Sick King

On the New York Cotton Exchange last week, the price of March futures soared to 25.87-c- a pound, highest in 21 years. But the price of cotton was like a fever chart; the higher it went, the sicker Old King Cotton got. His ills were those of gluttony.

U.S. warehouses bulged with a carryover of more than 11 million bales of cotton, at the end of July 1945. Despite bad weather and labor shortages, another 9.1 million bales have just been harvested. And, with soaring prices, U.S. planters are now getting ready to grow a whopping 11.6 million-bale crop in 1946.

Although the U.S. has hardly a new shirt for its back, and other war-worn nations desperately need cotton goods of all kinds, much of this raw cotton is not going to market. Main reason: it costs too much.

In 1932, cotton cost only 5-c- a pound. But in 13 years the South's cotton patriots, like Alabama's Senator John H. Bankhead, have pumped up the price by loan, subsidy and parity program till it has no relation to demand. Now the South is belatedly discovering that high-priced cotton is something people can do without.

Not Wanted at Home. Domestic consumption of cotton has been dropping steadily for three years. Textile mills, short of manpower, have used less. And synthetics, which have been getting steadily cheaper and better, have taken over cotton markets. Example: in 1935, no rayon was used in U.S. tire fabrics; last year, tire makers used the equivalent of about half a million bales of cotton. (Rayon is now actually cheaper than cotton when wastage in manufacture is counted.)

Exports of U.S. cotton, which in 1932 supplied 58% of the world's needs, have been dropping even faster. In the six years before the war, foreign consumption of American cotton fell off considerably as cotton production rose in India, Egypt and Brazil.

Unable to ship cotton during the war, these nations have piled up a carryover of 14.2 million bales, close to the greatest in their history. This will have to be sold in world markets in competition with U.S. cotton. Can the U.S. meet the competition?

Few Friends Abroad. Not if it practices the free trade it now piously preaches. Actually, as far as cotton is concerned, the U.S. gave up free trade long ago. In the last five years, the price of cotton in the U.S. and the world price (based on prices in Sao Paulo, Brazil) have gone their separate ways (see chart).

To sell cotton at all, the cotton bloc has legislated the U.S. into paying a subsidy of 4-c- a pound on all cotton sold in world markets, previously enough to allow the U.S. cotton to compete. (Shipping costs make the Brazil-U.S. price difference less than actual prices indicate.) But last week's sharp rise in cotton prices raised a new problem: now the subsidy will have to be increased or the U.S. will not be able to compete any better than before.

Friendly Enemies. Furthermore, the war has eliminated many a prewar market--e.g., Brazil, which once imported cotton, was forced to increase its planting till it is now an exporter. Other onetime customers of the U.S. may not buy either, because they: 1) cannot buy without U.S. loans; 2) would rather buy in non-U.S. markets, thus save what dollars they have; 3) would rather use rayon made from their own forests.

The Commodity Credit Corp., which last year held more than half of the U.S. carryover by virtue of its loans to cotton farmers under the Agricultural Adjustment Act and the Bankhead Amendment (and which thus keeps cotton off the market to keep the price up), has done most of the exporting for the U.S. since war's end. It has found cotton so hard to sell that it is now arranging to ship some 1,000,000 bales to Germany and Japan to get their spindles going again. But CCC kept mum on the price, gave no hint of when it expects to be finally paid off. CCC still has nearly 5,000,000 bales on hand--and few buyers.

As one way to save King Cotton from the grave politicians have dug, the U.S. is now trying to reach an agreement with other cotton-producing countries to set prices and production quotas. In this way it hopes that the mountainous world carryover can be absorbed eventually and everybody, including the U.S., be guaranteed a share of the world market. If the international agreement is signed, the South will have to either: 1) mechanize cotton growing so that it can be done much cheaper, or 2) grow much less cotton. The simple way of legislative price fixing seems doomed by postwar cotton economics. As Secretary of Agriculture Clinton Anderson summed up: "If any farmer has the idea that cotton's problems can be solved merely by putting a floor under the price of raw cotton, he is in for a rude awakening. . . ."

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