by

by

RELATION OF ARIZONA COTTON PRICES ON THE PHOENIX MARKET

TO QUALITY OF COTTON AND OTHER MAJOR FACTORS by

Walter B. Rogers

A Thesis

submitted to the faculty of the

Department of Agricultural Economics in partial fulfillment of the requirements for the degree of

MASTER OF SCIENCE in the Graduate College, University of Arizona

1953

Approved:

6/7

I

ACKNOWLEDGMENT

The author takes this opportunity to express his deepest

appreciation to Mr. James S. St. Clair who supervised and guided

the preparation and writing of this thesis.

The aid given by

the other members of the staff of the Agricultural Economics

Department has also been appreciated.

This thesis has been submitted in partial fulfillment of require­

ments for an advanced degree at the University of Arizona and is

deposited in the Library to be made available to borrowers under rules

of the Library. Brief quotations from this thesis are allowable with­

out special permission, provided that accurate acknowledgment of source

is made. Requests for permission for extended quotation from or repro­

duction of this manuscript in whole or in part may be granted by the

head of the major department or the dean of the Graduate College when in

their judgment the proposed use of the material is in the interests of

scholarship.

In all other instances, however, permission must be obtained

from the author.

SIGNED: iii

TABLE OF CONTENTS

Chapter

I. INTRODUCTION...........................................

A. Purpose and Scope of Study..........................

B. Source of Data.....................................

Page

1

1

1

1. Local Buyers...................................

2. Recapitulation Sheets..........................

3* USDA Statistical Bulletins......................

C. Method of Analysis.................................

D. Previous Research Programs..........................

E. Periodic Movements in Production and Quality of

Arizona Cotton..................................

1

2

3

3

3

1. Production.....................................

2. a. Arizona Cotton Production.................. h. National Cotton Production.................

Quality........................................ a. Grade Distribution Bi-weekly Intervals and

Annual 1951............................. b. Staple Distribution Bi-weekly Intervals and

Annual 1951............................. c. Arizona Grade Index for Several Years......

4

4

4

4

9

10 l

8

26

28

II. THE GOVERNMENT COTTON CLASSING SYSTEM...............

III. THE RELATIONSHIP BETWEEN PHOENIX AND CENTRAL MARKET

COTTON PRICES.......................................

A. Efficiency of the Phoenix Market in Reflecting

Central Market Premium and Discounts for Quality.

32

40

40 iv

Chapter

III. (Continued)

Page

B. Factors Influencing Spreads Between Local and

Central Markets.................................. 59

1. Cost of Moving Cotton............................ 59 a. Phoenix to Group B .......................... 59 b. Memphis to Group B .......................... 59

2. Other Costs..................................... 62

17. SUMMARY AND CONCLUSIONS.................................

63

V. BIBLIOGRAPHY......

VI. APPENDIX.......................................

65

66 v

LIST OF TABLES

Number Page

I. ACREAGE OF ALL COTTON IN ARIZONA AID THE UNITED

STATES, 191*0-1951 INCLUSIVE...................... 5

II. PRODUCTION OF ALL COTTON IN ARIZONA AND THE UNITED

STATES, 191*0-1951 INCLUSIVE...................... 7

III. H E L D S OF ALL COTTON IN ARIZONA AID THE UNITED

STATES, 191*0-1951 INCLUSIVE.................... . 8

IV. PERCENTAGE DISTRIBUTION OF GRADES IN ARIZONA UPLAND

V. GRADE DISTRIBUTION OF UPLAND COTTON GINNED PRIOR TO

SPECIFIED DATES, ARIZONA, AVERAGE OF CROP YEARS

1928-1951......................................... 27

VI. DISTRIBUTION IN STAPLE LENGTH OF UPLAND COTTON GINNED

PRIOR TO SPECIFIED DATE, ARIZONA, AVERAGE OF CROP

YEARS 1928-1951.......... 28

VII. GINNINGS OF ARIZONA UPLAND COTTON PRIOR TO SPECIFIED

DATE.............................................. 30

VIII. UNIVERSAL STANDARDS FOR GRADES OF AMERICAN UPLAND

COTTON............................................ 33

IX. CORRELATION BETWEEN AMERICAN UPLAND COTTON PRICES AT

X. COMPARATIVE COSTS MOVING COTTON TO GREENVILLE,

SOUTH CAROLINA, AUGUST 28, 1951.................. 62 vi

LIST OF FIGURES

Number Page

I. AVERAGE GRADE DISTRIBUTION OF UPLAND COTTON GINNED

10

II. ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

GRADING STRICT MIDDLING THROUGH SPECIFIED DATES,

ARIZONA, 1943-1951........................... 12

III. ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

GRADING MIDDLING THROUGH SPECIFIED DATES, ARIZONA,

1943-1951..........................

V. ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

GRADING LOW MIDDLING AND BELOW, THROUGH SPECIFIED

DATES, ARIZONA, 1943-1951......................... l4

IV. ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

GRADING STRICT LOW MIDDLING THROUGH SPECIFIED DATES,

ARIZONA, 1943-1951................................ 15

16

VI. ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

GRADING SPOT THROUGH SPECIFIED DATES, ARIZONA,

1943-1951.........................................

VII. AVERAGE DISTRIBUTION IN STAPLE LENGTH OF UPLAND

COTTON GINNED IN ARIZONA, 1943-1951...............

VIII. ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

31/32 INCH STAPLE LENGTH THROUGH SPECIFIED DATES,

ARIZONA, 1943-1951................................

DC. ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON 1

INCH STAPLE LENGTH THROUGH SPECIFIED DATES, ARIZONA,

1943-1951..........................................

X. ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

1 1/32 INCH STAPLE LENGTH THROUGH SPECIFIED DATES,

ARIZONA, 1943-1951........................

XI. ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

1 l/l6 INCH STAPLE LENGTH THROUGH SPECIFIED DATES,

ARIZONA, 1943-1951................................

17

19

20

21

22

24 vii

Number Page

XII. ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

1 3/32 INCH STAPLE LENGTH THROUGH SPECIFIED DATES,

ARIZONA, 19^3-1951...............

XIII. GRADE INDEX OF ARIZONA UPLAND COTTON THROUGH SPECIFIED

DATES, ARIZONA, 1943-1951.........................

25

XV. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, OCTOBER 18, 1951.............

26

XIV. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, OCTOBER 4,

1 9 5 1

.............. 42

43

XVI. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

44

XVII. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, NOVEMBER 1, 1951............. 45

XVIII. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, NOVEMBER

8

, 1951............. 46

XIX. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

4?

XX. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, NOVEMBER 21, 1951............

XXIII. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, DECEMBER 20,

1 9 5 1

............

48

XXI. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, NOVEMBER 29,

1 9 5 1

............ 49

XXII. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, DECEMBER

1 3

,

1 9 5 1

............ 50

51 viii

Number Page

XXIV. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, DECEMBER 27, 1951............ 52

XXV. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

53

XXVI. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, JANUARY 24, 1952.............

XXVII. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, FEBRUARY 7, 1952.............

54

55

XXVIII. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, FEBRUARY l4, 1952............

XXX. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, MARCH 13, 1952...............

56

XXIX. CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND

COTTON ON THE PHOENIX MARKET, AND EQUIVALENT

MEMPHIS EVALUATIONS, FEBRUARY

2 1

, I

9 5 2

............ 57

58 ix.

RELATION OF ARIZONA COTTON PRICES ON THE PHOENIX MARKET

TO QUALITY OF COTTON AND OTHER MAJOR FACTORS

CHAPTER I

INTRODUCTION

Purpose and Scope of the Study

The Phoenix cotton market is located in the approximate center of

the state of Arizona, many miles away from seaboard and Carolina mill

point markets.

This situation causes many types of allegations to arise

concerning the possibility that Arizona cotton does not receive a com­

parable price for quality and other factors that the markets nearer the

above-mentioned markets do.

The over-all goal of this study is to either

confirm or deny these assertions.

The specific purposes of this study are: (l) to study the relation­

ship of Arizona cotton prices on the Phoenix market to quality of cotton

and other major factors; (2) to determine the relationship between the

average prices in the local and central markets; (

3

) to determine causes

of difference in prices, if any, between local and central markets; and

(4) to discover the presence of any regular periodic movements which may

exist in the production, prices and quality of Arizona cotton.

Sources of Data

There were three major sources of data for this study: Gin managers

and other officials of cotton companies who acted as selling agents for

Central Arizona farmers constituted the first source of data.

These

agents made their various records of sales available so that any needed

information could be extracted. A copy of the schedule that was used in

this operation can he found in the Appendix, Table I. This recapitula­

2 tion sheet contains the following:

(1) Date of sale.

(2) Producing region.

(3) Variety of cotton.

(4) The staple length (from

1 5 /1 6

inch to 1-1/8 inch).

(5) The total number of bales of each staple.

(6) The grade of cotton.

(7) The total number of bales of each grade.

(8) The total bales of cotton.

(

9

) The New York futures market on which the price was

fixed.

(10) The number of points on or off of New York futures.

(11) The price per pound for the cotton sold.

(12) Any pertinent remarks about the cotton that was sold.

This data was gathered in connection with Southern Regional Marketing

Research Project SM-1 (Revised), Regional Marketing of Cotton, Cotton

Seed and Cottonseed Products; Sub-project Number 1; Factors Affecting

Cotton Prices in Local Markets. A second source of data was the various

bulletins that the Production Marketing Administration of the United

States Department of Agriculture makes available to anyone desiring this

information. Many types of information can be obtained from these bul­ letins of which the following are examples: The percentage of sales by

each grade and staple length, yearly production of cotton for both Arizona

and the United States, the price of cotton for each grade and staple

length, ginnings of cotton both accumulative and non-accuraulative as of

date of publication and the grade index for cotton. The United States

this operation can he found in the Appendix, Table I. This recapitula­ tion sheet contains the following:

(1) Date of sale.

(2) Producing region.

2

(3) Variety of cotton.

(4) The staple length (from

1 5 /1 6

inch to l-l/8 inch).

(5) The total number of bales of each staple.

(6) The grade of cotton.

(7) The total number of bales of each grade.

(8) The total bales of cotton.

(

9

) The New York futures market on which the price was

fixed.

(10) The number of points on or off of New York futures.

(11) The price per pound for the cotton sold.

(12) Any pertinent remarks about the cotton that was sold.

This data was gathered in connection with Southern Regional Marketing

Research Project SM-1 (Revised), Regional Marketing of Cotton, Cotton

Seed and Cottonseed Products; Sub-project Number 1; Factors Affecting

Cotton Prices in Local Markets. A second source of data was the various

bulletins that the Production Marketing Administration of the United

States Department of Agriculture makes available to anyone desiring this

information. Many types of information can be obtained from these bul­ letins of which the following are examples: The percentage of sales by

each grade and staple length, yearly production of cotton for both Arizona

and the United States, the price of cotton for each grade and staple

length, ginnings of cotton both accumulative and non-accumulative as of

date of publication and the grade index for cotton. The United States

Department of Agriculture Statistical bulletins constituted the third

source of data for this study.

Information obtained from this source

included: Cotton acreages, yields per acre, total value of cotton and cotton by-products, and the total number of bales sold each year.

3

Method of Analysis

To determine the relationship between average prices in the local

and central markets, a correlation was made using as variables weekly

Phoenix cotton prices and the equivalent central market (Memphis) prices.

Price spreads between local and central markets were examined after

adjusting both prices for costs of moving the cotton to Carolina mill

points. Finally, to discover the presence of any regular periodic move­

ments which may exist in the production, price and quality of Arizona

cotton, seasonal indices for these factors were computed.

Previous Research Programs

Several studies similar to this one were carried on in the southern

cotton-producing states a number of years ago.

No study of this type

has previously been made in the state of Arizona, although, at the pre­

sent time, there is one in progress directed by Mr. James S. St. Clair,

Assistant Agricultural Economist, University of Arizona. The Arizona

study is being carried on in conjunction with similar studies in the

southern cotton-producing areas. Cooperating states include: Alabama,

Arkansas, Georgia, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma,

South Carolina, Tennessee and Texas.

One may observe that the cooperating

states include most of the southern cotton belt.

Other studies that have been carried on in the past are as follows:

k

"Farm Prices and Quality of Missouri Cotton," Research Bulletin 233,

1936, Agricultural Experiment Station, University of Missourij "Rela­

tion of Farm Prices to Quality of Cotton," Bulletin 383? 1928, Texas

Agricultural Experiment Station; "Price-Quality Relationship in

Farmers* Cotton Markets of Texas," Bulletin 901, 193k, Texas Agricultural

Experiment Station and "Cotton Price-Quality Relationships in Local

Markets of Louisiana," Bulletin Mo. 221, 1931, Louisiana State University.

All of these are old, therefore, there is a definite need for a

more current study in this field.

Periodic Movements in Production and Quality of Arizona Cotton

Production of Arizona Cotton: To compare (trends in) Arizona

cotton production with those in the entire United States, indices of

acreage, yield and production were computed for Arizona and the United

States, respectively.

The comparison between Arizona and United States

production trends is facilitated by the use of index numbers, making

19 li

0

the base year for both areas.

Table I compares total cotton acreages in Arizona with those in

the U. S. for the years 19k0 through 195l»

Since 19h0 was used as the

base year, the index for both Arizona and the U. S. will be 100.00 for

the year 19kO. However, it can be seen that the Arizona cotton acreage

index is higher than the U.

5

. index for the years I

9

I

I, 19k2, and 19U3.

In 19kk a second period begins, one in which the U. S. cotton acreage

index ranks higher than the Arizona index.

This period lasts until the

year 19k7, in which the third and final period is entered.

This period,

19k7 through 1991, is one in which, once again the Arizona cotton acreage

index greatly outranks the U. S. index. At the end of the final period.

2

19U0

191a

1912

19h2

19hh

19U5

19 li

6

19it7

19 lt

8

19lt9

1950

1951

Ili5

15U

Ut5

226

282

386

280

5U8

TABIE I

ACREAGE OF ALL COTTON IN ARIZONA AND THE

UNITED STATES, 19UO-1951 INCLUSIVE

Harvested

Arizona

Acreage!/

(

1

,

0 0 6

)

221

255

27U

Arizona

Acreage

Index

1 0 0 .0 0

115.38

123.98

92.31

6 5 .6 1

6 9 .6 8

6 5 .6 1

1 0 2 .2 6

1 2 7 .6 0

17 k

. 66

1 2 6 .7 0

2li7.97

Harvested

Acreage]/

(

1

,

0 0 0

)

2li,871

23,130

23,302

2 1 ,9 0 0

19,990

17,558

18,251

2 1 ,6 1 1

23,26k

27,91k

18,629

27,917

U. S.

Acreage

Index

1 0 0 .0 0

93.00

93.69

88.05

80.37

7 0 .6 0

73.38

86.89

93.5k

112

.

2 k

7k. 90

112.25

1/ Statistics on Cotton and Related Data, United States Department

of Agriculture, Bureau of Agricultural Economics, Bulletin Number 99,

June, 1951.

6

it should be noted that the Arizona cotton acreage index is more than

double the U. S. index. These figures are quite significant in that

they indicate the rapid growth of the cotton industry in Arizona since

1940.

Table II compares the number of bales produced, in the form of

indices, for Arizona to that of the U. S. Again the year 1940 was used

as the base year and the index for both Arizona and the U. S. will

remain 100.00 for the year 1940. In the year 1941, Arizona cotton pro­

duction index outranked that of the U. S. However, in 1942, the U. S.

cotton bale production outranked that of Arizona. This continued until

the period 1946 through 1951, when the Arizona cotton production index,

once again, was larger than that of the U. S. Arizona production indi­

ces have climbed even more rapidly than the acreage indices of Table I

in the latter years, indicating that yields as well as acreages have

risen sharply in Arizona.

Table III compares the yield of Arizona cotton, in the form of

indices, to that of the U. S.

Once again the year 1940 was the base

year and the indices for that period are 100.00.

In the period 1941

through 1945 the U. S. yield index is greater than Arizona by a substan­

tial margin. However, in the period 1946 through 1951, the Arizona

yield index outranks the U. S. by an even greater figure than the U. S.

outranked Arizona in the first period.

These figures tend to prove the

statement, "Arizona cotton and cotton production is of a growing impor­ tance to the state of Arizona," true to an even greater extent.

The period 1940 through 1945 is a period in which U. S. cotton

acreage, cotton production and cotton yield indices generally outrank

that of Arizona. However, in the period 1946 through 1951, the Arizona

7

TABIE II

PRODUCTION OF ALL COTTON IN ARIZONA

AND TIE UNITED STATES, 19UO-1951

1910

191a

19 li

2

191)3

19Wi

1 9 k 5

19l|6

19U7

19U8

191)9

1950

1951

Arizona Bales

Produced

1 J

Running Rales

500 lb. Bales

195,000

1 8 1 ,0 0 0

1 9 3 ,0 0 0

2 3 1 ,0 0 0

1 3 6 ,0 0 0

1 1 7 ,0 0 0

1 5 8 ,0 0 0

23

U

,0 0 0

3 2 8 ,0 0 0

51)3,000

U7U,000

8 0 3 ,0 0 0

Arizona

Index

(

191)0

=

10 0

)

1 0 0 .0 0

9 2 .8 2

98.98

6 8 .2 0

69.71)

6 0 .0 0

8 1 .0 2

1 2 0 .0 0

168.87

278.1)7

214

).

20

1)22.05

u. s.

Production fZ

Running Bales

500 lb. Bales

12

,

5 66,000

10

,

000

1 2

,

8 1 7 ,0 0 0

11,1)27,000

12,230,000

9

,

0 15,000

8,61)0,000

1 1

,

8 60,000 ll),

8 7 7 ,0 0 0

16

,

1 28,000

1 0

,

012,000

15,130,000

U. S. Index

(

191)0

=

100

)

1 0 0 .0 0

85.50

1 0 2 .0 0

99.00

97.1)8

71.7L

68

.

01

)

91

).

1)6

118.39

128.35

79.68

120

.

1)0

2 / Ibid. Page $.

TABIE III

YIELDS OF ALL COTTON IN ARIZONA AND THE

UNITED STATES, 19UO-19$l INCLUSIVE

19UO

1 9 M

19U2

1 9 B

19UU

19U5

19U6

19U7

191(8

191(9

1950

1951

Arizona Lint

Yield Per Acre

Harvested 3/

(Pounds)

U23

3U(

339

308

U50

363

521

1(95

556

6?2

825

705

Arizona Yield

Index

(

191(0

=

100

)

1 0 0 .0 0

8 1 .0 6

8 0

.

1

U

7 1 .1 6

1 0 6 .3 8

8 5 .8 0

123.17

1 7 6 .0 2

131.UU

1 5 8 .8 6

195.OU

166.67

U. S. lint

Yield Per Acre

Harvested 3/

(Pounds)

U. S. Yield

Index

(

191(0

- lOo)

2

U

8 .0

2 2 7 .2

1 0 0 .0 0

9 1 .6 1

108.19

268.3

2 5 0 .6

293.8

2

U

6 .0

101.05

118.1(7

99.19

227.1

2 6 3 .2

3 0 6 .6

91.17

10 6

.

1

U

123.63

111.29

277.0

261.5

259.7

10

U

.7 2

8

3/ Ibid.

Page

5

cotton begins to rise as a major industry in Arizona.

In this period,

Arizona cotton acreage, cotton production and cotton yield indices out­ rank that of the XI. S. by substantial margins.

Quality of Arizona Cotton: It yas necessary to confine the study

of quality primarily to the two main factors of Classens’ grade and

staple, although some mention is made of other fiber measurements in a

later chapter.

Both of these factors tend to have major effects upon

prices received for cotton in any market in the United States, but as

this study indicates at a later point, the degree of recognition of these

quality factors varies at different market levels.

Grade: Table IV and Figure I compare the grade distribution for

the 1951 crop year to the average grade distribution for the period 1928

through 1951* These figures indicate that quality of cotton for the

crop year 1951* from the standpoint of grade, was lower than the average

of the years 1928 through 1951* It is difficult to isolate the effect

this lowering of grade had upon price, if any, because of the unususal

circumstances that occurred during the period 1928 through 1951*

These

occurances were the major depression of the 1930’s and World War II in

the early 19U0’s.

Figure II indicates the average seasonal movement in the propor­

tion of the Arizona Upland crop grading Strict Middling during the years

19h3-195l* The percentage of ginnings grading Strict Middling increase,

on the average, very rapidly until September 15. From this date forward,

until the end of the crop year, there is a general downward trend at all

times.

This chart is significant because it indicates that the better

grades of cotton are harvested and ginned at the beginning of the harvest'

ing season and as the season progresses, a much smaller percentage of

FIGURE I

AVERAGE GRADE DISTRIBUTION OF UPIAKD COTTON GINNED

IN ARIZONA, 1928-1951. 5/

10

GRADE

5/ Cotton Quality Report for Ginnings. Western Upland Cotton, Sept.

l5j l9l|li—March 20, 1952. United States Departnent of Agriculture, Prod­ uction Marketing Administration, Phoenix, Arizona

Grade

G M and Above

SM

M s m

IM and Below

Spot

Tinge

Gray

Below Grade

TABIE IV

PERCENTAGE DISTRIBUTION OF GRAZES IN ARIZONA UPIAND

COTTON GINNINGS, 1928-1951 AVERAGE AND 1951.

Average

Crop Tears

1928-1951

(percent)

8

.

8

?

25.55

23.12

1 1 .7 0

1951

Crop Tear

6.1*5 •

22.83

.85

.91

.67

{percent)

.27

1 2 .0 1

27.66

1 7 .8 8

1 0 .5 0

2 8 .1 7

1.03

1.90

.90

h / Cotton Quality

Bureau

o f Agricultural

Statistics. United States. IQPft-iocri .. .

culture, Washington, D,

Economics, United States Department

C* of Agri-

FIGURE II

ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

GRADING STRICT MIDDLING THROUGH SPECIFIED DATES,

ARIZONA, 191*3-1951. 6/

12

6/ Ibid. Page 10,

DATE

13 these better grades are present.

Figure III indicates the average seasonal movement in the proportion

of the Arizona Upland cotton crop grading Middling for the period 19li3-

1951.

The proportion of ginnings grading Middling, on the average, vary

little during the ginning season.

The figures also indicate that

Middling grade is the Modal grade for Arizona cotton.

Figure IV indicates the average seasonal movement in the proportion

of the Arizona Upland cotton crop grading Strict Low Middling for the

period 19lj3-195l. This graphic presentation shows that at the beginning

of the season, the percentage of Strict Low Middling cotton is very low.

From this point forward, there is a general upward trend in the proportion

of ginnings grading Strict Low Middling.

Several factors tend to cause

this small proportion of this grade at the beginning of the year compared

with a larger proportion at the end of the year.

These factors are as

follows: (l) mechanical picking, (

2

) deterioration of the cotton in the boll on the stalk because of weather influences and (

3

) rough harvesting

practices toward the end of the season.

Figure V indicates the average seasonal movement in the proportion

of the Arizona Upland cotton crop grading Low Middling and Below (Strict

Good Ordinary and Good Ordinary) for the period 19U3-1951* The proportions

of these grades are comparatively low throughout most of the season, but

there is a sharp increase of these grades at the end of the year. A very

desirable goal in producing cotton in Arizona is to keep the proportion

of these grades as low as possible because as previously stated, the

lowering in grade has a corresponding effect on prices.

Figure VI indicates the average seasonal movement in the proportion

of the Arizona Upland cotton crop which falls into the Spotted grades for

FIGURE III

ACCUMULATIVE ESRCENIAGE OF AI-ERICAN UPLAND COTTON

GRADING MEDDLING THROUGH SPECIFIED DATES,

ARIZONA, 19143-1951. 7/

Ik

7/ Ibid. Page 10

1 l

DATE

FIGURE IV

ACCUMJIATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

GRADING STRICT LOW MIDDLING THROUGH SPECIFIED DATES, ARIZONA,

19li3-195l. 8/

15

8/ Ibid." Page 10.

FIGURE V

ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

GRADING LOW MIDDLING AND BELOW THROUGH SPECIFIED DATES,

ARIZONA, £/

16

9/ Ibid. Page 10

FIGURE VI

ACCUMUIATIVE PERCENTAGE (F AMERICAN UPIAND COTTON

GRADING SPOT THROUGH SPECIFIED M I E S ,

ARIZONA, 19143-1951. ID/

17

»

10/ Ibid. Page 10,

18 was almost negligible. However, by the end of the season, this propor­ tion had shown an abrupt and sizeable increase.

The increase of this

grade can be attributed to: (l) The influences by weather, (2) the mixing of trash and staining of cotton by mechanization and (

3

) rough

harvesting practices toward the end of the season. Naturally, when this

classification becomes evident the value of the cotton decreases rapidly.

Staple Length: Figure VII indicates the average distribution in

staple lengths of Arizona Upland cotton for the period .19^3 through 1951♦

This graphic presentation indicates a strong central tendency. This

situation is shown by the very low percentage in the shorter lengths, with

a very steep incline in the I-

1 /3 2

inch staple length of cotton, and a

very sharp decline to a very low percentage of the longer staple cotton.

This chart proves that the staple length, 1-1/32 inch is the mean, median

and modal classification for Arizona cotton.

Figure VIII indicates the average seasonal movement in the proportion

of the Arizona Upland cotton crop which is 31/32 inch staple for the

period 19^3 through 1951* The graph indicates that the percentages of this

staple length were constantly low for the entire season. Three and seven

tenths is the average percentage for the nine-year period that was studied.

Figure IX indicates the average seasonal movement in the proportion

of the Arizona Upland cotton crop which is 1 inch staple for the period

1943 through 1951. Figure DC indicates that the lowest percentage of this

grade was evident at the beginning of the harvesting season, September

15

.

From this date forward, to the end of the crop year, the percentage line

forms a U shape, with a slightly higher percentage at the end of the year.

Figure X indicates the average seasonal movement in the proportion of

FIGURE VII

AVERAGE DISTRIBUTION IN STAPIE LENGTH OF UPLAND

COTTON GINNED IN ARIZONA, 19U3-1951.

3 oy

I

§

T I / IbicTr"Page 10,

(In Inches)

STAPIE IENGTH

FIGURE VIII

ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

31/32 INCH STAPLE LENGTH THROUGH SPECIFIED DATES,

ARIZONA, 1943-1951. 12/

20

12/ Ibid. Page 10.

FIGURE 3X

ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

1 INCH STAPIE IENGTH THROUGH SPECIFIED DATES,

ARIZONA, 19U3-1951- dsl/

21

I b i d . P a g e 10

FIGURE I

ACCUMUIATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

1 3/32 INCH STAPIE LENGTH THROUGH SPECIFIED DATES,

ARIZONA, 19143-1951. 2 V

22 lli/ Ibid. Page 10

23

the Arizona Upland cotton crop which is 1-1/32 inch staple length for

the period 19^3 through 1991.

The percentage line for this grade

remains almost constant throughout the entire year. However, at the end

of the season a slight increase is evident.

Figure XI indicates the average seasonal movement in the proportion

of the Arizona Upland cotton crop which is l-l/l

6

inch staple for the

period 19^3 through 1991. The percentage ginnings for this particular

staple length constitute an inverted U, rising until October 31 and

declining thereafter until the end of the season.

Figure XII indicates the average seasonal movement in the proportion

of the Arizona Upland cotton crop which is 1-3/32 inch staple for the

period 19^3 through 1991* There was a slight increase at the beginning

of the crop year from September

15

to September 30* From this point for­

ward, the percentage line decreases to October 17 where an almost straight

line was evident for the remainder of the season.

Figure XIII indicates the seasonal average grade indices for Arizona

cotton for the years 19^3 through 1951. The beginning of the graph indi­

cates a Middling plus grade. From this point to the end of the season

there was a steady decrease to a Strict Low Middling grade.

Utilization of Percentage Figures: Often in the past, buyers and sellers of Arizona cotton have expressed a desire to be furnished estima­

ted figures for both grade and staple length of Arizona cotton for both

certain specified dates and total crops. It is possible to use the

figures in Tables V, VI, and VII to furnish this information to anyone

desiring these estimates. Table V gives the nine-year average grade dis­

tribution for cotton ginned prior to specified dates. Table VI gives the

nine-year average distribution in the staple lengths of cotton ginned

FIGURE XI

ACCUMJIATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

1 1/16 INCH STAPIE LENGTH THROUGH SPECIFIED DATES,

ARIZONA, 19li3-195l. 15/

2k

15/ Ibid. Page 10,

FIGURE XII

ACCUMULATIVE PERCENTAGE OF AMERICAN UPLAND COTTON

1 3/32 INCH STAPLE LENGTH THROUGH SPECIFIED DATES,

ARIZONA, 1910-1951. !§/

25

16/ Ibid. Page

10

,

FIGURE XIII

GRADE INDEX OF ARIZONA UPLAND COTTON THROUGH

SPECIFIED DATES, ARIZONA,

19li3r195l. 37/

26

17/ Ibid. Page 10

DATE

TABIE V

GRADE DISTRIBUTION OF UPIAND COTTON GINNED PRIOR TO

SPECIFIED DATES, ARIZONA, AVERAGE OF CROP TEARS, 1928-1951. 18/

Date

Sept. 15

Sept. 30

Oct. 17

Oct. 31

Nov. 13

Nov. 30

Dec. 12

Jan. 15

TOTAL

G M & Above

1.38

1.27

.98

.81

.6 1

.50

.Wl

.33

.27

SM

38.96

36.iil

33.08

28

.

11

)

23.12

1 9 .8 0

1 7 .2 2

13.ill)

1 2 .0 1

M

1)6.07

Id.97

1)2.83

1)2.93

1

)

6 .0 0

1

)

0 .3 2

37.1)6

30.69

27.65

s m

5.70

7.81)

9.90

11

.

1

)

1

)

111

. )

15.78

1 7 .2 1

1 8 .7 2

1 7 .8 8

LM & Below

1 .0 0

1 .5 6

1.99

1 .9 6

2 .2 6

2 .6 6

3.36

6 .0 1

10.51)

Spot

6.91)

8.77

1 1 .7 0

U).61)

11

).

16.59

22.51)

27.1)8

28.17

Tinge

.0 1

.1)3

1.03

Gra^

.03

.2 0

.Id

1 .9 0

Below Grade

.

01

)

.90

3^/ Ibid. Page 10

Dates

Sept. 15

Sept.

30

Oct. 17

Shorter

Oct. 31

Nov. 13

Nov. 30

Dec. 12

Jan. 15

TOTAL •

5

•3

1.4

TABLE VI

DISTRIBUTION IN STAPLE LENGTH OF UPLAND COTTON GINNED PRIOR TO

SPECIFIED DATES, ARIZONA AVERAGE OF CROP YEARS

1 5 /1 6

31/32 l

1 1/32 l

1 /1 6

1 3/32

1 1 /8

2 .6

1.7

14.3

•7

5 1 .8

9 .0

4 9 .8

. .6

8 .0

5 0 .0

29.3

2 9 .1

34.7

9 .5

4.3

.8

1.8

• 5

• 5

7.0

5 0 .0

6 .9

51.0

35.4

34.4

4.5

4.6

1.1

1.1

1

5/32

Long-

.1

.1

.1

.2

.2

.8

.1

1.1

1.1

4.5

.2

1.0

.1

1.2

2.9

.5

7.7

52.5

9-7 52.3

2.3

14.2

50.3

3.7

1 6 .0

47.4

32.4

3 0 .6

2 6 .1

2 3 .2

4.3

3.6

3-2

1.0

1.0

.8

.2

.2

.2

1.0

.8

.7

19

/ Ibid. Page 10.

29

prior to specified dates, and Table VII gives a nine-year average of

ginnings of Arizona cotton prior to specified dates.

To obtain estimated figures for any one of the bi-weekly dates on

total ginnings of any one of the various grades, through that date, the

following procedure must be followed: First, the average percent of

ginnings through the selected date must be multiplied times the Arizona

Upland cotton crop estimate for the year concerned; Second, this figure

that is obtained, the estimated number of bales for the particular date,

must be multiplied by the percentage of the grade concerned for the

same date. B y following this procedure, it is possible to obtain a

purely estimated figure for both the number of bales ginned and the num­

ber of bales for one of the grades for the particular date that the

figure was used. A hypothetical example of the above-outlined procedure,

using these figures, is as follows: The estimated total number of bales

of Arizona cotton produced is 1,000,000. The averages for the date

October 17 will be used (percentage ginnings for this date is 22.5 per­ cent and the percentage figures for the Middling grade is 42.83).

The total estimate of 1,000,000 bales is multiplied by 22.5 percent,

the average percentage ginnings for October 17. This gives an estimated

ginning figure of 225,OCX) bales of cotton. This figure, 225,000, is mul­

tiplied by 42.83 percent which is the average percentage figure for the

Middling grade of cotton. A final figure of $4,748 bales of cotton is

obtained. This is the estimated number of bales of Arizona Middling

cotton that could be expected on October

17

for this hypothetical year.

The same procedure is followed in computing the estimated figures

for any particular staple length. The following is an example of expec­ ted staple lengths for a hypothetical year (

1

,

000,000

bales of cotton

TABLE VII

G I M I N G S OF ARIZONA UPLAND COTTON PRIOR TO SPECIFIED D A I E S ^ /

1951

1950

1949

1948

1947

19

W

1945

1944

1943

AVERAGE

Sept. 15 Sept. 30

Oct. 17 Oct. 31 Nov. 13 Nov. 30 Dec. 12 Jan. 15

TOTAL

2.8

7.0

23.5

33.2

4 9 .6

58.1

80.8

100

6 . 7

1 6 .7

14.9

3 1 .2

44.7

5 6 .0

71.9

81.0

9 6 .0

100

5.6

12.5

34.3

46.0

73.4

100

6 .1

14.5

23.5

2 6 .1

4 7 .8

63.3

64.4

74.1

93-9

9 2 .2

100

8.4

15.7

24.4

36.3

3 6 .1

46.3

57-3

65.1

91.4

100

7-3

12.4

33.5

44.1

59-0

7 0 .6

9 0 .1

100

4.0

10.8

2 3 .3

19.2

30.0

38.3

55.2

6 5 .6

84.4

100

2 .0

8.0

1 6 .5

25.9

34.5

43.2

78.7

100

13.7

2 3 .1

53.9

53.2

6 l.O

77.0

100

7.9

5 .6

12.4

2 2 .5

30.7

3 2 .8

4 0 .9

4 3 .0

57-5

6 6 .9

8 7 .2

100

Z y Ibid. Page 10.

21/ Cotton Production and Distribution, Season of 1947-48, Page

16

, and Season of 1943-44,

Page

8 7

Department of Commerce, Bureau of the Census.

31 will "be used once again for total crop and the I-

1/32

inch staple

length cotton classification figures will be used). The figure 1,000,000

bales is multiplied by

100

percent (this is the total crop therefore the

percentage figure would be

100

percent) and the figure of

1

,

000,000

bales

of I-I

/32

inch Middling Arizona Upland Cotton could be expected for this

hypothetical year.

As was previously stated, these figures are only estimates and this

fact should be remembered if figures computed in this manner are to be

used.

32

CHAPTER II

THE GOVERNMENT COTTON CLASSING SYSTEM

A complete study of the relation of Arizona cotton prices on the

Phoenix market to quality of cotton cannot be accomplished without a

study of the cotton classification system. That is the purpose of this

portion of the study. It was accomplished by examining the various bul­

letins available from various sources and extracting those portions that

are of particular interest to the buyers and sellers of Arizona cotton.

This, in turn, will be passed on to the readers of this study.

The first thing to examine in any study of cotton classing is the

principal elements which affect quality. These factors are grade, staple

length and character. Each of these factors will be considered individu­ ally in the following paragraphs.

Grade is composed of three factors: color, leaf or foreign matter, and ginning preparation. Color m ay be described in terms of three attri­

butes; hue or the name of the color, brilliance as the lightness or

darkness of color, and chroma which is the intensity, strength, or degree

of color. Foreign matter refers to the parts of the cotton plant such as

leaves, stems, or burrs which in some manner pass through the complete

ginning process and are retained in the ginned lint. This term does not

apply to any other matter, such as iron, steel, stone or other objects,

packed in "false bales." Preparation is the degree to which the normal

length of fiber is m aintained or the regularity with which the individual

fibers are laid together in ginning and the relative neppiness of the

cotton. Foreign matter is more readily found in the lower grades than

in the higher grades. The various grades of cotton may be found in

Table VIII.

TABLE VIII

UNIVERSAL STANDARDS FOR GRADE OF AMERICAN UPLAND COTTON

GRAY

*GMG

*SMG

*MG

EXTRA

WHITE

*GMEW

*SMEW

-*MEW

*SIMEW

*LMEW

*SGQEW

*GOEW

WHITE

*MF

SGM

GM

SM

M

S M

M

SGO

GO

* Descriptive Standards

SPOTTED

*GMSp

*SMS

*MSp t

> f S M S p

* M S p

TINGED

(ME

SMT

ME

S M T

M E

YELLOW

STAINED

*GMYS

* M Y S fMYS

33

The letters which are used mean as follows: G can denote either

good or gray (the difference in use can be noted in that the term gray

is always found under the columnar heading gray), M denotes middling,

E denotes extra, W denotes white,

0

denotes ordinary, Sp denotes spotted,

T denotes tinged and YS denotes yellow stained.

The grade Middling Fair embraces White cotton which in color, leaf,

and preparation is better than Strict Good Middling.

The grade Good Middling Gray, Strict Middling Gray, and Middling

Gray apply to cotton which in leaf and preparation is of these three

grades, but which is more gray in color than the corresponding grades

for White cotton.

The grades Good Middling Spotted, Strict Middling Spotted, Middling

Spotted, Strict Low Middling Spotted, and Low Middling Spotted apply to

cotton which in leaf and preparation is of these five grades, but which

3U

in color is between the corresponding grades for Y/hite and Tinged

cottons.

The grades Good Middling Yellow Stained, Strict Middling Yellow

Stained and Middling Yellow Stained apply to cotton which in leaf and

preparation is of these three grades, but which is more yellow in

color than the corresponding grades for Tinged cotton.

Since July 19b0, only the grades shown above the horizontal line

in the foregoing table have been deliverable on the cotton futures

contracts of the New York and New Orleans Cotton Exchanges, and the

Chicago Board of Trade. No cotton of any grade is deliverable on

futures contracts unless it is at least 7/8 of an inch in staple

length, and cotton is not deliverable on the new futures contract

if for any reason it has been reduced in grade or staple, or, if the

case of non-rain-grown cotton, unless it is at least Middling (White)

or Middling Extra T/hite in grade and at least 1 l/32 inches in staple

length. — / This was changed in 1952 to include one additional grade

of irrigated cotton, namely. Strict Low Middling White and Extra

White 1 1/16 inch and longer.

The standards as listed in Table VIII will be superceded by

revised standards which eliminate the classification, "extra white".

These were merely transferred to "white" with no designation between

"white and extra white" being made.

The grades of Middling Fair and

Strict Good Middling were eliminated. — /

£2/ Agriculture Handbook for Cotton Classers. United States

Department of Agriculture, Washington, D. C., September, I

9

I

4

O. P. 6.

23/ Official Cotton Standards of the United States for the Grade

of American Upland Cotton, effective August 1^.

( T?pm-int. fynm the Federal Register of August 15, 1952.)

Staple length of cotton is the length by measurement of a typical

sample of its fiber. The linear designation varies from below three-

fourths of an inch up to one and three-fourths inches by one and one-

thirty-second inch variation. For the purposes of this study, the

staple lengths are classified as thirteen-sixteenths inches and longer

by one-thirty-second of an inch variation. Reference is made to

Appendix II.

Character can be defined as those properties of cotton which are

not included in grade or staple length. Character can also be

described as "better than", "equal to", or "below" the character of

the official staple length types or in terms of special types or

samples or by any other means acceptable to the parties concerned.

In classifying a sample of inferior character, the sample is given

the proper grade designation, but the staple classification should be

reduced to that which corresponds most nearly to the value of the

cotton. The length from which reduced and to which reduced and the

reason for the reduction is always stated on the cotton tag.

A study of the cotton classing system would not be complete with­

out a brief treatment of method of sampling and the grading of the

samples. An actual sanple is composed of approximately six ounces of

cotton and approximately three ounces should be drawn from cither

side of the bale. These samples collected from the various bales are

stored in the normal atmosphere for several hours before the classing

is done.

(Normally, these samples are left standing overnight and then

the classing is done.) If the sample is either too dry or too moist,

an accurate sample cannot be obtained. Moisture content is also

applicable to the staple type to w h i c h the sample is compared. After

36

the sample has been exposed to the atmosphere, the grading of the sample

is begun. A portion of the sample is compared to a grade type to

determine the actual grade.

Then careful consideration is given to any

other color factors such as tinge, spot, gray, etc. After all of these

factors have been taken into consideration, a specific grade is assigned

to the sample. Another portion of the sample is "pulled" and compared

to a staple type and a specific staple length is assigned to the sample.

There are two factors that are very important in classifying

cotton.

These factors are (l) letting the cotton remain in a normal

atmosphere for several hours (the importance was stressed in the

preceding paragraph) and (2) light. Without proper and sufficient

light, cotton classing could not go on. Classing should be done under

a skylight or a north window and no crosslights.

Classers nearly

always work with the light coming over their left shoulders. All of

the windows in the building, except the skylights northern windows,

are painted, screened, or blocked in seme other manner to prevent

light infiltration.

Often there are samples that do not meet the requirements for

the normal sample and when these samples are classified, special

terms must be used. A few of these terms and their definitions are

as follows: (l) Cotton of perished staple - the strength of fiber

has been destroyed or reduced through exposure to the weather either

before picking or after baling, or through beating by fires, or on

account of water packing, or b y other causes.

(2) Cotton of immature

staple - cotton that has been picked and baled before the fiber has

reached a normal state of maturity, resulting in a weakened staple of

inferior value. (

3

) Gin-cut cotton - cotton that shows damage in

37

ginning, through "cutting” by the saws, to an extent that reduced its

value more than two grades. (U) Reginned cotton - cotton that has passed through the ginning process more than once.

(5) Repacked

cotton - cotton that has been packed from various samples or from two

or more bales of cotton.

(6) False-packed cotton - cotton that contains

substances entirely foreign to the cotton, interior damage without

any exterior indications, or containing pickers or linters worked into

the cotton.

(7) Mixed-packed cotton - cotton in a bale that indicates

differences of two or more grades, of the same grade but of different

color variations, or shows variations of staple length of three thirty-

seconds of an inch or more.

(8) Water-packed cotton - cotton that has

damage to the fiber either by exposure to weather conditions or

penetration by water while in the baling process.

(9) Sandy and dusty

cotton - cotton that has sand or dust mixed with it.

Classification

depends upon amount present.

(10) Oil-stained cotton - cotton that has

become saturated with oil.

(11) Seedy cotton - cotton that has a

number of whole and parts of seed mixed with the lint.

(12) Gin-

fall - an accumulation of leaf and other foreign matter that dropped

into the lint during the ginning process. 0 /

A final portion of the study of the cotton classing system must

be devoted to laboratory fiber analysis. Fiber analysis does not

completely do away with cotton classing, nor dees cotton classing do

away with fiber analysis in the laboratory. Either of these two

methods of measuring cotton quality can depend on the other and these

two methods together are much more useful than either method by itself.

21i/ Handbook for Cotton Classers, United States Department of

Agriculture, September, 19U0.

38

Four properties of fiber are most commonly measured in laboratory fiber analysis.

These factors are fineness, strength, length, and

maturity. — graphs.

Each of these will be discussed in the following para­

Fineness is usually reported as weight in micrograms per inch

of fiber or as specific surface area. Fineness is a fiber property

of great importance to the spinner and cotton product manufacturer.

There are several instruments used for determining fineness of the

cotton fiber but the most common one in use is called the Micronaire.

This instrument gives readings as so much weight per inch.

Another factor of cotton fiber is strength. Strength is pro­ bably more important than any other factor of cotton fiber.

Strength

is determined by the use of the Pressley strength tester.

Spinners

of cotton products relate yarn, cord and fabric strengths to fiber

strength.

Length is a third factor. Again, length is very important to

the cotton spinner and therefore he is deeply concerned with the

measurement of length.

Length can be expressed in several ways,

but the usual are: (l) Mean or average length, (2) upper half mean length, and (3) length uniformity or the uniformity ratio.

Length is computed with the Hertil Fibrograph.

Maturity is the general term that is used now, although several

years ago "immaturity" or "percentage of immature fibers" was used.

25/ Use and Application of Fiber and Spinning Test, National

Cotton Council of America, Memphis, Tennessee.

26/ Ibid. Page 38.

39

A simple chemical test is used to determine maturity. This test is as

follows: The cotton is soaked with caustic soda and the swollen or

mercerized fibers are examined under a microscope. This test shows

how big the lumen is and hew thick the wall.

Each of these properties is very important to the manufacturer

or spinner of a cotton product. Naturally, the spinner desires the

best cotton for his business and the tendency is for the manufacturer

to pay a higher premium for those properties that fit his needs.

CHAPTER III

THE REIATIONSHIP BETWEEN PHOENIX AND CENTRAL MARKET COTTON PRICES

Efficiency of the Phoenix Market in Reflecting Central Market

A correlation was made between prices received for Upland cotton

on the Phoenix market and prices received for equivalent qualities of

cotton on the Memphis market.

The purpose of this correlation was to

determine whether there was underpayment or overpayment prevailing in

the Phoenix market based on equivalent prices in the Memphis market.

It must be remembered that when the terms overpayment and underpayment

are used, they are based on the hypothesis that the expected Phoenix

price is the Memphis evaluation minus 105 points.

This hypothesis

is the same as the constant dollar margin line discussed in the

following paragraph.

The regression line (solid) and a constant

dollar margin line (broken) were determined and a line for each factor

was plotted on each chart. Around these lines, dots were plotted

representing prices in the Phoenix market and equivalent prices in

the Memphis market.

The formula for computing the line of regression was as follows;

SXY - (SX « j)

SX2 - (SX • X) .

T

is the Phoenix price and

X

is the Memphis price, and a - T - b •

x.

The constant dollar margin line was computed utilizing the 105 points

difference as outlined in Table X.

The 105 points was subtracted from

an imaginary 1 to 1 ratio line. For example;

on October It, 1951 the 1

to 1 ratio line would run from the origin through the coordinates T

Z

37> X = 37« To be absolutely correct, the constant dollar margin line

kl

would be extended below the axis to the coordinates Y = X * 33-00

Figures XIV, XV, XVI and X V H represent the first of the season.

All of these charts indicate the same tendencies of overpayment on the

Phoenix market compared to the constant dollar margin line. Many mer­

chants had made commitments for Middling and Strict Middling cotton

that they didn't own, but which they expected to buy to fulfill these

commitments. However, late August rains in 1951 reduced cotton in

grade and these qualities were not available in quantity. As a result

these merchants bought a wide range of grades of cotton at prices

higher than ordinary market conditions would justify in order to fulfill

the contracts.

The sole purpose of purchasing these grades and paying

the overpayments was to avoid the penalties for defaulting on their

contracts.

Figures XVIII, XIX and XX are approximately the same as the pre­

ceding correlation charts. However, overpayments are not as large.

During this period cotton prices approached the ceiling of $45-39 for

futures cotton and buyers were speculating that cotton prices would

continue to rise until the ceiling was reached.

Of course, this

resulted in overpayments for certain days, especially November

8

, 1951.

Figures XXI, XXII, XXIII, XXIV, XXV, XXVI, and XXVII are normal

market situations, in that, they are exactly as would have been expec­

ted. The line of regression and the constant dollar margin line are

either equal or cross, resulting in some overpayments and some

underpayments.

Figures XXVIII, XXIX and XXX indicate underpayments for Upland

cotton on the Phoenix market. This underpayment is a result of

FIGURE XIV

CORRELATION BETWEEN PRICES RECEIVED FOR. ARIZONA UPLAND COTTON

ON THE PHOENIX MARKET, AND EQUIVALENT MEMPHIS EVALUATIONS. 27/

OCTOBER L 1951

1*2

r “ .9721

b : .7011

a - 1.0006

PRICE ON THE MEMPHIS MARKET

(cents per pound)

2 7 / Recapitulation Sheets Referred to in Introduction, P. 2

FIGURE XV

CORRELATION BETWEEN FRIGES RECEIVED FOR ARIZONA UPLAND COTTON

ON THE PHOENIX MARKET, AND EQUIVALENT i-EKrHIS EVALUATIONS. 28/

OCTOBER 18, 1951 r equals ,

917

^

b equals „

6961 i a equals

1 ,8 3 6 1 d o

1

A

1 1

§ 1

8 g

C4 m

( A C A m

X A

(A

< 0

Cl f—

(A

CO

(A

CK rr\

(cents per pound)

PRICE ON THE NEMFHIS I-IARKET

28/ Ibid. Page h2.

FIGURE XVI

OCTOBER 25. 19<1

r equals

b equals

.6090

a equals

1.8597

a

2 $ / "Ibid." Page h2

(cents per p o u M )

PRICE ON THE MEMPHIS M R K E T

FIGURE XVII

CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND COTTON

ON THE PHOENIX MARKET, AND EQUIVALENT MEMPHIS EVALUATIONS.22/

NOVIMBER 1, 1951 r equals

.9317

b equals .8431

a equals .2409

4$

507

Ibid. Page 42.

(cents per pound)

PRICE ON THE MEMPHIS MARKET

FIGURE XVIII

CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND COTTON

NOVEMBER

8

, 1951 r equals

.9344

b equals I

.0635

a equals -.0641

46

3 1 / Ibid. Page 42

(cents per pound)

PRICE ON THE MEMPHIS MARKET

FIGURE X H

CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND COTTON

ON THE PHOENIX MARKET, AND EQUIVALENT MEMPHIS EVALUATIONS .2§Z

NOVEMBER 15, 1951 r equals

.9091

b equals a equals

.7595

2.6585

32/ Ibid. Page If2.

J— l L

S % 3 5$ ^

(cents per pound)

PRICE ON THE MEMPHIS MARKET

FIGURE X X

C O R R E C T I O N BETWEEN PRICES RECEIVED FO R ARIZONA. UPIAND COTTON

ON THE PHOENIX MARKET, AND EQUIVALENT MEMPHIS EVALUATIONS. 33/

NOffEIEER 21, 1951 r equals

.9229

b equals .5550

a equals

1.6536

•S

E

33/ Ibid. Page 1|2

(cents per pound)

PRICE ON THE

1

- E M P H S MARKET

FIGURE XXI

CORREIATION BETWEEN PRICES RECEIVED F(B ARIZONA. UPLAND COTTON

ON THE PHOENIX MARKET, AND EQUIVALENT ffiMPHIS EVALUATIONS. 31V

NOVEMBER 29, 1551

1*9

2 * / M u T P a g e 1*2

(cents per pound)

PRICE ON THE MEMPHIS MARKET

FIGURE XXII

CORRELATION BETWEEN PRICES RECEIVED F O R ARIZONA UPIAND COTTON

ON THE PHOENIX MARKET, AND ElJUVAIENT MEMPHIS EVALUATIONS. 35/

DECEMBER 13, 19gx

-sU

r equals .7377

b equals

,S $ h h

a equals .1442

"357 ibid.- Page U2.

(cents per pound)

PRICE ON THE lEMPHES MARKET

FIGURE XXIII

CORREIATION BETVEEN PRICES RECEIVED F O R ARIZONA UPIAHD COTTON

ON THE PHOENIX MARKET, AND EQUIVAIENT MEMPHIS EVADJATIONS. 36/

DECEIVE 20, 1951 r equals

,8628

b equals 1.0226

a equals -1.U211

51

36/ Ibid. Page U2

(cents per pound)

PRICE ON THE I-EMFHIS MARKET

FIGUBE XXIV

CORREIAHON BETWEEN PRICES RECEIVED FCE ABIZON& UPIAND COTTON

ON THE PHOENIX MARKET, AND EQUIVALENT IEMPHIS EVALUATIONS. 37/

DECEMBER 2?, 1951 r equals

.8876

b equals .8576

a equals -.9906

52

57/ Ibid. Page h2

(cents per pound)

PRICE ON THE MEMPHIS MARKET

FXGU3E XXV

CORREIATION BETWEEN PRICES RECEIVED FCE ARIZONA. UPLAND COTTON

ON THE PHOENIX MARKET, AND EQUIVAIENT MEMPHIS EVALUATIONS. 38/

JANUARY 10. 1952

r equals .7913

b equals .652*7

a equals .6255

38/ Ibid. Page 1*2

(cents per pound)

PRICE ON THE MEMPHIS MARKET

FIGURE XXVI

CORREIATION BETWEEN PRICES RECEIVED FO R ARIZONA. UPLAND COTTON

ON THE PHOENIX MARKET, AND EQUIVALENT PEMPHIS EVAIUATIONS. 3 9 /

JANUARY 2Ut 1952

r equals

.95^7

b equals 1.038?

a equals -I.l6l6

5U

EH a

8

H s

^13

§

8

39/ Ibid. Page U2

(cents per pound)

PRICE ON THE MEMPHIS MARKET

FIGURE XXVII

CORREIATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND COTTON

ON THE PHOENIX MARKET, A N D EQUIVALENT MEMPHIS EVALUATIONS. W

FEBRUARY 7. 1952

r equals .9037

b equals .8102

a equals .1326

cr\ rr\

(cents per pound)

PRICE ON THE MEMPHIS MARKET

b0/ Ibid. Page h2

FIGURE XVIII

CORREIATION BETWEEN PRICES RECEIVED FOR ARIZONA UPIAiO COTTON

ON THE PHOENIX KAHKET, AND EQUIVAIENT MEMPHIS EVALUATIONS. Ill/

FEBRUARY lii. 1952 ” r equals .

1*858

b equals .7288

a equals -.01*73

56

Ul/ Ibid. Page 1*2

I t t i t

r \ i \

(cents per pound)

PRICE ON THE MEMPHIS MARKET

FIGURE XXIX

CORRELATION BETWEEN PRICES RECEIVED FOR ARIZONA UPLAND COTTON

ON THE PHOENIX MARKET, AND EQUIVAIENT PEMPHIS EVALUATIONS. U2/

FEBRUARY, 21, 1952 r equals

.8112

b equals 1* 2018

a equals -5.2988

57

I l i i

-d* in vo co o\ o <-? cxi m

cxi o j cm cm cm cm

m cn

in vn co ox Q H

t n o*i m cn 01 m m

(cents per pound)

PRICE ON THE MSMPHIS MARKET

R2/ Ibid. Page i|2

FIGURE XXX

CORRELATION BETWEEN FRIGES RECEIVED FOR ARIZONA UPLAND COTTON

MARCH 13, 1952

58 r equals b equals

.9254

2.3223

a equals -

34.1986

4 3 / Ibid. Page 42.

(cents per pound)

PRICE ON THE MEMPHIS MARKET

lower grades and finer fibered cotton which tended toward weakness,

59 wastiness, and nepiness.

The line of regression is much steeper than

the 1 to 1 ratio, which reflects extreme discounts for lower grades.

At the same time the futures market declined rather steeply. Grades

were deteriorating and, as a result, the above situation was brought

about, where Phoenix prices were much lower than Memphis prices.

Table IX presents comparative Phoenix-Memphis data for the 1951

crop year. Included in this table are the correlation coefficients,

the regression coefficients, the "a" values and the standard error of

the estimates.

Factors Influencing Spreads Between Local and Central Markets

The major factor that causes a price spread between Phoenix and

Central markets is the difference in comparative costs to the Group

B or Carolina Mill points. Comparative costs, as outlined in Table

X, indicate that it requires 121 points or six dollars and five cents

to move a bale of cotton from Memphis to Greenville, South Carolina

and 2U6 points or twelve dollars and thirty cents to move a bale of

cotton from Phoenix to Greenville, South Carolina.

As it would naturally be expected, the major difference in the

comparative costs of moving cotton is the difference in the freight

bill in the two markets.

The freight rates from Phoenix, Arizona to

Greenville, South Carolina are 159 points or seven dollars and ninety-

five cents per bale whereas it only requires

83

points or four

dollars and fifteen cents to move a bale from Memphis to Greenville.

This one factor accounts for 76 of the 105 points difference between

the two markets.

Univ. of Arizona Library

TABLE IX

CORRELATION BETWEEN AMERICAN UPLAND COTTON PRICES

AT PHOENIX AND MEMPHIS, THURSDAYS, 1951 CROP YEAR 44/

Date

Number of

Lots Sold

Correlation

Coefficient

Regression

Coefficient

"a"

Value

Standard Error of Estimate

10-4-51

10-18-51

10- 25-51

11- 1-51

-

8-51

-15-51

-21-51

29-51

12-20-51

12-27-51

1

-

10-52

1- 24-52

2

-

7-52

2-14-52

2

-

21-52

3

-

13-52

17

12

23

12

49

17

22

12

11

36

23

11

51

32

21

15

16

.

9724

**

.9174**

.

9514

**

.9317**

.9344**

.

9091

**

.6142**

.7377*?

.

8628

**

.

8876

**

.7913**

.9547**

.9037**

.4838..

.

8112

**

.

9254

**

.7011

.6964

.6090

.8431

1.0635

.7595

.5550

.6273

.5544

1.0226

.8576

.6547

1.0387

.8102

.7288

1.2018

2.3223

1.0006

1.8361

1.8597

.2409

- .o64i

2.6585

1.6536

1.0576

.4412

-1.4211

-

.9906

-

.6255

1.1616

.1326

-

.0476

-

5.2988

-

34.1986

. 4 n 8

1.1667

.9240

.6098

.9740

1.8642

.7893

.5524

.5524

.8088

1.5772

1.3662

.4200

.9761

3.8409

2.2063

2.1215

** Significant at 1$ level, according to Snedecor, G. W . , Statistical Methods, 4th Ed., Iowa State

College Press, Ames, Iowa, 1946, Table 7*3# P* 149•

7*57 Ibid. Page 42.

S'

TABLE I

Gin Loading

Freight

Compression

Handling#

Minimum Storage

Hedging

Interest

Insurance

Commission

TOTAL

CCIFARATIVE COSTS MOVING COTTON TO

GREENVILLE, SOUTH CAROLINA, AUGUST 28, 1951.

Phoenix to Group B

5

159

28

Memphis to Group B

83

20

(Outhandling) ^

6 a

5

a

20

2a6

Points

a

5

a

20 iai Points

61

* Handling on the Phoenix market includes unloading, handling in

weighing and sampling upon arrival and loading out at the Compress.

Warehouse Tariff No. 11, August 15, 1950 Arizona Compress and

Warehouse Co.

U5/

Data~compiled Agricultural Economics Department, University

of Arizona.

62

Other differences in costs of moving cotton are as follows: gin

loading of five points or twenty-five cents and storage of six points

or thirty cents per bale for all Arizona cotton and no such costs for

the Memphis cotton and finally the differences in handling for Arizona

and Memphis cotton of ten points or fifty cents per bale. All cotton

received at the empresses in Arizona must be unloaded, handled, weighed

and sampled upon arrival and loading out. Because cotton prices on

the Memphis market are quoted uncompressed in the warehouse there is

no charge levied on the Memphis cotton for inhandling and a charge for

outhandling of five points or twenty-five cents per bale.

Cotton

shipped from both of these markets must be compressed into standard

density bales to facilitate handling and shipping to domestic mills.

Charges for the compression constitute the final difference in costs of

moving cotton.

Compression charges for Phoenix cotton are 29 points or

one dollar and forty cents per bale whereas Memphis charges are 20

points or one dollar per bale.

The other factors that add to cost for moving a bale of cotton

are assumed to be equal for both markets. These costs are: Hedging

four points or twenty cents; Interest five points or twenty-five

cents; Insurance four points or twenty cents; and the commission for

selling the cotton 20 points or one dollar.

Other Costs

Ordinarily cotton merchants will require a mill price for cotton

which will give them a margin of approximately $0 points above the 246

points of the itemized costs found in Table X. This 50 points includes

an allowance for their office overhead and an "opportunity cost" or

necessary profit to induce them to make the transaction.

CHAPTER IV

SIM'IARY AND COTCLUSICBS

1. Since 1940 Arizona acreage, production and. yield indices have in­ creased more rapidly than the United States average as a •whole.

2. The higher grades of cotton are predominant at the beginning of

the season and the tendency is for the cotton to decline to lower

grades at the end of the crop year. A decline such as this occurs

because of: (l) mechanical picking, (

2

) deterioration of the cotton in the boll on the stalk because of weather influences, and (

3

)

rough harvesting practices toward the end of the season.

3- The medium staple lengths, 1

1/32

and 1 l/l

6

inch, are predom inant

in the middle of the season.

The shorter lengths, below 1 l/32 inch,

are predominant at both the beginning and the close of the season

because of greener cotton in the first stages of picking and perished

cotton at the end of the season. Tie highest proportion of the unusu­

ally long stapled cotton seems to occur a few weeks after the beginning

of the season.

4. The Arizona grade index declines from approximately a Middling

grade at the beginning of the season to a Strict Low Middling at the

end of the season.

5

.

Overpayments based on the constant dollar margin line existed in

the Phoenix market in the beginning of the

1951

crop year.

This

overpayment was a result of forward sales on the part of the cotton

merchants with the expectation that the higher grades of cotton would

64

"be available in sufficient quantities to fulfill all c m m i t m e n t s .

However, these quantities were not present and higher prices resulted

for all grades which could be used to fulfill contracts.

6

.

Overpayments were also evident in early November as a result of

speculation that cotton prices would reach the established ceiling

of $45.39.

7

. The normal market, as expected, was evident during the period

November

29

, 1951 through February 7, 1952. This period was normal

in that the line of regression and constant dollar margin line are

either equal or cross, resulting in some overpayments and some under­ payments .

8

. Underpayments on Arizona cotton in the Phoenix market was evident

during the end of the season.

This underpayment was a result of

lower grades and finer fibered cotton which tended toward weakness,

washiness, and nepiness.

9

. The major factor that causes a price spread between Phoenix and

Central markets is the differences in comparative costs of moving

cotton to the Group B or Carolina Mill points. Using a difference of

105 points, this would mean that the expected Phoenix price would be

the Memphis evaluation minus 105 points.

65

BIBLIOGRAPHY

Bureau of Agricultural Economics: 1928-1951 issues. Cotton Quality

Statistics, United States. United States Department of Agriculture,

Washington, D. C.

Federal Register: Reprint August 15, 1952. Official Cotton Standards of the United States for the Grade of American Upland Cotton. Washing­ ton, D. C.

National Cotton Council of America: Use and Application of Fiber and

Spinning Testr, Memphis, Tennessee.

Bureau of the Census: Season of 1947-48 and Season 1943-44. Cotton

Production and Distribution. Department of Commerce, Washington, D. C.

Production Marketing Administration: September 15, 1944 through

March 20, 1952.

Cotton Quality Report for Ginnings Western Upland

Cotton.

United States Department of Agriculture, Phoenix, Arizona.

United States Department of Agriculture: September, 1940. Handbook for Cotton Classers. Washington, D. C.

APPENDIX I

FIELD SCHEDIJIES USED IN GATHERIM} DATA

6 6

Fix price on N.T.

Points on or off

(month)

( ) Today's Close ( ) Tomorrow's Open Price per lb.

Remarks:

APPENDIX II

STANDARDS FCR LENGTH G? STAPLE AMERICAN UPLAND COTTON h6/

3

/ k and belcw

13/16

7/8

29/32

15/16

31/32

1

1 1/32

1 1/16

1 3/32

1 1/8

1 5/32

1 3/16

1 7/32

1 1 /li

1 9/32

1 5/16

1 11/32

1 3/8

*1 13/32

*1 7/16

*1 15/32

1 1/2

■''•Descriptive standards and do not apply to American Upland Cotton.

67

U b / Handbook for Cotton Classers. United States Department of

Agriculture, 'Washington, D. C., September 191,0. P. 3.

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