Farm prices of cotton related to quality Arkansas crop, season 1928-29

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Farm prices of cotton related to quality Arkansas crop, season 1928-29
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United States -- Bureau of Agricultural Economics
Howell, L. D ( Leander D. ), 1893-
United States -- Dept. of Agriculture
United States -- Bureau of Agricultural Economics
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r.Jtt3I.
UNITED STATES DEPARTMENT OF AGRICULTURE
lumu of Agricultunl Economics


PLOflDA EfPxt-







FARM PRICES OF COTTON RELATED TO QUALITY


ARKANSAS CROP SEASON 1928-29













A Preliminai Report


WUington, D. C.
April, 1931.


7 I-
-- -------.----------













This report presents certain of the results

thus far obtained in the study 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. Palmer, In Charge.


Acknowledegments

Credit is due B. Youngblood for his contributions to the
study in its beginning; Arthur W. Palmer for general supervision
and helpful suggestions; Maurice R Cooper and Joel F. Heabree for
contributions in formulating methods for tabulating the data;
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 Projec* of the Division of Cotton Marketing
for cooperation in the collection and tabulation of the data and
for the classification of thA samples: and the Publications Con-
mittee of the Division of Cotton Marketing for 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 L/



CONTENTS

Page
Introduction.................................................................................... ... 1
Objects o f S tudy .................................................................................. 3
Loca l Ma rkets ........................................................................................ 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
2/ 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
untenderable 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

/ These date wr collected in cooperation with the Arkansas Agricultural Experiment Station.
2/ Ths seLutame of his paper s &ilves at the Cotton Sctool of the Collge of Agriculturt. Uaiv. of Arrana-
ase. ,ad KId-South Cotton Growers Association cooperating. Little Rock. Ariansaa. July 29. 1930. and at
Farmers' Short Core., Faetteville. ArkansUa. August 5. 13:0.
S/ Oe.. 5 or the U. S. Cotton Futures Act and regulations of the Secretary ofr Ar!:'Jlture thereundor
"/ Cott GrSe ed Staple Estiatl Report. bureau of Agrilcltural E:aomic. L'.-ed Sat.es teraraena'. Of
Agfrllturt .











LAItem


Total Crop

Tends erable

Uatenderable 5/

Because of Grade


Because of tale ........

Item


~I---ArlaMn-u


L2!Sa1929
DatesA I ET ala PEr
I a liBecnt
1.216.200 100.0 1.395,100 100.0

1.o.ooo 000 84.4 1.149.900 82.4

190.200 15.6 245.200 17.6

74,100 6.1 68.600 4.9

..119.600 9.8 178200 1.8
United Statfi


1929


I Bales E ar Ag Bla PEr
I cen nil
Total Crop 14.268.200 100.0 14,515.800 100.0
I I I
Tenderable 11.724.200 82.2 10.994.800 75.7

Untenderable 3.521,000
Utneal 2.544.000 17.8 3.521.000 | 24.3
1 1
Because of Grade 756.800 5. 880.100 6.1
_I I
__Because of Staple. .. ..... .. 2.051.100 14.4 2.,920.200Q 20.1
/ Section 5 of the United States Cotton Future. Act .nd the reglations of the Secretary of Aricultume
thereunder.
/ Tenderablllty ai reported by the Bureau of Atricultural Economaic. Division of Cotton Martketag oa AprLl
18. 1930.
3/ Some cotton was untnderablet because of both grade and staple and this fact accounts for total asteoderable
being lose than the mum of uteldTerable because of gread sad because of staple.
4/ Cotton Grade and Staple Istlmte Report. Bureau of Agriceultural Ecetmoon. United Stale Doprtesat of
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 38.6 per cent. in
1928 and to 571.300 bales, or 41.0 per cent, in 1929 Comparable figures
for the United States show that the proportion of the crop that had a
staplr. length of 7/8-inch and shorter amounted to 7.994.269 bales, or 56
per cent In 1928 and to 8.454,200 bales, or 58.2 per cent in 1929 This
short-staple cotton competes directly with cotton grown in India. China,


-2-


1 1928






t doam 18 les tman in itue United States. This competition, together
wil th the large quantity of very short staple cotton produced in Arkansas.
lm causing public attention to be directed to the desirability of improv-
I gL I the quality of the cotton produced In this State.

I Farmers are Inclined to grow the kind of cotton which, at prices
S received In local markets, yields them as individuals the greatest net
returns. Where an averaged price is received for all qualities of cotton.
farmers are more Interested in high yields than in good quality and they
find It more profitable as individuals to grow the kind of cotton that
oan 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
variations in prices with the differences for grade and the premiums and
discounts for staple length paid in central markets on the same days; (3)
to determine to what extent the average prices received by growers in
different 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 to call attention to some of the factors responsible for or associ-
ated with these variations; to indicate some of the influences of t.e
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
demand.

Brief discussions of the characteristics and functions of local
cotton markets and of the meaning and measures of quality in cotton are
given as a back-ground for the analysis presented.


-3-


......................................









in the cotton-producing area of Arkansas. The volume of sales varies from
a few hundred bales at cross-roads stores and country gins to many thou-
misand bales in larger cities. The greater part of the crop. however, is
sold in smaller cities and towns.

These local markets supply a meeting place for growers and buyers
%nd givo farmers an opportunity to bargain individually in the sale of
their cotton; furnish a ready and convenient market where farmers may sell
their cotton at almost any time;: serve as a point for assembling cotton in
such quantities as to facilitate handling; and serve as a medium through .
which the demand for cotton is transmitted to growers. i

The personnel of the local market consists of cotton growers 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 i
local buyers varies from one in some markets to several in others. Among
them are supply merchants, fertilizer dealers, gin operators, and others
who take cotton on debts of farmers or for increasing thoir volume of
business; local cotton merchants who are interested only in buying and
selling cotton; and representatives of largo cotton firms or mills who buy
for their firms on joint account, on salary, or on commission.

The facilities available and the methods of handling cotton in
local markets vary considerably. Somo 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
their cotton directly from the gin to a warehouse whore the bales are
uoighed and sampled and receipts arc issued in the farmer's name. With
tho 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 nn spot prices at the close of
t.he market through the Commercial Ntws Department of telegraph companies.
This information is used in determining the maximum prices local buyers
-an afford to pay growers for cotton. Many local buyers receive limits
from cotton merchants in central markets as a basis for buying. These
limits g-ncrally tend to vary with the average quality of the cotton
-cccntly received from the local markets.

QUALITY OF COTTON 5/

Quality of cotton is indicated by grade, staple length, and char-
-ict Cr Grade is determined by color and luster of the cotton; nature and
uaarU'ty of foreign matter present such as loaf. shale, motes, sand, and
lus: n)-d conditions as a result of ginning 3s indicated by smoothness of
'l-brs,. n.appinrss and whether the fibers are gin-cut or stringy

/ :rats: .. r'. l'.tfi- .trB aof A rkrliIn CcIt;o by A I P.tn:r. tintpr Staire Doprtmenl r.-f Agriculture
Circutar Pc. Z8.


S-4-











...... of 70 degrees Fahrenheit, / The staple length is expressed in
blfu miW and in fractions of an inch.

f1!! By "character" of cotton is meant the strength. "body." uniformity
In a length, harshness or silkiness. etc.. of the fibers. Although the
character of cotton is of great importance in determining the spinning
qm.lity of the fibers, the factors affecting the character of cotton are
8. V definitely known. Differences in character are recognized in the
I markets and the prices paid reflect differences in character to some ex-
tent; but In the absence of standards for character, no attempt has boon
m.de ia this study to relate the prices received by growers to the char-
acter of cotton in each bale.

1 METHOD OF PROCEDURE

Fourteen local markets widely distributed over the State and repre-
senting 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
S,. these markets are shown in Figure 1. Arrangements were made to secure
i trom a dinner located at each of these markets a sample of each bale of
cotton ginned at him plant during the season. These samples were mailed
III to the Memphis office of the United States Department of Agriculture where
: they were classed according to the Official Cotton Standards for the
United States by specialists in cotton classing regularly employed in the
Division of Cotton Marketing, Bureau of Agricultural Economics, United
i States 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
each 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
the 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.

/ STrvoe mnd Regulatory Am toemta (tarketas No. 41. January 1919. page 4.
Mw l ea lol MatS studied were selected at points where arrangements Lad already been made for obtaining
oil e for the GorS sad Staple 1ktlate Project. The methods of obtaining sales and the olasuificatlon
of Utose stls at price poutts mre the mano aU those for other points used in tbhe Grade mad Staple
UtIato Ptrject. Tte olawiftitlom were based on loose smaplew '"exn froa the press box at the &iM.

-.5-


















































o"1w osa
E o sonowpm A ,uW M v, M f

BgSadwe' &b'a


*.8mvepbo&


.A aw l3 do 44meltVtA ImsML ame ts rn..uwd
FrlOum I LOCATION OF PICC1 POINT* IN DIFtRrNIT SOIL ARLCA IN
AmANSAS, LIAISON 1928-29







tp ug price qyaoteo an oenitrai marKets U/ ior Te same quality o01 coTTon on
Uh na e day to give a figure representing the spread between the local
WiL and central market prices. A weighted average spread for cotton of each
grade and staple length marketed each month was calculated. The monthly
I average spread for 7/8-inch cotton of each grade was subtracted from the
Average spread for each other staple length of the same grade, and the
:: average spread for Middling White cotton of each staple length was sub-
tracted from the average spread of each other grade of the same staple
length to give an adjusted spread. Adjusting the spread at each market
on the basis of Middling 7/8-inch White cotton eliminated from consider-
ation the differences in price level at different markets and made it
possible to combine the adjusted spreads for similar qualities of cotton
in different markets.

An adjusted average spread for cotton of each grade and staple
length in each local market for the season was obtained by taking a weighted
average of the monthly adjusted spreads calculated as indicated above. An
adjusted average spread for cotton of each grade and staple length for the
State was obtained by taking a weighted average of the adjusted spreads
in' all local markets.

The adjusted spread for the different grades and staple lengths
shows the extent to which the grade differences and staple premiums and
discounts paid in local markets varied from those paid in central markets.
By subtracting these adjusted spreads from the quoted grade differences
and staple premiums and discounts paid in central markets, the actual
differences for grade, and premiums and discounts for staple received by
growers in local markets were obtained.

The relationship of the average prices received by growers to the
average quality of the cotton was determined by relating the comparative
price level to average grade and staple length of cotton sold in each
local market. Variations in comparative price levels were calculated from
the average spread between local and central market prices. A wide posi-
tive average spread means that the average prices received by growers were
low compared with central market prices and a narrow positive spread or a
minus spread means that the average prices received by growers were high
compared with central market prices. The same average spread for two or
more local markets does not mean that the average prices received by
growers in those markets were the same. unless the quality of the cotton
sold a.d the date of sale were also the same.

The comparati.ve price levels in local markets vary inversely with
the average spread between the local and central market prices. Those
local markets which had an average spread less than the average for the

f For the tlddlilt 7/8-isnch price and tae grade illffere ea paad In centr31 rica. a-erevis or "aT vi.ca-
tiomI for the 10 doelinte* d epot maistce were cied. Fsr staio q TrB'.Uaz ro! :5/I16 l: al.' II:; cCn:s.
3mweflI or te quotatiLns for %he six soa BarO-ets g'Lvr1 qucc1a5sn: v.r I.ipit- ,p e8a,.ui ore P jrnt For
prlmii for sales longer tha 1-1/32 Inches iZTer(e a of t.he at., -'-r. oz.,!" as- l. o %N. i el r::.a-.-i roa
med. discount of 50 points was mad for cotton Litb a 1s;le e.9 or c 6 /:S .E:I and sb"r..


-7-








tracing the average spread for all local markets from that for each local
' market, and then by dividing the results by a minus 1 the variation in
comparative price level in each local market from that of all local mar-
kets was obtained. These variations in comparative price level were re-
lated to variations in average grade and in average staple length.

High comparative price levels measured as indicated above mean that 'I
the average prices received by growers in local markets were high compared II
with those paid for the same qualities of cotton sold in central markets "
on thn sBeo dates. High comparative price levels in local markets in i!:
whlcI the quality of the cotton sold was relatively high mean that the .
average prices received by growers in these high quality markets were not
only absolutely higher than those received in local markets in which
cotton of poorer quality was sold, but that they were higher by amounts
creator than the differences paid in central markets for the differences
in quality.

This comparative price level in a local market is influenced by
instancee from central market. Adjustments were made for such differences
in location by adding to the average prices received by growers in local
markets the cost of compressing and of freight to New Orleans, La. This
idjustmant was made on the assumption that prices in local markets tend
to equal central market prices minus carrying charges from the local to
the central market. Interest, risks, insurance, and other costs may have
varied somewhat, but the differences in these costs were so small that
they had little, if any. influence on comparative price levels.

VARIATIONS IN PRICES WITH QUALITY IN THE SAME MARKETS

Irregular Variations

An analysis of the data collected in Arkansas during the season of
1928-29 shows that prices received by growers for cotton of the same
grade and staple length on the same day and in the same markets varied
widely. Prices received for cotton of different grades and staple lengths
iaried so irregularly that it was not unusual to find that prices re-
?cived by some farmers for higher grade and longer stapin cotton were
css than those received by other farmers for cotton of lower grade and
shorter staple in the same market on the same day These wide and ir-
regular variations indicate that the grade and staple length of the cotton
cro at tim.s of loss importance in determining prices received by growers
than wore the bargaining power of farmers or other factors.

To point out more specifically thcse variations in prices, data
3n sal:s mad' on a selected day during the active part of the season at
two r.p:rcs:ntativc local markets arc pres-ntod in Table 2. October 10,
1928. .as selected because this date represented an active part of the
mark:ting, s:asor, in local markets and because there wore no variations in
prices of N.w York futures as that market was closed on that date. Mar-
kot A .--s soloctcd to represent a one-buyer local market with no local


-8--








Io, Prices received by growers on October 10, 1928. for Strict Mi'ddling
ii15/16 Inch cotton varied a such as 32.50 per bale in market A and as
mobh a $7.50 per bale in market B. Prices received for Strict Middling
15/16-inoh cotton varied from $2.50 per bale above to $1.75 per bale
below those paid for Middling 7/8-inch cotton in market A. and from
32.50 per bale above to 15.00 per bale below those paid for Middling
7/8-inch cotton In market B. (Table 2.)

Table 2. -Variations in prices I/ paid to growers for cotton in local markets in
arkansas on October 10. 1928.


Grade I/


3-G.I .
4--S. N...
4-S.M.
4-5.1.
4-S .H.

5--N
5-H
5-N
5-N
5-H


1 Market A
Staple length Size or, Prices Paid
Inches i-IsaLPI Low i High
Balea Cests Clents
7/8 1 18.75 18.75
7/8 2 18.50 18.50
15/16 9 18.25 18.75
l nd l /32 -- a --- I --
1 I/Band 1 5/32 I -
13/16 and under 1 1 18.65 18.65
7/8 4 18.25 18.60
15/16 2 18.50 18.75
1 and 1 1/32 1 18.37 18.37
1 I/Sand 1 5/32 I I ---


Market B
Size of, Prices Pad
uanole- Low High
Bales cants |canto
1 18.50 18.50
15 18.00 18.50
27 17.50 19.00
4 18.50 19.00
1 19.50 19.50

3 18.50 18.50
3 18.50 18.50

2 19.50 19.50


i/ Prie given La cuts per pound.
2/ eato wta. ostlr.

Comparisons were made of-prices received by growers for difforont
grades of cotton of the same staple length in the selected local markets
on October 10, 1928. The results show that in market A prices received by
growers for Middling varied from $1.25 per bale below to $2.50 psr bale
above that received for Strict Middling and from $2.50 per bale to S.75
per bale below that received for Good Middling. In market B the prices
received for Middling varied from $5.00 per bale above to $2.50 per bale
below that received for Strict Middling and wore the same as those re-
ceived for Good Middling.

Similar comparisons were made of the prices received for cotton of
different staple lengths with the influence of grade eliminated by com-
paring cotton of different staple lengths of the same grade. The results
show that in market A the prices received by growers for 7/8-inch cotton
varied from 3.25 to $2.00 per bale below thoso received for cotton with
a staple length of 13/16 inch and shorter, from $2.50 per bale below to
(.50 per bale above those received for 15/16 inch cotton, and from 5.60
per bale below to $1.15 per bale above those received for cotton with a
staple length of from 1 to 1-1/32 inches. In market B prices received
for 7/8-inch cotton varied from $5.00 per bale below to $5.00 per bale
above those received for 15/16-inch cotton, from $5.00 per bale below to
the same as those received for cotton with a staple length of 1 to 1-1/32


-9-








it is not iiKAoy tnai any or ino variations notea woOve repremun
the extremes for the season. The date October 10, 1928. represented &
time when the volu5o of sales in the local markets was relatively great,
when the range in grade and staple length of the cotton was comparatively
narrow, and when there were no fluctuations in the futures market. All
of those conditions would tend to prevent tho variations from being extreme.

Differences in the character of cotton make one bale worth more
than another of the same grade and staple length in a given market on the
samo diy. No moasuro of character was available for the individual bales
sold in local markets and it was not possible to determine to what extent
differcnccs in character wore responsible for thn variations in prices
received for different bales It is belicvod. however, that variations
in the character of cotton sold in a given local market on tho same day
waro not likely to bo great enough to account for more than a very small
part of the variations noted.

The wide variations in prices received by growers for cotton of
the same grade and staple length and the Irregular variations in the
prices received for cotton of dlffcrcnt grades and staple lengths in the
samo markets or. the same day, as pointed out above, were probably the
results of a lack of knowlcdg, of the correct classification and cor-
monrcial values of the diff:rcnt qualities of cotton on the part of farmers
and local buyers and to differncccs in bargaining power of famers.

Grade Differences

The irregular variations referrer.d to above tend to compensate eaoh
other whcn averaged. 1oightcd averages of thr: data on prices collected in
local markets in Arkansis during the s'-ason of 1928-29 show that growers
actually received for white grades above Middling an av-rago premium of
S 35 per bale for Strict Middling. S.55 per bale for Good Middling and
S.10 per bale for Strict Good Middlin. The discounts received by growers
for white grades below Middling av:ragcd $1.00 per ball, for Strict Low
:' dling. S4 65 pe:r bale for Low Middli:-,g 59.10 per bale for Strict
Good Ordinary and $11.50 per bal: for Good Ordinary Using Middling white
cottor s a bhasis a wcight:d o.v:.-.-, f th. prices received by growers
f 3:,r sr: otcd -ottor. showed an av. r': discount of 51.35 per bale for
Wed i/ddlinz. S 40 p.-- lc for .."-ic ?."'dilin.. .1.40 per bale for
'.'.:d1::.. 55 C5p r, b-n for .trict '.:w Middl'i4-Z. and S9.45 per bale for
Low Middlilng (Ta:ble 3 and fig. 2. )

iW:th 1h- a vrage grar dir-: r aces r--d,..ived for cotton in local
nirk:- t*. .: m d rs sd: c'- .d n .bor.'- th- x-yt problem was to determine
S5 -.h ..y :, F t4 :-ad d: fr f:r"-..s ,ctu y r c co vc d by grow, rs re-
S-* q 'rs n pi.rir.g ;:' ty To solvo this problem. it was
7-. yC. .- a rn-:s. r of sp.n: .t qm:' ty Pric-s which mills can
'o I -.:, fc:- cottc, cf cUiffr ;t gdr'i.s and stap' lengths depend
;; :. ;'. :;r;.:-; ill. ,' l:ty of thi f-ltto:r Pricxs paid :n central markets
*.,:. :g dc :- .c -dc i, rf cs :-d staph, prstmiums and discounts paid


- 10 -


















































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UNDER


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I"l'.Mn 11% aI 'am
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Fgi5wm 2 AVulAIg PmNIumis FOR NADocS ABOVE RIDDLING
AND Aveame IlICOumNTS PON GRAOm BELOW MIDOLING EIPmEaa-
5 IN DOLLAIS PE* SALE OF S00 POuNDS PAID IN LOCAL MAE-
NETl I ARKANIAS AND IN CINTRAL MANEIT, SEAION 19128-29.
THE same &&Ova lIEE LINE SHOE PRENIMIUMS ANO SANS CLO
lEE0 LINE INHO OlIO0UNTI


. II m


FIPus 3 AfVasuA Pnamium Pea *TAPLEC u Le ty Eti
THAN T/8-INCHON AND AVIEAIE IISOUENTS PF STAPLE LENGTH
SHOIITER iMN 7/8-ON IPIcmuscIr IN OOLLAmS fWR &LE O
500 POUNDS PAID IN LOCAL MARKNTI IN ARKANSAS uMD IM e9-
TRAL MARKETS, SEASO 1926-29. TuN sAme Asevi turn LIeN
SNOE PREMIUMS ANIIO BARm LO EE0E LINE SNOW SIslOWSr


f ;;'"... .,1


















vita t0ose paw& i. oestral mrkleti. mamoa of 1928-29 a/


Local Iarketos


Grade


Sim of


A-Averas'


Central Vat Latios
--Avute rap i
3-Averal


White a/:
2-S.G.M.


3-4.3.


4-Sm. .


5-H


6-S L.U.


7-L. N..

-S .G.O.

9-C.O.0


Spo t ted:
3--G .V

4--S 3


kinr


3,728

3,457

2.036


0.10


-1.0

-4.'

-9 1


429

237

124


202


109
I
59 '


5--V


6-S L. M.


7-L N


0




15
0


0 '


-11.50



-1.35

-.40

-1.40

-5.05

-9.45


Dollars



3.05

2.00

1.25


0

-4 00

-7.95

-12 00

-16 25


1 .15

-.15

-3.90

-7.75

-11.70


/ Dlifferecca espresed in daolliar per bale of 00 pounds gross. Miaesi -1 so. a discouat.
'/ RLEu itLMIBa nWlte otton equals zero. T itverage price paid (or 34linjl 7"'l-aChb Colts. during the
710.B-> Lnu locaE sarlpta sw 16 12 esi. per pound or 9 60 per bale tad in retrRl sarete 18S 3e onati
n4r o.ud or 1191.0 per tale
1/ :1n;49 extra flit. cotton
i2/ B..*m't iLfa a lis a sarce a y be .imitS to mucti an teal *!nat prices paid la th8. narkel. so aot re.
&cv curatwelr the *tpl&BsC quality or ctM cif dIflrat grades n ud staple leata. Ceuntrl sekiret
,rizu sau represent a further eerlectloa frm a trus reprsentation of the dlftereacem In spinhll4 qual-
i Cestfal saikrt price are i4sed to represent tie diffTeret Is spLSaiM4 qua.lity. not b*caUs they an
.caidrd accurate fr mura. but became. me bitter measure to available


- 12it -


R21&ar


- .9 .0 ..,",.,
,ifi" 'iii

-1.45 ,

-.90 ..,ifml;|;


3.00

3.30

2.90

4.75



-2.50

-.25

2.50


2.70

2.25







1zizm reoeoavwo oy growers ror %ne nigner grades or waite cotton were less
than one-third of those quoted in central markets and that the higher the
grade, the smaller was the proportion of central market premiums actually
received by growers. For the white grades below Middling. the average
discounts In the local markets varied from one-fourth to three-fourths
of those quoted in the central markets, but the lower the grade the great-
er was the proportion of the central market discounts actually reflected
in the prices received by growers. The average discounts for Strict
Middling spotted cotton were greater in local than in central markets but
the average discounts for spotted grades of Middling and below wore less
in local than in central markets. (Table 3 and fig. 2.)

Staple Premiums and Discounts

Weighted averages of prices received for cotton in the 14 local
markets 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 staple
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 received by
growers in local markets in Arkansas represented differences in spinning
quality was indicated by comparing the staple premiums and discounts re-
ceived by growers with those paid in central markets. Quotations in
central markets show variations in 32nds of an inch in staple 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
I 1/32 inches. 1 1/16 to 1-3/32 inches. 1 1/8 to 1 5/32 inches. 1 3/16
to I 7/32. and 1 1/4 inches and longer respectively. It should be noted
that the differences between the staple premiums paid in central markets
and those received in local markets obtained as indicated above reprcs-nt
minimum differences 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 worn
found to be considerably less than those paid in the central markets.
(Table 4 and fig. 3.) Only 28 per cent of the discounts paid in the cen-
tral markets for cotton with a staple length of 13/16 inch and shorter
was reflected in local markets in the form of discounts to thr producers
of these short staples. The average premiums received by growers for
cotton with staple lengths longer than 7/8 inch amounted to only about 11
per cant of thosa paid in central markets. Tho range was from 2 6 per
cent for cotton with a staple length of 1 1/4 inches and longer to 19.4
pur cent for cotton with a staple" of 1 3/16 to 1 7/32 inches.

13 -








seUon of 1928-2 2/


Local
Staple length S/ I
IAnch I Sit of
sample

ALUM

13/16 and shorter [ 710

7/8 2.955

15/16 3.454

I and 1-1/32 2,857

1 1/16 and 1 3/32 981


1 1/8 and 1-5/32

1 3/16 sad 1 7/32

1 1/4 and longer


220

39

1


*


I Variation


A NMimnc 3
22lnM


market Central
----- m --marke ts
A-Av. presen. I B-Av. prems.
and discs. and dimsc.
r bal l aer bale


-0 70 -2.50

0 | 0

I
10 1.40

60 4.15

1.15 8.20

1.65 10.35

2.853 14.70

I65 2500
6s5 1 25.oo


-1.30

-3.55

-7.05

-8.70

-11.85

-24.35


I/ Premiums aDd dis,.oantu exprnBed In


dollasru per bale of 500 ponds grosin. Minus (.) meaas a dicoiut.


j/ BqLus 7/S-inch cotton equals zero. The average price paid for M*iddling 7/8-Inch cotton during the esam
in local markets wrau 18.12 cents per pound or 890.60 per bale. and in central markets 15.36 cents per
pound or f91.80 per btale.
3/ All grades of 'bite 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 received 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
!end to result in the production of larger proportions of the shorter
3taplos 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
growcrs as a group and to increase costs to consumers.

Several factors may help to explain the failure of farmers to re-
'-nvn gradr differences and staple premiums and discounts equal to those
paid in. central markets. Tho local buyers with the facilities available.
mr tanry cases, wore not in position to classify cotton accurately accord-
nr.g to Government standards at the time farmers sold their cotton. In

14 -


r


1.80

0





, rerences an.ma spe premiums ana aisoounts paic in cenirai marKOeis. L ven
if local burs knew the classification of cotton and were In position to
S pay central market grade differences and staple premiums and discounts,
differences in bargaining power of farmers, partly as a result of their
not knowing the classification and commercial value of their cotton, would
tend to cause prices received by growers to be out of line with central
market prices.
Cotton of the higher grades and longer staple lengths could not
always be had in sufficient quantities in local markets to Justify local
buyers in paying the sane grade differences and staple premiums as were
paid for similar qualities of cotton sold in oven running lots in the
central markets. Small quantities of lower grade and shorter staple
cotton, however, do not explain the failure of the local buyers to penal-
ize this cotton to the same extent as it was penalized in central markets.
Risks due to fluctuations in differences paid for grades above
Middling and premiums paid for staple lengths longer than 7/8 inch tend
to discourage local buyers from paying growers full central market dif-
ferences and premiums for the higher grades and longer staple lengths.
Similar risks for the lower grade and shorter staple cotton would tend
to cause, other things being equal, the discounts made by local buyers
for the lover grades and the shorter staple lengths to be greater than
the discounts made in central markets for cotton of the same grades and
staple lengths. The fact that the longer staple lengths cannot be de-
livered on futures contract at full central market premiums may tend to
prevent local buyers from paying to growers full central market premiums
for the longer staple cotton.
Lack 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
the practice of paying growers an averaged price for their cotton with
relatively little variations in prices paid with the difference in grade
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
growers in local markets as shown above represented the average variations
in prices received for other grades from that received for Middling White
cotton and for other staple lengths from that received for 7/8-inch cotton
in tbche same markets at the same timo. These 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 the practice of "point buying" or of paying an avoraged
price for all cotton offers little inducement to individual farmers to im-
prove the quality of the cotton grown, it may reward production of good
quality on a community basis if the average prices received by growe.:rs
vary with the average quality of the cotton. In order to determine the
extent to which production of cotton of good quality was rcwardcd on a
community basis it was necessary to compare the variations in average
prices received in local markets with variations in tho average quality of
cotton sold in these markets.


- 15 -








kcots studied combined for the season was 18.06 cents per pound wlile toe
average price paid in central markets for the same qualities of cotton
during the sane time was 18.67 cents per pound, giving an average spread
of 0.61 cents per pound. As stated above the comparative price levels in
local markets vary inversely with the average spread between the local
and central market prices. Those local markets which had an average
spread less than 0.61 cents per pound had relatively high comparative price
levels and those which had an average spread greater than 0.61 cents per
pound had relatively low comparative price levels.

Analysis of the data on prices received by growers indicated very
little, if any. relationship between variations in average adjusted cor-
oarativa price level and variations in average grade and staple length of
theo cotton sold. No relation of comparative price level to average grade
and staple length means that farmers who sold cotton in local markets
whore the average quality was relatively high received on the average
correspondingly higher prices than those who sold in local markets where
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 grades and longer staple lengths and to penalize growers on a
community basis for producing the lower grades and shorter staple lengths
by amounts approximately equal to the grade differences and staple pre-
miums and discounts paid in central markets.

As pointed out above, the failure of farmers to receive prices
which vary appreciably with quality makes it more profitable to them as
individuals to grow the kind of cotton which can be produced at the least
cost per pound regardless of grade and staple length. Production of short
staple cotton in order to obtain increased yields lowers the price level
in local markets to the disadvantage of all cotton growers in the 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 tho staple length of individual bales offers a reward to individual
farmers for growing the kind of cotton which forces the price level down
at the expense of all other cotton growers in the community and in effect
r:n-alizcs farmers for producing the kind of cotton responsible for the
higher price level. So long as farmers operate for individual profits
.t is not reasonable to expect them to sacrifice individual interests
for the interests of the group.

Seasonal Variations

A comparison of average monthly prices received for Middling 7/8-
.r.ch White cotton in local markets with those paid for cotton of the same
jrrJ: nr.d staple length in central markets shows that the average spread
v-.s r:lativcly narrow during September and October and widened considerably
'.ur.r.,. Novcmbcr. December, and January. The average prices received by
.;-o-iDrs varied from $.20 per bale above central market prices in September


- 16 -











Variations in the average monthly comparative price level from that
for the season show that for cotton of all grades and staple lengths the
average oceparative price level increased from p3.95 per bale below the
seoasomal average in August, to $1.70 per bale above the seasonal average
I October. (Table 6. fig. 5) From the high point in October, the aver-
ego ~omparative price level declined until the low point of $5.70 per bale
below the seasonal average was reached in January. After January the
comparative price level moved upward and in February was 15 per bale
*ove the sesonal average.

C The variations in comparative price level from month to month ap-
+++++' poured not to be very definitely related to variations in average grade
and in average staple length of the cotton. (Table 6 and fig. 5.) The
i comparative price level moved upward from August to October while at the
Im se time the average 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.
S After January the volume of sales was too small for the averages to be
si... significant.

Table 5. -Average price per pound paid for Middling 7/8-inch white cotton in local
ma r.. e eto ina Arkansas and in central markets 1/,. and prices of futures in
Now York 3/ by months, season of 1928-29

Month In Local markets Spot price in Futures in New York,
Sal I/ 1 Pric central markets 1/, active month. _
an Cents Cents 'Cents
August -.... 18.72 19.01
1Auc t ...... ... ............... 18.72 19.01
September ...... 194 17.80 17.76 I 18.39
October ..... 331 18.41 18.46 1 19.28
November .. 155 17.91 18.71 I 19.76
December 33 18.08 | 19.08 I 20.16
January 3 j16.66 18.88 20.00
ebrmar'y.............. .- -- 18.86 19.97
/ Avrag of te tm diumsinated spot markets ua reported to the United States Departament of Agriculture.
u/ Average of the ftures quotatioma for the current month as reported by the New York Cotton Exchange.
o ber of bles used ia oe Oativ ut averae prioea In the next column.

The average adjusted comparative price level in the local markets
studied was relatively high in October when the volume of sales by farmers
as relatively great. This means that the prices recoivod 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 level may
be 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 their com-
mIti nts.

17 -
fl .. ..
































AUG e
iA M SEPTII
ma w


tc


mCC


I- aII


JAN. FB.
iiii aI


Freui 4 Tiw spas ssTvrmu Tme AvEuAse poison moo Pn IIelmtsm T/I/-o.i VIou
8lE00 EiU LOAL AMRTii U AinUamiAI AED TiSE Pi i IE *TROa. mIaRTB au gn fl g Vmo
FWTUSES uAa eLATI.uvLw mam Iun IPTIo-Us AM 0m1T01u9 AGO THN l usuERI *OIseMsMair
on IvfMusII. koeemn, a.N JAUAVm. TER gasnel am SAI S wtINI TUEI FieST PamT of
TYEI I&BI aM GCMTIImuIm T IG Eui am TMu g8Oil0. a*WaeGS


AVERAGE MONTHLY VARIATIONS IN COMPARATIVE PRICE LEVEL FOMR ALL CM
AND FOR MIDOUN6 N-INCH WHITE COTrON IN AVERAm GRADE AND STAfL
LEMNGTh. LOCAL MARKETS IN ARKANSAS. SEASON 192I-29


I VARIATIONS |I _
- w cr pi.. iw (ria.) 0*1 qu 0
n-* jipi loiw lV.T- mat waft M*0
waxam Au, vW* f, loe r",, 0 1
owwA~W,,W am* 11W aw. wf o f a ,n m epm& 0


CENTS
pcp
Pa-
15OU
150


.50

-1.00

-ISO

-200


-2a0 L
AU6


AND
SIkM

Lm.
1.00


- Im e n


aios -


rFuge S Tue wigmeOl EOIUL* .iamia7u0m IE *00u1PaiTuI pIMlE LIVEL IP5 ALL SYTTSU
me fee ImissImIe F/S-Imlu IOTTiS eeufl TiAT Tui POInos 6e9iwem s11 llI.l u0es mess iWAS-
ma EfA VC. IlM T/s|. u *rn im *ASCM Smiim Sa"umu .me" Oemslum man same* aM m ,
LT gvat& TO IIIIII PAID 10 89ITTAL MANETI INlII6 UCPTRESS Al 06T1IU2 TlHN 94080O &iI
*0rig palv Sr TEE Deanna. TEE AveUSE DwanI wasl ItaTIuVILE HIGS DUIIN i i FIllT PAST OF
VS SELAS.. AM eMsILImem Au THE SGeS aDtVAUilIS WIEiI TiWE mB*SE STAPLE was *ayuTI.lfV
LM 69|-1 TU PISI PAill TEE OMASIIW 4IU I*Ugh AN EWAS V1lE SN u IT u TII v uS0NIMIm
mr TM E&a@*
I. -


evoovo- SAmam 6000
-.00 ]_ 40,10,






Table 6. -Ywf tt I eamparstive price level I/
average taple length V/ In local markets In
eammWl avenge*, seam Of 1928-29


in average grads / and in
Arkansas by months fraom the


month











August............

September.......

October...........

November ..........

Deoember........

January. .........

February........


All ursPRAM ind atanla laneOks


Size of




samle





23

3.178

3,894

3.226

1.378

287

17


MUlAA14ni :IQ r; h


l ,- --- -- I -I I I a-*tIa 1 111 1 11 1Ri p 1 .1..


Variations 4/ tan


Compara-
tlvm 1/
tie L./
Prloe

Cents
per
ound

-0.79

.27

.34

-.30


-1


.63

.14

.03


Average
grade I/


1.03

1.00

.39

-.56

-1.66

-1.98

-1.65


Average
staple I/
length







-0.31

-.37

-.11


.41

.12

.38

.84


Size of
sample

I.


Bala I







194

331

155

33

3


Variations !/ in com-
parative prias level
L/



Cents per
2ounQ





0.28

.19

-.56

-.76

-1.98


I/ Prio received


by growers were msubtracted free those paid in central markets for the sa*me qualities or


cotton on the same dates to give an average spread for the season. This average spread was subtracted
from te erage spread for each month to give monthly variations in spread from the average for the soea-
eom. The monthly variatioas in spread were divided by a minus 1 to give variations In comparative price
level Lm local markets. The seasonal average price received by growers for all cotton was 18.06 cents per
poad and the average price paid in central markets for the same qualities of cotton sold on the esame
dates w 18.67 cents per pound giving a spread of 0.61 cents per pound. The average spread for Middling
7/8-Lach cotton m 0.24 cents per pound.
3/ Average grade was calculated on the basis of equal ateps or variations from one grade to another. lbegin-
nLng with S. G. 0 as 1 up to Milddling Fair an 9). Strict Middling Spotted was considered equivalent to
MUddlLng white. The average grade for the season wan 5.06 or slightly better than Middling. monthly
variations Lin grade were obtained by subtracting the average grade for the season from the average grade
for each math.
j/ Staple length ms calculated in eoe-sixsteenth of an Inch. The average staple length for the season weae
15.22 sixtetha of an inah. Monthly varlations in staple were obtained by subtracting the average staple
for the eaon free the average staple for each month
4/ m 1-1 m-ma below sea omenal average.


- 19 -






INUi or FFAM PRICES ON QUALITY OF COTTON PRODUCED ii:

The prices received by growers for cotton in local markets are the
media through which the demand for cotton is expressed to growers, and
these prices Indicate to farmers who know and follow their beat interests. 7|
how much and what varieties of cotton they can afford to grow. Relatively :I
high prices received by growers for all cotton tend to result in an in- 1
creased acreage planted to cotton the following year 1/. Likewise sig-
nificant premiums received by growers for the longer staple cotton over
that received for the shorter staple cotton offers an incentive for grow-
ing the longer staple varieties. Where an averaged price is received for
all cotton or where no significant differences are made in the prices :
received by growers for cotton of different grades and staple lengths. ,
farmers are more interested in yields than in quality and they tend to
grow the kind of cotton which can be produced at the least cost per pound
regardless of grade and staple length.

The grower's apparent indifference to improving the quality of his
cotton may be accounted for, in part at least, by the fact that the dif-
ferences in prices received offer little inducement to the individual
farmer to improve the grade and staple length of his cotton. As shown
above, some farmers received more for cotton of low grade and short staple
than others received for cotton of higher grade and longer staple length
in the same local markets on the same days. On the average, however.
growers received slightly higher prices for the higher grades and longer
staple lengths than for the lower grades and shorter staple lengths. The
grade differences and staple premiums and discounts received by growers,
however, represent only a small proportion of those paid in central markets.

Coupled with the failure of growers to receive in local markets
significant grade differences and staple premiums and discounts is the
belief on the part of some farmers that the shorter staple varieties give
higher yields and that the costs of production are less than for the long-
er staple varieties. Since very small premiums on the average are re-
ceived by growers in local markets for cotton of longer staple lengths
over those received in the same markets for cottons of shorter staple
lengths, farmers in some localities are convinced that they can make more
money from the production of shorter staple than from the production of
the longer staple varieties. The percentage of lint to seed cotton is
isualiy greater for the shorter than for the longer staple varieties and
"t is possible that growers misjudge the relative yields of the shorter
and lor..er staple varieties because of this difference in percentage of
lint Total yields per acre are more important than a high gin turn-out,
but it :s far more difficult to compare differences in yields per acre
than it is to compare differences in percentage of lint to seed cotton.

The failure of farmers to receive grade differences and staple
.;rem-uar ai.d discounts equal to those paid ir central markets means that

IV p :..:!- .,!o..;r.L u.9 Prt1. o@ C0! .o i at. Bars ad re. B o Sll'. V S D A T7chDc;'. Bullaotl. V-0


- 20 -







the price incentive to growers was deflected out of line.with consumer
demand. This deflected price incentive to growers tends to result in the
production, of larger proportions of the shorter staples and smaller pro-
portions of the longer staple cotton than would be the case if production
were adjusted accurately to consumer demand. This maladjustment of pro-
duction to consumer demand makes it impossible for individual growers to
realize the full benefits of their rolativo advantage for producing the
hither grade and longer staple cotton. As stated above those results
tend to reduce net income to growers as a group and to increase costs to
consumers.

As a moans of pointing out more specifically the relationship be-
tween staple length, yield, and comparative value per acre of cotton grown
in Arkansas. results of cotton variety tests conducted by the State
Agricultural Experiment Station are shown in Table 7. Tho data for
Marianna, Arkansas, show that cotton with a staple length of 1-1/32
inches ranked first in yield and comparative value per acre and second in
percentage of lint. The results at Scott, Arkansas, show that cotton
with a staple length of 13/16 inch ranked first in yield, first in per-
centage of lint, and first in comparative value per acre when local market
premiums and discounts were applied, but when central market staple pre-
miums and discounts were applied cotton with a staple length of 1-1/16
inches ranked first in comparative value per acre.

SUMMARY AND CONCLUSION

Farmers are inclined to grow the kind of cotton that. at prices
received in local markets, yields them as individuals the greatest not
profits. Differences in prices received by growers along with differences
in cost of production are the principal incentives for producing cotton
of different grades and staple lengths.

Prices received by growers in local markets in Arkansas varied so
irregularly that some farmers received considerably higher prices for the
lower grades and shorter staples than other farmers received for the
higher grades and longer staples in the same markets on the same days.

The average premiums received by growers for grades above Middling
amounted to less than one-third of those paid in central markets. The
average discounts received by growers for grades below Middling amounted
to about 36 per cent of those paid in central markets.

The average price received by growers for cotton with a staple
length of 13/16 inch and shorter was only S.70 por bale less than that
received for 7/8 inch cotton; whereas in central markets, cotton with a
staple length of 13/16 inch and shorter was discounted S2.50 por bale.
The premiums received by growers for staple lengths longer than 7/8 inch
amounted to only about 11 per cent of those paid in central markets.


- 21 -









cotton of different stapls lengtbs nom in Arkansas. I/


Location and
staple In inchfles


Nar lanma,. Arkansas
7/8
15/16
1
1-1/32
1-1/16
1-3/32
1-1/8


Scott. Arkansas
13/16
15/16
1
1-1/32
1-1/16
1-1/8
1-3/16


S\I Price per pound for Couparsti
I Yeld I AT. | MiddliM 3/ .cr l.
lint per- Local : Central Local
eper oentae market market market
Sore 2/ lint Ipreas. andlprems. andlprem. and
ran-- -----t- Caglena ta llaans
I Bflfl 1' cfiaA asia! bfiun

398 37.4 18.06 18.06 66.84
379 34.3 18.08 18.34 63.90
381 34.9 1 818.s 18.89 64.58
434 36.1 18.18 18.89 73.49
397 34.2 18.29 19.70 67.49
395 35.0' 18.29 19.70 67.39
375 34.3 18.39 20.13 64.40
1 |

679 39.9 17.92 17.56 112.86
627 35.3 18.08 18.34 105.63
559 1 33.8 1 18.18 18.89 94.87
S637 35.5 18.18 18.89 107.94
S643 35.3 18.29 19 70 109.67
S545 33.1 18.39 1 20.13 93.70
566 32.5 18.63 21.00 81.13


re value
re waist

Central
market
press. and
DillaMs
i DQsar


66.84
64.89
67.29
76.57
73.09
72.97
70.93


110.41
107.26
98.84
112.46
118.74
103.19
94.55


1/ Cotlton Variety Teeta s reported by the


Ark&uas Agriculltural Experimelnt Station. limoographed reports.)


2/ The highest yielding variety in each taple group for oeacb year wo used. The results or teuts at M-L-
anna. Arkansas. how average for the years 1927. 1928. and 1929. and the result. at Scott. Arkansas. bow
averages for the years 1926. 1928. and 1929.
3/ The average price received by growers in local market. for Middlingl 7/a-8.lnch cotton during| the sermon of
1928-29 was taken a & basis. To this basis was applied local ud central market staple premium and dLs-
counts Local market premiums &ad discounts represent averages of what groare actually received in looml
markets in the State duriLag the season 1928-Z9. For central market preomium and discounts averages of the
sin central markets Kgiving taple quotations wore take u premiums for 15/16 and 1 Inch cotton. ftor
staple lengths longer than 1-1/32 incbeg averages or the premiums paid In He* Orlen and emphls mro
ised A fat deduction of S0 poinLm Was made for cotton with a staple shorter than 7/8 inch.
4/ The co paratLve value per acre represents the value of the cotton and cotton seed less the cost or pickling
and inning The value or the cotton seed wu based on December 1 prices for Arkansas as reported by the
DepartieBt of Ajriculture The prevailing rates for ginning and pickingl In Arkansas wer used im
'auleting pickiLng Lad ginaling costs.


- 22 -





wor 4i efflot penalized for producing the higher grades and longer staples
wad received a bonus for producing the lower grades and shorter staples.
This situation sakes it impossible for individual growers to realize the
full benefits of their relative advantage for producing cotton or dif-
ferent grades and staple lengths. Under such conditions the amount of
the premiums withheld from farmers who are more favorably situated for
producing the higher grades and longer staples is greater than the re-
wards to farmers who produce the lower grades and shorter staples. The
results tend to reduce net returns to growers as a group and to increase
costs to consumers.

Average prices received by growers were higher in communities noted
for producing the higher grades and longer staples than in communities
noted for producing lower grades and shorter staples. These differences
in average prices indicate a tendency to reward growers, on a community
basis, for producing the higher grades and longer staples and in effect
to penalize growers, on a community basis, for producing cotton of lower
grades and shorter staples. The failure to distribute these premiums and
discounts on an individual-bale basis offers a reward to individual farmers
for producing the kind of cotton that forces the local price level down
at the expense of all other cotton growers in the community, and in effect
penalizes farmers for producing the kind of cotton responsible for higher
price levels.

Average prices received by growers were relatively high in Cctober
when the volume of sales in local markets was relatively large. Varia--
tions in these average prices from month to month were not very definitely
related to variations in average grade and staple length.

Failure of growers to receive prices that reflect accurately the
differences in spinning quality of the different grades and staple lengths
as shown above results in the production of larger proportions of lower
grades and shorter staple lengths and smaller proportions of higher grades
and longer staples than would be the case if production were adjusted
accurately to consumer demand. The proportion of the different grades and
staple lengths of cotton produced in Arkansas can be brought more nearly
in line with spinners' demand and the net returns to growers as a group
.an be increased (1) by perfecting the marketing system so that the prices
received by growers will reflect the differences in spinning quality of
the different grades and staple lengths, and then (2) by advising farmers
regarding the relative profitableness of producing cotton of different
grades and staple lengths in each locality.

In order that farmers may sell their cotton in local markets
strictly on a quality basis, under the present marketing system, it would
'e necessary that both growers and local buyers know the quality and com-
mercial value of the cotton at the time of making the transactions. Since
farmers and many local cotton buyers are not able to classify cotton ac-
curately, a means of improvement would be to have some competent arnd
reliable person classify the cotton according to a uniform standard and
issue his certificate showing the grade, staple length, and character of
each bale before It is sold.

9 .


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WE US
as Vol**:-:*




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