48 BULLETIN 1444, U. S. DEPARTMENT OE AGRICULTURE 
(5) It is much more economical for the centralizing buyers to buy 
the cotton through local buyers in these markets rather than from 
the individual growers direct. 
PROBLEMS OF THE PRIMARY MARKET 
The two main problems of the primary market grow out of the 
limited volume of business on the one side and the inability of the 
farmer to know his product on the other. The volume of business 
in these local markets will not justify the cotton merchants in em- 
ploying skilled classers to buy the cotton. Native bargaining ability 
is often the asset most desired in a local representative. Few of 
the growers can class their cotton and bargain effectively in its sale. 
Previous investigations have shown that the growers were not paid 
the differences prevailing in the centralizing and spinners' markets 
for superior grade, staple, and character of cotton. 28 
PRICE MAKING IN THE FUTURES MARKET 
Two sets of forces determine cotton prices in the futures markets — 
those which affect demand for and those which affect the supply of 
cotton. 
MARKET FORCES AND POSITIONS 
The forces on the demand side exert their influence on the market 
through two channels. The first is through the purchase of cotton 
for consumption, and the second is through the purchase of cotton 
for speculation. The immediate price reaction is the same in kind, 
regardless of the parties doing the buying or whether they are 
buying cotton on the spot for forward delivery or for future 
delivery. 
i On the supply side, there are those who are offering spot cotton 
for immediate delivery and those who are willing to sell cotton for 
delivery at a stated month in the future, either on specific descrip- 
tion or as futures, believing that they will be able to buy the actual 
cotton or its equivalent in contracts before the delivery date at a 
lower price. Sales of spot cotton may influence the price by supply- 
ing mill demand direct or through hedge sales in the futures market 
by the growers or by the merchants who buy from the growers. 
The speculator who believes that the underlying forces will make 
for higher prices buys on that belief, hence represents a temporary 
portion of the demand in the market. In terms of market parlance, 
he" goes long " and is called a " bull." This buying tends to raise the 
price. The one with the opposite views, who sells futures or " goes 
short," represents a portion of the supply temporarily and is called 
a " bear." After the buyer goes long, his every effort is to force the 
price up and sell at the higher level that which he bought at the 
lower ; but when he sells he increases the market supply, thus tending 
to put the price down. 
On the other hand, he who sells short may thereby depress the 
price, but sooner or later must buy back the contract, or the spot 
28 Studies in Primary Cotton Marketing in Oklahoma. U. S. Dept. Agr. Bui. No. 36; 
also Relation Between Primary Market Prices and Qualities of Cotton, U. S. Dept. Agr. 
Bui. No. 457. 
