Peg Problem

Every year it is news in the South when the first bale of cotton is ginned. Last week, for the fifth time, Francisco P. Lozano, Rio Grande Valley farmer, made this news. But the event was the signal for little glee, for Texan Farmer Lozano and other U. S. cotton growers are expecting their second biggest crop in five years. Estimates have placed the total yield at 13,000,000 bales, compared to 12,400,000 in 1936, 10,630,000 in 1935. With a carryover of 14,000,000 bales from last year, this bumper crop can mean but one thing--low prices. In 1936, average price for cotton was 12.3-c- a bale; in 1935, 11.1-c-. Last week the spot price of cotton in New Orleans tumbled to 7.88-c-, lowest it has ever been in terms of the pre-New Deal gold dollar.

Though prices rallied slightly by week's end, they remained well below the 9-c- figure at which Commodity Credit Corp. bought surplus cotton last year. Organized in 1933 "to insure the orderly marketing" of cotton and other products--in short, to peg prices--Commodity Credit was once regarded as one of the New Deal's few self-sustaining agencies. But despite its auspicious start in 1933-34, its successful $200,000,000 issue of Government-guaranteed 3/4% notes last month, the agency has lately run into difficulties.* Recently it announced a $51,000,000 loss on 12-c- cotton loans made in 1934, and with 1,670,000 bales left on its hands it has a further paper loss of $46,250,000. Now Commodity Credit apparently must lend more heavily than ever if it hopes to peg the 1938 price against a 13,000,000-bale crop.

*Commodity Credit will use $100,000,000 of its new capital to clear its debt to RFC, $60,000,000 to refund collateral trust notes it sold last year, will have $40,000,000 left for current needs.

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