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Mr. BEALL. Well, does the supply, of that particular grade of cotton or the demand for that particular grade of cotton have anything to do with fixing that difference? Mr. NEVILLE. It may have a temporary effect when the supply of grades below middling is superabundant and the demand for the time being does not run on those grades; but experience has proven that in the course of a very short time the values of those grades do get back to practically their spinning value as compared to middling cotton. Mr. BEALL. The value of low middling, for example, from the standpoint of its spinning value, always bears the same proportion to the value of middling cotton as a spinnable article? Mr. NEville. Yes; I will say that is so. Mr. BEALL. Low middling this year bears the same proportion to middling that low middling last year bore, so far as spinnable quality oes? g Mr. NEVILLE. Yes; there may be some climatic conditions that affect it. Mr. BEALL. It always comes back in that proportion? Mr. NEVILLE. Yes. Mr. BEALL. Yet there are times when for months in succession that relative value is not maintained? Mr. NEVILLE. Yes. Mr. BEALL. What makes that disparity? Mr. NEvLLE. Panic on the part of the holders, brought about by adverse talk on the supply of the crop by people who have an interest in talking that particular quality down. That is my opinion; you ask it; I give it to you. Mr. BEALL. Do you think that was a condition that prevailed in 1906? Mr. NEVILLE. I think it was more accentuated in 1906 and 1907 than ever in my experience in the cotton business, which embraces a period of twenty years. r. BEALL. You think that was the cause of the disparity in 1906? Mr. NEVILLE. That was one of the causes. There were at least three causes, in my opinion, that brought about a wide disparity of low grades that year as compared to middling. Mr. BEALL. What were they? That may be anticipating something you may have been intending to bring in later on. Mr. NEVILLE. It is anticipating something that I want to say, but it comes in very well right here. I would rather answer it right now, with the permission of the chairman. The prime cause, Mr. Chairman, of the disparity, so-called, between middling, even running—and I want the committee and my farmer friends here to bear this in mind, because it has not been touched on here by anyone and I have never seen it in print—the primal cause, in my opinion, for the disparity between the price of middling cotton, even running, which is the basis which the world has fixed for arranging prices on this particular commodity, and the price of the basis middling contract, was this, that when middling, even running, was quoted at so many points over the low middling contract, there was ractically no middling, even running, in the United States for sale. hat was the first cause. The second cause was harping by people who professed to know; who circulated letters, wrote newspaper

articles, and made speeches at farmers' meetings, decrying the New York contract for the stock of cotton it carried, when the stock of cotton carried in New York represented the grade of cotton in the United States at that time. That is your second reason.

Mr. BEALL. All right. Mr. NEVILLE. The third reason was the error made by the New York Cotton Exchange in fixing its differences, that season, gentlemen, as in other seasons, based on the spinning value of that quality as compared to middling cotton. The experience of years had demonstrated that while at times there might be some falling off from the value as fixed by that committee, there always came around a time when that cotton was in demand by the spinners at the differences fixed by the New York Cotton Exchange. Those, briefly, are my reasons.

Mr. BEALL. Now, in the three reasons that you have given, have you put any of the responsibility for the disparity upon the action of the New York Cotton Exchange?

Mr. NEVILLE. Yes; I told you it was one reason. Mr. BEALL. You are willing to admitMr. NEVILLE. I am willing to admit. Mr. BEALL (continuing). That the New York Cotton Exchange, in fixing the differences in 1906, made a serious error ?

Mr. NEVILLE. I am not willing to say, a serious error, in that meaning of the word. I am willing to say they made a mistake.

Mr. BEALL. Was it not a very great mistake?

Mr. NEVILLE. It was a great mistake; but some extenuation is found for it in this, that if I mistake not, the Agricultural Department on the 5th or 6th of December that year estimated the crop at about 12,300,000 bales. I want to say to the committee that I am a very poor hand for carrying figures of prices and movements in my head, and if I make a misstatement I hope some gentleman here will correct me. I think the estimate of the Department of Agriculture was about 12,300,000 bales. The crop estimates of private estimatorsnone of them exceeded 12,500,000 bales. The estimates of the Farmers' Union and the National Ginners' Association were under 12,000,000 bales. So that, gentlemen, anything that merchants had to base themselves on was accepted by that committee. Now, what happened? The weather that the Lord gave the farmers that caused that storm, put moisture in the ground. The picking season that followed extended into March, with the result that bolls as large as a hickory nut to a black walnut, which never in the experience of man, I don't care whether he was a horny-handed son of toil, as some orators call them, or anyone else, ever saw open or make cotton, which were as a rule plowed under, that year by a freak of nature popped at the point of the boll, and a machine was invented to throw them in by the shovelful, so that cotton was made that counted as bales, and was to a certain extent spinnable. That cotton has all gone out of existence; every bale of it has gone somewhere. That added over a million and a half bales to that cotton crop. Mr. BEALL. You are talking now of the crop of 1906 ? Mr. NEVILLE. I am talking now of the crop of 1906–7.

Mr. BEALL. Right there, I do not know what condition prevailed elsewhere, but as a matter of fact was not that an entirely different year from 1906–7, that this condition prevailed ?

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Mr. NEVILLE. No, sir. Mr. BEALL. Was that the year you are referring to here, in which they threshed out cotton? Mr. NEVILLE. Yes; and they have been threshing it ever since. The fact of the matter is that the people in Oklahoma tell me the are not going to handle cotton hereafter except by that method, because it is cheaper. Mr. BEALL. I know that prior to 1906-7 that condition prevailed in the country. It was the year 1903–4 when that was done in Texas, and it has not been done to any considerable extent in Texas to my knowledge since. Mr. NEVILLE. All that I have to say about that is, I handled some of the cotton and I know where I got it from, and I did buy it in Texas. I bought some in Oklahoma. Mr. BEALL. Was that the first year you bought that cotton in an quantity ? r. NEVILLE. In large quantity. I think I am right in that statement, Mr. Beall. That crop of 1906–7, as given on page 2 of Shepperson's Cotton Facts, was 13,540,000 bales, in round figures; but it has been commonly looked upon as a 14,000,000-bale crop by the trade. Mr. BEALL. You referred to a storm that occurred in 1906? Mr. NEVILLE. Yes. Mr. BEALL. This difference was fixed by your revision committee I think on the 21st of November? Mr. NEville. After the storm, yes. Mr. BEALL. The storm ofon the 28th day of September 7 Mr. NEVILLE. Yes; it was after the storm. Mr. BEALL. Is it not a fact that long prior to the fixing of this difference on the 21st of November the members of the New York Cotton Exchange were pretty well aware of the extent of the damage done by that storm? Mr. NEvillE. Yes; they were pretty well acquainted with the extent of the damage done by that storm, Mr. Beall, but they were also aware of the enormous commitments of manufacturers for goods and the enormous demand that we had for spot cotton; and in face of private crop estimates, where nothing exceeded 12,500,000 bales, it was natural, based on past experience, that no matter what there was of that crop up to 12,500,000 bales there would be a demand for it. Mr. BEALL. I understand there is no standard fixed in the rules of the New York Cotton Exchange by which this revision committee is governed in fixing this disparity between different grades of cotton? Mr. NEville. There is no set rule as to the method that they shall ursue. p Mr. BEALL. In a matter of so great importance not only to the cotton producer but to the cotton merchant and others, do you not believe that there should be some fixed and definite rule to govern that committee in arriving at its conclusions? Mr. NEville. I think there is just as much discretion and just as much judgment shown by that committee in fixing their differences as there is in fixing the commercial differences in any southern market, and I say it without a fear of contradiction. Mr. BEALL. Commercial differences in the southern market are regulated to some extent by the law of supply and demand?

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Mr. NEVILLE. To some extent, yes, sir. I will accept that; to some extent.

Mr. BEALL. Is there anything that compels or requires this com-1 mittee to take into consideration, even, that law on the New York Cotton Exchange ?

Mr. NEVILLE. Yes.
Mr. BEALL. What is it?

Mr. NEVILLE. Based on the law of supply and demand, not at the time for those grades, but to their worth and what they will be worth to the mills before another crop comes around.

Mr. BEALL. Is it not largely governed by mere speculation as to what the demand will be in the future, or the supply in the future, months and months ahead ?

Mr. NEVILLE. Mr. Beall, I would assent to the way you put it if I knew in just what way you meant 'speculation.”

Mr. BEALL. Well, guesswork?
Mr. NEVILLE. No; I would not say guesswork.
Mr. BEALL. Is it not a matter of guess ?

Mr. NEVILLE. No, sir; anything that is founded on the results of the past experience of years is not speculation, nor is it guesswork.

Mr. BURLESON. You do not mean to tell Mr. Beall that there is anything in the rules of the exchange that requires you to take into consideration the spinnable value of the cotton ?

Mr. NEVILLE. Wait a minute, now, Mr. Burleson. Mr. Chairman, I refer the committee to section 67 of the Rules and Regulations of the New York Cotton Exchange, on page 49, and if you want this made a part of the proceedings and to take the time to read it I will be very glad to read it.

The CHAIRMAN. I think you had better read it.
Mr. NEVILLE. It reads as follows:

Sec. 67. The committee on revision of quotations of spot cotton shall consist of seventeen members, representing the various interests of the exchange. At any meeting of this committee ten members shall constitute a quorum. If no quorum of this committee can be obtained, the president shall appoint a sufficient number of members of the exchange to form a quorum.

The duty of this committee shall be to meet twice a year, viz: on the second Wednesday of September and the third Wednesday of November at 3.30 o'clock p. m., and receive a report from the committee on spot quotations as to the state of the market; also suggestions or opinions from any member of the exchange regarding the revision of spot quotations.

The committee shall on the day of the meeting consider the report of the committee on epot quotations and the suggestions and opinions presented by members, whether in writing or verbally, and establish the differences in value of all grades, on or off, as related to middling cotton, which shall constitute the rates at which grades other than middling may be delivered upon contract. Its report shall be publicly announced by the superintendent at the opening of the exchange on the day following the meeting, shall be posted for five days upon the bulletin of the exchange, and shall be printed in the official circular of the exchange.

The rest of it I do not think necessary to read. I will leave this copy of the by-laws here.

Mr. BEALL. At the time that this committee on revision acted, in 1906, what had been the difference between middling cotton and low middling up to that time?

Mr. NEVILLE. Mr. Beall, I could not answer that question right off the bat, so to speak. Mr. BEALL. What, ordinarily, is the difference? Mr. NEVILLE. It runs from 50 to 60 points off.

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Mr. BEALL. I may not have the grade right in my mind, but my recollection is that at that time there was a difference of 38 points.

Mr. NEVILLE. On low middling?
Mr. BEALL. Is that so?

Mr. NEVILLE. It may be so. I do not know. I was in the South when the revision took place, so that I am not very well posted.

Mr. BEALL. Between what grades did that difference of 38 points

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* Mr. NEVILLE. I could not answer unless I had the figures before me, and, as I said before, I am a very poor hand to carry figures in my head.

Mr. BEALL (reading):

First grade considered low middling. Mr. Brennecke moved that that grade be made 50 points off instead of 38 points off, as now existing.

That was 1906. At that time, up to the 1st of November, there was a difference of 38 points ?

Mr. NEVILLE. Yes.

Mr. BEALL. Through the action of that revision committee it was increased to 50 points; increased 12 points ?

Mr. NEVILLE. Yes.

Mr. BEALL. At that very time was not the commercial difference between those two grades of cotton something like 75 or 80 points ?

Mr. NEVILLE. To begin with, Mr. Beall, there is a question comes in right there; I would like to see what kind of low middling cotton that was. You say there was that much difference. I would like to see the low middling cotton and see how it would go under a New York contract.

Mr. BEALL. He says here the first grade considered was low middling. You understand what that means ?

Mr. NEVILLE. Yes, but in the first place, low middling cotton in New York is not low middling wherever that happens to be.

Mr. BEALL. He was talking about where the difference was to apply. Was that to be in New York ?

Mr. NEVILLE. Yes.
Mr. BEALL. We are talking about New York.

Mr. NEVILLE. Now, the difference between low middling there and low middling somewhere else was what?

Mr. BEALL. I do not know.
Mr. NEVILLE. I thought you stated it.

Mr. BEALL. My idea is that the commercial difference between these two grades of cotton was something like 75 or 80 points.

Mr. NEVILLE. That is what made me make my remark to you. I thought you said something of that kind. I said that while low middling in name is the same, low middling in cotton is not the same.

Mr. BEALL. How would that affect the action of your revision committee ?

Mr. NEVILLE. We have a standard of low middling cotton on the New York Cotton Exchange, and it is the only exchange that has maintained a standard in this country, and we have had it for years. Low middling in Galveston and in Houston will not go low middling in New York.

Mr. BEALL. We will take the low middling cotton as you understand it in New York.

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