New Hope for a Permanent Cure

THE COTTON SURPLUS

New Hope for a Permanent Cure OLD King Cotton has been sick for years, and getting progressively worse. But now, for the first time since the Korean war, there are hopeful signs of recovery. In the 1956-57 marketing year the staggering cotton surplus, currently at an all time record 14.1 million bales, is expected to level off or perhaps even decline a bit. More important, the Government is trying new medicines on cotton, all aimed at effecting a permanent cure in the years to come.

Last week the U.S. Export-Import Bank lent Japan $60 million to be used for importing more raw cotton from the U.S. The loan was one part of a broad program designed to boost both overseas and domestic consumption while holding down production. The goal for 1956-57 is a 20%-25% increase over total cotton sales in 1955-56 by doubling exports to 4,500,000 bales while keeping domestic consumption at last year’s 9,200,000-bale level or even increasing it. With flexible price supports between 75% and 90% of parity, Agriculture Secretary Ezra Taft Benson hopes that minimum acreage allotments (17.4 million acres in 1957) and marketing quotas (n million bales) will hold next year’s crop to 13 million bales, or about this year’s level. Furthermore, under the new soil-bank program Benson hopes that farmers will increase the number of acres taken out of production well beyond last year’s 1,064,000-acre total. Though some cottonmen fear that only the poorest acreage will be allowed to lie fallow, and that farmers will produce as much as ever by working their remaining acres harder, most applaud the program.

The biggest battle will be fought in the world market, where the U.S. has been taking its worst beating. The U.S. hopes to dispose of much of the surplus by stepping up grants and loans to underdeveloped nations, selling the rest. Though the U.S. is flatly against “dumping,” i.e., selling at any price, it has moved into world markets with a big program to dispose of some 7,000,000 bales of high-grade Government-owned cotton abroad at competitive world prices by subsidizing U.S. exporters, has already sold 3,000,000 bales. On the total, the U.S. stands to lose as much as $220 million (it paid 32¢ per Ib. for the cotton, can sell it for, at most, 25¢ to 26¢ per Ib.).

Heavy exports of cotton at world prices may reduce U.S. raw-cotton supplies, but they will also boost foreign production of cheap finished textiles—to the detriment of competing U.S. manufacturers, who still pay U.S. prices. The Government’s answer is still another program: textile exporters will get a 6.58¢-per-lb. subsidy on cotton products made for export, will thus be able to cut prices to compete in world markets.

While many cottonmen cry for higher tariffs or strict import quotas, the Administration is determined not to give in. Textilemen want protection, demand restrictions on Japan, which is “flooding” domestic markets with cheap finished cotton goods, forcing the closing of some U.S. mills. Actually, Japanese exports to the U.S. are barely 2½% of the U.S. cotton-goods market. Moreover, Japan is also one of cotton’s best customers, bought $120 million worth of raw cotton last year from the U.S. To still the protests, the U.S. has worked out agreements for voluntary curbs, e.g., Japan has pledged to limit exports to the U.S. of cotton cloth, blouses.

Overall, the hope is to cut the current 14.1 million bale surplus to a manageable 4,000,000 bales by 1959. But few cotton economists are that hopeful or think that any Government program alone can offer a final solution. The real answer is for Old King Cotton to grow up to the new U.S. industrial revolution. With mechanized farming methods, the U.S. currently produces more cotton on 17 million acres than it did on 36 million acres in 1930. Yet efficient growers cannot take advantage of their progress because cotton has been grown under an uneconomically high. Government-supported price system favoring the small marginal farmer. Cotton economists are convinced that the marginal farmer must get out of cotton to make way for the big mechanized producer, who can farm vast tracts of land on the Texas plains, California’s well-irrigated valleys or Mississippi’s rich delta lands —and do it at such a low cost that he can compete, without government subsidies, with both synthetic fibers and foreign cotton.

Textilemakers themselves must also build up new markets. Cotton consumption has held steady at some 9,000,000 bales annually for the past decade, while consumption of almost everything else has greatly increased. Says Dr. McDonald K. Home Jr., chief economist of the National Cotton Council: “We need very much to invest new money in research, to do some long-range planning. The auto industry gives power steering, while we wear old shirts and look like the devil. We haven’t met the test.”