COTTON PRICES AND MARKETS 65 
Par. 3. If on such given day there shall have been in such market no sale 
of spot cotton of any grade, the value of each grade shall be deemed to be 
the same as its value therein on the last preceding business day, unless in the 
meantime there shall have been bona fide bids and offers, or sales of hedged 
cotton, or other sales of cotton, or changes in prices of future contracts made 
subject to the act, which in the usual course of business would clearly establish 
a rise or fall in the value of spot cotton in such market, in which case such 
rise or fall may be calculated and added to or deducted from the value on the 
preceding business day of cotton of all grades affected thereby. 33 
Each of the designated markets can not be expected to quote the 
same differences at all times, for they are widely separated, and 
supply and demand conditions in the different markets do not per- 
mit it. Rains and other unfavorable circumstances may suddenly 
cause an excess of low grades in one part of the Cotton Belt while in 
another the low grades may be scarce. Point of origin is an impor- 
tant index of character of cotton, and buyers frequently specify 
point of shipment. If the cotton is for export, the port is desig- 
nated partly as an index of character and partly because it is neces- 
sary to engage freight room ahead. Thus, if merchants in a region 
sell forward very little low-grade cotton and the weather subse- 
quently is such that these qualities are produced in abundance, the 
discounts are wide on low grades. If many sales of high grades 
have been made for forward shipment, merchants compete for them 
to fill orders and force high premiums at the same time that dis- 
counts for low grades increase. If there is an unusually high-grade 
crop in the territory of a market, the grades above Middling tend 
to lose their premiums and the lower grades to lose their discounts. 
If a designated market should continue for very long to fail to 
reflect the value of spot cotton in its quotations, the Secretary of 
Agriculture may undesignate it. The law gives the Secretary the 
right also to compel those dealing in any market in the United 
States to turn over their books showing their purchases and sales, 
to assist him in determining whether the quotations represent the 
true commercial differences. 
The differences which apply in the settlement of contracts in Xew 
Orleans are quoted by the quotation committee of the exchange. 
They are based on transactions and offers to buy and to sell in that 
i market alone. This method is simple and inexpensive but it has 
I its limitations in actual practice. Even in the New Orleans market 
[ the sales are not always sufficiently numerous to furnish a satisfac- 
tory basis for establishing differences. 
The problem of arriving at true commercial differences for the 
various grades is made more difficult by the methods of trading in 
spot cotton. Much cotton is bought and sold on types which do not 
correspond to the standards. Sales may be for immediate or for- 
ward delivery. If for forward delivery, the differences agreed upon 
will probably be different from what they would be if immediate 
delivery were called for. The transaction may be in terms of an 
average price for gin-run cotton. The trade may be in terms of 
bale units or of even-running lots of 100 bales. In the fall, most 
of the transactions are purchases from farmers or local buyers, often 
33 U. S. Dept. of Agr. Service and Regulatory Announcement No. 91 (Agr. Economics), 
Regulations of the Secretary of Agriculture under the United States cotton futures act, 
p. 19. 
