It is, therefore, clear that if we figure out the average price of cotton for a period of say five or ten years, the re sult will be a price actually justified by the law of supply and demand. For example, the average price of cotton in the United States for the five years ending with the season embracing the 1914 crop was 10.96 cents per pound. This price certainly represented a fair margin of average profit for the period. It is safe to say that such price was the re sult c,f the average economic and financial conditions in their relation to actual supply and demand and that what may be styled the psychological influence was eliminated by its counte r neutralizing effects.
11. Reading the cotton market.—A particularly ex citing market is indicated in the following account adapted from the New York Times of August 26, 1916.
More than 16 cents a pound, or $80 a bale, was paid for cotton on the New York Cotton Exchange yesterday for de livery next year. Earlier options closely approached the 16 cent price. That rate is the highest at which cotton has sold since the Civil War in times of normal market, and only twice has it been exceeded. In the Sully campaign of 1903 0-t prices were carried to a 17 cent basis, only to drop pre cipitately. In the Patten-Hayne-Scales-Brown corner of 1910, shorts in the August option were squeezed up to 20 cents as the month ran out.
Yesterday's speculation was the most animated of any day of the year, and brokers said the public interest in the market was as great as ever before. There had been days of larger advances in price, but none in which the market advanced so impulsively on general rather than clique specu lation.
At one time prices of most of the options were up more than 60 points, or $3 a bale, over Thursday's close. The close showed advances of more than $2.50 a bale to be the rule. There was heavy buying for foreign account, for spinners and for shorts as well as for bullish speculators. Scores of reports from the South had it that planters were inclined to hold out for higher prices.
The 16 cent range compares with a price of 10 cents at which it was, aimed to steady the cotton market two years ago when in the first month of the war the Cotton Exchange closed, and cotton sold below 7 cents or $35 a bale. It was then expected the Teutonic markets would be closed. With that expectation realized, cotton is now more than 100 per cent higher. Two years ago, also, there was formed a $135, 000,000 pool to steady the cotton market. Now the mar ket is natural.
Reports from southern centres said that the picking of the bolls showed the cumulative effect of the use of inferior or scanty fertilizer for two years in succession. Damage from drought was also reported, and the bulls said there woulthbe no late pickings because the soil, having had insuf ficient moisture last winter, had not since been replenished. Predictions were made that the Government crop report on August 31, would indicate a crop even less than the scanty 12,000,000 bales, which lately has been an accepted estimate.
Liverpool again furnished a surprise by sending cables which were about 18 to 20 American points higher than due. Spot cotton was 16 points higher at 9.42d for American Middling. The local market made more than a full response to cables and opened at an advance of 23 to 31 points, with trading active and excited.
The New York Coffee Exchange Almost a billion pounds of coffee are consumed annually in the United States. This fact explains the existence of an important coffee market in New York. The principal source of supply for the United States as well as for other coun tries is Brazil, especially the states of Rio and Sao Paulo. The United States is the largest per capita consumer, the number of pounds being 14, whereas Germany consumes France 4.3 and England .69.
Coffee is generally classified and graded according to quality and the source of production. The names of the leading grades are as follows : La Guaira, Rio, Santos, Mo cha, etc. In addition there is a further subdivision of first, good first, regular first, extraordinary first, second, etc. The size of the bean and its cleanliness and color offer means for classification.
The New York Coffee Exchange was incorporated in 1887 the same year that the Havre Exchange began operations. Its present official title is "The Coffee Exchange of the City of New York." One of its duties is to classify and grade coffee through a special staff created for the purpose. Un less otherwise specified, the quantity of coffee taken as a unit is 250 bags, each weighing approximately 132 pounds or 32,500 pounds in all. The commission charges are as fol lows: 2 cents per bag to members, or $5 for the execution of purchase or sale of a unit, and four cents to non-members. As regards margins required by the broker, no definite amount is stipulated. The amounts range from $200 to $500 on a contract. The minimum fluctuation in the coffee Y market is five points, representing $16.25 on the standard unit.