COTTON PRICES AND MARKETS 75 
of futures. At other times when there is a crop of high quality 
with narrow premiums, inch cotton or even better may be delivered 
on contract. At such times the contract is relatively more valuable 
than when the stocks are poor and differences for quality are wide. 
The price of cotton is determined in markets essentially interna- 
tional in trading facilities, and is based on world demand and supply 
conditions. In order properly to weigh the cotton-market situation, 
it is desirable, therefore, to know the fundamental conditions affect- 
ing the world's demand for cotton goods and the factors affecting the 
sources of supply of raw cotton. The American production is the 
dominant factor on the supply side, especially for cotton of medium 
staple length. The production of this length cotton in the United 
States constitutes over half the world's supply of all cotton. Over 
half the American crop is exported, so that foreign demand is rela- 
tively much more important in determining prices than are foreign- 
grown supplies. 
Cotton markets are highly specialized as to their functions, and are 
closely interrelated. The methods of trading in cotton and of price 
making have given the futures markets a very important position in 
the market structure as a whole. Trading in the futures markets 
is the most highly standardized. The contract is the most liquid, 
and the price in the futures markets tends to respond most quickly 
to the changing opinions of traders as to world demand and supply 
conditions. There is, however, a very close relationship between the 
price of futures and of spot cotton. This is due to the system of 
buying and selling in the spot markets in terms of points "on" or 
" off " futures, and to the method of liquidating futures contracts by 
the delivery of spot cotton. Much of the business in the spot markets 
is done on "basis" for forward delivery, the price to be that of 
contracts for future delivery in a designated month in a named 
market. Any unforeseen or artificial changes which affect this basic 
relationship is detrimental to efficiency in cotton marketing. 
SUMMARY 
An understanding of cotton prices involves a study of the funda- 
mental factors of demand and supply and of the machinery built 
up to bring these factors into trading relations. Since much of 
each year's crop is placed long before it is grown, it is possible to 
anticipate the needs of spinners with a fair degree of accuracy. 
Pertinent facts as to probable demand should be made available to 
growers, so that they may more closely coordinate the volume and 
the quality of their production to the wishes of the market. 
The values of many kinds of cotton goods, such as ducks, denims, 
sheetings, and the cheaper clothing, are determined largely by the 
value of raw cotton, and the price is an important factor in deter- 
mining the amount taken. The amount of cotton taken by industry, 
however, is determined by the state of industry (notably automobile 
manufacturing, the building trades, and certain milling trades) 
rather than by the price of cotton. 
In measuring the world demand for raw cotton, statistics con- 
cerning activity of spinning spindles in the various countries are 
important indicators, though " counts " of yarn are also to be con- 
