Almost unanimously, Southerners believed they could use cotton to lure England and France into recognizing the Confederacy. Since the administration of Jefferson Davis wanted to avoid any appearance of international “blackmail,” the Confederate Congress never formally approved an embargo, but state governments and private citizens voluntarily withheld the crop from the market in hopes of causing a “cotton famine” overseas. Theoretically, widespread shortages would shut down European mills, forcing governments to recognize and perhaps come to the military aid of the Confederacy, or to declare the Union blockade ineffective and disregard or break it in order to reopen Southern ports.
Bumper crop in 1860 had glutted the marketplace : The “King Cotton” mentality was seriously flawed, not the least in overestimating the value of “white gold.” First, a bumper crop in 1860 had glutted the marketplace, lowering prices and allowing mill owners to stockpile.
Cotton prices rise sharply late in 1861, fall in 1863: In 1863 imports from India, Egypt, and Brazil sufficiently replaced Southern cotton. Second, Davis, never an astute diplomat, failed to recognize how much Europe feared the possibility of war with the U.S. Private European citizens and industrialists invested in speculative ventures tenuously backed by Southern cotton securities, but their governments would not antagonize the North by recognizing the Confederacy for the sake of guaranteeing those investments or increasing supplies of the staple. Further, Southern society tied cotton inseparably to slavery, and England, the example Napoleon Ill would follow, led the abolitionist movement in the world community. Europe’s wait-and-see attitude hardened into unassailable neutrality after the Southern armies suffered reverses beginning at Gettysburg, and Davis and his supporters realized the cotton strategy had failed as a diplomatic tool. They had unwisely hoarded their one great asset and undermined their best chance of financing the war.
Source: “Historical Times Encyclopedia of the Civil War” edited by Patricia L. Faust