live. It would be equally ruinous to put in the inch and three-eighths cotton or the inch and five-sixteenths cotton that would come from the Mississippi Delta or from some of the new sections in Arkansas and Texas. The mill to-day is getting an opportunity to sell its product of goods six months in advance. I do not know what other. manufacturers and dealers will tell you, but there are times when I can not buy cotton from any of my correspondents, and I probably have a hundred scattered in every cotton State in the Union. There are times when I inquire for 500 bales of inch and an eighth good middling cotton, and do not receive a single quotation. If that business is offered to the mill man on a parity which ought to be good, based upon the known quotations of other grades of cotton, one of the uses of trading in futures at that particular point would be for him to make a hedge against the ordinary contract of cotton, so that he might be able to convert his contract into the extraordinary grade of cotton as soon as an opportunity presented itself.

The CHAIRMAN. And yet, the fact that he is able to buy a future would not make it possible for him to get cotton when the cotton was not to be had?

Mr. LATHAM. The swing of cotton, the different grades and the different staples, is not exactly fixed, but it is nearly so; and if one goes up, the other is apt to go up, too.

The CHAIRMAN. Why would not that argument apply to the manufacture of wool? Is not that pretty closely allied to the manufacture of cotton?

Mr. LATHAM. I do not know, sir; I am not prepared to say much about that, except that I do know this: Cotton can be substituted for wool, but I do not believe wool will ever be substituted for cotton. The CHAIRMAN. That is probably because wool is more valuable than cotton, and the more valuable article is never substituted for the less valuable one.

Mr. LATHAM. Yes, sir; I think they do have some wool exchanges. Whether or not they trade in futures on wool, I am not able to say. But in reading the Journal of Commerce, or some of the papers of the country, it seems to me I have seen the Boston Wool Exchange mentioned.

The CHAIRMAN. I think there are no futures in wool.

Mr. LATHAM. No futures in wool?

The CHAIRMAN. At least that is the information I have.

Mr. LATHAM. I am not prepared to say whether there are or not. The CHAIRMAN. As a cotton merchant, I should like to inquire whether you find pretty free competition?

Mr. LATHAM. As a cotton merchant?

The CHAIRMAN. Yes.

Mr. LATHAM. Yes, sir; it is very warm.

The CHAIRMAN. You do not know of any arrangement by which the big cotton dealers divide up the cotton territory?

Mr. LATHAM. I do not, sir.

The CHAIRMAN. Or eliminate competition in
Mr. LATHAM. No, sir; I do not.

Mr. HAWLEY. If such a combination existed, would you know it? Mr. LATHAM. I can not answer as to that, sir. It might exist without my knowledge, but it does not exist to my knowledge.

The CHAIRMAN. Speaking for yourself, you will say that you do not have any understanding with any other cotton merchant whereby you agree to pay the same price?

Mr. LATHAM. I do, sir.

The CHAIRMAN. On any given day?

Mr. LATHAM. I do; I have no combination with anybody with regard to handling cotton.

Mr. LEVER. Right on that point: As a matter of fact, all cotton dealers are limited by quotations from New York, are they not? You buy within certain limitations during the day?

Mr. LATHAM. I would not say that, precisely, for it certainly would not fit my case. There are times when I pay relatively a great deal more for cotton than it is worth in New York; and sometimes I pay relatively less for cotton than it is worth in New York. Mr. LEVER. Is that the usual thing?

Mr. LATHAM. That is not the usual thing; that is the unusual thing.

Mr. LEVER. As a matter of fact, you are usually guided by the quotations you receive from New York from time to time during the day as to the price which you may give for your cotton during the day?

Mr. LATHAM. I am guided by the quotations from Liverpool and from New York, and by the mill orders that I have on my desk-the inquiries that I have. Those three, combined, fix the market. Mr. LEVER. Are those quotations quotations of spots, or practically of spots?

Mr. LATHAM. That guide my buying?

Mr. LEVER. Yes.

Mr. LATHAM. Yes, sir.

Mr. LEVER. They are quotations of spots?

Mr. LATHAM. They are quotations of spots; yes, sir.

Mr. LEVER. Those that you receive from New York are quotations of spots?

Mr. LATHAM. No, sir. Well, I do sell spot cotton to New York merchants occasionally, and I also buy some.

Mr. BURLESON. I did not catch your answer as to whether or not your buying is based on spots.

Mr. LATHAM. My answer, sir, is that the prices at which I buy or sell are based upon the quotations of both spots and futures-futures from Liverpool and New York particularly and the spot-cotton prices that come into my office from spinners throughout the world. Mr. LEVER. Do Liverpool and New York furnish you quotations on spots?

Mr. LATHAM. I think they do daily; yes, sir.

Mr. LEVER. You "think they do daily?"

Mr. LATHAM. Yes, sir.

Mr. LEVER. It does not make enough impression on your mind to make you know that?

Mr. LATHAM. Sir?

Mr. LEVER. The quotations that you receive do not make enough impression on your mind to make you know that you receive them daily?

Mr. LATHAM. Yes, sir; I do know it,

Mr. LEVER. You do know it?

Mr. LATHAM. I do, sir,

Mr. LEVER. Are you governed in the prices you pay to the producer of the cotton by the spot quotations or the future quotations you receive?

Mr. LATHAM. By both.
Mr. LEVER. By both?
Mr. LATHAM. Yes, sir.

Mr. LEVER. To which do you give the larger influence?

Mr. LATHAM. As my business is very largely in spot cotton, I am very frequently a buyer of cotton when it would not be delivered upon the quotations sent out by the New York or Liverpool cotton exchanges. I very frequently sell cotton and ship it to New York and Liverpool when that is the highest market in the world. I have done so this year. I have delivered several thousand bales of cotton to New York that went on the exchange there simply because that was the highest market in the world.

Mr. LEVER. As a matter of fact, Mr. Latham, is it not the custom of the cotton buyer in the South to receive his quotations from New York "20 points on" or "20 points off," and act within those quotations?

Mr. LATHAM. That may be so, sir. There are so many different schemes for handling the cotton that it would be impossible in a few hours or within a few days to go through all of them.

Mr. LEVER. Is it not so, as a matter of fact?

Mr. LATHAM. It is not so so far as I am concerned.
Mr. LEVER. It is not so so far as you are concerned?
Mr. LATHAM. No, sir.

Mr. BURLESON. Let me ask you a question right there. Mr. Latham, are or are not the majority of authorizations you receive for the purchase of cotton based upon so many points off or so many points on futures?

Mr. LATHAM. The authorizations that I receive?

Mr. BURLESON. I am speaking of the authorizations that you your self receive to buy cotton.

Mr. MENDELBAUM. He means

Mr. BURLESON. Mr. Latham needs no assistance. He is under oath, and I ask him this direct question: Do not the majority of authorizations you receive to buy cotton come to you to buy so many points on or so many points off futures-New York futures, too?

Mr. LATHAM. I will answer that question "No;" but I will state, further, that in sending out my own orders I do very frequently base them on that.

Mr. BURLESON. That is all.

Mr. SIMS. Let me ask you a question there. What time in the day is the spot quotation posted in New York?

Mr. LATHAM. I think it is at 2 o'clock.

Mr. SIMS. Is it not a fact that the largest amount of the cotton business is done everywhere before that quotation is even posted throughout?

Mr. LATHAM. It is not so where I operate.

Mr. SIMS. You wait until 2 o'clock to buy in your place, do you? Mr. LATHAM. Our buying is very largely done from dealers, and they buy and sell after the close of the market.

Mr. SIMS. Do the dealers wait until 2 o'clock ?

Mr. LATHAM. Well, we buy cotton all down in the South.

Mr. SIMS. What effect would a spot quotation in New York have which read in this way: "Spots, so much; sales, none?"

Mr. LATHAM. I think it would show that cotton was worth that money, if there was any for sale at that price.

Mr. SIMS. In other words, is it not a purely offered-and-bid price, and no actual business done as a general rule; and when there are any spots sold, are they not inconceivably small in comparison with the future business done in the same day on the same exchange?

Mr. LATHAM. I will answer that by saying that there is some; but the spot business done in New York or New Orleans or Liverpool either, which is a great spinners' market, is very small as compared with the amount of future business that is done there.

Mr. SIMS. Do hedges exceed the actual business of spot dealing? Do you sell or buy more hedges than you sell or buy actual bales of cotton?

Mr. LATHAM. I think I handle more actual bales of cotton than I handle hedges.

Mr. SIMS. Then the great bulk of the dealing on the New York Cotton Exchange is not hedges, not controlled by spot dealings, but is purely speculative or gambling transactions? Is not that the honest truth?

Mr. LATHAM. I could not answer that, sir.

Mr. SIMS. You are not a member of the cotton exchange?

Mr. LATHAM. Yes, sir; I am.

Mr. SIMS. You are?

Mr. LATHAM. Yes, sir.

Mr. SIMS. And yet you do not know what your own exchange does? Mr. LATHAM. I do not live there.

The CHAIRMAN. Mr. Latham, can you state what, in your opinion, would be the effect upon all the branches of your business-first as a cotton grower, then as a cotton broker, and then as a cotton merchant-in case future dealings upon the New Orleans and New York exchanges could be eliminated?

Mr. LATHAM. As a cotton manufacturer I should say that the cotton mills are usually well organized and well equipped with money. They are rich. Their borrowing capacity is nearly always great, because their names are good. In addition to that, they have a large amount of assets. I should say that so far as the cotton manufacturer was concerned, it would enable him to purchase at low prices in the season of abundance-September, October, November, and December, particularly when the farmer must sell in many cases from necessity, and in a great many other cases from inclination. There are a lot of people that can not hold their cotton, no matter what sort of commands they get. When they get ready, it must be sold. They want to sell; it is their natural disposition in many cases. I would say that if the cotton were forced upon the market in those months, without the aid of future transactions, the tendency would be to make the price very low, and the manufacturer would go in and buy at that time when the farmer needs a place to store it, and needs the money that he would receive from it. Therefore, I should say, at the front end of the season cotton would always be depressed, or nearly always so, and at the tail end of the season it would probably bring high prices.

36387-A A B-vol 2-10-9

The CHAIRMAN. And on the average would that be to the advantage or the disadvantage of the mill man?

Mr. LATHAM. I should say that the mill man would not suffer materially from that.

The CHAIRMAN. What would you say about the broker?

Mr. LATHAM. So far as the dealing of the broker is concerned, it would probably greatly enlarge the field of cotton dealers; it would make a great many of them go into that business.

The CHAIRMAN. Please state that again; I did not catch it.

I

Mr. LATHAM. I believe doing away with hedges-that is, if it could be done would increase the number of cotton dealers. am answering that on the assumption that there will be no way of hedging, either in Havre or Liverpool or New York or New Orleans. The CHAIRMAN. Yes; that is quite right.

Mr. LATHAM. I suppose you assume that in your question?

The CHAIRMAN. I do.

Mr. LATHAM. That all sorts of dealings in futures would be eliminated from the cotton trade?

The CHAIRMAN. Exactly. You are not of the opinion then, which was expressed here yesterday, that the elimination of the future market would put the cotton brokerage business into the hands of two or three large firms?

Mr. LATHAM. I think it would put it into the hands of a great many large firms, who would buy cotton so low that they could afford to average it instead of to hedge it, as they now do.

The CHAIRMAN. Would that be to the particular disadvantage of the cotton brokers? Would it cripple in any way the cotton brokers? Mr. LATHAM. I think it would, as they now exist. I believe it would.

The CHAIRMAN. But do you think that they could readjust themselves to the changed conditions and go on and continue to do business?

Mr. LATHAM. I doubt it very much. That would be particularly so of the weak brokers-those who are financially weak.

The CHAIRMAN. You think the weaker ones would probably have to leave the field?

Mr. LATHAM. I think they would.

The CHAIRMAN. And it would be only the strong firms that would remain ?

Mr. LATHAM. I think so; yes, sir.

The CHAIRMAN. Will you give us your judgment about the effect on the cotton grower?

Mr. LATHAM. I believe it would be hurtful to him.

The CHAIRMAN. Through depressing the price?

Mr. LATHAM. I believe it would.

The CHAIRMAN. If it depressed the price to the cotton grower, I presume it would correspondingly reduce the price of the goods manufactured from the cotton?

Mr. LATHAM. Not necessarily, sir.

The CHAIRMAN. That would not necessarily follow?

Mr. LATHAM. No, sir; not necessarily.

The CHAIRMAN. Is there not a pretty uniform parity between the

price of cotton and the price of cotton goods?

Mr. LATHAM. There is a relation, but not a uniform parity.