New-York tribune., 1918-05-29
Government to
Investigate the
Cotton Exchange
Commerce Department,
Also to Make Survey i'm
New Orleans

WASHINGTON, May 28.-An investi-
cation Of the cotton markets in New
York and New Orleans will be made
Immediately by the Department of
Agriculture, Senator Smith, of South
Carolina, was advised to-day by Secre
tary Houston. The investigation will
be made under the supervision of the
Bureau of Markets. The South Caro-
lima Senator had requested the inquiry.
Senator Smith said if the department
found it had not sufficient power to
conduct thorough investigation, he
would introduce a resolution calling ON
the Senate Agriculture Committee to
inquire into the situation surrounding
the cotton markets and authorizing the
subpenaing of witnesses and papers.
Cotton traders here yesterday saw
a relation between the proposed in
vestigation of the New York Cotton
Exchange and the Disappointment Of
many people of the South over the
break in prices of the staple during
who held on to their product in the
hope of still greater profit than was
offered by the unprecedented prices up
to a few weeks ago were contented as
long as the trend was in their favor,
according to members of the exchange;
but as soon as the change came. they
became certain that malignant forces
were at work.
Feeling Runs High
The announcement yesterday after
noon that the Bureau of Markets Of
the Department of Agriculture would
Investigate the New York and New
Orleans Cotton exchanges was unex-
pected, though the members of the
local trading centre were aware that
feeling against them south Of the
Mason and Dixon line was rising.
An official of the New York Cotton
Exchange said: eve understand there
is going to be an investigation. We
shall welcome one. Our books are open
and we shall be glad to aid any repre-
sentatives Of the government fully to
understand the work of our exchange.
tion is the dissatisfaction in some
sections over the disparity between
prices for spot cotton and for futures.
l have as yet no idea as to what the
nature Of the investigation will be-"
Spot cotton was yesterday quoted at
29.40, which is more than 400 points
above the price for future deliveries.
Explanations of the reason for the diff
ference between spot and future GEN.
tired on two points-the effect of the
South on the market and the inhibi-
Of f1If11 oot iNh
was passed shortly after the great war
began. The Southern cotton holders
are in possession of spot cotton, and
are able to keep it until they get a
satisfactory price, whereas the price
of futures, which have, of course, not
yet sprung into tangible form, is fixed
chiefly in the exchange. The Southern
growers can influence the price of fut-
ures directly only by buying or selling
in the trading centre therefore.
More important, according to experts
feet 90 the market of the cotton fut-
ures act. Recently the Southern mar
kets have been increasing the discounts
allowed for low grades, as compared
with the middling standard. The South
ern markets can make these discounts
freely and without restraint, but, it is
said, the New York Cotton Exchange
is compelled by the law to base its dis
count on lower grades on an average
Of the discounts allowed by at least
eleven Southern markets. The result
of this, according to students of the
exchange, IS to make it advantageous
to. deliver the lower grades at New
York, because the average at this time
works out in that way. This condition,
it is said depresses the market in
futures here.
May Change Futures Act
And since in spot sales only even
running middling is transferred the
effect Of the discounts is not felt. But
in futures middling is merely the basis,
and lower grade deliveries are per-
missible. Thus the cotton futures act,
which was really designed to protect
the Southern grower, according to the
analysis of men on the New York ex-
change, is now operating in a manner
which cuts the price Of futures.
1t was intimated that if survey by
the Department of Agriculture proved
the validity of the explanation given
by the members of the exchange as to
the effects of the cotton futures act,