131 UNITED STATES DEPARTMENT OF AGRICULTURE Bureau of Agricultural Economics i i PL(>mr>« FARM PRICES OF COTTON RELATED TO QUALITY ARKANSAS CROP - SEASON 1928-29 A Preliminary Report Washington, D. C April, 1931. This report presents certain cf the results a far obu . ty described by the authors. It is issued at this time to make the information available for immediate use in advance of a more com- prehensive printed publication when the study is com- pleted. Bureau of Agricultural Economics. Nils A. Olsen. Chief, Division of Cotton Marketing, Arthur W. p almer, In Charge. Acknowledgments Credit is due B. Youngblood for his contributions to the study in its beginning; Arthur W. Palmer for gene, and helpful suggestions; Maurice R. Coo Hembree contributions in formulating methods for tabulating the da John S. Burgess Jr. and T. A. Neubauer for assistance in compiling the data; ginners, warehousemen, and cotton buyers for making data available; the Arkansas State Agricultural Experiment Station for cooperation in the collection and tabulation of the data; the Grade and Staple Estimates Project of the Division of Cotton Marketing for cooperation in the collection and tabulr. data and for the classification of the samples; and the Publications Com- mittee of the Division of Cotton Marketing constructive criti- cisms and helpful suggestions. FARM PRICES OF COTTON RELATED TO QUALITY - ARKANSAS CROP. SEASON. 1928-29 \J By L. D. Howell. Senior Agricultural Economist, Division of Cotton Marketing 2/ CONTENTS Page reduction 1 Objects of Study. 3 Local Markets 4 Quality of Cotton 4 Method of Procedure 5 Variations in Prices with Quality in the Same Markets 8 Irregular Variations 8 Grade Differences 10 Staple Premiums and Discounts 13 Variations in Average Prices with Average Quality 15 In Different Markets 15 Seasonal Variations 16 Influence of Farm Prices on Quality of Cotton Produced 20 Summary and Conclusion 21 INTRODUCTION Considerable quantities of cotton with a staple length shorter than 7/8 of an inch are produced annually in Arkansas. In some years a notable proportion of the crop is of very low grade largely because of unfavorable weather conditions. The proportion of the crop that was less than 7/8- inch in staple length and, therefore, untenderable on futures contracts ZJ amounted to 119,600 bales, or 9.8 per cent in 1928; and to 178,200 bales, or 12.8 per cent in 1929. 4/ The proportion of the crop which was enderable on futures contracts because of low grade amounted to 74,100 bales, or 6.1 per cent in 1928 and to 68,600 bales, or 4.9 per cent, in »se data were collected la cooperation with the Arkanaaa Agricultural Experiaent Station. 2/ The aubetance of thla papar a&a given at the Cotton School of tha Collage of Agriculture. Univ. of kx aaa. end Mid-South Cotton Growers Association cooperating. Little Rock. Arkanaaa. July 29. 1930. and at reraera' Short Course. Fayettewllle. Arkanaaa. August 5. toe. 5 of the U. S. Cotton futures Act and regulations of the Secretary of Agriculture thereunder. £/ Cottoa Grade aad Steple Eetlaate Report. Bureau of Agricultural Ecoaoalci. ilea Department of Agrlealtare. Table I -Tenderabllity 1/ of cotton ginned ops of 1928 and 1929 2/ Ln Arkansas and States. Arkansas Itea 192Q 1929 Bales Qttl Bales c_ejvt Total Crop 1.216.200 100.0 1.395.100 100.0 ! Tenderable 1.0:6.000 84.4 1.149.900 82.4 Untenderable J/ 190.200 15.6 245.200 6 Because of Grade 74.100 6.1 68 . 600 4.9 Because of staple 119.600 9.8 178.200 States 12.8 United Item 1928 1929 Bftiu cent BftlffJ cent Total Crop 1 14.268.200 1 100.0 14.515.800 100.0 Tonderable 1 11.724.200 82.2 10.994.800 75.7 Untenderable 3/ 2.544.000 17.8 3.521.000 24 3 Because of Grade 1 756.800 5.3 880 . 100 6.1 Because of Staple 1 2.Q51J0O 14.4 2,920,200 ?0rl \J S«ctlon 5 of the United States Cotton Future Act ,-vnd the regulations of the Secretary of Agriculture thereunder. 2/ Tenderabllity a- reported by the Bureau of Agricultural Economies. Division of Cotton Marketing on I IB. 1930. 3/ Sono cotton was untenderable because of both grade and staple and this fact accounts for total untenderable being loss than the sua of untenderable because of grade and because of staple. •'•/ tton Grade and Staple Estlaato Report. Bureau of Agricultural Econoalcs. United States Oepartaer Agriculture. 1929. The proportion of the cotton produced in the United States that was untenderable on futures contracts because of short staple amounted to 2.051.100 bales, or 14.4 per cent, in 1928 and to 2.920,200 bales, or 20.1 per cent, in 1929; and because of low grade amounted to 756.800 bales, or 5.3 per cent in 1928 and to 880.100 bales, or 6.1 per cent in 1929. 4/ (Table 1. ) The proportion of the Arkansas cotton crop that had a staple length of 7/8-inch and shorter amounted to 469.940 bales, or 33.6 per c 1928 and to 571.300 bales, or 41.0 per cerv 1929 . Compc for tho United States show that the proportion o' crop that had a staple tb of 7/8-inch and sh od to 7 per cont in 1928 and to 8.454.200 bales, or 58.2 per cont in 1929 short-staple cotton coapotes diroctly with cotton grown in India. CI. - 2 - and some other foreign countries where, it is claimed, the cost of pro- duction is less than in the United States. This competition, together with the large quantity of very short staple cotton produced in Arkansas, causing public attention to be directed to the desirability of improv- ing the quality of the cotton produced in this State. Farmers are inclined to grow the kind of cotton which, at prices received in local markets, yields them as individuals the greatest not returns. Where an averaged price is received for all qualities of cotton, farmers are more interested in high yields than in good quality and I find it more profitable as individuals to grow the kind of cotton that can be produced at the least cost per pound regardless of grade and staple length. On the other hand, where prices received by growers are appre- ciably higher for the longer than for the shorter staples, farmers are offered an inducement for producing the longer staple cotton. It is reasonable to suppose that farmers will produce cotton of better quality when, and not until, the differences in prices received are adequate to convince them that the production of the better qualities is as profitable as, or more profitable than, the production of cotton of poorer quality. The supply of the different qualities of cotton produced by growers who follow their individual economic interests is likely to be out of line with spinners' demand, if prices received by growers fail to reflect accurately the spinning quality of the different grades and staple length. It is practically impossible, under a system of individual economy, to ad- just accurately the quality of cotton produced to spinners' demand unless prices received by growers reflect accurately the differences in demand for the different grades and staple lengths. Farmers are interested in adjusting the quality of cotton grown to spinners* demand when such ad- justment results in larger profits to the individual growers. OBJECTS OF STUDY The objects of this study are, (1) to determine he extent to which prices received by growers in the same markets on the same days varied with the grade and staple length of the cotton; (2) to compare these .ations in prices with the differences for grade and the premiums and discounts fcr staple length paid in central markets on the same days; (3) to determine to what extent the average prices received by growers in Cerent local markets varied with the average grade and staple length of the cotton in those markets; and (4) to determine the relationship between the fluctuations in prices received by growers in local markets and those paid in central and futures markets. It is the further purpose of this study io call attention to some of the factors responsible for or assc i with these variations; to indicate some of the influences of the variations in prices received by growers for different grades and staple lengths on the quality of cotton grown; and to suggest means of bringing about a better adjustment of the quality of cotton produced to consumer :cussions of the characteristics and functions of local ton ma: e meaning and measures of quality in cotton are ■en as a back-ground for the analysis presented. - 3 - LOCAL MARKETS Cotton is sold by faraors in almost every village, town, and city in tho cotton-producing aroa of Arkansas. The volume of sales varies from undrod bales at cross-roads storos and country gins to many thou- I bales in largor cities. Tho groat .t of the crop, he is said in smallor cities and towns. These local markets supply a meeting place for growers and buyers ind giv .3ors an opportunity to bargain individually in tfa of their cotton; furnish a ready and convenient market where farmers may a their cotton at almost any timo; servo as a point for assembling cotton in such quantities as to facilitate handling; and £ s a medium through which i for cotton is transmitted to growers. personnol of tho local market consists of cotton growors and local buyers. Farmers, as a rule, know little about the classification of cotton. Their bargaining power is largely determined by their business judgment and their financial obligations to local buyers. The number of local buyers varies from one in some markets to sov others. Among ■ are supply merchants, fertilizer dealers, gin operators, and ot: who tako cotton on debts of farmers or for increasing volume of business; local cotton I .ts who are interested only in buying and selling cotton; and representatives of largo cotton firms or mills who buy firms on joint account, on salary, or on commission. The facilities available and tho methods of handling cotton in local markots vary considerably. Some have a public square, a cotton yard, or a railroad platform where buyers and farmers meet and the cotton is sold through open competitive bids. In other markets farmers deliver Lr cotton directly from the gin to a warehouse- wher' bales are hed and sampled and receipts ssuod in the farmer's name, the samples and receipts obtained at tho warehouse the farmers bargain with local buyers for the sale of their cotton. In most of the local markets the local buyers obtain information on futures prices every fifteen minutes and on spot prices at the close of the market through the Commcrc: s Department of telegraph companies. This information is usod in determining the maximum prices local buy can afford to pay growors for cotton. Many local buyers re limits from cotton merchants in central markots as a basis for buying. T. limits generally tend to vary with t'r. rage q of tho cotton cntly rcccivod from tho local markets. QUALITY OF COTTON 5/ Quality of cotton is indicated by grado, staplo length, and char- Grado is determined by color and luster of the cotton; nature and -juantity of foroign matter present such as leaf, s: lus conditions as a result of ginning as indicated by smooth ; pinrss and whothor tho : gin-cut or strir. ; riMlloa of AMrlcaa Cotton by A * tur* C' rculi\r No 3T8. - 4 - The staple length of cotton moans tho normal length by measure without regard to quality or valuo, of a typical portion of its fibors under a relative humidity of tho atmosphoro of 65 p t and a tcmpora- turo of 70 degrocs Fahrenheit. 6/ Tho staple length is I in aes and in fractions of an inch. By "character" of cotton is meant the strongth. "body," uniformity in length, harshness or silkiness, etc., of tho fibors. Although the character of cotton is of great importance in determining the spinning quality of the fibers, the factors affecting the character of cotton are not definitely known. Differences in character aro rocognized in the markets and tho prices paid reflect differences in character to some ox- tent; but in the absence of standards for character, no attempt has boon . this study to relate the prices received by growors to the char- acter of cotton in each bale. METHOD OF PROCEDURE Fourteen local markets widely distributed over tho State and repre- ' :ng as nearly as possible a cross section of the types of local cotton markets in the State were selected for this study. The locations of markets are shown in Figure 1. Arrangements were made to secure from a ginner located at each of these markets a sample of each bale of cotton ginned at his plant during the season. These samples were mailed to the Memphis office of the United States Department of Agriculture where they were classed according to the Official Cotton Standards for tho . s by specialists in cotton classing regularly employed in the '. en of Cotton Marketing, Bureau of Agricultural Economics. United Department of Agriculture. 7/ The grade and staple length of the cotton in each sample were recorded. Data on the price per pound received by the grower, date sold by grower, and buyer's classifications, where available, were obtained for . bale from local buyers' books. The type of buyer who bought each bale was also indicated. Cotton sold by farmers in round lots was given a number and was separated from the individual bale sales before the data were tabulated. The official classification of the samples was recorded with the date of sale, price received by grower, and type of buyer. The marketing methods and practices at each market, information relative to central market and mill town, if any, to which cotton was shipped, and data on handling charges, insurance, storage, and freight rates were obtained for each market for use in interpreting the price data. §/ Serrlce and Rem: v. cry Announceaenta (Markets) No. 41. January 1919. pag- "JJ Tt« local aarketa studied vara aalactad at points where arr&ngeaents bad already been aade for obtaining •Mplas .rada and Stapla Estimate Project. The aethods of obtaining aaaplaa and tba classification of taasj a aaaplaa at price points were tbe saae aa tboaa for otber points used In tba Grade and Stapla Catlaate Project. Tbe claaalflcatlona were baaed on looae a&aplea taken froa tbe preaa boa at the gin. - 5 - "2 Northtrn OfO'H ana Otlohomo ore So"df comity fo^i U.,, A, r ,, o^j 6*nc*i l**4t ' *rtc* po*nf» I r. ••»(•. ' AC*C *•!-•« HtO IZO'm • *'<»M to p:.; ;lt grades and stai igths depend up0 ; :otton. tral ■ .1 stap aiums and discounts paid - ID - * > # M O * »M O ■ ! w mm j «i w w r If X X O - I ~ m l» kl « « - * J LI wo ! u t a « > J < « o ■ <-•>«>• o *j i « j * •> f - « o j k a u ►- k. O •< « X • a ■ - Hfl • X J « (- I - w O I - x o !■ k. 3 •(- ■ O O K w | M U u g -x S*3 a m » v • d — « s ■ - Q u O J z < < < X O IS « - x « u O 1 — < O i > Z CD U X < <^^ o •> < IV - IX < • •> o z a m 3 ?« * (*5 Z < H 3 5 u 1 - X in w - kl l >- o * 3 *§ •c 00 z a u n 3\ I 3 < 1 (j o- Li o 3 a 1 • - »- «. u- Z * J ■ < o o < o x x o m x 1- •) l/> (- •) M U O Z > Z _l O « O — A 4 • J z < ■ < O — u o no •> — o z - J - . < O < « • I I- n (J _l « * w Q c - « • Z < 3 O 3 3 kl k. « o a " a -i a mo < 3 < O « » 3 C O >- O - Oldl X a w «i W K k. U X O O kl t. k. z z _ u X «« J J 3 •J I- < o O « z ■ Z O u J • > u u » x O , - M ■ 1 O •> X > o , ■ « O X '. - « j i - < * m \ - - • o O I- k, ■ X O w t k. by Hills Since daily quotations for sill sarkets giving grade differ- ences and staple prosiuss and discounts paid for all grades and staple longths included in this study were not available, an average of the quotations of the grade differences paid in the ton designated spot mar- I was usod as tho best available measure of the spinning q;. of the difforont grades of cotton. 2/ Table 3 -Average grade differences \f paid for co'lor. in local aarksts ir Arkansas and in central aarkots, and comparison of differences paid in local narkots - with those paid in central aarketa. season of 1928-29 2/ Local Markets Central Variations Grade aarketa ' Size of A — Average B — Average aaaole differences pouars 4iffer9n<;fiB-.. p?llar§ . A, Minus P -. Bales Dollars -3 CM. 5 0.10 3.05 -2.95 3—g y 979 55 I 20 ° I -1.45 4--S M . 3.728 25 - 90 5--M 3.457 o 6— S .LK. 2.036 00 -4 00 S 00 7— L.M 429 -4 65 -7.95 3 30 8~S GO 237 -9 10 -12 00 2 90 B.O. 124 -11 50 -16 25 ' -^5 Spotted: 3—G M « -1.3^ 1.15 -2 50 4— S . M 131 - 40 - 15 - 25 5— M 202 -140 -390 2.50 6— S.L.I. 109 -5.05 70 7— L U 59 -9 45 -11.70 2.25 y M V ipr*M*d in dolUro por Ml* of 500 pouoda troaa. Slnoa <-( mmb • dlaccu 9/ (uu iiMliai *Mlt eottoo «)uli «oro T»o a*or»to prlco p*ld for Mlddllac V8-- :n during th. B#M0B I MU P»r po«od or »90 60 ptr bale. n*d I Mmota 18 por powd or tai.eo por Ml. ■\on wtktti My I '»«»> " •"• • *•*■ d0 r ' *toir tho apuaioi eaalltif or '•» »»d staple leagtaa. Coatre -.co. to m rease u a;-u- =t bocaua. tho* »ro coMldorotf asaaraM a.a#oroo. boi bocoMo so btlttr a.».»r. lo aoaUahle - 12 - A comparison of the grade differences receivod in local markets in Arkansas with those paid in central markots shows that tho av pre- miums : d by growers for the higher grades of white cotton woro 1 . one-third of those quoted in central markets and that tho higher the grade, tho small proportion of contral market promiums actually ived by growers. For tho white grades below Middling, tl. rage discounts in tho local markots varied from one-fourth to thrco-fourths of those quoted in tho central markets, but tho lower the grade the gr er was the proportion of the central market discounts actually re fie in the prices od by growers. The average discounts for Strict Middling spotted cotton were greater in local than in central markots but the average discounts for spotted grades of Middling and below were less in local than in central markots. (Table 3 and fig. 2.) Staple Premiums and Discounts Weighted averages of prices received for cotton in tho 14 local iota in Arkansas show that the average discount in the prices received by growers for cotton with a staple length of 13/16 inch and shorter was only $.70 per bale less than that received for 7/8 inch cotton of the same grade. The average premiums received by growers for the longer staplo lengths over that received for 7/8-inch cotton amounted to only $.10 per bale for 15/16-inch. $.60 per bale for 1 to 1-1/32 inches, $1.15 per bale for 1-1/16 to 1-3/32 inches. $1.65 per bale for 1-1/8 to 1-5/32 inches. $2.85 per bale for 1-3/16 to 1-7/32 inches, and $.65 per bale for 1-1/4 inches and longer. (Table 4 and fig. 3.) The extent to which the staple premiums and discounts receivod by growers in local markets in Arkansas represented differences in spinning quality was indicated by comparing the staple premiums and discounts re- • ed by growers with those paid in central markets. Quotations in tral markets show variations in 32nds of an inch in staplo length. while the classification of the samples used in this study shows varia- tions in 16ths of an inch. The staple premiums paid in central markets for cotton with staple lengths of 1 inch, 1 1/16 inches, 1 1/8 inches, 1 3/16 inches, and 1 1/4 inches were compared with average staple pre- miums received in local markets for cotton with staple lengths of 1 to 1 1/32 inches, 1 1/16 to 1-3/32 inches. 1 1/8 to 1 5/32 inches. 1 3/16 to 1 7/32, and 1 1/4 inches and longer respectively. It should bo noted that the differences between the staple premiums paid in central markots and those received in local markets obtained as indicated above represent minimum d: B because the quotations for the shortest staple length in each group were used for central market premiums. The average staple premiums and discounts received by growers i found to be considerably less than those paid in tho central markets. (Table 4 and fig 3.) Only 28 per cent of tho discounts paid in tho con- for cotton with a staple length of 13/16 inch and sho: '. in local markots in the form of discounts to tho produ- stapl:- ~ • miums received by growers for cotton with staple longths longer than 7/8 inch amounted to only about 11 per cent of thoso paid in contral markots. nge was from 2.6 • for cotton with a staple length of 1 1/4 inches and longor to 19.4 cent for cotton with a staple of 1 3/16 to 1 7/32 inches. - 13 - Table 4 -Average staple preaiuea and discounts 1/ paid for cotton in local markets in Arkansas and in central markets, and comparison of the average premiums and discounts paid in local marke- those paid in central markets, season of 1928-29 2/ Staple length J/ I Inches Local markets 13/16 and shorter 7/8 15/16 I and 1-1/32 1 1/16 and 1 3/32 I 1/8 and 1-5/32 1 3/16 and 1 7/32 1 1/4 and longer Size of A— Av. prems. sample and discs. oer bale BUM Bailors. 710 -0 70 2.955 3.454 10 2.857 60 981 1.15 220 1.65 39 2.85 1 65 Central Variation B — Av. prems. and disc per bale A Minus B PplUr* Pollers. -2.50 1.80 1.40 4.15 8.20 10.35 14.70 25.00 -1.30 -3.55 -7.05 -8.70 -11.85 -24.35 1/ Preaiuna and discounts expressed in dollars p«r bale of 500 pounda grosa. Mlnua (-) Beans a discount. 2/ P*-ii T/8-inrh cotton equals zero. Th# nrerage price paid for Middllnc 7/8- Inch cotton during tho season in local market: wis 18.12 cents per pound or 190.60 par bale, and in central aarketr 18.36 cents per pound or 191.60 par bale. 3/ All grades or white and spotted cotton Included. The small discounts received by growers for cotton with a staple length of 13/16-inch and shorter and the still relatively smaller pre- miums recoived for cotton with staple lengths longer than 7/8 inch offer little inducement to farmers to grow the longer staple cotton. This means that the stimuli in the form of prices received by growers for the pro- duction of cotton of different staple lengths were considerably out of line with demand for cotton based on spinning quality as indicated by staple premiums and discounts paid in central markets. Such conditions tend to result in the production of larger proportions of the shorter staples and smaller proportions of the longer staple cotton than would be the case if production were adjusted accurately to consumer demand. This maladjustment of production to demand tends to reduce net returns to growers as a group and to increase costs to consumers. Several factors may help to explain the failure of farmers to re- vo gra' ! ferenc ; staple premiums and discounts equal to those paid in contral markets. Tho local buyors with tho facilities available. In many cases, were not in position to classify cotton accurately accord- ing to Government standards at the time farmers sold their cotton. In - 14 - additic ,* local buyors woro not thoroughly familiar with grade dif- :ices and staple premiums and discounts paid in contral markets. Evon if local buyors knew the classification of cotton and woro in position to pay .1 market grade d: and staplo premiums and discounts, diff s in bargaining power of f ; »artly as a rosult of t!. not knowing tho classification and commercial value of their cotton, would tend to cause prices roceived by growers to be out of line with o ket prices. Cotton of the higher grades and longor staplo lengths could not always bo had in sufficient quantities in local markots to justify local buyers in paying the same g- s and staple premiums as ■ paid for similar qualities of cotton sold in oven running lots in central markots. Small quantities of lower grade and shorter staple cotton, he xplain th Lure of the local buyers to per otton to the same extent as it was penalized in central markots. Risks due to fluctuations in differences paid for grades above Middling and premiums paid for staple lengths longer than 7/8 inch + to discourage local buyers from paying growers full central market, dif- ferences and premiums for the higher grades and longer staplo lengths. Similar risks for the lower grade and shorter staple cotton would tend to cause, other things being equal, the discounts made by local buyors for tho lower grades and the shorter staple lengths to be greater than discounts made in central markots for cotton of tho same grades and stap igths. The fact that tho longor staple lengths cannot be do- red on futures contract at full central market premiums may tend to • local buyers from paying to growers full contral market premiums for the longer staple cotton. k of adequate information on correct classification and com- mercial value of the different qualities of cotton on the part of growers and local buyers was probably the most important factor responsible for practice of paying growers an averaged price for their cotton with y little variations in prices paid with the difference in g: and staple length of individual bales. VARIATIONS IN AVERAGE PRICES WITH AVERAGE QUALITY In Different Markets Grade differences and staple premiums and discounts received by grov. local markets as shown above represented tho average variations rices received for other grades from that received for Middling White cotton and for other staple lengths from that received for 7/8-inch cotton same markets at the same time. Th:se variations were independent of the average price level and do not indicate whether the average prices received by growers varied with the average grade and staple length. Although tho practice of "point buying" or of paying an averaged for all cotton c: little inducement to individual farmers to im- prov -y of the cotton grown, it may reward production of good f on a community basis if the average prices r d by grov y with th quality of the cotton. In order to determine the to which production of cotton of good quality was rewarded on a community b: *. was necessary to compare the variations in average *s with variations quality of cotton sold in these markets. - 15 - go price received by growors for cotton in all local mar- B studied combined for t: :ion was 18.06 cents per pound while the ago price paid in contral markets for the same qualities of cotton same time was 18.67 cents por pound, giving an average sp: of 0.61 cents per pound. As stated above the comparative price levols in local markots vary invorsoly with the average sproad bctwocn the local and contral market pric "hose local markets which had an avorago spr 0.61 conts per pound had relatively high comparative p: i thoso which had an avorago sproad groatcr than 0.61 cents per pound had rolativoly low compara - : ice levels. Analysis of tho data on prices received by growers indicated v little, if any. relationship between variations in average adjusted com- oarc 1 and variations in avcrago grade and staple length of cotton sold. No relation of comparative pri 1 to average gr staple length moans that farmers who sold cotton in local mar/, who: - . .go quality was relatively high roceivod or: the average correspondingly higher prices than those who sold in local markets w). the average quality of the cotton was relatively low. These results indicate a tendency to reward farmers on a community basis for producing the higher gradrs and longer staple lengths and to per. :s on a community for producing the lower grades and shorter staple lengths by amounts approximately equal to tho grade differences and staple i as and discounts paid in central markets. As pointed out above, the failure of farmors to ve pri ->.bly with quality makes it more profitable to them as individuals to grow the kind of cotton which can be produced at the lc cost per pound regardless of grade and staple length. Production of short staple cotton in ordor to obtain increased yields lowers the price level local markets to the disadvantage of all cotton growers in tho com- munity. Whore costs of production are less for the shorter than for longer staple cotton, the failure to vary the prices received by growers with t:. length of individual bales offers a reward to individual ■era for growing the kind of cotton which forces the price level down at the of all other cotton growors in tho community and in rs for producing tho kind of cotton responsible for tho higher price level. So long as farmers operate for individual profits it is not reasonable to expect them to sacrifice individual interests .- the interests of the group. Seasonal Variations A comparison of average monthly prices received for Middling 7/8- inch White cotton in local markets with those paid for cotton of the same aplo longth in central markots shows that the avorago sp: y narrow during September and October and widened considerably during No- . Docembcr. and January. The avcrago prices received by grower- d from $.20 por balo above central market prices in September - 16 - to $11.10 per bale below central markot pricos in January Tho spread between tho prices received by growers for Middling 7/8-inch cotton and Now York futures quotations for the curront months increased from $2.95 per bale in September to $16.70 per bale in January. (Tabic 5. fig. 4.) Variations in the average monthly comparative prico lovol from that for the season show that for cotton of all grades and staple lengths the average comparative price level increased from $3.95 per balo bolow the seasonal average in August, to $1.70 per bale above the seasonal avorage in October. (Table 6. fig. 5) From the high point in Octobor, tho aver- age comparative price level declined until the low point of $5.70 per bale below the seasonal average was roached in January. After January tho comparative price level moved upward and in February was $.15 per bale above the seasonal average. The variations in comparative price level from month to month ap- peared not to be very definitely related to variations in avorage grade and in average staple length of the cotton. (Table 6 and fig. 5.) The comparative price I nioved upward from August to October while at the same time the avorage staple length increased and the average grade became lower. From October to January the comparative price level and average grade declined while the trend in the average staple length was upward. Aft> uary the volume of sales was too small for the averages to be significant. Table 5. -Average price per pound paid for Middling 7/8-inch white cotton in local •arkets in Arkansas, and in central markets 1/. and prices of futures in New York 2/ by months, season of 1928-29 Month August Septeaber October N':v;-c r December January In Local markets Sales 5/ Bales 194 331 155 33 3 Price central markets 1/ Cents Cents 18.72 17.80 17.76 18.41 18.46 17.91 18.71 18.08 19.08 16.66 18.88 18.86 Futures in New York, active month. Cents 19.01 18.39 19.28 19.76 20.16 20.00 19.97 1/ Average of the tan designated spot markets as reported to the United States Department of Agriculture. 2/ Average of the futures quotations for the current Month as reported by the Nev York Cotton Exchange. // Nuaber of bales used In ooaputlng the average prices in the next coluan. The average adjusted comparative price level in tho local markets studied was relatively high in October when the volume of sales by farmers was relatively great. This means that the prices received by growers in October were more nearly equal to those paid in the central markets than at any other time during the season. This relatively high price -nay accounted for in part by the larger volume of sales which made it pos- sible to handle cotton on relatively narrow margins and by competition of buyers, who had sold in advance, for cotton with which to fill thoir com- mitments. - 17 - AVERAGE PRICE PER POUND FOR MIDDLING V. INCH WHITE Cotton in various Markets. 1928 29 aNTi AUG SEPT OCT NOV DEC JAN FEB a lMWIMQI MICH '>ID F0« M IDOL I NO 7/8-INCM IhiTC COTTON IN LOCAL MftMtTI <« AR«ANlAi AND TMOit PAID Id CltTlu MMITI ANO rOR Nf» YORR fUTuRCt RA» RCLATIVCL* »«»«0» IN Sl'TfuiO AND OCTORCR A 1 TH(« ■I0CMI0 C 0H1 I OC ■ A • L r III NovlHll*, OlCCVKI, ANO JANuARt. TmC t»»lO III NARROR OullHC THC nt|T FART or TMf JIAiON ANO CONTINuCO TO RIOCN At TMC IOION AOVANCCO Average Monthly Variations in Comparative price level for All Cotton and for Middling '/tj-inch white Cotton in Average Grade and Staple Length local Markets in Arkansas. Season 1928-29 cents ^___ cbade pSno variations ~]£lfL I 50 I I t _ _ ^ , _ . . e _^„.__ ^. _ i „.»,___,_,« -i ,N *f>L£ LENGTH 100 VARIATIONS I C mw u M pnct An*/ (allcfvt) 6l #f »•*» Cb «NI— *■« P"f» *>»/ (mi^httf V% ,nch <*lr*)0 2±rfv0ll -*»T y frwjt S 06 Rft/vA O .<■ t v »t« »»»p/» /5 22 urfrtnm$ of *> ««c* rrvt/j O AUG SEPT OCT NOV DEC JAN FEB FlCuRt * - T»l U|MM H0NTMLT ».■■••■ «• I" C0M»A«A7|»| fllCI LCVCL f0« ALL COTTON AND fOR HI00LI-0 7/e-INCN COTTON RMOR T-.T T-| '.K.I .CCCI'tO »T QRO.CRI RM MORI NC.R- L« t«UAL TO T-OM MIO IN CfNTRAL H.R.CT1 Oull-C SC'TCHRtR »N0 OCTORCR Than OliKi »NT OTMIN RART Of TN| ttA(0- "01 NA» NILATIVILT MION DURING T«l ril|T FART Or TH« 11.100 ANO OCCLINIO A( T-I tIAlON A0VANCI0 RN.Lt TmC XIOCI iTARLl ••! RILATI»CLT LOT Ou.inc t.i riatr part or t.i »l.iO. .no I «n u'h.o trino r.tn T«l aOv.nccuCnt - I* - Table 6. -Variations in comparative price level. \J in average grade £/ and average staple length £/ in local markets in Arkansas by months from the seasonal average, season of 1928-29 Month August September October November Dacember January February All trades and 1 staple lenKths ~e of sample Variations 4> ' in Compara- avtrtga Average tive 1/ grade 2/ staple J/ Price length i level Cents per Ba^s Grades. 1/16 inch ESUnd 23 -0.79 1.03 -0.31 3.178 .27 1.00 -.37 3.894 .34 .39 -.11 3,226 -.30 -.56 .41 1.378 -.63 -1.66 .12 287 -1.14 -1.98 .38 17 .03 -1.65 .84 ,Ml