Sixth, the present effect of speculation upon farmers' prices is not to be judged by comparison with assumed prices such as might be paid if all the abuses of speculation were abolished and all its advantages were retained, but by comparison with the prices which would probably be paid if there were no speculation whatever. The widespread use of the future markets for hedging purposes makes it clear that if the selling of futures were everywhere abolished, grain and cotton buyers would endeavor to protect their trade profits by paying the farmers relatively lower prices. While there are farmers who believe that speculation depresses spot prices, so there are flour millers and cotton spinners who are equally positive that it has the opposite effect. They usually have in mind the "corners" which sometimes occur in the speculative markets. A speculative corner occurs when the outstanding futures maturing in a particular month are bought up by a group of operators who suddenly threaten to require delivery. It is only a temporary "squeeze" which lasts until the operators who sold short for delivery in that month settle at a much advanced price. It is an evil mainly because of its disturbing effect upon outstanding hedges. The speculative corner should not be confused with an actual corner of spot grain or cotton. Such a corner would have far-reaching effects, but the grain and cotton crops of the United States and of the world have become so vast there is little likelihood of such a calamity. While the sale of futures usually tends to maintain growers' prices because of their use for hedging purposes, it does not follow that the spot prices paid by flour millers and cotton spinners are thereby advanced beyond the level warranted by natural conditions of supply and demand. As stated by the United States Bureau of Corporations in connection with cotton prices, "regardless of just how the benefit is divided as between producers and spinner, it is certain that the hedging function, under a properly conducted system, tends, within narrow limits, to increase the price of cotton to the producer without advancing the price to the spinner."34 34 Cotton Exchanges, Part IV, p. 284. Speculation affects central market prices in that it tends to establish a proper price level earlier than it would otherwise be established. It moreover tends to steady spot prices. This steadying effect is not to be confused with the fact that future prices have in recent years fluctuated more violently and more frequently than spot prices. Spot prices are steadied by speculation in that without the tendency of the exchanges to constantly discount future conditions and their unusual efforts to obtain accurate trade information, they would break much more sharply between the harvesting seasons. The speculative exchanges likewise, as was previously pointed out, tend to equalize the movement of prices somewhat throughout a given crop-year and to facilitate the establishment and maintenance of a world's price for cotton and the leading cereals. BIBLIOGRAPHY CONANT, L. "The United States Cotton Futures Act," American COPELAND, M. T. The Cotton Manufacturing Industry of the DONDLINGER, P. T. The Book of Wheat (1908), Chap. XIII. MARSH, A. R. "The New Rules of the New York Cotton Ex- SEIBELS, W. T. Produce Markets and Marketing (1911). SPARLING, S. E. Business Organization (1906), Chap. 9. Committee of American Cotton Manufacturers Association: Re- Cotton Futures Act of August 11, 1916. Federal Trade Commission: Report on Future Trading Operations in Grain (1920). Report on Terminal Grain Markets and Exchanges (1920). Report on Country Grain Marketing (1920). Grain Futures Act of September 21, 1922. House of Representatives (Committee on Rules): "Grain Ex changes," Hearings on House Resolution 24 (Mar. 3-7, 1914. New Orleans Cotton Exchange: Rules Governing Future Contract Cotton Business in New York Market. New York Cotton Exchange: Rules Governing Future Contract Cotton Business in New York Market. New York Produce Exchange: Annual Report (containing rules and by-laws). United States Bureau of Corporations: Cotton Exchanges (1909). United States Department of Agriculture: Review of some of the provisions of the pending Cotton Futures Bill and of causes of differences between prices of middling cotton in New York and Liverpool (1916). Changes Made in the Cotton Futures Act by its Reenactment on August 11, 1916. United States Industrial Commission: Products (1901), Vol. VI, Part 4. Distribution of Farm "American Produce Exchange Markets" (collection of valuable papers), The Annals of the American Academy of Political and Social Science (Sept., 1911). Series of short papers on Grain Exchanges, National Hay and Grain Reporter (May 20, 1911). CHAPTER IX THE LOCAL MARKET FOR LIVE STOCK The live-stock trade of the United States has reference largely, to the trade in beef cattle, hogs and sheep. Dairy cattle are the basis of the country's highly important dairy industries, and the value of horses, etc., for draft purposes is unquestioned; but neither in dairy cattle as such nor in horses is there the systematically conducted trade that is carried on in meat-producing animals. The trade in beef cattle, hogs and sheep will serve to illustrate an agricultural industry in which there is no systematic exchange speculation, in which the growers instead of selling locally ship much of their output direct to large central markets, and in which the central or primary markets serve somewhat different purposes than those of the grain and cotton trades. GEOGRAPHICAL CLASSIFICATION OF LIVE-STOCK TRADE The Cattle-growing Districts.-The United States Department of Agriculture estimates that prior to the high prices and special demand occasioned by the war, the total number of cattle, other than dairy cows, on the farms of the United States declined from a maximum of over 51,500,000 on January 1, 1907, to 35,855,000 on January 1, 1914, and 37,067,000 on January 1, 1915. The returns of the Census Office differ from these, but likewise show a decline from 50,584,000 on June 1, 1900, to 41,178,000 on April 15, 1910. There were in addition some 21,000,000 dairy cows. The total number of cattle varies considerably at different times of the year, the number on July first being about 14 per cent larger than on February first,' and this 1 U. S. Bureau of Statistics (Department of Agriculture), The Agricultural Outlook, April 23, 1914, P. 9. variation explains a part of the difference between the census returns and those of the Department of Agriculture. It also shows that the decline in the number of cattle during the decade 1900 to 1910, as reported by the Census Office, is somewhat exaggerated because their number is normally about 4 per cent larger in the United States on June first than on April fifteenth. During the war the number of beef cattle on the farms increased to 44,112,000 on Jan. 1, 1918. It reached a post-war maximum of 45,088,000 on Jan. 1, 1919 and then declined to slightly less than 42,000,000. The number reported by the Department of Agriculture for Jan. 1, 1923 was 41,923,000. The largest numbers of beef cattle are raised in Texas, Iowa, Nebraska, Kansas, Missouri, Illinois, South Dakota, California, Oklahoma, Colorado, Minnesota, Montana and Arizona. Although cattle are raised throughout the entire country, the great beefproducing states are those of the Mississippi Valley and the Far West. They may be divided into three main areas: (1) the northwestern grazing grounds, or northern half of the Great Plains including the eastern foothills and many of the plateaus and valleys of the Rocky Mountains. In this area, comprising large parts of North and South Dakota, Minnesota, western Nebraska, Colorado, Montana and Wyoming, the so-called "western" grass-fed cattle are grown. (2) The southwestern grazing grounds, comprising parts of Texas, Oklahoma, Arkansas, New Mexico and Arizona. The cattle raised in this area are commonly known as "Texas range" cattle. (3) The feeding grounds, include parts of Iowa, Kansas, eastern Nebraska, Missouri and Illinois. The number of beef cattle in this area exceeds that in any other cattle-growing district, for not only do the growers raise much native stock, but large numbers of Western and Texas range cattle are shipped to the feeding grounds to be fattened on corn and to a smaller extent on cottonseed meal and the coarse grains. Some of the stock feeders are corn growers who prefer to market their crop in this way, while others are professional feeders who make a business of buying the grassfed cattle and the necessary food and of selling the fattened |