Benson v. Productivity

U.S. cotton prices, which suffered one of their deepest postwar price slumps (as much as $10 a bale) in the futures market a fortnight ago, took another blow last week. The cause: an estimate by the U.S. Department of Agriculture that, despite a 14% acreage cut ordered this year to shore up prices, the 1955 cotton crop will be 2% bigger than 1954's 13,696,000 bales. Good weather, increased use of fertilizer and close planting had boosted productivity; the average acre, by the department's estimate, would yield a "fantastic" 405 lbs. v. 341 last year and an average of 279 in the ten-year postwar period. Promptly, Secretary Benson announced another cut in cotton plantings. For 1956, they will be reduced to 17,391,304 acres, 4% less than this year. This acreage at average yields will produce 10 million bales, the lowest quota allowed by law.

Will this solve the surplus problem? Benson doubted it. Markets have shrunk, and surpluses are so mountainous that it will take more than a 4% acreage cut to reduce them. The Government holds more than 6,000,000 bales ($1.1 billion worth) of cotton bought in support of prices at 90% of parity, will probably have to take over another 2,000,000 bales of last year's crop on which it has already made loans. Special restrictions on resale of this cotton virtually price it out of the domestic market, which in any case has not grown nearly fast enough to keep up with productivity.

Foreign markets provide no solution. In the 1920's the U.S. exported an average of 7,500,000 bales annually, roughly 57% of world cotton exports. In the marketing year ended last summer, the high price of U.S. cotton cut U.S. exports to only 3,500,000 bales. The Government cannot even salvage part of its loss by selling abroad at cut prices; foreign governments and the State Department both vigorously oppose anything that looks like dumping.

The solution to all cotton's problems, as Benson sees it, is to work out a more flexible support program, under which the Department of Agriculture could lower the price-support level when it saw fit. Benson thinks that a flexible formula would drop prices with a minimum of pain, boost the U.S. in world markets, help clear out the Government's surplus stocks.

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