227. Telegram From the Department of State to the Embassy in the United Arab Republic1

5956. Ref: Deptel Cairo 4103, Khartoum 226, Lima 643,2 and Dept A–157 to Cairo.3

Extra-Long Staple Cotton ( ELS )

Dept consulting with Embassies of Peru, Sudan, and UAR today re foreign-grown strategic stockpile (now virtually all Egyptian) and US-grown CCC stocks ELS along following lines. Recipient posts requested make similar representations ASAP and report fully on discussions and reactions.

1.
USG has examined at high level questions of disposal from strategic stockpile of foreign-grown ELS and of large accumulation of domestically-grown ELS in CCC inventory. As pointed out at recent meeting of ICAC in Frankfurt, ELS supply situation in world markets continues very tight. We understand Sudan has sold almost all (at least [Page 612] 90 percent) of current crop which reduced from last year. Neither UAR nor Peru has ELS for export this time. ICAC viewed 1964–65 season as one of continued short supply of ELS. It is our view that next several months best time to dispose of ELS stockpile and to provide export opportunity for domestically-produced ELS without adversely affecting interests other producers. Accordingly, USG is planning to take following actions.
2.

Stockpile ELS . About 75,000 US bale equivalents sold from stockpile up to present. Remaining balance in stockpile about 100,000 US bale equivalents. Present disposal program expires June 30.

USDA proposes announce later during present week monthly sales quota of 15,000 US bale equivalents each month for period July–December 1964, without carry-over of unsold quantity to succeeding months. Thus, not more than 15,000 US bale equivalent will be sold during any one month.

Recent stockpile sales have not adversely affected world market. Prices realized on stockpile sales have been increasing, reflecting upward trend world market. Minimum acceptable prices by USDA will be in line international prices as in program expiring June 30.

For Cairo. UAR delegation ICAC Plenary Frankfurt suggested that we dispose entire balance of stockpile by September 1964. We do not feel it is in interest UAR or other ELS producing countries to place on market such a large quantity in short period. This could affect prices downward. Consider USDA proposal more advantageous all concerned.

3.
American-Grown ELS . Stocks of American-grown ELS in CCC inventory very high, about 140,000 US bales after August 1. USDA planning inaugurate for 1964–65 season (August 1–July 31) sales-for-export program for American-grown ELS by competitive bids. For the period ending December 31, 1964, monthly amount to be offered for sale will be small, not exceeding 5,000 bales. USDA will not accept bids at less than support price but no assurance can be given that this policy will continue for indefinite future. If any change contemplated, i.e., if USG considering accepting bids below support price, USG will consult with three govts concerned before policy change made. Average support price announced by USDA for cotton year beginning August 1 is 49.25 cents. Actual price around average will depend grade and staple length.
Rusk
  1. Source: Department of State, Central Files, INCO–COTTON 17 US. Limited Official Use; Priority. Drafted by J.A. Harary (E/OR/FTD) and Stanley Nehmer on June 22; cleared by Solomon (ARA), Jean H. Mulliken (ECP), Robert W. Stookey (AF), Enoch S. Duncan (NE), Francis Bator, Under Secretary Murphy (USDA), Charles L. Schultze (Bureau of the Budget), Gardner Ackley (Council of Economic Advisers), and William M. Roth (STR); and approved for transmission by G. Griffith Johnson. Also sent to Khartoum and Lima.
  2. Dated April 6. (Ibid.)
  3. Dated March 24. (Ibid., INCO–COTTON 17 UAR-US)