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What was the break even price for cotton between 1800 and 1860?

Discussion in 'Civil War History - Secession and Politics' started by Hunter, Mar 1, 2017.

  1. Gene Green

    Gene Green Corporal

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    any agricultural or speculation investment has associated risks. and cotton prices were down then . even in a excellent market, the actual production of cotton could be risky. it was the potential for profits that made cotton king. those that overextended themselves with credit in the pursuit of more land and more slaves and failed to meet their targets, lost. but what was the break even point for the plantation owner who has no mortgage, owns his slaves who have already harvested many seasons, and produces most of his needs on the plantation ?
     
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  3. jgoodguy

    jgoodguy Brigadier General Moderator Forum Host

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    Age. While the price of a category prime field hand might appreciate, the individual prime field hand deprecates as he ages, accumulates injuries and so on until he is no longer a field hand, but some other category.
     
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  4. roberts

    roberts Sergeant Trivia Game Winner

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    I am not sure where the original OP was trying to go but actual production costs is much harder to find than price per pound and the prices that are most readily found are for what's paid in NY or NO or Liverpool...

    I did find these.... as stated earlier break even in 1866 was projected at 4 cents but it had some rosy assumptions.

    For 1849 I found an article where there were these estimates from different planters.

    South Carolina - about 5 cents
    (?) Carolina - 4.7 cents
    Alabama - 6.0 cents

    The author concludes that 'most' planters will have a profit of 13% when the price is 6 cents which would make your break even 5.2 cents. From here:

    upload_2017-3-12_0-27-31.png

    Thanks to @Eric Calistri for this excellent source.

    The cotton market was a series of bubbles in the 19th century. The biggest bubble occurred right before the war and it does not appear it could be sustained. While many planters became wealthy it was a risky business that required agriculture and business know how. It demanded a higher and higher capital investment as slave and land prices soared. Weather, floods, insects, could wipe out a crop while investments in slaves could be lost by epidemics or self liberation. Fortunes were made but they were also lost (even before the war.)
     

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  5. distantinlaw

    distantinlaw Private

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    the break even price would be determined by the cost of seed , fertilizer and labor , a man with 12 kids would have no labor cost !!!! unless he included cost of raising 12 kids !
     
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  6. Drew

    Drew Captain

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    Exactly! If Granddaddy's farm passed without a mortgage, we'd have a lower bottom line than our neighbor who had to borrow to pay for his own farm. That is but one reason there is no answer to the 'bottom line' production cost question.

    BTW, folks in the 19th century saved their own seed and didn't buy commercial fertilizers (there were none available). They did have to buy some seed and other farm supplies, but I'm still stumped on the 'bottom line' production cost question.
     
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  7. jgoodguy

    jgoodguy Brigadier General Moderator Forum Host

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    Cotton gins produced cotton seed as byproduct of ginning, growers bought from them. Also natural fertilizers needs slave labor to process. No free lunch.

    Granddaddy's farm passed without a mortgage requires no mortgage otherwise in same shape.

    Leverage means borrowed money means more production. For example assume 1000 cash, 3000 borrow got 4000 for production rather if no borrowing only 1000 for production.

    The problem is more in the lack of consistent accounting and lack of records to figure.
     
  8. Hunter

    Hunter Sergeant

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    I share your frustration. Like you, I have always assumed that cotton production was profitable, but then I spent a couple of decades looking through newspapers and other primary sources from the period and now have doubts. This is why I asked the question.

    I also came to realize that the true cause of the war was actually not fear of the loss of profits, but instead the fear of what the slaves would do if they were freed in light of the events on St. Domingue and during the Nat Turner rebellion. As President Buchanan put it in his last address to Congress, it was a matter of self preservation.
     
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  9. Drew

    Drew Captain

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    This post is unclear. I will re-assert granddaddy's un-mortgaged farm gives us a lower bottom-line production cost than our neighbor who borrowed to buy his own farm.

    I kind of think the historical record is thin here, because farmers kept their mouths shut. They didn't go to town and boast about how much money they made, or lost. Again, you can't lose money, year after year, and survive.

    Slave labor, BTW, is in fact free lunch. Or, about as close as one can get without paying for the meal.
     
  10. jgoodguy

    jgoodguy Brigadier General Moderator Forum Host

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    1. Maybe. Granddaddy's may have not planned for depreciation and has a bunch of old slaves, old buildings and old worn out equipment needing repairs. In which case the leveraged neighbor with young healthy slaves, new buildings and efficient equipment has a lower cost.
    2. More like no accounting standards. Southern Plantation owners were ostentatious in their display of wealth.
    Yes you can lose money year after year and survive for years. All you have to do is cover marginal costs and ignore depreciation. Eventually it will catch up with you, but you can ride for years.
    3. Slave Labor was not a free lunch. Capital expense to start with. Then food, clothing and medical care. In fact when there was dangerous work to be done like draining swamps, the plantation owners hired expendable free labor. Losing a 1000 investment in a prime field was a real downer.
     
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  11. jgoodguy

    jgoodguy Brigadier General Moderator Forum Host

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    I'd add loss of investment. Profitable or not, slaves were a store of value for investment, pensions, dowry, college fund for children, life fund for widow, endowments to churches and colleges plus social status.
    I'll make the observation that profitable for all is not important, just profitable for the political elite.
     
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  12. jgoodguy

    jgoodguy Brigadier General Moderator Forum Host

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    Quoted from above reference. p1.png
    p2.png

    p3.png
     
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  13. Eric Calistri

    Eric Calistri 2nd Lieutenant

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  14. Eric Calistri

    Eric Calistri 2nd Lieutenant

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    So we can see that Cotton production has moved geographically over time, one would assume from less profitable growing areas to more profitable growing areas. Can the struggles of planters in say, South Carolina or Louisiana, be attributed to an inability to compete with cotton grown in Texas?
     
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  15. Drew

    Drew Captain

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    Your 2016 data really doesn't help us understand the middle of the 19th century.

    We're looking for the cost of cotton production in this thread, if that helps.
     
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  16. jgoodguy

    jgoodguy Brigadier General Moderator Forum Host

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    I'd say that SC, NC and VA and maybe GA were replaced by AL, Mississippi and Missouri then everyone was replaced by Texas. Really need historical evidence.
     
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  17. Gene Green

    Gene Green Corporal

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    he might have depreciated but the planter did not lose any money. plus he appreciated as he aged until the apex of his healthy life . so is it a wash ? plus if he stayed healthy longer than the down side of the apex (he died shortly after he lost the ability to maintain his work load) , what then ? i just don't see how you account for these types of variables in the cost of production.
    cost of land, how many acres under cultivation, yield per acre, interest rates.....plus the things mentioned above and more.

    a speculator putting together a new operation may be able to operate with conventional accounting methods, but the long standing plantation could not, so i would answer the question this way. each plantation had it's own bottom line. 4 cents might break even for one while his neighbor needs 5.
     
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  18. Eric Calistri

    Eric Calistri 2nd Lieutenant

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    Production moves over time to the lowest cost producer.
     
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  19. jgoodguy

    jgoodguy Brigadier General Moderator Forum Host

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    Lets say you have an asset that you paid 1000 for now worth 800 you may not lose cash money, but you are less wealthy. Maybe the maket bails you out or maybe it puts you down. In cash accounting you pay 1,000,000 for a steamboat, write it all off in one year and all the rest of its life is gravy. In accrual accounting you pay 1,000,000 for a steamboat, assuming 10 year life, write off 100,000 per year.
     
  20. Hunter

    Hunter Sergeant

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    Thanks for making my point. Those who have asserted that cotton farming was profitable as a general rule really lack the evidence to support that assertion. They may be right, but they also may be wrong.
     
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  21. Gene Green

    Gene Green Corporal

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    sorry but i guess you missed my point. the evidence exists in terms of the value of slaves and the increase in slave population, the increase in land under cultivation, the increase in land prices, and others, but not necessarily in conventional accounting terms.
    i think that maybe the reason you cannot pin down the break even price is because it is a constant variable not only in time but from place to place and circumstance to circumstance.
    although many may have failed in the endeavor, and there were periods of boom and bust, the success stories probably weren't in the papers .
    i am beginning to believe that we have confused where the wealth really was and how it was acquired. i haven't worked out the logic yet but am forming the opinion that cotton was the means to the ends. the real objective was to acquire more slaves and i believe that is the true measure of profitability. maybe it was all three, land, slaves, cotton, and can only be accounted together.
     

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