The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1923-02-27
REPORT EXPLAINS DROP
DURING EARLY 1920

| WASHINGTON, Feb. 26.-The sharp
fall in cotton prices which began in
April 1920, and continued for more
than a year, was due to the general
deflation, the great increase in high
priced Inventories and the subsequent
buyers strike. the. federal trade
commission set forth in report sub
mitted today to Congress. The price
| inquiry was made by the commission
in accordance with a resolution by
Congress last March, and the present
preliminary report, it was said.
woupld be followed by another deal
ing particularly with operators of the
cotton exchange.
The postwar price deflation the
commission ascribed az of world
wide character affecting the commod-
tiles in this country in varying de-
Erees and cotton for which prices had
gone higher. before the break more
than any other in the low level of
prices reached. The most important
and immediate factors in the decline,
however. the commission found to be
the marked increase in supplies and
decrease ia demand" The report
went into market conditions during
the war period and Immediately after
which brought cotton prices up to the
peak in April. 1920. Supply and de-
mand were found to have been the
controlling factor throughout with
the high-priced level prevailing in
1920, attributed in part in the ex-
pectation that there would be a world
shortage of cotton.
"Recovery', Discussed.
In the subsequent recovery cotton
prices in money" since August, 1921,
nave been above the 1913 level, the
report set forth, and measured In
commodities, either slightly below
or more recently considerably above
the real exchange value of cotton in
that year." While 1t thus appears
that cotton prices compared with the
general level of prices are not de-
pressed at the present time, this does
not mean, the report said that cot
ton prizes ARE at a level which at
forded a compensation to the grower
which iustifies such an extensive use
of land and labor in its production"
Turning to a discussion of cotton
futures, trading under the cotton fu-
lures acts, the commission found that
the law apparently had brought
about marked improvement in the
methods of trading on future ex
changes" AS to the provision of the
sellers option in future contracts,
however, permitting delivery of any
one or more of ten grades, with a
price adjustment to cqualize, the
commission expressed the opinion
that effect of these options on the
part of the seller is generally to make
the future price lower than it prob
ably would be If a corresponding
buyers option was used instead"
O O o
Affect Prices Unfavornbly.
In reporting that according to the
best data available for the last three
years, future prices have been gen
orally lower than spot prices, the
commission stated that the matter of
fundamental Importance in connec-
tion with the exercise of the sellers
option was the relation between the
two prices. While other factors were
recognized as contributing to the abb
sence of parity between future and
spot prices, the situation generally
was cited as having "a probable ten
dency to affect unfavorably the
prices received by producers of cot
ton. This logically would be the
case, the commission said, because of
the fact that spot prices are large
ly quoted on the basis of futures and
probably they are absolutely influ-
enced by them to some extent