Wrong Guess

A bad August means a big cut in the growing cotton crop. Worst August that anyone in Wall Street remembered was 1927 when the Government's Sept. 1 crop estimate fell a whopping 800,000 bales below its August estimate. Since the official estimates largely determine cotton prices there is big money in guessing right what the next estimate will be. Fortnight ago more than a dozen cotton brokers and experts began this guessing game. Most of them daringly went out on a limb, estimated a record drop of 500,000 to 700,000 bales below the Government's August estimate of 12,481,000 bales. One noon last week they had the shock of their lives. Trading stopped as usual as the Government's Sept. 1 cotton estimate came over the wires: 11,121,000 bales-- down 1,360,000 bales in one month, an alltime record drop.

Wires flashed the news around the world. For 15 minutes commission men in New York, cotton mill operators in New England and the South, spinners in Manchester, in Bombay and Osaka, caught their breath, figured furiously, sent cables. After 20 minutes when trading was resumed in Manhattan, brokers' hands were full of large and small orders from all over the world. Before noon anyone could have bought U. S. cotton for future delivery at about 11 1/2 -c- Ib. An hour later none could be had under 12-c-, a difference of $2.50 a bale.

Curious part of the decreased crop estimate was that in the Eastern half of the cotton belt, cotton prospects had improved during August to the tune of 264,000 bales. In the Western half cotton conditions had gone from bad to worse. In August Oklahoma had only one twenty-fifth of its normal rainfall. That cut 226,000 bales off its estimated production. Texas, which normally produces one out of every three bales, had less than half a normal August's rain. That cut off 814,000 bales. Other Western states accounted for the rest.

Chief significance of 11,121,000 bale crop is that: 1) the world will probably consume at least 600,000 bales of U. S. cotton above this year's production, thereby taking a good hunk out of the 7,100,000 bale carryover; 2) Commodity Credit Corp. which still holds 3,028,675 bales as security for loans to farmers can partly bail itself out*; 3) a price rise of $2.50 a bale will mean $28,000,000 more income for U. S. farmers; 4) many U. S. cotton mills will show good 'profits as a result of the increased value of cotton they have already bought for future use.

*AAA has already sold over 2,000,000 bales bought in its 1934 cotton pool.

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