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版权信息书名：The Fabric of Civilization A Short Survey of the Cotton Industry in the United States作者：Guaranty Trust Company of New York排版：小半出版时间：2018-02-27本书由当当数字商店（公版书）授权北京当当科文电子商务有限公司制作与发行。— · 版权所有 侵权必究 · —CHAPTER IThe Importance and Power of CottonCOTTON is the fabric of civilization. It has built up peoples, and has riven them apart. It has brought to the world vast and permanent wealth. It has enlisted the vision of statesmen, the genius of inventors, the courage of pioneers, the forcefulness of manufacturers, the initiative of merchants and shipbuilders, and the patient toil of many millions.
A whole library could be written on the economic aspects of cotton alone. It could be told in detail, how and why the domination of the field of its manufacture passed from India to Spain, to Holland, and finally to England, which now shares it chiefly with the United States. The interdependence of nations which it has brought about has been the subject of numerous books and articles.
Genius that ServedThe World’s Need
Nor is the history of the inventions which have made possible to-day’s great production of cotton fabrics less impressive. From the unnamed Hindu genius of pre-Alexandrian days, through Arkwright and Eli Whitney, down to Jacquard and Northrop, the tale of cotton manufacture is a series of romances and tragedies, any one of which would be a story worth telling in detail. Yet, here is a work that is by no means finished. Great inventors who will apply their genius to the improvement of cotton growing and manufacture are still to be born.
The present purpose, however, is to explain, as briefly as may be, the growth of the cotton industry of the United States, in its more important branches, and to endeavor, on the basis of recognized authority, to indicate its position in relation to the cotton industries of the remainder of the world.America the ChiefSource of Raw Material
For the present, and for the future, as far as that may be seen, the United States will have to continue to supply the greater part of the world’s raw cotton. Staples of unusual length and strength have been grown in some foreign regions, and short and inferior fibers have come from still others. But the cotton belt of the Southern States, producing millions of bales, is the chief source of supply for all the world.
The following table, taken from "The World’s Cotton Crops, 1915," by J. A. Todd, gives the comparative production of the great cotton-growing areas, for the 1914-1915 season:16,500,000 pounds America bales of 500 5,000,000 India " " 500 " Egypt 1,300,000 " " 500 " 1,300,000 Russia " " 500 " 4,000,000 China " " 500 " 1,300,000 Others " " 500 " ----------- 29,400,000 Total " " 500 "
The American crop is thus approximately fifty-six per cent. of the world’s 6 total. The other producing countries have shown since the beginning of the century an interesting, if not a remarkable growth, that of China being the largest in quantity, and that of Russia, the largest in proportion. The American increase has been larger, absolutely, than that of any other region, and there is little indication that it will not continue to hold first position.English SpinnersDominate World Market
In the manufacture of cotton, Great Britain’s supremacy, while not so great proportionately as that of America in growing it, is for the present not likely to be challenged. The following table of the number of spindles in the chief manufacturing countries is based on English figures compiled shortly before the outbreak of the World War. The number of spindles is the usual basis upon which the size of the industry is judged. It is not a perfect method, but it has fewer objections than any other:55,576,108Great Britain30,579,000United StatesGermany10,920,4268,950,000Russia7,400,000France6,400,000India4,864,453AustriaItaly4,580,0003,100,000Latin AmericaJapan2,250,000Spain2,200,000Belgium1,468,8381,398,062SwitzerlandScattering2,499,421----------Total Spindles 142,186,308
Such figures can be only approximate. The war has brought growth in the United States and in Japan, but has certainly reduced the numbers of spindles in Germany, Austria, and Russia. It is doubtful, moreover, how well the French industry has been able to maintain itself. But the tabulation is accurate enough to show the relative standing of the various countries. There are, as has been indicated, other standards than the number of spindles. The United States, through the fact that it specializes, generally speaking, on the coarser fabrics, uses about 5,000,000 bales of cotton annually, as compared with Great Britain’s 4,000,000. The British product, however, sells for much more. Thus the value of the spindle standard is affirmed. England, then, produces well in excess of one-third of the cotton cloth of the world; the United States considerably more than one-fifth of it, with the other countries trailing far behind, but prospering nevertheless.The Individualityof the Cotton FiberThe cotton fiber—a highly magnified view, showing the twist
It is a curious ruling of fate which makes the spinning of cotton fiber possible. There are many other short vegetable fibers, but cotton is the only one which can profitably be spun into thread. Hemp and flax, its chief vegetable competitors, are both long fibered. The individuality of the cotton fiber lies in its shape. Viewed through the microscope, the fiber is seen to be, not a hollow cylinder, but rather a flattened cylinder, shaped in cross-section something like the figure eight. But the chief and valuable characteristic is that the flattened cylinder is not straight, but twisted. It is this twist which gives its peculiar and overwhelming importance to cotton, for without this apparently fortuitous characteristic, the spinning of cotton, if possible at all, would 7 result in a much weaker and less durable thread. The twist makes the threads "kink" together when they are spun, and it is this kink which makes for strength and durability.
Though the cotton plant seems to be native to South America, Southern Asia, Africa, and the West Indies, its cultivation, was largely confined at first to India, and later to India and the British West Indies. At the beginning of the eighteenth century, the West Indies, because of their especial fitness for growing the longer staples were supplying about seventy per cent. of the food of the Lancashire spindles. The United States having made unsuccessful attempts to produce cotton in the early days of the colonies, first became an important producing country toward the end of the eighteenth century. American Upland cotton, by reason of its comparatively short staple, and the unevenness of the fibers, as well as the difficulty of detaching it from the seed, was decidedly inferior to some other accessible species. The Southern planters who grew it, moreover, found it next to impossible to gin it properly, the primitive roller gin of the time being unsuited to the task, and the work of pulling off the fibers by hand being both tedious and expensive. In 1792, the amount exported from the United States was equivalent to only 275 bales.Eli Whitney, the schoolmaster inventor of the cotton gin
The next year, 1793, is the most important in the history of cotton growing in the United States. In the autumn of 1792, Eli Whitney, a young Massachusetts man who had just been graduated from Yale College, sailed from New York to South Carolina where he intended to teach school. On shipboard he met the widow of Nathaniel Greene, the Revolutionary general. Mrs. Greene invited the youth to begin his residence in the South on her plantation at Mulberry Grove, Georgia. Here one evening, some officers, late of General Greene’s command, were discussing the great wealth which might come to the South were there a suitable machine for removing stubborn Upland fiber from its green seed. The story goes that while the discussion was at its height, Mrs. Greene said:
"Gentlemen, apply to my young friend, Mr. Whitney. He can make anything."
Whitney commenced work on the problem. A room was set aside as his workshop, and it was not long before he had produced the beginnings of the gin. He fixed wire teeth in a board, and found that by pulling the fibers through with his fingers he could leave the tenacious seed behind. He carried this basic idea further by putting the teeth on a cylinder and by providing a rotating brush to clean the fiber from the teeth.
The changes which followed immediately 8 upon the introduction of the cotton gin were tremendous in scope and almost innumerable. There was a time, before cotton became a staple, when the South led New England in manufacturing. That time passed almost immediately. Iron works and coal mines were abandoned, and men turned their energies from the culture of corn, rice, and indigo largely to the raising of the cotton.Expansion inProduction
The following figures, giving production in the equivalent of 500 pound bales for the year at the close of each ten-year period, give some idea of the tremendous expansion which ensued.500 PoundYear Bales3,138179073,2221800177,8241810334,7281820732,21818301,347,64018402,136,08318503,841,41618604,024,52718706,356,99818808,562,089189010,123,027190011,608,616191011,302,3751917
By this table it will be seen that the Civil War and the freeing of the slaves held up production only temporarily. In 1914, the banner year, the crop reached the tremendous total of 16,134,930 bales of five hundred pounds each.
Some little spinning had been done in the seventeenth century, but in 1787-88 the first permanent factory, built of brick, and located in Beverly, Massachusetts, on the Bass river, was put into operation by a group headed by John Cabot and Joshua Fisher. This factory failed to justify itself economically, chiefly because of the crudeness of its machinery. But Samuel Slater, newly come from England with models of the Arkwright machinery in his brain, set up a factory in Pawtucket in 1790. From that time forth the growth was steady and sure, if not always extremely rapid.
The following table,[A] which covers the whole country, relates particularly to New England in the years before 1880, because the cotton manufacturing industry until then was largely concentrated there. It shows how the manufacturing interests of the country profited by the discovery that brought wealth to the agricultural South:NumberCottonNumberNumber YofUsedValue ofofofearEstab-inProduct inEmployeSpindles lish-MillionDollarssmentsPounds 187,000 810 1220,000 82 0 11,200,00$32,000,000 62,177 83795 77.8 0 0 12,300,0072,119 46,400,000 841240 113.1 0 0 13,600,0092,286 61,700,000 851094 276.1 0 0 15,200,00122,028 115,700,000 861091 422.7 0 0 17,100,00135,369 177,500,000 87956 398.3 0 0 110,700,0174,659 192,100,000 88756 750.3 00 0 114,200,0218,876 268,000,000 1,118.0 89905 00 0 119,000,0297,929 332,800,000 1,814.0 90973 00 0 1 27,400 371,12 616,500,0 2,332.2 911208 ,000 0 00 0 134,940,83,278.2 9130 8[A]This tabulation includes spinning and weaving establishments only.
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The North, having this growing interest in an industry struggling against the experience and ability of the more firmly established English market, sought naturally for the protection given by a high tariff. The South, having definitely dropped manufacturing, pleaded with Congress always for a low tariff, and the right to deal in human chattels.
There is little need to go further into the rift which began to develop almost immediately. In 1861 the split occurred. The war between the States caused hardly more suffering than the blockade which cut off the spinners of Manchester from the vegetable wool which supplied them the means of living. Cotton proved its power and its domination. It was a beneficent monarch, but it brooked no denial of its overlordship.Early Exportsto England Heavy
The invention of the Whitney Gin, as we have just said, found the United States able to use but a small part of the cotton grown. What became of the remainder? Obviously, it was exported to provide the means for operating the English mills. Here is a table which shows how American cotton left the Southern ports for England and the Continent in the alternate decennial years beginning in 1790, three years before the invention of the cotton gin by Eli Whitney. The figures are exclusive of linters.Exports inYear Equivalent of 500Pound Bales1790379124,1161810553,96018301,854,47418502,922,75718705,850,21918908,025,99119104,587,0001917
In 1910 American cotton made up almost exactly three-quarters of the whole amount imported into Great Britain. The other countries of Europe have developed a spinning industry by no means inconsiderable. American cotton is sent to almost all those European countries which spin and weave.
Such a movement had of course a profound effect upon the currents of world trade. The cotton crop is the second in value of all the crops produced in the United States, and such a large part of it is exported that the credit it gives to its sellers enables them to buy in return some of the most valuable of the products manufactured in Europe.
The following table gives the amount of cotton, expressed in the equivalent of 500 pound bales, exported to the various countries named in the decennial years:United YeGermanyFrance Russia NetherlBelgiuItaly Kingdom ar ands m 18175,438 54,878 1,496 1,796 8,372 609 21 18419,661 150,2117,135 2,246 471 223 30 2 18989,830 358,1821,698 25,780 18,317 7,805 4,406 40 0 18863,062 251,6618,707 25,492 10,090 8,677 8,590 50 8 182,528,27132,145 567,9354,037 43,396 25,515 29,601 60 4 5 181,298,33173,552 306,2914,549 30,341 17,050 3,452 70 2 3 182,433,25308,045 359,6959,126 204,5065,325 17,896 80 5 3 0 182,905,15837,641 484,75129,7593,588 193,1617,438 90 2 9 1 3 192,302,121,619,17736,09443,9554,950 74,635 148,3100 8 3 2 1 9 1967,203 18,823 102,342,444,551,887,65968,42393,3210 6 8 7 2 7 192,387,10658,55369,2115,945 10,098 17 1 3 3 CHAPTER IIWhere Cotton is Grown and Spun and Why
WE have seen (page 5) that the world’s cotton crop is produced chiefly by the United States, with 56%; India, with 17%; China, with 11113-/%; Egypt and Russia with 4-/%, the remaining 4-/% being 222made up by Brazil, Mexico, Peru, Turkey, Persia, Japan, and several other countries.Primitive Methods ofGrowing in India
India is the first country wherein, so far as we have record, the growing of cotton reached the stage of an industry. There conditions are almost ideal, apparently, for the production of a great crop; yet, for many years the crop was a small one, and was utilized locally in the domestic manufacture of the light clothing worn by the people. Nothing remotely resembling the present modern factory system developed during all the thousands of years that the Indians had the field practically to themselves. The plant grown in India for a long time produced a short, uncertain staple, difficult to gin and still more difficult to spin. The greater part of the cotton growing districts are still given 3over to the short staple varieties (about / inch) but in recent years 4certain varieties of Egyptian and American cotton have been produced with some success. About 20,000,000 acres are given over to the culture of the plant, but the methods used are to a great extent primitive in the extreme. Most of the crop, being unsuited to the needs of the British spinners, is either manufactured in Indian mills, of which the number is constantly growing, or exported to Japan. Before the war, Germany was a large consumer of Indian cotton.
The figures given as representing the Chinese crop probably are not any more accurate than the usual statistical figures concerning China. The Chinese are still largely in the domestic system of manufacture, and much of their crop—probably a larger proportion than in India—is spun and woven in the neighborhood where it is grown, without ever appearing in statistical tables. The methods of growing are equally primitive. The fiber is short, and the mills of the country import more raw cotton, yarn, and textiles than they export.The Growing ImportanceOf Egyptian Staples
The Egyptian crop is one of the most interesting, both in the methods of culture, and in the product. From the point of view of statistics—remembering the uncertainty of the size of the Chinese crop—Egypt is the third cotton growing country of the world. This is the more interesting because it was not until about 1820 that Egypt was considered as a source of supply. The present area, under extremely intensive cultivation, is about 1,800,000 acres, and nine-tenths of this is in the Nile delta.
Climatic conditions are radically different from those of the United States. Little rain falls during the growing season, but an elaborate system of irrigation provides a sufficient and probably more satisfactory water supply, insomuch as the quantity of water can be regulated, and there is little danger of either too much or too little moisture. The regions where the soil is not composed exclusively of the black delta mud, but is a mixture of sand and mud, produce the best crops. The land, 11 after being plowed, is thrown up into ridges about three feet apart. Channels for water are formed at right angles to the ridges. The seeds, before being sown, in March, are thoroughly soaked, and after the seedlings appear there is frequent hoeing and watering. The total water is equivalent to a rainfall of about 35 inches. There is little cultivation in the American fashion, hand labor being employed almost exclusively. The result of all this intensive effort is an abundant crop of long-stapled cotton with an extremely strong fiber, bringing in the open market a price second only to that of the American Sea Island variety. Much of the Egyptian cotton is used in the manufacture of hosiery and other knit goods, sateens, sewing thread, etc., but recently it has also been found to be exceedingly well fitted for the manufacture of the fabric used in pneumatic tires, and for the duck or filter cloth used in such industries as the refining of sugar.Pickers in Delta Field
Russian cotton, so-called, is really grown largely in Turkestan though a small amount is produced in the Southern Caucasus. The culture has been under way since very early times, but had little more than local significance until about 1875 when the Russian Government took steps to foster it, distributing American seed of the Upland variety, importing the necessary equipment, and providing instructors, frequently Americans. Railroads to handle the crop were built, and, with all this favorable assistance, progress was rapid. About one-third of the cotton used in the Russian mills up to the time of the war was grown on Russian soil, the remainder being brought largely from the United States.The American CropAs the World’s Basis
But the bulk of the world’s supply is the cotton grown in the United States. The price for American Upland Cotton 12 governs the price of the other varieties. The acreage devoted to the cultivation of the cotton crop in the United States is approximately 34,000,000. The increase since 1839, when census figures covering this point were first obtained, has been about seventeen fold. The 1916 acreage, of the various States, together with figures giving the value of the crop and the comparative rank, is here given:GrossApproxiCrop ValueEquivalentAcreamateIncludingStates500 Pound BalesgePercentaSeedExclusive ofgeand LintersLinters Alaba1,977,517,890 $86,940,000 4.6 ma000 Arizon 21,737 6,300,000 0.1 a Arkan2,740,973,752 164,840,000 8.6 sas000 Califor 57,826 9,410,000 0.5 nia183,0037,858 10,260,000 Florida0.3 0 Georgi5,195,1,883,911 322,600,000 16.7 a000 Louisi1,454,638,729 102,260,000 5.7 ana000 Missis2,788,905,554 152,270,000 8.0 sippi000 Misso345,0060,831 10,100,000 0.5 uri0 North 1,515,617,989 103,940,000 Carolin5.5 000 a Oklah2,783,959,081 150,270,000 8.5 oma000 South 2,837,1,236,871 207,220,000 Carolin10.9 000 a Tenne882,00240,525 40,130,000 2.1 ssee0 11,0923,125,378 495,590,000 Texas27.7 ,000 Virgini50,00018,777 3,140,000 0.2 a All 5,666 970,000 Other 0.1 States 33,84111,302,375 Totals100.00 1,866,240,000 ,000
There are generally speaking, two kinds of cotton produced in the United States—Upland cotton, and Sea Island cotton. The former makes up the great bulk of the crop, the relative percentages in 1917 being 99.2 and .8.The Constant SearchFor Long Staples
A few years ago the terms short-staple and Upland were practically interchangeable, but the great demand for long staple, chiefly from the manufacturers of thread and of pneumatic tire fabrics has led to a successful attempt to grow the longer fibers in the Upland districts, so that now more than a million bales annually are being 1produced in the Upland districts of cotton with a staple length of 1-/ 8inches and more. The world’s total production of long staple is in the neighborhood of 2,250,000 bales. Egypt is the chief producer outside the United States, her product being approximately 1,000,000 bales of 500 pounds every year. Although the product is small, the best Sea Island produced in the United States grows upon the small islands off the coast of South Carolina. The long-staple Upland is grown chiefly in the Mississippi delta, where the product is called "Peeler," "benders," etc., though the percentage of long-staple produced elsewhere is steadily increasing. The success of certain Arizona growers in producing long-staple from Egyptian seed is being watched with great interest. More than 3,000 bales came from this source in 1916, the 1fiber averaging 1-/ inches in length. There has recently been 2developed there, 13 the new and important Pima variety, which is superior to the native Egyptian cotton, being both longer and whiter, and the growers are now planting Pima almost exclusively.
The following table, taken from the Encyclopedia Brittanica, gives the comparative length of staple of the more important varieties of cotton. The order in which they are given represents, roughly, their relative commercial value:Length of StapleSea Island Cottonin Inches Carolina Sea Island1.8 Florida Sea Island1.8 Georgia Sea Island1.7 Barbados Sea Island2. Egyptian Cottons Yannovitch1.5 Abassi1.5 Good Brown Egyptian 1.2(Mitafifi)American Cotton Good Middling Memphis1.3 Good Middling Texas1.0 Good Middling Upland1.0Indian Cottons Fine Tinnevelly.8 Fine Bhaunagar1.0 Fine Amraoti1.0 Fine Broach.9 Fine Bengal.9 Fine ginned Sind.8 Good ginned Kumta1.0
The table of the number of spindles in each country in the world, given on page 6, gives some idea of the relative position of the United States in the field of cotton manufacturing. We have seen how the English industry, having the prior start, grew to imposing proportions and helped to bring about a change almost as great in its effects as the French Revolution, which was occurring at almost the same time. British supremacy in cotton manufacturing has never been truly challenged, but there has been an appreciable growth in several other countries, and in Germany and Japan, at least, the recent development has been little short of phenomenal. New figures will probably show that in the future Japan will be the chief competitor of England and the United States for a share of the cotton trade of the world.Fall River, MassachusettsThe Home MarketCreated An Industry
The chief factor in the growth of the American industry was probably not the nearness of the source of supply, cheap fuel or labor, nor any of these factors which operated in the case of England, such as climate, geographical position, and shipping control, but more than anything 14 else the presence of a market close at hand which grew so rapidly, more rapidly indeed than the industry could grow to meet it. Aided to some extent by an import tariff, the manufacturers have weathered some short periods of depression, but in the main the industry has grown in direct ratio to the growth of the country.A typical Southern millNew England As HomeOf American Spinning
The cotton mill, as we have seen, early chose New England as its domicile. Mills are scattered more or less throughout the entire region, but there are several localities which stand out beyond all others, and almost deserve the title they have acquired as the centers of the industry. Premier place for a long time was held by Fall River, and even now the race between that city and New Bedford is strong, with the lead slightly in favor of the former city.
Bristol County, Mass., in which these two centers, and Taunton, are located, Providence, R. I., and Middlesex County, Mass., together contained 10,086,686 spindles in 1917, or 29.5% of the country’s total of 34,221,252.
The growth in this one locality is due probably to the advantages which come with centralization, as well as to the natural advantages they possessed. These latter, which include particularly water power and a moist climate, are not as important now, With steam power and mechanical humidifiers as they were a generation ago.
In the Middle Atlantic States, the number of plants and the spindlage have remained about stationary over a long period of years, and are even showing a tendency to decrease. Small weaving establishments which buy their yarn are particularly numerous around Philadelphia, and there are large cotton duck mills in and near Baltimore.Mills in the Midst ofCotton Plantations
It has been in the South, however, that the growth of the cotton manufacturing industry in the last few decades has been most phenomenal. In 1860 there were 324,052 spindles in the cotton growing States compared with 8,632,087 in New England. In 1917, the figures were: Northern 15 States (including Connecticut, Illinois, Indiana, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont), 19,835,662 spindles devoted to the spinning of cotton exclusively; Southern States (including Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Virginia), 14,292,918 spindles devoted to cotton exclusively.
The census figures do not give the number of spindles in each city except when the confines of the city and of the county happen to coincide. But the appended table is presented as showing the spindlage of counties having more than 100,000 spindles devoted to the spinning of cotton.
About 1880, the Southerner saw the opportunity that awaited him when he should manufacture his own cotton. At that time he was consuming only 188,748 bales, while New England took 1,129,498. In ten years, he was utilizing more than half a million bales, while New England had just passed the million and a half figure. In 1905, the South consumed 2,140,151 bales, while New England had climbed to only 1,753,282. The figures are Scherer’s, who points out that the race was won in twenty-five years. However, as competition with the South increased, 16 New England, following the earlier lead of Old England, has tended always to produce a finer and finer quality of cloth, leaving the coarser grades of sheeting, drills and ducks to the Southern mills. Thus, while the South is consuming an ever larger proportion of the cotton crop, she is still far from receiving for her product the money that comes to the New Englander, who with a higher grade of labor and greater variation of output is constantly catering, with dress fabrics and fine stuffs of various kinds, to a discriminating well-to-do patronage.SpindlesCounty(Number)Bristol, Mass.7,294,221Providence, R. I.1,709,713Middlesex, Mass.1,082,752Hillsborough, N. H.907,245Spartanburg, S. C.831,476Windham, Conn.780,232Worcester, Mass.766,110Greenville, S. C.758,144Essex, Mass.645,020Hampden, Mass.642,096Gaston, N. C.603,102Kent, R.I.594,380Anderson, S. C.582,464Berkshire, Mass.521,408New London, 512,170Conn.Oneida, N. Y.419,255York, Me.408,600Androscoggin, Me.402,471Muscogee, Ga.346,740Pittsylvania, Va.346,320Union, S. C.330,656Strafford, N. H.318,160Cabarrus, N. C.315,810Mecklenburg, N. 272,198C.Guilford, N. C.262,862Richland, S. C.244,660Essex, N. J.232,291Albany, N. Y.226,564Madison, Ala.225,168Greenwood, S. C.217,744Pickens, S. C.211,320Bristol, R. I.210,488Hampshire, Mass.198,792York, S. C.198,404Fulton, Ga.198,016Aiken, S. C.193,989Laurens, S. C.193,312Richmond, Ga.192,914Rockingham, N. C.191,810Durham, N. C.172,532Newberry, S. C.168,040Chambers, Ala.164,000Cherokee, S. C.163,820Kennebec, Me.163,815Alamance, N. C.153,176Knox, Tenn.152,100Lancaster, S. C.151,768Richmond, N. C.149,748Chester, S. C.146,692Stanley, N. C.146,000Rutherford, N. C.143,400Calhoun, Ala.138,048Troup, Ga.136,204Floyd, Ga.126,264Cleveland, N. C.125,182Cumberland, Me.124,392Spalding, Ga.121,252Talladega, Ala.115,448Philadelphia, Pa.114,547Merrimack, N. H.113,316Davidson, N. C.110,564Baltimore City.106,008Halifax, N. C.104,116Hall, Ga.102,588
The wealth of the world—at least up to the time of the Great War—was constantly increasing and while there is little likelihood that the demand for the coarser grades of goods will fall off, the need for finer stuffs, not only in the United States, but abroad, is constantly growing. The greatest development of the South is probably still to come.
The locations of the world’s cotton markets have been dictated by the location of the growing fields and the manufacturing centers. Thus we find that the great raw cotton markets of the United States are in New York and New Orleans. In Europe they are at Liverpool, Bremen and Havre. Because of conditions imposed by the German government, the Bremen market is largely dependent upon New York and Liverpool. The other great world market is that of Alexandria, which, although it handles but a comparatively small part of the world’s crop, is important on account of the quality of the staple which makes up the Egyptian bale.
The two chief American markets, New York and New Orleans, are sharply differentiated. The New Orleans market is a true trader’s market. The great bulk of the sales made on the New Orleans floor are bona-fide sales, in which cotton actually changes hands. The New York market on the other hand is a merchants’ and manufacturers’ market, in which business transactions are protected against loss by the purchase or sale of "futures", though, of course, there is always a large amount of speculating. Delivery is rarely demanded. The function of the exchange, therefore, is largely that of insurance. The intricacies of this market will be discussed later.CHAPTER IIIThe Raw Cotton Market
BECAUSE of the ramifications of the cotton industry, the cotton itself, on its devious way from planter to consumer, is successively the concern of a series of individuals and corporations. The immense value of the product, the expense of growing, handling, manufacturing, and selling it all mean that great quantities of capital are utilized in bringing it at last to its final consumer. At any stage of the process, cotton represents no inconsiderable part of the nation’s wealth, and to expedite its journey, merchandising and financial methods of a highly specialized technique have been developed. There are two very clearly marked stages in this process. The first has to do with the raw cotton, as it goes from planter to mill. The second has to do with the journey from mill to consumer. The first is usually called the Raw Cotton Market, and the second the Cloth Market.
The planter begins his work early in the spring. His crop is dependent upon his ability to secure and pay for the labor to work it, for the tools and machinery which are used, and his own expenses. Small planters are rarely sufficiently in funds to enable them to go through the growing season without financial assistance. They must borrow money, and they usually borrow it with the growing crop as a basis.The Local GrowerAnd the Charge Account
They may borrow from the country merchant in the town near which their plantations are located. Credit here is usually furnished through the "charge account" system, whereby the merchant supplies the planter’s wants for the growing season, even to the extent of giving credit to his farm hands. Tenant farmers live almost entirely on credit furnished by the store-keepers of the vicinity. When the picking season begins, in July, August, or September, according to the region concerned, the merchant, in lieu of money, may take the cotton as it comes from the gins, crediting the grower thereof at the market price. The cotton thus accumulated is sold to local buyers, or, occasionally, to shippers or exporters. In the case of the larger plantations, or groups of plantations operated by syndicates or corporations, the cotton is frequently shipped direct to the mill or, more often, to a warehouse. The larger producers, instead of getting their credit from the local stores, as their tenant farmers do, are financed either by their banks, or by their buyers, who in turn are financed by their bankers.The Street BuyersOf Texas Towns
In some districts, particularly in Texas, there is the small or local buyer, usually called a "street buyer," who operates in the smaller towns, buying his cotton at the gins in lots of from one to ten bales, either from the small planters, or from the country merchants. This buying gives a certain concentration to the crop, and enables the larger buyers to deal in lots of comparatively uniform quality from certain regions, the general type of whose product is known.18 Street buyer in a Southern town
Cotton bought from the planters or from the country merchants is almost invariably paid for in cash.
Cotton is frequently sold at the compress point, rather than at the gin, this course being pursued in the case of large producers, or when the original buyer is a mere local operator. One of the most important operations, commercially as well as industrially, is the grading of cotton, which takes place as a rule at the compress point under the supervision of the buyer, who employs experts for this purpose. Cotton mills as a rule operate on certain specified grades of cotton, and any deviation from this grade means either a readjustment of machinery or disgruntled and dissatisfied employes, or, perhaps, an inability to fill an order for cloth of certain types. The manufacturer will usually refuse to accept any grades save those he has specifically commissioned the buyer to obtain for him. The actual grades, and the terms describing them have been established by the United States Government, and are rigidly adhered to by the trade. Prices are established on the grade known as "middling" as a basis, and variation from this basis is taken up in the price.Standardization ofAmerican Cotton Grades
The grades, for white cotton, as established by usage and confirmed by Governmental standardization are:Middling FairStrict Low MiddlingStrict Good Low MiddlingMiddlingGood MiddlingStrict Good OrdinaryStrict MiddlingGood OrdinaryMiddling
For yellow tinged stock the grades are:Strict Good MiddlingMiddlingGood MiddlingStrict Low MiddlingStrict MiddlingLow Middling
For yellow stained and blue stained there are only three grades quoted, good middling, strict middling, and middling, the inference here being that stained cotton below the basic grade, is unsuited for most commercial purposes.
With cotton selling around thirty cents a pound, the difference between the cost per pound of middling fair, the highest market grade of white cotton, and good ordinary, the lowest market grade, may 19 amount to twelve or thirteen cents. The value of the shipment, and its use as a basis for credit, is dependent upon its proper classification.
The large cotton buyers purchase for the account of mills, for exporters, or for clients abroad. They are usually firms of strong financial standing, and as we have seen, they are bankers or factors themselves, financing growers or small buyers during the growing of the crop, and the first concentration of the cotton. But when the large movement of cotton is on, it is frequently necessary that they, like the local banks, must be financed in order that they may execute their orders, or, as is frequently the case, accept cotton sent to them on consignment. Cotton sent on consignment must be stored until a market is found for it, and in order that proper storage facilities may be supplied, the provision of suitable warehouse facilities is an important matter.Warehousing asIndustry’s Great Need
Until recently, warehousing in its relations to the textile trade, had not been developed to the extent which might have been expected in those methods which would make it of the greatest use and advantage to textile interests. By means of the facilities which could properly be afforded by warehouses, manufacturers, or merchants should be able, at times of favorable markets, to lay in large stocks of materials, and to finance them safely and easily.
Today, this need is being met in constantly increasing measure by the Independent Warehouses, Inc., affiliated with the Textile Banking Co., and having, like the latter, the support of the Guaranty Trust Company of New York, and the Liberty National Bank of New York.
Modern warehouses of approved type, with all requisite facilities, will be established by this company at various ports of entry throughout the country, as well as at the important concentration points in the cotton belt, and also in the great textile manufacturing centers.Weighing cotton on the compress platform
Thus it is seen that the cotton merchant has an important economic function to perform. His is the duty of gathering up the great aggregate of cotton, from all parts of the cotton belt, and distributing it in exactly the quantity and grade needed to the cotton manufacturers of the world. In the performance of this function, and in order that the supply of cotton may be fed out exactly as it is needed by the manufacturers, the cotton merchants have found it convenient, and even necessary to establish great common markets where they may meet and enter into the transactions with each other and the whole world which are necessary to bring the cotton into the channels of commerce and keep it moving to its multitudinous destinations. These markets are in addition to the numerous local markets where the preliminary concentration takes place, and to some extent they are subsidiary to the latter, where the cotton of the actual quantity and quality they are seeking is to be had in the first instance. Yet it is the great markets which establish the 20 prices, for it is they which are in close and immediate touch with all the other markets of the world, and it is on their floors that the merchants and brokers meet who deal in great quantities. It is their connection with the numerous sources of information which gives these great markets their importance, for it is they which register immediately and most accurately the resultant of the sum total of all the 21 economic forces which determine the price.The New York Cotton Exchange
The great cotton markets of the world are those of New York and New Orleans, in the United States; Liverpool, in England; Bremen, in Germany; Havre, in France; Alexandria, in Egypt; and Bombay, in India. There are differences between these markets which give a greater importance to some of them. Bremen, which serves a large territory, operates under governmental restrictions which make it necessary for Bremen merchants to deal in other markets as well. Havre serves chiefly the needs of France, which is not one of the large cotton consuming countries. Alexandria deals only in Egyptian cottons, and Bombay, whose dealings are confined mostly to the native staples, has neither the responsiveness nor the completeness of the remaining markets. Thus, by elimination, the three great markets of the world, wherein cotton of all kinds is dealt in, and all forms of transactions in it are common are those of New York, New Orleans, and Liverpool. To these, the cotton world looks for guidance from day to day. The prices established on their several floors are the prices of the world.Cotton train going from gin to compress
The Liverpool Exchange, under different names, has existed since 1841, having taken approximately its present form in 1870, in the attempts to stabilize conditions after the great speculative period which resulted from the American Civil War. The New York and New Orleans Exchanges were both organized the following year. The uniformity of rules and practices in the trade which resulted from the establishment of the exchanges have been of inestimable benefit to the industry and to the world, and this despite occasional abuses, which have usually been corrected as methods for correction have been evolved.Spot Markets and ThoseWhich Deal in "Futures"
The New Orleans Cotton Market, and those of lesser cities, are largely spot markets, that is, the dealings which takes place in the Exchanges at those points involve the actual transferring of cotton which is on hand, or, at least, contracted for. The New York market deals preponderantly 22 in what are known as contracts for future delivery, or, in the language of the Exchange, "futures." The Liverpool Cotton Market is both a great "spot" cotton market, and a great "futures" market. The striking thing about these "futures" contracts is that but few of them are fulfilled by actual delivery.
The question then arises, what function is fulfilled by the New York Exchange that it should have such an important place in the cotton market? To the uninitiated the speculative features of the market have often served to condemn it, and at times of speculative fever, or of manipulation such as has occurred on one or two occasions, there has been public agitation calling for legislation against dealing in futures. Yet the New York Exchange performs a very definite and valuable service, and its trading methods have served to stabilize the whole industry, and to remove from it much of that very speculation which is frequently charged against the Exchange itself.
The justification of the Exchange is found in the fact that the futures contracts common on its floor afford the cotton merchant and manufacturer a chance to insure themselves against losses occasioned by fluctuations in the market. The method by which this is done is called hedging.Why the MerchantMust Hedge His Sales
For the cotton merchant, the situation as it develops is approximately this: buying, as he must, all grades and quantities of cotton, he may have an immediate market with the spinners whom he serves for only certain of these grades, and thus may have left on his hands a large supply of cotton of other grades which came to him in his purchases which he has no call for at the time. These "overs" are subject to the risk of a decline in value unless the merchant can find some way to protect himself. Nor is this risk the only one run by the cotton merchant. The spinners frequently contract for months ahead for the output of their mills, and it is part of the merchant’s task to see that the cotton is available at a contract price when the spinners are in need of it. Such contracts for future deliveries are not only common but customary. If it were impossible for the spinner to make such contracts, it would, of course, be impossible for the weaver to make future contracts for the delivery of cloth. Such a condition unsettling the distributing markets, would be intolerable. Hence, the necessity of future contracts between merchants and spinners. The situation would otherwise be a very difficult one for the merchant whose supply of cotton, and the price he must pay for it, are subject to the vagaries of nature, which may grant a bountiful crop one year, and a short and inferior one the next, with consequent fluctuations in price sufficient not alone to wipe out his profit but his capital as well.The Hedge As aCredit Transaction
Hedging, as has been said, affords the protection, against serious loss which these varying conditions make probable.
"It may almost be said," observes Arthur R. Marsh, former President of the New York Cotton Exchange, "that as the main business of banks today is not dealing in money, but in credits, so the main business of the cotton exchanges is now in credit transactions in cotton, toward which the actual cotton ’on the spot’ stands in much the same relation as the money in the banks to the sum total of their transactions in credit. It serves as a reserve at once for the satisfaction of unliquidated credit balances and for the maintenance of sound credit values in all the credit operations."
Elsewhere, Mr. Marsh describes the hedging process in these words: "A hedge 23 is the purchase or sale of contracts for one hundred or more bales of cotton for future delivery, made not for the purpose of receiving or delivering the actual cotton, but as an insurance against fluctuations in the market that might unfavorably affect other ventures in which the buyer or seller of the hedge is actually engaged."The floor of the New York Cotton ExchangeHow Merchants SecureProtection by Hedging
The cotton merchant, in making a hedge, would proceed in this fashion. Having made an actual sale of cotton to a spinner for future delivery, the price being fixed according to current quotations in New York for deliveries to be made in the month specified in the contract, he would buy futures for a corresponding amount of cotton on the New York Cotton Exchange.
If the price of cotton should have advanced when the time for the delivery of the actual cotton comes, he will be able to sell his futures contract at a higher price, thus offsetting the loss sustained upon the deal in actual cotton. Or, if he prefers, he may hold the "futures" contract until its maturity and sell it at the then prevailing figure. The first course would be the customary one for a bona-fide merchant, whose sole concern is protecting himself against loss by fluctuations in price.
If, on the other hand, cotton should fall before the merchant bought to fulfill his actual contract, he would make a profit upon his sales to the spinner. He would, however, suffer a loss upon his futures contract, for the seller would be able to purchase the cotton to fulfill the contract at a lower point than the contract called for, and would consequently be able to deliver to the merchant who made the hedge, cotton which the latter would be forced to accept at a price higher than the then prevailing one, and thus again 24 the profit and loss would balance each other. The usual custom is, not for the merchant to accept delivery, but to pay over to the seller of the futures contract the difference between the contract price and that prevailing. This would be just the difference between his own purchasing and selling price in his actual dealing with the spinner, and so would eliminate the profit, due to change in price, made in that transaction. Thus, by the hedging process, the merchant loses a possible profit on a falling market, but at the same time fails to suffer a loss when the market is against him.Hedging as PracticedBy Cotton Manufacturers
The manufacturer’s hedging is necessarily somewhat different in practice, though the same in principle. If he accepts orders for cloth requiring more cotton than is being held in his warehouse, he may buy futures contracts to the amount of the additional cotton he will need. Then in the event that his actual purchase of cotton may be at a figure which would tend to reduce or eliminate his profits on the sale of the cloth, already fixed by contract, he may sell his futures contract at a corresponding profit, thereby preventing loss. Should the price of cotton fall in the interim, his profit on the sale of the cloth will be larger, but the settlement of his futures contract will be expensive to the same extent. Thus he sacrifices the chance of a greater possible profit in order to be insured against loss.Compress bales bound for New Orleans
It is probably more common for the cotton merchant to hedge than for the manufacturer to adopt that proceeding. The manufacturer, as a rule, has been accustomed to buy his cotton during the buying season, that is, in October, November, December, and January, and he makes his arrangements with his selling agents on the basis of the price paid, trusting to his own judgment, and the 25 comparatively small fluctuations in the price of cloth in normal times, to protect him against loss. It is usually believed that the Southern mills, being newer, and frequently of a different financial standing, have found it more desirable to have recourse to this form of insurance than their older competitors in the North. Then, too, the rapid development of the cotton warehousing system has made it less necessary for the manufacturers to tie their money up in great quantities of cotton, as they can buy when the market appears favorable.Protection for MillsRunning for Stock
A very important point, however, and one which all manufacturers would do well to consider carefully is the protection which a "futures" market gives to a manufacturer making plain goods for stock, particularly on a falling raw material market, which, of course, would also mean a falling goods market. To stop the mill because values were falling would be impossible without utter disorganization, and its attendant heavy loss, while to keep on manufacturing stock goods with a certainty that they would be worth less each succeeding month is a disheartening prospect for the mill.
If, however, the manufacturer sells "futures" for the succeeding months to the extent of the cotton which he would require each month to manufacture the goods, he can run his machinery as usual and have a perfectly free mind, as he has safeguarded himself against any loss due to a falling value of the raw material. Suppose, for instance, the cotton market fell off, say one cent a pound each month, with a corresponding fall in the value of the woven goods. In such an event, the manufacturer could, as each month arrived, buy a contract for an amount corresponding to what he had sold, and at a proportionately
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