SERVICES IX COTTON MARKETING 23 
and classing the cotton. If there are rejections or arbitrations, he 
attends to these and performs any other service required in handling 
the cotton. 
WAREHOUSING 
"Warehousing is an essential function in efficient cotton marketing. 
The services performed are: (1) Physical protection of cotton, (2) 
converting of receipts for stored cotton into desirable collateral, and 
(3) efficient movement of cotton through marketing channels. 
Cotton requires physical protection from weather, mud, dust, fire, 
from mutilation and petty picking, and from theft and ;; tag 
switching." " Country damage " grows out of the lack of the pro- 
tection afforded by the warehouse. 
The conversion of the title to cotton into desirable collateral for 
loans is an important service. It enables the grower to obtain a 
substantial advance on his cotton and makes possible a policy of 
gradual marketing. The buyers, merchants, and shippers are enabled 
to conduct a much larger business on a given amount of capital, and 
this tempts them to buy the farmer's cotton more freely. 
The considerations which determine the value of warehouse re- 
ceipts are: (1) The structure and location of the warehouse, 15 (2) 
the facts set forth on the receipt, (3) the kind and amount of super- 
vision received from disinterested parties, (4) the net free assets 
of the company, (5) the size and nature of the bond furnished, (6) 
the kind and amount of insurance carried on the cotton in the ware- 
house, and (7) the integrity and standing of the officials responsible 
for the operation of the warehouse. 
There is such a wide difference between the values of individual 
bales of cotton that a receipt calling merely for a bale of cotton is 
of indefinite value. The most desirable receipt shows the grade and 
staple of the cotton, its condition, the weight of the bale, the tag 
number of the bale, by whom the cotton has been classed, whether 
the cotton is insured, and a statement as to the negotiability of the 
receipt. 
The paper upon which the receipts are written and the way they 
are marked and issued should be designed to make the counterfeiting 
of receipts extremely difficult. The United States Department of 
Agriculture has worked out a plan which tends to throw around the 
Federal warehouse receipt restrictions similar to those observed in 
the issuance of bank notes. 
Just as inspection has given confidence in national banks, so 
proper supervision and inspections strengthens confidence in ware- 
house receipts. Inspection by a disinterested Government official 
has demonstrated its value, and many banks are insisting upon a 
Federal receipt. 
A knowledge of the value of the net free assets of the company 
operating the warehouse is important, especially if the receipt is to 
be used at distant points. A periodic statement of the assets and 
liabilities add much to the standing of a warehouse company. 
Insurance to cover the cotton in the warehouse, based on the class 
and weight shown on the receipt and on the daily market price is 
usually required when receipts are offered as security for loans. The 
15 For a discussion of construction and location of warehouses, see U S. Dent. Asr 
Bui. No. 801, 1919. ' 
