Conceivably some indication of the working of "futures" might be gleaned
from observation of the relations of near and distant "futures" to one
another and of both to "spot." The complete explanation of changes in
these relations is still a mystery.[9] Probably an infinitude of subtle
influences came into play, and among these there seems reason to include
the intentional and unintentional "bulling" or "bearing" of the market.
Some examples of the diverse relations to be found, even when all the
"futures" fall in the same crop year, may be quoted here--quotations
running into the new crop year are obviously affected by anticipations
of the new crop.
As we pass from the "future" of the month in which the quotation is made
to the most distant "future" it will be observed that in the first and
second cases price rises continuously, in the second case even passing
"spot," whereas in the third case it falls first and then rises.
Instances might be given of its falling unintermittently. It seems a
plausible conjecture that if "futures" were "bulling" the market in the
first case, they were at least "bulling" it less in the second case
_ceteris paribus_, and probably "bearing" it in the last case. A closer
examination will reveal further that the magnitude of these gaps varies
a great deal; and if the "futures" do "bear" and "bull," as has been
supposed, they probably influence these magnitudes. It might be thought
that the "futures" of different months, being substitutes in proportion
to their temporal proximity to one another, should vary together
exactly; but it would seem to be a sufficient reply that as they are not
perfect substitutes they are in some slight degree independent
variables. The "spot" market might be judged generally as too high, in
view of crops and the probable normal demand of the year, but it might
not therefore drop immediately, owing partly to the pressure of demand
that must be satisfied instantaneously. "Current futures" would be
affected more than "spot" by this impression as to the relation of
"spot" to a conceived normal price for the year, and they might
therefore be expected to drop more than "spot" when this impression was
at all widely entertained. But the fall of "current futures" would be
checked by the demands that must be satisfied in the near future.
Probably the prices of the more distant "futures" are determined in a
higher degree by far-reaching imagination than the prices of nearer
futures. This explains what has been called above the unintentional
"bearing" of "spot" by "futures." And it is immediately evident that the
deliberate "bear" works by selling "futures," and that the effect of his
sales is propagated to "spot." These statements are equally true of
"bulling." The influence of expectations of the new crop on "futures"
running into the new crop is plain on inspection; but owing to the gap
between the two crop years it would be astonishing if "futures" against
which cotton from a new crop could be delivered were not appreciably
independent of "spot" at the time of their quotation. However, it is
noticeable that they are still so closely bound up with "futures"
culminating in the old crop year that the daily movements of the former
are closely correlated with those of the latter. Concluding cautiously,
we may admit the probability of the relations between near and distant
"futures" and "spot" (even in respect of "futures" running out in the
same crop year) indicating sometimes at least the intentional or
unintentional "bulling" or "bearing" or "spot" by "futures." But nothing
has yet been proved from these facts as to the effect "futures" are
having upon the steadiness of prices. In the case of any crop year, if
the relations which are suggested as indicating the "bulling" work of
"futures" usually corresponded with "spot" prices being below the normal
price of the crop year, or of what was left of the crop year, while the
relations which are suggested to indicate the "bearing" work of
"futures" on the whole corresponded with a relatively abnormal height of
"spot," it would be a legitimate inference that "futures" were tending
to smooth prices. However, it is made clear as the result of an
elaborate examination that the generality of these correspondences
cannot be affirmed.[10] The outcome of the whole matter is that the
investigator is still baffled in his attempt to discover what effect the
use of "futures" is having upon prices to-day. The sole piece of
evidence, from which probable conclusions may be drawn, is that three
separate measurements of price fluctuations over some forty years reveal
a growing unsteadiness of late, whether they be expressed absolutely or
as percentages of price.
Recent attempts to open up new cotton-fields.
The uneasiness caused by the excessive dependence of Great Britain upon
the United States for cotton, coupled with the belief that shortages of
supply are more frequent than they ought to be, and the fear that
diminishing returns may operate in America, occasioned the formation in
England of the British Cotton Growing Association on the 12th of June
1902. The proportions of England's supplies drawn from different fields
is indicated in the table below.
British dependence on American supplies is greater even than that of the
continent of Europe, for Russia possesses some internal supplies, and
more Indian cotton is used in continental countries than in England.
_Average Quantities of Raw Cotton imported Annually into the United
Kingdom from the following Countries in the Periods 1896-1900 and
1901-1904._
+----------------------------------------+-------------+-------------+
| Country | 1896-1900. | 1901-1904. |
| | Million lb. | Million lb. |
+----------------------------------------+-------------+-------------+
| United States | 1436 | 1424 |
| Brazil | 13.8 | 31.5 |
| Peru | 8.5 | 8.6 |
| Chile (including the Pacific coast of | .8 | 2.2 |
| Patagonia) | | |
| Venezuela and Republic of Colombia | .5 | .5 |
| British West Indies and British Guiana | .3 | .6 |
| Turkey (European and Asiatic) | .5 | 1.1 |
| Egypt | 295.7 | 314.4 |
| British possessions in the East Indies | 40.7 | 61.9 |
| Australasia | .035 | .041 |
| All other countries | 2.3 | 3.8 |
| +-------------+-------------+
| Total | 1800 | 1849 |
| +-------------+-------------+
| Re-exported | 223 | 260 |
+----------------------------------------+-------------+-------------+
The annual average shipments from Bombay to the European continent and
to Great Britain in 1900-1904 were as follows:--
To the continent 600 bales of 3-1/2 cwt.
To Great Britain 50 " " "
At the end of the 18th century the bulk of British cotton was obtained
from the West Indies. Approximately the supplies were as follows in
million lb.:--
British West Indies 6.6
French and Spanish settlements 6
Dutch settlements 1.7
Portuguese " 2.5
East Indies " .1
Smyrna or Turkey 5.7
The British Cotton Growing Association works under the sanction of a
royal charter and has met with valuable official support. Financial
assistance and assurances as to sales and prices have been given
liberally by the association where they are needed; ginning and buying
centres have been established; experts have been engaged to distribute
seed and afford instruction; and some land has been acquired for working
under the direct management of the association. The governments of some
colonies have aided the efforts of the association. Professor Wyndham
Dunstan of the Imperial Institute, on a reference from the government,
made favourable reports as to the possibilities of extending cotton
cultivation. The results may be seen in the approximate estimates below
of cotton grown more or less directly under the auspices of the
association.
_Bales of 400 lb._
+-------------------+---------+---------+-----------+-----------+
| | 1903. | 1904. | 1905. | 1906. |
+-------------------+---------+---------+-----------+-----------+
| Gambia | 50 | 100 | 300 | .. |
| Sierra Leone | 50 | 100 | 200 | 250 |
| Gold Coast | 50 | 150 | 200 | 250 |
| Lagos | 500 | 2,000 | 3,200 | 6,300 |
| Nigeria | 100 | 200 | 650 | 1,200 |
| | ----- | ----- | ----- | ----- |
| West Africa | 750 | 2,550 | 4,550 | 8,000 |
| West Indies | 1,000 | 2,000 | 4,000 | 6,000 |
| East Africa | 150 | 850 | 2,000 | 3,500 |
| Sind | .. | .. | 500 | 2,000 |
| Sundries | .. | 100 | 250 | 500 |
+-------------------+---------+---------+-----------+-----------+
| Total | 1,900 | 5,500 | 11,300 | 20,000 |
+-------------------+---------+---------+-----------+-----------+
| Approximate value |L29,000 |L75,000 | L150,000 | L270,000 |
+-------------------+---------+---------+-----------+-----------+
In the West Indies results are most favourable, both as regards quantity
and quality of the crops. West Indian grown cotton has realized even
higher prices than American grown Sea Island. In West Africa also
prospects appear encouraging. In Sierra Leone little success has been
met with, but on the Gold Coast some cotton better than middling
American has been grown, and the association has concluded an agreement
with the government for an extension of its work. In Lagos crops
increased rapidly. The cotton is almost entirely grown by natives in
small patches round their villages, and generally it has sold for about
the same price as middling American, though some of it realized as much
as 25 to 30 "points on." The quality in greatest demand in England, it
should be observed, is worth about 1/4d. to 1/2d. per lb. above middling
American. In Southern Nigeria the association has met with only slight
success; in Northern Nigeria, a working arrangement was entered into
with the Niger Company, and a small ginning establishment was set to
work in February 1906. In British Central Africa, the results on the
whole have not been satisfactory. Though planters who confined their
efforts to the lower lying grounds--of which there is a fairly large
tract--succeeded, all the cotton planted on the highlands proved more or
less a failure. In Uganda the association took no steps, but activity in
cotton-growing is not unknown, and some good cotton is being produced.
Arrangements were concluded with the British South Africa Company for
the formation of a small syndicate for working in Rhodesia.
The general movement for the extension of cotton cultivation was
welcomed by the International Congress of representatives of master
cotton spinners and manufacturers' associations at the meeting at Zurich
in May 1904. It placed on record "its cordial appreciation of the
efforts of those governments and institutions which have already
supported cotton-growing in their respective colonies." England is
pre-eminent but not alone in the matter. Germany and France, and in a
less degree Belgium, Portugal and Italy, have taken some steps. Russia,
too, is developing her internal supplies.
The advantages that might accrue from the wider distribution of
cotton-growing are mainly fourfold, (1) Greater elasticity of supply
might be caused. It is probably easier to extend the area under cotton
rapidly when crops are raised from many places in proximity to other
crops than when the mass of the cotton is obtained from a few highly
specialized districts. Possibly the advantages of specialism might be
retained and yet the elasticity of supply be enhanced. (2) Greater
stability of crops in proportion to area cultivated is hoped for. The
eggs are now too much in one basket, and local disease, or bad weather,
or some other misfortune, may diminish by serious percentages the
supplies anticipated. Were there numerous important centres, the bad
fortune of one would be more adequately offset by the good fortune of
another. (3) Desirable variations in the raw material might conceivably
eventuate from the introduction of cotton to spots in the globe where
its growth was previously unknown or little regarded. The results of the
enterprise of Mehemet Ali and Jumel in Egypt prove such an idea to be
not altogether fanciful, and warn us also against hastily arguing that
the plan is too artificial to succeed on a large scale. Without the
active intervention of a strong body of interested parties it is
sometimes unlikely that new industries will be undertaken even in places
well suited for them. (4) Lastly, the countries to which cotton-growing
is carried should gain in prosperity.
The Cotton Supply Association.
The general difficulties in the way of the British Cotton Growing
Association are many and will be sufficiently evident. Lessons of value
may be learnt from the fate of similar work undertaken by the Cotton
Supply Association, which was instituted in April 1857. According to its
fifth report, it originated "in the prospective fears of a portion of
the trade that some dire calamity must inevitably, sooner or later,
overtake the cotton manufacture of Lancashire, whose vast superstructure
had so long rested upon the treacherous foundation of restricted slave
labour as the main source of supply for its raw material."[11] Its
methods were stated to be: "To afford information to every country
capable of producing cotton, both by the diffusion of printed directions
for its cultivation, and sending competent teachers of cotton planting
and cleaning, and by direct communication with Christian missionaries
whose aid and co-operation it solicits; to supply, gratuitously, in the
first instance, the best seeds to natives in every part of the world who
are willing to receive them; to give prizes for the extended cultivation
of cotton; and to lend gins and improved machines for cleaning and
preparing cotton." Though the association brought about an extension and
improvement of the Indian crop, in which result it was enormously
assisted by the high prices consequent upon the American Civil War, it
sank after a few years into obscurity, and soon passed out of existence
altogether, while the effects of its work dwindled finally into
insignificance. Much the same had been the ultimate outcome of the
spasmodic attempt of the British government to bring about the
introduction of cotton to new districts, after it had been pressed to
take some action a few years prior to the formation of the Cotton Supply
Association. A Mr Clegg, who afterwards interested himself keenly in the
activities of the Cotton Supply Association reported that in the course
of a tour in 1855 through the Eastern countries bordering on the
Mediterranean he had found none of the gins presented by the British
government at work or workable.
BIBLIOGRAPHY.--On the question of cotton supplies, as treated in this
article, the reader may be referred to _Brook's Cotton, its Uses, &c._;
Dabney's _Cotton Plant_ (Department of Agriculture of the United
States); Foaden's _Cotton Culture in Egypt_; Dunstan's _Report on Cotton
Cultivation_ for the British government; Oppel's _Die Baumwolle_;
Leconte's _Le Coton_; publications of the British Cotton Growing
Association; _Report_ of the Lancashire Commission on the possibility of
extending cotton cultivation in the Southern States of North America;
Watt's _Lancashire and the Cotton Famine_; publications of the old
Cotton Supply Association (many will be found in the Manchester public
library in the volume marked "677 I. C. ii."), including their weekly
paper, _The Cotton Supply Reporter_; Hammond's _Cotton Culture and
Trade_. On methods of marketing to certain portions of the above must be
added: Ellison's _Cotton Trade of Great Britain_; Chapman's _Lancashire
Cotton Industry_ (ch. vii.); articles by Chapman and Knoop in the
_Economic Journal_ (December, 1904) and the _Journal of the Royal
Statistical Society_ (April, 1906); Emery's _Speculation on Stock and
Produce Exchanges of the United States_ (small portions of which relate
to cotton). Many statistics will be found in the works mentioned, and
these may be supplemented from the trade publications of different
countries. Many valuable figures of cotton imports, &c., in early years
will be found in Baines' _History of the Cotton Trade_. Recent
statistics bearing upon cotton are collected annually in the two
publications, Shepperson's _Cotton Facts_ and Jones's _Handbook for
Daily Cable Records of Cotton Crop Statistics_. For current information
the following may be added: Nield's, Ellison's and Tattersall's
circulars; _Cotton_ (the publication of the Manchester Cotton
Association); and daily reports and articles in the local press. Price
curves are published by Messrs Turner, Routledge & Co. (S. J. C.)