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ple explanation of a movement which has caused much astonishment during the season past the flow of currency, in amounts almost wholly unprecedented, from smaller interior banking institutions to New York.

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This also is the explanation of the fact that, although the gold export movement began with April and at once grew very large, and although the export gold was taken wholly from the New York City banks, nevertheless the cash reserve of these city institutions, which on April 9 was reported at $294,000,000, actually rose by April 30 to $311,700,000, and on May 21 had sunk no lower than $288,000,000. The reason why this flow of money from the inland banks to the reserves of city institutions was exceptionally large lay in the fact that the movement of trade and bank expansion during the three or four preceding years had also gone beyond all precedent. Never in the history of the country had its total money supply increased at such a rate. Not including the Treasury's own holdings, it was estimated by the Government at $1,806,000,000 in May, 1898, at $1,933,000,000 in May, 1899, at $2,060,000,000 in May, 1900, at $2,195,000,000 in May, 1901, at $2,260,000,000 in May, 1902, at $2,374,000,000 in May, 1903, and at $2,532,000,000 in May, 1904. Of this increase of $725,000,000 in seven years, moreover, $467,000,000 was in gold.

This increase had continued, it will be observed, into the years when trade activity, and hence demand for cash in hand-to-hand circulation and in bank reserves, was slackening. It followed that when trade reaction grew more general, the return flow of cash from inland institutions to the city depositories should be proportionately large. Had it not been for this movement of reserves from the interior to the New York banks, there is no doubt whatever that the extremely large gold exports of the season would have drained New York's bank reserves, tightened the rate for money, and thus in turn have checked the gold export movement itself. But, as it happened, New York's money market remained wholly impassive during this period of heavy gold remittances; and a temporary rise in call loans on the Wall Street market to two and one-half per cent, during the latter part of May, promptly gave way to a relapse to the one-and-one-half and one-per-cent quotation which had been prevalent before.

I described in detail, in the last number of THE FORUM, the situation created in the cotton trade by the extraordinary speculation of Mr. Daniel J. Sully and his associates. The precariousness of the situation in which the speculators stood, at the very time when their prestige on the

cotton exchange was highest, was a ready inference. As a matter of fact, the day of reckoning for their excesses came more suddenly than any one had expected. It is altogether probable, in the light of subsequent developments, that the money involved in this huge speculation had been largely wasted by foolish ventures, not only in cotton but in other markets, and that, at the very time when the leader of the clique was at the height of his professional reputation, he was on the verge of insolvency. The end came as the end comes usually in attempts to manipulate a corner; and it came in this case the more quickly because Sully, who had personally incurred the financial responsibility of the deal, was in reality, like Joseph Leiter in his wheat corner of 1898, in the hands of alleged associates who were really sharp manipulators for their own account and interest.

The case, as between Sully and these associates is still in Court, and the exact facts are more or less in doubt. It has, however, been repeatedly alleged in the evidence that his associates in the speculation, recognizing the precarious nature of the ground on which they stood, reached the conclusion that Sully must be sacrificed, and that their own retreat from the market should be secured by "selling out" on him. However this may be, the cotton market, during the second week of March, showed most formidable signs that some one was selling huge lines of speculative contracts. The market began the week with cotton at sixteen and three-eighths cents a pound; on Thursday it had fallen below fifteen; and at noon on March 18, announcement suddenly was made from the rostrum of the cotton exchange that Sully was insolvent. In the course of the wild liquidation which ensued, cotton went down almost to thirteen cents a pound, as compared with the price of seventeen and three-eighths which it had reached on February 1.

It is not necessary to moralize on this incident beyond pointing out that it simply illustrated anew the fact that it is easy for daring speculators, under favoring conditions, to create abnormally high prices through purchasing on credit, but that it is not so easy for them to sell at or near the figures thus created. Another fundamental fact developed by the episode I have already pointed out, namely, that while the figures of the trade may give undoubted testimony to the fact that supply is inadequate to a previous year's demands, the rock on which the speculator usually goes down is the far less obvious fact that, with each advance in price, demand decreases. This element in the situation became very much more obvious in the months succeeding Sully's failure.

The movement of cotton from the farm to market fell, as had been predicted, to a figure barely two-thirds of what it had been a year before. It was quite evident, by this time, that the total cotton crop of 1903 would not exceed 10,250,000 bales, whereas the world's consumption of American cotton during the previous twelvemonth had amounted to 10,700,000. But cotton mills in England and in the United States were steadily reducing output. By April, thirty-five per cent of the mill capacity in New England was shut down. Export of cotton manufactures, from this country to the East, continued to decrease, and, despite the shrinkage in the weekly arrivals from the farms, the visible supply held up; and it grew evident very soon that the question was not where the spinner could obtain his cotton, but where the speculator holding cotton could dispose of it.

From the price of thirteen cents a pound, reached on March 18, the day of Sully's failure, cotton advanced at first, nearly touching fifteen cents again. From that figure its decline was slow but almost uninterrupted. Meantime, work on the cotton plantations for the crop of 1904 was busily pursued; and, as all experienced people had predicted on the basis of this year's inviting prices, the acreage planted promised to exceed all estimates. At the opening of June, the Agricultural Department published its first estimate for the season. It figured out the condition of the country's growing cotton at 83 per cent of a perfect crop, as against 74.1 in June last year, and it calculated that planted area had increased over last year 2,823,000 acres. The acreage estimate was naturally of great importance, amounting as it did to a 9 per cent gain, and being concurred in by the private experts. The hopefulminded members of the trade reckoned from these estimates a crop of 12,000,000 bales, comparing with a probable 10,250,000 from last year's yield and with a maximum in our cotton history of 11,250,000 in 1898. On this basis, cotton's price, which had already fallen to 12 cents a pound, as against 173 on Feburary 1 and 137 at the opening of May, dropped to 11g the day after the Government report. Then a partial recovery ensued. This decline, however, brought the market back to the level which it held on the day of the Agricultural Bureau's famous 9,962,000 bale cotton estimate on December 3. In other words, practically all the increased value of the season's daring speculation had been wiped away.

As to what the near future has to show regarding our cotton output, it is still too early for close estimates. The increased acreage planted means much; weather conditions between now and September will mean

more.

It is safe to say, however, that no single development could be of more supreme importance to the country's commercial and industrial welfare during 1904 than an abundant crop of cotton. With mill stocks reduced to low ebb through the hand-to-mouth policy of the present year, Europe would in any case be forced to buy, and, with the further fall in prices which would accompany a heavy yield, would buy with such freedom as to create a strong position in this country's favor on the market for exchange.

The question of the wheat and corn crops still remains in much obscurity. I have shown how large a part was played in our falling export trade by the depleted shipments of our two main cereals. What this decrease was, as the season approached its close, may be judged from the fact that in May alone the value of our wheat exports decreased $5,622,000 from the same month in 1903, corn exports meantime declining $2,480,000. This decreased value on the export market, it will be observed, occurred with prices very much higher than they were in the preceding year. Looking to quantities, the April showing was extraordinary; the 724,000 bushels of wheat sent abroad during that month being the smallest shipment made from the United States in any month since the great expansion in the country's agricultural production started twenty-five years ago. It is still a matter of dispute how far this remarkable decrease was a consequence of actual shortage in supply, how far of the fact that Europe itself had raised abundant crops last year, and how far of the farmer's own prosperity and consequent unwillingness to sell except on attractive terms. As an economic fact, it is impossible to deny that the smallness of our agricultural export trade, during the last few months, has been most unfortunate to American finance.

In general it has been assumed, no doubt with reason, that another large crop, during the season of 1904, would result in renewed and heavy exports. So far as weather conditions are an index, the season has not been altogether favorable. Winter-sown wheat suffered so severely by the extreme cold weather of the winter months that the April estimate of the Government gave the condition of the crop at 761 per cent as against 97.3 at the same time last year, while planted area was reduced five million acres. This the trade figured out to mean a crop of winter wheat 39,000,000 bushels smaller than in 1903. In June the condition was raised, by favorable weather, to 77, and the spring wheat estimate at the same time gave a condition of 93.4, about the same as in the two past years. The apparent indication, then, was

for a total wheat crop slightly larger than last year's if adverse weather is escaped, and considerably smaller if the summer is not favorable. This leaves a somewhat perplexing situation - especially as regards next autumn's cereal export trade.

One striking theory has been advanced by foreign students of the situation—a theory which, if true, would not only explain the shrinkage in this season's cereal exports, but would portend a similar poor showing in the future. Broomhall, the well-known English grain expert, after pointing out that during the present season the United States has fallen far behind Russia as a wheat exporter to the outside world, and after showing also how the Argentine has risen to the position of a formidable competitor, ventures the conclusion that the United States is slowly shifting from the position of an exporter of surplus wheat to that of a wheat consumer. This interesting theory he thus states:

The change in the relative position of the three countries is not alone due to the growth in the exporting capacity of Russia and Argentine, but also, and in the main, to the falling off of the capability of America to feed the world, as was once expected of her. We have ventured to suggest that this change in the policy of the United States is due to the fact that a far larger proportion of the present-day immigrants become consumers of cereals than was formerly the case when land in the West was to be had for the asking, and when many of the better class immigrants in the course of a year or two became producers of substantial quantities of food stuffs, grown specially with the object of being sold and exported for cash. This is all changed now; there is no longer any good wheat land to be had for nothing or for an old song, and as the earlier appropriated land loses its virgin fertility it is abandoned, or, where more intensive culture is attempted, the cultivation of wheat and maize on the wholesale scale begins to give place to mixed farming. Then there is the question of the rapidly increasing population to be allowed for; for it is a fact that the annual increase, including immigration, amounts now to nearly 2,000,000 who require of one article alone, wheat, very nearly 10,000,000 bushels per an

num.

It may perhaps be suggested that, though extremely picturesque and interesting, this theory has the fault of all sweeping generalizations from the events of a single year. It will not greatly disturb the minds of the present wheat-consuming generation; and the prediction may be hazarded that eventually it will take its place with Prof. Jevons' mathematical demonstration, thirty years ago, of the approaching exhaustion of Great Britain's coal supply. ALEXANDER D. NOYES.

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