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Dr. HORNE. I turn now to the export side of our market, and to go straight to the fundamentals of that, I show you in chart 8 the record of cotton consumption in the entire free foreign world. This is the upper curve in that chart. In addition to consumution in the free foreign world, we have added a relatively small amount for the net exports of cotton from the free world to the Communist world. (The chart is as follows:)

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Sources:

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Consumption computed from data of International Cotton Advisory
Committee, as follows: For countries reported monthly (approxi-
mately 80 per cent of total) monthly totals were compiled and
seasonally adjusted. For remaining countries, annual consumption
figures were divided into equal monthly amounts and added. For
net exports to communist countries, annual figures were similarly
treated. Grand totals by months were consolidated into quarters
and plotted. Production International Cotton Advisory Committee.
U. S. Department of Agriculture.

Both estimates for 1962-63

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Dr. HORNE. Look at that strong upward trend in cotton consumption through the years. We are competing here for a growth market. But our No. 1 trouble is apparent when we look at the record of cotton production in this same free foreign world. This is in the lower curve in chart 8.

Our exports of cotton in any given season have to equal the amount of the spread as shown here between foreign consumption and production, plus or minus any change in the net amount of raw cotton stocks held in foreign countries. These stock changes balance one

governed by the two curves in this chart, and our basic concern must be with helping consumption to rise and with keeping this production in these foreign countries from rising too fast, so that the spread between will trend upward, not downward.

There are some short-term factors that complicate this picture. On the consumption side we have the textile cycle in foreign countries also, and sometimes it causes temporary dips in the overall volume of foreign consumption.

We see several of these dips in the cycle on chart 8, and, in fact, we are in one of them at the present time.

And the volume of production is quite erratic in many countries because of the weather. In the present season the estimated sharp rise in foreign production seems to be caused mainly by good growing weather in many countries, but acreage is up also. I will come back to that.

I do believe it is significant to notice that the squeeze that is occurring this particular year between estimated consumption and production is caused to a considerable extent by these temporary factorsa textile recession in some foreign consuming countries and particularly good weather in many producing countries.

That is part of the explanation of our current low exports this year. I certainly do not mean at all to say that is the whole explanation. The point I want to make is that we cannot tell too much about the underlying health of our export market by looking at a single season, but it is vitally significant to look at the trends in chart 8 through several years and see which is increasing faster-foreign consumption or production.

We have superimposed some trend lines for the earlier part of the period covered by this chart. It seems very clear that production in foreign countries was increasing decidedly faster than consumption, so that this country was definitely being squeezed out of the export market. Our actual exports were down around 3 million bales and declining. If this had continued, our export market, and in fact our whole cotton economy, would have been destroyed.

The export program, which brought decidedly lower prices for U.S. cotton moving into foreign markets, took effect for most qualities as of the date shown by the vertical line in chart 8-August 1, 1956. And you see what happened. The spread widened very decidedly and our export market was saved. The results in any single season are not so significant as the clear fact that the whole trend of things was improved for U.S. cotton exports. In the next 5 years, we exported about 30 million bales of cotton. Consumption abroad was trending upward faster than production, and we began to see the promise of continued expansion in our exports, averaging perhaps half a million bales a year in net increase. That would have made over the whole outlook for American cotton.

Cotton was definitely helped in its competition with rayon in the foreign world by this lower price of our export cotton, and this bolstered the consumption trend of cotton in the foreign world. Foreign production definitely was slowed in its rate of expansion by this new price situation.

We see what happened in production more clearly if we just con

This is shown in chart 9. Look how fast foreign acreage was rising down until the export program went into effect, and how dramatically it leveled off afterward. Production continued some upward trend because of rising yields, but this complete halt to the increase in acres slowed down that trend enough to save our export market.

(The chart is as follows:)

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Dr. HORNE. Now we have to notice that for the three most recent seasons we have been witnessing some increase in foreign acreage again. This is enough to cause some worry; it certainly has contributed to the dropoff in our exports in these years.

Chart 10 will give us an impression of what our export price has been. The solid curve represents Middling Inch cotton, and down to August 1, 1956, when the export program took effect, our cotton had the same price on the domestic market that was made on the export market. Thereafter, of course, the export price has been lower by the amount of the subsidy. I have put in, for the last three seasons and the present one, the actual amount of the export subsidy.

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Dr. HORNE. Back in 1959 and 1960 the domestic market price was being lowered. This made it possible to lower the subsidy by 2 cents in the beginning of the 1960-61 season without causing any increase in the export price. But then the increased domestic price in 1961 made it necessary to raise the subsidy again. It was raised by 212 cents, and even that wasn't enough to offset fully the rise in the domestic price, so the export price rose.

This chart does not show the increase in the export price very well because this is based on Middling Inch cotton, which is the base quality that we commonly used. As a matter of fact, this particular cotton, which is always used in the base quality today, rose as little between late 1960 and late 1961 or 1962 as almost any other leading quality you could name.

A great many of the most important qualities of cotton, according to the Government figures, rose in price by a net of 4 to 42 cents, and sometimes 5 cents, between the fall of 1960 and the fall of 1962, and with the export subsidy up only 212 cents, that meant an increase of 1/2 to 2 cents or more in the export price. And this rise in the export price had more meaning than the figures themselves might imply, because it took place in a world where the prices of many other agricultural commodities, such as coffee, have been dropping.

The big point I wish to make is that the lower export price, made possible by the Government's export program, has clearly saved our export market, and that if we mean to keep our export market alive in the years just ahead, we are most certainly in no position to let this export price rise. I haven't planned to go into the complex question of whether the present level is too high or how much too high,

This is shown in chart 9. Look how fast foreign acreage was rising down until the export program went into effect, and how dramatically it leveled off afterward. Production continued some upward trend because of rising yields, but this complete halt to the increase in acres slowed down that trend enough to save our export market.

(The chart is as follows:)

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Dr. HORNE. Now we have to notice that for the three most recent seasons we have been witnessing some increase in foreign acreage again. This is enough to cause some worry; it certainly has contributed to the dropoff in our exports in these years.

Chart 10 will give us an impression of what our export price has been. The solid curve represents Middling Inch cotton, and down to August 1, 1956, when the export program took effect, our cotton had the same price on the domestic market that was made on the export market. Thereafter, of course, the export price has been lower by the amount of the subsidy. I have put in, for the last three seasons and the present one, the actual amount of the export subsidy.

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