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Mr. Neville. You are only talking about your character of goods. If you take staple cotton you will see that it ruled from 1 cent to 2 cents a pound higher than your character of goods.

Mr. Parker. I am going to compare them.

Mr. Neville. If you are going to compare staple cotton, do not compare it with your character of goods.

Mr. Parker. No; but the very cotton I bought was raised right in South Carolina. That very cotton that I offered 14i cents for, and the man finally offered to me for 14f, I bought at 14^ cents, or a difference, you see, of not quite half a cent a pound, and in the meantime futures had changed 3 cents a pound.

Mr. Neville. Mr. Parker, was that cotton hedged?

Mr. Parker. Yes.

Mr. Cone. Allow me to take issue with you just one moment, sir. You can get evidence of what I am going to tell you. I will tell these gentlemen a very remarkable thing. In the spot-cotton end of my business I try to buy cotton when it is high; I try to sell it when it is cheap. To illustrate what I mean: Instead of paying 15 cents, as you say, I have bought cotton when the market was at the top; I have bought a thousand bales of cotton from the firm of Weil Brothers, at Montgomery, Ala., and I have bought cotton from A. P. Loverman, of Tuscaloosa, Ala., that I paid them 16J cents for—strict middling cotton.

Mr. Parker. But they were intermediate men. I am talking about the sale to the producer.

Mr. Cone. But, Mr. Parker, in answer to that, let me say that Mr. Loverman is a man who handles about 60,000 bales of cotton per annum, and has handled it for years and years; and I do not suppose he has $50,000 to his name to-day. But in the case of the illustration I wish to make, that I sold futures against, I was glad to get the cotton. I regarded it as too high, altogether too high; but I bought it because I could hedge it. I sold futures against that cotton at 16.43, and I was able to sell you cotton, when the market went down, cheaper than anybody else.

Mr. Parker. That is right. That is the very point I made, gentlemen. That is the very thing I said he did—that he was able to buy the spot cotton even from the intermediate man. Weil Brothers had already bought that spot cotton. The producer never got any 16\ cents. The producer probably did not get over 16J cents for that cotton. He bought from Weil Brothers at 30 points under the futures; and if he did like some of the rest of my friends he sold to the spinner at 100 points on futures.

Mr. Cone. I will give you the reverse case: Right at the same time, sir, right when they had this big smash here through an overextension oi speculation (which I regard as a question of ethics and morals, and not one of commerce), right at the time of that break, I sold cotton to mills around me a great deal cheaper than the farmers would.

Mr. Parker. That is right.

Mr. Cone. Here is where it helps the farmer: I just had to quit selling, I sold so much. I sold them cotton around 14£ and 14f cents when the farmer away down South was asking me 15 or 15J for it.

Mr. Parker. That is right.

Mr. Cone. And why? Because I could buy more of those high futures; and during that summer I was just simply giving it away around 13f cents. I bought a lot of it at 13.63. Now, I have not bought a bale of that cotton yet.

Mr. Parker. Yes.

Mr. Cone. I sold clean up to July. What will be the result? I have got to go to these gentlemen, and I do not care what they charge me for cotton. I believe I will bay 20 cents for some of that cotton. That is my honest conviction. I will be glad to do it. I sold the mills cotton for less than I could buy it for; and I am going to take it to the mills, and I will probably pay 20 cents a pound for some of the cotton; and then, when I buy the cotton from these gentlemen, I will sell my futures.

Mr. Parker. There is no difference, gentlemen, between Mr. Cone's statement and mine. He has j ust exactly confirmed my statement— that by that method of hedging he was able to knock out the producer entirely. And while I admit very frankly that it was a good thing for the spinners—I admit that that break the other day enabled many of us to get in on a basis we never hoped to get in on—at the same time it was a bad thing for the producer; and the spinners really are not going to make anything out of it, because that break has so demoralized the cotton-goods market that I would rather have given 15 cents for cotton three weeks ago than to give 14 cents for it to-day.

The Chairman. We are very much obliged to you.

Mr. Levee. It has been suggested that if you abolish the exchanges the only purchasers of cotton will be the mill men, and it will not be a very long time before there will be a great mill trust throughout this country which will control and fix prices of cotton. I would like to have your judgment about that.

Mr. Parker. So far as I know a trust only arises under two conditions: First, when a man has got enough of a business and wants to sell out and is willing to have somebody else make whatever money there is in it out of it. Most of us in the cotton-mill business in the South are young men who have not made our pile and are going to stay in there until we make something out of it. Outside of that, I regard a trust in cotton-mill manufacturing as an impossibilitv. There are too many styles of goods and too many grades of goods and there is too much characterization of goods to make a trust possible.

Mr. Lever. You would not consider that there was any danger of that?

Mr. Parker. I would not say that there was the least danger of it.

Mr. Neville. Referring to your association of manufacturers, you have stated in your recommendations to the Cotton Manufacturers' Association that the cotton exchanges should fix the price running through several grades, strict middling, low middling, and fair. You recognize,, of course, that the basis of contract should be such as will take care of the grades that nature enables the farmers to raise?

Mr. Parker. That is right.

Mr. Neville. Take the crop of 1906 and 1907, where you practically had a 14,000,000-bale crop raised with an average grade, I dare say, of low middling; over half the crop raised that year would have been debarred from any contract. How low do you think those lower grades would have sold to the trade that would have been the only buyers for them?

Mr. Parker. If I understand the result of that question, you hold that the exchanges are the only places where the low grades can be delivered?

Mr. Neville. I hold that their contract by experience provides for the delivery of cotton of spinnable cotton that nature enables the producer to raise, and any basis such as you ask the exchanges to adopt would have only resulted in one thing, namely, the disorganization and the bankruptcy of everybody connected with the cotton business; not to such a large extent with the spinners, but to every other interest in the trade.

Mr. Parker. Gentlemen, all I can say is that I take issue right there with my friend Mr. Neville. In that particular season he will bear me out that at the very time that the strict middling cotton in the South—which is an average grade used by spinners—was selling in the South at 12 to 12£ cents, cotton futures were selling in New York at 9.50. Why? Because under that rule of cotton futures they could apply these very low grades, and the spinner ran away from these very low grades; and therefore my friend would have the condition in which the great mass of cotton is depressed, in order to take care of these low grades. He and I will agree that this year there is not 10 per cent of the cotton below low middling.

Mr. Neville. I do not know about that.

Mr. Parker. Not 10 per cent below low middling, and yet on the average it is that 10 per cent of those low grades that will fix the price on the exchange as a whole.

Mr. Neville. I will not cite the New Orleans Cotton Exchange, because that seems to be debarred from discussion, but take New Orleans and Liverpool, where you have the system of differences known as commercial differences; take the basis middling price of those markets, does it rule close to the price of spots?

Mr. Parker. Reasonably close.

Mr. Neville. Well, take the two seasons that have been spoken about in this discussion, what do you say about the difference between spots and best middling?

Mr. Parker. Take those two seasons; on the basis middling contract, even where it was based on the market differences instead of the fixed differences in New York, they got pretty far apart. They were not so far apart in New York as in New Orleans, but our association has not expressed approval of the New Orleans contract, absolutely. We think it is better than that in New York, but we claim there that in New York it is unfair to both spinner and producer j that this low grade should fix the price of the whole, and our view is to-day that there ought to be deliverable on the contract only a class of cotton which represents the great mass of the cotton which is spun; and the great mass of the cotton, 80 or 90 per cent of the cotton that the spinners in the United States or the world—certainly in the United States—use now is middling and strict middling, and therefore to allow the low grades, whether in New York or anywhere else, to be a depressing factor to affect the price of all the cotton is to allow the tail to wag the dog, and it is the tail which is wagging the dog on the exchanges all the time.

Mr. NEVILLE. That is a debatable question which we will present when it comes our turn.

Mr. PARKER. Well, I was simply expressing my opinion.

Mr. NEVILLE. You are taking this year's crop, which is an unusualso h-grade crop.

r. PARKER. Last year was not a high-grade crop.

Mr. NEVILLE. Yes, but the proportion picked in the field after the 1st of December last year was greater than the proportion in any season that we have had that I can recall.

Mr. PARKER. Yes.

Mr. NEvilDE. Now, this year all your crop or practically all your crop was picked by the 15th of December, before any bad weather came to reduce the grades.

Mr. PARKER. Yes.

Mr. NEVILLE. Consequently this year you have got an exceptional crop in two ways; you have a crop that has not as good spinning value as last year's crop, so far as the staple is concerned, but you have the highest grade average crop that you have had in the history of the cotton trade; so that you can not take this year's cotton crop to support W. contention for a low middling contract for middling and fair. y? Because it is not one season you have got to provide for, but you have got to provide for the grades that God Almighty enables the farmers to raise.

Mr. PARKER. And yet, Mr. Neville, it is a curious coincidence that it happens that the very year you say there was a preponderance of high grades, and therefore there should be less low grades to deliver on the exchange, is the first year that the South has got a good price in the fall for its product.

Mr. NEVILLE. I differ with you.

Mr. PARKER. It is a singular coincidence, I say, that the very year that there were no low grades to deliver is the year that futures were i. depressed and the very year that the price of spot cotton was the

est.

Mr. NEville. We will produce evidence to the committee to show them that the contrary was the fact; we will produce facts, and not theory. And right on that question of differences, referring to the report of Mr. Herbert Knox Smith (and by the way, gentlemen, I want to say that Mr. Herbert Knox Smith's treatise on prices is a masterpiece, theoretically, practically the working out of some theories he advances is one that is of extreme difficulty, and impracticable; we will dwell on that later), Mr. Parker, the £i. cotton market, as we who are actively in the trade know, and according to Mr. Smith's report, is the most drastic commercial-difference market that there is in existence. In the Havre market they have absolutely fixed differences between grades, based on the presumed spinning value of those grades. In Liverpool the prices are fixed by the law of supply and demand, so called. . Now, in Liverpool in 1906–7 and in 1907–8, with the most drastic commercial-difference system in the world, in that market with the most drastic commercial differences, the difference between the price of best middling and spot was 160 points. They are a buyer's market; they have no regard for the producer of cotton, nor for the man who has the cotton to sell, and it is the man who buys the cotton that fixes the price to meet his own particular idea.

Mr. Parker. At the same time in New York it was 150.

Mr. Neville. Two hundred and twenty-eight.

Mr. Parker. Two hundred and twenty-eight. And further, gentlemen, do not forget that I have never contended that the change from arbitrarily fixed differences to commercial differences is going to do away with all difficulty. The New Orleans Exchange has got the commercial differences. We say that they should not allow these low grades, this trashy, dusty cotton, and cotton that can not be spun to come in there, and as long as it does you are going to have this condition, and you are going to have the low grades fixing the price of the whole. The spinners' request is as follows. We ask:

Cotton to be of any grade from low middling to fair, inclusive, and if tinged or stained, not below low middling (fair color) in value.

Price to be based on middling, with additions and deductions for other grades to be made according to rates of cotton exchange existing on the afternoon of the day previous to the date of notice of delivery

No certificate of classification to embrace qualities more than four quarter grades above or below the mean grade of the cotton covered in such certificate.

No dusty or gin-cut cotton to be deliverable, dusty cotton being defined as cotton lessened in value more than one-eighth cent by reason of dust.

No cotton containing more than 1 per cent of sand, or more than 1 per cent of burr, or more than 1 per cent of any other foreign substance to be deliverable under the contract.

No cotton to be deliverable under the contract unless 80 per cent of said cotton has a staple over eleven-sixteenths of an inch in length, as determined by the classification committee.

At one time, I believe, linters were delivered; they were down so low you could not distinguish them from linters.

Mr. Neville. No.

Mr. Parker. They were offered me. I saw cotton with my own eyes that I do not hesitate to say was as rotten as cotton»could be, and yet it was deliverable and was delivered on the New York Exchange. That has been rectified now. I see that the New York Exchange responded to the protest against that, and rectified it. Eleven-sixteenths of an inch in length is the minimum length that the spinners use in this country. What right have they to allow a man to put anything less than eleven-sixteenths in deliveries to be fixed? They have got their fixed differences. But that is only one trouble. If they will just put a contract there that will enable the cotton spinner to get cotton that he can spin, I am not afraid

Mr. Cone. You are speaking of that low-grade crop year. Was not the stock of cotton in New York one of the largest stocks you have ever known to be gathered in the market?

Mr. Parker. Yes, exactly; because every bit of cotton of a low grade gravitated to New York.

Mr. Cone. Was it not of immense value to the South that New York should finance that cotton? Was there not such a preponderance of that grade of cotton grown that year, all the way from Georgia to Arkansas, that the South if it had had to finance it itself would have been in great distress; and did not New York become the banking center for that cotton, and carry that cotton until the following season, when it not only ceased to be poor cotton but became good cotton, and the whole world bought it, even including myself? I went to New York and brought some of that cotton back down South.

Mr. Parker. I will only say that if the South is satisfied to have the best part of its products depreciated to give a value to a small

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