Silk Squeeze

On trays in millions of Japanese homes last week the lower jaws of billions of fat worms were steadily spinning filaments of silk. This valuable regurgitation has gone on in Japan for centuries but rarely has it been such a source of interest to the outside world. For in the next few weeks enough cocoons will have come to market for the silk industry to estimate the size of the 1939-40 crop. And upon that size depends: 1) the immediate outcome of the, tightest U. S. silk squeeze in history, 2) the fate of certain speculators, 3) whether the cost of silk stockings on the leg is going to be higher this summer.

On January 6 a bale of silk (132 1/4 Ibs.) in Japan cost 840 yen ($229). On March 2 the price hit 1,080 and the Japanese Government stepped in and stopped trading for a few days. Nonetheless, the price climbed to 1,195 yen ($325) on April 19, stood last week at 1,160. When this 40% price rise began, the small group of U. S. branded hosiery makers (such as Gotham and Phoenix) which control their resale prices had already announced their spring prices. For fear that unbranded rivals would undercut them, they did not raise prices and continued to manufacture out of previously purchased supplies. Meantime the silk became harder & harder to buy. Last week the National Association of Hosiery Manufacturers sent out a special news bulletin advising cooperatively restricted silk buying and advancing seasonal shutdowns.

The Japanese 1938 crop (July 1-June 30, 1939) was 12 1/2% under that of the year before. Meanwhile in the U. S. a ribbon fad and hosiery boom boosted silk consumption 13% in the ten months ended May 1, 1939 over the same period a year earlier.

These two facts do not fully account for the tightness of the squeeze. Figures for raw silk consumption in Japan show about a 20% increase which has been attributed to the fact that Japan has restricted cotton (and partially restricted wool and rayon) to army use only. But Japanese production of finished silk goods has declined, suggesting that Japanese: 1) may be hoarding silk as a hedge against inflation, or 2) deliberately creating a shortage in order to boost prices and make a killing before new synthetic silks start to compete in the U. S. market.

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