in the absence of hedging. Discounting of future conditions, moreover, is a feature of the speculative markets, and, although in basing spot cotton prices upon future contract prices the "limits" applied are changed frequently, spot prices are influenced to some extent by future contract prices. The comparatively small price increase which normally occurs in the spot markets during the later months of the crop-year (See diagram No. V), is due at least in part to the carrying charges which gradually increase during the crop-year. It is also in line with the seasonal decline in the supply of cotton, although the price advance is by no means in proportion to the gradually declining supply. The monthly average spot prices for middling cotton in the New Orleans market during 1919-1920 and 1921-1922, which are also plotted in diagram No. V, illustrate how cotton prices. do not follow the normal crop-yearly course when unforseen changes in important price determining factors occur after the general level for the crop-year has been adjusted. In such event a further readjustment of the general price level for the year occurs and the difference between prices during the early and later months of the crop year may be very wide. The price influences which were operative in 1919-1920 and 1921-1922 were referred to above.15 Diagram No. V indicates that they were not fully discounted at the beginning of the crop-year and that the general level of cotton prices was readjusted during later months. BIBLIOGRAPHY ARNOLD, J. J. "Financing Cotton," Journal American Bankers Association (Jan., 1911), pp. 414-418. Financing of Cotton in The Annals of the American Academy of Political and Social Science (Sept., 1911), pp. 281-292. BIGWOOD, G. Cotton (1919). *BURKETT, C. W., and PoE, C. H. Cotton, Section 3 (1906). CONANT, LUTHER. The United States Cotton Futures Act, American Economic Review (March, 1915), pp. 1–11. 15 See pp. 168-170. COPELAND, M. T. Cotton Manufacturing Industry of the United States (1913). HAMMOND, M. B. The Cotton Industry (1897), Vol. I. *MARSH, A. R. Cotton Exchanges and Their Economic Functions, The Annals of the American Academy of Political and Social Science (Sept., 1911), pp. 253–281. MILLER, T. S. Cotton Trade Guide and Students' Manual (1920). *POWELL, G. H. Coöperation in Agriculture (1913), Chap. 7. SCHERER, J. A. B. Cotton as a World Power (1916). *SHEPPERSON, A. B. & C. W. Cotton Facts (annual). Commerce Monthly, Warehouse Receipts as a Basis for Cotton Cotton,* Growing and Handling Cotton, June, 1920. Cotton and the Far Eastern Market, Jan., 1921. Economic Review, World's Cotton Resources, Oct. 29, 1920. *Cotton Acreage and Production, March 31, 1917. *Federal Trade Commission, Preliminary Report on the Cotton Trade, Feb. 26, 1923. *New Orleans Cotton Exchange: Annual Report of Secretary on the Cotton Crop (annual). *New York Cotton Exchange: Annual Report on the Cotton Crop (annual). *United States Bureau of the Census: Cotton Production and Distribution (annual). Cotton Production (annual). *Thirteenth Census, Agriculture, 1910, Vol. 5 (1913), pp. 680-684. Fourteenth Census, Agriculture, Individual Crops 1919 (1922). *United States Bureau of Corporations: Cotton Exchanges (1909). *Cotton Tare (1912). *United States Bureau of Crop Estimates (Department of Agriculture): The Cotton Crop Surplus, Farmers' Bulletin No. 641 (Nov. 23, 1914), pp. 9-12. *Cost of Producing Cotton, Ibid., pp. 12-14. *Production of Upland Long Staple Cotton, Farmers' Bulletin No. 651 (Feb. 6, 1915), pp 12, 13. United States Bureau of Foreign and Domestic Commerce (Department of Commerce): Monthly Summary of Foreign Commerce (monthly). Statistical Abstract of United States (annual). United States Commerce and Navigation Report (annual). Financing Cotton Sales to Germany, in Commerce Report, July 30, 1919. Market Conditions in England, in Commerce Report, Jan. 2, 1920. Raw Cotton in Japan, in Commerce Report, Sept. 17, 1920. *United States Bureau of Plant Industry (Department of Agriculture): "The Classification and Grading of Cotton," Farmers' Bulletin No. 591 (July 10, 1914). "The Relation of Cotton Buying to Cotton Growing," Bulletin No. 60 (Feb. 16, 1914). *"Varieties of American Upland Cotton," Bulletin No. 163 (1910). *United States Department of Agriculture: Improved Methods of Handling and Marketing Cotton (1913), in Year Book for 1912, pp. 443-462. The Cotton Situation, in Year Book 1921, pp. 323-406 (1922). Weather, Crops and Markets (weekly). Study of Cotton Market Conditions in North Carolina, Bulletin No. 476 (1917). *United States Industrial Commission: Distribution of Farm Products, Vol. 6, part III (1901). *United States Joint Commission on Agricultural Inquiry, Transportation (Vol. III), pp. 100-103. *United States Experimental Station (Department of Agriculture): The Cotton Plant, Bulletin No. 33 (1896). United States Tariff Board: Report on Cotton Manufactures (1912). [References designated by a * apply also to chapter VI.] CHAPTER VIII RELATIONS BETWEEN SPECULATIVE EXCHANGES AND THE SALE OF FARM PRODUCE One of the most striking characteristics of the trade in farm products during the last seventy-five years has been the organization of exchanges, and as the greatest produce exchanges are those in the grain and cotton trades, they may conveniently be discussed at this point in the organization of the trade in farm products. Exchanges are not, however, confined to the grain and cotton trades. Flour, provisions, flaxseed, timothy, clover and other grass and field seeds, hay and straw, hops and similar farm commodities are commonly bought and sold on the grain exchanges; cotton-seed products are dealt in on some of the cotton and grain exchanges; and some produce exchanges have branched out into nonagricultural commodities. The New York Produce Exchange for instance has rules for the purchase and sale of petroleum, oils, waxes and fats, and pig iron, although there is relatively little exchange trading in these commodities. Other agricultural industries in which exchanges have been organized are the live stock, wool, tobacco,3 dairy products,* fruit and vegetable industries, and special exchanges have likewise been organized for the purchase and sale of green coffee and raw sugar. In one sense there is speculation in the purchase and sale of practically all agricultural staples whether on exchanges or otherwise, for many dealers and manufacturers and an increasing number of growers purchase or sell when in their judgment 1 Chap. X, p. 237. 2 Chap. XI, p. 271. 8 Chap. XII, p. 287. 4 Chap. XIV, pp. 337, 348. Chap. XIII, pp. 309, 312. the prices are the most favorable to their particular purposes. The term "speculation" when applied to produce exchanges, however, has a narrower and more specialized meaning in that it refers to the purchase and sale of contracts for future delivery or so-called "futures." In this sense the exchanges are known either as "spot" or speculative exchanges, the former confining their activities solely to a spot or "cash" business and the latter providing rules for the purchase and sale of contracts for future delivery as well as of spot produce. Among the purely agricultural industries it is mainly in the sale of wheat, oats, corn, rye, barley, flaxseed, and cotton that a regular trade in "futures" is conducted. ORGANIZATION OF SPECULATIVE PRODUCE EXCHANGES 6 Speculative Grain Exchanges. In the United States, modern grain exchanges began to be organized in the later forties of the nineteenth century. The Chicago Board of Trade was organized in 1848, the New York Produce Exchange in 1850, the St. Louis Merchants' Exchange in 1854, the Kansas City Board of Trade in 1869, and the Minneapolis Chamber of Commerce in 1881. Grain exchanges have also been organized in Duluth, Milwaukee, Omaha, Toledo, Detroit, Buffalo, Philadelphia, Baltimore, Boston, and in nearly all the remaining primary and seaboard grain markets of the United States. Ten of the large grain exchanges conduct future as well as cash grain transactions." In Europe, the Antwerp Bourse was organized as a modern cash grain exchange as early as the middle of the sixteenth century. The number of foreign exchanges, however, where grain futures are bought and sold, is limited, the principal foreign speculative grain exchanges being at Winnipeg, Liverpool, Paris, and Budapest. There is some speculation on the 6 Year when it assumed functions of a grain exchange. 7 Grain futures are now being sold on exchanges at Chicago, Minneapolis, Duluth, Milwaukee, Kansas City, St. Louis, Toledo, Baltimore, San Francisco and Los Angeles. 8 S. S. Huebner, in the Annals of the American Academy of Political and Social Science, Sept., 1911, p. 1. |