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TESTIMONY OF WINGATE P. BARBOT, EXPERT COTTON
Mr. Neville. Mr. Barbot, you made these workable types for the department?
Mr. Barbot. I did.
Mr. Neville. I ask you to look at the grades, low middling, strict low middling, middling, strict middling, good middling, and strict
Sood middling. Is there a definable difference between each of those alf grades above and below middling?
Mr. Barbot. There is.
Mr. Neville. Is it used in the shipping and handling of cotton in the South?
Mr. Barbot. Very largely.
Mr. Neville. Mr. Barbot, you are one of the classers that classified the low-grade cotton in 1906 and 1907, that there has been so much discussion about, are you not?
Mr. Barbot. Yes.
Mr. Neville. Is that cotton that you classed, or the committee classed, unspinnable or unmerchantable?
Mr. Barbot. It is not.
Mr. Neville. That is all I have to say on this point, gentlemen.
Mr. Burleson. I would like to ask Mr. Neville a few questions bearing on that proposition.
TESTIMONY OF MR. NEVILLE—Continued.
Mr. Neville. While I have got light here, I would like to show you something I am going to talk on. I have finished talking on this particular feature, and while there is light in the room here I want to show you the result of tests I have had made of these full grades of cotton.
The Chairman. Perhaps you had better do that now, then.
Mr. Neville. The cotton does not look here like it does in the open. It shows more or less defects. This cotton here [indicating] is one of ten bales I marked good middling, New York standard, which is the only standard we have in general use to-day. This is a sample below middling [indicating], this is low middling; and this is a sample of good, ordinary cotton, the lowest deliverable white cotton there is on any contract.
This cotton here [indicating] is a grade that some of our mill friends and some of our manufacturing friends want to make the basis of the contract [referring to low middling]. In ordinary years it does not make any difference whether we have a low middling or good ordinan" contract, because if the grade is not there it does not affect the kind of cotton that the purchaser gets. But when you have conditions such as you had them in 1906 and 1907—1906 especially, which was the worst year—you have got to have a contract that will take care of the crop that is gathered. I am going to show you that this good ordinary cotton is a perfectly spinnable grade. Mr. Hubbard and I had one of our New England mill friends kind enough to tender us the use of his mill, and the services of the superintendents of several of his rooms. We indicated our intentions to the Department of Commerce and Labor and asked them to detail a man to go with us and witness these tests. They said they had no one they could give us. One thing, they didn't have the money; another thing, they didn't have a man who was an expert. I then wrote the Census Department, the Bureau of Manufactures, and asked them for a man, and they said they didn't have anybody. In fact, we offered to pay their expenses, but we could not get anybody. Mr. Hubbard and I, as best we could
Mr. Cocks. Did you try the Department of Agriculture?
Mr. Neville. I did not, because, inasmuch as we were being investigated by the Department of Commerce and Labor and by the Census Bureau, I did not think to ask the Agricultural Department, although I am sorry now that I did not do so.
That was with the result, gentlemen, that in putting this cotton through the machinery, this is what we got out of it. This, gentlemen, is known as finished lap. That is a bat of cotton that comes out before it goes into the machinery. It takes a pretty keen eye to tell the difference between that cotton and that cotton [indicating].
The Chairman. Which came from which?
Mr. Neville. This is the good middling, this is the middling, this is the low middling, and this is the good ordinary [indicating]. There is a marked difference here [indicating], but it is not as marked as between these [indicating]. The result of those experiments was this:
The good middling lost 9. 65
The middling lost 11. 6
The low middling lost 14. 85
The good ordinary lost 16. 73
In other words, counting the gross weight of the bales and weight of the laps, there was that much discrepancy in the weight.
And also this mill man was kind enough to say: "I want to see a square deal; I have used your exchange under adverse and favorable conditions, and I want you to have a square deal. I spin all grades of cotton from the dog tails up to fair, and I have got low-grade cotton from your exchange, and I can use it all." He says: "Not only can you get what you are after, but if you want to take the time you can get it to a gnat's heel." A gnat's heel is what we are after. We want a fair spinnable value on which to determine differences between grades.
Those figures, gentlemen, that we got in a simple way are to a certain extent verified by German and Alsatian spinners, who are the smartest spinners in the world. Spinning is in its infancy with us, compared with what they get out of it.
Here is a letter addressed to the president of our exchange, giving figures in detail. This is from Germany. (Reading:)
Middling fair, 8 per cent loss; fully good middling, 9 per cent loss; good middling, 10 per cent loss; fully middling, 11 per cent loss; middling, 12 per cent loss; fully low middling, 14 per cent loss; low middling, 16 per cent loss; good ordinary, 24 per cent loss.
Now, Mr. Chairman, I want to say that you were the first gentleman to whom that information has ever been divulged. The members of our exchange are not yet in possession of it. We have a continuation and finishing of that test yet to make, and we are in process of making it now.
The Chairman. The idea of what you say conveys to my mind that the grades you have shown are spinnable, the question being, then, simply whether the differences which your exchange fixes represent with some degree of accuracy the actual difference in the values of the different grades.
Mr. Neville. To a spinner?
The Chairman. To a spinner.
Mr. Neville. To the trade.
The Chairman. And I believe you answered this morning that your revision committee was not governed wholly by its judgment as to the spinning difference in the cotton.
Mr. Neville. No; Mr. Chairman, if I stated that, I did not understand the question asked me. My contention has been that our revision committee on the date that I was questioned did base their opinion on differences of the spinning value between the grades.
The Chairman. I understood you to be in disagreement as to the systems on both the exchanges.
Mr. Neville. 1 am in disagreement.
The Chairman. And I thought you expressed your disagreement with the New York system by saying that in your judgment the difference should be determined wholly by the difference in spinning value.
Mr. Neville. Yes.
The Chairman. Whereas the revision committee of the New York exchange allowed other factors to come in?
Mr. Neville. I did not understand you this time, then. You are correct there, yes, sir.
The Chairman. What are those other factors?
Mr. Neville. Well, I don't know what their line of reasoning was at that particular time; but they as a rule appear to get some idea of the value of those cottons South.
The Chairman. Then their judgment is made up of a sort of composite of the commercial difference growing out of the relation of supply and demand and the spinning difference?
Mr. Neville. Yes, sir; that influenced them, no doubt.
The Chairman. Since we have entered upon that line, I will ask you a question I should like your opinion upon before we leave the subject. I understood you to say that you are a member Of both exchanges?
Mr. Neville. Yes, sir.
The Chairman. Do you mind stating to the committee upon which exchange you get the most satisfactory results, so far as those results grow out of the difference in the valumg of the grades?
Mr. Neville. I would prefer not answering that question, because I can see some of my friends in New Orleans might take exception to the kind of criticism that I might inadvertently make, and I would rather not answer that question.
The Chairman. I ask it because there appears to be quite a distinct difference in the systems prevailing in the two exchanges. Mr. Marsh remarked that, inasmuch as these exchanges were in a measure in competition with each other, if the Now York system was fatally wrong it would have to be changed to meet the competition, whereas if in the ultimate judgment of the trade it was right, it would survive, and it occurred to me that a gentleman who operated on both exchanges could give an opinion as to the merits of the two systems.
Mr. Neville. I will answer this. I use the New York exchange more than I do the New Orleans exchange.
The Chairman. I do not care to press the matter any further.
I believe Mr. Burleson desires to ask you a couple of questions.
Mr. Burleson. You say that there have been many unjust and unfounded charges made by the producers in the South 1
Mr. Neville. I don't think I mentioned producers once.
Mr. Burleson. About the character of the stock?
Mr. Neville. I didn't say a word about producers.
Mr. Burleson. Who did you say was making the accusations?
Mr. Neville. Well, I said a great many people who said they represented the producers made public speeches on the subject.
Mr. Burleson. Well, all right; I will take it that way. Do they constitute the sole source of complaint against the character of stocks carried in New York?
Mr. Neville. Well, I will say they constitute the bulk of the complaint. The rest of the complaints was more or less from soreheads.
Mr. Burleson. Do you know Theophilus Parsons?
Mr. Neville. I know of him.
Mr. Burleson. I will ask you if he is not president of the ArkwrightClub?
Mr. Neville. Yes, sir; which is the biggest mill organization there is in the world.
Mr. Burleson. You mean an organization consisting of cotton consumers?
Mr. Neville. An organization consisting of cotton manufacturers, and the biggest, most secret, most powerful organization there is in the world. I am glad you mentioned him.
Mr. Burleson. All right. Let us see about that. He was the president of it, was he not?
Mr. Neville. Yes.
Mr. Burleson. I want to read this to you and see if you agree with the statement, made by Mr. Theophilus Parsons, and if you say they are not true you are at liberty to give the reasons why you think so.
The Chairman. We can not hear you, Mr. Burleson.
Mr. Neville. Before I answer that
Mr. Burleson. I have not propounded my question yet.
Mr. Neville. I know what you are going to propound. One minute. Mr. Chairman, I have got no objection m the world to answering the letter which Mr. Burleson is going to quote me from Mr. Parsons, president of the Arkwright Club, of Boston
Mr. Burleson. I think I ought to be permitted to propound my inquiry first. It is rather unusual, I think, for the answer to be given before the question.
Mr. Neville. It is my ignoranceof parliamentary law, perhaps, that causes me to talk too soon.
Mr. Burleson. I addressed a communication to Mr. Parsons in the early part of 1908, in which I propounded two inquiries. I will read them:
Do you, in the conduct of your business as a cotton manufacturer, find it necessary frequently to resort to the future markets of New York and New Orleans as a means of protecting yourself against unforeseen fluctuations in the price of raw cotton?
The second inquiry was:
Does the existing apparent disparity between the prices of future contracts and the price of middling cotton in the South and elsewhere operate to the advantage or disadvantage of the manufacturer?
He answered as follows:
In answer to the first question, I use the word never, for the reason that the manufacturer, when he buys upland cotton in the New York Cotton Exchange, has no idea whatever what he is buying. They can tender a spinner straw, cotton seed, or even the wood of the cotton plant mixed together at a difference in price, the value of which price no living man is able to determine. By having thousands of bales of this material in store in the two large cities they are able to maintain the market in such a way that I answer your fourth question that the member of the exchange makes hi8 money on so-called differences. They can manipulate these differences with the stock of trash they have on hand. Some years ago you will find that many mill treasurers in the United States favored encouraging the future market, and this was quite right, for at that time grades, such as stains, gin cuttings, and so forth, were not
Eermitted for differences, and the spinner could use the cotton that was tendered to im. But like everything else they have killed the goose that laid the golden egg, and have made their rules such that they can deliver trash which it is impossible to spin. This will eventually work to their disadvantage and possibly kill their business, and then they will reform their rules.
Mr. Neville. How do you want me to answer that question?
Mr. Burleson. I want to ask you first whether there is any truth in the statements made by Mr. Parsons that I have read to you?
Mr. Neville. Mr. Burleson and Mr. Chairman, my indignation at a charge like that from a man who states he never used it—if he never used it, how does he know what he gets? If Mr. Parsons was here and made that charge I would say to him what I hesitate to say to this committee, for decency's sake. How can a man say he gets straw where he says he never uses the market? That is the way I answer that question.
Mr. Burleso*n. That is your answer? You say he is president of the largest mill concern there is?
Mr. Neville. Largest organization of mills in the world. He says he never used the market. Mr. Chairman, I must confess that if Mr. Burleson is going to read such stuff as that, which is absolutely incapable of proof, I think it is a reflection on this committee, and certainly I construe it to be a reflection on me.
Mr. Burleson. Do youknow Mr. Theophilus Parsons?
Mr. Neville. I have not had the pleasure of knowing him, and don't want to know him.
Mr. Burleson. He is honored by being placed at the head of this club.
Mr. Neville. That is all right; but I know what I am talking about when it comes to grades of cotton in New York, as I have proven to you to-day.
Mr. Burleson. I will read from J. Knox Smith's report at page 262. In this connection one of the largest spot merchants in the New York market, who is also a member of the exchange, says:
There is no question but that there is a large amount of that inferior cotton here. These men who get control of a large amount of contracts and want to weaken the market—that is, the spot brokers—do not want to handle and finance actual cotton. They will throw a lot of this stuff over which they have got to transfer to a different month or themselves finance it. This has been acting as a club, and I think it is one of the worst features of the exchange. A combination will get together a lot of this low grade cotton, and before notice day there would be a high market, and they throw it right on the market, and of course it would force the market down, sometimes a half a cent.
Q. And then they take back their contract?
A. Yes; and very often at a lower price, and thereby make what is called a turn. They might have sold short, and they throw this low cotton on the market and lower the price a half a cent, and then buy it in again.
Q. Has that been an extensive practice?
A. Right along.