divergence being especially pronounced in the latter half of that month. In January it returned to a much narrower margin from the solid black line. The important thing to notice is that this divergence of the red line occurred simultaneously with a similar divergence of the dotted black line; that is, simultaneously with the abnormal widening of the discount of the future price. This is more clearly brought out by reference to the margin curves at the base of the chart, where it will be seen that both margins increased at almost identically the same time. Taken in connection with previous comparisons, this adds further evidence to confirm the conclusion already reached that such divergence of the interior price, indicated on the chart by the red line, is directly attributable to the increase in the discount of the future price, which is indicated on the chart by the dotted line.

Except for the divergence of the interior price from the spot price in December, however, the margin between these prices, while wide, was much more constant than in the season 1906-7. This will be apparent at once by comparison of chart 8 with chart 4.

This discussion, therefore, tends to show that it is not so much the amount of the discount of the future price as the amount of the fluctuation in that discount which affects the cotton producer. If the discount of the future price were always constant at, say, 100 points under the spot price, the producer might receive substantially the same price for his cotton as if this discount were the actual normal of about 25 points. But when pronounced changes in this discount occur, it is apparent from this discussion that the producer (and, as shown elsewhere, the cotton merchant as well) is placed at serious disadvantage.

The movement of limits in 1907-8 appears at first sight to be somewhat inconsistent with that shown for 1906-7, in that the limits "on were larger at a time when the discount of the future price was narrow, relatively speaking, than they were when the discount was somewhat wider. This does not, however, conflict with the statement just made that an abnormal discount tends to pull down the producers' price. The fact that the limits "on" were wide in the early part of the season, when the discount of the future price, taking this season by itself, was considerably narrower than it later became, is partly explained by the fact that during the period from November, 1906, until the revision meeting in the early part of September, 1907, the discount of the New York future price had been extremely abnormal, ranging for a large portion of this period at from 150 to 200 points. This may be seen from Table 28, on page 227. Merchants and producers had therefore become accustomed to an unusually wide discount, and the readjustment of the producers' price to offset such

a discount was fairly complete." In November the discount narrowed, and the net limits "on" also narrowed, thus maintaining a fairly constant margin between the spot price and the producers' price. The renewed divergence of the future price from the spot price in December, however, resulted in a decided increase in this margin between the producers' price and the spot price. This suggests that, despite the experience of the preceding season, producers were at a great disadvantage in interpreting this increase in the discount of the future price and were unable to tell whether this was of a permanent or a temporary character. Under these circumstances, the discount, as in the case of the preceding season, worked to their disadvantage. These figures for 1907-8 therefore substantiate the conclusions reached from a study of the comparisons for 1906-7.

Section 7. Comparison of buying limits of cotton merchants with discount of New Orleans future price, 1907-8.

CHANGES IN LIMITS OF A FIRM OF NEW ORLEANS MERCHANTS.As previously stated, during a part of the season 1907-8 the New Orleans future price was also at an unusual discount. In Table 12 there is given a comparison of the limits of a New Orleans firm of cotton merchants using the New Orleans future market as a basis for their purchases of cotton in this season, with the discount of the New Orleans future price, this table really being a continuation of Table 6, on page 76. The limits of these merchants, it will be recalled, are for cotton f. o. b. ship's, side at New Orleans, and include the charges necessary for such delivery from the point of purchase. From these actual limits a deduction of 50 points has been made, as in Table 6, in order to facilitate the comparison.

TABLE 12.-COMPARISON OF LIMITS USED BY A COTTON FIRM IN NEW ORLEANS IN PURCHASES OF MIDDLING COTTON AT INTERIOR POINTS WITH DISCOUNT OF THE FUTURE PRICE IN THE NEW ORLEANS MARKET ON DATES OF CHANGE IN LIMITS, OCTOBER 5, 1907, TO MARCH 27, 1908.

a By reference to chart 15, opposite page 136, it will be seen that early in September, 1907—that is, just at the beginning of the buying season-a very wide discount of the future price was accompanied by a wide margin between the interior price and the spot price at central markets. This, however, was speedily corrected.

First quotation.

TABLE 12.-COMPARISON OF LIMITS USED BY A COTTON FIRM IN NEW ORLEANS IN PURCHASES OF MIDDLING COTTON AT INTERIOR POINTS WITH DISCOUNT OF THE FUTURE PRICE IN THE NEW ORLEANS MARKET ON DATES OF CHANGE IN LIMITS, OCTOBER 5, 1907, TO MARCH 27, 1908-Continued.

Taking the table in its entirety, the counterbalancing movement of the limits is apparent. Thus the discount of the future price increased from an average of around 50 points early in the season to an average of about 75 points in the latter part of February. During this interval the net limits rose from about "even" to 25 points on, these comparisons being based on rough averages and not on the first and last dates given in the table.

While, however, the table, when read thus broadly, shows an offsetting movement of limits almost sufficient to counterbalance the increase in the discount of the future price, these comparisons, if carefully studied, show that this readjustment was not made with sufficient promptness to prevent the occasional increase in the discount from depressing the producer's price. This may be seen from a comparison of the figures given in the last column of the table, which show that the margin between the producer's price and the New Orleans spot price as a rule widened out perceptibly at those times when the discount of the future price was greatest.

This influence of the discount is best seen from chart 9, opposite this page Thus in October, when the discount of the future price was comparatively wide, the red line (which represents the producer's price) was at a wide margin from the solid black line (the New Orleans spot price). Again in February, when the discount was again wide, the red line, although remaining above the dotted black line, nevertheless clearly was pulled down somewhat by the depression of the latter. As a matter of fact, this depressing tendency of the future price can not be shown to advantage in this chart, since the most abnormal discount in the New Orleans market occurred later in the season, after this firm of merchants had ceased to put out buying limits. It is, however, suggestive that when in the latter part of March the future price declined rather abruptly from the spot price, it pulled the producer's price down with it. This is evident from the fact that an increase at this time in the margin between the solid black line and the dotted black line was accompanied by an increase in the margin between the solid black line and the red line. The chart clearly shows a distinct relationship between the dotted black line and the red line.

Owing to the frequency with which limits were changed by these New Orleans merchants in this season, it is unnecessary to present a daily comparison, as was done for the preceding season.

It should be noted that there is no such divergence between the indicated producers' price and the New Orleans spot price in December, 1907, as suggested by the comparison for the New York market. This is partly due to the fact that the squeeze in the New York market in December, 1907, which forced up the New York spot price very sharply, was not felt to the same extent in New Orleans. Consequently, the New Orleans spot price was at an unusually wide margin from the New York spot price. When this fact is borne in mind, it will be seen that the movement of the ultimate price to the producer was about the same in both cases, as would, of course, be expected.

CHANGES IN LIMITS OF A FIRM OF ALABAMA MERCHANTS.-A somewhat more satisfactory comparison for the New Orleans market is presented in Table 13, which shows the limits of the firm of Alabama merchants whose limits for the season of 1906-7 have already been presented in Table 8, on page 83.

THE NORRIS PETERS CO., WASHINGTON, D. C