N9%ca THE LIBRARY OF THE UNIVERSITY OF NORTH CAROLINA THE COLLECTION OF NORTH CAROLINIANA N87CO I a handbook on COOPERATIVE MARKETING Published for use of local officers and em¬ ployees by the North Carolina Cotton Growers Cooperative Association and the Tobacco Grow¬ ers Cooperative Association, Raleigh, N. C. 1923 TABLE OF CONTENTS Cooperative Commodity Marketing. Fundamental Principles. The Cause and History of Our Associations Description. Control and Functions. Some Questions and Answers. Contracts Basis of Business. Local Organizations.. Publications . Sources of Information. Southern Cotton Cooperative Associations.... Cotton Statistics. Tobacco Statistics. Tobacco Cooperative Associations.. National Council Cooperative Associations.... Extracts from Speech of Aaron Sapiro. This handbook compiled by a joint committee c< sisting of S. D. Frissell, R. W. Green, John A. Livii stone, and C. C. Zimmerman. 1. COOPERATIVE COMMODITY MARKETING ^What It Is A Cooperative Commodity Marketing Associa- on is an organization of the growers of a product the pur pose of making the business of growing lat product profitable. Two methods, one or- erly marketing and the other standardization or ie improvement of the product, are used to make profits for the growers. These two methods—orderly marketing and andardization—are combined called merchandis- ig. Cooperative Commodity Marketing is or- erly marketing and standardization. Coopera- ve Commodity Marketing is profitable because it inders a better product in a better order than iy previous system of marketing—and sees that le grower receives the rewards. Orderly Marketing By orderly marketing the product is sold to the anufacturer or ultimate consumer as the need uses, not in a few weeks as the grower prepares for the market. Thereby eventually the price fixed by the supply at point of distribution and )t by the supply at point of production. Orderly arketing helps stabilize the price for the benefit both grower and consumer. Standardization and Improvement Standardization begins with the selection of iproved seed by the grower and continues with a. 3 the careful processing and packaging of the prod¬ uct after it is gathered. Careful grading of the cotton and tobacco after it is received by the associations enables the grower to receive a pre¬ mium for his efforts to standardize the product. The standardization of grades is an essential and important part of cooperative marketing.. These two processes—orderly marketing and standardization—which are together called mer¬ chandising, are both vitally necessary to success The first year the gain from cooperative com modity marketing comes most largely from orderly marketing. After that, and of increasing im portance, come the gains from standardization. Business Methods and Service Cooperative commodity marketing is but tin application of the known successful business prin ciples to the grower’s market. It is better thai the former system because it furnishes a superio product in a more orderly way and returns th profits gained thereby to the farmer’s pocket. % 4 THE FUNDAMENTAL PRINCIPLES ON WHICH WE HAVE ORGANIZED Under the expert guidance of Aaron. Sapiro w e r\e oiganized our Associations on the following isic principles: 1. We have organized by commodity. 2. We have only growers for members. 3. We are Cooperative—one man, one vote, ur associations are ours and we control them. 4. We have a five-year legal binding contract. 5. We pool our products by type and grade, and tch member gets the same price for the same lantity and quality. 6. We are big enough to hire experts to run our isiness and serve us. 3. THE CAUSE AND HISTORY OF THE FORMA¬ TION OF OUR COTTON AND TOBACCO CO¬ OPERATIVE MARKETING ASSOCIATIONS TJie Speculative Market Failed Although the demand and use of our cotton and tobacco have increased steadily the last quarter century, the economic history of the growers dur¬ ing that period has been a succession of want, misery, and poverty. Since 1896 four campaigns for crop reduction have been waged by the cotton growers, only to find a few years later the world famishing for cotton at satisfactory prices. Th< experts of the United States Department of Agri¬ culture find that during the last quarter century tobacco growers have made money five years broke even five years, and lost money fifteen. The Results of This Failure These bad economic conditions among the cot¬ ton and tobacco growers have resulted in robbery of the soil and robbery of the women and children The fertility has been taken from the soil and tin chances for betterment taken from the women anc children. The women and children have gone tc the cotton and tobacco fields instead of to tin homes and schools, and the standards of living ii the country have lagged behind. The Attempts to Improve Many attempts have been made to improve thes» bad economic conditions among the growers 6 Farmers’ Alliance pools and warehouses, Farmers’ Jmon pools and warehouses, acreage reduction armer-owned stores and other methods were tried o improve these conditions among the growers, >ut their results were only minor and temporary! War-Time Prices Then came the war with its prices, and the ;rowers forgot their troubles. Cotton rose from i low of 6 cents in 1914 until in 1919 it reached peak of 43 cents a pound, and tobacco rose from n average in the three states, Virginia and the larolinas, of 10% cents a pound in 1914 to 45% ; ents a pound average for 1919. Then Came 1920 In 1920 a crop of tobacco which had an esti¬ mated cost of production in the three states of 0 cents a pound was sold for an average of about 0 cents a pound, and cotton with an estimated i>st of production of 30 cents a pound sold for as >w as eight cents a pound. This complete cok ^ ipse of the growers’ market convinced all think- ig farmers that there was no remedy for the >eculative system but abolishment. Campaigns > r acreage reduction of cotton and tobacco began ^mediately and meetings were held to solve the tuation. Aaron Sapiro Came Some one had heard that California, a great pficultural State, had not suffered from the 1920 fllapse as had other sections of the country, and at even in 1920 four out of five California 7 growers made money. An investigation was made and it was found that California growers at¬ tributed tbeir 1920 prosperity to the fact that eacli year they sell around three hundred millions of dollars of their product through cooperative commodity marketing associations. California growers were asked to send Virginia-Carolina growers their best expert to teach them this sys¬ tem of cooperative commodity marketing. .Thus came Aaron Sapiro. Cooperative Commodity Marketing Was Adopted Aaron Sapiro explained this plan of cooperative f commodity marketing to Virginia growers at Lynchburg, January 11,^1921; North Carolina 1 growers at Raleigh, January 12 and 13, 1921, and South Carolina growers at Florence, January 14 1921. Sapiro also told the growers in these meet¬ ings how agriculture and rural life had developed in California with group marketing, how the average California farmer produced $5,000 worth of products each year, compared to $2,300 average for the United States, and how California grew $309 worth of crops for every man, woman, and! child living on the farms, vdiich v T as $110 mort per person than was produced in Kansas, the nexl highest State, and almost four times as much as the per capita production of certain cotton anc tobacco producing states. He told them how croj values in California had declined less than anj State in the Union, and of splendid roads, schools churches, and homes the prosperous Californh farmers had built. Listening to these almost un 8 believable facts, the growers in their mass meet¬ ings adopted the cooperative commodity market¬ ing plan, the contract was drawn up, organization committees .appointed, and the movement was under way. The Sign-Up Campaigns The organization committees of the Tobacco Growers Cooperative Association and the North i Carolina Cotton Growers Cooperative Association vere given until January 1 , 1922, to complete the pign-up of growers of SO per cent of the tobacco md growers of two hundred thousand bales of ;otton in 1920 in order to make the contracts valid. The living history of these great campaigns vaged by the farmers themselves in the face of Te vicious opposition by certain of the specula- five interests will never be blurred in the minds of my who took part therein. Suffice to say, the pal was reached by January 1 , 1922, and the dinners’ organizations emerged victorious with >5,000 members of the tobacco association and 56,000 members of the cotton association. Janu- r y h 1923, 85,00 0 growers compose the tobacco issociation, and 32,000 growers compose the cot¬ on association. >\ 9 4. DESCRIPTION, CONTROL, AND FUNCTIONS OF OUR ORGANIZATIONS The Organization and Control of the Central Office; The central office of the tobacco association con sists of a warehouse, a leaf, a finance, a legal, an( a field service department. The central office of the cotton association con sists of a warehouse, a sales, a finance, a legal, anc a field service department; The central office of the tobacco association if controlled by 25 directors, 22 of whom are electee by the members and three of whom are appointee by the governors of the three states to safeguare the interests of the public. Officers of Tobacco Association T. C. Watkins, elected director from Halifax County, Virginia, is in direct charge of the ware house department. R. R. Patterson, formerly head of the leal department of the American Tobacco Company is in direct charge of the leaf department. Oliver J. Sands, public director appointed b^ the Governor of Virginia, is in direct charge oi the finance department. Aaron Sapiro is general counsel, and he has direct charge of the legal department. Associated with him is Major W. T. Joyner of Raleigh, K C. M. O. Wilson, secretary of the association elected director from Charlotte and Prince Ed- 10 ward counties, Virginia, is in direct charge of the held service department. Supervising these department heads are the 25 directors who safeguard the interests of the mem¬ bers and of the public. George A. Norwood, elected director of Goldsboro, North Carolina is president of this board of directors. Officers of Cotton Association dhe central office of the cotton association in Raleigh is controlled by 11 dir ectors. 10 of whom iare elected by the members and one appointed by the Governor of North Carolina to safeguard the mterests of the public. . The direct executive head of the cotton asso¬ ciation s central office is the general manager, P"* T. Blalock, of Wadesboro, prominent business |nan and farmer. He was a member of the or¬ ganization committee, and was a pioneer in the' cooperative movement. B. E. Brown, former director of markets for he State of North Carolina, is in direct charge of he cotton department, which looks after the stor- ng, insuring, grading, and transportation of •otton. Lawrence MacRae, experienced cotton mill man, s sales manager of the association. Ashley E. Bing, former national bank examiner, vho is secretary-treasurer of the association, is in harge of the finance and accounting departments. Aaron Sapiro is general counsel and has direct harge of the legal department. Associated with lim is Cale K. Burgess of Raleigh, N. C. A" ~ir A Homer H. B. Mask, formerly connected with the North Carolina Agricultural Extension Serv¬ ice, lias direct charge of the field service depart¬ ment. Supervising these department heads are the eleven directors who safeguard the interests of the members and of the public. W. H. Austin ot Smithfield is president of the board of directors. The Functions of the Departments The warehouse departments of the two associa¬ tions provide the ways and means of receiving and storing cotton and tobacco, and are responsible foi it while it is passing from grower to manufac¬ turer. Insurance is carried on both warehouses and product in order to safeguard the grower and the banker who lends money for advances. The leaf department of the tobacco association grades the tobacco into pools, the standards for which have been set up after the most careful study in cooperation with the manufacturers and con¬ sumers. The warehouses are owned and controlled by subsidiary corporations, and the plan of or¬ ganization contemplates their eventual ownershi by the growers. Cotton is stored in government-licensed and bonded warehouses, and the grading is done by expert graders under government supervision, am according to government standards. All ware housemen are bonded, and they work under govern ment regulations and under government inspec tion. This is made possible by the State-licensee warehouse system, which is used exclusively by the cotton association. 12 A careful study of supply, demand, and market conditions is made and steps taken to sell the product at a fair price for the grower. The sales policies are determined by the boards of directors of the respective associations, with the advice of experts, who are in touch with conditions affecting the market. Expert sales managers have been employed to give their entire time to this impor- ;ant work. The finance departments secure the funds for ~ advances, and when sufficient sales are made, re¬ pay these loans and make returns to the growers *or each pound delivered to the associations. 5very man connected with these departments charged with handling funds is heavily bonded. The legal departments guide the whole organi- ;ations in its contact with legal matters and pay pecial attention to growers who violate their igreements with their neighbors by selling on the >utside. ! The field service departments aid the growers n increasing the membership, furnish the growers fith information regarding their association, upervise the organization of locals and county nits, keep the central organizations informed as o the needs and desires of the growers, furnish re growers with information and aid in improv- tig and standardizing tlieir product, and in many rays help the growers to control their &ssocia- ions, to improve their products, and to make arming pay. The field service departments, by leir intimate contact with the growers, are en- bled to render them valuable service. 13 The Organization of the Growers Every grower is a member of a local, whic meets regularly at the schoolhouse. Each loct lias a chairman, vice-chairman, and secretary These local officers and other delegates compos the county association, which meets regularly one a month at the courthouse. The Function of the Local and County Units These local and county units have five mai functions. These functions are : 1. Securing deliveries and maintaining the lo^ alty to the associations by educating their men bers regarding cooperative marketing. 2. Increasing the membership of the assoch tions. 3. Controlling the associations by reporting 1 the directors and department managers all ineb ciency and disloyalty of employees and otherwh advising with their directors. 4. Improving the product by adopting standar seed, better methods of production and harvesting 5. Reporting all statistics as the departmei managers shall request. 14 SOME QUESTIONS ASKED AND THEIR ANSWERS I Wliat are locals? I They are branches of the associations composed only F growers, officered only by growers, and their pur- ose is to promote cooperative marketing and better irming. I Why is it necessary to have local and county organi- jitions? ■ Because the cotton and tobacco associations are imposed of growers, are run by growers, and exist |>lely to benefit the growers. In order to act intelli- ?ntly, members must be informed, and must also scuss the many problems connected with cooperative I arketing. If it were possible, it would be better to ive all the members come together in one place, be next best thing is the community unit. Here embers may get reports from headquarters, discuss em, and make suggestions as to the future conduct ! the associations. (Does the marketing agreement and contract comply I law. Absolutely so. It has been submitted to and has )od the test of inspection by the State courts and e Federal Trade Commission, and it has been ex- lined by competent attorneys and judges and pro- unced legal, fair and reasonable. i Why is it necessary to have a five-year contract? For a number of excellent reasons. One is to insure it all of the members will stick for that long a time, iiother is to insure that the associations will have a finite volume of business, so that an adequate selling organization can be set up and maintained. A third reason is that it will not pay to go into associations of this sort except for at least five years, so that the amount of business done during that time will reduce the overhead expense necessary to get them started A fourth reason is that competent salesmen and mana¬ gers cannot be hired for just one year. A fifth and very important reason is that manufacturers, export¬ ers, bankers and others will not do business with an organization that will remain in business for only a short time. Can a member sign for half or part of his crop? He cannot. Would you want to give any member the privilege of selling half or part of his crop througl the association and of selling the other part to a speculator who would work directly against the asso¬ ciation? What does a member obligate himself to do whet he signs the marketing contract? To sell all of crop through the association for a period of five years. What happens to the member if the association goes into court to prevent breach of contract? The grower not only has to pay liquidated damages for breach of contract, but he also has to pay all costs of suits and is restrained by injunction from selling outside of the association. Why are these cooperative associations made s( strong ? To prevent the weak-kneed from sliding out and t< prevent any possible breaking of the associations. Als< to prevent outsiders and speculators from tempting 16 y temporary high prices, members to forsake the ssociations and thus to destroy them. How much do the associations charge for handling, rading, warehousing and selling the cotton of mem- ers? Not a cent more than it actually takes to do this ^rvice. Each member will get the maximum net pro- seds for his crop, less the actual cost of running the ssociation. What about damaged cotton or tobacco? If the damage is the result of carelessness on the art of the member, such loss will be charged against ,ie member. If the damage occurs after the cotton or |»bacco is delivered to the association, the association ill stand the loss. This is one of the risks that every psiness undertaking has to take, but by storing in arehouses and insuring it, this source of loss will be inimized or eliminated entirely. Will the associations hold cotton and tobacco? Yes, if it is necessary to do so, but they are not I tiding institutions, and their purpose is to sell the op at such times and in such amounts as will best rve the interests of members. Do the associations guarantee the member any rtain price? jThey dojiot. The contract provides that the associa- >n will sell the members’ cotton or tobacco at the st price obtainable on the market. Neither the sociation nor any one else can guarantee what the Jirket will be. Why are the cooperative associations called non- bfit? i 17 Because all of the money received from sales after the expenses of selling are paid goes to the grower. He receives all that his cotton or tobacco brings, less the expense of selling it. Will my good grades of cotton and tobacco bej30ol§d ( with the sorry grades of my neighbors? No. All cotton and tobacco of similar grade and class is pooled together, insuring to each grower of good products the benefit he merits from his care in improving it. All members whose cotton or tobacco is of the same grade and class will receive the same price. Do I have to pay interest on money that is borrowed to make advances on cotton and tobacco? Yes, you will have to pay your pro rata share ox the interest. Interest on borrowed money is included as a part of the overhead cost of operating the asso ciation. This is exactly the same as is done by any other business organization. Suppose I do not take my cash advance when 1 deliver my cotton or tobacco, will I get interest on the amount of money to which I am entitled but which 1 leave with the association? No. The boards of directors found it would provt too costly to undertake to open up so many smal borrowing accounts; and, therefore, all members wer earnestly urged to take their advance when the, delivered their cotton or tobacco. It was also desire to distribute the advances as widely as possible ii order that business might be stimulated. Money tend 1 to flow toward the large business centers; cooperativi marketing seeks to keep money well distributed in ai orderly manner to help stabilize conditions. 18 & oc Hi CONTRACTS BASIS OF BUSINESS Membership contracts of the cotton and tobacco ssociations are the basis of their existence. With- ut them there would be no assurance of a suffi- ient volume of business to justify setting up ma- hinery for handling it. It is evident that they must be binding con¬ tacts. This fundamental principle is not con¬ ned to cooperative selling associations. It ap- lies to all modern business undertakings. If len entering into agreement to do or not to do a mtain particular thing, which is all that a con¬ tact is, were permitted to violate their solemn romises at will, orderly conduct of ordinary busi- ess affairs would he impossible. Confidence ould be broken down, and without confidence lere could be no stability. Destroy confidence pd stability, and you destroy all business. I Contracts become mere scraps of paper if they be not enforced. Checks on a hank would he orth nothing unless there are funds to meet them jhen they are presented for payment and they re accepted. In ordinary business relations, [ ' ecks are treated in the same way as money, hut is because of the reasonable assurance that those gning them will keep their solemn obligation. Sacredness of contract, then, is not peculiar to •operative selling associations. It holds for all isiness. It is to the everlasting credit of the j.rmers that they have given the.lie once for all i the slanderous charge that they will not keep 19 * their solemn obligations. The fine record made by the cotton and tobacco associations the past year shows that farmers are as careful to keep their word as any other class of people. The courts of every state, including North and South Carolina, and Virginia, wherever the va¬ lidity of one of our contracts has been brought before a judge, have held without exception that the agreements made by growers to market their own products are fair, reasonable, just and legal. It has been uniformly held that farmers have the same right to make contracts that anybody else has, and that it is not special privilege to permit him to organize for the orderly sale of his cotton and tobacco. LOYALTY MUST BE WATCHWORD Compliance with the contract by members of cooperative associations, however, is the negative side of the proposition. There ought never to he any question about it. There will not be in the future. It will be taken for granted that when a grower of cotton and tobacco signs a contract of membership, he is going to live up to his contract. But that is not enough. In order to grow and prosper, the cooperative associations must have the active, positive, loyal support of members. They must do more thar keep their contract. They must put their should¬ ers to the wheel and make the associations live living, breathing organizations. They must meei with other members and thresh out with them the many problems that must be solved before tin 20 cooperative associations can achieve their highest and best success. Loyalty to the associations does not mean that a member must calmly submit without a murmur of protest to had treatment he may receive, either in¬ tentionally or unintentionally, from those who have been placed in charge of the selling organiza¬ tions. It is his business to kick, if he feels that he isn’t receiving a square deal, hut it should be con¬ structive criticism. He should endeavor to kick in a way that a similar mistake will not be made again. He should have the good of the associa¬ tion at heart with a view always to helping it to give good service to members. It will aid materially in building up the morale jof the associations and in facilitating attention to | complaints, if they are made through duly elected officers of local organizations. It will give greater weight to a complaint and will enable other mem- jbers to have the benefit of the information. Help your associations to give good service by attending Imeetings of your locals. I i 21 LOCAL ORGANIZATIONS If You Live in South Carolina In counties growing both cotton and tobacco, local units are joint organizations of members of the To¬ bacco Growers Cooperative Association and the South Carolina Cotton Growers Cooperative Association. For information about locals in this territory, write to W. E. Lea, Tobacco Growers Cooperative Association, Florence, S. C., or to H. C. Booker, S. C. Cotton Growers Cooperative Association, Columbia, S. C. If You Live in Eastern North Carolina In a county where both cotton and tobacco are grown, local units include members of both the North Carolina Cotton Growers Cooperative Association and the Tobacco Growers Cooperative Association. For information, write to either association at Raleigh. N. C. If You Live in Western N. C. or Virginia In this territory, where no cotton is grown, local units comprise only the members of the Tobacco Growers Cooperative Association. For information, write to Raleigh headquarters of the association. If You Live in the Southern Piedmont North Caro¬ lina In these counties, where no tobacco is grown, local units comprise only members of Cotton Association. For information, write to H. H. B. Mask, N. C. Cotton Growers Cooperative Association, Raleigh, N. C. 22 PUBLICATIONS Literatiue on cooperative marketing is becom¬ ing voluminous, and numerous books on the sub- I ject oi marketing have recently come from the ■j press. As a beginning for a study of this subject, i the following two books are recommended: “Efficient Marketing for Agriculture,” by T. Mack- ) lin. Published by Macmillan Co., New York. Price, , $3; postage, 10 cents. i “Cooperation in Danish Agriculture,” by Faber. Published by Longmans, Green Co., New York Price £3.25. These two books will furnish a ground work, ] but for those wishing a more thorough knowledge j[>f the beginnings of this important cooperative movement, we recommend : “Marketing Agricultural Products,” by Hibbard. Published by D. Appleton & Co., New York. Price, >2.50. “Cooperation in Agriculture,” by Powell. Published 1 )y Macmillan Co., New York. Price, $2.50; postage, 0 L0 cents. l( “Denmark, a Cooperative Commonwealth,” by Howe. Published by Harcourt, Brace & Co., New York. Price, $2. '■ “How Farmers Cooperate and Double Profits,” by Poe. Published by Progressive Farmer Publishing jj So., Raleigh, N. C. Price, $1. 1 Except where noted, the price includes the post¬ age. These books may be ordered direct from the aublishers or they may be ordered through Alfred Williams & Co., Raleigh, E”. C. 23 BULLETINS Important bulletins published by the Bureau of Agricultural Economics, Department of Agiicul- ture, which may be obtained for the price named from the superintendent of documents, Govern¬ ment Printing Office, Washington, D. C., are as follows: “One Variety Cotton Communities,” by O. F. Cook, U. S. Department of Agriculture Bulletin, No. 1111. Price, 10 cents. “Legal Phases of Cooperative Associations,” by L. S. Hulbert, U. S. Department of Agriculture Bulletin, No. 1106. Price, 15 cents. “Producers Cooperative Milk Distributing Plants, by O. B. Jesness. U. S. Department of Agriculture Bulletin, No. 1095. Price, 10 cents. “Cooperative Grain Marketing,” by J. M. Melil. U. S. Department of Agriculture Bulletin, No. 937. Price, 5 cents. “The Organization of Cooperative Grain Elevator Companies,” by J. M. Mehl, U. S. Department of Agriculture Bulletin, No. 860. Price, 10 cents. “Cooperative Marketing,” Farmers’ Bulletin, No. 1144, U. S. Department of Agriculture, Washington, D. C. “Three Centuries of Tobacco.” Separate 805 Year¬ book, U. S. Department of Agriculture, 1919, Wash¬ ington, D. C. “Tobacco Culture.” Farmers’ Bulletin 571. “Authorizing Associations of Producers of Agricul¬ tural Products,” from Congressmen. H. R. 2373. 24 OTHER BULLETINS Write direct^ to the address indicated if you want the bulletins named : Report of American Cotton Association, 1920. Har- vie Jordan, St. Matthews, S. C. Marketing Problems of Minnesota Farmers,” by Hughes, State Department of Agriculture, St. Paul. Minn. “Tobacco Marketing in United States,” by E. H. Matthewson, U. S. D. A., Bureau of Plant Industry, Washington, D. C. PERIODICALS First-hand information on the sound principles of cooperative marketing and important news about its development is carried every week by The Progressive Farmer, Raleigh, 1ST. C., subscrip- pon, $1. Without exception, agricultural papers are keeping in touch with cooperative marketing, and irticles on the movement have found thei/way nto practically all magazines and periodicals of wery class during the past year. Start today to establish a library on cooperative narketing. It will be the means of obtaining >ractical information that you should have. SOURCES OF INFORMATION From time to time state and national agricul- ural departments issue publications of interest to obacco and cotton growers, and with the present nterest in cooperative marketing these depart- 25 ments may issue more bulletins on cooperative marketing. Your Congressman may be able to supply you with bulletins issued by the U. S. Department of Agriculture at Washington, D. C. Write, also, to your State Department of Agri¬ culture, to your State College, or Agricultural Extension Service. A list of addresses follows: George Y. Koiner, Commissioner of Agriculture, Richmond, Ya. John R. Hutcheson, Director of Extension, Blacks¬ burg, Ya. \V. A. Graham, Commissioner of Agriculture, Ra¬ leigh, N. C. B. W. Kilgore, Director N. C. .Agricultural Exten¬ sion Service and Experiment Station, Raleigh, N. C. U. Harris, Commissioner of Agriculture, Columbia S. C. W. W. Long, Director Agriculture Extension Work, Clemson College, S. C. Tobacco Experiment Station, Oxford, N. C. i ( t 26 SOUTHERN COTTON COOPERATIVE ASSOCIATIONS Alabama Farm Bureau Cotton Association, Mont¬ gomery, Ala. Arizona Pimacotton Growers Association, Phoenix, Ariz. Arkansas Cotton Growers Cooperative Association, Little Rock, Ark. Georgia Cotton Growers Cooperative Association, Atlanta, Ga. Mississippi Farm Bureau and Cotton Association, Jackson, Miss. North Carolina Cotton Growers Cooperative Asso¬ ciation, Raleigh, N. C. Oklahoma Cotton Growers Cooperative Association, Oklahoma City, Okla. South Carolina Cotton Growers Cooperative Asso¬ ciation, Columbia, S. C. Texas Farm Bureau Cotton Association, Dallas, Tex. These nine state cooperative selling associations are affiliated with the American Cotton Growers’ Ex¬ change, of Dallas, Tex., which acts in a general super¬ visory capacity with a view to preventing duplication of effort in securing information about market con¬ ditions and methods of business. 27 PRICES OBTAINED BY PRODUCERS OF COTTON, 1915-1921 (Averages compiled by the Bureau of Crop Esti¬ mates, Department of Agriculture. High and low prices from New York Exchange.) Year Average Low High 1921 . 16.90 12.80 23.75 1920 . 15.84 10.85 40.00 1919 . 35.36 27.00 43.00 1918 .;. 28.76 25.00 38.20 1917 . 27.12 21.20 36.00 1916 . 17.28 13.36 27.65 1915 . 11.22 9.20 13.45 COTTON PRODUCTION IN UNITED STATES Year Bales 1921 . 7,953,641 1920 . 13,439,603 1919 . 11,420,763 1918 . 12,040,532 1917 . 11,302,375 1916 .:... 11,449,930 1915 . 11,191,820 28 Cotton Acreage and Production by States, 1921 States. Acres. Bales. Virginia. 34,000 17,000 North Carolina_ . 1,403,000 776,000 South Carolina____ 2,571,000 755,000 Georgia_ __ 4,172,000 787,000 Florida.._ 65,000 11,000 Alabama . ... . 2,235,000 580,000 Mississippi_ . . 2,628,000 813,000 Louisiana.. ... 1,168,000 279,000 Texas.. .. 10,745,000 2,198,000 Arkansas..,. 2,382,000 797,000 Tennessee__ _ . . .. 634,000 302,000 Missouri...... 103,000 70,000 Dklahoma. .... 2,206,000 481,000 California__ _ 140,000 34,000 Arizona... __ _ .. ___ 90,000 45,000 til others_ . .. _ _ 18,000 9,000 United States___ 30,509,000 7,954,000 29 North Carolina Cotton Crop by Counties, 1922 Furnished by cooperative crop reporting service of U. S. and N. C. County. Production Bales, 1922. County. Production Bales, 1922. Alamance.__ .. 1,463 Johnston_ / 55,447 Alexander____ 1,469 Jones___ _ 3,448 Anson.... 24,679 Lee__ _ 8,394 Beaufort. .. _ . .. 12,291 Lenoir... .. _ 11,604 Bertie___ 13,766 Lincoln_ _ .. _ 9,097 Bladen... 6,626 Martin___ 8,850 Brunswick.. . _ 30 Mecklenburg. __ 19,490 Burke_ __ 337 Montgomery__ 4,686 Cabarrus... _ 11,897 Moore__ 3,664 Caldwell___ 72 Nash_ __ 27,207 Camden_ _ .. 1,950 New Hanover_ .. 440 Carteret___ 1,207 Northampton_ _ 21,037 Catawba_ __ 10,613 Onslow.. ___ 3,661 Chatham.. . __ 8,581 Orange . 1,538 Chowan_ __ 5,545 Pamlico.. 4,167 Cleveland. . . _ 35,128 Pasquotank .. _ 4,482 Columbus.. .. 1,031 Pender__ _ 1,874 Craven... __ 4,284 Perquimans 6,146 Cumberland_... . 20,665 Pitt.. ... 22,195 Currituck_... . 628 Polk_ 2,809 Dare_ . _ 14 Randolph. 1.170 Davidson .. ... 1,961 Richmond. 26,733 Davie_ . . 2,396 Robeson. 41,708 Duplin.. _ . . v 6,866 Rowan. 11,675 Durham__* 850 Rutherford 11,950 Edgecombe... . 37,624 Sampson.. 28,759 Forsyth ___ 99 Scotland. 26,987 Franklin... 16,415 Stanly__ 7,506 Gaston_ ... .. 10,929 Tyrrell. 2,386 Gates_ __ 5,538 Union.. 24,118 Granville... :__ 1,774 V ance. 3,757 Greene_ .. 9,073 Wake... 28,606 Guilford _. _ 186 Warren.. 13,846 Halifax... 27,615 Washington 3,953 Harnett. 28,303 Wayne_ 24,895 Hertford.. 9,560 Wilson. 24,819 Hoke 15,713 Hyde_ 3,532 State total 852,356 Iredell. 18,546 30 Comparative Prices Tobacco Crop in Four States Per 100 Pounds on Auction Floors Year North Carolina South Carolina Virginia Georgia 1910 _ $ 10.60 % 8.52 $ 9.00 $. . 1911 .. 11.60 12.18 9.60 1912 . 16.00 10.90 12.00 1913 18.50 13.76 13.90 1914 . _ 11.50 9.83 9.00 1915 11.20 7.28 9.40 1916 ' 20.00 14.11 14.90 1917 31.50 24.09 26.50 1918.-...-_ 35.10 31.06 27.00 31.50 1919_ 53.60 20.10 47.40 17.73 1920. 21.28 23.80 24.00 23.14 1921.__. 24.57 11.21 20.50 8.87 1922*_ 30.30 23.00 24.00 26.00 ♦Figures for 1922 are December 1st prices. 31 Tobacco Production and Average Price for All United States, 1880-1922 Year 1880- 1890- 1900- 1901- 1902- 1903- 1904- 1905.. 1906- 1907- 1908- 1909- 1910- 1911- 1912.. 1913.. 1914- 1915- 1916- 1917- 1918- 1919.. 1920- 1921- 1922* Pounds 506,663,000 457,881,000 814,345,000 818,953,000 821,824,000 815,972,000 660,461,000 633,034,000 682,429,000 698,126,000 718,061,000 1,055,133,000 1,103,415,000 905,109,000 962,855,000 953,734,000 1,034,679,000 1,062,237,000 1,153,278,000 1,249,276,000 1,439,071,000 1,465,481,000 1,582,225,000 1,075,418.000 1,324,840,000 Average Price Per Hundred $ 6.00 6.90 6.60 7.10 7.00 6.80 8.10 8.50 10.00 10.20 10.30 10.10 9.30 9.40 10.80 12.80 9.80 9.10 14.70 24.00 28.00 39.00 21.20 19.90 23.10 •Figures for 1922 are preliminary estimates. 32 Comparative Production Tobacco Crop in Pounds by States from U. S. Department of Agriculture Estimates Year North Carolina South Carolina Virginia Georgia 1840..... 16,772,000 1850_ 11,984,000 1860_ 32,853,000 1870_ 11,150,000 43,761 000 1880_ 26,986,000 78,421 000 1890_ 36,375,000 77,405 000 1900_ 127,503,000 105,543 000 1910_ 120,000,000 18,802,000 149,760,000 1911_ 99,400,000 11,101,000 128,000,000 1912_ 110,980,000 24,337,000 112,200,000 1913_ 167,500,000 33,299,000 154,000,000 1914_ 172,250,000 39,478,000 113,750,000 1915_ 198,400,000 37,924,000 144,375,000 1916_ 176,000,000 20,079,000 129,200,000 1917_ 249,033,000 51,080,000 129,500,000 1918_ 306,105,000 62,173,000 165,550,000 3,000,000 1919_ 323,371,000 81,156,000 119,780,000 10,327,000 1920... 431,531,000 66,342,000 179,580,000 9,667,000 1921_ 251,682,000 43,533,000 91,850,000 5,039,000 1922*_ 306,940,000 57,600,000 156,750,000 5,940,000 •Figures for 1922 are preliminary estimates taken from Tobacco. 33 AMERICAN TOBACCO GROWERS COOPERATIVE EXCHANGE James C. Stone, President M. O. Wilson, Secretary . Lexington, Ky. ...Raleigh, N. C. Members Burley Tobacco Growers Cooperative Association Lexington, Ky. Tobacco Growers Cooperative Association, Raleigh N. C. Canadian Tobacco Growers Kingston, Ont. (Canada). Cooperative Association, Connecticut Valley Tobacco Growers Association, Hartford, Conn. Northern Wisconsin Tobacco Growers Cooperative Pool, Madison, Wis. Dark Tobacco Growers Cooperative Association, Hopkinsville, Ky. 34 NATIONAL COUNCIL OF FARMERS COOPERA¬ TIVE MARKETING ASSOCIATIONS American Cotton Growers’ Exchange, Arizona Pima Cotton Growers, Texas Farm Bureau Cotton Associa¬ tion, Oklahoma Cotton Growers Association, Arkansas Cotton Growers Cooperative Association, Alabama Farm Bureau Cotton Association, Georgia Cotton Growers Cooperative Association, South Carolina Cot¬ ton Growers Cooperative Association, [North Carolina Cotton Growers Cooperative Association, American Tobacco Growers Exchange, Burley Tobacco Growers Cooperative Association, Dark Tobacco Growers Co¬ operative Association, Tobacco Growers Cooperative Association, Connecticut Valley Tobacco Growers As¬ sociation, Northern Wisconsin Tobacco Growers Co¬ operative Pool, Maryland Wheat Growers Associated, Washington Wheat Growers Association, Idaho Wheat Growers Association, Montana Wheat Growers Asso¬ ciation, Oregon Cooperative Grain Growers, Arizona Grain Growers, North Dakota Wheat Growers Asso¬ ciation. Texas Wheat Growers Association, Colorado Wheat Growers Association, Nebraska Wheat Growers Asso¬ ciation, New York State Sheep Growers Cooperative Association, Texas Farm Bureau Wool Growers Asso¬ ciation, Pacific Cooperative Wool Growers, Pacific Egg Producers, Poultry Producers of Central California, Poultry Producers of Southern California, Pacific Cooperative Poultry Producers, Washington Coopera¬ tive Poultry and Egg Producers, Southwest Georgia Watermelon Growers Association, Texas Watermelon 35 Growers Association, Florida Watermelon Growers Association, Texas Sweet Potato Growers Exchange, Texas Ribbon Cane Syrup Association, Texas Alfalfa Growers Association, California Peach and Fig Grow¬ ers, Arkansas Rice Growers Cooperative Association, National Milk Producers Federation, Maryland State Dairyman’s Association, Dairyman’s League of New York, Maryland-Virginia Milk Producers’ Association, and Peanut Growers Association (Virginia and North Carolina). 1 36 COOPERATIVE MARKETING By Aaron Sapiro of California From an address to tobacco growers made at Danville, Virginia, May 14, 1921 I am going to tell you the story of tbe raisin busi¬ ness in California, and for once we are going to talk about raisins without somebody asking bow much yeast does it take, bow long does it bave to set, etc. You know raisins are produced in one section of Cali¬ fornia ; tbis section contains something less than 10,000 square miles, but that is quite a big section of that State, and it so happens that in that section of- California they produce these tbin-skin grapes which authorities say are the best raisins in the world. They found that out in 1880, and they started these great vineyards, and men came from the East and from the Middle West and from all over the country to buy vineyards and plant raisins. By 1900 they reached the point where there was an overproduction of raisins. They produced about 40,000 to 50,000 tons of raisins and the consumption was only about 30,000 tons. There were only about ten firms to whom the growers could sell the raisins. Some of the raisins come without seed and some come with seed and are seeded; others come in clusters and they have ;o be spread out and dried and processed, and then >ut up in large boxes or cartons before they can go to ;he consumer. There were ten packing plants. Five vere great big ones, called the “High Five,” and five vere owned by smaller firms, called the “Low Five”; ind in California if you didn’t sell your raisins to the 37 High Five or the Low Five you were stuck with raisins and you had to feed them to the hogs. About 1900 they started in with this overproduction and the consumers who could not sell their raisins to the High Five or the Low Five had to keep them and feed them to the hogs. There was nothing else they could do with them. From 1900 to 1912 the growers of California who produced raisins were in just about the same situation that you men are—they' had no real form of organization; they were just absolutely at the mercy of the buyers. Between the years 1900 and 1912 there was never a crop of raisins that pro¬ duced a profit to growers of raisins as a whole in the State of California. Between those 12 years was the dark period of the raisin industry in that State. A buyer would call on a grower about February, and nobody on earth in February can tell what the crop of raisins is likely to be. He would say, “Now John, I have been up and down the State, and I want to tell you we are going to have a whale of a crop in Cali¬ fornia this year.” John would say: “How does that interest me?” He would say: “The consumption is only about 30,000 tons of raisins, and it looks like we are going to have a crop of 50,000 or 60,000 tons of raisins. Our firm is going to buy only about 3,000 tons of raisins, and when we buy our 3,000 tons we are not going to buy another pound.” In those years there was a very peculiar coincidence. No more than one buyer would ever call on any one grower. Two buyers never went to one grower in any one of those sections, so a fellow knew if he did not make a bargain with that buyer he would be gone and he wouldn’t sell his raisins. The buyer would come back in March and say, “John, I have been down 38 through the State, to all the different towns, and everywhere I go the signs are the same, and you can see it is going to be a huge crop. That means that half the growers are going to feed their raisins to the hogs. You have got to be thinking about selling your raisins. We are going to put you on our list and we will buy your raisins.” John says, “I will talk about selling when you can talk a good price to me.” So the buyer goes away and John would lean over the fence and say to his neighbor, “Bill, what have you been hearing about the crop?” And Bill would say: “A buyer was down to see me and he said we would have a crop of about 50,000 tons, and there would be a big overpro¬ duction, and that if I didn’t sell to him I would feed my raisins to the hogs.” And John would say, “That | is the very thing the buyer told me.” Strangely enough Bill and John would have heard exactly the same story from different buyers. Of course, men, I do not say that the buyers got together, but it is very queer how often they would agree on ; figures. About a week later the buyer would come back to John and say, “John, we are ready to make a contract for raisins.” John says, “We will see about it—what will you pay me?” The buyer says, “A cent a pound.” John would say, “Ye gods, they have been telling us from the University that it costs from 2 y 2 to 3c a pound to produce these raisins. I cannot sell for that; I owe more than I can possibly pay as it is; I cannot take that price.” The buyer would say, “I tell you we have got to buy our raisins at exactly the same price as our competitors; we cannot pay you any more. I will be back to see you again in about a week and w T e will see if you are ready to sign. In the 39 meantime you talk it over with your wife and your neighbor and your banker and see what you can do.” So John would talk it over with his wife, and John's wife would say, “I do not know anything about the price, but we have got to get things for the house and we need things for the children, and a cent a pound is better than nothing.” And John would say, “Let me talk it over with Bill.” So he would go and lean over the fence again and say: “Bill, what have you been offered for your raisins; I am offered a cent a pound for mine.” Bill would say, “Well, that is funny; I am offered a cent a pound by the other buyer.” So then John would go and talk it over with his banker, and the banker would say: “Now listen, John, a cent a pound is a pretty rotten price for raisins, hut I can¬ not tell you not to sell; and I can’t advise you to sell at that price. I know you owe some money at this bank; I know you have got to pay some interest. That is not my money that you owe, it belongs to my de¬ positors. All I want to tell you is that fall is coming around and the interest is due and I have got to have that interest; but of course I am not going to advise you to sell your raisins at a cent a pound—you have to make the decision.” So he would go back to his home feeling pretty worried. The buyer would come hack the next week and say: “You have either got to sign today or I cross you off the list and will get my 3,000 tons of raisins from the other fellows.” And John would say, “I cannot sell at that price.” The buyer would say, “Well, John, you have always handled your raisins in good condition. If you give me your word of honor that you will not say a word of this to Bill or any other grower, I will make the price to you 1 % c a pound.” And John 40 would break a leg to get to that contract and sign it and the buyer would go off with John’s contract for a cent and a quarter a pound. ! That trick was played all over California because the buyer understands the grower’s psychology. All the grower is interested in its getting a little better price than his neighbor. The buyer plays up to John’s ! psychology and makes him feel that he is smarter than Bill. We have eliminated that in California now. Our growers sell on terms of fair prices for all and not a • little better, secret price than his neighbor. But that is how they worked the raisin game in California. Half of the crop used to be bought under | ^ iese secret contracts, made under your word of honor not to tell anybody. And so John would sell his cio^ August would come and the grapes would show. September would come and the grapes would be har¬ vested. Usually there would be a crop of about 32,000' tons. The packers paid about iy 2 c a pound for the raisins; the packers would sell them from 6c to 8c a I pound; the public would pay up to 18c a pound. The I growers got 8 pennies out of every dollar that the con¬ sumer paid for the raisins, and there was only a half-cent expense in packing, etc., between the grower and the consumer. Under the present plan of co¬ operative marketing the growers get 48c out of every jdollar paid by the consumer. That is why in Cali¬ fornia, fiom 1900 to 1912 every crop of raisins pro¬ duced a big profit for the packers, and every crop of raisins left the grower poorer than he was when the year started. You can take any one of the years between 1900 and 1912, and you can take any one of the counties in 41 which raisins were produced, and there were more mortgages foreclosed in any one of those counties be¬ tween 1900 and 1912 than in all the years in all the raisin-producing counties of California from 1912 to 1921. The great change came in 1912. The growers woke up, fully determined they were not going to be exploited in future years. They determined they were going to get more of the consumer’s dollar without raising the price a cent on the consumer; they de¬ termined they were going to handle their business like business men and not like a lot of disorganized babies. They took up COOPERATIVE MARKETING. At the end of 1912 they had a terrific crop. Prices on raisins went down immediately—in some cases as low as a half-cent a pound to the growers, and over half of the crop was left in the growers’ hands and they w T ere simply broke. Some of the big men figured it out that by 1914 they w r ould be absolutely cleaned out; that they might as well stop right now, sell their vineyards for what they could get, get out of the line and go to some other way of making their living. So they went into town and began to talk to their bankers and their merchants; they began to hold little conferences in every little town around central Cali¬ fornia on the raisin industry; and the most famous meeting they had in Fresno. There was a big meeting in Fresno between the growers, bankers and mer¬ chants. The leading banker got up and said, “You men simply hate me because the only time you ever see me is when you borrow money to loan on your vineyards; and the next time you see me is when you come in to tell me you cannot pay the interest on that mortgage; and the next time you see me is when you come to borrow 42 more money for the next year’s crop. The next time you see me is when you say you cannot pay the interest on eithei loan; and the next time you see me is when I tell you I have to foreclose. So you hate me because you think I am the man to make money out of your losses and misfortune, and do not help you to make any prosperity. I don’t want you to think of me in that way as your enemy; I want you to be my friend. I would rather that you make than lose money. Profits are money to you, you pay your profits to the mer¬ chant and the merchants deposit the profits with the banks. I, as a banker, know that I cannot be a suc¬ cessful banker unless all you growers are successful and unless the merchants are successful; and if you growers will only get together and help yourselves I will put every penny in the world I have behind you, both my money and the money in my bank.” One of the growers said he pinched himself when he heard that— there was a banker telling them he would be willing to put up all of his personal resources be¬ hind them if they would help themselves. Suddenly up spoke the biggest merchant in the town. He said: “I am sick of you fellows; when I ^ame down to Fresno I expected to have a great big, ine, high-class store; I expected to carry fine stocks ind I wanted to have a good store. I wanted to have ■ i store of which you and I could be proud. But as it s now you fellows are not making any money; you are I lot making a living; you don’t buy anything from me a except overalls; you don’t buy anything for your wife except Mother Hubbards; you don’t buy any furniture sxcept the cheapest; you don’t buy any kitchen uten- 3 ils except tinware. The only way I have made money if n the last few years is by buying up mortgages on 43 your vineyards, and then I foreclose on your vineyards and sell your vineyards, and I make a little money that way. But I don’t like to make money that way; I want to make money as a merchant. If you men make money I can get some of your profits and I can put in fine, high-class stuff in my store which you can afford to buy and I can make decent profits. You fel¬ lows have to make profits for yourself so as to enable me to be a real merchant, and I’ve got to be a real merchant to help the bank make profits. If you fel¬ lows will organize, get together, and do something for yourself, I will put every penny I have in the world behind you.” Then came the third big shock to the growers. Fresno has a real newspaper —The Fresno Republican, and they were not making money, and the editor of that paper said: “I have my kick against these grow¬ ers. Why, we have the best paper in California and we can’t make any money on it because you don’t make enough money out of your raisins to be a sub¬ scriber, and the merchants won’t advertise in the paper because they say you fellows don’t take the paper, and you don’t buy anything; so I can’t make any money on advertisements, and I can’t make any money on your subscriptions because you fellows are not making any money. If you will get together and do something to help yourself we will put the columns of our paper behind you absolutely, and every penny that our paper has and every penny that our proprietor has, we will put behind you to help you help your¬ selves.” One of the big growers got up and said: “The bank¬ ers are with us, the merchants are with us, the editors are with us; they all realize that unless the growers. 44 as a whole are making money the community is not piosperous, and now let the growers help themselves ” And this big fellow said: “I wanted to sell my vine¬ yard, and I went down to the real estate firm to see about selling my place. They said, ‘What price do you put on your vineyard?’ I said, ‘$90 to $100 an acre.’ He said, ‘What will it cost to tear out your vines?’ I said, ‘$50 to $75 an acre.’ They told me my vineyard was worth more with the vines out than with the vines in.” Another man got up and said, All of our investments in these vineyards are going to the dogs; let s all get out of it at once and go in some other line.” Men .started up all over the house and said, “We ought to organize.” And they said, “How?” And somebody answered and said, “The orange and almond and walnut growers have organized and they have been successful. All over Europe the growers have been organized for years—Scandinavia and Italy and even paits of Russia, and you will find all the growers organized on all kinds of products.” One of the growers said, “Do you think that we, the American farmers, who are supposed to be the most intelligent people in the world, are backward in these things?” And one fellow popped up and said, “Yes, the Ameri¬ can farmer is 30 years behind in cooperative market¬ ing. My opinion is if they can do it in Europe or any other place in the world, we can do it right here, and do it with raisins.” Some of the growers got up with the usual stuff that you hear—“oranges are different from raisins, and walnuts are different from raisins, and almonds are different from raisins, wheat is different from raisins, and peas are different from raisins and flax is different from raisins.” Of course they are all different from raisins. We all know that the fellow who is telling you that is the fellow who is trying to keep you disorganized, because the same principles which have made successful co¬ operative marketing of other products apply not only to raisins, but to tobacco and cotton and wheat and everything else in the world that men produce. There is not a single grower problem which you cannot solve a whole lot better if you get together than you can solve when you are standing apart. At this meeting in Fresno the growers said the ques¬ tion is to get together. Now here is the method we adopted; it was well suited to their conditions at that time. They decided to form a great big corporation with a million dollars behind it, because they were going to put up a great big packing plant to take the place of the “High Five” and the “Low Five.” You have all these fine, big warehouses, which perform the function of receiving, separating, and grading tobacco. There is no need for the tobacco growers to start to put up warehouses and factories to do it, and we must respect their invested capital just as much as we want them to respect the capital we have invested in the growing line. So I am not suggesting the same plan for tobacco. I am suggesting for tobacco a plan that suits tobacco, just as the plan originally wdrked for raisins suited raisins. So they agreed out there in Fresno to put up about a million dollars to put up raisin packing plants, and they got the growers to tie up with the organization for five years. We found growers associations that just simply rotted away because the growers were tied up for only one year, or because they were tied up on a little weak contract—we found that all over the 46 State. We have had more failures than we.had suc¬ cesses before 1912. Since 1912 we have learned how to do it. These raisin growers said we will not start unless we start right, with a big five-year contract and a tight five-year contract, in which every grower who signs it agrees to deliver over all the raisins he pro¬ duces to the association, and then gives the association the right to grade them into clusters and into the seedless raisins, and then sell the raisins and give to every grower the same as every other grower for the same quality and quantity of raisins. Some of the growers said: “You can’t grade raisins because one man’s raisins are different from another man’s raisins.” Now, you fellows have heard that same thing about tobacco, haven’t you? Now that is the pet argument of the speculator, that nobody can grade the stuff. We all answer back, “What did you tell your buyers to do when they go out to buy raisins? How do they grade them?” They said, “Well, these buyers know how to do it.” We said, “How many?” They said, “We suppose we have 50 or 60 men to grade raisins for us, and you cannot grade raisins.” We said, “If you are able to grade raisins we are able to hire men to grade for us instead of to grade , against us” There has never been a thing which we organized to do which we have not succeeded in doing, and we succeeded absolutely in grading and classing raisins. Remember, whatever the speculator does, you can do. Here is the test. Suppose these fellows who buy tobacco—let us take the Reynolds Company, or any¬ body else—sends out a bunch of buyers. They give these buyers instructions; they tell them what to buy, what type to get, the kind of leaves they should buy. 47 They give these men absolute grading instructions, and these buyers go out by the hundreds, as you well know. You are supporting a few hundred buyers off of your tobacco. They grade tobacco by what we call “buyer’s grades.” If they can do it—it does not take a genius to do it, because there are not 200 geniuses in the whole country at any one time—if they can grade, we can grade; we will get experts to do it for us and not against us. You know the stockholders of Reynolds do not grade tobacco; they don’t have to know anything about grading tobacco; they hire sal¬ aried buyers to get tobacco and grade it. They cannot do anything with the tobacco that you can t do your¬ self. So this grading business we just swept aside, and the raisin growers decided they could grade and they put the grading provision in the contract. Every contract was conditioned upon their signing up 75 per cent of all the raisin acreage of California. Some of the fellows said, “Why do we want 75 per cent?” And we said, “We have either got to get the growers with us as a class or we might as well quit right now.” So they all agreed to sign up this five-year contract for 75 per cent of the crop, under which they pooled their product, graded it, and sold it, and everybody would get the same price as anybody else for the same quality, grade, and quantity of raisins. Well, how do they get the sign-ups? You know a lot of merchants and bankers have already realized that this is not the growers problem alone; it is the problem of the whole community. We realized that point in 1912 in California. So they all worked to¬ gether; the towns closed up their stores, the banks 48 the S f ch00ls cIosed > and they would form grow- . ‘nan'- 5 —t« T o growers and a merchant, two growers tW ° gl '° WerS and a ***». two ,, ' 1 a banker, two growers and a lawyer and they would go out in these teams of three to everv smgle raisin district in the J beeu put over . not by the growers, but by the gi on ers and the community leaders combined because our leaders have decided that if there is any’ agricut tural interest that keeps four out of five of the grow- poor that it is a rotten interest, and it is rotten thirttf, COmmunity ; and they figure that the only - at is good for the community is a thing that makes a profit for at least four out of five growers So our community leaders have devoted themselves to making the growers see the need and advantage of cooperative marketing. So they would send these teams out. The teams went to every town in the whole raisin district It became almost as holy to these people as a religious movement. You talk to a Californian today about cooperative marketing and see what he thinks about it The movement has transformed all of our dis¬ tricts from absolute despair to permanent prosperitv— even during this year. They went all through the raisin districts in Cali¬ fornia. In six months they had signed up 78 per cent of the entire raisin acreage of that State. Not only had they done that, but they had their million dollars. Now how did they get the million dollars? The bankers and merchants put up $300,000. The growers did not have any cash, and they put up $700,000 in notes, and the banks took up these notes and let the farmers have face value on the notes. 49 Suddenly came that awful crop of 1912, which was a 70,000 ton crop. In addition, there were 20,000 tons of raisins on hand from the previous year; and there the association was organized and came into a thing like that the first jump. All the trustees and the directors were raisin growers; they had to be. You know the great safety of a California association is that the directors have all their raisins in the same pools as the smallest fellow. If they want to make a profit for their own raisins they have to make a profit for everybody else. If they want to make a charge on anybody else’s raisins they have to put a charge on their own raisins. Now the directors and the trustees were chosen by the members, and the directors were these big raisin growers, and these directors met at Fresno, and they sat around a table and they looked at each other and they said, “We might as well not fool ourselves. We know we are all fine farmers, that we produce fine raisins, but we all know that we don’t know a blame thing about selling raisins.” They said, “Well, now, that is inter¬ esting, and that is frank.” You see, we know about this business, and right here I want to tell you that is one of the great dis¬ coveries of the California farmers. We are just the same type of fellows as you are, but we know that no farmer in the world knows how to sell his crop. We have got 80,000 farmer cooperators in California, just as energetic, just as intelligent as you, and not one of them tries to sell his own stuff. He would not try to sell it any more than he would try to draw up deeds for his property. So he hires experts to sell his stuff for him. Eighty thousand farmers in Cali¬ fornia, big, prosperous men, have hired men to help 50 them with production, and they hired great big men to help them on marketing. So these directors sat around that table and they said, TV e can t sell this crop, let’s hire some man who can. So they went and talked to their bankers, and the bankers gave them a list of names who were sup¬ posed to be sharks at marketing raisins. They got the name of the man who was the smartest one of the lot, James Madison, and they went to see him. They told him, “You are known to be clean and you are known to be square, and we know you are fond of California, you don t want to see Fresno and all these towns stay dead. You know our towns are jokes; we have to put our wives and children in the field and keep the chil- dren out of school because we haven't the money to | hire help. We want you to help us sell this stuff so we can take our wives and children out of the field and keep our children in school, where they belong.” James Madison says, “Do you know what salary I make a year?” They said, “Yes, we know you make a big one. We will give you a fair salary and we want you to represent us for the sake of California.” He said, “Well, I will go with you, no matter what you pay, but I want you to treat me square.” They said, “What do you think we ought to pay you as a start in salary?” He said, “$17,500 a year, plus a bonus.” The salary, plus the bonus which they paid Madison, amounted to $25,000 a year. The best in¬ vestment that the California farmer ever made was James Madison at $25,000 a year. Don’t you ever dare ask for a fair price for tobacco and deny a fair price for brains. You have got enough tobacco in the world, but you haven’t got enough brains on the farm¬ ers’ side in the tobacco industry. You have got to get 51 them on the same terms that the California farmer did. We always feel that the most important business in California is agriculture. It is not the Standard Oil Company, it is not the railroads, it is AGRICUL¬ TURE. Now the Standard Oil Company and all those fel¬ lows have high-class, efficient men, so do the growers in California. We pay our managers anywhere from $10,000 to $36,000 a year; we get the best men in the country to do our work for us. We need the best brains in the country, and they serve the growers instead of exploiting them. Those men are in the industry right now, but they are on the other side of the fence. The other fellows pay them to exploit the growers; we pay them to serve the growers. Now you growers want to determine that once for all. If you are going to apply this to the tobacco business you are going to build up the biggest business in the United States. If you are going to handle it like a business, you have got to go into the world of brains and compete for brains, compete for ability. You have got to hire big men for marketing and big men for grading, big men for transportation experts, big men at every point of the game. We not only hired Madison, but Madison came and studied the situation, and said, “We have got to have transportation experts, warehouse experts, packing experts.” The growers said they would get them. Then Madison said, “This is a funny business; we have this fine crop and yet we cannot make anything i for a year. I am going to hire a sales analyst and { put him on the job and find out why we can’t sell s raisins, but he will cost a lot of money.” So he called r in a sales analyst and said to him, “Your job is to s 52 answer one question-Wkat is wrong with the raisin hnt'if ^ Sald ’ " That is a P rett y Pig question, Put if you will give me a few months to study it I will answer it for you.” So this fellow went East. He went to every whole¬ saler who handles raisins; he went to all the retailers who handled raisins. He said to the wholesalers, When do you want raisins delivered?” And they said October and November of every year. He went to the retailers and asked them when they wanted raisins delivered, and they said November and Decem¬ ber of every year, that they sold 90 per cent of the raisins in these months and only 10 per cent the rest of the year. He found that was the story in almost every town in the United States. He came back and said, “I have found the trouble with the raisin indus¬ try,” and he showed a chart showing the delivery .dates and the sales date of raisins. He said, “The American people think that raisins are made to eat only three times a year—Thanksgiving, Christmas, and New Year. You have got to teach the American people that raisins are as good in June as they are in November.” He said they had to do two things: first, get a brand for the raisins and then put on a good system of inspection; the second thing was to put on a big advertising campaign in the United States, through magazines, newspapers and billboards, that California raisins are good to eat all the time for every purpose. Whatever it costs, this was the only thing that would save the industry. They told him to go ahead and spend whatever was necessary. They spent a few hundred thousand dollars on advertising raisins, and the first year they were organized they sold that entire 70,000 tons of raisins that they had to 53 sell, plus the 20,000 tons carried over from the pre¬ vious year, and the price to the grower ranged from 314 cents to 31/2 cents a pound. In one year those raisin growers took that dead industry and thej abso¬ lutely put it on its feet, so that the growers of Cali¬ fornia made a real and substantial profit on raisins from the crop of 1912, and since that date there has never been a crop of raisins on which the growers of California have not made a real and substantial profit —not merely an income, but a real profit. Now those fellows were pleased at this, it happened so quick, so they started in to plant more vineyards, and by 1915 the normal crop in California was about 100,000 tons a year. They were afraid the people of the country would not eat that much, so they called in the sales expert again. He said, “We will have to get the people who are eating raisins to eat more raisins, or we will have to get people who are not eating raisins to eat raisins.” He said, “I do not think we can get people who are already eating raisins now to eat more raisins, because we have saturated the field with raisins.” He meant the use of raisins as a food. So he went around and saw all the ladies he could in Fresno. He said, “How do you use raisins?” They said, “Sometimes we make raisin bread, and some¬ times raisin pie and raisin cake.” They showed him some of the raisin bread. It tasted good, and he went back to the board and said, “I have got the answer to it—raisin bread and raisin pie and raisin cake.” He got 15 young fellows who were trained salesmen and called in a baker, and the baker taught those young men how to make raisin bread and raisin pie and raisin cake in a standardized way. He then took 54 those 15 young fellows all over the United States to | the big cities and the big hotels and bakeries, and showed them how to make raisin pie and raisin bread and raisin cake according to a standard recipe. They would go into a bakery and tell the baker how to make raisin bread, and tell him, “All you have to do is to put in a quarter of a cent’s worth of raisins in the bread, and then you sell it for six cents a loaf instead J of the cents; and when your customers come in you tell them the children like bread like that because it has raisins in it, and they won’t want butter, and you wili save more for butter than you spent for the laisins. ’ (Of course that’s hard on you fellows who sell butter.) Then the bakers all over the country began to make raisin bread. The first year they sold a fair quantity to the baker trade; the next year they sold G,0(X) I tons, by 1910 they sold 20,000 tons. This year they are selling 35,000 tons to the baker trade in this I country. Now that is merchandising. I have told you those , things because the growers are the people who can do I it if they wfill stand together. And it is just as true for tobacco as it is for raisins. How is it that the High Five and the Low Five never found these new uses and this great demand for raisins? How is it that they never sent men over to China and Japan to open up markets? The dealer never exhausts the demand for any commodity. He never has to buy the whole tobacco crop. All he has to do is to buy what he can sell. All he has to do is to sell what he has bought. If there is a crop of one hundred million pounds and he has bought only fifty million pounds, all he has to sell is fifty million 55 pounds, and lie can let the growers carry the balance. The grower is the only man who has to sell the whole crop. The grower is the only man who really breaks his neck to extend demand, and that is absolutely true. It is to the dealer’s interest that the supply is always greater than the demand, because if you have the supply greater than the demand in any year, he uses that as an excuse for breaking the price of tobacco, or raisins, or prunes, or oranges, or cotton, or wheat, or any other product in the world, year after year. It is to the dealer’s advantage to have an over¬ production. It is to the dealer’s advantage to see that the world does not absorb that overproduction. The only time that the dealer ever comes to you and asks you to decrease your crop is when the dealer is stocked with tobacco, and he wants you to pull him out of the hole. We have had that experience with industry after industry in California. It is only the growers who, acting as a whole, have learned how to create de¬ mands, who have been able to solve their problems. Our orange growers increased the demand for Cali¬ fornia oranges 300 per cent by advertising. With raisins they increased the consumption in this coun¬ try from 30,000 tons a year to 160,000 tons a year from 1912 to 1918, and every single one of those years was at a higher price than the previous year. The growers can do it and they are the only fellows in the world who can do it, and they are the only people in the world who have the whole crop to sell and who, therefore, must do it. This is one of the great things we learned. In 1918 they had the raisin industry so prosperous that Fresno headed the list of the prosperous cities of the Union. You Virginians 56 used to think you had great cities in towns like Lynch¬ burg, Richmond, etc, on account of the prosperous factories. California towns head the list now in pros¬ perity ; not manufacturing towns, but our agricultural towns head the list. Look up and see what town is at the head of the prosperous towns in the United States —you will see that Fresno is. Why even this year, when the majority of the growers of the country are flat broke, 9 out of 10 of the California farmers are making money on their products, and their products are not any better than your products. The only difference between Cali¬ fornia and Virginia is that we are organized in Cali- fornm and you are disorganized and exploited in Virginia. You can rest assured your crops are making money for some one, but it is not for the growers. I Our crops in California are making money for lots of j people—for the growers, for the merchants, for the bankers, for the dealers—all the way down the line; but the growers are getting their share. Where the growers of California used to get 8 per cent of the consumer’s dollar, today they are getting 48 per cent of the consumer’s dollar. Where the growers of Cali¬ fornia used to have to go around in overalls, dressed in the poorest things, with no carpets on their floors, unpainted houses, with their children working in the fields and not in the schools, today the standard of living among the California farmers is equal to that of the city man; his home is attractive, his children are in school, his family has a car, and he has money in the bank. Today 2 per cent only of the growers of California have to borrow money on crop mortgages. Today 2 per cent, where in your state over 60 per cent of your growers are said to have given crop mortgages. I want to tell you, friends, there is only one reason. Our growers have learned that the way to succeed is to start in and help themselves. Nobody will do it for you. As long as you stay unorganized they will simply do it to you, but when once you are organized you do it for yourself. Why you know this California business is not a mystery; it is an absolutely true system. It is merchandising a product instead of dumping a product. It is going into the light instead of sitting in darkness. Remember you are never going to have the tobacco industry prosperous until you have the growers organized, working through the existing warehouses, working through the existing factories, on a real business system, the grower- mak¬ ing money, the warehouse making money, and the factory making money, and every step depending on the grower, who is the key to the whole industry. He creates wealth, and he is entitled to share in the products of that wealth. In California we never organize unless we know that we are big enough to hire the biggest men in the country. Three-fourths of all the growers signed up for raisins; three-fourths for prunes. We did not start up our egg association until we had signed up the owners of a million hens. From that point on we grew. Several of our associations in California have 92 per cent of the products of the State—our almond growers and our raisin growers. Ninety-seven per cent of all the berries in central California move through an organization. So with tobacco you will organize on a business basis; you are not going into existence unless you have signed up 50 per cent of the tobacco raised in these three states. From the moment you start you r will be the dominant factor in the bright tobacco markets in the world. Then we organize on a nonprofit basis and a co¬ operative basis. The association cannot make a nennv for itself. Everything that it does is to serve the grower. Every director has to be a grower; then all the interests are a community of interests—the grow¬ ers’ stuff and the directors’ stuff all in the same pool. Then you grade it, put it in separate pools and sell it. The expenses are paid and the balance goes back to the grower. The next California principle is, don’t work through a mate urs; don’t have anybody but experts. You won’t have to have amateurs. There are already some j men who have been angling to find out how the ; biggest jobs in this organization can be secured. Armour Company has hired good men all over the world—able men—and their one purpose is to see if they can separate the farmers of the country from their grain at the lowest price to the farmer and the greatest profit to Armour. He hires experts. We hire experts, too. We find that the Armour money is not any better than the farmer’s money. We hire the very men that they hired, but we hire them to serve the farmer instead of exploiting the farmer; and they say they would rather work for the farmer for half the price than for the exploiter for double the price. And what do these experts do? They do not have any magic wand. Cooperation is not a patent medi¬ cine. It is simply this: these experts handle our problems from a merchandising standpoint instead of . from a dumping standpoint; they have learned how . to control the so-called rules of supply and demand; they help create demand—we never get worried about 59 demand. We need our experts in order to find out liow to increase demand. Tfien we start out and we borrow the money on it, and I want you to know that our bankers at home have worked out several different systems under which we get money on our crops and can hold our goods over, so as to merchandise and not dump our crops. I want to tell you that if the world consumes one hundred and fifty million pounds of prunes a year, and we have a crop of one hundred and eighty million pounds a year, we keep thirty million pounds of prunes to carry over. We don't let one man’s prunes break the market against other prunes. We have learned how to do something with supply. We never have to say to our growers, “reduce your acreage, because they all pull together. We give them the full proceeds of what is sold; we give to the members the loan value of what is carried over. Every grower feels the same penalty for overproduction. Automati¬ cally they reduce their crops because they know if they produce more they will get loan value instead of sales value. We have learned all that. We have threshed out all these problems of financing and warehousing. You know as well as I know that we could not run our business for twenty-five years, as we have in Cali¬ fornia, without meeting all the problems that you men have to meet on tobacco. There is a precedent for anything you want in California, and this contract is simply the embodiment of all these principles I have been telling you about, and all the experience of Cali¬ fornians in the handling and marketing of farm products. We have adapted it to tobacco.; we adapted it to tobacco with our eyes open. 60 We fiist looked up all about tobacco—don’t listen to those fellows who come to you and tell you that I am full of prunes and raisins, and that I don’t know anything about tobacco grading, and that therefore (his contract might be good for prunes and raisins and not good for tobacco. The fellow who tells you that is full of tobacco all right, and he has got a profit in keeping you in your present system. Best Bankers and Merchants Friendly I am going to summarize by saying I told you the raisin story—I did not tell you because it was inter¬ esting ; I told you the raisin story as the nearest thing 1 know to the tobacco situation. In fact, you can do more for* tobacco than you can for raisins, because tobacco is less perishable than raisins. I then told you the principles that are exemplified in successful California Cooperative Marketing Associations. I ran ! through your contract. I told you that you form that association when you have 50 per cent of the tobacco in Virginia and the two Carolinas signed up. You then go in and deliver your tobacco, grade it into pools and merchandise those pools. You will take care of iyour warehouses under the Coykendall plan of finance set out in full in your contract. You will take care of your advance payments and crop mortgages on a standard banking basis; you will ask the banks to appoint a committee to work that out with you. You will find that the best banks are for you. Some of the banks and some of the merchants are against you I because, perhaps, they have an interest the other way; but don’t get worried about that. The best of the banks, wTio are doing business in terms of the com¬ munity, will be with you. So will your merchants; so will everybody who thinks for community prosperity instead of some one little individual, or some one particular year’s prosperity. Now I want to say this as a last thing: Don’t think that cooperative marketing only makes money. It does more—money is the least thing that it makes. When we started cooperative marketing in California we had to pool with industries just like yours; and we had to pool them in districts just like yours; we had to pool in districts in which the standard of living is just what it is in the tobacco district of Virginia. I have told you that there is no difference now in the way our farmers live and the way our city people live. We have farmers who have $25,000 invested in a farm who live on the same plan as men who have-the same amount invested living in the city. School systems were poor and everything else in the country was poor. We have changed all that; we have done it only through one thing—outsiders did not do it. Community effort did it. The growers, the bankers, the merchants, the editors, the lawyers, the doctors, the teachers in the community got together, and they substituted COOPERATIVE MARKETING instead of BLIND MARKETING. Our farmers and their fami¬ lies have a real standard of living today. Our farm¬ ers never worry about marketing. They worry about production only. They produce the things and they leave it to experts to market. You are going to produce tobacco; you are going to organize and then leave it to experts to market your tobacco; and I stake my whole standing as an expert in this line that within three years, or five years at the most, you are going to have a new rural civiliza¬ tion in Virginia on this account. Money is being made out of tobacco. You are not making it; you are not making your share. If you have cooperative marketing introduced you are going to close up that gap between the city man and the country man; you will not have your boys and girls working in the fields; you won't have women working in the fields. You won’t have your country women sand girls dressing differently from the city women and jgirls. You will have your country children getting the same education as the city children get. Your growers will have deposits of money; they will be carrying life insurance to provide for their future and the future of their families. Now don’t think that I am talking dream stuff, or that I am treating you to a lot of visions. I want to I say I have not said a word to you that I have not seen worked out in California; they have not seen it; I have seen it; I have not dreamed anything. I have seen this thing done, and I have seen it done with fourteen different commodities in my own state. I lave seen those growers flat and despairing just like rou; I have seen those bankers and merchants sud- lenly jump to the lead and lead the growers to j cooperation; and I have seen that cooperation change lie rural civilization of California until now we boast n that state that we have the most enlightened rural 'arm group of any state in the land. Four-fifths of >ur farmers are called “Cooperatives”; 90 per cent of ; hem today are making real money from their prod- icts, whereas in almost every other state in the Union he farmer is flat broke. The result has been that the S tandard of rural living in California is on a plane that Jlvould amaze you. Our growers are not worried with the fear that the profit they make one year might have to go to pay the loss of the next year: Who did it? Not the speculator or the gambler in the West. It was done by the growers, with the co¬ operation of the bankers and the merchants and the editors and the leaders of thought. Now if we did it in California you can do it in Virginia. It is up to you to see that you will do it in Virginia. 'mmm V.-:*t;**;'V-: /•*’'{■* 7#!j : 7W& •