64 BULLETIN 1444, U. S. DEPARTMENT OF AGRICULTURE 
The grades above the heavy line on Figure 13 are deliverable on 
future contracts under the United States cotton futures act, and 
those below are not. No cotton is deliverable, however, unless it is at 
least seven-eighths inch in staple length. Whether more grades 
should be made deliverable and differentials included for staple 
length and character will be discussed later. Differentials are pub- 
lished by the United States Department of Agriculture for the other 
grades and colors and for the staple lengths when obtainable. No 
attempt has been made to quote differences for character. 
Official standards have been established for American Egyptian 
cotton in five numerical grades numbered from 1 to 5, inclusive, and 
for various lengths of staple in American upland and American 
Egyptian cotton. By order of March 3, 1926, effective August 1, 
1927, standards were promulgated for extra white cotton such as 
that grown in the southwest section of the United States. 
METHODS OF ESTABLISHING COMMERCIAL DIFFERENCES 
A system of commercial differences is now used in establishing dif- 
ferentials for value of different grades and colors of cotton deliver- 
able on futures contracts. The method of application of the system 
is prescribed by the United States cotton futures act and the method 
in New York is different from that in New Orleans. The New York 
method employs what are known as average commercial differences. 
The number of spot sales of the various grades in the New York 
market were deemed insufficient for purposes of arriving at the true 
market values of different grades from day to day, and in order to 
put the market upon a system of commercial differences the cotton 
futures act provides for taking the average of the differences in 
certain southern spot markets designated by the Secretary of Agri- 
culture. The differences in these spot markets are made by a price 
quotation committee in each exchange. It is contemplated that the 
committees will make up their differences on the basis of actual sales, 
bids, and offers in the respective markets. 
A sale of every deliverable grade does not occur each day, and 
several days may pass without a sale, a bid, or an offer of a particu- 
lar grade in a given market. Under such circumstances the commit- 
tee faces the responsibility of quoting an arbitrarily fixed difference, 
or leaving the quotation for a grade without a sale unchanged. If 
the committee does the latter it may become greatly out of line with 
other designated markets. Where spot sales are not sufficient to 
establish differences in one of these markets, the rules promulgated 
by the Secretary of Agriculture under the authority of the cotton 
futures act for establishing such differences are as follows: 
Sec. 6. Paragraph 1. If on such given day there shall have been in such 
market both a sale of any higher grade and a sale of any lower grade, the 
average of the declines, or advances, or decline and advance, as the case may 
be, of the next higher grade and the next lower grade so sold shall be deducted 
from, or added to, as the case may be, the value, on the last preceding business 
day, of- the grade the value of which on such given day is sought to be ascer- 
tained. .-....;..... \ ... . 
Par. 2. If oh such given day there shall have been in such market a sale of 
either a higher or a lower grade, but not sales of both, the decline or advance 
of the next higher or the next lower grade so sold shall be deducted from, or 
added to, as the case may be, the value on the last preceding business day of 
the grade the value of which on such given day is sought to be ascertained. 
