be readily seen that cotton carried over a period of 2 or 3 years would involved from 10 to 15 bales of hedging transactions for each one bale of spot cotton so carried.

I wish also to reiterate that in placing our hedges we have consistently attempted to place same in the best market and the best month, placing buying hedges in that market and that month which at the moment appeared to be the cheapest and placing selling hedges in those positions which at the time seemed to be the dearest. Our operations have, since the adoption of southern delivery in 1930, at all times tended to maintain or restore normal parities between months and between markets and not to distort such parities. Under southern delivery, neither our operations nor those of any other cotton merchant maintaining a balanced position on the market can possibly make parities between months or between markets. Parities between months and between markets are made by the operation of the law of supply and demand and other economic factors surrounding the situation and not otherwise. If we or anyone else judge such conditions incorrectly nothing can save us from a loss and the bigger the interest placed as a result of incorrect analysis of the situation, the more certain and heavy the loss.

Finally, I wish respectfully to call attention to the fact that the beginnings of this present investigation are to be found in a conference called by Senator Smith and held under his auspices in Washington on January 19, 1934. At that conference, which was attended by 25 or 30 people interested in the cotton business in the South and in New York, a committee was appointed to carefully consider the matters discussed and report back to Senator Smith. In accordance with Senator Smith's suggestion, this committee was divided into two equal groups, one opposing Southern delivery and favoring certain proposals which had been made at the conference and the other favoring southern delivery and opposing such proposals.

Each group consisted of five members. Mr. Robert Harriss was a member of the group opposing southern delivery and favoring certain proposals made at the conference and I was a member of the other group. Since that time the question of Southern delivery and various proposals regarding changes in the contract have been the source of continual agitation and discussion on the exchange, resulting about a year ago in the appointment by the president of the exchange of a committee to study and report.

This exchange committee made two reports, a majority and a minority report, the latter signed by Messrs. Robert M. Harriss and Thomas J. Beauchamp. These reports have already been referred to by Mr. Wyllie in his examination of me.

Following the issuance and submission of these reports to Senator Smith, a general meeting of the members of the exchange was called and held on March 12, 1935, to consider these matters. At this meeting a letter was read from Senator Smith acknowledging receipt. of the two reports and indicating his insistence that the changes considered by the committee, rejected by the majority but advocated and approved by the minority, be adopted by April 3, 1935.

With this situation in view, and believing an impartial investigation is necessary, I again respect fully renew my request to the com

mittee that the records of the firm of Harris & Vose, as well as the records of their spot-cotton firm, Frierson & Co., be brought here and placed before the committee in as great detail as have those of my firm from 1928-29 up to and including July 31, 1935. There should be included the market position and straddles of these two firms and the partners in same and their financial statements together with a statement of the amounts received by them throughout this whole period as commissions on Government futures.

(Whereupon, at 12:20 p. m., the committee adjourned until 10:30 a. m., Wednesday, Mar. 11, 1936.)

TO INVESTIGATE THE CAUSES OF THE DECLINE OF

COTTON PRICES

WEDNESDAY, MARCH 11, 1936

UNITED STATES SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D. C.

The committee met, pursuant to adjournment, in the committee room, 324 Senate Office Building, at 10:30 a. m., Senator Theodore G. Bilbo presiding.

Senator BILBO. The committee will come to order. We have a quorum arranged for. Mr. Wyllie, you may proceed with the examination.

Mr. WYLLIE. The next witness I will call will be Mr. McFadden. Mr. Chairman, before proceeding with Mr. McFadden, I have a letter here from counsel for the New York Cotton Exchange and I would like to read this letter and also have it incorporated in the record. It is dated, Washington, D. C., March 10, 1936.

To the Chairman and Members of the Committee on Agriculture and Forestry of the United States Senate.

GENTLEMEN: The New York Cotton Exchange, as a national institution engaged in rendering an indispensable service to the marketing each year of the cotton crop of the United States, feels that it should not be unmindful of the hearings that are now being conducted by your committee; and that said exchange should cooperate in every respect with your committee as you may wish.

Accordingly the board of managers of the New York Cotton Exchange has authorized its legislative committee to volunteer to appear before you, to explain the operations on the exchange, the rules and regulations governing the same, the reasons and wherefores thereof and to express opinions if so desired. Moreover the New York Cotton Exchange will endeavor to have members to come before you as witnesses if you deem that their views and conclusions may be helpful. The New York Cotton Exchange will also render such other and further assistance that may be within its power when called upon by your committee. Said exchange, therefore, respectfully requests permission that its legislative committee, through its representatives, may be heard. Yours very truly,

PHELAN BEALE, Counsel for New York Cotton Exchange.

I am sure that this committee is very gratified in receiving a letter of this character and I would like to have it in the record. Senator BILBO. Mr. McFadden, you have not been sworn, have you? Mr. MCFADDEN. No, sir.

(Mr. John H. McFadden, Jr., was thereupon sworn.)

TESTIMONY OF JOHN H. McFADDEN, JR., OF GEO. H. McFADDEN & BRO., COTTON MERCHANTS OF NEW YORK AND PHILADELPHIA

Mr. WYLLIE. Mr. McFadden, I will ask you to give the place and date of your birth and then to give us a brief history of your connection with the cotton business.

Mr. MCFADDEN. I was born in Liverpool, England, April 15, 1890. When I graduated from college in 1913, I went into my father's office in Liverpool until the war broke out in 1914. I then went to the war and was not demobilized until 1919 when I returned to this country, and went into our Philadelphia office until 1924 at which time I went to New York. I have been in New York ever since. As far as the firm is concerned, my grandfather started in the cotton business some time prior to 1860. He died in 1865Senator BILBO. That was in Liverpool that he started?

Mr. MCFADDEN. No, sir; in Memphis. He died in 1865 and a firm was started by his eldest son, Geo. H. McFadden.

Mr. WYLLIE. From whom the present firm takes its name?

Mr. MCFADDEN. That is correct. The present firm of Geo. H. McFadden & Bro. was started in 1872 when my father joined my uncle. We have been operating under that name ever since.

Mr. WYLLIE. You are not the senior member of that firm, are you not?

Mr. MCFADDEN. I am one of the senior members.

Mr. WYLLIE. Suppose you give the names of your partners in this firm.

Mr. MCFADDEN. My brother, Phillip G. McFadden, George S. Patterson, Edward Browning, Jr., and J. W. Geary.

Mr. WYLLIE. You stated that your firm operates offices in New York and Philadelphia. Have you offices at any other points? If so please name them.

Mr. MCFADDEN. We have offices all through the South, New England, and we have selling agencies and offices throughout the Far East and in Europe.

Mr. WYLLIE. Your firm is engaged in both what is known as the futures cotton business and also the spot cotton business, is it not? Mr. MCFADDEN. Primarily the spot cotton business. The future commission business, if that is what you mean, is a very minor adjunct to our spot cotton business.

Mr. WYLLIE. Now, what physical properties do you own in connection with your cotton business, such as warehouses and so forth? Mr. MCFADDEN. The Southern Compress & Warehouse Co., Galveston.

Mr. WYLLIE. With respect to your warehouses, give us the approximate number of bales which can be stored in each one of them.

Mr. MCFADDEN, A maximum of 95,000 bales in the Southern Compress. The turning basin in Houston, with a maximum capacity of 54,500 bales: the Prospect Warehouse, New Bedford-that is leased. Do you wish those we have leased?

Mr. WYLLIE. If they are under your control.

Mr. MCFADDEN. It has 10,000 bales capacity. The Barkley Compress, in New Orleans, 56,000 bales; Tri-State Compress, Memphis, that is partly owned, 80,000 bales; Augusta Warehouse Co., Augusta,

Ga., 5,000 bales; North Georgia Warehouse, with a total approximately of 25,000 bales.

Mr. WYLLIE. Where is that located?

Mr. MCFADDEN. There is one at Norlina, N. C., another at Fayetteville, N. C., another at Greenville, S. C., another at Clio, S. C., and one at Atlanta, Ga. Continuing, Tri-City Warehouse, Attalla, Ala., 8.000 bales; Valley Bonded Warehouse, Decatur, Ala., 1,600 bales. Mr. WYLLIE. What do the capacity figures total which you have given or have you the total?

Mr. MCFADDEN. 325,600 bales.

Mr. WYLLIE. In connection with these warehouses, you also operate cotton compresses, do you not?

Mr. MCFADDEN. Yes, Mr. Wyllie.

Mr. WYLLIE. Do you operate any gins?
Mr. MCFADDEN. No.

Mr. WYLLIE. Any cottonseed-oil mills?
Mr. MCFADDEN. No.

Mr. WYLLIE. Any other physical properties other than your warehouses?

Mr. MCFADDEN. No.

Mr. WYLLIE. Now, Mr. McFadden, what is your official connection with the New York Cotton Exchange?

Mr. MCFADDEN. I am president of the New York Cotton Exchange. Mr. WYLLIE. And of course a member of the board of managers? Mr. MCFADDEN. Yes.

Mr. WYLLIE. Have you with you, Mr. McFadden, the figures showing the total amount of bales of American growth which your firm has bought each year during the past six years?

Mr. MCFADDEN. I have.

Mr. WYLLIE. Will you please read them into the record?

Mr. MCFADDEN. In the season 1928-29, we sold 1,224,000 bales and bought 1,256,000 bales, being 8.25 percent of the world's consumption. In the season 1929-30, we sold 1,007,000 bales and bought 1,048,000 bales, representing 8.05 percent of the world's consumption.

Mr. WYLLIE. Your percentages relate to purchases, do they not? Mr. MCFADDEN. Sales. In the season 1930-31, we bought 953,000 bales, representing 8.60 percent of the world's consumption, and sold 881,000 bales. In the season 1931-32, we sold 837,234 bales and bought 986,185 bales, representing 7.88 percent of the world's consumption. In the season 1932-33, we sold 955,000 bales and bought 1.064,000 bales, representing 7.4 percent of the world's consumption. In the season 1933-34, we sold 1,063,000 bales and bought 1,236,000 bales or 9 percent of the world's consumption. In the season 1934-35, we sold 657,000 bales and bought 685,000 bales or 6.10 percent of the world's consumption.

Mr. WYLLIE. Those figures are with respect to the American grown cotton?

Mr. MCFADDEN. Yes, sir. Making a summary of that, from the season of 1928-29 to 1934-35, inclusive, we merchandised 6,624,234 bales of American cotton, representing 7.3 percent of the world's consumption of American cotton.

Mr. WYLLIE. Have you 'the same figures with respect to your handling of foreign growth cotton?