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Mr. WEBB. Yes. - Mr. PARKER. When that particular contractor failed, spots had gone down to 9.19. Mr. WEBB. That was the year when they had the low cotton in New York. Mr. PARKER. Yes. Mr. WEBB. That was two years ago. Mr. PARKER. No; that was the low-crop year. Mr. WEBB. They were not in business in 1908. Mr. PARKER. Gentlemen, that was in 1908. The low-crop year was in the fall of 1908; and yet the effect of that low-grade cotton which gravitated to New York was such that even in 1908, Mr. Webb, you sold me the cotton at 110 points on May, which was unnatural, when I ought to have been paying less than New York, and yet the man who sold me the cotton broke because futures went down and spots went up. Mr. WEBB. I, think you have it wrong. The year they lost so much money and they went broke was the bad-crop year. I remember it distinctly. Mr. PARKER. Let us get the facts right. Do you not recall that I had to make claim against the bankrupt firm, growing out of the fact that I had to go out in the open market and buy that cotton at their expense? Mr. WEBB. That was the bad year. Mr. PARKER. That was the year that the firm became bankrupt. Mr. WEBB. Two years ago. Mr. PARKER. That was 1908. That was the year the firm became bankrupt: the spring of 1908, was it not? Mr. NEVILLE. Let me make a suggestion which may straighten you both out: 1906 and 1907 was an extremely low-grade year Mr. PARKER. Yes. Mr. NEVILLE. The crop of 1907 was better, but not a high-grade crop. §. PARKER. But in May, 1908, futures were selling on the New York Cotton Exchange at 9.18 at the very time I had to buy the spot cotton at the expense of that firm that you had sold me, and had to pay 11.50 cents for it. Mr. WEBB. Yes. Now, I am going to explain about why you had to do that. There was a great scarcity of the grade Isold you. . Isold you strict middling, and that was bringing a premium over middli or strict low jià. of 150 points. That was something abnormal. If it had not been we could have gotten it in New York for 9.13 and shipped it to you. We went to Memphis and bought some of that cotton and we bought it all over the country and took these low grades out and shipped you the high grades. The high-grade cotton brought a premium. We paid 150 to 250 points on for strict middling. That was the cause of it. It was a very low-grade crop year, and we could not get the grades we sold you. It was just like I had sold Mr. Parker, something I could not get and some fellow had it, and he would say, “You have got to pay me for it;” and we went after it and got it where we ... It was impossible to get it on the New York Exchange or on the New Orleans Cotton Exchange, and we had to scour, the country to get that grade, and in getting that we had to take these

low grades and select these high grades out. That is why we had to pay a premium. That will happen. It has happened only once in my twenty-five years' experience.

(At 5 o'clock p. m. the committee adjourned until to-morrow, Thursday, February 10, 1910, at 10.30 o'clock a. m.)


Thursday, February 10, 1910. The committee met at 10.30 o'clock a. m., Hon. Charles F. Scott (chairman) presiding.


(This witness had been previously sworn.)

The CHAIRMAN. I should like to make this statement in the interest of the clearness and correctness of the record. This is not a lawsuit and we are not attempting to impose any rules of evidence; our purpose is simply to elicit as much information as possible, and we recognize that the best way to do that, perhaps, is to allow a wide latitude in questioning; so we have no objections to any gentleman in the room asking a question at any time of the witness who may be testifying; we do believe, however, that in the interest of orderly procedure, and so that the record may be accurate, it would be best, if any gentleman wishes to interrogate a witness, to first address the chair and be recognized by name, so that the reporter can note the name and in order that the interrogator may proceed in proper order.

On yesterday Mr. Brooks made a statement before the committee, but in order to permit gentlemen to be heard who could not remain until to-day he yielded the floor before being cross-examined. If there are no objections we will ask Mr. Brooks to resume the stand this morning and submit to such questions as members of the committee or others may desire to ask. Mr. Brooks, I should like to inquire briefly as to the extent to which warehousing has gone in the South up to the present time, either on the part of individual growers of cotton or of warehouse companies.

Mr. BROOKS. Well, for the last three or four years, I would say four years, the farmers in the cotton belt have gone into the business of building their own cotton warehouses more than ever was known in the history of the country, and there have been some very expensive and very elaborate warehouses built by private concerns for the business of storing merely for the charges they might get out of the storage. The farmers, under the direction and influence of farmers unions, for short, have built, I do not know the exact number, but several hundred, something like two thousand warehouses of iron, brick, stone, and concrete, with a view of regulating the supply of cotton to the mills throughout the year as they needed it.

The philosophy upon which we base this work in the organization is that the flow of cotton to the mill should be regulated by the flow of cotton goods from the mills, to stop this spasmodic supply, and necessarily disturbing the general level of prices. One thing that has been against that practice being carried out, as it was proposed to be, has been the fact that it has been almost impossible for the farmer to sell direct to the spinner, for the very reason that when he produced his cotton and got it ready for the market, and went to the spinner to sell it, through his agents, he was informed by the spinner that he had already o, the spinner having bought from heavy cotton dealers months ahead, and therefore, depending on those contracts, he was not in the market and could not buy direct from the farmer. Now, as was intimated yesterday by some of the stock cotton dealers, that the forbidding of hedging would put them out of business, the deals that the spinners would make, in case that resulted, would be made directly with the farmers through the central sales offices established in the cities where their warehouses are located. The CHAIRMAN. Are there any such central warehouses already located 3 Mr. BRooks. I will take for illustration the State of Mississippi. They have, I think, about 80 warehouses in that State. I do not know the exact number; and in each of those warehouses cotton is stored by the farmers and each bale is sampled, that sample is sent to a central sales office in Jackson and graded by an expert grader, classified in all of its departments, and the salesmen there then can be in touch with any mill at any season of the year and supply any kind of cotton that is wanted at any month in the year, if they can agree upon prices; and we feel that by reason of these central offices in cotton States being in direct communication with each other the effect would soon be that a mill could make a deal to get any cotton it wanted, any kind of cotton it wanted for future delivery, and let it remain in the warehouse or have it shipped right to the mill and stored there in the storehouse as they .#. The CHAIRMAN. As a matter of fact, the intermediary is already eliminated, to a certain extent, in the State of Mississippi through the system you have mentioned? Mr. BRooks. They are already using that plan, but, as I say, they are handicapped by the very fact that the mills have so often made their contracts before they get to them. Now, the elimination of the so-called middle man is not the object; it is an incident, merely an incident. I would like to be permitted just on that point to read a resolution—I find I haven't the book here, but will send for it—a resolution that was indorsed and passed unanimously by the International Congress of Spinners and Cotton Growers in Atlanta, Ga., on this very subject, indorsing this plan. The CHAIRMAN. Suppose you go on and give us, while you are waiting for your pamphlet, a little idea of the way the cotton crop is distributed. Now, one of the arguments against the elimination of future dealings is that it would interfere materially with the distribution of the crop, that the necessity of carrying a great quantity of cotton would impose a heavier burden upon it than that which the exchanges now impose. Mr. Brooks. All cotton, after it is picked and ginned, has to be carried by somebody until it is spun by the mills; that is a certainty; we can not get around that. Now, then, the expense of carrying that cotton, the warehouse expenses, and insurance expenses, and the investment of money necessary to hold it, has all got to be borne by somebody; it is not a matter whether the exchanges exist or not. We do not see how they could possibly eliminate that expense; the

only thing in the world they could do would be to shift the responsibility of that expense onto an irresponsible party.

The CHAIRMAN. As a matter of practice at the present time, is it true that most of the cotton farmers market their cotton just as fast as they can get it out of the field ? Mr. BROOKS. It has been the custom generally in the past.

The CHAIRMAN. It is bought by the dealer at the local town and he ships it to the central market, like Memphis or New Orleans ?

Mr. BROOKS. Well, it depends on what kind of a buyer he is; if he buys it on orders, he may ship it at once to the point of destination; if he is merely a speculator, he may store it in Memphis or somewhere else, and it may be that sometimes a farmer ships to the Memphis warehouse for storage and lets the factors sell it for him.

The CHAIRMAN. There is a cash market in every neighborhood for cotton that is grown there?

Mr. BROOKS. Yes. But we have developed a plan by which, if a farmer needs the money, he can get about 80 per cent of it, sometimes more and sometimes less, loaned to him by the banks on warehouse certificates, at the lowest possible rate of interest. In my own State, Tennessee, the State Bankers' Association, in their annual convention, passed a resolution openly publishing to the world that they would loan money on cotton stored in warehouses, at 6 per cent, when the ruling price for interest on money loaned on real estate was 8 and 10 per cent. They gave us their moral support, because they felt like it was tiding us over, keeping the farmers from unnecessarily crowding the market with their cotton.

The CHAIRMAN. At what period of the year, ordinarily, is the price of cotton lowest?

Mr. BROOKS. Well, to take it for a considerable number of years, we usually feel the pressure of prices in the fall when it is delivered the fastest. Now, year before last that was not the case; the farmers held their cotton better than usual and the fall prices were better than they were in the spring, and the very fact that it worked out that way was because of so much cotton being sold early in the fall, this last fall, and another reason was that the short crop necessitated those who didn't raise but little selling it and getting the money, as they needed it worse than usual.

The CHAIRMAN. Do you know of any growers who hedge ? Mr. BROOKS. No, sir; I am not personally acquainted with a single grower that hedges.

The. CHAIRMAN. Yesterday you used the expression, “ringing out.” What do you mean by that?

Mr. BROOKS. As I was raised in the cotton patch and not on an exchange, perhaps the gentlemen on that side could explain it clearer than I could; but it is sales that are made, that go circulating around among the brokers and return back to the original seller, and is torn up and thrown on the floor without any trade being made.

The CHAIRMAN. Practically equivalent to a wash sale.

Mr. BURLESON. I will read you from a letter written by a man who has been in the cotton business for many, many years; he takes the trouble to explain this ringing-out system.

Mr. MENDELBAUM. I would like to ask one question before the gentleman from Texas reads that letter, and the question is this: This committee has ruled that the testimony that goes into this case

should be sworn to; I do not think it would be quite fair to admit testimony that has not been sworn to. The CHAIRMAN. Well, the committee has admitted thus far in this case a great deal of printed matter, reports of various organizations, and other material of that sort, which, in the nature of the case, could not be sworn to, and in view of the fact, as I stated in the beginning, that we are not trying a lawsuit, but trying to elicit information, and in view of the fact that the committee will take notice of the source of all the information it receives, I believe that we will not object to the introduction of it. Mr. MENDELBAUM. I did not want to object to it. I only wanted to call to the attention of the committee the difference it should make in considering sworn testimony, and that brought in by people who do not appear themselves and give that information. Mr. BURLEsoN. I will withdraw that for the present. Mr. Brooks. Mr. Chairman, if you are ready to have this resolution read, I am now ready to read it. The CHAIRMAN. To what does that resolution refer? Mr. BRooks. The resolution was adopted by this Congress of Spinners and Cotton Growers at Atlanta, Ga., in October, 1907; it was a report of a committee appointed by that body on “closer trade relationship between the farmer and manufacturer,” and the report of the committee was adopted unanimously, and it is the report that I want to read: That this conference of cotton growers and manufacturers is of the opinion that by closer trade relations between grower and spinner a great deal of the present expense in handling cotton can be saved, and the evils attendant on violent fluctuations of the market be mitigated. We are further of the opinion that the extension of the warehouse system in the Southern States, and the creation of central selling offices, will tend to bring about closer trade relations, and are therefore worthy of encouragement by both producer and spinner. Now, Mr. Chairman, that resolution was worded by Herr Arthur Kuffler, of Vienna. I was with him on the subcommittee that drafted it in the Piedmont Hotel, and it was passed without one . dissenting vote. The rule adopted at that convention was this, that nothing should go on record as having been passed and indorsed at the convention that was not unanimously passed; the farmers were in the majority and we could have outvoted them, and that was unfair; but this went through without objection. The CHAIRMAN. You heard the statement made here yesterday by Mr. Parker to the effect that the elimination of futures would involve a pretty complete and radical change in the system of handling and distributing cotton. Do you agree in the main with what he said : Mr. BRooks. Yes, sir. The CHAIRMAN. The purpose of my line of questioning in regard to the warehouse system in the South was to develop the fact, if it were a fact, that the producers are getting ready for that change. Mr. BRooks. Yes, sir. The CHAIRMAN. In your judgment is it a movement in that direction? Mr. BRooks. Yes, sir; and we are prepared for what the change will be; we have been preparing for it for years. The CHAIRMAN. You do ... then, that the elimination of the future market would compel the farmers or cotton growers to accept a lower price eventually?

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