Atlanta tri-weekly journal. [volume] (Atlanta, Ga.) 1920-19??, 1923-03-01
TRADE Commission
PLACES BLAME FOR
1920 COTTON CRASH

WASHINGTON, Feb. &c. - The
/ sharp fall in cotton prices which be
gan in April, 1920, and continued fol-
more than Il year, was due to the
general credit deflation, the great
increase in high priced inventories
and the subsequent buyers strike. y
the federal trade commission set
forth in report submitted today
to congress. The price inquiry was
made by the commission in accord
ance with a resolution adopted by
congress last March, and the pres
ent preliminary report, it was said,
would be followed by another deal
ing particularly with operations of
the cotton exchanges.
The postwar price deflation was
described as Of worldwide charac-
ter, affecting all commodities in this
country in varying degrees and cot
ton, for which prices had gone high
err before the break, more than any
other in the low level of prices
reached. The more important and
immediate factors in the decline
however, the commission found to
be "the marked increase in supply
and decrease in demand"
The report went exhaustively into
market conditions during the war
period and Immediately after which
brought cotton prices up to the peak
in April, 1920. Supply and demand
were found to have been the con-
trolling factors throughout, with the
high price level prevailing in 1919
20 attributed Sin part to the ex'
pectation that there would be a
world shortage of cotton"
Room for Advance
In the subsequent recovery, cot
ton prices sin money" since August
1921, have been above the 1913 level,
the report set forth, and measured
in commodities "either slightly be-
low or mere recently considerably
above the real exchange value #
cotton in that year." While it thus
appears that cotton prices, compar'
ed with the general level Of prices
are not depressed at the present
time, this does not mean, the report
said, that cotton prices "are at a
level which affords a compensation
to the grower which justifies such
an extensive use of land and labor
in it's production"
Turning to a discussion of cotton
futures trading under the cotton
futures act, the commission found
that the law apparently has
brought about a marked improve
ment in the methods of trading on
future exchanges" AS to the pro-
vision of the sellers option in fu-
lures contracts, however, permitting
delivery of, any one or more of ten
grades, with a price adjustment to
equalize, the commission expressed
the opinion that the "effect OF theSe
options on the part of the seller is
generally to make the futures price
lower than it probably would be if
a corresponding buyers option were
used instead"
-. Bearing on Prices
Reporting that according to the
best data available for the last three
years future prices have been gen.
orally lower that spot prices, the
commission stated the matter of
fundamental Importance in connec-
ton with the exercise of the seller
option was the relation between the
two prices. While other factors
were recognized as contributing to
the absence of parity between fu-
ture and spot prices, the situation
generally was cited as having a
probable tendency to affect un-
favorably the prices received by pro
1ucers of cotton" This logically