6040P. 19 14-; Ai Ai ol 01 1 1 41 51 6| 4i 4i 4 = •TasJSf^-sr; SSEtcr*-.^ 63d Congress, ) HOUSE OF REPKESENTATIVES. J Document 3d Session. j ( No. 1271. PRICES OF WHEAT TO PRODUCERS IN KANSAS, ETC. ' j!q[p«oY^ „;,r their sub- sidiary companies) at very low storage rates. Complaints on the part of other large markets on the ground that the manner in which the elevators were operated gave Kansas City a preferential advantage caused an investigation by the Interstate Commerce Commission. As a result, the railroads gave up the operation of the elevators (except in two cases) and they were leased to private grain companies at an annual rental of 5 per cent on an appraised valuation. This arrangement was sanctioned by the Interstate Commerce Com- mission. A number of the grain firms which did not secure elevators were skeptical about this arrangement, but acquiesced with the belief that one of the largest houses (2,500,000 bushels) and two of the smaller ones were to continue in operation by the railroads owning them, thus insuring ample storage space for their business without being dependent on their competitors, whohad leased the other houses. Shortly afterward, however, this large elevator was also leased to a grain company, and there are left only two small houses that are operated by the railroads. The manager of one of these, however, is also a grain dealer. The foUowhig statement indicates the present situation, showing the name of each elevator, its capacity, the name of the raih-oad owning, and the name of the company leasing. 1 Rule adopted by Kansas City Board of Trade, Sept. 22, 1914. PRICES or WHEAT TO PRODUCEES IIST KANSAS, ETC. Terminal elevators of Kansas City. 19 Name of elevator. Capacity (bushels). Name^^aUroad jjame of operator. A 2, 500, 000 COO, 000 2,500,000 1,150,000 450, 000 2, 000, 000 1,500,000 400, 000 2, 500, 000 (iOO, 000 .350,000 Santa Fe Neola Elevator Co. .lohn S. Glovrr. Frisco Frisco Kansas-Missouri Cliicaso Great Western. Memphis Missouri Pacific , Pacific Elevator Co. Great Western Lonsdale Grain Co. Frisco 1 lirodnax & Mc Linev. Milwaukee St. Paul j Simonds-Shirlds Grain Co. Burlinf^ton .\ vlsworth-Xcal-Tomlin Grain Co. B . " Santa Fe Neola Elevator Co. Terminal Ele ator Co. Rock Island Kansas City Southern . . Wabash Kansas City Southern . Wabash Kansas City Southern Elevator Co. Missouri Grain Co. 14,550,000 The last two named in the list are the only ones operated by the railroad companies, leaving elevators of 13,600,0{i0 bushels capacity in the hands of eight grain companies. The Frisco and Mem])his are comparatively small houses, and if the capacity of these is deducted from above, it will be found that seven elevators with a combined capacity of 12,550,000 bushels, or over 86 per cent of the total avail- able capacity, are in the hands of six firms. The Neola Elevator Co, is a subsidiary of the Armour Grain Co. of Chicago; and the Ter- minal Elevator Co., of the Rosenbaum Co. of Chicago. Together, these two companies control 5,400,000 bushels of the elevator capacity of Kansas City. The control of the elevator situation by a few powerful companies is not an unusual one in the large wheat markets of the United States, and it is a question whether it is the ideal condition for the grain trade at large. In Kansas City it undoubtedly gives the operators of tlie terminals an advantage over the small dealer, but it may be agreed that thev are entitled to an advantage because of the expense, risk, and skill involved in operating a large elevator. On the other hand, this situation tends to render the more powerful companies still more powerful as compared with the smaller com- petitors, to concentrate the grain business into fewer hands, and to thus narrow^ the market by reducing the number of active buyers. The representatives of a number of firms which formerly were actively engaged in buying grain in the country for shipment to Kansas City claimed that they have had to largely discontinue this business, and to specialize more on a straight consignment business, owing to the change in the elevator situation. INSPECTION AND GRADING. Although the State of Kansas has laws governing the inspection and gracUng of grain, and maintains an inspection department for ])er- forming this service, very little of the grain originating in Kansas is sold on Kansas inspection. This is because*, tliere is no im])ortant primary market in tlie State. The bulk of the wheat is graded either at Kansas City, Mo., or, during years wdien the export movement is heavy, at Gulf ports. At Galveston -insjK'Ctioii is ])erformed by the Galveston Cotton ICxchange, and at New^ Orleans by the Now Orleans Board of Trade. The charge at each point is 50 ccMits a car. For grain arriving in Kansas City, Mo., the State of ^fissouri has an inspection department which performs this service. This (U>part- 20 PKICES OF WHEAT TO PRODUCERS IN KANSAS, ETC. ment has no jurisdiction over cars arriving in yards on the Kansas side where formerly the Kansas inspection department attended to the grading. The State of Kansas sought to make inspection in Kansas City, Kans., compulsory, but owing to dissatisfaction with Kansas grades, both on the part of Kansas shippers and terminal grain dealers, the Board of Trade of Kansas City, Mo., fought the legality of the compulsory inspection in Kansas, resulting in a tlecision of the Kansas Supreme Court to the effect that such inspection should not be compulsory.^ The Board of Trade of Kansas City, Mo., then established a sampUng and inspection department to take samples from cars arriving on the Kansas side, for inspection and grading on the Missouri side. At present there are therefore two separate inspection departments grading grain that arrives at Kansas City, the Missouri State depart- ment and that of the board of trad?. The fee in both cases is 50 cents a car. Usually there is no dupUcation in the service, but when cars have been sampled by the board of trade on the Kansas side and these cars then pass to the Missouri side for unloading at public elevators, there are two inspections with a double fee. Fortunately the Missouri and board oi trade departments work in complete harmony, and where double inspection occurs there is seldom any difference in the grades except in some cases where cars are heavily loaded, rendering the obtaining of satisfactory samples difficult. Missouri still has "car-door inspection," whereas the board of trade has the more modern system of ''office inspection." Although the Kansas State inspection department plays no part in grading at Kansas City or at Gulf ports, there is a certain amount graded at interior Kansas points, some of which finds its wa}^ to outside markets where destination inspections govern. The follow- ing statement gives a number of specific carloads of wheat that were inspected both at Wichita, Kans., and Galveston, Tex. : Variation of grading by Kansas State at Wichita, and Galveston Cotton Exchange at Galveston, as shown by 21 cars shipped from Wichita to Galveston. Car No. Shipping station in Kansas. Galveston grade. [Kansas State grade. 25228 A. T.... 16765 A. T.... 10081 U. P. R. 36984 R. I 31803 R. I 41520 R.I 31414 R. I 65099 R.I 580349 P 35497 R. I 54552 R. I 41178 R. I 53094 R.I 50951 R. I 35401 R. I 103221 A. T... 26427 A. T.... 18728 A. T.... 22777 A. T 26718 A. T.... 44545 A. T.... Pretty Prairie. Clency Forg Mullen worth.. Preston Mullen worth. Bucklin Jerka Pratt Partridge Gerlinger Ford. Preston. . Tinker . . . Gar ford.. Belmont . Pratt Shard Shard 2 hard do 2 hard 2 hard Shard 3 hard Shard 3 hard 2 hard Shard 2 hard do Shard 2 hard Shard 2 hard 4 hard Shard 2 hard 58 test 2 hard, 57 test I Shard, 59 test 2 hard, ; Shard, 60 test ! 2 hard, 59 test 1 3 hard, 58 test I Do. 56 test 3 hard, 57 test 2 hard, 59 test Do. 59 test Shard, 59 test 59 test Shard, 2 hard, 58 test ! 2 hard, 60 test Do. 57 test 4 hard, 60 test 2 hard, .58 test 4 hard, 58 test i Shard, 59 test 3 hard. 59 test. 58 test. 59 test. 58 test. 59 test. 58 test. 56 test. 59 test. 58 test. 58i test. 59i test. 59 test. 55 test. 59J test. 57 test. 57 test. 59 test. Note. — It is apparent that the whole situation with regard to inspection and grading is of vital interest In connection with the problem of Federal inspection or supervision. There is a decided sentiment both in Kansas and Kansas City, Mo., in favor of Federal inspection. 1 Opinion No. 17598. The State of Kansas f. Atchison, Topeka & Santa Fe Railroad. PRICES OF WHEAT TO PRODUCERS IN KANSAS, ETC. 21 KANSAS CITY WEIGHTS. The weighing of carloads of wheat as they enter Kansas City is primarily in the hands of the weighing dejnirtment of the Kansas City Board of Trade. There is also a Missouri State weighing de])art- ment which weighs grain entering five large elevators, which are jnib- lic elevators under Missouri law. The ^lissouri State fee is 40 cents into and 35 cents out of an elevator. The board of trade charge is 50 cents into and 15 cents out for the im>)ortant elevators. On grain entering these elevators there is a double charge, each de])art- ment levying its fee. The supervision of weights is ])ractically in the hands of the board of trade weigliing department, wliich has ample facilities for the testing of scales and power to enforce owners to keep their elevators in ])ro]ier condition. There are 51 emi)loyees in this de])artment, and a sufHcient number of men are stationed at each elevator to properh^ take care of the weighing. There are 130 hopper scales and 22 track scales under the supervision of the de|)artment. The following statement shows the Missouri State inspection and weighing fees: Cents. Inspection fee, per car, in railroad yards 50 Sample'furnished. per car 15 Moisture test, including sample, per car 25 " In " inspection at elevator, if not inspected in ^Missouri yards, per car 50 "Out " inspection at elevator, per car 50 " In " weighing, per car 40 "Out" weighing, per car 25 "Transfers," not inspected in Missouri yards, per car 50 "In" weighing fee only on "transfers," per car 50 Moisture tests on "transfers" "in" and "out," on charge 25 Moisture test on "out" cars, per car 25 Fees charged by the board of trade weighing department on grain unloaded and loaded in carload lots are as follows: Empire Kelley Mills Zenith Dixie Mill R. E. Kidder Mill Southern Frisco Memphis Atchison, Topeka & Santa Fe "B" Elevator "A" Rock Island Chicago Great Western Kansas-Missouri Atlas Oats Kansas t'ity Southern WaRK'oner-Gates Southwestern Mill Rosedale Fowler, A. & B In. Out. $0. 50 SO. 25 i .50 .25 .50 .25 ! .50 .25 ..50 .25 .50 .25 .50 .15 .50 .15 .50 .15 .50 .15 .50 .15 .50 .15 .50 .15 ! .50 .25 ] .50 .15 , ..50 .2.5 j .50 .25 .50 .25 1.00 .50 Acme Elevator Kornfalfa BulteMill Kansas i itv Seed and Grain. Weston's Warehouse Ransom's Warehouse Milwaukee L. C. Worth Commission Co. Globe Murrav Terminal Wabash Shilling's Warehouse Kus-soll Elevator Murphy, ( '. and F Kemper Mills Olive Street Elevator Ismert-Hinol-e -Mill Solomon Valley Warehou.se.. SO. 50 1.00 .50 1.00 1.00 1.00 .50 1.00 .50 .50 .50 .50 1.00 1.00 2.00 .50 1.00 .50 1.00 Out. SO. 25 .25 .25 .25 .25 .25 .15 .25 .25 .15 .15 .25 .25 .25 .25 .25 .25 .25 .50 Weighing and counting out sacked commodities (even weight). Counting out sacked commodities Weighing and counting in commodities Weighing and counting in commodities (even weight) Weighing hav $0.75 .25 1.00 1.50 I. 00 22 PRICES OP WHEAT TO PRODUCEKS IN KANSAS, ETC. Number of cars of each grade of wheat sold in Kansas City, Mo., during the 5-day periods ending on about July 3, Aug. 3, and Sept. 3, 1913 and 1914. [Compibd from the Kansas City Price Current by the Bureau of Crop Estimates.] Grade. Total sales, 15 days. 1913 1914 No. 1 hard Cars. 4 637 13.-) 62 17 Cars. 1 No. 2 hard 827 No. 3 hard 1,180 No. 4 hard 307 33 45 16 9 1 21 30 10 6 No. 2 red 185 48 21 29 310 No. 3 red 119 49 Sample red 23 2 2 No. 3 white spring 3 5 2 1 Wholesale prices of wheat, in cents per bushel, at Kansas City, Mo. (Compiled from the Kansas City Price Current. Each price in the table is an average of the actual sales of that grade, quotations for individual sales being "weighted" according to the quantities sold.] Date. No. 1 hard. No. 2 hard. No. 3 hard. No. 4 hard. Sample hard. No. 1 mixed. No. 2 mixed. No. 3 mixed. No. 4 mixed. Sample mixed. 1913. June 20 87.6 86.2 85.1 84.7 85.3 82.2 82.4 82.8 84.1 82.7 83.4 83.8 84.1 84.1 85.6 76.0 75.5 7S.7 77.9 77.9 87.7 81.2 78.9 75.8 79.4 102.6 106.2 105.0 105.5 108.2 86.0 85.4 84.1 82.8 83.0 81.8 82.4 82.1 84.2 82.4 84.2 84.3 84.0 84.0 86.7 72.5 82.0 83.6 82.2 82.2 '"'82.'4' 81.6 82.0 81.6 82.8 81.1 82.9 83.0 83.0 81.0 83.8 72.0 84.0 84.5 80.0 76.0 80.0 June 30 83.2 82.0 July 1 July 2 83.0 82.3 82.5 80.0 80.0 81.2 80.0 81.5 81.5 81.5 July 3 July 30 ... 81.0 81.0 82.2 83.0 July 31 81.5 83.0 Aug 2 78.5 82.5 Aug 29 84.5 82.5 83.3 86.8 86.2 72.8 72.2 74.8 74.0 74.3 88.0 82.5 80.2 80.2 80.3 83.5 90.0 66.5 Sept. 2 ""'82.2' 86.0 82.2 82.2 79.0 Sept. 3 Sept. 4 1914. July 1 July 2 75.2 80.0 86.6 78.4 75.7 72.8 76.4 100.5 104.1 103.3 104.0 106.9 78.5 73.6 86.7 77.5 74.0 71.0 76.0 94.0 102.8 103.0 10?. 5 108.2 July 3 July 30 84.8 77.0 73.3 69.8 73.5 97.3 101.4 101.5 101.7 104.0 81.2 78.0 July 31 . . . 70.0 Aug 3 75.0 71.5 95.6 98.0 94.5 99.8 101.8 73.8 96.5 101.0 101.5 101.0 70.0 Aug. 29 101.5 105.0 105.0 96.0 Aug. 31 105.0 96.0 Sept. 1 100.0 Sept 2 100.0 Sept 3 107.5 PRICES OF WHEAT TO PEODUCERS IN KANSAS, ETC. 23 Wholesale prices of wheat, in cents per bushel, at Kansas City, Mo. — Continued. Date. No. 1 red. No. 2 red. No. 3 red. No. 4 red. Sample No. 1 red. durum. No. 2 durum. No. 3 durum. No. 2 white spring. No. 3 white spring. No. 4 white spring. 1913. June 20 85.1 83.6 83.5 82.9 83.5 81.5 81.7 84.0 81.3 80.5 81.3 81.9 80.2 80.6 80.0 81.8 81.5 80.0 July 1 1 July 2 78.3 ' 81.4 July 3 79.5 80.1 78.2 "'so.'s' 82.0 81.0 83.0 83.0 84.0 71.2 70.0 71.0 72.5 81.3 78.1 78.0 July 30 78.0 July 31 78.0 Aug 2 83.9 83.7 87.1 87.4 87.5 87.5 89.5 72.5 72.0 72.6 73.9 si. 5 82.2 85.5 "'88.'6' 71.9 71.3 72.1 73.0 79.0 78.2 78.5 1 79.0 1 Aug 29 81.0 Aug. 30 1 Sept. 2 .. 85.0 85.0 80.0 Sent. 3 ... 80.0 81.0 Sept. 4 79.0 1914. June 29 70.5 June 30 72.0 70.0 July 1 July 2 July 3 67.0 July 30 ... 88.2 81.5 79.8 74.9 77.7 103.8 107.0 106.8 106. 2 109.0 87.0 80.5 77.8 73.0 76.3 102.4 105.7 104.5 104.9 106.5 86.0 82.7 July 31 79.5 73.0 69.2 73.4 99.0 103.5 102.0 103.0 106.6 69.2 Aug. 3 . 67.7 Aug. 29 Aug. 31 ... 98.0 104.0 100.0 Sept. 1 Sept. 2 100.0 107.0 Sept. 3 104.0 105.0 Note.— From these prices must be subtracted the freight rate, shippers' profit, and other incidental chx"!?es, and the margin taken out by the country elevator, to determine the price which is paid the farmer. Account sales, shipment of 15,000 bushels of vjheat purchased by shipper at Kansas City and sold delivered at Philadelphia, Sept. 25, 1914. Grade. A-o-t. 1 P£- p- Cost of grain Kansas City. No 2 hard 3,333 bushels 20 pounds $1.00 3,050 bushels 1 .97 $3,333.33 No. 3 hard 2, 958. 50 Do 3,366 bushels 40 pounds , .98 2,950 bu.shels ' .97* 3, 299. 33 Do 2,876.25 Do 2,300 bushels i . 96i 2,219.50 1 Total cost of grain at Kansas City $14. 686. 91 Freight to Philadelphia on 15,000 bushels, at 15.6 cents 2, 340. 00 Office and overhead expense, estimated, \ cent; mixing, ^ cent; ex- change, ^ cent. Total miscellaneous expense, yu cent per bushel 105. 00 Total cost of grain to shipper delivered at Philadelphia 17, 131. 91 15,000 bushels sold at 1.14^ delivered Philadelphia 17, 175. 00 Net profit. HOW THE EXPORT BUSINESS IS HANDLED. 43.09 The export business in Kansas wheat is handled principally by Kansas City and Chicago houses, although a large quantity is also handled by eastern (principally New York) houses. In general there • Small net profit due to rise in market before grain to fill order had been purchased. 24 PEICES OP WHEAT TO PRODUCERS IN KANSAS, ETC. arc three classes of dealers wlio are engaged in the movement of wheat from Kansas stations to foreign ])orts. The first includes those who carry it only to the Gulf (Galveston, Port Arthur, or New Orleans). The second includes those who take it at the Gulf and sell itckdivered in foreign countries. This class is repr(>sented ]:)rincipally by New York exporters. The third consists of those who buy wheat in the countiy for delivery at the Gulf or on the Kansas City Board of Trade, and sell it on terms which call for delivery at foreign ])orts. This third class also buys some wheat "delivered" at the Gulf or f. o. b. vessel. There are many small firms that buy wheat in the country for delivery at Gulf ports. These are located not only in Kansas City but also at such points as Wichita and Hutchinson. "Delivered at the Gulf" means merely "on track" at a Gulf port, and the charges up to this point consist of the freight rate from the country station and weighing and inspection fees on arrival at the Gulf. To load wheat from the car into the hold of a vessel, it must be taken into an elevator and often stored until loading time. There is then a loading charge of three-fourths of a cent and other incidental expenses, amounting to a total of from 1 to H cents. To undertake these last- named operations is termed "fobbing," which means placing the wheat f. o. b. vessel. Most of the smaller houses who buy from the country "delivered Gulf" sell theii grain "on track" to the larger expoiters and do no "fobbing," while some undertake this function and sell to the larger firms f. o. b. steamer. During the "fobbing" operation grain is mixed in the Gulf elevators and the smaller firms often employ a forwarding agent at the Gulf port to attend to this matter, while the larger houses maintain men at the Gulf ports to look after this mixing. The large houses which buy direct from country points and carry the grain through to foreign ports necessarily do their own "fob- bing," which they must take into consideration in the price they charge the foreign buyer. Practically all grain sold to foreign importers is sold on a basis of delivery at foreign port. That is, an exporting house must charge the Liverpool buyer a high enough price to allow him to pay the ocean freight, insurance, and other incidental charges, and have something left for profit. When an exporter sells in this way, he is said to sell "c. i. f.," i. e., cost, insurance, and freight included. When a shipper sells to an exporter either "delivered" or f. o. b., he usually has to pay a brokerage of one-eighth of a cent to a broker who has consum- mated the sale for him. It occasionally happens that a Kansas City house places such a sale through a New York broker only to find that he has sold it to another Kansas City house, which is selling the grain "c. i. f." There are great risks incurred by those houses that sell c. i. f. In the first place, a Kansas City house, for example, has a certain amount of grain at the Gulf which it wishes to sell to a Liverpool importer. This grain is necessarily hedged in the future market. An offer is cabled the Liverpool house. The Liverpool market is in operation while it is night in Kansas City. The next morning the Liverpool house wires an acceptance. The Kansas City house must buy in its hedge. If the market is "off" at the opening, the Kansas City house may make more than it anticipated. But the Liverpool house knows more [about world market conditions than the American exporter PEICES OF WHEAT TO PEODUCEES IX KANSAS, ETC. 25 during the night, and is in a better position to know what effect the "cables" will have on the opening of the American market. The Kansas City house must allow for this possible fluctuation in the future market when he makes h.is offer. Another risk connected with the export business is the fluctuation of ocean freight rates as well as the difficulty of alwa^'s having enough ocean space contracted for or being able to use all that is contracted for. Ocean freights are not so stable as railroad rates. If tliere is a dearth of vessels at a given port, the rate goes up; if there are a number of vessels that can't get full cargoes, tlie rate is cut. A third risk is in the fluctuation of the price of foreign exchange. The exporter sells in terms of English money delivered at Liverpool. If the ]:rice of foreign exchange varies between the time of sale and the selling of the bill of exchange, the exporter has either an unfore- seen loss or gain. In spite of tliese risks and the fact that the export business requires the tying up of a large amount of capital, the business is done on astonishingly smaU margins. The gross margin allowed by the ex- porter in making his bids usually runs from 2^ to 3 cents. Out of this must be paid the overhead expenses of the firm, such as office expenses, cablcCTams, interest, etc., amounting in all to about 1 cent a bushel, and leaving a net profit of from 1| to 2 cents a bushel. Sometimes this net profit is attained; sometimes it is greater; some- times it is smaller. The following statement shows in detail eight actual transactions of a large exporting house during July, 1914, before the European war began. In each case the wheat was bought "delivered" at Gulf, and sold "delivered" Liverpool, and the ex- penses were the f . o. b. charges at Gulf port, ocean freight, and insur- ance and incidental charges. The f. o. b. charge of 1 cent is figured low, and most exporters consider it to be from 1| to 1^ cents. It is impossible to figure it exactly, because it involves some interest charges. The insurance and incidental charges are al^o figured lower than most houses, and include only marine insurance, wliereas all shipments to the Continent and some to the L'nited Kingdom carry an additional "msurance on outturn," meaning an insurance which guarantees or protects the delivery of the full amount that the ^Vmer- jcan exjiorter contracts to deliver at the wluirf in the foreign port. Detailed statement of eight specific transactions of wheat bought '^delivered Gulf" and sold "delivered Liverpool." a 2 Costs. g > • B "O "3 » «.> *^ a o 11 .5 i 9 i Si a IS C Oi a, § 2i 1.00 ! u 2.. July 11.. do.... ...do.. 40,000 92.60 81.75 in. 95 6.0 0.5 1.00 7.5 3i 1.00 1 2 3.. July 13.. do.... ...do.. 40,000 91.60 .801 10.75 6.0 0.5 1.00 7.5 3? 1.00 ' 2 4.. July 14.. do.... ...do.. 40,000 90.85 .801 10.00 6.0 0.5 1.00 7.5 2J 1.00 1 5.. JiUy21.. do.... Sept.. 24,000 94.65 .841 .84| 10.00 7.5 0.5 1.00 9.0 1 1.00 6.. ...do.... do.... Oct... 24,000 95.10 10.50 7.5 0.5 1.00 9.0 : 11 j 1.00 -i 7.. July 15. . do July.. 40,000 91.65 81.50 10.15 6.0 0.5 1.00 , 7.5 2.65 1.00 1.65 8.. July 25.. do.... Oct... 24,000 98.70 88.50 10.20 7.5 0.5 1.00 1 9.0 j 1.20 1.00 1 0.20 > Subtracting total costs from total marein. 451641 26 PEICES OP WHEAT TO PRODUCEES IN KANSAS^ ETC. The following statement gives in detail an actual transaction of another exporting house in which 8,000 bushels of wheat were bought "on track," or "delivered" New Orleans, and sold to an importer in Rotterdam on July 7, 1914: Cents per bushel. Selling price, delivered Rotterdam, at 96J Price paid "on track " New Orleans 84 Gross difference 12J Items of cost: F. o. b. expense If Brokerage for making sale | Marine insurance | Insurance on outturn f Brokerage to Rotterdam broker (J per cent) | Ocean freight 8 Total costs 11 Gross profit to exporter IJ Out of this gross margin the exporter must pay his office and other overhead expenses. In this case it will be noticed that two broker- ages were paid, one to a New York broker for making the sale and one to a Rotterdam broker for attending to the transaction at that port. There is also an insurance charge on outturn, which, as ex- plained above, insures the delivery of the full 8,000 bushels. The following statement shows a transaction in which a dealer bought 16,000 bushels of grain delivered Galveston, and sold f. o. b. vessel on the same day (July 9, 1914) to another exporter who sold the grain c. i. f. foreign port: Cents. per bushel. Price sold to exporter, f. o. b. vessel 85| Price paid " delivered " Galveston 83j Gross difference 2^ F. 0. b. expenses: Loading f Inspecting and weighing i Brokerage | Total expenses IJ Gross profit 1 It will be seen from the foregoing cases that the profits per bushel on the export business are extremely small — as small, in fact, as those of domestic shippers, although the latter do not perform as much service or run as great risks as the former. But export wheat is handled in large lots, and the profit on an individual transaction may be a large one. A half-cent clear profit on a sale of 40,000 bushels means a total net profit of $200 on the transaction. But a fiuctua- tion in a single one of the elements of risk enumerated above, which has an effect of as httle as one-half a cent a bushel, either wipes out the profit entirely or yields a profit of $400 instead of $200. PRICES OF WHEAT TO PEODUCEES IN KANSAS, ETC. 27 It is a question whether another business involving equivalent risks and capital investment can be found where the difference between profit and loss hangs on such slight fluctuations in the prices of the various factors involved. Summarized statement showing the spread between the price received by a farmer in southern Kansas on Sept. 28, 1914, and the price received by an exporter for wheat to be delivered at Liverpool, together with the various elements of marketing costs. Cents per bushel. Price received by farmer in Kansas 87. Margin taken by country elevator 3. Price paid country elevator by shipper 90. Freight rate point in Kansas to Galveston 15. Inspection and weigliing at Galveston 25 Gross profit of shipper 1. 25 Price paid by exporter at Galveston 106. 50 Cost of elevation, loading into boat, etc 1. 25 Freight, Galveston to Liverpool 6. Insurance, etc., in transit 75 Overhead expenses of exporter 1. Net profit of exporter 1. 25 Price delivered at Liverpool 116. 75 Summarized statement of approximate spread between Kansas farm price and price delivered at Philadelphia on Kansas City terms, Sept. SO, 1914. Cents per bushel. Price received by farmer in Kansas 87. Margin taken by country elevator 3. Freight rate to Kansas City 6.2 Inspection, weighing, and interest on draft 25 Commission 1. Price paid by shipper in Kansas City 97. 45 Freight rate, Kansas City to Philadelphia 15. 6 Mixing in Kansas City elevator 25 Exchange 20 Overhead expense of shipper 375 Net profit of shipper 625 Price delivered in Philadelphia 114. 500 SUMMARY. 1. The State of Kansas is fortunately situated for marketing its wheat in that it has a great number of domestic outlets and the for- eign market via Gulf ports. This situation leads to vigorous compe- tition between grain dealers of the various terminal markets for Kansas wheat. 2. The prices ot wheat paid to farmers in Kansas are based largely upon the prices in Kansas City, Mo., and at the Gulf ports for export. From these basic ]>rices must be subtracted the freight rate, shi])pcr"s j)rofit, anil other incidental charges and the margin taken out by the country elevator to determine the price which is paid to tiie farmer. Since the margins of j)rofit taken by the grain dealers in the larger markets are vovy small (averaging 28 PRICES OF WHEAT TO PRODUCERS IN KANSAS, ETC. ♦1.16-3/4 price In Llreripool. 1.15 gross profit of o/porter. .75 insurance, etc. 6.00 freight, Oulveeton to Liverpool. 1.25 f.o.b. coutfe. 1.25 profit of shipper. 1.05 Inspection, etc. .Galveston. 15.00 freight, Kunsas poSnt to GalvestOB. 3.00 count J7 elevator groao profit. 67.00 received by Kansas faraer. Fig. 2. — Diagram showing the relation between the price received by the farmer in Kansas and the price paid the exporter for a bushel of wheat to be delivered in Liverpool, with the various costs per bushel of marketing from the time the grain is delivered to the country eleva- tor by the farmer until it reaches Liverpool. about 1 cent a bushel), it appears that the farmers of Kansas, as a genei al rule, are obtaining all their wheat is worth. 3. The weakest link in the chain of marketing Kansas wheat is the country elevator. Compared with the value and difficulty of serv- ice rendered, the margin taken by the country elevator is per- haps larger than that taken by any other middleman in the maiketing of wheat. One spe- cial weakness is in the failure to use the future market to hedge holdings. Elevators fre- quently become congested with unhedged stored grain. The ele- vators, as a general rule, are operated inefficiently, with inad- equate accounting systems and lack a sufficient working capital. 4. In conspicuous contrast with the country elevatoi situation is the great efficiency and highly organized method of operation of the terminal grain operators and the exporteis. In the case of the export trade especially the profits per bushel are extremely low considering the service ren- dered and the capital and risk involved. 5. No evidence was discov- ered of collusion between large interests to restrain competition or to depress prices in Kansas City. In Kansas City 86 per cent of the terminal-elevator capacity is controlled by six firms, i3ut these firms appear to be in competition with each other. 6. The cost of transportation is by far the largest element in the cost of marketing wheat. Of the total difference between the farm price and the Kansas City price, freight accounts for approximately 65 per cent. Of the spread between the farm price and the Liverpool price, railroad and ocean freights ac- count for approximately 70 per cent. o UNIVERSITY OF CALIFORNIA, LOS ANGELES THE UNIVERSITY LIBRARY This book is DUE on the last date stamped below Form L-0 2.JI/1-2, '43(0205) AT LOS ANGJraLES UBRARY HD 9049 U.S. Bureau of W43U5 markets. 1914 Prices of wheal to producers in Kansas J etc. UCLA^Young Research Library HD9049.W43 U5 1914 y DEMCO LIBRARY SUPPLIES 114 South Cirroll Street Madison, Wisconsin