The Montgomery advertiser., 1908-05-29

Erades- can not. orulnarlly ship the cot ton to his mill. but must either rede- liver it on contract or resell 1t to some other spinner, thereby virtually becom- E ing a cotton merchant. As a result spInners have largely ceased to receive { AS q matter of fact. however. even though the contracts dealt in on ex- changes should provide for the delivery of only single specified grade on . meet the needs of most spinners AS already emphasized. the grading of cot- ton for contract purposes is confined to more or less superficiai characteristics, aud dn other in,pSrities spinners srs Ui c. sr acting, not merely as to such character istlcs, but also as to length. strength, and general character of staple, and as Some of these special charaeteristics can not be taken account of in the grading of cottonsby exchanges so that no modification in the form of the fu- ture contract would make 1t possible for spiners generally to supply their needs by: taking up cotton on such con- tracts.a Instead sntnners must continue to secure their actual. supply of cotton
 eCotton excnsnges. in. fact: do not pro O. fess thatstheir contracts were primarily intended to- enable splnners to receive cotton upon them., They were framed principally to, facilitate the business Of cotton merchants. It Is contended also that even if a. system. sh ould be devised under which spinners could secure the. particular grades of cotton which they desire, yon future contracts adapted to general trading purposes. the price of such ,confracts would, be so Increased that spinners would be no better off than under the present system of ob- taining the desired grades through specific contracts with spot mercha ants.
 7Complatnts against the delivery of a, greatly mixed assortment of grades up- on single contract are. not. however. confined to spinners. Many cotton mer- chants complain that the mixed deliv- cries ordinarily made on future con tracts. particularly at New York, in- pose unreasonable burdens upon mer- chants. and especially upon those who transact only limited volume of bus mess. Such merchants are forced. if they take up cotton on contract, to re assort 1t Into even-running lots if 1t Is to be sold to spinners, and this in- wolves very considerable expense.
 Arguments fn Favor of Excluding Low Grader from Contract Delivery.
 As distinct from restriction upon each individual delivery of cotton with in the present deliverable range, many interests in the cotton trade, including both spinners and cotton marchents, assert that the range itself should be reduced by the exclusion of some of the lower grades now tenderable.
 In support of this argument it is urged that during recent years an in- creased demand for high grade cot. cotton used in most mills until con1- paratively few spinners are now will ing to use low grades if highs grades are obtainable. Against this argument 1t Is urged that although most spin ners are unwilling to use low grades these grades are bv no means Unmer- ehentab1e but. instead. find q ready p5ses. such as the manufacture of Car pets. baREtnG, or rope.
 Those who argue that the range of contract grades should be thus narrow tracts h other commodities. such. for instance, as grain, are ordinarily much narrower than those in cotton. De- tenders of the present broad contract shs Tsnsa ss of Srades of 9s Cotton aetuay produced is much greater than the range of grades in the case of most other staple crops: Since a wide range they contend that the contract should be broad enough to take care of the crop" ...s.,s.
 a broad contract Is a distinct advant- age to tho cotton producer. The ar- gument is that the cotton merchant. because he has an outlet for a wide range of grades in the contract mar ket,, Is more disposed to take surplus grades or extremely low grades from the farmer than he would be if he were wholly dependent upon the spot market, and that he is thus able to pay the farmer q higher price for his crop.
 As q counter argument 1t Is assert ed that the farmer pays very dearly for this alleged benefit, because the in- clusion of low grades which are. ob- 1ectionable to the ordinary spinner has tedency to depress the contract price and thus to depress the price of the entire crop in the spot market. This tendency. 1t is urged. is. the more pow: system employed by the New York Cot ton Exchange. It was shown conclu- sively in Part that the usual effect of errors in differences is to depress the contract price relatively to the spot price of middling. It is contended by many that this depression of the con- tract price at the same time mas ten- dency to drag down the spot price of cotton, and particularly of the prevail ing contract grades. and that in view of this possible indirect effect upon the great bulk of the crop the producer is exceedingly shortsighted in enedavor- the limited porton of the crop which is ot very low grade. The merits of this argument will be discussed more exten- sfvely in a later part of this report. Tn this connection a point entitled to very serious consideration is that the difl- culties in the clasSfication of cotton and in the establishment of grade differ" ences are chiefly encountered in the A L. the exclusion of some of the lowest grades from contract delivery would obviate a east amount of controversy over classification. The etill more i'm. portant argument is advanced that, by tending to avoid errors in the estab- lishment of grade differences, a restric- tion of the range of deliverable grades would result in maintaining a much more nearly constant parity between the spot and contract prices, and thus give much greater degree of stabil- fly to operations in the future market, and particularly to hedging" transac- tions of cotton merchants.
 Still another argument in favor of excluding some of the lower grades from the privilege of contract delivery IS that the proportion of such grades In normal crop Is unnecessarily large, owing to careless methods of ciusion of such grades would be an in- centive to greater care in the gather. ing of the crop and that this, In turn, would add very materially to It's sugreated Specific Changes in Range of
 Contract Grades;
 Although the general arguments for and against restriction of the range ual contract. as well as for a restrict ion of the extreme range, provided by the contract itself, have been outlined, several spscidc suggestions along these may be briefly considered. A
 s Specific Contract.
 The first suggestion is for specific contracts; thit Is. that. each contract shall name, on. it's face a single grade or certain specific grades. This would mean, of course that there would be no single form, of contract for, future transactfons. but an indefinite number The huyer would know at the time he made his contract what grade or grades of cotton he would kreceive at