THE NEW YORK COTTON EXCHANGE 1 1. Importance of cotton.—Cotton is today one of the most valuable of the world's crops as well as the most diversely used. In normal times the world con sumes each year nearly eight pounds of cotton per capita. In the United States the consumption is thirty pounds per capita. Either the raw material or the manufactured product goes thru the routes of commerce to every part of the world.
While Egypt, India, China and Russia are fairly large producers of cotton, their crops do not approach the production of the United States, where nearly two thirds of the world's supply is grown. Next comes India, which produces 17 per cent of the total crop. Nearly two million persons in the United States are engaged in cotton-growing. In production, Texas surpasses all the other states of the cotton-growing belt, a district 1500 miles long and 500 wide. The American crop ranges from 12 to 17 million bales of nearly 500 pounds each.
There are tens of thousands of ginneries and two thousand mills in the United States. Moreover cot ton furnishes a huge volume of business to railroads, steamship lines, banks, merchants, factors, brokers and exporters, and normally corTstitutes the most valu able item of American foreign trade. The price of the staple is therefore of importance to millions of people. Some idea of the position which the New York Cotton Exchange holds may be had from the fact that seats cost more than on any other exchange in America, except on the New York Stock Exchange and, at times, on the Boston Stock Exchange.
2. Primary markets.—Both the New York and the New Orleans cotton exchanges were incorporated and granted charters in the same year, 1871. Their machinery for the conduct of affairs and their methods of trading are almost identical, consequently a de scription of the New York Cotton Exchange will ap ply also to the New Orleans and other similar ex changes.
The New York,.New Orleans and Liverpool cotton exchanges are the world's primary cotton markets, Liverpool being the chief distributing point for Amer ican exports. The world's great consuming centers
are Manchester, England, and Fall River and New Bedford in Massachusetts.
In the United States, the cotton-picking season lasts from September first to January first. The active cotton months (futures, deliveries, options) are Jan uary, March, May, July, August, September, October and December. In comparatively recent years the price of cotton has varied from about five and a half cents a pound to nearly twenty cents. The long sea son during which the cotton market is active and the wide fluctuations in the price afford of course, great opportunity for speculation.
3. Government and membership.—The New York Cotton Exchange is managed much as the other Amer ican exchanges which we have already studied are managed. Instead of the grading committees of the produce exchanges the cotton exchange has a classifica tion committee. The governing body is known as the Board of Managers. Membership is limited to 450. Seats have cost as high as $25,000, a more usual figure being from ten to fifteen thousand.
4. Unit of trading.—All trading in cotton is either in "spots" or "futures." Cotton is shipped in "bales," each bale weighing on the average 500 pounds. Cot ton is quoted at so many cents a pound, varying some what in price according to the month of delivery; spots always vary more or less from futures. For example, on August 24, 1916, the highest price for October cotton was 15.89 cents a pound. To get the price of one bale, multiply 15.89 cents by 500; to get the price of a trading contract multiply by 50,000.
Fluctuations are recorded in "points," one point being one one-hundredth of a cent. The highest for "October" on the day mentioned was 15.89 cents and the lowest was 15.41 cents. Thus "October" rose on that day 57 points, or about half a cent a pound or $2.50 a bale. Obviously a point in cotton is much less than a point in stocks. A ten-point rise in a stock is sensational, but ten points for a pound of cotton is only half a dollar a bale, which is of little impor tance.