Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1915-08-03

Cotton Favored
Although the Board applies its plan
to wheat, corn and all other cereals.
it devotes most attention to the cotton
crop. which, it says. is peculiarly
sensitive to abnormal conditions sucn
as now exist in the export trade.
Usually the crop movement has
been taken care of by government de-
posts in banks or the issue of
emergency currency under the AL
drich- Vreeland act, which expired last
month. In place of these agencies,
the Board states, there is ample au-
thority in the Federal Reserve act to
meet the situation, this fall.
The New Policy
I'm view of the large surplus re-
serves now held by the Federal Re-
serve banks, by member banks and by
other banks throughout the country
says the Boards letter, there should
be no difficulty in affording the pro-
ducers the assistance necessary to en-
able them to market their products In
volume corresponding to the power OF
the trade to absorb them. In order
to accomplish this end, it is suggested
that Federal Reserve Banks adopt a,
definite policy with reference to redis-
counting paper secured by documents
in satisfactory form evidencing the
ownership of stored agricultural
products. Through such a policy, to-
sether with proper methods of ware
housing, Federal Reserve. Banks can
be a potent factor in assisting the
normal movement of staple agrlcul-
turaI products from the field to the
factory or to the consumer 1t Is
recommended that regulations gov
erning the rediscount of notes cover
ing advances on such products be is
sued by such of these Federal Reserve
Banks whose members are actively
engaged in financing the movement OF
such crops to the market"
As to Cotton
The Board calls special attention to
the marketing of the cotton crops be-
cause it is clearly to the common in
terest that credits based upon this
crop be protected as far as possible
from the danger of decentralization
1t shows that no staple commodity is
subject to greater variations in prices
than cotton and quotes figures show
ing an average annual f1uctuation on
the New York Cotton Exchange Of 5.3S
cents per pound.
Sudden and violent fluctuations" it
continues, are clearly to the ad-
vantage Of neither the loaning banks,
the producer the manufacturer. nor
the consumer. They offer on the con-
inv faII he
lator and should the Federal Reserve
system, in making possible the more
normal movement of the crop, be a
contributing factor in reducing these
fluctuations. it would have accom-
plished a great public good"
The Board suggests that the Re-
serve banks communicate with their
members and others interested and
point out that cotton producers. if
they hope to take advantage OF the
facilities OF the system for carrying
cotton. should begin at once arrang-
| ing for its porper storage and insur-
ance as rapidly as ginned.
| Federal Reserve Banks,' says the
letter, should particularly point out
to their members tina. they are pre-
pared to red;scount the notes of farm
| ers and merchants secured by proper
warehouse receipts for cotton and ac-
companied by evidence of insurance"
! Member banks, the letter says
which offer these notes to Federal Re-
serve Banks, for rediscount. should be
Grady to state the grade and markey
value of the cotton and the notes
should be in The customary collateral
form. providing the right to call for
additional security in event Of ma
terial decline in market value.
The amount to be advanced would
be left primarily to the judgment OF
the member bank" says the letter.
Storage Space
The Board suggests that the Re-
serve banks call attention of theil
member banks to the desirability OF
reserving storage space for such cot.
ton as is to be used as security fol
loans in localities where warehouse
facilities are inadequate. The letter
says that while there is not sufficien,
warehouse space in the South to take
care of the entire cotton crop, there Is
probably ample facility for the proper
storage of all cotton likely to BIZ
pledged for loans. ~
1T should be made plain" the
Board warns that compliance with
the essential features of the plar
herein outlined. modified as circum.
stances may demand, will be neces.
sary for the normal marketing Of thi.
years crop and for the proper pro.
lection of those who are interested il
it's movement whether banks, produc.
ers or manufacturers.
While there seems to be no reason
to believe that the worlds presen
and potential supply of cotton is on
of proportion to requirements durins
the next twelve months, it is never
theless important, because of our lacl
of adequate shipping facilities as vel
as restriction brought about by tn,
war upon free exports to all coun
tries, that ample means be provide,
for the proper handling and effectiv,
marketing Of cotton"
Similar means may be taken to al,
in financing other agriculture
products. the letter says, whereye
there is available a system of ware
houses. elevators or other approve,
means OF storing. and certifying.
The Board calls attention to it's 70
cent regulations as to trade accent
/ ,-irr thai