ng the buying season, that is, in
October, November, December, and January, and he makes his arrangements
with his selling agents on the basis of the price paid, trusting to his
own judgment, and the comparatively small fluctuations in the price of
cloth in normal times, to protect him against loss. It is usually
believed that the Southern mills, being newer, and frequently of a
different financial standing, have found it more desirable to have
recourse to this form of insurance than their older competitors in the
North. Then, too, the rapid development of the cotton warehousing system
has made it less necessary for the manufacturers to tie their money up in
great quantities of cotton, as they can buy when the market appears
favorable.

Protection for Mills
Running for Stock

A very important point, however, and one which all manufacturers would do
well to consider carefully is the protection which a "futures" market
gives to a manufacturer making plain goods for stock, particularly on a
falling raw material market, which, of course, would also mean a falling
goods market. To stop the mill because values were falling would be
impossible without utter disorganization, and its attendant heavy loss,
while to keep on manufacturing stock goods with a certainty that they
would be worth less each succeeding month is a disheartening prospect for
the mill.

If, however, the manufacturer sells "futures" for the succeeding months
to the extent of the cotton which he would require each month to
manufacture the goods, he can run his machinery as usual and have a
perfectly free mind, as he has safeguarded himself against any loss due
to a falling value of the raw material. Suppose, for instance, the cotton
market fell off, say one cent a pound each month, with a corresponding
fall in the value of the woven goods. In such an event, the manufacturer
could, as each month arrived, buy a contract for an amount corresponding
to what he had sold, and at a proportionately less price, thus making a
profit on the "futures" which he had sold to an extent which would
correspond, approximately, to the smaller value which his manufactured
goods would then have in the market. Thus the profit on the one side
would take care of the loss on the other. If the market rose instead of
falling, he would make a loss in replacing his futures contract, but his
goods would then command a higher value, and again no loss would be
experienced.

This metho