850 to 1859 and from
1865 to 1869, but declined during, ther next three decades with the opening
of the West -and the tremendous expansion in exports of grains and livestock
products to Europe.

After the turn of t'.e century, however, the domestic demand for food-
stuffs expandeI arid new soirces of supply for the industrial countries of
Europe vere dv3clopCo in such countries as Can.da, Australia, Argentina.
its a result, exports of foodstuffs declined but Europe continued to rely
upon thu United States for cotton so that the share of total agricultural
exports end all exports represented by cotton increased. A rcclin.- in the
ratio of cotton exports to other exports came during the War end early post-
war years as i result of the heavy shipments of foodstuffs and raw r.i.tcrials
to the allied countries and the ccmpl:se cssr.tion of cotton exports to
2ormnvy -ad hr'r allies, which had form i-r constituted such a large market
for -rcri'can cotton. The resumpLtion In the letter half of tch 1920's of
the: dc-wnw:;rd t-rend in exports of foodstuffs and th: large volume, of cotton
exports accormpanied by compar.tivcly high prices for the staple caused an
incrcose in the shc.ru of total agricultural exports represented by cotton.

Since 1930 the proportion of the value of total exports represented
by cotton h-.s not declined and the, share of total agricultural exports repre-
sented by cotton has, on the -.'errgo, been higher than from 1925 to 1929.
The compacratively f.vorablo showing of cotton exports as a percentage of
the value of total exports, howc7ver, h.es resulted not from rn increase in
the volume and th, value of cotton exports but rvthor from the fact that
the foreign demand for r.11 exports, and especially exports of agricultural
products, as a whole h.-s been ,-rortly dprEssud. Also, the fact that for-
eign n-rkets are nore important to cotton than to other domestic products
hirs caused the dev-rlurtion of thu dollar to ha..ve a grec.tcr effect upon the
r7.luc: of cotton exports thnn upon the value of all exports taken as a group.





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The very lar.-; shpre of ;-'ross far;.. incn.i.:e an' cash frnn inco-.e rc-re-
sented by income from cotton n-roduction an' the lnr:.e -art of the vrlue of
the cotton crop still re-resented by exports indicate how irmort-nt foreijLn
demand is to cotton farmers' income andn to r-ricultural income as a whole.

The Textile Situation

Zorld mill activity and cotton cons.rintion tend to shoi further incre.?e.

The activity of cotton textile industries has tended to incrccse in most
important cotton consuzainf countries during the nast 6 weeks. Consuj.ntion by
mills in the United Stptes in Deccmbcr .'ais a record hi-h for the month and
utilization in the first 5 months of the current season -as a record high for
the period. In foreign countries, especially in J-jan, China an'. the United
Kingdom, as in the United States, increased industrial activity, consux-er
incomes and Government spending are beinr. reflected in ln.r-re sales of cotton
Soods, a larre volume of unfilled orders, increased -rices for yarn .an. cloth,
2.nd more profitable mill margins, which are tending to maintain or expand the
-lready larce volume of cotton consu;-.tion.

In foreiLC countries, the high decree of activity is tricing nlace
largely on the bisis of foreign cotton, but the lar-e consumption of -ll kinds
is tending to maintain the actual consu-.ntion of .A.nricnn at a level not
Greatly below that of nlst season even thoi ;h its relative importance has
declined considern.bly. This situation is well illustrated by data on for-ard-
ings of cotton to mills of the United Kin.-do-.i .ndc J?--an in the 5 months from
August 1 to Decemner 31, 1035, as reported by the New York Cotton excha.n;e
Service. Fron August 1 to Dece.-.bcr 31, forwardin:s of -ll kinds of cotton to
mills in Great Britain totaled 1,173,000 balos cor-rared with 1,030,000 bales in
the correspondin.- period a year earlier. 7For-nrdin "s of American cotton this
season were 48G,000 b"les, or 41.4 percentt of the total, rt.ercqs a ;c.r
earlier the 489,030 bales for-orrled re resented 45.3 -ercent of the t3tel.
In Japan, forwardin;s of all kinds of cotton totnl.el 1,535,00C
bales in the first 5 months of this year and 1,277,000 1-st season. ForwYrd-
in.s of Ar.erican vwre 512,000 bales and 33.3 -crcent of the total so f.r this
season and 1C.3,000 bales and 49 percent of the total in the ccrrcs-,cndinC
period a yerr earlier. In December, forvrardin.-s of all kinds of cotto:: to
Japanose mills were 30 percent lp.rcor, American 7 -crcent, ann forci-n 0 --pr-
cent larger than in Dcce:.-.ber 1935.

Domestic consrjnntion at record levels

Total domestic mill consun'-tion in Dccember exceeded that for -.ry le-
comber on record ani was nc-rly un to the record hi h for rrJ :.ont:: Consurn-
tion of 693,000 bLles in December cor.-rnrci with 317,000 in Nove..lber nni'. .ith
500,000 bales in Decombcr 1935. Consu-:ntion in the 5 months A'.:-st to De-
cenber, inclusive, totaled 3,170,000 bnlos, on increase of 31 nerce.t river
consi.ption in the corresnondin. rneriod n ;:,-r enrlior, and is r r-'ccr(. hich.
The rnily rnto of consunption, as cnlcult;.l by the Nc Yor' Cotton Exclhnnc
Service on the b-sis of 9l vorkin. d as, -ns Of .'-lcs. :'ill .mr.-ir.s
(based on 17 constructions of : ray cloth) nvcr- -l 17.?' cents 1:: :cer. her
a-T')r.:' vit!. n1.-'0 in -Svr-Lr .rn. :.ith 17.0? center in cco. :'; 175, n.: r-ere
the widest r.nri-ns for any r.onth cince Au-ust 193-3.


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Trade reports indicate that domestic mill consumption continued at an
unusually high rate during the first half of January. During the latter half
of December, mill sales of cloth tended to lag behind the very high rate of
output, but mills continued to hold a very large volume of unfilled orders. In
the first 2 weeks of January, sales increased and exceeded output by a sub-
stantial margin. Cloth prices advanced, and mill margins are believed to have
widened slightly. Sales of unfinished cloth were especially large.

It is not known to what extent unfinished goods and the articles made
from them have accumulated in the channels of wholesale and retail trade, but
indications are that retail sales have been very high during recent months.

Euronean cotton industries active outlook rood 1/

United Kingdom.- Cotton consumption in the United Kingdom was maintained
through the first 3 weeks of December at close to the highest rates so far
recorded in the recovery period. Cotton textile products continued in active
demand at higher prices. During the month agreements were reached binding
spinners to maintain fixed margins between cotton quotations and yarn prices
on both fine and medium counts, and a strike of spinning mill operatives was
averted at the last moment. The settlement involved a general wage increase
of 5.63 percent of current rates of compensation, with larger proportionate
increases granted to workers low in the scale. The wave increases in the
spinning mills follow increases of some 7.3 percent and more, granted to weavers
in November.

Weekly mill takings of American cotton,. while running somewhat under., the
best figures for the season, held up fairly well at slightly above the season's
average, while takings of Brazilians, Argentines and East Indians, which ran
high earlier, fell substantially below their 1933-37 weekly averages. Takings
of Egyptians, on the other hand, were relatively very large.

Imports of American, normally at their peak at this time, were unusually
low and so far this season have been only little more than sufficient to re-
plenish mill takings from the port stocks. Difficulty is reported in obtaining
from American ex-orters offers of desir-ble qualities at prices competitive
with cotton on the spot and with other growths, especially South Americans, the
available supply of which in Great Britain is now larger than usual. The com-
petitive position of other principal g-owths, with the notable exception of
Egyptian Uppers, was strengthened a little in December by price changes, which
made them slightly cheaper in relation to American than in November.

The outlook for British cotton mill activity in the next several months
continues favorable. In the home market underlying conditions continue favor-
able to the consumption of cotton goods. The export outlook, however, remains
somewhat uncertain, and with the Italian and Dutch devaluations competition has
increased notably.

l/ Prepared largely from a report from Agricultural Attache' Loyd V. Steere at
Berlin under date of January 11, 1937.


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Germany.- There has been no significant chance in the German situation.
Complaints from the industry have been numerous, and it is evident that raw
cotton as well tIs other raw material is very scarce. Retail sales have kept up
very well, and it is this discre'nncy in the development of retail turnover and
raw material supplies that mrk es for the tension existing at present. Accord-
ing to a recent decree, all stocks of cotton and cotton yarns, including mixed
yarns, exceedin- 100 kilogram.s per owner must be reported by January 15 to the
Supervisory Office.

Imports of raw cotton and other spinning ,nateri-l have remained low, and
it is hardly conceivable that the present rte of cotton mill activity can be
maintained for any length of time, unless the recent United States Treasury
ruling facilitates the purchase of larger supplies of Anericnn cotton through
increased Gerran exports to the United States.

Czechoslovakia.- The cotton mill situation in Czechosloviki. has
definitely improved, and it is evident that the increase in domestic purchvsinC
powor resulting from expansionistic Government policies has benefited the
industry gently. The spinning mill cartel has been concluded recently;
domestic yarn sales are apportioned, and exports are subsidized by a bounty
levied on the home sale of yarn. It is also planned to buy up surplus snindle-
aRe, for which purpose credits under Government guaranty are to be obtained.

Austria,- The situation in Austri. has been characterized by consider-
able fluctuation in recent weeks, with employment still rather high, but the
export outlook, notably for business with Rumania, changing from one week to
another. Export competition has become more difficult since the devaluation of
the Italian lira, and a considerable share of the Austrian business in south-
eastern Europe has been taken away by Italy. It is however, reported that an
export market tcreement between Austria and Italy has assured Austrian cotton
yarn a definite share of the Rumanian market.

France.- Very favorable business and mill occupation has continued in
the French cotton industry. There is n lack of skilled workers in many -laces,
and full activity has been recorded by Alsatian sAinners and from some other
districts. It is pointed out, however, that a lnrge share of this increase
in business and occupation is due to the justified expectation of stroncl.r
rising prices in connection with and following dev-luation.

This stimulus is expected to weaken as time roes on, and there :r-.y be
some slight recession in the nresont hi.-h level of turnover as a res-ult of
possible recession in wholesale demand. Since ultimate cor.sumer de::.nn for
textiles, hor-ever, will likely continue Crowin-, -s a result of the eoranL.inc
-eneral economic activity, the possible recession in mill activity nn. r-w
cotton consumrrtion is not oxtected to be laree.


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Italy.- There has teen a very not-'le further innrovement in the Italian
cotton r.ill situation, owinr- to rur.tly cnh-nce:. ex-ort business, not only with
the southeastern European countries r.-hre the It.lian ex-ort success is a
,:reat handica- to Central Europ-,en mills but r.lso with Britich India, China,
and the Dutch Infies. It is indic-.ted th.-t r:.ills L:.vc recently; been o-irating
at very satisfactory levels, since r,': cotton is freely allotted to then by
the Governm.ent for such -mi.nufacture as is destined for exTort.

Arrivals of ra:.., cotton in It'lian ports have appreciably increased. The
share of rpw cotton consume. by the ,..ills for rlanufacturin- .oods for the
lonestic market, however, re:.nins :rently restricted.. The outlook for Italian
cotton mill occu-ation in the next several monthss to com.ie is favor..ble on
account of the ermort situation. Ovin" to this ir.mrovenent the Government ha'
removed all direct restrictions on o'-er-tions of spin.dles and loo-.ms. By decree
of Decer-ber 22, all cotton :.ills have been co.n-clled to use a total of 5,000
metric tons of cottonized hemp during the ye-.r endin- Noveiber 30, 1937.

roland.- Donestic turnover of cotton :-oods in rolnnd is reo-ortod to have
considerably increased of l-te, notably because of incrcrsed military require-
-.ents. It is expected that rvw cotton consunmtion durin- the next several months
and in all of 1337 will be on the increase the increased quantity of raw
cotton counnared with last year to be -)rocured eventually through conrensation
deals, mainly with South American countries. The nrocurenent of sufficient
cotton supplies is not an easy task in Poland, since the forei.-n exchange avail-
able for that purpose an-ears lir.ited.

Russia.- The larg-e quantity of domestic cotton which is reported to be
available for consu.mrtion in 1937 has, for the first time during the -)ast years,
brought up the question of cotton r.ill equipment. Opinion seems to differ as
to whether or not the present number of snindles is sufficient to enable the
s-inning of a minimum of 3,000,000 bales of 478 pounds of ginned cotton. The
Co-2nissar of the Lirht Industry has recently stated that the industry must and
will be able to work un the large quantity of cotton available. Others, how-
ever, are of the opinion th?.t a fundar.ental modernization or expansion, or both,
of the existing mill equipment is required. It ap-ears that the large 1936
cotton crop finds the textile industry unprepared to handle it.

It is hardly possible to form o.n opinion as to whether or not a materiall
further increase in cotton textile output is possible with the present equipment,
but no doubt creat efforts will be made to nmke the best of available capacity
and to increase the productivity per unit of equipment. On the other hand, it
is not alto..ether imnprobable that -"art of any raw cotton surplus ..liAht be
exported.

Production of cotton fabrics by enterprises of the Light Industry during
the first 10 months of 1936 ar.ounted to 2,369,394,000 yards as compared with
1,842,279,000 yards in' the first 10 months of 1935 and 1,509,938,000 in 1934.

2/ BaseC. on information received front the American Consulate at Milan.


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Outlook for the next few months

The outlook for some months to come is relatively favorable for
Europe as a whole. It is likely that conditions in England will tend to
maintain a favorable domestic demand for cotton goods, and, although the
recent wage increases may be unfavorable for the export outlook, it is
unlikely that any great change in export possibilities of the British
cotton industry will occur in the near future, despite increased competition
from the devalued Lira and Guilder. World trade is now generally on a
definite upgrade, and production costs are rising in other countries as well.

In France, further progress along the line of economic recovery may
be definitely counted upon, and it is likely that this will tend to.increase
domestic consumer demand for cotton goods. Italy will probably be a much
better consumer of raw cotton in the next several months on account of a
decided increase in, or resumption of, her export business, for which raw
material is now being amply allotted. Czechoslovakia also is likely to
benefit from increased domestic purchasing power, the growth of which is
now being stimulated by expansionistic Government policies. Switzerland
should also continue to benefit from currency adjustment, which has already
brought about a notable betterment in the activity of the Swiss cotton
industry. Holland is likewise reported to have .experienced improvement that
should continue because of a general pick-up in her business with the Dutch
colonies.

Austria is likely to maintain her present satisfactory situation,
despite considerable uncertainty in regard to the further development of
yarn exports to the Danubian area. For Germany, on the other hand, the out-
look is not very favorable, for raw material reasons, but hopes are
entertained that the recent ruling of the United States Treasury governing
the use of Aski or compensation marks, will enable purchase of larger
quantities of American cotton.

Mills active in Japan and China imports and stocks of American
increase in Japan i/

Japan.- Imports of American cotton in November amounted to 247,0COC
bales compared with 109,000 bales in October and with 166,0CC b-les in
November 1935. Imports from September to November totaled 368,00u bales
compared with 277,000 in the corresponding period in 1935, an increase of
33 percent. Imports of all kinds of cotton were 380,000 bales in November
and 829,000 bales in the 3-month period from September to November compared
with 281,000 and 553,000 bales, respectively, in the corresponding period a
year earlier. Imports during November of Indian, Egyptian and Chinese cottons



3/ Prepared largely from cables received from Agriculturil Comrnissioner
Lawson at Shanghai, under date of December 30 and Janu.:ry 4 -ad 14.


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of 56,000, 15,000, and 21,000 bales, respectively, were in each case somewhat
below those in November 1935, but for the September to November period
imports of all three growths were larger than a year earlier. 4/

Stocks of all kinds of cotton in Japan on November 30, 1936, of
476,000 bales were 2-3/4 times as large as stocks on the corresponding date
a year earlier. Although a large increase was shown for Indian cotton and
other growths, the larger part of the increase in total stocks as compared
with November 1935 resulted from a rise in stocks of American cotton from
60,000 to 240,000 bales.

Mill takings of all kinds of cotton in November amounted to 301,000
bales compared with 251,000 bales in November 1935. Takings of American
cotton of 137,000 bales were about the same as in the corresponding month a
year earlier but takings of Indian of 108,000 were 30 percent larger.
Japanese mills took 24,000 bales of Brazilian compared with none in November
1935,

Yarn production was 318,428 bales of approximately 400 pounds in
November and with the exception of November 1934 was the largest yarn output
for the month on record. Production of 326,629 bales in December was a
record high for any month. The voluntary curtailment rate imposed by the
Japanese cotton spinners' association remained unchanged at 26.2 percent of
spindle capacity during November and December, but it is reported that the
percentage of operation will be increased by 1.2 percent in the first quarter
of 1937. It is proposed, however, to curtail spindle operation by 35 percent
of capacity in the second quarter of the year. In spite of the decreased pro-
portion of all spindles which will be operating, it is believed that a more
intensive and efficient utilization of a smaller percentage of capacity will
result in a yarn output in the second quarter of 1937 of from 315,000 to
320,000 bales per month, which, if realized, will be a higher level of yarn
output than has prevailed at any time with the exception of December 1936,
and 2 or 3 months in 1934-35.

It is reported that the domestic market is expected to absorb any
increase which takes place in the output of cotton textiles. It is believed
that an improvement in rural incomes in Japan, as a result of good rice crops,
is mainly responsible for recent increases in the domestic demand for yarn
and cloth. This increased demand from domestic consumers has been a con-
tributing factor in the recent rise in yarn and cloth prices in Japan.

Exports of cotton cloth from Japan amounted to 215,000,000 square yards
in November, and were slightly smaller than the 221,000,000 yards exported in
November 1935. Exports in the 4 months, August to November, totaled 880,000,0(
yards, compared with 895,000,000 in the corresponding period a year earlier.'
4/ The import figures are those estimated by the trade and differ considerably
from the official import statistics as reported by the Minister of Finance.
The official data are said to include only cotton which has been completely
unloaded by about the 25th of the month. Consequently, should a large number
of boats arrive toward the end of the month and be unloaded after the 25th
or be in process of being unloaded on or after that date, the official figure
for imports would be much smaller than the trade estimate. This has been the
case in recent month. For instance, the official source gives imports of
American and all kinds of cotton into Japan in November as 170,000 and 316,000
bales, respectively. However, taking an entire season of 12 months, the trade
estimates and official figures will differ but little. (See Foreign Crops and
Markets, January 11, 1936).





CS-3


China.- The cotton situation during November and December was
characterized by a high rate of mill activity, heavy arrivals of Chinese
cotton, a good demand for yarn with an unusually wide margin between yarn
prices and cotton prices, and vcry small imports of foreign cotton.

Preliminary Shanghai arrivals of all kinds of cotton in December
totaled 236,940 bales of which 229,000 bales were Chinese. In the 3-month
period, October to December, arrivals of all kinds amounted to 647,653
bales of which over 625,000 bales were Chinese. In the corresponding
period in 1935, arrivals of all kinds of cotton and Chinese cotton amounted
to 377,000 and 357,000 bales, respectively.

Deliveries to Shanghai mills of all growths of cotton totaled 562,000
bales from October to December, an increase of 63 percent over deliveries
in the same period of last year. The entire increase can be accounted
for by Chinese cotton, deliveries of all other growths being only 21,000
compared with 31,000 bales in the corresponding period a year earlier.

Deliveries as well as imports and arrivals of American cotton have
been less in recent months than in the corresponding months a year earlier.

It is estimated that from 175,000 to 200,000 bales of foreign cotton
will be needed by mills in China during the 10-month period extending from
November 30, 1936, to September 30, 1937, or about two-thirds as much as
was actually consumed in the corresponding period a year earlier. This
estimate has been made on the basis of present yarn prices and estimated
demand for the different qualities of yarn during the coming months.

It is estimated that spinning mill requirements will call for about
50,000 bales of American, 80,000 to 90,000 bales of Indian, and 50,COO to
60,000 bales of all other growths. It is realized, however, that variations
in price margins between different qualities of yarn and different kinds of
cottons may result in some shifting in the consumption of the diffe,-ent
qualities of yarn and the various growths of raw cotton. Thus far, the price
of Chinese cotton has not declined sufficiently to permit any considerable
export of qualities which are competitive with other short and medium staple
growths in world markets.

Production, Acrengn, and Crop Conditions

World.- World production of all kinds of cotton in the 1936-37
season is preliminarily estimated at 30,200,000 bales compared with the
earlier estimate for the present season of 29,900,000 bales and last year's
crop of 26,500,000 bales. Foreign production of 17,800,000 bales is a record
high and compares with the 1935-36 figure of 15,900,000 and the average for
the 10 ycErs ended 1932-33 of 11,200,000 bales.

In the 10 years ended 1932-33, cotton production in the United States
averaged 14,400,000 bales, or 3,200,000 more than the average production of
foreign cotton in the same period. In 1934-35 and 1935-36, foreign
production has exceeded American by 4,600,000 and 5,300,000 bales,
respectively. Should actual foreign production turn out to be as large or
larger than is anticipated at the present time it will cxoued the crop in
the United States by a greater amount than in any previous year.


-11-





CS-3


Russia.- On November 15, a month before the expiration of the date
fixed by the Russian Government, full execution was reported of this year's
cotton procuring plan of 2,685,000 bales of ginned cotton. Reports
indicated that cotton picking and procuring were still continuing.
Procurings of unginncd cotton by December 1 were reported to have amounted ti
9,833,000 bales or the equivalent of 3,046,000 bales of ginned cotton of
approximately 478 pounds net.

The crop is reported to be of good quality. Although in previous
years, early estimates of the crop made by the Russian Government have been
subsequently revised downward, the previous forecast made by the Bureau of
Agricultural Economics of Russian production of 2,500,000 bales is being
raised to 2,800,000. This is a record high production. The crop in
1935-36 amounted to 2,250,000 bales, in 1934-35 to 1,785,000 bales, and
for the 10 years ended 1932-33 averaged 1,100,000 bales.

United States.- An Agricultural Conservation Program for 1937
similar in many respects to the 1936 program was announced on December 7,
1936, by the Secretary of Agriculture. Subject to the expected provision of
funds by Congress, the Plan provides for payments to farmers who meet speci-
fied conditions for shifting land from soil-depleting crops to soil-
conserving crops and for carrying out approved soil-building practices. In
1937, it is proposed to place more emphasis upon soil-building practices
and more funds will be made available for this purpose than in the preced-
ing year.

Preparations are not being made to transfer the administration of
the Agricultural Conservation Program to the States on January 1, 1938,
as provided for in the Soil Conservation and Domestic Allotment Act.
While cotton is classified as a soil-depleting crop and payments will be
made for shifts from it to soil-conserving crops, it is impossible to tell
what effect the Program will have on the 1937 cotton acreage.

Argentina.- The first official estimate of the Argentine Government
places the cotton area for the 1936-37 season at 1,015,000 acres. This is
a record high and compares with the -revised estimate of 763,000 acres for
1935-36 and 300,000 in the 5-year period ended 1932-33.

It seems likely that the increase in production this season as compare
with last will not be in proportion to the increase in acreage. Persistent
drought delayed the development of the crop in the Chaco, the most important
cotton producing area in Argentina. Furthermore, locusts and hail have done
considerable damage. In Corrientes, the second most important producing
area, the condition of the crop is poor because of drought and locust damage<
In some cases, resowing was possible following drought or locust invasion,
but over much of the area the damage is believed to have been irreparable.
The cotton crop in Arguntina last year amounted to 354,000 bales compared
with 295,000 bales in 1934-35 and an average of 145,000 bales in the 5 yearly
1928-29 to 1932-33. The Argentine Government is making vigorous efforts to
expand cotton production, and it is anticipated that output during the next
few years will continue to show an upward trend.

Egypt.- Ginnings of Egyptian cotton from September 1, 1936, to Janua
1, of this year amounted to 1,407,000 bales of 478 pounds,including Scarto.
During the corresponding months of the 1935-36 season, 1,321,000 bales were
ginned.


-12-





-13-


United States: Production and exports of cotton, exports of all commodities,
and exports of agricultural commodities, 1850-51 to date


: : : : Ratio : :Ratio
: : :Ratio : :Value : of : Value : of
: :Quantity: of : Value : of :valueof: of :value of
:Cotton : of :cotton : of : all :cotton : total :cotton


:pro- :cotton :exports: cotton :commodi- :exports: agri- :exported
:duction:exported: to : exported: ties :to all :cultural :tototal


:pro-
:duction:


:exported :com-
: :modity :


exports :agricul-
:tural


: : : : :exports: :exports


Percent


1,000 1,000 1,000
dollars dollars Percent dollars Percent


1850-51 to
1859-60
1860-61 to
1864-65
1865-66 to
1869-70
1870-71 to
1879-80
1880-81 to
1889-90
1890-91 to
1899-1900
1900-01
1901-02
1902-03
1903-04
1904-05
1905-06
1906-07
1907-08
1908-09
1909-10
1910-11
1911-12
1912-13
1913-14
1914-15
1915-16
1916-17
1917-18
1918-19
1919-20


3,449 2,360


S2,140

S2,453

S4,397

S6,495

S8,900
: 10,124
S9,508
: 10,630
S9,851
: 13,438
: 10,576
: 13,274
: 11,106
: 13,241
: 10,005
: 11,609
: 15,694
: 13,703
: 14,153
: 16,112
: 11,172
:11,448
: 11,284
: 12,018
: 11,411


136

1,481

2,846

4,258

6,105
6,800
6,949
7,084
6,207
8,908
7,116
8,943
7,666
8,955
6,353
3,027
11,116
9,146
9,508
8,702
6,113
5,525
4,402
5,774
6,707


68.4

6.4

60.4

64.7

65.6

66.6
67.2
73.1
66.6
63.0
66.3
67.3
67.4
69.0
67.6
63.5
69.1
70.8
66.7
67.2
54.0
54.7
40.3
39.0
43.0
58.8


123,607

11,723

204,724

194,531

221,329

226,366
317,761
267,119
316,278
372,476
393,080
393,141
476,994
438,371
421,491
448,710
531,896
567.554
548,689
610,041
376,246
384,171
522.556
654.180
924,202
1,333,925


232,283 53.2 189,564 65.2


170,198 6.9

307,696 66.5

574,358 33.8

750,146 29.5


1,006,183
1,460,463
1,355,482
1,392,231
1,435,179
1,491.745
1,717,953
1,853,718
1,834,786
1,638,356
1,710,084
2,013,549
2,170,320
2,423,506
2,329,684
2,716,173
4,272,178
6,227,164
5,838,652
7,081,462
7,949,309


22.5
21.8
21.2
22.7
26.0
26.4
22.9
25.7
23.9
25.7
26.2
28.9
26.2
22.6
26.2
13.9
9,0
8.4
11.2
13.1
16.0


123,951


240,440 55.1

453,200 42.9

573,952 33.6


703,235
951,628
857,114
878,481
859,160
826,905
976,047
1,054,405
1,017,396
903,238
871,158
1,030,794
1,050,627
1,123,652
1,113,974
1,475,938
1,518,071
1,968,253
2,280,466
3,579,918
3,661.511


32.2
33.4
33.5
36.0
43.4
47.5
40.3
45.2
43.1
46.7
51.5
56.5
54.0
48.8
54.8
25.5
e-
25.3
26.5
28.7
25.8
34.5


ContinuLd -


Season
1/


: 1,000
: bales
S / -


1,000
bales
500 lb.


9.5





-14-


United States: Production and exports of cotton, exports of all
commodities, and exports of agricultural commodities,1850-51 to date
Continued


: Ratio : :Ratio
Ratio : alue :of : Value : of
q: Quantity of :Value of :valueof: of :value
:Cotton : of cotton of all :cotton : total :cotton
pro- :cotton :exports: cotton :commodi- :exports: agri- :exported
:duction:exported: to :exported: ties :to all :cultural :to total
:pro- : :exported :com- :exports :agricul-
:duction: : :modity : :tural
:exports: :exports


1920-21
1921-22
1922-23
1923-24
1924-25
1925-26
1926-27
1927-28
1926-29
1929-30
1930-31
1931-32
1932-33
1933-34
1934-35
1935-36 4/


1,000
:bales
2/

13,429
7,945
9,755
10,1'40
13,630
16,105
17,978
12,956
:14,477
:14,825
:13,932
: 17,097
:13,003
:13,049
9,636
S10,638


1,000
bales
500 lb.

5,973
6,348
5,007
5,815
8,240
0,267
11,299
7,857
8,419-
7,035
7,133
9,193
8,395
7;964
5,036
6,267


1,000
Percent dollars


44.5-
79.9
51.3
57.3
60.5-
51.3
62.8
60.6
53.2
47.5-
51.2
53.8
68.4
61.0
52.3
58.9


591,312
600,130
639,199
906,569
1,049,065
922,737
355,785
620,105
347,4'09
657,727
420;972
339,940
342,699
421,406
325,685
383,537


1,000
dollars Percent


6,385,884
3,699,909
3,686,682
4,223,973
*4,778,155
4,653,148
4,867,346
4,773,332
5,283,938
4,617,730
3,031,557
1,908,087
1,413,397
2,008,484
2,085,092
2,374,159


9.3
16.2
16.4
21.5
22.0
19.8
17.6
17.2
16.0
14.2
13.9
17.8
24.2
21.0
15.6
16.2


1,000
dollars

2,607,641
1,915,866
1,799,168
1,867,098
2,280,381
1,891,739
1,907,864
1,815,451
1,847,216
1,495,907
1,038,034
752,145
589,653
787,347
3/668,713
3/766,304


Exports compiled from reports of the Bureau of Foreign and Domestic Commerce.

1/ Cotton (quantity and value) 1850-51 through 1366-67 season beginning July;
1867-66 includes 13 months July through July; 1868-69 to date season
beginning August. All commodity exports and agricultural exports are for
season beginning July 1.
2/ Running bales 1850-51 through 1898-99;' 1899-1900 to date bales of 500 pounds
gross weight.
3/ Excludes distilled liquors which are classified as nonagricultural.
/ Preliminary.


CS-3


season
1/


Per-
cent

22.7
31.3
35.5
48.6
46.0
48.8
44.9
45.2
45.9
44.0
40.6
45.2
58.1
53.5
48.7
50.1





- 15 -


United States: Income frcm cctten lint and cotton and cottonseed,
gross and fan. income from farm production, specified seasons

S. Perccnt- ---
S: : : ~e in-
: : : : Percent-:come from: :


Season

/


193'9-10
1910-11
1911-12
1912-13
1913-14
1914-15
1915-16
1916-17
1917-18
1918-19
1919-20
19 20-21
1921-22
1922-23
1923-24
1924-25
1925-26


1928-29
1929-30
1930-31
1931-32
1932-33
1933-34,
1934-3532/
1935-363ki


Cash
income
from
lint
cotton


: 1, C00
: dollars

: 6sn,246
S809,724
752,925
:787,232
884,926
: 532,83
: 626,774
: 992,304
:1,529,862
:1,738, 71
:2,020,398
:1, 69,257
675,773
:1,115,578
:1,454,32"
:1,561, 22
:1 577, 91
:1, 121,185
:1 308,(.88
:1,302,036
:1,244,846
659,41
483,627
: 424,;no6
S 37,183
: 711,137
S753,582


Gross
income :


: ago in-: cotton :
Gross :come from: and
inrnnn : cnttnn : cotton- :


: from : from
:cotton : farm
and : pro-
:cottonsccd: ductinn
: :


1, C00
dollars

736, 386
912,837
842,300
875, 362
930, 632
685,9 3
748,394'
1,178,339
.1,781,462
1,996,129
2,266,126
1,164,530
754,783
1,224,914
1,597,658
1,707,478
1,736,348
1,248,316
1,461,321
1,469,251
1,388,540
751,1.14
528,441
464, 323
830,229
822,452
861,312


1, 000
dollars

6,238,000
6, 643,'.on
6,372,0 nO
6,784, on
6,375, no'
7,028,000
7, 35, 100
8,9l4,000
12,832,010
15,101, n"
16,335, nOn
13, 566, )00
8,927, oo
9,944,000
11, t41,Inno
11,337,000
11,368,000

11,616, ro
11,741,000
11, 341, oo
,9454, rrn
6, 968, 000
5,337, 10
6,4.06, -1'
7,276, 000n
8,508,0 O


: is of seed
: gross : is of
: income : gross
:from farm: income


Spro-
: duction


Percent

10.9
12.2
11.8
11.6
12.7
8.4
8-.5
11.1
11.3
11.5
11.9
7.9
7.6
11.2
13.2
13.8
13.2
9.8
11.3
11.1
10.4
7.0
6.39
7.9
13.1
9.8
g.3


: from
S farm


: pro-
: dqction


Percent

11.8
13.7
13.2
12.9
14.2
9.8
10.1
13.2
13.9
13.2
13.4
S.6
8.5
12.3
14.5
15.1
14.5
1).9
12.6
12.5
11.6
7.9
7.6
8.7
13.3
11.3
1'.1


Cash


income coto V W I


i: income
from
farm
:production.
: :



1, C
dollars



/
TI
2/


2/



21
21
W/


3,0 06: -
I0, o?6, ^Q
5,658, 'nf
C9, 72,rl'3
9,3999, 0"
C91 77Jc.
1 ,417, 1(0

5,801,. 0
4, 377, 9(
5.4, 1, o
7, '27, xn
7, 2 1,x 9 '


Crop year for crops; calendar year for
Not available
Includes bonofit payments.
Prolimrinary.


livestock and livcztoch: products.


Percent-
age
incom.c
from
cotton
is cf
cash
income
fr )m
farm
pro-
duction


Percent

















15.

13.

12.0
8.?
8.3

15.5

1J..e


--------- -,. ,L. .__




UNIVtIS II r r rL.JIU A



3 1262 06864 6921


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