Digitized by the Internet Archive in 2007 with funding from IVIicrosoft Corporation http://www.archive.org/details/americancottonsyOOmillrich UNIVERSITY Of y^.'m.ages of his chroniclers. l<'rom early records it will be seen that cotton was grown abundantly in Mexico previous to the advent of the Spaniard there, and its uses and manufacture were well understood by the Aztecs, that the *^In- dians roaming over the undulating prairies of Texas were blanketed and clad in garments of cotton, and that this plant was, also, ''found growing wild in Florida and elsewhere in the South," it is not as- suming too much for America to assert that cotton is indigenous to the Southern portion of this con- tinent. The cottons which have become known to the civilized world since the discovery of America, con- sists of two great divisions. The G. Barbadense, a black-seeded variety with its "pure yellow blos- soms" and the G. Hirsutum, or "hairy cotton" bear- ing "white or faintly primrose-colored blossoms." *See Prescott's American Encyclopedia, page 427. ♦*Watkiii'8 "King Cotton," page 10. 6 The American Cotton System The two are not always readily distinguished from each other by the appearance of the seed, as the black-seeded varieties occasionally show seed which have tufts of fiber at one or both ends, and in some instances completely covered with fuzz, and the fuzzy kind many times show black or naked seed predominating to a more or less extent, and on this account some authorities conclude that the two va- rieties belong to the same species. Carefully con- ducted investigations have shown, however, that the variations in the seed may be attributed to the pecu- liarities of soil, of climate and cultivation, and that the specific characteristics of the two classes remain distinct after generations and generations. The cottons mostly in demand and sought after by manufacturers of today, are those of the Western Hemisphere, designated as Sea-island and New Or- leans or Uplands, or long and short staple. Two varieties not equalled by any other like products of the world. SEA-ISLAND COTTON. G. Barbadense — Sea-Island Cotton — is said to have sprung from G. Arboreum* in Persia, and was car- ried to Barbadoes from India, though the name would seem to imply a Barbadensian origin. From the island of Anguilla in 1785 to Bahama Islands, it was brought to the United States in 1786 where it was first grown on St. Simon ^s Island which is now a part of Glynn County, Georgia. The culture and improvement of sea-island cotton were greatly aided *This origin is doubtful, but more likely from Barbadoes. Cotton History 7 by the efforts of *Kinsey Burden and wife of Colle- ton Count3% Georgia, who, by careful selection of the bk,ck seed produced the best varieties now grown in the United States. The islands lying off the coast of Georgia and a few interior counties, some portions of Florida and South Carolina furnish a home in which the Sea-Is- land varieties attain their greatest perfection. The cultivation of this cotton in the United States is now principally confined to about sixteen counties in Florida, twenty-nine in Georgia, and four in South Carolina, while these particular counties grow this kind of cotton, not all of their areas are given to its culture, but only those parts more particularly adapted to its perfect development, where frost is scarcely known and where it has surpassed all other cottons for length, strength and beauty of its lus- trous staple, a single pound of which could be spun into a thread more than 1000 miles in length. This fiber is much in demand by manufacturers whose fabrics require a long staple cotton, though, it is now closely approached by some hybridized varieties of long staple up-land cotton originated in Mississippi. Farmers who grow Sea-Island cotton in the in- terior counties, necessarily secure new seed, as a means of preserving the identity of the original pa- ***In 1790 the first commercial quantity of this cotton was grown by William Elliott, on the land where Jean Ribault landed his first colonist and claimed the country for France." *Cotton production, 1907. Bulletin 95, page 19, Dept. Com. and La., B. of C. 8 The American Cotton System rental stock, as the fiber degenerates rapidly into that of short staple up-land. Efforts have been made to grow this cotton in many parts of the Southern States, but results have been so unsatisfactory that experiments in this di- rection have almost ceased. Frequent attempts to grow this cotton have been made in Texas, the first effort in 1878 resulted in 202 bales of fairly good staple being gathered. An- nually thereafter some twenty bales were grown, un- til 1884, when the production shrank to only eleven bales, then ceased until 1895, when seed was again secured from Savannah parties, from which a crop of 991 bales were reported; in 1896, 2,597 bales, in 1897, 10 bales and in 1899, 6 bales, the last year reported. The increasing demand for long staple cotton has induced many progressive farmers and others in- terested in producing long staples, to experiment in many ways with upland varieties, to produce a bet- ter and longer fiber, chief of which is in seed selec- tion, better and more scientific cultivation, and proper fertilizatioi;i. Sea-Island cotton has been successfully introduced into Queensland, the Fiji Islands, Tahiti and Egypt, but the results accruing therefrom have not been of sufficient magnitude to affect the cotton trade to any appreciable extent. LONG STAPLE UPLAND COTTON. The Bureau of Plant Industry of the United States Department of Agriculture, has been and is now giv- ing much valuable assistance in directing the grow- Cotton History 9 ers attention to practical and scientific culture of the cotton plant with a view of more particularly de- veloping better staple varieties, and improving those now cultivated. The long staple uplands grow principally in the lower portion of the Mississippi valley, and by care- ful seed. selection of these fancy varieties, and more intelligent cultural methods, satisfactory results have been shown. As most all the American long staple uplands are ginned by saw gins, the fibres are badly cut and broken, making uneven lengths rendering the grow- ers' efforts unsatisfactory to a great extent, while Sea-Island and Egyptian cottons are treated by rol- ler gins which give a regular and more uniform fiber. Stimulated by offerings of fancy prices for long staple cotton, with the assistance of the National and State Agricultural Departments augmented by individual efforts, no doubt a variety suitable to all climates and soils of the Southern States will be developed to that extent its growth will become uni- versal, and roller gins will be erected independently or attached to those in operation at all points neces- sary to the better care for this class of cotton. From the gratifying success attained on the fertile Mississippi valley lands, from which upland seed have been distributed to many other points, some even to remote distances, equally as good quality of cotton has resulted from the planting of these seeds. A different character of cotton from that just described but seemingly confined to the limits of the State of Arkansas, whose staple is strong, heavy, of 10 The American Cotton System good body, pulling full 1 1-8 inch frequently, and known as ''Bender cotton'' or Benders from the fact of its growth apparently being indigenous to the very rich lands of that State bordering the riv- ers, especially the areas partially enclosed in the river bends, but as to the true history of the origin of this variety of cotton, the efforts of the author to trace it beyond the ''river bend" idea have been without success. SHORT STAPLE WESTERN COTTON. j Of the short staple or Western variety of cotton, little is known of its origin though it is quite prob- able it came from Mexico, and of this class we can with certainty recognize two distinct types ; one with green seeds and a hardy constitution, the other with white, tawny, or grayish seeds, showing a staple longer and distinctly silky in texture; these two types are the principal productions of the United States and are known in England and in European markets as "American Cottons.'* While the two classes enumerated constitute the principal ones, there are others so closely allied that it is quite difficult to clearly distinguish them as separate species, but showing so marked features for the one or the other class as to be more or less akin. Of the grayish-seed variety, two kinds are found, one with a small seed, while the other is very large, and the same may be said of the green-seeded plant, also. The fine Venezulean and West Indian cottons belong to this latter class. A variety supposed to have originated in Cuba, making in suitable soil and climate a fine showy Cotton History 11 plant, is often found growing spontaneously with other cotton, producing a brown or yellow-brownish fiber, known as nankeen, is frequently met with upon the cotton farms of the Southern planter. Its fiber is coarse and short, varying from five-eighths to three-quarters of an inch in length, but is never grown now as a distinct variety. BRAZIL ^S cottons. Occupying the most considerable part of the area designated as the Valley of the Amazon, it is the most important country in South America, and nat- ure seems to have lavished the best gifts of her hand in bestowing upon Brazil a tropical and semitropical climate, varying according to altitude, a plentiful supply of moisture wrung by the snow-clad Andes from the north-east and south-east tradewinds which come from the sea, a rich alluvial soil, and a long, dry season for gathering the cotton crop, requiring improved industrial and scientific methods alone to make this one of the finest cotton growing coun- tries of the world. Nothing is known definitely of the antiquity of the cotton plant in Brazil, but the earliest historians of the sixteenth century mention the plant and its uses as being well known to the ancient people in- habiting the Valley of the Amazon, and there is abundant evidence that cotton had long been used by the natives at the time of the Spanish invasion of the country in 1500, however, no records exist of the exportation of cotton from this country until late in the eighteenth century, when some mention 12 The American Cotton System is made of shipments of eottoii to Portugal in 1778, and to England in 1781. Both Herbaceous and Tree cottons are grown in Brazil, and there are other indigenous species attain- ing a height of from 10 to 15 feet, which yield fair crops for several years in succession. Practically all the present crop is grown in the valley of the San Francisco river, though a large area of Bra- zil is adapted to the culture of the cotton plant. The cultural methods of the country differ wide- ly from those employed by cotton planters in the United States, and in comparison, are extremely crude and primitive, but scant preparation of the soil is made for the cultivated species the use of the plow being little known, the first requisite being to '*bum off the woods and plant the seed at the proper time," the simple culture following consists in the use of the hoe ^4n chopping out weeds and cutting the sprouts three or four times a year dur- ing the growing season." The roller gin is employed more extensively than any other kind in Brazil, producing a more uniform fiber, though little ingenuity is manifested in the manufacture of the presses, hence they are rude, operated by hand principally, making a light bale, averaging about 250 pounds weight. A large part of the cotton is consumed in that country. The old- fashioned spindle and distaff being used to draw it into threads. While a part of it goes into local mills, which are increasing in number annually, and aiding in the manufacture of fabrics for local con- sumption. In 1904 the Brazilian mills consumed about 135,- Cotton History 13 000 bales of 500 pounds each. The production had increased in 1906 to 275,000 bales, which increase seems to have made no gain on the requirements of the people, as we have no record of any exportation to foreign mills during this time. COTTON CULTURE IN PERU. That cotton is indigenous to Peru will scarcely admit of a doubt, for early in the sixteenth century, when the Spanish invaders conquered the country, the natives were found to be accustomed to the cul- ture, spinning and weaving of cotton. There are two varieties of cotton grown in Peru, which are known in the market as ^^ smooth Peru- vian" and ''rough Peruvian.'' Smooth Peruvian yields itself more readily to the spinner's require- ments, is very flexible and easily prepared for spin- ning. The rough Peruvian possesses characteristics closely resembling wool, is ''fairly strong" and is used mixed with wool in the manufacture of woolen goods for which it is peculiarly suited, being al- most as important as wool itself. There is a great demand for Peruvian cotton in England and other markets supplying woolen manufactures. All efforts to grow it in the United States, however, have been unsuccessful, owing to climatic influences which limit the life of the plant to one season's growth, in- stead of a number of years as designed by nature for its perfect development, which seems to have been found only in the latitude of its native Peru. Other varieties, 'including Egyptian, are also grown here, to some extent, but is consumed in local mills. 14 The American Cotton System The Brazilian methods of culture and handling cotton prevail in Peru, the difference being so slight as to be scarcely noticeable. Often the seeds are planted in a hole in the ground which has been made with no other implement than a pointed stick, and there is little exertion used in either cultivation or fertilization. The manner of baling does not differ materially from those employed in Brazil, and the bales are light, averaging about 200 pounds. In 1885 the total production was about 12,000 bales, while in 1906 it was augmented to 55,000 bales. cotton-growing in MEXICO. Cotton culture in Mexico is older than any known history of the country, and it is evident that cent- uries ago the natives were acquainted with the uses and cultivation of the plant, and were expert in the manufacture of cotton goods, before the advent of the white man. Geographically, Mexico is splendidly situated, with a climate varying with elevation from the hot tropical valleys to cool, delightful, perpetual spring of the immense table-lands, that are eminently suit- ed to the growth and full development of the cot- ton plant, if improved cultural methods and ade- quate labor could be employed the export of cotton from that country could, doubtless, be increased greatly. The tree and annual varieties of cotton are grown in Mexico, the fiber is of good length and strength, though thinner and less silky than American cotton, as the plant suffers from insect pests, one of which is the boll weevil, the staple is not so clean. Cotton History 15 It is estimated that about 80 per cent of the cotton crop is grown in the district known as '^Laguna/' which includes ''a strip of the State of Coahuila and smaller adjacent portions of Durango and Chihua- hua. ' ' Irrigation works on the Nazos river supplying necessary moisture. Modern gins are used, each plantation having its own gin and press. The square bale, weighing about 500 to 550 pounds, with five one-inch ties, is used. Statistics of the annual production have not been obtained, but it is estimated at 130,000 bales, all of which is retained by mills of the country. cotton in BRITISH INDIA. India is credited with being the birthplace of cot- ton culture and manufacture, the mention of the plant by very early historians, has led to the con- clusion that it originated there, but whether this is a correct view, or w^hether it was indigenous to some other country and was carried to India cent- uries ago, may ever remain obscured by the length- ening shadows of the past. It is certain, however, cotton was known to the ancient inhabitants of In- dia, and it is probable that the rude and unwieldy one thread wheels used by them for spinning the coarsest yarns was copied later in the common do- mestic spinning wheels long in use in England and America. The areas from which the commercial cotton of the country is drawn, are the Central Tablelands or Deccan, the Valley of the Ganges, Western and Southern India, and embraces what is considered the cotton area of India. 16 The Americajst Cotton System The climate is varied according to altitude and uneven distribution of rainfall. A hot, dry season from April to September marking the winter time and six months following a plentiful distribution of moisture give the summer and growing period in all the fertile valleys, table-lands and deltas of the great rivers contribute towards making India one of the cotton growing countries of the world. Within this wide extent of country are areas where the soil is unsuitable to cotton growing, where drought scorches plant life and where a rapidly in- creasing population demand that the strength of the soil must be given in food for its people, with rav- ages of insect pests in favoring localities, together with the retarding influences of unscientific cultural methods, preclude a probability of any material in- crease in the production of cotton in India. While production has increased to some extent in recent years, consumption of cotton in that country has in- creased likewise, making no perceptible change in the quantity for export; it is estimated that besides the amount consumed in local mills, about 500,000 bales are used in the homes of the people. Experiments with American cotton in India have proved highly successful, but of the native varieties it can not be said that it is of the finest quality, 'Hhe fibres are large in diameter, short in length, irregular in strength and color, and often very dirty.'' With the exception of a few districts where im- proved modem methods are employed in cotton cul- ture, the usual mode of cultivation is but little ad- vanced from that used by the people of India hun- dreds of years ago. Oxen are used for turning over f^ ^. Of THE \ I UWIVERSITY ) Y Of / Cotton History 17 the soil which covers the last season's cotton stalks and serve as an inadequate fertilizer for the coming crop. The seeds are sown broadcast and the most primitive hand culture is given with hoes and other implements of rudest device. For some years following 1860 when the South was demoralized by the Civil War the quantity of American cotton was reduced to such an extent that there resulted a great shortage in the world 's sup- ply, as a consequence Very high prices ensued, and this in turn stimulated cotton growing in other coun- tries, among them, India. ''The production in 1859 was 1,316,800 bales, and had risen in 1865 to 2,090,400 bales, equaling an in- crease of nearly 60 per cent. In 1905 the total acreage for India was 21,332,000 acres, producing a crop of 2,848,800 bales; an aver- age of about 67 pounds per acre, while in 1906 the total acreage was 22,609,000, producing a crop of 4,038,400 bales ; an average of about 89 pounds per- acre." While these figures were compiled with great care by Messrs. Lyon & Co., of Bombay, and through them reported to the United States Agricultural De- partment, they may require some revision as meas- ured by the out-turn shown in the commercial move- ment for the year. It has been found quite difficult to secure reliable data, free from alteration and criticism from the most intelligent sources on the American crops ; and when the environments of the East Indian cotton grower is considered, the retarding influence of un- systematized methods of cultivation and crop report- 2 18 The American Cotton System ing, it is evident these figures must be taken with a view to amendment and correction and be ac- cepted as approximate in nature. EGYPT AS A COTTON COUNTRY. The following excerpt from ** Consular Report/' July, 1894, is interesting and instructive. **The story of the development of cotton culture in Egypt reads like a romance. In 1821, a French botanist found growing wild in the garden of a Cairo Bey a few plants possessing a long-stapled fiber, which he recognized as cotton of an excep- tionally fine quality. The sagacious Mehemet Ali seized upon the discovery and turned it to benefit. Beginning with the vice regal farms, the raising of cotton became general as soon as it was known that its quality secured for it a quick market at high prices. '* Indigenous varieties were grown centuries ago but the improvement in its character and cultivation did not begin until 1820-21. Sea-Island seed from America and Brazilian varieties were introduced, the former in 1838 while the latter had preceded it in 1820, both gave promise of favorable growth, but for some reasons which are are not given the Egyp- tian soon returned to his native seed. ' ' Egyptian cottons have a long, strong, uniform fiber showing equality of growth and in spinning value ranks next to Sea-Island. Many advantages are offered as the home of the cotton plant here; an equitable climate, long, warm seasons beginning early, with the element of frost entirely eliminated, giving the plant a long time to Cotton History 19 mature a continuous crop through the growing sea- son. Egypt being practically a rainless region, the growth of cotton is dependent upon irrigation. Af- ter the Nile has subsided a rich alluvial deposit 5rom the tropics is left upon the land, and the earli- est method of cultivation consisted in sowing the seed broadcast as we sometimes do wheat or oats, but not so thick, little subsequent cultivation was required and as the crop was never disturbed by storm or rain, there wa^ no loss or damage anticipated from these sources, and a high grade of cotton could be gathered, unless interfered with by insect depredations. More modern methods of culture are employed at the present time, and as agricultural lands in the delta of the Nile range in value from $200 to $600 per acre, the Egyptian farmer economizes according- ly. The cotton is planted on beds from thirty to thirty-six inches apart, which are so arranged as to best receive the water necessary to the perfect development of the plant, nine to ten applications be- ing required before picking begins. The seeds are planted near the top on the sides of the beds, and the plants are often not more than twenty inches apart in the rows ; this close planting induces shade and dampness, which fosters insect life and is cal- culated to injure the fiber. The cotton area of Egypt is limited to the extent of land reached by irrigation, for wherever it is possible to carry the vitalizing water of the Nile, the richest vegetation springs luxuriantly. The Eng- lish are now building an immense dam on the Up- per Nile for the purpose of augmenting the water 20 The American Cotton System supply for irrigation with a view to reclaiming more of the desert land for increased cotton acreage. 1906 has been reported as an especially favorable year for cotton in the Valley of the Nile; the pre- vious overflow of the river had contributed the requisite excess of vegetable matter to the soil; night fogs, which at times occur in temperate and warm climates to the detriment of the plant, were not experienced to cherish insect pests ; and a large yield of cotton was harvested and from the esti- mated 1,850,000 acres, 1,400,000 bales were gathered weighing 500 pounds each. "In this connection the following report of Lord Cromer on the Finance, Administration, and Condition of Egypt and the Sudan country for the year 1906 may prove of interest: " 'Although the [cotton] area sown in 1906 is believed to have been 64,506 acres less than in 1905, the crop will probably turn out to be larger by from 100,000 to 150,000 bales, which increase is due to favorable climatic condi- tions, abundant water, and less damage than in IS 05 from cotton boll worm. " *It now appears almost certain that the harm gener- ally attributed to fogs is in reality done by the boll worm, which makes its appearance during the season when fogs are usually prevalent. * * * " 'In order to ascertain to what extent the cotton bear- ing area is susceptible of expansion, I assume that the whole of the basin lands in the northern half of Upper Egypt will be brought under perennial irrigation, and that the uncultivated portions in both Upper and Lower Egypt will ultimately be reclaimed. The cotton-bearing area will then extend over some 5,600,000 acres. On the basis of a 40 per cent acreage per annum and a yield of 446 pounds per acre, this area might produce an annual cotton crop of about 1,981,000 bales of 500 pounds each. It is to be ob- Cotton History 21 served that a considerable portion of the land at present under cultivation is being improved, which will without doubt contribute to raise the average yield per acre. * * * It will of course be understood that this crop of 1,981,000 bales can not be produced until both the water supply has been largely increased, either by raising the Assouan dam or by some other means, and until reclamation works on a large scale have been executed in Lower Egypt. " 'The population of Egypt has been estimated at 10,- 000,000, and to provide food and clothing for these people, and protect the normal increase, it does not seem possible that any great addition to the annual acreage given to cot- ton can be made, unless, through improvements so vast as to require from ten to fifteen years to complete.' " Cotton growing in Egypt was gradually develop- ed: *^*In 1850, thirty years after the cultivation began, the crop was only 87,200 bales and nine years later only 100,800 bales. By 1865 the production had increased to 439,000 bales. This remarkable growth was due to the scarcity of the staple, caused by the serious check to cotton culture in the United States during the Civil War. By 1890 the production had increased to 798,000 bales." The cotton acreage and production in Egypt for the years 1898 to 1906 inclusive, is appended in tabular form, which will make it easy for , ready reference, and also show the high average yield per acre annually. *Cotton Production," 1906. Bulletin 76. 22 The American Cotton System (Number) (500-pound bales) Year. Acres.^ Production.* 1906 1,850,000 1,400,000 1905 1,900,000 1,250,000 1904 1,850,000 1,258,000 1903 1,750,000 1,289,000 1902 1,700,000 1,157,000 1901 1,650,000 1,262,000 1900 1,600,000 1,075,000 1899 1,500,000 1,295,419 1898 1,450,000 1,112,174 RUSSIA IN ASIA AND ITS COTTONS. The cotton growing areas of Asiatic Russia are: Transcaucasia, especially the low, level and fertile lands bordering the Caspian Sea, also, the eastern shore in Turkestan; besides, a large area of Turke- stan extending from Arabia and Afghanistan on the south, to south of the Kirghiz Steppes. It has been shown that much of this great territory is adapted to the growing of cotton, and under governmental encouragement, protection and aid produces con- siderable quantities of the fiber, however, it was not until the American Civil War, owing to the scarcity and high prices experienced at that time, the cot- ton culture in Turkestan received new life and vigor. Native and the hardier American Upland cottons ^Compiled by Alfred B. Shepperson in "Cotton Facts." ^Information furnished by Herman Capelle Co., and U. S. Agricultural Department. (In the chapter on Egypt the data is drawn in part from Reports of Department of Com. & La. Bureau of the Census.) / Cotton History 23 are grown in the country, the long staple varieties have been found unsuited to the climate. In many places the seeds are sown broadcast and rude wooden plows and antiquated cultured methods are employed, which can but minimize the yield; while in the cotton area surrounding Tashkend, there seems to be a decided determination to use the most modern improved and scientific cultivation and implements in growing this useful fiber which give encouraging results. ** According to the Commercial Industrial Gazette of St. Petersburg of January 24, 1907, the produc- tion of cotton in Russia in 1906 amounted to 675,000 bales of 500 pounds each, of which Central Asia produced 639,000 bales and Transcaucasia, 36,000 bales." This region being in a belt of country sub- ject to frost damages, influences the output more or less, as the frost appears early or late. It is es- timated the early frost in the latter portion of 1907 destroyed 400,000 bales. CHINA AS A COTTON COUNTRY. It is evident that cotton was cultivated in China for domestic uses, centuries ago, but statistics were not available to show the actual quantity grown, until recently a report was given by Mitsui & Co., Osaka, Japan, to the United States Agricultural Bu- reau showing the quantity grown in China in 1906 for the local mills to be 418,000 bales of 500 pounds each. The herbaceous varieties of cotton are cultivated here and the fiber is of inferior quality, probably, owing to the primitive and non-progressive manner 24 The American Cotton System of cultivating the plant, where little preparation is given the soil and the seed are sown broadcast, re- sulting in a stunted, stubby stalk, small bolls and much immature cotton. In some localities better modes of culture are pursued resulting in better crops. There are large areas of China, no doubt, adapted to successful cotton growing, but as there is a large population making a heavy demand for food prod- ucts, necessarily reducing thfe area of tillable land to be placed to cotton, which is grown only in small patches for home consumption and scant exporta- tion. Korea received her first introduction to cotton culture about five hundred years ago from China, the best cotton lands are in the southern part of the peninsula, but there is little probability that much of this territory will be so employed, as the existing circumstances show a great similarity to those of China in exacting food products from the land. COTTON IN JAPAN. Though cotton has been known in Japan for some centuries, being brought from China, it was not un- til early in the seventeenth century that the cul- ture commenced, but owing to the inferior quality of the fiber grown, the prosecution of the industry made little progress, though mill construction has increased rapidly, and to meet the demands for raw cotton other countries are relied upon to supply the spinning requirements, the disposition of the people to buy factory made yarns, and fabrics of foreign manufacture as being superior to those made from Cotton History 25 home grown cotton, from whicli facts the cause of this decrease is largely due. The total production of cotton for Japan *'in 1904, amounted to 16,000 bales of 500 pounds each, while that of 1906 was 11,000 bales. cotton culture in other countries. • There are other countries producing considerable quantities, namely: ^Turkey, with a production in 1907 of about 80,- 000 bales of 500 pounds each; Persia, with a crop of 51,000 bales; Greece, about 20,000 bales; Italy, 10,000 bales ; Indo-China, 15,000 bales ; Africa, other than Egypt, 20,000 bales ; Haiti, 15,000 bales ; Dutch East Indies, 12,400 bales ; Japan, 9,000 bales ; Korea, 6,000 bales, and Argentina, about 10,000 bales. In addition to these, there are still other coun- tries producing some cotton, nearly all of which is consumed in the homes of the people or in the local mills, rendering it impossible to estimate the exact amount grown. Cotton consumption steadily increased making larger supplies necessary and this heavy demand fall- ing largely upon the spinners of Europe, caused them to fear that the supply of upland cotton from the United States would be inadequate to their re- quirements, a movement to encourage cotton cul- ture in many European colonies was begun, for the purpose of growing crops of cotton, which, though small as taken separately, in the aggregate would *"Cottoii Production," 1907, Dept. of Com. and La., Bureau of the Cen. 26 The; American Cotton System be sufficient to supplement any possible deficiency in the amount received from the United States to the extent that steadiness in annual supply would fol- low. ***The principal efforts in this direction have been made by the British Cotton Growers' Association; in a much less degree efforts have been made by the German Colonial Economic Committee; for France, the undertaking is in the hands of the Colonial Cot- ton Association ; for Portugal, The Industrial Associ- ation of Lisbon; for Italy, the Cotton Industrial Association and Cotton Exchange; for the Nether- lands, the Netherlands Cotton Growing Association ; for Belgium, the Belgian Cotton Association; and for Spain, the National Industrial Propaganda." ** Outside of the cotton production of the East Indies, Egypt, and the Sudan, the colonial crop of 1903 was 3,052 bales with a net weight of 478 pounds, which weight conforms to the uniform weight with the computed bales of the cotton of the United States. In 1905 the crop had increased to 12,109 bales, and in 1906 to about 18,000 bales, the crop for the last year being to a small extent estimated. *'The increase of the cotton of 1906 over that of 1905, was 5,677 bales in British colonies outside of Egypt, the Sudan, and the East Indies, and 250 bales in German colonies, the increase in French, Spanish, Dutch, Italian, Belgian, and Portugese col- onies being practically nothing outside of the East ♦Crop Reporter, January, 1908. Cotton History 27 Indies. The British increase is found in Uganda, the Nigerias, Cyprus, and several of the West India Islands, against which there are decreases in the Central African Protectorate and in Jamaica. The German increase is in Togo. Two-fifths of the Brit- ish increase is found in Central Africa and in the Nigeria region.'' The territorial area of Northern Nigeria is es- timated at 323,000 square miles covering a region entirely tropical and semitropical, a large propor- tion of which can be placed to cotton culture. An area of 323,000 square miles represents over 200,000,- 000 acres. The entire ** cotton belt" of the Southern States of America contains about 448,000,000 acres, and while vast tracts of forests and waste lands are included in this belt, yet enough remains suit- able for the growth of cotton to give an adequate acreage sufficient to supply all the world for years to come. The British Cotton Growing Association in its efforts, aided by governmental support, to grow cot- ton in the Nigerian territory finds the best lands for its production lie some distance inland, and to de- velop these lands into paying properties, require not only competent and skilled labor, but large capital, and to evolve from the primitive forests and virgin soils cotfon farms of sufficient magnitude to produce a quantity of cotton that would affect to any ap- preciable extent the output of the world, will re- quire many years to accomplish, and the construc- tion of railway transportation facilities to interior points is absolutely necessary to their successful op- eration 28 The American Cotton System Quoting from ''Cotton/' a Manchester, England, publication states, that ''cotton is not only indigen- ous, but has been cultivated on a comparatively large scale for centuries for native manufactures, which have achieved a reputation throughout West Africa — Kano, the center of the industry being not inappropriately termed the 'Manchester of West Africa — ^the present production of cotton for na- tive use has been estimated at 50,000 bales." As no railway lines extend into these cotton areas, the production therefrom amounts to naught as a com- mercial commodity, and by virtue of their inacces- sibility will remain so for an indefinite time. BRITISH NORTH BORNEO. Lying between, from about 110 degrees to 120 de- grees east longitude, cut by the equator, Borneo is wholely a tropical country; rich, perhaps, in un- developed fertile soils and agricultural possibilities, but handicapped by its still primitive inhabitants; the enquiry has been raised as to the practicability of awakening an interest in cotton growing among the native population, under the auspices and pro- tection of the British Government, as heretofore efforts in this direction have been meager and ten- tative. The samples forwarded to the Imperial In- stitute for examination showed the staple to be short, rough and irregular in length and strength, but it was thought to be, under proper cultivation, capable of material improvement, but it is a weary journey between primeval man, forests and wide ocean position, to civilized man, cultivated fields, railway transportation facilities and skilled labor, Cotton History 29 all of which are essential to the successful produc- tion of cotton; and when Bo'rneo has reached this stage of advancement, possibly new cotton produc- ing areas may be found there, but not until then will it be of sufficient magnitude to be reckoned as one of the cotton producing countries of the world. COTTON AREA AND PRODUCTION. The cotton plant reaches the most perfect state of development in the fertile soils of warm countries, and it is between the fortieth parallel north and the twentieth south latitude that the world's supply of the ** fleecy staple'' is grown. This area *' ex- tends from the Mediterranean Sea to the Cape of Good Hope; from Spain to Japan and Australia; and from Norfolk, Va., in the United States, to Bue- nos Aires, in South America." This whole area marking the cotton belt of the world, though vast in itself, is circumscribed, as compared to the entire surface of the earth, yet, taking into consideration the corresponding extent occupied by ocean bodies, by lands unavailable, of countries in which cotton culture is an unknown factor, and countries in which it has proved unprofitable, leaves only the southern portion of the United States, British India and Egypt as the three principal cotton producing coun- tries of the world, the United States being para- mount to all the others combined, virtually occupy- ing a position giving it a preponderance sufficient to practically control the market, and it is self-evi- dent that there is little danger of overproduction of this valuable clothing material for an ever in- creasing population. 30 The America.n Cotton System As an index to the future, reliable statistics show the demands of the world for cotton, annually in- creasing in a ratio equivalent to, approximately, 400,000 bales; an increase commensurate with the additional acreage, and from increased demands that will be had upon the cotton fields at no distant day indications point to an increase proportionately higher. COTTON AREA OP THE UNITED STATES. By reference to Map 1 — Cotton Producing Area of the United States, 1907, in ** Cotton Production,'' Bulletin 95, it will be seen that beginning at Nor- folk in south-eastern Virginia, a line traced irregu- larly avoiding the mountain regions of North Caro- lina and Tennessee, including portions of the south- west comer of Kentucky and Missouri, along or near the northern boundaries of Arkansas and Oklahoma to the eastern boundary line of New Mexico, thence south to a point on the boundary line between Mexi- co and Texas, indicates the limits of the cotton area of the United States, the greatest cotton producing region of the world; an expanse of territory 1450 miles in length from east to west by 500 miles in breadth, comprising a total area, estimated at 700,- 000 square miles, or 448,000,000 acres, of which only one-fourteenth, or one acre in fourteen was given to cotton in 1907. In commenting on the area adapted to the culture of cotton in the Southern States and the amount produced thereon, the following statement from Bul- letin 76, Bureau of the Census, is appropriate and to the point. Cotton History 31 **No country in the world possesses the combina- tion of advantages found in the southern part of the United States for profitable cotton cultivation. In this section the soil is naturally adapted to cot- ton growing, the climate is favorable, the labor bet- ter than elsewhere, and the farm management more intelligent and experienced. Combined with these favorable internal conditions are good transporta- tion facilities. ' ' There is a great demand for American cotton in the markets of Europe. *The amount that left our ports on foreign demands ending March 31, 1907, was 8,705,896 bales, compared to 7,650,693 bales for the preceding year. The exports of the first seven .months of the present commercial year exceed those of the corresponding period last year by 1,952,380 bales. EARLY EXPERIMENTS AND PRODUCTION IN THE UNITED STATES. The knowledge of cotton growing wild in islands of the West Indies, is as old as the history of their discovery by the Spaniards in 1492, though little efforts were made towards its cultivation until 1621. It seems that the time for its introduction as a useful commercial and domestic product was now ripe, and the '* divinity that shapes our ends*' kindly took the cotton plant in hand tendering it for the benefit and civilization of the whole world, and as a late writer expresses it, **man can not be civilized ♦Cotton Production, 1906, Bulletin 76, Dept. Com. and La.. Bureau of the Cen. 32 The American Cotton System without clothing"* him. Necessity, the rugged teach- er, at a very early period, forced upon the first settlers of this country attention to manufacture and a demand for a new clothing material, to which cotton alone was adequate or available. ^''^'In the ten years following the founding of Massachusetts Col- ony in 1630, a heavy emigration, equal to the whole population annually, was added, and the raising of food products became the most profitable pursuit, so great was the demand that the price of cattle went as high as twenty-five pounds sterling, but when in 1640, the Eepublicans gained the ascenden- cy in the government in England; persecutions for religious non-conformity ceased and with it emigra- tion to this country was reduced to almost nothing; the demand for provisions was so reduced that cat- tle sold for not above five pounds a head. The effect was extremely distressing, but it put the intelligent colonists upon new resources, and to help them in this exigency, '^Hhe general court made order for the manufacture of woolen and linen cloth'' ; cut off from source of supply in England on the one hand, it remained for benignant Traffic to open a way to sup- ply the deficiency and trade being opened with the West Indies and Wine Island, where among other goods, much ^^ cotton wooV was brought into the col- ony and the people soon learned a way to supply them- selves with [cotton] linen, by spinning and weaving the new fiber, seemingly the gift of Providence. Hence, the seeds of the cultivated varieties are *Watkin*s "King Cotton," page 10. **Book of the United States," p. 353. ? i OP THf Of Cotton History 33 thought to have been brought from the West Indies and mention is made of its culture in Virginia as early as 1621 ; in South Carolina in 1733 ; In Georgia in 1734, the most suitable soil for the cultivation of cotton being the islands lying along the coast which produced the best variety, known in France as ' ' Geor- gia cotton'' and in England as '^Sea-Island." In 1822 cotton was reported as ** growing to the height of six feet," in Louisiana, though its culture is said to date back to 1722. In 1822 there were ex- ported from the port of New Orleans, 167,742 bales, however, the evolution of the cotton plant, from a beautiful natural curiosity, a wild weed of the tropics, to a cultivated commercial substance, the snowy web of a single season's weaving, might encircle the globe, was of slow growth, and it was 118 years after its introduction in Virginia, before a shipment was made to England. ''^A few bags were exported from Charleston, S. C, in 1747 ; not until 1770 was it made a staple crop, a record of the shipments to Liverpool are as follows: *'Ten bales from Charleston, 3 bales from New York, 4 bags from Virginia, and 3 barrels from North Carolina." England looking on, incredu- lous that such immense ( ?) quantities of cotton could be grown in the colonies, seized 8 of the 14 or 15 bales shipped to Liverpool in 1784, impressed with the be- lief that it had been wrongly entered and was not grown in the American colonies. The extension of the cotton growing areas, within the last ten years, has reached a surprising acreage, ♦Prom "Cotton Production,** Bulletins 76 and 95. 34 The American Cotton System especially in the ^Panhandle of Texas, which com- prises 51,350 square miles, produced in 1889 only 2000 bales of cotton, had increased to 113,623 bales in 1907 ; east of this a block of sixteen counties, with Hardeman, Wichita, Eastland and Taylor as corner counties, encloses an area at one time thought to be unsuitable to cotton growing, owing to the lack of rains, but produced in 1899, 47,622 bales, while in 1907, the increase had reached 206,979 bales. Okla- homa has a greatly increased cotton acreage, where large ranches have been ^^cut up'' into small farms, and in localities formerly given to wheat, the growers being disposed to change from wheat to cotton as the surer crop. Irrigation has been utilized to a considerable extent in Texas, New Mexico, Utah and Arizona, and prom- ises a greater development in the future, according to statistics 10,000 acres of this irrigated land was given to cotton in Texas and New Mexico, in 1907. As the existing climatic conditions are not wholely un- like those of Egypt — a long, hot and dry season, with water applied as required during its period of growth and maturity, which ripens a strong, uniforyi fiber, followed by a long dry season on the opening bolls, are interesting facts connected with cotton growing in the south-west. Experiments with Egyptian cotton are being made in Arizona along the Salt and Gila rivers, and as long as science, aided by governmental encouragement seeks for utilization of waste lands, for improved methods and products, great results may be expected. *From "Cotton Production," Bui. 95. CHAPTER II. COTTON CLASSIFICATION. Owing to the fact that cotton ripens in a period of four months, more or less according to the sea- sons, varying somewhat as to the latitude of the south- ern or most northern boundary of the cotton belt, usu- ally beginning about August 1st and ending with the first killing frost, the picking continuing often till March. The early maturing cotton that is gathered before any rain has fallen gives the better or high grade cottons, while to the practiced eye of the expert classer, the vicissitudes of the weather are pictured on the cotton samples, and he eventually reads the story of rain, or storm, or neglected fields in the fleecy staple, and pronounces them stained^ tinged or low grade, as the cotton shows itself to be in character, from this exposure. As there is no definite mechanical rule by which cotton can be classed, the matter resting with the judg- ment of the individual to a great extent, evidences the reason for many discrepances arising between even expert classers, in passing on the same cotton. All classers have a somewhat matured idea as to what constitutes a particular grade of cotton, but as it is rare that two grades of cotton are identically the same in every particular, then it follows that one grade approaches another so nearly in appearance as to be called the same in character, and on these re- 36 The American Cotton System semblances, opinions differ as to the particular class to which a certain grade should be assigned. In the main, there is a general agreement between classers as to what constitutes a specific grade of cot- ton, more particularly, those classing cotton in any particular State, that is, one well versed in classing Texas cotton would vary but little from his accus- tomed classification of such cotton, without reference to type or sample, but if requested to classify North Carolina or Georgia cotton, would find himself, per- haps, somewhat at sea on first attempt, likewise, the Georgia or Carolina classer would see a marked dif- ference between the Texas and Carolina or Georgia product on first observance of these cottons, and un- til accustomed to the character of the two cottons, would, no doubt, question his own ability to correctly classify them, for a time at least. "Winds, rain and sunshine, so change the appearance of cotton while exposed to the weather in the fields^ as to produce many grades of cotton, and to properly judge these grades is the duty of the classer, and it is well to again emphasize the fact that a perfect classification of cotton can not be performed with absolute accuracy, as an evidence of which, no two experts in classing a large lot of cotton always agree, nor, indeed, does the same expert in a second classi- fication of the same cotton produce an exact dupli- cate of the initial classification every time. It is admitted by nearly aU interests in the cotton trade that these differences of opinion among cotton classers exists to a more or less extent, especially, when making classifications on assorted or mixed grades, a proof positive proving the absence of any Cotton Classification 37 fixed rule or standard by which cotton can be classed. It would be unfair to allege dishonesty of purpose as a cause of difference of opinion arising between class- ers taking up a list of cotton, when a difference exists as to grades, as in most instances the individual who classes the cotton stands above reproach for honesty, truthfulness and intelligence. No Mechanical Means.— As previously stated, there being no mechanical means for performing the work absolutely correct, as the classification is done almost exclusively by the eye, it is apparent then that those who have eyes with an unimpaired vision, can be de- pended on and should give the better results. The amount of leaf fragments, stems, dirt, gin cuts and color are the elements that go to make dif- ferences in grades of cotton, and to so separate samples of cotton into grades showing more or less foreign matter and color, constitutes the requirements exacted by the classer to tell how much of this leaf, dirt and trash can be admitted into a sample to make it a certain grade of cotton. In order to make classification as near an exact art as possible, a starting point in classification is just as necessary as the classification itself, and this start- ing point is known as the ' ' base, ' ' and the cotton tak- ing this base is called ^^ middling," or *^ middling basis," in the vernacular of the cotton buyer and classer. MIDDLING COTTON. Middling cotton is the basis grade in all markets, and is the universal standard by which all other grades are measured. It is a white or nearly white cotton 38 The American Cotton System and contains only a small amount of foreign matter. To know the middling grade is to know the founda- tion of classification, and to know it well is to see it, as no description can be made of it sufficiently clear to give the reader a definite idea in words as to its exact type. All cotton bolls are enveloped in a covering of triangular form, known as '^squares,'' and when the bolls are ripe and burst, exposing the white, fluffy cotton protruding beyond the narrow limits of its former prison cell, the squares are dead, easily crum- bled, and it is quite difficult to pick the cotton from the bolls without getting a portion or all of the dried, dead squares in small fragmentary parts into the cot- ton. When the leaves of the cotton plant, from drouth, frost or any cause, die, and are easily pulverized, par- ticles of such dead leaves, dso, often get into the cot- ton to a more or less extent, governed by the care or carelessness of the picker, and these leaf fragments in addition to that of the squares, lower the classification. It has been argued by some classers, that if in one pound of clean cotton the gin throws the fragments of one dead leaf, and the grade recognized as good middling, two leaves would give strict middling and three leaves middling and so forth. While this illustration can not be used as a deter- minate feature in making the classification exact, yet it illustrates nicely an idea of the comparative amount of leaf-trash that might be admitted, and probably serving as a guide to the classer. Gin saws acting on very dry leaf, cut it into very small particles, and the cotton appears as if the trash Cotton Classification 39 had been injected from a pepper-box, and the cotton is said to be full of ''pin head" trash, which lowers the grade more than if leaf fragments were larger. When the bursting cotton bolls first appear in the fields and are gathered very soon afterwards, that cotton shows to be a creamy white tint, but when al- lowed to remain for some time exposed to sunlight its creamy color is bleached to a white cotton, and both ''creamy" and white cottons are recognized as cotton of ' ' good color, ' ' and if only a small per cent of leaf appears mixed with the cotton it is known as mid- dling in grade, if either creamy or white. Recognizing middling cotton as the basis from which other grades and valuations are made, then cotton showing less and less leaf and stem will be given a higher classification and value, while cotton exhibit- ing more and more foreign substance will receive a lower gradation and value, for which grades above and below middling distinctive names are given, which will be shown in another portion of this work. Light is an indispensable aid to the classer in get- ting at the relative value of the grade, yet if exhibited in certain ways it will prove flattering and cause a too high grade to be given. To class cotton in the open air early in the morning when the eastern sky has a reddish halo, or to attempt to do so late in the eve- ning with a reddish tint in the western horizon, the reflective effect on a sample of cotton exposed to such a light will cause the sample to appear fully a half grade better than it really is, hence such lights are deceptive in their nature and approach very nearly artificial lights, which are valueless for classification purposes. From light to shade and shade to light, as 40 The American Cotton System the passing of clouds during the day, are causes that produce varying ideas respecting gradation, and care should be exercised to allow for changeable lights. In classing cotton in bright sun light, a better idea as to the real color of the cotton can be had by one's back being turned towards the light and the sample opened in the shade of the classer holding the sample. To attempt to class cotton in sunlight reflected from white or gray earth or when snow is on the ground renders it difficult to do so. Constantly classing cot- ton under a light of uniforai character, as in a build- ing with sufficient window light, to which the classer has become accustomed, or in the open air to which light the classer has grown to be familiar, conduces to effective and satisfactory results. Samples Drawn for Classification, — ^With the im- proved machinery for ginning and packing cotton, and in place of the old *4int room^' into which the ginned cotton fell like a snow storm, it now passes through condensers that press the cotton in smooth '^ bats'' that fall in gentle folds one upon another in the bale, produces one from which samples can be drawn and opened as book leaves, making it very easy to see well the true character of cotton drawn. Samples taken for classification should not be torn crosswise, but should be opened lengthwise, a process to which one should accustom himself, as the sample thus opened can be examined with greater facility. Look well for gin cuts, motes y leaf fragments, stem, dirt, tinges, stains, and color, as these are the govern- 'ing features determining the character of the grade. A sample of sufficient size, approximately eight ounces in weight should be taken, especially when cotton is Cotton Classification 41 shipped, and a guarantee on classification accompanies the same. When it is known that a bale of cotton weighing, say, 500 pounds, is the product of one, two, five or perhaps ten acres of land, a sample may or may not be indicative of the true character of the bale en- tirely, which, if not so, gives cause for dissatisfaction, when the whole bale is judged by the sample offered as its representative. If an entire bale is gathered with care, free from foreign substances and discolor- ations and ginned without admixtures of other cot- ton, then a drawn sample would be a good index representing the true class of cotton in the bale, but when cotton is gathered with careless hands, foreign substances allowed to enter freely into the cotton this class of low grade cotton injected with better picked cotton, makes a very mixed cotton in the same bale, and a sample taken from such a bale would scarcely give an idea as to its literal class. This gives cause for the necessity arising, requiring a sample taken from both sides of a bale, in an effort to ascertain the true class of cotton therein, and even a single sample of such cotton may not show uniformity in grade. It is customary in the New York and New Orleans markets, and perhaps universal in all the other mar- kets, where two samples of cotton are drawn, one from each side of the bale, to base the value of the bale by the sample of lower grade, unless it be shown that the amount of low grade cotton is too small to be reckoned. Since better ginning plants have been established in the cotton belt, and the tendency is to make them of greater capacity as to output, it is not unusual to 42 The American Cotton System find four, six and eight gin stands of large size in one building, and since ginners usually retain a full **roll'' in each gin stand after a bale is finished, and when a load of good grade of seed cotton is passing through the gin, having previously retained a full *^roir' in all the gin stands from the bale of lower grade cotton just preceding it, this **roir' of inferior cotton makes one side, or a * Opiate'' of more or less thickness on the bale of good cotton following, and the *^roir' of good cotton from this bale of high grade, remains to become a portion of the next bale to follow. Such method of work necessarily makes ^^two sides'' to a bale of cotton, that is to say, the cotton shown on one side of the bale is different in grade to that on the other side, and where such exists, the classer should be careful to cut and draw a sample sufficiently deep from the bale to enable him to pass through the stratum of good or bad cotton and secure a sample showing the exact quality of the cotton beneath the thin shield of different grade enveloping this one side. Intentional ^^ Plating' ' Condemned, — J)Q^\gn.mg growers sometimes resort to practices the purpose of which is to deceive credulous or incredulous buyers, by placing good grades of cotton on each side of a bale, filling the middle portion with cotton of a lower grade, in an effort to have it appear that the whole bale is composed of good cotton, and thereby re- ceive a price commensurate with the value of such cotton as is shown superficially. Such practices, how- ever, are almost obsolete and can not be too severely condemned, but to the buyer beginning the classifica- tion of cotton and launching out into such fields of work for his future occupation, it is timely to be well Cotton Classification 43 advised on the actions of unscrupulous ones perpe- trating such frauds, and he should look with care and scrutinize closely all bales of cotton offered for sale, where cotton is bought in the bale, from which samples are drawn. Such surveilance of the bale can not be had where cotton is bought from factors' tables by sample alone, the classer relying upon the integrity and guarantee of the vendor for protection of his purchase in most every instance. Hurried Harvesting. — Their hurry to harvest cot- ton rapidly, induces many growers to enter the fields early before the dews of the morning have faded, and following closely after rainfall, also, results in much wet cotton being gathered, which carried to the ginners in this condition, gives rise for serious objec- tions being made to such class of cotton, showing as it does much dampness and an excessive cutting of the fibers. Extreme dampness or water ^'packs'' should be looked after. Leaks from steam or water pipes sometimes give an excess of moisture to a bale of cotton when in process of formation in the press, and the results of such carelessness are as much to be deprecated as if the water were injected by design. Dry Cotton. — Should necessity require that cotton be gathered wet, it should not be allowed to pass the gins until after it has been thoroughly dried, then dust, dirt, sand and much leaf and stem can be elim- inated, resulting in a much better grade being shown, while on the other hand if permitted to be ginned wet or damp, all foreign substances adhere with greater tenacity to the fiber, and giving, by way of illustra- tion, a low middling grade, which, if it had passed the gins dry, would have produced, perhaps, a mid- 44 The American Cotton System dling in classification, and a bale of cotton five to seven and a half dollars more in relative value. Premium Values Are Offered. — Too much encour- agement can not be given to the grower who exerts himself to produce cotton of better quality, and the tendency of the intelligent culturist of today is di- rected in this line, as premium values are offered as a stimulus to those who can and should undertake to improve the varieties now cultivated. Greater atten- tion should be given to the quality and not the quan- tity grown, and equal care bestowed on the harvest- ing and ginning, for on this as much as any part of the process depends the success for securing high grade cotton and good values. Lower Grades More Difficult. — The classification of the better grades of cotton, say, middling and up, is accomplished with greater facility, and a determina- tion to greater accuracy is more reasonably certain, but as the lower grades, those designated as under middling, show a preponderance of foreign matter, discolorations, tinges and stains, the difficulty for de- termining the correct, or relatively correct grade, in- creases as the grades are lowered. As the gradation of cotton is known as full, half and quarter grades, and the gradation of one so nearly harmonizing with its approximate grade either above or below in char- acter, it is quite difficult many times to determine to which class any certain grade belongs, and for this cause, differences of opinion arise between classers, and, indeed, the same classer passing upon a sample of cotton, which had been classed by him at some pre- vious time, will differ from his former opinion. To those unacquainted with cotton classification, this may Cotton Classification 45 seem strange, but if questioned, any good classer will confirm the statement, and upon this point, a member of the New York Exchange,, said: ''There are cer- tain people who say the grades of cottpn, or the types of cotton by which the grades are determined, should be mechanically fixed, and that the classification com- mittee should be required to classify mechanically in accordance with those mechanical types. Now every- body who has had any experience with cotton classers knows that the classing of cotton is not a mechanical art ; it is the work of the artist essentially. The good cotton classer does not class cotton by a mechanical standard. I have that well illustrated in- the case of one of my own classers in the South — one of the very best classers I have ever known — who could class 2000 to 3000 bales of cotton a day, and who would turn out the most beautiful lots .of even-running cotton that I have ever seen in my life. But a peculiarity of that man was that if he hesitated over a sample and took it up the second time and considered if he was right or wrong, he always got it wrong. * * * Classing cotton is a great deal more than matching samples. It is a matter of the eye and the judgment, a certain feeling that only a man with an artistic tem- perament can have. All good classers are in a way artists. No cotton classer can tell you why he classes a certain sample of cotton as strict low middling and another sample as strict middling; he just knows that it is so.'' An absolutely perfect system of classification for cotton, therefore, can not be hoped for. 46 The American Cotton System cotton standards. From the foregoing statements declaring the ab- sence of any mechanical measurements by which cot- ton can be classed with absolute accuracy, the ques- tion might arise, How then must cotton be classed, and who shall be the final arbiter in the matter? To better illustrate, A, who is a cotton merchant and a classer, ships 50 bales of cotton to B, also a cotton merchant who either classes or has the cotton classed on arrival; A puts out the shipment as even running middling cotton; B states the classification shows to average five points under middling; now both men being intelligent, honest, equal in knowledge of cot- ton classification, by whose decision shall the matter be determined; shall the settlement be on A's or B's classification? The Exchanges adopt certain grades of cotton, which grades are known as the *^ standard'* or ** standard grades/' For explanation of settle- ment see Arbitration. STAPLE COTTON. The name *' staple cotton" is applied to all cot- tons having long fibers or long lint. It may be graded and classed as short fiber cotton, that is, middling, strict middling and so forth, speaking relatively as to the amount of leaf, stem, dirt, color and tinges, but its merit value is determined not alone by these im- purities, nor lack of them, but by the length of staple as well. Cotton showing less length of fibers than one and one-sixteenth inch is not recognized by cotton au- thorities as long staple cotton, while staple of this length and above bear valuations increasing in value Cotton Classification 47 as the lengths increase, or in a nearly proportionate ratio. The strength of the fiber is an element of con- sideration, and should not be overlooked in passing upon a sample of staple cotton. It would seem from practice and good judgment that in efforts being made to classify staple cotton that no discrepancies or difference could arise as to length of staple, but as a matter of fact the reverse frequently obtains, as what one classer would recog- nize as one and one-eighth inch staple another would call it one and three-sixteenths or one and one-fourth inch, while, perhaps, another might still pronounce it one and five-sixteenths, each being equally honest in his judgment. These seeming differences can be har- monized on the theory that one classer in going through a list of samples may draw fibers measuring one and one-eighth inch, while another classer operat- ing on the same samples will draw fibers actually measuring one and 3-sixteenths or one and one-fourth inch in length and so pronounce it. This is because saw gins acting on staple cotton break it more or less, resulting in the production of a grade of cot- ton showing uneven lengths, and causing want of harmony among classers as to the exact leng]:h of staple. The length of the staple, although an extremely im- portant matter in determining the spinning value of cotton, is a distinct consideration, as well as the ten- sile strength of the fibers, and a classer in attempting to give a value to such characteristics should know well their true merits. 48 The American Cotton System relative grades. Middling cotton being the basis grade from which all the other grades are figured, each grade repre- sented as being above or below middling in class has a relative value compared to middling. Middling being recognized as a white cotton or nearly so, is a fleecy cotton containing only a small portion of foreign matter, strict middling a less quantity, good middling still less, middling fair almost free from any impurity, while fair cotton is entirely free from all contaminations of other substances, white or creamy and perfectly ginned — the highest grade given to any class of cotton. Descending the scale from middling through the entire list of lower grades — those below middling be- ing known as the lower grades — the values of these grades decrease as the grades become lower in type, which fact is known by the increasing excess of for- eign matter injected therein, until ordinary is reached, the lowest grade of white cotton. There are thirteen distinct grades of cotton very generally recognized in the spot cotton markets of the country, as follows : Fair. Strict low middling. Strict middling fair. Low middling. Middling fair. Strict good ordinary. Strict good middling. Good ordinary. Good middling. Strict ordinary. Strict middling. Ordinary.* Middling. ♦Secretary Wilson, of the United States Agricultural Department, in conforming with an act of Congress to es- Cotton Classification 49 The grades shown as fair, middling fair, good mid- dling, middling, low middling, good ordinary, and ordinary are known as the *'full grades,'' while the stricts are designated as ^'half grades,'' between them in class the ''quarter grades" or ''splits" have a recognized value among spot cotton buyers. These grades cover the class known as white cottons, and as more or less cotton is unavoidably left each sea- son exposed to the changes in the weather, the range of grades become wider as discolored, tinged, and spotted cottons are shown as results of exposure, giving cause for such grades as middling tinged, middling stained, strict middling stained and so on. The discolored cottons are in a separate class dis- tinct from the white cottons. tablish standard grades of cotton, called together several expert cotton classers from different parts of the cotton belt, who, acting with three experts of the Depart- ment, established the nine grades known as middling fair, strict good middling, good middling, strict middling, middling, strict low middling, low middling, strict good ordinary, and good ordinary. The samples from which these types were selected were gathered from the different exchanges and boards of trade from different parts of the United States and the large Exchanges of Europe, and from this large number of samples the nine were selected to be known as the o3cial standards or commercial grades. With these types as guides, the Department will prepare others of similar or parallel description, to be boxed and sold to whomsoever may be sufficiently interested to pay the cost for samples and doing the work. The committee of experts establishing the nine grades of cotton, finished its work about February 5, 1909, after having been in session for several days. The act of Congress requiring the Secretary of Agricul- ture to establish the official type standards was the result of the efforts of Congressman Burleson of Texas. 4 50 The American Cotton System grades tenderable on future contracts. The New York Cotton Exchange formerly recog- nized thirty grades of cotton, representing what it called the official list tenderable on future contracts, but on and after April 1, 1908, this list had been re- duced to 18 and so remains now, and is as follows : Fair. Strict good ordinary. Strict middling fair. Good ordinary. Middling fair. Strict good middling tinged. Strict good middling. Good middling tinged. Good middling. Strict middling tinged. Strict middling. Middling tinged. Middling. Strict low middling tinged. Strict low middling. Low middling tinged. Low middling. Middling stained. These grades are, according to the rules of the New York Exchange, deliverable on any future contracts bought or sold through this Exchange. That is, if one buys a hundred bales of cotton through any mem- ber of this Exchange, the seller has the right (option) to deliver any of the above grades on said contract, which is based on middling cotton, with the differ- ences in value compared to middling. All grades above middling commanding a premium — all below, a discount. The premiums above, and discounts be- low middling do not always remain the same, the variations arising from contingencies uncontrollable, such as rains, winds, and good weather, which give low, medium or high grade cottons to a greater or les- ser extent according to the weather obtaining, and if much low grade cotton appears in the markets the Cotton Classification 51 tendency is to widen the differences and lower the price, for when such grades are increased in number while the possibility of higher premiums being of- fered for the high grades is greater, but when the re- verse is true as to the character of the cotton ap- pearing, the differences in the values become changed in the same ratio; that is, much low grade cotton on the market induces lower values, or wider differences in value below middling; a high average or large quantities of good cotton narrows the differences above middling many times. DIFFERENCES.* The expressions, ** differences in grades,'' differ- ences in values,'' are terms used in a relative way which one often hears from those interested in the cotton trade. The expressions are well used and most applicable, and can be readily understood when tab- ulated statements are shown as here presented, and when once understood are easily remembered. Recognizing middling as the basis, the other grades and values are easily shown. Say, middling is worth 10 cents a pound, and showing the ''full" and ''half" grades in the table, and all above middling as "on" or above, and the grades below middling as "off" or below. ♦Values other than M. being established twice each year by the New York Cotton Exchange revision committee, are known as the -fixed differences, while those made monthly by the New Orleans Cotton Exchange revision committee, being based on the value of cotton in the market at the time, are recognized as the commercial-differences. 52 The American Cotton System Grades. Price. Price. Price. Cents. Cents. Cents. Good middling . . . . 101/4 103/8 101/2 Strict middling. . . . 101/8 lOA 101/4 Middling (Basis) . . 10 10 10 Strict low midl'g. 97/8 9% 91/4 Low middling. . . . 91/2 9 8I/2 The five grades shown are sufficient to explain the differences in grades and the three different prices shown will illustrate the idea of differences in value. In the first price column the difference in value for strict middling above middling is % ''up;" for good middling 14 ' ' up ; " the difference in the second price column for strict middling above middling is xV ''iiP;" for good middling % ''up;" while in the third price column the difference for strict mid- dling above middling is % ^^up;" for good middling 1/2 "up." In the first price column the price "off" middling, or less than middling for strict low mid- dling in value, is % ; in the second price column, the difference in value is % less, while in the last or third price column the difference is % less than middling. In the first price column for low middling I/2 is "off" in value, while in the second and third price columns 100 and 150 points (1 and 1%) are taken off respec- tively, in giving the relative value for this grade. It is not unusual to see these differences applied on low middling grade, but the differences as shown here for strict low middling are out of the line of the ordinary, and are given here for purpose of explana- tion only, especially the one showing % "off" for strict low middling. Cotton Classification 53 While weather changes are unavoidable circum- stances that produce varieties of grades, and are in- strumental in determining in many instances relative values for them, a committee known as the Commit- tee on Kevision of Quotations of Spot Cotton of both the New York and New Orleans Cotton Exchanges, exercise the right to revise the' price of relative grades, saying how much difference in price shall be put ''on'' or ''off" middling cotton, thus two factors are conducive to changes in relative values; the charac- ter of the cotton gathered as to an excess or scarcity of foreign substances, and the action of the Revision Committee, whose deliberations and decisions are gov- erned by the type of cotton, ' ' state of the market ' ' and the actual price for which spot cotton has been sold in the market during the day (New Orleans). REVISION COMMITTEE OF THE NEW YORK COTTON EXCHANGE. This committee is one of the most important con- nected with the Exchange; the results of its delib- erations are far-reaching in scope and exercise great power over the market many times, and it has been alleged that in the performance of its functions, it has at times gone beyond its legitimate bounds by creating differences too broad, relative values too ab- normal fo be salutary to the trade. It is not the purport of this volume to assert or deny the truthfulness of such allegations, but only to as- sert the existence of such a committee, the character of its duty, commenting only on the results of its ac- tions. 54 The American Cotton System Quoting from the Charter, By-Laws, and Rules of the New York Cotton Exchange, the duties of the Revision Committee are clearly set forth in Sec. 67. The Committee on Revision of Spot Cot- ton 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 three thirty o'clock p. m., and receive a report from the Committee on Spot Quotations as to the state of the market; also sugges- tions or opinions from any member of the Exchange regarding the revision of spot quotations. The Committee shall on the day of meeting consider the report of the Committee on Spot 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 middling cotton, which shall constitute the rates at which grades other than mid- dling may be delivered upon contract. Should any day appointed for a meeting of this Com- mittee fall upon a holiday, the Committee shall meet upon the next business day. Copying from Charter, Constitution, By-Laws and Rules of the New Orleans Cotton Exchange, its amend- ed rule, effective March 3, 1908. Rule 16. The Board of Directors, at their first meet- ing after election, shall appoint a standing committee of thirty (30) members, from which committee the Board shall select monthly five members, who shall constitute the Committee on Spot Quotations, etc. The Committee on Spot Quotations shall make up the oflicial spot market report of the Exchange daily at 2 p. m., except on Saturdays, when they shall meet at 11:45 a. m.; provided that when one or more of the members of the Spot Quotation Committee think that there should be a change in the differences between grades, or in the differences for off-colored cotton and stained cotton, he or they shall notify the Secretary of Cotton Classification 55 the Exchange by 12 noon on that day (except on Satur- days, when notice must be given by 10 a. m.), and it shall be the duty of the Secretary to immediately notify the other members of the Spot Quotation Committee and also the members of the Arbitration Committee on Classi- fications that the matter of changing such differences is to be considered at a joint meeting of the two commit- tees to be held at 2 o'clock p. m., on the same day (ex- cept on Saturdays, when the meeting will be at 11:45 a. m.); eight members shall constitute a quorum; the chairman of the Spot Quotation Committee shall act as chairman, but, in the event of his absence, the mem- bers shall choose a chairman for the occasion. A ma- jority vote of the members present of the combined com- mittees shall be necessary to make any changes in the differences between grades, or in the differences for off- colored and stained cotton, and no changes in said dif- ferences shall be made except at a joint meeting of the two committees, as provided above, or at the monthly meeting of the Revision Committee, as hereafter pro- vided; provided further, that no one who is at the time engaged in the receipt or delivery of cotton on contract, or who has same in contemplation, either as principal or agent, shall be eligible to act at such meeting; and it shall be the duty of the chairman of the meeting to call attention of the members to this provision before a vote is taken. The Committee on Spot Quotation, together with the Arbitration Committee on Classifications, shall constitute a Revision Committee, whose duty it shall be to revise quotations on the first Friday of each month, or, should such Friday occur on a holiday, on the first business day thereafter. The report of said Revision Committee shall consti- tute the official quotations on the day of its meeting. The Superintendent of the Exchange shall post upon the boards the state of the spot market each day between the hours of 12 a. m. and 1 p. m. From tlie foregoing the conclusion follows as stated in the last paragraph, that an approach is made to- wards a point where market quotations are made public by some one for cotton, or rather, some one or several, state a price they are willing to give or take for cotton, which prices are posted on the boards 56 The American Cotton System of the great Exchanges and go out over the wires as market quotations for futures and spot cotton, creat- ing a desire to know more fully HOW COTTON markets ARE MADE. While the rules of the New York Cotton Exchange are not entirely dissimilar to those of New Orleans, they approach so nearly in many respects that a de- scription of the daily working of one, will suffice for both. A description of a day's proceedings on the floor of the New Orleans Cotton Exchange will be of interest to those unacquainted with its in- ner workings in establishing in the minds of the read- er the facts that contribute to the establishing of figvires that are placed upon the blackboard in the Cotton Exchange, which figure valuations are flashed over the wires as market values for cotton. The New Orleans Cotton Exchange opens its doors at S a. m. At that time there are posted on the black- board, reserved for the Liverpool market, the opening prices, then the noon prices and the 2 p. m. quotations, as Liverpool is six hours ahead in time. Members be- gin to congregate, but no trading in futures is done until 9 :05 a. m. At nine o 'clock quotations begin to arrive from New" York which market opens at 10 a. m., Eastern time, equal to 9 a. m. New Orleans time. At five minutes past 9 a. m. the future business starts for the day by the official call. This is made by the Secretary of the Exchange or the assistant secretary stepping upon the rostrum seizing a wooden gavel and by a blow with it upon the rostrum open- ing the trading. He calls out the current month — the month exist- Cotton Classification 57 ing at the time, it being the first trading month, and continues to call all the twelve months, beginning with the existing month, and ending with the twelfth month thereafter. Each month is called aloud in a way that it can be heard everywhere on the floor, and sufficient time is given until the price for that month is stationary before the next month is called. Every trade made during the call is repeated aloud by the secretary : for instance Smith & Jones sell to Williams & Brown; the secretary would call out, ''Smith & Jones to Wil- liams & Brown, one January at 9 cents,'' and this trade as well as all others, are recorded on the black- board reserved for New Orleans quotations and there visible to everybody. Besides that, there is one, or, if trading is very active, two Exchange officials stand- ing inside the ring marking down throughout the day until 2:30 p. m., when trading officially closes, every trade that is made in futures, price, by what broker- age house it is sold, and by what brokerage firm it is bought, and the time the trade is made. All this goes on the blackboard and is kept on record in the Ex- change office. A portion of the Exchange floor is set aside for this future business, but is accessible to all members with- out discrimination. In this portion is the so-called Ring or Pit, a circular structure for the purpose of preventing jamming and confusion among the many brokers who assemble around it to execute their or- ders. After the ''cair' is over, trading across the Ring is done in all the twelve months or ''positions" in- stead of only the month called, and this character of 58 The American Cotton System trading where the membership call aloud their trade across the ring to each other is known as ^^ring-trad- ing'' or *^ring trades/' and as stated, occurs during the intervals between the opening and noon calls, and noon and close calls. One broker may call out that he wants to sell a March (contract) at 9.03, while others may offer to buy March at 9.02, others may, again, cry out they want to buy May at 9.10, others offer to sell July at 9.18 and so on. As before stated, if a trade results it is at once re- corded and put upon the blackboard. No trading is allowed by private agreement. All trades between brokers for third account must be made by loud out- cry across the ring. There is a heavy fine imposed by the rules of the Exchange for any violation of this rule, going as far as suspension from business, or expulsion from the Exchange. If the secretary calls a month during the official calls and no one offers to trade during the time the month is called out three times, then he knocks it down as ^'None. " If some one offers to buy at a certain figure, but no one offers to sell, he calls out, say, *^ Smith & Jones, January bid 9 cents," and after having called this out three times, he knocks it down as January bid 9 cents and vice versa, if a broker offers to sell, say March at 9.03, the secretary making the call cries out, for instance, ^^ Smith & Brown, March, offered at 9.03," and after having done so three times he knocks it down as, ''March, offered at 9.03." The call in any position (month) is over when the price does not vary any more after having been called Cotton Class'tfication 59 three times, marked each time with a blow from the gavel. Brokers in offering to buy or sell contracts are gov- erned by the prices their customers make for them in many instances, but if no price accompany the orders and are not restricted as to limitations of them, then they exercise their own judgment to do the best they can for their customers. The broker has to con- sider the showing of the other markets such as New York, Liverpool, Bremen, etc., the general tendency, speculative feeling, other news at hand that can be construed as guiding factors, in fact, any and every- thing that could influence the trading, and it is ap- parent that everybody else is doing the same thing, the execution of the deals are said to be governed finally on -supply and demand of contracts for the month or months he has to deal in. If he finds no buyer at the price at which he offers to sell, then he has to come down until he meets the demand, con- trarily, if he finds no seller at his bid, then he bids up until he meets the supply. So far as a literal transaction is concerned there is no difference in the theory of a trade whether in actual cotton or in futures. Trading in futures are said to be elements that facilitate exchanges in actual commodities. The New York and New Orleans Cotton Exchanges are chartered institutions, entirely independent in . their relationship, and trading in futures on either Exchange is not controlled by any stipulated agree- ment between them. The prices recorded in New York or Liverpool have a significant influence in de- termining trade quotations on the New Orleans Ex- change. If Liverpool is higher, it reflects a buying 60 The American Cotton System power or buying disposition there. If New York is lower, it may mean that some cause has created a preponderance of sellers, and so on. If Liverpool or New York show higher markets, more buying orders drift to the New Orleans market, if this market has not responded at once to the other market advances, but when an influx of orders from the other markets or any source pour into New Orleans, this stimulus causes an advance there, and should the New Orleans market make an important move, the trade in the North and abroad is likely to consider it and give orders accordingly, which find expression in the prices recorded in New York and Liverpool. Exchange Market Quotations. — Members of both the New York and New Orleans Cotton Exchanges affirm they do not make quotations as cotton values, but instead, the prices are made by the buyers and sellers of orders themselves through their brokers on the Cotton Exchanges. It will be noted in the preced- ing, that brokers are called upon at times to exercise their own ability and judgment in saying what shall be the price to sell or buy a March, June or August contract, when, especially, a buyer or seller has given them no price nor limit, then it is certainly evident upon its face that in this instance the broker is in- strumental in making quotations for futures. Now, if Williams & Clark of Liverpool transmit an order to a broker on the New Orleans Cotton Exchange for the purchase of 5000 bales of May cotton at, say, 9 cents, and the broker succeeds in buying it at that figure, then the Liverpool buyers are instrumental themselves to that extent in making the market quo- tation, although they may be spinners, manufactur- Cotton Classification 61 ers, brokers or cotton merchants, likeWise some specu- lator or manufacturer may think the market already high, and place an order with a New Orleans broker to sell 1,000, 5,000 or 10,000 bales of May cotton at 8.95, then in this instance this seller proves to be a factor inducing a decline in the market and to this extent is instrumental in affecting quotations, if his sale can be made at the figure offered. In such in- stances when the opinions of individuals differ as to the future of the market, some thinking an advance will occur, others believing the market about as high as it will go, for the time at least, and when such opin- ions are about equally balanced between those operat- ing on. the Exchanges, the market is said to be very stable, as those who think it should go higher (** bulls '0 can not well push it up because of the fact of the adverse element (^^bears") those who think it should go lower — constantly offer to sell on all ad- vances and in this way prevent an advance and make an equilibrium. When the opinion is prevalent universally that causes exist which within themselves so materially af- fect the output of cotton that an advance is sure to manifest itself, then everybody wants to buy cotton and buyers bid freely and above each other to get it, in so doing their own efforts induce higher values, and such manipulations sometimes carry the quota- tions to an abnormal limit, that is abnormal as con- strued by the buying (consuming) element. Facts exist sometimes that are so conclusive that an advance in prices can not occur, which so affect those operating on the Exchanges or independently, they 62 The American Cotton System all become '^bears'' and operate on the *sliort side, and the market constantly declines until it reaches a point where the consumer will take it at the prices offered and when this consuming power is sufficient in strength to absorb all offerings then the market de- clines no further, and equally so in a correlative way, where the buying power is constantly advancing quo- tations, a limit on the advance is reached when the cotton nor a contract for it can be sold at or above the quoted figure, then we logically conclude that the consuming powers act as a throttle valve in govern- ing finally the determination of prices for both spot and future cotton — the final arbiters in the matter. Prices offered by buyers and sellers for futures are recorded on the Exchange board and recognized a^ quotations for futures, and on these future quo- tations the prices of spots (spot cotton) keep in line, that is, if futures advance, spots follow : if futures de- cline, spots respond, but spots do not always make the same degree of advancement or decline that show in future fluctuations. "** These recorded prices for future quotations as shown on the three great Ex- changes, are indicative of what is going on in the cotton world; taking the Exchanges as barometric in- dicators of the cotton trade. (^3 *See page -SVS for fuller explanation. **For getting the value of spot cotton on any market as shown by the Exchanges, see page 268. CHAPTER III. EXCHANGES.* The word '* exchange ' ' means literally to swap, barter one thing for another, give value for value, and when so used is non-restrictive in sense with a verb significatioi;i, but in this work the word is re- ferred to as a noun denoting a place where cotton business is transacted. To transact a business where commodities of one class are exchanged for another, more especially those pertaining to agriculture, it is quite essential and certainly preferable, that a place be established most convenient to all, where such transactions can be had with best inducements that can be offered to facili- tate trading and that with least expense. By virtue of an unwritten law in most all instances, as well as municipal legislative enactment in some, every hamlet, village, town and city in the South has set aside certain streets or parts of them, squares and places, where the grower may come with his cot- *Tlie rules of the New Orleans Exchange prescribe no definite number constituting its membership, nor is the initiation fee stated, but the annual dues are $100. The membership of the New York Cotton Exchange is limited to 450 members; initiation fee $500; the annual dues are such as "may be fixed by the Exchange," and "levied from time to time by the Board of Managers." When a sale of the rights of membership is ordered, it shall be "posted for ten days on the bulletin of the Ex- change," and sale made "to the highest bidder at open outcry," the results of such sale often reach high into the thousands of dollars. 64 The American Cotton System ton to market and offer it for sale; where the buyer meets the seller, and where sales are consummated; here the seller can sell his bale of cotton on his wagon ; sell one to be picked next week, or sell his whole crop, whether few or many bales, by agreement with the buyer, and deliver in one, two, or three days, weeks or months; here the seller knows to be the place where he is to offer his cotton for sale ; here, the buy- er 's interests are centered and here is a legitimate exchange place. Such an exchange has no rules as governing factors, further than the sanction of custom. It has no mem- bership, and there are no plans nor prices for initia- tion. The sellers and buyers are its patrons. The character of such an exchange is familiar to all, and while it is commonplace, the importance of such a place where cotton transactions can be had can best be verified in a negative way and show its value with more emphasis. While such places are usually without shelter and not recognized by a large percentage of dealers as an exchange, yet the purposes for which they are al- lowable fulfill its requirements in all particulars ex- cept transactions in future contracts, in contradis- tinction to dealings . of such character on the New York and New Orleans Cotton Exchanges, or any other organized Exchange. It is said, ''You never know the value of water until the well goes dry, ' ^ so, negatively we do not know the value of an open street exchange, until deprived of it. Suppose John Smith comes to Smithville, a town of 2,000 inhabitants, to sell three bales of cotton, and Exchanges 65 is met by the city marshall, and told he can not sell his cotton on any of the streets of Smithville. **How and where can I sell it?" asks Smith. ^'Outside of town — any where you can/' the marshall replies. Now, if there is no place outside of town, only the broad country, with no definite location, where cotton can be sold, where seller and buyer can meet, what would be the result? Mr. Smith would evidently leave very much angered, resolving, no doubt, never to bring another bale of cotton to Smithville, deter- mining to sell his cotton in future at other points, but should he go to any other place and find the same thing to obtain as confronted him at Smithville, then he could and would recognize at once the necessity of a place where he, and all growers of cotton, could meet with buyers, for the definite purpose of negotiat- ing cotton sales. Were it possible that such a condition could exist, the results would be more far-reaching in their actions on _ the business interests of a country, than the con- fusion reflecting on the individual — in the one, his own interests are jeopardized, while that of the other is broad and sweeping, affecting the public in its en- tirety. The character and description of such places of business, while to a large extent perform the functions of an exchange, are quite different from the New York or New Orleans Cotton Exchanges — the only two leading Exchanges dealing in futures in America. On this local market place for the sale of cotton anywhere in the South, the vendor can offer directly his own productions for sale, or assign his interests to any one he may choose to act as agent or representa- 66 The American Cotton System tive for him; any one desiring who may be able to command the means or credit, can enter such a place of business as a dealer in cotton, exercising his own judgment and business sagacity to guide him in his efforts to establish a lucrative business, provided, in some instances he conforms to the legal requirements exacted by some of the States, a^ the payment of a special or occupation tax, etc. Barring this form of minor restriction, any one competent to classify and ''figure'' cotton can seek such business for himself, cognizant of the fact that he is not subjected to any rules or regulations further than that of propriety, business acumen, and integrity of purpose when guid- ed by honest intentions and moral ideas.* Origin of Exclvanges. — It would seem from a care- ful perusal of the foregoing that the primitive form of marketing cotton described should have been in- strumental in creating a tendency to the establishment of the founda,tion of a system of marketing cotton as that carried out today through the medium of the great Exchanges, but from the evidence adduced from members of the Exchanges, from its records and other sources, that the origin of the Exchanges came from deals embodying features known as ''futures'' — con- tracts calling for delivery of cotton at some future time designated. History. — **Future trading in cotton, in the modern ac- ceptance of the term, is of comparatively recent origin. Up to about forty-five years ago future sales of cotton were ♦This is certainly an evidence of the necessity of some form of exchange for legitimate trade. **From report of the Commission of Corporations on Cotton Exchanges, Part I, pp. 39, 40, 55 and 56, but had to be bought outright as a speculation. O Of THE ^ Exchanges 67 virtually unknown. There were practically no short sales — that is, merchants at this date would not contract at a time when they had no cotton on hand to supply a spinner with his requirements at some future date and run the risk of not being able to secure the cotton in the meantime. Instead, spinners, both in this country and abroad, usually accumulated large stocks of actual cotton for their future needs. Indeed, at this time an extensive system of for- ward or future contracts was almost impossible, owing to the lack of adequate means of communication. The first successful Atlantic cable had not been laid and the tele- graph was still in its infancy, while the telephone had not been invented. It is true that future transactions in cot- ton were made during the Civil War, but it appears that the price at which the cotton was secured was considered of less importance than the certainty of getting the cotton at all, and there was nothing like what could be called a future system at that time. There can be ho doubt that the extremely unsettled con- ditions which prevailed just after the close of the Civil War had much to do with the development of the future system. With many plantations in the South ruined, the cotton crops of that period were comparatively sniall. The average crop in the United States for the three years ended in 1S61 was over 4,400,000 bales, whereas for the four ended in 1869 the average was only about 2,500,000 bales. Prices ,in the latter period were extremely high, and owing to the unsettled state of affairs, and particularly of the currency, ffuctuations were violent. The spinner who was about to contract ahead for the sale of his cotton goods was unwilling to depend upon day to day purchase of cotton at widely varying prices, and yet was unable to buy his entire wants at once in the spot market. On the other hand, the cotton merchant was anxious to dispose of his stock when prices touched a high level and to sell an additional quantity at such high levels for more distant deliveries, relying upon his ability to secure the cotton in the meantime at lower prices. The two parties in the market were therefore both ready for some system by which they could go beyond the narrow limits of the mo- ment. Both were, in other words, ready for organized future trading. The introduction of the future system was undoubtedly hastened by the remarkable improvement in means of communication and transportation which oc- curred just at this period, particularly by the extension of telegraphic service and the successful operation of the trans-Atlantic cable. A manufacturer in Fall River or Liverpool who was offered a long term contract for the delivery of cotton cloth, and who formerly might have 68 The American Cotton System declined it unless he was fortunate enough to be carrying a large supply of cotton, was now in position, by utiliz- ing the future system, to contract for his requirements of raw material on short notice. The willingness of sellers to enter into such contracts was increased by the same causes, and furthermore by the fact, explained in the next section, that the risk of such operations was greatly re- duced by the very nature of the future system itself. A further important fact was that the new system greatly facilitated speculation. Hitherto speculation in cotton had been mainly on the buying side, and was in the^ form of an accumulation of a stock in anticipation of an advance in the price. The future system, through the op- portunity which it afforded for forward or short sales, enabled speculators with an equal facility to sell cotton at a time when they did not actually possess it, in anticipa- tion of an expected decline. Under these conditions the development of the system, as just stated, progressed rapidly. By 1868 future sales had become a distinct feature of the cotton business. About this time dealings in future contracts were regu- larly reported in the leading trade journals. With this rapid development of the business came the organization of cotton exchanges. 4e « 4c 4i * * * * The advantages of the future system were so apparent that dealings in future contracts increased with great rapidity. During the period from January 1 to August 31, 1869, the total sales of such contracts in the New York market amounted to 101,665 bales as compared with 873,563 bales of spot transactions. A "spot" transaction is one made from goods on hand, and which calls for prac- tice 11 v immediate delivery. iL tht nexL crop year, during which the exchange was organized and a regular form of contract adopted, dealing in these forward deliveries aggregated 591,586 bales, as compared with 616,410 bales of spots. In the year ended August 31, 1871, there was an enormous increase in the volume of future trading, which reached a total of nearly 3,000,000 bales, as compared with 733,905 bales of spots. This remarkable increase in the volume of business created a necessity for the establishment of rules and regu- lations for its systematic conduct ,and this in time led to the organization of cotton exchanges. The New York Cotton Exchange, the first of these insti- tutions in this country was organized on September 7, 1870, as a voluntary association; in April, 1871, it was in- corporated under the laws of New York. Shortly after- Exchanges 69 wards cotton exchanges were organized in various South- ern cities. The New Orleans Cotton Exchange was forpaed in January, 1871; the Mobile Cotton Exchange in Decem- ber of that year; the Galveston Cotton Exchange and Board of Trade, the Savannah Cotton Exchange, and the Charleston Cotton Exchange in 1872, and the Memphis Cot- ton Exchange in 1874. Among other cotton exchanges may be mentioned the Houston Cotton Exchange and Board of Trade, the Vicksburg Cotton Exchange, the St. Louis Cotton Exchange, the Augusta Exchange and Board of Trade, the Norfolk and Portsmouth Cotton Exchange, the Little Rock Board of Trade, and the Shreveport Cotton Exchange. Further elucidating this history, \\^e again quote from the same authority. Before the Civil War the cotton business in New York was simply one form of old-fashioned commission business, exactly like the business of handling molasses, sugar, hides, wool, country produce, and many other similar agricultural commodities. The Civil War completely upset the regular conduct of the cotton business in New York, as just described. While it lasted there were, of course, no regular shipments of cotton to New York from the South, and the only source of supply consisted of lots of cotton which the Government from time to time got hold of through capture of blockade runners, or through confiscation in the South. Naturally such lots of cotton could not be handled on a commission basis. The huge profit made by some of those who bought this Government cotton was the real beginning of general specu- lation in cotton in this country. And the same thing happened across the water, in Liverpool. The fierce de- mand and the uncertain and inadequate supply gave op- portunity for vast and sudden profits, such as has never been seen before or since in connection with any com- modity. And, curiously enough, it was out of this wild speculation of the time of the Civil War that the entire modern method of handling the cotton business was evolved, for, in their eagerness to get hold of cotton, specu- lators began to buy not only actual cotton on the spot in New York or Liverpool, but "cotton to arrive," when they got wind of a lot of cotton on some ship destined for one or the other of those ports. Here was the beginning of the system of trading in cotton futures, which has gradu- ally revolutionized the whole cotton business in every root 70 The American Cotton System and branch, for certain very clever men, whose business was that of cotton merchants and not speculators, saw a way to make use of the extensive trading in contracts for "cotton to arrive" as a protection to themselves in their legitimate buying and selling of actual cotton. It was two or three years after the Civil War that this new conception of the cotton business took shape in the mind of one of the most brilliant cotton merchants the world has ever known, the late Mr. John Rew, of Liverpool, whose firm is still in existence. In 1868 or 1869 Mr. Rew saw that the newly laid Atlantic cable made it possible for a cotton merchant in Liverpool to ascertain with unheard- of quickness the price at which actual cotton could be bought in the Southern States. and the approximate date at which it could be shipped to England. He saw also that the price that was being bid in Liverpool for "cotton to arrive" was high enough to enable him to buy the cotton in the South and sell contracts for this same "cotton to arrive" in Liverpool two or three months later, he could enter into the transaction with entire safety, as when his cotton reached Liverpool he could either deliver it to the parties to whom he had sold the contract, or if some spinner was willing to pay a higher relative price than the holder of the contracts had agreed to pay, he could buy back his contracts and sell the cotton to the spinner with the large profit to himself. The immediate and large success obtained by Mr. Rew in his new way of conducting the cotton business attracted the instant attention of the ablest cotton merchants both of Liverpool and New York; and when a year or two later (in 1870 and 1871, respectively), the Liverpool Cotton Association and the New York Cotton Exchange were or- ganized "the best men in the trade had the new scheme as the J)asis of their business. Already before the organiza- tion of these great exchanges the methods of dealing in contracts for "cotton to arrive" or "for future delivery" had become fairly well systematized. For example, the contract unit had already been made 100 bales as generally put up in the South. The period under which delivery might be made under the contract had been fixd at two months in Liverpool and one month in New York, the reason for this difference being that in those days the du- ration of an ocean voyage to Liverpool was necessarily uncertain, and it was considered fair that a delivery of cotton out of a vessel arriving at any time during two coupled months should be a good delivery. Hence we have to this day all the trading done in coupled months, that is, May-June, July-August, January-February, etc. In New Exchanges 71 York, on the other hand, it was felt that the arrival of cotton could be calculated in a single month, and so con- tracts for future delivery covered only one month, January, March, July, etc. These details and many others were embodied in the by-laws and rules of the L/iverpool and New York Exchanges, and other by-laws and rules were adopted to produce absolute uniformity, equality and fair- ness in all trading; whether between members of the ex- changes themselves, or betwen members and the public at large. Here, then, at least the cotton merchants who had seized upon Mr. John Rew's new method of conduct- ing the cotton business had all the facilities they required." *An excerpt from an address by Mr. Arthur R. Marsh, a member of the New York Exchange, before the National Association of Cotton Manufacturers at Washington, D. C, on October 4, 1907. It will be recalled, in a previous portion of this work a pen-picture, illustrating the manner by which the cotton of the South makes its initial appearance on the streets, squares, etc., in the villages and towns, setting forth the same as legitimate places fulfilling the functions of an exchange.* To better carry on this character of business on a broader and higher financial plane, came the forma- tion of the organized cotton exchanges of the country, their inception originating from the causes enumerated in the preceding. The contemplated purpose for the establishing of these exchanges primarily, and, no doubt, ultimately, was conceived to be intentional in executing purely legitimate transactions, and none other, and in its declaration of purposes, the New Orleans Cotton Ex- change states in its Constitution and By-Laws: **The purposes of this Association shall be to pro- *Prom report of the Commission of Corporations on Cot- ton Exchanges, Part I, pp. 39, 40, 55 and 56. *See page 63. 72 The American Cotton System vide and maintain suitable rooms for a Cotton and Commercial Exchange in the city of New Orleans, to adjust controversies between its members, to estab- lish just and equitable . principles, uniform usages, rules and regulations and standards for classifications, which shall govern all transactions connected with the cotton trade or any other articles of trade between its members; to acquire, preserve and disseminate infor- mation connected therewith; to decrease the risk inci- dent thereto and to generally promote the interests of the trade, and increase the facilities and amount of the cotton and other business in the city of New Orleans. ' '* The declaration of purposes of the New York Cot- ton Exchange are so nearly similar as to require no insertion here, and the statements of those of New Orleans are fully explanatory for both. In the execution of trades through members of the exchanges the largest percentage of its volume is di- rected to that line of business known as ^^ futures/' or deals in contracts, the nature of which embody feat- ures calling for delivery of cotton at a future date. It is claimed by its members that the introduction and continuation of such a character of business has given to the trade a well regulated system of hand- ling cotton, especially, for future delivery; has es- tablished grades or classes of cotton with definite recognized values; has been instrumental in facilitat- ing transactions between producer and consumer ; has practically done away with the old style of consign- ing cotton to commission merchants to be sold by them *Article 2, Const, and By-Laws, N. O. Cotton Exchange. Exchanges 73 for account of others; has given greater latitude to the markets of the world by bringing into closer rela- tionship with the great cotton interests; has virtually narrowed the range of prices and prevented violent fluctuations, and in this line tended its good offices as an auxiliary in regulating prices at home, which being reflective on the foreign markets conduce to regulation there, and facilitates the operation of bas- ing prices on supply and demand. These claims are ideal and fulfill the requisites es- sential to Cotton Exchange pre-eminently. An analysis of the character of the business actu- ally transpiring daily within its walls would seem to indicate that a wide departure from the legitimate course of the requirements of such an institution has taken place many times. The basis of its operations being founded on the contracts emanating from it, the forms prescribed for instruments of this kind are here inserted. 74 The American Cotton System The New York Cotton Exchange Contract reads: NEW YORK COTTON EXCHANGE. Contract. New York, 19 In consideration of one dollar in hand paid, receipt of • which is hereby acknowledged have this day Sold to (or Bought from) 50,000 lbs. in about 100 square bales of cotton, growth of the United States, deliverable from licensed warehouse, in the port of New York, between ^the first and last days of next, inclusive. The delivery within such a time to be at seller's option in one warehouse, upon notice to buyer, as provided by the By- Laws and Rules of the New York Cotton Exchange. The cotton to be of any grade from Good Ordinary to Fair, inclusive, and if Tinged or Stained, not below Low Mid- dling Stained (New York Cotton Exchange inspection and classification), at the price of cents per pound for Middling, with additions or deductions from other grades, according to the rates of the New York Cotton Exchange existing on the day previous to the date of the transferable notice of delivery. Either party to have the right to call for a margin, as the variation of the market for like deliveries may war- rant, and which margin shall be kept good. This contract is made in view of, and in all respects subject to the rules and conditions established by the New York Cot- ton Exchange, and in full accordance with Section 92 of the By-Laws. A portion of this contract form was amended and became operative in April, 1908 ; it reads : The cotton to be of any grade from Good Ordinary to Fair, inclusive, and if tinged, not below Low Middling tinged, or if stained, not below Middling stained (New York Cotton Exchange inspection and classification), at the price of, etc., etc. Exchanges 75 The following form shows the New Orleans Cotton Exchange contract. Contract. New Orleans 19 In consideration of one dollar in hand paid, receipt of which is hereby acknowledged have this day sold to (or bought from) 50,000 pounds in about 100 square bales of cotton, growth of the United States, de- liverable from press or presses, railroad depot or depots, in the port of New Orleans, between the first and last days of next, inclusive. The delivery within such time to be at seller's option, in not more than two places, upon five days' notice to the buyer. The cotton to be of any grade from Good Ordinary (fair color) to Fair, inclusive, and if stained, not below Low Middling, at the price of cents ( ) per pound for Middling, with additions or deductions for other grades, according to the quotations of the New Orleans Cotton Exchange existing on the sixth (6th) day previous to the day on which delivery is due. It is distinctly understood and agreed that no cotton shall be tendered or received under this Contract of a less market value than Good Ordinary (fair color), and that the receiver shall have the right to refuse all sandy, dusty red or gin cut cotton; dusty cotton being defined under this Contract as cotton lessened in value more than l-8c per pound by reason of dust; sandy cotton be- ing defined under this contract as cotton containing more than 1 per cent of sand. Either party shall have the right to call for margin, at the variations of the market for like deliveries may warrant, and which margin shall be kept good. This contract is made in view of, and in all respects subject to, the rules and conditions established by the New Orleans Cotton Exchange, and in full accordance with Rule 25 of said New Orleans Cotton Exchange. For the purposes of this Contract, Westwego and Southport are not included as places of delivery. Signed 76 The American Cotton System ' Orders given to members of the New Orleans Cot- ton Exchange to buy or sell a contract for future de- livery of cotton, as an agent or broker for the party giving the order, are required to receive the same on the following form : "Subject to the Rules and By-Laws of the New Orleans Cotton Exchange, make for my account, and as often canceled replace a contract for the sale (or purchase) of one hundred bales of cotton deliverable (or re- ceivable) in July." ANALYSIS OF THE COTTON EXCHANGE BUSINESS. On the previous page of this work, mention, and a minute description of a day's business on the New Orleans Cotton Exchange is given.* To acquaint the reader with the particulars concerning the character of the transactions taking place daily in the great exchanges, it is necessary to particularize to some ex- tent. The author believes it is very essential that producers should be enlightened, as well as dealers, concerning the cotton business from beginning to end, and armed with such knowledge, the intelligent pro- ducer should be in position to meet any dealer or consumer in the execution of any trade to be con- summated, upon equal grounds. The prices of futures and spots emanating from the Cotton Exchanges, being wired to all commercial cen- ters, affords a basis on which the producer's cotton is sold, and here seems to be the point of conten- tion between the Exchange and the grower, who al- leges the Exchange prices are many times fictitious, and the unsophisticated cotton grower should not be ♦Page 79. Exchanges 77 subjected to the alternative of accepting spurious quo- tations as a reward for his industry, or not make a sale. The present system of marketing cotton, whose parentage rests with the New York and New Orleans Cotton Exchanges, is a system over which some com- mercial interests and the cotton agricultural elements of the South are at variance, the former contending for a perpetuity of the system; the other seeking its destruction; the one contending for the mastery, the other fighting a believed-to-be subordination. The cotton grower does not alienate himself against the members of any exchange whose deals involve the handling of spot cotton, nor against the member who contracts in good faith to deliver when sold, or to re- ceive when bought, any number of bales of cotton, but does feel that his interests are jeopardized when con- tracts for cotton are so manipulated as to give ficti- tious prices to his products on purely gambling trans- actions. Contracts are dealt in, similarly, as one would handle stocks, bonds, notes or mortgages, etc., with the exception, that cotton contracts bought or sold through the cotton exchanges are often settled for, by the contracting parties paying a margin to settle the contract. The contract calls for 100 bales or more; the New York and New Orleans Cotton Exchanges will not con- tract to sell or buy less than that quantity. If a cotton merchant buys, say, 100 B/C — a con- tract for 100 bales — through some member of the New Orleans Cotton Exchange, or his representative, at, say, 10 cents a pound, he can pay a margin of $1.00 a 78 The American Cotton System bale — 100 dollars for 100-bale contract — and should the market advance 20 points, the price would then be 10.20 cents a pound, the merchant can close the deal by calling for this 20-point advance, equal to him to 100 dollars. If the contract is closed on this advance, the merchant has received 100 dollars, as a marginal profit, less $15.00.* Should the market decline 20 points, equivalent to one dollar on each 500-pound bale (the weight recog- nized by the exchanges in contracts as a commercial bale), the merchant has a loss of 100 dollars, and the price of his contract stands now to 9.80 cents a pound; should the merchant refuse to pay 20 points more (100 dollars), his contract is canceled and the broker keeps the original 100 dollars paid him by the mer- chant. In such transactions the purchaser gains on ad- vances in prices in the market, and the seller loses; inversely, declines in prices cause the purchaser a loss, and the seller, a gain. Continuing the illustration, when the decline had gone to 20 points, the merchant had a loss in his con- ♦Commission $7.50 to buy, $7.50 to sell — $15.00 for both. If the credit rating of the purchaser is not good, or is unknown, a broker will usually sell out the con- tract on 17 points decline, in order to protect himself, and to secure a brokerage of 3 points; that is, 20 points will cover a margin of 17 points and a 3 point brokerage. If the purchaser's account is beyond question, the broker may carry the cotton beyond a 20-point decline as an accommodation to his customer. Exchanges 79 tract of 100 dollars, which he could surrender or pro- tect by paying the broker 100 dollars more. Should the merchant think he had evidence to influence him to believe a reaction was due or would soon occur, and pay the additional 100 dollars called for, his contract would now cost him 200 dollars, that is, the broker would have 200 dollars of his money, and the mer- chant a contract for 100 bales of cotton; were the market to decline to 9.60, the merchant would bp called upon again to put up another 100 dollars, he could do so and protect his purchase, or refusing, his contract would be canceled at a loss now to him, of 200 dollars. The contract price standing at 9.80, the market would have to advance to 10.40 to give the merchant a return of his 200 dollars, less 15 dollars. In this character of business, wher^ both buyer and seller deal in contracts with the view of making or losing on the deal; where settlements are made by paying one to the other a loss or gain according as the market turns for or against them; where losses and gains are paid by settling for the differences in the value of the contracts, and are dealt in with no idea of delivering or receiving the cotton contracted for ; where gains are to be had on advances and losses on declines, or vice versa, evidently bears all the feat- ures of purely gambling transactions and are cer- tainly reprehensible in the extreme. Such contracts are optional, or ^^ options/' It has been stated by some opposing exchange op- erations, but the author does not give this as official, that fully 65 per cent of the volume of business done in contracts through the members of the exchanges, 80 The American Cotton System consists of that form requiring no delivery nor re- ceipt of cotton on them. Reasoning from analogy, one would conclude that 65 per cent of cotton exchange business is illigitimate, and 35 per cent conducive to beneficial results. If such surmising is correct, the great cotton ex- changes of our country are institutions in which the largest per cent of its business is gambling pure and simple, and to this feature, the attention of our state and national legislatures has been called with a view of having them enact laws eliminating such censurable practices.* BUCKET SHOPS. For convenience of those who wish to speculate in the rise and fall of prices in agricultural products or any other branch of industry, whose prices were regularly quoted on the Exchanges and Boards of Trade, suitable places in all the busy marts of Amer- ica for receiving telegraphic advices respecting mar- ket quotations, were established sometime after the organization of the large Exchanges. The class of business executed in these institutions, to many, was similar in character to that of the estab- lished Exchanges. Cotton Exchanges do not deal in less than 100 bales of cotton on contracts, while Bucket Shops will take orders for 25, 30, 50, 75, 100 or more bales, and in some instances, as low as 10 bales, to satisfy which, *It has been unofficially stated by some members of the exchanges that fully 90 per cent of the business transacted by these institutions is legitimate. Exchanges 81 the prices of the quoted articles from the Exchanges are the factors determining settlement. Trades in Bucket Shops are not based either directly or indirectly upon actual cotton, as saeh character of business does not contemplate either the receipt or delivery of cotton on any transaction originatmg there. In establishing such places of business it was not contemplated the convening of buyer and seller for the purpose of executing contracts with intentions of delivering or receiving any article dealt in, but in- stead, those who entered these places for buying or selling contracts, handled them with the view of mak- ing or losing, as the prices for exchange values showed advances) or declines; that is, its patrons would place their money on a Bucket Shop contract as a dealer at a card game would place his money on a certain card — taking a blind chance to win or lose. The Bucket Shop is a parasite upon the legitimate Exchanges; its business is detrimental and reflective against them; it is not contributive to the establish- ment of values, but may injure them intrinsically; to the agriculturist it is of no economic value. Hazarding money upon a contract of the Exchanges, with the idea of gaining or losing by making such deals exclusively for marginal purposes, is practically the same in kind as buying through any Bucket Shop. For illustration, let it be understood that in Johns- town are two places on opposite sides of the street, one, a place where representatives of the legally or- ganized Exchanges are receiving regularly the quota- tions from these Exchanges; the representative or representatives being duly authorized to execute con- tracts for members of the Exchanges, do so in the 6 82 The American Cotton System regular way, making no contract for less than IOC bales. Customers entering into contract, to buy oi sell this amount of cotton, or more, with intention purely, of making money by the rise and fall oi prices, eliminate speculation entirely in actual cot- ton, and the investments are nothing more nor less than bets in any other thing of value. If John Adams pays to the local broker 100 dollars for 100 bales of, say, July cotton, and John stands in the lobby of this representative Exchange and watches anxiously the prices for the different months as they are chalked on the blackboard, in column form every few minutes; he can readily witness his loss or gain as the figures show to rise above or fall below the price at which he bought; if the purchase price is 10 cents, and the market advances 10 points, he has a profit of 50 dollars; if 20 points, 100 dollars — for every point advance on a 500-pound bale of cotton, there is an equivalent value of 5 cents on the bale — and as both parties have a right under the rules of the Exchange to call for a margin, in this instance John can call for a settlement of the contract at any time he may desire, * whether it be for loss or gain; presuming that the market has gone up 20 points and John has made 100 dollars (less the com- mission of 15 dollars), he, feeling that he has done well, and no doubt giving himself credit for exhibit- ing marked financial ability, thinks he can do so again, he quits this place of business, steps across the street into a Bucket Shop and again buys 100 bales of future cotton, but as he sold his first contract on a 20-point advance in the market, he now buys at the figure for which he sold, or perhaps, a little more, as the market Exchanges 83 has advanced, a bullish feeling pervades the entire trading fraternity and John feels equally sure of making a gain here, but as the prices are being placed on the board — prices coming from some of the organ- ized Exchanges — he witnesses the beginning of a de- cline, and as the declines slightly stop at times, or per- haps again advance a few points to be followed in turn by further declines, this alternating, stimulates him, mixed with hope and doubt, to hang on to his purchase, but the inevitable happens ; the market grad- ually declines to 20 points below his purchase price, when he is called upon to put up another hundred dollars, which he refusing to do, loses the 100 dol- lars as first purchase price. Note this: When John made 100 dollars through a deal with a representative of the Exchange, he paid this representative 15 dollars commission, also, paid the same amount for a bucket shop contract, and not only lost 100 dollars, but 15 dollars commission in excess of the hundred dollars. It might appear that he won 100 dollars in the first instance, lost the same amount in the second, and of the two deals, one exactly offset the other, with no loss to him. As a fact, the 100 dollars gained, did exactly offset the hundred dollars lost, but the cost to secure these two contracts was 15 dollars for each, and the net loss to John, finally, was 30 dollars. The character of the two deals made by John is identical in both instances; his deals were made with his personal knowledge of the fact that if the market advanced he would gain, if it declined he would lose ; they were made in both institutions with no intention, whatever, of delivering any cotton to any one on them, 84 The American Cotton System , and were literally gambling bets, nothing more, noth- ing less. Thousands and tens of thousands of Johns have been allured into such business for many years ; those who were fortunate enough to succeed in winning handsome sums, were lauded as sagacious financiers, while the unlucky Johns, with the influential sym- pathizers enlisting in their behalf, caused so strong a sentiment to arise against this kind of business, which finally gathering strength as it progressed until its voice could be heard in the halls of the State Legis- latures and National Congress, and to help the un- fortunate Johns, laws have been enacted in most of the Southern States preventing his patronizing Bucket Shops; outlawing Bucket Shops, and, that he might not *^ waste his store'' in any form of gambling, laws that shall fall as a protective mantle over him have gone farther than the Bucket Shops and assert that he shall not buy or sell a future contract — ^^ shall not gamble in futures'' — from any of the organized Cot- ton Exchanges. From the foregoing, the inference is drawn, that Bucket Shops are places of gambling, and in confirma- tion of this we quote from Century Dictionary. ^'Bucket Shop. — An establishment conducted nom- inally for the transaction of a Stock Exchange busi- ness, or a business of similar character, but really for the registration of bets or wagers, usually for small amounts, on the rise and fall of prices of stocks, grain, oil, cotton, etc. There being no transfer or delivery of the stocks or commodities nominally dealt in. ^ ' Bucket Shop operations are gambling transactions and should be dealt with accordingly." Exchanges 85 ORIGIN OF BUCKET SHOPS. Man's cupidity leads him into investments, where perhaps, no other influence would induce him under similar circumstances to assume the risk or undertak- ing. This natural propensity evidently was the pri- mary motive that induced individuals to establish this form of business, knowing the gambling instinct or habit existed largely with many, and those caring to assume the risk on varying contingencies, would not hesitate to hazard their money on the rise and fall of prices of anything regularly quoted and given out from the Exchanges. The New York and New Orleans Cotton Exchanges dealing in no less than 100 bales (about 50,000 pounds) of cotton, for future delivery, the Chicago Board of Trade, no less than 1,000 bushels of wheat, 5,000 bushels of corn and oats, 250 barrels of pork, 250 tierces of lard and 50,000 pounds of ribs, made the initial purchase of any of these commodities be- yond the reach of many, and to get that class of in- vestors who would take a risk on a small amount, the Bucket Shop was established. From a few establishing themselves at tlrst near the great Exchanges and Boards of Trade, they grew in number until they had reached approximately 25,- 000, scattered in all the States, before the strong arm of the law was evoked for their destruction. The term ** Bucket Shop,'' originated in Chicago, from the best historical data available, from among members of the Board of Trade, when trading was dull, occasionally some members would call out, **I'll send down to the shop and get a bucket full," refer- 86 The American Cotton System ring to the ^* Shops'' where a small amount could be gambled in, so the term ' ' Bucket Shop ' ' has remained to this day as applied to stocks, grain and cotton gam- bling establishments, in contradistinction to the es- tablished legitimate Exchanges. In their infancy, they wielded but little influence for harm, but their practices having grown to such extensive proportions, their injurious operations be- came so alarming as to necessitate the intervention of the law for their complete eradication. It is argued by members of the Exchanges that legitimate transactions in any commodity, maintain and stimulate prices for*that commodity whether the transaction apply to dealings in the actual article or for future delivery, such reasoning being founded on good judgment and practical experience as to actuali- ties, but on the other hand, where wagers are posted as to rise or fall in price of any article, no amount of reasoning can substantiate the claim that any bene- fit can accrue to the price of the article dealt in from this form of manipulation. To deal in an article, real estate, live stock or any kind of investments, contributes to the stability of prices, but to bet the prices will be up or down to- morrow, next day, or some future time, add nothing in support of valuations. transactions recognized and alleged to be legiti- mate ON the cotton exchanges. In the preceding, the author has attempted to make clear transactions emanating from the Cotton Ex- changes, the nature of which were expressed as gam- Exchanges 87 bling deals ; this character of business contrasted with that of a Bucket Shop, paralleling so closely as to be almost indistinguishable one from the other. Were all the transactions coming from the Cotton Exchanges similar in character and meaning, similar in effect and purpose, as those previously described, it would be an easy matter to establish laws so directed as to effectually close out such sources of gambling opportunities, but as stated in their declaration of purposes, they have a broad field of usefulness when their efforts are directed in legitimate channels. It would be useless to argue that all members of the Cotton Exchanges are men who would not resort to sharp practices to influence the market to their own interests, or that they are every one of the most un- questioned integrity, who like Caesar's wife must not be even suspected, and no breath of censure should ever touch their immaculate reputations, for in that body are, no doubt, individuals who would not hesi- tate to utilize any scheme of ingenuity known to them- selves to direct trading under their surveillance or in- fluence to the end that it would result effectually to their personal gain financially. This assumption is based upon the broad idea of human nature, that there is to be found in all or- ganizations composing financial bodies, fraternal so- cieties and even religious orders, unfit material; and reasoning from this view-point a like conclusion may not inappropriately be applied to tbc Exchanges. THE CONTRACT BASIS. The New York and the New Orleans Cotton Ex- changes not being associated for the express purpose 88 The American Cotton System of handling spot cotton, although its members may exercise the right to act as spot buyers, brokers or factors on their individual account, its business is di- rected in the line of future trading; dealing in con- tracts calling for delivery of cotton at a future date, is maintained for the purpose of affording a con- venient method and a ready market for this class of transactions, the utility of which supplying hedging facilities for producers, merchants and manufactur- ers alike, the hedge operating as an insurance policy, not against the value of the cotton, but a guarantee that the price at delivery time will be the same as stated in the contract when made, thus safe-guard- ing the holder against fluctuations, and at nominal cost as previously stated, during the time from his purchase of the actual cotton to the time of its final disposition. For illustration, Williams & Smith, at Tyler, Texas, buy from farmers' wagons, 100 bales of cotton dur- ing the first week of September, at an average cost of 10 cents a pound, the market at the time varying but little above or below 10 cents, Williams & Smith who receive the market quotations daily, hope to catch the market at a point on which they can sell at a profit, but after they have secured this 100 bales and the price does not go above 10 cents again, they final- ly offer it to some other buyer for 10 cents, which price they could not obtain, and as quotation after quotation of the market showed it to be gradually declining, they seek to protect themselves by selling 100 bales of futures — 100 bales of Marchs, say, for which they can get 10^ cents. By way of parenthesis it may be stated, it is not Exchanges 89 always the case one can sell a near future contract for a margin of one-half cent, but to cover profit, carrying charges, such as insurance, loss in weight, *' country damage" and so forth, it is assumed the March contract has been sold at this figure. Unless a decline is anticipated or may seem imminent, a mer- chant is frequently able to sell a distant contract at .a premium, and with such assured premiums, con- tingencies are overcome to a certain extent. Williams & Smith can have two options in making disposition of this business. 1. Let it be assumed they are willing to take the one-half cent profit, and to realize this amount with- out any further loss, take shelter under the hedge. When they sold this contract they sent 100 dollars to a New Orleans Cotton Exchange broker as a mar- gin to protect him, who makes the transaction in the open on the Exchange floor; the 100 dollars is de- manded as protection in case the market goes up, for they have sold shorty and advances in price on such sales are losses to sellers. After making the sale of March futures, they immediately sold their 100 bales of spots for 9.85, losing 15 points, 75 cents a bale, in other words 75 dollars on this spot transaction; the price of futures in sympathy with bearish sentiment and spots having declined 20 points, also, making a gain of 100 dollars on the future deal; on such a transaction the 100 dollars would be repaid to them if demanded, less the brokerage 15 dollars — $7.50 com- mission to buy and the same amount to sell, a futul'e contract of 100 bales. In a procedure of this nature, they gained on futures 100 dollars, and lost on spots 75 dollars, and commission 15 dollars — ai total loss 90 The American Cotton System of 90 dollars, leaving them a net gain of 10 dollars. This is inferring that the transaction on the part of the Exchange has been legitimate; no revision of the differences on the grades other than middling were had, and relative values remain the same. 2. Williams & Smith can sell their spots, say, at 9.85, accept the same loss on it as just stated in the preceding, and should the market continue to decline, say, to 9 cents, they can order their broker to huy 100 bales of futures for them, and with this contract off- set the one sold for IOI/2, accepting the difference in value, 1^ cents, less expenses ; or they can hold their contract till maturity, say, January, February or even until March, demand the cotton on it, and tender this cotton to the purchaser of the original contract in settlement for the same, and the same differences in value would accrue to them in this form of settle- ment as to settle for the difference in value. It is not usual for dealers in such small quantities of cotton to resort to the hedging function as a pro- tection against a fluctuating market, such advantages being more generally accepted by those firms and in- dividuals whose dealings assume large proportions. It would be hazardous* for large merchants who buy cotton from customers in various* parts of the country, and who sell their holdings direct to the mills, to assume the entire risk of carrying such large amounts without the guarantee given them under the hedge; indeed, the risk would be so great the buyer would no doubt feel inclined to make his offers for purchases, much less than he could afford to pay, than where he can handle with definite prices assured. See pages 91, 92. ExchanSes 91 HEDGING FUTURE AND SPOT COTTON. In the case of Williams & Smith, it is shown how spot cotton can be hedged, held for future sale, or sold at any time desired. The buyer who cares to sell the market short can protect his sales of futures equally as well as spots. Adams & Jones, Memphis, Tenn., believing from the evidences they have relative to the growing crop, the demands of the trade, that cotton quoted in July at 11 cents is a good sale, sell to American and foreign spinners 10,000 bales to be delivered in September, October, November and December following. They can not fortell with any degree of accuracy what cotton will be worth during these delivery months, but in order to protect themselves, they hujj 10,000 bales futures, which contracts mature in these months. When the sale was made to the consumers, it will be noted, they made it direct with each other; a con- tract having no reference whatever to any Cotton Ex- change and entirely independent of it. This sale being made at 11 cents, is equivalent in value to 55 dollars a bale of 500 pounds, aggregating in amount to 550,000 dollars, and to use such a sum as an investment would be quite perilous, to overcome which, this cotton firm buys the contract mentioned in the foregoing from some broker on the Exchange, and here in this character of trading can well be inserted the usefulness of such an institution, as a factor eliminating risks in transactions in actual com- modities. Let it again be stated that when this sale was made 92 The American Cotton System Adams & Jones calculating a margin sufficient to cover expense of handling and a profit for themselves when closing the trade at 11 cents. As in the case of selling 100 bales ^' short ^' pre- viously mentioned, so in this instance, 10,000 bales have been sold '^shorty'' and to consumers who are to receive the cotton, and, not a contract or contracts, although it is not infrequent that settlements of such business may be had by payment of differences in value of the contracts. Estimating they buy 10,000 bales of futures at 10^^ cents, and as influences affecting prices of spots re- flect sympathetically on futures; any advance or de- cline correlatively reflects on the other. Let it be assumed the market declines 20 points, it is very e\ddent a loss of one dollar a bale has occurred on this sale for forward delivery, and a gain of one dollar on their ** short" sale. To make this clear to those who are not fully con- versant with the manner of estimating fluctuations, it will be observed that if the market declines 20 points the price of cotton in the open market has dropped from 11 to 10.80 cents, and a profit to the seller, be- cause they can now buy cotton for 10.80, which they have sold for 11 cents — ^this decline does not affect the price made to spinners, by virtue of their contract they are held to it, equally so, they would not be affected were the price to advance to 12 cents, for the contract would then reflect on the sellers, who are held to a 11 cent figure — ^were the market to advance 20 points, a loss would appear to Adams & Jones as the price would then be 11.20 and would cost them Exchanges 9S one dollar a bale above selling price to buy spot cot- ton. To overcome these contingencies, spot buyers, deal- ing heavily in cotton, take refuge under a hedge bought or sold through some member of the Cotton Exchanges, for future delivery, practically insuring themselves against any loss. Large dealers who buy cotton faster than they can dispose of it, when so purchased at figures from which the market shows a tendency to decline, protect such purchases by selling futures as an offset. In practice, they do not necessarily sell the exact number of bales they may have on hand, but they may sell any amount in excess of the actual spot cot- ton, their judgment may dictate. If Adams & Jones have 10,000 bales cotton in ware- houses in Memphis in September, and can dispose of it at a price satisfactory to themselves, to be delivered in some designated future time, say, November, De- cember, January and February, in such an instance the hedge would be entirely unnecessary, in fact, a tax upon the contract, unjustifiable, as the spot cot- ton is already in hand ready for delivery at the ap- pointed time, and needs no protection further than an insurance policy covering total value. Spinners and millers manufacturing yarns and fab- rics of different kinds, require the use of different grades of cotton and usually contract for their sup- plies with cotton merchants who handle spot cotton, not caring to depend upon a contract bought through the Exchanges, as any number of grades up to eigh- teen may be delivered on it. Suppose a mill requires the use of 500 bales of 94 The American Cotton System middling cotton monthly and should buy that amount of futures through one of the Exchanges, and be subjected to accepting any number of eighteen differ- ent grades upon the contract at time of delivery, and out of which it could perhaps get only, say, 100 bales middling cotton, it is obvious it would be forced to pay for 400 bales of cotton of different grades that it does not want, hence, a contract of this kind would prove undesirable to a mill. Spinners often take advantage of the contract for the future market when they sell their output at good prices, before manufactured, and at a time when they do not have the cotton on hand from which to make the yarns, by protecting themselves with con- tracts calling for delivery of cotton at future dates. If cotton is worth 10 cents, and sales of cotton products are made based on such a price, the spin- ner can sell any quantity of goods he may desire and protect the sale by purchasing future contracts sufficient in amount to cover the sale. In the use of the future contract in these instances the spinner has the same protecting advantage as the spot cotton deal- er who protects his cotton with futures. If the price of cotton declines he loses on the contract bought, but . can buy in the open market, spot cotton at a decline, the manufactured article from which was sold on a 10 cent basis gives a corresponding gain; the decline in futures is practically offset by the purchases of spots at an equivalent decline, and the profit on the manufactured goods remains undisturbed. The spinner in this case has used the contract for a hedging purpose only, and not with the view of receiving cotton on it. He can, if he desires, carry Exchanges 95 the contract to maturity, should the market justify him, receive the cotton of different grades, re-sell it, and buy with the same money the number of bales of the required class suitable for his purpose.* All things being equal, in a normal way, the pre- ceding describes briefly the manner in which spot or future deals may be eliminated from a field of specula- tion, the adventure being deprived of doubt, renders the profit safe and sure. This universal guarantee to the dealer who invests large sums in cotton, proves quite advantageous to the trade and affords such a protection to the dealer as to be almost incalculable. The preceding brief illustrations are founded on the idea that all proceedings as given are strictly in line with the rules and regulations of the Exchanges and are legitimate in scope and character. As a component part of the present system of hand- ling cotton, the right of contract for future delivery seems so closely related as to be an inseparable ({uan- tity; a factor, as a known agency, indespensable to the successful operation of a business in spot cotton requiring protection through the hedge. The hedge would always be a counterbalancing feat- ure were the prices of spots and futures to maintain their relative equilibrium, and any loss on the one would be exactly overcome by a gain on the other, but as the price of futures are at times so greatly at vari- ance with that of spots, the hedge offers only a par- tial cover, rendering it in such instances, of feeble *It should be remembered that in taking ud a list of cot- ton on contract, M. basis governs, and relative grades re- ceived are taken at their grade value. 96 The American Cotton System import as a protection in spot cotton transac- tion. Investments in cotton protected by hedges are subjected to influences that change their value — ^worth more today and less tomorrow — until a parity exists between spots and futures, the agreement of which protects the hedge. In this case the premiums or discounts on futures are the causes affecting the stability of the hedge. The foregoing statements descriptive of the utility of the hedge in connection with spot cotton transac- tions are some of the ways in which it is most uni- versally used. The cotton grower; the wholesale merchant carry- ing in stock large lots of cotton goods; the importer dealing in fabrics composed largely of cotton ; the re- tail merchant who may have his shelves loaded with high priced merchandise, of cotton manufacture, all, can take refuge under a future contract hedge. It is very rare to see a grower, or retail merchant avail himself of the opportunity to secure himself against loss, by means of a future contract, owing no doubt, to the prejudicial idea that this kind of business is morally wrong, and approaches so closely to gam- bling in its nature as to preclude its usefulness as a legitimate factor in conservative business, in their opinion, also, a want of a thorough understanding of the real functions of a hedge, as well as the initial cost to * * get in ' ' on such transactions, act as influences in preventing many from utilizing its availability. BUYING AND SELLING FUTURE CONTRACTS. John Adams having figured conspicuously in buy- ing cotton from representatives of the Exchanges and Exchanges 97 ^Bucket Shops as will be remembered in the preceding, let us get at the particulars by which he **got in/' or made his first investment. The statement there, was, that he made his pur- chase from a representative^ and not a member of the Exchange, now for purposes of illustration it will be assumed that he bought direct from a member (firm) of the New Orleans Cotton Exchange, Messrs. Smith & Jones, and that John resides in Winona, Miss. Future cotton in New Orleans for October, 1909, was quoted at the close at 10.75-76, May 13th, and John thinking the market will still advance, wires something like this: *' Winona, Miss., May 13, 1909. *' Messrs. Smith & Jones, **New Orleans, La. '*Buy for my account 100 bales October at 10.75. Check to cover by mail. **JoHN Adams. ^' If John is known to be reliable to Smith & Jones, the purchase would be made at once, or as soon as the order could be executed. If unknown to them, they would require some information respecting his ability to protect the purchase, either in cash, con- firmation by some bank or well known reliable firm, or bank guarantee. Where cash is used, John would remit any amount he might be able or desire to invest, to some bank in New Orleans, and check against it when he seUs or buys futures, or deposit in his home bank 100, 200, Tage 82. 7 98 The American Cotton System 300 or more dollars, and when trading as indicated by the foregoing wire order, have his local banker guarantee the amount to some New Orleans bank, at which bank Smith & Jones could get their money for making the purchase. Where parties do not have satisfactory credit rat- ings, depositing the money in some bank prior to in- vestment, or bank guarantee, are the more preferable plans for securing the broker making the deals. ^Members of the Exchange often make deals for one another, who are bankers, merchants, exporters and traders and frequently pay no commissions. Parties well known, whose financial standings are of undoubted integrity, and who are in many in- stances largely interested in spot cotton, have no trouble in having orders executed on short notice, without an immediate remittance. Presuming John's order is all right and accepted, he will receive a reply something after this manner: **John Adams, "Winona, Miss. '*We have this day bought for your account, in the New Orleans market, 100 bales of cotton for Oc- tober delivery, etc., at 10.75. Margin received on the above, 100 dollars. ''Yours respectfully, ''Smith & Jones.'' This reply received on a printed slip, filled in by hand or typewriter, is the evidence John has, showing he has bought 100 bales of future cotton. ♦See Latham Alexander & Co. in pamphlet, "Important to Merchants and Planters," 1908, page 33. Exchanges 99 The reader should notice that John does not receive any contract, nor any copy of one, but instead only the notation on the printed form, just mentioned. Unless he carries this contract to maturity, and goes to New Orleans for the purpose of receiving the cot- ton on it, he will never see the contract nor a duplicate of it. Should he or his agent visit New Orleans to accept the cotton on contract the contract would be turned over to him on payment of the cotton as represented by its weights and grades, and in accordance with the rules of the Exchange. The party who sold the cotton to him has the right under the rules to deliver any number of grades (18), from good ordinary to fair,* inclusive — this repetition of delivery grades being inserted here for clearness and emphasis. The broker selling the cotton to John will make up an invoice of the 100 bales, showing class and weight of each bale, and when so made and presented, the money in payment for the cotton is due. John has the right to reject falsely or mixed packed bales, unless they were sold to him as such, '^also, any cotton lower in grade than the lowest grade presented in the seller's samples." He has the right to reject any bales weighing less than 300 pounds; any bales with more than 6 iron bands, exceeding in weight twelve (12) pounds in the aggregate on uncompressed bales. Anything in excess of this weight (12 pounds) shall be deducted by him, or the extra band removed. When compressed bales are delivered as spot cotton. *See contract, page 74. 100 The American Cotton System no deduction will be made for the seventh band, but three (3) pounds will be added to the gross weight. Any amount of bagging in excess of seven yards, weighing two and a quarter pounds to the yard, shall be considered unnecessary, and shall, at the seller's option be removed from the bales before weighing, or an allowance for the excess weight granted. Side pieces, half the width of the bagging, running the entire length of the bale, are not considered as unnecessary, '*and shall not be removed without the authority of the parties in interest." It is the duty of the seller to have the cotton re- weighed in the presence of the buyer's re-weigher. Should the buyer's re-weigher not appear at the ap- pointed time and place for weighing, after having been duly notified the seller shall delay two hours, af- ter which he *^may proceed with the weighing with- out the presence of the buyer's re-weigher." Should damp or wet cotton be tendered, John can reject its allowance in so far as dampness appears, and if both buyer's and seller's re-weighers can not agree as to amount of excess weight for dampness, buyer's re- weigher can demand the cotton not be weighed until dry. Should John doubt the accuracy of the scales, he may have the Chief Surveyor look after them with the view of correcting any deficiencies, should any appear. After the cotton has been weighed both parties agreeing to its classification, and final payment made, the delivery is recognized as complete. This homely illustration is given to show in a clear and concise way, the manner in which future cotton contracts are carried to maturity and actual cotton Exchanges 101 delivered on them in compliance with their stipula- tions. SPOT HOUSES REFUGE. Spot firms doing a legitimate trade in actual cot- ton which is supplied to mill concerns directly by them, protect such purchasers with hedges from con- tracts secured through the Cotton Exchanges. Consumers who depend on Spot Houses for their requirements, seek reliable firms for the fulfillment of their contracts, and such firms making purchases in satisfaction of these contracts, protect fully 80 per cent of them with the hedge, leaving the minimum percentage in actual deals without a hedge, 20 per cent. % This refers to those firms who are daily in the mar- ket, and whose operations from day to day are con- fined to a spot business, and on whose calculations and quotations the interior buyer bases his prices to be offered to the grower, and how those houses in the legitimate channels of trade secure their requirements in fulfillment of the demands of the spinners, from initial points, is exhibited in the following: *This information is official. CHAPTER IV. BUYING SPOT COTTON. To complete the details of how the great American cotton crop is handled; how it is moved from first hands — the growers — to its final destination, it be- comes necessary to describe all the transactions, which are literally confined to a spot business, in addition to those previously enumerated as set forth in future operations in connection with that of spots. When it is remembered that the cotton crop is grown by hundreds of thousands of farmers in the South; from the most ignorant negro with his one, two or more bales, to the most intelligent culturists who grow from five, ten, a hundred, and in some in- stances a thousand or more, it can be seen what a great variety of customers are to be dealt with in a business, the aggregate of which reaches into hundreds of millions of dollars annually in the Southern cot- ton belt. The present system having been developed through a series of years is well known to all growers who offer cotton for sale in its regular season, a process very simple in its nature, but as to the intricacies and mul- tifarious operations enveloping the business in all its ramifications, the public apparently is not so well in- formed. Many intelligent growers seem to exercise but lit- tle forethought in marketing their cotton, offering it any time it may suit their fancy, regardless of the Exchanges 103 condition of the market, the demand of the trade, or want of it ; heedless of the price, whether high or low. Many farmers make a practice of selling their crop as fast as gathered; others adhere to the idea of sell- ing a portion each week, or month; still others with- hold their entire crop until all is gathered and sell late in the season or early the in-coming year. A small percentage, comparatively, consign cotton to reliable commission merchants to be sold by them for the account of the grower, not caring to trust the disposal of their own products in their own hands, or hoping to attain better results through a commis- sion agency. To fully understand the present system of gather- ing cotton from the growers in all districts, near or remote, it is deemed best to follow the plans adopted by some of the leading spinner and export buyers. What may be said of one will answer for all, as the entire buying fraternity operating on a large scale, whether buying in fulfillment of orders, on personal or firm account for speculative purposes, or in com- pletion of contracts previously made, the plan is the same, or so nearly allied as to admit of little distinc- tion, whether the buyers are operating in Tennessee, Georgia, Mississippi, Texas or any other cotton pro- ducing State. Acting upon this idea as a base, the reader's at- tention is directed to the business system of some of the large cotton firms now operating in Texas. A REPRESENTATIVE COTTON FIRM. The principal offices of the firm in question are, say, in New York and Liverpool ; the membership compos- 104 The American Cotton System ing it are also members of the New York and Liverpool Cotton Exchanges, and all the other principal Ex- changes of the world. This house is one of the largest buyers of spot cotton in the world, and the character of business transacted by it in spot cotton, as before stated, is indicative of the manner in which other firms operate. It has direct connection with foreign markets, through branch offices in Bremen, Germany, Havre, France, and many other cotton spinning or distribut- ing centers, giving it great advantage in securing a broader outlet for the disposition of its holdings or acquirements. It can be stated appropriately that a large percent- age of all dealers handling large investments in cot- ton are directly or indirectly represented in foreign markets by and through which medium greater facili- ties are offered for securing prompt sales, and enab- ling such dealers to be almost constantly in the market. For example, take a firm that has branch houses located at the principal interior markets, say Waco, Texas, as an illustration. Contributory Territory. — It may be stated that ad- jacent towns handling cotton which finds exit through the Waco district office are among others, Oglesby, McGregor, Crawford, Clifton, Valley Mills, Meridian, Morgan, Whitney, Blooming Grove, Corsicana. Hills- boro, West, Hubbard City, Marlin, Bremond, Lott, Eddy, Lorena, Moody, Temple, Cameron, Belton and other towns on the San Angelo branch of the Santa Fe Railway, and many others. At some of these points the Waco firm or office has salaried men, whose duty is the buying of cotton, ex- Buying Spot Cotton 105 clusively, through the season; at others it has repre- sentatives who receive the daily quotations from Waco, and buy on these quotations for the percentage of profit they can make, using the quotation as a base upon which to buy, the difference in the quotation given and the price at which they can buy, being the margin of profit to accrue. Let us assume that John Anderson represents the Waco firm at Valley Mills, and is attempting to make his wages by the margin he can gain on the purchases handled by him. In the first place, in order to obtain a working basis, the Waco house is in close touch with both the New York and New Orleans Exchanges, from which it re- ceives constantly through the day, the quotations for both futures and the price of spots, at the close of the market. From the future quotations it calculates a basic price to be given all correspondents contributing cotton to it. All places stated, being in ''common point terri- tory,^' take the same freight rate to Houston and Galveston.* From the port price the freight, ex- penses of handling the cotton is deducted which leaves the quotations for interior points. Both the New York and New Orleans Cotton Ex- etc. DECIMAL COMPARISONS. Tenths. .1 .2 .3 .4 .5 .6 .7 .8 .9 If written thus: 10 and call it 10-tenths, is equal to the fraction \%; then it is a whole number and becomes 1. If the number 10 is used to express 10-tenths it can not be expressed decimally. When desired to show its value in a decimal form, it is written 1.0 — one and no tenths. Whole numbers (integrals) used in connection with decimals, are separated from each other by the dot, and called mixed decimals. Hundredths. Thousandths. .01 ..001 .02 .002 .03 .003 .04 .004 .05 .005 .06 .006 .07 .007 .08 .008 .09 .009 142 The American Cotton System 1.1 =one and one-tenth. 5.8 =five and eight-tenths. 9.2 =nine and two-tenths. 6.03 =six and three-one-hundredths. 22.5 =twenty-two and five-tenths. 100.01 =one hundred and one one-hundredth. 3.001=three and one one-thousandths. 525.227=five hundred twenty-five and two hun- dred twenty-seven thousandths. decimal addition. Adding decimals, tenths must be over tenths, hun- dredths over hundredths, thousandths over thou- sandth, etc. Add these numbers: 2.7, 86.5, 27.03, 16.225, 4.886, 215.16. 2.7 86.5 27.03 16.225 4.886 215.16 352.501 The sum is read, three hundred fifty-two and five hundred and one thousandths. Add 356.11, 106.106, 2.5262, 527.8008, 15.00012. 356.11 106.106 2.5262 527.8008 15.00012 1,007.54312 Arithmetic of Cotton 143 This sum is one thousand and seven, and fifty-four thousand three hundred and twelve hundred thou- sandths. Add twenty-two and six-tenths, four and nine- thousandths, three hundred six and seventeen ten- thousandths, two thousand and two-tenths, three hun- dred twenty-nine and forty-two one-hundredths. 22.6 4.009 306.017 2,000.2 329.42 2,662.246 The answer is two thousand six hundred sixty-two and two hundred forty-six thousandths. Cotton calculations requiring the use of decimals almost constantly, the use of cents, mills and parts of them are necessarily involved. The use of cents as parts of a dollar is expressed decimally with two figures — decimals. Table 1. 1 cent = .01 (tto) of a dollar. 2 cents = .02 (yf^) of a dollar. 3 cents = .03 (y^) of a dollar. 4 cents = .04 (yto) of a dollar. 5 cents = .05 (xtTr) of a dollar. 6 cents = .06 (tK) of a dollar. 7 cents = .07 (rh) of a dollar. 8 cents = .08 (rlo) of a dollar. 9 cents = .09 (y^) of a dollar. 10 cents = .09 (fo\) of a dollar. 144 The American Cotton System Mills being -^^ of cents, cents being y^q-^ of dollars, then mills equal rV of tw of dollars, equal 3-^ (one thousandth) of dollars and are expressed with three decimals. Table 2. 1 mill = .001 (twtt) of a dollar. 2 mills = .002 (tAjj) of a dollar. 3 mills = .003 (i-ror) of a dollar. 4 mills = .004 (two) of a dollar. 5 mills = .005 (two) of a dollar =1^ cent. 6 mills = .006 (tAit) of a dollar. 7 mills = .007 (ttW) of a dollar. 8 mills = .008 (tA^) of a dollar. 9 mills = .009 (tw^) of a dollar. 10 mills = .010 (tw^) of a dollar =1 cent. 100 mills = .100 (twA) of a dollar =10cents. Add thirty dollars and nine cents, twenty dollars and two cents, five dollars and ten cents, eighty dol- lars and twenty cents, one dollar and one cent, one dollar and five cents 1, six dollars and three cents, six- teen dollars and sixteen cents. The same in figures: $30.09 20.02 5.10 80.20 1.01 1.05 6.03 16.16 $159.66 Arithmetic of Cotton 145 The total is one hundred fifty-nine dollars and six- ty-six one-hundredths of a dollar, decimally. This addition shows dollars and cents — whole num- bers and fractions, constituting mixed numbers. To add mixed numbers or decimals, add as in whole numbers, care being taken to place the dots directly over each other, tens over tens, hundreds over hundreds, etc., filling blank spaces with naughts if desired, and place the dot in the result directly un- der the dots above. Add: $- 27.16 9.05 160.003 225.017 9.22 4,728.001 $5,158,451 The same with naughts filled in vacant spaces : $ 27.160 9.050 160.003 225.017 9.220 4,728.001 $5,158,451 The sum may be expressed as $5,158.45^ — five thousand one hundred and fifty-eight dollars and forty-five and one-tenth cents — the 1 coming in mills place, which is iV of a cent. 10 146 The American Cotton System DECIMAL subtraction. To subtract decimals, the same rule must be ob- served as for addition; that is, tenths under tenths, hundredths under hundredths, etc., keeping the lines even by filling in with naughts. Subtract as in simple subtraction. Take twenty dollars and nine cents from thirty- two dollars and ten cents. $32.10 20.09 $12.01 The 10 cents equal yV oi a dollar and as a deci- mal is expressed as .1, but to make the subtraction easy the naught is added to the right. Table 3. $ .05 ( 5 cents )=j'o of a dollar. .10 (10 cents )^Ti;f of a dollar. .125 (121/2 cents)=|^of a dollar. .20 (20 cents)^iof a dollar. .25 (25 eents)^^of a dollar. .30 (30 cents )=^i^(i0f a dollar. .375 (371/2 cents)^f of a dollar. .40 (40 eents)=f of a dollar. .50 (50 cents)=iof a dollar. .60 (60 cents)^fof a dollar. .625 (621/2 eents)=^|'of a dollar. .75 (75 cents)=f of a dollar. .875 (871/2 cents)=|of a dollar. .90 (90 cents )=TVf a dollar. By the table add $35f, $61,%, $8Vi, $51^. $116t% and Ans. $272.90. Arithmetic of Cotton 147 Explanation : $ 35f=$ 35.40 61 1^= 61.90 81/4= 8.25 116i\= 116.30 51V„= 51.05 Total amount $272.90 Add $1161, $58%, $265^%, $565 f\, and from the sum take $92%. Ans. $912.80. Explanation : $1161=$ 116.40 =$ 116.400 587/8 = = 58.875= 58.875 265 A= = 265.30 = 265.300 565 ,V = 565.10 = 565.100 $1,005,675 $1,005,675 Subtract 92.875 Remainder $ 912.800 By Tables 2 and 3, add $150 and 1/2 cent, $3283/8, $39 and 1 mill, $437%, $125 and 5 cents, from the sum take $800 twenty-two and 14 cents. Explanation : $150+ V2cent=$ 150.005 (Table 2) $3283/s= 328.375 (Table 3) $39+1 mill = 39.001 (Table 2) $437%= 437.625 (Table 3) $125+5 cents = 125.050 (Table 1) $1,080,056 Less $800+221/2 cents =$ 800.225 (Tables 2 and 3) $ 279.831 148 The AmeriCxVN Cotton System Add $1441-, 72%, 91/2, 2351/4, 42Vo. Ans. $503,925. Add one dollar one mill, 63 dollars and 6 cents, 122 dollars and 20 cents, 91 dollars and 22 cents, 1001 dollars 1 cent and 2 mills, 36 dollars and sixty cents and 6 mills. Ans. $1,315,099. Add $49i $68%, $126 1%, $13^0. Ans. $376,225. Add $20^^ $991/2, $2921^, $634, $6,042^ $111%. Ans. $6,572,625. Add $563/8, $101-/0, $6211/2, $33 iV, $75 1, $1,000.- 101/2. Ans. $1,887.58. DECIMAL SUBTRACTION. From $9993/8 take $271/2. Ans. $971,875. From $10,375i take $156y^o^. Ans. $10,218.30. Add $100,260%, $1.044f, $500 iV, $221/2, from their sum subtract $99914. their sum subtract $99914. Ans. $100,828,625. Adding and subtracting decimals require the same process as adding and subtracting simple numbers, due regard being had for the location of the deci- mal point and position of the decimal numbers. DECIMAL MULTIPLICATION. To multiply decimal fractions requires the same operation as that performed in multiplication of sim- ple numbers. * There must be as manv decimals in the answer as Arithmetic of Cotton 149 are in both multiplier and multiplicand added to- gether. Point off with a decimal point as many decimals in the answer as are in both multiplier and multi- plicand, counting from the right towards the left. Should the multiplication not give a sufficient num- ber of decimals, in the product, prefix naughts to the left of it to make the required number. Multiply two and tV ^7 25 and A. 2.7X25.3= 25.3 2.7 1771 506 68.31 There is one decimal in the top, and one in the bottom number shown here; two must be cut off in the answer, commencing on the right and counting towards the left. Multiply 3.125 X50. 3.125 50 156.250 There are three decimals in the multiplicand and none in the multiplier — point off three in the answer. Multiply .005 (five thousandths) by .8 (eight- tenths). .005 .0040 150 The American Cotton System The multiplication here gives 40 as a product, but as both the bottom and top numbers contain four decimals added together, four must be shown in the answer to make which two naughts are prefixed to the left of the 40, the answer, then, is four one-thou- sandths. Multiply .25 by 50.64. 50.64 .25 25320 10128 12.6600 In this multiplication the two naughts in the prod- uct count nothing for additional value ; the answer will then read, twelve and sixty-six one-hundredths. Note. — Twenty-five one-hundredths of anything be- ing 1^ of it, the same result will be obtained by divid- ing by 4 : 4)50.64 12.66 DIVISION OF DECIMALS. To find the quotient (answer) in decimal division requires the same process as an operation in division of simple or whole numbers. The dividend corresponding to the product in mul- tiplication, must contain as many decimal places as are shown to be in both factors — divisor a*nd quotient. There must be as many decimals in the answer as those in the dividend exceed those in the divisor. Arithmetic of Cotton 151 Should the divisor contain more decimals than the dividend, annex naughts to the dividend until they equal in number those in the divisor ; the division will be performed then as in whole numbers with no deci- mals in the answer. 1. Divide 31.92 by .42. Explanation : .42)31.92(76 294 252 252 There being an equal number of decimals in both divisor (.42) and dividend (.92) they cancel each other and the answer is a whole number. It is usual in practice in such examples to take out both decimal points and divide as in whole numbers. 2. Divide 319.2 by .42. Explanation : .42)319.20(760 294 252 252 In this division only one decimal appears in the dividend (.2), and since the dividend must contain as many decimals as the divisor, a naught is an- nexed to the .2, making it now .20 dVij), the operation performed as in the preceding example (1), giving 760 as a whole number for an answer. Note. — Adding a naught to the .2, adds nothing 152 The American Cotton System in value to it- — only cyphers annexed as decimals to the dividend, facilitating the operation of division and making clear the character of the answer. 3. Divide 3.192 by .42. Explanation : .42)3.192(7.6 294 252 252 In this example one decimal appears in the answer. Note there are three decimals in the dividend (.192) and two in the divisor (.42), hence the number in the dividend exceed the number in the divisor one; this number (1) then is given in the answer. 4. Divide .3192 by .42. Explanation : •.42).3192(.76 294 252 252 Pour decimals in the dividend (.3192) are two more than in the divisor (.42), hence two decimals are placed in the answer. 5. Divide 3192 by 4.2. Explanation : 4.2)3192.0(760 294 252 252 Arithmetic of Cotton 153 In this example, as in No. 2, the same result is ob- tained, namely, 760 whole numbers. The divisor (4.2) containing one decimal, the same number is placed in the dividend by annexing one naught. 6. Divide .03192 by .42. Explanation : .42). 03192 (.076 294 252 252 Five decimals in the dividend here exceed those in the divisor by two, making three more in the dividend, hence three decimals must be in the answer, and as the division gave only 76, a cipher is prefixed to the 76, making .076 as the answer. 7. Divide .03192 by .042. Explanation : .042). 03192 (.76 294 252 252 Five decimals in the dividend exceed by tivo those in the divisor, so, two decimals are placed in the answer. From the preceding examples a general rule may be formed for division of decimals. / Rule. — Make the division as in simple numbers^ pointing off from the right hand side of the answer as many places for decimals^ as the number in the divi- dend exceeds those in the divisor; should the answer 154 The American Cotton System not show so many, prefix naughts to supply the de- ficiency. 8. Divide .00034 by 1.7. Ans. .0002. 9. Divide 40.36 by .27. Explanation: .27 ) 40.360000 ( 149.4814+ 27 133 108 256 243 130 108 220 216 40 27 130 108 22 It will be seen that the two decimals in the dividend equal those in the divisor, giving from the division 149 as a whole number, but the division is continued to four decimal places by adding naughts until car- Arithmetic of Cotton 155 ried to a point where the division repeats itself, and will never end evenly. In operations of this kind the division may be ex- tended to any number of decimals by the addition of naughts to the dividend. Reversing the operation by multiplication gives the proof. Table of Points. Table 4. 1 point equals .0001 of a dollar 2 points ' ' .0002 " ' 3 " ' .0003 " ' ", 4 " ' .0004 " ' 5 " ' .0005 " ' 6 " ' .0006 " ' 7 ' .0007 " ' 8 " ' .0008 " ' 9 " ' .0009 " ' 10 " ' .0010 " ' 20 " " .0020 " ' 25 " " .0025 " ' 50 " " .0050 " ' 75 " " .0075 " ' 100 " " .0100 " ' ' == 1 cent 250 " " .0250 " ' ' = 21/2 cents 300 " " .0300 " ' ' ^ 3 cents 500 " " .0500 " ' ' = 5 cents 1000 " " .1000 " ' ' ^10 cents Cotton quotations being given in common fractions, and computations being more readily ascertained by use of decimal fractions, the following table is given showing their relative value : 156 The American Cotton System Common Fractions with Decimal Equivalents — Table 5. ^»i =.03125 of a dollar A(=A^.0625 " " " ^.=.09375 " " " i=A=3*5=.125 " " " ^^=.15625 A=^'%=.18 #j=.21875 " " i=l=i\-=A=.250 " " ^=.21825 " " A=M— 3125 " " H-^.34375 " " 8 IB T2 •'J'O M=.40625 " " tV=M=.4375 1-1—46875 i=-|=l=i\=M=.500 " " ^•=•53125 " " tV=-M=.5625 " " 14=59375 " " l=il=li=-625 " " f^==.65625 " " -H=||— 6875 " " 16 S2~ ff=.71875 l=l=H-=M=.750 " " M=.78125 " " H=li=.8125 " " H-=-84375 " ■" -|-i-|-=M-=-875 " " 11= 90625 " " H=-M=-9375 " " f|=.96875 " " i-=l=l=l=H=«=i.ooo " " Arithmetic of Cotton 157 Eeversing the tabular form of decimals, for a ready and convenient reference, this will be found very use- ful as an aid. No fractions with equivalent decimals are exhibited lower than sixteenths, which in turn, show relative values in ''points." Table 6. .000625=.0006i/4 of a dollar =^r\ of a cent = GV4 pts .00125 =00121/2 " ' — 1 >> 8 ' =121/2 " .001875=. 00183^ " ' ^^18 ' =183/4 " .0025 = = \ " ' =25 " .003125=.0031% " ' = ,\ " ' -311/4 " .00375 —00371/2 " ' 8 ' -37 V2 " .004375=.00433^ " ' =^t\ " ' =433/4 " .0050 = = i " ' =50 " .005625=.0056i4 " ' 9 '» 1 6 ' =561/4 " .00625 =.00621/2 " ' " " 8 ' =621/2 " .006875— 00683^ " ' =\l " ' —683^ " .0075 = " ' = 1 " ' =75 " .008125=.0081i/t " ' =H " ' =811/4 " .00875 =.00871/2 " ' = i " ' =871/2 " .009375=00933^ " ' =H " ' — 933^ " .0100 = = ] . cent =n " ' =100 " For convenience the points are generally expressed in concrete numbers, as 2 points, 3 points, 6^/4 points, 714 points, instead of the long decimal showing equiv- alent value. Where cents are connected with the points, the deci- mal notation is usually disregarded, and a dot placed between the cents and points, making thereby cotton calculations easier by the avoidance of a multiplicity of figures. 158 The American Cotton System Ten cents and 2 points, 10.U2, are read ten naught two. Six cents and 1 point, 6.01, are read, six naught one. Twelve cents and 20 points, 12.20, are read, twelve twenty. Two cents and 78 points, 2.78, are read, two seventy- eight. Fifteen cents and 25 points, 15.25, are read, fifteen and a quarter. The reader who desires to be thorough in cotton calculations is urged to begin at the beginning of this work — *' Arithmetic of Cotton'' — follow it through carefully, and in a short time will be able to make any computation on cotton he may desire. It is the author's intention to set forth so clearly and by gradual gradation the elucidation of all the problems, that one can scarcely avoid understanding the manipulation of them, who mil take a little time and study for himself. As nearly all cotton calculations involve the use of both the common and decimal fractions, their mean- ing can be readily ascertained by reference to the tables, which explains the most required of them. Where cotton quotations are given involving the •use of common fractions, and the reader finds it diffi- cult to execute his work with such fractions, he can find their corresponding values in the decimal table showing equivalent value for such fraction and use this equivalent decimal in lieu of the common fraction. , Arithmetic of Cotton 159 EXAMPLES INVOLVING THE USE OF THE CENT— DECIMAL EQUIVALENT $.01 —100 POINTS. PROBLEMS. Ex. 1. A sells 1 bale of cotton weighing 520 pounds at 10 cents a pound. What amount of money does he receive ? Ans. $52.00. Note. — It is evident each pound of cotton brings 10 cents and the number of pounds is 520, he receives 520 times 10 cents, which equals 5200 cents. Two figures must always be used to express cents, and as cents are decimal parts of a dollar, then to show value in dollars a dot (.) — the decimal point — is placed to the left of cents — thus .10 (ten one-hundredths). .10X520=$52.00. Explanation : .10 520 200 50 52.00 The multiplicand here contains two decimals, hence two decimals must be cut off in the answer, commenc- ing on the right side of the answer and counting to- wards the left. Ex. 2. B sells 2 bales of cotton; their weights are 516 and 534 pounds, respectively, for 10 cents a pound. What is their total value at this price ? Ans. $105.00. 160 The American Cotton System Explanation : Add weight of both bales. One bale weighs 534 pounds One bale weighs 516 pounds Both bales weigh 1050 pounds 10 cents multiplied by 1050 pounds gives the total value. 10X1050=10500 or 1050 .10 $105.00 Ans. $105.00. Note. — Point off 2 decimals in the answer. Ex. 3. John Smith sold 3 bales of cotton at nine (.09 cents) cents a pound for all of it. When re- weighed it lost 10 pounds from gin weights. The bales weighed at the gin 516, 494, and 530 pounds, respectively. What was their total value? Ans. $137.70. Explanation : Their weights were 1 bale 516 pounds 1 bale 494 pounds 1 bale 530 pounds Total 1540 pounds Lost 10 pounds Left 1530 pounds at 9 cents .09 Amount $137.70 Note. — Two decimals express the cents (.09) and two are counted and pointed off in the answer. Arithmetic of Cotton 161 Ex. 4. B sold 2 bales of cotton, one weighing 525 pounds at 8 cents a pound, and the other, 540 pounds at 7 cents a pound. He paid 10 cents a bale for weighing. What amount of money did he receive? Ans. $79.60. Explanation. — One bale of 525 pounds at 8 cents, equals $42.00. One bale of 540 pounds at 7 cents equals $37.80. The tw^o amounts added equal $79.80 Less the weighing (10 cents each bale) 20 $79.60 Note. — For convenience multiply weight of each bale by its price. 525 pounds 540 pounds .08 .07 $42.00 $37.80 Price of 1 bale $42.00 Price of 1 bale 37.80 Total value $79.80 The weighing cost .20 Leaving net $79.60 Ex. 5. John Myres sold 2 bales of cotton weighing, each, 535 and 515 pounds at 9 cents a pound, also, 3 bales each 495, 565 and 510 pounds at 7 cents a pound. He owed 15 dollars for ginning and 10 cents a bale for weighing. How much money did he receive for the cotton and how much had he left after paying expenses ? 11 162 The American Cotton System Ans. Total received, $204.40; after paying ex- penses, $188.90. Explanation : Add the weights of the first 2 bales and multiply the sum by the price; add the last 3 bales and multiply the sum by the price for same. 1 bale weighing 535 pounds 1 bale weighing 515 pounds Total weight 1050 1050X.09=$94.50 for 2 bales. 1 bale weighing 495 pounds 1 bale weighing 565 pounds 1 bale weighing 510 pounds Total weight 1570 1570X.07=$109.90 price for 3 bales 94.50 price for 2 bales Total amount $204.40 price for 5 bales Ginning $15.00 Weighing .50 Total expenses 15.50 Net receipts $188.90 Ex. 6. John Williams was offered 10 cents a pound for 4 bales of cotton, which price he refused, but sold two months later for 9 cents a pound and lost 10 pounds in weight. Cotton weight at first was 2010 pounds. What was his loss? Ans. $21.00. Arithmetic of Cotton 163 Explanation.— 10 X2010=$201.00 the price he could have received at first, then the first price offered was $201.00 .09 X 2000= ( price now ) 180.00 Total loss $ 21.00 Note. — The explanation here has the operation of multiplication indicated. Ex. 7. Mr. Anderson could get 10 cents a pound for 21 bales of cotton weighing 11,340 pounds with no expenses deducted; he sold 4 months later for 11 cents a pound: charges against the cotton were, in- surance 30 cents a bale, weighing 10 cents a bale, de- livering to depot 10 cents a bale. The cotton gained 60 pounds in weight. What was his gain ? Ans. $109.50. Explanation : Original weight 11,340 pounds Gain in weight 60 pounds Weight now 11,400 pounds 11X11,400 (price now) = $1,254.00 Insurance 21 bales at 30 cents =$ 6.30 Weighing 21 bales at 10 cents = 2.10 * Hauling 21 bales at 10 cents = 2.10 Total expense 10.50 Net price now 1,243.50 Original weight 11,340 pounds: 10X11,340 (first price) = 1,134.00 Total gain $ 109.50 164 The American Cotton System Ex. 8. Jones & Brown, ginners, having refused an offer of 9 ceuts a pound for 40 bales of cotton, held it five months and sold for 10 cents a pound. The cotton originally weighed 20,960 pounds, but gained 140 pounds on final sale. The charges against this cotton were, insurance, 60 cents; drayage, 10 cents; sampling, 10 cents ; commission, 15 cents a bale. What was gained by holding? Ans. Gain $185.60. Note. — Solve as example 7. Ex. 9. What would be Jones & Brown's loss if they refuse 10 cents a pound, hold 5 months, sell for 9 cents a pound, loss 140 pounds in weight and charges the same as example 8? Ans. Lost $260.20. Explanation : Original weight 20,960X.10=$2,096.00. Original weight 20,960 pounds Lost weight 140 pounds Weight now .09X20820= Insurance 60X40=$24.00 Drayage 10X40= 4.00 Sampling 10X40= 4.00 Commission 15X40= 6.00 20,820 pounds $1,873.80 Total expense (subtract) 38.00 Net amount now $1,835.80 Value at 10 cents 2,096.00 Value at 9 cents less charges 1,835.80 L»ss $ 260.20 Arithmetic of Cotton 165 Ex. 10. Fred Smith is offered 11 cents a pound for 4 bales of cotton, 10 cents a pound for 5 bales of cotton, 9 cents a pound for 6 bales of cotton, 8 cents a pound for 10 bales of cotton, or 9 cents a pound for the whole lot. Cotton averages 500 pounds to a bale. Which price should he take? Ans. Different prices for different lots. Explanation : lbs. cts. 4 bales 500 pounds = 2,000 X.ll=$ 220.00 5 bales 500 pounds = 2,50QX.10= 250.00 6 bales 500 pounds = 3,000 X. 09= 270.00 10 bales 500 pounds = 5,000 X. 08= 400.00 Total value 12,500 $1,140.00 .09X12,500 pounds = 1,125.00 Would have lost at .09 all round $ 15.00 EXAMPLES INVOLVING THE USE OF THE HALF CENT— DECIMAL EQUIVALENT $.005—50 POINTS. Remark 1. — By reference to Tables 1 and 3, it will be observed that i/2 is represented as .0050 (five one- thousandths) of a dollar, equivalent in value to 5 mills and showing 4 decimals. A naught (0) annexed to the right of a decimal adds nothing in value to it, as .5 (i\), .50 (x%), .500 {-A%%), all have the same value, hence when the decimal .0050 is written, the same value exists as if written .005, and to point off 3 decimal places in the product is sufficient. Remark 2. — I^et it be required to find the value of 1 bale of cotton of 500 pounds weight at 9% (.095) cents. 166 The American Cotton System Here 9 cents is written .09 One-half cent is written .005 Nine and one-half cents is written (decimally) .095 .095X500=$47.500. Try the same with 4 decimals. .0950X500=$47.5000, showing no gain in the total value. Ex. 1. Will Smith sold 3 bales of cotton weighing 520, 535 and 485 pounds each at lOi/^ cents a pound, and 2 bales weighing 510 and 525 pounds each at 91/^ cents. What is the value of the 5 bales? Ans. $260,021/2. Explanation : Add the weights of the 3 bales which are 1540 pounds. Ten cents is written $ .10 One-half cent is written .005 Their decimal, lOi/g, is .105 .105X1540= $161,700 Add the 2 bales' weight, which is 1035. Nine cents is written $ .09 One-half cent is written .005 Then 9l^ cents is .095X1035— $ .095 1035 .095 5175 9315 98.325 Total value for 5 bales 1540 .105 7700 1540 $260,025 $161,700 $98,325 Arithmetic of Cotton 167 Each multiplier has 3 decimals — 3 must be pointed off in the product — the answer is two hundred and sixty dollars and two and one-half cents. Ex. 2. Mr. Williams sold his 7 bales of cotton, which had been exposed to the w^eather for several' months, for 11 14 cents, if not damaged, but when delivered to buyer, it was shown to be badly injured. It was agreed to make nothing off in weight, but re- duce the price % cent a pound. The cotton weighed 3650 pounds. What was rea- lized from sale? Ans. $401.50. Explanation : First price 11.5 cents Deducted for ''country damage" 00.5 cents Net price per pound 11.0 cents .11X3650=$401.50. Note. — lli/o cents is $ .115 decimally % cent is .005 decimally $ .110 % cent from III/2 cents leaves 11 cents. Ex. 3. What was Mr. William's loss for weather or ''country damage" on his cotton? Ans. $18.25. Explanation : 3650X111/2 (first price) = $419.75 3650X11 (sale price) = 401.50 Lost $ 18.25 168 The American Cotton System Ex. 4. Find the value of 625 pounds at 12i/4 cents, 1130 pounds at IIV2 cents, 1510 pounds at 10^ cents a pound. Ans. $366,621/2. Explanation : .125X 625=$ 78.125 .115X1130= 129.950 .105X1510= 158.550 Total value $366,625 Note. — All 3 multipliers here have 3 decimals, so 3 decimals must be pointed off in the answer. Ex. 5. A man sold 5 bales of cotton weighing 2640 pounds for 91/2 cents a pound. One week before, he was offered 8^/2 cents a pound for the same cotton. How much did he gain by holding one week? Ans. $26.40.' Explanation : Multiply 91/2X2640 Multiply 81/2X2540 Subtract Note. — If multiplication is made by use of the com- mon fraction i/>, point off 2 decimal places in the product. Ex. 6. A buyer bought 50 bales of cotton averag- ing 7I/2 cents a pound in price, which he sold six months afterwards for 9i/> cents a pound. His ex- penses were $1.50 a bale; what w^as his gain if the cotton weighed 26,000 pounds? Ans. $445.00. Arithmetic of Cotton 169 Explanation : .095X26000= value received $2,470.00 .075X26000= value paid 1,950.00 Difference $ 520.00 His expenses were $1.50X50=: 75.00 Leaving net gain $ 445.00 Ex. 7. A farmer having 6 bales of cotton, sold 2 for 8 cents a pound, 2 months later sold 2 for 8Y2 cents a pound ; 3 months after this sold the other 2 for 9^/2 cents a pound. The first 2 weighed 1125, the second 2, 990 and the third 2, 1105 pounds. What amount did he receive ? Ans. $279,121/2. Explanation : .08 X1125= what? .085 X 990= what? .095X1105= what? Add the products. Ex. 8. John Watkins raised 12 bales of cotton on 24 acres of ground. He paid i/4 for rent and % of the expense for ginning, which was 3 dollars a bale. 'The cotton sold for ly^ cents a pound; it weighed 6190 pounds. What amount did Mr. Watkins get for his cotton ? Ans. $348.1834. Explanation : The total weight is 6190 pounds. % belongs to Watkins. 1/4 of total =15471/^ pounds. % of total =15471/2X3=46421/2 pounds. .075X4642i/2=$348.1834. Note.— 4641/2=4642.5 (the .5 is A). 170 The American Cotton System Then .075X4642.5= 4642.5 .075 232125 324975 348.1875 There is 1 decimal in the multiplicand and 3 in the multiplier, making 4 decimals to be cut off from the right of the product, giving 348 as a whole number and .1875 (=18%) as the fractional part of the product. (Eeversing the multiplier and multiplicand for convenience.) Ex. 9. What would be the landlord's value of the cotton ? Ans. $116,061/4. Explanation : The total weight is 6190 pounds. The landlord has 1/4, which is 15471/2 pounds. 1547.5 X.075=$116.06i4, his part. Ex. 10. Prove that this is correct. Explanation : The total weight is 6190 pounds. 6190X.075=$464.25. Mr. Watkins' %= $348.1834 Landlord's 14= $116.0614 Both = $464.25 Ex. 11. What amount of money did Mr. Watkins have after paying the ginning? Ans. $321.1834. Explanation : His total amount of money received was $348,183/4. He raised 12 bales. Arithmetic of Cotton 171 % of them were his. 1/4 of them was 3 bales. % of them were 3X3 bales =9 bales. 3 (dollars) X9 (bales) =$27.00. He received $348.1834 He paid for ginning 27.00 Leaving for him $321,183/4 Note. — Bales are not multiplied by dollars, but as there are 9 bales, and the price for ginning is 3 dol- lars for each bale, it is evident 3 dollars must be for each bale, and as there are 9 of them, the multiplication is performed by multiplying the 3X9 to get the total amount. The 3 here is dollars, and the result is 9 times 3 dollars, equalling 27 dol- lars. EXAMPLES INVOLVING THE USE OF THE QUARTER CENT— DECIMAL EQUIVA- LENT $.0025—25 POINTS. Remark. — The i/4 represented here shows the frac- tional part of a cent, which, decimally, is .01, and % of it equals .0025 (twenty-five ten-thousandths) of a dollar. (See tables 1 and 3.) Ex. 1. Tom Williams sold 5 bales of cotton weigh- ing 2580 pounds at 8% cents a pound. "What is the total value? Ans. $212.85. Explanation: Multiply the weight by the price, 2580X.0825=$212.85. The 25 points involved necessitates the use of decimals to the fourth place. OF THE 172 The American Cotton System Note. — Eight cents is .08 Twenty-five points are .0025 Then 8 cents and 25 points == .0825 decimally, which equals 814 cents. 2580 .0825 • 12900 5160 20640 212.8500 Cut off 4 figures in answer, as there are 4 decimals in the multiplier. The operation can be performed this way: 2580 81/4 20640 645 21285 How can you tell what the product is? Where will you place the dot or decimal point ? The instruction given in the use of the decimal in multiplication will guide the student. If a naught (0) is placed in front of the 8^/4 then the multiplier would be .081/4 dollars and 2 figures would be cut off placing the dot in front of the 8, showing the an- swer to be 212.85. Ex. 2. A sells 3 bales of cotton, 1 weighing 495 pounds at 10^/4 cents, for the other 2, whose weights Arithmetic of Cotton 173 are 512 and 518 pounds, he sells at 9% cents a pound. What is the total cash received? Ans. $148.5834. Explanation. — Multiply weight of first bale by 101/4 (.1025) cents, and the sum of the 2 bales by 91/1 (.095) cents. 495X1025=$ 50.7375 512+518=1030X.095= 97.8500 Total received $148.5875 Ex. 3. Henry Jones took 1500 pounds seed cotton to the gin for which he was offered 314 cents a pound in the seed, not selling on this offer he had it ginned, the cotton 'Hhirded itself.^' The ginning cost 3 dol- lars. He sold the bale for IOI/4 cents a pound and the seed at the rate of 16 dollars a ton. Did he gain or lose, and how much by having the cotton ginned? Ans. Gain $7.50. Explanation : Seed cotton weighed 1500 pounds. i = weight of bale = 500 pounds I = weight of seed =1000 pounds 500X.1025= $51.25 2000 pounds weight equals 1 ton =$16.00 1000 pounds weight equals 1/2 ton = 8.00 8.00 Total received for cotton and seed $59.25 Less expense for ginning 3.00 Net amount received $56.25 1500 pounds seed cotton at 31/4 cents = 1500 X.0325= value in the seed = 48.75 Gained by having it ginned $ 7.50 174 The American Cotton System Note. — This cotton is figured as having no loss from trash or dirt. Ex. 4. Would Jones have gained anything had he sold the cotton for 9% cents a pound and the seed at 12 dollars a ton ? Ans. Gain, $3.00. Explanation : 500X.0975= $48.75 1000=1/2 ton = (at $12.00) 6.00 Total received, gross $54.75 Less ginning expenses 3.00 Total received, net $51.75 1500X.325 (314 cents) = 48.75 Gain $ 3.00 Ex. 5. A farmer had a bale of cotton ginned in which there was an excess of moisture, causing the lint to show '^gin cuts" and ^'naps;'' had it been ginned dry it would have classed middling and been worth 101/2 cents a pound, but owing to imperfect ginning it was sold for 10% cents a pound and 10 pounds in weight deducted for dampness. Bale weighed 560 pounds before deduction. How much loss to this man for having his cotton ginned wet? Ans. Lost $2,421/2. Explanation : 560X.105 (101/2)= $58,800 550 X. 1025 (1014)= 56.375 $ 2.425 Ex. 6. A grower took 3 bales of cotton to market Arithmetic of Cotton 175 weighing 516, 522 and 532 pounds, for which he was offered 9% cents, gin weights, or 91^ cents and have the cotton re- weighed at the public scales; he sold on gin weights. What was his gain or loss? The re-weights were 506, 519 and 530. Ans. Lost $2.50. Explanation. — Add gin weights and multiply by 914 (.0925) cents. Add the reweights and multiply by ^Yz (.095) cents. Subtract the lesser from the greater number; if the product of gin weights show greater, there will be a gain, otherwise a loss. Ex. 7. Tom Sanders found the market down 14 (25 points'! when he offered his 4 bales of cotton for sale which weighed 2620 pounds. What was his loss by the decline if he sold for 914 cents? Ans. Lost $6.55. Explanation : (1) 2620X.095 = price before decline $248.90 2620 X. 0925= price after decline 242.35 Lost $ 6.55 (2) First price .0950 (914) Second price .0925 (914) Difference (loss) .0025 ( %) 2620X.0025=$6.55. Ex. 8. Mr. Henderson offered to take "10 cents a pound for his 5 bales of cotton and deduct 30 pounds for damage; the buyer made a counter offer of 9%. cents a pound instead, with no deduction for weight ; the cotton weighed, without deduction, 2580 pounds. Mr. Henderson sold at the buyer's offer; did he gain or lose in the sale? Ans. Lost $3.45. 176 The American Cotton System Ex. 9, A tenant rented 40 acres of land at 3 dol- lars an acre, which land was planted in cotton and produced 10 bales weighing 5390 pounds, which he sold at 8% cents a pound, and paid for ginning $32.34. Would he have gained or lost in the transaction had he rented to pay 14 the cotton and each pay his own expense for ginning at 60 cents a hundred? Ans. Gained $16.93 to pay 14 rent. Explanation : 5390X.0825 (814) = value of cotton $444,675 Less rent 120.000 $324,675 Ginning 32.340 Net amount $292,335 14 of 5390 pounds =1347.5= rent. 5390—1347.5=4042.5= tenant's part. 4042.5X.0825 (814) = value $333.50+ 4042.5X60= cost ginning 24.25+ Net amount renting for part of crop $309.25+ Net amount renting money rent 292.33+ Gain $ 16.92 Ex. 10. The landlord received from the tenant (Ex. 9), cash, $120; what would he have received for 1/4 the cotton, if sold at the price the tenant secured, and pay his part of the ginning? Ans. $103.08+. Explanation : V4 is 1347.5 pounds X.0825 (814)= $111.16+ Ginning 13471/2X60 cents a hundred = 8.08+ Net receipt $103.08+ Arithmetic of Cotton 177 EXAMPLES INVOLVING THE USE OF THE ONE-EIGHTH ( Vs ) CENT— DECIMAL EQUIVALENT $.00125—121/2 POINTS. Ex. 1. A man sold 1 bale of cotton weighing' 560 pounds at 9% cents a pound. What was its value in dollars and cents? Ans. $51.10. Explanation : Multiply the weight of the bale by its price per pound. 560X. 09125 (91/8) =$51.10. Note. — Nine cents = $ .09 One-eighth cent = .00125 Nine and one-eighth cent = $ .09125 Ex. 2. Find the worth of 1600 pounds of seed cotton at 3% cents a pound. Ans. $50.00. Explanation: 1600X. 03125= (See Table 6). Ex. 3. Mr. Smith sold 8 bales of cotton for lli^ cents a pound to a street buyer, after refusing 11% cents from the first bidder. What did he gain by sell- ing at 1114 cents? Cotton weight 4120 pounds. Ans. $5.15. Explanation : 4120X.1125 (1114)= $463.50 , 4120X.11125 (111/8)= 458.35 $ 5.15 Note. — In first multiplication, count off 4 figures, and in second count off 5 figures in the answer. Ex. 4. Mr. Anderson sold 1 bale of cotton, 512 pounds, at 9l^ ; 1 bale, 520 pounds, at 914 : and 1 12 178 The American Cotton System bale, 560 pounds, at 9% cents a pound. How much money did he receive for all? Ans. $148.54. Ex. 5. Diltz & Weaver bought 50 bales of cotton, weighing 25,500 pounds, and sold it for Yg advance. What was their gain on the sale ? Ans. $31,871/2. Explanation : (1) Multiply total weight by price : 25,500X.00125 (Vg) =$31,875. (2) 25,500-^50= weight of each bale =510 pounds X -00125= gain on each bale =$ .6375; $ .6275=63% cents X50= gain on all the bales =$31,875. .6375 25,500 50 .00125 31.8750 127500 51000 25500 31.87500 Note. — (1) In first multiplication point off 4 deci- mals in answer, in the second, 5. (2) The same re- sult may be obtained by dividing the total weight (25,500 pounds) by 8, as in abstract numbers, and is equivalent to multiplying by 8 decimally. 8)25,500 31.875 Note. — (2) It should be noted that % of a cent is made on each pound of cotton, equal to 121/0 cents on each one hundred pounds, and to determine the loca- tion of the decimal point, first divide 25,500^-100, which would give 255. Arithmetic of Cotton 179 255-f-8=31 as a whole number, then annex naughts to the 255 and continue the division until it is exact or repeats itself, then after the whole number place the period, the numbers following are the fractional numbers. The third naught added gives no increase in value, but enables the operation to be completed to exactness. Ex. 6. John Knox having 900 pounds of seed cot- ton, bought 600 pounds more to complete his bale. He paid 3% cents a pound for the 600 pounds. The cot- ton thirded itself including bagging and ties, when ginned, the bale was sold for 10% cents a pound, and the seed at the rate of 20 dollars a ton. What did Mr. Knox gain on the seed cotton bought? Ans. Gain, $5.50. Explanation : 600 pounds = weight of cotton bought. 200 pounds = weight of \ cotton bought. 200X. 10125 (10%) = $20.25 600 pounds = weight of seed cotton. 200 pounds = weight of lint. 600—200=400 pounds seed. 2000 pounds weight of 1 ton. 400 pounds = ^ weight of 1 ton. 2000 pounds are worth $20.00 400 pounds are worth i of 20.00= 4.00 Value of seed and lint received $24.25 600 pounds X. 03125 (31/8) = cost = 18.75 Gain on 600 pounds seed cotton $ 5.50 Ex. 7. Henry Brown sold 1 bale of cotton, 520 pounds, at 6% cents a pound. How much money did he get for it ? Ans. $32.45. 180 The American Cotton System Explanation: If y8=.00125, 5/8 will ! .00125— .00625. (See Table 6.) Six cents is $ .06 Five-eighths are .00625 Six and five-eighths = $ .06625 520 X. 06625= price =$32.45. Ex. 8. Mr. Jones sold 10 bales of cottpn; 3 bales, 1616 pounds 10% cents a pound; 4 bales, 2120 pounds at 9% cents a pound; 3 bales, 1560 pounds at 9ys cents a pound. What was the total value of all? Ans. $515.22. Ex. 9. A grower sold 1 bale of cotton for 9%, 1 for 9% and 1 for 9% cents a pound. Supposing the bales to be of equal weight, what would be the average price? Ans. 9% cents. Explanation: (1) By inspection it is seen that the price of 1 bale is 9% cents a pound,! more make the % ; 1 less =% ; the | above and the | below the %, offset or cancel each other, leaving 9% cents as the average. (2) 1 bale at .09875 (9y8) 1 bale at .09625 (9%) 1 bale at .09375 (9%) Add price of 3 bales 3). 28875 Divide by 3 (No. bales) =09625 (95/8) Ex. 10. A sold 3 bales of cotton for $1613/8, 2 bales of cotton for $102^/8, 5 bales of cotton for $2523/8. What is the total value in dollars and cents? Ans. $515,871/2. Arithmetic of Cotton 181 Explanation : Referring to Table 5 — $3/8 equals $ .375 Vs equals .125 3/s equals .375 Total = $ .875 = 871/0 cents EXAMPLES INVOLVING THE USE OF THE ONE-SIXTEENTH CENT— ^V— DECIMAL EQUIVALENT .000625—614 POINTS. Ex. 1. What is the value of 1 bale of cotton, weigh- ing- 534 pounds at 7 ^\ cents a pound? Ans. 37.71%. Explanation : By referring to Table 6, one-six- teenth of a cent decimally is .000625 Seven cents are .07 Seven and jV cents are .070625 534X.070625=$37.71375. Note.— Table 6, .00375=3/^. Note the 71 cents occupy the place of the 2 naughts. Ex. 2. A man sold 1 bale of cotton, 544 pounds, at 9^V cents, 1 bale of cotton, 528 pounds, at 8yV cents. What is the value of both? Ans. $91.87. Explanation : (1) Nine cents are $ .09 One-sixteenth cent is .000625 Nine and one-sixteenth =$ .090625 544X.090625=$49.30 528 X. 080625= 42.57 Vahie of both bales $91.87 182 The American Cotton System (1) .090625 .080625 544 528 362500 645000 362500 161250 453125 403125 49.300000 42.570000 Note. — (1) For convenience the multiplier, which contains 6 decimals, is placed at the top, the same number to be pointed off in the answer. (2) 544 528 :09tV .08rV 4896 4224 34 33 $49.30 ' $42.57 Note. — (2) In the last multiplication only 2 deci- mals are cut off as the multiplier is cents and has only 2 decimals. In multiplying by the one-sixteenth, divide the weight of the bale by 16 and add to the first partial product in the multiplication. Ex. 3. John Knox was offered 81/2 cents a pound for 10 bales of cotton weighing 5160 pounds, but re- fused the offer, held his cotton and sold next day for ^ cents a pound less. What did he lose by not sell- ing on first offer? Ans. Lost $3,221/2. Explanation : (1) 5160 pounds X.085 (81/2) = first offer $438.- 60. Arithmetic of Cotton 183 ( 2 ) .085— .000625=.084375=8 ,\ . .085000 .000625 .084375=8/, Again — 81/2= 8A Less iV Equals 8A=.084375 5160 pounds X.084375 (8 A) =435.371/2. First offer $438.60 Sold for 435.371/2 Lost >. $ 3.221/2 cent a pound; the operation can be abbreviated by multiplying the total weight, 5160, by xV cents, and point off 2 decimals in the answer, as vV cent is expressed thus, OO^V, 5160X.00tV =$3.225=3.221/2— equivalent to dividing by 16. Ex. 4. Mr. James had 4 bales of cotton of 4 diff- erent grades, for which he was offered 4 different prices: 1 bale, 500 pounds, at 9iV cents; 1 bale, 500 pounds, at 9 cents ; 1 bale, 500 pounds, at 8^f cents ; 1 bale, 500 pounds,, at 8% cents. As the cotton averaged 500 pounds to the bale, what was the ave- rage price? Ans. .0896% cents. Explanation: Referring to Table 6, 9iV cents = .090625. Nine and t^ cents = $.090625 Nine cents = .09 Eight and U cents = .089375 Eight and % cents = .08875 Total $.358750 184 The American Cotton System Add the numbers and divide by 4, as there are 4 bales, the answer will be the average price. 4). 3587500 _==.0896y8 cents. .0896875 Note. — Table 5 will show % to be }t; then the 4 bales will be 9tV, 9, 8fi, 8ff. Ex. 5. Three bales of cotton weighing 521, 499 and 580 pounds were sold for S\i cents a pound. What wais their value? Ans. $143.00. Explanation: Multiply the sum of the weights by .08|f=.089375 and point off 6 figures in the answer. Ex. 6. A farmer sold 3 bales of cotton weighing 516, 524 and 520 pounds, at 8y\ cents a pound; 2 bales, 519 and 541 pounds, at 8iV cents. How much money did he receive? Ans. $213,183/4. Explanation: Add first the weights of the 3 bales and multiply by .08 A (.081875); add weights of the 2 bales and multiply by .08tV (.080625) ; then add the 2 answers. Ex. 7. A list of 100 bales of cotton was sold for i\ cents above the market ; the cotton weighed 52,480 pounds. What was the gain by selling this cotton in bulk? Ans. Gain, $98.40. Explanation: Multiply the whole weight, 52,480 X. 001875 (fV), point off 6 decimals in the answer, the result will be the whole amount in dollars and cents. Note. — It is immaterial what the price paid or what the cotton is worth; the statement is, the cotton sold for y\ above the quoted price in the market. If the Arithmetic of Cotton 185 price were 7 cents, the cotton sold for f% more ; if 8, 9, 10 or 11 cents a pound were the market quotations, it sold for y\ more. Ex. 8. A buyer received a limit (price) of 10i/> cents a pound on which to buy cotton ; during the day he bought 100 bales : 28 bales, 14,560 pounds, at 103/^ cents; 32 bales, 16,160 pounds, at lO^/i cents; 40 bales, 20,320 pounds, at 10 j^^ cents. How much money did he make on the day's business? , ._^ ,^^ Ans. $71.30. Explanation: Find out how much the whole amount is worth at 101/2 cents. (Table 6.) 14560 pounds 16160 pounds 20320 pounds 51040X101/2= $5,359.20 Calculate separate amounts — take sum from first amount. 14560X. 10375 (103/^) = $1,510.60 16160X-1025 (IO14) = 1,656.40 20320X. 104375 (10,V) = 2,120.90 5,287.90 $ 71.30 Ex. 9. A farmer rented land on the halves. On 50 acres he made 20 bales of cotton, which he sold at lOj^ cents a pound; the cotton averaged 500 pounds to the bale. The land owner gave his half of the seed to the tenant for hauling 10 bales to the gin and to market. . The ginner charged 60 cents per hundred for ginning and gave the ginning and 3 dollars a bale for the seed in each bale of seed cotton. The farmer sold 17 bales of seed and put 1500 pounds of seed cotton in each bale and hired 14 bales picked at 70 186 The American Cotton System cents a hundred. What amount of money had he left? Ans. $404,371/2. Explanation : Twenty bales at 500 pounds each = 500X20=10000 pounds. lOOOOXlOi^ (.101875) = value of cotton $1,018.75 Received 3 dollars a bale on 17 bales. 17X3= value of seed 51.00 Receipts for cotton and seed $1,069.75 He paid for ginning 3 bales $ 9.00 He paid 1/2 the cotton, 10 bales 509.371/2 He paid for picking 14 bales 1500 pounds at 70 cents, $10.50 14 bales =14X10.50= 147.00 Total paid 665.371/2 Amount left $ 404.371/2 Ex. 10. The tenant (Ex. 9) owed taxes, $6.20; a merchandise account, $185.70; a doctor, $15.30; a blacksmith, $3.50; a hired man, 8 months at 15 dol- lars a month. What was his net gain for the year? Ans. $73,671/2. Explanation : From sale of cotton and seed he had left $404.37iy4 He owed taxes $ 6.20 Store account 185.70 Doctor's bill 15.30 Blacksmith 3.50 Help 8 mos. at $15= =15X8= 120.00 Total indebtedness 330.70 After paying indebtedness, left $ 73.671^ Arithmetic of Cotton 187 EXAMPLES INVOLVING THE USE OF THE ^ CENT— DECIMAL EQUIVALENT $ .0003125—31/8 POINTS. Ex. 1. What is the value of one bale of cotton, 534 pounds, at 7^ cents a pound? Ans. $37.54H Note. — Solve as No. 1, — 6i/4 points. [534X.'07gi2 (.0703125)] = ? Ex. 2. A man sold 1 bale of cotton, 544 pounds, at 9^; 1 bale of cotton, 528 pounds, at 83V. What is the value of both ? Ans. $91,531/2. Note. — Solve as No. 2, under 6i/4 points. 544X.09^(.0903125)=$49.13 528X.08^(.0803125)= 42.401/2 $91,531/2 Ex. 3. Proceed as in No. 3, under tV at ^ instead, and find the loss. Ans. Loss $1.6114. Note.— The loss in No. 3 was $3.221/2 ; for brevity, ^ being % of yV? then the loss here is % of $3,221/2, which is $1.6l4. Ex. 4. Johnson & Smith bought 20,560 pounds of cotton at 9^ cents a pound and sold it for 9%. What was their gain? Ans. $44,971/2. Explanation: By Table 5, 1/4 equals ^\, then 9i^ =9 A. 9^— 9^=T!r as a gain. 20,560 pounds X A cents =$44,971/2. [20,560X.0021875=(.00A)] ? 188 The American Cotton System The result is the same if the value is obtained at 914 cents, from which subtract the value at 9^\ cents. 20,560X.09i4=$l,901.800 20,560X.09^2= 1,856.825 Gain $ 44.975 Ex. 5. Three bales of cotton, 526, 497 and 545 pounds, respectively, were sold for 8^ cents a pound. Find their value. Ans. $132.70. Explanation: Multiply total weight by .0846875 (Table 5) ; count 7 figures off to decimal place. (1568 pounds X. 0846875). Ex. 6.' A buyer bought 50 bales of- cotton at lO^'V cents a pound avera«re, held it two months and sold it for 10 14 ; his expenses were insurance 40 cents, wei^h • mg 10 cents, and drayage 10 cents a bale. The cotton" weighed 25,600 pounds. What was the gain or loss? Ans. Gain $98.00. Explanation : (1) 25,600X.10M= $2,744.00 25,600X103^-= 2,616.00 Total gain = $ 128.00 The insurance, weighing and drayage cost 60 cents a bale, 50X60= 30.00 Net gain $ 98.00 (2) M-A=M- (The fl are H of a cent.) ^=y2 of a cent =.005. 25,600 X.005=$128.00. Arithmetic of Cotton 189 Ex. 7. A farmer sold 35 bales of cotton to a buyer for 81/2 cents a pound, to be delivered in 5 days, dur- ing this time, before delivery, the market declined ^\ cents a pound. The buyer offered 40 dollars to the farmer to cancel the sale; the cotton weighed 18,550 pounds. What would the buyer have saved or lost had the farmer accepted the 40 dollars? Ans. Saved $11.01^^ Explanation: 81/2 cents =8|^|. (1) 8i|— ^\=8H. 18,550X8y2(.085 )=$1,576.75 18,550X8H(.0834375)= 1,547.76/e $ 28.98tV Buyer offered $40.00 Actual difference 28.98iV $ii.oiA (2) Multiply weight by price of decline, 3%. 18,550 X .00 #^ ( .0015625 ) =28.984375=28.98^ Ex. 8. John Patton was offered ten-thirty-seven and one-half (10.371/2) for his 8 bales of cotton, by one buyer, and ten and twelve thirty-seconds (.10^) by another; which offered the best price and what would he have gained or lost by selling to the first buyer ? Answer. Neither. Nothing. Note.— See Tables 5 and 6 for %, if and .00371/2. Ex. 9. Thompson & Brown shipped 100 bales of cotton to New Orleans, the returns from the sale of which showed a loss in weight equivalent to ^ in price. The cotton weighed 52,800 pounds. What was the money loss? Ans. $16.50. 190 The American Cotton System Explanation: It is evident the loss being ^ equivalent to 3% points, the total weight should be multiplied by the price. 52,800 pounds X.00^=$16.50. 52,800X3% will give same results, but as it takes 4 figures to make the number of points, the common fraction being used in place of the ' completed deci- mal, four figures must be counted off to give the num- ber of cents and parts of a cent. Ex. 10. Ayres & Co., shipped 60 bales of cotton to Savannah, which lost 2| pounds, average, to the bale and A valuation in classification. They paid for 30,592 pounds at 8| cents a pound and sold it de- livered in Savannah at 9^. The freight rate was 30 cents a hundred and commission 1 dollar a bale. What was the gain or loss on this shipment? Ans. Gain, $13.25^. Explanation: Find total loss in weight, subtract this from original weight ; find value of net weight at 9^, and from this deduct the sum of the expenses, loss in value, and first cost. 60 bales X2| pounds =160 pounds. 30592 less 160=30,432 pounds. 30,432 X .09^ ( .0928125 ) = $2,824,470 81 cents =860=.0860 30,592 X.0860=first cost = $2,630,912 30,592X30= freight cost = 91.776 60 X $1.00= commission = 60.000 30,432X A (-0009375) loss in class 28.530 Total cost, delivered 2,811.218 Net gain $ 13.252 Arithmetic of Cotton 191 Note. — To get the true result in multiplying 30,592 X30, 30,592 should first be divided by 100, as freight rate is 30 cents per hundred poui^ds, and the quotient multiplied by 30. Freight rates are calculated on the weights shown at shipping point, but the weights are generally veri- fied at destination and if found incorrect, the charges are calculated on the corrected weights. The loss of ^ in classification is here calculated on destination weights, as they are the weights govern- ing the settlement. CHAPTER VI. BASIC COTTON CALCULATIONS. Many expressions and abbreviations peculiar to the cotton trade are used, and as such will enter largely into the statement of problems in this volume, their introduction here may not be inappropriate. It is suggested that the reader familiarize himself with them in order to appreciate and understand their meaning and value. The terms are expressive to those familiar to the cotton trade, but to those who are not they will prove instructive. ABBREVIATIONS. B/L— Bill of lading. B/C — Bales of cotton. M/B — Middling basis. B/M — Basis middling. (B/M and M/B have the same meaning.) C. A. F.— Cash and freight. F. 0. B. or fob — Free on board. Cwt. — Hundred weight. Lbs. — Pounds. TERMS. Long. — Long cotton signifies the amount of cotton one has in his immediate possession. If Jones has 100 B/C on hand, he is ^^long" 100 bales. Spot Cotton or Spots. — Denote about the same thing as *'long''; in the preceding, Jones is ''long" 100 Basic Cotton Calculations 193 bales, that is, he has 100 bales of ' ' spot cotton ' ' in his possession. Short, Short Cotton, Shorts. — This term implies that the seller of cotton has sold it before getting it in his possession, and has '' sold short'' or ^'sold the market short. ' ' Short sellers make their money by a decline in the market. Those dealing on the '^ short side," who sell cotton they do not own, are called * 'shorts." Short sellers sometimes find the market does not decline as anticipated, but instead either remains the same or advances, if so, in the former case they make no gain, in the latter they suffer a loss. Short sellers make money by the market declining, and lose when it ddvances. Bear, Bears. — Those who sell *' short," desire, and exert an effort to make the market decline, in so do- ing their exertions are to bear (press) it down, hence the term ''bear." Those operating on the short side of the market — those who try to press the price down — -are designated as "Bears." Bull, Bulls. — A class of dealers whose operations are exactly opposite to those of a "bear." A dealer possessing spot cotton, or contracts, which he has bought at a price he thinks cheap, wishes an ad- vance, exerts his influence to secure it, which action is to lift up (bull) the price, hence the name "Bull." Those operating on the bull side — ^those trying to advance the price of cotton — are termed "Bulls." Bulls make money by the market advancing; lose it on declines. Bulls selling cotton at prices satisfactory to them- 13 194 The American Cotton System selves, after so doing and wishing to buy again, de- sire to buy at a cheaper basis if possible, in such in- stances they become bears, and vice versa. Briefly, bears are those who want and try to make the market go down; bulls are those who want and try to make the market go up. Point. — One one-hundredth (tw) of a cent. Market Opens. — The first figures that are chalked (put in figures on a blackboard) in the Cotton Ex- changes at beginning of the day's business. Market Closes. — The last figures that are placed on the boards in the Exchanges for the day's official quo-, tations. Futures, Future Sales. — Contracting to sell cotton to be delivered at some future time. The term is ap- plied to deals in which contracts are dealt in, instead of actual cotton. Contracts are dealt in as one would deal in stocks, bonds, notes, mortgages, etc., with the exception, that contracts bought or sold through the Cotton Exchanges are often settled for by the con- tracting parties paying a margin to settle the con- tract. No indorsement for transference is necessary. Sales or purchase of contracts for future delivery are dealt in only by the New York and New Orleans Cotton Exchanges, but contracts for either the sale or purchase of spot cotton are often made between parties, none of whom are members of any exchange, and such contracts are not subject to any exchange rule. The governing features of such transactions are the mutual agreements of the contracting parties. Contract Sf Agreements. — Agreeme*nt between two or more parties to perform certain stipulated acts. As reference to dealings in cotton, they may be Basic Cotton Calculations 195 two-fold ; they may refer to deals between individuals or corporations who execute contracts to sell and de- liver, and buy and receive cotton, one from the other ; they may have reference to Cotton Exchange con- tracts which are dealt in as commodities, and cotton may or may not be used as ba^is of settlement, but if not, liquidated by payment of margins. Margins. — (1) Payments required to make pur- chase of contracts, to maintain them after purchase, or to satisfy their requirements at or before maturity. (2) The difference between the price paid and re- ceived for cotton. If cotton be bought for 8% cents and sold for 8, the marginal difference is one-half cent loss; if bought for 8 cents and sold for 8I/2, the gain is V2 cent margin. (3) The difference between the price of spot cotton and that of futures. Violent fluctuations sometimes occur in the markets, when so, it is not unusual for brokers to demand the payment of $5.00 margin per bale or more, as a pro- tection to themselves against loss. In the ordinary course of events, the usual margin demanded is $1.00 per bale. Both parties to a marginal contract reserve the right to call for a margin. If Jones buys 100 bales of August futures and the market advances 20 points, he may call for this advance, equivalent to 100 dollars profit to himself, surrender his contract and the transaction is settled; should the market decline 20 points (100 dollars) he will be called upon to re-margin (pay another hun- dred dollars), if not paid his contract is canceled and the broker keeps the 100 dollars first paid. Premiums. — (1) The profit offered by a buyer to a seller as an inducement to secure a lot of cotton. 196 The American Cotton System If the basis price of middling cotton is 10 cents, and a cotton merchant has 500 bales for sale of even run- ning grades, a buyer might offer a premium of A or 14 dhove, that is to say, lOy^ or 10^/4 for such a list of cotton. (2) The grades of cotton recognized as better in quality than middling, have values higher than such a grade and these values above middling are known as premium values. Discounts. — (1) The difference between the price of spots and futures. If the price of spot cotton in New York is 9.65, in March, and the quotations for May cotton is 9.33 then the discount of the May op- tion under March spots is 32 points. (2) Middling being the basis, the grades under it are more inferior in quality with a corresponding depreciation in value, these differences for the comparative lower grades are the discounts for such character of cotton off the mid- dling value. (3) Cotton merchants selling cotton for future delivery, in some instances protect the sale by buying futures for the same number of bales. If Anderson & Smith sell 5,000 bales of cotton in August to be delivered in September, October and November, at 10 cents at the ship^s side in New Or- leans, if at the time of this sale August cotton is worth 9.80 as the publicly quoted value, and October is quoted at 9.50,* the merchant's sale is made at a premium of 20 points, and he buys 5,000 Octobers at 9.50, he gets them at 50 points discount from price _ of the sale. In this sale Anderson & Smith have '^sold short'' ♦Owing to heavy freights, marine insurance, exchange, etc., sales are effected at 60, 90, or, perhaps, 120 points, on some future month. Basic Cotton Calculations 197 5,000 bales — have sold 5,000 bales when perhaps they did not have one, and at a time, perhaps, when the cotton could not be bought in their territory — and as they did not know what the price of cotton would be in the delivery months, they sought to hedge them- selves and secure protection by buying contracts from some member of the New Orleans Cotton Exchange, maturing in the months for delivery. Parity f Equal Values. — If middling cotton is quoted in New Orleans at 9.80 for spots, and 30 points were necessary as a freight charge to put it in New York, 30 added to 9.80 would give par value in New York as 10.10. If March cotton is quoted at 9.75, and May futures at 9.60, the difference in parity existing between the two months, is 15 points. If March cotton is quoted at 9.75 in the month of March, and middling spots for the same month at 9.85, the difference in parity for spots and futures for the same month is 10 points. Hedge y Hedging. — To protect one's purchase or sale of cotton; to accomplish which, requires the neces- sity of resorting to the New York or New Orleans Cotton Exchanges (in America) securing from the one or the other a contract for some designated future month, covering the same number of bales in the con- tract as represent the number of bales of spot cotton. A contract bought in one month may be hedged (pro- tected) by selling a contract in another month, one to entirely offset the other must be of like character and equivalent value, that is to say, if the first con- tract bought stipulates 100 bales of May cotton, the same may be hedged by selling 100 bales of July; 198 The American Cotton System were a loss to occur on the May contract, an equal gain should accrue on the July sale.* Straddles or Spreads. — Mean the purchase and sale of one month against another in any of the New Or- leans, New York or Liverpool markets.** Scalpers. — Those who mediate between sellers and buyers and act in the capacity of both buyers and sell- ers themselves, but not recognized as regular dealers who cater to the trade. Splits. — Those grades of cotton that can not be classed as full types of half grades (stricts), and known to the trade as quarter grades, designated by the exchanges as *' fully'' and ''barely." A good style of low middling cotton, not sufficient in character to be classed as strict low middling, would be known as fully low middling. Some buyers of spot cotton, and since the first of January, 1908, the New York Cotton Exchange, do not recognize these grades. Flat Cotton. — The original bale of cotton as it comes from the press before compressing. Transpor- tation companies prefer for economic reasons, to han- dle cotton in compressed form and have it compressed at their expense, if not otherwise instructed. Con- ditions sometimes require that cotton be shipped ''flat" (without compressing), and if so, the words "To be shipped flat" or "Ship flat" must be so ex- pressed in the Bill of Lading. Shippers Order, Notify. — These words must be on the face of a B/L where the shipper desires to draw ♦See Discounts, Anderson & Smith, p. 196. **See Hedging, sale and purchase of contracts. Basic Cotton Calculations 199 through his local bank for the full or part value of his cotton before it reaches destination. If so word- ed, the shipper has a legal advantage, and the bank can protect itself. The local bank, with the B/L, Sight Draft and Invoice, forwards them to some bank at point of destination of shipment, with instructions to deliver the B/L to consignee (the party to whom the cotton is shipped), when the consignee pays the money to the bank for the cotton at destination, the bank in turn surrenders the B/L to the consignee and notifies the transportation company — this being the order of the shipper. The shipper must indorse on the back of the B/L the name of the shipper. If Williams & Smith are the shippers, their names must appear on the B/L; if the shipper is an individual, then his name. The B/L is indorsed over to the bank making the collection, as one would indorse a note or bank check to another. This authorizes the bank to make the collection. The bank at destination collects the money from the consignee and surrenders to him the B/L, and forwards the money to the bank which took care of the shipment, which money is credited to the individ- ual or firm making the sale of cotton. Where cotton merchants or factors as consignees are known to be men of undoubted financial ability, it is not unusual for banks to allow credit to the cotton shipper for the amount of the draft on the cotton, after the B/L is properly signed by the railroad agent and indorsed by the shipper, before collecting the money from the consignee. If J. H. Hicks ships 50 B/C from Talledega, Ala., 200 The American Cotton System to W. B. Thompson & Co., New Orleans, La., drawing through the local bank at Talladega for $2,500, this being the value of the cotton at time of shipment, and allow Mr. Hicks credit for the full amount of the draft. The bank allowing this credit to Mr. Hicks ,is equivalent to Mr. Hick's putting $2,500 in the bank in cash instead of the draft. This is supposing the Talladega bank recognizes W. B. Thompson & Co. as perfectly reliable, other- wise the draft would be received for collection only and Mr. Hicks would be given credit for it when col- lected. Factors, Cotton Factors. — Those interested in the cotton trade who do not buy cotton direct, but in- stead, receive from and sell for others, who consign cotton to them to be sold. As commission merchants, they usually make a charge for their services based on a small percentage of the amount of business handled. Broker, Brokerage. — Dealers buying and selling cotton, or dealing in contracts, for account of others, are termed Brokers. A charge for both buying and selling is usually made when the transactions are completed, based on a certain per cent of the value of the property. Brokers of the New York and New Orleans Cotton Exchanges make a minimum charge of seven dollars and fifty cents, for buying, and the same charge for selling, each 100 bales, that is, fifteen dollars for the *' round turn.'' This amount of com- mission applies on business done for those who are not members of the exchanges, that is to say, ^* out- side business. ' ' A commission of half this amount is Basic Cotton Calculations 201 charged for one member acting in capacity of broker for another.* The brokerage on deals consummated through the medium of the Exchange, applies to transactions af- fecting the sale or purchase of contracts specifying not less than 100 bales of cotton. Some members deal only in contract cotton, others in spots, and still others in both futures and spot cotton. The commission, based on percentage, is called hrokerage. EeclamatioTis. — Claims made for shortage in weight, class, or deviation in cotton from sample. Should a shipment of cotton prove at destination to be short in weight 100 pounds, and had the consignee paid full value for the shipment, on receipt of the invoice and B/L before its arrival, it is clear that he would have paid for 100 pounds too much, in such case he would reclaim from the shipper the value of the 100 pounds. Equally so, when the classification on the out-turn shows not to be as high as stated in the invoice, or if cotton be bought on sample, and it shows on arrival not to come up fully to the sample in quality, then in both instances reclamations would be made on the seller for the value of differences in class and varia- tion in the cotton from the sample. Invoice. — The bill or statement that describes in detail the shipment of cotton ; generally sent through the mail with the draft and B/L, and precedes the arrival of the cotton. It shows its date, number and weight of each bale, total weight of all, sometimes its classification, and full value when payment is re- ♦Members often operate for one another without charge. 202 The American Cotton System quested before the arrival of the cotton at destina- tion. Draft. — An order from one person on another for the payment of money — a bill of exchange. Such or- ders or drafts are usually handled through the banks. The seller of the cotton after making up his invoice, will make out his draft for the amount of it, place it in the hands of his local banker with instruction to collect for the full value, or in some instances, a part of it. It is sometimes written payable *^at sight,'' that is, payable when presented, or at 20, 30, or 60 days sight. Drafts in payment for domestic cotton are usually payable at sight, while those drawn cov- ering cotton for export, stipulate 60, 90, and in some instances, 120 days or more. Exporters making drafts on their cotton on w^hich payment will be made in 60 or 90 days, often avail the cash on them through their local or some other bank by selling exchange to cover their shipment. Some banks make a specialty of dealing in exchange on foreign commercial financial centers. Bill of Lading. — Virtually a receipt from a trans- portation company acknowledging the receipt of some- thing to be shipped. It describes the character of the shipment, condition, date received, from and to whom shipped, holding the company responsible to deliver at destination, barring certain contingencies, in like order received. All BiUs of Lading are signed by the company's lawful agents, and are usually made out in triplicate form. One copy (the original) for the shipper, one to be filed in the company's office as its record, and one copy to the freight car conductor, if the shipment is made via a railway company. Basic Cotton Calculations 203 The customary procedure in preparing the papers for a cotton shipment from initial points is: Make up the invoice, draw a draft (as one would write a bank check), have the railroad agent sign his name to the B/L, for his company, which he does after the cot- ton is on the railway platform, or in possession of the company, when he will give to the shipper the orig- inal; with these three papers — invoice, sight draft, and B/L — the shipper presents them to the bank with instructions how to handle the shipment, the bank in turn, writes a letter to some bank or banker, at or near the point of destination of the shipment, to this letter he pins all three papers, and forwards in one envelope. Upon receipt of the papers the receiving bank has full instructions how to proceed. Ordinarily it presents the draft, with the other papers to the consignee, collects the money, surrenders all papers, and returns the money to the bank at shipment point. Shippers often send invoice direct to the buyers, reserving only the draft and B/L to go through the banks. For such character of business, banks make a small charge to compensate them for their services, usually calculated as a percentage on the amount involved, the rate usually being determined by the demand for ex- change. Through Bill of Lading.— To facilitate the opera- tion of handling cotton from loading point to destina- tion, the Through Bill of Lading was devised. Large railroad interests combining into systems, these in turn effecting transportation arrangements with steamship companies, constructed a through bill 204 The American Cotton System of lading recognized by all concerned in International traffic. Such transportation receipts covering shipments for foreign account, usually read to '* shipper's order'' or to the order of some person who must indorse the bill of lading, so that it becomes at once a negotiable draft. Under its reading shipments can be made direct from interior points in the South to foreign ports, no longer necessitating rebilling at the ports receiv- ing the export shipment. Port Bills of Lading, — Shipments of cotton for German destination are sometimes protected by Port Bills of Lading in the absence of Through Bills of Lading. By means of such Bills the whole shipment is re- ceipted for, yet it may go out by several vessels, and when so billed, **is classed or arbitrated, and invoiced separately." Shipments originating at interior American towns, moving on one Through Bill of Lading, arriving in several vessels, are treated as *^ forming one ship- ment. ' ' Arbitrators, Arbitration, — ^Parties designated by two or more in controversy, as mediators to amicably adjust their alleged differences regarding the charac- ter of cotton delivered on contract. Arbitration, the hearing and determining of a cause by parties in con- troversy, by a person or persons chosen for the pur- pose. The Arbitration Committee of the New Orleans Cot- ton Exchange is composed of nine members appointed Basic Cotton Calculations 205 annually by the Board of Directors. Its duties are to hear claims of members against each other, con- cerning transactions in ''spot, future contracts and free on board cotton." This committee has the set- tlement of all such claims, except those in which the question of classification of cotton is involved, in which case the matter is determined ''by a committee or committees of experts/' N. 0. Cotton Exchange arbitrators are. allowed a fee of $5 for the adjustment of each case. The Arbitration Committee of the New York Cotton Exchange is composed of seven members, whose offices and functions are similar to the New Orleans Arbitration Committee. Its committee is paid a like fee as that allowed to the New Orleans mem- bers. These committees adjust differences concern- ing cotton delivered on Exchange contract. Dealers handling spot cotton often settle their own controversies by the selection of their own arbitrators, through mutual agreement, and whose determination in the matter is final; such arbitrators are not amen- able to the rules of any exchange. REQUISITES FOR CALCULATIONS. In figuring cotton on basic classification it is neces- sary to know the different grades of cotton, also the letters, figures and characters representing those grades. Having learned in previous articles the value of the cent, half cent, points, etc., the following prob- lems are stated and solved on the assumption that the student is conversant with their full meaning, and is 206 The American Cotton System prepared to accept shorter methods of cotton calcula- tions. For clearness, the grades are again given with their corresponding numbers, letters and characters. The Cotton Exchanges now recognizing eighteen grades of cotton, these numbers and more will be used in this work. It is immaterial the number of grades to be con- sidered, as the principle for calculating any number of them is the same. For practical purposes, it is thought advisable to make calculations in which a larger number of grades are shown. Any one who has mastered the theory and prin- ciple of solving any number of grades, can readily calculate the 9 grades to be established by the United States government as its standard types. GRADES, characters AND INITIALiS. The following grades will be used for the purpose of calculation: Basic Cotton Calculations 207 Character and Grade Name. Initials. Number. a Fair p b Strict middling fair S. M. F. c Middling fair M. F. d Strict good middling S. G. M. 1 Good middling G. M. 2 Strict middling S. M. 3 Middling M. 4 Strict low middling S. L. M. 5 Low middling L. M. 6 Strict good ordinary S. G. 0. 7 Good ordinary G. 0. 8 Strict low ordinary S. L. 0. 9 Low ordinary .L. 0. d-t Strict good middling tinged. S. G. M. T. 1-t Good middling tinged G. M. T. 2-t Strict middling tinged S. M. T. 3-t Middling tinged M. T. 4-t Strict low middling tinged S. L. M. T. 5-t Low middling tinged L. M. T. 3-s Middling stained M. S. The characters here used to represent the different grades are adopted for sake of convenience. Buyers do not all use the same symbols to indicate the grades — some use numbers, some letters, some characters of their own devising, but all are used for brevity in correspondence, making calculations, etc. All basic calculations require the use of the M. grade as the base. All grades showing a better class than M. receive 208 The American Cotton System premium or better prices, and the premiums are said to be so much * * on " M. ; and those grades inferior to M., bear discounts from the M. price and at different discounts as so much ^^off." The grade, good middling tinged (G. M. T.) has ordinarily, the same value as M. white cotton, and is so recognized in this work. There being no definite difference to be taken off M. cotton for tinges and stains, these differences being governed in the main by the determination of the buyer of spot cotton; values of differences for these colored cottons will be calculated at a stated value in problems showing such character of cotton. A large percentage of arithmetical problems are solved by the unit or analytical method; by tenths, or decimal plan; by the 100 or percentage manner or by twelfths or duodecimal way. In making cotton calculations the sixteenth or 6^ point method is used in this work, and should be thoroughly mastered, as fully 90 per cent of all cot- ton calculations requiring the average grade are de- termined in this way. Cotton quotations and prices being often in eighths, quarters and halves represented as multiples of the ^^ basis, regardless as to whether the grades to be cal- culated are above or below M. TO FIND, THE TOTAL VALUE OF COTTON WHEN DIFFERENT PRICES FOR DIFFERENT GRADES ARE GIVEN. For convenience take the five grades : (1) G. M., (2) St. M., (3) M., (4) St. L. M., (5) L. M. Basic Cotton Calculations 200 If the price of each grade is known, and the weight corresponding to the price, it is very easy to ascer- tain its value, by multiplying the price by the weight ; if several weights, the value of each will be calculated separately, and these different amounts added, the sum of which shows the total value; from this pro- cedure the following rule is adduced. Rule I. — Multiply the weights of the cotton of the different grades, by the price of these respective grades, and add the products of these different multi- plicatimis, the sum of which will he the total value. Note. — To accelerate the work it is frequently easier to perform the multiplication by multiplying weight by price. PEOBLBMS. Ex. 1. Find the value of 1 M. B/C 520 lbs. weight at 10 cents a lb. Ans. $52.00. Ex. 2. A farmer sold 2 B/C which classed M. and S. M.; for the M. he received 10 and for the other 1014 cents a pound; what is the value of both, if the M. weighed 500 and the other 520 pounds? Ans. $103.30. Note. — Apply the rule. Explanation : 500 x10c =$ 50.00 520x101/46= 53.30 Total value =$103.30 Note.— Should any difficulty arise as to multiply- inir by the %, change it to a decimal, .25, and multiply 14 210 The American Cotton System the 520 lbs. by .1025 and point off 4 decimals in the answer. Ex. 3. Johnson sold 3 B/C; 1 M. 548 lbs. at 10 cents, 1 St. L. M. 520 lbs. at 9% cents, 1 L. M. 580 lbs. at 9 cents. What is their total value ? Ans. $157.70. Note. — The % cents are equal to 75 points : Decimal equivalent $ .0075 Nine cents equal .09 Then nine and % cents =$ .0975 Multiply $ .0975X520= value of this bale. Ex. 4. Find the value of 7 G. M. B/C 3620 lbs. at 101/2, 5 S. M. B/C 2600 lbs. at IO14, 4 M. B/C 2250 lbs. at 10, 3 S. L. M. B/C 1650 lbs. at 9%, 1 L. M. B/C 560 lbs. at 9. Ans. $922.00. Suggestion. — If preferred, convert the fractions %, 1/2, and % into decimals equalling .0025, .0050, .0075, that is, 25, 50, and 75 points, and when so used, point off 4 decimals in the answer, otherwise only 2. Ex. 5. Tom Smith had his cotton graded by 2 cotton buyers, one said it was a S. M. and G. M. ; the other said 2 S. M. He sold to the first buyer who allowed % on S. M. for G. M. The weight of the S. M. was 560, the other 580 pounds. What did he gain by selling to the first buyer? Ans. Gain, $1.45. Note. — (1) It makes no difference in this problem what the basic price is, for the G. M. was ^4 above that of S. M. — assuming, however, that M. was 9%, S. M. 10, then G. M. wa^ 101/4. Basic Cotton Calculations 2H Explanation : (1) 580Xl0y4=(G. M.) $ 59.45 560X10 =(S. M.) 56.00 Total value of the first offer $115.45 580X10=$ 58.00 560X10= 56.00 Total value of second offer $114.00 Gain by selling to first classer $ 1.45 (2) 580X% (.0025) =$1.45. Note. — (2) The gain was on 1 bale only. To mul- iply the i/4 (difference in price) by the weight gives he gain on 1 bale. Ex. 6. What is the difference in value between 4 3/C, 2640 pounds at 8^^ and 8y\ cents a pound? Ans. $1.65. Ex. 7. Mr. Williams noted that quotations for L. ^. cotton were % off M., but when he offered his 12 )ales, the buyer stated the difference was 1^/4 off; vhat did Mr. Williams lose by reason of this change n low grade differences? His cotton weighed 6,480 )ounds. Ans. Lost $32.40. Explanation : 1^4 off equals 125 points % off equals 75 points Difference 50 50 points equal % cent. 6,480 pounds at 1/2 cent a pound =$32.40. 212 The American Cotton System Ex. 8. A grower knowing the price of cotton to be 8l^ cents M/B, took 15 bales to market, but be- fore arriving the market declined 12 points. The cot- ton weighed 7,860 pounds; what was his loss on the decline ? Ans. Lost $9.43+. Explanation : (1) The 81/2 cents = $ .0850 The 12 cents = $ .0012 The price now = $ .0838 = (eight thirty-eight) Find value at 81/2. • Find value at 8.38. The difference will be the loss. (2) Find weight of each bale. Multiply its weight by the 12 points, this equals loss on each bale. Multiply this loss by the number of bales, the pro- duct will be the total loss. Ex. 9. Had the market advanced 20 points, what would have been the gain to the grower in Ex. 8? Ans. $15.72. Ex. 10. Find value of 2 G. M. B/C 1160 pounds at 9.871/2, 3 S. M. B/C 1648 pounds at 9.621/2, 5 M. B/C 2824 pounds at 93/8, 2 L. M. B/C 1000 pounds at 8%. Ans. $624.17. Note. — The 87i/^ and 6214 are % and % respective- ly; the four different prices are then, dV^. 9%, 9%, and 8%. See table for eighths and points. Ex. 11. What can I get for 5 B/C, weights being 522, 518, 547, 560 and 503 lbs. each, if price is 7| cents ? Ans. $196.10. Basic Cotton Calculations 213 • Note. — One-fifth of a cent equals 2 mills equals 20 points; two-fifths equals twice one-fifth equals 4 mills equals 40 points. Decimally, then, the price is 7.40 (seven forty), Ex. 12. I have 1 G. M. B/C, 580 pounds, and, 1 L. M. 580 pounds. The G. M. is worth 81/2 and the L. M. 714 ; what is the difference in the value of the 2 bales? Ans. $7.25. Ex. 13. I had 1 B/C, G. M., weight 560, picked before a rain and ''ginned dry"; another S. L. M., 552, ''picked and ginned damp"; the former worth 7.80, the latter 7.05; what did I lose by not waiting for the second bale to dry? Ans. $4.66+. Ex. 14. A cotton merchant bought 100 B/C after nightfall by telephone; when the market came in next day it was up 15 points; what was the mer- chant 's gain on each 500 pounds B/C ? Ans. 75 cents. Ex. 15. If this lot of cotton averaged 520 lbs. to the bale, what was the merchant's gain on the trans- action ? Ans. $78.00. Explanation : 1 bale 520 lbs. X 15 points (=$ .0015) =78 cents. If gain on 1 bale is 78 cents 100 bales are 100 X 78 cents = $78.00. Ex. 16. M. cotton being worth 7%, what can I get for 1 G. M. T., 560 lbs., and 1 G. 0., 540 lbs., with 250 off for the G. O.? Ans. $70,351/0. 214 The American Cotton System ^ Statement.— G. M. T. being M. value =7%= $ .07625= .07625—250 points =.05125= ( 51/3 ) . 560X7%= value G. M. T. 540X5y8=value G. 0. Note.— $ .07625=eents, 7% Less .0250 points Leave .05125=5% cents. (See Table points and eighths.) TO FIND THE AVERAGE PRICE WHEN THE DIFFERENT PRICES AND GRADES ARE GIVEN, AND WEIGHTS OF THE BALES THE SAME. It is not unusual for buyers in making bids on cotton to say, ^*I'll give you so and so all round for this lot of cotton. '' If the seller can ascertain the grades of his cotton, how much ''on'' and ''off" for the different grades, and knows how to calculate the averages, he can read- ily know when the buyer is making an offer of full value for it. PROBLEMS — FIRST PROCESS. Ex. 1. Smith had 2 B/C weighing 500 lbs. each; for the S. M. he wa^ offered IO14 and for the M. 10 cents a pound; what was the average price? Ans. 10% cents. Basic Cotton Calculations 215 Explanation : Where the weights of the bales are the same, the average is readily found by adding the different prices and dividing by the number of bales; thus: 1 bale at lOi/4+l bale at 10=2 bales at 2014. Operation : 20l^-^-2= 2) 2014 lOYg average. From the explanation, we can easily form a rule. Rule 2. — Where the weights of the hales are the same, add the different prices for the different grades^ and divide hy the number of hales, the restdt will he the average price. (First process.) Ex. 2. Find average price of 4 B/C. 1 G. M. at 83/4 cents =$ .087500, 500 lbs. 1 S. M. at 81/2 cents = .085000, 500 lbs. 1 M. at 814 cents = .082500, 500 lbs. 1 S. L. M. at 7H cents = .079375, 500 lbs. 4 $ .334375 By the rule divide .334375 by 4= 4). 334375 .083593+ As the division will not be exact, for practical pur- poses, the average price may be stated as .0836+ (eight thirty-six) [8.36] ; the 93 at end of the division being so near 100, it is taken as 1 to be added to the 5, — this 93 representing only the ninety-three mil- lionth of a dollar. 216 The American Cotton System Ex. 3. Find the average price of 4 B/C ; 1 G. M., 1 S. M., 1 M., 1 L. M. the weights of the bales being 400 lbs. each. M. 10, S. M. 10%, G. M. lOi/o, L. M. 914 cents. Explanation : 1 bale 101^=1025 1 bale 10y2=.105 1 bale 10 =.10 1 bale 914=0925 4 .4000 4). 4000 .1000 By the rule the average price is 10 cents. To find the average price in the examples under this rule, the weights of the bales are of no import- ance, unless exactly similar. Prove the correctness of the average by solving Ex. 4. What will be the value of 4 B/C; 1 bale, 400 pounds, at .101/2 ; 1 bale, 400 pounds, at .IO14 ; 1 bale, 400 pounds, at .10; 1 bale, 400 pounds, at .091/4? Ans. $160.00. Explanation : 400 lbs. at .101/2=$ 42.00 400 lbs. at .1014= 41.00 400 lbs. at .10 = 40.00 400 lbs. at .0914= 37.00 1600 lbs. at =$160.00 1600 lbs. at 10c average = $160.00 ; proof. Basic Cotton Calculations 217 TO FIND THE AVERAGE PRICE, WHEN THE WEIGHTS AND PRICES OF THE BALES ARE DIFFERENT, AND BOTH WEIGHTS AND . GRADES ARE GIVEN. It is so unusual for the weights of the bales to be the same that different calculations from the preced- ing must be had to ascertain an average price where different. PROBLEMS — SECOND PROCESS. Rule 3. — Ary^ange the hales, grades, weights and prices in columns; placing hales under haleSf grades under grades, weights under weights, prices under prices. Find the value of the different grades sep- arately hy multiplying the weight of each grade htj its price, and place the amount opposite its graat\ which will form a column for the values of the dif- ferent grades. Add these values, divide the sum hy the total numher of pounds, the quotient will he the average price. Note. — Where the M. price only is given, with the statement that so many sixteenths, eighths or quar- ters are added as premiums on the better grades and similar relative differences or discounts off for the inferior ones, find the value of each grade by adding the premiums for the different grades to M. price and deducting the discounts from it. After ascertaining the grade price, proceed as stated in the rule. When the totals of all the values show dollars and cents, reduce them to cents by multiplying by 100, 218 The American Cotton System the number of cents in a dollar, the product will he in cents. The result of the operation of rule 2 (second pro- cess), is absolutely correct. Ex. 1. Let it be required to find the average price 1 M. and 1 S. M. bale of cotton, of 520 and 560 pounds each. M. is worth 10 and S. M. 10^/4 cents a pound. Explanation : Price 1 bale 560 pounds at 10i/i=$57.40 1 bale 520 pounds at 10 = 52.00 Total weights 1080 Total value $109.40 109.40X100=10940 cents. Divide the cents by the weight, 1080 pounds. 109.40-f-1080=1012|f cents as, average price. Note. — To prove this work, multiply the weight (1080 lbs.) by the price (1012|f cts.). It would be manifestly incorrect to add the two prices, 10 and IO14 cents, and divide by the number of bales, as the result would be IOI2-2V cents as the average price as shown in the former process, which is evidently not correct, and is caused by the inequal- ity of the weights of the bales. If the weights of the bales were equal, then Rule 2, First Process, would apply. Ex. 2. Try the problem again by assuming the M. to weigh 560 and S. M. 520, prices remaining the same. 1 bale 520 at 10i4=$53.30 1 bale 560 at 10 = 56.00 Total weights 1080 $109.30 Basic Cotton Calculations 219 109.30X100=10930 cts. 10930-f-1080=10122V cents =10.12, l. In performing this division, the process is the same as for that in Example 1: 1080)10930.00(10.12 1080 1300 1080 2200 2160 40 -27 1080 It will be noted that after consuming all the figures in the dividend (10930) that an additional naught is added twice in order to carry the division to 4 decimal places in the quotient to get the result to points and fraction of them. The ttftt ^s a remainder is reduced to its lowest term, equalling -^\, The an- swer may be read, ten, twelve and one twenty-seventh, and pointed off as shown. Ex. 3. What is the average of 1 M. 586 lbs. at 10 cents=$ 58.60 1 S. L. M. 540 lbs. at 9% cents= 52.65 Total weight 1126 Total value $111.25 Ans. 9.88+cts. Ex. 4. Average this list: 2 G. M. 1120 lbs. at 8 cts. =$ 89.60 1 S. M. 560 lbs. at 1% cts. = 43.40 2 M. 1000 lbs. at IV2 cts. = 75.00 Ans. 7.76+cts. 220 TjEiE American Cotton System Ex. 5. What should I pay for this list of cotton as an average price? , 2 G. M. 980 lbs. at 9 cts. 3 M. 1610 lbs. at 81/2 cts. 4 S. L. M. 2180 lbs. at 7% cts. 2 L. M. 1050 lbs. at 7 cts. Ans. 8.03+ cts. Ex. 6. As an all round price what should a buyer pay for 15 B/C at 8 cts. B/M; 14 up for S. M./ 1/0 up for G. M., 1^ down for S. L. M., and 100 down for L. M. Three G. M. 1610; four S. M. 2012; one M. 503; five S. L. M. 2490; and two L. M. 1015 lbs., respectively ? Ans. 7.95+ cts. Note. — In making this calculation, start from the M. price, 8 cts., to which add 14 for S. M., which is 814 ; add 1/2 to M. for G. M., equals 81/2 ; 14 off M. equals 7% for S. L. M., and from M. price take 1 cent off — 1 cent equals 100 points — leaving 7 cts. for L. M. Ex. 7. C is offered 10.30 for 1 S. M. B/C, 536 lbs., and 10.05 for 1 M. 520 lbs, or 10.15 as an average price. He sold for 10.15; did he gain or lose by accepting this, and how much? Ans. Lost 28% cts. Note. — Find the average price, and if 10.15 is more, he gained, if less, he lost. Ex. 8. Mr. Baum sold 1 G. M. bale, 496 lbs. at 1014 cents; and 2 M. bales, 512 and 528 lbs. each, at 9.80; what did he get for this cotton, and what was the average price? Ans. Received $152.76; average, 9.94+ cts. ,Ex. 9. Average: 3 S. G. M. 1640 lbs., 2 S. M. 1080 Basic Cotton Calculations 221 lbs., 2 S. L. M. 992 lbs., 1 L. M. 576 lbs., 2 S. G 1120 lbs. B/M 5 cents, % on for S. G. M., 1/2 on for G. M., 14 on for S. M., % off for S. L. M., 125 off for L. M., and 200 for S. G. 0. Ans. 4.62+ cts. 1 Note. — See note to, and solve as problem 6. Ex. 10. Find the average for this list of cotton, M/B 9 cents. 1 M. F. 520 lbs. 150 on, 2 S. G. M. 1040 lbs. 100 on, 3 S. M. 1560 lbs. 3/8 on, 8 M. 4160 lbs. nothing on nor off— passed, 5 S. L. M. 2600 lbs. % off, 1 L. M. 520 lbs. 100 off, 2 S. G. 0. 1040 lbs. 200 off, 10 S. M. T. 5200 lbs. 10 off, 9 S. L. M. T. 4680 lbs. 75 off, 7 L. M. T. 3640 lbs. 125 off, 2 M. S. 1040 lbs. 50 off. Ans. 8.6OV0 cts. TO FIND THE AVERAGE PRICE WHEN THE NUMBER AND CLASS OF EACH BALE ARE GIVEN BUT NOT THE WEIGHTS. THIRD PROCESS. The following rule illustrates one of the short methods of finding the average price where the weights of the bales are unknown. The average thus found is not accurate, but ap- proximates very closely. Rule 4. — Specify the numbers 7'epresenting the hales as that many pounds; multiplying the numbers of the different bales by the grade price of the bales: add flic products, and divide their sum by the stim of 222 The American Cotton System ■ the numbers of the bales, the quotient will be the average price, nearly. Ex. 1. Find the average price of 1 M. B/C at 10 cents, and 1 S. M. B/C at IO14 cents. Explanation : Bale Price 1 X 101/4 = $ .1025 1 X 10 = .1000 Number of bales 2 Sum of prices divided by 2). 2025 Average price $ .1012% $ .10121/2=10.121/2 or lOi/s cts. (See example 1 under Rule 2.) Ex. 2. Find the average of 2 G. M. at 8 cents, 1 S. M. at 7% cents, 2 M. at 71/2 cents. Ans. 7.75 cts. Explanation : 2X8 = $ .16 1 X 734 = .0775 2 X 71/2 = .15 Total 5 Sum of prices $ .3875 $ .3875 divided by 5= 5). 3875 Average price $ .0775 (See example 4 under Rule 3.) Note l.-^This is usually read 7.75 (seven seventy- five), that is, 7 cents and % of a cent. 2. In this and problem 1, the numbers of the bales are recognized as that many pounds. Example 2, if 1 pound G. M. cotton is worth 8 cents, 2 pounds are worth twice 8 cents = 16 cents; 2 pounds M. Basic Cotton Calculations 223 cotton at 71/2 cents a pound equal 15 cents, etc. Add- ing the prices of all the bales, gives 38% cents for 5 pounds of cotton ; if 5 pounds are worth 38% cents, 1 pound is worth ^ of that amount = 7% cents. Finding the averages of different ingredients whose prices are not the same are exemplified under Alli- gation Medial; the principles of Eule 4 here given, show its application in averaging cotton prices. Ex. 3. What should I pay as an average price for 1 G. M. at 9 cents, 3 M. at 81/2 cents, 4 S. L. M. at 7% cents, 2 L. M. at 7 cents? Ans. 8.04+ cts. (See problem 5, Rule 3.) Ex. 4. Find the average of this list of cotton ; M/B 81/4 cents: 2 S. M. at 81/2 cents, 5 M. at 814 cents, 7 L. M. at 714 cents, 3 S. G. 0. at 6i/4 cents. Ans. 7.51+ cts. Ex. 5. Mr. Johnson classed his own cotton as 3 G. M., 1 S. M., 5 M., and 1 S. L. M.; when he sold it the buyer classed it 1 G. M., 2 S. M., 3 M., 1 S. L. M. and 2 L. M. ; how many points difference in the grades? M. is worth 10 cents, l^ and 1/2 on for S. M. and G. M., -1%- and 100 off for S. L. M. and L. M. Explanation : Mr. Johnson's class : 3 G. M. 101/2=$ .315 1 S. M. 1014= .1025 5 M. 10 = .5000 1 S. L. M. 9H= .096875 10 10)1.014375 $ .1014375=.101iVJts. His average price is .lOlyV cts. 224 The American Cotton System The buyer's class: 2 G. M. 101/2=$ .21 2 S. M. 1014= .2050 3 M. 10 = .3000 1 S. L. M. 9V^6= .096875 2 L. M. 9 = .18 10 bales Divide by 10) .991875 .0991875= 099 ^ His average price is .099^ cts. Johnson's class =$ .1014375 Buyer's class = .0991875 Difference in class =$ .0022500=221/2 points. Note. — This difference of 22^ points is equivalent to 1121/2 cents value on a bale of 500 lbs., and on 10 bales, ten times 112i4=:$11.25. If the buyer classed the cotton correctly, Mr. John- son overclassed his cotton by $11.25 too much. If Mr. Johnson was correct, the buyer classed it too low, and caused Mr. Johnson to lose $11.25. This certainly emphasizes the necessity of each and every cotton grower's acquainting himself with his own products that he may be able to determine with some degree of accuracy the different grades of cot- ton grown by himself, and to estimate their value. Ex. 6. Williams & Smith, Jackson, Miss., shipped 50 B/C to Jones & Brown, New Orleans, which was sold for 11 cts. B/M f . 0. b. Jackson, the weights and grades being guaranteed by the shippers, who classed the cotton as 2 S. G. M., 5 G. M., 7 S. M.. 10 M., 15 S. L. M., 6 L. M., 3 S. G. 0., 2 G. M. T. Basic Cotton Calculations 225 The differences to apply were S. M. ,%, G. M. 1/2, S. G. M. % on; for S. L. M. i\, L. M. %, S. G. 0. IV2 off; G. M. T., M. value. The cotton weighed 26,500 pounds at shipping point. Williams & Smith drew for the full value of their cotton on the B/L, and their draft was so honored on presentation to consignee in New Orleans. The classification by Jones & Brown was, 1 S. G. M., 5 G. M., 5 S. M., 11 M., 16 S. L. M., 7 L. M., 4 S. G. 0., 1 G. M. T. The weights in New Orleans given in the returns, were 26,180 pounds. What amount of redamation will be made by Jones 6 Brown? Ans. $55.66+. Explanation : Williams & Smith 's class : 2 S. G. M. 1134=$ .235 5 G. M. 111/2= .575 7 S. M. 11||= .791875 10 M. 11 = 1.10 15 S. L. M. 10H= 1.603125 6 L. M. 1014= .615 3 S. G. 0. 91/2= .285 2 G. M. T. 11^= .22 50 bales 50)5.425000 Average price $ .1085 226 The American Cotton System Jones & Brown's class 1 S. G. M. 113^=$ .1175 5 G. M. 111/2— .5750 5 S. M. lli\= .565625 11 M. 11 = 1.2100 16 S. L. M. 10il== 1.7100 7 L. M. 1014= .7175 4 S. G. 0. 91/2= .3800 1 G. M. T. 11 = .1100 50 bales 50)5.385625 Average price $ .1077+ Shipper^s average price $ .1085 Buyer's average price .1077 Difference $ .0008 Amount paid for 26,500 lbs. Amount received 26,180 lbs. Short 320 lbs. 26,180X8 (points) = $20,944 320X.1085 = 34.72 Am't reclaimed $55,664 (1) 26500 lbs. at 10.85= $2,875,250 320 lbs. at 10.85=$34.72 26180 lbs. at (points) 8= 20.944 Total paid, too much 55.664 Amount invoice in New Orleans $2,819,586 Basic Cotton Calculations 227 (2) 26500X10.85=$2,875.250 26180X10.77= 2,819.586 Amount overpaid $ 55.664 The loss of 320 lbs. was paid for at original price, 10.85 ; the loss of 8 points is calculated on the weights shown at New Orleans, 26,180 lbs. Ex. 7. A buyer bought from wagons on the streets during the day 12 M. at 9.80, 3 G. M. at lOS/g, 6 S. L. M. 9.421/2, 2 L. M. 8.60, 1 G. M. T. 9.80; what was the average paid for this list of cotton? Ans. 9.68 cts., nearly. Ex. 8. If the buyer sold this lot of cotton at 6^4 points advance, what did he gain, the cotton averag- ing 500 lbs. to the bale ? Ans. $7.50. Ex. 9. At what price per pound did he sell it? Ans. 9.7414 cts. Ex. 10. Geo. Randolph, a grower, was offered 8.85 for his entire crop of 36 B/C at Gatesville, Texas, refusing this offer, he shipped the lot to a commission merchant at Galveston, Texas. The cotton was held 4 months and sold for 10 cts. a pound. What did Mr. Randolph gain, freight being 55 cents per hundred, brokerage $1.00 per bale first month, and 30 cents a bale each month thereafter, not reckoning any interest on the money for the time? The cotton weighed 18,720 lbs. Ans. Gain, $43.92. 228 The American Cotton System Explanation : (1) 18720 at 10 cts. =Selling price =$1,872.00 18720 at 8.85 cts. =Offered price = 1,656.72 (2) 'ifference in offered and s< Charges : 18720 at 55 cts., freight 36 bales, Com. $1.00 36 bales, 30 cts. each 1 month $10.80 3 months —3X10.80— filing < 10 8.85 price =$ ^102.96 36.00 32.40 215.28 Total charges 171.36 Gain Selling price Offered price $ cts. cts. 43.92 Difference, gain 1.15 cts. 18720 at 1.15=$215.28 Less charges = 171.36 Gain =$ 43.92 TO FIND THE AVERAGE PRICE WHERE NUMi BER AND CLASS BUT NOT WEIGHTS OF EACH BALE ARE GIVEN. FOURTH PROCESS. This is known as the sixteenth or 614 point process. To make cotton calculations involving its nse, quo tations must.be in sixteenths or multiples of it. Basic Cotton Calculations 229 Like the preceding or third process, averages are obtained without the use of weights, and the result is a close approximation. For practical purposes, among all buyers, this pro- cess is used almost universally, as it is brief, easily learned, and very convenient for those buying and selling in lots, after making the classification. After making the average, the cotton is usually weighed, and the weights multiplied by the average price will give the total amount. Consignees in giving account-sales of cotton re- ceived by them as purchasers or factors, generally multiply the total weights of each grade by the price of each grade, and from the sum of the totals, deduct whatever charges there may be, remitting the bal- ance. This operation is exemplified under Second Pro- cess, Rule 2. In performing the operation under this process, it is more convenient to understand and represent the different grades by characters, letters or numbers. Let, for example, the grade Fair, be represented by (full grade) a. Strict Mid. Fair (one-half grade) by b. Mid. Fair (full grade) by c. St. Good M. (one-half grade) by d. Good M. (full grade) by 1. Strict M. (one-half grade) by 2, and so on. see page 207. Rule 5.— 1. Designate the grades hy their charac- ter representations, as, a, &, c; 1, 2, 5, etc.; opposite each grade place the number of hales of that grade: 230 The American Cotton System multiply these mimbers by the number of sixteenths the class shows to be abone or below middling value; add the products of the sixteenths above and below middling^ separately; subtract the lesser from the greater amount^ multiply the remainder by ^^4^, divide the product by the number of bales; the quotient will be the number of points to be added to or subtracted from the middling price. 2. If the excess is above, add the points to, if be- low, subtract from the middling price, the result ivill be the a/uerage price, nearly. Ex. 1. Find the average of 1 M., 2 S. M., 3 L. M. ; M/B being 10 cents, % off for S. M., % off for L. M. Arrange the work in this way: Grades. Bales Price. Sixteenths. Sixteenths. (M.) 3 1 Pass 10 Bales (S.L.M.)4 2 93/4 4X2= 8 (L.M.) 5 3 914 12X3= 36 6 Added = 16 44 44X614=275 points. 275 divided by 6= 6)275 45f points. As the sixteenths are on cotton below M. in value, they must be taken off M. price — M. price is 10 cents =^1000 points. 1000—451= 1000 451 Average price =$ .0954^=9.54J cts. Basic Cotton Calculations 231 Explanation: In first column the figures 3, 4 and 5 represent the different grades ; the next column the bales; the next the price; the next the number of sixteenths each grade is below M. ; the 4-sixteenths is multiplied by 2, the number of bales of that grade, making 8-sixteenths ; the 12-sixteenths is multiplied by 3, the number of bales of that grade, making 36 sixteenths, which added to the 8 gives 44-sixteenths below M. To reduce which to points, the 44-sixteenths are multiplied by 614 points (equalling ^V), giving 275 points for the 6 bales ; to get the number of points for 1 bale, divide the 275 by 6, which is equal to 451 points to be taken from the M. price. Ex. 2. Average the following: 2 G. M. at 8 cts., 1 S. M. at 734 cts., 2 M. at 71/2 cts. Ans. 7.75 (734) cents. Explanation : (Grade.) (Bales) (Sixteenths.) (Sixteenths.) 1 2 X 8 = 16 2 IX 4 =4 3 2 Pass Sum = 20 20X61/4=125 points. 125-:-5(No. bales)=25 points. M. price is $ .0750 Plus .0025 Leaves average price $ .0775=7.75 cents. (See problem 4, Rule 3, and problem 2, Rule 4.) Note.— The M. price is 71/2, ^4 more =73^, then from M. to S. M. is 1/4 ^ 'up;'' i/i==T*(r and is placed as 4 in the sixteenths column ; from M. at 71/2 to G. 232 The American Cotton System M. is % **up;'' %==i\j P^t here as 8 in the sixteenths column. Two bales at 8-sixteenths = 1 bale at 16 -sixteenths ; one bale multiplied by 4=4-sixteenths ; both added =- 20-sixteenths, which reduced to points by multiplying 6y4, and dividing by the number of bales, gives the number of points to be added to M. price. M. being the base from which all basic calculations are made, is passed in making averages under this process. Ex. 3. What should I pay as an all round price for 2 G. M. at 9, 3 M. at 81/2, 4 S. L. M. at 1% and 2 L. M. at 7 cents? Ans. 8.04+ cents. Explanation : (Class.) (Bales.) ( Sixteenths. ) (Sixteenths. 1 2 X 8 = 16 on 2 3 3 Pass 4 4 X 12 = 48 off 5 2 X 24 = 48 off 11 bales Total 96 96—16=80. 80X61/4=500. 500-^11=45^51^. M. 81/2 cts. —451^1 points =$ .0850 .0045/, Average price =$ .0804 /v See problem 5, Rule 3. Note. — 1. Some of the grades are above M, and some below, which when reduced to sixteenths, equal 16-sixteenths above M. value, and 96 below that grade, Basic Cotton Calculations 233 taking one from the other, leaves an excess of 80- sixteenths below the M. base; reducing to points, give 4:5 fi to be taken from the M. price. From M. at 81/2 to S. L. M. at 7% cents equals % off; %=\i placed opposite that grade as 12; from M. 8V2 to L. M. at 7 cents equals 1% cents off; 1 cent off equals 16, V2 cent off equals i\, 16- and 8-sixteenths added equal \i, placed opposite that grade as 24; these 2 numbers, 12 and 24, multiplied by their grades oppo- site, make a total of 96-sixteenths for the grades off the M. price. 2. Care should be taken to place points under points to make a correct subtraction. Should any doubt arise, consult the tables for cents, mills and points. Ex. 4. Average problem 9, Rule 3. staten: Class. 1 2 lent: Bales. 3 X 2 X Sixteenths. Sixteenths. 10 = 30 4 '= 8 3 4 . 5 6 Pass 2 X 1 X 2 X 6 20 32 Total 38 np. == 12 = 20 = 64 Total 96 down. Follow the Rule. Ans. 4.63+ cents. Ex. 5. What should I pay for a list of cotton, as an average price, in which there are 1 G, M., 8 St. M., 10 M., 22 S. L. M., 25 L. M., 10 S. G. 0., 5 S. L. M. T., 19 G. 0.? 234 The American Cotton System B/M 8I/2, A and j\ up; A, 100, 150, A and 300 off, respectively, in the order named. Ans. 7.45+ cts. Statement : Class. Bales. Sixteenths. Sixteenths. 1 IX 9=9 2 8 X 5 = 40 3 10 Pass 49 up. 4 22 X 6 = = 132 5 25 X 16 = = 400 6 10 X 24 = = 240 7 19 X 48 = = 912 4t 5 X 8 = = 40 Total 1724 down Note.— For the grades L. M. 100, S. G. 0. 150, and G. 0. 300 points off, are represented in the first six- teenths columns, as 16, 24 and 48, respectively. As 100 is 16-sixteenths, it is given as 16; 16-sixteenths equals 100, and 8-sixteenths =50, then 150=16-1-8=:^ 24-sixteenths ; if 150=24-sixteenths, 300= twice 24- sixteenths =48-sixteenths, stated as 48. Again, 100 =U, 300=3XU=-!i. Ex. 6. What would be the price of G. M. cotton at H'^on,'' if M. is worth 10| ? Ans. 10.901 cts (See tables for eighths and thirty -seconds^ and add them decimally.) Ex. 7. Middling quoted at 7^4 cents, what would be the value of G. O. at 325 off? Ans. 4 cents. Basic Cotton Calculations 235 Note.— The 325 here means 325 points, equal to 3Vt cents, subtracted from 714=4 cents. Decimally 7i/4=$..0725 325 points = .0325 .04= cents. Often buyers speak of G. M. as ''goods/' S. M. as ''stricts/' S. L. M. as ''strict lows/' L. M. as "lows/' or G. M. as "ones," S. M. as "twos," M. as "threes," S. L. M. as "fours," L. M. as "fives," S. G. 0. as "sixes," G. 0. as "sevens," S. L. 0, as "eights," and L. 0. as "nines." These grades cover a very large per cent of the cotton and enter extensively into most all cotton cal- culations. Ex. 8. A gentleman sold 3 2's, 4 4's, and 5 6's at 8% M/B; the differences being i\ up; iV., 1% down ; what was the average price ? Ans. 8.32+ cts. Statement Class. Bales. Sixteenths. 1 2 3 X 5 = 15 up. 3 Pass 4 4 X 5 = 20 5 6 5 X 20 = 100 120 down Note.— The 20-sixteenths =11/4 off. 100=1^,1/4=^. n+i\=ii Ex. 9. Solve by Rule 4, Third Process. Ans. 8.32+ cts. 286 The American Cotton System Ex. 10. Solve by Rule 3, Second Process, weights of the S. M. being- 1632, S. L. M. 2208, and the S. G. 0. 3120 pounds. Ans. 8.29 cts., nearly. Ex. 11. What is the difference in value of tbis list of cotton calculated at 8.29 and 8.32 cts. a pound? Ans. $2.08+. Ex. 12. Find the average of 10 ^' Goods," 5 ^'Stricts,'' 5 ''Strict Lows," 4 5-t's, and 1 M. S. Premiums % and % for '^Stricts" and ''Goods." Discounts ^^e for ''Strict Lows," 93% for 5-t's and 561/4 for the M. S. M/B 7 cents. Ans. 6.9V[>. Statement and solution : 1 10 X 4 = 40 2 5X2= 10 50 up 3 Pass 4 5 X 3 = 15 5-t's 4 X 15 =: 60 M. S. 1 X 9 ^=: 9 25 bales 84 down. 84—50=34; 34X61^=212.5 ; 212.5---25=8.5 points. M. price 7 cents =$ .0700 Less 81/2 points = .OOO8I/2 Average $ .0691i4=6.91i/2Cts. Ex. 13. A number of farmers having 200 B/C stored in a cotton yard, thinking the market satis- factory, offered the cotton for sale to the highest bid- der, the highest being 8 cents M/B; the premiums were for S. M. f^, G. M. /,, S. G. M. % ; for the lower Basic Cotton Calculations 287 grades, the discounts were for S. L. M. i\, L. M. %. The quoted M. price for the open market was 7% ; what was the average price realized by selling in bulk, the cotton weighing 102,000 pounds? In this list were 5 ^'St. Goods," 55 ^' Goods,'' 102 ^^Stricts," 30 M's and 8 ^^ Strict Lows/' Ans. 8.30+ cts. Statement: M/B 8 cents. 12 = ? d 5 X 1 55 X 2 102 X 3 30 Pass 4 8 X 5 =: up. 5 = — down. Ex. 14. How much did the farmers gain by secur- ing a premium of this % above the market price ? Ans. $127.50. Ex. 15. What was the gain on each bale? Ans. 63% cents. Ex. 16. Farmers combining, sold 4,000 B/C for themselves, in Atlanta, Ga., at a premium of ,% above the market. For S. M., G. M., and S. G. M. the premiums were %, iV ^^^ 1^0; ^^^ S- L. M., L. M. and S. G. 0., the discounts were ^V, % and 150, re- spectively. M. price was lOy^ cents in Atlanta; the cotton weighed 1,960,000 pounds; there were 50 S. G. M., 870 G. M., 1,520 S. M., 1,260 M., 205 S. L. M., 70 L. M. and 25 S. G. 0. ; what was the average price; what the gain on each bale; and what the whole gain to the farmers from this co-operative sale? Ans. Average, 10.80, nearly. Gain on bale, $1,531/8. Gain to farmers, $6,125. 238 The American Cotton System statement: M/B lOi^e cts. d 50 X 16 1 870 X 9 2 1520 X 6 3 1260 Pass 4 205 X 5 5 70 X 14 6 25 X 24 -up. down. Note. — The market price is 10.25 ; the gain in class is 23.66+ points, added to 10.25=10.4866+ cents as the average price at 10.25; the market being 10.25 and a premium of ft (31% points) additional as a plus amount to secure this list of cotton, equals 10.25 +311/4=10.5614, or 10 ^^ as the basis for this sale- price. Now, 10.56% being* the basis price and the gain in class being 23.66+ points, added to 10.56% =10.799+, or 10.80, nearly, as average price. It is not usual to secure such premiums even on a large list of cotton as this, but as the lot shows to be largely high grade, with a very small percentage of "hard" cotton, exceptional values were obtained. ^ OF THE Of CHAPTER VII. CHECKS AND DRAFTS. Payments liquidating claims for cotton so frequent- ly require large sums of money, the handling of which is usually avoided by the use of checks and drafts. Orders drawn on banks, individual firms or cor- porate bodies for immediate payment of money are called Checks. The date, the amount, the name of the bank, firm or individual, and location, are stated in the cheek. Checks are used in payment of claims locally, gene- rally. A written order to an individual firm or bank for the payment of money is called a Draft. A draft made for immediate payment, is known as a Sight Draft. If its payment is directed at some future time, it is designated as a Time Draft. Drafts made by one bank upon another, are some- times called Bills of Exchange. When a draft does not sell for its face value, the exchange is made at a Discount. When a draft commands face value, its exchange is said to be at Par. When a draft is sold for more than face value, the exchange is made at a Premium. Drafts written in one place to be paid in another, are drawn to be paid at the other place. A person draws upon another, when he writes the draft to be paid. 240 The American Cotton System Drafts drawn for payment in any country having the same currency, are called Domestic Drafts^ and the exchange is Domestic ExcJmnge, in contradistinc- tion to drafts drawn for foreign account. Drafts sometimes are not paid when presented, but are accepted to be paid in a certain number of days, when so stated, the word ^^ Accepted^ ^ is written across the face of the bill, with the signature of acceptor, date and place of payment, if desired, usually writ- ten in red ink. Drafts are similar to checks, in showing the amount, date, place of the maker, the one to whom the money is paid, and the remitter. There are always three parties, and sometimes four, to transactions in exchange. The Drawer y the person signing the draft; the Drawee, the person to whom the draft is addressed; the Payee, the person to be paid. The payee may be the one himself to whom the money is to be paid. Note. — For example, a person in Atlanta, Ga., wish- ing $1,000 paid to himself in New York, may put $1,000 in the Atlanta bank and take exchange on New York for a similar sum, and receive $1,000 cash from the New York bank when he arrives. EXCHANGE. Exchange is a convenient method adopted by our banking institutions for payment of sums of money in one place, of like amount in another, without actual necessity of transmitting the cash. The risk and trouble of sending money is thus avoided. Checks and Drafts 241 The Course of Exchange deviates from par accord- ing to the superabundance or deficiency of supply of bills of exchange for sale. This variableness fluctu- ates as trade relationship differs in character between any two places. Bills of Exchange are drafts drawn by one bank upon another in a different place. Under the National Banking System, it is usual for banks to place a portion of their funds as credits in other banks. The banks receiving these credits are called the Correspondents of the bank, or Reserve Agents. If a bank at Salem, Ala., has $200,000 as de- posits, a portion of this amount may be placed in a bank at New Orleans; a portion with Montgomery, Atlanta, St. Louis, Chicago and New York banks as credits for the account of the Selma bank. Let it be understood that the Selma bank has in New Orleans $20,000 ; Montgomery, $10,000 ; Atlanta, $30,000; St. Louis, $30,000; Chicago, $20,000; New York, $50,000, making in the hands of its Correspond- ents, $160,000. Parties in Selma desiring to pay certain sums of money in any of the other cities, buy drafts from the Selma bank on the other city, transmit the draft to the one to whom it is payable, who in turn, upon its receipt presents it to the bank on which it is drawn and receives the money. Should a person in Selma wish to pay a bill for merchandise in Nashville, Tenn., he buys a draft from the Selma bank, either on St. Louis, Chicago or New York, and remits this draft (exchange) on say, New York: the merchant in Nashville receiving this New 16 242 The American Cotton System York exchange, gives the Selma drawer credit for its face value, as he can place such a draft with any local Nashville bank and get its value in money on pre- sentation, or a credit for its sum. Through such mediums established by the banking system, facilities for exchange are broader. Buying and selling drafts of one place on another is called buying and selling Exchange. Calculations respecting exchange between one place and another involve the principles of percentage. Outside of the banking channels, individuals or firms sometimes place money in other places for credit, or draw upon others, taking bank credits, which are collected by drafts. DOMESTIC EXCHANGE. PROBLEMS. 1. A wishes to remit $500 to New York, exchange being ^ of 1 per cent; what is the cost of the draft? Ans. $501.25. Note. — A wishes to send $500 to New York, and wants a bank to send it for him. The bank know- ing the rate of exchange to be i/i of 1 per cent, agrees to send the money for $501.25. A then pays the bank $501.25; the bank writes a draft on its cor- respondent bank in New York for $500, and keeps the $1.25 — this being the amount of exchange re- ceived for sending the money. Explanation : (1) One cent is .0100 (4 decimals). 14 of one cent is .0025=2% mills. Checks and Drafts 243 The bank's charge, then, is 2i^ mills on the dollar, =25 cents on 100 dollars and 5 times that on 500 dollars =$1.25. (2) $1.0025X500=$501.25. Ex. 2. A merchant in Waco, Texas, wishes to pay a debt of $1,200 in St. Louis; what will be the cost of the draft at %% premium? Ans. $1,201.50. Explanation: % of 1 per cent =$ .00121/2 ; this =121/2 cents on 100 dollars; $1,200=1,200 X.OOI21/2 =$1.50. $1,200+1.50=$1,201.50. Ans. As the rate is a certain per cent on the dollar, by adding the rate on a dollar to it when at a premium, or subtracting when at discount, the dollar can be used as a base on which to make a rule. To find the cost of a draft : FOR SIGHT DRAFTS. Rule. — Add to 1 dollar the rate of exchange, if at premium; subtract from 1 dollar the rate of exchange^ if at discount; multiply the sum or remainder, ly the face value of the draft, the result will he its cost, including exchange. Ex. 3. Smith bought 50 B/C amounting to 2620 dollars. He gave a check on a local bank in Macon, Ga., and protected the check with a sight draft on New York. Exchange being %% premium, what was its face value, and the amount of exchange? Ans., Face, $2,639.65; Exchange, $19.65. As this is a sight draft, the premium of exchange is the only calculation necessary. Explanation: (1) %%=$ .0075; this being TVs 244 The American Cotton System mills on 1 dollar; $2,620 X. 00075= cost of exchange =$19.65. Ans. (2) By the rule: exchange being at premium, add it to 1 dollar. $1.0000 .0075 $1.0075X$2,620=$2,639.65=cost draft. $2,639.65— $2,620=$19.65= cost exchange. Ex. 4. A commission merchant sold 60 B/C for $3,300, after deducting his commission at 2%% and exchange at %% premium; what amount was remit- ted to the owner of the cotton, in a sight draft ? Ans. $3,213.48. Explanation : Proceeds of sale $3,300.00 21/2% of $3,300 = 82.50 Amount less com. $3,217.50 Less Exchange = 4.02 Amount sight draft $3,213.48 The bank sending this draft, kept the exchange, $4.02, hence deducted from a portion of the gross receipts of the cotton sale.* 1/8% of $3,217.50=$4.02+. For brevity, point off 4 decimals, =32.1750 and divide by 8)32.1750 4.0218+ Ex. 5. A merchant in Boston having sold a quan- tity of wool for $5,000, wished to remit this sum *The exchange is calculated on the amount after de- ducting commission. Checks and Drafts 245 to New Orleans to invest in cotton; exchange being at 1 per cent discount, how much should he pay for the draft? Ans. $4,950.49. The usual mode of making such computations is to deduct 1 per cent of $5,000 from it; 1% of $5,000 =$50; $5,000— $50=$4,950. It is evident the true proportion would be $100 in Boston would =$101 in New Orleans, hence to get the result to exactness, divide $5,000 by $101= $4,950.49. Ex. 6. A cotton buyer deposited a draft on Chicago in the bank at Oxford, Miss., for $10,000. Exchange being %% premium, what was the net amount to the buyer's credit for cotton purchases? Ans. $9925.00. Ex. 7. Should this buyer, in preceding example, wish $10,000 to his credit for the draft, what amount of exchange would he be required to pay at same rate to secure it? Ans. $75.00. Ex. 8. A cotton buyer was allowed 1 per cent com- mission for buying cotton. His first purchase being 100 bales valued at $4,500, he wished to make a draft on Philadelphia, sufficient in amount to cover the value of the cotton, his commission, and exchange, it being i/4% premium. What was the face of the draft? Ans. $4,556.36. Ex. 9. A cotton merchant in New Orleans, after business hours, bought by telephone, 200 B/C from a dealer in Jackson, Miss., for which he offered f. o. b. Jackson 9% cents and pay the exchange, or 9H 246 The American Cotton System cents a pound, and the dealer pay exchange ; the dealer accepted the latter proposition; did he gain or lose, the cotton weighing 104,000 pounds, and ex- change at 14 of 1%? Ans. Dealer gained $8.05. It is not usual to buy cotton in such manner, unless both parties are acquainted with the grades. Ex. 10. $3500 Citizens' National Bank. Flatonia, Texas. At sight pay to the order of B. J. Enroe Three Thousand Five Hundred and no/joo Dollars and charge to account of Alton B. Jones, Cashier. To National Park Bank, New York. Premium being %%, what is the amount paid for this draft? Ans. $3,513.13. time drafts. A bill not paid at sight, but drawn to mature at a stated time, after sight, is a mixed question of ex- change and Bank Discount. Solving problems involving the use of the two, re- quire the use of the rules necessary for the solution of each, but into the one computation, the two must be combined. Three days of grace are usually allowed on time drafts after the expiration of the time specified.* The proceeds of a note, draft or account constitutes the amount left after deducting the bank discount. ♦Several States have passed laws inimical to "days of grace" in which they are forbidden. Checks and Drafts 247 Bank Discount is simple interest on the face of the Note or Draft for the time to elapse from any given date until maturity, therefore it is Simple Interest of the face of the Note or Draft paid in advance. TO FIND THE COST OP DRAFTS PAYABLE AFTER SIGHT. Rule. — Find the proceeds of 1 dollar at bank dis- count for the stated time, at the rate prescribed, or the legal rate, if no rate is expressed; to this add the rate of exchange if at premium, or subtract if at dis- count; multiply the result by the face of the draft, PROBLEMS. Ex. 1. After buying 100 B/C valued at $5,000, a merchant in Savannah gave to the local bank a draft payable 60 days after sight on New York, exchange being % per cent premium, interest rate 6 per cent; what amount of credit would the bank allow the mer- chant ? Ans. $4,985.00. Explanation : The interest (bank discount) on $1, 63 days =$.0105 The premium of exchange on $1 at %% = .0075 The difference is $.0030 As the face of the draft is $5,000, the bank will deduct A of 1 per cent =$15, leaving $4,985 to the merchant's credit. This is a brief, clear way to obtain the result quickly, and also accurately. Of course, the interest is first calculated before attempting to formulate the statement. 248 The American Cotton System By the Rule. — Interest on $1 for 63 days =$ .0105. $1—$ .0105=$ .9895. $ .9895+$ .0075 (Premium) =$ .9970. $ .9970X$5,000=$4,985. To understand fully its conception, the problem may be stated as follows: Find the Simple Interest on $5,000 for 63 days at 6%, which = $52.50 The premium of exchange at a %% rate = 37.50 Difference between premium and interest =$15.00 which can be deducted directly from the face of the draft, $5,000, leaving $4,985. Now, the bank discount on $5,000 being $52.50, deducted from $5,000=: proceeds = ^ $4,947.50 To which add the exchange = 37.50 Equals cost of draft $4,985.00 If no interest were allowed on this draft it would cost the merchant $5,037.50. Ex. 2. Sold 320 B/C for $17,600 ; accepted a New York draft at % per cent discount, interest to accrue at 6 per cent for 90 days: I sold this draft to my Jiome bank for cash ; what amount did it pay me ? Ans. $17,305.20. Ex. 3. A Philadelphia firm executed a 30 days draft for $42,000 at a 6 per cent rate, on New York, at 11/2 per cent discount ; what is the cost of the draft ? Ans. $41,139.00. Ex. 4. Thompson & Co., (xalveston, Texas, sold a list of 212 bales of Farmer ' Union cotton at 11 cents, it being % above quotation ; the cotton gained 4 points Checks and Drafts 249 in class, and 460 lbs. in weight. This cotton was held 3 months, on which were charges of 1 dollar per bale the first month, and 23 cents a bale each month thereafter. It averaged 510 lbs. to the bale. What was the amount of the draft to cover payment of this cotton after deducting charges. Exchange being 14 of 1%. What was the gain in class, weight and quo- tation ?* Ans. Amount s/d, $11,554.62 ; gain in class, $43.24 ; gain in weight, $50.60 ; gain in quotation, $135.15. Ex. 5. A dealer in Atlanta, Ga., sold 500 B/C, valued at $25,850 to Huggins & Co., Norfolk, Va., on whom he made a draft 60 d/s at 6% interest and %% premium, they were to pay the exchange, and he accepted the draft. The dealer found 2 days after the cotton was moving and he had cashed the draft at the local bank, that Huggins & Co. had failed, and could not receive the shipment, he immediately diverted it to Wilson Cotton Co., Savannah, Ga., to whom he had to sell for i\ less, and pay the exchange at the rate of 1/4% premium on a sight draft.* What was his loss or gain by the failure of the Norfolk firm? Ans. Gained $45.23+. Note. — The news of the fact of the failurt' of Hug- gins & Co., voided the draft on them, the value of which reflected on the bank cashing it for the dealer previously, but as the shipment was immediately sold to another, the dealer accepted the surrender of the original draft and issued a second one on Savannah, protecting both himself and the bank. In such instances where shipments on a B/L prop- *Note this is a sight draft. 250 The American Cotton System erly indorsed, with the notation ** Shipper's Order, Notify," on its face, the bank and shipper are both protected. INDIRECT EXCHANGE. Owing to the difference of the rates of exchange between any two places, and the frequent variation of it, it is often advantageous for persons wishing to make payment of any sum on some other place to draw through one, two or more intermediate points. By this process of Circular Exchange the rate is sometimes cheapened. Exchange of this character is called Indirect^ Circu- lar or Arhitrution of Exchange. PROBLEMS. Ex. 1. A spinner buyer in Galveston, having pur- chased $60,000 worth of cotton, for his Providence, R. I., mills, knowing the rate of exchange on New York to be %% premium, found by drawing in- directly through New Orleans banks, he could obtain a rate through the latter place of %% premium, and from New Orleans to New York, a discount of %%; he drew through New Orleans; what did he save by drawing through that place, and what was the amount of his draft? Ans. $59,999,621/2 Saved $300,371/2. Explanation : (1) $60,000= value of purchase. $1,005=%% premium on 1 dollar on N. Y. $60,000 X$1.005=$60,300=direct exchange, and the amount of such a draft. Checks and Drafts 251 $1.0025=14% premium on 1 dollar on N. 0. $60,000X$1.0025=$60,150= value sight draft on New Orleans. $1.00— 14%=$1.0000— $ .0025=$ .9975. $ .9975= discount on $1 from N. 0. to N. Y. $60,150X$ .9975=$59,999.96y2, indirect exchange. Cost direct exchange $60,300.00 Cost indirect exchange 59,999.62% Ans. Saved $ 300.371/2 Ans. (2) $60,000 in New York = what in Galveston? $1,001/2 in Galveston =$1.00 in New York. $1.00% in Galveston =$1.00 in New Orleans. $ .993/4 in New Orleans =$1.00 in New York, then $60,000X$1.00i/2= value draft in Galveston ' $60,300.00 $60,000X$1.00i4X$ .993/4= value draft $59,999,621/2 indirect. Subtracting, leaves gain $ 300.37% Ex. 2. A Baltimore manufacturer's representa- tive bought in Dallas, Texas, a list of cotton amount- ing to $16,530; exchange on Baltimore being 14% premium, he could by drawing indirectly through New Orleans and Havana, Cuba, secure exchange on New Orleans at %% premium; from New Orleans to Havana %% discount; from Havana to Baltimore 1/4% discount. What is the cost of the draft each way, and what is the gain by circular exchange? Ans., Cost direct $16,571.32+ Cost indirect 16,488.65+ Gain $ 82.67+ 252 The American Cotton System foreign exchange. People of one nation doing business with another, must have some basic value on which to consummate financial transactions. This basis is the mint valuation of the monetary unit of the countries. In Foreign Exchange it is necessary to find the value of money in one country in terms of unit value of the other. The amount of money of one country of equiva- lent value of the other is called Far of Exchange be- tween these two countries. This value determined by the Director of the Mint is the Intrinsic Par of Exchange, while the market value of such coins dealt in by the banks may slight- ly vary from this, such bank valuations are called the Commercial Par of Exchange. Eemark. — By virtue of an act of Congress, August 28, 1894, the Director of the Mint, proclaimed 'Hhe values of foreign coins to be values of such coins in terms of the money of account of the United States, to be followed in estimating the value of all foreign merchandise exported to the United States on and after April 1, 1909, expressed in any of such metalic currencies. ' ' Copying from United States Treasury Department Circvilar No. 15, the subjoined Table, for reference in estimating moneys of foreign account is given. Checks and Drafts Table No. 7. Value of Foreign Coins. 253 Country Standard Monetary unit Value in terms of U. S. gold dollar Austria Hungary- Gold Crown $0,203 Belgium Gold Franc .193 Brit. Pos. Gold DoUar 1.000 China* Silver TaeP* .613 Denmark •Gold Crown .268 Finland Gold Mark .193 France Gold Franc .193 Ger. Empire Gold Mark .238 Gr. Britain Gold Pound ster. 4.866y2 Italy Gold Lira .193 Japan, Gold Yen .498 Mexico Gold Peso .498 Netherlands Gold Florin .402 Persia Silver Kran .069 Portugal Gold Milreis 1.080 Russia Gold Ruble .515 Spain Gold Paseta .193 Sweden Gold Crown .268 Switzerland Gold Franc .193 Turkey Gold Piaster .044 The values of the coins of the countries to which cotton is exported, are the principal ones here given. Quotations giving exchange values for cotton in German territory are for four marks or reich's mark to the dollar. *The value of the Tael in China has a different valu- ation in each of its National territorial divisions— the Tael in Amoy is $.615; Cheefoo $.588; Hankow $.575; Nankin $.608, etc. **Canton. 254 The American Cotton System Those showing the French exchange quotations are in five-francs and centimes, or decimals of a franc. Drafts drawn for account of cotton destined for Russian points, are covered by sterling bills of ex- change on London, usually drawn at 90 d/s. For Germany, cotton shipments are protected by drafts on German banks, while for France, the stipu- lations generally require bills of exchange drawn on French banking institutions. There are any number of well established banks in enlightened foreign countries, upon which spinners are accustomed to give drafts as reimbursements. The rates of exchange vary from day to day, and buyers of exchange on this side are governed by the demand for it; by the rate of discount in London, Paris or Berlin, or on any country upon which the draft may be drawn. The rates varying are for those termed Commercial Exchange, and may be higher, equal to, or lower than the Par of Exchange. A bill payable in sixty days costs less than sight exchange. Calculations required for determining foreign ex- change valuations are for those of commercial or quot- ed values. Bills of Exchange on England, Ireland, Scotland are expressed in sterling money, called Sterling Bills, The denominations are in pounds (£), shillings (s.), and pence (d) ; 12d.=ls. ; 20s.=l£=$4.866y2. Note. — The old custom house silver valuation for the pound sterling was $4.44f , hence, when exchange between the United States and England is really at Intrinsic Par, $4,866^^, it is at a premium of 9^^ per cent above the old sterling silver rate. Checks and Drafts 255 Foreign Bills of Exchange are drawn or issued in triplicate form, known as First, Second and Third of Exchange, each of which are posted by different mails; the first to arrive at destination being vital and paid, renders the others void. The operation to find the values of moneys of foreign account will show further necessity for the advantage of Indirect Exchange. EXCHANGE ON ENGLAND. PROBLEMS. Ex. 1. What will be the value in dollars and cents for a bill on London for 500 pounds at Intrinsic Exchange ? Ans. $2,433.25. By Table No. 7, a £ sterling is quoted at $4.8661/2, then, £500 would equal 500X$4.866i/2=$2,433.25, Ex. 2. What is the value in U. S. money of £500, bankers' exchange quoted at $4.85i^? Ans. $2,427.50. Ex. 3. How much could a cotton buyer realize in New Orleans for a bill on I/iverpool for £219, 10s., 6d., exchange being quoted at $4.91i? ^„^ ... . Ans. $1,078,111+. Note.— Reduce the 10s. and 6d. to a decimal of a pound, and proceed as in Example 1. Explanation: 12d.=ls.; 20s.=£l. Multiply the 10s. by 12, as 12d.=ls., which gives 120d., to this add the 6d., making for 10s. and 6d. 126d. Reduc- ing 1£ to pence, equals 240d.; now with these 2 numbers form the common fraction \H; annexing naughts to the 126, and dividing by 240 as in division 256 The American Cotton System of decimals, the answer .525 is obtained as a decimal of a pound. The statement, then, is £219.525X$4.91i =$1,078,111+, Ans. 10s. 6d. 12 120d. 6 126=126d. Ex. 4. A Manchester representative paid a Mem- phis cotton merchant a draft for £600, 16s. for a list of cotton ; what is the equivalent value in U. S. money, exchange being $4.88? Ans. $2,931,904. Ex. 5. How much Federal money can I get for a draft on London for £802, 8s., payable in 60 days, when sterling exchange is quoted at $4.85 1? Ans. $3,896.45+. Note. — In this problem a 60-day time is stated, but no interest rate, because the exchange rate is allowed for 60-day paper, and cashed at this valua- tion. From the preceding examples, to find the cost of sterling exchange in dollars and cents, it is easy to form a Rule. — (1) Multiply the face of the draft in £'s by the stated exchange rate in dollars and cents. (2) Reduce shillings, pence and farthings to a decimal of a pound before multiplying. To find the amount of sterling exchange that can be bought for a certain sum of United States money, reverse the operation: Checks and Drafts 257 KuLE. — Divide the face of the draft expressed in dollars and cents, hy the rate of exchange for £1. Ex: 6. A buyer gave a draft on London for $2,195.- 475; if British exchange is quoted at 4.86|, what is its value in £., s., and d. ? , Ans. £451, 2s., 6d. NpTE. — The division gives a direct quotient, £451.- 125. .125X20 (No. shillings in £1) =2.500=2s. and .5 of a shilling, which is further reduced by multiply- ing by 12 (No. d. in a s.), giving a product 6.0= 6d. EXCHANGE ON FRANCE. Calculations to find the equivalent value of French moneys are similar to those for English account. Ex. 1. What can I get in U. S. money for a bill on Paris for 38,700 francs, the quotation being 5.16 fr. to 1 dollar? Ans. $7,500. Explanation : 38,700-^5.16=7,500X$l=$7,500. Ex. 2. I have a 90-day draft on Paris for 53,300 fr. for which a banker offers to cash at 5.121/^ ; what is its value in U. S. money? Ans. $10,400. Ex. 3. A French buyer having $1,500, wished to convert it into francs; what is its value in French money if exchange on Paris is quoted at 5.141/^? Ans. 7,717.5 fr. Explanation: 5.141/2 fr. X 1,500=7,717.5 fr. Ans. Ex. 4. I sold a Switzerlander 100 B/C for which he gave me a bill of exchange on Berne for 33,475 fr. ; exchange on Switzerland being quoted at 5.15, what amount of T^. S. money did I get from my local banker 17 258 The American Cotton System who cashed it for %% premium, who in turn drew indirectly through New York? ^ Ans. $6,491,871/2. Note. — The franc in Switzerland is same in value as that of France. exchange on GERMANY. Ex. 1. I sold to a German mill 220 B/C, averaging 510 lbs. each, at 11^/2 cents, for which the agent gave me exchange on Hamburg for its value in marks at .95l^ ; what was the face of the bill in German money ? Ans. 54,043.97m. Explanation : 220X510Xliy2=$12,903. 12,903--.95y2Xi=54,043.97+ marks. To find the value in German money: EuLE. — Divide the amount of money in dollars and cents by the exchange rate; multiply the product by 4; the answer tvill be in marks. Note. — The rate is quoted for four marks, and the same result can be obtained by dividing by the cost of 1 mark. Ex. 2. What is the value in marks for a bill on Berlin for $17,526, 90 d/s, if offered exchange for it at .9514? Ans. 73,600m. Ex. 3. A German buyer gave me a 90-day draft on Berlin for 73,600 marks in payment for a list of cot- ton, exchange being at .951/4, what was its worth in U. S. money? Ans. $17,526.00. Explanation : 73,600 X .95l^-^4=Ans. To find value in dollars and cents : EuLE. — Multiply the face of the bill in marks by Checks and Drafts 259 the exchange rate, and divide the product by 4; the answer will he in U, 8, money, Ex. 4. A Lancashire spinner buyer wished to pay $5,000 for 100 B/C in Charleston, and by making exchange indirect through Paris, could get a rate of 5.30 fr. for 1 dollar; from Paris to London 25.40 fr. for £1 ; for how many pounds, shilling and pence will he have to make his draft? Ans. £1,043, 6s., 1.7d.+. Explanation: $5,000X5.30=26,500 francs. 26,500-^-25.40= value in £'s and decimals of a pound, which reduce to s. and d. Ex. 5. For a sale of cotton made by a Houston firm, it agreed to accept a draft on London for £5,000, ex- change quoted at 4.88f . The firm found by paying a commission of i/^% to a Hamburg agent, it could draw through that place indirectly on London, a mark at Hamburg equaling 35^2 cents, and 13^/2 marks equaling £1 sterling, and get a cheaper rate. How much would this firm gain by drawing on London through Hamburg? Ans. $362.13+. Explanation : -£5,000X$4.88f =$24,444.44+, direct. £5,000 X 131/2=67,500 marks. Add 1/2% com. 337.5 67,837.5 67,837.5X35y2=$24,082.31+, indirect. Cost direct exchange $24,444.44+ Cost indirect exchange 24,082.31+ Gaii^ $ 362.13 260 The American Cotton System Ex. 6. A buyer from the Hague wished to pay $30,000 for 530 B/C in Montgomery; by drawing through London and Hamburg, exchange on London being $4.86=£1; £1=14 marks of Hamburg, and 6 marks =8 florins of the Netherlands; for how many florins will the draft have to be made? Ans. 115,226.2 fl. Explanation : (1) $30,000-f-$4.86 (£1) =£6,172.83+. £6,172.83X14=86,419.7 marks. I of 86,419.7 m. =115,226.2 flor. Ans. (2) AO|o^xYXf=? AMERICAN, GERMAN AND FRENCH WEIGHTS, AND METRIC MEASUREMENTS. The standard of weights for most all the European countries are based on the Metric system, and cal- culations are made in Kilograms ; for convenience and brevity, generally expressed as Kilos (Keeloze). Lengths for cotton staple are in millimeters, and length and strength are qualifying considerations in determining values, but not exclusive of other factors that go to make up the grades. Millimeters in quotations for staple values are ab- breviated thus — ^m/m. A meter being about 39.37 inches, a m/m =1000th part of it =.03937 inches, and for practical pur- poses may be expressed as .04 inches. To determine the length of cotton staple measur- Checks and Drafts 261 ing, say, 28 m/m, by multiplying by .04 would = 1.12 inches, an approximation close to accuracy. Quotations for staple cotton are given as definite lengths, and those intermediate, as 28 m/m; 28/30 m/m; 29 m/m; 29/30 m/m; 30 m/m; 30/32 m/m and so forth. The expression ''28/30," means 28 to 30 m/m in length; that is for cotton measuring 1.12 to 1.20 inches, equal to about 1% to 1^ inches. TABLE No. 8. AMERICAN-GERMAN WEIGHTS. Kilos to 2 decimals. 100 lbs. =45.35 Kilos. Lbs. Kilos. Lbs. Kilos. Lbs. Kilos. 1 0.45 70 31.74 4,000 1,814. 2 0.90 80 36.28 5,000 2,267.50 3 1.36 90 40.81 6,000 2721. 4 1.81 100 45.35 7,000 3,174.50 5 2.26 150 68.02 8,000 3,628. 6 2.72 200 90.70 9,000 4,081.50 7 3.17 300 136.05 10,000 4,535. 8 3.62 400 181.40 20,000 9070. 9 4.08 500 226.75 30,000 13,605. 10 4.53 600 272.10 40,000 18,140. 15 6.80 700 317.45 50,000 22,675. 20 • 9.07 800 362.80 60,000 27,210. 30 13.60 900 408.15 70.000 31,745. 40 18.14 1,000 453.50 80,000 36,280. 50 22.67 2,000 907. 90,000 40,815. 60 27.21 3,000 1,360.50 100,000 45,350. 262 The American Cotton System Table No. 9. german-american weights. Lbs. to 2 decimals. 45.35 Kilos =100 lbs. Kilos. Lbs. Kilos. Lbs. Kilos. Lbs. 1/4 0.55 50 110.25 3,000 6,615.21 y2 1.10 60 132.30 4,000 8,820.29 % 1.65 70 154.35 5,000 11,025.36 1 2.20 80 176.40 6,000 13,230.43 2 4.41 90 198.46 7,000 15,435.50 3 6.61 100 220.51 8,000 17,640.57 4 8.82 150 330.76 9,000 19,845.64 5 11.02 200 441.01 10,000 22,050.72 6 13.23 300 661.52 20,000 44,101.43 7 15.43 400 882.03 30,000 66.152.15 8 17.64 500 1,102.54 40,000 88,202.87 9 19.84 600 1,323.04 50,000 110,253.58 10 22.05 700 1,543.55 60,000 132,304.30 15 33.07 800 1,764.06 70,000 154,355.02 20 44.10 900 1,984.56 80,000 176,405.73 30 66.15 1,000 2,205.07 90,000 198,456.45 40 88.20 2,000 4,410.14 100,000 220,507.17 PROBLEMS. Ex. 1. A man sold one B/C weighing 522 lbs.; what 'is its weight in Kilos? Ans. 234.9 Kilos. Explanation : (1) 1 lb. (Table 8) =.45 Kilos. 522 lbs. =522 X. 45=234.9 Kilos. Ans. Checks and Drafts 263 (2) By the Table 2 lbs. = .90 Kilos. 20 lbs. = 9.07 Kilos. 500 lbs. =226.75 Kilos. 522 lbs. =236.72 Kilos. The difference is caused by carrying the relative value of the Kilo to the lb. to only 2 decimal places. The true decimal to 4 places is .4535+; .4535X522= 236.72+ Kilos. Ex. 2. What is the equivalent weight in Kilos of 5 B/C weighing respectively, 510, 532, 496, 501, 566 lbs? Give result by the Table. Ans. 1,181.37 Kilos. Ex. 3. Bought from a German 13 B/C which weighed 3482 Kilos at 9.80 cents a pound; what is the value of the cotton? Ans. $752.44+. Note. — Get weights in lbs. from Table 9, and mul- tiply by the price. Ex. 4. A buyer offered 1 mark per Kilo for 3 B/C weighing 685 Kilos ; what was the value in U. S. ^^^^y^ Ans. $163.03. Explanation : 685Xlni.=685m. 685 X$ .238=$163.03= Ans. Ex. 5. What is the price per pound U. S. money in example 4? ^^^ ^q g^ ^^^ nearly. Explanation : 600 Kilos = 1,323.04 lbs. 80 Kilos = 176.40 lbs. 5 Kilos = 11.02 lbs. 685 Kilos = 1,510.46 lbs. 264 The American Cotton System If 1,510.46 lbs. cost $163.03 ; 1 lb. will cost YTilVl^ of $163.03=$163.03-^1,510.40 lbs. =1080 cents, nearly. Ex. 6. I sold a list of cotton weighing 1,260 Kilos, which I classed 28 m/m staple, at 110 pfennigs per Kilo; the out turn from this shipment showed the cotton to grade 30 m/m; what did I gain in dollars and cents by this latter gradation if each m/m extra length was equivalent to 10 pfennigs ? Ans. $59,976. Explanation : 1,260 Kilos XllO pfennigs =138,600 pfgs. 138,600X$ .00238=$329.868, 28 m/m. Gain on each m/m =10 pfgs. Out-turn showed gain of 2 m/m, then — 10X2 pfgs. =20 pfgs. 110 pfgs. +20 pfgs. =130 pfgs. 1,260 Kilos X 130=163,800 pfgs. 163,800X.00238=$389,844, 30 m/m. Value at 30 m/m = $389,844 Value at 28 m/m = 329.868 Gain $ 59,976 Ans. Note. — A mark =23.8 cents; a pfennig is x^^ of a mark, therefore =$ .00238. Ex. 7. Prove otherwise Ex. 6 is correct. Explanation : 1,000 Kilos = 2,205.07 lbs. 200 Kilos = 441.01 lbs. 60 Kilos = 132.30 lbs. 1,260 Kilos = 2,778.38 lbs. Checks and Drafts 265 $389.844--2J78.38 lbs. = cost 1 lb., 30 m/m = $ .1403+. $329,868^2,778.38 lbs. = cost 1 lb., 28 m/m = $ .1187+. $ .1403—$ .1187=$ .0216= gain on 1 lb. 2,778.38 lbs. X$ .1187=$60.013 (a), Ans. Ex. 8. What will be the value in francs for 150 B/C weighing 231.28 Kilos each, at 1 mark per Kilo? Ans. 42,780.8+fr. Ex. 9. Adams & Smith, Houston, Texas, shipped 1,000 B/C to Mitsui & Co., Osaka, Japan; the invoice weights were 235,820 Kilos; this cotton was sold for an average of 10% cents per lb. f, o. b. Houston; the draft was drawn through a New York bank for U. S. money; it drew on Mitsui & Co., in Yen; find face of draft in Yen. Ans. 113,554.23+ Yen. (a) The slight difference in the two answers is caused by not extending the decimals beyond 4 places. Note. — Consult Tables 7 and 9 in solving problems 8 and 9 above. COTTON QUOTATIONS— CALCULATIONS FOR PRIMARY BASIS PRICE. The New Orleans and New York Cotton Exchanges being the only two dealing in future contracts in the United States, quotations for such futures on the Exchanges in Galveston, Houston, Little Rock, Mem- phis, Atlanta, Shreveport, Augusta, etc., are for tho. New Orleans and New York markets, but each of the other mentioned places quote spot cotton, this spot 266 The American Cotton System price being made by committees especially elected or appointed for such business. The duties requisite of these committees while not entirely identical, are so similar in many respects as to require no severance in a detailed description. For illustration let us take the committee of the Houston Cotton Exchange, which consists of five ap- pointed members, whose duty is to ''furnish daily quotations'' for spot cotton '* based on Houston stand- ards, ' ' that is, based on a type of cotton the samples of which the Exchange would recognize as good mid- dling, strict middling, middling, etc. ''In practice this committee consisting of three factors and two buyers, the quotations are based upon the sales that have been made during the day. ' ' Houston and Galveston are rival markets and it has been frequently stated that quotations for these mar- kets can not always be realized, from the fact of an active competition creating a tendency to over-quote the market, this statement arising from those selling or consigning cotton to those markets, but from buy- ers and factors operating in the two places such state- ments do not meet with full corroboration. All exchanges do not have the same number of committeemen; notably, Memphis has seven, it be- ing customary for four factors and three buyers one month and three factors and four buyers next month, etc., to serve; the chairman alternating. Little Rock has a committee of three, two buyers and one factor, who operate as a sub-committee. Each member "either from his own transactions or transactions of others, puts prices on a slip of paper," which "slips are turned over to the secretary of the exchange. If any Checks and Drafts 267 two agree, their figures are the price; if each is dif- ferent the average of all the prices is used.'' Their actions are based on transactions in spot cotton that have occurred during the day. The Augusta Exchange has six members, usually three buyers and three sellers, occasionally tieing on a quotation; if three quote middling 9 cents and three 9%, then the quotation would be posted 9 — 9%. Classification for this exchange is higher than any of the others. Augusta middling about the same as Liverpool good middling. The Savannah Cotton Exchange rules seem to be indeterminate as to the number constituting the spot cotton quotation committee, but practically the com- mittee is composed of both buyers and sellers. In determining the spot cotton valuations to be posted ''a book is taken around each day one-half hour be- fore the close, and each member of the committee writes in the book the quotation which he thinks should be established. The quotations are based on even-running grades, and a majority rules in deter- mining what quotation shall be.'' The Savannah Exchange has the Liverpool classifi- cation, and in comparing this with other markets, it is well to be remembered. From these quotations wired over the country, and those carried daily in the papers, relative values for the market in any locality can be determined. If cotton is quoted at 10% in New Orleans, what would be its relative value in Atlanta, if the freight rate between the two places is 40 cents per hundred ^ on cotton? 268 The American Cotton System Statement : Value New Orleans 10.875= ( 10% ) Less freight .40 Atlanta valuation 10.475 This statement shows value in Atlanta with only freight off, but it is usual to deduct 3 per cent brok- erage, the margin or profit desired, also. Again, value in N. 0. 10.875 cents Freight .40 Brokerage ^ .03 Expense and margin, say, .121/2 Total off .551/2= .555 cents Buying Basis in Atlanta 10.320 cents Buyers in Atlanta, then, would use about 10.30 as a basis on which to operate, if buying ^'on the market," that is, buying at a price it is worth at the time in the open market. Spot buyers generally base their operations on the quotations for certain fnUire months, instead basing on the spot quotations. It should be remembered that all quotations for future months are for middling, and basing on spots, whether they be exchange quotations or quotations given by a correspondent, are also for the same grade. Alternate months have become by the usage of the exchanges adopted as the governing months in ascer- taining present spot values. If May is the present month then July would be a basic month on which to calculate a spot price; if for delivery in the more distant month, October would govern. Checks and Drafts 269 Suppose October is quoted at 10.85, and a sjSot dealer is willing in May to enter into contract to sell 1,000 bales to be delivered in that month at 50 points on October, then his basis price would be 10.85 -^50=11.35. Were this transaction consummated in May, this dealer would protect it by a hedge and if, when near delivery time, the spot cotton had not been secured, he would buy it at the current price at the time, he being easy, as the hedge which is allowed to drift, had secured to him a protection, ex- cept in instances where the market had gone against him, then additional payment on his part would be required to keep the hedge vitalized. Should this merchant who sold 1,000 bales at 11.35, find, in September, the market was 10.90 and for fear it might ''go against him,'' (higher) offer 10 points on this month for middling, then a buyer buying for this operator, or for such a market quotation, at Atlanta, would calculate this way : October New Orleans 10.90 cents Ten points on .10 Value in New Orleans 11.00 cents Freight -40 Brokerage -03 Margin and expenses .121/2 Total off-set .551/2 -^^^ Buying basis in Atlanta = 10.445 cents. If this Atlanta buyer can by reason of a reversal in the market, use 10.30 basis, and retain the ten points offered, he has been fortunate to that extent. 270 The American Cotton System problems. Ex. 1. If the freight rate, Atlanta to New Or- leans is 40 cents; from New Orleans to Liverpool 32 cents; what could be paid in Atlanta for M. cotton, if quoted in Liverpool at 5.83d., brokerage 3, and margin and expense 15 points? Ans. 10.76. Explanation : Value in Liverpool, 5.83 X$ .02= 11.66 cents Freight .72 Brokerage .03 Profit and expense .15 Total off-set .90 Total off-set 10.76 Note. — One pence =$ .02+ =2+ cents. Ex. 2. Freight,* Memphis, Tenn., to Bremen being 68 cents; what will be my basis in Memphis, if I wish to reserve a margin, expense and profit, of 18% cents, and cotton quoted in Bremen at 51 pfennigs? Ans. 1114. Explanation: (See note, page 264.) 51 X$ .00238= 12.1380 cents Freight* .68 Brokerage .03 Margin and expense 18%= .1875 Total offset .8975 Memphis basis 11.2405 cents. ♦Freight rates are assumed approximations. Checks and Drafts 271 The preceding will suffice to show how to make the estimate for a base when all the charges are known. For foreign account all the charges are not given for the reason shipments of this character are gene- rally made subject to such stipulations for expenses as may be stated in the sale as agreed to by both parties. Parties on this side selling to European consumers usually have a representative there to whom ship- ments are er^trusted for supervision, and such charges as receiving, warehousing, delivering, commission, mending, sampling, tare, 5 per cent excess insurance, cost of exchange, etc., are some or all added to the lists already stated in the problems. If the shipments of cotton upon receipt and ex- amination do not conform identically to the class guarantee, and buyer and seller can not adjust it themselves, the matter is referred to arbitration, when so adjusted, further charges accrue. The prices quoted for foreign markets in news- papers, showing the value of spots, are the prices that might be obtained, after payment of the accustomed charges, hence it is not definite that such quotations can be obtained at all times for cotton delivered at the moment. COMPAEATIVB VALUES OF UNITED STATES AND FOREIGN FRACTIONAL MONIES. The following table will be found of service in showing the comparative values of foreign monies compared with those of the United States. It exhibits the values of the minor divisions of coin- 272 The American Cotton System age, enabling the student to determine at a glance the comparative values of such money with ours, and with such table, operations requiring the introduc- tion of foreign money in the computations, are made easier. The coinage valuation of the money of Germany, France and England are given only, as these coun- tries consume the greatest percentage of our cotton crops. The figures in the first row show the. comparative value of 1 cent, 1 pfennig, 1 centime, and 1 penny, to a dollar. The rows of figures, under their proper heading, show how many of one kind it takes to equal another of a different kind. To know how many pfennigs equal 5 cents, read the top line crosswise and it shows 5 cents equal 21.01 pfennigs, 25.91 centimes, and ^^ pence. In like manner to ascertain the equivalent num- ber of pfennigs or centimes for any number of cents from 5 to 16, find the number in cents and opposite on the same line will be found the number desired in foreign money. Excepting the English coinage, all the others quoted are in percentages; that is, it takes 100 cents to make a dollar; 100 pfennigs to make a mark; 100 centimes to make a franc, therefore fractions of a dollar, mark and franc can be expressed as a decimal of it. To write fifty marks and twenty pfennigs, write 50.20 m. ; two hundred and sixteen marks and 38 pfennigs, write 216.38 m. ; seventy-five francs and six- teen centimes, write 75.16 fr. To get a clear idea of the comparative values, let Checks and Drafts 273 it be stated that cotton is worth Ty^ cents a pound; what is its value in centimes? (38.87) ; what in pfen- nigs? (31.51); what in pence? (3.70.) (See the table. ) For greater accuracy, the German and French val- ues have been carried to 4 decimal places, with a point (.) dividing the decimal, and instead of writ- ing the decimal as .6353 of a mark, it is written as 63.53 pfennigs, with the same form for the French expressions — the penny is almost twice the value of one cent. Quotations for the German market are in pfennigs, each pfennig representing % Kilo in weight, equal to liT pounds; while for France they are given in francs, and for the weight of 50 Kilos, or 110 pounds. Quotations for foreign cotton are for net weight, the tare usually reckoned at 6% from gross weight. (See Bremen Cotton Exchange rules, page 117.) Table No. 10. United States. Germany. France. England Cents. - Pfennigs. Centimes. Pence. $.01 $.00238 $.00193 $.02+ 1 4.20 5.18 0.50 2 8.40 10.36 1.00 3 12.60 15.54 1.50 4 16.81 20.73 2.(H) 5 21.01 25.91 2.41 51/8 21.53 26.55 2.53 51/4 . 22.06 27.20 2.59 5% 22.58 - 27.85 2.65 51/2 23.11 28.50 2.71 18 274 The American Cotton System Table No. 10 — Continued. ited States. Grermany. France. England. Cents. Pfennigs. Centimes. Pence. 5% 23.63 29.15 2.77 5% 24.16 29.79 2.83 57/8 24.68 30.44 2.90 6 25.21 31.10 2.96 61/8 25.73 31.75 3.02 61/4 26.26 32.39 3.08 63/8 26.79 33.04 3.14 6y2 27.31 33.69 3.20 65/8 27.84 34.34 3.27 63/4 28.36 34.89 3.33 6% 28.89 35.64 3.39 7 29.41 36.27 3.45 71/8 29.94 36.92 3.51 m 30.46 37.57 3.57 7% 30.99 38.22 3.64 71/2 31.51 38.87 3.T0 7% 32.04 39.52 3.76 73/4 31.55 40.15 3.82 778 33.07 40.80 3.88 8 33.61 41.45 3.95 81/8 34.12 42.10 4.01 81/4 34.65 42.75 4.07 83/8 35.17 43.39 4.13 81/2 35.69 44.04 4.19 8% 36.22 44.69 4.25 8% 36.75 45.33 4.31 8% 37.27 45.98 4.38 9 37.82 46.63 4.44 91/8 38.32 47.27 4.50 Checks and Drafts 275 Table No. 10 — Continued. Fnited States. Germany. Prance. England. Cents. Pfennigs. Centimes. Pence. 91/4 38.85 47.92 4.56 9% 39.37 48.56 4.62 91/2 39.90 49.21 4.68 9% 40.43 49.86 4.75 93/4 40.95 50.50 4.81 • 97/8 41.47 51.15 4.87 10 42.02 51.81 4.93 10% 42.53 52.45 4.99 101/4 43.05 53.10 5.05 103/8 43.57 54.75 5.12 101/2 44.10 55.39 5.18 10% 44.62 56.04 5.24 103/4 45.15 55.69 5.30 10% 45.67 ^56.34 5.36 11 46.22 56.99 5.42 111/8 46.73 57.64 5.49 111/4 47.25 58.28 5.55 113/8 47.77 58.93 5.61 111/2 48.30 59.58 5.67 11% 48.83 60.22 5.73 113/4 49.35 60.87 5.79 11% 49.87 61.52 5.86 12 50.42 62.17 5.91 121/8 50.93 62.82 5.98 121/4 51.45 63.47 6.04 123/8 51.97 64.11 6.10 121/2 52.50 64.76 6.16 12% 53.03 65.41 6.22 . 123/4 53.55 66.05 6.29 276 The American Cotton System Table No. 10 — Continued. TTnited States. Grermany. France. England Cents. Pfennigs. Centimes. Pence. 12% 54.07 66.70 6.35 13 54.62 67.35 6.41 131/8 55.13 67.99 6.47 131/4 55.65 68.64 6.53 13% 56.17 69.29 6.60 131/2 56.70 69.93 6.66 13% 57.22 70.58 6.72 133/4 57.75 71.23 6.78 13% 58.27 71.89 6.84 14 58.82 72.54 6.90 141/8 59.33 73.18 6.96 141/4 59!85 73.81 7.03 14% 60.37 74.46 7.09 141/2 60.90 75.13 7.15 14% 61.42 75.76 7.21 143/4 61.95 76.42 7.27 14% 62.48 77.07 7.33 15 63.03 77.72 7.40 151/8 63.53 78.37 7.46 151/4 64.05 79.02 7.52 153/8 64.57 79.66 7.58 151/2 65.10 80.31 7.64 15% 65.63 80.96 7.70 15% 66.15 81.60 7.77 ■ 15% 66.68 82.25 7.83 16 67.23 82.90 7.89 These values are calculated on the basis of the United States Mint valuations — see Table No. 7. Checks and Drafts 277 problems. Ex. 1. If cotton is quoted on the Havre Bourse (Exchange) at 72 for M., what is the value in New Orleans, freight being 28? Ans. 12.35 cents. Note.— This quotation is 72 francs for 50 Kilos, 110 pounds; freight rate is 28 cents per hundred pounds. Explanation : 1 fr. =$ .193; 72 fr. =72X.193=$13.896. $13,896-^110=12.63 cents per pound. 12.63—28=12.35, value in New Orleans, Ans. This value is for the cotton without other charges than freight and profit deducted. Ex. 2. A Galveston merchant sold 100 B/C (50,000 lbs.) f. 0. b. Manchester, England, at 6d; what is the value of the cotton at Galveston in U. S. money, and what price in cents per pound, exchange quoted at 4.80, and freight at 30 cents a hundred? Ans. Total value $5,490; price per pound, 10.98c. Explanation : (1) Total gross weight 50,000 lbs. Less 6% tare 3,000 lbs. Net weight 47,000 lbs. 47,000 lbs. X6 d. =282,000 d. 282,000^12 d. =23,500 s. 23,500-^20 s. =1,175 £. Freight on 50,000 lbs. at 30 cents per hundred = $150. $150-^4.80=31%. £'s = £31, 5 s. £1,175— 31i4=£l,14334. 1,14334 X4.80=$5,490. Total value. $5,490-f-50,000 lbs. =10.98 cents == Galveston price. 278 The American Cotton System (2) 6 d. =12 cents = 12.00 Less 6% =.72 Less freight .30= 1.02 Galveston price 10.98 cents, Ans. 50,000 lbs. X10.98=$5,490 Total value. Briefly, 50,000—3,000=47,000 at 6 d. =£1,175, s. Less freight at 30 cents = 31, 5 s. Net value £1,143.15 s. £1,143, 15 s. X4.90=$5,490-^50,000=10.98c. Ex. 3. Cotton is quoted on the Bremen Exchange at 55 pfennigs; what is value in cents? Ans. 11.905 cents. Note. — The quotation is for I/2 Kilo =1to ^^^• Explanation: ^ Kilo (ly^o lbs.) =55 pfennigs. If IxV lbs. =55 pfennigs, 1 lb. will = li^o of 55 p. 55-^1.1=50 p. 4.20 p. =1 cent. (See Table.) 50 p. -^.20=11.905 cents. Ans., nearly. Ex. 4. What would be the value in Dallas, Texas, for cotton quoted in example 3, if freight is 85 and tare 6% ? Ans. 10.34% cents. Explanation : Bremen value 11.905 cents 6% of 11.905= .71 Freight .85 Total tare and freight 1.560 Dallas equivalent value 10.345 cents. Checks and Drafts 279 Ex. 5. What is the value in U. S. money if the German market is quoted at 54.6 pfennigs? (See Table.) Ans. 13 cents. Ex. 6. Brokerage 3, commission 2, tare 6, other expenses and profits 12, freight 65, what should a buyer in Macon, Ga., offer as a basis for cotton based on the quotation in example 5? Ans. 11.40 cents. Explanation : 54.6 p. =(See Table.) 13.00 cents 6% tare = .78 Brokerage .03 Commission .02 Freight .65 Expenses and profit .12 Total offset 1.60 11.40 This buyer would offer about 11.40, as M. base price, provided he had his cotton sold and protected, or if the market showed stability, with good indica- tions for an advance, he might offer this figure with- out a hedge. As previously stated, offsets given in the problems here, are only approximations, but it serves to illus- trate the manner in which calculations are to be made to ascertain a base. The total amount of charges to come off the quot- ed market, or premiums to be added, are usually stated and agreed upon by both buyer and seller. 280 The American Cotton System when trade is made, especially when for foreign ac- count. A buyer on a foreign market might offer a certain price f. 0. b. Liverpool, Bremen or Havre, as the case should be, then the seller would determine the ex- penses to accrue to himself before he could land the cotton there, which would be such charges as freight, clerical assistance, exchange, marine insurance, cable- grams, and whatever margin he desired to make or could make, and arbitration fees, etc. Ex. 7. A bale of cotton weighing 520 lbs. was sold for 10 cents a pound; what was its value in dol- lars and cents, marks and pfennigs, francs and cen- times, and English money? (See Table.) Ans. $52.00; Marks, 218.50; Francs, 269.42; £10, 13 s., 8 d. Explanation: (See Table.) Multiply weight of bale by 42.02 p. =520X42.02= 21,850.4 p. 21,850.4-f-100=218.50+ marks. Ans. In like manner for the French weights, multiply 51.81c. X 520=26,941.2 centimes -:-100=269.41+ Francs, Ans. 520 lbs. X3.93 pence =2,563.6 pence. 2,563.6-{-240 (number of pence in a £)=£10.6816+ 20 s. s. 13.6320 12 d. d. 7.5840 The answer is £10, 13 s., 8 d. Checks and Drafts 281 From the preceding a rule can be formed. To find the value of Marks, Francs, and all monies with fractional percentages. Rule. — Multiply the total weight of the cotton by the price in pfennigs or centimes, divide the product by 100; the answer ivill be in Murks amd Francs, with decimals as pfennings or centimes, should the division not come out even. To find the value in pounds, shillings and pence. Rule. — Multiply the weight of the cotton in pence, divide the product by 240, (the number of pence in a pound), the quotient will be pounds, and decimals of a pound, which decimal reduce to shillings and pence by multiplying it hy 20 s. first, cutting off the left whole number as shillings, multiplying the result- ing decimal by 12 d., the left whole number being the number of pence. Ex. 8. What will be the value of 2 B/C, 1040 lbs. at 8V2 cents a pound IT. S., French, German and English money? Ans., $88.40; Marks, 371.18; Francs, 458.02; £18, 3 s., 4 d. Ex. 9. John Anson sold 15 B/C weighing 7,830 lbs. at 11% cents; what is its value in dollars and cents, marks and pfennigs, francs and centimes, pounds, shillings and pence? Ans., $890,661/4; M., 3,740.39; F., 4,614.22; £, 183, s., 5 d. Note. — See Table No. 10 for comparative values. Explanation : Multiply 11% cents by 7,830 lbs. =$890.6614. Multiply 47.77 p. X 7,830 lbs. =374,039.10--100= 282 The American Cotton System 3,740.39+m. ; 58.93 c. X 7,830=461,421.9 c. -^100= 4,614.22, nearly. For conversion of U. S. money to Sterling, see ex- amples in preceding portion of this work, "Exchange on Englaiid/' The comparative values of the Marks and Francs in the answer are slightly too small as to the number of pfennigs and centimes, owing to the fact of the Table showing decimals only to 4 places. In calculating the Table for pfennigs, centimes, etc., the basis for such were the U. S. mint valuations, that is: 1 Mark = 23.8 cents. 1 Dollar =4.20 marks. 1 Franc = 19.3 cents. 1 Dollar = 5.181/8 francs. 1 Penny = 2 cents, nearly. 1 Dollar = 4 shillings and 1 penny. 1 £ = $4.8661/2. In example 9, let it be required to find the number of dollars in 3,740.39 marks, the process is performed by dividing by 4.20 m. as it takes that many to make one dollar; for the 4,614.22 francs, divide by 5.18% (5.18125), the result will be in dollars and cents. It should be remembered that the Mint valuations for comparative values are stable, while those for commercial purposes are variable, hence the differ- ent rates quoted by banking institutions for exchang- ing money of one nation for that of another. Should a cotton merchant receive a 60-day draft on Paris for his cotton, and one bank offer to exchange the French to U. S. money for 5.18% francs to the dollar, and another bank offer him 5.1814 francs to Checks and Drafts 283 the dollar, it is evident the first bank offered the cheaper exchange for the merchant, as he could get more dollars for his draft. Rates of exchange may vary widely at different times, but only when abnormal circumstances act as exciting causes. The variation is quite small when commercial trans- actions are moving normally. 284 The American Cotton System TABI.E NO. 11. Dates of Earliest Killing' Frosts in the Cotton States. (U. S. Weather Bureau Reports.) State N. Carolina— N. Carolina..- N. Carolina... N. Carolina— S. Carolina... S. Carolina.. - Georgia Georgia Georgia Georgia Georgia Florida Florida Alabama Alabama Alabama Mississippi Mississippi Louisiana Louisiana Texas Texas Texas Texas Arkansas Arkansas Tennessee Tennessee Tennessee Locality I 1907^ Charlotte Rockingham Raliegh Goldsboro Charleston Columbia Atlanta Augusta Savannah Columbus Rome Jacksonville Pensacola Eufaula Mobile Montgomery Vicksburg GreenviUe New Orleans Shreveport Galveston Palestine San Antonio Ft, Worth Little Rock Ft. Smith Memphis Nashville Chattanooga Nov. Nov. Oct. Oct. Nov. Oct. Oct. Nov. Nov. Nov. Oct. Dec. Dec. Nov. 1906-07 1905-06 Oct. Oct. Oct. Oct. Nov. Oct. Oct. 14 Oct. 14 1 Nov. 13! Nov. 14 1 Oct. 12 Nov. 11 j Nov. Nov. Nov. Oct. Nov. 12 Nov. Nov. Nov. Nov. Nov. Nov. Oct. Nov. Nov. Dec. Oct. Dec. Nov. Nov. Oct. Dec. Nov. Nov, Nov, Dec. Nov. Oct. Nov. 13 Dec. 13 i Nov. 11 Oct. 13 23 Dec. 29 Nov. 24lDec. 13, Nov. 13 Nov. 11 Nov. 24 Dec. iNov. 1905-04 11 Oct. 12 Nov. 15 1 Nov. 12 Nov. 11 [Dec. 22 Nov. 22 Nov. 12 j Nov. 4 Dec. 23 Nov. 22*Nov. Dec. Dec. Nov. Dec. Nov. Nov. Nov. Dec. Nov. 1904-03 Nov. Nov. Nov. Nov. Oct. Nov. Oct. Oct. Dec. Dec. Nov. Nov. Nov. Nov. Nov. Nov. Nov. 27 Oct. 28 Nov. 28 7;0ct. 27 13 Nov. 28 I5IN0V. 28 7j0ct. 25 15 i Oct. 28 131N0V. 28 Nov. Nov. Nov. 30 iNov. 291 Nov. Nov. Nov. Nov. Nov. 27 Nov. 28 Nov. 28 Nov. 27 Nov. 2S Nov. 19 Nov. 27 Nov. 19 Nov. 19 Nov. 19 Nov. 19 Nov. 19 Nov. 18 Nov. 18 Nov. 18 Nov. 19 Nov. 18 Nov. 25 Nov. 28 Tables 285 TABI^Z: NO. 12. Number of Active and Idle Ginneries, and Average Number of Running- Bales, Excluding I^inters, G-inned per Active Establishment, by States: 1904 to 1908. State o O United States. Alabama Arkansas Florida Georgia Mississippi North Carolina. 1908 1907 1906 1905 1904 1908 1907 1906 1905 1904 1908 1907 1906 1905 1904 1908 1907 1906 1905 1904 1908 1907 1906 1905 1904 1908 1907 1906 1905 1904 1908 1907 1906 1905 1904 1908 1907 1906 1905 1904 «M h , "S-i Number of Ginneries 1 111 §|« Total Active Idle Average bales active ment 30,3451 27,598 2,747 478 30,822! 27,592 3,230' 404 31,3251 28,709 2,616 457 31, 441 1 29,038 2,403| 866 32,855 30,337 2,518| 448 3,762 3,490 272 1 384 3,857 3,460 397 : 824 3,984 3,658 326 1 843 1 4,020 ! 3,736 284 ; 333 ! 4,239 ; 3,912 327 374 2,340 2,128 212 1 471 2,381' 1 2,115 266 1 357 2,487 2,312 175 889 2,521 2,306 215 i ^ 2,631 2,451 180 86S 301 1 258 48 274 304 259 46 219 309 1 276 88 223 311 292 19 270 811 279 32 314 4,950 4,475 475 442 5,106 ' 4,567 539 408 5,135 4,586 649 857 5,185 4,779 406 882 5,465 4,980 486 896 2,011 1.708 808 280 2,125 1,874 251 861 2,225 2,076 ^S 471 2,254 2,396 2,079 176 252 2,240 156 495 3,896 8,491 406 464 3,987 ' 8,641 446 408 4,152 1 8,780 872 898 4,215 8.886 880 801 4,442 4.084 868 4S6 8,034 2,788 246 846 8,039 2.754 286 282 8,089 2,792 247 219 3,044 2,884 210 280 8,188 2,947 286 254 286 The American Cotton System TABI.E irO. 12— Continued. o Sx: O, a> Number of Ginneries *-< ?3 '^'S* b Sfll State 08 3S* Xi l">^ 2 Total Active Idle mi o < Oklahoma 1908 1,057 987 70 722 1907 1,051 971 80 897 1906 987 939 48 950 1905 891 848 48 809 1904 848 809 39 1,017 South Carolina ^ 1908 3,481 3,241 240 375 1907 3,437 3,^92 245 365 1906 3,394 3,146 248 290 1905 3,392 3,170 222 351 1904 3,453 3,247 206 367 Tennessee 1908 1907 761 784 657 673 104 HI 509 396 1906 833 702 131 417 1905 847 734 118 367 1904 894 762 132 421 Texas 1908 4,507 4,169 838 887 1907 4,501 3,995 506 563 1906 4,532 4,232 300 952 1905 4,523 4,165 358 604 1904 4,753 4,416 337 711 All other states* 1908 1907 245 250 206 191 39 59 357 241 1906 248 210 38 325 1905 238 210 28 278 1904 240 210 30 327 •Includes Arizona, Kansas, Kentucky, Missouri, New Mexico, and Virginia. I o A 02 bo o n H s * rf g o * III ^ p o « §»» i " O f-1 O (8 n o t o O Tablks ^^ s 8 S g 8 li § 1 § s OS 00 oT 287 § § i i I & f^ 288 The American Cotton System TABI.I: NO. 14. No. Cotton Mills in U. S. Showing- No. of Spindles, Bales Consumed, and Stocks in XSacli State. (U. S. Census Bureau.) 29,946 825 3,590 49,060 62,400 1,575 4,445 5,220 799 37,616 4,445 367,098 3,491 1,168 82,696 9,217 37,797 84,542 8,564 12,933 76,250 96,487 10,508 5,543 1,342 9,085 6,798 1,016,738 Tables 289 TABI^E NO. 15. Production, Total Acreag^e, Total Estimated Value, ATerag'e Net Weig-ht of Bale, Value of Lint by the Pound, Prom 1790 to 1906. This Statement Shows the Running- Bales as They Come from the Press, Bound Bales Being* Counted as Halves. The Values Given Are Por Cotton, Including" Linters, and Not Por the Value of Cotton Seed Products. (Linters, short fiber taken from the seed at the oil milhs.) State Total acreage Total bales I Total I Net value I Wt. Av. price 1908 ; 32,444,000 1907 ! 31,311,000 1906 ! 28,()86,000 1905 : 26,117,153' 1904 30,053,739 1903 1902 1901 1900 1897 1896 1895 1894 1893 1892 1892 1891 1890 1889 1888 1887 1886 1885 1884 1883 1882 1881 1880 1879 1878 1877 1876 1875 1874 1873 1872 1871 1870 1869 1868 1867 1866 1865 1864 1863 28,016,893, 27,114,1031 27,220,414 25,758,139 24,275,101 24,967,295; 24,319,584! 23,273,2091 20,184,808: 23,687,950, 19,525,000 13,432 11,325, 13,305, 10,725 13,697 10,015, 10,784 9,748 10,245 9,345 11,189, 10,897, 8,532 7,161 9,901 7,493 131 882 265 ,602 310 721 473 ,546 602 391 205 $588,814,828 613 "' ' 640 556 561 576 421 311,538 833,817' 100,386: 499,824 687,941 323, 314, ,8571 356, ,7051 275, 0941 259, 251 220, nnnl 9m 758,171 263,615 294,209 718,223 468,107 441,452 502,928 ___ . "" " "" " " 1 " 20,175,270 7 -- — 1 _J__ _ * 14,480,019 1 i 1 6,700,365; 9,035,379 8,652,597 7,472,511] 6,938,290; 7,046,&33 6,505,087; 6,575,691! 5,706,165, 5,713,200! 6,949,756; 5,456,048; 6,605,750' 5,755,359| 5,074,155 4,773,8651 4,474,069' 4,632,313 3,832,991 4,170,388 8,930,508 2,974,351 4,352,317 3,011,996 2,366,467 2,519,554 2.097,254 2,269,316 300,000 450,000 267,344,5641 311,982,601: 351,970,341 296,4