24 BULLETIN 1444, U. S. DEPARTMENT OF AGRICULTURE 
The " future " is a contract entered into between two exchange 
members as the buyer and the seller, which specifies that 50,000 
pounds of cotton in about 100 square bales, growth of the United 
States, shall be delivered from an approved storage place in a speci- 
fied future month at a fixed price for Middling, the basis grade, 
though the seller has the right in the settlement of the contract to 
deliver any grade permissible under the cotton futures act at the 
differences fixed in accordance with the provisions of the act. Ac- 
cording to the rules of the exchange, it is a contract entered into 
across the trading ring in one of the futures exchanges, and must 
be made by loud outcry. The seller has the right to choose the day 
within the month on which he will make the delivery, but notice of 
his intent to deliver must be given five days in advance. When the 
cotton has been invoiced, he must give notice of the place within the 
city where delivery will be made, and of the grade or grades of 
cotton to be delivered, within the range prescribed by the cotton 
futures act. The United States cotton futures act, the regulations 
of the Secretary of Agriculture thereunder, and the rules of the 
exchange are incorporated by reference in the contract. 14 
Thus the specific quality of cotton to be delivered at the maturity 
of the contract is not specified, except in general terms, by the rules 
of the exchange or by the cotton futures act. The latter provides 
that the cotton must be in good merchantable condition; must have 
a length of staple of at least seven-eighths inch ; must be of or within 
the 10 grades declared deliverable ; and must be free from undue spe- 
cial defects such as excessive gin cutting, mixed pack, and perished 
staple. 15 The premiums or points " on " for grades more valuable 
than Middling and the discounts or points " off " for grades less 
valuable are determined at time of settlement according to methods 
prescribed by the United States cotton futures act and the regulations 
of the Secretary of Agriculture under the act. If the .differences 
established are truly commercial, no grade gives the seller any advan- 
tage over another for purposes of delivery, nor the buyer any in 
receiving delivery. The unit of all transactions on the New York 
and New Orleans cotton exchanges is 50,000 pounds in approximately 
100 bales, known as one contract. 
A " spot " contract, on the other hand, is one which calls for a lot 
of cotton of specific description. It may be for delivery immediately 
or at some forward date, and the price may be stated as so many cents 
per pound ; but the price is usually fixed in terms of so many points 
'"on" or "off" the value of contracts for future delivery in a 
named month in a specified future market. It may be for any number 
of bales and between any two persons or firms. 
A transaction in spot cotton may take any one of a large variety 
of forms. Forward delivery sales are spot transactions, as are sales 
" to arrive," sales f. o. b., or " afloat," as well as sales where the cus- 
tody of the cotton in the form of warehouse receipts or other evi- 
dences of actual transfer are passed immediately by the seller to the 
14 In United States Department of Agriculture, Service and Regulatory Announcements 
No. 91, see both the regulations promulgated by the Secretary of Agriculture and the 
cotton futures act itself in Appendix I. 
15 See U. S. Dept. of Agri. Service and Regulatory Announcements No. 91, which con- 
tains the regulations of the Secretary of Agriculture under the United States cotton 
futures act ; see also Service and Regulatory Announcements No. 82. 
