For a few years after the formation of these associations in 1921 price trends were upward. While these upward trends continued the results of the operation of seasonal pools in terms of sales and prices were, for the most part, satisfactory to growers. When price trends were downward the results of seasonal pool operations were usually unfavorable. Price returns to farmers during the last 2 years of the original "ironclad" contracts were unsatisfactory. Membership declined and deliveries by members fell off precipitately. To meet the situation the Staple Cotton Growers Association established in 1925 an "optional pool" which allowed the grower the privilege of fixing the price on his cotton according to his own choice. The Tennessee Cotton Growers Association introduced a new contract offering its growers the "daily option" pool as well as the seasonal pool. The second contract offered to members by all the associations, except the Georgia Cotton Growers Cooperative Association, included both long- and short-time pools. The Georgia organization operated only 1 year under its second "iron-clad" contract and then re-signed its members on the new form.

Most of the new contracts which became effective during the 192627 and 1927-28 seasons also included an annual withdrawal privilege. During the first year or two of the new contracts, the statistical service of the American Cotton Growers Exchange, which had been in the process of development, attracted the attention of association officials. They became definitely interested in methods of price forecasting as a means of establishing what they thought to be sounder merchandising and price-fixation policies. Hathcock 16 sums up the experiences of the member associations of the American Cotton Growers Exchange with price forecasting as follows:

The policies arrived at by the exchange as a result of its statistical studies, proved eminently successful during the season 1927-28. The success experienced in this year caused. the associations which had not yet fallen in line to accept the work of the exchange as a guide in 1928-29. In the latter year all of the cotton cooperatives followed to a considerable extent the policies outlined by the research department of the American Cotton Growers Exchange. The results of this experiment are doubtless known to all of you. The price-forecasting formula simply did not work, and when the Federal Farm Board was organized in July 1929, the cotton cooperatives were still holding their 1928 receipts waiting for prices to rise to the predicted level.

State, regional, and the national associations have made extensive changes in their operating methods and policies during the few years

16 See p. 253 of reference cited in footnote 12.

of their existence. The "iron-clad" contracts used in the early years have disappeared. Members have more freedom in the matter of making deliveries of their cotton. They also enjoy several options as to the time of sale, and as to whether or not they shall participate in pooling operations.

The associations' costs were excessive in early years and their services not readily available to members. This caused a decline in interest on the part of the growers which awakened leaders to the necessity for a revision in the organization set-up. Since that time operating costs have been steadily reduced and efficiencies and economies instituted which now place the cooperatives on a par with the more efficient cotton firms.

During this same period, farmers learned much about cotton and cotton-marketing practices through the educational campaigns put on by the associations. Quality received considerable emphasis and payments for cotton on the basis of grade and staple made cotton growers quality-conscious. This consciousness led to staple improvement and improvement in handling and ginning practices. The association's establishment of interior classing offices in the local markets during the 1930-31 season marked the beginning of an attempt to bring the association's services closer to the farmer. This service furnished independent competition in these markets and tended to cut margins taken by local buyers, as well as force them to recognize quality. Under the revised plan, prices advanced to growers for their cotton at time of delivery more nearly approached market prices. The plan also called for the payment of patronage dividends if the cotton was merchandised to advantage. The direct and indirect benefits of cooperative cotton marketing to southern cotton farmers are so great as to make their measurement difficult.

Cooperative leaders profited materially by the experiences of these organizations, and on the basis of these experiences apparently reached the following conclusions: (1) Opportunities for monopoly control of cotton prices through voluntary cooperative associations have very distinct limitations; (2) irregular price fluctuations make it difficult to obtain satisfactory results to growers by means of a sales policy based on the theory of spreading the sale of the crop throughout the year; (3) delays in making final settlement on cotton placed in seasonal pools create dissatisfaction among growers and the returns on cotton placed in these pools are unsatisfactory during periods of declining prices; (4) sales options must eliminate, insofar as possible, risks of price fluctuation; (5) economic conditions necessitate payments to members of a high percentage of the value of cotton at time of delivery; (6) efficient service is more effective in maintaining deliveries than legally binding contracts; (7) the errors in price forecasting warrant caution in its use in formulating sales

policies; (8) members judge the association by results rather than promises; (9) low operating costs and efficient merchandising practices offer the greatest possibilities for savings; (10) insofar as possible association services should be made available to the grower in his local community.

NATIONAL COTTON SALES ORGANIZATIONS

W

THE AMERICAN COTTON GROWERS EXCHANGE

WHEN the earlier State cooperative cotton-marketing associations were formed in 1921, many of the leaders felt that it would be better for their organizations to proceed along State or regional lines, and that any necessary overhead machinery for marketing cotton could be worked out later. However, the officers of several associations, particularly those interested in export markets, believed that an overhead organization would be of great assistance in solving problems which would probably arise as soon as the association began to operate. Plans were made accordingly, the first proposal being that the overhead organization should have considerable power and supervision over its member associations. The plan finally adopted, however, was for a rather loose federation for the purpose of handling certain specific matters for the affiliated groups. As organization proceeded, it became obvious that a world-wide selling organization would be too expensive for any single association to operate and that many of the associations would compete directly with each other in the sale of their cotton unless some machinery were perfected to prevent such competition. On the other hand, if an overhead organization carried the responsibility for avoiding duplications, many conflicts of interest could be eliminated.

The overhead organization, known as the American Cotton Growers Exchange, was set up in 1921 by the Texas, Oklahoma, and Arizona associations as a nonstock, unincorporated association, and continued as such until it was replaced by the American Cotton Cooperative Association in 1930. The agreement subscribed to by its affiliates was the only official document authorizing its existence and explaining its relationship to its member associations. The control of the exchange was in the hands of a board of trustees, consisting of three representatives from each association; the maintenance cost was prorated among the member associations on the basis of gross sales proceeds, regardless of whether these sales were made through the exchange or through the sales offices of the member associations. At the outset, the principal business of the exchange was to render assistance to southeastern cooperatives in the handling of their organization campaigns. As the exchange developed, the following departments were added from time to time: (1) Executive and ad

ministrative; (2) office management; (3) grading and standardization; (4) transportation; (5) insurance; (6) warehousing; (7) finance; (8) statistical; (9) legal; (10) field service; (11) sales department for short- and long-staple cotton.

There were two classes of membership. One class called for the sale of all cotton through the sales offices of the exchange. Under the other class sales were optional. All the State associations main

FIGURE 6.-COTTON ON DOCK READY FOR SHIPMENT ABROAD. The American Cotton Growers Exchange handled most of the export sales for its member associations and made shipments to foreign markets from all the principal southern ports.

tained sales offices. When orders were received by the exchange, they were referred to and prorated among the member associations having the required kind of cotton. The State association was not obligated to sell unless the price was considered satisfactory. The exchange first established its general sales offices at Atlanta, Ga., and other domestic sales offices at Memphis, Tenn.; Boston, New Bedford, and Fall River, Mass.; Greensboro, Charlotte, and Gastonia, N. C.; Greenville, S. C.; and New Orleans, La. Later the general offices and the general sales offices of the exchange were both moved to Memphis, Tenn. It developed a substantial export business (fig. 6) and maintained sales offices at Liverpool, Bremen, Havre, and Kobe. In addition, brokerage connections were made at Milan; Copenhagen; Vienna; Barcelona; Rotterdam and Enschede, in Holland; Winterthur, Switzerland, and Gothenberg, Sweden.

The headquarters of the exchange was located in Dallas, Tex., from July 1921 until July 1924, when it was transferred to Memphis, Tenn. In June 1928, the headquarters was returned to Dallas where it remained until February 1930. At this time the American Cotton Growers Exchange was superseded by the American Cotton Cooperative Association, with headquarters in New Orleans, La.

IN

AMERICAN COTTON COOPERATIVE ASSOCIATION

N December 1929, the directors of the State and regional associations met with representatives of various Federal and State agencies to discuss the possibilities of broadening the functions and extending the scope of the American Cotton Growers Exchange. As a result of this meeting, provisions were made for setting up an overhead organization to be known as the American Cotton Cooperative Association which would supersede the American Cotton Growers Exchange. The American Cotton Cooperative Association was incorporated January 13, 1930, under the laws of the State of Delaware, as a capital stock association with an authorized capital of $30,000,000. Only cooperative cotton marketing associations were eligible to become stockholders in this association. Permanent offices were established in New Orleans in time to handle the 1930 crop.

At the time of organization some of the important objectives of the new association as set forth in the by-laws were as follows: To provide central marketing facilities and sales services at all cotton markets for cotton and cotton by-products; to distribute and develop cottonseed for planting purposes; to acquire or construct the physical facilities for handling and marketing the cotton and cottonseed, which could not be provided through the local or regional cooperatives; to conduct educational work among farmers concerning the value of cooperative marketing and the adjustment of production to demand; to conduct a centralized financial system for the use and benefit of all member stockholders; and to lend money to member stockholders for investment in subsidiary companies which might be regarded as essential or helpful to the successful marketing of

cotton.

Eleven of the 12 large-scale State and regional cotton cooperatives in the South in 1930 were affiliated with the American Cotton Cooperative Association. The Staple Cotton Cooperative Association, of Greenwood, Miss., as has been mentioned previously, did not affiliate.

When the American Cotton Cooperative Association was organized, its principal functions were to sell and to finance the cotton received from the member associations. Later it was determined that the national organization should also perform other services incident to handling and merchandising cotton. In addition to sell