COTTON PRICES AND MARKETS 77 
near the public square, where the farmer offers his cotton for sale 
to the highest bidder as soon as it has been ginned. The facilities 
in this local market differ widely, and the buyers and sellers usually 
operate quite independently. The two main problems of the primary 
market grow out of the limited volume of business and inability of 
the farmer to know the comparative value of his product. 
Price making in the futures market operates through the pur- 
chase of cotton for consumption and for speculation. On the supply 
side, it operates through the sale of cotton for immediate delivery 
or delivery in a named future month. Prices rise or fall with changes 
in the minds of traders in cotton as to the relationship between de- 
mand and supply. 
The conversion of the price of spots into the price of futures has 
necessitated the devising of a way to arrive at the value of the 
various classes of spot cotton in terms of the basis grade. These 
adjustments are now made by means of price differentials established 
by commercial values. The method used in establishing differentials 
for value of different grades and colors of cotton deliverable on 
futures contracts in America is prescribed by the United States cot- 
ton futures act and the regulations thereunder. Occasionally futures 
or spots are forced out of line to an abnormal degree in the current 
month as a result of what is known as a " squeeze." The relation- 
ship between the prioe of futures and of spots is very close, because 
of the system of buying and selling in the sopt markets in terms 
of points wi on " or " off " futures, and to the method of liquidating 
future contracts by the delivery of spot cotton. Since much of the 
business in the spot markets is done on " basis " for forward deliv- 
ery, marked changes in the basic relationship disturb the normal 
course of cotton marketing. 
