REPORT OF thf: FEDERAL TRADE COMMISSION ON * THE GRAIN TRADE ^VOE. l ' COUNTRY GRAIN MARKETING • September 15, 1920 WASHINGTON GOVERNMENT PRINTING OFFICE (• FEDERAL TRADE COMMISSION. Victor Murdock, Chairman. Huston Thompson. WlULIAM B. C0L\’ER. Nelson B. Gaskill. John Garland Pollard. . J. P. Yoder, Secretary. additional copies OF THIS PUBLICATION MAT BE PROCURED FROM THE SUPERINTENDENT OF DOCUMENTS GOVERNMENT PRINTING OFFICE WASHINGTON, D. C. AT 35 CENTS PER COPY V , > t CONTENTS. Letter of acknowledgment_ Letter of submittal_ Chapter I. Origin and Scope of Grain Report. Sec. 1. The report as a whole_ Origin of inquiry_ ‘ Study of the grain trade_ Divisions of report_ Period covered by the inquiry_1_ Grains covered ____ Sec. 2. Scope of' country marketing volume_ Subject matter_!_ Interviews_ Correspondence_ Statistical data_ Chapter II. Functions, Age, and Distribution of Elevators and Wareho'^es. Sec. 1. Functions of country elevators and warehouses_ Elevators_i Warehouses_ Sec. 2. Physical differences of elevators and warehouses_ Sec. 3. Bulk and sack handling___ Bulk and sack areas_*_ Historical reasons for sack handling_ Arguments for sack handling_ Arguments for bulk handling_ Attitude of different interests_ Growers_._ Warehousemen_ Elevator operators_ Millers_ Banks and investment companies_ Farmers’ unions_ Summary_ Sec. 4. Type differences in country houses_- Line houses_ Individual houses_ Commercial line houses- Independent houses--- Line and individual cooperative houses_ * Line and individual mill houses_- -- Line and individual maltster houses_*_- Sec 5. I\uinbor of elevators and warehouses reporting and reported— Method of tabulating returns--,- Number of houses per station- Geographical distribution of country houses- Pec. 6. Avera^,e distance between stations- SEr-. 7. Average number of country houses per station- . jc . 8. Causes of variations in number of houses per stati(»n- Age of houses_ Age of territory-:- Size of farms_ Railway development- Conclusion- \ Pagei 15 16 lb lb lb lb 20 20 20 20 21 21 21 23 23 24 24 25 25 25 26 27 2b 29 29 29 29 29 29 30 .•’>0 30 30 30 31 31' 31 32 32 32 OO oo 34 34 35 36 36 37 38 3b 3b 3 4 COUNTRY GRAIN MARKETING. Page. Sec. 9. Distribution of houses by types-40 By single types- 40 By consolidated types- 41 Sec. 10. Relative importance of cooperatives- 41 Distribution of cooperatives- 41 Volume of grain handled_ 42 , Recent increases in cooperatives- 42 Sec. 11. Growth and decline of different types of elevators and warehouses. 42 Period of construction of all houses- 42 Age of different types- 43 Analysis of age distribution- 45 Relative growth and decline of types- 46 Growth and decline of consolidated types- 49 Sec. 12. Geographical distribution of different types of elevators and warehouses--— '49 Extent of geographical variations- 49 Geographical distribution of principal types of elevators- 51 Sec. 13. Explanation of geographical distribution of types of elevators- 53 Commercial lines and independents- 53 Cooperative development- 53 Mill elevators- 55 Maltster elevators_ 57 Sec. 14. Geographical distribution of warehouses- 57 Chapter III. Physical Characteristics of Country Elevators and Warehouses. Sec. 1. Sec. 2. Sec. 3. Sec. 4. Sec. 5. Sec. 6. Description of country elevator_ Average capacity of elevators and warehouses_ Results of tabulation_ Capacity variations of elevators and warehouses Type variations in capacity- Elevators__ Warehouses_ Geographical variations in capacity- Elevators _ Warehouses_^ Average number of bins per house- Type variations of elevators- Geographical variations of elevators- Warehouse variations- Construction materials of elevators and warehouses. Construction in general- Present tendencies_ Type variations_ Commercial line construction- Independent construction- Cooperative construction_ Individual and mill line construction- Geographical variations_ 00 61 61 62 63 63 63 64 64 65 65 65 66 67 68 68 68 70 71 71 :72 72 73 Chapter IV. Development of Country Elevators and Country Market¬ ing. Sec. 1. Character of the discussion_74 Sec. 2. General characteristics of early grain marketing- ' h Chicago territory____ 74 The Northwest_.*- 75 The Southwest._•- 76 Pacific coast- 76 Sec. 3. Methods of handling grain-- 76 Sec. 4. Commercial line elevators_ 77 Sec. 5. Mill line elevators_ 78 The Northwest_ 78 Mill elevators and character of wheat production- 78 Relation of hard wheat to mill line development- 79 CONTEXTS. ' ' ■ ■ 5 Page. Sec. 6. Individual mill elevators_ 80 Sec. 7. Independent elevators_ 81- Sec. 8. Early cooperative development _ 82 Orijrins_ 82 The penalty clause_ 83 ' Sec. 9. Reasons for cooperative development _ 83 Lack of competition_ 83 Situation in the Northwest_ S3 Chicago territory_ 85 Sec. 10. Opposition to cooperatives_ 86 Sec. 11. Irregular dealers_ 87 Sec. 12. Effects of opposition to cooperatives_:_ iX) Sec. 13. Patronage dividend cooperatives_ 92 lYoportion of cooperatives paying patronage dividends_ 92 ‘ Variations in geographical distribution of patronage divi¬ dend cooperatives_ 93 Chaptek V. The Purchase and Storage of Grain. Sec. 1. Methods of sale by the farmer_ 94 Sec. 2. Local purchasing factors other than elevators and warehouses_ 95 General characteristics_ 95 ^Interior brokers_ 95 VTrack buyers_ 95 Scoop shovelers_ 96 Terminal dealers_ 96 Other factors_ 97 Scope and extent of operations_ 97 Sec. 3. Outright sales by farmer to the elevator_ 99 Delivery_'_ 99 Grading_ 1 _ 99 Interviews with country agents on grading_ 100 Dockage_ 101 Interviews with country agents on dockage_ 101 Weighing in_ 102 Payment for grain_ 103 The elevating operation_ 104 Sec. 4. The storage function and the sale of grain after storage_ 104 Conditions affecting storage_ 104 Summary of interviews regarding storage_ lOil Storage charges_ 106 Sale after storage transactions_ 106 Special bin storage_ 110 Storage for own account_ 111 Pacific coast_ 112 Sec. 5. Sale of gi’ain by contracts_ < _ H- Interviews on grain contracting_ 112 Pacific coast_ 11^ Sec. 6. Distribution of total purchases by kind of grain_ ^ 114 Relative marketing importance of different grains_ 114 Distribution of purchases of different grains by States_ 11^ Sec. 7. Purchases of grain by different types of elevators_ 110 All types_ 110 Mill and maltster elevator purchases_ 110) Commercial line, cooperative, and independent purchases_ 116 Sec. 8. Average bushels handled (purchased)_ 117 By types- 117 Explanation of type variations_ 117 By States_ 118 Si:c. 9. Seasonal variations in country elevator purchases_ 118 Sec. 10. Rate of capacity turnover_ 120 Results of study_ 120 Explanation of variations_ 121 State variations in turnover_ 123 Capacity turnover by capacity of house_ 124 6 COUNTriY GRAIN MARKETING. Chapter VI. The Sale and Shipment oe Grain. . -Sec. 1. Handling country elevator shipments- 125 ■ ’ Time of sale- ^ Ordering cars- \ Weighing out--- y Loading out- \ Plugged or set-up cars- 107 J Sec. 2. Agents’ reports- Reporting by line agents- Reports of elevators other than line--- Sec. 3. Destinations of country elevator and warehouse shipments- 1 -^ Movement by States and grand divisions----— Sec. 4. Relation of size of terminal markets to country grain movement—. Idl Reported receipts of country grain at different terminal markets- Direction of grain movement--- Effect of direction of movement on terminal tributary areas_ 5. Effect of terminal market organization on grain movement- 1^4 6 . Other factors affecting terminal market movement- Minneapolis consumption- Sample selling of barley- Terminal market financing--- 7 — 7 - 7 ,-":^- 7. Shipments in territory outside Chicago-Minneapolis tributary cirOQ, -—————————— QQ 8 . Analysis of mill shipments----- 9. Destination of total grain movement by kinds of grain- 10. Terminal-market shipments by kind of grain- Results of tabulation-■- ^ Rye and barley-- f „ Wheat- Corn and oats- 11. Shipments by kind of grain to smaller points- | 12. Shipments to mills by kind of grain- 1 - Wheat- Other grains--- “ 13. Shipments to feeders by kind of grain----—-- 14. Shipments to interior brokers and others by kind of gram- Miscellaneous shipments- 15. Consignment and direct selling-- . . Geographical variations- Variations between grains----—- 16. Explanation of geographical variations in consignment and direct Variations in grains by States- ^ Effect of financing on consignments- Barley and the consignment business- • Minneapolis wheat and rye consumption and consignments-— Situation outside of Wisconsin and the Northwest- ^48 Sec. 17. Explanation of variations in grains—---- Sec. 18. Consignment and direct grain sales in important cities- Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec Sec. Sec. Chapter VII. Secondary or Incidental Functions oe Country Ele¬ vators AND Warehouses. Sec. 1. Characteristics of incidental functions--—•—- Sec. 2. Elevation and loading for the account of others than the local house _ General description- Extent of practice-- Sec. 3. Relation of elevation to shipping by farmers- Extent of farmer shipping-----— Comparison of elevation with farmer shipping and the size of farms_ Causes of direct shipping- 151 151 151 151 152 152 153 154 CONTENTS 7 Page. Sec. 4. Variations in elevation by type of house_ Results of tabulation___ Elevation by mills_::_ Elevation by other types_1_ Sec. 5. Elevation or loading charges_ Sec. 6. Mixing_ Intentional mixing operations_ Involuntary mixing_ Sec. 7. Conditioning_ Sec. 8. Cleaning_ Advantages_ Extent of cleaning facilities_ Sec. 9. Variations of different types of elevators in cleaning facilities_ Commercial line houses_ Mill houses_ Cooperatives and independents_ Sec. 10. State variations in cleaning facilities_ Sec. 11. Warehouse cleaning facilities__ Sec. 12. Summary of interviews in regard to cleaning_ Northwest territory_ Iowa and Illinois_ Sec. 13. Cleaning for farmers by country elevators_ Type variations_ State variations_ Terms and conditions__ Disposition of screenings by elevators_ Sec. 14. Side-line business of country elevators_ Extent of business_ Type variations in side-line business_ Sec. 15. Explanation of type variations in side lines_ Cooperatives_ Commercial lines_ Independents_ IMill elevators_ Sec. 16. State variations in side-line business_ Sec. 17. Relative importance of different side lines_ Results of tabulation_ Type variations_ State variations in different side lines handled_ Chapter VIII. Prices, Margins, Gkades, Dockages, and WeightsT^ \ 155 155 155 156 157 157 157 159 160 161 161 161 161 161 162 163 163 164 164 164 165 165 165 166 166 167 168 168 168 169 169 170 171 171 171 172 172 172 174 Sec. 1. Sources of price information__ 175 General statement_ 175 Daily price cards_ 175 Market telephone and private wire services_ 177 C..N. D.’s_ 178 Terminal market price currents or price reporters_ 178 “ On-track ” and “ to-arrive ” bids_ 178 Main office_ 180 Other sources_ 180 Sec. 2. Average number of services employed_ 180 Sec. 3. Relative extent of use of different sources_ 181 In total_ 181 Price cards_ 182 Price currents_ 182 Market telephone and private wire services_ 182 “On-track” and “to-arrive” bids_ 183 Main office_ 184 C. N. D.’s_ 185 Sec. 4. Type variations in the use of price-information services_ 185 Results of tabulation_ 185 Price cards and telephone and private-wir^ services_ 185 Price currents_186 “ On-track ” and “ to-arrive ” bids_ 186 Main office_ 186 8 COUNTRY GRAIN MARKETING. Page. Sec. 5. Determination of country prices- 187 Local competitive conditions- 187 Calculation of country price- 187 Pacific coast- 188 Sec. 6 . Nature and scope of study of margins- • 188 Method of obtaining price data- 188 Representative character of data- 189 Method of computing margin- 190 Grains selected- 190 Sec. 7. Analysis of results of study of margins- 191 Average margins found- 191 Margins by grains- 192 Margins by types of elevators- 193 Margins by months- 194 , Sec. 8. Summary of interviews on buying margins- 195 Sec. 9. Scope of study of grades, dockages, and weights- 196 ^ Reasons for study- 196 Elevators studied- 197 Grain selected- 197 Period covered- 198 / Sec. 10. Statistical method employed in study of grades, dockages, and weights_ 195 Sec. 11. Analysis of results, grades, dockages, and weights-- 200 All companies combined- 200 Individual companies- 202 Sec. 12. Explanation of the profits and losses involved- 208 Errors and inaccuracies- 203 Effect of competition- 204 Psychology of the line agent- 204 Explanation of weighing profit- 205 Sec. 13. Profits and losses, houses other than line--- 205 Sec. 14. Conclusions- 206 Chapter IX. Hedging Operations of Country Houses. Sec. 1. Theory of country elevator hedging- Sec. 2. Theoretical hedging operations and results- Basis of illustrations employed- Loss on cash and profit on futures- Speculative possibilities in connection with hedging- Limitations of profits--- Sec. 8. Some technical details of country elevator hedging- Sec. 4. Extent and prevalence of hedging- Sec. 5. Geographical variations in hedging- Extent of variations- Effect of consignment business- Effect of commission house financing on hedging- Effect of the presence of commercial line elevator companies on hedging- Sec. 6 . Type variations in hedging- Results of tabulation- Commercial line variations- Individual and cooperative variations- Mill elevators_ Sec. 7. Hedging in the various grand divisions- Sec. 8. Factors affecting the extent of hedging- General statement- Hedging policy- Commercial method of selling grain- Market conditions_ Kind of grain- Storage and contracting- Transportation facilities- Sec. 9. Markets employed by country elevators for hedging- Results of tabulation-- - Effect of shipments upon hedging markets-- Chicago as a hedging market for country elevators- 207 208 208 208 210 210 212 213 214 214 215 216 217 219 219 219 219 220 221 222 222 222 224 225 226 226 227 227 227 230 231 CONTENTS. 9 Chapi'er X. Financing Country Hotjses. Page. Sec. 1 . Sources of loans_ 233 Sec. 2. Sources of loaus type of elevator_ 234 Line elevators_~~ 234 Individual elevators_” 235 Sec. 3. Sources of loans by States_ 235 \ Sec. 4. Commission-house tinancing_______ _ _ 235 ' -iiiiiiiiiiiiiiizii:: 235 \ INlethods___ 237 Supervision of tiiianced elevators_ 238 Sec. 5. Contrasts between northwest and other areas_ _ 238 Sec. 6 . Country elevator interviews on sources of loans__239 Sec. 7. IMaximum amounts of capital borrowed_~ 240 Sec. 8 . Rates of interest__ 240 Rates reported__~_” 240 Country elevator interviews on interest rates_ 242 Chapter XI. Competitive Conditions in Country Grain Buying. Sec. 1 . Scope of inquiry regarding country competition_ 243 Sources of information_ 243 Period covered by the correspondence_244 v--^Sec. 2. General statement with reference to competitive conditions ' oaa Sec. 3. Factors in competition___ IIZIIIZ Elevators_ j. __ 94 ^ Scoopers- 245 Direct shipping_ 246 Sec., 4. Some general considerations affecting competition_ ZZ 247 Competitive and noncompetitive points_ 247 Competition between towns_ 248 Potential competition_ 248 Effects of competition between towns on local agreements_ 249 Railroads and town competition__~ 250 ' ^ vSec. 5. Competition in prices_~_ 95 ^ ^ Price wars_ 253 Threats of price wars__ 254 Sec. 6 . Competition in grading and dockage_ 254 Sec. 7. Competition in storage, elevation, and cleaning charges_ 25G Sec. 8 . Competition in side lines_~ 259 Sec. 9 . Character of cooperative, hr farmer, and mill elevator competition. 260 Sec. 10. Reasons for severity of mill competition_ 262 Sec. 11. Reasons for the severity of cooperative competition_ .264 Opposition to line companies_,__ 264 Friendly attitude of farmers toward cooperatives_ 265 Effect of dividends_1__ 906 Sec. 12. Independent elevator competition_"3_ 267 Sec. 13^. Line elevator price policy_ 268 w Sec. 14. Relation of Grain Bulletin to price competition_ 269 Basis for agreements_.*_ 270 Probable influence of Grain Bulletin_ 271 Sec. 15. Line-elevator competitive policies on grades, dockages, etc_ 271 Grades, dockages, and weights.._• 271 Elevation and storage charges_^_ 274 Sec. 16. Line-elevator policies in meeting competition.Z_ Z _ 275 Paying competitors’ prices_ 275 Reasons for paying competitors’ prices,_ 277 Meeting competition on grades, dockages, etc_ 278 Cooperation of line companies in meeting competition_ 280 Sec. 17. Division of receipts_ 282 Competition for “ fair share ” of business_ 282 Agreements and understandings on division of receipts_ 284 Sec. 18. Closing and wrecking elevators on a rental basis_ 288 Explanation of practice__ 288 Rates for closing_ 289 Wrecking and not rebuilding_ 291 Sec. 19. Relation of commission houses to local competition_ 293 10 COUNTRY GRATN MARKETING..* Sec. 20. Agreements and understandings among local agents- Local elevator agreements--- Agreements by direction of head office- Securing harmonious action among local agents- Broken agreements- Sec. 21. Effecting agreements and understandings through traveling super- ' intendents_ Competitive adjustments by individual superintendents- Joint efforts by superintendents- Sec. 22. Agreements, understandings, and cooperation between line and head offices-^-- Use of head offices for adjustments--- Complaints of line companies to one another-- Action taken on complaints- Mutually^ cooperative attitude of head offices- LIST OF TEXT TABLES. Page. 294 294 296 298 300 301 301 30:i 300 806 307 310 312 Table 1. Number of elevators and warehouses at stations and proportion reporting to those reported--- Table 2. Geographical distribution of all elevators and warehouses re¬ porting and reported- Table 3. Average distance between stations distributed according to the number of elevators and warehouses at each station- Table 4. Average and most frequently recurring number of elevators and warehouses per station in specified States and grand divisions-- Table 5. Elevators in specified States constructed prior to specified dates in comparison with the average number per station- Table 6. Average number of elevators per station in principal grain- producing States as compared with average distances between elevator stations, acreage of improved land per farm, and railway mileage per 100 sqfiare miles- Table 7. Numbers and percentages of different types of elevators and warehouses in the United States- Table 8. Proportions of all reporting elevators and warehouses con¬ structed in specified periods- Table 9. Period of construction reported by different types of counti’y elevators and warehouses- Table 10. Percentages of different types of existing elevators and ware¬ houses constructed in specified periods- Table 11. Percentage distribution between types for all elevators and warehouses constructed prior to specified dates---- Table 12. Percentage distribution between types of commercial line, inde¬ pendent, mill, cooperative, and maltster houses constructed prior to specified years- Table 13. Proportions of commercial line, independent, individual, coop¬ erative, and mill elevators in specified States--- Table 14. Proportion of cooperative elevators in specified States in com¬ parison with the proportion of existing elevators built prior to specified dates_1--— Table 15. Average capacity of elevators and warehouses in the United States by types and by States and grand divisions--— Table 16. Average elevator capacity in specified States in comparison with the proportions of specified types of elevators- Table 17. Comparison of average capacity of specified types of elevators with average number of bins per elevator and average capacity of bins_ Table 18. Comparison of average elevator capacity in specified States wihi average number of bins per elevator and average bin capacity- Table 19. Materials of which elevators were constructed in specified periods_ Table 20. Construction materials of different types of elevators and warehouses in the United States---- Table 21. Proportion of commercial line and individual mill elevators in specified States in comparison with the proportion of wooden elevator construction-- 83 84 35 35 ’•37 38 40 42 44 45 47 47 51 62 64 66 67 69 70 73 contt<:nts. 11 Table 22 . Distribution of mill elevators by specified States in comparison with hard-wbeat production _ 7 .) Table 28. Numbers and percentages of cooperative elevators and ware¬ houses paying and not paying patronage dividends in speci¬ fied States and grand divisions_ <>2 Table 24. Number and percentage of elevators in specified States report¬ ing direct loading by buyers in their vicinity and extent of such loading reported_ 9 ,^ Table 25. Variations in crop production and country -elevator marketings of the five principal grains in the 14 principal grain-produc¬ ing States in the crop years 1912-13 to 1916-17_ 115 Table 26. Proportions of different kinds of grain purchased by different types of elevators during the five crop years 1912-1917_ 116 Table 27. Average number of bushels of specified grains purchased annu¬ ally by specified types of country elevators in 14 States dur¬ ing crop years 1912-13 to 1916-17_ 117 Table 28. Average number of bushels of specified grains purchased annu¬ ally by country elevators in specified States during the crop years 1912-13 to 1916-17_ US Table 29. Monthly distribution of country elevator purchases ot five principal grains in the 14 principal grain-producing States expressed in cumulative percentages, crop years 1913-14 and 1916-17_;_ 119 Table 30. Ratio of elevator capacity to average purchases (capacity turn¬ over) in eight States_ 120 Table 31. Monthly distribution of total grain purchases in specified States in the crop years 1913-14 and 1916-17_ 122 Table 32. Capacity turnover in specified States in comparison with the proportions of elevators handling specified grains and combi¬ nations of grains_ 124 Table 33. Rate of capacity turnover (capacity into purchases) of houses ‘ of specified capacities in seven States_ 124 Table 34. Number of cars shipped to specified markets receiving more than 5,000 cars and proportion of total shipments reported by by country elevators and warehouses, crop years 1912-13 to 1916-17_ 120 Table 35. Destination of total shipments from all reporting country eleva¬ tors and warehouses for the five crop years 1912-13 to 1916-17_ 180 Table 36. Distribution of total shipments of five principal grains from country elevators and warehouses in specified States and grand divisions according to specified destinations during the five crop years 1912-13 to 1916-17___ 130 Table 37. Distribution of country grain shipments to specified terminal markets as reported for crop years 1912-13 to 1916-17_ 132 Table 38. Proportion of country elevator shipments to terminal markets from specified States in comparison with the proportion of terminal market financing_ I 37 Table 39. Proportion of total country-elevator shipments from specified States to mills, crop years 1912-13 to 1916-17, in comparison with proportion of individual mill elevators_ 138 Table 40. Proportion of country elevator and warehouse shipments of specified grains going to specified destinations, crop years 1912-13 to 1916-17_:_ 139 Table 41. Distribution of country-elevator shipments of specified grains from specified States to terminal markets during the crop years 1912-13 to 1916-17_ 140 Table 42. Distribution of country-elevator shipments of specified grains from specified States to smaller points during the crop years 1912-13 to 1916-17_ 141 Table 43. Distribution of country-elevator shipments of specified grains from specified States to mills during the crop years 1912-13 to 1916-17_1_ 142 TaliJe 44. Distribution of country elevator shipments of specified grains from specified States to feeders during the crop years 1912-13 to 1916-17_ 143 12 COUNTRY GRAIN MARKETING. Page. Table 45. Distribution of country elevator shipments of specified grains from specified States to interior brokei*s during the crop years 1912-13 to 1910-17- Table 46 Number and proportion of consignments and direct sales to terminal and smaller markets made by elevators and ware¬ houses in specified States and grand divisions during the crop years 1912-13 to 1916-17---- Table 47. Proportion of consignment and direct sales to terminal and smaller markets made by all country elevators and ware¬ houses reporting during the crop years 1912-13 to 1916-17- Table 48. Proportion of total cars of different kinds of grain sold to terminal and smaller markets by country elevators in specified States during the crop years 1912-13 to 1916-17- Table 49. Proportion of grain sold on consignment in specified, markets in comparison with the receipts of specified kinds of grain, 1912-13 to 1916-17_____ Table 50. Number and proportion of cars of grain sold by country ele¬ vators on consignment and direct to various markets during the crop years 1912-13 to 1916-17- Table 51. Proportion of elevators in specified States reporting elevation or no elevation for others, together with the extent of such elevation reported---- Table 52. Number and proportion of elevators in specified States report¬ ing direct shipping by farmers and the extent to which such shipping is reported- Table 53. Comparison of the proportions of elevators in specified States reporting direct shipping with the proportions reporting ele¬ vation and with the average acreage of improved land per farm---- Table 54. Number and proportion of elevators of different types report¬ ing elevation and no elevation for others---- Table 55. Percentages of elevators of different types with and without cleaning facilities in 14 principal grain-producing States- Table 56. Number and percentages of elevators in specified States report¬ ing cleaning facilities- Table 57. Proportions of different types of elevators with cleaning facili-'' ties reporting cleaning and not cleaning for farmers in eight grain-producing States of the Central West- Table 58. Proportions of elevators with cleaning facilities cleaning and not cleaning for farmers in eight principal grain-producing t0S ____ Table 59. Number and percentages of elevators of different types handling side lines and average number handled per elevator in 14 principal grain-producing States- Table 60. Comparison of the proportions of different types of elevators handling side lines with the average number handled per elevator----- 7 -—;—- Table 61. Proportion of elevators in specified States handling side lines and average number handled per elevator- Table 62. Proportion of different types of elevators handling side lines which deal in the five principal side lines-- Table 63. Average number of price information services reported by elevators in specified States- Tal)le64. Patio of times specified price information services are re¬ ported to total elevators reporting- Table 65. Comparison of “ on-track ” and “ to-arrive ” bids in 14 specified States with direct sales to terminal and smaller markets- Table 66 . Ratio of instances different sources of price information are reported to number of elevators of different types reporting in the 14 principal grain-producing States--- Table 67. Average buying margins of different types of elevators on speci¬ fied grades of grains during the crop years 1912-13 to 1916-17_ Table 68 . Average monthly per bushel margins on specified grades of grain during the five crop years 1912-13 to 1916-17- 144 145 145 146 147 150 152 153 154 155 161 163 105 166 168 169 172 173 181 181 184 185 192 194 CONTENTS 13 Page. Table 61). Average buying margins in comparison with average Minneapo¬ lis prices and as a percentage of average Minneapolis prices_ 11)5 Table 70. Profits and losses of four Minneapolis commercial line elevator companies on country grading, weighing, and docking of wheat for the period July 1, 1913, to June 30, 1916_ 201 Table 71. Profits and losses per bushel of four specified line elevator com¬ panies on country grading, weighing, and docking, crop years 1913-14 to 1915-16_ 203 Table 72. Numl)er and percentages of reporting elevators and warehouses customarily hedging and not hedging grain purchases_ 213 Table 73. Number and percentage of elevators customarily hedging and not hedging in specified States and grand divisions_ 214 Table 74. Proportions of elevators in specified States reporting hedging in comparison with the reported proportions of grain sold “ on consignment ” and direct during crop years 1912-13 to 1916-17_ 215 Table 75. Proportion of elevators in specified States reporting hedging in comparison with the prevalence of commission house financing- 216 Table 76. Proportion of elevators reporting hedging in specified States in comparison with the proportion of commercial line elevators_ 218 Table 77. Proportion of different types of elevators and warehouses hedg¬ ing and not hedging their purchases of grain_ 219 Table 78. Proportion of elevators reporting hedging in specified States in comparison with the proportion of independent and individual cooperative elevators_ 220 Table 79. Number and proportion of times specified exchanges are re¬ ported by country elevators as being used for hedging_ 228 Table 80. Number of country elevators in specified States and grand divi¬ sions hedging in specified markets in comparison with the proportion of country grain receipts in those markets_ 229, 230 Table 81. Relative importance of different sources of country elevator and ■warehouse borrowing as indicated by the proportion of times each source is reported to total sources reported_ 233 Table 82. Relative importance of different sources of borrowings by dif¬ ferent types of country elevators and w^arehouses_ 234 Table 83. Proportion of elevators of specified types in specified States in comparison with the extent of commission house and local bank financing_ 235 Table 84. Number and proportion of elevators in specified States reporting borrowed funds and average maximum amounts borrowed in the crop years 1913-14 and 1916-17__ 240 Table 85. Average maximum and minimum rates of interest paid by countrv elevators on borrowed funds in the crop years 1913-14 and 1916-17_ 241 LIST OF TEXT FORMS. Form 1. Scale ticket_ 103 Form 2. Storage ticket_ 108,109 Form 3. Daily price card_ 176 Form 4. Grain Bulletin daily price card- 177 Form 5. “ On-track ” bid_:- 179 Form 6. “ To-arrive ” bid_ 179 LIST OF DIAGRAMS. Diagram A. Per cent (ratio) of commercial line elevators to all classes of elevators reporting in 14 principal grain-producing States_;•_ 50 Diagram B. Per cent (ratio) of independent elevators to all classes of elevators reporting in 14 principal grain-producing States. 52 Diagram C. Per cent (ratio) of individual cooperative elevators to all classes of elevators reporting in 14 principal grain-pro¬ ducing States_ 54 Diagram D. Per cent (ratio) of individual mill elevators to all classes of elevators reporting in 14 principal grain-producing States_ 56 Diagram E. Per cent (ratio) of mill line elevators to all classes of ele¬ vators reporting in 14 principal grain-producing States- 58 14 COUNTRY GRAIN MARKETING. Page, Diagram F. Per cent distribution by types of elevators in each of 14 principal grain States-facing— 58 Diagram G. Proportions of wheat, corn, oats, rye, and barley marketed through country elevators in each month during the crop years 1913-14 and 1916-17--facing— 120 LIST OF APPENDICES. Appendix 1. Letter of the President to the Chairman of the Federal Trade Commission authorizing the food investigation- 315 Appendix 3. Form of contract between country elevator and farmer for the sale of grain before delivery- 321 Appendix 4. Notice to weighmaster- 322 Appendix 5. Report of shipment and instructions for reporting- 323-324 Appendix 6. Daily load report- 324 Appendix 7. Daily receipts report (wheat and durum)- 32;) Appendix 8. Form of commission-house contract for financing country elevators- 326 Appendix 9. St. Louis Daily Market Reporter-facing— 326 LIST OF APPENDIX TABLES. Table 1. Period of construction of elevators and warehouses in specified States and grand divisions- 327 Table 2. Distribution of elevators and warehouses by types and specified States and grand divisions- 328 Table 3. Average capacity of elevatbrs and warehouses in specified States and grand divisions-1- 329 Table 4. Average number of bins per house in elevators and warehouses in specified States and grand divisions- 330 Table 5. Construction materials of elevators and warehouses in specified States and grand divisions- 331 Table 6. Purchases of five principal kinds of grain, by elevators, in Table 7. Purchases of the five principal classes of grains by different _ , • ^ j • _T __ 1 _•_Cij_ Table 8. Total purchases of each of the five principal grains made in each month of the crop years 1913-14 and 1916-17 by all re¬ porting elevators in the 14 principal grain-producing States— 339 Table 9. Rate of capacity turnover of elevators in specified States handling specified grains exclusively and in combination- 340 Table 10. Capacity turnover by capacity of house in seven specified States- 341 Table 11. Number and proportion of cars of different kinds of grain sold on consignment and direct in specified States and grand divi¬ sions for the five crop years July 1, 1912, to June 30, 1917— 342,343 Table 12. Proportion of different types of elevators handling specified side lines in 14 principal grain-producing States of the Central West_ 344 Table 13. Proportion of elevators handling specified side lines in the 14 principal grain-producing States of the Central AVest- 345 Table 14. Proportion of elevators in specified States reporting the use of specified classes of price information- 346 Table 15. Percentage of specified types of elevators in 14 principal grain- producing States reporting use of specified kinds of price in¬ formation service_ 347 Table 16. Average monthly per bushel margins on No. 1 northern wheat in specified years_ 348 Table 17. Average monthly per bushel margins on No. 3 northern wheat in specified years_ 348 Table 18. Average monthly per bushel margins on No. 3 oats in specified years_ 349 Table 19. Proportion of different types of elevators and warehouses hedg- '■ ing and not hedging grain purchases_ 349 Table 20. Number of sources of borrowed funds reported by country ele- ^vators and warehouses in specified States and grand divisions ’and the percentage of each source to total sources reported— 350 ACKNOWLEDGMENT. The Commission desires to make acknowledgment, in connection with this volume of the report on the Grain Trade, of the valuable services rendered by Mr. W. H. S. Stevens, assistant chief economist and examiner in charge of the inquiry, who had immediate charge of the preparation of this volume, and by Messrs. Floyd L. Vaughan and Byron Phelps Parry. The Commission also desires to acknowledge the services of the Bureau of Markets of the Department of Agriculture, in the coun¬ try elevator field work in Illinois and Iowa, and in preparing re¬ ports upon this work. The Commission is indebted to the Bureau of the Census of the Department of Commerce for the tabulation of the data contained in the country elevator schedules and to the Bureau of Markets for certain assistance in connection therewith. * LETTER OF SUBMITTAL. Federal Trade Commission, Washington^ September 15^ 1920, To the Congress of thi; United States : There is submitted herewith a report on Country Grain Marketing, which is Volume I of a report on the Grain Trade. This inquiry had its origin in connection with the general food investigation made by the Commission, but was later continued as a separate inquiry. The report on the Grain Trade logically falls into four main divisions: (1) Country elevators and country grain marketing; (2) terminal grain markets and terminal cash grain business; (3) costs and profits of the present marketing system; and (4) future trading operations and their results. The present volume treats of the first of the foregoing subdivisions. The other three principal subdivisions will be treated in subsequent volumes. This volume, the title of which is Country Grain Marketing, pre¬ sents a detailed description of the mechanism employ^ in country marketing and a somewhat detailed discussion of country marketing methods, based largely upon schedule returns made by approxi¬ mately 10,000 county elevators and warehouses located in all sec¬ tions of the United States. It includes a discussion of the distribu¬ tion of the various types of country elevators and warehouses, their physical characteristics, functions, and operating methods, the profits and losses on grades, dockages, and weights, the geographic and commercial movement of the grain from the country elevator, based on reported shipments of one and a half million cars, country hedging and financing, and competitive conditions during the last seven or eight years. • The country elevator or warehouse is devoted to the storage and handling of grain in the country. It buys and stores grain hauled in by the farmers in wagon lots, and combines such wagon lots into car lots, which it sells outright to various purchasers, or ships for sale to some city or town that is a point of distribution for grain either on a large or a small scale. The great bulk of the grain which is marketed in the United States is handled through such country elevators and warehouses. Country elevators and warehouses are of two general classes, indi¬ vidual and line. An individual house is one operated as a unit within itself. A line house is one of two or more operated at dif¬ ferent towns by a central organization. A number of such con¬ cerns operate more than a hundred houses, and there are numerous line companies operating all the way from 25 to 75 houses. Alto¬ gether eight different types of elevators and warehouses are distin¬ guishable—four individual, i. e., cooperative, independent, mill, and maltster, and four line, i. e., commercial, cooperative, mill, and maltster. Only five of these types are of major numerical importance, namely, commercial line, mill line, independent, individual coopera¬ tive, and individual mill. The commercial line is one operated for the purpose of deriving a merchandising profit from the purchase and sale of grain. A mill line, on the other hand, while it may buy and sell some grain, is usually 16 LETTER OF SUBMITTAL. 17 run largely with reference to supplying the grinding requirements of one or more mills. The individual cooperative is a single elevator or warehouse operated or owned and operated by grain producers and engaged in buying and selling grain. It differs from the independent in the fact that the latter is not operated, or owned and operated, by producers. On the other hand, the individual mill, like the mill line, is usually concerned largely with supplying mill grinding requirements and only incidentally with buying and selling grain for profit. In some cases the individual mill elevator does no mer¬ chandising whatever. It is, however, a single unit and not like the mill line house one of several operated by a single organization. Commercial line elevators are relatively most important in Ne¬ braska and tlie four Northwestern States, and independent elevators in Iowa and Kansas and the States east of the Mississippi. The co¬ operative type is most important in Iowa, Kansas, Nebraska, Minne¬ sota, Montana, and North and South Dakota. Mill line elevators are relatively most important in Oklahoma, Kansas, and Missouri, and individual mill elevators in Missouri and east of the Mississippi in Indiana, Ohio, Wisconsin, and Michigan. xVn outstanding development in the marketing of grain in recent years has been the entry of the farmer into the elevator business, as shown by the growth in the number of individual cooperative ele¬ vators organized by farmers and used by them in marketing their grain. The average country elevator is of wood construction, most fre¬ quently the cribbed type, with a capacity of between 25.000 and 26,000 bushels. About one-half of the country elevators are equipped with cleaning machinery, and slightly less than 80 per cent handle other commodities than grain. The five principal side lines so handled, as indicated by the proportion of elevators reporting their handling, are, in order of importance, coal, feed, flour, building material, and seed. On the average the country elevator buys slightly less than 100,000 bushels of grain annually, of which about 36 per cent is wheat, 31 per cent oats, 24 per cent corn, 7 per cent barley, and 2 per cent rye. The average individual cooperative elevator, however, buys annually about 153,000 bushels, the individual mill elevator 113,000 bushels,* and the independent elevator 103,000 bushels. The com¬ mercial line and mill line elevators, on the other hand, buy on the average only about 77,000 and 79,000 bushels, respectively. About 70 per cent of the grain shipped by country elevators goes to terminal markets (those markets receiving annually more than 1,000 cars of country grain) and about 7 per cent to smaller markets (those receiving less than 1,000 cars annually). The local mills absorb 13J per cent of the country elevator shipments and interior brokers 6 per cent; about 2 per cent goes to feeders, and approxi¬ mately the same proportion to miscellaneous purchasers. Of the grain shipped to specified markets, about 71 per cent is sold on con¬ signment, the balance being sold “ to-arrive ” or “ on-track ” to rep¬ resentatives of these market organizations. About 40 per cent of the elevators and warehouses generally hedge their grain, another 10 per cent hedge it a limited extent, while 9904°—20-2 18 COUNTRY GRAIN MARKETING. V about 50 per cent report no hedging. The proportion of elevator hedging in the various States varies directly with the proportion of consignment sales reported, and also directly with the extent of commission-house financing of country elevators and the proportions of line elevators reported. Hedging is usually done in the markets to which the grain is generally shipped. A study of the profits and losses in one section of four line elevator companies on grades, dockages, and weights for three years (1914-15 to 1916-17) revealed the fact that these companies lost on grades but profited on dockages and weights, incurring a loss in profits so far as grades, dockages, and weights are concerned. This does not mean, of course, that the entire business was conducted at a loss, but relates only to the three items in question. The elevator companies selected were picked as fairly representative of that type of house in that section, and while no similar statistical study was practicable for other types of houses, it is reasonably deducible that these others have had a similar experience. Though country elevators obtain funds from numerous sources, the major portion of the financing of elevators is done by local banks, commission houses, and the head office of the line elevator companies. Line elevators, of course, procure the great bulk of their funds from their head offices, and the individual elevators are financed chiefiy by either the commission houses or the banks. Commission-house financing is of great importance in the four Northwestern States. A considerable amount of such financing is also done in Wisconsin, Illinois, and Missouri. In the other principal grain-producing States it is unimportant. The average maximum amount of borrow¬ ing per elevator in the crop year 1913—14 was $12,301 and in the crop year 1916-17, $17,309. The average rate of interest reported in both years was slightly above 7 per cent. Practically all elevators reported that they borrowed money to some extent. The general indications are that competition in buying grain in the country is keen, especially that of the mill and cooperative ele¬ vators. The mill elevators bid for grain largely to supply the grind¬ ing requirements of the mill, and frequently do not in consequence calculate upon a merchandising profit as do the other principal types. The frequent opposition of some farmers to the line-elevator com¬ panies, their friendly attitude toward the cooperative elevator, and the inducement of stock or patronage dividends, places the latter in an advantageous position. Competition in country grain buying affects all phases of the busi¬ ness. Not only grain prices, but also grades, dockages, elevation and storage charges and side lines, become subject to competitive in¬ fluences, including agreements and understandings among the ele¬ vators. Country grain buying appears to be often affected by these agreements and understandings, which are not peculiar to any one type of elevator, though the cooperative elevators appear less inclined than the others to enter into such arrangements. Respectfully, Victor Murdock, Chairman, Huston Thompson. William B. Colyer. Nelson B. Gaskill, John Garland Pollard. COUNTRY GRAIN MARKETING. ClIAl»TER I. ORIGIN AND SCOPE OF GRAIN REPORT. Section 1. The report as a whole. Origin of inquiry.— This inquiry had its origin in connection with the general food investigation made the Commission, but was later continued as a separate inquiry, the Bureau of Markets of the Department of Agriculture cooperating. In the division of the work between the Commission and the bureau it was finally arranged that the bureau should study country marketing conditions in the territory tributary to Chicago; that the Commission and the bureau should, in conjunction with each other, examine terminal marketing conditions in Chicago; and that the work as to the other terminal markets and grain-producing areas should be done by the Commission alone. Study of the grain trade.— In the investigation of grain ex¬ changes and grain marketing the Commission and the Bureau of ^larkets made a careful and extensive examination of all the processes involved in carrying the grain from the producer to the manufactur¬ ing consumer and wholesale and export distributor. No attempt was made to study the marketing process beyond these stages, for obvious reasons. Grain that has been converted by a miller or by a maltster, or a feed manufacturer, is no longer grain as such, but a derivative or mixed product thereof, in fact, a different commodity. To have studied the marketing of grain by the distributors to the retail trade (wholesalers) would have necessitated an examination of the system of wholesale feed and seed distribution, and, similarly, the study of the grain movement beyond the exporter would have involved a study of grain importation into other countries. No one of these matters was regarded as being within the scope of this investigation. Divisions of report. —An analysis of the foregoing process of distribution from the producer to the manufacturing consumer and wholesale and export distributor naturally falls into four main divisions: (1) Country markets and country marketing; (2) the terminal markets and the terminal cash grain business; (3) the costs and profits of the present marketing system; and (4) future trading operations and their effects. Each of these main divisions is sus¬ ceptible of further subdivision, and each of these latter divisions must be further subdivided before a complete picture of the complex machinery of grain marketing can be presented. In this volume and those which follow there will be given a comprehensive survey of this mechanism and the cost of its maintenance. \ 19 20 COUNTRY GRAIN MARKETING. Period covered by the inquiry.— The period covered by this inquiry is, roughly, 1912 to 1918, inclusive.. For various reasons the grain investigation did not get fully under way until the late fall of 1917. The field work was practically closed at the end of 1918, although some field'work was done in 19*19 and 1920. A considerable amount of data was also obtained by correspondence during both of these years. The work in 1919 and 1920, however, was chiefly in the way of checking the results obtained and bringing material other than schedule matter up to date as nearly as possible. On the other hand, the schedules and questionnaires sent out by the Commission in most cases covered only the five crop years, 1912-13 to 1916-17. The reasons for neither obtaining nor attempting to obtain statis¬ tical information by schedule of a date later than 191^17 are to be found in the situation arising out of Government. price fixing and control. The abolition of trading in wheat futures, the regulations of the Chicago Board of Trade and of other exchanges and of the Food Administration with reference to future trading in co.arse grains, the licensing of dealers, the fixing of wheat prices. Govern¬ ment control of transportation. Food Administration regulations with reference to wheat substitutes, together with purchases of the Grain Corporation and the various milling regulations, so disturbed the normal operation of the grain trade mechanism that any statis¬ tics secured during the war period would have been practically valueless for the permanent solution of problems of grain marketing. Such data would have recorded merely war conditions, and any studies based thereon would, in effect, have constituted a discussion of the Government control of the grain trade during the Avar and its results. Since Government control was expected to be a tem¬ porary affair, there was every reason to belieA^e that with the com¬ plete abolition of such restrictions as were imposed as a result thereof, the grain trade* would revert to practically the system of marketing employed prior to 1917 and that the war-time period would merely constitute an interlude in the normal operation of the grain mecha¬ nism of the United States. For these reasons it appeared that the statistical studies and the conclusions based thereon would have practically as much validity for the solution of grain-marketing prob¬ lems as though the statistics in question bore a later date. Grains co\t:red. —The grains selected for study were the five principal small grains—wlieat, corn, oats, rye, and barley. These grains are extensively raised in the United States, and they are also those which are most extensively traded in at the various im¬ portant organized markets or exchanges. Sec. 2. Scope of country marketing volume. Subject viatter. —The present volume deals with country markets and marketing, the first of the four principal divisions of the report enumerated aboA^e. It describes the purchase and sale_ of grain at country points, and also the various conditions and circumstances affecting this trade. Since the country elcA^ator is the predominat¬ ing factor in country purchasing, the bulk of the material presented herein deals Avith tlie processes of handling grain by various types of country elevators. ORIGIN AND SCOPE OF GRAIN REPORT. 21 Charges frequently have been made of monopolistic control of country markets by combinations of country elevators; of price cut¬ ting and of price agreements; of undergrading, underweighing, and overdocking; and of various unfair trade practices. The necessity of hedging by country elevators has been the subject of much dispute as well as the margin of gross profit exacted by such elevators. Country elevator operators maintain that they work on an extremely narrow margin, while the producers and their sup- l)orters state that the margins are entirely too wide. All these and many other charges^ questions, and subjects of dispute have been carefull}^ examined into by the Commission, and for the most part the results are presented in this volume. Hedging is so related, how¬ ever, to the whole system of future trading that the general question of its desirability has been reserved for the volume dealing with that subject. The question of the profits of country elevators has likewise been reserved for subsequent discussion. To determine the total per bushel handling charges involved in the marketing process from the producer to the manufacturing consumer or wholesale and export distributor, the costs and profits of all middlemen, both country and terminal dealers, have been considered together. Interviews.— The information used in preparing this volume on country marketing was obtained primarily from three sources, i. e., interviews, correspondence, and statistical data; the last obtained by questionnaires or taken directly from the books of the various con¬ cerns by agents of the Commission and the Bureau of Markets. , The interviews were divided into three classes: {a) Interviews with the operators of cooperative, independent, and mill-owned country elevators, -^ents of the Commission visited approximately 175 elevators in the States of Minnesota, North Da¬ kota, South Dakota, and Montana,^ and representatives of the Bu¬ reau of Markets visited about 90 elevators in the States of Illinois and Iowa. {h) Interviews with various line elevator operators in the terminal markets. (c) Interviews with parties not operating country elevators but closely affiliated therewith, such as various grain commission firms handling country elevator shipments, etc. Correspondence.— Probably the most illuminating source of in¬ formation as to country marketing methods was the correspondence of the line elevator companies. The agents of the Commission ex¬ amined the files of some 15 line elevator companies, making copies of the letters covering a wide variety of subjects, such as competitive methods, grades, dockage, prices, margins, hedging, etc. Statistical data.— Data on country prices, margins, grades, dock¬ ages, and weights were taken directly by representatives of the 1 As the Commission desired to ascertain conditions in the four northwestern States as accurately as possible and as the expense precluded visiting more than a small number of elevators relatively, it was necessary to secure as representative a group as possible. For this purpose the number of elevators visited in each state was determined accord¬ ing to the number of elevators in that state compared with the total for all four states. This number for each state was then distributed according to the proportion of elevators of each type within the State, mill, cooperative, independent, 'etc. Finally, in order to check as accurately as possible, competitive conditions, points were selected in each of the four States which had one, two, three, four, and more than four elevators at a station. COUNTRY GRAIN MARKETING. 22 Commission and the Bureau of Markets from the books of the line elevator companies at the terminal markets and also (on countiy prices) from certain of the country elevators which had kept records of such prices. The bulk of the statistical material, however, was obtained from the returns to a schedule which was prepared and sent out by the Commission to some fifteen thousand country elevators.- A- copy of this schedule will be found in A.ppendix 2. * , * n Approximately 10,000 returns to this schedule were received in all degrees of completeness and incompleteness. Line elevators made the most satisfactory returns, probably owing to the fact tn^t the returns of line concerns were generally made by the head ollice o the company and that a business thus operated from a central oihce usually has comparatively good records. The independent and the individual mill-owned elevators made the most unsatisfactory reports, and the replies of the cooperative elevators were but little better than those of these two former types. Generally speaking, the books and records of the individually operated elevators were found by the Commission to be poorly kept. In the case of each of the more important types of elevators, however, the replies were sufficiently complete, accurate, and numerous to furnish an adequate statistical basis for conclusions with respect to most of the questions asked. ■ »Tae commission attempt^ to to^aU satisfactory lists n^mmission’s list was compiled from a variety of sources, schedule was seut | ® f Agriculture, the Food Administration, the vxrain including the lists of rte PepMtme^^^ bodies of the various States, and the ma'rnunetira MinnSolis coni™ a dStly price card to country elevators. Chapter II. FUNCTIONS, AGE, AND DISTRIBUTION OF ELEVATORS AND WAREHOUSES. Section 1. Functions of country elevators and warehouses. Elevators. —The farmer may sell his grain, either in wagonload or carload quantities, the former method being by far the more prev¬ alent. Depending upon local marketing conditions and the number of factors operating in the local market, he may sell his grains to any one or more of the following purchasers: Elevators,® ware¬ houses, track buyers, feeders, scoop shovelers, interior brokers, re¬ tailers, solicitors of terminal market grain dealers, and solicitors or buyers for mills and other converters. Of all these factors the elevators and Avarehouses are by far the most important, and owing to this fact they are considered first. At the present time the primary functions of country -elevators are two in number, and in the order of importance they are, first, the merchandising of grain, and, second, the warehousing of grain. jMinor functions are, the elevating of grain for farmers and others, the cleaning and conditioning of grain either for the elevator’s own account or for others, the handling of side lines, etc. In the early days of the elevator l3usiness the primary function of country ele¬ vators seems to have been warehousing—that is, the storage of grain in return for a fee.® Merchandising, or the buying and selling of grain by the elevator for profit, was then of secondary importance, and even now it continues to be so on the Pacific coast. In performing its various functions, the elevator becomes a very important factor in the marketing of grain. Most of the grain marketed at country points is bought by the elevators directly from the farmers for the purpose of resale. If, however, the farmer does not care to sell his grain immediately after harvest, he may store it in the elevator,'^ for which service a fee is usually charged. In some cases the farmer may decide that he will ship his grain himself. In such a case the elevator perhaps elevates the grain and loads it into the car. Or, again, if the grain received by an elevator either for its own account or for that of farmers, contains an admixture of foreign matter the elevator, if it is equipped to do so, may clean the grain thus improving its merchantability. In addition to handling grain, either as a merchandiser or ware¬ houseman, many country elevators, and to a lesser extent warehouses, deal in various other commodities. These commodities, especially coal, feed and flour, seed, and lumber, are sold in large quantities to farmers, and numerous elevajors also buy and sell wool, beans, poultry, eggs, potatoes, etc. So far as the elevator or warehouse is s Country mill and maltster elevators included. 8 See Cb. IV. Some elevators, however, refuse to accept grain for storage. \ 23 COUNTRY GRAIN MARKETING. enffaffed in these operations, it acts as an ordinary merchandiser, and such operations have no direct relation to the functions ot the elevator in connection with the grain business. 4 . 1 ^ Warehouses.— The primary functions of warehouses, like those of elevators, are merchandising and warehousing, except that in the Pacific coast area their order of importance is reversed, merchandis¬ ing being secondary to warehousing. ‘ The reason that warehousing ranks first in importance on the Pacific coast is due to the methods of marketing which prevail. There the farmers, as a general rule, store their gram instead ot sell¬ ing it to the warehouse, receiving therefor warehouse receipts which they sell to various purchasers. The country warehouse receives a storage fee for its services. As regards secondary functions, neither loading for farmers nor cleaning is done by warehouses in this sec¬ tion, and side lines are handled to a relatively smaller extent as compared with other parts of the country. . „ In other sections than the Pacific coast the functions of warehouses conform more closely to those of elevators, and merchandising is o more importance than warehousing. Section 2. Physical differences of elevators and warehouses. A country elevator is a building specially designed for elevating, storing, ‘and loading grain in bulk, in which form it is handled throughout the operation. An endless chain of scoops cairies the grain to the top of the building, from which it is spouted into a bin, where it is stored. ^ i • n A country warehouse, sometimes.called a flat house, is usually noth¬ ing but a shed in which grain is collected and stored in the country. Almost any building will serve for this purpose, and in practice ware¬ houses will be found which formerly served as barns, stores, etc. More often, however, the warehouse is constructed specifically tor the purpose of handling grain. The construction of such a house usually differs radically from that of an elevator. The warehouse is usually a low building, which occupies considerable ground space as compared with an elevator, whose greatest dimension is i^ually heio-ht. In warehouses which handle grain in sacks, as on the y acme coast, bins are not necessary, and the construction of the building itself does not in consequence require the strength and rigidity ot an elevator. Warehouses handling grain in sacks are not, moreover, equipped with elevating machinery, as a rule. In tact, the sack- handling process may be entirely by man power, although some^sack warehouses are equipped with power appliances, such as pilers tor stacking the sacks of grain and with conveyors for carrying these sacks from one part of the building to another. It is interesting to note that in some sections of the country, as m Minnesota, a few warehouses, as well as some elevators, receive in sacks, but empty the grain into bins and ship it m bulk. his, however, is exceptional. The other warehouses m the Central West usually handle grain in bulk, storing it in bins which have been con¬ structed in the warehouse. A few of the warehouses are of crib con¬ struction.® _ ® This construction is ciescribetl in Ch. Ill, sec. 1. FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 25 Both elevators and warehouses i)urchase grain chiefly from the farmers who haul it in by wagon. In some cases both buy grain from farmers in carload lots, as when a farmer has loaded a car to ship and has been later persuaded to sell it to the local elevator or ware¬ house. Section 3. Bulk and sack handling. Bulk and sack areas. —Broadly speaking, elevators and ware¬ houses are adapted to and are the results of two distinctly different methods of handling grain. In practically all of the great grain- fi^rowing areas of the Central West, the practice of handling giain in bulk prevails both in the country and at the terminal markets. While a number of warehouses are also found within this area, their total number is relatively insignificant as compared with the total number of elevators which are located there, and it seems probable that where they appear in this area they are, at least in part, relics of the days preceding the development of the elevator. In the area to the westward of the great grain-growing States ot the Central West and extending to the Pacific coast, however, the warehouse is much more important than is the elevator. The great bulk of the grain produced in this area ^ is raised in California, Oreo’on, and Washington, all three of which are important grain- producing States. In these States the method of sack hamlling predominates and alwaj^s has. The production of the other States in this group is relatively negligible. While there is a large and important milling demand tor wheat in these States, especially Washington and Oregon, a very large proportion of the grain grown, especially wheat, is exported. Historical reasons for sack handling.— Over 25 years ago at¬ tempts were made, particularly by the Northern Pacific and the Great Northern Kailroads and the Oregon-Washington Kailroad & Navigation Co. to handle grain in bulk in the Pacific Northwest section. Elevators were constructed and much of the grain was moved from interior points to the coast in bulk, particularly to the Portland terminal. This attempt at bulk handling, however soon ceased and the elevators were either torn down or converted into hat warehouses. One reason for the failure of this attempt was that shippers refused to receive grain for export unless it was sacked. At that time, and earlier, the larger part of the grain shipped from Seattle, Portland, and Tacoma Avent to Europe, generally moving in sailing A-essels around Cape Horn, a voyage both long and rough. Many of these vessels were tramp boats that had left European ports for the Orient, whence they crossed to the ports on our western coast picking up a cargo of grain for home. These vessels not being equipped for bulk handling soon found that the only safe way to handle the grain was in sacks. Otherwise there was great danger ot the cargo shifting and the vessel failing to right itself. In addition, the trip through the Tropics overheated bulk grain, and after several disastrous experiences the insurance companies made their rates so high as to be practically prohibitive, and even in some instances re¬ fused to insure bulk grain at all. j, 1 • A second reason for the failure of bulk handling Avas found in the fact that the farmers had grown accustomed to the use of sacks prior to railroad development, when shipments from the interior were 26 COUNTRY GRAIN MARKETING. handled through river warehouses and river boats, neither of which was equipped for bulk handling.® In more recent years, when a desire was shown on the part of some for a reestablishment of elevators and the system of bulk handling, difficulties were encountered. Many farmers, accustomed to sack¬ ing, did not care to change. A lucrative business had grown up in the importation and sale of sacks and twine. In some instances the railroads were opposed to elevators, and the assertion is even made that the rental charged for sacks was made to vary inversely to the strength of the demand for elevators. Moreover, a “ spread ” had developed between the price of bulk as compared with sacked grain, the latter being from 3 to 4 cents higher. Furthermore, for a long time, terminal facilities for handling bulk grain were entirely in¬ adequate.^® According to the information obtained by the Commission’s agents, the revival of the agitation for the bulk plan of handling grain in the Pacific Northwest section has been largely due to the increase there of farmers’ cooperative companies, which are generally favor¬ able to this method, and to the abnormally high' price of sacks re¬ sulting from war conditions. Arguments for sack handling. —Broadly speaking, most of the arguments in favor of sack handling in the Pacific Northwest find their basis in the difficulties of changing the system rather than in the economic desirability of the one or the other method. The following are the principal arguments made for sack handling. (1) Elevators have been tried in the past in the Pacific coast region and largely abandoned at a heavy loss to all interested in them. (2) Sacked grain brings from 2 to 4 cents per bushel more than bulk grain. This difference in price is supposed to cover the value of the bag. (3) With reference to the price of sacks, it is pointed out that the prevailing figure during the war was much above normal, and that this war price arose largely from the exceptionally heavy de¬ mand for sacks, the higher cost of importing, and the fact that jute was on the embargo list. Moreover, the high price of jute has been counterbalanced by the high price paid farmers for their wheat. It is therefore unfair to base any criticisms of sack shipments on the abnormal conditions arising out of and subsequent to the war. (4) It is estimated that in the State of Washington alone there is somewhere between a million and a million and a half dollars in¬ vested in flat warehouses and their equipment. To scrap this prop-' erty and substitute other equipment the initial cost of which would be greater w'ould be a tremendous waste. (5) Higher insurance is required on bulk grain. (6) It is urged that prior to the war a large part of the export grain moved in sailing vessels, that can not go through the Panama ® This preference on the part of the farmers, combined with the insistence upon sacks by the export trade, led the railroads to furnish them in many cases to the farmers. In the early nineties some of the roads actually gave sacks away and many later rented them at from 1 to 2 cents a sack upward. More often, however, the farmer bought his sacks from the warehouseman on credit, agreeing in return for the accommodation to sell all of his crop to the warehouseman or at least a sufficient portion to cover the cost of sacks supplied. Cf. Howard T, Lewis, Elevator Movement in the Pacific Northwest, Jour, of Pol. Ec., Oct., 1916, p. 794. This study has been freely used in connection with this discussion. ■FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 27 Canal anyway, since to do so means entering the zone of calms and the loss of a great deal of valuable time. (7) The experience of the Middle West concerning bulk handling is by no means conclusive evidence of success on the Pacific coast, because of the difference in growing conditions, such as the large number of varieties of wheat grown, prevalence of smut, leased lands on which it would not pay to put permanent storage improvements, varying soil conditions due to abrupt changes in the topography of grain-lowing sections, and length of haul to country stations. (8) ^he sack method is the only economical and satisfactory way to handle the large number of varieties and grades grown so as to keep them distinct, which is necessary if the producer is to get the true value for his wheat. Smutty grain in varying degrees is preva¬ lent in much of the Pacific section, and the different lots of this grain should be kept separate as well as apart- from sound grain. The practicable way of doing this is by the sack method. (9) By the method of using sacks and piling in flat warehouses grain can be stored more cheaply than in any other way. The large concentrated movement to the country station during the harvest season can be taken care of more expeditiously and at less cost by this method. (10) The extensive demands of the millers that the different kinds of grain be kept separate are much more easily met when sacks are used. (11) The present facilities of the average Pacific coast farmer are better adapted to handling grain in sacks, and it would mean a con¬ siderable outlay for each farmer to equip himself to handle in bulk. (12) Some individuals favorable to the sack method claim that the bulk-handling costs through an elevator are not less than for handling sacks through the flat warehouse, but, on the contrary, that sack- handling is the cheaper on account of the much higher construction costs of elevators as compared with those for the flat warehouses. (13) In sack handling the grain movement can be expedited and hand labor eliminated by using power-operated conveyors wherever possible, as for piling, moving the sacks from the warehouse to cars, boats, etc., as is now being done in some instances. (14) The plan of converting flat warehouses into bulk-handling plants would be expensive and inefficient. The result would not give a satisfactory elevator, because the two types of houses are so totally different. Arguments for bulk handling. —Some of the arguments ad¬ vanced in support of bulk handling by those in favor of it are as follows: (1) Grain in bulk can be handled much more rapidly and efficiently through elevators either in the country or at terminal points than can grain in sacks through warehouses. This applies to unloading the farmer’s wagon, to storing in the house, to loading or unloading from or into boats or cars, and effects a considerable saving through¬ out the entire handling process. (2) It is alleged that grain in bulk can be better protected from moisture, vermin, fire, etc. 28 COUNTRY GRAIN AIARKETING. (3) The farmer in the long rim, it is claimed, can provide himself with the equipment for bulk handling, such as granaries, bins, and tight wagon boxes at as loiv or less cost than is required for him to equip himself with sacks. (4) Bulk grain can be inspected and graded with much greater ease and accuracy than grain in bags, and there is probably less chance of fraudulent practices. . . (5) By means of cleaning machinery, dirty and damaged gram in bulk may be improved in quality and conditioned more readily and with less expense than can sacked grain. In the latter case the sacks must be opened and the grain emptied before cleaning, and the grain rebagged and the sacks tied up after cleaning. (6) In bulk handling most of the work will be done by machine power instead of man power, a means both easier and cheaper. (7) Eastern grain buyers prefer grain bulked, and as there is a possibility in the future that Pacific coast grain will be shipped east to a greater extent than formerly, this is an argument in favor of the bulk plan. ^ ^ i ^ (8) So far as the Pacific Northwest is concerned, it is said that the grain buyers are usually the parties interested in the importing and selling of sacks, and that'they are the ones who insist that sacks must be used, because this business means large additional profits to them.^^ * (9) As the situation is now on the coast, it is claimed that practi¬ cally the entire supply of grain must be sacked in order that about 25 per cent may be shipped in the export trade. If this latter por¬ tion must be sacked before shipment, it would seem but fair that the burden should rest only on the grain that is actually shipped sacked, and the entire Pacific Northwest should not be saddled ^vith this apparently uneconomical system merely because of the require¬ ments for a small portion of the grain. Furthermore, it is stated that a basic argument for the use of sacks rests upon the shipping of the grain by sailing vessels on the long voyage around Cape Horn. The opening of the Panama Canal and the use of steamers with compartments, it is contended, will eliminate the necessity for using sacks and even render bulk shipments preferable. (10) It is stated that the present method is especially uneconomical on the coast on account of the fact that the exported grain is rarely shipped in the identical sacks in which it is received. The sacks upon arrival at the terminal are opened, the grain cleaned, and then resacked. The old sacks are not returned, and the new sacks are left to the importer to dispose of as he sees fit. To say nothing of the loss of time occasioned by this double operation, the additional sack loss is considerable. (11) Lastly, it is urged that there is no sound reason against bulk handling on the coast because of the existence of flat warehouses, since it is contended that they can be converted into buildings capable of handling bulk grain by installing an air-pressure conveyor, en¬ gines, and scales, and dividing the warehouse into bins at an expendi¬ ture by no means excessive. J. D. Brown, president Farmers’ Union of Oregon and Soutliern Idaho. FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 29 AiTiTUDE OF DIFFERENT TNTERESTS.^^—The general attitude of vari¬ ous interests in the Pacific Northwest may be summarized as follows: Growers .—Many of the growers, particularly the moderately large ])roducei's, favor bulk handling and are of the opinion that facilities for that purpose will continue to be provided rapidly. They con¬ sider that bulk handling will not again be abandoned, and that it is now a safer proposition than ever before. On the other hand, quite a number, particularly of the smaller growers, and some very large ones, who produce under varied conditions, think the permanency of bulk handling doubtful on account of the unwillingness of the average famier to try new methods and his desire to preserve the identity of his individual grain. They believe that when the grain movement of the section under discussion is once more to the coast and the price of sacks becomes normal the_trend will again be toward the sack method. Naturally, the growers who have changed to bulk handling and provided equipment for it generally feel that the method will grow, but some state that bulk handling is not as cheap as the sack method if the price of sacks drops to anything com¬ parable with the prewar level. Warehousemen .—The warehousemen generally show a preference for handling wheat in sacks, but some acknowledge that many growers want bulk handling and think it bound to come, though they are not Avilling to predict how soon or how fast. ^ Some ware¬ house representatives believe the farmers’ elevators will not be suc¬ cessful in the Pacific Northwest, and that those erecting them will not meet with success largely because the original cost of construction, as compared with that of flat warehouses, is so heavy that it will not be easy to obtain sufficient grain to pay for their operation. Elevator operators .—Those in charge of elevators recently placed in operation are apparently almost unanimous in the opinion that bulk handling is the only method of handling wheat, because in this way the grower gets rid of the use of sacks, the uncertainty of pro¬ curing them, and the constantly fluctuating price. MilleVs .—The millers as a rule favor sack handling. At the same time a feeling exists among them that the sentiment for bulk handling is grooving. They believe, however, that the change will come slowly. They also express the opinion that if the price of sacks again becomes normal farmers will buy them instead of going to the expense of installing equipment necessary for bulk handling. Banks and investment companies .—The officials of banks and in¬ vestment companies are conservative in their opinions as to the growth or permanency of the bulk-handling movement. They state that the high cost of sacks and the shipping of wheat east by rail, where it comes in competition with bulk grain, have had more to do with the growth of the sentiment for bulk handling than any permanent desire on the part of the growers. Some, however, think that lack of interior elevators and terminal bulk-handling facilities are pri¬ marily the factors that have retarded the more extensive use of bulk handling. Farmers'* unions .—In general, the farmers’ unions emphatically contend that there is no sound objection to bulk handling; that grain Based largely upon a Report of Engineer G. B. llegardt to the Commission of Public Docks. Portland' covering an Investigation of the Movement to Adopt the System of Bulk Handling of Wheat. COUNTRY GRAIN MARKETING. 30 is so handled nearly eA'eryAvhere else; and that with the opening of the Panama Canal the last obstacle thereto on the Pacific, coast has been removed. Xhey say the whole question is a matter of educa¬ tion, and that the sentiment for bulk handling is steadily gaining ^^Su^fMARY.—While it Avould seem probable that the bulk method of handlin^’^ will ultimately prevail on the Pacific coast as elsewhere in the United States, it is likely that the sack method will continue to be used for a long time to come. Section 4. Type differences in country houses. Line houses. —A concern engaged in the country elevator or ware¬ house business may, theoretically, operate any number of houses. Actually, something under 200 houses seems to be about the maxi¬ mum. The largest number of houses operated by a single organiza¬ tion which was reported in the returns to the Commission s country elevator schedule was 178. There are instances, however, where the ownership and control of two or more organizations, each operating several houses, are in the hands of a third organization, and in such cases it is evident that the latter concern might be operating, at least indirectly, more than the above-stated maximum. Between the companies thus operating from 30 or 40 to 150 or more houses located at different points and between companies operating a smaller nuinber of houses there is no essential distinction except in size. For this reason all these houses have been classed together and designated as line houses. For the purposes of this report, therefore, a line house may be defined as one operated by an organ¬ ization which operates two or more houses located at different points. Individual houses. —Between the line type of elevator or ware¬ house and the individual type there is a fairly clear line of demarca¬ tion. A single line house is only a part of a larger organization buying grain in two or more localities, and all its operations are directed and controlled, with reference, more or less, to the operations of all the other houses composing the line. The individual plevator or warehouse, on the other hand, operates locally only and is managed AAdthout reference to the operations of other houses, except in so far as it may be competitively affected by them. In each of these two principal classes of houses there may be dis¬ tinguished four subclasses based on the character of control or owner¬ ship. On this basis the line type may be divided into commercial, cooperative, mill, and maltster subtypes, and individual type into independent, cooperative, mill, and maltster houses. Commercial line houses. —A commercial line company may be defined as a company operating two or more houses at different sta¬ tions for the purpose of buying and selling grain at a profit. The typical large commercial line company is one which has a head office in one of the primary markets and Avhich operates a comparatiA^ely large number of elevators, ranging, say, from 30 or 40 to 150 or more. The great bulk of such companies are found in the NorthAvestern States, most of them haAung head offices in Minneapolis, from which the buying and selling operations of the various country stations are supervised. OccEsionally a single line company wi’l operate more than one house at a particular point, but these instances are rather exceptional. FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 31 Independent houses. —An independent elevator or warehouse is one operated, as is the commercial line house, for merchandising profit. In short, an independent elevator or warehouse is a single house organized and operated by an individual, partnership,' or cor¬ poration for the purpose of making a profit in the buying and selling of grain. If two or more such houses are operated by the same com¬ pany, the result is a commercial line concern. Line and individual cooperative houses.— “ Cooperative” as em¬ ployed in this volume in referring to elevators and warehouses in¬ cludes not only elevators and warehouses paying patronage divi¬ dends but also those operated or owned and operated by farmers. In fact, a more accurate designation of many of the houses report¬ ing themseh^es to the Commission as cooperative would perhaps be “ farmers’ houses.” As commonly employed in the grain trade the meaning of the terms “ cooperative ” and farmers ” as applied to country houses is decidedly inexact and indefinite. Both terms are frequently, perhaps most commonly, used to describe houses operated or else oAvned ‘and operated by farmers. But they are also employed in many instances, especially the term “cooperative,” to designate those which pay patronage dividends. The loose usage of both terms is indicated by the fact that one often encounters the expression “ patronage dividend cooperatives.” Moreover, the dividing line between these two classes of houses is not as definite as might appear to be the case. The farmer’s com¬ pany, even though not paying patronage dividends, frequently has as its stockholders or owners a very large proportion, and in some cases practically all of the farmers in the vicinity who would nor¬ mally be its patrons. Such an elevator or warehouse, therefore, is cooperatiA^e in the sense that the patrons receive the great bulk or all of the profits, although the distribution thus made as between indi¬ vidual farmers is not in any exact proportion to the business which they offer the house. Since a very large proportion of the houses reporting to the Com¬ mission as cooperatives also report that they do not pay patronage dividends, the term cooperative wherever employed in the volume is to be interpreted as including not only patronage dividend co- operatiA^es but also farmers’ elevators or warehouses Avhich, Avhile not paying patronage dividends, are either operated or else OAvned and operated by their farmer patrons. Elevators and warehouses of this type, therefore, may be distinguished from those of other types chiefly by reason of the fact that they are operated by and in the interest of producers. A cooperative line house is the same as an individual cooperative, except that the former is operated by a concern which is operating tAvo or more houses located at different stations. Line and individual mill houses.— The primary function of the mill elevator or warehouse is to insure the mill a supply of grain (usually Avheat) for milling purposes. This is the fundamental a patronage dividend house is one which pays a dividend based upon the amount of business done by the house with those from •v^hom it purchases. AARiile the returns to the Commission’s inquiry as to the basis of patronage dividend payment (Cf. Appendix 2, Inquiry 9) are not sufficiently numerous nor comprehensive to warrant presentation, it may be stated that the method of paying such dividends most frequently reported was according to the number of bushels of grain sold to the elevator, although a considerable number of houses based these dividends upon the value of the grain thus sold instead of upon the quantity. For further information on patronage dividends see Ch, IV, sec. 13, of this volume. 32 COUNTRY GRAIN MARKETING. purpose of its operation. Whether or not such houses engage, in i addition, in a merchandising business, depends upon various cir- i cumstances. But even though they do, this merchandising is usually • regarded as of subordinate importance in all but exceptional cases. , By constructing an elevator or warehouse, the mill provides storage j space for grain which may be held therein and used as required. j By the ownership of one or more elevators or warehouses, the mill avoids, in many cases, middlemen’s charges and thus secures its grain at a lower price. In case of a shortage in local receipts the mill house will usually pay a higher price than other types of houses. Since it is buying for milling purposes it does not, in consequence, find it necessary in bidding to consider the merchandising profit as do the other principal types of houses. Two or more of such houses at different points operated together constitute a line. Line and individual maltster houses. —The purpose of maltsters in operating elevators and warehouses is primarily the same as that of the mill operator—^to insure a supply of grain, barley. Malt^er houses, like those operated by mills, may or may not merchandise grain, depending on circumstances. These houses are distinguish¬ able from the mill type, therefore, only in the fact that they are operated by maltsters and brewers instead of millers and that thev buy chiefly barley instead of wheat. Two or more of them located at different points and operated by one concern are regarded as a line. Section 5. Number of elevators and warehouses reporting and reported. Method or tabulating returns. —Keturns to the country elevator schedule (Appendix 2) were made, by 9,906 elevators and ware¬ houses. According to information obtained from the Department of Agriculture and the Food Administration, there are probablw not far from 30,000 country elevators and warehouses in the United States. These returns therefore probably embrace about one-third „ of all such houses in the country. » , • In tabulating these replies the returns to most of the inquiries are presented according to geographical distribution of elevators and warehouses and also according to the type of houses reporting. Elevators were tabulated separately for 14 States, as follows: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, JVBssouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota_, and Wisconsin; and for three grand divisions, i. e.. Mountain and Pacific, Southern, and Middle Atlantic. The 14 States tabulated were selected partly because of the fact that they were leading gram- producing States, but more especially by reason of the fact that they were the only ones returning a sufficient number of schedules to war¬ rant separate presentation by States. i x • j Warehouses were tabulated for four divisions—the Mountain and Pacific, Central, Southern, and Middle Atlantic. The States in¬ cluded in the latter divisions are as follows: Mountain and Pacific Arizona, California, Colorado, Idaho, Montana, Nevada, Kew Mexico, Oregon, Utah, Washin^on, and Wyoming. Central^Illi- nois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, ^e- ])raska, North Dakota, Ohio, South Dakota, and Wisconsin. South¬ ern—Alabama, Arkansas, Delaware, District of Columbia, Ilorida, Oeorgia, Kentucky, Louisiana, Maryland, Mississippi, North Caro¬ lina, Oklahoma, South Carolina, Tennessee, Texas, ^ ^rg^ia, and West Virginia. Middle Atlantic—New Jersey, ^ew T ork, and Penn- FUNCTlO^sS, AliE, AND DISTRIBUTION OF HOUSES. 33 sylvania. The Mountain and Pacific division of elevators coincides with the Mountain and Pacific division of warehouses, except that the State of Montana, which was separately tabulated for elevators, is omitted, and the Solithern division of elevators coincides with the Southern division of warehouses, except that the former does not include the State of Oklahoma, which was separately tabulated. The Central division for elevators, where used, included 12 States, which are the same as those for which elevators were separately tabu¬ lated, excluding Montana and Oklahoma, Xo tabulations were made for the New England States on account of lack of replies. Returns to most of the inquiries Avere also tabulated for each of the eight types of houses discussed in the preceding section, i. e., com¬ mercial, cooperative, mill, and maltster line, and individual coop- erath^e, mill, maltster, and independent houses. In some cases ware¬ houses and elevators Avere tabulated together and in other instances separately. In many cases, owing to the small number of Avare- houses reporting, the results for elevators alone were employed. Number of houses per station. —Of the 9,906 houses returning the country eleA^ator schedule, 9,219 reported the number of elevators and Avarehouses operating at their station. For the purposes of this re¬ port a station is defined as any point, town, or place where one or more eleA^ators or AA’arehouses are located. Although the house maj^ be situated on a railway siding in the country, far aAvay from any town or post office, nevertheless it constitutes a station. Inquiry 12 pf the country elevator schedule (see Appendix 2) asked the names of all other mills and elevators at each station. From these data there was computed the number of elevators and warehouses per station and the total number of houses at all reporting stations,^® the latter by multiplying the number of stations reporting by the number of elevators, warehouses, and mills reported at each of such stations. Table 1 presents the result of this tabulation. Table 1. —Numher of elevator.^ and warehouses at stations and proportion re¬ porting to those reported.^ Number of elevators and warehouses reported at stations. Number of stations reporting. Elevators and ware¬ houses answering inquiry. Number of elevators and ware¬ houses reported. Per cent of number answering inquiry to num^r reported. 1,810 1,810 1,810 100.00 i;887 2,500 3,774 66.24 1,223 2,131 3,669 58.08 525 1,216 2,100 57.90 259 ^ 780 1,295 60.23 118 439 708 62.01 47 205 329 62.31 20 89 160 55.62 4 30 36 83.33 2 8 22 36.36 13 and over. 1 11 13 84,62 Total. 5,896 9,219 13,916 66.25 “ Attention is directed to the fact that the percentages in th^ various tables in this volume do not in all cases add to exactly 100 per cent. * Inquiry 12, Appendix 2. , _ 16 Each mill being counted as one house and excluding Diose not replying to the inquiry. 9904°—20-3 34 COUNTRY GRAIN MARKEtiNG. From this table it appears that the 9,219 elevators and warehouses answering this inquiry were located at 5,896 stations and that these 5,896 stations reported 13,916 elevators there located. In other words, approximately 66 per cent of the houses reported at all sta¬ tions replied to the questionnaire. This fact is important, since it in¬ dicates the representative character of the returns. The great bulk of the stations (nearly 5,000 out of 5,896) report three houses or less per station. A little less than one-third of the stations reporting are single-house stations and about another third have two houses. In the case of stations having more than two houses the number of stations reporting declines very sharply as the number of houses at the station increases. Less than 10 per cent of the total stations reporting have more than four houses and only seven stations report more than eight houses. Geographical distribution of country houses.— ^Table 2 presents the geographical distribution of all elevators and warehouses mak¬ ing returns to the country elevator schedule. (Appendix 2, in¬ quiry 2.) Table 2—Geographical dutrilmtion of all elevators and icarehmises reporting and reported. State or dh'ision.i ELEVATORS. Oklahoma. Kansas. Michigan. Nebraska. Wisconsin. Ohio..... Missouri. Iowa.T. North Dakota. Indiana. Illinois. Montana. Minnesota. South Dakota... Southern Di^^sion. Middle Atlantic Division...... Mountain and Pacific Division Total. •WAREHOUSES. Middle Atlantic Division. Mountain and Pacific Division.... Southern Division. Central Division.. Total.. Grand total. Total elevators and ware¬ houses making returns. Elevators and ware¬ houses answering inquiry 12.2 Number of elevators and ware¬ houses reported. Per cent of number answering inquin' 12^ to number reported. 175 162 342 47.37 629 591 1,109 53.29 249 222 398 55.78' 597 581 983 59.10 J228w 208 341 61.00 iOA ' 60% ouy 228 198 297 66.67 i 801 756 1,123 67.32 1 1,438 1,415 2,092 67.64 i 421 360 520 69.23 i 1,057 985 1,371 71.85 477 470 641 73.32 1,284 1,254 1,671 75.04 ! 966 920 1,196 76.92 1 128 100 178 56.18 167 141 232 60.78 196 179 290 61.72 9,395 8,851 13,264 66.72 25 20 38 52.63 283 196 369 53.12 42 32 58 55.17 j 161 120 187 64.17 511 368 652 56.44 9,906 9,219 13,916 66.25 1 For States included see above. 2 Appendix 2. Section 6. Average distance between stations. The following table presents according to the number of houses at the station the average distance in miles to the nearest elevator or This table was derived from the replies to the country elevator schedule by multi¬ plying each distance to the nearest station—1, 2, o, 4, 5 miles, etc. by the ni^bei of times it appeared in the schedules, usually foui', corresponding to pie four directions, north, south, Ust, and west (Cf. Appendix 2), adding all the products and dividing the resultant total by the number of distances. 35 FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. warehouse for all elevators and warehouses answering the Com¬ mission’s inquiry upon this subject (xippendix 2, inquiry 12) : Table 3. —Average distance between stations distHbuted according to the number of elevators and warehouses at each station. Nuiniier of elevators and warehouses at station. Average distance in miles. Number of elevators and warehouses at station. r- Avorage distance in miles. 1. 8.80 9. 11.33 2 . 9.47 10. 3 . 10.16 11. 11.00 4 . 10.91 12. 5 . 11.11 13 and over. 4.00 6 . . 11.09 11.19 Average. 9.70 8. 12.16 The significant fact of the foregoing table is the tendency for the average distance between stations to increase with the number of elevators at the station, a fact subsequently discussed in section 8 of this chapter. Section 7. Average number of country houses per station. From the replies to inquiry 12 it was also possible to compute the average and most frequently recurring numbers of elevators and warehouses at reporting stations. Table 4 presents the results of this tabulation. Table 4. —Average and most frequently recurring number of elevators and ware- houses per station in specified States and grand divisions. State or division.^ Number of stations answering inquiry 12.2 Number of elevators and ware¬ houses reported at stations. Average number of elevators and ware¬ houses per station. Modal figure per station. ELEVATORS. Missouri..j. 174 297 1.71 1 Indiana. 279 520 1.86 1 Illinois. 717 1,371 1.91 1 248 480 1.94 1 571 1,123 1.97 2 Michigan. 195 398 2.04 1 Wisconsin. 162 341 2.10 2 Montana. 269 641 2.38 1 Kansas. 444 1,109 2.50 2 Nebraska. 393 983 2.50 2 Miimesota. 638 1,671 2.62 2 Oklahoma. 127 342 2.69 3 North Dakota. 638 2,092 3.28 3 South Dakota. 362 1,196 232 3.30 3 Middle Atlantic Division. 124 1.87 1 Mountain and Pacific Division. 143. 290 2.03 1 Southern Division. 85 178 2.09 1 Total..-. 5,569 13,264 2.38 2 WAREHOUSES. Central Division. 113 187 1.65 1 Southern Division... 28 58 2.07 1 Middle Atlantic Division. 18 38 2.11 1 Mountain and Pacific Division. 168 369 2.20 1 Total. 327 652 1.99 1 Grand total. 5,896 13,916 2.36 2 » For States included, see sec. 5. * Inquiry 12, Appendix 2. 36 , COUNTRY GRAIN MARKETING. The average number of elevators located at a station as ascer¬ tained from the returns to the schedule is 2.38; the average num¬ ber of warehouses, 1.99; and the average number of both warehouses and elevators, 2.36. The most frequently recurring number of ele¬ vators at a station is 2; of warehouses, 1; and of both elevators and warehouses, 2. An examination of this table reveals the fact that the 7 more westerly of the 14 principal grain-producing States for which the figures were separately tabulated, i. e., Montana, Kan¬ sas, Nebraska, Oklahoma, Minnesota, and the Dakotas, show the highest average number of elevators per station, while the 7 more east¬ erly of these States, i. e., Missouri, Iowa, Wisconsin, Indiana, Illi¬ nois, Ohio, Michigan, show a considerably lower average number per station. In all the States in the former area the number of elevators at each station is either equal to or greater than the average of 2.38 for all elevators reporting, while in all the States in the latter area the average per station is considerably below this general average. Section 8. Causes of variations in number of houses per station. Age of houses. —The explanation of the variations in the num¬ ber of elevators at local stations is to be found primarily in the age of the grain-producing territory with reference to various other factors in its development. Elevators and warehouses to the number of 4,634 reported to the Commission the date of their construction (Appendix 2, inquiry 10). Except for those built prior to 1880 and subsequent to 1915, these houses Avere grouped together by five-year periods according to the reported date of construction. Those constructed prior to , 1880 Avere placed in a single group on account of the small number reporting construction prior to that date. All construction re¬ ported as of 1915 or later Avas tabulated under the heading “ 1915 and after.” The first of the country elevator schedules were sent out early in 1918 and the last a little before the middle of the year. The period covered, therefore, is, roughly, 1915 to 1917. On ac¬ count of the date of the sources from Avhich the country mailing list was made up, however, it can be accepted that probably not as full a proportion of 1917 construction is included as might have been the case if all such sources were of a date subsequent to that year. Table 5 compares the average number of elevators per station in different States with the relative age differences of elevators and Avarehouses as indicated by the period of their construction. Appendix Table 1 presents the period of construction of elevators and warehouses (Appendix 2, inquiry 10) by States and grand di¬ visions and mav be consulted for details of elevator and warehouse development. FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 37 Tablk 5 .—Elevators in specified SItates constructed prior to specified dates in comparison with the average number per station. State. Average number Elevators constructed prior to— at station. 1880 1885 1890 1895 1900 1905 1910 1915 1918 Per ct. Per ct. Per ct. Per ct. Per ct. Per ct. Per ct. Per ct. Per ct. South Dakota. 3.30 0.48 2.40 7.68 12.96 20.87 38.61 79.14 95.45 100 North Dakota. 3.28 .19 1.72 3.25 7 07 27 72 70 36 Q9 09 inn Oklahoma. 2.69 2 13 35 11 63 83 86 17 100 Minnesota. 2.62 3.28 6.93 10.61 18.84 37. 02 70h4 86.16 96. 33 100 Nebraska. 2.50 .35 .70 11.08 19.04 29. 77 47. 76 74.06 89. 98 100 Kansas. 2.50 .79 1.31 5.51 9.18 14.17 35. 69 60.10 77. 95 100 Montana. 2.38 .43 .86 1.29 13.41 63.19 100 Wisconsin. 2.10 11.20 21.60 29.60 39. 20 48.80 68.80 76.80 96.00 100 Michigan. 2.04 7.09 8.66 16.53 25.98 37.00 53.54 75.59 91. 34 100 Iowa. 1.97 3.97 7.14 9.52 14. 55 25.93 48. 42 66. 94 91.54 100 Ohio. 1.94 8.52 14.77 21.02 29.54 39. 20 61.36 76. 70 95. 45 100 Illinois. 1.91 4. 66 8.21 13. 75 22.62 36.59 61.20 75. 61 94. 24 100 Indiana. 1.86 4.78 6.77 10. 75 19.91 29.07 49. 79 67.72 91.62 100 Missouri. 1.71 2.03 3.38 10,14 18.25 21.63 33.79 54.74 81.09 100 All States and grand divisions. 2.38 2.88 5.01 9.29 15.01 23.66 43.97 67.03 87.73 100 An examination of this table reveals the fact that the seven grain States of the Central West reporting the highest average number of elevators per station are, on the whole and measured by the reported period of construction, much more recent grain-producing territory than the seven States reporting a lower concentration of elevators at stations. Except in the case of Minnesota and Nebraska, the propor¬ tion of existing construction in the former area built prior to 1905 is consistently below the average of total elevator construction, while with one or two exceptions the proportion in every State in the latter territory is above this average. Prior to 1880 no "State in the former area except Minnesota reported as much as 1 per cent of the total reported present construction and no construction whatsoever was reported for North Dakota, Montana, or Oklahoma. This last situa¬ tion continued to be true of Oklahoma even as late as 1894 and of Montana until 1890. In the latter area, on the other hand, construction prior to 1880 ranged from about 2 per cent of the existing total in Missouri to as high as 11 per cent in Wisconsin. Age of territory.— In the earlier stages of agricultural de¬ velopment land is comparatively cheap and a one-crop system fre¬ quently prevails. Cultivation is extensive rather than intensive, and a given production is secured rather by cultivating a large number of acres than by more carefully cultivating smaller areas. As a result large farms tend to predominate, and the average acreage cultivated per farm is considerably greater than in older and more thickly settled regions, where land is more expensive and where intensive cultiva¬ tion and especially mixed farming have developed. Cheap land, ex¬ tensive cultivation, the one-crop system, and large farms in an agri¬ cultural territory tend to result in a relatively slow development of railway facilities, since the volume of traffic per square mile of area is relatively low as compared with that in an area where the reverse 38 COUNTRY GRAIN MARKETING. of these conditions prevails. As already explained, the area com¬ prising the T more Avesterly of the 14 principal grain States, i. e., Oklahoma, Kansas, Nebraska, Minnesota, Montana, and the Dakotas, is a relatively younger grain-producing area than that including Wisconsin, Michigan, Ohio, Indiana, Illinois, Iowa, and Missouri. In the former area there is more extensive cultivation than in the latter, crops are less diversified, the farms are larger, and the rail¬ way net much less developed. As a result the average distance be¬ tween stations is greater than in the States lying to the eastward, the territory from which each station draws is larger, and a larger number of elevators at the station is required to handle the volume of grain offered. This appears somewhat more clearly from the following table, which shows the average number of elevators per station in the principal producing States in comparison with the average distances between elevator stations, size of farms, and rail¬ way mileage per 100 square miles. Table 6. —Average number of elevators per station in principal grain-producing States as compared with average distances between elevator stations, acreage of iinproved land per farm, and railway mileage per 100^ square miles. State. Average number elevators per station. Average distance to nearest ele¬ vator or warehouse. Acres of improved land per ferm.i Railway mileage per 100 square miles of territory in 1916.2 Rmitb "Dalrnta . 3.30 11.23 203.84 5.57 Mnrfli TAalrnti\ . 3.28 10.81 275.08 7.52 Olrl^Vinmci . .«... 2.69 11.70 92.28 9.29 . 2.62 9.68 125.80 11.37 2.50 9.98 188.02 8.03 Transas. . 2.50 10.36 168.15 11.51 Montana. . . 2.38 13.63 138.87 3.32 Wisfnnsiri . 2.10 9.85 67.22 13.89 lUinbipfari- . . 2.04 9.61 62.00 15.46 T owa .- . 1.97 8.64 135.87 17.70 Ohio ..-. - .. 1.94 7.10 70.67 22.28 Tllinnis ... 1.91 6.85 111.35 21.63 TriHiana. . 1.86 7.81 78.57 20.63 Missouri. 1.71 10.94 88.66 11.98 All Hl-ato«! anH CTand HivisioTlS . 2.38 9.62 75.21 8.54 -1- * 1 Statistical Abstract, TJ. S., 1918, Tables 97-99, from data of Census of 1910. 2 Ibid., Table 213, compiled from Poor’s Manual and I. C. C. Statistics of Railways. An examination of Table 6 shows that in the more westerly States of the central group, where the average number of elevators is greatest per local station, the average distance between houses is also greatest, while in the more easterly^ States with a lower concen¬ tration per station the average distance is considerably less. All the States in the former group show an average distance between sta¬ tions above 9.62 miles, the average for all States and grand divisions ranging from 9.68 miles in Minnesota to 13.63 miles in Montana. In the latter group the average distance ranges from 6.85 miles in Illi¬ nois to 10.94 in Missouri. AVisconsin and Missouri alone report an average higher than the average for all States and grand divisions. Size of farms. —The average acreage of all improved land on farms in the United States according to the census of 1910 was 75.2. These figures are employed as being the latest available at the time of writing this FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 39 All the States in the more westerly group of the central grain • States report an acreage of improved land far in excess of this aver¬ age, ranging from above 92 acres in Oklahoma to about 275 acres in North Dakota. Six out of the seven States in this region report an average acreage of improved land in excess of 120 acres. In the more easterly area, on the other hand, the acreage of im- })roved land per farm ranges from about 62 acres in Michigan to slightly less than 136 in Iowa. Only four out of the seven States in this group, however, report an acreage in excess of the average and only two, Iowa and Illinois, an average in excess of 90 acres. Kaiiavay deveiaipment.— As also appears from Table 6, the average railwa}^ mileage per 100 square miles of territory in the United States is 8.51. In tlie 7 more westerly of the 14 central grain States, the railway mileage per 100 square miles is below this average, except in three States, Kansas, Oklahoma, and Minnesota, and ranges from as low as 3.32 in IMontana to as high as 11.51 in Kansas. In the east¬ ern group of States, on the other hand, the average State mileage is far above the general average in every case, and no State in this group reports an average railway mileage as low even as the highest average mileage reported by any one of the western group of States under discussion.^® Conclusion.— Summarizing, it may be stated that the higher aver¬ age number of houses per station shown by the more westerly of the principal grain States—Montana, the Dakotas, Kansas, Nebraska, and Oklahoma—and the lower average number in the more easterly group—Wisconsin, Iowa, Illinois, Mich^an, Indiana, Ohio, and Mis¬ souri—is probably due primarily to differences in the degree of de¬ velopment of the two areas as grain-producing territory. Intensive cultivation and especially mixed farming in the eastern and older area, combined with its industrial development, has greatly expanded ' railway facilities. As a result of this great development of the rail¬ way net, the area serA^ed by a given mileage in the eastern territory has tended to decline. Since countr}^ houses must be located at points where transportation is available, the increase in such facilities renders possible the location of elevators and warehouses closer to¬ gether than in areas less well supplied with transportation and where the aA-erage distance between stations is in consequence greater. As a result, therefore, there is less concentration of the elevators and ware¬ houses at particular stations in the east, because the territory seiwed by each station is relatively small as compared with areas less well developed in transportation facilities. In Minnesota and the most westerly of great grain-producing States of the Central Wesl^the reA^erse of the foregoing situation ob¬ tains. This area is, as indicated, a relatively ncAv grain-producing territory as compared with the eastern group of States under dis¬ cussion. Extensive cultivation of one or two crops is still largely preA^alent and mixed farming is of comparatively small importance, at least in scA^eral of these States. Industrially this territory is also much less deA-eloped than the more easterly States, as, for example, Illinois, Michigan, and Ohio. In consequence, transportation facili- It is not. of course, intended to imply that the differences in the railway net in these two areas are alone due to differences in a,a:ricultural development; the industrial development as well is responsible, and in the eastern group is probably a more important factor. / 40 COUNTRY GRAIN MARKETING. ties are comparatively underdeveloped, and the area served by a given mileage is much greater than in the eastern grain States, and the average distance between stations is higher. The lesult is a gieatei concentration of elevators at stations in the more westerly group of the central grain-producing States. • • i While the higher concentration of houses at stations in the west¬ ern States of the central grain-producing territory is probably ac¬ counted for in the main by the foregoing explanation, it ought to be pointed out that the large development of cooperatives, at least in Minnesota, Montana, and the Dakotas, has probably tended to in¬ crease this concentration. In these States elevators were organized in no inconsiderable measure to combat the line companies, and one of these elevators is very likely to be found at a very large propor¬ tion of the stations where one or more line companies are operating. Section 9. Distribution of houses by types. By single types. —The principal characteristics of the eight differ¬ ent types of country elevators and warehouses, as well as the more important distinctions between types, have been discussed in section 4. The following table presents the number and percentage distri- tion of the 9,906 elevators and warehouses reporting to the Commis¬ sion according to the type of house (Appendix 2, inquiry 9) : Table 1 —Numbers and percentages of different types of elevators and ware¬ houses in the United States. Country elevators. Country warehouses. Total country elevators and warehouses. Type. Number reporting. Per cent of total. Number reporting. Per cent of total. Number reporting. Per cent of total. LINE. nnTnTnftrm'fl.l . 3,383 100 36.01 126 24.66 3,509 35.42 PnnnArativA . 1.06 6 1.17 106 1.07 Mill . 655 6.97 98 19.18 753 7.60 Maltster. 30 .32 30 .30 Total... 4,168 44.36 230 45.01 4,398 44.40 INDIVIDUAL. Pnnpp.ra.tive . 1,731 18.42 31 6.07 1,762 17.79 TnHp.nftndpnt . 2,971 31.62 234 45. 79 3,205 32.35 Mill. 520 5.54 16 3.13 536 5.41 Maltster. 5 .05 5 .05 Total. - 5,227 55.64 281 54.99 5,508 55.60 Grand total. 9,395 1 100.00 511 100.00 9,906 1 100.00 1 Percentages in this and subsequent tables do not always add to 100 (see Ch. I, sec. 3). Line houses of all types, 4,398 in number, constitute 44.40 per cent of all houses reporting and all individual, 5,508 in number, 55.60 per cent. The great bulk of the line houses are of the commercial Specific instances of the high degree of concentration in the territory under dis¬ cussion are interesting. Some years ago there were at Eureka, S. Dak., 16 elevators. These elevators, however, drew grain from hundreds of miles of territory, and it is re¬ ported that it was not uncommon for them to handle from two to three million bushels of grain a year. Even to-day, Beach, N. Dak., has eight elevators which draw from very long distances. Prom the information obtained, it api^ears probable that the points showing the greatest concentration are located at the ends of branch lines. FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 41 line type (8,509). This type is numerically the most important, composing over 85 per cent of all the elevators and warehouses re¬ porting. The independent is the second in importance with above 82 per cent of the total houses reporting. The only other type of very considerable numerical importance is the individual coopera¬ tive. Houses of this class amount to nearly 18 per cent of the tytal. Mill line, individual mill, cooperative line, and line and individual maltster houses follow one another in importance in the order named. The distribution of elevators by types is in approximately the same proportion as the distribution of elevators and warehouses combined. The number of warehouses reporting is so small as com¬ pared with the number of elevators that, although the type distribu¬ tion of the former varies greatly from the latter, it but slightly alfects the combined figures. By consolidated types.— As indicated in section 4, the eight types of houses may be consolidated into five from the standpoints of con¬ trol and ownership and the general characteristics of the business, i. e., commercial line, independent, cooperative, mill, and maltster. The following statement presents the numbers and percentages of elevators and warehouses according to these five types: Type. Country elevators. Country warehouses. Total country elevators and warehouses. Number reporting. Per cent of total. Number reporting. Per cent of total. Number reporting. Per cent of total. Commercial line. 3,383 36.01 126 24.66 3,509 35.42 Cooperative. 1,831 19.49 37 7.24 1,868 18.86 Independent. 2,971 31.62 234 45.79 3,205 32.35 Mill... 1,175 12.51 114 22.31 1,289 13.01 \f nIt^fpr ... 35 .37 35 .35 Total.,. 9,395 100.00 511 100.00 9,906 ‘100.00 Section 10. Relative importance of cooperatives. Distribution of cooperatives. —The foregoing tables indicate the present predominance of the commercial line and independent types of elevators and warehouses which until very recently have been by far the most important in the growth and development of country houses. For several reasons the importance of the cooperatives, how¬ ever, should not be measured merely by the percentage relationship which the total number of such houses bears to the total houses re¬ porting. The first of these reasons is the distribution of cooperative houses and the second is the volume of business handled by this type of house. A third consideration is the growing importance of the cooperative house relative to other types as indicated by the reported construction of houses. Although in practically every one of the large grain-producing States the cooperative houses are exceeded in number by either, or both, the commercial line and independent houses, the influence which is exerted by the first-mentioned type in determining the prices paid for grain at country points is probably greater than that of any other type of house. This is due to the fact that the distribution of : the cooperatives is usually such that there is seldom to be found more 42 COUNTRY GRAIN MARKETING. than one cooperative at a single station, although there may be two, three, or even more houses oi either one or more of the other types operating at the same point. In other words, although the number of the cooperatives is relatively small as compared, for example, with the commercial line and independent types, the former probably operate at a disproportionately large number of stations as com¬ pared with either of the latter.^® As elsewhere discussed in this volume (Ch. IV), the cooperative house came into existence, in large measure, in order to remedy the situation created by the lack of competition in country grain buying and the practices employed by the various other types of elevators and warehouses. As a rule one cooperative elevator in a locality was all that was necessary in order to secure the economic relief desired by the farmers, although two, three, four, and even more houses of another or other types might be in operation at the point in question. In consequence there was little duplication of coopera¬ tives at individual stations, and, as a result, in spite of their numerical weakness as compared with the commercial lines or independents, their influence in the country market is generally as great if not greater than that of any other type. Volume of grain handled. —The number and proportions of co¬ operative houses also fail as an index of the importance of this type by reason of the extensiveness of the business of the average coopera¬ tive house. Though this subject is discussed in detail in a later chap¬ ter (see Ch. V), it may be pointed out here that the average coopera¬ tive handles a considerably larger volume of grain than does any other type of country house, a fact which greatly increases the significance of its operations. Kecent increases in cooperatives. —Thirdly, as indicated above, the importance of the cooperative house is greater than that indicated by the number of houses by reason of the fact that the number of houses of this type has been and is increasing much more rapidly at present than is the case with any other type. This appears from the figures of reported construction by type of house discussed in the next section. Section 11. Growth and decline of different types of elevators and ware¬ houses. Period of construction of all houses. —The following table shows the percentage distribution of all reporting elevators and warehouses according to the period of construction: Table 8. —Proportions of all reporting elevators and ivarehouses constructed in specified periods. Period of construction. Percent¬ age of total. Cumula¬ tive per¬ centage. Period of construction. Percent¬ age of total. Cumula¬ tive per¬ centage. Prior to 1880. 2.87 2.87 1900-1904. 20.03 43.55 1880-1884 2.05 4.92 1905-1909. 22.94 66.49 188.'1-188Q 4.25 9.17 1910-1915. 21.06 87.55 1800-1804 5.80 14.97 1915 and after. 12.45 100.00 1895-1899. 8.55 23.52 ^ Although roughly there are about twice as many commercial line elevators as cooperatives in the four Northwestern States of Minnesota, North and South Dakota, and Montana, it was admitted by several Minneapolis grain men thoroughly familiar with the country grain business and including two or three large line operators, that roughly, and, of course, with frequent exceptions, there was a cooperative elevator located at almost every point where there was a line house. FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 43 Only 133 reporting elevators and warehouses now in operation, or 2.87 per cent, were constructed prior to 1880, and in fact only about 15 per cent were built .before 1895. Considerably over 75 per cent of them were erected since 1899. The foregoing figures should not be taken as indicative of the rate of growth from period to period in the total number of elevators, because many of the older elevators have ceased to operate and have been dismantled, while others have been destroyed. Although nearly 10,000 elevators and warehouses replied to the Commission’s schedule, only about one-half of these answered the inquiry as to the date of construction. It is logical to assume that a large proportion of those failing to report are elevators which were built during the earlier periods under discussion, since, other things being equal, the older the elevator the greater the number of changes in the management and the less the likelihood that the date of construction can be fixed. Furthermore, many of the older elevators and Avarehouses have been destroyed by fire, tornado, or otherwise, and have been rebuilt. Many of the older elevators and warehouses have also been driven out of business by the competition of other elevators which may have been constructed at a later date. For example, in the northwest territory many of the line elevators, which were as a rule old houses, haA^e been closed for competith^e or other reasons. Age of different types. —Table 9 presents the results of tabu¬ lating the period of elevator and warehouse construction (Appendix 2, inquiry 10) by type of house. . -V ‘ S; 1 «' I'. ■'' 'X • Ml*,’,”'- ■ /; ,'• func'tions, age, and distribution of houses. 45 The figures in Table 0 do not reflect with absolute correctness the facts with reference to the growth and decline of different types, because a considerable percentage of houses have doubtless passed from one type to another since they were originally built. Outside of this factor, however, there would seem to be no good reason for assuming that the differences in the amount of construction of one tyjie as compared with another in a particular period would be caused by other considerations than actual differences in the extent of construction by different types within the period. This of course assumes that the number of houses involved is large enough to be fairly representative. As over 4,500 houses reported, which is about one-seventh of the probable number in the United States, it is thought that the sample is of sufficient size to reflect approximately actual conditions of development as between types in spite of such shifts and changes in control as have unquestionably taken place and the relatively small amounts of construction reported for the ear¬ lier years. Analysis of age distribution. —Table 10 presents a summary of the percentages in Table 9 and is designed to show the age distribu¬ tion of the existing construction in the case of each of the five prin¬ cipal types of country houses. Table 10 .—Percentages of different types of existing elevators and ivarehouses constructed in specified periods. Percentage constructed. Period of construction. All elevators and ware¬ houses. Commer¬ cial line. Mill line. Inde¬ pendent. Individ¬ ual coop¬ erative. Individ¬ ual mill. Before 1880. 2.87 1.44 0.75 5.05 0.96 6.93 1880-1884. 2.05 1.59 1.26 3.29 .64 2.92 1885-1889. 4.25 4.33 3.77 5.30 2.45 4.75 1890-1894. 5.80 4.94 8.29 7.24 2.56 9.85 1895-1899. 8.55 9.79 6.28 8.58 6.92 . 10.22 Total to 1899. 23.52 22.09 20.35 29.46 13.53 34.67 1900-1904. 20.03 23.01 25.88 19.11 15.65 18.98 1505-1909. 22.94 23.84 18.09 21.24 27.16 20.07 1910-1915. 21.06 20.65 22.36 19.54 24.92 16.42 After 1915. 12.45 10.40 13.32 10.65 18. 74 9. 85 Total since 1899. 76.48 77.90 79.65 70.54 86.47 65.32 Of the 4,634 elevators and warehouses reporting the period of construction, 23.52 per cent were built prior to 1900 and 76.48 per cent subsequently. Tlie percentage of commercial and mill line con¬ struction in each of these two periods is approximately the same, but the proportions of the other types built prior to 1900 and subse¬ quently reveal considerable variations from the figures for all ele¬ vators and warehouses and the mill and commercial line types. According to these figures, nearly 35 per cent of the total number of individual mill houses reporting were built prior to 1900 and only a little over 65 per cent subsequently. Independent elevators also show a somewhat higher proportion of construction prior to 1900 than the total construction reported and a somewhat lower proportion subse- 46 COUNTRY GRAIN MARKETING. quent to that date. In the case of the individual cooperatives, how¬ ever the reverse of the last situation obtains. Only about 13.5 per cent of the houses of this type operating in 1917 were built before 1900 while about 86.5 per cent were erected subsequently. As compared with the total elevator construction or with the construction of any other of the five important types, therefore, a very much lower pro¬ portion of the individual cooperatives were built prior to 1900 and a very much higher proportion subsequent to that period. Relative growth and decline of types. —Table 11 indicates the relative importance of different types of houses at different dates from 1880 to 1917 as shown by the ratio of houses of each type to total of all types constructed prior to such dates. Table 11. —Perrcniage distribution between types for all elevators and warehouses constructed prior to specified dates. Constructed prior to— y FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 47 O 'rt — 1918 Per cent. 04005 05 ^ iO 06 1 -H 06 04 38.30 20.26 35.46 5.91 .07 61.70 100.00 Num¬ ber. r- 1 -H 00 05 —< lO 05 CO CO ^H 1,775 05 CO X 2,859 4,634 1915 Per cent. 29.09 1.04 8.50 .22 38.85 18.81 36.18 6.09 .07 61.15 - » - 8 S ^H Num¬ ber. 1,180 42 345 9 1,576 763 1,468 247 3 2,481 4,057 1910 Per cent. 29.47 .94 8.31 .23 38.95 17.17 37.23 6.55 ! .10 61.05 100.00 Num¬ ber. O 0 050t^ QC410 0 C4 1,200 529 1,147 202 3 X X 3,081 1905 Per cent. 29.44 .59 9.12 .30 39.45 ' X Tj< X VO VO VO 04 1 -H c605I>^ 1 1 -H X 60.55 100,00 Num¬ ber. ^C4-^CO 05 f-H 00 10 1 -H CP 1 TfH X X 35 05 Tjl r» 1 04 1 -H 1,222 2,018 1900 Per cent. 0 CO CO |> kO 0 ■ t>I * 04 35.14 11.65 44.40 8.72 .09 64.86 8 8 Num¬ ber. r-( 0 ^ VO 0 X ?4 383 r-. VO 1 -H 04 X05 t-H 707 1,090 1895 Per cent' 23.34 .29 8.07 .14 CO COCOO'^ 05 1 -H Cp ^ 060 05 68.16 8 8 rH Num¬ ber. -1-H 0 ’ 1 ^H CO X 694 1890 Per cent. V 04 ^ 1 -H ^ X 04 04 04 * VO * C4 28.71 0 1 -H Tj< 05 -If 04 X 04 05 VO 71.29 8 8 Num¬ ber. i 1 -H CO 1 -H C5 04 04 04 XrfiOi-H C 0 04-rt< 04 303 VO 04 0 00 00 ^H Per cent. 17.54 .44 3.51 21.49 6.58 60.09 11.84 78.51 8 8 Num¬ ber. 0 1-H X * • 49 VO I t-h X 04 • 1 ^ • • • • f 179 228 1880 Per cent. X i CO • ' 04 • 04 • I ^ • 04 • t 1 —H * .« • 1 • • kO C£> 6.77 62.41 14.28 83.46 100.00 Num¬ ber. 19 3 22 9 83 19 111 CO X 1 -^ • • • * 0 a c d d • .2 > * : > 0 • 03 0 * • 05 g 0 a 9 • 'I ’■^1 s i- • 0 to < 0 00 i csi o 00 ^ ^ cc ) 10 ^ ’*r I CO CO O ^ CO <0 Oi o Ci 00 Oi O *-• 00 '- ) »0 (M 0> CO Ci CO 1 -^ •-H O 00 lO OJ 00 coo 0 > 1 -H 1-H ^ 00 10 ® a PMg !>• CO T-^ CO CO 00 CO Oi 00 '*?' Oi CO ^ rH oots*ooooo 8 -^9* lO iO ^ «-?}i t>- o ^ Tp lO *-H TT 0> Oi CO CO ^ 00 o »-< o 05 05 00 CO ^r^- rr T«i 10 CO ci CO C- C 05 CO 04 05 04 CO CO 04 05 04 10 1000 CO CO 1-H o CO 10 Tji CO 1-1 CO 00 th Tfi 04 10 tT 04 CO CO CO ^H 05 CO 05 04 1 -HOO 04 l|2 g fl a-XT i&saa # 48 COUNTRY GRAIN MARKETING. This table confirms, in general, the conclusions drawn from the preceding table with reference to the development of different types of country houses, but in addition renders it easier to trace the rela¬ tive increase and decline in importance of these types since 1880. The most striking result shown is the sharp and uninterrupted de¬ cline in the relative numerical importance of the independent type of house. Of the elevators reported as constructed prior to 1880, the independent comprises above 62 per cent of the total. From this high point it has steadily declined in relative importance until just prior to 1915 it constituted only about 36 per cent of the total number of elevators and was even somewhat less important relatively as of the date of the returns. Of equal, though perhaps not so striking interest, is the rise of the individual cooperative. Prior to 1895 the cooperatives at no time constituted as much as 10 per cent of the total number of elevators and warehouses of all types and such increases in the proportion of these houses as did occur were relatively very slight. From 1895 on, however, the proportion of individual cooperatives in the total country house construction reported has pronouncedly increased. Just prior to 1915 the individual cooperatives constituted close to 19 per cent of the total number of existing houses reporting and above 20 per cent at the date of the returns. In relative numerical importance the commercial line houses under¬ went a comparatively steady increase until about 1904. These houses constituted 14.28 per cent of those reported prior to 1880, and 29.44 per cent in 1904. At this point the relative increase of this type apparently stopped and the figures indicate that since 1910 this type has undergone a slight, but perceptible, decline. The relative numerical importance of mill line houses also appears to have reached its maximum about 1904. Since 1910 it seems to have -remained about stationary. The individual mill, on the other hand, like the independents, seems to have undergone a comparatively steady decline throughout the period. Nearly 15 per cent of the existing elevators constructed prior to 1880 were of this type, while at the date of the return this type constituted something less than 6 per cent of the total reporting.^^ Up to about 1904, according to these figures, the relative numeri¬ cal importance of line houses of all types steadily increased, wMe the importance of the individual houses of all types steadily This increase of the lines was due chiefly to the increase in HP numerical importance of the commercial line type, but also to a con¬ siderable development of the mill line. The decline in the nu^ jrical importance of the individual house was due to a decline in b( h the independent and individual mill types, chiefly the former. The individual cooperatives were increasing relatively althouj i very slowly during this period. Since 1904 the relative importance of all lines and all individual houses has apparently remained about stationary, the lines at just below 39 per cent and the individual at just above 61 per cent of the total houses reporting. In the case of the lines this is due to the fact 21 It seems probable that tbe individual mill elevator has been unfavorably affected by the larger and larger scale of commercial flour milling, especially in th<‘ liard-wheat areas of the West and the decline in importance of the local milling industry. See Commission’s Report on Commercial Wheat Flour Milling. FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 49 that both the mill and commercial line types have remained almost stationary, a slight decrease in the commercial lines having been com¬ pensated by slight increases in the cooperatives and mill lines. In the case of the individual elevators the decline in numerical im¬ portance noted in the independents and mills prior to 1904 continued throughout the balance of the period, and the maintenance of the relative imjx>rtance of individual houses .as a whole has been due to the compensating growth of the cooperatives. Growth and decline of consolidated tyi^es.— Table 12 presents the relative growth and decline of different types of elevators and Avarehouses on the same basis as in the preceding section, all co¬ operatives, both line and individual, however, being consolidated as one type, and also all maltster and all mill houses. Section 12. Geographical distribution of different types of elevators and warehouses. Extent of geographical variations. —Appendix Table 2 indicates the distribution of elevators and warehouses separately and by types in specified States and grand divisions. This table reveals a wide discrepancy in the relative importance of different types of eleva¬ tors in different States. For example, line elevators of all types in Xorth Dakota compose 59.81 per cent, and all individual elevators 40.19 per cent of the total eleA^ators reporting, while Missouri reports 21.05 per cent of the former and 78.95 per cent of the latter. Similar contrasts appear in the distribution of different subtypes of line and individual elevators. In Xorth Dakota, Montana, Nebraska, ^linnesota, and South Dakota commercial line elevators constitute, re¬ spectively, 54.17 per cent, 49.90 per cent, 48.58 per cent, 46.42 per cent, and 43.37 per cent of the total elevators reported in each of these States, while this type of elevator comprised only 9.38 per cent, 10.96 per cent, and 13.60 per cent of all the eleA^ators reported in the States of Kansas, Missouri, and Wisconsin, respectively. The proportion of mill line elevators to total elevators as betAveen States ranges from 38.29 per cent in Oklahoma to less than 1 per cent in Iowa. Other States with A^ery low percentages of mill line elevators are Nebraska, Illinois, Indiana, and South Dakota. The cooperative line elevators are unimportant, both absolutely and relatively speaking. The only State having an appreciable number of such elevators is Kansas, Avhich reported 37 of such houses, or about 6 per cent of the total eleA^ators reported in the State. Line eleA-ators of maltsters appear only in three States—Ohio, Minnesota, and Wisconsin. In each of the first two States this type of elevator constitutes less than 1 per cent of the total elevators reported. Wisconsin, howcA^er, has nearly 9 per cent of such eleA^ators. In every State independent elevators are a type of considerable importance. In fact, the lowest per¬ centages in any States are found in Montana and North Dakota, each reporting approximately 14 per cent of this type of elevator. All the other States show larger percentages than these, the highest being Michigan, with about 51 per cent. The individual cooperative elevator constitutes more than 20 per cent of all the elevators in each of the States of North Dakota, Minnesota, South Dakota, loAva, Kansas, Nebraska, and Montana, but less than 8 ])er cent of those in Indiana, Ohio, ^fichigan, Missouri, Wisconsin, and Oklahoma. 0004°—20-4 Diai^ram A.—Per cent (ratio) of commercial line elevators to all classes of elevators reporting in fourteen principal srain-producing States. FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. Differences in the relative importance of individual mill elevators are likewise very noticeable as between certain States. Missouri, I Indiana, Ohio, Wisconsin, and Michigan report, respectively, 26.75, i 14.96, 13.56, 13.16, and 12.45 per cent of such houses, while Iowa ' and Xorth Dakota have only between 1 and 2 per cent. Individual ! elevators of maltsters appear only in Ohio and Wisconsin and are I insignificant in number. Diagrams A to E present graphically the relative importance of the five principal types of elevators in the principal producing States. Geographical distribution of principal types of elevators. —An anal^^sis of the distribution of types of elevators reveals the fact that the 14 principal grain-producing States fall into two more or less well-defined areas or divisions, the first-being the line and cooperative area and the second the independent and mill area. The former includes Minnesota, Montana, North and South Dakota, and Ne¬ braska. 'The first four of these States comprise the group frequently referred to in this report as the Northwestern States, a term com¬ monly employed by the grain trade to designate this area. As is explained in a succeeding chapter, the commercial line elevator was one of the earliest, if not the first, type of country house to develop in this territory, and it seems to have maintained a numerical pre¬ dominance ever since this early development, despite the growing- importance of the cooperative type. The mill and independent area includes the balance of the 14 large grain-producing States which were separately tabulated, i. e., Indiana, Illinois, Iowa, Michigan, Ohio, Oklahoma, Wisconsin, Kansas, and Missouri. The following table presents the proportion of commercial line, independent, cooperative,^^ and mill elevators which are reported in each of the 14 principal grain States. Maltster houses are disre¬ garded on account of their numerical unimportance. Table 13. —Proportimis of commercial line, independent, individual, cooperative, and mill elevators in specified States. ----- state. Commer¬ cialline elevators. Individ¬ ual co¬ operative elevators. Inde¬ pendent elevators. All mill elevators. Mill line elevators. Individ¬ ual mill elevators. North Dakota.. 54.17 23.71 14.67 7.23 5.42 1.81 Montana. 49.90 23.90 13.63 11.32 6.71 4.61 Nebraska. 48.58 26.30 20.77 - 3.52 .67 2.85 Minnesota. 46.42 21.34 19.08 12.08 7.87 4.21 South Dakota. 43.37 23.08 25.26 6.72 4.24 2.48 Indiana. 31.59 5.46 44.18 18.76 3.80 14.96 Illinois. 29.99 14.47 48.34 5.86 2.74 3.12 Iowa. 28.96 25.84 42.45 2.00 .25 1.75 Michigan. 27.31 2v8l 51.41 18.47 6.02 12.45 Ohio. . 21.75 7.63 49.72 19.21 5.65 13.56 Oklahoma. 20.57 4.57 29.71 45.15 38.29 6.86 Wisconsin. 13.60 5.70 49.12 21.05 7.89 13.16 Missourii. 10.96 6.14 46.05 36.84 10.09 26.75 Kansas. 9.38 21.30 35.93 27.51 19.08 8.43 All States and grand divisions. 36.01 V' 18.42 1 31.62 12.51 6.97 5.54 Nebraska and the four States commonly known as the Northwest report percentages of commercial line and of individual coopera¬ tive elevators considerably above the average for all States and Excluding the small number of cooperative lines reporting. FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 53 ^rand divisions. On the other hand, all other States report per¬ centages of commercial line elevators, and, excepting Iowa gind Kansas, percentages of cooperatives very much below the respective general averages of these two types. In the case of independent and mill elevators approximately the reverse of the foregoing distribu¬ tion obtains. Nebraska and the four Northwestern States are all below, and in most ca^es considerably below, the average in inde¬ pendent elevators, and are also lower than the average in mill ele¬ vators. Each of the remaining 14 States, with the exception of Oklahoma, is considerably above the average for the United States in its proportion of independent elevators and also excepting Illinois and Iowa in its proportion of mill elevators. Broadly speaking, therefore, it may be stated that the proportions of commercial line and of cooperative elevators in the principal grain-producing States vary directly with one another, as do also the proportions of inde¬ pendent and all mill elevators, while the two former vary inversely with the two latter. Diagram F (facing p. 58) presents graphically the foregoing direct and inverse correlations. This distribution of different types of elevators among different States is of considerable importance in explaining certain other statistical facts in subsequent chapters of this report. Section 13. Explanation of geographical distribution of types of elevators. Commercial lines and independents. —It is impossible to explain with any great degree of accuracy the reasons for all of the fore¬ going variations in the geographical distribution of types of ele¬ vators. Certain facts, however, may be pointed out which undoubt¬ edly have some bearing upon this distribution. As has been shown, the proportions of commercial line and independent elevators tend to A^ary inversely with one another as between the various States. These two types of houses are closely analogous to one another in that they are conducted solely as merchandising undertakings, buy¬ ing and selling for a profit. Such houses are owned and operated by private concerns or individuals, and unless they are able to obtain a sufficient volume of grain to make this merchandising profit, there is no reason for their continuing operations. It appears probable that in the very early days the independent type developed in the eastern portion of the central grain-producing area and so firmly established itself there that line houses never attained the relative^ importance which they did west of the Mississippi. The latter' area, according to the information obtained, especially Minnesota and the Dakotas, developed with comparative rapidity as grain- producing territory^ Local capital accumulations were not at first nearlv sufficient to keep pace with this development, and as a result elevator construction was financed and large lines built up by con¬ cerns operating from the terminal market which either possessed the capital or were able to obtain it. (See Ch. IV, secs. 4 and I, and Ch. X, sec. 5, for further discussions.) Cooperative development. —^The importance of the cooperative moA'ement since 1895 has been already alluded to in a preceding , section in connection with the period of construction of different types of houses. This age factor perhaps partially explains the distribution of the cooperatives and the tendency of this type to A^ary ’ directlv with the commercial lines. \ 55 FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. » The folloAviiig table presents the percentage of cooperative eleva¬ tors in 14 States, in comparison with the total amount of existing elevator construction which is reported in each of such States prior to 1880 and prior to 1900. Table 14 .—Proportion of cooperative elevators in specified States in comparison with the proportion of existing elevators huilt prior to specified dates. State. • Per cent of co¬ operative elevators. Per cent of total construction re¬ ported prior to— 1880 1900 27.18 0.79 14.17 27.14 .35 29.77 26.59 3.97 25.93 25.16 .86 24.63 .48 20.87 23.92 7.07 21.73 3.68 37.02 15.79 4.66 36.59 8.76 8.52 39.20 6.14 2.03 21.63 5.70 11.20 48.80 5.46 4.78 29.07 4.57 2.13 2.81 7.09 37.00 Average al States and divisions. 19.48 2.'88 23.66 Reference to this table shows that the cooperatives constitute less than 10 per cent of the total elevators in Oklahoma, Missouri, and in each of the five important grain States east of the Mississippi, except Illinois, while all of the other'central grain States report a propor¬ tion of cooperative elevators considerably above the average for the United States. This table also indicates that prior to 1900 the de¬ velopment of elevators in the latter area was considerably slower on the whole than in the former area. Reference to the tables of the period of construction by types in section 11 above shows that there was comparatively little devel¬ opment of the cooperatives prior to about the last five years of the last century. The territory, roughly, west of the Mississippi being relatively undeveloped at the time when the rise of the cooperatives began, probably offered a more fertile field for this type of organiza¬ tion than did the older and more developed area to the east. vVhile these facts perhaps account partially for the large proportion of co¬ operatives in the States west of the Mississippi, the age of me terri¬ tory is not the sole reason for the foregoing distribution. Owing to numerous agreements, local and otherwise, and various other prac¬ tices among the lines and independents, especially in the Dakotas, Minnesota, Iowa, and Nebraska, the farmer became convin^d that there was a lack of competition in country grain buying. This at¬ titude upon his part undoubtedly was a most potent factc^ iii stimu¬ lating the development of the cooperatives in this area, (bee Ch. 1V, secs. 8-12.) , . • .L .L • .Li elf.vators. —Mill elevators are relatively important in those States in which the local milling industry is highly developed and --• I 56 COUNTRY GRAIN MARKETING. V\ I ^ 5 J @§ 'll l: •.•2 -.a •• •'. ••••••••^ f' - i I ■•VN, I I f ;• • • • • . • • •.* I • • ••.•• •■.•- • -I ' • • . c ♦ • - • • ' • • • * • •/ ;• \ • .‘.i I*. '-''.'‘''y /• • . ' • • • r IP 01 01 m t- 01 m m • 01 N ZI in 2 o 0 o □ a u K 1 - h h* UI CQ 't OQ 01 10 j| H 1 FUNCTIONS,’ AGE, AND DISTRIBUTION OF HOUSES. 57 is less centralized than in the Northwest.The seven States having the largest percentages of mill elevators are, in the order of impor¬ tance, Oklahoma, Missouri, Kansas, Wisconsin, Ohio, Indiana, and Michigan. With the exception of Missouri (Kansas Ci-ty) no one of these States possesses a milling center anywhere nearly comparable wit'll Minneapolis. Each of them, however, according to the census of manufacturers for 1914, produced over 3,000,000 b^arrels of flour Jn the census year, and all these States, with the exception of Okla¬ homa, were among the first 13 States in milling production in the same census year. Maltster elevators.— Nearly all maltster elevators, both line and individual, are located in Wisconsin, a fact probably attributable to the number of maltsters located in this State who obtained barley through their own country elevators. Section 14. Geographical distribution of warehouses. Of the 511 warehouses making returns, 283, or more than 50 per cent, are located in the Mountain and Pacific division. The explana¬ tion of this relatively high percentage of the warehouses in these States, as compared with the other three divisions (Appendix Table 2), is due to the fact that, as previously indicated, the great bulk of the grain on the Pacific coast is handled in sacks, and that in conse¬ quence there are relatively few elevators in the territory, the country grain being handled almost exclusively through flat warehouses. The Central division reported a total of 161 warehouses and the Southern and Middle Atlantic divisions only a comparatively small number. No warehouses of maltsters and no line warehouses were reported to the Commission in the Middle Atlantic division. In the Southern division only 14 line warehouses were reported, and as a result it seems possible to say that line warehouses are, prac¬ tically speaking, confined to the Mountain and Pacific and Central divisions. It seems probable that the most of the warehouses in the Central division are relics of earlier days, since, according to all information the Commission was able to obtain, there is little or no handling of grain in the Central division except in bulk. Some¬ thing over 36 per cent of the Mountain and Pacific warehouses are independents, nearly 31 per cent commercial lines, and a little over 22 per cent are owned by mill lines. In the States on the coast, especially in Washington and Oregon, the grain business is chiefly in the hands of mills and large grain merchandising concerns, and the line warehouses are largely the outgrowth of this situation. Un¬ til very recently the cooperative movement in the country grain business has not appeared extensively in this area, which accounts, presumably, for the relatively small proportion of cooperative houses reported. In the Pacific northwest there does not exist the same antagonism to the line company that is found in the northwestern grain States, for the reason that, as already stated, these warehouses are generally used chiefly for storage and only secondarily for mer¬ chandising. In the former area the farmer stores his grain in a warehouse,' and receives therefor a warehouse receipt. Samples of his grain are sent to many of the buyers and they send bids to the farmer, who sells when he desires, the warehouse receiving a “ For further development of this point see Ch. IV, secs. 5 and G. 58 COUNTRY GRAIN AlARKETING. ■> ^ FUNCTIONS, AGE, AND DISTRIBUTION OF HOUSES. 59 fee for storing the grain. This system eliminates the buying and selling country middleman, and consequently there is less likelihood of dissatisfaction with the warehouse on the part of the farmers. Another factor which places the farmer upon a somewhat friendly basis with commercial line and mill line warehouses is that in this territory such warehouses finance farmers to a considerable extent. This financial assistance is sometimes by way of furnishing sacks, though often an outright loan of money. The security for such loans is either a note or a grain contract. The distribution of elevators by types in the Mountain and Pacific divisions corresponds roughly to the distribution of warehouses by types. I Chapter III. PHYSICAL CHARACTERISTICS OF COUNTRY ELEVATORS and warehouses. Section 1. Description of country elevator. . In the inquiry into the country marketing of gram, was secured regarding the physical characteristics of elevators a warehouses, especially with reference to the materia •. such elevators and warehouses are constructed, their total capacity, and the number and capacity of the bins (see Appendix , . . 10 and 11). This chapter presents the results of these inqu r e together with other descriptive details. ^ , , , -j. „ The typical country elevator is constructed of wood, with a ca¬ pacity of between 25,000 and 26,000 bushels, and contains some 10 ^^^rL^'usual construction of wooden elevators is as wood cribbing. The peculiarity of this construction lies in the fact that the house is built by laying the lumber for bins with flat side down instead of sideways, as in I’ inU Usually 2 by 4 inch or 2 by 6 inch lumber is laid in this falhion and securely nailed. This type of construction strength and rigidity and prevents the bulging of the sides of the Cse or bin walls and consequent leakage from the pressure of gram At times cribbed houses are covered with sheet metal as a protection agmnst ordinary country elevator is usually roughly rectangular in shape, the dfmensions depending upon the ®apacity of the Jouse The greatest dimension is, as a -rule, the height. In the middle the elevator is the work floor, where the ®l®7t®'’ cated This floor usually runs across the entire house. Flanki g Sis work floor on opposite sides are the stock bins, which are set in blocks or series of 2, 3, 4, or more, as the case “^e'work extend from the top to the bottom of the hou^. Above the work floor are the work bins, usually 3 in J*'^®^7oSe wldS'^S nracticallv always smaller than the stock bins. Ihe one which i Focated on the same side of the house as the railroad track is com¬ monly known as the shipping bin; the middle .°*^®> “ *^®. bin; \nd the third and farthest from the railroad track, as the Asindicated above, the average country ®l®^^t:?>'X‘!JfYsLTbins or 11 bins. In the case of an 11-bin house, a block of ^-stock bins would be located at one end or side of the ®l® 7 f ^h® side of the work floor, another block of 4 at the opposite side or end and the 3 trk bins above the work floor. H ouses with a larger or sm aller 'TTho system of bln arrangement Is not uniform and varies with the ideas of the owners. 60 f / CHAKACTERISTICS OF COUNTRY HOUSES. 61 number of bins usually have a greater or less number of stock bins, the increase or decrease not resulting in a change in the number of work bins unless the house is either very large or A^ery small. While the average bin capacity of all elevators is 2,471 bushels, as shoAvn in section 5 of this chapter, this average includes both stock and Avork bins. As a matter of fact the capacities of these tAvo classes of bins vary considerably, the stock bins usually holding from tAVo to four or fiA^e times as much as the Avork bins. In the elevators visited by the agents of the Commission the stock bins usually held from 3,000 to 4,000 bushels each; the shipping bin around 1,200 bushels; and the cleaning and transfer bins about 1,000 bushels each. The wagon scale for weighing the farmers’ grain is usually located on the side of the house opposite to the side nearest the railroad track in a lean-to, which protects the scales at all times whether the house is open or closed. This wagon scale is placed directly over the load¬ ing pit which slopes doAvn into the bottom of the elevator. Up to and oA-er this scale and doAvn on the other side runs the elevator. driA^eway, Avhich is sometimes inclosed its entire length, although this is not usual. In deliA^ering grain to the elevator the farmer drives up this inclined roadway onto the scale, unloads his grain, and driA^es down on the other side.^ The office of the country elevator is usually in an annex to the elevator proper. Sometimes it is in the scale lean-to on the opposite side of the driveway from the Avork floor; sometimes it is located in a shed against the side of the elevator proper, usually just off the drWeAvay; in still other cases it is in a separate building. The operating equipment of mi aA^erage country elevator is described hereafter in connection with the use of each machine em¬ ployed in the handling of grain (Ch. V). Many elevators, how¬ ever, contain various machines and contrivances not found at the average house. Special cleaning machines, oats clippers, man lifts or passenger elevators, dump scales, etc., are included in the equipment of many concerns. The power plants found at country elevators are usually internal combustion engines, gasoline predominating. A few electrically operated houses are found in Montana and possibly exist elsewhere. The power plants are frequently located in a building separate from the elevator on account of fire risk, etc., and the office is often in the same building. Some elevators handling side lines have additional buildings for this purpose,' such as coal sheds and small warehouses, Avhere such side lines are stored. Section 2. Average capacity of elevators and warehouses. Results of tabulation.— Appendix Table 3 shows the avemge capacity of different types of elevators and Avarehouses in specified States and grand divisions. This appendix table may be consulted for the details of capacity by types. Table 15 presents the aA^erage edacity of elevators and Avarehouses of all types reporting in specified States and grand divisions, and also the average capacity for all the elevators and Avarehouses of each type. * Owing to the recent development of motor truck delivery of grain by farmers, the elevators have found it necessary in many cases to enlarge their scales and pits, build concrete driveways, etc. 62 COUNTRY GRAIN MARKETING. Table 15 .—Average capacity of elevators and imrehouses in the United States by types and by States and grand divisions. States and grand divisions.^ Average capacity. ELEVATORS. OlrlahniTto. .... 14,482 15,068 17,017 17,119 17,309 20,048 22,865 24,006 24,428 25,421 26,305 29,602- 32,060 33,046 9,968 16,858 30,109 .. Afis«jnnri ... TT54T1 . .. ojiio .<. NfvLrn'ilrn. ... Tnrtinnn. . I owa RmitVi Tlnlfotn... Minnpsnta .-. Mnntnnn. Tllinni.Q . Mnrtli ... MiHHIa a tlcintip. T^ivisiou. .Qmi+hprn DiviQinTi .. Mmmtoin QTlfl Pn.pifip Divi5?ion. Average elevator capacity all States onrl crronH rlivisions . ... 25,527 WAREHOUSES. MiHHIa Atlontin Divission . 7,500 14,979 19,479 49,403 .. Mr>nn+ciin oiir) Pnp.ifin Division. Average warehouse capac ty all States and divisions... 34,199 Average elevator and warehouse capac¬ ity, all States and grand divisions.. 25,867 Type. Average capacity. Eleva¬ tors. Ware¬ houses. Elevators and ware¬ houses. LINE. Commercial. Cooperative. Mill. Maltster. 26,202 23,688 25,290 32,647 32,703 50,625 52,532 26,376 24,714 28,296 32,&47 All line. 26,017 42,336 26,695 INDIVIDUAL. Cooperative. Independent. Mill. 29,797 22,342 24,724 70,000 31,442 26,887 18,000 29,822 22,583 24,587 70,000 All individual. 25,142 27,042 25,213 / All types. 25,527 34,199 25,867 1 For States included in these grand divisions set- Ch. II, sec. 5. Capacity variations of elevators and warehouses. —The average capacity of the 9,158 elevators and warehouses of all types in the United States which reported their capacity is 25,867 bushels; of all elevators, 25,527, and of all warehouses, 34,199. In the consideration of the average capacity of elevators and ware¬ houses by types, those operated by maltsters may be disregarded since, as appears in appendix Table 3, they are too insignificant in number eitner seriously to affect the average capacity of all elevators or to be of any significance for comparative purposes. The average capacity of warehouses in the United States is greater than the average ca¬ pacity of elevators, not only in total but also as between all line and all individual elevators and between the various types of line and in¬ dividual concerns except individual mill warehouses. ^ ^ The range of difference between the average capacities of different types of elevators and of all elevators and warehouses combined, how¬ ever, is not very great, owing to the relatively small number of ware¬ houses. The individual cooperative has the highest average elevator- warehouse capacity of any type (excluding malster houses) and the independent the lowest, the average capacity of the former being 29,822 bushels and of the latter, 22,583 bushels. The average capaci¬ ties of other types are found somewhere between. The types of ele- CHARACTERISTICS OF COUNTRY HOUSES. 63 vators showing respectively the highest and lowest average capacities are the same as the above and the.differences between the highest and lowest average elevator capacities and the highest and lowest average elevator-warehouse capacities are very slight. Section 3. Type variations in capacity. Elevators. —The individual cooperative elevator, with a capacity of 29,797, shows a higher average capacity than any other type of ele¬ vator (except maltsters), being something over 3,000 bushels larger than the commercial line elevator, which has the second largest aver¬ age capacity. Mill line elevators, individual mill, and independent elevators follow in the order named. Various explanations may be given for the high average capacity of cooperatives and the low capacity of independents. In the first place the cooperative elevator expects to handle the greater propor¬ tion of all the grain at the station, or at least all the grain grown by its own stockholders. As stated by one line operator in the North¬ west “ They figure that the elevator is for their benefit and they de¬ sire to have it big enough to hold all their grain if necessary.” The application of the cooperative principle tends to procure a large cli¬ entele and steadier patronage, ayd as a result the cooperatives handle a larger volume of grain than the other types. (Ch. V, sec. 8.) Since the independent is owned as a rule by one individual, or at most by a few, the owner frequently does not possess the capital to build a large house, and also has on the whole more difficulty in borrowing funds for construction purposes than does the coopera¬ tive elevator. Again, in contrast to the cooperative, the independ¬ ent has no assured clientele or patronage. It must compete with every other type, including in many cases the cooperative, and in order to show a return on investment it endeavors to hold down its construction costs to as low a figure as possible. Similar considerations to the foregoing probably explain why the cooperative also shows a higher average capacity than does the com¬ mercial line house, which, as previously explained, bears a good deal •of resemblance to the independent. The reason that the commercial line house shows a higher average capacity than the independent may perhaps be found in the fact that it does not labor under as great limitations with reference to procuring capital as does the in¬ dependent elevator. ♦ <* -n A possible explanation for the relatively small capacity of mdl- owned elevators, both individual and line, is found in the chara^^r of the business of a mill elevator. As previously pointed out, the mill elevator is as a rule rim primarily as an adjunct to the milling business and not as a merchandising undertaking. The mill elevator, therefore, in the large proportion of cases confines itself chiefly to the purchase of wheat, the grain which it actually mills and buys but a small proportion of other grain. In consequence it does not tend to run high in capacity. (See Gh. V, sec. 8.) Warehouses. —^The average capacity of mill warehouses of the commercial line type is 52,000 bushels, and of the individual type only 18,000 bushels. The latter figure, as shown in Appendix Table 3, is based on returns from only 10 warehouses and is of little statis¬ tical significance. 64 COUNTRY GRAIN MARKETING. The high capacity of mill line warehouses is due almost entirely to the large size of these houses in the Pacific Northwest, where the average capacity of this type of w^arehouse is nearly 61,000 bushels as compared with less than 20,000 reported by the Central and South¬ ern divisions. (Appendix Table.3.) As is indicated by the last preceding table, the coast warehouses of all types show an average capacity of approximatelj?^ 50,000 bushels, while the average capacity of warehouses in the Middle Atlantic, Southern, and Central divisions is in no case as high as 20,000 bushels. The variations in capacity of different types of wivre- houses shown in Appendix Table 3 are due chiefly either to the high capacities of the coast houses as compared with the warehouses in other sections or else to the scantiness of the data. Only 359 ware¬ houses reported, and when these houses are distributed bj^ tj^pes the number reporting is necessarily small. Section 4. Geographical variations in capacity. Elevators. —There is a decided variation in the average capacity of elevators by States. In four States the average capacity is above that of all Sta'tes and grand divisions, namely. North Dakota with an average of 33,046 bushels, Illinois with 32,060, Montana with 29,602, and Minnesota with 26,305. The average capacities of the other 10 States are below the average for all States and divisions. The ex¬ planation of these variations appears to be found in the differences in the type of elevators located within the various States and the variations in average capacities by types. The following table shows the average capacities of elevators in the 14 principal grain-growing States in comparison with the proportion of individual cooperative, commercial line, mill, and independent elevators. Table 16 .—Average elevator capacity m specified States in comparison with the proportions of specified types of elevators. !■ i., state. ■Average elevator capacity. Individual cooperative elevators. Independ¬ ent ele¬ vators. Commercial line elevators. All mill ? elevators. Olrlahnnia . 14,482 4.57 29.71 20.57 45.15 18.47 36.84 21.05 27.51 19.21 3.52 18.76 2.00 6.72 Minhipan . 15,068 2.81 51.41 27.31 Miasnnri . 17,017 6.14 46.05 10.96 Wisennsin . 17,119 5.70 49.12 13.60 TTansas . 17,309 21.30 35.93 9.38 Ohio . 20,048 7.63 49.72 21.75 M pLraslca . 22,865 26.30 20.77 48.58 TnrUn.na .. .. 24,006 5.46 44.18 31. 59 . 24,428 25.84 42.45 28.96 SoutH Dakota. 25,421 23.08 25.26 43.37 MiTinp-SOta . 26,305 21.34 19.08 46.42 12.08 .11.32 5.86 7.2-3 Montana . 29,602 23.90 13.63 49.90 Tllinnls . 32,060 14.47 48.34 29.99 North Dakota... 33,046 23.71 14.67 54.17 Average all States and grand divisions. 25,527 18.42 31.62 36.01 12.51 As shown by Table 15, the independent elevators show the lowest A average capacity per house and the cooperatives the highest (exclud- s ing the few malster elevators). The average capacity of mill ele- 9 vators, both line and individual, and of the commercial and coop- erative line elevators lies between these two. The commercial lines ^ CHARACTERISTICS OF COUNTRY HOUSES. 65 report a higher average capacity than either type of mill eleva¬ tors, though much below the individual cooperative, and the. mills in turn show a considerably greater average capacity than the inde¬ pendent. Altliough there is by no means an exact correlation of capacity variations with the proportions of the elevators of these four types appearing in the individual States, there is yet sufficient to render plausible the view that these type variations in capacity account in large measure for the geographical variations. The fore¬ going table shows that all the 10 States, except South Dakota, Ne¬ braska, and Oklahoma, reporting less than the average elevator capac¬ ity (25,527 bushels) also report a higher proportion of independent elevators than the average of independent elevators for the United States as a whole, and with the exception of Nebraska, Iowa, and South Dakota, a higher proportion of mill elevators. Excepting South Dakota and Nebraska, each of the same 10 States shows a percentage of commercial line elevators which is considerably below the average. In the four States, excepting Illinois, which report a higher than average elevator capacity, and in South Dakota, which is approxi¬ mately average, the reverse of the foregoing situation obtains. Min¬ nesota, Montana, and North and South Dakota all show a higher than average percentage of cooperatives, a very much higher than average percentage of commercial lines, and a lower than average percentage of independents and mills. Thus, broadly speaking, the average capacity of elevators tends to be highest in those States in which the two types of elevators re¬ porting the highest average capacities—i. e., individual cooperative and commercial line—are relatively most important, and lowest ip those States in which the two types reporting the lowest average capacities—i. e., independents and mills—are relatively most im¬ portant. Warehouses. —Of the 359 warehouses reporting their capacities, considerably more than half were located in the Mountain and Pacific division, the balance being distributed among the other divisions. There is a striking difference between the average capacity ol the warehouses in the first division and those in other sections. These differences between sections seem to be due primarily to differences in the method of handling as between different sections. As has already been indicated (Ch. II, sec. 1), the Pacific coast warehouse is first of all a storage and secondarily a merchandising undertaking, the warehouse being used very largely for storage by the farmer, who holds his grain there until it is sold to the converter or exporter. AVhere houses are thus used chiefly for storage they must be larger than in those sections of the country where the warehouse is pri¬ marily engaged merely in buying and selling and stores only inci¬ dentally. Moreover, the coast is relatively lacking both in large organized markets and terminal storage capacity, and much more grain is held in the country warehouses than would probably be the case were the coast markets larger and terminal storage better developed. Section 5. Average number of bins per house. Type variations of elevators. —Appendix Table 4 presents the average number of bins reported by different types of elevators or 9964°—20-5 66 COUNTRY GRAIN MARKETING. warehouses in specified States and grand divisions. Since ware¬ houses are either not binned at all or only to a limited extent, eleva¬ tors and warehouses are separately considered. The average number of bins in all reporting elevators is 10.33 and the average capacity of bins is 2,471 bushels. This latter average was computed by dividing the average capacity of all reporting ele¬ vators by the average number of bins reported, including both stock and work bins, the former of which are usually much larger than the latter. (Ch. Ill, sec. 1.) There is a considerable variation in the average number of bins reported by elevators of different types, and the average of different types shows some tendency on the whole to fluctuate with the capac¬ ity of the elevator. The following table compares the average capacity of each of the five principal types of elevators with the average number of bins per elevator and average capacity of bins. The averages for elevators of the other three types are ignored for the reason that they are based upon too limited data to render the per¬ centages of any significance. Table 17. —Comparison of average eapacity of specified types of elevators with average number of Mns per elevator and average capacity of hins. Type of elevator. Average capacity. Average number of bins. Average capacity of bins. Bushels. 29,797 26,202 25,290 24,724 22,342 11.62 10.45 10.47 10.19 9.49 Bushels. 2,564 2.507 2,415 2,426 2,354 25,527 10.33 t 2,471 1 Including cooperative line and maltsters, both line and individual. From this table it appears not only that the average number of bins tends to vary more or less directly with the average capacity of the type but also that the average bin capacity tends to vary directly with the elevator capacity and the number of bins. The variation in the number of bins and bin capacities as between the different types may probably be explained on the same grounds as the variations in capacity as between types discussed in section 3. Geographical variations or elevators.— The tendency of the aver¬ age number of bins per elevator and capacity per bin to vary directly with the average capacity of elevators is considerably less character¬ istic of the figures of the individual States. In the following table the average capacities of elevators in the 14 principal producing States are shown in comparison with the average number of bins per elevator and the average capacity per bin. CHARACTERISTICS OF COUNTRY HOUSES. 67 Table 18 .—Comparison of average elevator capacity in specified States with average number of bins per elevator and average bin capacity. States. Elevator capacity. Average number bins per elevator. Average bin capacity. Oklahoma. Bushels. 14,482 15,068 17,017 17,119 17,309 20,048 22,865 24,006 24,428 25,421 7.18 12.13 8.07 10.60 7.76 8.52 10.21 9.94 9.87 10.97 Bushels. 2,017 1,242 2,109 1,615 2,231 2,353 2,239 2,415 2,475 2,317 Michigan. Missouri. Wisconsin... Kansas. Ohio. Nebraska..•. Indiana. Iowa. South Dakota.. Minnesota... 26,305 29,602 32,060 33,046 11.58 11.87 9.83 12.69 2,272 2,494 3,261 2,604 Montana. Illinois. North Dakota. Average all States and divisions. 25,527 10.33 2,471 Warehouse variations. —^Warehouses are either not binned at all or else show a relatively small number of bins as compared with elevators. An examination of the figures contained in Appendix Table 4 shows that the average number of bins in the 'Mountain and Pacific division is only about 3|, while the number of bins in the warehouses of the other three divisions is a little over 5 in the Southern and about 5f in both the Central and Middle Atlantic divisions. In the Pacific Northwest, as previously explained, sack and not bulk handling is the rule. Where grain is sacked there is no such possibility of its becoming mixed Avith other grain as in bulk han¬ dling, always, of course, presuming that the sacks are identified as to contents and are separately piled. Such being the case, there exists little or no necessity for the use of bins in warehouses where the method of sack handling prevails. Sack-handling warehouses, therefore, as a rule have either no bins at all or else merely a few partitions. These facts presumably account for the small number of bins reported by the warehouses in the Mountain and Pacific divisions. The information obtained indicates that there ds no sack handling in the Central division and very little in the Southern and Middle Atlantic divisions. In these areas bulk handling largely prevails and the warehouses have in consequence frequently been binned. The average number of such bins per house, however, in each division is considerably below the average number of bins reported by ele¬ vators in the corresponding divisions. (Appendix Table 4.) In the case of the Middle Atlantic and Central divisions this may be due to the lower capacities of warehouses in these sections as com¬ pared with elevators (Table 15). 68 COUNTRY GRAIN MARKETING. Section 6. Construction materials of elevators and warehouses. Construction in general— The great majority of all the elevates and warehouses in the United States are constructed of wood. Of the 9,637 reporting their construction 7,447, or 77.28 per cent, are built of this material. The only other important type of construc¬ tion reported is wood and metal, employed by 1,519 elevators and warehouses, or 15.76 per cent of the total. A.s tabulated, this latter type of construction included all “ iron-clad ” houses-—!, e., those constructed of wood but covered with a metal sheathing such^ as corrugated iron ^ wooden elevators with metal roofs ^ those haying wooden houses but metal tanks; and all other similar combinations. The material of construction employed by the balance of the country houses reporting—671, or 6.91 per cent of the total reporting in¬ cludes various combinations of wood with other materials, such as brick, concrete, stone, etc., and also straight concrete and steel con¬ struction. In no case did the number of houses reporting any one of these particular kinds of construction equal 2 per cent of the total answering the inquiry. The detailed figures of the construction material of elevators and warehouses in the various States and grand divisions will be found in Appendix Table 5. i • i i.- i. Present tendencies. —The principal reason for the relatively high proportion of wooden elevators and warehouses in the United States has been apparently the lower cost of such construction. This is the explanation offered by the majority of those terminal market grain concerns interested in the operation of country elevators who were questioned in regard to this matter. Until comparatively recently, it is said, wood was the cheapest material obtainable, and for this reason was utilized for the great bulk of elevator and warehouse con¬ struction. Of late, however, the price of lumber has increased to such an extent as to bring the cost of this material more in line with the cost of other materials suitable for use in building country house^ The tendency of elevator construction now is away from the use of wood only and to the employment of other materials formerly more expensive. This latter trend in construction is indicated by the sta¬ tistics of the reported period of elevator construction in comparison with the materials employed in four States selected at random for the purpose of testing this question, two (South Dakota and Kansas) from the territory west and two (Illinois and Indiana) from the ter¬ ritory east of the Mississippi River. These four States contained 1,490 elevators reporting both materials and period of construction. As only 4,372 elevators reported their period of construction, the 1 490 elevators located in these four States were deemed to be a large enough number and sufficiently well distributed fairly to represent the tendency in construction. ^ The following table presents the results of this tabulation tor the four States in question: CHARACTERISTICS OF COUNTRY HOUSES. 69 Table 19. —Materials of which elevators were constructed in specified periods. Period. Num¬ ber report¬ ing. Wood. Wood and metal. Concrete. All other materials. Num¬ ber. Per cent. Num¬ ber. Per cent. Num¬ ber. Per cent. Num¬ ber. Per cent. Prior to 1880. 37 32 86.49 1 2.70 4 10.81 1880 to 1884. 31 28 90.32 1 3.23 2 6.45 1885 to 1889. 72 57 79.17 8 11.11 7 9.72 1890 to 1894. 99 76 76.77 20 20.20 3 3.03 1895 to 1899. 135 112 82.96 . 16 11.85 7 5.19 1900 to 1904. 315 240 76.19 62 19.68 13 4.13 1905 to 1909. 368 284 77.17 68 18.48 1 0.27 15 4.08 1910 to 1914. 280 128 45.71 113 40.36 11 3.93 28 10.00 1915 to 1917. 153 50 32.68 72 47.06 10 6.54 21 13.72 Total. 1,490 1,007 67.58 361 24.23 22 1.48 100 6.71 % As is apparent from the table, more than three-fourths of the reported country elevator construction in each period prior to 1910 was of wood. 'Since 1910, however, according to the above figures, the proportion of wooden construction has declined to less than one- half of the total, while the proportion of wood and metal in combi¬ nation has increased to approximately twice its importance prior to that date, and concrete has developed from practically nothing to* over 6 per cent of the total. The use of other materials, including wood in combination with various materials, has also greatly iii^ creased as compared with the preceding years. The relative increase in the price of lumber would presumably affect the cost of elevator construction more seriously than it would the cost of ordinary building construction, owing to the manner in which elevators are built. As elsewhere indicated (sec. 1), the ordi¬ nary type of elevator is of cribbed construction; i. e., built by laying 2 by 4 inch or 2 by 6 inch lumber flat side down. This method of building, therefore, consumes a much larger number of board feet in a structure of any given size than would ordinary wooden- building construction. For this reason the advance that has taken place in the price of lumber has probably tended to increase the cost of wooden-elevator construction in comparison with other mate¬ rials more than ordinary wooden construction. An examination of the age of elevators shows that approximately 5 per cent of the elevators which replied to the Commission’s schedule regarding this matter were built prior to 1885, over 9 per cent prior to 1890, about 15 per cent prior to 1895, and over 23 per cent prior to 1900. (Cf. Ch. II, sec. 11, and Table 9.) As regards a large propor¬ tion of these old elevators, there can be little or no doubt that wood was used in their construction, because it was relatively very cheap as compared with other materials. In the case of the older elevators it was also no doubt frequently employed, because, owing to the comparative lack of development of the country, other materials were neither easily nor quickly obtain¬ able, but had to be transported long distances, often at relatively high freight rates, and involved perhaps a delay of weeks or months in building. In fact, one large line operator in Minneapolis stated that his concern had employed lumber principally because of its ready availability. COUNTRY GRAIN MARKETING. Another Minneapolis line operator expressed the opmion that the rapidity of construction and ease with which wooden hous^ can be transferred from one place to another has been a considerable lactOT, explaining the importance of wooden construction at least in the Northwestern States. As the northwestern territoiy developed very ; rapidly, elevators were in considerable demand. The wooden elevator can be easily and rapidly erected, with the result that this type ot construction was commonly used. Similarly, wooden elevators are easily and quickly enlarged, torn down, or, as happens in certain , instances, knocked down and moved to another town. In inany ; cases a wooden elevator can be knocked down in sections, loaded on cars transported to other localities, and set up again at a cost con¬ siderably less than that of constructing a new elevator.^ Type variations.— Table 20 presents the material of construction employed by the different types of elevators and warehouses in the United States. , Table 20.—Constructiem materials of different types of elevators and ware¬ houses in the United States. Type. Total. report¬ ing. Wood. Wood and metal. All other kinds. Number. Per cent. Number. Per cent. Number. Per cent. LINE. Commercial. Cooperative. Mill. Maltster. 3,348 104 743 30 2,957 79 576 22 88.32 75.96 77.52 73.34 291 22 85 7 8.69 21.15 11.44 23.33 100 3 82 1 2.99 , 2.89 11.04 3.33 All line. 4,225 3,634 86.01 405 9.59 186 4.40 INDIVIDUAL. Cooperative. Independent. Mill. Maltster. 1,751 3,135 521 5 1,289 2,242 280 2 73.61 71.51 53.74 40.00 371 595 146 2 21.19 18.98 28.02 40.00 91 298 95 1 5.20 9.51 18.24 20.00 All individual. 5,412 3,813 70.46 1,114 20.58 485 8.96 Grand total. 9,637 7,447 77.28 1,519 15.76 671 6.96 Slightly over 86 per cent of all line elevators and warehouses in the United States are constructed of wood as compared with less than 71 per cent of all individual elevators and warehouses which are built of this material. The proportion of wooden construction among all line elevators and warehouses is also considerably above the average of wooden construction—77.28 per cent—which is reported for all elevators and warehouses combined, and the proportion oi such con¬ struction among all individual elevators and warehouses combined is considerably below the foregoing general average. i - An examination of the percentages of wooden construction by types of houses in the above table indicates that the high proportion of cases in which lumber is used by all line types combined as compared with the combined individual types is caused chiefly by the extremely large amount of such construction by the commercial lines. Wood con- a A number of elevators in North Dakota, for example, located at ponits was^a surplus of elevators, have been thus knocked down, transported m sections to Montana, and there re-erected. f I ] i CHARACTERISTICS OF COUNTRY HOUSES. 71 struction in the mill line type is only a fraction of 1 per cent above the average proportion of wooden construction for all types, while neither of the other two line types employ this construction to an extent equal to the average. Commercial line construction. —As previously pointed out, the commercial line elevator company is a grain-merchandising under¬ taking operated solely for the purpose of deriving a profit from the differences in the prices at which it buys and sells. The individual line house is thus merely one part, and it may be a very small part, of a larger buying and selling organization. The commercial line company having presumably no local interests and being concerned solely with the profit and loss derived from the operations of all its houses, apparently considers the matter of elevator construction solely from the standpoint of costs and profits, and resorts to the cheapest type of construction as the one most likely, everything con¬ sidered, to yield the greatest net return on the investment. As one Minneapolis line operator put-it, the commercial line companies have found that the little saved in the cost of insurance by the more expensive types of construction does not compensate for the increased interest on the increased investment. It is also probable that the commercial lines have in a good many cases felt that it would be undesirable to construct other than cheap houses on account of competition. In more than a few cases com¬ petition has rendered the operation of particular line houses un¬ profitable, and many of the larger commercial line companies have had the experience of closing numerous elevators owing to the de¬ velopment of competition, especially of the cooperative variety. Independent construction. —It is not easy to determine why lumber should be so much more used by commercial line elevator com¬ panies than by independents, since the independent elevator is in essence operating in much the same manner as the commercial line and for the same purpose, i. e., to derive profit from the purchase and sale of grain. The independent house, however, is almost invariably owned and operated by local people. In many cases a large proportion of the income of the owners is derived from the operation of this^ par¬ ticular enterprise, and often their entire capital is invested in it. It is the business in which they are regularly engaged, and they expect not only to remain in it but to do so at the place where they have constructed their elevator. An elevator of this type is not like a line house—merely one of several. The average independent owner can not discontinue the business which is his livelihood and move to some other locality with the same facility as a commercial line company can discontinue a particular house whenever the profit from that house becomes too narrow and, as is often done, transfer operations to another and more profitable locality. The independent operator regards his business as a permanent affair; the line com¬ pany, operating several stations, regards it as subject to the exigen¬ cies of competition, etc., and hence to be continued or discontinued at a particular point, as circumstances justify^ and always more or less with reference to the profit of the entire business. As a result the independent operators tend to resort to somewhat more substantial types of construction, building houses of a more per- 72 COUNTRY GRAIN MARKETING. manent character, better protected against fire, and carrying a lower j insurance rate than is the case with the commercial line house. Cooperative construction. —The fact that the cooperative elevator ! also regards^ its business as of a permanent local character is prob¬ ably partially responsible for its low percentage of wooden construc¬ tion as compared with the commercial line, as well as the recent development of the cooperative type (Ch. II, sec. 11). As elsewhere indicated (Ch. V, sec. 8), however, the cooperative elevators handle more grain relative to their size than any other type. Other things being equal, the larger the volume of grain handled by the coun¬ try elevator the lower is the per bushel handling expense ^ and the larger the possible capital expenditure which would be justified. Moreover, on account of their plan of organization and operation these elevators are in a large proportion of cases able to obtain ample capital, and for this reason are in a position to build comparatively expensive elevators. Finally, there is also to be considered the fact that the farmers build the elevator for the purpose of handling their own grain. They look upon it more or less as a permanent institution and in many cases have a certain amount of pride in having a sub- -j stantial elevator. These facts also undoubtedly affect the cooperative line, and are, perhaps, responsible for the lower percentage of wooden construction of this type as compared with the commercial line, though the number reporting is very small. .. Individual and mill line construction. —Slightly less than 54 per cent of the individual mill elevators reported wooden construc¬ tion. This is far below the average not only of all elevators and ; warehouses in the United States (77.28 per cent) but also of all individual elevators and warehouses (70.46 per cent) and ot either independents or individual cooperatives. This percentage is in great contrast, moreover, to the extent of such construction among the * mill-owned lines, over 77 per cent of which are built of wood. The principal reason for this appears to be tlm fact that in a great proportion of cases the individual mill elevator is a part of mill j structure itself. Wooden construction involves in case of fire in such an elevator the possibility not only of the loss of the elevator , property but also of the mill structure as well. In this fact alone J there is good reason for a pronounced tendency to pse^ some form 3 of construction less inflammable than wood for the individual mill 9 elevator. Secondly, mills are usually constructed with the expecta- 1 tion of continuing in business for a relatively long period oi time. 4 So long as the mill continues operations it must obtain grain, and a | mill elevator can, conceivably, continue to exist and operate as a storage adjunct to the mill as long as the latter is operated, even though there is comparatively little grain raised in the immediately surrounding territory. These two factors make for a type of con¬ struction of considerable permanence. In this connection it is inter- J esting to note that, though not shown in the tables presented, some- 3 thing over 6 per cent of all individual mill elevators reporting are | constructed of either concrete or steel. J While the mill line elevators show a much higher percentage ot J wooden construction than the individual mill type, they employ S it considerably less than the commercial lines. The reason probably ■ lies in the fact that each mill line usually has at least one house 1 CHARACTERISTICS OF COUNTRY HOUSES. 73 connected with the mill. This house, like the indivMual mill type and for the same reasons, would in a large proportion of cases be of some other kind of construction than timber. As a result, the extent of wooden construction among mill-owned line houses is less than that of the commercial lines though greater than in the case of the individual mills. i t . -u Geographical variations. —Appendix Table 5 shows the distribu¬ tion of elevators in the different States and grand divisions accord¬ ing to the material of construction. There is a great variation be¬ tween States in the percentage of wooden construction reported, the amount ranging from 50 per cent iii Missouri to 94 per cent in North Dakota. Broadly speaking, these variations are probably explain¬ able in terms of the proportions of commercial line and individual mill elevators operating in these States. The following table shows the percentages of wooden construction in all the 14 States, sep¬ arately tabulated, in comparison with the proportion of commercial line and individual mill elevator construction. T\ble 21. _ Proportion of conwiorcicLl line and individuod mill elevators in specified States in comparison with the proportion of wooden elevator construction. state. Percent¬ age of com¬ mercial line ele¬ vators. Percent¬ age of indi¬ vidual mill ele¬ vators. Percent¬ age of wood construc¬ tion. 54.17 1.81 94.76 49.90 4.61 73.26 48.58 2.85 80.10 46.42 4.21 89.82 43.37 2.48 94.18 31.59 14.'96 54.37 29.99 3.12 67.37 28.96 1.75 . 54 27.31 12.45 70.37 21.75 13.56 65. 80 20.57 6.86 63.47 13.60 13.16 ' 76.55 10.96 26.75 49.77 9.38 8.43 56.37 36.01 5:54 77.53 All otatGs ana grana .. —--- An examination of this table shows that with a few exceptions those States having the largest proportion of commercial line ele¬ vators tend to have the highest percentages of wooden construction and those having the largest proportion of individual mill elevators the lowest percentages of wooden elevators. Since, as already pointed out the commercial lines are much above the average in the propor¬ tion of wooden construction and the individual mills much below the average, the distribution of these two types of elevators probably explains, in the main, the State variations. In the case of Montana the less than average percentage of this construction reported is m al probability due to the comparatively recent development ot this btatc as a large producing area. Chapter TV. DEVELOPMENT OF COUNTRY ELEVATORS AND COUNTRY MARKETING. Section 1. Character of the discussion. In Chapter III there has been set forth the development of the different types of country elevators in the different States as indi¬ cated by the figures of construction reported at different periods. In this chapter there will be summarized briefly such other historical data as have been collected by the Commission. No attempt will be made to present a comprehensive history of country marketing for several reasons. In the first place, readily available information in print is comparatively limited. Although a thorough study of all possible sources might have yielded in addition considerable informa¬ tion, such an examination would have involved an amount of research and expense which, considering the reasons for and scope of the investigation, would not have been justified. Moreover, the grain business is so old that outside of Minneapolis and the Pacific coast territory there are comparatively few men in the grain trade who are able to supply much information as to the characteristics of country marketing in the early days, and the information which could be obtained from this source is in consequence not great. Un¬ doubtedly the information obtained from the older Minneapolis grain men as to conditions in that area could have been somewhat, supplemented in other sections, but, again, only at an expenditure which it was not felt would be justified. The following brief re-, cital, therefore, is based upon easily available published sources and such historical information as was incidentally acquired in the course of the investigation. In the case of the Northwest territory, this latter information is more complete than for other sections, owing primarily to facts supplied by Minneapolis line elevator oper-_ ators, some of whom practically grew up with the grain business in that area. , Section 2. General characteristics of early grain marketing. Chicago territory. —In the very early days a large percentage of the grain was consumed locally. At that time urban centers were not large and a highly concentrated consuming demand was not as yet in existence, except in a few cases. Water-power gristmills were then quite common throughout the country districts and the farmer took much of his grain to these mills, where it was converted into flour and other grain products. In those days the grain fields were usually either adjacent to river courses or relatively close to the larger towns, and surplus grain was either hauled by wagon directly to the towns or shipped to them by boat on the rivers or canals. 74 DEVELOPMENT OF COUNTRY HOUSES. 75 Thus in the early days, before the advent of railroads, grain was hauled to Chicago by the farmers from as far as 100 miles inland and sold by them on the streets to local buyers. When, on account of the extension of railroads to the West and South, the receipts be¬ came so large that this method of selling was no longer practicable, a Board of Trade was formed where buyers and sellers could meet together and handle the grain more expeditious^ and economically. After the railroads were built grain men on the Board of Trade fur¬ nished capital to put up elevators at country stations. The farmers then sold their grain at their nearest station instead of hauling it to Chicago, and as the railroads continued to branch out the number of elevators located at country stations multiplied.^ The Northwest. —Flour was first produced in commercial quan¬ tities at the Falls of St. Anthony, now Minneapolis, about 1853. While the mill capacity at this early period was quite small, it was larger than the supply of grain locally, and hence grain was brought by barges down the Mississippi River and up from Iowa, Illinois, and Wisconsin.2 Writing in 1913, the chief grain inspector of the Minnesota Railroad and Warehouse Commission stated that even as late as 30 years previously the raising of wheat was confined largely to that area of Minnesota tributary to the Mississippi and that the markets along this river, including Winona, AVabasha, Red Wing, and Hastings, were among the most important in the world. Mil¬ lions of bushels of wheat were marketed by farmers at these land¬ ings and taken down the river.^ What is said to have been the pioneer elevator of the upper Mis¬ sissippi was probably that*erected at Prairie du Chien, AVis., some 60 years ago^ and which became one of the objectives of grain ship¬ ping from Minnesota in the prerailroad days. It had a capacity of nearly 300,000 bushels and was built standing in the water so that, even at a low stage of the river, steamers and barges could tie up at its doors and load and unload. Before 1857 there was no railroad to the Mississippi north of Dubuque, and all the produce of the country north of this point had to be brought to market on steamboats. St. Louis was the great market, although Gralena and Dunleith, Ill., received a small share of the business.^ ^ ^ The Milwaukee & Mississippi Railroad was completed to Prairie du Chien in the spring of 1857 and that fall the first Minnesota grain was shipped over the line from Prairie du Chien to Milwaukee. Within two years 100 carloads a day were going over the same route and the traffic continued to increase until Milwaukee was a success¬ ful rival of St. Louis for the grain of Minnesota and northern Iowa.' In 1861 the railroad company had a fleet of packets, five running ■ north from Prairie du Chien to St. Paul, two to Eau Claire and points on the Chippewa, and three to Lansing, Iowa, and Browns¬ ville, Minn. Besides these there were the weekly packets operating between St. Paul and St. Louis, which unloaded much gram and other produce at Prairie du Chien, while in winter Iowa and Minne- 1 Tn the matter of the relations of Common Carriers subject to the Act to Regulate Commerce to the ownership and operation of elevators and the buying and selling and forwarding of grain, see Sen. Doc. 278, 59th Cong., 2d ses^, p. 30. 2 Tohn S Pillsbury, in, pamphlet; Minneapiolis Golden Jubilee, p. 36. _ , „ * Annual ’Report, Chief Inspector of Grain, Minnesota Railroad and Warehouse Com¬ mission, 1013. , * Minneapolis Journal, Feb. 22, 1920. 8 Ibid. 76 COUNTRY GRAIN MARKETING. \ sota farmers teamed to this point over the snow from 200 miles away in Iowa and Minnesota.® The Southwest. —With the extension of the grain-producinff area to the Southwest across the Mississippi, the importance of St. Louis as a country marketing center was greatly increased. In the earlier days when the Mississippi and Missouri River courses were used to carry the traffic of that great interior tributary section, St. Louis, on account of its location, became the center of exchange for this traffic, and thus naturally attained importance even then as a coun¬ try grain market. Chicago’s importance as a grain-trading center was also much increased by this southwestern extension of the grain area. AVhen this area was further extended beyond the Missouri River, Kansas City and Omaha rapidly developed as important local grain-marketing centers. Pacific coast. —While some grain was grown in the Pacific coast section in the first half of the last century, which was mostly con¬ sumed by local mills, it was not until the last quarter of that century that grain was produced there in sufficient quantities to be of notice¬ able importance. By that time a large surplus was being marketed by boats from territory adjacent to the Sacramento and San Joa¬ quin Rivers in California and the Columbia, Willamette, and Snake Rivers in Oregon, Washington, and Idaho. San Francisco, Portland, . and Spokane apparently first became important as grain distributing and milling centers. With the completion of the transcontinental railroads to Tacoma and Seattle and the establishment of regular trans-Pacific service from these points, these also became important marketing points for grain, especially'that produced in the State of Washington. Section 3. Methods of handling grain. The first type of grain handling prior to about the time of the Civil War appears to have been through a flat warehouse with a scale and a wheelbarrow. This was prior to the advent of the rail¬ ways in certain sections, and where this was the case the flat houses were usually, though not always, river houses. Although Josept Dart began at Buffalo in 1842 the erection of probably the first steam transfer and storage elevator employing buckets attached to a belt revolving over two pulleys,^ this method of handling even at terminal points does not seem to have been rapidly adopted and in the country appears to have come into use even more slowly. In the Northwest, at least, the flat warehouses continued to be the principal means of handling grain until at least about the late sixties, when the first type of elevator came into use. Flat ware¬ houses, however, continued to be built for some time. In fact, in the Northwest they continued to be constructed to some extent until the early eighties. One of the first types of elevators in the Northwest Tvas the David¬ son high bridge, gravity elevator, developed by one Commodore Davidson. Teams were driven up oir this bridge and the grain dumped from the wagons flowed by gravity into bins and cars.® The ® Minneapolis Journal, Feb. 22, 1920. ’ Joseph Dart, Grain Elevators of Buffalo, Publication of the Buffalo Historical Society, Vol. I (1879), pp. 400-401. ® At least one of these high bridge elevators is reported to be in operation to-day in the State of Illinois. DEVELOPMENT OF COUNTRY HOUSES. 77 driveways were finally done away with in the early seventies when steam be^an to be used for hoisting purposes. The steam-power liouse, however, was quickly succeeded by the horse-power elevator around 1880. This elevator was operated by a sweep, the horse bein^ driven around and around in a circle. This type of elevator is said to have resulted in a decrease in size and greater economy in operation. Horse power was in turn followed, about 1885, by the application of gasoline i^ower to hoisting machinery, and gaso¬ line and other types of internal-combustion engines are still the principal sources of power for operating country elevators, although of recent years a few electrically operated houses have been built and put in operation. Section 4. Commercial line elevators. While there are many commercial line elevators in States other than the northwest group, this last area may properly be termed the great stronghold of this type of house, and the indications are that the first large commercial line companies developed in this territory. In the early days the buying of grain in this territory Tvas apparently largely dominated by the line organizations. Even in the sixties the flat warehouses, it is stated, were generally small lines of 5 and 10 stations. The pioneer large commercial line elevator company in the North- — west appears to have been the Pillsbury & Hurlbert, organized in the late seventies. Another of the early commercial lines was the Alinnesota & Dakota, which, according to one of the older line elevator men, absorbed the Davidson houses. It is also stated that this line later became the Farmers’ Union. Aj^parently the railroads went into the elevator business at first in some degree. The Soo Kailroad is reported by several grain men to have built a few elevators, and other roads reported either to have built or purchased elevators are the Chicago & North Western and the Northern Pacific. The railroads, however, failed to make a success of the operation of these houses, and later sold them out. About 1879 or 1880 the Northern Pacific Line Elevator Co. was started by one G. S. Barnes and a partner, and the Northwestern Elevator Co. (a line now in operation) began operations in the early eighties. The old Davidson system of elevators bought no grain, but-simply issued storage tickets, which were sold by the farmers.® The Minneapolis Millers’ Association kept buyers at all points at which the Davidson houses were located and the farmers sold their storage tickets to these agents or to representatives of David Dowes, a large New York grain concern. Mr. Marshall, of the National Elevator Co., a large Minneapolis line, states, quoting the report of the interview with him, “The elevator man shipped the grain on orders from these firms on a fixed charge that either the Millers’ Association or Dowes paid on the surrender of the storage tickets for shipment together with any storage charges, if storage had been earned. I believe, but do not know, that the fixed charge was agreed upon between the elevators and the buyers. I am not certain about tl^is, evenjdiough I was operating one of the Davidson elevators.’’ » According to best information obtainable there were some 40 or 50 of these Davidson elevators located ou the old St. Paul & Pacific Railway. 78 COUNTRY GRAIN MARKETING. With the advent of the commercial lines in the Northwest, succeed¬ ing the Davidson type of elevators, the method of handling appears to have changed from a storage to a merchandising basis, and this destroyed the business of the Millers’ Association buyers who were * purchasing storage tickets from the farmers in the country. Accord¬ ing to Mr. Magnuson, of the Northwestern Elevator Co. line, the early commercial lines actually bought the grain and sold it to the Millers’ Association on the basis of a fixed commission over the coun¬ try price, amounting to a few cents per bushel. According to Mr. Magnuson’s recollection the mills financed the purchases of the lines, loaning the money to buy the grain, and also paying the freight. The commercial line development of the Northwest may be attrib¬ uted largely to the scarcity of local capital resulting from the rapid development of this area as a grain-producing territory. Agriculture in the Northwest developed extensively rather than in¬ tensively. Land was cheap and fertile and this situation lent itself to large farms and the extensive cultivation of one or two crops. The territory was sparsely settled, there was little or no local capital available, and as a result lines of elevators were built by organiza¬ tions located at Minneapolis and other points possessing the resources and initiative to undertake such operations. (Ch. II, sec. 8.) Section 5. Mill line elevators. The Northwest. —In the late seventies or early eighties Hurlbert is reported to have sold out his interest in the Pillsbury-Hurlbert line, and this organization became the Minneapolis & Northern. Sometime in the early eighties the Minneapolis & Northern ap¬ parently passed into the control of the Pillsbury-Washburn inter¬ ests. According to Mr. Marshall’s recollection this change in control marks the beginning of the mill line in the Northwest, and this line may be regarded as the pioneer mill lipe.^® The control of the Minneapolis & Northern does not appear to liave amounted to ownership, and the relationship appears to have been rather one of affiliation. The St. Anthony & Dakota (a line company affiliated with Wash- burn-Crosby interests) began operations about 1885, and the Western Elevator Co., of Winona, also more or less related to the milling in¬ terests, about the same date. The most plausible reason assigned for the development of the mill line in the Northwest is that the milling interests in Minneapolis were developing so rapidly that they found considerable difficulty in obtaining sufficient grain, more especially as Milwaukee and other markets began to draw from their territory. As a result, the mills either began the establishment of their own ele¬ vators or else affiliated themselves with existing elevator lines. Mill elevators and character of wheat production. —The mill line elevator is relatively even more important in the Southwest than in the Northwest territory. Thus, mill line elevators consti¬ tute about 19 per cent of the total elevators reporting from the State of Kansas, 38 per cent of those of Oklahoma, and 10 per cent of those in Missouri. Eelatively, therefore, these three States are - ----^ 10 There is some divergence between Mr, Magnuson ^ahd Mr. Marshall on certain of these points. Both agree that the Minneapolis Northern was the pioneer mill line. Mr. Magnuson is authority for the statement that it was controlled by the Pillsbury- Washburn interests. Mr. Magnuson, however, states that the- Minne^olis & !^rthern constructed all of its elevators instead of being the successor to the Pillsbury-Hurlbert line, as stated by Mr. Marshall. DEVELOPMENT OF COUNTRY HOUSES. 79 the most important mill line States. In the number of these houses reporting, Kansas ranks first, Oklahoma fourth, and Missouri eighth. An examination of the figures of reporting elevators reveals the fact that in Kansas, Oklahoma, and each of the four Northwestern States, the proportion of mill line elevators is very much greater than the proportion of the individual mill elevators, while in Ne¬ braska, Iowa, and Missouri and each of the States east of the Mis¬ sissippi the reverse of this situation obtains. The former of these two areas is chiefly a hard-wheat producing section and the latter raises principally soft wheat. This clearly appears in the following table, which shows the proportions of mill line and individual mill ele¬ vators in the 14 principal grain-producing States in comparison with the proportion of total wheat production represented by hard wheat. Table 22 .—Distribution of mill elevators by specified States in comparison loith hard wheat production. ---— u ^ State. Proportion of indi¬ vidual mill elevators. Proportion of mill line elevators. Proportion of hard wheat pro¬ duction to total wheat produc¬ tion.! \ffi5<:miri ..... ... ... Per cent. 26.75 Per cent. 10.09 Per cent. 6 ...... 14.96 3.80 6 13.56 5.65 6 Wicpnn«:in ....... 13.16 7.89 88 Miphipan .........i. 12.45 6.02 15 Tllinnic ...... 3.12 2.74 24 ...... 2.85 .67 96 1.75 .25 82 • 8.43 19.08 85 6.86 38.29 84 4.61 6.71 92 4.21 7.87 99 2.48 4.24 100 1.81 5.42 100 1 Figures are from Commission’s Report on Commercial Flour Milling, as supplied by the Office of Cereal Investigation, Department of Agriculture. In the five States of Missouri, Indiana, Ohio, Michigan, and Illinois the proportion of hard wheat produced is relatively small, while in Kansas, Oklahoma, and the four Northwestern States practically all the wheat production is of the hard varieties. In the former area the proportion of individual mill elevators is relatively high as com¬ pared with the mill lines; in the latter area the reverse is true.^^ Relation of hard wheat to mill line development. —Historically, these differences in the character of wheat production have probably had a very important bearing upon the development of mill line and individual mill elevators. In the two decades prior to 1870 the great bulk of the flour-milling industry was located east of the Mississippi Nebraska, Iowa, and Wisconsin are the only hard-wheat States with a higher pro¬ portion of individual mill than of mill-line elevators. Only 16 mill elevators of both types reported from Iowa and only 21 from Nebraska. In both cases this is less than half the number reporting from any other of the 14 States. On account of the small number involved, therefore, the percentages of the two types in these States are probably not significant. In Wisconsin the high proportion of individual mills as compared with mill lines, though hard wheat production predominates, may probably be attributed to the early development of local milling in this area before the great development of the hard wheat area farther west and its persistence down to the present time. According to the census of 1870, Wisconsin was the seventh State in fiour production. In that year it produced between two and three times as much as the State of Minnesota, though by 1890 the reverse was true. COUNTRY GRAIN MARKETING. go COUNTRY GRAIN MARKETING. and the flour production was chiefly from soft wheat. The introduc¬ tion of the Hungarian process of roller milling at Minneapolis about 1870 marked an epoch in the production of flour in the United btates, and from this time on hard-wheat milling developed rapidly and hard-wheat flour gradually became commercially the predominant type of flour. The first hard-wheat territory to be developed exten¬ sively was in the' Northwest. Kansas some 20 years later began to be an extensive producer of hard wheat and was followed by Owino* to the commercial demand for hard-wheat flours, the milling industry in the Northwest and in Kansas and Oklahoma tended to a larger and larger scale production, with the consequent demand larger and larger quantity of wheat. In the Northwest, as already indicated, this resulted, apparently, in the development of mill lines at a very early date, for the purpose of insuring an adequate supply of wheat. In the Southwest an apparently similar situation has de¬ veloped But such information as is available would indicate that flour production in the southwestern area is considerably more decen¬ tralized than is the case in the Northwest. The water-power facilities of Minneapolis, combined with the momentum of its very early de¬ velopment as a wheat flour milling center and the extensive sample market, have resulted apparently in a higher degree of centralizaUon of flour milling in the Northwest than obtains in the Southwest. I he great bulk of the northwestern production is at Minneapolis. Obtain¬ able figures would indicate that relatively a much larger proportion of the southwestern flour production is to be found scattered through the heart of the grain-producing territory than is the case in the North¬ west where flour production is centralized so largely at Minneapolis. While mills located at points like Kansas City, where there is a con¬ siderable elevator capacity, are able to get along without the opera¬ tion of line elevators, there appears to be a tendency for the larger southwestern mills situated at various local points to operate a string of elevators, presumably in order to insure a supply of wheat of the requisite quality and grade.^^ Section 6. Individual mill elevators. Before the extension of the wheat-producing area much beyond the Mississippi, the milling industry, as stated, was confined largely to the production of soft-wheat flour raised in the- East, and Illinois, Ohio, Missouri, and Indiana, all important soft-wheat States, were among the most important milling States.^^ • . -n In the early days flour production was on a small scale, gristmills were relatively important as compared with to-day, and even the merchant mills were very small affairs measured by present-day standards. Chiefly by reason of these facts the demand for wheat for milling purposes was largely of a local character, the size qi establishments not being sufficient to require a large volume of gram to maintain the mill in operation. As a result the individual mill 12 ThP Kansas Flour Mills Co., operating 6 mills in Kansas, 1 in Missour^ and 2 in Oklahoma^ a^sfopir'^^tes be^^^^^^^^ and 150 country houses Min''& Ele' rornoration, the Rea-Patterson and Arkansas City Cos., the MUl & E e orator Co and the Hunter Milling Co. are among those also operating line elevaUir^ isTTven as late as 1870 Illinois was the principal milling* State, measured in terms of harrll floubproduced by m mills and New York, Missouri, Ohio, Pennsylvania, Indiana were second, third, fourth, fifth, and sixth, respectively, in importance. Ninth Census of United States (1870), Vol. Ill, Manufactures, Table X, p. 599. DEVELOPMENT OF COUNTRY HOUSES. 81 elevator developed at first in the East rather than the mill line. Sub¬ sequently the great commercial demand for hard-wheat flour, with the accompanying rapid increase in the scale and volume of produc¬ tion to the west of the Mississippi, tended to restrict the development of soft-wheat flour milling on anything like a corresponding scale. The demand for the older soft-wheat flour declined, and as a result the eastern mills tended, if milling exclusively soft wheat, to remain of small size, or if they embarked in large-scale operations, to obtain some hard wheat from the West.^^ Since the tendency to the establishment of mill lines probably re¬ sults from an increased demand for wheat to supply mill require¬ ments, there has been less tendency for the mill line to develop in the so ft-wheat area than in the hard-wheat territory. Large-scale mill¬ ing has not so extensively developed in the former as in the latter area, and so far as large-scale operations have developed in the East they have tended to draw their increased grain supply from the hard- wheat fields of the West. Section 7. Independent elevators. An examination of the tables of period of construction by types and States (Ch. II, secs. 8 and 11) reveals the fact that of the 133 ele¬ vators and warehouses reported as constructed prior to 1880, 83, or about 62 per cent, were of the independent type. This may be taken, probably, as indicative of the early importance of the independent as a factor in the grain trade. As has been repeatedly indicated, the independent house is relatively most important in the States east of the Mississippi and in Missouri and Iowa. In the Northwest the rapid development of large scale grain production, combined with the relative scarcity of local capital, produced the commercial line as one of the first types of elevators, while the development of large- scale milling at Minneapolis resulted in an almost simultaneous growth of the mill line. For a time at least these two types largely monopolized the field, and it was not, apparently, until about 1885 or 1890 that independent elevators began to be important in this area. By this time considerable local capital had been accumulated, and since then this type is reported to have increased steadily in number, though rather slowly in this area. A number of the so-called farmers’ houses of this period were nothing more in fact than independents, the companies operating them being composed largely of local busi¬ ness men with a few farmers to give them the name. Frequently the independents Tvere operated by local merchants as adjuncts to their stores. The importance of the independent as well as the relative unim¬ portance of commercial line elevators in eastern territory may prob¬ ably be attributed to the larger amount of local capital available in this area as compared with the Northwest, and the probability that in the former area farming has almost from the outset been of a more diversified and intensive character. As compared with the develop¬ ment of the Northwest area Missouri and the grain States east of the Mississippi had a much earlier and slower growth, and probably The Commission’s Report on Commercial Flour Milling (Exhibit V) shows that 20 mills east of the Mississippi are using 49 per cent hard wheat and 51 per cent soft wheat. Only two of these mills were using soft wheat exclusively, while four were using hard wheat exclusively. These mills in 1916-17 produced on an average about 60,000 barrels each. 9964°—20-6 82 COUNTRY GRAIN MARKETING. larger amounts of local capital were accumulated. In the very early days the farming industry in this territory was also of a diversified rather than a large-scale character, because, owing to the lack of transportation facilities, considerable mixed farming was necessary in order to sustain the local population. When they did not sell to the mills the farmers disposed of their grain to merchants or others in near-by towns, taking in exchange therefor the necessities which the farm did not produce. Purchasers required storage space for this grain, and from this stage it was but a step to the independent elevator or warehouse. In the grain States west of the Mississippi the development of independent elevators has depended upon local capital accumulations and the competition of other types of houses. The early development of the lines, however, tended at first to retard the growth of inde¬ pendent houses, and later the extensive cooperative movement in this area prevented it from becoming a fertile field for the independents. Section 8. Early cooperative development. Origins. —The exact genesis of the farmers^ or cooperative, elevator movement is exceedingly difficult to determine. It has been stated that the real initiation of the farmers’ elevator movement dates from the granger movement of the seventies.^® Hibbard, writing in the Cyclopedia of American Agriculture, says: “ It is reported on fairly good authority that over half of the elevators of Iowa were once in the hands of the grange cooperators.” According to another writer, a number of farmers’ elevators or¬ ganized by the Farmers’ Alliance movement in the eighties are still in operation.^^ Weld states that in Minnesota the farmers’ elevator movement may be said to have started about 1890, though a few companies had been formed before that date, most of which had failed.^® Of 204 farm¬ ers’ elevators in Minnesota in 1916, however, one dated back to 1876 and another to 1884, though the total number reported prior to 1900 was only 30.^^ . In Illinois it is also reported that farmer elevator companies, which were outgrowths of grange teachings or of the F. M. B. A.^® move¬ ment, were organized, some as stock corporations, others as voluntary associations,^^ prior to 1896. What has frequently been termed the first cooperative elevator ap¬ pears to have been established at Kockwell, Iowa. The belief of the farmer that ‘‘he was being robbed of his just profits through the ex¬ actions of the grain trust, the lumber trust, the coal trust, and other combinations with which he had to transact business * * prompted about 100 farmers in the little town of Rockwell, Iowa, in March, 1889, to meet and discuss their troubles. The result of this meeting was to organize a company and raise sufficient money to IS Erdman, H. E., Farmers Elevator Movement in Ohio, in Ohio Experiment Station Hibbari’ B. H.?'Cooperation in the Grain Elevator Business, Cyclopedia of American Agriculture, Vol. IV, p. 207. 18 W^ld,^L. °h’. D.’ Farmers’ Elevators in Minnesota, University of Minnesota Agricul¬ tural Experiment Station Bulletin 152, p. 5. tt • t 10 Durand & Jensen, Farmers’ Elevators in Minnesota, 1914-lo, University of Minne¬ sota Agricultural Experiment Station Bulletin 164, p. 9. 20 Probably Farmers Mutual Benevolent Association. , , 21 Thomas Lamb, jr., History of the Farmers Elevator Movement in Illinois, American Cooperative Journal, Sept., 1907, Vol. Ill, No. 1, p. 23. DEVELOPMENT OF COUNTRY HOUSES. 83 purchase or erect their own elevator. This was soon accomplished and the company be^an business.” Whether any of these early farmers’ elevators were cooperative in the true sense of the word or only in the sense that they were owned by farmers has not been ascertained, none of the available informa¬ tion making this point at all certain. The penalty clause.-— Regardless of whether the Rockwell ele¬ vator was truly cooperative or not, it was unique in one respect. It appears to be undisputed that it was the first elevator to employ and enforce the so-called penalty clause. In substance this clause usually provided that any member of the cooperative concern who sold grain to any other dealer in the to^m than the elevator OAvned by his organization should pay into the treasury of the company a cer¬ tain amount per bushel—usually one-half cent to 1 cent per bushel— for its support and maintenance.^^ This clause was destined to play an important part in the subsequent history of the development of the cooperative elevator. Section 9. Reasons for cooperative development. Lack of competition.— While there seems little reason to doubt that there was originally considerable competition between the older types of elevators, i. e., the mills, commercial lines, and independ¬ ents, this competition gradually led to various agreements among elevators, especially in the territory west of the Mississippi, with reference to prices, the pooling of purchases at particular stations, and other practices all more or less designed to decrease or eliminate - competition. In the late nineties and early years of the present cen¬ tury such arrangements were quite generally characteristic of coun¬ try marketing conditions. In the Northwest these practices ap¬ pear to have been especially prevalent among the commercial line comiianies,^^ Avhich were so largely developed in this area. Most of these companies had their headquarters in the terminal market, and it was therefore a comparatively simple and easy thing to perfect arrangements as to competition between the houses of these com¬ panies at local stations. Farther to the south and east, in Nebraska, Iowa, and Illinois, where the independents were relatively more im¬ portant than the lines, both types of houses Avere involved and the restriction of competition vms accomplished through the various State associations of grain dealers, to which associations both the independent and line houses quite generally belonged. Situation in the Northavest.— ^The situation which existed in the Northwest territory, tributary to Minneapolis, even as late as 1905, may be illustrated by the following quotations from the testimony of Mr. A. J. Hoskins before the Interstate Commerce Commission, November 22, 1906.^® Mr. Marble. Have you at the present time charge of any arrangement for pooling the grain or dividing the business at country stations? Danforth, H. W., Farmers’ Elevator Movement in the United States, Third National Conference on Marketing and Farm Credits, pp. 251-252. 28 Testimony of AV. M. Stickney, I. C. C., in, the matter of relation of common car¬ riers to the grain trade, 59th Cong., 2d sess.. Doc. 278. p. 16. 2* From available information it is impossible to determine to what extent independent elevators in this territory may have been parties to similar arrangements to those in which the line companies were involved. No indication has been found that State grain dealers’ associations ever'played such a part in these arrangements in the four northwestern States as they did farther to the south. 2® A. J. Hoskins, op. cit., S. Doc. 278, pp. 931, 932, 940-942. Italics, the Federal Trade Commission’s. 84 COUNTRY GRAIN MARKETING. Mr. Hoskins. No, sir. Mr. Marble. You have had in years past, have you not? Mr. Hoskins. Yes. sir. Mr Marble. But as to some of these arrangements in August, 1905, were there agreements to pay penalties on excess grain purchased? Mr. Marble.^ How many such agreements would you say there were in August, 1905 ? Mr. Hoskins. Do you call each station an agreement? Mr! Marble. Yes; how many points? ^ , Mr Hoskins. I do not know; perhaps a couple of hundred. Mr Marble. In what States were those stations located? Mr! Hoskins. Well, Minnesota, South Dakota, and North Dakota. * * * * * Mr. Makble. I will ask you first, Were these agreements of the same general nature and form at these 200 points? Mr. Hoskins. Yes, sir; I think so. ^ ^ , 4.0 Mr. Marble. What was the form and nature of that agreement? Mr Hoskins. Well, it was to figure a penalty on—of course, first it was decided what percentage each company was entitled to, and then those that got more than their share there was a penalty figured and those that got less than their share received the penalty. Mr. Marble. What was that penalty generally? • Mr. Hoskins. Two and a half cents on wheat, and in some cases 2 cents on barlev and rye, and flax was 3f and oats were 2 cents.^ 4 -r.Tvion+- Mr!^ Marble. Each of the buying elevator companies rendered a statement to you? Mr. Hoskins. Of their receipts; yes, sir. Mr. Marble. You figured who had the excess and the amount due from the ones getting the excess? Mr. Hoskins. Yes, sir. Mr. Marble. And also to whom that money was to go. Mr. Hoskins. Yes, sir. , i, Mr. Marble. You had the clearing house, as it were, for this business. Mr. Hoskins. Yes, sir. Mr Marble. Who paid you for that service? _ Mr Hoskins Why, I do not know that anybody did. I made an assessment to^covS the expense of my office, based on the number of elevators that each company had, and I sort of did this other service for nothing. . u, * * * * * * * ^ Mr. Mabble. Now, did all the people haying these arrangements—they also . got prices from you, did they not? Mr! Marble. Was*it any part of the contract that they should pay the card prices? Mr. Hoskins. No. . ^ ,, ^ Mr. Marble. Simply a division of the grain at the point, with a penalty to be paid on the excess? Mr. Hoskins. Yes, sir. ,. , . a. « Mr. Marble. And a share for the one not getting his proportion. Mr. Hoskins. Yes, sir. . 4.0 Mr. Marble. Was there any other feature in the contract I Mr. Hoskins. No. Mr. Marble. Were those written contracts? Mr. Hoskins. No, sir. Mr. Marble. Oral? Mr. Hoskins. Yes, sir. IMr. Marble. How often did you render statements? Mr. Hoskins. Once a month, generally. Mr. Marble. Those statements took the form of “ So-and-so elevator company to Hoskins, debtor ” ? ^ „ Mr. Hoskins. No ; we ran them by numbers, because it was easier and shorter to write than the name of the company. Mr. Marble. And you made a statement of the amount due them and the amount due from each one? DEVELOPMENT OF COUNTRY HOUSES. 85 Mr. Hoskins. No ; if they had a debit, I showed that, and if they had a credit I showed that. Mr. Marble. Not as to any person in particular? Mr. Hoskins, No. Mr. Marble. To whom was the money paid? Mr. Hoskins. To me. Mr. Marble. To you? Mr. Hoskins. Yes, sir. Mr. Marble. And by you distributed to the parties entitled to it under the arrangement? Mr. Hoskins. Yes, sir. Commissioner Lane. What was the total number of elevators in that arrange¬ ment? Mr. Hoskins. I should say 40—oh, elevators? Commissioner Lane. Yes, sir. Mr. Hoskins. I really could not say. Mr. IMarble. Perhaps 40 companies?[*®] *♦♦*♦♦* Mr. Marble. Did you have charge of such arrangements as this from the be¬ ginning of the time you sent out the prices? Mr. Hoskins. Yes, sir; I think so. Mr. Marble. And you testified that that was about 11 years ago you began? Mr. Hoskins. Yes, sir; 11 years ago the 1st of August last. Mr. Marble. That would be the 1st of August, 1895? Mr. Hoskins. No— well, I guess it would—why, no. Mr. Marble. The time you began sending out these prices. Mr. Hoskins. Eleven years ago the 1st of last August I commenced. Mr. Marble. What date would that be—1895, would it not? Mr. Hoskins. I guess so; yes, sir. Mr. Marble. And you have ever since continued this furnishing of prices? Mr. Hoskins. Yes, sir. Mr. Marble. And you had charge of such arrangements for paying penalties on surplus grain purchased and dividing the grain for approximately 10 years— no, 11 years? Mr. Hoskins. No ; 10; not more than that. Mr. Marble. Yes; 10; that is right. Commissioner Lane. Mr. Taylor informs me that there were about 950 eleva¬ tors, according to your statement, in this pool. Would that be approximately it? Mr. Hoskins. Why, approximately; yes, sir. Chicago territory.— In the Chicago territory Nebraska may be taken as more or less typical of the situation. According to findings of fact of the referee in State v. Omaha Elevator Co.: Some time prior to the year 1899 an association known as the Nebraska Grain Dealers’ Association was organized in this State, which adopted a constitution and by-laws under which it operated. Its officers consisted of a president, vice president, secretary, treasurer, and a governing board, consisting of the president, secretary, and three other members of the association. ♦ ♦♦**** There were about 1,200 grain dealers, all told, in the State on April 1, 1905, of whom about 770 belonged to said Nebraska Grain Dealers’ Association, and about 200 more were in sympathy with such association. To accomplish the objects of said association, * * * various expedients were resorted to by it, some of which were as follows: (a) A price committee, consisting of persons “According to Hoskins the following companies had stations which were involved In these agreements : Andrews & Gage ; Great Western Elevator Co.; Exchange Grain Co.; Pacific Elevator Co.; A. O. Cornwell; Security Elevator Co.; Winter & Ames Co.; State Elevator Co.; Federal Elevator Co. ; McCaull-Webster Elevator Co.; Hawkeye Elevator Co.; Interstate Grain Co.; National Elevator Co.; Osborne-McMillan Elevator Co.; Empire Elevator Co.; Northland Elevator Co.; Columbia Elevator Co.; Woodworth Elevator Co.; Monarch Elevator Co.; Duluth Elevator Co.; St. Anthony and Dakota Ele¬ vator Co. ; Imperial Elevator Co.; Powers Elevator Co.; Geo. C. Bagley Elevator Co.; Atlantic Elevator Co.; Royal Elevator Co.; Northwestern Elevator Co.; Heising Elevator Co.; Miller Elevator Co. ; Acme Grain Co.; N. J. Olsen ; Minnesota and Western Grain Co.; Anchor Grain Co.; Victoria Elevator Co. ; C. G. Ireys ; Reliance Elevator Co.; Minneapolis & Northern Elevator Co.; Thorpe Elevator Co.; Car^ll Elevator Co.—Op. cit., Sen. Doc. 278, pp. 932-940. «75 Nebraska, 655; 110 N. W., 874. 86 COUNTRY GRAIN MARKETING. chosen from five of the leading corporation members of said association, was formed, whose business it was to fix the prices which should be paid for grain by the various members of said association throughout the State, and the other regular dealers who worked in harmony with said association. All such mem¬ bers and Iversons were notified by card what such prices w’ere, and as members of such association and regular dealers they were expected and required to fix their bids for grain on the basis of the prices sent to them on the caids, and thej were not to pay any more for grain than other regular dealers in the same locality. For the purpose of facilitating the business, the State \vas divided into 13 districts, and it was the duty of some member of the association, selected for that purpose on account of his or its superior location and facilities for that purpose, to send cards to all the regular dealers in his district. The prices were changed as often as the fluctuations of the market made it necessary; some¬ times every day and sometimes less often. The new prices always went into elfect on the morning of the day succeeding the issuance of the cards and never on the same day. In said manner and by said method uniformity of prices was maintained amongst the members of said association and other regular dealers over the State. Regular dealers were those who were in harmony with the purpose and objects of said association .28 Agreements and price fixing of the above character together with the wide margins frequently exacted led the farmer to believe that there was little or no competition, and that he did not receive as much as he should for his grain. This situation may be said to be pri¬ marily responsible for the considerable and rapid increase of the co¬ operatives after the middle or late nineties. Many grain men have informed the agents of the Commission that this development has been due largely to cooperative promoters and propaganda. These arguments, however, are not impressive. There is, of course, little or no doubt that agitation and propaganda played an important part in the growth of the cooperative. This alone, however, would not account for the development. Cooperative agitation and propaganda found a foothold because of the facts already set out—that there was a lack of competition in the country grain business, and as a result that the prices paid the farmer were not as high as they should have been. In fact some grain men, at least, have admitted that in the earlier days many of the older types of elevators exacted alto¬ gether too large a margin, and many witnesses before the Interstate Commerce Commission in 1906 testified to the fact that the result of the organization of a farmers’ company was to raise the price of grain in the locality from 1 to 3 cents a bushel. It is certainly highly prob¬ able, in view of the widespread existence of pooling and price agree¬ ments among the older elevators, that such results were actually obtained. Section 10. Opposition to cooperatives. Of the development of the cooperative movement during the nine¬ ties very little is apparently known, though a great deal of informal tion is available as to the situation immediately subsequent to 1900. The Commission’s figures of construction (Ch. II, sec. 11)^ would indicate that the movement made considerable progress during the decade 1890 to 1900, the number of cooperatives reporting date of their construction increasing from 39 constructed prior to 1890 to 133 constructed prior to 1900. About 1900, or a little earlier, the farmers’ elevator movement be¬ gan to meet with determined opposition from the older types of 28 Cf. also testimony of G. A. Wells as to the fixing of prices in Iowa, op. cit., S. Doc. 278, pp. G58ff. / DEVELOPMENT OF COUNTRY HOUSES. 87 t ’ houses. In part at least this opposition was due to the employment by many of these houses of the penalty clause plan first employed by the Rockwell Co. Before the introduction of this plan it had often happened that when a farmers’ company, was organized the older competing elevators paid more than the market would warrant for the purpose of breaking down the farmers’ company by making the farmers dissatisfied with the business upon which they had em¬ barked.^® As the penalty clause required the farmer to pay a cash penalty if he hauled elsewhere than to the farmer’s house, it had two effects. It tended in the first place to divert all of the business of member farmers to the farmer’s house, and in the second place to render nugatory efforts of competitor companies to destroy the farmers’ organization by the method of local price raising. This kind of competition, said G. E. Marcy before the Interstate Commerce Com¬ mission, “ is mighty hard competition to go up against. Whenever I hear of a farmers’ elevator starting in I always try to sell them our elevator.” The warfare against the cooperatives assumed the most serious pro¬ portions in the Chicago territory. Outside this area little indication has been discovered of any organized attack upon this type of house. In North and South Dakota" and Minnesota the opposition to the cooperative came chiefly, of course, from the old line companies, there being comparatively few of the independents in this territory. The grain dealers’ associations apparently did not develop there to such an extent, nor did they exercise as much influence as in the area farther south. Moreover, the Northwest territory was younger and w as rapidly developing. It was not so well supplied with elevators as were the older States, and there was probably more room for new elevators than in the older territory. Section 11. Irregular dealers. In the Chicago territory the attack on the cooperatives assumed about the same form as similar wars conducted in various other in¬ dustries and trades against so-called irregular dealers, and in Iowa, ' Nebraska, and Illinois the State associations of grain dealers, com¬ posed largely of commercial line and independent elevator operators, refused recognition to cooperative or farmers’ elevators as well as scoop shovelers. ‘ . ^ t rn • The following is a portion of a bulletin of the Iowa Gram Dealers’ Association from the files of the Interstate Commerce Com¬ mission, which indicates the attitude of the association and its refusal to recognize cooperatives: [Bulletin No. 1.] ^ Iowa Grain Dealers’ Association 1 ■ Secretary’s Office, Des MoineSy Iowa, Aug. 10, 1902. To menihers: The Iowa Grain Dealers’ Association does not recognize scoop-shovel ship¬ pers, farmer elevator companies that are organized to agitate markets, or dealers (shippers, bidders, or receivers) who refuse to arbitrate differences 2»Cf. Vincent, testimony, op. cit., S. Doc. 278, p. 498. WG. E. Marcy, testimony, op. cit., S. Doc. 278, P-1'75. rnr* ^ In the matter of the Relations of Common Carriers to the Gram Trade, 1. G. G., Doc. 875, Vol. II. 88 COUNTRY GRAIN MARKETING as between buyers and sellers. We give below a list of such located in Iowa; also show changes in firms. Firms not r«cognized. Stations. Firms named to be recognized. C. & N. W. EY. Allan Smith. J. M. Wolf. D. L. Boyd. W. A. Smith. Hemmerson Bros. A. S. Evans... Barrett & Cariton. W. E. Mereness. Jos. Whyte. L. H. Noyes. Pepin & DeA*in. F. L. Howe & Co. W. H. Campbell. Ralph Dodge. Geo. Harris. L. J. MigheJ. J. A. Winkle & Co. M. Allineaux & Wright Boone. Grand Mound. Mount Vernon California Jc... Rutland. Earley. Earley. Earley. Blencoe. Mondatnin.... Salix. Radclifife. Goldfield. Paulina. Paulina. Lake City. Irvington. Tilton. American Grain Co Doon C. M. & ST. P. RY. Lawler Grain & Live Stock Ass’n. Farmers Elevator Co. Dunbar Grain & Stock Co. J. B. Haas (farmers). C. M. Goudy. W. W. Topf&Co. W. W. Topf&Co. W. W. Topf&Co. W. W. Tonf&Co. Fanner’s Inc. Society. Canton Grain Co. Lawler. Rudd. Dunbar. Hartley. Britt. Buck Grove. Kenwood... Charter Oak Rodney. Ruthven.... Hull. C. R. I. & P. RY. J. B. Haas (farmers). J. A. Campbell, or Atlantic Mill Co. Mat Johnson. To be recognized. F. D. Campbell. Smith & Damann. Moved house onto C. & G. W. Ry. Hartley.. Atlantic.. Audubon. Plato_ Winterset Tipton... Rowan... S cooper. S cooper. S cooper. S cooper. S cooper. Scooper. S cooper. Scooper. Scooper. Scooper. Scooper. Refused to arbitrate. Not recognized. Scooper. Scooper. Succeeded by Wells Horde Gr. Co. Succeeded by Bedell Bros. Succeeded by H. B. Hidy (Belle Plaine). Succeeded by W. S. Kaufman. Not recognized. Not recognized. Not recognized. Not recognized. Refused to arbitrate. Succeeded by Atlas Gr. Co. Chi. Succeeded by Atlas Gr. Co. Chi. Succeeded by Atlas Gr. Co. Chi. Succeeded by Neola Elevator Co. Not recognized. Succeeded by South Dakota Grain Co. (Parkston, S. D.) Not recognized. Refused to arbitrate. Refused to arbitrate. Blattner & Baldwin. Succeeded by A. L. Springle. Succeeded by Clinton Gram Co. Shaner & Fowler. B. C. R. & N. RY. John Dammarm & Son T. L. Eggum. Fred Hite... Geo. Neissen. Oscar Casey. Flemming Bros. Dixon.... Thompson Shellsburg. Wellsburg. Dysart.... Armstrong Farmer’s Exchange Society. Rockford Farmer’s Elevator Co.. — Kensett.. Scooping at other stations. Scooper. Scooper. Scooper. Refused to arbitrate. Ignored request to arbitrate 2 cases. Not recognized. Not recognized. A. Milligan. To be recognized ILL. CENTRAL RY. Tara and Ft. Dodge. Smithland. Scooper. G. J. Wickey. L. F. Hull. J. C. Phelps. A. Emmert. A. J. Mabie. Farmer’s Cooperative Ass’n Farmer’s Elevator Co. Farmer’s Elevator Co. Moore Bros. & Felthouse... A. Emmert. Manly Grain Co. (farmers) D. M. Smith. IOWA CENTRAL RY. Taintor. Taintor. Newburg. St. Anthony. Rockwell. Freeman. Kensett. Hampton. Kilduli & Newburg. C. & Q. W. RY. Manly. Manly. Scooper. Scooper. Scooper. Scooper. Not recognized. Not recognized. Not recognized. Succeeded by Moore Bros. Scooper. Not recognized. Not recognized. DEVELOPMENT OF COUNTRY HOUSES. 89 Having refused the cooperatives recognition^^ as regular dealers, the State associations and also various individual members brought pressure to bear upon terminal market receivers and bidders in an effort to prevent them from handling cooperative grain. This pres¬ sure took the form of threats of boycott and of actual boycott by the association and its members of those terminal concerns failing to confine their operations to the so-called regular dealers belonging to the association. The following letters sufficiently illustrate these operations: Secretary’s Office:,®® Nebraska Grain Dealer’s Association, Board of Trade Building, „ „ m Omaha, Ve&r., Nov. 23, 1903. H. G. Miller, Sec'y-Treas. The Kemper Grain Co., Kansas City, Mo. Gentlemen : I am advised that you are receiving wheat shipments from the Axtell Farmers Company at Axtell, Nebr. If this is a fact, beg to advise that this is a farmers organization which has in its constitution a penalty clause, penalizing its members for selling grain to other than its own Company. This is a restraint of trade, contrary to good business principles, and I believe, con¬ trary to the statutes of Nebraska. I give you this information, believing that you are not aware of the condi¬ tions. You will not I trust, think there is anything arbitrarily intended by my calling your attention to this matter. As I will be expected to make report to those interested, would you kindly favor me with a prompt reply. Yours truly, H. G. Miller, Se&y. Iowa Grain Dealers’ Ass’n,®* Geo. a. Wells, Secretary & Treasurer, Des Moines, Iowa, Des Moines, Iowa, February 17, 1903. Eschenberg & Dalton, Chicago, III. Gei?tlemen : We desire to advise you that the Iowa Grain Dealers’ Associa¬ tion does not recognize Farmers Elevator Companies organized for the purpose of agitating local markets or that work on the assessment plan. We shall use all legitimate means possible to protect our members from such competition, a competition that if successful, means that the grain dealer who should earn a legitimate profit must go out of business. We state our position plainly in this matter in order that you may decide upon such a policy in regard to doing business with these Farmers Elevator Companies as you may consider for your own best interests, and hope that you will continue to work in harmony with us. The Farmers Elevators Co’s that we do not recognize are as follows: Farmer’s Incorporated Society-Ruthven, Iowa. Farmer’s Co-operative Association-Rockwell, Iowa. Farmers Elevator Company--Gowrie, Iowa. Farmer’s Elevator Co_Garden City, Iowa. Farmer’s Elevator Company-Badger, Iowa. Manly Grain Company-Manly, Iowa. Farmer’s Elevator Company-Kensett, Iowa. Dunbar Grain & Stock Company-Dunbar, Iowa. Lawler Grain & Live Stock Ass’n-Lawler, Iowa. You will understand that it is my duty as Secretary of this Association to keep the members informed in regard to the disposition and conduct of bidders and receivers. Yours truly. Geo. A. Wells, Secretary. “There are indications that occasionally a cooperative was a member of a State oif the relations of common carriers to the grain trade. (I. C. C. Doc. 875, Vol. II.) «Ibid. 90 COUNTRY GRAIN MARKETING. To Members: Itjlinois Grain Dealers Association, Office of the Secretary, Decatur, III., Feb. 2^th, 190Jf. Enclosed you will find report of the Advisory Committee of the National Association, on terminal conditions at Memphis, Tennessee. Please read it carefully. It should be of interest to every shipper of grain whether he ships to Memphis or not. You will notice that in selling to Memphis firms, you must depend entirely upon the facilities and responsibility of the firm to whom you sell. The letter from Secretary Greaves of the Merchants Exchange shows the benefits to be derived from Association work, and every dealer should give it their moral and financial support. For your information I will state that a few receivers of grain are said to be soliciting business from irregular dealers, scoopers, and Co-operative companies. We do not question their right to do this, but as such companies and combines, are generally understood to be organized to eliminate the regular dealer, (or so-called middle man), persons who accept their business are supposed to be in sympathy with their views. If this is correct they cannot be in sympathy with you, or your business. You must be the judge of this yourself. .1 give you below the names of parties supposed to be receiving such business: H. H. Carr___Chicago, Ill. .Tohn West & Co__ Lowell Hoit & Co_ __ M. E. Cook--- Mills Bros__—,-Peoria, Ill. Quinn & Co_ — Suffern, Hunt & Co_,-'-Decatur, Ill. J. W. Hastings Com. Co__New Orleans, La. W. A. Randall & Co___Toledo, O. Yours truly. Geo. Beyer, Secretary. Section 12. Effects of opposition to cooperatives. The foregoing policy undoubtedly rendered it difficult for the cooperatives to find a market for their grain and resulted in serious injury to the business of certain terminal market concerns who insisted on dealing with the cooperatives. This latter point is well illustrated by the following sworn statement of James R. Dalton: Eschenberg & Dalton, Commission Merchants, Chicago, Nov. 3, 1906. BY JAMES R. DALTON OF ESCHENBERG & DALTON, COMMISSION MERCHANTS, 803 ROYAL INS. BLDG., CHICAGO, ILLS. My first experience in the grain business was Manager of a Farmers’ Eleva¬ tor Co. in South Dakota nearly twenty years ago. At that time I had frequent calls from traveling men who represented commission firms in Chicago, Mil¬ waukee, and Minneapolis. Any firm in any terminal market would have been pleased to get the account. Later I represented Rosenbaum Bros, of Chicago as a solicitor for four years. I traveled in Iowa, Minnesota, South Dakota, and made several trips into Wis¬ consin and Illinois. I called on all sorts of grain dealers indiscriminately. Line Houses, Independent Dealers, and Farmer Elevator Companies. I resigned my position with Rosenbaum Bros, and shortly afterwards made a contract with Gerstenberg and Kroeschell also of Chicago. I remained with this firm three years or until the firm of Eschenberg & Dalton started doing business, July 1, 1897. While with Gerstenberg and Kroeschell I covered about the same territory. I had covered for Rosenbaum Bros, and was getting considerable business from the Farmer Elevator Companies. For my own firm (Eschenberg & Dalton) I traveled five years steadily and always called on the Managers of the Farmer Elevator Companies wherever found in my territory. We always enjoyed a nice business from this class of customers as well as from Independent Dealers and Line Firms. ' I am quite positive that I received business every year for ”-5 In the matter of the relations of common carriers to the grain trade, I. C. C. Doc. Doc. 875, Vol. II. DEVELOPMENT OF COUNTRY HOUSES. 91 fourteen years from the Farmers’ Organization at Rockwell, Iowa. This latter concern is considered the parent company in Iowa and is the one which most of the new Companies h}*ve patterned after. The documentary evidence which we have given the Commission will show that in August, 1904, the Iowa Grain Dealers’ Association through their Secre¬ tary, George A. Wells, Des Moines, la. began a bull dozing, boycotting, and black listing fight upon us for the reason that we refused to stop handling ship¬ ments of grain and seed from the Farmer Elevator Companies which he named. As a result nearly all the so-called regular shippers we had in Iowa stopped sending us business at once. Well’s influence even reached outside of Iowa into Minnesota and South Dakota, and he certainly can flatter himself in the fact that he accomplished his purpose. Prior to the Fall of 1904 my firm had a fine business coming from Iowa, I venture to say as good a strictly commission business as any firm on the Chi¬ cago Board of Trade. At that time there were very few Farmer Elevators in Northern Iowa (The section of the State which we covered) so consequently the great, great bulk of our business came from Independent Dealers. My firm was not then known in Illinois, only at a few points, and I will state posi¬ tively that if it had not been for the quick organizing of Farmer Elevator Com¬ panies in Iowa the firm of Eschenberg and Dalton would not have made ex¬ penses and would probably been driven out of the trade. I do hereby certify that the foregoing statement is correct and true in every respect. [In ink.] (Signed) James R. Dalton. Subscribed and sworn to before me this 3d day of November, 1906. (Signed) Wm. Edgar Baker, Notary Public. The direct results of this boycotting of commission houses handling cooperative or farmers’ elevator grain were not entirely satisfactory, however, since the policy caused one or two such commission concerns to do everything possible to foster the farmers’ elevator movement. A good illustration of this is found in the case of the foregoing con¬ cern, Eschenberg & Dalton, now Brennan & Carden.^^ When the “regular” shippers boycotted this organization the firm met the emergency by sending one of their solicitors, Mr. E. G. Drum, into the field to organize farmers’ elevators. “Drum was said to be,” quoting from the interview with Mr. Brennan, “a whirlwind, a flame.” He organized on the average 8 elevator companies in every 10 towns visited. In this manner the trade of the farmers’ houses was turned to this firm, and it has been well maintained ever since. While the efforts of the regular country grain dealers against the cooperatives were undoubtedly a temporary handicap to the latter, the foregoing policy of interference was from every angle a short¬ sighted and mistaken one. In fact there is every reason to believe that it very greatly stimulated the development of the cooperatives, for in the action taken by the regular elevators to suppress the.moye- ment the farmers undoubtedly saw the confirmation of all, and in fact much more than all, that they had believed as to the prices they were paid for grain by the existing elevator concerns, and as to their methods and practices in general. In 1902 the first State farmers’ grain dealers’ association was or¬ ganized in Illinois and was followed by the Iowa Association in 1904,®^ and there are now several of these State associations. Since 1905 the cooperative or farmers’ elevator movement has steadily advanced until, as indicated in a preceding chapter (Ch. II), “ At one time this concern and Lowell Holt & Co. were the only Chicago receivers who would handle cooperative grain. C'.*G. Mcsserole, Testimony, op. cit.. Sen. Uoc. J7o, p. 646. Erdman, op. cit., Bulletin 331, p. 140. 92 COUNTRY GRAIN MARKETING. there is a considerable number of these elevators in nearly every important grain-producing State. Furthermore, as indicated by the figures of construction, this type is increasing relatively more rap¬ idly than is any other (Ch. II, sec. 11). Section 13. Patronage dividend cooperatives. Proportion or cooperatives paying patronage dividends.— Although a serious attempt was made to do so, it has not been pos¬ sible to ascertain anything definite with reference to the genesis of the truly cooperative or patronage dividend elevator, i. e., the elevator distributing its profits either in whole or in part upon the basis of the patronage afforded to it by its customers. Possibly the Rockwell ele¬ vator was of this type. Information obtained chiefly from the North¬ west territory, where this type of cooperative, or farmers’ house, is rela¬ tively important, indicates that the patronage dividend movement was a later development of the general farmers’ elevator movement. Of some 1,800 cooperative elevators and warehouses reporting, 1,208 answered the inquiry as to the payment of patronage divi¬ dends (Appendix 2, inquiry 9). These 1,208 replies indicate that nearly 70 per cent of the elevators reporting themselves as coop¬ eratives pay patronage dividends on some one or another basis. The number and percentage of houses paying patronage dividends in the various States and grand divisions appear in Table 23. Table 23. —Numbers and percentages of cooperative elevators and warehouses paying and not paying patronage dividends in specified States and grand divisions. state or division. Total ele¬ vators and warehouses reporting. Paying patronage dividends. Not paying patronage dividends. Number. Per cent. Number. Per cent. ELEVATORS. Illinois.. 93 27 29.03 66 70.97 Iowa. 142 50 35.21 92 64.79 Wisconsin. 10 5 50.00 5 50.00 Indiana. 19 10 52.63 9 47.37 Missouri..... 9 5 55.56 4 44,44 Minnesota. . 164 92 56.10 72 43.90 Michigan . 7 4 57.14 3 42.86 Ohio. 27 19 70.37 8 29.63 Nebraska . 132 101 76.52 31 23.48 South Dakota. 140 109 77.86 31 22.14 North Dakota. 178 145 81. 46 33 18.54 Montana. 66 54 81.82 12 18.18 Kansas. 153 141 92 16 12 7.84 6 6 100.00 Middle Atlantic Division.. 3 1 33.33 2 66.67 Southern Division. 2 1 50.00 1 50.00 Mountain and Pacific Division. 32 30 93.75 2 6.25 All elevators. 1,183 800 67.62 383 32.38 WAREHOUSES, .•SniTtVipm Division .. 1 1 100.00 Mountain and Pacific Division. 16 6 37.50 10 62.50 Central Division. 8 5 62. 50 3 37.50 All warehouses.. 25 11 44.00 14 56.00 All elevators and warehouses. 1,208 811 67.14 397 32.86 Although the number of elevators reporting from certain of the States on patronage dividends is extremely small—i. e., in Wisconsin, Indiana, Missouri, Ohio, and Oklahcfma particularly—an examina- # DEVELOPMENT OF COUNTRY HOUSES. 93 tion of Appendix Table 2 shows that these States in general also reported a very small number of cooperatives. For this reason, there¬ fore, the small number reporting on patronage dividends in these States is not probably as inaccurate an index of the situation in such States as might at first appear to be the case. At the same time the* smallness of the sample should be held in mind in considering the following discussion. Variations in geographical distribution of patronage dividend COOPERATIVES. —A careful examination of Table 23 will show that the States having the highest proportion of patronage dividend cooper¬ atives tend to be located, with the exception of Ohio, west of the Mississippi Kiver, and that the lowest percentages of such elevators tend to be reported in the States east of the Mississippi River. In other words, the patronage dividend cooperatives are chiefly located in the western and more recent grain-growing territory and com¬ paratively few are found in the eastern and older grain territory. As reported to the Commission, less than 14 per cent of all individual cooperative elevators and warehouses in the United States, in 1917—18, were constructed prior to 1900, as compared with slightly over 86 per cent which have been built since that date.^® (Ch. II, sec. 11.) As already indicated, the general farmers’ or cooperative move¬ ment did not probably assume very substantial proportions until at least the late nineties, and it spread apparently most rapidly in the area west of the Mississippi, which was less well supplied with ele¬ vators than the East. The patronage dividend movement coming at a still later date tended still further to concentrate itself in those States within this area, which were relatively recent grain-producing areas and the least supplied with elevators in 1900. This is roughly indicated by the following statement, which presents the proportion of cooperative elevators which pay patronage dividends in the 14 grain-producing States of the Central West in comparison with the proportion of existing elevators constructed prior to 1900. State. Percentage of elevator construc¬ tion prior to 1900. Percentage of cooperative elevators paying patronage dividends. 'WiQnnncjin ___ 48.80 50.00 Ohijn __ ........ 39.20 70.37 \fi-nno.cint.a... ....... 37.02 56.10 \UpViif elevator stated that it had experienced competition from such a buyer, though not since 1915. In the Southwest, particularly Texas and parts of Oklahoma,^ such grain buyers apparently operate more fre- , quently. Occasionally unscrupulous men have been attracted to the business of buying grain in the manner followed by scoopers. The capital re¬ quired is small. Many of these men have offered prices greatly in excess of the value of the grain, considering freight rates and pre¬ vailing terminal market prices. Attracted by these high prices, farmers have sometimes sold their grain to them and agreed to await payment until they had received their remittances from the terminal market. Such farmers have frequently found when attempting to collect their money that the scooper has disappeared. Scoop shovelers are a thorn in the side of the regular grain dealers. Each load of grain bought by the scoopers is lost to the elevators. In addition, the scoopers often, if not generally, offer higher prices than the elevators® are paying, and to secure grain it is necessary to meet these prices. At times an elevator company in a new territory before com¬ pleting its elevator may engage in buying grain in the manner fol¬ lowed by scoop shovelers. Any type of company may follow this practice, but it is particularly prevalent with cooperatives, because the organizers of cooperatives are usually anxious to begin business at once. Terminal dealers. —^The purchase of grain from farmers by rep¬ resentatives of terminal market grain dealers is usually spasmodic. Frequently their purchases are made from farmers who, dissatisfied with the prices offered at the station, have loaded their grain with the intention of consigning it or selling it “ on-track.” Purchases by this type of buyer are usually in carload lots, although at times grain has been bought from farmers in wagonload quantities. This last is particularly true of new territory where elevators have not been extensively established. At times portable elevators have also 3 Cf. Livingstone and Seeds, Marketing Grain at Country Points, Department ot Agriculture Bulletin No. 558. 3 They can, of course, afford to do this, since they have no fixed operating expenses comparable with those of the elevator. PURCHASE AND STORAGE OF GRAIN. 97 been used by these solicitors for loading grain directly from wagons into cars. The bulk of the grain purchased by solicitors of terminal market concerns, however, is froni elevators, warehouses, and scoopers rather than farmers. As solicitors of terminal concerns are also frequently attempting to secure the consignment business of local elevators, purchases of grain from farmers are avoided at stations where a local elevator is a customer of the house by which the solicitor is employed. Were a solicitor to buy grain from a farmer under such circumstances, the elevator’s volume of business would be decreased and its account almost certainly lost to the solicitor’s house. For example, a farmer at Broadview, Mont., had loaded a car of flaxseed which a solicitor of a line elevator company attempted to persuade him to consign to his firm. The farmer wanted to sell outright, however, and the solicitor refused to make him a bid because the agent of another local elevator company objected. Other factors. —Agents of the mills and other converters at times go from place to place, depending upon local prices and other con¬ ditions, purchase grain in carload or wagon lots from farmers, and then ship it to the miller or other consumer. Feeders are stock raisers or liverymen, and the grains they pur¬ chase—usually corn and oats—are used for feeding their stock. They also buy grain from farmers in both wagonload and carload quantities, in the former event loading it from the wagon into cars for shipment. The operation of the retailer is local in character. He buys grain from the farmer, usually in wagonload lots, and then sells it to his customers as feed. Very often the grain is paid for by merchan- dise. . -Ill Scope and extent of operations. —In spite of the considerable number of purchasers besides elevators and warehouses which are operating in the country market, the great bulk of the initial buy¬ ing from farmers is done by the country houses. The operations of all other classes of purchasers discussed in the preceding para¬ graphs are more limited in character, and it is doubtful if their total amounts to more than a small fraction of the total sales made by the producer. In a rough fashion, the importance of all these other factors as purchasers of the farmers’ grain is indicated by the replies to the Commission’s inquiry of elevators and warehouses as to the direct loading by other buyers in their respective localities (Appendix 2, inquiry 19). Since most of the buyers froin farmers in the country other than elevators, warehouses, and retailers load directly into cars for shipment, the extent of direct loading is roughly indicative of the extent to which other purchasers compete with the elevators and warehouses for the farmers’ grain. The replies to the inquiry on direct loading by buyers were tabu¬ lated for reporting elevators in nine States selected at random, i. e., Michigan, Montana, Missouri, Oklahoma, Illinois, Wisconsin, and’North and South Dakota. From these States 3,553 elevators reported as to the existence or nonexistence of direct loading and 845 as to its extent. The replies were tabulated together for all types of elevators and without reference to the number of elevators 9964®—20-7 I 98 COUNTRY GRAIN MARKETING. reporting at a station, and Table 24 presents the results of this inquiry: Table 24 .—Number and percentage of elevators in fipecifved Statefi reporting direct loading by buyers in their vicinity and extent of such loading reported. state. Michigan. Wisconsin.... Illinois. South Dakota Minnesota.... Montana. Oklahoma.... North Dakota Missouri. Total... State. Michigan. Montana__ Missouri. Oklahoma-... Illinois. Wisconsin.... Minnesota.... North Dakota South Dakota 4 Total... Direct loading. No direct loading. Total elevators reporting. Number. Per cent of total. Number. Per cent of total. 207 24 11.59 '183 8a. 41 . 188 26 13.83 162 86.17 688 136 19.77 552 80.23 513 105 20.47 408 79.53 700 144 20.57 556 79.43 192 40 20.83 152 79.17 135 46 34.07 89 65.93 766 318 41.51 448 58.49 164 85 51.83 79 48.17 3,553 924 26.01 2,629 73.99 Occasional.! Considerable.! Total elevators reporting. Number. Per cerlt of total. Number. Per cent of total. 18 9 50.00 9 50.00 35 19 54.29 16 45.71 66 39 59.09 27 40.91 35 . 24 68.57 11 31.43 122 93 76.23 29 23.77 22 19 86.36 3 13.64 136 127 93.38 9 6.62 314 294 93.63 20 6.37 97 91 93.81 6 6.19 845 715 84.62 130 15.38 1 Where returned as a percentage, replies less than 5 per cent were classed as “occasional and 5 per cent and over as “considerable.” Expressions such as “once in a while,” “seldom,” “aboirt one-fourth, a great deal,” “ a large amount,” etc., were, of course, classified readily under the one or the other head. A few schedules, where the replies were too vague to be thus definitely classified, were rejected and are not here included.* Of the 3,553 elevators replying to this inquiry only 924 houses, or slightly over one-fourth, reported direct loading by buyers in their locality. Even these figures, however, considered by themselves, give a misleading impression of the importance of this practice, for the reason that they give no indication of the extent of such direct loading in the vicinity of the houses reporting it. Of the 924 houses reporting affirmatively, 845 also reported, in one fashion or another, as to prevalence of the practice. The answers returned to this por¬ tion of the Commission’s schedule (Appendix 2, inquiry 19) were in all kinds of phraseology and included a certain number of replies in per¬ centages. All returns were carefully classified under the headings of “ occasional ” or “ considerable,” the most of the replies being so worded as to render such a classification reasonably accurate. Per¬ centage returns above 5 per cent were classified under the heading “considerable,” those less than 5 per cent under the heading “oc¬ casional.” Of these 845 houses, 84.62 per cent report that direct load¬ ing in their vicinity is occasional and 15.38 per cent that it is con¬ siderable. As measured by direct loading reports, therefore, a considerable proportion of elevators are in competition wdth the other types of buyers discussed in this section in purchasing the farmers’ grain. PURCHASE AND STORAGE OF GRATN. 99 This competition in the great majority of cases, however, is of minor importance. ' Section 3. Outright sales by farmer to the elevator. Delivery. —In the great grain-producing States of the Central West grain is practically always delivered in bulk to country ele¬ vators and warehouses. For this purpose farmers employ “grain tight ” ^ wagon boxes or tanks having a capacity of from 50 to 100 bushels. Upon his arrival at the local station the farmer may drive his grain around, if there is more than one elevator or buyer at the point, until he has ascertained where he can obtain the best returns for his load. In determining the total returns of the farmer from the sale, grade, dockage, and weight all play a part and will be considered in the order mentioned. Giii^DiNG.* *—In determining the grade of a load of grain the elevator agent usually scans the load and examines several handfuls therefrom for shrunken kernels, admixture with other grains, dirt, smut balls, etc. If a careful agent, he will also plunge his hands far into the load for the purpose of discovering any signs of heating. If the .grain has been bin burnt® or contains smut or garlic, etc., this can usually be detected by smelling samples of the grain, any such contamination giving rise to strong, disagreeable odors. Following this examination the test weight is taken, the weight of the grain being an important element in determining the grade. For this purpose a device knowm as a “ hand tester ” or “ test kettle ” is employed. It consists of a cup or kettle (usually of a pint or 1 or 2 quarts capacity) attached to a hand beam scale. The beam balances at zero Avhen the kettle is empty and is so graduated that when in balance with the kettle filled it will record the number of pounds the grain content of the kettle will weigh to the bushel. This result is the test weight per bushel. Taking into consideration all of the above tests and giving due weight to each, the agent decides the grade that he is willing to give the grain. During the season of heavy deliveries at country points many agents do not even attempt to grade each load. At that time this often becomes a practical impossibility on account of the time Avhich this process necessarily consumes. Instead, several handfuls of grain are taken from the stream as the grain is dumped from the farmer’s wagon into the unloading pit and these are placed in a box or other container. The samples from each farmer’s grain thus taken are kept separate, and when a farmer has finished hauling for the day the combined samples of his grain are thoroughly mixed and then graded, the result being the grade for all loads delivered. The process of obtaining samples from the stream is also often fol¬ lowed in grading individual loads. Samples obtained in this manner are more representative of the load than are those obtained from the wagon box on account of the fact that certain light foreign material, such as seeds, etc., for which dockage is taken are forced to the top of the load by the motion of the wagon, Avhile other and heavier forei r • 0 r, . 'i _ • . ■ » ^.P k f : / I 108 COUNTRY GRAIN MARKETING. ■'1 • U (-4 %oo ^ W w 0 eS j=^nr) fc; lO 2 ® CO flgs o J- s (Dfl m O t« 3 « =3^ O 03 +> S o, "S 2+j pi « 1=1 g +^''? 2 "§§ “3 >;_. ^T) g ■TS 03 5 >>o fS ■s 2 O 03 O 03 _ +J 4J O Zl'*^ d 'd o Art® A A 4jt 3 b A e« O o 05 ^ kT rd H __r ^ •rr^ i • •* i-tiliSi Si-zspl o5-&| 2^ A g g4^ 05 CO^ 5v5 ^ C3 rr^ ..-< 05 0^ . .0^2 s®'^'"- O -4-S o rd d ^ 3 •F^ C5 ^ d *- S A ■SasIoIS ®^.‘S'“'9 o OT 05 CO 4J ^ 3 d 03 g a A 4J C3 A tJ 3 B »3 A" a® ^5 s o §,^-^S 9.3 >- ® g A A A m ao«“9 bJDa5 ^ Q.d 0 ^ *9 IT-) >, A A 'o ^ -ts ^ A D'g g-^ >. o 'Ig A •sg'iSAsas ^ 05 d o ^ “ o d ?1aA.-4^ c3 05 cO :.: ^ *-• w o 05 A1 o ■*^ s. ®<® O g w «k< -B w § d. 05 .2 :'d3 rH • ^ d 2 2®- A X tvT® ® > '»■> •^2.2* dX3*o5 o ® 3"*^ ^ d CO CX d w Ss ® d CO d «o o ^ 03^ ^ g ®- W rt'® B) -.a.A-lit? 2 ®|-- >- A Pi9.S^i I M •»:? ‘FN 5> o ^r) ,A o ® g® S fe"^ ® P-A A 2 -g w lA A ® ® 03 5a -”|-Pltl|?i| 2.2 £ ® ^ 05'd d'^ dd‘^+^S^*-'S®dd S.|.sS5 s Sails PlfS . „„„» gg.ogj.a ^ 05 c3 :®.A gS'* "A ®.S'A w ^ A M .^a^.A o A ® A ® 3 •wtM iC-A 5 ® ®rT-l “ti 05 d 05 .is 05 05 CO A bB 05 fM 80 +^ 0 .3 t.4 d -4-3 CO -4-3 > 05 Ut cd 0 05 05 0 05 05 - u-> '—' y.' i . O .^3^ ® bCiA A-® '-' A+^ t B A s-' , A M O O O •.A.A'PMSln I 20 . o •!3 P+^rA g <(N g A 4-3 ®S..^^3.am 5 - agg — .■-,®®g®g 2 o 3 r; d'^'^ 05 ^ 05 cod'di>£i'<*^t>2'T!iOo ® o.a:a ^'S.L'S ®a ® t-O'B^ o ®^'A “ A"® A ^A ®i ^,2 Vr, A f 55 -o S-A 'AS2i'AMoAg„.T-,A ■ ^o AA-®Sm“® o -4-3 agp.'OE o:2« liS-|.S3'Ss*S a ■ SgA.'A.2'5*"S3 £.0^5=1 a1|5-®6 a 5 -^3 sa ^ CO ■’' £ o+3>,A W.3 o "S M A 2 2 2 m'® :o SI slo ®j3 a'3+-> Aw o A +f Si 'S’-^S ^ ® S O ^ Hi 1-^ ^1® t ^•4-3 H d 5 ♦ ^ I®+3. Ago.g® C5 O tZ) d O crt fd A A OT*« ®.2 ® ® S o^ 5.2§“^ .H+» .,T+iA3 A-A S'® ®.S';g.2A 5^ O ® o'^ A A A^O ® A O^T ■SS-SSoAOiAa SillllsJ“ I. Sea'S 2 g r"® w 2 3^ ® '35'2®h®®®® *fH .4-3 ^ '^'' U)tX)a 5 »- H A, wti§ A A g ® ® A JT-ArA •A fcr-A Poo w . _ A ®5 SfA to S 42 to.^^ ^ O ®+3> u O © OP^5 03 e« ■&% CO i COUNTRY GRAIN MARKETING. i I ; . 1 ' 110 The farmer retains this storage ticket until such time as he decides to sell. He then presents his ticket to the elevator agent, who coin- putes the total storage charges, deducts them from the price he is paying for that grade of grain on that day, and draws a check or draft to the farmer for the net proceeds. Storage tickets are often lost. Duplicates can be had upon appli¬ cation to the issuing company and the filing of a bond. Very rarely does a farmer present his storage tickets and demand delivery of the grain called for by such tickets. In the event that he were to do so he would be required to pay such storage charges as might have accrued upon the grain in question. Moreover, in such cases the farmer would not and could not receive back the actual gram which he delivered to the elevator, since this grain would not ordi¬ narily have been kept separate but would have been binned with other grain of similar kind and grade owned either by the elevator com¬ pany, other farmers, or by both the elevator and farmers. In fact, the actual grain delivered by the farmer may have been sold and shipped a long time previously, the elevator company having purchased a future, which is sold when the farmer cashes in his storage tickets. (Ch. IX.) ^ ^ ^ . Special bin storage.— If the farmer, instead of storing his gram in the elevator or warehouse with the intention of ultimately selling it to the house, stores with the expectation or intention of later demanding delivery of the identical lot he has unloaded, the grain in question is treated as special bin storage grain. ^ Special bin storage transactions are comparatively rare m the central grain 'States. Such transactions usually occur either when a farmer intends to ship his own grain or when the farmer and elevator agent are unable to agree upon the grade. In the first case the grain is put in an empty bin, and a special bin-storage ticket is issued for each load. This ticket does not indicate grade or dockage, but simply the gross weight and bin number. The reason for omit¬ ting the grade and dockage is that the elevator is not responsible for the same and guarantees only that the identical grain received will be surrendered upon the presentation of the tickets. M hen the farmer has finished his hauling or decides to ship, the elevator loads the grain into a car, collecting fees for this elevation and loading serv¬ ice (Ch. VII) and also for the storage, if any. In the event of a dis¬ agreement between the farmer and the agent as to grade, the grain is elevated to an empty bin and its identity preserved until a sample has been sent to the terminal market and there graded. The grade thus established, the elevator agent issues a regular storage ticket to the farmer if he does not wish to sell immediately, or a check in case he does. If the regular storage ticket is issued, the grain is given the grade thus determined, and thereby becomes ordinary storage grain. The usual ticket issued for special bin grain by elevators m the Northwestern grain States is the regular storage ticket’with a notation thereon that the transaction is special bin storage. The use of a separate ticket for such special storage is not general, as the occasions are not frequent enough to warrant different forms for this type of transaction. IS The only instance reported to the Commission of a farmer demanding delivery of ordinary stored grain was in a case where the grain was required for seed. PURCHASE AND STORAGE OF GRAIN. Ill Storagf/for own account. —Elevators as well as farmers may hold back grain from the terminal market awaiting higher prices. The e.xtent of this practice varies. In the Northwest only 13 out of about 150 elevators visited by the Commission’s agents reported storing for higher prices. Several of these reported that they held only about 10 ])er cent, or “ very little,” or “ occasionally.” One reported holding from 15,000 to 20,000 bushels of wheat; and still another that grain was held if bought on a falling market until a profit could be realized. Line elevators in the Northwest frequently fill the house with good grades of grain (usually wheat) for the purpose of carrying^it through the winter. In Iowa and Illinois grain apparently is much more often held by elevators for higher prices than in the Northwest. In Illinois about one-half of the elevators visited by the Department of Agriculture agents reported affirmatively on this matter and in Iowa about one- third. The following tabular statement presents the number of ele¬ vators in Iowa - and Illinois reporting to the department’s agents affirmatively and negatively on this question for each crop year, 1912-13 to 1916-17. Elevators reporting on holding grain for higher prices. Crop year. Iowa. Illinois. Yes. No. Yes. No. 1912 13. 9 21 22 19 1913-14. 12 21 21 20 1914-15. 12 21 24 21 1915-16. 12 22 24 23 1916-17. 11 23 20 24 56 108 111 107 There are indications in the data gathered by the Commission that the attitude of the country elevator on holding back its own grain is frequently influenced by the hedging policy of the ele¬ vator, and the differences in this respect between the Northwest on the one hand and Illinois and Iowa on the other confirms this view. Eeference to the chapter on hedging operations (Ch. IX) shows that in the Northwest hedging is much more prevalent than in either Iowa or Illinois. If an elevator has hedged its grain, there is little reason to hold it except for the purpose of realizing either a carrying charge or a' possible premium of the cash grain over the future. By hedging, the elevator has presumably pro¬ tected itself against loss, but it has also presumably limited its profit, except so far as the cash grain goes to a premium later in the crop year. Unless the cash grain should go to a premium, any advance will presumably be offset by a corresponding advance in the future. For this reason, therefore, there is projbably less inducement for the hedging house to hold grain than for the non¬ hedging house. The nonhedging house, however, having no future out¬ standing, will obtain the full ben«fit of any price advance, although it must also bear the loss resulting from any decline. In the case of the nonhedging house, therefore, there is a speculative inducement ■ 112 COUNTRY GRAIN MARKETING. for holding grain, which is largely absent in the case of hedging houses. Pacific coast. —As a rule the Pacific coast warehouse is much more a warehousing facility for the farmers than is the elevator in the moie easterly sections, which is, on the whole, chiefly a merchandising organization. Storage of grain on the Pacific coast is quite distinct from that of other sections. Low, flat warehouses with large capacities predominate, and as the grain is handled in sacks it is a simple matter to store the individual grain of a farmer in distinct piles, and this is frequently done. Some companies in issuing a storage ticket for grain do not specify the grade of gram, but keep it piled separately. Other companies ordinarily issue a storage ticket which specifies the grade, but do not keep the spemfic grain separate except when requested to do so by the farmers, lii®®® methods, therefore, roughly correspond with special bin and ordinary storage in the case of bulk handling. Section 5. Sale of grain by contracts. . Many of the contracts of elevators with farmers for the deliveiy of "rain are reported as made while the grain is being harvested. This is to be interpreted broadly, however. It may mean while the grain is being cut, while it is in the stacks, or again while being threshed, or even after threshing. In other cases contracts are made prior to the harvest, before the grain has been cut. Generally the devators in the Northwest that contract for gram confine their contracts to grain being threshed or already threshed and stored m the farmers’ granaries. , n -o Such contracts for grain are both oral and written. Lecause ot the reluctance of some farmers to sign written contracts, some com¬ panies make oral contracts only. Other companies will make written contracts. The oral contracts are frequently loosely made and indefinite. The written contracts are more explicit, more formal in character, and more easily enforced. In making a contract the country agent may agree to purchase the farmer s gram either at a price agreed upon at time of contracting or based upon the price prevailing at time of delivery. i i • <1 Various samples of written contracts were obtained during the inouirv, one of which is printed herewith as Appendix 3. -r-rri •! On the whole, these written contracts are very much alike. While there is some variation in the form and wording thereof, they are generally short, simple, and explicit, calling, for the delivery a specified time of a certain number of bushels of gram m a stated condition. For example, in the case of corn the contracts usually specify whether the corn is to be shelled or on the ear. Contracts made by cooperative and independent companies are generally m duplicate, one copy going to the farmer and one being retained by the elevator; those of line companies are usually made m triplicate, the third copy going to the head office of the line company. , , . Intervieavs on grain contracting.— The character and extent of grain contracting was carefully inquired into by the agents of the Commission and the Department of Agriculture. On the basis o this information the following sta^ments with regard to this prac¬ tice may be made. PURCHASE AND STORAGE OF GRAIN. 113 In the Northwest, with some differences in different sections, prac¬ tically all classes of elevators are disposed to discourage the making of contracts with farmers. The Minneapolis line companies inter¬ viewed stated that they preferred not to make these contracts, while of the approximately *150 representatives of mill, cooperative, and independent elevators interviewed in the country 69 per cent stated that they did not make contracts, and 18 per cent that they con¬ tracted but very little and only with farmers whom they were certain would deliver. About 4 per cent of these representatives informed the Commission’s agents that they had contracted in the past, but had abandoned the practice because of failure of farmers to deliver, and another 4 per cent reported that, while they contracted, they did so onlv in special cases, as, for example, when the farmers were in need o*^f money owing to inability to deliver grain on account of bad ronds In the grain States tributary to Chicago contracting appears to be much more prevalent than in the Northwest. Thus in Iowa a^d Illinois 73 out of 95 elevators reported that they made contracts for t>'rain with farmers; 21 out of 39 in Iowa; and 52 out of 56 in Illinois, fn south central Illinois a few elevators reported contracting acreage. The few line companies operating out of Chicago, Indianapolis, and Peoria, in contrast to those in the Northwest, do considerable contracting. Although one milling line reported only a few acreage contracts for grain, and only with farmers whom they thought would make deliveries, an official of one of the other line concerns stated that his company made contracts just prior to theffiarvest for about 5 per cent of the grain received at its elevators and for froni 25 to 50 per cent between the time of cutting and the time of threshing the gram. These contracts were made by the agents of the company and the farmer at a stipulated price and called for delivery on or before a specified future time. . . • xi. A 19-house line operating out of Peoria is also in the habit ot making contracts with farmers for the delivery of gram, these con¬ tracts usually running for 10, 30, 60, or 90 days. An Indianapolis mill line likewise reported a good many contracts with farmers tor the sale of grain. , . , j.- ^ Contracting for grain at a fixed price has proven an unsatisfactory practice with many elevators. The principal objection thereto is that if prices are in advance of those stipulated in the contract when the time of delivery arrives the farmer becomes dissatisfied and often refuses to fulfill the contract.^ If the elevator then attempts to enforce it the usual result is that the farmer transfers his business to another elevator. His dissatisfaction easily spreads to other farmers, esiiecially if the elevator in question is an independent or one ot a lino company and may result in a serious loss of business. Pacific coast.— Contracting with farmers for their gram by both warehouses and terminal market interests is a common practice on the Pacific coast. In this territory the farmers are financed to a considerable extent by terminal market buyers, mills, and other vrain dealers. When such advances are made it is quite customary 14 agents fi 5 wsirs s sKf not to be relied upon. 90G4°—20-8 114 COUNTRY GRAIN MARKETING. to enter into contracts either for the farmer’s whole crop or else to an amount sufficient to cover the advances. The contracts are gen- ' erally made during the harvest season and usually to enable the < farmer to pay the expenses of harvesting. They usuallv specify the i price to be paid the farmer for his grain. " ' In this territory, apparently, contracts are customarily complied with, and no complaint from this section that the farmers refuse to fulfill such agreements was reported. Section 6. Distribution of total purchases by kind of grain. Relative marketing importance or different grains. —Appendix Table 6 presents the purchases of about two billion bushels of o-rain by country elevators in the 14 principal grain-producing States^dur- ing the crop years 1912-13 to 1916-17, classified according to the kind of gram (Appendix 2, inquiry 14). This table may be consulted for the details of country-elevator purchases. The following summary staternent presents the proportion of different kinds of grain purchased in the 14 principal grain-produc¬ ing States in comparison with the production of those grains in the same States: Grain. Proportion of total elevator purchases in 14 grain- producing States, crop rears 1913-1917. Proportion of total production of 5 princi¬ pal grains in 14 grain- producing States for 5 calendar years 1913-1917.1 Wheat. oO. d4 15.75 oU. o(J 29.04 Uo 50.60 D, oU 1.70 3.64 .97 each the Department of Agriculture The foregoing figures may be said to be fairly indicative of the relative marketing importance through elevators of the different i kinds of grains. The great bulk of the grain crop which is marketed .i undoubtedly nmves through the local elevators, and the sample ob¬ tained by the Commission is so large that it would seem not unrea- ! sonable to assume that the foregoing results reflect the actual mar- ii keting conditions with very substantial accuracy. About 37 per cent i or the total grain marketed through country elevators is wheat * about 31 per cent oats; and barely 24 per cent corn. The proportion or total marketings represented by barley and rye are very small amounting to something less than 7 per cent of the total in the case ' ' of barley and less than 2 per cent in the case of rye. Although corn represents about 50 per cent of the total crop pro- ' duction of the five principal grains in the 14 States for which pur- ! chases were tabulated, it amounts to less than 25 per cent of the total ' of the five grains marketed. In the'case of wheat, rye, and barley the reverse of the foregoing situation with regard to corn obtains. Although Avheat comprises PURCHASE AND STORAGE OF GRATN. 115 only 15.75 per cent of the total production, barley only 3.64 per cent, and rye 0.97 per cent, these three grains comprise 36.64, 6.80, and 1.70 per cent of the total grain marketed through country elevators. Oats alone comprises about the same proportion of the total grain marketed as of total crop production. From a marketing standpoint, therefore, these figures would indicate that the ratio of the marketings of wheat, barley, and rye to the total crop is about twice that of oats and three times that of corn. , i? j- Both corn and oats, especially corn, are extensively used tor feeding purposes, and the figures are therefore also indicative of the rela¬ tively large amounts of both of these grains that remain on the farm for such use. The relatively smaller proportion of corn marketed, as compared with oats, is probably due to the exceedingly extensive local use of corn for feed in connection with the cattle and hog raising industry. Distribution of purchases of different grains by bTATES.— ine foreo^ing variations in total crops and total grains marketed are even*"more pronounced as betAveen the A^arious States, as appears in Table 25. Table 2o. _ Yanatlons in crop production and country clevntor marketings of the 5 principal grains in the I '/ principal grain-producing States in the crop years 1912-13 to 1916-17. 1 state. AVheat. Com. Oats. Rye. Barley. Per cent of total pur¬ chases 5 grains. Per cent of total pro¬ duction 5 grains. Per cent of total pur¬ chases 5 grains. Per cent of total pro¬ duction 5 grains. Per cent of total pur¬ chases 5 grains. Per cent of total pro¬ duction 5 grains. Per cent of total pur¬ chases 5 grains. Per cent of total pro¬ duction 5 grains. Per cent of total pur¬ chases 5 grains. Per cent of total pro¬ duction 5 grains. North Dakota. Minnesota. Illinois. South Dakota. Iowa. Kansas. Nebraska. Montana. Indiana. Ohio. Miehiiran. Missouri. AATsconsin. Oklahoma. 69.91 35.97 7.89 36.78 5.46 85.56 43.01 90. 45 27. 81 29.10 48.60 76. 71 12.91 74.92 43.21 18.48 6.93 20.08 2.35 39.92 17.18 49.78 13.16 11. 63 12. 42 13. 40 2.39 28.37 0.04 10.95 41.83 13.63 41.24 11.89 41.03 .05 34.61 28.83 9.42 17.86 9.49 20.80 5.66 29.75 61.62 40.99 62.34 38.90 57.09 2.77 65.91 59.18 40.56 71.82 32.73 50.33 10.36 30.24 49.53 35. 62 49.32 1.95 14. 81 8. 41 36.56 39.77 34.07 5.18 36.19 4.20 33.18 37.82 30.97 27.33 33.42 18. 64 23.91 42.90 20.00 25.13 40.74 14. 61 49.37 21.11 3.09 4.62 .38 1.12 .24 .10 .76 .21 1.01 .78 6. 60 .26 11.38 .07 2.25 2.04 .14 1.32 .18 .33 .83 .37 .81 .64 4.26 .12 4.16 .07 16.60 18.23 .37 12. 84 3.74 .50 .40 .88 1.52 1.31 30.03 .01 15.70 It 91 .34 10.28 ].n 2.21 .99 4.18 .12 .42 2.02 .05 11.35 .12 14 States. 36. 64 15.75 24.06 50.60 30.80 29.04 1.70 .97 6.80 3.64 It will be noted that in every one of the 14 States in the fore¬ going table Avheat comprises a larger proportion of the total gram marketed than it does of the total crop production. In the case of corn, on the other hand, exactly the reA^erse is true. Oats constitutes a higher proportion of total grain marketed than of production in Illinois, South Dakota, loAva, Indiana, and Ohio; rye in North Da¬ kota, Minnesota, Illinois, Ioaati, Indiana, Ohio, Michigan, Missouri, and Wisconsin; and barley in North Dakota, Minnesota, Illinois, South Dakota, Iowa, Ohio, and Wisconsin. The other States show a higher proportion of total crop production than of total gram marketed for each of these three grains. 116 COUNTRY GRAIN MARKETING. Section 7. Purchases of grain by different types of elevators. All types.— Appendix Table 7 presents by type of house and by years the distribution of purchases of different kinds of grain for tlie period 1912-13 to 1916-17. (Appendix 2, inquiry 14.) The follow¬ ing table shows by type of house the proportion of total elevator purchases during this period represented by wheat, corn, oats, rye, and barley: Table 26: —Proportions of different kinds of grain purchased by different types of elevators during the five crop years 1912-1917. Grain. All ele¬ vators. All line ele¬ vators. All indi¬ vidual ele¬ vators. Indi¬ vidual mill ele¬ vators. Mill line ele¬ vators. — i/ pendent ele¬ vators. Com¬ mercial line ele¬ vators. Indi¬ vidual cooper¬ ative ele¬ vators. Cooper¬ ative line ele¬ vators. Indi¬ vidual malt¬ ster ele¬ vators. Line malt¬ ster ele¬ vators. Wheat. 36.64 43.29 31.97 72.95 t 72.75 23.59 36.65 32.42 47.08 0.17 4.09 Oats. 30.80 27.24 33.31 11.22 13.34 39.29 30.94 31.60 20.61 5.02 Corn. 24.06 20.13 26.82 11.77 7.85 30.63 22. 87 26.02 27.56 Barley. 6.80 7.49 6.31 1.79 3.70 4.98 7.82 8.45 4.01 99.63 81.42 Rye. 1.70 1.86 1.A9 2 .27 ?.37 1.52 k71 1.'51 0.74 0.20 9.47 Mill and maltster elevator purchases. —As between the various types of elevators, wheat constitutes nearly three-fourths of the pur¬ chases of both line and individual mill elevators and thus comprises a far greater proportion of the total purchases of these elevators than it does of those of any other type. The high proportion of wheat purchases and low proportions of all other grain purchases made by mill elevators follows from the fact alreadj?^ frequently alluded to in this volume, that the mill elevator is in business primarily to furnish a supply of grain to the mill, and as a rule is either not en¬ gaged at all or only incidentally in merchandising either wheat or i other grains. Similarly, the extremely high percentages of barley bought by maltster elevators (81.42 per cent of the purchases of the line houses of this type and 99.63 per cent of the purchases of the in¬ dividual houses) and the low proportions of other grain purchases are explainable by the fact that the maltster elevator is run as an adjunct to the malting establishment' to furnish it with an adequate supply of barley in the same way as the mill elevator is operated as an adjunct of the mill to furnish a supply of wheat. Commercial line, cooperative, and independent purchases. —The purchases of each of the five grains made by commercial lines are roughly in about the same proportion as the purchases of the same grains by individual cooperatives. Both these types buy a consider¬ ably higher proportion of wheat and barley than does the independ¬ ent type and a considerably less proportion of both corn and oats. The explanation of this situation lies in the geographical distribu¬ tion of these types of elevators. An examination of Appendix Table 6 reveals the fact that about one-half of the reported pur¬ chases of both corn and oats are in Illinois and Iowa, both of which States have a relatively high proportion of independent andv • relatively low proportion of both commercial line and cooperative elevators. The higher proportion of barley purchases reported by the commercial lines and the individual cooperatives as compared ' with the independent is due to a similar set of facts. As shown in PITRCHASE AND STORAGE'^F GRAIN. 1/aa- 117 the appendix table above referred to nearly 80 per cent of the re- })orted purchases of barley during the period under discussion were in Minnesota and the Dakotas, all three of which are important com¬ mercial line and cooperative elevator States, but low in the propor¬ tion of independent houses operating therein. Section 8. Average bushels handled (purchased). By types. —F rom the reported total purchases of grain by country elevators (iVppendix 2, inquiry 14) it is possible to derive the average purchases made by elevators of different types. As the purchases re¬ ported are for five years, the carry-over or inventory at the beginning and end of the period would not presumably affect the averages in any very serious degree, and the average purchase figures of different types may therefore be regarded as substantially identical with average bushels handled.^® Table 27 presents the annual average purchases of different types of country elevators during the five crop years 1912-13 to 1916-17, obtained W dividing the total purchases reported for the five years by the number of elevator years. (Appendix Table 7.) Table 27. — Average number of bushels of specified grains purchased annually by specified types of cmintry elevators in U States during crop years 1912-13 to 1916-17. All grains. Wheat. Com. Oats. Rye. Barley. Commercial line. Cooperative line. Millline. MaltEfftr linr». . 77,250 136,825 78,613 61,457 28,315 64,413 57,191 2,514 17,670 37,703 6,172 23,905 28,203 10,484 3,087 1,322 1,017 1,861 5,820 6,038 5,489 2,905 50,036 Average line. Cooperative individual. Independent individual. Mill individual. Maltster individual. 78,423 33,847 15,788 21,362 1,456 5,870 152,792 102,934 113,100 158,699 49,543 24,279 82,502 278 39,754 31,526 13,311 48,279 40,444 12,692' 2,311 1,561 2,571 312 12,905 5,124 2,024 158,109 Average individual.- . Average, line and individual. 119,913 38,332 32,166 39,944 1,902 7,569 98.405 36,059 23,676 30,311 1,671 6,688 An examination of the foregoing table reveals some important and interesting facts. The average elevator in the 14 principal grain-producing States, according to these figures, buys close to 100,000 bushels of grain annually; 36,059 bushels of which is wheat, 30,311 oats, 23,676 corn, 6,688 barley, and 1,671 rye. Explanation of type variations. —The average individual elevator buys or handles 119,913 bushels annually, or about 50 per cent more than the average line purchases (78,423 bushels). Excepting the cooperative lines, the line types generally report a very much lower volume of purchases than the individual types. The individual maltster elevator reports the largest volume of purchases, but on account of the small number of these elevators reporting, some doubt must be expressed as to the representative character of this average. Aside from these individual maltster elevators, the individual co- “Tt should be noted that these average fifrures vary considerably from those used in determining costs and profits (Vol. IV) on account of the carry-over and^also the difference in the size of the two samples. 118 COUNTRY GRAIN MARKETING. operative buys annually on the average a far greater volume of grain than does any other type; nearly twice the volume of either the commercial or mill line, more than twice that of the maltster line, and | about one-half and one-third more than the independent and the j individual mill respectively. The generally smaller volume handled by the line type except i; the cooperative line, as compared with the individual type, is ex- j plainable chiefly in the terms of competitive conditions, and may probably be assigned largely to the more or less hostile attitude of the producer toward the line house (Ch. XI, sec. 11), and possibly to his belief that he will obtain a “ fairer deal ” from the individual ele¬ vator than from the line house. The individual elevator is locally managed and operated as a rule, and depends solely upon the jj locality for its patronage. Either its owmers or operators, or both, |j are members of the community, as line agents seldom are, and it is j not unreasonable to assume that with his information as to the j, ownership, operation, and policy of the average individual house, | the producer is more willing to deal with it than with the line agent, 1 of whom he frequently knows little and the policy of whose em- j , ployer he is inclined to distrust. The large volume handled by the individual cooperative and also the cooperative line is probably in ii| part contributed to by this opposition of some farmers to line com-.il panies, but is also attributable to patronage dividends and the attitude i of the producer toward cooperative elevators and cooperation in -i general. (Ch. XI, sec. 11.) ^ g The variations in the foregoing table in the proportions of different^ kinds of grain purchased by different types of houses are of course the'l same as the type variations in the proportions of total purchases of different grains and have been explained in the preceding section. f By States.— Table 28 shows the variations in annual average pur- • ji chases of different kinds of grain in the 14 principal grain-producing jli States. i: Table 28 .—Average numher of hiishels of specified grains purchased annually hy country elevators in specified States during the crop years 1912-13 to 1916-17. State. All grains. A\'Iieat. Corn. Oats. Rye. Barley. Illinois. 164,791 13,009 68,934 81,623 620 605 Iowa.. - -. 131,317 7,167 54,158 64,760 315 4,917 Indiana. 117,582 32,694 40,700 42,993 1,191 4 South Dakota. 104,424 . 38,407 14,236 37,203 1,173 13,405 Kansas. 100,287 85,8C9 11,919 1,956 105 498 Nebraska. 93,397 40,167 38,316 13,828 709 377 Ohio. 92,835 27,014 26,763 36,918 725 1,415 Minnesota.. 79,282 28,514 8,680 23,972 3,666 14,450 Oklahoma. 73,253 54,883 15,234 3,074 52 10 Montana. 72,560 65,629 39 6,099 155 638 Wisconsin.... 70,792 9,139 6,718 25,617 8,059 21,259 North Dakota. 70,294 49,145 25 7,281 2,173 11,670 Missouri... 66,855 51,284 11,939 3,461 171 Michigan. 56,816 27.; 614 5 ; 353 19,356 3,749 744 14 States. 98,405 36,059 23,676 30,311 1,671 6,688 Section 9. Seasonal variations in country elevator purchases. The following table presents in cumulative percentages the pro¬ portion of the crop of the five principal grains marketed in each , PURCHASE AND STORAGE OF GRAIN. 119 month for tlie two crop years 1918-14 and 1916-17. (Appendix 2, inquiry 14.) The number of elevators reporting and the total vol¬ ume of their purchases of each kind of grain in each month will be found in Appendix Table 8, together with the ratio of the purchases in each month to the total purchases. Table 29. —Monthly distnhntion of country elevator purchases of five principal yraiih^ in the Uf principal (jrain-produciny States^ expressed in cumulative percentages, crop years 1913-14 1916-17. Month. All grains. Wheat. Corn. Oats. Rye. Barley. 1913-14. July, 1913. 8.32 13.31 4.50 6.52 5.58 2.60 August, 1913. 20.27 25.34 11.33 24.65 20.94 11.43 September, 1913. 33.34 39.85 19.42 37.96 41.13 33.21 October, 1913. 44.60 54.10 24.99 48.28 56.47 52.30 November, 1913. 53.86 65.09 33.69 54.71 65.88 63.97 December, 1913. 64.57 73.21 51.01 62.77 75.19 73.05 January, 1914. 72.59 80.18 62.48 69.09 81.13. 80.07 February, 1914. 79.98 85.70 73.43 76.05 86.68 86.00 March, 1914. 86.11 90.19 81.48 83.04 91.36 91.07 AprU, 1914. 89.25 92.96 85.12 86.60 93.64 92.97 May, 1914. 94.70 96.56 93.26 92.91 96.26 95.91 June, 1914. 100.00 100.00 100.00 100.00 100.00 100.00 1916-17. July,1916. 8.59 13.56 5.73 7.25 3.13 4.04 August, 1916. 24.21 30.19 12.53 30.14 18.01 17.10 September, 1916. 36.54 44.68 19.05 43.25 42.33 39.02 October, 1916... 47.70 59.16 23.31 55.58 62.25 57.16 November, 1916. 58.64 69.55 36.54 64.04 77.07 72.91 December, 1916. 66.20 74.94 49.39 69.27 84.07 79.43 January, 1917. 76.07 82.25 65.81 76.69 88.63 86.10 February, 1917. 81.82 85.56 75.28 82.01 91.98 89.95 March, 1917. 87.42 90.12 82.60 87.66 95.10 93.14 April, 1917. 91.38 • 93.86 87.30 91.62 96.85 95.17 May, 1917. 96.02 97.71 93.80 95.87 98.50 97.86 Jime, 1917. 100.00 100.00 100.00 100.00 100.00 ' 100.00 1 For States included, see Ch. II, sec. 5. From this table some fairly definite conclusions with reference to the time distribution of country marketings can be drawn. During the first six months of the crop year about three-fourths of the wheat crop in the 14 principal grain-producing States is marketed and a somewhat higher proportion of both the rye and barley crops. Due perhaps in a considerable degree to the wide distribution of the oats crop,^® the proportion of this grain marketed during the first six months of the crop year is appreciably below that of wheat, barley, or rye, only 62.77 per cent of this grain in 1913-14 and 69.27 per cent in 1916-17 being marketed in the six months from July to December. Corn is marketed the latest of any of the five principal grain crops. Less than one-fourth of the corn crop in the 14 States tabulated is marketed during the first four months of the crop year as compared with about one-half or more of the crop of each of the other grains. Moreover, while the heavy movement of corn begins usually in Novem¬ ber, only about 50 per cent of the crop is marketed during the first six months of the crop year as compared with about 65 per cent of the oats and much higher proportions of wheat, rye, and barley. 18 The Department of Agriculture is authority for the statement that oats is the most widely distributed agricultural plant of the country excepting only the potato.—Pinch and Baker, Geography of World’s Agriculture, p. 36. 120 COUNTRY GRAIN MARKETING. 1 The difference in the period of marketing of the various grains is also indicated by the months in which the largest proportion of each grain is marketed. (Appendix Table 8.) Diagram G shows graphi¬ cally the percentages of each and of all five of the principal kinds of grain combined marketed in each month through country elevators for each of the two crop years under consideration. The month of heaviest marketing of all grains combined through country elevators in the 14 principal grain-producing States is either August or Sep¬ tember; of wheat, the same; of barley and rye, September; and of oats, August. The largest proportion of corn marketed in any one month, on the other hand, is in either December or January. Section 10. Rate of capacity turnover. Eesults or STUDY.— Appendix Table 9 presents in detail the rates at which the elevator capacity was turned over—or the ratio of capacity to purchases during the year—for the elevators of all types reporting both their capacity and purchases in the States of Okla¬ homa, Illinois, Ohio, Missouri, Wisconsin, Michigan, Montana, and North Dakota during the crop years 191^13 to 1916-17. The fig¬ ures were obtained by taking a simple average of the average rates of capacity turnover for the individual elevators as found by divid¬ ing the average yearly purchases of each elevator by its capacit}^ (Appendix 2, inquiries 11 and 14.) The average rate of capacity turnover for all the 2,229 elevators reporting is 3.94. The lowest rate is shown by those elevators han¬ dling combinations of the four principal grains other than corn, the next higher by elevators handling one of the five grains exclu¬ sively, and the highest by those elevators handling corn in combina¬ tion with one or more of the other four grains. These rates of turn¬ over by grains handled exclusively and in various combinations are as follows: 1 I Table 30. —Ratio of elevator capacity to average purchases (capacity turnover) in eight States.^ Handling— Capacity turnover. Oats exclusively... Wheat exclusively Com exclusively... Rye exclusively... Barley exclusively, 4.30 4.0(7 3.30 2.60 2.50 Average 3.92 2 grains, excluding com. 3 grains, excluding com 4 grains, excluding com 3.46 2.74 2.64 Average 2 .* Com and 1 other grain. Com and 4 other grains Com and 2 other grains. Corn and 3 other grains 5.54 5.20 5.18 Average 5.34 Average, all groups 3.94 ^ Oklahoma, Illinois, Ohio, Missouri, Wisconsin, Michigan, Montana, and North Dakota These States were selected at random. 99G4°- Pei'Csnf PerCetif Diagram G. Proportions of wheat, corn, oats, rye, and barley marketed through country elevators in each month during the crop years 1913-14 and 1916-17. 99G4°—20. (To face page 120.) PURCHASE AND STORAGE OF GRAIN. 121 Explanation of variations. —The explanation of the foregoing differences in the average rate of turnover of capacity according to the number and combination of grains handled is found in a variety of considerations. The first one is suggested by the grains and their combinations within each group, together with the harvesting period of each grain and the necessity the elevator is under of having a suf¬ ficient number of bins to permit the separation of the different grains. The bulk of the wheat, oats, barley, and rye crops is marketed at about the same time. (Sec. 9.) On the other hand, the bulk of the corn crop is harvested and marketed at a considerably later date than that of any one of the other four grains. During July, August, September, and October the elevators have absorbed more than half of the wheat, oats, rye, and barley marketed through country eleva¬ tors. During the latter part of November the marketing of the new corn crop begins, and when this starts, the capacity of the elevator in the corn States will in many cases be devoted very largely to the handling of this grain. Consequently, it is to be expected that the ele¬ vator which handles corn and one or more of the other grains to an appreciable degree can have a higher average rate of utilization than an elevator which handles no corn whatsoever. Other things being equal, if no corn is handled, the elevator would probably be in opera¬ tion a smaller portion of the year than if it handles corn in combina¬ tion with other grains. In the latter event it would logically be com¬ pelled to remain open for a considerably greater number of months than in the former, merely in order to receive the grain which is offered. The capacity, therefore, tends to be utilized a greater num¬ ber of times when corn is" handled, because the house will be able to handle a greater volume of'grain owing to a longer period during which grain will be offered in large quantities. This explanation of the high rate of utilization of elevators handling corn together with other grains seems to be substantiated by the figures of reported pur¬ chases for the various States. These figures appear to indicate that the elevators in the large corn States tend to have a somewhat more even distribution of purchases throughout the year than those in States where the corn crop is smaller and where little of it is handled through the elevators. . tit • i More specifically, this may be shown by contrasting Illinois and Ohio, States reporting a relatively large proportion of elevators han¬ dling corn in combination, with Montana and North Dakota, which States have scarcely any elevators handling com, but have large proportions of elevators handling wheat. 122 COUNTRY GRAIN MARKETING. Table 31 .—Monthly distribution of total grain purchases in specified States in the crop years 1913-U and 1916-17. Illinois. Ohio. Montana. North Dakota. Month and year. Per cent of total pur¬ chases. Cumu¬ lative per eent. Per cent of total pur¬ chases. Cumu¬ lative per cent. Per cent of total pur¬ chases. Cumu¬ lative per cent. Per eent of total pur¬ chases. Cumu¬ lative percent. 1913. July. 11.19 11.19 10.53 10.53 1.30 1.30 2,61 2.61 August. 14.62 25.81 16.69 27.22 10.62 11.92 6.97 9.58 September. 11.01 36.82 6.86 34.08 26.46 38.38 26.44 36.02 October. 6.67 43.49 5.99 40.07 21.12 59.50 22.78 58.80 November. 5.56 49.05 7.23 47.30 17.45 76.95 16.89 75.69 December. 7.56 56.61 8.51 55.81 10.69 87.64 8.03 83.72 * 1914. January. 7.70 64.31 8.38 64.19 3.41 91.05 3.60 87.32 February. 9.36 73.67 8.58 72.77 1.72 92.77 2.94 90.26 March. 5.80 79.47 8.91 81.68 1.87 94.64 2.78 93.04 April. 3.94 83.41 4.86 86.54 1.25 95.89 1.57 94.61 May. 8.57 91.98 6.63 93.17 1.69 97.58 2.05 96.66 June. 8.02 100.00 6.84 100.00 2.42 100.00 3.34 100.00 1316. July. 11.05 11.05 9.67 9.67 3.08 3.08 8.69 8.69 August. 19.19 30.24 18.61 28.28 5.62 8.70 9.98 18.67 September. 9.26 39.50 8.15 36.43 18.47 27.17 21.14 39.81 October. 6.35 45.85 8.62 45.05 18.84 46.01 16.43 56.24 November. 8.53 54.38 8.87 53.92 17.02 63.03 13.67 69.91 December. 6.80 61.18 6.55 60.47 8.96 71.99 5.32 75.23 1917. January. 11.00 72.18 12.38 72.85 8.41 80.40 4.66 79.89 February. 6.73 78.91 6.94 79.79 4.52 84.92 3.32 83.21 March. 5.92 84.83 7.44 87.23 5.73 90.65 4.90 88.11 April. 4.78 89.60 5.05 92.28 3.40 94.05 3.93 92.04 May. 5.64 95.24 4.55 96.83 2.52 96.57 4.45 96.49 June. 4.76 100.00 3.16 100.00 3.42 100.00 3.50 100.00 Elevators handling 1 grain. Elevators handling 2 or more grains, excluding com!!!! Elevators handling corn in combination.. Total reporting. Illinois. Ohio. Montana. North Dakota. 24 23 60 5 6 22 117 740 486 171 1 21 516 216 178 766 An examination of this table reveals the fact that in Ohio and Illinois from 55 to 60 per cent of the grain is marketed during the first six months of the crop year and from 40 to 45 per cent during the last six months. In Montana and North Dakota, on the other hand, from about 70 to 85 per cent of the crop is marketed during the first six months, and only about 15 to 30 per cent during the last six months. Ohio and Illinois also show a considerably more even dis¬ tribution of purchases from month to month throughout the year than do Montana and North Dakota. As between those elevators handling corn in combination on the one hand and those handling one grain exclusively, or the various grains other than corn in combination, on the other, therefore the sharp contrast in the number of times the capacity is utilized may be assigned chiefly to the foregoing facts. The higher average number of times capacity is utilized in the case of elevators handling one grain exclusively as compared with those handling two or more !>, i V‘V( 123 f PURCHASE AND STORAGE OF GRAIN. 1 , ^ I ip' .?■ ^*v ip other than corn is presumably due to the lack of necessity of effecting a separation of as many different kinds and grades of grain in tlie case of the former class with the result that tlie bins are, on the average, kept better filled. The lowest rate of utilization, as already stated, is found in the case of those elevators which handle two, or three, or four grains other than corn. These grains, that is, wheat, oats, rye, and barley must be handled at practically the same time. (Sec. 9.) On account of this fact larger facilities must be provided than if only one grain is handled or if the particular combination included corn (which moves largely after the bulk of the other grains). All the grains must be separated both by kind and by certain grades. The larger the number of kinds and grades handled and the more the bulk of the business is concentrated within a brief period of time, the larger will be the capacity and the number of bins theoretically required to handle the same. For example, if an elevator handles four kinds of grain the bulk of which moves at about the same time, it must provide bins for the dif¬ ferent kinds of grain and certain grades of each. If the four grains in¬ clude corn, which moves later than any of the others, it is either not necessary for the elevator to have as many bins or as large a capacity to handle a given volume of grain or else a given number of bins and capacity will enable the elevator to handle a larger volume. As bear¬ ing on this point, it is interesting to note that one elevator in the Northwest, for example, reported that 20 per cent of its capacity was practically dead space owing to the necessity of keeping grains and grades separated. Moreover, in the case of elevators handling two, three, and four grains, excluding corn, the rate of capacity turnover varies inversely as the number of grains handled, the highest, 3.46, being shown by elevators handling two grains. (Table 30.) This rate is considerably lower than the rate of elevators handling wheat exclusively (4.07). . , . i . The rates for elevators handling one gram exclusively except wheat are based upon so few elevators (cf. Appendix Table 9) that the results are probably not reliable, and comparisons with houses liandling two or more grains, excluding corn, are of no value. State variations in turnover. —The theory of the dependency ot capacity turnover figures upon the kinds and combinations of grain handled, as just set out, is also confirmed in a considerable meapre by the figures of the rate of capacity turnover for each of the eight States tabulated in comparison with the number of elevators in those States handling different combinations of grains. (Appendix fa¬ ble 9.) A summary of these figures is presented in the following table; 'C. 124 COUNTRY GRAIN MARKETING. Table 32. —Capacity turnover in specified States in comparison with the propor¬ tions of elevators handling specified grains and combinations of grains. Rate of Percentage of elevators reporting. state. capacity turnover (capacity into purchases). Handling corn and other grains. Handling one grain exclusively. Handling combina¬ tions of grain other than corn. Oklahoma. 5.72 56.31 36.89 6.80 IlUnois. 5.67 94.19 4.65 1.16 Ohio. 4.87 79.17 10. 65 27.48 10.19 8.40 Missouri. 4.35 64.12 Wisconsin.'... 3. 67 27.45 35.54 11.11 61.44 59.04 65.73 96.61 Michigan. 3.60 5.42 Montana. 2.85 .56 33. 71 North Dakota. 2.57 2. 74 .65 2,229 elevators. 3.94 41.36 9.51 49.13 From this table it is apparent that among the eight States tabu¬ lated the rate of capacity turnover tends to vary directly with the proportion of elevators handling combinations of corn with other grains and inversely with the proportion handling combinations of the other grains than corn. Capacity turnover by capacity of house.— Appendix Table 10 presents for each of the seven States tabulated the rate at which the capacity of houses of different sizes is turned. The following table presents a summary of the results for all the States combined; Table 33. —Rate of capacity turnover {capacity into purchases) of houses of specified capacities in seven States.^ Capacity (bushels). Less than 5,000. 5,000 to 9,999... 10,000 to 14,999. 15,000 to 19,999. 20,000 to 24,999. 25,000 to 29,999. 30,000 to 34,999. 35,000 tc 39,999. 40,000 to 44,999. 45,000 to 49,999. 50,000 to 54,999. 55,000 to 59,999. 60,000 and over. Total. Elevators reporting. Rate of capacity turnover. 56 6.60 202 5.77 274 5.11 212 4.71 308 3.44 265 3.19 277 2.98 149 2.87 123 3.32 38 3.11 77 2.84 13 2.35 115 2.63 2,109 3.87 ' Oklahoma, Illinois, Ohio, Wisconsin, Michigan, Montana, and North Dakota. * Capacity into average purchases. This table shows that the average rate of capacity turnover tends to decrease as the capacity of the elevator increases. In other words, the elevators of small capacity have the highest rates of utilization, while those of large capacity have the lowest. / ClIAlTER VI. THE SALE AND SHIPMENT OF GRAIN. . J dd i c Section 1. Handling country elevator shipments. Time of sale. —There are some indications of consid^able diifer- ences between the Northwest and the remainder of the 14 principal grain-producing States in the length of time elapsing between the time of purchase of ^rain by the country elevator and the time of its* sale (Ch. V, sec. 4). ITliis is probably partly due to the prevalence of hedging in the former area and its relative disuse in the latter. (Ch/ IX.) In the case of elevators which have hedged their purchases • there is little advantage in holding the grain in store (except in the event of a possible premium), and such elevators probably tend to ship out the grain more rapidly than houses in areas where hedging is less employed, since by so doing the amount of money invested in the grain is reduced and also interest on borrowed capital, insurance, charges, .etc.l»———--—- ^ ^RUERiNGjCARS.—Some time prior to shipping, the'^ent orders a car of the Required capacity from the local railroad agent. Such an order requires some care and attention. If, for example, it is for a G0,000-pound capacity car and the railroad furnishes an 80,000-pound capacity car, fhe elevator agent need load the car only to the mini¬ mum capacity of the 60,000-pound car ordered; whereas, if the order is for an 80-000-pound capacity car the agent is obliged either to load it to at least the iminimum capacity of the larger car or pay, freight on the difference between the weight of the car’s contents and that minimum capacity./ The reason for this rule is that in the first instance the car is furnished not in accordance with the order but at the railroad’s convenience. •" A notation to the latter effect is ade on the bill of lading in such cases. A common occurrence at country points equipped with a nuinber ()f elevators are disputes over the distribution of cars to the various elevators. State and Federal laws and regulations now govern such distribution, and these laws have diminished g»e#fcy the discrimina¬ tion in allotment formerly prevailing, although occasional cases of unfair distribution occur to-day. The laws of Minnesota may be taken as typical of such regulations. * * * Such ears as the company can furnish shall be divided among the applicants equally until each shipper has received at least one car, after which the balance shall be divided ratably in proportion to the amount of daily re¬ ceipts of grain or other freight to each shipper or to the total amount of grain offered at such station or sidetrack.* iecfion '{lie following statement, quoted from the interview with a Minne- 1 In this c? apolis line elevator operator is of interest: “ In the nonhedging States the grain business is done more on a merchandising basis. The elevators fill themselves up in the fall on the theory that before spring they will be able to sell out and make a profit. In the Northwest a different basis is used, the theory here being that the future shoiPd bo sold as soon as the grain is received and the grain*shipped out as early as possible.” _ . , j. 2 Laws relating to the Railroad and Warehouse Commission, including general pro¬ visions governing railroads and common carriers. (Sec. 4364, pp. 52—53.) S'- 125 126 - .-GOUOTRY GRAIN MARKETING. When cars are scarce and frequent requests to the local railroad agent are without results, the elevator agents usually send word of their difficulty to the terminal markets. The line company agents report the facts to their head offices; the cooperative and independent agents, to the commission firms handling their business. The line companies and the commission firms then communicate with the rail¬ road companies and endeavor to secure relief. When the empty car which has been ordered is “ spotted ” at the elevator, the elevator agent inspects it carefully for leaks and weak spots. Often it may be necessary to clean the car. While the rail¬ roads are required to furnish cars both clean and in good condition, these requirements are not always lived up to. In fact, it is seldom that the elevator agent is not compelled to do some coopering or cleaning. ^ Weighing out.— In addition to the wagon scale used for receiving grain, many'cduntry elevators are equipped with shipping or loading- out scales. These scales are of the hopper variety; and if automatic,' ..are placed above the shipping bin. If the scale is not automatic, it ^ may be placed on the work floor, where the elevator operator will be able to operate it as well as to attend to his other duties. The ship¬ ping scales as found in country elevators are practically never of carload capacity, and in consequence it is impossible to weigh a car¬ load at a time. ^Instead the grain is spouted into the scales in lots or drafts small enough to be within the scale capacity. In using a nonautomatic hopper scale the agent allows the grain to flow into the scale until it is full, cuts off the flow, weighs the drafts and notes the quantity on a weight slip. The scale is then dumped,' the grain falling into the pit at the bottom of the elevator, from which it is elevated by the elevating leg and spouted into the ship¬ ping bin, which, fts:pfev k) tm ly- «tate4, is usually placed above the elevator work floor on the track side of the elevator. This operation is repeated until the total quantity to be shipped has been weighed and elevated to the shipping bin. The automatic scales are so constructed that they regulate the flow of grain into the scale and register the weight of each draft. The grain flows into the hopper until it is full, and when the flow is cut off the scale weighs the load, registers the quantity, and dumps itself. This process is repeated until the quantity to be shipped has been weighed. / The weighing out of grain is most important, since it is the ele¬ vator’s main basis for claims for shortages which often arise on ac¬ count of losses in transit.^ Where possible, therefore, yelevator agents endeavor to weigh each car of grain. They are not always able to do so, because (1) not all country elevators are equipped with loading- out scales, (2) the agent is too busy, and (3) elevators at times be¬ come so blocked with grain that it is impossible to get the grain which it is desired to ship to the scale. When for one reason or another the grain can not be weighed, its flow into the car is from the bin in which it has been stored to the pit; from there to the shipping bin and thence into the car. Here the depth of the load is measured after it has been leveled off and the number of bushels is computed from this depth measurement and the inside measurements of the car. Loading OUT.— After the grain has been weighed and transferred to - the" shipping bin and the car has been cleaned and coopered and 9 SALE AND SHIPMENT OF GRAIN. 127 the grain doors put in place, the agent takes his position on a plat¬ form beside the car door and at the lower end of the elevator loading spout. Ihis spout is usually a flexible metal tube so constructed that it can be directed into any paH of the car. Setting the spout, the agent pulls a chain, or rope, hanging beside it. This chain, or rope, is connected with the gate at the bottom of the shipping bin, and pulling the rope opens the gate and allows the grain to fall through the spout into the car. The agent directs this stream of grain to various sec¬ tions of the car in order to secure an even distribution of the load and when the shipping bin is empty levels off the grain. If no weigh¬ ing has been done he also, as stated, measures the depth of the grain in order to compute the weight of the contents of the car. Some line elevator companies require their agents to fill out and tac k on t he doors of the freight car a notice oimilni’ Tliii^Btne givesr^^tatement of the condition of the car, together with the weight of its contents. The grade of grain is not given, but merely the kind of grain, as This slip constitutes a notification to the weighmaster and inspectors at the terminal markets of'the car’s condition and facilitates the making of reports of any discrepancy in weights. Samples of each shipment are obtained by the ^ent either at the scale or from the stream as it leaves the spout. These samples are then mixed, graded, and the amount of dockage determined. :r.nF.a or set-ttt —Occasionally unscrupulous country ship¬ pers attempt to defraud grain buyers through the practice of plug¬ ging ” or “ setting up ” cars of grain, i. e., deliberately distributing dirt, screenings, or very poor grain in a car of good grain, not throughout the load but in such a manner as to avoid its detection if possible and create the. impression that the entire car is filled with good grain. One of the methods usually followed is to sprinkle a thin layer of foreign matter over the floor of the box car and then fill the car with good grain. ^^Another is to place the foreign matter in an end, corner, or along the side of the car, with the hope that it Avill escape the probe of the sampler at the terminal market. Such practices are usually heavily penalized by all the various grain-inspection departments, whether under governmental juris¬ diction or that of boards of trade and chambers of commerce. Thus the rules of the Minnesota Kailroad and Warehouse Commission pro¬ vide that “All cars found to be ‘ set-up ’ or ‘ plugged ’ shall be graded ‘ no grade.’ ” ^ The general penalization of this practice tends to discourage it to considerable degree. T ' ^DviCE or SHIPMENT.— ^When the loading of the car has been com- ^Ieted“,ThiriTiir'bf ladiTig and a notice or advice of shipment is pre- ^^ared. The bill of lading is sometimes made out by the railroad '^gent, although this should, " ftp - a matt(H* - of be done by the ele¬ vator agent.'^Usually these bills of lading are order bills and are negotiable upon indorsement. •A-V - The most elaborate notices or advices of shipment are those used by the liny elev ator companies. (See Appendix 5.) Elevators other than the line companies do not, as a rule, use elaborate shipping notices. In many cases the notice of shipment may be simply in the I * Of. Tv\’enty-nintli Annual Report, Chief Inspector of Grain to the Railroad and Ware¬ house Commission of Minnesota, Aug. 31, 1914, p. 17. 128 COUNTRY GRAIN MARKETING. form of R letter of advice written by the agent ^ and in still other cases the bill of lading constitutes the only notice. In those cases _ where the elevator company draws on the consignee in advance on | account of the shipment, the draft is attached to the bill of lading | and deposited in the local bank instead of being sent direct to the com¬ mission company. After the necessary documents have been prepared the car of gram is picked up by the railroad company and hauled to the terminal arket or other destination. ' >Section Agents’ r eport s. line a g ents . —Line elevator agents are usually re¬ quired to make up a detailed daily report of business transacted, and these reports are mailed each day to the head office of the company, where they are carefully checked. Sometimes a daily load report (Appendix 6) is required of the agent and daily reports of receipts , are practically always made up and sent to the head office, x/ The load report sets out the number of loads of grain received not only by the reporting elevator but also by each competitor. Weather and road conditipns are also noted, and should farmers or “ scoopers ” be shipping grain, this fact is so recorded in the space provided. By reference to these slips the company is able to keep a fairly close check upon the amount of business being done at the station and also whether their agent is proving himself able to meet existing com¬ petition and procure a proper proportion of the business. (Ch. XI, Line ^mpanies usuall 3 r”pra^de two blanks for reporting daily receipts, one for wheat, including durum, and one for coarse grains. These forms are similar to Appendix T. When theTine company ships grain from'the house, the shipment, as stated in the preceding section, is reported to the head office on the j form known as Report of Shipment. (Appendix 5.) Companies issuing storage tickets instead of scale tickets in buying^ grain (Ch. A, sec. 3) usually require their agents to return on the" daily shipping report all local sales of grain for feed or seed, etc., either to farmers or others. Thus the Monarch Llevator Co. requires that all gram going out of the house, whether shipped or sold locally,! must be reported on this blank. '^This is done for the purpose of clear¬ ing the agents’ storage ticket account. The reports required by line companies of their agents vary some¬ what with each company. The general character and tenor of these reports, however,, is much the same. In some cases agents of line companies are required to make periodical reports to their traveling superintendents in addition to those made to the head office. These reports, usually rendered weekly, give a summary statement of the Tveek’s business. ^ At the end of every month the line agents are required to submit to the head ’offices their expense accounts showing, among other things, the various bills paid b}^ them. j. • j* • j i i Reports of elevators other than line. —Agents of individual ele¬ vators. whether cooperative, independent, or mill-owned, do not as a rule keep extensive records and reports of transactions such as are made up by the line elevator agents. '^Since such elevators are a unit in themselves, there is no home office to report to nor is the manage- SALE AND SHIPMENT OF GRAIN. 129 ment of the average individual elevator usually given to keeping complete and accurate records and reports. Line companies usually record in minute detail every step of the various operations. The other types of elevators as a rule keep as few records as possible, and at times these are exceedingly poorly kept. The situation in this respect is improving, however (Ch. X, sec, 4). In a number of cases, however, country elevators other than line houses are obliged to submit to commission houses detailed daily re¬ ports similar to those required of line company agents. When, as is frequently the case in the Northwest, the elevator is financed by a commission company, the latter organization in many cases requires such reports as a measure of protection to itself, and in such instances records and reports comparable with those of line agents may be X, sec. 4.) Destinations _of country elevator and warehouse shipments. Trri‘.T*r-Mav»Mi?N«.—Of 1,541,391 cars of grain reported by country elevators and warehouses as shipped during the five crops years— 191^13 to 1916-17 (Appendix 2, inquiry 6)—about 70 per cent went ^ to cities w'hich received 5,000 or more cars during this period, or an average of more than 1,000 cars a year. These cities were arbitrarilv classed as terminal markets as distinct from other geographic points receiving less than 5,000 cars during the period and from various TOmmercial factors to which shipments were also reported^ ■wiiig^taMeiTOesen'ts the numbei^ "rrf->«cc^tages of tol^J'^ipments to all destinations: Table134. —'Number of oars shipped to speci^hdmarket^eceivmg more thm. 5,00\ cars and jyroportion of total slupme)jfts\^orted country elevators and warehmises, crop years 1912-13 to IJ Markets. Louisville, Ky, Gralvestoii, Tex Nixmber of cars reported. Per ce oftdtal sl^ipineiits reported. Markets. Number of cars sported. Per cent of total shipments reported. Portland, Oreg. Geveland, Omo. 5,053 5,473 5,530 6,006 6,055 6,293 Philadelpihia, Pa... Baltimore, Md.. Seattle, Wash. 6:496 Cairo, Ill. 6,634 New Orleans, La Detroit, Mich.^. Wichita, Kans. Toledo, Ohio.... Cincinnati, Ohio 7,677 8.070 8J12 Buffalo, N. Y.... Indianapolis, Ind. Peoria, Ill.... St. Louis, Mo. Milwaukee, Wis. Omaha, Nebr. Kansas City, Mo. Duluth, Minn. Chicago, Ill.... Mtnneapohs, Minn. 16,991 ‘■,026 ,576 12X174 \S,5 81 ^ 85, 262,03^ 308,691 1.10 1.56 1.79 2.74 3.64 4.56 5.29 5.54 17.00 20.03 117087 12,091 Total. 1,070,027 69.42 H t appcariG r^ hafaalighttlT jiess than 70 per cent of the total reported shipments went to terminal markets. Another and smaller proportion (7.08 per cent) of the total shipments went to various geographic points receiving less than 5,000 cars. The bal¬ ance, or about 23^ per cent, was sold to mills, feeders, interior brokers, maltsters, retailers, etc. The following table presents the numbers and propoilions of cars ,moving to various destinations from all reporting country elevators and warehouses; 9064°—20—^9 130 COUNTRY GRAIN MARKETING Table 3^. —Destination of total shipments from all reporting country elevators ^^''7 amd warehouses for the five crop years 1912~1S to 1916-17. \ / Destination. / /' ■i . .. . 1912-131(^916-17 "5 Number'/ of carSj ' Per cent of otalt. ; GBDGRAPHIC POINTS. ^ Terminal markets each receiving Jv000>of more cars_... / 1,070,027 109, lOB 208,22d 30, 238( 93,334 30,457 09.42 7.08 13.51 1.96 6.05 1.98 Points each receiving less than 5,00f^^§rs. ....j. .. 1 f ' CQJrf^RCIAL FACTORS. ^ / Mills... ..yii . Fevers. .... Tntflrior brokers_: . Miscellaneous, i^cWSing private terminal elevators, maltsters, and other con- vertersj-Fotai!^^, etc... . Total... 1,541,391 100.00 ) Movement by States and grand divisions. —The next table pre¬ sents by States and grand divisions and according to destination the movement of the total grain (i. e., wheat, corn, oats, rye, and barley) reported as shipped by country elevators and warehouses during the five crop years 1912-13 to 191^17: Table 36. —Distribution of total, shipments of five principal grains from country elevators and warehouses in specified States and grand divisions according to specified destinations during the five crop years 1912-13 to 1916-17. State. Number of cars shipped. Terminal markets. Smaller points. Mills. Feeders. Interior brokers. Miscella¬ neous.! ELEVATORS. Oklahoma. 27,039 27.71 5.39 46.61 2.15 17.39 0.75 Michigan. 20,236 27.84 8.87 39.76 3.91 18.29 1.33 Ohio. 46,369 35.50 10.29 23.15 1.69 28.40 .97 Kansas. 117,909 49.04 6.77 27.32 1.46 14.87 .54 Nebraska. • 132,317 57.77 7.21 5.20 6.15 9.44 14.23 Montana. 30, 8l8 19,938 62.17 2.19 31.69* 1.12 1.94 .89 Missouri. 64.41 9.31 22.00 3.50 .76 .02 Indiana. 75,997 64.98 7.42 14.21 1.40 11.76 .23 Total. 470,623 52.11 7.16 20.28 3.00 13.02 4.43 Wisconsin. 15,809 74.53 4.06 7.51 2.04 7.10 4.76 Iowa. 186,430 76.14 10.80 7.37 2.11 2.96 .62 South Dakota... 133,998 80,31 2.48 11.92 1.25 2.69 1.35 Illinois.. 249,636 83.16 8.08 4.50 .58 3.30 .38 Minnesota. 185,683 84.19 4.37 8.40 .80 .57 1.67 North Dakota. 188,154 88.93 2.24 8.62 .18 .02 .01 Total.. 959,710 82.59 5.90 7.70 .96 2.04 .81 Total, 14 States. 1,430,333 72.56 6.31 11.84 1.63 5.65 2.01 GRAND DIVISIONS. 2 Elevators. Southern Division. 19,467 16.47 10.27 52.60 3.71 15.77 1.18 Middle Atlantic. 12,406 17.01 9.25 57.21 2.24 13.26 1.03 Mountain and Pacific. 21,352 28.28 18.24 37.81 9.42 5.38 .87 Warehouses. Southern Division. Middle Atlantic. 4,860 956 14.18 40.06 5.76 16.01 60.39 40.27 3.17 16.46 3.66 .04 Mountain and Pacific. 33,815 32.37 29.13 15.39 8.81 10. 85 3.45 Central. 18,202 48.55 8.13 27.05 4.22 11.62 .43 Total grand divisions. 111,058 29.00 •16. 93 34.99 6.23 11.24 1.61 All elevators and ware- houses. 1,541,391 69.42 7.08 13.51 1.96 6.05 1.98 * Private terminal elevators, retailers, maltsters, and other converters, etc. * For States included in the various grand divisions, see Ch. II, sec. 5. SALE AND SHIPMENT OF GRAIN. 131 The direction of the movement of "rain from the countr^y" ele¬ vators and warehouses is governed by a wide variety of conditions, V gy f which renders any explanation .more or less un¬ satisfactory. It is, however, possible at least to point out certain factors which undoubtedly exercise an important influence upon • ^lis floiv. y A-^ 1 ^bM^■.ldy indirateflr-ft^little le§s than ^er"T:ent of all griiin >^Hpped _liy country elevators gees to the terminal-inaFket: 7T)nly ;i6, of the 14 principal grain-producing States, i. e., Illi¬ nois, Iowa, AVisconsin, Minnesota, and the Dakotas, report a higher than average proportion of total grain shipments to terminal markets. AVhile thus considerably above the average in its propor¬ tion of terminal market shipments, this area as a whole is consist^ ently below the average in the percentage of its shipments which go to mills, feeders, interior brokers, and the smaller markets. In the balance of the 14 principal grain producing States, i. e., Okla¬ homa, Michigan, Ohio, Kansas, Nebraska, Montana, Missouri, and Indiana, the reverse of this situation obtains, and much higher than average proportions of their shipments go to small markets, mills, feeders, etc., and a much lower than average proportion to. terminal markets (as- low - as peiMjic in t imm^ Miobtgain of terminal markets to dnumm^rain movement. Relation of size ■ at OrPTERENT TERMINALl^R- ww.—There appears to be good reason for assuming that the pro¬ portion of terminal market shipments by country elevators from a given area as compared with shipments to other destinations will be considerably affected by the size of the terminal markets t@ which the area is tributary. Other things being equal, the larger the marke,t the greater the number of buyers, the keener the competition between them, and the higher the resulting price that will be obtained for grain. >?^hus size may become an attractive force, leading to a high proportion of terminal market shipments by rendering it difficult .for the smaller markets and local buyers to compete with such arketer examination of Table 36 reveals the fact that five of the~six States reporting the highest proportion of terminal market ship¬ ments, i. e., Minnesota, the Dakotas, Iowa, and Illinois,® are very directly tributary to Chicago and Minneapolis. The balance of the principal grain-producing States are tributary chiefly to other primary markets; for example, Kansas and Nebraska to Kansas City; Michigan to Detroit; Missouri to St. Louis; Ohio to Cincinnati; Indiana to Indianapolis, Cincinnati, and Detroit. (See . Table 37.) Based on the shipments reported by country elevators and ware¬ houses, Minneapolis during the five-year period received something* over 300,000 cars of "rain and Chicago 262,000. The reported re¬ ceipts of country grain at each of these two markets, therefore, are between three and four times as great as those at Kansas City, the third largest market in point of country receipts, as reported, and are many more times the receipts at the small terminal markets. (See Table 37.) ^ Wisconsin not included. 132 COUNTRY GRAIN MARKETING. Direction of grain movement.— The size of the Chicago and Min- ( neapolis markets as compared with the various other terminal mar¬ kets is greatly affected by the direction of the grain movement and the location of the markets with reference to productionV Droadly speaking, the general current of the grain movement is from the surplus to the deficit areas, or from west to east, with a certain amount of southern and southeastern flow, there being comparatively little westwar d, northern, or southwestern movemenL iflSC^ars ^ ^‘^71101^ trom Taiffe ai- ^yln ch presen^ the propcrrfl^ of the totaA country r^eipts of the prmciparTSrmmal markets which are deri^d from e^^ of the 14 principal grainWoducing States and variolas grand divisions during the crop years ]tel2-13 to 1916-17. Table 37 .—Distribution of 'country grain shipments to-specified terminal markets as reported for crop years 1912-13 to 1916-17. Markets. Grand total. Illinois. Indi¬ ana. Iowa. Kan¬ sas. Michi¬ gan. Minne¬ sota. Mis¬ souri. Mon¬ tana. Cars. Percent. Percent. Percent. Percent. Percent. Percent. Per,cent. Percent. Chicago. 262,033 51.98 2.44 31.43 0.35 0.03 5.79 0.71 0.02 Minneapolis. 308,691 .01 1.01 .11 36.03 4.24 Kansas City. 81'551 .04 • 6.53 55.24 .71 3.26 AO Dnlnth..... 85,385 .02 17.79 6.15 St. Louis. 42,174 41.63 .10 26.47 .49 1.07 19.73 .43 Milwaukee. 56' 085 1.39 32.35 .01 23.53 G) Omaha. 70' 338 22.38 .21 .20 .47 Peoria. 27' 576 78.68 21.04 .10 .01 Indianapolis. 24'026 47.26 48.61 0) Cincirmati. 12,091 12.09 67.99 .33 .02 .21 .08 Detroit... 8,070 11.95 39.74 44.99 Wichita. 8,712 .44 97.81 .ii Buffalo. 16,991 16.73 47.01 .08 1.94 Baltimore. 6; 293 20.56 12.59 .02 2.69 Louisville. 5'053 40.43 49.40 .04 6.67 Toledo. 11,087 7.12 39.99 9.96 .01 New Orleans. 7,677 44.59 17.66 Galveston. 5'473 23.15 Portland. 5,530 .63 Seattle.•.. 6'496 1.31 Markets. Chicago. Minneapolis.. Kansas City.. Duluth. St. Louis. Milwaukee... Omaha. Peoria. Indianapolis.. Cincinnati.... Detroit. Wichita. Buffalo. Baltimore.... Louisville.... Toledo. New Orleans. Galveston.... Portland. Seattle. Ne¬ braska. Percent. 78 86 39 02 39 74 19 26 63 05 04 10 04 05 North Dakota. Percent. 0.23 33.98 .05 72.20 .04 .25 Ohio. Percent. 0.01 0) .01 11.03 1.10 30.33 19.75 .20 40.98 Okla¬ homa. Percent. 0.07 .05 1.81 .33 ■'62 1.56 32.24 53.08 South Dakota. Percent. 3.30 23.11 3.78 3.38 .25 23.15 12.16 .04 C) .02 .02 .02 .’os' Wis¬ consin. Percent. 0.50 .09 MO .01 .40 17.74 .01 Middle Atlan¬ tic Di¬ vision. Percent. 0.09 13.34 Moun¬ tain and Pa¬ cific Di¬ vision. Percent. 0.53 .38 1.00 .15 .51 .04 .97 .28 .03 .06 2.31 4.09 3.40 99.36 98.57 South¬ ern Di¬ vision. Percent. 0.44 ".’63 24.79 1.32 20.32 Central Divi¬ sion.* * Percent. 0.84 .13 .48 .28 2.12 .79 .40 .13 4.12 7.96 2.22 3.81 6-18 .91 1.93 1 Less than one one-hundredth of 1 per cent. * Warehouses only, elevators being included among States separately tabulated. SALE AND SHIPMENT OF GRAIN. 133 ■ t H be no^d fr o m thiyfablo th?rt Chicago obtains the bulkoF^ grain from Illinois (52 per cent) and Iowa (31^ per cent). It also obtains a little from Minnesota and South Dakota to the north¬ west, but practically none from Ohio, Michigan, or Indiana to the ,east or from Missouri to the south. Miime w p »ta5=ga>i pt i a htb uliiL^hr ^r iiiiii Mi iii icffotn (1^^^ per ^ant) and the Dakotafi (57 pfr r^^t} - irn^l a ^n ft llei ‘"p roportion from M o ntana, all to the w csl 'f T' t i' i ^11y nil DiiIntL rpppipfg nvr ■Pr nwa-^thp Neither market receives much of anything from Wisconsin, Illinois, Iowa, or Nebraska. Kansas City obtains more than half its grain from Kansas to the west and more than one-fourth from Nebraska to the northwest. Less than 4 per cent is derived from Missouri and prac¬ tically nothing from Illinois,’ on the east. Kansas City also obtains a substantial proportion from Iowa (6J per cent), to the north, but much less from Oklahoma, on the south. St. Louis obtains above 40 per cent of its grain from Illinois, lying north and east. To w^hat extent this movement is from the east rather than the north is difficult to determine. In so far as the movement is westward, it is exceptional. ^St. Louis also receives about 20 per cent from Missouri, 26 per cent !rom Iowa, to the north, and a substantial amount from Nebraska Milwaukee obtains practically nothing from the south or east (Illi¬ nois, Indiana, or Michigan), securing the great bulk of its receipts from Wisconsin and the States west, i. e., Minnesota, Iowa, and South Dakota. Omaha, like St. Louis, is exceptional in obtaining heavy receipts from Iowa (22J per cent) directly to the east. It procures practically nothing, however, from either Missouri to the southeast or Kansas to the south, the balance of its grain being ob¬ tained chiefly from Nebraska (63 per cent). About 13 per cent, how¬ ever, is derived from South Dakota, to the northwest. Peoria sup¬ plies are obtained practically exclusively from Illinois and Iowa and those of Indianapolis from Indiana and Illinois. Cincinnati draws some grain from its own State, but obtains the great bulk of it Tndi^rn Illinois to the west. 'he general direction of the grain current from west to east and southeast is indicated in the following quotation from an opinion of the Interstate Commerce Commission: As this grain moves from point of origin toward the east and southeast it reaches or comes within the several spheres of influence of certain centers or primary markets. For example, grain is shipped in large quantities to Min¬ neapolis and reshipped from Minneapolis to Chicago or Milwaukee and from thence to various destinations in the east and southeast. Several railroads have lines from Minneapolis to Chicago and no lines north or west of Minne¬ apolis. If they participate in the transportation of this tonnage, as they always have insisted upon doing and as they undoubtedly will always insist upon doing, they must take out from Minneapolis grain that comes in on some other road. There are numerous railroads with lines east and southeast from Chicago that have no lines west or north of Chicago, and if they participate in the movement of this traffic they must take out from Chicago that which comes in on some other road. In every instance of a carrier so situated an additional competitive influence is injected into the situation.® e24 I. C. C., 120. 134 COUNTRY GRAIN MARKETING. Effect of direction of mo\t:ment on terminal tributary areas.—^ These eastward and southerly channels of grain movement have been more definitely established through freight-rate adjustments in con¬ formity with the general status of supply and demand.N/ Because of the fact that there is little westward or northern movement of grain, the States lying to the south and east of the principal primary markets do not feel the pull of these markets to the same extent as do those States lying more directly to the north or west of them. Many of these markets therefore have but a relatively small area to draw from. In the case of the more easterly and southerly markets this is due to the existence of primary markets farther west which cut off the bulk of the flow.s For example, St. Louis receives almost nothing from Kansas, which is a heavy shipper to the intervening market of Kan¬ sas City, and Cincinnati receives only about 12 per cent of its receipts from Illinois, though the intervening market of Indianapolis obtains nearly 50 per cent of its grain from this State. Peoria draws almost exclusively from Illinois and Iowa, obtaining nothing practically farther north or west. In the case of certain of the most westerly, primary markets the small area drawn upon is due to the restricted producing territory lying to the westward, as with Kansas City and Omaha. Minneapolis, on the other hand, can and does draw from all four of the Northwest States, there being no market farther west in this area. Chicago, like some of the smaller markets, is cut off to the west ‘ of Iowa by Omaha, and in consequence receives comparatively little grain from Nebraska. Owing to general current of eastward and southeastern movement and rate structure based thereon, however, Chicago is able to draw a substantial volume of receipts (about 9 per cent) from southern Minnesota and South Dakota. Moreover, based upon the average figures for five years—1912-13 to 1916-17—the total annual production of wheat, corn, oats, rye, and barley in Illinois and Iowa amounted to over one-fifth of the production of the entire United States. Although, therefore, the Chicago tributary area is largely cut off by Omaha to the west and by Minneapolis and Mil¬ waukee to the north, the production of this area is so huge that its comparatively small size has not restricted the growth of the Chicago market to the same extent as the small size of the areas tributary to the markets farther east and west has prevented their development on a scale comparable with Chicago and Minneapolis. Section 5. Effect of terminal-market organization on grain movement. The size of the terminal market as a factor explaining variations in the proportion of shipments to various destinations is of course closely related to and intimately interwoven with the degree of or¬ ganization of the terminal market mechanism, v The more highly organized this mechanism and the more extensive its ramifications, both geographically and otherwise, the greater the attractive power of the market.'^ Size promotes organization and organization pro¬ motes size.^ Neither can be regarded as the result of the other, but both are important causal factors in explaining the variations in the destination of shipments. The relatively higL percentage of termi- SALE AND SHIPMENT OF GRAIN. 135 nal market shipments by Iowa, Illinois, Minnesota, and the Dakotas^ may thus probably be attributed in part to the highly organized ter¬ minal market mechanism of Chicago and Minneapolis, to which markets these five States are directly tributary. In Minnesota and the Dakotas are hundreds of houses ot line elevator companies, chiefly with headquarters in Minneapolis, and, although these companies will usually ship anywhere, they are ex¬ ceedingly close to the Minneapolis market situation and ship in when-. ever prices are favorable for even the briefest period. The necessity of buying malting barley by sample and the prefer¬ ence of the Minneapolis mills for buying country-run grain (secs. 6 and 16) has tended to develop the sample market for both these o-rains at IMinneapolis on an extensive scale. /This in turn has greatly mcreased the cash commission business, since it has made it desirable for country elevators to consign to some house sufficiently expert in selling to be able to realize the best price for the wheat or barley involved. As a result of the competition between these cash commission houses, their representatives CQver the entire Northwest, soliciting shipments for Minneapolis and also Duluth. To the south the wire'^hoiises out of Chicago have of late embarked extensively in the cash commission business, and the wire house, especially highly developed in Illinois and Iowa, is used both for the solicitation and purchase of grain for shipment to Chicago. This market having little consumptive demand, the grain business is largely shipping tor domestic consumption or export, centered chiefly in the hands ot the oreat terminal elevators. As a rule, this business can be handled satis- • factorily on a grade as well as a sample basis. The result has been that the elevators and other dealers have reached out to bid the county for o-rain directly in competition with the commission houses solimt- ino" consignments and have built up a huge volume of business, this is "transacted chiefly upon the basis of acceptances by country eleva¬ tors, shippers, and dealers of bids for grain of specified kinds and tirades made by wire or otherwise directly by Chicago buyers to- arrive ” or to be shipped within a specified number of days, in this territory there is also considerable buying “ on-track’’ in the country by representatives of terminal dealers. (See Vols. Ill and i y .) It must, of course, be admitted that the territory ui^er discussion is also in large measure tributary to Milwaukee and Duluth as well as Chicago and Minneapolis. (Table 37.) Shipments to these mar¬ kets tend to increase the importance of terminal market movement in this area above the average. Especially, perhaps, is this true ot Duluth, whose dealers engage extensively in the financing ot country elevators. Exporting through Duluth by way of the Lakes is also a factor of importance in directing the flow of a considerable Por¬ tion of o-rain to the Duluth market, while the Milwaukee demand tor barley was at least, prior to prohibition, an important contributory factor in the terminal market movement of this gram. At the same time the average annual receipts of Minneapolis ana ’ Chicago are so huge as compared with those of Duluth and iviil- ’ Wisconsin can not properly be regarded, as tributary to Chicago or Minne^ shipped by^houses in Wisconsin over ten thousand were rye and barley, (lable 4 .) 136 COUNTRY GRAIN MARKETING. waukee that the proportion of terminal market shipments from the area under discussion may safely be assigned in considerable measure to the drawing power of Chicago and Minneapolis resulting from size and organization of these markets. Section 6. Other factors affecting terminal-market movement, CONSUMPTION.—Important contributory factors to the high percentages of terminal market shipments in Chicago-Min- neapolis tributary territory are (l)’^the consumption of Minneapolis mills, (2) the sale of barley by sample, and (S)*"terminal market nnancing. As is well known, the city of Minneapolis is the greatest flour-mill- mg center in the country. To this market Minnesota and the Dakotas, three of the leading wheat-producing States, are directly tributary, and the enormous capacity of the mills at this marketris ^pphed almost entirely with wheat and rye grown in these States. Owing to the mixing practices of the terminal elevators, the mills almost without exception prefer to buy country-run grain, and will usually pay premiums if necessary in order to obtain it. (Sec. 16.) It is probably owing largely to the huge buying power of these mills demanding country-run grain that country elevators in Minne¬ sota and the Dakotas send much higher than average proportions of their wheat® shipments to the terminal markets. (Table 41.) Sample selling of barley. —Based upon the yearly average for the ^op years 1912-13 to 1916-17, Iowa, Wisconsin, Minnesota, and the Dakotas were among the six leading States in the production of bar¬ ley. As shown in a subsequent section, malting barley is the one gram in the purchase of which grades have the least significance and color and other factors, such as the individual preferences of the buyers, play the most important part.® If the highest prices are to be obtained by the country elevators for malting barley, advantage must be taken of these facts by shipping to a point where numerous buyers for maltsters and others are to be found. The result is that the bulk of the malting barley has as a rule been shipped to the terminal mar¬ ket^ consignment. (Sec. 15.) Terminal AiAgTCJi-r factor of considerable im- porlance also in accounting for the high proportion of grain shipped to t^minal markets from Iowa, Illinois, Wisconsin, Minnesota, and the Dakotas is probably the financing of country elevators by ter¬ minal market grain dealers. It is interesting to note that those States which send the greatest proportion of their grain to terminal markets are, generally speakino- those in which terminal market concerns are most frequentlyj-eporte^’ as lenders of funds borrowed by country houses -- * And probably rye as well. for factors are not, of course, of such importance in the case of barley used .SALE AND SHIPMENT OF GRAIN. 137 Table 38 .—Proportion of country elevator shipments to terminal markets from specified States in comparison vyith the proportion of terminal market financ- iny.' state. rroportion of ship¬ ments to terminal markets. Ratio of terminal market sources of loans to total sources reported. 27.71 1.88 27.84 .53 35.50 .90 49.04 .44 57.77 1.55 62.17 25.88 64.41 4.46 64.98 .35 ♦ 1 52.11 3.30 74.53 9.79 76.14 3.08 80.31 23.08 83.16 5.77 84.19 20.26 8a 93 36.64 82.59 18.56 72.56 12.71 I As indicated by the ratio of the number of times terminal market dealers are reported by comtry ele¬ vators as sources of borrowed funds to the total number of sources reported. (Appendix 1 able 20.) While there is no very exact correlation, the proportion of financing by terminal dealers is, on the whole, distinctly higher in those States which report the larger proportions of shipments going to terminal markets than it is in those States with lower proportions of such shipments. . . As subsequently indicated, terminal financing, at least by commis¬ sion houses, is usually done under arrangements whereby the country house accommodated agrees to ship all or a very large proportion of its grain to the financing house. This financing, therefore, is an important factor in influencing shipments to the terminal market. (Ch. X.) Section 7. Shipments in territory outside Chicago-Minneapolis tributary area. The lower than average percentage of terminal market shipments shown " by the principal producing States outside the Chicago- Minneapolis tributary area—i. e., Oklahoma, Kansas, Nebraska, Mis¬ souri, Indiana, Ohio, and Michigan—is probably due chiefly to the absence of those factors which have, tended to produce a high pro¬ portion of terminal market shipments in the former section. The terminal markets located in this latter area are, as already indicated, very much smaller than Chicago or Minneapolis, less highly organ¬ ized, and consequently lacking in the attractive power of these markets. None of the smaller markets possess the extensive sample markets nor such extensive buying interests as those represented by the Minneapolis mills or Chicago terminal elevators. Neither are 138 COUNTRY GRAIN MARKETING. there the large line companies operating from the terminal market, nor the highly organized system of commission house soliciting and financing which is found, especially in Minneapolis territory, nor the extensive wire-house soliciting and purchasing and the terminal elevator direct buying which exists out from Chicago. The absence ,of these factors weakens the attractive power of the smaller markets and thus gives greater scope to operations outside the terminal markets.^® Section 8. Analysis of mill shipments. An important contributory factor to the low proportion of terminal market shipments in territory tributary to the smaller markets is the extent of the local milling industry in this area. Outside of shipments to terminal markets the mills absorb a larger proportion of the total shipments than do either the smaller markets, the feeders, the interior brokers, or the miscellaneous purchasers. The proportion of shipments to mills ranges all the way from 44 per cent in Illinois to 46^ per cent in Oklahoma. Broadly speaking these variations may be assigned chiefly to the relative importance of the local milling industry and local mill buying. The following table presents for the 14 States separately tabulated the proportion of shipments to mills reported by country elevators in comparison with the proportions of individual mill elevators reported in the same States.^ It will be noted that the seven States showing the lowest propor¬ tions of mill shipments include those in the Chicago-Minneapolis tributary area and the seven showing the highest proportions are in the territory tributary to the smaller markks. Table 39. Proportion of total country elevator shipments from speeified States to mills, crop years 1912—13 to 1916—17, in comparison tvith proportion of indi¬ vidual mill elevators. state. Oklahoma.... Michigan. Montana. Kansas. Ohio. Missouri. Indiana. South Dakota. North Dakota. Minnesota. Wisconsin. Iowa. Nebraska. Illinois. Total 14 States. Percentage of ship¬ ments to mills. 46.61 39.76 31.69 27.32 23.15 22.00 14.21 11.92 8.62 8.40 7.51 7.37 5.20 4.50 11.84 Percentage of indi¬ vidual mill elevators. 6.86 12.45 4.61 8.43 13.56 26.75 14.96 2.48 1.81 4.21 13.16 1.75 2.85 3.12 5.54 10 Montana belongs with this group rather than with the Chicago-MinneanoliThe barley crop is relatively very small and wheat consumption by terminal market mills inconsiderable as com- The same is also true, within certain limits, of wheat. See next subdivision. Except that mill sample buying probably tends to account partially for the large consignment business at Kansas City. Even more important probably at that market in creating a high proportion of consignments has been the action of the terminal ele¬ vators in engaging in the commission business and soliciting consignments in competition with the regular commission houses. (Vols. II and III.) SALE AND SHIPMENT OF GRAIN. 149 pared with Minneapolis. This area, moreover, is a heavy producer of oats and especially corn. Both of these ji^raiiis are used largely for feed. In consequence they can be bought much more satisfac¬ torily by grade than either barley or wheat and there is less necessity for sample buying. In this area, therefore, grain can, on the whole, be sold satisfactorily on a grade basis to a much greater degree than in the Northwest, and there is a much greater volume of “ to-arrive ” and “ on-track ” buying by terminal market organizations. Section 17. Explanation of variations in grains. These geographical differences largely explain the variations in consignment and direct sales as between the different kinds of grains. As has alreadjT^ been explained in this chapter, the production of rye and barley is relatively highly localized in Wisconsin, Minnesota, and the Dakotas (sec. 10), the bulk of the grain from which States goes to Minneapolis, Duluth, and Milwaukee. Table 37.) The average reported receipts of barley and rye at these three markets total nearly 65 per cent of the total average receipts of each of these grains at all 10 of the terminal markets tabulated (Table 49), while 87 per cent of the total rye and barley shipments made by all reporting country elevators and warehouses are from these four States.^® (See Table 39.) The situation with corn and oats is approximately reversed. Wis¬ consin and the Northwest produce comparatively little corn, and while certain of these States are among the very largest producers of oats the total volume of either of these grains raised in this area is considerably below the volume raised in the remaining 14 grain- producing States. Of the average corn and oats receipts at 10 primary markets, Minneapolis, Duluth, and Milwaukee, the prin¬ cipal consignment markets, received less than 10 per cent of the corn and only 23 per cent of the oats, while the other 7 markets received slightly over 90 per cent of the former grain and 77 per cent of the latter. (Table 49.) This situation largely accounts for the fact that corn and oats, especially the former, are sold on consignment to a much less extent than either rye or barley. The intermediate position of wheat in the proportion of consign¬ ment selling between corn and oats on the one hand and rye and barley on the other is similarly explainable. The Northwest is one of the largest wheat-producing areas, but the territory tributary to the other markets than Minneapolis, Duluth, and Milwaukee is also a producing area of great importance. As a result of this fact the pro¬ portion of wheat received at Minneapolis, Duluth, and Milwaukee (about 50 per cent) to the total received at all 10 markets is con¬ siderably higher than the proportion of corn or oats, but considerably lower than the proportion of rye or barley. Similarly, in the terri¬ tory tributary to the other markets the reverse is true, and the pro¬ portion of wheat received at the other 7 markets to the total received i«The high percentages of consigned rye and barley reported for certain States, par¬ ticularly Missouri, are misleading, in that the shipments involved are so small that they can not be regarded as sufficiently representative to indicate the situation for the State as a whole and also because the total of such shipments is so small in the aggregate as but slightly to affect the figure for the grain as a whole. So far as barley is con¬ cerned the high percentage of shipments in some cases reported for other than Wisconsin and the Northwestern States may probably be attributed to the extensive employment of sample purchasing referred to above. 150 COUNTRY GRAIN MARKETING at all 10 is considerably above the proportions of rye and barley, but | considerably below the proportions of corn and oats. (Table 49.) j Section 18. Consignment and direct grain sales in important cities. \ The following table shows the proportion of consignment and di- \ rect sales of grain to thirty-odd cities of the United States as reported ; by country elevators and warehouses. | I Table 50. —Number and proportion of cars of grain sold by country elevators t on consignriient and direct to various markets during the crop years 1912-J3 to 1916-17. f Market. INTERIOK. Consignment. Sold direct. Total number of cars. Number of cars. Per cent. Number of cars. Percent. I Salt Lake City, Utah Cairo, Ill. Columbus, Ohio. Spokane, Wash. Denver, Colo. Louisville, Ky. Cleveland, Ohio. Hutchinsom Kans... Nashville, Term. Pittsbrugn, Pa. Toledo, Ohio. Memphis, Tenn. Detroit, Mich. Buffalo, N. Y. Wichita, Kans. Peoria, Ill. Indianapolis, Ind.... St. Joseph^ Mo. Cincinnati, Ohio. Omaha, Nebr. Chicago^ Ill. St. Louis, Mo. Kansas City, Mo. St. Paul, Minn. Milwaukee, Wis. Duluth, Minn. Minneapolis, Mimi.. Total. SEABOARD. Boston, Mass. San Francisco, Calif Los Angeles, Calif.. Portland, Oreg. Tacoma, Wash. New Orleans, La... Seattle, Wash. Galveston, Tex. Philadelphia, Pa... New York, N. Y... Baltimore, Md. Total. Grand total.. M . 10 4,125 426 869 2,285 3,461 4,658 3,665 1,039 3,773 6,472 2,049 5,302 12,762 6,640 15,963 16,877 2,379 9,248 46,691 167,586 - 28,684 59,508 2,453 40,045 53,651 192,701 693,322 61 1,049 1,094 4,477 2,903 6,154 4,218 4,684 4,299 1,679 5,210 35.828 729,150 133 25 87 280 506 843 844 242 932 1,623 566 1,484 4,167 2,916 8,546 9,740 1,549 6,403 33,191 129,597 22,295 47,994 2,159 36,091 48,607 176,090 536,910 1 12 157 181 391 269 374 473 319 1,888 4,065 540,975 3.22 5.87 10.01 12.25 14.62 18.10 23.03 23.29 24.70 25.08 27.62 27.99 32.65 43.92 53.54 57.71 65.11 69.24 71.09 80.65- ‘^Coi •90.13 oorfeo 91.^38 77.44 0.10 1.10 3.51 6.23 6.35 6.38 7.98 11.00 19.00 36.24 11.35 74.19 10 3,992 401 782 2,005 2,955 3,815 2,821 797 2,841 4,849 1,483 3,818 8,595 3,724 7,417 7,137 830 2,845 13,500 37,989 6,389 11,514 294 3,954 5,044 16,611 156,412 31,763 28. 22.56 61 1,048 1,082 4,320 2,722 5,763 3,949 4,310 3,826 1,360 3,322 100.00 99.90 98.90 96.49 “ 93.77 93.65 93.62 92.02 81.00 63.76 88.65 188,175 25.81 i Chapter VIT. SECONDARY OR INCIDENTAL FUNCTIONS OF COUNTRY ELEVATORS AND WAREHOUSES. • Section 1. Characteristics of incidental functions. Besides the primary operations of merchandising and warehousing many elevators and warehouses also perform certain other opera¬ tions, usually of secondary importance to either of their two primary functions. Most of these secondary functions, such as elevation, cleaning, conditioning, etc., may be said to be directly incidental to the operations of country houses in the buying, selling, and storing of grain. Others, like the handling of side lines, may have prac¬ tically no relation to the grain operations of the local house, but have been undertaken merely for the convenience of patrons, as an additional source of profit, or for other reasons. Section 2. Elevation and loading for the account of others than the local house. General description.— The elevation or loading of grain by coum try elevators for the account of others is very largely the outgrowth of direct shipping by farmers. It involves unloading from the wagon the grain hauled in by the farmer, its weighing, elevation into a bin, and storage either until all the farmer’s gram has been hauled or the quantity in the particular bin is sufficient for a carload, as the case may be, and finalW the loading of the grain into cars for shipment by the farmer. During the period between the receipt of the grain and its loading the grain is special binned,^ and its iden- * tity preserved. There are cases where farmers having^ stored grain in the elevator with the intention of later disposing of it in the local market have insisted upon shipping when they have been dissatisfied with the price offered by the elevator. These instances, however, are rare, since, as previously explained, ordinary storage gram is not siiecial binned and the farmer could not, therefore, if he later de¬ sired to ship, secure the identical grain which he had hauled to the elevator. There are many country elevators that will not load grain for others under any circumstances. Practically any elevator inay re¬ fuse to accept such business during the rush season, though it may be entirely willing to do it when business is slack. Extent of practice. —In the nine States for which the mqiiiry re^-ardino- elevation for others was tabulated ^ (Appendix 2, inquiry 1 Cli V SGC. 4. ^Tliese States were selected at random. 151 152 COUNTRY GRAIN MARKETING. 19), approximately 4,000 elevators reported as to whether or not the}" performed this service and 1,048 also reported as to the extent to which it was done. The following table presents the results of this inquiry: Table 51 .—Proportion of elevators in specified States reporting elevation or no elevation for others, together with the extent of such elevation reported. state. Total elevators. Elevation for others. No elevation for others. Number. Per cent of total. Number. Per cent of total. Michigan. 233 212 146 197 778 786 618 207 850 3 4 4 20 267 296 249 119 571 1.29 1.89 2.74 10.15 34.32 37.66 40.29 57.49 67.18 230 208 142 177 • 511 490 369 88 279 98.71 98.11 97.26 89.85 65.68 62.34 59. 71 42.51 32.82 Wisconsin. Oklahoma. Missouri. Illinois. Minnesota.!. South Dakota. Montana. North Dakota. Total. 4,027 1,533 38.07 2,494 61.93 State. Total elevators reportmg. Occasional.! Considerable.! Number. Per cent of total. Number. Per cent of total. Illinois. 225 101 428 168 19 96 3 4 4 196 90 384 156 18 91 3 4 4 87.11 89.11 89.72 92.86 94.74 94.79 100.00 100.00 100.00 29 11 44 12 1 5 12.89 10.89 10.28 7.14 5.26 5.21 South Dakota. North Dakota . Minnesota. Missouri. Montana. Michigan. Oklahoma. Wisconsin. Total. 1,048 946 90.27 102 9.73 1 When returned as a percentage, replies less than 5 per cent were classed as ''occasional ” and 5 per cent and over as "considerable” Expressions such as "once in a while,” "seldom,” "about one-fourth,” "a great deal,” "a large amount,” etc., were, of course, classified readily under the one or the other head. A few schedules where the replies were too vague to be thus definitely classified were rejected and are not here included. About 38 per cent of the reporting elevators elevate for others, the proportion performing this service ranging all the way from as low as 1.29 per cent in Michigan to as high- as 67.18 per cent in North Dakota. In the gre^t proportion of cases elevation is reported a‘s ‘‘occa¬ sional ” in character—less than 10 per cent of the houses in the nine States reporting the amount as “ considerable.” Section 3. Kelation of elevation to shipping by farmers. Extent or farmer shipping. —^The " foregoing variations between different States in rendering elevation service are probably accounted for chiefly by the extent to which the farmers engage in direct ship¬ ping on their own account. (Appendix 2, inquiry 19.) Table 52 shows the number and proportion of elevators reporting direct ship- INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. 153 ping by farmers and the extent of this practice reported in the nine States for which this inquiry was tabulated. Table 52 .—Numher and proportion of elevators in specified States reporting direct shipping by farmers and the extent to which such shipping is re¬ ported. .state. Total elevators Direct shipping by farmers. No direct shipping by farmers. answer¬ ing Inquiry. Number. Per cent of total. Number. Per cent of total. Wisconsin . 203 17 8.37 186 91.63 Michigan... 223 23 10.31 200 89.69 Oklahoma. 132 31 23.48 101 76.52 Illinois. 734 177 24.11 557 75.89 South Dakota. . 539 165 30.61 374 69.39 Minnesota.. 731 256 35.02 475 64.98 Atontana.... - . - . 195 79 40.51 116 59.49 Missouri . 188 87 46.28 101 53.72 North Dakota . 811 615 75.83 196 24.17 Total . 3,756 1,450 38.60 2,306 61.40 Total elevators report¬ ing. Occasional.! Considerable.! , State. Number. 1 Per cent of total. Number. Per cent of total. Montana.... 71 59 83.10 12 16.90 Missouri. 79 67 84.81 12 15.19 Michigan.,. 22 19 86.36 3 13.64 Wisconsin.... 16 14 87.50 2 12.50 North Dakota . 607 532 87.64 75 12.36 Illinois .. 167 147 88.02 20 11.98 Minnesota. 246 224 91.06 22 8.94 South Dakota...1. 157 144 91.72 13 8.28 Oklahoma. 25 24 96.00 1 4.00 Total . 1,390 1,230 88.49 160 11.51 1 WTien returned as a percentage replies less than 5 per cent were classed as “occasional” and 5 per cent and over as “considerable.” Expressions such as “once in a while,” “seldom,” “about one-fourth,” “a great deal,” “a large amount,” etc., were, of course, classified readily under the one or the other head. A few schedules where the replies were too vague to be thus definitely classified were rejected and are not here included. About 39 per cent of the elevators answering this inquiry report direct shipping by farmers, the proportions ranging from 8.37 per cent in Wisconsin to 75.83 per cent in North Dakota. As with eleva¬ tion, the great bulk of the elevators report farmer shipping as “ occa¬ sional ” and less than 12 per cent report it as “ considerable.” Comparison of elevation with farmer shipping and the size of 1 ARMS.— The folloAving table compares the proportions of elevators reporting farmer shipping in the nine States for which the inquiry was tabulated, with the proportion reporting elevation and also with the size of farms: 154 COUNTRY GRAIN MARKETING. Table 53 .—Comparison of the proportions of elevators in specified States report¬ ing direct shipping ivith the proportions reporting elevation and loith the average acreage of improved land per farm. State. Proportion of elevators reporting direct shipping by farmers. Proportion of elevators reporting elevation for others. Acreage of improved land per farm.i .. 8 .37 1.89 67.22 Ai’if'hip'an 10.31 1.29 62.00 OlrlahoTTiJi,. 23.48 2.74 92.28 TlHnni*! .. 24.11 34.32 111.35 SmifVi . 30.61 40.29 203.84 MirmP-sntn. ___. 35.02 37.66 125.80 MfiTitn.Tia ...^. 40.51 57.49 138.87 46.28 10.15 88.66 North DaVota .. 75.83 67.18 275.08 Total, nine States. 38.60 38.07 107.45 11910 census. These figures are the latest available at this writing. An examination of the foregoing table indicates that, with the exception of Missouri, the proportion of elevators doing direct load¬ ing tends to vary directly with the proportion reporting direct ship- ping. Although some farmers shipping upon their own account may load directly into cars, the bulk of the grain thus shipped is probably handled through the elevators, so that, other things being equal, ele¬ vation tends to vary directly with direct shipping by farmers. Causes or direct shipping. — There are some indications that in earlier days direct shipping by farmers was due in no small meas¬ ure either to the fact that the elevators bought on too wide a margin or that the farmers believed such to be the case. Even to-day a good deal of direct shipping may be traced to the dissatisfaction of the farmer with the prices or grades or dockage offered by the elevator. In other cases the condition of the grain may be such that the ele¬ vators are unwilling to receive it except in order to load the same, or perhaps in exceptional cases for special bin storage.® Although some direct shipping is unquestionably due to these fac¬ tors, it is probable that the practice is more than anything else de¬ pendent upon production conditions. An examination of the fore¬ going table reveals the fact that there is, on the whole, a considerable tendency for the reported extent of direct shipping (and hence ele¬ vation) to increase with the increase in the average acreage of im¬ proved land per farm, although the correlation is not exact. The larger the acreage of improved land per farm the greater, presum¬ ably, the tendency to extensive cultivation and a lack of diversifica¬ tion in the crops raised. The smaller the area under cultivation the more intensive such cultivation is likely to be and the greater the tendency to mixed farming. As a result the individual farms with large improved areas frequently raise several carloads of the same kind of grain, and such farmers are in a position to do a good deal of direct shipping, either loading themselves or loading through the elevators. Although intensive cultivation results in a much higher 3 Obviously, if special binned, its bad condition will not affect the condition or grade of other grain bought by the elevator. 155 INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. yield per acre than in those regions where extensive cultivation pre¬ vails, the diversification of crops on more intensively pltivated land and the entrance of mixed farming results in the individual farmer ])r()(lucing less of a single kind of grain, and as a consequence there are probably fewer farmers in a position to ship directly. Section 4. Variations in elevation by type of house. Results of tabulation. —The following table presents the propor¬ tions of different types of elevators reporting elevation and no eleva¬ tion for others: Table 54. —Number and proportion of elevators of different types reporting elevation and no elevation for others} TjT© elevator. UNE. Commercial.. Cooperative... Mill. Maltster. Total lines. INDIVIDUAL. Cooperative. Independent. Mill. Maltster. Total individual. Grand total. Proportion of elevators reporting elevation. Elevation for others-. No elevation for others. Total elevators reporting. Number. Per cent of total. Number. Per cent of total. 1,560 870 55.77 690 44.23 23 9 39.13 14 60.87 250 32 12.80 218 87.20 26 26 100.00 1,859 911 49.00 948 51.00 770 287 37.27 483 62.73 1,190 322 27.06 868 72.94 199 12 6.03 187 93.97 9 1 11.11 8 88.89 2,168 622 28.69 1,546 71.31 4,027 1,533 38.07 2,494 61.93 1 In nine States as follows: Wisconsin, Michigan, Oklahoma, Illinois, South Dakota, Miimesota. Mon¬ tana, Missouri, and North Dakota. Something over one-half the commercial lines, one-third of the cooperatives, and one-fourth of independents report elevation or loading for others, whereas only about 13 per cent of the mill lines and 6 per cent of the individual mill elevators report performing this operation. Elevation by mills. —The very small proportions of the mill elevators which report elevation for others is readily comprehended. As previously pointed out in other chapters, the mill elevator is operated primarily for the purpose of providing the mill with a supply of grain, and as a rule only incidentally for profit as a mer¬ chandising undertaking. Being interested chiefly in procuring grain for the mill, it either refuses, in consequence, to elevate for others, or does so only to a limited extent. This latter supposition is sub¬ stantiated by the fact that not one of the 40 mill elevators which replied as to the extent of elevation or loading for others reported it to be anything more than occasional. The higher proportion of mill lines doing elevation as compared with individual mill elevators is possibly due to the fact that the mill line company, owing to the large volume of grain which it handles, tends, on the whole, more fre¬ quently to engage in commercial operations. In consequence a larger 156 COUNTRY GRAIN MARKETING. })roportion of these houses than of individual mills are willing to do elevation. Elevation by other types.— The explanation of the variations in elevation reported by the independent (27.06) and commercial line types (55.77) is probably to be found in the geographical distribu¬ tion of these types with reference to the extent of direct shipping and the size of farms discussed above in explaining the State vari¬ ations in elevation. Reference to Appendix Table 2 shows that of the group of nine States here considered, the proportion of inde¬ pendent elevators is highest in Michigan and Wisconsin, which States have the lowest percentages of elevators reporting eleva¬ tion. Missouri, also reporting a low percentage of this operation, is likewise an important independent elevator State. On the other hand, North Dakota and Montana, relatively the most important line elevator States, are the ones with the largest percentages of elevators doing direct loading, while South Dakota and Minnesota, also important line elevator States, rank third and fourth, re¬ spectively, in the proportion of elevators reporting loading for others. This concentration of the independents in areas where few of the elevators elevate or load for others, and of commercial lines where many elevators perform this service, would appear to ac¬ count for the wide variations in independent and commercial line practice in respect to this operation. A much smaller percentage of the cooperatives than of the commercial lines (about 37 per cent, as compared with nearly 56 per cent) elevate for others. Since both the commercial line and cooperative types are highly concentrated in the area in which elevation for others is most frequently reported, i. e., the four northwestern States, it would be logical to expect that the proportions of these two types reporting elevation would ap¬ proach much more closely to one another. It is possible that elevation is more frequently reported by the lines than the cooperatives, because the dissatisfaction of the farmer with the prices offered is probably more frequent in the case of the commercial line than in the case of the cooperative, in which the farmer frequently holds stock or from which, if the elevator is truly cooperative, he may receive a patronage dividend. This, perhaps, causes a larger proportion of direct shipping by the farmer customers of line companies, Avith the result that a relatively higher proportion of commercial lines than of cooperatives report elevation. It is also possible that the cooperatives are more disposed to refuse to elevate than are the lines, and that at competitive points the farmers are obliged to resort to the commercial line to load cars because of the refusal of the cooperative to perform this service. As previously shown in connection with the discussion of purchases (Ch. V, sec. 8), the cooperative type of house buys, on the average, about tAvice the volume of grain purchased by the commercial line house. Owing to this fact the cooperative is on the whole less in a position to do loading for others than is the commercial line, more especially dur¬ ing the rush season. Theoretically, at least, these facts would ac¬ count for the larger proportion of the cooperatives which do not elevate as compared with commercial line houses, although the relative importance of each type is high in the States where eleva¬ tion is most common. INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. 157 Section 5. Elevation or loading charges. Over 99 per cent of the elevators in the nine States for which the inquiry regarding terms for elevating (Appendix 2, inquiry 19) was tabulated reported that a charge w'as made for this service. Only J39 elevators reported their rates, however. These varied in differ¬ ent sections of the country, with local competitive conditions, and with the kind of grain handled. The average of the rates reported hv the 139 houses was between 1 and 2 cents, as follows: Grain. Number reporting. Average loading or elevating charge. 41 1.94 100 1.98 18 1.21 3 1.50 8 1.31 The charges for elevating sometimes include the cleaning of grain when the elevator is equipped for such treatment and the owner of the grain desires it. When such is the case the charges are usually higher than the charges for elevating only. Section 6. Mixing. Intentional mixing operations. —The mixing of grain by country elevators is either of an intentional or an involuntary character. Intentional mixing is done primarily for profit, through the im¬ proving of one grade of grain by mixing it with another grade, or the mixing of damp grain with a quantity of dry grain to prevent heating and increase the value of the former. (Sec. 7.) Involuntary mixing, on the other hand, while sometimes deliberate, ^ is not usually done with the expectation of making a profit. Instead, it either occurs accidentally or is a more or less unavoidable incident of the operation of the local house. When mixing is undertaken for profit the usual method is to run together into the pit the grains that are to be mixed, the flow of each grain from its bin being so regulated that the desired proportions are obtained. From the pit the grain is then elevated and spouted to a bin. The elevation operation tends to mix the grain quite thoroughly, but in case the agent is not satisfied and believes the mixture to be uneven, the mixed grains may be run through the house several times, i. e., dropped into the pit, elevated, and again dropped into the pit and elevated. Instead of the above process, and in case the mixed grain is to be shipped immediately, the tAvo grades of grain to be mixed may be spouted into the car and there shoveled about by the agent until the ei^enness of grade deemed necessary is obtained. The necessity of obtaiifmg an even mixture lies principally in two facts. In the fir§t-place^-if the mixing is not thoroughly done, the samplers at the terminal may strike a “ spot ” of the poorer grain, with the result that the entire car Avill be graded on the basis of this low grade. should the samplers probe only the good spots in the car and the grade be given on the basis of this sample, the pur¬ chaser might possibly refuse to accept the car when the spots of low 158 COUNTRY GRAIN MARKETING. grade were discovered. In addition, in the latter case, a charge of “ setting up ” or “ plugging ” cars might perhaps be lodged against the shipper.^ Smutty or bin-burned grain (Ch. V., sec. 3.) is not mixed, because it is easily detected by the inspection department and the presence of such grain lowers the grade. Some 26 of the country elevators, or about one-seventh of those visited by the Commission’s agents in the Northwest, reported mixing grain for profit. One independent elevator mixed most of its wheat to improve the grades and reported good profits from such mixing. Good No. 2 wheat was mixed with No. 1 wheat with profit by one Minnesota cooperative elevator, and another elevator mixed its good oats with wild oats and sold the mixture as sample grade. Still another elevator mixed about 75 per cent of its grain and estimated that these mixing operations had added 10 per cent to the profits. Several elevators reported the mixing of light-weight wheat with heavy wheat as being very profitable. Other elevators reported that they mixed whenever it was possible to do so, and one concern claimed mixing had been its only source of profit. The mixing of a small quantity of damp grain with a like grade of dry grain when loading cars is also a practice of some elevators, the damp grain be¬ coming dry by the time the car reaches the terminal. This opera¬ tion, however, is perhaps conditioning rather than mixing. (Sec. 7.) Cooperative and independent elevator operators are sometimes abetted and assisted in the mixing of grain by commission houses, and the elevator may receive advice either from the commission firm’s office or its traveling solicitors as to the making of mixtures. For ex¬ ample, in one case, a commission firm advised a country elevator operator that he could mix 25 to 30 bushels of rye in a car of No. 1 northern wheat and^ still have it “ stand up ” to grade. Again, in ^ August, 1916, when it was apparent that the new crop in the North¬ west was going to be very light in weight, the traveling solicitor of one large commission firm wrote to his head office at Minneapolis that he had advised one of the country elevator operators on whom he had called that it would be very profitable to hold back as much of the No. 1 and No. 2 northern wheat from the 1915 crop as possible for use in mixing with the new crop. The head office informed the solicitor that this would undoubtedly be a wise move and that any company doing so would probably make good profits. Line elevator agents, while frequently encouraged by their em¬ ployers to mix when it is possible to do so, are also cautioned to use extreme care in the making of mixtures. One company advised one of its agents-that he need have no fear of criticism from the com¬ pany on account of his attempt in this direction and that the company was greatly pleased to find the agent using his head in such matters. At the same time the company suggested that he make no more mixtures until it was determined how his initial effort was treated by the terminal inspection department. Another line elevator company instructed one of its agents to de¬ vise a plan whereby he could mix a part of his No. 4 with lower grades of wheat. It also suggested if he had any soft bleached wheat testing 57 to 58 pounds which he knew would grade onlv No. *Cf. Ch. VI, sec. 1. INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. 159 2, that it would be lietter to work a little li^ht wei<>:ht wheat into it and brin^ the sifted test weight down to 5(5 pounds rather than to ship the heavier grain by itself. At the same time the agent was cautioned not to attempt to mix without carefully figuring the result. At times the line country agent is assisted in making mixtures by his traveling superintendent, as is evidenced by a letter from the traveling superintendent of a large line company to his head office advising it that he had helped an agent mix some 300 bushels of No. 2 wheat into a car so that the whole car would “ stand up ” for No. 1 wheat. Involuntary mixing. —The involuntary mixing of grain is usually the result of (1) an error of the operator in binning grain after it has been received in the elevator; (2) leaks in bins which cause a small amount of mixing; (3) the placing of grain in a bin containing grain of another variety or grade because of the lack of bins; (4) the addition of a quantity of grain to make up the minimum capacity of a car. A frequent occurrence in the operation of a country elevator is the mixing of grains by mistake when binning grain which has been unloaded into the pit. Twenty-five per cent of the elevators visited by the Commission’s agents reported that this had happened. This error in spouting the grain from the elevator leg to the bin in many instances is a cause of loss, unless the elevator is equipped for clean¬ ing. In the latter event the loss is, of course, only the cost of the cleaning or separation if the mixture is separable. Quite often levator agents have been able to rectify mistakes similar to the above before a great deal of grain has been so mis¬ directed. By use of a scoop or shovel the grain thus wrongly binned has been largely removed. When such a mistake occurs some con¬ cerns not equipped to clean or separate grain have even shipped the mixed grain to the terminal and had it cleaned and separated there before selling. All concerns following this practice that were visited by the Commission’s agents reported that they had received very good service from the elevators at the terminal markets and that the charges had been reasonable. Such a procedure usually pays for itself, for without separation the grain would be sold as mixed and at a discount under the grade often much greater than the cleaning charge. Thus those elevators that did not separate mixed grain reported that such shipments had been sold as mixed grain, and that as a rule losses had resulted. Of course there are certain mixtures which it is practically impossible to separate and in such cases loss can not be avoided. IVheat and durum wheat can not be separated, and one agent claimed a loss of 19 cents per bushel on a shipment of a car containing such a mixture. A form of involuntary mixing, which rarely occurs, is.that due to leakage. An old elevator, or one so constructed that its bin walls are weak, may find that the pressure of grain in a iDin will cause the seams in the walls to open and thus permit grain to sift into another bin containing a different variety or grade of grain. This would not occur in new elevators of proper construction, nor will it happen as a rule if the bins are equally filled, as the pressure is then practically the same on both sides of the walls. 160 COUNTRY GRAIN MARKETING. Mixing through lack of sufficient bins frequently occurs and is ac¬ centuated by car shortages, the variety of crops grown, and by the number of the different grades. In the fall, when the grain is moving from farms in large quantities and cars are not readily procurable, it is difficult for an elevator operator to avoid mixing. Such mixtures are usually of grades only and are not apt to cause a considerable loss if a manager uses care not to be caught in such a position that he will be compelled either to mix very low-grade grain with relatively much higher grades or else to refuse to receive the load. Thus, one line elevator agent, forced to put some turkey wheat in on top of his durum because his house was blocked, shipped the mixture and the same was inspected and sold as mixed wheat at a discount under the price at which either the turkey or the durum would have sold separately. At times an elevator operator will add a quantity of grain to a car of grain that is about to be shipped in order to make up a quantity equal to the minimum capacity of the car, on which minimum he is obliged to pay freight. Obviously, this is likely to be done only in those cases where the difference between the quantity of the grade originally designed for shipment and the minimum capacity of the car is deemed great enough to warrant the expense of the mixing process. Section 7. Conditioning. Conditioning grain by country elevators is practically limited to the treatment of heated or heating grain and grain that is wet or damp. None of the elevators in the Northwestern grain States—Minne¬ sota, Montana, North Dakota, and South Dakota—visited by the Commission’s agents were equipped with special machinery, such as driers, for treating grain. Only one of the elevators in Iowa and Illinois visited by the agents of the Bureau of Markets was equipped with conditioning machinery. This elevator had installed a drier in 1917, when it became apparent that the corn crop was going to be very moist. Some conditioning can be done with the ordinary elevator ma-' chinery, and this is frequently employed for this purpose when the occasion demands. Grain that is heated, or heating, can be run from bin to bin, and this aerating is of considerable effectiveness in cooling grain. It thus becomes a method of preventing serious loss to the elevator, since heated grain is severely penalized at the terminal markets. Country elevator managers keep a close watch on their bins of grain to detect signs of heating, and line agents are con¬ stantly instructed by their employers to watch out for heating grain, and when discovered either to ship it out immediately or run it through the house until it is cooled. Another practice that may properly be classed as conditioning is that already referred to in discussing mixing where a relatively small quantity of wet grain is mixed with a much larger amount of dry grain of a like grade as the grain goes into the car. By the time the car reaches the terminal the damp grain is usually well dried out, the moisture having been absorbed and distributed throughout the dry grain. INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. 161 Section 8. Cleaning. Advantages. —Prior to the institution of any Federal grades there was probably not as much inducement for cleaning grain in the country as there is to-day, for the reason that dockage did not usually affect the grade as it does under the Federal system. For¬ merly, if equipped to do so, the elevator might clean gram either tor the farmer’s or its own account, because in some cases the foreign material, .or dockage, was largely composed of seeds, other grains, etc., having a market value as screenings.® In the case of the gram bought by the elevator, or in the case of gram which the farmer intends to ship directly for his own account, a further inducement to country cleaning is found in the fact that if shipped uncleaned the farmer or elevator is obliged to pay freight on the dockage m question. Neither of these nor other possible reasons for cleaning have in the past been sufficient to induce country elevators generally to install cleaning machinery and facilities, although about 50 per cent of those reporting to the Commission in regard to this matter are so equipped. ^ ..... , Extent of cleaning facilities. —^The Commission s inquiry as to cleaning facilities was answered by 6,882 elevators in the 14 principal grain-producing States (Appendix 2, inquiry 16), and the following table presents by type of house the percentages with and without such facilities: Table 55 .—Percentages of elevators of different types with and without cleaning faciities in Ik principal grain-producing States. Type of elevator. Total elevators reporting. Per cent with cleaning facilities. Per cent without cleaning facilities. LINE. 2,415 65 512 28 32.55 67.69 30.66 17.86 67.45 32.31 69.34 82.14 3,020 32.85 67.15 INDIVIDUAL. 1,313 2,176 369 4 59.86 60.02 82.93 75.00 40.14 39.98 17.07 25.00 3,862 62.17 37.83 6,882 49.30 50.70 1 For States included see Ch. II, sec. 5. According to this table only about one-third of all types of line elevators are equipped with cleaning facilities, as compared with about two-thirds of the individual elevators. Section 9. Variations of different types of elevators in cleaning facilities. Commercial line houses.— Commercial-line elevator operators have assigned a variety of reasons for the lack of country cleaning facilities which is reported by that type of house. If c leaning tacil- » The farmer or elevator might, of course, ship to the terminal market also and have the grain cleaned there. 9964“—20-11 162 COUNTRY GRAIN MARKETING. ities are installed in a commercial-line house, it is claimed, in the first place, that it is impossible for the company to hold its agent for short¬ ages, since discrepancies may be assigned to cleaning. As a result, therefore, the company has a less satisfactory check on the local agent than would otherwise be the case. Some of the smaller lines have found it fairly satisfactory to clean, but in these cases the smallness of the line has made it possible for the management to control their agents better than is possible in the case of a large company. Second ly, it is asserted by the line operators that cleaning can be done much more cheaply and economically in the terminal market than is possible in the country. It is claimed that there are very few country houses which have the capacity to install proper cleaning machinery. To clean grain so as to conserve the largest possible pro¬ portion of good grain, it is necessary to install cleaners of different types, and the average country elevator is not large enough to afford the space for all these different types. Necessarily, they are compelled to use fewer or smaller machines and it is difficult to oper¬ ate these so as to do the best work and save all the grain. It is also claimed that to secure the most economical cleaning, it is necessary to have a fixed stream of power for operating the cleaning machinery. If grain is brought to the country elevator during the time when the cleaning machinery is in operation, it is necessary to transfer a portion of the power which is being used to operate the cleaners to the elevating machinery. This necessarily slows dowm the cleaning machinery and, in turn, is likely to cause the sieves to run over and to throw good grain into the screenings. The possible un¬ evenness of the power load, therefore, may frequently result in uneven and wasteful cleaning. It has been stated by one line elevator opera¬ tor that he has taken from single cars of screenings bought from coun¬ try elevators equipped with cleaning facilities as high as 100 bushels of good wheat. Moreover, the operators of the large commercial line companies believe themselves to be better judges than their agents of the neces¬ sity for cleaning and whether it can be done economically. Such companies, especially in Minneapolis, are also frequently connected in one way or another with terminal elevators which clean grain on a large scale and under the supervision of men experienced in this work. In consequence there is a considerable tendency among com¬ mercial line elevators to have grain cleaned in the terminal markets, either at a plant affiliated with their own or at some other large ter¬ minal elevator which makes a specialty of handling this class of business. Mill houses. —The low proportion of cleaning facilities reported by mill-line elevators may be accounted for on somewhat different grounds than those explaining a similar situation in the case of the commercial lines. Milling concerns, whether located in the terminal market or not, are usually equipped with such cleaning machinery as is necessary to prepare the grain for grinding. In consequence there is a considerable tendency for the mill lines not to install cleaning machinery but to ship the grain to the mill for cleaning. As a re¬ sult, this type reports a relatively low percentage of these facilities. The individual mill elevator, on the other hand, is as a rule either physically connected with the mill or else an integral part of it. Since nearly all mills find at least a certain proportion of cleaning INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. 163 machinery necessary, more than 80 per cent of the individual mill elevators report such facilities, though in most cases, probably, the machinery belongs rather to the mill than to the elevator. That an even higher percentage is not reported is probably due to the fact that certain individual mill elevators reporting regarded the cleaning apparatus as a mill and not an elevator facility. Cooperatives and independents. —According to the foregoing table about 60 per cent of both the independent and individual co¬ operative elevators are equipped with some cleaning machinery. Neither of these types is in any way affiliated with mills, nor as a rule have they any terminal market connections. The result is that a considerably larger proportion of them are equipped with cleaning facilities than are either the commercial or mill line types, although both report a much lower percentage of these facilities than do the individual mills. Section 10. State variations in cleaning facilities. The following table shows the number and percentage of elevators reporting cleaning facilities in each of the 14 principal grain-produc¬ ing Stares of the Central West: Table 56. —Number and percentages of elevators in specified States reporting cleaning facilities. Michigan. Indiana. Ohio. Missouri. Kansas. Oklahoma.... North Dakota. Wisconsin.... Nebraska. Montana.. Illinois.. Minnesota.... South Dakota. Towa.. 14 States State. Number of elevators. Percentage reporting cleaning facilities. 232 401 321 204 682 159 902 215 571 277 790 860 674 694 96.98 91.77 87.54 63.73 58.42 53.46 48.56 47.91 46.76 46.21 44.18 31.98 31.75 27.38 6,882 49.30 The variations shown range all the way from 27 per cent in Iowa to 96 per cent in Michigan. Most of these variations are explainable in terms of type variations just discussed with reference to the loca¬ tion of the various types in the States in question. As indicated in the preceding section the commercial and mill-line types report the lowest proportions of cleaning facilities and the individual mills the highest, the independents and cooperatives occu¬ pying an intermediate position between the lowest and highest and considerably above the average. Of the six States where the proportion of elevators haying cleaning facilities is above the average, five, i. e., Indiana, Ohio, Michigan, Missouri, and Oklahoma, are above the average in the proportion of individual mill elevators located within their bordera, and the first four of these States are among the five leading States in their propor¬ tions of this type of house. Kansas, the sixth State in the group whose elevators report higher than average proportions of cleaning facilities, is an important independent and cooperative State. 164 COUNTRY GRAIN MARKETING. In the balance of the 14 principal grain States where the propor¬ tions of elevators with cleaning facilities are below average, 5 out of 8 States, i. e., Minnesota, the Dakotas, Montana, and Nebraska, are the most important commercial line States. Iowa, Illinois, and Wisconsin, however, arc important either as independent, individual, cooperative, or mill States, and are below average in their propor¬ tions of mill and commercial line elevators. The low proportions of elevators with cleaning facilities in these States thereiore can not be satisfactorily explained on this ground. (Appendix Table 2.) Section 11. Warehouse cleaning facilities. No tabulations of warehouse cleaning facilities were made owing to the small number of such concerns reporting on this matter. It should, however, be pointed out that in the Pacific Coast States, where the flat warehouse is found to such a large extent, country cleaning facilities are very limited. The country warehouse, as previously indicated, is most important in this region on account oi the sack¬ handling method which prevails there. The grain is brought to the warehouses already sacked by the farmer and cleaning would involve the opening of all these individual sacks, dumping them, and finally re-sacking after the cleaning process was completed. The expense of such an operation, needless to say, would be very considerable, and as a result country cleaning facilities are usually extremely limited wherever sack handling exists. Some of the large line companies on the Pacific coast have working houses at the terminal points where cleaning machinery is installed and the mills also have facilities of this character at their plants. In certain sections of the Pacific coast, moreover, smutty grain is found to a very large extent and must be put through a cleaning process to get rid of this smut at some time or other. This cleaning, however, is usually done at the mills when the grain is used for milling purposes, or at terminal points if handled by exporters or grain dealers. It is reported to the Commission that before the installation of Federal grades only uncleaned grain could be sold in the State of Washington as “ country-run ” grain, the State inspection department requiring that mixed or cleaned grain must be so graded. Section 12. Summary of interviews in regard to cleaning. Northwest territory. —Practically all the cooperative and inde¬ pendent elevators in the Northwest equipped with cleaning machines which were visited by the Commission’s agents, reported that they cleaned all grain which showed a certain amount of dockage, usually 2 per cent or more, provided their machines could handle the grain. Some machines that will clean one grain—say wheat—can not clean another efficiently. During the rush season cleaning, even though desirable, does not always take place, partly because the capacity of the cleaning machine is not as a rule great enough to furnish a sufficiently large flow of grain through the elevator and partly be¬ cause the managers have not the time both to buy grain and operate the cleaning machines. In such cases it is the practice, when possible, to ship only the cleanest grain and hold the dirty grain until the rush slackens sufficiently to permit cleaning it. Some concerns reported cleaning only two or three grains, such as wheat and rye, while others only one grain, usually wheat. Other elevators clean all kinds of grains. INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. 165* Iowa and Illinois. —Of 95 of the elevators visited by the agents of the Bureau of Markets in Iowa and Illinois, 64 stated that they did not clean their grain at all; 21 reported that they did to some extent; and 10 that they cleaned all their grain. Some of these elevators attempted to estimate the number of bushels of grain which they clean each year, as set forth in the fol¬ lowing statement: Estimated bushels cleaned. Number of eleva¬ tors re¬ porting. Estimated bushels cleaned. Numl)cr of eleva¬ tors re¬ porting. WHEAT. CORN—continued. 5,000. 1 125,000. 1 10,000. 4 150^000. 1 25'000. 1 iso'ooo. 1 50'000. 2 0.4TS. CORN. 18,000. 1 25,000. 2 75,000. 2 50,000. 1 125,000. 1 60,000. 1 150',000. 1 100,000. 2 200'000. 1 Section 13. Cleaning for farmers by country elevators. Type variations. —The proportions of country elevators which clean grain for farmers (Appendix 2, inquiry 16) were separately tabulated for only eight States; i. e., Nebraska, Iowa, Kansas, Minne¬ sota, South Dakota^ Indiana, Montana, and Michigan. Of the 1,732 elevators in these States which reported as to whether they did or did not clean for farmers 740, or about 43 per cent, answered in the affirmative and 992, or about. 57 per cent, in the negative. The following table presents the number and percentages of elevators cleaning and not cleaning in these eight States according to the type of elevator. It should be borne in mind that these numbers and percentages are those of elevators having cleaning machinery. Table 57 .—Proportions of different types of elevators with cleaning facilities reporting cleaning and not cleaning for farmers in eight ^ grain producing States of the Central West. T 3 rpe of elevator. Total elevators reporting. Percentage cleaning for farmers. Percentage not clean¬ ing for farmers. LTNE, CnTnTnercifil ... 373 45.31 54.69 Coop)erative. 33 30.30 69.70 Mill. 61 39.34 60.66 Maltster.. ... 1 100.00 Total line. . 468 43.38 56.62 iNDivrouAL. Coop)erative. 458 44.54 55.46 Independent. 666 41.59 58. 41 MilL. 140 40.00 60.00 Maltster. Total individual. 1,264 42. 48 57.52 Grand total. 1,732 42.73 57.27 ^ Nebraska, Iowa, Kansas, Minnesota, South Dakota, Indiana, Montana, and Michigan. 166 COUNTRY GRAIN MARKETING. The variations in the proportion of cleaning for farmers reported by the five principal types of elevators are too small to be significant, the variations from the average for any one of the five principal types being relatively slight. The returns made by cooperative line and maltster line elevators are so few that the variations may be dis¬ regarded. State variations. —The percentage of elevators cleaning for farm¬ ers shows a high degree of variation among the different States, run¬ ning all the way from 25.59 per cent in Nebraska to 81.48 per cent in the State of Michigan. The following table presents by States the number and percentages of elevators reporting cleaning for farmers. Table 58 .—Proportions of elevators with cleaning facilities cleaning and not cleaning for farmers in eight principal grain-producing States. state. Total elevators reporting. Per cent cleaning for farmers. Per cent not cleaning for farmers. Nebraska. 211 25.59 74.41 166 26.51 73.49 TCansas ... 307 28.66 71.34 Minnesota. 250 29.20 70.80 Snnt.h Daknt.a . . 186 33.33 66.67 Tnriiana . .. 302 57.95 42.05 Montana . 121 74.38 25.62 Miehipan... 189 81.48 18.52 Total. . . . 1,732 42.73 57.27 In view of the fact that there is no particular variation as between types, the State variations can not be accounted for on this ground, and no explanation of the variations is apparent other than the possibility that custom may be largely responsible for the situation prevailing. Terms and conditions.— A few hundred elevators reported to the Commission the terms and conditions upon which grain was cleaned. (Appendix 2, inquiry 16.) In the great bulk of cases grain is appar¬ ently cleaned at a flat rate of so many cents per bushel. A consid¬ erable proportion of those elevators reporting, however, stated that cleaning was done without charge, and in a few cases that it was done free if the elevator purchased the grain. The rates for this service reported by those elevators malring a charge in cents per bushel for the service range from as low as one-half of a cent per bushel to as high as 10 cents per bushel. The following summary statement presents the average and range of charges in cents per bushel reported by elevators of different types supplying information as to rates for cleaning: Type of elevator. • Number of quotations. Range of rates reported (cents per bushel). Average rate reported (cents per bushel). Commercial line. 89 1-10 2.13 Mill line. 17 1- 5 2.35 Individual mill. 38 1- 7 2.53 Individual cooperative. 164 i-10 1.98 Tndp.ne.ndp.nt. *.... 152 i-10 2.62 Total__ 460 i-10 2.28 INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. 167 The charge per bushel is usually uniform for all grains, althouf^h in some instances it varies as between the different "rains. For example, one cooperative elevator of Indiana'stated that its charges were 5 cents per bushel for wheat and rye and 2 cents for oats; an independent elevator of the same State charged 4 cents per bushel for oats and 5 cents for wheat; a commercial line elevator of Nebraska, three-fourths cent per bushel for corn and cents for wheat. If a difference in rates by grains prevails, the charge for wheat is usually higher than that of the other grains. The charges per bushel for cleaning grain made by some elevators are contingent upon the disposition of the screenings, i. e., whether or not the elevator retains them. (Ch. V, sec. 3.) Three elevators reported a rate per hour as the basis for cleaning the grain of farmers, although the rate was not indicated. Disposition of screenings by elevators. —The elevators which keep the screenings either as a part or all of their remuneration for cleaning grain usually sell them locally as feed or else ship them to some market.® If the elevator is equipped with a feed mill, the screenings are ground before they are sold. A few elevators reported that screenings are given away or destroyed. The farmers in some instances carry the screenings back to the farm to be used as feed, provided, of course, they do not contain too many noxious weed seeds. In Iowa and Illinois several of the elevators visited indicated their policy with respect to the disposition of screenings as shown by the following summary: Number. Answer. 4 elevators. No disposition. Sold. Made into feed. Given away. Burned. Sold and given away. Given back to farmers. Mixed with sample grade oats. 7 elevators. 6 elevators. 6 elevators. 4 elevators. 2 elevators. 1 elevator. 1 elevator. Amounts realized irom disposition of screenings secured from cleaning were estimated as follows: Number. Answer. 20 elevators. No value. $100 per year. $50 per year. $150 per year. $75 per year. $300 in 1916 and $800 in 1917. 25 cents per hundredweight. One-half value of wheat. 45 cents per bushel. 3 elev^ators. 2 elevators. 1 elevator. 1 elevator. 1 elevator. T elevator. 1 elevator. 1 elevator. «This, of course, assumes that if taken as remuneration, such screenings are not composed of dirt or noxious weed seeds or other material of no value. 168 COUNTRY GRAIN MARKETING. Section 14. Side-line business of country elevators. Extent of business. —A considerable proportion of country ele¬ vators and warehouses transact a merchandising business in com¬ modities other than grain, and these different commodities thus handled are commonly known and referred to in the trade as side lines and the business itself as side-line business. The extent to which the practice of handling side lines is prevalent among country elevators is indicated by the replies to the Commission’s inquiry on this subject (Appendix 2, inquiry 16), which were made by 6,97a elevators in the 14 large grain-producing States of the Central West. Out of this number, 5,520, or nearly 80 per cent, reported the han¬ dling of side lines, as against 1,453, or slightly over 20 per cent, which did not engage in such operations. This appears from the following table, which presents the number and percentages of elevators of the various types which handle and which do not handle side lines, together with the average number handled in the 14 States which were separately tabulated by the Commission.^ Table 59 .—Number and percentages of elevators of different types handling side lines and average number handled per elevator in 14 principal grain-producing States. Total Total Per cent Average number of side lines handled by— Type of elevators. elevators answering inquiry. elevators handling side lines. handling sidelines. All report¬ ing elevators. Elevators handling sidelines. LINE. Fnmmp.rnial . 2,442 1,698 69.53 1.41 2.02 3.22 2.38 1.67 Pnnnprativfi . 73 67 91.78 2.96 Mill . 498 357 71.69 1.71 Maltster. 24 6 25.00 .42 All line. 3,037 2,128 70.07 1.48 2.12 INDIVIDUAL. Fnn'nprat.ive ... 1,357 1,242 91.53 3.01 3.29 T'nHpnpTiHpTit. . . 2,244 1,901 84.71 2.24 2.64 2.30 2.00 Mill . . 332 248 74.70 1.72 Maltster. 3 1 33.33 .67 All individual. 3,936 3,392 * 86.18 2.46 2.85 Tntal 6,973 5,520 79.16 2.04 2.57 Type variations in side-line, business. —The average number of side lines handled by the different types of elevators tends to vary directly with the proportion of elevators of such types reporting the handling of side lines.® This is more clearly shown by the following statement which compares the proportion of elevators of the five prin¬ cipal types handling side lines with the average number of side lines handled. 7 For States separately tabulated see Ch. II, sec. 5. ® Disregarding cooperative line and all maltster elevators, tne inconsiderable. number of which is INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. im Tabu: 60 .—Comparison of the proportions of different types of elevators handling sides lines with the average number handled per elevator. Type of elevator. Proportion of elevators handling side lines. . Average number of side lines handled by elevators reporting side-line handling. Average number of side lines handled by all elevators- answering inquiry. TnHi\n#^nal r>nnnorA.t.ivA . . ..... 91.53 3.29 3.01 TnHATV'nHpnt; . ... 84.71 2.64 2.24 1 mill . . . ... . 74.70 2.30 1.72 Milllirio ........... 71.69 2.38 1.71 69.53 2.02 1.41 T.inpc oil . . 70.07 2.12 1.48 86.18 2. 85 2.46 A 11 plpi'-ofnrc rpnnrtino^ .. .. 79.16 2.57 2.04 While practically 80 per cent of the elevators answering the Com¬ mission’s inquiry regarding side lines are engaged in this business, barely TO per cent of all the lines report operations of this character as compared with over 86 per cent of all individual elevators. All elevators dealing in side lines average about two and a half lines per elevator, but all types of line elevators handle only a little over two side lines per elevator, while all individual types combined handle nearly three. Similarly, all reporting elevators handle on the aver¬ age about two side lines as compared with about one and a half for the line elevators and two and a half for the individual elevators. The individual cooperatives lead both in the proportion of eleva¬ tors handling side lines and in the average number reported. Over 90 per cent of such elevators handle side lines, and the average re¬ ported is 3.29 lines for those houses doing a side-line business, or 3.01 lines for all the houses of this type reporting. Commercial line elevators, on the other hand, rank lowest in the proportion handling side lines and in the average number of side lines handled. Slightly less than 70 per cent do any of this business, and the average number of side lines handled is barely two for such houses and less than one and a half for all reporting elevators of this type. Section 15. Explanation of type variations in side lines. CooPERATi\^s.—The reasons for these variations, both in the pro¬ portion of different types of elevators handling side lines and in the number of side lines handled, is to be found in the particular charac¬ teristics and business methods of the different types. The high percentages of cooperatives which engage in the handling of side lines and the high average number of lines handled by such elevators is due in large measure to the cooperative idea itself. There is every reason to believe that in many, if not most, cases the farmer stockholders, or patrons of the cooperative, wish to buy their coal, lumber, or farm machinery through their own organization. They are naturally inclined to feel that if cooperation is a good thing 170 COUNTKY GKAIN MAEKETING. in the handling of grain it is also a good thing in the purchasing of commodities. Both the stockholders and the management figure that they can save the middleman’s profit and that the stockholders will thus get the goods cheaper, either at the time of purchase or ulti¬ mately through the distribution of the elevator’s profits. These ideas have, moreover, been fostered, so the Commission is informed, by the promotion work of the cooperatives, a good deal of which has been devoted to the proposition that the cooperative elevator will not only handle the farmer’s grain but will also supply him advanta¬ geously with other things which he requires. The handling of side lines has also, according to the information obtained, been advocated by the cooperative and other journals, and the farmers have been urged to handle side lines as an adjunct to their business and as an additional source of profit. The agents of the Commission were also informed by one of the large line operators that the cooperatives in the Northwest frequently employ two or more men and are, in con¬ sequence, often in a better position to handle this business than are those elevators employing a smaller force like the line com¬ panies. ^ Finally, by reason of the cooperative principle, the volume of side¬ line business transacted by a cooperative ought, theoretically, to be very much greater than the amount which would be handled by ele¬ vators of other types, and, other things being equal, this should result in its being done at a lower cost. Commercial lines.— In the case of the commercial-line companies, the situation is decidedly different than it is with the cooperatives. Although the latter, for reasons stated, are probably able to find a good profit in the side-line business, the commercial-line operators say that they do not find side lines particularly profitable. Where they are handled, it is claimed that it is chiefly or largely in order to help pay expenses. At certain line stations the grain business would scarcely justify the salary paid the agent were it not for the side-line business done. It is stated that at such stations side lines tend to keep the agent busy and enable the line company to pay him a living salary, which might otherwise be impossible. The business of the line company is primarily grain merchandis¬ ing, however, and this must not be neglected on account of any side lines. As a rule the line station employs but one, or at most two men. As these can attend to only about so many duties efficiently, either the handling of a considerable volume of business in one or two side lines, or the handling of a considerable number of such lines would be likely to necessitate, in many cases, the employment of addi¬ tional help. The greatest demand for certain side lines, especially coal and lumber, comes during the busiest part of the crop year— fall and winter—when the full time of the manager is needed to at¬ tend to the grain business, a situation which always makes for the employment of an additional man. An objection to the handling of a great variety of sides lines which is advanced by some of the larger line companies is the large amount of detail work which this throws upon the head office. The greater the number of side lines handled, the greater the volume of detail in¬ volved and the more difficult it becomes to manage the numerous stations satisfactorily. INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. 171 Independents. —IVhile a very much higher proportion of inde¬ pendents than of commercial line or mill elevators merchandise side lines, the prevalence of this business among such organizations is considerably less than it is among the cooperatives. While a definite explanation of the position of this type of elevators in the side-line business can not be given, several probable reasons may be advanced. In the fiT§t.-phrci&y while the independent is like the line elevator, a purel/merchandising proposition, it is entirely dependent upon local patronage for its existence and, unlike the line, does not secure its business from a number of localities. In consequence, it probably handles side lines with a view to accommodating its patrons to a greater extent than do the line stations. Again , it often has farmer stockholders and farmer connections, and iiv-eohsequence inclines to a liberal policy in this matter. Custom and the age' of the territory also play a part, probably, in this connection. Moreover, as the independent elevator is in most cases locally con¬ trolled and operated, there is a certain tendency to expand its busi¬ ness. As elsewhere pointed out, the independent elevator often con¬ stitutes both the business and livelihood of some one or more persons or individuals in its locality and the natural result is probably that such persons in an endeavor to develop its business invest their capi¬ tal in it instead of turning their profits into other channels of investment. Mill elevators. —A somewhat higher proportion of mill elevators, both line and individual, than of commercial lines are engaged in the side-line business. Mill establishments also handle a higher aver¬ age number of lines than does the commercial line house. Both mill types, however, rank much below either the independents or the cooperatives in the proportion of establishments handling side lines and also in the average number of side lines handled. The nature of the mill-elevator business, which, as repeatedly explained, is pri¬ marily to serve as a feeder for the mill, is probably sufficient to account both for the low proportions of these elevators handling side lines and the low average number handled. Since the mill elevator serves primarily as a source of grain supply to the mill, a large num¬ ber of them either do not do any grain merchandising or are engaged in it only to a small degree, except in flour and feed (sec. 17). In so far, therefore, as this is the case, the number of mill elevators handling side lines is probably limited to merchandising elevators, and from the nature of the business it is not to be expected that the number of lines handled would be as great as in the case of either the cooperatives or independents. Section 16. State variations in side-line business. The following table shows the percentage of elevators handling side lines in each of the 14 States for which returns were separately tabulated, together with the average number of side lines handled both by elevators which report such business and by all elevators reporting: 172 COUNTRY GRAIN MARKETING. Table 61. — Proportion of elevators in specified States handling side lines and average number handled per elevator. state. Percentage of elevators handhng side lines Average number of side lines handled, all eleva¬ tors doing this business. Average niunber of side lines handled, aU eleva¬ tors an¬ swering inquiry. Michigan. 94.2C 3.99 3.75 Indiana. 90.86 3.01 2.73 Wisconsin. 84.58 3.22 2.72 South Dakota. 83.96 2.24 '088 Iowa. 83.77 2.76 2.31 Ohio. 82.46 3.81 3.14 Minnesota. 80.05 2.41 1.93 Oklahoma. 77.78 2.10 1.63 Ilhnois. 77.73 2.51 1.95 Kansas. 77.54 2.49 1.93 Missouri. 75.00 2.25 1.69 North Dakota... 73.95 2.01 1.-18 Nebraska. 73.23 2.14 1.57 Montana. 55.15 2.48 1.37 Average, 14 States. 79.16 2.57 2.04 The proportion of elevators of all types handling side lines ranges from about 55 per cent in Montana to about 94 per cent in Michigan. For all elevators reporting, the average number of side lines handled per elevator ranges from 1.37 per cent in Montana to 3.75 per cent in Michigan, and for elevators engaged in this business from 2.01 per cent in North Dakota to 3.99 per cent in Michigan. These variations are presumably due chiefly to the geographical distribution of the different types. Section 17. Relative importance of different side lines. Results of tabulation. —Appendix Table 12 presents in detail for each type of elevator in the 14 States separately tabulated the pro¬ portions of those elevators handling side lines which deal in each of 13 specific lines. Coal is reported by a far larger proportion of elevators than is any other side line, nearly 72 per cent of the elevators handling side lines reporting this commodity. Feeds are reported by 47.63 per cent of the elevators, flour by 32.43, building material by 18.80, and seed by 14.67. Fencing materials, farm implements, forage, live stock, fertilizer, country produce, merchandise, and beans follow in the order named. Each of these commodities, however, is reported as being handled by less than 7 per cent of the elevators handling side lines, so that the five commodities first mentioned are easily the most important. Type variations.— The distribution of the five principal side lines by type of elevator (excluding cooperative lines and all maltster ele¬ vators on account of scanty data) is as follows: INCIDENTAL FUNCTIONS OF COUNTRY HOUSES. 173 Table 62. —Proportion of different types of elevators handling side lines which deal in the five principal side lines. Type of elevators. Coal. Feeds. Flour. Building material. Seed. Commercial line. 83.57 32.86 24.73 20.26 12.01 Mill line. 51.26 83.75 79.27 3.64 4.76 Individual cooperative. 82.69 55.39 41.87 17.55 14.17 Independent. 63.39 46.29 24.04 22.67 19.36 Indi^dualmill. 30.24 65.32 37.90 6.45 12.10 All types 1. 71.94 47.63 30.43 18.80 14.67 1 Including all maltster and cooperative line elevators. Commercial line and cooperative elevators lead easily in the han¬ dling of coal, the two mill types in feeds and the mill lines in flour. The independent, commercial line, and cooperative type all handle building material and seeds to an extent somewhat comparable with the average, while the operations of both mill types in these com- - modities and in coal are much below average. The low proportions of mill elevators handling these last three side lines is presumably to be explained by the fact that mill elevators are so largely feeders for the mill and are frequently not engaged in the grain merchandising business. In so far, therefore, as they do not merchandise grain, it would appear somewhat less likely that they would take on side lines for merchandising and to this extent, there¬ fore, except in flour and feed, that their merchandising operations would tend to be more limited than those of other types. In the case of flour and feed, however, the situation is somewhat different. The one is the product and the other the by-product of the mill’s operations and these two commodities, therefore, are handled very extensively by these types. There are at least two possible explanations of the fact that mill lines handle flour and feeds more frequently than do the individual mill elevators. One is that since individual elevators are usually an integral part of the mill, sales of feed and flour are regarded as mill sales and not elevator sales, and were not, in consequence, returned.^ ’ The other is that a considerably larger proportion of mill line ele¬ vators are engaged in merchandising operations than are individual mill elevators. The relatively high frequency with which coal and lumber are handled by the commercial line is probably to be found, at least in part, in the fact that these commodities are reported to be much easier for the head office to keep a check on than are many of the other side lines. Coal and lumber are bought and sold on a weight and measure¬ ment basis and there is also less office detail involved in the handling of these commodities. Coal, especially, so the Commision is in¬ formed, takes .comparatively little of the time of the manager, for the reason that the farmer generally loads the coal into his wagon and all that the elevator man has to do is to weigh it in. It thus adds but little to the expense and something to the profits. * This may also explain the wide variations In individual mill elevator sales of flour and feed, the former being regarded as mill sales in a larger proportion of cases than the latter. 174 COUNTRY GRAIN MARKETING. Lumber differs considerably in grade, and to handle it requires a considerable amount of capital. The fact that the commercial line elevator companies usually command ample funds is probably one of the explanations for the extent to which building material is reported as a line elevator side line. It is to be noted, however, that one line company in Minneapolis reported that it w’^as dropping lumber be¬ cause of the fact that it required special men to handle it properly. The high proportion of commercial line elevators and also of coop¬ eratives reporting coal as a side line, is in all probability partly influ¬ enced by the fact that in the Northwest, where both these types are relatively very important, the average town has been reported to the Commission to sell so small a quantity of coal that it will scarcely support a dealer handling this commodity alone. A considerably higher proportion of the cooperatives handle coal, flour, and feeds than the average, and the proportion handling the other two principal side lines, lumber and seeds, is about average. State variations in different side lines handled. —^Appendix Table 13 presents the proportions of elevators handling 13 specified side lines in each of the 14 States separately tabulated. This appen¬ dix may be consulted for the details of side-line handling in different sections. Cani:cic^II- MAROINa, t atADES, DOCiSGBg, AND WEIGIIT B. . Sources of price information. General statement.— As the bulk of the grain bought by the country elevators is shipped to the terminal marketCh. '■ W) and sold at prices prevailing there, country prices are ordinarily based upon the terminal market prices for the corresponding kind and grade of grain. The country elevators are informed as to the terminal market price changes from a wide variety of sources through the medium of the mails, the telephone, and telegraph. Practically all of the large daily newspapers in the grain territory supply price quotations— the opening and closing and sometimes high and low of the market. Through the mails there come to the elevator these daily newspapers with their market news sections, circular letters, grain trade publi¬ cations of various kinds, commission men’s circulars, price cards, etc. These media furnish in many instances market information other than prices, including demand and supply conditions, daily receipts, car supply, and other trade gossip. The telephone and telegraph, of course, offer quicker service than the mails. This is especially im¬ portant if the country elevators are situated so far from the market that price information sent through the mails can not reach them in time for use in making the next day’s purchases. In most cases the price information obtained by the country eleva¬ tors is the prices prevailing at the terminal market, from which the T^uyer must deduct his gross margin--4^., freight and gross profit. SPtl!." The most important sources of price informa¬ tion reported by country elevators are daily price cards, market tele- or private wire services, C. N. D’s, terminal market price cur- “ on-track ” nnr] ‘‘f.n-nrrivp ” birl«, pprl mnin nfflpA LY PRICE CARDS. —Ordinarily the daily price card is a post card upon the back of which are printed the terminal market price quota¬ tions for various kinds and grades of grain. Sometimes future as well as cash prices are quoted and often the cards carry some other items of market information and occasionally market gossip. Such cards are sent out chiefly by the receivers in the various markets. Form 3 is an example of such a card. 175 176 COUNTRY GRAIN MARKETING. FORM 3.—DAILY PRICE CARD. Becher-LaBree Co. IS THE ANSWER TO THE QUESTION OF “Good Service” (U. S. FOOD ADMINISTRATION LICENSE NO. G-20997) Minneapolis. Jan. 10,1918. Duluth. Month. Minne¬ apolis. Duluth. Chicago. Oats. Flax. Corn. Oats. May. 74i 351J. 12415 761-76 July. 344 Jan. 350 127i 00 Minneapolis. Cash. Duluth. Track. To arrive. Close. Track. To arrive. 165-68 3 y. Corn. 78^79^ 78-79 3 W.Oats. 79^80J 79i 184i-85^ 184i-85i 2 Rye. 183 183 131-56 Barley. 127-59 356^591 354^-56^ Flax. 352-65 350 Further peace rumors today were responsible for a very nervous oat market with the May selling up to 76fc and then breaking sharply. While we cannot conceive of peace at this time, the situation is such that these rumors are bound to affect the market and we therefore advise you to cinch your profits on bulges. Barley market was still slow and draggy, the medium grades possibly selling off Ic. Rye was strong, showing a slight advance over yesterday’s sales The corn market was easy, being unchanged to 3c lower; the white mixtures slow to move. Receipts. Wheat. Corn. Oats. Rye. Barley. Flax. Mmneapolis... 214 49 75 30 Ill 24 Duluth. 15 1 4 6 Chicago. 3 101 40 3 5 B-A-Bechek-LaBree-Shipper In the case of the ordinary daily price card, service it is neces¬ sary to deduct from the terminal prices the gross margin, i. e., freight, operating expenses, and a net profit, in order to arrive at the price to be paid for grain by the local elevator. The most important ex¬ ception to this rule is the Grain Bulletin service which is used by several thousand elevators in the four northwestern grain States. The Grain Bulletin (Vol. HI), and certain other services as well, send out quotations on cards giving not the terminal market prices but instead prices which may be actually used by the elevator agent in making grain purchases; in other words, prices less freight from the local station to the terminal and also less a certain amount to cover costs of operation and a margin of profit. The Grain Bulle- PRICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. 177 tin ^ice card is familiarly known throughout the entire Northwest as “ T he Card.” It is also sometimes referred to as “ Durant’s Card,” since the service is operated by one F. K. Durant as a private busi¬ ness undertaking. Form 4 is a sample of one of these cards. FORM 4.—GRAIN BULLETIN DAILY PRICE CARD. Minneapolis, Minn., May 5 , 1920 . No. 1 NOR. SPRING 58# test_291 No. 2 “ “ 57# “_286 No. 3 “ “ 55# “_276 No. 4 “ “ 53# “_256 No. 5 “ “ 50# “_246 40-49# otherwise No. 5, 30 per pound less than No. 5 ; other light weight wheat depends on quality. No. 1 DARK NOR. 50 ; #2 50 3&4 50; lower grades 20 more than Nor. DURUM in SPRING 100 less SPG. Grade. DURUM Winter No. 1 60# test__ -266 : 1_ -276 No. 2 58# “_ -263 : 2_ - _ 271 No. 3 56# “_ - 258 : 3_ 261 No. 4 .54# “ . _ 251 : 4 _ 251 No. 5 .51# “ _247 : 5_ 241 40—50# otherwise o. 5, 30 per pound less than No. 5; other light weight DURUM depends on quality. AMBER 2 cents more than DURUM. SPRING in DURUM 40 less DURUM grade. RED DURUM 70 less than DURUM. No. 1 FLAX 426 No. 2 421 N. G__411 No. 3 OATS 26# test_ 91 No.4 “ 23# “_ 88 10 disc, per pound under 26# 55# Yel. Shell. CORN_ 154 50 disc, per pound under 55# White 10 ; Mix. 20 ; Ear 50 discount. No. 2 BARLEY 46# test_ 151 No. 3 “ 44# “_ 147 No. 4 “ 41# “_ 141 20 disc, per pound under 46# No. 2 RYE 54# test_190 10 disc, per pound under 54# Timothy Cwt 800 : Speltz Cwt_260 Buckwheat Cwt_260 #227 Int. 12 THE GRAIN BULLETIN Market telephone and private wire services. —The Grain Bulle¬ tin daily card service is supplemented by a telephone and telegraph service. Immediately after the close of the Minneapolis Chamber of Commerce, the changes necessary on the card due to a fluctuation in price, are telephoned, or sometimes telegraphed, from Minneapolis to specified central points and from there relayed to various country points at which are elevators subscribing to the supplementary service. Likewise, information of any sudden or important change in the 9964°—20-12 178 COUNTRY GRAIN MARKETING. market is similarly communicated.^ All of the subscribers to the ^ (rrain Bulletin receive the card daily, but only a portion receive the supplementary service. Out of 2,928 elevators replying to the Com¬ mission’s questionnaire who used the Grain Bulletin daily price cards, 1,630 used the supplementary service. • In market telephone and private wire service, there is also in¬ cluded all price information sent out over the telephone by various other price-reporting organizations and all telegraphic information of the same character sent over private wires by cash or future grain dealers owning or leasing private wires. C. N. D’s.—C. N. D. is the abbreviated expression commonly em¬ ployed to designate the telegraphic service of the Western Union’s commercial news department. Messages giving the prevailing market prices at an exchange are sent out by this company over its own wires at regular intervals during the trading hours-to the eleva¬ tor subscribers to the service. The telegraph company has branch stations on the various exchange floors, so that information as to price changes can be sent to the country elevators practically direct. The messages are sufficiently numerous to reflect all of the important changes.^ Terminal market price currents or price reporters. —Price cur¬ rents or reporters are printed and mailed to subscribing country elevators from all the important terminal grain markets, for ex¬ ample, Minneapolis, Chicago, Kansas City, St. Louis. These pub¬ lications, in some cases, consist of a single sheet about one-half the size of a newspaper sheet, on which appear the prevailing prices at the terminal market from which it is issued, and also prices at othqr markets.® In other cases, as, for example, the Daily Market Eecord of Minne¬ apolis and the Daily Trade Bulletin of Chicago, these publications are of newspaper size and contain a considerable amount of informa¬ tion other than mere price quotations. All these publications are conducted by private interests and not by the exchanges themselves, though the quotations may have some official standing. ’ “ On-track ” and “ to-arrive ” bids.— “ On-track ” bids are offers by mail or wire to buy grain on-track in the country, made by termi¬ nal market organizations or local buyers or their agents; “ to-arrive ” bids are offers usually from terminal market concerns for grain for shipment to, or to-arrive ” at, the terminal market within a specified period of time. Since bids of either character are bona fide offers for grain which may be accepted, they constitute a most satisfactory source of information for the elevator in determining the prices which it will pay for grain. ^ For further details, see Vol, III. 2 For details regarding these services, consult Vols. II and V. For an example of these price currents, see Appendix 9. 179 . • » PKICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. Form 5 is a sample of an “ on-track ” bid. FORM 5.—ON-TRACK ” BID. United States Food Admtnistkation License Numbee G-33419 THE PADDOCK HODGE CO. Toledo, Ohio, Ape. 16, 1918. For acceptance to reach us by 9:15 a. m. to¬ morrow or next business day, we bid you, less weighing and inspection at Toledo, any part of 5,000 bushels of each kind of grain, accept¬ ance of more than 5,000 bushels each kind of grain subject to our inTmediate wire confirma¬ tion. Specify amount of acceptance in bushels. Apparent errors excepted. F; O. B. YOUE TEACK If there is more than one railroad at your station we are to have selection of route. Do not ship until you receive billing instructions. Geade Shipment Peice Stand. White Oats 5 DAYS 861 3 White Oats 5 DAYS 86| Stand. White Oats 30 DAYS 85t 3 White Oats 30 DAYS 85 i TEACK TOLEDO Loaded in any kind of cars and shipped on any road., THE PADDOCK HODGE CO. 24 OATS-SPOT PEICES AEE ATTEACTIVE. DEMAND GOOD. WHY NOT CONSIGN US A CAE. Form 6 is a sample of a “ to-arrive ” bid. FORM 6.—“ TO-ARRIVE ” BID. ^ Philadelphia, Pa., Feb. 19, 1917. Gentlemen : For acceptance before 10.30 a. m. next business day, we will give delivered here, for No. 2 Red Wheat 195 Free from garlic * Clean, Dry Milling Wheat_ No. 2 Yellow Corn__ Cool and Sweet Yellow Corn_ Prime Yellow Cob Corn_ Shipment within ten days. Off grades accepted at market difference on day"of arrival. In accepting, state quantity in bushels, and await shipping directions, which will be furnished promptly. E. & O. E. Address, 304 Bourse Yours, truly. Bell Telephone, Lombard 19-55 Keystone “ Main 16-94 >■ • L. G. Geaff & Son. I 0 180 COUNTRY GRAIN MARKETING. Main office.— In many cases line companies, especially those with headquarters in the large terminal markets, send out from their cen¬ tral offices, either by mail or by wire, price quotations or instructions which their local elevators are to follow in buying grain. For exam¬ ple, one line company, with its main office in Chicago, sends a daily price letter to each elevator agent, while any sudden or wide changes in prices, due to a rapidly fluctuating market, are telegraphed to a central point and from there telephoned to each agent. Another Chicago company employs an evening letter and supplements this letter with information by telephone or telegraph when necessary, while others use, primarily, the telephone or telegraph and confirm or supplement this service with more detailed instructions by mail. Another Chicago company telegraphs daily at 1.30 p. m. to its ele¬ vators the Chicago Board of Trade closing prices. These prices form the basis for buying in the country for the rest of the day. In the morning additional price information is sent out, to be in effect until 1.30. Other sources.— “ Other sources ” includes any other means than the above of transmitting market information to the country ele¬ vators, as, for example, through private letters sent by grain dealers in the terminal markets, newspapers, traveling representatives of grain dealers, etc. Section 2. Average number of services employed. A considerable variation is found among the different country ele¬ vators in the number of price information services received. An ele¬ vator may use any one source of information enumerated above. Each of the different services is used exclusively by at least a few elevators. The majority of elevators, however, receive more than one service. The number of services received by single elevators ranges all the way from one to seven. Two sources of information only are used most commonly, but a substantial number of elevators ’ in some States reported as high as five, six, or seven price information services. One reason that so many elevators receive more than one price information service is the fact that certain price-quotation media are free to them, being sent out by terminal-market grain interests as advertisements.^ Another reason, and an important one, is that ' freight-rate structure is frequently such that many elevators ship to more than one market and desire price quotations from each in order to sell most advantageously. It should also be noted that some elevators not only receive more than one service there is a duplication «f the same service. For example, Price Currents and the Daily Market Records or bulletins are subscribed for by different grain interests in the terminal markets—commission firms, terminai elevators, etc.—and sent to elevators specified on mailing lists submitted by these subscribers. Thus many elevators are on the inailing lists of more than one subscriber. The amount of the resuiting duplication is 1 following table, based on 44 mailing lists of as many subscribers containing 4,yoy ii0.ni0s t * 7 elevators each receiving 7 copies. 14 elevators each receiving 6 copies. 32 elevators each receiving 5 copies. 98 elevators each receiving 4 copies. 252 elevators each receiving 3 copies. 646 elevators each receiving 2 copies. Thus, the total number of duplications is 1,684, and the net number of elevators reached is only 3,285. In Minneapolis the attempt has been made to eliminate this duplication bv having the mailing lists go through some central organization where all duplicated names are eliminated. 181 PRICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. The number of services used by an elevator may, and often does change during a year. It may feel justified in paying the charges’ of a service dunng the period of heavy crop movement, but feel com- pellecl to drop it during the season of light movement. The following table presents the average number of price informa¬ tion sepices reported by 7,944 elevators in the 14 principal grain- producing States. (Appendix 2, inquiry 13.) Table 63. Average number of price information services reported by elevators in specified States. State. Montana.• Wisconsin..... Oklahoma. Michigan. Missouri.. Minnesota. North Dakota. Ohio. South Dakota . Nebraska. Indiana. Kansas. Iowa. Illinois. Total. Number of elevators reporting. Number of price infor¬ mation services re¬ ported. Average number of price infor¬ mation services. 401 683 1.70 204 396 1.94 154 298 1.94 208 415 2.00 187 402 2 15 1,111 2,433 2.19 1,249 2,769 2.22 328 772 2 35 809 1,908 2.36 582 1,378 2,37 392 956 2.44 586 1,506 2.57 736 2,209 3.00 997 ,3,028 3.04 7,944 19,153 2.41 Section 3. Relative extent of use of different sources. j. following table presents the relative importance of different sources of price information as indicated by the ratio of times reported to total number of elevators reporting: Table 64. Ratio of times specified price information services are reported to total elevators reporting. - , Sources. V • . - N Times reported. Ratio of times re¬ ported to number of elevators reporting. Daily price cards. 5,082 3,735 2,728 2,220 1,606 1,597 876 1,249 63.97 47.02 34.34 27.95 20.97 20.10 11.03 15.72 Market telephone or private-wire service... Terminal market price currents..... ^ "On-track” bids. C. N. D...... . Bids, "to-arrive”. Main office. All other sources. Total. 19,153 7,944 Total elevators reporting. From this table it appears that approximately two-thirds of the country elevators in arriving at country buying prices make use of some one or another form of daily price cards and about half are also recipients of some form of market telephone or private wire service. Price currents, “on-track” bids, C. N. D’s, “to-arrive” bids, and main office follow in the order of importance. 182 COUNTKY GKAIN MARKETING. Price cards. —Appendix Table 14 presents the proportion of ele¬ vators in the 14 specified States reporting the use of the foregoing specified sources of price information in arriving at their buying prices. (Appendix 2, inquiry 13.) Daily price cards are most important in the four northwestern States, which are the only ones reporting the use of this Qlass of service to a greater extent than the average for all 14 States. As high as 96 per cent of the elevators in North Dakota and 95 per cent in Montana report the use of daily price cards, and above three- fourths of the elevators in Minnesota and South Dakota. The great importance of daily price cards in this area as compared with any other section of the country or any other States is unquestionably to be found in the widespread use of the Grain Bulletin card. For example, in North Dakota, out of 1,201 elevators reporting daily price cards, 1,163, or 96.84 per cent, used the Grain Bulletin, and in Minnesota, out of 935 reporting, 825, or 88.24 per cent. Price currents. —Both daily price cards and price currents are mail services and, except for the Grain Bulletin and possibly one or two other services, the information they supply is in essence the same. These services, therefore, tend to compete with one another and to some extent apparently this is responsible for the variations in the use of these services. Price currents, for exam¬ ple, are least employed in Ohio, Oklahoma, Michigan, and in the four northwestern States. In these four northwestern States, as stated, the Grain Bulletin is in almost universal use, and the lack of use of-price currents in this area, therefore, can probably be accounted for on this ground. As explained in a preceding section, the Grain Bulletin card gives a base buying price, which can actually be used for grain buying, and it is therefore in no way remarkable that price currents are not in extensive use in the Northwest merely from the fact that they are much less convenient, since they merely give the terminal market prices. The low percentages of use of price currents in Ohio, Oklahoma, and Michigan, especially the two latter, is probably explainable by the facts set out in connection with the direction of grain movement—^that these States, because of their loca¬ tion do not feel the pull of the terminal markets, the great bulk of their grain going to small local points, to feeders, interior brokers, etc. (Ch. VI, secs. 4-8.) JdARKET TELEPHONE AND PRIVATE WIRE SERVICES. JN Ortll anCl oOUtn Dakota, Minnesota, Illinois, and Iowa are the only States reporting the use of market telephone and private wire services to a greater extent than the average, and South Dakota is barely average. The importance of this class of service in the first three of these States may, with a good deal of certainty, be attributed to the Grain Bulletin. This source, as previously indicated, consists of daily price cards and a supplementary telephone service, the former being used by the great bulk of the elevators in the four Northwestern States. While the supplementary wire service is not nearly so frequptly employed as is the card service, the bulk of the elevators in Minne¬ sota and the Dakotas reporting market telephone and private wire service reported the Grain Bulletin supplementary service as that •employed. This appears from the following figures: PRICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. 183 State. Number of elevators reporting market telephone or private wire services. Elevators reporting Grain Bulletin wire service. Number. Percent¬ age. North Dakota. 927 577 381 854 429 273 92.13 74.30 71.65 Minnesota. South Dakota. In Illinois and Iowa the high proportions of this class of service may be readily accounted for by the private wires of the various Chi¬ cago wire houses. Of all the large grain-producing States, Iowa and Illinois easily lead in the number of branch offices and correspond¬ ents of wire houses.^ The following figures show the number of branches, correspondents, and towns served in these two States: \ State. Branches. Corre¬ spondents. Total branches and corre¬ spondents. Towns served. Illinois. 49 46 95 46 29 14 43 24 # , As it is not at all unusual for a single branch or correspondent to serve as high as 40 or more country elevators, the high concentration of these stations in these two States probably explains the importance of this service in this area. - ^ “ On-track ” AND “ TO-ARRivE ” BIDS.— The relative extent of use of ^‘on-track” and “to-arrive” bids is probably governed in large measure by the method of selling grain prevailing in different sec¬ tions of the grain-growing area. An examination of the statistics of the method of sale in comparison with the reported use of “to- arrive ” and “ on-track ” bids leads to the acceptance of this as perhaps the fundamental explanation of the variations reported in different States. As set out previously (Ch. YI), country elevators and warehouses reported as to whether sales of about three-quarters of a million cars sold to terminal and smaller markets were on consignment or were direct—i. e., sold “to-arrive” in the terminal or smaller markets or “ on-track ” in the country to representatives of dealers in such markets. The following table presents the proportion of elevators in the 14 principal grain-producing States reporting the use of “ on-track ” and “ to-arrive ” bids in comparison with the proportion of direct selling reported: ecf. Vol. V, Ch. 3. j^g4 COUNTRY GRAIN MARKETING. Table Qn.—Cmtvparison of ‘‘on^track^^ mid to-arrive” Uds in U specified States, loith direct sales to terminal and smaller markets. State. rroportion of direct sales to terminal and smaller markets. Percentapre of elevators reporting “to-arrive” bids. Percentage of elevators reporting “on-track” bids. 8.*). 37 9.09 35.06 78.16 11.06 31.25 67.64 18.60 53.96 51.41 23.21 54.85 39.67 37.71 63.06 37.06 25.77 27.15 29.47 25.77 41* 98 28.14 38.45 51.90 19.13 7.98 3.49 17.37 10.16 21.93 3.60 10.78 10.13 8.09 8. 70 10. 29 11.79 8.01 11.07 7.41 17.80 18.42 26.47 20.10 27.95 The lowest proportions of direct selling are found in the four North¬ west States and Wisconsin and Missouri, all of which are consider¬ ably below average in their proportions of sales by this method. ^a(m of the other eight States under consideration, on the other h^d, reports a much higher than average proportion of direct sales, ihe States in the former area all report a less than average ernployment oi both “on-track” and “to-arrive” bids, and all those in the latter area (except Nebraska) a higher than average use of onTrack bids, and, with the exception of Oklahoma, Michigan, and Ohio, a higher than average proportion of “to-arrive” bids. The low pro¬ portion of “ to-arrive ” bidding from these States may be assigned to facts previously discussed in connection with shipments. An ex¬ amination of Table 36 reveals the fact that these three States are the smallest shippers to terminal and smaller markets, the bulk ot their grain going to interior brokers, mills, feeders, etc. MTiile, therefore, extremely large proportions of the grain from these States moving to the terminal and smaller markets is sold direct, the total volume disposed of in this fashion is relatively not great, and to-arrive bidding is not in consequence extensive. ^ Main office.— The main office is relatively very important as a source of price information only in the States of Oklahoma and -Me- braska, in each of which it is far more frequently reported than in any other State. It would naturally be expected that this source of information would vary in importance with the relative impor¬ tance of the line elevators of all types in the various States, but such does not seem to be particularly the case. Thus the four North- we'stern States, all of which report very large proportions of line elevators of all types, are relatively low in the proportion of elevators reporting main office. The explanation of this fact lies in the large use of the Grain Bulletin service in this area. ^ The fact is that the commercial lines in the Northwest use the Durant or Grain Bulletin card probably as extensively as do the other types, and these elevators are, under normal competitive con-,^ PRICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. 185 ditions, frequently, if not usually, under instructions to “ follow the card.” Outside of thes^ four States and Nebraska and Oklahoma there are practically no States which report a proportion of total line elevators anywhere near the equal to the average for the United States, which probably explains the relatively low use of this source of information as reported for other States than these six. C. N. D’s.—For the variations in the use of C. N. D. service no plausible explanation was found. Section 4. Type variations in the use of price-information services. Results or tabulation.— Table 66 presents the relative impor¬ tance of different price-information services among the five princi¬ pal types of elevators. Appendix Table 15 may be consulted for further details regarding the other three types, the number of ele¬ vators reporting, etc. Table 66. —Ratio of instances different sources of price information are re¬ ported to number of elevators of different types reporting in the IJf principal grain-producing States. Price information service. All types.i Individ¬ ual coop¬ erative. Commer¬ cial line. Inde¬ pendent. Individ¬ ual mill. Mill line. Daily price cards. Market telephone and private wire. Price current. On-track bids. C. N. D. To-arrive bids. Main office. 63.97 47.02 34.34 27.95 20.97 20.10 11.03 71.82 54.74 36.45 31.00 ■ 27.34 26.16 68.91 48.72 22.96 ' 17.21 15.88 13.00 23.73 59.55 46.29 47.10 41.78 23.25 26.79 « 52.98 23.15 42.00 27.21 26.25 13.84 43.20 37.80 18.79 9.07 9.72 12.31 37.15 Average number of sources per elevator... 2.41 \ 2.63 ¥ 2.21 2.66 2.11 1.76 1 Including cooperative line and all maltster elevators. These are excluded from the type tal5ulations on accoimt of the small number reporting. The most important of the foregoing variations as between types of houses are explainable in the light of the discussion of the varia¬ tions in different States set out in the last preceding section, provided the following facts are borne in mind; that Nebraska and the four Northwestern States are relatively the most important commercial line States; that the same five States, together with Iowa and Kansas, are the most important cooperative elevator States; that the States east of the Mississippi, together with Iowa and Missouri, are the important independent elevator States; and that those States east of the Mississippi, except Illinois, together with Oklahoma, Missouri, and Kansas to the west, are the important mill elevator States. Price cards and telephone and private wire services.— Bearing in mind these facts and those set out in the preceding section, the relatively high use of daily price cards by the individual cooperative and commercial line types is no doubt due to the high concentration of these types in the four Northwestern States where the Grain Bulletin service is so generally employed. The relatively large use of market telephone and private wire service by these two types may similarly be attributed to the importance of the Grain Bulletin sup¬ plementary wire service in the same area, while the comparatively 186 COUNTRY GRAIN MARKETING. high proportion of independents reporting this^ class of service is attributable to the extensiveness of private wires in the territory sur¬ rounding Chicago, especially Iowa and Illinois. In most of the States in this area the proportion of independent elevators is rela¬ tively high. Price currents. —The use of price currents is relatively high for independents and individual mills and relatively low for the co¬ operatives and commercial lines. This is to be attributed probably to the fact that in the Northwest, where the two latter types are most important, the competition of the Grain Bulletin unfavorably affected the development of this class of service. In the States to the south and east, which are high in independent and individual mill elevators, there is no Grain Bulletin service and the competition encountered by the price currents is only that of the ordinary daily price card, with the result that the former is much more largely used by the independents and individual mills than by the commercial lines and cooperatives. “ On-track ” and “ to-arrive ” bids. —“ On-track ” and “ to-arrive ” bids are relatively little used by the commercial line type, chiefly be¬ cause these elevators are highly concentrated in the Northwest, where the great bulk of the grain is sold on the consignment basis and very little either “ on-track ” or “to-arrive.” “ On-track ” bids are employed to a far greater extent by the independents than by any other type, this being due chiefly to the fact that the bulk of the grain in areas where the independents are relatively important is sold either “ on-track ” or on a “ to-arrive ” basis and is not consigned. That the independents do not report a very much larger use of “ to-arrive ” bids is probably to be found in the fact that some of the important independent States, notably Michigan and Ohio, ship so largely to feeders, local mills, interior brokers, etc., and not to the terminal and smaller mar¬ kets, with the result that there is less “ to-arrive ” bidding in such areas. The reported variation in the use of “ on-track ” and “ to-arrive ” bids by individual mills corresponds roughly, though on a somewhat lower scale, with the variations shown by independent elevators, a much larger proportion reporting “on-track” bids than report “to- arrive ” bids. The lower use of the latter as a source of information is attributable probably to the large proportion of local shipping done in certain important individual mill States, notably Oklahoma, Michigan, and Ohio. As compared with the other types the cooperatives report a little above the average use of “ on-track ” and “ to-arrive ” bids, though the commercial lines, with a somewhat similar territory, are relatively . low in their employment of each of these two sources. The explana¬ tion lies perhaps in the fact that elevators in both Kansas and Iowa, which are important cooperative States, sell to a considerably greater extent “ on-track ” or “ to-arrive ” than do any of the important com¬ mercial line States, except Nebraska. Main office. —The main office is, of course, a source of price in¬ formation only for line companies. In consequence this is reported only by mill and commercial lines out of the five principal types of elevators. Mill lines, it will be noted, report a much larger employ¬ ment of the main office than do commercial lines, which is explainable I 187 PKICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. by facts already referred to in discussing the State variations. In the four Northwestern States, which are relatively so important in com¬ mercial line elevators, the Grain Bulletin service is used extensively by the commercial lines, and the stations are frequently if not usually under instructions to “follow the card.” In consequence there is rela¬ tively much less buying upon price information from the main office I than in the case of the mill lines, which are very important in other States than the Northwest. Determinatio m of-cojintry-prices. J A T —Prices paid by country elevators are greatly affected by the competition of other local elevators and buyers and also by that of elevators and buyers in near-by towns. The farmers are quick to take advantage of any situation which will permit the pitting of buyers against each other in bidding for grain, and as a result sharp competition frequently develops. Tales of the higher prices being paid at near-by competitive points or by other local elevators or buyers are repeated by the farmers to the various buyers and elevator agents, with the proposal to take their business elsewhere unless the prices are met. WTiile these rumors are often not well founded, they frequently have the desired effect. Similar bartering in reference to grades, dockage, elevating, and storage charges occurs at times, and in instances affects the grading and dockage or fees charged for elevating and storage service. (i S h. Calculation of country price. —Subject to these local competitive conditions, the prices paid in the country for grain are, as previously stated, based largely upon the terminal market price, since the great bulk of the grain bousrht by the country elevators moves to the term- I inal markets and is ultimately sold there. The price usually offered \ the farmer is the price being paid in the terminal market for grain of \ a like grade, less the amount of freight and the gross profit, the latter including operating and other expenses, such as insurance, taxes, etc., ^d the buyer’s n^t profit.—-- ^io Illustrate, iFthe Minneapolis price for No. 1 northern wheat was $1.20 per bushel, the freight to Minneapolis from a country point 14 cents per bushel, and the gross profit which the buyer of that grain in the country desired to obtain, 6 cents per bushel, he would bid $1 per bushel for that grade of grain, i. e., $1.20, the terminal market price less 14 cents freight and 6 cents gross profit. This difference of 20 cents—that is, the gross difference between the terminal market I price and the country price—is usually called the gross margin.® Owing to local competitive conditions, gross margins may fre¬ quently fail to show a net profit. In fact at times the competition in the country market may be of such a character as to compel the buyer so to narrow his margin by advancing the price that the dif- ' ® In the case of line companies, the term “margin,” when used, would frequently refer I to the spread without the freight, since this latter item would vary from station to station. The terms “ buying margin,” “ gross margin,” “ margin,” etc., therefore, may be said to refer to either class of spread. In this discussion the terms “ margin ” and “ buying margin ” are employed to designate the spread between country and terminal prices, making allowance for freight, and the terms “gross margin” or “gross buying i margin ” are employed to indicate the total spread. 188 COUNTRY GRAIN MARKETING. ference between the country price and that at the terminal market will be insufficient to pa}^ the freight. Conversely, and in the absence of competition, the buyer might j widen his gross margin by reducing his buying prices to such an ex¬ tent that his net profit per bushel would be entirely out of proportion to the service performed. ^ | Pacific coast. —While Pacific coast prices are necessarily based to J a certain extent on prices prevailing at Seattle, Portland, and other terminals, this does not mean precisely the same thing as in the big grain markets of the Central West. While the coast cities of Seattle, ' Tacoma, Portland, San Francisco, and perhaps Spokane may be ] regarded as terminal markets in the sense that they are grain con- * centration points, there can scarcely be said to be an organized market | existing at any one of these places, at least in the sense in which that I term is understood in Chicago, Minneapolis, Kansas City, and other j large grain markets. - I While certain of the exchanges in the coast cities have a trading I floor it is little used. There is no continuous market nor continuous J quotations, and most of the business, as in some of the eastern markets like New York, is transacted in the offices of the various buyers and | sellers. The country prices for grain on the coast, therefore, are not jj based on the prices made in an organized market which represent a collective rather than individual valuation, but rather upon indi- vidual bids and offers. | The prices paid on the Pacific coast by line company agents are I usually determined by the head office. These prices are sent to the J district managers, if any, and then on to the country agent, or sent I to the country agents direct. One line company mails post cards I daily to the various stations, stating prices and shipping instructions. , A cooperative line in Washington notifies its agents daily by tele- ' phone of prices to be paid. A number of the individual cooperative ( elevators obtain prices by telephone and telegraph from a grain- ^ marketing agency for cooperative companies, the Tri-State Terminal Co. Many independent elevators or warehouses apparently bas^/ their prices solely upon those paid by competing concerns. -j l y e f T iT gH . ' g T n s. [ethod or oBTAiNiNCL-EE LCE DATA . —The buying margins exacted by couhfry~eIevators' generally, and also by the different types, have always been a much debated subject. The partisans of each type have argued in favor of their elevators, the cooperatives claiming, for example, that their entrance into the field has forced the other types -to narrow their buying margins and thus to pay the farmers a higher price for their grain; the line companies asserting that grain was formerly handled on a much narrower margin than in recent years, and that country elevator competition has resulted in widening the margin and lowering the prices through the fact that the volume rrain handled by the individual elevator has been decreased..^^ it i^‘imposbIUl'e lu sec!me IjUilii^lical proot as icrany these points on account of the fact that country elevators do not keep their price records for more than a very few years at most. Statistical comparisons, therefore, of margins at different periods are practically PRICES^ MARGIITS, GRADES, DOCKAGES, WEIGHTS. out of the question. For the purpose of obtaining concrete informa¬ tion on this subject, however, representatives of the Commission made a study of con^ry elevator buying margins in the States of North JJakota, South Dakota, Montana, and Minnesota, covering the period ^1912, to^ June 30, 1917. The types of elevators included in this study are the commercial" and mill lines,"' the individual mill, the individual cooperative, and the independent. The elevators studied were distributed over the four States on the basis of the nunaber of elevators within each State, more elevator accounts from orth Dakota being examined than any other State because it is the State with the largest number of elevators. Conversely, fewer ele¬ vators were studied in Montana. - ^ The attempt was also made to allot each State a number of ele- yators of each type approximately proportional to the total number- ordhat type of elevator in the State, though this distribution was not entYely satisfactory, owing to the very poor lists of elevators which are to be had.® Within the State the effort was made so to scatter the points se¬ lected as to obtain prices in all sections, and in order to obtain rep¬ resentative competitive conditmns a further distribution of the ele¬ vators was made upon the basis of whether one, two, three, four or m^e than four elevators were located at the points selected. Representative character of data.— In all, country-price data were obtained from 340 country elevators, of- which 208 were of the commercial and mill line type and 132 of the individual. The prices for the former stations were obtamed from the Minneapolis head offices and the latter stations were visited by the Commission’s agents and the prices taken directly from the books and records.® The prices taken off were those for the different varieties and grades of grain on each day that such varieties and grades were purchased, and no ’These two types are considered as one, all the mill lines included being onerated as merchandisers like any commercial line. uemg opeiateu as 8As the returns to the Commission’s country elevator schedule had not been made at the time this s^dy was undertaken, the results as to the proiportion of different types of f different States later obtained could, not be usSi and the varies lists of elevators w^re tiie sole source of information available. The distribution of margins or spr^ds obtemed and found usablo as botwoon dififoront tvp^ of olovators as oomnarpri foflow?: "0?tCe?tern SmS, as Tjqie of elevator. Per cent of type to total in 4 States. Per cent of prices of No. 1 northern wheat. Per cent of prices of No. 3 northern wheat. Per cent of prices of No. 3 white oats. Per cent of prices of No. 2 rye. Commercial line ’. Individual cooperative. Independent. Individual npll. 55.34 23.07 18.54 3.05 53.16 32.83 9.93 4.08 53.96 35.57 9.66 .81 56.35 36.44 7.21 71.95 24. 43 3.62 -p 1 X ^ ^ price quotations in comparison with the dis- types were less so, and not all prices were entirely legible. 190 COUOTRY GRAIN MARKETING. prices were taken except where the date and the kind and grade were also recorded. A¥here more than one price for a particular kind and grade was found in a single day, as occasionally happened, all the prices were taken. While, therefore, only 340 elevators are 'included in the study, the prices represent those at which practically all their grain was bought by these elevators during the years in question, and considering this fact and the care employed in obtain¬ ing a representative distribution, it is believed that the country prices obtained are fairly representative of the prices of grain at country points in the Northwest during the crop years of 191^13 to 1916-17. Method of computing margin. —The data obtained as set out above were then surveyed for errors and obviously incorrect figures thrown out. The daily margin, or spread, was then computed hj subtracting the daily country price (or simple average of these prices in those few cases where more than one price was reported on the same day) from the price (less freight) at which the greatest number of cars of the same kind and grade of grain was sqld in the Minneapolis, market on the same days, as such prices for the greatest number of cars were reported in the Minneapolis Market Record. After the computation of the daily price spreads on the four grades tabulated, the yearly and five-year averages were computed by divid¬ ing the sum total of the plus and minus spreads by the total number of daily spreads computed for the month, year, and five years. Grains selected. —While the daily prices obtained from the ele¬ vators included practically every kind and grade of grain, final results are presented for only two grades of wheat and one grade each of oats and rye—i. e.. No. 1 and No. 3 northern wheat, No. 3 white oats, and No. 2 rye. No. 1 northern wheat. No. 2 rye, and No. 3 white oats are, respec¬ tively, the most important grades of wheat, rye, and oats in the Minneapolis market.^® They were, in consequence, those grades for which the largest number of prices were obtained in the country, and likewise the grades for which the daily record of terminal market prices was the most complete and representative. Wheat is by far the most important grain in the four Northwestern States. Partly for this reason and partly also in order to get a comparison of mar¬ gins as between high and low grades. No. 3 northern was also tabu¬ lated.^^ The margins for other grades of these'‘thi?ee'grains were not computed owing, with one or two exceptions, either to the few country prices obtained or to the lack of a continuous daily price record for the grade at Minneapolis. No margins were computed either for corn or barley. The north¬ western grain territory markets comparatively little corn and a suffi¬ cient number of prices therefore was not obtained to warrant tabu¬ lation. Considerable study was given to the question of barley mar¬ gins, and it is regretted that it has been found impossible to present any figures for this grain. No accurate or satisfactory comparison between the country and terminal grades on barley in the Northwest could be made, because until very recently buying in the country in I'J Except for occasional crop failures, disease, etc. . , . . x xt, “ A lower grade than No. 3 would have been desirable for this purpose, but the number of country prices on the lower grades was too scanty. PRICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. 191 pnf T *5® majority of cases based upon an entirely differ¬ ent set of grades from those used in the terminal market, and these two sets of grades were lacking in comparability. It IS undisputed, however, that the margins on which barlev was fntimrm^^ least prior to the establishment of a other grains. The reasons given by the trade were numerous, the being (a) the lack of a hedging market; (51 the fact that barley could not be accurately graded; (c) the fact that each malster desired a particular type ''oftarley Ld that ^leLver he If least 'the iri ^ reasons has been removed, and it would be highly interesting to determine statistically whether the T formerly. It is probably safe to state that the chances are that the margin has not been narrowed at least until very recently, owing to the very unsettled condition of the prohibition, the use of barley as a substitute for wheat during the war, etc. In spite of the future market, moreover, some doubt of the margins becoming much nar¬ rower may be expressed because of the probability that country X? this grain much more correctly then than they have been in the past.^^ ^^^Section 7. Analysis of results of study of margins. Average margiks found. —Table 67 presents the average buying .>-jnargIlls bv tvne of bn.,.p the foreo-oino- kiud.s anrl In coMideriSglW margins it is ne~ry Th bear in minTTlf^ that the margin does not reflect accurately the spread between coun- * prices. Grain in the country is bought on the basis of the judgnient of each individual elevator operator as to o-rades dockages, and weights. In the terminal it is sold on the basis of . grades and docka^s and weights determined by an expert inspec¬ tion depar tment .^ Owing particularly to competition in grading and dockage oimi. 0 uiid 16), grain bought in the countr/may be overgraded or underdocked, or the reverse. In the former case the spread is actually much narrower than is shown by the compari- sonof^t^ terminal and country prices; in the latter much wider. future market was established in 1918. during and since^th^ w\^r ^^e ^a^lUn"^^emand\or malting demand to prohibition, the difficulties in sradin^ wilf inpwft/hftr largely curtailed owing the principal ’ demand will th?n^ be ??r feedTnT^^^^^^^ ^hat 192 COUNTRY GRAIN MARKETING. Table 67 —Average buying margins ^ of different types of elevators on specified grades of grains during the erop years 1912-13 to 1916 17. Type and period. No. 1 northern. No. 3 nofthern. No. 3 white oats. No. 2 rye. Number of daily margins. A-verage margin In cents per .bushel. Number of daily margins. Average margin in cents per bushel. Number of daily margins. Average margin in cents per Dushel. Number of daily margins. Average margin ji cents per mshel. 1912-13. Individual cooperatives.... Commercial lines *. Independent. Individual mill. 949 2,394 339 195 + 4.35 + 4.82 + 4.72 + 3.79 176 29 49 + 5.79 6.56 + 5.56 162 62 34 +3.00 +2.63 +4.53 10 47 + 7.66 + 5.74 Total. 3,877 + 4.64 254 + 5.83 258 +3.11 57 + 5.86 1913-14. Individual cooperatives. Commercial lines *. Independent. 1,334 3,044 641 131 + 3.46 + 3.02 + 3.91 + 2.86 7 74 + 4.79 + 3.39 155 391 +3.09 +3.19 96 + 4.87 Individual mill. Total. 5,150 + 3.24 81 + 3.52 546 305 521 75 +3.16 96 + 4.87 1914-15. Individual cooperatives. Commercial lines *. Independent. Individual mill. 1,482 2,4.30 503 277 + 6.38 + 5.02 + 8.27 + 8.28 617 1,102 303 + 8.44 + 8.67 + 9.34 +3.62 +3.93 +3. 70 77 252 + 6.37 + 6.66 Total. 4,692 + 5.99 2,022 •f* 8. /O 901 +3.81 329 + 6.59 1915-16. Individual cooperatives. Commercial lines 2 . Independent. Individual mill. 3,669 6,211 1,094 350 + 5.29 -t- 5.32 + 6.54 + 7.58 356 830 111 + 7.46 + 7.12 + 7.66 322 639 56 +3.67 +3.57 +2.72 166 510 39 + 5.52 + 5.63 + .5.94 Total. 11,.324 + 5.50 1,297 + 7.26 1,017 +3.55 715 + 5.62 1916-17. Individual cooperatives. Commercial lines 2 . Independent. Individual mill. 2,197 1,519 337 244 +10.92 +11.87 +15.17 +10.22 649 703 27 41 +15.38 +15.08 + 7.08 +14.09 415 488 104 +3.08 +1.45 +2.63 233 526 33 +■8.40 + 6.90 +12.13 Total. 4,297 +11.55 1,420 +15.03 1,007 +3.21 792 + 7.56 1912-1917. Individual cooperatives. Commercial lines 2 . Independent. Individual mill. 9,631 15,598 2,914 . 1,197 + 6. .39 + 5.39 + 7.04 + 7,15 1,805 2,738 490 41 +10.47 + 9.68 + 8.46 +14.09 1,359 2,101 269 +3.33 +3.53 +3.19 486 1,431 72 + 7.08 + 6.22 + 8.78 Total, .. . 29,340 + 5.95 5,074 + 9.88 3,729 +3.44 1,989 + 6.52 1 Difference between the average daily prices paid by country elevators and the terminal market pnce (less freight) at which the greatest number of cars was sold on the onerate 2 Includes a certain proportion of northwestern hnes owned by or affihated with mills, but which op &s merchandisers in all essential respects like the commercial line ... Margins by grains.— Subject to the foregoing qualifications of the figures it appears that of the four grades of grain quoted, No. 6 northern wheat is bought on the widest margin. No. 2 rye, JNo. 1 northern and No. 3 white oats follow in the order mentmned. ihe hio-h margins for the two wheat grades as compared with the oats may be attributed largely to the high wheat prices prevailing after the outbreak of the European war, especially in As subsequently shown in this section, under the analysis by mont s, the higher the prices the wider the margin (in cents) on which the grain is bought. PRICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. 193 f The generally higher margins on No. 3 as compared with No. 1 are attributable in part to smaller volume and also to the fact that the grade is lower. As a general rule the higher the grades, the greater the uniformity and the easier accurate grading, and vice versa. There is, therefore, a greater chance of loss on the lower grades than on the higher and in consequence a wider margin is frequently if not usually found. Neither rye nor barley are handled in sufficient volume by the average elevator to warrant buying them on as narrow margin as wheat, according to grain men, though in certain sections either of these grains may be extensively grown and the volume handled by the elevators, in consequence, sufficient to warrant a narrower margin than is generally true for a large group of elevators. It is not to be expected that an elevator will work on as narrow margin in handling a few hundred bushels of rye, for example, as it would in the case of, say 50,000 or 75,000 bushels of wheat. The higher margin of No. 2 rye as compared with No. 1 wheat may therefore be explained partly by the comparatively small volume of rye raised in this territory as compared with wheat. The volume factor also ex:plains in part the higher margin on rye as compared with oats. A contributory factor is probably the fact that rye prices tend to run somewhat higher than oats prices. Margins by types of elevators. —Despite the care used to obtain a representative basis for the study of margins and despite the fact that the number of quotations obtained was statistically well distributed as between types, the results by types are decidedly unsatisfactory for the reason that there is an uneven distribution of the quotations obtained from different types as between the various years so that a disproportionate weight is given to the high margins in the case of mills and cooperatives in 1916-17 and to the low margins of the first two years in the case of the lines and independents. This clearly appears from the following distribution of quotations as between different periods of the study for the different types: Percentage of total quotations. Cooperatives.. Mills. Independents Lines. Low margin years (first and second). Medium margin years (tmrd and fourth). High margin years (fifth). 24 53 23 27 55 20 33 55 12 35 53 10 In addition, experimentation with the figures indicated that the margins as between the various types would vary considerably ac¬ cording to the method of analysis used. For example, using either a simple or a weighted average for five years the line shows ^ lower margin than the cooperative on both wheat and rye and the co¬ operative a slightly lower margin on oats. Yet in the 19 grain years in which comparisons between these two types are possible the coop- 9964 20-13 COUNTRY GRAIN MARKETING. 194 erative shows a lower margin than the line in a majority of cases. Again, on a weighted average basis the mills show the highest buying margin for the five-year period. On a simple average basis, how¬ ever, the mills show more than a cent lower buying margin than the independents. Moreover, in three years out of the five, i. e., the first, second, and fifth, the mill margin is lower than that of any other type. . ^ 1 i.- The foregoing facts have necessarily led to more or less negative conclusions regarding margins: . , x (1) That the differences in the buying margins between types are probably not great. * ^ i i xi (2) Some doubt may be expressed that on the whole the coopera¬ tives or the mills buy on much narrower margins, or, in other words, pay the farmer appreciably more for his grain than do the other types. (See, however, Ch. XI, secs. 9-11.) , n- , xi (3) That, in so far as the farmers do better by selling to the co¬ operative or farmers’ elevator, it is probably due to the returns de- Wed by the customers in the form of dividends either on patronage or stock owned rather than to better prices paid the farmer at the time the grain is sold. ^ Margins by months. —The following table presents the monthly average buying margin for the grades of wheat and oats studied during the five crop years, 1913-1917.^^ The detail figures by years appear in Appendix Tables 16 to 18. Table 68.— Average monthly per hushel margins on specified g'rades of grain during the five crop years 1912-1S to 1916-11. Month. No.l northern wheat. No. 3 northern wheat. No. 3 white oats. $0.0558 $0.1080 $0.0356 .0755 .1216 .0335 .0492 .0883 . U316 .0536 .0724 .0321 .0484 .0746 .0484 .0870 .0306 .0585 .1281 .0554 .0950 .0344 .0609 .1070 .0407 .0781 .1500 .0346 .0465 .1185 .2196 .0599 .1888 There is apparently some slight tendency for margins to be higher in the last six months of the crop year, when prices are usually higher, than in the first six months, when prices are usually lower. As the appendix tables show, however, the wheat margins in the latter part of the crop year are considerably affected by the figure for 1916-17, in the latter part of which year a tremendous increase in wheat prices took place, owing largely to heavy buying by the .A-llies Other things being equal, the higher the prices the greater the in¬ vestment in the grain and the wider the fluctuation of prices. This situation carries with it greater possibilities of large profits or losses, and the buying margin usually tends to widen accordingly. 14 Figures for rye are not presented, the uneven distribution of these quotations ren¬ dering the monthly average figures practically valueless. i. ii c: l: [ 1 I \ i ! J I .F i I .1 PEICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. 195 This appears very clearly from the following table, which shows the average buying margin in comparison with the average price and as a percentage of the average price: Table 69 .—Average buying margins in comparison loitli average Minneapolis prices'^ and as a percentage of average Minneapolis prices. Period. No. 1 northern wheat. No. 3 northern wheat. No. 3 white oats. No. 2 rye. Aver¬ age price for year in cents per -• bushel. Aver¬ age mar¬ gins in cents per bushel. Aver¬ age mar'f gin as per cent of aver¬ age yearly price. Aver¬ age price for year in cents per bushel. Aver¬ age mar¬ gins in cents per bushel. Aver¬ age mar¬ gin as per cent of aver¬ age yearly price. Aver¬ age price for year in cents per bushel. Aver¬ age mar¬ gins in cents per bushel. Aver¬ age mar¬ gin as per cent of aver¬ age yearly price. Aver¬ age price for year in cents per bushel. Aver¬ age mar¬ gins in cents per bushel. Aver¬ age mar¬ gin as per cent of aver¬ age yearly price. 1912-13. 90.50 4.64 5.1 85.86 5.83 6.8 32.45 3.11 9.6 59.73 5.86 9.8 1913-14. 89.16 3.24 3.6 85.18 3.52 4.1 37.10 3.16 8.5 57.26 4.87 8.5 1914-15. 129.79 5.99 4.6 123.61 8.70 7.0 49.15 3.81 7.8 100.76 6.59 6.5 1915-16. 118.71 5.50 4.6 112.23 7.26 6.5 39.90 3.55 8.9 94.48 5.62 5.9 1916-17. 199.15 11.55 5.8 186.63 \ 15.03 8.1 56.90 3.21 5.6 151.73 7.56 5.0 ^Computed by taking a simple average of monthly average prices computed from daily modal prices. Section 8. Summary of interviews on buying margins. ‘According to interviews with elevator operators margins vary according to a wide variety of conditions—as between different terri¬ tories, different grains, different seasons,, with changing competi¬ tive conditions, car shortages, and numerous other influences. In determining the margin the different factors entering into the cost of the elevator operation probably have some effect. Many of the items entering into the cost of operation are fairly constant; for example, the salary of the agent. Agents are most frequently hired for the entire year, even in one-crop sections, where most of the grain is brought to the elevator within a few months. In all such cases the item of labor expense remains the same for all months of the year, except in the case of those elevators which employ extra labor during the busiest season or which close during a portion of the year. In addition, such items as insurance, taxes, etc., are fairly con¬ stant from year to year. Perhaps the most important factor affecting buying margins is the volume of grain handled or the rate of utilization. In general the greater the volume of grain handled the lower the per bushel cost, because the fixed expenses, which constitute so large a part of the country elevator’s costs, are distributed over a larger volume of grain. Another factor that probably affects the buying margin is the hedging policy of the elevator. The manager of an elevator which insures itself against market fluctuations by selling futures, bushel for bushel, against its cash purchases will perhaps feel that he can handle grain on a narrower margin than those who do not hedge in this fashion, because he can calculate more closely on all the elements affecting the profit on each transaction. 196 COUNTRY GRAIN MARKETING. Wide fluctuations in terminal market prices (cash or future) will also affect the margin. It then becomes less possible for the ele¬ vator operator to figure what the grain will be likely to bring when it arrives at the terminal market. To be reasonably sure of a profit he will be inclined to widen the margin to allow for these fluctuations. Other factors which affect the margin are the relative ease of grading accurately, the necessity of cleaning, and the like. Within the same grain standard grades require less margins than off- grades, due, no doubt, to less risk of loss. 'Margins do not always remain the same throughout a year, even for the same grain. Forty of the cooperative and mill-owned ele¬ vators in the Northwest visited by the agents of the Commission re¬ ported that they bought on the same margin throughout the year, but 12 reported that during the months of heavy receipts they pur¬ chased grain on a narrower margin than during a period of light receipts. Eleven elevators in Iowa and eight in Illinois interviewed by agents of the Department of Agriculture reported they usually purchased wheat and oats on a narrower margin during the five months from August to December than in other months of the year, while 28 and 42 elevators, respectively, in the two States reported no change in the margins. Eleven elevators in Iowa and seven in Illi¬ nois reported the purchase of corn on a narrower margin during the four months November to February of each year than during other months, as against 28 and 43 elevators in the same States, respectively, which reported no change in the margin. Conversely,' the margin may be widened during months when the flow of grain is slow. A yery few elevators stated that it was neces¬ sary for them to widen the margin during the months of light deliv¬ eries because of the time necessary to obtain enough grain to hedge and the increased risk resulting therefrom. Another factor in changing the margins during a crop year is the availability of sufficient railroad cars to transport the grain. When the supply of cars is scarce and uncertain the margins tend to be widened. Margins also vary from year to year. Many elevators reported^ an increase in margins of late years, most of them explaining the’ increase on the ground of the higher prices of grain, or the higher operating costs of the elevator, or both. Section 9. Scope of study of grades, dockages, and weights. Eeasons for study. —For many years it has been contended by farmers and their supporters that country elevators, except the co¬ operatives, have undergraded, overdocked, and underweighed the grain purchased by them; in fact, many of the present cooperative concerns were organized with a view to correcting these alleged conditions, as well as other grievances. Because of these charges considerable effort was made to ascertain the actual facts in re¬ gard to all three of these matters. In general, the results of the many interviews had were thoroughly unsatisfactory. Thus many elevator managers maintained that they either graded, docked, and weighed their purchases with absolute accuracy or with a tendency to favor the farmer, while farmers and their supporters insisted that undergrading, excessive dockage, and fraudulent weighing were fre¬ quent, especially upon the part of the line elevator companies. In PRICES, MARGIITS, GRADES, DOCKAGES, WEIGHTS. 197 interviews with line elevator operators—that is, the officials of the companies—the Commission’s representatives were almost invariably iniormed that their companies suffered heavy losses through the over¬ grading of their country agents. These line officials laid particular stress upon the grading side of the controversy, and when pressed or details on the other features—weighing and docking—^maintained that the gains, if any, on these features were entirely offset by the loss on grades.* In consequence it was decided in determining the facts to rely entirely upon a comparison of the grades, dockages, and weights at uie country elevator with those of the same grain as found by the otate inspection department upon its arrival at the terminal market. h/LEVATORS STUDIED.— The collcction of the material for this com¬ parison was unfortunately limited by necessity to such figures as could be obtained from line elevator companies, since none of the cooperative and independent elevator companies visited had records covering the grades, dockages, and weights of grain both in the country and at the terminal market. An occasional case was found ^\here such elevators could give results on the grade, dockage, and weight of particular cars, but data of a comparable nature on all gram handled was unobtainable. A few Minneapolis line com¬ panies, however, have for their own information and guidance re¬ corded for their various country houses the grades, dockages, and weights given grain by the local agents when purchased and the grades, dockages, and weights given to this same grain by the inspec¬ tion department at the terminal market. For the purpose of this study four of these companies were se- lected, 1 . e., the Cargill Elevator Co., the Northwestern Elevator Co¬ me Andrews Grain Co., and the Osborne-McMillan Elevator Co. The selection thus made was influenced solely by the manner in which the records were kept, and the companies in question were those which, after a brief survey, appeared to have this information in the most accessible form. At the time of the Commission’s in¬ vestigation these four companies were operating approximately 275 houses, handling on the average, as subsequently appears, many million bushels of grain a year. ^ It seems reasonable to conclude, thereiDre, that this sample is sufficiently large to be fairly representa¬ tive of line elevator results on grading, weighing, and docking. Although the basis for the study does not include elevators other than line, for the reasons indicated, it is reasonably deducible that line elevator results on grades, dockages, and weights would show ^eater profits or less losses than a similar study for cooperative and independent elevator companies had it been possible to obtain the necessary data from representative groups of such houses. The rea- sons for this viewpoint are subsequently stated, but mention is made matter at this point as affecting the representative character or the figures. Grain SELECTED.— After some consideration it was determined to confine the study of grading, weighing, and docking to wheat. In the first place, wheat is by far the most important grain in the four orthwestern States, both in volume of production and amount marketed. As a result of the latter fact it is also the grain upon the r arious grades of which it is possible to obtain the most complete ♦ For interviews with local elevators, Ch. V, sec. 3, cf. also Ch. XI, sec. 6. 198 COUNTRY GRAIN MARKETING* ] record of terminal market prices from day to day. In the case of , many of the grades of other kinds of grain (especially the lower grades) the daily price record at the terminal market is unsatisiac- tory. Even in the case of wheat, despite the large volume of sales daily, prices on some of the lower grades are somewhat less complete than would be desirable. In the case of the other grains, on account of the smaller volume | of sales of different grades at the terminal market (especially the ^ lower grades) and the consequent incompleteness of the price record, ? it is doubtful if computations of profits and losses on these trans- ! actions would have been sufficiently accurate to warrant presentation. | Secondly, owing in part to the durum market in the Northwest, a | greater number of wheat grades could be subjected to examination ; than in the case of any ot&r grain. Wheat, therefore, was selec^d ^ not only because of the completeness of the price record, but also be¬ cause of the number of different grades involved. ; Period covered. —For all the elevators operated by the tour line , companies selected, the Commission obtained the grades, dockages, j and weights as reported by the agents of these companies in the coun- f try when the grain was bought and the grades, dockages, and weights £ applied by the grain inspection department to this same grain upon its I arrival at the terminal market. While these figures were taken from I the books of the four line companies for all five crop years of the I pGriod 1912—13 to 1916 —IT^ it wus (IgcicIgcI to tRbiilRt© the results lor s only three years on account of the large amount of labor and expense S involved in compiling the data and 1913—14 to 1915—16 were selected j as being representative years. A further consideration leading to 1 this selection was the fact that the figures for 1916-17 could not be ■ satisfactorily employed on account of the complications due to the in- troductibn of Federal grades. j Section 10. Statistical method employed in study of grades, dockages, and weights. J In the country the grain is inspected and graded by the elevator B agent (Ch. V, sec. 3). Upon its arrival at the Minneapolis or * Duluth market, and before its sale, it Avas at this time inspected and H graded by the* inspection department of the Minnesota Kailroad and B Warehouse Commission and was sold on the basis of this inspection B and grading. i . i • I If grain is overgraded in the country, it is apparent that this oyer- B grading will appear as a shortage in one or more of the grades given B at the terminal market upon inspection by the State authorities as B compared with the country grades and an overage in one or more B of the lower grades. Similarly, it is evident that if undergraded, this result will be reversed, an overage appearing in one or morelj of the higher grades given by the State and a shortage in one or morej of the lower grades, as compared with the country grades. In a similar fashion, incorrect docking or weighing will be trans-W posed into overages and shortages in grades at the terminal market on J State inspection, as compared with the quantities of such grades™ purchased in the country. Thus, if the grain is overdocked in the« country any such over docking will show up as an overage in one orB more of the various grades of wheat on State inspection, or if under-^W docked in the country, as a shortage. Either overages or shortages,*] PRICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. 199 as the case may be, will therefore be represented in the profits on the total net wheat. The same applies to short weights and overweights. Any underweighing or overweighing at the country points will be evidenced by an overage or shortage in at least one of the grades at the terminal market on State inspection. So far as profits and losses are concerned, the elevators profit and the farmers lose by undergrading, short weighing, and overdocking in the country. Elevators, on the other hand, lose and the farmers profit from the reverse of these conditions—i. e., overgrading, over¬ weighing, and under docking. It is important to bear these points in mind in considering the statistical results subsequently presented. In all cases the profits or losses on grades, dockages, or weights, or the total profit or loss on all combined, can be represented by the differences between the prices for net bushels bought in the country and for net bushels sold at the terminal market, since the prices paid both in the country and the terminal are, with some unimportant ex¬ ceptions, practically always for net wheat.^® In computing the profits and losses on these transactions, there¬ fore, average terminal market prices were applied to the grades re¬ ported as purchased in the country and also to the grades returned by the terminal market inspection department and the difference be¬ tween the two in terms of loss or gain computed. Any carry-over of grain was treated as though shipped and as receiving from the in¬ spection department the same grades as it had been bought at in the country.^® The average prices applied as aforesaid were computed by taking a weighted average of all sales of each grade of wheat on Wednesday and Friday of each week during each year, as shown by the Min¬ neapolis Daily Market Record, the preceding day being used when no quotations were to be had on Wednesday or Friday. From these average daily prices the spread between No. 1 northern wheat and each other grade was worked out for each day and the daily figures for each kind of spread (i. e., between two grades compared) aver¬ aged. The daily No. 1 northern price was then averaged for the year and the average figure for each kind of spread was then added to or deducted from this No. 1 northern price to obtain the prices for the other grades.^^ In some cases wheat will sell in the terminal at a premium on account of the value of the screenings contained therein. It is also true that in buying in the country allowances in prices are sometimes made on account of the screenings. (Ch. V, sec. 3.) The amounts of the carry overs at the various houses were so insignificant as compared with the total handled that the slight error involved in this method of treat¬ ment may be regarded as negligible. Moreover, it was the practice of the companies in question to treat the carry over as shipped and to have attempted to secure any greater accuracy would have involved a great amount of work in separating and tabulating a multitude of small inventory items, with the certainty that the averages would‘be little, if at all, affected thereby. A few' exceptions to this rule were necessary. In 1913-14, for No. 4 spring. No. 4 durum, no grade durum, and western wheat, prices were very infrequent. In order to avoid additional computations the weighted average of prices at which sales were made for these four grades and also No. 2 northern wheat were taken from computations made for another study. The same source was used, the only difference being that the averages in this case were those of the sales of each day when comparison of these grades and No. 2 northern was possible instead of two days a week. From these average prices the spread of each grade from No. 2 northern was computed and these spreads were deducted from the No. 2 northern prices as outlined for the present study. In 1914—15 no grade durum and western wheat were rarely quoted. Here the average prices of these grades were computed on every day when such prices were found and the daily spread was obtained by deducting such prices from average daily No. 1 northern prices computed for the same days. The resulting daily spreads were then averaged and deducted from the yearly average No. 1 northern price found as above described by averaging Wednesday and Friday prices throughout the year, 200 COUNTRY GRAIN MARKETING. Overages or shortages upon each grade were then obtained by com¬ puting the differences between the number of bushels of each grade bought in the country and the number of bushels of each grade found on terminal inspection. These overages and shortages were then multiplied by the average price of each grade, the result being the profit or loss on each grade and the net balance on all grades com¬ bined giving the total profit or loss on grading, weighing, and docking. In determining the profit or loss on each one of these items, further computations were required. The overages or shortages in dockages or weights are reflected in the comparison of the net weight of the wheat in the country and as inspected at the terminal market. There is no way of determining in what particular grades these overages or shortages were distributed. It is fair to assume that the distri¬ bution was in the same proportion as the distribution of the total net wheat among the different grades, terminal inspection figures as to distribution of total net wheat being employed as more accurate than the country figures. But no importance need be attached to this dis¬ tribution as such. It may be regarded as merely a means of com¬ puting in terms of dollars and cents the importance of the gain or loss by reason of differences between country grades as a whole and weights and dockages, respectively, and the corresponding terminal figures. It is possible to determine the separate gain or loss attributable to dockage and to weights, respectively, provided prices may be affixed to the quantities involved. In order to determine loss or gain on dockages and weights, the overage or shortage in each case was multi¬ plied by an average price obtained by weighting the price of feach grade according to the proportion which each such grade constituted of the total terminal inspections in net wheat. The loss or gain in quantity of dockage is directly determined as the difference between the country and the terminal figure. The loss or gain in weights is similarly the difference between the two gross total weights, includ¬ ing dockage. These figures multiplied into the average price de¬ scribed show the profits and losses* on dockages and weights, respec¬ tively. The profit or loss on grades was then determined as the difference between the profits and losses on grading, weighing, and docking combined and the profits and losses on weighing and docking as inde¬ pendently determined. The profit or loss in cents per bushel was derived by dividing total profit or loss by total net wheat as shown by the terminal inspections. Section 11. Analysis of results, grades, dockages, and weights. All companies combined. —Table 70 presents the consolidated re¬ sults of the country grading, weighing, and docking study made by the Commission according to the foregoing method. These results are not to be confused with the results of terminal elevator mixing operations which are discussed in a subsequent volume dealing with terminal market cash operations. This study covers only the differ¬ ences in grading, docking, and weighing between the country eleva¬ tors and the State inspection service at the terminal market, and does not extend to the terminal elevators. PRICES, MARGINS , GRADES, DOCKAGES, WEIGHTS. 201 1 Pnee for dockage and total wheat obtained by Undlng proportion of tenninai grades to total net and multiplying price of respective grades by this proportion. 202 COUNTRY GRAIN MARKETING. I From this study it appears that on something less than 25,000,000 bushels of wheat purchased during three years these four compa¬ nies sustained a net loss of over $83,000 on weig ing, a docking combined,* an average rate of over $27,000 a a third of a cent per bushel. On dockage a profit of about $87,000, amounting to something over a third of a cent per bushel, was rea - ized, and on weighing about $60,000, or around a fourth of a cent per bushel. The total profits on weighing and docking together, therefore, amounted to nearly $150,000 or a approximately three-fifths of a cent per bushel. As shown by the table, however, the grand total loss on grading, weighing, and docking combined amounted to $83,337.22, or a loss of 0.35 of a cent per bushel It follows, therefore, that the total loss on grading must have been the sum of this total loss on all three factors and the profits on dockage and weights, a total of $231,151.35, or a loss of 0.97 of a cent per bushel on grades. ^ A o One qualification of the foregoing results must be made. As elsewhere indicated (Ch. V, sec. 3), elevators not infrequently fail to make any allowances for dockage either in the form of prices or by the return of the screenings to the farmer. It has also been pointed out that the tendency is for the commercial lines to clean at the terminal market, with the result that this type reports a very low percentage of houses equipped with cleaning facilities as cornpared with the various types of individual elevators (Ch VII, sec. 9). Because of this lack of equipment it is impossible for many of the commercial line elevators to return the screenings to the farmer, and any allowance for dockage taken, therefore, must be made in the form of price. The general indications are that the line elevators do not always make such allowances except when com¬ pelled to do so by their competition. It is at least possible, in con¬ sequence, that the profits of the line companies shown on dockage were slightly increased by the sale of certain screenings for which no allowance was made to the farmers. Competition, however, in the bulk of cases forces allowances for such screenings, and the^ is no good reason for believing that the profits from this source would increase the total profit on dockages in any very considerable. Individual companies. —Table 71 presents by years for each of the four companies studied the per bushel profits and losses on j grading, weighing, and docking. These individual results are PJ’^i sented for companies A, B, C, and D, and are not identified with 3 the names of the organizations from which they were obtained. but * This does not mean, of course, that the entire business was conducted at a loss, t relates only to the three items in question. .V; PRICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. 203 Table 71. —Promts and losses per bushel of four specified line elevator companies on country grading, iceighing, and docking, crop years 1913-1to 1015-16, 1913-14. Profit on dockages. Total profit on weights. Total profit on grades. Total profit on all. 1914-15. Profit on dockages. Total profit on weights. Total profit on grades. Total profit on all. 1915-16. Profit on dockages. Total profit on weights. Total profit on grades. Total profit on all. A. B. Cents. Cents. +0.118 +0.313 + .183 + .408 - .496 - .723 - .195 - .002 + .380 + .152 + .684 + .823 -1.377 - .992 - .313 - .017 + .566 + .560 + .159 .+ .244 -1.766 -1.348 -1.041 - .544 C. D. Cents. Cents. +0.083 +0.029 - .012 + .946 - .602 - .422 - .531 + .553 + .174 + .606 +1.119 + .252 -1.108 - .635 + .185 + .223 + .551 + .866 - .726 + .300 - .746 -1.533 - .921 - .367 ALL COMPANIES. • 1913-14 1914-15 1915-16 1913-16 Profit on dockages. +0.110 + .308 - .532 - .114 +0.351 + .715 -1.077 - .011 +0.641 - .102 -1.345 - .806 +0.365 + .255 - .970 - .350 Total profit on weights. Total profit on grades.... Total profit on all.. . With the exception of company D in 1913-14 and companies C and D in 1914—15, no profits on grading, weighing, and docking combined are shown by the results of the computations for any of the com¬ panies in any year of the period. Each of the four companies made a profit on dockage in every one of the three years and a loss on grades. Companies A, B, and T> also made a profit on weighing in each year of the period. Company C, however, sustained losses on weights both in 1913-14 and 1915-16. All companies combined made a profit on dockage in each year of the period and a loss on grades. In the first two years of the period the combined companies made a profit also on weights, but in 1915-16 a loss was sustained. This loss, however, was not sufficient to offset the profits on this item in the pre¬ ceding two years, so that the four companies combined made a profit on this item for the three years. The largest loss in any one of the three years on all three factors was slightly over 1 cent a bushel sus¬ tained by company A in 1915-16. The largest profit on all three operations, something over half a cent, was obtained by company D in 1913-14. Section 12. Explanation of the profits and losses involved. Errors and inaccuracies. —The relative consistency of the profits of the line elevator companies in weighing and docking and of losses on grades probably calls for explanation. Broadly speaking, it is in the matter of grades that the country agent is most liable to make mistakes. As indicated elsewhere, the grading of grain requires that a wide variety of matters be taken into consideration and individual judgment plays a very important part. In the case of weighing and docking far greater accuracy is possible than in grading, for the 204 COUNTRY GRAIN MARKETING. reason that dockages and weights can be determined very largely by mechanical processes.^® (Ch. V, sec. 3.) There is little or no opportunity or need for exercising individual judgment and there should, in consequence, be less error than in determining grades. This, however, does not constitute an explanation of the consistent losses on grading. It is, however, an important result of the fore¬ going situation that it is impossible for the line houses either to check up grading as closely as dockages and weights or to demand the same accuracy in the first matter as in the second and third. At least two other elements are also of importance in causing the large and consistent losses on grades and the profits on dockages and weights. The first and probably most important is competition; the second is the general psychology of the line agent. Effect" of competition.^'^ —Every farmer desires to grow grain of the highest grade, and whether he does so or not he is likely to believe that his grain is of high grade. To this end he will argue at great length with the elevator operator, proposing to take his grain to a competitor unless a high grade is given. In the process of bartering the agent, to prevent the grain going elsewhere, may therefore con¬ cede a grade higher than the grain warrants, but drive a hard bar¬ gain on the dockage to be taken, the net result being that while the elevator sustains a loss on grades it makes up at least a portion of the loss by docking the grain more than is warranted by the amount of foreign material contained therein. The indications are that the farmer lays much more stress in his bargaining upon the grade than upon the dockage and is less inclined to barter over the latter than the former, which, in consequence, often makes the above course of action the line of least resistance for the elevator agent to follow. Broadly speaking, it may be stated that the information obtained by the Commission indicates that in a large proportion of cases profits on dockage result from attempts of the agent to offset over¬ grading. Country agents sometimes are urged by their employers to do this, and at one time it was not uncommon for certain line ^ elevator companies to instruct their agents to take at least a pound or more dockage.^® No recent evidence that such instructions are now generally given has been obtained, although isolated instances have been found in connection with this inquiry. A few country agents other than of line companies frankly admitted that whenever a customer was given the benefit of a grade an additional amount of dockage was taken to offset the concession, and the correspondence of the line companies plainly indicates that the line agents also frequently pursue the same policy, although the line companies as a rule prefer to make as little concession as possible in grades and to raise the price instead. (Ch. XI, secs. 15-16.) Psychology of the line agent.— At least two men prominently identified with Minneapolis line interests have argued that over¬ grading is in no inconsiderable degree due to a more or less deep¬ ly weights can also, of course, be determined better than dockage, as the latter is less a mechanical operation than the former and also because in determining dockage there is frequently inseparable foreign matter in the grain which must be estimated. 19 For further competitive aspects of this subject, see Ch. XI, secs. 6, 15, and 16. 20 The rules of one line-elevator company in the Northwest for the “ Instruction and guidance of its agents,” issued Aug. 1, 1907, contain the following; “ You are not to take less than 1 pound dockage,” and ” In addition to dockage taken yon should get 10 pounds additional for each 40 bushels on the load to cover shrinkage.” PRICES, MARGINS, GRADES, DOCKAGES, WEIGHTS. 205 seated or ingrained prejudice in the country elevator agent in favor of the farmer. Many of the elevator agents either are or have been farmers or else have relatives who are. They live in rural com¬ munities and their lives have been spent largely in contact with farmers. It is contended by the line interests that, as a result, their point of view is that of the farmer rather than that of their employers. These men go so far as to assert that this attitude often affect^ their traveling auditors as well as their agents, and is an important element in causing overgrading. Presumably, the attitude of the agent is coupled with the facts that he knows that he can not be taken to task as severely for overgrading as for overweighing and under¬ docking, on account of the individual judgment involved, and also that he can often make up for grade losses by heavy dockage. Explanation of iveighing profit.— From the evidence obtained it would appear that the country elevator operators as a whole view with disfavor the fraudulent weighing of grain, and that the line elevator operators do not countenance underweighing.^i Most of the lines are emphatic in their denunciations of under¬ weighing and have also in some cases informed their agents that the practice will result in dismissal. In no case in the correspondence or elsewhere was any statement found, either expressly or impliedly, countenancing this practice. It is true that the figures presented in the foregoing tables would seem to disprove these statements. The explanation of this discrepancy, however, lies in the fact that line elevator agents are under bonds which cover, among other things, shortages in weights. The opportunity for loss in connection with the operation of an elevator as a result of dishonesty is greatest in the weighing of grain, and in this matter the line companies are, as a result, apt to be very strict. The agents under pressure of constant cautioning and adinonition from their employers and the constant fear of being short in weights usuall^^ weigh carefully, but probably tend, through overcautiousness, to err in their own favor. Section 13. Profits and losses—Houses other than line. While the statistical study of grading, weighing, and docking presents the results of line company operation.only, it is reasonably safe to conclude that the losses by houses of other types are as great as those incurred by the lines, and certainly that they are not less. The indications from the correspondence of the line elevator com¬ panies and other data collected are that there may be less overgrading and underdocking on the part of the line companies than there is by the other types, owing to the close supervision of the agents by the head offices. The lines are continually instructing their agents to grade correctly and to take full dockage while the bonding of the agent usually insures that there will be no loss on weights. Even competition does not apparently greatly affect the line company pol¬ icy of insisting that the agent shall not overgrade and underdock. The correspondence of the line companies indicates that they seldom make any concessions in these respects no matter to what extent their competitors may be engaging in these practices. The lines gen¬ erally regard underdocking and overgrading as equivalent to paying 21 The following is an extract from the rules of the same line company referred to In the last preceding footnote: “ We do not expect you to take anything that does not belong to you, but we do expect you to see that your weights are correct so that you will come out all right.” 206 COUNTRY GRAIN MARKETING. higher prices^ and in meeting competition of this character they usually refuse to permit concessions in grades or dockages, but au¬ thorize their agents to pay higher prices instead. (Ch. XI, sec. 15.) Section 14. Conclusions. On the basis of the foregoing discussion, the Commission concludes that line companies in one section sustained a loss on country grading, weighmg, and docking, and that this loss was due chiefly to overgrad¬ ing and was partially reduced by underweighing and overdocking. The principal reasons accounting for these conditions are to be found in the competitive situation, the psychology of the country elevator agents, and the practice of bonding agents. While no statistical proof thereof is available, it is reasonably deducible that other types of elevators have had a similar experience. It is most desirable that grain should be accurately graded, docked, and weighed in the coun¬ try, and, despite the difficulties involved, efforts ought to be directed to this end. \ Chapter IX. HEDGING OPERATIONS OF COUNTRY HOUSES. Section 1. Theory of country-elevator hedging.^ f k! <=ommonly applied by the grain trade to the method employed by many dealers in cash grain of protecting themselves against losses due to inarket fluctuations by executing: wit cash purchases and sales practically simultaneous future trans- aetions upon the opposite side of the market. This is done upon the assumption that the prices of cash and future grain will move up and down together and that as the trades are on opposite sides of the market the decline or advance of either will be compensated by a corresponding fluctuation in the other. While this theoretical harmony in the movement of cash and future prices is not always to be found and the coincidence of the two movements is often more or less seriously disturbed, it is none the less well established that, broadly speaking, the cash and future prices actually do move up and down together with considerable regularity if not in the same egree. Consequently this fact is often taken advantage of by coun- merchandisers as well as other cash grain dealers, both of which classes frequently execute practically simultaneous cash and future trades on the opposite sides of the market, expecting, since cash and future prices move together, that gains or losses iA cash or tutures, bought or sold, will be compensated or offset by corre¬ sponding losses or gains in futures or cash sold or bought. Country elevators which hedge their grain do so primarily for the purpose of protecting their buying margin—i. e., the difference be¬ tween the prices paid the farmer and those prevailing in the terminal and other markets. (Ch. VIII, sec. 5.) If these elevators could sell tne actual grain immediately after purchase, hedging would be un¬ necessary, since in such event the risk of market fluctuations between the time of purchase and the time of sale would be comparatively slight, ^wingj^ to the long distances to markets, the differences in the methods of sale, and other factors, however, days, weeks, and sometimes inonths may intervene between purchase and sale, during which period the, grain purchased is subject to all the risks of world¬ wide market fluctuations and possible profits and losses owing to advances and declines of prices. Recourse, therefore, is sometimes had by the country elevator to the selling and buying of futures in order to insure that the buying margin upon which the elevator oper¬ ator bought the farmer’s grain is not reduced or wiped out.^ ^ It is necyssary, in order to describe country-elevator hedeine transactions to disrns« to some extent future-trading operations. This has been dole oSlv to luch delreo however, as it was thought would give a clear comprehension of Lis sSn For shS^ldLeL^JI^IteT future-trading operations Vols. V-VII of this ‘report 4 . slsyator does not hedge, the law of averages onerates to a (’prtain SlanL^LcroLer.^ ^ tending to 207 208 COUNTRY GRAIN MARKETING. Section 2. Theoretical hedging* operations and results. Basis OF illustrations employed.— The following theoretical; illustrations of the employment, and results of hedging by country elevators will sufficiently explain the practice. The Farmers Elevator Co. at Barrettj Minn., a subscriber to the Grain Bulletin price in¬ formation service, is assumed to be - the elevator engaging in the various trades, and the year 1913 has been selected as the time of the transactions, owing to the fact that the course of prices during that year was such that the various^ illustrations could be easily worked out. The prices employed are within the ranges of the actual cash and future prices prevailing in Minneapolis on the specific dates, and for the purposes of the example it is assumed that the Grain Bulletin card is followed exactly.^ The freight rate from Barrett to Minneapolis is 8.8 cents per hun¬ dredweight or 5.28 cents per bushel on wheat. On-October 2, 1913, the Grain Bulletin price card received by the Farmers Elevator Co! made the minimum buying price of No. 1 northern wheat at Barrett 75 cents per bushel. The, Minneapolis market price on which this price was based was about 85 cents per bushel.^ The difference be¬ tween the price shown by the card and the terminal price, 10 cents, was the gross buying margin.® As the freight rate is 5.28 cents per bushel and the Grain Bulletin price card usually eliminates the frac¬ tions, it may be assumed that the 10-cent margin was composed of 5 cents for freight and 5 cents to cover the costs of operation and the elevator’s profit. Assuming that 3i cents per bushel covered the costs of operation and 1^ cents per bushel is the balance of profit, the gross margin was divided as follows: Freight per bushel_ Cost of operation per bushel Net profit per bushel_ $0. 05 .035 .015 Total margin___ . _ iq Loss ON CASH AND PROFIT ON FUTURES.— By 11 a. m. on October 2, i 1913, let it be assumed that the Farmers’ Elevator Co. has purchased from various farmers a total of 1,000 bushels of No. 1 northern wheat, paying for it the price shown on the card for grain of that grade, namely, 75 cents per bushel, making the total cost of this grain $750. In order to hedge this transaction the elevator oper¬ ator would wire to his commission firm in Minneapolis about as follows: “Sell 1,000 December wheat against cash purchases.”® Upon receipt of the above telegram the commission firm executes the order in the future pit, either directly or through a pit trader. On October 2, 1913, the December wheat future opened at $0.84f and during the day’s trading the high point was $0.85J, the low $0,841-1, and the closing prices were $0.85^-^ to $0.85^. For the purposes of this illustration assume that the future sale of 1 000 bushels was made at $0.85 per bushel, or at a total cost of $850. After effecting the sale the commission firm sends a confirmation of this trade to the country elevator. !w^- regarding the Grain Bulletin card see the preceding chapter. average price of No. 1 northern in Minneapolis on Oct. 1 1913 was 84 83 purcMle!^^''^^’'^'’ delivery month to the month of the cash HEDGING OPERATIONS OF COUNTRY HOUSES. 209 About a Aveek later, on October 10, 1913, the elevator operator loads a car with 1,000 bushels of No. 1 northern wheat and consigns it to his commission firm at Minneapolis. At the same time the firm IS instructed to buy in 1,000 bushels of the December wheat future upon sale of the carload of wheat, in order to close out the 1,000 bushels of December which was sold on October 2. On October IT the car reaches Minneapolis. It is inspected and graded and a sanaple of the wheat is sent to the commission firm’s table on the trading floor of the Chamber of Commerce. On that day No. 1 northern wheat sold for $0.81 to $0.83f, this last pricq being for only one car which contained good dockage."^ The highest general price was $0.83|^. Let it be assumed that the commission firm’s cash grain salesman receives an offer of $0.82 per bushel for the car and accepts it, and that the firm receives therefor $820. When the car of cash grain has been sold, the commission firm’s l^it trader buys in the pit 1,000 bushels of December wheat to close out or cancel the elevator’s future account of 1,000 bushels sold on October 2. On the day in question—October IT, 1913—December wheat opened at $0.80J, the high was $0.80f-81, low $0.T9J-80, and the close $0.80f to $0.80f-|-. The pit trader executes the trade at $0.80 per bushel and purchases 1,000 bushels of December at a price of $800. ^ An account sale of the cash transaction is then prepared by the commission house and also an account of purchase and sale of the future, and both are mailed to the elevator. The results of the cash transaction to the elevator are as follows, disregarding all charges for commissions, weighing, inspection, etc.: Sold 1,000 bushels No. 1 northern, at $0.82_$820. 00 Cost of 1,000 bushels No. 1 northern, at $0.75_ 750. 00 Gross profit__ 70. 00 Less freight, $0.0528 per bushel_ 52. 80 Less operating expenses, $0,035 per bushel—_ 35. 00 Total expenses_ 87 80- Net loss- 17 ; 80 On the basis of prevailing cash market prices, therefore, at the time of the purchase and sale of this particular thousand bushels of wheat, and assuming a 10-cent buying margin, this elevator ivould have dost $1T.80 had only the foregoing cash buying and selling transactions been effected. Dut at the same time that the elevator bought the wheat frojn the farmer it also, as stated, sold 1,000 bushels of the December future, and when it sold the actual grain at Minneapolis'it bought back 1,000 bushels of the same future, thus canceling its previous sale. The results of this operation were as follows, disregarding com¬ missions : Sold 1,000 bushels December at $0.85_$850 Bought 1,000 bushels December at $0.80_ _ _ 800 Net profit_ 50 7 The weighted average price of No. 1 northern on Oct. 17, 1913, was 82 cents. 9964°—20-14 COUNTRY GRAIN MARKETING. 210 While, therefore, the elevator lost $17.80 on the cash operation, it made $50 on the future, and thus made a profit on the whole transac¬ tion of $32.20. Actually, of course, the profit was somewhat less, since commissions, fees, etc., would amount to at least a few dollars. Speculative possibilities in connection with hedging. Wni e the above illustration is fairly typical, some elevator operators do not sell the future until the car of actual gram has been loaded and is ready to be hauled to the terminal market. The future is then closed out (purchased) upon sale of the actual gram. Again, there are elevator companies which do not close out the future at the time the cash is sold, thus incurring a speculative chance of loss or gain. For example, if in the above illustration the elevator operator had not notified the commission firm to close his future upon the sale of the cash grain, but had left it open in anticipation of a decline m the future price, he would, in essence, be speculating, since he would be taking the chance of an increase or a decrease in his profits, it the future prices had declined, his profit of $32.20 on the transaction would have been increased, as he had originally sold the future, and the declining prices would enable him to buy m and cancel this sale at a lower price than the 80 cents per bushel which he paid in the illustration given. Had the price of December wheat dropped to 75 cents per bushel, and had the operator bought in his future at that price, his net profit on the whole operation would have been $82.80 instead of $32.20. Sold 1,000 December wheat at $0.85 per bushel-$850. W Bought 1,000 December wheat at $0.75 per bushel- 750. 00 Net profit on future transaction- 100. 00 Less loss on cash transaction- 17. 80 Total profit- On the other hand, if we assume that the elevator operator had not closed out his future upon sale of his cash grain and the prices of futures had not declined, but had advanced to, say, $0.87 per bushel before he closed out his trade, the result would have been: Sold 1,000 December wheat at $0.85- Bought 1,000 December wheat at $0.87- 870. 00 Net loss on future transaction- 20. W Loss on cash transaction- !'<'• 80 Total loss_ From the above it follows that hedging in the most exact sense of the term and to secure the fullest possible protection rec[uires that the execution of the cash and future transactions on opposite sides of the market should be as nearly simultaneous as possible and that the further apart they are in point of time the more the opeiation par¬ takes of speculation and the less the reason for regarding it as hedging. . i i Limitations of profits. —The foregoing illustrations show how as a result of a future operation a country grain merchant may re¬ duce the possible loss involved in the buying and selling of cash grain when the cash market declines through the corresponding de¬ cline of the futures which the elevator sold as soon as it had bought HEDGING OPERATIONS OF COUNTRY HOUSES. 211 the grain. While hedging,^ therefore, in theory and practice tends to limit the losses of the cash operator in the event of a decline in cash prices, it should be clearly understood that it usually decreases the profits in the event of an increase in cash prices. For example, suppose the Barrett elevator in the foregoing illus¬ tration, after buying the thousand bushels of wheat on October 2 and selling the December future against it, had not shipped the grain, but had held it until December and then decided to carry it over until the spring of 1914 on the chance of a possible premium of the cash price over the future. Since the operator originally hedged in the December future, he must, in order to protect himself, switch his hedge to another future. This he does by buying in the December future for 1,000 bushels which he originally sold and selling 1,000 bushels of the May future. Assume that this transfer was made on December 20, on which day the December future sold at $0.83i to $0.84 and the May future at $0,874 to $0.87f. Assume, further, that the country operator bought in his December future at $0.84 and sold 1,000 bushels of May at $0,874 and that on April 11, 1914, he loads out the wheat, which is shipped to^ Minneapolis and is sold there on April 24. On April 24 cash wheat ranged from $0.91J to $0,944 and the May future from $0.89f to $0.90f. Assume further, for illustrative pur¬ poses, that the cash wheat in question was sold at $0.93 ^ and that the future was bought in at $0.90^. The results of the foregoing transactions would then have been as follows: Purchase of 1,000 bushels of cash wheat on Oct. 2, 1914_$750. 00 Sale of 1,000 bushels of cash wheat on Apr. 11, 1914__ 930. 00 Profit on cash operations 180. 00 ' Sold 1,000 bushels of December wheat on Oct. 2 at $0.85_ 850. 00 Bought 1,000 bushels of December wheat on Dec. 20 at $0.84_ 840. 00 Profit on December future_ 10. 00 Sold 1,000 bushels of May wheat on Dec. 20, 1914_ 872. 50 Bought 1,000 bushels of May wheat on Apr. 24, 1914_ 902. 50 Loss on May future_ 30 . OO Less profit of $10 on December future_ 10. oO Net loss on futures_ 20. 00 Total profit on cash operations_ 180. 00 Less loss on futures_ 2o' 00 Net profit- 160.00 In other words, in the foregoing illustration, if the elevator op¬ erator had not hedged his grain, but had merely carried it over until spring and had sold at the prices indicated, he would have realized a profit of $180 in this particular instance. Not caring to assume the possible losses involved in carrying this grain, however, because he could not foretell the price at which he would be able to sell, he hedged in order to limit this possible loss, and by so doing in the particular instance reduced his profits from $180', which-he would ® Except the elevator speculates, as shown in the foregoing illustration, in which stated, the operation is not hedging in the exact sense of the word. 3 V eighted average of No. 1 northern, cash, 93.37. COUNTRY GRAIN MARKETING. 212 have obtained in the absence of hedging, to $160. But by thus liniit- ing his profit he had also limited the possibility that he would sutler loss. , n -x In other words, the hedging operator theoretically, as it were, con¬ sents to a limitation of his profits in return for a limitation ot his losses. Being upon opposite sides of the market, in the cash and in the futures, loss as a buyer of cash wheat, if cash declines, will theoretically be compensated by his profit as a seller of futures on the corresponding decline of the future. Conversely, if the cash advances, the hedger’s gain as a buyer of cash will be reduced by his loss as a seller of futures from the corresponding advance in the future market. Section 3. Some technical details of country-elevator hedging. On most of the exchanges trading in futures is in 1,000-bushel lots as a minimum. In consequence, orders for the purchase and sale of grain futures by country elevators for hedging purposes are usually instructions to buy or sell 1,000 bushels, or multiples thereof. generally, perhaps, the elevators in the Northwest wait until they have accumulated 1,000 bushels by purchases from the farmers or until the close of the day before sending in the hedging order. In some cases, however, they place hedging orders^ before they have accumulated as much as this minimum amount. Such action is most ^ likely to be taken when the receipts at the country elevator are heavy and there is good reason for anticipating that the total receipts either during the day or by the close of the day will amount to the miniinum quantity required by exchange regulations for a future transaction. For example, a few elevators in the Northwest and also in Illinois and Iowa reported the placing of a hedge when it seemed to be certain that sufficient grain to cover it would be received. ^ As the most of the grain markets close very early in the aiter- noon, however, the bulk of the hedging orders of the country ele¬ vators are executed by their terminal market representatives on the morning following the day when instructions are given. Telegraphic or telephonic instructions given by the country elevators before noon, however, may be received sufficiently early to permit the execution of the hedge on the same day. . . , i,- When the country elevator operator consigns a car ot gram to ins commission house he also gives instructions to close out the hedge upon the sale of the grain, provided, of course, that he is using the future market strictly for hedging purposes. (Sec. 2.) In some instances the order to close is attached to the bill of lading. In other cases the elevator operator telegraphs the order to close the hedge to the commission firm. ^ 1 m| As a rule the instructions specify the quantity ot futures to be|^| bought in, but if the elevator has sold several thousand bushels of I J futures the commission house may be told merely to buy in theljl future. Some elevators give standing orders to the commission houses to close out their hedges as fast as their grain arrives at the terminal markets. One operator reported that during the rush* season he often did not close out a hedge upon the sale of a car of grain, but allowed this hedge to stand to cover the heavy receipts of m grain. When receipts slackened he hedged the grain as it was re- ceived and the futures were closed as fast as the grain was sold. ■ HEDGING OPERATIONS OF COUNTRY HOUSES. 213 In the case of the lar^e line companies in the Northwest daily reports are submitted by each country agent to the head offices at Minneapolis and Duluth. These reports (Appendix 7) show the kinds and grades and quantities of all grain purchased during the day, and futures are sold to hedge the quantities of such purchases.^® These agents also often have standing instructions to notify the head office immediately by wire whenever purchases during the day exceed a certain quantity, generally 500 to 750 bushels. These telegraphic reports of purchases are used as a basis for additional hedging by the line companies during the day over and above the hedges placed by them to cover country purchases made on the preceding day, as shown by the agents’ daily reports, in order that as little grain as possible may be left unhedged. Section 4. Extent and prevalence of hedging. Approximately 50 per cent of all the country elevators and ware¬ houses in the United States reporting to the Commission customarily hedge their grain purchases and approximately 50 per cent do not. This appears from the following table which presents in summary form the reported answers of all elevators and warehouses reply¬ ing to the Commission’s inquiry on this subject. (Appendix 2, in¬ quiry 18.) Table 72. —Number and percentages of reporting elevators and warehouses cus- * tomarily hedging and not hedging grain purchases. Total num¬ ber report¬ ing. Reporting “YesTf Reporting to some extent. Reporting only by flour sales. Reporting “No.” Num¬ ber. Per cent. Num¬ ber. Per cent. Num¬ ber. Per cent. Num¬ ber. Per cent. Elevators. 8,217 354 3,437 7 41.83 1.98 810 10 9.86 2.82 9 0.11 3,961 337 48.20 95.20 Warehouses. Total. 8,571 3,444 Ao. 18 820 ( y (9.57' ; 9 .11 4,298 .m. 15 That hedging is not more often employed by country houses will perhaps seem peculiar to many, especially grain dealers and others in the northwest territory^ One of the most common and most em¬ phasized arguments in favor of future trading is that it is necessary to enable country elevators to protect themselves against financial loss by insuring their buying margins through hedging operations. / In the northwest territory country elevator hedging is probably believed by many to exist much more generally than is actually the case, owing either to a lack of perspective or'absence of statistics. The commer¬ cial line elevators in this territory hedge almost religiously all kinds of grains in the corresponding futures, and before the establishment of the barley and rye futures, sometimesjb^ged the former in oats or corn, and the latter in wheat.“^,,-0wing in part at least to the * -- 7 *^^—-^-—- At least one Minneapolis line company informed the Commission that it does not wait for the agents’ daily reports, which are not usually secured until the following morning, but hedges each day upon estimates of country receipts during the day, such estimates being made up from» the character and size of the crop, weather conditions, quantities bought in previous years on the same day, etc. “ The theory on which this was done, apparently, was that there should be some correlation between wheat and rye prices owing to the fact that rye is extensively milled into rye flour for human consumption. A large quantity of barley, on the other hand, is used for feeding purposes, as are both corn and oats. Wherefore, there should be some correlation between the prices of barley and those of these two grains. 214 COUNTRY GRAIN MARKETING. peculiar system of financing country elevators which prevails in the Northwest, a very large proportion of hedging in this area is also found among other types of elevators than the commercial lines. Largely perhaps as a result of these facts there is an impression in the Northwest, both of the necessity and prevalence of country elevator hedging which does not entirely coincide with the actually existing situation, considering the country as a whole. Section 5. Geographical variations in hedging. Extent of variations.— Table 73 presents in detail the proportion of elevators and warehouses customarily hedging and not hedging in the various States and grand divisions.' As between the various States for which the figures were separately tabulated, the proportions of hedging elevators show exceedingly wide variations. Thus, the per¬ centages of elevators reporting hedging range-from as low as 3.04 per cent in Wisconsin to as high as 94.33 in North Dakota. Similarly, only 3.68 per cent of Michigan elevators report hedging as compared with 89.54 per cent of those in Montana. Table 73._ ISlumher end percentage of elevators customarily hedging and not hedging in specified States and grand divisions. Reporting. State or division. Total ele¬ vators Yes. To some extent. No. Only by sale of flour. and ware¬ houses report¬ ing. Num¬ ber. Per cent of total. Num¬ ber. ' Per cent of total. Num¬ ber. Per cent of total. Num¬ ber. Per cent of total. ELEVATORS. 1,342 1,193 915 871 707 555 467 373 349 317 217 177 198 133 147 144 112 1,223 785 178 537 128 31 168 330 9 24 4 8 1 6 2 1 2 91.13 65.80 19.45 61.65 18.10 5.59 35.97 88.47 2.58 7.57 1.84 4.52 .51 4.51 1.36 .69 1.79 43 111 222 88 106 84 56 4 47 16 4 14 5 5 1 4 3.20 9.30 24.26 10.10 14.99 15.14 11.99 1.07 13.47 5.05 1.84 7.91 2.53 3.76 .68 2.78 76 296 514 246 473 438 241 39 293 275 208 155 192 122 144 139 110 5.66 24.81 56.17 28.24 66.90 78.92 51.61 10.46 83.95 86.75 95.85 87.57 96.97 91.73 97.96 96.53 98.21 4S 01 vU J-'dK.Uta' Minnesota. Illinois. 1 1 0.08 .11 Kansas. Nebraska. 2 2 .36 .43 Ohio. Michigan. 2 1 .63 .46 Mountain and Pacific Divi- Middle Atlantic Division.... Southern Division. Total. 8,217 3,437 41.83 810 9.86 3,961 48.20 9 .11 WAREHOUSES. Mountain and Pacific Divi- 190 4 2.11 1 .53 185 97.37 112 3 2.68 7 6.25 102 91.07 30 1 3.33 29 96.67 22 1 4.55 21 95.45 XVXlOOlw tldllvli/ X.'l V * • • • Total. 354 7 1.98 10 2.82 337 95.20 Grand total. 8,571 3,444 40.18 820 9.57 4,298 50.15 9 .11 i^That is those reporting “ yes ” and “ to some extent.” See also footnote 1, Table 74. HEDGING OPERATIONS OF COUNTRY HOUSES. 215 At least three primary reasons may be assigned in explanation of the foregoing variations between States; first, the relative extent of tlie consignment and direct methods of selling grain; second, the relative extent of commission-house financing; and third,the business methods of the large line elevator companies. Effect of consignment business. —The following table presents the proportions of elevators reporting hedging in comparison with the proportions of consignment and direct business in the 14 principal grain-producing States. Table 74 .—Proportions of elevators in specified States reporting hedgmg im comparison with the reported proportions of grain sold on consignment^^ and direct dnring crop years 1912-13 to 1916-17. State. North Dakota Montana. Minnesota.... South Dakota Nebraska. Illinois.. Iowa. Kansas. Indiana. Ohio. Missouri.... Oklahoma.. Michigan... Wisconsin.. All elevators Percentage of elevators reporting hedging to a greater or less extent.i Percentage of consign¬ ment sales reported, crop years 1912-13 to 1916-17.2 Percentage of direct sales reported, crop years 1912-13 to 1916-17.2 94.33 89.87 10.13 89.54 80.87 19.13 75.10 91.99 8.01 71.75 92.59 7.41 47.96 62.94 37.06 43.71 60.33 39.67 33.09 71.86 28.14 20.73 70.53 29.47 16.05 48.59 51.41 12.62 32.36 67.64 12.43 82.63 17.37 8.27 14.63 85.37 3.68 21.84 78.16 3.04 91.30 8.70 51.69 72.33 ^ 27.67 1 The question asked was, “Is it a custom to hedge your grain purchases?” The answers fell into four divisions, “ Yes,” “ To some extent,” “No,” and “ Only by flour sales,” as appears from Table 73. In this discussion, answers to the first two classes have been combined and those to the last two. The first two classes employ hedging in varying degrees, and hedging by flour sales is a type of hedging of radically dif¬ ferent character from hedging in grain (Vol. VII). 2 Ch. VI, sec. 15, Table 46. An examination of the foregoing table reveals the fact that with some exceptions, notably Missouri and Wisconsin, the proportion of hedging tends to vary directly with the proportion of consignment business reported, and therefore inversely with the percentage of direct selling. (Ch. VI, sec. 15.) Where grain is sold “ on-track ” in the country or on a “ to-arrive ” basis, there is not the necessity for hedging that exists where grain is sold on the consignment basis, the reason being that in the former case there is not, as a rule, so great a period of time elapsing between the date of purchase and the date of sale. A country elevator may sell grain “on-track ” or “ to-arrive ” on the same day that it is pur¬ chased, and does so in many cases.* In any event, the time elapsing between the time of purchase and the time of sale is likely to be much less in the case of direct sales than in the case of consignment selling, with the result that less risk of price changes is involved. In conse¬ quence it is to be expected that there will be a considerably greater use of hedging where consignment selling is largely employed than where direct sales are more frequently the rule. ♦ In such case the sale is in effect a hedge, and is sometimes so termed. 4 216 COUNTRY GRAIN MARKETING. The great bulk of the Northwest grain moves to Minneapolis and Duluth, which, as elsewhere stated, are probably the most important consignment markets in the country (Ch. VI, secs. 15—16, and Table 49). While something over 70 per cent of the grain disposed of by country elevators is sold on the consignment basis, the proportion is very much higher in all four of the Northwestern States, which, as stated, are tributary to these important consignment markets. In consequence the proportion of elevators reporting hedging tends to be relatively high in this area. In the areas farther to the south and the territory east of the Mississippi, except Wisconsin and Missouri, much smaller proportions of the various grains are reported sold on the consignment basis than in the Northwest and much larger pro¬ portions directly. Many of the markets in these latter States are large “ to-arrive ” markets and do comparatively little consignment business. In many of these States, moreover, there is a great deal of local grain merchandising, whereas in the Northwest there is little or none of it. (Ch. VI, secs. 7-16.) Effect of commission-house financing on hedging. —As previ¬ ously indicated, the elevators in the northwest territory other than the line houses are financed in large measure through various com¬ mission houses located in the terminals of Minneapolis and Duluth. (♦Siee also Ch. X.) The following table presents the proportion of elevators reporting hedging in the 14 large grain-producing States in comparison with the extent of financing by commission houses-: Table 75 .—Proportion of elovntors in specified States reporting hedging in com¬ parison with the prevalence of commisswn-house financing. State. Percentage of elevators reporting hedging to a greater or less ex- tent.i Proportion of times commission houses are reported as somce of loans to all somces reported.2 94.33 33.76 89.54 24.12 75.10 18.84 •71.75 21.16 47.96 .26 43.71 4.23 33.09 2.67 20.73 .44 16.05 3.68 12.62 12.43 3.82 8.27 .94 3.04 8.39 51.69 10.86 1 The question asked was “Is it a custom to hedge your grain purchases? ” The answers feU into fom divisions, “Yes,” “To some extent,” “No,” and “Only by flour sales,” as appears froin Table 73. In this discussion answers to the first two classes have been combnmd and those to the last two. The first two classes employ hedging in varying degrees, and hedging by flour sales is a type of hedging of a radi- cally different character from hedging in grain (Vol. VII). 2 Appendix Table 20, ) \ A I i 217 HEDGING OPERATIONS OF COUNTRY HOUSES. As appears from this table, the four Northwestern States reporting the highest proportions of hedging are also the ones which report the greatest prevalence of commission-house financing. They are in fact the only ones in which the proportion of this type of financing is above the average for the whole 14 States and, with the exception of Wisconsin, likewise the only ones in which commission houses are a very appreciable factor in financing. As a result of the develop¬ ment of this practice the average northwestern commission house will lend many thousands of dollars during the course of the year to various elevators scattered throughout these four States. (Ch. X, sec. 4.) In order, therefore, to protect themselves these houses fre¬ quently require that the elevators in consideration of the advances made shall consistently maintain a policy of hedging promptly all grain purchases. If the elevator does not hedge, its operations are necessarily subject to all the fluctuations of grain prices in the great terminal and world markets. While it is possible that large profits may be made as a result of these fluctuations, it is likewise possible that heavy losses will occur, and in the latter event the commission house is likely to find it somewhat difficult to obtain the repayment of the money which it has loaned. There is scarcely a commission house in Minneapolis that can not instance severe losses which it has at one time or another suffered by reason of having advanced money to some elevator which did not hedge, but took the risk of selling its grain without this form of insurance and lost heavily. The infor¬ mation obtained clearly indicates that the commission houses in the Northwest are tending more and more to insist on hedging. In many cases, moreover, these commission houses are keeping the books for the country elevators which they finance, and this tendency also is reported to be on the increase. When this is the case, the commis¬ sion house is in a better position to require hedging, since the ele¬ vators in such cases send in daily reports to the commission houses in , much the same way as line agents send daily reports to the home office. (Ch. VI, sec. 2.) As a result, it knows precisely the quantities ' of grain and grain futures bought and sold and can check up the hedging of the elevators. The reluctance of commission houses to finance country elevators unless they hedge probably results in a con- -^iderable proportion of elevators located in the Northwest hedging because of commission-house requirements in this matter. In other sections commission-house financing is not nearly as prevalent, and east of the Mississippi it can scarcely be said to exist. In-consequence, this is not an appreciable factor in inducing hedging, except in the former area. Effect of the presence of commercial line elevator companies ON HEDGING. —The followiiig table presents the proportion of elevators hedging in 14 States in comparison with the proportions of com¬ mercial line elevators in thosf^ States: 218 COUNTRY GRAIN MARKETING. Table 76 . — Proportion of elevators reporting hedging in specified States in com¬ parison with the proportion of commercial line elevators. State. Proportion of elevators reporting hedging to a greater or less extent.i Proportion of com¬ mercial line elevators. 94.33 54.17 89.54 49.90 75.10 46.42 71.75 43.37 47.96 48.58 43.71 29.99 33.09 28.96 20.73 9.38 16.05 31.59 3.68 27.31 12.62 21.75 12.43 10.96 8.27 20.57 3.04 13.60 51.69 '36.01 1 The question asked was, “Is it a custom to hedge your gram purchases? The answers fell into four divisions, “Yes,” “To some extent,” “No,” and ‘^Only by flour sales,” as appears from Table 73. In this discussion answers to the first two classes have been combined and those to the last two. i he first two classes employ hedging in varying degrees and hedging by flour sales is a type of hedging of radically different character from hedging in grain (Vol. VII). According to this table there is some tendency for the proportion of commercial line elevators to vary directly with the proportion of elevators reporting hedging. Thus the seven States reporting the largest proportions of hedging elevators are also among the eight re¬ porting the largest proportions of commercial line elevators. As has already been explained, there are many commercial line elevator companies operating a large number of houses---50, 60, 100, or even more. Wliether the line is as large as this or not, it is usually true that this type of company handles in total a considerably larger quantity of grain from day to day than does the individual elevator, and in the case of the larger ones the quantity of grain subject to the ' risk of fluctuation in market prices is very great. The managers of line companies, especially the larger ones, recognize that the larger the total volume of grain purchased and held the greater the amount of risk involved from the fluctuations of world grain prices and the more serious the possibility of heavy .losses. If they are willing to forego the opportunity for profits arising from the possibility of price advances, they can by the use of the hedging market protect themselves against serious losses. Other things. being equal, the greater the amount of risk involved the greater the tendency of tjie average business man to protect himself against that risk. As a result the large commercial lines tend to pursue a fairly con¬ sistent hedging policy, while even the smaller ones probably tend to hedge much more frequently than do the individual elevators, on the whole. In other territories where the commercial lines are fewer in number than in the Northwest, the amount at risk is not usually as great because the lines are smaller.^® As a rule, therefore, these types of elevators are much more inclined, having relatively smaller amounts at risk, to take the chances of the market than are the com¬ mercial line companies. Except perhaps some of the mill lines. HEDGING OPERATIONS OP COUNTRY HOUSES. 219 Section 6. Type variations in hedging. Reshuts of tabulation.— Appendix Table 19 presents the detail of hedging by different types of country elevators and warehouses in the united States. The following table presents in summary form the proportions of each type of house hedging and not hedging in the United States: Table 77. —Proportion of different types of Elevators and warehouses hedging and not hedging their purchases of grain. Type of house. Number reporting. Percentage hedging. 1 Percentage not hedging. 1 Commercial line. 3,140 88 1,479 671 2,709 451 29 4 73.25 56.81 49.22 38.01 30.79 21.51 26.75 43.18 50.78 62.00 69.21 78.49 100.00 100.00 Cooperative line. • Individual cooperative. Millline.t. Independent. Indi'^dual mill. Maltster line. Maltster individual. '1 . All elevators and warehouses. 8,571 4,643 3,928 49.75 35.73 66.32 50.26 64.27 33.69 All individual elevators and warehouses. All line elevators and warehouses. 1 The question asked was, ‘Us it a custom to hedge your grain purchases? ” The answers fell into four divisions,_“Yes,” “To some extent,” “No,” and “Only by flour sales,” as appears from Table 73. In this discussion answers in the first two classes have been combined and those in the last two. The first two classes indicate hedging in varying degrees and hedging by flour sales is of a radically different character from hedging in grain (Vol. VII). • Disregarding cooperative line and both maltster types on account of the insignificant number reporting, the commercial line house is easily the type most frequently employing hedging and the indi¬ vidual mill the type least often making use of this device. Both mill types and also the independent are considerably below the average in the percentage of hedging reported and the individual cooperative is also slightly below the average. Most of these variations are read¬ ily explainable on the basis of the relative importance of different types of elevators in different sections as affected by the conditions set forth in the preceding section. As warehouses were not tabulated by States, owing to the small number reporting, the succeeding discussion of type variations is based upon the returns from 8,217 elevators,^^ the 354 warehouses also reporting on hedging being too small a proportion appreciably to affect the generalizations made. Commercial line variations. —One reason for the high proportion of hedging by commercial line companies—l;he business methods of this type—has already been fully 'explained in the last preceding section in connection with the high percentage of hedging elevators reporting in the four northwestern States. Individual and cooperative variations. —The following table pre¬ sents the proportions of cooperative and independent elevators in 14 States in comparison with the reported proportions of hedging elevators. These figures are shown in detail in Table 73. 220 COUNTRY GRAIN MARKETING. Table 78 .—Proportion of elevators reporting hedging in specified States in comparison with the proportion of independent and individual cooperative elevators^ » state. Hedging to a greater or less extent.i Percentage of indi¬ vidual co¬ operative elevators. Percentage of inde¬ pendent elevators. 94.33 23.71 14.67 89.54 23.90 13.63 75.10 21.34 19.08 71.75 23.08 25.26 47.96 26.30 20.77 43.71 14.47 48.34 33.09 25.84 42.45 20.73 21.30 36^93 16.05 5.46 44.18 12.62 7.63 49.72 12.43 6.14 46.05 8.27 4.57 29.71 'M’lo'hicran . 3.68 2.81 51.41 3.04 5.70 49.12 All elevators. 51.69 18.42 31.62 1 The question asked was, “Is it a custom to hedge your grain purchases? The answers fell mto four divisions: “Yes,” “To some extent,” “No,” and “Only by flour sales,” as appears from Table 73. In this discussion answers in the first two classes have been combined and those in the last tw^ The first two classes indicate hedging in varying degrees and hedging by flour sales is of a radically dinerent char¬ acter from hedging in grain. A brief examination of this table reveals the fact that the pro portion of hedging as between the various States tends to vary di¬ rectly with the proportion of cooperative elevators reported, and inversely with the proportion of independent elevators. J In other words, hedging is most frequently employed in the four north¬ western States where the proportion of cooperative elevators is relatively high and the proportion of independent elevators rela¬ tively low. Conversely, it tends to be least frequently employed in those States where the proportion of cooperatives is low and that of the independents high. In the former area, owing largely to the prevalence of consignment selling and commission-house financing, hedging is customarily used. (Sec. 5.) In the rest of the area neither of these practices is so largely employed, for the reasons previously stated. The relative concentration of cooperatives in the former area and of the independents in the latter is therefore the most plausible explanation of the relatively high proportion of cooperatives reporting hedging as compared with the independents. Mill elevators. —The percentage of mill elevators, both line and individual, reporting hedging is considerably below the average, though the proportion of mill lines reporting this practice is nearly twice as great as that of the individual elevators*. The low per¬ centages of hedging thus reported are probably due primarily to the fact that mill elevators, as a whole, tend to hedge largely by flour sales rather than by the purchase of grain futures. In such cases many elevators hedging by flour sales probably interpreted the question as referring to hedging by transactions in grain futures and reported “No.” If a mill buys wheat for milling purposes, it'can obviously protect its milling profit against fluctuations either in the price of wheat or flour by making a contract for the sale of flour HEDGING OPERATIONS OF COUNTRY HOUSES. 221 based upon the price paid for Avheat. Wheat purchases, therefore, may be hedged by flour sales for future delivery, or, conversely, flour sales for future delivery may be protected by the purchase of wheat. As previously explained, mill elevators of both types purchase grain primarily for milling purposes and are only incidentally, as a rule, engaged in merchandising. In so far, therefore, as the elevator buys only for milling, it is unlikely that it will hedge by selling grain futures,* and the proportion of these elevators reporting hedg¬ ing, therefore, is probably composed chiefly of those engaging in some degree in merchandising. The much higher proportion of mill line elevators reporting hedging than of individual mill ele¬ vators is probably due to the greater tendency of mill lines to merchandise as compared with individual mill elevators. Section 7. Hedging in the various grand divisions. Elevators and warehouses in the Middle Atlantic and Southern grand divisions report very little hedging, presumably owing to the fact that the bulk of the business in these areas is direct and the shipments go chiefly to mills and small local points. In the Mountain and Pacific sections the amount of hedging by both elevators and warehouses is also small. Pacific coast grain has seldom come east to any extent, at least until recently, but instead has gone largely for export. On the coast there is a lack of large concentrated spot markets at the terminal cities, and in consequence exchanges are not utilized to any great extent for the buying and selling of grain. Aloreover, since the warehouses are not merchandisers to any con¬ siderable extent, but are largely storage propositions, the terminal market buyers deal chiefly with the farmers instead of the ware¬ houses. The foregoing situation is probably primarily responsible for the fact that cash grain prices on the coast move to a considerable degree independently of prices in the great grain markets of the Central West. On the coast, moreover, there is no future market except a limited call business at San Francisco (Vol. V), and in consequence such hedging as is done is chiefly in the eastern markets. As has already been stated the employment of the futures market as a means of protection against losses on cash operations is based upon the fact that cash and future prices move together. Although this coincidence of movement will be found in Chicago, Minneapolis, and other large terminal markets, it is not necessarily true of the futures in these markets and the prices of Pacific coast cash grain since, as stated, the coast cash prices move more or less independently of those in the terminal markets in the Central West. As a result these future markets can nolr be expected to afford adequate protection to coast grain dealers attempting to use them for hedging. This explanation is confirmed by the experience of coast grain dealers, many of whom have reported that they could secure little or no protection from the use of such future markets as Chicago, Minneapolis, etc., and that they had in some cases incurred heavy losses as a result of their attempts to do so. In consequence the proportion of elevators and warehouses hedging on the Pacific coast is relatively incon¬ siderable. ♦ This is by no means so true of the large commercial mill with high storage capacity. 222 COUNTRY GRAIN MARKETING. Section 8. Factors affecting the extent of hedging. General statement. —Agents of the Federal Trade Commission and of the Bureau of Markets interviewed the proprietors, operators, or officers of nearly 300 country elevators of the cooperative, inde¬ pendent, and individual mill types in the Dakotas, Minnesota, Mon¬ tana, Illinois, and Iowa concerning hedging. Interviews were also had with the officers of numerous mill and commercial line elevator companies with headquarters in Minneapolis, Chicago, Kansas City, and other terminal markets which covered the same subject. These interviews are interesting and suggestive, as they present the indi¬ vidual viewpoint of various persons connected with country market¬ ing operations, and also because they indicate the considerable va¬ riety of causes which in greater or less degree affect the extent of hedging. The various factors affecting the extent of hedging as reported in these interviews are as follows: Hedging policy, commercial methodj of selling grain, market conditions, kind of grain, storage and con¬ tracting, and transportation conditions. That the amount of hedging may fluctuate to a considerable de¬ gree owing to factors such as these and others of a similar character is indicated by the summary of the hedging operations of a Chicago line concern from July 1, 1912, to June 30, 1917. During this five- year period the hedging transactions in futures of this concern varied all the way from one-fifteenth to one-half of its total cash purchases. For several months—to be exact, from November 1, 1913, to May 1, 1914—this concern did not hedge at all on account of the small amount of grain which it was handling, while from May 1,1916, to May 1,1917, the books of this company indicated a volume of future transactions much in excess of actual grain purchases dur¬ ing the same period. This excess was explained by the fact that a part of these hedges were placed to cover grain on hand which had been bought during the previous six months. Hedging policy’. —The operators of numerous cooperative, inde¬ pendent, and individual mill elevators in the Northwest advocated hedging as being a necessity in order to permit the conduct of the grain business in a safe and conservative fashion and as a means of safeguarding it against undue risks. In fact, a considerable propor¬ tion, if not the bulk, of the operators of these types of elevators inter¬ viewed in this territory regarded a. failure to hedge grain as involv¬ ing the elevator in speculation. A few elevators in the Northwest, of the-cooperative type espe¬ cially, stated that hedging was contrary to their business policy. One organization, for example, contended that hedging was specula¬ tion, and that in view of this fact the manager was instructed not to hedge any grain. The board of directors of two other country ele¬ vators which were visited gave instructions to the manager not to hedge the purchases made, because they were opposed to the practice of hedging. While the Commission will not vouch for the authen¬ ticity of the statement, it is understood that the by-laws of a few co¬ operative elevator companies forbid trading in futures for any pur¬ pose whatsoever. The head of a Chicago commercial-line organization is authority for the statement that many of the cooperative com- HEDGING OPEKATIONS OF COUNTRY HOUSES. 223 panics in the territory tributary to Chicago do not hedge and that some even advertise on their stationery and elsewhere, We do not trade in futures.” In some cases there can be littie doubt, from the information se¬ cured by the Commission, that some of the country elevator mana¬ gers do not understand the hedging operation and are opposed to it largely for this reason. In other instances country managers who understand the operation do not hedge, because they fear that they will be unable to explain the operation satisfactorily to a farmer board of directors. There is also evidence from the Northwest ter¬ ritory indicating, in some cases, the misuse of the hedging policy adopted by certain elevators. Under the guise of hedging grain * which they have purchased, managers have occasionally speculated upon their own account, using the elevator’s resources for that pur¬ pose. Incidents of this character, of course, tend to react unfavor¬ ably upon the minds of the directors and are not unlikely to lead to ^ an unfavorable attitude toward hedging. The commercial line companies, especially those with headquar¬ ters at Minneapolis, as already stated, generally insist on the abso¬ lute necessity of hedging in order to insure themselves against de¬ clines in prices and consequential losses therefrom. These com¬ panies emphatically believe, if one is to judge from their statements, that hedging results in the elimination of great risks and by reason of this fact renders it possible to purchase grain on a much smaller margin than would otherwise be the case. The St. Anthony & Dakota Elevator Co., one of the largest Minneapolis line companies, reports that it is their custom to hedge country purchases immedi¬ ately if there is a future market for the grain.^® The Monarch and Northwestern elevator companies similarly re¬ port that all grain purchased is hedged as quickly as possible. Other Minneapolis lines claim to pursue a similar policy. Close question- ing, however, developed the fact that although the Minneapolis line companies usually state that they hedge every bushel purchased, this is probably true, with some exceptions, rather as a statement of policy than as a matter of absolute accuracy. Thus, circumstances, says one company, are often such that it is not advisable to hedge. In one year, when the wheat crop was poor, being chiefly No. 3 and No. 4 grades, one of the largest lines did not always hedge these low grades. Farther to the south, in Chicago territory, one large converter operating country houses, claimed that it was necessary to hedge its oats purchases on account of the large amount of this grain which it customarily carries in store in its country elevators. A milling company of St. Louis, however, which operates a few’ country elevators, does not hedge its grain by the selling of grain futures. Instead, its policy, like that of many other mills operating country elevators, is to sell flour and purchase wheat simultaneously, the company thus insuring its milling profit on its flour sales. The officer interviewed expressed the opinion that while a nonhedging policy (as regards grain not hedged by flour sales) results in losses at certain times and gains at others, the risk from a failure to hedge “This interview was taken before there were any reported future prices for rye and barley at Minneapolis. ^ j ^ 224 COUNTRY GRAIN MARKETING. is no greater than that which is present in hedging, provided a com¬ pany is financially strong enough to suffer a big loss when it occurs. According to his theory the losses and gains over a period ot years tend to offset each other, as in the case of losses and gams from hedging^transactions 5 and there is this difference between the result of the two policies, that the first involves no commission expense for conducting hedging transactions while the latter does. While this theory is interesting, a further qualification to his views must be pointed out. Except under yqyj abnormal conditions the total amount of losses or profits in a particular year should be less if hedging is used than if not, although over a series ot years the amount of total profits and losses with and without the use ot hedging might not be greatly different. ^ Some line companies expressed objections to any governmental restriction upon future trading on the ground that it would have an unfavorable effect upon the possibility of hedging. One company claimed that the restriction of future trading operations would tend to prevent the distribution of the forces of supply and demand over a long period of time and hence would tend to prevent the equaliza¬ tion of prices between different periods. Discussion of this subject is reserved for another volume. . Commercial method of selling grain. —As has already been indi¬ cated, the extent of hedging is greatly influenced by the commercial method used by the country elevator in disposing of its grain. A to-arrive sale made immediately after the purchase of grain is in itself an insurance against price fluctuations. Some of the elevators in the northwest territory which customarily hedge also report that they occasionally sell on a to-arrive basis in lieu of sales of futures to protect themselves. .,,^ 11 /. Line companies also not infrequently use the to-arrive method ot selling instead of hedging by future sales. This method can perhaps be used to the best advantage early in the crop movement, when a strong demand for the grain exists. A small Chicago line sells only a small proportion of its grain “to-arrive,” and therefore hedges nearly all its purchases. The attitude of the operator toward hedg¬ ing is much the same as that of the line companies farther north in the Minneapolis territory. He regards the practice as^ indispensable for insuring his organization against grain-handling risks. Another Chicago line over a period of five years consigned about the same amount of grain as it sold on the to-arrive basis. As between dif¬ ferent periods during these five years there is a considerable^ varia¬ tion in the use of the two methods. This was explained as being the result of the rapidity and amount of price changes, quality of, the crop, and other factors. As a general rule this company hedges its consigned grain. ^ n -j. - A line organization with headquarters in Kansas City sells its g <>-rain both on the “to-arrive” and consignment basis. It hedges allj Srain that is not sold “to-arrive.” The company considers that iril the case of corn it is better protected against loss by “ to-arrive sales than by hedging, this view being based upon the fact that the 1 company is ordinarily more familiar with the quality of this grain™ which is bought in its territory than it is in the case of wheat. .1 HEDGING OPEKATIONS OF COUNTRY HOUSES. 225 Another small line company of Kansas City does not, as a rule, hedge, for the reason that it usually sells on the “to-arrive” basis, which, as already indicated, is in a measure a protection against price fluctuations. This organization, however, occasionally makes use of the future market for hedging purposes when unable to secure cars. When cars can not be obtained, futures are sold, and later, when cars are available, the hedge is closed out and the grain sold, as a rule, “ to-arrive.” This company also reported that hedg¬ ing itself involved a risk in that the margin between cash and future prices may vary considerably. At one time the cash may be lower than the future, and at another time higher. This may result in a loss or gain from the hedging transaction, depending upon the posi¬ tion of cash and future prices at the time the hedge is placed in 1 relation to such prices at the time the hedge is closed out. The cor- 1 rectness of this observation must, of course, be admitted. As previ¬ ously pointed out, the cash price and the future price tend to move up and down together, but the margins between the two frequently vary considerably. So long as future and cash prices do not move ! together exactly, the use of the futures for hedging purposes does I not, and can not, afford a perfect insurance against loss; instead, it can only limit the losses and profits within certain boundaries, and in extraordinary situations, where cash and future prices become seri¬ ously dislocated, a hedge may afford little or no protection. Market conditions.— Some of the elevators in the northwestern States informed the Commission’s agents that their policy as to hedging depends to a great extent upon the conditions of the market. Thus some 12 of the elevators which were visited by the Commis¬ sion’s agents reported that they hedged grain only when the market was falling or was, in their opinion, ‘‘ due for a drop,” and that they did not hedge when the market was rising. Some of these same 12 ' elevator companies also stated that when the market was high they shipped their grain as fast as possible, presumably for the purpose of getting it to the terminals to obtain the benefit of the high prices prevailing. Certain northwestern elevators reported that their hedg¬ ing policy was more variable during the summer and fall of 1914 than at any other time, owing to the uncertain market conditions which obtained following the outbreak of the European war. The wide fluctuations in the prices of grain, both cash and future, tended to prevent hedging from constituting a satisfactory form of insur¬ ance for grain purchases. This, together with the general rise in prices, discouraged the practice. One northwestern elevator reported that upon the outbreak of the war it immediately stopped hedging, as it thought that prices would go up. Another elevator which re¬ ported that it was its custom systematically to hedge its grain ad¬ mitted that in 1916-17 its wheat was not hedged because of the rising prices. The operator of an elevator at Buttsville, N. Dak., informed the representatives of the Commission that he did not hedge his grain if he thought that a profit would follow from a failure to hedge. This tendency to speculate in connection with the hedging opera¬ tions is also manifest in the report of one country manager Avho ex¬ plained that the hedges which he placed were closed out according io his judgment as to market conditions. • 9964°—20-15 226 COUNTRY GRAIN MARKETING. As has been pointed out, country elevator hedging in the exact sense of the term, i. e., as an insurance against loss, involves a pur¬ chase of grain and the sale of a future as simultaneously as possible under existing conditions and circumstances; and in the “close-out” an equally simultaneous execution of the reverse of these transac¬ tions. The moment that the operator, after having sold his actual grain, fails to buy back his hedge in the future market he is backing his individual judgment against the fluctuations of market prices and is speculating and no longer hedging. It is also interesting to note that the manager of at least one co¬ operative elevator in the northwest territory expressed the opinion that better results were obtained in normal times by not hedging. Kind or grain.— There is a considerable variation in the extent of hedging as between the various kinds of grain. Up until recently, for example, the hedging of rye and barley was necessarily limited owing to a practically complete lack of hedging facilities. In occa¬ sional instances these grains used to be hedged in other grains; for example, barley by sales and purchases of oats or corn futures and rye by sales and purchases of wheat futures. (Ch. IX, sec. 4.) As has already been stated, the Minneapolis line companies tend, as a matter of policy, to hedge consistently all grains purchased. One Chicago line hedges a larger percentage of wheat than it does of corn and other grains. The explanation by the company of this fact is that wheat per bushel represents a considerably higher cost than the other grains, and therefore a greater risk of loss. Moreover, this concern claimed that wheat is handled on a narrower margin of profit and fluctuates more in price than the other grains within short periods of time. This company during the five-year period from July 1, 1912, to June 30, 1917, shows hedging sales of wheat futures amounting to about 44 per cent of its total purchases of wheat, but the similar ratio for corn and oats was less tlian 25 per cent. One Kansas City line informed the Commission that corn is not hedged so generally as wheat because it is handled in smaller quanti¬ ties, which makes hedging scarcely worth while. Wheat usually moves in larger quantities than corn and within a shorter period of time. Storage and contracting.— As the capacity of the average coun¬ try elevator is not always great enough to permit the operator to hold the grain which is stored and at the same time receive new grain offered for sale, it is frequently necessary to ship out stored grain as well as that owned by the elevator company in order to make room for incoming grain. Some of the elevators in the northwest territory reported that it was their practice to hedge shipments of stored grain. The farmer who stores grain expects to sell it at a price higher than the one prevailing when he brings the grain to the elevator unless it is to be used for seeding purposes at the next season. It is essential that the elevator shipping stored grain protect itself, since the grain so shipped may be sold at a lower price than that prevailing at the time the farmer presents his storage tickets for payment. Unless a future has been bought therefore, the elevator must suffer the loss of the difference between the price at which the grain was sold and the country market price prevailing when the farmer elects to cash his storage tickets. As the cash and future markets presumably move HEDGING OPERATIONS OF COUNTRY HOUSES. 227 or fluctuate together, the country elevator operator, when selling a car of storage grain, buys a like quantity of future grain and when, at a later date, the farmer presents his storage ticket to the elevator operator to be cashed, the latter pays the farmer the higher price and closes out his future, which presumably is also at a higher price.* In shipping stored grain the line elevator company is in a some¬ what better position than is the individual elevator, for the reason that it usually has plenty of its own grain in some one or other of its eleva¬ tors which protects it on shipments of the storage grain of farmers. In consequence a line company does not usually hedge individual shipments of grain stored for farmers if the amount of its own stored grain is asj ^eat as or gi’eater than that of the shipments of the farmers’ grain. The claim of the desirability of the individual elevator hedging shipments of stored grain is apparently sustained by the experience of one cooperative in North Dakota. This concern claims to have lost $7,000 during the crop year of 1916-17 because of the alleged failure of the commission company to which it had consigned ship¬ ments of stored grain to hedge it. Two northwestern elevators which were visited by the agents of the Commission reported that they hedged shipments of stored grain, though they did not follow this practice with reference to their own purchases, while another which reported no hedging did, however, after making the cut-off, hedge any shortage of storage grain which was discovered. In two instances encountered by the agents of the Commission, the elevators stated that they hedged in anticipation of receipts where contract grain was involved. If grain is contracted for at a given price, it is obvious that such a future transaction may be a protection of this contract price. Transportation facilities. —In the northwest territory two ele¬ vators reported that car shortages greatly influenced their hedging policy. For example, one of these concerns located near Minneapolis can ship grain into this city within a short period of time. If the shipment reaches the market the day after loading, it is evident that little risk of loss from price fluctuations is involved except during abnormal price conditions. As has been indicated above, car shortages are also likely to result in an increase in the amount of hedging even by those elevators which consistently sell either “ on-track ” in the country or on a “ to-arrive ” basis, the reason being that many of these elevators in the case of such shortages recognize the fact that some time is likely to elapse between the time of purchase and the time of sale and that it is desirable to protect themselves against the possible fluctuations occur¬ ring in this period. Section 9. Markets employed by country elevators for hedging. Results of tabulation.— Of those elevators and warehouses which answered the Commission’s inquiry on the subject of hedging, 2,457 reported the exchanges on which they hedged. (Appendix 2, inquiry 18.) The following table presents the number of times each of these exchanges is reported in the schedules as being employed both ex¬ clusively and exclusively and partially for hedging. * The effect from the elevator's standpoint would have .been the same if prices had gone the other way. 228 COUNTRY GRAIN MARKETING. Table 79 .—Number and proportion of times specified exchanges are reported by country elevators as bding used for hedging.'^ Exchanges used exclusively. Times reported in schedules report¬ ing only one ex-. change. Exchanges used exclusively and partially. Times reported in schedules report¬ ing one or more exchanges. Number. Per cent. N umber. Per cent. 5 0.35 Toledo. 20 0.51 6 .43 Omaha. 30 .76 8 16 .57 St. I.ouis. 33 .84 1.13 Milwaukee. 34 .86 Dnlntb . 36 2. 55 Kansas City.-. 125 3.17 99 7.02 Duluth. 811 21.34 508 36. 00 Chicago. 1,154 29.28 Minneapolis. 733 51.95 Minneapolis. 1,704 43. 24 Total times reported.... 1,411 100.00 Total times reported.... 3,941 100.00 1 This table is based on the returns made by 2,457 elevators and warehouses, 1,411 of which reported hedging on only one exchange, the balance, 1,046, reporting hedging on two or more exchanges Of the markets reported in the foregoing table as being used for hedging purposes by country elevators, Minneapolis is the one most frequently recurring in the schedules. On the basis of this fact, it is probably safe to conclude that Minneapolis is easily the most im¬ portant hedging market for country elevators and warehouses.^® 18 This conclusion is not arrived at solely on the basis of the figures as they were returned. It must be pointed out that over one-half of the elevators and warehouses reporting the exchanges on which they hedged are located in the four Northwestern States of Minnesota, North and South Dakota, and Montana, which States are normally regarded as being tributary to Minneapolis and Duluth. A not unnatural inference or deduction from this fact would be that the statistical indication of the above table is incorrect, owing to the unduly large proportion of elevators reporting which are located in territory tributary to Minneapolis, thus inflating the Minneapolis fi^re. ^ ^ On the other hand, it is undeniable that a vastly greater proportion of elevators in these four Northwestern States customarily hedge their grain purchases than is the case in any other section of the United States. (Cf. Table 73.) Necessarily, therefore, an accurate picture of hedging in the United States would include a relatively Much larger proportion of elevators from these States than from other localities or secDons where hedging is either relatively insignificant or can scarcely be said to exist. The follow¬ ing tabular statement compares,'' separately, the proportion of elevators hedging in the four Northwestern States and in the rest of the United States with the proportion of elevators reporting the markets in which they hedge for the same four Northwestern States and for the remainder of the country : Locality. Niunber of elevators and ware¬ houses answering inquiry on hedging. Number of elevators and ware¬ houses reporting hedging.® Per cent of elevators and ware¬ houses hedging to those reporting. Number of elevators and ware¬ houses reporting exchanges on which they hedge. Per cent of total. 4 North wpstom States . 3,779 4,792 3,121 1,143 82.59 23.85 1,756 701 71.47 28.53 Pa.lnriep. of Tlnited States .:... Total . 8,571 4,264 49.75 2,457 100.00 1 5 Figures obtained by combining those answering “Yes” and “To some extent” to the Commission’s inquiry. (Table 73.) While about 71J per cent of the elevators reporting the future markets employed for hedging are located in the four Northwestern States and only about 28i per cent in the remainder of the country, the proportion of hedging elevators in the four North¬ western States and the rest of the United States is in the ratio of 82.61 to 24.02. In other words, the high frequency with which country elevators report the employment of the Minneapolis future market for hedging purposes is not due so much to the large number of reporting elevators in the four Northwestern States tributary t9 Minne¬ apolis as to the high proportion of the elevators in this area which customarily hedge their grain purchases. On the basis of these facts, therefore, it is reasonable to con¬ clude that Minneapolis is probably used for hedging by a larger proportion of country elevators than is any other market. HEDGING OPERATIONS OF COUNTRY HOUSES. 229 Although Chicago is not employed for hedging by as large a pro¬ portion of country elevators and warehouses as is Minneapolis, it is apparently somewhat more important than the latter market, or any other market, in the breadth of distribution of the elevators hedging there. As appears from Table 80, country elevators or warehouses from every one of the grand divisions and from every one of the 14 States separately tabulated, except Wisconsin, report the use of Chicago for hedging. Table 80 .—Number of country elevators in specified States and grand divisions hedging in specified markets, in comparison with the proportion of country grain receipts ^ in those markets.^ Percentage of receipts and number of elevators hedging at— Total State or division. ele¬ vators and ware¬ houses report¬ ing. Miimeapolis. Chicago. Duluth. Kansas City. Re¬ ceipts. Num¬ ber hedg¬ ing. Re¬ ceipts. Num¬ ber hedg¬ ing. Re¬ ceipts. Num¬ ber hedg¬ ing. Re¬ ceipts. Num¬ ber hedg¬ ing. ELEVATORS. Perct. Per ct. Per ct. Per ct. North Dakota. 773 33.98 761 0.23 289 72.20 542 0.05 Minnesota. 475 36.03 458 5.79 146 17.79 123 .71 Illinois. 246 .01 51.98 236 South Dakota. 341 23.11 314 3.30 105 3.38 33 3 78 Iowa. 146 1.01 11 31.43 144 .02 6 53 Kansas. 90 .11 .35 6 55 24 89 Nebraska. 104 .86 12 1.78 90 .02 11 26.39 21 Montana. 167 4.24 145 .02 51 6.15 130 .16 Indiana. 35 2.44 35 1 Ohio. 36 .01 31 Michigan. 4 .03 4 Missouri. 11 .71 1 3 26 5 Wisconsin. 4 .09 1 .50 .01 .10 Oklahoma. 6 .05 .07 4 1.81 5 Mountain and Pacific divi- sion. 1 .17 .18 .08 .84 1 Middle Atlantic division.... 4 4 Southern division. 2 2 .05 1 Total. 2,445 99.66 1,702 98.81 1,148 99.65 839 98.97 123 WAREHOUSES. • Moimtain and Pacific divi- sion. 2 .21 1 .35 1 .07 1 .16 Central division. 9 .13 1 .84 5 .28 1 .48 ■ 1 Southern division.... 1 .39 1 Middle Atlantic division.... Total. 12 .34 2 1.19 6 .35 2 1.03 2 Grand total. 2,457 100.00 1,704 100.00 1,154 100.00 841 100.00 125 1 According to shipments to those markets as reported by country elevators (Table 37). 2 For States included in the grand divisions see Ch. II, sec, 5. t •t I 0 230 COUNTKY GRAIN MARKETING. Table 80 .—Number of country elevators in specified State'S, etc. — Continued. / Percentage of receipts and number of elevators hedging ait— Total state or division. ele¬ vators and ware¬ houses report¬ ing. Milwaukee. St. Louis. Omaha. Toledo. Re¬ ceipts. Num¬ ber hedg¬ ing. Re¬ ceipts. Num¬ ber hedg¬ ing. Re¬ ceipts. Num¬ ber hedg¬ ing. Re¬ ceipts. Num¬ ber hedg¬ ing. ELEVATORS. Per ct. Per ct. Per ct. Per ct. North Dakota. 773 0.25 2 0.04 Minnesota. 475 23.53 14 1.07 0.20 Illinois... 246 1.39 41.63 21 7.12 South Dakota. 341 23.15 14 .25 12.16 Iowa. 146 32.35 26.47 1 22.38 2 Kansas. 90 .01 .49 .21 Nebraska. 104 .74 6.39 63.19 28 Montana. 167 .43 .47 Indiana. 35 .10 1 39.99 Ohio. 36 40.98 11 Michigan. 4 9.96 2 Missouri. 11 19.73 7 .01 Wisconsin. 4 17.74 3 .40 .01 Oklahoma. 6 .33 .02 Mountain and Pacific divi- Sion. 1 .02 .31 .87 Middle Atlantic division.... 4 Southern division. 2 .02 Total. 2,445 99.20 33 97.67 30 99.50 30 98.07 20 WAREHOUSES. Mountain and Pacific divi- sion. 2 .02 .20 . 10 Central division. 9 .79 1 2.12 3 .40 1.93 Southern division. 1 .01 Middle Atlantic division.... Total. 12 .80 1 2.33 3 .50 1.93 Grand total. 2,457 100.00 34 100.00 33 100.00 30 100.00 20 Effect of shipments upon hedging markets. —A careful exami- .* nation of Table 80 indicates that the breadth of distribution of the country elevator hedging in the various markets is, with the possible 'j' exception of Chicago, conditioned largely by the flow of grain to the ; particular market. In other words, there appears to be a tendency r'. for the use of a market for hedging by the elevators to vary rather ih directly with the proportion of country grain receipts in that market, i Little or no hedging is reported by the elevators and warehouses of i any 'State in any market in which no country receijDts from that State ^ are reported, while the great bulk of the elevators using a particular market for hedging, except in the case of Chicago, tend to be located ^ in the relatively few States comprising the restricted geographical area from which the great bulk of the shipments to the particular market are drawn. For example, over 1,500 out of the 1,702 ele¬ vators reporting hedging in Minneapolis are located in the States of Minnesota and North and South Dakota,’from which three States that market, according to reported shipments by country elevators, receives over 90 per cent of its country grain. Over 600 out of 839 elevators reporting hedging in Duluth are in North Dakota and Min¬ nesota, from which two States 90 per cent of the shipments to Duluth are made. One hundred out of one hundred and twenty-three ele- HEDGING OPERATIONS OF COUNTRY HOUSES. 231 vators reporting hedging in Kansas City are located in Kansas and Nebraska, from which two States over 80 per cent of Kansas City country receipts are shipped. A somewhat similar situation is also found in the case of the most of the other markets. On the basis of these comparisons of shipments and hedging, there¬ fore, it is concluded that the selection of markets for hedging pur¬ poses by country elevators is determined primarily by the flow of grain from the elevators, and that country elevators usually hedge in those markets to which their shipments are made. Chicago as a hedging market for country elevators. —As already indicated, Chicago has a much wider distribution of country elevator hedging clientele than has any other market. Chicago is also peculiar in the fact that it is extensively used for hedging by elevators in vari¬ ous States from which comparatively little of its country receipts are reported as being obtained. Thus, Chicago receipts from North Dakota are less than one-fourth of 1 per cent of the total receipts at that market, but the use of the Chicago futures market for hedging is reported by 289 elevators in that State, or more than one-fifth of the total elevators and warehouses of the United States which report the use of Chicago for hedging. In Minnesota, South Dakota, and Nebraska, also, the number of elevators reporting the use of Chicago for hedging is apparently somewhat disproportionate to the reported Chicago receipts from these States. Chicago receives at least some grain from every State separately tabulated and-from two of the grand divisions, and there is, therefore, to that extent a relationship between the receipts at this market and its use for hedging. The apparent disproportion between hedging and receipts in certain cases is perhaps indicative of the fact that Chicago hedging by country elevators is somewhat less influenced by shipments than is the case with hedging in the other markets. If this view is correct, the predominance of the Chicago futures market is, in all likeli¬ hood, responsible for the situation. (Yol. V.) On account of the importance of Chicago as a futures market, it seems entirely probable that whenever elevators employ more than one market for hedging purposes, except perhaps in the four North¬ western States, Chicago is likely to be one of those employed. This is indicated by Table 79, which shows that although only 508 elevators report the use of Chicago exclusively for hedging, 1,154 elevators re¬ port it as being used either exclusively or partially.^’^ The use of the Chicago market by country elevators for hedging has also probably been largely increased by the operations of the various wire houses. Chicago is easily the principal wire-house While the corresponding increases in the employment of Minneapolis and Duluth exclusively and exclusively and partially are from 733 to 1,704 in the case of the former and from 36 to 841 in the case of the latter, these figures may be said to be indicative primarily of the fact that the Northwest tends to use either Duluth or Minneapolis for hedging, depending upon circumstances. In much of the northwest territory, ele¬ vators, on account of freight rates, are able to, and do, ship to both Minneapolis and Duluth and hedge in either or both markets. As appears from Table 80, the 839 ele¬ vators which report hedging in Duluth are all located in the four Northwestern States, except 11 in Nebraska, and of the 1,702 reporting hedging in Minneapolis, 1,678 a.re located in the same States, and only 11 in Iowa, 12 in Nebraska, and 1 in Wisconsin. It therefore follows that the greater number^of elevators which use Duluth and Minne¬ apolis, both exclusively and partially, as convgared with the respective numbers which use each of these markets exclusively, is causOT by this alternative employment of the one or the other in the Northwest, according to the course of shipments to both markets and various other factors. 232 COUNTRY GRAIN MARKETING. center in the United States. From this market there radiate thou¬ sands of miles of private wires extending to various towns and cities in the United States, including the 14 principal grain States, where, all told, there are scores of branch offices of such concerns. (Vol. V.) As elsewhere discussed, the primary business of wire houses is to obtain and execute orders for futures. Few of the other grain mar¬ kets of the United States are wire-house centers of any importance, and there seems little reason to doubt that the numerous branch offices of Chicago wire houses scattered throughout the grain terri¬ tory are partially responsible for the wide distribution of the country elevator hedging clientele of the Chicago market. (Ch. VIII.) 1 -• i Chapter X. FINANCING COUNTRY HOUSES. Section 1. Sources of loans. About 5,000 elevators and warehouses in the United States reported to the Commission as to the sources of their borrowed funds. (Cf. Appendix 2, inquiry 21.) Owing to the fact that line-elevator sta¬ tions usually procure their funds for buying grain from the main office of the company, the “head office” was reported as the source of such funds by most line elevators. Iij&.iLYideat^J^ that the funds ad_vaiiQed.d3y-the head office of a line company to an im. divlduar~stat m for the purchase of grain are not in^any true s^ s^^bUt he T^ord l^ounSj bu ^dv^ces . of J;ha. capital of the^^lmej^mfra employed in the transaction of its gr^n busi¬ ness. From the standpoint of the individual station, however, the* aHvSce from the head office is somewhat similar in character to the loans procured from a source outside of the local station itself by other types than the lines for the current operation of the house. These matters are mentioned at this point in order, since the ap¬ pendices and tables refer to sources of loans, that there may be no misapprehension as to the exact character of the transaction involved in the case of line elevators reporting the head office as a source of loans. The following table presents the percentages of elevators and ware¬ houses in the United States reporting various sources of loans in the order of their importance, as shown by the proportion of times in which each source occurs in the schedules to the total number of sources reported in all schedules. (Appendix 2, inquiry 21.) Ap¬ pendix table 20 presents the figures in detail by States and grand divisions. Table 81 .—Relative importance of different sources of country eldvatot and warehouse horroivinfi as indicated hy llie proportion of times each source is reported to total sources reported. Source. Percentage of t mes each source is reported to total times all sources are reported. Local banks. Head offices. Co mm ission houses. Farmers. City banks. Local residents other than farmers. Mills. Terminal dealers other than commission men Stockholders. Miscellaneous. 41.58 34.99 10.44 2.97 2.21 1.72 1.36 1.26 .67 2.80 100.00 2.S3 234 COUNTRY GRAIN MARKETING. From-this table it is-apparent that there are only three f of any great importance in financing the country grain business, i. e., local banks, head offices of line companies, and the commission houses.. Section 2. Sources of loans by type of elevator. Line elevators. —In considering the variations in the sources from which various types of country elevators and warehouses procure their funds, the cooperative line and individual and line maltster types may be disregarded owing to the small number of these houses reporting and the discussion may be confined to the other five types. Table 82, which shows the sources of loans of various types of elevators and warehouses in detail, indicates that so far as line houses are concerned the head office is by far the most frequently reported source of funds for financing. Table 82. —Relative importanee of different sourees of borrowings by different types of country eldvators and warehouses. Source of loans. Grand total. Line. Individual. Total. Com¬ mer¬ cial. Co- oper¬ ative. Mill. Malt¬ ster. Total. Co- oper¬ ative. Inde¬ pend¬ ent. Mill. Malt¬ ster. Number of elevators reported. 4,925 2,353 1,862 58 409 24 2,572 899 1,403 267 3 Total number of sources reported. 5,6.50 2,454 1,932 63 435 24 3,196 1,145 1,692 354 5 PERCENTAGE OF TOTAL NUMBER OF SOURCES REPORTED. EAnTiprs 2.97 0.37 0.31 4.77 4.97 8.99 2.66 3.11 1 72 .61 .52 1.15 2.56 1.31 2.60 6.50 Rtrtplrli nl H pr.cj .67 .33 .21 .92 .94 1.48 .47 1.41 Local banks... 41.58 10.80 9.68 34.92 12.41 8.33 65.21 55.81 70.63 70.06 40.00 10.44 2.00 2.28 1.59 .92 16.93 26.64 12.88 5.08 Other terminal grain flpalers 1.26 .61 .67 .46 1.75 2.36 1.54 .85 Oity banks_ .... 2.21 1.34 1.14 3.17 2.07 2.88 .61 3.31 7.63 40.00 TTpQfl nffipA 34.99 80.56 82.40 52.38 75.86 91.67 Mills 1.36 2.57 2.07 5.29 .44 .09 .41 1.69 Miscellaneous. 2.80 .81 .72 3.17 .92 4.32 2.71 5.50 3.67 20.66 Total. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Of all the sources from which funds are reported as procured by line elevator stations, the head office constitutes slightly over 80 per cent, local banks comprise about 11 per cent, and the proportion of any other one source reported is relatively insignificant. The-Jm- po rtance of the head office as a source of funds arises from the f ai 2 t_thatin_ the nature of things the head offices would normally in the opera tion of the business finance the requirements of their vari- ou s hous es and not place such a matter in the hands of the hired ma nagers of t heir local elevators. If the company possesses the finan¬ cial resources it may make the advances from its own funds. In other cases the head offices will borrow from various sources. Other sources of loans than the head office reported are probably due in large part to the fact that the head offices of smaller country lines are frequently located in connection with one of the local ele¬ vators. In consequence, such parties in making the returns had Imowledge of the sources of the funds procured by the head office and reported them. FINANCING COUNTRY HOUSES. 235 Individual elevators.— So far as the various types of individual elevators are concerned no funds are reported as borrowed through the head office for obvious reasons, and the most frequently reported sources for the individual type are the local banks and commission houses. Of the total number of reported sources of loans of co¬ operative elevators, local banks constitute 56 per cent and commis¬ sion houses something less than 27 per cent. In the case of the inde¬ pendents, however, local banks represent 70 per cent of the reported sources and commission houses only 12.88 per cent. Individual mill elevators report local banks as a source of loans in about the same proportion as do independent elevators, but borrow of commission houses in a considerably less proportion than the latter and more from both city banks and local residents. Section 3. Sources of loans by States. The explanation of the foregoing variations lies chiefly in the geo¬ graphical distribution of these types of elevators with reference to the characteristics of the grain business in different sections. Ap¬ pendix Table 20, which presents the distribution of sources of loans by States and grand divisions, reveals the fact that, broadly speaking, the proportion of commission-house financing is most important by fa*r in Minnesota, Montana, and the Dakotas, all of which report relatively high proportions of cooperative elevators and are rela¬ tively among the least important independent elevator States. Local- bank financing is most important, and commission-house financing relatively unimportant in those States reporting high percentages of independent or individual mill elevators or both, and relatively smaller proportions of cooperatives. This is shown in the following table: Taisle 83. —Proportion of elevators of specified types in specified States in com¬ parison ivitli the extent of commission house and local hank financing.^ state. Percentage of local banks to total sources, reported. Percentage of inde¬ pendent elevators. Percentage of individ¬ ual mill elevators. Percentage of commis¬ sion houses to total somces reported. Percentage of individ¬ ual cooper¬ atives. Ohio. 70.85 49.72 13.56 7 63 Missomi.. 64.33 46.05 26.75 3.82 6.14 Indiana... 64.09 44.18 14.96 5 46 Iowa. 61.73 42.45 1.75 2.67 25.84 Kansas. 60.09 35.93 8.43 .44 21.30 Illinois. 58.46 48.34 3.12 4.23 14.47 Michigan. 55.03 51.41 12.45 2 81 Wisconsin. 51.75 49.12 13.16 8.39 5.70 Oklahoma. 42.99 29.71 6.86 .94 4.57 Nebraska. 41.19 20.77 2.85 .26 26.30 Minnesota. 23.74 ' 19.08 4.21 18.84 21.34 South Dakota. 21.96 25.26 2.48 21.16 23,08 North Dakota... 10.56 14.67 1.81 33.76 23.71 Montana. 10.00 13.63 4.61 24.12 23.90 Average, all elevators. 41.71 31.62 5.54 10.86 18.42 1 As indicated by the ratio of the number of times commission houses and local banks are reported to the total sources reported. Section 4. Commission-house financing. Causes.— The extensive commission-house financing so largely prevalent in Minnesota, Montana, and the Dakotas has undoubtedly 236 COUNTRY GRAIN MARKETING. resulted from and been affected by a considerable variety of factors. 9 The indications are that originally, owing to the lack of development ■ of this area, it was difficult and in many cases impossible to borrow 1 money locally because there was little or no accumulation of local 9 capital. The opinion is quite generally expressed by northwestern M grain men that even to-day the local banks in the grain territory to v the south and east are better equipped to finance the grain business 1 than those in the Northwest on account of larger deposits and capital, i It is stated that many Northwest banks have comparatively small | capital and that their deposits are not large; also that they are fre- 1 quently under such limitations in regard to the amounts which maj^ 9 be loaned to a single organization as to render their resources inade- 1 quate to the financing of the country grain business. _ I Owing to the relative scarcity of local capital, moreover, it is as- J serted that the local banks are frequentlj^ able to obtain higher rates of interest than the grain people are willing to pay for the financing ■ of the crop. . • i I Another factor mentioned which is probably of importance is the || time the grain is in transit. In the Northwest the distances to the | terminals from much of this territory are considerably greater than i in the grain areas tributary to other markets, with the result tbat 9 grain is in transit longer and capital is correspondingly tied up for A a longer period. It is stated that Montana figures upon from 1 to 9 per cent interest charges merely for the time during which the grain | is in transit to the Minneapolis and Duluth terminals. ^ ■ However important historically the scarcity of local capital was, and ■ perhaps is even to-day, in developing commission-house financing, 1 there is every indication that two of the important factors in ■ preserving the system are the consignment business and the co^i- ■ petition of the commission houses. Probably as a result of the ■ scarcity of local capital the country grain handlers in the Northwest |j originally turned to the terminal markets for financial assistance, and thus developed these terminal connections. Owing largely to flj the preference of the Minneapolis mills for country-run grain, how- ever, there developed in the four Northwestern States more ex- 9 tensively than elsewhere the practice of selling on consignment. 9 (Ch. VI, sec. 16.) Under this method the grain was consigned to the* commission house and sold by sample on the floor. This method pos- sessed an advantage to two distinct groups: To the mills and other X consumers in that they could thus purchase virgin grain after an * examination of its peculiarities and characteristics with reference to * conversion; to the country elevator or shipping producer in that it * enabled these sellers occasionally to realize premiums for grain of* especially good quality or certain peculiar characteristics for conver- 1 sion purposes. * So large a volume of consignment sales, however, tended to make 9 the business profitable. The result was the multiplication of com-J mission houses and the development of the commission business .on* an extensive scale at both Minneapolis and Duluth. The country ele^ vator in need of funds naturally turned to the commission house han^ dling its shipments, and thus terminal market connections began tojj be built up by the country elevators. This in turn led to competition.J among the commission houses in financing the country elevators, such^j . FINANCING COUNTRY HOUSES. 237 financing being offered as an inducement to the country elevator to ship its grain to the financing house. The interviews clearly indicate that this competition is very sharp. Methods. —All the larger commission houses usually maintain at least two or three solicitors (often more).^ One of the chief func¬ tions of these solicitors is to procure new business. Many commission houses send them to the different elevators during the summer months soliciting grain business by offers to finance. When possible these solicitors attend the annual meetings of the stockholders of the ele¬ vators and also directors’ meetings, with the proposals of their prin¬ cipals as to the amounts of the loans which the latter are willing to make and the terms and conditions under which such amounts will be advanced. Some elevators request financial aid from commission houses, but usually the latter offer to finance the former. After agreeing upon details a contract is usually drawn up and signed by the officers of the elevator and the commission firm. Such con¬ tracts with cooperative concerns are signed by the board of directors and manager, while those with independent elevators usually by the owners. In some cases there is no formal written contract and the advances are made upon the basis of an oral agreement or under¬ standing as to the proportion of grain which the elevator will ship to the financing commission house. Where there is no contract or agreement, as is occasionally the case, the financing house usually obtains the bulk of the elevator’s business because the operators of such ele\^ators usually feel obligated to give them the greater part of it. The contracts state the amount of money that will be advanced and the method of repayment. Sometimes the commission house advances outright a specific amount. More often, probably, the ele¬ vator is given an open account under which it can draw against the commission house up to a certain amount, as business requires. Some of the contracts prescribe a fixed percentage of its grain which the elevator must ship to the commission house in question. The proportion thus demanded in return for financing varies as be¬ tween different commission houses and depends considerably upon the severity of the competition of the commission houses in different sections. Usually it runs from 60 per cent to 80 per cent, but larger proportions are not infrequently agreed upon. Thus, one country elevator operator interviewed contracted to ship 90 per cent of his grain to the commission house which financed him, while another re¬ ported that a mutual understanding existed that the commission house should receive all his shipments. Some of the contracts, how¬ ever, merely demand that a reasonable percentage of the shipments shall go to the commission house, and various other variations are found, as, for example,.that the value of the grain which the elevator ships to the commission house shall be as great as the amount of money advanced, etc. 1A few firms were found that had at various times maintained as many as six solicitors, and one firm at the time of the Commission’s investigation reported that it had ten men building up the business in the country. Usually the solicitors are comparatively highly paid, salaries reported being practically never below $200 a month and custom¬ arily ranging as high as $350 a month and in exceptional cases even higher. For further details, see the discussion of receiving on consignment in Vol. HI, 238 COUNTRY GRAIN MARKETING. While the variations in the character of the agreements employed are considerable, the form of contract shown in Appendix 8 illustrates the general nature of such arrangements. Supervision or financed elevators. —The risk involved in the financing of country elevators by commission houses is considerable and the severity of the competition between such houses tends to increase this risk through the fact that it leads to concessions in regard to the security for loans. The affairs of elevators financed by commission houses are usually carefully watched by the financing house. Often the elevator, es¬ pecially if financially weak, is required to submit detailed daily re¬ ports of its operations similar to those made by line stations to the head office (Ch. VI, sec. 2). These reports, and also the books of the elevators, are checked up more or less frequently by the traveling solicitors of the commission houses, and thus it is ascertained whether the purchases of grain shown by the books equal those reported. Country elevator agents are as a rule adverse to making out daily reports for the financing house and competition leads to the elimina¬ tion of the report feature in certain cases. A number of commission houses also insist upon the elevator pur¬ suing a rigid policy of hedging in connection with its grain pur¬ chases; As previously explained, the northwestern terminal market grain dealers are very much inclined to regard the buying and selling of grain without hedging as speculation. In consequence, they are usually loath to finance elevators which do not hedge or which engage in speculation. If an elevator is found to be speculating or endan¬ gering in any way the capital advanced by the commission house, the latter is very likely to withdraw its aid and demand the payment of the amounts loaned. The extent to which the affairs of financed elevators are supervised is likely to be governed in no small measure by the relative financial strength of 'such elevators. Commission houses, chiefly by reason of this financing, are able to influence the policies of the elevator not only as to hedging, but also as to prices, competition, etc.^ The development of the business of the commission house in the Northwest has thus become, in a large measure, dependent upon financing. Section 5. Contrasts between northwest and other areas. With some exceptions the principal grain States outside of the Northwest, especially those east of the Mississippi River, are rela¬ tively older grain-producing territory than the Northwest, have accumulated a larger volume of local capital and can, in conse¬ quence, finance through the local banks to a greater extent. In addi¬ tion, there is outside the Northwest, either a very much greater volume of local business or of direct selling to the terminal markets (Ch. VI, secs. 7 and 15), and consequently a much less development, on the whole, of the consignment business. The result is a higher pro¬ portion of financing through local banks and a much lower pro¬ portion through commission houses than is the case in the North¬ west territory. For further details on commission-house financing consult Vol. Ill of this report. FINANCING COUNTRY HOUSES. 239 » Section 6. Country-elevator interviews on sources of loans. The interviews had by the agents of the Commission and of the Bureau of Markets with country elevator operators confirm the data obtained by schedule. Of 87 of the elevators visited in Illinois and Iowa, 73 reported that they borrowed from local banks, 11 from local individuals, and only 3 from commission firms or houses. Out of 122 elevators in the Northwest interviewed on this same subject, 101^ borrowed from commission houses, 52 from local banks, and 8 from individuals. * In parts of South Dakota and southern Minnesota the elevators do not borrow from commission houses to such an extent as in other sections of the Northwest. The freight rates in this area permit the grain to move advantageously to two or more markets—Minneapolis, Duluth, Chicago, Milwaukee, and Omaha. Many of the elevators employ more than one market, and this situation tends to preclude the commission house from receiving as much of the grain as it would consider necessary to justify the financing. This same terri¬ tory is also the oldest portion of the Northwest, and the local banks, liaving larger resources, finance the elevators to a larger extent than in the remainder of the Northwest. Few Northwest elevators are financed entirely by local banks, and when this occurs the elevators usually require little capital owing to either a small grain business or a large capital of their own, or both. As a rule the northwestern country elevators prefer not to bor- roAv from the local banks. The requirements ^s to security are usually severe and the interest rate charged is often very high, especially as compared with the rate offered by the commission houses. Time and demand notes, both unsecured and secured by a mort¬ gage of the elevator, are given in return for loans. Often the per¬ sonal notes of directors, and even stockholders, are required; but, on the other hand, there are cases where the commission houses do not ask for any security whatever, but simply instruct the financed elevator to draw on them as they need funds. In general, the commission houses apparently get as much as they can in the way of security, but competition for the business of the elevators tends to make their requirements as to such security less severe, on the whole, than those of the local banks. An exception, perhaps, is to be found in cases where the financial condition of the elevator is not good. A number of country elevator operators that carry side lines borrow from both commission houses and local banks. The funds secured from the former are used to finance grain purchases, and 'those obtained from the latter to finance the side lines. One con¬ cern in North Dakota which borrows from both sources stated that the local banks would finance the side lines of an elevator, but not its grain business. On the other hand, the commission house is willing to finance the grain business of the country elevator so as to handle a part or all of its grain. Sometimes, however, the elevator, without the consent of the commission house, uses a part of the funds advanced by it in financing side lines, and also for other purposes. ® Including 6 reporting as borrowing from the Equity Cooperative Exchange of St. Paul. 240 COUNTKY GRAIN MARKETING. » Section 7. Maximum amounts of capital borrowed. The Commission endeavored by its country elevator and ware¬ house schedule to ascertain something about the seasonal variations in borrowed capital, together with the maximum and minimum amounts borrowed (Appendix 2, inquiry 21). The returns were so few regarding the seasonal variations, however, and so many elevators returned a maximum and no minimum amount borrowed, or vice versa, that the returns were tabulated only for the maximum amounts reported as borrowed. Tlje results appear in Table 84. Table 84. —Number and proportion of elevators in specified States reporting borrowed funds and average maximum amounts borroived in the crop years 191S-U and 1916-17. Total No funds borrowed. Funds borrowed. Average Year and State. elevators reporting. Number. Per cent of total. Number. Per cent of total. amount per elevator. 1913-14. ... 109 3 2.75 106 97.25 $7,403 7,597 9,770 9,920 ..-.. 111 1 .90 no 99.10 Ohin . 49 1 2.04 48 97.96 69 69 100.00 Mnrttfinfl, . 2 1 50.00 1 50.00 10,000 10,568' 106 •* 106 100.00 12 12 100.00 11,053 90 90 100.00 12,450 ^p.Erp.^iVp. .. .. 47 1 2.13 46 97.87 14,445 14,700 58 58 100.00 54 54 100.00 147 m 24 24 100.00 1.5,910 56 56 100.00 23,818 Missouri. 28 28 100.00 26,813 Total. 815 7 .86 808 99.14 12,301 1916-17. 191 191 100.00 10,582 .... 206 1 .49 205 99.51 11,402 14,041 134 134 100.00 Ohio . 93 1 1.08 92 98.92 14,801 17,029 194 194 100.00 47 47 100.00 17,553 71 71 100.00 17,577 26 26 100.00 17,773 164 164 100.00 18,330 196 196 100.00 19,060 97 97 100.00 20,034 NeVirfiska .... 121 1 .83 120 99.17 23,631 65 65 100.00 30,632 Montana. 34 1 2.94 33 97.06 40,828 Total .. 1,639 4 ! .24 1,635 99.76 17,309 i From this table it appears that most elevators rely largely upon borrowed capital in financing their business. The average maximum amount borrowed per elevator in 1913—14 was $12,301. In 1916—17 this amount had increased over 40 per cent, to $17,309. The quite generally larger amounts borrowed in 1916-17 in practically every State, as compared with 1913-14, may be attributed, of course, to the great increase in grain prices subsequent to the outbreak of the European war. Section 8. Rates of interest. Rates reported. —Maximum and minimum interest rates for two crop years were reported by several hundred individual elevators (cooperative, independent, niill, and malster). (Appendix 2, inquiry 21.) Table 85 presents the results by States. FINANCING COUNTRY HOUSES. 241 Table 85. — Average maximum and minimum, rates of interest paid by country elevators on borrowed funds in the crop years 1913-14 and 1910-17. State. Wisconsin_ Ohio. Indiana. Illinois. Michigan. North Dakota Minnesota_ Montana.. Missouri.. Nebraska. Iowa. South Dakota. Kansas.. Oklahoma.... Total... 1916-17 1913-14 Maximum. Minimum. Maximum. Minimum. Number of elevators reporting. Rate of interest reported. Number of elevators reporting. Rate of interest reported. Number of elevators reporting. Rate of interest reported. Number of elevators reporting. Rate of interest reported. 37 6.45 29 6.40 23 6.46 20 6.45 66 6.58 43 6.52 36 6.53 27 6.46 71 6.61 47 6.59 44 6.52 32 6.41 165 6.62 113 6.53 98 6.57 77 6.50 58 6.91 45 6.90 47 6.93 39 6.81 118 7.12 73 7.01 41 7.35 27 7.31 172 7.23 120 7.05 102 7.13 78 7.01 22 7.36 13 6.96 54 7.43 42 7.31 26 7.46 19 7.29 84 7.57 56 7.32 39 7.71 28 7.36 134 7.67 105 7.34 80 7.69 64 7.34 102 7.73 76 7.71 55 7.83 44 7.77 157 8.02 97 7.87 76 8.01 58 7.79 20 9.30 10 9.30 8 9.75 5 9.30 1,260 7.28 869 7.14 675 7.25 518 7.09 _ f This table indicates that the country grain business was financed during both of the years in question upon a basis slightly in excess of 7 per cent, though in several States it was considerably below this figure and in others considerably higher. It will be noted that in a general way the interest rates conform to the age of the territory (Ch. II, sec. 8). Thus the rates are lowest in the five States east of the Mississippi—Wisconsin, Illinois, Indiana, Michigan, and Ohio— and are considerably higher west of that river. The highest rates reported are in Oklahoma, one of the latest grain-producing areas to develop. Montana is of almost equally recent development, but shows a relatively low rate as compared with Oklahoma. This may be probably attributed to the existence of commission-house compe¬ tition in financing in the Northwest. By types the average variations in interest rates are even less than between States, as appears from the following summary statement: ^ Maximum. Minimum. Type of individual elevator. Number reporting. Average rate reported. Number reporting. • Average rate reported. 1913-14. Cooperative. 243 7.42 193 7.25 Independent. 330 7.20 245 7.02 99 7.06 78 6 .94 Total. 672 7.26 516 • 7.09 1916-17. Cooperative. 492 7.37 343 7.22 Independent. 629 7. 28 429 7.14 MUl. 138 7.04 97 6.83 Total. 1,2.59 7.29 869 7.14 * Individual maltsters not included on account of insignificant number of reports. 9004*’—20-10 242 COUNTKY GRAIN MARKETING. Country elevator interviews on interest rates. The operators of independent and cooperative elevators of the Northwest who were visited by the agents of the Commission reported that interest rates varied considerably as between the different factors which finance country elevators. The niost common rates charged at that time (1918) by individuals were reported to range from 5 per cent to 8 per cent; by commission houses from 5^ per cent to 8 per cent, with 6 per cent and 7 per cent as the most prevalent rates. The interest rate which commission houses charge is influenced not only by the general demand for capital and the supply of it available, but also by the competition between them in financing the country ele¬ vators in order to secure their grain business. A country elevator which is efficiently managed and does a large business is in a position to obtain a lower rate of interest than one which is operated in a less efiicient fashion, because commission firms will compete ,to a greater degree with each other in the former case. . The interest rate of the local bank in the Northwest was claimed to be higher than that charged by any other factor, in many instances as high as 10 per cent being asked. J \ \ Chait’er XI. COMPETITIVE CONDITIONS IN COUNTRY GRAIN BUYING.^ Section 1. Scope of inquiry regarding country competition. Sources of information.— ^The major portion of the discussion of competition and competitive conditions in the country marketing of giain refers to conditions existing in those States in which a special study of country marketing was made by the agents of the Commis¬ sion, i. e., Montana, North and South Dakota, and Minnesota. The reasons for this fact are found in the following circum¬ stances. By far the most illuminating data covering the matter of competition and competitive methods were found in the files of the ^ Following duced in this is a list of line elevator companies referred to in the correspondence intro- chapter : Name of company. Address. Greatest number of country elevators operated, Sept. 1, 1912-Sept. 1,1919. Smallest number of country elevators operated, Sept. 1. 1912-Sept. 1,1919. Amenia Elevator Co. Amenia. N. Dak. Andrews Grain Co. Atlantic Elevator Co. 803 Chamber of Commerce, Min¬ neapolis, Minn. Minneapolis Minn Bagley Elevator Co.. Geo. C. Cargill Elevator Co. Cornwell. A. 0. Empire Elevator Co. Heising Grain Co. 604 Chamber of Commerce, Min¬ neapolis, Minn. Minneapolis, Minn International Elevator Co. Duluth. Minn. McCaull-Webster Elevator Co_ Mimiekota Elevator Co. Monarch Elevator Co. Mooers, E. S., Elevator Co. National Elevator Co. New London Milling Co. Minneapolis, Minn. 652 Chamber of Commerce, Min¬ neapolis, Minn. 316 Chamber of Commerce, Min¬ neapolis, Minn, 1100 First National-Soo Line Building, Minneapolis, Minn. 754 Chamber of Commerce, Min¬ neapolis, Minn. W illmar. Minn.. . Northland Elevator Co. Northwestern Elevator Co., The.. Occident Elevator Co. • Osbome-McMillan Elevator Co... Pacific Elevator Co., The. Powers Elevator Co. St. Anthony & Dakota Elevator Co., The. Spaulding Elevator Co. 604 Chamber of Commerce, Min¬ neapolis, Minn. Chamber of Commerce, Minneap¬ olis, Minn. 434 Security Building, Minneap¬ olis, Minn. 604 Chamber of Commerce, Min¬ neapolis, Minn. Minneapolis Minn. 1004 Flour Exchange, Minneap¬ olis, Minn. 320 Chamber of Commerce, Min¬ neapolis, Minn. Warren. Minn. Thorpe Elevator Co. Minneapnli.c, Mirni Van Dusen & Co., G. W. Victoria Elevator Co. Woodworth Elevator Co... . 707 Chamber of Commerce, Min¬ neapolis, Minn. 819 Chamber of Commerce, Min¬ neapolis, Minn. 507 Chamber of Commerce, Min¬ neapolis, Minn. a) (a) 65 32 116 31 31 18 100 80 i>12 b 8 39 30 a) (a) 40 20 42 32 29 20 c 125 clOO 6 (a) 80 70 13 8 44 39 70 55 no 75 60 48 53 34 55 45 170 132 19 13 i) (d) 75 58 33 29 35 29 Mill line. No. No. No. No. No. No. No. No. No. No. No. Yes. No. No Yes. No. Yes. No. No. No. No. No. No. “ Out of business. 6 Out of business since Aug. 1 ,1917. C Aug. 1,1914-Sept. 1,1919. ^Corporation dissolved in 1917. Elevators consolidated with Cargill Co. orthography, gramniar, etc. in the correspondence introduced in this chapter have checked with original. Many letters were in manuscript and on account large aniount of correspondence copied it was not attempted to check all letters for typographical errors. Letterheads, except names of companies, were not copied. ^ ^ ^ 243 COUNTRY GRAIN MARKETING. 244 large line elevator companies having their headquarters in Minne- *| apolis. A much less complete and significant amount of material | was scoured from the country elevators visited by the Commission s || agents in these States and from those States in which the agents o || the Bureau of Markets studied country marketing, i. e., Iowa ^^^d Illinois. In this latter territory, and also in practically all those States tributary to Chicago and other markets, the line companies are, as a rule, smaller and their headquarters much more widely | scattered than is the case in the territory tributary to Minneapolis, yl where the line headquarters are concentrated principally at one termi- ||| nal market. In consequence no material comparable with that secured from the files of the Minneapolis line companies could be ^ obtained in other sections of the country than the Northwest (pro- J vided such material existed) without a large expenditure of time and money and with no certainty that the results would justify such || expenditure. . No attempt has been made in this discussion to recite all the evi- dence in the possession of the Commission with reference to country marketing practices. The method which has been followed is to state briefly the competitive conditions indicated by^ the correspondence | and interviews, employing selections from this correspondence to Jj illustrate the situations described. • j: §! Period covered by the correspondence. —In the presentation oi letters and excerpts from the correspondence of the line elevator com- panics, no attempt has been made to preserve any definite chron- olo^^ical or other order. The correspondence covers the period of ; eight years, from the crop year 1912-13 to the crop year 1919-20, | and there is every reason to believe that competitive conditions and || the methods and practices illustrated have been in general sub- | stantially the same throughout the entire period. The letters pre- | sented, therefore, have been selected primarily with reference to the | question of how satisfactorily they illustrate particular phases of 5 competition and agreements, and with little or no reference to the date within the period or any other factor. f It has been attempted wherever possible, however, to introduce - correspondence from a sufficient number of years, and also of such i recent date, as to indicate that the conditions described have, been • more or less characteristic of the entire period covered. The summary of the mass of information obtained (jIil Olffll- O^iBBmi indicates that at the average country marketing station, espe¬ cially in the northwestern grain States, there is a considerable amount of competition. On the other hand, there are frequently stations or points at which competition is either insignificant or nonexistent on account of local or other agreements among ^purchasing elevators or other factors. The Commission is in possession of hundreds of letters from the files of line elevator companies operating in the northwest which clearly evidence either agreements as to country prices, grades, dock¬ ages, etc., or else such harmonious and cooperative action with ref¬ erence to these matters as would bring about practically the same elimination of competition as could be secured by more specific agr^- ments. As is to be expected, this evidence relates principally the ^ acts of the line elevator companies From this, however, it should^ \ COMPETITIVE CONDITIONS IN COUNTRY BUYING. 245 not be Agrftftt y concluded that these methods are in any way peculiar to line elevator companies, although there is little reason to doubt that the lines are often, not mo g t frequently , the originators and instigators of the nmri TTn , !.; n, ^irrnngemenfr i The correspondence clearly shows, however, that cooperative or farmers, and independent and mill elevators are also frequently parties to such arrangements and that agreements and understand¬ ings affecting and often eliminating competition in one or more respects, are by no means peculiar to the line companies. Furthermore, it must be remembered that evidence that the coopera¬ tives or farmers and independent and mill elevators are also partici¬ pants in agreements and understandings is found in the correspond¬ ence files of the line companies. There exists no source of information , as to agreements and cooperation among other types of elevators y comparable with these files from which information as to line com- I^Xpany competitive practices was obtained. If all files of all types of elevators could have been examined, the extensiveness of agreements and cooperation in the whole field might have been found to be considerably greater. Factors in competition. fejDVATonci i While eight types of elevators have been distinguished in the discussion of country elevators, only five types require consid¬ eration from a competitive standpoint—commercial line, individual mill, mill line, cooperative, and independent. Cooperatives, both line and individual, may be classed together and maltster elevators are so insignificant in number that they can scarcely be said to affect the competitive situation in the country. Besides the foregoing types of elevators, which are by far the most important purchasing factors in the country market, certain less important buyers are also found operating in certain of the country markets in varying degrees. The principal! ones are the scoop shovelers, track buyers, and terminal market concerns, such as com¬ mission firms, or terminal elevators. Moreover, in considering coun¬ try competitive conditions it is to be borne in mind that a considerable influence upon competition is exercised by farmers who load their grain either on-track ” or through the elevator for the purpose of shipping and selling on their own account. Little or no information was obtained regarding the competitive operations of the foregoing factors in the country grain trade. In the Northwest a relatively larger proportion of the country grain is handled by the elevators than perhaps in any other section. As a result, the correspondence of the line companies contains comparatively little reference to these classes of operations. ScooPERs.—In occasional instances a scooper, or a track buyer, makes his appearance and the result is apt to be to compel the elevator to increase the price paid. sec.~2.)^ ' Royalton, Minn., May 9, 1916. POWEES Elevatoe Co., Minneapolis, Minn. Gentlemen : Don’t be surprised if you see that I am paying 40 cents to 41 cents for oats these days, because R. Barbagos, the son of J. G. Bargobos, the one that was in company with his father in the grain business has commenced to buy oats on track again, and is paying 40 cents. Yours truly, M. M, Saijee. 246 COUNTRY GRAIN MARKETING. f Farther to the south and east of the Mississippi there is niore direct / country buying than in the Northwest, and this is a very important I factor in competition. As to the eifects of these operations, however, I no investigation was attempted, it not being considered that the in- Yformation obtainable would warrant the labor and expense involved. VHKTthe older days scoop shovelers were bitterly fought both by the large line companies and also by other “ regular ” elevator dealers, it being felt by these organizations that their capital investment and the taxes which they paid warranted them in making things unpleasant for the scooper.^ Even to-day the established elevator companies are inclined to fight the scoop shoveler. Thus there are indications that the north¬ western line companies have been more or less active in supporting legislation requiring the bonding and licensing of scoop shovelers, and such operators are not apparently recognized by the grain trade as “ regular ” dealers in any case.^ ✓ Direct shipping. —An occasional reference to the practice of direct / shipping is also found in the correspondence. This operation else- ' where discussed A MI, 8 ) is a factor which tends to raise [ the price of grain in the country. Every bushel of grain shipped \ directly decreases the volume merchandised through ^ elevator, \ and in consequence the elevators frequently will pay a^price suffi- X^ciently high to discourage the practice. Dec. 10, 1915. Spaulding Elevator Co,, Warren, Mirni. Gentlemen : We are in receipt of yours of the 9th and note contents. * * * * We would suggest that we pay 2 cents over list for a while at least and possibly that will not only draw some grain to that station that might otherwise be marketed on some other line of railroad, and it will also discourage track loading to a certain extent. * * * Awaiting your reply, we remain, Yours truly. Osborne-McMillan Elev. Co. F.TS-N Mpls. ^ept. 9, '15. Mr. C. D. JuNKiNs, Mgr. St. Anthony d Dakota Elev. Co., Minneapolis. Dear Sir: * * * As far as our reports show, we did not pay over list on Sept. 3d, for any wheat, but paid 24 over list on a carload of barley which was spS^ial-binned in our elevator, to be shipped. In fact, the farmer did ship one carload and sold one carload to us. Our purchase nietted per bushel, which you will admit was better than allowing the farmer to ship. Yours truly. Minnesota Elevator Co., By W. H. Gooch. 2 Op. cit., Sen. Doc. 278. . , , , »Cf. titlei-pages of State and territorial lists of elevators and grain dealers, pub¬ lished by the Grain Dealers Journal of Chicago. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 247 Oct. 7, 1914. C. L. Spauldinc, Warren, Minn. Dear Sir: * * * f doubt that very much, if any, wheat has been bot at over list prices this year at Oslo. One or two lots which were “ special-binned ” would have been shipt if our agent had not bot them. I feel that he displayed good judgment in buying the grain at that time, rather than to let it be loaded on track with the margin in effect at that time. This should not be considered in the question at this time. We could no doubt recall special instances wherein yoiii' agents displayed their best judgment in similar cases, and paid over the card. * , :!! * * * Yours truly, F. C. U. Atlantic Elevator Co. Secy. Aside from a few references to direct shipping and “on-track” I operations, such as the foregoing, the correspondence of the line ^companies examined contains practically no information regarding the operations of country grain buyers other than elevators. Si3 Ti re g& i icral coiisidemtlglK allfttlliiij oompctiti o ir Competitive and noncompetitive points. —Based on the number of elevator buyers, country stations may be divided into two classes— noncompetitive and competitive. The former are those equipped with only one elevator and the latter those at which there are two or more elevators operated by different concerns or individuals. While there are, of course, in the grain belt a very considerable number of single elevator stations, the information obtained indicates that they rarely occupy a monopolistic position either in reference to the prices which they pay or otherwise. Two principal reasons may be assigned for this. The first of them is the competition of the elevators at near-by towns. The second is the element of potential competition, both at competitive and noncompetitive points, pd the ever-present fear of the construction of new elevators, especially of the patronage dividend type.'^ At probaWy a majority of so-called noncompetitive stations local policies as to prices, grades, dockage, storage charges, etc., are in¬ fluenced to a very considerable degree by the conditions with refer¬ ence to those matters prevailing at other near-by local stations,^ owing to the fact that many farmers are so situated that they can haul their grain to more than one station with almost equal facility. Gentlemen : We are in receipt of a letter from our agent at Rival, N. D., advising that a farmer who lives about midway between Rival and Lignite, where you have an elevator, stated that your agent at Lignite offered him 2<^ over list for his grain if he would haul it to him. ‘The two following quotations from one of the many letters on this subject taken from the files of the line companies are given as typical of this situation, in the case of “ At Clontarf we are entirely guided by the market at Hancock, as we are all alone at that point (Clontarf), and have to pay within reason of the Hancock market on everything from the North because of Hancock.” ♦ * * * ^ ^ “ At Everest we are paying 1 cent over list inasmuch as we are alone there and sur- rounding towns would draw our businoss away if wo did not, tho territory being veiy confined and small.” ^ ^ t (From letter written by Northwestern Elevator Co., of Minneapolis, to F. R. Durant, of the Grain Bulletin, Oct. 31, 1917.) 248 COUNTRY GRAIN MARKETING. We think that you are starting out pretty strong if this report is correct. We would like to see that territory held to list price. Please let us know as to what your instructions are to your agent at Lignite relative to paying over list, and greatly oblige. Yours truly, F.JS: OM Competition between towns. —Provided one elevator station is sufficiently close to another to permit any substantial number of farmers to haul to either, the prices or policies prevailing at the one are likely to be affected by those at the other, more or less irrespec¬ tive of the number of houses at either station. [Taken from the 1919 files of the Occident Elevator Co.] Dana, 9-29. Dear Sir: My instructions up to the present date are to come to list price strictly. Osborne-McMillan and the Farmers at Braddock are 10 (^ over list on rye and 5^ over list on durum and all of the houses in Hazelton are over list 10^^ on rye. Some of the patrons are threatening to haul their rye out of here and take it to Hazelton where they can get $1.29 for it. I am following my instructions to the letter so let me hear from you. Yours, truly, ’ Agent. Spaulding Elevator Company. Warren, Minn., Mr. F. J. Smith, Sec. Osl)orne-McMillan Elev. Co., Minneapolis, Minn. Jan. 2, 1916. Dear Sir: I have been trying to have our man see the other men at Silva and see if they cannot get down on the prices paid at that point. He says that the Ugland people are willing, but that your man says that Mr. Robert^ thinks the grain will go to Rugby if we tighten up. Please advise us what you think is best to do in the matter. Yours truly, Spaulding Elevator Co. CLS EMP (Signed) C. L. Spaulding, Pres. <& Gen. Mgr. Minneapolis, Minn., Dec. 17, 1915. Geo. C. Bagley Elevator Co. Building. Attention—Mr. Ralph Bagley. Gentlemen :—We have a load report from Wecota, S. D. He says there is nothing much doing, only all the farmers are talking about hauling to Millard. Evidently your man is booming the town again. We would suggest that you watch him closely. Yours truly, WAP-S ' The Pacific Elevator Company. Potential competition. —The fear of potential competition becom¬ ing actual is like the competition of nearby towns in no sense pecu¬ liar to single elevator points, but affects in a greater or less degree the buying policies and operations of elevators at numerous stations, both competitive and noncompetitive. New competition from any source means, as a rule, at least some decrease in receipts and a consequent decline in profits. Especially is this true in the event that a farmers’ house is organized, for such a house by virtue of a large number of farmer stockholders or patron- COMPETITIVE CONDITIONS IN COUNTRY BUYING. 249 age dividends, or both, will almost inevitably cut heavily into the re¬ ceipts of the other houses. The prospect of new compkition, there¬ fore, tends to deter the existing elevators from working on too wide a margin, or, in other words, paying too low prices for the crop. li St. Anthony & Dakota Elev. Co., Minneapolis. Duluth, Minnesota, 5/13/16. Gentlemen : We write you in regard to the situation in Western Montana. We believe it will be good business policy from this time until the end of the season, to work on a pretty close margin. There is considerable talk of more elvators all thru this territory, and so many people take advantage of the situation and talk about the working margin. We would be glad to hear just what your judgment is in regard to the balance of the season. Yours truly. International Elev. Co., W. J. McCabe. Effects of competition between towns on local agreements.— Even though all the elevators at a particular local station are getting along very satisfactorily under local agreements or under¬ standings, paying the same prices, grading and docking on a similar' basis, etc., it may be difficult to hold the elevators in line and keep the arrangements in operation in the face of competition from other stations. John Weick, Agent, Sanborn, N. D. Peer. 17, 1920. Dear Sir: We note what you have to say about the effect of paying strictly card prices is having on the trade at Sanborn, but do not imagine with the run of weather we have been having recently, that a great deal of business has been lost on this account. If this movement to other stations should develop into anything of any importance, perhaps it will be necessary for you and your competitors to get together and agree on going up a little—at least enough to hold the trade that should rightly come to Sanborn, and hope that if anything of this kind will be necessary, it will not be another “ cut throat ” proposition but that all of the buyers at your station will act uniformly. Yours truly, Andrews Grain Co. HGT:S By CO T T Bakke, [Andrews Grain Co. Receivers and shippers of grain.] Elevators General Office, Minneapolis, Minn., Commission Oriska N. D. Station 11/1 1015. To Andrews Grain Co. Minneapolis, Minn. Gentlemen : I received your letter dated 10/30 and noted contense. ' First plase we dident start with other people and pay Minneapolis prices then when we did get started we tried to get it on grade and next thing got together and bought on card prices and all the naboring towns paid more then Oriska Now Monarch agt breaks agreement and Mr. O Shea said I could follow suit today the Farmers are haveing a meeting to compell the agent to buy 11 off on list from highest arive price Now I am busy leting the farmers know that I will meet all comers if within reason almost half off the farmers are hauling to naboring towns that should haul here and it takes time to get them back. ♦ ***!):*♦ Yours Truly, ^ (Signed) F. J. Pottner, agt. 250 COUNTRY GRAIN MARKETING. Whenever a situation develops, or threatens to develop, at one sta¬ tion which in turn threatens to disrupt the smooth working of the market at another local station, efforts may be made by the operators at the latter point either to “ get in line ” or “ hold in line ” the elevators at the former.. The Northwesteen Elevator Co., Minneapolis, Minnesota, Oct. SI, 1917. National Elevator Co. Monarch Elevator Co. Gentlemen : Are we to understand you have come to list at Christine, N. D. ? Christine is in competition with our Walcott station, and we would be glad to come to list immediately at Walcott if we can rely upon the fact that Christine will remain at list also. Yours truly, M. G. Magnuson, Gen. Supt. [Taken from the files of the Empire Elevator Co.] August 31, 1914. Mr. H. Thompson, Oakes, N. D. Dear Sir: We want you to use your influence to keep the market down at Ellendale. We do not want any fighting going on there, or the first thing we know, we will have to put the price up at Winship. ::: * :is * Yours truly, JRM-M While the neighboring town is, in many cases, an important factor in protecting the farmer, it is probably true that elevators, or towns, that are more or less’isolated are apt to pay as little as possible for grain and there is some evidence in the possession of the Commission which tends to show that this is the case. As an illustration, there may be cited the following instance: S. I. Miller, a traveling super¬ intendent of the Atlantic Elevator Co., visited the town of Kimball, Minn., on August 5, 1916, at which point the Atlantic Elevator Co. and the Northland Elevator Co., both line concerns, are the only elevators operating. Following his visit, Mr. Miller wrote to the Northland Elevator Co., on August 6,1916, in part, as follows: I am not acquainted with conditions there, yesterday having been my first visit, nor have I met Mr. Wilson who looks after that station for you, but wish you would advise me the reason that station is so much over list, the station appears to be considerable distance from competing points on other lines. Eailroads and town competition. —Competition between towns lying upon different railroad lines, or between elevators in the same town similarly situated upon different lines, is at times the occasion for the railways injecting their influence into the competitive situa¬ tion. In the northwest grain States competing elevators, either in the same or different towns, are occasionally located upon different railway lines, so that the farmers can deliver at either elevator with almost equal facility. As it is to the interest of each railroad to draw as much grain as possible to its line in order to create traffic, there are apt to be attempts made upon the part of a road with ele¬ vators thus located to secure an adjustment of competitive condi¬ tions whenever the elevator located upon the competing line is taking the bulk of the grain at the expense of the elevator upon its own line. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 251 The late James J. Hill, of the Great Northern Kailroad, testified before the Interstate Commerce Commission that whenever situations arose similar to those outlined above he would try to remedy matters in such a nianner as to bring the grain to elevators on the Great Northern Railroad.® While this testimony was given in 1906, it is apparent that the railroads still attempt upon occasion to influence the local competi¬ tive situation by way of requests to elevators to raise prices at points on their own lines in order to meet the competition of elevators situ¬ ated upon competing roads. [Minneapolis, St. Paul & Sault Sainte Marie Railway Company. Office of Freight Agent.] In your reply please refer to CFR CFR Noethland Elevator Co. Sept. 11, 1916. Mr. F. J. Smith, City. Dear Sir : Referring to our ’phone conversation date: Will appreciate your taking whatever action you consistently can at Omemee, North Dakota, so our mutual interests will be protected there against the Farmers, who I understand are paying considerably over grade and over list. Yours truly, (Signed) B. G. Clark, General Freight Agent Soo Line. File R. Great Northern Railway Co St. Paul, Minn. Oct. IS, 1911^ ^YcTORIA Elevator Company, Minneapolis, Minn Gentlemen: Again referring to the grain situation at Reserve as compared with prices being paid on the Soo Line in that territory: On the 9th instant we had our Traveling Freight Agent cover the Soo Line to the west of Ambrose and on that date we find that the prices being paid at Westby, competitive with Reserve, were as follows: No. 1 Northern wheat Westby 92c; Reserve 89c, and on flax Westby $1.16 as against $1.11 at Reserve. Can you not arrange to raise your prices at Reserve in line with prices being paid on the Soo Line and save us from loss of business? Yours truly, James Robinson. Section 5. Competition in prices. As nearly as one can judge the most active competition in country grain buying, as well as the most frequent agreements, understand¬ ings and mutual arrangements, occur in the prices offered for grain. Neither competition nor agreements, however, are confined to buying prices and practically every other phase of country grain business, either primary or incidental, is subject to competition in varying degrees. The correspondence of the line companies is replete with letters referring to the higher prices paid by competitors either locally or at near-by stations. Often these letters recount the efforts made to persuade such competitors to reduce their prices, or again, suggesting measures to procure such a reduction. 6 Op. cit., S. Doc. 278, p. 861. 252 COUNTRY GRAIN MARKETING. The following letters will give some idea of this type of compe¬ tition as it exists in the country: The Northwestern Elevator Co., Sept. 13th, 1919. St. Anthony & Dakota Elevator Company, City. Mr. Jiinkins. Dear Sirs : I wrote our agent at Blanchard asking for the reason’ why he was paying o^er the card ® for wheat and flax. He writes me under date of Sopt 2ri(i" “ In regard to the above, the St. Anthony & Dakota Elevator Man is paying from 5 to 100 over list ® price on wheat, 50 over on flax and buying rye at 120 under Duluth and paying for pigeon grass dockage, so you can see for yourself that I have got to pay the above prices in order to get anything, but I will get down to card ® price if you order me to do so.” v:: ^ * ❖ * H« Yours truly, 'WET. Brest. [From the files of the Occident Elevator Co.] Hazelton, N. D., Sept. 1, 1919. Mr. M. R. Devaney, Mpls, Minn. Dear Sir : I am in receipt of your letter of Aug. 30th and note what Mr. Car¬ gill says regarding these prices and I will say that this is news to me. Hi 5l: ❖ ❖ * * I had an idea from his conversation and the way he acted that he had some dirty work on foot. I have a hunch that it is not the Farmers Elev. Co. that he is after but us, as their agent makes it a point to go after our customers and he has been very secretive as to what he is paying, which shows on the face of it that I knew nothing about these fancy prices and I did not know until today that he was paying better than 70 over the card for rye. I think he is exceeding the 100 over on wheat as I offered a man today 100 over and he said he had a better offer, and took it to the Victoria. I am intend¬ ing to go slow on these fancy prices and see if we cannot get some at a profit, as I do not figure they will last long at this rate. Kindly advise me just how you want me to handle the situation. Yours truly. (Signed) Leroy Irvine. [Andrews Grain Co. Receivers and Shippers of Grain, General Office: Minneapolis, Minn.] Elevators Commission Northwood, N. D.^ Station, May 15th 1911. Andrews Grain Co. Mpls Minn. Gentlemen : Yous of the 14th and allso of the 9th at hand and will say I has seen all the Elev. man and we are coming down to list at once But the Farmers man may not come down to list at once. But I think he will befor long. I orded cars last Friday but got a bad order car but am promished to get one in the morning. Yours truly H. J. Thorstenson. 8 In the Northwest, as explained earlier in this volume, the Grain Bulletin daily price card is in general use and in a large proportion of the letters dealing with price compe¬ tition, reference is made to “buying at card” or “ list” prices, “paying over the card or “ list,” etc. All of these statements refer to the price being paid as compared with the prices listed on the Grain Bulletin card and expressions of this character should be so interpreted throughout this discussion. ’At this station there were 6 elevators as follows; Andrews Gr. Co. L. Cargill Elev. Co. L. Great Western Gr. Co. L. Northwood Farmers Elev. C. Northwood Mill & Light Co. M. St. A. & D. Elev. Co. L. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 253 Kimball, Minn., Station 10-4 1916. O McM Elv Co " Mpls Minn Gentlemen : The Atlantic Agt is paying 2t over list for Oats and 10 over list for all other grain. I am paying 10 over for Oats and list price for all other grain: He is trying to get trade by that: Now I will pay the same as he ontill I here from you so please let me know by phone or mail at once what to do. Resp Yours Fred Meyer Sr, Agt. N. B. Me and the Atl Agt agreed to pay 10 over for Oats and strictly list price for all others grean and test to. F M Agt FFrom A. A. Von Hagen, Occident Elevator Co., to Mr. M. R. Devaney, Minneapolis, Minn., Sept. 18, 1913.] If you can get the Atlantic thru the Mpls office to get their man here at Coleharbor down to list I think it would be a good thing as we can get our trade here just as well at list as to pay over for it. Their man is paying over 20 today and yesterday on one load 30 over and can’t get any business at that but it makes it bad for us as we are getting as much as we could expect and could just as well buy it at list as I figure it they are not entitled to pay over with an old man in. We are the ones that should have that privilege with a new man in here. The Farmers man here would like to get the list down to 130 off on wheat and all pay the same. Now if we can get the Atlantic down it will cinch the Rust grain for us as he has promised it to me and Atlantic man leaves him alone we will get it, but Rust told me that the Atlantic man had been out to see him in his car four times now but hadn’t made a bid and if we get them down before Rust starts hauling why he wont have anything to bid on and we can get it at the old figures, 12 off and get out of it afterward by saying that I made the deal with Rust at the time they were paying over. Price wars. —While avoided whenever possible, there are occasions when the foregoing price competition leads to price wars at country points, some one or more of the elevators running up their prices to freight off ” ® and at times even higher. The following letters indicate the situation: [From the files of the Atlantic Elevator Co.] Oct. 13th, 1919. Crosby, N. D. Dear Sir : I have your letter of the 10th inst., and note what you say in regard to the market conditions and the prices that have been paid there are altogether too high, and it seems to me that all of the buyers ought to get down to a more reasonable basis and buy their stuff somewhere near the card. There is no use in doing business entirely for nothing. Of course, if the prices at Ambrose are being kept up on account of the prices at Crosby, we cannot blame the fellows very much at Ambrose. It seems to me, however, that regardless of what they are paying at Ambrose, they ought to get somewheres near a basis that will give us a little margin for handling the grain, and we hope that something of this kind We had better take this up with Geo. Riebe when he is up there and perhaps he can find out what is doing at Ambrose, and maybe when he goes up that way that he may be able to find out something. We are anxious to get down at your station to the regular card basis, with the proper premium for Dark Northern. Yours truly, FCR P 8 Osborne-McMillan Elevator Company. . 0 Bv buvine “ freight off ” is meant at the terminal market price the elevator allowing no margin to cover either its costs or a profit. less freight rate, 254 COUNTKY GRAIN MARKETING. Occident Elevator Co., Mpls Minn 9-22-13. Mr. S. J. Epler, Billmgs, Mont. E^M. Dear Sir : .Just had a talk with the McCaull people about Wilsall and it seems that it is their former agent who is getting all the business there, and he seemed to think we should put that market on basis of freight and commission off, so please get your card out on that basis for the next ten days or two weeks, unless you see some valid objection. Yours truly, Occident Elevator Company. Per M. R. Devaney, Gen-Mgr- Threats of price wars. —In certain cases threats of paying ‘‘freight off ” ® have also been made, presumably with intention of bringing competing elevators into line. Occident Elevator Company, Mpls 12/1-1 It. Mr. A. A. VonHagen, Supt., Bismarck, N. D. Dear Sir: Have your letter of the 20th and I wrote you further about the situation at New Salem. Since getting Nason’s figures I feel a little differently about the proposition altho if the independents continue to get the bulk of the business we will probably have to show our teeth there. I don’t believe in 24 over list in handling this bunch. About the only thing that makes them come across is freight off and if you happen to stop off there and go into the matter, in a quiet way without making any threats or creating any feeling, tell them that with the cutting in dockage that is being done we feel they are paying practically freight off and that if they do not discontinue it we will pay 4^-5^ over list or freight off. Yours, truly, Occident Elevator Company, Per M. R. Devaney, Gen-Mgr. Section 6. Competition in grading and dockage. An indirect form of price competition occurs when some one or more of the local elevator purchasers, instead of grading and docking the grain accurately, grade it higher than its quality actually warrants or deduct less dockage than the grain contains. Obviously, in either event, the result is to give the farmer a higher price for the grain than the quality in the one case, or the amount of foreign material contained therein in the other, would warrant. In consequence, over¬ grading and underdocking are usually regarded as equivalent to paying higher prices. Spaulding Elevator Company, Warren, Minn., Aug. 28, 1916. Mr. F. M. Smith, Minneapolis, Minn. Dear Sir ; * * * ^s you do, that we should try to buy everything at list price, and at proper grades and dockage, and we do not intend to pay over list at any point where we can buy it on the proper grade; that we con¬ sider overgrading the same as paying over list, and it depends entirely upon our competitors, whether we have to meet the competition by paying over list or not. * ^ * * * * sH Yours truly, Spaulding Elevator Co. CLS*EMP (Signed) By C. L. Spaulding, Enel. Pres. Gen. Mgr. “ The terminal market price, less freight, allowing nothing for the expense or profit of the elevator. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 255 Oct. 7, 1915. C. E. Smith, Agt., NorthrAlle, S. D. Dear Sir : We are in receipt of your favors of the 5th and 6th, in regard to losing grades and dockages. Now you cannot, of course, expect to buy grain on any other condition than your competitors are buying it on and we do not expect you to; but cannot you see that, if a competitor is over-grading or under-docking, they are really paying just that much over list? * Yours truly, CBR-W G. W. Van Dusen & Co., Mgr. Both overgrading and underdocking are important factors in country marketing, and competition in grading and docking is fre¬ quent, as well as are agreements in reference to these matters. Mpls, IMinn., Oct. 5, 1918. Mr. S. J. Epler, Supt-BilUngs, Mont. Dear Sir ; * * * When I took the matter of card price up with McCaull- Dinsmore they stated their man was overgrading but that they had to do it in order to meet the Occident. I told them that we were not overgrading; that we had been down to bedrock on discounts on smut, and suggested that his superintendent get in touch with you. Yours truly. mrd. 1. Occident Elevator, Gen. Mgr. [From Empire Elevator Co.] Station-Hutchinson, Minn., October 28, 1916. Mr. J. R. McMillan, Minneapolis, Minn. Dear Sir: I have now seen all the buyers here today and they have all agreed to grade all wheat #3 that contains either cockle and wild peas at all, and that which contains any noticeable amount will be graded lower according to the amount it contains, and all the boys seemed to be very will¬ ing to do so, and the results were that three loads of wheat drove out of our elevator this forenoon and went to some one else for a better grade, but I did not find out if they got it or not as they went over on the G N line with it, but I think the farmers will soon learn that they cannot get any better. Yours truly, (Signed) H. Thompson, Supt. [From the Northland Elevator Company to Geo. E. Arneson, Agt., Overly, N. Dak., Dec. 7, 1914.] You have a talk with the Woodworth agent and see if you can’t get.,-'^ him to stop over-grading your customers. Tell him that you will simply have to protect your trade and that you are not going to sit down and let your trade go to him on account of his grading higher than you are or paying over list. Use your best efforts to keep your market quiet and buy the grain right. * * * 256 COUNTKY GRAIN MARKETING. The Northwestern Ei^vator Company, Chamber of Commerce, Minneapolis, Minn., South Shore, II-IO-I 4 . C. A. Magnuson, Prest., Mpls, Minn. Dear Sir : The trouble at South Shore was caused by the Farmers Elevator Agent under-docking grain he is one of the worst on the line under his contract with the Directors he is only held for Gross weights and grades this season he does not seem to care at what dockage he takes grain They put in a cleaner this season and he says what he loses he makes up on the screenings. :Ic * * * * * Yours truly Jas. Hanna. [From Andrews Grain Co. to N. C. Welter, Agent, Bowden, N. D., September 13, 1912.] * * * The best thing for you to do under the circumstances is to talk it over with the agent of the Farmers Company and point out to him where it is necessary to have heavier dockage. * * * [From Andrews Grain Co. to O. M. Lee, Agt., Northwood, N. D., Sept. 23, 1912.] * * * At the same time of course we expect you will do whatever you can in using your influence to get the other buyers all down to list prices and get them to stay there and grade the stuff and dock it right, and it is easy of course for one to put up his prices because the other fellow does. It is not so easy to convince the other fellow that he is wrong but that is the thing to try to do rather than to fall into the error of his ways. * * * Section 7. Competition in storage, elevation, and cleaning charges. Charges made for cleaning, elevation, and storage by country ele¬ vators are likewise subject to sharp competition and also to agree¬ ments and understandings. Although a small fee is frequently, if not usually, charged for the performance of any of these services, any one or more of them may be done either gratis or at lower than the usual rate whenever it is thought that a competitive advantage may be se¬ cured thereby. Minneapolis, Minn., March SO, 1916. Cargill Elev. Co. City. Gentlemen : Our agent at Hensel was receiving grain from a man named Bussee. He had taken about 2000 bu. Mr. Busse had about 6000 bu. more and the International Elevator agent persuaded Mr. Busse to haul to him, with the understanding that no tickets would be issued for the grain, and that no storage would be charged. Our agent, learning beyond question that this was true, took a few loads from Mr. Bussee on that plan and wrote us the circumstances. We at once wrote him to give Mr. Bussee free storage to the 15th of June, but to issue tickets at once for the grain which he already had in the house, and to issue tickets for all the grain that he hauled, but to promise Mr. Bussee that if he sold at any time between now and June 15th no storage would be collected. ^ 'I* ¥ V Very truly yours, * National Elevator Company L. D. Marshall Manager. [From the Andrews Grain Company to the Atlantic Elevator Company, Minneapolis, August 4, 1914.] * *. * we believe it only right and fair besides being positively neces¬ sary, that all stored grain shall be subject to full storage charge, and we would suggest that you take this up with your stations and endeavor to point out the necessity to the others. Yours truly, BCC-Mc Andrews Grain Co. (Undated) Caegill Elevator Co. City. Gentlemen :— * * ♦ j learn also that a former customer of the St. Anthony and D. told the St A & D agent he would haul his grain to him, but he would not stand for the storage charges, consequently insisting on the storage charges he began hauling to you, and he presumes you are storing free of charge or at a reduced compensation at Ada. : j k 'I 4 * > 't St Yours truly, July 22, 1916. Northland Elevator Co., Chamber of Commerce, City. (Attention of Mr. F. J. Smith.) Gentlemen: Please note attached copy of a letter written to our man at Tolley to-day in regard to storage charges. We would appreciate it if you would mail us a copy of the instructions you have sent your man as to storage. Yours truly, Woodworth Elevator Co., By Is July 22, 1916. H. S. Gaskll, Agt., Tolley, N. D. Dear Sir : On receipt of this letter, on any grain on which you issue storage tickets from now on, have it understood with the farmers that we will give 60 days free storage, and that we will expect to collect per month after the 60 day period has elapsed. Of course any agreements that have been made on grain previously stored on which we have agreed to give free storage, we will have to live up to. We want to have it definitely understood on any grain that is stored in our elevator there after receipt of this letter, that it is stored on the above terms, until you are otherwise instructed. Talk with the other buyers and see if you cannot work along these lines. Also report to us any failure on their part to charge storage on this basis. Be sure and turn this letter over to Frank Johnson on his return. Yours truly, Woodworth Elevator Co. RPW*B September 6, 1915. H. J. Thorstenson, Agent, Northwood, N. D. Dear Sir : Replying to yours of the 4th wired you that wheat you were taking in on that day was very fine; also told you to use good judgment and make such reasonable concessions and storage charges as you think necessary to meet your competition. At the same time point out to these fellows that it is very absurd for them to give free storage because they will be loaded up with grain to the roof pretty soon and will have to take chances therefore on shipping out stored grain and selling it without any idea of what it would cost to buy it back. A little interview among them at the present time might do some good so see if you can’t convince them that they should charge full storage rates by talking to them earnestly. If you make any concessions please mark whatever the concession is on the storage ticket plainly so we can tell what it is, but we can’t of course, give any indefinite storage period. Two or three months, or something like that, ought to be sufficient. Yours truly, Ai^PBEws Grain Co. 9964®—20-17 258 COUNTRY GRAIN MARKETING, ■jri [From the files of G. W. Van Dusen & Co.] Jno. Kriebs, Agt.f Bellingham, Minn. Sept. 10, 1913. Dear Sir: We had a talk with Mr. Rndning today and he has promised to charge full storage provided we do. Now of course we will, so consequently he will. Yours truly, LDG-OK. Inter State Grain Co., Sec. [From a letter of the Cargill Elevator Company to F. R. Durant, Oct. 30, 1917.] Honeyford, N. D. Freight off, but getting no receipts, due mainly to practice of competitors cleaning grain for customers and returning screenings.^ [From the Empire Elevator Co. to H. Thompson, Auditor, Oakes, N. Dak., Sept. 3, 1914.] * * * When you are at Frederick, you better go and see the Auditor for the Dak. Grain Co. and tell him that there is no reason in the world why his man should ship anything through their house there at Winship for a cent a bushel, and that it would only hurt their business when they start up. * * * One of the interesting ramifications of competition in connection with storage is the practice of holding storage tickets for the farmers while the market is rising, buying them in after the market has gone down, but paying the farmer and reporting the price prevailing be¬ fore the drop. Spaulding Elevator Co., Warren, Minn. 9/16/13. F. C. Riebe, Atlantic Elev. Co., Minneapolis, Minn. Dear Sir: The writer would like to have you advise him how to meet the competition at Fonda and probably which you are aware of, namely the hold¬ ing up of storage tickets and selling for farmers on the drop. I have been told by farmers that the Minnekota Elev. Co. would do that at any and all times, and if we wanted to do any business there we would have to allow our agent to do the same. This may be good business but in the writer’s mind it is a poor business policy to pursue. I notified Mr. Gooch, last season, of the Minnekota people giving names, dates, etc., and the same was admitted as being true but they still allow their agent to do the same. The whole country knows they can depend on that. Before taking any steps in the matter would like to have your opinion in regard to the same. Yours truly, CLS/JMP. Spaulding Elevator Co., By C. L. Spaulding, General Manager. Stamped: Return to Minneapolis office at once. “Equivalent either to making no charge for cleaning, or cleaning at a very low rate. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 259 9 Sept. 19th, 1913. •• C. L. Spaulding, Pres. Spaulding Elev. Co., Warren, Minn. Dear Sib: Have your letter of the IStli with reference to Fonda and I have '•* this matter up v/ith the Minnekota Elev. Co. and they requested that I let them . use your letter, as they wish to fix this up with their superintendent and they ' state that if their man does not stop the practice, that they will fire him, I .. am in hopes of getting this fixed up so that there will be no further complaints from this matter. It is a bad practice and a competition that is pretty hard to meet and the best way to do is to get them to cut it out if we can. If we can’t get them to make their agent stop it, then we might have to send some money in order to get the practice stopped. I am in hopes very much however in getting them to stop the matter and if you have any other complaints from there in reference to the same please advise me promptly. I thank you very kindly for calling this matter to our attention. Yours truly, Atlantic Elev. Co., By [From the flies of the Northwestern Elevator Company.] (Undated.) Cargill Elevator Co. City. Gentlemen : * * * Another conversation between your agent, and a farmers was about to this effect: The farmer asked your agent if he had sol^ his (the farmer’s) wheat your man said yes, whereupon the farmer remarked: ‘‘Then it went down, did it?” So it looks as tho he undertook to sell the farmer’s grain at the price before the drop when there is a drop. Yours truly, fi / C. A. Magnuson, Prest. Osborne-McMillan Elevator Co., Minneapolis, Minn., October 7, 1916. Mr. F. C. Reibe, Sed*y, '.A' Atlantic Atlantic Elevator Co. Bldg. Dear Sir: We are in receipt of your letter of the 6th and note contents care- _ fully. •«r If you will be kind enough to furnish us with some specific case where our agent at Kimball has held grain in the house and then issued tickets for it after Yf; having received a reduction in the market we will be greatly obliged to you, as we are just as anxious to stop anything of this kind as you are. We cannot ^ very well stop it, however, by just telling our agent that we understand he ^ is doing it. If we could get ahold of some specific case then we could take the S. matter up with him in such a way that it will not occur again. * * * Yours truly. Osborne-McMillan Elevator Co. By F. J. Smith. \ FJS :OM Section 8. Competition in side lines. The side-line business is of varying importance as between types of elevators, different localities, and even between different types of elevators at the same point. Wherever there is more than one eleva¬ tor at a station carrying one or more of the same side lines there is sometimes competition between such elevators in this business, while in other cases prices of side lines may become subject derstandings and agreements between the interested paj-tjioo. 260 COUNTRY GRAIN MARKETING. Nov. 11, 1918. Northland Elevator Co., ^ City, Gentlemen : We are advised by our agent at Overly that the different coal dealers there have talked the matter over and have decided to make the fol- C lowing prices on coal: $11. 75 9.00 9.50 10.50 Hard coal Hocking _ Millers Creek Smokeless * Yours truly, Woodworth Elevator Co. (Signed) ByR. P. Woodworth, Sec. RPW-E Feb. 12, 1916. Atlantic Elevator C« Gentlemen : Our agent at Calio, N. D. advises us that you are selling to Millers Creek coal at $8.00 per ton at Calio. We see no good reason why we cannot get $8.50 per ton for Millers Creek coal at Calio, and we think that all you need to do is to write your agent to make the price $8.50 and he will get it. We are getting $7.50 per ton for Hocking and on that basis we should get $8.50 for Millers Creek. ^Kindly advise us as to what you decide to do in regard to this matter, and greatly oblige. Yours truly, Northland Elevator Company. FJS: OM Minneapolis, Minn., Aug. 2^^ 1914. Henry Haugland, Agt., Loma, N. D. Dear Sir : We are in receipt of your letter of the 21st, stating that the At¬ lantic Elevator Co.’s agent at your station is selling steam coal out of the shed at $7 per ton. Go and have a talk with him and ask him at what price he is selling coal out of the shed for to threshers; that if he is going to sell at $7 per ton, of course, the rest of us will have to sell at the same price, but if he will make his price $7.25 we will do likewise. Yours truly. Northland Elevator Company. Section 9. Character of cooperative, or farmer, and mill elevator compe¬ tition. There are numerous indications that the mill, and especially the farmers or cooperative elevators, are the most serious factors in country competition. Both these types frequently embark upon policies in prices, grades, dockage, etc., that have little or no ref¬ erence to the policies of their independent or commercial line com¬ petitors as appears from the following letters. Crosby, N. D., Oct. 24, 1919. Atlantic Elev. Co., Minneapolis, Minn. Dear Sir: The Farmers Elevator here is paying $2.56 for wheat—^being 10c over card price, and $4.00 for flax—being 11 cents over card price. We have all been card price on flax and 5c over on wheat, and the Farmers Elevator is getting the biggest part of the grain at that. ♦ ♦ * Yours very truly, J. A. Kappadall. [From the files of the Northwestern Elevator Company.] Nov. 2(?), 1917. Grain Bulletin, Chamh of Com., City. Gentlemen : Will you please take up with the Millers’ Committee in relation to Casselton, N. D.? This mill is operated by Baldwin, and they are paying $2.10 for wheat regardless of the amount of inseparable matter it may contain, and drawing wheat 5 or 6 miles to the south of Everest and all around that country. ♦ * ^ * * * ♦ Yours truly, (Unsigned) Gen. Supt. Occident Elevator Company, Billings Mont 10-29-17. Mr. M. R. Devaney, Gen-Mgr. Mpls Minn. Dear Sir: * * * Hardin, Laurel, and Silesia are our strong competitive points owing to the Farmers Elev at Hardin and the mill at Laurel. Of course had conditions been different at Laurel and Billings our receipts and profits would show up much better t Yegen, Laurel and Silesia. We have lost con¬ siderable business from these stations on account of the liberal grades and dockages allowed by the mills. In a way one cannot blame them as it is the cheapest wheat they can get but it deals us lots of grief. Yours truly S J Epler The Northwestern Elevator Company South Shore, 1-21-16 Mr. C. A. Magnuson, Brest. Minneapolis, Minn. Dear Sir: The situation here is not good the Farmers are taking two-thirds of all stuff' coming to town. They are paying all kinds of prices, and are awful loose on dockage. ******* Yours, truly. Northwestern Elevator Co., Old Chamber of Commerce. Jas. Hanna. Empire Elevator Co. Sept. 22, 1916. Gentlemen : Answering your letter of the 17th concerning price of grain at Granite Falls will say that the Red Wing Milling Co. and ourselves are only paying over list for old wheat. We would be very glad to get down on a reasonable basis if the Red Wing Milling Co. would but the way the matter stands, we cannot allow them to pay over us. If you have any further sugges¬ tions to make would be pleased to hear from you. Yours, truly, Empire Elevator Co. (Signed) J. R. McMillan, Asst. Secy. JRM-M. Sept. 28, 1916. M. G. Blaha, Agt., Hurdsfield, N. D. Dear Sir : We have yours of the 26th informing us that the Farmers Elevator Co. are now getting over list on all kinds of barley and wanting to know what to do. Yours, truly, (Signed) Andrews Grain Company By Bcc-Mc 262 COUNTRY GRAIN MARKETING. Sept. 21, 1915. H. J. Thoestenson, Agt., Northwood, N. D. Deak Sie : Your letter of the 19th is received and noted very fully. It is quite apparent that our friend at the Mill is up to his old-time tactics of getting business without regard to the manner in which he gets it, but I think you did perfectly right in calling the attention of one of the directors in the Mill to this condition. I rather think it may have some rather good effect. If it has not, I would suggest that you take other directors of the Mill Co. into your confidence. In fact, I believe it would be a very wise thing for you to try to have a little conference with all the directors of the Mill; also to have a little meeting among the buyers of grain in your market so as to talk these matters over and see if there is not some possible chance for uniformity of action. It might be possible to accomplish something in this direction. At least it is worth an effort which I hope you will put forth at once. But if you find that there is no chance to do anything in that direction then you will have to jump in and take your share of the grain on as good a basis as you can get it. Please advise me further in regard to this in a day or two. Yours, truly, BCC-Mc By Andeews Geain Co. Minneapolis, Minn., Aug. 17, IQlIf. Thoepe Elevatoe Co., City. Gentlemen : I understand that at Ada, Minn., the Farmers Elev. Co., are giving free storage. It is also stated that some of the line people at Ada will start paying 3^ over list on #1° and 2 Nor. wheat. As our list only gives us a margin of it looks to me as though it was a losing game from the start to do that. li: $ Yours truly, * >|C 4; * C. A. Magnuson,^ Prest. Section 10. Reasons for severity of mill competition. The disturbance in the country markets which is frequently created by the mill elevator is due chiefly to its desire to supply its grinding requirements. Since the mill elevator is in many, if not most, cases in business for the purpose of supplying wheat to the mill, ele¬ vators of this type necessarily become a serious factor in the market whenever the receipts at the local station are small, or other local marketing conditions are such that the mill is not obtaining its grind¬ ing requirements."" At such times the mills as a rule will pay any price, more or less, regardless of their competitors. The other principal types of elevators are grain merchandisers and derive their profits from such merchandising operations. The mills, on the other hand, derive their profits chiefly from the manufacture of flour, and many of them either do not merchandise grain at all or only to a limited extent. While the mills do not, of course, wish to pay more for wheat than is necessary, yet when they require it for grind¬ ing they are often willing to pay prices that leave the merchandising elevators little or no profits. Northwestern Elevator Company. 12 This applies to mill line as well as individual mill elevators, in so far as the former are engaged in supplying mill requirements. ! t i 1 I li 'J- * |! COMPETITIVE CONDITIONS IN COUNTKY BUYING. 263 August 28, 1919. Albeet Kunze, Agent, St. Bonifacius, Minn. Dear Sir: Note what you say about the mill at Waconia having paid some premium for wheat. * ♦ * ♦ * « ♦ How would it do for you to slip over to Waconia and find out exactly what is doing—have a heart to heart conference with the mill people and do what you can to induce them to come down to the card basis. If they refuse to do so, we have no alternative but to authorize you to pay their price at St. Bon in case you have difficulty in holding deliveries tributary to your territory. In other words, we don’t* propose to be losing wheat from St. Bon territory to Waconia—would rather meet the Waconia price occasionally than do so. Report further with a word on this sheet. Yours truly, PowExts Elevator Company By W. K. P., Mgr. WKP*K 8-29. Dear Sir: Just had a talk with the Mill people this evening. They told me they would pay card price from now on unless they can’t get wheat enough to run their mill. They say the farmers are holding back their grain this year. Yours truly, Albert Kunze. Received 10-28-14. Hurdsfield, N. D., 10/26/14. Andrews Grain Co., Minneapolis, Minn. Gentlemen: Market conditions are beginning to get bad here already. I expected it, but did not look for it so early in the season. The Occident have been paying a cent over list for Marquis and admit that they are willing to pay over for any good wheat for milling, because, “ loe are millers and need good milling wheat.” Sounds like Grobe to me. * H: * * * * Yours truly, W. M. Thompson. Minneapolis, Minn., Aug. 17, 1914- Thorpe Elevator Co., City. Gentlemen : * * * The Mill is undoubtedly paying over list to get wheat •o grind. I understand also they are giving free storage on all kinds of grain. : wish you v/ould advise me what you think of the situation, and what in your )pinion ought to be done at that point. Yours truly, ^ « G. A. Magnuson,” Brest. Andrews Grain Co., North WOOD N. D. Station, June 4t 1913. Andrews Grain Co., Minneapolis, Minn. Dear Sir* The market condition here is the same as it has been the Mill is advertising ’in the paper for wheat and the Farmers man is right after it. ♦ * * Yours truly, (Signed) O. M. Lee. 18 Northwestern Elevator Company. 264 COUNTRY GRAIN MARKETING. Andrews Grain Co., Northwood N. D. Station, Sept. 25, 1912. Andrews Grain Co., Minneapolis, Minn. B. C. C. Dear Sirs : Mr. Larson Mgr. of the Mill here told me he was going to pay 2^ over list for milling wheat for a while in order to get enough to grind. I trid today to get the line agents to come down to list but the Cargills agent thinks he will have to pay over list. I hardley think the mill will stay up very long but can not tell. Yours truly, (Signed) O. M. Lee. Section 11. Reasons for the severity of cooperative competition. Opposition to line companies. —Several factors are undoubtedly responsible for the competitive conditions created by the cooperative or farmers’ elevators. Of prime importance among such factors must be reckoned the more or less unfriendly attitude of many farmers and farmers’ organizations toward the line-elevator companies because of injuries which the farmers believed they have suffered at their hands. This, of course, operates to a certain extent to prevent the various line companies from procuring grain even though they offer equal or higher prices therefor. [From the files of the Van Dusen-Harrington Company.] Fessenden, N. D., 11/6/17. Mr. H. A. Fietus, Minneapolis, Minn. Dear Mr. Fietus : I want to ask you as a special favor not to use letter heads as per the enclosed in writing to any of my former e.evator accounts, as it has the same effect on them as shaking a red cloth at a Bull, as there is an awful strong sentiment among the average farmer elevator companies against com¬ mission houses who own a large line of old line elevators and letter heads like this certainly advertises us in good shape along this line. Just to show you how a great many farmers organizations feel about doing business with what they call old line firms, the farmers organized at Armaur- dale, N. D. I did not waste any time going to see them at all as I was told just what they were, but they made arrangements early with Kellogg Commis¬ sion Co., and threw them over when they learned they owned the Atlantic Elev. Co., and made arrangements with the Brown Grain Co. only to learn later on that they were the St. Anthony & Dakota and finally landed with McCarthy Bros, a strictly commission house. This crowd at Wimbledon are somewhat Equity inclined and the manager asked me today if Van Dusen-Harrington owned all these line of Elevators. I put him off by telling him you were joint traffic manager for all the above com¬ panies but I could see he did not seem satisfied and I know such letter heads as this should not be used in correspondence with our local shippers and I hope your stenographer will be instructed thoroughly so that they will not use it especially when writing to Farmers Elev. Co. Yours truly. (Signed) E. O. Dilling. [From the files of the Powers Elevator Company,] Halliday, N. D., 1/7/15. Mr. W. K. Powers, Minneapolis, Minn. Dear Sir : The Farmers Elevator people are pretty sore at me for going over list. :)c 4: 4: * 4: * * I offered one of his stock holders, the limit on wheat today and he laughed at me and told me that he had been told that if I gave him more than list price. COMPETITIVE CONDITIONS IN COUNTKY BUYING. 265 I would get it back some way either in dockage or weight. I just told him to try me and see where he got the most money, as it was money that he wanted for his grain. Yours truly, J. P. Havens. Andeews Grain Co. Northwood N D Station, June 1918. Andrews Grain Co Minneapolis Minn. Dear Sir * * * There is about 125 wagons loads daily in town but I cant buy it the Farmers think this house was bought to stop a good market and thay wont patronise us if they can help it. Yours truly (Signed) O. M. Lee. Friendly attitude of farmers toward cooperatives. —As con¬ trasted with the foregoing attitude on the part of the farmers toward the line house is the friendly disposition manifested toward the farmers’ elevators. In part this is due to the belief that farmers’ (and also mill elevators) are a protection to the farmer and in part also to a desire to support a farmers’ institution. [From the files of the Powers Elevator Company.] Halliday, N. D. 1/7/15. Mr. W. K. Powers, Minneapolis, Minn. Dear Sir: * * * I gave our printer the grain prices for this weeks paper, and I put wheat and Durum up at the advanced prise—^The Farmers buyer told me he would not have to raise the price as he had enough stock holders who would stay by him. * Hs ♦ * * * * Yours, truly, J. P. Havens. Andrews Grain Co. Regan N. D. Station, 11/2, 19Vi. Andrews Grain Co Minneapolis Minn. Dear Sirs \ We don’t see any real need of paying 20 over as it seems we are not able to move some of these farmers at any price at least I have been told by several that they would not haul a bushel away from the Farmer’s Elevator even if I could pay them 250 more than the Farmers were able to pay. * ^ ♦ They are very easy on grades and dockage also. Yours very truly (Signed) A. B. Greenfield. Charbonneau, N. D., 12/26, 1914. Victoria Elev. Co., Mpls, Minn. Gentlemen • * * * I have done all in my power to get our share, and I have tryed every thing I can think of to get our share but can’t get any hoult I have talked to the farmers to try us, and they say we would haul to you but we have got our Farmers Elev. here and we must support that, as long as we are treated right, so what can I do? There are about 90% of the farmers around here interested in the Farmers Elev. so the only thing I can see to do is to wait till the turn comes when some of the stock holders get dissatisfied they are hauling now to the Farmers Elev. for 2c less than we are paying. * * '^ • ♦ * * Yours truly, C. F. SCHOEN. 266 COUNTRY GRAIN MARKETING. ' ~ I ■ f Andrews Grain Co., \ Northwood N. D. Station, Jan. 16, 1913. ^ Andrews Grain Co., f Minneapolis, Minn. ^ 4. Dear Sirs : I have trid for a week to get some wheat at one cent over the ^ price the rest is paying but can not tutch it at that I have talked to the ^ farmers and asked them why they would not hall some here and they say they r ' would sooner the Mill or the Farmers elevator would get it as they was run | ■ to protect the farmer. I; Yours truly, f (Signed) O. M. Lee. It must, of course, be noted that the loyalty of the farmer toward the farmers’ elevator and the cooperative movement is not always |, altruistic, and that he may be very largely influenced in his attitude | ^ by the expectation of dividends, either stock or patronage, or both. Giving full weight to this factor, hov/ever, it is none the less "f; true that many farmers are influenced, in some degree, to patron- £ ize the cooperative or farmers’ house by the belief that in so doing t they are assisting not only the farmers’ house but also the entire I-, farmers’ cooperative movement, in which many of them are firm | ■ believers. | Effect of dividends. —In the early days of the farmers’ or coopera- I tive elevator movement the penalty clause often constituted an induce- " ment to the farmers to haul to the farmers’ elevator. But as this type v of house became a more significant factor in marketing grain, the f . penalty clause declined in importance,^^ and its function as an inducer | of patronage was usurped by the large dividends, either stock or } patronage, or both, which such houses gradually became able to dis- ^ : tribute. To-day these dividends probably constitute one of the most | “ important elements in the competition in the buying of grain in the ( country. i [From the files of the Occident Elevator Company.] | Law Office of H. A. Armstrong, f Hazelton, N. D., September 16, 1919. | < Ron. William Langer, T -i Attorney General, Bismarck, N. D. ^ In re; Occident Elevator Company. Dear Sir: * * * When the Farmers’ Elevator was started in our town I attempted to secure some stock in it but was informed that I was not a farmer, although I was having about 500 acres farmed to small grains each year. A lot of the grain raised on my land was hauled to this Elevator and sold there, by my tenants, and when the Elevator came to make their annual settlement they declared a dividend reported to me by a stockholder of almost 100%. It was very difficult for me to feel that I was getting a “ square deal ” out of the transac¬ tion; for, if they could declare any such a dividend as the one I have quoted they were certainly not paying me the full price for my grain. In consequence, very little of my grain has gone to the Farmers Elevator since. I feel that it is possible that there are two sides to the question. Respy. Yours, (Unsigned.) 1* Many of the cooperative or farmers elevators organized in recent years have not included this clause in their by-laws at all, and at present the evidence in the possession of the Commission indicates that the clause is practically never enforced. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 267 [From the files of the Northwestern Elevator Company.] Oct. 31, 1917. Grain Bulletin, City. Gentlemen : * * * At Rothsay we can not do any business without paying- over list, inasmuch as the Farmers Elevator is cooperative, and they are paying back to those hauling. * * * * * ♦ Yours truly, (Signature not decipherable.) Gen. Supt. Aug. 19th, 1915. Sawyer, Trenton CJiarhonneau. Dear Sir : Does the Farmers Elevator at your station pay a dividend at the end of the crop for the amount of grain hauled, and does the Manager adver¬ tise this to draw trade? If so, this is competition that we have a right to meet, and you have the right to put the price up on grain to the amount of the dividend which the Manager of the Farmers claims to be dividing at the end of the year. I expect to be out there within the next two weeks and will talk this matter over with you, so please do not use this until after I am out there, and try and keep the market as smooth as possible until that time. Yours very truly, Victoria Elevator Co. RGC. MBL. Charbonneau, N. D., 12, 26, 191Jf. Victoria Elev Co., Mpls, Minn. Gentlemen : Yours of the 22 instant at hand and note what you say about the Farmers getting most all the wheat. * * * * * * Please dont think, that I am pleased and contented, with the way business goes here, there is nothing harder on my nerves and gives me more werreau then when I have to sit around and cant do anything If the future wont turn out any better than the past Then I am sorrow that we ever built here. I have got about $1300 invested in a house I wish both house and Elev. was somewhere else. You may do better by sending some one else here but as long as them Farmers stock holders think they will clear about $100 on a $25 share it is hard to get them to go pass the Farmers Elev. Yours truly, C. F. SCHOEN. Section 12. Independent elevator competition. Although there are a considerable number of independent ele¬ vators in the four northwestern grain States, their relative impor¬ tance is much less in this area than east of the Mississippi. Possibly it is in part due to this fact that the correspondence contains such relatively infrequent references to the competition of this type of house. Such letters as do refer to the operations of independent houses usually indicate that they tend to work in harmony with their line competitors. Moreover, the mere lack of reference to the com¬ petition of this class of house would in itself seem to indicate that their competition is not especially severe. 268 COUNTKY GRAIN MARKETING, Section 13. Line-elevator price policy. From a careful examination of the correspondence, it appears rea¬ sonably safe to conclude that as a matter of general policy the line companies endeavor so far as possible to stick to card or list prices. Sept. 4, 1919. F. E. Bye, Agent Gilby, N. D. Dear Sib: * * * The receipts seem to be dividing up rather fairly and under these circumstances, we do not want to give you any instructions to pay up for such stuff as is represented by these samples, or for any others. We still feel that a reasonable amount of business done at a reasonable margin is a great deal better than lots of business done at no margins. We down here who are furnishing the money on which our agents buy grain and footing the bills covering the expense of doing business at their stations, cannot lose sight of the fact that this money must come back to us in some way or we will have to shut up shop. The only way we have of getting this back is to buy our grain in the country on a fair margin and cannot, consequently, let ourselves become blinded with this fact by a competitor’s doing a little business. Yours very truly, HGT: ML CC: Mr. Cochrane. Andrews Grain Co. By The Northwestern Eeevator Company. August 25th, 1919. Circular No. 11. To All Agents: I notice that a good many of you are paying a good deal over the card price. I w’ould like to have you write me as to whether or not you have tried to get the market down to card price or as near card price as possible. If you have not already done so, will you try to do so. You will understand of course, that in order to make a fair profit we have got to buy the grain as near card price as possible. Yours truly, (Pencil note) C. A. Magnuson, Prest. Arthur, N. D. 8/26/19. The St. Anthony has agreed to come to list, but we can’t do anything with the Farmers Elev Agent, but we are going to pay list after today and see how it works out. Yours truly, (Signed) H. W. Buchanan. Sept. 9, 1919. Mr. B. G. Cochrane, Detroit, Minn. 612 Fourth St. So. Dear Sir: We have yours of the 6th relative to the situation at Cashel, and also have yours of the 8th and note that you will be at Cashel to-day, and have asked us to call you up if we have any special instructions to give you. Competitively, the mill line is sometimes to be considered as a mill and sometimes as a commercial line. In so far as a mill line serves as a feeder for the mill, it will compete to obtain grain more or less regardless of its other line competitors. Many of the northwestern mill lines, however, are operated largely, if not chiefly, as merchandising propositions in the same way as any commercial line and their policy coincides in general with that of the commercial lines. Except in so far, therefore, as the discussion refers to the competition of mill lines to obtain grain for grinding, the term “line” as used in the discussion is intended to include both commercial and mill lines. »* Prices issued by the Grain Bulletin service. (Ch. VIII, sec. 1.) COMPETITIVE CONDITIONS IN COUNTKY BUYING. 269 We have just called up the Equity on this situation again, and he claims that their man was delayed in getting to that point but that he is giving Landousky strict instructions to come down to list. Now we do not believe that they are trifling around on this proposition and feel absolutely certain that they want to buy grain right at that point, as well as at all others. In view of this, we doubt its being good policy to spring prices at that point until we have exhausted all reasonable means of getting the station on the right basis. It is easy enough to put these prices up, but it is something else to bring them down. We are not, however, going to fool around on this thing all winter, but do not feel just yet like putting that station at freight off, which is undoubtedly the only other step open to us. Yours very truly, Andrews Grain Co., By HGT :ML November 4th, 1916. Mr. P. J. Smith, Sec., Northland Elevator Co., City. Dear Sir : We note your letter of the 2nd and also the letter from your agent at Ambrose. The general buying of our grain at Colgan has been very satisfactory to date. However, there was quite a stir made by our agent as well as all of the other buyers in that territory on account of your agent having received a special schedule of prices to buy on and all of the buyers then got excited and since that time the thing has been somewhat demoralized. Our agent wrote in here and wanted to know why it was that the Northland at Ambrose were sending out special cards of their own and not following the grain Bulletin Card. I have had the same question come up before and I do not know whether this is going to lead to demoralization in a general way or not. However, we are checking up our buying at Ambrose and we certainly do not propose to pay Minneapolis prices for wheat at Colgan if we can help it. Yours, truly, Atlantic Elevator Co., By FCR/c Occident Elevator Co., Minneapolis, Minn., 8-31-16. Osborne-McMillan Co., City. Gentlemen : I have your letter of the 30th and return herewith letter from your agent at Bergen. Our agent at Bergen was in here about ten days ago and we impressed on him the fact that receipts at his point were going to be light and that we wanted him to buy the stuff at the card. We have been advis¬ ing him since to follow the card, and if he has not been doing this I would like speciflc cases. ♦ sc Hi * * * * Yours, truly, Occident Elevator Company, Per (Signed) M. R. Devaney, mrd 1. end. Section 14. Relation of Grain Bulletin to price competition. This policy of the line elevator companies in attempting to hold the markets at which they operate to the Grain Bulletin card or list price is presumably based upon the fact that the card deducts from terminal market prices, not only freight, but also a handling mai:gin of several cents, which is sufficiently liberal to cover both expenses and a margin of profit.^^ (Ch. VIII, sec. 1.) If this card or list price can be maintained, therefore, the line house is usually assured ” This would probably apply to all houses except those very Inefficiently operated or which handle a very small volume of grain. 270 COUNTRY GRAIN MARKETING. of a profit subject only to being able to procure a fair volume of S grain. ... J Basis for agreements. —It is difficult to estimate how important a « part this card plays in the competition of country elevators. The 1 fact that it quotes a-buying price for each station and is generally in 1 use throughout the Northwest would appear, in a technical way, m to facilitate agreements by reason of the fact that the elevators at each point thus have a minimum buying price upon which agree- ments or understandings could readily be based. ^ Nov. 30th, 1915. i Mr. G. H. WisHEK, Pres., A Zeeland State Bank, Zeeland, N. Dak. Dear Sir: Your letter of the 29th received. We are writing Mr. Schatz. J today to try and get him down to card basis, also that he must not take « wheat lower than 54 pounds to the bushel for better than 4 wheat and 2 grade J must test 56 pounds. . ^ The trouble with Zeeland is that the buyers are all working on their own J| basis, and not on a common basis. We would suggest that you and the other buyers in town take the Grain Bulletin card which is sent out from Aberdeen, j S. Dak., every night and you would get this on the noon train showing the previous days market, and all agree to buy on that basis. We are enclosing you ^ herewith a copy of the Zeeland card for the 29th and you will see by this that J wheat closed at Minneapolis at $1.02-3/8 to $1.02-7/8 which leaves you a good « margin and cuts out all chances for difference in judgment and gives us a S common basis to work at. If you all agiee to buy on this basis there could be no S differences in opinions. M If you can put this work through think you will be a benefactor to all the Grain men in Zeeland and we will stick to this kind of agreement. This Grain Bulletin card will cost each of you .90 cents per month, and it ^ would be a good plan to cut out the C. N. D’s as they only make trouble. * Yours very truly, « RGC. MBL ViCT Elev. Co. J Secondly, the technical method of distribution of Grain Bulletin * telephonic and telegraphic price changes offers a means of facilitat- .1 ing agreements. In order to reduce the expenses of this service, a J station having two or more elevator subscribers receives as a rule ■* only oRe message. The agent receiving the same then distributes the information to the other elevators at that point. Frequently the j agents work in rotation in receiving and delivering the changes, one ^ doing it one week, another the next, and so on, and this system sup- i plies good opportunities for talking oyer prices, etc. J There is also in existence some evidence that F. E. Durant, the J proprietor of the Grain Bulletin, formerly had weekly conferences "m with the operators of certain important Minneapolis line elevator ® companies. [Cargill Elevator Files.] Minneapolis, Minn., Sept. 17, 1915. 9 Cargill Elv. Co., D. D. McMillan. Imperial Elv. Co., P. L. Howe. » Monarch Elv. Co., A. Stewart. » National Elv. Co., L. D. Marshall. Northwestern Elv. Co., C. A. Magnuson. 1 *; St. A. & D. Elv. Co., C. A. Brown. ^ At a meeting held about a week ago, it was suggested that the companies*, named above meet each Friday afternoon at 3 o'clock in my ofiBce, for consulta-^j tion of matters of general interest. S Please be represented this afternoon. » F. B. Durant. a i COMPETITIVE CONDITIONS IN COUNTRY BUYING. 271 Probable influence of Grain Bulletin.— It should not be in- ' ferred, however, that these meetings necessarily involved illegitimate discussions or resulted in illegitimate action of any sort. If it be assumed (and there is some evidence to support the view) that Mr. Durant attempts to make the card show a fair minimum buying price I in the country, it is necessary that he have a thorough knowledge of the character of the crop and similar conditions throughout the entire Northwest. The officers of the line companies have from their agents’ 1 reports such a knowledge of crop conditions at their local stations, and owing to the wide territory covered by the lines, consultations by Mr. Durant with a few line officers is sufficient to supply him with an i amount of information otherwise difficult, if not impossible, to obtain. It is not intended at all to imply, however, that this was the purpose ■; of the Durant conferences with the line elevators, but only to suggest ! that there may have been entirely legitimate reasons for such con¬ ferences. It may be regarded, however, as somewhat doubtful that Durant ! has employed the card, at least in recent years, in furtherance of the 1 line elevator interests. The reasons for this view are found in several ‘ facts. First, the lines at present constitute a minority of the sub- ^ scribers to the card and considerably more than one-half of the sub¬ scribers are elevators of other types. Secondly, there are numerous indications that Durant has essayed, at least in recent years, to make ! the card price at any station reflect what the buyers at that particular - station are willing to pay for grain. Third, following the passage of the antidiscrimination laws, Durant took the position that he could I not adjust card prices at a station on the request of a line company I unless he did it for the line as a whole, though he would adjust the [ price upon the request of an individual operator. Fourth, the cor- r respondence and other data examined failed to show any clear ’ evidence that the Grain Bulletin is now operated in the interests of i the line elevators. If the foregoing is a correct view, the chief influence of the Grain 1 Bulletin competitively is the frequency with which its prices are em- i ployed as the basis of agreements among competitors.^® : Section 15. Line-elevator competitive policies on grades, dockages, etc. Grades, dockages, and weights. —As elsewhere indicated (Ch. VIII, ' secs. 10-11), the line companies may lose on grades, a portion of which loss, at least, is compensated for by a profit on dockages i and weights. The line agents are constantly checked by their head ’ offices as to their grades and dockages and instructed against either overgrading or underdocking. On the basis of the letters of instruc¬ tion to agents and other statements contained in the correspondence, it may be stated that, on the whole, the policy of the line companies is to prevent both overgrading and underdocking. Moreover, from correspondence examined, it appears that the lines, with some possible For a further discussion of the Grain Bulletin and Durant’s activities consult the chapter on the Grain Bulletin in Vol. Ill of this report. In that volume will be found a detailed discussion of the relation of the line alevators to the Grain Bulletin so far as it was ascertainable and a comparison of actual prices paid in the country with ' the Grain Bulletin prices, together with a detailed discussion of the relation of the card to i prices in general. The foregoing discussion relates only to the matter of the competitive ' effects of the card at individual stations. 272 COUNTRY GRAIN MARKETING. exceptions, desire their agents to be as accurate as possible in these matters and also in weights. The Northwestebn Elevator Company, August 25th, 1919. Circular No. 11. To All Agents: * I want to say this, that we do want to get our full share of the grain, but if in order to get it, we have to pay a high price for it, we want no losses on shortage in dockage, shortage in grades, or shortage in weights. I want you to write me fully, particulars in relation to these matters on this sheet for refer¬ ence. Yours truly, O. A. Magnuson, Prest. May 15, 1917. A. B. Greenfield, Agt., Regan, N. D. Dear Sir : We have yours of the 12th. Very glad to note that the buyers in your market are all down to strictly list prices and proper grades and dock¬ ages. Reference to our general letter of the 14th and again the one of today, will show you the grave importance of paying nothing more than list price. Yours truly. Andrews Grain Co. By BCC-Mc Occident Elevator Company, Billings, Mont., 10-26-17. Mr. M. R. Devaney, Gen. Mgr. Mpls, Minn. Dear Sir: * * * I was at Boyd this week investigating a report to me that we were overgrading and docking but find that our man there has bought his grain so far right and far cheaper than our competitor. I never had as much trouble before trying to work in harmony with our competition and keep¬ ing the buyers down to proper grade and dockage. Yours truly, S. J. Epler. overgraded you on this stuff but you did not give us a specific case. I mean you did not give us the man’s name nor the date nor the price paid. If you would do that I would take it up with the Occident Co. and think they would take steps to get their agent in line. They are not anxious to overgrade the stuff nor pay any more than it is worth. * * Yours truly, Andrews Grain Co. By BCC-Mc Minneapolis, Minn., Sept. 6, 1915. Mr. L. D. Marshall, Mgr., National Elev. Co., Minneapolis, Minn. Dear Sir: Your letter of the 4th relative to our Dresden agent’s cutting dockage is received, and I can assure you that this is a practice that we do not want our agent to reason to. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 273 I will write our agent a good strong letter relative to maintaining proper dockage and will also write it in a way that he will not think there has been any complaint. Thanking you for the information which your letter contained, I remain, Yours very truly, Cargill Elevator Company. WY-P Occident Elevator Company ■ 12-22-15. Mr. F. C. Rtere, % Atlantic Elev. Co., City. Dear Sir: Have your letter of the 21st and note what you say about the situation at North Valley City, which, of course, is a little worse this year than heretofore, on account of difficulty in grading the stuff. I am inclined to agree with your agent that we cannot do very much in the matter of price, but my idea would be to issue rigid instructions to our men to grade and dock properly, or let the stuff go. Yours truly, Occident Elevator Company, PerM. R. Devaney, Gen-Mgr. mrd 1. Aug. 22, 1914. Spaulding Elevator Co., TVorren, Minn. Gentlemen : According to samples that we are receiving from Silva, N. Dak., we are inclined to believe that your Agent is badly overgrading. We give this information in order that you may be on the lookout for that station. We received a number of samples from our Agent, all of which he overgraded, and we went after him bard. Yours truly, Osborne-McMillan Elevator Company. FJS: OM Minneapolis, Minn., Sept. 12, 1914. Cargill Elevator Co., Mr. D. D. MacMillan, City. Dear Sir: T have yours of Sept. 11th. and I fully agree with you on every proposition you make, that the Line Companies are largely to blame for over¬ grading and* under-docking in the country. I do not heheve this is on account of any instructions i.ssued direct from the offices of the Elevator Companies at Minneapolis. I cannot conceive how any office should undertake to give any leeway in regard to grades and dockage without having their ^vhoIe line de¬ moralized to such an extent that they would naturally feel that they were having a loss. I will have our Supt. go to .Tohn.son at once, and I wish he and Mr. Hanson could go together, because there is certainly no reason why there should be any friction at .Tohnson that I can see. The fact of it is that we have lost grades and dockage both on shipments from .Johnson, and that T have taken our Agent there severely to task in the matter. There is no disposition on our part to permit it at Johnson or any other station, and we will not do it if we know it, and if anyone can send out anv stronger letters than I have in this respect, then I lack a knowledge of English. Yours truly, C. A. Magnuson, Prc.st.“ Northland Elevator Co., Thief River Falls, Station, Oct. 24 1914. Agent Nor. Elv. Co., Bronson. Dear Sir: On receipt of this letter you can pay over list for all kiuls of wheat but I do not want you to overgrade one bushel nor take any for less ” Northwestern Elevator Co. 9964°—20-18 274 CXHJITTKY GKAIN MARKETING. dockage than Is necessary to clean it. If you can’t see your way clear to follow those instructions and handle the grain business like other people there is only one way for me to do and that will be this check you out and get an¬ other man to run our House at Bronson. I want you to file this letter away so that you will know that I have advised you of what is coming if you don’t follow my instruction in this the wheat we took in from Erickson for 1° will not grade better then 2® so don’t take another load except at 2° with a good dockage. Yours Rep C W Nelson. Elevation and storage charges. —Similarly, with reference to elevation and storage charges, etc., there are indications in the line company correspondence that these concerns do not, as a rule, favor the reduction or elimination of such charges as a means of obtaining business: Mpls Nov. 5-19IS. Andrews Grain Co., Mpls, Minn. Gentlemen : We have your letter of Nov 4th with your Edmunds agent’s letter attached and will say regarding this that our agent at Edmunds has in¬ structions to collect storage after Nov 1st. It seems that in some cases he had to give free storage at Edmunds on account of Mr. Alfson giving free storage to farmers in that territory but we had this matter up fully with him a short time ago and the understanding is that he is to collect storage at that station after Nov. 1st. and I do not think that you will have any reason to complain regarding the matter of storage at that station from now on. Yours truly Occident Elevator Company, Per F. A. Cousins, Asst. Gen. Mgr. [From McCaull-Webster Fllea] Mpls. Minn., Aug. 11, 1914. Mr. E. E. Conner, Aberdeen, S. D. Dear Sir: * * * Now in regard to storage, the others can do as they like in regard to this, but we will not give free storage on this crop for longer than thirty days. If we did, it would simple mean that when our elevator was filled with stored wheat that we would have to ship and it is impossible to protect yourself on this option. ♦ * * * ♦ « * Yours very truly, DW/B Vice President. Minnekota Elevator Company March 29th 1916. Atlantic Elevator Co., Chamber e f Commerce, Minneapolis, Minnesota. Gentlemen : We are in receipt of letter from our agent at Fonda, North Dakota, relative to the report that he had been offering to store grain free, and he advises as follows: “ I am not offering free storage to anyone, and am not forced to do so. I presume that some farmer has made this claim to the Atlantic Agent in order to induce him to cancel storage charges.” We can assure you that if our agent should fail to collect storage at any time in the future, the amount due us will be deducted from his salary. We trust this makes our position clear on this subject. Yours truly, Minnekota Elevator Company, By W. H. Gooch. G-T COMPETITIVE CONDITIONS IN COUNTRY BUYING. 275 Section 16. Line-elevator policies in meeting competition. Paying competitors’ prices.— Although the indications are that the lines greatly prefer to stick to list prices and to grade and dock correctly and direct a great deal of energy to procuring these results through agreements or understandings, or otherwise, it is also their policy to meet competition whenever necessary. As a rule, this is to be interpreted to mean that the line company will pay whatever {irices its competitors pay. The indications are, however, that the lines are not usually willing to go further than this. In other words, while the line companies frequently go over list in the prices which they pay, the indications are that they tend, on the whole, to follow rather than to lead their competitors in bidding up the local market prices. Josephine, N. Dak. Sept. 10, 1919. Powers Elevator Co., Minneapolis, Min/n. Gentlemen : In regard to your letter, can say that I have been paying ac¬ cording to card price on all the durum, with the exception of Dan Moneghan, which he said that he could get $2.06 at Farmers for test 60# and I told him’ that I would give him the same if he would haul over here which he did, other¬ wise the others were paid at card prices. * ****** Yours truly, (Signed) Carl. C. Anderson. Crosby, N. D., Oct. 24, 1919. Atlantic Elev. Co., Minneapolis, Minn. Dear Sir; The Farmers Elevator here is paying $2.56 for wheat—^being 10c over card price, and $4.00 for flax—being 11 cents over card price. Shall we meet competition or not? The Northland agent is also taking it up with the company too. Yours very truly, J. A. Kappadall. August 27, 1919. Carl Anderson, Agent , Josephine, N. Dale. Dear Sir: * * * We are anxious to get our share of the run and it is quite necessary that we get it right. I have authorized you to pay a reasonable premium if the Farmers are not satisfied with Grain Bulletin margin, but we do not propose to follow them into a loss. # 3): 4: 4t :!: * Yours truly, WKP/P By Powers Elevator Company, Manager. [From the flies of the Occident Elevator Company.] * Cleveland, N. D. Sept. 23d, 1919. Mr. F. T. Hurley, Asst. Genl. Mgr., Mpls, Minn. Dear Sir: I have your circular letter instructing us to pay list price on everything. I wish to ask permission to pay 14 over on rye, that being as low as my competitors are willing to go. Yours truly, (Signed) Geo. Johnson. 276 COUNTRY GRAIN MARKETING. Minneapolis, Minn. Sept. 24, 1919. Mr. Geo. Johnson, Agent, Cleveland, N. D. Dear Sir : You can meet your competitors’ price on rye. Yours truly, fth.l. Asst. Gen. Mgr. Mr. J. E. Pridgen, agent, Glen JJlUn, N. D. Occident Elevator Company, Mpls, Minn, 9-28-17. Dear Sir: Have your letter and, of course, while we don’t want to spring | the price there unless the other people do, I now give you authority to pay up * to freight off in order to meet competition, providing they spring the price. i We certainly cannot allow these people to take our business away from us. Yours truly, ‘ Occident Elevator Company, j Per M. R. Devaney, Gen-Mgr. Nov. 1, 1916. H. J. Thorstenson, Agt., Northwood, N. D, Dear Sir: Replying to yours of the 31st would say that I presume you can¬ not help but follow the prices being paid by the Farmers Elevator Co., but we hope that they will be agreeable to taking the stuff at list price. Yours truly, Andrews Grain Co. BCC-Mc By V . Sept. 16, 1915. Henry Rambold, Agt., Bowden, N. D. Dear Sir : Your letter of the 13th received stating that the market conditions , at your station were not on a very firm basis. Inasmuch as you are a new man in the position we presume it will be diffi¬ cult for you to work up a trade unless you have privileges of meeting com¬ petition. I desire above all things, to keep the market conditions down on a normal basis and in order to accomplish that I wish you would interview all of the other buyers at once on receipt of this letter and see if you cannot get them all to agree to stick to list and to stick to grades and dockages and let me know what the result is, but in the meantime if you are unable to get your share because of the others overpaying you can meet their prices, whatever they happen to be in order that you get some business coming. But keep me posted as to what you are doing and be very strict on grades and particularly strict on dockages. Mr. O’Shea will probably be there in a few days and will help you straighten this thing out. We are writing him to-day in your care. Please see that he gets the letter when he comes. a Yours truly, M BCC-Mc (Signed) Andrews Grain Co. .9 [From the files of the McCaull-Webster Company.] Dec. 18, 1913. ; Mr. H. E. Pasek, .j Buffalo, Montana. \ ^ Dear Sir : I note your letter of the 15th in regard to B. C. White’s Durum and I note that your list has been too high and has now been corrected. You^ had better compare prices with the farmers’ every day so as to be sure and remain equal. 1 I note from your load report of the 15th that the farmers’ are bidding one cent over list. If they insist upon doing this, you of course can do the same' thing; but if you can talk it over with them and persuade them to keep down' COMPETITIVE CONDITIONS IN COUNTRY BUYING. 277 to list, you will both get the same amount of grain and a better margin. Please do this and let me hear what you have accomplished. Very truly yours, 9 Vice President. August 28, 1913. DW/B H. J. Thorstenson, Agt.y Northwood, N. D. Dear Sir: * * * We have your letter of the 27th, saying that the Farmers’ agent has begun to stir around, and it looks like market conditions are going to be disrupted. I have been expecting that sort of thing. It is the usual con¬ dition at Northwood. But you want to watch the situation closely, and do not get excited; but any of the customers, or any of the farmers who have been in the habit of hauling their grain to us, or any of the others, that you want to get for customers,—meet the competitors, the Farmers’ Company, or anybody else, and take your share if you can get it. * * * * Yours truly, Andrews Grain Co. By BCC B Reasons for paying competitors’ prices.— This policy of merely meeting competitors’ prices is due not only to the fact that the line companies desire to buy at the lowest prices possible and endeavor to hold the markets to that basis but also to the influence of the State laws. In several States laws have been passed with reference to buying grain which make it illegal for the line companies to discriminate in prices between stations except to meet competition; so that if the price is raised at one station, except it be to meet competition at that station, the price must, theoretically at least, be raised at all stations of the line company within that State, if such company is to avoid possible charges of discrimination.^® [Copy of mimeograph [circular letter?) from the files of the Powers Elevator Company.) State of North Dakota, Office of Attorney General, ' Bismarck, Sept. 18th, 1919. Dear Sir • Last week I arrested the agents of the Occident Elevator Company at Hazelton, Temvik, and Linton for unlawful discrimination, and brought three different criminal proceedings against the Occident Elevator Company itself. Grain from the same stack, (being from the same field), sold to the same company at three different points, brought different prices at the three towns. I feel that the Occident Elevator Company is one of the main cogs in the big machine known as the Grain Trust, and that they are trying to crush all farmers’ interests and wipe out local competition wherever it exists. We already have a lot of good evidence, evidence which I believe will convict them, but I am desirous of putting up as strong a case as possible. If you have sold grain lately to any old line elevator, I wish you would write me telling me to whom you sold, what it graded and the price you secured, and when it was sold, and mail me any sale slips that you might have. An early reply will be much appreciated. We will not implicate you, if it will embarrass you in any way. We simply want to do all we can to protect you and the other farmers’ interests, and I am asking for your help. With kind regards, I am Yours very truly. (Signed) William Langer, Attorney General. WL/R u f^r ^are of th© receipts at the station. 278 COUNTRY GRAIN MARKETING. Nov. 6th, 1915. Mr. H. J Linde, Attorney General, Bismark, N. Dak. Deae Sie: * * * We certainly want to comply with the laws of your State and think that you will admit that we have hard competition at Williston i and all we want there is a fair share of the business which we are entitled to. Our agent has positive instructions to follow the Mill on prices up to .4 cents over and after that to let the grain go. We are not trying to discriminate against anyone in that market and if we can do anything to bring about a change whereby we can get some grain at more of a profit than we are getting now, it is our desire to do so. Our agent is reporting every day on his reports, or sending in letters stating what the Mill is paying and we are keeping close watch what is going on, and should we receive any information which we think would be of benefit to you to ' clear up the matter we would be very pleased to forward same to you. Kindly return Mr. Sawyer’s letter for our files here. Yours very truly, DLR, MBL ViCTOEiA Elevator Co. Jan. 5th, 1915. B. F. Kieth, Agt., Trenton, N. Dak. Dear Sie; * * * if necessary you can pay .4 cents over list to take your share. * * * W’e have seen a lawyer about this and we have the right considering the way the receipts have been going at your station this crop to pay up enough to get some wheat at that station. * ♦ ♦ Yours very truly, RGC. MOL. ViCTOEiA Elevator Co. Nov. 2, 1914. A. B. Greenfield, Agt., Regan, N. D. Dear Sir: We have your letter of the 29th and note same fully. Glad to find that you have all gotten down to the basis of 10 over list. Also pleased to learn that you were not the first to raise the price. So long as you follow the others’ prices I have no fear whatever with reference to any violation of the Anti-discrimination law. Naturally, I have been a little disappointed with the recent load reports I showing we are dropping behind a little. Perhaps that is only temporary and ij that you will get your good share again shortly. Yours truly, L Andrews Grain Co. BCC-Mc By ' Meeting competition on grades, dockages, etc. —As stated, the i lines appear to be opposed on principle to cutting dockage or over- i grading, and also object, though perhaps in a less degree, to the cut- 3i ting of storage, elevation, and other charges. As a result, when | forced to meet competition of this character, the lines usually resort 1 to “ springing ” the price rather than to meeting their competitors J on their own ground by overgrading, underdocking, etc. In fact, ^ comparatively little correspondence was obtained containing instruc- t, tions to meet this kind of competition other than by increased prices. | Noethwood, N. D. Feb. 16-16. ft Andrews Grain Co. j| Minneapolis, Minn. c; Gentlemen : We the line companies was around and maid agrement with the Si Mill and the Farmers Elev. Co.’ to pay one cent over list and not over three S cents on Barley and we all keep to the agrement for about six weeks but thay m started to over grade and cut dockage on us and thay was getting all the grain, ? so we put the price up three cents to make them pay for their over grading. I A am sticking to the grades and docking, and should come out all right Durum 4 COMPETITIVE CONDITIONS IN COUNTRY BUYING. 279 we are buying at list, I do not think we can cpme down to list, becaus if we do thay will give a grade better and take all the grain. Please let me know what ' you think about it. Yours truly (Signed) H J T. Oct. 7, 1915. C. E Smith, Agt., Northville, S. D. Dear Sir: * * * Now we have never asked our agents to buy grain for less money than the farmer could sell it for to someone else but, if one of your competitors is taking #2 grain at #1 price and grading it #1, you will have to pay #1 price for it but we want you to grade it and ship it as #2. This also applies to dockage. We want our reports to show the exact grade and the exact dockage contained in our wheat. In price you will have to meet your competition; but keep your grades and dockages absolutely correct. ^ • H< ♦ * * * * Yours truly, CBR-W G. W. Van Dusen & Co. Mgr. Sept. 22nd 1915 F. R. Knittle, Agt., Anamoose, N. Dak. Dear Sir: —Think that you had better start and pay over list a little for wheat, and take full dockage, I cannot understand what the O & M people are doing, somebody is going to lose a job and get a black eye and never get it back. He must be doing this on his own hook, as I do not think the office will O. K. anything of this kind. You can pay up to 5 cents over list, but we must have the proper dockage. Yours very truly, Victoria Elevator Co. RGC. MBL The Northwestern Elevator Company, Pickert, N. D. 9-3-15. Gentlemen :—We have gotten started at this station and that is about all. » The Far. Elev. agent thru his greed and jealousy did us an underhand trick to start with. A party who is a neighbor of our agent, and told him he would haul to him brought a load to us and one to the farmers. Our load docked and the one to the Farmers’ 7# but the Far. Elev. agent told him he would take it for 6#. I have just been over to see him about it and after some hesi¬ tation he acknowledged having done it, but promised that it should not occur again. I told him that the policy of our company was to protect their agents on their outcome, and if a competitor persisted in doing such things as he had done, they would grade and dock the stuff right, and if they made the customers any concessions it would be in cash. Yours truly, (Signed) W. E. Taplin. ' Oct. 8, 1915. F. J. Pottner, Agt., Oriska, N. D. Dear Sir : We have yours of the 6th stating that you and the Monarch agent are paying over list, and probably overgrading as well. I told you that under no circumstances would we care to have you overgrade, but you might meet competition on price. Why is it that you and the Monarch agent are paying over list after you all apparently agreed not to do that? Yours truly, Andrews Grain Co. Bcc-Mc By 21 Osborne-McMillan Company. 280 COUNTRY GRAIN MARKETING. [Prom the files of the McCaull-Webster Company.] Mr. E. R. Lynn, Geraldine, Mont. Oct. 22, 191C). Dear Sir: I have your telegram saying we do not grade high enough to get the bullv of the stuff coming in. We cannot grade 2 for 3 stuff. * * * * ♦ - 4 , * I have just wired you to meet your competitors prices at all times on the same class of wheat and to send us samples daily, showing how graded. We will pay the same price that our competitors are paying for the same ciass of wheat, regardless of the grade. We may want to put our own grade on it, but the farmers will get just as much money from us as they will from anyone else, and money is what he is after. **♦♦♦#* Yours very truly, JLMC FHH President. Cooperation of line companies in meeting competition.— In meeting competition there are numerous indications that the line companies have not infrequently worked together in endeavoring not only to prevent competition among themselves, but also to take business from their competitors of other types. [From the files of the Northwestern Elevator Company.] Nov. 19, 1915. From: Cargill Elevator Co. Minneapolis, Minn. To: Northwestern Elev. Co., City. Gentlemen: We herewith return papers relating to the South Shore situa¬ tion. We think perhaps your complaint well founded. However, South Shore has been for sometime a market to go it as you please. Last year our agent complained that your agent afforded him much worse competition than the Farmers, and so it goes. We have written our South Shore agent to be particularly careful not to be aggressive with your trade, but to confine his aggressive efforts to the Farmers, more especially. Yours truly, DDM W Cargill Elevator Company. Enel. J. W. Brenner, Agt., Oriska, N. D. Sep. 5, 1914. Dear Sir : * * * Be as conservative as you can, but meet competition from any direction. Inasmuch as you seem to be getting along with the Acme and Monarch agents it might be well for you to confer with them and see if you can not work it out together, without going after one another as long as others are right with you. ♦ **♦♦♦* Yours truly, BCC-B Andrews Grain Co., By [From the files of the Victoria Elevator Company.] Jacob Strobel, Agt., Oriska, N. Dak. Sept. 5th, 1914. Dear Sir: We saw a letter the Andrews Grain Co. received from their agent in which he says the Farmers are paying 3c over list for Barley, and they have written their man to meet competition and take their share of the stuff. Now COMPETITIVE CONDITIONS IN COUNTKY BUYING. 281 you understand this matter, and it is a question of working together and keeping from cutting each other throat, but I think you are the oldest nran there and have had a lot of experience and can keep them in line. We want to get some grain, and take it up to an even thing if necessary, but do not pay over other line buyers, but work with them. Yours very truly, RGc. MBL [From the flies of the St. Anthony & Dakota Elevator Co.] Nov. 17, 1913. Northwesteen Elevator Co., Minneapolis. C. A. Magnuson Gentlemen : We are enclosing you copy of letter from our Mr. Sheffield in regard to conditions at Hillsboro. Now, I believe you look at Hillsboro just as we do. It’s anything to get that stuff away from the Farmers’ house, and we are trying to do that and not interfere with anyone else’s business, and I think we have been able to make quite a hole in their business so far, without paying much attention to what your agent has done, but it would seem that in the future we should try and maintain the list price there and let the man that can get the stuff get it, I don’t care whether it is you or ourselves. At any point where we have got Farmers’ competition and where they are getting all the busi¬ ness, it’s the live wire at the station who should get the business and not be hampered by the rest of us. I think you will agree with us on this. Yours truly, C. D. JUNKIN, Gen'l Supt. [From the flies of the St. Anthony & Dakota Elevator Co.] ■ International Elev. Co., Duluth. 11/12/13. Gentlemen : Answering yours of the 11th: I am very sorry that any misun- , derstanding or irregular transaction should have occurred at Humboldt to cause any feeling to arise that our two companies are not dealing fairly with each other. We are, of course, very anxious and, as you knowj have been anxious all the season to get a better share of the business at that station, as we are much below the average and below you, who are our nearest competitor. It is our desire and intention, however, to draw business from the Farmers Elevator Co., as they get more than both of us combined, and I do not approve for a moment , our agent’s interfering with any of your customers. I enclose copy of a letter which' I have today written to our agent at Humboldt, which I trust may have the effect of preventing anything of this kind in the future. I return herewith your agent’s letter. Yours truly, Enc. C. A. Brown, General Manager. Sept. 7, 1912. W. M. Thompson, Agt., Rurdsfield, N. D. Dear Sir; * * * Now, Thompson, I want to try to show you wherein we have confidence in your judgment. We feel that you are always working for our interests but we do not wish to make any effort whatever to beat out the Occident Co. either in quantity or otherwise unless we can get it on a perfectly even break. Hi Jif * * * * In other words, you and the Occident man work together on this proposition and don’t try to take any grain from one another but take it from the other 282 COUNTRY GRAIN MARKETING. fellows if you take it from anybody. Wish you would write me by return mail stating whether or not you understand what I mean. Yours truly, Andrews Grain Co. By BCC Section 17. Division of receipts. Competition for “fair share” of business. —Competition un¬ questionably becomes most pronounced in the country when some one or more of the local elevators fail to obtain a fair share of the busi¬ ness at the station. In such an event competition almost certainly breaks out and any local working arrangements or understandings are disrupted, for in practically no case will an elevator, line or otherwise, receiving little or nothing stand by and allow the other houses to obtain the grain without strenuous efforts to procure its share. Spaulding Elevator Co. Warren, Minn., Oct. 29, 1914- Atlantic Elev. Co., Minneapolis, Minn. Gentlemen : Your letter of the 28th In regard to conditions at Fonda re¬ ceived and noted. In reply beg to state that up to date we have handled about 5000 bus. at that point, while both yourself and the Minnekota people have handled consider¬ ably more. We have made up our mind that from this time on we will try to handle our share of the receipts at that point irrespective of price, and we stand willing to throw away $1000.00, or more, if necessary to, bring this about. As long as the Minnekota people are some 50,000 bus. ahead of us and you about 20,000 bus. ahead, if you showed the right spirit you would be willing to let our man pay a little more to get some of the business. We notice that our competitors never lay down when they are ahead and give us a chance to catch up, and we have done so several times in the past for our competitors at points where we were ahead. We know there is no money in this proposition. Neither is there any money in it as it has been heretofore. We have been trying up until recently to get some little business right. Each and every time, he has been overgraded or under-docked and same taken away from him. If this is the policy which you people deem to be correct in regard to that station, we can see no other way than to fight it out. We do not care a rap if it teai*s up things over the entire line, by our action at that point. We will never agree to buy any wheat right at Fonda as long as the stand taken by our competitors is such that we can not get one tenth of the grain marketed there. Next year, with any crop, we propose to start right in and get our share from the start. It will depend entirely on what my comi>etitors pay as to what we shall pay. We only want one third. We have an investment there equal to the rest of you, and we feel that we are entitled to some of this business. We would even be satisfied with less than one third, as in the past, but it seems to be the plan outlined by both the Minnekota people and your¬ selves that we shall get nothing. In conclusion, beg to state that it will depend what we pay at that point whether the rest of you will let us get anything or not. We do not think that you are as much to blame for conditions as the Minnekota. They have let their man pay No. 2 for practically all the No. 3 wheat in that country. In fact, he has been practically one grade over Rolette all the time. Yours truly, Spaulding Elevator Co. By 0. L. Spaulding, General Manager, CLS/EMP COiVIPETlTIVE CONDITIONS IN COUNTRY BUYING. 283 Minneapolis, Minn., Aug. SO, 1919. Mr. Leroy Irvine, Agent, Hazelton, N. D. Dear Sik : I received your wire in regard to the Victoria paying 70 over on rye and I took this up wth Mr. Cargill and he stated that he had authorized his agent to pay 100 over on wheat and durum, 200 over on flax, 40 over on oats, 70 over on barley, 100 over on rye. He further stated that he explained this all to you and that you understood it thoroughly. I did not question his word, but I wish you would write me a letter giving the facts in regard to your conversation with Mr. Cargill, and if it is a fact that he told you he was going to authorize his agent that he might pay these prices in order to get the business. Cargill, of course, intimated that his man would not go to these limits unless he had to, but he undoubtedly will, and you are authorized to use your judgment about the price you will pay. Of course I would prefer to have the Victoria take the lead so if there is any in¬ vestigation about who is responsible for paying freight off there, it will lie with the Victoria Elevator Company, and I don’t believe that the Farmers will submit to us paying freight off there without a roar to McGovern’s office, and we are apt to get in very bad. My idea would be to handle this very cautiously because I don’t believe we are justified in paying freight off, except to protect our business, and I want the responsibility for this to rest entirely with the Victoria, and you want the Farmers elevator man to understand you are not responsible for paying freight off. Be sure and let me have the letter I have asked for as I am interested to know just what conversation you had with Mr. Cargill. Yours truly, Occident Elev. Co. W. B. Grobe. Gen.-Mgr. MRD. 1. [From the files of the McCaull-Webster Company.] Mr. T. M. Reimers, Buffalo, Montana. Minneapolis, Minn. Nov. 6th, 1917. Dear Sir: I have just wired you that you are continually running behind on your share and to pay 70 over list if necessary to get your share. It probably won’t be necessary to pay this much over list on all you buy, but when it is necessary go ahead and pay it. You are away your share so far you will have to get more than your share from now on. I asked you to wire us every night the number of loads in town and the number you received. You can put this in a night message. Yours truly, JLMcC F J. L. McCaull, President. Dear Sie: I have set the price at 60 over list and I think wo will get our share at this. Now I hope you will pay this for the bals. of the season or it might have a bad effect. As it is now I think we will establish a grain business for next year. But we must pay them all alike. We cannot pay one man one price and the next man another. If we are going to build up our grain business here in Buffalo, they must all be treated alike. The last two days we have received a little more than half the grain coming into town. So far this season the farmers ele. has bought about 28000 bu. Montana 13000 and I figure there will be about 90000 bu. marketed herein Buffalo this season. But I am sure if we stick to the 60 we will be able to get our full share and get a business start that will help us out for next year. Yours truly. T. M. Reimers, agt. 284 COUNTRY GRAIN MARKETING. [From the files of the McCaull-Webster Company.] Nov. 6th, 1917. Wm. Olson, Hobson, Mont. Six load reports received from you last week show a total of forty-nine loads received Hobson out of which you received one. You have been run¬ ning behind for several weeks. Wired you on twenty-ninth to keep us posted by mail or wire. Take' your full share of grain. If necessary pay freight off Minneapolis. For ten days wire us every night total loads received by you and total loads in town. J. L, McCaull. Dec. 22nd 1914. Roy C. Udy, Agt., Epping, N. Dak. Deae Sir : We find upon investigation that you have taken less than half your share of the receipts, and that the St. Anthony people have taken over twice the grain that you have. Now, we have not received a letter from you kicking about this, and you have set down all season and let this thing go on. While it has been the fault of this office that we have not given you enough rope, you have never kicked or let us know the situation, and to that extent you are responsible. We are enclosing herewith a letter from Mr. Sawyer and we want you to follow this, and we also want you to send us in load reports each day, and if you can not get your half of the grain coming in we want to know the reason why, and if at any time anything happens that the other man gets more than his share we want you to keep yelling until the matter is fixed, as that is as much your duty as buying wheat. Yours very truly, ^ Victoria Elevator Oo. RGC. MBL. [From the files of the Monarch Elevator Company.] Jan. 17, 1913. Mr. E. Bogren, Agent, Drayton, N. D. Dear Sir : * * ♦ Now we want you to get in the market and take your full share of the business from this time on and you get out on the street and bid on every fourth load of grain that comes into town if you have to pay as high as 4^ over list for it, but don’t take any more than your fourth. Now unless you can get your share of the business, it will be necessary for us to close up your house, as we have fooled around all this year and done no business there and do not propose to sit down any longer and let the other people do all the business. „ .r « Yours truly, Smith. Agreements and understandings on division of receipts. —In¬ stead of putting up prices and thus competing to obtain a fair share of the business at the local station, a division of receipts is fre¬ quently brought about either through outright agreements or under¬ standings and cooperative arrangements of various kinds. As earlier indicated (Ch. IV, sec. 9), there were in effect prior to 1905 numerous pooling arrangements- with attendant systems of penalties, but most, if not all, of these agreements appear to have been abandoned. In those days it seems to have been the practice to determine in advance the proportion of grain each elevator at the station was to obtain, all concerns being required to report to some disinterested party the amount of their purchases. At the end of a given period, often a month, this party figured the amount of grain purchased by each and compared these amounts with the percentage apportioned by the agreement. Those concerns buying more than COMPETITIVE CONDITIONS IN COUNTRY BUYING. 285 their share paid a penalty (usually 2J cents per bushel on wheat) for each bushel over their share to the party acting as the clearing agency, who in turn paid the money thus received to those who failed to purchase their share.^^ More recently the business at local stations has often been divided among those elevators interested, but without any system of penalties being involved. The Nobthwestebn Elevatob Co., Minneapolis, Minn., Dec. iJf, 1917. McCaull Webstee Elev. Co., City. Gentlemen : I have yours from Albee and if those people are willing to behave and not hog the stuff, and want to come down to card price and make a fair division of it, I don’t know of any reason why we^ should not be able to work in that way. I will take it up with our agent at Albee and see what we can thrash out of it. Yours truly, C3. A. Magnijson, President. [From the files of the Northland Elevator Company.] Atlantic Elevatob Co., Detroit, Minn., 8-6-16. Nobthland Elevatob Co., Minneapolis, Minn. Gentlemen ; * * * i also notice that your house handles about 2/3 of the grain marketed there, both agents seem to have been there about the same length of time, and unless there is some special reason for this I hope to handle nearer our share if it is possible, and of course wish your cooperation if agree¬ able to you. May I bank on it? Yours truly, (Signed) S. I. Milleb. « Memorandum of Agreement at Worthington, Minn.—Effe^ive Au^ 1, 1^00- U. E. Torrence (7): Swedish Mercantile Co. (20); Hubbard & Palmer Co. (26); Peavey Elevator Co. (32) : H. N. Douglas (36) : St. John Bros^^^ (40) : each to receive one-sixth (J) or the entire receipts of all the grain handled at Worthington. Prices to be made by H. N. Douglas, but are to be as nearly as possible on following *^^wVeat at 12 cents and fraction off Minneapolis delivered close. Oats at 6 cents and fraction off Minneapolis; flax at 16 cents off Minneapolis; corn at 10 cents off Min- neanolis; tiomthy seed at 65 cents per cwt. off Chicago, x v. . « *■ Penalties to be: Wheat, 2i cents; oats, 1| cents; corn, 2 cents; barley, 3 cents ; rye, 4 cents; flax, 4 cents; timothy, 10 cents. Full rates of storage, as shown on S tandard ^^Mfnhnunf^ScSge® t?^^be^*l^'pound per bushel, and a sieve test to be made of all wheat showing over 2 dockage. All parties agree not to pay over list. Closed house to get one-half penalty. „ ^ .l j .x.. Statements to bl rendered each week to H. N. Douglas, who is to render monthly renorts to F. R. Durant. . , i,. j. x . x.. The books of any party to this agreement are to be subject to examination at any time This agreement to continue in effect for one year from date, provided however, ttat'any party may withdraw by giving fifteen days notice in writing to that effect to ^ch party to this agreement and by paying the penalties to the expiration of said fifteen days.^ ^ * . * • • * All statements will be made up by number instead of name. „ The names corresponding to numbers at Worthington are: 23, H. E. Torrance; 24, Swedish Wcantile Company; 25, H. N. Douglas; 26, Peavey Elevator Company ; 37, St. jJhn Brothers; 58, Hubbard & Putnam Company. Please keep this^for reference. ***** STATEMENT. November 4, 1901. Mr H. E. Torrence with F. R. Durant. Worthington. October 1" to --- 1% 15" to 31"_ 172. 99 Settlement- • Check to follow- (Exhibits No. 1. 2, and 3 to testimony of F. R. Durant, Op. cit., S. Doc. 278, pp. 970-72.) 286 COUNTRY GRAIN MAEIKETING. ^ Dec. 14, 1914. Mr. J. P. Havens, Agt., Halliday, N. D. Dear Sir: In confidence will say we have to-day had conference with Mr. Devany concerning conditions at Halliday—we are both pretty much in the same boat and we don’t propose to set back and see the other fellow take the entire run. Now both Mr. Devany and myself have confidence in our Halliday representa¬ tives—you are men of good judgment, have had experience and are to be trusted, therefore we have agreed simply to give you both instructions to work together and to “ take your share of the run.” • ^ * 4c 4c . 4: Now confirm this with the Occident agent and pull together from the time you receive these instructions, but see to it that you take your full share, and by that we mean at least one-third—do what you can to help him to get his portion while we expect him to assist you in getting yours—between the two of you I think you can handle two-thirds of the run with the leeway we have given you. Return this letter to me after reading, and confirm with the Occident man— don’t want it in your files. Yours truly, Powers Elevator Co., M By-, Mgr. Sept. 4, 1914. H. Thompson, Oakes, N. Dak. Dear Sir: * * * The principle thing, however, is to get them to work together, and divide the grain as nearly equal as possible. We only want our share and that is all the other people want. Yours truly, Osborn-McMillan Elevator Compant. FJS: OM [From the files of the McCaull-Webster Company.] Randolph, Neb,, July 22nd, 1914- D, Webster, Minneapolis, Minn. Dear Sir : I got Ruden & Felsen and the rest of the Crofton boys together and the only hitch was that Ruden & Felsen think they are entitled to 20,000 over our equal share. This will not work cut. Mr. Felsen is here to-day, (Randolph) and now he is inclined to divide up equally, so we are going to get together again in the course of a week. There is not going to be any trouble at Crofton this year. Will also have Mr. Roberts come over. Yours truly, C. Gleysteen. Minneapolis, Minn., Sept. 26, 1913. From: The Northwestern Elevator Co., Minneapolis. To: Jas. Hanna, Supt. Dear Sir: I wish you would meet Mr. Hanson®® at South Shore on Monday. The Farmers’ Elevator Co. at South Shore want to make an arrangement whereby there will be sort of a phisical division of the business at South Shore on the same plan as Litchfield, and if that is the purpose; handle it in the same way. Yours truly, (Signed) C. A. Magnuson, Prest. A division of receipts, whether specifically agreed or not, can be effected by a further mutual understanding or agreement to allow 2* Cargill Elevator Co. CX)MPEnTIVE OaNDITIOITS IN COUNTKY BUYING. - 2S7 the elevator falling behind to pay a higher price than its competitors at this station, and this occasionally is done. [From the files of the Monarch Elevator Company.] % Oct. 8, 1917. Mr. R. H. Boswokth, % Agent, Bird Island, Minn. Dear Sir : When you are out at Milan I wish you would see what is the trouble with our man there and get him into the market so that he will get some business. There was an agreement made the other day that we would be allowed to pay a cent over list until we caught up, but it seems the other fellows are hogging it all. I would like to have you find out what is the matter and see if you can not do something to enable him to get some business. Yours truly, WLS/B [From the files of the Victoria Elevator Company.] Hazelton, N. D. Sept. 25 15. Mr. R. G. Cargell, Minneapolis, Minn. Dear Sir: In regard to this paying over proposition at Hazelton will say that we got together and agreed to put the market down to 2 cents over list ,and in order to come to this point we had to promise the Columbia man that he could pay Ic more than the Victoria or Occident providing that he go after the farmers elevator customers and leave our trade alone this extra cent is a gi’eat advantage and as soon as he gets his full share of trade we will have to bring him down again to an equal markets Yours truly, B. C. Hanson. Dec. 10, 1915. Spaulding Elevator Co., Warren, Minn. Gentlemen : We are in receipt of yours of the 9th and note contents. We think something should be done at Silva to protect our trade there, and if agreeable to the rest, we would suggest that we pay 2(j: over list for a while at least. * , ^ ' 4 : ^ 4 4 = Awaiting your reply, we remain. Yours truly, PJS-N Osborne-McMillan Elev Co The Northwestern Elevator Company, Benson, Minn. 8-4-14- N. W. Elevator Co., Minneapolis, Minn. Dear Sir: It is with regret that I have to answer your circular No. 1 the way I do, but it is useless to even think of buying on card at this station and get any business at all; I called the Cargill and the Farmers’ buyer together to-day to talk things over, without any results, for this reason: The Cargill man was willing that w^e should all have our share, getting our grade and dockage and follow list, but the Farmers buyer, while willing to get down to card price would not concede anybody their share, (that is, he would take it all if he could get it) we were talking of buying out Moores, and I told him that if we did I would allow him 20,000 bu. to go on but not any more and all get proper grade and dockage, but that he (the Farmers’ buyer) would not go in on, say¬ ing he was only too glad to buy o^ card but would take all he could get as N W elev. had never had their share, and could not expect it. I then told the boys it was useless to talk agreement of any kind unless we got within at least 20,000 bu. of our share, as they knew well enough that we would come closer than that to our share on an open market. Yours very truly. (Signed) U. O. Jensen (?). 288 COUNTRY GRAIN MARKETING. Section 18. Closing and wrecking elevators on a rental kasis. I Explanation of practice. —A practice, amounting in effect to a 1 pooling of receipts, is that of closing or wrecking elevators on a 1 rental basis. While the indications are that these arrangements are 1 made chiefly by line elevator companies, it is possible, if not probable, 1 that other types of elevators have also been participants therein. I The method is usually resorted to whenever one or more of the 1 line companies operating at a particular station conclude that there I are too many houses interested at the point as compared with the I volume of grain to permit any money to be made. In such a situa- I tion the line houses interested sometimes arrange for the closing or | tearing down of one or more of the houses involved, upon the agree- u ment or understanding that the other line companies will pay a cer¬ tain amount of compensation to the line company closing or wreck¬ ing the house. In the case of closing, the practice apparently is for the houses remaining open to lease the closed house and leases in j due form are apparently drawn to cover such transactions and signed ^ by the interested parties. As a rule the arrangements have appar- : ently been handled through F. K. Durant, of the Grain Bulletin, who < appears to have been a sort of clearing house for operations of this . character: August 9, 1916. Mr. P. R. Durant, Grain Bulletin, City. Dear Sir: We will be closed at the following Great Northern stations, or are willing to negotiate closing with those interested • Waverly Graceville Addison Howard Lake Bement Everest Cokato Truro Galesburg Dassel Honeyford Roseville Litchfield Burch Portland Roscoe Huffton Sharon Paynesville Montrose Inkster Spicer Smith Lake Westhope Kerkhoven Hankinson Lidgerwood Clontarf Colfax Bathgate Hancock Kindred Claremont The above stations constitute just 50% of our G N points if 1 have counted right, eliminating Montana. • ^ Yours truly, Cargill Elevator Company. DDM W [The Grain Bulletin, Minneapolis, Minn. F. R. Durant, Manager.] Mr. C. A. Magnuson," Minneapolis. March 15, 1915. I * Dear Sir: Attached you will find statement of rentals for 1915-16, the mark # in front of a name indicates that that house was closed the past year on \\ rental basis. I am somewhat busy just at present with other matters and will appreciate it if you will give this your usual prompt attention and advise me what changes, if any, you would wish to make for the coming year so that the leases may be drawn and if possible the delays of past years avoided. At Fisher the Monarch house will be wrecked on the basis agreed upon. “ Northwestern Elevator Company. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 289 At Maynard, Thorpe decline to pay for wrecking the Monarch house unless the New London is also wrecked, and further, they decline to pay any rental in the future, the New London say they have a good flour trade there and do not care to wreck and unless they can receive rent for a few years more will put their house in shape and open it for the next crop. Yours very truly, (Signed) F. R. Durant. April 23, 1915. Cargill Elevator Co., Minneapolis, Minn. Gentlemen ; Below is statement of closed houses for 1915—16. Clontarf-Cargill- Everest “ - Inkster “ - Kempton-National $275.00 Lidgewood Cargill- Newberg Imperial 202.50 Portland St. A»&D 185.00 Sherwood Cargill- Truro “ - Westhope “ - 495.00 315. 00 390. (X) 900. 00 930. 00 300. 00 420. 00 Erie omitted as offset to Clifford. Leases will be prepared May 1st, please to that date. Yours very truly, advise any changes in above prior F. R. Durant. [From the files of the Northwestern Elevator Company.] Northwestern Elevator Co. May 29, 1914. ^ Rental 1914-1915. Checks to (due on or before August 1st, 1914) : Cargill Elevator Co. Benson- Clontarf_ Everest_ , Litchfleld- Duluth Elevator Co. Fisher- Maynard- Wales_ Glasston_,- $166. 66 510.00 360. 00 220. 00 585. 00 645. 00 615. 00 170.00 $1,256. 66 1, 845. 00 170. 00 $3, 271. 66 Checks from: St. A. & D. Elevator Co. Climax — Fisher_ . National Elev. Co. Evansville Wales_ Duluth Elevator Co. Hillsboro _ G. W..Van Dusen & Co. Maynard-. Amenia Elevator Co. Pickert — $720. 00 292. .50 $1, 012. 50 240. 00 307. 50 547. 50 525. 00 525. 00 215. 00 215. 00 405. 00 405. 00 $2,180. 00 (Stamped) F. R. Durant. (Lead Pencil) How about Hamilton-Milton Rates for closing. — Usually the rental to be paid for a closed house is a sum obtained by applying a rate of cents per bushel to that proportion of the average handlings by all the houses par- ticipatino- which is represented by the division of this average by the total number of participating houses, whether open or closed. 9964°—20-19 ■ 'X' 290 COUNTRY GRAIN MARKETING. [From the flies of The Grain Bulletin, Minneapolis, Minn.l March 12th, 1914. New London Milling Co., Willmar. Gentlemen : The rental values at Maynard and Raymond figure for the com¬ ing year as follows:— Maynard— 9-10 10-11 11-12 12-13 13-14 Northwestern _ _ _ *>•> 47 44 78 87 Thorpe - 93 91 61 28 33 Duluth c c c c c VanDusen 99 90 61 97 122 New London- — — c c c c 214 228 166 203 242 228 27 166 203 269 1080- -216-43 $645. 00 Raymond— 9-10 10-11 11-12 12-13 13-14 Thorpe - - --- _ 52 34 41 c c Duluth _ 111 62 70 79 100 New London —- _ _ 115 63 53 46 49 278 159 164 125 149 159 17 164 125 166 892- 178-59 $885. 00 It is hoped to make the same arrangement at these stations as was in effect last year, except that Thorpe will probably insist on the regular amount due at Raymond instead of $700.00 as in the past, they have had the matter up with Mr. Johnson, I think; and in this connection, it is a fact Raymond is the only station out of 75 or 80 where houses have been closed under this arrangement where the regular amount has not been paid. The writer expects to leave for a vacation on the 24th of this month and the Northwestern people insist on knowing what houses are to be closed before the first of April so it would be greatly appreciated if you vqu take the matter under advisement and come to a conclusion as much before the 24th as possible. Yours very truly. Thus in the case of the station at Eaymond the tliree line houses handled a total of 892,000 bushels of grain from 1909-10 to 1913-14,^® an average for the station of 178,000 bushels a year, or 59,000 bushels per elevator, which at a rate of 1^ cents per bushel would amount to $885. The closing of houses on a rental basis is not necessarily a perma¬ nent thing, and houses closed may be opened up subsequently if the management considers it desirable, as is not infrequently the case. [From the files of the Northwestern Elevator Co.] July 23, 1913. Mr. P. R. Durant, City. Dear Sir : Will you please notify the parties in interest at Osnabrock, Wales and Glasston that we wish to open up at those points this year, and that we are perfectly willing that any of those who have been open there the last few years should close under the same conditions as would apply to us if we re¬ mained closed. We consider that we have been closed long enough at those points, and that there have been good crops enough so that no one who has been open there has suffered by reason of being closed, and we don’t want our houses at either of those points to become a dead issue, and consequently as they have 17,000 bushels apparently beiuj? estimated amount yet to come to elevator from Mar. 12, the date of the letter, to June 30, the end of the crop year. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 291 been put in shape to operate we prefer to operate them on this basis. I am going away Saturday night to be gone until the 11th of Aug. hence this letter. Yours truly, (Signed) • C. A. Magnuson, Prest. [Prom the files of the Monarch Elevator Co.] March 16, 1915. Mr. F. R. Durant, Mgr., Grain Bulletin, City. Dear Sir : In regard will keep open at to houses on the Great Northern, would say that we Angus Edinburg Nash Backoo Hendrum Northcote Bantry Hillsboro / Portland Borup Litchfield / Raymond Cando Merrifield ^ • St. Thomas Crary Milton Wolford Cummings Mohall ^ * ♦ * * * There are I think two houses that we want open that we had closed last year, i. e., Wolford and Nash. Yours truly Wrecking and not rebuilding. —In some cases houses are wrecked or torn down instead of closed, in consideration of compensation paid bj the other elevators. When elevators are destroyed by fire, explosion, or any other cause, at towns having more than one ele¬ vator, there have also been instances where the remaining elevators have arranged to pay compensation for not rebuilding to the com¬ pany owning the destroyed house. I Prom the files of the St. Anthony & Dakota Elevator Co.] 5/6/14. Mr. F. R. Durant, c/o Grain Bulletin, Minneapolis. . Dear Sir ; As you are doubtless aware, our elevator at Northwood, N. Dak., burned about March 1st. As you know, the volume of business at Northwood is very good and it has been a particularly good station for us—in fact, about the best we had. . It was the original point for Mr. Heising, where he first started his business. However, in harmony with the general policy of the elevator companies not to rebuild burned elevators where it can be avoided, we would like to have you submit to the other elevators at the station the conditions under which we will be ’willing not to rebuild. If the other three elevators will buy our one-quarter interest in the old Andrews elevator owned jointly, at co.st, and pay us on the regular wrecking basis, we will give up our business at that station. Please Hpt us know the results^of your conference at soon as possible. Yours truly. Heising Grain Co. By C. A. Brown, July 7, 1915. Mr. Clarence L. Spaulding, Pres., Spaulding Elevator Co., Warren, Minn. Personal. Dear Sir : We have talked to the Minnesota Elevator Company in regard to the situation at Fonda, and if you do not rebuild at Fonda you will receive the usual closed house penalty for three years. 4 : « « * « * Yours truly. Atlantic Elevator Company By Vice Pres. 292 COUNTRY GRAIN MARKETING. So far as the Commission was able to ascertain there has been no such customary charge for wrecking or not rebuilding destroyed elevators as has existed in the case of closing houses. In the last letter quoted above, the compensation for not rebuilding appears to have been the closed house penalty for three years. The same basis also appears to have been used for wrecking in at least one case at Hallock, Minn. Generally speaking, the information obtained indicates that other items than the rental charges are taken into account in arrangements for wrecking or not rebuilding and that the compensation in such cases is determined largely with reference to such other items. This appears in a measure in the following plan of determining wrecking compensation which was employed in about a dozen cases. M'^RECKING ELEVATORS. Each proposition to wreck to be volnntary on the part of owner and only permissible with the consent of a majority of his competitors participating in this arrangement at the station. When an owner has signified his willingness to wreck a rented house under this plan, if he is not permitted to do so, he shall no longer be under the obligations to keep the house in repair in order to secure his rental. When a house is to be wrecked and rebuilt elsewhere it must not be located at a station occupied by any of the comrpetitors who help to pay for the wrecking, without their consent. COMPENSATION. The basis to be one and one-half times the rental value at the station using last computation in the Grain Bulletin office; (1) deduct five per cent (5%) for each consecutive year previous to the time of wrecking that the house has been kept closed under the rental plan; (2) add ten per cent (10%) for each 5,000 bushels of capacity in excess of 20,000 bushels up to 50,000 bushels; (3) add '^>100.00 for each competitor at the station who participates. (The purpose of this clause is to give the wrecked elevator a part of the general benefit arising from distributing the burden among two or more competitors.) The maximum compensation for wrecking a house in no case to exceed $2,000. EXAMPLE. Station having four (4) elevators, one of 30,000 bushels closed for two years at rental the last year of $400.00; Rent— 50%— Deduct (1) Add (2) — Add (3) — ,$400. 00 200. 00 600,00 60.00 540.00 108. 00 648. 00 300. 00 948.00 Another interesting method of compensation for the elimination of elevators from the competitive field was encountered in one instance. Many of the line companies are also cash commission houses or have a subsidiary commission branch. The Cargill Elevator Co., having a subsidiary commission firm (Cargill Commission Co.), agreed not to rebuild* a house that had been destroyed by fire at Willow City, N. Dak., provided that other elevators interested at the station where the fire occurred would ship on consignment to the subsidiary com- COMPETITIVE CONDITIONS IN COUNTRY BUYING. 293 mission firm a proportion of their receipts at Willow City over a period of years. - Cargill Elevator Co. April IJf, St. Anthony & Dakota Elev. Co. Chamher of Commerce, City. Gentlemen : Mr. Cook of Willow City is willing to give us 20% of his con¬ signments for a period of five years if we do not rebuild or reenter that market. Til is seems a liberal proposition and we are writing to ascertain if you care to do anything in the premises. Of course, we expect no contribution from the Farmers’ Elevator Co. Yours truly, Cargill Elevator Co. DDM-W No signature. In concluding this subject it may be stated that it is claimed that these practices existed for only a few years and applied to only a few companies. Mr. Durant states that the last time he compiled figures for this purpose was the crop year 1915-16. The Commission is not in a position to confirm this, but the correspondence obtained relating to this particular matter all bore a date prior to 191Y._ Section 19. Relation of commission houses to local competition, y In occasional instances the independent and cooperative elevators employ the commission firms to which they ship as a medium of com¬ munication with the line companies at their station with reference to competitive conditions and also their adjustment. Occident Elevator Company Mpls. Minn. 10-22-17. Mr. S. J. Epler, Supt. Billings, Mont. % R-M. Dear Sir : The Broadview Farmers Elevator Company wired their commission firm, Beecher and LaBree, this morning stating the Occident was paying 3^ over on spring, over on winter, stating they would have to close if this was continued, and asking that the matter be referred to the proper authorities. The -Commission company very kindly took the matter up with Mr. Carey, which is characteristic of those people, and I happened to be in his office when the telegram was sent down to him. I presume there is considerably more in this than the Farmers have put forth, although, of course, on the face of it I do not think we should arbitrarily raise the price unless the other people do so. I would ask that you write me a letter giving me the facts and put it in such form that I can pass it on to Mr. Carey. Yours truly, Occident Elevator Company, 1, Per M. R. Devaney, Gen.-Mgr. Oct. 8, 1914. W. M. Thompson, Agt., Hurdsfield, N. D. Dear Sir : After receiving your letter the other day in regard to the situation there at your station concerning the Farmers Co., I took the matter up with the Van Dusen-Harrington Co.,"*® and they told me that they would look into the matter very carefully and see what they could do to put that fellow in line. Wish you would write me by early mail as to whether or not the conditions are any different now than they were when you last wrote. Yours truly, Andrews Grain Co. BCC-Mc By I Presumably the commissioii branch of the Van Dusen-Harrington interests. / 294 COUNTRY GRAIN MARKETING. Similarly, the line companies occasionally employ the same agency for the purpose of influencing their cooperative or independent com¬ petitors, though instances of this character are apparently very rare. Powers Elevator Co., Minneapolis Minn. 2/26/16. M. M. Sauer, Agt., Royalton, Minn. Dear Sir : Refresh my memory concerning the commission house with whom .T. B."” works—is it Quinn-Shepardson & Co. to whom he consigns? There must be some institution financing him and if you will tell me who they are I will have them write him a special letter on the importance of docking rye for what there is in it for the reason that the state officials put on dockage at terminals—reply on this sheet first mail. Yours truly, Powers Elevator Co. W. K. P A. By AV. K. P. Mgr. Gentlemen : J. B.^ has been shipping to Hagen Burg Co. or some such name. I dont know if I have it just right. Yours truly, M. M. Sauer. Section 20. Agreements and understandings among local agents. Jj Local elevator agreements. —While it is probably the desire to 11 those promoting or entering into the agreements and understandings J. to have them cover as many branches of country grain marketing as possible, the agreement frequently includes only a single point. Thus '' an arrangement which covers grading or docking may not include price, or vice versa. Or the parties may not be able to agree on taking ^ full dockage, for instance, but will agree to dock the grain a fixed number of pounds. A considerable proportion of the agreements and understandings with reference to prices and other matters are effected directly be¬ tween or among the local agents involved. [From the files of the Atlantic Elevator Co.] Crosby, N. D., Oct. 10, 1919 Atlantic Elev. Co., Minneapolis, Minn. Gentlemen : Have your letter of the 7th and note what you say in regard to paying over card price. The Northland buyer made the rounds to all elevators this morning and all were willing to come to list price except the National agent, and the agents at Ambrose are also willing to, so we are coming closer to business now I think. Yours truly, J. A. Kappadall. Andrews Grain Co., Regan N. D. Station, 5/12/17. Andrews Grain Co., Minneapolis, Minn. Dear Sirs: Regarding your letter of May 9th can say I have taken the matter up with the other buyer here and we have agreed to buy all grain at strictly list prices. We have been doing this in the past, excepting very few cases and these were parties who live very close to StilU So we will hardly have any trouble here as regards the matter referred to. Yours very truly, (Signed) A. B. Greenfield. ■ m * 1 J. G. Bargabos & Son, an independent elevator operator at Royalton, Minr COMPETITIVE CONDITIONS IN COUNTKY BUYING. 295 [From the files of the Atlantic Elevator Co.] Oakes Station, July 28, 1916. Atlantic Elev. Co. Deak Sirs : I have seen the Salzer man and Knox Grain Co. and the following is what we have agreed on as coal prices. Stove Size Hard $n.oo $9.60 Nut ii 11.25 9.85 « H. V. “ n 7.75 6.15 Millers Creek a 8.75 7.00 this is out Bin I had two talks with the Hawkeye Elev. man hut didn’t get any satisfaction Can’t you take the matter up with the Hawkeye people there and let we know Yours truly, R. O. Smith. [From the files of the Victoria Elevator Co.] Epping N. D. 10-12, 1915. Victoria Elev. Co. Minneapolis Gentlemen Well we have got together on the hard wht proposition again and have agreed on paying hard for only wheat that would grade hard and to grade the wheat down where it belongs. 4= sH 4: * Yours resp, R. C. Udy. [From the files of the Northwestern Elevator Co.] C. A. Magnuson, Pres., N. W. Elev. Co., Minneapolis, Minn. Sept. 7, 1915. Dear Sir : I had a talk with the other elevator boys in town yesterday and the prices agreed upon are as follows: Wheat 2^ and freight off, Minneapolis Oats, 20 and freight off, “ Barley and rye 30 and freight off Mpls. Flax 40 and freight off, Minneapolis. These were the prices that you suggested before, and taking Into considera¬ tion the conditions that exist here at the present time, I think they will have to serve for this season. I think tho that they are a little bit too high for any profit on this year’s business, but at the same time, I do not think that we can exxiect any. Yours truly, A. W. Kron, Sec., The Farmers Elevator, Litchfield, Minn. [Prom the files of the Victoria Elevator Co.] Roger, N. D. Dec 7, 1915. Acme Grain Co. Minneapolis, Minn. ^ Dear Sir : We are paying 2 ct over list here as card price. We was to come to card price Monday but the rest of the Grain Thieves here would not agree, to it so we are paying 2 over. 4 > « « * * * « Respy, G. L. Britten. 296 COUNTRY GRAIN MARKETING. [From the files of the McCaull-Webster Co.] Randolph, Neb. Oct. 25th, 1913. D. Webster, Minneapolis, Minn. Dear Sir- I phoned Mr. Kennedy yesterday about reducing Osmond but he will not do a thing at present. He says the minute they mark the market down the Farmers Elevator snap up something. Dennis, farmers buyer is per ec y willing to reduce.' Mr. Kennedy is coming out next week and I think we can get that market in shape. Yours truly, ' Gi.etsteen. Agreements by direction of head office. In so fur, Iiowbvgt, as the line company agents are responsible for the initiation of mutual arrangements as to prices, etc., the correspondence indicates that action is usually taken only upon instructions from the head ouice. The correspondence obtained by the Commission records numerous instances where the head offices have directed their agents to call on their competitors with reference to effecting agreements or at least more harmonious action on prices, grades, dockage, etc. Alamo, N. D. Aug. 20-1919. Occident Elevator Co. Mpls, Minn. Gentlemen : The Farmers Elev. Manager from Appam was here and asked me what I was going to pay for wheat this fall. I told him I did not ha^ any instructions to pay any other price except card. He said Grenora, Hanks ^ Zahl, Appam was trying to get together and just pay the 2.01 and 2.03 for is reason—he said if they paid up card price and before they got a carload the Government would take the premium off and they would be the loser. I told him I had no authority whatever to make any agreement of this kind and would have to take it up with my Co. I think if the Farmers got hold of t is that it would cause trouble, and that I will pay card price for wheat until I got instructions to do different. (Signed) Ale. Everson. Minneapolis, Minn. Aug. 22, 1919. Mr. Ai.r. Everson, agent. Alamo, N. D. Dear Sir: I have your letter of the 20th and, of course, we would not go J into any deal to depress the prices. You will follow the Grain Bulletin card J and our instructions to pay over, as you get them. You would get in pretty bac. j personally and we would get in bad also if we attempted to buy the wheat on the basis they mention. Yours truly, ^ -r. Occident Elevator Co. Genera l-M anager, mrd. 1 _ Nov. 28, 1916. H. J. Thorstenson., Agt., Northwood, N. D. Dear Sir : We have your letter of the 26th enclosing a list of prices for wheat, arranged by the farmers Elevator Co. , i ^ On the basis of 270 under Minneapolis December for 53# good bright wheat, we would be willing to let it stand at that, provided the cost of freight was 53# wheat of good color will bring about 200 under Minneapolis December wheat at Minneapolis but we ought to take the freight off and make it about 340 under Minneapolis December at your station. I would say that the prices on the other test weights of wheat would not be very much out of line provided you take the freight charge off. Better see the COMPETITIVE CONDITIONS IN COUNTRY BUYING. 297 ‘i' Farmers Co. on receipt of this letter and find out whether they will do this or not. If they do, we will be satisfied for the present to buy the stuff on the basis given, but as it is without the freight being taken off, the price is a little too strong. Yours truly, BCC-Mc Andeews Grain Co. By Powers Elevator Co., Minneapolis, Minn., 25th Jan. 1916. Martin Sauer. Agt.., Royalton, Minn. Dear Sir : Attached find letter received from Belgrade this morning. There is no good reason for our not holding to the 2^ discount under No 1 card price at Royalton. Show this to J. B.^® and fix it up with him—we are working on this same basis at Rices, and are doing a.11 that we can to assist J. B.*® in getting somewhat safer margin on his stuff—he should appreciate it. Reply on this sheet, returning enclosure. Yours truly, Powers Ej.evator Co By Mgr. WKP M Gentlemen : I had quite a talk with J. B."*® and we are now paying 20 under list for wheat. Now if Bowlus will get in line, it will be all right. Otherwise J. B.^® said that he would not stay below Bowlus.^** Yours truly, M. M. Sauer. Sept. 28, 1916. M. G. Blaha, Agt., Hiirdsfield, N. D. Dear Sir : We have yours of the 2Gth informing us that the Farmers Elevator Co. are now getting 50 over list on all kinds of barley and wanting to know what to do. The first thing to do under these circumstances is to go and see Thompson and have a little talk with him and ask him if he cannot see his way clear to buy barley strictly on list price and also his wheat in the same way according to the test. If you are unable to convince him that this is the only safe basis upon which to buy the stuff, notify us and in the meantime arrange to meet his prices provided by doing so you can get full share of the grhin. Keep us fully advised in regard to this matter. Yours truly, (Signed) Andrews Grain Company. Bcc-Mc By [From the files of the McCaull-Webster Co.] Minneapolis, Minn., Aug. 15, 1914. Mr. H. E. Pasek, Buffalo, Montana. Dear Sir: We yesterday wired you to work on a basis of 270 under Duluth September for No. 1 Turkey. Are your competitors willing to work on the same basis? Yours very truly, , J. L. McCaull, JLMcC/B President. I think this is satisfactory to all, at least the farmers and I compare prices every morning and we seem to correspond and they seem to be anxious to work with us, that is, work on the same margin. Yours truly. H. E. Pasek. \ 28 J. G. Bargabos & Son, an independent elevator at Royalton, Minn. 2* A town in Minnesota, near Royalton. 298 COUNTRY GRAIN MARKETING, Nov. 22, 1915. H. J. Thorstenson, Agt., Northwood, N. D. Dear Sir: This 1° wheat which you are shipping now is not going to grade. It is too yellow, soft, and contains cockle. Think it would be wise to have an interview with the Farmers Co. and Mill buyers as well as the line company agent, and see if you cannot round them up on a little better basis on grades and dockages hereafter. I suppose the others are grading it just as leniently as you are and in that case they must be losing grade in the same way we are. Therefore losing money. Perhaps they are waiting for a chance to get the stuff right. See what you can do and let me know. Yours truly. Andrews Grain Co. BCCMc By Occasionally, it seems, line agents are instructed to attempt adjust¬ ments of the competitive conditions between local stations with agents at other towns.^® This appears to be very exceptional, how¬ ever, competition between different stations being usually handled either by the head offices or else by the traveling superintendents. Securing harmonious action among local agents. —The friendly feeling toward one another frequently, if not usually, apparent among the various line companies leads to definite efforts on the part of the head offices to keep the agents of the different lines at each station working together on a harmonious basis, “buying grain right,” or, in other words, at card prices, with accurate grad¬ ing and dockage. In fact, definite instructions are frequently is¬ sued to the local line agents unmistakabl ;7 designed to prevent competitive fights, to eliminate any ill feeling or hostility which might develop into competitive warfare, or once such warfare has occurred, to put an immediate or early stop to the same. There are also occasional instances where the lines manifest a similar attitude toward their competitors other than the line com¬ panies. [From the files of the Northwestern Elevator Co.l Sept. 5th, 1919. P. J. Thompson, Agent, Climax. Dear Sir : I have had the matter up with the St. Anthony & Dakota in re¬ gard to our paying a much more price than the stuff is worth at Climax. Now it seems to me that there is no use of either you or the St. Anthony & Dakota Company keeping a chip on your shoulder thereby making severaP companies pay more for the stuff than you should and the only thing for^ »® An instance of this is the following: The Andrews Grain Co., a Minneapolis line concern, wrote their agent at Oriska,] N. Dak., Charles H. Ferguson, in part as follows : Why don’t you go over to this town of Pillsbury and make a personal visit of buyers there and find out what they are doing and if it is true that they are paying more than we are at Oriska, you tell them that that is the case and that for that reason they are taking grain out of our territory and that unless they get back to list price where they belong that we will have to put prices up at Oriska to equal theirs or perhaps in advance of theirs and take the'grain away from them or else make them pay up where there won’t be anything in it. * * * Now you get in touch with them and go over there at our expense and take one or two other agents along with you from Oriska and see what you can accomplish in the way of being travelling supt. yourself and then let us know about it.” In accordance with the above instructions, Ferguson went to Pillsbury, accompanied by the Monarch Elevator Co.’s agent. Ferguson first reported that the results of his visit were doubtful, writing that he hoped the cooperative concern at Pillsbury would ‘‘ see it this way but don’t have much hopes they will.” Still later he reported that “ It seems that instead of doing this market any good by going up to Pillsbury we have hurt it. The farmers’ man up there has told all over that we were up there to get him to come to our prices and he has used it to a good advantage. The farmers are hotter than wool. They are 3 or 4 cents over on wheat and about 5 cents on fiax.” COMPETITIVE CONDITIONS IN COUNTRY BUYING. 299 you to do is to get together and buy the stuff right and I want you to do your full portion to right this matter. The fact of it is that both of us have got to do it in order to make expenses this year at your station and I hope you will take this into consideration and the necessity of maintaining har¬ mony at your station. I want you to do your part no matter what the other fellow does, but I believe you can as you ought to, work together to this end. Yours truly, Pkest. F. E. Bye, Agent, Oilby, N. D. August 27, 1919. Dear Sir: * * * We are greatly encouraged over what you have to say in regard to visiting the Monarch agent, and that you believe there is a dis¬ position on his part to come down to right prices and grains. It hardly seems impossible that you two should get together out there and work in harmony, and we ard" led to believe from this letter, that something of this kind might possibly come about. There is no use in preaching on this subject, Fred, as you know that you should work for this end without our having to give you any advice thereon from down here. You can rest assured that anything you can do to straighten out the local situation is going to be thoroughly appreciated at this end of the line. Yours very truly, Andrews Grain Co., By HGT :ML CC Mr. B G. Cochrane. The harmonious and cooperative action of the various line com¬ panies is also well indicated by the frequent condemnation of agents by the head offices, or traveling superintendents, for failing to work in harmony with competing line and other agents in buying grain. [From the files of the Andrews Grain Co.] H. M. Olson, Agent, Elliott, N. D. October 24, 1919. Dear Sir : We have your Load Report of the 23rd instant and note that the Farmers were “ out of luck ” not having received a load that day. That is very hard on them, of course, but the whole town came pretty near being out of luck. We are a little bit surprised that you should hog things in this way, especially after the kind and considerate treatment Mr. Packard has always extended you. While it is a little bit late for us to say what should have been done on this particular day, we think it might be very nice of you in the future, to at least extend Mr. Packard the opportunity on occasions like this, of coming over and taking a share of the load. It is quite possible that you extended this courtesy" to him at the time, but as you do not mention it, we are jumping at the con¬ clusion that you didn’t do so. Yours very truly. Andrews Grain Co., By HGT ;ML CC Mr. Bakke, O’Shea. [From the files of the St. Anthony <& Dakota Elevator Company.] J 2/21/16. Northwestern Elev. Co., Building. Gentlemen : We have your favor of the 18th and are returning your agent’s letter. We ju.st have a letter from Hillsboro in which he says he talked matters C. T. Packard, manager and secretary of Farmers’ Elevator & Mercantile Co. 300 COUNTKY GRAIN MARKETING. I over with your man and that his price at the present time was 970. We went after him pretty hard for not having a heart-to-heart talk with your agent and establishing a price at the time you wrote us. We don’t think it is a spirit that will get us anywhere and we want our agents to understand that we expect them to work in harmony with their competitors; that what is to their competitor’s interest is to ours. Unless we can put the two interests together, we can’t get results. Yours truly, C. D. JUNKIN, Enc. Gen’l Supt. Aug. 24, 1914. Geo. L. Heffos, Agt., Omemee, N. Dah. Dear Sir: We understand that a few days age the buyer for the Imperial Elevator Co., at your station had a talk with you in regard to buying grain at proper grades, etc., but that you talked as though you did not intend to pay very much attention to grades or list prices, that you were going to get the grain anyway. This is not the proper way to talk to a competitor no matter what you intend to do. When he came to you to talk this matter over you should have advised him that it was your intention to buy the grain right, which we want you to do, if it is possible to do so. In regard to this matter we want you to go to him now and tell that you are going to buy the grain right and that there won’t be any trouble. Of course it will be all right for you to advise him that you want your share of the grain but you are going to get your share anyway. You have been there long enough so that you should be able to get your share. Of course if the Imperial buyer falls doyvn one (once) in awhile you must not pay any attention to that as you might fall down sometime yourself, but you must not lead him to believe that you have your fighting clothes on and that you are going to get the grain anyway. That is no way to do business. Yours truly, FJS :OM Northland Elevator Company. Minneapolis, Minn., Sept. ^915. Northwestern Elevator Co. City. Gentlemen : Replying to yours of the 3rd relative to Osnabrock. We cer¬ tainly will do our part to hold Osnabrock to a satisfactory market, and we have instructed our Supermtendent to see that our agent minds his own business and if he is at all inclined to hold personal grievances against the other buyer to keep them to himself and do his part in eliminating some of the apparent friction. Yours truly, Imperial Elevator Company, (Signed) F. H. Ellis, Qen. Supt. FHE-GR Broken agreements.— When an agreement is broken there is frequently an immediate attempt made to readjust matters and return to the former arrangement. [Frcm the files of the Victoria Elevator Co.] Epping N. D, 10-12 1915. Victoria Elev. Co., Minneapolis. Gentlemen : After the Occident man started paying hard * we all came up and so he came over yesterday and says we had better get together and buy it down where it belongs. So this will be the second time for us to get together as we had all agreed to not pay hard in the start so we will see if we can stay down * Hard wheat prices. 301 COMPETITIVE CONDITIONS IN COUNTRY BUYING. where we belong, bunches of them. Yours resp. I received my extra joints for my shipping spout and got two R. C. Udy. Apparently the violation of an agreement is frequently the result of a misunderstanding and does not always occur through aeliberate intention. A farmer may make report to an elevator of die higher prices offered, better grades given, or less dockage taken by a competi¬ tor, when, as a matter of fact, such is not the case. [From the files of the Northwestern Elevator Co.] Dec. 17, 1919. For D. D. MacMilt.an, Cargill Elevator Company, Chamber of Commerce City. Gentlemen: Our Traveling Supt. Mr. J. P. Hull, has been at .Tolnson and he writes me under date of December 16th: I find the trouble at Johnson comes largely from the fact that the two agents do not get along well. This taken with the quality of wheat coming to Johnson, for instance with the price difference of 5^ per pound, a man might bring a load of wheat in today that might test 54 lbs and the next load might test 52 lbs., both coming from the same farmer. When you explain the difference the farmer thinks one load as good as the other, so he takes the next load around to another house and claims that he has been getting the top price and unless the buyer stands pat or is suspicious of his competitor, he justifies him¬ self by paying up. It is the case of the farmer farming the buyer and has been worked at Johnson. I have ordered our men to buy strictly at the arranged price. ******* Yours truly, Pres. ‘ Sept. 16, 1915. J. A. Schatz, Agt., Wellesherg, N. Dale. Dear Sir: We have a letter from Jacob Heit your opponent at Wellesberg and he complains that you are paying over list. Now we do not want to fight with these people as it costs money to fight. In case some farmer is carrying tales before you get angry take the matter up with these people personally and at any time he wishes to see your books to prove that you are not doing anything wrong, it will be alright for you to show them to him. ******* Yours very truly, RGC MBL Victoria Elevator Co. The agent hearing such reports frequently believes that his competi¬ tor has broken an agreement, and as a consequence feels at liberty to do likewise. A period of strenuous competition often follows before matters can be adjusted. Section 21. Effecting agreements and understandings through traveling superintendents. Competitive adjustments by individual superintendents. Among the various duties apparently assigned to the traveling super¬ intendents or auditors of line companies is that of securing har¬ monious action among the agents at local stations (especially those of the line companies) with reference to prices, grades, dockages, etc. 302 COUNTEY GRAIN MARKETING. .[■ • A failure on the part of the local agent upon direction to adjust satis¬ factorily the competitive situation is by no means taken as final by the line company or companies affected. In such an event, as well as at other times, the traveling superintendent may be instructed to tty his hand at arranging matters. . Sept. 1, 1919. Mr. B, G. Cochrane, Detroit, Minn. Dear Bert; We have your letters of the 30th relative to conditions along the line North of Grand Forks. * * * s!: s|s * :)! We are quite surprised to see that you cannot solve the Drayton situation. We had expected you to go up there to look this matter over for a few minutes and then put that market on a strictly list basis, and as stated above, we are qu’ie surprised that you did not see how to bring this about. The only thing we can suggest is to carry a little lemon extract on your hip as this will help the situation out as long as the extract lasts. Yours very truly, Andrews Grain Co. HGT; ML By- Oriska, Feh. 8, 1918. Monarch Elev. Co. Mpls., Minn. Gentlemen : In regard to the Bly.** market, as near as I can find out the Farmers & Nelson are paying from 8 to 12^ above on Bly.®^ The Andrews Agt. is wild on Bly.,®^ but O’Shay promised that they would come down as much as they could and still be in the market and that their man would at all times give our man the price that he is authorized to pay, so that we can pay the same if we want to^ do so. There is no trouble between the Agts. whatever, but the Andrews mah seems to think that he can make any price that he wants to to get the stuff, regardless to whom the grain would go, us or the Farmers or Independent, but says that he will work with us from now on. Yours truly, N. C. Jensen.“ \ [From Empire Elevator Co.] Station Hutchinson, Minn., October 28, 1916. Mr. J. R. McMillan, Minneapolis, Minn. Dear Sir: I will be at Stewart Monday and will then make all of the Minn, stations going west, and get them all lined up again and I expect to reach Mil- bank Thursday or Friday and then I will come back to Correll and get straight¬ ened up with Clapp. Yours truly, (Signed) H. Thompson, Supt, Minneapolis, Minn. Sept. 21, 1915. Bagley Elevator Co., City. (Attention of Mr. Ralph Bagley) Gentlemen : Pursuant to our talk yesterday, you will be interested to know that we have wired Mr. Moritz, our auditor on the Gettysburg line, to go to Faulkton and put that market in condition where the line companies will get some share of the business. *« A traveling superintendent for Monarch, “ Barley. COMPETITIVE CONDITIONS IN COUNTRY BUYING. ■303 situation seems to be very peculiar, as we are getting: it from our agent this morning; in that, no matter what we otfer, we are getting absolutely noth¬ ing. The farmers’ Elevator Co. is buying strictly at list, and the farmers have all gone crazy over the idea of a Farmers’ Elevator Co. We have asked Mr. Moritz to stay there until he can work out something, and we will keep you posted from time to time. Yours truly, G. W. Van Dusen & Co. C. B. Rogers Mgr, CBR-W [From the files of the Northland Elevator Co.] G. J. White, Kenmare, N. D. Dear Sir: We want you to go down to Overly just as soon as you can and see if you can not get that market straightened out, as all of the buyers are one grade too high and it seems that the farmers’ buyer is about two grades too high. There will be no money made at that station unless you can get that I market straightened out pretty soon. You will then go to Mylo and see if you can not do something there. There is no use fighting for the grain, the best way is to get your competitors into line and do it right away. Yours truly, 1 FJS/SM [Pror.i the files of the Northland Elevator Co.] Mr. Geo. J. White, Kenmare, N. Dak. De.'. 7, 1914. Dear Sir : Find enclosed herewith a letter from our agent at Tolley, N. Dak., which explains itself. Me doii t want you to get all of your stations overlist. We want you to go to Tolley and Norma both as soon as possible and try and get those stations down to list. There isn’t any sense in such foolishness. The only way that we can hope to make any money or even pay expenses from now on is to buy at list. The same rule applies to everyone, and there is no use in sending out those lists unless they are followed. Therefore, we want you to use your best endeav¬ ors in all cases to keep markets down to list. Of course we will have to pay’ what the others pay but there is no use in “ winking ” at this paying over list, as it is going to mean a loss to us in the end, therefore, it is the traveling man’s place to use his best efforts to keep markets quiet, as that is the only way to make any money. Yours truly, F JS: CM Enc #16 Joint efforts by superintendents.— In a number of cases it has been the custom for the superintendents of two or more competing line companies to be sent to a station to confer with the agents with refer¬ ence to the proper adjustment of prices, grades, dockages, etc. Minneapolis, Minn. Oct. 21, 1018. Mr. S. J. Epler, Supt. -Billings, Mont. %R.M. Dear Sir : Have your letter of the 19th in regard to the McCaull-Dinsmore Co. and I don’t believe there is much use in trying to pay a great deal of attention to what the people say down here. I told Early, the Manager, some time ago that he wanted to get his superintendent out there and check up with you. M^e could not do anything in a long range way. These people have been inclined to feel their oats and so long as conditions are as they will be for the present, I would be inclined to let them find out where they are at. There is absolutely no sense in conducting a long range correspondence between this office and you on what McCaull-Dinsmore may think their man is doing, based 304 COUNTRY GRAIN MARKETING. on roports thoy from him. Tho thing to do is to got their suporintondont to call on you and you can both go up there and find out what is going on. Yours truly, ^ Occident Elevator Co. mrd. 1. Gen-Mgr. Po\^T':rs Elevator Co. Steele, N. D., 10-9-16. Dear Mr. Powers : I have your letter about meeting Mr. Woods of tlie Occident and making trip to Dunn Center with him. I phoned him yesterday ^ and found th.qt his plans would not permit my meeting him in Mandan today but I gave him my plans and where he could find me if he finds it possible to meet me this week as the Buick is at Stanton I am going up there today. I have met Mr. Woods several times made one trip to BeulaD with him some time ago. Mr. Woods impresses me as a fine square fellow who knows his business and would very much like to meet him and make that trip together. . Yours truly ^ _ Ckas. Boardman. Nov. 12th 1915. Mr. C. L. Sawyer, si Minot, N. Dak. Dear Sir: If possible we would like to have you go to Anamoose on Monday j to meet Mr. Gaskel of the Woodworth Elevator, and INIr. Eaton of the Osborn-,! McMillan Elevator. These people are extremely anxious to get Anamoose down 1 to a better basis. I think that their idea is to stick absolutely to grade on all j grain, but possibly pay 2 cents over list if necssary. ^ When you go there give us a full report on what you think of the situation. Yours very truly, DLR. MBL. Victoria Elevator Co. Nov. 12, 1915. M. G. Blaha, Agt., Hurdsfield, V. D. Dear Sir: * * * About next Monday I think Mr. O'Shea®^ will be at youri station and perhaps Mr. Grobe®® will be there with him and I hope that between i you buyers and the two superintendents that you will be able to get the 1 market conditions down on a proper basis as to grades and dockages and prices, i There is not any use trying to force the matter any longer. You know pretty ^ well now from the returns that you had on your shipments what the stuff isj grading down here and we have got to hew to the line out there. We cannot S afford to take the grain except at a positively safe grade. We have lost money on a good many of the shipments and we have got to get that back. . ^ ^ * ♦ * * Yours truly, BCO-Mc By Andrews Grain Co. Andrews Grain Co., Hurdsfield, N. D. Station, Nov. 18, 1915. Andrews Elev Co MpUs, Minn. . Gentlemen : Mr. O’Shea and Mr. Grobe were here and we all got together^ for the purpose of improving the conditions at this station. j It was agreed to establish proper grades and not to pay over list, except] on such storage that is outstanding where concession have been made. :| *****’’' * Yours very truly ^ (Signed) M. G. Blaha. ** Traveling superintendent of Andrews Grain Co. Traveling superintendent of Occident Elevator Co. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 305 . Sept. 4, 1914. [ H. Thompson, Oakes, N. Dak. Dear Sir : We have been tryinj? all day today to reach you by phone, but np to this time we have been unable to do so. If you get this letter in time we want you to meet the traveling man for the .Hawkeye Elevator Co. at Hample, N. Dak. Saturday, Sept. 5th, but if you do not get this in time to do so you will meet him there Monday, Sept. 7th. Get those agents together and get them right on grades and dockages,' and also get them : down to list. * ♦ ♦ * ♦ ♦ * Yours truly, FJS : CM Osborn-McMillan Elevator Company. Apparently there have also been cases where the trips of two or more superintendents have embraced several stations along the same line. In at least one or two cases the line relationships have been so friendly that the agent of one line has been practically directed to act according to the instruction of the superintendent of another line. W. M. Thompson, Agent, Hurdsfield, N. D. Oct. 5th, 1912. Dear Sir : Our superintendent, Mr. Kerr, will endeavor to make a trip over the Turtle Lake Branch next week with the superintendents for the Crown Com¬ pany and the Occident Company in order to advise you and the others as to the grades that will be safe upon which to buy this wheat hereafter, after the rains. If for any reason Mr. Kerr is unable to make this trip the others will un¬ doubtedly be along and we wish you would be on the lookout for them or either one of them and advise with them or him as to how to properly grade this wheat from this on and whatever advice you receive please consider it the same as though Mr. Kerr had given it to you himself. We feel that whatever advice is given you will be absolutely correct. We shall be pleased to hear from you after your visit with these men. We should like to have your report as to what you think the conditions will be at your station aftbr their visit. Yours truly, Andrews Grain Co. B. C. C/EP. By [From the files of the Northwestern Elevator Company.] The Northwestern Elevator Company, South Shore ll-lO-IJ/. C. A. Magnuson, Prest. Mpls. Minn. Dear Sir: Just as we were ready to leave Benson yesterday, Mr. Hanson received a message to go to Barry and he could not come with me, but he gave me a letter to his agent to do what I told him to do in regard to paying over list. I find that the Farmers were paying over but they were taking what dockage was in it, and were fair on grades. I have put the line agents down to 2^ over list on wheat, proper grades and dockage and I am in hopes that it will not be a great while until I can lop off another cent. Kazek had several loads while I was here, and if he will buy in the future as he was buying today, he never will run short on grades or dockage. He will get two cars of durum loaded out today. Yours truly, (Signed) Jas. Hanna, 9964°—20-20 306 COUNTRY GRAIN MARKETING. Section 22. Agreements, understandings, and cooperation between line and head offices. Use or head offices for adjustments. —While in many cases, as indicated by the preceding correspondence, the lines rely upon the agents and traveling superintendents to adjust the local competitive situation, these difficulties are frequently taken up by the head office, especially in the event that the agents or superintendents are unable to secure the desired results. [From the files of the Occident Elevator Company.] Mpls, Minn., Oct. 5 1918. Mr. S. J. Epler, Supt-Billings, Mont. Dear Sir: * * * McCaiill-Dinsniore agreed that they would follow the Grain Bulletin list and if you get your price out on that line at $1.93 and $1.94 we will be practically on that. ******* I told that man Early, who is the Manager, and also Mr. McOaull, who is the owner, that if they put a little more time in on getting the right kind of men they would get more business and make more money on it. Early says their man at Rapelje is sick and is in the hospital now so probably the matter will adjust itself. The main thing is for you to get in touch with their man out there and I can handle this end, especially if Mr. McCaull is on the job. * * * * ♦ * * Yours, truly, Mrd. 1. Occident Elev. Co., Oen. Mgr. Sept. 23rd 1915. B. C. Hansen, Agt., Hazelton, N. Dak. Dear Sib: In reply to your wire about the Occident paying over. We told you to pay 5 cents over on wheat. Durum, & Rye, and 2 cents over for oats, and 10 cents over on flax. If you can see any money in it in the way of excessive dockage etc., you can meet the Occident price of 7 cents over, but 5 cents over is an even thing with Minneapolis. We are trying to settle this matter in town, and hope to do so within the next two or 3 days. Yours very truly, vtotorta Ut.f.vator Co. RGC. MBL. Nov. 18, 1915. Mr. W. M. Thompson, Hurdsfield, N. D. Dear Sib: * * * I do not understand why the Occident Elevator agent takes such a belligerent attitude in the matter but I hope from this on the conditions there will be much improved. We are working on it from this end and will make every endeavor to bring about a proper situation. **♦♦**♦ Yours truly, BCC-Mc. Andbews Gbain Co., By Sept. 14th, 1914. Mr. C. L. Sawyis, Minot, N. Dak. Dear Sir: Anamoose is in the worst trouble at present. I wish you would go there if you possibly can and straighten that market out in some way. If you have any trouble telephone us here and we will take it up with Woodworth, or wire us. Yours very truly. RGC. MBL. Victoria Elevator Co. COMPETITIVE CONDITIONS IN COUNTRY BUYING. 307 Occident Elevator Company, Mpls., 12-1-14. Mr. M. Kirchen, Supt., Kenmare, N. D. Dear Sir: I have your letter in regard to conditions at Tolley and when you find out just what the situation is let me know. I presume the O & M are paying over. If you cannot get it adjusted down there we will have to take it up here. This is a habit of theirs. Yours truly Occident Elevator Company, Per M R Devaney, Geti-Mgr Complaints of line companies to one another.— The daily and other reports of the agents and traveling superintendents, which usually include statements of any competitive action which has been taken by other elevators form the basis for a more or less con¬ tinuous stream of complaints by the line companies to one another regarding competitive practices at various stations with requests, demands, and suggestions for adjustments. In some cases the com¬ plaining company in its own letter details the circumstances accord¬ ing to its information. In other instances the agent’s or superin¬ tendent’s report is transmitted to the offending company. Mr. B. G. Cochrane, Detroit, Minn. Sept. 16, 1919. Dear Sir: We have just had a call from the Equity advising us that they will have two men at Cashel to-morrow investigating the situation up there. We took advantage of the opportunity to make quite a hard kick on the situa¬ tion at Meckinock, claiming that they and the Monarch were buying strictly on grade and the card prices, while Oscar is over-grading and by that means exceeding list. Do not know if you are in a position to make a run up there or not, but if you can possible do it, think you should. We haven’t the confidence in Oscar’s buying that we should have and would like to have your report on this situation. They mentioned in particular a lot of 56 lb. wheat which Oscar had taken at the 1 northern price. They gave us the party’s name, but do not recall it now. Yours very truly, Andrews Grain Co. By HGT: ML [From the flies of the Osborne-McMillan Elevator Co.] Station—Kimball, Minn., 5-15-17. Mr. F. J. Smith, Supt., Minneapolis. Dear Sir: There seems to be little consistency in your program on flour market conditions. We follow market changes, whatever they may be, today, flour in-Mpls, close 14th should be worth $8.60 per cwt. and your station shows no change since INIay 10th and your quotations are $8.00 per cwt. Now on the grain side of the deal, some time ago your office was demanding oats sales about 124 over 3 white list figuring that the station was from 1 to 24 over list on oats. Now you ship oats from N. D. points and sell at same margin. What is the reason for such procedure, if you have any arrangements get at the bottom of the difficulty and thresh it out, or can both these agents and put in a couple of new men and see if we cannot work somewhere nearer in line. Osborne-McMillan Co. 308 COUNTRY GRAIN MARKETING. Understand yon are now at list on oats local and last time I was here we were agreed on over and 1^- over selling out. Your man does not seem to have advised us with regard to coming to list. Why not? Yours truly, ^ (Signed) F. C. R. The Northwestekn Elevator Co. Minneapolis, Minn. Oct. 28, 1917. McCaull Webster Elev. Co. City. Gentlemen : Will you please advise if you have come to list at Albee and Forestville? Both our agents advise that you are paying-considerable over list there on instructions to pay up for the stuff and you have been paying $2.07 for wheat at Albee that will grade 1 Red Spring. Your man there says he expects to pay over list until he gets other orders. We understood the orders were to be sent out. ♦ *♦♦♦** Yours truly, Gen. Supt. Minnekota Elevator Company, February 22, 1916. Atlantic Elevator Co., Chamber of Commerce, Minneapolis, Minnesota. Gentlemen : On Saturday we received a wire from our Agent at Fonda advising that your agent had authority to pay over list on all grain, and had been paying this price for some time. In a letter received from our agent today he states that your agent admitted that he was paying 3?^ over because he had received orders to do so. If you have not already written your agent to reduce his price to 2(^ over list, we wish you would please wire him, as our agent has strict orders not to pay more than over list on any grain. Yours truly, Minnekota Elevator Company G-T By W. H. Gooch. [From the files of the Northland Elevator Company.] Minneapolis, Minn., Nov. 20, 1916. Mr. P. J. Smith, Sec. Northland Elevator Co., Chamber of Commerce, City. Dear Sib: I enclose herewith a letter fron?' Mr. Riebe, with reference to conditions at Crosby. It is quite evident that your man is not disposed to work in harmony with the others. I received a letter from one of the Great Northern companies and they seemed to think that if your man would try and work in harmony with the others there it would be very little difficulty to divide the stuff on somewhere near the proper basis, and they seem anxious to get down also. Kindly return this letter when you are thru with it and oblige, Yours truly, Atlantic Elevator Co. (Signed) By F. C. Reibe, Sec. [From the flies of the Occident Elevator Company.] Andrews Elevator Company Mpls, Nov 10-1915. Mr. M. R. Devaney, Occident El Co Mpls. Dear Sir : I enclose a letter just received from our agent at Hurdsfield, for your attention. I am not inclined to accept our agent’s report as to your man there, in its entirety, but Mr. Thompson of the Farmers Co there, has Intimated to me in letters lately that your man is inclined to be out of line. COMPETITIVE CONDITIONS IN COUNTRY BUYING. ' 309 If you can do anything about getting the situation on a proper basis, we shall be very glad of It. * « « * • * 4 > Youis Uuly, Andbews Grain Company By B. G. Ceangle. . Northland Elevator Co. Minneapolis, Minn., July 31, 1915. Atlantic Elevator Co., City. Gentlemen : Our agent at Armourdale, N. D. advises us that your agent at that station is selling barley locally at 7c over list. Our retail price for barley at all stations is 10c over “ C ” list. Yours truly, FJS :OM Northland Elevator Co. By F. J. Smith. Minneapolis, Minn., 10-13-15. Bagley Elevator Co., City. Attention Mr. Ralph Bagley. Gentlemen ; Have another letter from our agent at Carlyle about your man overgrading at Millard. Hold him down. Yours truly, WAP. A The Pacific Elevator Co. Andrews Grain Company, Mpls, Oct. 3-1914. Occident Elev. Co. . Mpls, Minn. Gentlemen : I beg to submit a letter just received from our agent at Hurds- field. Will you kindly read what he says and return the same to us? Is it not possible to bring about some better conditions at that station? We have dropped a line to Van Dusen Co. and suggested that they look into it. We hope that something may be accomplished. Please note that our agent's letter is simply a report as to the conditions, written in his best manner, after receiving request from us as to the condi¬ tions there. Yours tiuly, Andrews Grain Co. Per B C Crangle. Powers Elevator Company, Mpls, 11-11-U. Mr. Devaney, % Occidental Elev. Co. Security Bldg,, City. Dear Sir : In today’s mail I find another letter from Beulah dated the 7th which reads as follows: “ Note the returns on several cars of wheat and that they docked more than I figured on. In reply will say that I am taking every pound of dockage I can get. I even let farmers drive out, and I notice my competitor takes them in. I herewith mail you sample of S. Keller wheat which he took for, 1® You will note there is smut in this wheat. I offered 2° for it, as the wheat is good and would grade 1° if it were not for the smut.” This is the sample which I handed you today I don’t criticize your man for taking it for 1° providing he got a good dockage, but I will venture the assertion that he did not dock it enough and I only quote to show you what Stuhr says further about the difficulties he is having in getting the right dockage. An average of 2J# at Beulah is none too much, in my opinion. Yours truly. Powers Elevator Co., By W. K. P. Mgr. [From the St. Anthony & Dakota Elevator Co.’s files.] 11/5/13 Mr. C D Junkin, St. Anthony d Dakota Elev. Co., City. * Dear Sir: Our Finley agent writes that dockage conditions at that station are not satisfactory, and by reason of others underdocking that he is steadily 310 COUNTRY GRAIN MARKETING. losing trade. In order to get a line on the situation we are asking you and the Northwestern Elevator Co. to give us your in-dockage. We are also asking i Jerry Comer, of the E L Welsh Co., who handles the Farmers business at j Finley, to get us this information from the Farmers Elevator, and when this data is forthcoming we will gladly forward you results of the compilation. | Something interesting and instructive may develop, and again, our agent may I be entirely mistaken. We believe it well to clear up any misunderstanding | that may exist, and to this end we ask your cooperation. | Yours truly, I Cargill Elevator Co. (No signature) DDM-H [From the files of the Occident Elevator Co.] Andrews Elevator Company, Mpls. Sept. 22, 1913. Occident El. Co., Security Bldg., Mpls., Minn. Gentlemen : We have just received a letter from Regan & Lyness in which ; they state that their agent at McClusky, reports your agent, ours, and the Crown ' agent, paying 1^4 over list promiscuously to everybody, and that they in turn i have advised their agent to meet competition. ‘ I took this matter up with Mr. Lyness at Fessenden by wire today and told him that our agent had no authority to pay 1^4 9 vei* list, except to those people who have big lots which was previously agreed upon, and we did not think our i; agent was exceeding instructions, and asked him if he could not get over there I to Fessenden today, and satisfy himself on the subject. In the meantime I do not believe that our agent is exceeding instructions, « and hope that yours Is not. Yours truly, Andrews Grain Co., By B. C. Crangle. Action taken on complaints.— On receipt of complaints, such as ' the foregoing, the line companies complained against, investigate or ii issue instructions to their agents and superintendents, and otherwise I! endeavor to rectify conditions in such a manner as will be satisfactory | to the complaining line company. jl National Elevator Co., Dec. 5th, 1919. | Mr. C. A. Magnuson, Pres., | The Northwestern Elevator Co., Building. ji Dear Sir He writes his letter from Hope, N. Dak. He says he will I be in your office next week, and thinks this matter can be explained to your I satisfaction. You will recall that when I wrote you the letter, I did not write | it in the way of a complaint. I wrote it because I felt when we paid ten cents ■' over the card at Neche, we were paying more money than we could afford to ji pay, and all I hoped to accomplish was to get you to assist me in trying to keep | that market on a basis that would be just and equitable to the producer, and | show a fair return to ourselves. ‘i Sincerely yours. (Signed) L. D. Marshall, Manager. Enc. 1. Sept. 22, 1918. Osborne-McMillan Elevator Co., City. Gentlemen : Returning herewith letter from your Kensal agent, Mr. Gaskill who was at Kensal on the 18th, writes as follows; “ Schlect tells me the Farmers have been 10 to 12^‘ over him on prices of the light wheat below 49#, and O & M have been as high as 17^^ over him on the light wheat. He has lost considerable wheat that he would have taken if the S’ Osborne-McMillan Co. COMPETITIVE CONDITIONS IN COUNTRY BUYING. • 311 prices had been down where they should have been. Since the light wheat took a big slump last week, they see where they are at and show signs of getting down.” This report from- Mr. Gaskill corresponds with letters previously received from our Kensal agent in regard to the prices paid by your agent and the Farm¬ ers’ buyer for wheat. If your buyer has been getting down to proper prices on wheat, I think you will find our man quite willing to cooperate with him. Yours truly, WOODWOETH ELEVATOE COMPANY, ' BHW-E (Signed) By B. H. Woodwoeth. August 30th, 1916. Mr. T. L. Spaulding,*® Warren, Minn. Deae Sie : I have your letter in regard to the splitting of grades at Alvarado and I think that this probably came about on account of our agent sending in a sample on which I advised him that the wheat was not good enough for 3°, but was a very choice 4° and perhaps in this case he split the difference. I do not think that this is a very good policy, as a rule and I do not know as it is neces¬ sary at Alvarado. Inasmuch as you did not give me your ideas in the matter I cannot say what would be the best plan. However, we are willing to cooperate ^ in any way that we can, because we feel that we will need every dollar we pos- * sibly can get in the way of profit this year to pay expenses, to say nothing about making any money. If anybody makes any m-oney out of operating a line of ele¬ vators this year, he will certainly be entitled to all he makes and ought to be given a medal of some kind. Yours truly, Atlantic Elevatoe Co., FRC/c By Novembee 14th, 1916. Mr. F. .T. Smith, Sec., Northland Elevator Co., Building. Gentlemen : We note your Mr. White’s letter in regard to conditions at Col- gan. We are sorry that things are so disturbed there and will do our best to get our man on the proper basis at that point. We are receiving samples from him and he is buying the stuff a little close and we are urging him to get down and hope that we will be successful in getting him down to the proper basis. We thank you very kindly for the information. Yours truly. Atlantic Elevatoe Co., FCR/c By [From the St. Anthony & Dakota Elevator Co. files.] * Mpls Sept 9 '15. • Mr C D JuNKiNS. Mgr, St. Anthony & Dakota Elev. Co., Minneapolis Deae Sie; We have your letter of the 7th, together with copy of the letter from your agent at Revere under date of Sept 3d, and we are today writing our agent that we shall expect him at all times to work in perfect harmony with your man and to work on the same basis with your man. ******* Mr. Porter wants me to assure you that our books, reports and tickets are open to your inspection any time you wish to call at our office, and that we are very anxious to work in perfect harmony not only at Revere, but at this end. Any time you have any complaints to make, we assure you that they will re¬ ceive due and prompt consideration. Yours truly, Minnekota Elevatoe Co. By W. H. Gooch ^ Spaulding Elevator Co. 312 COUNTRY GRAIN MARKETING. [From the files of the Cargill Elevator Co.] Minneapolis, Minn. Sept. 25, 191J^. Caegill Elev. Co., City. Gentlemen : Replying to yours of the 24th in regard to Easby. Our Super¬ intendent has orders to go there, carefully investigate the whole matter and report. When we get his report, we will see you. Very truly yours, L. D. Makshall,’® Manager. j Mutually cooperative attitude of head offices.— The corre- ? sponclence passing between the head offices of the line companies con- * tains scores of letters revealing the disposition of the line companies to work in harmony with one another so far as possible. In some few instances these letters are clearly indicative of agreements among the various head offices. In other cases, though agreements may not be involved, the degree of mutual cooperation evidenced would in¬ dicate the possibility that results are achieved thereby much similar to any which could be obtained through outright agreements. Nov. 11, 1918. Nokthland Elevator Co., City. Gentlemen ; * * * thought best to write you about this as the prices that we agreed upon last Wednesday at that station were as follows: Hard coal_$11. 75 Hocking_ 9. 50 Millers Creek_ 10. 00 Smokeless_ 10. 50 We are not disposed to sell coal at the prices our agent has advised us about, 1 and think we should Instruct them to hold the prices that we gave them, and f have written our agent to sell at the prices that wq arranged with you last. i We hope you will see fit to instruct your man in the same way. Yours truly, RPW-E Woodworth Elevator Co. (Signed) By R. P. Woodworth, Sec. Minneapolis, Minn., May 9, 1917. Empire Elevator Co. Columbia Elevator Monarch Elevator Co. Crown Elevator Co. / Gentlemen : The above companies and ourselves will send instructions to agents tonight to buy gi-ain at card prices only. Yours truly, , The Pacific Elevator Company. WAP-S I __ July 26th, 1917. Atlantic Elevator Company, Cliamher of Comm^erce, City. Gentlemen : We have advanced our price on Bran and Middlings at Kimball Prairie, Minnesota as follows: Bran-.$42. 00 per ton. Rich Country Middlings-$.50. 00 per ton. Mpls “A” Middlings-$54. 00 per ton. If this price is not satisfactory to you, kindly advise us and greatly oblige. Yours truly, Osborne-McMillan Elevator Co. By F. J. Smith Sec'y PJS-J National Elevator Co. i COMPETITIVE CONDITIONS IN COUNTRY BUYING. 813 July 6, 1915. Atlantic Eievator Co.. BLDO. Gentlemen : Pleases give us your total receipts of all kinds of grain at the following stations: Bronson, Minn, from Jan. 31st to June 5tli, 1915. Nekoma, N. D. IMylo, “ “ Kramer “ “ Crosby “ “ Mar. 3rd “ May 30th, 1915. “ 1st “ July 1st, 1915. July 1, 1914 to July 1, 1915. Feb. 1st to July 1st, 1915. Yours truly, FJS: OM Northland Elevator Company F. J. Smith October 21, ’15. Mr. L. D. Marshall, Mgr. National Elevator Co., City. Dear Sir : Do you think it would be possible for you to use your good offices * * * to bring about a better condition as to price at Ardock, N. D. They aro^ still 4c over the card at this station, and they are grading the NG wheat, #V. Our stuff has been selling 4 to 6c under #1° price from this sta¬ tion lately, and of course this means an actual loss of at least a couple of cents per bushel on everything we have handled since the rain, and we thought per¬ haps all interested parties would now be willing to get down to a point of perhaps 2c over the card, which would leave a very sm.all handling margin at stations. Inasmuch as we were unsuccessful in doing anything towards bettering condi¬ tions there we have taken the liberty to call on you to see Yours truly, Atlantic Elevator Co. • * By — FCR-J Geo. C. Bagley Elevator Co., Minneapolis, Minn. The Pacific Elevator Company Minneapolis, Minn. Nov. 5, 1915. Gentlemen : Grain has been badly over graded up to this time at country points. Companies interested on the M St L are instructing agents to-morrow to grade absolutely right, without question. We suggest that the same instructions be sent to Milwaukee points. ^ Yours truly. WAP-S The Pacific Elevator Company. Minneapolis. Minn. Oct. 21, 1915. Cargill Elev. Co. City. Gentlemen: I am in receipt of sample of wheat from our Agent at Benson which you bought for 92^ yesterday. I am not advised as to the weight of this wheat, but regardless of weight, I believe on account of the cockle" and wild peas in it, it would not grade better than #2 and sell around 97J0 on yesterday’s market, leaving about it profit in it on the basis of the purchase. Don’t you think we can get together at Benson and buy on a little better margin than this ? Yours truly, M. G. Magnuson,'^ Gen'l Supt. Spaulding Elevator Co. Warren, Minn., Aug. 10, 1914. Mr. F. C. Riebe, Sec^y, Atlantic Elev. Co., Minneapolis, Minn. Dear Sir : In the opinion of the writer, I believe that it would be a good thing for all concerned if, when you send out general buying instructions, that you would send us a copy of the same. Northwestern Elevator Co. 314 COUNTRY GRAIN MARKETING. I write this with the idea of lining up my agents with yours and if it meets with your approval, will be glad to receive the same. I do not write this with any intention of prying into your concern’s affairs any more than for our mutual good. Would like to hear from you in regard to the matter. Yours truly, C. L. Spaulding. CLS/EMP Aug. 11, 1914. Spaulding Elevator Co., Warren, Minn. Gentlemen : Mr. Fred Riebe is out on the line, but the writer took the liberty of opening your letter. I will send you herewith a copy of all of the circulars which we have gotten out so far, and we will be glad to send you copies of any we get out in the future. We are very glad to co-operate with you in this manner, and glad that everybody realizes the necessity of unusual care in handling this crop. It is going to be difficult to buy it on proper grade and it is going to be extremely difficult to hedge It safely. Yours truly, Atlantic Elev. Co. By V. P. CMC :V Enel: [From the flies of the Northwestern Elevator Company.! The Northwestern Elevator Company Minneapolis, Minn. July 20, lOllf. Dear Sirs : According to the usual custom, will you please notify your agent at Litchfield to come to my room at the Chamber of Commerce, No. 51 next Sunday morning, at 10 o’clock, for our usual consultation? I am notifying all other parties interested, including the Farmers Elevator representative at Litchfield. Will you please notify me if you will be present, and also your agent, so that there may be no misunderstanding? Yours truly, (Unsigned) J*rest. Cargill El. Co. Duluth El. Co. Thorpe El. Co. A. O. Cornwell Farmers El. I ! •r ■ill V i [Minneapolis Office Chamber of Commerce.] \ Standard Grain Company, ^ Duluth, Minn. Oct. 16th, 19H. C. M. Case, V. Pres., Atlantic Elevator Co., Minneapolis, Minn. Dear Sir : Strange things certainly happen in this grain business and here we are with an elevator on our hands at Alkabo, N. D., in direct competition with one of your elevators at that point. I never thought I would be in the elevator business, but find myself with a few houses to run, and possibly I may increase my line if I like the game. Our agent at Alkabo seems to have a good deal of trouble, and I would ap¬ preciate it greatly if you would write me regarding the situation at that station. I assure you that as far as I am concerned, I would like very much to get things lined up there on a good paying basis. As I understand it you not only v. have an elevator at that point, but virtually control the independent buyer that is there. If you will tell me how things are fixed at that station and how you^ want them lined up, I assure you that our man will fall in line. Yours very truly, Standard Grain Co., H. S. Newell, Prest. Note in Pencil (Fred: Write friend Newell) # \ APPENDICES. i ! Appendix 1. LETTER OF THE PRESIDENT TO THE CHAIRMAN OF THE FEDERAL TRADE COMMISSION AUTHORIZING THE FOOD INVESTIGATION. * The White House, Washington, 7 Fetyruary, 1917. My Dear Mr. Chairman : An adequate supply of food products is a matter of concern to the Nation at all times. It is of peculiar importance at present. ; Our domestic food supply is normally very large and has become increasingly varied. In some respects it has steadily expanded and has kept pace with the increasing population. Unfortunately, this is not true, however, of a number of important staple products, including certain cereals and particularly meats. While the population of the Nation has increased 26,000,000 since 1900, the pro¬ duction of the two leading cereals, corn and wheat, while tending to increase, i -has shown only a slight advance; and that of the meat products in the same ! period has shown an increase of only 3,500,000,000 pounds—a decrease of 29 I pounds per capita. Much can be done, and is being done, to change this situation through im- I proved methods of production and through the control or eradication of plant i and animal diseases. But there are problems also of distribution; and, in some respects, the problems presented in this field_are the more difficult. Only re¬ cently have official agencies been created to deal systematically with this side of the difficulty. Much work has been done, and, considering the limited nature of the powers under which it has been conducted, no little headway has been ' m-ade, particularly in obtaining and diffusing useful information. Neverthe- ! less, it is not yet clear in many directions just what the nature of the difficulty ' is or what measures should be adopted to effect fundamental improvements. Many necessary facts are not available, and it is questionable whether any single agency of the Government at present possesses the requisite power and equip¬ ment to secure the information needed to enable both public and private instru¬ mentalities to render their fullest service to the people. It is obvious that there will be no sufficient incentive to enlarge production if there does not exist an unobstructed and economical system of distribution. Unjustifiable fluctuations in prices are not merely demoralizing; they inevitably deter adequate pro¬ duction. It has been alleged before committees of the Congress and elsewhere that the course of trade in important food products is not free, but is restricted and con- 1 trolled by artificial and illegal means. It is of the highest public concern to ascertain the truth or falsity of these allegations. No business can be trans¬ acted effectively in an atmosphere of suspicion. If the allegations are well grounded it is necessary that the nature and extent of the evils and abuses be accurately determined, so that proper remedies, legislative or administrative, may be applied. If they are not true, it is equally essential that the public be informed, so that unrest and dissatisfaction may be allayed. In any event, be¬ cause of the grave public interests which the food supply affects, the efficient performance of the duties imposed upon agencies of the Government requires that all the pertinent facts be ascertained. To this end the powers of such agencies should be made adequate, if in any respect they are now deficient. Pursuant to the authority conferred upon me by the act creating the Fed¬ eral Trade Commission, therefore, I direct the Commission, within the scope of its powers, to investigate and report the facts relating to the production, ownership, manufacture, storage, and distribution of foodstuffs and the products 315 316 1 COUNTRY GRAIN MARKETING. or by-products arising from or in connection vith their preparation and manu¬ facture ; to ascertain the facts bearing on alleged violations of the antitrust acts, and particularly upon the question whether there are manipulations, con¬ trols, trusts, combinations, conspiracies, or restraints of trade out of harmony with the law or the public interest. I am aware that the Commission has additional authority in this field, through the power conferred upon it to prevent certain persons, partnerships, or corporations from using unfair methods of competiton in commerce. I pre¬ sume that you may see fit to exercise that authority, upon your own initiative, without direction from me. The Department of Agriculture has been engaged for several years in study¬ ing problems of distribution. I have noted that it has been proposed in the Congress to add to the funds of the department and give it larger powers to conduct its investigations. As its activities will touch phases of the problem I am calling to your attention which may not be covered by your inquiry and may furnish information of great importance for the purposes contemplated, I shall direct that department to cooperate with you in this enterprise. For the adequate prosecution of the inquiry by both your Commission and the Department of Agriculture, it is essential that sufficient funds be available. I accordingly request that you furnish me at the earliest possible moment an estimate for an appropriation, if one is needed, to supplement existing appro¬ priations, to enable you successfully to carry out the investigation. A copy of this letter is being sent to the Secretary of Agriculture, with the direction that his department cooperate with you and with the request that he furnish an estimate for the funds needed by his department. Sincerely, yours, (Signed) Woodeow Wilson. Hon. William J. HARKia, Chairman Federal Trade Commission, Washington^ D. G. • APPENDICES 317 Appp:ndix 2. COUNTRY ELEVATOR SCHEDULE. Federal Trade Commission, Washington, D. C. February, 1918. ■ The Federal Trade Commission, under authority of the Act of Congress, entitled “An act to create a I Federal Trade Commission, to Define its Powers and Duties, and for other Purposes,” approved Septem¬ ber 26,1914, requires you to answer the following questions, said answers to be written and inclosed m the franked envelope (which requires no postage) and mailed to Washington within one week of the receipt thereof. Read the entire schedule before filling out, and note carefully the instructions under each inquiry. Re- t turns for years must be for crop years except as otherwise indicated. Do not restrict answers for lack of room; if necessary use additional paper. Federal Trade Commission. 1. Name of elevator.. 2. Post Office. 3. County. 4. State 6. Railroad or railroads on which your elevator is situated. 6, Markets to which your grain is shipped. Number of cars shipped to — Crop Year TERMINAL MARKETS For Each Terminal Market Use Separate Column and Indicate the Name m the Space at the Top. Mills Feeders Interior Brokers Total 1 1912-13 Wheat. Com . Oats. Barley. Rye. 1913-14 Wheat. s Com . Oats . Barley. Rye. 1914-15 Wheat _ Com. Oats. Barley. Rye_ 1915-16 Wheat _ Com. . Oats . Barley. Rye_ 1916-17. Wheat. Com. Oats. Barley. Rye. • 7. Name of present local manager. 8. Manager at this point since what date? 318 COUNTKY GRAIN MARKETING, fl. Is elevator operated one of a line?... If so, give name of company and location of head office. As to form of organization, is it a corporation.a partnership.., or individually owned?.. [Mark opposite Is it cooperative.., independent.., mill-owned.., or otherwise controlled?.•[ description Is elevator leased?. If so, from whom?.( that applies. If cooperative, do you pay patronage dividends?. On what basis?. What is the limit to dividends on stock?. If a corporation, does any individual or group own a controlling interest?. If so, give name or names.-. 10. Is the elevator constructed of wood, concrete, steel, or other material?. When was it built?... 11. Rated capacity of elevator in bushels. Number of bins. 12. Name aU other elevators and mills at your station, indicating whether operated or not. Nearest elevators or mills in operation at other stations: Direction from yovu station. Name of station. Elevator or miU? Approximate distance from your station in miles. F.a.st . . West _ North South . - . 13. In arriving at your daily buying prices to what extent do you use: (a) Daily price cards. From whom?. lb) C. N. D. reports covering cash or futures, or both. (c) Bids "to-arrive”. (d) ‘‘On-track" bids. (e) Terminal market price currents. (/) Market telephone or private-wire service. From whom?. (jr) Any other sources of information. Inclose samples of each kind of market information received. 14. State (estimating if necessary) the number of bushels of grain purchased for each of the following five crop years (July 1 to June 30), and by months for 1913-14 and 1916-17: Year Wheat Corn Oats Rye Barley Other 1912 13 1 191.3 14 1914 15 191.5-16 1916 17. Months of 191S-14. Julv 1913 . .\ue 1913 Spnt 1913 Oct 1913 Nov 191.3 . Dec 1913 Jan 1914 .... Feb 1914 Mar 1914 _ Anr 1014 Mav 1914 Tnnft 1914 . Months of 1916-17. Julv 1916 Anv 1916 _ Sent 1916 Oct , 1916 / Nov., 1916 Dec 1916 •Tan., 1917. Feb 1917 Mar 1917 Anr 1917 May 1917 Tiirio 1917 If it is impossible to make returns for July 1-June 30 years, use available basis and specify beginning and end of years used. APPENDICES. 319 15. State the number of carloads of each kind of grain shipped to terminal markets on consignment and the number so shipped on direct sale for each of the following five crop years: NUMBER OF CARS— Shipped on consignment. For each terminal market use separate column and indicate the name in the space at the top. Crop Year, etc. Total. 1912-13 Wheat. ( orn. Oats. Barley. Rye... 1913-14 Wheat. Com. Oats. 1 Barley. Rve. 1914-15 Wheat. Corn. Oats. Bariev. 1 Rve. 1 1915-16. Wheat. Com. Oats. 1 Bariev. Rye. 1 1916-17. Wheat. Corn. 1 Oats.. • Barley. 1 Rye.". i Sold direct. 1912- 13. Wheat..., Com.. Oats.. Barley..., Rye...... 1913- 14. Wheat... Com. Oats. Barley... Rve..... 1914- 15. Wheat... Com. Oats. Barley... Rye. 1915- 16. Wheat... Corn. Oats. Barley... Rve. 1916- 17. Wheat... Corn. Oats. Barley... Rye. Freight rates (per hundredweight) to each market (Jan., 1917). Crop Year, etc. Total. Wheat PQfTl Oats Rye. 16. What side lines do you handle? (List in order of Importance) What facilities have you for cleaning?..... On what terms do you clean and condition grain for farmers?.;... 17. Will your records show, for the past five years, the daily purchase prices paid for gram, by grades?- . If not for five years, for how long?. 320 COUNTRY GRAIN MARKETING. 18. Is it a custom to hedcc your grain purchases?. If so, on what exchange? State (in bushels) futui-es bought and sold by years and by kinds of grain: Year. Wheat. Corn. Oats. Total. Bought Sold Bought Sold Bought Sold Bought Sold 1Q19.-1.3 . f 191.1 14 1914 l.'i mi.'i-ifi .... 191R-17 . . 1 Does the elevator take orders for futures from farmers?. Has there been an increase of such business in recent years, and if so to what extent?. " To what extent do farmers dealing in futures carry open trades in excess of the size of their crops ?. 19. Do any buyers in your locality load directly into cars, and if so, to what extent in the last five Do any farmers ship directly, and if so to what extent in the last five years? Do you elevate lor others, and if so to what extent in the last five years?.. On what terms and under what circumstances?.. 20. Answer the following questions for each of the last five years. 1913-14 1914-15 1915-16 1916-17 1917-18 To what extent has your business been affected by rflr ...-. Has delay in shipment resulted in a greater margin nr- Q ]aqq mn.rfrin nn prain alrfiadv bought? . In what years have you seciued more at terminal moi-Votc nn anpnnnf. of Car .shortaB'e?... • Have you felt it necessary to pay less to the farmer Bononcfi of ca.r shortavo delav? . In your judgment have the farmers in yoiu neighbor¬ hood received more or less for their grain because of r»o r qTi nrtapp ?. . ...-.. _a II 1 ■ ' -- 21. State amounts and sources of borrowed funds (exclusive of bond issues) as per the following schedule: i! Date. Amount owed on short-term or demand loans. Rate of interest. Source ol loans—whether farmers, other local residents, local banks, commission houses, other terminal grain dealers, city banks, etc. Give names of banks and dealers. dant 19 191.1 . noA 1Q1.^ . \for 1Q14 . . Tiitia 1Q14 . Coni- 1f1 191fi . IQlfi . Mar 1917. ♦ Insert date when largest and smallest amounts, respectively, owed at any one time during the crop year, and fill out line correspondingly. Submit copies of contracts used in connection with above loans. State maximum amounts owed on open accounts to farmers for grain delivered for each year, 1912-13 to date, and approximate dates. If figures are not available, describe situation and practices. I HEREBY CERTIFY that the answers given in the above schedule arc true in all respects, to the best of my knowledge and belief, and that I used my best endeavors to fill out this schedule and mail it within the ; required time. j| (Signature of Manager or person answering.) If the elevator belongs to a line company, specify what information returned is supplied by or through | the head office, enumerating each inquiry so answered.. (Signatiue.) APPENDICES. 821 Appendix 3. FORM OF CONTRACT BETWEEN COUNTRY ELEVATOR AND FARMER FOR THE SALE OF GRAIN BEFORE DELIVERY. GRAIN CONTRACT. I / i. Contract No. .; 191.. This is to certify that I have this day contracted and sold to. I bushels of.at.cents per bushel (.per bushel), ;: to be clean, sound, and dry and to grade No.to be delivered into. !(»elevator or cribs at . on or before the [liday of., 191.. i If damaged or inferior grain is delivered and accepted on this contract, the market |d difference at which such grain is selling under the contracted grade day of delivery is shall be deducted from the contract price, I certify that this grain is in my possession and free of all liens and incumbrances. [Appendix 3—Reverse.] GRAIN DELIVERED ON THIS CONTRACT. Date. ■ Hauler. No. of car or bin. Gross. Tare. Net, Grade. Dockage. • . * . - • • 9964°—20-21 322 COUNTRY GRAIN MARKETING. Appendix 4. NOTICE TO WEIGHMASTER. Notice to Weighmaster. The grain in this car has been carefully weighed, if found short when unloaded, in¬ vestigate and report immediately to Northwestern Elevator Co., Minneapolis, Minn. Car No. Initial... Contents. Bushels. Date. Station. Seals... Remarks. Pounds. Total Weight. Form 14 Kimball-Storer Co. Minneapolis. [Appendix 4—Reverse.] Instructions to Agents. The reveree side of this card must he carefully filled out in duplicate and tacked to the outside of both grain doors on every car shipped from your station. When car is weighed by you, each draft should be entered on this card and totaled. If not weighed, so state under the heading ‘‘Remarks,” giving your estimate of the amount contained in the car. In loading bulkhead cars, the weight of each part should be given separately and designated as “Break End,” “No Break End,” or “Center,” as the case may be. It is IMPERATIVE in filling out this card, that the GRADE of any grain con¬ tained in the car NEVER BE GIVEN. Under the heading “Contents” simply designate the kind of grain loaded as ^‘Wheat,” “Flax,” “Barley,” “Durum,” “Rye,” “Oats” or “Corn.’* The Northwestern Elevator Co. APPENDICES. 323 & o a &£ (A o o 'O <£) O p. Aver¬ age cost per bu. Gross bushels shipped. | Esti¬ mated weight. Actual weight as per list of drafts attached hereto. Dockage. | Per cent. Pounds] per bu. I 4^2 g ^ £ s ^ ft • Grade. Kind of grain. *3 ® C o3 co.a CJ 3 03 rt 0. fcb S'" o ® g-d •S 4^ S o g og O’M M S;5)j^ C3' <© W o “'gv 0*3 . ' rO 3 •- 03 ® ® ftoo &2 W W 25 2>. CO ^ '®'d t3 ® ® 5? a o S'? b S o 3 M M ^ .S ^ t3 ® fl.9 03^3 M a ® ta " w •S ^ 03 >1 (-1 03 600 ® ® • 1 ^ I V rr) • a-" 8^ §« 111 S 60 8 CQ 3 S-g a ^a w ■<< 324 COUNTRY GRAIN MARKETING. Forms. [Appendix 6—Continued.*] | Report of Grain Shipped, Sold, or Demvered. | On this blank must be reported all grain that leaves the elevator, whether shipped, sold, delivered out on I surrendered storage tickets or otherwise disposed of, it being intended that this book must give a complete I record of all grain that the agent is entitled to receive credit for in the same manner that the two receipts | report books ^ve a complete record of all grain charged to him, excepting, of course, car lots that may be I shipped to any station to sell. Do not report sales of grain on Flour and Feed reports or any other blank f but this. At any time your grain sales are too numerous to go into the three lines provided you will please | make up a complete list of them on a letter head and attach same to the report when you send it in, listing | in the body of the report only the total bushels and amount of money pertaining to each kind of grain. D o not enter the cash sales of grain on the same report with a car shipment. Each report must cover the ship¬ ment of ONE car only. Whenever you have any grain to ship place your order in writing with the railroad agent for the proper capacity of empty car required and renew your order daily until you get the car. If the railway company is imreasonably slow in fiunishing cars or the agent fails to give you your full share of the cars distributed to the various elevators at the station, write your superintendent and the Minneapolis office about it, | ^vlng full particulars. Mention how many cars you have ordered, when the order was placed, and give I enou^ information so that we can form an intelligent idea of the situation and place the matter before the 1 proper official in the general office of the railw^ company. If at any time the railway company furnishes | a larger car than you ordered and you fail to load it up to capacity required for such car, a notation that I “ Small car ordered, large car furnished,” “60 M Cap. car ordered, 80 M Cap. car furnished,” or any other t notation to cover the particular case MUST be made on the original Bill of Lading BEFORE it is signed by the railroad agent or we will be required to pay freight on the minimum capacity of the car loaded, t and if at any time we are obliged to pay excess freight on account of our agent’s failure to make proper notation on Bill of Lading, such excess freight will be charged to the agent. If you do not know the capacity , to wMch the railway company requires the different size cars loaded, write the Minneapolis office for cir- i cular giving this information. You should fill out the Bills of Lading yourself and not depend on railway agent to do it for you, then there can never be any question as to who is at fault if the car is improperly 1 billed or any notations left off. When you report the contents of a car at “Actual Weight,” such weight i must be understood to mean that the grain was ACTUALLY WEIGHED INTO THE CAR WHEN LOADED and not weights taken from the “in” weights of a number of wagon loads which you think you put into a certain bin and then in turn loaded the contents of the bin into the car, as we have had too much trouble with that kind of weights in the past and foimd them unreliable. Be sure at all times to report the numbers of seals applied to cars, as that information is particularly important. Also fill in blank spaces for all other information requested. When the grain loaded is actually weighed it is not necessary to report measurements of car or depth to which grain is loaded. Send Original {Pink) and Triplicate ( Yellow) Co'pies with Bill of Lading Attached to Minneapolis Office ] | on the Day Shipment is made. Appendix 6. j DAILY LOAD REPORT. ^ MiNNEKOTA ELEVATOB CO. \ LOAD REPORT. \ This blank must be filled out and mailed every day. . ^ .191.... I Station. • Loads received. Cars shipped. ■Rir ATTKTWTil'irnT* Et.evator Co _ ... tt . « ... a . 1 a . Cars Shipped by Trackers and Individual Farmers. Car No. Initial. Grain. Destina¬ tion. S To whom shipped. • Weather. Roads. Form 7. .^M. Agent. ^ I * These are the instructions for filling out the foregoing shipping report. 326 COUNTRY GRAIN MARKETING, Appendix 8* FORM OF COMMISSION HOUSE CONTRACT FOR FINANCING COUNTRY ELEVATORS. Mutual Contract. The signers hereof, in consideration of the mutual promises and undertakings herein, hereby mutually promise and agree to and with each other, as follows: , engaged in basiness as a Grain Commission merchant, hereinafter called the That the owner and operator ji “Commission Merchant,” will advance and loan to the of a certain grain elevator, in the town of. and State of. hereinafter called the “Elevator Company,” such amoimts of money,—to be used by the Elevator Company ■ solely in purchasing grain at the said elevator and in the proper and necessary expense of operating said elevator,—as may be required for the purposes aforesaid, from time to time during the continuance of this *■ contract, not obligating itself, however, to advance an amount exceeding at any time the sum of, Dollars (S.). Ttot said Elevator Company shall, during the continuance of this contract, and of any indebtedness to the Commission Merchant hereunder, consi^ and ship to said Commission Merchant, for sale by it upon commission.all grains purchased by said Elevator Company and shipped from its said ' elevator, and shall pay said Commission Merchant commissions on such sales, in accordance wdth the rules : of the Chamber of Commerce or Board of Trade of Minneapolis, Duluth, Milwaukee, or Chicago, to which jj such shipments may be made. ; That said Commission Merchant willreceive all grains consigned to it by the Elevator Company, and will j use its best efforts to sell the same at the best prices possible, and shall promptly render confirmations and account of sales thereof. : per cent per annum, computed on That said loans and advances shall draw interest at the rate of. daily balances, or the stated rate of interest in notes, if any, as to the amount of such notes. ,|j That this agreement mav beterminated at will by the said Commission Merchant, and may be terminated ji at will by the said Elevator Company, upon the payment in full of all its indebtedness hereunder to said Commission Merchant. ; That the parties hereto, signers hereof, except said Commission Merchant, jointly and severally,—in consideration of the agreement of said Commission Merchant and of the advances of money made by it to the Elevator Company, which advances are hereby requested by all of the parties hereto, signers hereof,' except said Commission Merchant,—promise and agree to repay from time to time whenever said money is not actually in use in the purchasing of grain and the payment of operating expenses of said elevator, the moneys theretofore advanced to the Elevator Company by said Commission Merchant, with accrued interest thereon and, on or before.of each year, to repay to said Commission Merchant in full, the balance of any moneys theretofore advanced by said Commission Merchant to said Elevatorj Company, with accrued interest thereon, whether said moneys so advanced and loaned by said Com¬ mission Merchant to said Elevator Company are secured or unsecured, or whether said moneys are repre¬ sented by notes given therefor or carried in open account, and that if the said Commission Merchant should deem its advances insecure because of improper business conduct of said Elevator Company, or if said Ele-; vator Company shall violate theterms of this contract or become insolvent, said Commission Merchant may demand payment of any and all moneys and balances advanced or loaned to said Elevator Company, andf thereupon the said parties hereto, except such Commission Merchant, shall promptly pay all such money^ and balances so demanded, together with interest accrued thereon. Elevator Company to keep their elevator, coal-sheds and other buildings, also grain, seeds, flour, feed, ^ coal and twine fully insured and the policies to read “Loss if any payable to.. as their, = interest may appear.” . . ^ ^ i- A IN WITNESS WHEREOF, the parties hereto have signed and executed this agreement in duplicate upon this.day of.. A.. D. 19. 1 Witnesses to Signature of ' By Pres. By Secy. ■■ '> ,1 Witnesses to all other Signatures. By Pres. By Secy. Primary Shii)- ments. Wk.Pri. Receipts Since Nov. 1. Wk. Pri. Ship¬ ments . Exports. St. Louis Re¬ ceipts. “ Rec this week... 337,000 2,625,000 177,194,000 3! 3,5i 174, 5i Late General Commercial News cables said Russia has proposed peace to umania. 1,933,000 2, K Western hog packing to date 2,501,000 head, against none 154,000 last year. 144,000 bu rye and 60,000 bu barley cleared from the 14,000 «aboard today. Western hogs 29,000 head, against 30,000 last Satur- 217,000 2ay and 17,000 a year ago. Western receipts of oats since 1st of August reported Weather news much more favorabt 3,454,000 bu, against 8,100,000 bu year ago. interests than for several days baclj Late wires from different points in eight States re- rainfall and low temperature wired lorted very little rain, but more or less cloudy, in the principal grain-growing States- Australian crop news more favorable: seedlings there Iowa, and Nebraska, but still dry ^d in Argentine completed under excellent conditions. Grain markets were greatly excited, < Wheat shipments from Western m^kets this week futiues participating in the general frf ere 5,719,000 bu, compared to 4,034,000 bu previous and prices, after starting last Mondafeek, and 8,187,000 bu last year, lower than pre^dous Saturday’s cloS Receipts of com at Western markets since November excited advance, culminating in aj 1919, show 177,194,(XX) bu, compared to 148,892,000 bu on Monday to $1.5}| yesterday for fjear before and 238,437,000 bu m 1918. and from 151.201 to S1.31i for Dccel Forecast—Generally fair and not much change in which very interesting period largtfmperature over most of the grain States tonight and active futures were dealt in, includiimday, barring showers in Illinois and Missom-i. orders, both city and country, besic^ Western receipts of corn this week 2,625,000 bu, in the professional ranks—short sellgainst 3,591,000 bu week before and 1,619,000 bu last on the advance, while it frequently hear; shipments 1,933,000 bu, against 1,580,000 bu year bull traders were left in the lurch ago. realizing sales. The strongest featuf Wired from Regina, Sask.—Wheat fair to good sellers for the decline were increasiiiround Regina, may run 20 bu, still green, and needs drv, hot weather was causing more oftin; may average 30 bu; around Brandon, may only in the old growing crop, a decided shui 15 bu; 400-mile trip reveals varied crop conditions; arrivals at primary markets, droppfrouth and much idle land; labor asking $7 per day. 9964®—(To follow Ajj»PENDIX 9. ST. LOUIS DAijiY MARKET REPORTER. ST. LOUIS DAILY Vol. 45 Merchant’ Exchange Price Current. Published every business day by O’CONNOR MARKET REPORTER CO 216 Market St. St. Louis Mo’ Entered as Second Class Matter at the Post Office. St. Louis, Mo. Subscription R^tes By Mail, Postage Paid; One Year, $1.50. Three Months, $2.00. FUTURE GRAIN MARKETS options at St. Louis, as r^corfied at IS-iiiinute intervals. Opening.,.. Dec. Wheat. . 145MaMb . l47M«Ma 11:15. 147M 11:30. 147M 11:45. lieiMa Close. 147 ^ a High. 148M Low. 1447^ 125a 24M 124Mb 124M a 124Ma 124M b 125M b 125M a 125M a 125M l24Ma 124M 126 124 WHEAT— Primarj’- Rec. Primary Ship. St. L. & K. C. rec_ W’ks Primary rec.. Since July 1st. N. W. cars. “ this week.... Winnipeg cars. “ cars this week Exports. “ this week.... W’k Prim Ship. To-dav. Week ago. 1,449,‘000 1,527,000 895,000 827,000 768,000 533,000 10,247,000 9,248,000 37,122,000 26,784,000 249 182 1,760 1,586 152 89 791 789 423,000 368,000 delaved 9,967,000 5,719,000 4,834,000 CORN— To-day. Week ago. Primary Receipts 261,000 441,000 Primary Shifi- ments. 337,000 381,000 WT. Pri. Receipts 2,625,0)X) 3,591,000 Since Nov. 1 . 177,194,000 174,569,000 Wk. Pri. Ship- ments. 1,933,000 2,108,000 Exports. none none St. Louis Re- ceipts. 14,000 43,000 “ Rec this week... 217,000 269,000 Last year. 149,000 207,000 1,619,000 148,892,000 1,580,000 none 18,000 112,000 Weather news much more favorable for the farming interests than for several days l)ack; fair to generous rainfall and low temperature wired from many y^oints in the principal grain-growing States—Illinois, Indiana, Iowa, and Nebraska, Init still dry in the Northwest. Grain markets were greatly e.xcited, day after day, corn futures participatingin the general furor that prevailed, and prices, after starting last Monday’s session slightly lower than previous Saturday's close, experienced an excited advance, culminating in a bulge from $1.35,4 on Monday to .$1.5If yesterday for Septemljer thus far and from .$1.20', to .$1.31f for December corn, during which very interesting period largo quantities of the active futures were dealt in, including a big inflow of orders, both city and country, besides a good business in the professional ranks—short sellers caught sharply on the advance, while it frequently happened that some bull traders were left in the lurch by rapid breaks on realizing sales. The strongest features working against sellers for the decline V'ere increasing complaints that dry, hot weather was causing more or less deterioration in'the old growing crop, a decided shrinkage in current arrivals at primary markets, dropping far behind the MARKET REPORTER Saturday; August 7, 1920 No. 136 Ilfsh sasMb 2;{8b WHEAT FUTURES DECEMBER. march . . ooL/ SEPTEMBER. DECEMBER.. OATS. SEPTEMBER 701 / DECEMBER . ^ 148M 1‘36 ?3Mb Low 233 335M 144M 124 Today 235a 237Ma 147Ma 134M 73Mb 70Mn Closing Prices Yesterday 238Ma 241n 148Mb 127Ma 74Mb 71Ma 1919 196M 157M 78Ma SOM Recent advances well maintained in today’s light trading. Offerings scant. Sales: Timothy—Old—1 car No. 2 at $32, 1 car do at $37; New—Part car at .$27,1 car No. 2 at $30,1 car do at $31, 3 cars standard at $33. Clover-mixed—1 car and part car at $27, 2 cars new light mixed at $30. Prairie—1 ear No. 2 at $23.50. Alfalfa—3 cars standard at $32. 232 232 233 233 b 233 b 235M b 235M b 235M b 235M b 235M b 235 a 235M b 232 Last year. 1,744,000 1,436,000 749,000 17,007,000 65,560,000 182 1,720 28 215 755,OOq 5,950, OOq 8,167, OOq though still over last jear at this time; a great revival in the casliTnisi- ness and rising values therefor; a fierce raid on shorts in wheat futures, which ran up 38@39c from lastlMon- aay s bottom rates, though subsequentlv timlbling h^vily from the top notch, a sharp upturn in cash wheat and growing inquiry therefor, rapidly appre- wating rye quotations and serious w'ar news from abroad. a big change in the situauon—letter weather, less serious information Su’ii ^.ussian-Polish troubles, and a noticeable lalling off in bull support caused a break of 2c to 3-lc at the opening, followed by a still further softening, and pen a limited upturn, but market very unsettled and toppy generally. Cash gi’ain made a materiallv higher range than a week ago. Suddenly turned and liic^ mled second hour, offerings running light, f 1 he spurt carried prices up 2c from the earlierjeheap- est rates, (hie iri great part to widespread reports that rain needed, in most sections, only showers heinc repopd; cash grain generally lower, including wheat; anoper week-end future market—realizing on 'profit- holding contracts, getting out of futures brought 6n the another sharp spurt near noon, pough falling back at the last, closing |c under yester- day for September and 2f c on December, latter showing 2c net gain over last Saturday and December 4ic up. Violent fluctuations characterized the action of the St. Louis wheat market this week; cash quotations bulged from $2.22 @2.25 for No. 2 Red winter on Mon¬ day last to $2.48@2.57 yesterday, with No. 2 Hard winter from $2.24@2.25 up to $2.50. December wheat meanwhile advancing from $2.09M@2.16 last Monday to $2.49 yesterday, with the March future up from $2.12 to$2.50;but the general market had asharpset back late yesterday, cash wheat losing 2c to 6@7c and futures 9c to 10c from the previous pp figures; market during the week was excited by increasing war reports from abroad, more poor crop reports, due to rust damage in the Northwest and drouth over the Canadian line.'Ex- port business was quite active in the early period but appeared to slacken later on, although considerable wheat was reported sold in different positions, and sea¬ board clearances large. Receipts at Western markets have increased to some extent of late, but continue to fallheavily short of both 1919 and 1918 at this time, and total since July 1st heavily behind. Rapid price changes occurred in the future wheat market this morning, opening 5c to 6Mc lower, rallying 2M@3 Mc. hut again softening, along with lower cash quotations, closing 3M(‘ down from yesterday, but over 20c to 22c over last Saturday. DECEMBER opened at $2.32, and later to $2.35M to $2.33 to $2.35 asked at close. MARCH ranged from $2.35M (opening) to $2.38 bid to $2.37M sellers at close. OATS— Primary Receipts... Primary Shipment.. Exports.. St. Louis Receipts... St. L. Wk. Receipt.. Wk. Pri. Receipts... Wk. Pri. Shipments. Rec. since Aug. 1_ To-day. 552,000 393,000 None. 75,000 572,000 3,4.54,000 2,347,000 3,454,000 Week ago. 695,000 506,000 None. 60,000 302,000 4,427,000 2,866,000 205,970,000 Last Y ear. 504,000 854,000 478,000 40,000 405,000 5,306,000 6,301,000 8, 100. 000 There was a very lively market for both cash and future oats, prices of the former commodity advancing 3 @ 3|c and futures 5c to 8c from last Saturday to yesterday, stimulated, as a matter of course, by the feverish action of other grain markets; crop news good, but not given much attention, Western receipts of limited volume—away short of last year; cash demand pod to excellent; increased e.xport business wired from the seaboard; stocks very small. But this morn¬ ing s mpket was beariply affected by the break in corn and wheat, and prices let down 4 4Ic from the previous highest level. There was a sudden upturn of Ifc from the lowest notch of the morning, with the close ic to lie under yesterday. SEPTEMBER opened at 72|c, and later to .72|c /2|c to 73Jc to 734 c to 734 c bid at close. DECEMBER figured at 704c. to READY REFERENCE Garlicky at $2.40 1 2.45. Garlicky at $2.38 @ I 2.43. Garlicky at $2.36 @ SAMPLE WHEAT, on track—Red winter 3c to 7c lower. Hard 10c to 11c lower. i No. 1 Red mnter, $2.44 @ 2.48. 2.41. Smutty at $2.40. No. 2 Red winter, $2.42 @ 2.40. Smutty at $2.40. No. 3 Red winter, $2.40 @ 2.38. No. 4 Red winter, $2.38. No. 1 Hard winter, $2.45. No. 2 Hard winter, $2.40. ! No. 3 Hard winter, $2.42. SAMPLE CORN, on track—Ic to 3c lower; fair demand. i No. 6 corn, $1.52. No. 1 yellow, $1.60 to $1.61. | No. 2 yellow, $1.60. ! No. 3 yellow, .$1..58. j No. 1 white, $1.60 to $1.61. No. 2 white, $1.60 to $1.61. ! sample oats, on track—Ic to demand. No. 1 white, 82c. No. 3 white, 784c to 79c. No. 2 oats, 76c. No. 3 oats, 75c. lie lower; fair CASH GRAIN WHEAT— Received 232,371 bu, including 107 cars and 2,476 sacks local and 82 cars through. i . Red winter from 3c to 7c lower, comparejl with yesterday’s late sales, but in better demand,’export buyers coming into the market at around .$2.45 for No. 1 Red and $2.43 to $2.44 for No. 2 Red, No.' 3s and off’ grades selling, too, and all offerings taken orjsalable within the range of prices quoted. Offerings were about 75 cars of all grades, with a few cars heldlover. Hard wheat 10c to 11c lower. Export buyetrs took the offerings. Little or no milling inquiry todiy. Track sales, new wheat, unless otherwise noted: No. 1 Bed winter— 3 cars 60 @ 60i-lb. test at $2.48 dest, 9 cars 60 @ 61.2-lb. test at .$2.45 simplest, 1 car 60-lb. test at $2.44, 1 car at 60.1-lb. garlicky a|t -$2.41, M. F. 42.00 August. ., . September. October.... November. December.. January.... February.. 2 cars 60.1 @ 60..3-lb. garlicky at $2.40, 1 car 60-lb. smutty at $2.40. , No. 2 Red winter— 7 cars 58.2 @ 59.8-lb test at $2.45 SIX dest, 4 cars 59 @ 59.8-lb test at $2.44 two dest, 1 car bl. 8 -Ib 3% damage at $2.44 dest, 1 car 5S-lb 1% dockage at $2.44, 9 cars 58@59M-lb test at $2.43 three dest, 1 car 60-lb 2% rye at $2.43,1 car 59-lb test at $2.42,1 car 59.6-lb garlicky at $2.40, 1 car 59-lb smutty at $2.40, 2 cars 58® 59.6-lb garlicky at $2.39, 1 car 58.8-lb garlicky at $2.38, 1 car gplickly and smutty at $2.30. No. 3 Red winter — 1 car 61.2-lb 14.4% moisture at $2.43, 2 cars 57® 57.2-lb test at $2.42,3 cars 56M®57.1-lb one 1% dockage at $2.40, 1 car 59.7-lb garlickly and dockage at $2.38, 1 car 57M-lb garlicky at »pz,3d. No. 4 Red winter —1 car 54.2-lb test at $2.38. No. 1 Hard winter— 5 cars 60@61.7-lb test at $2.45 dest. No. 2 Hard winter— 1 car 58.4-lb Iowa 1% dockage at $2.40. No. 3 Hard winter— 1 car 57.4-lb test at $2.42. No. 1 Mrted— 1 car at $2.43, 2 cars at $ 2.44 dest. CORN — Received 14,300 bu, including 9 cars local *__ and 2 cars through. m arch SAMPLES—Only a fair demand' prevailed today and April prices off Ic to 3c. Local industries were the principal buyers, less than half dozen cars taken to fill outside orders. Offerings light and cleaned up. Sales, in bulk, on track, this and East side, mainly delivered; local weights unless otherwise specified: No. 6 com—3 cars loaded at 11.52. } yellow -1 car 13% moisture 1M% damaged at $1.60, 4 cars 11.8@13.2% moisture 1M®2% damaged at $1.61 one dest wts. No. 2 yellow —1 car 13.4% moisture 2M% damaged at (151.dO. No. 3 yellow —1 car 14% moisture 6 % damaged at $ 1 . 08 . No. 1 white—3 cars 13.4@13.6% moisture 1M®2% damaged at $1.60, 1 car 12 . 2 % moisture 1 M% damaged at $1.61 shipper’s wts. No. 2 white—1 car 14% moisture 4% damaged at $1.60, 1 car 12.2% moisture 3% foreign material at $1.61 dest wts, 5 cars loaded at $1.60. No. 6 white—1 car 13% moisture 12% damaged at 81.o4. Sample Grade —1 car hot yellow at $ 1 . 47 . OATS —Received 70,000 bu, including 26 cars local .. _ and 9 cars through. A ustralia SAMPLES—l®lMc lower. Fair demand from ship- pmg people early, but these buyers soon filled up and late market a little slow, with several cars carried over. Sales, in bulk, on track, this and East side, mainly delivered; local weights unless otherwise specified; No. 1 white—1 car at 82c. No. 3 white—12 cars at 79c ten dest one shipper’s wts, 1 car at 7SMc. No. 2 oats—1 car at 76c dest wts. No. 3 oats—1 car at 75c dest wts. KAFIR —Received 3,600 bu, including 3 cars local. LEAD AND SLAB ZINC $9.00 still asked by LEAD— Quote at $8.85 to sell; some producers. SLAB ZINC— Quote at $7.80. COTTON ST. LOUIS—Quotations reduced 50 points; quiet. G. M. 40.50 Mid. 38.00 L. M. 29.00 G. O. 22.00 Tinges and Stains 5Mc to 10c less. MEMPHIS—Quiet. Middling 38.00. NEW ORLEANS—Quiet. Midd. 36.75. NEW YORK—Quiet. Middling 39.50. To-day. 34. 40 33. 40 32. 02-03 31.55 30. 76-78 29. 56 29. 35 29. 22 - 28.95 May. 28.75 . 28.65 JiJy. 28.50 Cottonseed Oil—Per lb: Winter white, yellow, l8Mc; summer white, 18Mc; ' salad, 18Mc; cooking white at 18Mc; cocoanut oil, 17c; soya bean oil, 15Mc. Yester¬ day. 34.50 33. 70 32. 0.5-10 31. 50 30. 72 29. 47 29. 30 29. 10 28. 85 28. 65 28.60 28. 40 19c; do do yellow, 18c; do yellow 18c; Bradstreet’s omitted): U. S.—Wheat— East. West.. Canada.. Total available... Com. Oats. Available .Supply Changes (000 Last week. Last year. 1,082,000 inc 8,379,000 inc 982,000 dec 48,000 inc 1,571,000 dec 878,000 dec 1,421,000 dec 7,549,000 inc 572,000 inc 618,000 dec 796,000 dec 137,000 inc Exports of Breadstuffs from surplus countries— Broomhall: North America.. India. July 31. 8,140,000 W’k before 8,773,000 1919 10,092,000 Argentme. 4,458,000 752,000 3,805,000 1,496,000 i, 744,000 2,646,000 Cfi r\nn Australia. Various. Total. 13,350,000 ii, 074,000 oUy UUU 14,561.000 United States... A rgentine. July 31. 34,000 1,070,000 Week before. 140,000 1,644,000 1919. 2,449,000 100,000 2,545,000 Vkrious. Total. 1,104,000 i, 784,000 FLOUR, FEED, ETC. FLOUR— Unsettled and dull; scattered small sales only being reported. Inquiries with requests for offers for export noted, but low exchange and irregular wheat values deterring mills from making prices. Quo¬ tations by mills on Kansas 95% of $11.30 to $11.50 lute was reported, also an offer at $11.00 jute. Sales- 1 car low-grade (yesterday) at $7.00 jute, 1 car extra fanev at $9.50 jute, 1 car soft 95% at $10.45 bulk, 350 brls hard 95% (by local mill, on Southern order) at $12 75 in 9S-lb cotton, 1 car high soft patent (Southern orderl at $13.40 cotton, 2500 brls soft onp. t. Quote, nominally. Jute basis; Soft patents at $11.00 to $13.10, 100% at $10.50 to $10.75, extra fanev at .$9.50 to $10.00, clears at $7.75 to $8..50, low-grades at $7.00 to $7.25; Hard 95% at $11.00 to $11.50, 100% at $10.50 to $11.00, clears at $8.75 to .$9.25, low-grades at .$7.00 to $7..50, spring patents $12.00 to $12.95, first clears $9.50 to $10.00 and second clears .$7..50 to $8.10. Rye Flour— Quoted by mills in car lots in 9S-lb cotton sks: White patent at $10.90 per brl, medium at $10.00, straight at $9.60, pure dark at $8.70, and Rye Meal at $8.30—30c less in jute; jobbing prices higher"^ Corn Meal— Steady. City mill quotes in 100-lb sacks delivered: Corn Meal at $4.10. Cream Meal at $4.20, Grits and Hominy at $1.35. MILLSTUFFS— Wheat-feed quiet and easv Sales: 1 trk car hard Bran yes. p. m. at $46.00, 1 trk car do today at $45.00, 1 trk car Bran at $46.00,\3 cars ordinary grey Shorts (to go out, fifteen davs’ shipment) at .$59.00, 1 car hard grey Shorts to arrive at $60 00 prompt shipment: for 1,000 tons Bran season ship- ment, bid of .$37.72 was refused. Track car No. 2 Alfalfa Meal in new sks sold at $34.00 and 5 cars No. 1 in s. h. sks (for shipment prior to August 25th) sold at $37.00. White IIominy Feed stronger at $.59.00 prompt shipment. Oat-feed quoted at $36.00 prompt, $ 32.00 Angus) and $29..50 September shipment. HAY—Received 17 cars, of which 11 cars were Timothy, 2 Clover-mixed, 1 Clover and 3 Alfalfa Last week.. MTek before Since Jan. 1. 1920. bu. 4,442,000 4,458,000 187,676,000 Argentine Com Exports; , , , 1920. bu. Last week... M''eek before. Since April 1, 2,188,000 1,070,000 54,483,000 1919. bu, 2,188,000 2,244,000 45,962,000 1919. bu. 12,128,000 2,841,000 3,608,000 General Commercial News RKania*^^^^^ Russia has proposed peace to SMboH t’o'diy'! fix’ Westyn hogs 20,000 head, against 30,000 lost Satur- dfiy and L,000 a year ago. iM estern receipts of oats since 1st of \ugust reunrlArl at 3,454,01)0 bu, against 8,100,000 bu year aSf Tate wires from different points in eight States re¬ ported very little ram, but more or less cloudy Australian crop news more favorable: seedlirigs there apd m Argentme completed mider excellent conditions [Wheat shipments from Western marke1;s this week were 5,719,OOt) bu, compared to 4,0;5Wbu nmyiS Qeek, and 8,187,000 bu fast year. ' ^ estern markets since November ij 1919, show 1/7,194,000 bu, compared to 148 89*’ 000 bu yW before and 238,437,000 bu in 1918 ’ ^ jForecast-Generally faff and not much change in bimperature qver most of the grain States tonight and Simday, baiTing showers in Illinois and Missour 'VVesterii receipts of corn this week 2 625 000 bn against 3,591,000 bu week before and 1,619 000 bu last year; shipments 1,933,000 bu, agamst 1,580;000 bu vear ago- . 2 , Wired from . Regina, Sask.-Wheat fair to good around Regina, may run 20 bu, still green, and nSds r^; may average 30 bu; around Brandon msv nnUr rff 15 bu: 400-mlle trip reveals varieXtop cS,°„ns5 djrouth and much idle land; labor asking $7 per day? ’ 9964®—(To follpw page 326.) No. 1 s jv/ui • Wheat, bu.... Corn, bu. Oats, bu. Rj^e, bu. Barley, bu.... Hay, local.... Hay, thru. Lead, pigs.... Wool, lbs. Hogs, hd. Zinc & S. Shipments: Flour, bis. Wheat, bu.... Corn, bu. Oats, bu. Rye, bu. Barley, bu.... Hay, tons. Lead, pigs.... Wool, lbs. Hogs, hd. Zinc & S. 1,853,65711,694,325 217,100 269,100 572,000 - 11,162; 17,600; 1,417 1,313 37,690 111,600; 49,3811 49,070, 1 77,650 1,297,060 170,870, 104,380| 3,020 7,440i 1,155, 31,230, 248,800' 16,841' 194,980 302,000 6,796 14,400 1,307 969 47,420 145,700 46,767 72,000 70,660 876,960 179,470 253.330 1,180 5,020 1,345 26,830 205,200 11,134 110.330 15, 20 19 : 00; heavy yellow brass, 110.00; heavy copper ana Iper wire, 114.00; zinc, $4.50; lead, $6.50; pewter, 1,00; tinfoil, $38.00; tea lead, $3.00; aluminum, 20c; gip iron in car lots, $14.00(tc. 15.00 per ton. Veatiier—Clear; ther. at noon 88. l.OiOcal Forecast—Thundershowers this afternoon or 2,4)ight—Sunday fair—not much change in tempera- 2 , : 4 . 2,7 - 2,0 11,5 }1-Jday....| ^“*5 ^terday. j t year. Stocks of Grain in St. Louis. 1.1 10,6 8 5,2 1 Wheat Corn Oats Rye 185,096 340,169 56,563 10,683 j 184,298 356,106 56,614 10, 294 12,792,296 87,102 119,818 65,578 ?’rincipal Grades . 1 Red Wheat. . 2 Red Wheat. . 1 Hard Winter... , 2 Hard Winter... . 2 Corn. 2 White. Flour output of the following milli ^ this week, against 55,700 brls bv sam2 Yellow week, as follows: G. P. Plant Milling C 2 Oats... Stanard-Tilton Milling Co. (Alton, J 2 White. Tex.), 7,000; Kehlor Flour Mills Co. 3 White. Ill.), 6,000; Sparks Milling Co. (Alton 2 Rj^e... Haute, Ind.), no report; Saxony Mipr. To-dav Yesterday 45,983 44,9S3 86,863 66,785 18,722 3,000 , 16,170 12,000 15,762 15,762 33,198 43,400 38,760 35,017 18,583 19,523 1,960 1,960 19,086 20,196 3,545 3,555 49,122 52,687 Barley 8,522 8,252 4,627 Last year 287,169 2,090,641 19,019 91,139 60,070 3,614 5,381 2,620 17,680 66,640 33,081 9964°—(To follow pi PRODU CE PAGE O’CONNOR MARKET REPORTER CO. 218 Market Street. St. Louis’ Mo. Saturday, August 7, 1920. Prices heretvith are for round lots in first hands unless otherwise stated. Orders charged higher. EGGS, BUTTER, POULTRY, ETC. Eggs—Market steady. Firsts, country candled. 40 do, cases returned.. 42 ^ Today Last week 1919 Pkgs>cal. 2,503 3,655 3 ; 300 Butter—Steady. Quote creamery extras at 53 c staiidards 52c, firsts 47c, seconds 42@44c, ladles 41c’ packing stock at 39c. j -iic, Chees^Quote per lb: Northern Twins at 25Kc' Singles at 28c: Long Horns at 27c; Daisies at 26c- Y 4i/^ 2 c, prints at 29c; Swiss at 50c to 58c; brick at 25t> per dozen and common liye Squabs at $1.50. Dressed Squabs, 75c per lb; small and dark at 50c per lb. Veals—Unchanged: market steady. Quote choice 100@d40 lbs at 12@l21c per lb, 165@185 lbs at 10@llc, 185@200jbs at S@9c per lb; rough, coarse, heretics, etc., 5@7c. Sheep 2c to 6 c, bucks 3c to 5c, spring lambs 6 c to 10 c. Broom Corn—Nominal. Quote new choice self¬ working and hurl at $250.00 to $300.00 per ton, medium self-working and hurl at $ 200.00 to $225.00; medium to choice insides and coyers and common self-working and hurl at $125.00 to $150.00. Common insides and coyers at $75.00 to $100.00; crooked half price. Pop Corn-Quote shelled w-hite rice at $4.50 per 100 lbs. Peanuts—Quote, per lb: Tennessee farmers’ stock at 7c to Sc; cleaned jumbo at 14t^c. Pecans—Quote ayerage AVestern or Texas at 14c per lb. Hogs—Receiyed 4,000 head. Late market steady at $12.50@16.45. Leading Receipts For 24 hours ARTICLES Flour, brls. Wheat, bu. Corn, bu. Oats, bu. Rye, bu. Barley, pu. Kafir A Milo Maize . Hay, tons, local. Hay, tons, through. Hams, lbs. Meats, lbs. Lard,lbs. Lead, pigs. Zinc & Spelter, slabs & Shipments Receipts Riyer A Rail 1920 14,370 2.33,371 14, .300 70,000 3.200 3,600 235 119 270,000 40,000 4,860 15,620 St. Louis Produce Receipts and Shipments. Shipments Rail only. 1919 6,010 261,600 18, 200 40,000 5,500 1,600 ARTICLES: Apples brls. Apples, boxes. Butter, lbs. Eggs pkgs., local_ Eggs pkgs. through. Hides, lbs. Onions, pkgs. Onions, cars. Potatoes sks. A brls. Potatoes cars. AVool, lbs. 200,000 25,000 690 17,560 Receipts Riyer A Rail. at St. Louis. Shipments River A Rail 1920 16,0-50 3.53,210 19,520 3,630 1,530 265 5.3,200 613,800 2.33,400 2,240 19,390 1919 8,280 344, 880 17,870 18,275 1,000 250 74,700 689,800 11.3,600 132,500 12,590 1920 1,410 410 123,370 2,503 2,400 300 1,870 300 1919 780 7,900 2,224 496 407.900 20 1,560 1 8,100 1920 170 20 92,830 545 122,300 40 4,007 54,500 1919 10 20 20,440 3,892 1.32,700 480 3,600, John 1. Meyer Milling Co. (Springfield, Mo.), 1,500 Camp Spring Milling Co. (Nashville, Ill.), none; Hezel Milling Co. (East St. Louis, Ill.), 2,000; .1. F. Imbs Milling Co (Belleville, Ill.), 2,000; Bemet, Craft ’ and Kaufmann Milling Co. (Mt. Sterling, Ill.), 7,500; \ aher and Spies Milling Co. (4 mills), 11,000; Aiinan, Burg and Co. (city), none. ^ , FRUITS Apples Market w-eak at recently reduced prices^ large and demand of a local character mainly, although one car of upper river apples w-as loaded for shipnient. Home-growui boxed apples are plentiful and cheap and there is considerable coming in by rail in barrels and baskets w'hich are supplying consump- VivG needs to a considerable extent. Most of the apples from upper river are welthys anii inclucie many lots not properly culled and assorted, while the larger pro¬ portion w^as No. 2, small and green stock; and maiden- blush are being marketed too early, the fruit being green, small and lacking color. Based on yesterday’s sales, w'e quote No. 1 w'elthy and woll riyer well packed ®o $ 5.60 to $5..50 and No. 2 and orchard-run at $3.00 tyi $4.00 (mo-st sales at latter range); bu baskets at from $1.00@1.25 for No. 2 to $2.00 for No. 1; niaiden- and bu baskets at $1.00 to $1.50. Home-grown boxed apples sold at ranp of 50c to $1.50 loose. Local rail shipments Ill’, bu baskets sold at $1.25 to $1.50 and a car Illinois No, 2 duchess sold at $2.58 per brl del. Reported sales of upper river apples included 200 brls and 150’bu baskets at range given above; besides jobbing lots: 132 bris iveRhy at $5.00, 50 No. 1 do at $5.50, 24 do $5.25, 65 do at $5.,50 for No. 1 and $3.50 for No. 2, 18 No. 1 at $5 50 6 at $5.25, 14 at $4.00, 18 No. 2 at $3.75, 11 do $.150, 18 do at $3.50, 5 wdndfall do $3.12, 22 wolf river at $6.00 and 5 weRhy $5.00, 57 bu baskets fancy strawberry $2..50, 30 bu baskets w'elthy $1.60, 2’2 do $L35,’24 welthy $o.2;j, 17 do and wolf river $4.08; 16 w-elthy $2.95, i27’bu do $1.55, 10 do $1.40, 25 do sweet =81-35; 2 brls duchess $4.00, 12 maidenblush ' and 5 do $4.85,10 and 10 at $5.-52, 4 wolf river , __ w^ehhy $1.75, 8 do $1..50, 22 brls welthy'at $5712, * 21 " do at $5.50, 14 No. 2 do at $3.12, 9 do $3’.26, 28 do $3.40, 25 bu baskets No. 1 do .$1.80. Yesterday’s river receipts (twm boats) were 1414 brls and 411 baskets. Peaches—Market firmer on fancy elbertas, and demand good. Jobbing sales: Tennessee—2 cars bu baskets elbertas at $1.75; Georgia—1 car. bu bbkets elbertas at $4.50, 1 car 6-basket crates do at $4 25 1 car 6-basket crates at $3.50 to $4.00, clean-up of carls (decay) at $1.50 to $3.00. Home-grow’n -i-bu chip baskets sold at from 50e to $1.10. Pears—Quote Alabama sand pears at $1.00@1.25 per hamper; Home-grown chip baskets sugar pears at $1.25. Watermelons—Demand active, and market aTong Track sales: Missouri—1 car 22-av at $375.00; Alablima— 1 car 23-av at $375.00, 1 car 24-av at $3-50.00, 1 eat do at $369.00, 1 car 18-av at $269.00, 2 cars 25-av at ,f!:75.00, 1 car 25-av at $390.00, 1 car do at $400.00,1 car do (decay) at $325.00; Georgia—1 car 26-av at $320.00, 1 car do and 1 car 2S-av at $360.00. Jobbing sales at $1.50 to $2.50 per 100 lbs delivered—1 car 20@25-av Alabama jobbed at $1.50 to $2.00. Cantaloupes—Weak and low^er; larger portion of the offerings soft and overripe. Jobbing sales: Cali¬ fornia—1 soft car Turlock standards at $1.50, pony crates at $1.00, flats at 6 c, few good standard Turlocks at $4.00; Arizona—2 cars standards at $1.50@2.50. pony crates at $1.00(5)4.25, flats at 7.5c to $1.00; Arkansas— 1 car 45s at .$2..50 ,863 at $ 2 . 00 , flats at S5c, 1 car (irregular pack) standards at $1.50(5;, 1.7.5, 1 car 45s at $1.75(5 2.25, 36s at $1.50, flats at 80c, 1 car standards at $1.50@1.75 and flats at 65c, 1 car bu baskets at $1.25, 3 cars good 4.5s at $ 3 . 2 . 5 , .36s at $2.7.5, pony crates at $2.00, flats at $1.00. Lot Tennessee climax baskets sold at '50c and Illinois (Poag) bu baskets sold at $3.00. Oranges—Quote California Valencias' $4.00 to $7.00 per box in jobbing way. Lemons—Quote California in jobbing way at $3.00 to $4.00 and Messina at $3.50 to $4.50 per box. 90 2 142,100 RECEIPTS and SHIPMENTS at St. Louis. Receipts: Wheat, bu.... Corn, bu. Oats, bu. R 5 n, bu. Barley, bu.... Hay, local.... Hay, thru. Lead, pigs.... M ool, lbs. Hogs, hd. Zinc A S. Shipments: Flour, bis. Wheat, bu.... Corn, bu. Oats, bu. Rye, bu. Barley, bu.... Hay, tons. Lead, pigs.... Wool, lbs. Hogs, hd. Zinc A S. Last Week. ~^1,15 1,853,657 217,100 572,000. 11,162 17,600 1,417' 1,31.3! 37,690, 111,600 49,381' 49,070 77,650 1,297,060 170,870 104,380, 3,020 7,440, 1,155 31,230 248,800 16,841 194,980 1 Pre- Since Same 1 A'ious Jan 1 Time 1 Week. 1920. 1919. 59, 240 1,694,325 269,100 302,000 6, 796 14,400 1,307 969 47,420 145,700 46,767 72,000 70,660 87f), 960 179,470 253,330 1,180 5,020 1,3451 26,8,30| 205,200: 11,1.341 110,330, 2,548,900 15,64.3,715 20,129,520 19,108,130 156,130 326.433 326.434 67,886 1,621,780 2,439,500 2,3.38,296 2,706,100 2,059,635 11,5.34,5.30 11,582,765 14,524,070 188,950 150,845 81,955 1,195,605 10,67.3,200 860,408 5,219,730 1,675,810 17,299,445 13,388,133 19,904,000 163,492 721,400 93,026 21,967 826,800 13,322,600 2,448,057 2,919,620 2,217,505 9,640,610 8,414,995 14,811,705 87,610 236,460 62,99(1 1,185,480 14,69}, 70o 827,63o 5,419,71o Flour output of the following mills was 53,000 brls his week, against 55,700 brls bv same mills previous reek, as follows: G. P. Plant Milling Co. (city), 12,000; >tanard-Tilton Milling Co. (Alton, Ill., and Dallas, Mx.), 7,000; Kehlor Flour Mills Co. (East St. Louis, 11.), 6,000; Sparks Milling Co. (Alton. Ill., and Terre laute, Ind.), no report; Saxony Milling Co. (city,) VEGETABLES Potatoes—Higher; receipts lighter. Twenty bulk loads Home-grown on market this morning and early ohios sold at $4.00 to $4.50 and cobblers at $4.25 to $4.75 per 100 lbs; boxed lots ranged from $2.00 to .S2..50. Part car Virginia cobblers sold at $8.00 to $8.50 per brl del; 2 cars sacked Kaw Valley early ohio sold at $3.75; also couple lots lower river early ohio on levee—18 sks at $.3..50 and 22 sks at $3.65. Onions—Firmer. Quote Missouri sacked yellow at $1.85 per 100 lbs; North Missouri sacked reel $1.80 to $2.25 and white at $4.00 per 100 lbs. Home-grown boxed white onions at $1.25 to $1..50, red at $ 1 . 2 . 5 ( 2 . 1 . 35 , and yellow at $1.00 per box loose, and bulk loads red globes at $2.40. Cabbage—Quiet. Quote Chicago bulk cabbage at $50.00 to $55.00 per ton del. Home-grown boxed cab¬ bage sold loose at 50c to 75c, and bulk loads nearby Illionis at $1.75 per 100 lbs. Celery—Slow and weaker. Quote Miclugan high¬ ball crates at $1.25(5),1.50 and square boxes at $1.00. Lettuce—Fancy head lettuce in fair demand. Part car New York cases sold at $2.50 to $3.00 del and Chicago boxes sold at 50c to 75c. Home-grown lettuce slow at 25c to 40e per box loose. String Beans—Firmer. Quote Chicago boxes green at $1.25; Illinois hampers wax beans at $1.75. Home-grown beans sold at $2.00 to $3.00 per bu box loose, as in quality. Sweet Potatoes—Lower. Quote Alabama short hampers porto rico, yellow and white at $1.75(^12.00 for No. 1 and $1.00(^1.25 for No. 2; Tennessee bu ham¬ pers bermuda sold at $2.50. Home-grown bu boxes bermuda sold at .$3.75. Tomatoes—Higher on good quality. Quote H ome- grown ripes at $1.00 to $2.00 per bu box loose as to quality, and half-ripes at $1.25. SEEDS, DRIED FRUIT, BEANS Grass Seeds (per 100 lbs)—No business; samples of new Timothy to arrive offering, but drew n9 isatis- factory bids." On basis of latest sale, good old Tirriothy nominally at $9.50 to $10.00. Dried Fruits-Dull and weak. Quote Evaporated rings Apples at 10c per lb and quarters 9c to 10c; evap¬ orated chops 44c and waste at 4(2>4.4c; Sun-dried'(]uar- ters Apples at 9@10c. Beans and Peas—Quote white beans in car lots— choice hand-picked Michigan at $8.25 per 100 Ihs, prime machine-picked $8.00; orders ana small lots nigher; pinto beans $8.00 per 100 lbs. From Store- Scotch peas 6c per lb; split peas, green at 10 c and yel¬ low at 8c per lb. Per 100 lbs—Choice lima beans at $13.00; California pink beans at $8.00 and large ^vhite at $7.50. . Honey—Quote Southern extracted and strained bright amber in cans at 16c to 17c per lb; dark J@dc less. Linseed Oil—Quote in lots of 1 to 4 brls at $1.90 for raw and $1.92 for boiled. Cottonseed Oil—Per lb: Winter white, 19c; do yellow, 18ic; summer white, IS^c; do yellow, 18c; salad, 184(3; cooking white at 18-Jc; do yellow 18c; cocoanut oil, 17c; soya bean oil, 15^c. Green Meats—Quote, per lb: 'Tenderloins. MARKETS BY TELEGRAPH. CHICAGO Wheat—Dec.. Mar.. Corn—Sept... Dec.... Oats—Sept... Dec.... Rye—Sept_ Dec. Pork—Sept... Oct.... Lard—Sept... Oct ... Ribs—Sept... Oct.... KAN. CITY. Wheat—Dec.. Mar.. Corn Sept. Dec. Oats Sept. Dec High Low Close 2 35 2 31 2 32i-3 2 371 2 32 2 351 b 1 47 1 43 1 46*- -1 1 25 1 23 1 241 3f 731 71* 72ff 71 69| 70ii- 1 84 1 77-1 1 83 1 72 1 66i 1 70 26 00 25 30 25 65 b 26 50 a 19 07 18 80 19 00 b 19 42 19 10 19 37 a 15 65 15 55 15 55 16 05 15 85 15 90 2 3U 2 29 2 29 2 32| 2 31 2 31 a 1 39i 1 37 1 38-1 1 20| 1 18-1 1 191 711 701 71-i 694 68* 691 b Yes. 2 361 2 38 a 1 46-^7 1 27- I 73f-f 7l|f 1 821 -^ 1 714 25 50 26 75 a 18 95 19 25 15 60 15 95 Hams, skinned. ..29}^a30 Bellies Squarecut, seedless according to avg.22 a29}.^ Amer.lgttomed. 17 al9%! S. P. Meats—Quote, per lb; Hams, 10-12 lb.... 29^030 Hams, 12-14 lb.... 29^030 Hams, 14-16 lb 29 %^30 Hams, 18-20 lb.... 29% 030 D. S. Meats—Quote, per lb: Ribs. 16 al6%jEx. short clear.. 16%al6% .18 al9 .21 022 .17 017% .28 029 .34 036 .24 025 .60 o65 .15 016 33 034 17 018% Bellies, clear.21%a29% 344 36i 40| 22 | Bellies, clear.17 o20 Bellies, rib.17 a20 Ex. short c’ribs.. 16%al6% Smoked Meats Brkfst bac’n. Ight 35%a36% do heavy.... 34 a35 Hams.36%a37% Hams, skinned.. 36%a37% Regular plates .. 12%ol3 Clear plates.12%al3 Reg. jowl buts.. ll%oll% Fat Backs Light to med.... 14 ol5 Picnics. 21%a22% Ex. short ribs... 18%“18% Ex. clear sides.. 18%al8% Rough sides 17%al8% not in MINNEAPOLIS—Oats—Sept, closed at 68fc bid, Dec. 664c bid. WINNIPEG- 78ic bid. WOOL, HIDES, ROOTS, ETC. Wool—Easy at unchanged prices. Missouri, Illinois, Wisconsin, southeast Iowa, northern Arkan¬ sas and similar. -Oats—Oct. closed at 83ic bid, Dec. CASH PRICES AT OTHER MARKETS Light fine, long. 35 Light flne,short. 30 Heavy fine, long. 30 Heavy “ short.. 25 a38 035 <135 a30 WHEAT Red No. 2. Chicago Omaha. Kan.Citj 240 Minn. Spring 250 245 260 a 270 255 a 265 No. 3. 245 238 Northern No. 1. No. 2. Hard No. 1. 244 a 248 239 a 243 245 n. 2.56 No. 2. 243 a 245 238 a 239 245 No. 3. 243 237 a 240 248 a 250 No. 4. 236 a 237 255 No. 5. 233 a 240 2:16 a 237 CORN No. 2. 154* 146 a 146 j No. 3. 143 a 145 1 142 a 143 139 a 141 134 a 1.36 No. 4. No. 5. Yellow No. 2. 154 No. 3. isii 152 143 a 145 140 a 142 137 a 140 No. 4. 150 No. 5. 150 White No. 2. 155J 152 No. 3. No. 4. No. 5. OATS White No. 2 . 74J a 82 74^ a 79* 73 741 a 75| 72| a 74| B5f a 71f 194*-195* No. 3. 72 No. 4. 72 I rye No. 2. 1 192 185 Choice medium.. 31 Untied.30 Coarse, braid.... 15 Slight burry. 23}^2^24 Hard burry. 16 Southern Arkansas, Northern and Eastern Texas, Eastern Oklahoma and Southern and Southeastern States. Ligh fine..long... 35 c38 Medium.30 Medium, loose.... 29 Slight burry.22 Hard burry.12 Minnesota, Central al5 and Ligh ‘‘ shorlt... 30 a35 Heavy finel’ng... 30 c35 Heavy “short.... 25 c30, Western Iowa, Dakotas, Kansas, Nebraska, and similar Bright medium.. 29 Dark medium.... 23 a26 Slight burry. 21 a22 Hard burry.12 al4 Western Texas, Western Medium.25 o28 Light fine.27 a28 Heavy fine.20 ffl25 Short stubby.15 o20 TUBWASHED. No. 1. 40 No. 2.30 Mohair or Aiigora Goat) Long lustrous_22 a23 Short. 18 a20 Light fine, long.. Light ” short. Heavy ” long.. Heavy ” short. Oklahoma, and similar. 30 25 25 20 a35 a30 a30 a25 Burry, medium.. 18 Burry, hard. 12 Burry, fine.12 Slight burry. 25 Hard burry.15 fi20 cl 4 cl 7 13 Dry. Flint. 25 12 Salted. 22 11 Salted, Pack. 18 10 Culls. 12 7 Culls, Salted. 10 CHICAGO- Barley— Cash $1.09 (^$1.13; Timothy- Cash $8.00 (g$ll. 00. TOLEDO—Clover—Cash $20.00, Oct. $20.05, Dec., $19.30, March, $20.00; Alsike—Cash, Oct. and Dec., $20.40 ask. March, $21.00 ask; Timothy—Old, $4.45, New, $4.60. Cash $4.55, Sept., $4.60. Oct., $4.40 ask, Dec., $4.45 ask, March, $4.65. Western Receipts of Wheat from last Saturday to yesterday inclusive, as compiled bv the St. Louis Daily Maeket Repoetee: This M^’k Last w’k 1919 1918 St. Louis. 1.854,000 1,694,000 1, 972,000 3, 306,000 Chicago. 2,150, 000 1,034,000 5, SOI, 000 327,000 Toledo. 247, 000 147,000 508,000 306,000 Detroit. 20,000 15, 000 75, 000 54, 000 Kansas City . 2,128,000 2, 254,000 4, 481) 000 3, 940,000 Milwaukee... 48,000 51,000 82,000 78,000 Minneapolis. 1,415, 000 1,668,000 1, 8.S8, 000 1, 588,000 Duluth. 4.54, 000 459,000 50, 000 27,000 Omaha. 1,141,000 1,305,000 1, 170,000 1, 157,000 Peoria. 222,000 1.59,000 158, 000 306,000 Indianapolis. 568'000 466,000 813,000 .576,000 Total.... 10,247,000 9,248,000 17, 007, QOO 17, 667,000 Western Receipts of wheat from July 1 to date St. Louis_ Chicago. Toledo. Detroit. Kansas City. Milwaukee.. Minneapolis. Duluth. Omaha. Peoria. Indianapolis. Total.. 1920-21. 1919-20. 6,127,000 11,277,000 4,459,000 17,261,000 664, 000 2,015,000 120, 000 221,000 8, .535, 000 19,039,000 305,000 317, 000 8,097,000 6,577,000 2,195, 000 518,000 3,816,000 3, .500, 000 532,000 703,000 1,274,000 3,553,000 37,122,000 65,500,000 1918-19. 13,601,000 15,392,000 1,470,00() 183,000 19,743,000 207,000 4,868,000 39,000 4,441,000 937,000 6,225,OOo 64,lll,OOo Slight burry. 15 Hard burry. 10 Sandy, bucks, dead, cotted, etc., at usual discounts. Hides.—Dull. Quote, current receipts (less 1 lb. tare per hide on wet salted): Wet salted. No.l. No. 2. Bull, No. 1. Bull, No. 2. Glue stock. Uncured hides 2c less. No. 1 horse hides, mane and tail on, $6.00—small and No. 2, $5.00—glue and ponv $3.00, colts 75c., hog hides 50c—glue and pig half price) Feathers.—To command full quotations, stock must be dry and full grown. Quote, per lb.: Prime wlrite live geese 88c, prime grey do 68c. Duck—white 68c, colored, 40c. Chicken—prime drv-picked body 6c, green 3c—musty not wanted. Chicken and Turkey body mixed 4c. Turkey—white body 50c, green 40c, colored 10c, green 8c, witigs, tail and pointers,"8c. Boots—Quote per lb: Golden Seal, $5.15, Lady Slipper, 50c; Seneca, 75c; pinlc, 75c; black, 14c; May apple, 10c; snake, 45c; black snake, 32c; Angelica, 18c; Wahoo bark of root, 35c; bark of tree, 18c; wafer ash bark, 10c; bloodroot at 14c; striped blue-flag, 8c; sassa¬ fras bark of root, ISc; wild ginger, 18c: skull cap leaves, 6c; wild ginseng, $10.50@11.00; transplanted, $3.00(^ 5.00; cultivated, $2.00@3.00; star root, 45c. Foregoirig prices are for clean, dry roots free of foreign material. Sheep Pelts—Quote, each: Wool pelts $1.25. Dry stock 20c per lb for light and 15c for heavy. Shear¬ lings 10c to 200 . CJoat Skins—Quote No. 1 common at 60c, No. 1 angora at 50(®60c, clipped angora at 30c, kids and glue at 10(@15c. Beeswax—Quote prime at 32c per lb.—impure and inferior less. Tallow—Quote country No. 1 in brls and tubs at 10c per lb No. 2 at 7QiSc. Movement of Grain (24 hours) WHEAT. Rec. 232 465 254 247 11 (000 omitted) St. Louis. Chicago. Minneapolis... Kansas City... Milwaukee.... Duluth. Omaha. Toledo. Peoria. Indianapolis... Detroit. Baltimore. Philadelphia.. Boston. New Orleans.. New York. 11 77 21 46 101 1 152 209 436 266 .T. CO] RN. OATS. Flour Ship. Rec. Sliii). Rec.lSliip. Shin. 353 14 20 70i 4 16 114 148 113 270: 141 21 81 10 13 7; 4 52 143 8 3 12 5 51 19 no 36, 117 38 79 43 34 34' 42 1 3 2 2 3.' 66 7 65 31 4 7-1 18 33 118 78 1 3. 246 22 9. 387 4 14. 3. 8 i 296 5 28. Rubber, Rags, etc.—Country rags $2.50 per 100 lbs- old rope—manila $5.00, common $2.00. Rubber—No i boots and shoes 5c, No. 2, 4c, No. 3, 3c; auto tires 2c; inner tubes at 6c. Scrap Iron and Metals—Quote per 100 lbs: Light brass, $8.00; heavy red brass, $14.00; light copper $12,00; heavy yellow brass, $10.00; heavy copper and copper wire, $14.00; zinc, $4.50; lead, $6.50; pewter $25i00; tinfoil, $38.00; tea lead, $3.00; aluminum 20c’ scrap iron in car lots, $14.OOfe 15.00 per ton. ’ ’ lifeather—Clear; ther. at noon 88. ^ Local Forecast Thundershowers this afternoon or tonight—Sunday fair—not much change in tempera- turp. ^ Stocks of Grain in St. Louis. PROVISIONS. Green Hams weak; Lard and D. S. Ribs about stead y Demand dull. Lard—Quote, per lb. in new tierces: Prime steam... 18.65al8.70 | Kettle-rendered I8%al8% To-day_ Ye:}terday. f rincipal Grades Noj 1 Red Wheat. No 2 Red Wheat. Nojl Hard Winter... No] 2 Hard Winter... No] 2 Corn. Noj 2 White. No 2 Yellow. Noj 2 Oats. Noj 2 White. Noj 3 White. No 2 Rye. Kato. Wheat Corn Oats Rye 185,096 340, 169 56,563 10,683 184,298 356, 106 56, 614 10,294 2,792,296 87, 102 119,818 65, 578 To-dav Yesterday 45,983 44,983 86,863 66, 785 18,722 3,000 , 16,170 12,000 15,762 15,762 33,198 43, 400 38,760 35,017 18,583 19,523 1,960 1,960 19,086 20,196 3,545 3,555 49,122 52,687 Barley 8, 522 8, 252 4,627 Last year 287,169 2,090,641 19,019 91,139 60,070 3, 614 5,381 2,620 17,680 66,640 33,081 9964°—(To follow page 326.) No. 2 APPENDIX TABLES. APPENDIX TABLES 327 I For States included in these divisions, see Ch. II, sec. Table 2.— Distribution of elevators and warehouses by types in specified States and grand divisions. Line houses. I Individual houses. 328 COUNTRY GRAIN MARKETING. 1 For States included in these divisions, see Ch. II, sec. APPENDIX TABLES 329 1 For States included in these divisions, see Ch. II, sec. 330 COUNTRY GRAIN MARKETING. o • 2 "a e ?>. C>J 'TS i 'T3 ■w 00 •S CO 00 (3 ■TS si C3 CO 5 C3 § •c* <» CO Si o r< CO si -o Is rO S V Oi « » m < &H CO o CO d O 03 >1^ o CO O 4-» cd > "o C3 a CO CO :3 o o Ui c5 (h o CO t-, O 09 > o I? o d t-t 0^ c9 d ® • ft's ^ d 03 Ih . CD O O-^ O 'S « cc 1^ il a-„ o.i; O o CJ CO CD d • o • o • to » (... »o 6 ll * • (N ^CO^OtOOOcOOOOiGOCCJkOOr^OCOCOOD KCO’^OOOCOOCvlOOOC^COtOC^Ot^COO ^OOODOC50iC^OairHO»-t>-Oi ^ I COOOODC^tOt>*OOtOCOO»^tO j^COOit>-cOCOtO»H-^'<^i-Hi-f^ ^t^i>t^odf-Hoooococoo4 g ^ rH ^ rH I 1 O CO >0 (N TjC O i-HOOlOCOe^i-IOi—(t^OCOr-IOOcOTjCOOCO ^;(NO>cot^oa>cj5cocsiococtitiodocio>oO'-ioic4COC^OOl>-t^OOCOCOOOtOC^'^rt<00 I *000 O • CO to CO o oo o3 05 • o O to o • CO 00 o o o v< • CD CD lO 50 • O 05 • 05 to 05 05 V. 05 ft t> s • lH rH • rH rH ^ rH rH o O-^ O 1 • • • • • • t • • fOOOO.-lCciOOIV^.-l'^.-IOS'^OOOCOO j^lCOCOOiiOiOi-Hot^CCIOt^OCDOt^t^ ... ^OC000t^t^0D0iOO05O»HOCv|i-JC0’^00 ^ ^ rH ^ ^ tH rH ^ I .tOC^'^CO«OOOi-4t^OOtOt^OO'^ODO'^t^ ^,t-HC^OD05eot^050tocooDcoc^Ciooc r>- to to tooco C. CO 00 05 00 05 C5 rH o (N to o 05 to Tt* 00 05 o 05 00 05 o to W O , R c3 CD i ^ > CO ' ? d '1^1 ® § g •H CO V t~4 o o •M cO CQ .oocot^c5cor^’^rHOt^oor>-co05 05QOO S...»Hr'-OtO00 00 05C5C005t000rHC0tOC0C0 H:il>^r^C00d 05 05*05OOOrHrH(r4c^t^a5 05* K ^H ^H rH ^H rH »H I rH O 05 05 CO iH t-. CO to to to CO o o CO to CO CtS o Hj > piq I-D c3 a o W S 03 Is o3 03 d-^ C3.S 03 03^^ 23Q s d « d-iS O TO ’w CD •dec K* ‘fH ;d TO c3 CD Pm ^ . • o W) -*-> d 03 •-! JtJ d Pi 5 P p) c3 O 03 3 S.2S-” p'd's-S d.2 go g ^ O 3 o CO rH 'O' g<.S •H u td p o H CO H [> •d d o x! a> 03 o ft s§ rH -N ^ 9 • - ^ P^-2 d « rO'P 0-3 Ej P CO O J3 t^T* CS •§ i 03 ® o a as g s CD o3 Vi d V4 O P^ CD Vi CO CD CO P O x: CD Vi 03 'a HH) o H ot kH 08 -d d c3 m Ih o -l-> 03 > 6 (h S3 W d O d1 ® >H 03 'd p 03 'S 1 CO v« • o r-1 • ■ C8 . C3 J> ® s CD Id ro rn g o ®,d c3 O < H bO P •H Vi O PX 1 For States included in these divisions, see Ch. II, sec. Table 5. —Construction materials of elevators and warehouses in specified States and grand divisions. APPENDIX TABLES. 331 All other. Per cent of total. o fi r-ie- • • • % * * • t 1 * • • 05 CO 1.65 Num¬ ber. ^ O 40 O CO 156 • t C^rH • • ■ • • • • • « « • • ■ CO 169 Wood and stone. Per cent of total. • I * • • OOOt-h 'CO * 'OOCOC^O ’CO • • Tji 00 00 TP • * * * • • * • • lit • • O *05 • cO * 05 • . csi . • ( « • .30 • ■ ( 1 • • t t • « * * « • « • • ill • « I * 1 • 1 1 • « • 05 (N Num¬ ber. • lO^OC^ 'C^ • •C^C0C^»-H • 1 • 1 • « ■ • • « 1 « • » • t • t rH *40 • « • ■ • « • • • • • 28 • ( • • t • • • • « • • • t t 1 • ■ • I till ■ • • * • • • 1 • 28 W ood and concrete, Per cent of total. ooooNM(M>oc<^'-iot^oo505a>oco C^t:^tOfQO'i*0000>OOT}<.rt(OOt-ir-iCiOO Or-Hr-I 'tNcir-I ’ci "cii-I 1.48 .42 3.57 1.37 1.47 Num¬ ber. ’«^^C^t^COOiOOT}iC^CO'^cD05eoi-HC^oocot^ocOi- (N t—l CO 1-H (N CO i-H (N t-i 1-H CO 15.74 CO 05 Tp 05 O 1-H CC 40 05 00 rH rH pH 16.25 15.76 Num¬ ber. C^Q'^COt^'^OOT-HC^CDrHCOT-HOC^O COOOiOTjirHOOOCOOOTticOCOCOOT-iCO 1—1 1—< 1,448 CO CO CO 1,519 Steel. Per cent of total. (N 00 • CO 05 »-H o 00 T-t 1-HCOTji 'i-Hi—ii— O • 1-^ t-H r—t lO ( 4.19 .60 4.03 4.18 .71 2.52. Num¬ ber. • 1-1 !>■ O 1-H 1-1 • 1-H ^ « • •00 1H 40 ( • t • • I t O rH • • iH » » • • • i • • 1 • rH tH (M 00 Concrete. Per cent of total. i-iC^COi—l005iOT-*OOOiOC5l>Ot^OCO C.OOI>OI>*t^iOt^cDiO(M t^OOCOi—'iOCOi-H(MCOOOCOt^»OTpTpOT^ •cdQcO'^*ooc50cocococ4 050CO0500iO0Ct^i0Ot^’^t>*cCTr't^i0 77.53 ,|>l^cO 71,85 77. 28 Num¬ ber. t^THCCOiOiOiHOOTfCSi-Ht^COCOCOC^iO COi—'005Tj^Tfl>^C^(Ml>*Ot^OOOC.CCiOi-HC^COiOC^COCOiCOt^THt^-^ i-HCOT*H'rpO5f-H00t^rHTj-0»0'«C<*^COC^C^C '3 .5 CO c3 ■4-i CO c APPENDIX TABLES. 333 fl 0) o 04 o a> ;h fl fl 0) fl o fl fl CG OQ 0) iJ APPENDIX TABLES CJ a> c; o u rc O CD w ^ ^ ^ ^ ^ § e!i CO •4'lA ;A 2 ^ ^ ^ ^ ^ •C 0> O O) O) o8 th ^ ^ t-s o es I eo 43 ®»H H eo'jooot^ fH r-l iH 1-H »H j ci e4 -A >A «A 03 ^ ^ ^ ^ ^ Oi O Cd o> O • • OO *0 • « • • * • • • * • * * » • th O T-i05r-’irt^ 1-4 CO o o t^t^cDt^cb 6.80 ! o lO • ^ . - 05 (M 05 04 0 o o ^ o o CO CD CD 05 t> * • • • ^ rH ^ >»-y ^* 5 ^ 00 CO 0 04 00 O W5 00 (M 05 04 0 00 CO CO CH iC O ‘D 05 lO 1-H CO 05 O C4 CO 1-4 O 0 04 0 CD CD kO r^t»iOOoot^ COl^ 0 05 1^ ic CO CD 00000 COO 0 1-4 C4 tH CD oo»ca> c<30 05 05 05 CC 05 'rr iO(NO* (N 04 CO CD 00 10 • ^4 rH 1—( —H !>► ^ lO 00 CO CD CO ^ Tt< 05 00 05 CC OO CD O o Tj<00COCDO4 »D O 1-4 00 CD 1-H CO CO CO 04 Tf «0 O ■>»' 05 04 05 100 04 05 <0(N 00 CCI 04 05 04 00 00 Q O CDt^ 05t^ ^ 05 CD CD 05 D4 1^04 04 ^ to CO CD04 iO to CO c^ ^ ^ ^ 0 04 "' 00 04 00 05 CC 04 kOt> Tfi Tfl CDt>.0000 CO l>- CD CO I> 05 ^ tH CO 0 CD 1-H 05 CO CO Tp 10 o' 04 O H d o o a o ja •4^ 'S 'S <9 d o n 'S I COUNTRY GRAIN MARKETING. 338 cc a O CO gq Os S£ •g -I o . ?5- ss •<~2 c Os r~* o eis 's I >H Oi I T ~1 Oi ss CQ Cn 5 £ o s- a, ? 3 l Oi •-0 e P, •S 'I a, %> HO rfi s fi. ►•0 00 « •J cc < Eh I' 'C 03 PQ Ph 03 o S o O C3 (H 60 P o ^ © C8 O © 4^ oeooooit^ooc^eor^Q'^00 000 t'- 0 < 0000 > 0^030 c 4 odi- 3 oi 4 -^oi 6 '‘ 0 ‘ 0 t-ic 4 '^ CS|rH.-l o a <5 S'S'S o ® t; 60 o ® 03 -(-> o a <5 Ht« 05 O 4 -< Q 00 ■ 4 *< >Q 5 eo 0 > <0 O On «0 4 o» ■' 0 * o '4'i-i«-i''**»oooooe^4o iOC04-tC0'«J Ph a p o a s°^ o o fe fl p o a ■S'” • O © 4 ^ tH tCo © C3 4-» Ph o a <>i S 0-3 O ® i 3 t: 60 o o a <) es i M > H.g 42 at: MOO P 4 P o a -p d 03 (x ® ® >4 c<»f 04 HC 4 ioo« 0 (N«oa>t 04 Hoo i 0 i-(coco-^ocoo»a 340 ooo «oodcoc 5 « 6 od 5 d«o.40t—O‘«00 o'oTco'oo'^rori-T'^orct'o'io S odo5«oOi-hooooc^’-io c>31'. lO 03 M o»| Q O O OS 1-4 f-40 CO 00 44H O to r-( 1 O ■ 4 j 4 e< 94 - 4 o 6 >ocococoeoc 4 c 4 c 4 fM 03 f-4 4-^ ocoo 36 xoe<»t^»o^>o '^40 ioooo 40 txeo- 4 i 403 oc 0 i-it^' T)icdo 640 odi>^ 4 - 4 oodcoo 6 cd i-4fOCOb~03 00030300T—li—lO ^OSlOlNOSCOCO'l’COfNt^COCO ,£2'-i40-4ro(MtoiocDOcD»-4t^ oroo'oo'’-:''-to''-^co'co't^c£r o' .oCCIOC^<^io 3C0i040''T'O03(N0C-'f03l0'^ PQ co'io'ccT'^t^co'orocTcorot'tir'o' t-ICOT- 4 iOO 3 C 3 I:^e 3036 'Q''i 4 C 0 O‘ 0 C^ 03 l- 403 l 0 ' 4 t 4 t^C 0''»4 eoOiO<-ICD^OO 0003 OOcDC 000 C 0 '' 1403 eci 00 e<5oooo-rt40t^03i—icoc^cgtx Oi-l03400 IN >0 40 03 J >0 CO t-l 6- CO •4*4 C 0 ' 4 t|^O 3 ' 4 * 46 ''^ 44 c 0 C 0 i- 4 i-H 4 -l 00 03NC00000400400^;^ f^N03ON40t^C0C0i003(N 00000>OCOCOCOCOC0003tx. Co'— 1 ^ 4Hi-H40400t—!•—40 C 30 COCOO'^COCNC 3 *t— 44 — 4 t —4 4OO3x-4C0COC006'*040CO'^''*4 N r —4 rH OiHCOCDININrHINcOCDOOiO rHCOOOrH-*40003000000 CO>OOCONCO'^r-403t— OO S *‘cf or 4 o'(^^ 4 'oo' 4 -rb 4 ^ 03 H 4 CO NcOCOO(N(N>Or’CONQO C 0 C 0 C 0 C 0 C^c£ri-rc£ro 3 o- 4 o 40 40 CO ^ ^ o tr:> CO (N (M 00' o 00 o o (N 10 lO crT kO CO C0t^*^^i-HC0l0O05t^ ^C^ur:)t^GCi-Hc^c-.t^ooTii rC ^''r-^C^TocT^^to'^t^C^o’ co-^CD^Mr-tcOiOCOiOt^Oi ^COCCt-’^OCOOCO^i-H ^ iocoO00tH.C0C040i0 COOC.C^OOO t^OOkO(MiOCN^ u5oO'^CO^tj5oqO oco b*» 00 O oTt^ t>» C5 Wk. -V ^ . H - , ^ CO .- 4 ^ OstH-iOOOOtOOO'^iOiO COCOC^COOC^I— 'i-Tc^irTi^co'QO^io'^^ '^a 50 t^»oo 5 oooc^co CD 05 iCOC^OiO»OCDC^ <^i>'t>-rTtru:rio'orT-^oo lO tH. i>- o o 10 00 C 0 C 0 l 330003 l 03 THrHC 0 'ct 44 CO 40 CO-ci4-4*4cOCOCOCOlCt>ODCO COCO- 4 * 4 ' 444040 l>CO-^C>icO(N ^ ^ fH oocvic^cotH*copr^cooiMO t^oo5i-»i>»to^«ooa5io COCOiOiOOO^COOCOCQ’—itH. 1 —I i-Ti-h 00 tn^oTp lo CQ o lo CO C^iO'^(NvClr^OiOpT-HpT^ OOOOOOcOOcDCOCiGiOO 1—4 CS i-H 1-H o o 00 o' (M T}H C5C^COCO'^CDI'^»^OCO’^00 lOcOcOi-HOitOOOC^cOOicOOi o 6 iOC^i-HOI>^C 5 iOiOCOt! 4 CO |,Hi-Ht^iOt^'^COOCO ,52 00 05 06 10 ^*4 N CO N 10 M S 5 rSiOO ao CO 5 $ ^ 92 ? 2 ^ 92 ^ X.X. ,-rr 4,~^00 COO5tO(Ni-H00C^O5CO C^IOOICOCOCOOOOC^I '\ooo CO r-Ti-TocTi-^oo c>co ^ CO CO CO C <1 CO Cs| cq i-( ^1-H 00 r^ »* 05 wo O CO O'^OOlOCOOCOOOrHtH-t^iO l>-tN-t^COW3'^i—tt-iCOOCOO tH.r^ c^c4'co''ccrc^c^c^c-COW005T-*COcOW500 C^C^00O'^W005{MOC0 wo Ht« < coco* >w^*^,-hOC0(Nc005C0 >4^4^CO'^C»05 ^ 3 J-* ^ d! 05 d-^^x-r X r ■ - HbS 03 s lll^ Table 9. —Rate of capacity turnover of elevators in specified States handling specified grains exclusively and in combination. 340 COUNTRY GRAIN MARKETING. State and average rate of capacity turnover. m North Dakota. Rate. 4.00 4.00 00 Ci Oi CD iO ciwcq 2.54 I . .oo • *10 CO 1 I eco CO 3.45 2.57 Eleva¬ tors re¬ porting. iO kO »HOQ 1-H COO> 1-^ \o 740 oe i 1 766 Montana. Rate. 2.88 2.88 coooo COt^fcO COMW 2.84 1 : ! lo 1 2.50 2.85 Eleva¬ tors re¬ porting. o to o o co^o co*^ CO 117 I i • * 178 Michigan. Rate. 5.60 6.00 6.00 5.78 • • 2.71 3.17 2.69 2.94 oco ot^ ^ CO 00 00 CO 98‘i 3.60 Eleva¬ tors re¬ porting. to a c5 00 a> 1 ^ CO CO 05 co^ 05 »D 166 Wisconsin. Rate. • • • • • • • t OIO CO lO CO rH C*^ 2.15 CO OOC^I ■rj5 CO CO 3.61 or^ooo XD f-I kO CO OiiDCO*^ 4.43 3.67 Eleva¬ tors re¬ porting. • 1 • • • • • f lO CO CO 1-HC^ ID 05 CO CO CO 153 Missouri. Rate. 4.00 4.50 6.50 00 o 2.90 1.50 2.77 1-H005 • COO) CD • • • • • ^ T}4 • 4.67 4.35 Eleva¬ tors re¬ porting. ^ f-H 1-H CO CO CO OiH ^ CD • CO • 00 131 Ohio. Rate. ' 2.89 1.50 2.83 3.97 3.50 3.84 1 7.32 4.45 5.49 6.22 5.28 4.87 Eleva¬ tors re¬ porting. CO cs COCO ^4 CS| 1 H CO o i-Hr» CD 171 1 ^ 1 Illinois. Rate. CDOO 4.13 01‘i OS* 3.50 1 cO ^ XD ID ifO 5.77 5.67 Eleva¬ tors re¬ porting. ^ CO C005 O 05 ID 486 516 Oklahoma. Rate. 6.50 3.50 6.26 6.67 3.50 6.21 05 CO o 1 -t CO o ^ ^ c )PC > 4 “»C Total. Elevators handling 2, 3, and 4 grains (excluding com): 2 grains. 3 grains. 4 oTatnn ^ Total. Elevators handling com and 1, 2, 3 and 4 other grahis: Com and 1 other grain. Com and 2 other grains Com and 3 other grains Com and 4 other grains Total. Grand total. Table 10 .—Capacity turnover J)y capacity of house in seven specified States. APPENDIX TABLES, 341 Table 11 .—Number and 'proportion of cars of different kinds of grain sold on consignment and direct in specified States and grand divisions ^ for the five crop years July 1, 1912, to June 30, 1917. 342 COUNTRY GRAIN MARKETING. Rye. Wheat. . Barley. APPENDIX TABLES. 343 0 > ui 6 <» ® 03 T3 « X> S3 § 03 ® 03 +3> 03 S-i O f M-, ^ Table 12 .—Proportion of different types of elevators handling specified side lines in 14 principal grain-producing States of the Central Westd 344 COUNTRY GRAIN MARKETING. Per cent of elevators handling side lines which handle— Other. f-H Ci CO CC tH CD C4 rH CD CO r-< CO T-H 12.83 71.18 42.61 50.00 100.00 53.63 37.90 i e9 o PQ o8 I § rH • fH t • • 69 T OOt^ 1-H O COd ’ tA 1.44 1.54 Mer¬ chan¬ dise. 0.41 7.46 .84 .70 ^ ^ tH ^ ^ CO 2.14 Coun- prod¬ uce. 1.47 2.99 1.27 UO t^oco cicoi-H 2.83 2.23 Ferti¬ lizers. lO 05 CO CO 05 05 1.50 tfO CO C4 3.74 00 00 Live stock. 4.30 8.96 1 3.71 7.00 7.47 3.23 6.99 6.72 For¬ age. 05 00 1—1 05 CO (N 3.34 3.62 9.73 12.90 7.72 6.03 Farm imple¬ ments and tools. 1.94 14.93 .28 2.07 11.51 8.89 2.42 9.37 6.56 Fenc¬ ing ma¬ terial. 2.06 10.45 .28 2.02 17.79 5.37 .40 9.55 6.65 1 Seeds. 12.01 22.39 4.76 11.09 14.17 19.36 12.10 16.92 14.67 Build¬ ing ma¬ terial. CO O CO 05 CO CO O O CO CO CS CO 17.53 17.55 22.67 6.45 19. 60 o 00 00 t™4 Flour. C0 05l>»t^ eo CO (N CO (N rH 33.79 41.87 24.04 37.90 31.57 32.43 Feeds. 32.86 55.22 83.75 83.33 42.25 55.39 46.29 65.32 51.00 47.63 Coal. iCcOt^ kOOl CO CO O co 00 00 lO 78.16 82.69 63.39 30.24 100.00 68.04 71.94 Per cent of eleva¬ tors han¬ dling side lines. CO 00 05 0 CO o 05 rH fH lO CO 05 70.07 COT-tOC< O5 00l^C^ J > t 86.18 79.16 Num¬ ber ele¬ vators han¬ dling side lines. ooi>r^co 05 CO wo CO CO 2,128 1,242 1,901 248 1 3,392 5,520 k IN um¬ ber ele¬ vators report¬ ing. j ^ cooo-^ 3,037 1,357 2,244 332 3 3,936 6,973 Classification. Commercial... Cooperative.. Mill. Maltster. Total line. Cooperative. Independent. Mill. Maltster. Total individual... Grand total. ^ For States included, see Cli. U, sec. 5. Table 13 .—Proportion of elevators handling specified side lines in the U principal grain-producing States of the Central West. 346 COUNTRY GRAIN MARKETING r Table 14 .—Proportion of elevators in specified States reporting the use of specified classes of price information. .11 state. Number of eleva¬ tors re¬ porting. Daily price cards. Market telephone and private wire system. State. Percent¬ age of ele¬ vators using. State. Percent¬ age of ele¬ vators using. 1,349 North Dakota . 96.16 North Dakota. 74.22 :|l| A11T171A Qnt.ft . ... 1,111 Montana. 95.01 Illinois. 59.08 M TllinniQ . . . 997 Minnesota. 84.16 Iowa. 53.53 809 Rnnth Dakota. 77.01 Minnesota. 51.94 9 . . . 736 Iowa. 54.08 South Dakota. 47.10 ■ 'K'anQft.Q 586 Illinois. 51.96 Nebraska.. 34.02 X 582 Indiana*.. 49.23 Kansas. 32.08 X ATnnf.QTift. . . 401 Ohio. 48.48 Michigan. 31.73 X 392 Michigan. 42.31 Wisconsin. 31.37, ■ 328 Missouri.. 40.64 Ohio. 28.96 S 208 ■Wi.seonsin . '39.71 Indiana. 26.53 4 187 Nebraska. 34.71 Oklahoma. 24.03 X 204 Kansas. 33.28 Missouri. 22.99'X 154 Oklahoma__ 20.78 Montana. 17.96 X Total. 7,944 Average 14 States. 63.97 Average 14 States. 47.02 X Price currents. “On-track” bids. C. N. D. State. Percent¬ age ofele¬ vators using. State. Percent¬ age ofele¬ vators using. State. Percent¬ age of ele-. vators using. 68.45 61.27 55.71 50.05 50,00 46.56 39.29 35.67 26.55 26.44 24.97 20.13 10.97 2.74 Indiana. 54.85 53.96 53.06 51.90 41.98 35.06 31.25 27.15 21.93 18.42 11.07 10.78 3.60 3.49 Kansas. 37.71 36.36 24.97 23.67 19.54 19.43 19.21 19.20 17.28 16.58 16.58 16.49 11.54 7.84 Ohio. Oklahoma. Illinois. South Dakota. Iowa. Illinois. Kansas. North Dakota. Oklahoma. Iowa. Michigan... Ohio. Nebraska. Montana. Missouri. Minnesota. South Dakota. Indiana. •MiTiriP.snt,a.. Missouri. OOU vli X/cllAUbw •••••••••-- Wisconsin. Nebraska. North Dakota. North Dakota. Montana. Michigan. Wisconsin. Average 14 States. Average 14 States. Average 14 States. 34.34 27.95 20.97 Bids “to-arrive.” Main office. Other sources. State. Percent¬ age of elevators using. State. Percent¬ age of elevators using. State. Percent¬ age of elevators using. 38.45 37.71 25.77 25.77 23.21 18.60 17.80 11.79 11.06 10.29 10.16 9.09 8.09 7.98 Oklahoma.. 38.96 36.25 18.14 14.90 12.80 11.99 11.72 10.03 9.78 6.75 6.55 5.35 3.92 2.74 Michigan . 30.29 28.88 27.74 23.38 22.19 19.04 18.15 17.26 15.81 14.71 12.22 9.45 9.09 5.20 Nebraska _...... Missouri. WlsnoTisin Ohio. Miohigan... Kansas. Kansas... Indiana. Indiana. South Dakota. Montana _ Illinois. Illinois___ Iowa . Iowa_... Nebraska . Minnesota . Wisconsin. . South Dakota......... Montana . Missouri Minnesota. North Dakota . Montana . North Dakota . Ohio . Oklahoma . North Dakota . Average 14 States . 20.10 Average 14 States . 11.03 Average 14 States . 15.72 Table 15. _ Percentage of specified types of elevators in 14 principal grain-producing States^ reporting use of specified kinds of price information service. APPENDIX TABLES 347 / ^ For States included, see Appendix Table 14. 18 .—Average monthly per bushel margins on No. S oats in specified years. 349 APPENDIX XABLES. n 1912-1916 Average net margins. »-ico<0'^«oc»C»CT-4COOO ^ i-H 1-H 1916-17 Average net margins. ooo 1-11-1 ic !t^oot^i-H cocooot^oo CO CO ^ CO OOOOOOO lOOOO o « • Number of quota¬ tions. CO t-05 CO CO 00 40 i-< tH CO 05 CS| CO iC^ fH ^ • • • • t • • 1915-16 Average net margins. iHkOt'i-IOOCO.-lt^cOOi-liO r-t^U50>iO'«J''«rt-05»OCOfO ^Tt the exchange. 81 The call rule. 83 The to-arrive rule. 85 6. Enforcement of rules. 86 The Nelson case, 1896 . 87 Commission rules. 88 7. Terminal elevators and the warehouse controversies. 90 Factors in the problem at Chicago. 90 GroAvth of storage capacity and concentration of control... 90 Regulation of public warehouses. 91 ’ Dealing in grain by public warehousemen. 96 The Central Elevator Co. case, 1898 . 99 The custodian system. 103 8. The Chicago cash market. 106 9. The futures market... 107 Origin of future trading. 107 Opposition to future trading. 109 Comers. 110 Trading in privileges—puts and calls—indemnities—bids and offers. 113 Case of Booth v. People.■... 116 Indemnities. 118 10. The -quotation service and the bucketshops. 121 The antibucketshop crusade. 122 Public interest in exchange quotations. 123 Agreement with the telegraph companies. 126 .J Quotations are property within the control of the exchange.... 127 j 11. The open board of trade. 128 ^ CONTENTS. 5 ra"o. Section 12. Publicity and promotion of exchange interests. 129 The “crusade of acquaintance” among country shippers. 129 Newspaper publicity. 129 Country newspapers and journals.. 13 ] Chapter IV. Development of Other Markets and Exchanges. Section 1. Milwaukee. 133 Origins. 133 The Milwaukee Chamber of Commerce. 135 Membership. 135 Operating revenues. 13 G Weighing and inspection. 137 Elevator facilities. 137 Transportation bureau. 137 ' Price quotations and market reports. 137 The cash market. 137 The futures market. 138 Publicity and promotion. 139 Section 2. Minneapolis. 140 Origin of the Minneapolis market. 140 The Minneapolis Chamber of Commerce. 140 Membership privileges and requirements. 1'42 The trading groups. 142 Enforcement of rules. 144 The cash grain market.. 144 The futures market... 145 Publicity and promotion of exchange interests.. 146 Interlocking interests.'. 148 Section 3. Duluth. 153 Development of the Duluth-Superior grain market. 153 The milling industry. 154 The Duluth Board of Trade. 155 The Superior Board of Trade. 158 Inspection and weighing controversy. 158 Development of elevator capacity. 157 The cash grain market. 157 Durum wheat. 157 The futures market.. 158 Section 4. Kansas City.. 158 Origins. 1.58 The Kansas City Board of Trade. 159 Membership—admission and requirements. 159 Classification of members. 180 Operating revenue and expense. 181 Elevator facilities... 182 Other facilities.. 182 The cash market. 163 The futures market. 164 Publicity and promotion of exchange interests. 164 Section 5. (9maha. 165 The rate adjustment of 1904. 165 Organization and membership of the exchange. 1G5 Operating revenues. 166 The cash market. 167 Trading in futures at Omaha. 167 Page. Section 6. St. Louis. The early river market. Development of milling and elevator facilities. 168 Handling in bulk. 168 The St. Louis Merchants’ Exchange. 170 Membership policy. 171 Classification of members. 172 Operating revenue and expense. 172 Elevator and warehouse facilities. 173 The cash market. 171 The futures market. 175 Section 7. Peoria.. The Peoria market. 175 The Peoria Board of Trade. 175 Enforcement of rules.. • - 176 Elevator facilities. 177 The cash market. 177 Section 8. Louisville.. 177 The Louisville market. 177 Section 9. Cincinnati. 178 V The Cincinnati market. 178 The Cincinnati Grain and Hay Exchange. .. 178 Local consumption. 179 Elevator facilities.. 170 Credit facilities. 170 Cash trading. 180 Future trading. 180 Section 10. Indianapolis. 180 The Indianapolis market. 180 The Indianapolis Board of Trade. 180 Elevator facilities. 181 Cash trading. 181 Section 11. Toledo. 181 The Toledo market. 181 The Toledo Produce Exchange. 182 Section 12. Buffalo. 183 The Buffalo market. 183 Origin of lake shipping. 183 Lake receipts and canal shipments. 183 Invention of the elevator. 184 The Buffalo Corn Exchange. 185 Memb ership. 185 The terminal elevators. 186 Weighing and inspection.. 186 The cash market. 187 Section 13. The eastern seaboard markets. 187 The commercial exchanges. 189 The cash markets. 189 Chapter V. Organization, Rules and Regulations of the Exchanges. Section 1. Incorporation of grain exchange associations. 190 CONTEXTS. 7 Section Section Section Section Section Section Section Section Section Page. 2. Exchange government. 195 Elective officers. 196 Elective committees. 196 Appointive com m ittees. 197 Functions of officers and committees. 197 3. Adoption of rules, by-laws, and regulations. 199 General powers. 199 Grain exchange corporations. 200 General commercial exchanges and stock companies. 200 Procedure. 200 Uniformity of rules and the Council of Grain Exchanges. 202 4. Membership. 2D2 Limitation of membership. 203 Requirements for admission. 205 Assessments on memberships. 206 Firm and corporation memberships. 206 Liens on membership certificates. 207 Membership of a suspended member. 209 Membership of an expelled member. 209 5. Discipline.. 210 Subject matter. 210 Procedure. 212 Trial procedure. 213 Suspension, exjnilsion, and reinstatement.. 214 Suspension. 215 / Expulsion. 215 Blacklisting nonmembers. 216 6 .Arbitration. 218 Boards of arbitration and appeal. 218 Special arbitration committees. 220 Arbitration for noiimembers. 220 Cumpulsory arbitration for nonmembers. 220 Arbitration agreements. 221 Procedure. 221 y Professional counsel.. 223 Appeals. 223 Fees. 224 Enforcement of awards. 224 7. Uniform commission rules. 225 Members’ rates. 228 The uniform commission rule as applied to the consignment business. 229 Rebates. 229 Gifts, “compensation,” premiums, etc. 229 Employment of solicitors. 230 Keeping books of customers. 230 Financing country shippers. 230 Current rate of interest. 231 Free wire service. 231 8. The commission rule as applied to buying and shipping on order... 232 9. The uniform commission rules applied to trading in futures. 235 10. The uniform rule as applied to purchases at country points. 235 Application of the rule. 235 8 CONTENTS. .1' Page. Section 1]. Solicitors and brokers... 238 Employment of solicitors in primary markets. 238 Employment of brokers under tlie uniform commission rule_ 241 Employment of brokers in secondary and export markets. 243 Export brokers...'. 243 Section 12. Regular warehouses.. 244 / General requirements. 244 , Liability for damaged grain. 247 Section 13. "Contracts of sale—sundry trading rules.. 248 Customs of the market. 248 ‘ ‘ Regular trading ”. 249 Hours for future trading. 249 Curb trading prohibited. 249 Prohibition of personal or private trades. 250 Cash trading off exchange.. 250 Confirmation of trades. 251 Futures. 251 Cash trades. 251 Advances required on grain for shipment (call for margin). 252 Shipping instructions. 252 Shipments. 253 * “Carload”. 254 Time to reject... 255 — Passing of title. 255 Delay in transfer or unloading. 256 Acceptance. 258 ■ The time for payment. 258 Section 14. Defaults on contracts. 259 In general. 259 Willful violation of a business contract*.. 260 Default through inability to meet the obligation... 260 Failure to deliver on future contracts. 261 Failure to receive and pay on future contracts. 263 Failure to deliver on cash contracts. 264 Failure to receive and pay on cash contracts. 264 Section 15. Terminal market “terms.”w. 265 Inspection. 265 Sampling.. _ 266 Weighing. 267 Weights at seaboard markets. 268 Section 16. Terminal charges. 268 Switching charges on grain. 275 ^"'^ection 1'7. Rules for trading in futures. 282 General summary. 282 The “contract grades”. 282 Requirements of margins. 283 The “legitimate value”. 283 Offsets and substitutions. 284 Contracts for deferred acceptance—puts and calls. 284 Regular delivery. 285 Payment upon delivery.287 Only “actual trades”. 287 Prohibitions against bucketshops. 288 In general. 288 \ V' CONTENTS. 9 Page. Section 18. Control of quotations and market reports. 289 Market quotations. 289 Reporting cash sales. 289 Future prices. 290 Control of price dissemination. 291 After-market prices. 292 Control of market letters. 293 Control of wire-house acti^uties. 293 Chapter VI. Inspection and Weighing. Section 1. In the early markets. 295 Section 2. State inspection and weighing. 296 Section 3. Duplication of inspection and weighing ser^dees. 297 ^Kansas City grading and weighing. 298 Weighing at St. Louis... 299 Weighing by the State of Missouri. 300 Summary. 301 Section 4. Personnel of State departments. 301 Federal license. 301 State inspection personnel. 301 Illinois and Chicago. 302 Chief grain inspector. 303 Deputy inspectors. 303 Samplers. 303 Section 5. Technical methods of inspecting and grading grain. 303 Laboratory inspection. 304 Inspection before arrival. 304 The inspection tracks. ^04- The sealer. 305 The sampling operation. 305 Inspection of boatloads. 307 In the inspection laboratory. 308 Section 6. Sampling by prwate agencies. 309 Sampling in Minneapolis. 810 Sampling in Duluth. 311 Private sampling in Chicago. 311 Sampling in St. Louis. 311 Sampling in East St. Louis. 312 Section 7. Car inspection. 312 St. Louis. 312 Chicago. 313 Section 8.^ Inspection charges and revenues. 313 Section 9. Reinspection and appeals. 315 Peoria inspection. 318 Section 10. Federal grades. 319 Section 11. Weighing. 319 Track-scale operations. 319 Typical operation of cupola scale. 320 Weights to carriers. 320 Weighing records. 320 Weight certificates (Chicago). 320 Scale inspection.,. 321 Service at country stations. 321 Section 12. Personnel of weighing departments. 322 Minnesota. 322 Chicago Hoard of Trade. 322 10 CONTENTS. Chapter VII. Quotation Services op the Exchanges. Page. In general. 323 Cash quotations. 323 Grains quoted in cash markets... 323 Nominal prices. 325 To-arrive prices. 325 Future quotations. 326 Opening, high, low, and closing prices. 327 ]\Iethods of collecting quotations. 328 APPENDIX. Definition of Grain Marketing Terms. Section 1. Markets. 329 Section 2. Cash traders and trading terms. 330 Section 3. Future traders and trading terms. 331 LIST OF TABLES. Table 1. Methods of compilation of figures of grain receipts at various terminal markets in the United States. 18 Table 2. Average annual receipts of wheat at 10 primary markets and at 7 secondary markets for the five calendar years 1913 to 1917. ].9 Table 3. Average annual receipts of corn at 10 primary markets and at 7 sec¬ ondary markets for the calendar years 1913 to 1917. 20 Table 4. Average annual receipts of oats at 10 primary markets and at 7 sec¬ ondary markets for the calendar years 1913 to 1917. 21 Table 5. Average annual receipts of barley at 10 primary markets and at 7 secondary markets for the calendar years 1913 to 1917. 22 Table 6. Average annual receipts of rye at 10 primary markets and at 7 sec¬ ondary markets for the calendar years 1913 to 1917. 22 • Table 7. Average annual receipts of wheat, corn, oats, barley, and rye com¬ bined for the five calendar years 1913 to 1^17 at the principal pri¬ mary and secondary markets. ,... 23 Table 8. Average annual receipts, shipments, and local consumption of wheat at 10 primary markets for the five calendar years 1913 to 1917. 24 Table 9. Average annual receipts, shipments, and local consumption of corn at 10 primary markets for the five calendar years 1913 to 1917. 25 Table 10. Average annual receipts, shipments, and local consumption of oats at 10 primary markets for the five calendar years 1913 to 1917.... 25 Table 11. Average annual receipts, shipments, and local consumption of barley at 10 primary markets for the calendar years 1913 to 1917.. 26 Table 12. Average annual receipts, shipments, and local consumption of rye at 10 primary markets for the five calendar years 1913 to 1917. 26 Table 13. Average annual receipts, shipments, and local consumption of wheat, corn, oats, barley, and rye combined at 10 primary markets for the five calendar years 1913 to 1917. 27 Table 14. Rated elevator storage capacity at terminal grain markets for 1919.. 28 Table 15. Average annual production of spring and winter wheat, by principal producing States, for the calendar years 1913 to 1917. 30 Table 16. Distribution of spring and winter wheat shipments at specified mar¬ kets, 1913 to 1917... 31 Table 17. Average annual production of corn in the principal producing States, 1913 to 1917. 33 CONTENTS. 11 Page. Table 18. Average annual production of oats in the principal producing States, 1913 to 1917. 34 Table 19. Average annual production of barley in the principal producing States, 1913 to 1917. 35 Table 20. Average annual production of rye in the principal producing States, 1913 to 1917. 37 Table 21. Percentage analysis of sources of grain receipts (wheat, corn, oats, rye, and barley) at specified markets during the crop years 1912-13 to 1916-17. 40,41 Table 22. Export grain rates from 10 primary markets to 6 Atlantic and Gulf ports, in force January 1,1919. 51 Table 23. Receipts of grain at Cincinnati, St. Louis, and Chicago in 1858-.... - GO Table 24. Flour production in Chicago, 1870 to 1896, inclusive. 61 Table 25. Shipments (including transshipments) of all grains by lake, canal, and railroad, 1860. 63 Table 26. Average freight rates, Chicago to New York, by lake-and-canal, and bv all-rail, with ratio of all-rail to lake-and-canal rates, 1887 to 1916. 69 Table 27. Movement of wheat, corn, and oats eastward from Chicago by five-year averages, 1887 to 1916, with percentage of lake to total shipments. 69 Table 28. Total movement of wheat, corn, and oats combined eastward from Chicago by five-year averages, 1887 to 1916, with percentage of lake to total shipments. 70 Table 29. Relation of freight rates ratio to percentage of lake shipments east¬ ward from Chicago, 1887 to 1916. 70 Table 30. Classification of members of Chicago Board of Trade (list dated Mar. 6, 1918). 75 Table 31. Classification of interests represented on board of directors of the Chicago Board of Trade (on the basis of their firm connections) and the voting powers of the trading groups. 76 Table 32. Elevator storage distribution at Chicago, March 31, 1868. 90 Table 33. Total elevator warehouse capacity at Chicago, relative storage capac¬ ity of houses declared regular, of houses operated on a ‘^private” basis, and of houses operated under the Custodian Rules, 1902 to 1918, inclusive. 102,103 Table 34. Classification of resident members in the grain trade, Milwaukee Chamber of Commerce, 1917. 135 Table 35. Transactions in bushels cleared through the Milwaukee Clearing Association for the three crop years 1915-16, 1916-17, 1917-18. 139 Table 36. Receipts and shipments, Minneapolis, 1876 to 1883... 140 Table 37. Classification of resident members in the grain trade, Minneapolis Chamber of Commerce, December 31, 1917. 143 Table 38. Memberships of Washburn-Crosby interests at Minneapolis and Duluth. 149 Table 39. Memberships of Van Dusen-Harrington interests at Minneapolis and Duluth. 149 Table 40. Memberships of Gregory-Jennison Co. interests at Minneapolis and Duluth. 150 Table 41. Memberships of Peavey interests at Minneapolis and Duluth. 150 Table 42. Memberships of Cargill Commission Co. interests at Minneapolis and Duluth. 150 Table 43. Memberships of Pillsbury Flour Mills Co. interests at Minneapolis and Duluth. 151 12 CONTENTS, Page. Table 44. Memberships of E. S. Woodworth Co. interests at Minneapolis and Duluth. 151 Table 45. Memberships of H. Poehler Co. interests at Minneapolis and Duluth. 151 Table 46. Memberships of McCaull-Webster interests at Minneapolis and Duluth. 151 Table 47. Memberships of McCarthy Brothers interests at Minneapolis and Duluth. 152 Table 48. Memberships of Russell-Miller Milling Co. interests at Minneapolis and Duluth... 1.52 Tal)le 49. Memberships of Northwestern Consolidated Milling Co. interests at Minneapolis and Duluth. 152 Table 50. Memberships of Nye-Jenks interests at Minneapolis and Duluth... 152 Table 51. Receipts and shipments of grain at Duluth, 1870 to 1886. 153 Table 52. Receipts and shipments of flaxseed at Minneapolis and Duluth, 1913 to 1917. 1,54 Table 53. Classification of resident members in the grain trade, Duluth Board of Trade, 1917. 155 Table 54. Receipts of grain at Kansas City, 1871 to 1880. 159 Table 55. Classification of resident members in the grain trade, Kansas City Board of Trade, 1917. 160 Table 56. Classification of resident members in the grain trade, Omaha Grain Exchange, 1917. 165 Table 57. Shipments and receipts of grain at St. Louis by rail and river, 1896 to 1904. 169 Table 58. Classification of resident members in the grain trade, St. Louis Merchants’ Exchange, 1917. 172 Table 59. Cash and future call board transactions, St. Louis Merchants’ Ex¬ change, 1876 to 1897. 174 Table 60. Classification of resident members in the grain trade, Peoria Board of Trade, 1916. 176 Table 61. Classification of resident members in the grain trade, Cincinnati Grain and Hay Exchange, 1918. 179 Table 62. Classification of resident members in the grain trade, Indianapolis Board of Trade, 1917. 181 Table 63. Classification of resident members in the grain trade, Toledo Pro¬ duce Exchange, 1917.. 182 Table 64. Grain movement by canal at Buffalo, from 1880 to 1900. 184 Table 65. Classification of resident members in the grain trade, Buffalo Corn Exchange (both certificate holding and licensed members), in 1917. 186 Table 66. Average grain exports from the United States and from specified Atlantic ports for the calendar years 1913 to 1917 (in bushels)_ 188 Table 67. Proportion of exchange members, in .^T)ecified exchanges, engaged in the grain trade, 1918 .. 193 Table 68. Cash commission rates (receiving and selling) on 14 specified ex¬ changes. 226,227 Table 69. Commission rates for buying and shipping on order at specified exchanges in 1918. 233 Table 70. Minimum future commission rates for purchase or sale or for pur¬ chase and sale by grade alone for 8 specified exchanges in 1918.. 236, 237 Table 71. ‘‘Charges” required to be deducted in conformity with the uniform commission rule for direct buying from outside points; that is, from nonmembers and nonresident members—at 7 specified exchanges.. 239 CONTENTS. 13 Page. Table 72. Table 73. Table 74. Table 75. Table 76. Table 77. Table 78. Table 79. Mixing and conditioning charges at specified markets, Decemher 1,1919.. 274 LIST OF DIAGRAMS. Diagram A. Wheat production in the principal grain States. 31 Diagram B. Corn production in the principal grain States. 32 Diagram C. Oats production in the principal grain States. 33 Diagram D. Barley production in the principal grain States.. 35 Diagram E. Rye production in the principal grain States. 36 Diagram F. Total grain production in the principal grain States... 38 Diagram G. Comparison of receipts and production of five grains by sections of the largest grain producing areas.facing.. 40 ILLUSTRATIONS. View of the trading floor, Chicago Board of Trade.facing.. 60 Views of the exchange hall, Minneapolis Chamber of Commerce"..facing.. 140 Cash brokers’ rates on 15 specified exchanges. 242 Time periods for to-arrive shipments as defined in exchange rules.. 254 Number of bushels in a “ carload ” of grain for 17 specified exchanges. 254 Inspection charges at specified markets, December 1, 1919. 270 Weighing charges at specified markets, December 1, 1919. 271 Sampling charges at specified markets, December 1, 1919. 272 Elevating and storage charges at specified markets, December 1, ^ . ACKNOWLEDGMENT. The Commission desires to make acknowledgment in connection with this volume of the report on the Grain Trade of the valuable services rendered by Mr. W. H. S. Stevens, assistant chief economist and examiner in charge of the inquiry; by Mr. Edmund Brown, jr., who had immediate charge of the preparation of this volume; and by Mr. A. M. Sakolski, Avho assisted in certain phases of the work. The Commission also desires to acknowledge the assistance of the Bureau of Markets of the Department of Agriculture in making the inquiry and of the Interstate Commerce Commission in analyzing tlie effect of freight rates on the development of terminal markets. LETTER OF SUBMITTAL. Federal Trade Commission^, Washington, September 15, 1920. To the Congress of the United States: There is submitted herewith Volume II of a report on the grain trade. This volume is entitled “Terminal Markets and Grain Exchanges, and is largely a descriptive and analytical statement. Another vol¬ ume of the report will present a more detailed discussion of methods and operations found to exist in the grain trade at the large central markets. Hitherto there has been no comprehensive description of the sys¬ tem of grain marketing, the channels of grain movement, 'the trading methods employed, or the highly organized exchanges where the major portion of trading takes place. It was necessary, therefore, to incorporate in this report a volume describing the growth and rel¬ ative importance of the markets and to outline the functions exercised and the rules prescribed by these grain exchange associations. This is the subject matter of the present volume. The report covers 17 markets, 10 of which, known as “primar}’- markets,^’ receive the bulk of the grain shipped from local points in producing territor}’. The primary markets include Chicago, Minneapolis, Dulutl^, Kansas City, St. Louis, Omaha, Mihvaukee, Peoria, Indianapolis; and Cincinnati. An effort has been made to trace the development of the grain trade and the history of the local exchange at each market considered, with a view to setting forth the main factors which have operated to build up the present marketing system. It is found that the freight rate structure has had an important bearing on the development of grain markets and the existing system of grain distribution. The digest and analysis of the rules and regulations enforced by the larger grain exchanges, here presented, is of essential importance for an understanding of grain marketing in the United States, since the greater portion of the grain is bought and sold subject to such rules and regulations. There is also included a technical description of the functions assumed by the grain exchanges. These comprise inspection and 16 LETTER OF SUBMITTAL. grading, weighing, quotation services, traffic bureaus and the like. The inspection and weighing services are by no means wholly con¬ trolled by the exchange associations, but are subject to regulation by State commissions and the Federal Government as well. This gives rise to considerable duplication and overlapping of jurisdictions espe¬ cially at such points as Kansas City and St. Louis. Perhaps the most important function assumed by the exchanges, aside from providing a regulated market procedure and trading halls for their members, is that of collecting, recording, and distrib- uting quotations and market information. For these services the trade at large is almost wholly dependent upon the exchange organ¬ izations. The methods followed by the larger exchanges in dissem¬ inating this price information are herein set forth in comparative form. Although these large exchange associations have operated over a long period as private corporations, it is none the less apparent that the powers which they exercise and the methods which they Tollow are of vital interest to the public. No conclusions or recom¬ mendations with reference to the public regulation of these exchanges are made in this volume. Its purpose is rather to present a com¬ prehensive description of these exchanges as they are now organized and operated, and to leave conclusions and also specific recommen¬ dations for subsequent consideration. Kespectfully, Victor Murdock, Chairman, Huston Thompson. VVILLIAM B. CoLVER. Nelson B. Gaskill. John Garland Pollard. 0 TERMINAL GRAIN MARKETS AND EXCHANGES.’ Chapter I. COMPARATIVE SIZE AND IMPORTANCE OF THE MARKETS. Section 1. Factors determining size. Tlic ill's! step in any description of the grain-marketing system is to determine the order of importance of the larger markets on some fair basis of comparison. Obviously there is no single uniform standard for measuring the size and importance of such markets, and the char¬ acter of the trading must be considered separately in each case. Chi¬ cago, for example, is of relatively little importance as a milling center while Minneapolis is unapproached in milling capacity and milling demand on the market. On the other hand the volume of shipping or forwarding business at Chicago has made it a cash market of great importance. Future markets. —Because of well recognized differences in trad¬ ing methods, futures markets can not be compared with cash markets, and the comparative size and importance of the futures markets must be given a separate and distinct treatment. This is reserved for the volumes on future trading. It is well known, however, that the Chicago Board of Trade operates the largest and most active of the grain futures markets. Cash markets. —It is apparent that priority of importance among cash markets must be determined from a combination of several important factors, and not because of any one characteristic. The cliief factors are (1) volume of cash trading, (2) receipts of grain, (3) local consumption, (4) storage and transfer capacity. Section 2. Volume of cash trading. The first thought in discussing the relative importance of any group of markets would be to compare the cash trading in volume and value, at the various points. Statistics for any such comparison are totally lacking. The exchanges in general make no effort to record either the number or the value of cash trades. The nearest approach to such a record for the larger markets exists in Minneapolis where , the rules of the chamber require members to report original sales of spot grain.2 But even in this market it is admitted that all of the original sales are not reported, that no resales are reported, and that, in general, the rule is not rigidly enforced. It is therefore necessary to reject this standard of comparison. 1 For definitions of trade tenns used, see appendix at the end of this volume. 2 See methods of reporting prices outlined in Chapter VII. 168093*’—20 - 2 17 18 TERMINAL GRAIN MARKETS AND EXCHANGES. Section 3. Receipts. Another index of relative size lies in the volume of receipts at the terminal markets reported from year to year by the various exchanges. These receipts figures arc customarily used by the exchange members for publicity purposes to denote the importance of a particular market; and, if computed on a uniform basis at all points, would furnish a satisfactory index of the business attracted to various terminal centers. The lack of such uniformity in the computations, and the frequent inclusion of through shipments, greatly lessens the comparative value of the figures. The table which follows shows that several exchanges (Cincinnati, Duluth, Kansas City, Milwaukee and Minneapolis), confine their figures for receipts to local-billed cars; that is, cars passing into the trade at the market. On the other hand, Chicago, Peoria, St. Louis, and the seaboard markets, include all cars passing through the terminal yards, whether local, through- billed or reconsigned. Again, as the table shows, some exchanges confine their figures to the number of cars inspected; that is, the figures are derived from the records of the inspection department, while others obtain these reports from the railroad companies. Duluth uses elevator reports of grain unloaded. Eeconsigned cars are totally eliminated only in Duluth and Kansas City. Obviously, those markets wliich include all cars arriving at the terminal, in compiling their grain receipts, will appear to be larger and more important than those in which the receipts more nearly represent the grain handled by local traders. There is a substantial margin of error, therefore, in using these data for comparisons, though it is probably not more than 25 per cent in any case.^ Table 1 . — Methods of compilation of figures of grain receipts at various terminal markets in the United S tales, Market. Source of information from which exchange figures are compiled. Basis of computation. Includes transit movement as follows: Daily railroad reports... All arrivals. Through-billed and recon¬ signed. Do. "nnQfnn Railroad and'stcamship com¬ panies. Dn.ily railroad reports. .do. PViiPQcrn .do. Do. P/incinnn.l i _ Railroad companies. Cincinnati billed cars only. Reconsigned. Tinlnth. Terminal elevator reports. Amount unloaded at el^ None. Indianapolis.... Kansas City.... Inspection department. Raihcad companies. vator. Inspections &. Kansas City billed cars Reconsigned included it in¬ spected. None. TTispeetion department .... only. Inspections. Reconsigned. Do. Milwaukee Daily railroad reports. Milwaukee billed cars only. Minnea.nnli'! _ do. Minneapolisbilled cars only Inspections only. Do. O m n.h n, Inspection department. Do. IVow Vnrlr Railroad and steamship com¬ panies. Railroads. All arriv'als.. Through-billed and recon¬ signed. Do. Penri'fi .do. Philadelphia.... Inspection department and .do. Do. Rf. T.nnis terminal elevators. Railroad eomnanios. .do. Do. Toledo - Inspection department. Insnections only. Through-billed and recon¬ signed if inspected. Through-billed and recon- .San Francisco.. Chamber of commerce, statis- All arrivals. tical department. signed. a As reported bv the various exchanges. 2 A very few through-billed cars are inspected and these cars are presumably included in receipts. 8 See p. 62. SIZE A2sD IMPORTANCE OP THE MARKETS. 19 Tlio transportation department of the Chicago Board of Trade, for example, reports that ''the only reliable record that we have of receipts at Chicago that are handled by traders at Chicago is that covering the carloads of grain inspected by the Illinois State Grain Inspection Department.” Since Chicago inspection is fre¬ quently used by outside traders, it is fair to assume that the inspection ligures represent the maximum quantity of grain that could enter into the trade of the market. On this basis it appears that the aver¬ age through-billed movement during the five-year period 1913-1917 was 24 per cent for wheat, 17 per cent for corn, 27 per cent for oats, 38 per cent for barley, 24 per cent for rye, and 24 per cent for all grains, as follows: [ In bushels, OOO’s omitted.] V ■ Grains. ■” • - Receipts. ucss Inspec¬ tions.* Difference through¬ billed. Per cent of through¬ billed to receipts. Wheat . . ... 6.5,412 .50,007 15,405 24 lOO; 592 83,1S6 99,397 17,406 17 13G, 687 37,290 27 ■1, 259 3,219 1,040 24 Barley.. 27,993 17,313 10,680 38 334,943 253,122 81,821 24 > Cars reduced to bushels: 1 car wheat, corn, rye, harley=^ 1,200 bushels; 1 car cats=1,000 bushels. Wheat receipts. —The following table shows the average annual receipts of wheat at 10 primary markets and at 7 secondary markets for the 5 calendar years, 1913 to 1917: Table 2.— Average annual receipts of reheat at 10 primary markets and at 7 secondary markets for the 5 calendar years 1913 to 1917d [In bushels, OOO’s omitted.] Primary markets. Pub¬ lished. receipts. Order of impor¬ tance .2 Secondary markets. Pub¬ lished. receipts. Order of impor¬ tance. 120,151 1 Buffalo. 125,109 1 65,412 4 New York. 81,674 56,884 2 Baltimore. 31,369 3 55,612 3 Philadelphia. 30,862 4 T.oni <2 34 ' 209 5 Boston. .*. 14,399 5 21,275 6 Toledo 2 . 6,808 6 8' 062 7 Louisville. 4,814 7 Cincinnati. 5,95.5 8 Indianapohs. 3,175 9 Peoria. 3,079 10 1 Receipts compiled from annual reports of exchanges, excepting Louisville, Indianapolis, Buffalo, and Toledo, which do not publish receipts. Louisville and Indianapolis ligures were obtained by the Cornmis- sion from records of the respective exchanges. Buffalo figures combine Buffalo lake receipts (Miller’s Almanac for 1917) with car inspections at Buffalo as compiled by the Commission. Toledo figm-es arc from the armual Statistical report 01 the New York Produce Exchange for 1917. ^ „ 2 As estimated by the Commission because of known variations in the basis for compuung receipts. 3 Toledo is classed as a secondary market because the bulk of the grain is purchased from jobbers at outside points. With reference to the secondary markets it will be understood that these receipts are not in any case to be added to the receipts of primary markets as an estimate of the total grain movement, since 20 TERMINAL GRAIN MARKETS AND EXCHANGES. tlie receipts at secondary markets are largely made up of wheat which lias already been traded in at primary terminals. As the table indicates, Minneapolis is the leading market in the United States in point of wheat receipts. When it is recalled that these figures for receipts include no through-billed cars, the position of Minneapolis is rendered more striking. The figures for Duluth are based on the quantities unloaded at elevators, and are on an even more restricted basis than those for Minneapolis, since they do not even include reconsigned cars. Kansas City figures are also on this basis. The Chicago receipts, as listed, exceed those of either Duluth or Kansas City by more than 16 per cent; but as already stated there is a through-billed movement of about 24 per cent included in the Chi¬ cago figures, so that it seems certain that both Duluth and Kansas City actually receive more wheat than passes into the cash trading at Cliicago. Hence Chicago is assigned to the fourth place. The table shows that each of six primary markets and four second¬ ary markets receives on the average more than 20,000,000 bushels of wheat annually. Corn receipts.— The table below shows the average annual re¬ ceipts of corn at 10 primary markets and 7 secondary markets for the calendar years 1913 to 1917. Table 3. —Avemge annual receipts of corn at 10 primary markets and at 7 secondary markets for the calendar years 1913 to 1917} [ In bushels, OOO’s omitted.] Primary markets. Pub¬ lished. receipts. Order of impor¬ tance.* Secondary markets. Pub¬ lished. receipts. Order of impor¬ tance.* Chicago. 100.592 1 Buffalo. Omaha. 27' 3.52 2 Baltimore. . 17 c;An I Peoria. 23', 843 4 New York_ 12 A o Kansas City. 20,422 3 Louisville. St. Louis.. 19,784 6 Philadelphia Indianapolis. 18,' 586 5 Toledo. 3 KIA O Milwaukee. 13,666 7 Boston. 1,705 0 7 Minneaoolis. 9', 366 8 i Cincinnati. 8 , 504 9 Duluth 3. 862 10 } Pigures compiled from the atmual reports of the exchanges for the years 1913 to 1917, excepting Lom’s- ville, Indianapolis, Buffalo^ and Toledo, which do not publish figiu-es of receipts. Louisvilie and Indian- " apohs figures compiled by the Commission Irom the records of the respective exchanges. Buffalo figures were made up by combining Buffalo lake receipts (Millers’ Almanac for 1917) with car inspections at Bifffalo as compiled by the Commission. Toledo figiu-es from the annual statistical report of the New York Produce Exchange for 1917. 2 As estimated by the Commission because of known variations in the basis for computing ‘^receipts ” 3 No corn receipts reported for 1916. Average figured on a 5-j'ear basis. ^ , In analyzing the corn movement it is apparent that the markets at Peoria, Indianaoplis, and Milwaukee come into greater rela¬ tive importance. Each of seven primary markets receives over - 10,000,000 bushels of corn annually. It will be noted that Chieagb is the leading cash corn market just as Minneapolis has a clear pri¬ ority with respect to cash wheat. The receipts of corn at Minneapo- SIZE AND IMPORTANCE OF THE MARKETS. 21 lis and Dulutli are comparatively insignificant owing to their location north of the corn belt. Kansas City is assigned to third place in order of receipts since the figures for receipts at Kansas City are compiled on a more restricted basis than those at anybther large corn market and this market should have more weight with reference to Peoria and St. Louis than would appear from the published tables. Indi¬ anapolis must be considered more important than St. Louis for similar reasons. Oats receipts. —The table below shows the average annual re¬ ceipts of oats at 10 primary markets and at 7 secondary markets for the calendar years 1913 to 1917. Table 4. —Average annual receipts of oats at 10 primary markets and at 7 secondary markets for the calendar years 1913 to 1917 d (In bushels, OOO’s omitted.) Primary markets. Pub¬ lished. receipts. % Order of impor¬ tance.* Secondary markets. Pub- lishd. receipts. Order of* impor¬ tance. * Chicago. 136,687 1 Buffalo. 32 043 1 Minneapolis. 30,446 2 New York. 31647 2 Milwaukee. 28' 153 3 Baltimore. 24 ’ 376 St. Louis. 23; 758 4 Philadelphia.. 14 ’ 303 4 Omaha. 15,845 5 Boston... 7 ’ 138 5 Peoria. 12'. 779 7 I.ouisville. 6,677 0 Indianapolis. 10,913 f) Toledo. 4 522 7 Kansas City. 9, 712 8 Cincinnati. 7,014 9 Duluth.:. 5, C24 10 1 Figures compiled from the annual reports of the exchanges for the years 1913 to 1917, excepting Louis¬ ville, Indianapohs, Buffalo, and Toledo, wliich do not publish receipts. Louisville and Indianapolis figures compiled by the Commission from the reoords of the respective exchanges. Buffalo figures were made up by combining Buffalo lake receipts (Millers’ Almanac for 1917) with car inspections at Buffalo as compiled by the Commission. Toledo figures are from the annual statistical report of the New York Produce Exchange for 1917. » As estimated by the Commission because of known variations in basis for computing ‘'receipts.” In the movement of oats Chicago has greater prominence than in the case of any other grain. Taking into consideration all differences in methods of computing the figures Chicago would nevertheless remain far in the lead as an oats center. There arc seven primary oats markets which receive in excess of 10,000,000 bushels a year. The variations in basis of computation do not seriously affect the rank of the markets in oats receipts except for Peoria and Indian¬ apolis. It is fair to assume that the volume of through-billed cars included in the figures for Peoria amounts to something more than 17 per cent of the stated receipts, so that Peoria should rank lower than Indianapolis in oats receipts. With this modification the published figures indicate the order of the primary markets. Barley receipts. —The table below shows the average annual receipts of barley at 10 primary markets and at 7 secondary mar¬ kets for the calendar vears 1913 to 1917. «/ 22 TERMINAL GRAIN MARKETS AND EXCHANGES Table 5. —Average annual receipts of barley at 10 primary marhets and at 7 secondary marhets for the calendar years 1913 to 1917 d [In bushels, OOO’s omitted.] Primary markets. Pub¬ lished. receii^s. Order of impor¬ tance. Secondary markets. Pub¬ lished. receipts. Order of impor¬ tance. Minneapolis. 33,171 1 Buffalo. 14 454 1 Chicago.. 27'993 2 New York. 8*920 2 Tililwaukee. 18'840 3 Baltimore 2 . 3 '209 3 Duluth. 11 424 4 Philadelphia . 'C2] 4 Peoria. 3'001 5 Boston. 5 St. Louis. 1,883 0 Louisville. (*) Kansas City. 1,'084 7 Toledo. 4G G Cincirmati.“... 885 8 Omaha. 872 9 Indianapolis. e) 1 Compiled from the annual reports of the exchanges for years 1913 to 1917, excepting Louisville, Indian¬ apolis, Buffalo, and Toledo, which do not publish receipts. The Buffalo figures were made up by com¬ bining lake receipts at Buffalo (Millers’ Almanac for 1917) with car inspections at Buffalo as compiled by the Commission. Toledo figures are from the annual statistical report of the New York Produce Exchange for 1917. 2 Receipts at BalUmorc include malt. * No figures. - * There are only four primary markets each of which receive an annual average of more than 10,000,000 bushels of barley. This may be accounted for by the comj)arativcly restricted area of pro¬ duction of this grain. The receipts at Minneapolis are considerably in excess of those of any other terminal. Because of the variations in computing the figures, Chicago should be considered of less im¬ portance than the figures would indicate, although clearly holding second place in the order of markets. Since nearly 14,000,000 bushels of the barley received at Milwaukee was consumed in that market during 1913 to 1917, it is probably correct to place Mil¬ waukee ahead of Duluth, although there is but slight difference in the volume of trading. Rye RECEIPTS.— The table below shows the average annual receipts of rye at 10 primary markets and at 7 secondary markets for the calendar years 1913 to 1917: Table (S.—Average annual receipts of rye at 10 primary markets and at 7 secondary markets for the calendar years 1913 to 1917.^ [In bushels, OOO's omitted.] Primary markets. Pub¬ lished receipts. Order of . impor¬ tance.* Secondary markets. Pub¬ lished receipts. Order of impor¬ tance. Minneapolis. 6 882 1 Baltimore. 7 924 1 Chicago. 4,259 2 Buffalo... 2 337 0 Milwaukee.... 3*308 3 New York. l'844 3 Duluth. 3 ' 299 4 Philadelphia. Tai 4 Omaha. '805 5 Louisville. 371 r, Cincinnati. 649 6 Boston... 327 f, St. Louis.. 518 7 Toledo. 113 Peoria. 468 8 Kansas City. 375 9 Indianapolis. 145 10 % 1 Figures compiled from the annual reports of the exchanges for the years 1913 to 1917, excepting Louis¬ ville, Indianapolis, Buffalo, and Toledo, which do not publish receipts. Louisville figures were compiled by the Commission from the records of the exchange. Buffalo figures were made up by combining Buffalo lake receipts (Millers’ Almanac for 1917) with car inspections at Buffalo as compiled by the Commission. Toledo figures arc from the Annual Statistical Report of the New York Produce Exchange for 1917. 2 Assumed, but not definitely established in several cases. SIZE AND IMPORTANCE OF TFIE MARKETS. 23 As in the ease of barley, the receipts of rye in other than four principal markets are relatively insignificant. Since the four leading l)arley markets are also the four leading markets for rye in the same order, the c|ualifications already referred to would apply to both tables. However, the distribution is so equally divided that it is impossible to say that more rye is actually received at Chicago than at either Milwaukee or Duluth. A uniform basis for compiling figures might show any one of these three markets second onh’ to Minneapolis. Comparative importance of the secondary markets. —The tabulated figures show that Buffalo takes the lead over all secondarj- markets in the receipts of each grain except rye, and that Buffalo, New York, and Baltimore are among the four principal secondary markets with respect to every kind of grain. The receipts at Boston are insignificant except for wheat and oats. The figures used for Buffalo include arrivals of grain by lake plus cars inspected only. It is probable, therefore, that the Buffalo figures arc somcwdiat too low in comparison with the seaboard markets, which report receipts on a broader basis. Similarly the importance of Toledo and Louisville may be underrated in comparison with the Atlantic ports for the reason that the receipts at the two interior markets are com¬ puted on the basis of inspection only, and do not include reconsigned cars or through-billed cars not inspected. Yet the business of sea¬ board markets is so largely of a transfer or transit character that such comparisons are unsatisfactory in any case. Beceipts of all five grains. —The table below shows the average annual receipts of wheat, corn, oats, barley, and rye com¬ bined for the five calendar years 1913 to 1917 at the principal primary and secondary markets. Table 7. —Average annual re'ceipts of wheat, corn, oats, barley, and rye combined for the five calendar years 1913 to 1917 at the principal primary and secondary markets. [In bushels, 000’s omitted.] Primary markets. Published receipts. Per cent. Phirnpo . 334,943 32.9 . 200,016 19.7 nit.V_... 87,205 80,152 8.5 fit T.miis. 7.9 Duluth. 78,093 7.7 Atilwankpc .. 72,031 7.1 Omahn. _ 66,149 6.5 Pporia... 43,170 4.2 Indianapolis. 32,674 3.2 fMnpinna.ti__ 23,007 2.3 Total. 1,017,440 100.0 Order of impor¬ tance.! Secondary markets. Pub^ lished receipts. Per cent. 1 Buffalo. 198,695 37.7 2 New York. 136,945 26.0 3 Baltimore. 84,438 16.0 5 Philadelphia. 50,332 9.5 4 Boston. 24,119 4.6 6 Louisville. 17,169 3.3 7 Toledo. 1.5,305 2.9 8 9 Total. 527,003 100.0 10 Order of impor¬ tance. 1 i 1 -Vs estimated by the Commission because of known variations in basis for computing “recaipts.” The figures of average yearly receipts of all five grains at these 17 markets are valuable as an indication of the comparative volume of trading at each center, although subject to the qualifications already I 1 Ci cn 4^ CO tc 24 TERMINAL GRAIN MARKETS AND EXCHANGES. noted. Tile only doubt as to the relative importance of the markets as indicated by the tabulated figures occurs in comparing St. Louis, Duluth, and Milwaukee. Since Duluth figures represent grain actually unloaded, while those for St. Louis include a substantial thi-ough-billed movement, there is little question but that Duluth should receive fourth place. It is impossible to state definitely that more grain is marketed at St. Louis than at Milwaukee, although such an order of rank is given in the absence of contrary evidence. , Several markets not covered by these tables, such as Sioux City, Des Moines, and St. Joseph, do, nevertheless, claim a place as primary markets. Considering the volume of receipts, Buffalo (classed as a secondary market) would rank with the primary terminal of Min¬ neapolis, while some of the Atlantic and Gulf ports export more grain than is handled at such primary markets as Peoria, Cincin¬ nati, and Indianapolis. As already stated, however, the term primary market refers not to volume but to source of receipts. Section 4. Local consumption. Introductory. —Another criterion of the importance of markets lies in a consideration of local consumptive demand, which is gauged by the difference between receipts and shipments of grain.. It might be presumed that both receipts and shipments are computed on the same or similar bases in a given market, and that the published figures are, therefore, sufficiently accurate for such a comparison. Yet even here there are certain inconsistencies in collecting the figures as between incoming and outgoing grain which mar com¬ parisons. In a few instances, for example, reconsigned cars are included in the published data for shipments, but not in receipts. Yet in general, especially for all five grains combined, these figures furnish indices whereby the markets can be ranked in order of local consumption. Wheat consumption. —The table below shows the average annual local consumption of wheat at 10 primary markets for the five calendar years 1913 to 1917. Table 8. —Avemgc annual receipts, shipments, and local consumption of ivhcat at 10 primary marletsfor the Jive calendar years 19IS to 1917. [In bushels, OOO’s omitted.] Receipts. Ship¬ ments. Local consump¬ tion. Per cent of local consump¬ tion to receipts. Minneapolis. 120,151 55,612 65,412 34,209 21,275 8,062 56,884 3,390 5,955 3,079 38,521 43,986 58,127 27,090 17,889 4,933 54,090 1,255 4,356 2,974 81,630 11,626 7,285 7,119 3,386 3,129 2,794 2,135 1,599 105 67.94 20.91 11.14 20.81 15.92 38.81 4.91 62.98 26.85 3.41 KansasCity. Chicago... St. Louis. Omaha. Milwaukee. . Duluth. Indianapolis >. Cincinnati. Peoria. Total. 374,029 253,221 120,808 32.30 * 2-year average, 1916-17. SIZE AND IMPORTANCE OF THE MARKETS. 25 It. is apparent from the table that Minneapolis is by far the greatest consumptive market for wheat in the United States. Kansas City is second among primary markets as regards quantity of receipts consumed^ although the proportion is relatively small. The other large concentration points ship out the greater proportion of the grain handled. Corn consumption. —The table, below shows the average annual local consumption of corn at 10 primary markets for the five calen¬ dar years 1913 to 1917. Table 9. —Average annual receipts, shipments, and local consumption of corn at 10 primary maricetsfor the five calendar years 1913 to 1917. Chicago. Peoria.. Indianapolis’ St. Louis. Cincinnati... Kansas City.. Milwaukee... Minneapolis.. Omaha. Duluth....... Total.. [In bushels, OOO’s omitted.) Receipts. Ship¬ ments. Local consump¬ tion. Per cent of local consump. tion to receipts. 100,592 70,474 30,118 29.94 23,843 10,080 13,763 58.14 23,144 12,702 10,442 45.12 19,774 11,023 8,751 = 44.26 8,504 4,450 4,054 47.67 20,422 14,728 5,694 ' 27.88 1.3,666 10,167 3,499 25.60 9,366 7,482 1,884 20.12 27,352 25,559 1,793 6.56 862 779 83 9.63 247,525 167,444 80,081 32.35 ’ 2-year average, 1916-1917. This table indicates that corn consuuiption at primary markets is chiefly centered at Chicago, Peoria, Indianapolis, and St. Louis. These cities not only furnish markets for the grain, but also have exerted the attractive force of an active milling and manufacturing demand. Oats consibiption. —The table below shows the average annual local consumption of oats at 10 primary markets for the five calen¬ dar years 1913 to 1917. Table 10. —Average annual receipts, shipments, and local consumption of oats at 10 primary markets for the five calendar years 1913 to 1917. Chicago. St. Louis. Indianapolis ’ Milwaukee... Kansas City.. Cincinnati.... Peoria. Muineapolis.. Duluth. Omaha. Total.. (In bushels, OOO’s omitted.) Receipts. Ship¬ ments. Local consump¬ tion. Per cent of local consump¬ tion to receipts. 136,687 23,758 16,267 28,155 9,712 7,014 12,779 30,446 5,624 15,846 113,130 18,147 11,405 25,563 7,539 5,410 12,570 30,562 5,683 15,857 23,557 5,611 4,862 2,592 2,173 1,604 209 2 116 2 59 2 11 17.23 23.62 29.89 9.21 22.37 22.87 1.64 286,288 245,866 40,422 14.12 1 2-year average, 1916-1917. * “Shipments” exceed “receipts” due to inconsistencies in collecting figures published or to decreases in stocks carried over. 26 TERMINxiL GRAIjS^ MARKETS AKD EXCHAXGES. The table indicates that Chicago is the only large consumer of oats among the markets considered, although the consumption at that point is only about 17 per cent of receipts. A large proportion of this is, of course, used for local feeding purposes. Barley consumptiojST. —Thb table below shows the average an- nual local consumption of barley at 10 primary markets for the calendar years 1913 to 1917. Table 11.— Ava'age annual receipts, shipments, and local consumption of harley at 10 primary marJeets for the calendar years 1913 to 1917. [In bushels, OOO’s omitted.] ♦ • Receipts. Ship¬ ments. Local consump¬ tion. Per cent of local consump. tion to receipts. Chicago. 28,033 18,840 33,171 1,883 3,001 905 11,424 872 1,084 8,370 5,136 30,154 193 1,422 72 10,878 448 928 19,663 13,704 3,017 1,690 1,579 833 544 424 156 70.14 72.74 9.10 89.75 .52.62 92.0-t 4.76 48.62 14..30 Mihvaukee..... Minneapolis. St. Louis. Peoria. Cincinnati. Duluth. Omaha. Kansas Citv. Indianapolis!. Total. 99,213 57,601 41,610 41.94 J No barley receipts at Indianapolis. As shown by the table, Chicago is the largest consumer of barley although a slightly greater percentage of receipts is consumed by Milwaukee. Rye consumption. —-The table below shows the average annual local consumption of rye at 10 primary markets for the five calendar years 1913 to 1917. ^ Table 12. — Average annual receipts, shipments, and local consumption of rye at 10 primary markets for the five calendar years 1913 to 1917. [In bushels, OOO’s omitted.] Minneapolis.. Chicago. Milwaukee... Cincinnati... Indianapolis ^ St. Loms_ Omaha...... Peona. Kansas City. Duiuth. Total.. Receipts. Ship¬ ments. Local Percent of local consump- consump- tion. tion to receipts. 6,882 4,590 4,259 3,203 3,308 2,635 318 649 218 7 518 386 805 687 468 376 375 303 3,299 3,273 2,292 33.30 1,056 24. 79 673 20.31 331 51.00 211 96. 79 132 25.48 118 14.66 92 19.66 72 19.20 26 .79 20,781 15,778 5,003 24.07 12-year average, 1916-17. As the table indicates, the Minneapolis mills attract more rye than is consumed at any other primary market. Indianapohs has led in the percentage of rye receipts consumed owing to the demand of > T- SIZE AND IMPORTANCE OF THE MARKETS. 27 I ' local mills and distilleries, although the quantity consumed is coih siderably less than that at Chicago, Milwaukee, or Cincinnati. Consumption of all five grains. —The table below shows tho average annual local consumption of the five grains combined at 10 primary markets for the five calendar years 1913 to 1917. Table 13. —Average annual receipts, shipments, and local consumption of ivhcat, corn, oats, barley, and rye combined at 10 primary markets for the five calendar years 1913 to 1917. [In bushels, OOO’s omitted.] Receipts. Ship¬ ments. Local consump¬ tion. Per cent of local consump¬ tion to receipts. Minneapolis. 200,016 111,309 253,304 88,707 44 35 Chicago. 334'9S3 8i; 679 24,38 32.76 Milwaukee.*. 72;031 48,' 434 23;597 Ri T.nnfs..... so; 142 56,839 67 484 23' 303 29.08 22.61 41.03 T 00 7 WINTER WHEAT. Kansas . 102,377 .53,176 37,593 36,629 34,644 33 4=i0 18.5 0 J. 1 o - Nebraska . lo. D Illinois . A ^ Z/. V.f Indiana . i...: . A A «5X. i A 2 41. o Oklahoma . A n 4 /. u Missouri . 32,228 24 OO. Bennsvlvania .. d d oy. 4 Washington _ . , 23,524 1.5,996 15,770 14,610 12,786 12,253 10 d 9 Oo. o 9 0 OO. U Michigan. 9 0 «u, y Virginia. 9 A t o. o 76.4 Oregon. O Q Arizona. 9 9 t o. / Maryland. 1 Q Kentucky. 9,862 8,901 8,592 •S am 1.8 1 A North Carolina. o4. o Idaho. 1 A oO. Z New York. 1 K o/. o 1 oW. o X. 0 VU. o 1 Compiled from Yearbooks of Department of Agriculture, each year’s issue. The Yearbooks do not give corrected figures. figures taken from the ^mar of Tlie table shows that the production of winter wheat extends through a broad belt including Nebraska on the north and extending into Texas in the southwest. The most productive area centers in Kansas reaching north into Nebraska, south into Oklahoma, and eastward through Missouri, Illinois, Indiana, and Ohio. Wlieat is not grown successfully in the southeast where the warm, humid spring weather permits fungous diseases to injure the crop, and where the mild winters frequently give the plant a premature start only to be damaged or destroyed by late frosts.^ Spring wheat, on the other hand, is highly locahzed in the North¬ west, from Minnesota to Washhigton, with North Dakota the leading producer. The Rocky Mountain plateau cuts athwart this region 1 Finch and Baker, Geography of World's Agriculture (1917), pp. 14,15,18. V DEVELOPMENT OF TERMINiU:. MAPvKETS. 31 so that the Washington area (the Palouse and Big Bend districts) must ])e considered a secondary zone of production. It is apparent, then, that Duluth and Minneaj^olis are in position to command the shipments of spring wheat while Kansas City, Chicago, and St. Louis have ready access to the winter-wheat areas. Omaha and Milwaukee are in position to derive a certain proportion from each crop. Kansas City is undoubtedly the leading winter wheat market, although the exchange publishes no figures distin- ■ Diagram g, WHEAT PRODUCTION (BU.PER SQ. Ml.) IN THE PRINCIPAL. GRAIN STATES SSQ] IIOO AND OVER 300 TO 1093 CuXiZXj o o TO 839 500 TO B33 300 TO 433 L_M lOO TO 299 CZl 0 TO 39 (flVSPPGeFOR YCRRS J3l3 -19/7) 'M/LWRUKi /I ^HRNSRSCI^^ guishhig between the two varieties. The effect of the localization of spring wheat appears in the following table, which shows the distri¬ bution of spring and winter wheat shipments between Minneapolis, Duluth, Chicago, and St. Louis for the'five-year period 1913 to 1917 (no data being available for Kansas City or Omaha): Table 1G .—Distribution of spring and winter wheat shipments at specified marhets 1913 to 1917.^ % Average total receipts. Spring wheat receipts. Per cent of spring wheat. Winter wheat receipts. Per cent of winter wheat. Unclassi¬ fied wheat. Per cent of un-. classified wheat. Minneapolis (cars). 104,995 78,706 75.91 13,395 12.76 11,894 11.33 Duluth (1,000 bushels). 66,973 41,685 45,368 67.74 3,695 30,567 5.52 17,909 26.74 Chicago (cars)... 4,338 10.41 73.33 6,780 16.26 St. Louis (cars). 21,819 '682 3.12 18,511 84.84 2,626 12.04 1 No statistics available for Kansas City or Omaha. Receipts at Kansas City are practically all winter wheat. 32 TERMINAL GRAIN MARKETS AND EXCHANGES. Primary markets and corn production. —The United ^States corn crop is the largest cereal crop produced in any country. While production extends generally throughout the United States, the gi'eat bulk of the crop is consumed on the farm in feeding ^ so that shipments are made largely from the fields of greatest production. Diagram B. CORN PRODUCTION ( BUSHELS PER SQ.MI.) IN THE PRINCIPAL GRAIN STATES Diagram B shows that the area of heaviest production extends from the Mississippi Basin in western Iowa and eastern Nebraska across Illinois and Indiana and into Ohio.^ As both the table and Diagram B indicate, the markets in or near the States of Iowa, Illinois, Nebraska, Indiana, Missouri, and Ohio are most accessible to surplus corn production. The rank of these corn markets has been shown at page 20. The following table gives the classification by States of the average annual production of corn for the period 1913-1917: * Estimated at from 71 to 80 per cent. 3 The temperature requirements of difierent varieties of com vary widely. Some southern varieties need an average frostless season of 180 days and mean summer temperature of 80°. Practically no corn is grown where the mean summer temperature is less than 66°, or where the average night temperature during the three summer months falls below 55°. Consequently the production of corn along the northern border of the United States and at the higher elevations in the West is negligible. (Finch and Baker, p. 29.) DEVELOPMENT OF TERMINAL MARKETS. 33 Table 17. — Average annual production of corn in the principal producing States, 1913 to 1917.^ [In thousands of bushels.] States. Iowa. Illinois. Nebraska. Indiana. Missouri. Ohio. Texas. Kansas. Kentucky. Tennessee. Minnesota. South Dakota.. Mississippi. Oeorgia. Alabama. Oklahoma. Pennsylvania.. Virginia. North Carolina Wisconsin. Average annual pro¬ duction. 360,750 335,097 188,596 181,752 172,665 141,203 132,375 100,277 97,825 86,275 85,700 84,159 64,075 63,595 60,432 60,165 59,203 56,499 56,366 56,110 Per cent of annual average pro¬ duction in United States. Cumula¬ tive percent¬ age. 13.0 13.0 12.1 25.1 6.8 31.9 6.6 38.5 6.2 44.7 5.1 49.8 4.8 54.6 3.6 58.2 3.5 61.7 3.1 64.8 3.1 67.9 3.0 70.9 2.3 73.2 2.2 75.4 2.2 77.6 2.2 79.8 2.1 81.9 2.0 83.9 2.0 85.9 2.0 87.9 J C'Ompiled from Yearbooks of the Department of Agriculture, 1914 to 1917, each year’s figures being taken from the Yearbook of the following year to obtain corrected figures, except 1917, which is from the 1917 Yearbook. Primary markets and oats production. —Oats, like corn, is grown chiefly for feeding purposes. The geographical distribution of the oats crop, as Diagram C shows, is similar in a general way to Diagram C. OATS PRODUCTION ( BUSHEUS PER SQ. Ml.) IN THE PRINCIPAL GRAIN STATES / ( > / I 3000 AND over 2450 TO 2939 1300 TO 2443 ^/A 1350 TO 1839 BOO TO 1349 EH) 250 TO 799 CD O TO 249 (fi\/ERPlJEFVfi YEPRS /9/3 - I9i7) I I . . •'HMg A'"" I • ^ T I I rMV . A I / j 1. OKLA. 368693°—20-3 34 TERMIi«rx\L GRAIN AIARKETS AND EXCHANGES that of corn, except that the former cereal is grown much more extensively in the Northwest. The more northwesterly trend of the oats belt and the relatively heavy i^rodiiction in Minnesota and the Dakotas enables Minneapolis and Milwaukee to obtain a volume of receipts which places them in second and third rank, respectively, as oats markets. (See Table 4, p. 21.) Oats also follows corn production in the Central West l>c- causc of its use in crop rotation with the latter cereal.^ The figures of average oats production, by States for the period 1913 to 1917, are shown in the following table: Table IS. — Average annual produciioii of oats in the principal producing States, 1913 to 1917 d [In bushels OOO’s omitted.] Slate. Average annual produc¬ tion. Per cent of annual average produc¬ tion. Cumula¬ tive per¬ centage. Iowa.. 193,3G2 1G8,409 14.5 14.5 Illinois... 12.7 27.2 Minnesota... 108,900 8-1,638 78,989 62,621 59,973 56,125 8.2 35.4 Wisconsin. 6.4 41.8 Nebraska. 5.9 47.7 North Dakota... 4.7 52.4 Ohio. 4.5 56.9 South Dakota. 4.2 61.1 Indiana. 55^46 4.1 05,2 Michigan. 51,855 3.9 69.1 48'052 3.6 72 7 75.9 78.7 New T'ork. 42,625 37,610 37,488 3.2 Texas. 2.8 Pennsylvania_.. 2.8 81.5 Missouri. 35^20 2.6 84.1 Oklahoma. 2.')'238 1.9 86.0 87.7 Montana. 22' 036 1.7 Oregon. 14' 087 1.1 88.8 Idaho. 13' 849 1.0 89.8 AVashington. 1 : 3 '500 1.0 90.8 ’ Compiled from Yearbooks of the Department of Agricnlture, 1914 to 1917: each year from the Yearbook of the following year to obtain corrected figures, except 1917, which is from the Yearbook of the same 5 ''car. From the table it appears that Iowa and Illinois, the leading corn States, are also first in the production of oats. These vStates arc directly tributary to Cliicago and Milwaukee, the first and third markets in oats receipts. Minneapolis, the second largest oats pri¬ mary market, is tribuary to the Dakotas, Iowa, and the Minnesota oats beltv Primary markets and barley production.- —Diagram D (fol¬ lowing) shows the trend of barley production into the Northwest.^ < Sec Finch and Baker, Cl cography of the World’s Agriculture, p. 35. In the great oats-producing region of the central United States this crop is particularly important not only because the grain is desired for feeding work animals, but also because it offers a spring grain needed in the crop rotation with corn,«priug wheat not being adapted to this region. As oats arc sown in the spring, before corn-planting time, the crop docs not require the early removal of the corn, as is the case with fall-sown wheat, and as oats do not mature until after the corn is laid by in early July, there is very little competition with this more profitable crop for labor at critical times of the year. 5 Most of the barley in the United States is grown in Minnesota and the Dakotas; California also raises a large amormt, eastern Washington and the famous barley district of eastern AVisconsin constituting tho other important centers. A considerable acreage of barley is also found in Ivunsas, Iowa, eastern Michigan, and central New York. The barley used for brewing is grown almost entirely to the west and northwest of the Great Lakes. Barley is not grown to any extent as yet in the South. (Finch and Baker, p. 40.) DEVFXOPMEXT OF TEIlMIXx\L MARKETS. 85 Diagram D. BARLEY PRODUCTION (BUSHELS PER SQ.MI.) IN THE PRINCIPAL GRAIN STATES S- •• t.-; V.- s- /•, V 'v. / / rrm fine 3BO AND Over 2 90 TO 353 FFFIffl 220 TO 283 150 TO 2 19 ao TO 143 CED lO TO 79 1_1 o TO 9 (fiVBRffOe FOR YEFRS19/3 -f9/7j ^ N -S MO- [ A ■■■ INp- ■'• . OHip .• .'i /psa/f//’,-:. I .'a-'-' ■ ■ ■ y.-.,‘nciNNfni \ '• \-\'\-\syKfiNsrsciTr •‘.•V -'1 ^ sT.LOuis[:^'yy^ _ V.V r—1 ■ - If I—- k. OKLA, -’'-I, As a result of the high concentration of barley production in this area, Minneapohs, Chicago, Milwaukee, and Duluth are in position to handle the bulk of the movement. (See Table 5.) The average an¬ nual production for the years 1913 to 1917 by States are shown in the following table: T\ble 19 —Average annual 'production of barley in the principal producing States, lOlo to 1917 d [In bushels 000’3 omitted.] State. California. Minnesota. North Dakota.. South Dakota.. Wisconsin. Iowa. Idaho. Washington_ Kansas... Oregon. Colorado. Nebraska. Midiigan. New York. Montana. All other States Annual average crop. Per cent of total average crop. Cumula¬ tive per¬ centage. 37,424 18.7 18.7 34,319 17.2 35.9 29;C25 14.8 50.7 21,113 10.6 61.3 19,468 9.7 71.0 9,901 5.0 76.0 7,049 3.5 79.5 6,679 3.3 82.8 5,699 2.8 85.6 4,642 2.3 87.9 4,512 2.3 90.2 3,279 1.6 91.8 2, -570 1.3 93,1 2,369 1.2- 94.3 2,145 l.l 95.4 9,217 4.G 1 100.0 1 Compiled from Yearbooks oflhe Department of AgriculUire, 1914 to 1917, each yearfrom the Yearbook of the following year to obtain corrected figures, except 191/ , v. liicli is from the 1 1917 Yearbook. /'■; i i 36 TERMINAL GRAIN MARKETS AND EXCHANGES. It will be noted that with the exception of California the principal barley producing States are also among the principal spring-wheat States, (See p. 30.) Accordingly, the spring wheat primary markets are also important barley markets. Milwaukee- and Chicago, however, the second and third barley markets, have held their position primarily because of the demands of malting concerns in those localities. Primary markets and rye production. —Diagram E show’s a concentration of rye production in the North Central States.® Penn- l^iagr^m E. RYE PRODUCTION (buSHELS PER SQ. Ml.) IN THE PRINCIPAL GRAIN STATES sylvania and New York are relatively large producers of this cereal (Table 20, p. 37), but are not showm on the map for the reason that rye is a small crop and no great concentration markets exist by reason of the crop in these States. Minneapohs, Chicago, Milwaukee, and Duluth are immediately accessible to the areas of rye production and handle the great bulk of the countiy shipments. The relative importance of the principal producing States is shown in the following table: ® Very little rye is grown for grain south of the mean summer temperatme line of 75°, and the principal centers of production are located where the mean summer temperature is about 70°. The States Laving an average jrield of over 16 bushels per acre are all located in the North. (Finch and Baker, p. 27.) I DEVELOPMENT OF TERMINAL MARKETS. 37 Table 20. —Average annual production of rye in the principal producing States, 1913 to 1917 d lln bushels, OOO’s omitted.) Stale. Average annual crop. Per cent of total average crop, United States. Cumula¬ tive per¬ centage. "W'i sofm sin __..... ... .... 7,133 14.8 14.8 Minn Asnt a _____ 5,881 12.2 27.0 Miehi'i'n.n .. ........ 5,421 11.3 38.3 Fpnnsylvan.ift ___.....___ 4,742 9.8 48.1 Xfirth Dakota .......... 4,22.5 8.8 56.9 X phraska ___...._...._... 2,724 2,707 5.7 62.6 Smith Dakota _ ... 5.6 68.2 Xpw York r _...... ..._.... 3,532 5.3 73.5 Indiana .......-.- 2,234 4.6 78.1 1,535 3.2 81.3 "Kow .Tpfsav .. .. 1,.316 2.7 82.0 1,032 2.1 86.1 Vircrinift .... 915 1.9 88.0 ICansa Compiled from the reports of the Department of Agriculture for the years 191.3 to 1917, each year’s figmes from the Yearbook of the following year to obtain correcte^l figures, except 1917, which is from the 1917 Yearbook. , Rye is used largely for milling purposes, so that the location of the markets would not only be influenced by the producing area, but also by the presence of the mills. According to a report of the Census Bureau ’ Minneapolis flour and grist mills ground 2,054,894 bushels of rye in 1914 and Chicago and Milwaukee 704,621 and 269,367 bushels, respectively. These three cities consumed about one-fourth of the rye milled during that year. Primary markets with reference to total grain produc¬ tion. —Diagram F (p. 38) is somewhat misleading as an indication of the marketing scheme, because it includes the total corn crop, only a small part of which enters into the marketing movement. This would modify the density indicated for all grains in Nebraska, Iowa, and the prairie States. It is clear from the foregoing that the great established primary grain markets are located, for the most part, in close proximity to the areas of dense production. That is, geographical location with reference to production is essential to the development of a primai’y market. To illustrate further, it should be recalled that the west¬ ern primary market for Canada is located at Winnipeg on the east¬ ern edge of production and not at the lake shipping points, Fort William and Port Arthur. In order to handle a large volume of country shipments to the satisfaction of producers, a location rela- ' tively close to the productive areas seems to be essential. Section 3. Influence of production upon the development of markets. In order fairly to estimate the positive influence of production upon the development of adjacent markets, it is necessary to compare J Prepared for the Federal Trade Commission. 88 TEPvMUTAL GEAIir MAKKETS AISTD EXCHANGES. the production of specific sections over a period of years with re¬ ceipts at the markets to which these sections are tri])iitaiy. Although certain errors due to different methods in compiling receipts (see p. 18) enter into any such computations, these are not large enough to modify seriously the conclusions. In the main, the failure of receipts at established markets to parallel production in the tributarv' areas indicates that some other influence has operated to deflect the moye- iuent of grain from the most direct channels. Diagram F. TOTAL GRAIN PRODUCTION (CWT. PER SQ. Ml.] IN THC PRINCIPAL GRAIN STATES In preparing the diagram of correlations (opposite p. 40) the grain- producing region was divided into four sections and the markets selected which were most accessible to each area, as follows: Markets. MinnoaTX)li.s_ . I. Noethwest. Duluth______ Omaha. - II. Southwest. Kansas Citv. St. Louis. III. Middle West. Producing are^. Minnesota. North Dakota. ' South Dakota. Montana. Nebraska. Kansas. ^Missouri. Chicago... Peoria.... IMilwaiikee Iowa, Illinois. Wisconsin. ^':?"7 - •• DEVELOPMENX OE TERMIlSTAIi MARKETS. 39 ^^arkcls. IV* EasT Centiial, Producing area. ] )cl roi t..-.....Michigan. Indianapolis.Indiana. ('incinnati' Toledo •.Ohio. Cleveland Figures for aA'crago procliictioii and aA^crage market receipts were then computed to establisli the position of the curves at 1885, 1895; 1905, and 1915, and the graphs were drawn from the logarithms of these figures. loga rithms for coriuiiacL-oats ^)roduction were reduced by 0.80 for convenience in presentation. It was assumed that the four points thus obtained for both production and receipts would giAm a comparison sufficiently accurate to demonstrate the force of proximity to producing areas in building up the markets.® * The tables of logarithms for figures of production and receipts are as follows: LOGAIUTHMS OF AVERAGE PRODUCTION OF FIVE GRAINS IN SPECIFIED AREAS BY 10-YEAR INTERVALS. Corn. Wheat. Oats. Barley. Rye. Northwest: 1884-1886. 3.56279 4.83249 4.74187 4.01824 2.77.597 1894-1896. 3.658:30 5.06773 4.970.55 4..32410 3.11992 1904-1906. 4.01148 5.24746 5.20455 4.800.59 3.43201 1913-1917. Southwest: 4.25999 5.30448 5.39749 4.93908 4.1.5445 1884-1886. 5.65312 4.79497 4.89851 3.66521 .3.67311 1894-1896. 5.68820 4.802.57 4.91940 3.02.366 3.24403 1904-1906. 5.79717 5.17851 5.00615 3.86982 3..53377 1913-1917.. 5.66421 5.28310 5.20994 3.97030 3.59218 Middle West: 1884-1886. 5.70034 4.85562 5.3.5216 4.14258 3.84979 1893-1897. 5.69859 4.68060 5.44646 4.33143 3.86623 1903-1907... 5.86851 4.71112 5.5:3532 4.50109 3.84:392 1913-1917... 5.87619 4.74341 5.64981 4.47586 3.95173 East Central; 1883-1887. 5.38820 4.98.590 4.89164 3.38970 3.02653 1893-1897. 5.38956 4.89988 4.94942 3.35353 3.46761 1903-1907. 5.52350 4.88168 5.11169 3.33284 3.64187 1913-1917. 5.57354 4.93954 5.22266 3.59528 3.96501 LOGARITHMS OF AVERAGE TERMINAL MARKET RECEIPTS OF FIVE GRAINS AT SPECIFIED MARKETS BA' 10-A'EAR INTERVALS. Corn. AVheat. Oats. Barley. R.ye. Northwest; • 1883-1887. “>. 83.378 4.69887 3.06371 2. .38917 1.00000 1893-1897. 3.53769 5.0.3487 4.0:3266 3.64078 3.1179:5 1903-1907. 3. 64758 .5.09167 4. 4.8372 4.35110 3.39270 1913-1917.*. 4.00979 5. 24,805 4.5571.5 4.029:36 4.00775 Southwest: 1883-1887. 4. 41162 4. 2.8630 3.93381 3. 45834 2.841:36 1893-1897. 4. .55078 4.38769 4.13360 3.28825 2.76118 1903-1907. 4. 76615 4. 82259 4. .59112 3.56360 3.08819 191.3-1917. 4. 82968 5.04.567 4.69299 3. 58422 3.229^)1 l^Iiddle AVest: 1883-1887. 4. .8.5914 4. 48701 . 4.7373.5 4.21927 3.53314 1.893-1897. .5.01237 4. 5674:5 5.06920 4.4516:5 3. .55691 190:3-1907. 5.10.891 4. .55706 5.04045 4.63801 3.602r»0 191:3-1917. 5.14019 4.88:397 5. 24,500 4.69788 3.90499 Ea.'t Central: 1.88.3-1887. 4. ^790 4.47245 3. 69152 3.16673 2.5.5871 189.3-1.897... 4.42999 4.39926 4.09258 3.42681 3.15045 190:3-1907. 4. .56.8.51 4.09889 4.447,86 3.46938 3.1277:5 1913-1917. 4. 58727 4.32974 4.51546 3.04139 3.20656 40 TERMINAL GRAIN MARKETS AND EXCHANGES. The first section of the diagram, the Northwest, shows a very- definite correlation between production in the four States for the four 10-year intervals, and the combined receipts at Minneapolis and Duluth during the same periods. The movement of grain in this section is relatively unaffected by railroad competition, con¬ sumptive demand, or other factors which disturb the correlations obtained for the sections farther east. Either for mill consumption or for large scale shipping the bulk of the grain must move to one of these two markets, so long as transportation rates are favorable. In considering the Southwest, Middle West, and East Central sections it must be borne in mind that milling centers, or largely consumptive markets, and a futures market such as Chicago, will attract grain from distant areas to meet an abnormal demand. This Avould be true even assuming an equality of transportation facil¬ ities and rates, which is undoubtedly an incorrect assumption. There are cross currents of competition operating in these sections which adversely affect the correlation between receipts and produc¬ tion in certain instances, although in the main the trend is shown to be toward the markets indicated. Section 4. Distribution of country shipments. A concrete demonstration of the flow of countiy shipments to the more adjacent primary markets appears in the followmg table. These figures by no means represent the total movement, but do give a fair cross section of the distribution under prewar conditions. Table 21. — Percentage analysis of sources of grain receipts {u'heat, corri, oats, rye, and barley) at specified markets during the crop years 19P2-13 to 1916-17d Grand total (car¬ loads).2 Illi¬ nois. Indi¬ ana. Iowa. Kan¬ sas. Michi¬ gan. Minne¬ sota. Mis¬ souri. Mon¬ tana. Ne¬ braska. ('hicago. Minneapolis. Kansas City. Duluth. St, Louis... 262.03.3 308,691 Sl,.)ol 85,385 42.174 53 ; 0S5 70,33S 27, 576 24,026 12,091 8. 070 8, 712 16, 991 6, 293 5, 053 11,087 4,364 7,677 5,473 5, 530 e; 496 2,117 51.98 .01 .04 2.44 31.43 1.01 6. .53 .02 26.47 32. 3,5 22.38 21.04 > 0.35 .11 .55. 24 0.03 5. 79 36.03 .71 17. 79 1.07 23.53 ,20 .10 G) .08 0. 71 "' 3 .’ 26 ’ 0.02 4.24 .16 6.15 .43 (^) .47 1.78 .86 26.39 .02 6.39 .74 63.19 41. 63 1.39 "Yf.m 47. 26 12. 09 11. 95 . 10 .49 .01 .21 ■ 19.73 Milwaukee. . Omaha. "is.'ei’ 67.99 39. 74 Peoria. . .01 Indianapolis. Cincinnati. Detroit. Wichita. .33 .02 .21 .44 .08 .02 97.81 . .11 .05 Secondary markets: Bulfalo. 16. 73 20. 56 40.43 7.12 1.17 14. 59 47. 01 12. .59 49.40 39.99 1.94 2.69 .04 9.96 Baltimore. . - • ' • Louisville. 6. 67 "is. 79 .04 Toledo. .01 St. Paul. . 66 .92 17. 66 23.15 # 6.19 .32 .10 .04 Gulf: New Orleans... Galveston. ... Pacific coast: Portland. . 63 1.31 Seattle. .05 .28 Los Angeles.... * Percentages computed and adjusted by the Bureau of the Census. According to shipments reported by country CiCvators and warehouses. ®Lcss than one one-hundredth per cent. j 1 A -DEVELOPMENT OF TERMINAL MARKETS. 41 Table 21 .—Percentage analysis of sources of grain receipts {wheat, corn, oats, rye, and barley) at specified marlcets during the crop years 1912-13 to 1916-17 —Continued. Chicago. Minneapolis. Kansas City. Jhiluth. St. Louis. Milwaukee. Omaha. Peoria. Indianapolis. Cincinnati. Detroit. Wichita. Secondary markets: 13 ufTalo. Baltimore. Louisville. Toledo. Gulf: New Orleans... Galveston. Pacific coast: Portland. Seattle. Los Angeles.... North Dakota. 0.23 33.98 .0.5 72. 20 .04 .25 Ohio. 0.01 (•) .01 11.03 1.10 30.33 19. 75 .20 40.98 Okla¬ homa. 0. 07 .05 1.81 .33 '.'62 1.56 32. 24 53. 08 ,09 South Dakota. 3.30 23.11 3. 78 3.38 .25 23.15 12.16 .04 C) .02 ,02 .02 .08 Wis¬ consin. 0.50 .09 .10 .01 .40 17. 74 ,01 Middle Atlantic division. 0.09 13.34 Moun- j tain and j Southern Pacific I division. division, i 1 _I._ 0.53 .38 1.00 .15 ..51 .04 .97 ,28 ,03 .06 2.31 4.09 3.40 99.36 98.57 99. 26 0. 44 ".' 0 . 3 ' 24. 79 1..32 20.32 Central division.^ 0.84 .13 .48 .28 2.12 .79 .40 .13 4.12 7.96 2 . 22 3. 81 6 . IS .91 1.93 1 Warehouses only. Shipments from elevators were separately tabulated by States and are included in the individual State figures. (See Vol. I.) 2 Less than one one-hundredth per cent. It will be seen that Chicago derived from Illinois about 52 per cent of all grain received from the country; from Iowa about 31 per cent; from Minnesota about 6 per cent; and from South Dakota about 3 per cent. Minneapolis drew upon Minnesota for about 36 per cent; derived about 34 per cent from North Dakota; about 23 per cent from South Dakota; and about 4 per cent from Montana. Kansas City derived about 55 per cent from Kansas; about 26 per cent from Nebraska; and about 7 per cent from Iowa. Duluth received about 18 per cent from Minnesota; about 72 per cent from North Dakota; about 6 per cent from Montana; and about 3 per cent from' South Dakota. vSt. Louis received about 42 per cent from Illinois; about 27 per cent from Iowa; about 20 per cent from Missouri; and about 6 per cent from Nebraska. Milwaukee received about 32 per cent from Iowa; about 24 per cent from Minnesota; about 23 per cent from South Dakota; and about 18 per cent from Wisconsin. Omaha received about 63 per cent from Nebraska; about 22 per cent from Iowa; and about 12 per cent from South Dakota. Peoria received about 79 per cent from Illinois and about 21 per cent from Iowa. Reference to this table will show the distribution to the other terminals. It is clear that the general movement was eastward 42 TERMII^-AL GRAIN MARKETS AND EXCHANGES. and southeastward to the primary markets except in the case of St. Louis, which drew largely on Illinois; and Onmha, which re¬ ceived 22 per cent from Iowa. All the primary markets received the great bulk of their country shipments from closely contiguous territory. It m.a\ 1)0 generally concluded that to operate successfully as a primarv’ concentration point a market must be located adjacent to large producing areas; and that markets so located have an initial advantage. This does not mean, however, that geographical loca¬ tion has been the controlling factor in developing these judncipal grain markets. Numerous cities might be pointed out along the margin of dense production which might havo marketed the grain quite as effectively as the existing niiirkets. Geographical position will not explain why Milwaukee has received in recent years on an aver¬ age only 12 per cent as much wheat as Chicago, or why Omaha, lying adjacent to both spring and winter wheat areas, receives less wheat than St. Louis. It will not exjdain why I)es jMoines, Sioux (ity, St. Joseph and Springfield (Mo.), have not developed as grain terminals comparable to the other primary markets. To fully un¬ derstand the development of the grain markets, the transportation j facilities and market organization as well as productive areas must ' be considered. ^ Section 5. Freight rates as related to the development of grain markets. The influence of transportation facilities and the freight-rate structure in building up grain markets will be alluded to in out¬ lining the histories of the larger markets (CLaps. Ill and IV). It is necessaiT here to analyze the various rate classifications and adjustments which appear in the histoiy of grain transportation, so as to ascertain their effect upon individual markets. Local rates. —As Jong as the grain was largely consumed in the areas where produced, freight rates were on a local basis. It is needless to point out that this condition ceased to exist after the trunk line railroad systems had reached the Mississippi and Missouri Kivers . (i. e., in the seventies). Through rates. —It then became necessary to consider the aggregate rates from producing to consuming centers and to adjust inbound with outbound rates, so that the combination of the two for a given market should not be higher than similar combinations through other gateways. Local rates from country stations became increasingly less important than through rates via the terminal in which the grain was to be marketed. A competitive struggle ensued between growing grain markets to obtain favorable through rates or proportions thereof. During the eighties the grain trade was DEVELOP^NIEXT OF TERMINAL IMARKETS. 43 involved in the destructive rate wars which characterized unrestricted railroad competition. * * * The roads were a law unto themseh'es. Nobody had any authority to say what the maximum of any rate might be or to fix the future rate or to limit the car¬ riers in fixing any rate they might please. ^ * And so we had discriminations, rebates were rife, free transportation was offered to tlioso who were big enough to ])e considered important. Out of this chaos of preferential competitive rates evolved the present system of proportionals or specifics, comhinatioii rates, reshipping rates, transit privileges and export rates, which has hecn elaborated and defined by the Interstate Commerce Commission. The territorial classifications and adjustments which were built into the rate structure were determining factors in the establishment of grain markets and channels of grain traffic. Where markets became “rate brcaldng points’^—such as Chicago and St. Louis— y. their interest lay in securing a favorable combination of the inbound and outbound rates. Where markets lay in the middle of classifica¬ tion territory—e. g., Minneapolis and Duluth—they were allowed pro¬ portional rates and transit privileges in order to compete as forward¬ ing centers for eastern consumption. It has been possible to make or unmake markets by the allowance or withdrawal of what is known as “transit”—that is, the privilege of reshipping grain or its equiva¬ lent in grain products on a through rate calculated from producing to consuming territoiy or to export points. Proportional rates. —The “proportional rate” Avas devised to equalize rates for shipment via one gateway as compared Avith ex¬ isting through rates via another gatev-ay. It also proAuded a Jthrough rate basis for certain interior points AAdiich Avere formerffi restricted . to local rates or. a combination thereof. It enabled shippers already enjoying a through rate via one route to consuming territory^ to obtain a similar rate Aua a different junction point or terminal market. It also enabled shippers in producing territory AAdio had never been alloAved a through rate to obtain such a rate by combination via a giA^en gatcAvay or basing point. The existing local rate Avas replaced by a so-called “proportional” into the junction point, and this pro¬ portional Avas combined Avith another proportional out of that junc¬ tion point so as to provide a through-billing. The intermediate _gateways or junctions in thisjyte„Mimtiire.AATRn-kne^A^^ pioints.” In the case of grain, the basing point Avas usually a ter¬ minal matket. It Avas thus made possible for a grain dealer in Chi¬ cago, for example, to buy grain in loAva for ultimate shipment to NeAV York on a through rate; or for a Minneapolis shipper to bring in grain from the country on a “proportional” and ship the grain, or its equWalent in grain products, out of the market on the same billing. * statement of Commissioner Clements in “American Elevator and Grain Trade,” October, 1916, p. 231. 44 TERMINAL GRAIN MARKETS AND EXCHANGES. In determining freight rates between two points the rate by the 1 shortest or most direct route is the prevailing maximum through 1 rate which the longer and more indirect routes must not exceed I if they arc to participate in the traffic. A ‘h^eshipping’’ rate is often 1 referred to as a “ proportional/’ meaning the part of the through rate I covering the haul from the primary market to destination.^® I A form of proportional rates has been applied in what is known 1 as Illinois territor}^. The freight rates in this territory are con- 1 structed both with reference to local shipments to the local markets I and also with reference to shipments to the intermediate and eastern 1 terminal markets. Since the bulk of the grain moving into Chicago 1 is ultimately reshipped east, there is practically no ‘‘local” billing i to Chicago from countiy points in Illinois. The rates applied in 1 this territoiy are known as the “Illinois proportionals,” i. e., the I shipments from Illinois producing territoiy to Peoria and Chicago 1 are not made on local rates, but on through billing to eastern terri- 1 toiy with transit and reshipping privileges at the intermediate I market. The proportion of the through rate chargeable to the ship- ■ ment as far as Chicago is less than the local rate. a The origin of the Illinois proportional rates (introduced in 1907) I is explained b^^ the Interstate Commerce Commission as follows: m Altlioagli Illinois is divided into territorial groups to wliicli percentage rates are a applied on most commodities, grain rates are not so stated. The State is traversed 9 by a number of east and west lines leading to New York or other points on the eastern m seaboard, intersected by a number of north and south lines centering at Chicago. 9 There are also certain lines entering Chicago from the East which do not tap the State fl to any great extent. These lines and the merchants of Chicago, the greatest grain a market of the United States, were desii'oiis of handling the grain of Illinois as were ^ also the noidli and south lines. To divert a portion of the grain from the east and west J shoi t lines, grain rates from Illinois points were early made the same tlirough Chicago 3-. as by the direct lines, though the distance might be much greater. The abuse of certain transit privileges at Chicago led to their discontinuance and the reestablish # ment by the carriers leading east from Chicago of what are known as reshipj)ing rates. Whereupon, the north and south lines established “proportional” rates, the simj of y the proportional and reshipment rates equalling the through rate by the direct line. ^ While the bulk of the grain was shipped to the East, some was shipped to the southeast, south and southwest, through rates being formed by combinations on the ^lississippi ^ and Ohio gateways. The through rate on Illinois grain to eastern territory is divided i into two parts called “specifics.” The inbound “specific” into the I primary market (that is, Chicago or Peoria) is the rate actually collected and retained by the carrier as its compensation for the inbound transportation, whether the grain be consumed locally or reshipped to points other than to points in the eastern or so-called “Trunk line territory.” In case the grain (or a similar substituted quantity) be subsequently reshipped (within a year) to any point le 27 I. C. C., p. 290. 21 I. C. C,, 5 and 9; see also 28 I. C. C., 549, DEVELOPMENT OF TERMINAL MARKETS. 45 in trunk line territory, any amount which has been collected in excess of the proportional or ‘^specific” is deducted from the outbound rate. This is accomplished through the presentation by the outbound” shipper of ‘^expense bills” (freight receipts) to the transportation company. Peoria, as a terminal market lying in tlie lieart of the Illinois grain- producing section, halfway between St. Louis and Chicago, has a system of proportional rates similar to its larger rival, Chicago. Peoria’s complaint, however, is that the adjustments of the reship¬ ping rate to the proportionals on through shipments to eastern terri¬ tory are unfair to Peoria. The prevailing difference in the reship¬ ping rates has been 2 cents (per 100 pounds) in favor of Chicago, which is 100 miles nearer to the eastern seaboard. This 2 cents differential is complained of by Peoria as excessive. The reshipping rail rate from Chicago to trunk line territory is induced (as claimed by Chicago) by the lake competition. Grain from Chicago can move to the east via the lakes as well as by all-rail transportation. Ship¬ ments from Peoria directly east can not participate in the water route unless the grain passes through Chicago or some other of the terminal gateways. Grain from the Trans-Mississippi territory may be through-billed to Chicago and St. Louis on Trans-Mississippi (T. M.) billing in the same manner and under the same regulations as the Illinois propor¬ tional billing already described. ' This billing allows a proportional rate into the terminal market with reshipping privilege lower than the combination of the local rates. As another example of a proportional adjustment, Toledo was for many years prior to 1913 unable to secure a joint through rate on grain over connecting lines. The dealers were required to pay local rates in and local rates out on shipments east, unless both the ‘Gn” and “out” shipment was over the lines of the same carrier. Moreover, the rate on ex-lake grain from Toledo was higher relatively than the proportion of the through all-rail rate from Chicago. The Interstate Commerce Commission, as the result of a complaint, ordered the railroads reaching Toledo to establish joint through rates with transit at Toledo to cover the movement of grain products by all reasonably direct routes to points east. It also ordered that the domestic and export rates on ex-lake grain forwarded from Toledo to New York be established at 78 per cent of the Chicago-New York rates and that the customary differ¬ entials to other destinations should be observed. 12 See I. C. C. Docket 8347. Rail proportional of a through lake-rail rate. Toledo Produce Plxchange v. Ann Harbor Railroad Co. ft al., decided June 23,1913 (271. C. C., p. 536). 46 TERMINAL GRAIX AIARKETS AND EXCHANGES. Omaha .—The history of the Omaha grain market offers a con- spicuous example of the immediate effect of favorable through-rate adjustment. It is stated by the trafTic dci:)artment of the Omaha Oliamber of Commerce that the rate combinations in effect on Omalui to the east prior to 1903 were higher than the through rates east from points west of Omaha, and that the outbound rates from that city were too high to permit rebilling on the combination of locals. About this time, however, the Chicago Great Western Railroad entered tlio Omaha market. This road insisted that the through rates on grain from points in Nebraska to the Mississippi River, Chicago and com¬ mon points, Minneairolis and also the Atlantic and Gulf jiorts slioiild be on a proportional basis through Omaha, rather than on a com¬ bination of locals. In this position they were supported by the exchange and various largo grain shippers. A bitter rate contro¬ versy followed which lasted for several months. Finally, an under¬ standing was reached and new rates effective June 10, 1904, were promulgated. These new rates were in accordance with the position of the Chicago Great Western Railroad and the Omaha Exchange and are shown in the following statement in comparison with the former rates on wheat and corn: f Ratos in rents per 100 pounds.] Wheat. Corn. From Omaha to— Nov. 1, 1903. June 10, 1904. Nov. 1, 1903. Juno 10, 19(31. Chicago; Local.. 21 17 IS 16 Proportional. i . 21 12 18 11 M St. Loins; Local..*. 16 14 13 Proportional. 16 9 13 8 14 St. Paul and Minneapolis; . Local.T.•. 21 17 IS Proportional. 21 11 IS 10 Duluth;" Local. 31 27 2S 24 Proportional. 31 16 28 15 Memphis; Local. 21 19 18 IS 13 Proportional... 21 It 18 New Orleans; < Local. 2.S 27) 25 • 23 Proportional. 26 19 25 18 Galveston; Local. 2.S 24 2.5 23 Proportional.. 28 19 25 IS New York; Local...'. 37 34. 5 31 34 33.5 Pro port ion a I.. o7 29. 5 28.5 Poston;" Local. . 39 36. 5 36 36 3.5. 5 Proportional. 39 31.5 30. 5 Baltimore; Local. 31 31.7) 31 30.5 Proportional.. 34 26. 3 31 2S.5 Philadelphia; 1 yoc.a 1 .. . ... 35 32. .5 32 3t.5 Proportional. 35 27.5 32 26.5 Rc'port the secretary oi the Omaha Grain EKChango, .Tan. 1, lOO-l. ' 47 DEVELOPMENT OF TERMINAL MARKETS. The secretary of the exchange reported, January 1,1905, as follows: In tlic readjustment of the grain rates, a reduction of one-half to 3 cents per 100 I)ounds was made to Omaha from nearly -one-half of the stations in Nebraska, and a reduction in the through rates to the Mississippi River, Chicago, and common points, from approximately 700 stations. It would be a difficult matter to estimate the bene- ht derived by the producers in Nebraska from these reductions. They should appre¬ ciate what the Omaha Grain Exchange has done for them, and patronize this market in preference to any other. Sonic of the rates have been altered, but the adjustment has not ))een substantially changed and lias, at least by implication, been approved by the Interstate Commerce Commission. As noted in Chapter IV, the rapid increase in the grain-forwarding business resulting from this adjustment, warranted the formation of a grain exchange at Omaha and placed that market on a more or less competitive equality with the other Missouri and the Mississippi River gateways. The following extract indicates the constant struggle Avhich has been kept up to maintain favorable projiortidnal rates: A very.serious menace to the continued growth and prosperity of the Omaha grain market is the so-called ''equalization” plan, wdiich was put in force by the Frisco system on July 1. Under the operation of this plan, grain originating at all stations on and south of the main line of the Union Pacific Railroad in Nebraska is hauled from Kansas City to Memphis, by the Frisco road, at whatever rate is necessary to equalize the combination of rates via Omaha, down to a minimum of 9 cents ixu’ hundredweight. The viciousness of this plan lies in the fact of its apparent fairness. If we accept the principle upon which it is based, we virtually concede the proposition that the Kan¬ sas City market is entitled to an equal footing with Omaha in all of Omaha’s teriitoiy, and to all the advantages it now' has in its own territory. To concede such a principle would mean the death of our hope of making Omalia a great primary market and w'o have done everything in our power to obtain the W'ithdraw'al of the "equalization” plan. So far avc have not succeded, but we are hopeful that w'e may still be able to conwnce the railroads that are responsible for the policy, that it is a wrong and unjust application of the gatew'ay equalization irrinciple. Buffalo .—Milling in triinsit privileges and other reshipping privi¬ leges on grain products have operated to build up milling centers as grain markets. It developed in the 1901 hearings of the Interstate Commerce Commission on rates on grain and grain products that cer¬ tain western millers enjoyed not only transit privileges in their own markets, but what was in effect a reshipping privilege at Buffalo. Under this practice, the western millers, particularly those at Minne¬ apolis, were given a through rate on flour shipments to the East via Buffalo, and then allowed to stop this flour at Buffalo for repacking. The carriers had agreed to give tliis privilege because tlie flour was usually shipped to Buffalo l)y ]>oat in jute sacks, and since the eastern trade demanded the flour in paper sacks, it was l)olted and repacked at Buffalo and then went forward by rail. It was necessary to ship i® Secretary’s report, Jau. 31,1907 48 TEKMTNAL GEAIl^ MARKETS AND EXCHANGES. the flour in jute sacks by the lake boats because when paper sacks were used there was likely to be heavy loss from breakage. The carriers at Buffalo furnished the facilities for this repacking and un¬ loaded and reloaded the flour Avithout additional charge. On the other hand, on wheat shipped in to local millers they charged for unloading and storage and charged local rates when the Buffalo juillers shipped flour to the East. In addition these western millers could even enter into local competition at Buffalo and undersell the local millers because they were allowed to bill in flour sold locall}^ on the through rate and also given the repacking facilities free.^^ Kansas City .—It was testified at this 1901 hearing that the through lines at Kansas City favored a fcAV large grain forwarders, operating on a through rate basis, to the disadA^antage of the local commission men and mill buyers. The following extracts illustrate this matter: Mr. Hagerman. On the Missouri Pacific— AA'hat concern or concerns haA^e the grain pri\dleges there? Mr. Trickett. Hall & Robinson do the major portion of the export business; Or^enleaf & Baker, at Atchison, Kans., operate in the domestic trade, as do Denton Brothers, of LeaA^enworth, Kans. Mr. Hagerman. Greenleaf & Baker and Denton practically divide the domestic business and Plall & Robinson attend to the export business? Mr. Trickett. Yes, sir, Mr. Hagerman. That is on the Missouri Pacific? Mr. Trickett. Yes, sir. Mr. Hagerman. Now, in the practical working of that system of ha\dng one con¬ cern or one man or company do the business upon a line of road, what has been your observation as to its effect and what abuses does it lead to? Mr. Trickett. The operations of these firms ha\'e excluded the Kansas City grain dealer from participating in the grain trade along that line—the different grain lines. * * * Mr. Trickett. In former years it was the custom for grain purchasers to consign gi-ain to this market, and for Kansas City grain firms to bid for grain in the country. There is practically no consignment business here to-day. All the gi’ain that Kansas ('ity receives it has to fight for, and in very few instances is a Kansas City grain firm able to successfully compete with these larger firms on the grain-producing lines. Mr. Hagerman. Suppose that a Kansas City firm gets it fixed some way so it makes up the arbitrary; Avhat additional difficulty is there in dealing with this situa¬ tion when some particular firm has all the grain priAuleges? Mr. Trickett. Regardless of concessions which he may recede from Kansas City, the firm operating on the through line is still able to control the business. Commissioner Proety. What do you mean by that; that he can handle the grain better on the through rate than the Kansas City man can? Mr. Trickett. Yes, sir; regardless of any concessions he might secure here or else¬ where, the firm operating on the throughdine is in a position to handle the business. They can go in the country and bid whateA'er is necessary to obtain the grain. Commissioner Prouty. Then the necessary inference from that would be that they would have to make it some way in the rate, in addition to the arbitrary. Mr. Trickett. Yes, sir. That is supposed to be the way they handle the business. R I. C. C. hearings, 1901, Rales on Grain and Products, AVestern Points to Atlantic Seaboard, pp. 59, 57, 58, 93, 100. 18 Pp. 1.83-1S7. DEVELOPMENT OF TERMINAL MARKETS. 49 ronimissioner Pkouty. Have you any figures to show what has been the growth of lliis w heat business and the proportions that Kansas City has received and the effect upon the market? ^fr. Trickett. It is not possible for us to determine the exact proportion of the V. heat crop of the State of Kansas received at Kansas City. 1 have, however, taken the total receipts at Kansas City for a number of years and estimated the proportion of the wheat crop of Kansas tliat those figures represent. In 1893 we handled 69.1 per cent of the total wheat crop of Kansas, estimated as previously explained. In J895 we handled 51.4 per cent. In 1896, when the trou})le with the through lines originated, w'e handled but 25.1 per cent, despite the fact that with one exce])tion the crop w^as larger that year than for five years pre^ ious. Mr. Day. Was that after the reconsignment was abolished? Mr. Trickett. That w’as after the reconsignment was abolished; yes, sir. In 1898 we handled 47.2 per cent. In 1901, out of a crop of 90,000,000 bushels, the banner crop of the State of Kansas, w^e handled but 29.8 per cent, showing that our receipts have decreased regularly for a number of years, and especially since the establish¬ ment of the proportional rate basis and the operation of the larger dealers on the through grain lines. Export differentials and export rates. —Differentials or arbitraries for specific markets and commodities liave influenced the growth of grain centers in many ways. A witness in testifying before the Industrial Commission (1901) asserted that as a result of competition the railroads had put freight rates into effect which favored the cities as against the country, the big shippers as against the small men, and sections which contain the large cities and have the main currents of traffic as against the sections that lie a little out of the central current, like New England.*® Wliile this is a sweeping generalization, it is true that rates have been frequently adjusted on a preferential basis. ' A long series of rate wars culminated in 1877 in the establisliment of fixed differentials in rates from specified western territory to the North Atlantic ports. In this agreement of 1877 and in later agree¬ ments the Chicago-New York rate was made the basis. The amount of the charge under or OA^er this rate is dedgnated the differential and has been applied to the folloAAung territory: The section bounded on the east by a line, drawn from Pittsburgh to Buffalo, on the south by the Ohio River, on the west by the Mississippi River, and on the north by the Great Lakes and a line drawn west from Chicago to Dubuque. Rates between points in this territory and New York City are based upon the Chicago-NeAv York rate; that is, the rate between a given point in this territory and New York is either the same as the Chicago rate or a certain percentage of that rate. To other points upon the Atlantic seaboard, the rates liaA^e been higher or lower than that to New York by a giA^en number of cents per hundred pounds. Report of the U. S, Industrial Commission, Ami. IX, p. 130. ™ In the Matter of Differential Freight Rates, 11 I.C.C., 13; see also Daish, Atlantic Port Ditferentials, pp. 12, 13. 108698°—20 4 50 TERMINAL GRAIN AIARKET3 AND EXCHANGES. Til addition to the difFcrentials in the territory described above, : hipments over the Great Lakes to the lower lake ports and thence to North Atlantic ports have been placed on an‘^ex-lake differentiah^ ])a'^ds. The method of securing export rates prior to 1900 was brouglit out in the 1901 hearing,-^ as'follows: At Kansas City there are numerous firms which send their business out via Gal¬ veston, others via Mobile, some via Chicago, some ^ia Baltimore, and others by Norlolk or Newport News. All those firms are in there bidding for the gi’ain, and the different lines find it necessary from time to time to make rates in order to carry the liusiness by their rails. For example, a line leading from Kansas City to St. Louis in connection with some line leading to Baltimore would want to move a line of wheat. They would go into the market and find out what was being bid by Galveston ship¬ pers, by Chicago shippers, by Newport News shippers, or Alobile shippers. They would write to the road and say, here is the wheat and the price fixed by the other lines, and here is what we can pay for it in Baltimore. The difference approximates the rcrte. And in that way the roads would niakc the rate in order to got their share of the business. The, published rates for export grain have been largely deter¬ mined with reference to foreign competition and ocean freight rates. They are distinguished from domestic rates in nearly all classifica¬ tions and adjustments. Grain from the western primary markets can be exported to Europe or South American points either from the Gulf ports or through the Atlantic terminals, so that these routes have become competitive. Adjustment in the rates applying to one route has usually been counterbalanced b}^ an adjustment appljdng to the other. The railroads extending through the Mississippi Valley to the Gulf began to build up their traffic in grain about 1900 after the river movement had been practically abandoned. At first, in order to attract the traffic, these railroads made rates on export billing including elevation and other terminal services far below those in effect at Atlantic seaports. The grounds of defense for lower Gulf rates were (1) shorter haul from the grain fields, (2) absence of heavy grades, and (3) less expensive operation. The railroads running east to the various Atlantic ports, in order to protect their export grain traffic, adjusted their rates to meet those to the Gulf. Since St. Louis, for example, is an intermediate point bn routes to New Orleans from Chicago and Minneapolis on the north and from Omaha and Kansas City on the west, the grain freight rates (both domestic and export) from St. I^ouis have logicall}" been proportions of the through rates from the more distant markets to the Gulf. The Omaha rate to New Orleans and the Chicago rate to New Orleans have been made on the St. Louis combination, this combination I. C. C., ‘Un the Matter of Rates, Facilities, and Practices Applied in the Transportatiaa, Handling and Storage of Grain, etc.”. DEVELOPMENT OF TERMINAL INIARKETS. being adjusted to the through rate from Omaha, Qhicago, and other western terminals to the Atlantic seaboard.^- The 1919 export adjustments appear in the following table: Tap.lk 22 . —Export grain rates from 10 jminary marhets to 6 Atlantic and Gulf ports. in force Jan. 1, lO'lQ. iln cents per 100 pounds.] Boston. New A'crk. Philadelphia. Baltimore. New Orleans. Galves¬ ton. From— All rail. Lake, rail. All rail. Lake, rail. All rail. Lake, rail. All rail. Lake, rail. All rail. All rad. Chicago_^. / 129 \ 2 23 1 29 2 2.3 1 29 2 23 1 29 2 23 1 28 2 22 1 28 2 22 1 27} 1 27} } 24 1 1 50} 2 21 .} 2 21 } 1 244 Milwaukee. ) 1 29 \ 2 23 1 29 2 23 1 29 2 23 1 29 2 23 1 28 2 21 } 1 28 2 22 1 27} 2214 1 27} 2 21 } } 27} 1 352 1 *i() Duluth. 2 . 9541 - 2 ; 8 3H 0 29.} 2, 0 31} 6 29.1. 2, 5 32} e 27} 2 , 5311 6 26} 2 34 \ 7 42} Minii^apolis._ 1 8 4.5} 2; 5 341- 2,0,9 32} 2 , 0 34} 2,0,9 32} 2 , 0 32} 2 , 0 , 930 -}. 8 31} • ••••••• 234 f 1 51 \ 249 11 26 } 11 25' ( 1 38 \ 237 1 13 25 Omaha. 10 38 !0 38 1037 10 36-} 11 26 } 11 25" ( 1 22 } 1 13 10 } Kansas Citv.../_ 10 3S 10 38 1037 10 36} j 1 29 .} 1 2 25' St. Louis. y. _ / 1.31 1 2 26} jo ,12 29 / 1 31 \ 2 26} jo ,12 29 / 130 1 *2.5}. }o ,12 27 }o -12 26 Peoria. 31 31 30 29} / 124 } 1 11 22 } Indianapolis.. 25.1 25.} 25} 24 23 1 4 391 , Cincinnati. 24 24 23 991 . 22 } / 352 \ MO ' Local rates applying from points of origin on shipmcnt.s not enlif led to rcslupping rates. 2 Reshipping rate. 3 Through rate made on East St. Louis combination (domestic reshipping rate). 4 Through rate made over East St. Loui.s, using joint rate to East St. Louis and the 25-ccnt export rate beyond. & Rates apply on gi-ain products and wheat. s Lake rates suspended in January. Rates named arc those in force opening navigation as of Mar. 1.1910. ■ Through rates made over East St. Louis, using joint proportional rate to Liast St. Louis and the 2.')-ccnt export rate beyond. 8 Through rate made over East St. Louis, u.sing joint local rate to East St. Louis and the 25-ccnt export rale beyond. 8 Lake rates suspended in January. Rates named are those in force opening navigation as of ifar. 29,1919. 18 Rates made on St. Louis combination. ■1 Proportional rate on grain originating beyond. 12 Rates named apply on grain products other than on flour and are reshipping*rates. Rates on flour arc 1 cent per 100 pounds, lower to Boston and New York, but same as on grain products to Philadelphia and Baltimore. 18 Reshipping rate from St. Louis, for export. The term 'A'eshipping rate'' as used in this table has reference to rates applicable to shipments originating localty at Milwaukee, Cliicago, etc., as distinguished from through shipments from pointy beyond, or shipments which are held at those points under proper tariff authority and afterwards reshipped to eastern points. A ‘h'eshipihng rate’' is defined An Cairo Board of Trade v. C. C. C. & St. L. By. (46 I. C. C. 343), as follows: , A reshipping or rebilling rate is a proportional rate under which after a commodity has been shipped to a distributing market and unloaded for the imrpose of storage or treatment in transit, the same commodity or an equivalent amount may be re- shipped to final destination. There is close analogy between reshipping rates and transit. -2 See Transcript of Hearings Before Western Freight Traffic Committee, Interstate Commerce Commis¬ sion, Dec. 10 and 11 , 1918, pp. 33-3(J. 52 TERMINAL GRAIN MARKETS AND EXCHANGES. Tile foregoing table shows the present differentials whereby the re-hipping rate to Philadelphia from Chicago is 1 cent and to Balti¬ more is 1^ cents under that to New York and Boston. It also indi¬ cates the transit privileges effective at Minneapolis and Duluth. The only rate open to Omaha and Kansas City for exports through the Atlantic ports is a combination via St. Loins. A conspicuous feature of the schedule is the low reshipping rate of 161 cents from St. Louis to New Orleans while the proportional from Kansas City to New Orleans is 25 cents. It will be noted that Omaha, Kansas City, and St. Louis' are allowed substantially lower export rates to the Gulf ports than to the Atlantic seaboard. These are offset, to a var^dng extent, by higher ocean rates from the Gulf to Europe. Duluth and Minneapolis are the only primary markets which are allowed export rates via the lake-rail routes which are substantially cheaper than the all-rail rates. Northwestern territory.— In the northwestern grain-growing territory is included the principal spring wheat-growing belt and one of the most important oats-producing areas of the United States. It includes Minnesota, the Dakotas, parts of Iowa and Nebraska, and extends westward into Montana and Wyoming. The section is chiefly tributary to the Duluth and Minneapolis markets, but Chicago, Omaha, and even vSt. Louis also bid for the grain from this region. The principal market competition for northwestern grain is between Minneapolis and Duluth on the one hand and Minneapolis and Chicago on the other. Since Milwaukee for the most part has the same freight rates east and west as Chicago, it is linked as a market with Chicago. Minneapolis, because of its location between ('hicago and Duluth (it is about 400 miles northwest of Chicago and 150 miles southwest of Duluth) forms a primary gateway for much of the grain moving east to or through its two principal rival markets. Accordingly, Minneapolis, because of its convenience both as a gateway and as a marketing point, demands transit and ^^propor¬ tional” privileges such as are enjoyed by Chicago, St. Louis, Kansas City, and other largo reshipping centers. Moreover, as Duluth and Chicago arc both intermediate markets for grain shipped via Minne¬ apolis to eastern consuming and seaboard centers, the Minneapolis- Duluth rate in relation to the Minneapolis-Chicago rate is of direct interest to Chicago, and the Minneapolis-Chicago proportional is of direct interest to Duluth. Both of these rates are considered parts of the through rates from producing points to eastern consuming tenitory. In commenting upon the difficidty of making a final and satis¬ factory adjustment of proportionals and transit privileges in the Northwest the Interstate Commerce Commission stated in 1913: f DEVELOPMENT OF TJ^mMINAL MARKETS. 53 If it be proper to fix the rates to Milwaukee on the basis of one-half cent per 100 pounds for each additional 50 miles in distance as compared with Superior it is equally jiroper to apply that same principle in the relkive rates as between Minneapolis and Duluth, and as between Omaha and Minneapolis. In determining the rates to Duluth- Superior via Minneapolis, we required that they should be not more than 4 cents higher than to Minneapolis. In fixing the rates to Duluth-Superior via the Great Northern, we held that from its junction-point, Wilmar, and points beyond from Avhich the shipments moved through Wilmar, the rates to Duluth-Superior should not be more than 3 cents higher than to Minneapolis. The difference in distance from Wilmar. to Duluth-Superior and Wilmar to jNIinneapolis is about 106 miles. From Minneapolis to Duluth-Superior is about 150 miles. If the rates to Duluth-Superior were made on a basis of one-half cent for each additional 50 miles beyond Minneapolis, it would result in a differential of 1.5 cents, and the establishment of that differential would revolutionize the relationship of the markets and the movement of the grain., ******* * * * Removal of the discrimination that was found to exist against Duluth- Superior and in favor of Mihvaukee and Chicago necessitated some increases in rates to Milwaukee and Chicago, and the reduction of the differentials Duluth-Superior over Minneapolis, and over Wilmar, resulted in a great many reductions in rates. The history of these rates and the proceedings before the Commission show that there has never been an adjustment that was satisfactory to the rival markets. Duluth and Superior on the one hand, Chicago and Milwaukee on the other hand, and Minne¬ apolis in between them, each contend that any adjustment that has existed, or that has been proposed by the canders, either on their own initiative or under findings of the Commission, unduly prefers some or all of the competing markets. It is not at all difficult to pick out from any large and complicated rate adjustment apparent or actual inconsistencies, but in endeavoring to correct all such inconsistencies it is almost invariably found that as to some of them the correction of one creates others.^^ The rate system in the Northwest is at present in a highly contro¬ versial state as a result of readjustments during the period of Federal control of the railroads. The general increase in rates on June 25, 1918, had materially disturbed the relationship of rates on grain and grain products, especially in the Northwest. Subsequent tariffs failed to give a solution satisfactory to the conflicting interests and “instructions were issued by the Director General to the Western Freight Traffic Committee to work out a general revision of North¬ western grain rates and practices through the various competing markets.” The report of this committee was referred to the Inter¬ state Commerce Commission for recommendations.*^ Their decision resulted in at least three adjustments of importance to the grain trade of the Northwest: (1) The controversy involved certain routes through Minneapolis to Chicago and to Duluth. Dealers in the Minneapolis market had previously operated under a transit arrangement whereby grain orig¬ inating in the larger part of the Northwest (including most of Min¬ nesota, North and South Dakota, and Montana) could be stopped for merchandising or milling purposes at Minneapolis and subse¬ ts Investigation and Suspension Docket No. 220; Chicago-Duluth Grain Rates, 27 I. C. C. 216. « 56 I. C. C. 134. « Decided in Ex Parte 70, 56 I. C. C. 133. 54 TERIvriNAL GRAIN AIARKETS AND EXCHANGES. queiitly forwarded to Chicago at the direct Chicago rate or at certain prescribed transit penalties above that rate. The Minneapolis dealers- were anxious to retain these privileges. The Interstate Commerce Commission, however, disapproved the transit airangements in view of the out-of-line hauls which were involved. They required that the rates should break on Minneapolis, allowing a fixed proportional rate of 11 cents from Minneapolis to Chicago and 5% cents from Min¬ neapolis to Duluth. The opinion on the matter of transit was as follows: Wc have required the estal)lishinent of transit in few instances. ^ hen practicable, rates through important grain inarhets should break into definitelj known inbound and outbound components. Such an adjustment is preferable to transit under a through rate, where the opportunities for complications in the application of rates, and for undue preferences resulting from the selected use of inbound expense bills in securing a desired outbound transit rate, are multiplied in proportion to the greater volume of tonnage handled through important markets and the greater number of carriers that ordinarily servo sirch markets. A\e shcrrld view' as e^en less warranted orrr establishment of transit at such important markets if srrbstantial out-of-line hauls w'cre involved. Minneapolis is an im.portant grain mmrket, and the charge above the direct Chicago rate is proxrosed only for out-of-line hauls. At least since June 25, 1918, the transit arrangements at ^Minneapolis have not been satisfactory, even to the milling and other interests at that point, although material extensions of those arrangements have been granted irnder the Boyd tariffs. It seems evident, therefore, that transit offers no satisfactory solution of the difhculties inci¬ dent to’the rivalries of Minneapolis, Chicago, the Missouri River cities, and other markets in the handling of grain and grain products. The proposal of the Western Freight Traffic Committee with respect to the revision of the Chicago rates and the cancellation of transit at Minneapolis should be adopted. The proDOsed proportional rate of 11 cents from INIinneapolis to Chicago, w'hich will apply on traffic routed out of line through Minneapolis, is in effect a reshipping rate and comes wmll within the limits of reasonableness. It has been stated that in the cancellation of transit at ^linncapolis an exception is to be made of Montana grain. This is'mainly because of the effect upon the west¬ bound rates from Montana which the witness for the carriers states the cancellation w’ould have. ATewing alone the eastbound rates, there would seem to be no more reason for the retention of transit on grain from Montana than fiom othci parts of the general territory of origin, and we recommend that it be eliminated.-® Duluth asks for transit on grain moving to Chicago from Montana and beyond. We have already disapproved the granting of transit at Alinneapolis on Alontana grain. The request of Duluth for transit on -Montana grain should also be denied.-’ They held further that transit should be granted “at directly inter¬ mediate intt'rior milling points” in ^Minnesota-* and Wisconsin under the proposed proportional rates from ^Minneapolis to Chicago and Miimeapolis to Duluth; likewise at Minneapolis—“when a directly 25 Idein, pp. 137, 138. Idem, p. 140. 25 Upon the rcargumeiit of this case the rccommciidatioii.s of the C ommLssion were somew hat modified .so as to make the line of the Chicago and North \\ o^stcra from Mankato, Minato Rapid C-ity, S. Uak.., tlio logicaldividinglincbetween the penalty and nonponaUy territories for ont-of-linc hauls.” (See 561. C. C. CS9.) Above this line Chicago is required to pay rates not Ic.ss than lho.\'e prescribed for combinations ou Minneapolis to Chicago. DEVELOP.MENT OF TERMINAL MARKETS. intermediate point”—^l)ct\veen Omaha and Duluth and l)ctween Sioux City and Duluth; ''the same as transit has been and is granted under the proportional rate from the Missouri Riycr to Chicago.”-^ (2) The second ruling involved the through rates from Minneapolis to New York via Duluth, Manitowoc, Milwaukee, and Chicago. The committee appointed by the Director General had proposeoint in one of the routes o\'er which it is proposed that the l(Jem, p. llG. idem, p. 110. M r. no. ]’p. 110, 111. “ r. 141. 56 TERMINAL GRAIN MARKETS AND EXCHANGES. rales sliall be equalized, and Chicago is an intermediate point in another, The desira¬ bility of having the through rates over these routes the same through both gateways^ is of more importance than the relative mileages to the gateways, which becomes less pronounced when merged into the longer through routes. Distances often vary to a considerable extent between two points over various routes that take a common rate. Generally speaking, it is the rule, and not the exception, that rates are the same over all routes between given points. And it is desirable that, vrhen practicable, this should be so. If the rates here should vary according to a close refinement of mileages to and from the ports, there would be different through rates via Duluth, Manitowoc, Milwaukee, and Chicago, all of which are practical routes from Minneapolis to the east. By the jiort equalization proposed the interior milling point between Minneapolis and Chicago would be continued on a parity in the milling and marketing of grain bought on the Minneapolis market. Under the plan proposed by Duluth, and concurred in by Minneapolis, the interior milling point between Minneapolis and Chicago would be confined, under transit arrangements, to the higher-rated route through Chicago, while Minneapolis could ship out either through Chicago, or through Duluth at a low'er rate than through Chicago. We recommend an adjustment under which the through charges from Minneapolis to the east would be the same via the various gateways, so far as this can' be done wdthout unduly prejudicing any locality. As the Great I.akes Transit Corporation is not under Federal control, and is not a party to this proceeding, we make no recom¬ mendation concerning its rates from Duluth.^'* (3) As a third recommendation they disapproved the joint through ' rate on grain products from Minneapolis to New York whereby Minneapolis millers had been able to ship flour to the east at rates lower than those charged for similar shipments of grain. The decision reduced by cents the disadvantage of Kansas City as compared with Minneapolis in shipping grain products. It also made it possible for the Buffalo miller, because of cheaper water rates, to procure grain from Duluth at charges less than those required of the Minne¬ apolis miller attempting to buy wheat and deliver it as flour at Buffalo. The Commission held; There is no justification for the present rate on grain products from Minneapolis to New' York, 2^ cents, or other amount, lower than the contemporaneous rate on grain from and to the same points. The flour rate should be at least not low'er than the rate on grain. The lower rate on the products from Minneapolis affords the only exception to this general rule shown by this record to exis-t throughout the entire northwestern and western grain-producing territory. The fact, referred to by Minnea¬ polis, that Chicago and other intermediate points can mill in transit, under this rate, grain purchased in Minneapolis does not make the adjustment proper. ******* The readjustment proposed by the director general wdll reduce the disadvantage of Kansas City on grain products by cents, leaving it but three-tenths of a cent higher than it rvas prior to Federal control; and while the proposed differential of 4 cents on both grain and grain products is substantial, w^e are not persuaded by this record, in view' of the influence of rail-and-lake movements from Minneapolis,' that it is excessive. Tlie proposed all-rail rates from Minneapolis to the east on grain and grain products sliould be approved. < ' * * * the elimination of the transit and the establishment of the 11-cent rate will result in an advance of Twin City rates to consuming territory of from 2.1 to 2.7 per 100 pounds. If the Commission is desirous of giving the Minnesota markets an opportunity to live in competition with Chicago, Milwaukee and other eastern markets there must be through rates established and maintained from the Minnesota markets on a basis of not over 9 cents over Chicago or the transit privileges that it is proposed to eliminate must be continued. With the one or the other the Minnesota markets can live, although even then seriously handicapped in competition with Chicago, Milwaukee and other eastern points. We can not believe that with the full apprecia¬ tion of this situation the Commission will desire to hand the entire Northwest over to the Board of Trade of Chicago, especially as there are no transportation condition justifying such a sacrifice. Trans-Missouri territory. —This temtor’y embraces roughly the States of Nebraska, Kansas and Oklahoma, and the grain-growing regions directly west thereof, and is largely a winter wheat and corn producing section. Grain dealers in Kansas City, Omaha, St. Louis, Chicago, Minneapolis, and even as far east as Buffalo, Toledo and Cin¬ cinnati, bid for grain in trans-Missouri territory, so that the whole grain freight rate structure is involved in moving the surplus crops from this section to places of ultimate consumption. For many years grain rates from Missouri River points eastbound, were so adjusted that a shipper of grain west of the Missouri River coidd ship via Chicago or St. Louis to seaboard territory at the same aggregate charges through either gateway. The proportion of this rate from Kansas City to St. Louis was 9 cents per 100 pounds and from the same point to Chicago 12 cents per 100 pounds. The rate from St. Louis to seaboard territory was adjusted at 3 cents above the Chicago rate, thereby providing an equalization upon western grain moving through Chicago and St. Louis to seaboard territory.^® The intermediate grain growing and milling centers between the Missouri and Mississippi Rivers in order to be placed on a competitive basis with the trans- Missouri producers have demanded and generally received propor¬ tional rates to Chicago and St. Louis on through billing. Practically the entire western grain rate fabric has been built up with reference to the competition in the various producing areas and at the In re Rates on Grain and Grain Products from Northwestern Points; Ex Parte 70. Petition for Rehear¬ ing by Minnesota Railroad and Warehouse Commission, the Minneapolis Chamber of Commerce, St. Paul Association, St. Paul Grain Exchange, Minnesota Millers’ Club, Farmers’ Grain Dealers’ Association of Minnesota, Farmers’ Grain Dealers’ Association of South Dakota, Tri-State Country Grain Shippers’ Association, Minneapolis Traflic Association¬ s'; Sec 27 I. C. C. 2St). • / 58 TER^tlNAL GRAIN MARKETS AND EXCHANGES. grain marketing centers. The competitive relationship between pro¬ ducing areas on the one hand, and marketing or consuming points on the other, has created for the territory between the Mississippi and Missouri Rivers a system of combination rates applying to and from the river crossings (i. e., the ^h'ate breaking’’ points). These combi¬ nations serve as maximum rates for shipments from intermediate points. On the principle of 'Svater competition” rates for many years were maintained from Missouri River points to the Gulf so low as to materiallv assist in the development of the Kansas City market. As river transportation of bulk' grain became of negligible importance this principle of ''water competition” was largely abandoned, and rates from certain producing points in Kansas and Oklahoma to the Gulf became less than the combinations via Kansas City. As a result grain was frequently sold on the Kansas City exchange which ■was shipped direct from the country station to a Gulf point vithoiit passing through Kansas C’ity. Conclusion. —In general, there is sufTicient evidence to indicate that ' transportation facilities and transportation rates are of controlling ! importance in establishing grain markets and a primary factor in the ! cost of marketing grain. No adequate conclusions can bo made with reference to the grain marketing system without a detailed examina¬ tion of comparative transportation costs from producing to consum¬ ing territory. Such an analysis is reserved for Volume IV. Chapter III. THE CHICAGO MARKET AND THE BOARD OF TRADE. Section 1. Origins. • Tlio development of a grain market at Chicago is traceable to its strategic position as a lake shipping point located in the heart of the grain growing area, and offering a natural terminal to lake and water movement. The first official record of the grain trade in the little prairie town show's the receipt of 78 bushels of wdieat in 1838.^ The shipping business was inaugurated in the following year wdien a cargo of,lj678 bushels of wdieat w'as loaded from farmers’ wagons into a brig and shipped to Black Bock, Erie County, N. Y By 1841 Chicago had become the grain market for northern Illi¬ nois and parts of Indiana and Wi'-'consin. The prairie farmer W'as interested not only in the cash price to be obtained for grain but also in the price of the supplies wdiich he invariably purchased with a part of the proceeds. A ncl hig herjirkj^ij^pxevailed for grain, wdiilo low'er prices w'er e aske d for manufactured goods, in the lake port of Chicago tliairiitTiiterior points. In 1841, on the same day that Chicago w'as paying $l7TcdrIariiought wdieat at 40 cents. At nearer points, dur¬ ing the same year, wdieat w*as fete bin a: 50 cents a bushel wdien Chicago was paying 87 cents. In September, 1842, when Chicago wns paying 53 to 54 cents cash for wdieat, Springfield offered but 374 cents in trade. Consequently plank roads w'ore ])iult out in all directions to enable producers to bring in tlieir wagonloads over the jirairie miid. Trains of wvagons loaded wdth wdieat w'crc a frpquent sight in the Cliicago market and trains sometimes of 80 wngons wnre observed passing tlough the country eii route to the city.^ Such a lively traffic developed on Lake Michigan that in 1841 the arrivals and departures of lake craft for the season averaged 150 per month; but (it is recorded) the grain trade had increased so rapidly that there W'ere not vessels enough to carry aw'ay the wdieat.-^ The building of railroads and canals relieved the farmers, merchants, and millers of the necessity of hauling by wngon sometimes 100 miles to find a market. The local stations on these routes became country 1 Report of tlic U. S. Industrial Commission, 1900, Vol. IV, p. 404. Note.— The population of Cliicaso in 1S40 was, 4,833. 2 See Taylor, History of Board of Trade, Chicago, vol. 1, pp. 114, 11.5, referring to the Chicago Press ancl Tribune, Jan. 6, 18.59, in which the hill of lading covering the shipment is reprinted and spoken of as ‘Uho first bill of lading for wheat made out in Chicago.” Also, see the American Elevator and Grain Trade, May 15, 1918, p. 708, containing extracts from the Journal of the Illinois State Historical Society, and David McCulloch in Proceedings of the Chicago Historical Society, Jan. 19, 1904. Also sec p. 107, note 23. s American Elevator and Grain Trade, vol. 36, p. 707, based on studies of the Illinois Historical Association. * Idem. 60 TERMINAL GRAIN MARKETS AND EXCHANGES. markets from which grain was shipped to Chicago. Within a few years after the completion of the Galena & Chicago Union Railroad, Clinton, Elgin, Belvidere, Rockford, and other stations became active grain centers, and Chicago the central market for that territory.^ The organized market at Chicago was established in -the ye ar 1848 . In that year the first wheat was received in the market by rail, and the Illinois & Michigan Canal was opened with Chicago as its terminus. In that year, also, the merchants and traders of the town organized the Board of Trade, which will presently be described. Two years later connection was made with the Atlantic seaboard via the New York Central Railroad. During the subsequent decade the trade in greiin outstripped that of all other commodities, and in 1858 it was asserted that Chicago had the reputation, 'Gvhich she has enjoyed for years, of being the largest primary gniin market in the world.’' ‘'Chicago," it was pointed out, "from her position, and connection by lake, canal, and railroads, com¬ mands the trade of an extent of country controlled bv^ no other city, and nowhere surpassed by the richness of its soil."® A table was cited by the Board of Trade to show the preeminence of Chicago among Avestern markets, as follows: Table 2’i.-^Receipts of grain at Cincinnati, St. Louis, and Chicago in IShS.a Cincinnati. St. Louis. Chicago. Flour (reduced to wheati. Bushels. 3.166.. 590 1.211.. 543 1,000,236 588,950 64,358 400,967 Bushels. 1,861,196 3,835,759 900,000 1,690,562 48,198 408,000 Bushels. 2,610,685 9,6.39,614 8,252,641 2,313,597 71,012 413,812 AA'heat. ('brn. Oats. Bariev. Tolal... 6,432,644 8,7.39,715 23,301,361 Chic?a.go over ('incinnati and St. Loui.s combined « First annual statement, p. 4-3. The supremacy of Chicago as a distributing center for grain, which was so CAndent in 1858, was only strengthened by the Civil War.^ And by 1864 the market claimed a like preeminence in the distri¬ bution of beef and pork: The same uatural causes Avhich made this the greatest interior grain market in the country, has also made it the greatest collecting point for hogs and beef cattle. Con- * Idem. * First aimual statement of tlie Trade and Commerce of Chicago for the year ending Dee. .31, 1858, p. 44. Jin the critical year of 18ti3 the secretary of the board reported that “while our city has thus been cut off from some of its commercial points, it is generally conceded that we are gainers by the internal troubles that afflict the coimtry.” (Annual statement, Jan. 1, 1863.) The records show that the railroads running south out of Chicago were taxed to the utmost with ship- ments of oats to the armies in the field, and an ever-increasing number of packing houses on the Chicago River carried on a lively export trade with London and Liverpool. (1803, Hoard of Trade Report, p. 32 1864, Report, p. 34.) ' ’ THE CHICAGO MAEKET AND THE BOARD OF TRADE. 61 iiocted by a perfect network of railroads with the great Northwestern States, Chicago is the natural depot for the receipt of their produce, and it is the best general dis¬ tributing point. No matter what market is the best, the facilities for shipping are unequaled—whether it be to the South, or the North, the East, or the West. With the lake trade and its shipping, produce can be carried cheaper from Chicago to the East than from any other market in the West; and in the winter season there are four great lines of railroad connecting us with the seaboard, striking as far north as Quebec and as far south as Baltimore.® Historically a forwarding market. —It is clear from the pre¬ ceding discussion that the Chicago market during its earlier years was devoted primarily to the forwarding business; and it has re¬ mained a shipping rather than a consumptive center.** This is emphasized by the history of flour production in Chicago. Prior to the great fire in 1871 flour production in the city had reached an annual output of 543,285 barrels (1869); but, with the exception of 1885 and 1891, this figure was not exceeded for 25 years.(See table below.) While the other industries of the city were revived with marvelous rapidity after that year of destruction the grain interests ! became even more closely centered in the large forwarding business. Table 24. —Flour 'production in Chicago, 1870 to 1896 , inclmive. Vear.i • 1870 . 1871 . ]872. 1873 . 1874 . 1875 . 1876 . 1877 . 1878 . 1879 . 18,80. 1881. 1882. 1.S83. 1 Annual reports, Board of Trade. Although flour production increased in the later nineties the flour trade became relatively less important on the exchange. The frank¬ est statement of the situation appears in the annual report of the secretary of the Board of Trade for the year 1902: The flour trade in this market is largely of a local character outside of the business transacted in the flouring mills. The middle or commissLonman has disappeared « Annual statement, 1804, p. 46. »See Table 13, p. 27. 10 Flour production jumped to 751,501 barrels in 1895. See Board of Trade report for that year. 11 For example, in the secretary’s general review of the year 1874, the wheat movement was reported to have been “of unprecedented magnitude * * * being about 3,.500,000 in excess of the large receipts of 1873.” But the manufacture of flour showed a decline for that year of nearly 20,000 bushels; and the grind for that year amounted to only 10.5 per cent of the barreled flour passing out of Chicago terminals. (Reports for 1874 and 1875.) Number of mills of over 5,000 barrels annual capacity. Total aimual i production of flour (in barrels). Vcar.i Number of mills of over 5,000 barrels annual capacity. 13 i 443,976 1884. 4 8 327,739 1885. 4 " 2 186,968 1886. 4 3 264,363 1887. 4 3 244,667 1888. 4 3 249,653 1889. 4 3 271,074 1890. 4 3 293,244 1891. 4 3 308,284 1892.. 4 5 285,904 1893. 3 4 196,041 1894. 3 3 2.38,200 1895. 4 2 300,358 1896. 3 2 294,720 Total annual production of flour (in barrels). 535,841 575,165 494,789 514,870 435,110 431,000 430,609 578,180 542,000 455,469 444,000 751,501 923,28:3 G2 TERMINAL GRAIN AIARKETS AND EXCHANGES. from the market; his services are not wanted. The buyer puts himself in direct relation with the miller, or rather the miller passes by the commission mcrcliant and calls at once and directly upon the buyer, not only in all domestic but in foreurii markets. Chicago can not be called in any prominent sense a flour-manufacturing center.^- * * * * Thanssiiipments. —Not only is the great hulk of the grain received at Chicago ultimately shipped on to eastern or European buyers Init a considerable percentage is transshipped without going into storage. The weighing committee of the board reported in 1886 that the tlirough eonsignment business was on the inerease: In 1876 only 13 per cent of the grain arriving here was not sent to store; in 1880 only 20 per cent was not sent to store, while in 1885 nearly 57 per cent did not go to store; and your directors unite in the opinion that it is the duty of this board to do all in its power to increase the importance of this city as a great and reliable produce dis¬ tributing center.'^ * * * Section 2. History of the transportation problem. ^ Water vs. rail transportation. —Transportation has been shown to be a controlling factor in the development of aii}^ terminal mar¬ ket. It has been of especial importance at primaiw shipping points such as Chicago. In fact, the history of the Chicago cash grain market from 1860 until the present day is largely a record of the acquisition or the loss of transportation advantages. This is the perennial problem. During the period 1840-1860 shipments were almost exclusively by lake. The business of the port in grain was therefore restricted t6 the period of open navigation. The year 1860 may be taken as a turn¬ ing point in the history of transportation in the United States,and specifically of Chicago. The great bulk of grain shipments from Chicago in 1860 was by lake routes. In fact, only 6.4 per cent of all grains shipped out 'of Chicago terminals (i. e., including through shipments) was forwarded by rail. This predominance of the lake movement appears in Table 25. >2 Annual report, Chicago Board of Trade, 1902, p. liii. Report of the Chicago Board of Trade for the year 1883, p. XLIV. Sec also Ch. I, p. 19. “ “Before 1860 the extent of populated area of the United States and the facilities for transportation were such that the bulk of internal trade followed two distinct routes; an east-and-west route over the Eric Canal on the trunk-line railroads, and a north-and-south route over the waters of the Mississippi River. * * * The westward movement of the population and the development of the great railway net com¬ pletely put an end to the simplicity which characterized the trade of the period before 1860. The old line;-; were modified or swept away.’' (Johnson, E. R., etc., History of Commerce of the United States, vol. I, p. 270.) THE CHICAGO MARKET AKD THE BOARD OE TRADE. 63 TAi’ii.E 25 .—Shipments {including transshipments) of all grains by lake, canal, and rail¬ road, ISGOd AVheat. Corn. Oats. Rye. Barley. All grains. Percent of total. 3‘oU)! forwarded: Bv lake. By canal. ifv rail. Brand total. Bushels. 11,817,476 60,166 524,555 Bushels. 13,063,043 685 636,385 Bushels. 605,304 110,584 369,810 Bushels. 114,686 62 41,894 Bushels. 60,328 5,734 201,387 Bushels. 25,660,8:17 183,231 1,774,031 93.00 . 6 6. 4 12,402,197 13,700,113 1,091,698 156,642 1 267,449 27,618,099 100.00 » Figures from third annual statement, year ending Dec. 31,1860. By 1867, however, the rail routes had captured 38 per cent of this ^ traflic and ‘'the elimination of the Erie Canal as an important factor ill the transportation of grain was clearly indicated.’' The status of Chicago as a forwarding market in the seventies was brought out by the Supreme Court of the United States in the Muim case. Accepting as true the statements of fact submitted bv the counsel for the Chicago elevator interests the court said: It appears that the great producing region of the AVest and Northwest sends its grain by water and rail to Chicago, wliere the greater part of it is sliipiied by vessel for transportation to the seaboard by the Great Tiakes, and some of it is forwarded ])y railway to the eastern ports. * * * A'essels to some extent are loaded in the Chicago harbor and sailed through the St. Lawrence directly to Europe. * * The quantity (of grain) received in Chicago has made it the greatest grain market in the world. This business has created a demand for means by which the immense quantity of grain can be handled or stored, and these have been found in grain warehouse.s, which are commonly called elevators, because the grain is elevated from the boat or car by machinery operated by steam into the bins prepared for its reception, and elevated from the bins by a like process into the vessel or car which is to carry it on. * * * In this way the largest trafTic between the citizens of the country north and west of Chicago and the citizens of tlie country lying on the Atlantic coast nortli of AAnshington is in the grain which passes tlirough the elevators of Chicago. In this way the trade in grain is carried on by the inhabitants of seven or eight of the great States of the AVest with four or five of the States lying on the seashore and forms the largest part of interstate commerce in these States.^® With the further development of trunk railroad lines to the sea¬ board there ensued a comparative increase in the rail movement and a tetidency toward diversion of the movement by water, which presented an ever-pressing problem to Chicago shippers. It was not merely a problem of rates but rather of the actual diversion of grain through and around the Chicago market. The necessity of maintaining the lake marine was continually emphasized by shippers. As the year 1875 closed it was apparent that the alternating rate Avars and pooling agreements instituted by competing railroads out of Chicago had “tended to divert larcre Idem, p. 271. 1® Munn V. Illinois, 91 U. S. 1.30. w The Baltimore Ohio had reached Chicago in 1S72. G4 TERMINAL GRAIN MARKETS AND EXCHANGES. {unoiiiits of })roperty tliat would under ordinary circumstances M liave found its way to market through this city.’’ The members | of tlie Board of Trade felt that such competition wmdd only work its own destruction: Tins * Report of George Armour, president of the Chicago Board of Trade, for the year 1875, pp. 24, 25. ■* Report of secretary of the Board of Trade for the year ending Dec. 31, 1876, p, 19. ^ Report for the year ending Dec. 31,1876, pp. 19, 20. 3 65 . THE CHICAGO MAUKET AND THE BOARD OF TRADE. amounted to 71 f per cent of the total. There was a similar increase in the movement throiigli the Eric Canal, and whereas the export trade had been diverted somewliat from New York in 1877 it returned to normal, with the increase in the water movement.The com- ])arativc increase in export trade through New York was favored by the Chicago Board of Trade, not because of any preference as between the eastern seaports, but because it was felt that an increase in ti'ade movement through Philadelphia and Baltimore indicated ''a railway diversion from tlie water routes,” which meant a diversion of business from Chicago. The shippers were still insistent upon the maintenance of lake traffic: Chicago exists to-day as a great produce market because of her position in respect to water transportation, and her citizens can ill afford to contemplate with indifference any serious diversion of traffic from this great natural means of communication. 22 * * * Nothing occurred for several years to shake the convictions of members of the Board of Trade in the surpassing advantage of cheap water transportation. In 1878 the water movement exceeded all expectations, a ton of wheat being ‘transported from Chicago to New York for $2.25, or 6?^ cents per bushel. It is hardly probable,” said the secretary of the board, “that the most sanguine advocate of cheap railroad transportation expects that as low a rate as this can ever pay for the same service performed by rail. The water line is undoubtedly the great advantage that Chicago possesses for attracting to her the produce of the Northwest. Railway lines are invaluable as auxiliaries to this great route, but it must continue, as in the past, to regulate the rates that will prevail for moving from the producer to the consumer this vast volume of traffic.” Toward 1880, however, the character of railroad terminal arrange¬ ments became such as to cause general alarm to the shipping public. Whereas during the two previous decades railroads had been fostered, assisted, and promoted by public and private measures, now there was a rising sentiment against railroad manipulations which fre¬ quently appeared to be wholly at variance with the public interest.^^ As is well known, this agitation resulted in the passage of the inter¬ state commerce act of 1887. For the first time, the shippers voiced a feeling ol positive appre¬ hension lest the lake traffic should no longer constitute a check upon Report of the Board of Trade for the year 1877, p. 18, et seq. ** Report of the Chicago Board of Trade for the year 1877, p. 19. •* Report for the year 1878, p. 18. the seventies the public gradually came to realize that the railroad companies disregarded the interests of the public. Persons and communities found themselves at the mercy of railroad corporations, which, by discriminations in charges, built up and destroyed towns and had power to control arbitrarily the economic future of sections of the country.” (Johnson, etc.. History of Domestic and Foreign Com¬ merce of the United States, Vol. T, 294.) 1G8093‘’—20-5 66 TERMINAL GRAIN MARKETS AND EXCHANGES. the rate advances of railroads. There is no reason to doubt the sub¬ stantial accuracy of the statement^'* of Charles Randolph; secietaiy of the Board of Trade (1880): A comparatively few individuals arc steadily gaining control of the valuable inter¬ state lines, through which they can dictate the poUcy of, or effectually destroy those of less importance. By far the most formidable scheme for destioying competition that has ever been devised in this country or the world, has been developed during the past year. By it all the great trunk lines between the East and the West are prac¬ tically consolidated, in so far as their relations to the people are concerned, into a giant monopoly, from which the element of competition seems to be entirelj elimi¬ nated. * * * ^ ^ In December the organization embraced 34 railroad lines, substantially coi ering the whole of the east and west traffic of the United States north of the Ohio Pd\ er and through Canada. * * * For a portion of the year the navigable waterways will undoubtedly hold in check any disposition that might otherwise prevail for the undue advance of rates but for nearly half the year these can exercise little but a prospective influence, and for the vast volume of property that must be moved in the winter months lates can be maintained at a point wholly unjustified by the cost of the service. The shifting of the center of wheat production toward the North¬ west after 1880 also had a marked effect upon transportation arrange¬ ments. An increasing percentage of the spring wheat marketed over the Northern Pacific Railroad was moved direct to Buffalo, out of the Minneapolis and Duluth terminals. It was apparent that Chicago would have to depend largely upon a tributary area not commanded by the shipping port of Duluth-Superior or b}^ the flour mills of Minneapolis.^® The Erie Canal movement.— In 1880 the electorate of the State of New York authorized the removal of all tolls for the use of the Erie Canal. No shippers welcomed this act more warmly than did the grain dealers of Chicago, since the canal formed an important link m the chain of lake traffic upon which they placed dependence. And it was testified before the Industrial Commission in 1899 that, as a general rule, the cheapest route for shipping out of Chicago v as b\ the Great Lakes and canal."^ * -X- * The favorite routes are from Chicago to Buffalo, for shipment from there East via the Erie Canal and Hudson River to New York, or by rail from Buffalo or Albany to Boston, New York, Philadelphia; or from Chicago to Erie, then by rail Philadelphia or Baltimore; from Chicago by water to FaiiTort, Ohio, and then to Bal¬ timore; from Chicago to Port Huron, Sarnia, Portland, Owen Sound, Parry Sound, and Collingswood, and thence by rail through Canada to Montreal, St. Jolms, Portland, 25 Annual report, secretary of Chicago Board of Trade, year ending Dec. 31, 1879, pp. 17-19. 26 It was reported in 1884: “ * * * a considerable percentage of the crop of spring wheat grown in northern Minnesota and Dakota and not used at home or by the Mimieapolis mills, has passed eastward by way of Duluth, and it is not improbable that this route will in the future command the greater portion of the eastward movement of wheat from along the line of the Northern Pacific Railroad. Freight rates from Duluth to Buffalo are maintained on substantially the same basis as from Chicago, and an effort wiU doubtless be made to secure the haul, by the railroad line first receiving it, of the longest possible distance. * * (Chicago Board of Trade, annual report for 1883, p. 14.) 22 Report of the U. S. Industrial Commission, Vol. IV, p. 412. - THE CHICAGO MARKET AKD THE BOARD OF TRADE. 67 or Boston; from Chicago via the Great Lakes and the Welland Canal to Prescott, Kings¬ ton, or Ogdensburg, and the transfer to barges and down the St. LawTence River to Montreal, or taken from Ogdensburg by rail to Portland or Boston. * * * At present the Canadian routes are the cheapest, and during last season they have had all the grain they could possibly take care of at Montreal, and the lack of ocean tonnage has been the only thing which prevented Montreal from doing a much larger business. The lines from Montreal are now establishing, for the wintertime, ocean lines from St. Johns and Portland, and will doubtless do a very large business via that route. Tlic canal tonnage, depth, and general facilities were becoming, however, hopelessly inadequate and lower rates had little effect upon railroad competition.^'^ The marked decline in canal shipments of grain out of Buffalo as compared with the lake receipts at that point from 1880 until 1900 (inclusive) appears in Table 64, p, 184. After ownership of the lake lines was acquired by the trunk lines in 1900 the through-route arrangements and the interchange of traffic between lake lines and these canal barge lines was terminated. Canal grain traflic thereupon practically disappeared, and as a result serious competition between lake lines and railroads for grain business was eliminated. To quote from the decision of the Interstate Com¬ merce Commission in 1915: It is contrary'to the interests of tlic owming railroads, operating from Buffalo east, for their boat lines to continue any through operating arrangement with these canal barge lines for the movement of eastbound traffic. These boat lines under the control of the petitioning railroads have been first a sword and then a shield. When these roads succeeded in gaining control of the boat lines which had been in competition with paralleling rails in which they were interested and later effected their combination through the Lake Line Association, by which they were able to and did drive all independent boats from the thi’ough lake-and- rail transportation, they thereby destroyed the possibility of competition with their railroads other than such competition as they were of a mind to permit. Having dis¬ posed of real competition via the lakes, these boats are now held as a shield against possible competition of new independents. Since it appears from the records that the railroads are able to operate their boat lines at a loss where there is now no competition from independent lines, it is manifest that they could and would operate at a further loss in a rate war against independents. The large financial resources of the owning railroads make it impossible for an independent to engage in a rate war with a boat line so financed. Ex-lake rates. —With the removal of lake-and-caiial competition there remained (aside from Canadian competition) only the lake-and- rail route as a waterway competitor with all-rail lines. 28 “The Erie Canal is a factor to a certain extent,but it is really not as great a factoras is generally supposed. It does, to a certain extent, regulate the rates which are charged by the railroads east of Buffalo and has a tendency to keep them from charging exorbitant rates. The Eric Canal’s total capacity is very small compared with the amount of grain passing through Buffalo—-not over about 15 per cent. This canal tonnage has decreased yearly. The cause for this is largely the fact that a great deal of agitation has been going on looking to the improvement of the Eric Canal so as to allow vessels carrying larger loads to make the passage. This has had a tendency to keep people from building additional canal boats, as when the change is made the small boats will be of little value.” (Report of U. S. Industrial Commission, 1900, Vol. IV, p. 412.) «33I.C. C. 714-710. 68 TERMI^^AL GRAIN MARKETS AND EXCHANGES. Those ex-lake rates on grain have been a subject of complaint in Chicago for more than a decade. In 1914 the matter was stated as follows: * * * We are fully convinced that the ex-lake rates which apply easterly from Buffalo on grain coming off the lake are, and have been since 1908, too high, so high indeed that it is cheaper to ship to most points all rail than to ship lake and rail. In other words, we are deprived of the value of our location on the lake and the value of cheap water transportation. The rates east of Buffalo ought to be, we believe, at least 1| cents per bushel lower than they are, and on that basis the carriers would earn as much on the water-borne grain as they earn on all-rail grain from Buffalo, and that, we think, is all they are entitled to. Rail and water differentials. —There were certain advantages possessed by rail carriers over water transportation, such as quicker and more direct routes, more extensive distributing connections, and superior terminal facilities. Yet these advantages could not have offset the lake rate differential for export shipments had it not been for rate wars, long-haul agreements, terminal discrimination, and finally the operating control of American lake lines and barges by the trunkline railroads. During the period 1880-1900 the lake movement of wheat and corn out of Chicago maintained a substantial,increase over that by rail, and the percentage of shipments of these cereals through and out of the market by rail during those years averaged less than 40 per cent of the total. On the other hand, the railroads carried approximately 70 per cent of the oats. A fair equilibrium was thus maintained be¬ tween the railroad and water traffic. There was nevertheless a sharp competition with widely varying results in individual years. In specific years the railroads made great gains while in others the lake carriers almost monopolized the trafFic.”^^ So long as lake freight rates could be maintained at a scale sub¬ stantially lower than rail rates (other things being favorable) a vigorous lake movement was assured. With the practical elimina¬ tion of the lake lines as a competitive factor in the eastward movement of grain, the freight rate differential was also gradually reduced. From 1899 to 1916 a decline in the ratio of rail to water rates from Chicago to New York was progressively accompanied by a decline in the percentage of lake shipments eastward from Chicago. The reduc¬ tion in the rate differential during the five-year period 1899-1904 was sufficient in itself to render the lake shipping business in grain un¬ profitable, regardless of other factors which accelerated this decline. Such a progressive reduction in the rail-to-water differential can not be explained by the decline in business on the Erie Canal or any i i .1 I ^ ■ \ 80Chicago Board of Trade report for 1913, p. 30. 81 Tiinnell, Geo. G , in Journal of Political Economy, vol. 5, p. 350 (1897). 88 Cl. 331. C. C., p. 714. “ Furthermore, there Is much in the records tending to show that the very pur¬ pose of these advances in lake-and-rail rates was to divert tonnage to the all-rail lines. As a direct result of this rate policy of the owning railroads, the lake boats bavo operated with small cargoes, although their operating expense was almost as great as il they had been fully loaded. * * *» I THE CHICAGO MARKET AND TPIE BOARD OF TRADE. 69 consequent adjustment of ex-iake rates. (See Table 26 below.) No distinct trend is evident in the variations of actual lake-and-canal rates now^ in the corrresponding lake-and-rail rates during the period 1889-1916. The trend is in the all-rail to water ratio. The all-rail rate broke sharply in 1900, and from that year on the differential can not be said to have })een on a competitive basis. The tables following show that there was a decline in the ratio of all-rail to lake-and-canal average freight rates from Chicago to New York after 1900 (Table 26); that there was a decline in the percentage of wheat shipments from Chicago by lake in the period 1902-1916, al¬ though not an actual decline in such shipments (Table 27); that there w^as both an actual and proportional decline in the lake shipments of corn and oats; that the percentage of lake shipments in the three grains combined shows a distinct decline for the period 1902-1916 (Table 28); that the relative trend in lake shipments has followed, in general, the trend in the freight rate differentia] for the 30-year period (Table 29). How the divorcement of lake from water lines and the opening of Canadian and New York water routes to the grain traffic will affect this situation, is as yet a matter of speculation. Table 2G. —A verage export f reight rates omvheat, Chicago to New York, hy lake-and-canal and hy all-rail, 'with ratio of all-rail to lake-and-canal rates, 1887 to 1916. [Rates in cents per bushel.] Lake- and- canal. All-rail. Ratio of all-rail to lake- and- canal. 1887-1891.. 7.44 14.91 2.00 1892-1896 . 6.05 13.10 2 17 1897-1901. 5.02 10.84 2.16 1902 1906 .... 5.39 8.38 1.55 19')7-1911. 5.62 7.80 1.39 1912-1916. 6.15 7.96 1.29 Tabi.e 27. —Movement of wheat, corn, and oats eastward from Chicago, hy five-year a verages, 1887 to 1916, wUh percentage of lake to total shipments. ^ - Total ship¬ ment. Lake ship¬ ment. Percentage of lake to .total. Wheat: Bushels. Bushels. 1887 to 1891. 21,192 ,858 14,321,625 67.58 1892 to 1896 .. 27,08.5,4-81 18,945,477 69.94 1.897-1901. 31, 544,087 21,666,056 68.68 1902-1906... 20,651,412 11,661,625 56.47 1907-1911..... 22,*479-, 341 11,576,692 51.50 1912 1916. 56,791,220 22,632,630 39.85 Corn: 1837-1891. 72,200,915 49,399,314 68.42 1892-1896. 69,446,014 53,254,800 76.68 1897-1901. 103,921,622 71,523,854 68.82 1902-1906. 76,209,980 46,782,277 61.39 1907-1911.. 80,970,613 37,152, 871 45.88 1912-1916. 73,407,420 23,568,610 32.11 Oats: 1.887-1891. 53,714,595 17,056,753 31.75 1892-1896... 66,7.59,396 19,415,465 29.08 1897-1901. 85,920, 422 26,931,552 31,34 1902-1906. 61,744,659 10,767,769 17.44 1907-1911.'... 76,272,425 6,327,086 8.30 1912-1916... 112, .510,800 6,138,880 5.46 i / 70 TEFvMIXAL GRAIN MARKETS AND EXCHANGES. Table 28 .—-Total movement of u'hcat, corn, and oats combined eastward from Chicago, by five-year averages, 1887 to 1916, with percentage of lake to total shipments. Wheat, corn, and oats. Total ship¬ ment. Lake ship¬ ment. Percentage of lake to total. 1SS7 1R01 . Bushels. 147,108,368 Bushels. 80,777,693 54.91 1802 189fi . 163,290,890 221,386,131 91,615,741 56.11 1897 1901 . 120,121,463 54.26 1902-1905 . 158,606,051 69,211,671 43.64 1007 1011 . 179,722,379 242.709,440 55,056,648 30. a3 1912 1916 . 52,-340,120 21.56 Table 29 .—Relation of freight rates ratio to percentage of lake shipments eastward from Chicago, 1887 to 1916. Ratio of freight rates (all¬ rail tolake- and-canal). Increase or decrease. Percentage of lake ship¬ ments to total ship¬ ments. Increa.s<3 or de¬ crease. 1887 1801 . 2.00 54.91 1892 1896 . 2.17 + 56.11 + 1897 1901. . 2.16 54.26 __ 1902 i906. 1.55 — 43.64 — 1907 1911. 1.39 — 30.63 — 1912 1916 .. 1.29 — 21.56 — 1 ^ ' Section 3. The Chicago Board of Trade. During 1848 there was called a “meeting of merchants and busi¬ ness men'’ at which was organized the Board of Trade of the City of Chicago. There were 82 original members. The association pro¬ cured a charter of incorporation under general Illinois laws in 1850 and opened the membership to reputable traders at an initiation fee of $5.^^ Within a few years this organization took on the nature of an exchange, including traders in grain, flour, beef, hogs, hides, lumber, salt, wool, high wines, lead, fish, stone, coal, wood and other com¬ modities. A room for daily meetings was leased in 1854. The trading in this hall appears to have been largely in grain, since it was proposed in 1856 to erect a building which would constitute “a merchants’ exchange, and not as is now the case with the board of trade rooms, a mere corn exchange.This proposal was not carried out at that time. Ten years after the association was organized (1858) grain was still apparently the leading commodity in the trade of the port, but the grain traders constituted then only an important subdivision of the genera] commercial body. Wheat was foremost among tho cereals handled—corn, oats, rye, and barley following in order. 33 Annual reports 1858 and 1859. No annual statements were published until 1853. 3« Report of the directors, annual statement, 1864. *3 Quoted in Taylor, History of the Board of Trade of the City of Chicago, p. 221. THE CHICAGO MARKET AKD TRIE BOARD OF TRADE. 7l It is of interest to note that in 1858 the warehouse operators, sur¬ mising that a short crop had been raised, proceeded to hold their grain for speculative profits. Prices rose steadily through the month of August, but unexpected supplies suddenly poured in and, ^Hhere being no margin for shipment, a panic took place and prices receded as rapidly as they had advanced until about the middle of October.'’^'^ The government of the early association consisted of a president, vice president, secretary and treasurer, a superintendent, and a board of direc tors of 10_members (which was increased to 15 in 1875). For the settlement of disputes there were a first committee of reference and a second committee of reference. Charter of 1859.—special charter of incorporation was granted by the State legislature in 1859, enlarging the powers of the board, and a revised set of rules and regulations in compliance therewith were adopted by the board. The secretary summarized in that year the benefits conferred upon the business community by the new association: Aside from the valuable statistical information which it collects and daily fur¬ nishes for the use of the public, it is the means of simplifying, in a great degree, the enormous business transacted by its members, and of arranging controversies that may arise among them, * * * It is very desirable that other mercantile and manufacturing interests should be represented in this, the only association we have to foster and protect the business interests of the city.^^ An analysis of the occupations of the 685 members listed for 1860 shows the following principal groups: General commission merchants. 20G Produce commission merchants. 143 Millers. 25 Grain d ealers. 41 Grain elevators. 12 Flour, feed and commission. 10 Wholesale grocers. 25 Produce and provision brokers. 13 Lumber dealers and manufacturers. 16 Beef and pork packers. 13 Coal and pig iron. G Railroad freight agents. 12 Miscellaneous merchants and manufacturers. IG.- Total. 685 It is quite clear that the board set out to conform to the broad purpose set forth in the charter of 1859, i. e., to ^‘maintain a com¬ mercial exchange.’^ Only the millers, grain dealers and grain elc- Annual report for 1858, p. 18. 37 The boards of arbitration and appeal were given quasi judicial powers. Act approved March 7, 1859. 33 Report 1860, p. 28. 39 Annual report for 1850. TERMINAL, GRAl^I MARKETS AKD EXCHANGES. 70 f vators were classed‘as primarily interested in grain and these com¬ prised but 78 out of the 665 members, or less than 12 per cent. How^ the character of this membership has changed during the past 58 years under the same articles of association, is brought out in Table 30 (p. 75). To-day wuth nearly a thousand more members fully 88 per cent of the traders are directly interested in the grain trade. The EXCHANGE HALL. —The ’Change, or trading floor, became the center of trading for members prior to 1860. The concentration of buying and selling in one place offered obvious advantages over bargaining in railroad yards or at steamboat landings. The trading rooms wdiich had been leased in 1854 w^ere given up in 1860 and new quarters w'ere taken, including an Exchange Hall 95 feet long, 47 feet wude, and 18 feet high. In 1865 the board came into possession of a still larger hall in the new building erected by the Chamber of Commerce building association.^® Trading in an exchange hall has been continuous from that time to the present with the slight inter¬ ruption due to the great fire of 1871. It is noteworthy that the exchange was kept in operation even during the panic of 1872. Membership—admission and assessments. —^Membership during the earlier years of the association did not involve any considerable property interest and new^ members W'ere taken in upon payment of a small initiation fee.^^ The proposal in 1864 to increase the fee to $25 was met with positive disapproval by the directorate of that day. ^^The amount of 1 initiation fee,” they said, ''is not one of the questions taken into j account when a man is proposed for membership. The character I and standing of thq applicant is the only matter for consideration.” ' OiTthimasis the membership had increased to 1,261 members in that year, "embracing men in every branch of commercial busi¬ ness.” However, the financial statement a year later showed an increase . in initiation fee to $10 and the annual assessment on members was j' increased from $10 to $25.^^ The decline in membership from 1,462 ~ (in 1864) to 1,259 (in 1866) was attributed largely to this increased assessmentThe assessment was fixed at $35 in 1867 "in view of the probability that the rates of inspection wmuld not pay the ex¬ penses of inspection until after the harvest.”The income of the association as then operated was derived from grain inspection, annual assessment, table rents, arbitration fees, appeal fees, and,sale of annual reports; and the annual assessments were calculated to Taylor’s History of the Board, vol. 1, p. 330. « Prior to I 860 the initiation fee was not in excess of $5. <2 Report of the directors, April 4,1864. <3 Directors’ Annual Report, 1866. << Annual Report of the directors, April 1, 1867. Report of the directors, 1867. 5 THE CHICAGO MAEKP^T AND THE BOAED OF TEADE. 73 meet the operating deficits which would have otherwise been in¬ curred.^® Memberships made transferable.— In March, 1875, the rules were changed so as to make memberships transferable. The initia¬ tion fee for the previous year had been $250 and the membership had reached 1,851 names. Under the new policy members might be added through purchase and transfer of a membership as well as by payment of the initiation fee. This iiolicy was entered upon with some reluctance by the directors because of the loss of revenue to the association which it entailed: The policy of making these memberships merchandise has not been tested suffi¬ ciently long to enable us to pass a matured judgment upon its wisdom. There are undoubtedly advantages of a pecuniary nature in this arrangement to members retir¬ ing, or who may wish to do so; but it seems quite probable its adoption has permanently destroyed the source of a large revenue to the association—a revenue which, in 1874, amounted to $17,250, and would not probably have materially differed from that amount for many years to come.'*^ On this basis of admission the total membership continued to increase until in 1881 it reached the high-water mark of 1,936. By that time the initiation fee had been increased to $1,000 and it is ^ noteworthy that during that year the first 74 applicants were admitted at $1,000 while the next 69 applicants were required to pay an increased rate of $2,500. This marks the adoption of the policy of maintaining the' initiation fee at such a figure above the prevailing transfer price as to practically eliminate anyfurther extension of the total membership.'** The initiation fee was set at $10,000 in k a rule effective in 1887."*® Since 1884, with the continuous increase in the initiation fee, membership has been acquired only by transfer of an existing certifi¬ cate and the membership total has therefore been within the control of the association. iVlthough admission by payment of initiation fee and issuance of a new certificate is still provided in the lules (see p. 204), such a procedure is practically obsolete. The loss of revenue due to making memberships transferable has been offset by the imposition of a transfer fee. This fee was kept at $25 for a considerable period so that it did not materially affect the purchase price of a membership. In 1909 the fee was increased to «E. g.—The Directors’ Report for 1868 stated: ''The membership of the board for. the last year was 1,224, being an increase over the year previous of 23, and in view of the slight increase 3 'oiiu directors deem it prudent to change the yearly assessment fee for membership from $35 to $30.” Report of the directors, Jan. i, 1876, p. 22. , « "During the past year no initiation fees have been received, nor is it probable any revenue from tliis source may be expected in the near future. The current market value of memberships in the board is so far below what the initiation fee was previous to the large advance in that fee voted by the membership in October last, that it vrould seem to have been a quite unnecessary if not unwise measure to adopt, espe¬ cially as it destroys all hope of securing the additional number of members which the association expect to be amply able to accommodate on the occupation of their new quarters now’ in course of creclion.” (Report of Board of Directors, 1882, p. 23.) <5 The market value of a membership reached $1,S00 in 1883 w’hich was the highest price for ovoi,3U years. 9 74 TERMINAL GRAIN MARKETS AND EXCHANGES. $100; and at this rate 145 transfers were recorded for the year 1915. In 1916 the fee was increased to $250. The present status of the regulation of memberships is as follows: ^ Number of members, January, 1919. 3, 620 Net price of membership, September, 1919. $10,850 “Initiation fee,” 1919... $25,000 Tlic steady decrease in the membership total was effected mainly tlirough the pohcy of buying in unused certificates at their market value and retiring the memberships. President Warren advocated the continuation of this policy in his inaugural address in 1900, as follows: I -X- * * policy of retiring memberships pursued during the past year should j be continued, and the conditions for admission of new members should be made more I strhigent. This is not a charity organization and there is no reason why we should 1 not require applicants to show that their acquisition will be of some value to the board. 1 Genuine and x>ermanent reform can only come through elevating the character and \ responsibilityofourmembershipandincreasingthe value of our certificates. * * 1 • 1 In 1905 the members assessed themselves $25 a year in order to buy in unused memberships. The next year 44 memberships were so purchased at an aggregate cost of $116,500. Under this policy the total membership was reduced from 1,785 in January, 1905, to 1,647 in January, 1911. Property value op membership. —In 1883 it was ruled in the Illinois courts that for purposes of taxation and attachment the exchange membership constituted a privilege, rather than personal property of the holder.^^ The president of the board reported: We have now 1,936 members. These memberships represent a valuation of about six million dollars. The question, whether or not these memberships were' personal property, and subject to taxation or attachment as i)ersonal property, under the laws of the land, or whether they were simply privileges given by this board, granting the holders thereof certain rights and privileges to transact business under the rules of the Board, has been determined in favor of the latter * * *. The membership was held to be. property, however, by^ the Federal courts (1917) in construing the national bankruptcy act, section 70a, in its application to a membership held on the Chicago Board of Trade. The court cited the rules of the board with regard to the admission of members and transfer of memberships (rule 4, section 7; and rule 10, sections 1 and 2, 1917) and that a membership in such board of trade, having a value of about $4,000, was property passing to the member’s trustee in bankruptcy, under bankruptcy act, section 70a, though other members of the board of trade held *50 Market price including transfer fee. The price on Jan. 1,1913, was $2,250 and in 1915 had been only $2,700. 51 Chicago Board of Trade, Report for 1899, p. 82. 52 Seo Barclay v. Smith, 107 Ill. 349 (1883). ‘ \ 53 Chicago Board of Trade, Report for year 1883, p. 22. 51 Bd. of Trade v. Weston, 243 Fed. Rep. 333. THE CHICAGO MARKET AND THE BOARD OF TRADE. 75 outstanding, unadjusted, and unsettled claims against him, aggrega¬ ting about $35,000, and protested or objected against the transfer of his membership.’’® Classification of members. ^—The larger groups of grain traders in Chicago to-day are (1) t he future commission opera tors, (2) the cash commission men, or receivers, and (3) the terminal elevator interests. Reference to Table 30 shows that the future com¬ mission business claims the greatest number of traders on the ex¬ change and that the cash grain business is carried on more extensively as a secondary feature than as an exclusive or primary business. It is also clear that shipping on commission is more frequently a secondary than a primary function. The total number of elevator representatives, 121, considering the character of the business and the capital involved, is a large group. Table 30 .—Classification of members of Chicago Board of Trade. {List dated Mar. 6, 1918.) / Engaged exclu¬ sively. Engaged primar¬ ily- Total. Engaged second¬ arily. Resident members in grain trade; Poch . .-.. 15 no 125 325 32 89 121 r>thpr d P.a1 prsl .. 29 2 31 37 P.nncnTYiPr^s 2 . . ... 40 3 43 T .1 np. p 1 p.va.tnrs .... 10 10 53 RViinnpTt: 3 __________ 13 18 31 76 Vntnrp pnmmi<;sinTl 4 ______ 420 219 639 218 340 340 76 76 198 6 Tnfal -mPTnhprc: _ _ 549 867 1,620 709 1 Including feeders, and all others not in other classes. " Millers, malsters, etc. 3 Not operating terminal elcvatcrs. < Including wire houses and pit traders. The figures in the table confirm the generally known facts as to the separation of trading groups, namely, that many of the wire houses are solicitors of cash commission business on a large scale; that the members interested in a cash commissiop business are sufficiently numerous to enforce the “uniform commission rule” as against the interests of “direct buyers”; and that the future trading group is sufficiently numerous to maintain its owm methods in the face of any internal opposition. This relationship is demonstrated even more clearly in Table 31 following, showing the trading representation on the directorate from 1908 to 1917, inclusive. a But see Secretary’s statement, p. 208. 76 TKRMIKAL GRAIX MARKP:TS AXD EXCHANGES. Table 31. — Ola&sijiraiion of interests represented on hoard of directors of the Chicago Board of Trade ion the basis of their firm connections) and the voting powers of the trad¬ ing growps. Year. Cash grain commis¬ sion men (re¬ ceivers). Futures commis¬ sion men (includ¬ ing wire houses). Termi¬ nal ele¬ vators. • Pit bro¬ kers. Provi¬ sion men. Grain con¬ verters. Miscel¬ laneous. 1908. 5 r> 3 1 3 1 0 1909. .3 6 1 2 3 2 1 1910. 4 q 3 1 2 2 1 1911. 3 5 4 2 2 1 1 1912. 5 .5 3 1 2 1 1 5 6 1 1 3 1 1 1914. 7 5 3 0 3 0 0 191"). 6 7 3 0 2 0 0 1916. 6 7 3 1 1 0 0 1917. 6 7 3 1 1 0 0 Current revenues and expenses. —The regular sources of reve¬ nue to the Board of Trade association are (1) the Real Estate De¬ partment, which manages the exchange building; (2) "tlie Cleanng House Department, and (3) transfers of membership providing a $250 fee in each case. At times substantial net revenues have been derived by other services such as the Grain Sampling and Seed In¬ spection Department and the Weighing and Custodian Department; ])ut these offices have in recent years been scarcely self-sustaining and the latter was operated at a net loss of $39,477.65 in 1917. There are other incidental sources of revenue, none of them from trading operations. The assessments upon members are calculated to cover operating expenses not otherwise defrayed. Section 4. Facilities developed by the exchange. It may be noted that the marketing facilities developed by the Board of Trade during the first decade after the charter grant of 1859 comprised essentially the facilities offered by the exchange to-day. Weighing, inspection and grading, warehousing, the market ^ ciuotations s^vice, arbitration of comrnercial disputes, as well as the provision of floor facilities for cash and future trading, were all in evidence during this early period. Such matters are discussed here only as they have affected the development of the market. • v The trading floor. —The conspicuous features of the trading floorto-day are: The four octagonal pits for future trading in wheat, corn, oats, and provisions; the parallel rows of sample tables for cash trading; the 'ffiri^e’^ from which the Cleveland Telegraph Co. collects and transmits the continuous quotations; and the various blackboards for cash prices, to-arrive prices, the visible supply of grain, and general market and crop reports. At present a small volume of trading in barley and rye takes place in the former “pro¬ vision pit’’ or on the main floor. i Sec iliu miration opposite p. 60. THK CHICAGO MARKET AND THE BOARD OF TRADE. 77 Inspection systems. —Inspection and grading grain became a leading problem in the affairs of the board in 1858. The manner in \^ich the farmers cleaned, or failed to clean, the grain, and the prac- tice of mixing followed by the dealers, ^ induced the Board early in the season to adopt more stringent measures for the inspection of grain than had previously been practiced. ” Accordingly a com¬ mittee was appointed whose report constitutes one of the most important documents in the history of the inspection and grading of grain: We have met the inspectors, and examined and compared various samples as graded under the old system, and have come to the conclusion, after giving the matter much thought, that to improve the character of our grain it will be necessary hereafter to reject entirely much of the grain that has heretofore passed as standard in this market. We are credibly informed, and believe that it is a common occurrence, for farmers to send damp and dirty grain to this market, calculating that under the present system of inspection it will bring about as much as it would if it were thoroughly cleaned and in good order, and consequently it will not pay them to clean it. We have no doubt of the fact, either, that some parties buying grain in the country are in the habit of mixing, at times, oats, rye, barley, screenings, or damp and un¬ merchantable wheat, with that of sound and good quality, and that when sent here it has brought about the market price for standard wheat. It is also frequently the case that shippers from this port bill rejected and standard wheat mixed as all standard, or even sometimes as extra, thereby much injuring the standing of our grain abroad, and consequently at home also. Under these circumstances, we propose after the 15th of June proximo, to make the inspection much more rigid than it has heretofore been, and that spring wheat may bring in this market, a price in proportion to its true value; we propose to grade it as follows, viz: “Club Wheat,” “No. 1 Spring,” “No. 2 Spring,” and “Rejected.” Without the assistance of the storage merchants of the city, we would be unable to carry out our design; with their assistance, which they readily accord to all our requests (provided the board pass a resolution making it compulsory, so far as in their power, upon parties receiving grain to pay back to them the inspection fees upon receiving their receipts), we think our whole efforts may be successful. (In our proposition to them we provide for the inspection of grain not only into store, nut on to the vessels also; and further, that they shall furnish to the board, daily, a statement of the quan¬ tity and grade of all grain delivered to each vessel, a correct account of which shall be kept by the superintendent of the board, in a book for that purpose, and be daily posted on ’change.®^ The warehouse operators agreed to this inspection system and stated that they would ‘‘at all times deliver grain, which in the opinion of the inspectors is equal to the grade called for by the receipts * * The board adopted substantially the report of their committee. Within three yearn after the adoption of the above system it v/as reported that practically the entire receipts were being inspected. Grain was not the only commodity which was subjected to inspec¬ tion standards by the board. In fact in this same year it was de¬ clared by traders in provisions “that our inspection is not suffi- »« Annual Statement, Februar}’, 18o9, p. 10. 6' Idem, p. 11. 78 TERMINAL GRAIN AIARKETS AND EXCHANGES. cicntly rigid, particularly as regards mess pork.”Likewise the record shows that a system of fish inspection was established with grades similar to those for grain, i. c., No. 1, No. 2, and rejected. The grain inspection rules were amended (effective January, 1860) so that ‘'no spring wheat shall pass as No. 1 that weighs less than 59 pounds to the measured bushel; none shall pass as No. 2 that weighs less than 56 pounds to the measured bushel, and none shall pass as rejec¬ ted that weighs less than 45 pounds to the measured bushel.”^® As an effect of this increase in inspection requirements the price of spring wheat approached that of red winter ^Tor the first time in the history of the Chicago grain trade.” Toward the close of navigation No. 1 spring and No. 2 red winter occasionally sold at the same price, although usually there was a difference of two or three cents in favor of the latter, while the new grade of extra club commanded a premium of about five cents over No. 1 spring.®*^ The rules for inspecting grain were altered from time to time with a view to adopting standards more conformable to the reported crop conditions. The evils attendant upon these frequent changes in the grades were pointed out in 1868 by the directors who favored a more permanent system rather than one based upon annual experi¬ mentation. We would earnestly recommend that no further alteration be made in the rules of inspection of wheat. Heretofore it has been customary to make frequent changes in the inspection, which we believe to be wrong in theory. The grades should be perma¬ nent, and the crops should come up to the requirements rather than reduce the inspec¬ tion to meet a bad crop. As frequent changes only tend to injure our market by lead¬ ing foreign wheat buyers astray in purchasing by inspection, which, when once established on as good a standard as now, should be permanent. The inspection of grain was taken over by the State in 1871. " Weighing. —The weighmaster appointed by the board of direc¬ tors in 1862 adopted a schedule of weighing fees for all commodities. For ^‘all grain, provisions and other produce weighed by the wagon¬ load on large team scales” the charge was 10 cents. For grain, seed, beans, malt and potatoes in bags (‘Aveighed on platform and beam scales”) the charge was 1 cent per bag.®^ As pointed out elsewhere (Chap. VI) weighing in the Chicago market has been performed under exchange auspices since that time to the apparent satisfaction of all concerned. Department of grain sampling. —A department of grain sam¬ pling and seed inspection was established in 1904 for the purpose of a check on the State inspection service. One of the reasons assigned for establishing this department was ^ ‘ the desire on the part of the directors to regard and reestablish the 58 Idem, p. 30. 58 Annual statement, year ending Dec. 31, 1859, p. 52. 60 Taylor's History of the Board of Trade, p. 261, vol. 1. 61 Annual statement 1863, p. 15. THE CHICAGO MARKET AXD THE BOARD OF TRADE. 79 entire confidence concerning the inspection and sampling of grain in the Chicago market, of the western shippers whose grain is sold largely by sample on our exchange, and also of the eastern buyers who must from the nature of the business depend largely upon some disinterested party to see that the grain shipped on their ordei's is properly graded and the quality is fully up to the specification of their contracts.’’®- The TRANSPORTATION DEPARTMENT. —Ill 1888 a freight bureau was established in Chicago to handle traffic complaints and all mat¬ ters relating to freight adjustments. The Board of Trade contribu¬ ted to the support of this bureau until the establishment of its own transportation department in 1904. All of these transportation activities of the board have been supervised by the transportation committee which has been, consequently, one of the most active and influential committees of the board. The transportation department of the board during recent years has not only acted upon the traffic grievances of members, but has compiled exhaustive tariff files relating to the tributary territory and eastward shipping routes. For example, in 1914, the depart¬ ment prepared for the use of members a book of grain rates from points in southern Minnesota, Iowa, South Dakota, and Missouri, showing rates to Duluth, Minneapolis, Missouri River markets, St. Louis, and Chicago, from territory tributary to such markets. Similar rate books have been compiled for routes to the Atlantic seaboard. The department has been of particular service to members by prosecuting claims before the Interstate Commerce Commission and with the individual carriers. In addition to rate adjustment cases, the department has handled claims respecting demurrage, free time for reinspection, penalty for overloading cal’s, small car order rule, claims for reparation, loss and damage claims, elevation allowance, receipts for bills of lading, embargoes, track storage charges, lia¬ bility of lake carriers for shortage, and like matters. Section 5. The conflict between receivers and elevator buyers on the board. In GENERAL. —Thc avowed purposes and interests of receivers as contrasted with those of the elevator buyers indicate a commercial antagonism which may be traced through the history of cash trading on the Chicago Board of Trade for the past 30 years. The position of the receivers is set forth in Secretary Stone’s report for the year 1888: * * the Receivers’ and Shippers’ Association, organized and maintained in the interest of the country shipper, exerts a most beneficial influence. It is the ob¬ ject of this association to secure minimum terminal charges, equitable and economical Board of Trade Report for 1901, p. 51. 80 TERMINAL GRAIN MARKETS AND EXCHANGES. freight rates, and careful sampling of consignments, to the end that the western shipper may be justly treated in all respects, and may obtain maximum returns for his merchandise without delay. Not depreciating any other market, it is only just to observe that it is not possible for the tvestern consignor to realize elsewhere such favorable and prompt returns, the year through, for all kinds of produce, as he may in Chicago. Tlie opposite viewpoint was brought out in testimony by elevator operators before the Industrial Commission in 1899 to the effect that “competition, and the natural desire of both producer and consumer to come closer together, to eliminate the middleman, and all unnec¬ essary intermediate expense, have resulted in dispensing largely with commission men, brokers, and traveling solicitors.” At these hearings the history of the cash grain trade was outlined for 25 year’s. It was stated that in the period 1870-1880 country grain had usually been consigned by the local dealer to some one of the larger markets; and that— The bulk of it was reconsigned to the eastern seaboard—New York or Baltimore. Tliere it paid another commission, and it was sold then to the exporter, w’’ho sent it abroad. * * * That was the system in vogue 20 or 25 years ago. The first change in that w^as when Gill & Fisher, of Baltimore, and C. H. Cum¬ mings, of Philadelphia, commenced ]3idding the w’estern dealer direct for gi*ain, passing the markets of accumulation like Indianapolis, Toledo, Chicago, Peoria, and 8t. Louis. They sent direct to the country dealer and bought from him. This sys¬ tem was then adopted by New York, Indianapolis, Peoria, and the last market to go into it w’as Chicago. To-day * * * our firm, and others not only buy direct from the gi'ain dealer at the country stations, eliminating the commission at Chicago, eliminating the commission at New York, and selling it direct to the consumer on the Continent and in the United Kingdom, but w’e also do more: We run hundreds of country elevators that buy the grain direct from the farmer, and absolutely we are the only middlemen between the farmer and the foreigner who buys the grain. Cer¬ tainly that change has been for the benefit of the producer. It has wiped out the commissions at the western point of accumulation; it has wiped out the commission at the eastern point of accumulation. * * * The business to-day, as handled here in Chicago, is not handled by the firms who were in business 20 years ago. Ten years ago we had no elevator in Chicago, but the necessities of the business compelled us to build elevators, one, two, and we are build¬ ing a third now. Until within a week we have never had a regular house. We have been under no obligations to the board of trade in any way. We are simply grain merchants. We have our own houses in Liverpool and Montreal and merchandise this grain. The men who come here and complain about the elevators are generally men who have refused to adapt themselves to the change in conditions and want to have the old commission system in vogue now and levy toll at every point of accu¬ mulation on the gi’ain as it passes through. That is not in vogue, and you can not reinstate it by legislation. The trade has gone beyond that. It is simply the old- timer railing at the business that has passed him. The effect of these achievements of the elevator man was further described by the president of the Armour Elevator Co. as follows: 63 Testimony of George U. Webster, President of the Armour Elevator Co., Report of the U. S. Industrial Commission (1900), yol. IV, p. 405. W. IL Bartlett. Report of U. S. Industrial Commission, Vol. IV, p. 393. THE CHICAGO MAIIKET AND THE BOARD OF TRADE. 81 I'hc oliniination of the commission charges at terminal points has caused a very hitter feeling among the commission merchants against what are now known as ele¬ vator proprietors and buyers. These commission merchants naturally feel bitter to think that they do not now receive as much of this grain as formerly and get a com¬ mission out of it as it passes through terminal points. The Chicago elevator men would be only too glad to have the same state of affairs restored which existed 15 or 20 years ago, when, on grain coming into the grain commission men, the elevator j)ro- ])iietor had simply to unload the grain and receive for transferring it through his (devator 1] cents per bushel, with no risk, no wear and tear, and no anxiety. As it is now, in order to get any business he must go out and compete against the other terminal markets, to say nothing of his own market, and fight for the grain, handling it on small margins and taking large chances in the way of changes in the market, etc., and, finally, receive probably not half of Avhat he formerly received without bother or risk or expense.®'^ The economic aspects of buying direct as compared with the con¬ signment method are fully discussed in Volume III. It is intended here merely to outline the earlier history of this conflict of elevator and commission interests. Restrictions on direct buying imposed by the exchange.— It is a generally accepted fact that there was more commission business than direct buying prior to 1885. Buyino- direct from (‘oun try stat ions was instituted by the^ operators who developed tenninal elevator and Ime-house systems in Chicago after 1885 with .. the expre^purpose of mer chand ising gruhi, in addition to making a profi t_as_sto rage and transf e r systems.The primary interest of these elevators was ^^private’’ rather than ^^public;’’ that is, they utilized terminal elevator facilities to store, mix, and condition their own grain. On account of the practice of mixing, they were not interested primarily in buying grain by sample and so began to bid the country stations in preference to buying on the exchange. The payment of storage charges to themselves gave them an additional return on the elevator investment. As was stated, they eliminated the middleman and ^hviped out commissions,”®^ but the court found, in CentTol Elevator Co. v. People ,that in so doing they “nearly crushed out competition in the largest grain market of the world.” They were closely allied with the railroad interests (see p. 42) and allegations of rebating were frequent prior to the enforcement of the interstate commerce law of 1887.®® The following summary of this whole development seems to be supported by the weight of authority: X- * * When I came to Chicago, the grain was, I think, all consigned to Chicago; rates were not made beyond. It practically came here to be sold in Chicago, was received by one set of men called receivers, who sold it to another set of men called Report of the Industrial Commission, Vol. IV, p. 410. So stated by coupsel of the Board of Trade. 67 Sec p. 80. • 68 174 Ill., 208, 1898. 69 Report of U. S. Industrial Commission!, Vol. IV, pp. 353, 428-429. 108093°—20--6 82 TEFvMIXAL GRAIN :MArJvETS AND EXCHANGES. shippers. The receiver represented the people in the country who consigned it —Gie country merchants—and the shipper either bought it for speculation on his own account or bought it here to be sold to the eastern market, or else bought it here for some one in the eastern market who consumed it. The elevators at that time were all situated on western roads, and did not buy grain thomsel\es. I think one elevator concern, when no one else was buying grain on their road, took it and sold it in the option pits—as we call them—and delivered it as soon as they could get receipts. The rates from the West were made into Chicago. There were very few through rates before the interstate law went into effect. Soon aftei it went into effect the elevator proprietors became grain liuyers here on the market, until to-day there are practically no other buyers of grain who go on the market except elevator proprietors, and they also buy grain in the country, and send out bids foi giain in the country, and the men wdio used to be called receivers, and received it and sold it here, hav^e been forced to become buyers, and are bidding against each other. Of course, you understand that these elevator people are public custodians. The law of the State of Illinois gives them the right to charge three-fourths of a cent per bushel on every bushel of grain going into their house which covers ten days storage, and that three-fourths of a cent gives them that much leverage over anyone else. They can give it away to anyone they wish. If an indiv idual goes there and ships grain in and out he has to pay three-fourths of a cent a bushel. * * The men who used to buy the grain here to ship, on the open market, * * * have been going more or less to the West to buy grain themselv os, * * and theie is a rate made now from the West on grain going through elevators which is a reduced rate over the local rate into Chicago This increase in direct buying by elevator operators continued through the 80^s and 90’s. Finally" the Supreme Court of Illinois, in the Central Elevator Co. case referred to above, enjoined public" elevator operators from buying grain and storing it in their own warehouses. '‘It was thought by those who sought this decision,’’ says the present counsel to the board, "that it would broaden tlio^- market for grain bought and sold 'to_arriye’ in Chicago.” He st^es that the next year— A statute passed by the Illinois Legislature at the instance of these public pro¬ prietors to legalize what the Supreme Court had enjoined, v\as declared unconstitu¬ tional. (Hannah r. People, 198 Ill., 77.) These monopolistic tendencies were doubtless also aggravated by tlie liberal granting by the railroads of freight rebates to these public elevator proprietors. Neither these decisions of the Illinois Supreme Court, nor the Hepburn Act pro¬ hibiting rebates, wore sufficient to eliminate this already established concentration of grain buying in the hands of a few'. The few large buyers already occupied the field, with established channels for the promotion of the bulk of their business. During the time of this concentration of business under the conditions above enumerated, the practice had grown up of making bids to the country after the close of the Chicago market, good if accepted by wire before the opening of the market on the following day. This enabled these few large grain buyers to agree among themselves upon the price bid to the countrj^ and place the smaller buyers at a dis¬ advantage by keeping them in ignorance of the bidding price. The result of this was that an unduly small number of the members of the board of trade participated in this buying of grain ‘Ho arrive,” while the farmers and other shippers of gram suffered from tfte absence of competition in such buyers at Cliicago. 70 Testimony of II. F. Dousman, grain shipper: Report of the U. S. Industrial Commission, Vol. IV, p. 351. THE CHICAGO MARKET AXD THE BOARD OF TRADE. 83 It will bo noted that a marked feature of the ^hnoiiopolistic tend¬ ency” was the volume of buying done after market hours and ofi^ exchange./ The broad sample market which was considered essential to the exchange was being reduced, and floor tradiug in grain to arrive was largely eliminatod.^^ It was declared by the commission men (receivers) that the open bidding and continuous price information which characterize an active cash market did not exist under the methods followed by the large elevator operators. In order to find out what grain was worth * * * you had to use your friendship, to a great extent, or rely on devious ways to hnd oat what the bid was and \eYy often you could not find out what the prices to arrive were until the next morning, from some interested customer in the country or wires from brokers of other markets what the prices were; so the volume of business that came generally on the market was small and the large number of people interested in the western trade were at a dis¬ advantage.'^ The CALL RULE. —Finally, 1906 , the Board of Trade took action through the adoption of the ^‘call rule.” By this rule a call was established at the close of regular trading - (between 1J.5 and 2 p. m.). The objects of the rule, as testified by the secretary of the board in 1915; were in the first place— • To increase public market bidding, increase competition, and facilitate doing business openly in the open market, and, second, to give us reasonable hours of closure under which to finish up our office work, do our banldng, get out our mail, and get away from our business. Conditions before that had been running bad some years and especially in the earlier days when business would continue even as late as 10 o’clock at night; men used to adjourn to the hotel and trade; that was not of late years, however, but I only speak of that as the extreme representations of the effect of having no close hours in which to do our office work in.'^ The call thus instituted resembled an auction except that the object was to establish closing prices rather than to sell goods. The procedure has been fully described by a former ''caller’' under the lule: * * * I took the position as the caller before this crowd of buyers and sellers, about similar to an auctioneer on the block, disposing of the different grades of grain under the different conditions—that is, the shipping and the grades and so forth. My duty I felt was to get as good price for the different grains as it was possible for me to do so, and I believe that that is about all there was to it. Testimony of Willicini N. Eckhardt End otliers before the TJnitcd StEtes District Court for the Xoitlicrii District of Illinois, Jonuary, 1915. (United States Board of Trade, City of no opinion filed.) Eckhardt testified that his knowledge of the grain trade in Chicago extended back continuously for U years. ’■'Udem., Eckhardt testimony. -3 Sec 246 United States 237: “The defendants admitted the adoption and enforcement of the call rule and averred that its purpose was not to prevent competition or to control prices, but to promote the con¬ venience of members by restricting their hours of business and to break up a monopoly in that branch of the grain trade acquired by four or five warehousemen in Chicago. On motion of the Government the allegations concerning the purpose of establishing the regulation were stricken from the record.’' Testimony of J. P. F. Merrill in case cited. ^4 TERMINAL GRAIN MARKETS AND EXCHANGES. Q. Wellj what did you do?—A. I would offer the stuff and call for bids and auction it off from one man to the other as the case might be and as the number of buyers or sellers might appear. Q. Taking first one grain and one grade of that?—A. I \vmuld take it and go down the list of different grades, the different grades and<^nditions—that is, the shipping conditions and the grades and so forth, Q. And how long did you keep open the bids on any partic\ilar grain?—A, I would keep open until I found that there was no further bid or offer. Q. And you did not close the call until everybody had ceased to bid?—A. Every¬ body had a chance to bid or offer. Q. About how many people attended that call?—A. Sometimes—it wrould be a matter of guesswork entirely—thirty to one hundred according to the amount of stuff that was moving. Q, And what class of persons w'ere in there?—A. What class? Q. Yes, what class of business were they engaged in?—A. They were buyers and sellers of grain on‘the board of trade. Q. Were there any elevator owners?--A. Oh, yes. Q. Manufacturers, like glucose companies?—A. Yes, sir. Q. And there were, I presume, members of the board of trade representing country interests?—A. Oh, yes; commission men.'^ The call rule was in force from 1906 to 1913. In the latter year suit was brought by the United States against the board to enjoin the enforcement of the ride, alleging it to be in violation of the anti¬ trust law (26 Stat. 209). Without waiting for a decree from the district court the board modified the call ride and adopted what is known as the ^‘to-arrive rule.’^ The case was carried to the Supreme Court, however, and the decision as rendered by Mr. Justice Brandeis deserves carefid consideration for its bearing upon the power of the board of trade to fix prices and regulate the conditions of buying and selling among its members. The district court had ^ declared that defendants became parties to a combination or conspiracy to restrain intemtate and foreign trade and commerce ^by adopting, acting upon, and enforcing’ the ‘call’ ride, and enjoined them from acting upon the same or froni adopting or acting upon any similar rule * * In the dis¬ trict court— * * * i' 0 gtecl upon the bald proposition that a rule or agreement by which men occupying positions of strength in any branch of trade fixed prices at which they would buy or sell during an important part of the business day is an illegal restraint of trade under the antitrust law * * The Supreme Court differentiated between agreements to regulate and agreements to suppress competition: * * * 'pjjg iggi; Qf legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine that question the court rnust '6 Testimony of David H. Harris. '«Board of Trade of the City of Chicago et al. r. United States, 246 U. S. 231, decided March 4,1918. »Idem, p. 238. • THE CHICAGO MARKET AKD THE BOARD OF TRADE, 85 ordinarily consider tlie facts peculiar to the business to which the resti“aint is applied; its condition before and after the restraint was imposed; the nature of the restraint, and* its effect actual or probable * * The decision was based therefore upon tlie economic effects of the rule: * * * As it applies to only a small part of the grain shipped to Chicago and to that only during a part of the business day and does not apply at all to grain shipped to other markets, the rule had no appreciable effect on general market prices; nor did it materially affect the total volume of grain coming to Chicago. But within the narrow limits of its operation the rule helped to improve market conditions thus: (a) It created a public market for grain “to arrive.” Before its adoption bids were made privately. Men had to buy and sell without adequate knowledge of actual market conditions. This was disadvantageous to all concerned, but particularly so to country dealers and farmers. (b) It brought into the regular market hours of the board sessions more of the trading in grain “to arrive.” (c) It brought buyers and sellers into more direct relations, because on the call they gathered together for a free and open ititerchange of bids and offers. (d) It distributed the business in grain “to arrive” among a far larger number of Chicago receivers and commission merchants than had been the case there before. (e) It increased the number of country dealers engaging in this branch of the business; supplied them more regularly witli bids from Chicago; and also increased the number of bids received by them from competing markets. (/) It eliminated risks necessarily incident to a private market, and thus enabled country dealers to do business on a smaller margin. In that way the rule made it possible for them to pay more to farmers without raising the price to consumer. ([/) It enabled country dealers to sell some grain to arrive which they would other¬ wise have been obliged either to ship to Chicago commission merchants or to sell for “future delivery.” (h) It enabled those grain merchants of Chicago who sell to millers and exporters to trade on a smaller margin, and, by paying more for grain or selling it for less, to make the Chicago market more attractive for both shippers and buyers of grain. (i) Incidentally it facilitated trading “to amve” by enabling those engaged in these transactions to fulfill their contracts by tendering grain arriving at Chicago on any railroad, whereas formerly shipments had to be made over the particular railroad designated by the buyer. The restraint imposed by the rule is less severe than that sustained in Anderson v. United States, 171 U. S. 604. Every board of trade and nearly every trade organiza¬ tion imposes some restraint upon the conduct of business by its members. Those relating to the hours in which business may be done are common; and they make a special appeal where, as here, they tend to shorten the working day, or, at least, limit the period of most exacting activity. The decree of the district court is reversed with directions to dismiss the bill.'^ T' The to-arrive rule. —The rule adopted in 1913 in place of the call rule®® included two important reciuirements: (1) The so-caUed uniform commission rule,®^ requiring direct purchases from the country to include certain charges calculated to place such buying more nearly on a par with the consignment business, and (2) the to- aiTive rule whereby the board of directors were empowered to Js Idem. ’9 Idem, p. 240-241. fo Rule IV, sec. 32. See Ch. V, sec. 7, 86 TJ'TvMIXAL GEAIX AIArJvETS AXD EXCHANGES. evstablisli regulations governing the terms and conditions of trading in grain to-arrive both during and after the close of the regular market. (The to-arrive regulations are quoted in Chapter V, sec. 13, ''Cash trading off exchange.’') These rules were, respectively, designed to reduce the price advantages which had been acquired by the elevator mterests in buying direct from the country and to remove the evils of secret bidding. Members buying grain at country points to-dayVhen departing from the closing price are expected to present satisfactory evidence to the secretary of the board 'and to their competitors that such bids arc bona fide and based on a new market level. Section 6. Enforcement of rules. The power of the board to enforce its rules as against an individual member has been tested in a long series of court decisions. The earliest important litigation of this kind was the Page case decided by the Supreme Court of Illinois in 1867.^^ This case mvolved the validity of a by-law of the early association providing that in case a member failed to comply promptly with the terms of "any business contract, either written or verbal,” a complaint setting forth satis¬ factory evidence of the facts might be filed with the board of direc¬ tors, who were authorized to hear such cases and to suspend delin¬ quent "from all privileges of membership in the association until such contract is equitably or satisfactorily arranged or settled * * The facts are best recited in the opinion of the court: It appears by tlie petition that on the 14th of May, 1867, Page sold to Stevers and Brown, also members of the board of trade, a quantity of corn, deliverable at any time thereafter during the month; that on the 21st of May, corn having advanced in price, he offered to pay the purchasers $500 to rescind the contract; tliat they accepted his offer, and on the same day he paid them $100 in money and executed to them his promissory note for $400, payable on demand; that Page, failing to pay when re¬ quested, Stevers and Brown made a complaint to the board of directors; that Page appeared and admitted the indebtedness, but said he was unable to pay; and there¬ upon the board made an order in accordance with the fifth by-law, suspending him from the privileges of the board * “ ■ Page applied to the circuit court for a writ of mandamus to compel * the restoration of his membership. Being denied, he appealed to the Supreme Court of Illinois where the judgment was affirmed. The Supreme Court held— That a corporation, purely commercial in its character, would soon cease to be respected or respectable, if it tolerated among its members a violation of an undisputed contract, is a proposition too plain for argument. Perhaps the rule would have been better if it had allowed more discretion to the board of directors, to be exercised in cases of misfortune and not of fault. But this does not touch the question of power, and is a matter wholly for the decision of the corporation itself. That the rule, even in its present form, is either unreasonable or unjust, we can not hold. Even if there 82 People ex rel Thomas P. Page r. Board of Trade, 45 Ill. 1J.2. THE CHICAGO MARKET AXD THE BOARD OE TIE\DE. 87 had been no express grant in the charter of a power of expulsion, we sliould be inclined to hold that a prompt i^erformance, by the members, of their contracts with each other, was so important to the well-being of such a corporation as this, that a member failing in tliis regard, was guilty of a breach of his duty as a corporator; and if the corporation thought proper to pass a by-law making such breach of duty a ground of disfranchisement, the act would have to be sustained as an exercise of its inherent power under the rules of the common law.®"^ The Nelson case, 1896.—The power of the board to discipline its members by suspension was reviewed at a later date by the Illi¬ nois Supreme Court in Board of Trade of the City of Chicago v. Kel¬ son. This case arose out of the elevator controversy which came to a climax in 1896. The respondent was president of the National Elevator & Dock Co., which had, through its secretary, signed an agreement (with other elevator proprietors and managers) to apply to have their elevator made regular, providing a certain rule (not material here) were adopted by the association. The rule was adopted by the association but (as was averred) ^Hhc petitioner declined to permit the National Elevator & Dock Co. to carry out the agreement.’’ Nelson was formally charged with an act of bad faith and dishonorable conduct, was summoned to appear at a hear¬ ing before the board of directors, ^Svas found guilty of the charge made, and suspended from the privileges of the board.” The relator CMurry Nelson) obtained judgment in the low’er state courts upon a petition filed for a writ of mandamus to compel the Board of Trade to permit him to resume his privileges and rights as a member of said board. The Supreme Court of Illinois was called upon to review the pro¬ ceedings. Their opinion had an important bearing upon the status of the association and upon the plenary power of the board to dis¬ cipline its members. As the directors pointed out in their annual report for the year 1896, the decision was ^^of incalculable value to the board.” The court said: * * * The status of the board of trade has been determined by this court in numerous cases; and it has been held to be merely a voluntary organization, although incorporated under an act of the general assembly. It is averred in the petition tliat it owned a building, and rented out rooms as offices, from which it derived an income ; that this income was insufficient for its expenses, and an assessment was required each year; and that the present value of a membership is about $800. This does not change in any respect the character of the association, which must be determined by its charter. Any club or voluntary association, whether incorporated or unincorporated, may rent out rooms and derive income therefrom; but the character of the association is not changed by that fact. The right to pursue a business as a member of such an organization in the hall of the building devoted to that purpose may be a thing of value; but its value is incidental to the membership, and a determination of such membership, destroys the rights under it. This corporation is not bound to admit any pei'son to membersliip, and a determination of such membership, destroys the rights under it. This corporation is not bound to admit any person to membership, *^43 Ill. 110. Readirmel in Rice v. Board of Trade, SO Ill. 133. 88 ' TERMIKAL GRAIN MARKETS AND EXCHANGES. nor was tlie relator in any way forced into such association. He voluntarily became a member, and by his contract is bound to abide by the rules and regulations of the board. The courts will never interfere to control the enforcement of by-laws of such associations; but they will be left to enforce their rules and regulations by such means as they may adopt for their government * * * . There is no question that the judgment of the board of directors was arrived at in accordance with the rules and regulations of the board. The relator was suspended by a tribunal which he had voluntarily chosen to determine the question, and according to the rules to which he assented in becoming a member; and he had due notice of the proceedings. Such a judgment can not.be collaterally reviewed by the courts. So far as the courts are concerned, tlie judgment of the board of directors is conclusive like that of any other tribunal.^ The board has been involved in nmnerous damage suits instituted by expelled or suspended members, but has suffered no serious en¬ croachment upon its disciplinary powers.®^ (Commission rules.— Uniform commission charges and brokerage fees to be followed by the association were adopted by the members at large and ratified by the directors during 1862. On grain received by railroad the commission for selling was a flat rate of 1 cent per bushel. The commission for purchasing ^^on all kinds of gi-ain, by cargo or otherwise/' was a minimum of ^ per cent of the purchase ])rice and a maximum of 1 cent per bushel. Commission rates for provisions, broom corn, high-wines, dressed hogs, hides, and seeds, were listed in the same schedule; commissions for selling all kinds of property not enumerated to be subject to agreement between the jiarties."®® Full commissions 'were allowed for all property received and reconsigned. The schedule of brokers’ fees, for purchase and sale, allowed | cent |)er bushel on corn and oats and I cent on all other grains. The brokerage rates could be used only in trades for membei*s; the agents of nonmembers must charge commission rates. In 1864 advances on account were ruled to be an additional serv¬ ice for which commission men should charge an additional T per cent “with ruling rates of interest.” Violations of the minimum commission rule were defined from time to time,®' and finally, in 1900, an amendment was adopted pro¬ viding for the expulsion of violators. The reasons for this were stated in the respondent’s brief in John Diclinson v. Board of Trade (1904):®® * some members, unmindful of their agreements to abide by said rules, violated said commission rule by soliciting and doing business at lower rates than are •^44 Northeastern Reporter, p. 743. The following extracts are typical; ■'* * * A suit commenced in the Federal Court by Mr. Woods, of St. Paul, to recover .$400,000 damages iigainst the board by reason of his expulsion, has been disposed of favorably to the board. * The two suits brought by Charles R. and Albert O. McLain for $50,000 damages, by reason of tlieir expulsion from the board, have been dismissed for want of prosecution.” ^Chicago Board of Trade, year ending Dec. 31,1903, p. G2.) Fifth annual statement, 1863, p. 15. ” See Ch. V, secs., 7, 8, 9, and 10. 114 III. App. 302. THE CHICAGO MARKET AND THE BOARD OF TRADE, 89 therein spseified^ and lower than were remunerative when business was honestly transacted; and by reason thereof the number of applications by persons desiring to ))ecome members became very much lessened, and the opportunities of members to transfer their memberships to incoming members was very much decreased, and tliereby the amount for which memberships could be sold to incoming members declined from the sum of $4,700, at which they were selling at one time, to less than $750, at about which ligure the value of memberships stood prior to the inauguration of steps for the adoption of the rule fixing commissions, set out in said petition. The result of this was that the disciplinary power of respondent was thereby very much weakened and this respondent and its members found it necessary to adopt, and put in force, said rule fixing the rates of commissions, set out in said petition; and there¬ upon and by reason thereof, the value of memberships steadily improved, and at the present time they are selling at from $4,000 to $4,300. This respondent further says that said rule was not adopted with any other end or purpose, nor with the intention of improperly or unreasonably imposing any restraint upon its members, or upon the business done by its members on the floor of its exchange. In the above case Dickinson contended, '‘that he became a mem¬ ber of the board in the year 1885, and has continued as such and been recognized as such up to the 6th day of February, 1901, during which time, owing to his rights of membership, he has built up an extensive business in buying and selling commodities upon the exchange of the board, of an annual value to him of more than $50,000; and that his right of membership or membership ticket has a salable value of at least $2,200, if allowed by the board to be transferred; but that be¬ cause of his alleged expulsion as a member, such transfer is not per¬ mitted by the board.” / In reaching its decision the court made an analysis of the powers of the board to enact such a rule: It is urged in behalf of appellant that any combination restraining freedom of trade so as to increase the price of commodities or services and prevent competition in fix¬ ing-prices, is illegal and contrary to public policy, and that rule 3 comes within this legal prohibition. That rule as above stated prohibits, on pain of expulsion, any member of the Board of Trade of Chicago from charging less than a fixed minimum rate of commission to nonmembers of the board for the purchase or sale of grain in specified quantities. Appellant contends that the rule does necessarily restrain free¬ dom of trade and increase the price of commodities to the general public. The board is by its charter authorized to make such rules, regulations, and by-laws as it may deem proper, “not contrary to the laws of the land.” It does not itself carry on the business of buying and selling nor of dealing in commodities. Its objects are stated in its charter to be inter alia “generally to secure to its members the benefits of coopera¬ tion in the furtherance of their legitimate pursuits.” It maintains a commercial ■ exchange where its members carry on their business, and furnishes them facilities for so doing to such an extent that one not a member can not, as it seems to be con¬ ceded, profitably engage in buying and selling in Chicago the commodities in which its members deal. Expulsion from membership therefore involves serious conse¬ quences to the member expelled, and inability to become a member precludes one seeking to engage in the lines of business carried on upon the board from profitalfly so doing and in a sense gives to its membership a monopoly. If the rule complained of is “contrary to the law of the land,” then it is in violation of the board’s express charter powers.®® ‘»114 Ill. App. 208. soil! 111. App. 803. 90 It was hold, liowevcr, that the enforcement of such a commission rule, ^ infringes no rule of law or public policy, confined as it is to the members of the hoard, upon whom alone it operates, and b}' whom it has been enacted for their own government.” Section 7. Terminal elevators and the warehouse controversies. Factors in the problem at Chicago. —Since the Chicago market was developed as a shipping center the most conspicuous facilities of the market, even before the maintenance of an exchange hall, were the warehouses constructed along lake, canal, and railroad. The horse¬ power elevators of the primitive market into which grain was dumped regardless of grade, quality, or inspection,” were soon replaced by steam-operated houses built as an adjunct to railway terminals. In fact, terminal grain elevators have always been closely associated with railway terminal development. The transportation of freight includes transfer and delivery services, and in the case of bulk grain such serv¬ ices can be performed only by modern terminal elevators. Fmdher- more, at competitive points the absorption of elevating and other terminal charges in the railroad freight rate has constituted an effect¬ ive competitive method. The payment of elevating and handling charges by railroads to elevator companies has been a matter of re¬ current complaint before the Interstate Commerce Commission. In considering the history of the elevator problem in Chicago it is necessary to bear in mind, first, the position of the market as a natural trunk line terminal and handling various grains in transit from the Missouri and Mississippi River gateways, with a large reshipping traffic in winter wdieat and coarse grains. A second, but no less important, consideration lies in the fact that Chicago has become the greatest grain futures market in the world and that the basis for this trading is ^‘contract” grain in regular storage. Growth of storage capacity and concentration of con¬ trol.—A total storage capacity of over four million bushels was re¬ ported for Chicago in 1858, distributed among 12 eleva tors and 11 opera¬ torswith an aggregate daily shipping capacity of 1,340,000 bushels. Ten years later (1868) a census of terminal elevators showed a capacity of over ten million bushels, more than two-thirds of which was controlled bv four firms, as follows: Operator. Table 32 .—Elevator storage distribution at Chicago, Mar. SI, 1868. Number of ware¬ houses. bushels. J. E. Buckingham & Co Flint, Thompson & Co. Munn & Scott. 2 Illinois Central Railway and canal. 2 Chicago Rock Island Railway. 4 Chicago & Alton, Chicago & North Western Rail- 1 , 400,000 2 , 000 ,< XK ) 2 , 750,000 Armoiu, Dole & Co.... Munger, Wheeler & Co Four other .operators... way and canal. 2 Chicago, Burlington & Quincy Railway. 3 Galena & Chicago Union Railway and canal.... 4 Railroads and canal. 2,100,000 1 , 600,000 830,000 Estimated total capacity 10 , 680,000 91 First annual statement, year ending Dec. 31, 1858, p. 7. 9- .Vnnual statement of the board, Mar. 31, 1868 I 91 THE CHICAGO HARKET AND THE BOARD OE TRADE. At the time of the great fire (Oct. 9, 1871), the elevator storage distribution was practically as above, with an increase in aggregate capacity of less than a million bushels. The capacity destroyed b}’ the lire was 2,475,000 bushels. Yet this disaster was of less concern to the elevators than the agitation for public regulation of warehouse utilities, which reached a climax in 1870. Regulatiox of public warehouses. —It has been shown that the first restrictions upon the operations of grain elevators were self- imposed, being a part of the agreement subscribed to by the ware¬ housemen to put into effect the inspection system of 1858. (Sec p. 77). There was at that time no regulation of warehousemen by State agencies. Accordingly, it soon devolved upon the boarcl of trade to make the proprietors responsible for the grain in storage which they held as bailees. The fact that in the early years of the market, elevators could mix all grades of grain, could even deliver out on their own account grain owned by others, and could engage in all kinds of manipulations for their own profit, impeded the progress of merchandising grain in store and (as was frequently stated) injured the reputation of the official Chicago grades.®^ This effort to derive profit from handling grain in public storage, which provoked so sharp a controversy in later years, can be traced through the early history of the market. During and after the Civil War, when the buying and selling of grain in store became a common practice, there developed a more insistent demand for a closer regulation of warehousing practice. A system of posting the quan¬ tity and grade of grain received and shipped had already been inaugurated,^'^ and the inspection and weighing agencies of the board were in daily contact with the individual elevator operators. In 1862 the board of directors adopted a rule wherein they condemned the practice of ^4oaning grain by warehousemen.’’ They ordered ^Ahat when charges are made to the board of directors that any warehouse¬ man has improperly loaned grain, not his own, stored in his house, that the same be investigated by the directors; and if such charge is sustained, the facts to be posted on the bulletin of the exchange. A system of registration of warehouse grain was also adopted, as a means of checking the operations of the elevators and protecting the grain placed in storage by members. For this reason the chief inspector was, in 1862, instructed ^Ao keep a record of the weight of grain inspected into and out of each warehouse, which record shall be open to the inspection of any member of the board during busi¬ ness hours * * 9G Complaints from shippers and dealers regarding the terminal warehouse service became so frequent during the next few years 83 Fifth annual report, p. 14. Sec p. 77. *9 Annual statement, 1863, p. 14. 8 ‘Idem. 92 TERMINAL GRAIN AIARKETS AND EXCHANGES. tliat an cfTort was instituted to secure State regulation. Legislation was urged by the Board of Trade and it was formally resolved on danuary 22, 1867: Tliat any action which may lie taken by the ,State legislatare toward placing the grain warehouses of this city under wholesome legal restrictions will meet with the unqualified approbation and the cordial sympathy and support of the board. Resolved, That copies of this resolution be sent to the legislature and that Cook County representatives be asked to act to secure the passage of a law which will give to the people ample protection from the abuses which have become so oppressive in connection with the warehouse system.^' The law which was passed in 1867 contained prohibitions designed to meet the causes of complaint. ‘'Public'’ and “private” ware¬ housemen were defined, the latter being forbidden to mix lots of grain belonging to different owners.^® Public warehousemen, in places where authorized inspectors should be appointed, were required to accept only inspected and graded grain, and the practice of mixing and conditioning grain for profit on the outturn was substantially forbidden. The fraudulent issuance of receipts was also forbidden, and parties interested were authorized to visit the warehouse and inspect stored grain. However, no agency was provided to enforce the account¬ ability of the operators, except that certain reports were to be made to the board of trade in Chicago: All persons keeping public warehouses in the city of Chicago shall file with the board of trade oif said city, on Tuesday of each week, a statement, showing the amount of each kind of grain in store in such warehouses up to the Saturday night preceding such statement, which shall be sworn to by the persons keeping such warehouses, or l.)y their agents, and shall be so made that the aggregate of such statements during the year will show exactly the amount of grain held in store during the year; and in case any person making such statement shall be guilty of false swearing he shall be and he is hereby made subject to the pains and penalties of perjury. The act of 1867 did not, however, adequateljM-^lieve the situation. The demand of Board of Trade operators’®®—particularly the future traders—was a leading influence toward the enactment of the warehouse provision in the Illinois constitution of 1870. S’ Taylor, vol. 1, p. 350. !■« Illinois Laws, 1867, p. 178: “It shall be lawful for public warehousemen to store grain in bulk and mix the grain of like kind and grade of different oAvmers, and the keepers of such public warehouses are hereby exempted from the provisions of this act prohibiting the mixing of the grain of different owners, which provisions apply alone to private warehousemen.” 89 Illtuois Laws,1867, p. 179: “Any public warehouseman or shipper of gram, who shall be guilty of mix¬ ing the different grades of grain in cars or warehouses or of selecting or causing to be selected choice lots of any particular grade, for the purpose of raising the grade thereof, or of placing the same in special bins, separate and apart from the grain of the same grade, save upon application of the owner of such identical grain, or shall be guilty of raising the grade of any grain, or causing the grade of any grain to be raised, so stored with him, as aforesaid, shall be deemed guilty of a misdemeanor * * 'w See Inaugural Address of President McCrea, 1870: “The business of dealing in wheat receipts in this market has grown to gigantic proportions, and not only our own members and citizens are interested, but also merchants at a distance are constantly investing large sums in these evidences of property. Surely, if it is possible to know it, it should be known that these issues are in every way proper and right, and it is no reflection on the integrity of the issuer of such receipts if he be asked to make as clear as possible the record of those issues.” THE CHICAGO JVIARKET AND THE BOARD OF TRADE. 93 Id siinimary, the following complaints had been made by the advo¬ cates of further elevator reform in Chicago in 1870 d (1) That there was an elevator ^Hnist’’ or ‘‘pooL’^ (2) That the elevator proprietors issued receipts for grain not in their possession. (3) That they traded in property held in trust so that no depend¬ ence could be placed upon the quality of grain presumed to be repre¬ sented by the warehouse receipts. (4) That elevator receipts did not correspond to the certificates of inspection for the same grain. (5) That certain railroads had refused to make switching con¬ nection whereby grain could be delivered to the elevators designated by consignors, and that consignees on existing sidings had been discriminated against in favor of railroad elevators. The constitutional provision of 1870 was designed to meet these enumerated evils. The act defined ''public warehouses” as "all elevators or storehouses where grain or other property is stored for a compensation, whether the property be kept separate or not. ”2 Each operator of such a warehouse was required to make a weekly statement under oath—- which statement shall correctly set forth the amount and grade of each and every kind of grain in such warehouse together with such other property as may be stored therein and what warehouse receipts have been issued, and are, at the time of making such statement, outstanding therefor and shall on the copy posted in the warehouse, note daily such changes as may be made in the quantity and grades of grain in such warehouse; and the different grades of grain shipped in separate lots shall not be mixed with inferior or superior grades, without the consent of the owner or consignee thereof.^ That is, the holder of a warehouse receipt was to be assured that grain of the grade designated was held for him in store. Further¬ more, the owner (or holder of the receipt) should "always be at liberty to examine such property stored, and all the books and records of the warehouse in regard to such property.” The most important restriction upon the railroads appeared in section 5 of the same article: All railroad companies receiving and transporting grain in bulk or otherwise, shall deliver the same to any consignee thereof, or any elevator or public warehouse to which it may be consigned, provided such consignee or elevator, or public warehouse can be reached by any track owned, leased, or used, or which can be used, by such railroad companies; and all railroad companies shall permit connections to be made with their trackj so that any such consignee and any public warehouse, coal bank or coal yard, may be reached by the cars of said railroad. The constitutional provision was made effective by the warehouse act of 1871 which established the Illinois Kailroad and Warehouse * Taylor, vol. 1, p. 397-400, quoting from Chicago Times and Tribune. * Art. 13, sec. 1. •Amendment to Constitution, 1870, sec. 2. 94 TER.MIXAL GRAIX MARKETS AKD EXCHAKC4ES. Commission. Tlie legislature went a step further than had ]>een contemplated by the Board of Trade in that grain inspection was also placed within the jurisdiction of the new commission. Public warehouses” were divided into three classes, class A applying to “cities having not less than 100,000 inhabitants” and therefore to Chicago. This class embraced all houses “in which grain is stored in bulk, and in which the grain of different owners is mixed together, or in which grain is stored in such a manner that the identity of different lots or parcels can not be accurately preserved.”^ The act required the operators of public warehouses to be licensed by the cAcuit court and to file a bond with the clerk of the court in the penal sum of $10,000." Grain was to be received as tendered for storage and it was required that— each ‘‘receipt shall bear date corresponding with the receipt of grain into store, and shall state upon its face the quantity and inspected grade of the grain, and that the grain mentioned in it has been received into store, to be stored with grain of the same grade by inspection, received at about the date of the receipt, and that it is deliverable upon the return of the receipt, properly indorsed by the person to whose order it was issued, and the payment of proper charges for storage.” ^ Detailed regulations were prescribed to meet the evils of fraud¬ ulent issuance of receipts. Weekly statements of grain in store were required to be posted in the warehouse and both daily and weekly reports to be rendered to the warehouse registrar showing in detail the receipts and shipments of each grade of grain and a complete record of each receipt issued or canceled. And the warehouseman making such statements, shall, in addition, furnish the said registrar any further information, regarding receipts issued or canceled, that may be necessary to enable him to keep a full and correct record of all receipts issued and canceled, and of grain received and delivered.' The Board of Commissioners of Railroads-and Warehouses which was set up had full authority over the chief inspector of grain and the State warehouse registrar. Parties injured through violations of this act were authorized to sue the warehouseman upon his bond. And— In all criminal prosecutions against a warehouseman, for the violation of any of the provisions of this act, it shall be the duty of the prosecuting attorney of the comity in which such prosecution is brought, to prosecute the same to a final issue, in the name of and on the behalf of the people of the State of Illinois.^ It may be observed that a conspicuous feature in the history of grain elevators in Chicago is the concentration of control which has frequently existed; that is, a close commmiity of interest between the larger houses, fortified by 'agreements with the railroads. It has been noted that four firms controlled more than two-thirds of the < Illinois Public Laws 1871-1872, p. 762. 6 Secs. 3 and 4. 6 Idem, sec. 7. 7 Idem , sec. 12. «Idem. sec. 23. THE CHICAGO MAEKET AXD THE BOAED OF TEADE. 95 storage in 1870. The liistory of the board during the year 1872 as related by Taylor throws additional light upon this group. In the latter part of September, Mumi f a cent a bushel and immediately resell the same to a private buyer at a quarter of a ccjit less than they paid, exacting storage, which more than balances their loss. In this way they use their business as warehousemen to drive out competition with them as buyers. It would be idle to expect a warehouseman to perform his duty to the public as an impartial holder of the grain of the different proprietors if he is permitted to occupy a position where his self-interest is at variance with his duty. In exercising the public employment for which he is licensed he can not be permitted to use the advantage of his position to crush out competition and to combine in establishing a monopoly by which a great accumulation of grain is in the hands of the warehousemen, “ Central Elevator Co. v. People, 174 III., 203, 1898. 21 Idem, p. 205. THE CHICAGO MARKET AND THE BOARD OF TRADE. 101 liable to be suddenly thrown upon the market whenever they, as speculators, see profit in such course. The defendants are large dealers in futures on the Chicago Board of Trade and together hold an enormous supply of grain ready to aid their opportunities as speculators. The warehouseman issues his own warehouse receipt to himself. As public warehouseman he gives a receipt to himself as individual, and is enabled to use his own receipts for the purpose of trade and to build up a monoply and destroy competition. That this course of dealing is inconsistent with the full and impartial performance of his duty to the public seems clear. The defendants answer that the practice had a beneficial effect upon producers and shippers, and naturally were able to prove that when, by reason of their advantages, they were overbidding other dealers, there was benefit to sellers, but there was an entire failure to show that ^ in the general average there was any public good to producers or shippers. The answers also set up, and it is claimed here that there was at the time of the passage of the warehouse act a general custom of warehousemen to deal in grain, and to store it in their warehouses, and that the law was passed with reference to that existing custom. The evidence fails to establish any such custom. The amount so bought and stored or dealt in up to the year 1885 was trifling, and the first time Avhen there was any material increase was in 1890. Many witnesses who would have known if such a practice or usage existed united in denying all knowledge of it, and many of them testified that they never knew or heard of any elevator owner buying or selling grain prior to 1885. There w'as no such custom. Finally, it is claimed that there has been a practical construction of the law by the warehouse commissioners, peimitting the practice complained of. There was a little buffing and storing of grain by warehousemen from time to time, but it was so insignificant as to call no attention to it until in recent years. * * * If the com¬ missioners were derelict, it would not bind the public, and indifference on their part could not have that effect. * * * The decree of the circuit court is affirmed.: Even while the appeal was pending in the Central Elevator case an attempt was made to render the court’s action nugatory by the passage of an act in the general assembly of 1897, amending the warehouse act of 1871 so as to legalize the specific practices forbidden by the injunctions of the circuit court. The passage of this act made it necessary for the opponents of the elevator interests to institute new proceedings. Accordingly, contempt proceedings were brought against a member of the firm owning the Central Elevator Co. The Circuit Court of Cook County (Judge Tuley presiding) held the statute of 1897 to be unconstitutional and fined the defendant $100 for contempt of court. This case was reviewed by the supreme court of the State in Hannah v. the Peojiler^ The court took the same ground as in the provious decision and upheld the language of that decision. Proceeding further, they said: It was manifestly beyond the power of the general assembly, by th-e enactment of the amendatory act of 1897, to relieve public warehousemen of a duty charged upon them by the provisions of the constitution of the State or to remove the inhibi¬ tion clearly implied by the organic law. The constitutional remedy of protection is that the warehousemen shall act only as a trustee for others, and the producers and shippers shall not be subjected to the danger of loss through the pressure of personal interest of the tnistee to wrong them. ‘2 51 N. E., 250-257. 22 Illinois Laws 1897, p. 302. 2< 198 Illinois, 77, 1902. 102 TER^kllNAL GRATX MARKETS AKD EXCHANGES. No question is presented by this record, as to the right of a public warehouseman to store his own grain in vacant places in his own warehouse where the space so vacant was not occupied and not needed for the storagb of grain of customers of the ware¬ house. That which the warehouseman here seeks to do and which the court ha.s prohibited from being done is the mixing of the grain of the keeper of a public ware¬ house witli that of his customers, and issuing and dealing in certificates or warehouse receipts representing a mass of grain composed of that of the keeper of the warehouse and of his customers. No question of an infringement of a right secured by the Con¬ stitution of the United States is involved in that controversy. This decision estahlislied the present practice in Chicago whcre])y public warehousemen are permitted to store their own grain in special bins, hut arc forbidden to mix such grain with that of their customers. In 1899 approximately 25 per cent of the grain received at the Chicago market was handled by public licensed elevators, the rest passing into private storage,^^ and the ratio has increased in favor of the private elevators. The statutory restrictions upon mixing and conditioning grain, the regulation of storage charges, and the annulment of the act of 1897 led many elevators (about 1899) to cancel their licenses and operate as private houses. The operators pointed out that cleaning machinery was allowed in public elevators in Minneapolis and Duluth and declared that unless this were allowed in Chicago they could more profitably operate on a private basis."® There has been a corresponding decline in the number and capacity of regular elevators until in 1918 these elevators included only about 20 per cent of the storage capacity of the market. This decline in regular elevator storage appears in the table below. Table 33 .—Total elevator warehouse capacity at Chicago, relative storage capacity of houses declared regular, of houses operated on a private^’ basis, and of houses operated wider the custodian rules, 1902 to 1918, inclusive. (In I)usliels, OOO’s omitted.) Total Regular warehouses (under Board of Trade rules). elevator capacity Chicago district. Number of ■ware¬ houses. Niunbcr of oper¬ ating com¬ panies. Capacity, bushels. Per cent of total capacity. 1902.. . 57,720 17 10 27,250 20,750 21,950 22,800 22,000 47.21 1903. 57 ; 150 03,480 61,655 10 11 46.81 1904. 13 7 34.58 1905. 14 8 36.98 1900... 53,355 13 8 41.23 1907. 58,645 53,945 13 9 22,500 19,000 18,100 17,100 18,275 38.37 1908. 10 7 35.22 1909. 5i;045 50,845 46,640 ' 45,265 9 6 35.46 1910. 9 5 33.63 1911.. 11 5 39.13 1912. 10 5 17 ; 730 17,730 17,730 14,030 14.530 12.530 11,700 39.17 1913. 45,375 10 5 39.07 1914. 50,375 10 5 35.20 1915. 47,135 10 5 29.77 1910. 50,420 5.5,236 57,305 11 5 28.81 1917. 9 4 22,68 1918. 8 4 20.42 2' Report of U. S. Industrial Commission, Vol. IV, p. 408. 24 Idem, p. 411. 103 THE CHICAGO MARKET AXD THE BOARD OF TRADE. Table Total elevator u-archoiise capaciUj at Chicago, relative storage capacity of houses declared regular, of houses operated on a ^^inivate’’’ basis, and of houses operated under the custodian rules, 1902 to 1918, inclusive —Continued. PriA’atc AA'arehouses (i. e., not declared regular). Number oi)eraled under custo¬ dian rule. Number of oper¬ ators. Capacity, bushel. Per cent of total capacit y Number of pri- A'ate ware¬ houses. Number of oper¬ ators Capacity, bushels. Per cent of total capacity. 1902. 57 45 30,470 52.79 1[K)3 . 52 39 1 30,400 53.19 ■ ■ 190-1 70 51 2 41' 530 65.42 1905 . 05 49 3 38' 855 63.02 . 190(; . 58 47 < 31' 355 58.77 U)07 67 52 3 36' 145 (;i. 63 1908 . 05 51 3 34,945 fd.78 1909_ 63 49 32' 945 64.54 1910 . 62 48 33,745 66.37 1911 . 57 43 28^365 60.82 1912 . 55 39 27' 535 60.83 1913 51 36 27' 645 60.93 1914 . 54 39 32' 645 64.80 1915 . 56 41 7 33' 105 70.23 1916 72 55 35' 896 71.19 1917 . 71 54 3 42' 706 77.32 1918. 59 26 45 ; 605 79.58 31 19 32,260 50.51) \ 1 Three private elevators with an aggregate capacity of 2,060,000 bushels were closed during 1904 and are not included in this total. One private elevator with a capacity of 400,000 bushels which was omitted from the tabulation in the Chicago Board of Trade Year Book (1904) is included here. 2 Five elevators with an aggregate capacity of 2,290,000 bushels closed during 1905 arc not included in this total. One elevator Avith a capacity of 400,000 bushels is included which was omitted from the published list in Chicago Board of Trade Year Book 1905. 3 Eight eleA'ators with a total capacity of 5,365,000 bushels closed during 1906 not included in total. < Two elevators Avith a total capacity of 300,000 bushels closed diuing 1907 not included in total. 3 Two elevators Avith a total capacity of 300,000 bushels closed during 1908 not included in total. «Includes tAAm elevators with a total capacity of 365,000 bushels for which no operators were reported. ' One elevator Avith a total capacity of 150,000 bushels for which no operators were reported. « One eleA'-ator Avith a total capacity of 550,000 bushels for Avhich no operators Avere reported. As the table shows, about 80 per cent of the elevator storage capacity at Chicago in 1918 was operated on a private basis. Two important features of the elevator situation have been (1) the ownership of over 21,000,000 bushels storage (rated capacity) by Chicago board members in other markets and (2) the fact that fully GO per cent of the aggregate private storage capacity has been included in houses leased from railroads. The CUSTODIAN system. —A unique plan to provide public storage for receivers of grain was inaugurated in Chicago in 1911 by the establishment of the custodian department. Table 33 shows the relative increase in private elevators at Chicago during recent years. As already stated, the bulk of the grain placed in storage has been increasingly handled by private elevators, with the consequence that prior to 1911 there was no protection to the seller of the grain against the financial failure of an elevator buyer after delivery and before he had paid the purchase price. The condition was stated by the secretary of the board in 1914 as follows: For many years all grain arriving liere and unloaded in elevators was stored in public eloA^ators, Avhicli Avere bonded to and licensed by the State and tlieir Avarc- liouse receipts registered by the State. Under these conditions the seller retained full control of the grain and receiA od the receipt and therefore assumed no risk of failure of the buyer. Some years ago. hoAveA'er, the priAute eleA ator industry began making very large inroads on this business, and now proliably 90 per cent at least and perhaps 104 TEKMIXAL GRAIX AlARKETS AXD EXCHANGES more of all grain arriving here goes into private elevators, and through the failure hrst and last of three or four important firms operating private elevators large losses to our receiving merchants were sustained. Furthermore it was desired to secure the validitv of warehouse A/ receipts issued by private elevators as collateral security. Public elevators had been under bond and supervised by the State; and there were certain guaranties that the warehouse receipt repre¬ sented a delinite quantity and grade of grain held in safe custody for the owner. These guaranties were lacking in the case of eleva¬ tors whose operators were constantly merchandising the grain Avhich they held in store. Accordingly a rule was adopted by the association in 1911 authorizing the board of directors to establish a custodian depart¬ ment whereby an officer of the Board of Trade should assume trustee¬ ship, as agent of the seller, to hold possession of any and all com¬ modities placed in his care and control until the purchase price of the same is paid. * * *”• Under this authority the chief weighmaster was made custodian and placed under a bond of 140,000. His assistants were also bonded in the sum of $5,000. Detailed regulations were adopted-® including the form of cus¬ todian certificate to be issued to the owner of the grain: ’7 Rule IV, sec. 22. 2 * The regulations in force July 21, 1919, were as follows: I. A custodian duly appointed by the board of directors shall be placed at such private elevators or other buildings or places of private ownership as the custodian committee shall deem necessary and such custo¬ dian shall keep a daily record containing the official board of trade weights of all commodities dealt in under the rules of the association and weighed by the official board of trade weighmaster which commodities have been unloaded into or loaded out of such private elevators of other buildings or places of private owner¬ ship. II. When any of such commodities shall be unloaded as above provided, the custodian shall promptly issue and deliver to the party for whose account the same is unloaded an official certificate as evidence of such unloading, except in cases where the commodity is loaded out in whole or in part on the same day as received, in which case the custodian shall procure the shipping receipt or bill of lading given for such property, and shall deliver the same to such party with a certificate for such quantity that is not loaded out—the two together representing the entire quantity unloaded. III. The custodian shall not allow the loading out of any commodity from such private elevators or other buildings or places of iwivate ownership, except as provided in the second of these regulations, until the proprietor or manager thereof shall surrender to him for cancellation official certificates properly indorsed equal to the amount of the commodities to be loaded out and such commodities shall be weighed by the weighing department of the Board of Trade of the City of Chicago. IV. The custodian shall estimate daily the amount of shrinkage incidental to the handling, cleaning, or clipping of grain; also of any variation between the “in” and the “out” weight and report same at once to the proprietors or managers, and it shall be their duty to surrender to the custodian certificates for can¬ cellation sufficient to cover same. It fuqher shall be the duty of the proprietors or managers to keep in store at all times in excess of all outstanding certificates a quantity equal to at least .3 per cent of the total quantity in store represented by outstanding certificates in addition to the estimated amount of shnnkage, as hereinbefore provided. V. In such places where the commodities herein described arc manufactured into products or the original commodity' otherwise changed in form, the custodian may permit the proprietors or managers thereof to use such commodities without the surrender of custodian certificates for the same whenever the said pro¬ prietors or managers shall furnish to said custodian vritten evidence of the consent to such use by the party for whose account the said commodities were unloaded: provided, however, that the custodian shall not issue any certificates for commodities used under such circumstances. I. It shall be the duty of the custodian to require the official weighing of all commodities in each and every private elevator or other building or place of private ownership hereinbefore described by the board of trade weighmaster as often as in his judgment may be needful to enable him to accurately determine the iatided by either party, not to exceed 10 per cent on the value tlie property bought or sold on the day such margin is dema.nded, said margin to be deposited with the treasurer of the association unless otherwise agreed upon.’’*^ Either party was made liable to a call for additional margin from time to time as deemed necessary from the condition of the market. In fact, this initial rule embodied the features which appear in greater elaboration in Kule XX of the C’hicago board to-day. (2) On ^Tailure to deliver on contracts’’ the average market price of the next business day was to be used to determine the value of the property. (3) The third rule defined the time limits for delivery after a “cah” was made. By these rules the exchange formally adopted trading in futures as a regular market practice. The matter of adjusting balances and settlements, especially on defaulted contracts, was a vexatious question for many years. Prior to 1875— it was in the power of combinations or of an individual, under circumstances which 1 were found quite too frequently to exist, to extort damages on account of the non- ^ fulfillment of a contract entirely out of ])roportion to the damages really sustained, j The practice of manipulating our markets to effect these selfish ends had in some | cases developed to such proportions that it had come to threaten the good name of'^ our association * * In 1875 the rules applicable to the deposit of margins and the adjustment of balances were modified more in conformity with present practice (see Ch. V, sec. 17) and less trouble was experienced. Opposition to future trading. —Chicago future* traders were first called upon to defend their practices in 1867 when certain an¬ tagonistic clauses were inserted in the' warehouse act (presumably hy representatives of the elevator interests whose operations had been condemned by exchange traders): All contracts for the sale of grain for future delivery, except in cases where the seller is the owner or agent of the owner of such grain at the time of making the con¬ tract and in actual possession thereof, are hereby declared void and gambling con¬ tracts, and all money paid in settlement of differences on any such contracts may be recovered'back in the same manner as other money lost in gambling. <9 Seventh annual statement, p. 7. Published in appendix to annual report, April, 1869, p. 1G3. « Quoted in Taylor Vol. I, p. 331. « Directors’ report, Jan. 1, 1876, p. 23. # 110 TERMINAL GRAIN MARKETS AND EXCHANGES. All parties to any such gambling contract shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be fined one thousand dollars and imprisoned not exceeding one year in the county jail, and one-half of said fine shall go to the informer, who is hereby declared to be a competent witness on the trial of parties indicted under this act/^ On the advice of counsel these sections were ignored by the hoard members and trading in futures j^roceeded as usual. This was fol¬ lowed by the spectacular arrest of nine traders on a charge of gam- hlinof.'^^ Prosecution was withdrawn, however, and the sections re- ferred to were repealed at the next session of the legislature.^® The present legal status of future trading is discussed in Volume V, Chapter VII. Corners."*^—A n ineffectual attempt to regulate cornem was made in 1868 when the board passed the following resolution: Resolved, That the practice of '‘corners,” of making contracts for the pui'chase of a commodity, and then taking measures to render it impossible for the seller to fill his contract, for the purpose of extorting money from him, has been too long tolerated by this and other commercial bodies in the country to the injury and discredit of legiti¬ mate commerce; that these transactions are essentially improper and fraudulent, and should any member of this board hereafter engage in any such transactions, the directors should take measures for his expulsion, under the provisions of rule 5, for the preA'ention of improper and fraudulent practices.^® Corners were also prohibited and severely penalized by the law of 1874, but this act failed of enforcement. According to Taylor, there was ^ ‘ almost a corner a monthduring the latter half of 1874. No less than four members were alluded to by the press during that year as violators of the law against corners.-® In 1875 the rules were amended so as to prevent the collection of extortionate damages on defaulted contracts.®® Since that date, however, corners and attempted cor¬ ners liavc occurred repeatedly^ on the Chicago Board of Trade without a move on the part of anyone to invoke the statute of 1874.®^ The history of the anticorner rule at the close of 1882 was reviewed by the Chicago Tribune as follows: The first attempt at preventing the reoccurrence of disastrous corners was made in 1873. The rule then adopted provided substantially that the committee called in cases of default should fix the price by reference to the value in other markets. This was found to be unfair to the buyer of property, tending to an undue lowering of prices, and July 24, 1879—three and a half years ago—the board adopted the well-known "Rule 27,” after having A'oted it down in April, 1878. That rule increased the ■n Public Laws of Illinois, 1867, p. 181. Taylor, Vol. I, p. 352. <6 Ibid., p. 352. For detailed discussion of economic aspects see Vol. V. <8 Taylor, Vol. I, p. 371. Taylor, Vol. I, p. 506. 80 See directors’ report, year ending Dec. 31, 1875, p. 23. 81 See in this connection Wells v. McGeocli, 71 Wis. 196, (1888), in which the Supreme Court of 'Wisconsin said: “AYe hai'e no doubt the county court ruled coiTcctly that the wheat deal of 1882 and the lard deal of 1883 were illegal transactions imder the statutes of the State of Illinois.” THE CHICAGO MAIIKET AND THE BOAKD OF TRADE. Ill power of the committee by authorizing them to take into consideration (also) the value of the property for other purposes, meaning its value as determined by a demand to fill contracts. The rule was equitable enough in spirit, and was interpreted fairly enough till within the last 12 months. * * * One great evil connected with this matter has been the holding back in numerous cases, refusing to cancel trades, because a committee might possibly be called, and award a more favorable basis of settlement. This as well as the construction of the rule by committees, involved much loss to innocent traders. Many parties lost money standing in the gap on deliveries long after they had balanced the transaction witli customers. Nobody was certain that anyone else was going to deliver what he had agreed to, and uncertainty led to the paying of rather large premiums on spot stuff which was delivered as agreed, the demoralization not having extended to this class of transactions. The second sense of the board seems to be opposed to the blotting out of corner rules. It is desirable that there should be some means of protection accorded for men who arc not to blame for omitting to deliA'cr. But there should be no inducement to default deliberately. * * * 52 The validity of the statute of 1874 with reference to corners was tested in 1894 in the case of Cummings v. Foss. Foss was a member of the board who had formed a syndicate with several others, in¬ cluding Cummings, whereby they expected to control the corn market and run up the price.Foss, Strong & Co. were given powers of attorney by several of the parties to manage and control the contracts of purchase. The agreement was as follows: Grand Pacific Hotel, Chicago, April 4, 18SS. This agreement, made and entered into this 4th day of April, 1888, between C. M • Hartley, Hall & Ross, S. B. Walton, R. F. Cummings, Moore & Bushnell, Union Grain Co., O. Barnard, Curtis & Bowman, D. A. Fredericks, W. 8. Rankin, J. Shonk- wiler and the Rice Elevator Co., in which the parties herein named agi’ee to and with each other to form a sjmdicate, for the purpose of buying cash corn and May options in corn in Chicago, from time to time as the majority may decide; each of the above- named parties agree to advance the sum of $5,000, for each full share or a fractional part of same for a fraction of a share, by cash or certified check, for the purpose of pro¬ tecting, carrying or otherwise handling said purchases of cash corn and May options in corn from time to time, it being further agreed that C. W. Hartley, Tim Ross, H. L. Bushnell, and S. A. Brown act as an executive committee for said syndicate, and that we shall be responsible only for the amounts subscribed by each of us from time to time; that all gains or losses shall be divided pro rata to each share or a fractional part of a share; that said executive committee shall have full authority to act for us and purchase cash corn and May options, and sell same to the extent of the authority given to them by us from time to time, for which we are to be held responsible only for a share, or a fractional part of a share pro rata. A majority vote, vive voce, or telegraph, shall constitute valid instructions. The enterprise was unsuccessful and Foss et al. became plaintiff- appellants in an action before the Illinois Afipellate Court for the First District, “ to recover mone 3 ^s alleged to have been advanced, and serv- Quoted in Taylor II, pp. GoO-051, M 40 Ill. App. 521. ^<40 Ill. App. 52.3. 112 TERMINAL GRAIN MARKETS AND EXCHANGES. ices rendered in aid of such a combination/^ The court made the following finding of facts: ^ * all the immense amount of corn owned by these parties was put into the hands of the plaintiffs; they were to control all, and thus by united holding, united purchases, and no sales, save such as should be for the benefit and the interest of all, the market was to be controlled, the price of a staple commodity, one of the prime necessities of life, enhanced, and it was expected great gains would be made by the parties to the combination, while he who had corn to buy for food would be compelled to pay, not the price of a free market, but the sum to which, by such combination, such united holding and withholding, the market might be forced. (40 Ill. App. 530). It was held that there had been created a combination against ])ublic policy which was, therefore, void. ‘'The law,’^ said the appellate court, “will not attempt to adjust differences which arise out of transactions it condemns.’’ This decision was affirmed by the court of last resort in the State. The lower court had not found it necessary to construe the anti¬ corner law of 1874 in declaring the contracts in question void and unenforceable. The Supreme Court of Illinois, however, while holding that there was a combination “to advance the price of corn beyond the natural market” which “the law condemns as against public right and void,” also took occasion to invoke the statute of 1874: Our statute makes it a penal offense to “corner the market, or to attempt to do so,’^ in relation to any grain or other commodity, and declares all contracts made for that purpose void. (Rev. Stat. Sec. 130, c. 38.) We are unable to distinguish the combi¬ nation between these parties, as found by the appellate court, from an attempt to corner the Chicago market in relation to corn. Practically, it is that, and nothing else.^“ In spite of court decisions, and exchange regulations, corners were effected on the Board of Trade during practically every market season, 'ITe decline in regular (public) storage capacity in recent years has of course operated to the advantage of market manipulators. The difficulties of the situation ajDpear in a description of one of the 1909 deals, taken from Taylor’s History:” The Armour and Peavey elevator interests were long large lines of September oats and continued buying until the shorts became panic-stricken, notAvithstanding the largest crop ever raised had just been harvested. The bull leaders, however, bought the cash oats as fast as they Avere offered in the sample markets and buoyed up cash A'aliie. During the last few days of September the situation became extremely acute, and prices Avere forced up rapidly, the shorts paying a heavy penalty for their temerity in staying short. Excitement in the oats pit on the final day was at fever heat. The Peavey and Armour interests stood pat on their remaining holdings until shorts bid the price up to 50 cents, at AAdiich figure they Avere accommodated. Later the price eased off to 48 cents, Avhere it closed after lluctuating erratically during the latter part of the session. All the trades settled up in good shape, there being no defaults recorded. Complaints were made to the directors of the board of this eleventh hour squeeze, and a committee was appointed to investigate. This special committee « 40 HI. App. .')32. •^30 N. E. Reporter, .wo. Vol. II, p. 1148. 113 THE CHICAGO MARKET AND THE BOARD OF TRADE. jeported near the end of October, but made no recommendations to the directors, merely laying before them the information they had got. After considering the report of this committee, the directors posted for vote of the members an amendment providing for the expulsion of members from the board who engineered corners or manipulated the markets, but this ‘‘anticorner” amendment was defeated, and so the directors, on December 21, as an example of their disapproval of corners, sus¬ pended from the board for one day Mr. George E. Marcy, president of the Armour Grain Co., and Mr. James Pettit, president of the Peavey Elevdtor Co. In 1911 there was adopted a drastic amendment to Rule 23 designed to protect the short interests in a market manipulation. * * * It provided that the principals in any big deal on the board of trade be allowed to collect not less than 5 per cent, nor more than 10 per cent of the true 'commercial value of the commodity dealt in, thus preventing a squeeze when con¬ ditions did not justify high prices and giving the shorts the right to settle at the fair, market price, plus the liquidated damages of not more than 10 per cent. The rule provided that the settling price should be fixed by a committee of three, appointed by the president, the members of which should take into consideration the cash price in Chicago on the last day of the month, prices in other markets for cash grain, and also for futures; whereas, theretofore, the rules had provided that the average price of a future should be the settling price for the day.®® This is the rule in force to-day.®^ Trading in privileges—puts and calls—indemnities—bids AND OFFERS.®®— The buying and selling of ''privileges/’ sometimes referred to as "puts and calls/’ or "indemnities/’ was denied recog¬ nition in the very rules which established trading in futures in 1865.®^ This prohibition was, however, dropped from the rules as published in 1869.®2 Such trading was declared unlawful by State law and a Federal court in 1874. The law of 1874 declared that: Whoever contracts to have or give to himself or another the option to sell or buy, at a future time, any grain, or other commodity, stock of any railroad or other company, or gold, or forestalls the market by spreading false rumors to influence the price of commodities therein, or corners the market, or attempts to do so in relation to any of such commodities, shall be fined not less than $10 nor more than $1,000* or con¬ fined in the county jail not exceeding one year, or both; and all contracts made in violation of this section shall be considered gambling contracts, and shall be void.®® In Ex parte Young ,decided by the Federal district court for the northern district of Illinois (1874) a motion was made by an assignee in bankmptcy to expunge certain claims derived from the sale of Taylor, Vol. II, p. 1164. Rule 23, sec. 1; rules of the Board oT Trade, in force July 21, 1919. “ See definition on p. 332. *'> According to Taylor (I, p. 332) the last paragraph of Rule XI was as follows: “Privileges bought or sold to deliver or call for grain or other property by members of the Association shall not be recognized as a basiness transaction by the directors or committee of arbitration.” « See appendix to Annual Report of vhe Board of Trade for 1869. Revised Statutes, Ill., 1874, p. 372. 6 Bissell’s Reports, p. 53. 108603°—20——8 114 TERMINAL GRAIN MARKETS AND EXCHANGES. ^ Splits” Oil the ground that they were wager contracts and so void under the gaming laws. The court ruled in favor of the assignee: " * * It seems to me that the contracts in question partake of all the character¬ istics of a wager. It is in substance an assertion by the seller of the ‘‘put” that oats can not be purchased on that market before 3 o’clock p. m. of the 30th of June for less than 41 cents a bushel, and an undertaking to pay the difference between 41 cents and any market price. If he, Chandler,^’^ sustains the price at 41 cents or aboAn*, he wins the half-cent a bushel paid for the “ put, ” because the holder Avill not deliver, Avhile if the price goes t)elowdhat named he is to pay the difference. This is prac¬ tically the contract. It is as manifestly a bet upon the future price of the grain in (question as any which could be made upon the speed of a horse or the turn of a card. The evidence in this case shows that in nearly all the cases of settlements on “put” or “option” contracts the grain is never delivered, nor expected to be delivered, but the parties simply pay the difference as settled by the prices. But, if that were not so in all cases, it i.s clear that in this case no delh'ery of the grain Avas intended by these “put” holders, because they kneAV that Chandler controlled all the oats in the market and fixed the price, and that their only expectation for success depended on their being able to break the market before their time for deln’ery expired. - * * In AA'liat I luiA’e said I do not intend to A'indicate Chandler. His conduct Avas as reprehensible as that of the claimants. All A\'ere engaged in an immoral and illegal transaction, and this court ought not to alloAv its poAvers to be prostituted to the enforcement of these contracts for either party. Money lost at play or in gaming can not be recoA^ered except Avhere an action is given by statute, but, as I liaA'c already intimated, my opinion that these cases are Avithin the statute of this State on the subject of gaming, under which money paid may be recoA'ered back, I shall allow the claimants to prove their claims for the amounts actually paid by them respectHcly, Avhich is a half cent per bushel on the grain named on their tickets. The statute of 1874 in its application to ^^piits’^ and calls” was scarcely enforced at all; although the directors of the board liad adopted at least one resolution to prohibit the buying or selling of Splits” or ^^calls” on the exchange floor.®® However; in February, 1885; privilege trading was placed definitely within the prohibitions of the statute by the decision of the Illinois Supreme Court in the case of Pearce v. Foote. Action was brought to recover the value of a promissory note from the assignee of a broker to whom the note had been transferred in payment of losses incurred in the execution of an optional contract,” i. e.; one involving privilege trading. The trial court held that the broker was a ^Svinner” within the statute of 1874 (section 130 of the Criminal Code), and that action would lie. This judgment Avas affirmed. on subsequent appeals to the appellate and supreme courts of Illinois. The opinion of the supreme court served to define more clearly trading in ^Options” or ”'puts and calls” and showed the illegitimate status of such trading in Illinois laAAX The bankrupt, Taylor, A’ol. I, p. 530. 115 THE CHICAGO MARKET AXD THE BOARD OF TRADE. It is pliiin that uiidor the contract between plaintiff and the firm of Hooker & Co., it was not in the contemplation of the parties any actual purchases or sides of grain or other commodities should be made for plaintiff, or on his behalf. Indeed, it wa.s expre.ssly agreed none should bo made. All the speculating that was to ))e done was to be in differences in options—or, as the parties termed it, '"betting on the market.” Of course it was exj)ected hy the parlies that such purchases and sales of grain or other commodities that should be made, were to be made oji the board of trade. As was said by this court in Pixlej/ v. Boynton, 79 Ill. 351, the true idea of an option is what are called, in the ])eculiar language of the dealers, “puts” and “calls.” A “])ut ” is defined to be the “privilege of delivering or not delivering” the thing sold, and a “call” is defined to be the “privilege of calling for or not calling for” the thing bought. “Optional contracts,” in this sense, are usually settled by adjusting market value.s, as the party having the “option” may elect. It is simply a mode adopted for speculating in differences in market values of grain or other commodities. It must have been in this sense the term “option” is u.sed in the statute. “ * It needs no illustration to make it apparent the contract between plaintiff and Hooker & Co., as the trial court must have found it from the evidence, comes exactly within the meaning of section 130 of the Criminal Code, that declares; “Whoever contracts to have or to give to himself or another the option to sell or buy at a future time any grain or other commodity,” shall be subject to a fine or imprison¬ ment, and “all contracts made in violation of this section shall be considered gambling contracts, and shall be void,” It is seen this statute forbids anyone to contract to have, or to give to himself, or to contract to give to another, the privilege to deal in options. That is precisely what hlooker & Co. did. They contracted to give to plaintiff the privilege to deal in oj)tions and settle with them upon differences, as indicated or determined by the fluctuations of the market. That is one of the offenses against which the statute is leveled. Of course the party who contracts to liore the option is equally guilty with the party who contracts to (jkc it. * * * Legithnate transaction.-^ on the board of trade are of the utmost importance in c'ommerce. Such contracts, whether for immediate or future delivery, are valid in law, and receive its sanction and all the support that can be giA'cn to them. It is only against unlawful “gambling contracts” the penalties of the laws are denounced, and no subtle finesse of construction ought to be adopted to defeat the end it is to be hoped may be ultimately accomplished.^''^ Another resolution forbidding tlie practice was adopted by the directory of 1887 and a member was suspended for 15 days for viola¬ tion of the rule. It was learned that members were resorting to the Open Board of Trade for this sort of trading, where it was then permitted. The regular board assumed jurLsdiction of the conduct of members even when operating on the open board and seven members were suspended (for from 20 to 90 days), among tliem, the president of the Open Board.A rule declaring irregular any trades made after adjournment was then posted and adopted by the regular board. Again, in 1888, when tlie directors proceeded to suspend three traders for dealing in puts and calls ^‘it was found that it would be im])o.ssiblc to punish all without disrupting the exchange.” Accord¬ ingly, twenty-nine members were reprimanded, the suspended Pearce v. Foote, 11.'! III. 2!-l. Idem, p. 2I.j. Taylor, vol. II, 7!1. Idem. TERMINAL GRAIN MARKETS AND EXCHANGES. lib members were restored and secret committees were appointed to report further violations, which were to be punished by expulsion.’’^- However, trading in privileges off the exchange floor, it seems, liad never entirely ceased, and it increased with the failure to enforce the rule. Taylor, in commenting upon the market in 1892, states that ^Tor a time the market was dull and privilege trading grew to such an extent that there was serious consideration of a project to establish a clearing house especially for these deals, but outside the ])oard of trade, which did not recognize such transactions.'^^ In his inaugural address in 1895 Mr. Baker, president of the board, advocated immediate enforcement of the rules against trading in privileges: Trading in privileges has become so common outside of exchange hours as to impair the good name of the association. These transactions are outside the law and are distinctly obnoxious to your own rules. They can not be enforced either in the courts or under the rules of this b 3ard, and anybody can sue at any time and recover for even consequential losses. The Illinois statute prescribes penalties of fine and imprison¬ ment for making such contracts, and specifically declares that all such contracts “shall be considered gambling contracts and shall be void.” It is claimed that the dull state of trade makes these transactions necessary, but do they not contribute to an important extent to the very stagnation you complain of? By coopering prices within a iiarrow limit day after day, do you not discourage busine.ss that you would count on in a free and unrestricted market? The risks assumed by you as commission merchants are beyond computation, and more than all else in making these transactions we violate the law. I sincerely urge that means may be taken to put an end to the practice at once.'^ The posting of a proposed rule to define trading in privileges as uncommercial conduct provoked a sharp controversy within the exchange membership. The defeat of this rule was followed by the resignation of two directors and also of Mr. Baker. These resigna¬ tions were withdrawn and the directorate finally succeeded in enforc¬ ing the rule against trading after hours; but it was very apparent that a substantial number of traders were still interested in privilege trading."^ Booth v. People. —-Trading in privileges persisted with varying frec[uency among members of the board (usually off exchange) for many years.'^® In 1900 there had been such a change of sentiment with regard to this trading that ‘‘by a vote of 623 to 373 the directors were em¬ powered to prevent trading in puts and calls and to suspend or expel a member found dealing in them. ” This ruling might have had '2 Taylor, vol. 11, 771. 23 Vol. II, p. 856. "i* Annual report for 1894, p. 69. 23 See Taylor, vol. II, 895-897. 2® See Taylor, Vol. II, p. 977: ‘'A .somewhat extensive trading in privileges had again grown up (1899) but this was largely confined to operations after the close of the board’s session in a room at 28 Sherman Street.” 22 Taylor, vol. II, p. 1002. THE CHICAGO MARKET AND THE BOARD OF TRADE. 117 as little force as previous pronouncements had it not been for a de¬ cision obtained in the ’supreme court construing the law of 1874 in application to a specific privilege transaction. It had been previously alleged by opponents of regulation that privilege trading was no crime in other States and the Chicago rule had never been tested in the courts. This deficiency was now met in the case of Booth v. People.'^^ Phe facts involved and the contentions ‘of the plaintiff in error were as follows: The plaintiff in error was convicted and adjudged to pay a fine of $100 under an indictment which charged that he, on the 16th day of August, 1899, in said county of Cook, in the State of Illinois, aforesaid, unlawfully did contract in writing with the Weare Commission Company, a corporation, to then and there have to himself, to wit, to said Alfred V. Booth, a certain o])tion to buy at a future time, to wit, on or before the 26th day of August, 1899, a certain commodity, to wit, grain, to Avit, 10,000 bushels of corn, from the said Weare Commission Company, a corpora¬ tion as aforesaid, which said contract is in the words and figures as follows, to wit: ‘‘Alfred V. Booth, Grain and Provision Broker. “Chicago, Aug. 16, 1899. “Sept. Corn, 1899. “10 Weare Com. Co. C 31 1-2 Paid. “Good till close of change. Sat., Aug. 26, 1899. Weare C. Co. J. J. C.,” —contrary to the statute, and against the peace and dignity of the same people of the State of Illinois. The evidence explained the Avriting set out in the indictment to constitute an agreement giving defendant the option to buy 10,000 bushels of corn, at 31^ cents per bushel, from the Weare Commission Company, at any time withim 10 days after the 16th day of August, 1899. The allegations of fact set forth in The indictment were fully established by the evidence. * * * Counsel for defendant in error do not question the position thus taken by counsel for plaintiff in error as to the facts proven on the hearing. Counsel for plaintiff in error admits the facts so charged in the indictment, and established by the evidence in support thereof, justified the conviction, under the provisions of section 130 of the Criminal Code, as interpreted by this court in Schneider v. Turner, 130 Ill. 28, 22 N. E. 497, 6 L. E. A. 164, but insists—First, said section 130 is in con¬ travention of, the provision incorporated in the Constitution of the United States, and also in the constitution of the State of Illinois, that “no person shall be deprived of life, liberty, or property without due process of laAv;” and, second, that said section is violative of the pro\dsion of section 1 of the Fourteenth amendment of the Constitu¬ tion of the United States, which provides that no State shall “deny to any person within its jurisdiction the equal protection of the laAvs.” The court affirmed the validity of the statute even though it might ‘infringe in a degree upon the property rights of citizens.” * * * The prohibition of the right to enter into contracts Avhich do not contem- l>late the creation of an obligation on the part of one of the contracting parties to accept and pay for the commodity which is the purported subject matter of the contract, but only to invest him Avith the option or privilege to demand the other contracting party shall deliver him the grain if he desires to purchase it, tends materially to the suppression of the very eAul of gambling in grain options AAdiich it Avas the legislative ra 57 N. E, 798 (Ill., 1900). 118 TERMINAL GRATIS MARIvETS AND EXCHANGES. intent to extirpate, for the reason such evil injuriously affected the welfare and safety of the public. The denial of the right to make such contracts tended directly to advance the end the legislature had in view, and was not an inappropriate measure of attack on the evil intended to be eradicated. So far as that point is concerned the act must be deemed a ^'alid law of the land, and as such must be enforced, though it infringe in a degree upon the property rights of citizens. To that extent private right must be deemed secondary to the public good. As to the allegation that equal protection of the laws was denied the court pointed out: The prohibition need not embrace all contracts for options to buy or sell, but only all of such contracts as lie at the root of the evil which threatens the public safety and welfare. The prevailing niajority was now opposed to privilege trading in Chicao-o and the bulk of such transactions were carried on in Mil- o waukee by telegraph."'’ In 1903 a vigorous attempt was made to secure the enactment of legislation favorable to trades in privileges. A sharp division occurred on the board in which the directorate ap¬ peared as advocates of the existing law whereas those in favor of its repeal obtained a petition with 1,000 signatures 'Avhich was for¬ warded to the legislature by telegraph.’’'^'’ To quote from Taylor: '‘'With the Board of Trade thus divided it is not surprising that no important legislation relative to the board was enacted.” The question of privilege trading continued to appear as a peren¬ nial dispute.*^ Such a method of trading was defended by the presi¬ dent of the board in 1900.^- However, an amendment was approved by the directorate and adopted in that year, which prohibited trading in privileges in outside markets based on Chicago receipts (applying especially to Milwaukee).^'’ This position was warranted by addi¬ tional court decisions in support of the act of 1874. Indemnities. —To meet the demands of advocates of privilege trading—especially the small traders—a committee of the board outlined a new scheme in 190() which met the approval of counsel as not prohibited by the law of 1874. This scheme proposed certain contracts to be known as indemnity of sale or indemnity of purchase on the theory that there would be no implied wager'as to the course of the market but rather a contract made to protect specific future trades from loss through price fluctuations. The contracts were to terminate at the close of the regular session of the exchange on tlie day following the date of issuance. Mdien the holder of cither form of contract should elect to make a demand on account of such contract he must make a sale to (or purchase of) the maker of the contract at the regular closing price and the market difference thus determined was to be immediately payable. 79 Taylor, op. cit., Vol. II, p. 1033. to Idem, p. 105S. St Idem, pp. 1081 and 1088. 82 Idem, p. 1100. 83 Rule IV, sec. 8, rules in force June 1,1907. I THE CHICAGO MARKET AKD THE BOARD OF TRADE. 119 The rule in detail was as follows: Six'. 10. Any member or firm, or corporation, making or receiving contracts of indemnity, shall confirm the same by memorandimis through the clearing house in sanu? manner and under the same regulations and requirements as are provided for contracts of purchase and sale in and by the other sections of this rule. Sec. 20. In the absence of special agreements in relation thereto contracts of in¬ demnity shall be understood to be in substance in the following forms and terms; INDEMNITY OP SALE. ‘'Chicago,-, 190 —, ■‘In consideration of the receipt of-dollars, I hereby agree to indemnify-- and save him harmless from loss on the sale of-bushels of Mdieat for-delivery through an advance in the market to above the price of-cents per bushel.” Tliis contract terminates at the close of the exchange on the regular business session following the date hereof. Any and all claims for payment of indemnity hereunder must‘be made and established in the manner and in accordance with the rules and regulations of the exchange providing therefor and relating thereto. “indemnity of PUnCHASE. ' “Til consideration of the receipt of —— dollars, I hereby agree to indemnify-- and save him harmless from loss on the purchase of •—— bushels of Mdieat for delivery through a decline in the market to below the price of-cents per bushel.” This contract terminates at the close of the exchange on the regular business session following the date hereof. Any and all claims for payment of indemnity hereunder must be made and established in the manner and in accordance -with the rules and regulations of the exchange providing therefor and relating thereto. Sec. 21. 'When the holder of a contract of indemnity of purchase desires to make a demand on account of said contract, he shall so notify the maker of said contract at or before the close of the session on the day on which said contract terminates; he shall also notify him ndiether his demand extends to all the property covered by the con¬ tract, and if apart only, he shall name such part; he shall sell to the maker of such contract and the maker of such contract shall buy from him all or such part of such property at the oflicial closing price of the exchange of that date. Any loss between such closing price and the price named in the contract of indemnity shall lie due and payable by the maker of the contract at once and shall be in full of all claims under such contract. rrovided, lioicever, That should the maker of said contract refuse to so buy from the holder of said contract such property as hereinbefore provided, then the holder of such contract shall during the first hour of the next session of the exchange sell the same in the open market “for account of ndioni it may concern;” he shall at onci; notify the maker of said contract of said sale, the price, the parties to whom sold, and the loss shown beDveen the price or prices of such sale and the price named in tlu‘ contract of indemnity shall then be due him from the maker of said contract and shall bo payable at once. When the holder of a contract of indemnity of sale desires to make a demand on account of said contract he shall so notify the maker of said contract at or before the close of the session on the dav on ndiich.said contract terminates; he shall also notif\' him whether his demand extends to all the property covered by the contract and if a part only, he shall name such part; he shall buy from the maker of such contract and the maker of such contract shall .sell to him all or such part of such property at the oflicial closing price of that date. Any loss beHveen such closing price and the price named in the contract of indemnity shall be due and payable by the maker of the contract at once and shall be in full of all claims under such contract 120 TERMINAL GRAIN AIARKETS AND EXCHANGES. Provided, however, That should the maker of said contract refuse to so sell to the holder of said contract such property as hereinbefore provided, then the holder of such contract shall during the first hour of the next session of the exchange buy the same in the open market for account of “whom it may concern;” he shall at once notify the maker of said contract of said purchase, the price, the parties of whom bought, and the loss shown between the price or prices of such purchase and the price named in the contract of indemnity shall then be due him from the maker of said contract and shall be payable at once.^ The above indemnity rule was in force until 1910. In that year the board was under Federal investigation, and for various reasons tlie directors voted to abolish such trading as being substantially identical with that in ^‘puts’^ and “calls.” To quote from Taylor: A lively controversy immediately arose over the amendment recommended by the directors, and John Hill, jr., announced a few days later that unless trading in in¬ demnities was no longer practiced, he would ask the courts to stop it. The*next day most of the big houses agreed to discontinue the objectionable form of trading, and after a consultation Avith Attorney H. S. Robbins the directors voted to abolish it, the new rule to take effect immediately. However, in September an amendment was passed by a vote of 550 to 105 providing for trading in indemnities under cer¬ tain restrictions and was said to be legally sound. The restriction made was to insert in ettch indemnity contract and confirmation of the same a stiiiulation that “the said indemnity against loss is bought to protect an existing and legitimate insurable interest in the commodities forming the subject matter of this risk not otherwise protected by contract made under this rule.®® It fol¬ lowed that dealers in “indemnities” who had had no “existing and legitimate insurable interest” were engaged in gambling and nothing else. So the rule stood until the legislative session of 1913. In that year, supported by a majority of the Board of Trade,®^ the Illinois Legislature passed an amendment to the law of 1874 whereby such contracts were forbidden only— ^ * where it is at the time of making such contract intended by both parties thereto that the option whenever exercised or the contract resulting therefrom shall be settled, not by the receipt or delivery of such property, but by the payment only of differences in prices thereof. “ * Lhider this sanction the board immediately adopted the present rule which authorizes trading in “bids” and “offers.” Under this rule the trader agrees to buy or sell a given quantity at a given price subject to deferred acceptance prior to a given date. (See Ch. V, sec. 17.)®® Rules ot the boaixl in force June 1, 1907, p. 52. ^ Vol. II, p. 1155. Rules of the board in force Feb. 10, 1911, pp. 5G and 57. Taylor, op. cit., Vol. II, p. 1188. **8 Laws of Illinois, 1913, p. 256. 88 Rules of the board in force April 25, 1914, pp. 59-GO. (See Vol. V for detailed discussion.) THE CHICAGO MARKET AND THE BOARD OF TRADE. 121 No qualifying definitions with respect to ''legitimate trading interest’^ were inserted in the new rule. Commissions of 5 per cent cliarged to nonmembers and 3 per cent charged to members are allowed, based on the consideration paid or received. Section 10. The quotation service and the bucketshops. Interchange of market quotations with other cash and speculative markets began prior to 1860.^*^ The telegi'aphic quotation service has always been fundamental to the futures market. Beginning with daily telegraphic reports posted on the exchange bulletins each day, the system has been extended until to-day, during exchange hours, it amounts to a practically continuous transmission of prices from the Chicago pits to the markets of the world. The invention of the "ticker” shortly before 1880 accelerated this development. The groAvth of the system has been well described in an opinion of th« Illinois Supreme Court: For many years prior to August, 1883, the board of trade permitted iheM’estern Union Telegraph Co., by its agents and servants in that behalf, to occupy and use its ex¬ change hall, and there collect and transmit, without any restrictions whatever, reports of the dealings, fluctuations, and changes of the market on the board. This informa¬ tion was sent by telegraph throughout the country, and delivered without discrim¬ ination to all persons who desired and would pay for the same. There were numerous customers of this commercial news department of the business of the telegraph com¬ pany, and they were scattered over the land, wherever the business of buying and selling grain and provisions was followed. The tVestern Union Telegraph Co. then had, and still has, a lease upon and control of the Gold & Stock Telegraph Co., which latter corporation, in turn, had and has a mo\.opoly of the'telegraphic instruments known as “tickers.” Telegraphic circuits \tere established by the Western Union ‘Telegraph Co. in Chicago, and in other principal cities, and, by means of Morse in¬ struments and these tickers, market infoimation passed to every office and place of business connected by wire wdth one oi these circuits, and was automatically regis¬ tered, so that every merchant or dealer provided with these instrumentalities, wherever his place of business might be, was instantaneously, and from minute to minute, and from hour to houi, during the business sessions of the board of trade, informed of all fluctuations and changes in the market prices of grain and other prod¬ ucts as they occurred.^^ It is notable that prior to 1884 no revenue was derNed from the distribution of market quotations.-- The report for that year, how¬ ever, showed that the quotation department which had been organ¬ ized to conduct this service received $11,201 and disbursed $9,224.75, giving the board a net income of $1,976.25 from its quotations. This was made possible by the adoption of a rule in 1883 author¬ izing the directors to: Provide an efficient corps of market reporters, whose duty it shall be * * * to ascertain the current market prices of such commodities as are dealt in by members of the association during the hours for trading prescribed by these rules, the reporting On June 17, 1S58, the board voted to have market reports from Oswego, Buffalo, Montreal, and Xew York, posted on the bulletin board daily at noon. (Taylor, Vol. I, p. 241.) N. Y. and Chi. Grain & Stock Exchange v. Board of Trade, 19 N. E. 837). 122 TERIVriXAL GRATX MARKETS AXD EXCHANGES. of which may be desired by any considerable number of correspondents, and also all changes which may occur in the same from time to time; such reports to be frequently communicated by telegraph to such approved correspondents, in the city of Chicago or elsewhere, as may desire the same and are willing to pay necessary charges for compiling and transmitting them by telegraph, under such arrangements as may be made by the board of directors with any telegraph company for the performance of the service of transmission. The methods followed in distributing these quotations are well knowji and are described in a comparative way in Chapter VIL The controversies which arose as to the property interest in these quota¬ tions possessed by the board, their right to control the distribution of price information or to withhold it, and the effect of these contro¬ versies upon the maintenance of a futures market as a legitimate business enterprise are discussed below. All of these c|uestions were raised in the prolonged fight against bucketshops, which has only recently come to a close. The AXTiBUCKETsiioP CRUSADE. —Bucketsliops began to operate in Chicago in 1878.®^ Many attempts were made tlirough the eighties to obtain court orders restraining them from using board of trade quotations, but without permanent success.®^ The loss of country orders for futures through the bucketshop competition was so keenly felt at times that there were several movements to reduce the scale of commission charges,and the penalty for cutting commission rates was in fact repealed in 1885. ^^One result of the action,’^ says Taylor, ‘Avas to greatl}" lessen the value of memberships and toward the close of the year it was said that 30 memberships were for sale, mostly by men who traded through brokers, as the repeal of the rule practi- callv destroved the differential w^hich had hitherto existed in the ^ kJ , commission charged to members and nonmembers. '’ A statute passed by the Illinois Legislature in 1887 furnished an entering wedge for the fight against these organizations. This law imposed severe penalties against gambling in market fluctuations. The first step taken by the board in the antibiicketshop crusade which followed this legislation was do authorize the establishment of a department of market records and reports (1887). The resolution adopted for this purpose recited also that— “The records and reports which may be prepared and compiled by said department shall be considered and treated as portions of the ofhcial records of the association, and the said records, or parts thereof, may be disseminated in such manner and under such conditions and restrictions as may be prescribed by the board of directors.” Fol- *>2 Taylor, op. cit., p. 565. The annual report for 1883 slates; * * There were also several suits pending, resulting from an endeavor to suppress those monstrosities called ‘Riicket shops.’ These suits have been concluded during the year, resulting in establishing the right of this board to control its own market quotations. Under this right, now clearly defined, your directors have entered into negotiations with the ^'arious tolegra}>h companies, to furnish them with our market quotations, under such I'cstrictions as will enable them to dictate where and to whom the market quotations shall be sent. * * S'* t-’ce Taylor, op. cit., pp. 6-18, 663. Idem, p. 719. 123 THE CHICAGO MARKET AXI) THE BOARD OF TRADE. lowing this action, President Wright inaugurated a still more active campaign against the bucket shoj^s. He first persuaded the Western Union Telegraph Co. to agree to take its wires out of all bucket shops, and next made the same proposition to the Postal Telegraph Co. and the Baltimore & Ohio Co. They refused to comply, and there was great excitement on change when the instruments of these two companies were literally thrown''out of the board of trade building. Both companies came to terms immediately; their wires were taken from the bucket shops, and they were reinstated on the exchange. At the close of the day there was not a bucket shop within the Chicago circuit which had an excuse to live. Action was also taken at Cincinnati, St. Louis, and Kansas City, and the Chicago city authorities cooperated by cutting all bucket-shop wires which w’'erc above ground. As a result the directors confidently reported in January,. 1 S8S: ■K- w’itnessed the practical extinction of the bucket-shop evil in Chicago and the South and West. The evil is also greatly mitigated in the East and in the iwovinces. This has all been brought about by the cooperation of the telegraph companies with other agencies, and without the aid of the courts of justice. Several of these courts still hamper the board of trade and the telegraph companies with their injunctions, but the w'ork of suppression hasstillgone forward * ^ * 'J' Yet the success obtained by President Wright in 1887 was short¬ lived. The secretary of the board in his annual report two years later stated that: * * * The blighting and pernicious influence of the bucket shops has been apparent throughout the year. IMany persons from all parts of the country have been decoyed by their plausible pretensions, only to meet wdth financial destruction. This business, or rather this gauzy pretension, has deluded thousands and spread demoralization over every man and industry which it has touched. It is an unmiti¬ gated evil, and thrives not upon the receipts and shipments of commodities, upon the movement or carrying of merchandise, but solely upon (piotalions from bona fide markets, posted upon blackboards. The public interest.in exchange quotations. —A question of law which was fundamental to the whole agitation—ami wdiich is not fully settled to-day—was placed before the Supreme Court of Illinois in 1889. Granting that the board was within its rio’hts in cutting off quotations from concerns doing an illegal business, and Avhose existence depended upon an illegal use of such quotations, would it be warranted in withholding them from any applicant whatso¬ ever on the ground that they were private property or, at least, tlnit their transmission was a wholly voluntary aiid private affair ? The New Aork & Chicago Grain & Stock Exchange, which figured in this case, was not demonstrably a bucketsho]). It was “organ¬ ized under the laws of the State of Illinois for the purpose of doing business in buying and selling grain on commission; and on the 29tii of April, 1885, its place of business was at No. 140 Monroe Street, Chicago, and it had in use at said place, in its business of bindng and selling grain on commission, one Morse instrument and two tickers, '6 Taylor, Vol. IJ, p. 744. ” Report for calendar year 1SS7, p. .59. •8 Chicago Board of Trade, report for year endin ' Dec. 31, 1SS\ p. 31. 124 TERMINAL GRAIN AIARKETS AND EXCHANGES. | which were connected with the wires of the Western Union Telegraph i Co., and by means of which the market information in relation to the changes and fluctuations of the market on the Board of Trade of C'hicago was transmitted and delivered to it instantaneously and | continuously during business hours, and which information it was ] using in and about its business. * * * I A move on the part of the board of trade to remove the market and telegraph instruments from the offlce of this concern was pre- | vented by a preliminary injunction issued by the circuit court of ; (hok County. i It was admitted that the business the appellant was doing did not violate the law. The board rather asserted its own private right to control the quotations: The contention of the board of trade is that it is strictly a private corporation, and that both the individual and aggregate business of its members is essentially private business, and that the market news and statistics collected and compiled at the expense of the association are the private property of the association, and that it has a legal right to control such market news and statistics and determine what telegraphic , dispatches touching the same it will send directly from the floor of its exchange during ; business hours, and to whom they shall be sent, or whether it will send any such dispatches whatever. • i The court held, on the contrary, that such price information was ; impressed with a public interest: X) The question is, can the board so conduct its affairs for a long term of years as to ';! create a standard market for agricultural products, and, acting in concert or combina- tion with the telegraph companies, build up a great system for the instantaneous and A\ cominuous indication of that market and its fluctuations, until the public and all persons dealing in such products conform their business to this system, and until by the usage and custom of merchants, thus advanced by the methods adopted by the board and telegraph companies, such instantaneous quotations become necessary to h the successful and safe transaction of business, and until such system has become ^ impressed and affected with a public interest, and then be allowed to discriminate between persons and parties, and, where all alike are willing to conform to reasonable rules and requirements, and pay for the information desired, say that one shall and another shall not have such information? i If the board has such right, and these corporations are lawfully permitted so to do, a then they have the power to create monopolies, and dictate who shall deal in the agri- cultural products of the country, and at will impoverish or enrich merchants, shippers, and producers. It was clear, then, that the board might withhold quotations from bucketshops only so long as injury was not done to bona fide dealers. This was not always easy, since the bucketshop appeared under so ?| many different guises; and there were technical difficulties involved $! in proving to a court that the practices condemned were clearly dis- .i i tinguishable from forms of speculative trading as carried on by certain . members of the exchange. In spite of vigilant work on the i)art of the membership and market reports committees, bucketshop oper- ^ Mi9N. E., p. 837 (Ill., 18S3). 100 19 N. E., p. 859. 125 THE CHICAGO MARKET AND THE BOARD OF TRADE. ators continued to gain access to exchange quotations. The direc¬ torate earnestly appealed to the association in 1895 to make a decided stand against these organizations: * * * The bucket-shop evil, injurious alike to producer and consumer, still menaces legitimate business. The general public interest is aroused upon this subject and your directors recommend that the board cooperate with the civil authorities for the destruction of these gambling shops. No commercial transactions are connected \M’th these institutions, and the whole system is founded upon pretense and not upon reality. This system is nefarious, fraught only with evil, and is utterly demoralizing, it is so contagious and infectious in its character that it is a moral and commercial pestilence. * * * Bucket-shop dealing has so honeycombed the trade as to seem ineradicable, though tnis association is furnishing to bucket shops that without which they never could have started and ^\dthout which they can not exist. * * * i ask you for an expression on this subject at the meeting and recommend that your directors be airthbrized to discontinue the present plan of supplying continuous official quotations of our mar¬ kets. * * * 1 July 1, 1897, an Illinois act to suppress bucketshops went into effect. In construing this law the supreme court of the vState said: '^It is manifest that the object of the statute was to suppress and prevent gambling in grain and other commodities.^^ ^ This act gave the board a legal advantage which it in’oceeded to use during the next years with increasing effect. The fight still continued in the courts and in the market place; but as late as 1900 a president of the board complained that the '‘more insidious eviP’ consisted of "bucketshop method within our own organization, as revealed by recent disclosures.^’ ^ During the same year two well-known members of the Chicago board were expelled and three others were suspended on bucketshop charges. This measure of reform was provoked by indictments found against these five members by a Federal grand jury. Although by the court decree in the Grain and Stock Exchange case the board was forced to continue the distribution of its quota¬ tions, the regular telegraph companies declined to submit to a super¬ vision of their subscribers. In order to continue the distribution of quotations and yet withhold them from bucketshops the board therefore granted to an organization known as the Cleveland Tele¬ graph Co. an exclusive contract (July 1, 1900) to distribute quota¬ tions through the business district of Chicago, and one month latoi’ removed the wires of the Western Union and Postal companies from the exchange hall. ^ 1 Annual Report for the year ending Dec. 31, 1894, pp. 59, 65, and 66. ‘Van Rensselear v. Wright. 121 N. Y. 626, 25 N. E., 3. 3 Annual Report for j-ear ending Dec. 31, 1899, p. 82. o 3 27 F uture commission d. 19 2 21 55 95 87 182 138 Out-of-tovra members; Member^; of other fivchanres . . 86 Afemhers iri sairronniiTTip territ.orv t . 58 144 Net in grain lousiness... 208 534 « Feeders, and all not included in other ola.sses. '■i Including wier houses. ^ Millers, maltsters, etc. « Several county elevators included, c Operating without terminal elevat'JF-hwilitie.^. I As provided in the charter of 1SG8. 136 terminal grain markets and exchanges. As the foregoing table shows, a majority of the members of the Mil¬ waukee exchange are not actively interested in the grain trade. Tliere are over 200 nonresident members, most of whom have no active interest in trading at Milwaukee. The advantages of a mem¬ bership on the near-by Chicago exchange are so much greater that there has been no great demand for Milwaukee memberships. Con¬ sequently the market price (prior to 1919) has not exceeded $100 for several years, and memberships sold for $80 during 1916-17. The present nominal price of memberships not only affects the character of applicants, hut lessens the discijilinary power of the board of directors. ^ . Several expedients have been tried with a view to enhancing. membership value. The secretary states that in 1906 it was dis¬ covered that, an enterprising broker was urging country shippers through ’ the West to buy seats at Milwaukee with a view to taking advantage of the reduced commission rates for members. Conse¬ quently %he rule 2 was adopted whereby ‘'only active members engaged in business in the Milwaukee market” are allowed one-half commission rates (nonresident members who are also members of the Chicago and Minneapolis exchanges being allowed three-fourths rates). There has also been an effort to buy in as many certificates as the chamber could afford ^ and thus enhance their value. Fifty seats were eliminated from September 30, 1914, to April 1, 1918. It was reported in 1918 that out of the 550 memberships 16 were the certificates of deceased members, and 15 were ‘‘additional” member¬ ships. Three memberships had been forfeited during the preceding year for nonpayment of the annual assessment. The term “additional membership” has a peculiar meaning at Milwaukee. It is provided (rule 12, sec. 7) that any member in good standing may purchase (without payment of transfer fee) one or more additional certificates, such additional memberships to entitle him to no greater or additional rights and privileges on the exchange, and to be indorsed “Additional certificate held for redisposition only.” On other exchanges the term “additional membership” refers to a certificate acquired through payment of the “initiation f ee.^^ In 1919, possildy because of improved shipping facilities,'* * the price of memberships suddenly rose a^id one was sold for $480.® Operating revenues .—The only reliable source of revenues to the Milwaukee chamber is the membership assessments. There is no real estate investment and the inspection and weighing departments, 2 Rule 32, sec. 7. 3 Cf. St. I.ouis practice, p. 171. * The city is now engaged in extensive water-front terminal improvements. • American Elevator and Grain Trade, Oct. 15, 1919, p. 356. DEVELOPMENT OP OTHER MARKETS AND EXCHANGES. 137 wliile practically self-sustaining, provide no dependable net income. The freight bureau is wholly an expense. On this basis the net operating gain ® for 1917-18 was $7,11.3.49. Weighing and Inspection. —The weighing and inspection of grain in Milwaukee has never been assumed by State agencies.^ The Milwaukee chamber has maintained an inspection department since 1 S 60 , and except for the present Federal supervision, this is the only • inspection service at that market. There seem to be few appeals from the findings ol tlie exchange inspectors and both receivers and sliippers are apparently satisfied with the present system. Elevator facilities. —As appears from Table 14 (p. 28), the business of public warehousing has scarcely been developed at Mil¬ waukee. The distinction between public and private elevators exists onl}^ by reason of exchange rules defining and regulating regular warehouses.'^ (See p. 245.) The private warehouses are operated mainly for transfer purposes or to maintain a manufacturing surplus. Very little consigned grain goes into storage for commission men; the grain in store is for tho most part the property of the warehouse owners. Transportation bureau. —The transportation bureau, operated by the Milwaukee chamber, is one of the most important agencies of the exchange. Since Milwaukee is a milling and transfer point for the grain trade, the transit privileges which can be obtained from the railroads have an important effect on the market. Also, because of its situation off the major trunk lines, it is possible for freight-rate adjustments to have a disastrous effect upon Milwaukee receipts. For this reason the traffic expert in charge of this bureau is con¬ tinuously busy. This bureau costs the chamber approximately $7,000 a year. Price quotations and market reports. —The Milwaukee exchange has made no collection and distribution of price information except as to the transactions in its own futures pit. These quotations are recorded and made public daily and filed with the secretary-treasurer of the exchange. The telegraphic service of the exchange costs about $5,000 a year. By contract with the telegraph companies future quotations are received from the Chicago Board of Trade and posted immediately on a bulletin in the trading room. Quotations are no longer received from Minneapolis since this does not seem to be warranted by the volume of future trading. General statistics of the grain movement and crop conditions are received and posted daily as on the other exchanges. • The cash market.— Although consumption of barley by Milwaukee brewers was (prior to 1918) relatively high, the local consumption of all grains has been considerably less than the volume shipped. * As reported in treasurer’s statement, report for 1917-18, p. 32. ^The act of 1905 (see p. 156) applied to Superior only. 138 TERMINAL GRAIN MARKETS AND EXCHANGES. The wheat market is primarily related to the forwarding business (see Table 8, p. 24). An estimate based on about 175,000 cars "of all grains received at Milwaukee during the 5 years 1013-1917 showed that 60 per cent of the receipts were shipped out and sold in other markets.® During this period the bulk of the grain (82.5 per cent) w'as brought in on consignment by commission men. Of the total cars of grain reported as received, the local elevators bought slightly more than the consumers, the ratio being 46.5 per cent to 35.7 per cent. The futures market. —-The inauguration of active future trading occurred in March, 1901, when a number of Chicago grain dealers transferred their hedging and speculative activities to Milwaukee, r^his was a result of (1) the effective prohibition of trading in privileges I at Chicago and (2) the disaffection of the Chicago elevator interests (see Ch. III). Among these Chicago traders on the Milwaukee ex¬ change were representatives of several of the large Chicago terminal elevator companies, including the Armour Grain Co. As a result of a conference between the board of directors of the Milwaukee ex¬ change and such dealers, provision was made in the rules of the Mil¬ waukee Chamber of Commerce for future trading, and a clearing house was organized. Trading in a very short time became so active ! that the price of memberships rose from $40 to about $1,100 within \ a few days. This future trading was on the basis of warehouse re- \ ceipts issued by the licensed warehouses of Illinois. ^ The Chicago Board of Trade passed measures of retaliation against the Milwaukee Chamber of Commerce by the enactment of (1) a rule prohibiting members from executing orders either as principal or agent on any market outside Chicago where the contracts were predicated on Chicago warehouse receij^ts,® and (2) a regulation that any Chicago warehouse which made application to have its receipts declared regular on any other exchange would thereby become <‘irregular’’ for deliveries on future contracts on the Chicago Board of Trade.^° The board of directors of the Milwaukee chamber have endeavored at various times to have the Chicago Board of Trade cancel these restrictions but without success. Tlie period of active future trading in Milwaukee was, therefore, of comparative!}" short duration. This appears in the following statement of clearing by the Milwaukee Chamber of Commerce Clearing House: BuslieJs. 1904 . 2 , 790 , 718,000 1905 . 2 , 033 , 854,000 1900 . 324 , 552,000 ]907 . 190 , 848,000 1908 . 141 , 548,000 1909 . 127 , 014,000 8 See Geiieral Tables, Vol. IV'. 9 Amendment to Rule IV, sec. 8. 10 Requirements £or Grain Warehouses, par. 10,1918 rules. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 139 Subsequently the Milwaukee Chamber of Commerce endeavoroxl to maintain future trading on the basis of local warehouse receipts. But the lack of public warehouse facilities under State super¬ vision, and the proximity to the Chicago futures market, seriously handicapped such trading. Accordingly the Milwaukee commission houses, on December 23, 1912, reverted to the use of Chicago ware¬ house receipts for Milwaukee future trading. The yearly volume of this trading, as shown in the accompanying statement furnished by the clearing association, is considerably less than that of cash transactions in the same commodities. Table 35 .—Transactions in bushels cleared through the Milwaukee Clearing Association for the three crop years 1915-16, 1916-17, and 1917-18. Auf:upt.... Soptember Ociohev... >s ovember. J^ocember. January... Febrnarj'.. March. April. May. June. July.,. Total 1915-16 1916-17 1917-1S 1,871,000 1,901,000 2,153,000 1.730.500 2.152.500 2,062,000 2,810,000 2,739,000 3,090,000 3,238,000 3,037,000 2,146,000 3,584,000 2,306,000 3,203,000 3,611,000 3,489,000 4,058,000 2,777,000 5,449,000 4,701,000 3,362,000 2,595,000 3,676,000 3,105,000' 3,553,000 2,636,000 3,206,000 3,585,0(XJ 2,976,000 3,220.000 3,050,000 2,993,000 4,700,000 2,142,000 2,490,000 28,930,000 42,811,000 37,656,000 It is estimated by the manager of the Milwaukee Chamber of Com¬ merce Clearing Association that normally 40 per cent of the trans¬ actions in the pit of the exchange are made in wheat, 30 per cent ill corn, and 30 per cent in oats. The individual items usually are in amounts of from 1,000 to 5,000 bushels and it is very rare that any concern executes a single trade of more than 5,000 bushels. Usually in order to close out a future transaction in Milwaukee it is necessary to execute a transaction through an order on a. Chicago commission house. The future contracts are for the most part hedged through Chicago operators at full commission rates. There are on the Mil¬ waukee board a few pit traders, known as changers,’’ who buy or sell a future at a fractional difference over or under the current price on the Chicago Board of Trade and protect themselves by ordern executed in the Chicago pits. A ^'changer’’ who buys a future in the Milwaukee pit usually gives an order to sell a future, in like quantity, in the Chicago pit. When he wishes to close out the transaction in Milwaukee, he sells his commitment in Milwaukee and at the same time buys the future through a Chicago trader. These spreading operations^ arc described elsewhere (Vol. V), and only serve to illustrate the insignificance of the Milwaukee futures market. Publicity and promotion. —Milwaukee has played a less promi¬ nent part than the larger exchanges in promoting exchtinge interests 140 TEKMIXAI^ GRAIN MARKETS AND EXCHANGES. throughout the country. A small reserve fund is maintained for publicity, but this is insufficient to carry on any serious campaign. A membership is held in the National Council of Grain Exchanges and it is assumed that the contribution to this association will suffici¬ ently protect the interests of the chamber in a national way. Local interest in the grain trade is stimulated by a journal entitled '^Doings in Grain at Milwaukee,’' which has been published monthly from the secretary’s office since 1912. Section 2. Minneapolis. Origin of the Minneapolis market.— The grain market at Minneapolis originated and developed around the flour milling in¬ dustry at the Falls of St. Anthony in the upper Mississippi River. Flour was first produced in this market at the Government mill which was established in 1823, but not operated on a commercial basis. Tlie first merchant mill was constructed in 1854, and in less than 25 years the number increased to 20. These milling facilities, located on the eastern edge of the great grain growing area of the North¬ west, have continued to be the primary factor in the attraction of grain to the Minneapolis market. The presence of mill buyers ready to pay premium prices on occasion has given Minneapolis an advan¬ tage found in no other market. During the period from 1860 to 1880, practically the only demand for wheat at Minneapolis had been to supply the requirements of the rapidly expanding milling industry. The development of a for- warense of the line companies. Enforcement of rules. —-In enforcing its rules and disci¬ plining members for uncommercial conduct the Minneapolis chamber has been quite as well supported by court decisions as has been the Chicago Board of Trade. The authority of the former asso¬ ciation to discipline members for refusal to arbitrate has been affirmed in a leading case,^® in the following language: * -X- -X- Because such by-laws and rules give to the board of diicctors power to discipline only when a member refuses to arbitrate as he has agreed to do in considera¬ tion of the rights and privileges of membership, and no attempt is made to deprive him of an op]X)rtunity to litigate his differences in the ordinary way, they are not unreasonable, coercive, violative of constitutional rights, or contrary to public policy. The cash grain market. —-The cash grain market on the Min¬ neapolis exchange has been largely on a sample (rather than grade) basis, owing to the demand of mill buyers. For this reason the com- tnission houses are the largest and most active operatoi’s on the selling side of the market. Commission firms organized the chamber of commerce in 1881, and thereupon entered the field and soon displaced the Millers’ Association, which had controlled the marketing of country grain prior to that time. In some instances they sent out solicitors who assisted the organ¬ ization of independent and cooperative companies in the country C® and they developed an active consignment business in the terminal. Their financial assistance to country elevators was a strong competi¬ tive weapon and the prices on the Minneapolis exchange encouraged country dealers to ship on consignment. To-arrive buying was never such an issue between the commission men and the terminal elevators in Minneapolis as it was in Chicago, one reason being that the com¬ mission men in Minneapolis organized to handle country grain both on a consignment and to-arrive basis and prevented any considerable trading off exchange. During the period 1913-1917 about 65 per cent of all grain received came in on consignment and 35 per cent was bought direct (7 per cent to-arrive and 28 per cent through line companies’ stations). Milling consumption, including that of country mills accessible to Minneapolis, has always been the outstanding fact in this market. The total output of the Minneapolis flour mills for the crop year I’The Gee-Lewis Co. and the Gill ,111 m Remund Co. ‘8 Evans v. Chamber of Commerce, 91 N. W. 8 (Minn., 1902). w So stated by ofheers of the Giirillan-Remimd Co. and the Gee-Lewis Co., commission merchants. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 145 ending August 31, 1917, amounted to 16,235,330 barrels, representing a milling demand for about 75,000,000 bushels of wheat, while the 6 linseed-oif mills had an annual consuming capacity of about 15,000,000 bushels of flaxseed. The estimated flour-milling capacity of Min¬ neapolis is 91,000 barrels per day. It is reported that there are out¬ side milling interests located at points in Minnesota, Iowa, Wisconsin, and Illinois whose purchases in Minneai)olis account for a substantial proportion of the shipments. Car shipments for these outside mills are consigned to Minneapolis and sold on the exchange floor l)y sample to the mill buyers. These facts explain why Min¬ neapolis is the largest cash market for wheat and flaxseed in the United States. The Washburn-Crosby Co., which claims a daily capacity of 50,000 barrels of flour, states: “We far prefer to purchase all our grain on track at Minneapolis, as we have the opportunity of personally examin¬ ing the (juality of the grain before purchase. During the five-year period 1913-1917 not more than 30 per cent of the wheat received at Minneapolis was shipped out by local traders, leaving 70 per cent for local consumption. By reference to the table of wheat consumption it is clear that far more wheat is consumed by Minneapolis mills than is received at any other terminal in the United States. (See Table 8.) The consumption of the other cereals is much smaller. The average proportion consumed of all grains received (five-year average, 1913- 1917) was about 47 per cent. (Vol. IV.) It appears, therefore, that throughout the development of the Minne¬ apolis market there have been three rather distinct elements: The receivers (or commission men), the mill buyers, and the terminal and line elevator operators. The first two classes represent, respectively, the selling and bu 3 dng interests. The third class trades on both sides of the market. \ The futures market. —-Trading in grain futures was introduced in Minneapolis in 1890 and Avas for 25 years confined to contracts for spring wheat.Future trading in oats became active in 1917 although there was an attempt to stimulate trades in this cereal as early as 1903.^^ Future trading in barley and rye was practical^ non¬ existent until 1918 when it was carried on with varying activity under war conditions. -- I , . . I - I -•--- Grain for the Buffalo mill is purchased at Duluth. • 21 For the volume of this trading see Vol. V of the report. 22 At a conference of gram men held in the chamber Nov. 17, 1903, the following agreement was drawn to be circulated and sent to the members to sign: " For the purpose of stimulating trading in oat futures tho undersigned agree that as soon as notice is given them that the board of directors of the chamber of commerce have approved the method devised for the establishing of an oat market they will on every business day for the next succeediug 30 days either buy or sell in the open pit at least 5,000 bushels of oats for future delivery. 168693®—20-10 146 TERMINAL GRAIN AIARKETS AND EXCHANGES. Two pits are operated on the Minneapolis excliange as the photo¬ graph (opposite p. 140) shows. The clearing association, which was organized in 1891’, holds a membership in the Chamber of Commerce hut is operated as private corporation linancially independent of the exchange. The member¬ ship includes slightly more than 100 members of the Chamber of Commerce and no others. Outstanding capital stock was about $25,000 in 1918. The methods followed in clearing future trades are shown ill the following extracts from the rules of the association. Rule Y1. — ^VIethod of Cleatung. Section 1. All transactions made in grain during the day shall be cleared tlircaig^ the clearii^ association, unless otherwise agreed upon by the parties to the transaction. Upon the acceptance by the manager of such transactions, the clearing association /assumes the position of buyer to the seller and seller to the buyer in respect to such ^ transactions and the last settling price shall be considered as the contiact price. Rule VII. r ’-? SscTioN 1. The manager of this association may call from purchasers below the market and from sellers above the market such reasonable margins as in his judgment ^ ! may be necessaiy for the protection of the association. Such margins to be placed to the credit of the party paying the same and to be retained by the manager, in wdiole or in part, as he may deem necessary until the trades for which such margins have been _paid have been settled. * * '' Publicity and promotion of exchange interests. Minnctipolis has joined with Chicago, Kansas City and the other larger exchanges in combating bucketshop activities, in warding off legTslation con¬ sidered detrimental to the exchange, and in presenting the exchange point of view to the public through the press. This work in Minneapolis in recent years has been closely connected with a controversy with the Equity Co-operative Exchange. Inasmuch as this controversy is the subject of a legal process before the Federal Trade Commission it is not proper to consider the matter in this place. The records indicate that the office of the Grain Bulletin,' of which F. R. Durant’ is manager, although not officially connected with the chamber, yet constitutes an active agency in the promotion of exchange interests before legislative bodies. The following extracts from correspondence will illustrate: March 12. 1915. Mr. F. C. Van Busen, Mr. C. M, Harrington, Mr. G. F. Ewe. Gentlemen ; As a member of a committee which has for several years, been a close observer of legislative matters in South Dakota, I desire to state that during all that period legislative matters in that State, so far as they related to the grain trade, have . been more closely watched and more efficiently handled than in any State in the IS est or Northwest with which I am at all familiar. 25 Sco Vol. V,Ch, V, fora comparative analysis of clearing-house methods. DEVELOPMENT OF OTIIEE MAEKKTS AND EXC'HANGES. 147 t In tills connection it is appropriiUe to say tliat the watchful eye and the ceaselesa activity of Mr. F. R. Durant in connection with legislative matters has been of the greatest value to the grain trade of the Northwest, and I know of no one who could surpass, if indeed they could equal his a igilance and valuable achievements in this connection. Yours, very truly, J. li. McCaull, Presklnit . Mr. F. E. Duhant, Chamber of Commerce, Cily. June 13, 1917. Dear Sir: Mr. Martinson was hero this morning, talking about the campaign to line up the complexion of the next House of Representatives and the Senate in this State. * * * I understand F. B. Snyder is in line for nomination as senator from tins district in case Knute Nelson concluded in 1918 that he does not want the honor again, and would suggest that you take this matter up :v\-ith the proper people and advise me whether or not we can have a meeting for the privilege of getting in line on this matter, which probably is of some importance, or 'will be, particularly to 1918. Yours trulv, C. A. Magnuson, Fresident, [Circular letter.] October 20, 1913. Please attend meeting in room 902 this afternoon at 3 o ’clock. The Railroad Fommissioners of North Dakota have called a hearing on the anti- discrimination law, and the object of this meeting is to determine what steps shall bo taken in reference thereto. F. R. Durant. The minutes of the hoard of directors for April 25, 1917, show that the board audited and approved for payment and invoice to the Grain Bulletin for $996.56 ^^on account of printing, distribution of petitions, etc., in connection with the 1917 session of legislature.^’ The central executive office for all activities of the chamber is that of the secretary. From that point a constant scrutiny is main¬ tained not only on bills and resolutions introduced in Federal and State legislatures, but on appointments to official positions affecting the interests of the exchange. Such publicity and legislative work is, of C/Ourse, only similar to practice extending throughout commercial circles in the United States. In a letter of May 26, 1913, the secretary called upon a local elevator company for a subscription of $25 for publicity work. He announced that the chamber was about to undertake a “campaign of education” throughout the Northwest to remove misunderstandings with regard to the methods of the chamber of commerce. It w^as stated that this campaign was induced by the recent attack on the chamber through the legislature, and it was hoped that these “expensive and trying e.vperiences ” could be avoided when the public at large should be better informed. The letter stated that by authority^of the directors 148 terminal grain markets and exchanges. the ])resident of the chamber had appointed a publicity committee to solicit volimtary subscriptions from the members. ^ * the committee has assessed the members of this organization various amounts in harmony with the volume of business transacted. In November, 1913, when the North Dakota high schools contem¬ plated a debate on the (piestion of the State of North Dakota engaging in the terminal elevator business, the secretary prepared an article stating the case against State operation, which was published in the December issue of the National Grain Grower. The article was accepted by the journal with the promise that they, would mail a copy of this issue to each high school in the State as well as to every elevator in the State. “I think it best to run it without your name, so will do so if it does not make any difference to you,” said the editor. The records of the chamber show that on July 21, 1914, they paid the’National Grain Grower .$2,500 for subscriptions and additional copies during the 10 months previous. Interlocking interests, 1918.—Although the concerns represented on the Minneapolis Chamber of Commerce are listed as “firm and corporation members,” this does not mean that each trading house is allowed to have onl}" one of its employees on the trading floor. For example, no less than 7 of the employees of the Washburn- Crosby Co. are listed in the annual reports as members of the ex¬ change. Likewise, the Armour Grain Co. has 5 members in good standing. The Van Dusen-Harrington Co., in addition to its presi¬ dent, has 13 officers and employees who are members of the exchange. In fact, there exists a close community of interests among the more heavily capitalized companies, and also between these com¬ panies and three large Minneapolis banks; that is, the First and Security National, the Northwestern National and the Midland Na¬ tional. These interlocking interests also extend into the Duluth Board of Trade, since many of the larger firms maintain offices in both markets. A considerable concentration of control over memberships appears from an analysis of the interests of the officers and employees of large concerns, such as those just mentioned. Table 38 (following) shows the voting power on the exchange of the Washburn-Crosby interests, based on the assumption that all of the companies in this interlock¬ ing group have identical interests, and that they would be subject to the control of the officers of the Washburn-Crosby Co. The remain¬ ing 13 tables show the memberships largely controlled or influenced by the trading interests under which they are listed (1918), DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 149 Table —Memberships of Washburn-Crosby interests at Minneapolis and Duluth. (Members of Minneapolis Chamber of Commerce in roman; members of Duluth Board of Trade in italic.] Brown Grain Co.—Continued. E. W. Stiihr. 0. G. Williams. Washbiirn-Crosby Co.: Clyde H. Burdick. W. G. Crocker. E. M. Crosby." Arthur M. Hartwell. P. D. McMillan, jr. Walter H. Mills. John Washburn. W. H. Dunwoody. St. Anthony Elevator Co.: Harold O. Hunt. John A. Mull. John Washburn. St. Anthony & Dakota Elevator Co.: C. D. Junkins. Geo. K. Labatt. Clarence A. Brown. Rocky Mountain Elevator Co.: Jas. F. Bell. Brown Grain Co.; L. E. Brown. Donald Bruce. Thos. V. Colemen, Harold C. Hall. P. E. King. Barnum Grain Co. : Thornton W. Hall. G. G. Barnum. G. G. Barnum, jr. Great Western Grain Co.: H. F. Douglas. E. E. Mitchell. E. E. Mitchell. Northeast Feed Mill Co.; Eberhardt J. Gulden. Huhn Elevator Co.: A. Huhn. Alex G. Huhn. Imperial Elevator Co. and Hatton Grain Co.: Raymond J. Allen. Morgan Burke. P. L. Howe. P. L. Howe. Heising Grain Co.; Chas. D. White. Table 39 .—Memberships of Van Dusen-Harrington interests at Minneapolis and Duluth. jMembers of Minneapolis Chamber of Commerce in roman; members of Duluth Board of Trade m italic.] Van Dusen-Harrington Co.; J. P. Andrews. L. C. Andrews. C. R. Davis. A. W. Goetz. M. E, Grant. C. M. Harrington. H. E. Hughes. Edward L. McNulty, Frank F. Murray. Paul C. Rutherford. John D. Stone. W. C. Wheelock. G. G. Williams. G . W. Van Dusen Co.; Jas. B. Forbes. Chas. B. Rngers. F. C. Van Dusen. John J. Wilson. Ward A. Brown. A. W. Friclc. C. M. Harrington. W. B. Joyce. J. W. JaeJeson. M. G. Winsted. National Elevator Co.; L. D. Marshall. Herbert E. Marshall. Atlas Elevator Co.: D. G. Kennedy. J. A. Reed. Crescent Elevator Co.: G. F. Ewe. Clarence Mathewson. Pioneers Steel Elevator Co.: Walter G. Hudson. Interstate Elevator Co.: Star Elevator Co.: Sheffield-King MillingiCo.; Edwin J. L. Judd. H. H. King. 150 TERMINAL GRAIN MARKETS AND EXCHANGES. Commander Mills Co.: W. J. Kiissoll. State EleA'ator Co.: Tabt.e 40 .—Memberships of Grcporp-Jenni-son Co. mteresls at Minneapolis and Duluth. [Mpiinbers of Minneapolis Chamber of Commerce in roman; members of Duluth Board of Trade m italic^ Gregory-Jemiison Co.: Gregoiy-Cook & Co.: Lawrence S. Gregory. \V. A. Gregory. IF. D. Gregory. Carter, Sammis & Co.: Carl I, Rollins. T. A. Sammis. W, D. Sammis. T. A. Sammis. Midway Elevator Co: Merton W. Sowle. Powers Elevator Co.: AV. K. Powers. Duliitli Universal Milling Co.: A. L. Goodman. Big Diamond Mills Co.: B. B. Sheffield. Empire Milling Co,: AV. H. Siiddnth. AV. J. Jennison Co.: AV. G. Gooding. Century Milling Co.: AA". D. Gregory. Table 41 .—Memberships of Peavcy interests at Minneapolis and Duluth. [Members of Minneapolis Chamber ofComtaerce in roman; members of Duluth Board of Trade ia italte4 F. H. Peavey & Co.: F. B. AA^ells. Monarch Elevator Co.: H. G. Dickey. AAmi. L. Smith. A. Stewart. Alex Stewart. J. A. Schumacher. Globe Elevator Co.: A. L. Searle. E. -N. Bradley. J. T. Lundquist. W. D. Newcomb. A. L. Searle. Omaha Elevator Co.: Clias. F. Deaver. British-Ainerica Elevator Co.: F. T. Heffelfinger. Tabi-e 42 .—Memberships of Cargill Commission Co. interests at Minneapolis a^id Duluth. [Members of Minneapolis Chamber of Commerce in roman; members of Duluth Board of Trade in itati^.j Cargill Commission Co.: Harold J. Bates. * Austin S. Cargill. J. B. Cooper. Fred AA^. Drum. E. J. Grimes. John C. Tresise. N. C. Clarlc. F. E. Lindahl. J. II. McMillan. A. M. Prime. Cargill Elevator Co.: Goo. H. Feetham. Robert M. Johnston. J. H. McMillan. A. F. Owen. Superior Terminal Elevator Co.: Minneapolis Seed Co.: D. D. McMillan. Victoria Elevator Co.: Robert G. Cargill. David S. Levin. R. G. Cargill. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 151 Table 43. —Memberships of niUhimj Flour Milts Co. interests at MimieapoUs and Duluth. [Members of Minneapolis Chamber of Commerce in roman; members of Duluth Board of Trade in italic;] Pillsbiiry Flour Mills Co.: J. W. Avery. Edw. M. Kaiitli. A. C. Loring. A. F. Pillsbury. Clias. S. Pillsbury. Lester R. Stevens. A. C. Loring. Empire Elevator Co.: .T. R. McMillan. E. N. Osborne. Edward N. Osborne. Atlantic Elevator Co.: G. C. Bagley. C. M. Case. Union Terminal Elevator Co.: AV. F. Brittain. R. AV. Little. Kellogg Commission Co.: Alvin F. Campbell. Herbert A. Dew. E. S. Ferguson. Royal Elevator Co. and Geo. C. Bagley Elevator Co.: R. C. Bagley. C. M. Case. I\. C. Bagley. Homestead Elevator Co.: F. C. Riebe. Minneapolis & Northern Elevator Co : J. S. Pillsbury. Columbia Elevator Co.: ' F. AV. Commons. H. AA^. Commons. A. H, Thompson. Victor A’'on Ende. J. F. AATiallon. F. W. Commons. Table. AA.— Memberships of E. S. Woodworth Co. interests at Minneapolis and Duluth. (Members of Mumeapolis Chamber of Commerce in roman; members of Duluth Board of Trade in italic.] E. S. AA^oodwortli Co.: J. C. Geggie. L. B. Sanford. John B. Siewers. E. S. AA'oodworth. E. S. Woodworth, Concrete Elevator Co.: Chas. A. Eaton. G. P. Hardin". Concrete Elevator Co.—Continued. Maurice Reinstein. B. H. AVoodworth. AAnodworth Elevator Cn.: B. If. Woodworth. C'entral Grain & Commission Go.: R. P. AA^oodworth. R. F. Woodworth. Table Ao.—M emberships of H. PoehJer Co. interests at Minneapolis and DuLifli. [Members of Momeapolis Chamber of Commerce in roman; members of Duluth Board of Trade in i talic. H. Poehler Co.: Harry J. Butler. F, J. Midwood. Alvin H. Poehler. F. A. Richter. Raymond R. Ember. A. TF. Withrow. Pacific Elevator Co.: P. R. Holmes. Frank M. Norton. AV. A. Poehler. AV. C. Poehler. Crescent Milling Co.: Table 46.-— Memberships of McCaull-Webster interests at Minneapolis and Duluth. [Members of Minneapolis Chamber of Commerce in roman; members of Duluth Board of Trade in italic.^ McCaull-AA'ebster Elevator Co.: John H. Ehrlc. T. F. Graham. Jas. C. McCaull. Mct'aull-Dinsmore Commissioa Co. S. J. McCaull. Harry A. Murphy. McCaull-Dinsmore Commission Co.—Con, J. AV. Robinson. Geo. M. Shannon, Z. K. Stacks. R. A. Dinsmore. Hawkeye Elevator Co.: R. A. Dinsmore. 152 TERMINAL GRAIN MARKETS AND EXCHANGES. Table 47. — Memberships of McCarthy Bros, interests at Minneapolis and Duluth. jMembers of Minneapolis Chamber of Commerce in roman; members of Duluth Board of Trade in italic.] McCarthy Bros. Co.: Charles 11. McCarthy. J. H. McCarthy. Jas. H. McCartliy, Jr. John V. McCarthy. Siehel C. Harris. John F. McCarthy. T. F. McCarthy. International Grain Co.: H. F. McCarthy. Walter R. McCarthy. Capitol Elevator Co.: T. G. McCarthy. R. A. Bissonnette. Jas. S. Graves. F. JI. McCarthy. Table 48 .—Memberships of Riossell-Miller Milling Co. interests at Minneapolis and Duluth. jMembers of Minneapolis Chamber of Commerce in roman; members of Duluth Board of Trade in italic.] Kiissell-Miller Milling Co.; 0ccident Elevator Co.: n. S. Helm. M. II. Devaney. W. 0. Helm. A. W. Robinson. Electric Steel Elevator Co.: M. R. Devaney. G. A. Morris. C. C. Thayer. Table 49 .—Memberships of Northwestern Consolidated Milling Co. interests at Minneapolis and Duluth. (Members of Minneapolis Chamber of Commerce in roman; members of Duluth Board of Trade in italic.] Northwestern Consolidated Milling Co.: Dnluth-Superior Milling Co.: H. P. Gallaher. B. Stockmann. Robert H. Gallaher. B. /Stockmann. John H. Stadon. Geo. Spalshury. Table 50 .—Memberships of Nye-Jenks interests at Minneapolis and Duluth. [Members of Minneapolis Chamber of Commerce in roman; members of Duluth Board of Trade in italic.) Nye, Jenks & Co.: C. C. Austin. David Fuller. Clarence E. Johnson. Buell L. Simmons. J. M. Jenks. Itasca Elevator Co.: J. M. Jenks.' Nye, Schneider, Fowler Co.: Nebraska Elevator Co.: Independent Grain & Lumber Co.: Rialto Elevator Co,: Chas. T. Hears. Buffalo Grain Co.: Walter Stanger. -—. J. A. JIaglun. Central Groceries Co.: M. L. Jenks. -. C. T. Mears. James W. Wood. The three large Minneapolis hanks which finance the movement of^ grain in the Northwest include on their directories representatives of the leading grain interests of the chamber. There is, then, a powerful concentration of buying, selling, and financial interests. It has been publicly stated by officers of the chamber that all of the grain buyers of consequence within 1.50 miles of Minneapolis are members of the Chamber of Commerce. t DEVELOPMENT OF OTHEK MARKETS AND EXCHANGES. 153 Section 8. Duluth. Development of the Duluth-Superior grain market. —The conjunction of a railroad terminal with the deep-water shipping facilities at the head of the Great Lakes accounts for the development of the Duluth-Superior grain market. Western railroad connection was not established until 1870. Between 1870 and 1873 the Northern Pacific was extended from Duluth to Moorhead, Fargo, and Bis¬ marck. The Great Northern (then the St. Paul and Pacific) soon penetrated the Northwest with additional lines. Since 1880 Duluth has become increasingly prominent as a forwarding and shipping center for bulk commodities. Wheat is second only to iron ore in value of commodities shipped annually from the Duluth-Superior harbor. The table below of receipts and shipments of grain indicates the growth of the market during the formative period, 1870 to 1886, inclusive. The development of the Duluth market parallels closely that at Minneapolis, since the two markets are equidistant from many of the northwestern shipping points. Table 51. — Receipts and shipments of grain at Duluth, 1870 to 1886. Receipts, j Shipments. Year ending Aug. 31: 1871 . 1872 ... 1873 . 1874 . 1875 . 1876 . 1877 .*.. 1878 ./ 1879 ... 1880 . 1881... 1883 . Year ending Dec. 31: 1884 . 1885 . 1886 . Prior to 1878 wheat was the only cereal received at Duluth oats and corn were received in small quantities in that year. It was not until 1886 that barley and flax were established as constant com¬ modities in the Duluth market.’^ From 1895 until 1913 Duluth was the largest receiver of flaxseed in the United States. Beginning with the year 1914, however, the Minneapolis receipts exceeded those of Duluth, and recently a greater volume of that commodity has been drawn to Minneapolis by the linseed mills. Table No. 48 shows a comparison of the Minneapolis local consumption of flaxseed with that of the Duluth market. In 1917 there was more flaxseed shipped from Duluth than was received in that year. The following table shows the diversion of the flax movement in favor of Minneapolis. 556,783 931,611 1,981,453 2,407,476 1,137,721 1,451,190 460,595 l,8a3,090 1,524,065 1,347,679 3,332,176 4,707,803 13,722,930 14,869,675 22,424,850 544,848 951,046 1,583,073 2,424,176 1,081,194 1,376,372 503,899 1,782,3.58 1,487,222 1,453,674 2,865,536 4,586,908 11,551,582 14,065,775 17,668,251 Woodbridge & Tardee, History of Duluth and St. Louis County, vol. 1, p. 165. Idem. 154 TERMINAI. GPvAIISr MARKETS AND EXCHANGES. Table 1)2—Receipts and shipments of flaxseed at Minneapolis and Duluth, 1913 to 1917. Minneapolis. Duluth. Receipts. Shipments. Receipts. : Shipments. Bushels. 11,319,620 7,759,130 6,148,970 8,892,200 6,026,380 Bushels. 1,875,090 568,520 933,270 1,163,700 1,172,150 Bushels. 16,441,209 0,697,766 5,356,769 7,590,754 4,087,260 Bushels. 16,990,525 7,769,549 4,587,715 7,422,931 4,528,659 'rjiE MILLING INDUSTRY. —There was a time when it was confi- I dently predicted that Duluth was to become the greatest flour milling ' city of the country. In 1895 it ranked second in the country in the production of flour, and then had 10 mills with a daily capacity of 19,000 barrels. One of the writers of that time, in a review of the flour industry of the city, has left the following record; ‘‘It is only a question of a very few years wlien the great Inilk of the wheat grown in northern Minnesota and the Dakotas will be ground into flour at the head of tho lakes. The advantages possessed by Duluth over Minneapolis as a point for milling are too plain to require elaborate illustration. A look at the map is all that is needed. The geographical position of Duluth at the head of deep-water navigation is supreme. She sits in the middle of a channel through which the No. 1 hard wheat of the North¬ west must naturally find its way to the markets of the East and Europe. MTiatever portion of this wheat is used by the Minneapolis mills is diverted from this channel \ at the expense of those mills and to the proportionate advantage of the D^iluth mills, ^ so it requires no lengthy argument to shoAV that Duluth must soon pass Minnoapolis : as a milling center. ” In 1899 the milling capacity at Dulutli-Superior was listed at about 1 20,000 barrels daily. In that year the United States Milling Co., ^ which Avas organized by a New York City promoter for the operation | of mills at various points, acquired practically the entire capacity at Duluth-Superior. They also acquired a controlling interest in the J mills of the NortliAvestern Consolidated Milling Co. at Minneapolis. | Within less than a year the company went into bankruptcy and a | Minneapolis operator was named as receiver. During the reorganiza- i tion several of the mills at Duluth-Superior were closed down and some . J of the smaller mills were Imrncd in a large fire at a later time. This | left Duluth in a temporarily weakened position as compared with J Minneapolis in the development of the wheat-milling industry, | Tlie Minneapolis interests were also alloAved certain transit pri vilegivs ^ o]i wheat and wheat products not enjoyed by Dulutli, Avhich assisted \ the former millers in marketing flour. (See Chap. II, sec. 5). i As a result of this situation and of the rapid development of flour , production at Minneapolis, milling at Duluth-Superior has failed to- r realize the predictions of 25 A^ears ago. S8 History of Duluth and St. Louis County, vol. 1, p. 170. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 155 'To-day there are only two large hour mills in the Duluth-Superior district with an aggregate daily capacity of 6,500 barrels. The Duluth Board of Trade. —The Board of Trade was organized at Duluth contemporaneously with that at Minneapolis, that is, ISSl. From an original membership of 11, the exchange grew to 200 in less than hve years, more than half of whom were active grain dealers. The membership has scarcely increased beyond that pomt although the personnel has become almost wholly devoted to grain. About one-fourfh of the membershi}) is made up of traders doing business both in Duluth and Mmneapolis. Reference to Chapter V will show in detail the rules and regula¬ tions under w'hich these members operate. A classification of the active members appears in the following table: Table 53. — Classification of resident members in the grain trade, Duluth Board of Trade, 1917. Engaged exclu¬ sively. Engaged prima¬ rily. Total. Engaged second¬ arily. Cash cotnmissiou.;. 1 69 70 12 Terminal elevators..... 22 4 26 other dealers'. 2 2 4 Consumers 2 ..... 10 10 Line and country elevators. ‘6 3 10 Shippers (notoperating terminals).^. 4 6 10 9 Future commissions, . 2 1 3 83 41 ... -m . 85 126 114 Gu 1 0 1 town members: Other exchanges... 56 Cniintrv el evatnrs ... 3 59 16 Not in grain business. 201 1 Includes all not in other classes. 2 Millers, malsters, linseed crushers, etc. 3 Includes -wire houses. It will be noted that the cash commission men, as in Minneapolis, constitute the most numerous group in this market. However, as shown in another volume of the report, there exists a financial dependency between a majority of the receivers and certain terminal elevators such as to preclude the division pf trading interests which characterizes some of the other markets. (See" Vol. III.) The number of members representing line elevators on this exchange is relative^ small and the milling and converting interests are likewise of lesser importance. There are some 10 members representing commission house shippers (i. e., shippers not operating elevators). The future commission business is carried on largely as a secondary matter by concerns primarily interested in the cash commission business. 27Annual Report for 1885, p. 11. 156 TERMINAL GRAIN MARKETS AND EXCHANGES. The SurERioR Board of Trade.— A rival organization known a.s tlio Superior Board of Trade was created in the adjacent city of Superior in 1904. Soon thereafter the Duluth Board of Trade adopted a rule tJiat none of its members could hold membership in a similar organization within a radius of 100 miles.As a result prac¬ tically all the grain men in in the market were compelled to coniine their operations to the larger exchange and the Superior Board of Trade lost most of its business. At present the grain receivers in Superior sell largely to Duluth elevator interests directly without em¬ ploying exchange agencies. Inspection and weighing controversy. —The services of weigh¬ ing and inspection at Duluth-Superior are now performed by the Minnesota or the Wisconsin State agencies, respectively. There was no State control of grain inspection and warehousing in Wiscon¬ sin prior to 1905 when the Wisconsin Legislature provided for a State grain and warehouse commission.^® An examination of considerable evidence indicates that the fairest statement of the controversy leading to the passage of this act, and the subsequent administrative difficulties of the commission appointed, was made by the governor of Wisconsin in his annual message, 1905: At the last session, the legislature enacted chapters 19 and 317, creating a grain and warehouse commission for the State of Wisconsin, and providing for licensing and regulating warehouses and elevators, and for the storage, weighing, and inspection of grain in the city of Superior, and conditionally at other points in said State. This legislation was the«outcome of a prolonged contest between railroad and ele¬ vator interests upon the one side and citizens of Superior, fai’mers of the Northwest, and millers of the East upon the other. Its object was to secure uniform grades of grain, and an inspection of the same which should be just both to the producer and the miller. Under the system which had prevailed prior to the passage of tliis legislation, it was claimed that the elevator and railroad interests doing business at the city of Superior so manipulated grades and inspection as to work a great injustice to both producers and millers, reserving enormous profits to themselves to which they were not entitled. As was to be expected, the railroads and the elevators combined to defeat the opera¬ tion of these laws, and, it is claimed hy the grain and warehouse commission are openly defying them. In a communication to the executive the grain and warehouse commission states: “In attempting to enforce this law, we have met with the stubborn opposition of not only the railroads, elevators, and mills in the city of Superior, but also the Duluth Board of Trade. 28 The situation was described in the Milwaukee Sentinel (Feb. 27,1908) as follows: In the summer of 1905 after the passage of the Wisconsin inspection law the business of the Superior Board of Trade became much more active and much enthusiasm was shown. Many new members were taken in and the price of mem¬ bership ran up from $50 as high as $250 and $300. In the fall, owing to the closing of the elevators, no ware¬ house receipts were issued in Superior and the trading on the board was largely for Minneapolis or Cliicago delivery. (Transcript by Wisconsin Legislative Reference Library.) I.aws of Wisconsin, 1905, p. 19. One member of the commission was to be appointed from Wisconsin end one each from North Dakota and New York on the nomination of the governors of the respective States. Copy furnished by Legislative Reference Library, Madison, IVis DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 157' The failure of the Wisconsin commission to collect its fees and re¬ ceive the support of the Superior elevators led to a further compro¬ mise in 1907, whereby coarse grains received into the Duluth- Superior market arc inspected by Wisconsin officials and wheat in¬ spected by Minnesota officials.^^ Development of elevator capacity. —Whereas in the year 1883 there were but 4 elevators in Duluth with an aggregate capacity of 3,160,000 bushels, by the year 1918, 27 elevators had been constructed with a rated capacity of more than 35,000,000 bushels. Duluth is, therefore, third in elevator capacity among the primary markets. As noted in Chapter V, section 12, either public or private elevators may become regular under the Board of Trade rules. Public termi¬ nal elevators in Duluth, as in Minneapolis, may be licensed by the State Railroad and Warehouse Commission. Recently the list of regular elevators under Board of Trade supervision has included no liouses holding a State license. Regular elevators are distinguished only by the fact that their receipts are deliverable on future con¬ tracts. Fifteen out of 27 elevators in the market had been declared regular by the Board of Trade in 1918, and offered an aggregate capacity of 26,400,000 bushels. The capacity of elevators declared regular imder Duluth Board of Trade rules, therefore, exceeds that maintained as regular in either Chicago or Kansas City. The cash grain market. —^As already noted, the great bulk . of the grain business has consisted in shipments by lake to eastern markets for export,® or in direct exports from the head of the lakes. For this reason, the terminal elevator interests at Duluth are of controlling importance. Moreover, the shipping business is suf¬ ficiently large to support a group of shippers or dealers who do not operate elevators but assume the shipping function between certain elevatora and eastern or European buyers.'^" Such a condition scarcely exists in any other interior grain market. Duluth is also characterized as a ^‘surplus market’^ by local dealers, on the ground that only such part of the northwestern crop as is not required by Minneapolis mills may be diverted to Duluth.^^ Durum wheat. ^About 25 per cent of the total wheat receipts during 1917 and about 22 per cent during 1916 consisted of durum SI The agreement as finally perfected was reported by the Milwaukee Free Press (Dec. 31,1907) as follows: Following is the agreement imder which the commission will work: Wisconsin officials to do all weighing in and out. Wisconsin inspection of all coarse grains, including barley, rye, com, and oats, in and out: Wisconsin inspection of wheat and flax, in and out, when requested by the owners. Mills and elevators to buy grain in Superior without discrimination against members of either Superior or Duluth boards of trade when usual commission is charged. Proper facilities to be furnished for storing Wisconsin inspected grain and flax. 32 See Table 53 33 Cf. p. 154. For example, wheat receipts were over 91 million bushels in 1915, and only 39 million bushels-in 1910. o Or consumption to a lesser extent. 158 TEEMINiVL GKAIK MARKETS AKD EXCHANGES. wlieat. The trade in this cereal has been a conspicuous feature of the market since 1903. Although at first refused by millers it has been found to produce the standard semolina for macaroni and has a steady demand on that account in Europe and America. Tlie bulk of the trading in the Duluth market is not characterizr^d by such sharp competition and commercial antagonisms as are evi¬ dent in some of the other markets. The elevator companies consti¬ tute the only considerable buying group in the market. Two-tliicds of the receivers are so identified with or obligated to elevator concerns as to operate practically as country buying agents of these elevators in a coherent shipping system. The futures market. —Future trading in Duluth issmahin voiume^ and the exchange mamtains but one pit. The chief features of the futures market are the trade in durum as well as spring wheat, and in flaxseed. There is no future trading in either durum or flaxseed elsewhere in the United States. The Duluth Board of Trade Clearing Association was incorporated in 1909 for settling regular future contracts. As in Minneapolis, the clearing house is an independent organization, although closely super- f vised by the Board of Trade. The plan of clearing and assumption of responsibility for trades cleared is similar to that which obtains in Minneapolis. Membership in the clearing house is separate from that in the Board of Trade, each member being required to subscribe to at least 5 shares and not more than 25 shares of stock. ’ Section 4. Kansas City. Origins. —Accessibility to the most productive area of hard winter wheat siipplemehted by a concentration of railroad terminals led to the development of a large grain market at Kansas City. The milling industry which was built up because of the flouring properties of this variety of wheat created a steady buying demand in and near the market. However, Kansas City has been predominantly a shipping market rather than a consumptive center and is quite comparable in ' this respect to Chicago. It is a generally accepted fact that the original seed for Kansas liard winter wheat was brought in by Kussian Mennonite immigrants from the Crimea. It was soon discovered that this seed resembled the hard spring wheat of Minnesota and its cultivation was extended through the Southwest during the seventies. Not until after 1870 did grain begin to be shipped east from Kamsas City in appreciable quantities. In 1871 the first giMin elevator (100,000 bushels capacity) was built. This was followed in 1874 by the erection of two other elevators of a combined capacity of 400,000 busliels. These elevator facilities furnished a basis for trading in both cash and contract grain on the newly organized Board of Trade. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 159 ■ St. Louis, however, still continued to attract most of the grain from Ka nsas and the West; the railroads favoring the longer haul by granting through rates lower than the combination of the rates from producihg points to Kansas City and from Kansas City to St. Louis. It was not until several short-line railroads were built from Kansas City into the grain belt that the Kansas City grain market obtained an equal footing with St. Louis in the matter of freight rates and elevator facilities. These new stub lines in order to secure grain traffic, built and operated terminal elevators in Kansas City and gave free transfer and storage to shippers and dealers. Trunk lines such as the Santa Fe and the Burlington also constructed ter¬ minal elevators and absorbed elevation and transfer charges. AU this enhanced the advantages of Kansas Citv as a terminal market. The sharp increase in terminal receipts during 1875, and' the rapid development of the market thereafter, appears in the following ta])ulation: Table 54. — Receipts of grain at Kansas City, 1871 to 1880. Year. Wheat. Corn. Oats. Rye. Barley. 1871 . 687,000 350,000 • 1872. 289; 726 6 I 0 ; 804 93,695 105,200 12,921 3,087 12,380 37,4.50 15,100 109,045 203,341 136,257 82,894 82 894 1873. 750,400 836,300 10,500 1874. 37i;273 ^ 711 ; 367 210 ; 475 3 ; 400 40,000 1875. 1,256; 237 1,258;700 382;^ 1876. 1,820,297 2,259,572 5,769,395 5,881,703 111', 241 396;6i2 329,887 352,262 184,046 1877. I 8 O; 657 1878. 9 ; 014;'291 4 ; 911 ', 529 155 ; 089 1879. 6,417,952 4,093,528 4,121,904 276,775 1880. 4,421,760 366,486 65', 267 The Kansas City Board of Trade. —A general commercial body for the promotion of local trade and commerce was organized at Kansas Cit}^ in 1869 and was incorporated in 1876. Tlie objects of this corporation were substantially identical with those adopted by the Chicago Board of Trade in its charter of 1869 (see p. 191). With the increase of the trade in grain the Board of Trade became wholly a grain exchange as it is to-day. Future trading (by means of a ‘‘calF’) was introduced in the year of incorporation and later became a permanent feature of the exchange. Memherslii]}—admission and requirements .—Membership on the Kansas City Board of Trade has apparently been treated by exchange representatives as a privilege rather than as property; although no record is at hand substantiating this theory. The present member¬ ship, 199, is practically of the same size as that of the Duluth Board of Trade. As on the other exchanges, the certificates are transferable and it has been considered disadvantageous to allow memberships to ‘‘l)ecDme vacant.’’ dlie secretary has been authorized to sell mem- 160 TERMINAL GRAIN MARKETS AND EXCHANGES, })erslups to fill vacancies as follows: In 1907, one for $2,500; 1909, one for $2,700; 1910, one for $2,500; 1913, one for $2,600. Glassification of members .—From Table 55 below it appears that only 17 members (less than 9 per cent) are nonresident. It should be understood that fully 10 per cent more of the personnel is derived from liranch offices of Chicago concerns. These include terminal elevators, wire houses, and shipping and brokerage firms. Table 55. — Classification of resident memhers in the grain trade, Kansas City Board of Trade, 1917. Engaged. * Exclu¬ sively. Pri¬ marily. Total. Second¬ arily. Cash eommission. 4 74 78 58 Terininal elevators. 1 34 35 6 other dealers *... 9 7 16 Consumers 2 . 11 3 14 Line elevators. 4 4 8 8 Shippers, not operating terminal. 1 1 38 FHtnVft commission.. 10 7 17 121 Nonresident members in erain trade .. 40 129 169 17 229 Not in vrain trade....__ 3 13 Total members.. 199 > All not included in other classes. 2 Millers, malsters, linseed crushers, etc. 3 See p. 194. It will be noted from the foregoing table that the cash commis¬ sion men form the most numerous group on the board and are apparently in a position to control the policies of the exchange. This power of the receivers’ group is, however, more apparent than real. The wide connections of the terminal elevator operators and their unity of interest have enabled them to assume leadership in the affairs of the board. The fact that most of them carry on a com¬ mission business in addition to merchandising places them in direct competition with all other receivers. It is charged by small operators that the elevator interests act as a united group to secure favorable rules and regulations. A list of the officers and directors, July 1, 1918, showed that 7 out of 15 had elevator connections; that another one owned and op¬ erated a line elevator; while the remaining 7 represented small grain dealers. It is alleged by the smaller dealers that the elevator interests ob¬ tained the recent amendment to the commission rule for buying and shipping, and that this rule in practice operates to their ad¬ vantage. Although Kansas is a prominent milling State the mills are widely distributed and not concentrated at Kansas City. The group of consumers is, therefore, relatively small. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 161 Another outstanding fact in the classification-is that a majority of all members carry on a certain amount of future commission busi¬ ness. Operating reveu'we and expense ,—The chief sources of income for the association have been (1) assessments upon members, (2) membership transfer fees, (3) sampling department, (4) weighing department. The assumption of inspection and weighing by the St-ate has cut down the income from those sources. Assessments are expected to cover expenses which can not be otherwise defrayed. The excess of income over expenditures was $683.83 for 1914 and $537.34 for 1015. A small deficit was incurred in 1916 as the follow¬ ing published statement shows: Board of Trade of Kansas City, Mo.—Income and expendilure account for the year ended December 30, 1916. .$3,000.00 . 10,000.00 $1,176. 00 1 , ] 00 . 00 505. 85 422. 50 192. 00 -^- 3,396.35 . 582. 60 . 7, 000. 00 23, 978. 95 Membership as-sessmeiits. 12, 000. 00 35, 978. 95 Deficiency of income for year. 139. 33 37, 418.33 EXPENDITURES. INCOME. Sampling department. Weighing department. Floor privileges: Admissions.. Annual permits... Messengers. Telephones. Tables. Market quotations. Membership transfer fees..... Salaries.. Kent. Legal expense. Postage. Printing. Stationery and office supplies. Telephones. Market reports (wire). Iriirniture and fixtures and repairs Dues: Council of Grain Exchanges. $240. 00 United States Chamber of Commerce. 90. 00 Round Table. 6. 00 Expense of delegates. 108093^—20-n $11, 547. 50 2, 400. 00 600. 00 140. 00 352. 72 293. 24 1, 326. 84 8, 292. 15 2, 737. 36 336. 00 543. 55 162 TERMINAL GRAIN MARKETS AND EXCHANGES. Expenses in rate and other eases: Missouri rate case. $899. 03 Shrinkage case. 25G. 50 Missouri grain dealers. 49. 98 Omaha Grain Exchange. 130. 00 AVestern transit rate case. 22. 62 Lake line case. 10. 00 $1, 368. ]:} Appropriations: Transportation bureau Kansas City Commercial Club. 4 , 640. 75 Crop improvement committee Council of Gmin Exchanges. 1, 500. 00 Entertainment of grain dealers and managers of cooperative elevators. 333. 38 Rivers and harbors congress. 50. 00 Freight bureau, Milwaukee Chamber of Commerce. 10. 00 - 7, 034. 13 Miscellaneous...-. 71 37, 418. 33 Elevator facilities.— Since Kansas City functions so largely as an interior concentration point, the elevator facilities are of pri¬ mary importance. Beginning with one small warehouse in 1871, the rated elevator capacity has gradually increased to about 24,000,000 bushels. About 35 per cent (8,500,000 bushels) of tha rated capacity is owned outright by Chicago interests, and there are other working arrangements between elevators in the two markets. About 89 per cent of the total rated capacity is leased or rented from the railroads. The railroads built the elevators in the early days to provide traffic at the terminal, and elevator facilities have always played a prominent part in Kansas City transportation problems. (See p. 57.) About 6 per cent of the total capacity is owned by millers and converters, although the great majority of the houses are operated for storage and transfer purposes. The “regular elevators’’ have an aggregate capacity exceeding 20,000,000 bushels and include both “public” and “private” houses. Tliat is, practically all the storage elevators of the market conform to the regisU’ation and other requirements of the rules for “regular elevators,” and may issue receipts deliverable on future contracts. As in the other markets the available “public” storage is an uncer¬ tain quantity. Any merchandiser owning an elevator can conform to the public warehouse law without seriously interfering with his j)rivate business. Other facilities. —The weighing, inspection, and transporta¬ tion and quotation facilities are discussed elsewhere in the report. , Tiu' board contributes $3,000 annually to a local transportation bureau and maintains a clerk in this agency to compile freight rates. DEVELOP.\[ENT OF OTHER MARKETS AND EXUHANGES. 163 Quotations are distributed according to formal contracts had with the Western Union and Postal Telegraph Companies. As in the case of the Chicago Board of Trade, the exchange as well as the telegraph companies is party to each contract made with an appli¬ cant for continuous grain quotations'’ service, so that the hoard may control the use made of quotations. With reference to the collection of prices it is agreed between the ])oard and the companies that— Suck (quotations shall be collected by the board of trade in the different parts of said Exchange Hall and be delivered on the floor of said Exchange Hall to the au¬ thorized representatives of said telegraph companies at such place or places and in such Avay or method as said board of trade may determine. The said board of trade agrees to employ or cause to be employed without expense to the telegraph com- qmriies a sufficient number of competent j^ersons for the purpose of collecting and delivering the said quotations of prices, so that the telegraph companies shall obtain complete and continuous quotations throughout all sessions of said board of trade of the prices at which all grains dealt in on said l)oard of trade are bought and sold. Tlie said telegraph companies agree to employ, without expense to the board of trade, a sufficient number of operators and any other competent persons necessary to receive and transmit said cquotations. ^ Tlic Kansas City board receives no compensation for the quotation privilege. Continuous quotations of futures"are exchanged with the Chicago Board of Trade. The cash market.— More titan one-half of all grain shipped Ity Kansas country elevators, and about one-fourth of tlie shipments from Nebraska go to Kansas City. As the tables in Chapter I in¬ dicate, Kansas City is probably third market in wheat receipts and third in corn. The leading cereal in both cash and future trade is wheat (mostly of the “hard winter” variety). Trading in the other grains is conducted on a much less extensive scale. Of the grain received during 1913-1917, about 68 per cent was shipped in on consignment and about 32 per cent was bought directly from outside points. , The terminal elevators were the largest buyers in the market, taking 48 per cent of all grain sold in the market Consumers (millers, manufacturers, and feeders) bought about 25 per cent of the grain received, and houses listed as “commission men” about 5 per cent on a to-arrive basis. Other dealers purchased 19 per cent. Approximately 75 per cent of all grain received^® .was shipped out. While the consumers constitute a steady attractive force in the market, by far the strongest buying group is that of the terminal elevators. These latter operators even compete with the commission Based cn 101,711 ears received during 1913-1917, inclusive. •«Thc published figures for receipts and shipments (1913-1917, inclusive) showed that 77.39 per cent of Ihe grain received at the terminal was shipped out. A s'peeial study of actual ears sold showed 71.5 jjcr cent sold and shipped to outside buyers by the receivers. 164 TERMI^nAL grain markets and exchanges. men as receivers and shippers. Perhaps the most significant fact of tile cash market is the failure of the commission men to obtain control of the receiving business. The futures market. —Future trading has existed throughout the life of the present association, one pit being maintained for that purpose.^^ The volume of future transactions on the Kansas City Board of Trade compared with the trading on the Chicago Board of Trade is relativeh" small. The total futures transactions cleared during the six years 1913-1918, as reported by the exchange clearing house, were as follows: Bushels. ]9L:I. 1,242,004,000 1014. 1,338,252,000 1915 . 1,430,644,000 1916 .'.. 2,004,786,000 1917 .-.. 1,156,352,000 1918 . 507,058,000 Included in the foregoing figures are transactions in wheat (except for 1918), corn, and oats. There is no record of future trading in milo maize, though the exchange provided contract grades in this commodity January, 1916. In 1917 the question was raised as to whether puts and calls should be recognized and a charge prescribed for executing them. The attorney for the board advised that the Supreme Court decision caused him to doubt the legality of these transactions, and a special committee finally brought in an adverse report March 6, 1917. Publicity and promotion of exchange interests. —In pro¬ moting exchange interests through the press and before legislative bodies the Kansas City Board of Trade has taken an active although relatively minor part. The following paragraphs indicate the activi¬ ties of the directors of the board in this regard. August 4, 1908, a special committee was authorized to spend not over $2,500 to try to persuade the Interstate Commerce Commission to permit free elevation at Missouri River terminals. On January 27, 1914, the board voted to contribute $1,000 toward a special fund of $10,000 to be used by the Grain Dealers’ National Association ‘An an endeavor to avert any drastic action or laws that might revolutionize the entire present method of handling grain.” On April 27, 1915, the president was authorized to appoint a secret committee of three to investigate bucketshops in Kansas City and to take remedial measures, including the expenditure of any reasonable sums necessary. On February 5, 1916, the secretary was authorized to publish 5,000 copies of an article by the secretary of the Chicago Board of Trade, entitled Truth and Error in the Economics of the Grain Trade.” 57 See Volumes V and VI on future trading for detailed discussion of futures operations and the clearing house. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 165 Section 5. Omaha. ■ The rate adjustment of 1904.—The Omaha Grain Exchange was organized by officers of the Chicago Great Western Railroad Co., to¬ gether with certain bankers and grain dealers at Ojnaha, during the years 1903-4. Prior to 1904 Omaha had been a railroad center, with an elevator capacity of slightly more than 2,000,000 bushels for transferring grain. Because of an unfavorable adjustment (see Chap. II, p. 46), the bulk of the grain from Nebraska and other territory west of Omaha passed on through without entering mto the trade of this market. A pronounced change in this situation was effected by the promulgation of new proportional rates on June 10, 1904. As a result the elevator capacity was doubled within less than two years, and receipts of all grains increased to nearly 20,000,000 bushels. The combined elevators of Omaha and Council Bluffs were rated at more than 10,000,000 bushels capacity in 1917. There has been a steady increase, especially in the receipts of wheat, corn, and oats. The quantity of rye and barle}^ handled has been comparatively in¬ significant. During the five-year period 1913-1917 the average an¬ nual receipts of the five cereals were as follow^s: Corn, 27,352,000 bushels; wheat, 21,274,000 bushels; oats, 15,864,000 bushels; barley, 872,000 bushels; rye, 805,000 bushels. Organization and membership of the exchange. —The Omaha Grain Exchange is a stock corporation, organized in 1904 for a period of 99 years, with an authorized capital stock of $200,000. Of this authorization $109,000 was outstanding in 1917.It is expected that the revenues of the corporation will be chiefly derived from the sale of memberships, and all money so received in excess of $200,000 must be charged to surplus account and not distributed as dividends. There were, on December 31, 1917, 188 members in good standing. From the evidence at hand there were from 60 to 70 firms actively engaged in the cash business in 1918, but only 43 of these were bonded to transact business on the floor. Under the stock arrange¬ ment the membership is limited to 200. The classification of mem¬ bers appears in the following table: Table 56. —Classification of resident members in the grain trade, Omaha Grain Exchange, 1917. Engaged exclu¬ sively. Engaged prima¬ rily. Total. Engaged second¬ arily. Resident members in grain trade: Cash commission. 22 34 56 60 Terminal elevators. 4 36 40 17 Other dealers ®... 1 1 2 2 Consumers b . 5 4 9 11 Line elevators. 3 10 13 21 Shipr/’TS . 4 4 8 16 Future commission d . 6 ■ ' 7 13 40 45 96 141 167 Out-of-town grain firms. 18 Not in grain business.. 29 47 188 a Includes all not in other classes. <■ Operating without a terminal. Millers, malsters, etc. Includes wire houses. 3* Articles 5 and 8, Articles of Incorjicration, published Apr. 1,1918; also see balance sheet for 1917. 166 TERMINAL GRAIN AIARKETS AND EXCHANGES. Operating revenues. —^Thc following profit and loss statements* for the years 1916 and 1917 indicate the present activities of the ex- chaiiiie and its favorable financial condition: ‘ IXCOMK. Inspection and weighing depaidTiients: Inspection fees... Weighing fees. Tallymen deficiency. Condition reports. Moisture tests. Overtime. Testing scales. Appeals.-. Sample grain.-. Rent of tradhig tables... Telephone rental. Arbitration fees. I^enalties. Rent. Income from other sources: Interest. Transfer fees and special cards. Cash assessments. Total amount income.. EXrEXDlTVRF.S. Inspection and weighing departments; Inspection- Salaries . Rent. Supplies. Miscellaneous... Weighing— Salaries. Weigh credits. Rent. Seale exi)enses.. Supplies. Miscellaneous. Overtime, salaries.. Carfare. Trading hall: Ticker and clock. Salaries.-. Uniforms, supplies, and miscellaneous. Arbitvation. Telephone: Instruments.. Salary. Telegraph. Postage. Prmting and stationery. Office salaries. Office rent and light. Traffic department.. Office equipment.. Subscription and dues. Miscellaneous expenses... Towel supply.-.-. Publicity committee. T^egal expenses. Traveling expenses. Surety bond. Insurance. Taxes. Depreciation, furniture and fixtures. Accounts charged off. * Total expendit nres. Total gain... Loss on leases. Net gain.. 1916 1917 $40,865.33 $51,133.48 36,007 .48 29,121. ;30 100.60 2,021.95 15,343'. 50 12,274.75 4,824.50 2,454.75 2,025.80 919.10 263.30 491.00 90.00 180.00 3,588.82 1,042.85 1,019.50 1,.575.86 1,69.5.86 203.00 218.50 9.75 .50.75 4:3.00 .59.5.63 1,655.70 2,525.00 2,.500.0(» 10,660.00 9,925.00 116,3.55 .60 119,070.46 ! 2:3,140.80 30,158.90 ! 658.24 1 4.:394.48 7,151.15 1 95.13 22,3.57.00 25,731.45 5,998.50 4,775.60 6.58.24 2,073.08 16l3.54 714.01 1,334.00 106.84 3,951.36 3,222.25 6:34.40 758.25 789.90 2,124.02 2,200.68 2,067.00 152.85 486, 9:1 169.00 111. 6.5 1,037.61 1,078.52 600.00 655.00 1:30.61 2^.94 290.12 178.85 .877.01 1,066.38 3,840.00 4,515.50 1,355.75 1,733.50 1,218.86 5,571.51 464.81 1,165.00 1,300.00 455..59 58.09 :34..50 36.00 1,140.2.5 529.00 4,123.70 2,166.67 1,117.00 1,461.54 45.00 43. (RT 126.80 435.25 713.57 781.15 1,303.43 1,540.78 1.65 285.20 i. 86,095.55 ' 103,812.92 30,260.05 15,257.54 5,000.00 1,793.18 25,260.05 . 13,401.36 a Issued bv the exehange^. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 167 'I'iio Omaha Exchange^ unlike most similar associations in the large primary markets, did not have a scries of preceding organizations upon which to build. The exchange was organized as much by bankers and wholesale merchants as by the grain men, and for six yeai*s the president was not chosen from the grain dealers. Only four out of nine of the first board of directors were directly interested in grain. In 1910 the grain dealers obtained control of a majority of the memberships and in the winter of 1911 it was urged that active grain dealers be chosen for the directoiy. At present every officet and director, with the exception of the secretary, is an active dealer in grain. The cash market.— The Omaha Exchange started with a few line companies, local elevators, and shippers carrying on the bulk of cash trading. By 1911 there were 92 active grain members, representing 3(S firms. The line companies had declined appreciably in their busi¬ ness and many small dealers had gained a foothold through the expan¬ sion of the market.'^^ An examination of the records for 227,579 cars of grain received at Omaha from 1913 to 1917 showed that about 58 per cent of the grain was received on consignment and the remainder purchased on a to-arrive or other basis. Of the grain disposed of in the market on first sales the elevators took about 55 per cent (mostly for ship- ])iiig purposes). The great bulk (about 90 per cent) of these re¬ ceipts was ultimately shipped out of the market.It is clear that Omaha is chiefly a transfer and forwarding point. The larger part of the trading takes place between commission men acting for sellers and elevator men operating as buyers and shippers. Trading in futures at Omaha.— Immediatelv after the organiza- tion of the Omaha Exchange future trading was introduced, and carried on from February 1 to December 31, 1904. The total volume of future trades during that period amounted to slightly over 5,000,000 bushels, including wheat, corn, and oats. Another attempt to estab¬ lish a market in futures was made July 5, 1916, and trading continued for some 18 months. Since 1917 the pit has been entirely discon¬ tinued. It seems impossible to conduct future trading successfully at Omaha in competition with the older and firmly established future markets at Chicago, Minneapolis, and Kansas City. The relatively small membership and the smaller volume of receipts of wheat, corn, and oats, as compared with these other three markets, have also constituted handicaps to active and continuous future trading. Section 6. St. Louis. The earla' river market.— The early grain trade at St. Louis was derived from the water traffic on the Mississippi, Missouri, and Illinois Kivers. Prior to 1860 this market held a leading position in the *9 See Nalional Hay and (irain Reporter, May 20, 1911, pp. 94 and 9ti. ** See Vol. IV, Appendix taldes. / 168 TERMINAL GRAIN MARKETS AND EXCHANGES. Mississippi Valley trade as a distributor of water-borne grain (espe¬ cially oats) from the North and West to points South and Southeast.'*^ Tlic srain carried in the river trade was handled in sacks; there w^ere no elevators for bulk grain on the St. Louis levee prior to 1864.^" The inadequacy of the river channels for heavy cargoes and the lack of facilities for handling in bulk constituted limitations upon the grain movement. Even as late as 1865 when the trunk line railroads had reached the Mississippi, rnore than 80 per cent of the grain receipts at St. Louis came by river, as appears in the following statement; Bushels received. Wheat. Oats. Rye. Barley. Totals. Tty river. . 2,756,359 514,529 181,834 3, .502,617 670, .562 208,111 9,457 732,038 114,192 7,199,125 1,308,740 181,834 Ily rail . . ... H V i .. 3,452,722 4,173,179 217,-568 846,230 8,689,099 Development of milling and elevator facilities. —Prior to ^ 1865 the great bulk of wheat received was ground in the city.**^ In that year the market had 16 mills with an annual grind of 743,281 barrels. Owing to the lack of elevator facilities the mills controlled the local ^ stocks of wheat almost up to 1870. St. Louis operated 14 flour mills , as early as 1847, and was the largest milling center in the United States prior to 1880, wLen precedence went to Minneapolis. Consumption of grain by flour and grist mills in 1914 was only about 2,500,000 bushels.^® i Handling in bulk. —It was first proposed to handle grain in bulk at St. Louis in 1860. A resolution to permit the construction , of an elevator in that year was vetoed by the mayor.'*^ , In 1865 a barge company (The Mississippi Valley Transportation j Co.) w^as formed to carry grain in bulk to New'Orleans, thus giving dealers a southern outlet for their grain. Through the efforts of the | Merchants’ Exchange of the city, a small elevator for receiving, stor¬ ing, and shipping grain was begun in 1865 and completed two j ea'rs later. As a result of these improvements, St. Louis no longer de¬ pended entirely on the milling demand to attract wheat to its market. 'LV healthy and paying order demand sprung up from the Eastern and Middle States, sufficient to take any surplus not wanted by the ' millers.”^® Report of the St. Louis Merchants’Exchange for 1882, p. 86. ’ W. B. Stevens, History of St. Louis, 1764-1911, Vol. II, p. 470. ' ' See Report of St. Louis Merchants Exchange for 1865, pp. 34 and 38. << Thus, in 1865, only 62,860 bushels of wheat vvere shipped out of St. Louis, The shipment of oats, how¬ ever, amounted in the same year to 3,083,864 bushcjs, compared with receipts of 4,173,221 bushels. (Annuel report, 1865, pp. 34 and 38.) Report for 1865, p. 22. From a report prepared by the Division of Manufactures of the Bureau of the Census for theFeleral Trade Commission. •t'Stevens, History of St. Louis, II, p. 470. . <8 Report of Merchants Exchange for 1870, p. GO. ■ — 169 DEVELOPMENT OF OTUEP MARKETS AND EXCHANGES. The fil-st important attempt to establish an ex])ort trade came in 1869 when the St. Louis Grain Association ' was organized with 8100,000 capital stock. During the first year 470,000 bushels of wlieat were shipped to Europe, and Avhile the experiment was not profitable the feasibility of the Gulf route was clearly established. After more experience was gained, the export business increased so that in the year 1880 over 15,000,000 bushels were exported by St. Louis houses. In 1906 about 50,000,000 bushels of wheat, corn, and oats were exported through New Orleans and Galveston. This export movement has sometimes been temporarily interrupted through the uncertainty of river iiavigation as compared with that of the Great Lakes and all-rail trunk-line routes to the Atlantic sea¬ board. Likewise the river port is no longer a significant factor in the attraction of grain shipments. The falling off in river receipts was very marked in 1903 and 1904, as is shown by the following table: Table b7.—Shipments and receipts of grain at St. Louis by rail and river, 1896 to 1904d l.sOf) 1.S97, 1598 1599 1900. 1901. 1902. 1903. 1904. Year. Shipmeiits. Receipts. River. Rail. ^ River. Rail. Bushels. 11,652,027 6,813,450 7,276,668 2,669,180 3,943,266 2,975,974 3,900,041 3,295,141 155,355 Bushels. 20,791,121 32,889, .506 .38.317,507 29 ; 234,279 39,254,806 42,849,364 44,704,186 51,609,930 54,796,963 Bushels. 1,555,097 819,438 1,327, 763 1,293,411 1,831,503 1,943,192 2,408,700 554,454 835, 431 ----—. Bushels. 49,579,247 56,781,201 52,945,452 46,950,326 59,31.3,301 58,106,606 68,028,372 68,205,532 61,50.5,507 Report of the Commissioner of Corporations on Transportation by Water, Vol. 2, p. 301. As the table shows, ‘formerly large quantities of wheat, corn, and some oats were sent by river to New Orleans for export, but the building of railroad lines direct to Gulf ports from points in the grain- growing territory w^est of St. Louis and the neglect of systematic river improvement in the Mississippi below the city have greatly decreased the river shipments. The last of the river shipments to New Orleans were taken by the St. Louis Steel Barge Co. (in 1902) and by the St. Louis and Mississippi Valley Transportation Co., which went out of business shortly afterwards.” The promoters of inland deep-waterway development now predict a 1 ‘evival of the grain movement down the Mississippi with New Or¬ leans as a great port of concentration for the tributary area.^® In Report of the Commis-sioaer of Corporations on Transportation by Water, Vol. 2, p. 300, ‘'® The president of the Merchants’ Exchange in welcoming the Grain Dealers National Association, Oct. 13,1919, stated: ‘U indeed esteem it a great privilege to welcome you on behalf of the Merchants’ Exchange, l)robably the oldest grain exchange in the United States. * * * q'jig mayor has told you of the barge line. That barge line, carrying grain to the Gulf, will add to and make St. Louis still larger as a consign¬ ment market. And you will see a beautiful sign if you will go to any one of our present public elevators, now connected with loading facilities to the river, and see a l)arge carrying (50,000 bushels of wheat down the river, the first time in many years. Sixty thousand bushels of wheat or corn means 50 carloads, in one barge.” 170 TERMINAL GRAIN MARKETS AND EXCHANGES. fact the Merchants’ Exchange did appropriate $25,000^ on May 10, 1917, ^Ho be invested in a transportation line, to be operated on the Mississippi Kiver between St. Louis and New Orleans.This line, liowever, is not yet in operation (1919).® The St. Louis Merchants’ Exchange. —The St. Louis’Merchants’ Exchange traces its origin to a merchants’ debating society (known as the Chamber of Commerce) organized in the summer of 1836, and on that precedent may be considered the oldest grain exchange among the primary markets. The 25 business men of this earliest association met monthly to hear papers on commercial topics. They were incorporated in 1837 by special act of the State of Mis¬ souri. This charter required that the property of the association should ‘Liot exceed at any time a sum of $20,000.” Otherwise, they might perform any function ''not contrary to the laws of the land.”^" Although the early chamber did not provide an exchange hall, they did agree upon certain regulations for the grain business and adopted a schedule of commissions “to be charged on sales of produce and lead, on purchases of produce, on payment of freight bills, on advances to customers, on placing insurance, and on adjustment of losses.” The new chamber also fixed a schedule of fees for the arbitration of business disputes which is the earliest record on file of commercial arbitration provided by a grain exchange agency in the United vStates.^^ Although the meeting place of the commercial l)ody was known as the “Merchants’ Exchange and News Room,” it was not until 1849 that the Merchanis’ Exchange was formally established by the cham¬ ber of commerce. A permanent secretary was appointed; news- ])apers were kept on file; regular telegrams showing the state of other markets were received; and trading hours were set from 11 a. m. to 12 noon. The rooms were, during that time, open to everybody, but only members could buy and sell. During the same year a Millers’ Exchange was opened for business in rooms rented near the levee so that samples of grain and produce might be displayed without being exposed on the river front. This exchange was shortly absorbed by the older body. Upon two pine counters, in 24 tin ]>ans, i)egan the selling oi grain and flour by sample : in St. Louis. And this was the inauguration of tlie sample method of trading on : ’Change for the United States. It dates back to the decade of ISlO-1850. The Mer- < chants’ Exchange, which was only two blocks away, sent an invitation to the Mil¬ lers’ Exchange to bring their flour and grain sanqilc^s and do the tiading there. The invitation w-as accepted* " ’ a A barge line was operated during the war by the Director General of Railroads. _ n Mmual Report for 1917, p. 32. Stevens, History of St. JiOuis, Vol. II, pp. IJO-lTi. Idem. »’ .‘^tevens’ History of St. Louis, 17G1-1911, Vol. II, p. 181. development of OTHER VtARKETS AND EXCHANGES. 171 A special chamber of commerce building was erected in 1857^ in which the Merchants’ Exchange occupied the second floor, at an annual rental of $2,500. The Exchange hall was 101 feet long by SO feet wide, with a distance of 63 feet from the floor to the apex of the dome. It was pro])ably the best equipped commereia] hall of its day in the country. The Civil War disrupted the chamber of commerce because of a division of sympathies between the members, with the result that there was organized what was called the Union Merchants’ Exchange. This group had withdrawn from the other members at the time of the annual election in 1862. In March, 1863, they were incorporated, and later (1875) the name Avas changed to Merchants’ Exchange of St. Louis. The corporate history of the present body, therefore, dates from the Civil War. In 1871 they absorbed the St. Louis Grain Association, Avhich liad been organized a few years previously as an independent exchange for the purpose of marketing surplus receipts nbt taken by the local mills. Memhersliip j^olicy .—Embracing as it did the various trades of the city the membership of the exchange continued to expand so long as it Avas on a subscription basis. The largest membership Avas reached in 1883, Avhen it totaled 3,565 members. In 1882 the old form of ^^subscribing” memberships Avas abolished and membership " certificates aawc issued and made transferable.^® The initiation fed on May 1, 1882, Avas fixed at $2,500.^^ Since that time the number of memberships has progressively declined, due to the redemption and forfeiture of outstanding certificates.^* As Table 55 shows, there. Avere only 942 members in 1917, and the membei-ship is noAv limited ’ to the outstanding certificates. This policy has not as yet greatly increascAl the market value of the certificates, AAdiich ranges below $200. A large portion of the membership is inactive, retaining the Certificates only to obtain membership commission rates. Expenditures by the exchange for the redemption of unused certifi¬ cates over a 5-year period haA^e been as follows: . $3,450.00 1914. 3,300.00 1915.. 3,000.00 1910..... 3, 20(».00 1917. 45,200.00 Reports of the Merchants’ Exchange, 1869, p. 11; 1S71, p. 8. Cf. p. 73 for Chicago practice. Annual Report 1892, p. 10. See also Directors’ Report for 1897, in which they state The time is near at hand when the number of outstanding memberships will have been reduced to the actual requirements of business, resulting in ait iircreased value for certificates.’: Annual Report, 1832, p. 9. 172 TERMINAL GRAIN MARKETS AND EXCHANGES.. A reduction of 119 members was effected in 1917 as follows: Purchased and canceled 100, as provided for by an order of the board under section 38 of Rule XIII; redeemed 11 certificates of deceased members; resigned 1; 5 for- leited for nonpayment of dues, and the certificates of two members were canceled, the members being placed on the list of honorary members. * * * »» Classification of memhers.—iCaQ table below shows a classification of the resident members in the grain trade at the close of 1917. Table No. 58.— Classification Kesident members in grain trade; ('ash commission. Terminal elevators. Other dealers i. Consumers'-... Line elevators. Shippers ^. Future commission * . Out-of-town members: Other exchanges.. Adjacent territory. Not in grain business.. Total. of resident members in the grain chants^ Exchange, 1917. trade, St. Louis Mer- gel lu- ly. Engaged prima¬ rily. Total. Engaged second¬ arily. 40 109 149 24 12 9 21 15 74 74 81 7 88 4 4 3 4 3 7 62 43 3 46 84 254 135 389 188 61 128 189 364 942 1 Feeders, and all others not included in other classes. 2 Millers, malsters, etc. 3 Operatiirg without terminal elevator facilities. * Including wire houses. Examination of the table shows that the cash commission men are by far the most numerous on the exchange and that the buyers for millers and manufacturers constitute a relatively large group. .The bulk of the grain storage of the market is owned by these latter inter¬ ests and public warehousing at St. Louis is insignificant in comparison to that business at Chicago, Minneapolis, and Kansas City. The ])ulk of the grain which passes eastward (or southeastward) is recon¬ signed without going to storage. Operating revenue and expense .—The treasurer’s statement of cur¬ rent receipts and expenditures for the calendar year 1917, which fol¬ lows, shows the trading facilities maintained by the exchange. Receipts: Balance on band, Jan. 1, 1917. |2, 820. 57 Received from assessments. 108, 500. 00 * Received from department of wmigbts. 42,135.78 Received from hay department... G, 070. 00 Received from telegraph counters. 3, 700. 02 Received from transfer fees. 3,100. 00 Received from drawer rents..*.. 1, 333. 25 Received from interest. 1, 025. 71 Received from long-distant telephone booths. 888, 00 i Received from nonresident tickets. 500. 00 ^ 1917 Report. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 173 Receipts—Continued. Received from sweepings. Received from private telephone booths Received from messenger tickets. $452. 20 266. 00 160. 00 Total receipts. Expenditures: Department of weights. | 4 g^ 045. 79 Redemptions. 45 ’ 200 . 00 Salaries. 702 70 Telegraph account... 16 ^ 447 og Traffic department.' _ 55 046 52 Transferred to real estate account. 5 ^ 500. 00 Hay department.. 5 ^ 045. 75 Delegates to conferences and conventions. 3 . 255. 05 Telephone service... 2 462 05^ Printing and stationery. 4 ^ 74 g 47 State ex rel. v. Merchants’ Exchange.. 1 , 460. 32 Annual report." l’030. 85 Su 4 )plie 8 , lavatory and porters’. g 47 . 40 Attorney. 75 O. oo Flour inspector. 739 qo Provision inspector. 600. 00 Postap..... 571.76 Contribution—Missouri Federated Road Association. 500. 00 Contribution—Mississippi Valley Waterways Association. 500. 00 Sanitary cups, water and ice. 354 . 40 Dues—Chamber of Commerce of the United States of ^nierica. 300 . 00 Rt^pairs. 243. 91 Board of directors. 225. 75 Dues—Council of Grain Exchanges. 200 . 00 Books, papers, price currents, etc. 407. 50 Judges of election. 63.00 Taxes for 1917. 50. 97 Sundries... 946 . 75 170, 931. 53 Total expenditures... 470 ^ 342 . 02 Balance on hand, Dec. 31, 1917. 619. 51 It will be noted from this statement that 63 per cent, or $108,500, of the revenues for that year were derived from assessments upon members; and that this assessment was all necessary to meet operating expenses. The principal expenditures have been for the following objects: The weighing department (now superseded by the State of Missouri); administrative salaries; the telegraph account (market in¬ formation service); and the traffic department. Elevator and warehouse facilities. —As already stated, the fu’st public warehouse for bulk grain was completed in 1865. In 1872 there was one 1,250,000-bushel house and 1,600,000 bushels capacity distributed among five other houses. Between 1882 and 1891 the storage capacity increased to more than 11,000,000 bushels. Owing, however, to the decline in river grain 174 TERMINAL GRAIN MARKETS AND EXCHANGES. movement and the competition with Kansas City, Omaha, and other recently developed western markets the storage capacity has shown a marked decline. (Sec Ch. II, sec. 5.) The public elevators in the St. Louis market may and do operate as merchandisers, since the Illinois warehouse law does not apply t<* Ihist St. Louis.®® The 10 '^public” elevators (with an aggregate ca¬ pacity of 4,750,000 bushels Jan., 1918) are operated by grain dealers. TJie 32 private” elevators are practically all operated by millers, brewers, and other converters, and possess a rated capacity of 4,776,500 bushels.®^ The Mississippi Valley and Burlington elevators have rated capacities of 1,500,000 and 1,300,000 bushels, respectively. The Anheuser-Busch Brewing Association has maintained a private house of 1,660,000 bushels capacity. The remaining houses are small. Little grain is bought for storage on the Merchants ’ Exchange, the bulk trointr to consumers or distributors. The CASH market. —A regular trading floor for cash contracts was conducted by the Merchants’ Exchange after the absorption of the millers’ association (about 1850). About 1876 the call method of trading was introduced for both spot -and futures contracts. The call board was vciy active for more than 20 years. It has practically ceased since 1897, although still provided for in the rules.®- These call board transactions (both in cash and futures), as shown by the annual reports of the merchants’ exchange from 1876 to 1897, are ofiven in the following table: T 'Vble 59. — Cash and future a call board transactions, St. Louis Merchants' Exchmiffe, 1S76 to 1897. [Car lots reduced to bushels, OOO's omitted.] Year. Wheat. * Corn. Oats. Rye. Cash. Futures. Cash. Futures. Cash. Futures. - Ca.sh. Futures. 1870. 1,268 22,853 5,881 10,895 600 1,030 95 97 1877. '910 7,162 3,670 14,345 335 2,340 128 78 3878. 3,530 9,645 2,665 10,645 695 3,218 233 270 3879. 4,441 18,505 1,780 25,165 983 6,170 101 120 1880. 10,287 39 ; 080 7,287 39,115 1,231 5,315 82 55 3881.. 7,114 64,275 10,808 87,585 2,489 21,630 185 110 1SS9 11,822 77,885 9,668 97,405 4,514 26,155 121 8^659 105' 160 12,560 105,860 3,944 21,175 286 8,378 105,316 8,970 99,650. 2,188- 20,580 ITO 2,392 109 '480 9,733 72,720 2)478 18,140 201 4,862 85,855 4,270 57,410 1,994 12,475 48 1.SS7 3,588 86,170 2,322 62,735 1,377 12,740 86 1,130 87,895 4,331 61,995 1,821 16,580 87 3,541 52,205 6)180 51,010 1,273 8,325 192 3,192 71 ', 890 7,502 53,980 803 12,305 145 1891. 10^385 62', 160 5,898 48,120 1,326 9,255 72 1 RQO 7,089 55,095 5,464 45,435 895 10,575 104 ' 48) 815 4,540 39,230 602 4,265 63 4 '968 39 ) 520 3,564 35,705 846 oSo" 48 3 357 39)860 3,322 > 35,265 638 7,980 71 isioa 3 ’ 522 38,3^ 3)654 ■ 34,590 892 6,405 70 1897.. '240 20,055 920 17,065 130 2,380 10 . :• « This does not include all future trading. See annual report for 1897,. p. 184. The law defining public warehouses of class A relates to cities of over 100,000 populatioii. Annual report for 1917, p. 101% Rule XI, 1017 edition, p. 47. DEVl'lLOPMENT OF OTHER MARKETS A:ND EXCHANGES. 175 llie cxchaiigc is eoiicenicd primarily with the grain and flour trade, although its membership comprises all trades and industries in the city. It differs from most of the other western irrain ex- changes, in that the flour trade is as important as that in grain. There is also extensive trading in hay, provisions, produce, seeds, and castor beans. A feature of the grain market is the trade in soft, red winter wheat, which is concentrated at this terminal. A- d e f ^ 10, b 71 c a i s received by St. Louis traders durimj: _ * ^ * 1913-1917 showed that 56 per cent were shipped in on consignment and the remainder purchased direct from outside points; 62 per cent of the direct purchases were made by consumers. tlie ^ram sold in the market, the consumers (millers, converters, and feeders) were likewise the largest buyers, taking about 47 per cent of the cars examined. The elevators took 25 per cent. The futures market. —As Table 59 shows, trading in futures lias been conducted since the early seventies, but never on a scale comparable Avith that in (Licago, Minneapolis, or Kansas City to-day. There is no great conGentration of contract grain and tlie market is comparatively free from large speculative operations.®* Section 7. Peoria. The Peoria market.— Peoria, as the maps show (pp. 32, 33), lies in the^ center of an area of dense corn and oats production. The early market was developed through its river shipping facilities, the movement being toward St. Louis. A regular line of packets was operated between the two river ports for a long period. Pe- ccntly, however, the larger part of the river traffic has been by barges and canal boats. Railway connection Avas established between Lhicago and Peoria in 1854. Peoria is noAV a “rate breaking’’ point AA'ith connections on 14 railroads, although possessing no trunk line terminals such as those in Chicago. The Peoria Board of Trade has for maiw years alleged a rate discrimination by trunk-line roads in favor of Chicago (see p. 45). The grain sliipping business, Avhile active, has been of less conse¬ quence to the market than the consumptiA^e demand of local distilleries and cereal food manufacturers. During 1913-1917 about 58 per cent of coiii receipts, 53 per cent of barley, and 20 per cent of rye receipts Avere consumed in the local market. (See Table S, p. 24.) Peoria Avas second among the primary markets in the United States in con¬ sumption of corn during 1913-1917, using on the average (in all Avays) nearly 14,000,000 bushels annuallv. The Peoria Board of Trade. —The earliest board of trade in Peoria aatis incorporated in 1857. The present body Avas organized “ Sec general tables, A'ol. IV. See \*ol. A', cli. 1, lor more detailed discussion. 176 TERMINAL GRAIN MARKETS AND EXCHANGES. in 1869 au(] incorporated the next year under the general laws of Illinois. About 135 memberships are outstanding to-day, the recent market Table (1918) being about $400. The price of a ^Areasury member¬ ship” (^‘initiation fee”) is fixed at $1,000. Further expansion of tlie association is thus restricted, as on the other larger western exchanges. A transfer fee of $50 is charged except as between mem- ])ers of a single firm. Memberships maybe owned either by individ¬ uals or by a firm itself.®^ It will be noted from the following table tliat although tliere is no pit trading at Peoria there are five future commission houses which liold memberships on the Board of Trade. These are branch offices of Chicago wire houses which handle the Peoria futures business and also serve the local cash traders by sending to-arrive bids to' the country and procuring Chicago cash and future cjuotations. Table 00. —Classification of resident members in the grain trade, Peoria Board of Trade, 1916. Engaged exclu¬ sively. Engaged prima¬ rily. Total. Engaged second¬ arily. Ilesident members in grain trade: ('ash commission. 14 30 44 10 Terminal elevators. 1 1 3 1 Other dealers i. 3 1 Consumers *... 14 1 15 Fine elevators... 7 7 4 Shippers 3 . 2 2 4 35 18 Future commission <. 4 1 0 35 44 79 69 Out of-town members. 4 Not in grain business.■.. 50 54 Total accounted for. 133 1 Feeders and all others not included in other classes. 2 Millers, malsters, distillers, etc. 3 Operating without terminal facilities. * Including wire houses. Enforcement of rules .—The Peoria exchange seems to be neither so highly organized nor so strictly regulated as those in the larger primary markets. For example, the margin rule designed to pro¬ tect buyers and sellers on contracts for deferred shipment (30, 60, or 90 days delivery) is almost never invoked. The reason advanced for failure to demand cash margins is that competition is so keen that the customer will simply transfer his account to some other Peoria grain man who does not demand margins. It is reported that sub¬ stantial losses have been sustained in cases of default on such contracts. Likewise, the arbitration rules (see Ch. V, sec. 6) have been seldom called into use. See Ch. V, sec. 4. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 177 Elevator facilities. —Peoria lias very meager elevator facilities. Of tlie three houses in operation®® in 1918 only one, the Burlington, was operated ‘‘as a public house.’' This elevator has a 1,000,000- bushel rated capacity and the stock is controlled by three local grain firms. The available public storage of the market is thus so small as to make it difficult to transfer grain for shipping purposes. Lack of elevator facilities frequently compels receivers to reconsign grain or ship on destination weights, which constitutes an obstacle to the growth of the market. The exchange has no supervision over the elevators except in weighing grain and registering grain stored by outside parties. The CASH market.— Trading on the Peoria Board of Trade is confined to cash transactions. About 75 per cent of all cars of grain received at Peoria are sold for local consumption. An examination of 91,983 cars received®^ during the period 1913-1917 showed that 49.6 per cent were bought on to-arrive contracts (mostly from Illinois). Most of these direct purchases (94 per cent) were made by commis¬ sion men. Of aU grain sold in the market, consumers took 46 per cent on initial sales. It is reported that 75 per cent of the corn received was pur- cliased by the seven distilleries, operating through one agent. They were the heaviest buyers in the market. The traders listed as commission men are therefore the predomi¬ nant selling group, while consumers (manufacturers, converters, and feeders) are to-day the principal buyers. There is only one terminal elevator represented on the exchange, and the seven members repre¬ senting line companies are reported to be dissatisfied and ready to sell out. It is apparent that the Peoria market is narrow and irregular as compared with the larger exchanges already described. A call board is frequently resorted to as a method of establishing local cash prices: The concentrated buying by associated distilleries®® scarcely assisted the development of the market, since they could readily buy and store at Chicago or St. Louis when Peoria prices were out of line, and have done so in times past. The buying agent of the distilleries stated in Jul}^, 1918, that he then had 2,009,000 bushels of sam 2 :)le grade corn stored at Chicago. Section 8. Louisville. The Louisville market.— Like the other Ohio River and Lake Erie markets Louisville was relatively more important as a grain market several decades ago than it is to-da}^. In common with Cincinnati, Louisville is a natural gateway to the Southeast. These ®«Including the Turner-Hudnut, a private house, at Pekin. See general tables, Vol. IV. 6® Owned by the American Distilling i Distributing Co. 20-12 178 TERMIKxiL GExUX MxVRKETS AND EXCEEVNGES. river 2 :)orts flourished as distributing 2 >oiDts so long as transx>ortation v'as largely by water, but development, of the trunk-line railroad system and the shifting of production areas gave other maikets, such ais 8t. Louis and Chicago, an initial advantage. Idiere is no trading floor operated for grain in Louisville and tlie consignment business is negligible. The grain trade is supervised ])y tlu' grain committee of the Board of Trade, which also controls the weighing and inspection services. A special act of Kentucky, approved April 28, 1880, authorized the local board of trade to weigli and inspect grain. Seven or eight firms handle the grain trade of the market. The oldest of these merchandisers, A. Brandeis & Son, has operated at this point since 1851. About 68 per cent of the grain handled is consumed in the market, for the most part by the local flour and cereal mills and (formerly) distilleries. There are 3 corn mills with an aggregate daily capacity of 8,000 barrels and 2 flour mills with an aggregate dailv capacitv of 5,000 barrels. Since there is no floor trading, local transactions are based largely on Chicago quotations. Section 9. Cincinnati. The Cincinnati market. —^Cincinnati, once a relatively important market, was surpassed by Chicago and St Louis in receipts of grain as far back as 1858.®° Keceipts of grain to-day are considerably less than at Peoria or Indianapolis although greater than at Toledo or Louisville. (If the country grain received more than 65 per cent conies from Indiana and the remainder is about equally derived from Ohio and Illinois. Shipments out of the market are to Newport News or Baltimore for export and to the Southeast for consumption. It has been difficult to get favorable billing in other directions. Cincinnati is a large hay market and trade in this commodity accounts to a large extent for the present activity of the local exchange. The Cincinnati Grain and Hay Exchange. —The Cincinnati Grain and Play Exchange is the result of a secession of the grain men from the general commercial body which had long existed in the market.'^ It was felt that a distinct association, composed of active traders, could improve the system of weighing and grading grain, and regulate trading practices more effectively. A stock corporation was organized in April, 1918, and stock was taken up by 44 firms. There were more than 100 resident members of record in 1918. Capital stock in the sum of $10,000 (100 shares at $100 each) wa.s authorized and annual dues were set at $50 for eacli firm membership. 63 See Ch. in, sec. 1. 68 per cent of the country shipments reported for 1913-lt>17. ” Cf. formation of nufralo-C'oru Exchange,p. 183. J212S on Aug. 3, 1918. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 179 For issuance of additional memberships an initiation fee of $2,500 was adopted. The membership figures are subject to some qualification, since only 20 or 25 firms are actively engaged in trading on the floor. Most of the fh’ms are small dealers in grain, hay, and feed. A classification of members made early in 1918 appears in the fol¬ lowing table: Table —Classiftcaiion of resident members in the grain trade, Cincinnati Grain and Hay Exchange, 1918. Engaged exclu¬ sively. Engaged primarily. Total. Engaged second¬ arily. Cash commission.. 37 11 18 20 Terminal elevators. ^ 10 10 2 other dealers i. ■ 22 22 4 Consumers 2 . 11 11 Line elevators. Shippers 2 . 10 10 0 Future commission <. 1 1 71 31 102 35 Out of town members: Surrounding country. Not in grain busines's... 5 * 12 * . 114 1 Feeders and all others not included in other classes. 2 Millers, malsters, etc. * Operating without terminal elevator facilities. ^ Including wire houses. Local consumption. —Formerly there were about 40 distilleries, and a large starch miU in Cincinnati, which consumed large quantities of corn and rye. There were also over 20 breweries, but these con¬ cerns purchased their barley direct from Minneapolis. The dis¬ tilleries were closed prior to 1918 and the starch mill has been ino^'cd away. The local consumptive demand has been, therefore, mucii restricted. Elevator facilities. —There are no public elevators at Cincin¬ nati (i. e., elevators devoted wholly or primarily to the public storage and transfer business, and issuing warehouse receipts). Private storage is rated at 2,995,000 bushels capacity. The largest house, that of the Cleveland Grain Co., is rated at 700,000 bushels and does not issue any warehouse receipts. It is reported that a little storage business is done as an accommodation to other firms. As in Indianapolis, it is difficult for the small dealer not equipped with an elevator to break into’^ the shipping business. He is obliged to reconsign or sell his grain on destination weights, neither of which is a very satisfactory method. The new exchange is en¬ deavoring to improve this situation by preparing a list of approved weighing points” for the protection of shippers against imreliablo consignees. Credit facilities. —It appeal's that the banks have opposed rather than promoted the grain trade in Cincinnati, and will advance money 180 TERMINAL GRAIN MARKETS AND EXCHANGES. only when it can be strongly secured by liills of lading. (See Vol. Ill for discussion of financing consignments.) Cash trading. — The newly organized exchange (1018) fitted up a trading floor with 18 sample tables. The cash market, however, seems to be very narrow. Exchange officers reported that ^‘practically all the buying’^ was concentrated in the hands of three firms, Early & Eaniel, the Cleveland Grain Co., and A. C. Gale. They were reported to be doing also 90 per cent of the grain shipping business. Because of this narrow market certain methods of trading exist, under sanction of exchange rules, which would not be tolerated in the larger markets. Member firms are allowed to buy grain consigned to themselves if the car is put up at auction and they are the highest bidders. It is assumed that such an auction sale complies with the law of the jurisdiction. The larger traders approve of the practice, and it is reported that from 3 to 5 cars are so sold at auction every business day. The exchange exercises drastic supervisory powers over members and may ap23oint auditors to examine individual accounts. Future trading. —Future trading is not carried on in Cincinnati (although provided for in the exchange rules) and, in fact, is not in very good repute. Early & Daniel is the only firm reported as hedging its transactions, while the president of the exchange in 1918 stated that he considered it a detriment for a grain man in that section to acquire the reputation of being engaged in future trading. Two branches of Chicago wire houses are located in Cincinnati, neither of them participating in the cash business. Section 10. Indianapolis. The Indianapolis market. —Indianapolis, which is ranked ninth among the primary markets tabulated in this report, is a primary market for corn and oats grown in Indiana and eastern Illinois. The average yearly consumption of wheat by local flour mills was more than 2,000,000 bushels during the period 1913-1917. Corn was consumed to the extent of about 10,000,000 bushels yearly, mostly by corn products mills. The census of 1914 showed that more corn was con¬ sumed by cereal mills in Indianapolis than at any other center in the United States —namely, 6,883,199 bushels. The Indianapolis market has developed, therefore, from local ' milling demand and its railroad position as a reconsigning point. The Indianapolis Board of Trade. —The Board of Trade is a large stock corporation which was chartered in 1882. Only about 13 per cent of the members are resident grain traders. Ownership of one share of stock gives full membership, although other persons may ’3 The largei’ total consumption at Peoria was due to distilleries. Prom a report prepared tor the Federal I'rade Commission by the Division of Manufacture"?, Bureauof the Census. DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 181 acquire a license to trade.The grain traders constitute the only group with a special body of rules and regulations. A classification of the members appears in the following table: Table Q2.—Classification of resident members in the grain trade, Indianapolis Board of Trade, 1917. Engaged exclu¬ sively Engaged pri¬ marily. Total. Engaged second¬ arily. Cash commission. 6 1 11 15 1 2 7 17 11 23 12 11 17 5 7 9 18 4 4 Terminal elevators. other dealers!..j.. Consumers 2. 2 4 5 2 Line elevator. Shippers*. 19 4 Future commission <. Out of town members: Members of other exchanges. 43 41 84 57 496 49 23 34 Located in surrounding countrv. Not in grain business. 637 ‘ Feeders and all others not included in other classes. 2 Millers, malsters, etc. 2 Operating without terminal elevator facilities. * Including wire houses. The present trading floor for grain has been maintained since 1915 and contains 16 sample tables which are rented annually to members. Bid prices are frequently established through the call-board mefhod. Elevator facilitipis. —The Indianapolis elevator warehouses are relatively small and a majority are connected with milling or manu¬ facturing plants. The largest is the Big Four at Urmston with a rated capacity of 650,000 bushels. Most of the country grain shipped to this market is handled on a reconsignment or transit billing. Cash trading. —The grain trade at Indianapolis has been con¬ fined to cash transactions since 1896, although rules for future trad¬ ing are still published. Examination of the records of 73,994 cars of grain received by local traders during the period 1913 to 1917 showed that about 52 per cent of the grain was bought directly from outside points and the remainder handled on consignment. The largest buyers on ini¬ tial sales of this grain w^ere the consumers, who took 38 per cent. Elevator buyers took 25 per cent and later sold nearly one-half of this to the consumers. A conspicuous feature of the market was the large proportion of total direct purchases brought in by con¬ sumers—68 per cent. Section 11. Toledo. The Toledo market.— The grain market at Toledo is old and well established, but for many years it has not been in position to attract country grain to any such extent as the other markets here con- See Annual Report 1917, p. 44. TERMINAL GRAIN MARKETS AND EXCHANGES. III wim !}} ■ 't' “*1 sidorod. Examination of the records of more than 10,000 cars of grain received during the period 1913 to 1917 showed that 41 per cent canm from Ohio, 40 per cent from Indiana, 10 per cent from Michigan, and 7 per cent from Illinois. The market for clover and grass seed at Toledo is relativelv more important than that for grain. This is probably the only market in the United States where future trading in grass seeds is conducted. The local milling demand for soft winter wheat brings a larger volume of vrheat to Toledo than is received by either Peoria, Indi- ana])olis, or Cincinnati. A study of the records of more than 32,000 cars of wheat handled at Toledo during the period 1913 to K)17 showeil that 68 per cent of the wheat was bought from dealers, 21 per cent through l)rokers, and only 12 per cent received on consignment. Receipts of the other cereals for the period were so small as to place Toledo seventh in rank among secondary markets as to re¬ ceipts of all grains. Out of about 52,000 cars received, 1913 to 1917, (all 5 grains) 73 per cent were obtained from dealers elsewhere so that Toledo is clearly a secondary market under the classifications hero adopted (see p. 329). 7\1 though possessed of excellent water and rail shipping facilities and elevator storage in excess of many of the secondary markets (see ]>. 28) Toledo does not figure promineiitU among the terminal grain markets. Both as an initial concentration point and for transship men ts the market is somewhat out of line with the present marketing scheme. The Toledo Produce Excii.vnge. —The Toledo Produce Ex¬ change, which was incorporated in 1876, has at present onl3^35 mem- l)ers. Twenty-four of these (68 per cent) are resident members iti the grain business. The fact that 14 members arc engaged as future commission men indicates chiefly the prominence of the futures market in seeds, since the grain futures business in the market is of minor importance. The classification is shown in the following table: Table 63 .—Classification of resident members in the rjrain trade, Toledo Produce Exchanrie, 1917} Cash commission Terminal elevators other dealers " Consumers ^ Line elevators Shippers <. Future commissions DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 183 Section 12, Buffalo. The Buffalo market. —Buffalo is and always lias been distin- <>:iiished as a transfer point for grain sliipped to the Atlantic seaboard. Just as the union of rail and water terminals has made Duluth a great shipping port, so a similar junction of terminals at the other end of the lakes has built up Buffalo as the chief forwarding and dis¬ tributing market for grain at the eastern end of the Great Lakes. Prior to the great industrial development which set in about 1875 tlic chief business of Buffalo merchants was in grain. At that time it is reported that— * * * the larger business interests of Buffalo were so much in transportation and the grain trade that all really dignified ideas of business were associated, habitually, with the line of wharves on the north side of Buffalo Creek, extending about a half mile in length, which were spoken of always as The Dock. There, in the storage and transfer elevators, in the offices of grain merchants and brokers, lake and canal shippers, and marine insurance agencies, were the principal operations of capital, the chief source of wealth, the most readily recognized positions of commercial and financial importance in the town.'® Origin of lake shipping.— In 1836 a small cargo of grain reached Buffalo from Grand Haven on Lake Michigan. The first arrival fi’om Chicago was in 1839 when the 39 bags of wheat were brought in by the steamer Great ^\estern. Also, a small bulk shipment arrived in that year. A full cargo of grain—3,000 bushels—was received from Lake Michigan in 1840. ''The growth of the trade was slow until the opening of the Illinois Canal in 1848, and it did not rise rapidly until 1861, when the total receipts of breadstuffs (including flour, reduced to its equivalent in wheat) suddenly rose to 61,000,000 bushels.” Lake receipts and canal shipments. —As indicated in the history of the Chicago market, an importan^t factor in the lake movement of grain was the Erie Canal with its terminal at Buffalo. Before the Civil War there was no immediate railroad competition in the move¬ ment of bulk grain down the canal. By 1869, however, with the beginning of the great trunk-line development, grain was being diverted from the canal to the railroads. The report of the Buffalo Board of Trade for 1870 shows that one-third of the grain shipments went by rail and two-thirds througli the canal. During the next 15 years, as the volume of shipments increased, the canal gained over the railroads. This was assisted in 1883 by the removal of all tolls on canal traffic. Beginning Avith 1889 the railroads began to take a larger portion of grain shipments, and 10 years later shipments by rail aggregated over 130,000,000 bushels, Avhile those through the canal were slightly more than 21,000,000.'* (See decision of the <6 The History of Buffalo, by J. N. Larued, Vol. I, p. 20‘J. '7 llj., p. 215. 7* Idem, pp. 215-219. 184 TERMIJs^AL GRAIN MARKETS AND EXCHANGES. Interstate Commerce Commission with regard to the railroad com- ])etition with the lake and canal grain traffic, quoted on p. 67.) The decline in canal shipments is shown in the following table: f Table 64. —Grain movement by canal at Buffalo from 1880 to 1900. [In thousands of bushels.] Year. . t Lake receipts. Canal ship¬ ments. Per cent of canal shipment to lake receipts. 105,453 56,807 50,834 72,069 68.4 issi . 31;175 29,753 42,378 54.9 1882 . 58.5 188.3 . 65,722 64.4 issi . 56,964 49,740 72,.515 38, ICO 31,660 45,224 49,246 38,194 42,023 38,479 34,658 31,821 68.0 1885 . 63.5 ] 883 . 62.4 84; 731 73,224 90,870 89,313 58.2 1888 ..j. 52.2 46.3 1890 . 43.1 128,993 133,039 135,920 103,960 118,028 163.432 26.8 1892 . . 23.9 1893 . 48; 127 48,567 20,364 36,327 36.1 1894 . 46.7 1895 . 17.2 1896 . 22.1 1897 . 185,444 221,384 26,193 23,296 14.1 1898 .!.. 10.8 18^ ... 153,393 157,656 21,145 15,865 13.7 1900 . 10.0 No evidence is yet at hand of the effect of the Welland and New York Barge Canal routes upon the Buffalo grain business. The average yearly receipts of all grains by lake during the period 1913-1917 were over 169,000,000 bushels. Invention of the elevator. —Quite appropriately the first great labor-saving device in handling grain was introduced in the transfer market of Buffalo. Prior to 1843 handling at transfer points was a large factor in the transportation cost. At Buffalo transshipment was required on lake vessels to canal boat, and at New York from canal boat to ocean vessel. If carried in bulk the grain had to be shoveled into barrels or buckets and hoisted from the vessel holds by block and tackle, all of which was a very slow and laborious process. As earl}^ as 1780 an endless belt with buckets attached had been invented by Oliver Evans for conveying wheat and flour in mills. This device was now taken over by Joseph Dart, a Buffalo grain forwarder, to be worked inside of a long movable ‘deg’’ which could be lowered directly into the vessel hold. He was thus able to scoop out a cargo of grain rapidly and convey it to the top of a warehouse, from which point gravitation would carry it through pipes to any desired bin. “His little elevator, built for that experiment at Buffalo in 1843, with a capacity for holding 55,000 bushels per day, was the first of its kind in the world.” Similar elevators were « Larhed, Vol. I, p. 216. I DEVELOPMENT OF OTHER MARKETS AND EXCHANGES. 185 o]:)cratc(l at other ports by horse power until 1848, when the first steam elevator was erected in Chicago. o As a direct result of this invention it became more profitable to move grain eastward without previously grinding it into flour as had been formerly done. During the period 1836 to 1845 out of the total receipts of flour and grain (representing 41,851,438 bushels) only one-third came in as grain. During the next decade the total receipts rose to 174,714,437 bushels, and two-thirds of this amount was received as grain. The remainder consisted of barreled flour. •This proportion has been fairly well maintained throughout the later history of the market. The Buffalo Corn Exchange.— The first commercial organization which operated an exchange at Buffalo was organized in 1844 and known as the Board of Trade.*® This body was incorporated in 1857 and its name was changed in 1882 to ^‘The Buffalo Merchants’ Ex¬ change.” In 1903 the membership was enlarged and the association was reorganized as the Chamber of Commerce.” The present Buffalo Corn Exchange was organized and incorporated by the grain trade of this chamber of commerce in 1904. The grain traders had become dissatisfied with their subordinate position in the large commercial body wdiich is similar to the commercial exchanges of the Atlantic and Gulf ports. They began to operate as a grain exchange in 1906, assuming the functions of inspecting and w^eighing grain as well as entire jurisdiction over other matters pertinent to the grain trade in the market.*^ As pointed out in Chapter V (p. 194) the Buffalo Corn Exchange has very broad charter powders, unlike those of any other grain asso¬ ciation considered in this report. In practice, how^ever, both the trading and the government of the exchange is quite similar to that of western exchanges. Membership .—The Corn Exchange has but a’small membership, indicating that a large portion of the enormous receipts of grain do not enter into the local trading. The regular membership is limited to 75, the $7,500 outstanding capital stock being divided into shares of $100 each. In order to enlarge this membership the practice of issuing license memberships for trading privileges only was introduced. A further distinction is made between the two classes of membership in that a licensed member pays dues of $150 per year for use of the trading floor, whereas a cer¬ tificate-holding member pays only $75 a year. Regular certificates are transferable without payment of a transfer fee. There are ap¬ proximately 25 licensed members to-day, showing a substantial demand in excess of the 75 outstanding stock certificates. Recent J. N. Lamed, History of Buffalo, vol. 1, p. 213. See National Hay and Grain Reporter, May 20, 1911, p. 134. 186 TERMINi^ GRAIN MARKETS AND EXCHANGES. market prices (19l7) of the certificates liave ranged between $800 and $900. The following table gives a classification of the members in 1917. Table Go .—Classification of resident members in the grain trade, Buffalo Corn Exchange {both certificate holding and licensed members), in 1917. Exclus¬ ively. Pri¬ marily. Total. Second¬ arily. Total. Receivers. G 20 26 19 45 5 8 13 13 (IthGr Hp5^1or.8l ... 4 4 2 6 ('onsumers. 18 G 24 1 25 Shippers - . 3 6 9 24 33 Future commissions. 8 2 10 15 25 Total. 44 42 86 61 147 Out o{ town members: ether e.xfhanpe.s. 4 Adjacent territory. 3 7 'Mol in era in irado . 8 101 1 Feeders and all others not included in other classes. 2 Operating without terminal elevator facilities. The terminal elevators. —The Buffalo terminal elevators, with an aggregate capacity of 28 million bushels, constitute the most conspicuous feature of the market. For a period of over 50 years (and until recently) an association of grain elevators known as the Western Elevating Asociation con¬ trolled these facilities in the port. The earnings of the member elevators were pooled and distributed on an agreed basis. The association at one time issued negotiable warehouse receipts which were used both as bank collateral and as a means of delivering grain sold on contract. These receipts generally covered grain of vdiich the identity was preserved. At various times attempts have been made in Buffalo liy grain dealers to introduce a system of bulk and grade storage of grain similar to the systems of Chicago, Kansas City, and other large markets which would enable grain in store to be negotiated by means of warehouse receipts without regard to the identit}^ of parcels. These efforts, however, have not met with success. Weighing and inspection. —The Corn Exchange maintains a weighing and inspection department. This had been established' in 1884 by the Merchants Exchange and was taken over by the present body at its organization. The State of New York has no weighing or inspection laws so that, excepting Federal supervision, the system is wholly private. (See. Ch. V, p. 270, for charges.) The average annual expenses of this department have been slightly more than $26,000; and have been defrayed from inspection and weighing fees. The exchange made a profit from the operation of its weigh¬ ing and inspection department during four of the five years ending December 31, 1917. DEVELOPMENT OE OTHER MARKETS AND EXCHANGES. 187 The CASH market. —The Buffalo Corn Exchange at present con¬ ducts cash trading only. The Chicago future cpiotations are posted, however, and form the basis for a considerable part of the cash trad¬ ing on the floor. The principal coiiimodities sold are wheat and corn, although the other cereals, including buckwheat and several foodstuffs, enter into the sales. In addition to the shipping business there is a steady consumptive demand from the large flour mills and cereal manufac¬ turing plants. There is also a distributing business to millers, con¬ verters, and local dealers in New York, Pennsylvania, and New England. Future trading was conducted in a limited way on the old Board of Trade between 1877 and 1886. The “calF' board method was employed and thrived for a few years. There is no evidence of any revival of future trading in Buffalo. Section 13. The. eastern seaboard markets. Because of their geographical location the seaboard grain markets are largely export shipping points and in many other ways are hardly to be compared with the interior terminals. Except at Baltimore, there is only a negligible consignment business in grain at the Atlantic ports. In each port the grain dealers form a section of a general commercial exchange, and sample trading is quite meager as com¬ pared with the western primary markets. Export jobbers and bro¬ kers predominate in the grain trade. The business consists largely of arranging transshipments between rail and water carriers, or in trading for foreign account. Actual merchandising has declined at the seaboard during recent years and trading is largely on interior market terms. Baltimore is the only port on the Atlantic seaboard where grain has been handled on consignment over a long period. Grain has been shipped to this market over the Baltimore & Ohio and Western Maryland Railroads since the early history of the city. A study of the records of some 60,000 cars handled during the period 1913-1917 showed that about 48 per cent of the grain came in on consignment. On the same basis of comparison Philadelphia received less than 4 per cent on consignment. New York less than 2 per cent, and Boston about 0.2 per cent. Baltimore consignments were derived mainly from Maryland, Illinois, Indiana, and Ohio.*" The export business at the seaboard terminals has been developed by the trunk line railroads. Export rate adjustments and the de¬ velopment of elevating, switching, and lighterage facilities have ])e(‘ii the important factors in the history of the markets. The elevators are operated for the accommodation of rail and water carriem, m # ^2 See general tables in Voi. IV. 188 TERMINAL GRAIN MARKETS AND EXCHANGES. There has been a comparative decline in elevator capacity at the port of New York, as shown by the tabulation below. This was largely caused by the decline in canal traffic and the practice of the railroads of delivering grain free alongside ship. Rated elevator capacity at four ports (in bushels). • 1898 1905 1919 New York. 30,075,000 4,5.50,000 3,925,000 5,350,000 15,730,000 4,250,000 4,300,000 5,350,000 7,3.30,000 2,500,000 4,550,000 5,650,000 Boston. Pliiladelpliia. 13altimore. The quantity of grain exported at a given port (see Table 63) is not a fair index of the volume of trading in that market. Grain exporting is largely done through seaboard forwarders or brokers who do not own the grain themselves, and do not carry stocks with which their orders are filled. They, however, offer grain in cargo or round lots to European dealers (usually by cable offer), and, upon receiving an acceptance, they go into the market and fill the order at the lowest price possible. They may sell the grain free on board the vessel on this side (f. o. b.) but frequently the price includes cost, insurance, and freight to Europe (c. i. f.). In purchasing the grain to fiir their contracts the exporters obtain their supply mainly direct from western markets. Hence the grain exporters can with almost equal convenience do business through one of any of the principal ports.®^ The brokers are usually in a position to know from what port grain for the time being may be most cheaply and conveniently ex¬ ported. It appears, then, that the relative shipments of grain from the rival ports are not conclusive evidence as to the importance of an}' one port as a grain merchandising center, but that they do show the importance of each port as a gateway for export grain. The table below shows the average exports of grain from the United States and from the four North Atlantic ports during the period 1913-1917, with corresponding percentages. Table 66. —Average grain exports from the United States and from specified Atlantic ports for the calendar years 191S to 1917 (in bushels). Exported from— AVheat Per cent. Corn. Per cent. Oats. Per cent. Ignited States. N ew Y ork. 3’hiladelphia. Baltimore. Boston. 147,890,547 73,761,632 17,625,273 19,843,825 3,406,613 100.0 49.9 11.9 13.4 2.3 42,974,269 7,951,804 1,944,156 14,670,983 1,668,925 100.0 18.5 4.5 34.1 3.9 68,998,210 15,203,128 5,489,292 19,370,596 1,816,560 100.0 22.0 8.0 28.1 2.6 Exported from— Barlej'. Per cent. Rye. Per cent. All grains Per cent United States.. New York. Philadelphia. Baltimore. Boston. 19,565,200 6,916,992 466,604 2, 449,293 280,036 100.0 35.4 2.4 12.5 1.4 10,314,203 1,662,513 620,048 7,301,403 283, 798 100.0 16.1 6.0 70.8 2.8 289, 742,430 105,496,069 26,145,373 6.3,636,100 7,455,932 100.0 36.4 9.0 22.0' 2.8 See New York Produce Exchange v. £. d- 0. R. R., 7 I. C. C., p. 634. DEVELOPMENT OF OTHEK MARKETS AND EXCHANGES. 189 TilE COMMERCIAL EXCHANGES.-CollGCtioil of SHiall eXCllJiRgeS, each trading in different comniodities according to its own rules, but all in the same big hall, that, in a nutshell is the New York Produce Exchange. * * * It is not a homogeneous exchange, but is rather a supervisory body leaving the management of the exchange trans¬ actions in each commodity to a committee of members of that trade appointed by the exchange. * * * takes all kinds of produce, no one commodity being important enough to support a single exchange.^’ This description of the New York Produce Exchange applies in general to the Commercial Exchange of Philadelphia and the Boston Chamber of Commerce.*^ The exchanges at Philadelphia and Balti¬ more are smaller so that the grain traders are relatively niore impor¬ tant; but none of these bodies can be considered a grain exchange comparable to the highly organized associations of the western pri¬ mary markets. The recent price of memberships on the New York Produce Ex¬ change has been about $3,500. The prices of memberships in the other seaboard associations are nominal and procurable at small fees (see Ch. V). The cash markets. —The forwarding or exporting business (ex¬ cept for a nominal amount of local merchandising) characterizes all of the seaboard markets. Even the business of ''receivers” includes the handling of grain reconsigned from other terminal markets. On the New York Produce Exchange, as an example, grain trading occupies almost the entire eastern half of the trading hall. The grain brokers are stationed about long tables, but most of the export buying is by grade instead of sample. The brokers operate on a commission of one-eighth cent for trades with nonmembers and one- sixteenth cent for trades with members. At Baltimore a trading hall for the grain trade is maintained in the Chamber of Commerce building. Sample tables for the con¬ signment business occupy one side of the floor, while representatives of receiving-and-exporting firms congregate in another section to watch the Chicago quotations and arrange trades for European orders. A "market” is established by means of a "call” conducted twice daily by the secretary of the chamber from a disused pit near the quotation boards. There is no requirement that trades be ex¬ ecuted on ’change or confined to exchange hours Mortimer B. Lane in “The Street,” Vol. 1, No. 15, p. 7. 86 No public oflicial grain market is maintained at Boston. Chapter V. ORGANIZATION, RULES, AND REGULATIONS OF THE EXCHANGES/ Section 1. Incorporation of grain exchange associations. From the earliest history of the terminal markets, traders’ organi¬ zations have been maintained to regulate the marketing methods. Hoiiietimes the organization was of a buying group such as the old Millers’ Association of Minneapolis. More frequently a local chamber of commerce or board of trade existed as a deliberative body to ])romote the welfare of the market town. The so-called grain exchanges are essentially modern in character. They develoj^ed with the spread of modern means of transportation and communication, linking markets together and accelerating the concentration of grain at great centers of commerce. The exchanges have been called by their advocates “merely organized market places”; but they arc, in several instances, corporate organizations of such wealth and influ¬ ence, and perform services of such vast imj^ort to the public as to differ radically from the ordinary municipal market place (or chamber of commerce controlling it).“ Some idea of the chronological development of organized exchanges providing a market for grain can be gained from the following tabu¬ lation; although the reorganizations which have taken place in indi¬ vidual markets make the dates of incorporation not altogether a fair index of historical position: 1 Schedule of abbreviations and corresponding documents cited in this chapter. (E. g.—‘Thi.—1:2'’ refers to rule 1, section 2, rules of the Board of Trade of the City of Chicago.) “Chi.”: Act of incorporation, rules, b}’-laws, and regulations of the Board of Trade of the City of Chicago, in force Feb. 15,1918.* “Mil.”: Annual report, Milwaukee Cham])er of Commerce, 1917-18. Appendix dated Apr. 1, 1918, contains charter and general rules. “M'pls.”: Rules and by-laws of the Chamber of Commerce of Minneapolis, Minn., amended to Oct. 25, 1918. “ Dul.”; Articles of incorporation and general rules and by-laws of the Duluth Board of Trade, corrected to Mar. 1,1918. “ K. C.”: Constitution, rules, and regulations of the Board of Trade of Kansas City, Mo., corrected to 1919. “Oma.”: Articles, by-laws, rules, and regulations of the Omaha Grain Exc^nge of Omaha, Nebr., fevised to Apr. 1,1918. “St. L.”; Merchants’ Ifxchange of St. Louis. Articles of association, rules, by-lav's, regulations, corrected to 1919. “ Feo.”: Rules and by-laws, Peoria Board of Trade, corrected to Dec. 30,1918. “Cin.”: By-laws adopted Mar. 12, 1918; rules and regulations governing grain and hay trade in Cincin¬ nati, effective Apr. 1,1918. “Tol.”: General rules, Tojedo Produce Exchange, 1918. “Ind.”: Annual report of the Indianapolis Board of Trade for the fiscal year ending June, 1918. “Buf.”: By-laws of Corn Exchange of Buffalo. (Also) rules and regulations governing the grain trade, corrected to June, 1918. “Balto.”: Annual report, Baltimore Chamber of Commerce, year ending Dec. 31, 1918; contains act of incorporation, bj'-laAvs of the Chamber. “Phila.”: Annual report, the Commercial Exchange of Philadelphia, 1918; contains charter, by-laws, floor rules, and grain rules of the Exchange. “N. Y.”: Annual report. New York Produce Exchange, 1917-18; contains charter, by-laws, rules of the grain trade, etc. “ Bos.”: Annual report, Boston Chamber of Commerce, 1917-18. 2 (’i'_ jYgn; York ct- Chicago Grain <£* Stock Exchange v. Board of Trade of the Citij of Chicago et at., 2 L. 'r . .\. 111, 19 N L. 855 (Ill., 1889). EXCHANGE EULES AND REGULATIONS. 191 Chicago Board of Track — 1S59. —Incorporated under a special act of the State of 1 llinois. First incorporation in 1850 under the general laws of Illinois. New York Produce Exchange — 1862. — Incorporated as New York Commercial Association under special rmt of the State of Now York. .Present name adopted 1872. koidsville Board of Trade — 1862. —Incorporated under a special act of the State of Kentucky. The Commercial Exchange of Philadelphia 1863. —Incorporated as the Corn Exchange Association under a special act of the State of Pennsylvania. Present name adopted 1868. Baltimore Chamber of Commerce I 860 . —Incorporated as the Corn and Flour Exchange under a special act of the State of Maryland. Present name adopted 1884. Milwaukee Chamber of Commerce 1868. —Incorporated under special act of the State of Wisconsin. Peoria Board of Trade 1870. —Incorporated under the general laws of Illinois provid¬ ing for the incorporation of boards of trade and chambers of commerce. An earlier Board of Trade was incorporated in 1857. Indianapolis Board of Trade 1875. —Incorporated under the general laws of Indiana. Kansas City Board of Trade 1876. —Incorporated under the general laws of Kansas. Toledo Produce Exchange 1876. —Incorporated under the general laws of Ohio authorizing the incorporation of boards of trade and chambers of commerce. Minneapolis Chamber of Commerce Incorporated under the general laws of Minnesota providing for the incorporation of chambers of commerce and boards of trade. Artieles amended to conform -with session laws of 1883. Duluth Board of Trade 1881. —Incorporated under the same general laws of Minne¬ sota as Minneapolis Chamber of Commerce, and articles amended to conform with the session laws of 1883. St. Louis Merchants Exchange Incorporated under the general laws of Missouri. An earlier association, the St. Louis Chamber of Commerce, was incorporated in 1837. Omaha Grain Exchange 1903. —Incorporated under the general laws of Nebraska. Buffalo Corn Exchange 1904. —Incorporated under the general laws of New York. Its predecessor, the Merchants’ Exchang-e, was incorporated in 1882. The still earlier Board of Trade was incorporated in 1857. Boston Chamber of Commerce 1909.—Tha present charter, uniting the former Cham¬ ber of Commerce with the Boston Merchants’ Association was granted by special act of the State of Massachusetts. This is the fourth organization in Boston to bear the corporate name “Boston Chamber of Commerce.” It is a merger of the old Boston Chamber of Commerce incorporated in the year 1885 and the Boston Merchants’ A.ssociation which was organized in 1876 and ineorporated December 9, 1880'. Cincinnati Grain and Hay Exchange 7975.—Incorporated under the general laws of Ohio. The members had been organized since 1911 as a part of the Cincinnati Cham¬ ber of Commerce. The objects and purposes expressed in the articles of incorpora¬ tion of these associations are substantially uniform^ and are as fol¬ lows: ToJacilit ate the buying and selling of all products,^ to incul- ^ Mpls. and Onia.—“ To facilitate the buying and selling of all products.” Chi., Dul., and Pco.—“To maintain a commercial exchange.” Tol.—“To conduct and regulate commercial transactions, the buying and selling of provisions, bread- stuffs, grain and produce, and all other such, articles of trade and exchange as may be determined by the rules and by-laws of the association. * * * ” Phila.—In 1S63 the Corn Exchange Association petitioned the Court of Quarter Sessions (City and County of Philadelphia) to change its name “to one which, in the judgment of its members, will be moro descriptive of its purposes,” i. c.,. Commercial Exchange of Philadelphia; which petition was granted. X. Y.—“ To provide a suitable reem or reems for a produce exchange in the city of New York.” The objects were somewhat more rcslrictedfor the associations in Cincinnati, Buffalo, and Baltimore. Cin.—“ * * * guarding, protecting, and promoting the general interests of the grain, hay, and mill¬ ing trades Biif.--‘“'= * to conduct, maintain, and regulate a grain, produce and stock exchange * * *. ” Balto.—“ * * to advance the commorcialcl!aia.cter and promote the general interests of the city of Paltimore, and more particularly those of the giain and flour tiade =*= *. ” 192 TERMINAL GRAIN MARKETS AND EXCHANGES. cate just and eqiiitalde principles in trade/ to promote uniformity in the customs and usages of merchants/ to facilitate the speedy adjust¬ ment of husijiess disputes/ to acquire and to disseminate valuable commercial (and economic) information^ The articles of a majority of the associations include as a purpose the promotion of the com¬ mercial \yelfare of the locality.*^ < This language is identical in Chi., Mpls., Dul., K. C., St. L., Peo., Buf., Baito., Phila., N. Y., and Bos¬ ton; and in Mil. except for “promote” instead of “inculcate.” indpis.—“* * * to promote commercial ethics * * Tol.—“* * * to promote equitable and honorable principles and modes of business * * * 6 So stated by Chi., K. C., Peo. Mil.—“to maintain uniformity in the commercial usages of the city. * * * » St. L.—“ To establish and maintain the utmost fairness and unifonnity in commercial usages * * * " Indpis.—“* * * to secure uniformity in commercial usages and customs Phila., Baito., N. Y. and Boston.—“* * * establish and maintain uniformity in commercial u.sages ® So stated in Chi., Mpls., K. C., Oma., Peo. Dul.—“* * * to adjust controversies and business disputes ***,»» St. L.—“* * * to avoid and araicabl}’ adjust, as far as practicable, any controversies or misunder¬ standings arising between individuals engaged in trade * * *. ” Indpis.—“* * * to adjtsst differences and disputes in trade Cin.—* * adjusting and settling in a proper and equitable manner controversies, disputes, and differences as to contracts, accounts, customs and usages that may arise *=!«*” Buf.—“* * * to adjust controversies and misunderstandings between persons engaged in business h< Baito.—“* * * with a view to avoid and adjust, as far as practicable, the controversies and misun¬ derstandings which frequently arise between persons engaged in trade * * * » N. Y., Phila.—“ * * * to adjust controversies and misunderstandings between the members thereof * * * »» y.—“its members.”) ‘ ’ So stated by Chi., Mpls., Oma., and Peo. Mil., Baito., Phila., N. Y., and Boston—"* * * to-acquire', preserve, and disseminate valuable l.msi- ess information * * *.” Dul.—“* * * to acquire and dis.seminate valualde business informat ion * * *.” K. C.—“* * * to collect and disseminate valuable commercial and economic information * * *.” St. L.—“* * * to acquire, preserve, and disseminate valuable information * * *.” Cin.—“* * * for the purpose of collecting and recording local and general statistical information relating to the grain, hay, and milling trade * * *.” Buf.—“* * * to acquire, preserve, and diffuse accurate and reliable businc.ss information * * *.” » Mpls.—“* * * to advance the general prosperity and business interests of the City of Minneapolis.” M. i,'.—“* * * to support such regulations and measures as may advance the mercantile and manu¬ facturing interests of the City of Milwaukee * * *.” Chi., Dul., and Peo.—The corporate name, “Board of Trade of the City of Chicago,” which was adopted in the articles of that association implies as an object the general commercial AATlfare of the city. The same is true of the “Duluth Board of Trade” and the “ Peoria Board of Trade.” K. C—“'* * * to promote the general welfare of Kansas City * * *.” Oma.—“* * * to advance the general prosperity and business interests of the City of Omaha and of the territory tributary thereto.” Bt. L.—“* * * generally to advance, promote, and extend the commercial and manufacturing inter¬ ests of St. Louis and vicinity * * *.” Tol.—“* * * to advance the commercial and material interests of the city of Toledo, * * * and also of the places in and from which interchanges of commodities are made by dnd through this associa¬ tion * * *.” Indpis.—“* * * to promote the commercial, financial, industrial, and other interests of the city of Indianapolis * * *.” Baito.—“* * * to advance the commercial character and promote the general interests of the city of Baltimore * * *.” Phila.—“* * * to provide and maintain suitable accommodations for general business exchanges in the city of Philadelphia * * *.” N. Y.—“* * * to provide and regulate a suitable room or rooms for a produce Exchange in the city of New York.” Boston.—“* * * to advance the commerce, industr}^ and public interests of Boston and of New England * * *.” Buf.—“* * * to conduct, maintain, and regulate a grain, produce, and stock exchange * * *.” (-'in.—In contrast with the above provisions the articles of the (.'incinnati Hay and Grain E.xchango give as an object: “ Providing a place of common resort during business hours of those interested in said trade, and for the interchange of opinion, the transaction of daily business in such a hall as may be erected or pjovided for the u.‘;e of said trade, and for the doing of all other things that will enhance the interest of said trade * * *.” ■J EXCHANGE RULES AND REGULATIONS. 193 Only the Grain and Hay Exchange of Cincinnati and the Balti¬ more Chamber of Commerce, among the 17 associations enumerated, have chartem which specify a particular trade or uidustry.’’ The articles of incorporation of the Omaha, St. Louis, and Toledo ex¬ changes contemplate not only the welfare of a particular city, but also tliat of the territory surrounding or tributary to the city, as being within the commercial objects of the association. And tlie purpose clauses contained in the 17 articles of association (with the two exceptions noted) are applicable without qualification to all the mercantile interests of each community. The prmcipal grain ex¬ changes” in the United States., according to their'articles of incor¬ poration, were not incorporated solely or exclusively for the conve¬ nience and regulation of the grain trade or of any particular trade. As stated in the Minneapolis and Omaha articles, they were created ”to facilitate the buying and selling of all products.” It would seem that the practice of trading exclusively or prmcipaUy m grain and seeds on the exchange floors of these exchanges was brought about through the wiU of the predominant group of traders. In any case the following table shows the unquestioned predominance of the grain trade on 12 exchanges. Table —Proportion of exchange members in specified exchanges engaged in the grain trade, 1918. I. p:xchanges devoted exclusively or primarily to grain and seeds. ' s Total member¬ ship. Members not in grain trade. Chicago Board of Trade. 1,620 464 199 201 188 534 133 942 114 101 35 303 1 198 Minneapolis Chamber of Commerce. Kansas City Board of Trade. Duluth Board of Trade. It) Omaha Grain Exchange. Milwaukee Chamber of Commerce. 20 s Peoria Board of Trade. St. Louis Merchants’ Exchanee. Cincinnati Hay and Grain Exchange. A Buffalo Corn Exchange. Toledo Produce Exchange. c Baltimore Chamber of Commerce. 9 II.-EXCHANGES WHERE THE GRAIN TRADE IS SUBORDINATE. ' ndianipolis Board of Trade. 637 1,631 , 1,769 1,278 496 1,563 a 1 sfi.! Louisville Board of Trade. New York Produce Exchanee. Boston Chamber of Commerce. 1,0.51 ‘ Unaccounted for, 6. 2 Unaccounted for, 95. It will be noted that in the so-called grain exchanges at Chicago, Milwaukee, St. Louis, and Baltimore there is a considerable personnel not engaged in the grain trade. This is due to the fact that certain ® See footnote 3, p. 191. The Baltimore association’s objects were “more particularly those of the grain and flour trade.” See footnote 8, p. 192. 108693°—20-13 194 TERMINAL GRAIN MARKETS AND EXCHANGES. members of these fom' exchanges have continued to a small extent the trading in other commodities, such as provisions. On the other eight exchanges remainino* in Part I of the table the groups not in the grain business are comprised of banks, railroads, brokerage houses, and others who find it advantageous to hold a membership on one or more grain exchanges; that is, they have a collateral interest in grain. Of the 22 members of the Minneapolis Chamber of Commerce not actually trading in grain, there was only one reported to the Com¬ mission who was not known to have been at least indirectly interested in the grain business. The members of the Kansas City and Duluth exchanges not engaged in this trade are likewise collaterally interested as follows: Firm connections of members of Kansas City and Duluth Boards of Trade not engaged in grain business, 1918. Kansas City: Railroads. 3 Bag manufacturer. 1 Packer. 1 Secretary of board. 1 Retired from grain busmess. 7 Total... 13 Duluth: Shipping companies. 8 Banks.:.. 2 Railroads. 2 Insurance agency. _ 1 Retirtrd from grain business. 3 Total... 16 The legislative act under which the Chicago Board of Trade was incorporated makes no specific mention of grain except in listing the commodities which they might weigh, inspect, measure, etc.; that is, the board was empowered to examine, measure, weigh, gauge, or inspect flour, grain, provisions, liquors, lumber, or any other articles of produce or traflB.c commonl}^ cfealt in by the members of said corpo¬ ration.’’ And yet, as the table shows, except for a small subdi¬ vision of the membership, the Chicago Board of Trade is a grain exchange. The four exchanges listed in Part II of the table arc, on the other hand, general commercial bodies representing the diverse trades of the community. The grain traders here exercise only a subordinate influence. Among the exchanges now considered, the Buffalo Corn Exchange is the only association empowered to construct, manage, and operate elevators, and to buy, sell, and deal in grain produce, stocks, bonds, and property of all descriptions. However, since its organization the ^^Sec. 10 of act approved Feb. 18,1859. EXCHANGE RULES AND REGULATIONS. 195 association has never exercised these broad powerS; but has confined its operations to the maintenance of a grain exchange for the use of members. The regulatory powers acquired by these exchanges are exceedingly broad. It has been shown that there is a marked similarity In the purposes of incorporation as expressed in the articles filed by the respective. associations, and these stated objects cover in the main the functions which have been assumed by the exchanges: (1) A frequently stated purpose was ‘^to inculcate principles of justice and equity in trade.’' Keference to the section on discipline (p. 210) and to other sections of this chapter discussing the rules of the exchanges will show to what extent tliis object has been car¬ ried out. (2) Several of the charters give as an object that of securing uni- fornaity-in-cammercial usage s an d customs. The sections which fol¬ low will show the service rendered by the exchanges for the grain trade in promoting uniformity among the customs and regulations of the markets. (3) Under the object ^Ho facilitate speedy adjustments of business disputes/’ all of the exchanges have provided means of settling such disputes through boards of arbitration and appeal.^^ Some of the charters provide in detail for the establishment of such boards, giving their awTards the force of judgments when properly filed and confirmed by the courts. The language of these charter provisions for arbitration is important only where it is necessary to distinguish between voluntary and compulsory arbitration. (See p. 218.) (4) A further object of association is ^‘to acquire and disseminate valuable commercial information.” This function includes the wdiole quotation service of the exchanges whereby the world is continuously informed of prevailing prices and of supplies of grain in the leading markets. The charters of these associations contain ^ in many instances specific powers which w^ould be implied, such as to admit, regulate, discipline, and expel members, and to adopt by-law^s, rules, and regulations.’^ Section 2. Exchange government. The gram exchange corporations have follow’-ed a generally uni¬ form scheme of organization and government.’^ Exchange affairs are directed and policies are formulated by an elective board of di¬ rectors, wdiich usually includes, ex officio, the president, vice presi¬ dents, and sometimes other elective officers of the association. This J^Sce Evans v. Minneapolis Chamber ofCommerce, «S6 Minn., 448, 91 N. W., 8. ’ Chicago, Minneapolis, Milwaukee, and Peoria. ’ 17 Cyc. 15 L ’“This socl.ion is based on only 10 exchanges, viz, those at Chicago, Milwaukee, Minneapolis, Duluth. Kansas City, Omaha, St. Louis, Peoria, Toledo, and Budalo. 196 TERMINAL GRAIN MARKETS AND EXCHANGES. l)oard appoints a secretary/* who constitutes the chief administrative officer or manager of the association, and usually receives the highest salary of any of the full-time officials. The supervision of the various departments and services is assigned to committees, some of which are selected from the directors and some from the membership at large. Moreover, each association maintains a staff of employees and subordinate officers (inspectors, samplers, weighers, traffic experts, quotation reporters, and the like), some of whom are responsible to the secretary and some to specific committees. Such, in brief, is the usual plan of organization of these associations. Elective officers. —In most of the associations the officers, in¬ cluding a president and one or two vice presidents, are elected by the whole membership.These officers are chosen for short terms, the president invariably for one year. In Chicago, Minneapolis, and Kansas City a second vice president is elected annually and he auto¬ matically becomes first vice president during his second year of office. In the other associations vice presidents are elected for one year only. The directory is partially renewed each year on most of the exchanges and the terms of office vary from two to three years. There are 9 directors elected in Milwaukee, Duluth, Omaha, and Buffalo; 10 in Minneapolis, St. Louis, Peoria, and Cincinnati (Grain, and Hay Exchange); and 15 in Chicago. In addition to these the president and vice president(s) are, ex officio, members of the board.^** In Milwaukee and Peoria the secretary and treasurer are also ex officio members of the board of directors. Elective committees. —The committee (or board) of arbitration is elective in eight associations and the committee on appeals is like¬ wise elective, except in Omaha, Kansas City, and Peoria, where they are appointed by the board of directors. These arbitration and appeals committees are chosen as follows; Exchange. Arbitra¬ tion com¬ mittee (number of mem¬ bers). Terms (years). Appeals commit¬ tee (num¬ ber of mem¬ bers). Terms (years). Elected— Chicago. 10 2 10 2 5 each year. Part each year. 2 members on even years and 3 on odd years. Annually. Arbitration committee elected annually Both committees appointive. Arbitration committee elected annually. Annually. 1 Milwaukee. 5 2 5 2 Minueanolis. 5 2 5 2 Duluth. 3 1 3 1 Kansas City. 5 1 fll5 1 Omaha__ 10 5 Peoria. 3 1 0 15 1 Toledo .. 7 1 11 1 a Appointive. '«Elective at Milwaukee, Toledo and Peoria. 17 The executive officers (president, vice president, treasurer, etc.) arc chosen by the board of directors Iron! their own number in Omaha, Cincinnati, Louisville, and Buffalo. Two vice presidents are elected except on Duluth and Indianapolis Boards oi Trade. The treasurer is also elective in Milwaukee, Peoria, and Indianapolis. Except Peoria (1 year), Toledo (1 year) and Indianapolis (4 years). " Except on the Omaha Crain Exchange, where they are elected by the board ol directors from its own number. *® Chicago, Milwaukee, Duluth, Minneapolis, Omaha, Kansas City Peoria and Toieda v EXCHANGE RULES AND REGULATIONS. 197 Appointive committees. —The more important appointive com¬ mittees (generally appointed by the president with the approval of the directors) are those on membership,rules,-- quotations,^^ ware¬ housing (or elevators), inspection and weighing,^^ transportation,-® to-arrive grain,^’ discount,'^® and the call.-® There is also a committee on futures in St. Louis, on margins in Kansas City and Omaha, and a clearing-house committee in Chicago. The sundry committees which relate to exchange real estate, finance, trading hall, promo¬ tion, publicit}^, and the like, are not considered here. Functions of officers and committees. —The duties of ex- (*hange officers and committees are fairly apparent from their titles and are indicated in subsequent sections. The powers and duties of the board of directors and of standing committees generally resemble those enumerated by the Omaha Grain Exchange, viz: Sec, 7. The board of directors shall have power— (а) To employ such legal assistance as they may deem needful for the exchange. (б) To elect a presiding officer in the absence of the president and vice presidents who shall discharge the duties of president during such absence. (c) To establish all necessary regulations for the inspection, weighing, and ware¬ housing of any property dealt in by members of this exchange. (d) To determine the terms and conditions to which elevators and warehouses must submit in order to have their receipts for property made a legal tender in deliveries among members of this exchange, and to require their assent thereto: Provided, No elevator shall be so made regular unless it has a storage capacity of not less than 50,000 bushels and receiving and discharging facilities adequate for the prompt dispatch of business. {e) To designate the warehouses and elevators, the receipts of which shall be a legal tender in delivering property, and to declare such receipts no longer a legal tender: Provided, That no elevator or warehouse shall be thus made regular or irregular by less than six affirmative ballot votes. (/) To levy assessments upon the memberships of this exchange as is provided in the articles of incorporation. ig) To establish the time and place of trading among members of this exchange and the manner in which said trading shall be conducted and provide regulations Chicago (3 members), Milwaukee (5), Minneapolis (5), Duluth (3), Omaha (5), Kansas City (5), St. Louis (3), Peoria (5), Indianapolis (9). 22 Milwaukee (3), Minneapolis (5), Kansas City (5), St. Louis (6), Peoria (3). On by-laws, Indianapolis (.5); change in rules, Minneapolis (9); interpretation of rules, Kansas City (3); rules and legislation, Chicago (3); violation of rules, Chicago (5) and Omaha (5). 23 Chicago (3), Milwaukee (3), Minneapolis (5), Duluth (3), Omaha (5), and Kansas City (5). On closing price on wheat, Miimeapolis (3); closing price on coarse grain, Minneapolis (3); market reports, St. Louis (7), Peoria (3); telegraph and printing, Peoria (3). 2-1 Chicago (3), Minneapolis (4), Duluth (3), Omaha (5), Peoria (3). Regular warehouse, Peoria (3); in- .surance, Duluth (3), St. Louis (5), and Indianapolis (5); bonding and insurance, Kaasas City (3). 23 Milwaukee (5) and Buffalo (5). Inspection, Peoria (5), Baltimore (3), Toledo (7), and Duluth (5 elected); sampling, Chicago (7) and Minneapolis (3); sampling and inspection, Duluth (5), Kansas City (3); weighing, Kansas City (4), St, Louis (9), Peoria (3); weighing and custodian, Chicago (3); grain committee, Chicago (7), Omaha (7), St. Louis (7), Indianapolis (9), Buffalo (5). 26 Chicago (7), Milwaukee (3), Minneapolis (12), Duluth (3), Omaha (9), Kansas City (5), St. Louis (14), Peoria (9), Indianapolis (9), Buffalo (5). Harbor, Duluth (3); Mississippi River, St. Louis (7). » Chicago (5), Milwaukee (3), Omaha (5), and Kansas City (3). Omaha (5), Indianapolis (5). 29 Peoria (3) and Indianapolis (3). 198 TERMINAL GRAIN MARKETS AND EXCHANGES. tliercfor. Members guilty of irregular trading may be fined, suspended, or expelled from this exchange at the discretion of said board of directors. (h) To establish regulations for admission to the exchange room and to charge a fee therefor. (i) To require of the secretary and treasurer such bonds as they may determine, conditioned for the safe-keeping and proper disbursement of the funds of this exchange (j) It shall be their duty, unless otherwise provided for, to enforce the by-laws, rules, and regulations of this exchange, and to require obedience thereto from all persons and parties under the jurisdiction thereof. (k) Whenever it shall be determined by such board of directors that it is to the interest of this exchange to become the owner of, or interested in, any property, said board of directors shall have full power to frame and adopt such plan as they may deem advisable, by which such property shall be held for the use and benefit of those who may, from time to time, be members of this exchange in good standing, and so as not to vest in any person, now or hereafter a party hereto, any interest in said property independent of, or distinct from, such membership. Sec. 8. It shall be the duty of the board of directors to provide for the collection of the revenues of this exchange and for the payment of its legitimate, ordinary ex¬ penses, including also the cost of such measures as they may deem requisite for fostering and promoting the objects of this exchange and the commerce of Omaha. * * * * * * POWERS OF STANDING COMMITTEES. The Alleged Violation of Rules Committee shall hear and determine all complaints arising from technical violations of the rules, and shall cause to be inflicted the penal¬ ties provided therefor. The Appeals Committee shall hear and determine all cases appealed from a decision of any committee when formally brought before it as otherwise provided in the by¬ laws, rules, and regulations. The Arbitration Committee shall hear and determine all disputes of financial, mer¬ cantile, or commercial character connected wdth or arising from any matter referred to in the by-laws, rules, and regulations, subject to the provisions in Article III of the rules and regulations of this excliange. The Cash Margin Committee shall settle all disputes as to proper marginal prices or any other feature connected with cash margins. The Discount Committee shall determine the proper basis of settlement where buyer and seller can not agree in all cases of reinspection. The Elevator Committee sliall investigate and report as to the character and equip¬ ment of all elevators or warehouses applying to be made “regular. ” The Finance Committee shall act as counselor in all financial matters relating to the exchange. The Grain Committee shall have general supervision of the inspection and weighing of grain and of all matters relating thereto subject to the order and,direction of the board of directors. The grain committee shall at its firat meeting elect by ballot a permanent chairman, and in case the permanent chairman is disqualified or absent at any meeting, a temporary chairman shall be elected in the same manner. The Membership Committee shall receive, investigate, and pass upon all appli¬ cations for membership in the exchange, and make the proper recommendations to the board of directors. The Quotations Committee shall have general supervision of the trading floor and mirket quotations. The Transportation Committee shall have supervision over all matters relating to transportation, adjustment of rates, and railroad regulation. ““Omaha by-laws, Art. II. EXCHANGE EULES AND KEGULATIONS. 199 A fairly typical enumeration of the functions of the secretary occurs in the rules of the Kansas City Board of Trade: It shall be the duty of the secretary under the direction and control of the board of director’s to keep a journal of the proceedings of said board and of the association: to keep the books and accounts of the association: to collect and pay over to the treas¬ urer all moneys due the association; to take charge of the seal, books, papers, and personal property belonging to the association; to collect and record valuable statistical and other information pertaining to the commercial, mercantile, and manufacturing interests of the city, and on or about the 1st of January in each year he shall make to the association a full report of the grain and provision business of the city for the year ending December 31, which report shall contain allrsuch commercial information in his possession as may be of interest to the members; he shall furnish the chairman of every special committee a copy of the resolution whereby such committees shall have been created; give notice of meetings of the board of directors and of the asso¬ ciation, read such records and papers as the presiding officer may direct, conduct the correspondence of this association; attend meetings of the committees of arbi¬ tration and appeals, and any committees of the board of trade when requested so to do by the acting chairman thereof, and keep a record of their proceedings and give notice when their services are required. He shall issue certificates of election to the president, second vice president, directors, and members of the committees of arbitration and appeals, and shall issue to all appointees of the board of directors certificates of their appointment. All such certificates will bear the signature of the president and secretary and the seal of the association, and those issued to employees shall specify the duties to which they may be appointed, the term of their service, and that such appointments are revocable at the pleasure of the board of directors. He shall keep his office open during usual hours of business, shall see that the rooms and pmperty of the association are kept in good order, and shall perform such other duties as may be provided by by-laws, rules, regulations, or resolution of the board of directors. Section 3. Adoption of rules, by-laws, and regulations. General powers. —The charters of the exchanges here considered ^ rarely state precisely the rules or by-laws which may or may not be adopted. They generally lay down the broad objects for which the association was created, and leave the adoption of rules, by-laws and regulations to the discretion of the association. In the adoption of rules these associations are subject to certain limitations established in the law of corporations: (1) The rules ^ must be within the objects and purposes for which the exchange w'as organized. (2). They must not contravene public policy or the ^ law' of the land. (3) They must not be uin’easonable or uncertain. In general trade usage every contract made on exchange, or by or through a member of the exchange, is subject to the exchange rules as a condition thereof.^ This is clearly recognized in the trade rules of the Grain Dealers’ National Association (which is fairly representative of terminal markets throughout the United States). Rule 2 states Soc 17 Cyc. 8ol and cases cited. ^ In correspoadonco from tlie Secretary, Chicago Board of Trade, June 3,1916, itis stated that the courts lia\ 0 held repeatedly and, so far as he knows, never to the contrary, “that all contracts made on the Chi¬ cago market under these rules have as a part the condition of the contract and the said rules.” 200 TERMINAL GRAIN MARKETS AND EXCHANGES. that * * whenever applied to a terminal market, the wmrd ^terms ^ shall he construed to mean that all the rules governing such market shall obtain/^ It is apparent, therefore, that the whole marketing system is defined and governed to a marked extent by these rules of the exchanges. Grain exchange corporations. —-In the more strictly grain exchange corporations (see Table 69) there is no distinction made, betwreen rules and by-laws in the method of adoption. Both by-laws and general rules must have the sanction of the membership of the association.The regulations and rulings (under the rules), how¬ ever, are issued by the board of directors or an appropriate committee. That is, the application and construction of substantive rules is, in theory, an administrative matter. For example, in 1915 when the directorate of the Chicago Board of Trade was considering a closer supervision of the branch offices of private wnre companies, the counsel to the board advised that they might legally go to the extent of rerpiiring resident and correspond¬ ent members to. submit their books of account at any time for examination by auditors of the board, but he insisted that such a practice should be instituted only by authority of a general rule and not by administrative regulation, fie stated that, in his opinion,, “no regulation of the board can stand the legal test unless it>is based upon the rule authorizing the board of directors to pass such a regulation.'*’ -s General commercial exchanges and stock companies. —In the government of the general commercial exchanges and stock companies, such as those in most of the secondary and seaboard markets, a distinction is made between rules and by-laws. The by-laws are adopted at stated meetings of the wffiole membership, or body of stockholders, whereas the rules are promulgated by the managing board (or, as in New York, by the members of the par¬ ticular trade). Procedure. —The procedure for adopting rules is quite uniform among the former group of associations, the main distinction lying - in the requirement of a mere majority on some exchanges and an extraordinary majority on others. ^ A proposed rule may be initiated by petition of members or upon recommendation of a committee. On eight exchanges it must be first approved by a majority of the directors before it can be sub- 33 Except Omaha Grain Exchange. * Tho rule of the St. Louis Merchants’ Exchange providing for the issuance of now certificates was repealed in 1002. d‘ho number of inomberships is now limited to tho outstanding certificates. <6 Tho market price of memberships in Chicago has never exceeded ^11,000. 204 TERMINAL GRAIN MARKETS AND EXCHANGES. by striking out on second and third lines as follows; “And .resident of or perma¬ nently doing business in Toledo. ” Where a membership is purchased and transferred from a living member, a transfer fee is charged on most exchanges, which is usually included in the market price quoted for such membership. The fol¬ lowing is a statement of initiation fees and transfer fees provided in the rules: Initiation fee for additional member¬ ships. Transfer fee. 1 Chicago. 000 00 on Milwaukee. 5,000.00 7 500 00 10 oo Minneapolis. 1 no ^ 000 or^ PL on Kansas City. W\.f 15,000.00 10,000. 00 (0 1 non nn c;no nn Omaha. TOO on St. Louis 2 . Kf\(\ no ion niv Cincinnati. 2 .500 00 Toledo.. . . ^ 000 m K no Indianapolis . 6 20. 00 100.00 8 250.00 tin 0. UU Bullalo^. Philadelphia. Baltimore... 1 nn New York... pLo f'^n V / 1 As required from new members when certificate is transferred from a retiring (not deceased) member 2 No provision for issuing new certificates. Membership can be acquired only by transfer 3 Organized in 1918. * Stock company. ■ ■> Per share. * J500 after membership reaches 600. ' ' ' . ' ' ' f None. ' ■ - - Membership on a grain exchange, then, may be acquired by a quali¬ fied applicant (1) by payment of an initiation fee or (2) by purchase and transfer of an outstanding certificate and payment of the trans¬ fer fee; the latter is the more frequent procedure. Before a transfer can be effected, the membership certificate of the record holder must be free of assessments and unencumbered t>.y any unsettled claims or controversies in which exchange members are interested. Such outstanding charges must be met either by the holder (or his estate) or by the purchaser of the membership at the time of transfer. Due time is allowed for filing such claims and after the transfer is made no claim'or demand is allowed to impair such a membership in the hands of an innocent transferee. On four of the exchanges no fee is required for the transfer of an unencumbered membership left by a deceased member when trans¬ ferred by his legal representatives.^^ In Minneapolis and Milwaukee no fee is charged for a transfer between members/* These provisions for free transfers between members recognize a traffic in memberships on the exchange. Most Chi., 10:2: Mil. (exception, fee ol $10 required); Mpis., 12:4; K.C.,R. 6; Oma., 3 : 2 b: Peo., (exception ' lee required). ’ * ^Mpls., 12:4; Mil. 12:7. EXCHANGE RULES AND REGULATIONS. 205 of the exchanges do not prohibit a member from acquiring more than one membei*ship certificate (although hut one vote can be acquired except m a stock corporation). In Milwaukee such a right is specifi¬ cally recognized in the rules, with the restriction that the purchaser of such ‘^add it ion al membership’’ * * * shall acquire * * * no further or greater rights or privileges in this association.” Additional memberships are, of course, subject to all charges, dues, and assessments; and, furthermore, the Milwaukee rules distinguish sharply between such “additional memberships” and the “primary membership” to the effect that in case a primary membership is for¬ feited or offered for sale “any and all additional memberships held by him shall at the same time be likewise forfeited or offered for sale”; and further that “ the redisposition of or trading or dealing in such additional memberships by any member of this association shall in nowise affect the primary membership of such member except in case such additional certificate shall be the subject matter of any trade or contract in violation of any of the rules or by-laws * * In Minneapolis, as a further example, there is no rule with regard to the number of memberships which a member may hold, although an additional membership does not give the holder additional privi¬ leges, and a member is required to pay dues on all the certificates standing in his name. In the words of the secretary: We simply refer to them by number, i. e., membership certificate No. 1, No. 2, No. 3, etc., and when transfers are made the notice on the bulletin board and the circulars sent to members specify the membership certificates being transferred. * * We have 15 or 20 individuals now holding more than one certificate of membership under their o^vn name. Requirements for admission. —The requirements for admission follow the usual scheme of club membership. The applicant is re¬ quired (1) to satisfy the membership committee as to his character and credit rating, (2) to make written application indorsed by two members, (3) to have his application posted (usually for 10 days) on the bulletin of the exchange in order to allow the filing of any objec¬ tions and unsatisfied claims against the membership certificate, and (4) to subscribe to the articles, by-laws, rules, and regulations of the association.^® Applicants are commonly admitted by vote of the board of direc¬ tors, in most cases by an extraordinary majority."' Duluth is ex- « Mil., 12:7; also Pliila., by-laws, art. 1, sec. 4; also, Balto., art. 3, sec. 4. 5® Chi., 10:1; Mil., 12:2 (indorsemeut by 1 member); Mpls., 12:2; Dul.,9:2; K. C., 6:1; Oma., p. 16; St. L., 13:1: Peo., 12:1: Balto., Art. II; Phila. (proposed by membership committee), Art., 11:2; Tol., 10:1; Ind. and Buf., approved stockholders issued trailing permits; N. \ by-1., sec. 3. Chi., 3 negative votes reject; Mil., 3 negative votes of directors or objections filed by 7 members may reject; Mpls., requires a majority vote of membership committeeand at least 7 affirmative votes of directors; K.C., 10 directors present and 8 voting in affirmative; Oma., 6 affirmative votes; St. L., “upon the approval of the board”; Peo., 8 affirmative votes; Tol. requires 9 affirmative votes; Balto., two-thirds of directors present; Phila., majority; N. Y., majority. X 206 TERMINAL GRAIN AIARKETS AND EXCHANGES. ceptional in that the applicant must be acceptable to a majority of the directors and must be elected by ballot ''at a meeting of the asso¬ ciation at which not less than 15 members shall be present and vote.^^ Assessments on memberships. —^Assessments upon members must be paid when levied, and continued delinc|uency forfeits mem¬ bership.^^ The rules of the major exchanges are almost identical on this subject. It is usually provided that a member be suspended after one month’s dehnquency and automatically expelled after a year’s continuous failm’e to pay. The Chicago rules require that— when the annual assessment is made, it shall be considered due, and any member neglecting or refusing to pay the same within 30 days thereafter, may be excluded from the rooms of the association until such assessment is paid. And in case of the failure of any member to pay the annual assessment during the whole of any fiscal year of the association (said fiscal year beginning and closing with the day of the regular annual election) such failure shall of itself operate as a forfeiture and cancella¬ tion of the membership of such member and of all rights and privileges thereunder. * * " Payment of annual assessments by a member while under suspension shall not be construed as in any way affecting such suspension.®^ Ill Duluth a membership is forfeited for a year’s delinquency in paying assessments only after a formal complaint, summons, and hearing before the board of directors. The Indianapolis Board of Trade allows only 30 days’ delinquency on an assessment, or on an award in arbitration, whereupon the member is to be formally warned by the secretary. • * * * and if the amount so in default shall not within ten (10) days from the date of such warning be fully paid, the membership shall, by reason of such failure, at the expiration of such ten (10) days lapse and revert to the association and this com¬ mon stock shall be disposed of * * *. Firm and corporation memberships.— Firms and corporations may be considered as members for trading purposes on the exchanges providing they arc represented in the personnel of the exchange by one or more bona fide firm heads or executive officers who are certifi¬ cate holders. The primary object of firm and corporation member¬ ship is to obtain members’ commission rates. Since membership certificates are granted to individuals only on these exchanges, firms !>- Also provides “if not more than 25 per cent of i lie total number ofballots cast appear against him.’' 63 A member suspended from the Chicago Board of Trade for 10 years filed a mandamus suit against the Ijoard (1904) “ to secure restoration to membership upon the ground that he was under no obligation to pay dues while suspended, and also upon the ground that he was under no obligation to pay dues while sus¬ pended, and also upon the ground that the by-law, by which nonpayment of dues operates ipso facto to terminate a membership, v/as illegal because not providing for notice to the defaulting member and hear¬ ing.” The Circuit Court sustained the by-law in question. (Annual Report, Chi. Bd. of Tr. for 1901, p. -M.hi.,^10:3; Mil., 12:3; Mpis., 12:5; K. C., 6:1G; Oma., 1:17 (not canceled until delinquent 2 years). k.t. L., lo:G; Bco., 12:4; Balto., art. 3, sec. 3 and art. 4, sec. 1 (excluded from chamber after 20 days’ for¬ feiture after 3 years’ arrears). N. Y,, by-laws, see. 2i (suspension after 5 days arrears; forfeiture after 3 months). ^>5 Dul., 9:9. 66 Ind., Art. 9. EXCHANGE KULES AND REGULATIONS. 207 and corporations are required to show in the case of individuals representing them that the business relations with such persons were not created solely to obtain members’ rates, and that such representatives own a substantial financial interest in the concern. The Minneapolis rule recites that such a firm or corporation having formally agreed to abide by the Rules, regulations, usages and customs governing the members” shall be ‘^deemed a member of said association in respect to and for^the purpose of all trades, contracts, or transactions made in its behalf on the floor of the chamber. * * The general principle that a corporation’s representative trading on the exchange assumes liability for acts of the corporate body is specifically set forth in the rules of two exchanges as follows: He shall be liable for the performance of all the duties, contracts, debts and trans¬ actions of such firm or corporation, made upon said board, or by virtue of its mem¬ bership therein, in the same manner as ff they were his own acts, contracts, debts or transactions * * The rules generally prohibit one member from representing more than one concern whether firm or corporation. The origin of this rule in Chicago (1901) is described in Taylor’s History of the Board of Trade (Tol. II, p. 1021): ^^On June 17 a number of amendments to the commission rule were voted upon and carried by a vote of 524 to 10. These amend¬ ments were calculated to stop evasions of the rules by brokers who made a practice of buying one or two shares of stock in a corpora¬ tion and secured their election to an executive office for the sole pur¬ pose of taking advantage of membership rates. Under the new amendments a corporation could be* represented on the exchange by but one member * * Liens on membership certificates.— It is recognized, expressly or by implication, in exchange regulations that a claim against a member becomes a lien upon his membership certificate.For ex¬ ample, the Minneapolis rules provide that— any member of tliis association to whom another member is indebted upon any claim, demand, or transaction arising from or entered into by virtue of membership in this association shall have a lien upon the membership of such debtor, and also on all membersliips the purchase price of which has been paid by such debtor for the amount of such claim, demand, or indebtedness, which lien may be enforced at any time after the expiration of 00 days (except in the case of expelled members, sec. 23, Rule IV) after such claim, demand, or indebtedness became due and payable by a sale of said membership by the secretary of this association. 6T Chi., 14:8; Mpis., 12;12; Dul., 9:9; K.C. G;14; Oma., 8:9 (G). None of the exchanges forbid a member from trading in the name of his company. Dul.,9:9; Oma.,1:16. Cf. Ballo.,art. 3, sec. 4, where member corporation may be held responsible for acts of a representative. 59Chi., 14:S; K. C., G:ll; Oma., 8:9; (G); b't. L., 13:3; I’hila., art. 2:2; Baito., by-laws, 1:1; Indpls., by-laws, 10:3. See Dul. 9 :12; Mpls. 12:14; K. C G: 17. 208 TERMINAL GRAIN MARKETS AND EXCHANGES. Before such membership may be sold to satisfy a lien the member is allowed a hearing on the claims before the board of directors. The rights of claimants (in Minneapolis) are further protected by the restriction that— Neither the discharge in bankruptcy of such debtor from the legal obligation of such claim, demand, or indebtedness, nor the statute of limitations, shall impair‘or pre¬ clude the right to enforce such lien; nor shall they, or either of them, impair the light to interpose objection to the transfer of a membership on account of any claim, demand, or indebtedness affected thereby. In Kansas City this light is restricted from abuse by setting a lime limit: No claim against any member shall constitute a lien against his membership unless it be filed with the secretary within (>0 days of the date of the transaction governed by these rules and regulations from wdiich arose the liability upon which the claim is founded, and, if such claim be not acknowledged to be correct and due, unless the claimant bring arbitration proceedings thereon within said 60 days. The Omaha rules attempt to enhance the standing of exchange members and to retain control of the stock of the corporation by a specific prohibition against encumbering a membership in any way: Any member who shall pledge, mortgage, or encumber his membership in the ex¬ change as security or otherwise shall, upon notice of the same being brought to the attention of the board of directors of the exchange, be suspended from the exchange, and shall remain suspended until such encumbrance, mortgage, or pledge has been removed.®^ • Likewise, in Chicago the duty is imposed upon each member to maintain his financial integrity: When any member of this association, knowing himself, or the firm in which he is a partner, or the corporation of wdiich he^ is an executive officer, to be in an insolvent condition, shall make any contract on his own account, or on account of such firm or corporation, under the rules of this association, whereby pecuniary loss shall result to any other .member, or to any firm or corporation entitled to transact business on this exchange, he shall be suspended or expelled, at the discretion of the board of directors. The secretary of the Chicago Board of Trade reports that— The rules of the board now (since 1917) do not contemplate the issuance of member¬ ship certificates. When a member is expelled and is indebted to other members, the membersnip expires and ceases to have any value. It does not remain as an asset for the satisfaction of claims held by other members, even though siich other members may be adjudged bankrupts. In other w^ords, wdien a member of the Board of Trade Rule 1, sec. 3. Rme 4, sec.^31. It was held in Board of Trade of the City of Chicago v. Weston, 243 Fed Rep 3.32 (1917), that a m.:>ml>ership on the Chicago Eoard of Trade was property passing to a member’s tru«=toe 'in \.n .ruptcy. The court cited the rules ofthc board with regard to the admission of members anl tranT('r of mrmiiorships (rule 4, .sec. 7. and rule 10, secs. 1 and 2,1917), ani " IkU, that a membership in such baird of tra io, having a value of ab.out .$4,000, was property passing to the member’s trustee in bankruntcy nn ler bankruptcy act, section 70a, though other members of the board of trade held outstm lin^ un\ i- .lusted, an 1 unsettled claims ag.vinst him, aggregatm-i about ,$35,000, an I protosteJ or objectea against the transfer of his mem’oership.” < & « EXCHANGE RULES AND REGULATIONS. 209 is guilty of conduct requiring his expulsion, he is expelled and the value of his mem- Ixuship is lost to him or his trustee in bankruptcy. Membership of a suspended member. —Although the rules fail to define the status of a suspended member, it seems clear from the general use of the term that a suspended member does not lose or surrender any of the rights incidental to the membership, but that for the time being he can not exercise theni.®^ This theory is con- lirmed by a ruling of the directorate of the Chicago Board of Trade (July 18, 1915) that they had no power to reinstate a certain member who was under suspension for three years solely to permit him to sell Ins membership. Membership of an expelled member. —There are two theories with regard to the membership of an expelled member: (1) To con- (‘ede that he retains the property rights in his membemhip (subject to liens) unaffected by the expulsion; (2) to mle that upon expulsion all rights and interests in the membership are forfeited and the cer¬ tificate may be sold or reissued at the will of the association, i. e., that the member has no vested property rights hi the certificate. The first principle is followed hi the Minneapolis and Duluth rules, where it is provided that an expelled member shall be allowed 60 days after expulsion in which to settle all claims held agahist him by members,. and failing to do this his membership shall be sold and ‘ ‘ the proceeds of the sale, if there be more than one claimant, shah be ])rorated by the secretary, and the remainder, if any, shall be paid to the expelled member or to his assign ^ * *y’64 The second principle is maintained in the rules of Kansas City,. Omaha, and St. Louis.®^ The Kansas City rules provide that ^‘when a member is expelled or becomes ineligible for remstatement, he shall be deemed to have surrendered and resigned his membership m this body, and all the privileges and property interests, if any, pertaining thereto and resulting therefrom * * * shall be thereby extin¬ guished.” The expelled member’s interest in his membership being thus extmguished, an extraordinary procedure is provided in Kansas City for issuing a membership in place thereof and for satisfying any claims filed against the certificate. It is ruled that ^^a new membership may be issued by the association in the place thereof * * * upon such terms * * * as to price, as may be determined by the board of directors by at least eight affirmative votes * * The pre¬ ss A suspension does not interfere with the offending meml>er’s vested rights of property. See Haebler v. N. Y. Produce Exchange, 149, N. Y. 414. (Quotation from Mpls. rule:) Mpls.—4:23; Dul.—9:13 (substantially the. same). No provision in Mil. In New York (by-laws, see. 21) a forfeited certificate of membership may be sold at public auction and, after charges and assessments due have been deducted, the proceeds are payable to the original holder. ® K. C.—6:10; Oma.—1:7; St. L.—4:9. For Chicago practice, see previous page. 168693*’—20-14 210 TERMINAL GRAIN INIARKETS AND EXCHANGES. cccds of this sale are to be applied ‘Ho the following purposes in the folio whig order of priority:” (1) Payment of usual transfer fee plus all fines, dues, and assess¬ ments due agamst the expelled member. (2) Payment of claims filed by member creditors, or firms regis¬ tered in the Board of Trade, “provided, that if such proceeds shall be insufficient to pay said claims as so allowed, in full, the same shall be applied to payment thereof pro rata.” (3) The payment (in full, or pro rata) “of judgments of the com¬ mittees of arbitration or appeal and of all filed claims arising, from contracts subject to the by-laws, rules, and regulations of the board of trade, if and to the extent that the same shall be allowed bv the board of directors.” (4) “The surplus, if any, of said proceeds shall belong to and become the property of the association.”®® The Omaha rules are far less explicit on the subject, merely pro¬ viding that the board of directors “may thereafter sell such mem¬ bership at pubhc or private sale, after notice thereof has been posted upon the bulletin of the exchange for at least 10 days,” and that members^ claims on the proceeds shall have prior consideration to those of outside creditors.®^ The St. Louis rules conform in pruiciple to those of Kansas City and Omaha, providing that “upon the expulsion of a member all rights under his certificate of membership shall thereby be forfeited and annulled.” ®® The exchanges at Buffalo and Indianapolis are exceptional in this matter, since they are stock companies which issue trading privileges to nonstockholders in the form of a license and not as a contract with the corporation.®** Section 5. Discipline. Subject matter.— Any discussion of S3^s terns of discipline pro¬ vided in the rules is closely related to the question of arbitration, since a dispute in arbitration may, upon investigation, be found to involve the violation of a rule; and the failure of a member to abide by an award in arbitration proceedings naturally leads to disciplinary action. However, on the highly organized exchanges the codes of discipline may be considered apart and distinct from the arbritation rules, after the analogy of the criminal laws as compared with laws providing for adjustment of violations of private or civil rights. 66 K. C.—6:11. 67 Oma.—1:7. 63 St. L.—4:9. Also reported to be the present interpretation of the Chicago rules. 66 Articles, Indianapolis Board of Trade, art. 13: “Special members shall have no legal or equitable interest in the property or moneys of the association, all of which shall be represented by and appertain to the regular memberships held, and in the common capital stock of the association owned by regular members according to the plan provided in these articles of association.” EXCHANGE EULES AND HKGULATIONS. 211 The following practices, in addition to violations of specific rules, are designated as uncommercial conduct and subject to discipline: ' (1) Willful violation of a business contract.^^ (2) Refusal to arbitrate.(See p. 218.) (3) Refusal to comply with an award in arbitration.'^^ (4) Making or reporting false or fictitious purchases or sales."^^ (5) Acts of bad faith, attempts at extortion, or dishonest conduct.'^^ (6) Contracts in violation of the criminal statutes of the State."^® On none of the exchanges does the enumeration of specific viola¬ tions and -causes for discipline prevent the board of directors from hearing aii}^ complaint of commercial irregularity. The Buffalo by¬ laws, for example, include the elastic phrase, “or any other irregu- laritv,’' in the enumeration of violations. The exchanges have asserted the right to expel members on grounds of general policy. For example, on April 22, 1907, the Minneap¬ olis directors had before them a circular letter of Schmitt-Howe & Co. of Duluth whereby this firm proposed to organize a joint stock company so that country shippers “would have an interest m the profits of commissions of firms made bv them without conflictmo^ with the rules of the exchanges.’’ They had outlined a plan of increasing their capital stock to $125,000 by means of subscriptions from 50 or 60 farmers and independent elevators and they had then proposed to carry on a much larger commission busmess at a pro¬ portionately smaller overhead cost and thereby not only increase the earnings of the stock but benefit the interested local elevators. This plan was considered objectionable by the board of directors. The commission firm was so advised, but replied that they intended to carry out the scheme. Thereupon, September 7, the resolution recognizing tliis firm as a member of the chamber was rescinded and they were expelled from the membership. These associations may discipline their members for defaults on contracts which would be unenforceable at law under the statute of frauds. A formal opinion of Henry S. Robbins, attorney for the Chi,, 4:9; Mil., 4:12; Mpls., 4:9; K, C., 8:1; Oma., 1:1; St. L., 4:9; Peo., 7:8; Ind. (by-laws), 10:3; Tol. 4:12; Buf. (by-laws), 4:9; Phila. (by-laws), 25:2; Balto. (by-laws), 9:11; N. Y. (by-laws), see. 32. 72 Chi., 4:9; Mil., 4:12; Mpls., 4:9; Dul., 4.-9; K. C., 8:1; Oma., 3:2; St. L., 4:9 and 6:6; Peo., 9:1; Ind, (Rules for Arb. and Ap.), sec. 7; Phila. (by-laws), 25:2. , 73 Chi., 4:9; Mil., 4:12; Mpls., 4:9; Dul., 4:9; K. C., 8:1; Oma., 1:1 and 3:2; St. L., 4:9; Peo., 7:8; Ind. (by-laws), 10:3; Tol., 4:12; Buf. (by-laws) 4:9. 71 Chi., 4:9; Mil., 4:10; Mpls., 4:7; Dul., 4:7; K. C., 8:5 and 10; Oma., 1:2; St. L., 4:9; Peo., 7:8; Ind. (by-laws), 10:3; Tol., 4:12; Buf. (by-laws), 4:9; Balto., (by-laws), 7:5. As early as 1885 two members of the Minneapolis Chamber of Commerce were indefinitely suspended for reporting prices in excess of those actually paid on purchases of wheat. 7iChi., 4:9; Mil. 4:10; Mpls., 4:7; Dul., 4:7; K. C., 8:2; Oma., 1:2; St. L., 4:9; Peo., 7:9; Tol., 4:12; Buf. (by-laws), 4:9. “A board of trade wliich, though incorporated, is a mere voluntary association, has power, the incorporating act not denying it, to provide by by-law for forfeiture of a membership for fraud of the member in securing his acceptance as a member; it being reasonable, and not contrary to public policy or the law of the land.” (244 Fed. Rep., 108.) 76 Chi., 4:9; Mpls., 4:7 (“ * * * or if any member shall be convicted in any court of competent juris¬ diction of any crime * * *”); St. L., 4:9; Ind. (by-laws), 10:3. 212 TERMINAL GRAIN MARKETS AND EXCHANGES. Chicago Board of Trade (Oct. 26, 1915), cautions the members to ha\'e their confirmation slips signed in order that contracts may be enforceable by action in the courts. He points out, however, that the Illinois uniform sales act of 1915 does not prevent the board from disciplining a member for failure to comply with the terms of any business obligation, and that the board is still warranted in sus¬ pending a member for failure to fulfill a contract not so reduced to writing.” Procedltre. —The administration of discipline and the trial of offenders is placed in the discretion of the board of directors or of complaint committees.'^® It is customary, in case a serious charge is made, to first conduct a preliminary or informal investigation, in most instances through a committee of the board of directors. In Omaha cases of discipline are first heard before the Alleged Violation of Rules Committee and in PhiladHphia, Baltimore, and New York, before the so-called complaint committees. Appeal from any of these committees lies to the Board of Directors,’® giving the accused hearing before two separate bodies. If the prehminary report confirms the charge, a formal hearing will be held with op¬ portunity for the accused to be heard in his own defense. If found guilty, he may be censured, fined, suspended, or expelled. The exchanges uiranimously provide a form of trial with due notice of tlie charges against him and an opportunity to be heard.®® The rule is identical in Chicago, Minneapolis, and Milwaukee, as follows: It shall be the duty of the board of directors, in case any grave offense or act of dishonesty committed by any member involving the good name or dignity of the association, or any act of dishonesty on the part of a member, shall come to their knowledge, either by complaint or public report, to chaise a preliminary or informal investigation to be made by a committee of their number into the truth or falsity of such complaint or report; and if the said committee, after investigation, shall deem any member guilty of such offense, they shall so report to the board of directors, with specific charges; whereupon the member thus implicated shall be notified to appear before the board of directors in manner as provided by Section 16 of this rule, and if found guilty the said member shall be suspended or expelled, as herein¬ before provided.®^ As an example of the application of this rule, on November 19, 1915, the Minneapolis Directory referred a complaint (alleging dis- ” See Green v. Board of Trade, 174 Ill., 585, where the court said: “As heretofore said, where such by¬ laws infringe no public policy or rule of law, and are not unreasonable, courts will never interfere to control their enforcement, but such corporations or associations will be left to enforce their rules and regulations in the manner they have adopted for their own government and methods of discipline.” 4:9; Mil., 4:10-12; Mpls., 4:7; Dul., 4:7; K. C., 8:7; St. L.,-4:9, p. 12; Ind., Sec. 35; Tol., 4:12,13,14; Buf. (by-laws), Art. 4, Sec. 9; Cin., no provision; Peo., 7:8; Phila. (by-laws). Art. 25. See also, 17 Cyc., 857, note 46 and cases cited. Oma., 1:7; Balto. (by-laws). Art. 9, Sec. 11; Phila., Art. 25, Sec. 2; N. Y. (by-laws), 32. ^0 Chi., 4:18; Mil., 4:17; substantially the same in Dul., 4:12; K. C., 8:6-7; Oma., 1:7-13; St. L., 4:9; Peo., 7:10; Cin., no provision; Tol., 4:18; Phila., Art. 25, Sec. 2; N. Y., (by-laws). Sec. 32; Balto., 7:5. « Sections cited above. EXCHANGE EULKS AND REGULATIONS. 213 iumest conduct of ii member) to the Committee of Investigation with instructions to go to the books of tlie parties implicated. On most of the exchanges the directors make final disposition of cases of disciphne and prescribe penalties. In Peoria, however — * * * no vote of said board of directors expelling a member shall be of any effect until the same shall have been sii])mitted to a meeting of the association called for that purpose and shall be approved by a majority of the members present (the numljer being not less than 25), the vote being taken by ballot.®^ To expel a member an extraordinary majority of the board of directors is usually required,and on some exchanges the same is true of suspension.*' Trial procedure.— The procedure to be followed in trials before a board of directors or disciplinary committee of the exchange is not usually stated in the general rules. The follomng provisions (Cin¬ cinnati)** may be considered typical, however, of the practice gen¬ erally followed by the exchanges in trials of this nature: RULES FOR THIS MANAGEMENT OF TRIALS BEFORE THE BOARD. Rule 1, No trial before the board shall be proceeded with in the absence of either party, until after proof of sciA ice of notice, by the secretary or an employee of this company, personally, or at the place of business of the party, or by mail to his last known residence, if he has no place of business in Cincinnati. Unavoidable absence from the city, sickness, or the absence of material witnesses shall be considered, at. the discretion of the board, cause for adjournment of trial. Rule 2, The trial shall be opened by a verbal or written statement of the case by the complainant, and shall be followed by a verlml or written statement by the respondent. Interruptions shall not be permitted. Rule 3. All testimony introduced in trials before the board shall be under oath; to be administered by a judge or justice of the peace of the County of Hamilton, State of Ohio, or other officer authorized, or to be authorized, to administer oaths in such cases. Rule 4. All questions as to the relevancy or admissibility of testimony shall be decided by the presiding officer. The party against whom the question of evidence is decided shall have the right of apiDeal to the board trying the case. Rule 5. All interrogatories by contestants shall be put by only one person on each side unless by consent of the board. Rule 6. The order of testimony shall be as follows; I. The evidence for the complainant. II. The evidence for the respondent. Minutes of Minneapolis board of directors. Peo., 7:10. •"t Chi. (4:9), an affirmative vote of at least 12 members; Mpls. (4:8), two-thirds vote of directors present, l.Hit in every case at least 7 affinnative votes; Mil. (4:11) and Dul. (4:12), same language as Mpls. except 6 affirmative votes required as minimum; K. C. (5:6), affirmative ballots of 9 directors required to expel; Bt. L. (4:9), affirmative votes of 9 directors required to expel; Ind. (Art. 10, See. 3), “the Governing Com¬ mittee shall have power to reprimand, suspend, or expel such member by a two-thirds vote” of a quorum of the committee; Buf. (By-law 4, Sec. 9), affirmative vote of 5 directors required to expel; Phila. (By¬ law 25, Sec. 2), majority of directors present is sufficient; N. Y. (by-laws. Sec. 32), two-thirds vote of members of Complaint Committee present required to censure, suspend, or expel. 85 Mpls., 4:8; Dul., 4:12; N. Y. (bjMaws Sec. 32). These rules are the same for both suspension and expulsion. 8* By-law 13. 214 TErxMINAL GRAIN MARKETS AND EXCHANGES. III. The evidence for the complainant in regard to new matter presented in the evidence for the respondent. The evidence shall then close, exce])! that it may be reopened in the interest of justice, by vote of the board. Rule 7. The cross-examination of witnesses need not be confined to matters testified to in the direct examination, but can be extended to any matters necessary to make out the case of the party making the cross-examination. Rule 8. The reexamination in chief shall be strictly confined to new matter intro¬ duced in the cross-examination. Rule 9. Witnesses will only be permitted to testify as to facts within their own personal knowledge, and can not be allowed to state information given them by others. Rule 10. The testimony must be confined to the matters in controversy, and all irrelevant facts must be excluded. Rule 11. Whenever books of accounts require any extended examination, or the papers presented are voluminous, the board may refer the matter to one of their number, or to an accountant, for examination and report. Rule 12. Whenever the genuineness of the signature of any material paper presented in evidence, is contested the board shall dismiss the case, unless both litigant parties shall agree to a final decision without reference to the question of the genuineness of the signature. Rule 13. Proof of agency must be established before the admissions of an agent can be received. Rule 14. The board reserves the right to dismiss any case where the conflict in the testimony is such that it may be deemed improper to proceed to give a decision. Rule 15. In trials or investigations before the board of directors, arbitrators or committee on arbitration, or any other committee of tlie compa,ny, no party shall bo allowed to be represented by an attorney at law. Suspension, expulsion, and reinstatement.— On most of the exchanges a suspended member is automatically reinstated upon the expiration of the period of suspension unless suspended indefinitely or conditionally; in which case positive action of the board of directors is required for reinstatement. In the latter case a majority vote of a quorum of the board is required to reinstate and the directors may attach further conditions to such reinstatement.®^ Most frequently suspension is for a definite period. As illustration, on January 27, 1914, a member of the Kansas City Board of Trade was suspended for 10 days by a 7 to 6 vote of the directors on the charge of selling No. 3 corn as No. 2. To consider a more serious Chi., 4:14; Mil., 4:16; Mpls., 4:12; Dul., 4:16 (Mil., Mpls., and Dul., “such reinstatement may be made to depend * * upon such conditions to bo observed and performed by the suspended member as the board of directors, by a vote as aforesaid, may sec fit to prescribe.St. L., 4:9; Peo., 7:18 (the Peoria rule on reinstatement may be considered as typical of the attitude of the exchanges on the matter): “Any member suspended may bo reinstated bj' a majority vote of the whole board of directors. Appli¬ cation lor relief from suspension must be made to the board of directors in writing by the party suspended. Notice of the application shall be posted upon the bulletin of the exchange for at least one week previous to any such hearing by the board of directors, when if no other just claims be filed against such applicant, he may be reinstated; and if the board of directors shall be satisfied that his failure was mere!}’ from financial inability or misfortune, such member having given satisfactory evidence that he has adjusted or settled such outstanding obligations, shall be reinstated, and such reinstatement in either case shall thereafter serve a.s a bar to any further discipline by the association on account of any claims maturing at a date prior to the reinstatement of such applicant.” Cin., no provision; Peo., 4:15; Buf. (by-laws), 4:13; Phila. (by-laws), 25:4 (by majority vote of board). InJ. and Balto. have no provisions for reinstatement after suspension; N. Y. (by-!hws), section 35 (by majority vote of board of managers). EXCHANGE RULES AXD EEGULATIOKS. 215 offcnsc; on July 11, 1916, a member of the Chicago Board of Trade was suspended from aU privileges of the board for a period of two years on the charge of accepting and clearing a future trade for ac¬ count of an employee of Logan & Bryan, the latter firm being a party to the trade. Suspension .—^The Kansas City rules make it possible for any member with a valid objection to prevent the readmission of a sus¬ pended member. The suspended member is required to adjust and settle aU outstanding claims held by members against him before his application for relief from suspension wiU be entertained. Then, after the application has been posted for 10 days, ^‘if no objection to his reinstatement be made the applicant may be reinstated by the board of directors.” Omaha adds to this the provision ^‘that if it appear, in any case, that the suspension was due to mere financial inability to meet his obligations, and not to any unwillingness to do so, he shall be so reinstated by the board of directors.” The Minneapolis and Duluth rules post a suspended member under authority of the following provision; Any member suspended by tbe board of directors shall not be allowed to trade Upon the floor of the exchange, either personally or through a broker or employee. Any member of the association trading or offering to trade either as a broker or employee in the name of a suspended member shall be considered as having \iolated a rule of the association, and shall be liable to discipline therefor, as in these rules provided. Expulsion .—^It is required by the rules of 12 exchanges that an exjDeUed member may not be readmitted except as a new member and general approval by an extraordinary vote of the board of direc¬ tors is required.®^ Omaha requires that an expelled member be ad¬ mitted only as a new applicant ^^and not then until he shall have fuUy purged himself of the offenses for which he was expelled.” In Chicago this rule has been materially altered by construction. In 1914 an expelled member was petitioning for reinstatement and it was insisted before the board of directors that the framers of the rule intended that an expelled member might be reinstated only upon the payment of the regular initiation fee and annual assessment, and that he could not be reinstated through the mere purchase and transfer of an unimpaired membership certificate. Yet the counsel to the board advised otherwise. He pointed out that the rule had on a previous occasion been construed to permit an applicant to ten- 88 K. C., 8:10. 89 Oma., 1:9. 80 Dul., 4:15; Mpls., 4:23; idem. Ind. (rules of the grain trade), section 34:12. 91 Chi., 4:15; Mil., 4:17; Mpls., 4:14; Dul., 4:17; K, C., 8:10; Oma., 1:9; St. L., 4:9; Peo., 7:19 (Peoria similar to Chicago): Ind. (by-laws, 10:3; Tol., 4:10; Buf. (by-laws), 4:13; Phila (by-laws), 25:1 (Philadelphia offers a slight exception again in the provision that, ‘‘he (the expelled member) may appeal in writing to the exchange, and, at a special meeting called for the purpose, be reinstated by an affirmative vote of two-thirds of the members present.”): Balto., no provision; N. Y. (by-laws), section 35, three-fourths vote of board of managers required. 216 TERMINAL GRAIN MARKETS AND EXCHANGES. (ler ail unimpaired membership in lieu of the initiation fee. He stated further that when this rule was first adopted there was probably little dilference between the value of a membership and the initiation fee (the latter then not exceeding $1,000); and that it had been felt by later boards of directors that to require an expelled member to pay the $10,000 (now $25,000) fee would be prohibitive except to rich members. In answer to this, one of the directors stated that in 1913 it was proposed to amend the rule so as to allow reinstatement by presen¬ tation of a transferred membership and that this was voted down. He considered this to be the latest interpretation of the section, irrespective of earlier precedents. vSince the expelled member in question was not approved for reinstatement no definite ruling on this point exists at this time. Blacklisting nonmembers. —On the part of several exchanges there has been an effort to regulate the conduct of nonmembers. Under the rules nonmembers may be blacklisted for delinquencies resulting out of transactions had with or through members of the ex¬ changes in vSt. Louis, Duluth, Buffalo, Baltimore, and New York in substantially identical provisions. The rule applies to— any corporation, firm or individual not a member * * * * who shall be accused of any proceedings inconsistent with just and equitable principles of trade, or who has failed to comply promptly with any contract, either verbal or written, in relation to a transaction had through or with any member of this association, or who has neg- " lected or refused to comply promptly with the award of any board of arbitration or board of appeals rendered in conformity wdth the rules or regulations of the association. * * * If, in the opinion of the directors, the chai’ge or charges against the accused shall be substantiated, the directors may, by a vote of not less than two-thirds of all the members present, prohibit the accused representation on the floor of the exchange; and any member of the association who shall, with knowledge of such prohibition, or after notice of such proliibition shall have been posted on the bulletin five days, represent, or transact business for or on behalf of such accused upon the exchange, may upon complaint of any member, be fined, suspended or expelled.®^ A rule common to the Minneapolis and Milwaukee Chambers of Commerce provides for denial of representation ^Tor any business object or purpose whatsoever” to any “party or parties, whethei corporation, comiiany, firm, or individual, who shall be in default and shall have remained so in default for the space of one month, to any member of the chamber, upon any contract or agreement made with such member * * *” Members are forbidden to represent such a party on the floor or “enter into any contract or agreement whilst said party * * * shall be and remain in default as afore¬ said, and with the knowledge of such default”—under penalty of suspension or expulsion. It is reported that the rule at Minneapolis -2 Dul., 4:10; St. L., 4:9; Buf., 3:1; Balto. (by-laws), art. 9; sec. 11; N. Y, (by-laws), sec. 36. *3 Rule 8, sec. 3 on both exchanges. Procedure under the Minneapolis rule is defined in circular 361, issued May 7, 1912. EXCHANGE RULES AND REGULATIONS. 217 has not been invoked against iionmembers during the past 12 years and probably not prior thereto; and that the rule in“Milwaukee has not been invoked in recent years. The rules of the Milwaukee and Buffalo exchanges provide for posting a nonmember and denying him representation on the floor, only in case of default in a transactioii, conducted through a Hiember who can show that he has acted as agent of the nonmember principal, and that he has disclosed such principal at the time that the transac¬ tion was made.®* To cite the Buffalo rule: " * * if such principal shall not be a member of the exchange, the directors by sucli vote may prohibit said principal’s representation on the floor of the exchange, and any member of the exchange who shall with knowledge of such prohibition, seek to represent or transact business for, with or on behalf of said principal, after notice of such prohibition shall have been posted on the bulletin during five days, shall be deemed guilty of a wilful violation of these rules and subject to the penalties pre¬ scribed in rule 4, Section II. The Omaha Grain Exchange not only posts the nonmeinber foi failure to abide by an award in arbitration but goes so far as to black¬ list him for refusal to arbitrate any dispute arising in grain trans¬ actions with a member. The rule enforced by this exchange provides for blacklisting (boycotting) nonmembers who decline to submit to an exchange agency in the settlement of business disputes. The rule leaves no other recourse to a nonmember providing he finds it necessary to deal through a member of the Omaha Grain Exchange, viz. : No member shall make advances on any shipment nor handle on consignment or buy grain from any person, firm or corporation against whom a judgment of the board of arbitration remains unsatisfied or who has failed or refused to submit to arbitration any matter in dispute with a member of the Omaha Grain Exchange after. 10 days’ notice and demand in writing for arbitration by such member. Nor shall any mem¬ ber of this exchange consign grain to or sell grain to any person, firm or corporation against whom a judgment of the board of arbitration remains unsatisfied or who has failed or refused to submit to arbitration any matter in dispute with a member of the Omaha Grain Exchange after 10 days’ notice and demand in writing for arbitration by such member. Provided, Notice of such judgment of the board of arbitration or refusal of such person, firm, or corporation to submit to arbitration shall have been posted for 5 days on the trading floor of the exchange in the usual and customary manner and notice in writing thereof given to the active members of said exchange. Provided further, That no person, firm, or corporation shall be posted as hereinbe¬ fore provided for until notice in writing of the refusal of such person, firm, or corpora¬ tion to satisfy the judgment of the board of arbitration or refusal to submit to arbitra¬ tion any matter in dispute shall have been filed with the secretary of this exchange, and such person, firm, or corporation has been given a reasonable opportunity to appear before the board of directors of this exchange and show cause why such person, firm, or corporation should not be posted as hereinbefore provided, and until the board of directors has ordered the posting of said person, firm, or corporation and the giving of written notice to the active members as hereinbefore provided. « Mil., 8:2; Buf., 3:6. 1918 Rules, p. 65. 218 TERMINAL GRAIN MARKETS AND EXCHANGES. From May 4, 1915, to September 21, 1916, eight firms were jiosted on the Omaha Exchange for refusal to arbitrate disputes with mem¬ bers. The firms were variously located in Texas, Oklahoma, Ne¬ braska, Missouri, and Massachusetts. On February 5, 1914, a dealer in Modal, Iowa, was blacklisted by the directorate of the Omaha p]xchange ^Tor not paying a bona fide claim.” On September 21, 1916, the directors adopted a motion that the secretary be instructed to issue to the members of the Omaha Grain • Exchange a list of the nonresident mcmbcrs'who were posted. ^-feection 6. Arbitration. Boards of arbitration and appeal. —^Arbitration of disputes by the exchange agency is practically one of the terminal market terms” under which contracts between members are made. The recom¬ mended grain contract” which is written into the rules of the St. • Louis Exchange stipulates that— * * * it is hereby agreed that any dispute or difference in connection herewith shall be referred for settlement to the duly constituted committees of the merchants’ exchange, and that we will abide by their decisionf^^ There are two different modes of commercial arbitration provided by the various exchange rules: (1) Where submission of a dispute to the arbitration committee is voluntarily made by both parties and it is agreed beforehand that the decision of the highest tribunal of the exchange shall be final and binding between the parties (as in Chicago, Toledo, Cincinnati, Baltimore, and New York),and (2) compulsory arbitration, where the arbitration committee acts on the complaint of one party and formal notice of such complaint is served on the sec¬ ond party (providing he is a member) forcing him to agree to arbitrate or incur the penalty provided for such default, which may be suspen¬ sion or expulsion (as in Minneapolis, Milwaukee, Duluth, Kansas City, Omaha, Peoria, Indianapolis, Buffalo, and Philadelphia).®^ Thcrule was adopted Aug. 28,1914.- Sec Minutes of Omaha Board of Directors, 1915,1916. Rule 8, sec. 1. i'S Chi., Rule 8; Balto, (hy-laws), 9-2; Tol., 8:1; Cin,, by-law 11; N. Y. (by-law), sec. 29; in Chicago, how¬ ever, charges against any member for “default, misconduct, or offense’^ may be filed with the board of direc¬ tors and tried as by the arbitration committee, although a trial before the board of directors is regarded a»a disciplinary procedure (Rule 4, sec. 16); and in Baltimore, when parties can not agree to arbitrate the com¬ plainant may file his complaint with the complaint committee which shall try the case in the usual way. Appealfrom the complaint committee lies to the board of directors. (By-laws, ai't. 9, sec. 11.) Arbitrationis “voluntary”on the Toledo Produce Exchange, but “when formal complaint is made to the secretary and the services of the arbitration committee is requested, the defendant is given copy of the charge and furnished with an agreement to sign agreeing to abide by said committee’s decision. If the same is returned withrefusal to arbitrate, the directors take up the matter and if they decide a willful violation of a business contract has occurred, the defendant 'shall be censured, suspended, or expelled by the board of directors, as they may determine from the gravity and nature of the offense committed.’ The-directors really take charge and may conduct the case as if it were in the hands of the arbitration committee, and may enforce the award made as a majority decides.” (Letter from secretary of the exchange, dated Nov. 14,1919.) ‘•^Mil., 4:12; Mpls., 7:1-4; Dul., 8; St. L.,6:6; K. C., 8:1; Oma., 1:1; Peo.. 9:1; Buf., art. 5; Ind.,sec. 12; Cin., 2:2; Phila. (by-laws), 16:1; N. Y. (by-laws), sec. 29. See statement or facts in Evans v. Chamber of Commerce (Minn.), June 20,1902 (91 N. W., 8). I EXCHANGE RULES AND REGULATIONS. 219 The distinction between voluntary and compulsoiy arbitration can be set forth no more clearly than by stating the respective rules of the Chicago and Minneapolis exchanges. (1) The Chicago rules state that: It shall be the duty of the committee of arbitration to hear and determine all cases of disputed claims voluntarily submitted for their adjudication by members of the association. (Rule 8, sec. 1); and Parties desiring the services of either of the foregoing committees shall notify the sec¬ retary to that effect in writing and, before the hearing of the case, shall file an agree¬ ment with him, signed by the parties to the controversy, binding themselves to abide, perform, and fulfill the final award or finding which shall be made touching the matter submitted, without recourse to any other court or tribunal. (Sec. 9.) (2) TVhile in Minneapolis it is provided that: Any party desiiing to submit a matter in controversy to the board of arbitration shall file a complaint in writing with the secretary. * * * A copy of such com¬ plaint shall be served by the secretary on the adverse party, and if the party com¬ plained against shall fail to appear and answer such complaint within six business days after service of copy thereof, as aforesaid, he shall be deemed to be in default, and to have incurred the penalties of refusal to join in submission to arbitration. (Rule 7, sec. 2.) Moreover, it is expressly or impliedly stated in certain rules that arbitration is the only method open to members to settle business disputes among themselves (unless a complaint has been filed and refused) and resort to the courts without first requesting arbitration is forbidden^®® (e. g., Kansas City, Omaha, Indianapolis, Peoria, and Buffalo).^ The Kansas City rule recites that: All disputes, differences, or disagreements of a financial, mercantile, or commercial character * * * among members of this association or between members and other parties, when such others assent thereto, must and are hereby agreed to be submitted to the committee of arbitration for adjustment, * * * but if arbitration shall have been proposed and refused, then an action or actions at law may be commenced, and the members failing or refusing to arbitrate may be suspended or expelled, as the board of directors may determine. (Rule 11, sec. 2.) In a certain legal sense, commercial arbitration is always voluntary for both parties; either through agreement to submit a specific case, or agreement to abide by exchange rules which require arbu tration of commercial disputes. The theory of exchange rules (with the exceptions noted) is that all members consent to the arbitration of controversies between themselves. On this theory, the refusal to arbitrate is defined to be ‘^an act detrimental to the interests and welfare of the Exchange.”^ It must be understood, however, that the right to compel arbitration relates only to transactions entered 100 This is “compulsory arbitration” in the view of the courts. Cf. paragraph 5 in syllabus, “Evans v. Chamber of Commerce of Miimeapolis,” 85 Minn., 41S, 91 N. W., S. 1 K. C., 8:1; Oma., 1:1; Ind. (Rules for Arb. & Ap., sec. 7); Pco., 9:1; Buf. (bj'-laws), art 5. 2 St. L., rule 6, sec. 6; Mpls., rule 4, sec. 9; Mil., 4:12; Dub, 8:2. 220 . TERMINAL GRAIN MARKETS AND EXCHANGES. into “ by virtue of membership’’ on the exchange, i. e., to obligations which might constitute a lien upon such membership. Special arbitration committees.— On a majority of the ex¬ changes boards of arbitration are presumed to care for all commercial disputes of importance and to render unnecessary any resort to the old common-law methods of arbitration. There are, however, cases where special committees are appointed to adjust an alleged default, such as the provisions for failure to deliver on future contracts.*^ The Cincinnati Exchange allows disputants to submit their arbi- tratio]! agreement to—- {a) One of the members of The Exchange as sole arbitrator; or {h) Any two members to act as arbitrators, who in turn shall designate from the membership of The Exchange a third person to be associated with them as arbitrators; or (c) The Committee on Arbitration, or a quorum thereof. Finally, there is a recent rule of the Merchants’ Exchange of St. Louis, applicable to cash sales of grain on track, which provides the common-law method for adjustment of disputes: In no case shall a rejection or claim for difference in value be made, unless for good cause, and any disagreement between purchaser and seller in relation thereto shall be inmiediately submitted to three arbiters, one chosen by the purchaser, one by the seller, and the third by the two arbiters so chosen, and their decision shall be final. Arbitration for nonmembers. —The exchange provisions for arbitration usuall}^ apply to disputes between members and non¬ members, such action being apparently voluntary on the part of the nonmember • In most instances, also, arbitration can be arranged between two nonmembers.^ In the latter case a larger fee—generally double the regular amount—is exacted by the arbitration tribunal.® In Indianapolis: When either party to an arbitration is not a member of the association he shall pay in advance to the Secretary, for the benefit of the association, the sum of $10 and give a satisfactoiy bond to cover the fees, costs, and any award that may be made against him.' Compulsory arbitration for nonmembers.— To require of non¬ member customers that they settle all disputes with members through arbitration tribunals of the terminal market exchange wmuld perhaps constitute an unfair, or at least a questionable, practice. It would 3 See sec. 18 below, and Vol. V. < Except in Omaha; see p. 217 seq. 5 Chi., 8:14; Mil., 7:2, 14; Mpls., 7:1-4; Dul.. 8; K. C., 11:2; Oma., 3:4; St. L., 6:6; Peo., rule 9; Ind., Rules for Arb. and Ap., sec. 7; Cin. (by-laws), 11:8; Buf. (by-laws), refer to membership only; Phila. (by-laws), art. 16, secs. 1 and 15; N. Y. (by-laws), sec. 33. Chi., 8:14 (fees “may be doubled’/); Mil., 7:14 (fees “shall be doubled”); Mpls., 7:12 (“shall be doubled”); Dub, 8:11; K. C., no provision for noiimembers’ fees; Oma. (fees to be doubled when but one party is a mem¬ ber); St. L., (Same fees for all arbitrations “under the sanction of this exchange.”); Peo., 9:12 (doubled when neither party a member); Cin., no provision for fees; Tol., 8:13, double fee; N. Y., action upon complaint of one party. No provision for arbitration between nonmembers. ’Ind., Rules for Arb. and Ap., sec. 17. EXCHANGE RULES AND REGULATIONS. 221 appear that they could not properly be deprived of their right tu carry a case into the coiuds after such an award in arbitration liad been made. Such nonmember shippers or dealeis are frequently members of a State or National association through which they have })Iedged themselves to commercial arbitration through their ow]i committees. Yet several of the exchanges, as already noted (p. 216), ])rovide for the enforcement of contracts between a member and a nonmember by summoning the latter to appear before the board of directors or an appropriate committee, and on his failure to appear, forbidding him representation on the exchange. And the Omaha ' Grain Exchange, as stated, authorizes the posting of nonmembers for refusal to arbitrate through the exchange agency. Arbitration agreements.— Although enforcement of awards in arbitration are provided for in the membership agreement of exchange associations, yet, in conformity with their charters or with the State law, exchanges have required members to sign a preliminary agree¬ ment before entering into arbitration. These instruments bind the parties to the terms of the final award.® Agreements which foreclose any subsequent resort to the courts must be signed by both members and nonmembers seeking arbitration according to the rules in Kansas City, Omaha, and Peoria.® Of course in all grain exchange arbitrations it is understood that the award of the highest tribunal shall be '‘final and binding” on the parties; and the defendant in a subsequent action at law may invoke the arbitra¬ tion award as a bar to such action. However, only in the three mar¬ kets mentioned above is the right to resort to the courts clearly relin¬ quished by the language of the arbitration agreement. Procedure. —The steps commonly followed in arbitration pro¬ cedure, where the second party has not signed the agreement, are: (1) formal complaint to a committee or board of arbitration of ex¬ change members; (2) service of such complaint upon the second party; (3) a formal reply or counter demand from the second party; (4) formal hearing and trial of the case before the committee; with (5) possible appeal to a higher tribunal whose decision shall be final. ® Chi., 8:9; parties file agreement to abide by award “without recourse to any other court or tribmial.’* Mpls., 1917, p. 244; nonmember consents in writing to the jurisdiction of the board; also, Dul., 1918 rules p. 27; Mil., 1918 rules, p. 22; decision of board of appeals “shall be final and binding upon the parties." K. C. (1917), pp. 39-41: “In case the complainant is a nonmember, he shall also sign an agreement to abide by and comply with all the the terms and provisions of this constitution and all orders and resolutions of t he board of directors, and any committee of this association concerning the arbitration of said demand, and of any coxmter demand which the defendant may present." Iso, must sign formal release of subsequent rights of action (see text). Oma. (1918), pp. 31-34 (identical with K. C.); St. L. (1917), p. 24; both parties (members or nonmembers) sign agreement to abide by the award and to have it entered as a judgment in the circuit court of St. Louis. Peo., rule 9, sec. 8: both parties bind themselves to fulfill the final award “ without recourse to any other court or tribunal." Also, Ind., rules for Arb. & Ap., sec. 7; Cih., no pro¬ vision; Phila., by-laws, art. 16, sec. 15: Nonmembers agree to abide by the decision without recourse to court; N. Y. and Balto., no provisions. 9 K. C., 11:6; Oma., 3:4; Peo., 9:8. Note that in Chicago, Baltimore, Toledo, and New i'ork arbitratibn follows a mutual agreement rather than individual complaint. 222 TERMINi'LL GEAIN MiHlKETS AISTD EXCHANGES, It is customary for the secretary of the exchange to receive and serve complaints, administer oaths to members of the tribunal, file appeals, announce the awards, and perform the general administrative duties of a clerk of court. The arbitrating body on the major ex¬ changes is possessed of the ordinary judicial powers to compel tesli- niony under oath, rec|uire the production of papers, and assess the fees and costs as allowed in the rules of the exchange. The trial procedure in a grain exchange arbitration is generally understood to follow the usual course of a formal public hearing and is not outlined in the rules. In Cincinnati, however, the exchange rules describe the proceeding as follows: On trial of any case before said committee, the complainant, or any one of them, if more than one, shall first state his case fully and the evidence by wliich he proposes to sustain his case, giving the names of the witnesses and what he believes each witness will testify to. The respondent, or any one of them, if more than one, shall then state his answer fully, and what he claims in the transaction, and the evidence by which he proposes to sustain his side of the case, giving the names of the witnesses and what he believes each witness will testify to. The decision of a majority of the committee present and trying the case shall be held as valid and binding and shall be entered in the records of said committee.^^ As already stated, the respondent must attend and answer on service of a complaint or become liable to discipline as having re¬ fused arbitration. Eight of the exchanges require a fine of either party for failure to attend the trial or for requesting a postpone¬ ment. In Minneapolis, Milwaukee, Duluth, and St. Louis and Indianapolis the fine may not exceed half'the regular fees; Kansas City, Omaha, and Peoria stipulate a fine ''not exceeding $500.”^^ It is similarly provided that members of the arbitrating body must be present under penalty of fine. Philadelphia is exceptional in that it provides for an ex parte hearing: - If either of the parties to the dispute shall not be present at this meeting, or shall refuse to submit his case in dispute to the committee on arbitration, as provided in these by-laws, the committee shall decide the case upon the evidence submitted by the party present.^'* Where the complaint and answer method is not followed in arbi¬ tration (as in Peoria), it is nevertheless provided that: Neither party shall postpone the trial of a case longer than 10 days after it has been submitted unless good cause can be shown therefor, satisfactory to the committee. Nonmembers must be represented by members in order to obtain arbitration in Philadelphia and Cincinnati,^® while the New York Rule 2, sec. S. 12Seep. 211. 13 Mpls., 7:13; Mil., 7:13; Dul., 10:12; K. C., 11:18; St. L., 6:12; Oma., 3:15; Peo., 9:8. X Phila., by-laws, art. 16, sec. 7. E.x parte hearing of cases of discipline arc, of course, more frequent. 15 Rule 9, sec. 8. 18 Phila. (by-laws), 16:15; Cin., 2:2. EXCHANGE TvULES AND llEGULATIONS. 223 Produce Exchange provides that ^ hionmcnihers mav^ appear in person, or through authorized representatives. ’ ’ On most of tiic exchanges either party to an arbitration (member or nonmember) is required to attend or incur a severe penalty; and IVIinneapolis provides that ‘ dn no case shall parties appear by counsel except by permission of the board hearing the case.” Professional counsel. —The einplmmient of professional counsel is not entirely prohibited from exchange adjudications. The require¬ ment that respondents must appear and answer might be construed under the rules of nine exchanges as allowing members to appear by counsel. Uniformity is lacking on this point. The St. Louis rules restrict counsel to members: Either party to an arbitration may, having notified the opposite party of his inten¬ tion, be represented by a member of the exchange cither as legal adviser or as a friend. In ^liimeapolis, as stated, members are specifically forbidden from appearing by counsel in any case unless by permission of the arbitrating board. Chicago forbids the employment of professional counseland the .Kansas City exchange is equally explicit on the subject: In investigations before the board of directors or before any committee of the asso¬ ciation, no parties shall be allowed to be represented by professional counsel, nor shall any member be permitted to appear before the directors or any committee of this association, in behalf of any other party, who receives compensation, directly or indirectly, for so appearing. No member of the Board of Trade shall be allowed, unless personally interested, to appear as counsel for or represent another member before the arbitration committee or appeals committee, if objected to by any of the members interested in the case.^'^ The by-laws of the Buffalo Com Exchauge likewise prohibit the employment of professional counsel, except by mutual consent. Appeals. —-All the exchanges allow appeal from an original hear¬ ing in arbitration to a higher committee whose decision shall be final. The committee on appeals in most instances confines itself to a review of the record made up before the apbitration committee. But they may also receive new and important evidence under oath and remand the case to the lower committee for a new^ hearing,on the ground that relevant testimony was excluded. IT By-laws, sec. 33. IS Mpls, 7:6. IS Mil., Dul., Oma., Pco., Ind., Cin., Phila., Ballo., and N. Y. •0 Rule 6, sec. 16. 21 K. C., 8:14; Chi., 4:19. 22 Sections cited. 23 Art. 4, sec. 16. 21 Chi., 8:3; Mpls., 7:4; Mil., 7:4; Dul., 8:4; St. L., 6:2; Ind., Rules of Arbitration and Appeal, sec. 2; Pco., 9:2 (appeal may be carried to board of directors 'Uor revision'0; Cin., 2:10 (appeal from Com. on Grain & Hay Inspection to Com. of Arbitration); Tol., 8:3; Buf., 3:6-8 (appeal from Reference Com. to Arbitration Com.); Balto., by-la\^':s, art. 9 (no appeal from Arbitration Committee, appeal from complaint committee lies to board of directors); N. Y., by-lav's secs., 27, 32 (same procedure as Balto.). 224 TERMINAL GRAIN MARKETS AND EXCHANGES. T]\e Kansas City and Omalia rules are ambiguous on the point of new evidence, but apparently vest plenary power in the committee on appeals: It shall be the duty the committee on appeals to hear and determine all cases appealed from the decision of any committee and formally brought before it, and render a just and equitable award thereon according to the evidence and by-lav/s, rules and regulations of the exchange and the laws of the land, to the best of their ability.^"’ In Philadelphia the appeals committee “may hear new evidence and may affirm, reverse, alter or modify the decision or award of the arbitration committee. “ Also, it may proceed with the hearing “notwithstanding one of the parties to the dispute may not be present or shall refuse to submit his case in dispute to the appeals c.ommittec. ’ ’ Indianapolis is exceptional in that either party may liJe a bill of exceptions to the decision of the committee on appeals: In all cases decided by the committee on appeals, either party thereto who shall not liave asked for a new trial therein, shall have the right, within five days after receiv¬ ing proper notice of the award or decision, to appear before the committee and file a bill of exceptions to the award or decision, setting forth his reasons for a new trial, and the committee may, in its discretion, confirm its previous award or remand the case to the committee on arbitration for a new trial. Fees. —Almost complete uniformity has been reached in the fees retpiired by the exchange rules in arbitration cases. The same fees are usuall}^ exacted for the benefit of either arbitration or appeal committees. Incidental fees required for additional hearings and postponed cases, or the small fee allowed the secretary in some' instances, are not considered in this analysis.-® Tlie fees are identical on seven exchanges,^® varying from $10 for a controversy involving less than $500 to a $50 fee for controversies involving more than $2,500. Enforcement of awards.— With regard to the force of such awaixls, the counsel for the Minneapolis Chamber of Commerce ad¬ vised on August 21, 1911, (1) that the theory of arbitration by ex- 7^ change boards is the same as that of arbitration at common law or under statutes and, (2) to the extent that parties give consent to such arbitration they are bound by the award as if by a judgment. 25 Oma., 3:9: K.C., 11:11. 26 Phila. (by-laws), 16:9. 27 Ind. rules for arb. & ap.. sec. 8. , 28 For e.xample, in Omaha: “The fees as above shall be paid to the secretary for compensation to the members sitting as arbitrators, and in addition there shall be paid to the secretary for his fees S;3 for e^ch case submitted and the sum of $10 to apply on stenographer’s fees. ” (Rule 3, sec. 14.) Also, St. L., 6:10. 23 Chicago, Milwaukee, Minneapolis, Duluth, Kansas City, Omaha, and Toledo. Other fees are as follows: Indianapolis, minimum, $10; maximum, $25. St. Louis, minimum $10; maximum, $20. Peoria, “for each case,” $15. Cincinnati, fee not to e.xceed $5 “and to be payable to the association.” Buffalo, fee of $20 upon filing the case. Philadelphia, for A’alue less than $1,000, $15; over $1,000, $25. Baltimore, for value less than $1,000, $3 per committee member for each sitting; over $1,000, $5 per member. New York, arbitration committee: $5 per member for each sitting; complaint committee: $10 “to be equally divided among the members.” EXCHA^s^GE RULES AXD REGULATIONS. 225 (3) Exchange members' give consent to ar})itration of all such con- trovei-sies between themselves^ when they subscribe to the rules and regulations. Under the incorporation laws of some States, or under specific arti¬ cles of incorporation, the award of an exchange arbitration com¬ mittee may be filed in the appropriate county or district court and be entered as a judgment and executed against the delinquent.^® This is made a part of the arbitration agreement in Kansas City, Omaha, and St. Louis: And we do further agree, that the awards of the arbitrators, as aforesaid, whetlier made by the committee of arbitration or the committee of appeals, if made in writing and signed by the arbitrators and attested by the secretary of the said board of trade and liave affixed thereto the seal of said board of trade, may be entered on the records of the circuit court of Jackson County, and that judgment may be had thereon in accord¬ ance with the terms thereof, and in pursuance of the provisions of the statute law of the State in cases of arbitration under said statute. It has been shown that on five exchanges (see p. 219) the rules pre- . vent the members from resorting to the courts after arbitration. In exchange practice, however, enforcement of awards in any case is rarely by proceedings in court. It is accomplished rather by the regular disciplinary processes of the exchange. As early as August 13, 1883, a member was suspended from the privileges of the Minne¬ apolis Chamber for refusal to abide by an award in arbitration. The counsel for the association approved the action of the board of dhec- tors as within their power to punish for contempt. To cite a more recent case, on February 4, 1913, the Chicago, Mil¬ waukee & St. Paul Kailroad Co. was prohibited from representation on the floor of the Milwaukee Chamber or in the city of Milwaukee by a member so long as they refused to execute an award of-the board of arbitration and board of appeals. Section 7. Uniform commission rules. Table 68 following shows the minimum cash commission rates for receiving and selling in 14 markets. It will be noted that in some instances the commission consists of a percentage of the selling price with a stipulated minimum per bushel; in other cases the percentage obtainable is limited by both maximum and minimum flat rates per bushel; and in others a single flat minimum rate in cents per bushel is charged. For example, if the price of wheat is in the neighborhood of $1.50 the rate of 1 per cent of gi’oss receipts (as in Chicago) will allow the commission house practically the same profit as a flat rate of 1^ cents per bushel (as in Minneapolis). Should the price rise to $2, however, the percentage basis would be more profitable. Chi., Charter, secs. 7, 8; Peo., Arts, of Incorporation, sec. 7; Mpls., Incorporation Act and R. 7, sec. 16; Dul., 8.15; Mil,—Charter, sees. 8, 9; K. C., 11:5; Oma., 3:4; St. L.—6:6. «K. C.,ll:6; Oma.,3:4; St. L. ll:5w 168693°—20-15 vf ' TERMINAL GRAIN MARKETS AND EXCHANGES. O O ;-4 C3 w CC c3 (V^ Min *«>o 1-H • • • 4 • • • t • 1 ■ • I • • C5 * ' HjM rH C4 ca rH «A • • « • • y, e3 «o •*«» C:> Cl • • « * 1 • t * « • CO • 1-llM CO « « • • • • f • • * • « • • • « • • • * . • • • • Per cent. y— rH » 1 « • « ■ » t • « f * tH • celH t-H r“ • • • - • Min. Cts. 1 • « 1 t • « » • • • 1 • • • tH • r^-ii tH r-^ • tH « HH tH es OJ Max. Cts, 1 . _ * . < • • • I » • « * f • « * HIM * rH ' • • • • * Per cent. T“ • • • 1 • • ■ « • « « 1 ■ t 1 • tH • rH T» • rH t Cts. 1 T—( r!« rH Max. (7 is. • • t • • ■ » • • • • • t iHMHH iH iH • • • Per cent. H * • « • • • f rH «lHi rH T” i • r- celH < cc f3 •rS C/5. Hn HMfOlcO i-(M HiMMlaO HiMMlOO HM«!« HM ®© o ceiH © CH.H' c niH ee!H i < « • • « X .s • tH rH rH rH tH • • • Cl O o : • « • • 1 • . - «;hi ccHi C^iH* ® fl rH rH rH rH rH tH rH • rH Ch <» o \ cel'll cel'^'f-iici ce;'#H^^ © EXCHANGE EULES AND TxEGULATIONS © r!'3 ^ a o) d • .. O o ;h ft CO CO O (m &£ d o o Ui o ft o CO <3? C5 o r-» <1> b'cs.Q'H.a 2 ffl fl^irg .0 o 0 a> C O CJ ©rr-< o W <» ©MOM O O © O O ©Ti O ^•4 ^ d CO © © © ®.Q Sco .0 0 +j o to o 0 0 0^ S2o O+jJh b. a I '3 a -M d © w o M ©r> 0 X X S © oo »M o Td' © ra CO 2 d ft CO C3 C3 I TJ'd d c3 © CO CO ;d ©TT -0 -tS -2 t.: 0 . g «'"'S o d © M ©«ti •M . © ^ d - M ^ CO •M ^ © 0.2® 2 o .X r-H ..Pi © ^ CO +-» w 0 0 0^ ^ d d o*^ 3^^ --d •'k/* y CO CO m jd CO oC*^ CO CO O CO © o © ©—« d © © tiJ!>7^ 0 a o X 0 . ® 0+5 a 2 0 O & klC ^ gj +j''2 'd "-xJ ^ d 5 © d ©£ ^3 M M ■0 0 0 “ 0-0 fl® 00^^ 0000^-00 8oMrtM5o« 228 TERMINAL GRAIN MARKETS AND EXCHANGES. u « It is argued in favor of the fiat rate that it is fairer to base the ciiarge on the service performed rather than the purchase price; and that a flat rate offers a constant charge which can more conveniently be deducted in making 'Ho arrive’' and "on track” bids. On the other hand, it may be maintained that the percentage l)asis offers an inducement to the commission men to secure the high¬ est market price for the shipment; that it prevents "scalping” and operates to prevent any agreements hostile to the producers’ interests in the terminal market. The question of a fair basis for computing commissions is compli¬ cated, however, by considerations of the extent of competition in the consignment business and for that reason will not be discussed further at this point. Members’ rates. —The table above shows that 8 of the markets considered provide special cash commission rates for members vary¬ ing from three-quarters to one-half of the regular rates charged to nonmembers.32 Members’ rates (that is, rates for handling members’ business) are a more important factor in the business of buying for slnpment out of the market and in future trading than for the pure consignment business. Nevertheless, members’ rates have been recog¬ nized by the exchanges from earliest adoption of the commission rule in the larger primary markets. For example, the commission rule for Minneapolis was recommended by a special committee in 1887 prac¬ tically as it exists to-day, and members’ rates were provided to be not less than one-half of the regular rates for cash grain on all grains "providing no advances of money are made.”^^ It is apparent that uniform commission rates cleared the way for bu^^ing and selling grain on its merits. They eliminated rate wars and' reduced the handling and carrying charges to a fixed basis. However, such commission rules are in effect price regulations and have consti¬ tuted points of attack for numerous investigations and controversies in which the exchanges have been involved. It is not proposed to discuss these controversies at this point nor to offer any opinion upon the legal validity of the rules in question. It is rather intended to discuss the existing rules in a comparative way and to define their scope by reference to interpretations in actual exchange practice. The following classes of business come within the application of the commission rule: (1) Receiving and selling on arrival or to-arrive; (2) buying to-arrive or on-track in the country for shipment to the terminal market; (3) buying on commission in the terminal market foi:^hipment elsewhere; (4) buying, selling, or buying and selling on cd'mmission for future delivery. 32 The commission rates in San Francisco, which are on a bag or cental basis, have not been in¬ cluded in these abstracts. The principle of one-half rates to members is also maintained on that exchange. (Rules of Grain Trade Association, San Francisco Chamber of Commerce, Rule 22.) ' « Minutes of the Board of Directors, Chamber of Commerce. EXCHANGE RULES AND REGULATIONS. 220 Tlie first two classes of transactions apply to purchasing and bring¬ ing in the country grain. Tlie other two classifications apply to buying and selling terminal market gi'ain and grain in this position has gen¬ erally been inspected, weighed, and covered by warehouse receipts prior to delivery; so that the enforcement of exchange rules is a far simpler matter. In exchange usage, the term ‘‘our uniform com¬ mission rule” usually refers to a rule which applies to country pur¬ chases. The uniform commission rule as applied to the consign¬ ment BUSINESS. —The minimum cash commission rates shown in Table 68 (p. 226) apply specifically to the consignment business. Violations of the commission rule by those engaged in the consignment business consist of attempts to evade directly or indirectly these regular rates of commission by special favors to shippers. Just what practices constitute evasions of the commission rule are not clear; and the interpretations by individual exchanges in some instances not only differ but are in direct conflict. In general, however, there is a relatively large degree of uniformity among grain exchanges in interpreting the violations of their respective commission rules as they apply to consigned grain. It 'will be shown below that uniformity of regulation does not exist to the same extent as applied to other methods of purchasing. Rebates. —^Twelve of the exchanges enforcing minimum rates specifically forbid rebates of any sort.^^ On December 28, 1916, a Muineapolis firm was fined $1,000 and suspended until paid, for having rebated commissions in business done in February, 1915, nearly two years previous. The Chicago definition of rebate is fairly typical and has also been incorporated verbatim in the Omaha rules, i. e.: * * * any evasion thereof by making rebates in prices, by making any con¬ tract or observing any contract already made, by furnishing a membei'ship in this exchange, by giving any bonus, gift, donation or otherwise, * * Gifts, compensation,” premiums, etc. —Anything savoring of bribery or a valuable consideration to influence shipments is forbidden.^* The members in Duluth are forbidden to “give, either (IRectly or indirectly, compensation to station agents, elevator agents, bankers, brokers, merchants or any other parties, at any locality whatsoever, to influence shipments or consignments of grain * * Expensive gifts or premiums to country customers arc disallowed. To offer an automobile to the shipper sending in the most consign- ^ Chi.-14:9 (F); Mil.-22:11; Mpls.-8:11; Dul.-13;8; K. C.-21:9 (I); Oma.-1918 Rules, p. 68; the St. Louis Ex¬ change merely forbids violations or evasions ‘'in any form or manner whatsoever,” leaving interpretation oftherule to the Board of Directors; Peo.-leaves interpretation to Board of Directors; Ind.-Sec. 29; Balto. (By-laws) 24:2; Phila.-19l8 Report, p. 157, Sec. 4; N. Y.-(Rules of the Grain Trade), R. 37, Sec. 5. • Sections cited. 230 TERMIi^AL GEAIX MARKETS AlsD EXCHANGES. inonts has been ruled to be a violation in Chicago. Solicitors arc not allowed to spend money entertaining to any such extent as is prac¬ ticed by brokers m some other trades. One commission firm was denied the privilege of placing special registers in country elevators, for registering purchase checks, whereby the elevator would bo required to sign a contract to sliip a minimum of 15 cars to the com¬ mission house and to pay a small rental on the machine. Employment of solicitoks. —None of the exchanges regard the employment of traveling men on salary to solicit consignments as per se a violation of the commission rules. This is specifically allowed by the rules in Minneapolis, Duluth, and Ivansas City, with the condition that “the rule * * * shall prohibit a division of commissions with such travclhig men who are not resident members of the association.”^® The solicitor in this connection is understood to be on a fixed salary and to give his entire time and services to his employer. The Milwaukee rules add the condition (which would always be implied) “that all business shall be conducted in the name , of the parent firm or member, and said firm or member shall be i responsible to the customer in every transaction and also for the conduct of the employee.^^ Keeping books of customers. —In Minneapolis, where it is the practice of commission men to finance country shippers, the rules committee issued an opinion on January 6, 1914, that “to keep the books of a country shipper, or to offer to do so without full com¬ pensation, for the purpose of obtaining shipments, is contrary to the commission rule.”^® Financing country shippers. —-The practice of financmg the busi¬ ness of country elevators by commission houses—extending them credit to purchase grain and thereby binding them to ship to the financing house—-has not been considered a violation of the commis¬ sion rule. This question would arise chiefly in the Northwest where commission-house financing is most extensive.^® When the matter of regulating such financing was under discussion before the board of directors of the Minneapolis Chamber of Commerce in 1917 the counsel of the chamber advised that under the existing provisions -for violations of the commission rule financing is not forbidden “and complaint based thereon should not be recognized by the board of directors, and can not be sustained by that board.” In giving their opinion the counsel had before them the provision of the rule making any member guilty of violation who— shall, with intent to evade the regular rates of commission established by the rules of the association, directly or indirectly pay, or give, or offer so to do, any money, or other consideration of whatsoever nature to any person, to procure or influence ship¬ ments or consignments of grain or seed in any form * * * * S6 Identical rules: Mpls.-8:11; Dul.-13:8; K. C.-21:9 (I), 37 Mil.-32:2. 3* Mpls., 1918 Rules, p. 85, Circular 509. *9 Vols. I and III. *0 Mpls., 8:11. EXCHANGE EULES AND REGULATIONS. 231 There can be no question that the extension of an open line of credit does operate to “influence shipments.’’ The counsel in this o})inion evidently reasoned that no consideration was being given “with intent to evade the regular rates of commission.” It is note¬ worthy that the Minneapolis Directcu'atc has taken the position that financing becomes a clear violation of the commission rule when no interest is charged. On March 20, 1902, they fined two commission firms $500 each, one for loaning money without interest and the other for offering to loan money on that basis. Current rate of interest. —^Thc commission rule requires not only that the uniform rates be followed but also that the “termmal charges” such as interest, when entered on the account sales,^- be uniform as regards identical services. Such charges as are made for freight, demurrage, switching, weighing, inspection, storage, and the like, are known and established tariffs in a given market and any deviation would be readily detected. Howeycr^Jhiijrate-of interest to be charged for advances made on bdls of lading is not definitely fixed, with the result that the exchanges have laid down specific rules to be followed.The Chicage rule requires that the receiver “shall charge the current rate of interest on any sum advanced on such consignment, or purchase; provided always, that the minimum rate of interest so charged shall be at the rate of 5 per cent per annum.” The rules of the other exchanges are of a similar tenor. Any violation makes a member liable to suspension or expulsion, in the discretion of the board of directors. Chicago and New York are the only markets which stipulate a 5 per cent minimum. The Milwaukee Chamber instructs the finance committee to determme the “current rate” the first of each month. In Kansas City, Omaha, vSt. Louis, and Peoria, 6 pen cent is required as a minimum; and Iklinncapolis, Duluth, Buffalo, Baltimore, and Philadelphia require the “legal rate” in force in their respective States. Free wire service. —^In connection with the business of commis¬ sion men operating private wires the question has been raised on at least three exchanges as to whether free telephone and telegraph communication in connection with to-arrive bids is a service to ship¬ pers of such value as to violate the commission rule. In Chicago it is flatly stated in the rules that “free telegraphic communication shall not be construed as a violation of this rule.”“ This should be com- See chapter on Financing, Vol. III. See chapter on Receiving and Purchasing from Country Points, Vol. III. « Chi., 22:5; Mil., 32:9; Mpls., 8:10; Dul., 12:7; K. C., 21:9; Oina., Rule 8: Reg. 11; St. L., 4:15; Peo., 17:3: 16:2; Balto., by laws, 23:1; Phila., 1918, report, p. 157; X’. Y. (Rules of the Grain Trade), 37:1. Chi., 11:9 (F). The following extract shows the conflict of opinion on this construction of the commis¬ sion rule in Chicago: u r. :i: Pfcvious to this time (1901) the small commission merchants had circulated a petition asking the directors of the board of trade to prohibit private wire houses from distributing quotations over their wires, and this petition, referred to the committee on violation of the rules, stirred up a good deal of comm nit. On March 20 a proposed amendment to the rules, restricting the use of [)rivato wires, was posted for ballot, but lost by a vote of 45^3 to 161 in April * * (Tayloi’, History of the Chicago Board of Trade, \'ol. ir, pp. 1022-1023). TERMINAL GRAIN MARKETS AND EXCHANGES. ^ U pared with the ruling laid down in the neighboring market of Mil¬ waukee: I'hat tlie practice of paying for telephone and telegrapli messages of shippers and buyers of grain at interior points by members of the association is clearly a violation of ‘ tire existing rules of the chamber of commerce, section 11 of rule 32, providing that members are prohibited from paying “directly or indirectly” any money or other consideration of whatever nature, to any person, to procure or influence shipments or consignments of grain or seeds in any form.''^ Two rulings wore made on this point by the Minneapolis directors durintr 1910, and the rule for that exchange was finally set forth in a summary resolution on May 10, 1911: ResoJud, Tliat the board of directors deems it a violation of the commission rules for members to assume the expense of telegraph messages sent collect by customers, or reversed telephone calls from customers, the assumption of these charges by a member of the chamber of commerce amounting, in the opinion of the board of directors, to a rebate of a portion of the commission charge, making the member subject to the penalties provided in section 11 of Rule VIII of the general rules of iliis association. 1'his resolution applies to all messages received by members, or their agents, at any of their offices outside of Minneapolis, as well as those received at Minneapolis.”*® A similar rule is followed in Omaha/’ but none exists in Kansas City, and the question is of little importance in markets where there are no private wire operators. Of course, no violation occurs in any case unless the payment of wire service relieves the shipper of some "expense. On the whole, it is apparent that violations of the commis¬ sion rule among strictly commission men are determined largely by tlie accepted usages prevailing in the market. Beyond that class of ])raclices, which are clearl}^ an attempt to cut or rebate the regular rates, there remain other services given in competition for country Imsiness which are considered violations only as they bring excep¬ tional and individual advantage; and not when they are generally known to the trade and open to all on fairly equal terms. To return to the case of free wire communication, in case a majority of com¬ mission men are opposed to such a competitive method and do not practice it either by use of private or of public wires it is tabooed as an attempt to obtain a special price advantage and is ruled to be a violation of the commission rule. Where the prevailing majority favors it, it is not considered such a violation. It is very apparent that the commission rule is defined largely by reference to the prohibitions against violations. These rules will be considered in detail after showing the application of the rule to purchases direct from the country. / Section 8. The commission rule as applied to buying and shipping on order. The commission rates provided in exchange rules for buying and shipping out of the market apply solely to the operations of ship- ]>ei*s on commission and are set forth in the following table: Rulings of the board of directors, Jan. 4,1910. « Mpls., p. 68 (Circular 249). <' Oma., 1918 rules, p. C9. Table 69 .—Commission rates for buying and shipping on order at specified exchanges in 191S. EXCHANGE RULES AND REGULATIONS 233 W) ‘53 & '5 c rH w t 234 TEEMINAL GRAIN MARKETS AND EXCHANGES. It lias been at times suggested that shippers; alsO; should bo rcH|uired to add to their charges a margin equivalent to these rates just as buyers are required to deduct such a margin when bringing grain into the market. Such an extension of the rule was suggested in Minneapolis in 1910. The amendment suggested at that time would have undertaken ''to require members of the chamber of commerce selling grain or seed to outside members of eastern buyers to exact a profit over and above the Minneapolis prices for such grain or seed which should be equal to the commission charged for buying and shipping the same; and in addition to charge all other expenses, such as interest on advances, etc.,.which the commission merchant buying and shipping grain for the outside mill or eastern buyer would bo compelled to charge.” Such a provision would liave been a radical departure from a universal exchange practice in merchandising grain out of the market. The attorneys of the chamber advised against such an amendment. They felt that there might be "some legitimate contention for claim¬ ing that such a rule would be a restraint of trade.” As in the case of consignments, however, shippers on commission must charge "all legitimate expenses” in addition to the prescribed rates. It is shown in Volume III that the rule in force on the large primary markets, although designed ostensibly to enforce uniformity among shippers on commission, sometimes operates to the advantage of then competitors, the terminal elevator shippers. This is especially true under a rule of enumerated charges, such as has been finally "worked out in Kansas City. In 1917 the Kansas City Board of Trade adopted an amendment to its commission rule for buying to ship on order, to the effect that in addition to the rates of commission prescribed the expense in¬ curred for transferring such grain should be charged to the party or parties for whom the property was handled.On June 28, 1918, the board again amended the rules so as to enmnerate precisely the "ter¬ minal costs” which must be charged to the outside buyer in each case. Under this provision— In addition to tlic rates of commission prescribed in this article all legitimate ex¬ penses, such as demurrage,- sampling, weighing, inspection, storage, insurance, ex¬ change, interest (at not less than 6 per cent per annum), elevation, etc., incurred in the handling of and caring for property bought or sold for a commission charge, shall be charged to the party or parties for whom the property is handled; it being the in¬ tent of this rule that the net amount received for performing the service shall be the prescribed commission. <3 Chi., 14:7; Mil., 32:8; Mpls., 8:10; K. C., 21:9 (K); Onia.,no provision; St. L., 4:12; Peo., 17:2; Balto., (bj'-laws), 24:11. <3 Amendment to sec 9 (K) of art. 21. EXCHANGE RULES AND REGULATIONS. 235 Section 9. The uniform commission rules applied to trading in futures. The commission rates for trading in futures, as in case of shipping on commission, concern only a particular class of traders. While tliey have required special interpretation (discussed in Vol. V) they do not involve any such questions as have been outlined under the '‘ uniform commission rule’’ for receiving cash grain. In Table 70 following, covering seven active markets, it will ])e noted (1) that the principle of half-rates to members is pretty regu¬ larly observed on seven exchanges (Kansas City makes a distinctio)n between resident and nonresident members); (2) that all the ex¬ changes considered, except Kansas City, provide a rate for clearing the floor trades of members "who personally do their own buying and selling” (indicated as floor trades); (3) that Kansas City and New York provide special rates for members who clear trades the same day (1-day limit); and (4) that the seven exchanges provide a pit brokerage for executing trades on a piece basis. Section 10. The uniform rule as applied to purchases at country points. Application of the rule.— The "uniform commission rule” herein discussed applies only to the seven primary markets of Chicago, Minneapolis, Milwaukee, Duluth, Kansas City, Omaha, and St. Louis. These markets, as shown elsewhere, have been developed as great concentration centers for marketing the grain from producing areas, and consequently have regarded the commission rule as more or less essential to their system. It has been already shown that minimum rates of commission for handling on consignment have been prescribed in all grain markets maintaining an active exchange. However, the commission rule as extended to direct car-lot purchases exists only in the seven markets enumerated. (See Table 71, p. 239.) Three of these exchanges—Minneapolis, Duluth, and Mihvaukce_ in extending the rule to direct purchases adopt the rates listed for handling on consignment. Buyers arc required to make their bids, offers, and purchases on the basis of market values "loss commission or a profit at least equal to the established rates of commission.”^- The apparent purpose of the rule is to place to-arrive buyers and track buyers precisely on the same basis as commission merchants. S'® Chi., 14:4 (II); Mil., 32:1; Mpls., 8:6; Dili., 8:5; K. C., 21:9; St. L., 4: p. IS; N. Y. (rules of the grain trade), 36U; Balto. (by-laws), art. 24. For explanation of this practice see Vol. V, ch. 2, sec. 9. - Mpls., 8:10; Dul., 13:8; * * or purchase or offer to purchase, sell, or ofTer to sell, any grain or seed on track, at any railway station outside of, and for delivery at, the city of Duluth or Superior; or purchase, directly or indirectly, for his o wn account, or otherwise, from any person not a member of the association, any grain, seed, or other commodity dealt in upon the board, without charging and deducting from the purchase price the regular rate of commission, and interest if any * shall be deemed guilty of a violation of the rules of the association establishing rates of commission, and,-upon conviction thereof, shall le fined not less than-fl, 000 , nor more than $ 2 , 000 , as the board of directors may determine * * Mil., 32:11. % 238 TERMINAL GRAIN MARKETS AND EXCHANGES. On the other four exchanges (Chicago; Kansas City, Omaha, and St. Louis), the commission rule takes on a different aspect. These exchanges have set up special schedules of “charges’^ to be included in making purchases at points outside for shipment to the market (the term “market’' being defined as all places where the local inspection and weighing prevails). These rates are known as “han¬ dling charges” which (to quote the St. Louis rules), “in addition to all charges prescribed by the rules of the exchange * * shall he deducted from each and every such bid before same is forwarded to persons located outside” of the market.A brief examination of the table given below shows that operators who buy direct in these markets—chiefly the terminal elevator interests—are given a differ¬ ential of one-fourth cent under the consignment rates, and that the commission rule fails to be “uniform” by precisely that margin. Moreover, the very rules which specify these handling charges permit bidders under certain conditions to depart from the closing price and create new price levels as they see fit. Section 11. Solicitors and brokers. wSupplementary to the rules for commission men arc those governing solicitors and brokers. Because of the diversity of trading methods and the combination and overlapping of functions these three classes of agents would be confused were it not for explicit rules on the sub¬ ject. Since brokerage rates are considerably lower than commission rates, an attempt has been made to clearly define the term broker so as to prevent evasions of the commission rules. In the seven markets which maintain the “uniform” rule the activities of such employees or agents are closely regulated. Thus in the Chicago Board of Trade rules the following appears: The employment by members of all persons soliciting orders for the purchase or sale of property for future delivery upon this exchange, or for the purchase or sale of property to be shipped to this market, or for the consignment of property to this market for the purpose of sale, or for the disposition in any manner of property dealt in upon this exchange, shall be in accordance with regulations established and pro¬ mulgated by the board of directors. All persons soliciting the business above de¬ scribed shall be divided into two classes first, “Solicitors,” and “Brokers.” ^3 Employment of solicitors in primary markets. —There are rela¬ tively more solicitors and fewer’brokers in primary than in secondary markets. In order that they may be subject to exchange control, solicitors (in Cliicago, Kansas City, Minneapohs, and Duluth) arc required to give their entire time and services to one employer at a fixed salary,^® which shall not be changed oftener than once in six months. That is, they may not operate on a percentage basis. 03 St. L., 1918 rules, pp. 61 and 78; Chi., p. 22; K. C., p. 101; Oma., p. 72. 61 Chicago, Milwaukee, Minneapolis, Duluth, Kansas City, Omaha, and St. Louis. M Chi., 4:33. *■6 Clu., 4:33; K.C., 6:18; Mpls., Circular 286; DuL, Terms of license under rule 4, sec. 25. nonmembers and nonresident members, at seven specified exchanges. EXCHANGE RULES AND REGULATIONS 239 s • c- c w O*". n:; a a- " (-1 -H rH M «« Maxi¬ mum. Cis. rH (M i-l P9 «9 Per cent. n|>«fi- C Kansas City: From nonmembers. From (nonresident) members. Omaha: From nonmembers. From (nonresident) members. St. Louis: Prnm nnnmAml-ifirs- From (nonresident) members (no special rate). Minneapolis..]“Established Rates of Commission”^—as in Duluth.^ Table 68, p. 226 (rates for receiving and Milwaukee...) selling). 0> M ui cs a CD c /1 a* o a a o o oS u o Gl o C53 Q> o a o «r-* o '3 o s-< CU cd o5 vi :3 o o rc: t/5 CO Til a 05 c3 c5 240 TERMINAL GRAIN MARKETS AND EXCHANGES. ■ This rule does not obtain in Milwaukee, where, possibly because of the difficulty of maintaining the flow of grain to that market, the om})loyment of solicitors for cash grain on a percentage basis is not held to be a violation of the commission rule and is allowed.^^ . In the resolution adopting the requirement for solicitors, the Minneapolis directorate stated that: It lias come to the knowledge of this board that many of the regular traveling repre¬ sentatives of members of this association are unfamiliar vdth'the purposes and objects of this association; that they are sometimes employed for short intervals under cir- ( umstances which amount to an evasion of the commission rules; that they not infre¬ quently reflect wrongfully upon this association or its members in their eager efforts to obtain or further individual business. * * * Whereas, such regular traveling representatives should be bound by and informed upon the charter, rules, regulations, customs, and resolutions of this association, which in the judgment of this board can best be accomplished through the system of license herein provided. * * * On the four exchanges mentioned it is presumed that solicitors in the majority of cases will be nonmembers, that is, traveling employees of a member of the exchange, and so long as they are not on a broker¬ age basis, membership is not reeptired as a qualification. In Omaha, however, the distinction between solicitor and broker is not sharply made and it is required that '‘such traveling representative, solicitor, or broker shall be a member of the Omaha Grain Exchange in good standing,”"® unless he take out a broker’s (solicitor’s) special license, which license is restricted to trading outside of Nebraska and Iowa. Yet this Omaha rule is not sueh a radical requirement as it might seem, since the general purpose of all regulations applied to traveling representatives is to make them as amenable to the government of the association as if they were members. In fact, the Minneapolis legulation makes it part of the license agreement—, tbat in all his dealings as solicitor he shall assume a fair and equitable attitude to¬ ward this association and all its members, and abide by and be subject to the charter, rules, regulations, customs, and resolutions of this association, the same as if he Avere'a member of this association * * " and that he may be tried by the board of directors of this association herein upon the same procedure as a member could be tried. * * * Considering the cost of membership certificates it would be mani¬ festly impractical to require solicitors to be members of the exchange ii\ markets where competition for the country grain is largely carried on through these traveling representatives. This is obviated by ruling that the approval of the membership committee of the board of directors (or of the whole board) is prerequisite to the appoint¬ ment of solicitors in Minneapolis, Duluth, Chicago, Kansas City, and Omaha."^ _____ Ruling of Oct. 4,1909; still in force but does not apply to solicitors for futures business; who must be on a fixed salary only, as indicated in sec. 2 of rule 32. -8 By laws. III, 5. ■ ri bnipls. Circular 286; Dul. 4:25 must be approved by board of directors; Chi. 4:33; K. C. 6:18; Oma. (By-Laws) 3:5 must be a member. EXCHANGE RULES AND REGULATIONS.- 241 Employ:ment of brokers under the uniform commission RULE. —The seven primary markets already mentioned define “bro¬ ker’^ so as to distinguish clearly from receivers, shippers, and other dealers, and the rules are designed to prevent these latter members from operating on a brokerage ba^is. Brokers are required to dis- 1 close an acceptable principal at the time of making the transaction or assume liability for the fulfillment thereof.'^® That is, only the broker is recognized in the rules of the grain markets; otherwise he is a commission man. The St. Louis rules give the definition of broker prevailing in these primary markets, i. e.: One wlio executes contracts or transactions in the name or behalf of another, and who does not receive, deliver, ship, pay for, or collect for the property contracted, either in whole or in part, but who merely executes transactions or contracts in the name and for the account of those who employ him for that purpose. The brokerage rates, which are listed in Table 72 (p. 242) below, are allowed on business with members only.®^ They do not apply to coun¬ try purchases, which operations must be handled on a strictly com¬ mission basis.®3 They may apply to the business of securing ship¬ ments out of the market, or to the export business which docs not interfere with the present commission rules. «0Chi. 14:1 (c): Mil. 8:1; Mpls. 8:1; Dul. Rule 13; K. C. 21:8; Oma. 1:4; St. L. 13:3. 61 St. I.. 4:12. Cf. Definition adopted by Grain Dealers’ National Association, Oct. 13, 1919 : “Rule 36. Brokers: (a) A broker is one who is engaged, for others, on a commission basis, in negotiating contracts relative to property with the custody of which, actual or constructive, he has no concern! “A person is not a broker: “First, who has possession and absolute control of merchandise shipped to him to sell and colled the ])rice. (Therefore, a commission merchant to whom grain is consigned for sale is not a broker.) “Second, who receives a salarj'^ instead of a commission or brokerage. “Third, who acts for one principal to the exclusion of all others. “(b) A broker has power to bind his principals only to the extent of his instructions, and the principals are not liable for any acts of the broker in excess of such instructions. “(c) A broker who. in good faith or otherwise, exceeds his authority is liable for resulting damages. “(d) A broker who negotiates a contract, without disclosing his principals, is responsible as principal until the real principal’s name is given up a)id accepted by the other party. “(e) A broker who, in good faith, negotiates a contract which Is in accord with instructions from both his principals, who, at the time of negotiation, advises each principal the name of the other, and who com¬ pletes such negotiaticiis in accordance with the rules and customs governing such tran.sactions, thereby fulfills all his obligations, and has no further liability to either of his principals. The contract so nego¬ tiated is valid and binding between the buyer and seller, the same as if it had been negotiated directly be¬ tween them.” (The American Elevator & Grain Trade, Chicago, Oct. 1.'), 1919 p. 3390 62 The Chicago rules (rule 14, sec. 1), in stipulating that “members may act as brokers between othe members only,” add a proviso allowing members to “give up” principals who are not members on c. i. f. c-ontracts for shipment out of the market. This is with the understanding “that in such cases brokers shall be held liable both for the acceptance of such contracts and for their faithful performance under the rules of this association.” Kansas City has a similar provision (6 :12). «*Chi.4 :33 (exception as to nonresident members); Mil. 32:10; Mpls. 8:13. Jn Duluth the only brokerage is for flaxseed futures. The payment of any compensation to brokers “to influence consign¬ ments or shipments of grain” is listed as a violation of the commission rule (rule, 13, sec. 8). K. C. 21°; 9 (G); Oma., 1918 rules, p. 68 (G). St. L., rule 13, sec. 3, requires members to act as brokers for members only, and rule 4, see. 12, forbids brokers to “receive, deliver, ship, pay for, or collect for ” liic grain. 168G93°—20-16 Table 72 .—Cash hroherst' rales on 15 specAfied exchanges. 1 1 TERMINAL GRAIN MARKETS AND EXCHANGES. PP :3 pq <73 u •2 : o : • Hm ) O ) O o 4^ JO o iO o a;) c3 O Co , o : »o C 4 o o C3 O o o >.o o lO 3 PP o o o o : lO (M O o O lO s . filiO Wco *“1» r^50 rSiO^'f r“,95 30-t« 3 o c r<^ r-!'je H;,A c3 o > o i o o lO o »o O) 1 ^ d ! P^ c3 :a£i :s , c 3 o3 jH • tjO® «X2 «-i c3 ®^>ag.^Sfq ^ O O r s ^ ^ c 3 T? ^ O) G3 Ui O O ; • a? I • bJO •S O bO W ^ , C3 . c1Cx3 o CD4-> P3 d P- a.s m’SJ: S a ®5 a a 3 g 3 c3 rap:cA>o2dW“jO ■ C/j r/> L. —a i—J 3c3(aP^3Q3c3 w dM^qp^-c: .-, 3 c3 a .2 Sfi w o Hr '»*. y f« i EXCHANGE RULES AND REGULATIONS. 243 31x0 Milwaukee rules stipulate tliat the casli brokerage rates of ^ cent do not apply to sales “for ^spot’ delivery or Ho arrive’ which tire to be filled by car shipments”; that is, they do not apply to the business normally handled by receivers on commission,®^ Tn Minneapolis, where tlie commission rule is most rigidly enforced, the term “broker” is to be “construed by the members of the chamber of commerce and by all courts to mean a member of the Chamber of Commerce of Minneapolis who acts for another member in making any trade on the floor of the chandxer, and who reports the name of the member for whom he acts at the time of makins: the trade. As already noted, in Chicago a concession was made to nonresident members so that they might act as “ commission-participatihg solicit¬ ors” at a -^r-cent brokerage under strict regulation. It is generally true, however, that the brokerage rates for the seven enumerated primary markets apply to trades on the floor between members en¬ gaged in either cash or future trading. The law of principal and agent of course applies to such trades. This is recognized in the provisions of Chicago and Kansas City that the brokerage compensation shall not apply on grain purchased from a concern in which the broker has any financial interest whatsoever.®® Employment of brokers in secondary and export markets.—■ Peoria is classed as a primary market,®' ])ut for the purposes of this discussion its rules are similar to those of the secondary ter¬ minals. There is no rule for solicitors provided by this exchange and the rule for “brokerage” presumes that shipments of grain will Ixe solicited by brokers (who need not be members). Such business may be handled under brokerage rates by persons c[ualified under the definition of “broker,” that is, “having no ownership directly or indirectly in the grain bought or solicited for consignments nor can he be in the employ of the owner of such grain.” ®® In Cincinnati and Buffalo the distinction between brokerage and handling on commission is based on the payment of advances by the factor. Members of these exchanges may operate as brokers at the minimum brokerage rate “so long as they do not finance the trans¬ actions; in which case the commission rule shall apply.” ®® Export brokers. —At export points the brokerage rates for cash transactions and the rules for their enforcement are relatively more important than in most of the inland markets. This difference is reflected in the broader application given to these rates. M Rule 32, sec. 10. See p. 329. 65 Mpls., 8:13. 63 Rule 18. 66 Chi., 4:33; K. C., 6:18; Peo., rule 18. Cin., 15:2; Buf., 16:1. N 244 TERMINAL GRAIN MARKETS AND EXCHANGES. For example, the by-laws of the Baltimore Chamber of Commerce list the following services for which ^‘brokers or agents’’ may make a minimum charge of f cent per bushel: 1. Shipping grain for export. 2. Receiving and shipping grain for export. 3. Exchanging inland for ocean documents. 4. And/or engaging ocean freight. If such brokers ^‘buy or sell the grain, or perform any service other tlian as above specified” the regular commission rates must be cliarged. The brokerage charge is also allowed in Baltimore on the following classes of business: 1. Sales of ex-lake grain for export, or 2. Grain for export sold on ‘Gvestern terms,” i. e., western weights and grades; also 3. Grain sold for export f. o. b. vessel or c. i. f. to or through this or other Atlantic or Gulf ports, or 4. Grain sold from Baltimore c. i. f. to New York or Philadelphia, when one or both principals reside in Baltimore and either is a member of the Baltimore Chamber of Commerce.'® Analysis of this rule and of usage in Philadelphia and New York shows that these export brokers, like those of the western markets (i. e., traders operating under brokerage rates), must act solely as agents and that they do not assume responsibility for delivery or collection after a contract is made. Section 12. Regular warehouses. • General requirements. —Grain in storage is the basis for all future trading on the exchange as well as for considerable cash trad¬ ing carried on by shippers and consumers in the terminal market. Coordinate with the maintenance of contract grades, the exchanges have established a supervision over warehouse grain with a view to insuring the C[uality, cpiantity, and sound condition of such grain when deliverable on warehouse receipts. In order to insure the con¬ stant validity of the receipts deliverable on future contracts the licensmg and control of ‘‘regular” warehouses has been, a funda¬ mental necessity. The elevators and warehouses declared regular in Chicago, Min¬ neapolis, St. Louis, and Peoria are those of firms engaged as “public warehousemen” as defined by the State laws.'^^ On the other hand, the rules of Duluth and Kansas City expressly authorize both “pub¬ lic” and “private” warehouses to be declared regular.'^^ Warehouses may become “regular” (or licensed) upon application to, and approval by, the board of directors. The following form of application is prescribed in Duluth:’^ w Balto. (by-laws), art. 24, secs. 2, 4; see also N. Y. (Rules of the Grain Trade), rule 33. 7) Chi., 21:1; AIpls., 21:1; St. L., regulations governing regular warehouses. Nos. 8 and 9; Peo.. 14:1. In a resolution of August 7, 1889, the Minneapolis directory required all elevators to conform to the State law in order to be considered regular and that no receipts could be delivered on contract except such as had been registered by the State registrar. n Dul., 17:1; K. C., 13:1. «Dul., 17:18. EXCHANGE RULES AND REGULATIONS. 245 FORM OF APPLICATION^. To the president of the Duluth Board of Trade: Sir: The undersigned liereby makes application to the Duluth Board of Trade to have-elevator-of the'town of State of_declared ‘‘regular” by the Duluth Board of Trade, to the end that said elevator_and all the warehouse and elevator receipts issued for grain stored by the said .... shall have and be entitled to the same rights, privileges, and qualities as are accorded to the elevators, and warehouses now admitted as “regular” and to elevator and warehouse receipts regu¬ larly issued for grain stored therein, and does agree that the said elevator .... will be managed strictly in accordance with the laws of the State in which it is located relating to such grain warehouses and elevators and that the business therein to be carried on and be conducted will be in strict accordance with the rules, regulations, and decisions of the Duluth Board of Trade and its directors relating to inspection, weighing, registering of elevator and warehouse receipts, general storage and elevator charges and in other particulars as are now or may hereafter be prescribed. This application is accompanied by a bond in the sum of.($.) dollars in the form prescribed by your board and the.will furnish any other additional bond which may be required by the board of directors of the Duluth Board of Trade. Signed. As a rule such authorization must be renewed annually and is revocable at any time. ‘Regular warehouses are required to conform to at least the following conditions: (1) They must store only grain which has boon ofllcially inspected and weighed. (2) In five markets (Chicago, Duluth, Kansas City, Peoria, and New York) the receipts must be registered and signed by an exchange registrar or other officer appointed for that purpose."^^ (3) The proprietors must be of good financial standing and credit and must give bond as surety for the grain handled.'^'’ 7i< * shall be in unquestioned good financial , ^t^nding and credit.” Insurance in a “board” company must be obtainable. Must file with the regis¬ trar “a bond with good and sufficient sureties, to be approved by the board of directors, for the penal sum of no less than 10 cents per bashel upon the capacity of the house.” Oma., 5:18: St. L., 8:10 and p. 70, par. 12 . No provision as to bond in other exchange rules. * The Omaha rule arranges a sliding scale so that “all elevators and warehouses desiring to issue warehouse receipts”tobecomeregularunderthcserules, shall give bond, in the form prescribed and to be approved by the board of directors, in the following amounts: Capacity. Unencum¬ bered, Encum¬ bered. 50,000 to 100,000. S10,000 15 000 100,000 to 1.50,000. oo nfv\ 1.50,000 to 200,000. 20 000 UW 30,000 200,000 to 2.50,000. 25,000 .30 000 2.50,000 to 300,000. ' ' 45,000 Vi Am ;i00,(XXI to 350,000. 35,000 40 000 3.50,000 to 400,000. UU*J AAA 400,000 to .500,000.•.. . 45 000 AAA 500,000 upward. .50 000 *7^ n/krt the State of bonds required as stated above, de duction may be made of the bond required by 246 TERMINAL GRAIN MARKETS AND EXCHANGES. V' (4) They must agree to furnish exchange officials with regular reports of grain received and delivered showing the corresponding receipts issued and canceled, and with periodic statements of bal¬ ances in storage. These requirements vary in detail on the various exchanges. The Chicago Board of Trade gives the registrar broad discretion as to the requirement of reports, the warehouses to furnish him ‘^all needed' information to enable him to keep a correct record and account of all grain, together with the grade thereof, received and delivered by them daily and of that remaining in store at the close of each wcek.^' Many of the exchanges, however, outline the specific requirements. The following regulation adopted by the Milwaukee Chamber of Commerce in 1896 typifies exchange supervision of regular ware- liouses: The proprietor or proprietors of every warehouse, made and declared regular for the storage of grain under the rules of the Chamber of Commerce of the City of Milwaukee, shall make a daily report to the secretary of said chamber of commerce of the quan¬ tity and grade of each kind of grain received into and delivered out of such regular warehouse, respectively, during the 24 hours ending at the close of business of the preceding day, and a weekly report every Monday of the quantity and grade of each kind of grain, or ungraded grain, remaining in store in such regular warehouse at the close of business on* the last business day of the preceding week. Said weekly report shall include all grain stored in said warehouse at the time specified, whether in special bins or otherwise.'^ (5) Regular warehouses must bo conveniently situated with regard to transportation facilities and must possess modern equipment for the receiving, handling, and delivery of grain in bulk. The Chicago requirement is that they so situated that they can be conven¬ iently approached by vessels of ordinary draft, and shall be connected by railroad tracks with one or more of the eastern railway lines.’' In Minneapolis the qualification is based on switching charges, viz: All elevators to become “regular” under the rules of the chamber of commerce shall be connected by railroad tracks with one or more of the eastern railway lines and all local flour mills, so that the switching charges from the said warehouses and elevators • to each, and all of the said eastern railway lines and mills, shall not be in excess of $3 per car, and if in excess of that amount such excess shall be absorbed by the ele¬ vator company.^ It is generally understood that regular elevators shall be of com¬ paratively large capacity. Peoria, for example, still stipulates 100,000 bushels as a minimum,but with the continuous increase in size of elevators in the major markets to-day it is considered unnec¬ essary to prescribe the size by rule. ” Chi., 1918 Rules, p. 118 “Fourth”; see also Mpls., 21:1. 78 Mil., 1917-1918 Report, p. 112; see also Dul., 17:11; K. C., 13:5 (g); Oma., 4:5; St. L., p. 07, par. 2; Cin. 11:1; Phila. (Rules of the Grain Trade), 4:8; N. Y. (Rules of the Grain Trade), 5:9. 78 Chi., 1918 Rules, p. 118; Mil., 31; 3,4; Dul., 17:8; K. C., 13:3; Oma., 4:1; St. L.,p.67; Peo. ,14:1; Cin., 0:2; Phila. (Grain Rules), 4:2; N. Y. (Rules of the Grain Trade), 5:2.. 80 Mpls., 21:3. 87 Peo., 14:1. EXCHANGE RULES AND REGULATIONS. 247 (6) ‘‘Public’^ warehouses are generally prohibited by State ware- Iiouse laws from making any discrimination between persons offering grain for storage. Restrictions against discrimination by regular’' warehouses are also found in exchange rules in Milwaukee and St. Louis.The St. Louis Exchange requires that—• I'ho proprietors or managers of such ele^'ators or ^varehouses shall receive for storage any grain that may be tendered them in the usual manner 'With which elevators or warehouses are accustomed to receive the same in the ordinary and usual course of business and shall not discriminate between persons desiring to avail themselves of elevator or warehouse facilities, and the schedule of charges for said elevator or ware¬ house service shall be uniform, regardless of quantities of lots so offered or received. (7) The mixing of different grades of grain in regular warehouses is forbidden by rule in Chicago, Milwaukee, Omaha, St. Louis, Philadelphia, and New York, but not in the rules of other cx- changes.^3 Mixing of different lots of the same grade is the regu¬ lar warehouse practice except where grain is special binned (which is not ''good delivery” on future contracts). To cite the Milwaukee rule: In no case shall grain or llaxsc-ed of different grades be mixed together while in store, but if the owner or consignee so request, and the warehouseman consent thereto, his grain of the same grade may be kept in a bin by itself apart from that of the owners of other grain or flaxseed, which bin shall thereupon be marked and known as a sepa- tate bin or special bin.*^ Liability for damaged grain.— Regular elevators as bailees arc legally liable for losses and damages resulting through their neglect. When grain becomes out of condition through causes beyond their control they may generally invoke rights established either in State law or by exchange regulation for waiving such liability. The Illinois railroad and warehouse law lays down the rule for Chicago and Peoria which is followed in substance by exchange rules in Kansas City, Omaha, Philadelphia, and New York.®^ With regard to the responsibility of warehousemen for damaged grain, this Illinois act provides that— no public wareliousoman sliall 1)e lield responsible for any loss or damage to i)roperty by fire while in liis custody, provided reasonable care and vigilance be exercised to protect and preserve the same, nor shall be held liable for damage to grain by heating, if it can be shown that he has exercised proper care in handling and storing the same and that such heating or damage was the result of causes beyond liis control. ' 82 Mil., 21:1; St. L.,1917 Rules, p. G9. 83Ill. constitution oflSTO, see. 2, and Chi., 1918 rules, p. 118; Mil., 31:1. See Minnesota Railroad and Ware¬ house Conunission, “Laws, Rules, and Regulations,” 191G, p. 6, where the storage contract specifics, “This grain has been received and stored with gram of the same lawful grade.” K. C. (c) (“The mixing together of grain of different kinds, the mi.xing of unsound and sound grain, the introduction of foreign substances of any kind whatsoever into grain of any kind, and the mixing of damaged corn with com of higher grades * by elevators or warehouses made regular by this board of trade, except as may be provided by the laws of the State in which said elevator or warehouse is located, is hereby forbidden: raid any such elevator or warehouse violating this regulation, either for itself or on account or liy order of any person or persons whatsoever, shall be declared irregular'-); Oma., 4:3; St. I/., 1917 rules, p. GO; Phila., 4:9; N. Y., 5-0 8< Mil., 31:1. 83 Hurd, Rev. Stats., Illinois, 1917, p. 2368; Peo., 14:3; K. C., 13:5 (d); Oma., 4:G; Phila., 4:6; N. Y., 5:7. 248 TERMINAL GRAIN AIARKETS AND EXCHANGES. Bui it is also stated that— any warehouseman guilty of any act or neglect, the effect of which is to depreciate proj>erty stored in the warehouse under his control, shall be held responsible as at Common law, or upon the bond of such warehouseman, and in addition tliereto, the license of such warehouseman, if his warehouse be of class A, shall be revoked.^® In case, however, any warehouseman of class A or B shall discover that any portion of the grain in his warehouse is out of condition or becoming so, and it is not in his power to preserve the same, he shall immediately give public notice, by advertise¬ ment in a daily newspaper in the city in which such warehouse is situated and by ])osting a notice in the most public place (for such a purpose) in such a city, of its actual condition; as near as he can ascertain it; shall state in such notice the kind and grade ol the grain and the bins in which it is stored; and shall also state in such notice the receipts outstanding upon which such grain muII be delivered, giving the numbers, amounts, and dates of each—which receipts shall be those of the oldest dates then in circulation or uncanceled. The provision for ‘‘posting” damaged grain incorporated in the exchange rules in Chicago, Milwaukee, Duluth, St. Louis, and Cin¬ cinnati is based on the unwillingness of the warehouse to replace- the damaged grain; Tlie proprietors or managers of such elevators or warehouses shall promptly, by written notice to the Secretary of the Merchants’ Exchange, which notice shall imme¬ diately be posted upon the bulletin board of the exchange, advise the trade and public nf any damage to grain held in store by them, whenever such damage shall occur to an extent that will render them unwilling to purchase and withdraw from store, at their own cost, all such damaged grain.®® In Duluth, however, the regular warehouses must assume liability for the condition of all contract grain except corn.®® This latter rule recognizes the fact that frequent “postings” of “out of condition” grain operate to prejudice an elevator in the e^ms of the trade and that warehouse receipts will command gi’ain equivalent to that for which they were issued, except in extreme eases. ^Section 13. Contracts of sale—sundry trading rules. (IrsTOMS OF THE MAiMvEi'. —Ill ordcT to insure the prompt fulfill¬ ment of contracts for the immediate or future delivery of grain and to eliminate frequent resort to litigation the exchanges have, fiwri time to time, adopted rules defining the customs and require- “ Hurd, idem, p. 2368. Idem. St. L., 1917 rules, p. 67; Chi., 1918 rules, p. 118 “Fifth;” Mil., 31:6; Dul., 17:5; Cin., 11:2. A letter from the Secretary of the Chicago Board of Trade, dated July 21, 1914, fully explained the State la w and lioard rules in regard to warehouses and posting of grain. To show a nonresident member why it was impossible to recover damages when grain had l^een posted as spoiled, he stated that the shipper should liavc Imown that winter shelled corn could not lie carried into July safely. “There comes a time when if makes the turn from sweet corn to sour and does this in the course of a few hours.” " There is nothing that the commission man could do in the matter and he would be no more responsible for the grain being posted than you yourself would be; nor could he do anything to prevent it, nor is there anything he could do or that can be done under the law to recover damages. It is a risk that every man must take who takes ownership of grain in a public house.” Dub, 17:5. EXCHANGE EULES AND EEGULATIONS. 249 jueiits of the market ou reciuTent points of the law of sales. As^ noted elsewhere, these rules are regarded as conditions of each con- ti'act made on the particnlar oxdiange; and, in fact, many of the confirmation forms used members for contracts with nonmembers not only specify terminal market terms (e. g., ^‘Minneapolis terms”) but also specify the rules and regulations of the exchange as a con¬ dition of the contract. ‘^Regular trading. ”—Under certain conditions trading off exchange is irregular. There has been a general effort to confine trading in time contracts to regular exchange hours and to trading on the exchange^ floor. Certain exchanges have adopted rules also to regulate the time and place of cash trading so as to maintain calculable market levels. Yet, owing to its highly technical charac¬ ter, the rules for ‘Y’egular trading in time contracts” are more severe than those for cash grain. Hours for future trading. —The principal western exchanges confine trading in contracts for future delivery to the regular exchange hours, i. e., 9.30 a. m. to 1.15 p. m. every business day but Saturday, when the hours are 9.30 to 12 o’clock.®® The eastern markets generally begin the session at 10:30, which allows for an hour’s difference in time. On some of the smaller interior markets, such as Peoria, the closing hour is a matter of con¬ venience among the traders. Curb trading prohibited.— Curb trading—that is, trading in futures off exchange—is prohibited by drastic rules in Chicago, Min¬ neapolis, Milwaukee, Kansas City, and St. Louis.The following is the rule forbidding such curb trading in Minneapolis and Milwaukee: Members of the association are hereby prohibited gathering in any place, public or private, except within the exchange room of the Chamber of Commerce Building, and forming a market for the purpose of making any trade or contract for the future delivery of grain or provisions; and any member Avho shall make any trade or con¬ tract in the manner herein prohibited shall be deemed to have violated this rule, and he may therefor be fined in a sum not exceeding $5 for the first offense, and not exceeding $50 for each and every subsequent offense, and shall stand suspended from all privileges of membership until such fine or fines shall have been paid, and until he shall have been reinstated upon his application. At the time of imposing such fine he shall also be subjected to such additional discipline, other than by fine, as the board of directors may determine to inflict.®* The penalty in Chicago for not executing future trades in the o})en market in the Exchange Plali during the hours of regular trading’'’ • is expulsion from the association. *®Chi., 16:1; Mil., rule 33; Mpls., Circular No. 141, hours not specified; K.C., 21:2, trades “ at any other time or place” are not subject to margin and are not enforceable by any tribunal of the association; St. L., 1917 rules, p. 80; Dul., rule 12; Oma., 8:1; N. Y., rule 13, time trades by members limited to hours, 10.30 a. m. to 2.15 p. m. (12 m. on Saturdays), sj Mpls., 11:7; Mil., 11:9; Chi., 4:8; 11:7; K. C., 21:2; Oma., 8:1 (c); St. L., 9:1. The Milwaukee rule was sustained in State v. Milwaukee Chamber of Commerce, 47 Wis., 070; 3 N, W., 760 . 250 TERxklll^AL GRAIN MARKETS AND EXCHANGES. it Prohibition of personal or private trades. —Not only must contracts for future delivery be executed in the open market in tlic exchange hall during regular hours, but the sales must be public to the extent that they can not be restricted or specified for acceptance by any particular member.®" ’ ' The Chicago rule is the result of an investigation by the rules com¬ mittee (Apr. 13, 1915) and designed to meet the abuses which were then reported, namely, (1) Making personal bids and oilers. (2) Bidding for and offering larger quantities and refusing to ac¬ cept less. (3) Making pretended or fictitious offers to bu^TTri’ sell. The rule prohibits all three of these practices. Minneapolis has no general rule on the subject, but an order of the board of directors (Dec. 10, 1907) recites ^Ahat so-called‘personal bids’ or ‘personal offers’ in pit trading arc not permissible and aic hereby forbidden. The spirit of this order is that pit trading shall be open and free, and that our maikct shall maintain the fuU breadth and fairness for all for whicli it is noted.” The same requirements—that bids an d offe rs be not limited m (qianiity, that they be open for acceptance by any member, and that they be made in good faith—are in force in bt. Loui s. Cash trading off exchange. —The rules forbidding curb trading for Chicago, Milwaukee, and Minnea])olis, apply solely to trading m futures.®^ Chicago specifically excepts cash trades from the applica¬ tion of the rule for regular trading and Buffalo qualifies its statement of the “regular tradmg hours” to the effect that: “This rule is not to be construed that members arc prohibited from dealing in cash grain after the close of the hours designated.” ®® After market bids for grain to-arrive are permissible in all the mar¬ kets (see p. 326) although required by some exchanges to be based on genuine price levels. Rules that cash trading between members must be carried on only in the exchange hall exist only in Kansas City, Omaha, St. Louis, and Indianapolis. The Omaha rule is the most explicit in providing that ‘Call consigned grain must be publicly offered for sale by sample 92 Chi.—22:10. \ 9S Cii’cixlar 61. 94 Rule 9, secs. 4, 5. Chi.—4:8; Mpls. and Mil. verified. 99 Rule 10. 97 K. C., 21:2; Oma., 8:1 (c); St. L., 9:1. Indpls.— , , , . t 1 _ "Trading in grain shipped to this market on consignment must take place only during exchange hour.^ and on exchange floor, unless grain arrived in such condition tliat it would be hazardous to hold it over to the next business day, then members are permitted to sell such gi-ain and report immediately upon the opening of the exchange the following business day.” (Letter from the secretary of the Indianapolis Board of Trade, dated Oct. 1-3, 1919.) EXCHANGE RULES AND REGULATIONS. 251 and sold on the floor during trading hours, and if carried over, must he brought back onto the floor during trading hours each succeeding day until soldd’ Confirmation of trades. — Certain exchanges require by rule that trades made on the floor be confirmed by written memorandum within a short time thereafter. These requirements have been adopted more particularly with reference to contracts for future delivery. Futures . — Transactions for future delivery on the Chicago Board of Trade must be confirmed by memorandum filed with the clearing house before 6 p. m. of the day the trade is made. “Such memoran¬ dum shah be in writing, and shah state on its face the date of the transaction, the quantity and kind of property covered by the same, the month of delivery, the price, and the name of the party to whom sold or of whom bought, and shall be signed by the party or firm making the samc.’'*’^ Likewise, a member making an offset of an outstanding contract for future delivery must file a similar memorandum with the clearing house. Similar rules applicable to future contracts arc foUowcd in Kansas City, St. Louis, Philadelphia, and New York. In Kansas City non- compliance with this rule “shall be deemed uncommercial conduct and punishable accordingly. ” The St. Louis and Philadelphia exchanges have adopted formal grain contracts ^ for the future option business; according to the rule in St. Louis, “it shall be the duty of the buyer and seller to prepare contracts for signatures and send same to the office of the other con¬ tracting party on the day of sale or to present same for exchange between 8.45 a. m. and 9.15 a. m. on the next business day * * The Philadelphia rule provides merely that “ cither party is entitled to demand a wTitten contract in due form * The New York Produce Exchange authorizes either party to a contract for clearance through the clearing association “to require of the other party to the contract a slip properly confirming said contract * * ^ Cash trades .—Confirmation of cash trades has not been ruled on b}^ most of the exchanges. The Minneapolis Chamber of Com¬ merce, however, has ruled that “in all cash transactions or sales to arrive a written confirmation of same shall bo made within 24 hours thereafter.'’ ^ Such confirmations are largely required by usage in the market, whereby shipping instructions, biUs of lading, ware¬ house receipts, or other documents must pass and bo acknowl- — - • ' 1 St. L., 1917, Rules, p. 33; Pliila., 1918, annual report, p. 124. 2 Rules or the grain trade. Rule 35. 5 Rule 18, sec 2. E8 Rule 22, see. 7. 80 Ibid.; sec. 8. Rule 14, sec. 6. 252 TERMINAL GRAIN AIARKETS AND EXCtlANGES odgod ill order to make a sale. The Grain Dealers’ National Associa¬ tion has adopted minute regulations on the subject.** In the case of contracts for future delivery, however, there frequently would be no otlier documents to stand as evidence in case of a subsequent dispute were it not for the required confirmation slips. Advances required on grain for shipment (call for mar¬ gins). —On sales of grain for deferred shipment, margins of cash security may be called for under certain rules. The seller of grain for shipment from Minneapolis may require a 10 per cent margin and ‘^further security from time to time to the extent of any decline in the market value” below the contract price.'^ The Omaha and St. Louis exchanges have set up a procedure for cash margin deposits applicable to purcliases or sale “for which ship¬ ment or delivery extends beyond 10 days from date of contract,” and similar to the procedure for deposit of margins on futures,® although different in detail. In St. Louis the original deposits for grain contracts are limited to 3 cents per bushel. Failure to deposit such margins within a stated time, when called for, constitutes a default on the contract authorizing the party making call for margin to collect damages as provided in the rules for defaults.^ AU deposits so made must be released upon performance of tiie con¬ tract, or applied on payment.® Shipping instructions. —The binder is obligated to furnish the seller (or his agent) full shipping instructions from point of shipment to destination.® Failing to do so (Minneapolis)— ■< Rule 4. (a) Confirmation: It shall be the duty of both buyer and seller, on day of trade, to mail, each to the other, a confirmation, in writing (the buyer a confirmation of purchase, and the seller a confirmation of sale), setting forth the specifications as agreed upon in the original articles of trade. Upon receipt of said confirmation, the parties thereto shall carefully check all specifications named therein and upon finding any differences, shall immediately notify the other party to the contract, by wire, except in the case of manifest errors and differences of minor character, in which event notice by return mail will suffice. {h) When a trade is made through a broker, it shall be the duty of the broker, on the day of trade, to send a written confirmation to each of the principals (to the buyer a confirmation of sale, and to the seller a con- tirmation of purchase) setting forth the specifications of the trade as made by him Upon receipt of said confirmations the parties thereto shall carefully check all specifications named therein, and upon finding any dift’erences, shall immediately notify the other party to the contract, by wire. In default of such notice by wire the contract shall be filled in accordance with the terms of the confirmation issued by the broker, (c) All sales by telephone shall be confirmed on date of sale by both buyer and seller. (rf) When either of the confirmations contains provisions at variance with the conditions expressed in the card bid, or other written or printed bid, the provisions of the said card, other written, or printed bid shall govern, except when both parties to the contract shall waive the irregularity by signing the confirmation,in which event the confirmation thus signed shall be understood to express the terms of the contract. *’ Mpls., 8:15. ^Oma., Trading Regulations, No. 15. Enumerates procedure at length and stipulates that “members are required to insert the above contract in all confirmations of purchase or sale of cash grain.” St. L., Rule 18. ' See p. 259. The Omaharulerecites, “In case marginal deposit call to the market is not deposited and oflfi* fial notice of same is not received within the required time, as hereinbefore provided, the party thus call¬ ing shall have the privilege to cancel all contracts covered by such margin call at the general market value, or to reseller rebuy at his or their option, under prompt telegraphic advice, charging difference or loss to the defaulting party, said amount to be due and payable at once.” (1918 Rules, p. 75.) Mpls., Oma., and St. L., as cited. 8 Mpls., 8:15; Chi., 22:17; MU., 11:11; Phila. (Grain Rules), 0:7; N. Y. (Grain Rules), 38:5; Buf., 19:6; also, Trade Rules, Grain Dealers’ National Association, Rule 6 (b). EXCHANGE RULES AND REGULATIONS. 253 the seller may assess and add to contract price tlio usual prevailing charge for carrying until such time as shipping-directions are received, or the seller shall have the riglit to sliip th.e goods to the post-office address of the buyer or to cancel the contract, as seller may elect, 24 hours’ written or^telegraphic notice having been given by seller (f his intention or election. Tlie Milwaukee rule is similar hut adaf-ited to lake sliippiug con- ditions.“ It is material to the completion of a to-arrive contract to know wlietJier the shipment period begins to run from the date shipping instructions are ‘Murnished^’ by the buyer in the tei^minal market or from the date instructions are received at the point of shipment. The language of the rules varies slightly on this point. Under the Cliicago and Milwaukee rules the period begins to run when and not until the seller actually receives the shipping instructiojis.^^ Tlie Minneapolis rule specifies that the period shall be reckoned from the day after full written or telegraphic shipping instructioiis are received by the seller in Minneapolis.’’ This ride suggests the expectation that most of the to-arrive buying will be handled through commission men in the terminal market; rather tlian by direct bids to the country. ^ It may be fairly considered the rule of the trade that the time period begins to run with the day following that upon wliich sliipping instructions are received by the seller.'^ Shipments. —The table following shows the shipment terms as under¬ stood on the various exchanges. Chicago, Kansas City, and St. Louis leave the period of time to be specified (by days) in the contract, merely providing a period to govern where no time is si^ecified. It is generally provided or understood that the bill of lading will be for¬ warded to the buyer immediately after shipment and will constitute final evidence of the date of shipment. Any given number of days means calendar days, excluding date of sale, throughout the trade. >® MpLs., 8:15. Mil., 11:11. 12 Chi. (22:17) “from the date of the receipt of full shipping instructions at point of shipment.” Mil. (11:12) “In making contracts a specific nmnber of days (meaning calendar days) in which to make shipment, shall be stipulated, and shall be reckoned from the day after shipping instructions are received by the seller,” “ ‘Receipt of billing instructions by seller ’ shall mean receipt of same at seller’s main office or by his duly authorized representative.”" isMpls., 8:15. Bos. (Grain Rules), 1:1; Phila. (Grain Rules), 6:5; Grain Dealers’ National Association, 6 (b;. See rule 5, Trade Rules, Grain Dealers’ National Association. Also confiimed by exchange rules. 254 TERMINAL GRAIN MARKETS AND EXCEIANGES. Table 73. —Time jjeriods for to-arrive shipments as defined in exchange rules} “Imme¬ diate.” “Quick.” “Prompt.” Specification to apply when time is not specified. Chicago (contract to specify time). Milwaukee . Days. Days. Days. “15 days arrival.” “Prompt” is understood. 3 7 14 Minneapolis. 3 7 14 Do. Duluth 2 . 10 Seller has 20 days. Kansas City (contract to specify time). Ornaha. “10 daj'S shipment.” 3 5 10 St. Louis (contract to specify time). Peoria (no provision). Indianapolis. Do. 3 5 10 Cincinnati. 3 5 10 “ Prompt shipment” is understood. Buffalo. 3 .5 10 “ Prompt shipment shall apply.” Pltiladelphia. 3 10 Do. New York. 3 5 10 Do. Unst.nn __ 3 7 “Prompt” is understood. “ Prompt shipment shall apply.” C.raiji Dealers’ National As¬ sociation. 3 5 10 1 Period begins the day alter seller receives order. ~ “On the opening of navigation” means 10 days thereafter. 'X^VRLOAD.”—Payments for actual grain are based on the agreed weights of the particular car purchased. However, when settlement is required on a hypothetical carload’’ (which exists only m storage) it is necessary to have an arbitrary definition of the quantity of grain which the term implies. (The same is true of ‘‘boatload” in a few cases.) Standard carloads are also necessary in accounting for “less than carload lots” which frequently requires a commission rate different from that for full carloads. The figures adopted in the various markets for bushels (or pounds) per “carload” appear below. Table 74, —Number of bushels in a ^‘carload” of grain for 17 specified exchanges. Chicago. Milwaukee. Minneapolis. Duluth. Kansas City. Omaha. St. Louis. Peoria. Indianapolis. Cincinnati. Toledo 1. Buffalo. Baltimore. Philadelphia. New York. “boatloads” Buffalo.... New York pounds.. pounds.. IN BUSHELS. Wheat. Corn. Oats. Barley. Rye. 1,100 1,200 1,800 1,250 1,200 1,100 1,100 1,800 1,250 1,100 1,000 1,000 1,500 1,000 1,000 1,000 1,2.50 1,500 1,200 1,000 1,000 1,000 1,500 1,000 1,000 60,000 60,000 48,000 60,000 60,000 1,000 1,000 1,.500 l,0i)0 1,000 1,075 1,100 1,600 1,2.50 1,100 1,075 1,100 1,600 1,250 1,100 1,075 1,100 1,600 1,250 1,100 425-450 475-500 750-850 500-550 ■475-500 1,000 1,000 1,600 1,000 1,000 1,100 1,100 1,600 1,250 1,100 64,500 61,600 51,200 60,000 61,600 8,000 8,500 13,000 10,000 8,500 8,000 8,500 10,000 10,000 8,500 Flaxseed. GGO Ij-OOff l.OO'l 1 Rule adopted Mar. 20, 1880. EXCHANGE KtlLES AND REG ULAflOKS. 255 Time to reject. —The time withui which a buyer may reject grain sold by sample depends largely upon the terms of the contract. Kojcction can not be made in any case after a final inspectioii certificate has been issued. In some markets time must be allowed for a sample by the official exchange sampler, which shall constitute evidence whereby the purchaser may or may not reject and call for reinspection. For example—■ - Whenever grain or mill feed is sold by sample, the purchaser must accept or reject such grain or mill feed by 11 o’clock a. m. of the business day next succeeding the day of purchase, unless it shall have been impossible for an official board of trade sampler to sample such grain or mill feed by that time. If it be impossible to sample such grain or mill feed within the time specified it shall be the duty of the purchaser to notify the seller by 11 a. m. of the business day next succeeding the day of purchase, and such grain or mill feed shall be sampled as soon as possible thereafter by the official grain sampler, and the purchaser must accept or reject such-grain or mill feed immediately after the report of the official sampler is made.^® For grain weighed in Omaha or Council Bluffs the buyer is required 'to deliver to the seller the certificate of weight by 12 o’clock noon of the next business day following the weighing of the car. Grain sold on track and not ordered to elevators, mills, or warehouses must be rejected within 24 hours from time of sale or accepted on original inspection of sample.” ” In addition to the specifications already enumerated, certain other details of contracts for the purchase and delivery of country grain have been written into the rules. For example, on contracts dealing with ^'first half” and "second half” of the month, some of the exchanges preclude any subsequent dispute as to what is meant by first half by stipulating midnight of the 15th day on a 30-day month and midnight of the 16th on a 31-day month as the termination of a shipment period.^® Passing of title.— -The passing of title is a matter of varying construction in the law of sales and is frequently stipulated in indi¬ vidual contracts. When the question arose with reference to fire risk in Minneapolis in 1916, the directorate adopted the following resolution: WJiereas, there is more or less uncertainty as to where the fire-insurance risk lies, and as to the exact time when the title i)asses to grain sold on the exchange floor of this association, for delivery at elevators, mills, and industries, or on track in the Minneapolis switching district: Now therefore l^e it ‘8 Chi., 22:14. Compare K. C., rule 21, sec. 6, where ‘Uho purchaser may call for reinspcction by 1 o’clock p. m, of the second succeeding business day from time of regular tender and in case of chango of grade * * Sec also K. C., rule 3, sec. 12. See Balto. (by-laws), 12:1, where grain can not be rejected later than 10.30 a. m. of the day after purchase. Oma., 0:9, specifies 24 hours for grain sold on track. Oma., 191S rules, p. 54. Mpls., 8:15; Mil., 11:12. 256 TEKMIXAL GKAIN MARKETS AND EXCHANGES. Resolved by the hoard of directors of this associat ion, Tliat from and after the date of the p issige of this resolution it shall be understood to bo the intention of the mem- bers of this avssociation with respect to said matters: 1. That when such sales of grain are made to be delivered at or from elevators, liidlls or iudustries, or on track, or in any manner, or at any place agreed upon between the buyer and the seller, that such sales shall be for cash. 2. That the title to the grain shall not pass to the buyer until the payment of the ])urchase price to the seller or his assigns. (Circular No. 685.) Tlie Buffalo Corn Exchange has written into the general rules the following definition, which seems to be gaining acceptance in the trade: The title to lake grain shall be deemed to have passed upon the delivery of the original bill of lading, or a certificate showing cancellation thereof, or negotiable, warehouse receipt or nonnegotiable warehouse receipt; but the buyer shall have tlie right to demand the original bill of lading or the vessel agent’s certificate showing the same to be canceled, or the cancellation thereon of any grain represented by such nonnegotiable warehouse receipt. The title to rail grain shall be held to have passed to the buyer upon the delivery to him of the warehouse receipt or the original bill of lading, properly indorsed, cov¬ ering said grain, or upon reissue by the railroad company of a bill of lading covering said grain. Delay in transfer or unloading. —If the buyer of grain fails to provide instructions for unloading, handling, or shipping the grain purchased, so that weights may be obtained within a specified time, the seller is entitled to collect the larger part of the value of the grain based on shipper’s weights. In Chicago on all property for delivery, transfer, or shipment, not transferred or unloaded within seven busi¬ ness days, the seller may collect 80 per cent, based on shipper’s wcights,‘® and in Minneapolis if the grain is not moved or ordered toward destination and unloaded within three business days ‘‘the buyer shall pay to the seller, upon demand, a cash advance on said grain or seeds equal to ninety (90) per cent of its value.” On the Kansas City Board of Trade the purchaser of track grain or grain bought to arrive must give disposition orders within 24 •' ‘ ~~ ' ’ ' ^ u ' ^ '9 Biif., 18:3, 4. .See Pampa Grain Co. v. Otitakoma City Mill & FAcvator Co., 248 Fed., 477, decided Mar. 13, 1918, where the court held: "There may be a sale without completed or perfected delivery. By delivery of the bills of lading, and by the express terms of the confirmation letter, the Oklahoma Company acquired complete dominion over the property, with the right to change its destination in transit, to sell at this changed destination, or to sell in transit." See also Rules of the Merchants’ Exchange of St. Louis, 1919, p. 43: "The seller shall, however, have the right to demand from the buyer, payment of 95 per cent of the value of the property upon the delivery of sa id property to the outbound railroad and surrender of the proper documents, passing title to said property to the buyer." -’0 Chi., 22:14; K. C., 15:8. 2 Mpls., R. 18, secs. 4, 5, 6, 7, and circulars 374 and 702: “Resale shall not be construed as moving or or.lering a car, in the above sense." When the car is delivered and, without being unloaded, "is subsequentiy reordered to some other des¬ tination, the buyer shall pay the seller upon demand a cash advance on said grain or seeds equal to 90 per cent of its value.” The rule in the text applies also to sales for shipment beyond Minneapolis, in which case (circular 702) "the seller shall have the right to demand a cash advance on said grain or seeds equal to 90 per cent of its value, which advance shall be due and payable when the car reaches the yard of the outgoing railroad, and the duplicate disposition order or other necessary railroad order is delivered by the seller to the buyer.’ EXCHANGE EULES AND REGULATIONS. 257 hours, or, failing to do so, seller may demand payment on ship¬ per’s or railroad weights, upon delivery of bill of lading, properly in¬ dorsed, subject to readjustment upon Kansas City official weights.” ^2 Omaha follows tlie Chicago requirement that ownership remains with the seller until grain is paid for and that seller may draft upon buyer if the unloading is delayed over a speeffied time. The time limit in Omaha, however, is hours from 2 o’clock p. m.mf the date of sale of the grain,” If the purchaser fails to unload within that time he shall pay seventy-five(75) per cent of the value of the grain, on demand, for the grain so delayed, based on shipper’s weights or based on the capacity of the car * * * * ” 23 A somewhat different rule obtains on the Merchants’ Exchange of St. Louis, the seller being entitled to interest rather than part payment after failure to unload within the required time. Grain, feed stuffs or seeds, sold from track or to arrive, to be switched or delivered to an elevator, industry or team track, shall be unloaded within five calendar days after actual or constructive delivery (and for purpose of this rule the records of a railroad company of the time of tender or delivery shall be prima facie evidence) to the speci¬ fied tracks or to the lead or switch upon which the industry is located. In the event any grain, feed stuffs, or seed shall not have been unloaded or paid for within a period of five calendar days, including the date of delivery or tender, as specified in this rule, the buyer shall pay to the seller, and the seller shall collect from the buyer, interest at the minimum rate of 6 per cent per annum, or the current legal rate, if higher, for each, calendar day after the expiration of the five calendar days’ free unloading period until the commodity is paid for, provided the buyer shall have the right to make advances or tender payment in full at any time. Refusal or neglect to comply with these provisions shall be considered unmercantile conduct under the rules of the exchange.^-* / Tlie rules of the Indianapolis Board of Trade allow the buyer 24 hours to give a disposition order and 10 days to furnish to the seller an official weigher’s certificate.^® On tender of a negotiable bill of lading, or indorsed railroad order, the seller may demand 95 per cent of the purchase money estimated on bill of lading weight‘d, or indorsed railroad order with certified weight. And it shall be deemed uncommercial conduct for any member to overinvoice the contents of a car or cars when he has knowledge of the correct weight. A very similar rule exists in Cincinnati.^® 2^ K. C., 15:8. *3 0ma.,6:9. St. L., 4:15. Rules of the Grain Trade, secs. 24 and 25. 2«Cin., rule 6, secs. 3, 4: "The buyer shall pay to the seller 90 per cent * * * on railroad weights, within 24 hours after such tender. •Tn all transactions the buyer shall order the property within one day from date of purchase, unless otherwise specified at time of sale. When grain and hay exchange weights are to govern, same shall be furnished within 10 days from date of original sale, except for unavoidable causes for which the biiyer is not responsible. If such weights are not furnished witliin 10 days, the seller may demand payment on shippers’ weight. ’ ’ 1G8G93°— 20-IT 258 TERMINi^ GRAIN AIARKETS AND EXCHANGES. Ill Philadelphia, if the consignee does not unload on time he is required to make payment on invoice weights. In all sales of grain or feed on track, unless otherwise stipulated at time of sale, the purchaser shall be required to remove the contents of the cars within four working days after they shall have been placed in position to unload, in default of which he shall pay for same at invoice -weight, as established by public weigher’s certificate, or by affidavit of private weigher, and shall also be responsible for any demurrage or deten¬ tion charges. Acceptance. —^Acceptance by the purchaser of a car of grain bought by sample takes place upon the unloading thereof, accord¬ ing to the Duluth rules, provided— that where, in the process of unloading, any portion of a car is found to be plugged or of quality inferior to that of sample upon which the grain was sold, the purchaser shall accept the portion of the car unloaded and the remainder shall be left in the car sub¬ ject to the order of the seller, who shall be immediately notified by the elevator com¬ pany unloading the same.^® Also, under Minneapolis rules, if ^‘the car is reordered without unloading, or without first calling for rcinspection, such reordering shall be considered a final acceptance of the car by the purchaser.’’ The time for payment. —One of the causes for discipline already discussed^® is that of willfully faihng to pay for property sold for cash by another member, upon delivery of the same.^^ Failure of a member, party to a contract, to receive and pay for the property will be dis¬ cussed in considering defaults. There are, in addition, certain rules designed to enforce payment for goods received and accepted. As a general rule, on sales of cash grain to go to elevators or mills in the market, payment is due immediately after the grain is weighed and unloaded (“as soon as unloaded and weighed”). ' The “time for jiayment” is clearly set forth in the Omaha rule: On all sales of cash grain to go to elevators, mills or warehouses in this market, made on the floor of the exchange, on the “call” board, or by private sale, in accordance with the rules and regulations of the excliange, the buyer shall order the grain to the elevator, the ownership of such grain to remain in the seller until the grain is paid for. On such sales payment shall be made by the purchaser before 2 o’clock p. m., of the day following the day on which the grain is unloaded at the elevator; except that in case the grain, for any reason whatsoever, is not unloaded at elevator within 144 hours from 2 o’clock p. m. of the date of sale of the grain, the purchaser shall pay 75 per cent of the A'alue of the grain, on demand, for the grain so delayed, based on shipper’s weights, or based on the capacity of the car; subject, however, to final adjustment, based on official weights of the exchange, or as may be otherwise agreed Phila., Grain rules, 8:5. 28 Dul., 14:11. 29 Mpls., 18:6. io r. 211. E. g., see St. Louis, 4:9. 22 ]'eo,, 13:16. Sec also Balto. (Bj'-Laws) 12:1, where bills are due and payable “immediately after delivery unless otherwise agreed upon at time of sale.’-' Also, see Mpls., Circular No. CS5, « * * * such sales shall be for cash.” EXCHANGE RULES AND REGULATIONS. 259 between buyer and seller. No grain shall be paid for until unloaded, or at the expia¬ tion of 144 hours from 2 o’elock p. m., of the date of the sale of the grain.^^ The Chicago rules are most explicit on this point of payment for cash grain, requiring that ‘^all bills rendered for grain * * * sold by grade, or by sample, or by grade and sample, either after arrival or to arrive, or in any manner as may be agreed upon between buyer and seller if delivered at the office of the buyer by 2 p. m. shall be paid by 2.45 p. m. the same day, except that on Saturdays all bills delivered by 11.20 a. m. shall be paid by 11.50 a. m. the same day,’'34 with due provisos as to the documents which shall be attached to the invoice. Kansas City has an equally stringent rule applymg to ‘^all bills for carlot loads of grain,” with a slightly more liberal time allowance. There is a rule in Milwaukee that when grain is sold on-track in the market, ‘^payment must be made therefor on date of presenta¬ tion of the invoice, provided that invoice is delivered to the buyer before 11 a. m., accompanied by necessary certificate of weight.”^® Section 14. Defaults on contracts. In GENERAL. —^Another outstanding object in the organization of grain exchange associations has been to insure the fulfillment of business obligations. For example, the very first provision in the rule book of the Omaha Grain Exchange is that every person ad¬ mitted to the privileges of this exchange shall promptly and faith¬ fully comply with and fulfill all business obligations into which he may enter, either with other members of this exchange, or with other parties, and shall equitably and satisfactorily adjust and settle the same.” This is the primary obligation of a member. On all highly organized exchanges stringent rules have been adopted to insure the observance of every business contract entered into bv a member of the exchange; and, as pointed out in previous sections, willful default on a contract subjects a member to suspension, ex¬ pulsion, or other disciplinary action by the governing board. Every contract so made is not only subject to the existing law but also to the exchange rules as a part of the conditions thereof,®^ and the rules may extend to contracts not enforceable in Oma., 6:9. Chi., 22:16. fe K. C., 15:9. ‘6 Mil., 11:10. « Correspondence of secretary of Chicago Board of Trade, June 3, 1916, states that the courts have held repeatedly and, so far as he knows, never to the contrary, ‘‘that all contracts made on the Cliicago market under these rules have as a part the conditions of the contract and the said rules.” And the Kansas City rules provide: “All coutraefs of a member of the board of trade, or a fii’m having a member of the board of trade as a general partner, or a corporation having a membership representation with any other member of the board of trade as a general partner, or any other corporation having membership representation for the purchase and sale of grain or provisions, or futures, or transactions incident to the-grain or provi¬ sion business proper, are contracts subject to the rules of this board of trade.” (Art. 21, sec. 13.) St. Louis, Rule 8, see. 1: “ This contract is subject in all respects to the rules and regulations of the Mer¬ chants’ Exchange of St. Louis.’j 260 TERMINAL GRAIN MARKETS AND EXCHANGES. the law. To understand, then, the rights and remedies set up for the protection of members and their customers in the grain trade it is necessary to make a brief survey of the rules covering defaults. Such defaults may occur (1) through willful noncompliance or gross negligence, or (2) through inability to meet the conditions of the contract for causes beyond the delinquent’s control. The ques¬ tion of intent is of controlling importance in disciplinary action; but equally important to the interests of the trade are the rules of dam¬ ages which apply to any default. Willful violation of a business contract. —As a general rule willful breach of any business contract by an exchange member renders him subject to suspension or expulsion at the discretion of the^ board of directors.None of the exchanges limit such default to contracts with another member. The Chicago rule refers to “a willful violation of any business contract or obligation,” and the Minneapolis board will entertain complaints “for the breach of any contract or agreement.” In Duluth we find the rule limited to con¬ tracts “which he has entered into in connection with, or by virtue of, his membership in this association;” which contracts include of course those with nonmembers. 'Ordinarily the mere willful default in itself does not subject the member to discipline until it is also shown that the delinquent neg¬ lected or refused to make a satisfactory adjustment or settlement of the obligation, as provided for by the rules governing defaults.=^® The effort to adjust or settle must be made within a reasonable time, since prompt compliance with contracts is the general customary requirement of such associations. In construing these rules, willing¬ ness to submit a disputed difference to arbitration is considered by the Omaha Grain Exchange “as evidence on the part of such member of his readiness to equitably adjust and settle his said disputed obligations.” Where evidence of fraud, dishonesty, or other dishonorable conduct appears in the controversy, discipline may ensue of course for the act itself quite apart from any subsequent settlement of differences.'*^ Defaui^t through inability to meet the obligation.— Where default results from causes beyond the delinquent’s immediate control, as in case of car shortage, or inability to procure the grain, the rules generally provide a method of settlement or adjustment 88Seep. 211. 8»E. g., Mil., 4:12, “* * * The member in fault shall, by such finding, stand suspended from all privileges of membership imtil the matter complained of shall have been satisfactorily settled in the judg¬ ment of the board of directors.” Mpls., 8:2; Mil., 4:12; Chi., 4:9; Dul., 4:9; Oma., 1:9; Sy L., 4:9; Peo., •::8; Buf., 4:1; N Y. (by-laws), sec. 32; Balto. (by-laws), 7:7; Phila. (by-laws), 24:2. <8 Oma., 6:3. , , On failure to deliver warehouse receipts after issuing notice of readiness to deliver a “party shall be deemed guilty of gross fraud, and shall be suspended or expelled from membership in this association.” (Chi., 21:2.) EXCHANGE RULES AND REGULATIONS. 261 whereby the obligation may l)e satisfied. Discipline need not bo resorted to unless the defaulter is financially insolvent (or for reasons of dishonorable conduct). Ti’ading while in an insolvent condition will generally involve fraud and is punishable for reasons other than the default itself. The rules for settlement and adjustment apply mainly to contracts for future delivery and contracts for future shipment. The rights of buyers and sellers under these two classes of business will therefore be briefly summarized. Failure to deliver on future contracts. —Failure to deliver tlie property on a future contract is frequently the result of operations wdiich have inflated market prices. It is necessary, therefore, to determine the true commercial value at date of maturity so that a settling price can be adopted which will operate to prevent corners and yet not encourage irresponsible short selling. This can be arrived at (1) by allowing the injured party (the long side) to buy in the property stipulated in the contract for account of seller or (2) by taking the average market price on day of maturity, or (3) a settling price may be determined by a special committee appointed for the purpose. - ' In Chicago and Duluth the third method is jjrovided for ever}^ such default. The president shall appoint a committee of three from the membership at large, to be approved by the board of directors, which committee shall determine as nearly as possible the true commercial value of the commodity in question on the day of ma¬ turity of the contract, and the price so established shall be the basis upon which settlement is made. A similar committee, which amounts to a special committee of arbitration, is provided for in Minneapolis when there is a disagree¬ ment on the fulfillment of the contract. Either party to such disagreement may call upon the president of the chamber for the appointment of a committee to determine such matter of dispute; whereupon the president shall select five (5) discreet members of the association, in good standing, (See p. 208.) "When any member of this association, knowing himself, or the firm in which he is a pnrtnor, or the corporation of which he is an executive officer, to be in an insolvent condition, shall make any contract on his own account, or on account of such firm or corporation, under the rules of this association, whereby pecuniary loss shall result to any other member, or to any firm or corporation entitled to trans.act business on this exchange, he shall be suspended or expelled at the discretion of the board of dirfectors; or, when any member of this association, knowing himself, or the firm in which he is a partner, or the corpora¬ tion of which he is an executive officer, to be in an insolvent condition, shall accept on his own account, or on account of any such firm or corporation, any money or security or securities as margins from any cus¬ tomer on any trade or trades made under the rules of this board, whereby pecuniary loss shall result to the person,firm, or corporation depositing such margins, such member shall be suspended or expelled at the discretion of the board of directors.” (Chi., 4:31.) And compare with the following rule in Milwaukee: " In case of insolvency of either party to the contract it shall be considered a default, and the contr.ict may be closed by purchase or sale on the open market of a like quantity of property equal in quality to that called for in the contract, without reference to the contract period, 24 hours’ notice of such intention having been given.” (Rule 11, sec. 12.) « Chi., 23:1. The Chicago rule is admittedly devised to penahze short selling. Idem: Duh, rule 15; also Balto. (by-laws), 13:18; Peo., 13:11. 262 TERMIK-AL GRAIN MARKETS AND EXCHANGES. to be approved by the board of directors, who are not in any manner interested in the matter in controversy, who shall, without unnecessary delay, organize by electing one of their number chairman, andlu'oceed to hear and determine the question as to the equitable measure of damages, if any, to be paid by the party in default. Said committee shall before entering upon their duties be sworn to fairly and impartially hear and determine the questions presented to them. They shall receive such state¬ ments or evidence, under oath, as either of the parties may present; and, m order that then investigation shall be thorough and impartial, notice of the appointment of the time and place of the hearing shall be announced on ’Change, and an in\'itation given to any member of the association to appear before them with evidence of any facts having a bearing on the subject matter they are appointed to consider. The committee shall be authorized to determine the relevancy of any testimony presented to them; and if they deem it necessary, may call for any available evidence that may not be voluntarily tendered. The said committee, in determining the measure of damages to be paid by the defaulter, shall be authorized to consider whether or not the value of the property in dispute has been enhanced by combina¬ tion or by any individual for the purpose of extorting unreasonable damages, and shall also consider the effect on values produced by sales in excess of the marketable Gupply, and in view of the facts presented and having reference to the duty of the seller to specifically fulfill his contract, shall determine the just and true value of the property defaulted on at the time of the default, and by the \ alue so established shall determine the measure of damages to be assessed, both of which shall be stated in their findings, which shall be made by a majority vote of the committee, and in writing, signed by the chafiman of the committee. The decision of said committee as to the value of the property in question on the day to which thefi decision applies shall be deemed its true value at that date and shall be accepted and recognized ai establishing said value as to the equitable basis for all settlements and adjustments of similar defaults by members of the association on that day, and values so estab¬ lished shall be respected as final by the board of directors and committees of arbitra¬ tion and appeals of the association. The committee appointed under the provisions of this section shall be entitled to twenty-five ($25) dollars for their services, to be equally divided among them; said fees shall be paid in advance by the party upon whose request the committee is called, and shall be finally i)aid as the committee shall determine and state in their findings.'*^ The Minneapolis rule also provides the other methods of settle¬ ment for the buyer; that is, (1) by buying in the property for account of the seller, or (2) by payment (on the seller’s part) of loss based on the average market price at date of maturity with due regard for any manipulation of market prices. And substantially these same alternatives exist as recourses for the buyer in Kansas City, Omaha, St. Louis, Milwaukee, and Toledo.^" Any loss incurred by the purchaser is due and payable at once by the party in default. On the four exchanges just named if private settlement fails the dispute must be submitted to arbitration in the regular way; and it is provided in Kansas City and Omaha (in identical rules) that the disputes over « Mpls., rule 10. 45 K. C.. 14:1; Oma., 5:1; St. L., (S:5). The St. Louis rule provides a T) per cent penalty with a minimum of 6 cents per bushel on wheat, 4 cents on corn and 3 cents on oats, for such defaulted delivery. Mil., 10:1; it is also provided in Kansas City, Omaha, and St. Louis that the buyer may cancel or forfeit the contract. Note that in New York the Grain Committee is directed to hold a public call to buy in grain to satisfy the buyer on such a default (rules of grain trade, 32:1); Tol., 21:1. EXCHANGE RULES AND REGULATIONS. 203 all defaults on future deliveries for one month shall be handled as one arbitration with the clearing house a party thereto.'^® After a controversy extending from the earliest years of active future trading a rule was adopted in Chicago in 191setting arbitrary limits (both up and down) to the liquidated damages which may be collected on a defaulted contract: As liquidated damage the seller shall pay to the purchaser not less than five per cent, nor more than ten per cent of the value of the commodity as -established by the committee; the percentage, within said limits, to be such as in the judgment of the committee, may be just and equitable. Settlement shall be made without delay, and the damage, as determined under the provisions of this section, shall be due and payable immediately upon the finding of the committee. This section shall not be construed as applying to any parties having the property both bought and sold, in all of which cases settlement shall be made on the basis of prices established by the contracts in such instances.^® Failure to receive and pay on future contracts.— Failure to receive and pay for delivery of warehouse receipts by the final holder of a delivery notice constitutes a breach of contract which may be settled by pa^unent of differences between the contract and the mar¬ ket price, plus chaises and penalty. In case of such a default the seUer in order to establish a claim must resell the property on the market within 24 hours and notify the defaulting purchaser of such sale."*® In Chicago, Minneapolis, Duluth, and Milwaukee, all expense for storage, interest, insurance and other risk as well as I-cent commission arc payable by the defaulting buyer to the party required to make resale.'^® The penalty (for failure to receive and pay) in St. Louis isfar more severe, namely,an additional sum * * * equal to five (5) cents per bushel on wheat, four (4) cents per bushel on corn and three (3) cents per bushel on oats.^' The Kansas City, Omaha, and Kevv' York rules do not provide a penalty but merely state that ^^any loss resulting to the seller shall be paid by the party in default.’^ «K. C., 14:4; Oma., 5:4. <7 See Ch. Ill, p. 113. <8 Chi. 23,1. « Chi., 23:2; Mpls., 11:9; Dul.. 13:9; Mil., 11:6; St. L., 8:5; K. C., 14:2; Oma., 5:2; N. Y., (rules of the grain trade) 32:2; Tol., 21:2. f-o Chi., 21:2 and 23:2; Mpls., 11:9; Dul., 13:19; Mil., 11:6. 81 St. L.,S:5. 62 K. C., 14:2; Oma., 5:2; N. Y. (Rules of Grain Trade), 32:2. Defaults by either party to a contract for future delivery are covered in the Mlowing Peoria rule wliich may be considered a fair summary of general exchange practice (although the Peoria futures market is inactive): ‘Un case any property contracted for future delivery is not delivered or received on the day of maturity of such contract, the contracting party not in default may, at his option, consider the contract forfeited, or may purchase or sell the proi-'crty on the market for account of the buyer or seller, as the case may be, during Lbe next business day, notifying him at once in writing of such purchase or sale, or may compel a settlement by the party making the default at the average market price on the day of maturity of contract; the loss, if any shall be due and pay¬ able at once by the party making the default.” (R. 13, sec. 12.) ‘204 TERMINAL GRAIN MARKETS AND EXCHANGES. On the whole, it is fairly settled on tlie exchanges that defaults on contracts for warehouse grain may he settled by payment of market differences if agreed to by the parties. It will be noted that the rules for future trading proceed on the theory that failure to receive and pay for grain on an original contract dating presumably two or three months back is not a fraudulent breach of contract but may occur through the unforeseen contin¬ gencies of trade; and therefore that it is fair to allow the buyer to settle by payment of differences and a stated penalty, rather than to be compelled to make full payment on the actual grain. This rule should be contrasted with that for failure to accept and pay for car-lot purchases on a to-arrive contract, which is discussed below. In the case of default by a purcliaser of grain for future delivery it is assumed that there will be a market for the actual grain in store and that no great inconvenience will result from allowing the defaulting party to settle by payment of differences plus penalty. Failure to deliver on cash contracts. —Sellers of deferred shipments are also allowed to default and settle under certain condi¬ tions without becoming liable to discipline for breach of contract. The alternatives open to the buyer are similar to those for defaults on future deliveries. He may elect to extend or cancel the contract or to rebuy on the open market for account of seller, or, under some rules, require settlement at the market price at the time of demand. In any event, providing the buyer notifies the seller within a stipu¬ lated time of the course which he elects for settlement, the party in default must pay him a sum equal to the prov^en loss sustained. This loss may be determined by buying the grain in on the open market or by a comparison of the contract with the market price.It is a general rule that the contract shall continue in force until some such demand is made by the buyer. Failure to receive and pay on cash contracts. — Some of th e exchang es still publish rules indicating that on any defaulted con- *tractinScIiange trading the aggrieved party is entitled to any dam¬ ages that can be shown to have been sustained and that, in order to protect his interest, he may purchase or sell a like amount of property, as the case may be.®^ Settlements on this basis have been described for contracts where one party defaults through inability to vdeliver 63 Chi.—22:13; Mpls.—11:8; Mil.—11:11; Dul.—14:9; K. C.—15:14; Oma.—6:1; St. L.—8:G; Peo.—13:9; Buf.—R. 12; Cin.—6:8: Balto.—(by-laws) 13:17; N. Y.—(Rules of Grain Trade) 38:6; Phila.—(Grain Rules) 6:8; Boston (Trade Rules), Rule 7, and General Rules of the Trade, sec. 4. 61 Cf., the Peoria rule quoted on p. 263, and note the following rule of the Milwaukee Chamber of Com¬ merce: “In case any property contracted for immediate, regular, or futme delivery shall not have been delivered or received at the maturity of such contract, the party aggrieved shall be entitled to any damages that can be shown to have been actually sustained, and shall be entitled to protect his interest by pur¬ chase or sale of a like quantity of property, in open market, on or before the next regular session of the chamber: Provided, That nothing herein contained shall be construed as authorizing extortionate claims bases on values manipulated for the piu-pose of seeming such claims.^’ (Rule 10, sec. 1.) EXCHANGE RULES AND REGULATIONS. 265 or (ill the ease of futures) inability to accept delivery. The question is now raised: On a contract for car-lot shipment, assuming that the grain arrives on time, and disregarding disputes over grades and weights, can tlie buyer default and settle by paying to the seller the damages sustained out of a difference between the contract price and the price obtained ? And, if such a settlement takes place, is the defaulting party further subject to discipline for violation of a busi¬ ness contract ? A rule permitting such defaults in specific terms is provided by the Philadelphia Commercial Excliange: When any property contracted for delivery is not received and paid for when properly tendered, it shall be the duty of the seller to sell it on the regular market at any time during the next 24 hours, Sundays and holidays excepted, at his discretion, after such default shall have been made, he notifying the buyer at least one hour before such sale; or the seller shall have the privilege of referring the case to the grain committee, which shall establish the amount of his damage, which shall be paid by the party in default.®® But this rule does not exist in the larger grain markets where failure to receive and pay after final grades and weights are received amounts to insolvency and uncommercial conduct rendering the member sub¬ ject to severe discipline. (See Ch. V, sec. 5.) The Chicago rule indicates the prevailing requirements of the terminal markets: All bills rendered for grain, seeds, mill-stuffs, straw and hay, sold by grade, or by sample, or by grade and sample, either after arrival or to arrive, unloaded on regular or private tracks, or in private elevators or warehouses, or in any manner as may be agreed upon between buyer and seller, if delivered at the office of the buyer by 2 p. m., shall be paid by 2.45 p. m. the same day, except that on Saturdays all bids delivered by 11.20 a. m. shall be paid by 11.50 a. m. the same day; provided that the regular team track w'eight tickets, or official board of trade weight tickets, or other disinter¬ ested certificates of weight, shall be attached to the invoice. Any member, firm or corporation violating any of the provisions of this section shall be deemed guilty of dishonorable conduct, as defined by Section IX of Rule IV, and upon conviction thereof * * * shall be .subject to the penalty * * * etc. (That is)—“he shall be suspended from all the privileges of this association until such contract or obligation is satisfactorily adjusted and settled * * * It is presumed that a buyer of grain on track is able to receive and pay for it if he buys in good faith. Therefore, when the seller has met the terms of the contract and filed the proper papers, the buyer must order the grain delivered and pay for it. He can not default and settle by payment of market differences. Section 16. Terminal market “terms.” Inspection. —^Unless otherwise agreed to, grain in carlots is sold subject to the inspection and weight certificates recognized in the • terminal market through which it passes; and buyers and sellers, »» Rules of the Grain Trade, IX, 2. Idem, Peo.—13:9. M Rule 22: Secs. 14 and 15. TERMINAL GRAIN MARKETS AND EXCHANGES. whether receivers or shippers, are entitled to certificates of inspection as a basis for each contract.^^ Terminal market ‘Herms’' as applied in a contract for sale is understood by the grain trade to mean ^Hhe official in spection a nd weights of some Board of Trade, Stat e, or disinter este d public in spec- tion and weighing departoent.” \Vliere State grading and inspection prevails—as in the majority of western markets—the exchange has of necessity adopted the cer¬ tificates issued by such official agency as part of the “terms’’ of that particular market,^'’ all iieing subject to the Federal grain standards act of August 11, 1916. In case the exchange provides its own inspection service—as in Milwaukee, Omaha, Peoria, Indianapolis,' Cincinnati, Buffalo, Balti- more, Philadelphia, and New York—a special set of rules has been adopted for the organization of such inspection department and to define the duties of the chief inspector and liis subordinates.®® These rules and regulations do not establish any substantial rights for buyers and sellers which need be discussed at this place. Under the Federal grain standards act of 1916, regulations have been adopted largely nullifying the effect of exchange rules and regulations as applied to wheat, corn, and oats in interstate com¬ merce. Any person who properly presents himself is entitled to have inspection and grading performed by licensed inspectors, under the above act, and he can not “be deprived of his right there by any rule, regulation, by-law, or custom of any market, board of trade, chamber of commerce, exchange, inspection department, or similar organization, or by any contract, agreement, or understanding whatsoever.”®^ ^Samplin g. —Where State inspection prevails the principal ex¬ changes have provided a department of grain sampling, and appointed a cliief grain sampler or official sampler ®^ to act as a check on the State department and represent the interests of the association on inspection matters. , In Chicago the grain committee is to nominate the samplers (“helpers”) and the board of trade*furnish funds for their payment. 57 K G., Rules, p. 102. 03 See, Trade Rules, Grain Dealers’ National Association, rule 2, (c). “Terras” also includes the rules of the marf;ct. Sec also opinion of court in Chicago Board of Tradev. UnitedStates (246 U. S. 236): “ Grains there dealt in are graded according to kind and qualityandaresoldusually ‘Chicago weight.inspectionand delivery.’” Chi., 22:3; Mpls., 11:1; Dul., 14:1; K. C., 15:10. The St. Louis Merchants’ Exchange has no rule for- mally adopting the Missouri or lihuois inspection service; the rules merely designate the (Federal) grades which shall apply as “contract” grades. CO Mil., R. 19;. Oma., 1918 Rules, p. 77; Ind., 1918 Report, p. 82; Cin., R. 4; Buf., 17: Balto., (By-Laws) Art. 10; Phila., (Grain Rules) R. 2; N. Y., (Rules of Grain Trade) R. 3. 61 Regulation 8, sec. 6; rules and regulations of the Secretary of Agriculture under the United States grain standards act of August 11,1916. 62 Chi., Regulations adopted by Board of Directors (under authority of the rules) 1918 Book of Rules, p. 121. Mpls., Rule 22. Dul., Rule IS: “The board of directors shall have power to establish, control, and conduct a department for sampling grain and seeds in cars, cargoes, and otherwise, and to make regular tiens for its government and operation.’’ (Sec. 4.) IC. C., 3:11 and 12. St. L., 8:6. EXCHANGE RULES AND REGULATIONS. 267 HQL&:cver^_tliey ai’c to be appointed by and subject to control and discharge by the State grain department. The sampling departments established on other exchanges are quite independent of the State agency. According to the Kansas City rules: (6) This department shall have jurisdiction in the matter of sampling at all places on tracks or at elevators, mills, warehouses, etc., within the switching limits of Kansas City. It shall be the duty of the board of trade official sampler, or his assistants, upon written request, to obtain a true sample of any commodity and deliver the same to the person requesting such sample by 12 o’clock noon of the next succeeding business day. In the event of his inability to get such sample, the sampler shall make and file with the secretary of the board of trade a report of such inability and its cause. The com¬ pensation for such sampling shall be fixed by the sampling committee subject to the approval of the board of dmectors and shall be paid by the person requesting it.*^^ Even under State inspection grain may be sold subject to the ^ approval of the official sampler.’’ Under these terms an appeal may be taken from the decision of the official sampler to the grain com¬ mittee (Chicago) or to the grain appeal co mmittee (Kansas City). The decisions of these committees shall be final and binding on the parties interested. In Minne apolis, where disputes arise ^‘as to the qual ity of g rain , tendered on sales to-arrive, where sales have been made by sample, the parties in dispute may refer same to an official grain sampler of the chamber of commerce for decision. Appeal from the official grain sampler lies to the board of arbitration” in the regular way, as provided by the rules. Weighing.-— The weighing of grain is performed by State com¬ missions to the same extent as inspection and grading, except that in Illinois jurisdiction has been given to the Chicago and Peoria Boards of Trade by special arrangement. The duties of the chief weighmasters and their assistants, as those for scale inspectors, are indicated elsewhere. (See p. 319.) It is sufficient to state here that buyers and sellers are entitled to official State or exchange weights before final adjustment of a contract based on terminal market terms. This right was defined in a ruling of the Minneapolis board of directors on October 22, 1908: Resolved, That all sales of grain made upon the floor of the exchange are subject to State weights, unless it is definitely agreed upon at the time to the contrary, and is stipulated in the confirmation of the trade; that failure to furnish State weights when the same were required would bo deemed uncommercial conduct, and in such case the seller should have the right to demand payment for shipper’s weights, The weights of the recognized official agency in the terminal are binding between buyers and sellers, whether members or nonmembers, unless otherwise specified in the contract,®^ and, whether performed ^ Sections “ninth” and “tenth.” Rule 3, see. 11 (6). 65 Chi., 22:18; K. C., 3:12. 66 General Rules, p. 65. 6 r Clii., Constitution, Sec. X, Rule 22, Sec. XIII and Special Regulations, p. 131; Mil., 9:6; N. Y. (Grain Rubs), 3S:7; Ruf., 17:8. 268 TEllMINAL GEAIN MAEKETS AND EXCHANGES. by public or exchange agency, the inspection aiul weighing of car-lot grain shipped into or out of-terminal markets are regarded as indis¬ pensable to the general marketing system and matters of general public concern.®® Therefore, it is scarcely necessary for any trader, who properly presents himself, to invoke any special rule or agree¬ ment in order to secure a disinterested certificate of weights. Weights at seaboaed markets. —Since the traders in eastern seaboard markets frequently buy on terms of the terminal market at point of origin, subject to claims for shortages, the obligation to furnish weights under these circumstances rests primarily upon the seller. Destination outturn weights will govern in determining shortages in any case and will be the sole basis for payment when no official weight certificates have been furnished by the seller.®® The New York and Boston rules given below set forth the prevailing practice : On all sales of grain and mill feeds in car lots for future delivery, unless otherwise specified, the shipper shall furnish for each car a certificate of weight issued by a •weighmaster who is an official appointee of a recognized commercial body or of the Slate in which the grain or feed was weighed. Xhis certificate shall be the basis of settlement between buyer and seller."" Certificates of weights issued by a public elevator or official board of tiade weigh¬ master shall be final. Shipments without either of these certificates, but accom¬ panied by sworn certificate of weight, or duly authorized weighmaster’s certificate, shall be guaranteed within 1 per cent. All shipments unaccompanied by proper certificates of weights shall be settled on outturn weights, unless the seller furnish such certificates before arrival of car at destination. All claims for shortage must be made within 10 days after arrival at point of desti¬ nation, accompanied by a duly sworn certificate of outturn weight, paid freight bill, and canceled bill of lading, or copy of same.^* Section 16. Terminal charges. As already indicated, there are certain inevitable terminal services (in addition to commissions, handling charges, interest, etc.) which must be paid for on every shipment of grain. The exchanges which enforce the ‘^uniform commission rule’^ (see sections 7-11) recognize this and have endeavored to require all purchasers of country grain to assess these charges on a uniform basis. Cincinniti Rules Governing Public Weighing, Rule II, Section 17: ‘‘These rules governing weigh¬ ing operations of the Grain and Hay Exchange Weighing Bureau arc for the purpose of securing uni- fo: mity of practices in weighing operation in this market for the benefit of the whole trade interested, and' for a proper standing of the market.” And cf. Buffalo Corn Exchange Rules, Rule 17, Sec. 8: “All grain sold by or to members Cf the Corn Exchange must be weighed by its authorized weighmaster, unless previously weighed at a public elevator, or by a board of trade weighmaster.” See also, Reg. 13, p. 73, Omaha Grain Exchange Rules, 1918. “It shall be the duty of every member of the exchange who owns, operates, or controls an elevator in Omaha, South Omaha, or Council Bluffs to have every car of grain shipped out of such elevator inspected and weighed by the exchange in the regular way, and each such m mber shall pay to the exchange the regular fees for weighing and inspection.” Buf.—17:10; Balto.—(By-Laws) 12:2; Phila.—(Grain rules) 8:5; N. Y.— (Grain rules) 38:7: Bos. — (Trade rules) 5 and 6. 7® N. Y.—(Grain rules) 38:7. Bos.—(Trade rules for grain) 5,6. exchange rules and regulations. 269 The more frequent of these cliarges cover the services of (1) inspection, (2) weighing, (3) sampling, (4) elevation and storage, (5) mixing and conditioning, and (6) switching. The insurance charges on grain in store are not tabulated here, since they are largely a matter of private contract and vary greatly according as the location and construction of the elevator affects the risk. It will be noted that these rates are regulated in some markets by the State, in others by the exchange, and elsewhere by elevators, railroads, or individual agreement. It follows that the charges lack uniformity as between certain markets, even for the same service. The specific services for which these six classes of charges are assessedare apparent from the tables, and are referred to contin¬ uously throughout the report. For the inspection aiid weighing services reference should be made to Chapter VI. “Sampling,’’ as used in Table 77 -, refers to an additional sampling service, usually per¬ formed as a check on the official inspection. Elevation and storage usually means the elevation of bulk grain without preserving identity within the grade, and discharging it to a receiving carrier within a stated period. Additional storage accrues when grain is held beyond the specified “free time.” The various mixing and conditioning services are sufficiently described in the table below. Switching is included among terminal charges, since it is usually assessed against the shipper as a separate item and not included in the freight charge (except where absorbed by the carrier). Smtehing charges are subject to many variations, even in a single market, and for the most part are predicated on specific competitive conditions. In a few instances, where all industries are connected by a local belt line railroad, flat charges have been set up for the district. No attempt is made here to give an exhaustive statement of switching charges. The statements do present, however, the rates appearing in the switching tariffs of the principal grain-carrying railroads at the markets listed, and indicate the policies of these roads with reference to the absorption of switching. It will be noted that the carriers will usually absorb switching in connection with a line haul for which they have earned a certain minimum revenue. However, there are frecpient exceptions to any general principles which might be laid down. '2 Under certain conditions both elevation and SAvitehing may be absorbed by the railroad carrier as a part of transportation. The Supreme Court of the United States, in 1911, in reviewing the cases of Interstate Commerce Com¬ mission V. DilYenbaugh, Interstate Commerce Commission u. F. H. Peavey & Company, and Union Paci^c Railroad Company v. Same (222 U. S., p. 42), held, ‘'The interstate commerce act does not attempt to equalise fortune, opportunities, or abilities; it contemplates payment of reasonable compensation by carriers for serA’ices rendered and instrumentalities furnished by owners of property transported, the only power of the Commission being to determine the maximum of such compensation. Contracts made by various railroads for elevation expenses of grain at points of transshipment at rates not exceeding those fixed by the Commission as reasonable, held not to be illegal discriminations or rebates when paid to owners of elevators on their own grain, although such owners performed services other than those paid for at the same time to their own advantage.’' Table 75 .—Inspection charges at specified markets Dec. 1, 1919. 270 TERMINAL GRAIN MARKETS AND EXCHANGES. X) o X c: C3 O o U > o3 tn 2 § CO oS aJQQ S®S*S 2 c3« 2 C3 d d ^ jM 4 -. aioai O) d a X W 7! § 0 ® Si'o pq-t^ is l O lO P H CO . 1 ^ Ss vdjD to ‘O CO Si Cl i CN* O d ^ >• P< * o Cl lO ooo Ci lO to tO o o o o o Ofi to to • o • to :A >o\ • o • o O too X) cs »o 1 to C'l »o o t-O O OQI €^e, O to CM CO to to 04 to O to oo to to to I'- to O to o o o t- to CO O to CO tos o -♦-> . d^ > M P- U W d CJ > o c ) t^c o O O O O O to < o o O O O to tx ) to o ) t^o too to o oo to to i*-- o xh tA < CO .~« « « ■4' to i; to o to c a> o'! • W ^C3 oS ci’S r /2 o pj d^ 2 w ^ ^ ^ 0 . 2.2 S r3 C3 ^ 3 8 .S ;:5QWOajP-io O d CD t—t O CO 44 o ft d d c o ®'S bjoB 0 a 42 t ri O d CO 44 :§ H gO [^.2 S ■W3i3:!t£-S^ "■■ B- : w) CO ( O d a> o •■4 s a o d d o u Q> ft d (4 d b£> d t/3 o R Ho d_^* Jd _r CO 4 h w o , o) 5 o . C3 H S H ^ '3 gS S S o'^Spi 42^42 S o M O 0 +J g ' O CjlM _ oj .a ;,r CO CO CO bb CO § 5000 | 2 § 8 Si 8 •5 fl . R M t-j R a- d ^ WJJ 44 rt O ‘^•^44 R tJOc-S R ^ T 5 C3 .. w a o gi* cc. CO r-H ‘ ‘ ‘ ‘ ft O O ^ftpnftft trt w ro to J-- o» •-H ^ ^ ^ -I l-i CO. p, a> s d H _ fO o d o bO R d . o -^d CO O) d ffl. X a (ta *3 x’ a c3 03 ai fllS H R o 2 +3 R ft 5?o o o X J-* 00 CO flo«kerHC4eo-^ F^ F^ r4 ^ Table 76 .'—Weighing charges at specified markets Dec. 1, 1919. Table 77 —Sampling charges at specified marhets, Bee. 1 , 1919. 272 TERMINAL GRAIN MARKETS AND EXCHANGES. >> ,Q TJ ai Ifi V -t-j c9 K w-S.'S ^ bflS )-• <0 a p • »-> I « tog p bO as fl- m bO Q . .Si232' P,ro.-r2 g 5 t> a^ O ^ a-5 .9 S . p.^'Cr IC lit) "S1 IQ c ^ oo . o to kO ^ I SS CD Or-* »o •»'r si SCO O o»c iO »-H ■StA K t- o ] • kO ?2 O O kO »o . ^ O ? 1 IQ > : ; •SQ ; . 1 • .Sft :o :.2 [ d I ft a is -p to o3 a j a o' d is oo CO kO o 1 2 (M o o kO tJ o a *■♦-> CQ *-< CJ Ifi-P ; S-c! ^ C3 g ™ 3 O > Pt3 rt oj ce ® j QJ r— +J i . o a S5 .a © -o ea U) "S _ g to 3 »- cat" £ M Ut o to hC c« o o kO cl C3 -d CO to q:> «i0 u c3 -d o o d 'd d o '©'« xsy- ^ d d ® o o F3 !5c3 tjj CO *. d CO CO ^ L- cfl2 c> o u ^sfe . 'dxJT) 5 g88° CO w CO O 03 W c3 ^ rt ^ ® 3 .a fcffiESEE- (g'pq^ •• «« O la’SS 3^1 2 EXCHANGE RULES AND REGULATIONS. 273 Tablk 1^.—Elevating and storage charges at specified markets Dec. 1, 1910. [In bushels unless otherwise specified.] • Market. Elevating and initial storage. Free time. Additional storage (rate per day). Unloading and reloading. Chicago. Crntit. 1 Days. 10 Vents. 1 Milwaukee 7. 1 10 1 Minneapolis. 15 @ -Sts Duluth. Li 15 10 3$3.00 35 . 00 - 6 10.00 Kansas City. Omaha. 7100- 8 .50 3 St. Louis. 1-1 10 Peoria. ©, 1 15 5 5 i ^ 0 ^ @ i ® :\- (§) ^ 71 3.00 Cincinnati. Toledo. 11 1 10 15 1.00- 76 2.00 Indianapolis. 1 Buffalo. 17 1 5 fis) 1- 551 Baltimore. L© 1 1_7 20 20 10 20 i 27 1.00 25 1.00 261.50-272.00-283.00 Philadelphia. Now York. X Boston..... @ 50 1_ 3^ f 1 32 30 H Li San Francisco. Seattle. 8 40- 33 100 5-30 New Orleans3<.... 1- (g) a 36 5- 37 1 0 381-® a @ •« 2.00- « 6.00 Portland. • ■•2 100 5 «20 Rates fixed b}-- State Grain Inspection Department. Elevators. State law (maximum). Do. Do. Grain Exchange. State law (maximum). Elevators. Grain and Hay Ex¬ change. Produce Exchange Elevators. State law (maximum). Railroads. Elevators. Produce Exchange. Railroads. Do. Port of Seattle Corpo¬ ration. New Orleans Board of Trade. Commission of public docks. ' 1919, the rate will be H cents per bushel for unloading, elevating, and reloading; and for additionalstorage cent in concrete and cent in wooden elevators. 2 Storage charges Nov. 15 to May 15 shall not exceed 4 cents per bushel. 3 Bulkhead cars per car; coopering cars $2 per car. * Includes insurance and unloading. ‘ Bulkhead cars per car. * Unloading only from coalcars, percar. '• Inbound grain. * Outbound grain. » Corn and oats. 1® 15 days additionalstorage until maximum, 4 cents on oats and 5 cents on other grain, is reached to M&y 1 }« “ Bulkhead ears per car. *2 First 10 days. 1310 days of part thereof after first (additional) K> days. 1^ Elevating damaged grain 1 cent extra. 1® Loading ^yheat, corn, rye, flaxseed, per car; oats and barley 1,-500 bushels, and 30 cents for each addi¬ tional 100 bushels. 1® Bulkhead cars, also screenings, per car. 17 A ll accrued charges on grain remaining in store on Apr. 1 in each year must be paid to that date on ® the 15th day of April, under penalty of h cent per bushel additionalstorage charge. 18 Lake gram each seven days thereafter or part thereof. 18 Rail grain. 8® Rail grain includes delivery to vessels or cars; delivery in bags J cent. 21 Trimming per car. 82 Delivery to tramp boats in addition to elevation charge. 23 Domestic grain. 21 Export grain. 23 Reloading or trimming per car. 26 Canal boats, trimming per 1,000 bushels. 27 Ocean vessels and schooners, trimming per 1,000 bushels. 28 Ocean vessels, trimming per 1,000 bushels. 29 Bostnn & Maine export rate. Includes insurance; also delivery to vessels or steamers at Common¬ wealth Piers; also delivery m cars at Boston A Maine Railroad wharves; each 10 days thereafter to cover storage and insurance. ■ 3® Domestic oats, barley, and buckwheat. 31 Domestic other than oats, barley, and buckwheat. 32 Flat storage per month, 30 cents. Rate per season on wheat, $1.25; on barley, corn, and rye, .$1..50; 33 Wharfage per ton; includes unloading, trucking in, elevating, or hauling from ship. 31 On grain for export charges includes elevation “from cars or river barges in bulk and thence into vessels atelevator’s wharf in bulk or into cars in bulk for delivery to other export elevators.^’ On grain imported charges include elevator “from cars in bulk or from hokl of ve.ssel in bulk and thence into cars” or “from cam in bulk or from hold of vessel in bulk and thence into vessel or into river barge at elevator’s wharf in bulk.” (Public grain elevator tariff No. -3.) 33 Oats onw- 36 For local domestic grain. 37 Export grain. 38 On local or domestic grain 1 cent per hundredweight for 10 calendar days or fraction thereof; for each succeeding 10 calendar days or fraction thereof J cent per hundredweight. 39 On export grain cent per ton each additional calendar day. ^® Per car for loading into cars. Per car for receiving into elevators. !! wharfage, unloading cars, and piling when received in sacks. *3 Each 30 days or fraction thereof. 16SG03°—20-18 . 7: 111 CS m ci a a a 3 a X ci C3 ® a Mr o X ct M QJ O bX) C c3 c5 CJh c3 O y. Es o o fS aiPP 3 ® ^ ^ ^ "r* -i-» ^ C3 Sm OcqP=^ 2 ® o D 'S O (D &-I S ^ bo p q . i rt O) a 33 ^a o 3 fl . I>< c3 3 ® ^ oO cj • • .2 M o ^ ^ -Td S <03 SdgSS:;^® ^csa^sg •3 w O 3 c 3 <3 o ^ ® !«i c3 a c/3 O* X >.« Q ^ W pL,K pio^oPP C3 O’ c3 CQ C^ Ci >s • Ktl • uo • iC • • K?> KmO . CO * CO ' w * • CO CM lO * ^ tub Co * CO •rH :Jm ;(N * 1 ’ • H)M • • CM • * t^ 1 • HJM KMi-H 1 ^ :2 '1 • CM P * • CM • 1 » »-H ••H >1 « • •ci. 0> kiv (- fi CJ 40 1- 0 t • H]:i J J a l-'O • • * 8“ t-* P •»<. * : 1 : m <0 : a j !om * * H(?i > • t • • I t~H «10 • » 4 • 00 bi * • Cl • 1 q 4 4 4 •i^ - 4 -^ e ; • t • 44 4 4 4 • 0 •JO a a ^ . •- • 4 4* 4 4 4 -75- CQ • to 4 4 4 4 4 4 4 • * • CO • bib • • T" < • » »K 4 • ct;-i» 4 4 4 * a 00 , 8 : 0 ! 0 C) : t • • 4 0 • « 4 « 4 4 4 4 bJO a ' c/3 'O c o3 c/i c3 O 'a tJO c% C 03 S'® a c/ c/3 'C 03 o bjO C •-- a ® n ® ^ vJ k»0 -«-» CO q ^ 03 Jm I p ft ^ 1*0 CO 03 ® > u- O p .gs ^ ft 03 3 (0_ ^ g bo5£ prP .P o o s ^ 03 ... .._, Vi ^ ^■fe s ® 3 ® 5 a TS a C3 p-l ® ^ ® o. c! C.I 70 <3 ® «.^-s „ „ ® _ c3 O ** T3.a c3 t, ® c3 c3^4a p, pi- _ C r* *-* a a >•' 03 O CJ*-? i: S-s P-® £■;; 53 arr a a OJ P3 HH 02 i-i cQ 3 cc C3 «5 O I-. 00 •^0» .a g-d a o a C/3 ^ , w be .~a tu; p s- «" cs 3 ••• ® ^i:::.S'0<2 dj^Ofq “ EXCHAXGE TvULES AND REGULATIONS. 275 Switching charges on grain (compiled from railroad tariffs in force Dec. 1, 1919).—The statements below indicate the switching charges required by one or more grain carrying roads in each terminal and the charges which will be absorbed by such carriers. CHICAGO. Charges .—The switching charge from terminals (inspection tracks of the inbound carrier) to industries on other roads is almost uniformly $3 per car, which is absorbed by the inbound carrier. The present basis for the switching charge from industry to industry is the combination of the local switching charges of various switching roads participating in the movement. It ranges, therefore, from $2 per car (where one line is interested) to $10 or more per car where other lines are interested. Chicago, Rock Island & Pacific Railroad switching charges from $3 to $4 per car. Absorplmis .—Inbound switching is absorbed by inbound carrier and outbound grain absorbed by outbound carrier. MILWAUKEE. Charges .—From one industry to another on the same railroad 1,3 cents per 100 pounds. From industry on one road to industry on another road 0.02 cent per 100 pounds. Internal switching $2 per car for each movement. From industry to industry, $2 per car on tracks of Chicago & North Western Railroad. Absorptions .—The Chicago & North Western Railroad will absorb switching charges of connecting lines at Milwaukee as per their published tariffs. Minneapolis.— Between connecting lines of railroads and industries located on— 1 Rates apply on switch movement in connection with road- haul move¬ ment. Rates apply on movements within the Minneapolis switching district.'- Chicago, Milwaukee & St. Paul. $1.50 1.50 1.50 1.50 1.50 1.50 $1.00-1.50 2.00-3,00 1.50 1.50 1.50 1.00-1.50 1.50 $2,00-$G.50 1.50- 5.00 2.00- 6.50 2.00- 6.50 2.00- 5.00 2.00- 6.50 1.50- 5.00 2.50- 5.00 2.00- 6.50 2.00- 5.00 (b 1.50- 6.50 2.00- 6.5') Chicago'Great Western Railway....,. Minneapolis & St. Louis Railway 2 . Railway Transfer Co. Minneapolis Eastern Railway... Soo Line. Northern Pacific Railway... East. St. Louis Railway. Great Northem Railw ay.. Minneapolis Western Railway. Chicago, Rock Island & Pacific Railwav. Chicago, St. Paul, Minneapolis & Omaha Railwav. Chicago, Burlington & Quincy Railway * . * Minimum Inter-terminal charge, $o. -Between Minneapolis, Hopkins, St. Lpuis Park, 1 cent per pound, minimum charge $6 per car, 2 cents per 100 pounds, minimum weight 34,000 pounds. 3 Two and one-half cent per 100 pounds; minimum, 30,000 pounds. - < Track connection with all lines via Great Northern Railway; Chicago, Burlington & Quincy uses team tracks of Great Northern Railway but does not have free access to Great Northern Ry. industry tracks ' (Great Northem switching rates apply). Note.— Intermediate switching charge; Carriers not having direct track connections the switching charge of the intermediate line is in addition to the delivering line switching charge. Absorptions .—On carload shipments having origin or destination in the State of Minnesota (including the city of Minneapolis) consigned to or originating at industries located on the tracks of the Minneapolis Eastern Railway or consigned to industries located on connecting lines where intermediate switching is performed \ia the Min¬ neapolis Eastern Railway this railroad will absorb the switching charges of the Minneapolis Eastern Railway. Will apply only on Minnesota intrastate traffic. 276 TEKMINAL GRAIN MARKETS AND EXCHANGES. Switching charges at Minneapolis will not be absorbed on grain or seeds, carloads, received via the Chicago Great Western Railroad except in the following cases:, (a) On grain or seeds, carloads, except grain to be milled in transit, from Council Bluffs, Iowa, Omaha and South Omaha, Nebr., Kansas City and St. Joseph, Mo., Atchison, Kansas City, and Leav enworth, Kans., when originating beyond, unloaded at elevators or mills on the Chicago, Burlington & Quincy Railroad, Chicago, Mil¬ waukee & St. Paul Railway, Chicago, Rock Island & Pacific Railway, Chicago, St. Paul, Minneapolis & Omaha Railway, Great Northern Railway, or Minneapolis & St. Louis Railroad, switching will be absorbed. (b) On grain, carload, except grain to be milled in transit, from Council Bluffs, Iowa, Omaha and South Omaha, Nebr., Kansas City and St. Joseph, Mo., Atchison, Kansas City, and Leavenworth, Kans., when originating beyond, unloaded at ele¬ vators or mills on the Minneapolis Eastern Railway or Minneapolis, St. Paul & Sault Ste. Marie Railway the charges for intermediate switching only will be absorbed. (c) On grain and seeds, carload, from Chicago, Ill., unloaded at elevators or mills on Chicago, Burlington & Quincy Railroad, Chicago, Milwaukee & St. Paul Railway, Chicago, Rock Island & Pacific Railway, Chicago, St. Paul, Minneapolis & Omaha Railway, Great Northern Railway, Minneai:)olis A St. Louis Railroad, or Minneapolis, St. Paul & Sault Ste. Marie Railway, switching will be absorbed. (d) On wheat, carload, from Council Bluffs, Iowa, Omaha and South Omaha, Nebr., Kansas City and St. Jossph, Mo., Atchison, Kansas City, and Leavenworth, Kans., when originating beyond, to be milled in transit at Minneapolis, Minn., that is deliv¬ ered to mills or elevators on tracks of the Chicago, St. Paul, Minneapolis & Omaha Railway, Minneapolis Eastern Railway, or Minneapolis, St. Paul & Sault Ste. Marie Railway, the intermediate switching charges will be absorbed. (e) On wheat, carload, from Council Bluffs, Iowa, Omaha and South Omaha, Nebr., Kansas City and St. Joseph, Mo., Atchison, Kansas City, and Leavenworth, Kans., when originating beyond to be milled in transit at Minneapolis, Minn., that is delivered to mills or elevators on the Great Northern Railway or the Railway Trans¬ fer Co., switching will be absorbed. Switching charges in connection v/ith line haul transportation, applying from elevators on Great Northern Railroad tracks to team tracks of Great Northern Rail¬ road, also switching charges in connection with line haul transportation between industries on Minneapolis Western Railroad, will be absorbed. Cooperage $1.50 per car. DULUTH. Charges. —Great Northern Railroad switching charges. Grain from elevators ‘‘E,” “H,” “Capitol,” and “Peavey” to connecting lines, in connection with line haul, $3 per car. Intraplant, intraterminal or interterminal elevators “E, ” “H, ” “Cap¬ itol, ” and “Peavey, ” $4 per car. Absorption. —Chicago, St. Paul, Minneapolis & Omaha Railway will absorb $1.50 of switching charge as per tariff on file with the Interstate Commerce Commission. Cooperage. —$2 per car. OMAHA. Charges. —From Union Pacific Railroad tracks connecting with Chicago, Burling¬ ton & Quincy Railroad; Chicago, St. Paul, Minneapolis & Omaha Railroad; Chicago & North Western Railroad, and Missouri Pacific Railroad in Omaha to Union Pacific tracks connecting with Chicago Great Western Railroad tracks in Omaha, $2 per car, l^quipment for Chicago & North Western Railroad at Omaha between Cliicago & North Western Railroad and Chicago, Burlington Quincy Railroad $2 per car. Carload switching rates between industries on Union Pacific Railroad located in the Omaha yard. ^ First district, $2 per car. EXCHANGE RULES AND REGULATIONS. 27-7 Second district, $2,50 per car; between second and first districts,.$3 per car. Third district, $2.50 per car; between second and third districts, $3 per car, and be¬ tween first and third districts, $3 per car. Fourth district, $2 per car; between first and fourth districts, $3 per car; between second and fourth districts, $3.50 per car; between third and fourth districts, $4 per car. Fifth district, $2.50 per car; between first, second and fifth districts, $3 per car; between third and fifth districts, $3.50 per car; and between fourth and fifth districts, $4 per car. Intraterniinal or interterminal between Union Pacific Railroad tracks in Omaha and Omaha Flour Mills Co. and Peters Milling Co., same service in connection with line haul, $4 per car. Absorptions. —Outbound. On grain (not moving under transit privileges) the Union Pacific Railroad will absorb the switching between Council Bluffs and Omaha or South Omaha when moving over its rails destined to stations Denver to Speer and Cheyenne, Wyo. KANSAS CITY. C/wr(/€5.—Reconsignment, $2. Switching, $3 to $5. Chicago, Burlington & Quincy effective September, 1919. From Chicago, Burlington roHght to storage ])oints by railroads is switched to warehouses free of charge, the service being ])art of the main line haul. SEATTLE. Terminal tracks are divided into zones. If car is switched from zone 1 to zone 2 or 3 the rate is $10 per car. If switched from zone 1 to zone 4 the rate is $12,50 ])er car. If switched from zone 2 to zone 4 or 5 the rate is $15 per car. From industry to industry or terminal located in same zone rate is $7.50 per car. Intraterminal sAvitching (usually) $3.50 per car. Switching charges on import and export ti'affic through Seattle is al> sorbed liy the railroad Avhich secures the line haul. PORTLAND, OREO. Charges .—Transfer track ’with Oregon-Washington Railroad & Navigation Co. at .East Portland and Portland (Park Street), Oregon $5 per car, switching charge. Absorptions .—Southern Pacific Railroad 'wall absorb switching charge of $5 per car when originating at or destined to the following competitive points served by water carriers, viz: Albany, Corvallis, Dayton, Independence, McMinville, Newbiirg, and Oregon City, Oreg. No aKsorption except when revenue amounts to $15 per car or more. i Towing, Lighterage, and Switching Charges. [Compiled from railroad larriffs in force Dec. 1, 1919.] NEW YORK. Charges—To^wing: Iriom Whitehall to Fulton Street, North River; East River, Brooklyn; Atlantic Dock; and Yorjc Street, Jersey City. $4.00 From Whitehall Street to points between Fulton and Vesey Streets. 5.00 From Whitehall to Erie Basin; South Sixth Street, Williamsburg; Fifth Street, East River; and Pier 45, North River; and Seventh Street, Hoboken. 6.00 From Whitehall to Thirty-fourth Street, North River... . 9 .00 From Whitehall to Thirty-ninth Street, Gowanus; Mouth of Newtown Creek and Thirty-fourth Street, Ea.st River. 9 00 From Whitehall to Ravenswood and Sixty-third Street, East River. 10.00 From Whitehall to West Shore Railroad; Weehawken; and Sixty-fifth Street, North River. 10.00 From Whitehall to One hundred and thirty-fifth Street, Harlem River. 11.00 From Whitehall to Staten Island, North and South Shore as far as Staten Island Flour Mill. 12 00 Shifting from Atlantic Dock. 2.00 Shifting from Erie Basin. 3 qq On addition to the above prices, except in the first-named limit on the East River, shifting from one river to the other, one tow and one-half tow.) Loaded boats from canal district to Shady Side or Edgewater.$12.00 'Lighterage.— Lighterage 2\ cents per bushel on 1,000 bushels or less. Lighterage 2 cents per bushel upward of 1,000 and not exceeding 2,000 bushels. Lighterage 1^ cents per bushel upward of 2,000 and not exceeding 5,000 bushels. Lighterage 1 cent per bushel upward of 5,000 bushels. 282 TERMINAL GRAIN AIARKETS AND EXCHANGES. Absorptions .—Free lighterage limits—For ^'essels; North River, New Jersey side, from National Stores to AVest Shore Railroad, Wce- hawken, N. J.; New York side, from Battery to Seventy-second Street. East River—New York side, Battery to Sixty-third Street; Brooklyn side, from steamer piers to Webster Avenue, Ravenswood, J.ong Island; South Brooklyn, from steamer piers to Fifty-first Street. Railroads—The railroad lighterage limits extend from Bergen Point to Fort Lee on the Jersey side, and to One hundred and thirty-fifth Street on the New York side; to Jerome Avenue Bridge on the Harlem River; to Pot Cove on the East River; and to Sixty-ninth Street, Brooklyn. The free floatage privilege is applied where six times the carload minimum is floated, although the property may be loaded in less than six cars. PHILADELPHIA. Charges .—(See absorptions.) Absorptions .—Almost the entire export and import traftic of the port of Philadelphia originating at or destined to interior points is exchanged between the railroad lines and the steamship lines without any expense to the owners of the goods other than the transportation charges. Section 17. Rules for trading in futures. General summary.— Tlic rules applicable strictly to contracts for future delivery relate for tlie most part to details of procedure, and raise no problems not thoroughly treated in other chapters of the report.’^^ They arc confined for the most part to the following classes of subject matter: . . {a) The “contract grades’^ established for future delivery. (6) The requirement of margins as security. (c) Operation of, or agreement with, a clearing house. {d) Requirements for “regular delivery.’’ ^ (e) Liquidation of damages on default. ^ (f) Prohibited methods of trading. These rules form but a skeleton for the business engaged in and by no means indicate the technical intricacies of the futures market. Rules applicable to future trading have already been discussed in sections 9, 12, and 14. The rules laid down in addition to these do not present substantial rights or severe prohibitions such as to warrant more than a summary discussion at this point. The “contract grades.” —The grades of grain which .shall be valid tender on future contracts arc selected necessarily from those varieties under the Federal grain standards act which are dealt in on the particular exchange. For example, the Chicago Board of Trade lists certain No. 1 and No. 2 varieties of wheat, corn, and oats which are deliverable at contract price in 1,000 or 5,000 bushel lots. There are also listed other varieties which may be delivered at a premium over, or discount under, the contract price. Occasional rules have been adopted to insure the condition of these grades, such as the prohibition against treating contract wheat by any process except EXCHANGE nULES AND REGULATIONS. 283 drying.'^® For the most part, however, dependence is placed on the statutory requirements for grading. Reference may be had to Vol¬ ume for a comparison of contract grades there listed for the various futures markets. Requirements of margins. —The exchanges where future trad¬ ing is active provide for the protection of buyers and sellers on time contracts by permitting either party to require the deposit of ade¬ quate margins as cash security.^* The Minneapolis rule is typical: On time contracts purchasers shall have the right to require of sellers as security 10 per cent based on the contract price, and further security, from time to time, to the extent of any advance above said contract price for the article named and the delivery specified in the contract. Sellers shall have the right to require, as security from buyers, 10 per cent based on the contract price, and further security from time to time to the extent of any decline below said contract price for the article named and the delivery specified in the contract. Should the contract price be above the legitimate shipping or intrinsic value of the property sold, sellers may require additional security to the extent of any difference that may exist between such legitimate shipping or intrinsic value and the price of sale. On the New York Produce Exchange where future trading in grain has become negligible the deposit of margins is contingent upon a by either party, the caller depositing an equal amount at the time of making the call. This procedure applies to contracts ^^on the spot, to arrive, or for future delivery.’’^® Margins are usually required to be deposited with a bank approved by the directorate, or with an officer of the association such as tlie treasurer (Chicago). In Minneapolis the banking house must be a member of the Clearing House Association.^® In Duluth deposits are made in ^‘some well-established bank or banking house in the city of Duluth, which may be designated by the seller.’'®^ The ‘Legitimate value.’’ —In adjusting margins to the market, in assessing damages, and in settling disagreements as to value, it is necessary for parties and arbitration bodies to have a rule defining such “legitimate value,” or “true market value” as compared with contract prices of grain. All of the futures markets stipulate a cash •S Chi., 22: 3. ” Chap. IV, sec. 9. 73 Mpls. 9:1, 2; Chi'. 20:1; Mil. 9; Dul. 1G;1,2; K. C. 12:1; St. L. 7:1; Tol. 18:1; Teo. 13:1,2, 3 (inactive) Ind. sec. 2 (inactive). 73 “ On all sales or purchases of grain, on the spot,to arrive or for future delivery, cither party to the con- tract shall have the right to call an original margin of not exceeding 10 cents per bushel on wheat, rye, and barley, and 5 cents per bushel on corn and oats, upon a deposit by the caller of an equal amount to that called, provided sueh call be made before 12 m. of the business day next succeeding the day of such sals or purchase; and, on all contracts for future delivery a further margin may be called from time to time to the extent of any variation in the market value from the contract price. •‘Where no original margin has been deposited calls may be made from time to time to the extent of 1 cent per bushel above or below the current quotation at the time the call is made.” (Rules of the Grain Trade, Rule XXX.) Rule 9, sec. 4. Rule 15, sec. 4 284 TERMINAL GRAIN MARKETS AND EXCHANGES. basis for estiinatiiig this legitimate valuej for the most part in iden¬ tical language: • In determining the value of property under this rule, its value in other markets, or for manufacturing or consumptive purposes in this market, together with such other facts as may justly enter in the determination of its value, shall be considered irrespective of any fictitious price it may at the time be selling for in this market. Such value, for the purposes of this rule, in case of disagreement, shall be determined by the board of directors, and communicated to the parties in interest through the president or secretary.®^ Disagreements as to such ^degitimate shipping or intrinsic value” may be determined by ruling of the lioard of directors®^ or by refer¬ ence to the board of arbitrationj^^ or to a special committee (as in Kansas City). Offsets and substitutions. —The settlement of contracts by ofl’sets or the substitution of other principals is characteristic of future trading in grain (see Vol. V, Ch. V) and recognized by rule on the exchanges. In the markets where trading in futures is active, clearing houses have been established for clearing and settling the i trades of members in this way.®'^ While the practices of making offsets and substitutions is impliedly recognized in the I'ules of various exchanges, only in Chicago and vSt. Louis is it set up as a right of traders executing contracts.** Both rules are identical in requiring that any differences between the current market value of the property and the several contract prices ”shall be due and payable immediately.” The Chicago rule provides a basis for adjustment of such balances (which is omitted from the St. Louis provision); ‘^such memorandum shall be in writing, and shall state on its face the date of the transaction, the quantity and kind of property covered b)^ the same, the month of delivery, the price, and the name of the party to whom sold or of whom bought, and shall be signed by the party or firm making the same.” Contracts for deferred acceptance—puts and calls.— Contracts for deferred acceptance, known specifically as ”bids” and 'Liffors” (and similar to contracts known as ^^puts” and calls,” or ‘‘privileges”) are recognized by rule in Chicago and Kansas City only.®’ Both exchanges provide that a commission of “ not less than 5 per cent of the consideration paid or received” be charged nonmem¬ bers for securing such a privilege trade. Members securing offers for their personal accounts shall bo charged not less than per cent, and brokers employed by a clearing member not less than 3 per cent. *2 Chi. 20:7; Mil. 9:8f Mpls. 9:3; Dul. 16:3; K. C. 12:7; St. L. 7:1; Tol. 18:6. .\lso stated in Peo. 13:5. Chi. and St. Iv. Mpls., Mil., and Dul, See Vol. V, Ch. V, for description and comparisons. Chi. 22:6; St. L. 8:12. « Chi., 22:20; K. C., 1.5:20, 21. 285 EXCHANGE RULES AND REGULATIONS. The Chicago rules prescribing the contract forms for this sort of trading is as follows: Sec. 20. All offers made subject to deferred acceptance provided for under this rule shall be in one of the'folloAving forms: f Chicago, 111.,- day of -- — 19 —, I will give-^ per bushel for —- bushels of contract grade of-for delivery during-19—, same to be delivered in store in regular warehouses under the rules of the Board of Trade of the City of Chicago. This offer is subject to acceptance by you until the closing hour for regular trading on —-19—. (Signature.) ----. Chicago, III., • —— day of - 19 —. I will sell — bushels of contract grade of-— at-per bushel for delivery (juring—- 39 —^ same to be delivered in store in regular warehouses under the rules of the Board of Trade of the City of Chicago. This offer is subject to acceptance by you until the closing hour for regular trading on-19—. ^ : (Signature.) --. Chicago, III., - day of - 19 —. I have your offer to buy-bushels of contract grade of-at — per bushel for delivery during-— 19—, same to be delivered in stoie in regular warehouses under the rules of the Board of Trade of the City of Chicago, and subject to my accep¬ tance until the closing hour for regular trading on —— 19—. Chicago, III., - day of — - 19 —. * • I have your offer to sell-bushels of contract grade of--— at-})er bushel for delivery during-— 19—, same to be delivered in store in regular warehouses under the rules of the Board of Trade of the City of Chicago, and subject to my accep¬ tance until the closing hour for regular trading on-19—. Regular delivery. —Time contracts are limited to denominations of 1,000 and 5,000 bushels of grain. The requirements for a valid tender of such property are fairly uniform where the seller’s option is the prevailing form of contract. In all the active futures markets except Kansas City the rules provide for delivery, by service of notice of delivery on the buyer. Such notice must state the place of business of the issuer, the precise receipts which the seller proposes to deliver, the contract price and (in Chicago) the net cash price at time of delivery.®* In New York and Baltimore rules this method of settlement and delivery is referred to as a ‘Hransferable order.” wChi., 21:2; Mil., 11:6; Mpls., 11:9; I)ul., 14:14; St. L., 8:1; N. Y., rule 10 of the grain rules, see. .5. Cf, Balto., art. 14. Failure to serve such a notice constitutes default on delivery (see p. 261). f 286 TERMINAL GRAIIT MARKETS AXD EXCHANGES. The exchanges set a definite time and place for the notice of de¬ livery and designate such deliiTir.v hv notic e as a valid and sufficient tender on futures contracts.^® In Chicago, where the volume of futures business is largest, two delivery periods are provided. Between 9.30 and 11 a. m. deliv¬ eries may be made by notice at the office of the buyer and between 1.30 and 2 p. m. may be made in the exchange hall or ^fin such other place as may be designated by the board of directors,with certain special provisions for the first and last days of the month.®® In Minneapolis notice of delivery may bo made on the exchange floor between 9.10 a. m, and 1.20 p. m.®^ If, however, the buyer or his representative is absent from the floor, or in case delivery is made through the Clearing Association, the time limit is extended to 2.30, p. in.-^- The Chicago (and St. Louis) rules provide that parties must be present at the time and place of deliveiy. ^LVny property which can not be delivered owing to the absence of the buyer from the exchange hall, or such other place as the directors may have desig¬ nated for the purpose of delivery, may be sold out by the party havmg same sold to such absentee, as hereinbefore provided in cases of default; all expenses and risk of carrying the property, commis¬ sions, etc., shall be paid by the absentee, the same as in the case of default; provided, however, such property shall not be sold until the absentee has had notice in writing, either delivered to him in person, to his business representative, at his place of business, or left at the secretary’s office in case he has no regular place of business, that the property was ready for delivery under this rule on Ifis contract.” Such notices of delivery may be transferred from purchaser to pur¬ chaser by proper indorsement, up to the limit set on the specified day of delivery. The Merchants Exchange of St. Louis has written into the rules the form of delivery notice and the indorsement required: ®> “ * * it: parties haAing property due them on time sales shall be present, or shall be represented by an authorized employee in the exchange hall or such other place as may be designated by the board of directors, between the hours of 1.30 and 2 o’clock p. m. of each business day and on days when the board adjourns at 12 o’clock m., between the hours of 12.30 and 1 o'clock p. m. and on the first business day of each month between the hours of 8.30 and 9.15 o'clock a. m.; and admission to the exchange hall or such ether place as may be designated by the board of directors shall be denied all parties after 1.30,12.30 o'clhck p. in. cr 8.30 o'clock a. m., as the case may be. * * *” * A7id, provided further, That on the last business day of any month, when deliveries of articles mentioned in this section are made after 11 o'clock a. m., the secretary of the board, or any person acting under his direction, shall have the poiver to extend the time for such deliveries from 2 o'clock p. m. (if on a Saturday, from 1 o’clcck p. m.), as often and to such time during that day as in his judgment it may bo necessary to enable all who arc prepared to do so to tender or receive delivery notices * * *>’ 12.05 p. m. on Saturdays. 11.39 a. m. on Saturdays or 12.30 p. m. when Saturday falls on the last day of the month. Substan¬ tially the same rules in Duluth (Rule 14) and Milwaukee (Rule 11) with differences in the hour. Chi., 21:2; St. L.. 8:1. ^ Sections cited, preceding footnote. EXCHANGE RULES AND REGULATIONS. 287 NOTICE or DELIVERY. St. Louis, Mo. Messrs.-- We hereby give notice that we shall this day deliver to you or to the last indorser hereon five thousand bushels at-cents per bushel on account of our contract sale to you dated-at-- cents per bushel. Signed-Originator, -Indorser. lliere is nothing to prevent delivery by notice, as outlined above, under the Kansas City rules. In practice in that market, deliveries are largely made through the Grain Clearing Co., and delivery by notice is not provided in the rules. As in the other markets, time limits are set for delivery by the seller and for delivery by the Clear¬ ing Co.®^ Payment upon delivery. —All the rules mentioned provide that payment at the market price shall be due immediately from the final holder of the delivery notice at the expiration of the time limit. The “market price ’’ of grain deliverable on such time contracts is required to be posted by the secretary twice daily in Chicago. In Minne¬ apolis, Duluth, and Milwaukee the closing price of the preceding business day is taken as a basis for settlement and posted daily on the exchange bulletin.*’^ Failure to pay for the grain upon receipt of the above notice con¬ stitutes a default, which may be settled by liquidation of damages. This is discussed in another section (p. 263). Only “actual trades.’’ —In defending speculative trading and in campaigning against bucketshops the exchanges proceed on the theory that an actual trade or exchange of a commodity is intended in every sale executed on the exchange. On this theory the rules or regulations generally prohibit transactions wdiere actual delivery is not intended and brand the practice as “uncommercial” (or “unmer- cantile”) conduct. In' addition to the provisions against bucket shopping (stated below), twm exchanges publish rulings on this requirement of “actual trades.” The Mhvaukee directorate resolved (Aug. 23, 1910): That any member of the association who enters into a transaction which is not a “ bona fide purchase and sale of property ” shall be deemed by the board of directors guilty of unmercantile conduct, as provided by section 27, rule 4. And that it would not be considered a “ bona fide purchase and sale of property” for members to become parties to so-called “accommodation” trades, or any subterfuge having merelj'’ the appearance but not the intent of an actual purchase or sale. Likewise, when the Omaha Grain Exchange was organized in 1903 they wTote the following provision into their rules: Only actual trades shall be allowed to bo made on the exchange, and no arrangement for the purchase or sale of commodities shall be entered into except where it is intended K. C., 15:3. Not provided for in St. Louis. 288 TERMINAL GRAIN MARKETS AND EXCHANGES. vH' there shall be an actual receipt or delivery of the property bought or sold; and any member enteiing into any arrangement in which it is understood that there shall be no actual receipt or delivery, but that only the difference shall be settled between the parties, or otherwise violating the provisions of this section, shall, upon conviction, be suspended or expelled by the board of directors.*® Prohibitions against bucketshops.-— All of the exchanges inter¬ ested in future trading have promoted or assisted campaigns for the suppression of bucketshops (see p. 121). The rules reflect this agita¬ tion in the strict prohibitions against dealing in differences C' bucket shopping The following rule is substantially identical on seven exchanges: Any member of the association who shall be interested or associated in business with, or who shall act as the representative of, or who shall knowingly execute any order or orders for the account of any organization, firm, or individual engaged in the business of dealing in differences on the fluctuations in the market price of any com¬ modity or corporate stock, without a bona fide purchase and sale of the article for an actual delivery; or who shall be a member of, or shall, in his own behalf, or as agent, directly or indirectly make, execute, or give any orders for a trade or transaction in or upon any bucket shop or any so-called exchange, wherein is conducted or permitted the business afore-said, or who shall knowingly accept, cither directly or indirectly, from any member of any so-called exchange, wherein is conducted or permitted the business aforesaid, any orders for trades or transactions to be executed in the exchange hall of this association, shall be deemed guilty of unmercantile conduct, which renders him unworthy to be a member of the association; and upon complaint to and conviction thereof by the board of directors, he shall be expelled from membership in the association. The Minneapolis and Duluth rules eliminate an obvious possibility of bucketshop practices by forbidding members to act as brokers or commission merchants in buying or selling for future delivery for any agent or employee of a local telegraph company. In GENERAL.— Under the broad discretion given the directors to construe the rules relative to uncoipmercial conduct on aU large grain exchanges, various regulations are adopted and action is taken from time to time affecting the technical methods of future trading. For example, members have been suspended and expelled in Chicago for ‘'cross trading” while no definition and prohibition of this practice has been written into the rules.®® Likewise in Minneapolis and Milwaukee there exist orders of the directorate construing it to be a violation of the rules for members to make what are termed “cross trades” in buying grain or seeds for future delivery.^®® These matters are more thoroughly discussed in the volumes on future trading. It is important here to note that the practices in future trading which are prohibited on the exchange can Oma., 1:.5. w Quotation from Chi., 4:8. See also Mil., 4:27; Mpls., 4:7; Diil., 4:7; 98 Mpls., 4:7; Dul., 4:7 K. C., 8:15; Oma., 1:6; St. L., 99 See minuter of the board of directors, June S, 1915, and for explanation of “cross trading,” Vol. V. Mpls., July 17, 1905; Mil., Feb. 9, 1915. 9:2. see EXCHANGE RULES AND REGULATIONS. 289 by no means be fully ascertained by reference to the general rules. Suflicient power is lodged with the board of directors to discipline any member for an infraction of well established customs and usages under the general commercial ethics which obtain in the particular market. Section 18. Control of quotations and market reports. Makki:t QUOTATIONS. —All essential purpose of all exchanges is to afford members and their customers continuous informa¬ tion of market prices and market conditions. To this end the majority of grain exchanges have authorized their directors to adopt methods of contipllmg the record and distribution of quotations.^ These requirements do not always appear in the rules or regulations. Frequently the requirements for reporting ])rices of sales on exchange are issued by a quotations committee or appear in unpublished orders and so can not be discussed by reference to any general rules. For example, the fact that trans¬ actions in futures in Chicago are reported immediately to employees of an authorized telegraph company docs not appear in any section of the book of rules. For these reasons no attempt is made in this section to enumerate the practices of all the exchanges, but rather to discuss certain rules which typify these practices.-^ It will be under¬ stood that regardless of rules in the transactions on a commission basis, it is of interest to the seller to report the price (especially if it departs from prior quotations) so that his customer may have no ground for complaint. Reporting cash sales. —On several exchanges tlie reporting of cash sales is not compulsory on membei's, e. g., Chicago and Duluth. (See p. 324).^ Yet on five exchanges (Minneapohs, Kansas City, Omaha, Indianapolis, and Cincinnati) the rules are very definite on this point. Private and unreported sales on exchange were forbidden in Minneapolis in 1911, when the board of directors resolved: That the mem})ers be required to report all spot sales of cash grain seed from coun¬ try points without exception to the Cash Grain Reporter as soon as practicable after the same are made, but in any event not later than the close of the market on that date. In order that the reports shall indicate clearly the character of the grain or seed, members are required to state the color in sales of corn; also in reporting sales carrying an excessive dockage to note the words, “Heavy dockage;” also, in reporting 1 The authority given the directors in Kansas City is: “ To control absolutely any and all quotations of transactions made lietween members under the rules of this association, and they shall have power to make all regulations and contracts necessary to govern the collection, transmission, distribution, and use of all such quotations.” And see page 323 of this volume. 2 See p. 323 for detailed discussion of practices and requirements in the quotation services. « The neglect to require reporting of cash sales by rule on the Chicago Board of Trade may be attributed to the fact that Howard, Bartels & Co. have reported cash sales for so long a period as to be regarded as an established institution, yet there is no reason why the interests of cash customers sliould not be protected as well irs those of futures customers. 108693'^—20-19 290 TEKiVIINAL GRAIX .MAirivI-:TS AXD EXCHAXCiKS. sales to go out “0. W, B.,” 'vviiicli on tins account command a }n-emium, to note the letters ‘‘0. W. B.;” also in reporting sales wliicli, on account of its choice quality commands a premium, to note the word “Choice,” and in general to make such other notations in reporting sales as will indicate clearly the cliaracter of the grain or seed, or the conditions surrounding the sale. And “that the failure to so report sales as above mentioned shall be considered uncommercial conduct, subjecting the member to the penalties provided by the rules of the cbam])er of commerce.’ The Omaha Grain Exchange also provides that sales of cash grain by sample car lot ‘^be immediately reported.’^ The rule goes on to describe the procedure— * * * the seller Idling' out slips pro^•ided by the exchange, showing number of cars, kind of grain, grade, price, and name of seller and buyer. These slips to be handed to the board marker, who will immediately post the information on the black¬ board, together with the time the slip is handed him. Failure to so report shall sub¬ ject the seller violating this rule to a fine of $5 for each offense. These reports of sales shall be jrreserved by the exchange, where all members thereof and reporters of the market may have access to them at any time.^ The Kansas City Board of Trade requires that a sale of incoming country grain must be reported within 15 minutes after the sale is made, subject to a fine for violation." The Indianapolis Board of Trade requires ‘Trll sales of track grain’’ to be reported to the secretary;"^ and the Cincinnati Grain & Hay Exchange recpiircs the seller to report “all sales of cash grain” to the entry clerk.^ Idle Cincinnati exchange has adopted 17 special rules governing the report of sales to the secretary, stating specifically what must be reported regarding the quality and condition of grain and the cir¬ cumstances surrounding the transaction. A procedure is also pro¬ vided whereby the accuracy of entries in the exchange sales book juay be challenged by members on the day of entry. Such a chal¬ lenge may result in a preliminaiA' investigation by the executive secretary and (on his recommendation) a formal investigation by the appropriate inspection committee; and “if it be found that the entiy misrepresents the conditions attending the transaction the said committee shall report to the l)oard of directors.” The sole penalty provided in the rules is an announcenient by the board “that the offending party has been found guilty of serious irregularity in re¬ porting an entry for the sales book.’’^ Future prices. —^In the interest of customers and of the trade gen¬ erally transactions in futures are reported on the exchanges where , sucli business is active. Yet this matter, as in the case of many others relating to future tniding, is not provided for by general rules. ^ ('ircular No. 296: “O. W. B.” refers to a Minneapolis transit privilege. " Orna. —( 1918 rules), p. G2. « K. C.—21:10. ' itules of the grain trade, sec. 33. s 1918 Rules, p. 53. “ Idem. EXClfANCU^. RULES AND REGULATIONS. 291 Control of price dissemination. —Tiic effort to control the pub¬ lication and distribution of price inforination which has been col¬ lected by the exchanges has been conffned largety to the futures market. Restrictions on the use of cpiotations by telegraph com¬ panies are discussed elsewhere (see p. 126). The right of exchanges to prohibit members from furnishing quotations to biicketshops is imquestioned and such rules appear in the records of four exchanges. Members in Minneapolis may not ^Turnish such market quotations in any manner, either directly or indirectly, to parties doing a com¬ mission or brokerage business’’ outside of the exchange.'® The Milwaukee board requires that— N^o such quotations shall be transmitted outside the exchange room except upon duo application to and approval of the board of directors or appropriate committee, nor shall the office of any member or any hrin or corporation entitled to trade or do busi¬ ness on the floor of the chamber of commerce be connected by telephone or telegraph with any other office, except in accordance with the regulations established by the Imard of directors in pursuance of the objects of this rule.'^ The above rules were adopted particularly with a view to the suppression of biicketshops. A far more sweeping rule—and one which takes the dissemination of quotations entirely out of the hands of members on the floor—has been adopted in Chicago: No member of this association shall, by messenger, signals, telephone, telegraph, or any other means whatsoever, convey or transmit continuously the market quota¬ tions from the exchange floor to any person, firm, or corporation located off said exchange floor, and any member violating this regulation shall bo deemed guilty of dishonorable conduct and subject to the penalty provided therefor in the rules and by-laws of this association.'- It must not be inferred from the above rules that the Chicago Board of Trade, for example, may arbitrarily withhold its quotations from the public. This was decided in the New York and Chicago Grain and Stock Exchange case in 1889: * * * The question is, can the board so conduct its affairs for a long term of years as to create a standard market for agricultural products, and, acting in concert or combination with the telegraph companies, build up a great system for the instan¬ taneous and continuous indication of that market and its fluctuations, until the public and all persons dealing in such products conform their business to this system, and until by the usage and custom of merchants, thus advanced by the methods adopted by the board and telegraph companies, such instantaneous quotations become neces¬ sary to the successful and safe transaction of business, and until such system has become impressed and affected with a public interest, and then be allowed to dis¬ criminate between persons and parties, and, where all alike are willing to conform to reasonable rules and requirements, and pay for the information desired, say that one shall and another shall not have sueh information? io Mpls., 4:7; Dul., 4:7. >i Mil., 4:28. Regulation VI, 1918 Rules, p. 13G. 19 N. E. 859-860. Approved by the United Stales Supreme Court in the Christie case (198 U. S., 252.). 292 TERMINAL GRAIN MARKETS AND EXCHANGES. ■ If the board has such right, and these corporations are lawfully permitted so to do, then they have the power to create monopolies, and dictate who shall deal in the agricultural products of the country, and at will impoverish or enrich merchants, shippers, and producers. After-market prices. —The control of after-market prices is con¬ fined to the regulation of to-arrive bids to the country—afternoon Jiids/' as they are called. This control involves not only the use of) quotations but a regulation of the actual bids which may be made.? Tlie historical and economic aspects of these rules are discussed in) the chapter on Receiving Grain (Vol. III). The rules for four of the markets stand to-day as follows: (1) The closing quotation of the “to-arrive market” .(where such exists) is a basis for subsequent bids.^^ (2) In Chicago, Milwaukee, Omaha, and St. Louis members may depart from such closing quotation and make a higher bid provided they file with the secretary of the exchange before the opening hour evidence to show that a new market level has been fairly established.^^ The Kansas City Board of Trade allows any bid to be sent out “upon proper record being made of the same,”^® and so long as the “regular charges” are allowed in conformity with the “Commission rule.” Further details are left to the to-arrive committee. The Omaha Grain Exchange rule provides that—- fuitlier competitive bids may be received and posted, provided such bid be first sub¬ mitted in writing and signed by seven active members of this exchange; each member signing must represent a different firm and the last member signing must be a member of the to-arrive committee. llie St. Louis Merchants' Exchange likewise has established strict requirements of publicity of after-market bids in the following manner: Such authority by a secondary buyer shall be evidenced by a bona fide bid in hand from a buyer at this market, who has declared his intention of bidding seven active cash handlers of the kind of grain bid for, in this market, for the purpose of establish¬ ing a new basis for an overnight bid to the country, or by a clear showing that a member or members making such bids to persons outside of St. Louis have, prior thereto, made to members here, not less than seven bona fide bids for sufficient quantities, to estab- blish fairly a new market level, and further, such member or members must show the bid so made represents the price thus bid to the members here less the regular handling charge.’® Outside of the above five markets no restrictions whatever are placed on after-market bids except that they must allow the charges Chi. (1918 rules), p. 138; Mil. regulation of Nov. 13, 1917 (1918 report, p. 121); Oma. (1918 rules) p. 71- St. L. (1917 rules), p. 77. Sections cited above. It has been ruled by the to-arrive grain committee in Chicago that such bids must be made to at least five people or firms who are active in the handling of the particular grains for which such bids are made. (Aug. 18, 1914.) J* K. C., 21:17. Same rule in Chicago, but supplemented and construed by published regulations as in footnote 14. Rule cited. Rules, p. 79. EXCHANGE EULES AND EEGULATIONS. 293 required under the ^^uniform commission rule/’ where such exists.’* The Minneapolis, Duluth, and Peoria exchanges, for example, allow commission men or terminal market buyers to send out any bona fide bids to the country after the close of the market.^^ v' Control of market letters. — Market circulars sent out by mem¬ bers to the trade are generally under the supervision of the Tpark et report .committee or a similar agency. It is thought necessary to place in the discretion of an administrative body the regulation of the market news services provided by cash and future commission houses for their customers. Consequently, there are few general rules restricting specifically markenelters and circulars, but the practice appears in sundry regulations and committee rulings. A' resolution adopted by the board of directors in Minneapolis, however, has the same effect as a general rule and furnishes evidence of the effort of the major exchanges to insure the accuracy of market reports and to eliminate publicity material calculated to invite pure speculation. Resolved, That members sending out circular and other letters, giving information regiirding values of cash grain in this market, be required to so word these letters as to avoid misapprehension on the part of the receiver of the letters regarding values in this market ;_that the reporting of sales of cash wheat of a certain test weight, in such a manner as to leave the impression that all wheat of that test weight is of equal value, is misleading and uncommercial conduct; that the reporting of specific sales of cash grain should not be made in any manner as to create a false impression re¬ garding values generally; that circular and market letters sent out should be carefully worded, so as to convey to the receiver of the letter an accurate impression regarding terminal grain values. Be it further Resolved, That members be requested to call the attention of the secretary’s office to any circular or other letters sent out b}^ members which appear to be in violation of this resolution. Be it further Resolved, That on and after December 20, 1916, members be required to forward a copy of all circular and market letters forwarded by them to country shippers to the secretary’s office, these copies being for examination by the committee of investiga¬ tion and board of directors, in connection with the enforcement of the above resolu¬ tion.'^^ Control of wire-house activities. —The department of market records and reports, under the market record committee, is an im¬ portant bureau in Chicago owing to the several large private tvire houses which transmit future quotations to their branches through¬ out the United States. Under authority of a general rule the board of directors have adopted strict regulations requiring such wire houses to have the approval of the board both as to the place ’s See p. 235. Note that the uniform commission rule must be followe'I in Minneapolis and Duluth. 21 Circular No. 700, Dec. 14,1916. 22 Rule 4, sec. 23. 23 1918 rules, p. 130. 294 TERMIivTAL GEAIN MARKETS AKD EXCHANGES. to which a private wire may be extended and as to the nature of the information which mav be furnished. . */ As applied to private wire houses the most drastic section of these regidations, lies in the authority vested in the market report com¬ mittee to examine books and records of brancii offices or^ more literal^, ^Ao examine into the conduct of all private offices or places of business Tecciving the continuous market quotations of the board of trade * * This regulation was especially difficult to enforce at first; and the directorate was called upon for disciplinary action in several cases. As an instance; on July 13, 1916, an order was issued to a nonresi¬ dent member of Memphis; Tenn., to produce all books and papers of his firm so that a representative of the department of market records and reports, under the regulations adopted for that depart¬ ment, might examine the business of his firm. The member from Memphis, on the advice of counsel, persistently refused to produce his books and papers or disclose the same to the board’s investigator. He stated that it would .place his firm at a great disadvantage before the courts of Tennessee. Tlie matter was finally tried before the directors and he was suspended from all privileges of membership until he should see fit to comply with the order of the market record' committee. The suspended member instituted a suit for $200,000 damages against the Board of Trade, but subsecjuently withdrew the suit, acceded to the rules of the exchange, and was reinstated in Januarv, 1918. Chapter VI. INSPECTION AND WEIGHING.^ Section 1. In the early markets. The most important facilities which the early exchanges ofTcrod the grain grower and shipper, outside of an immediate market for the grain, were the .grading and weighing agencies established at the ter¬ minal. Reliable weights and measures had been a matter of concern to traders in bulk commodities since time immemorial. If the farmer who broke the prairie soil was to be offered continuous markets for his product at near-by terminals, there must be established facilities for weighing winch would command his confidence. Likewise, if grain prices were to be based on quality as well as quantity—if thei’o was to be any incentive for producing the best grain—it was indis¬ pensable that standard grades bo established by definite rule and administered through a reliable and representative agency. Prior to 1850 there were nq inspection systems, and no standai'ds of grade, and grain was bought in the eastern markets by measured bushels (that is, not determined by weights) The crude method of testing quantity by the half-bushel method was abandoned by the Buffalo, Chicago, and other western markets in the early 50’s, and the 6()-pound bushel was adopted for vdieat. The eastern markets still clung to the old measuring method for several years, and evoked a pro¬ test from the midway market of Buffalo in 1854. The merchants of the Buffalo Board of Trade, by formal resolution, strongly disapproved of ‘The antiquated custom of measuring grain as practiced in the city of New York.” They stated that, “it is the custom in this city, and also with dealers at all western ports, to buy, sell, and ship all kinds of grain by weight, * whereas, it is the custom in the city of New York to sell and deliver grain by measuring in sealed half¬ bushel measures.” They considered this latter practice “as an incor¬ rect and illegal method of ascertaining the number of bushels, and the practice ought to be abolished and a uniform system of selling and delivering by weight adopted.”^ This resolution was concurred in by the Chicago Board of Trade and they voted to “rorpiest the Boards of Trade of Milwaukee, Detroit, Toledo, Cleveland, and all other shipping ports to cooperate with us in the effort to accomplish this desirable object.”^ 1 See Tables 75 and 76, Ch. V. - Taylor, History of the Board of Trade of Chicago, Vol. 1, pp. 147-137. 3 Taylor, Vol. l,p. 180. Udem, p. 190. 295 296 TERMI^’AL GRAIN MARKETS AND EXCHANGES. Inspection systems were devised and instituted at al>t)Ut the same time. The early grades were experimental, and the inspector was “instructed to use his discretion in inspecting the different grades of wheat, and not confine himself strietty to the standard of weight where it is a manifest injury to do so.’*^ After the Civil War, with the development of the storage business, ^ and of trading in grain for future delivery, facilities for grading and ; inspecting grain, as well as official weighing departments were devel¬ oped on all the principal exchanges. On the part of the farmers there was a considerable apprehension and distrust of the exchange systems, associated as they wore with the newly developed railroad and elevator interests. Evidence of this appears in the report of the St. Louis Merchants’ Exchange in 1870: Cur system of inspection carefully guards against any of the deceptions or tricks practiced in other markets, and being controlled by the Merchants’ Exchange in the interest of the merchants, can not be used to the advantage of the elevators.® Section 2. State inspection and weighing. The recurrent distrust of hoard of trade inspection and weighing resulted in the assumption of these functions by the State authorities in certain States. The first State agency was established in Illinois with the passage of the railroad and warehouse act^ oLlS?!.^ The Board of Trade of Chicago had been engaged in a long fight to hold the terminal warehousemen to a stricter accountability for grain in storage, and* had been influential in the enactment of constitutional and statutory provisions for the regulation of such warehouses. But the legislature—“at the instance of farmers and country dealers”'^— took a further step and established “compulsory inspection” under the authority of the Illinois Railroad and Warehouse Commission. And, in spite of protests from the Board of Trade,* State inspection in Chicago prevailed from that time on.® This move was followed by other States in the grain areas. A Minnesota statute of 1885 t Idem, p. 14. * Report, 1870, p. 61. ’• So .stated in ICth Annual Report (1874), p. 22. « For example, the following in the report published January 1, 1874, p. 22: The investigations of a year or ’ more ago disclosed the perpetration, imder State regime, of irregularities and frauds unparalleled in the history of the grain trade of the country, and the investigations made more recently show continued viola¬ tions of the law. It would seem that a few moments of reflection would suffice to convince any ordinary mind that the inspection of grain in Chicago is a matter of such vast importance, affecting, as it does, the value of many millions of dollars’ worth of property which changes ownership many times annually, and that the adoption and supervision of the execution of rules governing grain inspection and the registration' of warehouse receipts require such practical experience with the business, and such perfect familiarity with the wants of the trade, together with such constant care and so much of thought and time, as to render it absolutely impossible for a board of three coimnissioners, having headquarters IGO miles distant from this business, to satisfactorily control its conduct, and at the same time succeed in enforcing laws regarding the management of railroads. It is not, therefore, surprising that the present law and its administration have proved unsatisfactory. In this connection it may not be improper to say that it is the unanimous opinion of youi’ board of directors that compulsory inspection as conducted by this State is not only wrong in prin¬ ciple and theory, but is in practice detrimental to the interests of the agricultm ists of the Northwest and damaging to the trade and commerce of Chicago, 8 The act was limited (in its specific requirements) to cities of over 100,000 inhabitanis. INSPECTION AND WEIGHING. 297 gave the railroad and warehouse commission of the State power to supervise, weigh, and register grain. State inspection and weighing was established in Kansas (1907), Missouri (1889),^^ Wisconsin (1905), Washington (1911), Oregon (1917), and North Dakota, Montana, and Idaho (1919). The Chicago Board of Trade protested vigorously against State inspection, when first established, and State juris- tliction was obtained in Kansas City and St. Louis only after prolonged litigation. By long-standing agreement the function of w^eighing in Illinois has never been undertaken by the vState commission but has been delegated to exchange agencies in Chicago and East St. Louis.“ In the other States enumerated, State weighing is coordinate with State inspection. It is noteworthy that in Kentucky, where com¬ paratively little grain is grown, the State legislature in 1880 vested the weighing and inspection of grain in the Louisville Board of Trade, where the authority has ever since remained. Inspection, grading, and weighing are stiU exchange facilities in Milwaukee, Omaha, Peoria, Decatur, Indianapolis, Cincinnati, Louis¬ ville, Cleveland, Buflalo, Baltimore, Philadelphia, New York, Boston, and San Francisco. Even wliere State agencies have superseded those of the exchanges, a check on the grades has been maintained through authorized sampling companies and standing committees.® (See p. 309.) Section 3. Duplication of inspection and weighing services. The fact that State boundaries bear no relation to the marketing system results in concurrent, and, at times, conflicting administra¬ tion of the inspection services, notably in Kansas City and St. Louis.* The United States grain standards act (1916) authorized the Secretary of Agriculture ^Mo fix and establish * * * standards of quality and condition for corn (maize), wheat, rye, oats, barley, flaxseed, and such other grains as in his judgment the usages of the trade may warrant and permit,” and to license competent persons ‘Ho inspect and grade grain and to certificate the grade thereof for shipment or delivery for shipment in interstate or foreign commerce * * *” and provided for appropriate appeals from such inspection. (39 U. S. Stat. L., pp. 482, 484.) It did not and could not eliminate administrative duplication as between States and as between official and private agencies. The grain in East St. Louis, whicli lias been graded by the Illinois Inspection Department, is graded again by the Missouri Inspection Department, if such grain later passes into a Missouri elevator. ^ See p. 300. “ The State commission has jnrisdietioii in these markets only, a Note that the inspection of wheat, corn, and oats is subject to Federal supervision in all important grain markets. See service and regulatory announcements and bulletins of the Bureau of Markets, Department of Agriculture, t* Also, see Duluth-Superior controversy, p. 156. 298 TERMINAL GRAIN AIARKETS AND EXCHANGES. Likewise, grain which has been graded by the Missouri Inspection Department in a terminal yard on the Missouri side, provided it later goes into an Illinois elevator, must bo graded anew. Under each jurisdiction there are the usual provisions for reinspection and appeal. It is estimated that about 10 per cent of the grain which comes to the St. Louis market is the subject of double inspection by Missouri and Illinois agencies; that is, 10 per cent of the grain is first graded in the railway yard of one vState, and later passes into the elevator of anotlier State, necessitating a double grading. No estimate is at liand as to the percentage of changes in grades when grain is regraded by the second State. However, the supervising inspector states that during the first half of 1918 he knew of some forty or fifty cars of grain whose grades wore lowered by the Illinois Inspection Depart¬ ment after they were graded by the Missouri Inspection Department. Differences in the fees required for corresponding services have given additional irritation to shippers. Kansas City grading and weighing.— In Kansas City about 50 per cent of the cars of grain passing through the market are subjected to double grading. About one-half of the terminal elevators are located on the Kansas side and one-half on the Missouri side, while a majority of the wheat-carrying railways liave their yards on the Kansas side. These are the Santa Fe, Rock Island, Lhiion Pacific, Frisco, Mis¬ souri, Kansas & Texas, and Kansas City Northwestern. The only largo road on the Missouri side is tlie Burlington. This means that grain coming into the market from Kansas may bo graded both at Kansas railwav vards and Missouri elevators—the reverse being true of grain coming in from Missouri. In Kansas, as in Missouri, there has been carried on for years a running fight between the State legislature and the board of trade of tile terminal market. In 1911 the law providing a State inspection department in Kansas was declared unconstitutional by the Supremo Court of Kansas. As a result, from 1911 to 1915 the inspection department of the Board of Trade graded all grain received on the Kansas side. In 1915 the State inspection department was reor¬ ganized by the legislature to conform with deficiencies shown by the court, and the Board of Trade discontinued all grading operations. Prior to 1917 weighing in Kansas City was supervised by Board of Trade inspectors, and the actual weighing was done by vState emplo^^ees in the respective jurisdictions. In tliat year the vStates of Kansas and Missouri jirohibited the Board of Trade from having such inspectors at the elevators. The Kansas City Board of Trade contested the establishment of the Missouri weighing department until the law was sustained by the supreme court of the State. Owing to the strenuous objection among shipj)ers of grain to the frequent double inspection charges, the Kansas and Missouri inspcc- 299 INSPECTION AND WEICIHING. lion departments later reached an agreement by which the fee for inspecting a car of grain going into an elevator^ which had previ¬ ously been the subject of a yard inspection by tlio other State, was reduced to 15 cents, provided the elevator grade corresponded with tlie yard grade. In case it did not, then the full inspection charges were paid, viz, 65 cents for inspection and the delivery of a sample to the consignee, and 25 cents additional for moisture test on wheat and corn, made necessary by the Federal grading system. This charge of 15 cents Avas called a “review” charge and accord¬ ing to the inspection department of I^ansas^'Ss” proven unsatis¬ factory. It is necessary to do just as mucJi Avork in the grading- of that grain AAdiich has previously been inspected bA’ the other State as it is for the grading of the grain Avhich has not been proAuously inspected. Moreover, it is reported that the operation of the Federal grades has entailed far more AAmrk in the grading of grain, so that it has made necessary a large increase in the force of the Kansas inspection department, and there has been a decrease in its rcA^enue. In Kansas City the burden of a double inspection charge is borne Avliolly.hy the shipper. In St. Louis the elcAbator receiAung the grain pays the second charge in case such is exacted. Double inspection is not as serious a matter in St. Louis as in Kansas City, since a larger proportion of the grain Avhich enters St. Louis is transferred or shipped AAuthout being handled by an elcA^ator. There is strong sentiment on the Kansas City Board of Trade for the elimination of all State inspection because of the alleged “ex¬ cessive expense and red tape” and the inequalities of service. Weighing at St. Louis. —In 1911 the Railroad and Warehouse Committee of Illinois entered into a formal agreement Avith the I^Ierchants’ Exchange of St. Louis by AAdiich the latter Avas given complete jurisdiction over the weighing of grain in East St. Louis. This Avas the result of the dissatisfaction Avith State weighing results, and the system of double charges, as voiced in protest from the mer¬ chants’ exchange, the millers of Illinois, aiwl the Illinois Grain Dealers Association.^- The agreement draAAUi up alluded to the agreement already exist¬ ing between the vState commission and the Chicago Board of Trade, AAdiereby the weighing of grain has been administered “for a number of years and has proven A^ery satisfactory to all parties in interest.” It stated that “it is detrimental, in the judgment of the commission, that there should bo two supervisions of weighing of grain in the city of East St. Louis and Aucinity.” The stipulated “sole and only object” of the agreement AAvas “to eliminate the double charge of superAusion of Aveighing of grain in the city of East St. Louis and A'icinity in the interest of both grain buyer and seller *.” 12 1’coria conventiou, 1909; Decatur conventioTi, 1910. 300 TERMINAL GRAIN MARKETS AND EXCHANGES. TJie protest whieli had be.en made against "'political appointees in the weighing service was reflected in the following language of the agreement: Tlie mercliaiits’ exchange, through its pro])er officers, shall have the sole power and authority to appoint supervisoi-s of weighing, who shall be under the absolute control of said merchants’ exchange or its officers, with the right at any time to dis¬ charge any such employees if, in their judgment, the interests of the business re¬ quires. The railroad and warehouse commission may, however, submit a list of names of citizens of Illinois for appointment as supervisors of weighing at places where the State supervisors are now employed, viz, Soutliern, Advance, Venice, and Terminal Elevators, and the Corn Products plant, at least double the names to be sub¬ mitted for the number to be appointed, and if the merchants’ exchange, or its proper officers, linds such persons, or any of them, capable and worthy they will appoint them subject to discharge if not satisfactory. In case an employee is discharged or resigns, the merchants’ exchange will notify th.e railroad and warehouse commission of such vacancy, and the commission may suggest two names of citizens of Illinois to fill each vacancy; but the merchants’ exchange sliall not be compelled to appoint any person recommended by the railroad and warehouse commission, or its officers, iinle.ss such person or persons are, in the estimate of the exchange, or its officers, capable and efficient for such service. It will be the purpose of the exchange, through its proper officers, to employ citizens of Illinois for service at East St. Louis and vicinity, but in case the persons suggested by the railroad and warehouse commission are not competent the said exchange shall be at liberty to appoint other persons of its own selection, citizens of the State of Illinois. This agreement has proved satisfactory to the merchants’ exchange, and (it is reported) has resulted in more accurate weighing and the elimination of double charges. The present supervisor of weights lias declined to appoint nominees of the commission whom he con¬ sidered to possess only political qualifications, and has dismissed weighmen who had already been appointed on such a basis. At the present time, out of a total of 25 on the Illinois side only three of the men who were employed by the Illinois weighing department, prior to the above contract, are weighers for the merchants’ exchange. Weighing by the State of Missouri.— The agreement described eliminated the weighing administration of Illinois, but on the Mis¬ souri side the St. Louis Exchange has been wholly ousted from jurisdiction. In 1904 the right of the merchants.’ exchange to weigh grain had been upheld in a suit instituted against the exchange by the attorney general of Missouri. But by an act approved in 1913 the State Legislature of Missouri set up a single warehouse com¬ missioner in place of the old railroad and warehouse commission, and passed a statute forbidding any person or corporation “other than a duly authorized and bonded State weigher to issue any weight certifi¬ cate * * * (for any) grain at any warehouse or elevator in this State where duly appointed and qualified State weighers are sta¬ tioned * * j’ Action instituied by this commissioner finally compelled the Board of Trade of Kansas City and the Merchants’ Exchange of St. Louis to give up their weighing operations.*^ « See 248 U. S., 305. 301 INSPECTION AND WEIGHING. Summary. —Tlie theoretical justification of State inspection is that it affords country shippers protection against unfair practices by the controlling interests in the terminal market. It is subject to two objections in practice; (1) State boundaries do not conform to market areas so that two State jurisdictions with diverse policies and methods » may be found in the same market, as notably in St. Louis and Kansas (fity. (2) LTnlcss the merit system is well established appointments of State inspectors and weighers may be made for political consider¬ ations. This has been alleged of Missouri and Kansas inspections, and is the argument invariably advanced in markets where inspection through the exchange agency has been satisfactory to the trade. The obvious test of any inspection, grading, or weighing service is the degree of confidence which it commands from both buyers and sellers. Section 4. Personnel of State departments. A leading firm in Chicago reported to the Federal Trade Com¬ mission that Board of Trade sampling was better than that of the State department, since the samplers and inspectors of the board were usually more experienced men. Without passing on the validity of this statement it is clear that the problem of personnel enters acutely into any consideration of inspection and weighing services. Federal license.— The likelihood of securing incompetent inspect¬ ors is being continually reduced (as affecting wheat, corn, and oats) by the regulations of the Secretary of Agriculture under the grain standards act. Lhider the act all inspectors of wheat, corn, and oats in interstate or foreign commerce must be’ licensed by the Federal Government. The inspectors are still employed by exchange or State inspection departments (or they may operate independently), and Federal licenses arc granted on State recommendation. The requirement of a Federal license has resulted in a degree of uniformity in the qualifications required of applicants which tends to eliminate any question of the relative superiority of State or exchange inspection service. Tlie fact that disputes as to any grade determined for wheat, corn, or oats in interstate commerce may be referred, by appeal, to the office of the.KeffeLaLGxait^ of the district, has reduced the opportunity for partisan interference or local dis- mmination in establishing the quality of these grains. State inspection personnel.— The history of Minnesota State inspection in the Minneapolis market indicates a rigid insistence upon line promotion and the merit system. The present chief deputy inspector began in the department as a helper iti 1885. He has been helper, deputy inspector, assistant chief inspector, and chief deputy inspector. All three of the assistant chief deputy inspectors began service as helpers in the yards in 1901. The present chief clerk * 1918. 302 TERMINAL GRAIN # MARKETS AND EXCHANGES. began his career with the department as lielpcr in the yards in 1902. Many of the helpers and yard foremen have been in the service from five to ten years or more. Under the general policy of promotion, in the busy season of the fall when the receipts are large and the depart¬ ment is rushed, such new men as arc needed arc taken on as helpers in the sampling yards. These men arc required to furnish written applications showing certain qualifications as to competency. From these written applications selection is made. Promotion from helper to yard foreman usually covers a period of one to four years, and often more. To become a deputy inspector requires that a man shall have had at least four years’ actual service in the sampling of grain. These men are required by the State to pass a written examination showing their knowledge of grain, grain standards, and the policy of the department. First appointments from the eligible list are based upon the standing of applicants in this examination. To inspect wheat and corn they must also obtain Federal licenses. In this way the department maintains at all times men who have been trained in the handling of grain at the terminal. The system amounts to a State civil service, supplemented with personal knowl¬ edge of the work that these men have been engaged in for at least four years before one can become a deputy inspector.^*’ Illinois and Chicago.— The Sl ate supcr Yisifig inspector is at the head of the entire grain inspection system of Illinois. The remainder of the force consists of two assistant supervismg inspectors, five deputy grain inspectors, four grain helpers, one moisture tester, one chief clerk and registrar, and one clerk. The grain inspection department itself is a division of the Illinois j_lepartment of trfldf> and comm erce which was created in 1917 to Include as a subdivi- sjonmepublic utilities commission. While these statements arc based on first hand information, the following extract from a pamphlet issued by the Minnesota grain inspection and weighing department shows the importance attached to the problem of personnel: “The inspectors are taken from the oldest samplers. A sampler, after lour or five years service in that capacity, submits, with others, to an examination as to his ability to grade grain. When a vacancy occurs the man who stood highest in the examination is promoted, provided that no man can be promoted to an inspectoi’ship who passed lower than 85 per cent. The man so promoted may possess any known religious creed or political faith—all that is asked of him in his new position is to give the State the best service of which he is capable. No man is ever made an inspector wlio has net served from four to eight years as a sampler or helper. There arc men in the department tc-day (both the inspection and weighing branches) wlio began when the department Avas organized in 1885. It is sometimes charged people who ought to know hotter that promotions are influenced by terminal grain dealers and elevator men. In truth and fact no man outside of the department ever knows when a promotion is to he made. Neither does the man who is to be promoted. Commission men and elevator men have no more to do with these matters than they do in selecting the men to work on the Panama Canal.” 1“ The United States Department of Agriculture recognizes tlie appointees of State agencies in prescribing the ciualifications of licensed grain inspectors, as follows (Regulation 2, par. 3): ” In case the applicant is a person duly authorized and employed to inspect and grade the kind of grain for which the license is sought under the laws of a State having a State grain inspection department established by the law’s of such State, the application shall contain, or be accompanied by satisfactory evidence thereof, and shall otherwise comply with paragraphs 1 and 2 of this section.” The civil administration code of Illinois, approved Mar. 7,1917. INSPECTIOX AND WEIOHING. 303 J]vain inspector .—The chief grain inspector for tlie Chicago market is appointed for a period of foiir^years by the governor of the State, subject to confirmation by the senate. The present code requires that ‘‘the chief grain inspector shall be a person who is not interested, either directly or indirectly, in any warehouse in this State, and who is not a member of the Board of Trade.’’ There is one assistant chief inspector who has general supervision of all of the routine inspection work. Deinity inspectors .—The men who actually inspect the grain under the present system are known as deputy inspectors. There arc 2 1 men employed. They arc under State civil service, as arc the other members of the insiDcction staff below the chief inspector. They are required to execute a bond in the penal sum of $5,000 at the time of their api^ointmcnt, as a guaranty of tlie faithful discharge of duty, which bonds are approved in the same manner as that of the chief inspector. Samplers.—Tlio men who sample the cars in the yards under the respective yard foremen arc likewise chosen by civil service. Under the present arrangement, both inspectors and samplers are re¬ quired to pass a written examination on certain practical tests. They are roc[uircd to give evidence that they know the practical handling of grain so far as their duties arc concerned, as well as the technical requirements now provided under the Federal grades. There arejUirec supervising inspectors, who check the work of the deputj^nspectors and review samples upon which remspection has been called.. There are at pre^nt some 73 samplers and hel 2 :>ers. The total list of the employees in tlie dejiartnient as of January 1, 1918, is 109. It was learned from the chief inspector that the policy of the de¬ partment is to school men for the more responsible positions through service in the less responsible work. However, it is frankly ad¬ mitted that, under the frequent changes of administration that now obtahi, the department suffers considerably in the point of con¬ tinuity of policy and also with regard to retaining employees on the basis of their experience and efficiency. 'In East vSt. Louis the officers and employees of the inspection department are subject to the civil service rules of the vState, and arc ajipointcd subject to the consent and approval of the civil service! commission of Illinois. ^ Section <5. Technical methods of inspecting and grading grain. In the following pages no attempt is made to give a complete comparative analysis of the inspection methods followed in all '* Secs. 12 and 7, Civil Administrative Code of IllinoLs. From July, 1871, to August,1891, there were 11 chief grain insi)cotors, all of-whom belonged to the Ecpublican Tarty; they were followed by two Tcrao- orats ill 1S93 and 1895, by six Republicans from 1897 to 1911, by two Teinocrats from 1913 to 1915, and by two Rcjniblicans since that time. 304 TERMINAL GRAIN MARKETS AND EXCHANGES. Diarkcts. It is rather intended to set forth the essentials of the systems which now obtain at the larger terminals. The require¬ ments of the Federal grain standards act for interstate shipments, as well as the competition between markets, has resulted in a high degree of uniformity in the technical methods of inspecting wheat, corn, and oats. Laboratory inspection.^— The three main considerations in arriv¬ ing at the grade of wheat are: The quality of the grain, its c ondit ion, and the ad mixt ures. The quality depends upon soundness, color, weight, and the percentage of hard grain. The c onditio n depends upon the moisture content, the heat, smut, etc. The a dmixtnr(^ ^ nrA tested by a process of sieving and weighing, by which the dockage is determined. Much the same factors are considered in grading other grains. On such a basis it is manifestl}" impossible to determine the grade of grain scientifically by the old ^‘car-door inspection’^ with poor light and inadequate apparatus. The laboratory method of inspection pro¬ vides orderly work in a well-lighted room with a scientific equipment. This method has been highly developed in Minneapolis and Chicago with substantially the same methods in use. Inspection before arrival. —State inspection, notably in Minne¬ sota, does not confine its activities to the terminal market. In order to expedite inspection and relieve congestion in raih*oad terminals the Minnesota Railroad and Wareliouse Commission has established sampling stations at various interior jioints, and has even provided an inspection and weighing station at La Crosse^Wis. Tlie samples obtained at these interior stations are forwarded by express to the main inspection office, so that the bulk of the grain is officially graded before it reaches the terminal. The inspection tracks. —The samples of grain are procured from newly arrived cars on the '‘^pection tracks’’—special tracks pro¬ vided for the purpose by the railroads in the larger markets. The gftififitos.J£QrL_i n crews u n der a yard foreman in, the large yaSIE T TImJoroman receives the car waybills or recen’S's’ notices from the ^railroad and assigns the cars to individual samplers, wtiom he holds accqinitable. Each grain car is tagged by the railrq^ e^^'^vees showing the contents . The work begins in the morning as soon as the crew can see to work/^ which, during the month of December is a little past 7 a. m. The crew goes at once to the shack maintained by the carrier in the differ¬ ent yards, where the men get their tools and change their clothes. The cars to be sampled include all cars of grain which have come into the yards since the close of sampling operations on the day before. - --On arrival of a train the conductor leaves the car bills in the rail¬ ’s The following descriptions of actual practice were reported by agents of the Bureau of Markets Depart¬ ment of Agriculture. ' INSPECTION AND AVEIGHING. 305 road company's yar d office. A list of these hills is made showing the car number, name of shipper, the'shipping station, and consignee. Tliese details are necessary for issuing the inspection certificates. From such a list the ^^ard sampling foreman with his crew works the cars. A record of the seal is made when the car is opened. The sealek. —In Minneapolis the operations of the sealer precede those of the sampler. He enters the number of the car seal upon his record book, also noting any defects that he may observe in the con¬ dition of the car. He pounds upon questionable looking spots with his crowbar to determine whether the car when moving was likely to have been leaking. He then breaks the seal, opens the door, and leaves the car to the sampler. The sampling operation. —Under Minnesota practice, before enter¬ ing the car, the sampler records on an inspection ticket the car number, the initials, the date of sampling, and the name of the sampler. Tliis ticket is kept until the sam]ile is taken and is placed in the sample sack with the grain taken. The sample is drawn by means of a brass or steel probe about 60 inches long. In Minneapolis the implement used is composed of two tubes, one within the other, each part having 7 (sometimes 10) equi¬ distant slots (approximately f inch wide by 3^ inches long) through which the grain at various depths may enter the probe. By revolving the inner tube the holes of the probe are tightly closed before insertion and are opened again after the tube has been plunged into position. The holes are closed again when the probe is filled and samples of grain at various depths in the load can thus be lifted out. Employees are instructed to probe the cars in at least five places—more if there is reason to believe that a car has been plugged. The two bottom holes of the probe sometimes empty into separate compartments in order to give a separate examination of grain near the bottom of the car. The records of the Minnesota Railroad & Warehouse Commis¬ sion indicate about 1^ per cent plugged cars in Minneapolis receipts.-® The grain is carefully emptied onto a canvas so as to keep its relative position as in the car. The samples thus emptied in parallel lines show a trained man at once the comparative qualities in various points of the car and at various depths. In the Chicago market a similar device is used except that the probe consists of a single tube inclosing a wooden stick which must be with¬ drawn to let in the grain. The limited room on top of a load often makes it necessary to insert this style of probe at a considerable angle. This grain which has been taken by the several probes is, after it has been looked over by the sampler, put in the sample bag. In the same bag with each sample there is placed a card giving the sampler’s 20 Annual Report Chief Inspector of Grain, Aug. 31, 1913, p. 12. 168093°—20-20 306 TKKMIIsAL GKAIX MARKETS AKD EXCHAK'GES. name, the car number, the contents, and the date sample was taken, together with the receiver’s notice from the carrier. The car is then closed and is read}^ for sealing. Tt has been iioted that in Minneapolis the grain is spread on a can¬ vas before being deposited in the sample sack. This practice is also recommended by the Federal grain supervision office. Another Minneapolis practice which has Federal indorsement is that of placing a part of the contents of the probe sample in an air-tight tin container in the case of wheat and corn. This sample is used to make a moisture test in the inspection laboratory in conformity to the provisions of the Federal grades. In Minneapolis after the sampler has reached the end of the string of cars the sealer goes down the line, closes the doors, and applies the State seal. The record of this seal as well as all the other I'ecords of seals and car orders arc preserved so that it is possible to ascertam for years afterwards the name of the person who broke the seal, who took the sample, who inspected it, and the condition of the car at the time of sampling. Under the Illinois inspection dei)artment no grain is 'taken in metal containers for moisture tests. Instead, all moisture tests are made from grain taken in bags. When asked the reason for not using the tin containers the reply given by the chief inspector was that it takes extra time and involves extra expense, and that they have found from actual experience that moisture tests made from grain taken promptly in sacks to the laboratory do not differ to any appreciable extent from tests made of similar grain taken in the metal containers. Tlic methods of sampling employed at the other interior markets do not differ materially from those described. For example, in St. Louis, after the car arrives in the terminal ^nxrd of some railway, a joint sample is obtained by the Missouri inspection department and the Wilson Sampling Bureau. If the grain in question is either wlieat, corn, or oats it is carried to the inspection office in St. Louis, where a test is made. If the grain is any other than wheat or corn, the grading operation, which consists of a mere examination of the visi})le qualities of the grain, may take place either in the yard or later in the offices of the insj^ection department. In any event, the results of the grading operation, including the moisture test, if made are-recorded on small pan tickets. The Wilson Sampling Bureau takes the sample of grain from the office of the Missouri inspection department and delivers it to the consignee. In Milwaukee the grades are generally inspected between five and six in therinorning. Each commission house has a box in the vards in whicli the samples from cars consigned to them are deposited. These samples are brought to the exchange, as a rule, before tlie INSPECTION AND WEIGHING. 307 market opens, so that tlie consigned grain can be inspected and sold the same day. In busy seasons, liowcvcr, there arc cases where tlio gi*ain arrh'cs on the table after the market opens. In Louisville the exchange follows the customary methods of yard sampling, except that a canvas is not used in dumping grain from the probe. Instead, the ])robc is emptied directly into the sample sack. (.Train is then brought into the office where it is inspected and graded. There is no trading floor and the gi*aded samples are delivered directly to the offices of the various firms. Firms located outside the building get their samples from the inspector’s office. The hammer and mallet test to detect leaking from the car is not practiced in Louisville. Instead, whenever a car is thought to bo leaking the inspector opens it and looks in to see if there is an}' depression in the surface of the grain; if so, a leak is reported. Inspection of boatloads. —The above discussion covei*s inspec¬ tion of bulk carload shipments into or out of the market. When shipment is by boat the mechanics of inspecting are necessarily different. In (ffiica go the p lan is to h ave an inspectoi^at the several elevators, who is charged with determining a grade on the grain at jlie house at the .time the cargo is loaded. The sample of grain is ordinarily taken from the running stream in the loading spout. Sometimes grade is taken by the use of the probe in the hold of tlie steamer, but not often. The theory is to get a representative sample, and to know what kind of grain is being loaded while the loading is taking place. For this purpose the grain taken at the different points- in the stream is all put into one box, where it is thoroughly mixed. From this the final sample is taken. Grades are determined at the loading houses by licensed inspectors. check their grading, samples are delivered to the inspection labora¬ tory whei^ they are reviewed to determine whether or not the grade fixed by the inspector at the house in each case is correct. These are handled by special messenger, and are reviewed promptly when ix'ceived in the laboratory, in order that the grade given to the cargo may be checked before the vessel leaves the house. Uniformity in all markets is promoted by the regulation of the Secretary of Agriculture prescribing the requirements to whicli a sample of grain must conform ^Uor the purposes of an appeal or a dispute.” 21 Sec. 7. For tlic purposes of an appeal or a dispute no sample shall be deemed to be representative unless it comply Tvith the following requirements: Paragraph 1. It shall be at least 2 quarts in size, of which at least IJ pints shall be inclosed in a clean, air-tight container and the remainder, if any, in a clean cloth sack. Par. 2. In case of bulk grain in a carload lot or in a wagon, at least five probes and as many more as may be necessary in the discretion of the sampler, shall be taken from the grain in different parts of the car or wagon, as the case may be. Par. 3. In case of bulk grain in a canal boat, barge, ship, or other vessel, at least five probes and as many it;ore as may be necessary in the discretion of the sampler, shall be taken from the grain at different points 308 TERMINAL GRAIN MARKETS AND EXCHANGES. In the inspection laboratory. —When a sample of wheat or other grain is placed upon the inspector’s table it is emptied into a large pan, where observations are made of color, odor, and general appearance. In the determination of dockage 500 grams are put over what is generally called the ^P acke r.” The Emerson kicker is used in the Minnesota inspection department. This machine sepa¬ rates out from the grain foreign material, such as the wild oats fre¬ quently found in wheat. Dockage is determined on the basis of per cent by weight. All samples of corn are tested for moisture. In the case of wheat, when the moisture content is the determining factor, or from general observation of the inspector is likely to be an important factor, in the determination of the grade, a moisture test is also made. It has been found necessar)^ at Minneapolis under the new Government grades for wheat to make a moisture test on approximately 5 per cent of all samples of this grain handled. This moisture test, as approved by the United States Department of Agriculture, is made over the Brown-Duvel moisture tester. The test is made in a separate laboratory room, connected with the main inspection laboratory, by employees who have that work exclusively in charge. Whenever an inspector finds a sample on which he wants a moisture test he makes it known, and the contents in the air-tight container are taken to the moisture-test room, wEere the test is made and the results reported directly to him. Then, on the basis of complete study of the sample in hand, the grade of the grain is determined. . In Minneapolis an average hour’s work for each inspector under the new standards is 8 to 10 samples, while under the regulations of the through each hatch or opening in the deck, except that when it is impractical to obtain a sample in accord- ance with the foregoing portion of this paragraph, it may be drawn from the grain stream while running from the spout or on the belt or other conveyor to or from the vessel, if taken in such a way as to shovv an average of the entire lot. Par. 4. In case of grain in sacks, samples shall be drawn from such number of sacks selected at ran¬ dom from the entire lot as will, in the judgment of the sampler, show an average of the lot, except that if the grade of each individual sack be in question, a sample shall be drawn from each sack. . Par. 5. In case of grain in an elevator or warehouse, or in any other case not covered in this section, samples sliall be taken from as many different portions of the lot or parcel as will, in the judgment of the sampler, show an average of the lot or parcel. Par. 6. The grain taken from the different portions of a lot or parcel shall be thoroughly mixed, and such mixture, or a typical portion thereof otherwise complying with tiffs regulation, shall constitute a sample of the entire lot or parcel. Par. 7. In ease any portion of a lot or parcel of grain is sour, musty, excessively wet, heating, hot, fire- burnt, infested with live w eevils or other insects injurious to stored grain, or otherwise of distinctly low quality, separate samples otherwise complying with this regulation shall be taken, respectively, from such portion and from the remaining portion. There shall be filed with such samples a statement showing the estimated quantity of each portion of the grain from wiffeh each such sample was taken. Par. 8. In case it shall appear that a lot or parcel of grain has been so loaded or handled as intentionally to conceal evidently inferior grain, a sample of such inferior grain, otherwise complying with this regulation, shall constitute a sample of the entire lot or parcel. (Rules and Regulations of the Secretary of Agriculture under the United States grain standards act of Aug. 11, 1916.) INSPECTION AND WEIGHING. 309 old l^Oiirds of vState grain ap))eals, 15 to 18 samples could be graded each hour. Seventeen inspectors are generally required for the work. , Inspectoi*s, as well as samplers, now work under licenses issued by the United States Department of Agriculture. Nebraska has no State supervision of grain inspection. Tlie regula¬ tions for the inspection, weighing, and grading of grain in Omaha are lixed by the grain exchange. Supervisory control is by the grain committee. Appeals from the chief inspector are to the grain com¬ mittee, if made within 24 hours, and a stipulated fee is paid. Tiie rules of the Omalia Grain Excliange provide fully as to how the inspection and weighing must ])e carried on. They do not in any material respect differ from the rules in Minneapolis, Chicago, and Kansas City. The methods and mechanics are practically the same in all these cities. It is maintained in Omaha that inspection and grading can not be made in less than 24 hours if the Federal requirements are to be fully met. The exchange has adopted this practice, which is known as ^‘one-day inspection.’’ In ^lilwaukee the Avhole inspection service is organized by the Chamber of Commerce. Wisconsin has provided no State depart¬ ment to supervise the marketing of grain. The exchange maintains a committee of five, designated as the ^‘supervisors of grain inspec¬ tion.” They control tlie activities of the official inspector and weigher and hear the complaints of members. Further appeal lies to the board of arbitration of the chamber. The Illinois State inspection does not apply to Peoria. The inspec¬ tion department was organized and is operated by the Board of Trade, subject only to Federal supervision. In Buffalo, New York City, Philadelphia, Baltimore, and Boston the commercial body has charge of weighing and inspection. In New A^ork the Produce Exchange has made agreement with the leading railway trunk lines whereby the inspection department of the exchange has fid! power to certify grain, which certificates shall be accepted as the basis of claim for loss or damage. Section 6. Sampling by private agencies. Besides the sample taken b}^ the State or oTicial agency (upon which the official grade is issued), samples are frequently procured by private agencies on the order of commission men, dealers, elevator buvers, and other traders. The commission man is interested in obtaining the best possible grade for his consignor, and in consequence the best price procurable for the grain handled. Hence he desires an inspected sample of the grain for his own use, that he may be in a position to determine whether or not he should accept the official grade or ask for reinspection or appeal. Price-Current Grain Keportor, Jujie 12, 1918, p. 19. 310 TEPvMIITAL GRAIN AIARKETS AND EXCHANGES. JikcwisC; where the grain has been purchased outright from the country shipper by some grain dealer, the purchaser at the terminal usuallv sells the grain within a short time to some terminal elevator, mill, or exporter, and is equally interested in procuring a separate check on the grade. It often happens that the buyer also is interested in having a sample. Some of the larger mill bujmrs in Minneapolis maintain their own samplers in the yards, who are permitted to enter the cars and take samples in the usual way and seal the car again wfth the firm’s private seal, ^ften, however, a car is sold on the sample procured for the seller, which may be either "'a~commission man or a grain dealer. Sampling in Minneapolis. —^Up to. 20 years ago in Minneapolis each firm had its own private sampler. wSince that time the sampling has been done by two sampling bureaus, directly under the super¬ vision of the chamber. The samples are taken in the ^mrds at the same time the car is opened by the State sealer for the State sampler. After the vState sample is taken the chamber sampler enters the car, uses the same probing device as the State sampler, and takes his sample in precisely the same way. In no case is it permitted that a sampler for the State and one for the chamber of commerce be present in the same car at the same time. These samples taken by the chamber samplers are delivered to the office of the grain dealers to whom grain is consigned or sold, to be used for trading on th e exc hange floor. Private samples taken at the country points are boxed and sent to Minneapolis by express. Samples taken in Minneapolis yards arc brought to the chamber in automobiles. When the samples arc received at the office they are sorted immediately and carried to the tables of the consignees on the floor of the exchange. After sale the purchaser of the car is customarily given a part of the sample in a ])aper bag, the rest being retained by the seller. The samples of the private samplers reach the table shortly after 9 o’clock in the morning. The State grades arc obtained some time later, often two or three hours, and they are then written on tickets and placed in the pans on the tables. The samplers of each commission house have a list of its customers and all cars consigned to them arc sampled. Cars consigned to the order of the shipper, and not to a commission house, are handled by the sampling company having the least cars to sample that morning, and later when the consignee is determined, the samples are exchanged if necessarv. It is necessary that all cars be sampled as soon as the}" reach Minneapolis, as the private sampling companies are required to pa}" the demurrage that accrues due to the failure to inspect promptly. INSPECTION AND WEIGHING. 311 1 11 Minneapolis the charge made for sampling has been 30 cents per car or bulkhead since September 1, 1917. The Minnesota State fee for sampling and grading has been 75 cents ($1 for corn and flax). Practically all active members of the Chamber of Commerce in Minneapolis have their sampling done by one of the private sampling companies. Some of the larger concerns like the Washburn-Crosby Co., Pillsbury Flour Milling Co., and others, have their own samplers at some points and resort to private sampling companies onl}^ where the traffic is light. Sampling in Duluth. ^private sampling bureau in Duluth is operated by the Board of Trade at cost. The present sampling fee is 50 cents. Since the great volume of shipments from Duluth is on a grade basis it is considered important to have a check on the State grades. Private sampling in Chicago.^ —In Chicago the Board of.Trade operates a department of grain sampling and seed inspection under the control of the grain committee. Both State and Board of Trade inspectors procure samples to be graded, although they arc rigidly prohibited from both being in the car at the same time. Standard (or type) samples are made up by the Board of Trade department at the beginning of each season. S.AMPLiNG in St. Louis. —The Wilson Sampling Bureau, as official representative of the Merchants’ Exchange of St. Louis, takes samples jointly with the Missouri inspection department. The two depart¬ ments send out an equal number of men to the different terminal yards for the purpose of obtaining a joint sample of grain from each car. Both private and State samplers arc allowed in the car at the same time in this jurisdiction. The sampling bureau depends upon the State agency for the determination of grades. The Missouri department sends three men and the Wilson bureau three men to the Burlington yards (the heaviest receiver), and each dei)artment sends two men to the Wabash yard. These different men work in conjunction. An employee of one department makes the probe in one car while the employee of the second department makes the probe of the second car, thus alternating from car to car. Each sample is brought to the office of the Missouri inspection department where it is graded, and for which a pan ticket is made out. The sample, together with* pan ticket, is later delivered by the Wilson Sampling Bureau to the consignee at a fee of 35 cents (1918). This expense is borne entirely bv the consignee. In case the purchaser of the gi’ain is dissatisfied with the grade of the sample, he may older the Wilson vSampling Bureau to obtain another sample. After the sample is obtained by the Wilson 312 TERMINAL GRAIN MARKETS AND EXCHANGES. bureau an eye and nose test'' is made of it so as to decide if the grade of the sample is equal to that of the original sample. The chief criterion in this inspection consists of weighing the sample; if the resultant weight is one pound more or less per bushel than in the case of the weight of original sample, such fact is reported to the purchaser, together with other observations relating to the noticeable attributes of the grain. The Wilson Sampling Bureau decides, as a matter of fact, whether the grade of the second sample corresponds with that of the first sample, and if it does not, the jnirchaser may call for reinspection by the Missouri inspection department, from which he may make an appeal to the Federal grain supervision department (provided the grain is the subject of interstate shipment). In other words, the Missouri department permits a sampling company to procure an official sample for the use of the consignee; and to procure an independent sample upon further request and upon payment of another fee. It is estimated that the purchaser in St. Louis calls for a second sample in the case of about one-third of his purchases of grain, and that of this one-third, 10 per cent receives a change of grade, as a result of obtaining and grading the second sample. Sampling in East St. Louis.— Representatives of both the Wilson Sampling Bureau and the Illinois inspection department (East St. Louis) obtain samples of grain from cars while they are stationed in the teiminal ^^a^rds of railways, but instead of securing a joint sample as in the case of the Missouri department, each one obtains a separate sample. The Illinois department uses its sample in order to arrive at the grade of the grain; the Wilson bureau takes its sample immediately to the office. Within a short while the bureau communicates with the Illinois inspection department to obtain the grade of the car of grain from which the sample of the Wilson bureau was secured. This information is compiled on a card or pan ticket which is placed in the sample of the grain, all of which are delivered to the consignee. For this service, also, a fee of 35 cents is charged (1918), and is paid entirely by the consignee. The resampling and other procedure are the same as already described . itli tlie resampling of the grain in St. Louis. The income of private sampling companies is, of course, derived from fees paid by the members whom they serve. Section 7. Car inspection. St. Louis. —Lhider both State and exchange inspection methods it is an obvious duty of the inspection office to maintain a record of the condition of the grain cars on track at the receiving terminal. I his woik has been extended in certain markets into what amounts to a track inspection department. IXSPPXJTTOX AND WEIGHING. 313 An example is found in tlie system which luis heen o])erated by llie weigliing department of the Merchants’ Exchange of St. Louis. It is reported that the system was adopted at the instance of country sliippers in order to protect them in preferring claims for damages against the railroad. Em])loyees are stationed at all the railway tnirds in this market where they conduct ‘Hrack inspections” of the physical condition of the grain cars, obtaining seal records, a!id report¬ ing all such information to the weighing department. When the car arrives at the elevator a similar inspection is made by the ‘Alown- stairs” elevator nijin, which means that the work of each of these two men serves as a check upon the otlier. The weighing depart¬ ment makes a charge of 25 cents for this service, which is paid by the country shipper. The inspector of tlie car makes out several reports of the condition of cars examined, one of which-is made out immediately and given to the '‘light repair man” stationed at the "hold track.” This is done in order that the repah* man can make proper and temporary repairs on the car before it continues its journey to the elevator and thus iirevent a further loss of grain from leakage. The inspector in his report to the repair man gives the track number to show where such car is located and also indicates with green chalk on each car the location of the different leaks. Chicago. —A car-inspection service was instituted by the Chicago Board of Trade under the chief weighmaster October 5, 1915, and was even extended to the arrival yards of nine of the most extensive inbound grain-carrying lines.-^ A full record is kept of the inspec¬ tion of each car, and it is the duty of the car inspector "to promptly issue and deliver an official certificate to the consignor or the consignor to be notified as evidence of the physical condition in which he found the car, the condition of its seals and whether sealed or not on de¬ parture, together with any other report on the condition of the car relative to its safe use for transporting grain.” Section 8. Inspection charges and revenues. Both State and exchange inspection offices are presumed to be self-supporting. The two sources of income are the inspection fees and the sale of grain taken in samples. The latter is, of course, a meager revenue except on the large exchanges. Under statutory inspection the fees are usually fixed by the State utilities or warehouse commission -31915 Annual Report, p. 34. For example, in Missouri the chief inspector “is hereby authorized and directed to collect such charges for the inspection and weighing of grain as may be established from time to time by the Warehouse Com¬ mission, and all other moneys that may become due on account of inspection and weighing services in the department, and deposit the same with the State treasm’er to the credit of the Missouri State Grain Inspec- tion Department, and only to be drawn out by checks, to be countersigned by the Warehouse Commis¬ sioner, for the payment ofsalaries and other expenses of the department upon pay rolls and bills of expense approved by said commissioner and the State auditor.’' (Report of Warehouse Commissioner of Mis¬ souri, 1913, p. 255.) 314 TERMINAL GRAIN MARKETS AND EXCHANGES. Under exchange inspection the grain committee (or inspection committee) is generally authorized to control the charges for in¬ spection.-^ In Chicago the inspection fees arc fixed by the Illinois Public Utili¬ ties Commission at a rate calculated to cover the budget of the depart¬ ment without profit to the State. The Minnesota inspection fees for Minneapolis have varied some¬ what according to the volume of grain received at the market and the operation costs of the department, as the record shows: Wheat andcoarse grains. Flax and corn. Aiurnct' 100*1^ Ancrnsit lOOT ...... Cents. 20 25 35 15 15 35 25 40 50 Cents. 75 75 75 75 50 75 75 75 Sent 1 1909 Sent 1 1910 . Oct 10 1910-Julv 1 1913 . Feb 1 1913 Nov 1, 1913 . Nov 1 1913-Aue’ 1. 1914. All" 1 1914 Oct 1 1915 . Oct 1 1915-Oct 1. 191&.. Oct 1 1916 Dec. 1.1916 . Dec 1 1916-Oct. 1. 1917. Below is given a financial statement showing receipts, disbursc- incnts, the gain and the loss for the fiscal years ending June 30,1916, and June 30, 1917. In discussing this matter the chief grain inspector stated that inspection under the United States grain standards act takes more time and increases tlie cost of the service. Hence the de¬ ficit for 1917. 25 E. g., Rules oltlie Comuacrcial Exchange of Philadelpliia, charges for inspection: Sec. 11. The grain committee shall have power to alter the charges for inspection of grain from time to time, when it shall deem such change advisable, but notice of any change, whether to high or lower charges, must be posted upon the bulletin board of the exchange at least 30 days before the altered charges become operative. Sec. 12. The grain committee shall, at its first regular meeting or at a special meeting called lor the pur¬ pose, fix the charges for inspection for such period as it secs fit, but in no event for a period longer than its tenine of office. The charges fixed by the grain committee shall remain in force until the committee fixing them or a succeeding committee shall change them. Sec. 13. The charges for inspection of grain shall be alien upon such grain and may,in the judgment of the grain committee, be treated as “advance charges, ” and payment of same may be required of the carrier or warehousemair in whose possession the grain is at the time of such inspection. Sec. 14. The inspection and sampling charges on grain sold on Philadelphia grades shall be paid by the seller and on other inspections by the buyer. Sec. 15. All charges for inspection shall bo collected by the secretary of the commercial exchange not less frequently than once a month and shall be promptly paid over to the treasury of the exchange, who shall keep t hem in a separate fund which shall be known as the “grain inspection fund.” Salaries and other expenses connected with the inspection department shall be audited by the grain committee and paid - by the treasurer from said “grain inspect ion fund” under direction of the finance committee. Sec. K). Neither the entire “grain inspection fund” nor any portion thereof shall be appropriated for any other pui’pose than in the maintenance and promotion of the inspection department, nor shall be transferred to a reserve or other special fimd nor to the general fund of the exchange, except by the board of directors and with the approval of the grain and finance committees; but the board may with the approval ofthc aforesaid committees transfer amoimts of money frvom the “grain inspection fund” to the genera! fund of the exchange, to carry out recommended purpnsoi in the conduct of the affairs of the ex¬ change. (Annual Report, Commercial Exchange, Fhi’adclphia, 1917.) INSPECTION AND WEIGHING. 315 Financial statcmenL, Chicago. Receipts. Disburse¬ ments. Gain. 1^035. .Tilly 1, 1915, to June 30, 1916, inclusive. $193,137. 85 164,677.47 $188,967.85 194,200. 80 M, 170.00 July 1, 1916’ to June 30^ 1917^ inclusive. $29,523. 3 5 Likewise in Minneapolis a recent marked increase in inspection cliarges is accounted for b}^ the general increased cost of labor and the larger staff necessary to inspect grain under the Lhiited States grain standards act requirements. Statement showing the earnings and expenses, profit and loss, by departments, at Minyicapolis. CROP YEAR ENDING AUG. 31, 1915. Earnirigs. Expenses. Gain. Loss. Inspection. $141,164.82 111,6.57.64 $114,184.12 126,311.94 11,252.31 $26,980.70 Weighing..... $14,654.30 11,252.31 -\ppeal. ."1. CROP YEAR ENDING AUG. 31, 191G. Inspection Weighing, Appeal.... $170,851.18 $134,215.31 $36,635.87 103,910.29 146,028.82 3.50 11,130.32 $42,118.53 11,126. 82 The fees given in Table 75 (p. 270) are the charges for the regular first inspection. In case of reinspection this is done without charge if the grade is raised or lowered, and a charge is generally made in case the grade is sustained. Louisville offers an exception to the rule in that the department is not self-supporting, and depends upon assessments made upon grain firms to make up the deficit. Tliis market, however, does not com¬ mand a large volume of shipments, and the Board of Trade inspection is virtuallv for the benefit of six grain firms and two milling com- panics. * Section 9. Reinspection and appeals. At least two appeals are open after the initial grade has been taken on a car of grain. Where State inspection exists reinspection may be obtained from a supervising inspector or the chief ins^iector, with further appeal to a State board constituted for that purpose. Under exchange inspection similar reinspection is provided, and appeal lies to the appropriate committee. In any case, when grain shipped in interstate commerce has been inspected by an inspector licensed by the Federal Government, appeal may be had to the office of Federal grain supervision for that district. 316 TERMINAL GRAIN MARKETS AND EXCHANGES. T]ie inspection services of all the markets are in such a state of flux that anything more than a bare outline of the facilities provided would be unsatisfactory. For technical discussions of the adminis¬ tration of standard grades reference should be had to the publications of the Bureau of Markets, Department of Agriculture. Keinspection is generally instituted on written application to a supervising inspector within a stated period after the original inspec¬ tion, upon the deposit of an amount equal to the reinspection fee. The following table shows the results of appeals taken to the State board of grain appeals at Minneapolis during 1914-15 and 1915-16: Appeals. 1914-15 1915-16 Number. Per cent. Number. Per cent. Total cars inspected. 227,208 325,665 .io.T Per cent of cars appealed. 7.3 Number of cars appealed. 16,703 1,172 331 681 2,183 14,519 33,2i2 2,580 1,033 899 4,509 28,700 Raised to higher grade. 7.02 1.98 4.07 13.07 86.93 7.17 3. 71 2.71 13.59 86. 41 G rade lowered. nock'aee changed. Total chances. Grades sustained. In Chicago reinspection is done under the direction of one of the supervising inspectors. Below is given a record of the calls for rein¬ spection during the years 1915, 1916, and 1917, showing the requests that were canceied, the cases in which the grade was maintained, and the cases in which the grade was changed. Rcinspection (cars). Called. Requests canceled. Sus¬ tained. Changed. July 1,1914, to June30,1915, inclusive. 3,975 3,161 1,464 22 91 35 2,176 1,587 641 1,777 1,483 788 July 1. 1915, to June 30,1916, inclusive. July 1,1916, to Juno 30, 1917, inclusive. .. If the grade as determined from reinspection is unsatisfactory- to either party concerned, an appeal may be taken to th e Illinois S^ te Board of Grain Appeals. The party requesting the appeal signs^a formal application. The board is then called together by the chief grain inspector. If there is reason to believe that the sample already taken is not representative, another sample is taken by some regular employee of the inspection department. The board reviews the sample and fixes the grade. Any interested party may be present during the time the review is being taken, but he is forbidden to make any suggestions with reference to the grade. If the grade is sustained, the deposit fee of $5 is retained. If the grade is changed this amount is reminded. INSPECTION AND WEIGHING. 317 On grain inspected under the Federal grain standards act, appeal may be taken to a Federal grain supervision office upon deposit of a sum sufficient to cover the fees and charges. The schedule of fees announced February 24, 1919, was as follows: For ])ulk grain in carload lots, per car. t"or bulk or sacked grain in wagon lots, $1 per wagon. For bulk grain other than in carload or wagon lots, $:3 per 2,000 bushels or fraction thereof, not to exceed $50 for any one inspection lot or parcel. h'or sacked'grain other than in wagon lots, 1 cent per sack. Such further charges may be made for telegrams, express, parcel ] 308 t, registry fees, traveling expenses, and other items paid or incurred by the Department of Agricul¬ ture on account of a dispute, or an appeal taken from an inspection made at a point where no licensed inspector is located, and for oral hearings, as will reimburse the department; all charges above the minimum, and all of such additional items, to be determined in each case by the Secretary of'Agricidture. Appeal must be taken (a) before the grain leaves the place where the inspection appealed from was made; (b)'before the identity of tlie grain has been lost; and (c) as promptly as possible, but in no event later than the close of business on the second business day following the date the grading was performed as shown by the record. A report that inspection and grading by the Omaha inspection was loose and arbitrarily high led to the following stud}^ of all the super¬ visions and appeals made by the Omaha grain supervisors from Octo¬ ber 1, 1917, to June 29, 1918, inclusive. There were 1,047 cars super¬ vised and appealed of which 285 were wheat and 762 corn. The re¬ sult of the supervision is as follows: Cars arriving in Omaha. Cars shipped out. Sustained. Raised. Lowered. Sustained. Raised. Lowered. AVheat; Niiml)pr of cars. 104 s 98 28 6 31 Per cent. 49 4 47 43 9 48 Corn; Number of cars. 275 SO 79 154 17 157 Percent. 63 18.5 18.5 47 6 48 The table shows that on-over 1,000 supervisions and appeals, the results foi‘ wheat inspected in and out and corn inspected out of Omaha, the percentages are strikingly similar and show a general tendency to grade all grain too easily. In the case of incoming corn the inspection was much more efficient, as 63 per cent of inspections were upheld by the Federal grain supervisors and only 37 per cent were changed; 18| per cent were lowered, while 18^ per cent were raised. This analysis of the Federal grain supervisors’ records shows no ])ositive results. The new system of Federal grading has been in operation only a short time and it is to be expected that the inspec¬ tion department in the various markets would take some time before meeting the Government standards. One would expect to find that 318 TERMINAL GRAIN MARKETS AND EXCHANGES. the grade would be raised on a majority of appeals for grain coming into the market. It would not be appealed unless the shipper believed that the grade was too low, and for this reason a larger percentage of the appeals should show that the grade was raised. The exact opjx)- site is true in grading grain which is shippe dout. Neither one of these results are strikingly shown in the study and one would be inclined to believe that the inspection department at Om.aha is fairly efficient. Peoria inspection. —similar experiment was made in Peoria. Tiiis record was taken for the period f)f January 1, 1917, to January 30, 1918. During this period there were 2,351 supervisions and ap- ]ieals, of which 2,264 were for corn and 87 for wheat. The result of the supervision is as follows: Cars arriving in P coria. ’ Cars shipped out. Sustained. Raised. Lowered. Sustained. Raised. Lowered. Wheat: Number of cars. 51 10 12 11 3 Per cent. 09.9 1.3.7 16.4 78.6 21.4 Corn: Number of cars. 1.659 114 172 249 18 52 Per cent. 85.4 5.8 8.8 78 5.7 16.3 This table shows a very high efficiency for the Peoria inspection department, since over 85 per cent of the original grades on corn com¬ ing into this market was sustained by Federal supervisors, and 78 ])or cent of corn sent out was sustained/ Such a very small quantity of wheat was handled that the percentages as appl 3 'ing to wheat have practically no significance. It will be noted that most of the super¬ visions were given on incoming grain. This is accounted for by the fact that during the past 3 "ear probably 75 per cent of all grains received in Peoria was consumed. One of the reasons That such a liigh percentage of grades was sustained may ])c due to the fact that there was so much sample corn received in this market, sample grade being usually so far below the line that it would not be raised and could not be lowered. In Indianapolis there were 187 supervisions of wheat and 1,229 of corn during the period Januaiy 1, 1917, to July 1, 1918, inclusive. The record was as follows: Cars arriving in Indianapolis. Cars shipped out of Indianapolis. Sustained. Raised. Lowered. Sustained. Raised. Lowered. Wheat: Number of cars. 127 12 13 19 1 15 Per cent. 83.5 8 • 8.5 54.4 2.8 42.8 Corn: Number of cars. 657 72 71 292 25 112 Per cent. 82 9 9 68.1 5.8 26.1 INSPECTION AND WEIGHING, 319 Section 10. Federal grades. Whatever the effect of the Federal grades upon inspection costs and upon the country 2 :>rices there seems to be no question that they Jiavc instituted a nation-wide uniformity which has greatly benefited the mill buyers. The receiving interests at Buffalo nov/ state that they have no reluctance in buying wheat by grades, whereas prior to the intro¬ duction of these grades ^^tlic grade placed by western inspection vs'ould be below the standard used in the East.’' Section 11. Weighing. Wheat is weighed by State and exchange officials for two purposes: (1) At the inspection laboratory as a factor in determining the grade / aiid dockage; (2) at the receiving elevator or on track scales to check ^ the quantity of the shipment. The latter function is that of the oflicial weighing departments in the terminal markets. No Federal supervision exists with reference to weighing. State weighing departments arc coordinate with State inspection departments where such exist, except in Illinois wlicre by long¬ standing agreement the weighing of grain in Chicago and East St. Louis has been delegated to the commercial bodies in those markets. (See p. 299.) Weighing b}^ a State department offers the possible advantage of a Statc-wdde rather than a wholly local service. The Minnesota Aveighing department, for cxam 2 :>lo, Avill maintain weighers at country stations for any elevator Avhere tlie volume handled is large enough to warrant it.-*”* - Grain is officially weighed either on a track scale while in the car or in a hopjief scale in the ciqoola of an elevator. Scale experts differ as to the comi^aratiA^e merits of track and h opjier scales. The limitations of yard si)acc frequently j^rohibit track weighing and the tendency in the trade is toward a greater use of the hopper scale. It is reported that out of 72 Aveighing stations su23erAdsed at Minne¬ apolis, 45 are cqui2:>ped Avitli both hoj^per and track scales and 19 use track scales entireW. Iiop])er scales arc considered the more accurate in Kansas City. A iieAver type of basement hoj^per scale has been installed by the Washburn-Crosby Co., of Minneapolis, AAfficreby the grain is run into a hopper beneath the track and Aveighed before being clcA^ated. This, of course, preA^ents Avastage from the holding back or diA^ersion of the grain in the course of elevation. Tkack-scale operations.—F or track A\mghing cars are handled in groups or strings in the folloAAung manner: 1. The scales are examined by the weigher and balanced. 2. The car is detached and “spotted.” “ See p. 321. 320 TEIIMINAI. GRAIN MARKETS AND EXCHANGES. 3. Pile weigher then determineg the weight wliich is recorded by Jiim and by the weigher of the receiving house. 4. The car is emptied and weighed again to determine the tare. 5. llie taro is recorded and deduction made to determine the Aveigjit of the load. Iypical operation of cupola scale.— The operation of a hop¬ per scale in tlie cupola is as follows: 1. rile car is unloaded (often by use of power shovels) into the pit beneath the track. 2. The grain is elevated directly into the garner above the scale. ^3. The supervising weigher sends up the car ticket to the weigher in the cupola. 4. The scale is balanced and the scale hopper valve closed. 5. Ihe grain is then drawn down from the garner into the hopper and weighed. 6. rile weight is entered in the weigher’s book and registered on a card (frequently by means of the type registering beam). Weights to carriers. —In Chicago weights on all grain sold on board of trade weiglits (95 per cent of the grain sold in the terminal) are furnished also by the weighing department to the respective caiiieis at the rate of 5 cents per car. Since 1899 these weights liave been accepted as the basis for freiglit bills by all the railroads entering Chicago. In all cases the weiglits furnished the railroads are the same as those shown on the regular weiglit certilicates issued by the depart¬ ment. The railroads are willing to pay for this service rather than weigli the cars over their own equipment, which they would be re¬ quired to maintain, and the practice would require much yard room foi the necessary svitcliing incident to weighing all cars over rail- j'oad-track scales. The present arrangement facilitates dispatch in liandling the cars, makes all freight bills for grain received available for settlement within 24 hours after the grrin is unloaded. Weighing records. —In Chicago weights taken are reported each day by each weigher to the weighmaster on a special form pro¬ vided for the purpose. The certificate of w- i dit issued in the weigh¬ master s office is made out on the basis of t-iis daily report from the weighers. These records from the individu d weigliers are filed as received from the different houses, each house separately. These files are kept by the department for eight years before they are destroyed. Weight certificates (Chicago).— Weights covering grain re¬ ceived aie entered on white certificates, while those covering grain shipped out of this market are recorded on yellow forms. All cer¬ tilicates are made out at the earliest practicable hour in the day following the reports li-om the different weighers sent in on the INSPECTION AND WEIGHING. 321 afternoon of tlie day before. A box is provided for each member of tlie grain trade where the weight certificates covering grain in which each member of the trade is interested are made available to mes¬ sengers who are sent for tliem. Some few are mailed to parties who have no down-town office. Most of the scales used by the weighing department are equipped with a mechanical self-registering device. Each weigher who weighs grain over scales equipped with this mechanism is required by the Board of Trade weighmaster to record first in his tally book the record shown by the scale beam. The weigher then checks his tally book with the scale ticket made by the self-registering device to see that the scale beam record agrees with the ticket. The weigher’s daily report is made up from his tally book, and is checked back before it is mailed on to the weighmaster. No first weights are allowed to be recorded on any other record than the prescribed tally book. In the case of scales not equipped with the self-registering device, the first record put in the tally book is taken from the weights used in the weighing operation plus the reading of the scale beam. This recorded weight is then checked by examination of the exact denominations of weights used in the draft together with the scale-beam reading. This precaution is taken to reduce error to the minimum. Scale inspection. —In Minneapolis and Chicago the weighing departments offer a scale inspection service to the trade. A scale so tested is sealed against willful or accidental changing of the scale leverage. The Chicago Board of Trade weighing department is called upon frequently to test the accuracy of scales at country points tributary to Chicago. The following table shows the number of these scales tested by Chicago Board of Trade experts during the four years 1913-1916, inclusive: Year. Number tested. Number correct. Number incorrect. Per cent correct. 1913 .. 141 57 84 40 1914 . 74 28 46 38 1915 . 51 14 37 28 1916 . 55 20 35 38 Service at country stations. —^In order to avoid congestion at Minneapolis and Duluth the Minnesota weighing department will maintain weighers at country stations for any elevator where the volume handled is large enough to warrant it. Grain handling firms outside the terminal markets are afforded the benefit of State supervision of weights. State weighers are now' _ maintained at Appleton, Faribault, Hastings, Janesville, Kastota, Little Falls, 168693°—20-21 322 TEKMIK-AL GRAIN MARKETS AND EXCHANGES. Montgomery, Morristown, New Kiciiinond, Waseca, New Ulm, Red Wing, and Wabasha, in Minnesota; also at Davenport, Iowa, and Valley Cit}', N. Dak. For weighing flax a Minnesota State weigher is now stationed at Portland, Greg., and at Davenport, Iowa. Section 12. Personnel of weighing departments. Minnesota. —Under the Minnesota Railroad and Warehouse Commission the policy of appointment and promotion on merit obtains in the weighing department just as it does in the inspection department. The present State weighmaster has been identified with the department for 17 years, and the chief clerk has .been in the service for 14 years. Permanent appointments are made from the ranks of helpers. A policy of line promotion is followed. The schedule of employees conforms generally to the following schedule: In Minneapolis; 1 weighmaster, 1 chief clerk, 103 weighers, 5 clerks. Outside [Minneapolis: 22 State weighers, 4 State weighers and inspectors. Chicago Board of Trade.— Appointment and promotion on a merit basis likewise exists in Chicago, where the Board of Trade by agreement with the State of Illinois and with the general consent of tlie grain trade takes jurisdiction over all weighing in the market. Tile weighmaster has served the department in that capacity for 20 years, and his assistant has been in the service for nearly 30 years. Tiieir salaries are, respectively, $12,000 and $4,500. The other positions are, 4 supervisors—2 over Chicago districts, 1 over South Chi¬ cago, 1 over inspection of condition of cars in yards—1 special agent; 1 esthnator with 3 helpers—estimate grain in both regular and custodian houses; 110 weighers, scale inspectors, car inspectors and clerks. (Jan. 1, 1917). CirAPTER VII. QUOTATION SERVICES OF THE EXCHANGES. Ix GEXERAL.^—A fulictioii of primary importance to any exchange is that of collecting, recording, and distributing quotations and market information. The cash and future cpiotation services afforded to membei’s and outside customers focuses the attention of tradem on the larger exchanges; and, aside from providing a trading floor for buvers and sellers, the dissemintition of market information is the most conspicuous service of exchanges to the trade. The quotation serv¬ ice is of especial concern to grain merchants who are not exchange members. The exchange member may, with little difficulty, ascer¬ tain the prcvaihng prices m the trading haU; but a country shipper (e. g., in North Dakota) must rely on the published information sent him from the terminal market. Whether he relies upon daily price cards, price currents, the market letters of commission men, or other sources, he is none the less dependent upon the exchange price record¬ ing agencies. (Sec Vol. I.) Cash quotations. —Every active grain exchange issues prices once or twice each business day, representing actual sales or estimated cash values. These quotations are by grade and frequently indicate any special conditions which have influenced the price. Sinctrthevrestern primary market prices govern trading at the secondary points to a large extent, this discussion will include only the primary centos. The de¬ pendence of the secondary markets upon prices at primary centers is indicated in the method of determining quotations in New York. The New York Produce Exchange has for a number of years published in its annual statistical report daily prices of grain in New Tork City. These prices, except in the case of oats, do not generally represent the actual price at which transactions were made, but are made up from Buffalo prices by adding, an arbitrary figure to cover freight and terminal charges to New York. The Produce Exchange has no quotation committee, and it is reported that the only object in hav¬ ing daily prices is to determine the commercial value of grain for the purposes of setthng disputes between buyers andsellem. The quota¬ tions of prices on grain in New York City published by the West¬ ern Union Telegraph Co. are usually made on a Chicago basis plus the additional charges for bringing the grain to New Tork. Grains quoted in cash marhets. —^Wheat, corn, oats, rye, and bar¬ ley are all officially quoted at Chicago, Milwaukee, Minneapolis, Duluth, Kansas City, St. Louis, Omaha, and Peoria, and the grades 323 324 TERMINAL GRAIN MARKETS AND EXCHANGES. quoted vary with the location of the market. Obviously there will be few sales of No. 1 northern spring wheat at St. Louis/and No.1 red winter does not appear in Duluth. An effort is made in the primary markets to record the actual cash sales/ stating number of cars sold, grade, and price. The following extract from St. Louis wheat quotations^ will illustrate: Sales on track, local weights, unless otherwise noted: No. 2, 2 cars 61-lb. test, at$2.02 one this side local one del. E. side dest., 1 car GO^-lb. soft, at $2.01 this side, 1 car 60-lb soft, at $2 this side dest., 1 car weevil bored at $1.97 this side. No. 3, 1 car 584-lb te;d at $1.97 del. this side, 2 cars 57^-lb., at $1.96^ this side, 1 car do, at $1.96 do, 1 car 56-lb. test, at $1.95 do., 2 cars do., at $1.92, one del. this side local, one east side dest., 1 car unsound, at $1.90 this side. No. 4, 2 cars badly mow burnt, at $1.75 del. this side, 1 car do., at $1.70 do. Sample grade, 1 car 53J-lb. bleached and damaged, at $1.76, 1 car oniony and skin burnt, at $L.89. With the exception of Cliicago the exchanges in the primary markets depend upon trade publications to quote all cash sales. At Chicago the official cash quotations are transmitted over the wires by the Cleve¬ land Telegraph Co. at 12 noon and at the close of the market at 1.15. The quotations represent the actual high, low, and closing prices at which sales were transacted. In vSt. Louis and Indianapolis the official cash closing price represents the last actual sale, but in Minneapolis and Duluth the official ‘‘ close” may or may not represent actual sales. In Duluth the buying (mostly in the hands of terminal elevator operators) is so concen¬ trated that these buyers may be easily canvassed and the closing price quotation is the highest price any one of the large operators is willing to pay. In Minneapohs, on the other hand, the ‘‘close” is determined by closing price committees, and represents their opinion of the value of grain at the termination of the trading session. The closing price quotations of these two markets are, therefore, not reliable for comparative purposes. Nor do the other quotations afford any adequate opportunity for a country shipper to contrast the prices obtaining on these two ex¬ changes. In Minneapolis it is required that all original sales, though' not resales, be reported, while in Duluth no such regulation exists. It is claimed to be customary in Duluth for sellers to report aU prices at which transactions were made, but not aU cars of grain at these prices. That is, if a sale ,of two cars of grain at 98 cents has been recorded, and subsequently 10 more cars are sold at the same price, the latter sale, more often than not, is not reported. As a result any average of the published Duluth quotations is bound to be inaccurate. The cash closing quotations are most frequently stated as a range. This fact is explained by the secretary of the Duluth Board of Trade as follows: ^ See Ch. V, sec. 18. s St. Louis Daily Market Reporter. QUOTATION SERVICES OF THE EXCHANGES. 325 J * * - * the daily cash closing prices of wheat are as a rule made by single quo¬ tation, but there are times wdien the close is on a range. There are times when, owing to a peculiar condition of a crop, grain within the same grade will vary considerably in some features and will sell according to the sample of the indi\ddual car; at such times are closing prices shown at a range. Barley prices are always closed upon a range, and a wide one, because barley does not sell by grade, but entirely by sample, and there is, of course, mde variance in the quality of barley. Although the markets apparently proceed on the principle of quoting all reported sales, no attempt is made to keep an accurate record of the volume of selling. Frequently when a sale is made at a selling price already established, the sale will not he reported. The chief concern of commission men is to be able to confirm a price obtained by reference to the official record. Consequently there is less effort made to report sales when the transaction involves no change in price. Nominal prices .—In certain instances nominal prices are made up when there has been no demand for a given grade, and are pub¬ lished for the guidance of country shippers. Nominal prices are usually determined by a market committee. In the Kansas City market— * * * They fill out a sheet at the close of the market, quoting price at which, in their judgment, grain that was not on the market would have brought. Where there are no sales the price named by the cash market committee is a price, that in their judgment, the grain would have brought, and is designated as “nominal.’’ To-arrive ‘prices .—On markets where the volume of to-arrive trading is relatively large and continuous, as for example, in Chicago, a distinct to-arrive market is maintained and to-arrive prices are pub¬ lished. It is provided in the rules of the Chicago Board of Trade * * * board of directors shall establish and maintain during a part or the whole of each day upon which the exchange is open for business, a place where buyers and sellers of wheat, corn, oats, and rye to arrive may gather and freely buy or sell or offer to buy or sell the various commodities traded in thereon. * * * The Chicago Board of Trade began to record to-arrive bids on October 6, 1913. These bids made during market hours are re¬ ported by the different firms and are posted on the board. They cover the principal grains—wheat, corn, and oats. AU details regarding the specifications are also recorded in permanent form. The specifica¬ tions not only cover the variety and grade of the grain and the date or period when shipment must be made, but also the character of the billing. Thus some bids may be for ^^Trans-Mississippi” billing, some on ‘Mllincus proportional” billing, and some Track Chicago;” akliough the latter billing is not frequently used. In some cases the bids indicate the shipping territory, such as Nebraska or Kansas. ■rice. If the bids are sent out during the market hours and accepted during the market, the future-price basis is the price prevaihng at the time of day when the telegram is received. This makes it very essential that the Board of Trade keep a record of the consecutive changes in prices of future transactions for the purpose of adjusting any disputes, that may arise as to what the price basis may be on the to-arrive bid accepted during the market hours. If the bids are accepted after the market closes, and before the opening of the market the next day, the closing price is used as the basis. Accordingly, on each day in the same book in which the to- arrive bids are posted there are also posted the closing prices on the carious future months in each commodity. To-arrive prices are quoted at, over, or under the prevailing futures price in Kansas City, as the following extract from the Kansas City Daily Price Current ^ shows: TO-ARRIVE MARKET. T]ie following bids were posted on the to-arrive market at the Kansas City Board of Trade at noon to day: No. 3 white oats, sliipment 20 days, one-half cent under Chicago July price; No. 3 mixed, Ayhite, or No. 3 yellow corn, shipment 10 days, Chicago-July price, 3 cents off if No. 4. Future quotations.— Quotations of grain futures were pub¬ lished regularly by five markets ^ prior to the war on the following grains: Chicago.—Wheat, corn, oats. Minneapolis.—Wheat, oats. Kansas City.—Wheat, corn, oats. Duluth.—Wheat. St. Louis.—^AVheat, corn, oats. Cliicago is the leading grain futures market of the world and has published future quotations (under varying delivery systems) for wheat, corn, and oats each business day since 1877. The future fpiotatioii service at Chicago is, then, of controlling importance in the trade. It must be remembered that prices of futures do not repre¬ sent the value of actual grain at the date of sale, but rather the esti¬ mates of traders as to what the grain vfill be worth in some specified future delivery month. Future quotations are to be distinguished from cash prices in that a more or less continuous record of market fluctuations is published. The word continuousis relative and is specifically defined in the contract entered into between the Chicago Board of Trade and the . .■ ■ -rr lov^,:•wi -♦•ffi .-.rU ,t ,1 ‘ If . ; -ful jv ^ volq ^ ri *. - W ' ’ u ’ '. (Mifl Smi !-.'•» ,ihs . IJ’/O . -M .1 ’Hit 'i'j/.j r^i,-^ri h'.h;.|/*> «• a,‘'■f'' PX .]/• .)(y' Mfi- ,r ;](_> - •">(;*) I, '/xmcT r-i .J.x: vi ( : l/'J.1x >'^;r:..ri}:v.nq '.:•: ^^ iV idJ X. :-tO-|OV/ ■lo, >-'Ui ;>: ' .. 'f' ,T,.d4 .. ’ 4 i ' ■•'if i :J ■. j ^j.. i'l ( d' fTij/t* !i\H',' ' -“' ’’ -.'.d ' if*.''’f|qij,- [f ,'/ ni/'d;'■' .‘'kdf' w-'d,'>;['•» 'd' ^ ..M' '' tfl: O'raatli i> -i ■ d !•■ f !Hi;W 1 I.’ V ',' ,, ii ’. 4 . . • > <■ . . { ; ' d -•'" ! i:l X .. ■); <•■ r -■ ; '<< rl d;i ] i Oyj. *i ■ " t.-v Vofl'If'Hjd-d.jr mWa'i ;; ■' • s ' ^ ’ r •" 1 ' ' • '.' / , I !<• r->.: . 1 ■ I'd'!' '•*•■- , ‘ • IaJ “f t' ; . i ,* H ’ }.i '.) ‘,*if J . > iu i'Wiq . '! f)o 7’*. iflo-'' • •>'f blf' > 'i'l.T -V; t wrirr .^Jid ■ ' 'f :' d 7 ,fj r . ){:' , ff'd djf :- ■tivld /» i ' ■ '.ffni . > 1 77 >■ . ■ , 1 • ; ■ ■ ; ■ . ■ 1 .. 1 •; ‘ , i "*' 4 ’ M . ii ' >1 ! = ' .; " > <. 7 i hir ’ 0 ■ ' ' bfr /:; ; k ’"< 1 M I ^ ‘ * !}.<;- 7 10 d ill . oM - j / r ' ' • J V ■' j : i :7 ; i - V ' nt ; •■ >■ ^ ■: i < ( ' Jill ol - i , •' jffHd " • I't f -• . xj.'i 7 11 , ><:• ■■ 't , •» • i - d , ■ ' V J JfJ I idxt . 1 oajfui - fD . d^^fr HdfK )-' ( lyi-if . t . : >-)(•! ■ -‘hD * ■ . i 5 i:.-‘'SUo K - i - t ■• • 'ro.d^drnnif^'> ■:■ . 'dildii •Hr Vi|Mr,d,o -.i .; ' • ■ > A .Udu- vX’.' i i n ’i. ri .4 /iV ‘ i .■ ■r.i j:/, al-s/fiH)?, 'a'r .j .')Tfc ill ‘.vi'dl at r ! a ■ ■■ f >(; SUMMARY. The report on Terminal Grain Marketing (Volume III of the Report on the Grain Trade) deals with the handling of cash gram by the various factors at the terminal markets. GRAIN PRODUCTION AND MARKETING MOVEMENT. most important surplus wheat-producing areas m the United States are the spring wheat area in the Northwest, center¬ ing in the Dakotas and including Minnesota and Montana, the hard winter wheat area, centering in Kansas and including Nebraska, parts of Oklahoma, Nevada, and Texas, and the smaller, Imt proimc wheat area of the Pacific Northwest. Minneapolis and Duluth are the principal markets for the carlot movement in the spring wheat areafwhile Kansas City, Chicago, St. Louis, and Omaha are the chief markets for the hard winter wheat movement. The distribution of the hard winter wheat crop is much more widespread than that ot the hard spring crop. The available information would indicate that exports of har(i winter wheat are both absolutely and relatively grkter than those of hard spring, the demand of domestic mills, particularly the larger mills in the vicinity of Minneapolis, leaving only a negligible quantity of hard spring wheat for export. Com.—The heaviest production of corn centers in Iowa and Illinois, although corn is pne oi the most widely distributed crop^ Chicago is the greatest distributing center for corn in the United States, and the inspections indicate that for 1920-21 the other primary markets, in the order of importance next to Chicago, were St. Louis, Kansas Citv, Milwaukee, Omaha, and Indianapolis. It is estimated that about 80 per cent of the corn crop is consumed on farms where grown, and the proportion of the corn crop marketed represents m con¬ sequence but a small proportion of the entire crop. The size ot the crop, however, is so great that the carlot movement ot corn is heavy. Approximately 3 per cent of the corn crop has been normally absorbed by the manufacturers of corn meal; about 1 per cent in the production of grits, and about 2 per cent in the manufacture ot corn starch and glucose. The export demand for corn has never been §ats .—The area of surplus oats production in the United States has conformed closely to that of corn, except that oats are raised m lar^e quantities considerably farther north. Thus, while Iowa and Illinois are the leading States for both oats and corn production, the area ol heaviest oats production extends into Minnesota, Wisconsin, and other States to the north of the corn belt. As with corn, the bulk of the oats crop (about 70 per cent) is consumed on the 80 per cent of the remainder comes from the North Central States. Chicago is the chief outlet for oats as well as corn. Minneapolis, Mil¬ waukee, and St. Louis are normally the next largest oats markets. ^ TERMINAL GRAIN MARKETING. Bye QT^ larley.—kA compared with wheat, corn, or oats the barlev and particularly the rye crops are very small. The chief barley product in® United States are the extreme West, particularly Cadiforma, and the upper M ssissippi Valley States-Miilnesotrthe Dakotas, and Wisconsin. The leacfing States in the rye production have been Wisconsin, Minnesota, Michigan, Pennsylvania, and North Dakota. Feeding on the farms accounts for more than half of the barley crop. Minneapolis has been the chief market for barley and also rye, and Chicago, Milwaukee, and Duluth are next in importence in each of these grains. During the war a considerable proportion of b^s bpiin ^ crop was exported. Since the adoption of profcbition there has been a small increase in the consumption of rye by flour mills and relative to the size of the crop an extremely heavy exportation of this cereal to Europe. A considerable proportion of the Minneapolis receipts have been consumed by the local mills. ^ RECEIVING AND PURCHASING PROM COUNTRY POINTS. ConsMftmenf JusW.—Grain comes into the primary markets either by shipment on consignment to a commission house to be shinn^*^ i®fi,^^ Purchase from the country V * “ethod the gram is usually sold by sample on ffrade^’’ fn®!; officially inipecteS and of o ^ F ^ second method, which comprises various conditions samnbn^^^ *0 delivery, and the operations of amphng, inspecting and weighing take place when the grain is delivered. Frequently the commission houses handle direct transac¬ tions in addition to their consignment business. The consignment business holds a prominent place in the cash trading of all the larger on markets has been carrfed on tor a long period of time. A merchant .—The commission merchant may be dehned as one who acts as a selling agent of the shipper and who does not take title to the gram shipped, although frequently securing reclTvffiVbns-n^°“i^' advances made against it. Incidental to thf receivmg business the commission man or receiver frequently under¬ takes other functions connected with the marketing of grain for country shippers. Thus the commission man may finance in part or a most entirely the operations of the country elevators. He may buy and sell futures to cover hedging accounts of his country elevator customers In some cases, particularly in the Northwest, he may fasMon^^fl c, the country elevator in much the same ashion as the head office of a line-elevator company supervises the operations of its country stations. As a rule tois^ is Tound only m those cases where the commission house is financing the elevator The commission house may also supply country Shippers with market information, assist in procuring cars for shipment, and arrange £simWe conditioning of grain in terminal houses when thr fntire«tl nf' iT®® ‘^® ““ is expected to protect the interests of the consignor with reference to the inspection *v® terminal market, md to call for remspection when the same appears to be desirable business three competitive factors appear to be of special importance; (1) The employment of traveling O'. r . -V >T 1 1 SUMMAKY. 3 solicitors to canvass the country elevators; (2) the advance of funds on open account to country shippers; and (3) the use of private wire systems which were developed primarily for handling business m ^^^Solidtors.—The primary business of the commission-house solicitor is to procure the business of country elevators and other country shippers. In the Northwest this solicitation is largely based upon offers to finance, and a commission house that is liberal m the amoun and terms of its financing is very likely to procure the business. Where a country elevator is financed, solicitors are also expected to keep a check upon the financial condition Oif the house that is, o serve as auditors as well as solicitors. In addition, solicitors may ai and assist in procuring country managers, advise as to correct operating and business methods, and sometimes, financing is involved, practically supervise the entire operations of the elevator. The employment of solicitors appears to have been greatly over¬ done in the Northwest, entailing large items of expense. I e inquiry showed that a majority of the Minneapolis commission houses employed from two to four solicitors and a few firms main¬ tained as many as six solicitors in the field at salaries rangmg $200 to $350 per month. The employment of these solicitors in the latter area has been frequently criticized, and in many cases by the commission men themselves, on the ground of the large expense. Owing to a variety of factors the financing of country shippers has become in a high degree a function of the commission houses m a great part of the territory tributary to Minneapolis and Dulutfi. i e proportion of open account shippers, i. e., elevators given a drawing account against the commission house up to a certain amount, as reported by firms in that area,- has run from about 75 per cent to 90 per cent of the customers of each commission house, though Ih®!*® have been a few large receivers in the Northwest who have to finance country elevator consignors. I^^^^asj 3 een estimated that credit extensions by commission men in the Northwest have frequently aggregated over $100,000,000 for a single crop year. Some idea of the extent of these advances can be gained from the fact that tfie commission merchants’ association in 1917 at Minneapolis and Duluth proposed to restrict loans to a maximum of $45,000 to eacfi ^^loommission men usually have figured on a spread of about 1 per cent between country and terminal rates of inter^t, though m the last year or two the spread has been higher. Thus m 1920 , according to the best available information, the commission Rouses were borrowing at about 7i and loaning at about 9 per cent. In practice a formal agreement as to the interest rates has been Lch year by the commission merchants’ associations at mnneapolis and Duluth, and deviations from the rate have been subject to action by these associations. „ , cAaxra Personal notes signed by the directors and managers of the eleva¬ tors have been required from a varymg proportion of the ^anced elpvators as secuntv for the loans. In many cases, however, no security at all is reqbred. This lack f a® ^ largety due to the severity of competition which leads ^ liberal advances of funds than would be made by a bank. Ihe tact 4 TERMINAL GRAIN MARKETING. that the financing is carried on as a part of the commission business and not solely as a banking function, however, reduces the liability to loss. Ihe financed shippers consign and ship the bulk of then- gram to the houses extending the credit, and the money is practically always loaned with the assurance of receiving the actual gram. cases contracts to consign and ship to the financing house are made, but this is often regarded as unnecessary, since, as a rule it sidCTatkm ^ understood that the advances are made upon this con- The supervision which is exercised by the commission houses over financed elevators through their traveling solicitors, as stated above, tends to reduce the commission house’s possibility of loss, and many such firms also require that grain shall be hedged as soon as pur¬ chased. Financing has apparently added undue elements of risk to the commission business, and probably tends to keep out of it men of small capital and credit facilities in this area. It is also due largely to unancmg that so many solicitors are employed. Minneapolis and Duluth commission merchants’ associations haye at various times considered the matter of financing and passed resolutions advocating its restriction or elimination. On the other hand, there are certain arguments advanced in favor of the practice. any of the country elevators in the Northwest have reported that they can obtam funds cheaper and in larger amounts through the commission men than through the local banks. The commission men apparently agree that it creates a steady volume of business and thus makes for economy Furthermore, in order to finance country ele¬ vators, either considerable capital or credit is required, so that only men of reliability and standing can go into the business. The system also frequently result^ as stated, in the commission men supervising toe elevators in an effort to prevent them from sustaining losses^ Repidmg this form of financing the Federal Land Bank of St. Paul Mates that it was about the only way the elevators could secure mopy, and the commission houses have really made it possible for them to run their farmers elevators m many cases where they would otherwise not have been able to operate at all.” Financing hy terminal elevator companies at Dnluth .—The Duluth commission firms have frequently been financed to a large extent by loans from terminal elevator companies rather than by banks. Two of the large terminal elevator companies have regularly loaned huge tem^whom^tL^'fi^ ^ secured by grain paper, to commission houses d commission firms so financed have nrobol^lt^n®^ the large commission houses in the market, handling probably 60 per cent of the gram received at that market during the period 19ipi3 to 1^6-17. An officer of one of the elevator lorn- panies deckred that there was no written contract of any kind between a financing elevator and the commission house, but Added: We re not going to loan, unless he gives us his business.^^ Conclusvons onfiTiancing.—Improved banking facilities are needed m the producmg peas of the Northwest, so that country shippers need not be depndent upon t^minal market commission louses^for their working funds While in other sections of the country the gram movement is financed through regular banking channels the country dealer m the Northwest frequently draws upon a commisskn SUMMARY. 5 house for operating funds and thereby becomes obligated to ship to it This results in competition in financing as well as in the handling of grain. This competition in turn results in the assumption ot heavy financial risks by the commission houses, dnd sometimes in the ac¬ ceptance of inadequate security for the funds advanced, it also probably tends to keep out of the commission business men with small capital and lines of credit. i . t x- i* r u Moreover, the practice leads to a multiplication of solicitors and to expenses for solicitation greatly in excess of those incurred by commission houses operating in the territory outside the Northwest, and thus has a tendency to create high commission rates, ihis is due not only to the fact that such financing requires extensive solici¬ tation to secure the business in the first place, but also to the necessity of maintaining some check upon the subsequent operations ot the financed elevators. . i. j i ^ As pointed out in Volume I, however, there is a great deal ot evidence to indicate that in a large portion of the Northwest the elevators can borrow more cheaply from the commission houses than from the local banks. As long as this is the case, it is doubtful if a,ny material improvement with reference to commission-house financing can be expected. , , ^ i i + The financing of Duluth commission houses by terminal elevator operators tends to have a restrictive effect upon competition, and the practice should be abolished. Commission houses are the agents of country elevators for the sale of their gram and as such it is their duty to obtain the best possible price for that gram. Arrangements under which they turn over gram consigned to them to certain terminal elevators because of financing is not conducive to free competition in the sale of grain nor presumably to the consignees procuring the best obtainable price therefor. ^ Purchasinq direct.—D'woct purchases of gram may be made on the basis of “net, your station,” i. e., f. o. b. cars country station track, or “delivered at the terminal market.” In the former case the buying is commonly known as “on-track” purchasing, aM m the latter case as “to-arrive” purchasing. These direct purchases are more often on a grade than a sample basis, though in some cases samples are used. Such transactions most often originate Jh® terminal market, though they may originate in the country. exchange hours direct bids are sometimes made to country points by wire for immediate acceptance. After exchange hours it is cus¬ tomary for many firms at the primary markets to send out over¬ night bids, usually on postal cards, for acceptance prior to the open¬ ing of the exchange on the next business day. Private wire systems out of Chicago are employed for making direct bids at all times. At several markets the practice of “ bidding the country after exchange hours has been sufficiently extensive to lead to the adoption of rules for its regulation, particularly in connection with maintenance of uniform rates of commission and the uniform commission rule. Grain both on-track’’ and ‘ To-arrive” is usually bought to be shipped or to arrive within a specified period of time. • • +i ^ The most conspicuous effect of the direct marketing of gram is the increase in cash trading off the exchange floor, which naturally tends ^narrow the trading^ the floor. Opposition to its increase has 6 termustal grain marketing. pnerally come from commission men and their customers and oth^r traders who are especially interested in the StTnTnce of thp Direct buying is favored, on the other hand bv „ X 1 such as terminal elevator operators who are inter be bouSt and sold satisfactorily on a grade basis and more or less irresneftivp nf premium qualities in particular cars. It has been ar^nied in nnr. tion to purchasing d/ect that it results rn concentrftTi .feSi “ -» ‘Vis ES:S= ci,i‘S fcSJr'' -i,7.Sit,* Sv£“ro:' Jnd‘^!hif Is involved as i?tiieTa“^of 7 uLre ope?a\fon^^ elevators. Wldle *^tLrIfore°h*^mav*^bf "tf country ^eS f'i^°??ngTseh SfSre\u\Vri“l jie ex^ftr t ra^„^?xTs tferw^bthSlfe wires were employed for the transaction of only the cientl V This would necesiril^involye woulXrolmbfrt^nTt’o expense of the facility and ness. P ^®"'* *0 ^'gh concentration of the commission busi- TERMINAL ELEVATOR FACILITIES. vessel to another, either directly or bf transfereiny to thehT^*'’i°'' storage tanks and subsequently loading out elevator itioning, which processes inyolvrs^enint’ 0001^^-1 drying wet grmn, Smutting, bleaching, :trfnd ( 4 ) "rfixbg^ SUM MAE Y. 7 260 000 000 bushels. Fully 80 per cent of this capacity is operated by nrivate dealers in grain. Nearly half of the total capacity is included in privately operated houses, i. c.,not licensed nor operated as public warehouses. Over 30 per cent of the total is operated under State license, but largely for account of the operators Possib y 20 per cent of the total is operated on a public utility basis, and this includes all the houses operated by railroads, public agencies, and public warehousemen not dealing in grain, hrom a commercia standpoint, therefore, the aggregate elevator capacity controlled by private dealers includes the bulk of storage in elevatom licensed as public warehouses by the States. This is true of most of the licensed public elevators at Minneapolis, Chicago, and Kansas City, and is m marked contrast to the situation in Canada. Except perhaps at seaboard points, it appears to be generally true that terminal eieva- ator companies can obtain a higher rate of profit by combmmg mer¬ chandising with storage and other functions, and that therem lies in part the reason for the existing situation m the United States. Leasirn/.—Grain elevators at terminal points have always been largely owned by the railroads as a part of their terminal facilities. To-day approximately 35 per cent of the commercial terminal elevator capacity of the country is owned by railroads. At interior terminal points most of these railroad-owned elevators are leased to private dealers. At the seaboard points the railroads, on the other hand, own about 69 per cent of the total storage capacity and retain in most instances operating control. , p There are various reasons for the development of the practice of leasing terminal elevators by the railroads. In the first place the railroads have found that tonnage can be obtained fully as well, it not more effectively, by leasing the house to a large dealer who has every incentive to route the -gram over the lessor s line. As the interior markets are frequently the terminals of various roads, so that-some lines have no interest in the gram after it reaches the terminal and others no interest in the gram except after its arrival, there has often been an advantage in the railroad company leasing a terminal elevator to an individual dealer with the specific agreement tLt the grain owned by the lessee shall be brought m or shipped out over the lessor’s railroad where possible. 1 he second reason for leas¬ ing frequently advanced is that of operating cost; that at competi¬ tive points in the interior a terminal elevator affords the railroad no profit^and may be operated at a loss. To lease a house at a fixed rental may afford a reduction m expense and may al^ eliminate cer- tahi vexatious operating problems at the terminal. But the railroad carriers having constructed elevator facilities at the terminal niarkets, have frequently leased such property to large merchandising and shipping companies as a means of developing traffic on highly favor- able^terms to the lessee. Investigation of the leasing situation at Kansas City in 1918 by the Interstate Commerce Commission devel- oU tfie flct that an the public elevators "^Kansas City were o^ed by the railroads (except two small elevators), and that the control of these railroad properties by the six or seven lessees gave them an advantage in buying and selling gram and placed the other grain dealers at that market at a disadvantage. 8 TERMINAL GRAIN MARKETING. Elevation aZZowonces.—Elevation allowances by the railroads to the operators of terminal elevators have also given rise to a great deal oi criticism. Contracts have been entered into between rail¬ roads and gram merchandising concerns in which the railroad com¬ panies have agreed to pay certain allowances per bushel to concerns operating terminal elevators for providing elevation and storage facilities at terminal poin^ts. In a number of these cases it was found that the gram handled by the elevator m question at the terminal point (for which handling the railroad had agreed to pay the elevator company) was chiefly the property of the latter, and a number of suits on the ground that this represented unlawful discrim¬ ination. Ihe Interstate Commerce Commission held that elevator companies could not be properly remunerated for transportation services, e g., elevation and transfer performed for the railroad Without allowing them commercial benefits amounting to an unlawful iscrimm^ion against other dealers. The Supreme Court, however carriers were required to provide elevation under the interstate commerce acts and that regulation of the trade advantage accruing to operators performing elevation services for the carriers was without the scope of the Commission’s power haprincipal grain-producing States th Poljce power, passed laws declaring that the elev^ion and storage of gram under certain conditions is a busi¬ ness so affected with a public interest as to require license and regula- f but few exceptions, been upheld by the courts. One of the primwy purposes of the State regulation of elevators and warehouses is to secure the validity and negotiability of w^ehquse receipts. The warehouse laws of the grain States in¬ variably include certain provisions with reference to the form and substance of such receipts, the manner of issuing and canceling them and the conditions demanded of the warehouseman. In Illinois a perpetual injunction was granted by the courts against Chicago ware¬ housemen enjoining them from storing their own grain in the public ' bins. Subsequent to this decision operators of the public warelmuses the ruling of the courts^has been effeX- al y evaded. The. principal method has been for an operator to sell ftinfelevator to another concern under an agreement that the gram is to go to store” in the public warehouse which the ^ller operates, there being deducted from the prevailing prices a to cover the expenses for storage and allow a small brok^age to the purchaser m compensation. _ Eubhc warehousing has for a long time been on the decline. This forwarding.markets such as Chicago and^uluth. Various causes have been assigned for this decline It has been attributed partly to the fact thaUhe entrance of the public gram business has made it impossible store m the public elevator in competition with uch merchandisers who either have no storage to pay except to them- Regular elevators. ^At those markets where members of the ex¬ changes conduct trading in futures the exchanges declare certain houses to be “regular” for the storage and delivery of grab on SUMMARY. 9 future contracts. Grain in such houses is registered and subjected to inspection by exchange officials. l.he practice seems to have origi¬ nated in Chicago in the decade 1870-1880. The requirements gen¬ erally made of regular elevators indicate that the term bears no specific relation to the elevation and storage of cash gram. In Chi- cat'o and Minneapolis the regular warehouse must under the exchange rufes bo a public warehouse in conformity with State laws. At Duluth and Kansas City, on the other hand, the exchanges do not require that a regular warehouseman shall hold a State license, and houses operated wholly for private account have been declared regular and placed under exchange supervision for handling contract gram. Merchandising and shifping.—ThQ public or private terminal eleva¬ tor companies operating as grain dealers are the largest merchandisers and distributors in the trade. Several of the larger elevatorcom- panies combine with merchandising and warehousing a cash and future commission business and the operation of country elevators. The chief profit of terminal elevator merchandisers is ol course derived from the purchase and sale of grain. The indications are, particularly at Chicago, that a substantial proportion ol this profit IS often realized by the mixing of different grades of gram to raise the commercial value. • i i i. In addition to the foregoing sources of profit terminal elevator companies operating as merchandisers derive a considerable revenue from various auxiliary operations, such as the sale ol screenings obtained from cleaning operations, transactions in the futures mar¬ ket, and from the storage, transfer, cleaning, and conditioning ol grain for others in return for a fee. . A considerable part of terminal elevator merchandising m certain markets is for local delivery, but the elevators as a class are predomi- nantlv shippers. The wheat flour millers at Mmneapohs and the corn millers at Indianapolis furnish perhaps the most conspicuous examples of local absorption of elevator stocks. Certain elevator companies specialize in selling to flour millers, m some instances, on a type sample basis. , Private elevator companies with houses that are regular under exchange rules are often in a position to influence the course of tfie futures market by having control of a large quantity of deliverable grain. A large elevator or a group of elevators may make deliveries on the first day of a delivery month with a view to such manipulation. Long buyers of futures who do not wish to bother with the cash gram will be impelled to sell hastily, thus depressing the current delivery future price relative to the price for the next future delivery. e elevators will then be able to transfer their open hedges to th^e next delivery month on a basis of a profitable spread between the two operations, buying-in the current option and selling the next option, or they may buy back the ca^ grain at a sufficiently depressed price to give them a larger carrying charge. . , , ^ Practically every private terminal elevator company engaged in merchandising makes a practice of mixing, cleaning, and conditioning, either to secure screenings, to improve the quality ot the grain, or to take advantage of the latitude withm the require¬ ments of each standard grade by mixing to the bottom level of such requirements. Different grades are frequently mixed also m railroad 10 TERMINAL GRAIN MARKETING. operated elevators under the supervision of local inspection depart- ments with a view to releasing additional bin space. Comlfined results of wheat-mixing operations in Chicago in six private elevators l^coSarS wKo f ^o. 2 winter ^ compared with 42 6 per cent received, and an outturn of 90 ner Milt No. 1 spring wheat as against 38,9 per cent received, ^he mixing operations at Minneapolis during approximately the same period were of comparatively little significance There is a consid^ able volum^e of selling by type sample to the mills in this market TvelP^th '®®s mixing to thTlower level of the grade reciuirements than is the case in Chicago. A com¬ parison of the mixing results for terminal elevators ^in Chicago Minneapolis, Duluth, and Kansas City on all contract grades (No” 1 and No. 2 of both spring and winter wheat) specified by rule on each exchange for four years was as follows: At Clucago, 45 7 per centTn TV®]' Minneapolis, 31.4 per cent in, 34.4 per cent out- at Duluth 36.9 per cent in, 72.4 per cent out; at Kansas Shy 36 1 per ■ cent 111 , 51.6 per cent out. An attempt to determine statistieallv ‘ mixing operations at Minne- To ^9’’ g»^e a range of from about one-fourth to 33 cents p®r bushel at Minneapolis amffrom about two-thirds of ^ about cents per bushel at Duluth. th«T has provoked considerable criticism on a variety of grounds- that it leads to a discrimination m favor of country run OTain as com ’ pared with terminal elevator grain, since terminal elevftor grain“s always expected to be “skin” grade; that such mixW giferthe e evator meichandisers who operate regular warehouses m undue advantage in the futures market and that it leads to manipulation of that inarket. It is defended by the elevator men on the ground that mixing makes a market for low-grade grains and permits a reali¬ zation by the producers of higher prices for these grains through creating a competitive demand for them for mixing purposes. • ^ ' ► ^ REMEDIES FOR TERMINAL ELEVATOR SITUATION. From what has just been said, it would seem that grain merchandis mg on the part of operators of licensed public elelatoiTcontra^Y to sound principles of public warehousing. The possible remedy for this situation suggested by the circumstances is to make it prac- ticable for pam dealers not operating eleyators to store gram in public elevators in competition with the big elevator merchandisers To accomplish this would require a reduction in storage charges. But the mdications are that, even at present storage rates, a purely storage termbMpoTntf®^ profitabTy operate^d a/inter4 The problem in question can bo met in either one of two ways The railroads might be required to operate eleyators for the c^- venience of their shippers; or the Government, presumably the State government, might operate storage elevators at rates suffi- Sevator merchaiXers ® ®®“P®‘® ‘he roU* objected that the operation of public warehouses by the railroads m such manner or at such storage rates as would restore the SUMMARY. 11 possibility of the utilization of public storage by cash grain handlers generally would involve a loss to the railroads. This is not a conclu¬ sive objection and the implied premise is not necessarily true. Rail¬ road elevators are at present and have in the past been leased to operators at rentals often nominal and frequently insufficient to afford an adequate return on the investment. There are collateral advan- tao'es to the railroads from these facilities, due to their assistance m attracting and holding traffic, which are largely compensatory for the direct losses in question. As regards terminal facilities m general the charge for the specific terminal service need not cover, and perhaps can not be made to cover, all the costs incurred. There is no reason why the same principle should not be applied in the public interest to the terminal storage of grain, especially as the railroads are already not obtaining any appreciable profits from this part of their property. The charge made for public storage should of course cover necessary operating expenses, but in addition need include only a mmimum contribution to fixed charges instead of attempting to insure the covering of that element, in cost. Furthermore, it is not at all impossible that railroad elevators could be operated profitably at interior terminals, if the storage rates were made sufficiently low to enable cash handlers gener ally to employ these facilities in competition with elevator mer¬ chandisers. Adequate profit from a purely storage and transler elevator is chiefly a question of volume of business, If rates were sufficiently low to enable dealers without elevators to use th^e facilities, there should be a vast increase in the quantity stored by such dealers and a great increase in the degree of utilization ot capacity, such as to mean possibly a direct profit as well as an indirect advantage to the railroads owning the elevators. It is worth noting that 30 years ago or so there was less tendency to a concentrated and possibly monopolistic exploitation of termma storage facilities than at present and no economic obstacle to the utilization of public storage by cash gram handlers generally. I he public storing of grain owned by producers and handlers ha^ng no devators was then a regular incident of the gram business. At that time the relation (or spread) between cash and future prices at Chicago was much more in conformity with economic requirements than has recently been the case. The existing situation tends to choke the normal channel of connection between the cash and futures markets, to foster in the latter market technical condi¬ tions and price movements not related to the demand and supply situation for actual grain, to give to powerful integrated concerns additional opportunity for manipulation, and to impair the uselul- ness of the futures market for hedging purposes. All the incidents of terminal handling should be arranged so as to eliminate incentives to unduly prompt selling and premature removal from storage at the terminal elevator of the railroad on which the grain originates, and so as to facilitate the continue ownership of the grain hy the country shipper, if his judgment of economic conditions suggests such a policy. elevation and storage charge should uniformly be included m the freight charge, so that only through-billed gram would escape con- tributing something toward the cost of storage facilities at the 12 TERMINAL GRAIN MARKETING. railroad elevator. Such a measure would tend to prevent holding grain in cars and the tying up of railroad equipment, as well as the diversion of grain to private elevators for speculative purposes. The restoration of a more normal situation as regards the use of public storage in the grain trade would be so generally beneficial to the trade and to the public as to warrant necessary legal reforms and financial expenditures in the directions suggested, or whatever other steps might be necessary to accomplish the object in view. SHIPPING AND BROKERAGE. The business of shipping on a commission basis is carried on to a small extent generally in the terminal markets. This class of trade includes a considerable nuinber of independent shippers not operating elevators, as well as terminal elevator operators. The number of firms not operating elevators which are engaged exclusively in shipping is almost negligible, since most of these dealers carry on a cominission business in addition to their trading operations. The shipping function in the grain market at Duluth has been performed largely by concerns not operating elevators. The business of a cash grain broker is to bring together the buyer and seller. The broker does not handle the commodity on his own account and assumes no risk for shipment, storage, or delivery of, or payment for the grain. He is primarily concerned with obtaining a brokexage for bringing about the transaction. The bona fide broker IS a middleman, acting as an agent in certain transactions, and dis¬ closes the name of the principal whenever he arranges a trade. The broker is distinct from the commission man chiefly in point of risk and responsibility for the movement of grain. The commission man assumes risks of shipment, delivery, and payment. The broker has none ot these hazards, but is merely an agent handling no funds and taking no responsibility. His fee is usually not over one-fourth cent per bushel. In the larger central markets the cash grain broker’s business is very restricted. It is a small part of the business done at Minneapolis and the number of strictly cash brokers in Chicago would embrace only a comparatively few specialists. Strictly broker¬ age concerns are most frequently found in the smaller markets or at points where there is no active exchange. The larger primary dealers often operate through brokers in a territory where they have no branch offices. Thus sales to local distributors in the Southeast are requently handled through brokers in that area. Exchange privi¬ leges are not sought by some brokers, either because their business IS too small, or because they are located at small secondary markets where there is no highly organized exchange. The eastern seaport brokers operate between the great shipping and selling markets of the productive areas and the consumption and export trade of the East. I heir business differs from that of the inland brokers chiefly in vol- ume, in more elaborate selling organization, and in technical under¬ standing of export and transshipment matters. THE GRAIN BULLETIN. The most important country price information service is the Grain Bulletin of Minneapolis, operated by F. R. Durant. The Grain JjUlietin lurnishes each country elevator, shipper, or buying agent SUMMARY. 13 subscribing to its price card service with a daily country price list, or card, giving a price at the subscriber’s local station, based on the market at Minneapolis or Duluth. It also furnishes a wire service to those subscribing for it, transmitting market changes immediately after the close of the market, and (during the day) notification by wire of any important market fluctuations. In addition there is furnished to the head ofiice manager of each line company a daily abstract of cards issued to its local elevators. For the purpose of distributing the cards Mr. Durant has divided the territory covered by the Bulletin into two zones, which are further divided into groups based on freight rates. The prices sent to the individual stations by the Grain Bulletin ofiice are computed from a basing sheet, which sets forth the estimated values for given varieties and grades of grain less a handling margin, which purports to include the country eleva¬ tor’s expenses and profit. The daily price cards are computed by subtracting the freight charges for each station from the correspond¬ ing group figures on the basing sheet. The card represents in^ Mr. Durant’s theory a minimum price list for buyers at country stations. The normal handling margins off terminal market prices used m making up the cards vary, not only as between different grains, dif¬ ferent grades of the same grain, and different crop years, but also with various local conditions and other special factors, such as car shortages and severity of weather. , . p The question of the use made of the card as a basis for price agree¬ ments among its suscribers is entirely separate from the question * of whether in recent years Mr. Durant in issuing the card prices has been in collusion with the line-elevator interests. ^ j* • On the score of the use of the card by subscribers to it, as distm- guished from Mr. Durant’s preparation of it, it may be said that the card is used by a very large proportion of country elevators m the Northwest, and that the statistical evidence indicates that it is employed chiefly as a basis for buying, and that the prices listed by it do not coincide with the prices actually paid by a majority of the eleva¬ tors. That is to say, a minority of the elevators (43 per cent out ol about 2,500), chiefly line, report that they follow the card, but the replies of the balance indicate deviations from the prices on the card based on competitive conditions and other factors. A detailed study of actual prices paid by a representative group of country elevators scattered through the Northwest over a five-year period showed that the prices actually paid did not coincide with the prices ol the card except in a negligible proportion of cases. , , i . As appears from Volume I of the report, the card has been lepeat- edly and continuously employed as a basis for price agreements and similar arrangements entered into on the initiative of elevator rnan- agers in the country markets or through line officials at the terminal markets. The Commission is in possession of hundreds of letters from the files of line companies, covering the period 1912-1920, which clearly evidence either agreements as to country prices, grades, dockages, etc., or else such harmonious and cooperative action with reference to these matters as would bring about practically the same elimination of competition as could be secured by more specific agreements. Cooperative or farmers’ elevators, and independent 56976°—22-3 14 TERMINAL GRAIN MARKETING. and mill elevators are rIso involved frequently in these agreements and practices. Repeatedly it has been either agreed or mutually understood that card prices only should be paid by the elevators at a station, and certain technicalities of the service facilitate the card’s employment in connection with such price agreements. This use of the card for price-fixing purposes, however, is attributable chiefly to the price policies of the various country elevators, particularly the lines. It is probably safe to infer that many of the elevators reporting to the Commission that they followed the card were doing so as the result of such agreements. In this connection it is perhaps worth noting that the lines which are most frequently the instigators and partici¬ pants in the agreements and understandings regarding prices are also the most consistent according to their returns in following the card. In meeting competition there are numerous indications that the line companies not infrequently have worked together in endeavoring not only to prevent competition among themselves, but also to take business from their competitors of other types. On the score of the preparation of the card itself, as distinguished from the iise of it by subscribers, it may be said that the Grain Bulle- tm was originally organized and financed by Minneapolis line-elevator companies but was assurned as a personal enterprise by Mr. Durant in 1907 ; that Mr. Durant in the early years acted for the line-elevator , companies in pooling arrangements; and until a comparatively recent date handled for them matters pertaining to the closing and leasing of country elevators, as well as receiving and disbursing funds for political and legislative purposes on behalf of these concerns. It seems fairly certain that prior to 1913 the line-elevator companies, some of which originated the service, largely influenced the policy of the card, and tliat it was operated to a greater or less extent in their interest. Prior to 1912, according to Mr. Durant, opinions were obtained Rom the attorneys general of three of the States served by the Bulletin to the effect that the cards were on a legal basis if they indicated the highest price which any dealer was willing to pay at a mven station. As a result of this ruling, up to about 1913 Mr. Durant placed certain stations on a special basis, the prices at those stations being based not on the normal handling margin but on the highest price at which any elevator, line or nonline, at such station was willing to buy grain. It thus became possible for the line to have the card price raised to a point which would allow no profit at any station where it might wish to destroy competition, and there are numerous indications that the card thus became, during that period, an instrument which was employed by the line companies in local price-raising wars of this character. By implication, at least, Mr. Durant has admitted the influence of the line companies prior to 1913, as appears in the following extract from a letter of August 28, 1916, signed by the Grain Bulletin and addressed to D. B. Johns:- • 1913 "wliat you say about our being influenced by line elevator companies might have been true, but since that time it has not been. The passage of the State antidiscrimination laws in 1913 marked a change in the policy of the Grain Bulletin. From that time till 1917 Mr. Durant took the position that he would adjust the card SUMMARY. 15 basis at the request of local nonline elevator managers but not at the request of a lino company (unless for the line ap a whole). So far as can be judged by his correspondence, this policy was adhered to during this period. As shown elsewhere, the lines were able from 1913 to 1917 to obtain adjustments at local stations through procuring nonline competitors to request the change in the card. Since this involved the consent and cooperation of the latter, it is probably safe to conclude that adjustments thus procured were indicative of agree¬ ments and cooperation at the stations affected. That Mr. Durant was privy to this situation is certain. With the closing out of the guarantor’s fund in 1914 the Gram Bulletin may be said to have become financially independent of- the line elevators. In 1917, under war conditions, Mr. Durant dropped the policy ol adjusting prices upon request (special cards) and has not resumed this plan so far as any evidence has been obtained. In conclusion, it may be said that, so far as evidence has been found, Mr. Durant does not appear to be operating the card at the present time in the interest of any particular class of subscribers nor as a price-fixing mechanism, whatever he may have done in the past and whatever his present relations with the line companies may be in political and other activities. , ■ Chapter VIII and Appendix A of the report contain a record ol an examination of Mr. Durant regarding the items of political expendi¬ tures in the ^^FRDS” (F. R. Durant Special) account in which such disbursements were recorded by him. In a letter of March 12, 1915, by J. L. McCaull, president of the McCaull-Webster Elevator C^, addressed to Messrs. F. C. Vp Dusen, C. M. Harrington, and G. I. Ewe, and referring to legislative matters in South Dakota so lar as they related to the grain trade,” Mr. McCaull said: In this connection it is appropriate to say that the watchful eye and the ceaseless activity of Mr. F. R. Durant in connection with legislative matters has been ot tne greatest value to the grain trade of the Northwest, and I know of no one who could surpass, if, indeed, they could equal, his vigilance and valuable achievements in this connection. Mr. Durant’s political and other miscellaneous activities in behalf of the line companies, such as are above indicated, have naturally caused suspicion as to the independence of the Grain Bulletm. In view of all the facts it would seem that some form m ernment regulation or supervision of the card. State or Federal, is probably desirable. Just what form this regulation should take the Commission is not prepared to suggest without making a much more detailed and careful canvass of the situation. So far as present information goes, however, it is believed that such regulation and supervision should not be too detailed, but at least regular repor s to some governmental agency should be required. These repoits might be, for example, a continuous daily record-of the terinmal market base prices employed, whether “to-arrive,” ‘^spot, or fu¬ ture ” the handling margins allowed and methods of ascertaining and computing them, with explanations of any differences between dinw- ent grains. Records of any special adjustments made shmii^ supplied, together with reasons. Another method would be to re¬ quire that a full report of this character should be made at the begin¬ ning of each crop year, any subsequent report to be made only 16 TERMINAL GRAIN MARKETING. when there are any changes or deviations in the handling margins base prices, etc. ^ All such reports should be made matters of public record, and the governmental agency should, of course, be directed to confer with Mr. Durant in regard to any changes made and to raise objections and discuss the changes with him. Lest there be misinterpretation, it should be clearly understood that these tentative suggestions are not advanced upon the theory that there are irregularities in the operation of the Grain Bulletin service to-day, but because of the important influence of the card on buying prices and of the large uncontrolled and unsupervised dis¬ cretion vested in a single individual who is responsible for computing and sending out these prices. To adopt the foregoing recommendations proposed by the Commis¬ sion should tend, it is believed, to insure not only that the card prices will be at all times fair and just country prices, but also that the card will not m the future be influenced by any particular class of sub¬ scribers, as it apparently has been in the past. PRICES OF CASH GRAIN AND CLOSING PRICE COMMITTEES. % The rules of many of the exchanges require that some record be kept of actual transactions in cash grain, and even where there is no specific requirement by rule it is usually customary to do so. More or less detailed records of the prices at which cash grain sales are made are kept at all the principal markets. At several of the markets, as Chicago, Minneapolis, Duluth, and Kansas City, there is published a daily market bulletin or price current, which gives a daily record of the prices at which numerous individual cars of grain are sold. The sources of these price lists are the exchanges or members thereof, but the methods of collecting them vary with the different markets. hor the exchanges at Minneapolis and Duluth, committees com¬ posed 01 exchange members make up each day cash closing prices for the vanous grains. At Minneapolis there are two of su5i commit¬ tees one for wheat and the other for coarse grains, each usually composed of tmee or four members. The method of making up such closing prices is by determining the premiums and discounts over or under the future at which cash grain is being sold and then to add these premiums to or to deduct these discounts from the future closing price. The result is the cash close for the day. A study of the closing prices on specified grades of grain in com- with both the mean of the high and low prices paid during the day and the prices at which the greatest number of cars of each grade were sold, reveals the fact that the closing prices tend much more frequently to be under the mean of the high and low for the • modal price for the day than they do to be over; and that the minus deviations are on the whole much wider than the plus deviations. Several possible explanations of this phenomenon may be given, but the fact that the determinations of the premiums and discounts which are employed in arriving at the close are so largely a matter of personal opinion suggests that the foregoing variations are probably due to the defects in human judgment involved rather P9 flfher factors, and that the psychology of the market is such summaky. 17 that the committee-made close tends to be In a downward rather than in an upward direction. . • j • Terminal market prices serve as a basis of the prices paid m me country and it is therefore of vital importance to the grower that records of prices actually paid should be as complete and accurate as possible, and that any prices compiled or selected from them lor circularizing should be determined as objectively and impersonally as rei less 01 wiieiner utiiei oa,ico xiavc ---- _ ^ ^ • or not As grain from country points may be resold several m the same market before reaching the ultimate consuiner (as at Minne¬ apolis), it should also be required that all resales of cars should be reported in exactly the same fashion m order jiarticularly that the hidier prices paid to scalpers will have their due influence on the gen¬ eral price level. Under present methods the lower original prices figure in the records of the day^s transactions, but the higher prices paid the same day to scalpers for the same cars do not appear m the record. Perhaps such resale prices should be specially designated as such but in any case the complete record of these cash gram transac¬ tions, together with the time, should be available to country elevators and to the public. . i .1 . • xi, • Secondly, it would seem to be fundamental that m the issuance ot prices, such as opening, high, low, and closing, the element of human ludgment should, so far as practicable, be elunmated. These prices ought to represent actual purchases and sales so far as possible, and, in the case of opening and closing quotations, prices on transa^ions within a definite period after the opening or before the close. Highs and lows should likewise represent m all cases actual transactions it it is found necessary to use bid or asked prices or nominal prices they should be so labeled and any necessary explanations inade. Where actual transactions are not available at the close the prices may b^ye to be based upon actual transactions earlier m the day. Possibly there is no objection to the method used at Minneapolis and Philuth of applying premiums and discounts over and under the future to the future close, but if this is done the method should be sharply defined and should be more objective and impersonal than that at present emploved. It is important for the proper application ol any satis¬ factory method that, as already stated, there be a complete record of all cash sales, including resales, together with the time at wbich each transaction was effected. With this record before them and the complete record of continuous quotations of futures, it would be possible for the committees in making the close to determine with a good deal of accuracy the exact premiums and discounts prevailing instead of employing more or less of a '‘snap judgment. , • . 1 Whether this particular method is emploj^ed or not, it is 7 important that the procedure of closing price committees should be "^Ftoafly^twould appear desirable that all the exchanges should publish quotations on a uniform basis, each kind of quotation to be made up by as nearly uniform methods and principles as Pi’^cticable. It would doubtless be necessary to recognize the fact that on the 18 TERMINAL GRAIN MARKETING. smaller exchanges only a small number of actual transactions may be available. If practicable, it mi^ht be desirable that a representa¬ tive of the Federal Department of Agriculture or other governmental agency should sit with all committees having supervision over price quotations. ^ Cash prices, as at present reported for the various exchanges, and the methods of recording and computing such prices, taking the exchanges as a whole, leave a good deal to be desired. The exchanges have apparently devoted less attention to. such matters than their importance demands. It is believed that they would perform a con¬ siderable public service if they would undertake a careful study of the situation, with a view to attempting the establishment of a system oi cash price quotations along the lines already indicated, or along such other lines as might seem likely to improve the situation. DULUTH INSURANCE CHARGES. ^ fh® Duluth market it has been the practice to charge shippers insurance ^on their grain after delivery but before unloading at the elevators. It appears that a majority of the receivers at that market have lor several years billed shippers for insurance at the rate of 5 cents per hundred dollars ‘^selling price,’’ and that in many instances the charges billed as recorded on the books are far in excess of any insurance expenses actually incurred. Two questions arise out of this practice. The first is as to whether or not there is actually any liability lor loss on the .grain which it is necessary to insure against. 1 he second is as to the amount charged for such insurance. As regards the first point, opinions at Duluth are divided The commi^ion men as a rule claim that there is such a liability. Respon- sible officers of insurance agencies and elevator operators, however assert that the liability alleged by the commission men is nonexistent’ and that either the railroad or the elevator company on whose tracks the gram is delivered is in reality responsible for any loss. ven supposing that there is such a liability for loss, however, the 1 i I ■] , tes charged. According to the card fol¬ lowed by the agency at Duluth, through whom the bulk of this grain insurance was placed, the 5-cent rate billed to the consignor for the alleged insurance was greatly in excess of the actual premium cost of such insurance. Accounts of some of the commission houses examined showed that in certain years no money was actually expended for one organization showed a total of over ^24,UUU collected lor gram insurance over a period of 12 years, while the amount actually expended for such insurance amounted to $1 000 leaving a credit balance to insurance account for this period of $23 000.’ urmg the five years ending with 1917, Duluth receivers collected for such insurance charges more than $69,000 in excess of any expendi¬ tures made by them for such insurance, but these insurance tolls were never questioned by the exchange authorities. The rates at which the insurance was billed to shippers were (on the basis of 1917 rate car ) conside^bly m excess of the rates charged by regular insurance companies. This income, therefore, was secured through an over¬ charge where the commission houses insured through insurance com¬ panies; where the commission men carried their own risks (i. e did not purchase insurance from insurance companies) this income theo- summary. 19 retically represented excess of charges billed over ^ losses apparently occurred, the income was presumably the total amount^of charges billed. Even granting that the liability for loss is actually existent, there is no justification for billmg shippeis a charge in^excess of regular premium rates for insurance m the case of cLpanies purchasing insurance from insurance , companies or m excess of loss ratios in the case of those companies which do not purchase regular insurance but prefer to carry their own ns . CAR-I.OT SCALPING. I For the purpose of the study of scalping, a car of gi’ain was con¬ sidered to have been scalped when it passed through the hands of on or more middlemen, other than the consignee, m the same market, nriOT to delivery on either a “to-arrive” or future contract, or prior to delivery to a concern or its agent engaged m storing, conditionmg converting or shipping grain. The practice of scalping appears to be prevalent only in the Minneapolis market, and little or none oi it was^ found by the investigation at either Chicago or Kansas City. tS bulk of scalping at Minneapolis is done on a joint venture between various commission houses and their employees, the ioriner financing the transaction and the latter actually transacting the harness, the profits and losses being split m a certain agreed ratio. The results of tests by the Commission indicate that the percentage of cars scalped in^e Minneapolis market in 1916-17 was between 5i per cent and per cent of the total cars received. This result, how ever should probably be regarded as the proportion likely to be scalped in a g^d scalping year, 1916-17 bemg, accordmg to avadaUe information, a year favorable to the practice. Out of 180 cars originally scalped in the Minneapolis market which were traced through to ultimate destination, 65 were scalped the second time, 10 a third time, and 2 a fourth time. Average net scalp¬ ing profits per bushel (losses having been deducted) at Minneapolis in amounted to about 5§ cents per bushel. The most profitable soalpino' was in lower grade wheat. Wheat grading No. 3 or better vlffl'a net profit of only 5.42 cents; wheat poorer than No. 3 ^.11 1 o _jL. nn«Gsifip.H ou which thc sfadc couM not so prSle^ BarlS gave a profit of only 2i cents and rye^li cents per bushel; corn scalping yielded only about one^K of a cent per bushel and oats about two-thirds ol a cent. These nrofits beino* in a year of rising prices are presumably considerably Eetfer t&hey wLld have beln in a year less favorable to scalping, when the prices were more nearly stationary or declining. By tracing through the various scalped cars certain facts were clearly established: (1) That the consignments of certain large Sers arrmuch more heavily scalped than the consignments of other receivers; (2) that the two largest scalpers in Minneapolis SeSLt vely 71 and 81 per cent of the cars which they pur- chaswl Cm the other; (3) that a substantial proportion of the scalped cars were bought back by the original consignees; (4) that a con¬ siderable proportion of the scalped cars were resold on the same day as purchased. 20 TERMINAL GRAIN MARKETING. The foregoing points would seem to raise the question whether scalping as it has been conducted at Minneapolis does not result less m serving to myntain cash prices than in causing scalping commission Wes to fail to procure the best obtainable prices for consignors While positive statements can not be made on this point, it Is be- 1 eyed that the statistics presented point to an affirmative answer to this question; that m some cases there is collusion and logrollins among scalping operatives, who tip one another off as to good ‘‘ buys" buV Wt of the firm employing them, or else agree to buy back cars consigned to them or their employing houses which may be purchased by the scalpers of another firm; and that there is a **^® highest possible prices obtainable on the floor at tlie time of the sale, owing both to a comparative lack of skill in selling on the part of certain consignees which allows a scalper to pick up cam at prices lower than those being offered on other parts of the floor at le same time, and to the fact that heads of consignee houses or their ^^® “°“'® interested in possible scalping profits than m realizing the best results for their shippers. ^ In so tar as scalping may be due to lack of skill on the part of the consignee seller it necessarily implies that the field for the scalper’s operations IS to be found in this lack of ability on the part of the con¬ signee rather than in any economic considerations relating to the maintenance of market prices for the seller. Moreover, there is presum¬ ably no excuse for lack of skill on the part of some of the larger scalpers whose consigned gram is, as indicated, most heavily scalped. ¥he mere tact that an organization is a large scalper would indicate that it as m its employ men who are either highly competent judges of grain or who have great familiarity with the requirements of various buyers or both. The proper protection of the interest of the consignor oimht to require that the best talents of a commission house organiza¬ tion should be empW'ed for the purpose of selling its consignments. Scalping, however, affords an outside profit over and above the com- mission obtained by a receiver for selling grain and in addition, in the case of a salaried employee working on joint account for such a house wouid*n*^nrhp°'^ revenue. So long as this is the case it certainly would not be surprising if many scalping operators were somewhat more interested in the possibilities of extra profit from such operations than in procuring the best possible prices obtainable for consigH gram which they are supposed to sell onsigiiea The foregoing propositions lead the Commission to the conclusion that scalping as conducted at Minneapolis has been to a large degree at the expense of the consignment business and the consignors of the gram m at least a considerable proportion of cases. The Commission IS further of the opinion that commission houses devoting their entire time and attention solely to the sale of grain should be able to absorb a very considerable proportion of the profits now obtained by the scalpers, and thus to procure a higher price for consigned cars which are scalped. It may be argued that the scalping of grain can be theoretically justified on the ground that otherwise the prices real¬ ized might be lower than they are. On the other hanI Tt is be¬ lieved that the actual and potential results of the practice_collu¬ sion, ogrolhng, lack of attention to selling on the part of con¬ signees, and the great possibility that the lack of skfll of certain SUMMARY. 21 of the latter may lead to sales to scalpers wnen oetter prices could be realized in the absence of such transactions—all lead to the conclusion that these factors more than offset the possible theoretical considera¬ tion mentioned. Whatever benefits to the market scalping may afford can be obtained through the purchases of scalpers who are not permitted to act as or for consignees or who are not connected with other grain concerns affiliated with such consignees. For these reasons, therefore, the Coniniission is of the opinion that cash grain scalping by concerns or individuals in any way connected with the cash grain commission business, either directly or indirectly, should be forbidden. , ' * ’ •• ,X T 1i J: ■■;Sl r»j I itTi li ■ '/■ - frj ■i/h'!- i'* i'] /jjtf’:/ OJ br.^l T'* t TOilftl;'K1,1 fif »4..r:‘iO(V^‘.)‘i'-U 'j j f';;'' .-! rt ;■> );)Q“.F.''i.. iiii';-' 1.;; ‘ y.i b'+xiii'.-yi : fn fjijJ ,8 .(.'. ( - '-S' fe>--;'i'8'ij[K'; 'J . i 'll O ‘ ' f W Ji'i ^'j-O -i J: i.'I |'>li‘i*r‘8 i •*;> ■ ■ ■ .. '.'■i iint»-;i;.s ti '>4ii i.- ^ riL V ^ hfij'viiino'? >«) ' . • V i}>tir *10 "‘fOT >■*.*'• > >. /li ;:*> , /i )••■.;i]! ‘I i[\ U.‘i iH}-• • iiLfllh».') ntj>';'^ Jki^.ijO •is[? ii.i\ // ■ . f. J iiliWifr, A «, t :, ,J' ‘ • ' , , ■ ’:'. _. ■ J it !.*:», ,T ■• . "li V\ >; ' { 6{ ■>. A 'ti. hr i^': VI* .. • ■-.'S' TERMINAL GRAIN MARKETING. Chapter I. THE CAR-LOT MOVEMENT OF GRAIN. Section 1. Wheat production and the marketing movement. Importance of wheat in the grain trade. —A very large pro¬ portion of the annual wheat crop of the United States, as compared with that of either corn or oats, enters the car-lot grain movement. A much larger part of both the corn and oats crops is consumed m the county where grown than in the case of wheat. As pointed out in Volume II (p. 31) of this report, Minneapolis and Duluth are the principal markets for the initial car-lot movement in the spring wheat area, while Kansas City, Chicago, St. Louis, and Omaha handle the bulk of this movement from the areas farther south.^ Quantity and characteristics of the wheat crop. I he average wheat crop of the United States during the 10 years 1911— 1920 was 795,000,000 bushels. It ranged from 621,000,000 bushels in 1911 to 1,026,000,000 in lOlS.^ • . . • i i Wheat is characterized by a difference m variety which largely determines its marketing movement. Flour from hard wheat, because of its gluten content, is always in demand where yeast breads are largely used. Soft wheat flours dominate the market where soda and other baking powders are substituted for yea^. ^ott spring wheat and durum are of subordinate significance in the liour- milling industry, although these varieties as well as the mixed wheat can be used as a minor element in blending wheats, and durum con¬ tributes largely to the export movement. . T ^ ^ +1. Estimates of the Department of Agriculture indicate that the wheat crop of the United States in 1918, amounting to 921,000,000 bushels, was distributed among the more important varieties approximately as follows: ^ Variety. Bushels. Soft winter.. Hard spring. Hard winter Miscellaneous varieties.... Unclassified. 355 , 000,000 248 , 000,000 216 , 000,000 95 , 000,000 7,000,000 predominance of the thr e important classes of wheat. . 23 24 TERMINAL GRAIN MARKETING. i • ! : : The marketing movement of wheat is also affected from year to year by the great variation in yield of wheat per acre. The estimated I yield of spring wheat for the entire United States in 1918 was 16.2 bushels per acre and in 1919 only 8.8 bushels. In Kansas, which is the source of so large a part of the marketing movement of hard winter wheat, the yield fell from 20.5 bushels in 1914 to 12.5 in 1915. Climatic conditions also greatly affect the acreage harvested from year to year. The combined effect of variation in acreage and in yield IS remarkable. There was a decrease in the Kansas crop from 177 000,000 bushels in 1914, to 45,000,000 in 1917. A similar striking instance was the drop in the North Dakota crop from 152,- 000,000 bushels in 1915 to 39,000,000 in 1916. The effect on the marketing movement is probably better illustrated, however, by the fact that in 1914 the Kansas crop was over twice as large as that of North Dakota, while in 1915 the crop of North Dakota was more than 40 per cent larger than that of Kansas. Location of car-lot wheat supplies. —The areas from which the marketing movement of wheat in the United States originates are not to be delimited easily or exactly. This is due not only to the eccentricities in the crop already noted, but also to the great distance frorn each other of the somewhat restricted localities which seem i; particularly adapted to wheat farming, and above all to the lack of | data of the convincing character that might be expected on so |i important a subject. f! Isolated facts enable one to get some grasp of the situation. For ||) example, in 1914 the three great hard winter wheat States—Kansas, ■ Nebraska, and Oklahoma—with about 5 per cent of the country's population, produced 33 per cent of its entire wheat crop. The next year, 1915, the four great hard wheat States of the North— Minnesota, North Dakota, South Dakota, and Montana—with about 4 per cent of the total population, produced 32 per cent of the largest crop the country has ever grown. Not so striking, but still worth noting, is the production of 8^ per cent of the entire crop of 1919 by the wheat States of the Pacific Northwest—Washington, Oregon, and Idaho, with their population considerably less than 3 per cent of the total. The situation is probably more forcefully presented, however, in the statement that, according to the best available information, about 80 per cent of the hard spring wheat grown in the United States is produced in the three States—Minnesota, North Dakota, and South Dakota. The concentration in hard winter wheat is not so great, although probably over two-thirds of the entire crop is grown in Kansas, Nebraska, and Oklahoma. The estimated dis- tribution of the wheat crop of 1918 upon which the above statements are based also shows over half of the soft winter wheat crop to have been grown m four States—Missouri, Illinois, Indiana, and Ohio." ^ The foUowing table gives the estimated distribution of the 1918 wheat crop (in thousand bushels):« Soft winter wheat: ^ssopri. 49 965 Illinois. 617 ktdiana...46 461 Ohio. 40 934 Pennsylvania. 25 , 29^ Soft winter wheat—Continued. Kansas.15,301 Virginia. 12 600 Kentucky. 12,129 Maryland. 11,346 Miclngan. 9 223 Commercial Wheat Flour Milling, p. 108). V CAR-LOT MOVEMENT OF GRAIN. 25 It is evident of course that the size of the crop grown within a State does not measure its contribution to the car-lot movement ol wheat. Because the local demand for flour is greater m some States than in others, and also on account of peculiar advantages in regard to manufacture, transportation, or marketing, local mills grind a much larger proportion of the crop in some States than in others, ine surplus of wheat grown in excess of consumption within a given State, from some points of view, affords a fairly satisfactory measure ot wheat going into the car-lot grain trade from that State. It is at least, of interest in this connection to note the estimates made by the Department of Agriculture on this basis for the five years 1911-1915 ^ These estimates give a fairly accurate idea ol ^ndi- tions prevailing just prior to and including the first year of the Euro¬ pean War. The figures, obtained by deducting from the crop ot a given area the requirements for food and seed, show a net average Innual surplus for the United States of 208,000,000 bushels. Since Soft winter wheat—Continued. Oregon. 8,6^ Texas. WasMngton.Mg Idaho. r no.A Oklahoma. West Virginia. California. Arkansas. .2:^ South Carolina. NewJersey.-.; Iowa. I 000 Wisconsin. Montana. Nebraska. 2.0 Minnesota. Colorado. c. Nevada._ Total. 355,006 Hard spring wheat: North Dakota. 75,0/7 Minnesota. South Dakota. 48,485 Montana. ii aqi Iowa..... Wisconsm. Nebraska. Colorado. ",08/ Wyoming. Idaho. FT2X Washington. Michigan. Ohio. 48b Nevada. "h Pennsylvania. Utah. Texas- California. Total. 247,933 Hard winter wheat: Kansas. 86,707 Nebraska. 32,970 Oklahoma. Illinois. 14,073 Montana. o’l^ Colorado. 2’ Iowa. 7,015 Idaho. 4,^0 Missouri. Indiana. w^a Minnesota. Texas. 2,2M Ohio. Washington. 2,0« Wyoming.... 1»6M South Dakota. L243 Wisconsin. ' MicMgan. Utah. Nevada. Arkansas.. Total. 216,382 Miscellaneous varieties: & North Dakota. 30,^5 Washington. South Dakota. ,’om Iowa. 3,278 Minnesota. California. 2,8U» Utah.,. Neoraska. f, Colorado. 1> ^ Nevada. 492 Wisconsin. 905 193 30 Texas. 90 Total. 66,382 Grand total. .914,703 Unclassified. United States total. .. c6,735 .... 921,438 ^ Alabama, Arizona, Maine, Mississippi, ^6 B^leto°ko^594,^Geography of Wheat Prices, pp. 8 and 9. 26 TERMINAL GRAIN MARKETING. the average export during these years was only 189,000,000 bushels, it appears probable that the movement into the grain trade from the different States estimated by this method will be somewhat exagger¬ ated. Nevertheless, it is worth while to note the surplus allotted by these estimates to different groups of States as follows : Minnesota, North Dakota, South Dakota, and Montana Kansas, Nebraska, and Oklahoma. Washington, Oregon, and Idaho. Missouri, Illinois, and Indiana. Bushels. 174,000,000 142, 000, 000 63, 000, 000 32, 000,000 As further emphasizing the degree of localization these estimates show that the combined surplus of the three States of North Dakota, South Dakota, and Kansas nearly equals the net surplus for the entire country, and that if Nebraska is substituted for South Dakota the combined surplus of three States is considerably in excess of the country’s net total. The above comparison unquestionably fails to show the real rela¬ tive importance of the soft winter wheat States in the car-lot wheat movement. A large part of the wheat requirement of the large cities m these States is satisfied by the use of hard winter wheat shipped in as grain or flour from other States. Section 2. Milling demand for wheat. Total demand.— The total reported consumption of wheat by merchant mills in the United States in recent census years has been as follows: Year. Bushels. 1 1899. 471, 306, 986 *494,095,083 496, 480,314 545, 728, 431 613,094, 420 1904. 1909. 1914. 1919. 1 Statistics for 1919, preliminary figures published by the Bureau of the Census: figures for 1914 taken from Census of Manufactures, 1914, Flour-Mill and Gristmill Products, p. 12; other figures from Census Bulletin, Manufactures, 1909, Statistics for the Flour-Mill and Gristmill Industry, p. 13 'census These figures show but little change from 1899 to 1909, and a con¬ siderable increase from 1909 to 1919. Domestic mill requirements in recent years (in millions of bushels) - according to the best available data are shown below: Crop years ending June 30. Ground by domestic mills. 1 Available imports .2 Require¬ ments from domestic crop. 1917-18. 523 27 496 191g-19. 539 11 528 1919-20. 600 5 595 1920-21. 479 51 428 for 192^21 from Supplement to Grain and Flour Statistics During the War, United Cnr^fnrS^inlf 1920-21, estimate of former chief statistician of the Grain Corporation, publisjied in Modern Miller, July 9,1921, p. 23. Figures furnished by the Bureau of Foreign and Domestic Commerce. The above figures suggest several important conclusions. First, under most favorable circumstances, the wheat farmers apparently should not expect the demand from domestic mill s to go far above CAR-LOT MOVEMENT OF GRAIN. 27 600,000,000 bushels in the near future. Second, under the most unfavorable circumstances conceivable (including free trade in wheat), this demand might apparently drop nearly to 400,000,000 bushels, but there appears to be hardly a chance of its going appreciably below that figure. Third, mill requirements of domestic wheat in a single year may fall below the level of consumption 20 years earlier, as IS shown by the figures for 1899 and 1920-21, given above. Demand for hard spring wheat. —In 1870 the nailling industry of Minnesota was of no importance except to immediately adjacent territory. Twenty years later its surplus flour output amounted to over 10,000,000 barrels and foreign exports from Minneapolis alone had already exceeded 2,500,000 barrels in a single year. The peculiar excellence of the hard spring wheat flour produced in Minnesota and the States immediately west has enabled their millers to increase these shipments of flour to outside points until they approach (if they do not exceed) 30,000,000 barrels in some years. The hard spring wheat flour business of the country is by no means confined to shipments from the States referred to above, for mills all along the line of transportation to the consumer in the East use more or less hard spring wheat whenever its price will allow them to do so. Its use, favored by lake transportation, is in part responsible for the increase in the flour output of Buffalo from 2,000,000 barrels in the calendar year 1904 to 7,000,000 barrels in 1916. Indeed, in 1916 the combined output of just the two cities—Minneapolis and Buffalo—exceeded 25,000,000 barrels, amounting to practically 25 per cent of the total quantity consumed in the entire country.® ^ The two important facts in this situation are theJbj 3 flited. extent of good hard spring wheat territory in the United Sta.tes, and the d^anff'fof The maximum crop of that territory from near-by mills, of "ihills located on the most economical line of transportation to the ultimate consumer. It must be remembered that the ^eat bulk of the hard spring wheat is grown in Minnesota, North Dakota, and South Dakota. In good years, such as 1915 and 1918, for example, these three States have produced 200,000,000 to 225,000,000 bushels of this hard spring wheat; but in poor years, such as 1916 and 1919, for example, they may harvest less than 100,000,000 bushels.^ Keeping in mind that even in the maximum crop years demand from domestic mills leaves only a negligible quantity of this high grade hard spring wheat for e:^ort, it is easy to understand why the output of Minneapolis and Buffalo in the calendar years following the two good crops noted above, averaged practically 25,000,000; while following the two poor crops in 1916 and 1917 their output in the calendar year 1918 was only 20,400,000 barrels.® Montana affords an even more striking exaniple of how a shortage in the-local crop reduces flour production by mills depending on it for their supplies. From the large crop of nearly 30,000,000 bushels raised in that State in 1918, Montana mills, according to reports of the Grain Corporation, produced 1,934,000 barrels of flour in 1918-19; but apparently because of the short crop of less than 11,000,000 bushels in the following year, their output in the year 1919—20 8 The Miller’s Almanack, 1920-21, pp. 176 and 177; Report of the Federal Trade Commission on Com¬ mercial Wheat Flour MilUngpp. 1-4 and 20. T Monthly Crop Reporter, December, 1917, p. 122, and December, 1920, p. 136. *The MUler’s Almanack, 1920-21, pp. 176, 177. 28 TERMINAL GRAIN MARKETING. dropped to 827,000 barrels.® Minneapolis and other large milling centers farther east are able to substitute winter wheat for spring wheat to a considerable extent, as is shown in the following para¬ graph j consequently their output of flour shows no such violent fluctuations as that of Montana. Inspection figures reported to the Department of Agriculture for the first six months of the crop years 1918-19 and 1919-20, re¬ spectively, illustrate the depenaence of Minneapolis on hard and soft winter wheat in years when the hard spring wheat crop is short. The total estimated wheat crop of the United States increased from 921,000,000 bushels in 1918 to 941,000,000 in 1919. Nevertheless, according to data on inspections, hard red spring wheat marketed in the year ending with June, 1920, was less than 40 per cent of that marketed in the preceding 12 months.^® As was to be expected under such circumstances, net receipts of hard red spring wheat in Minneapolis fell from 47,000,000 bushels in the first six months of the crop year 1918-19 to 26,000,000 in the first six months of the crop year 1919-20. This, however, did not result in a reduction of 4,000,000 to 5,000,000 barrels in the State’s output of flour, for during the same period net receipts of hard red winter wheat in¬ creased from 7,000 to 16,000 cars, and those of soft red winter wheat from 1,000 to 4,000 cars. Ability to supplement its supply of hard spring wheat by the use of the high-grade winter wheat produced in 1919 enabled Minneapolis to respond to the extraordi¬ nary demand for flour from that crop by increasing its output from 16,543,630 barrels in the mill year ending August 31, 1919, To 17,117,610 barrels in the mill year 1919-20, despite the greatly de¬ creased supply of hard spring wheat in the latter year referred to above. In contrast to this increase, the output of other northwest¬ ern mills fell off about 20 per cent.^^ Neither the decrease in the wheat crop nor in flour output was as great for North and South Dakota, however, as that for Montana, which has already been noted. Demand for hard winter and hard spring wheat com¬ pared. —Wheat inspections reported to the Department of Agri¬ culture show that the market for hard spring wheat is much more restricted than that for hard winter wheat.In 1919—20, inspections of hard spring wheat in the four largest markets amounted to 82 per cent of the 75,774 cars inspected that year. In contrast to this, hard winter wheat inspections in the four largest markets were only 52 per cent of a total amounting to 232,490 cars. On the other hand, among the smaller markets hard spring wheat inspections exceeded 1,000 cars in only three markets, while in five different markets hard winter wheat inspections exceeded 4,000 cars. Total hard spring wheat inspections in the smaller markets amounted to I only 13,238 cars, while corresponding hard winter wheat inspections were over eight times as great (110,999 cars). * fibres from Statistical Abstract of the United States, 1920, p. 154; statistics of flour production pp^O an?!?^^^^ Statistics during the War, United States Grain Corporation (1920), 1? Pepartment of Agriculture Market Reporter, July 31,1920, p. 78. Shown by total production figures for the period, n Northwestern Miller, vol. 123, pp. 1076 and 1316. 1® Statistics of inspections pubhshed in the weekly Market Reporter of the Department of Agriculture. CAR-LOT MOVEMENT OF GRAIN. 29 The showing for 1920-21 is quite similar. In the four largest markets hard spring wheat inspections amounted to 77 per cent of a total of 133,234 cars, and hard winter wheat inspections to only 55 per cent of 299,050 cars. Among the smaller markets only three showed hard spring wheat inspections exceeding 2,000 cars, while six showed hard winter wheat inspections exceeding 4,000 cars. Total hard spring wheat inspections in the smaller markets amounted to 30,174 cars, while hard winter wheat inspections were over four times that quantity (135,163 cars). Localization of milling demand as indicated by capacity AND OUTPUT OF FLOUR. —The daily capacity of all the mills in the United States on January 1, 1920, as reported by the Northwestern Miller, was 1,085,875 barrels of wheat flour.^^ These figures are the best available for capacity by States. They indicate that the flour output of the country has in no recent year approached 50 per cent of the total rated capacity of the mills. Stating the situation in another way, the mills of the United States are capable of grinding a much larger quantity of wheat than the farms have ever produced. Almost 24 per cent of this milling capacity, 260,050 barrels, was located in the four soft winter wheat States—Missouri, Illinois, Indi¬ ana, and Ohio; about 20 per cent, 219,940 barrels, in the four hard spring wheat States—Minnesota, North Dakota, South Dakota, and Montana; only 12 per cent, 132,500 barrels, in the hard winter wheat States—Kansas, Nebraska, and Oklahoma; and 7 per cent, 72,200 barrels, in Washington, Oregon, and Idaho. The groups of mills referred to in the preceding paragraph produce by far the larger part of the wheat flour entering the commercial flour markets of the United States. Nevertheless, flour produced in Iowa, Wisconsin, Michigan, Kentucky, and Tennessee, with a capacity apparently somewhat larger than that of the three hard winter wheat States, unquestionably has some influence on prices in favorably located markets, and indirectly on the movement of wheat from surplus product States. Mills located in the Atlantic Coast States report only about 15 per cent of the capacity of the entire country. Though there are a few flour mills of considerable commercial impor¬ tance located in the cotton States, their entire capacity is rated at less than 5 per cent.^® About 4 per cent of the total capacity is scattered tl rough California and the mountain States lying between it and the hard wheat belt. Bearing in mind the purely approximate character of the data available on wheat flour production, it may be noted that the four hard spring wheat States, having only 20 per cent of the total capacity of the country, were credited with 27 per cent of its total flour, output in 1918-19, and nearly 33 per cent for the three calendar years 1914, 1915, and 1916, taken together. Yet, in 1919-20 the mills^of this group were credited with only 23 per cent of the country s total output. On the other hand, the tWe hard winter wheat States (with only 12 per cent of the capacity and showing in recent years only from 13 to 154 per cent of the grind) were reported to have H The Miller’s Almanack, 1920-21, p. 156. That the total capacity given above is overrated is indicated by a statement in the Northwestern Miller of Mar. 16, 1921, that these figures include “150,000 barrels not at present available for wheat-flour production.” win t^e grouping used above, the Atlantic Coast States include West Virginia and North Carolina, the cotton States, with the exception of South Carolina and Arkansas, are limited to Gulf States. 56976°—22 - 4 30 TERMINAL GRAIN MARKETING. increased their flour production to nearly 17 per cent of the total for 1919-20. The four soft winter wheat States with about 24 per cent of the country’s total milling capacity, and probably making in most years less than 20 per cent of the output, are reported to have made that proportion of the total in 1919-20.^^ Sources of mill purchases. —miller can depend entirely on terminal markets for his supply of wheat; or, if favorably located, he can secure his entire supply from the near-by country markets. Frequently he will make use of both these sources of supply. Analysis was made of the purchases of 198 milling companies during the mill year 1915-16 (Appendix Table 43). These companies, operating 299 mills, bought an aggregate of 295,573 carloads, or about 300,000,000 bushels of wheat. They probably made over 40 per cent of the flour ground from the 1915 crop. ' The reports of these milling concerns showed generally that millers at or near the terminal markets bought the larger part of their sup¬ plies from those centers and that the proportion of purchases from country points increased in accordance with the distance of the m ill location from the nearest terminal. Although the representative character of these figures is in some respects open to question, owing to the fact that the sample is not larger, certain figures are of interest. In Minnesota, for example, where flour production is highly concentrated at Minneapolis and the mills prefer to buy country-run grain (Vol. I, Chap. IV, sec. 5), above 60 per cent of the total mill purchases reported were bought on the exchange floor through their own organizations and above 80 per cent of the total purchases reported were made in the terminal markets. On the other hand, in Kansas the reporting mills bought barely 20 per cent of their wheat purchases on the exchange floor through their oAvn organization and only 30 per cent in total at the terminal markets. The commercial mills in Kansas are largely scattered through the State and the production is relatively much less concentrated at Kansas City than the production of Minnesota is at Minneapolis. The result is that Kansas shows a relatively high proportion of purchases in the country and Minnesota a relatively high proportion at the terminal markets (Appendix Table 43). The figures for the three mills reporting from Montana, which show more than half the purchases made through their own elevators, and the balance ‘‘on-track” in the country, or through interior brokers, is indicative' of the great distance to the terminal markets eastward. The high proportions both of terminal purchases and of purchases on the exchange floor made by the Missouri mills are the result of heavy buying at the terminal markets by Kansas City and St. Louis concerns, most of which are comparatively large mills. Several of the mills outside these terminals, however, at St. Joseph, Inde¬ pendence, and Sweet Springs, also bought heavily in the terminal markets by one or another of the methods classified. 17 Statistics of flour production from Grain and Flour Statistics During the War, United States Grain Corporation (1919), p. 8, and Supplement (1920), pp. 10 and 19. 18 Although less than 20 miUs reported for this State, their combined purchases totaled above 17,000,000 bushels, or the equivalent of around 4,000,000 barrels of flour. As the production of flour in Missouri in 1914 was only above five and one-third million barrels and was apparently declining (Report of the Federal Trade Commission on Commercial Wheat Flour Milling, p. 16), it is probable that the methods of purchase shown are fairly representative of the methods of purchase for about 75 per cent of the flour production of that State (probably the greater part of the commercial production), though they can not be regarded as representative of the methods of the Missouri mills as a whole, since there are some 300 or 400 of these estab¬ lishments in that State. CAR-LOT MOVEMENT OF GRAIN. 31 The Illinois and Oklahoma figures reflect respectively proximity to and distance from the terminal markets. Of nearly 16,000,000 bushels reported as purchased by Illinois mills 83 per cent was bought at the terminal markets. About 59 per cent of the total purchases were made on the exchange floor through their own organizations, and above 15 per cent from terminal dealers and shippers. In Okla¬ homa, on the other hand, nearly 95 per cent of the reported purchases was bought in the country, 60 per cent through their own country elevators and 32 per cent on-track'' from country elevators. Two Colorado companies, operating 26 mills in Colorado and adjacent States, bought all their wheat (over 9,000,000 bushels) in the country, chiefly through their own elevators and ‘^on-track from farmers. Reporting mills in New York State, on the other hand, make practically all their purchases in the terminal markets, either through terminal dealers or brokers. Presumably these pur¬ chases were chiefly of western grain moving East via Duluth and tliG Is/kcs The absence of a highly developed terminal market in Washington and Oregon, and the considerable development of mill warehouses in this area, is indicated by the fact that out of 19,000,000 bushels pur¬ chased by the mills in these States 28 per cent was bought through mill elevators and 20 per cent more on-track" from country houses, no purchases on exchange floors being reported. In total 63 per cent of the purchases of reporting mills in this area were made in the country. The most of the grain purchased in terminal markets by reporting mills in these two States was bought from dealers and shippers. Preference for country-run wheat. —The flour mills, par¬ ticularly in the Northwest, have generally preferred to buy country- run" wheat, i. e., wheaf as received directly from the country, rather than grain deliver^ from terminal elevator storage. The miller, particularly in the Northwest, makes his purchases with the view to obtaining wheat which will meet the requirenaents ol his standard brands of flour. By purchasing ^Yountry-run gram he is able to secure both high and low grade wheat which he can mix himself to as good, if not better, advantage than the terminal elevator. Mills can, and do, in this way use large quantities of low-grade wheat. These low grades of wheat can not be purchased from the terminal elevators to as good advantage, since the latter buy such wheat lor mixing purposes. It should be noted, however, that the Minne¬ apolis mills do buy considerable terminal elevator wheat, largely on type sample. (Ch. V, sec. 2.) t ^ i ^ » It was stated by grain men at Minneapolis that elevator gram was always discriminated against by the mills to the extent ol about 2 cents per bushel even when the country run of grain was poor in quality. One operator said: ‘‘You can't tell what proportion of stronger wheat is in the mixture, and it is hard to determine le One^ Minneapolis company has established a rigid taking any deliveries on future contracts. Others reported that the^ took delivery on futures “only as a last resort to get f^e gram. They reported that this policy was necessary because of deteriora¬ tion in gi’ades deliverable on contract wheat, stating that they 32 TEEMINAL GEAIIT MAEKETING. preferred to pay a premium to obtain the grain needed for their brand of flour. It was noted, however, that during the crop years 1912-13 and 1913-14 approximately half the grain consumed by^this concern was low-grade stuff, not within the contract grades. This suggests an additional reason for avoiding actual delivery, namely, that the niills can profitably use low-grade wheats before they have been conditioned or mixed with higher grades, and that the desire to secure the best wheat within the grade is frequently no more prominent than the desire to avoid the cost of purchasing higher grades. The millers take the position, however, that they must make elaborate tests of the available supplies of wheat in order to, make the blend for a special brand of flour, and must assign the cars purchased to a far greater variety of lots than can be attempted in grading for sale. Consequently, for satisfactory blending they are. reluctant to buy a mixture of the various varieties, such as may be made in a terminal elevator, since such a mixture is often ill-adapted to nailling blends, notwithstanding the fact that it may grade as relatively high-grade wheat. To cite further examples, an Illinois miller stated that he pre¬ ferred the country run because then he could ‘'grade and mix it properly.’’ One Milwaukee milling company reported that they preferred the country run of grain because “the terminals doctor it and skin the grade.” A grain man at Duluth admitted that the “millers prefer to buy on sample,” but asserted that it was because they wanted the mixing profit for themselves, and that their flour sales were based on the assumption of a top price paid for “elevator one northern.” An interview with officers of a large northwestern mill developed the following statement: The problem resolves itself into the rnethod of mixing the available wheat so that at all times there will be plenty of the different varieties in stock to maintain an even blend of flour. As the visible and available supplies of different kinds of wheat become greater or smaller, it is necessary to change the proportions going to the rolls to maintain the uniform run of the flour. To do this, the proportions must be changed ‘ many times a year. In arriving at the milling value of wheat, the baking test or' bread produced is the criterion. The first consideration is the quantity of flour that is produced. Of second consideration is the quality of flour, which depends on good rising properties, good color, and good texture. Our Lot Number One is good hard wheat that has considerable gluten, is nice and dry, weighing 58 pounds. Other lots are made up by this company to distinguish grain of any special character. The entire daily grind may be drawn from a number of lots or it may be drawn from only a few. The miller may run 50 per cent of a particular run from lot 1, 20 per cent from lot 3, and so on. This concern prefers to buy in the terminal sample markets, and to do its own mixing. The reason most frequently given by flour millers for recent increases in mill storage capacity is the increase in merchandising by private elevator companies. The millers state that they must maintain stocks of wheat adapted to their particular blends and that this is impossible where supplies are obtained from private terminal elevators which make a practice of mixing and conditioning the grain. The Minneapolis millers assert that oecause of the increase E^nd grades of wheat they can not keep up their grades of flour unless they are able to control the quality of their surplus stocks. The miller, they say, is not interested in the commercial CAR-LOT MOVEMENT OF GRAIN. 33 grades except as they represent uniform qualities of millable wheat. It should not be inferred, however, that millers, even in the primary markets of the Northwest, carry stocks adequate to their require¬ ments throughout the season, for such is by no means the case. In certain instances millers have made arrangements with terminal elevator operators for the use of storage space and in other cases the elevator men have specialized their operations so as to supply the milling trade. For example, one Minneapolis elevator operator, in stating that most of the grain stored at his plant was sold to mills on sample, explained the policy as follows: We have aimed in what we have done in filling onr elevator to get a mixtnre that would make a high level of No. 1 northern. We want above an average No. 1 northern because we have found that there is no money—we can get more money out of the millers than by mixing it down at the lowest level of No. 1 northern. In other words, the miller gives a premium for quality. We won’t put any velvet chaff in our stock of wheat in the elevator. Such a policy appears to be followed by but a few elevator merchan¬ disers in the United States. However, all millers in terminal markets are dependent to some extent upon terminal stocks at times when receipts fall off from the country, and many concerns occasionally take deliveries on future contracts. Export demand. —The outstanding facts in the export wheat market of the United States in recent years are these: (1) During the 10 fiscal years prior to 1914 United States exports of wheat, in the grain, averaged only 52,000,000 bushels. Relatively large ship¬ ments from the Pacific coast and very small exports to Europe marked the years of minimum movement. The flour millers of the United States used a larger proportion of the country’s hard wheat crop during this period than they have in later years. (2) During the 6-year period ending with 1919-20 wheat exports averaged 153,000,000 bushels; this period included the short crop of 1917-18, when only 34,000,000 bushels were exported. With the elimination of Russian and Rumanian supplies during the war, the world looked to the United States for over 40 per cent of its wheat importations,^ whereas in the preceding period we had supplied less than 25 cent of this movement. There was an increase in the export demand amounting to about 130,000,000 bushels, on the average, spd con¬ sequently an increased movement from the Atlantic and Gulf ports. (3) This increased export demand for wheat was met by a correspond¬ ing increase in domestic production. The average crop for the 6-year period 1915-1920 was about 165,000,000 bushels greater than the average for the 10-year period 1904—1913, despite the short crops of 1916 and 1917. Wheat cultivation was increased in American producing regions even in the face of higher costs. (4) The export movement continued in increasing volume after the armistice and through the shipping period of 1920—21, there being little substantial improvement in the European situation. Foreign governmental agencies—especially the British Royal Commission purchased heavily of private dealers in the United States after the restrictions upon exports were removed on December 15, 1919. (5) This in¬ creased export movement has included substantial quantities of haid wheats, especially from the region west and southwest of Kansas City. (6) The percentage increases in export rail rates in connection 19 Including flour. 34 TERMINAL GRAIN MARKETING. with substantial decreases in ocean rates influenced for some months the direction of exports as between the Atlantic and Gulf ports. This is evidenced by the fact that from the last half of 1919 to the last half of 1920 exports of wheat from Galveston and New Orleans increased-61,000,000 bushels, while exports from New York, Phila¬ delphia, and Baltimore increased only 13,000,000 bushels. The increase for the Gulf ports was from 19,000,000 to 80,000,000 bushels, or over 300 per cent, while the increase from the Atlantic ports was from 47,000,000 to 60,000,000 bushels, or less than 30 per cent. (7) Due to the removal of the import tariff on Canadian wheat in 1917 the Canadian crop for a time competed, either directly or poten¬ tially, with that of the United States in the American market. The resulting importation of free wheat released considerable quantities of domestic wheat for export. The export demand for wheat has thus become a very important though variable factor in most of the primary markets of the United States. Minneapolis is exceptional in that the local milling demand dominates all other influences in the wheat market. Duluth is primarily a water-shipping point, and during the close of navigation— December 1 to April 1—it is practically eliminated from participation in the export movement. The export demand is frequently a strong factor in the cash markets at Chicago, Kansas City, Omaha, Bt. Louis, and smaller shipping points nearer the seaboard." The markets last named draw primarily upon winter-wheat areas. No. 2 red and No. 2 har d, both of them winter wheats, are the graffes most fre- quehfly^uoted in the export markets. Section 3. Corn production and the marketing movement. Production and distribution.— The heaviest production of corn centers in Iowa and Illinois,although the crop area extends through¬ out all the agricultural regions east of the Rocky Mountains. As is well known, Chicago is the greatest distribution center for corn in America.22 For the 1920-21 crop the primary markets next in impor¬ tance were St. Louis, Kansas City, Milwaukee, Omaha, Indianapolis, Minneapolis, and Peoria. The leading secondary markets in order of importance were Baltimore, New York, Buffalo, Philadelphia, and New Orleans. It should be noted that the local car-lot trade in corn is very extensive because of the numerous smaller markets. Consumption of corn.— It is estimated that about 90 per cent of the corn crop is regularly consumed by hogs, cattle, horses, mules, and other animals, and 80 per cent of it on the farm where grown. In any case corn marketings comprise but a small proportion of the entire crop. Yet the crops are so large—varying roughly from 2,500,000,000 to 3,000,000,000 bushels—that the supplies available' for the purposes of manufacture and conversion are always large, and the movement of corn is second in volume to that of wheat. The uses of the crop for human consumptive purposes may be summarized as follows: 21 See Vol. II, p. 32. 22 For the 1920 crop the inspected receipts at Chicago have averaged five times as large as those at St. Louis, which ranks second on this basis. See also Vol. II, p. 32. CAR-LOT MOVEMENT OF GRAIN. 35 * * * When ground into meal it produces degerminated corn meal; when crushed it produces hominy grits; when subjected to certain chemical changes it produces whisky, alcohol, and beer. When the starchy part is separated from the gluten and ground it produces starch. The remaining gluten is used for cattle teed and is called gluten feed. The starch may be subjected to certain chemical processes to produce glucose or corn sirup Approximately 3 per cent of the corn crop (85,000,000 bushels) has been, normally used in the manufacture of corn meal;^^ about 1 per cent_ (28,000,000 bushels) in the production of grits; and about 2jehjifiii£_in. tlie manufacture of cornstarch and glucose.^^ These ^Hgm'es serve to indicate that the supply of American corn has been enormously in excess of the ordinary demands of manufactuiers and converters. Export demand. —The export demand for American corn has never been large. While exports averaged nearly 43,000,000 bushels for the six calendar years 1913-1918, they amounted to only 11,000,- 000 and 18,000,000 for 1919 and 1920, respectively. The largest export movement for a single year took place in 1916-17, when about 65,000,000 bushels were sent abroad to meet war-time de¬ mands. In view of the size of the crop, exp ort demand is an incon¬ siderable factor in the corn markets. Section 4. Oats production and the marketing movement. Localization of production. —The area of surplus oats produc¬ tion in the United States conforms largely to that of corn production, except that oats can be produced farther north. While Iowa and Illinois are the leading States for both oats and corn, the area of heavy oats production extends into Minnesota, Wisconsin, and other States on the Canadian border north of the corn belt. Fully JQ. per cent of the crop is consumed on the fm'ms. Probably 80 per cent of the remainder (the so-called commercial oats) comes from the North Central States.^® Chicago is the largest outlet for oats as well as corn in this area, and receives and ships yearly a far greater quantity of oats than any other market.Minneapolis, Milwaukee, and St. Louis, in the order named, are the next most important primary outlets. Consumptive demand. —^^The census figures for 1909 and 1914 indicate a consumption of oats in flour mills of only bush¬ els of which 36 million bushels were manufactured ' chiefly for human food’ and 14 million bushels ' chiefly for live stock.’ This consump¬ tion for human food—oatmeal, rolled oats, and ‘breakfast foods constitutes about ^er cent of a crop of li billion bushels. An addi¬ tional 7.6 per cent of the crop is used for seed, while exports and imports are usually unimportant. This would indicate a consumption by live stock of between 85 and 90 per cent of the crop. Apparently about 15 per cent of the production is consumed by horses and other live stock in urban centers.”^® The oats movement, like that of corn, depends largely upon tne price relation. The grower can sometimes feed his oats with profit S ‘^he^p^e^enrteMencyTs^to^pro^luL degerminated meal, i. e., the is extracted aM is t^ avail¬ able for the nroduction of corn oil and oil meal.” (War Industries Board, Price Bulletin No. 10, p. 12.) ^ 25 In the past nearly 1 per cent was used in the manufacture of grain alcohol and bourbon whisky, and about 1 per cent in the manufacture of beer. 26 U. S. Department of Agriculture, Bulletin 755.- 27 See Table 4, p. 21, Vol. II. . r, . xt on ox ok 28 U. S. Tariff Commission, Tariff Information Series No. 20, pp. 84, 85. 36 TERMINAL GRAIN MARKETING. when it would be unprofitable to ship to market. On the other hand m case oi a short crop, or conditions of demand tending to increase the price, shipments in large quantities may be readily attracted to the terminal markets. . demand for feeding purposes is the most important mtluence in the commercial oats movement. This demand fixes the general level of prices for cash oats and renders the marketing problem less complicated than in the case of wheat. The doniestic trade in oats in the United States exceeds in volume the entire mternatiimal trade in this cereal.^® The main movements are from the North Central area to the East and Southeast, yet there are lesser outlets for the country shipper in various directions, because ol the extensive demand and the diversity in character of the markets. 4 . 1 . ®fPo^t^"^c>vement of oats is usually small, despite the fact that ^ates crop has always been more than twice as large as that of any European country.^o Exports increased, however, under war prices to about 99,000,000 bushels in 1917 and 114,000 000 bush¬ els in 1918. Exports for the 10 months ending with April 1921 were less than 4,000,000 bushels. ^ ’ Section 5. Barley production and the marketing movement. Localization OF production.— ^As compared with wheat, corn, and oats the barley crop has always been small, 223,000,000 bushels being the record crop prior to 1915.31 - The two chief barley-producing sections of the United States are n the extreme West, especially California, and the upper Mississippi Valley States—Minnesota, the Dakotas, and Wisconsin. In each of these sections a predominant commercial type is grown: and these types enter into a distinct trade. The market price depends in part on their suitability to the use to which they are put. The six-rowed Cahiornia feed or bay brewing barley is known as an export type, being preferred by European brewers. The brewers of the Central and Eastern States used chiefly the Manchuria and Oderbrucker varieties grown in the northern Great Plains. Pearled barley is pro¬ duced Irom a large-grained, two-rowed variety known as Chevalier. of Gih^ornTa^”°'^" irrigation in Montana and in the delta lands in?n the 57,705,000 bushels shipped out of producing counties in 1919, California contributed 16,500,000 bushels and the States in the upper Mississippi Valley about 34,000,000 bushels. , Consumption.— To-day feeding on the farm accounts for more than half of the disappearance of the barley cfopr~TE5re is a relatively small demand for barley malt by manufacturers of malt preparations and extracts, nonintoxicating malt beverages, sirups, yeast, vinegar, r other products. The Tariff Commission has estimated that all of these processes combined do not as yet absorb more than one- !i^*m bushels formerly used in fermented and ^stiUed liquors.^ The manufacture of pearl or pot barley, barley nour, and breakfast foods also takes up a small percentage of Idem, p. 75. 592,000,000 bushels and in France 310,000,000 31 The largest war crop, that of 1918, was 256,225.000 bushels. •» fSwomaUou SteNo.%" 07.“ Inlormation Series, No. 20, p. 111. CAR-LOT MOVEMENT OF GRAIN. 37 the crop. During four of the war years barley exports ex¬ ceeded 20,000,000 Whels. A record was established in 1919 when about 38,000,000 bushels were exported. Exports during 1920 were about 18,000,000 bushels. Minn^eapolis, Chicago, Milwaukee, and Duluth are the leading primary markets for barley. Section 6. Rye production and the marketing movement. Production. —While rye constitutes in point of production the smallest of the five cereal crops considered in this report, it never¬ theless merits careful consideration because of the recent increases in production and important changes in its use as a food grain. The cron harvested in 1918—91,000,000 bushels— was mpxe than doub le thakuL-tha- laid^cjop. The average production for the 5-year period 1915-1919, however, was only 69,000,000 bushels,^^ owing to the short crops of 1916 and 1917. The final estimate of the 1920 crop was 69,318,000 bushels, being close to the .average for the preceding five years. Wisconsi n has been the leading rye State, with Minne¬ sota, Michigan, Pennsylvania, North Dakota, and New York follow¬ ing in orderi i i • Consumption —With the adoption of prohibition and the closing ol distilleries, there has been a marked increase in the consumption of rye byJLauu-mills, as well as an unprecedented export movement of this cSealto Europe. Although the production is still relatively small, rye is of importance as a substitute for wheat in supplying the world’s requirements for breadstuffs. The production of rye in increased quantities has been advocated in recent years for the reasons (1) that it is a hardier plant than wheat, and therefore involves fewer risks to the grower; (2rtharit will givu-bnUer.,.yields and more food per acre than wheat; (3) that it will often produce profit able cro ps f>p soils whirh are poorly adapted-to wheat; and (4) that it can be sowp m the fa ll and,.harvi 3 ted before tj^wheat is ripe, thus saving and distributing farm labor. Among the primary markets Minneapolis, Chicago, Milwaukee, and Duluth have shown the heaviest receipts of rye. About one-third of the receipts at Minneapolis has been consumed by the local mills. Milling consumption elsewhere in the producing area has been much less concentrated. There is a general shipping movement eastward and southeastward, as in the case of spring wheat. Rye exports were generally smaller than those of any of the other four grains prior to the adoption of prohibition. In 1919 (calendar year) rye exports jumped to about 33,000,000 bushels and in 1920 to 57,000,000 bushels. Section 7. Summary as to the trading centers. The bulk of the wheat, corn, oats, barley, and rye marketed in car- lots moves from country shipping stations to large primary markets which have grown up at centers convenient to the producing areas, viz, Minneapolis and Duluth in the spring-wheat region, Omaha and Kansas City on the Missouri River, St. Louis at the juncture of the Missouri and Mississippi, Chicago and Milwaukee on the lower ex¬ tremity of Lake Michigan, Peoria and Indianapolis in the prairie region, and Louisville and Cincinnati on the Ohio River. Price Current Grain Reporter Year Book, 1920, p. 24. 85 Vol. II, p. 37. 38 TERMINAL GRAIN MARKETING. Certain secondary outlets have also developed, such as Detroit, Toledo, and Buffalo on Lake Erie and New York, Philadelphia, Bah timore, Galyeston, New Orleans, Portland, and Seattle on the sea¬ board. These secondary points in the scheme of distribution are generally more conspicuous for physical handhn^ facilities and as shipping points than as markets supporting active organized ex¬ changes or organized'trading associations. The grain traffic through these markets, especially at the export points, is influenced largely by transportation conditions and facilities for transshipment from rail to water carriers, rather than by the attractive force of open- market trading. An exporter located at one port may find tonnage for a particular shipment at other points on the seaboard, and often the tonnage factor deterhaines the route to be followed. Transship- ment inay be arranged through the employment of brokers at the point of loading. The primary markets—many of them more than 1,000 miles from ^e seaboard-^ constitute the most important centers of trading. Highly organized exchanges have been conducted in the primary markets for many years, including in their membership commission merchants, elevator companies, shippers, buyers for milling and converting companies, as well as various traders and brokers in the futures business. It should be noted that there are numerous interior markets in addition to those enumerated which handle grain in car lots. Am nno- these mention should be made especially of Des Moines, Sioux City"" St. Joseph, Wichita, Oklahoma City, Fort Worth, Cairo, and Memphis. Chapter II. RECEIVING AND PURCHASING FROM COUNTRY POINTS. Section 1. Comparison of methods. The business of buying and shipping grain in producing areas was described in detail in Volume I of the report. It was shown there (p. 144) that there are two distinct methods of sale to terminal market buyers, (1) by shipment on consignment to a commission house to be disposed of for a commission upon its sale, and (2) by direct sale ‘^on-track’’ at the cormtry station or ^Ho-arrive’’ at a terminal destination. By the first method the shipper employs a commis¬ sion man as agent to dispose of his grain at point of destination, the commission man usually accepting a sight draft against the bill of lading. By the second method—which includes several possi¬ ble variations in the terms of contract—the grain is sold prior to delivery and is shipped directly to a buyer (or to his order). By whatever method the grain is sold—whether consigned or sold direct—it is usually shipped on order bills of lading, so that bank loans may be negotiated to finance the comrnodity thioughout its progress; and payment^ is usually by seller’s sight draft on the con¬ signee, with bill of lading attached, although arrival drafts are some¬ times used. Sales on consignment usually apply to grain placed “on-track” at the terminal, officially inspected and graded, and m position lor immediate delivery. ^ i ^ , • i. -uu. A direct purchase, as the term is used here, relates to gram bougUt prior to arrival at the terminal or other destination. Direct purchases may be on the basis of delivery at destination or may be f. o. b. shipping station. That is, there is a commercial distinction as to whether the commodity is bought f. o. b. country station, subject to billing instructions, or bought on the basis of delivery at a designated terminal or other point. The former is known to the trade as a purchase on-track” and the latter as a purchase to-arriye. _ Commission merchants often handle sales ‘Ho-arnve lor their customers, and, by agreement, it may be left to the discretion ol the commission merchant to determine whether a shipment is to be sold as a consignment or applied upon a contract for gram to-arrive. The commission merchant usually takes title to gram applied on a “to-arrive” contract and thereby becomes technically a dealer, al¬ though the distinction often does not appear in his accounts. The terms “on-track” and “to-arrive” are applied the business of buying directly from country shippers, although the same distinction in contract terms appears in the gram-shippmg business generally. Grain originating from country points has not usually been officially inspected and weighed, and such transactions are usually contingent upon terminal market grades and weights. 1 Allowing 3 . customary margin for the protection of the consignee. 39 40 TERMINAL GRAIN MARKETING. It should be noted that direct purchases are usually on a ffrade basis and that the volume of this class of purchases is larger for corn and oats than for wheat, rye, or barley. For example, corn and oats are very frequently accumulated in this way at Chicago. The vol¬ ume ol direct buying at Minneapolis, which is the largest of the wheat rye, and bailey markets, is relatively small. The explanation of these variations may be found in Volume I, Chapter VI, sections Several of the larger primary market exchanges ^ make some effort to maintain separate to-arrive’’ markets, i. e., trading spaces, black¬ boards, and quotation services for the convenience of traders bidding direct to country shippers; and trading rules applicable to this specific business have been adopted by the larger exchanges—especially by those which have a so-called uniform commission rule.^ In the absence of such regulations the practice of buying direct from the country rnay enable dealers to avoid the payment of commissions in whole or m part. The sections which follow will set forth the methods employed in handling consignments and in buying ^‘on-track’’ and ^To-arrive” from country shippers. Section 2. Nature of the consignment business. Introductory.— The consignment business as carried on by com¬ mission merchants, or receivers, holds a prominent place in the cash trading ol all the larger primary grain markets. In the older primary markets, such as Chicago, Milwaukee, Kansas City, and St. Louis, tins class ol business has been carried on with varying activity over a Pu been especially important in Minneapolis and Duluth. (Appendix lable 2 and note 2.) After the railway net was extended into producing territories commission houses were organized m the terminal markets to represent country shippers and other dealers. Their direct competitors were the line eleva¬ tor companies which were organized along the railroads, especially m the territory tributary to Chicago, Minneapolis, and Omaha. ne consignment business has been especially well supported in consumptive markets, such as Minneapolis, where there is continu¬ ous demand for premium grain, particularly wheat, and conse¬ quently a preference for buying on sample. No system of grading gram can take full cognizance of the milling qualities of wheat. If exchaigTto rviSnfeften^ Chamber of Commerce, Kansas City Board of Trade, and other o/SJl quRMn poSv to-arrive grain committee of the Chicago Board has not been considered. It was explained that this tax on freight would be chargS as an itfm of ex^of^ co'^IKaK f f o fmaking drafts upon appellees at the time of each eonSgnment fo^abont in RECEIVING FROM COUNTRY POINTS. 41 sales are made on consignment, the transaction is most often on a sample basis. The buyer then has the opportunity of examining the o-rain, and because of certain qualities may be willing to pay a h^her price than he would pay if the grain was sold direct on a grade basis without examination of the sample. Wliile direct sales are some¬ times on a sample basis, as a rule consignment and sample selling tend to go togetlier and direct and grade sales (sec. 8). Grain is occasionally shipped by the growers themselves, m which case a country elevator operator may be paid a custorn^y rate—say 2 cents a bushel—for loading the car. (Vol. I, Chap. Vii, secs. 2—3.) However, the bulk of the shipments in all areas aie from local or line elevator companies who have purchased the gram from the growers. . . Functions of the commission merchant.—- i he com missio n mer- chant may be defined ® as one who acts as a selling^g^t for a Hiipper and who does not take title to the grain shipped, although he ire- Quently secures a direct lien through advances made against the corn- mo'dity.'Th practice many firms are orgpized to buy and sell gram asTvell as to operate on a commission basis, advertising themsel^s as ‘'grain dealers'’ or “receivers and shippers," so that it is often dithcuit to distinguish clearly the group of commission merchants in a given in9jrk0l; ^ On the larger exchanges the number'of firms operating on an exclu¬ sively cash commission basis, i. e., not operating at the same time as dealers, is very small; and in Kansas City, Chicago, Milwaukee, Minneapolis, and Duluth is almost negligible. In the St. Louis Mer¬ chants’ Exchange there were 40 memberships and m the Omaha Gram Exchange 22 memberships held in 1918 by individuals engaged exclusively in the consignment business, comprising 10 per cent and 16 per cent of the total resident memberships of the respective asso¬ ciations. (Appendix Table 1.) • . . As incidental to the receiving business a commission merchant may, and frequently does, undertake numerous functions relative to market¬ ing the grain for the country shipper, viz; (a) To finance the operations of country elevator companies; (b) To buy and sell futures for customers; (c) To supervise the daily operations and accounts oi country elevators through periodic reports and even procure managers tor elevator companies (although these services are performed chieny by houses advancing credit to the local elevators); (d) To supply country shippers with market information; (e) To assist in the procurement of cars for shipping gram; (f) To protect the interests of the consignor in the inspection, weighing, and grading of consigned grain, and call for reinspection when desired; ^ . . • • . • i (g) To arrange for cleaning and conditioning gram m terminal elevators whenever desirable. too inclusive to be usable. 42 TERMINAL GRAIN MARKETING. From an examination of the practice in the Northwest, it appears that (^mmission. houses frequently receive samples of the grain pur- chased by or available to their customers (i. e., consignors) and secure the oincial grade and dockage thereon. The country shipper is then advised of the grade dockage and the market value of each sample, ihe commission house may also advise the shipper of the current prices for certain varieties and grades of wheat, and in turn send type samples to the shipper in connection with this advice. This interchange of physical samples and of market information is designed to keep the country shippers in line’’ with values in the terminal market. It is stated by several commission men that high-grade service can not be rendered to consignors when merchandising is combined with the consignment business. They insist that if the commission mer¬ chant IS offering for sale two samples of grain on his table, the one consigned by a country shipper and the other bought outright by him- ^li, he will very naturally be more solicitous to sell his own property, h urthermore, it is said that ^Tf you buy and sell and scalp on the side soniethmg will be neglected, and shippers will prefer to send their gram to the men who give all their time and attention to getting best prices for consignments.” (Chap. XI.) Yet in probably the great majority oi instances the con^gnment business has been carried on by hrms which also merchandise grain. Section 3. Operating methods of commission men. Shipping arrangements. In trade terminology consignors are irequently classified as (1) open-account shippers and (2) bill-of- mding (or closed-account) shippers. This is especially true of the Northwest, where consignments are far more frequent than direct sales. Ihe open-account shipper is extended credit by the commis- uof ^account is not closed for each -transaction. The bill-ol-ladmg shipper draws upon his commission house by sight draft attached to the bill of lading for an agreed percentage of the value of the shipment, the balance being adjusted for each transaction. , ^®^ally, m the case of open accounts, credit has been extended to the country shipper prior to the shipment of grain, so that the specific consignments received are credited against a debit balance. Shippers on the bill-of-lading basis are usually allowed to draw from 80 to 90 per cent of the value of the car,^ according to the credit standing of the consignor and market conditions. It is n^essary to leave a margin to cover the terminal costs, commission differences m grades and weights, and price fluctuations. Shippers who habitually attempt to overdraw are discredited and likelv to have their drafts refused. Notice of shipment.— The shipper usually, although not always, notifies the commission house of a shipment. Form 1 below shows the form of notice distributed to customers by a Minneapolis concern market of 1920-21, authorized shippers to draw upon them un to 95 per cent of the value; but in most instances a wider margin was required. ^ ^ RECEIVING FROM COUNTRY POINTS. 43 Form 1.—CAR SHIPMENT REPORT. CAR SHIPMENT REPORT. Cargill Commission Co. .(Date) /Minneapolis, Minn. \Duluth, Minn. Gentlemen: We are shipping you to-day from.billed to .. Car No., Initial,.containing —bushels of No.. which please—sell on arrival—sell to arrive— apply on sale of. We have drawn draft on you, with bill of lading attached, for ... This car was loaded to a depth of.inches, and tested .pounds in the dirt. In my opinion this car should grade destination.grade. dockage. Car seals—side doors No.. doors No. Yours ti^y. Remarks:. SCALE WEIGHTS. Drafts Pounds 19 [Read instructions on other side.] [Form L—Reverse side.] INSTRUCTIONS TO SHIPPERS. One of these reports should be made out for every car shaped by ypu, the “original” mailed to us at the earliest possible moment. The depth, in imhes, and the test per bushel in the dirt, should always be given, and reported down as close as i pound on the test or ^inch on the depth. The utmost care should be taken that this information be given as accurately as possible, as its value depends on the correctness of your figures. In arriving at the test in the dirt, gmn should be dropped into the tester from height of at least 18 inches, so as to give /he approi^ate density of parjvhen loaded. Every car containing a mixture of any kind, whether intentional or caused by ^cident, should always be fully explained, so that we may know just exactly how the car should be handled upon its arrival at *^I^^^^ing us your idea of what a car should grade and dock, give us your very best judgment, as tWs information, if given correctly, enables us always to act mtelhgently in all cases, and ^dl undoubtedly often save you useless expense. In arriving at your dockage, get a good average sample of the car and sift Everv car weighed should show the weight by drafts. i. „ „ i*- To avoid paying excess freight, every railroad receipt or bill of lading should show across the face of it whether car is loaded to grain line or not.__ A printed post-card form is used by some firms for the notice of shipment. Freouently, however, the first notice received by the consignee is the hill of lading with draft attached forwarded through banking channels. In some instances cars arrive without specific notification other than the railroad manifest and subsequent delivery of the inspected sample. . . i i u Inspection and sampling. —Each car of gram is sainpled by the official inspection department prior to arrival at the terminal market, or immediately thereafter. (See Vol. II, Chap. VI.) At Minneapolis and Duluth the initial sampling frequently takes place outside the city limits—sometimes at points several hundred miles distant—to avoid congestion in the railroad yards. In Minneapolis a separate sample is usually obtained from a private sampling company as an independent check upon the official inspection department. these sampling companies are subject to exchange regulation and control. (See Vol. II, Chap. VI, sec. 6.) . . , j- .u The grade as determined by the commission house Irom the sam¬ pling companies’ samples is noted on a card, which is used to identity the sample as placed in a sample pan on the firm s table (on the trad- 8 See also Vol II u. 309. Most of the grain firms at Minneapolis are equipped wth apparatus for determining the grade and dockage of a car of grain, and some of them maintam private testmg laboratories which pass upon ail the grain which they handle. 44 TERMINAL GRAIN MARKETING. ing floor). When the commission man has obtained from the inspec¬ tion department the list showing the official grades of the cars con- s^ned to him, he compares the grades given with those assigned to the samples which have been received from the sampling company; and II the official grade is lower than his own, reinspection may be requested.^ From the official list new tickets showing the official also prepared and are placed in the sample pans. Where possible the approval of the shipper is obtained before rein- spection or appeal is called for. However, an effort is made to expedite the process of inspecting and preparing the grain for sale in order not to incur demurrage, which is chargeable to the shipper. . A car of grain may be received in bad condition, as for example, when corn becomes heated in transit. The grain may be dirty or contain excessive weed seeds and chaff, so that the shipper in the judgment of the commission man would receive a better price if the gram were treated or cleaned. In such a case the shipper is usually notified and asked for instructions. If the shipper agrees to have the car conditioned it is sent to an elevator for that purpose. Unless gram is very dirty or badly out of condition, it may not pay to have a consigmnent of grain cleaned or conditioned, since the cost of the process, together with switching charges, may be greater than the increase m price which might be obtained. Selling the grain . The chief function of a commission merchant IS to represent the country shipper as a selling agent in the terminal is offered for sale usually on the basis of samples whmh are exhibited on the sample tables in the exchange hall, where such exists. The salesman may wait for the buyers to come to his table, or he may peddle the sample around the floor. If, as fre¬ quently happens, the salesman knows that grain similar in quality ^ certain buyer, or group of buyers, he will solicit their bids. Ihus a salesman rnay, at the opening of the market, decide that conditions warrant his forcing the buyers to come to him and he accordingly does not go about the floor seeking buyers* whereas several hours after the opening an entirely new aspect of the marlmt may cause him to circulate around the floor offering his gram, endeavoring to secure as high a price as possible, but being forced, frequently, to accept an offer which is much lower than his early id^s of values. Similarly, buyers do not follow any usual practice but govern their actions upon the special conditions of the holding off or bidding freely as the circumstances warrant. When seller and buyer agree and the sale is made each makes a notation on a trading card.^*^ foll^^wing description was made from a first-hand observation n ^ commission merchant’s table on the Chicago Board of Trade: ^ be one of the best corn sellers on the floor. A great many of the other sellers came to him throughout the session and asked him his opinion as to prices on various grades. r o ^ car is sold before official inspection has been obtained. Reinspection of a car of erain bv depoVt upod RECEIVING FROM COUNTRY POINTS. 45 Whenever a new sample of corn came to his table, Mr. C. examined it carefully, trying to fix a figure in his mind which would be a fair selling price. As the market first opened, buyers appeared on the floor and began to walk from one table to another looking at various samples of corn displayed. Until 10 o’clock, there was practically no bidding by any buyer. The first sale of corn was made by Mr. C. at 10.15. This was a car of sample grade white corn, 35 per cent damaged. The best bid that had been received up until 10 was $1.25. At 10.15, a C. P. Co. buyer bid $1.35, and the sale was made at that price. Mr. M. (another salesman) was selling his oats at the same table. Five cars of Standard oats were sold at 71| * “* “X *’'®y Q. In normal times how many of those men do von liccxm /-vn +9 a t t, j country elevators is characteristic of territory where such shippers are financed by commission houses and is not so prevalent elsewhere. But even in the former area (tL NorthwLt) noTcfl'rTto^® country elevators’ books, since they do Quhed Ono accounts where so much supervision is re- quired One commission merchant stated that he assured himself that elevators which he financed were fully insured and gave the solicitors instructions to “take a peep at the bins” and sizi un the situation where a shipner had draAi heavily and Tal sendZ ^ gram slowly; but that le believed in leaving the eleTSor“free manage his business without commission-house supervision Many country elevator managers have not been competent book- keepers and the financing commission houses have frequentlv felt obliged to make “audits’^in self protection.^ Ji-cquenuy telt 22 See Vol. I, pp. 235-237. The foUowing letter also illustrates this practice: The Van Dusen-Harrington Co., Dewls Lake, N. D.ak., July 16, 1916. Minnea-polh, Minn. th?tTy Sd Smdeblker^Jai^forXh Grain and Elev. Co., and figure to get two more members elected on the board* whieh wr^i J worked up a strong organization, death knell. There are five or six stocSolders wlmfiw nhSrlrT k mean our Whenit rained sohard Friday night I found four or five have their lands out near Josephine, as the roads were too bad fo^ a car, they t£ught agreemg to take them out and bacl^. I got fiT&Sorsfn ^ ^ after them’, votes, and we elected our man, Mr. Thomas who is nVht w iaio ^ ^ proxieSj which gave us 14 now, 2 Equity and 5 who are ri^t. ’ ^ ^ chamber, also for us; it leaves the board Ihetertthl Uhly hiuS Shiorthev^use moSfv f„? owing to to give them hall of the accoVmt or they Sd tL?&^ *’* *““• “'o™' “'0^ "ouW hive they only asked for enough grain to Scrthem lii elsewhere. Last year more greedy now, and Mr. Getchell savs Mr 4ndrew^i Assuming $20 per mile as the cost of the lease and $20 per mile additional for operators’ salaries and other additional overhead expense,the expense of this 500-mile line would reach at least $20,000 a year. The following illustration of private-wire 26 Circular No. 249. 27 Ruling of the board of directors Jan. 4,1910, on rule 32, sec. 11. For text see Vol. 11, p. 232. 28 It is reported that a rule has been considered by the Merchants Exchange of St. Louis which would prohibit private wire operators from serving that exchange so long as their wires were also used to receive orders from country merchants. 29 The use of private wires for cash trading is discussed in Vol. V, Chap. Ill, sec. 7. 80 Since about 1910. See I. C. C. Doc. No. 5421, Evidence, p. 1957. 31 See Table 16, Vol. V. > 32 These are conservative figures. See Vol. V, Chap. Ill, sec. 4. HECEIVING EROM COUNTRY POINTS. 55 cost appears in the recent decision of the Interstate Commerce Commission on Wire Contracts'P The record shows the details of two days’ operations of a broker’s wire from Chicago to Kansas City, Mo., with drops at Davenport, Iowa, and St. Joseph, Mo. The ex¬ penses of this operation were as follows: Rental of wire, including two drops, per annum.$11,000.00 Salaries of four operators. 5, 720.00 Total allocated expenses. 16, 720.00 Incidental expenses, estimated. 5, 720.00 Total expenses, per annum. 22,440. 00 Total expenses, per day. 71. 90 Certain Chicago receivers point to the case of a cash commission firm which set up a branch office at Pontiac, Ill. By public tele¬ phone it took from 20 to 60 minutes for the main office to call the Pontiac branch. There were three private-wire branches already operating at Pontiac enjoying practically continuous communica¬ tion with the head offices at Chicago, and it became impossible for the commission firm not so equipped to do business. Because of the network of private wires extending out of Chi¬ cago the hedging orders of country dealers are frequently executed by private-wire operators even when the grain is to he consigned to firms not so equipped. It is alleged that this use of wire houses by country shippers lor hedging grain places strictly cash commission firms at a further disadvantage in competition, although the hedg¬ ing of grain by country elevators is not so extensively practiced in Chicago territory as in the Northwest. Apparently the fact that private-wire systems are already es- tablisned leads to marked economies in using the equipment for a cash commission business, since the futures business can be relied on in general to take care of the expense. At the Interstate Commerce Commission hearing in 1917^^ it was testified that the cash grain business in Iowa going to Chicago firms had become concentrated in the hands of six private-wire concerns. Others say that the solicitation of consignments by wire houses at Chicago offsets to a certain extent the efforts of terminal elevators to buy direct and thereby tends to sustain the volume of sample selling on the floor. So far as the conduct of the cash grain commission business is con¬ cerned the private wire is necessarily an expensive facility. Generally speaking there is not in this business any such necessity for promptness and speed in the transactions involved as in the case of futures opera¬ tions, and this is also true even of the hedging transactions of country elevators. While, therefore, it may be that this is an economical method of handling grain so long as cash and future business is com¬ bined and the speculative futures business takes care of the largest share of the expense, it by no means follows that this would be true if private wires were employed for the transaction of only the cash commission business, including hedges. This would necessarily involve sufficiently high commission rates to cover the expense of « Doc. No. 5421, decided Aug. 3,1918, pp. 751-752. M See Vol. V, chart facing p. 126. 84 Private Wire Contracts, Docket 5421. 56 TERMINAL GRAIN MARKETING. the facility and would probably tend to a high concentration of the commission business. Section 6. Commission merchants associations. In four terminal markets (Minneapolis, Duluth, Milwaukee, and Chicago) the commission merchants have formed associations of their own witlun the exchange bodies. The matters largely occupy¬ ing the attention of such associations have been: The establishm ent of cre dit jpureaus for protecting the members against unreliable country shippers; agreements to limh^he number of country solic itors and to require them to be licensed; regulation of cr^it advances to country shippers as to security, volume, etc.; agreements upon unifonn interest rates to be charged shippers during the shipping season; the elirnination of,duplication in sending puklParket informa¬ tion; and agreements upon minimum commission rates. The Minneapolis Graih'Commission Merchants^ Association, organ¬ ized in 1909, grew from 22 to about 50 members in 10 years, and now includes most of the commission houses in the market. Member¬ ship in the association is limited to exchange members who are engaged in the cash grain commission business. A majority of the members are also subscribers to the credit bureau, which is main¬ tained by the association at a fee of $2.50 per month D918). The Duluth association had a membership of 40 in 1918, with dues of $10 a year. On March 5, 1917, this association adopted a resolution pledging the membership to— exert its best efforts from this time on to forward a campaign of education looking to discontinuance of the burdens carried by the commission houses in financing grain dealers in the Northwest by using every effort and instructing traveling men to use every effort to have independent grain dealers and farmers’ elevator companies secure their funds through the local banks and through these local banks passing their papers to a Federal reserve bank. Such a radical move to eliminate the financing operations of receivers in the Northwest depended upon the cooperation of the Minneapolis association to become effective, and there is as yet only slight evidence of a serious movement to abolish commission house financing of the crop movement. The Milwaukee association has comprised some 16 fir m s. The personnel includes the branch offices of two Chicago concerns, neither of which are receivers. The association is not so large or active a group as are those in Minneapolis and Duluth, though its functions are supposed to be about the same. Its main utility has been to report unreliable shippers to the members. The Grain Receivers’ Association of Chicago is an informal organiza¬ tion of 48 members. They seldom meet as a body, keep no records or correspondence, and have adopted no rules with reference to competitive methods. They are not recognized officially, but are influential as a voting group. The chief cause for the union of the receivers in Chicago has been the increasing attempt of elevator interests to bid for grain at country points and absorb the receiving business. It is stated that the receivers effected the adoption of the ''to-arrive” rule,^® de¬ signed to place them competitively on an equality with elevator buyers. 36 Vol. II, p. 85. RECEIVING EROM COUNTRY POINTS. 57 The Kansas City Receivers & Shippers’ Association was organized in an informal way to secure an investigation into the operation of elevators leased from the railroads by private dealers. The associa¬ tion is now inactive and is reported (1921) to have held no meetings for over two years. ... Credit bureaus have been established by the associations in Minneapolis, Duluth, and Milwaukee. In Minneapolis in order to obtain the benefits of the credit bureau the members hpe been required to furnish each Monday morning ^^a complete list of all country shippers indebted to them in excess of $500 * * * together witn a list of all country shippers who have open trades * * These lists are tabulated by the secretary, and in case a shipper’s name appears on two lists, so that his debit balance seerns to be unduly high, the interested commission men are immediately advised. , i i i i« ^ j The credit bureau at Duluth was taken over by the board ol trade on the request of the commission men. Members of the bureau as thus operated were required to conform to the following regulations Every member of the association shall, on Monday of each week, file with the manager a report, made in duplicate, giving the name of every person, firm, or cor¬ poration not a member of the Duluth Board of Trade, or of any other gram ^change, with whom, at the close of business on Saturday of the week previous, he had open trades in grain or flaxseed, either for immediate or future delivery, and a ledger balance, including bills receivable of $500 or more, indicating whether the balance is debit or credit. It is not required that in making the said reports the amount of the trades or the balance shall be given. , . . ^ The manager shall have authority to exchange the information obtained from the reports made by members for similar information furnished by members of the cham¬ ber of Commerce of Minneapolis. x i, • Where the same person, firm, or corporation appears from reports as having open trades with two or more members, the manager is authorized to commumcate the information to those members. , . j j i, n The reports made to the manager shall at all times be in his custody and shall not be open to inspection by anyone other than himself or employees of the department. Section 7. State license and regulation of commission merchants. Extent of legislation. —In at least five States the business of the commission merchant has been subjected to regulation and license Under the police power of the State. The States of Kansas, Minn^ sota. North Dakota, Nebraska, and Washington have made .such merchants subject to the supervision and licensing of administra¬ tive departments.^® The Minnesota law, which is especially com¬ prehensive on this subject, provides that; * * * A commission merchant is a person who may receive for sale, for account of the consignor, any agricultural products or farm produce. No person shall sell or receive or solicit shipments of such commodities for sale without first obtaining a license from the railroad and warehouse commission to carry on the business of a commission merchant and executing and filing with the secretaty of state a bond to the State for the benefit of such consignors; if the license authorizes the sale of gram the bond shall not be less than $4,000. _ ^ It shall be unlawful to use the word commission, commission merchant, or com¬ mission company on any advertising matter, letter, or bill heads of any persons not having a license from the commission. ^ Any person ’^bo shall hold himself out ^ claim to be a licensed or bonded commission merchant, either by or verbal representation or by the use of any letterhead, statement, or advertisement, ^thout ha^ng a license from the commission, shall be guilty of a misdemeanor. S declared unconstitutional,as expltin^dS. ?or th^ rTghlaUon of Commission nierchants mak^ tion “to erains ana seeds which are classified into grades by any governmental or State d^artment du y Sted by Zy law of thi State of lUiuois or of the tJnited States.” (Illinois Laws of 1919,p. 15.) »»Minnesota Laws 1915 ,ch. 370 ,secs. 1 and 7. 58 TERMINAL GRAIN MARKETING. • required of grain commission merchants operating in JMorth Dakota: ^ merchant or other factor to receive anv wheat, flax, or other gram, * * * m this State to be sold for other persons or to have any agent or correspondents in this State receiving or soliciting any consi’gn- ^ ^ without being licensel and autho?ized^o t^^ It is provided in Nebraska— * * * person, firm, or corporation pursuing or who shall pursue the business of selhng farm, dairy, orchard or garden produce, wares or merchandise of merchant consignment for a commission shaU be deemed to be a commission Tr.£^h’ unla^^ for any person engaged in the business of commission merchant to receive or sohcit consignments of produce, wares, or merchandise in the State of Nebraska without first obtaining a license from the food, dairy, and drug commissira to conduct and carry on the business of such commission merchant q payable to the State treasurer. bond! eth “ The Washington statute is similar in substance: Sec. 1. It shall be unlawful for any person, firm, or corporation to engage in the business of selling farm produce on commission, or to receive or solicit consignments of such produce on commission in the State of Washington without first obtlininra license from the commissioner of horticulture to conduct and carry on the business and giidng a bond to the State of Washington in the sum of $3,000, said bond to be conditioned for the faithful performance of his duties as such commission merchant. uuuch Sec. 10. For the purpose of this act a commission merchant is defined and declared to be any pCTson, firm, or corporation whose principal business is the sale of farm •dairy, orchard, or garden produce on account of the shipper or consignor.’ The Kansas law differs from those already cited in that the term commission merchant’’ for the purposes of the act includes every person licensed to receive, sell, or offer for sale on commission within this btate any kind of farm produce; except where such farm produce %s sold for consumption and not for resale:^ The statute is further qualified m the following manner: This article shall not apply to the sale of farm produce at public auction by an auctioneer, acting as the agent of another to whom such farm produce shall have been consigned, nor shall this article apply to seeds sold at retail.^* Administrative regulation. —The Minnesota law provides that the merchant licensed to receive and sell grain in Minnesota shall ^ true statement in writing to the consignor within 24 hours of the anaount sold, price received, name and address of purchaser, and the day, hour, and minute of sale, and shall forward vouchers for all charges and expenses.'^^ In addition it is provided that the railroad and warehouse commission shall require statements of his business for the exclusive use of the commissioners, investigate com¬ plaints of consignors with regard to specific shipments, and give the complainant a written report of the investigation.'‘« The power delegated to such administrative commissions in North Dakota JNebraska, and Washington includes similar powers to prescribe regu-- « Revised Code of North Dakota, 1905, 2197: 1897. ch 54 1 - R C isqq i « Laws of Nebraska, 1909, ch. 66. ’ ’ ' Laws of Washington, 1907, ch. 139. « Kansas General Statutes, 1915, ch. 371. ** Idem, sec. 1. « Laws of Minnesota, 1915, ch. 370, sec. 4. Idem, secs. 3 and 5. RECEIVING FROM COUNTRY POINTS. 59 lations and to conduct investigations. The general irtent of such regulation is apparently to prevent fraudulent practices on the part of representatives of country shippers.i o t 3 j ^ The Kansas law empowers the secretary of the State Board of Agriculture to investigate formally the conaplaints of consignors and to regulate the conduct of licensed commission merchants under a procedure s im ilar to that laid down for warehouse commissions else¬ where. The authority of this official to grant and revoke licenses is set forth as follows: The secretary of the State board of agriculture may decline to grant a license or may Woke a license already granted where he is satisfied of the existence ot the following cases or any of them: (a) Where a money judgment has been entered against such commission merchant and upon which execution has been returned imsansned. (h) Where false charges have been imposed for handling or services rendered, (c) Where there has been a failure to account promptly and properly or to make settle¬ ments with intent to defraud, (d) Where there have been false statemente as to con¬ ditions, quality, or quantity of goods received or held for sale on commission when the same might be known on reasonable inspection, (e) Where ^ere has b^n false or misleading statement or statements as to market conditions mth intent to deceive. (f) Where there has been a combination or combinations to fix prices, (gr) Wnere the commission merchant directly or indirectly purchases the goods^ for own account without prior authority therefor or without notifying the consignor thereoi. (h) Where the commission merchant is in bankruptcy or in insolvency, or where the secretary of the State board of agriculture has reason to beheye that bankruptcy or insolvency may shortly occur, (i) Where there has been a continued course of dealing of such a nature as to satisfy the secretary of the inability to properly conduct the business of commission merchant or of intent to deceive or defraud shippers. (j) Where a licensee has been guilty of fraud or deception in obtaimng his license. {k) Where the licensee neglects to file a new bond when notified by the secretary tiiat the bond already filed is unsatisfactory.^* Constitutionality. —^Laws for licensing conunission merchants were adopted in both Minnesota and Michigan in 1899. They were almost immediately attacked as unconstitutional in the r^pective State courts with quite opposite results. The Minnesota Supreme Court reviewed conditions in the grain trade in the Northwest ^^d held that the business of handling grain on consignment had ‘ffiecome sufficiently affected with public interests as to be the proper subject of police regulation.’’ On the other hand, the Michi^n Supreme Court decided that such legislation was an unjustihable interference with private rights and repugnant to the constitution ot the State. , The Minnesota case referred to was brought up on habeas corpus proceedings to test the validity of the act, and the court based ^s decision on existing evils in the trade which were pointed out in the following opinion: It was publicly believed that the business of selling agricultural products and farm produce on commission had become saturated with false and fraudulent methods, to the great injury of a large class of our citizens, who were compelled to deal with com- <7 Thfl Minnesota commission declined to revoke the licenses of 19 elevator companies on the complaint ot MiSjSTerSttSe licSisees were at the same time buyers, sellers,and receivers of gram. It construed the Minnesota law as follows: , , „ unt fUreotlv orhvim- “Thelaw which authorizes the licensmg of coi^ssion merchants on com¬ plication forbid elevator companies from engagmg in the ^^*“1?** mission. In practice, the commission has given the same consideration to elevato^^ to any other reputable person or corporation whp desired to engage elevator compames from participation in this busmess has been adopted by the co^ssipn the elevator cWanies mentioned in the petition have been and are legally ^cen*cd to engage in the busmess of grain commission merchants, and such hcenses can only be canceled for cause, and then only alter a hearing and investigation-.” (May 29,1914.) « Kansas General Statutes, ch. 371, sec. 5. iAanbao VjreutJldi Otcfctuteo, oi i, V. oA XT xxr « state ex rel. Seek v. Wagener (1899). 77 Mmn. 483. 80 N. W. 633^ 60 Valentine v. Berrien,Circuit Judge (1900), 124 Mich. 664, 83 N. W. 594. 60 TERMINAL GRAIN MARKETING. mission men, and who were powerless to detect or prevent the wrong, and that the business had thus become sufficiently affected with public interests as to be the proper pbject of police regulation. We are of opinion that the legislature did not exceed its powers when, under the circumstances, it enacted a measure having relation ^ and a tendency to accomplish, the desired end, such as is the law now before us. ihis enactment was designed to prevent false and fraudulent practices of the char¬ acter cornplained of, to correct tho evils generally believed to prevail, and to compel the merchant to whom property was consigned for sale on commission to deal honestlv and to be faithful to his trust. ******* The treatment of consignors was frequently most exasperating and injurious to them. Sometimes reports were never made of sales, and on other occasions were purposely delayed so that it would be difficult, if not impossible, for the consignor to ascertain the real facts of a given sale. Prices of grain fluctuated, not only from but from hour to hour. It might make a great difference to the consignor whether lus grain was sold in the morning or near the close of the day. And for these reasons the law has therefore studiously provided that the reports of sales shall state the day, hour, and minute when they are made. The Michigan court, however, found no existing evils which would warrant an exercise of the police power, such as the legislature had attempted.®^ The act had provided— That every person who shall solicit to receive for sale, for himself or another or who shall receive for sale, or offer for sale, for another, for hire, or cause the same to be done, any grain, fruits, vegetables, live stock, meats or poultry, and all other kinds of farm or dairy produce shall execute a bond in the penal sum of five thousand dollars running to the people of the State of Michigan, to be approved by the judge of probate in the county where his principal office may be, except as hereinafter provided with two or more sureties, or by an indemnity company authorized by law to do business in this State, conditioned for the faithful performance of the trust reposed in him as a commission man or broker, and to pay over all moneys to the proper parties coming into his hands by virtue of his agency or trusteeship, by virtue of his receiving the goods and produce a,foresaid which shall justly belong to any person. Such bond when approved, shall be filed with the county clerk of the county where such com- imssion or brokerman shall be engaged in business and where he shall have his prin¬ cipal office: Provided, That the provisions of this act shall apply only to persons firms and corporations who hold themselves out as commission men, brokers agents or merchants and their agents. ’ ’ The opinion of the Michigan Supreme Court was, in part, as follows: The business of buying and selling on commission has existed ever since commerce began. There are and always have been dishonest men engaged in it, as there are and always have been in every other branch of business. There are and always h^ve been dishonest sellers, who will pack their produce in such a manner as to deceive It would be as reasonable to require the latter to give bond to properly pack their produce. In every such case the common law provides an ample remedy for redress to^ the injHired party for breach of contract. There is no more reason why a com- mission inerchant should pay a license fee and execute a bond to pay his debts and to do his business honestly than there is that any other merchant should pay a like fee and file a like bond to properly do his business and pay his debts. The business requires no regulation, any more than any other mercantile pursuit. The validity of similar legislation in Kansas was sustained in 1918 by the Supreme Court of the United States.®^ ^^g on appeal from a decision of the Supreme Court of the State of Kansas which had upheld the validity of the Kansas law of 1915 for licensing commission merchants. In affirming the judgment of the Kansas court the United States Supreme Court said: The validity of c. 371, Laws of Kansas, 1915—“An act in relation to the sale of farm produce on commission is challenged by certain grain dealers carrying on business in that State. It forbids the sale of farm produce on commission without « Public Acts of Michigan, 1899, sec. 1, p. 391. M Payne v. State of Kansas, 248 U. S. 112; 63 Lawyers Edition, 153. RECEIVING FROM COUNTRY POINTS. 61 an annual license, to be procured from the State board of agriculture upon a proper showing as to character, responsibility, etc., and a bond conditioned to make honest accounting. A fee of $10 is required. , Plaintiffs in error maintain that the statute is class legislation which abridges their rights and privileges, that it deprives them of the equal protection of the laws and also of their property without due process of law—^all in violation of the fourteenth amendment. . ^ xu Manifestly, the purpose of the State was to prevent certain evils incident to tne business of commission merchants in farm products by regulating it. Many former opinions have pointed out the limitations upon powers of the States concerning matters of this kind, and we think the present record fails to show that these limita¬ tions have been transcended. Section 8. Purchasing direct from country points. In GENERAL. —As already stated, grain is frequently purchased directly from country shippers by terminal market dealers prior to its arrival at the terminal point. Direct purchases may be made on the basis ‘'net your station,’’ i. e., f. o. b. cars country station track; or they may be made on the basis “delivered” at the terminal market. In the former case they are customarily known as “qn- track” purchases; and in the latter as “ to-arrive” purchases. While such transactions more frequently originate from a terminal market they may originate in the country, as when a country elevator man¬ ager notifies his commission house at the terminal to sell a ^iven quantity and grade of grain “to-arrive,” perhaps setting a limit on Sie price. , . , , . • i, -x Where grain so purchased is received by a commission mercnant it is usually on the basis of orders previously in hand and, although technically he takes title to the grain, the routine of handling the commodity and the accounting thereof follows closely that already described for the consignment business. Direct purchases from country shippers are more often on a grade than on a sample basis; since these transactions are usually contingent upon terminal market official grades and considerable delay may be involved in shipping type samples in from the country as a basis for the sale. However, it appears that a small volume of this business is done on a sample basis, as when an elevator com¬ pany determines to sell part of its country stocks “to-arrive” on the basis of type samples sent to a commission house. During exchange hours to-arrive bids are sometimes made to coun¬ try points by wire for immediate acceptance. After exchange hours it is customary for many firms at primary markets to send out “overnight bids” to the country on postal cards. The private-wire systems out of Chicago are employed in making direct bids at ah times. At five markets—Kansas City, Chicago, Milwaukee, Omaha, and St. Louis—the practice of “bidding the country” after exchange hours has been sufficiently large to lead to the adoption of rules for its regulation in connection with the so-called uniform commission rules. In Chicago bids after hours (and during exchange hours) may be direct to the country from the buyer’s office or through a receiving firm, or both. In case the bid is made through a receiver at the terminal market it is made gross, i. e., to include terminal charges End commission. When the bid is made to the country directly, these charges, or their equivalent, must be deducted. The grade, variety, price, and billing are usually stated. After-market bids direct to the country are usually subject to acceptance prior to the opening of the ex- 56976°—22-6 62 TERMINAL GRAIN MARKETING. change on the next business day.®^ To-arrive ’’ bids are usually com¬ puted at a difference over or under the close of the next maturing future, as a convenience in hedging, although they are issued to the country at a flat price. The use of a flat price on direct bids during the trading session, however, necessarily entails some risk of loss due to rnarket fluctuations, since the‘‘to-arrive” market prices are par¬ ticularly sensitive to changes in the futures market. This is re¬ flected m the following regulationof the Chicago Board of Trade: Du^g the hours of regular trading, all bids to persons located outside of Chicago for wheat, corn, oats, or rye to be shipped to this market, shall be based upon the price then and there prevailing in the open and competitive “to-arrive’* market, less the charges prescribed in section 32 of Rule IV. All bids forwarded during the regular session to persons located outside of Chicago on the basis of a flat price shall be made upon the condition that acceptance thereof shall be filed within five minutes after receipt, and all such bids not then accepted within said time shall be null and void. To-arrive ” BIDS. —Following is the card issued by a Kansas City company for No. 1 hard wheat and No. 3 mixed, yellow, and white corn. It will be noted the wheat prices are bid on either a Kansas City or Gulf basis with prices varying in accordance with the tima allowed for shipment.®^ Form 4.—TO-ARRIVE BID CARD ISSUED FROM KANSAS CITY. Barnes-Piazzek Co. (Inc.), New England Building, Kansas City, Mo. April 16, 1921. [Acceptance to reach us by 8.30 a. m. Monday.) We bid you the following prices for grain, Kansas City official weights and grades,, gram not to be mixed in transit, shipment direct from the country. Price. Basis. Shipment. 1 hard wheat. 81.29 1. 28 1.26 1.51i 1.50i 1.48J ir n 10 days. 20 30 “ 10 “ 20 “ 30 “ 1<4 (( . 44 44 1 44 44 . 44 44 ^44 44 . Gulf 1 44 44 . 44 1 44 44 . 44 [Special bid to originate west of Concordia, or Union Pacific west of Salina.) 1 hard wheat.. #3 or better mixed corn. ^ or better yellow corn, or better white corn. #3 or better yellow corn. SI. 30 K. C. 10 days. .47^ K. C. 30 days. .49 K. C. 30 “ .49 K. C. 30 “ .50 K. C. 5 “ When consigning to the Kansas City or St. Joseph market for good prices, prompt returns, be sure your next car reads; “Barnes-Piazzek Company.” All offers or bids subject to following conditions: (1) Acceptance reaching us before opening on next business day and if received after opening subject to our confirmation. (2) Acceptances for more than 5,000 bushels subject to our confirmation. (31 Acceptances must specify capacity of cars or bushels. (4) State price and amount when accepting. (5) Prices quoted are basis bulk. (6) Demand draft B-L attached. (7) Overfilled contracts to be applied at market differences unless otherwise specified. Barnes-Piazzek Co. (Inc.). M See 1 Arbitratira Decisions, Grain Dealers’ National Association, p. 252: " It is the opinion of the com- imttee that a firm offer without any hnutation as to the amount is good for acceptance until there is a change m the market or the offer is withdrawn. In this case the defendants did not send out their wire until after tne close of the market on the 13th and the same offer went out to four other firms. As the offer did not carry any Binit as to the amount that they would accept on their bid, they were bound to accept anv aniounts offered that were within their hands before the opening of the market on the 14th or until they had wired a cancellation of their offer, which they did not dp.” ^ or umu rney Chicago Board of Trade Yearbook, 1920, p. 116, 65 See Vol. II, p. 254, ' - ' RECEIVING FROM COUNTRY POINTS. 63 Grain sold on the bids shown in the card above must be shipped within the period specified (excepting the day of issue) and delivered at the terminal point shown in the column headed basis.’ ’ The seven conditions listed on the bottom of the card are typical of this class of business. That is, limits are usually placed upon the time of acceptance and the quantities accepted for, and it is customary to specify or agree that a demand draft with bill of lading attached will be accepted, although arrival drafts are sometimes employed. The specification that overfilled contracts may be applied at market differ¬ ences protects the buyer in case more grain arrives than he has booked and the adjustment may result in favor of either buyer or seller con¬ tingent upon the course of the market.^® The following bid card issued by the Quaker Oats Co. shows the conditions of ‘‘ to-arrive ” bids for corn and oats by a converter: Form 5.—TO-ARRIVE BID CARD ISSUED FROM CHICAGO FOR GRAIN TO BE DELIVERED AT MILLS IN IOWA. Form 812 25M 3-10-21. Codes—Robinson and Universal. Chicago, Apr. 15, 1921. Subject to wire acceptance to reach us at Chicago time prior to 9.30 a. m. to-morrow or next business day, we bid the following prices, errors excepted, basis Chicago for * 20 days shipment to our mills at Cedar Rapids or Fort Dodge, Iowa, our option, our weights and approval. White or yellow milling oats, 30 pounds or better, free from foreign, damaged, or stack burned grains, 35^. Yellow corn (milling quality), subject to discount for moisture, 53. Over 17^ per cent. White corn (milling quality), subject to discount for moisture, 53. Over 17^ per cent. Load cars to capacity. Sell bushels instead of cars. Grain shipped to our mills subject to our weights and approval. Grain not suitable for our milling requirements will be turned over to any commission firm requested on payment of draft or we will sell same for your account charging usual commission. Other shipments must be made to replace those rejected. All quantities over 10,000 bushels subject to our wire confirmation. If grain is not shipped within time specified, seller agrees that contract is open until shipped or until we advise you that we have closed same. Make no shipments until you receive our shipping directions. Draw on us at Chicago with B/L and weights attached. Draw not to exceed four-fifths value of shipment. • The Quaker Oats Company, 1600 Railway Exchange Bldg., Chicago. It will be noted that under the conditions of Form 5 above the grain is not bought subject to primary market official grades and weights, but subject to the weights and approval of the milling concern; and that grain not considered suitable for milling requirements, after delivery, will be sold on a commission basis or sold to a commission man. ‘‘On-track bids.” —The card below may be used for a bid f. o. b. country station, i. e., “on-track”; or a bid delivered Kansas City, i. e., “to-arrive”; or for both of these terms. The card as shown gives bids for wheat “on-track” at Elsmore, Kans. (addressed to the M Rule 14 of the Grain Dealers’ National Association provides that “suri)lus ^ain shall be taken to account by the buyer at the current market price on the day after the last car is vudoaded. (Nov., 1920.) 64 TERMINAL GRAIN MARKETING. Elsmore Elevator Co.), indicating that the buyer will furnish billing instructions after acceptance and will pay the freight costs. Form 6.-ON.TRACK BID CARD ISSUED BY KANSAS CITY RECEIVERS AND SHIPPERS. .Bell 3925 Main. „ Home 9670 Victor. Hodqson-Davis Grain Co. BOARD OF TRADE, KANSAS CITY, MO. E. H. Sullivan, Mgr. Cash Grain Dept. We bid for ^ceptance to reach us before 8.30 a. m. to-morrow (Sunday excepted). Gestination, official weights and grades, our option. Clerical errors excepted. F. 0. b. your station. Delivered Kansas City. 2 hard dark wheat. 1 hard wheat. 116i 113J 116J 113J 2 hard wheat. 1 red wheat. 2 red wheat. 3 or better corn. 3 or better yellow corn. 3 or better white corn. - Shipment Apr. 25. To avoid errors, acceptance should state price, grade, and number of bushels When shipments are not made according to contract, we reserve the right to extend the time of shipment or cancel sale or buy in the grain for shipper’s account Inspection and weighing charges to be paid by shipper. Board of^Tmde^^ handled at Kansas City, subject to the rules of the Kansas City If acceptance reaches us later than specified time, we will enter the purchase unless you hear from us to the contrary by wire. This bid is based on 1,000 bushels to the car, exc^t when only one car is sold it will mean capacity of car unless other¬ wise aped. Our option to accept or reject more than 10,000 bushels of any one kind of grain at this bid. ^ Cars to be loaded to capacity required by railroad. Unless otherwise provided, any grain failing to grade as specified in contract will be accepd at market difference unless unfit for our use, in which case same will be sold for shipper s account, by sample, at the usual commission, but can not in that case be applied on contract, and other shipments must be made to replace any 80 soldi. Subject to reinspection after arrival at unloading elevator. instructions and bill as directed, making draft on us at Kansas ^ty, Mo., with bill of lading attached, leaving a fair margin. K. & O. E. ° * Hodgson-Davis Grain Co. U. S. Food Administration license number. No. G-35952. Bids from smaller markets appear to be most frequently on the on-track basis. The following card was sent by a cash grain concern at Indianapolis to a shipper at Le Roy, Ill.: KECEIVING PROM COUNTRY POINTS. 65 Form 7.—ON-TRACK BID CARD OF A DEALER LOCATED AT INDIANAPOLIS AND CINCINNATI. Phones, Bell Circle 0749. Automatic 21-742. The Early & Daniel Co. Indianapolis, April 13, 1921. For acceptance to reach us by 9.15 a. m. to-morrow or next business day, we bid you, less weighing and inspection charges, any part of 5,000 bushels of each kind of grain, acceptance of more than 5,000 bushels subject to our immediate wire con¬ firmation. Specify amount of acceptance in bushels. E. & 0. E. F. o. b. Your basis. Shippers pay war tax. • Acceptance to arrive by 8.15 a, m. Indianapolis terms, 47 N. Y. P red w. wheat, 10 days. 118J ^3 yellow corn, 10 days. 44 #3 wht. oats orbtr., 10 days. 31 Cincinnati terms, 19\ Cin. p red w. wheat, 10 days. 118i 1^3 yellow corn, 10 days. 45 i^3 white corn, 10 days. 46^ #4 grades at 2^ discount. #3 wht. oats orbtr., 10 days. 32^ Wire us your acceptance. We solicit your consignments. On-track bids are frequently issued by brokers, as shown by the following card sent from Wichita, Kans., to Fletcher, Okla.: Form 8.—BROKER’S Bm CARD FOR GRAIN F. O. B. CARS ON-TRACK IN THE COUNTRY. Grain, Feed, Kaffir, Hay. Local Phone—Mkt. 696. Robinson’s Code. Long Distance—L. D. 24. The Anchor Grain Co., E. M. Flickinger, Mgr. Sedgwick Building, Wichita, Kans., . Gentlemen: Subject prior purchase and further confirmation, we can contract purchase of few cars wheat, usual terms, at following prices, f, o. b. your track: For April shipment. $1.10 For 15 days shipment. 1.05 For 30 days shipment... 1.00 For May shipment.95 For June shipment. $0.90 For July 10th shipment.85 For July 20th shipment.80 For July 31st shipment.75 4/20/21. E. & O. E. Quotations subject to further confirmation. Yours, truly. The Anchor Grain Co. Eastern shippers sometimes arrange their cards so as to base the bids on a schedule of domestic rates to a designated destination, thus making it unnecessary for the sender to determine the ‘‘on-track’’ price for eadi shipper on the mailing list. The following card was sent to Lochiel, Ind., Buffalo terms to apply, the bids being arranged to cover points having domestic rates to Philadelphia ranging from 29 to 45 cents: 66 TERMINAL GRAIN MARKETING. Form 9. BID CARD ISSUED BY A BUFFALO ELEVATOR COMPANY FOR GRAIN FOB CARS AT DESIGNATED RATE POINTS. O. B, IHE H/LECTRIC GRAIN LlEVATOR Co., p., „ Buffalo, N. Y., April 15, 1921. to reach us before the opening of market next business day. lerms. Buffalo weights, grades and terms—Lower grades to apply at market dif¬ ference day of arrival. Not our bid difference. y uii 5,000 bushels subject to our confirmation as to such excess. docu^Ss properly margined and accompanied by properly executed Drafts.—To be drai^n on us through the Marine Trust Co. Note —When wiring acceptances state quantity in bushels, are niade in cars we will consider as being a carload wheat, rye. Oats 2,000 bushels. ’ When acceptances corn 1,100 bushels. E. & O. E. F. o. b. points taking following new domestic rates to Philadelphia, buyer paying Grade. Rates. 29 30 33 33.5 36 38.5 40 40.5 41.5 42 45 3 yellow corn or better.. Shipment. 2 white oats or better... 3 white oats or better... .. -do..^ 35| 35| 341 351 34| 34i 331 33f 321 33J 32i 33 32 32f 31^ 32i 31J 3ii 30i The Electric Grain Elevator Co. Confirmation. —Direct purchases, whether '^to-arrive’' or ''on- tpck, are usually contingent upon the exchange of written confirma¬ tions, especially where the shipper desires to accept for a quantity of gram m excess of the limit set in the buyer’s bid. Confirmations are to furnish sapping instructions. The board of directors ol the Chicago Board of Trade have recommended the following form to the trade: ‘ ° Form lO.-CONFIRMATION OP TO-ARBIVE TRANSACTION RECOMMENDED BY CHICAGO Chicago,.•^19.... - We herewith confirm purchase from you of ..... of...... .bushels At per 100 lbs. . per bushel net , , , . Iper ton shSir weighing, and for State inspection.terms. Bill of order.. . Notify... Subject to the rulca of the Board of Trade of the City of Chicio and the r^iilations on cnXcr.f “n Off grades,^if merchantable gr^^ifto appfy on contracts at market differences on arrival. Manifest errors excepted. ^ Per (Duplicate to read): Accepted and approved: S® contract remains unfilled at expiration, the buyer reserves the nght without further notice to the seller, to extend time of shipment to cS the SSaccoS"^^ concellation, if any, to the seller, or to buy same for RECEIVING FROM COUNTRY POINTS. 67 The shipment pebiod. —It will be noted from the cards previously- shown that the shipment period for grain bought to-arrive’’ and on-track’’ is most frequently stated as a definite number of days or as a designated month or half month. When cars are bought ‘^20 days’ shipment,” for example, the plain inference is that the commodity must leave the shipping station or that instructions be issued by the shipper to the carrier within 20 days from the effective date of the contract. The cars must be shipped within 20 days from the date of contract as shown by written confirmation and the date of the bill of lading must indicate this fact. Under these conditions, ^ where cars are shipped within the specified period, the cars can be applied upon the contract no matter what length of time may inter¬ vene before their actual arrival at the terminal. On the exchanges at Minneapolis and Duluth the term ‘^to-arrive” (without other specification) has a technical meaning, indicating that the cars must arrive at the terminal market within 20 days from the date of sale. Members are of course free to make special contracts regarding both the time of arrival and the period within which ship¬ ment must be made; and they may make contracts requiring that cars must not only be shipped within a certain number of days but that they must also arrive within a certain specified period. In Duluth the contracts often specify ‘‘to-arrive,” calling for delivery at the 'terminal within 20 days in order to meet vessel sailings. Under the rules of the Duluth Board of Trade ^‘if the grain is not delivered within the 20-day period, the contract continues in force until such time as the buyer makes demand upon the seller for delivery. When demand is made the seller has until 12 o’clock of the next business day to fill the same, otherwise he is in default.” Delivery. —The rules for valid delivery of grain on sales for shipment are discussed in connection with the shipping business (Chap. V). The question of delivery on direct purchases from coun¬ try' points presents few points not covered there. ^^To-arrive” purchases are frequently made on the basis of contract grades to facilitate hedging of the .acceptances. Delivery of grades lower than those specified may usually be made at a discount at the bu\ ^er’s option. The coimtry run of grain is required to be delivered on to-arrive”*^ contracts at Minneapolis, where the milling demand dominates the wheat market. It has been ruled” that ‘‘on all sales of grain, ‘ to-arrive ^ the buyer is entitled to receive grain from country points, and grain which was not inspected at the time when the sale ‘ to- arrive’ was made.” In markets where local milling is not so active there appears to be less insistence upon receiving the country rim stuff. During the operation of the Call Ryle in Chicago (1906-1913) there was no such requirement.” But the rule now in force relating to “to-arrive” grain states that it is intended “that all sales of wheat, corn, oats, or rye made in accordance therewith shall be filled by the delivery of grain billed direct from the country point of origin to the seller at this market.” ” 67 Board of Directors, Chamber of Commerce, Circular No. 97, Mar. 16,1909. 68 See Vol. II, Ch. Ill, sec. 5. 69 Rules of the Board of Trade, sec. 32. 68 TERMINAL GRAIN MARKETING. "I xT-» * AFTER-MARKET BIDS. — In the primary markets, where there is active bidding after hours for grain at country points the exchange regulations usually require that in case a firm departs closing ''to-arrive’’ price other representative firms shall be notified of the price bid. If the buyer offers a higher price to country shippers he is expected to show that it is a bona fide bid 1 . e., based on actual orders in hand; and due publicity must be given to the change in ^ice.«« Under the “ to-arrive rules and regulations on tne Chicago Board of Trade, notice must also be given to the secretary s office of the price bid and the firms notified. Further-' more, it has been the custom to require the firms notified to advise secretary s office upon receipt of such bids, so that the exchange omcials may have at all times a reliable check upon the publicity given to after-market bids when the price set is higher than the closing quotation. The regulation of the Chicago Board of Trade on this subject should be considered in its entirety: regular market for grain to-arrive has closed, any member may base his persons located outside of Chicago, for wheat, corn, oats, or rye to be shipped to this market, either upon the closing quotation of said “ to-arrive’’market, less the handing chaiyes, or, upon a price higher than said closing quotation: Pro- vvied, however^ the member or members departing in their bids from said closing quotation shall in every instance comply with the following conditions ^ Iirst. Ibe handhng charges prescribed in section 32 of Rule IV shall be deducted o^Siicago^^^ forwarded to persons located outside * such bids shall in every instance file with the secre- on^hp T V* next business day, or by United States mail soPb biIlf authority for making such bids. Such authority shall be evidenced, either by a bona fide bid in hand rom a buyer at this market, or by a clear showing that the member or members - here^blna^L^pl^ldf Chicago have, prior thereto, made to members faiX^a ^pw InrW 1 ®nfRcient number and for sufficient quantities to establish fairly a new market level; and further such member or members must show the bids S^ges^ i^epresent the price thus bid to the members here, less the regular handhng regular “to-arrive” market, all bids to persons located outside of Chicago, shall expire at 9.30 a. m. on the following business day.^^ The following letter will illustrate the practice in enforcing this regulation: ® Armour Grain Co., 208 So. La Salle St., The To-Areive Grain Commiitee. (Care Secretary’s Office), Board of Trade of City of Chicago, Chicago, III. Dear Sir: We have authorized the following firms: [Enumerates 37 firms all pri^lprou^count bueinese.]” to bid the folloiring, 3 white o^s. Aug.-Sept. shipment 53| cents T. M. & I P ea Standard Oats Aug.-Sept. shipment 54| cents T. M. & I.’p. We are using the same bids ourselves less the usual commission ^ Yours very truly, Armour Grain Co., (Signed) W. A. Fraser. 60 See Vol. II, p. 292. ' 61 Regulations in force Mar., 1921. S'oUcTtK BilUng T. M.” means Trans-Mi^isslppi Billing; “I. p,” means Illinois Proportional RECEIVING FROM COUNTRY POINTS. 69 The following letter illustrates the requirement of publicity of overnight to-arrive’’ bids on the Kansas City Board of Trade: Kansas City, Mo., Aiigusl 18, 1917. E, D. Bigelow, Secretary. A. J. Poor Grain Co. W. S. Nicholson Grain Co. Shannon Com. Co. Hoebel Grain Co. A. C. Davis Grain Co. E. D. Fisher Com. Co. E. E. Roahen Grain Co. Gentlemen: We are making the following bid to-night basis, Kansas City weights and grades: 54^by shipper. Figured from test weight of.lbs. per bushel. lestimatedj Pounds. Grade. Gross bu. Dockage. Net bu. Price. Amoimt. Attached (as checked): 1. Report of shipment. 2. Bill of lading. 3. Expense bill. Freight. Amount of claim. $ 6. Certificate of weights received. 6. Certificate of inspection. 7. Affidavit of depth loaded. 8. Weighmaster’s report. 9. Certified copy of invoice. 10 . Remarks: Please advise your claim number and place in line for prompt settlement. Shipment report No. 76 TERMINAL GRAIN MARKETING. Supervision of agents. —Essential factors in the successful operation of line-elevator systems are the securing of competent local agents and the maintenance of a rigid supervision over their operations in the local markets. Most of the large companies, as alread;^ stated, employ traveling superintendents whose duties are to supervise local agents and correct practices found to be unprofitable to the company. The local manager of a line-company elevator is usually bonded, is more closely supervised, and enjoys less independ¬ ence of action than any other operator in the country market. The policies of the company are determined from the head office and are explicitly defined for the local agent. Several line companies issue printed instructions to their agents who must promise to comply with them while in the employ of the company. At least one Minneapolis company has issued a pamphlet of instructions to its agents, relating the requirements of the bonding company, and giving detailed directions as to ffre protection and insurance, office and elevator management, power and engine-room management, receiving of grain, grading of grain, docking of grain, weighing of grain and coal, binning and disposition of grain in elevator, cooper ing of cars, loading of cars, shipping, issuing and buying grain storage tickets, forms of reports, relations with competitors, etc. Competitive methods. —The competitive methods of line-elevator companies in the country have been set forth in Volume I, Chapter XI, of the report. Examination of voluminous correspondence has shown that line companies in the Northwest have forbidden their agents to overgrade and underdock and that they have tried to prevent other local Healers from engaging in such practices. Furthermore, they have not as a rule favored any modification or elimination of charges for elevation and storage in country markets; i. e., for handling grain for producers prior to purchase. The evidence also shows that the line companies m the Northwest have preferred to adhere to ^‘lisf prices (prices on the Grain Bulletin card), and that they have tended to follow rather than to lead their coinpetitors in bidding up the local market prices.^^ When nonline competitors have secured business through overgrading or underdocking, free elevation, or free storage, etc., the line compa¬ nies have usually instructed their agents to meet this competition by bidding up the price rather than by employing such methods. Under the antidiscrimination laws in force in some States it has become necessary for line companies to offer the same price basis at all country markets, subject to the exception of meeting competition. The cor¬ respondence of the line companies is replete with complaints from the head office of one company to another regarding competitive practices at specified stations and making requests, demands, and suggestions for adjustments; and they also show a general effort to rectify conditions detrimental to line company interests. There is plenty of evidence of actual agreements as to prices, grades, etc., between the head offices of line companies in the Northwest, and even more evidence of mutual cooperation in the same matters. Positive instructions and frequent suggestions have been issued to « ^scussion of supervision ofline elevators, see Vol. I, Chap. VI, sec. 2. See Vol. II, Chap. XI, secs. 15, 16 . > f > ” Vol. I, pp. 275-282. Vol. I, Chap. XI, sec. 16. RECEIVING EROM COUNTRY POINTS. 77 local agents at competitive points with a view to keeping them on harmonious terms with the other agents at such markets. When cor¬ respondence fails to harmonize a particular local point with reference to prices, grades, dockage, etc., a traveling superintendent or auditor is frequently sent on to make a satisfactory arrangement.'^® In some instances it is known that the agents of one line company have been directed to act according to the instructions of a superintendent of another line company. Where the line companies have been confronted with the ‘^cooper¬ ative movement” they frequently have been obliged to close their houses, since the cooperative often obtained so large a volume of , business that certain of the lines found it unprofitable to operate at that point either temporarily or permanently.®® The correspondence examined indicates that agreements at local stations have been originated more frequently by line-elevator com¬ panies than by cooperatives or independents. These agreements have often resulted as a reaction from severe competition m certain local markets and have probably, at times, enabled a line elevator to continue to operate when it might otherwise have been impossible.®^ Alleged economy of line-elevator operation. —In considering the question of economical distribution the following arguments have been advanced in favor of line-elevator systems: (a) That by holding exchange memberships the line companies operating from terminal markets can either eliminajba ^ charges or, when selling through commission men, can secure mem¬ bers’ rates.®^ (b) That by operating on a large scale they ca n employ spec iahsts to work out operating standards and records whereas ea^ inde¬ pendent local elevator must work out its own system regardless of the practices at other stations. The line company is in position to bring each of its elevators up to the standards maintained by the most efficient. (c) That through their traffic an d claims departments at the head office they can obtain cars and prosecute claims for loss and damage more effectively than in the case of any individual country dealer. (d) That the line-elevator companies (at least in the Northwest) c onsistently hed ge their grain, and by so doing are able to secure credit froiri terminal market banks at minimum rates. The major argument advanced against the line-elevator system is that it tends toward concentration and a resultant lessening of competition for grain in the producing areas. There seems to be no doubt that price agreements and divisions of receipts have char¬ acterized line-company operations in country areas, and that the cooperative movement gained impetus because of the evident lack of competition in the country markets. The fact that cooperative country elevators in competition with the lines have handled more Idem, sec. 21. 80 The comparative margins and returns on investment, as between the various types ef country elevators, appear in Vol. IV. 81 See Vol. I, Chap. XI, sec. 17. 82 Members’ rates are usually half those charged to nonmembers. 56976°—22-7 78 TERMINAL GRAIN MARKETING. gram, paid higher prices, and increased competition for individual lots at many country points, together with the patronage dividend feature often employed, have operated adversely to the line-elevator plan of distribution.®^ It appears probable that agreements and understandings as to prices, competitive methods, and divisions of receipts in the country markets (sometimes instituted by individual local companies as well as by the lines) serve the line companies to-day rather as a means of remaining in business than as a method of controlling the local markets. For financial results supporting this conclusion, see Vol. IV. 0 \ Chapter III. TRANSPORTATION AND RAILROAD TERMINAL FACILITIES. Section 1. Relation of the freight rate structure to grain marketing. The rate increases of 1920. —Transportation rates and trans¬ portation facilities have been of primary importance in the main¬ tenance of grain markets at terminal points; and transportation has recently been absorbing an increasingly large part of the total cost of distributing grain and grain products. Certain effects of freight rate adjustments upon the growth of individual terminal markets are set forth in Volume II of the report. The importance of such adjustments with reference to competing markets was emphasized in the decision on Increased Rates, 1920,^ by the Interstate Commerce Commission, viz: There are in the Middle West a number of important grain markets through which it has been customary to maintain an equalization of the rates from important produc¬ ing States to important consuming regions, under which the sum of the rates into and out of the various markets is in most cases equal. This adjustment differs from an ordinary differential basis in that it is in substance providing an equal through charge over various routes between the same points by the use of sums of proportional ^ rates rather than the establishment of joint through rates or of transit. The application of different percentages in the various groups will result in dislocation of this equalization. Carriers and shippers unite in recommending that this equalization be continued because of the keenly competitive situation of the various markets and of the lines of railway serving such markets. However, sufficient detailed information to cover fully the situation is not before us upon this record. We find that the grain rates into and out of these markets maybe increased by the general percentages herein approved, vdth the understanding that the carriers will, within 30 days after the service of this report, file tariffs restoring the equalization through the grain markets now enjoying that basis. That is, in the car-lot grain market, differences in the price of grain on a delivered basis, as between the various terminals conform very closely to the differences in transportation charges. Railroad con¬ gestion and an inadequate car supply, or other influences, may widen the spreads between markets, as these conditions did in the period from November, 1919, to August, 1920. Again, the premiums which sometimes prevail for spot grain and the variations in value within 1 gg I Q 0 220 2 The “proportional rate” was devised to equalize rates for shipment via one gateway as compared with existing through rates via another gateway. It also provided a through rate basis for certain interior points which were formerly restricted to local rates or a combination thereof. It enabled shippers already enjoying a through rate via one route to consuming territory to obtain a similar rate via a different junction point or terminal market. It also enabled shippers in producing territory who had never been allowed a through rate to obtain such a rate by combination via a given gateway or basing point. The existing 1 ocal rate was replaced by a so-called “proportional” into the junction point, and this proportional was combined with another proportional out of that junction point so as to provide a through billing. The intermediate gate¬ ways or junctions in this rate structure were known as “basing points.” In the case of grain, the basing point was usually a terminal market. It was thus made possible for a grain dealer in Chicago, for example, tohuy grain in lowafor ultimate shipment to New York on a through rate: orfora Minneapolis shipper to bring in grain from the country on a “proportional” and ship the grain, or its equivalent in grain products, out of the market on the same billing. x j - .. 4 . • 4 .x. In determining freight rates between two points the rate by the shortest or most direct route is the pre¬ vailing maximum through rate which the longer and more indirect routes must not exceed if tlmy are to participate in the traffic, A reshippingrateis often referred to as a ^^proportional, ^ meanmg the part of the through rate covering the haul from the primary market to destination. (Vol. II, pp. 43, 44.) 79 80 TERMINAL GRAIN MARKETING. the same grade under conditions of sample buying at milling centers necessarily affect the spreads as between markets; but for shipping purposes it is generally true-that the price differences between ter¬ minal points are closely approximate to the freight rate differentials. Accordingly the percentage increases in freight rates, which became effective after July, 1920, operated to the disadvantage of the more distant shippers and dislocated the adjustments between markets, which had been constructed in most instances on a competitive basis. To consider the country shipper first, the rate from Ellsworth,^ Kans., to Kansas City was increased from 16 cents per 100 pounds to 21i cents ^ per 100 pounds, while that from Brantford," K Dak., to Duluth was increased from 17 cents to 23 cents^ per 100 po-unds, and that from Martinsdale," Mont., to Minneapolis from 36 cents to 48 cents ^ per 100 pounds. The increase was 5} cents in the first rate, 6 cents in the second, and 12 cents in the third. Without further analysis it is apparent that the country shipper who customarily shipped the greater distance was more seriously affected by the rate increase than the shipper who shipped the lesser distance; and that the effect of the general increase upon country shippers was to lead them to ship to a nearer buyer’s market, if possible, in order to shift part of the burden of the freight increase to a manufacturer or another dealer. The freight rate increase was of immediate concern to the terminal market dealers, since in the shipping business a few cents advantage secured by the markets operating over one route as against those dependent upon another may constitute a decisive competitive advantage. Certain effects of the rate increases of 1920 upon this situation appear from a consideration of the export rates. The comparative export rates from three primary markets are shown in the following tabulation: Bates on grain for reshipment2 [In cents per 100 pounds.] From— To— Kind of rate. As of July 1, 1920. As of Mar. 1, 1921. As of May 15, 1921. Omaha. Galveston (export)... 29 36^ 26i 23 24| 39 Do. Baltimore (export). 39 St. Louis. New Orleans (export") 48 23i 2 34,»38 <30,‘33 34^ Do. New York (export).... dn 38 33 34i Chicago. Do. New York (domestic).. iui biupment w points oeyond or on shipments/rom points beyond. O'* proportional rate, provided shipments originate at points west of the west bank of the Mississippi River from which there is no through joint rate in effect. 4 ^ roshipping or proportional rate from territory not covered by reference “2.” trai^^M ssfsSi proportional rate on traffic originating at points in Northwest territory, in^Sfe^ River territory, and northern Iowa territory, from which there are no joint through rat^ rat^ a?e S proportional rate on traffic originating at points beyond from which no through It will be seen that the dealer at Omaha shipping on export billing had, on July D 1920, a differential of 7^ cents in favor of Galveston as against Baltimore; whereas on March 1, 1921, this differential amounted to 13 cents. 3 yssumed to be the center of production of the State. RAILROADS AND TERMINAL ELEVATORS. 81 Likewise, by the percentage increase, the differential in favor of New Orleans as compared with New York on shipments from St. Louis was increased from 9 to 14^ cents, and comparisons of other differentials on export shipments from the interior showed much the same situation. The differential as between domestic and export rates was not changed for the Atlantic ports, since it was required ^ that the former ‘^port differentials” be maintained. The percentage increase did operate to widen the differences between export and domestic rates to other ports, notably Galveston. With ocean rates to Europe from the Gulf almost on a parity with those from the Atlantic ports, as they frequently were during 1920-21, the widening of the differential effected in 1920 was responsible for an increased export movement via the Gulf routes. Subsequent adjustments. —Complaints and controversies over these rate relations led to conferences early in 1921 between repre¬ sentatives of the grain markets, the Atlantic and Gulf ports, and the carriers of eastern and western territory. The representatives of the Minneapolis, Missouri River, and Chicago markets proposed reduc¬ tions of 8 cents on export and 9^ cents on domestic traffic from Minne¬ apolis to New York, reductions of 2 cents from the Missouri River to Chicago, 4 cents from Chicago to eastern points, and 6 cents from the Mississippi River to eastern points. These petitions were laid before the Interstate Commerce Commis¬ sion and certain reductions in export rates were advised. The director of traffic, with the approval of the chairman of the Interstate Commerce Commission, made the following comments ® on the general situation: 4. It is recognized that the differentials on traffic from the Missouri River to the Gulf ports for export as compared mth Atlantic ports for export and of the all-rail rates from Minneapolis to eastern points as compared with the throu^ lake-aim-rail charges have been widened to an extent to make desirable reductions therein. Read¬ justments of rates to bring about this end, however, must be approached with extreme caution and having in mind all the factors which have led to the existing situation and which are likelv to exist in the near future. , , i +• i It has been demonstrated that during the past season there has been a relatively gi’eater movement of grain to Gulf ports as compared with Atlantic ports than existed during the previous four seasons. It is not considered, however, that this change in the trend of movement is wholly the result of the widening of rail differentials. Unusual conditions appear to have existed in the grain trad e and particularly witn respect to the ocean transportation charges, which have undoubtedly beeii lactors in determining the movement during the past season. The differences heretofore preva¬ lent, Gulf ports over Atlantic ports, have been materially Ipsened during the past season, in many cases rates from the Gulf ports being no higher than tho^ Atlantic seaboard, which leads to the conclusion that movement via the Gull would have been stimulated had there been no widening of the rail differentials. It is con¬ ceded that as conditions become more nearly normal, the ocean rates from the Lull ports will inevitably become higher than those from the Atlantic ports. While no information as to the trend of ocean rates since February 1 is available, an increased exportation of grain from Atlantic ports would indicate a tendency to return to nomal ocean rates and further demonstrate that the relatively greater tonnage to the Gulf ports during the fall of 1920 was not wholly due to rail rate ditlerences 5. As above stated, practically all the rates involved are related one to another, and changes in one rate must be carefully considered with respect to the e^ct which sue i changes may have upon other rates. Reductions in rates east of Chicago and the Mississippi River upon grain originating at the Missouri River may be restricted to Missouri River grain only by the expedidht of establishing joint through rates less 5 Interstate Commerce Commission Ex Parte 74, P- 253. 8 Letter of W. V. Hardie, director of traffic, Mar. 30, 1921. I 82 TERMINAL GRAIN MARKETING. than the sums of the proportional rates to and from Chicago or the Mississippi River out of the principal primary markets have generallv been not greater than the through rates. In our report in ex parte 74 the importance of main¬ taining this equalization was recognized, and it is not thought desirable at this time equalTzato ^^^ioh will have the effect of destroying S It must therefore be assumed that whatever reductions are to be-made from the Missouri River to ARantic ports should be in the proportional rates east or ™t of Chicago, or both. Reductions east of Chicago and the Mississippi River reflect to traffic from the Missouri River but as to all other grain traffic oiigmabmg in the West, thus making reductions in such rates vital t^ the revenues of the earners. As the rates from Lake Erie ports and eastern points ap- the^all raiT?ftP^rfmm into such ports by lake have a definite relatFonship to the all-rail rates from Chicago and Milwaukee they may not be maintained upon a result in unduly high through lake-and-rail charges as compared wi^ the all-rail rates, unless the lake route is to be substantially closed. Reductions in the rates east of Buffalo, termed “at and east rates,”’are reflected and^&nadlan pFrts^ originating not only at Lake Michigan ports but at Duluth in mind these and other factors, it is not found consistent to recom Srirn’i! MWp^o.ronf As a result these recommendations new tariffs were filed show¬ ing certain reductions m the export rates. Those applicable to the three markets included m the last preceding table were as follows: grita prodlte‘““ ^ 8^““ ““d A-\ ““t grain and grain products from Missouri River points expoSSfic oSy to apply'^^^on priducts"*''’”''‘'"“ ^ ^ nnd grain These changes reduced the differentials as between Atlantic and Gull ports to a basis very close to the adjustments prevailing prior ff y, •‘'I'® widening of the differential in fiTvor of the Gulf, as compared with July 1, 1920, now amounted to less than I cent per bushel (for wheat) in most instances.'^ Relation of 1921® rates to prices. —As an indication of the rela- tion of rail rates on gram for shipment from west of the Mississippi the following quotations for No. 2 hard wheat issued by a KansM City shipper on May 20, 1921, are in point- ^ Delivery terms. Price. Percent¬ age added. F. 0 . b., Kansas City. C. a. f., East St. Louis. . C. a. f., Chicago or Minneapolis.. . $1.55 1-641 1.67i 1.70 1.81i 1.88 0.0 6.1 8.1 9.7 17.4 21.3 C. a. f., Group 1, Texas. . C. a. f., Philadelphia. ... The rate from Kansas City to Philadelphia was 53 cents per 100 pounds, or 31.8 cents per bushel. A spread of 33 cents was flowed between these pomte in the above quotations. In any case at least 20 per cent had to be added to the Kansas City price to lay the com¬ modity down at Philadelphia. ^ juAem ofthfASuc-oX^^^ “PP™''®! Aug. 8, 1921, eflected a material read- 8 Prior to reductions ordered after the middle of 1921. KAILKOADS AND TERMINAL ELEVATORS. 83 As a comparison with prewar conditions, on May 20, 1914, the price of No. 2 hard wheat at Kansas City was 92 cents per bushel. The rate® to Philadelphia was 24 cents per 100 pounds,^® or 14.4 cents per bushel; that is, on the same rate basis it was necessary to add 15.6 per cent to the Kansas City price to cover transporta¬ tion charges. As a further illustration, it may] be assumed that Ellsworth, Kans., is the center of production in that State. The rate from Ellsworth to Kansas City amounts to 12.9 cents per bushel. The spread in freight costs alone between Ellsworth and Philadelphia would have amounted, on May 20, 1921, to fully one-third of the Ellsworth price. This takes no account of handling costs and profits or the terminal charges that would necessarily have been incurred. To consider another central market, the transportation charge, June 1,1921, from Omaha to Baltimore represented 29 cents a bushel, the increase since July, 1920, being 7 cefits on a per bushel basis. Transportation absorbs a relatively larger part of the price of corn delivered in consuming territory than it does of wheat, be¬ cause of the lower price of the former commodity; and the same statement is true for oats, except that the lighter weightof the latter commodity would more nearly offset the relatively heavy transportation costs. Section 2. Railroad construction of grain elevators. Prior to about 1885 the terminal elevators operated for general shipping purposes were chiefly those constructed by the railroads. The operation of terminal elevators for private merchandising pur¬ poses originated after that date. There have been at least three reasons for the construction of elevators by railroads: (1) To secure tonnage in competition with other lines, (2) to release equipment by transferring the commodity to a connecting line, and (3) the legal obligation of the carrier to provide elevation at break-bulk points. The first consideration, i. e., to secure tonnage, has influenced the railroads to provide elevator facilities at terminal grain markets for transfers between connecting lines. For example, in 1906 it was testified by the president of the Rock Island Co.^® that he had no choice as to what was paid for certain elevators purchased at Chicago: 9 Proportional export rate. 10 The rate on com was 23 cents. . j cc 11 The legal weights per bushel in the grain States are as follows: Wheat, 60 pounds; shelled corn, 56 pounds; oats, 32 pounds; rye, 56 pounds; barley, 48 pounds. , 12 Inquiry by the Interstate Commerce Commission mto the relations of common carriers to the gram trade, 59th Cong., 2d sess., S. Doc. No. 278, p. 115. . , , . •it. i .. 13 It appears that the Rock Island lines in 1918 owned eight termmal elevators with an aggregate rated capacity of 8,300,000 bushels and seven country elevators with an aggregate rated capacity of 135,000 bushels. The terminal elevators were distributed as follows: Location. Capacity. Year built. Lessee (1918). 1,200,000 1882 J. Rosenbaum Grain Co. Dn . 1,500,000 1894 J. C. Shaffer, Dn . 1,500,000 1894 Do. Po . 1,500,000 Unknown. Do. J. Rosenbaum Grain Co. 500,000 1905 r>n . 1,000,000 1913 Do. rin . 1,000,000 100,000 1914 Do. rin . («) Do. a Leased in 1912. 84 TERMINAL GRAIN MARKETING. additional footing on the Calumet River and it was property we could not atford to have come into the possession of any other railroad company anv of our western rivals. I made the best trade I could. Likewise the early elevating facilities in the Kansas City market were constructed by the various trunk lines and branch roads com- traffic and the bulk of the storage at that market, al¬ though operated to a large extent by private concerns, has always been owned by the railroad companies. Similar competitive reasons have often existed for the construction of railroad elevators at other primary markets in the West. The consideration of releasing equipment was of greater influence m the early years of transcontinental roads than in recent years- subsequent arrangements for the interchange of cars—at the Missouri and Mississippi River crossings, for example—modified the necessity ot providing elevators for transferring the traffic. However the western railroads have always made an effort to retain their own equipment in sufficient quantity to move grain during the shipping SGS^SOH. The third consideration, that of the obligation of the carrier to provide elevation at terminal and break-bulk points, has resulted in the construction of railroad elevators to transfer grain to connecting lines, especially at transshipment points such as Buffalo and the ocean ports. In the interior this obligation has often been met by contract¬ ing with private operators for transfer service. In some instances subsidiary companies have been formed, the stock being controlled by one or more railroad companies. ^^Transportation elevation^’ has been defined by the Interstate Commerce Commission as— * * * u^oad^ing grain from cars or grain-carrying vessels into a grain elevator loading-it out again after a period of not to exceed 10 daysj it does not include treatment or grading, cleaning, and clipping of grain; and retention in an elevator beyond 10 days becomes storage and is not a part of the service of elevation as that word IS used in the statute. It has also been decided by this authority that 'Hhe act to regulate commerce requires carriers to furnish transportation elevation” • and by the United States Supreme Court that the term ''transporta¬ tion” shall include all facilities of shipment, irrespective of ownership and all services in connection with the elevation, transfer in transit and handling of property transported.^^ ' In the course of transportation development it has become apparent that the mterests of railroads in providing grain elevation can be fully secured, especially in the interior, by leasing elevator property to a large private shipper and contracting for the transfer of grain routed p George B. Flack, secretary of the Midland Elevator Co. of the Peavey system (idem, elevator of any magnitude to be built here. There were no trans- uonorigmating roads built elevators to attract grain away from the other railroads, and to do It they had to give concessions of some description. ^ cA allowances and privileges given free are in the line of inducements? grain to go^th^i-e^”™^ ^ object m puttmg up an elevator here unless it would be to get 15 Allowances to elevators by U. P. R. R. Co., 121. C. C., 85. See also, 24 I. C. C. 202 where it was said* oro IS extremely difficult to separate tonsportation elevation from commercial elevation. Both things ^^"'® ^®°®/f ^ Pr(fess. The same plant facilities, the same power, the same gang, arc eiS^ ployed, and the pr^^ess of transfer and the commercial process go on at the same time It has therefore the dffierent items of expense and to say with confidence this’belongs to transportation and this to commercial elevation.” 16 24 1. C. C., 200. 1^ Union Pacific R. R. v. Updike Grain Co., 222 U. S., 218. RAILROADS AND TERMINAL ELEVATORS. 85 over the line of the lessor. This practice of leasing will be discussed in a subsequent section. The transfer service constitutes a question in itself because of its relation to freight rates and because of the overlapping of railroad and private commercial services. This problem has been developed in the so-called elevation allowance cases in proceedings before the Interstate Commerce Commission and the Federal courts. Section 3. The elevation allowance cases. The Peavey case. —In 1904 the Interstate Commerce Commission instituted an inquiry into the matter of allowances to elevators by the Union Pacific Railroad Co. at Kansas City.^* It was found that the Union Pacific was the only extensive system then operating wholly in the territory west of the Missouri River; that a substantial pro¬ portion of the grain grown in Nebraska and Kansas moved over the fines of this carrier on its way to eastern and foreign markets; and that in order to retain possession of cars sufficient to meet the require¬ ments of its own shippers it was ‘^highly important, if not absolutely essential * * * to provide for the transfer of this grain to other cars than its own at its termini on the Missouri River.’’ Not choosing to operate facilities of its own for such transfers the Union Pacific on February 7, 1899, had entered into a contract with Frank H. Peavey, of Minneapolis, whereby the railroad company agreed to convey to him a tract of land on the right of way at Council Bluffs, and Peavey agreed to construct an elevator of about 1,500,000 bushels capacity at that point and to transfer grain originating on the Union Pacific. The Union Pacific agreed to pay a charge of 1^ cents per 100 pounds to the elevator company on all grain transferred and there were speci¬ fications as to switching arrangements and like matters. Peavey later assigned his interest in this plant to the Omaha Elevator Co., which apparently was organized to conduct this business. A controlling interest in the stock, however, was held by F. H. Peavey & Co. A similar arrangement was made at Kansas City whereby an eleva¬ tor of 1,000,000 bushels capacity was constructed and operated by the Midland Elevator Co. under contract to transfer grain for the Union Pacific. The stock of this elevator company also was for the most part owned by the individual members of the firm of F. H. Peavey & Co. It appeared that in addition to these two elevators the Peavey in¬ terests comprised some 450 country elevators in the States of Kan¬ sas, North Dakota, South Dakota, Minnesota, Iowa, and Nebraska, ^‘besides large elevators at Council Bluffs, Kansas City, Duluth, Min¬ neapolis, and Chicago.” The Union Pacific had thus entered into contracts with a large merchandising syndicate to provide for the transfer of grain at the Missouri River crossings. It developed that Peavey & Co. directly or through their subsidiaries handled ‘^some 60 per cent, perhaps more, of the grain shipped from Union Pacific stations,” 20 and that ‘‘little or no grain” was transferred through these elevators for other parties, “although the Union Pacific had the right to require such transfer under the terms of its contract.” 18 lOl.C, C.,309. 19 Idem, p. 315. 20 Idem, p. 316. 86 TERMINAL GRAIN MARKETING. ^ other words, the great bulk of the grain so handled was owned bv Feavey & Co. ‘ It was stated by the Union Pacific Co. that provision was made for the gram shipped over its lines by other dealers, through the inter- chan^ of cars with other connecting lines. That is, by contracting with Feavey & Co. for the transfer of its own grain the railroad com¬ pany was able to retain equipment in sufficient quantity to accom¬ modate the remaining shippers. view of these facts it had been charged that the arrangement between Union Pacific and Feavey & Co. was preferential and un¬ lawful— that the allowance of a cent and a quarter per 100 pounds, paid to the said elevator companies for transferring their own gram, amounts in its ultimate result to a rebate because it so miich reduces the through published ra'te, in favor of said elevator com¬ panies, but not in favor of other shippers. It was iOimd, however, that the annual earnings from the transfer ol gram by these two transfer elevators did not net Feavey & Co a profit on the property investment and that they ‘‘could not afford to construct and operate these elevators for the sole purpose of trans¬ ferring gram at II cents per 100 pounds.’' “As a transfer proposition pure and simple’—said the commission—“taking into account the cost ol these elevators and the expense of their operation, it would not seem to be attractive; by reason of its incidental aid to the extensive business of these grain merchants it is undoubtedly a very profitable arrangement.” ^ j t' The co mm ission concluded that “these contracts for transferring gram were made m good faith and for a legitimate purpose, and that the compensation paid is not unreasonable for the service performed ” They said— • ^ The law imposes no duty upon the Union Pacific to safeguard the business of Its competitors or the shippers they serve. Granted that the allowance to Peavey & Co. places these other carriers and grain dealers on their lines at some commercial disadvantage, that it introduces an element of competition which they will be forced to equalize—and that would seem to be its character so far as rival roads are concerned_ on wliat theory can the commission interfere so long as the obligations of the Union Pacific to its own shippers are not disregarded? * * * It is scarcely needful to add that arrangements of the kind investigated favorably regarded. When anything directly connected with the public service which a carrier is bound or undertakes to perform is farmed out so to speak to one of its own shippers, the relation thereby brought about is likely to excite distrust and to be looked upon with suspicion. The SECOND Feavey case.— The matter of allowances to elevators at these pomts was reopened before the Interstate Commerce Com¬ mission two years later. At that time it appeared that the allow¬ ance of II cents per 100 pounds for the elevation and transfer of grain had been extend^ to all the elevators at Kansas City, Omaha, and Council Flulis. The proceeding was reopened upon the petition of certain railroad companies interested in the grain traffic of that area, and it was alleged that the elevator allowances made by the Union Facific were excessive and operated as a rebate.^^ The commission again found that the railroad company had the rig it under the interstate commerce law to provide elevation for 21 Idem, pp. 318 and 322. 22 Idem,p. 324. 2* Idem, pp. 325, 326. 2< Allowances to elevators by Union Pacific R. R., 121. C. C., 86 (1907). RAILROADS AND TERMINAL ELEVATORS. 87 its shippers, and that it was ‘^not to be doubted that a railroad corn- pan}^ may either construct and operate an elevator of its own or may furnish elevation facilities to its shippers by making some .arrange¬ ment with the owner of an elevator for such a service.’^ However, they regarded the arrangement as objectionable, ‘‘although not necessarily and in itself unlawfuP’ because the Peavey interests not only operated the elevators in question for the railroad company but were “ also extensive buyers, sellers, and shippers of grain.’’ The case turned upon the reasonableness of the charges allowed. And it was concluded from the evidence brought out at these hearings that the allowance of Ij cents per 100 pounds “whatever the service may be called, results in an appreciable profit to Peavey & Co., which can be and is used to advantage by them as buyers and shippers.” Accordingly the commission decided to abate the allowance for elevation at these points: * * * We are satisfied from the information acquired in this and other investi¬ gations as to the charges and practices at other points where large quantities of grain are handled and transferred, that an allowance of three-fourths of 1 cent will fully and amply cover the actual cost of the elevation contemplated in the law without returning a profit and thus becoming a rebate.^® In the same year it was held that railroads which paid the cost of elevating and transferring grain in transit must not discriminate in such allowance between shippers at common points: * * * It is therefore the opinion of the commission that the defendant carriers should not now or hereafter grant or furnish at Kansas City, Mo., Kansas City, Leaven-' worth, or Argentine, Kans., any elevator allowance or free service in connection with the elevation, transfer, mixing, cleaning, clipping, drying, weighing, storage, loading out or shipment of grain, which is not granted or furnished at the same time in like service or equivalent allowance to the same degree and extent at Atchison. An order will be entered accordingly. The third Peavey case. —^A year later (1908) the Peavey case was reopened “upon the petition of the Chicago Board of Trade, and upon numerous protests from other quarters, indicating an extension of the practice of making elevation allowances and alleging discriminations and other evils arising therefrom.”^® The commission then examined the actual operation of the contract between Peavey & Co. and the Union Pacific and found that the benefits derived by the elevator concern from elevating its own grain were frequently so considerable as to give the allowance paid by the railroad the character of an unlawful rebate. The opinion ran as follows: * * * advantages that are unlawful may be enjoyed in ways that do not involve the direct payment of rebates. And we think that Peavey & Co. do enjoy in the actual operation of their contract advantages that do not accrue to other shippers of grain. The mixing of grain is said to be one of the largest soiuces of profit to a grain dealer. By mixing a carload of inferior grain with a carload of grain of higher grade the aggregate value of the two carloads is increased and the dealer’s profits from the sale are larger than they would be if the two carloads were sold separately. The storage of grain beyond the elevation period of 10 days is also of commercial value to grain dealers. The ‘ ‘ treatment**’ of grain is of advantage to them in that it results in enhanc¬ ing its value. Weighing and inspection are ^ also of advantage to the owner of the grain. As was expressly stated in our last report, such services are commercial serv¬ ices and are in no sense a part of elevation as defined in the act to regulate commerce. * * * allowance, therefore, not only results in an undue preference when 25 Idem, p. 87. 26 Idem, p. 90. 27 City Council of Atchison, Kans., v. Missouri Pacific Ry. Co.et al., 121. C. C., 111. A motion for rehear¬ ing this decision was denied the same year (1907), 121. C. C., 254. 28 In the matter of allowances to elevators by the Union Pacific R., R. ,141. C. C., 315. 88 TERMINAL GRAIN MARKETING. paid on grain belonging to the owner of an elevator thus under contract, but, in effect, IS also an unlawful rebate, unless confined to grain that is reshipped within the eleva- tion period of 10 days and has not been mixed, treated, weighed, or inspected. No way has been suggested by which the Union Pacific Kailroad Co. may avail itself of the Peavey elevators under the contract in question without giving to Peavey & Co. and to their grain the commercial advantages alluded to, and these advantages we regard as an undue and an unlaw^l preference. We therefore hold that the practice of the Union Pacific Railroad Co. in paying to Peavey & Co. an allowance under such circumstances upon their own grain is unlawful. An order will be entered in accord¬ ance with these views. The matter of alleged discrimination against St. Louis.— On the same day (June 29, 1908) the commission disposed of another case involving elevation allowances at the Missouri Kiver by five other railroads. Action was brought on complaint of the traffic bureau of the Merchants' Exchange of St. Louis.^^ The defendants had proceeded in reliance upon the decision in the second Peavey Case and had established ‘^elevation allowances" of three-fourths of 1 cent per 100 pounds. It developed that whereas an elevator company marketing grain at Omaha for shipment and sale to consumers at points east was allowed a charge of three-fourths of 1 cent by the out¬ bound carrier, an elevator company similarly situated at St. Louis and marketing grain for shipment and sale to points east was com¬ pelled to pay the full freight charge regardless of elevation services. The question was raised whether this discrimination against the market of St. Louis was undue and unlawful. The defendants alleged that— competitive conditions, not existing at St. Louis, force the payment of this eleva¬ tion allowance at the Missouri River * * * The traffic representatives of these defendants all testified that they paid this sum, not as a transfer charge, not because they had occasion to use a transfer, but because they were compelled by competitive conditions. It appeared from testimony in this and the preceding cases that the elevation services paid for by the carriers had not been performed prunarily as incidents of transportation, since in the great majority of cases the elevator companies owned the grain which they transferred and the elevator equipment was essential to their business; so that, in most instances, they would have passed the grain through their houses regardless of elevation allowances from the railroad. More¬ over, it appeared that the elevation allowance had not decreased transportation costs to the shipping public since the railroads had increased their rates so as to more than offset the ‘‘transfer charge." Furthermore, the traffic conditions, commercial arrangements, and rate adjustments had undergone such changes in the years 1904 to 1908 that the arguments advanced during the earlier period in support of allowances to elevator companies were affected by an entirely new set of facts. It was pointed out that there were shippers and consumers in territory on both sides of the Missouri River who did not desire and could not use the privilege of free elevation allowed by the carriers at Missouri River points. The commission held that the elevation allowances resulted in a rate discrimination between certain classes of shippers and that such discrimination was undue and unlawful. 29 Docs. 1239,1240, 1241,1263, and 1267,141. C. C., 317. 30 Chicago, Burlington & Quincy R. R. Co.; Missouri Pacific Ry. Co.; Chicago, Rock Island & Pacific & San Francisco R. R. Co.; and the Missouri, Kansas* Texas Ry. Co. 31121. C. C., 85, discussed supra. RAILROADS AND TERMINAL ELEVATORS. 89 The Diffenbaugh decision. —The effect of these decisions would have been to prohibit certain railroad companies from paying to the owners and lessees of elevators any compensation for the elevation of grain in transit at the Missouri River. Bills of complaint were filed in the Federal Circuit Court for the Western District of Missouri by the Peavey interests and others raising this specific question on the basis of facts already enumerated. The court reviewed the contracts involved and the decisions of the Interstate Commerce Commission in considerable detail. They decided that it was without the power of the commission to attempt to regulate the measure of profits derived by shippers from the use of facilities of trade which were also used for purposes of transpor¬ tation. The reasoning of the court was as follows: It is no part of the duty, nor is it within the power, of the commission to see that all shippers of like commodities derive the same measure of profit from their trade in and treatment of the articles which they ship, to see that a shipper who owns a warehouse, an industrial track, and private cars derives no greater profit from dealing in the groceries or other articles he ships than a shipper who has none of these facilities, to see that a shipper of coal who owns a tipple from which he loads it gains no greater profit from the handling of his coal than one who loads it from a wagon. Harp. v. Choctaw, Oklahoma & Gulf R. Co. (125 Fed. 445, 61 C. C. A. 405).^ Pecuniary advantages derived by shippers from the ownership or use of such facilities of trade are attributable to that ownership, and not to the transportation of the articles shipped, and the consideration and regulation of these advantages are without the scope of the commission’s power. ^ , , , The truth is that trade advantages of this nature do not condition the questions of reasonableness of rates, of rebates, or of discrimination. The shipper who owns warehouses, tipples, spur tracks, cars, mills, and by their use derives greater profit from the dealing in the articles which he ships over a railroad, is entitled to the same rate of charge for transportation and the same reasonable compensation for transporta¬ tion services which he renders that the shipper who owns less or no such trade facilities and derives less profit is entitled to. The reasonableness of and the discrimination by the charge and the compensation is conditioned by_ the reasonable value of the service, not by the gain or the loss which the shipper derives from the use of the trad¬ ing facilities he owns in the handling of the articles transported.^^ * * * 'pjjg enforcement of these orders can not fail to cause great losses and to entail much discrimination. It will strike down the practice of a decade in reliance upon which elevators have been built, terminal grounds in large cities have been bought and equipped, contracts have been made, business and markets have grown up, and business relations have been established. If the carriers whose roads ter¬ minate at the Missouri River cities may not pay for this elevation in transit, they must furnish it themselves free, or the producers and consumers whose grain passes over their roads must ultimately bear the expense of it. If they furnish it free, or if they construct elevators and charge a reasonable compensation for it, the owners of the terminal elevators at the river must lose the use which in large part induced their construction and must lose a portion of their value. If the carriers charge for it, producers and consumers of grain, which on account of its origin must pass, or for other reasons does pass, over their railroads, must bear this charge, while those whose grain may pass over the through roads may be free from it, and this fact will_ imces- sarily have the effect to divert grain and the business in it from the Missouri River cities and to diminish the value of all investments therein in facilities for conduct¬ ing it.^ Consequently decrees were entered in favor of the complainants in accordance with the following conclusions: Orders of the commission which prohibit the allowance or payment by carriers of all compensation to owners and operators of elevatop for elevation and transfer in transit are beyond the delegated power of the commission. 32 Bills bv F. H. Peavey & Co. and others against the Union Pacific Railroad Co. and the Interstate Commerce Commission, and by Harry J. Diffenbaugh and others against the Interstate Cornmerce Com¬ mission, the Chicago Alton RaUroad Co. and others, mtervemng. Decrees for complamants. (176 Fed., 409.) 33 176 Fed., 419. 420. Idem, pp. 425, 426. 90 TERMINAL GRAIN MARKETING. An order which forbids a carrier to allow or pay to the owner of an elevator any compensation for elevation in transit of grain which he ships, unless he refuses to clean, clip, mix, inspect, or grade the grain while it is passing through the elevator, IS beyond the power of the commission.^ ’ On appeal the case was reviewed by the United States Supreme Court in 1911 (Interstate Commerce Commission v. Diffenbaugh) ^Uie decision of the circuit eourt was affirmed in its main point with the modification that the commission’s order of 1907, diminishing the allowance to three-quarters of a cent, and so much of the Peavey order of 1908 as confines allowances to grain reshipped within 10 days, should be allowed to stand.” Although the courts differed with the Interstate Commerce Com- mission in construing the interstate commerce act as applied to eleva- tion lacilities, it was clearly shown in the records and decisions of both bodies that the use of terminal elevators as facilities for trans¬ portation puiTioses was inseparable froiri their use as facilities of ij had seemed to the commission that the elevator companies could not be properly remunerated for transportation services without allowing them commercial benefits amounting to an unlawful dis- crimination against other dealers.^^ The court, on the other hand held that carriers were required to provide elevation under the act and i that the trading benefits accruing to operators who performed such effivation services for the carriers could not be considered as affecting j the question of a reasonable rate for the service of elevating and trans¬ ferring grain. 1 Subsequent orders and decisions.— Pursuant to the decisions of \ the court, the Interstate Commerce Commission modified its orders ^ as to permit elevation allowances by the railroads at Missouri Kiver points, provided the grain be unloaded and reshipped within ' a 10-day period. They also interpreted the decision of the court to require that a railroad ^ must, when it makes this allowance to one elevator under such circumstances as to give that elevator payment lor commercial elevation, extend the same privilege to all other ele- ’ vators similarly situated at that point.” , As the effective date of these orders approached, it was pointed out to the commission that several lines of railway operating at the Mis- , souri Kiver had not been defendants in the previous cases and there- i lore subject to the 10-day order. Moreover, complaints were filed by the Missouri Kiver interests insisting that to apply this order to the Missouri Kiver and not to other grain markets would ^ create a^ discrimmation against that locality. For these and other ^ reasons it was determined to broaden the investigation so as to : 35 Idem, p, 409. Pacifl!;TR.“vSto Grata 222 U. opinion ol Justices McKenna and Hughes (1.0. C. v. DlSenbaugh, ri Inspectmg, Cleaning, and mixing—that is, raising the quality of the grain tosult tho deruand of the market is the busmess of the grain dealer or others, and the two businesses are nof tn thp 1 think, the purpose of the statute to confound them. The statute makAg oniv include all instrumentalities and facilities of shipment or carriage ’ and it is 1™ tmmernalRv Zd ‘connected with such tran^ipXuon, ™&shcs w therein, that he inay be compensated by the railroad: What goes bevond that ^ 38 99 T P becomes, as the commission held,a discrimination.” oeyond that an’^onfhe oteakiSrifra Mississippi, and Ohio Blv«^ RAILROADS AND TERMINAL ELEVATORS. 91 take in the Ohio River and points generally north of the Ohio and east of the Missouri. It was found at the final hearing that in all eastern territory, except upon the Ohio and Missouri Rivers, the elevation allowance for a long time had been and still was one-fourth of 1 cent per bushel, which was ‘‘supposed to cover merely the passing of the grain through the elevator.’’ If the owner of the grain obtained storage, or if the grain was ‘^subjected to any of the various commercial processes” an addi¬ tional payment was required.^® The dealers and carriers in this territory desired that such a rate be continued, and this rate was agreed to by the Ohio River interests and by a minority of the inter¬ ests from the Missouri River. The decision in this case was influenced by evidence relating to the operation of “ what is known as the railroad elevator.” It was shown that nearly all railroads operating at the Missouri River owned one or more ebvators at the grain markets, and that these elevators included as a part of their elevation service the cleaning, mixing, and clipping of grain and other operations. In many instances these elevators were operated by the railroad itself, either directly or through a subsidiary; in other cases they were leased to grain dealers “some¬ times at an almost nominal rental and sometimes upon a fairly com¬ pensatory basis.” It then appeared that to require a imit of one-fourth of a cent per bushel when an allowance was paid by the carrier to a private elevator while at the same time railroad elevators were performing these various commercial services free of charge, would create a discrimina¬ tion “ in favor of the shipper who uses the railroad elevator and against the shipper who employs his own elevator for these commercial operations.^^ The commission found that— * * * In order, therefore, to do justice at the Missouri River, where these rail¬ road elevators exist, we must not only prohibit the payment by the railroad to the private elevator of more than one-fourth cent per bushel, but we must also prohibit the railroad from rendering for the shipper at its own elevator, free, any service beyond transportation elevation proper. We must go further. We must determine what is a just charge for these commercial operations and insist that the railroad elevator, if it performs the operations, shall charge not less than the sums found reasonable.'*^ Accordingly it was recommended (but not ordered) that the allow¬ ance at Missouri River points for elevation under the 10-day limit be reduced to one-fourth of 1 cent and that the railroad elevators adopt the following charges for commercial services performed: For clipping, one-fourth cent per bushel. For cleaning, one-fourth cent per bushel. For mixing or turning, one-eighth cent per bushel. For sulphuring, one-eighth cent per bushel. For drying, from 1 to cents per bushel. For sacking, one-half cent per bushel (sacks and strings to be furnished by owner of the grain). In subsequent decisions of the commission it has been ruled that a carrier is not required to make allowances for elevation unless it can be conclusively shown that elevation is a necessary incident to «24 I. C. C., 201. « 24 I. C. C., 203. <2 Idem, p. 204. 92 TERMINAL GRAIN MARKETING. the transportation movement involved; and it has been decided that the carrier is not required to transfer grain in order to obtain correct weights.^^ Section 4. The practice of leasing. Extent of leasing. —After about 1885, when several large primary grain markets were well established, it became a frequent practice for competing railroads to offer special facilities to certain large shippers along the line to secure their tonnage. The railroad carriers constructed elevator facilities at terminal and sometimes at country points on the right of way, leasing such property to large merchandising and shipping companies as a means of developing traffic in competition with other lines. Leases were frequently on highly favorable terms. Prior to 1906, at least, there was evidence of preferential rates; and discrimination in switching arrangements, and in providing cars for the private use of the operator, were often alleged. At export points and at certain transshipment points, such as Buffalo, where the necessity of rapid release of equipment so as to avoid congestion and demurrage was of paramount impor¬ tance, the carriers more frequently retained operating control of the elevators. But at interior points it was, and has continued to be, a common practice to lease a railroad terminal elevator to a certain large dealer with sundry provisions in the lease for transferring the grain of other (usually smaller) shippers. The extent of this leasing practice in the United States to-day is indicated in Apnendix Table 7. Keasons for LEASING. —The first reason for leasing railroad elevators to private dealers rather than operating them as public transportation facilities relates to competition. The railroads have found that their chief interest in the operation of elevators, that of securing tonnage, can be served fully as well if not even more effec¬ tively by leasing the house to a dealer. In some of the interior markets the incoming lines have no interest in following the commercial course of the grain after it is delivered.at the terminal. Likewise certain of the outgoing lines have no interest in the origin of the commodity so long as they receive the haul. Consequently there has been considerable advantage in leasing a terminal on the right of way to an individual shipper with the expectation—and some¬ times the specific agreement—that his grain shall be shipped in or out over the lessor’s rails. Grain elevation allowances ai Kansas City, Mo., and other points (1915), 34 I. C, C., 442. The Peavev contract with the Union Pacific R. R. Co. at Omaha (1899) was later assigned to the Omaha Elevator Co. and was invoked by that company in an action at law before the Federalcourt of appeals (249 Fed SU*? transfer of upward of 40,000,000 pounds of grain handled between Sept. 1, 1911, and Nov. 25, 1914, amounting to S3,005.29. It was held that in view of the fact that the allowances in question were no longer covered by tariffs duly published and filed, such amounts could not be collected by the elevator company. “ The cancellation effective May 20, 1912, of the tariff con- ^^^^Igthese allowances, was a matter of record of which the plaintiff was bound to take notice.” (249 «34I. C. C.,,445. conuni^aion “As this grain moves from point of origin toward the East and Southeast it reaches or comes within the severalspheres ofinfluence of certain centers or primary markets. For example, grain is shipped in large quantities to Minneapolis and reshipped from Minneapolis to Chicago or Milwai^ee and fr6m thence to vanous destmati^s in the East and Southeast. Severa 1 railroads have fines from Minneapolis to Chicago Mmneapofis. If they participate in the transportation of tWs tonnage, as tte onTf^oT^ as they undoubtedly will always insist upon doing, they must Minneapolis gram that comes in on some other road. There are numerous railroads with southeast from Chicago that have no fines west or north of Chicago, and if they participate traffic they must take out from Chicago that which comes in on some other road. In every instance of a carrier so situated an additiona 1 competitive influence is injected into the situation.” RAILROADS AND TERMINAL ELEVATORS. 93 At the important primary markets competition has unquestionably seen a controlling reason for the leasing of the railroad houses. This has been explained by an operator of elevators leased from the Rock Island Railroad Co., at Chicago, as follows: Years ago when the public elevators were operated, grain came here from all parts of the country. Competing markets did not exist to any great extent. This was a great central market. Markets like St. Louis, Kansas City, etc., were not in existence at that time. To-day those conditions are different. The grain does not come here of its own accord. We go after it. We are exporters as well as public warehousemen. We go out and meet competition as far as we can and bring the grain here.^® Similar testimony was offered in 1906 by J. H. Hiland, who was then third vice president in charge of traffic of the Chicago, Milwaukee & St. Paul Railway Co. Being asked about the rental accepted for the storage tanks of the Milwaukee Elevator at Kansas City, he stated: The people who are occupying these properties have been engaged for years in the purchase of grain that has been shipped over the Chicago, Milwaukee & St. Paul Railroad. They are familiar with the points of purchase; they are familiar with the points of consumption and the dealers who consume the various products passing through the elevator; and the mere fact of this long experience and knowledge in the conduct of the business in itself is a compensation if we gave them the elevators for nothing, rather than to advertise or to put on the auction block in any way these properties to people who did not have the same knowledge and experience for secur¬ ing business to the Milwaukee & St. Paul Railway that the lessees did. , There is a value in that knowledge that can not be offset or obtained by a mere increase in a rental of an elevator located as the elevators that are leased by the Milwaukee & St. Paul Railway. Various instances might be cited of close association between a railroad company and grain dealers on the line. It was disclosed in 1906 that the Chicago, Milwaukee & St. Paul Railroad had perfected an arrangement whereby the Simonds-Shields Grain Co. at Kansas City were allowed to operate the storage tanks of the railroad elevator under lease from the railroad company while the workhouse of the plant was operated by the railroad company through Mr. Shields as a salaried superintendent—that is, the Simonds-Shields Grain Co. paid the Milwaukee road an annual rental of $2,500 for the use of their storage tanks, while the railroad employed a member of the firm at a salary of $3,000 as superintendent of the transfer house. It was testified that fully 95 per cent of all the grain passing through the transfer house belonged to the grain company. The services of mix¬ ing, cleaning, and clipping were performed by the railroad free of charge for the lessee, and later for all shippers. Mr. Shields as an employee of the railroad company v/as given a pass over their lines. Another reason for the practice of leasing frequently advanced by the carriers is that of operating cost. It is pointed out that at competitive points in the interior the terminal elevator affords the railroad no dependable revenue and is often operated at a yearly loss. On the other hand, to lease the house at a fixed rental, arranged on an interest basis, often affords a reduction in expense and eliminates certain vexatious operating problems at the terminal. The situation has been different at the ocean ports, where the Hearing before the Interstate Commerce Commission, 1906, in the matter of Relations of Common Carriers to the Grain Trade, Sen. Doc. 278, 59th Cong., 2d sess., p. 87. <7 Idem, p. 626. « Idem, p. 345. As superintendent of the railroad elevator he was charged with the duty of receiving, handling, weighing, and conditioning grain in which he frequently had a private interest. 56976°—22-8 94 TERMINAL GRAIN MARKETING. problem is one of providing water terminals in order to secure export shipments. However, the utilization of capacity of a railroad ele¬ vator plant has been uncertain and variable even at a port terminal, as appears from the following tabulation of all grain handled by the Baltimore & Ohio Railroad through its elevators at Locust Point, Baltimore, during the years 1897-1919, inclusive: Receipts of grain from cars and schooners into Locust Point elevators B and 0 for years 1897-1919, inclusive. . 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906. 1907. 1908. 1909. Quantity. Percentage received based on 1916 receipts as 100 per cent. Year. Quantity. Percentage received based on 1916 receipts as 100 per cent. 40,866,023 78.21 1910. 7,047,745 11,226,203 17,071,941 31,374, 721 24,953, 759 46,294,849 52,249,316 32,191,106 17,609,378 18,326,119 13.49 21.49 32.67 ATI fiK 49,403,586 94.55 1911. 37,047,477 70.91 1912. 33,322,516 63. 78 1913. 32,877,576 62.92 1914.. . OU, Ut) 9,887,859 18.92 1915. • /O QQ AA 12,909,104 24. 71 1916. 100.00 A1 A1 7,230,314 13.84 1917. 14,853,180 28.43 1918. Dl- 01 21,143,041 40,47 29.50 1919.. oo« /U A'T 15,412,838 10,427,531 5,938,684 19. 96 13.66 Yearly average... 23,898,472 45. 74 These figures show that a plant which was equipped to handle at least 52,000,000 bushels of grain annually (as in 1916) had in 14 of the years of operation handled less than 50 per cent of that quantity, V. 1 average over a 23-year period, only 23,898,472 Section 5. Examples of leasing arrangements. Lease op toe South Chicago elevatobs.— The transaction where- by theRo(^ ^land Railroad acquired the South Chicago elevators from; John C. Shaffer m 1904 illustrates the policy of that road in relation; to the business of public terminal elevators. Shaffer purchased’ these elevators, having an aggregate rated capacity of 4,500,000 f^oin a certain estate for $700,000 cash. He then organized the Chicago-Rock Island Elevator Co., to which he transferred the elevator in exchange for $1,000,000 in 5 per cent first mortgage onds and $1,000,000 in stock of the company. The corporation < was organized primarily to float a loan on the property. The ele¬ vators were then sold to the Chicago, Rock Island & Pacific Railway Co. in consideration of their assuming the bonded debt and under ? an agreement made before Shaffer had acquired title to the property. Ihe railroad company then entered into a lease with Shaffer wherein i 1 agreed to redeem the bonds to the extent of $50,000 each year m the following manner: purchase price of one million dollars ($1,000,000) shall be paid by the ' st party, to the tnistee, in monthly instalments, commencing on the first day of November, 1904, of two cents per one hundred pounds on all grain which may be^de- elevators, or either of them, during the continuance of this agreement originates on the line of the first party, west of Joliet, Illinois, of ^hich is Chicago from any point distant RAILROADS AND TERMINAL ELEVATORS. 95 The term of the lease was conditioned upon the liquidation of the bonded debt. The railroad company also agreed to keep in repair the ‘^permanent outside structure of the elevator bmldmgs, to pay all taxes, insurance, and assessments against the property; and as a common carrier to receive and transport all grain tendered to it for shipment by the lessee at reasonable and customary rates, and to furni^ at all tunes reasonable facilities for the transportation of grain to and from the said elevators,’’ etc. Among other things the lessee made the following agreement relative to shipping over the lessor’s lines: * * * that all grain which may be shipped, into or^ out of said elevator, the movement of which can be controlled by him and which is destined to pomts that can be reached by the lines of railway operated or controlled by the Rock Island. Ck)., or by a practicable route of which said lines form a P^rt, shall be shipped over 8ai(i lines, or route, and not otherwise, provided the rates of freight of the Rock Island Co. and of such route, of which its lines form a part, shall be as favorable as the rates of other companies, which may be published and established in accordance vnth l^w, to and from the same points; that he will, at all times during the term hereof give the lessor the opportunity of meeting the rates of any other railroad company, or companies, before shipping any grain over the line of another carrier; that he will route all grain, the destination or place of shipment of which shall be, off the lines operated or con- • trolled by the Rock Island Co., so far as he may be able to control the same, in such manner that it will give the lessor the benefit of the longest possible haul over the lines operated or controlled by it, subject to the conditions as enumerated abo^i that all grain carried on the lines operated or controlled by the lessor, which shall be consigned to or bought by the lessee, and which shall pass through said elevators, or either of them, shall be there received and unloaded by him as promptly as possible, and that all cars containing such grain shall be subject to all rea^nab^ car service rules and regulations which may be applicable to the place of such tramc, that he will operate the said elevators, and each of them, actively and continuously during the continuance of the term hereof; that there shall be delivered at the said elevators not less than five million bushels of grain during every period of one year, while this lease is in force; * * *. And the lessee further agreed to deliver at the elevators not less than 5,000,000 bushels of grain each year during the life of the lease, or to— forfeit and pay to the lessor, as a consideration hereof, and as liqmdated damag^ for said failure and breach of covenant, an amount equal to one cent (:^.) for each and every bushel of grain constituting the difference between the number of bushels of Irain less than said five million bushels actually delivered to said elevators in any one year, and said agreed amount of five million bushels. It was also provided that the lessee upon request of the railroad company should store or transfer grain m the course of transporta¬ tion, the lessee agreeing under this provision that he will always promptly, and when the same is offered, receive for storage or transfer, all grain which the lessor shall offer, to have stored or transferred in or through the said elevators, or either of them, and that the rate for storage or transfer of such grain when so required by the lessor to be stored or transferred, shall, under no cir¬ cumstances, exceed the rate charged at the time for like services at the same elevator performed by the lessee for any other railroad company. The property was apparently leased to Shaffer for a purely nominal rental; he agreed to pay “in consideration of the leasing of the premises * * * the sum of one dollar * * * m full of all money rental for said premises during the entire term of this lease. Shaffer thereby apparently made a large profit on the transaction and secured the use of the elevator for private account under a guar- anty to furnish the owner with a minimum tonnage yearly, bnaner 96 TERMINAL GRAIN MARKETING. testified in 1906 that no one could afford to operate an elevator in Chicago unless he were in the grain business. With reference to the operation of the houses described above, he said: We buy in the country, out in Iowa, Nebraska, and Kansas, and then bring it in over the Rock Island road’s tracks, and create the business for them. Keystone Elevator Co. case.— In 1903 the Pennsylvania Railroad leased to the Germantown Junction Elevator & Warehouse Co. a plot of ground adjoining its tracks at North Philadelphia, Pa., and constructed thereon, wholly at its own expense, a fully equipped grain elevator and a warehouse. In the same year all the lessee^s rights imder the contract were transferred to the Keystone Elevator & Warehouse Co., who proceeded to operate the plant as a private warehouse. The operation of the elevator by fiiis latter corporation, under its lease, subseq^uently provoked numerous com¬ plaints from grain dealers at Philadelphia and elsewhere and finally led to an investigation by the Interstate Commerce Commission upon its own motion m 1912. It was found that the value of the lands included in the lease was $15,000 and the cost of the plant $163,065.09. During the period 1903-1912 the average annual expense to the railroad company for maintenance of the elevator plant was $3,805.50. The rental paid by the elevator company was $6,000 per year, leaving the railroad company an income of $2,194.50 or about 1^ per cent annuallv on its investment. It was also found that— The railroad company by the original lease bound itself to pay to the elevator com¬ pany 35 cents per ton for each ton of grain and merchandise handled through said elevator and warehouse, excepting that no payment was to be made upon traffic for the movement of which the railroad company received only a switching rate By an amended lease made on April 30, 1910, this allowance was changed to read aa follows: “ To pay to the elevator company twenty (20) cents per ton of two thousand (2,000) pounds on all grain delivered from the elevator to teams, or loaded out of the elevator into cars for local delivery in the city of Philadelphia, it being understood that this applies solely to grain consumed in the city and not to business destined to points outside of the city, or to points reached by water; thirty-five (35) cents per ton of two thousand (2,000) pounds on hay, straw, and other merchandise delivered into or received from the elevator company’s warehouses at North Philadelphia, except that no payment shall be made upon merchandise which it is customary for the rail¬ road company to deliver directly from car on the track and not through railroad ware¬ house or across railroad platform, nor upon traffic on the movement of which the rail¬ road cornpany has only received a switching rate, or material and supplies belonginf^ to th e railroad company. ” ® And that among the obligations of the elevator company under the contract were— * * * to use all reasonable efforts to secure to the railroad company all traffic con¬ trolled by the elevator company or destined to or from the said elevator and warehouse and to confine the services of the elevator to traffic passing over the lines of the railroad company; to unload, load, and handle all grain and merchandise received by it to be shipped over the lines of the railroad company or received by it for delivery to con¬ signee; to promptly notify consignees of the arrival of such shipments and to pay all running expenses of the elevator and warehouse; to be responsible to the railroad com¬ pany for the prompt collection of all freights and other charges upon inbound grain and merchandise- to indemnify the railroad company for all damage to or loss of grain and merchandise in the custody of the elevator company and to maintain fire insurance « Op. cit., Sen. Doc. 278, pp. 75, 76. 60 In re Keystone Elevator Co., 1913, 25 I. C. C., 619, KAILROADS AKD TERMINAL ELEVATORS. 97 on such grain and merchandise; to notify the railroad in writing of the failure of any consignee to remove freight and to observe and comply with all directions with respect to such freight which may be received by it from the railroad company; to take charge of grain as warehousemen for account of the owners thereof at the expiration of the period currently given by the railroad company as free time. It was further found that the firm of L. F. Miller & Sons, grain dealers, customarily owned and merchandised about 92 per cent of all the grain passing through the elevator property; that during the years 1907-8 and 1908-9 the payments made oy the railroad company in consideration of grain handled amounted to nearly 50 per cent of the revenues of the concern; and that the principal and almost the sole beneficiary of the leasing arrangement was Harvey C. Miller, of Phila¬ delphia. In the course of the opinion it was said that— Itfully appears that the Keystone Elevator & Warehouse Co., almost entirely owned by Harvey C. Miller, pays to Harvey C. Miller for the use of cleaning rnachines each year considerably more than the total cost of construction of these machines and con¬ siderably more than their total value. It is enabled to make this payment of money to Mr. Miller over and above the dividends on the elevator stock owned by him by reason of the allowances paid to the elevator company by the Pennsylvania Railroad Co. An order was entered directing— * * * the Pennsylvania Railroad to cease and desist for the period of two years from leasing the elevator property above mentioned to the Keystone Elevator & Ware¬ house Co. so long as the stockholders of the latter are owners wholly or in part of the property passing through such elevator, and to cease and desist for the period of two years from paying any allowance for terminal services to the Keystone Elevator & Warehouse Co. upon any property passing through such elevator belonging wholly or in part to any stockholder of said Keystone Elevator & Warehouse Co. unless its published tariffs shall at the same time offer such allowance to all other shippers using said or any other elevator in the city of Philadelphia. This decision was of controlling importance to the grain trade throughout the East. At that time L. F. Miller & Sons were known to be heavy purchasers in the grain centers and, as pointed out by the Interstate Commerce Commission in its annual report — * * * All routes leading to or competing with the route of the Pennsylvania Railroad Co. to Philadelphia, as well as routes via other gateways to the southeastern territory and New England points, have felt the effect of the enormous concessions and rebates paid by the Pennsylvania Railroad Co. to the Miller Bros, during recent years. Furthermore, this grain firm has been in a position to underbuy and undersell its com¬ petitors in the grain markets from the Atlantic coast as far west as Chicago.^ While the responsibility for this condition is disclaimed by the officials of the carrier, the fact that L. F. Miller & Sons routed practically all of their business via the Pennsylvania Railroad, and, in fact, secured preference as to elevation, demurrage, and storage charges from this carrier, can not be disputed. Section 6. Special obligations in lease agreements. Tonnage stipulations. —In several instances the leases of railroad elevators have included certain express obligations with reference to the conduct of the lessee’s business, or with reference to the facilities to be furnished by the lessor. The stipulation of minimum tonnage contained in the Shaffer con¬ tract already described is also found in other leases. The J. Rosenbaum Grain Co. leased a 500,000-bushel terminal elevator from the New Orleans Terminal Co. prior to 1906, agreeing to pay one-fourth of 1 per cent per bushel for every bushel of grain handled through the house and a minimum rental of $7,500 per year. w Twenty-seventh Annual Report, 1913, p. 13. 98 TERMINAL GRAIN MARKETING. The grain company also paid for maintenance and 75 per cent of insurance and taxes. In some cases the tonnage agreement is exclusive, as in the agree¬ ment of lease between the Ind^endent Elevator Co. and the Nye- Schneider-Fowler Grain Co., of Omaha (July 15, 1917), where it was stipulated that— The lessee hereby agrees that it will, during the term of said lease, ship over the lines of the Chipgo Great Western Railroad Co. all grain to be shipped out of said elevator to competitive points. Agreements to operate as public elevators. —In most of the leases examined the lessee has not assumed any specific obligation to operate the house as a public elevator. Sometimes it requires only that the lessee shall use the property ‘‘for the elevation, storage, and handling of grain and sometimes the precise nature of the business contemplated is not set forth. Certain exceptions to this statement are wortlw of note. In the lease of the Chicago & North Western Railroad Co. elevator at Mil¬ waukee to the Rialto Elevator Co. in 1913 it was agreed as follows: The said party of the second part further agrees and obligates itself to keep said buildings open at all times for the receipt, storage, or handling of grain in the manner in which public elevators or warehouses are usually kept, and to receive, store, and ship grain from said buildings for any and all persons applying to it for that purpose, at the usual and customary rate charged therefor, which must in all cases be reasonable rates, and if it shall elect to close said buildings, it will immediately surrender up the same to said party of the first part. This agreement apparently brings the Rialto Co.^s elevator within the application of the public warehouse laws of Wisconsin. Substantially the same stipulations were made in the agreement of lease entered into by the Itasca Elevator Co., of Duluth, with the Chicago, Milwaukee, St. Paul & Omaha Railway Co. However, since there is relatively little public warehousing at Duluth, and since the Minnesota law does not prohibit public warehousemen from storing their own grain in the public bins, the agreement has resolved itself into an obligation to handle grain routed over the lessor’s line. A more effective agreement to operate for public account is that made by the Armour Grain Co. in leasing the recently constructed Calumet Elevator at Chicago from the Chicago & North Western Rail- . road. This agreement (made in 1915) required the operator “to set ' apart and completely separate at least 12 storage tanks on the south side of the storage house, together with the corresponding' space in the workhouse and in the river house and to separately maintain, use, and operate said portions so set apart as a public warehouse in accordance with the laws of the State of Illinois.” As alpady noted in the Shaffer-Rock Island lease, the railroad companies have sometimes required a lessee to transfer grain moving over the lessor’s line at customary rates. In the lease of an elevator at Argentine, Kans., by the Atchison, Topeka & Santa Fe Railway Co. to the Neola Elevator Co. (Armour Grain Co., guarantor) in 1915, the lessee agreed— To promptly transfer grain from car to car through said elevator upon request of the lessor at the expense of the lessor, and for such rates as may from time to time be fixed by the tariffs of the lessor. It is understood and agreed that the insurance policy of the lessee shall extend to and cover the grain while being so transferred. “ Op. cit., Sen. Doc. 278, pp. 91, 92. RAILROADS AND TERMINAL ELEVATORS. 99 In the lease of the Chicago & North Western Railroad Co. elevator at Council Bluffs to the Updike Grain Co. of Omaha, 1918, it was provided that the lessee should— * * * promptly transfer grain from car to car through said elevator upon the request of lessor, and for such charges and rates as shall from time to time be lawfully fixed by lessor or by any lawfully constituted public authority. Precisely the same agreement was made by the same parties in the lease of a railroad elevator under construction at Milwaukee in 1916. Free switching. —^The contract of lease between the Atchison, Topeka & Santa Fe Railway Co. and the Armour Grain Co. (1913), applying to a grain elevator at Chicago, incorporated the following condition: Whereas under existing conditions all grain destined for said elevator reaching Chicago over the Atchison, Topeka & Santa Fe Railway, the Chicago & Northwestern Railway, the Chicago, Milwaukee & St. Paul Railway, the Chicago Great Western Railway, the Wisconsin Central Railway, the Chicago & Alton Railway, and the Chicago, Madison & Northern Division of the Illinois Central Railway is now deliv¬ ered at the elevator free of any Chicago switching charges, and all grain shipped from the elevator by rail to any point beyond the switching district of Chicago is now moved free of any Chicago switching charges; now, therefore, it is further agreed that if during said term such conditions or any of them shall change, the lessee shall have the right, upon thirty (30) days’ notice in writing to the lessor, to cancel this lease. Such a provision was rendered necessary by the requirement (after the passage of the Hepburn Act) that the railroads publish tariffs for all switching allowances or absorptions. Prior to 1906 switching arrangements between the railroads and the lessees of their elevators were a matter of private arrangement between the two parties. It was not the custom of railroads to publish any regular tariff form or anything for switching arrangements in the city of Chicago. Section 7. Agreements prior to construction. In 1917-18 the Chicago & Northwestern Railway Co. constructed a 10,000,000-bushel elevator on the Calumet River in South Chicago for occupation by the Armout Grain Co. In 1915 a lease was entered into which incorporated the plans and specifications as approved by both parties.A rental was agreed to at 6 per cent per annum on— (а) The cost to lessor of the ground leased, which cost is hereby agreed to be the sum of $33,000. (б) The cost to lessor of constructing, equipping, and completing the said elevator plant as herein provided, which cost shall be shown by the books of lessor. When the plant was completed in 1918 the railroad company made the following announcement: The Chicago & North Western Railway announces that their new terminal grain elevator, located on the Calumet River in South Chicago at Irondale, Ill., will be ready for operation by the Armour Grain Co. January 2, 1918. The entire plant is fireproof and of the most modern design and has the largest storage, handling, and cleaning capacity of any grain elevator ever constructed it is the largest grain elevator in the world. The Chicago & North Western Railway facilities at the elevator are in keeping with the high standard of the plant. There is a total of 18 miles of track, and the yard capacity is 1,250 cars. A modern mechanical fuel station and roundhouse are in¬ cluded in the terminal. Direct connections with belt and trunk lines are made at this point. M Op. cit., Sen. Doc. 240, p. 116. M The Chicago & North Western Railway elevators at Milwaukee and leased to the Updike Grain Co. prior to construction ol the plants. Council Bluffs were likewise 100 TERMINAL GRAIN MARKETING. With reference to operation it was agreed as follows: 9. Lessee agrees to keep the premises leased open during the term of this leasp for the purpose for which said premises are leased, and to occunv and use for receipt, storage, and handling of grain during the term of thfs lease and ™!et anart and completely separate at least twelve storage tanks on the south aide'nf tho a+n?o and to separately maintain, use, and operate said portions so set apart as a nublie warehouse in accordance with the laws of the State of Illinois. ^ ^ nr. agrees to promptly transfer grain from car to car through said elevator upon of lessor, and for such charges and rates as shall from^time to time be lawfully fixed by lessor or by any lawfully constituted public authSit^ In a similar way negotiations were entered into between the Bur¬ lington road and the Armour Grain Co. in 1917 relative to the con¬ struction of a 2,000,000-bushel elevator at Omaha, as the following correspondence shows: Armour Grain Co., Chicago, III. Chicago, January 24, 1917. Gentlemen: We expect to erect, in the near future at Omaha Nebr a modem elevator o^ about 2,000,000 bushels capacity on land adjoining our present terminals near Gibson, so as to facilitate the transportation of grain on our western lines and better control our equipment and more promptly release same. It is my understand¬ ing that you are desirous of securing such facilities there and I write this to inalire whether upon completion of the elevator your company will lease same on basi^ nf a rental of 6 per cent per annum upon the cost of tl?e Cd occuSd bv same with usual provisions attending such leases as to liability, repairs, etc I would be obhged if you would advise me at an early date and if you would undertake to agree to take the house on these general terms with the understanding that the details of the lease will be negotiated later when our plans are completed Yours, truly, ^ (Signed) C. G. Burnham, Vice President. Mr. C. G. Burnham, January 24, 1917. Vice Presidmt, Chicago, Burlington & Quincy Railroad, Chicago, III. acknowledge receipt of your letter of this date adidsing that 2 non oSi i! near future, at Omaha, Nebr., a modern elevator of about 2,000,000-bushels capacity, on land adjoining your present terminal near Gib> f j Mr. Crowell. Well, I believe at first it was based upon an allowance, and then it was based entirely on a free handling, free clipping, and an allowance besides of a cent and^ a quarter. That is my understanding. Commissioner Clark. Do all of these elevator services, such as you have just enumerated, partake of the nature of an allowance from the railroad to the shipper of the grain? ^ Mr.^ Crowell. I would hardly consider it that, Mr. Commissioner. I would con¬ sider it an inducement for the shipment of grain over their line. The privileges that are granted they grant to everybody and state openly what they do. Commissioner Clark. But it is in the nature of an allowance as an inducement for grain to come or go over their lines? Mr. Crowell. You might put it that way; yes, sir. Corumissioner Clark. And if one railroad company does it, its competitors feel bound to meet that competition either in exactly the same or a different way? Mr. Crowell. Yes, sir. It has been contended by some, of course, that the han¬ dling of gram through an elevator is a thing that is incumbent upon a railroad com- pany, the same as the handling of merchandise upon their depot platform, etc. Whether that is a good argument or not I do not know. Commissioner Clark. If a railroad company transports a car of horses and it is necessary to take them out for feeding, or transfer them from one car to another, the railroad company does it, doesn’t it? Mr. Crowell. I am inclined to believe they do. Commissioner Clark. Do they furnish any men to clean the horses? Mr. Crowell. Well, I presume not. (Rec., pp. 254-255.) Court decisions. It has b6en held by the courts in certain juris¬ dictions that railroads were not authorized by their charters to carry on the customary business of warehousemen. This question was passed upon by the Supreme Court of Illinois in People v. Illinois Central Ry. Co. (1908).^* A bill had been filed in equity in the name of the people of the State of Illinois to enjoin the Illinois Central, ^e Chicago, Burlington & Quincy, the Chicago, Rock Island & Pacific Railroad Cos. and others from discontinuing the operation (through their lessees) of certain grain elevators as public ware¬ houses of class A under the warehouse act of Illinois. The bill having been dismissed by the lower court for want of equity the Supreme Court affirmed the juc^ment of the lower court, referring to five decisions by the courts of Illinois and other States and said: ^ 58 233 Ill., 378; 84 N. E.,368. Louisiana v. Southern Pacific Ry. Co., 52 La Ann- and illtaofs CemS ^ ^wlgert, 119 lU., Ssi RAILROADS AND TERMINAL ELEVATORS. 105 It will thus be seen that there is nothing in the statute imposing the duty on a railroad company to furnish public warehouse facilities, or to engage in the business of public warehousing, and issue receipts to meet the wants or convenience of members of a trading exchange. It may be conceded that, as incidental to their duty to trans¬ port grain in bulk, railroad companies may, under some circumstances, have the power to furnish storage room for grain at important transfer points temporarily, to enable the owner to collect enough for a cargo where the grain is to be reshipped by water, and it is well known that many railroads maintain grain elevators for such purposes; but such storage contemplates a rotation, so that no one shipper or con¬ signee can monopolize all the storage room, and hold the same indefinitely, or until the market seems to j ustify him in selling his grain. The duty of the railroad company to the public to transport all the grain that is offered for transportation forbids the company from adopting a method of business which would permit third parties, over whom the company has no control, to use its storerooms and warehouses indefinitely, to the exclusion of other patrons and the embarrassment of the company in the per¬ formance of its duty as a carrier. The combined capacity of the two elevators in question is 2,500,000 bushels, which is less than 10 per cent of the grain annually transported to Chicago by the Illinois Central Railroad Co. If appellants’ contention is sustained, it would be possible for one buyer of grain to monopolize all the bins in these two elevators. One person might thus become the owner of all the grain in the elevators. Appellants would compel the railroad company, or its lessees in charge of the elevators, to issue such owner warehouse receipts for the grain stored. As long as the owner is willing to pay storage charges to a public warehouse, we know of no law limiting the time of storage. Under the possible condition suggested, the ability of the railroad company to serve the public would be dependent upon the will and pleasure of the owner of the grain in the elevators. While this might be a great convenience to persons engaged in trading on the board of trade, we are unable to see how the public generally will be benefited, or the railroad company mil thereby be the better able to discharge its duties as a carrier. The producer and con¬ sumer of grain alike require the services of railroad companies to transport grain from the former to the latter, but neither will be benefited by having the grain lodged in a public warehouse at some intermediate point for an indefinite time, in order to allow speculators to use the receipts representing such grain as a trading commodity. That a railroad company has no power, either express or implied, to own and operate a public warehouse as an incident to public purposes as a public carrier is, in our opinion, supported by sound reason and authority. rstate commerce law the carriers are re¬ regular tariffs designating any services— such as elevating, storing, conditioning and generally warehousing grain—which they provide in the course of transportation.®® As a general rule, if the carrier undertakes to transfer grain from car to car or from vessel to car, or vice versa, whether the service be per¬ formed by its own agents or by contract, such service must be speci¬ fied in a published tariff. If, however, “elevation’’ is absorbed in the rate, as has been customary practice at Buffalo and New York City, the publication of a through rate is sufficient authority for furnishing the transfer service free of additional charge.®^ The publication of additional rates for elevation and warehousing services indicates that such services are additional to the line haul and are not included in the established freight rates. For example, the lollowing tariff (I. C. C. No. 6714) became effective upon export grain received by the Western Maryland Railway Co., at the Port Covington Elevator, Baltimore, June 23, 1920: 60 Interstate Commerce Act, sec. 6, as amended Feb. 28,1920 (24 Stat. L., 379; 25 Stat. L., 855; 34 Stat. L., 584;41 Stat.L.,483). 61 See notes 15 and 64. 621. C. C. Conference Ruling 59: “ Where connecting lines have united in publishing a joint through rate between two points it is the sense of the commission that it is the duty of the carriers in the route to pro¬ vide the car and permit it to go through to destination or to transfer the property en route to another car at their own expense. (Affirmed in ruling 339.)” 106 TERMINAL GRAIN MARKETING. EXPLANATORY STATEMENT, For charges on domestic (other than coastwise) and coastwise grain, refer to I. C. 0. Nos. 6712 and 6713 or reissues thereof. APPLICATION OF TARIFF. The charges named in this tariff on export grain apply on shipments delivered to vessels at Port Covington elevator, destined to foreign countries, including Cuba and the insular possessions of the United States; also Panama Canal Zone. ELEVATOR CHARGES. The following charges which are in addition to the rates for transportation, will be made for the various services at the Port Covington elevator (Baltimore), Maryland: INSPECTION. No grain will be received in store until it has been inspected and graded by authorized ' inspectors, unless by special agreement. The right is reserved to decline to receive or store unsound or unmerchantable grain or grain from vessels. INSURANCE. !i * Unless otherwise instructed by owners, this company will cause to be insured against loss by fire, for account of whom it may concern all grain while in Port Cov¬ ington elevator at annual rate of 25 cents per $100.00 of value and for shorter periods at short-term percentages of that rate as promulgated by the Association of Fire Under¬ writers of Baltimore City, Loss or damage by fire on grain not so insured, and loss or damage by deterioration from heating or other inherent causes at owner’s risk. ELEVATOR CERTIFICATES, WEIGHTS, ETC. Elevator certificates will be issued for the actual weight of the grain received, and jj elevator charges will be based thereon. Freight charges will be collected on actual | weight, subject to minimum carload weight of governing tariff. f WAREHOUSE RECEIPTS. Warehouse receipts will be issued by the superintendent of the elevator office upon the payment of freight and charges. SCREENING, BLOWING, MIXING, TRIMMING, ETC. Handling.....per bushel -. Screening and blowing.do.... The maximum charge for both mixing, blowing, and screening of part or all of any parcel (the rate to apply on entire parcel).per bushel.. Mixing to apply on total quantity mixed...do_ Delivering in bags (specific weights), sewing or tying to be performed by the owners.^...per bushel -. Reloading or trimming cars.per car.. DRYING (see note). Corn, white, yellow, or mixed: No. 1.per bushel.. No. 2.do_ No. 3.do__ No. 4.do.... No. 5.do_ No, 6...do_ Sample grade (includes hot, fire-burned and infested with live weevils or otherwise of distinctly low quality): Dried for higher grade.per bushel.. Dried for sample grade.do_ at his Cents. $1 i i; i 00 Cents. i i i i 1 2i * Change. RAILROADS AND TERMINAL ELEVATORS. 107 WTieat: Nos. 1, 2, and 3. No. 4. No. 5. Sample grade: To be dried for higher grade. To be dried for sample grade. Rye: No. 3. No. 4. Rejected. Cents. 1 11 21 i 1 11 All loss of weight to be borne by the owners of the grain. The above,rates will be charged upon the weight of the grain after being dried. Note,— This company does not guarantee to dry grain within any specified time and will not be responsible for deterioration of grain due to delay in passing through drier. Grain ordered through the drier will be handled as promptly as possible, taking its regular turn according to the date the order for drying is received at the elevator office. STORAGE. On grain from cars for first twenty (20) days, or any part of same, including re¬ ceiving, also delivery in bulk to vessels or cars.per bushel.. On bulk grain (all grades except salvage grain) from vessels for the first twenty (20) days, or any part of same, including receiving, also delivery in bulk to vessels or cars.per bushel.. Each succeeding five (5) days or part of same.do_ Cents. 1 2 [FileTL-846. Mailing list No. 592. (P. O. No. 273.) 750.] The following extracts from an Erie Railroad tariff illustrates present practice as to free elevation and allowances at New York: Graded grain ordered afloat on arrival will be delivered in boats in lots of not less than 4,000 bushels to any customary place of delivery within the free lighterage limits of New York Harbor, without extra charge, and consignee will be allowed four (4) days to discharge the grain. * * * Grain, in bulk, carloads, consigned to New York, lighterage free, which has arrived via this company and been delivered to public elevator on Erie Railroad tracks at J ersey City, may be delivered from, at, or through such elevators, or it may be reloaded, in carloads of 40,000 pounds or more, in bulk, into cars and delivered at regular stations of this cornpany in New York and Brooklyn at which grain is handled * * * to private sidings on Erie Railroad in J ersey City and to float bridges of connecting lines in New York Harbor and to connecting lines at Weehawken. * * * When delivery is made in bulk from public elevator on Erie Railroad tracks at J ersey City, by boats, in accordance with lighterage rules and regulations, an allowance of 60 cents per net ton will be made to such elevator for lighterage service. It is apparent that railroad elevators as at present operated do not attempt to distinguish between transportation elevation and commercial elevation.®* Utilization of capacity. —It has been alleged that the railroad elevator as operated by the railroad agents for various shippers can not hope to utilize the capacity of the house to any such degree as is possible in the case of the private operator who has entire con- 63 1. C. C. No. 16225, effective Jan. 17,1921. 6 < This distinction was made by the Interstate Commerce Commission, 1912 (In the matter of elevation allowances, etc.,24 I. C. C., 197), wdth the following comment: “There are two kinds oi elevation, one of which may be termed transportation elevation, consisting of the passing of the grain through an elevator for the purpose of transferring it from car to car and obtain¬ ing its weight, and commercial elevation, which involves various processes in the treatment of the grain itself, like cleaning, mixing, clipping, drying, etc. The first sort of elevation is an incident to the trans¬ portation of the grain, the second to the merchandising of the grain. ^ ^ ^ ^ ^ ^ )(c “It is extremely difficult to separate transportation elevation from commercial elevation. Both things are part of the same general process. The same plant facilities, the same power, the same gang, are em¬ ployed, and the commercial process go on at the same time. It has, therefore, been found impossible to separate the different items of expense and to say with confidence this belongs to transportation and this to commercial elevation.” 108 TERMINAL GRAIN MARKETING. trol of the disposition of all grain received in store. However, an examination of the operating methods of the more efficient railroad elevators shows that such is not necessarily the case. The rail¬ road elevator is, to be sure, required to store shipments received by various shippers classified into many varieties and grades. But it is generally possible to secure mixing orders from the owners of the grain whereby several grades or varieties may be mixed and rein¬ spected, with the result that certain bins may be released for new receipts. This may be explained by describing the operating meth¬ ods at a certain elevator on the seaboard. The superintendent of that house has stated that in 1919 he handled about 36,000,000 bushels of grain and that at a conservative estimate he could have handled 100,000,000 bushels at 25 per cent additional cost. Fur¬ thermore, as it was, the quantit}^ handled amounted to a capacity turnover of about 18 times; that is, the rated capacity was utilized one and a half times every month on the average.®^ At many times during 1919 there were from 65 to 70 different grades of grain included in the stocks in store in this elevator. As an indication of the range of grades handled there were 79 different grades in store on June 21 and 46 different grades on July 6. To have kept all of these gradp separate for the respective owners of the grain would have required special binning (such as has been practiced at Buffalo) and would have prevented economical operation, since the plant contains but 159 bins. Such a condition, however, has been I avoided by requesting owners to issue mixing orders when it is desired to release certain bins for additional receipts. At times such orders come from the merchants on their own initiative. Frequently, however, the elevator calls up the board of trade in¬ spection department and asks that mixing orders be secured to cover certain lots of grain represented by outstanding warehouse receipts. The chief inspector of the board thereupon arranges with the merchants interested to issue signed mixing orders whidi desig¬ nate the grades, the specific quantities, and warehouse receipts cov¬ ering these quantities so as to relieve the elevator operator of all responsibility for the mixing and reinspection of these lots of grain. This practice appears to be operated effectively at Baltimore through the harmonious cooperation of elevator operators, the inspection department, and individual shippers. In that way storage facilities are assured except at times of abnormal congestion and the elevator storage is utilized to an extent quite comparable with the results attained by most of the private operators. It appears that the capacity utilization of terminal elevators in general increases in inverse ratio to the amount of conditioning (clean¬ ing, drying, smutting, mixing, etc.) which is required. At the ocean ports the controlling motive in all operations is to keep the traffic moving. Congestion, blockade, and embargoes lead to delays and 65 Compare the following statement (42 I. C. C., 534). “Theoretically an elevator will contain its bin capacity. Practically it is said to be full when 75 per cent of its capacity is in use. But the working capacity fluctuates. Although the identity of grain is not ordinarily preserved, the various grades are separated. There are 128 grades at Baltimore and 115 at New York. In order to move current grain through to the ships, a certain number of bins must be kept empty. The processes of mixing, cleaning, blowing, screening, drjdng, etc., require space. Bins are often not filled, but they can not be further utilized without commingling therein different grades of ^ain. Por example, the aggregate bin capacity of the Baltimore elevators of the Baltimore & Ohio and the Pennsylvania Railroads is 4,800,000 bushels. The working capacity would be approximately 75 per capacity, or 3,600,000 bushels. During the year 1915 these elevators handled approximately 90,000,000 bushels of grain, or during the year were emptied and filled on an average every 12 working days.” RAILROADS AND TERMINAL ELEVATORS. 109 demurrage charges on cars and vessels; and demurrage is the veritable bugbear of the exporter. At Buffalo, which is largely a transfer point (except during the winter months), special binning of large shipments is a customary practice, and every effort is made to move the grain so as to increase capacity turnover and, in consequence, the transfer earnings. At the primary markets, on the other hand, the storage factor is more prominent, storage and conditioning charges must be considered as sources of income, and both capacity turnover and capacity utilization are relatively less. At such points the railroad elevator may often be an unprofitable enterprise. And, since the carrier is interested primarily in moving freight, there has been a general tendency, already discussed, to lease the elevators at primary markets to private operators. From the larger viewpoint, however, this may not be the best solution of the problem. While the railroads may have little direct interest in grain elevators except as transfer facilities, this situation is no reason why the larger problem of storage or warehousing should be neglected, nor why the railroads— since they have in fact so largely entered this field—should not assist in the solution of this problem (Chap. IV). 56976°—22-^9 5 ^ Chapter IV. WAREHOUSING AND STORAGE AT TERMINAL POINTS. Section 1. The terminal elevator system in general. Necessity of terminal storage. —Extensive elevator pxants are operated at numerous terminal points ^ in the United States for the purpose of storing, conditioning, and shipping the surplus supplies of grain received. As shown elsewhere in the report, a large proportion of each marketed crop is moved from the farms and country shipping stations soon after the harvesting season, and the system has devel¬ oped of storing surplus stocks largely at terminal points. Grain at terminal points is readily available for consumption or shipment and terminal market warehouse receipts are high-grade collateral. The elevators constitute the largest fixed assets of the grain trade at terminal points. They are operated to a varying extent by deal¬ ers, consumers, common carriers, and warehouse companies. The aggregate rated storage capacity ^ in the United States, as reported from various important terminal markets, on July 30, 1920, was over 260,000,000 bushels.^ Description of terminal elevator plants and facilities.— The typical elevator for storing and shipping grain, whether located at an interior railroad terminal or at an ocean port, usually includes the following facilities: (1) Unloading pits or hoppers for receiving the grain from railroad cars on the switch track; (2) elevating legs equipped with buckets on an endless chain or belt for carrying grain to the top of the house above the storage bins; (3) hopper scales above the storage bins for weighing the grain so received (in case it has not already been weighed on track scales when spotted for unloading); (4) a system of conveying belts for transferring grain from one part of the house to another or to place it in position for loading; (5) a workhouse containing special bins and machinery for cleaning, drying, mixing, and variously conditioning the grain prior to storage or transfer to a car or vessel for shipment; (6) one or more batteries of storage tanks or bins. The elevator used primarily for storage may be equipped with as many tanks as desired in connection with the transferring and conditioning machinery described. The ele-^ vator used primarily for transfer purposes will contain fewer storage tanks and the workhouse will accordingly be a more essential part of the equipment. The tanks may be constructed of wood, concrete, tile, or steel, and the fire risk and corresponding insurance rate at¬ tached to the grain in store will vary accordingly. The insurance rates on elevators in the same terminal market frequently vary from as high as $2,50 to as low as 15 cents per $100 per annum.^ 1 See Appendix Table 11. . * * * Excluding mill and manufacturing storage. * See Appendix Tables 6-11. < The insurance rate quoted on the pubhc elevator operated by the port commissioners at New Orleans is 13 cents per 3100; the rate for one of the Peoria elevators in 1919 was 33.34. WAREHOUSING AND STORAGE. Ill The following description of a fairly modern terminal elevator in operation at Chicago includes the essential features of such a plant: The elevator is situated on a bolt railroad outside the city limits. It has a rated capacity of about 1,000,000 bushels, one-fourth of which is included in the workhouse. The construction is concrete throughout. On one side of the house there are three unloading pits directly under track scales upon which the cars can be drawn from the switch tracks where they are delivered. On the other side of the house there are two pits which can also be used for unloading, but the weights for grain unloaded on this side must be obtained from the hopper scales at the top of the house. Each of the five unloading pits is provided with an elevating leg and there are also four smaller legs for elevating into the various workhouse bins or directly to the cleaning machines. The cars are moved up for unloading by means of automatic car pullers and auto¬ matic grain shovels are used for each operation. Two shovels attached to cables are used in each car. The car is weighed before the seal is broken and after the grain has been removed to determine the net weight. Automatic scales are used, and the weights are recorded on small slips inserted in a registering device. The weighing is done by an employee of the elevator and superintended by a representative of the weigh- master of the board of trade. Grain flows into the pits and down into the boot, an iron receptacle through which the baskets of the elevating legs pass. The buckets carry the grain to the top of the house and dump it into the spout through which it passes into the garner which has been selected to receive the particular carload. From the top floor where the grain is thus received spouts are directed to the various bins and the grain can be spouted from any garner to any tank in the workhouse or can be directed onto a conveyor belt ana conveyed out over a storage tank where it is to be stored. Grain is taken off from the conveyor belt through a machine called a tripper, which runs on steel tracks across the top of the bins and can be set at any point on the conveyor belt. As there are three rows of tanks and five tanks in each row, there are three conveyor belts and three trippers. As the belt runs into a tripper it is flattened out and diverted downward, causing the grain to be dumped into a spout and thence into the desired tank. If necessary the ^ain can be conveyed into the drying tanks, of which there are three; and when it is in such poor condition that it does not flow readily through the spouts screw conveyors are used to convey the grain into these drying tanks. On the scale floor are the three hopper scales for weighing the grain received on the loading-out side of the house, and also for weighing all grains shipped out of the house. These scales are of a similar character to those on the grain floor, recording automatically the weight of the grain in the scales. On this floor are three separators for taking the coarse &t and chaff from grain. These machines are of the screen variety, there being three mesh screens of different sizes. The grain goes into the top of the machines through a spout, falls onto a very coarse meshed screen which takes off any larger sticks and stones, the smaller stuff falling with the grain onto another screen of slightly smaller mesh. The second screen removes more chaff and dirt, and the grain then goes onto a screen of still smaller mesh which removes all small seeds, allowing the grain to pass off into a spout and so on down into a bin. The dirt and chaff falls from the machine onto the floor, where it is swept up and sacked. The seeds removed from grain go into a seed bin. There are also five machines known as oat clippers. These machines are used for clipping oats for the purpose of increasing the weight per bushel. They can also be used to scour wheat to remove smut. For this latter purpose a lime preparation is necessary. For separating oats from wheat there are four machines, known as Richardson oats separators. These machines consist of a number of steel plates containing numerous small pockets, over which brushes are revolved. The oats being longer than the wheat, can not enter the indentations on the metal plates and are brushed off, while the wheat is saved. The oats pass into one spout and into the oat bin and the wheat goes into another bin through another spout. There is another machine for removing the oats from grain on this floor. This machine operates on a suction principle. The grain is introduced into the top of the machine and falls through an air current which catches the light oats and draws them off and allows the heavier grain to fall into a spout and into a bin. This machine can be used for removing any grain or seeds that is considerably lighter than other grain in the mixture. It would not, however, separate wheat and barley or rye and barley. In the basement of the elevator are three belt conveyers which run under the storage tanks. When grain is to be removed from the tanks the proper bin is opened 112 TERMINAL GRAIN MARKETING. at the bottom and the grain falls onto the conveyer belt and is carried along under the tanks into the basement of the workhouse and dumped into a pit. From this pit it is elevated by a leg to the top of the house and sent to a cleaning machine, a workhouse bin, or weighed out by the hopper scales, whichever is desired. Another screw con¬ veyer is also located in the bottom of the house. This conveyer is reversible and is for the purpose of transferring grain to various parts of the house, thus saving elevating. On the unloading-side of the house are four unloading spouts connected with the scale hoppers. When grain is to be shipped it is weighed and then released from the scale hopper, whence it falls through the loading spout into the car. The driers, of which there are three, are located just outside the workhouse. At the top of the drier is a round tank, which is the outlet for the conveyers from the workhouse. Directly below these tanks are the driers themselves. These are large tanks, the upper halves of which are subjected to a current of hot air which is driven into the tank by a blow fan through perforated ducts. As the grain falls from the tank on the top of the drier into this chamber the current of hot air dries the grain. The lower half of the tank is used to cool the grain. This tank is provided with ducts which are opposite windows that are kept open. At the other end of the duct is a suction fan which draws the cool air through the grain and rapidly lowers its temperature. From this bin the grain drops through funnels into another trough, and so on into a conveyer which carries it back to the workhouse. As the grain falls through these funnels the man in charge of the drying is able to obtain a sample and ascertain whether the grain is sufficiently cool and dry. A car of heating grain can be cooled by this latter process in a surprisingly short time. This elevator lacks a vacumn-cleaning system, and some of the cleaning equipment is not of the most modern type, but in general it is considered one of the most efl&- cient houses in the market. A published description ^ of the recently completed (1920) Penn¬ sylvania Railroad elevator at Baltimore, while not based on actual performance, presents the engineering detail of a modern railroad elevator for bulk grain: The new Northern Central Canton elevator has ample trackage and a water frontage which may accommodate five ocean steamships at one time. The loading gallery Avith its six 42-inch belts and the gantries in front of the workhouse can all be utilized simultaneously; as much as 60,000 bushels of grain per hour can be loaded into one hatchway, if desired. The details of the unloading equipment will be given separate treatment later. The house is in eight units: The workhouse; three batteries of storage bins known as annex 1, annex 2, annex 3; the drier building; boiler house; dust house; and office building. The workhouste has four unloading pits from which grain is received by conveyer from car unloaders; 19 stands of elevators; 10 No. 15 Invincible warehouse separators with a combined capacity of 75,000 bushels per hour; 23 solid lever scales made by the Standard Scale Co.; 14 belt conveyers, 42 inches wide, carry the grain from the head house to the storage bins or 'drier, and as each of the conveyers has a capacity of 20,000 bushels per hour there is no danger of congestion in the head house, even though the extreme limit of close to 400 cars a day are handled. The workhouse has a bin capacity of 650,000 bushels. Including the storage tanks, the drier, and the workhouse, the plant has a total of 522 bins. The dimensions of the various buildings are as follows: The head house is 83 by 212 feet on the ground plant and 225 feet high; the original storage annex No. 3 is 200 by 100 feet and 110 feet high; annex No. 1, just completed, is 225 by 195 feet on the ground and 125 feet high; and annex No. 2, which is not yet completed, is 240 by 195 feet and 125 feet high. The drier house is 34 by 64 feet on the ground plan; the boiler house, 52 by 47 feet; and the dust house, 36 by 36 feet. The boiler house is equipped with three 200-horsepower boilers. The drier house is equipped with Morris driers of 4,000 bushels per hour capacity. The drier can be set to extract any desired amount of moisture and will perform its function without further attention. Grain can be sent from the scale or from any bin to the drier and discharged direct to a shipping bin or put back into storage. There are eight units of 500 bushels each in the drier, with grain storage of 3,000 bushels above and below each. The grain is held until the house unit of 20,000 bushels has been dried; then it is all moved. 6 From the American Elevator and Grain Trade, July 15, 1920, verified by the elevator agent. WAREHOUSING AND STORAGE. 113 The car-unloader building is 68 by 84 feet. There is a covered drip shed just beyond the unloaders where the cars dry so the water will not drip into the grain dump or the machinery of the unloader. This drip shed is 120 by 80 feet in size. The dust house is directly connected with the Day dust collecting system of the plant. The dust is delivered to bins under which are spouts and packers so that the dust can be sacked or loaded into cars in bulk. The office and welfare building is completely equipped with recreation and lunch rooms on the first floor and the general offices on the second floor. . The operation of the entire house is by electricity. No device or equipment which would eliminate a man or insure more prompt or accurate movement has been omitted. ^ ^ The house is as near automatic as it is possible to make it and is interlocked in its operations. The bins all have an overflow check. When the grain gets to a certain level the check automatically stops the elevator and the belt feeding the elevator chokes it stops automatically and a special device at the head holds the belt so that the loaded side can not slip back. If grain rises more than 3 feet in the boot the feed to the boot is shut off until it is again at the proper level. At every step of its progress through the house the grain is protected against misadventure and almost all fire hazards are eliminated. All the spouts have a choke feed, so there is prac¬ tically no escape of dust into the house and consequent loss of weight from this cause. The cars are received over four tracks of the Pennsylvania Road. The elevator yard extends from the Canton Railroad tracks to the end of the pier along which the unload¬ ing gallery extends. To obtain the maximum car-handling capacity the Stewart link belt car unloaders are placed midway between the Canton tracks and the pier end. By this arrangement 16 loaded cars can be placed on each of the four tracl^ and unloaded without the use of a switch engine. Each track has an unloader which discharges to a conveyer belt, which in turn carries the ^ain to the head house. Each track is equipped with a disappearing barney, which ivill drop down below the level of the track or rise up and pull a string of 16 cars either forward or backward as the operator of the car unloader in the track shed may desire. Each barney is con¬ trolled by heavy endless cables. . ^ t i j The operator of each car unloader is stationed in a glass house pst down above and beside the car on his unloader, so that he can easily see what is going on at every stage of the operation. The cars are not damaged, marred, or soiled in the operation. TOen with the assistance of the barney the operator has pulled the foremost car to the middle of his unloader, he first anchors the car, then pushes in the gram door and slowly tips it to different positions, so that all grain will be readily dropped into the receiving sink. A large car is unloaded just as quickly as a small car. Each movement of the grain car unloaderis controlled by an individual motor, and all motors are operated only from the operator’s house. All motors and operating devices are so arranged that when the first and each succeeding motor is set in motion, each in its order will perform the service for which it was designed and automatically stop when its cycle of operation is completed. When it is completed it automatically connects the next cycle of operation. . , , t. The unloader is worked with the services of two men, one in the operator s house, and the other to uncouple cars and operate the air hose to dislodge grain caught behind linings or frame and sweep the car. ^ i .<. 1 . The operator, after getting car on unloader, starts motor No. 1, which controls the clamps at tliG Giids of tho car and holds fast tliG couplers. These clamps when not in use drop down below the level of the rails out of the way. They are so arranged that they will firmly engage the couplers of cars of any length. , • n When the end clamps have exerted a certain pressure, the power is automatmally thrown out, and the motors controlling the side supports are set in operation. These side supports move up against the side and sill of the car on the receiving-sink side, and when they have exerted a certain pressure the power is automatically thrown off and motor No. 3, which controls the grain-door opener, is set in operation. The t^rain-door opener is operated by a motor which moves it steadily in fixed lines. The front of the opener first drops so that the lower edge^rests on the floor P the doorway. Two upright bars bear on their faces small, sharp-pointed pins, which imme¬ diately engage the outer surface of the grain door just beside the car-door posts. Ihe grain door is quickly pushed in about 6 inches and raised a similar distance from the floor, so as to insure the breaking of all connection with the doorposts. The grain door is retained on the sharp prongs of the door pusher until all ^ain has run out and the car has been swept out, when the pusher is withdrawn and the gram door drops to the floor of the car intact without being touched by hand. As soon as the grain-door opener has pushed the grain door to it linut, the next motor. No. 4, is automatically connected and this motor quickly tips the car sidewise 114 TERMINAL GRAIN MARKETING. to an angle of 30°. As the ^ain door is retained on the face of the door opener, which remains stationary, the tipping of the car sidewise greatly increases the opening below the grain door and permits the grain to drop into the hopper of the receiving sink. When the car has been tipped sidewise to an angle of about 30°, the current is automatically transferred to motor No. 5, which in its turn tips the car endwise to an angle of 45° while it remains at 30° sidewise. This permits the grain in the up end of the car to run out rapidly. ^ Motor No._5 is then placed in reverse motion, and the car is tipped into a directly opposite position, so that all grain runs out from other end of the car box. Then motor No. 5 is again brought into operation and car is raised to a horizontal position. Motor No. 4 18 reversed and car is brought to a normal position. The doorman then enters with air hose and dislodges grain from linings and sweeps it out. As motor No. 3 is reversed, the grain-door pusher is withdrawn and the grain doors or lumber are dropped to the floor of the car. The reversal of motor No. 2 withdraws the side supports and the reversal of motor No. 1 withdraws the coupler clamps and drops them below the level of the rails. ^ The car door can be removed in 15 seconds and the car emptied in 3 minutes. Including spotting and removing the car, the operation takes from 7 to 10 minutes* but it is confidently expected that with practice this time can be considerably re¬ duced. It is estimated that these four unloaders save employing about 68 men to unload the same number of cars. As the grain is elevated to the head of the house another innovation is encountered. The Texas is dustless. The elevator heads are inclosed in iron housings which permit no dust to escape. The motors driving the elevator heads are direct connected to Stewart-Falk helical-cut herringbone gears which effect the reduction in the speed for the elevator pulleys with a loss of only 2^ per cent in efiiciency at the head pulley, as against a loss of 15 per cent where rope drive is used. This gear is the most eco¬ nomical device for speed reduction ever devised. As there is 600 horsepower on the elevator heads costing approximately If cents per horsepower-hour, you can figure what this saving of 12^ per cent over ordinary head installation means. The backstop securely locks and holds the belt if it is stopped under load to prevent slipping back under weight of the full buckets. This head drive absolutely eliminates any danc^er of misalignment or friction in the elevator head. It is self-oiling and noiseless and is undoubtedly one of the greatest advances in elevator equipment made in years. The bins and scale hoppers are equipped with a large ventilator which carriers off the diist ^ the grain is discharged, so that the entire plant is peculiarly free from dust. The distributing spouts tinder the scales are a great improvement over those usually found. Instead of traveling on a single wheel on the suspended circular track and on casters on the floor, these spouts have two ball-bearing wheels on the track and a large ball-bearing wheel on the floor with the result that, literally, a touch of the fin^^er will turn the heavy spout to the desired position. ° The power is entirely electric, 150 Westinghouse motors supplying a total of 7,500 horsepower. Most of these motors are direct connected and the balance have Morse silent chain drive transmission, a total for the latter of 2,270 horsepower. The loading-out facilities of the house are as efficient as the other features. As the elevator is designed primarily for export business, vessel loading, naturally, is given the principal consideration. The loading gallery along the pier is 900 feet long and contains six 42-inch conveyors. Four of these can all load into one vessel or into different ones at the same time. There are about 9 miles of belting and 69 conveyors in the plant. All the conveyors have automatic take-ups arranged with a counter¬ shaft and counterweight on the wall. There is a marine leg for handling grain from bay boats, with a capacity of about 5,000 bushels per hour, equipped with Webster machinery and with its own scales and cleaner. There are four bins in the leg, so that the grain here also may be held in store until the unit amount is accumulated for movement. Floating elevators. —At some of the ocean ports, notably New York and Philadelphia, floating elevators are operated for transfer purposes. These are needed especially to serve liners at points where the vessels can not be loaded alongside a stationary elevator plant, and the grain must be carried to the vessels in-barges. Since grain can not be transferred economically with ship’s gear from barges, the floating elevator is employed. It consists mainly of a hull which carries a ‘^marine leg” and a system of discharge spouts. Grain WAREHOUSING AND STORAGE. 115 barges are towed to the ship’s side and the floating elevator runs or is towed alongside and transfers the grain over the side of the ship.® Section 2. Utilization of capacity. Variations in capacity turnover. —There are wide variations in the quantities of grain handled by individual elevators, depending upon location and the services customarily performed. The elevator operated by a private dealer at a large primary market is, as a rule, used largely for storage purposes, and the yearly turnover of grain per bushel of capacity is frequently much less than that of a house of similar construction operated at some break-bulk point relatively more distant from the producing areas; that is, the yearly turnover varies according to location in the transportation scheme. Further¬ more, especially for public elevators, there are marked variations in the quantity handled as between crops—variations resulting from differences in the availability of the crop for milling or other convert¬ ing purposes, and differences in the surplus available for export, as well as from general changes in traffic conditions. These variations in capacity turnover are indicated W an examina¬ tion of a few figures for specific elevators located at different markets and operated for somewhat different purposes. Storage elevators .—Analysis of the records of 28 elevators at Minneapolis showed that the highest average capacity turnover for the 5-year period 1913-1917 was 6, i. e., the total quantity han¬ dled during the year was six times the total capacity. This capacity turnover was made by an elevator of 600,000 bushels capacity oper-, ated primarily for private account (although licensed by the State). The lowest turnover was 0.5. This latter figure represents the capacity turnover of a house rated at 500,000 bushels capacity and also used primarily for private account of the operator. The average capacity turnover for the 28 elevators, aggregating 32,325,000 bushels capacity, was 1.99. This figure indicates very clearly that the ele¬ vators at Minneapolis haveheen used largely for storage for subse¬ quent consumption or in anticipation of shipping demand. At Coffeyville, Kans., there is an elevator bonded under the laws of Kansas which does a general storage, cleaning, clipping, sacking, mixing, and transfer business in grain.” The rated storage capacity is 175,000 bushels. There were such variations in the quantity han¬ dled as between specified crop years that a 5-year average would be misleading. The yearly turnover was as follows: Year. Bushels loaded out. Capacity turnover. Year. Bushels loaded out. Capacity turnover. 1 Q1 Q 300 000 1.70 1916. 300,000 1.70 1 m /4 1 ooo’ooo 5. 70 1917. 860,000 4 ,90 . 1915. '' 450 '000 2.60 Transfer elevators in the interior .—The figures above are in sharp contrast with those for two small private terminal elevators operated atPekin,Ill.,andforoneatCedarRapids, Iowa. The first of the two Pekin houses, with a rated capacity of 270,000 bushels, handled as a 6 See Joint Report of the New York, New Jersey Port and Harbor Development Commission, 1920, p.416. 116 TERMINAL GRAIN MARKETING. yearly average (1913-1917) 2,513,270 bushels of grain, a capacity ^liouse, with a rated capacity of 100,000 bushels, made an average capacity turnover of about 11 for the same period. The third house (at Cedar Kapids), with a rated capacity of 175,000 bushels, loaded out 2,800,000 bushels as a yearly average, which was a capacity turnover of 16 for the same period. Elevators at export points.~The port elevators at various points have exhibited wide vimations in quantity handled v.early, regardless ol war conditions. This appears in the figures for three plants located, rGSDBCtlVGlV. flitr NgW IVToxxra ^ A . ’ Orleans, Newport News, and PorUand, Me. (1) The quantities unloaded by the Trans-Mississippi Terminal Kailroad Co. at New Orleans, aggregating (in houses and 1,350,000 bushels rated capacity, were as follows: Year. Bushels unloaded. Capacity turnover. Year. Bushels unloaded. Capacity turnover. 1912-13. 8,565,051 7,892,592 13,866,536 6.3 1915-16 6,113,574 10,612,616 1913-14. 5.8 1916-17 4.5 1914-15. 10.3 7. 9 (2) At Newport News the Chesapeake & Ohio Railway Co. operates an export elevator of 1,000,000 bushels rated capacity. The quan¬ tities loaded out yearly for three years ^ and the figures for capacity turnover were as follows: Year. Bushels unloaded. Capacity turnover. Year. Bushels unloaded. Capacity turnover. 1915. 62,812,440 50,993,331 62.8 51.0 1917. 32,344,430 32.3 1916. (3) At Portland, Me., the Grand Trunk Railway Co. operates two export elevators aggregating 2,500,000 bushels rated capacity. The quantities loaded out (largely Canadian transit grain) were as follows: Year. Bushels loaded out. Capacity turnover. Year. Bushels loaded out. Capacity turnover. 1913. 12,635,868 9,105,301 15,772,374 5.1 1916 37,842,841 12,171,779 1914. 3.6 6.3 1917 15.1 1915. 4. 9 Variations in stocks at terminal points.— The utilization of the elevator capacity of a given market necessarily varies with the rapidity of rnovement from the producing areas and with transpor¬ tation conditions generally. Thus the average combined stocks of wheat in store at the 15 largest terminal markets showed a range from 69,000,000 bushels during the first six months of 1919 to 26,000,000 bushels during the last six months of 1920. (See Appendix Table 4.) The average com¬ bined stocks of all grains in store, as between these periods, ranged from 117,000,000 bushels to 57,000,000 bushels. Whereas about 50 7 Records for 1913 and 1914 destroyed by fire.' WAREHOUSING AND STORAGE. 117 per cent of the rated storage capacity at these points was utilized ® during the first half of 1919 0^anuary to June), the average utilization during thelast half of 1920 (July to December) was less than 25 per cent.® During the two years 1919 and 1920 the high point for all grain stocks in Chicago commercial elevators was 31,000,000 buSiels, reported on February 22, 1919. The next highest was 29,000,000 bushels on November 15, 1919. The high point for 1920 was 22,000,000 bushels on January 3 (Appendix, Table 5). The low points for the two years were reached on June 26 and July 3, 1920, when the stocks of all grains were reported as about 4,000,000 bushels. The low points for 1919 were 6,000,000 bushels on June 14 and 9,500,000 bushels on July 5 (Appendix, Table 5). At Minneapolis the high point reached for stocks of grains for the years 1919 and 1920 was 31,000,000 bushels on February 1, 1919. The high point for 1920 was 20,000,000 bushels on January 3. The low point for 1919 was 9,000,000 bushels on August 3, and for 1920 was about 1,000,000 bushels on August 21 (Appendix, Table 5). At Chicago the ratio of average stocks of all grains to elevator capacity for the two years was about 40 per cent; at Mmneapolis it was about 36 per cent. At the highest point reached by elevator stocks at Chicago in 1919 the bins were loaded to about 73 per cent of total rated capacity; and at the high point in 1919 the utilization was about 52 per cent. When stocks reached their lowest ebb at Chicago in 1920, the ratio of capacity utilization was about 9 per cent. At Minneapolis capacity utilization in 1919 ranged from about 72 per cent to 22 per cent, and in 1920 from 46 per cent to about 3 per cent. At Buffalo, which is primarily a transshipment point, utilization of elevator capacity was lower in 1920 than in 1919, but the difference was not so great as at Chicago and Minneapolis. The high point for Buffalo stocKs in 1919 was 19,000,000 bushels (78 per cent of capacity) on November 8, and the low point about 3,000,000 bushels (12 per cent of capacity) on July 12. The high point for 1920 was 15,()00,000 bushels (61 per cent of capacity), the low point being 1,000,000 bushels (4 per cent of capacity) on August 21. From the figures examined it is clear that terminal stocks normally reach a low ebb at the close of each crop year. As between 1919 and 1920 there was a marked difference in the utilization of elevator capacity during the season of heavy movement. The slackening of the movement from country points which followed the price recessions of 1920 and, espe¬ cially as regards wheat, the steady flow of terminal receipts into export trade resulted in a much lower utilization of elevator capacity at all the larger terminal points (Appendix Tables 3-5). Elevator services enumerated.— In Volume II (pp. 273 and 274) are shown, in tabular form, the customary services and charges of terminal grain elevators. In addition to the services of storing ® The capacity utilization figures in this section are maximum figures, since stocks in mill elevators are appareiitly often included in the published statistics of “the visible supply” at specified terminals. The distinction between commercial elevator stocks and mill stocks does not seem to be carefully drawn by statisticians in the trade. In reply to an inquiry from the Commission one well-known commercia 1 agency stated: “The statistics referred to are received by the Chicago Board of Trade and posted on the black¬ board, and we copy them. We know of no particulars regarding them.” Another prominent commercial journal repUed: “We aim to report what we call stocks in first hands, that is, stocks that are not designed lor purely local consumption, and I presume your ‘storage and shipping' designation would cover the greater part of our stocks except perhaps where big wheat millers have stocks which are to be ground and shipped in the form of flour. I would say that, generally speaking, they do not cover purely local stocks.” ® It should be noted that a 100 per cent utilization of capacity is only theoretically attainable, since most elevators require a part of the rated storage capacity for working space. 118 TERMINAL GRAIN MARKETING. and transferring grain there are several technical operations referred to in general as mixing and conditioning. The conditioning services of elevators are economically useful and beneficial to the extent that they prepare the grain to meet milling requirements, render it merchantable, and remove the dockage which otherwise would increase the freight costs. Failure to clean the grain in or near to producing territory may lead to congestion and of^n retards the movement at export points. It is said that ‘^cleaning and blowing’’ decreases the fire hazard. However, conditioning as performed by the private elevator operator is based on merchandis¬ ing considerations, and the services are usually performed with a view to securing incidental profits from the sale of screenings, and im¬ provement of the average grade through mixing various lots, as well as the enhancement in value resulting from the removal of actually objectionable features. The specific services performed by terminal elevators may be de¬ fined as follows: (a) Storage, —^This term refers to storing in elevator tanks or bins in bulk with other grain of the same variety and grade. When stored separately it is ‘^special binned.” Usually ‘Uree storage” is allowed for an initial period varying from 5 to 20 days as between markets— that is, the initial storage cost for grain temporarily held to be unloaded to another carrier is included in the service known as elevation.” (5) Unloading and loading—receiving and loading — elevation. —The service described by these various terms is a traffic operation and is performed largely as a transportation matter. It involves the trans¬ fer of grain from car, barge, or vessel to another connecting carrier but presupposes that the grain can be loaded out within a specified p^eriod after being placed in the elevator’s bins, e. g., 20 days. Otherwise a ‘^storage” charge will accrue. (c) Direct transfer. —This refers to the operation of transferring from car to car, irom car to vessel or barge, or vice versa, in one operation; i. e., without unloading the grain into a storage tank. For example, the charge in Kansas City for ‘^receiving and loading, in¬ cluding first 10 days’ storage” (effective Nov. 5, 1918), was 1 cent per bushel, while the charge for a ‘‘direct transfer” was one-half cent per bushel. (d) Cleaning. —When cleaning involves screening only, the charge is usually established and published. At times it is necessary to em¬ ploy special machinery, as an oats separator, to remove that grain from wheat, or a needle machine to remove oats from barley or flax from wheat. In such a case the process may require more time than for screening and charges are often a matter of private arrangement. Several of the elevators on the seaboard, however, publish regular charges for these services. (e) Cooling — blowing — turning — running to condition. —These terms relate to similar and sometimes identical services performed to prevent deterioration of grain from heating. Grain may be cooled by conveying it out of the bin or car and passing it through a cooler. The principal mechanisms of the cooler are the fans which subject the grain to drafts of cool air. The operation of merely running the grain from one bin to another may be sufficient to overcome a In this connection, see descriptions of plant facilities in sec. 1 above. WAREHOUSING AND STORAGE. 119 heating condition. Some elevators have thermometer systems for registering the temperature of all the bins. (/) Mixing }^—As a warehousing service mixing is performed to combine lots of grain of different grades, in bulk, so as to release bin space, make up an average grade out of the several lots, improve the condition of damp grain by mixing it with dry lots, or for other reasons. When performed for public account mixing operations are more closely regulated than when performed by a private elevator company. {g) Drying .—This service usually involves special machinery and may be aliighly technical operation. As is well known, moisture con¬ tent is now a factor in the determination of the grade, and maximum percentages of moisture for the various grades of wheat, corn, and oats are prescribed in regulations of the Secretary of Agriculture under the Federal grain standards act. By employing a drying machine—which forces dry air through the moving grain—each lot of grain can be conditioned to precisely the moisture content desired. Qi) Clipping — Smutting .—Special machines are employed to scour off sprouts, smut, must, beard, etc., from wheat and oats and for increasing the test weight through the clipping or scouring process. The use of oats clippers to increase the test weight is illustrated by the following extract from the interoffice correspondence of a Chicago elevator company: We are clipping some 30 and 32 pound oats, 50 per cent No. 4 whites and 50 per cent No. 3 whites, and with the clippers set as light as possible, they clipped up 34| pounds, so it will require some 27 or 28 pounds oats to get us down to 34 pounds. These oats clipped to 34f pounds cost us f cent per bushel to clip them, so it would look as though by using lighter oats with the heavier oats and clipping down to 34 pounds we ought to do it for i cent per bushel. This is encouraging, as it looked for awhile as though we would not be able to do anything. Just heard from C. on the lot of oats that he clipped to 34 pounds. He advises that he used 4 M bushels of oats and that there was a shrink in this lot of 128 bushels, practically 3^ per cent. This shrinkage is for clipping only, the oats not being cleaned. In making this test he used 75 per cent No. 3 white and 25 per cent No. 4 white, averaging in weight 27^ pounds. C. has at the elevator oats-that weigh 30 to 32 pounds, but these are of better quality and presume would be too good to use for export. We had a talk with M. and he tells us that if our oats test out 33^ pounds they will pass muster all right. We will clip some of those good oats and then run in enough light oats to bring down the weight. After mixing the oats 50-50, No. 4 and No. 3 white did before, so I don’t think there will be any trouble about inspection out on the color, and on the basis of 33^ pounds it won’t take but a very little clipping to put them in that class, so I think if you could sell 50 M bushels more on the same basis as the others it might be good idea to sell them. {i) Bleaching .—The sulphur process is sometimes used to bring damaged grain back to its natural color and to remove foreign odors. Bleached oats are considerably lighter in color than those of natural color. Under existing laws, bleached oats or other grains must be so marked when loaded. Elevator men claim that oats which are discounted as stained or off-color and grade No. 4 white, for example, can often be bleached and sold at the price paid for higher grades, even when it is known to all parties that they have been bleached byj^he sulphur process. Mixing and conditioning under railroad operation.— Grain may “be conditioned by railroad operated elevators (1) to render it merchantable and to protect the carrier against damage claims, or (2) upon specific order from the merchant subject to the conditions of the published tariffs. For example, if corn arrives with an 18^ “ See Chap. V, see. 2. 120 TERMINAL GRAIN MARKETING. per cent moisture content it may be considered unmerchantable and, if so, must be dried before it can be stored in the railroad elevator. However, if a dealer has sold No. 2 corn and the lot received grades No. 3 because of a 17^ per cent moisture content, it rests with the dealer to order the elevator to dry it down to 15^ per cent moisture with a view to securing a No. 2 grade on reinspection. Grain of different grades may be mixed in. railroad-operated elevators under the supervision of disinterested parties in order to release additional bin space.If mixing were not permitted at an export elevator it would not only be impossible to utilize the bin capacity (except in large block shipments) but there would be a further complication in unloading a great variety of grades into a vessel. In general practice, export grain has been mixed several times before it reaches the hold of the vessel. Elevator operating records. —Form 13 below shows the record kept on each car of grain of any description received at the Western Maryland (Port Covington) Elevator at Baltimore. Form 13.—UNLOADING RECORD, WESTERN MARYLAND (PORT COVINGTON) GRAIN ELEVATOR, BALTIMORE. Form Elv. 5-B. 5m-9-19-19 No. United States Railroad Administration. . DIRECTOR GENERAL OF RAILROADS. Date. Western Maryland Railroad Port Covington Elevators. Baltimore. RECEIVED. Leg. Track. Initial. Number. Bin. Grade. Net weight. Bushels. Cap. Remarks. 1 1 1 2 1 3 1 4 - ..C. of a Weigher . El. Weigher. C. of C. Trackman . El. Trackman. 12 For example, the following regulation has been in effect at Baltimore since Nov. 24,1919, as a means of utilizing a maximum of bin space in the elevators and to expedite the unloading of cars: On and after Nov. 24,1919, in mixing, the following proportions will have to be used to make the respective grades: Mix for 1 red winter— li parts of special 1. 1 part of special 2. Mix for 1 red winter— 3 parts of special 1. 1 part of specials. Mix for 1 red winter— 4 parts of special 1. 1 part of special 4. Mix for 2 red winter— 2 parts of special 2. 1 part of special 3. Mix for 2 red winter— 3 parts of special 2. 1 part of special 4. Mix for 2 red winter— 5 parts of special 2. 1 part of special 5. These same proportions apply to garlicky wheat. Mix for 3 red winter— 3 parts of 3. 1 part of 4. Mix for 3 red winter— • 4 parts of 3. 1 part of 5. Mix for 3 red winter— parts of 3. ' 1 part of sample Gd. red winter. Mix for 4 red winter— 3 parts of 4. 1 part of 5. Mix for 5 red winter— 3 parts of 4. 1 part of sample Gd. red winter. Mix for 5 red winter— 4 parts of 5 red winter. 1 part of sample Gd. rules regarding mixtures of wheat. , Mixing orders to show quantity of each grade of wheat to be mixed in conformity with formula to be furnished by the chief inspector of the Baltimore Chamber of Commerce. Certificates covering the quantities of wheat to be mixed to accompany the orders, and as soon as prac¬ ticable the elevator offices willreissue new certificates for the grade the mixture is ordered for, deducting from the gross amount ofthe mixture ordered an amount equal to the average losses* sustained in mixing at Port Covington and Elevator No. Iduringthepastsix weeks beforeissuingthenew certificates. The actualmixing to be done ■mthout weighing before and after mixing atthetime ofdelivery to the ship or at times suiting the convenience ofthe elevators. The grain is weighed but once imder this arrange- ment, since the railroads willassume an average mixing loss. The usual mixing charge to be made. *Loss of 50 poimds per 1,000 bushels mixed is the average for six weeks previous to Aug. 23,1918, and will be used on all mixtures. WAREHOUSING AND STORAGE. 121 It will be noted that representatives of the chaniber of commerce as well as of the elevator make a check on the operations at the receiv¬ ing track and on the weighing floor. In receiving grain from vessels at the Western Maryland elevator a pneumatic marine tower is usually employed and complete data is recorded to show the costs and net revenue of each operation. This appears in Form 14 below. Form 14—OPERATING RECORD, PNEUMATIC MARINE TOWER, WESTERN MARYLAND (PORT COVINGTON) GRAIN ELEVATOR, BALTIMORE. United States Railroad Administration. DIRECTOR GENERAL OF RAILROADS. Western Maryland Railroad. Operation of the pneumatic marine tower at Port Covington elevator. Name of boat. Began unloading, date. Finished unloading, date. Total bushels unloaded. Grade of grains. hour. hour. Bushels. Number of K. W. H. consumed .. ; • • • V.'•-: *' Number of men in charge of marine tower and raising and lowering the suction pipe Number^of men moving grain to suction end of conveyor in hold of boat, cleaning-up boat, etc. When varying number of men were used during unloading: Laborers. What doing. Cost per hr. Total hrs. Total cost. Total cost of labor $ Total cost of labor. ^ Total cost of power.hours at $1.25 KW... $ Total cost of unloading. $ Average cost per 1,000 bushels. $ Revenue for unloading, 2 64 Wisconsin Statutes, Revision of 1919, secs. 1747-1768 and 1747-1770. This appears to be the only State which has specifically declared that railroad elevators are public warehouses. WAREHOUSING AND STORAGE. 137 although in three States he is forbidden to ‘‘tamper with the grain with a view to securing a profit to himself or any other person.’’ It should be noted that the Canada grain act, on the other hand, forbids the owner, manager, or operator of a public terminal elevator to deal in grain or to store his own grain m any such warehouse operated by him. A prohibition similar to that of Canada has been applied in Illinois, where the courts have construed the State warehouse act, in its appli¬ cation to Chicago, so as to prohibit operators of public warehouses from storing their own grain in the public warehouses operated by them except in special bins, on the theory that their interests as private dealers should not be allowed to conflict with their duties to the public. This principle was expressed by the Illinois Supreme Court®® in 1898 as follows: * * * It would be idle to expect a warehouseman to perform his duty to the public as an impartial holder of the grain of the different proprietors if he is permitted to occupy a position where his self-interest is at variance with his duty. In exer¬ cising the public employment for which he is licensed^ he can not be permitted to use the advantage of his position to crush out competition^ and to combine in estab¬ lishing a monopoly by which a great accumulation of grain is, in the hands of the warehouseman, liable to be suddenly thrown upon the market whenever they, as speculators, see profit in such course. This rule has been evaded in practice,®^ however, and has not been adopted in the other grain States. In the United States generally a person may hold himself out to be a public warehouseman and at the same time utilize his plant for the storage of his own grain. Section 7. Evasion of the warehouse law in Chicago. Method of evasion. —The public interest in maintaining public grain warehouses in Chicago, subject to regulation under the Illinois warehouse act, was pointed out in a concurring opinion in the case- of People V. Illinois Central R. R. Co. (1908): ®® The fact that anyone shipping grain to Chicago can store it in a public warehouse prevents private elevators having a monopoly in the purchase of grain, and thus has a very strong tendency to increase the selling price of grain. It is a well-kno\Yi that if one railroad reduces freight rates all other competing roads must meet such reduction. The great argument in favor of pub he canals and waterways generally is the effect they have upon shipping and freight rates. Applying this saine hne of reasoning to pub he warehouses in a great grain center as to the storing and wading of grain, it is self-evident that the existence of such warehouses regulated by oiir present warehouse act must necessarily have a salutary effect upon the price of grain and the conduct of the grain trade, with a resultant benefit to the pubhc at large. However, as already shown above and in Volume II®® of this report, the decrees of the Illinois courts (1897-98) granted a perpetual in¬ junction against Chicago warehousemen frorn storing their own gram in the public bins; and subsequent to this ruling there was a consider¬ able decline in the elevator storage space operated for public account. The operators of public warehouses, however, instituted practices whereby the ruling of the courts has been effectively evaded ever since the final decision (1898). The principal method employed has 55 Hurd’S Illinois Revised Statutes, 1915-16, p. 2103; Minnesota Revised Laws, 1905, sec. 2050; Wis. Stats. ^57SSrarE^e4ltor 174 lU., 203 ; 51 Northwestern Reporter, 254; followed in Hannah r. People, 198 Ill., 77; 64N.W., 776. 57 See next section. 5* 233 Ul. 400. «cSalEfeoiCo. t;. People, 174 Ill., 203; 51 Northwestern Reporter, 254; followed in Hannah v. People, 198 lU., 77; 64 N. W., 776, 138 TERMINAL GRAIN MARKETING. been for the operator to sell grain from his private elevator to another trader under the agreement that the grain is ‘^to go to storein the public warehouse which the seller operates; deducting from the pre¬ vailing future price a margin sufficient to cover the buyer’s expenses for storage and to allow him a small brokerage in compensation. The following testimony presents a record of an early example of this practice : Mr. Marble, Have you had any dealings of the sort testified to? Mr, Wetmore. Yes, sir. Mr. Marble. When? Mr, Wetmore. At various times. Mr. Marble. When? When did you have the first one, if you can remember? Mr. Wetmore. I had the first one at the beginning, after the law was passed, and I took the grain in Charles Counselman’s elevator the next day. Commissioner Prouty. How long ago, about, was that? Mr. Wetmore. That was either four or five years ago; it was after the decision was handed down. Mr. Counselman’s president came to see me and told me that Mr. Counselman wanted to see me, and he wanted me to take the grain. I took what was in their store there, and there was somewhere in the neighborhood of $280,000 worth. It was sold to rne at that time, I think, about a cent and a half under the market, and we carried it through until the next delivery in the future, whenever it was. I know that it included the storage and the interest and the insurance, and it was something like a cent and a half a bushel under the market. There was three-quarters of a cent—no; that was about what it was, a cent and a half under the market. Mr. Marble. You mean your compensation was about a cent and a half a bushel for the transaction? Mr. Wetmore. No, sir; I mean my compensation was one-eighth, but they de¬ ducted a cent and a half off the market, below the spot [future?] price for the grain. Commissioner Prouty. That is, they sold it to you for a cent and a half below the cash market—sold the wheat to you? Mr. Wetmore. Yes; they sold me all the grain they had in the house. I think it was something like a cent and a half. We figured the storage and the insurance, and the interest on the money, and one-eighth profit to me, and the grain was sold on that basis. Commissioner Lane. Did that gentleman tell you what the purpose of this trans¬ action was? Mr. Wetmore. He told me that the law had been passed, and they did not want to carry the grain in their own house there, and I took it for an eighth of a cent, and I sold them back the future. Commissioner Lane. The purpose was to evade the *injiinction that had been granted by Judge Tuley? Mr. Wetmore. Well, I can not say. I inferred so, although there was nothing said about it. That is, the elevator operator being forbidden from storing his own grain in the public warehouse which he operates, employs a buyer, who in effect acts as a broker, to purchase the cash grain ^Ho go to store.” With this understanding, the elevator operator sells such a buyer 50,000 bushels of cash wheat, for example, at one-eighth of .a cent and carrying charges (storage, insurance, etc.) under the market for the prevailing option and at the same time buys from him a future for the same quantity of grain at the market price of the same option. All elevating and carrying charges attaching to the grain prior to date of delivery on the future are in effect paid by the elevator operator. But the elevator will earn a carrying charge if the spread between cash and future prices shows the latter at a premium. It is only under such circumstances that the elevator has an inducement to send grain to store for a considerable period. The elevator opera- « Relations of the Common Carriers to the Grain Trade, Sen. Doc. 278, 59th Cong., 2d sess., p. 212. / 4 ^^^ T? that other methods have been recently employed in such sales ‘Ho go to storebecause Qi the Federal tax on futures. WAREHOUSING AND STORAGE. 139 tor recovers the grain for merchandising purposes by taking delivery on the future contract and removing the grain from store; or he may accept the warehouse receipts on ddivery and pass them on in fulfill¬ ment of sales of futures just as if he had previously been the legal owner of the grain in public store.®^ Illustrations of go-to-store sales. —Transactions of this kind are described in great detail in the record in Lichtstern v. Rosenbaum Grain Co. (Appellate Court of Illinois, 1912). The following extract from the examination and cross-examination of one of the defendant’s witnesses is in point: * * * I have bought cash grain from the J. Rosenbaum Grain Co., and have made immediate sales of futures to the seller against those purchases. In August, 1911, we bought 50,000 bushels of wheat to go to store, and sold them 50,000 bushels of September wheat. The warehouse receipt was delivered to us on the 29th or 30th of August. The transaction we had was practically taking off a hedge. In December, we made a similar transaction in oats with the defendants. We used to do some of this business for the Armour Grain Co. There are two sides of a hedge. To start with, we might buy from the dealer in the country a certain amount of grain, and we would sell a future against it. When the grain had arrived in Chicago we would sell the grain and buy back the future, which is taking off a hedge, as we call it. When the grain arrives in Chicago and we sell the cash grain to the dealer here, then we put back the future. That winds up the future trade. Our cash grain which has arrived we sell out in the market, and that closes the transaction. WTien I bought the 50,000 bushels from the Rosenbaum Grain Co. I protected myself, in order to avoid gambling or speculation, by selling the future. Otherwise, the trade would have been open, and I would have had a loss or profit according as the wheat went up or down. That would have been a speculation. The practice to-day follows closely that described in 1906 in the following testimony: Q. "VOiere does the grain come from that goes into your public elevators—the bulk of it?—A. The bulk of the grain is forced into the public elevators through our efforts. Q. Into your public elevators?—A. Yes, sir. Q. Out of your privateelevators?—A. Some out of private elevators and contract grades originally from the country. We are compelled to sell that before it goes into the public elevators. Q. Explain what you mean by “ forced ” into the public elevators.—A. We generally buy grain on basis of futures. The price of the future is established on the floor and we base the price of the cash on the futmes, so when we send out our bids to the country any acceptance we get we sell for future delivery. Wlien the grain comes in, if it grades we sell it out and buy back the future. If it does not grade, we put it into the cleaning house, and if we can ship it to better advantage we ship it without putting it into the public house. If we can not, we make it into contract grade and sell to a member of the board to go into a public house, immediately buying back our future. Q. From the same man?—A. As a rule. Q. Do you sell to him at the current market price of cash grain that day?—A. We usually have to allow about one-eighth of a cent a bushel profit to the buyer. Q. You select this man to be the holder of the grain in the house?—A. Not necessarily. We sell the grain to Jones, for instance, at one-eighth of a cent under the current option. Take October corn, we calculatethat willmakeus aprofltifwesellat44i. We will go to Jones and say, “We will sell you 50,000 corn at 44j and then buy 50,000 October corn at45 cents.” Under the rules of our exchange that corn can be delivered to us, but we can not retain it. In other words, the first 50,000 October corn we sold when we bought the corn in the country may be settled against the October corn bought against the party we sell to to go to store. Q. Why do you sell grain worth 45 cents for 445 cents?—A. We discount one-eighth of a cent of the earnings, because there is three-quarters of a cent elevation that follows the grain. If the grain remains in store the elevator interests earn the second storage after the first 10 days. The first 10 days carries a charge for loading and unloading. Then there is a storage charge. Q. Suppose the broker buys at one-eighth of a cent below, and instead of ordering it into your house he orders it into some other house? Do you insure that it goes into your house?—A. The purpose of buying the grain is to try and get it into the house. I could not sacrifice three-quarters of a cent a bushel and put It in somebody else’s house. Q. Are public elevator operators in the city engaged in the grain business?—A. Well, indirectly. The public elevators, as a rule, are operated by a corporation. 0,. And the sameinterests are engaged in the grain business?—A. Yes, sir. Q. Are the public elevator proprietors really the great grain merchants of the city?—Take the interests that control the public elevators of the city, what portion of the grain trade of the city would you say they do? Take Armour, Peavey, Bartlett-Frazier, etc., are they the great grain merchants of the city?— A. Yes, sir. Q. Is there anybody not owning a public elevator that would rank with the pubhc elevator operators as a grain man—a receiver and shipper of grain? I do not mean a speculator.—A. No; I would not say that there is any that would rank with an elevator, because they have not the facilities for storing. Q. Would you say that the greatness of the elevator interests in the grain trade comes from the fact that the elevator charge is frequently used in the buying?—A. Yes, sir. (Senate Doc. 278, 59th Cong., 2d sess., pp. 50-53.) 140 TERMINAL GRAIN MARKETING. (Answering the court:) It is a fact that merchants, millers, very often who buy grain for delivery in the future take an option for protection; make a hedge. The ; men who are consuming grain do that. ^ The Court. What is the use of going into that any further? There is no question about it. Mr. Mayer. I am content, except one or two questions. ; Mr. Robbins. Everybody understands the ordinary practice of hedging, and its ' purpose. The Court. Yes. Mr. Robbins. It is a species of insurance. Cross-examination: The reason that I made the sale of the 50,000 bushels was I wanted to make a profit. I could not assure myself of the one-eighth profit without making a sale at the same time I made the purchase. That is a certain species of hedging. We frequently buy grain and sell it at a profit. If we could have bought this grain of Rosenbaum and sold it to some one else at the one-eighth or any premium we would have done so. We are there to make money in that way. The Court. Suppose you conceded, Mr. Robbins, that when Mr. Rosenbaum came to him and offered him this grain at this price, that he would sa>^, “ I do not want grain ' at that price, ’ ’ and Rosenbaum would have replied, ‘ ‘ I will buy it of you at an advance i of one-eighth a bushel for future delivery”? i Mr. Robbins. Yes. The Court. Suppose you concede that to be the fact. He says, “All right, I will buy the grain at that; I will make an eighth of a cent a bushel, and get the interest on the moneyI will go into that transaction.” Now, that was really the proposi¬ tion as it rests in my mind, but is it not regular? Both transactions are regular under the rules of the board of trade and at law, as far as I know. (Witness resumes.) The proposition between Mr. Rosenbaum and myself on the 50,000 bushels, I think that we were asked—that is that we had a certain amount of cash grain offered to us i; at a price, and then took the future at the one-eighth premium. Both propositions ll were made at the same time. I remember more distinctly about the oats delivery " than about the wheat transactioh. We delivered the oats right out, as soon as they were delivered to us. We closed the future sale either with deliveries of other grain 1; that might be delivered to us, or it might be settled direct. We could not tell. It ji might be a ring up. . ' The practice of selling grain ‘'to go to store” in this manner has been recognized by the board of trade to the extent that a place on the floor was at one time designated for such trading. It is reported that there was little bidding, however, so that the trading soon resolved itsefl into a matter of private arrangements. It appears that the practice of selling “to go to store” sometimes enables an elevator operator to make delivery on sales of futures to better advantage than if he were obliged to bid for contracts in the pit. The following statements are typical specimens of sales “to go to store’ ’ made by the Armour Grain Co., which operates both public and private elevators. The first sale was to Bartlett-Fraz-ier Co., which also operates public and private warehouses as well as a future commission business at Chicago, and the second to Jackson Bros. & Co., who were engaged in the futures commission business. WAREHOUSING AND STORAGE. 141 Chicago, March 29, 1916. 816.68 Armour Grain Company to Bartlett Frazier Co. Dr., Offices 111 W. Jackson, Western Union Bldg. E3281 Date sale 2/25/, 3/7, 3/13, 3/20. Pro. No. Cont. Wht. On Track to go to Store Less Chgs. to 5/1. Car No. Weight, bushels. Kind of grain. Price. Amount. Total. Receipts. 2/25 100, 000 2 hd. wht. 118 1/4 118, 250. 00 3/7 100,000 113 1/4 113, 250.00 3/13 . 50,000 107 53, 500. 00 3/20 5,736.50 “ 109 6, 253.15 255, 736. 50 291,253.15 Stge. Nat. Ele. as per memo. 3,101. 59 “ CalB. 911.79 Insurance. 1,317.87 Interest. 1,453.32 - 6, 784. 57 284, 468. 58 As billed 255,000 283, 645. 79 736.50 bushel. . 822.79 Int. 822.79 32 days, @3^% .2.55 Ins. 800 38 days 175/2546 .3.56 6.11 816. 68 Total.816. 68 Wheat 736.50 (Red checking pencil) (Handwritten) (Stamped): Armour Grain Company, Paid March 30, 1916. May 25, 1916. Jackson Bros. & Co., city, wheat sales to go to store. Receipts. Jan. 11. 200,000 bus. 2 hd. wheat, 125f. 250, 750.00 Jan. 17. 200,000 “ @127^ . 255,000.00 Feb. 29. 100,000 “ 111|. 111,750.00 617,500. 00 Less storage (per memo.). 12,193. 44 “ insurance “ . 4,673.77 ‘ ‘ interest “ . 5,152.87 - 22,020.08 595,479.92 - As billed (see memo.) 500,000 bus. 595,456.06 23. 86 Add a/c error 3/3/16 our bill 2,679.20 as we allowed 59 days interest on $3,000 in error*. 19.67 43.53 Wheat money only. (Handwritten, carbon copy.) *(Original writing.) Checked. E. S. L. Rt. 10-14-20. The first statement shows that the Armour Grain Co. on the above date sold 4 lots of contract wheat inspection No. 2 hard, at a price 56976°—22-11 142 TERMINAL GRAIN MARKETING. based on the May future (5/1) with the understanding that such grain go into storage in the Armour public warehouses and that they deducted from the purchase price the storage charges from the dates of sale to May 1. The original transaction involved the sale of 255,000 bushels of cash wheat and purchase of an equal quantity of May (presumably at a fraction over the cash price). The statement shows the account when adjusted to weights as received at the Armour public elevators. The second statement comprises a similar transaction and is self- explanatory. Public storage is sometimes used by the public-elevatoT operators by mutual exchange of storage, each operator storing a certain quantity in the other’s public warehouse. This is apparently not commonly practiced, however. The president of the Armour Grain Co. stated that they had sold 1,855,000 pounds of wheat screenings in 1916-17 to their own treasurer, who stored them in their public elevators A and B. In summary, it is generally understood and admitted by the trade in Chicago that the public storage facilities at that center for many years have been largely utilized by the operators either directly or indirectly for their own private merchandising purposes. This does not mean that they have, strictly speaking, a proprietary interest in the grain sold to be stored in their public elevators; but rather that they are able to arrange for and direct the movement of their own cash grain into the public warehouses which they operate. Section 8. Exchange regulation of elevators. Regular elevators. —The term ‘^regular warehouse” (or regular elevator) refers to those houses operating under the regulations of the exchanges conducting trading in futures and which are declared to be regular for the storage and delivery of grain deliverable on future contracts. Grain in such houses is registered and subjected to inspection by exchange officials. The practice of declaring certain elevators ‘^regular” seems to have originated in Chicago in the early seventies. (See Vol. II, Ch. Ill, sec. 7.) The requirements generally made of regular elevators to-day*^"^ indicate that the term has no specific relation to the elevation and storage of cash grain. However, merchants operating houses which have been declared regular are in a position of advantage for hedging and other operations in the futures market. In Chicago and Minneapolis the regular warehouse must under the exchange rules be a public warehouse in conformity with State laws. In Kansas City and Duluth, on the other hand, the exchanges do not require that the regular warehouse hold a State license, and houses operated wholly for private account have been declared regular and placed under exchange supervision for handling contract grain. The requirements of regular elevators operated under exchange regulation in the principal terminal markets are enumerated in Vol¬ ume II (pp. 245-248). Reference should be made to that volume for a description of the custodian system (pp. 104-105) of the Chicago Board of Trade whereby exchange officials assume trusteeship for See Vol. II, p. 244. « See Vol. II, pp. 244-248. WAREHOUSING AND STORAGE. 143 ^ain stored in private elevators and police the movement of grain into and out of the houses operating under the custodian rule. Section 9. Status of the public warehousing business. Decline of public warehousing. —The elimination of public warehousing has been especially apparent in the history of forwarding markets such as Chicago and Duluth. A Chicago grain merchant stated the case in 1918 as follows: When I first engaged in the grain business of Chicago, about 1890, there were three distinct classes engaged in the trade: First, the cash commission man doing a strictly receiving business; second, the public elevators, in which the receivers stored their grain until they had an opportunity to merchandise it; and, third, the shippers who had their eastern connections which they supplied by purchases from the receivers and shipment out of public elevators. The entrance of the public elevator proprietors into the grain merchandising business has had several effects. First, it has destroyed the ability of grain receivers to store grain in public elevators in competition with the proprietor-merchandiser who has no storage to pay except to himself and in many cases has practically no costs of storage due to the very favorable leases of elevator property from railroads. This situation has developed to such an extent that I believe over 99 per cent of the grain stored in public elevators is owned by proprietors of such elevators. In reality the so-called public elevators have become private, but with all the privileges given to public elevators under the law. It is contended by the operators, however, that operation wholly for public account has not been a dependable source of income and is therefore impracticable in most instances. One Chicago operator stated that ‘4f you were operating a public elevator and depended upon the public to put grain in there, it would not pay.” Another operator, commenting upon the decline of public warehouse storage, said: It is principally caused by the fact that the public, as soon as they own any grain, as a general rule, they want to get rid of it and they usually take it out of store and ship it away—dispose of it. The result is, public elevators have to lie idle such a large share of the time that their expenses, going right on all the time, run them into a loss, and the only way that the public elevator man in Chicago can get any of that money to pay expenses, as a general rule, is to put some special bin stuff in there and carry it himself. If he does that he has got his stuff in an undesirable position, because if he has to make it up into certain grades he has to retransfer it back into his private house at an expense. At Kansas City commission merchants and dealers (not operating elevators) state that the storage rates and the general operating con¬ ditions of the elevators licensed to do a public business have rendered it unprofitable in recent years to carry grain in public storage.®® Furthermore, it is maintained by the elevator operators that it is unprofitable to operate for public account except in the slack seasons, because the independent shippers do not care to have their grain mixed with that of others, with the result that large bins must be used to store comparatively small quantities of grain. Whatever reasons be assigned, it is a fact that the public storage business in that market in recent years has amounted to but a small proportion of the total volume of grain handled. For example, a Kansas City elevator, which appears to have done a larger percentage of public business than any other of the licensed houses in that market, utilized its storage capacity in the 5-year period, 1913-14 to 1917-18, in the fol¬ lowing manner: «6 See Chap. Ill, secs. 4 and 9. 144 TERMINAL GRAIN MARKETING. Bushels. Percent. For their own account. 32,696,000 12,963,900 488,800 9,697,000 58.55 23.21 .88 17.36 For other dealers. For Food Administration. Railroad transfers. Total. 55,845,700 100.00 That is, out of an average yearly handling of over 11,000,000 bushels going through the house about 59 per cent was handled for their own account, about 23 per cent for other dealers, and the remainder consisted largely of through shipments transferred by this house. At Duluth ‘^up until 1897 or thereabouts” the main function of the terminal elevators was to store grain for account of others. Then- only sources of income were the established charges for storing, han¬ dling, and cleaning, and these operations were subject to the super¬ vision of the railroad and warehouse commission of Minnesota. About 1897 the competition of the mills at Minneapolis for cash grain began to influence prices so largely that dealers and shippers could see no profit for themselves in buying the cash grain under such competitive conditions unless purchasers from them were in sight. They had formerly been able to hedge and send the grain to store while waiting for such purchasers, but null buying so narrowed the spread between cash and future prices, even at the season of heaviest receipts, that the holding of grain by a merchant with no elevator and the paying of storage charges for any considerable period involved a loss on the hedge not compensated by any oppor¬ tunity to find meanwhile a better market for the cash grain. This caused a decline in the volume of grain placed in storage by dealers without their own elevators so that the terminal elevators were unable to make a profit from storage charges on grain handled for the account of others. The elevator companies therefore went into the market themselves as buyers of gram, contenting themselves with earning on a larger quantity of grain a carrying charge” smaller per unit than the public rate supplemented by opportunities for profit from mixing, conditioning, and spreading. There have been no public elevators in Duluth since 1916.®^ The elevator companies are the predominant buyers on the market and there is very little grain placed in store by other concerns. The tendency since 1900 is indicated by the situation at Omaha, where there was hardly an organized market prior to 1905. Here the elevator facilities were developed largely by private grain dealers in accordance with the tendency in recent years in other markets. When the grain exchange was incorporated in 1904 it appears that there were only three considerable terminal elevators in the market. The largest house was that of the Omaha Elevator Co., with 1,500,000 bushels rated capacity, which was operated on a merchandising basis in conjunction with a line of country elevators. At Council Bluffs the Union Elevator Co. (whose stock was held by six railroads) had constructed a 750,000-bushel house and leased the same to the Trans-Mississippi Grain Co. under an agreement to transfer grain.®® 67 There is one public house at Superior, Wis. 68 See 10 I. C. C., 318. WAREHOUSING AND STORAGE. 145 The third elevator was that of the Merriam & Holmquist Co. (A), which was operated as a ‘'regular public storage warehouse.’’ There was also a small private house of 40,000 bushels rated capacity. In January, 1907 (three years later), the secretary of the exchange re¬ ported that the total capacity of terminal elevators in active operation was 6,040,000 bushels, but that only thr,ee elevators were operated as “regular public warehouses” with an aggregate capacity of 1,600,000 bushels.®^ The number of elevators now operated at interior terminal points by companies which do not buy or sell grain is relatively small, as the following schedule shows: Grain elevators at specified interior points^ operated^ exclusively for public account hy concerns not engaged in the grain traded Market. Name of operator. Capacity. Bushels. Electric Steel Elevator C 0.2 . 4,000,000 Victoria Elevator Co. 500,000 Cragin Elevator Co. 600,000 Frisco Elevator Co. 950,000 Tin Wabash Railway Co. 442,000 Burlington PubUc Elevator Co. 413,000 Tho Wilson Elevator Co. 175,000 Michigan Central R. R. Co. 500,000 East Side Iron Elevator Co. 1,640,000 Fostoria Storage & Transfer Elevator Co. 325,000 Rentucky Public Elevator Co. 650;000 Erie & Western Transportation Co. 1,156,400 Mutual TerminalCo-. 2,500,000 rtn Connecting TerminalR. R. Co. 2,000,000 r>n Buffalo Elevating Co. 1,200,000 Tin Marine Elevator Co. 650,000 Tin Wheeler Elevator Co. 650,000 Tin Monarch Elevator Co. 450,000 Do . Erie Transfer Co. 150,000 17,951,400 1 Taken from return made by the operators. * The majority of the stock of this concern, however, is owned by the Russell-Miller Millmg C o. oi Mm' neapolis. This table shows that not more than 19 of the public elevators at the more important interior terminal points in the United States are operated by concerns not dealing in grain and that 9 of these are water terminal facilities on the Great Lakes. There are, then, few elevators operated on a strictly public utility basis excepting those operated by railroads and public agencies. Higher utilization of plant has been obtained and larger profits realized through combining a merchandising business with the storage and transfer functions.^® At Chicago and Minneapolis the necessity of providing storage facilities in connection with the futures markets is advanced as a reason for operating on a public basis, but such public operation is closely related to the private merchandising business in those markets. All the grain received in the 9 public warehouses at Chicago is technically held in store for owners other than the operators, yet the bulk of the grain so received customarily originates from stocks 69 Third Aimual Report of the Omaha Grain Exchange, Jan. 31,1907. 70 For example, the Fort Worth Elevators Co., operating a 1,000,000-bushelel^tor at Fort Worth, Tex., on the Rock Island tracks, solicits a public storage and handling business. They rePort, tha they are active traders in cash grain and claim that through the first nme months of largest export business in wheat through the Gulf of any gram concern m the United States in addition to alarge domestic trade. 71 See Appendix Table 6. 146 TERMINAL GRAIN MARKETING. owned by such operators and stored in their private terminal ele¬ vators, and the public storage bins are little used by other dealers. The 29 licensed houses at Minneapolis are operated predominantly for account of the operating companies, and the demand for public storage appears to be relatively small. A Minneapolis operator .whose concern owns grain storage space amounting to more than 2,000,000 bushels rated capacity, when questioned as to the percentage of capacity normally used for public storage, made the following statement: We use it all for our business. Up to this year we used it for our own storage It is public storage in this sense: We might buy up or sell to some dutside mill a quantity of grain and carry it for them throughout the season, but it is our property until we sen It, so we are not carrying it for the public; we are carrying it for ourselves. In other words, if the elevator should be demolished the grain would be—it is held at our risk. * * * It is a public warehouse because we are registered and licensed. We have all that a man can get to keep tab on us. At the same time we are public. I don’t know just how to classify it. If a man wanted to store 50,000 bushels with us, if we could agree on the rate we might take it if we had the room, and then we would issue receipts for It. He could do as he pleased with the receipts. He might sell them or he could hypothecate them. We have very little of that. We really own all the grain that is ni the house as a rule. Last year we had the house full. We had 30,000 bushels of barley and then we loaded that out and the house was chock full. It was our wheat. This statement conforms largely to those of other operators. There is a variable public storage business for account of independent ship¬ pers, but this has usually comprised but a small proportion of the total volume of business. The transfer business. —The business of storing and transferring grain for others is carried on to a certain extent by private operators, particularly those leasing elevators from railroads, as is shown in another chapter (Chap. Ill, sec. 6). Private elevators in the interior may and frequently do receive allowances from the railroads for transferring grain in the course of transportation under duly pub¬ lished tariffs of the carriers (Chap. Ill, sec. 3). The Buffalo market offers the best example of the transfer busi¬ ness as a principal source of revenue. Nearly all of the elevators at that point, excluding mill-owned storage plants, have been engaged in the transfer business.Prior to 1916, for about 50 years, under various agreements, the transfer of ex-lake grain received at the port was largely controlled by a pool of elevator companies known as the Western Elevating Association. The pool, which included 12 companies under its 1913 agreement, was organized each year apparently with the purpose of stabilizing elevator charges and in¬ suring an equitable and prompt distribution of the incoming grain tonnage. The nature of the earlier agreement appears in a state¬ ment of facts by the Court of Appeals of the State of New York,^^ as follows: the Buffalo Elevating Co. had entered into a written agreement with a number of other proprietors of elevators to form the Western Elevating Association, to continue for the term of one year, and during the insurance period of the policy renewed the agreement for the further term of one year. Under this agreement be- tweeri the elevators the Western Elevating Association would collect the receipts and the earnings of the various elevators to a certain amount, which, in the case of the plaintiff, amounted to 80 per cent of its total earnings. The association would \\ inspection (no "in" inspection) on grain elevated from vessel at Buffalo. 73 Michael v, Prussian Nat. Ins. Co., 171 N. Y., 25 (1902); 63 N. E., 810-11. -ouumu. WAREHOUSING AND STORAGE. 147 make payments or distributions from these receipts or earnings to the various mem¬ bers of the association at various intervals, as determined by its executive committee. Each member of the association retained possession of its or his elevator, employed and directed its employees, and paid its own operating expenses, taxes, and insur¬ ance premiums. The executive committee fixed the rates of elevation and storage for all the members of the association. The individual rnembers made their o^ con¬ tracts with the railroad companies, shippers, and consignees for the shipping and handling of grain for their particular elevators, except as to the price for elevating. It was the course of business that consignments of grain to any elevator, upon ar¬ rival, were immediately reported to the secretary and treasurer of the association, who issued warehouse receipts for the grain. When the grain was transferred out of the elevator, such transfer was reported to the same officer, and the warehouse re¬ ceipt was canceled. This course of business, as regulated and controlled by the agreements, obtained during the seasons of navigation. The main objective of most of the Buffalo elevators has been sim¬ ilar to that of elevators at export points, i. e., to move the grain through the terminals as rapidly as possible. Storage has been for the most E art on a special bin basis without the issuance of negotiable ware- ouse receipts. It has been customary for the railroads to absorb elevating and transfer charges (including five days’ storage) on transit grain, so that this transfer service has been performed largely for railroad account. In 1920-21 the elevator fees were— Cents per bushel. Elevating. ^ Storage, first 5 days or any part thereof. i Storage, thereafter, for each 7 days or part thereof. 1 Running over grain. i Delivery to side bin. i Section 10. Remedies for the terminal elevator situation. The Commission is of the opinion that grain merchandising on the part of operators of licensed public elevators is contrary to sound principles of public warehousing, leading to dissatisfaction on the part of growers and millers and to ill feeling throughout the grain trade. While the practice now prevailing at the primary markets can be defended on the ground of larger turnover and lower handling costs per bushel throu^ such combination of merchandising with public warehousing, it is apparently contrary to the general public interest. As long as these warehouses are operated by dealers in grain and as long as storage charges remain at the present level the natural result will be concentration of the control of actual grain in the hands of the elevator operators because only such operators can profitably accumulate a large line of grain. This situation gives to the large elevator merchandisers practical control of deliverable grain at the terminal markets, facilitates the manipulation of futures, and has doubtless been at times responsible for the failure of the cash and futures markets to move in harmony. The possible remedy for this situation suggested by the circumstances is to make it practicable for grain dealers not operating elevators to store grain in public ele¬ vators in competition with the large merchandisers. To accomplish this would require a reduction in storage charges. But, as already pointed out, the indications are that even at present storage rates a purely storage and transfer elevator can not be profitably operated at interior terminal points. Established by the Lake Grain Elevator Association, which was organized after the dissolution of the Western Elevator Association. 148 TEKMINAL GKAIN" MARKETING. The problem in question can be met in either one of two ways. The railroads might be required to operate elevators for the conven¬ ience of their shippers; or the government, presumably the State government, might operate storage elevators at rates sufficiently low to permit dealers without elevators to compete with the elevator merchandisers. Public warehousing has long been recognized as a ‘^business aflected with a public interest.’’ From the standpoint of the public interest involved it is doubtless better, if this economic service can not stand on its own bottom under present conditions, that it be per¬ formed in conjunction with the common carrier service which is likewise affected with a public interest than that it be joined with and to a greater, or less extent exploited by grain merchandising It is hardly necessary to repeat that in general the grain-carrying railroads already own large terminal elevators. At the primary markets, however, they are almost always leased to and operated by grmn merchandisers. It may be objected that the operation of public warehouses by the railroads in such manner or at such stor¬ age rates as would restore the possibility of the utilization of public storage by cash ^rain handlers generally would involve a loss to the railroads. This is not a conclusive objection and the implied prem¬ ise IS not necessarily true. Railroad elevators are at present and have in the past been leased to their operators at rentals often nom¬ inal and frequently insufficient to afford an adequate return on the investment. There are collateral advantages to the railroads from these facilities due to their assistance in attracting and holing traffic which are largely compensatorjr for the direct losses in ques- tion. As regards terminal facilities in general the charge for the specific terminal service need not cover and perhaps can not be made to coyer all the costs incurred. There is no reason why the same principle should not be applied in the public interest to the terminal storage of grain, especially as the railroads are already not appreciable profits from this part of their property. I he charge made for public storage should of course cover necessary opera^^ng^ expenses but in addition need include only a minimum contribution to fixed charges instead of attempting to insure the covering of that element in cost. impossible that railroad elevators could be operated profitably at interior terminals if the storage rates were xnade sufficiently low to enable cash handlers generally to em¬ ploy these facilities in competition with elevator merchandisers. Adequate profit from a purely storage and transfer elevator is chiefly a question of volume of business. If rates were sufficiently ^j enable dealers without elevators to use these facilities, there should be a vast increase in the quantity stored by grain handlers and a great increase in the degree of utilization of capacity, such as to mean possibly a direct profit as well as an indirect advantage to the railroads owning the elevators. It is worth noting that 30 years ago or so there was less tendency to a concentrated and possibly monopolistic exploitation of terminal storage facilities than at present and no economic obstacle to the utilization of public storage by cash grain handlers generally. The public storing of grain owned by producers and handlers having no WAREHOUSING AND STORAGE. 149 elevators was then a regular incident of the grain business. At that time the relation (or spread) between cash and future prices at Chicago was much more in conformity with economic requirements than has recently been the case. The existing situation tends to choke the normal channel of connection between the cash and futures markets, to foster in the latter market ‘Aechnicar’ conditions and price movements not related to the demand and supply situation for actual grain, to give to powerful integrated concerns additional opportunity for manipulation, and to impair the usefulness of the futures market for hedging purposes. All the incidents of terminal handling should be arranged so as to eliminate incentives to unduly prompt selling and premature removal from storage at the terminal elevator of the railroad on which the grain originates and to facilitate the continued ownership of the grain by the country shipper if his judgment of economic conditions sug¬ gests such a policy. Possibly the initial elevation and storage charge should uniformly be included in the freight charge so that only through-billed grain would escape contributing something toward the cost of storage facilities at the railroad elevator. Such a measure would tend to prevent holding grain in cars and the tying up of railroad equipment as well as the diversion of grain to private eleva¬ tors for speculative purposes. The restoration of a normal situation as regards the use of public storage in the grain trade would be so generally beneficial to the trade and to the public as to warrant necessary legal reforms and financial expenditures in the directions suggested or whatever other steps might be necessary to accomplish the object in view. Chapter V. MERCHANDISING AND SHIPPING BUSINESS IN TERMINAL MARKETS. Section 1. Operations of terminal elevator companies. Introductory. —The buyers in the terminal grain markets are necessarily either consumers or shippers, or their agents. Tables 8 to 12 in Volume II indicate that for 10 primary markets taken as a whole about one-third of the wheat receipts and one-third of the corn receipts in the five years, 1913-1917, were consumed locally, i. e., not dipped as grain; that less than 15 per cent of the oats received was retained for local consumption at these points; that a little more than 40 per cent of the barley received and about 25 per cent of the rye receipts were likewise retained for consumptive purposes. What¬ ever periods or statistics are considered, it is conclusive that at many of the primary points the larger volume of buying is for shipment out of the market. The predominance of local mill buying at Minne¬ apolis is exceptional as compared with other primary markets. The terminal elevator companies are the largest merchandisers and distributors in the trade. At Duluth, Chicago, and Omaha, for example, the terminal elevator companies as a group buy more than two-thirds of the wheat, corn, and oats (Appendix Table 12). While parts of the stocks purchased are later sold to consumers and distributors in the local market, the bulk is sold for shipment to other points. As was shown in Chapter IV, these private elevator mer¬ chandisers have the operating control of probably 80 per cent of the terminal elevator- storage space in the United States (excluding the plants of millers and converters). They are generally equipped to handle grain in carload lots, or larger units, for storage, conditioning, and mixing purposes. Their chief sources of profit are as follows: (1) Mixing, cleaning, and conditioning for their own account with a view to raising the commercial value of their own stocks; (2) mer¬ chandising grain for domestic consumption and foreign demand, immediate or deferred; (3) sale of screenings; (4) operations in the futures market; (5) elevation, storage, transfer, cleaning, mixing, and conditioning for others. A considerable volume of shipping business is also carried on by dealers not operating terminal elevators and the elevator companies themselves sometimes apply cars on contract without unloading them or by merely transferring the grain through the elevator to obtain the weights. Rules and regulations. —The trade customs and regulations relative to the more important points involved in contracts for ship¬ ment appear in the following extracts from the rules of the Gram Dealers’ National Association:^ 1 As in force Nov. 20.1920. 150 MERCHANDISING AND SHIPPING. 151 Rule 3. Card bids .—The acceptance of a card bid shall carry mth it a full accept¬ ance of the ^vritten and printed conditions contained therein. Rule 4. (a) Confirmation .—It shall be the duty of both buyer and seller, on day of trade, to mail, each to the other, a confirmation, in writing (the buyer a confirmation of purchase, and the seller a confirmation of sale), setting forth the specifications as agreed upon in the original articles of trade. Upon receipt of said confirmation, the parties thereto shall carefully check all specifications named therein and upon finding any differences, shall immediately notify the other party to the contract, by wire, except in the case of manifest errors and differences of minor character, in which event notice by return mail will suffice. (6) When a trade is made through a broker, it shall be the duty of the broker, on the day of trade, to send a written confirmation to each of the principals (to the buyer a confirmation of sale, and to the seller a confirmation of purchase), setting forth the specifications of the trade as made by him. Upon receipt of said confirmations th(? parties thereto shall carefully check all specifications named therein, and upon find¬ ing any differences, shall immediately notify the other party to the contract, by wire, In default of such notice by wire the contract shall be filled in accordance with the terms of the confirmation issued by the broker. (c) AU sales by telephone shall be confirmed on date of sale by both buyer and seller. {d) When either of the confirmations contains provisions at variance with the con¬ ditions expressed in the card bid, or other written or printed bid, the. pro visions of the said card, either written or printed, bid shall govern, except when both parties to the contract shall waive the irregularity by signing the confirmation, in which event the confirmation thus signed shall be understood to express the terms of the contract. Rule 5. Time of shipment or delivery. — In making contracts, a specific time in which shipment or delivery is to be made shall be mentioned. Any given number of days shall mean calendar days excluding date of sale in which to load and ship grain to apply on a sale for shipment, or to deliver at the agreed destination, grain sold for delivery. The word ship when used in the rules shall mean that shipping instructions shall have been filed with the railroad company by the shipper. Grain to apply on a sale for shipment must be actually loaded, and billing instruc¬ tions must be furnished the railroad company in accordance with the custom then in vogue at the shipping point. When the words immediate, quick, and prompt are used the following meanings shall be implied: “Immediate,’^’ three days; “Quick,” five days; “Prompt,” ten days. Where no specifications as to time of shipment are named in the contract, prompt shipment shall be implied. ** First half of the month shipment shall be construed as meaning the first 15 days, including February, and last half of the month shipment shall mean the remaining days. Rule 6. Billing instructions. —(a) In case grain is sold for three or five days’ ship¬ ment, the buyer shall furnish billing instructions by wire, unless said instructions were embodied in the original articles or trade. (b) The buyer shall be allowed three calendar days within which to furnish billing instructions on sales for deferred shipment, and must furnish the said billing instruc¬ tions any time after three days, when requested by the seller. Should the buyer, after the expiration of the allotted three days, fail to furnish shipping instructions on demand, the seller shall have the right to elect either to ship the grain to the post- office address of the buyer or to cancel the contract outright; 24 hours’ notice having been given by the seller of his intention and election. Shipping directions furnished by the buyer before the expiration of said 24 hours must be accepted by the seller. Rule 7. Incomplete shipments .—When the seller finds that he mil not be able to complete a contract within the agreed limit, it shall be his duty at once to advise the buyer by mail, telephone, or telegraph, whereupon it shall be the duty of the buyer at once to elect either to buy in or to cancel the deficit, or, with the consent of the shipper, to extend the contract to cover the said deficit. If the seller fail to notify the buyer of his inability to complete his contract, as above provided, the liability of the seller shall continue until the buyer, by the exercise of due diligence, can determine whether the seller has defaulted, when the buyer shall immediately (a) agree with the seller upon an extension of the contract to cover the deficit, (6) cancel the contract outright, or (c) buy in the deficit for the seller’s account. 152 TERMINAL GRAIN MARKETING. Rule 8. Incomplete delivery, —When the seller fails to complete a contract for delivery within the agreed time, it shall be the duty of the buyer immediately to extend, buy in, or cancel the deficit, said deficit to be determined by the quantity already weighed up, plus sellers’ weights or estimates on shipments arrived but not yet weighed. Wherever sellers’ weights or estimates have not been furnished on shipments not yet weighed, it shall be the duty of the buyer to estimate the weight, for the purpose of fixing the deficit. Rule 9. Demurrage. —'The seller shall be liable for any demurrage charges accruing on grain billed to “shipper’s order,” when such charges can be shown to have accrued by reason of the inability of the buyer to get possession of the bill of lading whenever said bill of lading is necessary to furnish disposition. Rule 10. Sample grain. —It shall be the duty of the seller of grain by sample to furnish grain fully up to sample. The word “Sample” used in this connection shall mean a portion of the shipment, or of the lot from which shipment is to be made, and must represent the identical grain shipped or to be shipped. The words “Type .sample ” shall mean sample of like character but not necessarily identical in all re¬ spects with the grain shipped or to be shipped. Shipments rejected on account of quality shall be compared mth the sale sample, by either the inspection committee or some other duly authorized or agreed committee of the market in which such rejec¬ tion is made, and the finding of said committee shall be final. Should the finding be in favor of the buyer, the buyer shall at once notify the seller, by wire, and it shall be the duty of the seller to make satisfactory adjustment with the buyer within 24 hours, at the expiration of which time, if not adjusted, the shipment shall be sub¬ ject to the order of the seller and it shall be the duty of the buyer to buy in, cancel, or extend the defaulted contract and notify the seller of his action. Should the buyer and seller fail to arrive at a basis for adjustment that would enable the buyer to handle such grain not up to sample, and should said grain be finally rejected, it shall be the duty of the seller promptly to reimburse the buyer to the full amount of money advanced on such a shipment so rejected. Rule 11. Loading minimum. —It shall be the duty of the seller to load cars in accordance with the rules and regulations of the initial railroad and to assume any loss resulting from the nonobservance of such rules and regulations. Rule 12. Telegrams and telephones. —The sender of a telegram or telephone message shall prepay the charges. Rule 13. Acceptances. —^Telegraph and telephone acceptances of letter and card bids for “track grain” must reach the office of the bidder within the limit specified therein. Wire bids and quotations shall specify time limit for acceptance. Rule 14. Surplus grain. —Surplus grain shall be taken to account by the buyer at the current market price on the day after the last car is unloaded. Rule 15. Interior shipments. —Grain sold on the basis of “Regular market terms” , can not be forwarded to interior points by the buyer, without the consent of the seller, and the same rule shall apply to “Terminal market sales” that do not contemplate public official weights and inspection. Rule 16. Invoice. —It shall be the duty of the seller to mail to the buyer, or such other consignee as may have been previously designated by the buyer, an invoice, giving the initial and number of the car, kind and grade of grain, actual or estimated weight (state which), price, contract on which shipment is to apply, amount of draft drawn, and railroad routing. Rule 17. Bills of lading. —^Bills of lading attached either to invoices or to drafts shall be original and negotiable, and in conformity with the specifications of the con¬ tract on which the shipment is to apply, and shall be signed in ink. Any loss resulting from irregular or incorrect bills of lading shall be paid by the seller. Rule 18. Overdrafts. —When, for any reason, an overdraft has been made on grain shipments, and has been discovered before the draft is paid, the buyer shall elect either to pay the overdraft for account of the seller, or to request the seller to reduce his draft to the proper amount. In the event that the buyer elects-to pay the over¬ draft for account of the seller and in cases where drafts are so paid, and an overdraft is not manifest until an account current is rendered, the seller shall reimburse the buyer on demand for the full amount of said overdrafts. Rule 19. Balances. —Any cash balances accruing to the seller on a contract shall be promptly remitted when said contract is complete. RuiiE 20. Margin on drafts. —Where sales are made on destination terms, it shall be the duty of the seller to leave ample margin on his drafts to provide for possible discrepancies in weights and grades. Rule 21. Arbitration. — (a) Where differences between members of this associa¬ tion or between a member of this association and a member of an affiliated association can not be amicably adjusted, said differences shall, at the request of either party. MERCHANDISING AND SHIPPING. 153 be fiibmitted^ to the arbitration committees of either this association or the State or local association of which either one or both parties may be a member, except in cases where the disputants mutually agree to exchange arbitration, in which event this association will recognize the validity of such exchange arbitration. (b) The decision of an arbitration committee of this association shall be final, except as provided in Article IV of the Arbitration Rules. (c) Either party may appeal from a decision of the arbitration committee of a State or a local association to an arbitration committee of this association, except as provided in Article III of the Arbitration Rules. Rule 22. Car lots of grain and assorted feedstuff's. —These rules shall also govern transactions in f eedstufis in straight car lots, and grain, f eedstuffs, and flour in assorted car lots. By feedstuffs is meant all animal feed that is derived from or is a product of grain. Rule 23. Weights and inspection of grain sold destination terms. —(a) On"grain sold track-loading station, or delivered basis destination terms, it shall be the duty of track buyers, receivers, millers, and consumers of grain at points of destination where no regularly constituted rules and regulations are in effect, first, to obtain the consent of seller to make such delivery, and then furnish to the seller sworn or public certifi¬ cates of weights and grades, giving the post office, date, name of elevator, mill, or warehouse where weights were obtained; name of the weighmasters’ employer, name of the weighmaster, location or description of leaks, if any, the seal record, the rail¬ road agent’s written acknowledgment of said leaks or other bad-order conditions, when and where the grain was unloaded, and the original paid freight bill on grain sold delivered. (6) On a sale shipper’s weights and grades it is understood shipments must be made by the seller from his own stations, or from stations that operate under the same tariff rates, regulations, and conditions,^ and he must furnish the buyer sworn certificates of weight attached to draft or invoice, unless otherwise agreed at the time of sale. Rule 24. Grain shipped from terminal or interior markets. —^When grain is sold by telegraph, telephone, or mail, by receivers or distributors, located in terminal and interior markets, it shall be understood and agreed that the public weights and grades of the market from which the grain is shipped shall govern. Rule 25. Terminal market sales. —Sales made out of any terminal market for a specific number of days’ shipment shall be filled with shipments from the point from which sold, unless otherwise agreed or understood at time of trade. Rule 26. O./f grades. —It shall be the duty of receivers, track buyers, and dis¬ tributors of grain on regular market terms, to notify sellers of any failure to grade, so that he will receive such notice within 24 hours from date of inspection. The buyer then shall either apply the grain on contract at ruling market difference on day of arrival or let the notice to seller be by wire, of that date, giving the condition of the grain, stating whether unloaded or still on track; whereupon it shall be the duty of the seller receiving such notice to wire disposition at once. Off-grade grain sold for account of shipper shall not apply on contract. Rule 27. Routing on grain sold delivered. —Grain sold delivered shall be deliverable via any line at the discretion of the seller, unless otherwise agi’eed at time of sale. When such shipments are routed by the purchaser, the carrier becomes the purchaser’s agent, and the seller’s liability ceases when he furnishes bill of lading in accordance with the purchaser’s instructions. Rule 28. Routing of grain sold track. —Grain sold track the original point of ship¬ ment shall be routed in accordance with the billing instructions furnished by the buyer. Rule 29. Alteration of contract. —The specifications of a contract can not be altered or amended without the expressed consent of both the buyer and the seller. (This abolishes the custom of “silence confirms.”) Rule 30. Stored grain. —Grain stored in terminal regular elevators can not be applied on sale for shipment except by consent of the buyer. Rule 31. Sellers inspection. —Grain sold for delivery, seller’s inspection, shall be covered by an inspection certificate of the grade contracted. The submission of a certificate of a lower grade to apply on a contract for a higher grade shall be authority for the buyer to sell the grain, represented by such certificates, for the account of whom it may concern, and proceed to buy in, extend, or cancel the original contract for account of the seller, notifying him at once of such action. Rule 32. Carload. —A carload shall consist of bushels, as follows: Wheat, 1,100; shelled corn, milo maize, kaffir corn, and feterita, 1,100; ear corn, 700; rye, 1,100; barley, 1,250; oats, 1,600: Provided, That where rules of carriers, lawfully on file with the Interstate Commerce Commission or State railway commissions, provide for 154 TERMINAL GRAIN MARKETING. minimum carload weights in excess of the above, such minimum weights shall con¬ stitute a carload within the meaning of this rule. Rule 33. Grain in tmnsff.—Grain shipped prior to the date of sale can not be applied on contract without the buyer’s consent. Rule 34. Size of cars when bushels sold.—When bushels are sold and the size of cars to be loaded is not mentioned by the buyer, it shall be the privilege of the seller to load cars of a size suitable to his convenience; he, the seller, to answer to the rail¬ roads for the fulfillment of their minimum weight requirements. Rule 35. Term “24 hours.^’—The term “24 hours,” as used in these rules, shall be construed to mean 24 hours, including Sunday or legal holiday. Section 2. Mixing and conditioning by terminal elevators, The mixing process. —Practically every private terminal elevator company engaged in buying and selling grain makes a practice of mixing, cleaning, and conditioning the various lots of grain pur¬ chased in order (1) to secure the screenings; (2) to improve the quality; and (3) to take advantage of the latitude within the re¬ quirements of each standard grade by mixing large quantities of grain to the bottom level of such requirements. A large Duluth operator stated that blending and conditioning (including cleaning and mixing) during the years 1900 to 1914 was the most important source of profit to the private terminal elevator. A Minneapolis company estimated that their gross profits on mixing under pre¬ war conditions had averaged 1^ cents per bushel. The different grades of grain are frequently mixed in railroad- operated elevators, under the supervision of the local inspection department, with a view to releasing additional bin space for stor¬ age. But this practice under railroad operation appears to have little or no direct relation to merchandising profits and is neces¬ sarily more restricted than the mixing operations of private com¬ mercial elevators. The process of mixing in the Chicago market was explained be¬ fore the Interstate Commerce Commission ^ in 1906 as follows: Comi^ssioner Prouty. WTien you mix oats, what is your purpose in mixing the oats? You want to take a poor grade and make it better. What is the trouble with the poor grade? Is it too light? Mr. Bevan. Too light and bad color. Commissioner Prouty. MTiat do you do—take good oats and mix with the poor? Mr. Bevan. Exactly. ^ Commssioner Prouty. And you try to get enough good in to bring up the quality? Mr. Bevan. Exactly. ^ Prouty. To what extent is it possible to do that? Take a thou- sand bushels of what you call poor oats. You want to bring those up to what grade“i* Mr. Bevan. You can mix in about 25 per cent of poor oats with 75 per cent good 03;bS* Comrmssioner Prouty. And produce the same grade that the good oats were at tJQ0 st/Rrt i Mr. Bevan. Yes, sir. Mr. Marble. That really lowers the market value of the oats, but keeps them within the limits of the grade? Mr. Bevan. Within the limits. Mr. Marble. And skins the grade? Mr. Bevan. I do not know about “skinning.” Commissioner Prouty. Don’t oats sell by grade? Mr. Bevan. Some do, and some by sample. We sell all of ours by sample Commissioner Prouty. After you have mixed those oats, if you take a sample sample sell for as much as a sample of the good oats before they were mixed? Mr. Bevan. That is up to the buyer. Commissioner Prouty. Well, as a general proposition? » Op. cit., S. Doc. No. 278, p. 788. MERCHANDISING AND SHIPPING. 155 Mr. Bevan. Yes, sir. Commissioner Prouty. They do sell for as much? Mr. Bevan. Yes, sir. Commissioner Prouty. So you gain the difference between the difference in the market price? Mr. Bevan. You must make something or there is no use being in the elevator business. Commissioner Prouty. Is that the main thing in the elevator business, bringing up grades? Mr. Bevan. I think so. As another instance of mixing and conditioning, a certain car of wheat was bought ‘‘on-track’^ at Indianapolis (in 1918)* for $2.07 per bushel. This wheat had been graded No. 3 because ijt was slightly smutty. The grain was run through a cleaner, which removed the smut, and was then mixed with a high grade No. 2. It thus be¬ came part of a lot which was sold for about $2.17. The loss in weight from scouring did not seriously cut down the profit. Mixing may be performed either within the elevator or in the process of loading out. One elevator operator stated that under conditions prevalent several years ago in loading lake vessels he frequently added several thousand dollars to the profit on a cargo by skillful manipulation of the various streams turned into the loading spouts. At one time in Chicago it was customary for ship¬ pers loading a vessel to gradually increase the mixture of low-grade t rain until the stream would scarcely make the grade specified. 'requently they were stopped by the inspector and required to run the entire cargo over again. There was a continuous effort to keep the quality of the shipment down to the lowest level allow¬ able, i. e., to “skin the grade.’’ Results of mixing wheat by private elevators. —With a view to ascertaining the results of mixing operations by terminal elevators data were obtained from certain elevators at Kansas City, Chicago, Minneapolis, and Duluth. Such data were obtainable from certain houses for a five-year period (1912-13 to 1916-17), from others for only four of these years, and from others for only three years.^ Chicago .—The Chicago terminal elevator companies—especially those operating public warehouses—have regularly mixed the re¬ ceipts at their private plants for the purpose of turning out con¬ tract grain, i. e., grain deliverable on future contracts. An ex¬ perienced trader and officer of the board of trade has estimated that over a period of 10 years (prior to 1918) fully 90 per cent of the stocks in the public warehouses were “manufactured” in this way. The extraordinarily favorable mixing results obtained in 1913-14 by one large operator appear in the following summary. Since figures by grades could not be obtained for all stocks in the elevator the * Figxires were secured in Minneapolis from the State railroad and warehouse commission, giving the “ins" and “outs" of wheat by grades for the public warehouses in Minneapolis, some 30 in number. (In 1912-13 there were 30 public elevators in MinneapoUs; in 1913-14, 28; 1914-15,31; 1915-16,30; in 1916-17, 25. In this last year is included the Equity Elevator in St. Paul.) . i, j In Duluth s imil ar figures were taken from the books of two terminal elevator companies (Globe and Consolidated). These data were for wheat of all grades for the five crop years 1912-13 to 1916-17, inclusive. In Chicago the figures used were secured by agents of the Bureau of Markets. Data were obtained for wheat from J. Rosenbaum’s IrondaleA for four crop years, and from Armour’s Santa Fe and Bartlctt- Frazier or the Central Elevator Co. operating the National and Calumet A, B, and C, for three years. Fig¬ ures on corn were obtained for the four crop years beginning 1913-14 from J. Rosenbaum and for one house of Bartlett-Frazier. Corn figures from Armour’s Santa Fe were for the three years beginning 1914-15. In Kansas City, data on the mixing of wheat were obtained from five terminal elevator companies operat¬ ing six houses—viz, the Murray, Wabash, Kansas City Southern, Kansas-Missouri, the Milwaukee, and CWcago Great Western. 1 156 TERMINAL GRAIN MARKETING. opening and closing inventories are disregarded in the computa¬ tions for Chicago. Results of mixing operations in wheat at a Chicago elevator, 1913-14. Bushels.i Percentages. In. Out. In. Out. Winter wheat: No. 1... 8,881 1,294,067 606,450 29,168 15, 722 0.5 66.2 31.0 1.5 .8 No. 2. 2,004,609 ' 100.0 No. 3. No. 4. Lower. 139 Total. 1,954,288 2,004,748 100.0 100.0 Spring wheat: No. 1. 166,530 73,935 46,835 10,663 80,442 350,887 914 44.0 19.5 12.4 2.8 21.3 99.5 .2 No. 2. No. 3. No. 4. Lower. 97i .3 Total. 378,405 352,772 100.0 100.0 Grand total.■... 2,332,693 2,357,520 1 No figures for opening and closing inventories. it is clear that this operator bought wheat of all grades, both spring and winter, and was able to deliver out practically the entire stocks as contract grades. The combined results of wheat-mixing operations at Chicago in six private elevators (Irondale A, Santa Fe, National, and Calumet A, B, and C) for the successive crop years 1914-15, 1915-16, and 1916-17, and for one of these six in 1913-14, appear in Appendix Tables 13-16. These figures show that the total mixing operations in wheat of these elevators resulted in an outturn of 93.6 per cent of No. 2 winter wheat, as compared with 42.6 received, and an outturn of 90 per cent No. 1 spring wheat, as against 38.9 per cent taken in. Minneapolis .—A similar analysis was made of wheat-mixing results at the Minneapolis public elevators for five specified crop years and for the entire period (Appendix Tables 17-22) . These figures indicate that mixing operations by the Minneapolis elevators during this period were of comparatively less significance than at Chicago. Because of the predominant local milling demand for wheat in that market there is a large volume of selling by terminal elevators to the mills, often on type sample. In consequence, mixing is probably employed largely for the purpose of meeting milling requirements and less for raising the commercial grades and mixing to the bottom level of such grades. The shipping business in wheat at Minneapolis is small; and mixing operations of the sort last mentioned seem to be practiced more extensively in connection with the shipping business and are more characteristic of shipping markets. (Cf. Chap. I, sec. 2.) Duluth .—Similar mixing data to the above were procured at Duluth from the books of two elevator companies and are set forth in Appendix Tables 23-28. < There is no reason to believe that the inclusion of inventories would have altered to any marked extent the results shown. MERCHANDISIN'G AND SHIPPING. 157 The most conspicuous result of these operations over a five-year period at Duluth was the increase in the quantity of No. 1 northern spring wheat delivered on the outturn, as compared with decreases in the outturn of No. 2 and No. 3. Whereas 40 per cent of the receipts for the five-year period were No. 1 northern spring and 24 per cent were No. 2, the grain loaded out graded about 77 per cent No. 1 and 10 per cent No. 2. Kansas City .—The records of receipts and shipments by five ele¬ vator companies at Kansas City (operating six elevators) furnished data for four crop years. (Appendix Tables 29-33.) It will be noted from the figures in this analysis that although many varieties of wheat were handled through these houses there was a marked effort to turn out No. 2 hard and No. 2 red, presumably because No. 2 hard is a contract grade and both No. 2 hard and No. 2 red are commonly handled in the export trade. The figures for the four-year period showed about 49 per cent No. 2 hard in the outturn, as against 32 per cent of that grade received. There was a decrease of over 50 per cent in the quantity of No. 4 hard delivered out, as against the quantity received. Comparison of four markets. —From the data obtained it was possible to make a comparison of operations at the four markets on the basis of ‘‘contract grades”; i. e.. No. 1 and No. 2 of certain varieties of wheat specified by rule on each exchange,^ and made deliverable on future contracts without discounts or premiums. The results in perceijtages appear in the following statement of “ins” and “outs”: Elevator “ins^ ’ and ^‘outs* ’ of all contract grades. Chicago. Minneapolis. Duluth. Kansas City. In. Out. In. Out. In. Out. In. Out. 1912-13. Per cent. Per cent. Per cent. 47.2 Per cent. 57.0 Per cent. 54.2 Per cent. 91.4 Per cent. Per cent. 1913-14. 1 42.4 193.4 57.1 68.2 67.2 95.1 68.4 79.7 1914-15. 62.9 99.9 21.7 22.1 32.3 72.7 25.1 42.8 1915-16. 46.9 94.6 35.2 34.9 32.3 76.0 4.0 16.3 1916-17. 30.6 91.9 11.2 12.5 15.8 45.8 47.0 67.5 Average. 45.7 95.0 34.5 38.9 40.4 76.2 36.1 51.6 4 years only. 45.7 95.0 31.4 34.4 36.9 72.4 36.1 51.6 1 One company only. From this statement it appears that in Minneapolis, which is largely a sample market, wheat mixing to secure contract grades (con¬ sidering the market as a whole) has not been extensive. In fact, it appears that for 1915-16 a lesser quantity of the two contract grades was shown on the outturn than was received during the year. The possible reasons for this have already been discussed. On the other hand, the elevators considered at Duluth, Kansas City, and particularly Chicago, have been able to deliver out a very much higher percentage of the upper.grade higher-priced wheat than they have received. At Duluth the outturn has frequently contained » See Vol. V, pp. 188-196. 56976®—22-12 158 TERMINAL GRAIN MARKETING over twice as much contract grade wheat as was taken in during the crop year. The figures tend to bear out certain allegations made with reference to the ‘‘manufacture’’ of contract grades at Chicago, since on the basis of all (merations analyzed at that market, the “outs” for contract grades (Nos. 1 and 2) averaged 95 per cent of the wheat handled as against “ins” of those grades amounting to only 45.7 per cent of the total. Mixing profits per bushel. —The general results of mixing oper¬ ations are fairly apparent from the comparisons of “ins” and “outs” already shown. Because of the labor involved, it was considered inadvisable to compute profits per bushel in more than two markets. This was done with reference to the Minneapolis and Duluth figures on all grades of wheat. Three different methods were employed to obtain representative prices to apply to the increase of outshipments for a given grade of wheat.® Profits for a particular grade were calculated by multiplying the average annual price of that grade by the overage (excess of “out” over “in”). Losses were likewise 6 Prices were obtained in the following three ways: In the first, designated Method I, prices were arrived at for grades No. 1 hard, No. 1 northern. No. 2 northern, No. 3 northern. No. 1 durum. No. 2 durum, by taking the average of the mean daily prices for such grades as given out during the year by the closing quotations committee of the Minneapolis Chamber of Commerce. From the Daily Market Record, M in- neapohs, the average prices of No. 2 northern and all of the grades not quoted by the committee were obtained, summated, and averaged for two days in each month of the year and the price differential between each of the latter grades and the No. 2 northern figure computed. These differentials were then applied to the closing quotations average price for No. 2 northern to get the average prices of the grades not quoted. All prices derived by this method are thus on the basis of closing quotations. In Method II prices were obtained for each grade by taking the weighted average of all prices quoted for such grades in the Daily Market Record on two days (when possible, the 10th and 20th) of each month during the year. Some exceptions to these methods may be noted. In 1913-14 receipts of No. 4 northern. No. 4 durum, no grade durum and western, were small and scattered. Prices for these grades as given in Method II are therefore arrived at by ta^g the average of all prices quoted in the Daily Market Record for such grades at any time during the year weighted by the number of cars at each price. To get the price of each of these grades on the basis of the closing quotations for use in Method I, the differential in each case was arrived at by comparing the average price of which the method of computation has just been set forth with the average price of No. 2 northern computed in the same way for the days on which quotations of the grades in question were available. These differentials were then applied to the closing quotations average price for No. 2 northern to get the price of the other grades in Method I. In 1916-17 there was a change from State to Federal grades during the year. The prices of these Federal grades were computed in Method I by taking the closing quotations of Nos. 1, 2, 3, and 4 dark northern, northern spring, and red spring, and for Nos. 1, 2, and 3 durum; to get the prices of the other Federal grades on the basis of the closing quotations the differentials were arrived at oy comparing the average of all prices quoted in the Daily Market Record for such grades at any time during the month with the average prices of No. 2 northern spring, computed in each case for the number of days on which quotations of the grade in question were available. In every instance the prices were weighted by the number of cars. Price statistics in Method II were obtained for Federal grade by taking a weighted average of all prices quoted during the month for which they held. The net profits per bushel as determined by these two methods were strikingly similar, as will be shown presently. However, to test the results more thoroughly another method has been tried, which may be called Method III, which was tried out in the three years 1913-14 to 191.6-16. By this method the weighted aver¬ age price of all grades quoted in the Minneapohs Daily Market Record was taken for two days a week, Wednesdays and Fridays, if possible. The spread on each day from the No. 1 northern price was deter¬ mined and an average of these differentials made for the year. A yearly price for No. 1 northern was determined by averaging the daily prices and the prices of the other grades determined by adding or de¬ ducting the average yearly spread from the No. 1 northern price. In this way relatively heavier receipts either at the beginning or end of the year for a grade not continuously quoted was given no weight in the calculations. The results by this method show a striking correspondence to those obtained in the two outUned above. Prices were computed for Duluth by Methods I and II only. The per bushel profits on mixing wheat in Minneapolis and Duluth were thus found to be— Minneapolis. Duluth. Year. Method Method Method Method Method I II III I II Cents. Cents. Cents. Cents. Cents. 1912-13. 1.04 1.00 1.55 1.33 1913-14. .26 .27 .23 .71 .64 1914-15. 1.35 1.34 1.30 2.47 2.31 1915-16. .87 .89 .78 3.30 2.39 1916-17. 3.38 3.36 4.60 4.31 • MERCHANDISING AND SHIPPING. 159 determii^d by multiplying such a price by the shortage for that grade. The per bushel profit was derived by dividing the total profit by the outs or shipments. The detail for the various com¬ putations, as worked out for the Minneapolis elevators by different methods, appears in Appendix Tables 34-36. Averaging the results shown by Methods I and II of computing prices (footnote 6), the following were the per bushel mixing profits of the elevators at Min¬ neapolis and Duluth which were studied (footnote 3). Elevator profits due to mixing operations in wheat (all grades). [Cents per bushel.] Year. Minne¬ apolis. Duluth. 1912-13. 1.0 .3 1.3 .9 3.4 1.4 .7 2.4 2.8 4.5 Assuming an average yearly per bushel profit of 2 cents on an . elevator of 1,000,000 bushels capacity, valued at $1,000,000, handling 2,000,000 bushels of wheat, the gross yearly return from mixing alone would amount to $40,000, which would show a return of 4 per cent on the plant investment. This demonstration of the potential profits obtainable from mixing different grades of wheat conforms with the statements made to the commission’s agents that millions of bushels of wheat are handled by shipping elevators each year merely for the mixing profits. It was stated by a Minneapolis elevator man, however, that mixing profits are not as great as might appear, since competition for grain for mixing purposes forces buying prices up, while the millers’ dis¬ counts against mixed grain force the selling prices down.” Mixing to make ‘'contract’’ corn. —With reference to opera¬ tions in corn, figures were obtained from three Chicago private elevators for three successive crop years. The results appear in the following statement: Results of mixing operations in corn by three Chicago elevator companies for the three crop years 1914-15 to 1916-17. Year and grade. Bushels. Percentages. In. Out. In. Out. 1914-15: No. 2. 6,867,582 8,134,005 2,209, 551 649, 281 8,485,407 9,240, 905 73, 823 113, 228 38.5 45. 5 12.4 3.6 47.4 51.6 4.4 .6 No. 3. No. 4. Lower. Total.. . . 17,860,419 17,913,363 100.0 100.0 1915-16: No. 2. 4,512, 418 1,766,926 1,697,642 1,680,363 7,965,865 1,258,978 331, 976 309,407 46.7 18. 3 17.6 17.4 80.7 12.8 3.4 3.1 No. 3. No. 4. Lower. Total. 9,657,349 9,866,226 100.0 100.0 160 TERMINAL GRAIN MARKETING. Results of mixing operations in corn by three Chicago elevator companies for' the ihrde crop years 1914-15 to 1916-17 —Continued. Year and grade. Bushels. Percentages. In. Out. In. Out. 1916-17: No. 2.. 3,992,733 5,548,443 46.8 65.0 No. 3. 3,023,691 2,789,943 35.5 32.7 No. 4. 1,142, 783 68 , 529 13.4 .8 Lower. 365, 940 129, 741 4.3 1.5 Total. 8,525,147 8,536,456 100.0 100.0 1914-15 to 1916-17: No. 2. 18,190,240 28,875,095 39.3 62.1 . No. 3. 17,829,213 16,561,871 38.5 35.7 No. 4. 7,497,664 482, 003 16.2 1.0 Lower. 2,766,308 553,443 6.0 1.2 Total. 46,283,425 46,472,412 100.0 100.0 ‘ These computations show that in each of the crop years considered the three companies as a whole turned out a considerably larger pro¬ portion of No. 2 than they had received (disregarding inventories) and that on the average for the four years the outturn of No. 2' showed 62 per cent as compared with 39 per cent received. Economic aspects of mixing.— It appears that grain passing into a primary market under the present arrangements frequently takes one of two courses: (1) It is bought by a miller and adapted to the requirements of his grind, or (2) it is bought by a terminal elevator company, cleaned, conditioned, and mixed with other lots so that the outturn just meets the requirements of the higher grades with practically all premium attributes eliminated in the general mixture. This latter course—the handling and mixing by a terminal elevator dealer—has provoked considerable criticism. It is alleged that the only services of economic value which the private elevator can per¬ form are {a) storage of excess supplies for subsequent distribution, {1) cleaning and conditioning to render the grain merchantable, and (c) direct transfer services to enable shippers to obtain weights and to effect transshipment from carrier to carrier. This position was taken by an elevator operator in Chicago, who made the following criticism of mixing, when interviewed: Q. is your opinion on mixing?—-A. The way I feel is that if the miller or con¬ sumer wants to mix grain, let him do his own mixing. He can do this and make the profit from it as well as I can. Here are three or four cars grading No. 2 red wheat, and if I see a car of No. 4 red wheat I could readily mix the No. 4 with the other wheat and make it all come out No. 2, but if I am doing business and am doing it straight I am not going to do this. Q. Do you think that terminal elevator wheat will be discriniinated against in favor of country run wheat?—A. Every time. I buy lots of grain out in Kansas City and I insist that it be country run wheat, because I know all elevator wheat in Kansas City is mixed. It is also alleged—particularly of Chicago dealers—that the possi¬ bility and practice of ^^manufacturing’’ contract grades through mix¬ ing and conditioning give the elevator dealers who operate ‘Tegular” warehouses an undue advantage in the futures market and lead to manipulations in that market (see sec. 5). MERCHANDISTKG AITD SHIPPING. 161 As against these contentions, it has been asserted by elevator men in Chicago, Minneapolis, Kansas City, and elsewhere that the practice of mixing ‘‘makes a market’’ for low-grade grains and enables the producer to realize higher prices for the lower grades owing to the competitive demand of elevator companies for such grain for mixing purposes. They insist that the expectation of raising’the value of the grain leads elevator concerns in a competitive market to bid up the prices, i. e., lessen the discounts on the lower grades, and causes them to pay the producer a higher price for the lower grades than is possible where grain is concentrated and sold without such treatment. It is also contended that mixing is of direct benefit to the small miller, not equipped with mixing madiinery, since it gives him an even run for his grind. An elevator man stated that to prohibit conditioning and mixing by terminal elevators would work a hardship upon both farmer and consumer. His view was substantially as follows: It would have this effect. It would cause the lower grades of wheat to sell on the farm much lower than they would if we were not permitted to raise the value. It would reduce the volume of millable wheat very materially. If you could not bring it in and dry it the farmer would get very little for it on his farm. Otherwise, if the terminal man is permitted to buy that wheat and clean it up, dry it and condition it, and mix it here, he will pay the farmer much more. But even assuming that mixing by terminal elevators operates to the benefit of the grower, it is alleged that it can be of little service to millers unless performed specifically to meet milling requirements. It was stated in Minneapolis that ‘ ‘ elevator grain ” as against ‘ ‘ the coun¬ try run ” was always discounted by mill buyers unless the -mixing had been performed by special arrangement. The millers stated that they were reluctant to buy “elevator grain” because it was difficult to determine its milling qualities, and experience showed that it was often ill-adapted to milling blends. This criticism did not apply to certain elevator companies which were specializing in milling require¬ ments. An Illinois miller stated that he preferred the “country run” because then he could “grade and mix it properly.” A Milwaukee milling company reported that it preferred the “country run” of grain because “the terminals doctor it and skin the grade.” These objections to the terminal elevator “mixwere generally expressed wherever millers were in position to obtain the virgin grain. Inasmuch as the mills can to best advantage do any mixing that will increase the millable supply and do actually mix, there is no rea¬ son to suppose that mixing by the elevator has the alleged effect of increasing the millable supply. It is entirely possible, however, that the competition of the terminal elevators for low-grade grain for mixing purposes does have some effect in increasing prices to pro¬ ducers for such grades. Section 3. Merchandising by terminal elevator companies. Introductory. —As already stated, the elevator companies are the largest dealers in grain in the primary markets. A considerable part of this trading is for local delivery in certain markets, although the elevator companies as a class are predominantly shippers. The following statement gives a fairly typical picture of the merchandising 162 TERMINAL GRAIN MARKETING. process where hedging is employed, although there are many varia¬ tions in methods among the different markets and individual con¬ cerns : We put out our card bids. For instance, we have acceptances overnight of a hundred thousand bushels of wheat and a hundred thousand bushels of corn—I am speaking now of prewar times. The market opens in the morning and we sell an option against that grain. Then that would protect us against loss and would also protect us against any undue profit. It is a fixed purchase and sale—cash bought and future sold. After that grain was shipped, within a day or two we sell a hundred thousand bushels of wheat for export and buy in our Option. The cash wheat would be sold and the op¬ tion would be out of the way. In the case of the corn we might be able to sell only 50,000 bushels for domestic purposes. Then we would be long 50,000 bushels of cash corn and short 50,000 bushels of the future. If there was no other demand for it it would pay us to deliver that out on contracts. If the corn failed to meet the require¬ ments of the grade we would clean it, dry it, put it in public elevators, and deliver it out to satisfy the requirements of the contracts we had out. ^ The “carrying charge’’ theory. —Theoretically the object of most terminal elevator companies is to earn a “carrying” or “stor¬ age” charge. The theory sometimes advanced is that the elevator companies accumulate grain in anticipation of future demands and tend to equalize the distribution of the crop to converters and con¬ sumers, and that the costs incident to carrying these surplus stocks after the crop has been moved from the farm (i. e., storage, insurance, interest, etc.) will be reflected in a gradual rise in the level of prices. This expected rise in prices toward spring frequently fails of actual realization because of the other factors besides the cost of carrying the grain which affect prices. But the grain carried by a large elevator is usually hedged in the futures market. Under such circumstances the elevator man may cease to have any interest in whether the price change between fall and spring is a decrease or an increase. If he is to carry the grain through the winter, however, he is very much interested m the rela¬ tion of the price (of the future) at \^hich he hedges to the cash price. To illustrate, if he must earn 1 cent per bushel per month to meet storage costs, in order to carry grain from November to May (six months), he must be able to sell the future (his hedge) in November at 6 cents over the cash price he pays for car lots to go to his elevator. From this point of view, winter storage is practicable or not according to whether the future shows an adequate premium late in the fall. The elevator man may have other means of obtaining a profit from stored grain which will make him willing to hedge at a smaller pre¬ mium or take a smaller carrying charge. The “carrying charge” theory, as it would usually be understood in the grain trade, refers to the situation described in this paragraph. Selling for local delivery. —It has oeen shown that with few exceptions private elevator companies at terminal points sell a larger volume of grain for shipment than for local delivery. The selling for account of local wheat-flour millers at Minneapolis and to local corn mills at Indianapolis are perhaps the most conspicuous examples of the absorption of elevator stocks in the local market. The transactions between elevator companies and local millers, as carried on in the Minneapolis marketj require but brief description. The elevator companies buy largely on the exchange floor, and usually by sample. The sales to local millers are largely on the basis of type samples, submitted by the elevator or by the mill, as the case may be. mBCHANDlSmO AND SHIPPING. 163 Sales are in round lots generally. The sale may be for immediate or for deferred delivery and there is no requirement that cash sales of this character be negotiated on the exchange floor. Delivery usually involves a switching operation from the elevator to the mill storage tanks. In the case of regular elevators located in futures markets soine grain is delivered to mills on future contracts, although such deliveries usually comprise but a small part of the whole. In some instances, notably at Duluth, sales for local delivery are made to shipping companies who do not themselves operate elevators. For example, the Consolidated Elevator Co., which operates elevators at Duluth-Superior aggregating more than 10,000,000 bushels storage, reported that it did little shipping on its own account, but sold to the local shipping companies, which in turn forwarded the grain, usually by lake, to eastern millers and dealers. Since the elevator company bought from local commission men, some of whom it financed, and sold to local shippers, its business was largely restricted to the local market.^ The general method followed was to acquire the country run of grain in large quantities, hedge it by equivalent sales of futures, raise its commercial value by mixing and conditioning, secure the screenings for sale to feed concerns, and carry the stocks until favorable prices were offered by the shippers, or, when necessary, make delivery on the outstanding futures.® Statements made by officers of the company to agents of the commission indicate the manner of computing margins in this business, viz: I think I can safely say that we are always ready to sell the grain for what it costs us. We get our handling charge out of it because we sell it in store, and the man that loads it out has to pay that 1^ cents and we get the mix, and we get the screenings for thecleaning, so we are always ready to sell the grain for what it costs us. * * * * The man that we sell it to, I think he sells it to Buffalo, I think his profit is around one- fourth cent. * * * A shipper will stand on the floor in a busy season and get one- fourth cent profit between us and the miller he sells it to, say. Shipping operations of terminal elevators. —The terminal elevator companies are sometimes referred, to as ‘^concentrators and shippers’’ by the trade. They operate at terminal points be¬ tween the areas of supply and tne consumptive territory in the United States and abroad. Grain applied on contracts may be from cars on track or in transit, although the elevator stocks generally furnish the basis for these shipping operations. Many of the larger companies issue daily card offers based on the closing cash quotations. Certain typical cards of this sort have been selected to illustrate the various phases of the shipping business as conducted by terminal elevator companies. The following card was sent by a Kansas City elevator company after the close of the market on the date indicated to a milling concern at Nashville, Tenn.: 7 This concern loaded out nearly 115,000,000 bushels of grain and flaxseed during the 5-year period 1912-13 to 1916-17, turning their capacity nearly two and one-half times annually. * Private elevators may be declared “regular” for delivery on future contracts under the rules of the Duluth Board of Trade. 164 TERMIN’AL GRAIN MARKETING. Form 20.--OFFER CARD ISSUED BY A KANSAS CITY ELEVATOR COMPANY. Simonds-Shields-Lonsdale Grain Co. Kansas City, Mo., May 6, 1921. On basis to-day’s closing prices we quote our wheat as follows: Kansas City weights and grades, prompt shipment: Our samples. F, 0. B. Kansas City. f Delivered East St. Louis, Ill. Delivered Chicago or Minne¬ apolis rate. Delivered Philadel¬ phia rate. 70 per cent dark, 2 hard, sample B. Kansas dark, 1 hard. $1.55 1.60 1.58 1.54 1.52 1.65 1.62 $1.64i 1.69i 1.67i 1.63i 1.61i 1 744 $1.67i 1.72i 1.70i 1 604 $1.87 1.92 1.90 1 QA Kansas dark, 2 hard...... 1 hard wheat. 2 hard wheat... 1 644 1.84 1 Q7 1 red wheat. 1 774 2 red wheat. 1.71i 1 7dA 1 0/1 Wheat receipts to-day 134 cars. For prices delivered group 1 Texas, add cents per bushel to f. o. b. Kansas City quotations. For prices delivered group 3 Texas, add 31 cents per bushel to f. o. b. Kansas City quotations. Crop complaints to-day were decidedly more numerous and was largely responsible for the advance. Exporters are not following the advance however and as the crop damage at the moment is not of a serious nature it is probable there has been enough advance for the present, still damage clMms, true or false, carry an appeal and attract buying power which nearly always has effect. •» Terms: Demand draft, bill lading attached. . It will be noted that these quotations are adjusted to four delivery bases. Rate differences make a difference in price of 9^ cents per bushel between Kansas City and East St. Louis, 12J cents between Kansas City and Chicago or ^Minneapolis rate points, and 32 cents between Kansas City and Philadelphia. The first quotation is on a type-sample basis, the sample being guaranteed to contain 70 per cent of dark No. 2 hard wheat, offered at a discount of 3 cents under the regular Kansas dark No. 2 hard grade. , The quotations were all for ‘‘prompt’’ shipment, i. e., within 10 days excluding the date of sale.® Sometimes these cards show prices of actual cash sales as of the day upon which the quotations are based. The following card from another Kansas City elevator company is an example in point, affording an immediate check upon the shipper’s margin of profit: ~ i - “““ ~ " —■ » Rules of the Grain Dealers National Association. t MERCHANDISING AND SHIPPING 165 Form 21.—OFFER CARD ISSUED BY A KANSAS CITY ELEVATOR COMPANY, SAMPLE BASIS, INCLUDING CLOSING CASH PRICES. Moore-Seaver Grain Co. Kansas City, Mo., May 7,1921. We offer you subject to our immediate wire confirmation, 1 to 5,000 bushels each of the following grades and samples bulk grain, Kansas City weights and grades. [10 days’ shipment.) i. - F. 0. B. Kansas City. C. A. F. East St. Louis. C. A. F. Chicago or Minne¬ apolis. C. A. F. Group 1 Texas. C. A. F. Phila¬ delphia rate. Sample A No. 1 dark hard Kansas. 151 160§ 164 \11\ 184i Sample A No. 2 dark hard Kansas. 149 1581 162 175i 182i Sample B No. 1 semidark Kansas. 148 157J 161 174J 181i Sample B No. 2 semidark Kansas. 146 155i 159 172^ 179i Sample 0 No. 1 hard wheat. 146 155J 159 172i 179i Sample 0 No. 2 hard wheat. 144 153i' 157 170J 177j Sample R No. 1 red wheat. 158 167i 171 184i 191i Sample R No. 2 red wheat. 155 164i 168 181i 188i No. 2 mixed wheat (80 per cent red). 150 159i 163 176i 183J 70 per cent dark. No. 2 hard. 147 156i 160 180i Add 15i cents per bushel to Kansas City price for basis C. A. F. Memphis, Tenn. Add 26 cents per bushel to Kansas City price for basis C. A. F. Buffalo, N. Y. We solicit your orders to buy sample table wheat and assure yoii we will give same our personal attention. Our commission for buying and shipping is 1 per cent. Sales of cash wheat on the Kansas City Board of Trade to-day were ^s follows: Cars. 1 dark hard 148. 1 2 dafk hard 148,152. 8 3 dark hard 147. 3 1 hard. 2 hard 143, 146 . 7 3 hard 143. 3 Cars. 1 red. 2 red. 3 red... 1 mixed. 2 mixed. 3 mixed. Sales dark hard wheat 6 to 8 cents lower, hard 5 to 7 cents lower, soft wheat nomi¬ nally 5 cents lower. The demand for cash wheat to-day could be called dull. Only a few buyers in the market with a rather free carry over to-night. Better country acceptances on overnight bids was responsible for the lack of interest generally, most buyers holding off until Monday expecting a better run of wheat. Kindly let us have your inquiries. Moore-Seaver Grain Co. E. & O. E. 166 TERMINAL GRAIN MARKETING. The following card was sent from Buffalo to millers in New York State offering grain for shipment from Kansas City and Chicago. It mil be noted that all sales are to be made on western market terms, i. e., the terms of the market from which shipment is made. Form 22.—OFFER CARD ISSUED BY A CHICAGO TERMINAL ELEVATOR COMPANY. Armour Grain Co., 1300 Chamber of Commerce, Buffalo, N. Y., May 2, 1921. Subject to acceptance here by 9 a, m., above date, we offer as below (orders for over five cars subject to confirmation), cost and freight following rate points, seller pays Government tax on freight charges. E. and O. E. All sales subject delays account strikes or embargoes. Buyer agrees to settle for overage or shortage at out limit selling price the date of loading provided can not secure cars as ordered. All sales subject to terms of market from which shipment is made: also subject demand draft B-L attached. FROM CHICAGO. FROM CHICAGO—ALL RAIL. [10 days.] Oats, unsulphured, 2,000-bushel cars: Sainple 2, white, 32-34. Sample 3, white, 32-34. Regular 2, white. Regular 3, white. 2 mixed. Royal mixture, 32-34. 481 47f 48| m 46l 4ll Sulphured or unsulphured: 38 sterlings, 40, J cent; 42,1 cent more_ 36 knickers, 38, | cent more... 36 clippers, 38, i cent more. 32-34 winners, undipped. 48| 47 | 471 m Sulphured only: 36-38 Crown mixture. 47J 36-38 Capital mixture. 47 | 36-38 Niagara mixture. 47 J [Corn, 1,428 bushel cars.) 3 yellow, 10 days. 77 j 3 white, 10 days. 77 j 3 mixed, 10 days. 2 yellow —2 wlute, 10 days.j 79 J 48 Imperial barley, 10 days. 81i 44 Liberty barley, 10 days. 76J LAKE AND RAIL—VTA BUFFALO. [Shipment within 10 days after opening of naviga¬ tion. Chicago inspection.] 3 yellow corn, c. i. f. Buffalo. “At and East” rates. Albany, .’i. Baltimore, Philadelphia, New York. Boston. FROM KANSAS CITY. [10 days.] Dark, 2, hard winter. Semidark, 2 , hard winter 2 hard winter. 2 red winter. 2 Milo. 2 white kaffir. 2 Milo—kaffir mixed. 1731 1691 1651 1691 162 144 156 Prices above are Philadelphia rate. For other points add or deduct as below. For— Deduct Bflo., Pitt’g. Deduct Syr., Roch. Deduct Balt. Ded’t Utica. Deduct Albany. Add N. Y. Add Bost. Wheat. Corn, rye. Barley. Oats. Feed per ton. 7* 6 | 6 4 2. 30 2 i 21 2 11 .70 f t i . 20 * 1 i 1 i .30 f 1 1 1 -f . 10 * 11 u 1 s .40 2 i 21 2 11 .80 Always mention price when ordering to avoid mistakes. Armour Grain Co. MERCHANDISING AND SHIPPING. 167 The quotation sheet of the Taylor & Bournique Co. shown below illustrates in greater detail the scope of business and operating methods of a large merchandising elevator company: Form 23.—QUOTATION SHEET, BASIS PHILADELPHIA RATE POINTS, ISSUED BY A LARGE GRAIN DISTRIBUTING COMPANY. Taylor & Bournique Co., Grain Merchants. “quality and uniformity.” Chamber of Commerce, Buffalo, N. Y. [Members of: Chicago Board of Trade, Minneapolis Chamber of Commerce, Milwaukee Chamber of Com¬ merce, New York Produce Exchange, Boston Chamber of Commerce, Buffalo Corn Exchange, Balti¬ more Chamber of Commerce, Philadelphia Commercial Exchange, Sioux City Board of Trade, Des Moines Board of Trade. Main office, Milwaukee, Wis. Eastern branches: New York City, N. Y., Produce Exchange; Boston, Mass., Chamber of Commerce; Buffalo, N. Y., Chamber of Commerce; Philadelphia, Pa., Bourse Building; Baltimore, Md., Chamber of Commerce, Western branches: Chicago, Ill., Postal Telegraph Building; Streator, Ill., Murray Building; Sioux City, Iowa, Grain Exchange Building; Des Moines, Iowa, Hubbell Building; Fort Dodge, Iowa, Snell Building. Private wires all offices. Fast and efficient service.] Cost prices Philadelphia points on orders received by 10.15 a. m. Manifest errors excepted. Limited number of cars. Western terms are hnal. All corn and oats guaranteed. Following offerings subject to Milwaukee Chamber of Commerce rules. Shippers’ ' option, Milwaukee, Chicago. Hammond or Schneider weights and inspection. For other points add or deduct as below, viz: For— Deduct. Add. Cleve¬ land. Buf¬ falo, Pitts¬ burg. Syra¬ cuse, Roch¬ ester. Balti¬ more. Utica. Al¬ bany. To¬ ronto. New York. Bos¬ ton. Mon¬ treal. Que¬ bec. Wheat. 8i lOi 8i 6 6| 6 4 2.30 2i 2i 2 li .70 f I i 1 .20 1 1 i * .30' 1 i i i +.10 li H 1 1 .40 2i 2i 2 li .80 Com. Barley.. 3 2i Oats.!!. Feed per ton. Tuesday. Phone (L. D.) Seneca 6437 when in the market for grain. Chicago Board of Trade using daylight saving time. Acceptances should reach us by 9.15 a. m. eastern standard time. Oats (10 d^s): 49| c., Excelsiors. 48i c.. Superiors. 48| c.,3 whites. 49| c., 2 whites, natural. 49| c., 2 whites, sulphured. 49i c., 36^^ Nashotahs. 48i c., 36^ sulphured Waukeshas. 49| c., 38^ natural or sulphmed White Rocks. 50| c., 40tt natural or sulphured Oshkosh. 47| c., Poland oats. 50 per cent barley. Rye (two cars, 10 days’ shipment); 166i c., good N 0 .2 Wisconsin milling. Wheat (two cars, subject to confirmation), now loaded ready to run: 180 c., 1 dark northern spring. 175J c., 2 dark northern spring. Com (10 days): 7S^ c., 2, yellow com. White,'same as yellow. Mixed i c. discount. Barley (5 cars, 10 days): 80i c., 48|t feeding. 78ic.,46ff feeding. c., 43# sulphured, “A” feed, c., 43# natural “B” feed. Buffalo offerings subject confirmation: 180c.,l, mixed durum wheat. 172 c., 2, mixed durum wheat. 167 c., 3, mixed durum wheat. 173 c., 2, mixed winter wheat. 170 c., 3, white winter wheat. 95 c., smol^ wheat. 85 c., N. D, Salvage wheat; 2 mixed com, 7 cents. 2 yellow corn, first half May shipment, 64^ cents, Georgian Bay. Split cars, 1 cent per bushel more each grade. All sales subject to no penalty if delay account of car shortage, embargoes, or any conditions over which we have no control. We are in the market for two cars New York State, two white wheat. Have you any to offer? Also in the market for a couple cars of buckwheat. 168 TERMINAL GRAIN MARKETING.- Following is the card issued by a corporation operating at Buffalo and shipping both on all-rail and ex-lake billings, all shipments within three days: Form 24.—OFFER CARD ISSUED BY A BUFFALO MILL AND ELEVATOR COMPANY. Telephone Seneca 7460. BUFFALO, N. Y., May 7, 1921. We offer for acceptance, to reach us not later than 10.30 a. m. Eastern time next business day for shipment as shown below, printer’s and manifest errors excepted. Including freight to various rate points as shown below. Official weight and inspec¬ tion certificates final. Sight draft payable on first presentation, or 7 per cent inter¬ est will be added to draft until paid. Orders for Penna. Ry. delivery on all rail subject to our confirmation. To avoid mistakes, always name price when ordering. All rail. 2 yellow corn Eastern corn. 3 yellow corn 1 white oats.. 2 white oats.. Eastern oats. 3 white oats.. 36 white clips Shipment. Roch. a We would ask the cooperation of the Minneapolis Gram Commission Men s Asso¬ ciation, and secure if possible their assurance that this campaign of education will be started by them. 5 Resolution of the Duluth Commission Merchants’ Association, Mar. 5,1917. 192 TERMINAL GRAIN MARKETING. This resolution did not result in the proposed campaign of educa¬ tion,” but rather in the adoption by both associations of proposed amendments to the rules to be offered to the governing bodies of the respective exchanges for a stricter regulation of the financing systern. Wliile these resolutions did not touch upon the effect of financing as a competitive weapon, they did confirm the objections made to excessive and unsecured loans. Following is the resolution proposed to be offered by the Minneapolis Commission Merchants’ Association to the Chamber of Commerce May 16, 1918: Article 1 . That funds advanced to any corporation for the purpose of buying and shipping grain shall be secured by a corporation note in an amount equal to the amount of funds advanced, indorsed individually by the directors of the corpora¬ tion and such security may be accompanied by mortgage on the property of the cor¬ poration or collateral notes and accounts. Art. 2 . Grain advances to independent dealers shall be seciued by the note of such dealers accompanied by insurance with loss payable writer on the grain when the said dealer is known to be financially responsible; otherwise, he shall be re¬ quired to furnish daily reports of grain receipts and purchases for the purpose of hedging, checking, etc,, and surrounding business with such protection as deemed necessary in the matter of banking facilities with full insiuance on the grain, and in the event of the commission house keeping books for indi^dduals, the miniTmim charge shall be $100 per annum. Art. 3, No loans to be made to corporations or individuals for the purpose of buy¬ ing or building elevators. Art. 4. No loans to be made to any corporation or firm or indi\ndiial except for the purchase of grain. Art. 5. A committee consisting of three members of the Minneapolis Chamber of Commerce shall be appointed by the directors of said board to pass on such security as outlined above when presented to them here and settle complaints in relation thereto, their decision being final. The rate of interest on such grain advances shall not exceed The lawful rate of the State of Minnesota nor less than 6 per cent and the interest paid to individuals and corporations on credit balances shall not exceed 4 per cent per annum. An amendment offered by the Duluth association was about identical, the principal differences being that article 2 provided a minimum charge for bookkeeping of $300 per annum and article 3 did not absolutely prohibit loans for the purpose of buying or build¬ ing elevators but merely provided that such loans should not be in excess of 50 per cent of the actual value of such elevators and should be secured by mortgages accompanied by insurance or collateral stock notes. These amendments never came before the exchange associations, since they were disapproved by coimsel. It has been stated indi¬ vidually, however, by a majority of commission men in the North¬ west, that financing in their opinion is a burden which the country banks should assume. A ininority of commission men, on the other hand, have advocated financing as an economic necessity. The following reasons are advanced: (1) The practice enables commission men to be sure of a steady flow of business and consequently makes for economy of operation in the commission business. (2) Before a commission house can borrow money enough to finance country elevators, the members of the firm must be approved as relia¬ ble by terminal market bankers; so that only men of high standing enter the business. (3) Without such financing the farmers’ organizations in the coun¬ try would not have the guardianship whicui they now have; the 193 FINANCING THE GRAIN TRADE. commission man endeavoring to protect his shippers from loss, since such failures reflect upon his own business standing. (4) Assuming that hedging is necessary to keep the margins low in the grain business, financing is said to be a benefit on the ground that the elevators financed are generally required to keep their grain hedged. It is pointed out that financing has thus resulted in less speculation with cash grain in the Northwest than in some other sections. One commission merchant was asked what necessity there was for hedging in the Northwest that did not exist in the South¬ west, where little hedging is done. He replied: ^'1 think your finan¬ cing has to do with that. I think there is more speculation in the Southwest, actual speculation on the handling of cash grain, than there is in the Northwest. They don’t avail themselves of the hedg¬ ing facilities because there are more of them able to finance them¬ selves, and have the privilege of doing as they see fit, while here we insist on grain being hedged.” (5) It is argued that it is beneficial to have commission men finance the country elevators, since they are able to check up the funds loaned in a way quite impossible to the banks. The receivers are in position to check the purchases of grain and also to watch the market for price fluctuations, viz: If barley is off 5 cents, we know it, and we see to it that our clients know it and save themselves from loss of our funds by acting accordingly. Yet it is a fact that this financing, which necessarily requires large drawing accounts, is undertaken to-day primarily as a weapon of competition. Funds are offered with a view to securing shippers’ accounts or to hold them in the face of competition. It is thus merely a phase of competitive operations among commission men. The com¬ mission man who finances a country elevator expects to receive the great bulk of its consignments. Once having secured a country account, he expects little competition for that business during the season, except occasionally. Opinion of the Federal Land Bank.— While deploring the neces¬ sity of this form of financing, i. e., through open-line credit, the Fed¬ eral Land Bank of St. Paul explains ® the situation as follows: * * * It was about the only way the elevators could secure money, and the commission houses have really made it possible for them to run their farmers’ elevators in many cases where they would otherwise not have been able to operate at all. The commission houses have secured the necessary credit from the large metropolitan banks and have loaned this credit to the scattered elevators throughout the country. In other words, the commission houses have been a buffer between the country ele¬ vator and the metropolitan bank. Under no system that could be devised, that I can see, would the metropolitan banks care to loan money direct to the country eleva¬ tors. It is too hazardous a proposition. There is too much inefficiency in the man¬ agement of country elevators as yet to place them on a firm credit basis which would entitle them to go into the money markets and secure credit like a well-organized and operated terminal house. Section 3. Financing the cash commission business at Duluth. The commission houses at Duluth have frequently been financed to a large extent by loans from the terminal elevator companies rather than by bank loans. A majority of the commission houses at Duluth have operated to some extent on funds advanced by one or more terminal elevator companies, which have frequently made such loans on ‘^open-line of credit,” i. e., without collateral security. 6 By correspondence with the Federal Trade Commission, May 19, 1921. 194 TERMINAL GRAIN MARKETING. The statement below indicates the extent of loans outstanding:^ and secured only by personal or firm notes on the books of two terminal elevator companies on November 30 of each of the years specified: Year. Company A. Company B. Number of ac¬ counts. Amount outstanding as of Nov. 30.1 Number of ac¬ counts. Amount outstanding as of Nov. .30.1 1912. 8 $900 .500 K $.555,000 ' 7An nm 1913. 12 1 17,8 .500 ft 1914. 13 1 6Qfi 000 C AAA AAA 1915.:. 14 1 fiOO 000 K OAt; AAA 191G. 14 2,097,500 7 (\Af\ AAA uuu 1 The figures for these loans are actual amounts outstanding unsecured. The figures for Company B were arrived at by taking the total amount loaned on both secured and unsecured notes and then de¬ termining the highest amount within that figure which the commission firm could borrow without collat¬ eral. The vice president stated that the commission firm would borrow up to a certain limit on unse¬ cured notes and after that figure had been reached they must put up collateral for further loans The limits of unsecured credit for these firms ranged from $25,000 to $300,000. * An inquiry into loans made by the same Duluth terminal elevator companies during the four years 1917-1920 shows how large is the proportion of unsecured loans: Year (Nov. 30). Company A. Company B. Secured by bills of lading or warehouse receipts. Secured by personal or firm notes. Secured by biUs of lading or warehouse receipts. Secured by personal or firm notes. 1917. $822,575 1,540,800 97,300 253,900 $898,000 1,334,000 906,500 520,000 $375,350 1,405,300 221,300 322,000 $1,813,000 2,082,500 1,560,000 1,122,500 1918. 1919. 1920. Loans to commission houses by the three other large elevator com¬ panies at Duluth have been small and incidental as compared with the figures shown above. It appears that the loans not secured by grain collateral in the case of each of these companies was less than $50,000 on the dates specified in the above tables. It appears that the loans from Companies A and B are to com¬ mission houses who sell primarily to the elevator companies. The commission houses draw upon the elevator companies for funds to finance country elevators; and as the consignments come in they sell to these terminal elevator companies in order to liquidate their ac¬ counts. Out of 35 receivers operating in the Duluth market in 1917, 7 obtained loans froin Company B and 13 obtained loans from Com¬ pany- A.^ The commission firms so financed comprised most of the large companies in the market and probably handled 60 per cent of the grain received at the market during 1912-13 to 1916-17. The plants operated by Companies A and B comprised about 51 per cent of the devator capacity of the market, and during the period 7 The elevator companies usually loaned at a rate one-half of 1 per cent higher than that for which they could obtain the funds. There was little profit from these operations owing to the necessity of borrowing on time against loans on open account. FINANCING THE GRAIN TRADE. 195 1912-13 to 1916-17 they purchased more than 53 per cent of all the grain coming into the marKet, their proportionate purchases of wheat being considerably larger than this. Considering that other com¬ panies also advanced funds to commission houses to some extent, it IS fairly apparent that a large part of the grain marketed at Duluth was applied on these loans—assuming that the financed commission houses sold directly to the companies advancing the funds. Analysis of the sales showed this last to be the case. Of six repre¬ sentative commission houses financed by the terminal elevator com¬ panies, each sold more than 70 per cent of its grain to the terminal elevator which had advanced it funds. An officer of one company estimated that 80 per cent of the consignments received went regu¬ larly to the elevator which was advancing it funds. On the other hand, the records of a ^‘free-lance’’ company (not financed by an elevator company) showed no such predominance of sales to any one house. The highest percentages of grain sold to any one buyer by this concern were as follows: Per cent. Wheat—^A. D. Thompson. 28. 8 Durum—Globe Elevator..,. 26. 8 Durum—Capitol Elevator. 26. 8 Flax—A. D. Thompson. 33. 2 An officer of one of the terminal elevator companies doing a large volume of this financing declared that there was no written contract of any kind between a financing elevator and its “assisted” commis¬ sion houses, binding the latter to turn over a definite percentage of its grain to the elevator, but added, “We’re not going to loan unless he gives us his business.” Questioned further on this point, he ex¬ plained that one could not expect a commission man to give all of his business to one elevator, since there would frequently be poor cars which the latter would not want to take, and when the commission man offered such a car to some other buyer the latter would nat¬ urally refuse to take it unless he be given some good cars also. If the houses receiving loans on open account would give us all of their grain, he said, the elevator company would get 45 per cent of the grain coming to Duluth, whereas they actually got about 22 per cent. It is apparently difficult for elevators which do not make loans on this basis to obtain this “mortgaged grain,” as they call it. The manager of one company stated the situation as follows (quoting the agent”s report of the interview): Financed commission men can not sell grain to anybody else unless * * * the latter will pay more money, and even then it’s a question. * * * It works out practically as if the elevators had lines of feeders in the country. I don’t see how any corporation is justified in putting the money of its stockholders out so beyond control. ‘ ‘ I loan to you and you scatter it all over. ’ ’ A man worth $100,000 gets credit amount¬ ing to $500,000. Personally I refuse to ‘ ‘ throw money to the birds ” in that way. It does make it hard to get our share of the grain. When we spring the price sometimes these other companies follow, and sometimes they drop out. Officers of other companies declared that they were obliged to pay a premium to prevent a commission house from selling its grain to the elevator which had advanced it credit. It was stated that even the lower grades of grain were often turned over to the financing ele¬ vator at an agreed differential, the grain being sold off exchange. It was also alleged that the nonfinancing mevators were so associ¬ ated with line-elevator companies that they did not bid for grain to 196 TERMIITAL GRAIN MARKETING. any large extent from the so-called financed commission houses un- | less the supplies of a particular crop proved insufficient to meet their i demands. T Without further discussion of the competitive situation it appears ' reasonably conclusive that such extensive borrowing from dealers is i carried on for commercial reasons rather than for lack of banking facilities. [ Section 4. Conclusions on financing. [ Improved banking arrangements are needed in the producing areas i of the Northwest so that country shippers need not be dependent upon * terminal market commission houses for their working funds. While in other sections of the country grain in car lots is financed through regular banking channels, the country dealer in the Northwest f frequently draws upon a commission house for operating funds and thereby becomes obligated to ship to this concern. This results in ! competition in financing as well as in the handling of grain. This | competition in turn results in the assumption of heavy financial ■ risks by the commission houses, and sometimes the acceptance of ' inadequate security for the funds advanced. It also probably tends to keep out of the commission business men with small capital and lines of credit. Moreover, the practice leads to a multiplication of ^ solicitors and to expenses for solicitation greatly in excess of those incurred by commission houses operating in the territory outside the Northwest, and thus has a tendency to create high commission rates. This is due not only to the fact that such financing requires exten¬ sive solicitation to secure the business in the first place but also to the necessity of maintaining some check upon the subsequent opera¬ tions of the financed elevators. As pointed out in Volume I, page 242, however, there is a great ■ deal of evidence to indicate that in a large portion of the Northwest I the elevators can borrow more cheaply from the commission houses fl than from the local banks. As long as this continues to be true, ■ it is doubtful if any material improvement with reference to commis- S sion house financing can be expected. ■ The financing of Duluth commission houses by terminal elevator . I operators tends to have a restrictive effect upon competition and should be eliminated. Commission houses are the agents of country fl elevator consignees for the sale of their grain, and as such it is their S duty to obtain the best possible price for that grain. Arrangements 9 under which they turn over grain consigned to them to certain I terminal elevators in return for financing is not conducive to free I competition in the sale of grain nor presumably to the consignees I procuring the best obtainable price therefor. Chapter VIII. THE GRAIN BULLETIN. Section 1. Market news agencies in general. Price information from the terminal grain markets is made availa¬ ble to country shippers through a variety of agencies.^ From several terminal markets there are issued one or more daily market journals or ''price currents,” such as the Daily Trade Bulletin of Chicago, the Daily Market Record of Minneapolis, the St. Louis Market Reporter, and the Kansas City Daily Price Current; and these journals, or the quotations contained therein, are available to the trade generally. Actual bids for grain to arrive from the country are sent out almost daily by terminal market dealers and afford a price basis for buyers and shippers in producing territory. In addition, there are the daily telegraphic dispatches distributed by the Western Union and Postal Telegraph Cos. over local Morse wires or tickers through the producing areas. By subscribing to either the "continuous service,” or the "interval service,” ^ a local grain dealer at a rail¬ road shipping point may secure regular wire quotations from the terminal markets. Moreover, the private-wire systems which radiate out of Chicago, through their branch and correspondent offices, supply their customers and the trade in general with market price information and other market news. Exchange members, especially the commission merchants, often advise their customers by wire of important market developments and send out by mail daily market letters, price currents, and other circulars. In the case of line-ele¬ vator systems, letters, cards, and wire messages are sent out as instructions for local agents to follow in buying grain and are a direct influence in determining the prices paid to producers. The custom of sending out buying prices for country shippers, i. e., lists of prices with the freight, handling costs, and profit already deducted, has developed more extensively in the Northwest than in any other producing section.^ The Grain Bulletin, a price card of this character issued daily by F. R. Durant, of Minneapolis, is now used very widely in the territory tributary to Minneapolis and Duluth. Section 2. General statement with reference to competitive conditions and agreements in country buying in territory covered by the Grain Bulletin. In Chapter XI of Volume I of this report there is printed a large . number of letters from the files of the line-elevator companies show¬ ing competitive conditions and many examples of agreements in restraint of competition in the buying of grain at country stations in 1 Seo Vol. I, Chap. VIII. 2 See Vol. V, Chap. II, sec. 4, and footnotes. 3 Although line-elevator companies in all sections generally furnish their country agents with buying prices. 197 198 TERMINAL GRAIN MARKETING. the Northwestern States tributary to the terminal markets of Minne¬ apolis and Duluth. In order to make clear the conditions prevailing in the country marketing of grain and some of the conditions surrounding the use of the Grain Bulletin card in country buying by those who subscribe to it, as distinguished from Mr. Durant's preparation of it, a brief summary is here given of part of the voluminous detailed evidence printed in Chapter XI of Volume I. Reference should be made to that volume for the evidence itself, chiefly in the form of letters, since the detailed evidence gives perhaps a clearer view of the situation than can be had from the summarization here made. The question of the use made of the card as a basis for price agreements among its subscribers is entirely separate from the question whether in recent years Mr. Durant in issuing the card prices has been in collusion with the line-elevator interests. A review of the mass of information obtained by the Commission indicates that at the average country marketing station, especially in the northwestern grain States, there is a considerable amount of buying competition but that there are frequently stations at which competition is either insignificant or nonexistent on account of local or other agreements. The Commission is in possession of hundreds of letters from the files of line-elevator companies operating in the Northwest which cover the period 1912-1920 and which clearly evidence either agree¬ ments as to country prices, grades, dockages, etc., or else such har¬ monious and cooperative action with reference to these matters as would bring about practically the same elimination of competition as could be secured by more specific agreements. This evidence relates principally to the acts of the line-elevator companies. Although the lines appear to be frequently the originators and instigators of the agreements and arrangements, the correspondence clearly shows that cooperative, or farmers', and independent and mill elevators are frequently parties to such arrangements and that agreements and understandings affecting and often eliminating competition in one or more respects are bv no means peculiar to the line companies (Vol. I, pp. 244-245). The most active competition in country grain buying, as well as the most frequent agreements, understandings, and mutual arrange¬ ments, seem to occur in the prices ofiered. An indirect form of price competition occurs when some one or more of the local elevator purchasers, instead of grading and docking the grain accurately, grade it higher than its quality actually warrants or deduct less dockage than the grain contains. Obviously, in either event, the result is to give the farmer more money for his grain than he would get if accurately graded and docked, competition in grading and docking being frequent, as well as are agreements in reference to these matters (Vol. I, pp. 254—255). It is believed by the line-elevator companies that farmers' elevators are especially prone to overgrade and to underdock. There are numerous indications that the mill, and especially the farmers' or cooperative elevators, are the most serious factors in country competition. Both these types frequently undertake poli¬ cies in prices, grades, dockages, etc., at variance with the policies of their independent or commercial line competitors. THE GRAIN BULLETIN. 199 Division of receipts at local stations was frequent twenty or more years ago by pooling agreements, with cash penalties to be paid by those buying more than their share. Most if not all of these old pooling agreements appear to have been abandoned. More recently the business at local stations has often been divided among elevators interested but without any system of penalties. Occasionally there is an understanding that if one of the elevators at the station falls behind in its share of receipts it is to be allowed to pay a higher price than its competitors, so as to enable it to catch up (Vol. I, pp. 282- 287). A practice, amounting in effect to a pooling of receipts, is that of closing or wrecking elevators on a rental basis. When the line com¬ panies operating at a station conclude that there are too many eleva¬ tors there to enable a profitable handling of the volume of grain tributary to that point, they sometimes agree to close or tear down one of the line houses at the station upon agreement that the line companies keeping open will pay a certain sum in compensation to the company which closes or wrecks its house. In case of closing it is apparently the practice for the agreement to take the form of a signed lease, the agreed sum being paid as rental. It is claimed that these practices existed for only a few years and applied to only a few companies. Mr. Durant, of the Grain Bulletin, who appears to have been a sort of clearing house for operations of this character, states that the last time he compiled figures for this purpose was the crop year 1915-16. The Commission is not in a position to confirm this, but the correspondence obtained relating to this particular matter all bore a date prior to 1917 (Vol. I, pp. 288-293). The correspondence obtained by the Commission records numerous instances where the head offices of line companies have directed their agents to call on their competitors with reference to effecting agree¬ ments or at least more harmonious action on prices, grades, dockages, etc. The friendly feeling frequently, if not usually, apparent among the various line companies leads to definite efforts on the part of many of the head offices to keep the agents of the different lines at each station working together on a harmonious basis, ‘^buying grain right,” or, in other words, at card prices, with accurate grading and dockage. Definite instructions are frequently issued to the local line agents unmistakably designed to prevent competitive fights, to eliminate ill-feeling which might develop into competitive warfare,, or, once such warfare has occurred, to put an immediate or early stop to. it. There are also occasional instances where the lines manifest a similar attitude toward their competitors other than the line companies (Vol. I, pp. 296-298). Letters by line-elevator companies summarizing price CONDITIONS AT THEIR VARIOUS STATIONS. —Line-company .corre¬ spondence in the fall of 1917 stating the competitive reasons for pay¬ ing over the list price of the Grain Bulletin card at specified stations is here quoted: [From Cargill Elevator Co. files.] October 30, 1917. Mr. F. C. Durant (% Grain Bulletin'), City. Dear Sir: Below find list of stations paying over list: Clara City, Minn .—1 to 2(i;/over for oats, 3 to 4(J; over for barley and flax. One-half the receipts at station going to Farmers Elev. Co. 200 TERMINAL GRAIN MARKETING. Moynord, Minn. 1 to 24 ; ovor for oats in ondoavor to get share of receipts. Milroy, Minn.—1<^ over for oats. Surrounding stations all over I 4 ; or more. StewdTtville, Minn. 24 ; over for oats; 3 to 545 over for barley. Farmers Co makes price. Dover, Minn. 1 to 24; over for oats; 3 to 44; over for barley, in endeavor to get share of receipts. Airlie, ifmn.—Oats 1 to 24; over, barley 3 to 44; over, account Farmers and list being out of line with Milwaukee most of time. Stirum, N. D. 1 to 34; over Wheat, Flax and barley. Receipts almost entirely going to h armors. ’’ (>ete, N. List to 1 4 ; over for wheat, barley and flax, account Farmers Elev. Co. Honeyford, N. D. —Freight off, but getting no receipts, due mainly to practice of competitors cleaning grain for customers and returning screenings. Buffalo, N. D.—H over for wheat, flax and barley, in endeavor to get share of receipts. Hensel, N.. i).—List but running 14 to short for wheat dockage account light dockage taken by Farmers Elev. Co. Garretson, S. D. 24 ; over for oats, account local and surrounding markets. Willow Lakes, S. D. —2 to 34; over for wheat, flax and barley. Farmers Elev Co taking nearly half receipts on markets. Mclntire, la. —Oats 24 ; over account surrounding markets.- Alvord, Iowa. Oats 2 to 34; over, barley 3 to 54; over, account Farmers Elev Co prices. Sioux Center, Iowa. 3 /-(• Oct. 31, 1917. Grain Bulletin, City. Gentlemen: At Grove City we are buying as our competitors permit us, being in competition with Nelson-Lund Co. and the Farmers. Under the conditions that exist there and always have existed we will be unable to say that we can ever come to list and our prices fluctuate according to conditions fot [for] the day. ' THE GRAIN BULLETIN. 201 Our Willmar man advises that the mill and himself follow what the Farmers Ele¬ vator at that point does and would be willing to come to list if he would, but they say his prices vary from day to day and they have to watch what he is doing. At Murdock our agent is working with the Farmers Elevator Co. and they would be glad to go to list on everything if Kerkhoven and De Graff on either side, could be brought into line. At Benson the mill is taking all the wheat, which is very badly overgraded. The Benson Market Co. are paying up fairly well for oats and barley, and competition for what is left seems to be very strong between Cargills, ourselves and the Benson Market Co. and our man claims to be following the prices the others are setting. At Clontarf we are entirely guided by the market at Hancock, as we are all alone at that point and have to pay within reason of the Hancock market on everything from the North because of Hancock. At Hancock we are the only line house, having to compete with three independents and a Farmers Elevator, with no chance to come to list. At Walcott the Farmers and ourselves are willing to come to list on everything providing Christine can be brought to list and remain there. At Everest we are paying l(l5 over list, inasmuch as we are alone there and surround¬ ing towns would draw our business away if we did not, the territory being very con¬ fined and small. At Blab on our man is paying 1 to 2^ over list on practically everything, and claims this is necessary on account of the Farmers Elev. Co. paying about 11 to 120 over the market; Mr. Taplin also advises us on this point. At Pickert we would be glad to remain at list and all the others up there would do the same if Hipley could be brought into line. At Finley I understand the Farmers, Cargills and the St. A. & D. are all paying 20 over list, and as high as 50 over list on barley. Our man is a new man there, and of course has to buy on the same prices that the others set altho he says he is perfectly willing to come to list at any time. At Sharon our market is being run at list price but being interfered with more or less on account of.Finley, and the agents are grumbling because some of the stuff is going away from them and going to Finley. At Pekin we are buying at list, and also at Hamar, altho our man at that point claims he thought he was paying over list and the farmers thought he was also inas¬ much as he was getting a’great deal of Dark Nor. Spring but not so grading it. The wheat has graded that way, however, in this market. At Arthur, the farmers, as you know, at that point clean the wheat and pay for the dockage. We have no cleaner so it would practically mean an over list basis for us. At Blanchard I believe we are paying at present 10 over list but see no reason why the market should not go to list unless it is due to Murray or some stations competing with Blanchard. At Larimore we are paying 10 over list. Our agent advises one of his competitors will not come to list. At Milton we have been buying at list right along but the Monarch did not put the 10 reduction in about a month ago and so we had to come up to their price, which is 10 over list. I suppose that can be adjusted at the present time. At Hillsboro the agents have all agreed to come to list. At Thompson we are buying some stuff at list and some at l0 over list. I don’t know what the reason is, and our agent has failed to advise us. At Glasston we are at list. At Hamilton at list, and at Neche at list. At Ashby it is catch as catch can, inasmuch as he has a farmers competition who handles f to f of the business and we have to pay whatever we can afford to to get what we can. At Rothsay we cannot do any business without paying over list, inasmuch as the Farmers Elevator is cooperative, and they are paying back to those hauling. At Ada we can only buy the coarse grain and have to pay over list for those inasmuch as the Mill Co. are buying all the wheat on an OA'^er-grading basis, and are buying oats and shipping them north in mixed car load feed lots for nothern [northern] lumbermen. They have a sacking machine and everything to handle this business, and inasmuch as they are shipping feed and flour also they ship part carloads of oats with it. At Fisher we are buying at list. At Halstad we are paying 1 to 20 over owing to Farmers competition. At Shelly, Neilsville and Climax, I know of nothing to interfere with list price basis. At Clara City we pay 10 over the Farmers and they allow us to do so, but inasmuch as they do not think tney ought to come to list and are paying l0 over, of course it forces us to pay 20 over. All the buyers are on the same basis. 20^ i^RMiNAL gMin Marketing, b^nard we have been buying our stuff at, 10 oy^r list; All the other compaftie^ are paying 20 over list. The Farmers are willing to cohie to l0 over list providing' th8 Atlas and Thpipe will do the sam§; At (jranite Fails we buy the majority of tbe stuff arourid list pfiee^; At Green Valley we could buy everything at list price if Marshall and Cotton Wood would hold the same basis. , At Marshall we are paying l0 over list, as that seems to be the price the mill down there and tbe Farniers Mlfevatof want t0 pay. , At Pdofehcbj Mihh.j we biiy accetdihg to What Tyl0f and Bllthtott are doing, which at pfe§ent seeins tb bb 20 bvbf bji bat§ ahd ^ tb 40 qWer bh,barley; At Riithton the i^afinefs Want to pay 20 over list fbr all the oats they buy, and ar@ paying ahywhere frotti 2 to 50 over on barley. At Holland the market has been gotten do.wn from 40 over to 20 over on bats; They are buying barley some over list also. At Pipestone we are in competition with two Independents and one Farmer’s elevator, and have to pay on the basis of the market they set. At Ihlen we are buying against the Farmers and an Independent, and they hold the market high enough. At present we are paying about 30 over list on oats, and most any price on barley. At Jasper the market can be gotten down to 20 over list anyhow. It has been 3 to 40 over in the past. This only depends upon the action of the Atlas and E A Brown. At Garretson we are only buying oats, inasmuch as another station down there takes practically all the barley in that country and pays abnormally high prices for it. They are paying 10 oyer qu oatS; and the Thorpe Elevator I believe are paying 20 over. At Danvers we are trying to buy at listj but oUr competitors are overgrading. At Hqllbway We have to pay over list to make bUr grades stand up, inasmuch as oUr Coinpetitbr, the Farttiers, are overgrading. ^ At Appleton we are paying 1 to 20 over list on various commodities to hold our share of the business with the Farmers. At Bellingham we are buying at list price, although the Farmers at that point are overgrading. At Nassau we are holding prices at about list. At Albee we are practically buying on list price basis. The Farmers are over¬ grading and the Cargill people are paying over list 3 to 40. At LaBolt we are buying on a somewhat over list basis to compete with the Farmers who are overgrading. At South shore we are buying on an over list basis on account of the Farmers there overgrading. Neither the Cargills nor ourselves are doing anything at Forestville. We are paying what we have to to keep all the stuff, belonging to Forestville from going to South Shore or over to Waverly or down to Rauville all three of which markets are taking practically the majority of the stuff from that territory. At Vienna we are simply competing with the Independents on the Milwaukee Road. At Chokio we do the best we can and buy according to grade, altho we may at times pay over list to compete with Stewart who is overgrading everything he takes in. At Johnson we are simply holding prices to keep the stuff coming to Johnson that belongs there instead of going either to Chokio or Graceville. At Graceville the mill is paying |2.07 for practically all the wheat that comes, and more or less of its is overgraded I should say about 50 % of it. On the Ellendale line, from Belle Plains to Silver Leaf we are willing to buy every¬ thing at list price if the stations on the Soo to the North and the points on the North¬ western and Milwaukee who are competitors of those stations will do the same. If these stations are put at list basis we can buy all the stuff up there at list prices; other¬ wise we will have to pay the same as the others. Yours truly, (Signature not decipherable.) Gen. Supt. [From Cargill Elevator Co. files.] Nov. 15, 1917. Mr. F. C. Durant (®/o Grain Bulletin), City. Dear Sir: We are paying over list at the following stations and for the reasons given; Cooperstown, N. D .—20 over on wheat and 30 over on barley, account Farmers and Erickson Co. THE GRAIN BULLETIN. 203 Eckelson.—2-967.) ® Cf. Ill and IV of the Articles of Association. 10 Mr. Durant stated to the Commission that on Dec. 1, 1914, he closed out the Grain BuUetin guaran¬ tors’ fund, crediting the balance ($2,842.53) to profit and loss. suaidu 11 The Gram Bulletin has been investigated by the Minnesota Legislature (1905 and 1913) bv State railroad and warehouse commissions in the Northwest, by the United States Interstate Commer4 Com- (19^), and bv the United States Department of Justice (1914), and by others. 12 Many elevators close to Minneapolis, however, receive the card before the close of the day on which the prices are based. THE GRAIN BULLETIN. 209 difference in a group being one-half a cent. Each group contains several mailing points, as indicated in the table below. The stations within each group are classified by rate numbers, i. e., those stations within the group operating on the same tariff for the five grains and flax are classed under a rate for the convenience of the main office. This number is referred to to find the freight charge which must be deducted from the basis price before the card is sent out. The table below shows the general arrangement of groups and mailing points for the Grain Bulletin card service: Group organization of the Grain Bulletin service {1920). Group No. Territory. Mailing points. Number of cards dis¬ tributed (May 5, 1920). 1 Southern Minnesota. Minneapolis, Minn. 570 Bingham Lake. 75 2 fioiitb Dakota. . .. Aberdeen. 171 Minneapolis. 184 Madison. 99 a Sflntion of cftntra.1 Minnesota.. Minneapolis. 139 4 do ... .do. 38 Alonof riorthPTri honnda.rv of South Dakota-.... . 64 Aberdeen. 115 Morthem half of Minnesota. Miiin68 Northwestern Grain Dealers’ Association, --, Secretary. Extent of the Grain Bulletin service.— In a letter written July26,1912,Mr. Durant stated that “from the mainline of the North¬ western Kailroad between Mankato and Kapid City to the Canada line the card is being used by all line companies and full 85 per cent of the independent and farmers’ companies. This was brought about by the fact that in this new territory the card is a buying card and shows the prices to be paid at each station regardless of any other station not affected by it.” The statistics of country elevators indicate that in 1918 the Grain Bulletin card was used by the great bulk of the country elevators in Minnesota, North and South Dakota, pd Montana; and that in Minnesota and North and South Dakota its wire service was used by the great majority of country elevators reporting the employment of wire services. In the fall of 1906 approximately 1,275 cards were sent out daily, 90 going to farmers’ elevators, 275 to independent dealers, and the renmmder, or about 75 per cent, to line-elevator companies’ agents. In October, 1921, out of 4,084 elevator subscribers only 1,645 were line elevators, while 1,487 were farmers and 952 independents. In other woids, practically 60 per cent of the elevator subscribers were nonJme houses. This shift has been due to the relatively more rapid lUCTease in the number of nonline as compared with line houses. Cost of the service.— For years prior to 1917 the charge per elevator for the Grain Bulletin card was 90 cents per month. In that year the charge was first raised to $1 and subsequentlv under the increased postage rates, to $1.25 per month. Kegular toll rates are paid for the telephone service and charges are prorated to individual stations on the basis of actual toll charges plus the compensation of Mr. Durant’s agents at distributing points. The telephone charges in 1917 varied from about $10 to about $40 per country elevator per year. Mr. Durant states that this wire service IS lurmshed at cost and that his own compensation is paid out of the revenues from the card service. He also states that this service, because ot the variation in number of subscribers from year to year has sometimes been operated at a loss. To quote: “For instance' m 1911-12 the loss was over $500 and in 1917-18 the gain was $32.” However, the proprietor’s drawings (salary or compensation) are included in the expenses. Mr. Durant’s books have not been audited smce 1907, and no profit-and-loss statement has been made public since that time. He estimated in 1917 that the entire service (including wire messages) was costing about $100,000 a year, of which wire expenses constituted $60,000 to $70,000. The cost per elevator was probably 50 per cent more in 1920 than in 1914. 17 For detail see Vol. I, Chap. VIIR s(ic. 3 THE GRAIN BULLETIN. 217 S Section 6. Failure of the State Bulletin. There has been at least one attempt in the Northwest to substitute a 'State quotation service for that operated by Mr. Durant. In 1913 the .'Minnesota Legislature by joint resolution instructed the railroad and ’Warehouse commission of that State ^Mo prepare, issue, and furnish : to subscribers a price card showing the market price for each grade and >kind of grain at terminal markets for each day, together with other : necessary information under such rules and regulations as to the service f and price to be paid by the subscribers as the commission may deem reasonable.’’^® Pursuant to the resolution this commission proceeded to publish an “^official price bulletin” at a subscription price of $1 per month ‘^subject to changes which will eventually make the service self- sustaining and no more. ” This bulletin, however, indicated only the closing prices for grain both ‘‘spot” and “to-arrive” at Minneapolis and Duluth as determined by the closing price committees of the I respective exchanges. The State commission did not furnish prices ifor delivery at country markets, although there was “placed in I the hands of every local warehouseman in the State of Minnesota I a card which showed the terminal handling charges that would ordi- I narily be assessed against a consignment of grain, except the freight, I and this card invited the attention of the local agent to the question of freight, directing him to go to the local freight agent for that 1 information. ” That is, they attempted to provide the local elevator ] manager with all data necessary to enable him to calculate his own ] price hut did not attempt to calculate it for him. The history and abrupt termination of this service is described by F. W. Eva, the then chief inspector of grain,^^ as follows: Notices were published in a number of the daily papers, advising that these cards ' would be prepared and would be sent out. In addition to this a circular letter was prepared by the department and forwarded by mail to the agent or operator of every focal warehouse in the State, inviting him to subscribe for the Price Bulletin. Ap- : proximately 1,500 of these letters were sent out. The commission, in directing that these letters be sent, fixed a price of $3 for a three months’ subscription. We received I replies from 60 out of the 1,500 or more, who became subscribers for three months. A little later we received another subscriber’s request for the bulletins, so that the largest number of subscribers at any time to this bulletin was 61. * * * At the expiration of all of these subscriptions, none of them were renewed, 1 in fact, the department received letters from a large number of the 61 asking that I these bulletins be stopped, as they were of absolutely no value to them—that they preferred the Grain Bulletin’s price cards. * * * At the investigation of the grain business of the State, there was con- ! siderable discussion by members of the investigating committees of the house and the I senate, particularly of the house committee, of the price cards published by the Grain Bulletin of Minneapolis and these bulletins were denounced in rather emphatic terms, "^ile there were some features of the price cards sent out by the Grain Bulletin that needed amendment or change, the fact that the official price card offered by the commission met vdth absolutely no encouragement and with a refusal even to receive it, plus the further fact that those who did receive it, in a large measure, wrote their preference for the Grain Bulletin’s cards, would indicate that the local warehouse buyer was possibly better able to take care of himself than had been antici¬ pated. The resolutions directed the sending of the cash closing prices for the one crop year to all who subscribed, but when our 61 subscril^ers refused to further pay for or accept the service the department had no other alternative but to stop sending the cards. 18 Report of the Chief Inspector of Grain to the Railroad and Warehouse Commission, 1914, p. 12. _ 19 Annual Report of the Chief Inspector of Grain to the Minnesota Railroad and Warehouse Commission, 1914, pp. 13-16. 218 TERMINAL GRAIN MARKETING. Section 7. Variations in normal margins of Grain Bulletin Card. The normal handling margins deducted by Mr. Durant from ter¬ minal market prices in making up the card show considerable varia¬ tions, not only as between different grains but also as between differ- . ent grades of the same grain and as between crop years, etc. Between grains. —According to Mr. Durant the narrowest normal margin is maintained on oats with corn approximately the same. The margins on wheat, rye, and especially barley, are wider normally than on either of these two grains and the widest margin is ■ on flax. Mr. Durant states that in determining these differences a variety of factors are considered, such as (a) relative normal selling ^ values of the different grains, (b) the weight of the legal bushel, (c) ^ the total number of bushels of the commodity marketed, {d) the quality of the crop, (e) opportunity to hedge, (/) a sufficient carrying charge. Using the Government crop estimates for 1921-22 and the ' percentage shipped out of the county where grown for 1920-21, to determine the theoretical volume of each grain handled Mr. Durant gives the following as the hypothetical results for a North Dakota elevator handling 100,000 bushels on the margins in use in November, 1921: Wheat. 67,100 bushels, at 7 cents.. $4, 697 ^ Oats. 7, 500 bushels, at 4 cents.. 300 - Barley. 10, 500 bushels, at 8 cents.. 840 I Rye. 10, 200 bushels, at 7 cents.. 714 I Flax. 3, 300 bushels, at 17 cents.. 561 I Corn. 1,400 bushels, at 5 cents.. 70 J 100, 000 7,182 It will be noted that approximately two-thirds of the grain handled' is wheat and that the average margin is only a little over 7 cents per bushel on all grains and flax combined. Between different grades of the same grain. —The risk in handling the lower grades of grain is greater than for the higher' grades. As no ^Uo-arrive’’ quotations are available for the lower , grades, the basis on the lower grades is arrived at, Mr. Durant states, by considering the discount prevailing on the daily sales and apply- ; ing that discount to the higher grade which is quoted ^Ho-arrive.’^ •; The quality grown in the several sections of the territory tributary to I Minneapolis is considered, and the test weight per bushel is a factor, r; the lower grades having lower test weights per bushel. The effort is ['] made to reflect at least the normal margin on each grade. In addi- j tion, hedging can not protect the buyer so closely on the lower grades J because the relation between the future and such lower grades flue-- j tuates more frequently and to a greater degree than that between f j the future and the standard grades. ^ j Between different years. —According to Mr. Duranffs rec- ; ollection, the normal margin (on wheat ?) in 1900 and for some years,. subsequent thereto was rarely more than 3 cents per bushel, while in ] 1915 and a few years prior thereto it was rarely less than 6 cents. In ^ j determining the normal margin one of the most important factors is the cost of operation, i. e., labor, taxes, insurance, supplies, etc.,. Salaries of managers and agents have advanced to a considerable | extent, and whereas 10 or 15 years ago the maximum paid was ! THE GRAIN BULLETIN. 219 probably in the neighborhood of $1,000 per year, this maximum is now probably as high as $2,500 per year, while the average has ad¬ vanced in proportion. Terminal charges for commission inspection and weighing have increased considerably since 1914. Years ago the charge for inspection and weighing was as low as 15 cents per car for each. Now weighing is $1.25 per car, and inspection on corn and flax $1.25 per car, and $1 per car on other grains. The Rowing of other crops than wheat has also been a factor in increasing the normal margins over a period of years. A good illustration of the effect of expense factors in the variations in normal margins from year to year is the situation during the last two crop years. The normal margin for wheat for the crop of 1920 allowed by the Grain Bulletin was, according to Mr. Durant, 9 cents. Owing to the great decline in commodity values, however, which he estimated would heavily reduce the items of interest and insurance, he decreased the normal wheat margins for the crop of 1921 to 7 cents. Other variations.— Besides the foregoing, which are factors in the variations in the normal margins of a more or less continuous and permanent character, numerous other changes in margins are made owing to temporary and unusual conditions. In October, 1907, grain buyers were notified that the banks could not continue to supply currency for the purchase of grain at country points. A wider margin was at once made, and while it is Mr. Durant’s recollection that it was slightly reduced within a day or two, the normal margin was not restored until money conditions- became normal again. There have also been occasions when temporary shortage of box cars or severe storms have made necessary a change in the normal margins for a time. In another case a variation in the margin was made for a time owing to temporary rules promulgated by certain railroads limiting the movement of their equipment. When future trading was discontinued in May, 1917, there was no ^Ho-arrive” market and cash wheat values fluctuated from 10 to 25 cents daily. The Grain Bulletin reflected this condition to country buyers by maintaining a wider buying margin in order to afford them as much protection as possible. In 1918-19, with the Government minimum price in effect, Mr. Durant employed a normal margin of 7^ cents on wheat when the actual selling price did not exceed the Government minimum. When the actual selling price at the terminal market, however, was greater than the Governrnent minimum, he increased the normal margin up to 10 cents on account of the increased risk, on the theory that the only protection the buyer had in the absence of future trading was the Government minimum price. Variations as between stations. —The Grain Bulletin has been the object of a greater volume of complaint on account of the varia¬ tions in margins and prices as between local markets than for any other one fact. This subject will be developed in the following section, in connection with the relation of the Grain Bulletin to country price competition in general and the question as to whether the line- elevator interests at present influence the local list prices of the Grain Bulletin. 220 TERMINAL GRAIN MARKETING. Section 8. Question as to influence of line-elevator interests on the Grain Bulletin price card. Eelation of Grain Bulletin to country price competition IN GENERAL.— The relation of the Grain Bulletin to country price competition in general was discussed in Chapter XI, Volume I, of this report (p. 268 ff). In that volume detailed evidence is given bearing out the statements which are here excerpted from Volume I as a review of the situation. The matter referred to is as follows: From a careful examination of the correspondence, it appears reasonably safe to conclude that as a matter of general policy the line companies endeavor so far as possible to stick to card or list prices. This policy of the line elevator companies in attempting to hold the markets at which they operate to the Grain Bulletin card or list price is presumably based upon the fact that the card deducts from terminal market prices, not only freight, but also a handling margin of several cents, which is sufficiently liberal to cover both expenses and a margin of profit. If this card or list price can be maintained, therefore, the line house is usually assured of a profit subject only to being able to procure a fair volume of grain. It is difficult to estimate how important a part this card plays in the competition of country elevators. The fact that it quotes a buying price for each station and is generally in use throughout the Northwest would appear, in a technical way, to facilitate agreements by reason of the fact that the elevators at each point thus have a minimum buying price upon which agreements or understandings could readily be based. Secondly, the technical method of distribution of Grain Bulletin tele¬ phonic and telegraphic price changes offers a means of facilitating agreements. Fre¬ quently the agents work in rotation in receiving and delivering the changes, one doing it one week, another the next, and so on, and this system supplies good oppor¬ tunities for talking over prices, etc. (Vol. I, p. 270). Although the indications are that the lines greatly prefer to stick to list prices and to grade and dock correctly and direct a great deal of energy to procuring these results through agreements or understandings, or otherwise, it is also their policy to meet competition whenever necessary. As a rule, this is to be interpreted to mean that the line company will pay whatever prices its competitors pay. The indications are, however, that the lines are not usually mlling to go further than this. In other words, while the line companies frequently go over the list in the prices which they pay, the indications are that they tend, on the whole, to follow rather than to lead their competitors in bidding up the local market prices (Vol. I, p. 275). This policy of merely meeting competitors’ prices is due not only to the fact that the line companies desire to buy at the lowest prices possible and endeavor to hold the markets to that basis but also to the influence of the State laws. In several States laws have been passed with reference to buying grain which make it illegal for the line companies to discriminate in prices between stations except to meet competition; so that if the price is raised at one station, except it be to meet competition at that station, the price must, theoretically at least, be raised at all stations of the line com¬ pany within that State, if such company is to avoid possible charges of discrimination (Vol. I, p. 277). In meeting competition there are numerous indications that the line companies have not infrequently worked together in endeavoring not only to prevent competition among themselves, but also to take business from their competitors of other types (Vol. I, p. 280). Question whether past influence of line elevators on PRICE CARD STILL PERSISTS.— As stated in section 7, the Grain Bul¬ letin has been the object of a greater volume of complaint on account of variations in margins and prices as between local markets than for any other one fact. The history of the policy of the Durant card service with reference to variations of margin as between stations is here reviewed. Prior to 1912 (according to Mr. Durant) opinion was obtained from the attorneys general of three of the States served by the Bulletin to the effect that the cards would be on a legal basis if they indi¬ cated the highest prices which any dealer was willing to pay at a given station. That is, the cards should reflect competitive con- THE GRAIN BULLETIN. 221 ditions rather than any arbitrary or theoretical arrangement of margins. This policy was stated by Mr. Durant as follows: * * * The card for one station has nothing to do with the card to any other sta¬ tion even if the freight rate is the same; we have always maintained that the local conditions at each station determines the price. * * * The card represents the paying price and is used as such by over 80 per cent of the farmers’ companies. It is important to examine those factors which have influenced the Grain Bulletin in thus adjusting prices and margins for a given country market. (1) At the outset it is clear that Mr. Durant did not always prior to 1917 wait for a request to raise or lower the card, but made adjustments for different sections based on varying crop conditions. The following extract from correspondence (Sept. 17, 1913) shows this policy as applied to barley and wheat: * * * The writer remembers well explaining to you some time ago that barley sometimes has a different value from different parts of the country and that it was necessary for us to make the break in the price somewhere, and for convenience we have always taken the State line; this does not happen only in the territory in which you are interested but wherever it is necessary. Last year in certain parts of North Dakota we quoted a different price for wheat than in other parts on account of the condition of the wheat. (2) Prior to 1913 the data obtained show that Mr. Durant altered the cards for particular stations on the request of either an individual country elevator or a line. Office of Clinton Farmers’ Elevator Co., Clinton, Minn., Aug. 31, 1912. The Grain Bulletin, Minneapolis, Minn. • Gentlemen: Our list for flax you are making about 22 ther information on the quotation services of the exchanges, see also Vol. 11, Chap. VII. ' ' 2 Chicago and Duluth. 3 The following statement, as published for the Kansas City market (May 10,1921), will illustrate the practice; . ; KANSAS CITY CAR-LOT GRAIN SALES. Actual sales of cash grain as posted on the board of trade to-day were: Hard wheat. - Dark hard — No. 1. —1 car, $1.43. No. 2 dark hard. —2 cars, $1.45, 1 at $1.44, 2 at $1.43. No. 3 dark hard. —1 car, $1.45, 5 at $1.44,1 at $1.43. No. 4 dark hard. —2 cars, $1.43. No. 5 dark hard. —1 car, musty, $1.39. Hard — No. 1. —1 car, $1.39i, 8 at $1.39, 10 at $1.38; smutty, 1 at $1.38, 1 at $1.36, 2 at $1.35. No. 2 hard. —7 cars, $1.39, 9 at $1.38, 15 at $1.37; smutty, 4 at $1.36, 3 at $1.35, 6 at $1.34. jVb. 3 hard. —2 cars, $1.36, 1 at $1.35, 8 at $1.34; smutty, 1 at $1,38, 3 at $1.34, 2 at $1.32. No. 4 hard .—1 car, 4 per cent rye, $1.38, 2 at $1.33, 1 at $1.32; smutty, 2 at $1.31, 1 at $1.30. No. 5 hard .—1 car, smutty, $1.34,1 at $1.32, 1 at $1.30,1 smutty, $1,30; musty, 1 at $1.35,1 car, 1 pe H. D., $1.33,1 smutty, $1.32. Sample hard .—1 car, L. W., musty, $1.32, 1 smutty, H. D., $1.28. Red wheat — No. 1. —2 cars, $1.52, 1 L. S., $1.52. No. 2 red .—1 car, $1.49, 1 at $1.48, 1 at $1.46. No. 3 red .—1 car, $1.43. No. 4 'red .—1 car, B. H., $1.35. Sample red .—Wild weevil, 1 car, $1.49,1 musty, $1.40, 1 light test, $1.37, 1 onions, $1.32,‘l at $1.32. Mixed wheat. — No. 1. —1 car, $1.40, 1 at $1.39, 2 at $1.38. No. 2 mixed .—1 car, $1.45, 1 at $1.44, 1 at $1.37, 1 durum, $1.32. No. 3 mixed .—Smutty, 1 car, $1.31,1 at $1.30. Sample mixed .—1 car, L. W., musty, $1.33. 55 cents. No. 6 white, 1 car, B. H., 45 cents. No. 2 yellow, 3 cars, 56 cents, 1 B. H., 55 cents. No. 3 yellow, 1 car, 54 cents. No. 5 yellow, 1 car, 54§ cents. No. 2 mixed, 1 car, high color, 54J cents, 1 at 53J No.2white,7 cars, 55^cents, 1 at 55cents, 1 B. II., CORN. 1 WlAll/O. JL V/Oil ^ j. Xl-LU.Ol»y^ 0£7 No. 3 mixed, 1 car, 95 cents. Milo maize. No. 3, 2 cars, $1.08, 1 No. 4 or better. No. 3 white, 2 cars, 38^ cents, 1 at 38 cents. Kafir, No. 2 white, 1 car, 97 cents. No. 3 white, 1 car, 95 cents, 1 at 93 cents. No. 4 white, 1 car, 89 cents, 1 musty, 89 cents. OATS, ETC. at $1.08,1 mixed, $1.05. cents. No. 3 mixed, 4 cars, 51 i cents. No. 5 mixed, 1 car, 52 cents. Cane seed, 1 car, 35 per cent kafir and milo, 20 per cent wheat, 95 cents. Barley, No. 3, 1 car, 55^ cents. No. 4 barley, 1 car, 54 cents, 1 at 53 cents. Millet, 1 car, 98 cents, 236 CASH GRAIN PRICE QUOTATIONS. 2^7 The sources from which tRese publications secure the price records are the exchanges, or members thereof, and the actual methods of collecting them vary with the different markets. At Minneapolis the cash traders on the floor are required by rule of the exchange to report all sales of cash grain received from country points. These transactions are then posted on the exchange black¬ board and are published daily by the Minneapolis Daily Market Record.In addition to the record of actual transactions there are posted each day at the close of the market the closing prices of cash grain as determined by the closing price committees. (See sec. 2, below.) Records of actual sales of cash grain on the Chicago Board of Trade are made public daily and appear in the Chicago Daily Trade Bulletin. The method by which these prices are collected differs radically from that at Minneapolis. Mr. Mauff, secretary of the board of trade, stated in reply to a question as to whether or not all sales were reported daily, that they were “supposed to be so reported but no means of knowing whether a member holds back or not. To him it would be vital to report, otherwise customers would complain if not in the official record of prices.’’ The method of collection is described by the secretary of the board of trade as follows: The Cleveland Telegraph Company (Vol. II, p. 125, and Vol. V, p. 56) has two employees whose duty it is during market hours to move around among the sample tables and those making contracts in cash property, and gather all the prices they can in these cash transactions. This method does not insure the collection of every quotation on cash property, as in the case of contracts for future delivery, but is sufficient to insure the gathering of most of the cash prices. Members to these cash transactions are generally willing and glad to notify the reporter. These quotations are also retained on slips of paper and sent to the telegraph operator whose duty it is to send them on the wires. These cash prices are transmitted over the wires at 12:00 o’clock and at the close of the market. These slips are also put on the spindle with the other quotation slips. At 1:15 o’clock P.M., .the close of the market, the Chief Operator of the Cleveland Telegraph Company makes a list of the high, low and closing prices of each com¬ modity, including cash transactions, and these are sent out by the operator of the Cleveland Telegraph Company on the wires immediately following the close of the market. None of these high, low and closing prices are published by the Exchange. All that is done towards their publication is they are put on the telegraph wire, as above stated. - . After the close of the market the quotations on these slips which are placed upon the spindles are recorded by employes of the Cleveland Telegraph Company in books under each date, so that these books, to which the exchange and all of its members have access, furnish a permanent record of every change in contracts for future de¬ livery rnade on the floor of the exchange and such changes in the price of gash grain transactions as these employes are able to learn from the parties to the cash trade. ******* The quotations give the highest cash sales and the lowest cash sales that these employes are able to collect from the parties to the transactions. At Kansas City the members of the board of trade are, quoting from a letter from the secretary, “obliged to report every sale within 15 minutes.” The exchange furnishes members with slips on which sales are noted, and from these slips a clerk from the secretary’s office posts on a blackboard all cash sales. From this blackboard * It should be noted that all original sales of cash grain are not reported, a statement by the assistant secretary of the exchange being “practically all sales reported,’' 56976°—22-17 238 TERMINAL GRAIN MARKETING. the Kansas City Daily Price Current ^’secures the record of cash sales which it publishes daily. vSince all sales are recorded, the high and low prices for the day necessarily are published. When no sales of any grade of grain occur on any day the Cash Market Committee ® names a price which, ''in their judgment, the grain would have brought.”^ Such prices are designated as nominal.^ This committee also is charged with seeing that sales are promptly reported and posted. At those markets where it is not required that all cash sales be reported the record of sales is almost certainly not complete. At other markets the word¬ ing of the rules is such that not every cash sale is reported. Thus Minneapolis requires, under the rules, reports of all sales of "cash grain seed from country points.” Obviously such a rule does not require the report of resales of cars and, according to the report of the secretary, these are not included. Consequently scalped cars do not figure in the price records of the Minneapolis exchange (Chap. XI). At most exchanges it has also been stated that, where a sale is reported at a certain price, cars subsequently sold at the same price are not always reported, the commission house having in the original sale a price record by which his consignor can confirm the sale price reported to him. At Chicago and Peoria cash sales may be made between buyers and sellers on private terms (P. T. transactions), and the prices at which these transactions are effected are not re¬ ported. In consequence such transactions are not published in these daily records of prices. Section 2. Closing prices. The Minneapolis and Duluth markets are peculiar in that on these two exchanges, as contrasted with others, committees composed of exchange inembers make up each day cash closing prices for the various grains. At Minneapolis there are two of such committees, one for wheat and the other for coarse grains. Each committee is usually composed of three or four members. A description of the processes involved in making up these closing prices as given by the two Minneapolis committees in 1921 is as lollows: ® CASH WHEAT CLOSING PRICES, MINNEAPOLIS CHAMBER OF COMMERCE. The closing quotations for cash wheat are based on the prevailing future. The three members of the committee on closing quotations on wheat meet at the close of the market H-ud pool the knowledge which they have gained in the course of the morning frorn their various associates as to the premium or discounts over or under the pre¬ vailing future which are being paid in the market. In case of any question each of them go around to the different buyers and sellers and find out what, in their judg¬ ment, is the market. The close is not based on the cash sales during the day neither on the range of such sales nor on the average of them. It might happen, lor example, that the buyers were in the course of the morning paying a certain permium for wheat, but before the close be filled up or not willing to take wheat at the early premiums and therefore J> The secre^ry of the Board of Trade of Kansas City states that this is "the official Price Current of the Kansas City Board of Trade. ® Appointed by the directors. 7 From a letter from secretary of Kansas City Board of Trade. 8 The method of making up the closing prices each day is in general much the same at Duluth as at Min¬ neapolis, and in consequence no description of the practice at Duluth is given. In this connection atten¬ tion is directed to the fact that the statement on p. 324 of Vol. II. to the effect that the Duluth close is the highest price which any of the large operators is willing to pav, is erroneous and is based on a misunder¬ standing of the situation at the time when that volume of the report was written. CASH GRAIN PRICE QUOTATIONS. 239 the closing quotations would be based on the later premiums as the earlier premiums could not be obtained at the close. On the other hand, it might happen that buyers were in the market strong at the close, offering and paying premiums higher than those paid earlier in the morning and then the closing quotations would be based on the later premiums. Briefly then, the members of the committee find out what premiums or discounts are being offered and paid for wheat by buyers who are in the market for reasonable quantities of wheat at the close, and then apply these premiums or discounts to the closing quotation of the prevailing future thus making the closing quotations for cash wheat. ^ COARSE GRAIN CLOSING PRICES, MINNEAPOLIS CHAMBER OF COMMERCE. The closing price committee for coarse grains, in closing the market daily, endeav¬ ors to show actual trading prices existing at the close of each session. In determining these prices, representative buyers and sellers are questioned as to trading baS current during the day, posted sales compared with range of futures and such informa¬ tion checked by the committee from their personal knowledge of the day’s trading. As demand fluctuates frequently, special effort is made to learn if the day’s price basis still maintains at the close. Methods of handling the various grain prices differ in some particulars as detailed herewith. Barley: Prices on cash barley do not follow futures so closely as other grains, perhaps due to barley grades not accurately reflecting buyers’ different requirements "vmich are variously governed by weight, plumpness, color, cleanness, condition and character. The course of barley futures may reflect the general market movement, but cash prices are seldom based closely thereon. It follows that closing prices must therefore be more or less arbitrary to the judgment of the committee and since the market is so largely a “sample ” proposition, barley has been grouped for closing quo¬ tations in three classes:—choice to fancy, medium to good, and lower grades. In quoting a range of value on these groups, various factors are considered; the relative quality of the receipts, the cash sales compared with the day previous, the volume offered and the demand. All are judged as to their effect on values and closing prices based thereon. Sales to-arrive are made on individual samples so no “to-arrive” close can be given. Corn: In times of surplus cash corn prices follow closely the movement of Chicago corn futures. When offerings are insufficient for local consumption, prices become temporarily independent of such basis. Cash sales, volume offered, demand existing and movement of futures are therefore all considered in closing prices which usually can be based approximately at a discount or premium on closing futures. Oats: This commodity follows closely the movement of Minneapolis oat futures. There being a considerable range in quality at present on the various grades, quota¬ tions show a spread in values cereal mills paying premiums for best quality. For example, present range on oats shows December price to ljVol. II,Table30. 256 TERMINAL GRAIN MARKETING. of Kansas City and Chicago and 2,395 cars in the Minneapolis market in the crop year 1916-17): Disposition of specified numbers of consigned cars by first purchasers in the markets of Chicago, Kansas City, and Minneapolis, crop year 1916-17. Markets. Disposition by first purchaser. Chicago. Kansas City. Minneapolis. First test. Second test. Both tests. Num¬ ber of cars. Per cent of total cars. Num¬ ber of cars. Per cent of total cars. Num¬ ber of cars. Per cent of total cars. Num¬ ber of cars. Per cent of total cars. Num¬ ber of cars. Per cent Of total cars. Unloaded by first purchaser: In local market. 1,018 85.95 997 84. 21 830 69.23 851 71.15 1,681 70.19 Elsewhere. 3 .25 85 7.18 48 4.00 32 2.68 80 3.34 Bought on brokerage: For local elevators and unloaded. 19 1.61 1 .08 8 .67 5 .42 13 .54 For local seed companies • and unloaded. 4 .34 For local consumers and unloaded. 20 1.69 5 .42 22 1.84 16 1.34 38 1.59 Total unloaded by first purchaser. 1,060 89.53 1,092 92.23 908 75.74 904 75. 59 1,812 75.66 Shipped outside by first pur- chaser. 92 7.77 58 4.90 197 16.43 167 13.96 364 15.20 Delivered on “to-arrive” con- tract. 16 1.35 30 2.53 13 1.08 5 .42 20 .83 Sold to local feeders i. 14 1.18 13 1. 08 7 . 58 18 75 Resold in local market(scalped) 2 .17 4 .34 68 5.67 113 9. 45 181 7.56 Total. 1,184 100.00 1,184 100.00 1,199 100.00 1,196 100.00 2,395 100.00 1 These feeders were not members of the exchange and it was therefore necessary for them to purchase through members. It is not known whether these transactions were on a brokerage basis or not. The tabulation shows nine different ways of disposing of the con¬ signed cps, i. e., nine classes of transactions. Only the last class of transactions, however, includes cars scalped, under the definition adopted, i. e., those consigned cars which were resold by the first purchaser in the same market, and not delivered on contracts, or sold to organizations or their agents which either store, condition, convert, or ship grain. The first fact to be noted from this tabulation is that a much larger proportion of consigned cars were unloaded by Kansas City and Chicago first purchasers than W those in Minneapolis. In Kansas City about 92 per cent, and in Chicago about 90 per cent of the cars bought by first purchasers were unloaded as compared with approxi¬ mately 75 per cent shown in Minneapolis by each test and by the combined tests. This fact indicates that a considerably larger pro¬ portion of the consigned grain coming into Chicago was in the first instance bought for shipment, storage, conditioning, or conversion, than was the case in Minneapolis. It is also apparent that the proportions of consigned cars scalped- in both Chicago and Kansas City were almost negligible; 2 cars, or only 0.17 per cent, in the case of Chicago, and 4 cars, or 0.34 per cent in Kansas City. In Minneapolis, on the other hand, 68 cars, or SCALPING IN THE CASH MARKETS. 257 approximately per cent, were scalped on the first test and 113 cars, or about 9^ per cent of the total, on the second test. The Minneapolis results showing the number and percentage of cars consigned to each of the selected consignees which were scalped were as follows: Consignee. A B C. D E Total first Minneapolis test F. G. H. Total F, G, and H I. J. Total second Minneapolis test. Total of both Minneapolis tests Number of cars received on con¬ signment. Number of cars scalped. Percent¬ age of scalping to re¬ ceipts. 240 6 2.50 240 7 2.92 240 14 5.85 240 20 8.33 239 21 8. 79 1,199 68 5. 67 237 • 8 3.38 239 10 4.18 237 18 7.59 713 36 5. 04 240 31 12. 92 243 46 18.93 1,196 113 9.45 2,395 181 7.56 This analysis shows that in the case of no one of these 10 receivers was the percentage of their consigned cars scalped less than 2^ per cent, and secondly, that in the case of 6 out of the 10 receivers the percentage of their cars scalped was above 5 per cent. It is also immediately apparent from this table that the relatively greater percentage of scalping shown by the second test as compared to the first, is due to the large volume of scalping on the cars con¬ signed to concerns ''I'' and ''J.” If ‘"I” and be eliminated, and and only considered on the second test, it appears that only 36 of the 713 cars consigned to these last three concerns were scalped, or 5.04 per cent of their total receipts. This percentage is somewhat less than the proportion of cars scalped on the first test. Concerns ''I'^ and ‘'J’’ were by common repute the largest scalpers in Minneapofis, with one exception. A very much larger proportion of the grain consigned to these concerns was scalped than in the case of grain consigned to the other eight consignees. Since the group of concerns selected at random for the first test did not include the largest scalpers, it is probable that the proportion of cars scalped, considering the market as a whole, was higher than 5.67 per cent shown on the first test. On the other hand, it would appear to follow that the figure of 9.45 per cent is perhaps too high, considering the entire market. On the basis of this test, therefore, it may be concluded that in 1916-17 between 5^ and 9^ per cent of incoming consigned cars were scalped in Minneapolis. In this connection it is worth noting that a later test made in the same year by tracing 3,496 cars taken from railroad records showed about 9J per cent of the cars scalped and that by this test the proportion of the cars from line elevators which were scalped was much lower than the proportion of those from farmers and independent elevators. 258 TEKMINAL GRAIN MARKETING; Of the total 2,395 cars traced in Minneapolis, as already stated, 181, or 7.56 per cent, were scalped. An analysis of these scalping transactions, however, shows that there were only six concerns which scalped 10 cars or more, and further, that these six concerns scalped 121, or 66.8 per cent, of the total number of 181 cars scalped. These six concerns included among their number only two of the consignees from which cars for tracing purposes were selected; i. e., “1” and ‘ ‘ J.” The other four concerns in this group of leading scalpers are hereafter designated as ‘‘K,” ‘‘L,” and ‘‘N.'’ A detailed analysis of scalping by these six concerns follows: Ratios of scalping to purchases for six Minneapolis concerns scalping 10 or more cars on Commission’s tests. Company. Both tests. First test. Second test. Number of cars purchas¬ ed. Number of cars scalped. Per cent of pur¬ chases scalped. Number of cars purchas¬ ed. Number of cars scalped. Per cent of pur¬ chases scalped. Number of cars purchas¬ ed. Number of cars scalped. Per cent of pur¬ chases scalped. K. 127 42 33.1 52 11 21.2 75 31 41.3 1. 27 18 66.7 5 2 40.0 22 16 72.7 J. 58 19 32.8 34 6 17.6 24 13 54.0 L. 19 18 94.7 7 6 85.7 12 12 100.0 M. 24 13 54.2 16 7 43.8 8 6 75.0 N. 13 11 84.6 1 0.0 12 11 91.7 Total. 268 121 45.1 115 32 27.8 9 153 89 58.2 Company. K. I. J. L. M. N. Total Per cent of total purchases bought on first test. 40.9 18.5 58.6 36.8 66.7 7.7 42.9 Per cent of total scalps scalped on first test. 26.2 11.1 36.8 33.3 53.8 26.4 Per cent of total purchases bought on second test. 59.1 81. 5. 41.4 63.2 33.3 92.3 57.1 Per cent of total scalps scalped on second test. 73.8 88.9 63.2 66.7 46.2 100.0 73.6 It appears from this table that while only 28 per cent of the cars bought by these six large scalpers were scalped on the first test, 58 per cent of their purchases, or more than twice that proportion, were scalped on the second test. That this is not due to the larger number of cars purchased on the second test as compared with the first appears from the comparison of scalps and purchases on each test in the last four columns of the table. Although not shown in the table, the larger proportions of their purchases scalped by the large scalpers on the second test was due chiefly to operations on the cars of '‘I’' and '‘J.” Of the cars pur¬ chased by pie five largest scalpers from being necessarily excluded, since a concern is forbidden by rule to buy cars consigned to it), 79 per cent were scalped, and of those purchases made from “J” ( J being excluded), 67 per cent. The next highest proportion of purchased cars scalped by these large scalpers was 50 per cent on the cars bought from receiver '‘D” on the first test. In the case of the SCALPING IN THE CASH MARKETS. 259 cars consigned to all the other seven receivers employed in the two tests the proportion of purchased cars scalped was less than 42 per cent. It’is perhaps worth noting that of the 16 cars ‘‘I” bought of ‘‘J” 13, or 81 per cent, were scalped and of the 7 cars bought by J’’ from 5, or 71 per cent, were scalped. Apparently either certain consignees who are largely engaged in scalping do not pay sufficient attention to the grain consigned to them to obtain the best possible prices for their consignors, or else certain of these consignees or their representatives work in collusion with one another. Only on one of these two bases or the other does it seem possible to account for the fact that the grain of some con¬ signees is so much more frequently scalped than the grain of certain other consignees. From this, however, it does not necessarily follow that the houses themselves have knowledge of the situation. As already indicated, most of the scalping is done on joint account. It would seem that the desire of the various representatives working on joint account to make money by engaging in scalping might easily lead to a certain degree of neglect in selling the consignors’ grain, owing to the greater interest which these particular represen¬ tatives might have in scalping operations.® Similarly, if collusion exists or has existed, it is entirely within the bounds of possibility that such collusion is between individual joint account salesmen working for different houses, and that such operations are carried out not only without any instructions upon the part of the houses themselves but even without their cognizance. Section 4. Probable percentage of Minneapolis grain concerns engaged in scalping. The second purpose of the statistical tests was to ascertain the probable proportion of grain dealers engaged in scalping operations in Minneapolis, Chicago, and Kansas City being eliminated because of the insignificant volume of scalping at those centers. The proportion of Minneapolis concerns engaged in scalping as shown by the first and second tests, and on both tests combined, appears as follows: First test. Second test. Both tests. Class of first purchasers. Num¬ ber of first pur¬ chasers. First purchasers that scalped. Num¬ ber of first pur¬ chasers. First purchasers that scalped. Num¬ ber of first pur¬ chasers. First purchasers that scalped. Dealers operating terminal elevators. 38 Num¬ ber. 9 Per cent. 23.7 35 Num¬ ber. 11 Per cent. 31.4 39 Num¬ ber. 13 Per cent. 33.3 Dealers not operating termi¬ nal elevators o. 32 14 43.8 30 13 43.3 37 20 54.1 All dealers. 70 23 32.9 65 24 36.9 76 33 43.3 Consumers. 26 23 29 Total. 96 23 24.0 88 24 27.3 105 33 31.4 o Includes H. Poehler & Co. and E. S. Woodworth & Co. The Pacific Elevator Co., operating a terminal elevator, was owned by Poehler; and the Concrete Elevator Co., also operating a terminal elevator, was owned by Woodworth. Both these terminal elevator companies were operated separately, however, and their purchases recorded separately. « This would also seem to apply in those cases where the head of a commission house or a partner both sells consigned grain and scalps. 260 TERMINAL GRAIN MARKETING. According to these tests, 33 out of the 105 first purchasers in Minneapolis, or 31 per cent, did some scalping during. 1916-17. These peicentages include millers and converters who obviously were not buying with a view to resale. Excluding, therefore, the figures of the latter class of purchasers, the tests showed that 33 out of a total of 76 dealer ^^first purchasers,’’ or 43 per cent, did some scalping, and that whereas only 33 per cent of the terminal elevator first pur¬ chasers scalped, slightly over 54 per cent of the first purchasers not operating terminal elevator companies did some scalping. These should be regarded as minimum percentages, however, since the table clearly shows the tendency for the number and proportion of first purchasers scalping to increase with the size of the sample. The reasons why the proportion of scalpers operating terminal elevators is so much less than the proportion of other dealers engaging in scalping is perhaps to be found in the nature of the terminal elevator business. The terminal elevator company usually purchases grain and stores it until it is rec^uired by converters or shippers. W^hen a car of grain is bought on the floor by a terminal elevator company, that concern has the option either of reselling the car or of turning it into the elevator either for mixing purposes or to make ''storage charges.” In the latter event, as large a profit will presumably be obtained from the operations involved as would be the case were the car in question resold or scalped. In many instances it is probably a inatter of indifference as to which course of action is pursued. But it also must be considered that the terminal elevator company is equipped for doing that kind of business and the staff IS employed for the purpose of making a return out of it. For these reasons, therefore, it seems probable that there is less inclination on the part of elevator company buyers to scalp. Section 5. Number of scalping operations to which scalped cars were subjected. The third purpose of the statistics was to determine the number of scalping operations to which each car originally scalped is sub¬ jected. For this purpose, tracing sheets similar to those sent to each first purchaser of cars in Minneapolis were also sent to second, third, fourth, and fifth purchasers. Returns to these schedules were then tabulated and gave the following results: Scalped cars traced. Cars scalped. Number of scalp¬ ing opera¬ tions. Average number of times each car is scalped. Once. Twice. Three times. Four times. Cars traced to final disposition... 168 63 11 2 244 1 4.^ Cars scalped once, no further record... 10 10 1 nn Cars scalped twice, no further record. 3 3 6 2.00 Total cars scalned. 181 66 11 2 260 1.44 At least 36 per cent of the cars originally scalped, therefore, were scalped a second time, and about 6 per cent of them were scalped a third time. SCALPING IN THE CASH MAKKETS. 261 Section 6. Scalping profits and losses. From the prices on the original sale and the subsequent resales, the Commission computed the average profits and losses per bushel on each scalping operation and on each car scalped, and from the names of the consignors and the purchasers on the various resales the number of cars sold back to original consignees. In computing the profits and losses in question, the 180 cars ^ were first divided according to kind of grain (wheat, corn, oats, rye, and barley). In view of the importance of wheat as an article of human food, it was deemed desirable to make a somewhat more intensive study of the profits and losses in scalping wheat and for this purpose cars of wheat scalped were divided into three classes. In the first class were included all cars of wheat of all classes (spring, durum, winter, mixed, western, etc.) grading No. 3 or better; in the second class, all cars of wheat of all classes grading poorer than No. 3 and including '^no grade'’; and in the third class all cars of wheat upon which the data as to the grade could not be obtained. The results appear in Appendix Table 42. This table shows that the bulk of the scalping was in wheat. On the first scalp, 117 cars out of 180 scalped, or 65 per cent, were wheat and 63 cars, or 35 per cent of the total, were coarse grains. This higher percentage of wheat scalping as compared with coarse grains is very probably explained by the relation of wheat to coarse-grain receipts at Minneapolis in 1916—17. Normally wheat constitutes more than 50 per cent of the Minneapolis receipts, and in the crop year 1916-17 there were received 101,353 cars of wheat, or 64 per cent of a total of 156,877 cars of all grains. The original Minneapolis scalping operations, therefore, as between y^heat and coarse grains, correspond almost exactly to the proportions in which wheat and coarse grains were received in the market. Sixty-six of the original 180 cars were scalped a second time, and of these 54, or approximately 83 per cent, were wheat and only 12, or approximately 17 per cent, were coarse grains. All of the 11 cars scalped the third time and both of the two cars scalped the fourth time were wheat. The data on scalping also show that by far the greater proportion of scalping in wheat was on the lower grade offerings. Whereas nearly 50 per cent of the wheat inspected at Minneapolis graded No. 3 or better, only about 30 per cent of the scalping was done in these grades. Nearly 70 per cent of the scalping was on cars grading No. 4 or lower. Moreover, the average net profit on scalping wheat was greater on grades lower than No. 3 than it was on No. 3 and better. On the first scalping operation the average net profit per bushel on wheat poorer than No. 3 was 5.30 cents as compared with 4.97 cents on wheat grading No. 3 or better; on the second operation (same cars), 4.80 cents as against 1.15 cents; and on total wheat scalping on all cars, 8.20 cents as against 5.42 cents (cf. table following). It appears that a greater proportion of the cars of wheat were scalped at a profit than was the case with coarse grains, and that 7 The two tests made by the Commission in Minneapolis included a total of 181 cars scalped out of a total of 2,395. In the case of one of these cars, it was impossible to obtain the price at which it was resold by the purchaser on accoimt of the fact that the concern to which the car was resold was no longer in business. In consequence, the profits and losses of scalping operations are figured upon the basis of 180 cars instead of 181. 262 TEKMINAL GRAIN MARKETING. the average per bushel profit on wheat scalping was greater than for the coarse grains. The original scalping operations show that 117 cars of wheat were scalped, of which two were resold at the same prices, leaving 115 disposed of at either a profit or a loss. Of these 115 cars, 104, or slightly over 90 per cent, were sold at a profit as against 11, or slightly less than 10 per cent, sold at a loss. In the case of coarse grains (eliminating 5 cars, which 5 were resold at the same price), 45 were resold at a profit and 13 at a loss, or 77 per cent at a profit and 23 per cent at a loss. The foregoing conclusions with reference to the extent and profitableness of scalping as between wheat and coarse grains and as between high and low grade wheat are further supported by the following table, which presents the net profits and losses on all scalping operations on various kinds and grades of grain: * Kind and grade. Total cars scalped. Cars which could not be traced further. Total cars scalped and traced through. Aver¬ age net profit per Taushel. Sold at a profit. Sold at a loss. Scalped once. Scalped twice. Num¬ ber of cars. Aver¬ age profit per bushel. Num¬ ber of cars. Aver¬ age loss per bushel. Wheat grading No. 3 or better. 37 76 4 1 37 2 71 3 Cents. 5.42 8.20 19.50 31 64 3 Cents. 6.96 9.63 19.50 4 6 Cents. 3.84 5.77 Poorer than No. 3. 3 1 2 Unclassifieds. Wheat, all grades. Barley. 117 4 2 4 111 7.57 98 9.09 10 5.00 22 14 25 2 3 2 19 13 122 2 2 2.63 .66 .15 1.25 18 10 10 1 2.78 1.30 2.63 2. 50 Oats. 1 3 10 1.46 2.45 Corn. 3 Rye. Allcoarse grains.^_ All grains. 63 6 1 5 56 1.03 39 2.22 13 2.22 180 10 3 6 167 5.38 137 7.U 23 3.43 1 Two cars resold at same price. 1 2 One car resold at same price. • ] 3 Grade not obtained. I < Three cars resold at same price. | 3 F our cars resold at same price. I ® Seven cars resold at same price. J This table shows that of the 167 scalped cars traced through to 1 ultimate destination, 111, or about 66 per cent, were wheat and the ! balance, or 34 per cent, coarse grains, and that the total average j scalping profit per bushel on these 111 cars of wheat amounted to! 7.57 cents, as compared with approximately 1.03 cents on coarse grains. These figures give some indication of the per bushel toll ^ taken on the cars of gram coming into the Minneapolis market which are scalped in a year considered favorable to scalping operations. _ The cars showing, respectively, the greatest profit and the greatest I loss m scalping appear m. the following statement: | SCALPING IN THE CASH MARKETS. 263 [Car G. W. 210059 containing SG-1 wheat consigned to H, Pophler Co.] Sold May 16, 1917: To fianner Grain Co., at..... $1.40 To F, M. Davies Co., at.... 1. 49 To A. J. Atkins Grain Co., at... 1. 50 Sold May 17, 1917: To Pacific Elevator Co., at. 1. 60 To Milwaukee Elevator Co., at. 1, 70 Unloaded by Milwaukee Elevator Co., May 22; total profit.30 [Car L. 4150 containing SG-2 wheat consigned to H. Poehler Co.) Sold June 26, 1917, to Fraser-Smith Co., at... 1. 50 Sold to June 29, 1917: To C. C. Wyman & Co., at. 1. 29^ To Washburn-Crosby Co., at.. 1. 30 Unloaded by Washburn-Crosby Co., July 5; total loss.20 A computation was also made of the average profit per scalping operation. Since a considerable number of cars were scalped more than once the average profit per operation was necessarily lower than the average scalping profit per car. The following statement shows these profits per operation, including the figures for the entire 180 cars, 13 of which it was impossible to trace to final destination: Kind and grade. At a profit. At a loss. Total. Number of opera¬ tions. Average profit per bushel. Number of opera¬ tions. Average loss per bushel. Number of opera¬ tions. Average net profit per bushel. Cents. Cents. Cents. Wheat, grade 3 or better. 45 4.83 4 4.22 151 3.93 Poorer than 3. 120 5.53 8 7. 52 128 4. 72 Unclassified. 5 11.90 5 11.90 Wheat. 170 5.53 12 6.42 1 184 4.69 Barley. 30 2. 23 * 32 2 09 Oats. 12 1.23 3 1.46 15 .69 Corn. 13 1.93 10 2. 45 2 26 .02 Rj'^e. 1 2.50 5 2 1. 25 Coarse grains. 56 1.95 13 2. 22 3 75 1. 07 All grains. 226 4.65 25 4. 24 <259 3.65 i^Two cars resold at sarae price. 2 Three cars resold at same price. ® Six cars resold at same price. < Eight cars resold at same price. 5 One car sold at the same price. This table covers a total of 259 scalping operations, of which 226 (87 per cent) showed a profit and 25 a loss, 8 operations being at the same price. The average profit per operation was 4.69 cents a bushel in the case of wheat, against 1.07 cents on coarse grains, and the average profit for all operations was 3.65 cents per bushel. Section 7. Conclusion. The operations of the scalper have been defended by one writer as follows: The scalper performs his principal function through the influence that he exerts on prices in the market in which he operates. If the price sags the least bit below what the scalpers believe the market conditions warrant, they begin to buy, and this 264 TEKMINAL GRAIN MARKETING. mamtaiiis the price. In the Minneapolis Chamber of Commerce, for example the bulk of the wheat is bought by a small number of large flour millers and by the ter¬ minal elevators. During some seasons of the year the elevators may be buying very ■ ^ j 1 ^^^ milling companies are the principal buyers. It would appear that the buyers of these companies might be able to depress the price by merely holding back in making their purchases, but if they did so the scalpers would immediately jump in and furnish sufficient demand to keep the price up. They know that the millers have to buy large quantities of wheat every day and that they will have to pay the price to get it. Such a theoretical justification of this practice, however, seems to lose sight of a number of factors in the situation.® As has already been shown, it appears that certain firms whose - consignments were most extensively scalped were at the same time ^ ^emselves among the largest scalpers in the Minneapolis market. \ There are apparently, as also indicated (sec 5), only two possible ^^plti'Dations of this situation! (1) That there is collusion between ^ consignees and buyers; (2) That certain scalping consignees do not ' pay sufficient attention to their consignments to procure the best • results for consignors. ' T7^_ _j1 •!••• . _ _ * SCALPING IN THE CASH MARKETS. 265 Consignee. J. I. I. H H H H E E E E E E C. C. C. D Number of cars. Original sale price per bushel. Price at which car was bought back per bushel. Differ¬ ence per bushel. 1 $1.82i $1.82i Cents. None. 1 1.69i 1.72i -b 3 1 1,56 1.59 + 3 1 1.46 1.461 + h 1 .90 .901 + h 1 1.77^ 1.78 + i 1 1.55 1.55i + h 1 .87 .87 None. 1 .90i .92 + 11 1 1.33 1.33i + i 1 1.46 1.46i + 1 1 1.04 1.041 + 1 1 1.05 1.04 - 1 1 1.21i 1.211 None. 1 .541 .56 + 11 1 2.171 2. 33 +15i 1 .91i .92 + 1 From this table it will be observed that seven cars were bought back at the same differential (one-half of a cent) and that three cars were bought back at the same price. In other words, 10 out of 17 cars were bought back either at the same price or at the same differential. These figures taken in conjunction with all the other statistics would seem at least to raise the question of whether there may not have been some understanding between the consignees and these original purchasers with reference to repurchasing. If it be assumed that there was no collusion it then appears that the original consignees bought back 16 out of these 17 cars either at the same price or at prices from one-fourth of a cent to 15 J cents per bushel more than the price at which they were originally sold, and that as to 14 out of these 17 cars, the consignee or his agent subsequently concluded that the grain was worth more than what it was originally sold for. It will of course be claimed that this is not controlling as to whether the consignee has properly attended to the sale of the grain since changes in the market may have taken place between the time of the original sale and repurchase. Other things being equal, how¬ ever, it would seem safe to assume that the shorter the period elapsing between purchase and sale in scalping transactions the less important would be the element of time differences in prices and the greater the probability that the scalping profit may be due to the failure of the consignee to realize the highest possible price for the cars in the first place. In this connection it may be pointed out, therefore, that both of the cars bought back at 3 cents advance and one of the two bought back at cents over, were repurchased on the same day, and that 8 out of the 13 cars repurchased by the original consignees at an advance were bought back on the same day. Furthermore, out of 180 cars scalped, 82, or 45 per cent, were bought and scalped the first time on the same day—68 at a profit, 9 at a loss, and 5 at the same price. Out of 115 cars scalped once only, 60 were scalped on the day of purchase—47 at a profit, 8 at a loss, and 5 at the same price; out of 37 cars scalped twice only, 18 were scalped twice on the same day as purchased—17 at a profit and 1 at a loss; and out of 9 266 TERMINAL GRAIN MARKETING. cars scalped three times only, 4 were thus scalped on the same day '■ as purchased, all at a profit. It probably can not be disputed that a scalper may under certain conditions serve to support the market for cash grain, but the figures heretofore presented together with other information and data i procured would indicate that in scalping operations in cash grain as : conducted at Minneapolis the scalper does not always function according to the theory that has been outlined in the early part of ^ this section. ^ In the first place the obtainable data, both statistical and other- \ wise, indicates that the great field for the cash scalper is a rising I market and that scalping operations decline pronouncedly in a ! stationary market and tend to disappear altogether in a declining \ Secondly, it has been shown (1) that the bulk of Minneapolis scalping IS done upon a joint account basis; (2) that the consign¬ ments of certain large scalpers are much more heavily scalped than the consignments of other receivers; (3) that the two largest scalpers in Minneapolis apparently scalped 71 and 81 per cent respectively of the cars consigned to the other which they purchased; (4) that a sub¬ stantial proportion of the scalped cars are bought back by the original consignees; (5) and that a large proportion of the cars prof¬ itably scalped are bought and scalped one, two, or three times on the same day. sc The foregoing points would seem to raise the question whether alpmg as it has been conducted at Minneapolis does not result less SPT’VTnO’ m €» in f Q i-n _* l • . . m servmg to maintain cash prices than in causing scalping commission lo procure the best obtainable prices for consignors. While positive statements can not be made on this point, it is believed that the statistics presented point to an affirmative answer to this niiAsfinn • fhcif iT-i -_i i n* question; that in some cases there is collusion and logrolling among the scalping operators, who tip one another off as to good ‘'buys’' on their tables or those of the firm employing them, or else agree to their em buy back cam consigned to them or their employing houses'^which be purchased by the scalpers of another firm; and that there is a failure to realize the highest possible prices obtainable on the floor at the time of the sale, owing both to a comparative lack of skill in selling on the part of certain consignees which allows a scalper to pick up cars at prices lower than those being offered on other parts ol the floor at the same time and to the fact that heads of consignee houses or their salesmen who are scalping are more inter- ested in possible scalping profits than in realizing the best results for their shippers. In so lar as scalping may be due to lack of skill on the part of the consignee seller, it necessarily implies that the field for the scalper’s operations is to be found in this lack of ability on the part of the consignee rather than in any economic considerations relating to the maintenance of market prices for the seller. Moreo'^er, there is presumably no excuse for lack of skill on the part of the larger scalpers whose consigned grain is, as indicated, most heavily scalped. of futures St in their general nature from those of the scalper The S scalar it soon sell as purchase, stead^nl m?ces wS i economic service in creating a continuous market and in from rSfcline of the ma?kef '^ho can only profit from an advance and not 2 \ SCALPING IN THE CASH MARKETS. 267 The mere fact that an organization is a large scalper would indicate that it has in its employ men who are either highly competent judges of grain or who have great familiarity with the requirements of various buyers or both. The proper protection of the interests of the consignor ought to require that the best possible talents of a commission house organization should be employed for the purpose of selling its consignments. Scalping, however, affords an outside profit over and above the commission obtained by a receiver for selling grain and in addition, in the case of a salaried employee working on joint account for such a house, an extra source of income. So long as this is the case it certainly would not be peculiar if many scalpers were somewhat more interested in the possibilities of extra profit from such operations than in procuring the best possible prices obtainable for consigned grain which they are supposed to sell. The foregoing propositions lead the Commission to the conclusion that scalping as conducted at Minneapolis has been to a large degree at the expense of the consignment business and the consignors of the gram in at least a considerable proportion of cases. The Com¬ mission is further of the opinion that commission houses devoting their entire time and attention solely to the sale of grain should be able to absorb a very considerable proportion of the profits now obtained by the scalpers and thus to procure a higher price for con¬ signed cars which are scalped than has been obtained for such cars. It may be granted that the scalping of grain can be theoretically justified on the ground that otherwise the price realized might be lower than it is. On the other hand, it is believed that the actual and potential results of the practice—collusion, logrolling, lack of attention to selling on the part of consignees, and the great possi¬ bility that the lack of skill of certain of the latter may lead to sales to scalpers when better prices could be realized in the absence of such transactions—all lead to the conclusion that these factors more than offset the possible theoretical considerations mentioned. What¬ ever benefits to the market scalping may afford can be obtained through the purchases of scalpers who are not permitted to act as or for consignees or who are not connected with other grain concerns affiliated with such consignees. * For these reasons, therefore, the Commission concludes that cash grain scalping by concerns or individuals in any way connected with the cash grain commission businesss either directly or indirectly should be forbidden. APPENDIX. EXHIBITS. Exhibit A. ANALYSIS OF THE FRDS (FRANK R. DURANT SPECIAL) ACCOUNT 1913-1917, INCLUSIVE. [Note.—T he accounts themselves are not presented on account of lack of space.) Mr. Twining: All of these items are from the Frank R. Durant account? Mr. Durant: Yes. Mr. Twining: That is a line elevator account purely, is it? Mr. Durant: Why, yes. I would not have thought of it in that way but I think that will cover it. Mr. Flannery: That is by a line elevator company account, the money that is contnbuted by the line elevator for this legislative purpose and that is kept in a special account. ■ ^ Mr. Durant: Yes. Mr. Flannery: And these expenditures are for that account and for the purposes named, as well as you know? ^ Mr. Durant: Yes. 1913. Me. Twining: On March 8, 1913, there was a payment of $40 to Mr. D. H. Smith? Mr. Durant: That was paid for copies of the legislative journals and bills that were introduced. Mr. Twining: On March 10, there was a payment of $1600 to P. L. Howe? Mr. Durant: I could not say what that was used for, whether it was used for similar Dakota or not. I have every reason to believe that it was. Mr. Twining: That is for lobbying in North Dakota? Mr. Durant: Not lobbying, no. For somebody that was emploved to stav out there and look after legislative matters. Mr. Flannery: Was that the president of- Mr. Durant: Imperial Elevator Company. Mr. Twining; Mr. Howe, you think, wasAoing work of that sort in North Dakota being paid by the line elevator companies? ’ Mr. Durant: I think that it was somebody else that he had in charge of it. In days, that is, further back, some of the line elevator companies used to look m ^ themselves, but of late years it has been left entirely with me. Mr. Twining: You think some one of Mr. Howe’s emplovees? Mr. Durant: No. Mr. Twining. You think Mr. Howe looked after this work and then you remunerated him and you drew on the other line elevator companies for those sums? Mr. Durant: Yes. March 10, 1913, there was a payment of $40.45 to P. L. Howe Will the same explanation cover that? Mr. Durant: In general, I would say that that was what it was for, but, of course I can not be positive of that. Mr. Twining: All of these items are from the Frank R. Durant account? Mr. Durant: Yes. That is a line elevator account purely, is it? A ’ .Why, yes. I would not have thought of it in that way, but I think that will cover it. Mr. Flannery: That is by a line elevator company account, the money that is contributed by the line elevator for this legislative purpose and that is kept in a special account? Mr. Durant: Yes. 268 EXHIBITS. 269 Mr. Flannery: And these expenditures are for that account and for the purposes named, as well as you know? Mr. Durant: Yes. Mr. Twining: On March 13, 1913, there was a payment of $566 to A. W. Campbell? Mr. Durant: I don’t remember that name, at all. Mr. Twining: Probably it was for some similar purpose in connection with legisla¬ tion in some similar state? Mr. Durant: He was sent to Pierre on some special legislation. Mr. Twining: On the same date there was a payment of $150 to Mr. D. H. Smith. He was looking after legislation, too? Mr. Durant: Yes. Mr. Twining: Then these payments beginning on March 14, 1913, to E. W. Sarles, $366.50? Mr. Durant: I can give you the full explanation of that if you want. It will take in all of these items. There was organized in North Dakota what was called the North Dakota Better Farming Association. Different industries were asked to contribute so much a year Avith a view of employing an expert agricultural man or men to assist the farmers in improving their crops. The elevator companies agreed to give approx¬ imately $5,000 a year for three years. The payments were made monthly by me to the treasurer and collected by me monthly from the elevator companies in proportion to the number of elevators that each company had in the state of North Dakota. Mr. Flannery: Did the association pan out all right? Mr. Durant: Yes, it did very good work. Mr. Flannery: And finally was abandoned? Mr. Durant: It was turned over to the Agricultural College. Mr. Cooper was the head man and the Agricultural College wanted him and so the Association disbanded and turned the matter over to him. Mr. Flannery: Do they still keep up their contributions? Mr. Durant: No. After it was turned over to the College the State Appropriation took care of it. Mr. Twining: Just there you might make an explanation of that item on December 1, when that account was closed and the $1,345 balance was put into the special account. Mr. Durant: The Association made 10 assessments a year on me and for my own convenience I made 12 assessments a year on the elevator companies. When the Association was disbanded I was left with $1,345 balance and this amount was then transferred to the special account on December 1,1914. Mr. Twining: On March 25, 1913, $500 was paid to J. J. Wilson? Mr. Durant: That was South Dakota legislation. Mr. Twining: And Mr. Wilson is a local man? Mr. Durant: He is now here in Minneapolis. At that time he was the traveling representative of G. W. Van Dusen Company. Mr. Twining: Is he still in that capacity? Mr. Durant: No, he is in the office here, in G. W. Van Dusen Company’s office. Mr. Twining: On April 1, 1913, there was a payment of $536.20 to the Atlas Elevator Company. Mr. Durant: That was Mr. Wilson’s expenses. We assumed his expenses while he was at Pierre. Mr. Twining: And the payments were made thru the Atlas Elevator Company? Mr. Durant: Yes, they paid his salary and expenses each month and we reim¬ bursed them at the end of the session. Mr. Twining: Then he got about $1,036.20? Mr. Durant: I would not say that. Mr. Twining: There is $1,036.20 that went to him in a week. Mr. Durant: He would have had half of that had he not been out at Pierre. Mr. Twining: Items run along monthly throughout all the term covered. Chamber of Commerce, $30. Mr. Durant: That is my floor privilege. Mr. Twining: Then, on April 14, a payment of $10 to W. F. Cushing is shown. Mr. Durant: W. F. Cushing was secretary of the Railroad Commissioners of North Dakota and at different times I employed him to furnish me with lists of candidates for the legislature and also lists of licensed elevators in the state and that was for a list of some Mnd, I don’t remember just what. Mr. Twining On April 29, 1913, $37.12 was paid to Winter-Truesdell-Ames Com¬ pany. Mr. Durant: I haven’t any idea what that was for. Mr. Twining: May 10, 1913, $50 to Oscar Arneson. 56976°—22-19 270 TERMINAL GRAIN MARKETING. Mr. Durant: He was chief clerk of the Minnesota House of Representatives and his work was to send me copies of these journals and bills. Mr. Twining: May 19, 1913, St. Anthony & Dakota Elevator Company, $88.74; Imperial Elevator Company, $82.24; Cargill Elev. Company, $19. 50; Dodge Elev. Co., $85.06; Northland Elevator Co., $77.36; Atlantic Elev. Co., $43.50; National Elevator Co., $20.06; May 19, Farmers Elevator Co., $16.56, and I think there were some others that I did not take down. There was a note in the corner of one “Credit interstation expense.” Mr. Durant: I have always been accused of getting money from these elevator companies and never giving any back to them. Mr. Twining: The “interstation expense” doesn’t suggest anything? Mr. Durant: These items were paid to the various companies due to an error made by one of the telephone companies in transmitting a market change. It was quite a serious error and the telephone company agreed to re-imburse my subscribers for the loss0s duo to tho orror Mr. Twining: Then on July 16, $400 to W. C. Gilbreath, Cornmissioner of Agri¬ culture and Labor, Bismarck, N. D. Mr. Durant: For several years the elevator companies contributed yearly to the exhibition provided by the Dept, of Agriculture of the State of North Dakota and this amount was for that purpose. Mr. Twining: On September 5, 1913, St. Anthony & Dakota Elevator Co., $180. Mr. Durant: That can not be that special account. Mr. Flannery: There was a similar payment to the Monarch Elevator Company on September 5. Mr. Durant: For several years at stations where there were more elevators than the needs of the station required it was the custom of the companies to lease each other’s elevator. At one station after arrangements were all supposed to have been made one of the companies declined to enter into the arrangement and rather than make the statements out all over again I personally paid those two companies $180 apiece. That is the explanation of that transaction as far as you have it there. I think you will find that is charged to my personal account. I intimated to one of those that I had paid the money to that I paid that out of my own pocket and that happened just as I was starting away on a vacation and when I came b'ack from my vacation, I found the two checks for $180 apiece on my desk. Mr. Flannery: When they decided there were too many elevators at a point they leased them for the purpose of closing them, didn’t they? Mr. Durant: Yes, keeping that particular house closed. Mr. Flannery: And that was a part of your numerous duties, to look after that? Mr. Durant: Yes. Mr. Flannery: To tell them when there were too many at a station? Mr. Durant: As a rule, they would suggest that such and such a station had too many, or one elevator company at a certain station would say: “ I am wilfing to close if the other elevator companies want me to”. Then I would make up the scheme all the way thru. The first few years it amounted to considerable. It was a saving of overhead expense to the elevator companies and there was still station capacity and, as a matter of fact, those elevators would be used, if it was necessary, by the one who was leasing them. (Of. Vol. I, Chap. XI, sec. 18.) Mr. Flannery: But as long as one elevator or two elevators could handle the business- Mr. Durant: It was economy to close up. * Mr. Twining: On October 20, 1913, Cashier’s check for $3600 is shown. Mr. Durant: That was not in that special account either, was it? Mr. Twining: No. Mr. Durant: That is my own account. That is charged to my personal account. Mr. Flannery: For your personal benefit? Mr. Durant: Yes, that was my own personal matter. Mr. Flannery: Here is an interesting one. November 3, 1913, Benjamin Drake, $17. Mr. Durant: Benjamin Drake is my attorney, strange as it may seem. I think there is $3600 for some piece of property that I bought and the $17 to Ben was for checking up the abstract and title, etc. Mr. Twining: R. B. Pelton, November 4, 1913, $135.84; and Hartzell and Hartzell, $242. Mr. Durant: That is my personal account. Mr. Twining: Powers Elevator Company $150 on December 12, 1913. Mr. Durant: That was for transcript of testimony taken in one of those anti-die- crimination cases. EXHIBITS. 271 1914. Mr. Twining: On March 13, 1914, $100 was paid to the Atlas Elevator Company. Mr. Durant: I made use of one of their men to collect information on the prospec¬ tive candidates for the legislature and I think that was the payment for his expenses. Mr. Twining: March 19, 1914, Security National Bank, $600. Mr. Durant: That is where I get into the Grain Bulletin. I took a trip and went east and it cost me $600 and I charged the Grain Bulletin with $500 and myself with $ 100 . Mr. Twining: May 20, G. C. Dargis, $237.88. Mr. Durant: That was personal in both my case and his—taxes. Mr. Twining: These payments on June 5, and 12, 1914, to G. C. Dargis—he is an employee in the office here? Mr. Durant: Yes. Mr. Twining: Then on June 6, there is $500 charged to the FRDS account paid to yourself. Mr. Durant: I haven’t any idea what that was for. You saw the check, did you? Mr. Twining: Yes, on June 6, $500 on the Security National Bank, check No. 7240 S. Mr. Durant: I haven’t any idea just what that was for. Let me see. That was to defeat Mr. James Manahan for the office of Attorney General of the State of Minnesota. That was part of the cost. There will be some other fees come in later. He went out over the State and said he was going to get the Minneapolis Chamber of Commerce when he was made Attorney General so there is no reason why we should make any bones about taking the other side. Mr. Flannery: They were campaign expense contributions? Mr. Durant: Yes. Mr. Twining: June 10, 1914, Daily Market Record, $86 (Charged expenses $77.25, car service $4.25 FRDS, $4.50). Mr. Durant: The $4.50 was for printing some of those campaign documents. Mr. Twining: June 10, W. F. Cushing, $20, was for the same purpose as was explained before? Mr. Durant: Yes, in this case I should say it was for lists of candidates for the legislature, because of the date. Mr. Twining: June 23, 1914, $450, F. R. Durant? Mr. Durant: That was personal. Mr. Twining: October 15, 1914, G. C. Dargis, $750, charged to the FRDS account. Mr. Durant: That is the second one I haven’t got here. That, I am satisfied, was a Manahan campaign item. Mr. Twining: That is, payment was made to an employee here in the office? Mr. Durant: He just simply got the money from the bank for me, that was all. Having such a large amount I did not want to make the check out to cash so I made it out to him. Mr. Twining: Then on November 2, 1914, Van Dusen Harrington Company, FRDS $ 100 . Mr. Durant: I could not say just exactly what that was; apparently campaign expenses. Mr. Twining: Dargis, again, November 5, $300. Mr. Durant: That would be the same as November 2. Mr. Twining: December 1, Grain Bulletin Guarantors’ Fund account closed, and $2842.53 balance put into profit and loss account. Will you explain that. Mr. Durant: I had been carrying on the books a credit to the original organizers of the Grain Bulletin. Many changes had been made in the companies, some of them having gone out of business and, as the original amoimt contributed was small and it had been increased by profits for several years and interest on the money, I finally decided to close that account and put the balance into the profit and losses. Mr. Flannery: Close it by refundiiig to the original men? Mr. Durant: Closing it by putting it into profit and loss. Mr. Twining: On that same date you transferred $600 from Profit and loss to your own account. Mr. Durant: As additional compensation for the year. Mr. Twining: December 30, 1914 G. C. Dargis, $400, again, FRDS. Mr. Durant: That probably was campaign funds but it was after the campaign was over, but it may have been the tail end of it. , Mr. Twining: That is, you just drew the check to his account to avoid making out a cashier’s check, thhaking it would make a better record that way? 272 TERMINAL GRAIN MARKETING. Mr. Durant: No, I presume that I was told that $400 additional was needed and I simply drew the check and gave it to whoever asked for it. Mr. Twining: Why did you draw it to Dargis’ account? Mr. Durant: He is an employee in the office and I sent him up to the bank for the money and, rather than make it out to cash when it is for a large amount, I make it to his order. Then I have an endorsement on it. 1915. Mr. Twining: February 9, 1915, American Typewriter Sales Company, $60 FRDS. Mr. Durant: I bought that typewriter for one of the boys here in the office to keep at home to do any extra work that was necessary to be done for the Grain Bulle¬ tin or the Elevator companies. Mr. Twining: March, 4, 1915, W. H. Bailey, $62.40. Mr. Durant: He was D. H. Smith’s successor at Pierre. Mr. Twining: March 12, 1915, W. D. Austin, $40. Mr. Durant: This is a similar case to the North Dakota case at,Bismarck; fur¬ nishing copies of the journals and bills. Mr. Twining: March 16, 1915, Atlas Elevator Company, $150. (A. G. Moritz, employee of V. D. H. Co., kept at Pierre during legislative session, in interests of line elevator companies. Salary paid by V. D. H., and Durant paid them for his time.) (The question explains itself.) Mr. Twining: March 17, Cashier’s check $700 order of Mr. Durant on the next item, Wilson and Moritz, is the same, paid to Wilson and Moritz, for services during legislative session. Mr. Twining: March 17, 1915, C. J. Mortieau, Helena, Mont., $47. Mr. Durant: That was a similar case at Helena, Monta., that was for legislation. Mr. Twining: Mr. Frank A. Cousins, $391.25, FRDS. (Employee of Occident Elevator Co., kept at Bismarck during legislative session.) Mr. Durant: That was for special expenses at Bismarck during the-session of the legislature. Mr. Twining: He is an employee of the Occident Elevator Company? Mr. Durant: He was at that time. Mr. Twining: On March 22, Occident Elevator Company, $100. Mr. Durant: That was additional for F. A. Cousins. Mr. Twining: May 25, 1915, F. H. ElHs, $200. Mr. Durant: There is a counter entry for that. I never knew why but the Impe¬ rial Elevator brought me a check for $200 and asked me to give a check to F. H. Ellis, one of their employees, for a similar amount. Mr. Twining: August 14, G. F. Ewe, $44.18. Mr. Durant: That was an item of expense incurred by Mr. Ewe going to Duluth on some matter which was of interest to all the elevator companies. I don’t remember just what the matter was. Mr. Twining: On November 1, 1915, there was a payment of $50 to J. F. McKenney. Mr. Durant: J. F. McKenney is an employee of mine and he did some special work for the elevator companies in relation to bad order cars which I thought ought to be borne by all the elevator companies and put into this account. Mr. Twining: November 2, S. W. Clark, $50. Mr. Durant: That was attorney’s advice for an opinion on some South Dakota law. Mr. Twining: November 17, Victoria Elevator Co., $265. Mr. Durant: That was for a transcript of evidence taken on the anti-discrimination case here in North Dakota. Mr. Twining: November 20, 1915, Spaulding Elevator Co., $25.20. Mr. Durant: I think that was telephone and telegraph. You will find there is a check every month to them. Mr. Twining: On December 2, S. W. Clark, $348.77. Mr. Durant: He was an attorney employed by the elevator companies on one of these anti-discrimination cases in South Dakota. I think the case was tried at Mil- bank, S. D. Mr. Flannery: Anti-discrimination against the elevators? Mr. Durant: Yes, you remember, all of these states have a law requiring them to pay the same price at each station, freight rate considered. Mr. Flannery: They never enforced that? Mr. Durant: They never got any further than the justice courts with it. EXHIBITS. 273 Mr. Twining: December 7, 1915, F. C. Riebe, $16.80. Mr. Durant: That was for transcript of testimony taken at another of those dis¬ crimination cases. Mr. Twining: He is connected with the Atlantic Elevator Company? Mr. Durant: Yes, they were cited to appear up at Bisbee. 1916. Mr. Twining: May 2, 1916, Wm. Wallace, $45.25. Mr. Durant: That was for transcript of the evidence taken in a bankruptcy case at Aberdeen, S. D. Mr. Twining: For the elevator companies? Mr. Durant: I think that was obtained for the President of the Railroad Commis¬ sioners of North Dakota on his request. They had some matter up before them which was of a similar nature and the president wrote me and asked me if we could obtain that testimony for him and I did, and to be good fellows, we paid for it and sent it to him. I am quite sure that is what that item is. Mr. Twining: On June 13,1916, a payment of $500 was made to G. C. Dargis, FRDS. Mr. Durant: We are getting into campaign time again. That is probably what that was. Mr. Twining: This may have been my inability to see correctly but from February to June, for instance, for a long time, I was not able to find checks. There would be $100 drawn on the FRDS account for which I could not find any check and they come contemporaneous with checks to G. C. Dargis for $50. Mr. Durant: In making up the check for currency for the pay roll I would add $100 for use on the campaign fund from week to week and it would be—the currency would be brought down to me. There are a number of those items you will find from the 12th of May to the 30th of June. Mr. Twining: October 25, $250. Mr. Durant: That was to get money at hand to be paid on small amounts on cam¬ paign expenses. Mr. Twining: August 22, Cashier’s check to George J. Smith for $1,000. Mr. Durant: That was a campaign fund in North Dakota. Mr. Twining: Mr. Smith was assisting the line elevators companies in a campaign there? Mr. Durant: Yes, assisting the grain trade. Mr. Twining: He was editor of a paper up there at that time? Mr. Flannery: Was that amount paid for articles written or what? Mr. Durant: I think he was making speeches around the country, more par¬ ticularly, as far as I know. I didn’t have any communications with Smith myself at all, I don’t know. There is another check later on for him, I think, too. Mr. Twining: Smith had been an Equity supporter until just about that time when he switched over to attack the Equity. Do you know if this was in that con¬ nection, thatis, for services? Mr. Durant: I don’t think it was so much against the Equity as it was the Non Partisan League. That was just about the time that they were organizing. Mr. Flannery : Is that the paper that retained the legend on it after it had switched over. You know there was one of those papers that had a legend on it “Official Organ of the Equity”. I don’t kno.v whether this was the one or not, but after a certain sum was paid, why, they turned against the Equity, that is, their policy was against the Equity, but they still retained that legend. Isn’t that right? Mr. Twining: Yes, I don’t remember whether that was Smith’s papers, or not. Mr. Flannery: Was this at Plaza? Mr. Durant: Plaza was where he lived. I presume I have seen some of his papers but I don’t remember enough about them to know about it. It is my recollection that he was more against the Non Partisan League at this time than he was against the Equity. Mr. Twining: On August 28, Monarch Elevator Company was paid $26.16. Mr. Durant: That was an expense on an elevator which is held in my name by three of the elevator companies. It is taxes and other items of expense. You will find a number of those items as we go along, of that money. Of course, I am reim¬ bursed by those three companies, not by all of the companies. Mr. Flannery: That one elevator is held by three line elevator companies? Mr. Durant: Yes, not in use. It is one of those stations where there is an over plus of elevators and this elevator company wanted to get out and, of course, they did not want a fourth company to come in there and do business and the three companies combined and bought the elevator and put it in my name to hold until it can be wrecked. Probably that is what will be done with it. 274 TERMINAL GRAIN MARKETING. Mr. Flannery: Where is that located? Mr. Durant: At Wolford, N. D. Mr. Twining: On October 11, Watson and Young were paid $2193.47. Mr. Durant: That was attorneys’ fees for contesting the law in North Dakota placing a tax on the sites upon which elevators are built on a railroad right of way Mr. Flannery: Kind of a joint action? Mr. Durant: Yes. Mr. Flannery: In other words, the tax was thought to be excessive, or something: of that kind? ^ Mr. Durant: Double taxation. Mr. Flannery: And against the interests of the line elevator companies Mr. Durant: Yes, all the companies. Mr. Twining: On October 25, cash $215. Mr. Durant: I could not say what that was used for, or the next item on the 31st of $200. Mr. Twining: There is a notation in the comer of that check ‘‘Great Falls.” Mr. Durant: Then I know. That was a trip which I made to Great Falls to inaugurate the Grain Bulletin in the State of Montana. Mr. Twining: And the line eleva,tor companies here paid for that trip? Mr. Durant: Yes. Mr. Twining: On December 4, H. N. Stockett, Sec’y., $159.32. Mr. Durant: He is the man that has charge of the cars (cards) out at Great Falls, Montana, that is salary and expense. Mr. Twining: Then on December 9, Cooperative Manager & Farmer, $12.70. Mr. Durant. That must have been an expense item. That was just for printing: some supplies for us. 1917. Mr. Twining: February 14, Van Dusan Harrington Company, $100. Mr, Durant. That was logislativ© GxpGnsG. You undGrstand whGn a chGck is nmde out to Van Dusen Harrington i t is simply that I know I can get it cashed in their office. I make the check out to them and go down to their office and get the cssh They have nothing to do with the check. Mr. Flannery: Just the same as if I asked you to cash my salary check Mr. Durant: Yes. Mr. Twining. Then it is only in exceptional cases that the checks are issued to them for the services of their employees. Mr. Durant: Yes, and wherever it has been, I have told you. Mr. Twining. Then these other checks made out to Van Dusen Harrington are just for the money? They are charged to the FEDS account but they are for some pumose in connection with the line elevator companies? Mr. Durant: Yes, but I don’t remember just what they are issued for. Mr. Twining: All those items for Mortieau, Bailey & Austin are for furnishing documents in connection with legislation? Mr. Durant: Yes, at Helena, Pierre and Bismarck. Mr. Twining: Then on March 9, the pay roll was three times the usual size Mr. Durant: $200 was charged to the FEDS account. Mr. Twining: That was for the services of your employees in connection with the line elevator companies interests? Mr. Durant: No, thatis just as I explained to you on those $100 checks. I got the currency to have in the office to use in small amounts. Mr. Twining: For line elevator companies’ interests? Mr. Durant: Yes. Mr. Twining: Then on March 19, National Elevator Company, $144.38. Mr. Durant: That was insurance on the elevator at Wolford 26, [Judge] N. C.'Young, is explained. (Mr. 1 Wining then read the explanation which appears on sheet 7 of the amounts listed about which Mr. Durant was questioned.) Mr. Durant: If you want any further explanation I think you can safely spy it was used in the campaign against the Non partisan League. I have no doubt but that IS what it was used for. Mr. Twining: April 11, Van Dusen Harrington Company, $100. That is again for cash? ^» e, Mr. Durant: That may have been a case of where I got $100 from them for mvself Mr. Twining: April 12, Cashier’s check Geo. J. Smith, $500. Mr. Durant: That is that other $500 that I told you would appear later. EXHIBITS. 275 Mr. Twining: Mr. Smith was writing too, if I remember correctly, from the corre¬ spondence. He was conducting a campaign in his papers in behalf of elevator inter¬ ests, wasn’t he? Mr. Durant: That is possible, yes. As I say, I didn’t see his papers, I don’t know. Mr. Flannery: Northwestern Grain Dealers Association, $528.03, April 16th. ^Ir. Durant: That is not in the special account. That is this H. N. Stockett’s salary and the telegraph bills. He paid the telegraph bills out there and I remitted to him in total and then prorated it among the subscribers. Mr. Twining: May 9, FRDS Cash $300. Mr. Durant: I don’t know what that was for. It is probably some campaign fund because we are coming now into the time of the primaries again. Mr. Twining: June 6, 1917, Van Dusen Harrington Co., $400 FRDS. Mr. Durant: That was cash that I obtained from them for similar purposes. Mr. Twining: June 20, Cashier’s check to W. F. Cushing, $300. Mr. Durant: Well, sir, I never did know what that was for. Mr. Cushing is now, he is the same Cushing who was at one time Secretary of the Railroad Commissioners of North Dakota. At present he is a publisher of a newspaper in Fargo, and just why that money was given to him—I beheve I do know. The Non-partisan League had published throughout the State of North Dakota erroneous statements in regard to the cutoffs of certain elevator companies, making it appear that these elevators showed an over run of thousands of bushels each year. The statements were alto¬ gether false and were arrived at by omitting from the reports the amount of grain held in the elevators for the accounts of various farmers for which storage tickets were outstanding. Due to Mr. Cushing’s familiarity with the grain interests in that state, he was asked to go to Bismarck and see the actual reports on file there and make correct comments in his pubhcation. Mr. Twining: G. W. Van Dusen Company, $75 on July 25th. Mr. Durant: That is a similar item. I don’t know just what it was for. I got the cash from them. Mr. Twining: July 27, Watson & Young, $235. Mr. Durant: Messrs. Watson & Young were asked to write an opinion on the Grain Grading Act passed by the North Dakota Legislature at the 1917 Session, and this $235 was their fee. Mr. Twining: These items run along: here is First and Security National Bank, $127.46, and are for rental of this office, are they? Mr. Durant: Yes. Mr. Twining: August 22, Cashier’s check, M. C. Gaulke, $200. Mr. Durant: After the opinion in regard to the North Dakota Grain Grading Act had been obtained the Farmers’ Grain Dealers’ Association of North Dakota under¬ took to make a test case of the law and M. C. Gaulke was Secretary of this Associa¬ tion and proceedings were taken against him to enforce the law. The line elevator companies contributed part of the cost of maintaining this action. I might say that the above applies also to the item of $325 to M. C. Gaulke on September 14th. Mr. Twining: He lives at Thompson, N. D.? Mr. Durant: Thompson, N. D., yes. Mr. Twining: August 30, 1917, Van Dusen Harrington Company, $100. Those items run along about every month. Mr. Durant: You will find they stop right there. That was a wind up on the legislative expense of the 1917 legislature. Mr. Twining: November 23, Pubhcity Corporation, $100. Mr. Durant: That is this Federal Trade information service at Washington. It is a very interesting service. They give all the Washington news every day. Mr. Flannery: Do you get the bills through them? Mr. Durant: I get any particular bills or Interstate Commerce Commission deci¬ sion, or Treasurer’s decision, or Supreme Court decisions I want instead of bothering the Senators for them. I thought it was worth the $100. 1918. Mr. Twining: These items to J. R. McMillan and C. N. Magnuson, are personal items? . , , , Mr. Durant: No, Mr. Magnuson and Mr. McMillan made a trip to New York to visit Jules Barnes on a matter of vital interest to the grain trade in the Northwest and they thought that all the companies should share in their expenses. , APPENDIX TABLES Table 1,— Representation of cash commission merchants on specified exchanges, 1918. Exchanges. Total resident member¬ ship. 1 Exclusively cash commission. Primarily cash commission. Secondarily cash commission. Number. Per cent. Number. Per cent. Number. Per cent. Chicago. 1,000 15 1.5 no 11.0 320 32.0 Milwa'ukee. 182 8 4.0 48 26.0 32 17.0 Miimeapolis. 464 0 .0 157 34.0 112 24.0 Duluth. 126 1 1.0 69 55.0 12 9.0 Kansas City. 169 4 2.4 74 44.0 56 33.0 St. Louis. 389 40 10.3 109 28.0 24 6.0 Omaha. 141 22 16.0 34 24.0 60 43.0 Peoria. 79 14 17.0 30 38.0 10 13.0 Indianapolis. 84 6 7.0 17 20.0 18 21.0 Louisville. 68 0 0 2 3. 0 3 4 0 Cincinnati. 102 37 36.0 11 11.0 20 20.0 Toledo. 24 0 0 6 25.0 4 17.0 2,828 147 5.0 667 24.0 671 24.0 I Excluding those not in the grain business. Table 2.— Methods of obtaining grain^ at specified markets, 1913-1917. Primary markets. Chicago.. Milwaukee.. Duluth. Minneapolis. Omaha. Kansas City St. Louis_ Peoria. Indianapolis. Cincinnati... Cars re¬ ported (for this test). Received on con¬ sign¬ ment. 2 Received on direct pur¬ chases. Received by the head of¬ fice ofline eleva,tor com¬ panies. Total. 558,797 174,932 37,283 Per cent. 57.4 82.5 68.0 Per cent. 42.6 17.5 32.0 Per cent. Per cent. 100 100 100 626,327 65.3 7.0 ‘Pl.l 100 227,579 57.5 42.5 100 164, 711 67.7 32.3 100 219, 671 56.0 44.0 100 91, 983 50.4 49.6 100 73,994 47.8 52.2 100 54,093 66.1 33.9 100 1 Combined figur es for wheat, corn, oats, barley, and rye. 2 Analysis of carsreceivedfrom country points only shows higher percentages in favor of the consignment basmess than j^s indicated by the table above, viz, Miimeapolis, 91.38; Duluth, 90.60; Milwaukee, 90.13; Kan^sCity, 80.65; St. Louis, 77.73; Chicago, 77.33; Omaha, 71.09; Cincirmati, 69.24; Indianapolis, 57.71; and Peoria, 53.54. (See Volume 1, Table 49.) The differences in the figures are probably due to the fact that the foregoing table is based upon reports made by terminal market concerns and presumably includes grain other than that obtained from the country; in other words, bought at other markets. The figures in this note are probably more correct for country shipments therefore. 276 APPENDIX TABLES 277 Table 3.— HigTi, low, and average stocks of the five grains combined, in terms of ratios to the rated elevator capacity ^ of each market, at 15 specified terminal points for the 2-year period 1919-20. Market. Elevator capacity. Ratio of high stocks to capacity. 2 Ratio of low stocks to capacity. Ratio of average stocks to capacity. Percent. Date. Percent. Date. INTERIOR POINTS. Minneapolis. 42,775,000 71.8 Feb. 1,1919 2.8 Aug. 21,1920 33.5 Chicago. 42,783,600 72.8 Feb. 22,1919 9.2 Jan. 3,1920 39.7 Duluth. 35,850,000 83.3 Mar. 15,1919 1.1 Aug. 28,1920 23.9 Buffalo. 24,933,000 78.0 Nov. 8,1919 4.2 Aug. 2i; 1920 39.8 Kansas City. 21,902,000 94.5 Oct. 25,1919 6.6 July 5 ,1919 39.6 Omaha. 9,085,000 73.3 Oct. 18,1919 9.9 July 24 ; 1920 38.8 Milwaukee. 7,173,000 129.7 Feb. 8,1919 8.4 Aug. 21 ; 1920 49.3 St. Louis. 5,355,000 72.2 Sept. 6,1919 7.7 May 31,1919 32.9 Peoria. 2,130,000 30.5 Sept. 25,1920 1.7 May 24,1919 16.2 Indianapolis. 945,000 222.4 Nov. 6,1920 42.0 July 3,1920 99.0 SEABOARD POINTS. Baltimore. 9,752,000 53.8 Sept. 11,1920 10.7 Jan. 10,1920 38.5 New Orleans. 7,572,000 84.9 Nov. 8,1919 27.1 May 15', 1920 53.9 New York. 3 6,732,000 151.1 Mar. 29,1919 9.7 May 8; 1920 76.9 Philadelphia. 4,250,000 83.6 June 19,1920 18.1 Jan. 24', 1920 52.9 Galveston. 3,100,000 156.2 May 29,1920 13.3 July 19 ; 1919 76.2 1 Excluding the elevator capacity of millers, converters, etc. For detailed figures of stocks and capacities see Tables 5 and 11. 2 The stocks at Milwaukee, St. Louis, Indianapolis, New York, and Galveston were overstated, in that str«ks not in commercial elevators wore included. At present there seems to be no data available for adjusting the figi.ires. The ratios of stocks to capacity are therefore maximum figures 2 Warehouse capacity of 570 tons not considered. Table 4.— Average combined stocks in elevators'^ at 15 terminal points for each of the 5 grains and for all grains combined, and ratio of combined stocks of all grains to aggre¬ gate storage capacity, by 6-month periods, 1919-20. Period. Average stocks (M bushels). Ratio of average combined stocks to aggregate storage capacity. Wheat. Com. Oats. Rye. Barley. All grains. January-June, 1919. July-December, 1919. January-June, 1920. July-December, 1920. Two-year average. Percentage distribution... 69,152 61,422 45,726 25,808 3,580 2,064 4,092 5,754 20,135 17,558 8,926 19,795 14,215 13,020 14,263 2,829 9,860 5,264 3,251 3,089 116,942 99,328 76,258 57,275 51.0 43.3 33.3 25.0 50,527 3,873 16,604 11,082 5,366 87,451 38.1 58 4 19 13 6 100 1 See footnotes 1 to 3, preceding table. Table b.—Grain stocks (M husheh) at 15 specified terminal points,^ by six-month periods, January, 1919-December, 1920. 278 TERMINAL GRAIN MARKETING. o o o t-H W o W :3 X2 o o CO o •M *c3 c3 P. c3 O tH O c9 S V-t ^ O L- .2|j3l|-3 lalall Ph O ^03 o “ o w d 'cs fcb o > a> T! o3 PP ■ Ph 03 O I a (V -t-» 03 fl ,i«1 o o ■1-2 OQ (U C3 P O' -u 03 P 4«i o o M ■*2 03 P M u o •*2 M 0 ) ■*2 03 P O ■12 CO O) ■12 03 P o CO o 00 o CO ^ ^ '^COCO 00 (N I-H <0 (N iO fHC^OO >1 SI CO co'^ . o ^ 3 C3 P o CO > >) SI o ^ CO CO t-H(M (M •s •v_•s t-h CO O CO (N lO lO 00 lO lO O Ci Oi 05 (N (M CO CO 05 O TfH CO CO 05 O c^Tco’^tjT tH Cp ^ 1-H >>Q. "3 a» •-5C0 (M Jg ti o a 05 co'^ . c:) P o3 CO Tt< (N ^ 05 O CO CO (M 1-1 05 (N 00 00 CO CM TfH CM ^ lO CM 00 Tf< CO O t^co'crT CO ^ 00 O IC o GO CO 05 c^i-Tcm*' o . s >=* p p ►n t-i t>>bib 00 CM CM ^ p 0 ^ P Q CO 005Q CM ^ lO 00 CO CO 00 1-H CO 40 CO Tfi CO CO 05 I 00 00 CM p B io CM O'P • 05 05 CM 05 05 05 i-H O icT o' CO 05 o CO O 1-H CO 1-H CO 05*' CM*' 05 CO 05 CO 00 CM 1 -H CM CO iO'i-H 00*' 05 05 1-H 00 CO »-H fH <0 CM tH CO "3 M V o • 8,261 1,063 2,210 1,466 200 524 800 445 635 CO CM Cp O CO ^ CM CO 02 a bi a> 3 P >. SI 1 —< O 1-H 00 Tt^ 00 IC CO hH P o p w Iz; Iz; 05 Tf Om 05 CO lO CO CO lO CO o' in' 00 , 1-H c«5 c3^ p3 8?2 00 >> (-1 .. P 05 p ^ §2 I ^ :a (D 05 00 O 05 t^C^I ^ O CO 05 rt< 1 CM 4 lO 05 05 COD P g2Wi3-^ (-* 05 M 1—J p 1-5 APPENDIX TABLES 279 csooo CD ^ CO 1C ^ i-» o o CO 00 oToT*^ CJ a o o o Q COC cs 1C O Q Tt< CO O CD lO oo*‘co*'t^ §d5 c3 ’ 1C 00 00 ^c4 o> ^ tH 1 • • • • • • • • I • • • • 1 • t • . J^’ • • • • « • • « t> ci O 3 . 0) *=^ a 03 3 o M <15 3 P^ Ci ^ CO ^ 1C CS rCi-rod^ t^CD 00 ^ t>« cq ^ . i C I ® :a ^ <1? I® 2p r2WH4>Oi 3^ Oi P^Oi bx) g O t> ap«5i July 12. Dec. 27. May 22. May 8. Dec. 25. Aug. 21. 1,288 832 991 1,009 715 840 1,505 304 960 Nov. 29. July 5. Jan.3. June 26. July 3. Nov. 13. 6,639 4,180 5,700 6,339 1,702 4. .363 (N 00 O CO CO rH Nov. 8. July 5. Jan. 3. June 26. Dec. 25. Aug. 21. 4,434 2,815 3,817 3,802 777 2,486 7,636 38 3,585 Dec. 27. Aug. 2. Jan. 17. Apr. 3. July 10. Aug. 28. w H ■p p p p « .4 CO >Q IC CO o (N 05 >1 3 >> 4-» ’c3 a< o3 o tH o c« > O) CO CO o 00 IC 05 05 CD oT^'oT (N 1C -vO 00 ^ p^s < 1C > »C oo CD O rt« ^ CO 05eD >» 1 • 0^ • ^ ri * > &c c3 2 • sa : £3 : &* CO 00 »-t CD CD csT 00 QO ^ J fH 1 ,; >» ’• 53 : . ® • gg: H-5 • C5 bfi « 0 PH ^ 00 00 O 05 CO r-i s (Nl> 05 CD CD oocot>- 05 1C co' i-T o c ,4 2q 3'" tll&g ^-2 C3 ® : : '§3 :4J :a b g- 3-^ • • » « • i • « 1 * • 1 • 1 • « • • 1 • • • * 1 ! 00* « I • 1 1C o • * Icq ( 1 • • * rH IM tH CO 'OS > ti . © >p o3 B O 3 Ph y O O ;z:h O ^ 00 d4 ^ 05 05 CD Q l> 05 C5 00 CO iC C^ iC C^ • • • 1 • 1 • 1 • • • 05 00 • t • 1 • • • » t • • t iC • cq ic 1 • • • • t 1 • I • • • • • 1 • • • • 1 • CO rH cq rH 1C tH rH ‘-'d ^4 !> bb c^a «3 p-a 3 ^ na oa H^ :2;h 1C 00 IC Tt< CO S8' ic CD ^ CO O CN* i-T CD CD O OO CD 05 iC CO OO 00 00 (D bO c3 'S&g 33^ a o •4P> <3^ Q O CO o 2 03 w a; -4-3 o a • CO O 05 a; (N CO O IC 1-H c^i-TcxT 8 8 05 w . kO S TtH c» (N ■>*< CO CO 00 no (N .'29 (N bC b..§|i §|w3. 00 o' ’-H*' os' «M 1-1 CO 00 o ^ o o QO CO o 00 ^ to l> (M o* C4 CO o Oi 05 O »-• CO ^ r-T o:> 8 Q o •4^ 05 >^05 3 O CO tooo (N 00 (N »-H O CO o ^ O lO 00 05 ^ CO CO r>* 00 00 Oi C ci o a Tf 05 CO CO CO rH t> CO CO CO Ttl 05 ob 00 05 tH lO ^ CO 05 to CO OI to CO CO fH CO CO CO 40 to CO c^’^oT o • • &£>< • • OCW • • M • ; C3 5 J : =3 W>- 5 -«S^ W hJ > 3 05 K^05 c— 3^ o3 CD 3 oT o 05 w <1 o >> 3 o c8 ft o3 o (l o ■4^ d V o (M CO »0 . 00 rH (N ft! ® d s O - 1-H 40 ^H 40 1 -H Tt< CO 1 -H 40 . < 1 > ^ >“-5 CO >> O'd CO co^ . '=> . ® • a ; S . ft •J-2 43 fe. be f " O ® . 05 >5 > 05 05 40 CO 05 rH CO >> 05 O 1 -H CO t> Tt< CO r>. O t>>> IS 1-H CO '';f< rH rH CO tH CO > >> 40 o. te M g ‘ O 1=1 05 ft >405 3 >^05 Table h.—Grain stocks {M bushels) at 15 specified terminal points, by six-month periods, January, 1919-December, 1920-ContmMed. 282 TERMINAL GRAIN MARKETING. <£> A VI a 00 t> M S ■3 •p^ ft ea o k. o ■w e9 > > « o "a > o3 03 fl >< ?3 ^ ft 8 w ® 6 m a '& i~, bD > Lh C3 w . C3 O a (4 o O c3 ai -a a 44) 03 ft o o 44> M a ■|4> c 3 Q CO 52 0 CO 10 CO CO CO CO 25 00 tN. 40 CO 8 03 Q a o 44 CQ a 44 a 4-3 02 a ■44 C3 02 a -44 OS a a o 44 02 •a o 'C a ft 05 Tt< eo 05 Tf 00 4j< r-4 (oi e4 O i-H 4j5 * UO CO o c4 1-4 00 00 CO ■8 « fts .‘'O Tt--' M o D CO » CO <3^ a CO ^ CO o 00 CO CO oToTcir t>. O ' O ^ ' Ci < O Tt< lO CO cor^co CO' 5 >>> § ^4 ® c3 b ftiz; Sft 1 05 ; .'d : Tji N ^ ^ • ic ^ . y^ ^ ^ » ; >> ei I 3 3 .' ft • -p d <» d ftft 1 -^ (M GO a>(N o CO c4" rn" Tt< O CO CO ^ lO 1-H CO > » > CO < TjJ ^ i ^ o (N 1 O) fs. ^ q o) R 00 00 Oi b- ^ Oi 05 CO Oi ^ CO CO ^ 05 CO CO CO CO CO lO o . s d c« J-5 (Noo Pho CO a S 05 '^oor- lO OI ^ 0 ( iO(N< CQ T C^l IN. , f CO » S 8 : ) O - J CO ^ ^ 00 e5 a a S (N (N 4 J bO a a o«< 00 —( Tf 05 iM 00 CO IN -H co" »0 ^ ^ ko ^ cf i-T 1 -H o CO Cp 05 1-H O 05 of o d d >> ' Ui • • • C3 05^ a=5 05 05 O 05 05 05 lO 05 C’f 1-f 10 • (N cua c; . ^ 01 f-H »—I a a CC 1-5 •Iti O CO C- 1-H CD a'a oB> CO Tf -H 1-H 10 N CO rH Hfl co" i-T -^ft 3 ® ft 05 CO y^ t>* 05 In. CO • 1 • « 00 N • • .*05 CO^ • * . * . * 1 • i • > bi) • P ► >> 2. ^ ^<5 P 9 C9 d II ^ O -i **-3 05 ! ® . d • d I r^ • ^ • .X5 :a 0^ O) ca ® PS ■ : M ® • • S) i“sw35pw3^“|g34 g- §4 ■g-H ft ft 05 ft ft> o ft 05 a »3 a a 2 8 iO 10 CO 05 >> ^■H d ■3 C5 P- o tH o 4-9 C3 -2 OOt^QO COtN. 05 CD 05 00 CO 05 05 CO 00 CO S (N CO 05 CO O * 1-H (J) ^ CO >» 3 a> 05 00 CO >05. 3^' O CO GO CO O (N CO CO 05 rH CO 05 CO CO 00 tH • c ; d , So p >> > ^. CO 05 «CO CO (M • • 1 • • CO CO t 1 -V o > ^ >5 d C3 « • • « : > to QO * 1 00 CO . CO (N . ^ <3; .X5 ^ > b£ > o2 .05 >-> O! <» “I fe ^ > >>05 d >~> (V bC 05 Ui a> « O H Pi^ w '3 -d m d X2 o (N s 05 3 C5 Ph o Ui o 03 > H CO wH C^ tH t^CO 05 00 CO TJH I TJH s ^ 05 1 o I CO a> P P CO o cooo lO Tfi o > 0) d c/2 Hi c^ fN. to 0 05 lO 1 (N tN. > P P CO H> C» . EJTJI-;:; 05 1 d 05 05 C^ 05 i-( Tt^ b 03 05 3 ^ e M r-1 03 fe ..£fS tuO CO j., & r^ L> t-i O) a Q 1 «> . p ; P , So o CO OI ic (N P^ (X) CO CO >> r>H a O 00 (M lO ic lO ^ tt* 00 00 (M ■3Q o to > p p. > Ph O 4-» Q A Zh c3 pq c3 M OQ ® >> ® ts ft 4«1 CQ 8 CO CQ 05 ® ® C3 Q M 8 CO .1 o Ah I CO Cl Oi Oi CSI o Oi CO 00 UO i S'O 53S ^co > >> 003 g 0 to CD 01 to CD 01 CD OT 00 CO 1-H d 01 to i OT ^ 0 05 0 0 to 00 d 0 OT 1-H CO 934 0 •M 02 iH tH rH fH 01 (M (N (N (N »C) lO u u c« ce s« C3 0 O) ^ 02h-5 S ^ CO > CO 05 o CO^ LO ) 10 CO 05 CO 6 • • • • • 1 • » 1 « 1 * 0 Tf 1 -H d 45 03 • 01 CO fH (N 00 fH tH , Q t>.c p ^ ft ^ c ftS Ui 0 ^0 0 d 0? tf o CO CO d 8 (N* 10 oT o (N 05 o CO^ OT CO Q CD CO to SS p! Tt4 0 1-1 -cf* OT 0 05 CD CO d 00 CD to fH 01 CD 01 to fH o 00 CO • • • 1 • • * t • • • , ■* 1 'OS (N^ CO* ; , t CO .r ^ bi >» ftS c eS 1-5 CD fH t-J o'd W ^ o 03 P 4 c3 O l-i O 4 ^ > O) S ^ t>-ci toci a> w O Tf 10 o to 01 01 o . 2 ° d 05 CO01»-H 05 CD »-» iO d cot^ Tti 10 CO 01 05 o !>• COO to t^t^Ol ^ CO Tt^Ol o 00 o CO 01 1-H 0 ; ! .rO . :a QJ _ • • O) ® gs ts t-» i-» ® tuO c9 b> ® > <1 2?5 l: ® O i-H Tt4 01 CD CD 05 C^Ol SS CO 01 to 00 oi to tc 00 05 05 05 t^t^Ol O 01 to OT 4t< 01 d CD 00 d t25 d*' i-T O) 0) bo OT APPENDIX TABLES 40 05 O CD cq 00 cq CO OCDI^ • • • oooo CO f 4 FjJ 1-H CO fH CO 40 oq 05t>. Dl 05 CO CO CD fH fH -^1^05 o6i>i^ <0 fH 05 05 CD oq 00 CO CD 00 oq ^ t>-Dq 40 Oct. 25. Dec. 27. June 19. Jan.10. Sept. 11. July 17. 4,828 1,657 3,615 4,745 1,048 2,941 5,248 2,064 4,320 July 5. Oct. 18. Apr. 17. June 26. Dec .25. July 10-31... .-H 0.-I50 O r» IM ^ C^ O ir: cp Cf> Cl cs lO O lO '^ !>• Tt< CO UO CO i-T iC 1-M rt< O 40 t>- 05 ?c 05 (N O OO iC O (Mi-h o ^ t>*t» GO (N fH CO 05 OC 00’-H ^ C3 CM 2 * F-f • CO'’’ Cyo ^ • : •<5-5 • S P. W ^ ' 5^0 : . CD • ^ d • ® 3 : * <40 Qi ® ^ Pco CO o 05(N 00 fH CD CD t-l Q CD (M O 40 CO Di fH CO 05 d W) COIM d ^ rH Oi O oo •*ti a (V u .05 >, tl , t-i C3 05 3 3 o3 : o) 56976°—22- -20 Excluding Oct. 2, 9,16, and Nov. Table 5. —Grain stocks {M bushels) at 15 specified terminal points, by six-month periods, January, 1919-December, 1920 — Continued. 286 TERMINAL GRAIN MARKETING. 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Low_ Average. c3 APPENDIX TABLES 287 cc oc OC ^ CO iOcO'^ O O CO 00 o> CO < >» u . • c3 O Q > C tyO> ' o h- << o 3 t^. 04 05 o 05 > C’O o> cs >4 (-4 05 >UI C3 ^ CD rH ci 3 . oP t- IM COO'^'^ -» ® to (N O c> Oi >> CO CO »c Oi ID S 00 .hcJ' .cT 1-H 5-H C^ 1—t ^ —D A ^ ” d 1^’ O .03*^^ • gcs-0.4 ^ 05 ^ >40? ’3'^ M a &: O 4 >4 ^.Q « >> c3 & o "3 O ^(2 CO o I Tt< n V 3 CEq<< (N lO CO o> wr- ^ 1-H > >» Tt< CO kO o6 ID o Ci . 00 . • ^ oc D4 • . ex d ri 9 3 lO o Goj o < t>* c CO CD » t cs •' >'^ (M* (M* (N IM CD* CD* >>>. > > C3 C!3 O O > o o :z::z; to to CD 1-H Tf< CO to CD 00 00 CO CD' . ^-' ■I ii > o. ’3-^ t£ ^ *^OhH j "3^ 8 Warehouse capacity of 570 tons not considered. i Two items. 288 TERMINAL GRAIN MARKETING, Table 6.— Capacity of public and private terminal grain elevators at specified interior and seaboard points in the United States, July 1, 1920. Total eleva- Public.i Private.^ Markets. INTERIOR POINTS. Chicago. Minneapolis. Duluth-Superior. BulTalo. Kansas City. Omaha. Milwaukee. St. Louis. Toledo. Manitowoc. Cleveland. Peoria. St. Joseph. Nashville. Erie. Cincinnati. Detroit. Fort Worth. Indianapohs. Sioux City. West Fairport. Hutchinson. Louisville. Port Huron. Ogden, Utah.. Mansfield, Ohio.. Fremont, Nebr.. Memphis.. Atchison.. Pekin, 111 . Hillsdale, Mich. Fostoria, Ohio. Des Moines. Green Bay. Coffeyville, Kans. Cedar Rapids. San Antonio. Evansville. Total interior. SEABOARD POINTS. Baltimore. New Orleans. New York. Philadelphia. Boston. Galveston. Portland, Me. Seattle. Portland, Oreg. Astoria, Oreg. Newport News. Tacoma. Port Arthur, Tex. Mobile. Total seaboard.... Total all markets. tor storage capacity of the market (excluding millers and converters). Num¬ ber of eleva¬ tors. Storage capacity in elevators. Percent¬ age to total storage capacity. Num¬ ber of eleva¬ tors. Storage capacity in elevators. Percent¬ age to total storage capacity. Bushels. Bushels. Bushels. 42,783,600 9 13,400,000 31.32 27 29,383,600 68.68 42,775,000 29 36,481,000 85.29 16 6; 294; 000 14.71 35,850,000 1 300,000 .84 8 35; 550; 000 99.16 24,933,000 8 9,098,000 36.49 11 15; 835; 000 63.51 21,902,000 13 21,142,000 96.53 9 ■ 760; 000 3.47 9,085, 000 13 Q 085 000 inn nn 7,173; 000 10 7 173 000 . inn nn . 5,355,000 11 4,845,000 90.48 7 510,000 9.52 2,619,000 1 1,640,000 62.62 4 979', 000 37.38 2,220, 000 2 2 220 000 inn nn . » 2,166,000 1 • 200,000 9.23 9 1,966,000 90.77 2,130,000 3 1,850,000 86.85 1 '280;000 13.15 1,913,000 3 1,513,000 79.09 1 400; 000 20.91 . * * 1,606,120 6 1 .506 120 100.00 i; 156; 400 1 1,156,400 100.00 1,070,000 8 1 070 000 inn nn i; Olo; 000 1 600,000 49.50 3 510,000 50.50 1,000,000 1 1 000 000 inn nn ' 945,000 4 945 000 inn nn 920; 000 2 920,000 100.00 900,000 1 900,000 100.00 800,000 2 500,000 62.50 2 300,000 37. 51 800,000 1 650,000 81. 25 1 i.5o;ooo 18.75 750,000 1 7.50 000 ion on 700,000 1 700 000 inn nn 649; 525 1 649 .525 inn nn 600,000 1 600 000 inn nn 485; 000 3 485 000 inn nn 400; 000 1 400 000 inn nn 370,000 2 370 000 inn nn 355,000 1 355,000 100.00 325; 000 1 325,000 100.00 290,000 2 290 666 inn nn 200;000 1 200,000 inn nn 175,000 1 175,000 100.00 100 00 175,000 1 175 666 inn nn 150;000 1 1,50 000 inn nn . 9o;ooo 2 90 000 100.00 216,726,645 87 94,675,400 43.68 163 122,051,245 56.32 9,752,000 7 9,752,000 100.00 7,572,000 7 7; 322; 000 96. 70 1 250,000 33.02 ‘ 6,732,000 10 6,732,000 100.00 4,250,000 5 4,250,000 100.00 • 3,717,191 3 3,717,191 100.00 3,100,000 • 2 2; 100; 000 67. 74 1 1,000,000 32.26 2,500,000 2 2,500,000 100.00 6 2,226,870 1 1,026,870 46.11 2 1,200,000 53.89 T 1,350, 517 1 1,033,850 76.55 1 ' 316; 667 23.45 1,250,000 1 1,250,000 100.00 1,000,000 1 1,000,000 100.00 8 630,000 1 100,000 15.87 4 530,000 84.13 500,000 1 500,000 100.00 200,000 1 200,000 100.00 44,780, 578 43 41,483,911 92.64 9 3,296,667 7.36 261, 507, 223 130 136,159,311 52.07 172 125, 347,912 47.93 1 The elevators listed as “public” in this table include houses operated under State license as public warehouses, houses operated by common carriers as terminal facilities, and houses operated wholly as public warehouses by elevating and storage companies. As noted in the text, a majority of the elevators hcensed by State authority are operated by grain dealers and for this reason in ordinary practice handle more grain for private than for public account. * Elevators handling grain for account of the operating company and not licensed as public warehouses arellsted as private. 3 Warehouse capacity of 350 tons not included above. * Warehouse capacity of 150,000 bushels not included above. 5 Warehouse capacity of 570 tons not included. ® Flat warehouse capacity of 22,000 tons not included. 7 Warehouse capacity for sacked grain not included. 8 Warehouse capacity of 42,400 tons not included. APPENDIX TABLES. 289 Table 7.— Terminal grain elevators owned by railroads and leased to dealers markets, 1920. at specified Market. Capacity of elevator. Owner.i Y early rental. Rental reduced to cents per bushel capacity. INTERIOR POINTS. Bushels. Minneapolis. Chicago. 600,000 8,300,000 3,000,000 1,500,000 1,250,000 C. St. P.M.&O.R. R. C. & N. W. Ry. Co $4,000. 00 217,091. 64 2 18,000. 00 2 18,000.00 2,500. 00 8 ,495. 00 21,282. 00 21,800.00 7,200. 00 16.500. 00 2,400. 00 80,251. 00 3,600. 00 87.500. 00 27,641.04 30,954. 77 30,000. 00 20.500. 00 15,140. 40 7, 500. 00 4,920. 00 3,520. 00 2,450.00 300.00 72,000.00 18,000.00 3,584. 06 1 3,000. 00 5 100 , 000.00 3,000. 00 5,000. 00 2, 400.00 18,150. 00 6 , 000 . 00 ( 8 ) 4,696. 56 0.67 2.61 .60 1.20 .20 .77 1.93 2.18 .90 4. 27 2.67 8.21 10.29 1.56 . 95 1.24 1. 67 1. 37 1.26 1. 25 .89 .88 1.53 .75 5. 76 1.09 .29 .30 1. 33 .23 1. 25 .96 1.82 1.00 Do. C. R. I. A P. Ry. Co Do. .do. Do. .do. Do. 1 , 100 , 000 1 , 100,000 1 , 000,000 C. B. it Q. R. R Do. A. T. A: S. F. Ry. Co Do. Penn. R. R. Co Do. '800'000 386,600 90,000 2,500,000 I. C. R. R. Do. Erie R. R. Co. Do. Buffalo. N. Y.C.& St. L. R. R. N. Y. C. R. R. Co Do. 35,000 5,600,000 2,900,000 2,500,000 1 , 800, 000 1,500, 000 1 , 200,000 Erie R. R__ Kansas City. A. T. & S. F. Ry.... Do. C.M.& St.P. ily. Co Do. C.R.I. & P. Ry. Co Do. K.C.S. Ry. Co... Do. C.B. & Q.* *^R. R. Co Do. C. G. W. R. R. Co. Do. '600'000 K.C. S. Ry. Co. Do. 550'000 St. L.-San Fran. Rv-® Do. 400;000 160,000 .do. St. Louis. T. St. L. & W. R. R Do. 40'000 Southern Ry. Co Omaha. 1,250,000 1,650,000 C. & N. W. Ry. Co... Milwaukee. C. M. & St. P/Rv. Co Do. l' 248; 000 C. & N. W. Ry. Co. Do. 1 , 000,000 C. M. & St. P. Ry. Co. Duluth-Superior. 5oo;ooo 1,300, 000 400,000 250,000 1 , 000 , 000 G. N. R. R. Do. C. St. P. M. A O. Ry. Co Toledo.;.. B. & 0. R. R. Co_ Do. N. Y. C. R. R. Co.. Cleveland. C. C. C. & St. L. Ry. Co Do. '600,'000 750,000 413,000 Bie Four R. R. Co.. Port Huron. Grand Trunk R. R. Co. St. Joseph. C.B.&Q. R. R.7. 1.14 Do. 100,000 C. G. W. Ry. Co. 600.00 .60 Cincinnati. 600,000 Big Four R. R. Co .. 6 , 000 . 00 1 , 800. 00 1.00 .90 Green Bay, Wis. 200;000 Green Bay Sz Western Ry, Co SEABOARD POINTS. New York City. 8 50,000 N. Y. C. R. R. Co. 6,660.00 6 , 550. 00 (») 30,000. 00 2 , 000 . 00 (“) 19,449. 24 29,901. 27 13. 32 2 . 18 Philadelphia .1. 300,000 225,000 1 , 000,000 18 316,687 100,000 Penn. R. R. Co. Do... P. & R. Ry. Co. Galveston. So. Pac. r; R. Co... . 3.00 .63 Portland, Oreg. .do. Tacoma..... C. M. & St. P. Ry. Co... Do. 12 50, 000 20,000 Nor. Pac. Rv. Co_ 38. 90 149. 51 Do. .do. Total capacity. 59, 234,267 990, 336. 98 1 I For lessees see Appendix Table 11. * Plus maintenance. 3 Leased to the Frisco Elevator Co., not a dealer. < Cost of improvements made by operating company. 5 Plus certain repairs. ® Unknown or not reporting. 7 Leased to the Burlington Public Elevator Co., not a dealer 8 Warehouse capacity of 500 tons not included. 9 Net earnings. 18 Warehouse capacity of 12,000 tons not included. II Rental undecided. 12 Warehouse capacity of 18,000 tons not i;icl uiel. 290 TERMINAL GRAIN MARKETING Table 8. Total terminal elevator capacity at specified interior and seaboard points as related to the total capacity owned by railroads and leased to dealers and the capacity owned and operated by railroads or subsidiary companies. Market. INTERIOR POINTS. Minneapolis. Chicago. Duluth-Superior_ Buffalo. Kansas City.!!”!!! Omaha...!. Milwaukee. St. Louis. Other. .. Total interior. SEABOARD POINTS. Baltimore. New Orleans. New York.** Philadelphia.!.'.!!!' Boston. Galveston. Other. Total seaboard- Total, all points Total elevator storage capacity (excluding millers and convert¬ ers). Total capacity owned by railroads and leased to grain deal¬ ers. Total capacity owmed and operated by rail¬ roads. ✓ Bushels. Per cent. Bushels. Per cent. Bushels. Per cent. 42,775,000 42, 783,600 35,850, 000 24,933, 000 21, 902, 000 9,085, 000 7,173,000 5,355,000 26,870,045 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 600,000 18,526,600 8,800,000 2, 535,000 17,050,000 1, 250, 000 3,898,000 200,000 4,313, 000 1.40 43.30 24. 55 10.11 77.14 13.76 54. 34 5.19 15.99 1,048,000 442,000 4.18 2.00 1,656, 400 6.14 216,726,645 100.00 57,172,600 26. 50 3,146,400 1.46 9,752,000 7,572,000 6,732, 000 4,250, 000 3,717,191 3,100, 000 9,657,387 100.00 100.00 100.00 100.00 100.00 100.00 100.00 9, 752.000 4,700, 000 4,750, 000 2, 350, 000 3,717,191 100.00 82.07 70. .56 55. 29 100.00 50,000 525, 000 .74 12. 35 1 ,000,000 486,667 32.26 4.94 3,700, 000 37. .54 44,780, 578 100.00 2,061, 667 4. .58 28,969,191 64.40 261, 507, 223 100.00 59, 234, 267 . 22. 72 32,11.5, 591 12. 32 Table 9. Storage capacity in elevators operated by millers and converters at 20 specified markets, July 1, 1920. Market. Minneapohs... Chicago..._ Milwaukee.... Cedar Rapids. St. Louis. Kansas City... Toledo. Omaha. Tacoma. TndianapoUs.. St. Joseph. Duluth. Portland, Orep Galveston.. Cincinnati. Detroit. Buffalo. Nashville. Seattle. Cleveland. Total.... Total avail¬ able storage capacity! Bushels. Storage capacity in elevators op¬ erated by millers and convert¬ ers. Number of com¬ panies. Bushels. Per cent of total. Total storage capacity, not including millers and converters. Bushels. Per cent of total. 53, 935, 380 51,928,600 15,566, 000 4,675, 000 9,665.000 24,594, 000 4,314,000 10,125, 000 1 1,630, 000 1,920,000 2,763, 000 36,475, 000 1,901, 717 3,650, 000 1, 59.5, 000 1,520, 000 25,473, 000 1 , 800, 120 2,496, 870 2 2,366, 000 258, 393,687 18 17 17 1 14 11 5 5 3 5 3 2 3 1 2 3 2 2 2 1 117 11,160, 380 9,145, 000 8 ,393, 000 4, 500, 000 4,310, 000 2,692, 000 1,695, 000 1,040, 000 1,000,000 975,000 850,000 625,000 551,200 550,000 525, 000 510,000 390,000 294, 000 270,000 200, 000 49, 675, 580 20. 68 17. 61 53. 92 96.26 52. 79 10.86 39.29 10.27 61. 35 50.78 26.69 1. 71 28.98 15.07 32. 92 33. 55 1.53 16. .33 10. 01 8 . 45 42, 775, 000 42,783, 600 7,173, 000 175,000 5,355, 000 21,902, 000 2,619, 000 9,085, 000 630,000 945,000 1,913, 000 35, 850, 000 1,3.50, 517 3,100, 000 1,070, 000 1 , 010 , 000 25,083, 000 1, 506, 120 2,226, 870 2,166, 000 79. 31 82. 39 46.08 3.74 55. 41 89.05 60. 71 89.73 38.65 49.22 69.24 98.29 71.02 84.93 67.08 66 .45 98.47 83.67 89.19 91. 55 19.30 208, 718,107 80.78 1 Warehouse capacity of 4,000 tons not included. 2 Workhouse capacity of 350 tons not included. APPENDIX TABLES 291 Table 10. — Elevator storage capacity at Fort William and Port Arthur, Canada, 1920} PUBLIC. Fort William elevators: Bushels. Can. Pac. Ry. Co., “D”. 7,500,000 Grand Trunk Pac. Elev. Co. (Ltd.). 5,750,000 United Grain Growers (Ltd.), “B andE”. 2,500,000 East. Term. Elev. Co. (Ltd.), “A and C” (not licensed). 2,500,000 Ogilvie Flour Mills Co. (Ltd.). 2,000,000 Western Terminal Elev. Co. (Ltd.).. 2,000,000 Consolidated Elev. Co. (Ltd.). 1,750,000 Fort William Elev. Co. (Ltd.),“F”. 1,750,000 Northwestern Elev. Co. (Ltd.). 850,000 Total... 26,350,000 Port Arthur elevators: Port Arthur Elev. Co. (Ltd.). 9,000,000 Canadian Government. 3,250,000 Saskatchewan Co-op. Elev. Co. (Ltd.). 4,500,000 Davidson & Smith. 1,750,000 David Horn & Co. (not licensed)... 750,000 Total. 19,250,000 Grand total. 45,600,000 Fort William and Port Arthur combined Percentage of public to total. PRIVATE. Fort William elevators: Bushels. N. M. Paterson & Co. (Ltd.). 800,000 Mutual Elev. Co. (Ltd.). 500,000 Gillespie Term. Grain Co. (Ltd.)... 250,000 Western Grain Co. (Ltd.), “ G ”_ 250,000 Empire Elev. Co. (Ltd.). 1,750,000 Mount McKay Feed Co. (Ltd.). 8,000 Jas. Davidson & Co. (Ltd.). 10,000 Canadian Feed Mfg. Co. 85,000 Gooderham Melady & Co. (Ltd.), “Capitol”. 65,000 Merchants Grain Co. (Ltd.). 35,000 Muirhead-Bole Grain Co. 30,000 Bole Grain Co. 10,000 Total. 3,793,000 Port Arthur elevators: United Grain Growers (Ltd.), “H”. 600,000 Sask. Co-op. Export Co. (Ltd.). 650,000 Eastern Term. Elev. Co. (Ltd.), ‘ ‘ Richardson ”. 2,000,000 Thunder Bay Term. Elev. Co. (Ltd.). 1,500,000 National Elev. Co. (Ltd.). 50,000 Total. 4,800,000 Grand total. 8,593,000 54,193,000 .84 1 As reported by the board of grain commissioners for Canada, Mar. 1,1921. 292 TERMINAL GRAIN MARKETING. CO d *5^ OT c CO 0? o w Q> o S CD n ‘fh /y is g O •«s> HO ?! 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O ® O 05 O d^d 05Td ._( PI CIJ ® d -os-^ P 03 pqHP«jJQ j Hf ,ft «0 r- on e<» cl P5 • . d=y 52 P . ••P ®rv3 i^Ph" dn^ <*-i ® dS o ^.■s ® .3 ^rrH •*■3 ^ > fcn ^ ®Hi^ -.-. o cw--! O p-< o C4 CO C4 ^ VI tH o •M G > Sm . G 2 C/3 3-S - ^ d 03 ^ G G O (-1 o Pc cn G u Bh G O) H-> C/1 (D CO qj O *GO W c« o CO O) '• g3 c/l G ^ cS— G bX) G CO G (m e G (m <3) 4-» CO a> > • Ui^ fi o 3 0^ .2 >2 03 2^-g O C3 Qc 03 O CO G o •M q^ tO CO ^ 'd o . ® ® ^S3'ph fp t- .2* 323 CO P3 ® t3 cn .d d , 03 ^ o 2 ^03 dS S 03 ^ K MP 03 .•P P " c3 dJ 03 B o -d d G O O CO G Ui QJ .G O •M G 0? Ui o o G •M o G Ph- G Ui O) G 'M Ui O O do’'.jd o3'^2 a 2 6 -g •« w d3 S' ® 61)2 o d2 ^ d t^dn^^ P O 2 ^ >H-'P O M rj Q P'g25Hp2S-2tSo PP22 ®03 ‘C’d ^ g >,t 3 d.^- 52 ° >0 S ?3«« O P-P d P « d o U4 M (D 4-> G ® d5 +H> d o dn y — 00 +51 ^ w p g2'd w _ d o2—' P d' d-^ Pr 03: OT ® -d d OJ3 d Ph d“’ d o'® SB <3 d 1-H QO ’ P5 Ph P3 • * 3 P3 o 3^ 4.9 © M Ph Ph* o •«. d :2: • 3^ • CO o O CO u* O 03 > H ti o Oh ® j=l H d =9 «3 © tx> 05 L. o •fj M . .2o ° o to O o5 ^ © •pg HP O bi) ..=^1 CO ^ H S'© ^ ^11 >cQpq © . . ®M © 4-0 o 2 ^ © © (h o Oh © ® 2 -d o 0 o d o H 00 o Ph CO d © (h © 60 © . So CQ £.2-2 b c © ^ toij t> Om ©P^W ® © 0X3 >« (S O /■•-s eo s—./ y-~S s-/ y-*N CO oT CO rH 05 CO t>- o> Si 1 o I § o o 88^ 1 o 8 y—s <^10^0 o o 05 g IC 8 ss' 8 g" v-x s cq CO CO »0 CO 1^ ci' Ph Dh’ Ph’ d TJ d © =3 d 33 o O ii © p-H & ' © 'd > J2; O o Ui C3 pCj d o © O P5 n !? e-T iz; o P5 OS Ph O O Ph © % o Ph pT .. © CO "d fe© ■w d > o ®CQ © ® g. HH> p~> ‘C Ph (? o > o o o V-I W ® d © o > w O ® gQ o © d Ph P3 Pi d © Ph d CC! o O Ph’ Ph’ d © Ph d CO o a X! d PH f-H © HJ o Eh CO O O .d © C PhI -2 © 05^ P'd © S ^P3 p9x. CO o 4^ c3 > 3^ C3 4-9 o Eh APPENDIX TABLES. 299 8 8 O 8 8- o' CO »-H CO CO O O 8 CO*' 8 8 8 to »o 00 CO r-- Ci Oi lO o o o o 00 Ci 00 CD o a> C u OJ 4^ CO O C9 CQ cl a> ® t-i O o Ph’ d b. CO « c3 n a> (m O o 8_^ irT ID CO pH pH* *3 d O) O o 05 ;2; CO d o CO 4*1 o o 4-3 JX) o 8 8’' o o o o*' o 1 o ' o $ 88 8 8 o' o o'o' o o s' to CO 00 P5 Ph* hH P3 CO Ph CO o Q (m o 4-^ 03 > >> 4i^ CO * ft ft ft* Ph . .CO 00 ft^ c .. m-< o O c/2 is S !=! P^O (SH CO S ° 03 OJ Wo o o o 8 S_^ 8 __ o'o'o' CO lO (M lO CO a • 1 « a Ph' Ph •03^ b-pi ® 3 .PQ cl fi O ♦.H O ^ WPhP tf ii d o Ph 60 W o O >> , JJ? a? i. ® rf* t QJ |PQ> C3 , . SWd o O N ■M w d c a o o O Q CO O ic" CO*" P3 pi Ph P3 02 =a Pi3 H P-< >. P3 d Ph 03 -M a o3 02 03 -d CH O Eh cT o CO .d o o O Ui o d > Ol 4 d o o3 c/j d o3 P" 4 n (d p; o 60 b-i 03 o « "c? d O i2.S- 52d d^ > d b-ta o3 to •c w d S w" >J *• d Cxj ♦ -4 tH PU cn 'A <1 W !? O 03 w o O b^ o -bs 03 M d OPP P/ p/ a a ft ft Ph ® I o S Am A d o A A d P/ '3 4-» o Eh o O ogg "loo 03 ® ‘^pq Ph ® i' • SSo a> 4-S c3 > • fH Sm ft *3 4-» o H CO u O 4.^ C3 > 0) c« ^4 c3 4-3 o Eh p O (H 4 A p A ® 3. o -S.cfl ffl «MO • f 4 fc-t P^ o O TS d o O o” • • ^ ^ tn CO 0^ Q o °Ww 5 > du ® ®r° SS ®Ph 2 ^ ^m;z:ppi 'C p^ cl o m = CO '3 o3 44> o H o >* 6-* »-4 o CQ «< 00 -*1 o O d gs 50 S *- ^ d d a d b. 3^ o o H o -b> 03 00 w d a d (S 1 Unknown or not reported. Plus share of profits. *3 Wharf company’s terminal railway connects with aU lines at Galveston. Equipment only. Tariffs filed with Interstate Commerce Commission. 38 Between Turner and Argentine, Kansas. 33 About. ' Apphes to workhouse. Tanks added later. Table 11. Description of elevator facilities for handling gram in carlot (and boatload) shipments at 52 terminal points in the United States-Con. 300 TERMINAL GRAIN MARKETING. XJ > o ^ 43rt«i a ® M fl) -v 8 d H « lO lO lO lO s >> 02 « . n- ^ Ph . o O o Q P? Ph" >> Ph (y c« l-i OQ ‘ ■ d pq d d M o O Ph" Ph’ d d o o Ph o o o p) C3 (h Ph PI c3 W CO o O Ph’ Ph’ O M M O o sA Ph r£3 OT (S -Q 03 O O ; 1 ^ .’ : o • o • OT . • O ® 2 .S Ph g iPO Mg ® •§ M O) S Pi 03 (m o Pi o i-i o HH 03 Hi 0 'S s .2 a3 2 ^ a PM Ph o O a O rK a> • -S 2 CO C3 S HH Hi ^ a'^m J) asj op ^ o O CO Hi O o _ l-S ^ S3 ^2 ® ®o W al H Hi CO 03 X2 03 s| ”9 ^ hto k4 o o CO o o (h O HH> 03 > V w •3 a C3 Hi o 03 M p5 :ph • • • Ph I'p; ;Ph I • :p>h : g • CO » o • • 0 • . J ! Ph' :ph'«X : ai^.oQp^ 'aPH^ad^pH ^ E-5PHEHddpH''®d Ph Ph* ’i (m Q o O M dd^’g 5^ fH J-I &2lHc3Hlwp»3< . . § pHt.H ^ *H •(HO) • Wd!^ S (£> o; 4-9 C3 > PM 2 dad 'ai'-'dd 22 £f^ ‘as ^^'2 0^o*^,'so «'3.dfe9 H 2 d a 3 _ „ M c3 > ^ CO .^3 oO tH ci5^®S’ce OaC5®g^g§-g3 ^ S “ 2'^i © c3 Ok® o .iax3 >>9 ® s §1 Eh LOUISVILLE APPENDIX TABLES. 301 Cl O'"* lO cT s 8 ci o ^ rH a> oi '22 roj t--. kO CO O O 1 -H O Oi Ci o lO CO 8 § 88 to (N 888 o o o o o o to o o o o 8 •h •\ o o to o" (N o'io''o' •s 00 CO to r o CQ w rp2 “« . .02 Pi : d : 13 : 2o : rt 3 3 ® id M I 002 Ph o O u o ■<-> e5 > D H o a ,Q Ph « 3 ■u fl 0) m g Ol 0 09 J3 C9 09 O o +.a C9 > Q W o D ..P^ OT Ul Bv>. 09-^ > ^ ® 3 t>> Ph 3 •M OT O) ■u IM O =3 o O 0) •W c« u Pm a? o 09 PP to ..g a 09 ® 3 aM «o "S •- 3 u Ph P. 73 <» "eS +j o lT O o El s O o (1 ® • • CO N Ih CS C >M 03^ > •2 ® •3H ® 5 csca b. Ph Ph PP PP PP o Ph Ph* 'A °3 e4 T3 3 • O • o :o o 3 tio ; : 3 w . o te • M ® : •a-S : «TPh’ 7} (i o o H o a o o' >-) 3 ►t &i 73 !2; o 09 s .. a w 'OS fa 2 2 «« 09 > ® 0) O) CO d c« ® - 73 w H a ® 3 d^o toO SPS CO 5'-^ co^a-S o O ® 5 03 3 o9 888 § * TfJ Q 00 O kO O 7\ •V TS 00 CO CO crcroc o o 00 ^ o o O Q o o to to (N O CO 00 CO r-( O O 0005T.O> Ow O O O Q Q O OOQO OO o o o o o o O^00*'o'cr o'lo' to o to CO o to (M • . . o • • • O ( \ I [CO ; I I Ixj • • • * r • • • • k-w • • . .s • • »'^ t • « I • • rt PP P^PhPi Ph o o : 3 • I—I o 3 o ® -O .«2 Ph -Mm PhPhPhS « • • c> do do > •c Ph ■s 0^5 O •c Ph 73 b. o « I "a -*-> o &H w 3 <1 d o O ® 3 O* :g • CO ®’g UcQ hO§«3 i2§-S23 ® 4 jO ®P ©^'§,2« •S ^ ^ ® • rtedOfi 'C 88 88 8 >o (N O Tt< Ph tfpHtfjj p^P^ p5 AkPh Ah -*^t> ’>-» cQ a-assM'SH) a dddd dd d ^ ® “3x3 © P-1 • «Pm Pm .a C5 tM bjo O) rilt^ o o3 5 CO 5 O CO ^ O •N CO O O to o >> d c5 a o o bi} d ’-d c3 u 0) o. o >> 0) T5 c3 a 03 M d-g c3 > ® K^i—< -M ® ® 4-;> 3(0 C3rO? o , ® s : CO d © o CO ‘ s I ® £ a ® o 09-13 -d p: ® o 9 h ia-SHS ^ o .3 O (S ^ 40 o**i o O sf 2 •» 21 3.33 »o 56976°—22-^21 i 'li'i Li I'Ni 'III t'5-iiiaii'ii s 616 Ji 1 : w w <1 g-d 0 Qi t. © d p 'w' q;) fc-i k '*-> ^ CO fl rrH ^ "S O d o ••H d 8 Ui < 3 ^ U O c3 o 0 0 10 CO 0 CO 00 0 0 1-4 , 0 0 0 05 CO 0 0 00 0 0 0 CO 0 0 Q CO rH 0 CO Q 0 d d s 0 CO 0 1 -H 0 CO ^Ja /-N t- 8 2 lo' ti‘o' 05 '' CO 0 CO OJ 0 CO CO*' cs 10 d tH CO CO iO 1 -i (N O O O O Q O c o o o o o o < 8 *doooo< Q O O t-l O < O O O O Oi O < (M (N O »-4< *-* rH 1-t 1 > o ) IC ICO CO Oi 1-H O I Oi 05 O ^ 05 05 rH 01 1 CO o> 00 05 '00 05 .00 00 C"~' 00 ^00 00 rH 0 ^ 05 1 —i ^00 00 rH 0 05 0 05 rH O O 05 ® o P ^05 00 00 o ^ ^00 00 00 00 05 .g Cc cT f«S fio (N ;3 cq 8 8 (N 10 o < O c o < > lO 00 3 O > rH O Q O 888 8¥8 O 00 t>* 3 Q O 00 88 ) O < > O < ) CO > O CO 10 CO OJ r~i O O o O O O Q O O Q O O o O 0000000 rio'o*'p'd'of ■ "JCOOf )f^»OCOOCO ) t>* t>- CO CO 'd 0 05 Ah H-d 02 **3 Ah* • s' « « Q^op; 'A rr\ ^ m d d A «3 d □ CO a ^ § .2 M o d S •-S tj 0 ) d d • •H H -5 d o o w w d ■< d T) (» d _d -u d o V o ^2 ;> c 3 ® . ©O ^Ah ••H IH P 4 . be :.2 o < 0.5 O ® CO .0 g o O 4^0 H-d f-H tj ■M M d 02 ©+J VS ■gm '- 2 r 5 W t>> § CQ « ©^ H d^ ©Q ® ■2 dW ^ . fcl dos s o O fH o c /3 u, O 4-) C 3 > +-» o Eh o O ui o H -3 03 > a> o CIh << ;z; M !>. «. 2 g sill c 5 ^ 4 ^ ^ ® gti © © " 03X3 aWPQH XJ d (k 2 W § o , 3 dos O r §s KS o Q > © o O 1 APPENDIX TABLES 303 t-4 ] lO lO ' «o wtf: (M (N Co 1 —♦ i-H Tt< ^ <0 CO CD o V—^ N—X Nw/ N iC . ic lO ic 'w' s-^ s.x ^ ^ ^ 'w' V—^ N—' ^ • • W -W 'W (N C^ JJ'tN (N (M cj'jjcsi JiJ'lM J^-S'co C? C? ^ T-H ^ ^ ^ ^ i~< t—^ i*H ^ CS **H N^CO CO CO CO ^ s-x CO tc CO CO a >oo CO CO c TO ; p? : tf i p^pi o _o o Ph Ido 2^.g 2^,0 Sd ^ 50o2 o o < o o < s s s cs lO a> q2^ ^ Oi F-i O ^ C QO 05 00--''- (N • > o o o o > o o o o «N < WO c o4 < 0 0;:^ PtC^ >TtH o o o o o Jsisgg OoiOOoo; -'lo' >j:r lo' o' cT - 05 O T O O ^ o ^co ✓00 05 05 2 05 05 ::^o T-i ^ ^ 55 rH ^ *^2 00 o 05 I W5 ss lO (M TO P5 PW CO § §|||S||||8||8|| 1 0 8 § 00 o'q'tjTo 'a q'o'q'q'q'io'^q’io'o' o' Q 0 0 >c 0 0 0 »is lia e^i 0 0 CO Hti .«f OCOlOUSlOlOlOOlT-IrHWrHrH Tt^ 05 lo' t'^ CO*" CO cT co" S3' o T5 a C3 « P5 ^pHp5 rd . r=3^- > .Ph O ^ i_3 ^ ^ odd 'zliz o'd ta ^ > >.g ® mS .caO § 5^'-'-a o caxi ® bO o t- T* >ow o . O o c^ oX fc> TO w sB a w fp‘3 ® "m tlO S^^’2 SoS Ph PP 5““ CQ :p3 ddl^iSSddd;^’ ro PP P^ Ph‘ ^’p? Ph O -a w 'P3 Ph^ " fc- . • ® ^ Ph • cc 2 . .•'gp5 Ph'^.H^ HI^Ph G*^ Kf . CJOO o o «o- 0^0 _ “50 o . o . oO O o o u o C3 a^ . . • •' . CS oo :oo d o o Im o •+H ca > o ca • o ^ o O .g o O bo t-.9u-r^G^^Oo ^ Q=3 a a°t! ^ ?•§ ^ a > S^og-g^ flo ba." w'rtMog.^o^ g'j^Ort ^ £3.11.1 a^§®^-g;i-s-g o;ziOWQoH o O =3 TO % C3 -M O en TO tH o •M > Q> 'S O) 03 > V o O <>3 0 Of _ §00 o O (m o oad ca > 'w' ti • o ;o . ta • o • 4-> . C3 • > - o .a POW ' o :o : o j.g p.^ . o oO o O U.O ^ rj > rH.aT C3 ®-a a jH HQ ^aa)Hc3l>a>r5cai-.-n-H'^ a ’-' a ®^ to c3 lalSSS'SlsH^flSSS ->®'-'oy.HoaaOKi ^ a ^ aH ® H ® H' b>. *P'^^wo^.^O'2S'HO<55 ^£3P|® a-^go^.gg'g® O Iz; O W O U e o a o O w P. J-H O Ph W O) 4-d c3 r—^ C3 o TO U O > O'*-* . O qo . 'O CO >5^3 . o^qoj o >> oS^.-gP^ TO ^ ^ O O.H! 33 "a sl •-^• 1^ S'® .£ r« r d >> >^ t>> c3^ ^a-a-Sa W)go B 3 ^ - a o 3 o ^ .pTdTa 2 'rt ’-'aaagg ».« OQ Cl T ^ f 3 o3 S c3 ^ J C3 2 3 Table 11.—Description of elevator facilities for handling grain in carlot (and boatload) shipments at 52 terminal points in the United States—Gon. 304 TERMINAL GRAIN MARKETING. ® . O ^ .2 ^ S a» H o) ? in % ■ 03^ c;> a •4-9 in c; c: ^ 2 a p a; t-4 k -+-9 a o 8 a & o O <4-9 ca (h (3^ a o ca ^ o CO S.-X S' O o f.» 0 M 05r>* 0 CO 88 CO 05 Q ' Tti 0 CO 0 0 CO 0 0 0 ^ c^'^t-T 00 'cT Tt< 10 CD 05 to CO*' o o o o iO o o o 8 8 C5 •05 tH OS »0 M 0 00 ^05 05 05 05 05 C/00 00 O O PQ O O p IM p O p O O —I o o o o 8 "'cr lo'' O so OS •*! I-H so -H ^ o o ss (N O lO CO CO 8 8 (N (N CO o »o > -l-s F-^ ca o ®P3 q|:^ •9 3 03-3 o I ® *3 ® r f3 ® M §<5 C0 63| "3 33 9 Ph'W w . .33 1-5 1-5 H iJ t—( m o o ajS 8^ > ® ®-s ® o u kJ iJ W 1/1 ■< • o :o • >> • +S ! "3 OfS o 3 03 O w ■§.3“^ 3 ••O 9 wco=3m |®fe3«3|=y O ^ ^ 02 • • • ^ H 5^ O f-5 l-s 1-5 •d Pi Pi ® w P3 3 Pi M m Pi’ Pi’ Pi’ s’ '3 3 o3 oPi’ 03 •M 3 O hP •w o ® +61 03 +J GQ Pi Pi’ d :p3 :>’ •s’ Pi 6.3 Pi’>i’ S'g . SS A, <>3 w P3 «’ Pi’ s’ TJ 3 c3 §^. COM O (0 o t-l C3 GO tM o o F“^ ® +J O 6h <) OT !? •< 3 3 « O 3 iz; o 03 (_ ® g M T1 .20 w=3 S O 05 4 ^ ca > o GO O '4>P> ca > 05 ^—4 ® ® 33 3 Pi fi d— • o ^ 03 O 3 ® ® OQ V ‘••Q 3 >» P5 ® t3 ® 03 Pi =3 03 o3 ® Eh ® 33 Eh ® ! o : >s : ^P? -• Bg- ®s '•^ ksi ® k’ 02 >H >5 PP 05 cm 05 C3 Ph 03 K ® Ei ® 33 m J ■£ .3 ; c3 i ® . =y Eh o O o - ft 3 > .& .E® 03 g o g d So fl.dO ® ^ p^’ ® ® ® Q § .503 2«g.S-§ Eh MEh P4 Pi’ d 03 3 o 35 rO o Hi M 05 '2^ ^ . ,2 . 5 2 I .Eh ® . ® Eh s •c Pi OQ (-1 O •M c3 > 05 ^4 05 ca ^-H ca 4-9 o APPENDIX TABLES. 305 ID CO (N ' Tfl rf 1—I 1-H 1-H i-H 1-H o> o» s •t to CO • o • o ii . 2 Q 05 a> 00 o> o ® vT o 05 00 00 00 00 ® OO » 05 8 ^5 rH 05 1 § CO 8 t>. t>- 00 lO o Q 0^ CO •»-« 3 .. r" t. 5 03 ° •g. •'C 3 o Q, . P< S3 — ”si £ 5^-3 ft® 2 ^>^'§3 3 02 ±i+^n gi2S| G ^ .p-H fl5 ^ 4-> !0' ir1 O^ <=3,0 ^ °ai.s I £|«a . ^ ff> ri \,\t fm. *f^ , « So yl-il-ga p f 3 +j o ® d Sm'6 o bo C3 'd ea „ M P o C3 ►-I ^ PI ;'o oo S3 w ® ® Or? 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O X £ fpi 9 d<©'2i o'®,i3 W t3H APPENDIX TABLES 311 Table 12. —Analysis of purchases of wheat, corn, oats, and of barley ana rye at specified primary markets, shomng proportion purchased by elevator companies, and distribution of elevator purchases by sources, for the five-year period 1913-1917. Percent- Analysis of purchases by terminal elevator companies. Total cars reported for this test. age bought by termi¬ nal eleva¬ tor com¬ panies. Bought from commis¬ sion mer¬ chants. Bought on direct purchase from country. points. Bought from local dealers. Total. Chicago: Wheat. 103,804 86.6 32 47 21 100 Corn. 209,853* 79.0 52 14 34 100 Oats. 202,170 77.0 54 23 23 100 Barley and rye. 42 ; 970 35.0 38 39 23 100 Milwaukee: Wheat. 15,721 35.5 69 7 24 100 Corn. 33^977 67.7 7 16 100 Oats. 51,689 82.0 78 9 13 100 Barley and rye. 73,545 34.6 66 14 20 100 Duluth: Wheat. 28,630 90.2 100 100 Corn. 23 95.6 100 100 Oats. 2,382 69.1 100 100 Barley and rye. 6,248 87.4 100 100 Minneapolis: Wheat. 414,367 21.8 77 2 21 100 Corn. 26,269 264,480 28.4 133 20 47 100 Oats... 47.4 84 7 9 100 Barley and rye. 122,929 79,255 100,698 40,632 6,994 112,373 33,422 11,764 7,162 120,413 47,920 39,849 11,489 22,894 37,006 13,771 323 45.9 75 14 11 100 Omaha: Wheat. 68.8 44 60 6 100 Corn. 79.1 61 28 11 100 Oats. 90.6 62 31 7 100 Barley and rye. 88.7 73 24 3 100 Kansas City: Wheat. . 52.9 79 16 6 100 Corn . 67.7 62 22 16 100 Oats. 60.3 39 44 17 100 Barley and rye . 42.0 63 28 9 100 St. Loulsf Wheat... 28.6 81 9 10 100 Corn. 33.6 64 31 16 100 Oats. 31.7 68 16 16 100 Barley and rye. 16.9 61 49 100 Indianapolis: Wheat. 14.0 96 1 3 100 Corn. 40.9 64 40 6 100 Oats.■. 64,8 80 9 11 100 Barley and rye. 36.0 84 U 6 100 1 Includes purchases from line elevators- Table 13 .—Results of mixing operations in wheat at six private elevators, Chicago, for the crop year 1914-15. Quantities (bushels) .1 Percentages. In. Out. In.' Out. Winter wheat: No. 1. 14,875 15,727 No. 2. 16,631,403 33,243,167 244,926 48.5 95.8 No. 3. 15,799,881 46.1 .7 No. 4. 1,122,131 210,916 3.3 .6 Lower. 734,984 1,002,243 2.1 2.9 Total.. 34,303,274 34,716,979 100.0 100.0 Spring wheat: No. 1. 22,751 27,016 1.9 5.9 No. 2. 76,020 81,003 48,658 6.5 17.7 No. 3. 373,508 31.6 10.7 No. 4. 478,785 8,476 40.5 1.9 Lower. 230,667 291,644 19.5 63.8 Total. 1,181,731 456,797 100.0 100.0 Grand total. . 35,485,005 35,173,776 / 1 No figures for opening and closing inventories. 312 TEKMINAL GRAIN MARKETING Table 14. — Results of mixing operations in wheat at six private elevators, Chicago, for the crop year 1915-16. Quantities (bushels).i Percentages. In. Out. In. Out. Winter wheat: No. 1. 62,417 3,105,886 7,094,108 3,018,240 823,050 0.5 22.0 50.3 21.4 5.8 No. 2. 12,802,330 810,948 165,827 369,888 90.5 5.7 1.2 2.6 No. 3.... No. 4. Lower. Total. 14,103,701 14,148,993 100.0 100.0 Spring wheat: No. 1. 13,348,201 1,697,389 1,551,196 532,543 87,132 *6,288,512 118,623 135,235 26,668 48,323 46.4 23.5 21.5 7.4 1.2 95.1 1.7 2.1 .4 .7 No. 2. No. 3. . No. 4. Lower. Total. 7,216,461 6,617,361 100.0! 100.0 Grand total. I 21,320,162 20,766,354 1 .j 1 Includes 7,414 bushels of No. 1 hard. »Includes 69,501 bushels of No. 1 hard. Table 1^.—Results of mixing operations in wheat at six private elevators, Chicago, feyr the crop year 1916-17. Quantities (bushels). Percentages. In. Out. In. Out. Winter wheat: No. 1. 82,477 3,188,447 2,144,412 758,172 283,816 168,896 6,297,833 660,745 61,586 13,568 1.3 49.4 33.2 11.8 4.3 2.3 87.4 9.2 .9 .2 No. 2. No. 3. . No. 4. Lower. Total. 6,457,324 7,202,628 100.0 100.0 Spring wheat: No. 1. 1 56,052 43,994 92,210 118,520 146,634 2 266,095 12.3 9.6 20.2 25.9 32.0 95.9 No. 2. No. 3. 6,583 2.4 No. 4. Lower. 4,866 1.7 Total. 457,410 277,544 100.0 100.0 Grand lotal... 6,914,734 7,480,172 -- -- 1 Includes 1,824 bushels of No. 1 hard. a includes 16,025 bushels of No. 1 hard. 1 APPENDIX TABLES, 313 Table 16. —Results of mixing operations in wheat at certain Chicago elevators, 1913-1^ to 1916-11} Quantities (bushels). Percentages. In. Out. In. Out. Winter wheat: No.l. 168,650 184,623 0.3 0.3 No. 2. 24,219,803 54,34?; 939 42.6 93.6 No. 3. 25,644,851 i; 716;619 45.1 3.0 No. 4. 4,927,711 438,329 8.7 .7 Lower. 1,857,572 1,385,838 3.3 2.4 Total. 56,818,587 58,073,348 100.0 100.0 Spring wheat: No. 1. 3,593,534 6,932,510 38.9 90.0 No. 2. 1,891,338 200,540 20.5 2.6 No. 3. 2,063,749 190,476 22.3 2.5 No. 4. 1,140,511 35', 144 12.4 .4 Lower. 544,875 345,804 5.9 4.5 Total. 9,234,007 7,704,474 100.0 100.0 . Grand total. 66,052,594 65,777,822 1 Includes operations of six elevators for three years, 1914-15 to 1916-17, and of one of these six for 1913-14. Table 17. —Results of mixing operations in wheat by the public elevators at Minneapolis for the crop year 1912-13. Quantities (bushels). Percentages. In.i Out.2 In. Out. No. 1 hard. 436,903 17,917,562 11,754,636 3,289,463 36,733 4,964,946 465,817 165,285 18,371,089 8,489,480 3,070,809 3,523 2,154,578 293,072 1.1 46.1 30.2 8.5 .1 12.8 1.2 0.5 56.5 26.1 9.4 Northern spring wheat: No. 1. No. 2. No. 3. No. 4. Lower. 6.6 .9 Ungraded. Total. 38,866,060 32,547,836 100.0 100.0 1 Includes opening inventories. * Includes closing inventories. Table 18. —Results of mixing operations in wheat by the public elevators at Minneapolis for the crop year 1913-14- t Quantities. Percentages. In.i Out.2 In. Out. No. 1 hard. Bushels. 4,198,798 13,044,954 6,713,262 2,339, 729 28, 206 1,717, 527 2,168, 098 Bushels. 3,935,1Q6 20,769,365 5,441,119 3,557,279 10,946 946,617 1,604, 782 13.9 43.2 22.2 7.7 .1 5.7 7.2 10.9 57.3 15.0 9.8 Northern spring wheat: No.l. No. 2... No.3. No. 4.. Lowejj.. 2.6 4.4 Ungraded. Total. 30,210,574 36,265,214 100.0 100.0 1 Includes opening inventories. * Includes closing inventories. 314 TEKMINAL GRAIN MARKETING, Table 19. —Results of mixing operations in wheat by the public elevators at Minneapolis for the crop year 1914-15. Quantities. Percentages. In.i Out.2 In. Out. No. 1 hard. Bushels. 348,166 7,514,089 8,837, 461 . 7, 852, 207 5,669,133 2, 749, 308 3,358,106 Bushels. 231,685 7,937,842 11,782, 498 8,153, 680 2,423, 504 805, 707 5,625, 714 1.0 20.7 24.3 21.6 15.6 7.6 9.2 0.6 21.5 31.9 22.1 6.5 2.2 15.2 Northern spring wheat: No. 1. No. 2. No. 3. No. 4. Lower. Ungraded. Total. 36,328,470 36,960,630 100.0 100.0 1 Includes opening inventories. 2 Includes closing inventories. Table 20. —Results of mixing operations in wheat by the public elevators at Minneapolis for the crop year 1915-16. Quantities. Percentages. In.i Out.2 In, Out. No. 1 hard. Bushels. 2,879,797 12,534,566 11,054,000 5,888,091 3,368,539 4,392, 543 3,738,049 Bushels. 1,689,556 11,323,457 12,530, 895 5,793,381 1,342,880 1,499,363 3,091, 785 6.6 28.6 25.2 13.4 7.7 10.0 8.5 4.5 30.4 33.6 15.6 3.6 4.0 8.3 Northern spring wheat: No. 1. No. 2. No. 3. No. 4. Lower. Ungraded. Total. 43,855,585 37,271,317 100.0 100.0 1 Includes opening inventories. 2 includes closing inventories. Table 21. —Results of mixing operations in wheat by the public elevators at Minneapolis for the crop year 1916-17. Quantities, Percentages. In.i Out.2 In. Out. t Bushels. Bushels. No. 1 hard. 897,995 512,817 3.4 1.6 Northern spring wheat: No. 1. 2,036,938 3,519,023 7.8 10.9 No. 2. 2,536,945 6,001,610 9.7 18.5 No. 3. 3,127, 888 5,724,699 11.9 17.7 No. 4. 7,608, 536 6,516,799 29.0 20.1 Lower. 6,073, 478 3,747,248 23.2 11.6 Ungraded. 3,930,894 6,330,230 15.0 19.6 Total. 26,212,674 32,352,426 100.0 100.0 1 Includes opening inventories. 2 includes closing inventories. % APPENDIX TABLES 316 Table 22. —Results of mixing operations in wheat by the public elevators at Minneapolis, 1912-13 to 1916-17. Quantities. Percentages. * In.i Out.2 In. Out. No. 1 hard. Bushels. 8,761,659 53,048,109 40, 896,304 22, 497,378 16,711,147 19, 897, 802 13,660,964 Bushels. n Q 7 Northern spring wheat: No. 1. Xy X XtT fil Q9n 77A o« u Qn 0 o* 1 No. 2. AA OAe\ OQ 9 9=; 9 No. 3. 26,299, 848 in 907 fit;9 0 19 R 1 p; n No. 4. Q t; 10 . u p; Q Lower. Q 1 y. 0 11.4 7.8 0 . y p; 9 Unvraded. 16,945, 583 0 * A Q 7 y* / Total. 175,473,363 17=; *^07 /19Q 1 /VI n lUU. U ivJlJ* u 1 Includes opening inventories. * includes closing inventories. Table 23.—Results of mixing operations in wheat by two Duluth elevator companies for the crop year 1912-13. Quantities. Percentages. In.i Out.2 In. Out. No. 1 hard. Bushels. 712,595 19,461,512 7,922,325 698, 635 29, 422 7,404,108 982,136 Bushels. 755,839 30,982,183 1,837,553 551, 676 1,385 204,459 377,344 1.9 52.3 21.3 1.9 .1 19.9 2.6 2.2 89.2 5.3 1.6 .6 1.1 Northern spring wheat: No. 1. No. 2. No. 3. No. 4. Lower. Ungraded. Total. 37,210,733 34, 710,439 100.0 100.0 1 Includes opening inventories. 2 Includes closing inventories. Table 24. — Results of mixing operations in wheat by two Duluth elevator companies for the crop year 1913-14. # Quantities. Percentages. In.i Out.* In. Out. No. 1 hard. Bushels. 3,614,632 14,264,924 5,138,310 862, 691 5,260 644, 707 2,088,835 Bushels. 4,448,844 24,212,650 332,270 144, 755 1,403 66,156 935,134 13.6 53.6 19.3 3.2 14.8 80.3 1.1 .5 Northern spring wheat: No. 1. No. 2. No. 3. No. 4.. Lower. 2.4 7.9 .2 3.1 Ungraded. Total. 26,619,359 30,141,212 inn n 1 inn n 1 Includes opening inventories. 2 Includes closing inventories. 316 TERMINAL GRAIN MARKETING Table 25. —Results of mixing operations in wheat by two Duluth elevator companies for the crop year 1914-15. Quantities. Percentages. In.i Out.2 In. Out. No. 1 hard.. Bushels. 151,156 Bushels. 3,984 0.6 Northern spring wheat: No. 1. 7, 767, 493 18,006,757 31.7 72.7 No. 2... 6,119,137 2,851,151 25.0 11.5 No. 3. 4,266, 477 1,368, 566 17.4 5.6 No. 4. 1,906, 947 98, 558 7.8 .4 Lower. 1,034, 584 125,990 4.2 .5 Ungraded. 3,276, 694 2,307,958 13.3 9.3 Total. 24,522,488 24, 762, 764 100.0 100.0 1 Includes opening inventories. 2 Includes closing inventories. Table 26. —Results of mixing operations in wheat by two Duluth elevator companies for the crop year 1915-16. Quantities. Percentages. In.i Out.2 In. Out. No. 1 hard. Bushels. 764,860 Bushels. 269,030 1.9 0.8 Northern spring wheat: No. 1. 12,037,298 26,633,060 30.4 75.2 No. 2. 12,127, 498 6,054,514 30.7 17.1 No. 3. 5,664,477 304, 747 14.3 .9 No. 4... 1,434,282 132,542 3.6 .4 Lower. 2, 426,892 75,983 6.1 .2 Ungraded. 5,133, 922 1,922,186 13.0 5.4 Total. 39,589,229 35,392,062 100.0 100.0 1 Includes opening inventories. 2 Includes closing inventories. Table 27. —Results of mixing operations in wheat by two Duluth elevator companies for the crop year 1916-17. Quantities. Percentages. In.i Out.2 In. Out. No. 1 hard. Bushels. 243,968 967,664 1,207,048 986,500 471, 732 1,156, 983 2,616, 777 Bushels. 12,130 5,411,044 3,458,883 121,635 20,204 997, 762 1,812,389 3.2 12.6 15.8 12.9 6.2 15.1 34.2 0.1 45.7 29.2 1.0 .2 8.5 15.3 Northern spring wheat: No. 1. No. 2... No. 3. No. 4. Lower. Ungraded. Total. 7,650,672 11,834,047 100.0 100.0 ' Includes opening inventories. 2 includes closing inventories. APPENDIX TABLES 317 Table 28.—Results of mixing operations in wheat by two Duluth elevator companies 1912-13 to 1916-17. Quantities. Percentages. In.i Out.* In. Out. No. 1 hard . Bushels. Ft 487 211 Bushels. 5,489,827 105,245,694 14,534,371 2,491,379 254,092 1,470,150 7,355,011 A 1 4.0 76.9 10.6 1.8 Northern spring wheat: No. 1. K4 AQS fiQI 4. 1 No. 2. XOOy OvX 4U. 2 No. 3. ox Xy 0X0 12 478 780 U n 0 No. 4. 8 847 fU8 Lower. 12 ,667,274 14,098,364 Z. 0 . 2 1.1 5.4 Ungraded. y. 0 lU. 4 Total. LS.*) 692 481 136,840,524 100 . 0 ! 100.0 i 1 Includes opening inventories. 2 Includes closing inventories. Table 29.—Results of mixing operations in wheat at six licensed public elevators at Kansas City for the crop year 1913-14. No. 1 red. No. 2 red. No. 3 red. No. 4 red. No. 1 hard. No. 2 hard. No. 3 hard. No. 4 hard. No. 2 mixed. No. 3 mixed. No. 4 mixed. No. 2 western psring No. 3 western spring No. 4 western spring No. 2 durum. No. 3 durum. No. 3 spring. No. 4 spring. No. 2 Pacific coast.. Sample. Total. Quantities. Percentages. In.i Out.* In. Out. Bushels. Bushels. 8,108 1,000 0.1 1,322,039 2,038,674 10.0 15.5 329,975 8,217 2.5 .1 151,698 6,426 1.1 .1 76,445 368,652 .6 2.8 9,004,804 10,137,259 67.8 76,9 1,203,338 185,683 9.1 1.4 306, 111 18,523 2.3 .1 364,709 156,047 2.7 1.2 1 154,191 140,452 1.2 1.7 ^ 70,564 6,099 .5 23,545 36,342 .2 .3 36,957 25,058 .3 .2 571 14,708 15,816 .1 .1 2,199 2,932 4,120 l'358 i 2,479 j 5,798 1 205,733 27,068 1.5 .2 13,288,092 13,175,606 100.0 100.0 1 Includes opening inventories. 2 Includes closing inventories. 56976°—22-22 ✓ 318 TERMINAL GRAIN MARKETING'. Table 30.~ResuUs of mixing operations in wheat at six licensed public elevators at Kansas City for the crop year 1914-15. No. 1 red. No. 2 red. No. 3 red. No. 4 red. No. 1 hard. No. 2 hard. No. 3 hard. No. 4 hard. No. 2 mixed. No. 3 mixed. No. 4 mixed. No. 2 western spring No. 3 western spring No. 4 western spring No. 2 durum. No. 3 durum. No. 4 durum. No. 2 Pacific coast.. No. 3 Pacific coast.. Sample. Total. Quantities. , Percentages. In.i Out.2 In. Out. Bushels. Bushels. 949 1,557,014 2,321,493 4.6 6.8 872,693 286,142 2.6 .8 348,346 84,006 1.0 .2 14,335 .1 8,446,530 14,604,129 25.0 42.8 14,379,000 13,824,558 42.6 40.5 6,137,452 2,107,987 18.2 6.2 199,086 32,872 .6 . 1 404,940 173,396 1.2 .5 199,424 189,526 .6 .6 13,508 16,106 . 1 70,938 65,285 .2 .2 12,924 1,100 12,279 12,245 1 11,303 12,318 1 1,236 .... 6,728 706 1,111,328 422,120 1 3.3 1.2 33,800,719 34,153,283 100.0 100.0 Table 31.—Results of mixing operations in wheat at six licensed public elevators at Kansas City for the crop year 1915-16. No. 2 red. No. 3 red. No. 4 red. No. 1 hard. No. 2 hard. No. 3 hard. No. 4 hard. No. 2 mixed. No. 3 mixed. No. 4 mixed. No. 2 western spring No. 3 western spring No. 4 western spring No. 2 durum. No. 3 durum. No. 4 durum. No. 2 Pacific coast... No. 3 Pacific coast... No. 3 spring. No. 4 spring. Sample. Total. Quantities. Percentages. Ili.P Out.2 In. Out. Bushels. Bushels. 36,882 91,833 0.2 0.5 233, 078 426,872 1.2 2.3 931,111 248,907 4.7 1.3 1,221 804,547 3,037,122 4.0 16 3 5,692,409 10,416,824 28.4 56 1 9,066,228 3,609,055 45.2 19.4 46,522 7,103 .2 284,107 70,904 1.4 .4 441,257 240,466 2.2 13 1,468 9,423 1 126,090 214, 714 .6 1.2 49,116 7,373 .3 8,355 5, 011 10,974 .1 4,176 7,905 3,248 1,102 3,375 2,299, 536 198,390 11.5 1.1 20,052, 707 18,583,997 100.0 100.0 1 Includes opening inventories. 2 Includes closing inventories. APPENDIX TABLES. 319 Table 32. — Results of mixing operations in wheat at six licensed public elevators at Kansas City for the crop year 1916-17. Quantities. Percentages. In.i Out.2 In. Out. No. 1 red. Bushels. 4,868 856, 659 511,114 340,150 105, 454 9,930, 439 4,672, 865 2,355, 807 281,028 384, 493 235, 274 1, 416 60, 070 16,537 1,476 3,804 5,089 49,252 10,491 1,649 Bushels. No. 2 red. 1,093,336 . 263,941 118,685 4.0 2.4 1.6 .5 46.5 21.9 11.0 1.3 1.8 1.1 4.7 1.1 .5 No. 3 red. No. 4 red. No. lhard. No. 2 hard. 15,649,61 i 2,142, 719 2,541,447 16,089 312,075 455,195 67.5 9.3 11.0 .1 1.4 2.0 No. 3 hard. No. 4 hard. No. 2 mixed. No. 3 mixed. No. 4 mixed. No. 2 western spring:. No. 3 western spring. No. 4 western spring. 171,306 .3 .1 .7 No. 2 durum.. No. 3 durum. 1,689 No. 4 durum. No. 2 Pacific coast. 46,368 2,484 .2 .1 .2 No. 3 Pacific coast. No. 4 Pacific coast. No. 2 spring. 1,467 3,820 356,734 No. 4 spring. Sample. 1,537,294 7.2 1.5 Total. 21,365,229 23,176,966 100.0 100.0 1 Includes opening inventories. 2 includes closing inventories. Table S3.—Results of mixing operations in wheat at six licensed public elevators at Kansas City, 1913-14 to 1916-17. No. 1 red. No. 2red. No. 3 red. No. 4red. No. 1 hard. No. 2 hard. No, 3 hard. No. 4 hard. No. 2mixed. No. 3mixed. No. 4mixed. No. 2 western spring No. 3 western spring No. 4 western spring No. 2 durum. No. 3 durum. No. 4 durum. No. 2 spring. No. 3 spring. No. 4 spring. No. 2 Pacific coast... No. 3 Pacific coast... No. 4 Pacific coast... Sample. Total. Quantities. Percentages. In.i Out.2 In. Out. Bushels. Bushels. 13,925 1,000 3, 772, 594 5,545,336 4.3 6.2 1,946, 860 985,172 2.2 1.1 1,771,305 458, 024 2.0 .5 197,455 368,652 .2 .4 28,186,320 43,428,121 31.9 48.8 25,947, 612 26,569, 784 29.3 29.8 17,865, 598 8,277,012 20.2 9.3 891,345 212,111 1.0 .3 1,227, 731 696, 827 1.4 .8 946, 519 891,286 1.1 1.0 39,937 61,871 .1 .1 294,055 476,363 .3 .5 79,148 8,473 .1 36,818 33,072 28,280 16,939 10,501 * 1,467 5,222 1,358 5, 854 3 ; 820 69,683 46;368 .1 .1 14,445 2,484 1,649 5,153,891 1,004, 312 5.8 1.1 88,506,747 89,089, 852 100.0 100.0 1 Includes opening inventories. 2 Includes closing inventories. Table 34. Ins ’ and ‘ Outs’^ and mixing profits ^ in wheat of the Minneapolis public terminal elevators for the crop year 1913-14. 320 TERMINAL GRAIN MARKETING. •kOJ (D 0) b/)TJ hn M a'S'S o. ri c3 o> + OOOOCi»OC^OOCOi- s PCI lO «0 IN 00 00 CD IN n' r-T .cONOiCiO^OOeCi-H(N COCOOOO rfi co’^co'co"" --ir ,_r CO N s pq 00 ^ ^ O 57.' v bO CS > o CO I CD IN CO CD IN 00 CO 00 Tt< 05 lO ■»}< N CO 05-cti CD t'* -cti rt-'JiCOINNiN'^l^lN'^ I ^ < I iO y CO r»s» • T! r- Sm • 03 , c! 3 i-( o< 00 O GO 00 r^2 ca CO CO c;:. •v .s rCt lO tH T-i CO lO ;a >iO(N cq 05 05 »-H 05 ^ CO ^ 05 ‘co'cToT s CO co-^ 05 1C »ooo COCO‘S 05 »C »ooo s ict>* 05 CO 05 CO Tt^ CO < 05 ' CO • c^ o •\ t> CO C<5 N XJ O) ID 3 Pho OT ^ .5£SJ3?’-'?S°o°ONicoo o;00005»D-^00»DOOlNlN i^00t'-O5C0cD»-iNiO r^SlCC^COOOt^-^t^t^CD ccMcDCD'J'i-iOSCOOt^i-i S05 t-ic0iO C0!NCDI>- Oi CO 00 CO CO 1—• 1-4 Tf< CO 05 1—4 1-4 00 o o^' CO O Tt4 CO C-»—1CO co • rN.o 05 (N o 00 C 1—I Tf4 IC 1-H )kCT^«M(McO cO(N o •40 8 ci PcP CO a f< «o oot>»t>»t>»<^ocoi>»coi 05C0O500OC^i-4 0C'C0Tt< l>*COI>r-)(N(NOkOTt4lC 00 00 o t^*'oo*'orcsrco*'oror 1-4-^00 01 cococooo ^ '^‘'oTko'cf 00 t>* CO o oor^co ko^ O CO ca c.$ 05 CO ^ CO •s .S •. fc: Tt^ o 05 kO Tt4 o 1 -H ?3 t-H * CD OO*' Tj4''a5*' (N tco • • IC • 01 •. 00000 5*0 0000 o.SrJ ® a d ;z; ;z; ;z; ; 2 ; Z «;z; ; 2 ; 12 ; ;z: iz; ;z; a ^ ^ c« 4>» o ~~T T~*'~ APPENDIX TABLES O CNJ 00 nd o Q) if 00 cd o X l^iOt^GOOt>>OiCt^OOOOCC^O'^0 loco'^r^o'^cot^coc^vo'^r^ofooo i-^C0^00(M'^»Ot^(N00C^i0C0O05'^ r^'^r-oc^»otN.t^»-Hcot^a5i^iOooo5 t>.ior^iO(MooO'^ ooi-HC^c • (N • 00 • oo :?5 I 1 -H ^ 1 —< co 1-Hi-HiO’^cor^iot^cO’^ 00 Cp (N ^ gj t--00- ^ _ , _,00a5(M»-HO cOCOOOO(NOOOOOg^ cococo?^csii-Hi-HcococoT-HC^cacoc^< co'* f-H cc 05 CO 00 CO (M CO 05 S CO t-H CO o o 05 00 . ^ o 'd o pd "S • 40 CO rH 8 X Zl tG o PM X “sg ® S‘C > G o, -.ri 03 t^Ot>*l>0500C^t^^4Ct^C c0C^40O4CC040i-HC0c00<< ) CO 40 CO CO >05 O 00 O OTfcoi-Ha5coi-Hoot>-i-HOOcoc-»Hi0t>*C040t>--OC^^O5l>>i-HC0'^00l>40004O 4C5 eg pH ^ TjH G0 i-H«NCS40O ) O 05 CO CO • 00 05 • 4OC0t». # CO 40 CO •l> ^ • t>-00 • 00 u • CO 00 1- • «^ • CO I 00 CO • 40 CO • CO CO • 05 O • 05 (M • i>rco^ • 40 • CO . CO • cs . lO • c^ :?5 CO CO CO 40 CO ^ CO 05 05 00 Ci— i»-t(MCOC. 00 !'>• oo"' c?5 CO oo'' CO 1-H CO O CO 1-H . . CO lO t>- ^ CO Tf4 l>- 05 CO •s 40 CO o 05 05 . 1-H Tt< O *> 05 CO (N o rd "S o 1-3 (N rH X 4-3 Cri 2 X Pm “gS fea-H >Hk ^ c3 05C0i-HO^I>*Ot^'^C040C^.TH'HtCOTt-rHC0'—'00C0C^r--O !> lO r-05 T}4 oo»hc^040co CO !>• 05 05 1-H CO CO CO 1-H • 00 40 o • 1-H 1-H •1^ ® - 1-H • ©a -» • CO • CO 05 •CO 05 • Is- • 40 • CO • t^ • CO • isT 1 -H iH rH 40 40 t>-4040 1 -H IS- Q 40i-H(Mi-H00t>-C0O00t>05-^O’^ r^Tfii-Hoo^cocO’^i-HC'‘5'^coi^oo CO CO CO C Ja o 8 o 0X3^ § ri id G-5 : iGo,^ d6d6d'®’o6dddo.S->G^®SG iz; Iz; [ 2 ; :z; ; 2 ; ;z; iz; z Z z ;z; S ^ ^ M O) -d CO d oeG D H O P. »=G £ 2 ZifM 1 For methods followed in computing profits, see Chap. V, sec. 2 (especially footnote 6.) 2 Includes 1,764 bushels taken in Sept. 1. Figure for Aug. 31 is 57,375. 3 Includes 2,345 bushels taken in Sept. 1. Figure for Aug. 31 is 21,728. < Includes 1,106 bushels taken in Sept. 1. Figure for Aug. 31 is 1,527. 6 Includes 1,449 bushels taken in Sept. 1. Figure for Aug. 31 is 228,053 Table 36. “/ns” and “Outs’' and mixing profits ^ in wheat of the Minneapolis public elevators for the crop year 1915-16. 324 TERMINAL GRAIN MARKETING. 10 Overage, all grades as appor¬ tioned to grades. 7-f-9 53 ^ 00 (N —1 00 CO "f lO >0 •»>< O O 1-t . OOOiO'^Oi'-t>.r-cOO^t^iOCaOTiOOO • aj O-H 00 50 CS ■’f CO T-HCO 00 lO + . 'S sTs'sTsfsT'-5*''-i' '®''o'r-Tco'' • ,ci50 CO O CO CO T-( 1-1 ^ . oo O CO 00 rH es • rH CO ! 5,762,486 9 Amounts as appor¬ tioned. . $2 ?? !2 2S £J fS “5 “O ro o o 1-1 ' 00 22 *3 £S ^ *o 05 S lo 00 • rS O lO CS 1-1 CS 50 CO rH CS CO 00'T'-9< lO + ^ 1 cq : 955,430 8 Apportion¬ ment un¬ graded over¬ age to grades, on basis of total outs graded wheat. 92 3J29^ cs Oi (M 50 t--00 CO ’ S2 SS £2 f2 ^ 22 S? t?'® ' 00 ■ 3J22£0”'^'^^»oOco^-^-a3'7 fe 5*c TO o 05 s 05 00 o • 00 • 00 • • (M • 05 to o lO iO CO O r^i-T C^l o csT O O CO -> C^iOr^ ^ 05 C«T}1 > CO CO ^ Tji Tt< 00 ■rj< CO co<0 IC o Or^C^t>.-^t^00C^i005U0C005U0 05COOCOt^’^^t^OOlOCOCOOOCS l>’^OC005lO’^COOOTfi05iOtOOO O5t>-COCO'^C0’^t>rH 1—( 05 CO CO t-H iH 00 00 rH (N O ^ CO 00 (N CO»-H»-H00^i-HlOCOCOCO^O500CpC0i COCSICO^'^'n^i—ICO»Of>«O05r-H00COC0 »-HOOTPOiOi-HT}<,-Ht^C0000005iO CnJ^i-i^OOOt-hOO' CO s oT 00 1-H CO* (M 05 Tfi l> CO 05 05 CO oo''o5''8 00 . lO (N O to CO to o 4<5 a> CO o rd "S w CO o X 4-5 <0! o u pH X o CO w, o 1-^ X -Li CM o X ^ 2 c:>^ ^-1 y S S'G >• P Cu H5- 03 00 CO 40 •» o § 05 CM 00 CO oT t:- CM C 05 C S CO lO 05 05 00 Ht( 05 00 rH t^COCM lO CO 8 CO CM 40 CO th^cm’^oT CO 05 00 CM C o< > 05 5 CO 05 rH ^ 00 rH CM cm CM 05 05 COtO'^ fH CO t-- CO o lO CM 05t^00’^COO00rHO5Hj.COCOI>* I'^4f05040C00505CO ^^pCMQOt^^^gCJO^ 40 !>• T-H CO rH 05 « CO 40 rt^ CO O _ _ 00 t^oo CO iO^CO00^0C4O4O00 C0O5CMI>“COLrHHC0'^l>rH 40 40 CM 05 CO CO rH rH €^CM 00 00 rH v^^rn'^c^ CM 40 CO Hf 05 i> HH « . CO rH rji O CM 40 05 05 00 CM rH o 00 CO . 40 CO o to 4O 40 00rHt^t^0qCMCM’^O'^40 05 CO '^i-HCOOtN'40 00'^05C005C04000'^00 rHOOTfi—l40CMrHi-Hl>.C0050000'^40 CMrHi-Hi-HOOOrHOO05 05rHi-HOO 40 »o 00 CO CO 00 o CO CO o' r>. 05 ^ CM CO TT 40 00 CO 40 i-h'o'' Tt« 05 CM CO O HJ1 00 ^ COi-H 00 HJH rH o 00 gTcm*' oo'' CO 05 00 CO ^ rH O O CO CO TT O 05 fH Tfl Tfl t^OO CO i-H^ccTi-T ^ fH CO t>* 05 40 05 05*' CM to 05rHO00 00rH00C0C040O5Tf-005rH005t>CO'^ CO O 00 CO CM CO 1 —It-H40 40'^'^COI>-OCOCO^’^OOOCO CMQCOrH05rHCOOOOCM«0'«t^CMOOr^CM COCO^i-h05CM40 40COC000^40C04000 c^rH ’^^c^4o't>rHcrcF^Fjrt>r,-r cm^'^i-Tc^ 40 40 O 00 CO CO rH rH 00 ^CM 00 00 rH cm 00 40 O CO HJH 00 CM CM O CM . 40 CO o ccT C0054000HfTt-CO 05COrH40CMOCM'^OrHCOOOOCOOOCO OI>*Hf0540CMrHOt^C005t^OOC040 CMrHi-HOOOOrHOO05 05i-H»—(OO CM 05 fH Pi •rH o •^ d Qa w 03 4-5 c« u o p T5 •rH 'C u o 4-d . c9 S' ® O 'o * O M *t-H OT ^tS Pi^ .a ® 2 M ^ >1 > g do o2 -A O) 2 tfl O Png bc^j .ag "S o r? ®5 a > o ® d ® 'O 5 ® to L4 o ® O ’fh p w .2 ■gs a| II a> rP CO CO I CO CM -4 s • O • 40 • 05 • 05 . CO 40 .40 • O . 40 CO . CO to T-1 ss cm 00 CO 40 CO 40 Ht1 CO O CO CM nf «C 05 ^ 00 Ico' • 40 . CO , co’'c^ . CO • 05 ' 40*'cm’'^ ' 40 05 05 • fH CM*'40'40'‘ 00 fH t>. CM to r>r 00 CQ • rH*' • rH 40*' a> (m o p p p p t-4 b4 bH q;> q;> o 0^ ^ a ®" •w4J4^-H>4-» , •r'r'^r^r^ tHUiint-iUi^ObfabbO C8 O O O O'd^ 3 p! p! 3-rj ^ PI q 3 0^ a’d'3'3'3 5_- ^ .J, g feb®-s-^ a 66666’57 o6d66oa!;^>iS !z; :zi Jz; Iz; Iz;«!2; :z; ;zi ;zi :zi Iz; ^ ^ m tZ3 3 ildt! o«3 ® Eh P ft -1-= Q ® a Izift 326 TERMINAL GRAIN MARKETING. O . oa§£S8 •'" .9 c3 CsOiO 00 CS CO O CO O 1-^ ;:;^ot^t^C500'^ocooot*^co ^ o 'S c3 o_g (X* O 00 o l ^ CO O Cft o 00 * lO lO > CO • o • lO ^'' I I 0^ d ^ ^ « T! b '3 3 O H g ° 2 s a ''0.9 03 ' OJ ft 9 9 - 41 ft ft ;3j e: r^'03-3 • : • IM O • CD X •X • Tp •£0^0 • • • O iD fh • • Tp 05 05 :8 : : • • X 7. 459. 185. • *D • X • 05 • X X CD • « • 05 r- ID • • • 05 cs • • 'J O O 00 05 05 JO O C> lO O 05 22 ’“< C^ '—I i-H 05 r-l o (^^ to lo CO u CO ‘(N C > O lO > 00 • lO CD 00 lO ^ • (N O lO O • CO rfi CO CO 00 o CO 05"“ 05 ( 05 < 5 lO ( > CO c >o ) lO Q CO 05 05 o o CO CO ^ CO 05 J-H CO 1—I 05 4^ O I o ; Pi 3 ' 2^ u - 3 eg 4> o g .S o ,o UJ 05 < 05 CO < > "-H T}' 00 I ) CO ^ < • t^ CO io CO r'* < CO 05 o . iO CO 05 o CO(N OOCS i-H 00 O ^ O 00 o 05 CO C^ CO CS CD t-T CD*' i-T 0) I O f~4 P d 9 d w o"c3.B TP t>. O O t^o C5 O 00 1—{ CD fH CD iO CO o o r>- O O 05 ^ (N Tp c4 S CO S ^ O •«I' 05 00 »» »» 1-H (N :R • 05 • 05 • CO 'd n ' • X TJ fe *2 p o p.2 2 g fl 9^ Eb.S «3 • 00 • CO • ^ • 05 fH X • • • •005 • -« 9^ O <1> °S-3 TP lO < O 05 c > 05 *-H o > CO CO 05 o 00 00 00 00 (N Tp TP CO »D IC r-» o ID O »-H O 00 CO th i-Tf-i CO* ^ o o !>• 05 u:) CD CD 00 iO o fH o •o ' Tp 123£'®SI'2’-'*p> ^05»—(OOcOTf^ ICO CO CO (N CO CO 05 00 'esf cs" r-H rn" ' 1 4> 3 li oj 'O o '3 S a 3® 9 s S W).9 3 ft 05 »D 05 !>. (N Tp ID 00 O 05 t>. ^ S ^ 2 O prt C5^g3 C/3 c:) a, Q (M ^ CD ID TP 00 00 CO CD O »D TP CO csT CD CD 05 1-H t-H ID CO 1-H 00 CD *-H Tp 05 Dl CD Tp O 00 S Tp CO g 0,9 9 aj 05 v-i 2 P o S'-c 2 g 3 H ® W).g 3 H ■e 9 2 ft ft 8 !> Tp CO 8S§8S Q CO CD ID 1-H »D 05 Dl 05 CO 00 CD CD CD • iDCS TP • Tp 00 o • Tp W o •€»^00 Q iDC^ l>- ID 00 *-H »D CD S OO ^ ID fH t^O^ 3^ CO ii.”i I §-3^ P5QWO 3 CO ) Tp »D 1-H CDC^ C 00 CO X CO C ID CD CD Tp O CD ID iD CD X CD Tp 1—I O O Tp . !>, . CO • CO 05 CD ID ID CD X CD • (N X X CD • iD Tp Tp ID ID 05 • X 1-H C'J Dl !>. (M CD • CS CD X Tp CD CD Tp • CD Tp CO • C^ i-T ;$hC305 05(Nc^xo C^iDi-HCDTPC^OOiD 05CDl^i-HTpTPOO TP»-Ht>.C^i-HO5C0lD X <) X Tp . Tp • X Tp CD X 05 X Tp X - ID X 05 1-H TP t>. t>, 00 CD »D ID t>* Tp CO CD fH 05 fH tp . O- oO o o o C") M ■u >.'i^lo £ |’|33 g =sgo|wf 9 tn^C^ 4)^0 iL C3 CS 4< O 3 _ oteMw;§c5“t) 8 CD 05 ^ X X X FH -o »0 CO CO Oi ^ 1,425 iO ;p 00 ^ 05 • 05 00 JO 05 00 to CO to CO to CO f-H 1-H CO 00 ^ rj’ Ti? 00 CO i>- to r— 75. 81 o to 00 r^- to i-i 00 r- o to to CO o co 68. 84 Number. 564 1,406 201 189 o CO CO 1,027 2,391 435 124 3,977 t-H O to 1-H CO oc 05 oc OC 1-H rH 3,087 O t-- 1-H 05 00 to c: 6.82 15. 02 18.96 18.99 18.85 16.94 Number. CO Oi CO • Tf GOt-H i 148 - 00 05 O (M ^ CO c4 00 ^ f—♦ f-H 13. 75 ^ OOC^ TtH t>- f-H oi 05 00 -^H ^ 1-H tO 18.25 21.66 26. 87 14.11 42.86 24.84 38.40 42.02 23. 77 42.86 39.11 o o CO 00 ''f CO o CO* 05 c4 to Tji CO CO 47.85 Number. Tfi (N CO CS 05 CO to »-H • --- Total. 1914-15: Cooperative. Line. Independent. Mill owned. Total. 1915-16: Cooperative. Line. Independent. Mill owned. Total. 1916-17: Cooperative. Line. Independent. Mill owned.... Total. 328 TERMINAL GRAIN MARKETING, o ?s e <3 e to o e tci to o CQ si « to ?t cT o GO S£ ?«?** 3 5- ^ 1'^ ec =0 S ^ 8 •c* o ^ -13^ SJ 'w s o S « •S 'TS s e o os ?e o • e • ?> OS CO w n -»5 E-i w W :zi pt w w P5 C ;z5 d 1 1 Total prices which followed card. . Percent. • .o . .C^l . .o • « « • ( • • I • « 1.97 •CO |CO 6.17 •T-l C<| •05 CO • • « t ,69 « CO 05 05 00 CO CO . CO ■rr 755 1H 1^(N 270 1 CO CO 00 O (N 04 520 Total prices above card. Per cent. 62.50 55.17 63. 27 1—< 00 CO 100.00 68. 92 71.61 71.15 59. 62 51, 82 61.97 79. 21 80.96 58. 56 00 1 pH ••ti t'- CO 04 C£5 05 c5 pH CO »0 lO 62.75 Number. OCO^ CO rH kO i-i 58 05 (>. t- CO lO lO tf «o >—( 1, 253 Ol (M lO 00 r>* CO Ol CO 610‘I 1 H o 05 pH CO (N PH 04 891 Total deviations of 2 cents or more. Per cent. 57.96 31.03 46. 94 52. 76 00 lO 53.08 49.43 47.91 29.70 45.65 53. 09 61.20 46. 84 57. 75 67.18 67.00 66.67 90.24 67.74 Number. C5 CO O M 134 CO 43 ^ 00 o O (N OS CO >C 923 05 00(M OC Oio pH iO 749 CO pH QO CO pH CO 962 2 cents or more below card. Per cent. 23.30 3.45 12. 25 18. 89 6.76 6.17 8,10 17.42 12. 54 00 CO pH ^ ^ pH ^ COr^ '•Sf? pH 8.02 18.34 28.02 7.41 43.90 23.66 Number. ^ 00 IC lO O (N 00 IC Osco 280 ^ CO 01 CO pH 104 05 (N 00 pH 05 pH pH pH 336 O) U Si o « Per cent. 34.66 27.58 34.69 33.86 51.35 46.91 41.33 30.49 17.16 31.80 46. 35 53. 49 32.43 49. 73 00 CO 00 05 (N CO CO OC 05 cd CO iO 00 o ” > §o (N Number. 1-H 00 O 1—1 CO 00 00 ■o t 38 lOCO 04 lO CO iO OQ CO 643 165 444 36 645 1 o 05 pH pH pH CO 04 626 Number of prices tabu¬ lated. CO Oi 05 lO CQ oc -i '^O t'. 1,420 1 Crop year and type of elevator. 1912-13; Cooperative. Line. Independent. -1 LWdi . 1913-14: Cooperative. T .in A i ^ loiai. 1914-15; Cooperative. Line. Independent. m _ 1 lotai. .915-16: Cooperative. Line. Independent. xutai. 916-17: Cooperative. Line. Independent. Mill owned. • « • * ( • • 1 1 • • « • • • • 1 1 • • • t t f • • f ( • • H 7i H 0 Table 40 .—Deviations over and under Grain Bulletin card prices by four types of country elevators in Minnesota, North and South Dakota, and Montana combined, for consecutive crop years, 1912-13 to 1916-17. APPENDIX TABLES. 329 APPENDIX TABLES 331 Tabi,e 42 .—Profits and losses on the first, second,' third, and fourth scalps of 180 cars in the Minneapolis market, crop year 1916-17. FIRST SCALP. Sold at profit. Sold at loss. Net profit. Number of cars. Average profit per bushel. Number of cars. Average loss per bushel. Number of cars. Average net profit per bushel. Cents. Cents. Cents. Wheat, grade 3 or better. 31 6.47 4 4.22 1 37 4.97 Poorer than 3. 69 6.39 7 5.45 76 5.30 Unclassified 2. 4 14.75 4 14. 75 ^^^leat. 104 6. 74 11 5.00 1 117 5.52 Barley. , 21 2.86 3 22 2 73 Oats.. 11 1.27 3 1.46 14 .69 Corn. 12 1.93 10 2.45 <25 -.06 Rye. 1 .2. 50 32 2.50 Coarse grains. 45 2.21 13 2.22 5 63 1.12 All grains. 149 5.37 24 3.50 6 180 3.98 SECOND SCALP. Wheat, grade 3 or better. 12 1.15 12 1 1^ Poorer than 3. 41 4.80 41 A fiO Unclassified 2.. 1 . 50 1 e;o Wheat. 54 3. 91 54 3.91 Barley. 9 .78 3 10 70 Oats.'. 1 . 75 1 Corn. 1 2.00 1 ♦ 10 2.00 Coarse grains. 11 .89 312 .81 All grains. 65 3.40 3 66 3.35 - THIRD SCALP. WTieat, grade 3 or better. 2 1.44 2 ' 1 4.1 Poorer than 3. 8 1.97 1 22.00 9 -.70 Wheat. 10 1.86 1 22.00 11 -.31 FOURTH SCALP. Poorer than 3. 2 5.25 0 5.25 1 Two cars resold at same price. 2 Grade not obtained. 2 One car resold at same price. * Three cars resold at same price. ^ Five cars resold at same price. * Seven cars resold at same price. I >1 ( t. 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