UNITED STATES DEPARTlETNT OF AGRICULTURE
Bureau of Agricultural Econorics
CS-12 October 25, 1937.
THE COTTOII SITUATION
Spot cotton prices at the 10 markets declined to an average of 7.96 cents
for the week ended October 9, the lowest weekly average since April 1933, but
have since recovered slightly. The average for the r.o'-.th of September was 8.72
cents, compared with 10.23 in .August and with 12.05 cents in September 1936.
Major price-depressing influences have included the improvement in crop
prospects in the United States, a large prospective crop in foreign countries,
reduced cotton consumption in the Orient, declining unfilled orders and increas-
ing mill stocks of cotton gcods in some -ountries, particularly the United
States, and declining prices of many othc-r commodities and securities.
NTew loan provisions designed to make Government loans on cotton more
attractive by raising loan rats on the shorter staples and lower grades and
Ine-reasing the qualities eligible was announced by the Commodity Credit Corpora-
tion on October 4,
Mill activity and cotton consumption in the United States are still high
relative, to most past seasons. But orders bock:ed by mills are continuing to
lag behind the production of cotton goods, and now orders and mill activity are
failing to show the seasonal increase usual at this time of year. Cotton con-
sumption during September and early October was at a high level in most foreign
countries, with the exception of China.
The indicated production of cotton in the United States in 1937-58 is
17,573,000 bales of 478 pounds, according to the October 1 report of the Crop
Reporting Board. This is the second largest United States production on
record and makes the prospective world supply of Anerican cotton 25,600,000
bales, or 22 percent more than in 1936-37.
Spot prices decline further
Spot cotton prices at the 10 markets declined to an average of 7.96
cents foT the week ended October 9, the lowest weekly average since April 19335.
But they have since recovered slightly. The average for the week ended October
16 was 8.22 cents. The average for the month of September was 8.72 cents com-
pared with 10.23 in August and 12.05 cents in 'Sertrmber 1936. Major price-
defressinrg influences included the improvrnee-.t in crop prospects in the United
States and a large prospective crop in foreign countries, reduced cotton con-
sur.ption in the Orient, declining unfilled orders and increasing mill stocks of
cotton goods in some countries, particularly the United States, and declining
prices of many other commodities and securities.
Government loans made inore attractive to Cro 'rs
The Commodity Cr-.dit Corporation announced on October 4 that cotton of
7/8 inch and longer staple and of strict low Liddling or equivalent grade, here-
tofore eligible for loans at the rate of 7-3/4 cents, is now eligible for loans
at 8-1/2 c-nts. Cotton of staple less than 7,8 inch and strict low Middling or
equivalent grade, heretofore ineligible for loans, is made eligible for loan at
the rate of 7 cents. Cotton of staple less than 7/8 inch and of low Middling
or equivalent grade, orc tofore ineli :ible for loans, is made eligible for
loans at the rate of 6 cents. It is believed that th-e ntw rats will sub-
stantially increase the quantity of short-.r staples and lower grades entering
the loan stock during the remainder of the season.
It is i4-ortant to note that under present provisions gro.:ers who put
cotton into the Governr.:nrt loan will forfeit the ri.-ht to the 3-cent adjustment
payiments on such cotton unless they take it out of the lo-an, Daying loan prin-
cipal and carrying charge on it, before July 1, 1930. This provision would
seem to indicate that a relatively large portion of the cotton entering the
loan stock will tend to come from that part of the crop whih is not eligible
for an adjustment payment. Since growers will receive the 3-cent paymcnt on
only 65 percent of their base production (base production equivalentto about
15,600,000 running bales), on the basis of present crop prospects more than
7,000,000 bales will not be eligible for an adjustment payment. It is be-
lieved by the trade that prices are such as to cause a considerable portion of
this cotton to go into Government-financed stocks.
Up to and including October 18, only 606,000 bales had entered the loan
stock. Trade reports state, however, that large quantities of cotton are being
held by grow'-rs pending their decision as to h.'hethcr to sell it or pledge it
to the Government for a loan.
CS-12 3 -
DEP'.A1D AID CZ' SUr.TTION
Do.mesti- mill activity still high, but tending downward
According to the Tiew York Cotton Exchenge Service, mill activity in the
United States tended to iecline in September -and the first half of October in
contrast to the seasonal rise which generally occurs about this time of the year.
Consumption of 602,000 bales of all kinds of cotton was slightly smaller than
August utilization of 604,00O bales but, with the exception of September of last
season and Septemcber 1927, it was the lar&Test consmrr.ption in any corresponding
month on record.
Mills encountered a somewhat better de.-pand for many lines of goods about
the middle of October, but it is reported that salks were still below production.
The decline in prices of cotton goods during the past 2 months has been more than
equal to the decrease in raw cotton prices. Mill martins in September were 14.38
cents compared ',:ith 15.14 in August, .9 in July, arnd the record high of 18.22
cents in January.
Foreign mill activity, cotton consumption high except in China
There was sonime hesitation and uncertainty in the European cotton textile
mark-ets in September but conditions in general were comparatively favorable.
In the British market, after several months of. a reduced volume of sales
of yarn and cloth, there was evidence of an increased buying interest both for
the domestic r-arket and for exports. In early October, sales of yarn and cloth
by mills ran somewhat in excess of mill outp.u.t and operations are being well
maintained at the highest level in recent years. Sales of goods by French mills
were larger in September than in August, although there was hesitation and un-
certainty, in the Frr-nch market because of the weakness of the franc. In Germany,
imports of raw cotton were largZr than for many months past.
The lower prices for raw cotton should encourage a higher level of
European imports and consumption of raw cotton, particularly if general business
conditions there are maintained or show further improvement. The difficulty of
obtaining foreign exchange in such countries as Germany and Italy, however, will
no doubt restrict importa and- consumption sorr-i-.'hat below '.h'.t might, otherwise
OC c ur.
It has been expected for the past 2 or 3 months that mill activity and
cotton consumntion would decline "in Jar.an as a result of a falling of orders
below mill output and a shortage- in raw material supplies. So far, however, no
cLrtailment of mill activity or cotton consumption has take-n place. Japanese
yarn production and exp-orts of piece goods in September were the largest for any
month on record. Trsde reports state, however, that the industry has agreed to
operate during the months of October, november, and Dccc:ribcr at a rate about 7
percent below t.he Septomber l!vc-l and beginnin- in January *-t a rate about 12
pc.rcent below thj r-.cent level,
The manufacture of and trade in cotton goods in China is greetly re-
stricted. At Shanghai all but about 15 pcrc'.nt of total spindles are idle,
UNIVERSITY OF FLORIDA
CS-12 4 3 1262 08900 4369
and the 15 percent that are in operation are working only half time. i/
United States exports larger to Europe; smaller to Japan
Exports of cotton from the United States in the 2 months ended September 30
amounted to 838,000 bales, an increase of 11 percent over exports of 752,000 bales
in the corresponding period a year earlier. Exports to nearly all of the European
countries were materially above those for last season, but shipments to Japan were
less than one-fourth as large as in 1936.
Prospective United States production second largest in history
The indicated United States production of cotton on the basis of condi-
tions on October 1 was 17,573,000 bales of 478 rounds, according to the Crop Re.-
porting Board. This increase of nearly 1,500,000 bales over the September 1
figure indicates the second largest United States production on record.
The prospective world supply of American cotton for 1937-38 is 23,600,000
bales. This is approximately 4,250,000 bales or 22 percent more than last sea-
son's supply, 1,300,000 bales or 6 percent more than the 1928-29 to 1932-33
average, but 2,600,000 bales or 10 p:rccnt below the record high supply of 1932-
33. The indicated yield per acre for the United States, of 249.3 pounds, is the
highest on rrcurd and comr.ipnr.s with 197.9 pounds in 1936 and the average of 174
pounds in the 5 years ended 1952-33.
T.Tilitary operations reduce Chin:s. crop prospects
Frequent heavy rains in both lorth China zcnd the Yangtze Valley have de-
layed harvesting of cotton and causd sore. damage to the crop, especially in
North China,- according to Agricultur-il Cor.m-nissionc:r Dawson at Shanghai. Military
activity in the S'.anghai area an.d in parts of INorth China also has prevented
harvesting, and has resulted in the destruction of many fields. In light of
these developments, it seems probable tciat the estimate of Chinese production of
4,400,000 bales of 478 pounds published in last month's Situation is somewhat
The movement of cotton to market has been greatly retarded in all areas,
and prices offered to farmers are very low as a result of the shutting down of a
large part of the Chinese textile industry. In addition, dealers are unable to
obtain transportation facilities to move the crop to what market outlets there
are available. It is reported that the Provincial Governments are taking steps
to encourage the purchasing and holding of cotton by dealers and that the central:
Government has plans under way for the creation of a Government controlled hold-
ing organization to buy cotton from farmers at fixed prices and store it in the
interior until satisfactory market outlets can be secured.
Egyp tian production expected to be a record high
The first estimate of the Egyptian Governriment places 1937-38 production in
Egypt at 2,309,000 bales or 473 pounds. The largest previous crop was the
1, .87,000 brales produced last year.
1/ Part of the information on Japan and China furnished by cable from Agricul-
tural Commissionmr Dawson at Shanghai.