The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1909-12-06
COTTON TRADING
SYSTEM is WRONG
Commissioners of Corporations
Points Out Some of the Evils
PRODUCER is THE LOSER
Work of Farmers Union In Controlling
Cotton Crop and Price of Staple
Is Discussed But No concIu-
sions Are Reached.
PRODUCER is THE LOSER

| Washington, Dece.lber 5.-Both the pro-
! ducers of cotton and the dealers in that
commodity are the victims of the system
of trading in vogue on the cotton ex-
changes of the country.
| This is the burden of parts and 5 of
the report of Commissioner of Corpora
/ tons Herber t Knox Smith on the con-
duct of such exchanges The practice of
dealing in futures, as 1t is carried on
at present. is condemned, although the
report does not condemn the existence
of the exchange.
1.-The brief discussion OF general specu-
lation in this report. says Mr.. Smith,
recognizes the possibilities for good in
herent in a great central market like a
cotton exchange and the need that this
good be developed and evils eliminated
by regulations in line with the economic
law"
The report is especially condemnatory
of the dealings in futures, branding this
form of speculation as pure gambling
and highly injurious to legitimate trade.
In quotations for future" deliveries OF
cotton. the market is so uncertain and
so many elements of chance enter into
the transaction that all bids are made
at much lower figure than those offered
for cotton actually in existence.
The effect of these fictitious quotations,
j the report points out, tends to mislead
the cotton planter as to the true value
of his crop honestly grown. In addition,
it leads brokers to play" both sides
of the market to protect themselves
against loss in such trades, with the re-
suit that the producer is forced to pay
| in the end. while the farmer loses like
/ wise
The report while recognizing that the
exchanges in New Orleans and New York
are necessary, does not nince words in
criticising the New York exchange. After
declaring that the New Orleans methods
of conducting the transactions in cotton
followed natural lines, the report draws
attention to the fact that 1t has been
proven that the abnormal depressions in
the future price In New York were
almost wholly due to improper artificial
conditions now maintained by the New
York cotton exchange. BY maintaining
them the New York exchange is respon-
sble for a very real injury to the pro-
Queer and merchant"
In closing the letter to President Taft
which accompanied his report Commits
sioner Smith again takes occasion to re-
prove the New York exchange. He
says:
after the publication of the earlier
parts of this report the New Orleans and
! New York cotton exchanges esta blished
special committees instructed to consider
the systems of their exchanges and to
: cooperate therein with the commissioner
of corporations. Conferences have been
held by the commissioner with. both COM
J mittees On the part of New Orleans
this cooperation was very complete. re-
sultng in certain important improvements
in the rules of that exchange. After
more than a years investigation the
committee of the New York exchange has
not yet made any final report or taken
any substantial action
The commissioner touches on the ac-
tivities of the various organizations OF
cotton growers, all formed with view
of controlling both price and production.
He believes. however, that so numerous
are the factors of supply and demand in
determining the price OF cotton that it
is impossible to arrive at any satisfactory
conclusion as to the extent of influence
exerted by such organization.
Causes Affecting Prices.
+, Owing to the multitude of causes affect
| ing prices of cotton, it is exceedingly diff
fcult to determine the effect of any spe-
! cific cause, and anything like a precise
measurement of such effect is impossible
| Thus. in the case of the Farmers union
there is absolutely no means of determin-
! ing to what extent the time of selling
i or the price received by the producer was
! affected by the action of the union In
recommending the minimum price. 1t
follows that 1t Is not only impossible to
tell whether individual producers gained
| or lost as result of this minimum-price
policy, but also whether the course OF
! prices was at all influenced by that pol
Icy.
i For instance, in the season 1867, the
Farmers union named minimum price
i OF II cents. In September of that year
middling cotton in New Orleans was
quoted at about 9 cents 1t advanced
! in October to above II cents, and during
| most of the period from October to May
the price huctuated between l0a and II
! cents, while still later in the season 1t
! advanced to over 10 cents This does not
. necessarily mean that the price policy of
the Farmers union was the dominating
influence In this advance. In 1867 the
demand for cotton was exceedingly ac-
tive.
In the season of 1s07-S the Farmers
union recommended minimum of Is
cents per pound, whereas, except in Sep
TENDER when the New Orleans price
touched 1856 cents, the price of middling
| at New Orleans in this season never ex-
ceeding 70 cents. and frequently fell
| below II cents. and at times below 10
| cents On the other hand, in this season
there occurred the panic of 1907, while
/ other causes operated to counteract the
efforts of the Farmers union. While,
| therefore. comparison of the price Of
middling cotton at New Orleans with the
minimum price recommended by the
union in that year might suggest an abso-
lutte failure Of the minimum-price pol
Icy. 1t is not possible to say that such
| was the case, for the reason that 1t can
not be determined whether the action of
the union did not prevent the price from
| going lower than 1t otherwise would have
gone. Statistics suggest that the efforts