Mr. BEALL (continuing). What effect did that have upon the future market?

Mr. NEVILLE. I do not know that it had any effect. At that time that you refer to, when middling cotton everywhere was quoted so much higher than futures, as I stated to the gentlemen of the committee a moment ago, there was practically no middling cotton in existence, and the price was quoted in the trade because it was the custom to take middling cotton as a basis to work from.

Mr. BEALL. I will ask you this, if as a matter of fact the farmer in Texas is not very largely governed by the price that is given to him as the price of futures in New York, in determining in his own mind what he thinks his cotton should be worth in Texas?

Mr. NEVILLE. I should not think so.

Mr. BEALL. Is not that about the only market that the farmer has access to?

Mr. NEVILLE. I should not think so. I should not think that was the only thing that governs him.

Mr. BEALL. In the exchanges that used to operate in the South, the markets that they posted on the board were the future markets, were they not?

Mr. NEVILLE. Yes; all future markets, if you will recollect.

Mr. BEALL. Of course the cotton buyer keeps up with the market, but as a matter of fact is not the farmer in the South very largely dependent, in estimating for himself the value of his cotton, upon the information he gets as to the price of futures?

Mr. NEVILLE. I would say that has some influence on his mind, but I do not think that is altogether the controlling factor, because I have seen farmers carry their cotton back because the price did not suit them.

Mr. BEALL. Yes, that occasionally happens; but very rarely.
Mr. NEVILLE. I think it happens pretty often.

Mr. LEVER. Would you say 10 per cent of the farmers did that?
Mr. NEVILLE. That is an impossible question to answer.

Mr. BEALL. You would not say 1 per cent did that?

Mr. NEVILLE. No, sir; I would not say that one-half of 1 per cent did it.

Mr. BEALL. No; I would not, either.

Mr. Cocks. Will you explain to us the objection that has been raised here by the cotton planter that he could not get a price on his cotton when he came to town, until they had heard from New York?

Mr. NEVILLE. Mr. Cocks, my experience is not that way. I have bought cotton from farmers from North Carolina down to Texas, and I have never seen a time when the farmer came into market with a bale of cotton for sale that he could not get a price from some buyer, if it was 7 o'clock at night. I take exception to that statement, and I wanted to cross-examine the gentleman on it, but I would not do it.

Mr. Cocks. It seemed to me an improbable proposition, because in the matter of cattle, or hogs, or wheat, or matters of that sort, we could always get a price. It looked to me, the way they put the question, as if they were awfully anxious to see if cotton had not gone up before they sold.

Mr. NEVILLE. I expect, Mr. Cocks, you have solved that problem. Mr. Cocks. I just seemed to gather that impression.

Mr. NEVILLE. I expect my reply to Mr. Cocks's question ought to have a little more explanation, and I will try to explain it. Everyone south of Atlanta, every man connected with the cotton business, knows at 8 o'clock, their time, what the Liverpool market is; so that if the farmer wants to sell at 8 o'clock, the man will make him a price. Farmers do not come in and want to sell 50 bales to 1,000 bales, you know. When they come in that way, they may have 1 bale or 20 bales to sell. Ordinarily it is from 1 to 5 bales.

Mr. BEALL. When the farmer gets that price, if the price of futures

Mr. NEVILLE. Let me get through, Mr. Beall.

Mr. BEALL. All right.

Mr. NEVILLE. And then you can come in. That buyer knows at 8 o'clock what the market is in Liveropol. If he comes in after hours, after 2 o'clock, when the American exchanges are closed, there is not a buyer anywhere in the South, as it is to-day, who has not the order in hand that he can buy that cotton.

Mr. LEVER. Is it not often a fact that you cover up your transactions in New York through Liverpool, and is it not a fact that Liverpool is controlled absolutely by the New York Cotton Exchange?

Mr. NEVILLE. Liverpool is absolutely controlled by the spinners of England, and nowhere else.

Mr. LEVER. You do not operate on the Liverpool Exchange very largely?

Mr. NEVILLE. Yes, I would say sometimes we operate very largely; and sometimes, again, we do not.

Mr. LEVER. And it frequently happens that you hammer prices in Liverpool

Mr. NEVILLE. We never hammer prices; sir. That is a common expression that is just as

Mr. LEVER. That is just a newspaper expression, hammering prices?

Mr. NEVILLE. Yes; that is it.

Mr. LEVER. Is it not a fact, however, that the great bulk of the cotton crop of the South coming from the hands of farmers into the hands of cotton buyers is controlled in its price by the future quotations from the New York Cotton Exchange?

Mr. NEVILLE. No, sir; absolutely, no.

Mr. LEVER. You would not admit that?

Mr. NEVILLE. No, sir.

Mr. LEVER. Would you admit that the future quotations have any effect whatever upon the price?

Mr. NEVILLE. I think the two are closely related, and perhaps I can best illustrate that, Mr. Chairman, by stating that it might suit my business, with the orders I have got on my books, to offer 10 cents in Columbia, S. C., for strict middling cotton. That was the price I bought at yesterday. The man I telegraphed to, offering 10 cents, said: "Notwithstanding future markets unchanged, I can not buy at less than 10%, and there is a demand at this price." That happens often. Mr. LEVER. If you were to telegraph a local cotton buyer down there by the name of J. D. Frost to buy you 10,000 bales of cottonMr. NEVILLE. I do not telegraph for large quantities like that. Put it down in reason.

Mr. LEVER. Well, 1,000 bales; if you were to telegraph to him to buy you 1,000 bales of strict middling cotton for May deliveryMr. NEVILLE. Yes.

Mr. LEVER (continuing). How would that telegram read, in all probability?

Mr. NEVILLE. Well, if I had not had any previous communication with him, my telegram would be: "At what price can you buy 1,000 bales strict middling cotton for May delivery?"

Mr. LEVER. If he was your own broker-your own representative you would telegraph to him "Buy me a thousand bales strict middling cotton for May delivery, 50 points on," or "50 points off?" Mr. NEVILLE. Yes; and when I got the reply from him I might have to raise it to 60 points on or make it 40 points off.

Mr. LEVER. Then 50 points on or off means on or off what?
Mr. NEVILLE. May contracts.

Mr. LEVER. Future contracts?
Mr. NEVILLE. Yes.

Mr. LEVER. So that, then, there is a most intimate relationship between spot cotton and contracts?

Mr. NEVILLE. I told you I was willing to admit that there was a relationship.

Mr. LEVER. A very intimate relationship?

Mr. NEVILLE. I would not put so much emphasis on the close relationship; because you might think some people are married, but they

are not.

Mr. LEVER. As a matter of fact, through the custom of your exchange in telegraphing your representatives throughout the country to buy off or on futures, do you not believe that futures really control the price of spot cotton?

Mr. NEVILLE. I have answered that as honestly as I could, and I will give you an instance. As I stated, I might telegraph Mr. Frost, offering him 50 points on May for strict middling cotton and 50 points off for low middling, but I might have to turn around and pay him 60 points on for strict middling and 40 points off for low middling. There would be a case where the spot price dominated the future contracts. You see the point, Mr. Chairman?

Mr. LEVER. Suppose, from the time you send your telegram until it reaches your local man in Columbia, there should be a break of 50 points in May futures, would you change your order at all?

Mr. NEVILLE. How is that?

Mr. LEVER. Suppose in the time that transpires in the sending of your message to Columbia, S. C., there should be a sudden break in the market in May futures; would you change your order at all? Mr. NEVILLE. Not at all.

·

Mr. LEVER. You would not change it at all?

Mr. NEVILLE. No, sir.

The CHAIRMAN. Would you not have to change your order in order that you might pay the price you have in your mind for the cotton? Have you not been using the future price as a marker?

Mr. NEVILLE. I have been using it as a marker; and I think I can make it clear to you. We will assume that May cotton is 15 cents. My farmer friends always like to hear those high prices, and that is the reason I put it up for them. We will assume May cotton is 15 cents, and I wire Mr. Frost to buy that cotton at 50 points on May.

cotton at those two points to the spinner is of approximately the same value it would mean the same thing. But what happened? In less than one season everybody went back to the same old grades again, except the New York Cotton Exchange which preserved theirs intact, and they have them now. So to-day we welcome it because we want low middling cotton in New York the same as low middling cotton in New Orleans or any other market.

The CHAIRMAN. I assume that is the case, and I asked the question only to lead up to this question. Do you believe that it would be practicable, in case these grades are accepted, to have the actual spinning value of these different grades determined, and if that could be done, is it your idea that the fixed differences on the New York market should be governed accordingly?

Mr. NEVILLE. Yes.

The CHAIRMAN. I just want to get that fixed in my mind.

Mr. NEVILLE. And I want to say to the chairman that as soon as those standards were adopted by that committee, I applied for two sets of them for the New York Cotton Exchange, and guaranteed that the New York Cotton Exchange would adopt them. The CHAIRMAN. I am very glad to have that information. Mr. MANDLEBAUM. May I ask a question, Mr. Chairman? The CHAIRMAN. Yes.

Mr. MANDLEBAUM. Mr. Neville, Mr. Lever as well as Mr. Beall has asked you the question as to the interrelation between spots and contracts for the future delivery of cotton. Is it or is it not more frequently the case that the price of future contracts is dictated by the price of spot cotton than that the reverse is the case?

Mr. NEVILLE. I should say yes, sir.

Mr. MANDLEBAUM. Is it or is it not a fact that the opening prices in Liverpool as well as in New York reflect the amount of offers of cotton in the spot, actually offered to Liverpool and to New York? Mr. NEVILLE. Yes.

Mr. MANDLEBAUM. And it thereby dictates the price of futures? Mr. NEVILLE. That is the point I made with Mr. Lever.

Mr. MANDLEBAUM. That is all I wanted to bring out.

Mr. LEVER. As a matter of fact it ought always to fix the price of futures, ought it not?

Mr. NEVILLE. What is that?

Mr. LEVER. If conditions are normal, the price of spots would always fix the price of futures?

Mr. NEVILLE. As I told you, there are no two seasons that are alike, and there are outside conditions which might affect it in the way of the supply of India cotton and the fact of there being no demand from some place which would affect temporarily the price of futures.

Mr. LEVER. If there is no effect upon the spots to make the price of futures, as you suggested in your question, then how is it that during the month of January of this year spots were selling for 15 and 15 cents a pound, and futures were selling down to 13 cents a pound?

Mr. MANDLEBAUM. Do you wish me to be sworn first before I answer this question, or will you accept this as a statement? Mr. LEVER. Oh, just answer it; make it a statement.

Mr. LEVER. That would not seem to affect the difference in the parity between spots and futures.

Mr. NEVILLE. Sure.

Mr. LEVER. This is a pretty mystic maze of a subject to me, and I confess I do not see how.

Mr. NEVILLE. With all due apologies, Mr. Lever, it is a pretty mystic subject to all of us, sometimes. No two seasons are alike. We think we know a thing one year, and we do not know it the next.

Mr. HOWELL. You stated as an extensive dealer that there were certain practices on the New York Cotton Exchange and other exchanges of which you did not approve.

Mr. NEVILLE. I beg your pardon?

Mr. HOWELL. I say as an extensive dealer in actual cotton you stated that there were practices, methods and practices

Mr. NEVILLE. Methods, I should say.

Mr. HOWELL. Methods of practice on the New York Cotton Exchange and other exchanges which you did not approve of.

Mr. NEVILLE. I referred to this question of fixing the difference between the grades. That was the subject under discussion at the time.

Mr. HOWELL. Would you care to give the committee your idea as to doing that?

Mr. NEVILLE. My idea was to fix the basis on the spinning value, above and below middling as compared to middling. There would be times when in the marketing of the crop those differences might seem out of gear; but as the crop progressed, and the demand came on the grades that at one time were neglected, the differences would go back very quickly and become normal. That has been our experience through a number of years.

Mr. HOWELL. Is not that the method involved now in the New York Cotton Exchange?

Mr. NEVILLE. Partially so; but not on the figures, as we are trying to have ascertained by actual mill tests of actual cotton of the various grades that we are interested in.

The CHAIRMAN. In that connection, you were one of the committee that assisted the experts in the Department of Agriculture in making up the samples of the grades of cotton?

Mr. NEVILLE. Yes.

The CHAIRMAN. Provided for by recent legislation?

Mr. NEVILLE. Yes.

The CHAIRMAN. Is it your judgment that these grades will be generally accepted by the cotton trade?

Mr. NEVILLE. Mr. Chairman, I have never seen a piece of legislation offered before any body that appealed to the members of the New York Cotton Exchange more than that, as individuals and collectively, and I will tell you why. In the early seventies there was a convention of all the cotton interests in the world, held at Old Point Comfort, where standards of classification for American cotton were agreed on. They were made up and they were carried to England and they were carried in the various markets in the South. That convention sought to have a uniform system of classification so that when a merchant, a spinner or a farmer, saw that middling cotton was quoted in Augusta at 11 cents, and middling cotton was quoted in Meridian, Miss., at 11 cents-and I quote those two points because the middling