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^ AGRICULTURAL INQUIRY
HEARING
BBFOBB THE

J O IN T COMMISSION OF AGRICULTURAL INQUIRY
SIXTY-SEVEN TH CONGRESS
FIRST SESSION.
UNDER

Senate Concurrent Resolution 4




IN THREE VOLUMES

Volume 3

AUGUST 4 ,1 0 ,1 1 ,1 2 ,1 5 ,1 6 , 17,1 8 ,1 9 ,
22, 24, a n d NOVEMBER 16, 1921

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WASHINGTON
GOVERNMENT PRINTING OFFICE

1922

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UNITED STATES CONGRESS.
J o in t C o m m is s io n

of

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g r ic u l t u r a l

I n q u ir y .

LIST OF COMMISSION.
SYDNEY ANDERSON, Minnesota,
HOUSE M E M B E R S .

OGDEN L. MILLS, New York.
FRANK1H. FUNK, Illinois.
HATTON W . SUMNERS, Texas.
PETER G. TEN EYCK, New York.




Ca a .
h irm n

SEN ATE M E M BER S.

IRVINE L. LENROOT, Wisconsin.
ARTH U R CAPPER, Kansu.
CHARLES L. McNARY, Oregon.
JOSEPH T . ROBINSON, Arkansas.
PAT HARRISON, Mississippi.

L. Kora, E om
con itt.
Isv m o S. P a u l l , S
ecretary.

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AGRICULTURAL INQUIRY.
TH U RSDAY, AUGUST 4, 1921.
C ongkes 8 o r t h e U n it e d S t a t e s ,
J o in t C o m m is s io n of A g r ic u l t u r a l I n q u ir y ,

Washington, D. C.
The joint commission met, pursuant to recess, in room 70, Capitol
Building, Hon. Sydney Anderson (chairman) presiding.
The C h a i r m a n . We will now hear Mr. Powell. I should like to
say that Mr. Powell did not come here with the expectation of ap­
pearing before the committee. He appears now at my suggestion,
and without having ample opportunity to get the material which I
think he would like to present at this time. I make this statement
in justice to him.
STATEMENT OF HE. 0. HAROLD POWELL, GENERAL MANAGER
OF THE CALIFORNIA FRUIT GROWERS’ EXCHANGE, LOS AN­
GELES, CALIF.

Mr. P o w e l l . Mr. Chairman, I take it that I was asked to come
before the committee because o f the fact that I represent a co­
operative organization of producers, the California Fruit Growers’
Exchange, that has had 25 years of experience, which has gone
through all the stages of childbirth, learning to creep, and then to
walk; also because of the fact that the exchange handles a business
which runs into very large figures, probably $100,000,000 in all
branches o f its business, and that it may have" had some experience
that may be useful to the committee.
The California citrus industry has grown to very large propor­
tions. It now represents an investment of about $250,000,000. Years
ago it tried to sell its products just as most agricultural products
are sold, either to speculative buyers at the point of production, or
it would consign them east on commission, or in other ways common
to the sale of agricultural produce generally.
That system broke down. The fruit was a semiluxury. The
markets were a long distance away. Facilities for transportation •
were not very well developed, and for several years the industry did
not receive the cost o f handling the business. It was faced either
with giving up the investment or improving its marketing system.
Twenty-five years ago the growers in California began to get to­
gether and form local units through which they would assemble the
products of quite a number of growers in order that they might
standardize tne product and ship it in carlot quantities. They
formed quite a large number of these local units and attempted




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through them to sell carlot quantities in the same way that the indi­
vidual had done, but that system broke down also.
Following that the local organizations federated into a single
agency called the California Fruit Growers’ Exchange, which has
now developed until its membership represents about 11,500 growers,
who are divided into about 200 local associations, each association o f
growers being largely composed of neighbors who build packing
houses at a cost of from $40,000 to $500,000 each, there assemble their
fruit, grade it, standardize it, pack it, and put it on the cars for
shipment.
Representative T e n E y c k . Right there, what is the requirement
of membership?
Mr. P o w e l l . Any grower who desires to join can become a member
of the association. Each member usually contributes to the capital
of the association in amount proportionate to his acreage or ship­
ments. These growers are held to the association by a contract, usu­
ally a long-term contract, which has in it. however, a cancellation
clause, through which any member can withdraw at the end of a sea­
son if he is dissatisfied. It may be a 10-year contract or it may be
a 25-year contract, but he has a cancellation privilege at the end o f
the year.
R ep resen ta tiv e M il l s . H ow a b o u t th e g r a d in g o f th e fr u it a n d
p ic k in g ?
Mr. P o w e l l . The grower forms his local associations. The fruit

o f the growers is picked by the local association, not by the individual
grower, delivered to the packing house, and there packed by them
under rules and regulations laid down by the central organization.
The function of a local association is to assemble the fruit and prepare
it for shipment.
Representative M il l s . And grade it?
Mr. P o w e l l . And grade it and prepare it for shipment.
Representative F tjnk . What proportion of products of this kind
produced in California does your association handle ?
Mr. P o w e l l . Seventy-five per cent. Now. these 200 associations
for business convenience have formed what they call district ex­
changes ; that is, if there are half a dozen associations in a community
they form a nonprofit association, which acts as an agent for them in
handling their distributing problems at cost. The associations oper­
ate at cost for the members. Some of them are capital stock corpo­
rations and some noncapital corporations, but all of them operate at
cost, without profit to tne capital invested.
Representative T e n E y c k . What interest have they in your large
working capital?
Mr. P o w e ll We have no capital at all. I will come to that.
•

R epresentative. T e n E y c k . V e r y w ell.
Mr. P o w e l l . Then, for still further business

convenience the dis­
trict exchanges have formed a central organization, the California
Fruit Growers’ Exchange, which has no capital, is a noncapital stock
corporation, formed under the laws of California, and acts as the
marketing agent for these different associations and district exchanges
at cost.
Representative M il l s . It does all the selling?
Mr. P o w e l l . It does all the selling; that is the local units sell their
product through the central organization. It is not turned over to




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the central organization. The central organization furnishes facili­
ties in all the markets of the United States, in charge of salaried
agents, and the local units determine the conditions under which their
product shall be sold through the central agency. About 33 per cent
o f all the fruit is sold at public auction. It is sold at public auction
in practically all the large eastern markets. The rest is sold at
private sale.
Now, in addition to the purpose I have described, there are other
functions which these agencies perform. They include the function
o f developing markets through their service men; through their
agents to cooperate with the trade for the purpose of developing
better merchandising and quicker turnovers at lower margins per
turnover: national advertising in order to extend the consumption of
citrus fruits; furnish the different units a daily news service which
will rive the members all the information that is necessary for the
handling o f their business; the collecting of the funds and returning
the funds to the local units.
Representative M il l s . Well, now, let me ask you this: You main­
tain a selling agent in a city like New York?
Mr. P o w e l l . Y e s. T h a t is an a u ctio n m a rk et.
Representative M il l s . And you sell 70 per cent of your product by
private sale ?
Mr. P o w e l l . Y e s . A b o u t 33 p e r cen t o f it is so ld at p u b lic a u ctio n .
Representative M il l s . On w h a t basis is your price fix e d ?
Mr. P o w e l l . The law o f supply and demand wholly on a perish­
able product. There is no way in which you can fix any price on a
product that is to lie sold when it reaches the market except what the
buyer is willing to pay for it. and what the seller is willing to sell it
for.
Representative M il l s . That is what I say—your agent does not
attempt to sell your product before it arrives at New York City?
Mr. P o w e l l . N o ; all the fruit at New York, Boston, and the
larger markets is sold at public auction, not at private sale at all.
Representative Muxs. So that your agent in New York does not
attempt to sell at private sale ?
Mr. P o w e l l . No; in all auction markets everything is sold ex­
clusively at auction. In a private-sale market the fruit is sold as
promptly as possible after arrival at a price negotiated between the
local unit through the central office and the agent with the buyer,
and they negotiate back and forth until they arrive at a price that
is mutually satisfactory.
Representative Muxs. We had another gentleman here from some
California association who said that they attempted to sell their
product f. o. b.
Mr. P o w e l l . We do not follow that system at all.
Representative M il ls . Y ou d o not follow that system at all?
Mr. P o w e l l . We follow the delivered system altogether, except in
a few pocket markets in the Northwest, where we do sell on an f. o. b.
basis. Probably 95 per cent of the commodity is sold on a delivered
basis.
Representative M il i -s . N o w , you do not attempt to sell directly to
wholesalers or retailers, do you ?
Mr. P o w e l l . We sell entirely to wholesalers. At public auction
the auction company sells to anyone who comes into the auction




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room and buys, under the rules and regulations of the auction.
Usually 20 or 30 box lots, whatever the local conditions may be.
.Representative M ills. That may be to a commission merchant?
Mr. P owell. It may be a commission merchant, it may be a jobber,
it may be a retail merchant, it may be a peddler, it may be anybody.
In the private-sale market we sell exclusively to the wholesale trade.
Representative M ills. Let me ask one more question with refer­
ence to the marketing. You are familiar with the New York situa­
tion, Mr. Powell, are you?
Mr. P owell. Very familiar with the New York situation; yes, sir.
Representative M ills. Your fruit is sold for the most part on the
Erie Pier, is it not ?
Mr. P owell. All of it.
Representative M ills. Do you not have considerable difficulty there
by reason of congestion at times ?
Mr. P owell. Yes; all the New York facilities for handling perish­
able products are very much congested, and there is difficulty in get­
ting material properly arranged on the piers and quickly off the
piers because of the congestion.
Representative M ills. And because of the fact that frequently you
can not get the cars over from Jersey City ?
Mr- P owell- Not often- Only in times of congestion do we have
that difficulty- But generally in normal times there is a very regular
movement, almost as regular as a passenger schedule, from California.
Representative M ills. There are no refrigerator facilities there,
are there?
Mr. P owell. No; there are no refrigerator facilities. The fruit
is sold immediately, within 24 hours after unloading.
Representative M ills. Do you not lose a good deal by reason of
delay sometimes, and through exposure?
Mr. P owell. Practically none. It is unloaded, Mr. Congressman,
during the night. Sales begin at 8.30 or 9 o’clock; the sales are com­
pleted between 2 and 3 o’clock in the afternoon and delivered in the
afternoon.
Representative M ills. You are not interested, of course—well, you
are; but it does not concern your association primarily—as to the
system of distribution after you have sold the fruit?
* Mr. P owell. We are very much interested in that, Mr. Congress­
man ; and I would like to discuss that a little bit later, if I may.
Representative M ills. All right.
Mr. P owell. I would like to show what we have done in the matter
of distribution and what the costs of distribution are. I thought
you might be interested, possibly, in the margins of the wholesaler
and retailer in handling the California citrus products.
Representative T en E yok . We are interested in that. But if we
could properly grade and standardize the farm products in a general
way, what is your opinion as regards selling at the point or ship­
ment or on consignment at the point of delivery? Which do you
think would be the better method?
Mr. P owell. I f I may. I would like to come to that point just two
or three moments later, after I have covered one or two costs here,
Mr. Congressman, and then I will discuss the breakdown in agricul­
tural distribution this year and the relation of delivered methods of




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sale to that breakdown in agricultural distribution, with your per­
mission.
Representative Ten E y c k . That is perfectly satisfactory to me.
Mr. P owell. I f I may, I would just like to follow this out logically
for a moment.
With the sale of, say, 40,000 carloads of fruit to the wholesale trade
annually—and that is about the volume of our business—the cost of
selling, including the cost of the California Fruit Growers’ Exchange,
the central organization, and its agencies and the district exchange,
is less than 1£ per cent on the delivered value of the product. Most
farm crops are sold delivered at 10 to 15 per cent, say from 7 to 15
per cent, and even up to 20 per cent on the delivered value of the
product. Through ine cooperation of these 11,000 growers we have
been able to effect economies in distribution, so that our total cost of
delivering to the wholesale trade, not including national advertising,
is less than 1£ per cent on the delivered value. The actual figure is
1.35. We spend from $600,000 to $700,000 a year in national adver­
tising, and, adding that to distribution cost, the total is approximately
2 per cent on the delivered value, which indicates what you can accom­
plish through cooperation in large volume.
I might bring out one other point to the commission. We have
heard a good deal about the crooks in the trade, about the middle­
man, about the fact that he does not deal fairly with his constit­
uents, with the men that he does business with. We are dealing with
about 3,000 wholesale dealers: all classes of trade; Americans,
<5reeks, Jews, Italians, all classes, all nationalities. In the last J5
o r 18 years we have returned to California over $350,000,000 through
this organization, and dealing with 3,000 wholesale dealers the actual
losses from uncollected bills, losses in transit, losses through our
agents, have been less than $10,000. I do not believe, Mr. Chairman,
you can handle many Government funds of $350,000,000 and have
a loss of less than $10,000. I was in the Government service 10 or
15 years and I think it would be suprising to find many funds
handled in Washington with less than those losses. I think that
speaks fairly well for the integrity of the average man in business,
i f you are dealing with him on a fair basis. He pays his bills if
you are dealing with him on a fair basis. I have forgotten what
percentage that is, though I figured it out once. It is something
like one three-thousandths of 1 per cent of the money returned to
California.
So much for those costs. I think you may be interested now in
the cost of distributing this product to the wholesale trade, the
average wholesale cost to the retail trade, and the average retail cost
to the consumer.
The C h airm an . Very well.
Mr. P owelu In other words, take a dollar’s worth of oranges and
divide it up into its constituent parts, and I will give you now the
records of eight years of very careful investigation showing the dis­
tribution of the consumer’s dollar backwards. We arrive at it in
this way: We began eight years ago to take from the principal
cities o f the United States and Canada twice monthly the wholesale
delivered price of oranges to the jobber, of definite grades and sizes.
Then we take the same grades and sizes and trace those through and




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get the jobber’s price to the retailer, and then we trace those through
in different classes of stores, like the chain store and the fancy
grocery store and the corner grocery store, and get the average retail
price on the same identical grades and sizes, so that for eignt years
every month we would have from the same cities on the same sub­
ject comparable figures, and it can be charted just like an engineer’s
chart. I happen to have in my grip a few o f these charts which
summarize these figures and which I thought you might possibly like
to look over. This chart shows a division of the consumer’s dollar
for oranges for a period of years and is based upon probably more
accurate data than has been brought together in any other agricul­
tural industry in this country.
To summarize that, Mr. Chairman, it shows that for a 5-year
period the average gross margin of the retailer—that is, the margin
on his selling cost—lias been 26.4 per cent; about 33 per cent on the
purchase price. Dry groceries, I think, are just a little less than
20 per cent.
Wben we began this investigation the retail margin was about 38
per cent. The average wholesale jobber’s margin, so-called middle­
man’s margin, during the five-year period has been 8.4 per cent o f
the consumer’s dollar.
Representative T en E y ck . I s that on the purchase price?
Mr. P o w e l l . On the sale price to the consumer.
Representative T en E y ck . What is it on the purchase price?
Mr. P o w e l l . About one-half more on the jobber's purchase price.
The part which goes into transportation, you can see from this chart,
back in 1918 was 16.4 per cent. A year later it was 15.8 per cent,
and a year later it was 18.1 per cent, and now it has jumped up
to 24.1 per cent with our higher freight rates. You can not pass a
freight rate or any additional cost on a perishable product along
to the consumer. Every cent added to your overhead, either in
cost of production or freight on a perishable commodity is stood by
the producer, because it must be sold for what it is worth at the time
it reaches the market, and our shipments through the canal and our
shipments by rail, each carrying an entirely different freight rate,
sell in New York on the same day at the same identical price for
comparable lots.
The average cost o f the exchange on the consumer’s dollar basis for
this period has been 1 per cent of the consumer’s dollar.
The average amount returned to California during this period has
been 49 per cent.
I f you will take this chart you will see that practically every year
the retail cost, the jobber’s cost, and the transportation cost, until
these freight rates went up, was 50 per cent of the consumer’s dollar.
The average retail margin on oranges is 25 to 26 per cent. The
jobber’s margin 8 to 10 per cent. Transportation is from 15 to 25
per cent, depending on just what freight rates are in ‘effect, and the
amount that returns to California may be about 50 per cent, varying
up or down, depending upon the retail price.
Representative T en E y c k . N ow, take this freight rate. It would
be the extreme freight rate due to the fact that your products are
carried the longest distance to market and you are using the higher
cost rate.
Mr. P o w e l l . Highest classification.




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Representative T en E yck . Yours is the highest classification?
Mr. P owell. Yes; our rate on lemons at the present time is $1.66$
a hundred pounds, and on oranges $1.92, exclusive of the war tax.
Representative F ttnk. In other words, as I understand you, the
amount received by the producer is reduced in proportion as the
freight rate is increased?
Mr. P owell. Yes; or any other fixed cost that takes place after
you harvest your product, because you can not add to a perishable
commodity any of those costs. It has pot to be sold for what it is
worth on the day it reaches the market, and you can not add any of
those costs on the selling price. A manufacturer can simply reduce
his production, but in the case of this commodity that can not be
done. The fruit must reach its full volume, and it must be shipped
and sold for what it is worth.
Representative F u n k . In which class would you include "rain ?
Mr. P oweli* I am not familiar enough with grain marketing to
.
draw a comparison. Of course, it is not perishable like citrus fruits,
and it is not as stable as steel or an entirely nonperishable com­
modity.
Representative T en E yck . Undoubtedly these figures that you
have given to us set forth what the farmer gets out of his product
•with the most efficient organization that exists in the country to-day
for sales and distribution; is that not so ?
Mr. P owell. And on a product grown or produced awav from the
average market.
Representative T en E yck . Yes.
Mr. P owell. I might say that through the cooperation of the
industry with the trade we have been able to reduce these margins
and we have been able to reduce them bv showing the merchant that
lie can make more money by so doing. In other words, a good many
systems of merchandising are based upon slow turnovers at high
margins per turnover. We have conducted an educational campaign
for several years with the wholesale trade organizations and the
retail trade organizations through which we have attempted to show
them that by better displays, attracting the consumer more, and
putting reasonable margins on their products they will turn them
over quicker; that there will be less waste in the product: that they
can afford to sell them for less; they can use their capital more times
per year; and the jobber or retailer will get a higher net profit on
the whole year’s business. In other words, to reduce the cost of a
perishable commodity to the consumer, our experience leads us to
believe that you first must have large volume, so that you can ship
in carload quantities; you must have a standardization of the product;
you must have an equitable distribution; you must couple that up with
the cooperation of the trade; you must have national advertising,
regular supplies, and when you do that then your wholesale or retail
dealer can adopt a merchandising system that is efficient, and he
can not adopt a merchandising system that is efficient with irregular
supplies, with fruit that rots, or where there is a great loss in it.
Sow , our experience has led us to believe that the farmers ought
to cooperate with the men with whom they do business, and only
by cooperating with them and helping them to understand your
problems, and by your understanding their problems, can you get
the maximum of efficiency.




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Representative T en E y ck . The farmers should standardize th e
grades of their products before shipment?
Mr. P owell. That, Mr. Congressman, is the first requisite of any
system of modem merchandising. No merchant can deal in non standardized commodities and charge reasonable margins on them.
That is the first thing that must be done. You must have efficient
merchandising.
Representative M ills . Have you made any study of the high cost
o f retail distribution ?
Mr. P owell. Yes, sir; I have studied that subject a great deal.
Representative M ills . What is the answer ?
Mr. P owell. The high cost ?
Representative M ills . Yes.
Mr. P o w e l l . It depends very largely on the whims and the de­
mands of the man who creates a high cost of retail distribution.
Representative M ills. That is the consumer ?
Mr. P o w e l l . The consumer. The cost of distribution in any class
o f store is usually, in our commodity at least, in response to the
demands of the man who deals with that store. I f it is a chain store,
and the man is willing to go to that store and get his stuff and take
it home, of course the service rendered is light. I f he deals with a
Fifth Avenue store in New York, it is a different proposition. There
is a type of buyer who likes to be seen coming out of a store on Fifth
Avenue, drive his machine up to that store, and have it known that
he is able to deal with that store. I f he does that, then he is paying
for the service. And we have found that the question of retail cost
is largely a matter of the whim of the customer, and the only way it
can be reduced is by adopting these fundamentals which I have
spoken of, which permits the merchants in anv class of these stores to
eliminate waste, to make quick turnovers, and to sell at reasonable
margins per turnover, and therefore have a large number of turn­
overs per year. I do not think that there is any formula, any patentmedicine formula by which you can reduce these costs.
Representative M i l l s . There is no short way out ?
Mr. P owell. I don’t know of any short wav out.
Representative M ills . In so far as retail buying is concerned ?
Mr. P owell. I have never discovered any short methods that can
be applied to agriculture or agricultural products. All of it is a
matter of evolution; and if it goes too fast, there is a devolution that
follows it always, and you have to start over again. All of our im­
provements in purchasing or distribution or advertising or anything
else have had to creep step by step, and we have had to get our expe­
rience as we went along. If we go too fast, it costs us money, and we
have to start over again.
Now to come to your question. Mr. Congressman. You asked me
about the relative merits, as I understand it, of the delivered
method of sale versus the f. o b. method of sale. As I see it, the
agricultural machinery of this country very largely collapsed in
1920 for a number of reasons. One was- because there was not an
export outlet for surplus. We dumped back on the farmers’ hands
an immense amount of material which could not be merchandised.
It created a surplus here which depressed the market.
Second, the financial conditions of the country were such that the
men who have usually bought farm crops at the point of production,




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either the local buyers or the representatives of the distant buyers,
could not be financed because the distribution and the future sale is
a speculative operation. Under financial conditions existing this
year no bank could afford to finance an operator who went into
Oregon from New York or Philadelphia, or who went into California
or any other distant market and bought a year’s supply, because it
was a* speculative venture under present financial conditions.
Therefore the two chief reasons for the collapse in the marketing
o f the commodities in which I am interested and with which I am
familiar, were: First, lack of credit facilities for purchase, and
second, a lack of outlet for the surplus.
Now the organization which I represent learned this lesson 25
years ago. It learned the lesson that in bad years, whenever
merchandising conditions are bad. that no merchant will attempt
to finance a crop for distribution, because he can not afford to do so,
nor can the bank afford to finance him, and therefore we learned 25
years ago that the f. o. b. method of sale must be eliminated, on a
perishable product at least. So we established these agencies all
over the United States for the purpose of distributing this product
to our own agents: in other words, the producer assumes the specula­
tive risk o f distribution himself. He financed the first distribution.
The man in. the market who buys then only has to finance his daily
purchasing, and it is no strain on anybody.
This year in California, at least, there are only fwo commodities
that I know of that have moved out under normal conditions, in
normal quantities, and sold on a basis comparable with prewar
prices. One is walnuts and the other is .citrus fruits. And the
reason for it is the fact that the industry itself has distributed these
commodities to the primary market, and there has sold them to
3,000 or more dealers who have only had to buy their daily
supplies. Now that was no financial strain on anybody. The man
can do that. We have done that in the citrus business for 25 years.
Walnuts have always sold on an f. o. b. basis. This year the
California Walnut Growers’ Association, foreseeing this financial
difficulty, changed their system of merchandising. They reduced
their prices 30 per cent at the beginning of the year, because they
knew prices had to come down. Next they established warehouse
centers all over the United States, shipped their product to those
warehouses and sold, where normally they had sold 15 to 50 carloads
o f walnuts, in 10-bag lots. The result is they cleaned up their crop,
with the trade fighting for the supplies at the end of the year.
Now, there is the answer as I see it, Mr. Congressman, to your
question. The value of the delivered method of sale versus the f. o. b.
sale is a credit question very largely. I do not believe that any pro­
ducers' organization can establish II national advertising system and
can cooperate with the wholesale and retail trade, unless it applies
delivered methods, because it can not harmonize and equalize dis­
tribution, which is essential to a national advertising o f a product
or a cooperative method of trade.
Representative M ills . D o you attempt to maintain prices at all
by retaining any of your fruit from the market ?
Mr. P owell. We can not. On a perishable commodity we have
got to ship it. On a perishable commodity, if you try to in any way
influence your price situation by holding you are likely to lose more




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by holding than you would make by any rise in price, and we have
found through years of experience that the only way to market a
perishable commodity is to ship it when it is ready to ship, to take
what it is worth at the time you sell it. You may get a low price one
day and a high price another day, but they equalize and wash them­
selves out. It always sells under those conditions for what it is worth. *
Speculation is eliminated, and you get an average price based upon
the value of the product throughout the year. We could not control
the price if we tried to. We could not control the price on a perish­
able commodity, because you must sell when it is ready to be sold.
You can sometimes on a storage commodity influence price, but if
you fix prices and influence them, then whether you gain by it or
lose by it depends entirely on whether you are a successful or un­
successful guesser. The principles which govern the price in the
long run are the principles o f supply and demand. I f you guess
right you have a feeling that you are a pretty wise merchant. I f you
guess wrong you forget about it and don’t tell anybody about it.
So much for the delivered versus the f. o. b. method of sale. Are
there any questions on that? I am covering this, Mr. Chairman,
rapidly, because I know your time is limited, and I am not quite sure
whether these are things in which you are interested.
The C hairm an . We are.
Mr. P owell. .But personally I think that this is very significant.
The breakdown this year was due to a lack of credit facilities. And
yet, with the reduced buying power, there was sold a volume of fruit
above the normal, a semiluxiiry like oranges, under a delivered
method of sale, where nobody had to take a speculative risk. The
largest volume of fruit in the history of this business was sold this
year.
The C hairman . When you speak of a lack of credit, do you mean
by that that the machinery could not arrange credit, or that the
economic conditions were such that it was not safe to do it ?
Mr. P owell. It was unsafe to extend credit under the present
economic conditions. I might say that in our own industry we have
no lack of credit. We have been cooperating so long in southern
California that I think there is no branch of the economic structure
of the country that cooperates more with our industries than the
banks themselves. The banks have realized that the cooperative
movement is essential to the stability of these agricultural industries,
and I think I am safe in saying that no cooperative organization in
California has ever been denied anv credit that its securities entitle
it to. I am sure that is true of the citrus industry.
Representative M ills. And that was true in 1920?
Mr. P owell. That is true all thp time in California.
Representative M ills. And true to-day ?
Mr. P owell. It is true to-day, and it has been true all the time
that I have known the industry in southern California.
Now, so much for the distributing.
Representative S umners . I want to ask you one question with
reference to the distribution. Do you have important competitive
areas outside of your section coming to market at the time when you
are coming to market?
Mr. P owell. Yes; our orange business is a year-around business.
The navel business begins in November and extends to June. Our




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Valencia business begins in May and extends to November. So it
is a complete year around business. Now during the period of the
Florida crop we have a very active competition in all eastern parts of
the United States with the Florida product. Then we have a very
severe competition throughout the summer with other perishable
fruits; that is, competition between oranges and cantaloupes and
peaches and other perishable products is as severe as the competi­
tion between California and Florida oranges in the wintertime.
Representative S umners. Now, how do you adjust the volume of
your shipment with reference to the total shipments coming in from
other sections?
Mr. P owell. We do not attempt to adjust it. What we do is this:
A t the beginning of the year we make an estimate of the probable
volume of fruit to be shipped out during the year. Now we know
that each district of California ships its fruit within certain periods,
and that to bring back the most for that product it must be shipped
during the period when it is in the best condition. We know from
years o f experience that about a certain percentage ought to come
iorward every week, first from the State, and second from each
community. And so the shipments automatically adjust themselves
to the experience of the past. Each association has its complete
record for 10, 15, or more years period. They know in January
that they have got to ship a certain proportion of their estimated
crop in February, because if they do not, and try to hold it, they
have got a surplus.
Representative S umners. -In the absence of some understanding
between you and other competing territories, how can you avoid
loss and congestion in the market at one place and inadequate supply
at the other?
Mr. P owell. Well, we do not attempt to have any understandings
with any other part of the country on distribution. We know that
in order to handle our own business it must come forward at the
time it is fit to come forward, irrespective of competition anywhere
else.
Representative S umners . What I am trying to find out is this:
How do you arrange to route your shipments in to the points that
are least supplied by other shipments?
Mr. P owell. Weil, we know every day through our agent what
the supply is in every market in the United States. We know what
the cantaloupe supply is, not in car lots, but the general market
conditions. Every day we receive from our agents telegrams that
come in to our central office. At the height of the season we receive
three to four hundred a day. Now that information goes out every
night in bulletin form to all the associations, so that every associa­
tion has every telegram that comes in, so they know what the con­
ditions are, and they use that information as the basis for their
judgment. And each association knows, from a period of years,
what conditions to expect. It has its customers in various markets.
I t knows what proportion it shipped each year to Detroit or Cincin­
nati or Buffalo or Rochester or Washington.
Representative S umners. Yes; but what I am trying to find out is,
do you have any knowledge with reference to the movement into the
various markets from the sections where your organization does not
operate?



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Mr. P owell. No; we do not. Do you mean from Florida, for
instance ?
Representative S umners . Well, from anywhere. Yes; Florida, for
instance.
Mr. P owell. N o ; we do not.
Representative S umners. Then in the absence of that knowledge,
does it result, in practical operation, that you and the other fellow
arrive in a given market in large quantities at the same time?
Mr. P owell. We might at some times, but it could not last very
long, because if the Florida fruit came into Philadelphia in exces­
sive quantities and reduced the price, our people would not come
to Philadelphia. They would ship to some other part o f the
country.
Representative S umners. Might it not happen also that in such a
case the Florida man would do the same thing?
Mr. P owell. It might, but we would not lose, because these prices
on perishables adjust themselves so quickly. They would not both
do it, probably, at the same time. They might come head-on again,
but automatically in the handling of perishable products those
things adjust themselves without very much difficulty.
The C hairman . I f I may refer back again now to the crop situa­
tion out there. A suggestion has been made that the banking
facilities of California have been adapted with regularity to the co­
operative situation. Is that true?
Mr. P owell. Well, I suppose, Mr. Chairman, that through an
intimate knowledge on the part of the bankers of the cooperative
system, that they have had more confidence in the cooperative
system, that they probably have extended their facilities with better
understanding of the safety of their loans than in most sections o f
the country. I would not say that there are any peculiarities in the
machinery through which they have adapted their credit to co­
operative organizations. I think it has been more through a greater
understanding and better knowledge of the risks involved, which
has brought them into closer contact and into a more sympathetic
contact with the cooperative system, than is possible in the sections
of the country where cooperative organizations are just starting,
and where their financial ability to meet their credit has to be de­
termined in the future.
The C hairman . N ow you refer to some work that your organiza­
tion has done with the retail grocers. Did you get any figures as
the result of that work on the average grocer s overhead, on the cost
of handling general stock ?
Mr. P owell. No; except that, of course, at Harvard there are
published a number of bulletins, as you probably are aware of,
giving the overhead of handling different kinds of commodities
through retail stores, which is an average of about 17 or 18 per cent.
It is a little larger on perishables, because there is a little more loss
than there is on dry groceries or dry commodities.
The C hairman . Did you find that there was very much overstock­
ing, carrying larger stocks, having longer turnovers than desirable?
Mr. P owell. There was several years ago. I do not believe there
is very much of that at the present time, because a man who over­
stocks on a perishable loses through having his stock on hand. When
we first began working with the lemon trade throughout the country



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they used to refer frequently to the “ secret box ” of lemons which we
find frequently under the back stairs, never displayed, and the mer­
chant would bring out a half a dozen lemons or one little dried up
hard thing when somebody would ask for it. He would have a
stock of lemons on hand hidden away, and as a result the customers
would not ask for lemons? and he always had an oversupply. We
have been trying to get him to put them in the window, let people
see them, because through suggestion they buy them, particularly
in hot weather.
The C hairman . I had reference rather to overstocking general
stock rather than perishables. I thought perhaps in your investiga­
tion you had run across something on that.
Mr. P owell. N o ; Mr. Chairman; we have not.
The C hairman . N ow, you referred to the fact that you got an
average retail price in different communities from chain stores and
comer stores and fancy grocery stores, etc. Now, how wide a varia­
tion would you find charged at retail for the same quality of article?
Mr. P owell. Oh, I would estimate 40 or 50 per cent or more, de­
pending entirely on the class of trade. I f you have got a very
nigh class, fancy specialty grocery store, where you are dealing with
very wealthy people, and where price does not cut much of a consid­
eration, you may get, for instance, for the same grade of oranges a
dollar a dozen, while the same identical oranges sell at public auction
from the same car of the same grade, going into another section, may
be sold for 50 cents a dozen, and the difference between the 50 cents and
the $1 representing largely the service to the customer or the pref­
erence of the customer for dealing in certain sections or on certain
streets. For instance, during the war the highest grades of oranges
sold in New York went on the East Side, to the laboring people.
The laboring people would not buy the medium grades or the low
grades, but they constantly bought the very highest grade at public
auction. They paid the same price for those oranges at the public
auction that the Fifth Avenue grocery store paid for them. When
you went to the little store on the East Side and bought those at
retail the actual price that you paid, the price to the consumer, may
have been 20, 30, or 40 cents a dozen less than they were sold at-on
Fifth Avenue, depending on the auction price.
The C h a i r m a n . Are these auction sales conducted b y auction com­
panies or by you, or how ?
Mr. P o w e l l . Bv auction companies. We have no interest in the
auction companies. The auction companies may be made up of the
trade in the community, or they may be purely service corporations
not connected with the trade or with the snipper.
Representative S umners . D o you sell through an auction company
or does the person to whom you sell in carload lots sell to the auction
company ?
Mr. P o w e l l . In all the auction markets in the east—in New York,
Philadelphia, Buffalo, Boston, St. Louis, Cleveland, Cincinnati—
everything that we sell goes direct through public auction. We sell
direct at public auction.
Representative S umners. Y ou do not auction in carload lots, or
break your cars?
Mr. P owell. They are usually unloaded on the platform, so that
tbe buyers can inspect by sample, and then they are offered in lots of



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a minimum of usually 20 boxes, or 10 boxes, or 30 boxes. That is
purely a local rule of the auction company. Now, he can buy 10
boxes, or 20 boxes, or 30 boxes, depending on the rule of the auction
company. Our agent represents us in dealing with the auction com­
pany. ’The auction company is responsible for the collections from
the trade and tumingthe money over to us.
Senator L enboot. Then, in no case do you fix prices ?
Mr. P owell. You can not fix prices on perishable commodities.
Senator L enroot. I say you do not, as a matter of fact, in any case ?
Mr. P owell. We do not, as a matter of fact, in any case. The cen­
tral organization does not control the destinations, does not control
the shipments, does not control the proportion; those are controlled
by the local units. Each local organization reserves to itself the
right to determine when it shall pick its fruit, the quantity it shall
pack, where it shall ship its fruit, the pric« at which it -will sell it.
except at public auction.
Representative S umners. H ow do you avoid, under that arrange­
ment, having the local units conflicting with each other in a given
market?
Mr. P owell. Through the daily bulletin that goes out every night
to them.
Representative S umnebs. In case half a dozen local units want to
ship at the same time to the best market, who controls that ?
Mr. P owell. Well, their experience has taught them that they
would go in head on if they did that. A large part of this crop is
sold to regular customers in the private-sale markets. A man has
his regular customers, and he goes to that market and supplies his
trade. I f they are shipping too strong into a market, the man who
has not got his trade does not get any customers, and therefore he has
to divert. Automatically that adjusts itself. Nobody controls it,
but the experience of the shippers over a period of years controls it,
because they know that if a man who has not got a definite trade in
a market attempts to compete in that market with the man who has
established customers, if he oversupplies that market he can not sell
his fruit, and therefore he has to divert.
Representative S umnebs. S o that the shipping organization which
has a list of definite customers in a given market ships to that
market?
Mr. P owell. He will protect his customer and keep his products
in the market.
Mr. Chairman, that is all I think of just now that I want to say to
the committee. I could speak here a long time on different branches
of this subject. I am not sure what the committee is interested in.'
The C hairman . Mr. Ten Eyck would like to ask you a question,
Mr. Powell.
Representative T en E y c k . From your experience in following your
products to the consumer, I would like your opinion as to whether
or not you feel that we have too few or too many retail men in the
various communities.
Mr. P owell. In a perishable commodity, like oranges and lemons,
the more retail distributing agents we have the better we like it.
Representative T en E yck . From your standpoint ?
Mr. P owell. From our standpoint, because people buy a great
many commodities through suggestion. They do not shop for per-_




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ishable commodities. They do not call up on the telephone and ask
this store -what the price of oranges or what the price of lemons is,
and then another store and shop. They buy from their grocery
store, and they buy from a near-by grocery store. The}' seldom
go downtown to buy perishable commodities. Therefore in the dis­
tribution o f these perishable commodities the more distributing
agents you have got the larger your distribution, because more people
come in contact, in intimate contact with the commodity, and it is
only by intimate contact with the commodity that they get suggestion
that impels them to buy.
Representative T en E yck . Well, how does the consumer come out
on that as regards price?
Mr. P o w e l l . Probably better than he would otherwise. He doesn’t
have to travel and shop for this stuff. He gets it near by, con•veniently.
Representative T en E yc k . You feel that the consumer, then,
benefits by a greater amount of retail men ?
Mr. P owell. I think he does. On this commodity I do.
Representative T en E yck . I s it not a fact that while you may sell
more, due to a larger number of retail men, that you increase the
overhead on other commodities and other things, and on your own as
well, so that the consumer has to pay a larger price for all his food
products in proportion to the division of the profits, on account of
the increase in the number of retail men ?
Mr. P owell. You possibly do; but you probably reduce his cost
o f getting his commodity. I don’t know which would overbalance
the other.
Representative T en E yck . In other words, you feel that at the
oint of production you should cooperate and do it on a large scale,
ut at the point of distribution you should extend it ?
Mr. P owell. Exactly; so that you can get your commodity on
a large scale close to the people who buy it, just as in the cooperative
movement we form our local units close to the man who produces,
and therefore on the same principle I would develop a retail business
close to the man who buys. And the closer you can establish it to
the man who buys the less expense he has in purchasing his com­
modity.
Representative M ills. Y ou think that is so, even if you find two
or three retail stores in one block?
Mr. P owell. Our retail stores run probably one to 300 people or
400 people.
Representative M ills. I should think they run less than that—less
than 400 people in New York City.
Mr. P o w e l l . Possibly, in a great city like that.
Representative M ills. Of course, it is a great convenience to the
consumer, but he pays for it.
Mr. P owell. He is willing to pay; and he is the king, and he is
going to have it the way he wants it and have it when he wants it. I
do not know of any other way you can lay down the supplies to him.
You can not tell him to go and buy the stuff, but you must bring it
to him.
Representative M ills. He is not very happy about it.

E

91341— 22— VOL 3------ 2




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Mr. P owell. No; but he does not want to go down town to buy
his stuff. He wants it, even if it is higher priced, he wants it anyway.
Representative T en E yck . Carrying your idea and plan into e f­
fect, you would break up the department stores and distribute them
throughout the entire city of New York, so as to bring the distribu­
tion close to the people.
Mr. P owell. 1 do not think in that case you can do it, but you can
do it on food products, and you must bring the food products close
to the consumer.
Representative T en E yck . I have found that the consumer here
in the East usually buys over the telephone.
Mr. P owell. I would not want to try to apply that on those
goods; I do not know anything about dry goods. But I would apply
it to the articles that are liable to be lost.
Representative S umners . Do you observe that the fluctuations in
the retail market correspond to the fluctuations in the price which the
retailer pays for these perishable commodities ?
Mr. P owell. Yes; only they fluctuate more slowly than the whole­
sale prices. But take the three sets of figures—I am not quite sure
whether you were in, Congressman, when I outlined the matter that
for three years we were making a study of distribution. We take the
prices from three places, the price to the jobbers, and to the retailer,
and to the consumer, on the same lot of fruit. Now, you have the
three sets of figures, and on our chart I draw a line ot the wholesale
price for eight years, and that wholesale price will follow identically
our price to the jobber, and you take your retail price and that will
follow your wholesale price also. It will be a little slow in adapting
itself, but it will follow. I f I had our charts here I could illustrate
that to you. I think it was a most amazing thing to me, the way these
prices followed each other with the accuracy of an engineer’s chart,
based upon the studies of these three sets of figures which we have
made. I f you had all this stuff centralized down town, it would not
do it, but the fact that you have it distributed in a large number
of stores it could not be otherwise. The retailer will relate his price
to the wholesale price, because if he does not somebody else in the next
block will vary his price and follow the wholesale price and he will
get the customer. I f you take the car lot, the wholesale, and the retail
prices over a period of years and chart them, the three lines will
follow each other with almost mathematical accuracy.
Representative T en E yck . Have you a chart o f the overhead of
those various stores?
Mr. P owell. Y ou mean the grocery stores?
Representative T en E yck . The stores you sell to.

Mr. P owell. The chain store, or the corner grocery ?
Representative T en E yck . Yes; both.
Mr. P owell. N o ; we take the average-----Representative T en E yck . I know, but what I am getting at is, do
you have any inform ation as regards the amount o f the overhead
costs o f these distributing stores ?
Mr. P owell. N o ; not from our investigation.
Representative T en E yck . You see, that to a certain extent would

cover the cost to the consumer, and while the rise and fall of the
prices would follow your wholesale prices evenly, if the overhead
charge varied at different times, why their percentage of profit would




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vary, or they would go out of business. They have to, in a business
way, follow their overhead charges, because their profits would vary
in accordance with their overhead charges; is that not so ?
Mr. P o w e l l . I t h in k so .
Representative F u n k . Mr. Chairman, I think that exhibit sub­
mitted bv Mr. Powell should go into the record, if it is not already
provided for.
The C h a i r m a n . We have that exhibit in another form to put into
the record. Blit, without objection, this exhibit now submitted by
Mr. Powell may go into the record. I presume in printing we shall
have to omit these dollars at the top or the page. We have no op­
portunity of printing the chart.
(The exhibit referred to is printed in full, as follows:)
Division of the consumer dollar paid for oranges.
[Compiled b y the California Fruit Growers’ Exchange.]
Per
box.

Per
cent.

Per
b ox.
Dec. 1, 1919-Nov. 15, 1920:
Fruit on tree...............
Harvesting...................
Packing........................
Selling................. .........

Dec. 1. 191&-Nov. 15, 1918 f5-y?ar
period, averaged):
Fruit on tree ................................. $2,265
.112
H arvesting.....................................
.341
P a ckin g..........................................
.061
Selling.............................................

39.8
2.0
6.0
1.0

F . 0 . b . California.....................
Transportation..........................

2.779
.935

48.8
16.4

F. 0 . b . market..........................
Jobber’s margin........................

3.714
.48

65.2 ,
8.4

Jobber’s price............................
R etailer’s margin......................

4.194
1.50

73.6
26.4

Consum er paid ..........................

5.69*

, Per
cent.

100.0

$3,540
39.1
.184 . 2.0
.594
6.6
.092
1.0

F. o. b . C alifornia...
Transportation........

4.410
1.640

48.7
18.1

F. o. b . m arket........
Jobber’s m argin___

6.05
.75

66.8
8.3

Jobber's price..........
Retailer’s margin. . .

6.80
2.25

75.1
24.9

Consumer p a id ........

9.05

100.0

Dec. 1 , 1920-May 15,1921:
Fruit on tree...............
42.4
Harvesting...................
1.8 1
P acking........................
5.3
Selling...........................

Dec. 1 , 1918-Nov. 15,1919:
Fruit o n tree.................................
H arvestin g.....................................
P a ck in g..........................................
Selling.............................................

3.277
.138
.406
.066

F. o . b . California.....................
Transportation..........................

3.887
1.223

50.4 \
15.8

F. o . b . m arket..........................
J o b b e r’s m argin........................

5.11
.59

06.1 !
7.6

Jobber’ s price................................
R etailer’ s margin..........................

5.70
2.02

73.8 ;
26.2

Consumer paid...........................

7.72

100.0 :

25.9
2.7
8.8
1.4

F. o. b. C alifornia...
Transportation........

2.640
1.64

38.8
24.1

F. o. b. m arket........
Jobber’ s m argin____

4.28
.54

62.9
8.0

Jobber's price.........
Retailer's margin...

4.82
1.98

70.9
29.1

Consumer p a id ........

•»i

1.762
.186
.600
.092

6.80

100.0

1

A careful statistical survey conducted by the California Fruit Growers'
Exchange over a period of eight years in minimizing the guesswork in the
distribution and marketing of California citrus fruits.
Since December 1, 1913. thorough surveys of the factors entering into the
selling o f oranges and lemons have been compiled at intervals through infor­
mation supplied by the eastern agents, dealer service men, and special investi­
gators with the cooperation o f the Jobbing and retail trade.
One of the most interesting and Important phases of this work has been
the investigation and study of the cost of oranges and lemons to the consumer
and the distribution of the dollar the consumer pays for oranges between the
producer and the various factors in distribution.
The method of the research which started in December, 1913, has been
virtually the same for each succeeding period. It is as follow s: Exchange sales
agents check up the retail prices on particular brands and sizes of oranges and




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lemons; follow these brands back to the jobber and ascertain his price and
show the price paid by the jobbers In carload lots.
An average Is taken o f the retail, jobbing, and car-lot prices shown on these
reports, and by percentages the dollar paid to the retailer is distributed over
the factors that enter into the harvesting, packing, and distribution, the
remainder showing what proportion of the dollar comes back to the producer
for his labors.
The figures compiled in the above charts cover Valencias and navels as well
as other varieties of oranges.
In the five-year period from December 1, 1913, to November 15. 1918, the
dollar was divided up approximately Into the following elements when traced
back to the producer.
The retailer’s gross margin averaged 26.4 per cent of the consumer's dollar
during the five years.
The jobber’s gross margin averaged 8.4 per cent o f the consumer’s dollar.
The railroad’s gross revenue over this period averaged 16.4 per cent o f the
consumer’s dollar.
The cost of distribution through the exchange, including advertising, aver­
aged 1 per cent o f the consumer’s dollar.
The crops returned to California during this averaged five-year period ap­
proximately 49 per cent o f the consumer’s dollar, o f which the fruit on the
tree received nearly 40 per cent.
TRANSPORTATION CHARGES ADVANCE.

An interesting commentary brought out in the compilation of the’ figures
Included in the charts pictured above is the steady increase in transportation
charges which have gradually been making larger and larger inroads on the
consumer’s dollar spent for oranges.
During the 5-year period from December 1, 1913, to November 15. 1918. the
average transportation charges amounted to 16.4 per cent o f the consumer’s
dollar. In the season o f 1919 the charges for transportation dropped slightly
to 15.8 per cent o f the consumer’s dollar. In 1920 the percentage o f the con­
sumer’s dollar paid to railroads for the transportation of oranges jumped to
18.1 per cent. The greatest Inroads made by transportation charges into the
consumer's dollar are within the past 6-month period from December 1,
1920, to May 15, 1921. when a jump from 18.1 per cent to 24.1 per cent was
registered by trnns]>ortation charges again st.th e dollar which the consumer
pays for oranges.
INCREASED FIXED CHARGES LOWERS GROWER'S HKTTRNS.

Perhaps the most conclusive proof that an increase In transportat'on and the
other so-called “ fixed charges” is inevitably accompanied by decreased returns
to the producer is shown in these charts.
During the five years covered when transportation charges absorbed 16.4 i>er
cent of the consumer’s dollar the fruit on the tree returned on an average of 39.8
per cent o f the consumer’s dollar to the grower.
In the season of 1919, when transportation charges were only 15.8 per cent
o f the consumer's dollar, an increase of 42.4 per cent o f the consumer's dollar
returned to the producer was registered.
The following year, 1920, with transportation charges taking an average o f
18.1 per cent o f the consumer’s dollar the return to the producer, or the fruit
on the tree, dropped to 39.1 per cent o f the consumer’s dollar paid for oranges.
W ithin the last 6-month period from December 1, 1920, to May 15. 1921.
when transportation charges absorbed 24.1 per cent o f the consumer’s dollar,
the fruit on the tree returned to the producer only 25 9 per cent of the total
the consumer expended for oranges.
OPERATING CO8T 8 SO M E W H A T FIXED.

An important item which should be noticed in these charts is the fact that
with a lower price per box a larger percentage of the consumer's dollar goes
for “ fixed charges,” such as harvesting, packing, and transportation.
The oi>erating costs of the retailer, the jobber, the railroads, and the producer
are largely fixed. They are independent o f the value o f the fruit. They repre­
sent the cost of producing the fru it; o f freight and refrigeration service; o f




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d elivery b y the retailer and jobber; and the jobber’s and retailer's cost o f sell­
ing. P r ic e s are determined by the relation of supply to demand rather than by
costs o f production and distribution, and changes in these costs are directly
reflected i n the producer’s net return.

M r. P o w e l l . Mr. Chairman, I regret very much that I did not
know I was to appear before this commission, or I would have
brought very much more detailed information to the commission,
which I have tried now to supply from memory.
The C h a ir m a n . We would be very glad to have you submit any
detailed figures, Mr. Powell, that you think would be valuable to
us in arriving at our conclusions.
M r. P o w ell . I would be very glad to submit data to you, Mr. Chair­
man, i f you will indicate to me what type of data you would be
interested in.
The C h a ir m a n . I will be very glad to do that. We are very much
obliged to you for your statement, Mr. Powell.
(A n d thereupon the commission proceeded to the consideration o f
other business.)




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AGRICULTURAL INQUIRY.
W EDNESDAY, AUGUST 10, 1921.

C ongress o r the U nited States,
J oint Commission of A gricultural I nquiry ,

Washington, D. C.

The joint commission met, pursuant to adjournment on yesterday,
at 10 o’clock a. m., in room 70, Capitol Building, Representative
Sydney Anderson (chairman) presiding.
The C h airm an . The commission this morning will hear Mr.
Franklin N. Brewer, general manager of Wanamaker’s store in
Philadelphia.
Before you begin, Mr. Brewer, I would like to outline the general
character of the investigation that the commission is making, parti­
cularly the various phases of it to which I think you can address
yourself with profit and advantage to the committee. The terms of
the resolution under which the commission is operating are very
broad, indeed. The particular part of which I think you can give
us some help on is the cause of the difference between the prices of
agricultural products paid to the producer and the ultimate cost to
the consumer; that is, the differences between the prices which the
farmer receives and the prices which the consumer pays; in other
words, the spread between the wholesale and retail prices.
Another proposition we are considering is; the relation of com­
modities other than agricultural products to such products, and
also the character and efficiency and adequacy of the usual marketing
system of the country.
W e will be very glad to have vou discuss any phase of retail
merchandising which you think will help the commission in arriving
at some conclusions with respect to the problems that it is considering.
STATEMENT OF MB. FBANKLDT N. BREWER, GENERAL MANAGER
OF JOHN WANAMAKER’S STOKE, PHILADELPHIA, PA.

Mr. B rewer. Mr. Chairman, in considering the scope and character
of the services rendered, I think, from the point of view of our
business, it is fair to assume, in general, that what the public wants
and the order in which it wants it are, first, the exact article or
the exact type of goods desired or that will ultimately satisfy;
second, I would put a pleasing environment, and a pleasing, de­
pendable quality of .service; third, I think I would put quality of
merchandise; and last of all, price.
The C hairm an . Now, in that statement you are giving, I assume,
what you believe to be the elements which the consumer stresses ?




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Mr. B rewer. Yes; in the order of their demand. The price,
perhaps, being the last in importance of them.
The C hairman . That is to say, the consumer would first consider
what store he would trade in; the various considerations which you
have suggested, substantially in the order in which you have sug­
gested them?
Mr. B rewer. Not necessarily consciously, but practically.
The C h airm an . And in that order you think the price to be paid
would be the least important ?
Mr. B rewer. Say, rather, the last in importance.
Senator L enroot. Any retailer who holds that view would, you
think, not be very particular about a close margin on prices?
Mr. B rewer. No; that would not follow.
Senator L enroot. Why not?
Mr. B rewer. Because if he goes too far in his prices, and gains
to himself a reputation for extravagance in prices, he goes far to
counteract the effect of his other three elements.
Senator L enroot. That would only go to the extent of the margin?
Mr. B rewer. Yes. I say if he goes too far in how much he
charged.
Senator L enroot. But a merchant holding that view would natur­
ally not feel inclined to hold his prices down to what would be a
reasonable margin?
Mr. B rewer. Yes; he would. But in calculating his margin
he will take very carefully into consideration the quality of service
that he was giving and the real desire of the public in nis services.
Senator L enroot. Why should he if the price is fourth in the
mind of the purchaser; why does he consider these other elements
and still make only a reasonable margin?
Mr. B rewer. The fact that it comes fourth does not reduce its
significance, or its importance; it simply puts it in' order. You
must take into consideration all of these other items, and to the
extent the merchant is able to do.so and his business grows in
consequence his turnover increases and his ability to hold his
prices at a margin which is fair and a safe one for comparison with
his competitors increases. So that his course becomes a part of that
wisdom which gains the real point by the broader, less direct path.
Not by aiming at narrow economy, but by giving a broader return
for the money spent with him. He finds that this gives him ability
to set his prices as economically, as closely, as his neighbor who
does not aim for those broader elements of service.
Senator L enroot. Let me put it this way then: I f a merchant
believed that the purchaser had in mind price first instead of
fourth, would not his margin be narrower than it would be if he
believed it were fourth in consideration ?
Mr. B rewer. No; I do not think so. As a matter of fact, in our
own experience it is not so.
The C hairman . Let me see if I get your idea, if I may interrupt
you, Senator.
Senator L enroot. Certainly.
The C hairman . A s I understand you, the type of goods which
you handle, and the type of merchandise, and the quality of serv­
ice which you render determines to a large extent the extent of
the business which you do?




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Mr. B rewer. Yes; and add to that the environment of the serv­
ice in the selling.
The C hairm an . And that environment makes it possible for you
to reduce your price ?
Mr. B r e w e r . Exactly. I think, as a matter of fact, our turnover
is distinctly larger than that of the average store, and our cost of
doing business is less: certainly no greater.
The C hairman . What is the turnover in your store, if I may ask?
Mr. B rewer. About four.
The C hairman . Four times a year?
Mr. B rewer. Yes, sir.
The C hairman . You carry nearly everything?
Mr. B rewer. I am not on my own ground there. I do not give that
as absolute, but that is my impression.
The C h airm an . Your turnover means, of course, the average turn­
over, averaging a great variety of goods, some of which have a very
rapid turnover and some less rapid?
Mr. B rewer. Yes, sir.
The C h airm an . In other words, your grocery stock may have a
turnover-----Mr. B rewer (interposing). We do not carry groceries.
The C hairm an . You do not carry groceries?
Mr. B rewer. No, sir.
The C h airm an . What do you get the most rapid turnover on ?
Mr. B rewer. Wearing apparel.
The C h airm an . Do you carry furniture ?
Mr. B rewer. We have to have a rapid turnover on wearing apparel
because the styles change so often. Yes; we carry a large stock of
furniture.
The C hairm an . The turnover on furniture is rather slower?
Mr. B rewer. Yes, sir.
The C h airm an . The statistical tabulations which we have made
indicate that retail prices generally, during this more or less of a
slump that has occurred during the last 8 or 12 months, have lagged
behind the wholesale prices; can you give us the reason for that f
Mr. B rewer. I don t know that I can. O f course, that would be the
natural order. You hold goods as a wholesaler, and I hold them as a
retailer, and the start in the movement of goods comes in that way. I
still have the goods for which I paid the higher prices. That would
be the perfectly natural order.
Senator L enroot. To what extent is that true of the wholesaler ?
Mr. B rewer. I suppose it is equally true of the wholesaler, although
the wholesaler starts at the beginning of the line; the retailer is far­
ther down.
The C hairm an . I assume the sequence of events would be this, that
as soon as the wholesaler gets his goods and the prices come down
from the manufacturer, and he sells those goods to the wholesaler,
and the wholesaler sells to the retailer, but the goods come down
faster, perhaps, to the retailer than to any other person. He has to
dispose of his stock that he bought at the old pnee; the new stock
comes in and comes in competition with the old stock which remains
still on his hands?
Mr. B rewer. Yes, sir.




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The C hairman . I wish you would discuss a little bit, if you will, the
relation of turnover to the cost of doing business.
Mr. B rewer. Y ou mean that, given the same plant and the same
expense, the more rapid the turnover, the less your cost or percentage
on the volume o f business; in other words, the larger volume o f
business you do with the same expense of handling the business, the
less it costs—the less per cent it costs you to do that business—is that
your idea ?
The C h airman . Yes; I want to get at the relation between turn­
over and cost of doing business.
Senator L enroot. In your statement you are making an assump­
tion that is not quite correct, is it? You say the same expense. O f
course, the volume of turnover does have a bearing, to some extent,
on the plant o f a^given size.
Mr. B rewer. T es; but given a plant such as ours—a building and
c
equipment and a force of people which is capable of expanding or
contracting a great deal in the amount o f business done in-----Senator L enroot (interposing). Without additional expense?
Mr. B rewer. With practically no additional expense. The Christ­
mas business is an illustration of that. We do have to increase the
rank and file of employees very largely, but otherwise we do not
increase; otherwise there is very little increase of expense.
Senator L enroot. Could you give us some estimate of this matter:
Supposing your turnover, instead of four times, was six. what in­
crease would that involve? I do not expect you to be accurate, o f
course, but give us some idea.
Mr. B rewer. Suppose the expense of doing business were 20 to
25. and I should suppose we could add another time’s turnover with­
out raising it ; and yet I would like to have the commission take this
as guesswork. As I explained, that is not the side o f the business
that I have charge of. If you desire a more accurate calculation on
that line, I would be very glad to forward to the chairman of the
commission such information.
The C hairman . We would be very glad to have a chart or table
showing the relation of turnover to the volume of business.
Mr. B rewer. I f Mr. Pauli will let me know what points you would
like to have covered, I will be glad to furnish it.
Senator L enroot. What we are leading up to is this: Take your
own business. I f your turnover, instead of four, would be only twice,
would there be any substantial increase in expense?
Mr. B rewer. Increase in expense?
Senator L enroot. N o ; reduction in expense.
Mr. B rewer. A reduction of direct expense, but increase in ex­
pense of doing business.
Senator L enroot. Yes; of course.
Mr. B rewer. Yes; a fall like that would make a good deal of d if­
ference in the ratio of expense.
Senator L enroot. That is, in gross; I do not mean percentage. I f
you could give us some data on that, I think it would be very valuable.
Eepresentative T en E tc k . Your department store is like a number
of stores, all in one, is it not?
Mr. B rewer. Yes, sir.
Representative T en E vck . Each department runs separately and
with its own cost o f overhead and all that, does it not?




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Mr. B rewer. Charged to it; yes, sir.
Representative T en E tck . Charged to that particular store ?
Mr. B rewer. Yes, sir.
Representative T en E t c k . N ow , what is the largest cost that is
chargeable to the overhead in these different departments?
Mr. B rewer . Wages, then supplies, then advertising.
Representative T en E tck . The largest item chargeable is wages?
Mr. B rewer. Yes, sir.
Representative T en E t c k . What is the next?
Mr. B bewer. Well, there is only one other.
Representative T en E tck . What is that?
Mr. B rewer . That, is the rent, light, heat, and insurance, and gen­
eral charges, which are divided up-----Representative T en E tck (interposing). I see.
Mr. B rewer . Delivery is included in that, too.
Representative T en E t c k . What position does delivery take in
proportion to the other costs ?
Mr. B rewer . I think our delivery would cost between 1 and
per
cent, probably.
Representative T en E t c k . Between 1 and
Per cent?
Mr. B rewer, Yes; certainly not 2.
Senator L enroot. Have you given the percentage of cost of over­
head?
Representative T en E tck . No; he has not. I was leading up to
that. Now, what is your percentage of wages ?
Mr. B rewer. It would run from 18 to 20 per cent, I would think,
offhand.
Representative T en E tc k . And the total of the others that you
referred to, other than wages?
Mr. B rewer. The whole direct cost, including wages, would be
between 20 and 30 per cent; I should say about*25 per cent.
Representative T en E t c k . What would be the total of the whole ?
Mr. B rewer. Perhaps 28 per cent.
Senator L enroot. That would not be right, would it? You gave
delivery at 1£ per cent and wages at 18 per cent and the other at 25
per cent.
Mr. B rewer. We are not separating them. Delivery is in there
with the other items.
Senator L enroot. Then, the other would be 7 per cent?
Mr. B rewer. Yes, sir.
Senator L enroot. Delivery 1£ per cent; wages would be included
in the delivery ?
Mf. B rewer. Yes, sir.
Representative T en E tc k . He has not segregated it.
Mr. B rewer. Suppose we put it this way: About 25 per cent for
general expenses of doing business, and that would include ad­
vertising and the delivery and all that, and 2£ to 3 per cent for rent,
light, and heat.
Senator L enroot, What are the items that go into the 25 per
cent?
Mr. B rewer. Wages and delivery and advertising; what we would
call the direct work of selling goods; and the other item would be the
plant—the building, and so on.
Senator L enroot. That is, taxes and insurance?




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Mr. B rewer. Yes, sir.
Senator L enroot. That is included in the 25 per cent?
Mr. B rewer. N o ; that would be included in, perhaps, 3 per cent.
Senator L enroot. You add 3 per cent to the 25 per cent?
Mr. B rewer. You see, I am separating the actual selling of the
goods, the business that goes on in the building, from the building
itself—the maintenance and operation of the building itself. That
would be insurance, and light and heat, and all that. I think I am
about right to set 25 per cent for the actual doing of the business
and 3 per cent for the other.
Representative T en E yck . What you might call the rental o f
space?
Mr. B rewer. Yes, sir.
Senator L enroot. It would be more than that; you say insurance
and taxes-----Representative T en E yck (interposing). The insurance and taxes
are included?
Mr. B rewer. Yes, sir.
Representative T en E yck . That would be in the rental ?
Mr. B rewer. Yes, sir.
Senator L enroot. The rent, but not the insurance.
Representative T en E yck . I f a man owned the property and
insured it, it would be included.
Senator L enroot. But the insurance on the stock.
Representative T en & y c k . The insurance on the stock is also in­
cluded.
Mr. B rewer. No; I took the insurance on the stock in the 25 per
cent.
Representative T en E yck . S o this 3 per cent would be known as
the rental?
Mr. B rewer. Yes, sir.
The C hairman . Does this 25 per cent include profit on the turn­
over ?
Mr. B rewer. You mean the net profit, after everything is paid ? .
The C hairman . Yes.
Mr. B rewer. No; that would not be included in the 25 per cent.
Senator L enroot. Now, what would ordinarily be added to the 25
per cent for profit ?
Mr. B rewer. I do not know what the business nets, but I imagine
around from 3 to 4 per cent.
The C hairman . On the gross sales?
Mr. B rewer. That would be the net profit.
The C hairman . Net profit on the business?
Mr. B rewer. Yes, sir.
Senator L enroot. What would be the net profit added to that 28
per cent; you have 25 per cent and 3 per cent; what would be added
for the profit?
Mr. B rewer. The net profit would be added.
Senator L enroot. That would mean a margin between the whole­
saler and the jobber’s price and the price the consumer paid of 31
per cent?
Mr. B rewer. I f I am correct in my figures. I may be a little too
strong in that. My impression is that the merchandise represents
a little more than 70 per cent.




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'

Senator L enroot. That is, you think this percentage is probably
high?
Mr. B rewer. I say. if it is off the line at all, it is in the direction
of being a little high.
Senator L enroot. A little high, you think ?
Mr. B rewer. Yes, sir.
Senator L enroot. So that with a turnover of four times we ought
not to expect a greater increase over wholesale prices than 30 or 31
per cent; is that correct ?
Mr. B rewer. I f I am right about it.
Representative Ten Eyck. In other words, your gross profits on
your sales would be how much ?
Mr. B rewer. Around 30 per cent.
Senator L enroot. Now, of course, that would not run right
through—that average?
Mr. B rewer. N o, sir.
Senator L enroot. Can you tell us something about the minimum
o f percentage upon the gross sales, and the maximum, that goes to
make up that average?
Mr. B rewer. Not very well. I made clear to your chairman, or to
your secretary, before I came down that that was the side of the
business that was not my side.
Senator L enroot. That would be true ?
Mr. B rewer. Oh, ves; absolutely true. Jewelry, for instance, car­
ries a larger profit. Coming down to notions, and things of that kind,
they are very much less. And between the two the margin would
vary with each class of goods.
Senator L enroot. Take a business like your own, is there any con­
siderable volume of goods that are sold a t cost; sometimes there are
~
sales at cost, I take it ?
Mr. B rewer. It has never been Mr. Wanamaker’s policy to sell
items at cost, or below cost, as a method of advertising, but only in
the ordinary run of business when goods have to be gotten rid of.
Senator L e n r o o t . To get rid of the goods?
Mr. B rewer. Yes, sir.
The C hairman . Mr. Brewer, what was the effect of the so-called
prosperity o f 1919 in the movement of retail goods; did they move
faster during that period with a tendency to get rid of stocks in
anticipation of a drop in price, or what was the situation in 1919?
Mr. B rewer. Nineteen hundred and nineteen was a strikingly good
year. The business and demand for goods held on beyond expecta­
tion. And, of course, it resulted in getting stocks down in a very
healthy degree. It was an advantageous thing from the view­
point of the retailer.
The C hairman . Do you think that retailers and wholesalers dis­
counted in advance the probable drop in prices?
Mr. B rewer. Of course, everybody knew it was bound to come.
As soon as the armistice was declared everybody knew it was bound
to come. The whole thought then was, How are we going to get back
to normal again? Just as before the armistice, the thought was,
How are we going to get the merchandise, the people want f So, as
a general thing, tne drop was anticipated. But as a direct forecast,
or exact forecast, I thnik very few people had their minds clear as to
when it would happen.




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The C hairman . Y ou would think, then, your inventories on Janu­
ary 1, 1920, were at a relatively lower point than they were pre­
viously during the year.
Mr. B rewer. The effort was made all during 1919 to reduce the
inventory, and I should have supposed that general figures would
show a distinct reduction at the beginning of 1920. And yet not a
very great reduction either, because the demand was strong in 1919
and prices were rising and the volume of merchandise would not be
accurately represented by the inventory in dollars. So that prob­
ably there was comparatively very little fall, although the effort
was constantly on to get rid of goods that were previously on hand,
and to live from hand to mouth in supplying daily needs.
The C h airm an . Y ou think, then, during 1919'merchants gener­
ally, both wholesale and retail, were anticipating a drop in prices
in *1920 or perhaps earlier?
Mr. B rewer. Undoubtedly.
The C hairm an . N ow, I think Wanamaker’s was the first to make
a considerable reduction in prices in recognition of the imminence
of falling prices.
Mr. B rewer. Yes.
The C hairm an . N ow, if you are willing to do it, I would like to
have you explain the reasons which moved you in adopting that
policy; the economic and financial reasons.
Mr. B rewer. I will be very glad to give you. our whole mind on
the subject. In the first place, as I said, it was manifest to every­
one that the break would have to come.
In the next place. Mr. Wanamaker, personally, is a very unusual
man. He is a far-seeing man; has a vision of things in advance
which carries him ahead of the average person.
In the next place, he is more than a merchant; he is a statesman.
He thinks in terms of the life of the country, and he knew' perfectly
well that the time had come—that prices were abnormally high—
that the break must come, and to precipitate that break at a time
when it would be most beneficial, was a thing that a man who was
as preeminently a leader and as sincerely devoted to the good of the
people as he, would regard his duty.
And so when he did come to that conclusion, and it was after a
great deal o f consideration and many conferences with his chiefs
of the New York store and the Philadelphia store, he came to it
from both of those points of view.
The C hairman . Can you state when the conclusion was arrived at ?
Mr. B rewer. The final conclusion was arrived at on the day be­
fore the publication o f it in our advertisements.
The C hairm an . There was no considerable interval, then, between
the time when you arrived at the conclusion as to what was going to
happen and what he was going to do and the time when he did it ?
Mr. B rewer. No; there were a number of days of study and
thought, but when the final conclusion was arrived at the statement
was dictated and published the next day.
Representative T en E tck . Do you remember what day that was,
approximately ?
Mr. B rewer. I think Mr. King would know. I know we finished
on the 4th of July.




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Mr. K ino . About the first week in May.
Mr. B rewer. We had the full months of May and June. It was
very early in May, I think.
Representative T en E yck . What year?
Mr. B rewer. 1920.
Mr. K ino. It was the first month o f the market break.
The C h airm an . Had there been any general reductions in whole­
sale prices before this policy was adopted by you ?
Mr. Brewer. As I remember, very few ;'and in a great many in­
stances the tendency was still up rather than down in wholesale
prices. One o f the things that our action took into consideration
was the fact that many lines o f wholesalers were showing a tendency
to stiffen instead o f lowering.

Senator L enroot. Was that a 25 per cent reduction?
Mr. B rewer. Twenty pec cent.
Senator L enroot. Then during that time you actually sustained a
loss in money in making that reauction?
Mr. B rewer. Yes, sir. When I say a loss I would have to analyze
exactly what was meant by that. Certainly a loss on the great
mass o f individual articles and lines directly affected.
Senator L enroot. N o ; I do not mean that. I f your cost of doing
business was 28 per cent and your profit on gross sales was 3 per
cent and you made a reduction of 20 per cent, you must have sus­
tained an actual loss.
Representative T en E y ck . Was not your reduction in those goods
in which you had over 33 per cent profit?
Mr. B rewer. You can not pick out a month's business and apply
figures to it that way. It is a question of what you replace the goods
with that you sell: how they, the latter, sell then, and so on.
Representative T en E yck . There were lots of things that you did
not reduce at all at that time ?
Mr. B rewer. We took 20 per cent flat off of everything.
Senator L enroot. I was just coming to that, Mr. Brewer. Surely
in dollars there was a loss, but if you could replace those goods
at the same reduction, there would be no loss?
Mr. B rewer. That would average down the loss. It is all a ques­
tion of the conditions existing and the conditions to follow.
The C h airm an . H ow long did the 20 per cent reduction continue?
Mr. B rewer. During the two months of May and June, ending
the 3d o f July.
Senator L enroot. Were prices then restored ?
Mr. B rewer. The 20 per cent was. A good many eoods were re­
priced. Some went up to former prices again; not all, but many of
them.
Senator L enroot. That led to very largely increased sales?
Mr. B rewer. Yes, sir.
Senator L enroot. Was there an almost complete turnover in those
60 days ?
Mr. B rewer. I do not believe I know. It was large.
Senator L enroot. I f it was four times during the year, probably
it would be almost a complete turnover with the added sales, would
it not?
Mr. B rewer. Yes, sir.




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Senator L enroot. So that you were restocking your store then a t
a lower price level ?
Mr. B rewer. Yes, sir.
Senator L enkoot. At the end of the period ?
Mr. B rewer. Yes, sir.
The C hairman . In order to get some idea of the volume of this

business, how did this sale compare, for instance, with your Christ­
mas business ?
Mr. B rewer. Well, we say among ourselves, it gave us a Christ­
mas business. I am not able to say from memory how exactly that
is true. •I do not think, as a matter of fact, it did. But it gave us so
abnormally large a business that we compare it in that way when
we speak of it.
The C hairman . Are there any figures, or is ' there any sound
opinion as to the extent to which a business which is increased over
a short period holds that increase; I mean, did you make any new
customers who continue to do business with you m the store?
Mr. B rewer. Yes; I think we did. I think we made new friends,
decidedly.
The C hairm an . I s there any way of estimating the percentage o f
your business which represents customers who trade with you regu­
larly, and who are transient people who come in from time to time,
or only occasionally?
Mr. B rewer. No; there is not. Of course, customers who carry
charge accounts with us we regard as regulars, and the cash pur­
chasers include the transients, though they are not bv nny means
all transient. But I do not know of any way by which we could
judge how much was transient and how much was regular. Phila­
delphia is not a place where a large transient business is done. It is
much more in New York and Chicago than Philadelphia.
The C hairman . What I am trying to pet at is the extent to which
the consumer is influenced by his own habits in trading with certain
people as compared with how he is influenced by consideration o f
prices which may-exist temporarily, perhaps, in other stores.
Mr. B rewer. The interest and eagerness for “ bargains.” for spe­
cially priced goods, is always great, and there is always a large
response when special lines of poods at particularly low prices are
advertised. I suppose that always breaks into the habits of a pur­
chaser a good deal. Aside from that, each store has a fairly regular
clientele of its own.
Representative T en E yck . Did you do this in all your stores?
Mr. B rewer. Both stores; we have but the two—New York and
Philadelphia.
Representative T en E yck . Y ou spoke of Chicago; I did not know
what you meant by that.
Mr. B rewer. No: I said there was not as large an element of
transient customers in Philadelphia as there is in New York and
Chicago.
Representative T en E yck . Did any other of the department stores
do likewise?
Mr. B rewer. No; they had their various ways of advertising price
reductions on this, that, and the other lot. They advertised large
reductions, but, aside from a few of the smaller stores, I think we
were the only one.




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Representative T en E t c k . The reason, then, that you really made
this clean-up was on account of Mr. Wanamaker’s foresightedness,
and it was like the early bird catching the worm; he sold his stock
before there was a general sale of that kind of goods over the two
cities; is that true?
Mr. B rewer. I think it helped to make his action more of a success.
Representative T en E tck . T o stand out?
Mr. B rewer. Yes; the fact that the others did not follow.
Representative T en E t c k . N ow , in relation to the 20 per cent dis­
count, that was on what price—the selling price or the purchase
price?
Mr. B rewer. The goods remained priced as they were, and the
salesmen simply took 20 per cent off of the sales slip.
Representative T en E t c k . Was this 20 per cent below the actual
cost price of the goods in any instance?
Mr. B rewer. Yes; in a great many.
Representative T en E t c k . Do you know whether or not at the
end of the two months you had a deficit in the store for each month
or a small profit ?
Mr. B rewer. We do not figure it out month by month. I do not
think I could answer that question.
Representative T en E t c k . I thought that your departments made
a report to the general manager or superintendent each month of
sales and purchases and profits.
Mr. B rewer. That is going on all the time. Sales are reported
every night, and purchases are reported when they are made. The
incoming goods are reported as they come into the invoice depart­
ment ; the price reductions are reported; and so month by month the
general-merchandise manager is able to keep the individual depart­
ment chiefs posted as to what margin they have to make purchases
for the next month.
Representative T en E tck . Not only posted, but he tells him what
he has got to do if th'e business is falling off.
Mr. B rewer. Yes; to keep him under control.
Senator L enroot. What determines the actual fixing of the actual
sale price?
Mr. B rewer. They go by a factor that has grown out of the ex­
perience of the store. I f you were the head of the furniture depart­
ment, the factor of profit would be higher than mine, if I were the
head o f the clothing department.
Senator L enroot. I understand that.
.
Mr. B rewer. That has grown out of the experience of the store.
Senator L enroot. But take a rising market; I take it the stocks
evidently are adjusted to a rising market, are they not ?
Mr. B rewer. Yes, sir.
Senator L enroot. So that upon a rising market-----Mr. B rewer (interposing). But adjusted more automatically than
directly. The factor would be the same.
Senator L enroot. Let us see. Supposing here is a commodity that
is bought 60 days ago at a low price, and to-day comes on a rising
market, we will say, which has increased 50 per cent. Now, in fix­
ing the price of a commodity bought to-day, would you not adjust
your price of the same commodity on hand ?
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Mr. B rewer. That would depend entirely upon the circumstances.
The policy of the store is to sell goods they have on the basis of the
actual purchase price. I f you were a department chief and you
had a small lot left of goods that you bought at one figure, and you
had to buy that same line of goods at a higher figure, naturally your
small lot would be priced up with the new lot when it came in. But
if you have a large lot of goods, and the price goes up, until you
have to buy again, while your stock lasts, you sell at the old rate.
Senator L enroot. Do you think that is a general rule, or the rule
of your store?
Mr. B rewer. There is no general rule. As I say, it must depend
upon circumstances. I know that we were very conservative in that
line. Mr. Wanamaker is not one to join in the profiteering rush to
raise prices. I know that there was strong pressure brought to bear
upon our various department chiefs to prevent their raising the
prices of their goods, although they would have to pay more when
they came to replace them.
The C hairman . Generally speaking, then, the goods were not sold
during this period of rising prices in the retail trade on the basis o f
replacement onlv?
Mr. B rewer. N o, sir.
The C hairm an . You think they were sold rather on the basis o f
what they cost ?
Mr. B rewer. I think so, and the prices went up as the purchase
price went up, on the actual goods purchased at the new prices.
Representative T en E y c k . And is it not a fact that Mr. Wanamaker’s store sells its wares for less gross profit than most of the
similar stores in the city of New York?
Mr. B rewer. I think it is.
Representative T en E yck . Is that due to the economic way in
which he handles the operation of his store, or a policy of his ?
Mr. B rewer. Both. His policy throughout has been to hold prices
down, so that if you deal with him you can feel that in the long
run, in general purchasing, you are protected against overcharge.
Then, in addition to that, there is the other policy that I spoke o f
at the beginning, of giving a generous, pleasing, dependable quality
of service and environment. While those factors add a direct ex­
pense they also increase the turnover, and therefore, I believe, our
general expense of doing business is less than that of the average
store.
Representative T en E yc k . Do I understand you to say that you
did not increase your prices abnormally during the war on articles
purchased previously?
Mr. B rewer. Yes; on goods we already held.
Representative T en E y c k . On goods you already held?
Mr. B rewer. Yes, sir.
Representative T en E yck . Now, how did you prevent—in case of
silk, we will say—how did you prevent other stores from coming in
and buying over your counter silks and things of that sort where your
normal retail price was actually below the new wholesale prices ?
Mr. B rewer. That does not often happen.
Representative T en E yck . It did happen, though ?
Mr. B rewer. Yes, sir.




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Representative T en E yck . W hat did you do in that instance?
Mr. B rewer. In some instances we had to regulate the amount we

would sell to any one purchaser, and in some instances we just let it go.
Representative T en E yck . Now. in relation to the concentration
of wares o f this sort in large department stores. The other day we
had a gentleman here who spoke of the retailing of food products,
and he made the suggestion that it was better for a community if it
had a large population to increase the number of grocery stores and
fruit stands throughout the entire city, as he felt that it was better
for the trade to have many stores distributed throughout the entire
city for the ease of purchase o f goods. What is your idea in relation
to that?
Mr. B rewer. I think there is, perhaps, an increasing line of dis­
tinction between these smaller businesses that are locally close to the
eople and must necessarily deal largely in staples and the larger
usinesses that can afford to do as we do—bring in the unusual and
extraordinary things and offer a range of merchandise and variety
of new things to hem lift the choice of the people.
Representative T en E yck . Does not Mr. Wanamaker deal in
canned goods and goods of that sort?
Mr. B bewer. We do not deal in groceries at all.
Representative T en E yc k . I thought you did at one time.
Mr. B rewer. N o ; at no time.
Representative T en E yck . I was mistaken. Are there any depart­
ment stores who deal in them ?
Mr. B rewer. Yes; a great many of them do. In Philadelphia
Gimbel Bros. do. In New York Macey’s do, and several do in
Chicago.
Representative T en E yck . What effect has the increase of local
stores throughout the community on prices ?
Mr. B rewer. It is a hard question to answer. Generally speaking,
you have got to consider that there is something besides the merchan­
dise itself that you buy. As a purchaser you buy convenience, and
you buy pleasurable surroundings, and so on. Now, the small store
gives you an ability to run in and get what you want on the spur
of the moment; that is a convenience. It is very much, I suppose,
as the competition that seems to be coming between delivery of freight
by truck and delivery by the railroads. The railroads. I guess, are
finding it necessary to study how they can make their freight deliv­
eries more convenient and make it less necessary for the man who is
receiving by freight to go a long distance and fetch his goods, because
the automobile truck is bringing the goods closer to him.
Representative T en E yck . That was your original slogan o f
service, was it not—one of them, when you started ?
Mr. B rewer. Yes, decidedly. But service is of a good many dif­
ferent types. Now, these smaller stores unquestionably are grow­
ing, and I think the type of service between the two is differentiat­
ing more and more, but whether with a distinct effect in raising or
in lowering prices. I am not in position to tell. Certainly, the big
chain stores, like the American stores, do claim, and seem on the
face of it, to sell lots of things at lower prices. The big mail-order
establishments, like Sears. Roebuck & Co.. with conservative, staple
lines of goods, unquestionably can sell at low prices.

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Representative T en E tck . The Williams store in New York, now
in Brooklyn, or Williams & Sons; that is a mail-order store which
sells cheaper?
Mr. B rewer. I am not familiar with it.
Representative T en E tc k . There is quite a big store there. What
do you think the bearing will be of tne continual growth of these
small stores on the economic condition o f the country?
Mr. B rewer. Speaking very generally, it seems to me that we are
not going to find much change one way or the other. The small
store will continue to develop to the extent the public finds itself
satisfactorily served by it, and the large store will continue to de­
velop to the extent it is able to offer what the public wants. It is
not m a margin o f greater or lesser economy between these two
that we are going to find very much difference in the cost of living.
We must get back to the question of production, we must find a way
to stimulate that; we must find a way to protect the producer so
that his effort and his life in producing are satisfactory to him;
so that he is attracted to it. We must find a way to control things,
so that the power to step in between the producer and the consumer
and hold up the line of flow of goods and levy a profit without
adequate return—that that power is checked. So that in the pro­
duction end will be the attraction to the man who wants to make a
living; the attraction be at the producing end rather than in the
middleman’s position. As to the retailer, as I said, I think you
will always find it will not be narrow economies that will mean
very much in the long run. In proportion as producing brings
the return that it ought to, to that extent the number of people
attracted to the middleman’s positions will grow less, automatically
less; and the retailer will find, just as he finds now, that as he
pleases his public, his public will buy from him, and that the prices
of his goods are one element in the pleasing always, and he must
keep his prices normally down.
Representative T en E tc k . Have you anything to suggest that can
be done along that line, for undoubtedly in running such a large
mercantile establishment as you are operating you have had a great
deal to do with the purchases of goods and have endeavored—I im­
agine you are continually endeavoring—to get as close to the pro­
ducer as you possibly can to buy cheaply. I understand that the
proper purchases at proper prices of proper materials has really to a
great extent to do with either success or failure in the business?
Mr. B rewer. Yes; of proper purchases in two regards—to get the
goods that the public will want and to get them so that you can give
the public a right price on them.
Representative T en E t c k . N ow , give us a little experience along
that line, and what your suggestions would be as regards who to
eliminate or what to eliminate; put yourself in the place of this com­
mission.
Mr. B rewer. Y ou have got me on ground where I feel very hesi­
tant. I will say what I have in mind, but I do not feel equal to the
problem. However, this may have a bearing. One of our men has
ust returned—one of our buyers— from abroad. He found the mar:et abroad high, not breaking, and with not too much goods in sight
in his line, and yet he told me that he had bought freely, more so than

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some of our other buyers. The others were more conservative. As he
put it. “ I feel confident that I can sell my goods and I am getting
* them at a better price abroad than I can get them from the importers
in this country, and so I am taking the risk that some of the other
buyers have not taken; they have bought more conservatively abroad,
and will take the chance of having to pay higher prices to the im­
porter here.” Now, that element of risk always enters in. I know I
am not answering your question now; I am simply making this state­
ment for what, if any, value it may have. Now, I take it you are
asking if I have any thought-----Representative T en E yck (interposing). That will cut down the
cost of distribution.
Mr. B rewer. That will cut down the cost of distribution; yes. Of
course, the biggest element of abnormal cost is the waste of idleness,
whether it be idleness of people, of plant, of merchandise, of freight
cars----Representative T en E yck . Or capital ?
Mr. B rewer. Yes; or idleness of capital. Now, if I am a manu­
facturer or farmer, anything that would enable me to have guaran­
teed for myself such a return for my goods as would, under any forecastable circumstances, keep me from breaking, would encourage me
to keep going and keep my employees at work, keep my organization
unbroken. 1 have wondered whether the time would not come when
we would find that an insurance element must enter in to assure a
return on the output up to a certain point. This would include, of
course, the question of how, as a country, we could take the goods
that are idle at one point and instead of leaving them idle and a waste
all up and down the line, put them out where they are needed and
at a price that would at least keep the wheels moving. The same
question is up constantly with regard to labor—how to shift from
where it is not wanted and is not serving to the place where it is
wanted and can serve. Always, if done, thus artificially—we will
call it artificially—always at a price which would not put the move­
ment into competition with the natural flow of merchandise or of
labor.
Representative S umners . May I ask a question right at that point:
Do you regard that it would tie more economical to assist the ma­
chinery for the shifting of merchandise and labor, both with re•gard to vocation and locality, than it would be to attempt to suffi­
ciently stabilize the production so that this shift will not be necessary ?
Mr. B rewer. You are asking a question that only experience and
the actual circumstances could answer. In actual experience neither
of those processes would prevail over the other. Both would enter
in. I f we were living in a small community and there was more
produced than the normal living of the people of one part of that com­
munity required, while scarcity prevailed in another part, I take it
we would find a way to take the surplus here and use it over there.
Representative S umners. Well, there is an irresistible economic
drift, is there not, toward vocations and locations of greatest profit?
Mr. B rewer. Yes; that irresistible economic drift, of course, is one
of the forces, but it is only one.
Representative S umners. Do you think anything could be done by
legislation or by arbitrary methods which would be more efficacious,




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anything more than merely to provide an open way, an unobstructed
way through which this shift may take place ?
Mr. B rewer. I am hopeful that something can be done and feel that
something will have, to be done. If, for instance, there were no fire
insurance, there would be, I think, nothing like the same normal pos­
session and building of homes there is to-day.
Representative S umners. Do you mean that people would not have
houses?
Mr. B rewer. Oh, yes; they would have houses, but they would be
struggling with difficulties with regard to their houses, just as the
farmer is now with his crops and the manufacturer with his stocks
from time to time. But my ability to build a house and insure it gives
me a confidence, and I go on. Now, it does not seem reasonable that
we should go on living with such conditions unmet as do exist. The
manufacturer scents his dull time coming and he stops manufac­
turing. He says, “ I will produce nothing excepting I have the order
for it ” ; and, of course, that presses back and back as people are out
o f work, and the corner grocery does not sell as much goods, and so
on. You know the whole story. The farmer produces his stuff, and
it is needed—needed tremendously—in New York or somewhere else,
but he can not get enough to pay him for harvesting and shipping it.
That was true of apples in New York State last year or the year
before. And you know better than I do how often it is true.
Representative S umners . What would you do; would you have a
fixed price, or a price-fixing board which would say to the farmer
that for his different products he shall receive a certain price?
Mr. B rewer. I have looked forward, gentlemen, to the time when
there will be a sort of insurance principle in these matters, worked
out in private business but governmentally directed, that would mean
this: I f I can insure myself and therefore go forward with confi­
dence that if I produce*I can at least get a price out o f my goods
that will keep me from breaking: and that in so far as the normal
flow of business does not give me that, there will be an agency
which will direct the disposition of my stuff, and will recover for
itself what is represented by its insurance of me in the best way
that it can.
Representative S umners. But in order to do that, would you not
have to establish standards for manufactured articles to which they
would be compelled to conform, especially with respect to quality?
Mr. B rewer. You never find standards established very rigidly
about anything of this kind. It would be a question where the stuff
could be disposed of to the best advantage, and how. You certainly
would have to establish agencies for taking over and disposing of
the surplus goods, or an organization to control the sending and
disposal of it.
The C hairman . Let me see if I get your idea: A low price o f a
commodity is usually the result of a relatively small overplus of the
commodity in a given locality ?
Mr. B rewer. In a given locality, yes; but not in the world.
The C hairman . N ow , your idea is some form of insurance which,
I think, you do not use at all in a technical sense?
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The C h airm an . Which will provide a means whereby that over­
plus can be removed from the community where it is, thus relieving
the pressure which compelled the sale below the cost of productions
Mr. B rewer. Yes, sir.
The C h airm an . To some other place where it can be consumed at
a price, even if that price may be abnormally low in the other place ?
Mr. B rewer. Yes, sir.
The C h airm an . The relative increase in price in the community
where it was a weight upon the market will De large enough to take
up the slack occasioned by your having to sell at some other place
at a lower price ?
Mr. B rewer. Yes; and with that would be my ability to insure
myself up to a certain point—by paying more I could insure myself
higher, o f course—up to the point where I felt I could assume the
risk of going ahead with my production. And if I did that, I would
be removed from the temptation of deliberately underproducing,
whether I was a manufacturer or farmer, and my employees and my
community would, to that extent, continue as normal consumers,
instead or dropping into abnormal underproduction. I could get
rid of my surplus and it would go to where it was needed, and the
amount o f surplus would-----Representative S umners (interposing). What is to prevent it
now, without the operation of law, from going to the place where
the greatest price is offered?
Mr. B rewer. Oh, so many things. Of course, I realize when the
farmers in a community unite-----Representative S umners (interposing). You are speaking agricul­
turally, I take it—of farmers especially ?
Mr. B rewer. I am speaking generally.
Representative S umners. It is interesting to have you get into
that.
Mr. B rewer. I feel that where farmers are uniting and creating
cooperative markets they are accomplishing this very process we
are talking about, although not fully. And 1 realize that the manu­
facturers can get along m the same way, but we all know that we
have not got past the times when you, as a manufacturer, hesitate to
keep your mill running unless you have got the actual orders in hand,
nor have we got past the time when I, as a farmer, raise my wheat
with high hopes of a good price and when the time comes get less
than it cost me to raise it.
Now, the thought I have, am reaching out for, is to change those
conditions. We would do it if we were a little community among
ourselves. I thing our whole salvation rests in learning to do it on
such a big scale that the country can do it as a whole.
Representative S umners . Under such an arrangement of guar­
anteed profits, how would you permit the economic law to operate
which would shift the surplus from the place where it was not
needed to some place where, through some necessity, the public re­
quired the employment of the products.
Mr. B rewer. Of course, I can not answer you that any more than
when fire insurance was first conceived they could tell you of the
enormous companies and their methods that are operating to-day.
I only know that it seems to me to be a reasonable thing. I do not




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know about insuring a profit. I do not know that you could go to
that extent. When your house bums you do not get a profit out o f
your insurance; it simply keeps you from breaking, ana you go on.
But I do feel, with a principle like that established, we would find
a way to create the machinery.
Representative S umnebs . I f agricultural producers could stand­
ardize the items of their production, the various crops, and there
could be established an exchange system in places where the standordized products should be listed for sale and buyers could resort
there, in person, or by agents, and have a financial machinery pro­
vided to make the orderly marketing o f agricultural products pos­
sible, might it not be possible to provide machinery under which the
economic laws—the laws of Almighty God—would help this thing
out, rather than for Congress to try to enact mandatory legislation?
Mr. B rewer. Well, 1 have three thoughts on that: In the first
place, to the extent this thing you are talking about is or shall be
done, our problem will be reduced. There is much to be gained along
that line.
In the next place, it is not my thought that the Congress would
work this out to any great extent, any more than it works out fire
insurance. I think that is for the business men to do.
Representative S umners . Fire insurance is for physical loss.
Mr. B rewer. No; it is insurance against loss o f the amount o f
your financial ability that your house represents.
Representative S umners . I know, but what you are trying to pro­

tect against-----Mr. B rewei? (interposing). What we are trying to protect against
is my going broke if my house burns down and I nave not the money
to buy another.
Representative S umners. O f course, that is the incentive which
causes the person to undertake to protect himself against loss;
to protect himself against the loss from the physical destruction
of his house.
Mr. B rewer. It prevents the man who is insured from being in the
position of the farmer who can not market his crop; it is the same
principle in the end, as I look at it. But we would look to Congress
only for regulating measures. The thing itself must be worked out
by the people themselves.
Now, the third point: I think we all believe in the uniting o f
fruit producers and farmers, and so on, and the standardizing o f
prices and placing of agencies to handle their goods. There will
always be the ups and downs of market conditions. You can not
meet the whole problem that way, though you can go a long way
toward it.
Representative S umners . You can not control the volume of pro­
duction.
Mr. B rewer. N o ; nor a good many other factors.
Representative S umners. The hazards of production for instance.
Mr. B rewer. So, as I see it, there is always going to be some
necessity for some such insurance system. Sooner or later, I believe
the country will come to it.
Senator’ L enroot. I would like to ask you, Mr. Brewer, whether
the spread in costs—speaking of percentages, and speaking of what




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the consumer pays and the producer receives—if the spread is not
very much greater to-day than it was formerly ?
Mr. B rewer. Y ou ought to ask an economist that question. I
think the general assumption is that it is, that the middleman is
getting a bigger slice than he is entitled to, under right manage­
ment of things. It would be wise that he should not have it; that
he be a producer or distributor, and not an intermediate with arbi­
trary power to control the flow of things.
Senator L enroot. I f some remedy could be found to remove that
cost, at least in part, is not that the greatest single thing that can
be done for the relief of the general situation ?
Mr. B rewer. Yes; and it is just that that I feel this that I have
been talking about would go far to accomplish. The sooner you
can guarantee me as a farmer or manufacturer a reasonable safety
and a reasonable return for my investment and labors the more you
will encourage me to remain as a producer and become a greater pro­
ducer. And the more you can make the business of producing safe
and profitable the more you will automatically take away from the
middleman. There may have to be laws to regulate the per cent of
profit the middleman can make, and so on. I can not go into that
with you at all. But I believe our big question is how to make the
roducer safe and make his business stable and attractive and give
im confidence, so that he can go into production strong and hopeful
for his life’s career.
Senator L enroot. You stated, did you not, Mr. Brewer—or there
was some testimony here—that the cost of the article has a very
material bearing upon the price that is charged for that article, did
yotr not?
Mr. B rewer. Oh, absolutely.
Senator L enroot. I f there are three grocery stores in a block, or
four we will say, where one or two could render the service, could
not the cost of distribution be very greatly decreased, at the same
time paying as great a profit to the one store as each of the four
now receives?
Mr. B rewer. I think you are feeling for an artificial control there
that will never be successfully worked out. I think the three men
will say they are entitled to do business there if they want to, and
if they can each make a living under the conditions prevailing it is
legitimate that they should. I f the conditions prevailing enable them
all three to make a living when only two are necessary, then the
trouble is with the conditions and not with the three stores, and
you will not change it very much by lopping off any of the stores.
Senator L enroot. Assuming— and you will assume for the pur­
pose o f my question—that 10 years ago there was not anything like
the number of retail establishments there are to-day, and 10 years
ago there was a very much less spread between what the producer
received and what the consumer paid, would not a limitation—I am
not speaking of congressional action—but a limitation upon the
number of the retail stores in a given territory have a beneficial
result?
Mr. B rewer. Yes; but it will have to be done indirectly. I f there
is an overamount of water flowing in this channel and it is depleting
this important pond, you must deepen the other channel and the

E




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waters will automatically adjust themselves. Now, if we can find
a way to make production the adequate and confident assurance o f a
living for a man, you will deepen that channel and there will be a
falling off from the other and a larger flow into the old pond o f
normal life. It will have to be by some such process as that, and
not by arbitrarily saying you can not fish in this stream because
there are too many fishing here already. Stock the other stream and
make it attractive to the fishermen and he will go to it of his own
will.
Representative T en E t c k . Theoretically speaking, or practically
speaking, do you not lay a map before yourself or the purchasing
agent and ascertain at various times from the people who handle
the goods that you are purchasing the profits that are made by each,
with the ultimate idea of getting close to the producer, so that you
may buy your wares cheaper; is it not a fact that Mr. Wanamaker
now goes to the fountain of production on account of his ability to
buy in large quantities?
Mr. B rewer. Yes, sir.
Representative T en E t ck . And thereby under buy a great many
other people who have to pay tribute to a number of commission
men?
Mr. B rewer. That is one of the elements in good merchandising;
yes, sir.
Representative T en E tck . Does not that hold good in the same
way with the consumer, if he could get closer to the producer and
eliminate the go-betweens and the commission men ?
Mr. B rewer. Yes; but in saying that you are not indicating any
method by which you can eliminate the go-betweens.
Representative T en E t c k . No; and that was my original ques­
tion to you, whether or not you could give us, from your vast expe­
rience, what the people of to-day can do to accomplish what you are
doing in Mr. Wanamaker’s store.
Mr. B rewer. I have tried to say what I have in my mind on the
subject. There is unquestionably existing the power to-day to con­
trol goods and prices between the producer and the consumer; peo­
ple who have tne power of large means, and people who have the
power of legislation; people who have control of transportation and
commodity exchanges, credits, and so on. There exists to-day, I
believe, hurtful ability to hold up, so to speak, the flow of produce
from the producer to the consumer and levy tribute upon it ; that is
true and the way to check it must be found. But that is only one of
the difficulties. To my mind that would disappear almost if you
could find the way to make the producer the strong and confident
man, and the work of the producer the attractive calling in life. I f
you could do that, you would automatically draw away from the at­
tractiveness of the middleman’s station.
Representative T en E yc k . Of l o u r s e , if you do that you will
make the farmer—I am talkin'? now of the farmer particularly-----Mr. B rewer (interposing). Yes; or the manufacturer, either way.
Representative T en E tc k . T o make the farmer’s life easier and
more attractive you would not actually increase the cost o f produc­
tion materially ?
Mr. B rewer. No; not necessarily.




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Representative T en E yck . Well, you would have to increase the
cost of his living?
Mr. T en E yck . Yes; but not necessarily the cost of his produc­
tion ; not by any means, necessarily. In the first place, I am not lay­
ing stress on ease. I am laying stress on his ability to feel that his
farm is an economic foundation under his feet on which he can stand
solidly and build a good living upon it, commensurate with his apti­
tude and work.
Representative T en E yck . That is a fact, but he does not do that
to-day.
Mr. B reweb. No.
Representative T en E yck . He has not the conveniences of all the
rest of his brothers in industry.
Mr. B rewer. No; but they w ill come.
Representative T en E yck . And, therefore, it will increase his cost
of production, which it should not do.
Mr. B rewer. No; it will increase his volume of production, and
he will have a larger turnover. He will be a stronger producer and
a larger producer, and he can draw to himself the things-----Representative T en E yck (interposing). He can not increase the
amount of his turnover-----Mr. B rewer. I speak of his “ turnover,” because his output corre­
sponds to the turnover of a merchant. He can draw to himself these
things o f better living without increasing his cost of production. I
think that would work out inevitably.
Representative S umners . Mr. Brewer, in response to the inquiry
made by Mr. Ten Eyck a moment ago, you stated that you were
able to get nearer to tne sources of supply tnan perhaps the man with
a small business, and you are able to reach the sources of supply be­
cause you have a large business organization which includes, I as­
sume, a competent and comprehensive purchasing organization in
connection with the business.
Mr. B rewer. Yes, sir.
Representative T en E yck . Of course, the little men can not do
that, because it takes a big business to support the business organiza­
tion which can reach from the sources of supply to the areas of dis­
tribution. It seems to me that the tendency would be to crowd the
little men out and to develop instead big business and toll-making
power; it would seem to me that perhaps the only way in which
that could be avoided, short of licenses and fixing of prices, would
be to attempt to establish, so far as possible, a route around privately
controlled distribution; a route around available distributors and
producers, in order that, automatically, the economical value would
be held to be the basis o f the service rendered. It seems to me the
basis o f such a law would be to throw back into the avenues of pro­
duction the unnecessary accumulation in the channels of distribu­
tion. I do not see how it can be accomplished, except, in a few
words, arbitrarily fixing the profit, or giving the economic law a
chance to regulate it. Perhaps, to make myself a little clearer, and
bring it down to your particular business, if this route around the
privately controlled avenues of distribution could be established,
then your concern could only charge the economic value of service.
In other words, you would nave to render your distribution service




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at a price which would be more attractive to the public generally to
avail itself of it than for it to undertake to effect the change itself.
Have you considered the possibility of being able to regulate matters
of the spread and that sort of thing?
Mr. B rewer. You can not make the handling of small purchases as
economical in proportion to value as the handling o f large purchases.
When you say a “ route,” do you mean a transportation matter?
Representative S umners. Xo. sir; I do not. I mean this, and I
want to illustrate it : In the old days, when the community was the
industrial organization and the public markets obtained—brought
down from the very ancient times—there was the possibility of direct
trade between the people who produced the commodities and the
people in those communities who consumed the major part of the
surplus which the farmers of those communities produced. Under
such a condition as that I do not believe it would have been possible
for the small merchants in the little county-seat towns, for instance,
to have charged an exorbitant profit; nor would it have been possible
for an unnecessary number of merchants to have made a living out
of merchandising in those communities. I f they undertook to charge
too much for the hams which Mr. Brown produced on his farm when
sold to Judge Smith, Mr. Brown would go to Judge Smith’s house
and deliver his hams in person.
Mr. B rewer. I think that would cover only a part of our require­
ment. I do not think, historically, it has been shown to have much
effect. The small shops that you find in the cities abroad, especially
as you go farther east, have all grown up under such primitive con­
ditions, and they multiply and multiply. I think that public markets
unquestionably have a part to play and are bound to come into what­
ever plan develops, as we live on. They are bound to come in more
and more. But they are not going to cover the whole question any
more than the cooperative stores m England, which do millions o f
pounds of business—regulate the general business—which is the ques­
tion we are after.
You are assuming that there is a tendency to drive out the small
store. I think you are wrong there. I tnink perhaps the small
store is prospering more than it ever did. There is always this ele­
ment to come in. Mr. Chairman. Say, I have a peculiar ability’ in the
matter of ladies’ tailoring, and I open a store of my own. My per­
sonality goes into my work. I create my own conditions. I would
be out of place in the harness of a big store; I would not be happy
there; I would not succeed there. But to the extent that I produce
something that the public wants I make a success out of my little
store, and always will.
Representative S umners. But the volume of business is more and
more being done by the big stores.
Mr. B rewer. I do not think so.
Representative S umners. Let us see. Relatively and compara­
tively, a short time ago there were no department stores-----Mr. B rewer (interposing). The population has developed tremen­
dously, and business, the variety and volume of demand, has de­
veloped tremendously.
Representative S umners. That is why I used the term " relatively.”
They are doing the business which was done by a number of stores.




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Mr. B beweb. One of the big questions is whether a store with a
central management can continue to compete with the smaller store
in which the personality and the effort of the proprietor enter most
directly, and ne gives a personal hand-to-hand service that the more
impersonal large store finds hard to give. It is one of the questions
for the future.
Representative S umnebs. Y ou think the smaller store-----Mr. B beweb (interposing.) I say, that is one of the questions
time must answer. No doubt the big store has a bigger opportunity
to sell cheaper in large quantity; and it does. It has its own fiela.
The small store has its own field. The small store has an opportu­
nity and a power of direct personal service that the large store has
not as yet developed as fully. And whether the one is to give way
to the other, or both go on equally strong is a distinct question for
the future.
Representative S umners. N ow , Mr. Brewer, because of your large
experience in distribution, I would like to ask you a few questions
drawn from your judgment and experience, in regard to the diffi­
culties of agriculture. O f course, the hazards of agricultural pro
duction, in so far as they result from the uncertainties of seasons
and insect pests, and thing's of that sort, are inherent in the business.
Those hazards, at least in some countries, I understand, and to
some degree in this country, mav be protected against by ordinary
insurance. Perhaps “ ordinary ” is not the right word, hut by in­
surance.
Mr. B bewer. They are not, to any general extent, are they ?
Representative S umners. There are some insurance companies
that write insurance against those hazards.
Mr. B rewer. But it is by no means general.
Representative S umnebs. Anyhow, that is a difficulty that I be­
lieve we conceive there is some possibility of meeting. Now, the
farmer’s great difficulty comes in marketing and in finance. I think
his difficulty in marketing is perhaps his fundamental difficulty, be­
cause no business can be more unstable than the market in which it
sells-----Mr. B beweb (interposing). But that does not mean that he can not
learn to make his markets more stable.
Representative S umnebs. That is the difficulty, exactly. I am
indicating the difficulty.
-J
Mr. B beweb. Yes, sir.

Representative S umnebs. The difficulty of marketing itself, aside
from the element o f instability which is thrown in by the uncer­
tainty of supply and uncertainty of volume of production arises out
of two causes—perhaps three causes: One is that there is no con­
certed action among agricultural producers with reference to the
volume of their commodities which go on the market at a given
time: and that, perhaps underlying that, is the fact that their com­
modities go to market under the influence of pressure exerted at the
points of production, which arises out of the fact that the commodity
is there ready to market, or through financial pressure.
Mr. B reweb. In other words, you have to remove the element of
competition to a large extent.
Representative S umnebs . You have got to make possible some uni­
formity in the flow o f commodities to the markets.



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Mr. B rewer. Yes, sir.
Representative S umners . N ow, there is no method—no system,

under which it is now possible for the farmer to send his commodity
to market in an orderly manner when it is ready for market, or to
resist when there is pressure upon him to compel him to put it upon
the market; that is, perhap, a fundamental difficulty.
Mr. B rewer. Yes, sir.
Representative S umners . N ow , when you sell it is to meet a dis­
covered demand to buy; your commodities move from your possession
to the buyer, of course.
Mr. B rewer. There is that same uncertainty. I f you were a buyer
for a store like ours there would,always be that uncertainty as to
whether your purchases would go out as you hoped they would.
Representative S umners. Your uncertainty as to whether or not
you are buying in quantities too large is an uncertainty similar to the
uncertainty o f the farmer as to what the volume of his crops will be.
Mr. B rewer. With the added element o f character of goods. You
may find that you have bought stuff that the retail market is going
to drift entirely away from.
Representative S umners. And the farmer may find that he has too
much volume ?
Mr. B rewer. Precisely.
Representative S umners . By reason o f a favorable harvest in one
section or another section?
Mr. B rewer. They are both in very much the same boat.
Representative S umners . By different causes, they are about in the
same boat?
Mr. B rewer. Yes; very much.
Representative S umners. N ow , when they are in the same boat,
however, this fundamental difference seems to obtain. When your
commodity leaves your possession it leaves in response to an estab­
lished want.
Mr. B rewer. Yes, sir.
Representative S umners . And goes from your possession under
prior sale.
Mr. B rewer. It goes from my possession-----Representative S umners (interposing). Under prior sale?
Mr. B rewer. Yes, sir.
Representative S umners. In other words, you do not send your
stuff around to see whether you can find somebody to buy it?
Mr. B rewer. Yes; in other words, we sell direct to the consumer.
Representative S umners. Yes; and the farmers’ commodities g o
on the market to seek a buyer.
Mr. B rewer. Yes, sir.
Representative S umners . It may happen to go into a congested
market.
Mr. B rewer. Yes, sir.
Representative S umners . It goes out of his possession, if it is live
stock, and goes into a stockyard, with a high expense for maintenance,
and with shrinkage, and is sold when he is at that relative disad­
vantage.
Mr. B rewer. The manufacturer is in about the same position, too.
Representative S umners. Does the manufacturer ship his com
modity away from his warehouse before he has a buyer?




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Mr. B rewer. He manufactures in advance on a risk, to a very
laree extent; that is, when he is running normally.
Representative S umners. With reference to the demand?
Mr. B rewer. Yes, sir.
Representative S umners. I do not believe that obtains in this stage
of our development.
Mr. B rewer. Perhaps not.
Representative S umners. It is not, in that position, subject to
attack, if I may use the expression, from that particular point.
Mr. B rewer. Perhaps not; I was using it as an illustration.
Representative S umners. But what I am getting at is this—that
we ought to be able to establish some sort of machinery under which,
to a large extent, agricultural commodities can move from the point
of production to the point of use and move in quality and quantity
as req'uired, instead oi this blind, haphazard method by which these
commodities are shipped out all over the country, with the hope
that they: may find somebody who wants to buy them at the point
to which they are shipped.
Mr. B rewer. N ow , you are getting exactly at the same thought I
tried to express. I expressed it a little differently; I put it in the
form of insurance. But we must find some way to give the farmer a
safe return, so that he can operate. And, consequently, we must find
a way to take the stuff to the place where it is needed and where it
can be used to the best economical advantage and to the best advan­
tage of the people.
Representative S umners. Have you considered this, that the farm­
er’s commodity is going to market in this unsystematic way and
to be sold to the highest bidder—because that is the way it is sold—
makes it impossible for him to look to the future, to maintain the
necessary surplus of agricultural commodities?
Mr. B rewer. Yes: I think so.
Representative 'Sumners In order to protect the public against
the hazards and uncertainties of the next year’s production, because
nobody knows when a drought or insects are going to come.
Mr. B rewer. I sa*? that it puts the advantage all into the hands
of the middleman.
Representative S umners . Does not that uncertainty also carry a
peril to the fellow who must eat?
Mr. B rewer. That, too, is what I meant. It puts the advantage
into the hands of tb"*. man who can store to-day. I f he can dictate
the price at which he buys, and if he can dictate the price at which
he sells, he has a tremendous advantage.
Representative S umners . Here is the difficulty, even about trust­
ing that the middleman will hold the surplus—to illustrate: Suppos­
ing that this year $2 a bushel is a price which we would pay the
fanner; with full energy he would go to the production of another
crop. Now, the speculator can hardly afford to pay that price,
assuming that this particular year we have a two months’ surplus
above demand for consumption during the year. The speculator
could hardly afford to pay that $2, because if he should pay that $2
he knows that he will have to meet the competition of the next crop,
when the farmer raises another crop. In this year, say, we produce
14 months’ supply------




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Mr. B rewer (interposing). I think it all comes back to the same
thing, that we shall have to find a way to insure or guarantee a safe
return to the producer, and the same must hold true for the specu­
lator, the middleman, who should have the same opportunity to in­
sure. You would reach a time when the producer was the man most
encouraged to go on, and that would mean the encouragement o f
consumption. It would mean that the middleman, I think, auto­
matically would find himself in a less advantageous position. In any
case this element of safety and confidence applied to the producer—
and applied to the handler, the middleman, if the handler remains,
as he undoubtedly would, in some form or another, behind the pro­
ducer—would do away with a vast amount of discouragement and
hesitation that now exists and would steadily increase production and
lift the normal of consumption.
Representative S umners (presiding). I f that is all, Mr. Brewer,
we are very much obliged to you for your statement.
Mr. B rewer. Y ou are welcome, indeed. I have taken up a great
deal of your time.
Representative S umners (presiding). We have taken a great deal
of your time.
Mr. B rewer. Not at all. I came here to put myself at the disposal
of the commission.
Representative S itmners (presiding). The commission will stand
in recess until 1.30 o’clock this afternoon.
(Whereupon, at 12 o’clock and 20 minutes p. m., the commission
stood in recess until 1.30 o’clock p. m. of the same day.)
AFTER RECESS.

The commission resumed its session at 1.30 o’clock p. m., pursuant
to taking of recess.
STATEMENT OF MBS. H. 0. BODEN, PHILADELPHIA, PA.
Representative S umners (presiding). Mrs. Boden, some other
members of the commission will be here in a short time; and in view
of the fact that we are running behind our schedule, I think you might
begin now by giving us an introductory statement as to who you are
and in what capacity you appear here.
Will you state your name, please?
Mrs. B o d e n . Mrs. H. C. Boden.
Representative S umners. Whom do you represent, Mrs. Boden ?
Mrs. B oden. I have been asked by Dr. King to represent the con­
sumers’ interests.
Representative S umners. Do you sustain any official relationship
to any consumers’ organization ?
Mrs. B oden. I am very active in the women’s club movement in
Philadelphia.
Representative S umners. Y ou live in Philadelphia?
Mrs. B oden. I live in Philadelphia; yes, sir.
Representative S umners. H ow long have you been interested in
the matters concerning which you propose to testify now 1




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Mrs. B oden. Since about November, 1917, when I took charge of
the woman’s division of food conservation for Philadelphia County
for the United States Food Administration.
Representative S umners . About how long did you hold that po­
sition?
Mrs. B oden. I held that until we closed the Food Administra­
tion, about February, 1919,1 think we finally closed out.
Representative S umners . What were your duties in connection
with the service which you then rendered ?
Mrs. B oden. My duties there were connected with educating the
women of Philadelphia County to conserve food. In the early part
of the work it was the use of substitutes, other materials than flour,
for war bread. We established a number of war kitchens all through
the city where we held demonstrations to show the people how to use
substitutes in place of flour. That was my first experience. I went
in as they were beginning that campaign and subsequently enlisted
the support of all womens organizations to cooperate with the Food
Administration. We furnished Pennsylvania State College with
headquarters and organization for an intensive campaign of their
home extension department. We also organized the Philadelphia
food army.
Representative S umners. Have you had occasion to study the ques­
tions involved in the distribution of food commodities or any other
phase of distribution within the city?
Mrs. B oden. During the Food Administration my work was wholly
with the consumer. Later, in 1919,1 organized a woman’s committee
on prices, composed of representatives of women’s clubs and operat­
ing with the advice and approval of the United States district attorhey, Mr. Kane. Shortly after our work began, Mr. Palmer, United
States Attorney General, appointed a fair-price commission for
Pennsylvania under Lieut Gov. McLain. I had charge of the food
work during the existence of that commission.
My duties then were not at all connected with the consumers; they
were all connected with conferences among retailers as to the cost
of food and the spread they were getting, and the probable chance of
bringing prices down for the benefit of the consumers. That was the
fair-price work.
. After that was over, I was interested last winter in the work of one
of the women’s clubs of the city, by which we were trying to get
through a series of investigations to find out why there was such an
enormous difference between the wholesale and retail prices of food
in Philadelphia. We started an investigation through the commis­
sion men as to the prices of certain commodities, like potatoes,
apples, onions, oranges, and lettuce, and we unearthed some very
interesting details.
One of the large Philadelphia papers had promised us to print
everything that we could gather together, and they did print for
several weeks the results of our work. We had discovered that the
shippers were getting about $1.25 to $1.50 per hundred head of
lettuce, and at the same time in the open market they were selling
for from 25 to 30 cents a head. We just mentioned the fact of the
wholesale prices in this little box that we were allowed in the paper,
and in the next few days there was a remarkable drop. We had in91341— 22— vol 3-------1




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structed our club people to go to every market and ask why they
had made these enormous prices for lettuce. We began to think we
■were getting somewhere-----Representative S umners. Pardon me just a minute. I see you
have sufficiently introduced yourself. 1 ou had a conference with
Dr. King, I assume, and have in your mind the order in which vou
desire to present whatever you purpose to present to the commission.
Now, you may proceed in your own way.
Mrs. B oden. It seemed necessary, Mr. Chairman, to give a brief
summary of the foundation that has been laid in Philadelphia for
food work, and the same is true all over the country. The general
consuming public is the largest unorganized body in the world.
But we have as a nucleus for organization the Women’s Clubs in
the United States, with over 2,000,000 members trained to work, and
with departments committed to the study of food, its production,
distribution, and consumption. Two million women are being or­
ganized by the Catholic Church into a national council, and all over
the country women are being organized politically with the definite
policy that they will stand for the things that are necessary to make
their homes better.
And one of the greatest things is to have better food at lower
prices. That is what we need all through the country, and I am
sure that this commission can go a long way toward giving that to us.
Representative S umners . Just tell us how we can do it.
Mrs. B oden. I would not attempt to do that. However, I have
thought for a long time that if the food supply of the country were
offered to the consumers with one iota of the principles on which
any great business is conducted, neither the producer nor the con­
sumer would suffer so constantly from overproduction with its sub­
sequent loss, nor underproduction with its following of high prices.
The merchant creates his market by advertising, and thus sells the
goods he must move for profit. I f the producers of food? especially
those dealing in perishable foods, would pursue this policy toward
their consuming public I believe there be would immediate relief
in markets and prices.
Or, if the Department of Agriculture would cooperate with the
marketing bureaus of the different States of the Union, and adver­
tise when they have a quantity of goods on the market, I believe we.
could move those goods better than we do.
Last year the apple crop was tremendous, but what did those
growers and shippers get? They lost heavily on it, because by the
time they paid the transportation charges they had to put their
apples in storage because there were too many to move, and after
they paid the storage charges they were a dead loss. But if there
had been a concerted movement all through the country to put be­
fore the people the fact that there were millions of apples and that
barrels or apples could be purchased at a certain price and stored
for the winter I believe those apples could have been moved. But
nobody knew about that. We knew about it, because we were in­
vestigating through the commission merchants. Don’t you think
there is reason in that ?
Representative S umners. You ask me a question. My own
notion has been all the time, with regard to the economical distribu­




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tion of agricultural commodities, that we must first standardize so
that the people who live in Philadelphia, for instance, when they
read about apples of a certain grade for sale they will know what
is meant. Then after we have standardized them it is necessary to
establish a place where there can be acquired information as to
where apples may be bought, and get in trading contact with them
and be assured that there will be integrity in the transaction and
that exactly what is purchased will be received.
Mrs. B oden. I understand that exactly. But now the Department
of Agriculture stands back of a, great deal of home work. They
have a big home extension department. Our State college has a big
home extension department. Now, why in the world can they not
bring the farmer and consumer together?
Representative S umners. I agree with you absolutely. That is
the thing I have been trying to accomplish ever since 1 have been
in Congress.
Mrs. B oden. That is a thing I have been working on in Phila­
delphia. But you can not do it single handed. We have had the
cooperation of the New Jersey Bureau of Markets and the Pennsyl­
vania Bureau of Markets, but you see we have not the money to
carry it on, and we do not have the prestige.
Representative T en E yck . Is not this about what you would like
to have done: In the various large markets, in the thickly populated
districts, have an understanding, through the chambers of commerce
or the boards of trade, with the daily newspapers that they will
call to the attention of the public at large that at certain times,
when the peak of production has been reached in relation to the
various food products, when tomatoes are at the peak of production
and coming on to the market in great quantities, notice should be
given the public that such is the case in relation to tomatoes and that
then is the time to buy tomatoes to can ?
Mrs. B oden. I certainly do.
Representative T en E yck . And the same way with peas, the same
way with beans, the same way with all classes of food products; bring
that to the attention of the public at that particular time, when
things are produced abundantly, so that they would not only take
care of the overload but would get their produce at a lower price ?
Mrs. B oden. Exactly. Now, here is another thing. When Mr.
Wanamaker has too many shoes, what does he do ? He does not send
them to the roanufacturers3 and he does not dump them into the
Delaware River; he advertises a big sale of shoes. Why does not
the Department of Agriculture do that ?
Representative T en E yck . Let me say with regard to the Depart­
ment of Agriculture that it would be rather hard—and yet it could
be done— for the Department of Agriculture to watch out and keep
in mind the various communities and the peak of production in those
articular localities at the different times of the year. But that could
e done through the chambers of commerce and the organizations
that represent the people locally, and in cooperation with them,
through the medium of the daily papers, call to the people’s atten­
tion whenever there is an oversupply of any particular article, so
that the consumer could take advantage of it and at the same time
relieve the farmer of his overload.

E




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Mrs. B oden. That is what I mean.
It is not only a case of overproduction; it is a case of underproduc­
tion. For instance, when we have a shortage of potatoes, bring that
to the public’s notice and say, “ Please buy and use substitutes. Do
not buy potatoes; there are very few in the market, and you will
only force the price up if you buy them.” Don’t you see there ought
to be cooperation between the producer and the consumer? The rea­
son I brought in the food work of the Food Administration is to
show that there has been a wonderful foundation laid for cooperation
along that line.
Representative S umnehs. Y ou have made some study of conditions
in Philadelphia and the terminal markets and the questions o f
spread in distribution. I imagine if you will give us the result o f
that study it would, perhaps, be as valuable to the commission as
anything else you could tell us.
Mrs. B oden. O f course, I am very proud of Philadelphia, but I am
not proud of its terminal markets; and we ought to have the very
best food in the world. We are at the gateway. We have New
Jersey, Delaware, and Pennsylvania all at our front door. And do
you know what they do? They ship their goods to Baltimore or
!New York, and we do not get them, and yet we ought to have the
T
garden products of the most fertile part of the country. But we
can not take them in; we have not the accommodations for them.
We have a terminal market in Philadelphia which is very antiquated
and very insanitary.
Mind you, we have 1,800,000 population in Philadelphia. This
market handles from 80 to 95 per cent o f all the package goods that
come into that city, and it has one entrance for trucks. Conse­
quently, the trucks have to line up there all night, all around the
square, and they charge so much an hour; and by the time the last
truck gets into that market and loads you can imagine what the
costs are for that produce that is put on that truck.
They can unload from 75 to 200 cars there daily, but they are all
unloaded out in the open and all that stuff is put on the trucks, and
then it is carted down to the wharves and commission houses from
Thirty-second Street—the wharf is beyond Front Street. Then our
hucksters and food dealers go down to the wharves and stock up
there, and they bring that stuff back and sell it out to the people.
By that time, as you can imagine, there is a good deal added to
the original wholesale cost.
The citrus fruits are brought into the Pennsylvania docks and
the B. & O. docks at Pier 12, along the river. We have a belt line,
but the belt line is never operated. There is some undercurrent
that, o f course, we do not go into very much. Consequently, when
a carload comes in at the Pennsylvania Railroad and they want to
get it up to the B. & O., which is about six blocks, they send it out
of the city and switch it onto the other tracks and bring it in again,
and that adds about 20 per cent to the cost of the original product.
But, of course, it saves using the belt line.
Representative T en E t c k . Have you ever explained this to Mr. J.
Hampton Moore?
Mrs. B oden. Yes; Mr. Moore has had this brought before him
several times. But we had a little difficulty before Mr. Moore’s




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incumbency with the marketing situation in Philadelphia, and it
did not pan out just as we hoped it would do. I shall not go into
that story, but Mr. Moore is apparently afraid to touch the market­
ing situation. He is like the boy with the hornet, you know; he does
not know whether to take it or not.
What we really want in Philadelphia is sufficient terminals for
our food to do away with the middleman. I f we could have a
big terminal somewhere on the water front where we could have a
capacity of 500 cars a day and have big refrigerating plants of our
own, where goods could be stored without charge, and have a market
so that the people could come and buy right there, we would have
the finest food supply in the country, and at the lowest prices.
Representative T en E tck . Are you recommending community
storehouses ?
Mrs. B o d e n . Well, I have not quite gotten to that point. I do not
quite know whether I am or not. We wanted to do that, and several
communities in the city—blocks—have gotten together and gone
down and bought, say, a whole side of meat, or a whole carload of
thills. They have tried that in the university, through the Frank­
lin Cooperative Society, but, of course, they have to have a member­
ship to do it.
Representative T en E yc k . I do not mean in that sense of small
communities in the city. My question related to a large municipal
warehouse where these things could be placed and thereby held in
good condition for a small charge.
Mrs. B oden. Yes; that is'what we want. But such storehouses
would open up the subject of the food supply of the city, and we
feel that Mayor Moore has his own reasons for keeping that quiet.
We are talking about entertaining the world in 1926. How can
we do it? We have not enough food for our own people. We can
not possibly supply food even for what we have.
Representative T en E ycic. It would be very interesting if you
would tell us about some of the differences in prices that you found
at the time you made your investigation.
Mrs. B oden. We investigated the California products. We in­
vestigated the California lettuce, which is a great luxury and which
we all like very much, and we found that California lettuce was
selling for anywhere from $2.50 to $3.50 a crate. Now, a crate has
100 heads in it, and that would make the price anywhere from
to
3i cents a head. It was selling in the open market at that time at
30 cents a head. On investigation we found that those California
shippers had to pay $2.65 freight charges on that lettuce, and they
were losing money; they were not making a cent on it.
Representative Ten E yck . They were paying just about as much as
they got for it?

Mrs. B oden. Just about as much in some instances, and in some
instances a little less than what they got for a whole crate. When
we asked the newspapers to give publicity to these rates they politely
said to us, “ We have no more space in the paper.”
Representative T en E yck . What did the consumer have to pay
for that?
Mrs. B oden. The consumer had to pay from 25 to 30 cents a
head for that same lettuce.




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Representative T en E yck . Then the big spread was not in the
freight ?
Mrs. B oden. Not at all.
Representative T en E yck . It was in the case of the retailer or
the distributor after it had reached the city of Philadelphia?
Mrs. B oden. Exactly so. What I want to make very clear is
the fact that after our trucks reach Philadelphia they go through
so many hands and they make so many trips back and forth there
across the city, and they are loaded and unloaded, and everybody
takes a turn at adding a little bit here and adding a little there, so
that by the time it gets to the retailer it is not the fact that the
retailer has taken out so much, but every middleman has taken his
profit. Really, the retailer is not getting an exorbitant price.
Representative S umners . Did you trace that shipment of lettuce
through all of its movements to the consumer?
Mrs. B oden. N o; we traced it to the commission houses.
Representative S umnebs . And you do not know what the com­
mission houses sold it for?
Mrs. B orden. N o; we only know what the commission houses paid
for it. They paid the wholesale price for it. It is the same way
with oranges; we traced those to the commission houses.
Representative S umners. How many different hands do these
commodities pass through before they get to the retailer?
Mrs. B oden. They should not pass through a jgreat many differ­
ent hands. Of course, they come to the commission houses-----Representative S umners . Let us take this lettuce. That comes
to the commission houses?
Mrs. B oden. That comes to the commission houses. Then some­
body buys that lettuce.
Representative S umners . A t what price?
Mrs. B oden. They buy that lettuce for about $1.50 a hundred—
not of the California, but of the home grown.
Representative S umners. I know, but let us trace this particular
shipment. How much do they pay for that?
Mrs. B oden. $3.50 a hundred.
Representative S umners. That is 3| cents a head. That is what
the California growers got?
Mrs. B oden. That is what the California grower got.
Representative S umners . And the consumer paid from 25 to 30
cents ?
Mrs. B oden. From 25 to 30 cents a head. The commission men
are supposed to get 10 per cent on their sales. That is what they
claim they get? and I do not believe they get any more than that.
Representative S itmners. Did that liigh price for lettuce tend to
deny the use of lettuce to the average family and to reduce its
consumption ?
Mrs. B o d e n . Yes, I think it did. But, you know, there are lots
of people that will pay any price, and like to tell how much they
had a very interesting experience during the Food Adminis­
tration that I wanted to speak-about, because it shows how we can
educate our women in Philadelphia. We undertook to raise a food
army. We used the city wards and put a so-called woman lieutenant




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At the head of each ward. Then we used the voting divisions o f the
city and put the women sergeants at the head of them. Then we
had every block organized, and one woman on each block was made
a corporal, and she was responsible for all the information dis­
seminated to that block. Once a week we would have this matter
printed and handed to the block corporal, and she would go to every
Louse and distribute it. In that way we kept in touch with almost
every family as to the foods that were available, the foods that
should be served, the foods that should be substituted, and the
different requirements of the occasion. And they responded, because
every woman is o f the firm conviction that she practically helped to
win that war by conserving food. It was a splendid thing, and I
know they could do it again.
The C h airm an . Do you think it could be done in the absence o f
the patriotic impulse that we had at that time?

Mrs. B oden. I do not think it could be done with the same snap,
but I think that an educational campaign could be carried on among
the housewives. I think they have had a demonstration, and they
would respond if the Government would put its seal on it. You see
they have gotten in the habit of looking for advice, and they are
concerned all the time with the facts that they must buy for their
families.
The C h aibm an . I am afraid, as far as I am concerned, that we
have not discovered anything we could advise them to do, except to
quit buying.
Mrs. B oden. That would not be a very good thing, would it ? That
would be hard on the farmers.
The C h aibm an . It would be eventually.
Mrs. B oden. We are afraid we would have to advise them to put a
little truck patch in their back yards after we heard of the trans­
portation difficulties.
The C h a ib m a n . Has any effort ever been made in Philadelphia to
discuss through your organizations the retail marketing question?
Mrs. B oden. Oh, yes; indeed. We have had a number of meetings.
We have had retailers, and retailers are most willing to cooperate
with us, -with only one or two exceptions. We have had the meat
men come, and they have given us full information on the meat and
the different kinds of meat. We had a campaign on that to show
the different kinds of cattle, large and small cattle, and differences
between the two, and how some stores could sell meat at a relatively
lower price—naturally it was not the same class of meat. We had
that explained very thoroughly.
The C h airm an . Y ou can get information enough, but did you get
any results in the way of getting retail prices somewhat nearer the
wholesale prices?
Mrs. B oden. When we investigated the retail meat prices, we
found the retail meat butchers were practically, in some instances,
making less than 10 per cent on their prices.
The C h airm an . Well, who is making it?
Mrs. B oden. I do not know. I guess the packers are getting the
money, are they not?
The C hairman . Well, they say they are not. Everybody is pass­
ing the buck around here. We" are trying to find somebody who
knows where it is right now.




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Representative T en E yck . Do you know the packers are doing
business on from 1 to 2 cents turnover? That was brought out be­
fore another committee.
Mrs. B oden. I should not wonder at all.
Representative T en E yck . Of course they make 14 turnovers, but
that is only 28 cents. They are only making from 80 cents to a $1.50
on a steer, but they sell a great many steers. But if the individual
takes the profit on a steer he would get very little in a steak. It
would be so small that absolutely you could not find it in the steak.
Mrs. B oden. The trouble is that if the steer was all made of steaks
that would be a very different matter, but meat demands are for the
quick meats, for the chops and steaks, and the butchers have to
cnarge enough for the steak to pay for all the waste that is in the
rest of the carcass. They have gone over that with us over and over
again, and I really believe that if the public would only buy the
lower grade and use the cheaper cuts it would bring down these
high prices.
Representative T en E yck . I am not taking the side of the packers
or anyone else, except that we want to find out where the greatest
spread is, because you can always save the most out of the greatest
pile.
Mrs. B oden. That is right.
Representative T en E yck . Did you inquire as regards the price
that the packer sells his meat to the retail man, and then compare
that with the price that he purchased it at?
Mrs. B oden. Yes; we did. I can not give you the figures on that,
but I know we did.
The way those meat men sell meat in the city is this. The small
corner grocer only buys part of the animal; he will buy the quarter
that is most called for, and he has to pay apparently for the whole
steer, and in order to cover his loss he has to sell those popular cuts
at an abnormal price, because the other cuts are not called for at all.
But there is another matter, as I say, about educating the con­
suming public; if they would only be taught to buy the cheaper cuts
of meat it would bring down the whole price of the meat. You can
see that.
Representative T en E yck . I appreciate that. And what I am
endeavoring to ascertain is where this great spread lies, and the
cause.
Mrs. B oden. I believe the cause is the demand for just certain cuts
out of the animal, and that forces the whole price up.
Representative T en E yck . What the committee wants to know is
how to take care of that. You must remember we are legislating
from a national standpoint, and the States, under our Constitution,
would object to our coming in and regulating local industries.
Mrs. B oden. You could not, really.
Representative T en E y c k . Now, that is a question that the bureaus
of markets in the States would have to take up, and I believe that
they, in turn, would have to appeal to the cities and the communities
to cooperate with them to accomplish what you desire.
Mrs. B oden. I think so.
The C hairman . Did you go into the relative price of hind-quarter
meat and fore-quarter meat? Was there really any difference in the
price ?



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Mrs. B oden. Y es: there was a difference in price.
The C hairman . Considering the quantity o i meat and the amount

of bones and all that?
Mrs. B oden. Yes; there was a difference in price.
The Ch airm an . You really think there was a difference in price
in favor of front-quarter meat ?
Mrs. B oden. Oh, yes; a great difference in favor of front-quarter
meat.
The Ch airm an . I had the impression that there was a great deal
of bnnk about that.
Mrs. B oden. That is perfectly true. We investigated that.
You see, we have different grades of meat; that is another thing. I
do not see how you could standardize food in a city, because there are
those differences. We have city-dressed meat—that is absolutely the
best. We have the small cattle that are cheaper. That is very good,
but not as good as our city-dressed meat. Then we have the big meat
butchers in the terminal' market, each selling the very best prime
beef, and people go there and they know what they are getting. The
price ranges all the way from the little meat shop out in West Phila­
delphia that advertises sales o f meat at 15 and 18 cents a pound—but
they are selling an inferior grade of cattle. 'Yet the meat is good,
and they are really making the same profit as the big men who cnarge
the bigger prices, because they pay a great deal less for their meat.
You can not set a standard for anything like that, but you have got
to educate the people to know what they are getting. That is why I
am in favor of getting right in touch with the consumer to give them
an educational campaign.
The C h a i r m a n . I was unfortunate in not hearing the first part of
your statement, so I do not know whether you have covered what I
have in mind or not. Is it your judgment tnat the way to get at the
question o f retail prices is through organizations of the consumers?
Mrs. B o d e n . Yes; that is my judgment. I do not think you could
get at it any other way. How could you? How can you go to the
retailer and try to standardize their products and try to fix the prices
of what they sell ? Of course I would like to see the public educated
up to read the market reports, but they do not They do not know
what it means. But if there was a small article in the paper every
Friday, the day before marketing day, saying that tomatoes are sell­
ing at so much a basket wholesale, and butter is ranging so and so,
and eggs can be bought for so and so, and then they will go to their
grocers and say, “ How dare you charge me 60 cents a dozen for
eggs when they are selling for 25 cents wholesale ” ? That is a matter
of education, and you can not get food prices down to any sort
of sensible level until you educate the people how to buy food.
Now, in department stores you do not see the women getting fooled,
because they have plenty of chance to go shopping, and they know
the grade of goods, and they go from one store to another and ex­
amine things and learn prices. Women are the very best shoppers in
the country, but you see they have not any chance to do that in food.
They have no way of finding out what tliey are getting, or anything
about it.
The C h a i r m a n . I imagine as far as food is concerned, most of
them buy what they want without any reference to what is in the
market. *



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Mrs. B oden. Y ou would be surprised to learn the facts. W e
thought that too. Our picture of the situation was that most o f
the women sit in a comfortable sitting room and take the receiver
off the hook and phone to the butcher to send around so and so.
When we investigated that during the war we found that only 15
per cent of all the housewives in Philadelphia had telephones. There
you have an enormous army of people that have to go out with their
own market baskets and buy the food.
The C hairman . Did you get any information about what propor­
tion of those people buy at the corner grocery ?
Mrs. B oden. Almost all of them; a large percentage of them.
The C hairman . D o you have large retail markets in Philadelphia,
such as we have in Washington?
Mrs. B oden. Yes—I won’t say large ones. Our market at the
Beading Terminal is our big market.
The C hairman . And that is wholesale?
Mrs. B oden. Retail and wholesale, but mostly retail. People come
from all around the surrounding country to that market. They have
the very best food there, and the very highest prices.
The C hairman . The prices there are higher than in other places?
Mrs. B oden. Higher than in other places.
The C hairman . And that, you think, is due to the better quality
of the food?
Mrs. B oden. The better quality of the food. There are certain
stalls where meats are sold at lower prices during certain times
o f the day, and you can go to them and procure your food cheaper,
after the rush is over, say, betweeen 2 and 5 o’clock, and you will see
women coming in there and getting their food at lower prices.
We had the old Second Street Market in the southern part of the
city, and we have a fairly good farmers’ market in West Philadel­
phia.
The C hairman . That is a vegetable market?
Mrs. B oden. A vegetable and meat market, and chickens and dairy
produce.
The C hairman . But the relative proportion of the purchases that
are made on these markets is quite small, I take it ?
Mrs. B oden. Yes. Most of our food purchases, I would say, would
be made at what are sometimes called specialty shops, shops that
sell meat alone, or vegetables alone. In North Philadelphia they have
very fine shops with good food and low prices. That almost amounts
to a community section, because the Logan people have recently ac­
quired their homes, and they demand good food at low prices, and
are getting it.
The C hairman . One of the difficulties of the situation seems to be
that there is no uniformity about it. not even in the same city or next
door. You have one section of the city where there is a corner
grocery stock, and that is all there is, and you have another city
where they have community stores of all kinds, grocery stores, drug
stores, hardware stores, and the complete community outfit.
Mrs. B oden. The stores size up the community. For instance, I
live in West Philadelphia, and I do mv marketing at Fortieth and
Market Streets. I go there, and I say. “ How is it you are selling
chickens so high? ” And they will say, “ Well, if you want a cheaper




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grade you will have to go on out to Fifty-second Street; they have
a demand for them out there, but we keep the best here.” You see,
it is the law of demand and supply.
Representative T en E t c k . I s that really a fact, that the other
community does not get just as good food? We had a gentleman
from California here the other day that sells a great deal of the
citrus fruit in the entire country, in New York City, and gave us
a demonstration, that oranges that sold for a certain price in the
terminal market at auction were sold in some stores in New York
City at a dollar a dozen, and sold for 60 cents per dozen over on
the East Side. The people who live over there demanded the best
fruit that can be obtained, and know what they are buying, because
they are composed of people who eat a great deal of iruit-----Sirs. B oden. And they came from Italy.
Representative T en E t c k . They came from Italy—they have the
same oranges, the same class and the same grade, all out of the same
cargo, and they only pay 60 cents a dozen.
Mrs. B oden* O f course, that is perfectly true. Don’t you see, it
.
is because those people are educated in oranges, and that is what I
say. I f our consumers were educated and knew what they were
getting they would fix their own prices; and they would get it, too,
because they get what they ask for.
Another thing about California. Here is California with her
“ Sun K ist” oranges. They are known all over the world, and why?
Because they spend money on publicity. I f our farmers would do
the same with their apples and potatoes and tomatoes and water­
melons, they would not have a bit of trouble in disposing of them.
Representative T en E t c k . Why can not the women in Philadel­
phia start a good campaign on that?
Mrs. B oden. The Philadelphia club women have had food cam­
paigns and food demonstrations, but they are necessarily limited to
groups and localities. They will indorse to their utmost a publicity
and educational campaign through the newspapers authorized by
the Department of Agriculture through its State Bureaus of Mar­
kets.
The C h airm an . Did you make any investigation of the actual
machinery of distribution in Philadelphia?
Mrs. B oden. Well, no; I can not say that I did. The commission
men mainly come into the terminal markets out there at Thirtieth
and Chestnut and gather up the food as best they can and take it
down to the wharves and sell to the retail trade. Small hucksters
come down there and buy and hawk it through the city streets; that
is, the perishable foods. And, of course, we have the curb markets.
We thought that was going to be wonderful. We thought at last
we were getting the farmer and consumer in touch with each other.
We established these curb markets and fanners came in, and we
found they were just the old hucksters of the city dressed up. They
came in there with a nice farm price for their products, and they
carted them all the way from the receiving terminal and back again
and hawked them all through the city.
The C hairm an . Why did not the farmers come in ?
Mrs. B oden. The farmers could not spare the time.
Representative T en E t c k . Don’t you license your hucksters in
Philadelphia?



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Mrs. B oden. Indeed we do.
Representative T en E yck . Under the law they ought to have a
sign on their wagons that they are hucksters.
Mrs. B oden. I know, but they did not display them.
Representative T en E yck . Well, I would suggest that you take
that up with Mayor Moore again.
Mrs. B oden. W e gave that up in despair.
Representative S umners . Do you find any indisposition on the
part of the newspapers to advertise these markets of yours which
compete with their regular advertisers?
Mrs. B oden. Yes; the newspapers were not interested.
Representative S umners . You do not have many people up there
in Philadelphia, except yourselves, who are enthusiastic about this
movement?
Mrs. B oden. Not a great many, except, as I say, the women con­
sumers, who will stand Dy us if we put on a campaign for them. But
we must have more than ourselves back of it.
Representative T en E yck . H ow do you think this committee could
assist you ?
Mrs. B oden. It seems to me that if the commission would advise
the bureau of markets in the different States, as I have said, to make
public the different stocks in the market, when there is plenty and
when there is scarcity, and educate the people to looking in the news­
papers for the official'report. I f you only issue it once in a while,
it does not mean anything; but if they look there every Friday
morning for a bulletin from the marketing bureau of their own
State, even if it is just a 2-inch square in tne paper, I believe our
housewives would expect that and would make their purchases accord­
ingly. Have it signed “ Bureau of Markets.” Then, you see, there
is no feeling about anything. The Pennsylvania bureau of markets
is under the care of a most able man, Mr. Rasmussen, and we would
hnve authority back of us.
Senator C apper. What information would you have carried in that
bulletin ?
Mrs. B oden. We would like to have marketing news every week,
even if it is just one article of information. For instance, it appears
that watermelons will be plentiful. At the summer resorts in New
Jersey they are keeping up the prices and charging from 80 cents to
$1 apiece. In the city of Philadelphia they can be bought for a
uarter of a dollar or less, and we shall soon hear that they are a
ead loss to the farmer, because the market is overstocked. There is
too great a discrepancy in prices.
The Jersey farmers, for instance, are charging 70 cents a dozen for
eggs, and you can buy them for a great deal less in the city.
Representative T en E yck . I might say for your information at this
time of the year the farmers get very few eggs.
Mrs. B oden. That is true.
Representative T en E yck . Those are storage eggs?
Mrs. B oden. They are fresh farm eggs. 1 was talking yesterday
with a friend of mine from York, Pa. You know, it is nice to have
a hobby, because you have always something to talk about, so I imme­
diately asked her what she was paying for eggs, and she said, “ Oh,
eggs are very high up in York.” “ Are they? ” I said. “ How much

a




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do you pay?” She said, “ Thirty-seven cents a dozen.” “ Well,” I
said, “ you have nothing on New Jersey.”
In the suggested weekly bulletin I would like to have some infor­
mation that the housewife could go by, because I know if she would
go to the stores and say, “ I have the authority of the Bureau of
Markets that such and such a price is a fair price for this commodity
and I refuse to pay any more,” we would soon be able to keep the
prices where they belong.
Representative M ills . What is a fair price?
Mrs. B oden. In our fair price committee we tried to have a spread
of 20 per cent, or 30 per cent up in a very expensive locality.
Representative M ills. For the retailer?
Mrs. B oden. For the retailer.
Representative M ills . How much are you going to figure it for
the commission merchant and for the wholesaler? What would be
a fair price, I mean ?
Mrs. B oden. I think the bureau ought to fix a fair price. Take
eggs, for instance. I f eggs are worth, say, 30 cents a dozen whole­
sale, it seems to me they would have authority to say that 30 per
cent increase is a fair price. Don’t you think so ?
Representative M ills. N o ; I should think if you had a market
bulletin that published the price every day you would probably have
gone as far as you could.
Mrs. B oden. O f course, you have to know the grades you are get­
ting. But they publish the wholesale prices in the back of the paper
every day.
Representative M ills. I know they do, and so they know every
day what the wholesale prices are. I do not see how you can con­
trol the retailer, because obviously what is a fair price for a retailer
in one section of the city is not a fair price for a retailer in another
section o f the city.
Mrs. B oden. Iion’t you think if we gave the information to the
consumer that such and such a price, with a certain percentage
added for overhead, was a fair price for her to pay, then it would
be up to her if she wanted to pay a fancy price?
Representative M ills. What percentage would you add for the
retailer? There is no fixed percentage, is there?
Mrs. B oden. In our fair-price work in Philadelphia we tried to
fix that.
Representative M ills . But, obviously, a retailer who owns a shop
in a section of the city where rents are low has a much lower over­
head.
Mrs. B oden. That is what we did; we gave them 20 per cent over­
head where the rents were low. I f they paid 30 cents a dozen for
eggs and they had an exclusive shop in an exclusive section of the
city we were willing to stand by the 30 per cent increase in their
pnces. In a cheaper part of the city it was 20 per cent for overhead.
Representative M ills . Well, don’t you think, in the long run, if
you are going to say that 30 per cent profit is a fair profit for a
retailer, that will adjust itself, with the competition there is?
Mrs. B oden. It has not done so.
Representative M ills . Well, now, a curious thing is this. This
gentleman who is at the head of the California Fruit Exchange and




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who has 20 years’ experience back of him—they have investigated
retail prices very carefully—showed that the retail price followed
the wholesale price with absolute accuracy, that the curve was iden­
tical over a period of, I think he said, 15 years, and that the retail
profit was fairlv constant, varying between 24 and 29 per cent.
Mrs. B oden. Mr. Ten Eyck has just said that in New York the
California oranges were selling in one district for a dollar and in
another district, exactly the same oranges, for 60 cents.
Representative M ills. Yes; of course. I f you buy on Fifth Avenue
and buy on Tenth Avenue there is a very big difference. But they
were speaking of average prices.
The C hairman . But that would be true only, I imagine, if you
took a very large number of transactions. Of course, the tendency,
if you took a large number of transactions, would be for the curve
to come to an apparently common basis.
Mrs. B oden. I see that.
The C hairman . I think that if you took a single article and fol­
lowed it over a long period, you would find a considerable fluctua­
tion in the margin between retail and wholesale prices. For instance,
you could not take the statistics upon wholesale and retail prices now,
as compared with 1913; the margin between the wholesale and retail
prices has not dropped in the same radio as the wholesale price has
dropped.
Representative M ills . I know, but you will find that, except in
abnormal periods, the retail prices will follow the wholesale prices,
only they will lag somewhat behind. In normal times I do not know
what that period would be; perhaps a month or two.
Representative T en E t c k . I wonder how the efficiency of the
housewife in her profession to-day compares with the efficiency of
the housewife 20 years ago?
Mrs. B oden. It is not at all the same. You can not contrast them.
Let us take a longer time than that; let us take our grandmother’s
times. They did everything in their own homes. They cured their
meat-----Representative T en E t c k . But they had to purchase it.
Mrs. B oden. They thought $2 a week to their cook was a large
T
wage, and they supplied her with all her clothes, and pensioned her
off when she got too old to work. Now, what we have come to in the
city is this—the young women of the city are almost without ex­
ception self-supporting girls. They are all in industry: they have
no chance to secure any education as to home making. They marry
and go to housekeeping, and they do not know one blessed thing
about it. They go out, because they have been used to going out,
and they rush out to the movies, they rush out shopping, and they
only have time to stop at the delicatessen shop at the corner and buy
something, and they rush home and put it on the table for dinner,
and that is all they know about food distribution and consumption.
The Department of Agriculture will furnish them bulletins on house­
keeping, but they do not know enough to ask for them. Once in a
while I see in the Sunday paper a very glowing account of what the
Department of Agriculture will do for the women of the country i f
they ask for it, but these bulletins should be in every home or given
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Representative S umners. The Department of Agriculture can not
do the outside work and the inside work, too.
Mrs. B oden. I know it, but I am begging you all to advertise. I am
strong for publicity.
Representative S umnebs. Take the present situation: You can read
in the morning paper, as Mr. Mills suggested a moment ago, with ref­
erence to the wnolesale prices. Then you go down to the store and
see what the retail prices are. What are you going to do about it?
What good is it going to do you to have from a governmental agency
knowledge of wholesale prices that anybody can acquire by reading
the paper?
Mrs. B oden. It is not going to do one person a bit o f good, but if
that one person is multiplied by a thousand-----Representative M ills. Well, she goes to her grocery, and she says,
“ This is not a fair price.” He says, “ I am sorry, but that is the price
I have to charge to live.” She goes into the next grocery and finds
the same prices. She may go two or three blocks; but by the time she
has gone two or three blocks and finds they are all selling at the same
price, she says, “ Well, that is interesting, but it does not get me
anywhere.”
Mrs. B oden. More than one woman reads the newspaper. Sup­
pose a thousand women in West Philadelphia go to their stores and
say, “ How dare you charge me 25 cents a head for this lettuce when
you are only paying 5 cents for it?” They say, “ Well, we can not sell
it for any less.” Then another thousand women come and say the
same thing. The retail dealers say, “ We are sorry, but we can not
sell it for any less.” In the same day two or three hundred more
women come m, and then the dealers say, “Well, we will see what w©
can do about it.”
Representative M ills. I f they have somewhere else to go. But if
they have not—if that is the retail price for that day, generally speak­
ing—they are helpless. I f it is away above a proper margin of
profit then the fellow around the corner is going to cut the price, be­
cause I do not know any keener competition than among the small
retailers.
Mrs. B oden. Don’t you know what would happen? All those
women who had read that bulletin would say, “We do not want any
lettuce to-day; we really do not care for it, and we won’t buy it until
it comes to a decent price.
Representative M ills. I admit if you have a buyers’ strike on any
article the price will come down.
Mrs. B oden. We do not want that. We do not want to put any­
thing like that before the public, but we want them educated to intel­
ligent buying.
Representative M ills. Well, I think you are right. I think you
ought to educate people to intelligent buying, but it is a very long,
slow process.
Mrs. B oden. That would have been true five years ago, but since
then our women have been trained to organized effort and to the use
and conservation of food. I feel sure that the women in every State
would respond to a central campaign to eliminate as far as possible
the middleman and bring the consuming housewife in touch with
the producer of perishable food. In Philadelphia we have an or­




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ganization of wealthy society women, the Emergency Aid. They
are vitally interested in food prices. The club women are trained
to study economic values. The vast majority of housewives, those in
our city, who live in rows of two-storv red brick houses, and who
belong to no organization, can be reached and influenced by news­
paper publicity and by an educational campaign which coula be put
on in the motion-picture houses, authorized by the Department of
Agriculture in cooperation with the State marketing bureaus, the
State granges, and the home-extension department of our State
colleges.
I may add, by way of example, that the coal dealers in Philadel­
phia are putting on a fine moving picture depicting all the processes
by which coal is brought from the mine to your front cellar window.
Representative M ills. Have you ever been able to see in Philadel­
phia that there was very great interest in the establishment of a free
marketing system?
Mrs. B oden. We have held meetings, we have been to the mayor’s
office-----Representative M ills. But have you got anywhere?
Mrs. B oden. No; we have not.
Representative M ills. Exactly; and why is that? Because you can
not get the general public interested. The same is true in New York
City. The situation is perfectly well recognized, but the public is
absolutely indifferent.
Mrs. B oden. You know what the public is in Philadelphia?
Representative M ills. No; but I know the public in New York is.
Mrs. B oden. But we do not call them the public; we call it the
Pennsylvania Railroad in Philadelphia.
Representative M ills. Well, in New York I think all the rail­
roads would be very glad if you gave them free terminal facilities.
Mrs. B oden. But you have wonderful markets in New York. You
are noted for your markets.
Representative M ills. I do not know where they are.
Mrs. B oden. You have eight times as many people in New York as
we have in Philadelphia.
Representative M ills. Yes; and we have not got a single real ter
minal market.
Mrs. B oden. But New York is so big you are not up against it the
way we are.
Representative M ills . I do not know why. The people in the
Bronx have to come down and buy at the Washington Market and
carry all their stuff up to The Bronx. There is no real distributing
point in The Bronx. It is all sold to the retailers. It is a bad situa­
tion, and yet we can not get the people interested.
Mrs. B oden. What we want most of all in Philadelphia is to have
a survey made. We want a market commission appointed, pref­
erably from the outside, absolutely free from political ties or special
interests control. We want to eliminate the middleman as far as
possible and deal direct with the producer. We want an efficient
plan whereby we can get better food at lower prices. WT
hen such a
plan is devised and meets the approval of such men as Dr. King,
we women are ready to get behind it and make it a political issue if
needs be for the good oi the city. But we must start with a survey.
Representative M ills. But you know what they will find.




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65

Mrs. 13oden. We want them to come out in print and tell us what
they find, and then tell us just what we need. Then it is up to us to
put it through. But we have not been able to get that survey
through. There was $10,000 appropriated for the survey. We went
to the mayor and we said, “ You know, we had $10,000 appropriated
by the last administration for a market survey, and we would like
to have that money put to that use.” The mayor said, “ Your money
has been spent long ago, and I do not know where I could turn to
get it again.” So there is our survey, but stilt we want it. We
thought perhaps the commission could make some recommendation
about that. I do not see why they should not have surveys made in
different cities, and then it would not hurt anybody^ feelings.
Don’t you think so ?
The C hairm an . The Department of Agriculture has made surveys,
and various organizations have made surveys. The trouble is, there
has nothing ever come of the survey.
Mrs. B oden. I can not answer for any other place but Philadelphia,
but we would like very much to have one.
The C hairm an . If there is nothing further, Mrs. Boden, we. are
very much obliged to you.
Mrs. B oden. I am very much obliged to you, Mr. Chairman, for
letting me have this opportunity to appear here.
The C hairm an . Judge Cowan, are you ready to enlighten the
committee now?
Mr. .Cow an . I am ready, but I do not know whether I am able to.
The C hairm an . Y ou may give your full name and the organiza­
tion you represent to the reporter.
STATEMENT OF MB. S. H. COWAN, ATTORNEY FOR THE AMERICAN
NATIONAL LIVE STOCK ASSOCIATION, AND THE NATIONAL LIVE­
STO SHIPPERS’ LEAGUE, FORT WORTH, TEX.
CK
Mr. C owan . My name is S. H. Cowan; I reside at Forth Worth,
Tex.; I am appearing here as attorney for the American Live Stock
Association and its constituent associations and other organizations—
the National Live Stock Shippers’ League. I am a citizen and farmer
of the State of Texas; a Democrat who voted the Republican ticket;
white; 62 years old.
Gentlemen o f the commission I hesitated to come here before the
commission because the breadth of your investigation is such that
there is hardly anything you will not hear. There is probably very
little of it you can consider. There is no proposition pending to
remedy such conditions as are alleged to exist or which you find to
exist. There is nothing to speak to, except to argue something. I
have done that so often and before so many committees of Congress
that I guess I have achieved about all the pleasure and reputation
that I can get out o f that sort of performance.
I have had in mind to endeavor to so state the situation about
which I wish to speak that you would understand it as it is. I do
not mean by that expression that this commission is not, to its own
belief, fully cognizant of the situation pertaining to live stock, of
which I most particularly speak, and that it likewise has a vast
fund of information upon the subject.
91341— 22— VOL 3------ 5




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I take it that many o f you are personally acquainted with the
business o f agriculture, which also includes live stock in our western
country, _using the term agriculture as a generic term. And the
two are inseparable, and the two are the basis and foundation of all
prosperity, o f the existence of civilization, even. It furnishes meat
and bread for this country and for the world, and when we need
them the best soldiers. And from my State more Democrats than
anywhere on earth: I am not bragging about that, either.
I have been to Washington many times in representing the Texas
Cattle Association; later the American Live Stock Association in
about all o f the measures that have been up for die regulation of
rates, transportation, and service, and in many other matters; have
appeared in the Department of Justice, and to some extent the
Interior Department and its various services. And at my advanced
age you can readily understand that I am pretty well acquainted
throughout the West.
I speak of the western district as being that territory lying west
Of Chicago and the Mississippi River, but including the State of
Illinois and the corn belt, that being the district, so far as trans­
portation is concerned, that is used tor statistical purposes by the
Interstate Commerce Commission, called the western district.
The interests of the people throughout that whole territory is each
inseparably wrapped up m the other; that interest applies just as
well to banking and merchandising as it does to anything else; as it
did apply in tne saloon in the days preceding the great drought ; it
now applies to prohibition as well, and moonshine and everything
else interchangeably interwoven together.
The conditions there are not describable by any particular lan­
guage ; the poverty of language forbids the use or language 'in set
form or phrase that will describe the condition in any particular
community. A few recitals would suffice. They have been made to
you in many cases, no doubt, though I do not recall having seen
that anyone has appeared particularly with respect to the live-stock
situation out there, although I assume a number of men have apeared who have gone into the subject. Am I correct about that?
ou have had witnesses here, I suppose, before the commission, or
persons who made statements to that effect. The word “ poverty”
does not exactly strike the right chord. The word “ bankrupt ” does
not do it, because the energy of the people there is so great that you
can not bankrupt them if you give them a chance. The fertility
of the soil, and the abundance of honest production is such that if
they havg an opportunity they can not be bankrupted. They will
come out. They will scratch out, and have done it many times in
local communities. Now it applies to the entire country.
The enormous expense laid is a burden upon the product of their
business, they being so remote from the places of consumption of
their product that they can not overcome it, because they.can not con­
trol it. After they have disposed of their products, they have noth­
ing left, and if they have nothing left to trade upon, they can not
continue in business. The cost of production of live stock has, in
many instances, been greater than the actual receipts at the market.
In many more instances it has been greater than the receipts less
the freight and expense of getting it to the market. The general con­

?




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dition to-day is that the live-stock interests of the West, including
the corn belt, can not make a farthing by the very best that they can
possibly do, to pay any return whatsoever upon their investment in
their lands. And for the most part, the farmer and the stockman
who employs men to carry on his business has nothing left after he
gets through paying the interest on the money he has to borrow and
his taxes, that would not allow for him any compensation other than
the fact that he makes a living at the place where he and his family
reside.
Such a condition has never existed before. It is universal, and the
people are calling as loud as they can speak, at least, upon Congress
for relief, and the question here, of course, ought to be: “ What re­
lief can we give? What is within the domain of the possibilities of
our cutting down the expenses?” We can not increase prices. Then,
the question is: “ What can we do with respect to cutting down ex­
penses? And what can we do to keep you going and give you an
opportunity to use your energy—a vast army of millions of people,
able, ready, and willing and with the opportunities at their doors
to continue in business to produce, to make, and to create the primary
wealth of the country ?”
Representative M i l l s . Let me ask you a question now: Is not the
crux of your present situation—I am not talking of future produc­
tion—the fact that your farmer has a commodity produced at a very
high price which he has not yet disposed of?
Mr. C o w a n . No, sir; not altogether. He has that, yes, so far as
he has retained it, that is true; and this year’s crop is in considerable
measure in that way, although not so much as it was in the pre­
ceding year.
Representative M i l l s . So far as your stockmen are concerned, is
that true to a great extent?

Mr. C o w a n . There are almost innumerable instances, each of
which is differentiated from the other. Some illustrations would
answer your question better. A man who is engaged in buying of
yearling steers in the trading country, and shipping them to Kansas
or Colorado, or some other place, speculates upon tnem, and he paid
a price for them when he bought them; if he bought them a year
ago he paid a price which he could not realize now. And in that
sense he has got a commodity on his hands which he can not market
presently, at least, to pay him any money, if he gets his money back
that he has expended in the process.
Representative M i l l s . Now, let us deal with that fellow before
we pass on to the next man. Is there anything that you can do for
that man?
Mr. C o w a n . Yes, sir.
Representative M i l l s . What is that?
Mr. C o w a n . Reduce his freight rate so that he will not have to
pay 75 per cent more than he had to pay previous to the war when
the same prices prevailed, about, as they do now.
Representative M i l l s . That, of course, will reduce his loss.
Mr. C o w a n . You asked me what I could do for him. That is what
I could do, to try to save him loss.
Representative M i l l s . I s there anythin# that will save him this
product—speaking of this particular product—even at a loss?




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Mr. C o w a n . Yes; furnish him the money so that he can hold his
cattle, and thus prevent his flooding the market with immature
cattle; help him to hold his cattle, and thus save himself and every­
body else from putting these young, immature cattle on the market
I f that is corrected, he will grow out of that condition, and he will
buy other cattle, and he will continue to grow out of it. I f he has
the credit, he can do it. Credit lies at the foundation of any pos­
sibility of increasing the prices, as we view it.
Representative S u m n e r s . Judge Cowan, this difficulty is not repre­
sented entirely by the decrease in the price of livestock that is ready
for market, but, as you have indicated, that difficulty is accentuated
by reason of the fact that young stuff and cheap stuff and immature
stuff is forced onto the market in competition with whatever stuff is
ready for the market.
Mr. C o w a n . Exactly; that is, the stuff that should not be marketed.
It should be held until it is mature and ready for the market. It
has always had its price fixed by the men who wanted to continue
to produce it so as ultimately to produce a marketable commodity.
Representative S u m n e r s . But you have a situation that not only
the man who is producing for the market, when he gets to market,
is confronted with a reduction in price, but the herds are being
destroyed by the condition that exists. They are being forced
on the market; and that, in turn, is destroying the man who has
something ready to sell.
Mr. C o w a n . That is, to a certain extent, true. Many of them will,
of course, continue in business; most of them will continue; those
most favorably circumstanced. Those not so favorably circum­
stanced, under the conditions, will go out of business.
Now, gentlemen, let me pause for a moment and state that it was
not my intention to go into that subject so much, because Mr. Mercer
will go into it. And at this point I want to say that Mr. Williams,
assisant secretary of the Texas and Southwestern Cattle Raisers’
Association, of Fort Worth, Tex., is here and has some information
that he will likewise desire to present for your consideration. Mr.
Mercer is also here and would like to be heard: and Mr. Williams
would like to present his matters after Mr. Mercer is through.
It was my intention to go into some of the other subjects; that is
to say, the matter of transportation and the things that Congress,
as it seems to us, must give consideration to; some of the things
that Congress must take action concerning, because they will not
right themselves. We are to-day, as I say, selling live stock on the
market and on the ranch at about prewar prices. We will not quibble
about the exact amount. I am speaking of cattle particularly, be­
cause that is the backbone of the business that I care to speak ahout.
I am not so familiar with sheep and hogs, but it was the case with
sheep, and also it was the case with hogs until the recent rise in the
market, beginning some four weeks ago.
Cattle move probably an average of three times before they reach
the block in the ordinary course of business. Some will move four
or five times. That is not open to controversy, and the general
opinion is, taking the whole situation, that they will move an average
of three times. For example, cattle bred in Texas may move to the
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it, and then you can take that and consider it. The Matador Cattle
Co., that has a large ranch in Motley County and down in that part
of Texas, purely a breeding range, raises a large number of cattle
on that range. And they have another range of about 217,000 acres
some 200 miles or more up into the Panhandle, near the line of Colo­
rado, in the northwestern corner of Texas. They will move young
cattle from the lower ranch up to the upper ranch, where they will
keep them until they are about 2 years ola. Then they have a ranch
in Montana, and they will send a lot of those cattle up to graze up
there on their ranch in Montana; and they also did have a ranch
in Canada, some years ago, over the line, and did move cattle there.
They also have a ranch in 'South Dakota, or did have one there for
many years; there was an interval when they did not. And they
move cattle from this lower Texas ranch up by the different steps,
as you see, to South Dakota and Montana and Canada—generally
to South Dakota, and also move some to Montana. When those
cattle are shipped out from South Dakota or Montana they will go
most uniformly to the Chicago market.
Now. at the Chicago market those cattle, although they are gras«fat cattle—they are well-bred Hereford cattle—a brand that is well
known, and they are desirable cattle to finish on corn; so that they
will meet a competitive market at Chicago, in those who desire to
buy cattle to feed, and some of them may be sold and may go out
again to be finished on corn. Now, there are many shipments from
Montana where the cattle are bought and carried out into the corn
belt, and elsewhere, where they are fattened. So that the animal,
from the time it is bred and is a calf up to the time that it reaches
the block may have been taken on four or five journeys on the rail­
road. It also involves a matter of feed. Mr. Campbell, of Wichita,
Kans., feeds cattle at Lajunta, and he ships cottonseed meal from
Oklahoma and Texas to feed his cattle. They will ship corn from
Kansas or Iowa to be fed to those cattle. They use sugar beet pulp,
if that is what they call it, and alfalfa meal, all of which involves
railroad rates. And all this material that is shipped in the form of
feed will eventullv be marketed in the form of beef. That is a
matter that is going on all the time. These cattle are shipped from
Texas to South Dakota and to Canada, and to Montana, and are
fattened, and are shipped to Chicago, and then sometimes from
Chicago out to be finished on corn, so that you can see that the mat­
ter of transportation is one of the most important matters to the
cattle raiser.
Now, these railroads are built up by the country that was devel­
oped out there by the cattle business and farming business, and they
even themselves bought stock and put into that country to help
develop the country. And after the country had settled up, and
the reclamation service was established, they put in alfalfa, and
alfalfa is a great product in that country; it is a great product
aside from tne irrigation districts, even m the State of Kansas.
It is very extensively grown there and in Nebraska, and elsewhere.
Proper uses were made of the products and the people knew what
they were doing, and the business was going on; there was a com­
plexity of business, and the people generally and the banks and the
railroads and everybody else were supported by that enormous




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business. For 25 years, or 30 years, or 40 years, while this country
was developing, people knew about what they could do; they knew
something about what the rates were costing, and then what margin
they would have to have to take care of this transportation. We
were going about upon the maximum at the time tne Government
took over the railroads. And those maximum rates were those that
were made bv the Interstate Commerce Commission, or were in­
dorsed by the Interstate Commerce Commission, all made to con­
form to competitive rates moving in similar territory, according to
the schedules that had been passed upon by the commission, and
all of wh;ch had been tried oilt in great detail before the commis­
sion and had received the consideration of the best taient of the
country, and the best judgment of the commission; and many of
them had been fought to the courts and sustained, as, for example,
the rates in the cattle raiser’s case. So that there was substantially
a standard of rates throughout that country. Business was going
upon that basis; all sorts of business.
I say that was a standard of rates, considered to be reasonable,
and about a certain general price was being paid for live stock for
some years, fluctuating a few cents a pound, according to circum­
stances. The country was prosperous, the railroads were prosper­
ous, and business was growing; everybody’s business was growing. I f
we could return to such a condition now the same thing must hap­
pen again, because the same causes that produced the condition
before are there now to produce1it again. But the difficulty that
stands in the way of returning to such conditions to-day is two­
fold ; one is the railroads feel that they can not put the rates down
so as to move the traffic and start up the business of the country
without bankruptcy; and the other is that they are not willing to
do it, having once seen these high rates written upon the paper.
As it is to-day, and was disclosed when we were trying a recent
case, there were’ 1,700 hogs that were hauled into the market at St.
Joseph in one day on Ford trailers; half of the sheep that are
shipped to Omaha in a 50-mile radius are moved to market on trucks
and trailers. People will not use the railroads; cattle, wherever it
is possible, are driven between pastures and ranges.
They put such high rates on hay and alfalfa as to absolutely tie
it up where it is raised and close up the alfalfa mills on their lines,
and in Idaho there are a million tons of alfalfa hay going to waste
simply because the people can not afford to move it on the railroads
to the available markets at the price.
There was an instance of one man in Nevada who shipped a car­
load of horses to Kansas City, and after he had shipped them and
sold them and paid the freight he was in debt $124. And then
they had to send them to the zoo and kill them for meat for the lions,
because there was no other use for them.
You can not ship cows that would make good canners because the
rates are so high that the cattle will not pay the rate, and the only
valuable by-product there was, or the most valuable by-product was
the hides, and now Congress in its great wisdom has put hides upon
the free list, so that hides are not worth anything. And I say, in
its great wisdom ” with several exclamation points. A a Democrat
ss
I voted for the protective tariff, and yet Congress in its great wis­
dom put hides on the free list.




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I was told, digressing, that some o f the Members of Congress had
concluded that that was a way to hit the packers, to put hides on
the free list. The only people who can import them in great quan­
tities and have the entire meat supply in their control, and yet they

to hit the packers.
think some
fut hides on the free list voted that way. TheI Lord forbid. of our
exas Congressmen, even,

These things that are staring the common people now in the face
and are bankrupting the people are the things they want to bring
before this committee. What I have stated in relation to the trans­
portation is the thing that pertains throughout the country. Why,
they don’t even ship the tags from the wool now, about 20 per cent on
a wool clip from the sheep. Talk about conservation of natural re­
sources about Washington here. I don’t know who this talk is by,
but I suppose some professors. They have to throw away the tags
they shear from the sheep because they will not pay the freight.

A man that is in the lumber business and worth some millions of
dollars has a large ranch in Texas, and he told me coming up to
Washington to see about something—I don’t know what—a tariff
on lumber, I reckon—I don’t know—this man had killed a steer on
his ranch in Texas, because that is about the cheapest meat they can
get—the steer dressed 700 pounds, and you gentlemen who know
about those things know that it must have been a good-sized steer.
And along with other hides they shipped this hide. As I say, it must
have been a large steer that dressed 700 pounds; it must have
weighed—I don’t know—I suppose 1,250 or 1,300 pounds. And what
do you think he got back as an emolument on that big steer hide?
The enormous sum of 56 cents from the hide of that big steer. And
the hides from that country, covering a large per cent of the by­
product o f the cattle, can not be sold, because they will not stand
the freight to be shipped.
Representative S u m n e r s . What did he get for the hide?
Mr. C o w a n . Fifty-six cents, and his name is Jim West, of Houston,
whom you know.
Representative S u m n e r s . I f he had had a tariff on that hide, it
would have paid him to raise that animal, do you think?
Mr. C o w a n . I f there was a tariff on hides, he could have got more
for it, and hides would be worth more generally. The Democrats
told me when I voted for Hancock that they were for a revenue
tariff. But afterwards they were not for a revenue tariff. That is
the reason I am for a tariff. They treated me like the Baptist Church
treats a member; they don’t turn a member out of the church; they
withdraw from him, and I guess that is what the Democratic Party
did to me.
This is just sound common sense; we can’t afford to put our
products in competition with the cheapest products in the world
while we pay union labor $5 or $6 a day for eight hours’ work, and
pay another man to watch him. That is a thing I will reach in a
minute.
Representative T e n E y c k . Mr. Cowan, can you tell how old tlioso
cattle were at the different shipments you spoke of?
Mr. C o w a n . Beef steers are often shipped at 2 years old. Wellmatured, fine-finished cattle are older; some are 5 or 6 years old.
Old cows, that have quit breeding, of course, they ship when they




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get fat. They ship them when they can; a man on a ranch knows
something about his business, and he will ship them for what he can
get, often. But now, after the hide is of no value, he can not afford
to ship them, because the hide was the most valuable by-product.
R e p r e s e n t a t iv e T e x E y c k . D o t h e y d o m u c h b u s in e s s in c a t t le a t
20 m o n th s?
Mr. C o w a n . Y o u mean to fatten?
Representative T e n E y c k . Yes.
Mr. C o w a n . Oh, yes; it depends upon a man’s business and the

condition of his ranch. If he has a crowded condition on his ranch
he will get rid of them and they will go on grass. Not all the
cattle that are shipped as feeders go on feed; some of them go on
grass. At Kansas City they have shipped out as high as 20 to 35
per cent of all the cattle sold there to go on grass, and at Fort Worth
it is as high as 40 per cent, and at Chicago 20 to 30 per cent at
times dependent on conditions.
Representative T e n E y c k . Somewhere I have heard or read that
a great deal of business was done in taking cattle off the range,
and keeping them for six months to fatten on grain.
Mr. C o w a n . There is absolutely no custom about that. Some
individual may conduct his business that way, but there is no custom
about that.
Representative T e n E y c k . Why I ask that is this: There has
been a compilation of costs, in five different States in the Union that
represented quite a number of thousands of cattle, and they appeared
to be about the age that these cattle were purchased, and about the
length of time, six months, for fattening, some on alfalfa and some
on grain, and the average weight of those cattle ran somewhere in
the neighborhood of a half ton, or a little more.
Mr. C o w e n . That would be about right, but I suppose they h a d
to take some uniform standard on which the business is based. Mr.
Mercer is a cattleman, and he will tell you all about that.
R e p r e s e n t a t iv e T e n E y c k . I u n d e r s t o o d y o u t o s a y fiv e o r s i x
y e a r s -------Mr. C o w a n

(interposing). They don’t keep them that long, except
by accident. Oftentimes steers will be marketed at 5 years old, but
the Kansas steers will come in, usually, in four years. Mr. Mercer
can tell you all about that, he was raised with cattle, as he appears.
Representative T e n E y c k . Can you tell us about what the cost i s
of raising these cattle for market, per hundred ?
Mr. C o w a n . Per hundred ?
Representative T e n E y c k . Have you any idea about that?
Mr. C o w a n . I would not attempt to answer that question, because
I would take too long a time to go into the details of the matter.
It is estimated, of course, according to circumstances and conditions.
Representative T e n E y c k . Coula you estimate that?
Mr. C o w a n . There is no such thing as raising a particular steer
until he gets to be marketable. There are cases, of course, where
circumstances and conditions will arise, but then the other fellow
will not have those conditions to put up with. It depends on such
a variety of conditions. Mr. Mercer can explain that to you, because
he has fattened cattle all his life, and run with them. I would
rather he would do that, because I do not want to cover his ground.




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But it costs more than the 5 cents a pound that they do get for
grass cattle in Texas to raise a steer under the cheapest conditions.
Representative T e n E y c k . How old is that steer that you are
talking of ?
Mr. C o w a n . A little over 4 years old, and pretty gootf grass
cattle.
Representative T e n E y c k . You do not think it costs more than
$o a hundred to raise a steer to 3 years old ?
Mr. C o w a n . Oh, yes, it will; if you estimate cost as other people
estimate cost.
Representative T e n E y c k . That is what I am getting at; you say
it would not cost over 5 cents ?
Mr. C o w e n . It d e p e n d s o n what y o u m e a n .
Representative T e n E y c k . Everything.
Mr. C o w a n . I f you mean everything; no 3-year-old steer could be
raised for 5 cents.
Representative T e n E y c k . Would it cost 10 cents?
Mr. C o w a n . No, sir; not under ordinary circumstances.
Representative T e n E y c k . You don’t think it would cost 10 cents
to raise a steer to 26 months old ?
Mr. C o w a n . A steer, if you mean a steer fattened for beef, yes;
probably more than that; but if you are talking about a grass-fat
steer, it will not. But he does not bring as much on the market. Of
course, there is a great detail in the matter of handling live stock, and
what it would cost to produce live stock, and the sort you are mar­
keting.
Representative T e n E y c k . Of course, we have to know the cost
before we know how much the fellow lost at the time he sold.
Mr. C o w a n . I f you let him tell it, he will be apt to tell how much
he lost. But you can’t figure how much it cost the fellow in losses.
It has been enormous. There is no question about that.
Now, coming to the question of transportation, I want to point
out to you gentlemen and I hope this commission will make some
recommendations on this all-important subject. I say all important,
because it goes to the whole question here. Wherever it cost a dollar
for freight for a period of 25 years previous to the war and for
transportation it costs now $1.75, as near as I can estimate it, and I
can estimate it very closely. We have had two advances, one of 25
per cent and another of 35 per cent, and another advance in the
charges for feeding and bedding the cars and disinfecting the cars,
and so on. I havent got the time to go into detail in that.
Representative T e n E y c k . That is the cost o f the f o u r shipments?
Mr. C o w a n . Yes. And the producer has paid the bill; where he
paid a dollar before, he now will pay $1.75.
Representative T e n E y c k . Per hundred ?
Mr. C o w a n . No; no matter whether it is per hundred or how. It
was a dollar before, and it is $1.75 now; in other words, it is an in­
crease of 75 per cent.
Representative T e n E y c k . Does that cover the entire turnover, or
the four toumovers on the cattle ?
Mr. C o w a n . That applies to the transportation. If you ship a
trainload of cattle from Amarillo to Wyoming, and it cost $2,000 pre­
viously, it will now cost you an increase of about 75 per cent; and if




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you could ship a trainload of cattle from Amarillo to Kansas for
$1,000 before, now it is about a 75 per cent increase. And then when
the producer moves these cattle to market, as he will later,' it will
cost Ijim another 75 per cent more. In other words, the entire
transportation costs have increased 75 per cent.
Now, let us see how that can be remedied. By the act of Con­
gress, section 15 (a) of the transportation act, there is a provision
for the Interstate Commerce Commission in the first place to value
the railroads for the purpose of rate making and to so adjust the
rates as to give 5| per cent to the roads on the aggregate of the roads
in a certain group.
In our country the group extends from the Mississippi to the
Rocky Mountain region and from Canada to the Gulf and the Rio
Grande. That is the largest and most important group, because o f
the vast territory and the vast proportion of cattle, hogs, and other
live stock there is in that territory. That is called the western group.
They increased the rates 35 per cent in that group to accomplish that
purpose. The Rocky Mountain and the Pacific group lies west o f
the Rocky Mountains, speaking roughly, and they increased the rates
25 per cent there. The territory east of the Mississippi River, they
increased the rates 40 per cent. The Railroad Administration had
increased those rates 25 per cent previously. That is for the pur­
pose of carrying out an arbitrary rule made for the Interstate Com­
merce Commission to follow.
Now, they fixed a value of $60,000 a mile in the Western group on
132,000 miles of railroads, first class. If you were to repeal every
law on the statute books; every regulating rule, and all the statutes
and turn the railroads loose and say, gentlemen, make all you can,
they can’t make 3 per cent on $60,000 a mile, because the business o f
this country can not stand it. The hay crop was nearly lost—it is
lost; almost two crops of hay have been cut in Kansas, and can not
be moved; but it had to be cut, and they can not afford to pay the
freight to ship it. I am a profiteer; I have a farm which almost
adjoins the city limits of Fort Worth. And I sell baled hay, and
short weight at that—it is supposed to have 50 pounds when it is
baled, but by the time the sun shines on it a little while it is about
47 pounds. I can sell that hay at a big price, because they can’t ship
in the hay from Oklahoma that ought to come in because the freight
alone is about $10.50 a ton. Why can I sell my hay at a higher price ?
Because the people do not have access to the market for hay, because
the hay men can not ship their hay. The rates are too high, and they
can not afford to ship it. That is the result of making up these
figures, and that is what it means.
Now, that law ought to be repealed, whether the Interstate Com­
merce Commission wants it repealed or not, because they can not ex­
ercise their judgment as to what a rate ought to be in the face of such
a rule as that.
Representative T e n E y c k . Can you raise alfalfa on your land?
Mr. C o w a n . No; it does not do so well on the black land there in
Texas. There are a few places where it will grow, but I guess
it is too hot. It will grow some on the limestone land, but it will
not do as well as it does in the lighter soils of Kansas and farther
north.




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Representative T e n E t c k . It is supposed to grow well on lime­
stone land.
Mr. C o w a n . It won’t do it with us. Sometimes you get a crop
started, but it gets spotted in a year or two, and it disappears in
about the third year. And then you would not want to grow it any­
how, because you can grow other feedstuffs so much better. But it
does grow in Texas where they irrigate, and there are places in Texas
where they do not irrigate that they grow it. But not to any con­
siderable extent. It does not do so well, and it is not a considerable
crop in Texas.
Now, going again to what ought to be done. The Interstate Com­
merce Commission fixed this valuation without rhyme or reason.

Now, I am not challenging the intelligence nor the honesty of the
commission, but I do challenge their judgment when they fix $60,000
per mile as the value. And they do not fix it by the mile; it is fixed
in a lump sum of $8,100,000,000 for the western district. They
took a number of the roads, the lines north of the Illinois River,
and took them out of the 35 per cent group, although they never
changed the valuation figures in either group at all. Neither did they
segregate as between the Mountain-Pacific group and the Western
group, as to how much value there was in the one or the other. But
taking the entire district, they said, If you add 25 per cent here
and 35 per cent here to the rates here they can operate, and they will
make so much money; but they did not do it, because the commission
could not make the traffic. The first item, I believe, in the receipt
for cooking a rabbit is to catch the rabbit.
The result was that they held every State in the West—and I be­
lieve every State in the Union—held every State up to that rule, and
declared that if you vary one jot or tittle from that rule, that is dis­
crimination, and we have jurisdiction over discrimination, and we
will, therefore, require the railroads to put in a certain advance in
percentage on the State rates, the same as we do on the interstate
rates. And that, notwithstanding the fact that the first section of
the act says that it shall not apply to transportation wholly within a
State. But they said that because it would show discrimination, it
was to applj'. It was like the doctor who said, “ I am not much of
a doctor for this case, but if you have anything that will throw this
man into fits. I am hell on fits.”
Now, gentlemen, we have to live under a Government that, in­
stead of protecting the people, is punishing the people. And it has
taken away from every W e s te r n State the right to fix rates within
the State on sand and. gravel that moves within the State for the
purpose of helping to make the public roads. And now they have to
close down their sand and gravel beds, because they can not afford to
move it. And now Mr. Kruttschnitt says that the public roads are
competing with the railroads, because the people are carrying their
goods on trucks alongside of the railroads. I heard him say it. And
these ships that carry food and product through the Panama Canal,
gentlemen, the shippers are making contracts on the Pacific coast
with these ships to carry the goods for them through the Panama
Canal. And let me tell you that once that business is established
there that the railroads will not get it back again.
That is what is happening in this whole vast area of this western
countiy, where these vast resources of the wealth of the people are



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that would produce to feed the people; and where the Government
has spent a hundred or two hundred million dollars in the develop­
ment of the Reclamation Service, and where the Government owns
land. The conditions have put the people where they can not make
their living upon that land, and the money is wasted. It has gone
to nothing.
They insist on keeping these rates up so high that we will not
move the traffic, and the country must go down, therefore, instead o f
up. And they must go down with it. But they can not see it. They
are like Paul, who once thought he was truly serving the Lord when
he was persecuting the Christians; if the scales could only fall from
the eyes of Israel, I think they could see.
Representative M i l l s . H o w do you account for the fact that traffic
moved for the first three months after these rates went into effect ?
Mr. C o w a n . Well, I haven’t exactly admitted it was a fact. I
haven’t the facts before me as to how the traffic did move. But I
can say this, that when we were selling hogs at 16 cents; when we
were selling cattle at 17 and 18 cents; when we were selling cotton
at 30 cents a pound; when we were selling corn for $1.75 a bushel it
was one thing to move traffic. It is another and a different thing
when these prices are reduced to prewar prices. And as prices went
down and the war business faded away, tne traffic ceased. Of course,
there is a direct relation between the cost of transporting the thing
and the value that you get out of it at the other end of the line, so
that to-day you can not ship brick long distances.
Mr. Hoover said that it will transpose the commercial conditions
in this country. He was exactly correct. They will use substitutes
for the real thing; they will use lumber that they can get nearby;
they will use brick that can be made almost anywhere that they
establish brickyards. 1 will give you an illustration of that. When
the rates were raised to Texas points from St. Louis 5 cents per
hundred—and it was fought out before the Interstate Commerce
Commission—one of the parties that owned a brickyard near Carondelet near St. Louis stated that he had shipped 500 cars a year over
the Iron Mountain road. After this rate went into effect, he could
not ship any at all. Just about that time they established a brick­
yard at Texarkana, and the people used the brick, and the man who
owned the brickyard at Carondelet lost out, and the Iron Mountain
is out of the business, and St. Louis gets nothing out of it.
We have passed through a history of prosperity unexampled,
which was shared by the railroads and everybody else. Now, we
can return to that. The railroads would have more business than
they could handle if the Congress would put the rates back to where
they were when the Government took them over.
R e p r e s e n t a t iv e T e n E t c k . B u t w h a t w o u l d h a p p e n i f th e r a i l r o a d s
c o u ld n o t d o it a n d i f t h e y c r u m p l e d a n d w e n t o u t o f b u s in e s s ?
Mr. C o w a n . That is exactly what is going to happen.
Representative T e n E t c k . What would happen in that case ?
Mr. C o w a n . Y o u might as well ask me where I will go when I die.

I don’t know where I am going. In that case the Government would
have to afford transportation.
R e p r e s e n t a t iv e T e n E t c k . W o u l d n o t th e s a m e t h in g h a p p e n a s
w o u l d h a p p e n t o th e f a r m e r i f h e c a n n o t e a r n e n o u g h t o p a y h im t o
r u n h is f a r m ?




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Mr. C o w a n . He would certainly pass out o f the business. You
have got to have a policy to run these roads, and you can not repeal
the law o f supply and demand. I think what Congress ought to
do—this, gentlemen, and this is the result of a great deal of thought
upon the subject—-it may be poor thought, but it is my thought, after
having had, I think about as complete knowledge of the subject as
any of my fellows—I think Congress ought to provide for a method
of reducing these rates to the prewar period; and I think Congress
must and will—of course, everybody will jump on me for saying
this, but if you can see any other way out of it let somebody name
it; he has not named it yet. There isn’t a man in this Capitol who
has named it yet. The Government will have to provide assistance
to the railroads, so that it will help to avoid what you spoke of,
Mr. Ten Eyck, the crumbling o f the roads in the meantime. It was
an unpopular thing to d o; that is true. Most men hate to say a
thing that is unpopular. But it is the man who will stand in the
face of the howling mob that will bring law and order at last. So
that you will have to provide assistance, and lots of assistance, to
the railroads in order that they may survive and function while
they are reaching the point of going back to these prewar rates,
where, by the judgment and experience of all men in this country,
we were on a fairly prosperous basis, and then we will have a reason­
able and fair condition of rates.
You asked me how we can do it. O f course, you have not asked
me: I am putting that question to myself. But if you do ask me,
I must answer you that I do not believe there is a man in Congress
who will introduce a bill that provides for giving the railroads—
affording to them the necessary assistance to do that. And that
assistance consists of this: To guarantee the payment of the fixed
charges. That is to say, the difference between what they earn to
pay the fixed charges and what the charges actually are. To fix that
as a loan against the railroads—an additional loan, to be repaid on
the amortization plan over a period of years, after and only after
the railroads shall have earned more than a certain per cent in their
business. And coupled with that the provision that in consideration
of this assistance the rates shall be reduced to the tariffs in effect
when the roads were taken over by the Government and subject to regu­
lation by the Interstate Commerce Commission, the same as they then
were. Now, you can study over it and you can try to find somebody
that will iron this out otherwise, and you will not find him. You
can do that and afford these railroads the opportunity of keeping
out of the hands of receivers; certainly, as they are going now, if they
go ahead on the same lines, many will go into the hands of receivers.
I have before me, and will file to be printed, if you will permit, a
table of earnings and expenses of roads by regions for five months.
[Exhibit A, inserted at end of testimony.]
I have recently been over the statements of the Interstate Com­
merce Commission: I have been all through them recently as to
the freight, as to tne earnings, and so on, for the western district;
and, taking the individual rates—and that is the only way you can
consider mem, the individual statements—and taking those state­
ments, there are very few roads that are operated on a basis that is
paying upon the valuation which they carry as to the amount invested




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in property more than 3 per cent, and upon the basis of their capi­
talization, which is considerably less in many instances, more than.
4 per cent; and I believe very few are operating on a basis to pay
their interest charges. Many are operating in the red; and in the
State of Wisconsin, for example, I saw in the statement of the tax
commission there that the St. Paul and Northwestern were both,
operating in the red. I forget the figures, but it runs in my mind
one of them something more than $3,000,000 and one more than
$4,000,000. And they must continue that on the present rates. I have
just been up there fishing, as my color would indicate. They have
rates up there on lumber, but they can not move it; they have logs
at the tracks, but it costs $7.50 a thousand to move them to the first
sawmill and they can not afford to move them. And their potatoes
they were told to keep, as they would be higher, but they were never
higher, and they froze in the ground. They are clearing some land
up there, and it will be a good farming country, and it is a great
dairt country. But what can they do ? There is no business. And
the bad showing of the Chicago & North Western, which has always
made such a good showing, is that in the State of Wisconsin,
where they have the iron mines, they can not ship, because of the
rates, and the road makes a bad showing. And they run their pas­
senger trains to-day, with the high passenger fares, I expect, at a loss.
And so all along the line. The North Western can not pull out
on the traffic out of Iowa and North and South Dakota and Minnesota.
They will have to get relief somewhere. The Milwaukee & St. Paul,
of course, went through an administration of high financing con­
ceived by the idea of building a railroad where none was needed—
building a railroad where it can not, in many years, develop enough
traffic to support the road. How can it be expected? The country
can not support it; it can not produce sufficiently for years to sup­
port it.
Now, I say that bad judgment has visited this section 15(a) upon
the backs of the farmers of this country. No such crime has ever
been written on the statute books of this country. I speak that
advisedly. I say that no such crime has ever before been written upon
the statute books of this country as to levy against the shippers a
tax of 5| per cent on the aggregate value of the railroads in these
groups, fixed at $60,000 a mile. It might as well have been fixed
at $80,000. There is no evidence in support oi either.
I want to file here for the purpose of your hearing a brief which
should be printed. And I hope Mr. Sumners—and I speak of him
because I know he is familiar with it and has a knowledge of our
situation—will read it. I want to furnish a brief prepared by my­
self and the attorney general of the State of Texas, Mr. Cureton, and
Mr. Bruce W. Bryant, assistant attorney general of the State o f
Texas, and Mr. S. C. Rowe and Mr. Paul Keyser, special counsel,
attorneys for the Railroad Commission of Texas in a case brought
before the Interstate Commerce Commission to have that tribunal
declare that they had jurisdiction to require the railroads in Texas
to charge the same percentage of advance on the rates in Texas which
the Interstate Commerce Commission had fixed for the western
group, and which were added to a 25 per cent rate fixed by the director
general, because they found in ex parte 74 that in the western group.




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of which Texas is a part, it would require 35 per cent advance to
produce an aggregate net return of per cent plus £ per cent for pur­
chase of equipment and making improvements.
In this brief, gentlemen, we nave pointed out and demonstrated by
the undisputed testimony introduced before the examiner of the com­
mission that the railroads in Texas were valued by the engineers of
the railroad commission, inventoried and valued; that to that value
had been added by the Texas commission what betterments had been
reported to the commission. There were 3,900 miles of road; if I
am mistaken in the figures, I will be corrected by the brief. They
were all valued in the same manner precisely, and they did that on
3,900 miles of railroad, to wit, on the Texas & Pacific system, on the
Rock Island within the State, and on the Gulf Coast Line, Trinity &
Brazos Valley, and on the Texas Midland, which, as Mr. Sumners
will know, are fairly representative; and that the value fixed by the
Texas commissioners was greater than the value fixed by the Inter­
state Commerce Commission engineers; and that that value runs up
only to about $33,000 a mile. The figures will show that the Texas
commission allowed 33^ per cent advance, instead of 35 per cent; and
that that would pay more than 6 per cent on the valuation as traffic
then existed. The Interstate Commerce Commission never mentioned
the value of the railroads in Texas. They did not fix it in ex parte 74
just because they had made, under section 15(a), a general rule of
the fixing of rates in this vast territory that I have described as the
western group, and then said Texas must advance its rates 35 per
cent on that basis, and does not value the railroads for that purpose
in Texas. But they said there would be a discrimination, and so
they advanced the rates 35 per cent in Texas. Whereupon the rail­
roads went to the Federal court and asked for an injunction, and
to-day Texas is operating its 16,000 miles of railroad under a tempo­
rary restraining order just because the Interstate Commerce Com­
mission, under section 15(a), advanced the rate 35 per cent and abol­
ished thereby the State’s power. I f you will examine that brief, I
think you will come to the same conclusion I did.
Now, I will take the case of a shipment of sheep from Rock
Springs, Wyo., to Chicago; a man has 2,000 head of sheep, and he
ships them, and pays all the expenses and charges, and they net him
the pitiful sum of 32 cents per head, and, of course, he went out of
the sheep business. He shipped them over the Union Pacific Rail­
road, which was earning all sorts of money, but he had to ship upon
the rate established, and that rate could not be reduced, and they had
no right to reduce it, because it is a part of the rates m that group,
and the group must earn 5£ per cent. It amazes me that men of
intelligence could have ever subscribed to such a proposition, had
they thought of the result. I do not think the Senate committee has
considered the matter of a repeal of that section. I think the farmers
of this country require, at the hands of this commission, a recom­
mendation upon that subject.
Now, let me show you further: The fanner ships all of his stuff,
his cotton, his corn, his oats, and live stock to a market that is an
open market, and. he sells at what he can get, and he can not help
himself; he can not name his price; he does not do it and has not
done it. to say the least of it. They deduct from his account after




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sales the freight, and the other charges, all the advance charges, and
for all transportation, and he pays all of it, and his money, which
he receives, is reduced by that amount. And when he ships his
agricultural implements from South Bend to Des Moines, or Minne­
apolis, or Fort Worth, or Denver, or Salt Lake City, or anywhere
else, he buys it at the price at South Bend, and the freight is added
to the amount. And tne man that ships from Moline, 111., or Pekin,
111., or any other place, pays the same price at the factory, and the
freight is added. Nearly everything that is manufactured is shipped
that way. When he ships barbed wire it is billed f. o. b. Pittsburgh,
although it may be manufactured, and most or a lot of it is manu­
factured at Joliet; but it is shipped f. o. b. Pittsburgh. And so with
everything else. Take the farmer, when he ships nis wagon—when
he buys a wagon, it comes with the freight charges on it. When he
buys binder twine, it comes that way; when he buys his bagging
and ties for his cotton, it comes that way.
I have witnessed, and Mr. Mercer has, before the Interstate Com­
merce Commission, when ex parte 74 was being heard, letters from
association after association in Chicago and St. Louis and else­
where—and I suppose there were produced not less than a million
letters of that sort in Washington, and they are to-day a part of the
files of the Interstate Commerce Commission, saying grant the
increase; what we tfant is service. And there have been not less
than 5,000 men, in my opinion, who have paraded in this country
circulating that expression that has been repeated a million times,
“ What we want is service.” I heard it everywhere; in the Inter­
state Commerce Commission office, and in the examiners’ offices, and
everywhere. And thev testified before the commission, and one
fellow who represented a national association said, “ What we are
afraid of is that you wont give them enough; give them what they
ask for.” And they did it. I said in my argument then, “ When
you do that you will write the epitaph of the private ownership o f
railroads.” They have done it. So they are in that condition
to-day that they can be put in the hands oi receivers.
So I say the farmers are paying this advanced rate at both ends
of the line. I have here, but I have not time to refer to it, the
matter about the classified tonnage. And by going over this classi­
fied tonnage you will find this great army of people who were advo­
cating these increased costs all the time are the people who do not
have to pay it. They belong to the great organization of men who
pass the buck; they can pass it up. The farmer can not do that.
So he has been charged double the amount of freight on everything
he ships out and on everything that he ships in to himself. I say
that ought to be repealed. He has the right to a reasonable rate.
He has the right to the judgment of the commission on the evidence
whether it is reasonable or not. It should not be declared by an ar­
bitrary rule. There is no foundation in justice or reason anywhere
in saving that because in this group it takes 35 per cent, therefore
the Texas lines and the Texas people should add 35 per cent increase
of their rates if it was not required there.
That brings me to the point of valuation, and then I am going
to conclude for the present. I guess you wish I would conclude for­
ever. But there is the subject of valuation. I do not bear in mind




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the many millions of dollars that have been expended by the division
of valuation of the Interstate Commerce Commission. But many
millions of dollars have been expended. I say, when the engineers
have made this valuation and tentatively reported an inventory of
the property as then made up and returned, and it has been submitted
to the governors of the States and the railroads, that ipso facto, upon
the coming in of that report, it should be made the maximum valua­
tion until it is set aside by law, or changed, so that you will get
something practical out of this, instead of the Interstate Commerce
Commission throwing it in the waste basket. They said they con­
sidered it, but they did not adopt it, because there is the Texas case
that proves it. I say, if you get any advantage whatever out of these
millions expended ror this valuation of the railroad properties, it is
when Congress makes it a law, to make it prime facie the value to be
followed, until it is changed, or the contrary be made to appear. I
do not ask that it be made more than the prima facie value. But it
should be taken prima facie as the value until in due process it is
set aside. There is no man among you that supposes that $60,000
a mile for the railroads of the West should be taken as the value,
and pay interest upon that.
When they talk about the farmers, they picture before you a nice
cottage; they see vines winding around the porch posts; they see the
lambs gamboling upon the green; they see the housemaid dressed in
her nice gingham dress going to the spring house to get water; they
see these beautiful scenes when they talk about the farmer. But I
am telling you that the man who comes in from his field, after work­
ing all day, and takes his ax on his shoulder and chops wood for his
wife to make a fire, %fter she has been sick all day, perhaps, and cook
his frugal meal, and the next day he does not know where he can
get the money to buy her a pair of shoes, that is the situation of the
thousands of farmers of Texas and throughout this country. You
can look around Washington. You can never find the conditions
here. The only way you can find out is by taking a look. If I were
on this commission, I would not stop this investigation until I saw
into the households of this country throughout the West, and find
out what the people are suffering from the situation as it exists to­
day, controlled, as I believe it is, by the great interests in New York.
And you are breeding trouble just as fast as it can be bred by the
failure to do something to relieve these people in their distress, when
their labor is reaping no reward, when they see no hope of its doing it.
Gentlemen, I think it rests on this commission to hold hearings
where the people can get to it.
In the hearing on ex parte 74, this great hearing room was filled
with men, many of whom perhaps were drawing $50,000 a year,
witnessing what was going on. There were a raw pitiful repre­
sentatives of the live-stock and agricultural people there that barely
opened their mouths. Some of the witnesses who testified the com­
mission scarcely mentioned their evidence. There were three or
four witnesses for the live-stock interests. There were few for the
citrus fruit growers, and some from Florida. And there were sev­
eral State commissions who raised their small voices to make sug­
gestions, but they were afraid they were going to be cut off. But
they might just as well have made the fight from the shoulder, and
91341—22— v o l 3------ 6




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that is the way I am going to fight. I do not believe in raisins the
yellow flag. I believe in fighting from the shoulder. I will nave
the red flag up until they roll the dirt on my trench.
I tell you, you have got to take hold of these things and make an
investigation. The railroads have had the greatest return—the
greatest return ever known in their history. Where did the money
go? Has anybody kept tab on it; any State commission or anybody
in the Interstate Commerce Commission, or any representative of
any committee in Congress ? I think it is somebody’s duty to make
an examination and find out where the money went. Have you seen
any report of it? But when the investigation began before the
Interstate Commerce Committee of the Senate, then came these
railroads and presented figures and figures and figures to show
what they did and what they had spent the money for. And I will
say I will admit they did spend it tor that, but those accounts show
for labor, for salary, and then you will always find they add “ and
other expenses.*' Look at the items, gentlemen.
Go to the Interstate Commerce Commission office and get the
annual reports of the railroads and look them over, and you will
find always that item “ and other expenses.” They have their insti­
tution down here known as the board of railroad economics, and
they worked for two months, and worked overtime, to get these
figures to present down there. All that expense was paid by you
and the shippers, and the expense to support these gentlemen at the
big and expensive hotels here was paid by you and the others. But
nobody knows where the money went. I am simply stating to you
the facts, and if you do not believe it, go out and look it up. I say,
nobody has checked it up. Nobody has been sent out to check it up.
There has been no organization. And when the’ Government of the
United States is paying out—I don’t know how much—but some
billions of dollars, and is asked now to pay some hundreds of mil­
lions of dollars for the inefficiency of labor and the like. Who
caused the inefficiency of labor ? The same men all the way through.
The same men pull the tricks all the way through.
There is no one to check it. It is a pitiable state that we are in.
It is a pity that in the United States of America there is no place
to which you can resort to-day to find what actually happened to the
money, whether it was judiciously spent or not, any more than with
the Shipping Board or the Aviation Service. Just think of it.
Think of the situation we are in to-day on that account. We have
ot to return to these previous conditions, gentlemen. And you can
o it. You have got to help the railroads do it. You will nave to
help them.
But when you do that you must have a supervision over that helpYou must see what they do with that money. And instead of a large
expense account; having large expenditures for the purpose of keep­
ing accounts which furnish tne great bond markets and stock markets
and other places of the country with the information on the finances
of the railroads, find out what is being actually done. It is worth
your while, gentlemen. It is worth tne people’s while. And ulti­
mately it must be done, and these things must take place. This
method or some such method must be resorted to or the Government
of the United States will have to own the railroads or we will have
to do without transportation.

S




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Referring to the matter of inefficiency and the matter of the
employment of so many extra men, I think every one of you know
of particular instances, and everybody in the United States knows
it In that connection I will refer to a little story illustrating that
point.
A man came into Houston, Tex., and he met a master mechanic
there that he knew, who asked him what he was doing. He said
he wasn’t doing anything. The master mechanic said to him, Do
you want a job? “ Yes; sure,” he said, “ that is what I am looking
for.” “ Well,” the master mechanic said to him, “ you come down
to the machine shop to-day, down to the roundhouse, and I will
give you a job.” This man said, “ well, I am not a mechanic.”
“ Well, that doesn’t make any difference. You get yourself some
overalls and a hammer and an oil can and come down there.” So
he came down there, and when he arrived the master mechanic said
to him, “ Now, you go around with this hammer; don’t bother any­
body; don’t say anything to anybody, but when you see something
here and there you go around and tap on it and listen. Or if you
see a place that can be oiled you put a little oil on it. It doesn’t
make any difference whether it is old or new or whether it needs it
or not; you just put some on. And then you report in your time at
night and you will be paid $8 a day.”
Well, atiout 3 o’clock in the afternoon this man came back to the
master mechanic’s office, and he said “ I am going to quit this job.
I don’t want this thing. I went on there as you told me, and there
has been a son of a gun following me around all day; I hit him on
the head with the hammer, and I quit; I resign.” “ Why,” the master
mechanic said, “ you fool, that was your helper. Didn’t you know
that?”
Now. gentlemen, where have been three men employed to do two
men’s work, and it has been so throughout this country. But who
has checked it up ? Who has tried to find it out ? It is time that we
go to the bottom of this proposition, instead of felicitating with one
another.
When the railroad presidents came here and laid their matters
before the country it was to shoulder them off, to shift them off, and
shift them onto the Government. The Government did it. And the
hearing stopped at that point. Now, of course, the hearings will go
on after September I am mentioning these matters so insistently to
you now in the hope that you, seeing the utter ruin and destruction
of an effort to continue the payment of enormous freight rates which
prevent the doing of business, which prevent the movement of traffic,
and which is reducing many communities to poverty, will make some
report in regard to it.
I wish to request the privilege of making some analyses of some
statistical data that I have with respect to the comparative commodity
movements, the relative earnings of the railroads, which I have gath­
ered from the Interstate Commerce Commission, and the amount of
live stock produced from the Census Bureau and from the Bureau
of Markets.
The C h a i b m a n . We will be very glad to have that data.
Mr. C o w a n . I will file that in a typewritten statement with the
committee, so that you may print it, and it will save your time, if you




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will permit me to do so, and it will be in better form than I could
give it now.
I thank the commission very much for the opportunity you have
given me to get this out of my system.
Revenue traffic statistics o f Class I steam roads in the United States, including mixedtrain service (for 173 steam roads, switching and terminal companies not included),
.5 months ended with May, 1921 and 1920.
[Interstate Commerce Commission, Bureau of Statistics.]
Freight revenue.
1921

1920

Revenue per ton*
mile.
1921

1920

Revenue per passenger-mile.

Passenger revenue.
1921

1920

1921

1920

965,940,515
268,587,743
359,842,359
62,510,784
204,071,468
168,656,866
263.949,932
148,810,850

958,976,247
240,661,001
341,202,921
59,244,350
208,364,236
191,009,172
273,988,303
142.024,821

Centt.
1.800
1.238
1.184
.782
1.259
1.320
1.471
1.471

Cento.
1.410
.907
.925
.584
.996
.973
1.077
1.197

138,121,249
69,038,242
109,896,033
11,011,951
63,445,617
51,733,646
89,111,181
41,379,408

134,932,495
62,699,307
96,989,865
9,281,612
64,419,082
53,505,845
89,750,476
45,744,223

Cents.
2.726
2.953
2.963
3.576
3.407
3.267
3.352
3.381

Centi.
2.367
2.449
2.429
2.809
2.795
2.772
2.750
2.845

1,542,370,517

1,515,471,051

1.277

.974

473,737,327

457,322,905

3.141

2.609

SUPPLEMENTARY.

In the foregoing argum m
ent ention w m
as ade at different places of statistical data
to be subm
itted herew as a part of my statem
ith
ent. I therefore submit the following:
First. A statem issued by the Bureau of the Census under date of June 8, 1921.
ent
relative to the slaughtering an m
'd eat-packing industry for the year 1919, as com
pared
with the year 1914, as follow
s:
A prelim
inary statem of the 1920 census of m
ent
anufactures has been prepared by
the Bureau of the Census, Departm of Com erce, furnishing statistics concerning
ent
m
the slaughtering and m
eat-packing industry for the year 1919. It consists of a state­
ment of the number and cost of anim slaughtered, and the quantities and values
als
of the principal products m
anufactured during the year 1919.
The figures are com
piled from1.305 establishm
ents with products for the year valued
at $4,246,290,000. Tne total cost of raw m
aterials, principally live stock, w $3,774.as
901.000, or 88.8 per cent of the total value of products.
The statistics for 1919 and 1914 are sum arized in the follow table. Those for
m
ing
1919 are prelim
inary and subject to such change and correction as may be necessary
from further exam
ination of the original reports.
Slaughtering and meat packing, wholesale—Census Bureau's summary for the
industry—1919 and 19H.
*
' 1019

1914

MATERIALS.

$3,774,901,000

$1,441,663,000

$3,055,496,000

$1,199,642,000

10,818,000
$1,055,319,000
Calves—
Number....................................................................................... !
4,MS,000
Cost..............................................................................................
195,720,000
Sheep, lambs, goats, and kids—
Number.......................................................................................
13.523,000
Cost..............................................................................................
$146,965,000
H ogsNumber.-......................................................................................1
44,519,000
Cost..............................................................................................I *1.757,491,000
All other material.', cost........................................................................... i
(719,406,000

7,149,000
$490,108,000

Beeves—'




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*27,623,000
15.952.000
*84,813,000
34.442.000
*587,098,000
*242,021,000

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Slaughtering and meat packing, wholesale, etc.— Continued.
1914

PRODUCTS.

Total value..
Fresh meat:
Beef—
Pounds...........................................
Value.............................................
VealPounds...........................................
Value.............................................
Hatton, lamb, goat and kid—
Pounds...........................................
Value..............................................
Port—
Pounds...........................................
Value..............................................
Edible offal and all other fresh meat—
Pounds...........................................
Value..............................................
Cured meat:
Beef, pickled and other cured—
Pounds...........................................
Value..............................................
Pork, pickled and other cured—
Pounds...........................................
Vahie..............................................
Canned goods:
Pound*..................................................
Value............. .......................................
Sausage:
Canoed—
Pounds...........................................
Value..............................................
All other—
Pounds...........................................
Value..............................................
Lard:
Pounds..................................................
Value.....................................................
Lard compounds and substitute*:
Pounds..................................................
Value....................................................
Oleooil:
Gallons..................................................
Value....................................................
Other oils:
Gallons..................................................
Value....................................................
Tallow and oleo stock:
Pounds..................................................
Value....................................................
Oleomargarine:
Pounds..................................................
Value....................................................
Hidesand pelts:
Cattle hkiee—
Number..........................................
Value..............................................
Calf—
Number.......................................... .
Value.............................................. .
Sheep, lamb, goat, and Idd—
Number...........................................
Value.................. ............................
/ertUbers and fertilizer material:

y *» ...................

other products,* value.

$4,246,290,000 ’

$1,651,965,000

4.932.284.000
$$46,806,000 !

3.658.334.000
$421,297,000

422.928.000
$83,884,000
501.201.000
$120,451,000

194.699.000
$26,299,000
i

629.233.000
$74,676,000

2.112.243.000
$532,075,000

1.877.099.000
$226,535,000

516.983.000
$59,832,000

296.667.000
$20,576,000

129.960.000
$28,360,000 ,

91,572,000
$14,395,000

i

4,145,232,000
$1,217,42*),000 '
305.943.000 1
$90,904,000 1

2,929,310,000
$393,605,000
160,799,000
$26,418,000

161,002,000
$27,985,000

004.000
845.000

629.701.000
$145,601,000

455, 147.000
$58, 3-50,000

1,372,550,000
$415,817,000

1,119, 189.000
414.000

521.122.000
$123,724,000

$33, 037.000

$2,
10
3 6 398.000
9,

20,339,000
$30,953,000

$ 11 , 926.000

6,721,000
$9,153,000

*4, 010.000

242.084.000

$ 6 3 ,°W
3 ,5 ^

123.639.000
$3'>, 778,000

16, 502.000

6 . 715.000

209, 614.000
$13, 733.000

I.O 3<vS, (XX)
,
$M,

*19,000

10,818,000
$185,02l>, 000 I

7.159.000
$69,959,000

3,353,000
$24,797,000 1

1.464.000
$3,513,000

12,244,000 1
$33, 780,000

15.917.000
$13,624,000

391,000
$18.315,O X
C)
$172,099,000

294,000
$8,737,000
$92,197,000

'Inotoies value of ammonia, butter, butter reworked, condensed milk, glue, glycerine, hog hair, icc,
•wage casings, scrapple, soap, wool, etc., and amount received for slaughtering and refrigeration for
others.




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86

AGRICULTURAL INQUIRY.

Second. Tables from reports issued by the Bureau of Foreign and Domestic Com
­
m
erce show the im
ing
ports and exports of m
eats for the years 1910 to 1921, as follow
s:
Merchandise imported: Quantities qnd values, by articles.
Calendar years.
Article.
1914

1915

............................... {SSSSi:

254,319,200
22,758,994
19,875,942
1,824,168
18,952,005
2,342,271

118,589,580
11,125» 444
11,879,353
1,109,156
3,498*294
370,553

39,772,414
3,988,944
17,235,208
1,526,688
954,561
95,997

22,072,147
3,088,759
5,623,903
685,401
2,580,340
553,812

Total fresh meats........ -

293,147,147
26,925,433

133,967,227
12,605*153

57,962,183
5,611,574

30,276,390
4,327,972

Meat and dairy products:
Meat products—
Meats, fresh—
Beef and veal..................jS S taS !"
Mutton and lamb........... {§2£n?’'

1916

Calendar year.

1917

Fiscal year ending J u n e-

Article.
1918
Meat and dairy products:
Meat products—
Meats, fresh—
Beef and veal..................

: :

Total fresh meats........ {§ 3 £ £ !"

1921

23,339,081
4.159,186
607,896
134,290
1,721,979
376,604

38,461,758
6,408,081
8,209,182
1,547,338
2,779,361
601,051

42,436,333
6,962,894
16,358,299
2,519,355
2,132; 444
464,838

40,319,240
6,045,316
108*528,214
12,843,671
1,212,495
336,413

25,668,956
4,670,080

Mutton and lamb........... "
............................... t e

1920

1919

49,450,301
8,556,470

60,927,576
9,947,087

151,606*965
19,425,543

Domestic merchandise exported: Quantities and values, by articles.
Calendar years.
Article.
1910
Meat products:
Beef products—
Beef, canned... jib s ....
\dolls..
Beef, fresh...... /lb s ....
Idolls..
Beef, pickled, [lbs....
and
other [dolls..
cured.
Hog products—
Bacon............. /lb s ....
(dolls..
H am s a n d libs
sh ou ld ers, [dolls..
cured.
fibs....
Lard............... \doUs..
P orkCanned_ /lb s ....
_ Idolis..
Fr&h....... /lbs
[dolls..
Pickled.... lib s....
[dolls..
Lard compounds lbs__
and other substi­ 'dolls..
tutes for lard.
Hutton (excep t libs....
[iolls..
canned.)




1911

1912

1913

1914

1915

11,503,037 11,248,543 8,439,735 4,163,095 30,734,748 09,999,828
539,889 4,807, d/9 11,014,980
1,330,048 1,311,234 1,040,891
55,538,924 28,782,481 9,025,552 6,850,123 31,442,463 262,813,397
817,847 3,899,070 33,606,465
5,911,108 2,905,412 1,053,777
35,335,92? 42,304,538 28,709,513 25,180,539 23,779,449 42,746,813
3,071,975 3,181,044 2,437,460 2,507,541 2,371,563 4,597,289
128,269,744
17,880,082
131,181,642
17,884,237
368,831,681
45,935,897

198,112,203
24,185,672
189,615,032
23,337,395
552,429,865
54,504,681

192,021,658
23,483,949
176,058,810
22,235,899
495,092,561
52,201,560

212,796,618
27,983,536
171,671,407
24,177,782
536,179,645
60,664,940

184,267,850
25,570,543
142,398,301
20,797,130
438,015,898
48,610,269

524,138,245
69,823,962
266,442,819
37,348,592
451,286,439
48,342,004-

3,715,803 5,057,999 5,185,411 3,651,101 2,786,415 7,928,944
596,379
635,570
545,368
450,724 1,312,558
428,396
1,250,977 24,230,183
927,229 2,2’.1,661 2,607,659 3,182,678
256,096
310,558
407,283
120,523
178,099 2,879,833
41,488,829 51,029,350 54,o72,819 53,984,973 37,006,108 59,047,897
4,806,246 4,875,795 5,468,207 5,866,901 4,001,586 6,026,008
71,993,638 69,484,042 73,724,170 63,699,754 63,355,911 63,869,985
7,258,758 6,022,309 6,397,205 5,769,314 5,668,980 5,519,231
1,997,099 2,573,653 5,076,168 4,789,431 3,847,093 4,230,928
500,117
220,104
246,221
523,655
547,893
436,069

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87

AGRICULTURAL INQUIRY.

Domestic merchandise exported: Quantities and values, by articles— Continued.
Fiscal year ending
Jun e-

Calendar years.
Article.
1916
M ot products:
Beef products—
Beef,canned... fibs...
dolls.
Beef, fresh...... lbs...
dolls.
BeeT, pickled, lbs...
a n d other dolls.
cured.
Hog products—

Bacon..........f e

H a m s a n d liK .
s h o u .d e r s ,^

^

........... {dSii:

P ork C a n n e d ..../^
/lb s...
Fresh.. -\dolls
Pickled.... lbs...
dolls.
Lard compounds lbs...
and other substi- dolls.
lutes for lard.
Mutton (ex cep t lb s...
canned).
koUs.
d

1917

1918

1919

54,026,922
11,911,790
181,976,831
22,316,803
36,682,614
3,942,826

65,471,232
18,258,522
216,419,599
31,427,132
67,810,990
8,319.655

141,457,163
51,498,010
514,341,529
109,605,363
44,206,020
7,921,220

53,867,327
20,672,964
174,426,999
40,280,747
42,804,724
8,739,141

592,851,157
87,113,549
287,161,195
45,340,015
426,659,599
56,039,641

578,128,056 1,104,788,081 1,190,297,494
123,115,384 315,968,064 373,913,227
243,386,814 537,213,041 596,795,663
54,047,798 145,674,888 189,428,837
372,721,342 548,817,901 760,901,611
75,355,138 144,933,151 237,983,449

1920

1921

31,133,918 10,785,306
9,364,410 2,521,873
153,560,647 21,084,203
32,566,746 3,704,590
32,383,501 23,312,856
5,880,766 2,998,514
803,666,851
233,327,856
275,455,931
82,633,460
587,224,549
171,523,351

489,298,109
103,114,918
172,011,676
40,088,562
746,157,356
131,329,199

7,263,012 5,377,226 5,267,342 5,791,706 3,261,967
1,118,967
1,7.U, 531 1,776,392 2,422,364
1,559,799
1,480,364
449,816
55,112,043 49,372,780 11,632,635 26,776,978 27,224,941 57.043.446
6,950,706 9,899,883 2,907,894 8,347,557 7,327,611 11.128.446
54,975,221 39,294,011 36,671,660 34,113,875 41,643,119 33,286,064
6,556,925 7,088,935 8,535,017 8,632,518 9,680,987 5,380,792
49,821,709 49,300,143 43,977,410 124,962,950 44,195,842 42,155,971
5,930,841 8,582,320 10,258,536 31,605,885 11,850,311 6,099,914
5,257,883 2,862,175 1,630,815 3,009,164 3,958,131
6,624,522
697,847
387,132
514,855
632,667
815,452 1,291,325

The imports and exports of beef and mutton for the fiscal year 1921 were as
follows: Imports 148,847,454 pounds; exports 55,1S2,365 pounds. It will there­
fore be seen that the imports exceeded the exports by 93,665,039 pounds.
Third. Tables from the reports of the Bureau of Foreign and Domestic Com­
m
erce showing the imports and exports of cattle, hogs, and sheep for the years
1910 to 1921, as follows:
Domestic merchandise exported: Quantities and values, by articles.
Calendar years.
Article.
Animals:
.................... (dolis"
h °8*......................jd olis"

Sh8»p .....................{§Sn»:;

All other (Including fowls,
dolls...............................

1910

1911

1912

109,629
9,464,580
4,019
46,387
52,638
908,796

164,087
14,110,081
13,246
107,676
177,069
853,300

46,463
3,623,013
17,478
144,143
191,963
636,856

236,336

274,944

378,339

Total................ dolls.. 15,292,411

20,389,993

9,449,078

1913

1914

26,236
851,060
12,118
133,962
170.411
595,324

8,694
515,046
12,399
157,421
78,277
317,939

475.411

292,034

208,182

7,071,055 20,419,257

121,641,460

1915
16,256
2,523,689
7,261
85,133
40,501
171,361

Fiscal year ending
Jun e-

Calendar yean.
Article.
1917

1918

1919

1920

12,171
658,934
28,301
339,747
55,059
268,538

20,009
1,291,714
15,588
276,451
30,359
278,759

17,280
1,082,758
10,308
333,729
7,962
120,882

69,859
6,439,521
24,745
683,911
34,531
369,974

83,039
11,92L 518
38,107
982,120
56,155
711,549

396,516

383,903

288,645

464,702

575,056

931,229

Total................ dolls.. 92,425,609 49,005,850 ( 15,045,142

12,003,684

19,291,197

17,617,041

1916
Animals:
c *ttl®................... Idolis"
..................... { * & : :
Sh*op................... IdcSii::
All other (including fowls),
dolls..............................




D igitized by

1921

145,673
10,950,507
103,414
2,216,500
80,723
532,510

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88

AGRICULTURAL INQUIRY.

Merchandise imported: Quantities and values, by articles.
Calendar years.
Article.
1910
Animals:
................... p i i ”.
8h«>p................... {d<Sii;:

1911

211,230
3,281,023
56,201
408,976

252,423
3,915,888
23,063
153,459

1912

1913

1914

1915

552,489
18,627,368
276,521
884,312

736,937
727,891
325,717
5,296,296 14,692,916 19,660; 90S
15,342
115,688
199,995
312; 26$
89,288
657,388

Fiscal year ending
Jun e-

Calendar yean.
Article.
1916

1917

1918

1919

1920

1921

Animals:

326,214
23,589,124
161,292
1,541, T »
1,161
27,589

347,510
35%601
295,647
642;395
575,328
c**®*....................is?®**®'" 101603,697 18,245,973 25,518,585 53,296,078 45,081,179
125,722
202,861
150,203
2%774
199,549
sh<» p ....................jd oiii::
668,658 2,014,160
2,473,386 2,279,949
2,402
16,236
3.662
20,657
Swine........ ..........ffiS u "
396,061
40,467
185,617
758,259
121,068

We have included in the foregoing tables live stock and meats only. Fig­
ures are readily obtainable with respect to all the different classes of products,
but it is not deemed necessary or desirable to present them here.
It will be observed that there was nearly a 100 per cent Increase in the
Importations of cattle for the years 1913 and 1914 over the year 1912, and a
large increase in 1912 over 1911 and in 1911 over 1910. The peak was reached
in 1913, when 736,937 head were Imported, falling to 552,489 head In 1915, and
again reaching the high mark of 642,395 in the year 1919.
The exports for the same periods show a very small and generally Insignifi­
cant number, the highest number being 164,087 head for the year IDil. The
low mark was 8,694 head in the year 1914. In 1919 the number increased to
69.859.
For the year 1921 the imports of cattle were 326,214 head, and the exports
145,673 head, so that the imports exceeded the exports by 180,541 head.
Fourth. Tables from the reports of the Bureau of Foreign and Domestic
Commerce showing the Imports and exports of calf and cattle hides for the
year 1910 to 1921, as follows:
Domestic merchandise exported: Quantities and values, by articles.
Years ended June 30—
Article.
1912
Hides and skins, except fur skins, raw or
uncured:

548,242
99,592
17,445,209
Cattle........................................\doUs" 2,289,648

CU
a -............................... fflSs::

1913

903,922
155,499
17,971,809
2,589,603

Yean ended June 30—

1914

1915

1916

323,417 1,074,529
69,515
248,547
12,524,901 21,135,730
1,933,705 4,013,172

1,574,369
469,637
13,284,190
2 938,925

Fiscal year ended June 30—

Article.
1917
Hides and skins, except fur skins, raw or
uncured:

............................... fflSs::
* * * ........................................f e




:

1,374,038
549,450
7,365,461
2,041,357

1918

1919

1921

1920

3,148,310
69 023
8,802,594
1,251,451

3,458.001 2,778,393 2,875,600
1,462,456 1,597,141 2,282,464
7,023,761 10,189,293 16,433,766
1,953,700 3,236,418 6,476,671

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89

AGRICULTURAL INQUIRY.

Merchandise imported: Quantities and values, by articles.
Calendar years.
Article.
1911

1910

1912

1913

1914

1915

53,157,653 82,631,186 114,859,364 76,468,995 66,915,534 48,914,776
11,334,162
..................... jd S k : 11,814,440 '21,227,102 31,033,634 21,243,369 16,373,257
221.969.098 170,649,238 303,630,775 223,649,752 308,050,216 408,632,111
Oattiehw*..................{dSui:; 32,925,374 25,226,945 49,178,526 40,844,504 55,931,415 78,137,660
Fiscal year ending
Juno—

Calendar years.
Article.
1916

« • * • » ..................... f c : :
............f

^

e

1917

1918

1920

1921

68,359,825
38,065,562
439,461,094
151,218,395

35,589,617
10,547,818
198,573,338
39,866,631

1919

62,657,181 29,585,605 7,582,723 64,555,521
18,132,654 11,511,555 2,953,959 33,653,139
404.201,341 370,684,826 221,051,070 407,282,271
87,674,812 102,357,052 52,029,041 125,590,047

Wherever values have been left in the tables, It has been done only as a
m
atter of convenient information. In the case of meats and other products
it is, of course, well understood that conditions during the war and even up
to this period have been too abnormal to make the value figures adaptable for
the purpose of drawing deductions which are reliable.
Also the quantities of exports during the same period, which were affected
by the war, can not be used for the purpose of drawing deductions as to what
m be expected in the future. It is for that reason that we have presented
ay
the figures for the years before the war and brought them down to date.
Fifth. A statement com
piled by Mr. John Roberts, of the Bureau of Animal
Industry of the Department of Agriculture, concerning meat production, con­
sum
ption, and foreign trade in the United States, 1907-1920, as follows:
Meat

P

r o d u c t io n ,

C o n s u m p t io n ,

an d

F o r e ig n T

rade

in

U

n it e d

States,

1907-1920.
The accompanying tables show the trend for the last 14 years of the pro­
duction, exports, imports, and consumption of ench of the various kinds of
m in the United States. The data are based on two kinds of slaughter re­
eat
ports—(1) the complete slaughter in the United States taken by the census for
1909. and (2) the Federally-inspected slaughter, the details of which are pub­
lished annually by the Bureau of Animal Industry. The combination of these
reports affords a means of estimating the total slaughter from year to year.
These est mates can not be made earlier than 1907, as that was the first year
th Federal inspection was in operation on its present scale. Hence the tables
e
b
egin with that yeur.
The slaughter reports referred to give results only in numbers slaughtered
of each kind of animals. Average dressing percentages and average carcass
w
eights are provided in order to convert the live animals into meat equivalents.
A annual determination of these factors is necessary, because in some cases,
n
especially with cattle and swine, the average carcass weights vary considerably
from one year to the next.
The data throughout are computed from a dressed-weight basis. The edible
offal (liver, pluck, etc.) is not included in the dressed weights nnd so is dis­
regarded. In the aggregate it represents a large quantity of edible material,
bu it is more than offset by the bones and waste trimmings of the dressed
t
carcasses. The figures in the tables, therefore, represent approximately actual
m
eat. I^ard is estimated separately from the dressed weights of swine.
The foreign-trade figures in the tables are taken from the December report
of the Department of Commerce, which gives the calendar-year totals.
N ote.— Slight changes have been made in the per capita consum
ption figures
published previously for the years 1914 to 1919, inclusive. These changes have
b
een caused by the corrections in the census-populatlon figures following the
taking of the 1920 census.




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90

AGRICULTURAL INQUIRY.

Number of anim als slaughtered annually under Federal inspection and esti­
mated number slaughtered otherwise (including farm ) in United States.
Calendar year.

Cattle.

Calves.

Sheep and
lunbs.

Goats.

1007—Federally Inspected..............................

7,633,365
5,836,500

2,024,387
4,002,400

10,252,070
3,048,500

56,750
104,300

32,885,377
22,852,500

13,469,900

6,026,800

13,300,600

101,000

55,737,900

7,279,260
5,565,700

1,958,273
3,871,600

10,304,666
3,064,100

42,981
78,900

38,643,101
26,853,700

12,845,000

5,829,900

13,368,800

121,900

65,496,800

11,350,349
3,374,350

100,650 | 31,394,896
184,894 ; 21,824,673

1008—Federally Inspected..............................

1800—Federally Inspected..............................

7,713,807
5,887,615

2,180,017
4,326,959

Swine.

13,611,422
1910—Federally Inspected..............................

6,515,976

14,724,699 | 285,563 , 53,219,568

7,807,600
5,733,000

2,238,587
4,314,000

11,408,020
3,392,200

Total.............................................. 13,540,600 | 6,552,600
7,619,096 2,183,533
5,339,000 4,081,000

1911—Federally Inspected..............................

100,379 I 26,003,463
184,400 18,070,000

14,800,200 | 284,800 ! 44,073,500
14,020,446 1 38,891 ! 34,232,955
4,169,100 j 71,400 , 23,789,000

12,958,100 I 6,264,500 j 18,189,500 | 110,300 1 58,022,000
1012—Federally Inspected..............................
Other....................................................

7,252,378 2,277,046
4,726,600 ' 4,070,100

14,979,265 1 72,894 , 33,052,727
4,454,100 1 133,900 1 22,969,300

11,979,000 , 6,348,000 j 19,433,400 ' 206,800 1 56,022,000
1913—Federally Inspected.............................

6,978,361 I 1,902,414
4,499,200 3,3*2,100

14,405,759
4,283,600

75,655 I 34,198,585
138,000 ; 23,774,900

Total.............................................. 11,477,600, 5,284,500 I 18,689,400 I 214,600 | 57,973,500
6,756,737 1,696,962 14,229,343 i 175,906 > 32,531,840
4,247,600 | 2,964,400 4,231,200 , 323,100 1 22,516,300

1914—Federally inspected.............................

Total.............................................. 11,004,500 t 4,661,400 | 18,460,500 | 499,000 55,148,100
1916—Federally inspected............................. 7,153,395 1,818,702 12,211,765 I 153,346 . 38,381,228
3,668,700 2,820,800 3,631,200 ; 281,700 | 26,682,800
Total.............................................. 10,822,100 1 4,639,500 | 15,843,000 ! 436,000
8,310,458 j 2,367,303 11,941,366 198,909
3,716,200 1 3,406,600 3,550,800 365,400

65,064,000

1916—Federally inspected..............................
Other...................................................

43,083,703
29,951,900

Total.............................................. 12,026,700 1 5,773,900 15,492,200 | 564,300
1917—Federally inspected.............................. 10,350,052 3,142,721 9,344,994 | 165,660
3,373,800 3,888,000 2,778,800 ; 304,300

73,035,600

12,123,800

470,000

57,483,800

3,456,393 10,319,877
4,310,800 3,065,200

137,725
252,400

41,214,250
28,640,400

7,767,200

13,385,100

390,100

69,854,700

10,089,984 , 3,969,019
3,545,100 1 5,072,000

12,691,117
3,769,500

87,380
160,100

41,811,830
29,055,700

13,723,900 | 7,030,700
1918—Federally Inspected.............................. 11,828,549
3,921,900
Total.............................................. 15,750,400
1919—Federally inspected.............................

33,909,704
23,574,100

13,635,100

9,041,000

16,460,600 | 247,500

70,867,500

8,608,091
3,567,400

4,058,370
5,604,400

10,982,180 I 42,477
3,265,600 | 78,000

38,018,604
26,430,700

Total.............................................. 12,176,400 | 9,662,800 14,247,800 | 120,500

64,449,400

1920—Federally inspected..............................
Other...................................................




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AGRICULTURAL IN QU IRY.

A few horses are slaughtered under the Federal inspection, and probably
m otherwise, the flesh being mostly used to feed wild animals in zoological
ore
gardens, m
enageries, etc. The Federal inspection of horses commenced in Sep­
tem
ber, 1919, and 433 were slaughtered up to the end of the year. During
1920 the number slaughtered was 894. A large proportion of the inspected
horseflesh Is exported.
Estimated annual production, exports, imports, and consumption o f beef in
United States.
Slaughter.

Calendar year.

Consumption.

Total.

1910.
1912.
1913.

1914.
1915.
1916.

1917.
1918.

1919.
1930.

Million
pounds.

Million
pounds.

7,320
6,676
7,071
7,323
7,016
6,509
5,913
5,639
5,816
6,118
6,686
7,641
6,571
6, 111

1911.

Other.

Million
pounds.

1907.
1908.
1909.

Feder­
ally in­
spected.

4,336
3,955
4, 199
4,240
4, 137
3, 938
3, 595
3,601
3, 979
4, 362
5,169
5,885
4,993
4,451

2,984
2, 721
2,882
3,083
2, 899
2, 57!
2,318
2, 038
1,837
1,756
1,517
1, 756
1, .‘>78
1,660

Imports
Exports. (less re­
exports).

Million
pounds.
352
228
163
no
92
.56
47
95
39*.)
287
376
728
314
164

Million
pounds.

38
265
110
20
29
112
43
53

Total.

Million
pounds.

Per
capita.

Pounds.

6,968
6,448
6,908
7, 313
6,944
6, 453
5, 904
5,809
5, 527
5,851
6, 339
7,025
ft, :*ft0
6,000

79.7
72.4
76.2
78.1
73.9
67. 5
60.8
58.9
55.6
58. 1
62.0
67.8
60.0
56.4

The trend of beef production, which was especially high in 1907 and 1910,
declined steadily from the last-named year until the advent of the World War.
The war production culminated in 1918 with the largest total on record. The
elT
ort, however, to some extent depleted the resources of the producers, and
w other causes brought about a reaction during 1919 and 1920.
ith
Bxports of beef at one time formed a large and important branch of our
foreign trade, but by 1913 they had largely disappeared nnd foreign beef began
to come in. The exports were large from 1915 to 1918 solely because of the
war needs and have since fallen away very noticeably.
Imports of meat previous to 1913 were so small that they were not enu­
m
erated separately in the commerce reports. Imports of beef in 1914, however,
w
ere quite considerable. At this period the sources of cheap beef in the
Southern Hemisphere, especially Argentina, had developed enormously, and
they had, in fact, supplanted the United States in the overseas trade with
Europe.
Consumption of beef, as seen in the table, was at the lowest point in 1915,
shortly after the advent of the World War. Restricted supply and high prices
brought the next lowest consumption per head in 1920.
Estimated annual production, exports, and consumption o f real in United States.
Consumption.

Slaughter.
Calendar year.




Federally
Total. inspected. Other.
Million Million
pounds. pounds.
210
626
203
005
684
230
235
687
657
229
668
239
176
488
433
158
168
428
536
220
662
296
726
323
373
851
909
382

Total.

Per
capita.

MiUion Million
pounds. pounds. Pounds.
626
7.1
416
402
605
6.8
454
7.5
684
7.4
687
452
657
7.0
428
7.0
429
668
312
488
5.0
4.4
275
433
4.3
260
428
536
5.3
316
366
6.5
662
7.0
403
726
8.1
478
851
527
909
8.5

D igitized by L . o o Q

le

92

AGBICULTUBAL INQUIBY.

Veal production, as a rule, follows that of beef. The unusually large slaughter
In the last two yeiirs, however, contrasts rather curiously with the considerable
decline in cattle slaughter in the same period. It is accounted for partly by
the droughty conditions in the West, which induced heavy marketings of young
stock during 1919 and the relatively higher prices for calf products In 1920.
Country slaughter of veal is proportionately much larger than for any other
class of animals. The Federally-inspected slaughter of calves in 1909 was about
one-third of the total slaughter; and, although it is increasing, it is estim
ated
to be still well below one-half of the total.
The consum
ption of veal corresponds to the production, as there are no im
ports
or exports recorded. The per capita consumption for the whole period has
averaged close to 7 pounds per annum. It was lowest in 1915 (4.3 pounds) an
d
highest in 1920 (8.5 pounds).
Estimated annual production, exports, imports, and consumption of mutton and
lamb in United States.
Consumption.

Slaughter.
Calendar year.
Total.

1907...........................................
1908...........................................
1909...........................................
1910...........................................
1911...........................................
1912...........................................
1914...........................................
1916...........................................
1917...........................................
1918...........................................
1919...........................................
1920...........................................

Feder­
ally In­
spected.

Other.

Million
pounds.

Million
pounds.

Million
pounds.

559
555
604
600
738
788
738
720
626
612
473
522
626
556

431
428
466
463
569
608
569
555
482
472
364
402
482
428

128
127
138
137
169
180
169
165
144
140
109
120
144
128

Imports
Exports. (less re­
exports).

Million
pounds.

1
1
2
2
3
5
5
4
4
5
3
2
3
4

Million
pounds.

Total.

Million
pounds.

1
20
12
16
6
1
8
101

558
554
602
598
735
783
734
736
634
623
476
521
63!
653

Per
capita.

Pounds.

14
6.2
6.6
6.6
7.8
8.2
7.5
7.5
6.4
6.2
4.7
6.0

6.0

The production and consum
ption of mutton and lamb is very small in com
­
parison with beef and pork. It averages only about one-tenth of beef and
one-twelfth of pork. The table shows the production of mutton and lamb to
have been greatest from 1911 to 1914, in each of which years it exceeded
700,000,000 pounds. The year of lowest production was 1917, when the yield
was only 473,000,000 pounds. Since 1917 the trend was upward for two years,
but declined again in 1920.
The proport'on of Federal-inspected slaughter is greater with sheep and
lambs than with any other class of live stock. Nearly four-fifths of the total
m
utton and lamb produced is inspected in establishments having Governm
ent
supervision.
Normally, there is very little foreign trade in m
utton or lamb, but last year
saw a new departure in heavy imports of Australasian product. These im
ports
nm
ounted to nearly one-flfth of the total production.
The tnhle shows the per capita consum
ption ranging between 8.2 pounds
(highest) in 1912 and 4.7 pounds (lowest) in 1917. There has been a steady
rise In the last three years.




D igitized by L . o o Q

le

93

AGRICULTURAL INQUIRY.

Estimated annual production, exports, imports, and consumption of pork and
lard in United States.
PORK.
Slaughter.

Calendar year.

Consumption.
Imports
Exports. (less re­
exports).

Total.

1907.
1908
1909
1910.
1911.
1912.
1913.
1914.
1915.
1916.
1917.
1918.
1919.
1920.

Feder­
ally in­
spected.

Other.

Million
pound*.

Million
pounds.

Million
poundn.

Million
pounds.

7.491
8,226
6,690
5,881
7,511
7,189
7.492
7,228
8,050
8,634
6,901
9,137
9,269
8,470

4.420
4,853
3,946
3,470
4,48!
4,242
4.420
4,264
4,749
5,196
4,071
5,391
5,469
4,996

3.071
3,373
2,744
2,411
3,080
2,947
3.072
2,964
3,801
3,448
2,830
3,746
3,800
3,474

1,014
619
472
313
456
440
456
377
906
1,011
943
1,724
1,897
925

690
760
618
551
704
674
702
677
754
809
647
856
869
794

589
582
458
379
605
503
575
460
487
454
383
555
784

Million
pounds.

3
38
7
2
10
97
11

6

Total.

Per
capita.

Million
pounds.

Pounds.

6,477
7,607
6,218
5,568
7,055
6,749
7,039
6,889
7,151
7,625
5,968
7,510
7,383
7,551

74.1
85.4
68.6
60.3
75.1
70.6
72.5
69.9
72.0
75.7
58.4
72.5
7a 3
71.0

1,094
1,272
1,048
965
1,112
1,090
1,138
1,192
1,353
1,519
1,194
1,534
1,335
1,300

12.5
14.3
11.6
10.5
11.8
11.4
11.7
12.1
13.6
15.1
11.7
14.8
12.7
12.2

LARD.
1907
1906
1909

1910.
1911.
1912.
1913.
1914.
1915.
1916
1*17.
1918.
1919.
1920.

1,698
1,834
1,506
1,344
1,717
1,613
1,713
1,652
1,840
1,973
1,677
2,089
2,119
1,936

1,094

888

798
1,013
969
1,011

975
1,066
1,164
930
1,233
1,250
1,142

1 1......................... ; !

It is well known that the hog Industry 1 subject to rather violent changes
b
due to the economic situation and the character of the corn crop in n given
year. This is illustrated in the tables, in which it may be seen there are three
lean years, viz, 1909, 1910, and 1917. The shortage in 1909 and 1910 was due
to the failure of the corn crop, and that of 1917 is attributed to overinarketlng,
including breeding stock, in the preceding year, due mostly to the attraction
of high war prices. The enormous productions In 1918 and 1919 evidence a
remarkable recovery, which would have been impossible with any other class
of live stock than the prolific and quick-maturing hog. The production in 1920
probably suffered somewhat from the heavy marketings of the previous year.
The exports of pork products, excluding lard, in 1920 indicate a return tn
norm proportions as com
al
pared with the enormous war-time shipments of the
previous two years. The reversal was no doubt aided by the shorter produc­
tion and by the international economic conditions.
Regarding the exports of Inrd, it may be noted that those of the war period
did not exceed the prewar totals as did those of other pork products. Lard
exports have been large for a long period of years; in fact, the American lanl
hog has never had a competitor in the world’s markets. It is, nevertheless,
rnther surprising to note that the lard exports of 1911 to 1913 were larger
even than those of tbe years from 1915 to 1918. This is explained by the fact
that the Central Powers, especially Germany, as well as the continental Euro­
pean neutrals, were large consumers of our lard, and the loss of this trade
affected the totals until 1919, when foreign shipments were the largest in
history. The lard exports were very lurge also in 1920, although those of other
products fell off fully 50 per cent




D igitized by L . o o Q

le

94

AGRICULTURAL INQUIRY.

The largest quantity of pork products consumed within a year occurred ii>
1916, nnd the next highest figures were in 1908 and 1918. The smallest con­
sumption occurred in 1910 and 1917. in which years the production, as before
stated, was much below normal. The per capita consumption was highest in
1908 and lowest in 1917. The difference between these two years shows the
wide margin of 28 pounds, but it may be stated that the unusually low figure
in 1917 wns caused not only by the short production but also in large measure
by the high prices and the need of conserving a scarce supply for export.
Estimated annual production, exports, imports, and consumption of all m ea ts'
(excluding lard) in United States.
Consumption.

Slaughter.
Calendar vear.

Imports
Exports. (less re­
exports).

Total.

'

190
190
190
191
191
191
191
191
191
191
191
191
191
192

7
8
9
0
1
2
3
4
5
6
7
8
9
0

Feder­
ally in­
spected.

Other.

M i ll i o n
po u n d s.

Million
pounds.

Million
pounds.

Million
pounds.

Million
Million
pounds. , pounds.

10,003
16,007
15,000
14,j<r2
15,940
15,10*2
14,640
14,mo
14,937
15,922
14,740
IS,041
17,326
16,051

9,399
9,441
8, S35
8,412
9,368
9,030
8,763
S,5*5
9,384
10,248
9,906
12,0(16
11,320
10,259

0,004
6,626
6,225
6,090
6,578
6,132
5,877
5,454
5,553
5,074
4,S34
6,035
6,006
5,792

1,367
848
637
412
534
486
507
475
1,309
1,304
1,322

14,636
15,219
14,423
14,090
15,412
14,676
14,174
13,887
13,757
14,656
13,462
15,797
15,173
15,118

1
1
1
|
1
!
!

2,4M
2,215
1,093

41
323
129
38
44
210
62
160

Per
cap ita.

Total.

Pound*.
167.4
170.0
159.0
152. 5
163.9
153.5
145.9
140.9
13ft. 5
145.5
13L *
152.5
144.5
142.1

1Includes small quantity ol goat meat not given separately.

The figures in the table above are merely the addition of the various meats
in the previous tables plus a small quantity of goat meat. The latter, however,
furnishes only about one-tentli of a pound per capita of the total meat con­
sumption In the country.
It may be seen from the last table that the banner year in meat production
wns 1918, when a little over 18,000,000,000 pounds were produced. Two-thirds
of this meat was examined and certified as fit for human food by Federal
inspectors. One-third, or 6,000,000,000 pounds, was subject to State or local
inspection, or 110 indirection at all, and practically all of this was slaughtered
and consumed within State boundaries. During the last two yenrs the pro­
duction hns fallen off at the rate of about 1.000,000,000 pounds a year, but
hei-ause of the decrease in exports there was little change in the consumption
totals of 1919 and 1920.
N o t e .— Any conflict oV disparity in the figures of the foregoing tables and
those contained in Mr. Roberts's report doubtless arise fr,om the different
periods, i. e., whether the fiscal year or the cnlendar year is used, or the
difference In the classes of animals or products. They all originate from
the same source.
Sixth. Statements issued by the Bureau of the Census in June, 1921, showing'
the number of cattle, swine, sheep, and goats on farms in the United States
on January 1, 1920, as com
pared with April 15, 1910, as follows: These figures
do not Include a number of animals in village barns and elsewhere other than
on farms which, as shown by the Bureau of the Census, num
bered on January
1, 1920, 2,111,928 cattle and 1,220.564 dairy cows, and on April 15, 1910,
1,878,782 cattle and 1,170838 dairy cows.
C a t tl e

on

F arm s

in t h e

U n ited S t a te s .

W a s h in g to n , D. C.. June 8. 1921.
The Bureau of the Census, of the Department of Commerce, announces, sub­
ject to correction, tlie following preliminary figures from the 1920 census of
agriculture for the United States, with eompnratlve figures for 1910:




D igitized by L . o o Q

le

95

AGRICULTURAL IN QU IRY.

Cattle on fa r m in the United Statu: 1910 and 1910.

C
attle on farms Jan. 1, 1920, total number_____________________ 66,810,836
Beef cattle, total________________________________________ 35,424,458
Calves und«r 1 year of age___________- ________________ 8,631,631
Heifers 1 year old and under 2 years__________________ 3,980,343
Cows and heifers 2 years old and over__________________ 12,644,018
Steers 1 year old and under 2 years____________________ 4, 697,147
Steers 2 years old and over___________________________ 4,611,763
Bulls 1 year old and over_____________________________
777,704
Unclassified_________________________________________
81,852
Dairy cattle, total_______________________________________ 31,386,378
Calves under 1 year of age____________________________ 6, 904,586
Heifers 1 year old and under 2 years___________________ 4,057,644
Cows and heifers 2 years old and over_________________ 19,671, 777
Bulls 1 year old and over------------------------------------------752,371
C
attle on farms Apr. 15, 1910, total number_____________________ 61,803,866
Spring calves___________________________________________ 7,806. 539
Cattle born before Jan. 1, 1910___________________________ 53, 997,327
The number of cattle on fnrms in the United States on January 1, 1920,
according to the Fourteenth Census, was 66,810,836. This number included
35,424,458 beef cattle (cattle kept mainly for beef production) and 31,386,378
dairy cattle (cattle kept mainly for milk production).
BEEF AND DAIRY CATTLE.

The beef cattle included 8,631,631 calves under 1 year of age, 3,980,343 year­
ling heifers, 12,644,018 cows and heifers 2 years old and over, 4,697,147 yearling
B
teers, 4,611,763 steers 2 years old and over, 777,704 bulls 1 year old and over,
an 81,852 cattle not classified by nge or sex.
d
The dairy cattle included 6,901,586 calves under 1 year of age, 4,057,644
yearling heifers, 19,671,777 cows and heifers 2 years old and over, and 752,371
bulls 1 year old and over.
COMPABISON W IT H 1 9 1 0 .

The number of cattle reported at the census of 1910 was 61,803,866, but the
change in the date of enumeration, from April 15 in 1910 to January 1 in 1920,
m be taken into account in making any comparisons between the two years.
ost
The 1920 census, taken as of January 1, was too early to include tiny spring
calves, while the 1910 census, taken as of April 15, included 7,806,539 calves
bom between January 1 and April 15, 1910, or probably more than one-half of
th calves born in the spring of that year. On the other hand, the' cattle
e
enum
erated as of January 1, 1920, included large numbers of animals destined
to be slaughtered or marketed before April 15.
The relative importance of these two factors resulting from the change in the
date of enumeration varies from State to State. In some States the number of
calves born in the first three and one-half months of the year would greatly
exceed the number of cattle slaughtered or sent to market, while in other
States the number of cattle slaughtered during this period might almost offset
th number of calves born.
e
For the United States as a whole, the total number of cattle reported for
1920 exceeds the total num
ber In 1910 by 5,006,970. The actual Increase, after
doe allowance has been made for the effects of the change in date of enumera­
tion, is doubtless more than this, but less than the difference between the
nnm of cattle in 1910, excluding spring calves, and the number of cattle in
ber
1920.
STATES BANKING HIGHEST IN CATTLE.

•
Five States reported more than 3,000,000 cattle on farms for January 1,
1920, as follows: Texas, 6,249,443; Iowa, 4,567,708; Nebraska, 3,167,279; Wis­
consin, 3,050,829; and Minnesota 3,021,469. The States reporting the largest
num
bers of dairy cows 2 years old and over were Wisconsin with 1,795,122;
N York, with 1,481,918; and Minnesota,, with 1,229,179, no other State re­
ew
porting as many as 1,000,000 dairy cows 2 years old and over.




D igitized by L . o o Q

le

Number of catde on farms in the United Slates, by geographic divisions and States:

o

eg
FT

Tnrtlftna.....................

nUnois.

W boohsin.........
West North Central:
M innesota.......
Iowa..................




22,437
59,911
794,689
3,921,271
727,769
507,660
3,065,110
2,813,480
731,691

25,241
83,546
442,979
1,660,752
294,558
216,498;
899,690;
671,45l!
317,048

3,251
23,199
71,247
267,888
46,445
35,483
163,049
132,413
34,729

1,262
596
542
414
76
361

300,747
163,653
435,480
216,099
30,519
173,764

33,474
18,277
14,200
10,089
1,706
11,025

6,046
3,019
2,501
1,823
244
1,897

2,864
1,424
1,023
1,317
164
998

7,092
3,631
3,219
4,533
837
3,225

6,509
3,337
2,568
760
97
1,251

9,701
6,270
4,347
1,242
288
3,393

2,144,244
179,459
1,540,816

63,170
6,766
248,555

14,737
1,793
47,782

6,257
573
20,799

20,407
2,656
36,848

11,164
573
48,157

1,926,823
1,546,095
2,803,389
1,573,214
3,050,829

577,450
599,694
1,292,778
332,859
287,346

148,118
158,923!
350,3971
100,725'
71,1071

71,321
75,683
139,437
39,030
31,269

137,415
171,171
361,640
50,881
73,682

3,001,460
940,842
4*567,706 3,048,198

248,319
854,656

112,417
338,64l|

252,183
848,914

OS

183,934
172,711
429,707;
519,810:
1,549,446 1,034,014
1,820,708
977,747
546,442
339,7961
353,085
758,524
966,093
416,799
134,866
270,680
288,949 198,919

842,928
2,486,701
5,032,552
4,512,861
1,676,471
1,677,992
1,901,544
619,581
921,147,

41,596;
23,206
55,521!

175,425!
95,9971
290,122
147,331
21,431
112,622

31,918 1,336,550
109,8101 4,232,521
194,211 9,819,097
197,826, 17,647,714
57,691 4,839,321
50,365 3,942,526
62,859 10,721,012
18,519 6,060,725
29,172 3.204.400

267,273
145,376
421,280
206,010
28,813
162,739

43,898
22,482
64,147
26,618
3,183
23,606

9,328
813
73,405

1,277 2,081,074
358
172,693
21,564 1,292,261

291,721
18,764
209,325

248,164 1,481,918
17,635
130,497
163,908
874,286

59,271 2,423,003
222,999
5,797
44,742 1,586,519

119,977
109,333
208,765
91,219
65,906

86,909
70*047
202,684
43,892
39^447

13,710 1,349,373
14,537
946,401
29,855 1,510,611
7,112 1,240,355
6,033 2,763,483

261,003
200,243
315,633
269,311
503,256

171,426
118,662
193,860
165,871
384,605

888,0571
608,211
967,986
783,176
1,795,132

28,887 1,837,607
19,285 1,363,016
43,132 2,440,577
22,497 1,497,823
8M 2,680,074
10

182,242
519,596

120.620
421,028

25,061 2,080,627
65,363 1,519,610

479,210
386,628

303,279 1,229,179

68,959 2,347,435
39,507 4,448,006

26,513

3,483'
22,392

|

196*707

897,668

6,354
3,691
11,490
5,648
716
4,119

256,523
167,831
430,314
252,416
34,148
195,318

IKQUIEY.

o

New England:
M aine.....................
New Hampshire..
Verm ont................
Massachusetts___
Rhode I s l a n d ....
Connecticut..........
M iddle Atlantic:
New Y o r k .............
N ew Jersey...........
P e n n sy lv a n ia ....
East North Central:
Ohio........................

88,771
15,530;
64,312
318,491
3,090,127
829,2701
12,713,663 3,454,845
2,089,241
469,3S6;
466,922
1,709,820
6,866,404' 1,400,0001
6,554,339 1,503,181
1,993,602
428,125

to

AG
BICU
LTUBAL

Geographic divisions:
New England___
Middle Atlantic___
East North Central
W est North C entral...
South Atlantic..............
East South Central....
W est South Central. . .
Mountain........................
Pacific..............................

1 t and 1 1 .
9O 9 0

Miwml.............

North Dakota.........
South Dakota.........
Nebraska................

T n ffr* ............ .
Tn

Booth Atlantic:

M iv a n ................ .

r

Maryland.....................
District of Colombia
Virginia.......................,
W est Virginia............
North Carolina.........
South Carolina.........
Georgia........................
Florida..........................
Ease South Central:
Kentucky....................
Tennessee....................
Alabam a.................... .
Mississippi.................
W est South Central:
Arkansas....................
Louisiana.................. .
Oklahoma...................
Texas...........................
Mountain:
Montana.................... .
Idaho............................
W yom ing....................
Colorado......................
New Mexico...............
Arizona........................
U tah..............................
N evada........................
Pacific:
Washington................
Oregon..........................
California....................

448,199
213,398
409,511
682,546
542,216

181,048
85,061
222,155
293,630
240,860

672,023

416
6,177
3
103,0901
91,696
56,306
29,683
103,315
78,700

162
8,308
3
42,214
45,553
24,492
15,302
*64,886'
53,3831

740
10,396
10
61,155
71,664
58,136.
49,428,
214,300
261,931

1,093,453
1,161,846
1,044,008
1,250,479

433,659; 129,036
492,4861 155,996
322,4341 71,693
461,2411 110,197

55,362!
64,3451
42,1 7
1|
57,063|

79, 3isl
95,373!
128,350l
204,619

1,072,966
804, 241
2,087,049
6,249,443

.345,8061 86, 791
487,709! 100,343
1,265,317; 306,188
4, 767,5721 906,738

43,466
63, 856!
155, 290
400,737

1,268,516
714,003
*73, 729
1, 756,616
1, 300, 335
821,918
505, 578
356, 390

1,057,418
512,512
814, 386
1,434,423
1,237,541
768,197
.397, 563
332, 299

275,564
129. 276
206,541
325,033
249, 545
153,137
94, 528
69, 557

572,644
S51, 108

193,819
570,697
1,229,086

51,062
134. 748
242.3J.*'

2,781,6441 1,714,804
1,334, M2
674,520

2,871703
8)107,279
2,975*390

46,509
283,977
965

914,674
587.462
644,779
435.462
1,157,432

638,961

2 ,00S,03"

1,818,784
8,470,779
2,045,637

^ 752
53,666
19
403,985
332,441
182,702
117,386
478,940'
518,350|

967,197
99,204
246,045
326,345

285,200
50,669
263,718
286,668
262,799

32,598
16,123
34,102
50,276
44,368

142
8,414

214
23,272

2,099

76,201
63,191
20,289
7,797
45,063
41,180

114,930
55,352
19,003
10,496
35,997
35,294

92,743
96,028
35,971
39,628

70,073
71,609
35,191
39,625

119,8431
252,6621
494,080
2,198, 525

50,011
31.259
147,544
444, 326

39,531
30, 276
137,119
692,764

130, 705
63, 508;
92,95!
162, 5 5
-4
127.74S
76,497
53, 825.
44, 597

384,148;
187,006
298, 840i
529,186j
664, 329
429,480
175,128
145,303

118,516
71,976
84,394
191,701
67, 242
41,165
41,917
35, 356

108,544
49, 740
118, 348
200,026
97,446
41,819
24,557
30,971

1 , 423;
G
8,6781
13, 312
25,932
31,231
22, 774
7,608
6,455

24,045
72,193
134,220

64, 924
225, 70S1
441,059

26,861
66,380
158,310

23,668
61,113
232, 267

3,259
10,555
20,915

1

839,076

211,084
574,690
828,702

1,066,750
660,023
555,979
696,500
929,753

284,060
181,739
133,767
158,804
227,431

131,317
90.386
70,444
78,604
107,010

061,060
370,707
338,283
440,838
574,257

6,395
4,985
4,476
4,680
15,379;
8,362

44,757
229,711
946
510,689
255,021
462,077
318,076
678,492
120,631

5,141
31,345
118
83,052
41,558
99,222
81,835
175,276
27,995

4,852
26,565
95
59,894
28,608
64,334
40,822
96.387
18,239

83,026
161,972
704
357,880
181,206
290,223
188,305
391,514
71,641

2,561,482
743,762
1,635,276
2,932,350
8,079,403
54,986
1,738
9,820
287,751
962
20
850,067
8,963
620,288
3,649
8,298
700,861
389,882
7,114
14315 1,080^316
2,756
845,188

7,127
9,135
9,1121
10,1 9
0|

659,794
669,360
721,674
789,238

137,312
165,877
214,219
241,116

73,571
79,595
97,051

102,868

441,346
415,128
394,112
427,406

7,565
8,760
16.192
17,848

6,164,
727,160
9.313,
316,532
821,732
25,096
122,476' 1,481,871

198,445
92,886
235,306
439, 456

101,182
40, 754
105,835
169,028

415,507,
176,9 6
3|
464,5 6
5|
844,545

12,026 1,028,071
5,956
804,795
16,035 1,953,560
28,842 6,934,586

211,098
202,391
59, 343
322,193
62,794
53,721
108,015
24,091

54,422
56, 207
16,615
81,447
15, 779
13, 293
25, 794
7,123

25,844
27,616
6, 893
41,513

127,581
115,336
34,933
192,234
37,805
31,619
66,724
13,349

3,251
3,232
902
6,999
1,188
1,041
1,420

378,825
280,411
778,951

80,990
57,840
150,119

238,270
180,462
502,415

6,098
14,874

8,022

7,768
14,077
3,133
51,365
36,011

111,543

19,405
17.191
13,815
18,194
21,055

1,000,937
996,529
932,428
1,012,632

943,147
453,807
767,427
1,127,737
1,081,663
824,929
412,334
449,681

►

§
a

d
5

d

J*

0

8,200

1 The United States total includes 81,832 cattle not classified by age or sex. Tbls number is distributed by States as follows: South Dakota, 8,363; Nebraska, 2,612; Florida,
39,300; Texas, 2,006; Montana, 23,518; Idaho 2,328; and Arizona, 8,323.

n
o
eg
FT



CD

98

AGRICULTURAL INQUIRY.
S w in e o n .F arm s in t h e U n ite d S ta te s .

W a s h in g to n , D. C., June 4 , 1921.
The Bureau of the Census of the Department of Commerce announces, sub­
ject to correction, the following preliminary figures from the 1920 census of
agriculture for the United States, with comparative figures for 1910:

Swine on farms in the United States, 1920 and 1910.

Swine on farms Jan. 1,1920, total number_______________________ 59,368,167
Figs under 6 months old__________________________________ 26,237,924
Sows and gilts for breeding, 6 m
onths old and over___________ 11,445,239
___
934,553
Boars for breeding, 6 m
onths old and over______________ *
All other hogs, 6 months old and over_______________________ 20,750,451
Swine on farms Apr. 15, 1910_________________________________ 58,185,676
The number of swine.on farms in the United States on January 1, 1920,
according to the Fourteenth Census, was 59,368,167. This num
ber Included
26,237,924 pigs under 6 m
onths old on that date, 11,445,239 sows and gilts 6
months old and over kept for breeding purposes, 934,553 boars kept for breeding
purposes, and 20,750,451 other hogs 6 m
onths old and over.
The num
ber of swine reported at the 1910 census was 58,185,676, but the
change in the date of enum
eration from April 15 in 1910 to January 1 in 1920,
must be taken into consideration in making nny com
parisons between the tw
o
years. The 1920 census, taken in January, was too early to include any spring
pigs, while the 1910 census, taken in April (beginning Apr. 15), probably
Included more than half of the “ crop ” of spring pigs. On the other hand, a
farm census taken in January would Include large numbers of hogs destined
for sale or slaughter before April 15.
The relative im
portance of these two factors resulting from the change in the
date of enum
eration varies from State to State. In those States where the num
­
ber of pigs born In the first three and a half m
onths of the year Is greater than
the num
ber of hogs slaughtered or marketed, the 1910 figures, relating to April
15, are too large for a fair com
parison with the number of swine on hand Janu­
ary 1, 1920—as m
uch too large as the num
ber of pigs born between January 1
and April 15 exceeds the num
ber of hogs sold or slaughtered during the sam
e
period. On the other hand. If in any State the num
ber of swine slaughtered
or sent to market between January 1 and April 15 were greater than the num
ber
of pigs born during the same period, the 1910 figures would be too small for a
fair com
parison with the 1920 figures.
Arranging the States in order of the number of hogs and pigs reported, it
appears that the following States stood at the head of the list (and in the sam
e
order) both in 1920 and in 1910: Iowa, with 7,864,304 swine on farms In 1920;
Illinois, with 4,640,447; Missouri, with 3,888,677; Indiana, with 3,757,135; N
e­
braska. with 3,441,917; and Ohio, with 3,083,846. These six States are the only
ones which reported more than 3,000,000 swine in 1920.
Kansas ranked seventh in 1910, but showed a decided falling off in 1920.
This was accom
panied by a marked decrease in the acreage and production of
corn and a corresponding Increase in wheat and oats, and doubtless indicates
a change in type of farming. A similar situation prevails in Oklahoma, w
hich
also shows a considerable decrease in the num
ber of swine reported for 1920,
as com
pared with 1910. Most of the Mountain States, on the other hand, show
a decided Increase in the num
ber of hogs on farms.




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99

AGRICULTURAL INQUIRY.

Number of twine on farms in the United States, by geographic divisions and
States—1920 and 1910.
SwLne on (arms Jan . 1, 1920.

Division or State.
Total.

United States.................
Geographic divisions:
New England..........
Middle Atlantic.......
East North Central.
8outh Atlantic........
East South Central..
West Soath Central.
Mountain.................
Pacific.....................
New England:
Maine.................
New Hampshire.
Vermont.............
Massachusetts_
_
Rhode Island___
Connecticut........
Middle Atlantic:
New York...........
New Jersey.
Pennsylvania___
Esst North Central:
at 1
Ohio________ ________
Indiana_________ ______
Illinois.................I .......
Michigan..........................
Wisconsin........................
West North Central:
Minnesota........................
Iowa.................................
Missouri...........................
North Dakota.................
South Dakota.................
Nebraska.........................

V.n— .........................

Soath Atlantic:
Delaware..........................
Maryland.........................
District of Columbia.......
Virginia...........................
West Virginia.................
North Carolina................
South Carolina................
Geonda.............................
Florida.............................
East Sooth Central:
Kentucky.........................
Tennessee........................
West South'
tral:
Arkansas...
Louisiana
Oklahoma--

Swine on
Sows and
[ Boars for
All other farms Apr.
Pigs under
gilts for
breeding, 6
hops, 6
15, 1910.
I 6 months breeding, 6
Imonths old months old
|
old.
months old
and over.
and over.
and over.

59,368,167 | 26,237,924
383,752
1,955,982
14,184,054
21,699,968
6,537,392
6,206,942
5,766,535
1,192,745
1,440,797

11,445,239

934,553

20, 750,451

58,185,676

1
219,624
57,224
! 1,161,410 1
279,037
7,371,160 j 2,645,914
! 6, K30,783 i 4,970,012
3,454,251
1,0-19,190
3,045,326
918.442
I 2,885,354
1,090,946
214,194
538,373
731,640
220,250

6,831
32,5S6
230,954
363.436
103,967
71.322
85,352
18,520
21,582

100,070
482.919
3,936,026
9.535,707
1,929,981
2,171,852
1,704,883
421,658
467,325

396,642
1,790,821
14, 461,059
21,281,509
5,963.920
5, 438,606
7,021.945
640.911
1,190,263

91,204
41,655
72,701
1(H, 192
12,869
61,071

53,036
25,053
46,386
53,757
6,833
34,559

12,414
5,765
10,779
17,742
1,701
8,823

1,553
754
1,087
2,042
261
1,137,

24,201
10.083
14,509
30,651
4,074
16,552

87,156
45,237
94,821
103,018
14,038
52,372

600,560
139,222
1,216,200

379,413
74,817
707,180

90,368
21,174
167,495

8,898
2,659
21,029

121,881
40,572
320,496

666,179
147,005
977,637

3,063,846
3,757,135
4,640,447
1,106,207
1,596,419

1,888,040
2,171,143
1,887,313
686,866
737,798

493,603
636,025
929,823
184,577
401,886

44, 823
59,888
i ,271
14,302
34,670

657,380 1
890,079
1,746,040
220,462
422,005 ,

3,105,627
3,613,906
4,686,362
1,245, >33
1,809,331

2,380,862
7,864,304
3,888,677
458,265
1,932,741
3,441,917
1,733,202

627,745
2,116,191
1,937,526
133,870
377,474
814,078
823,899

617,538
1,937,351
677,481
126,760
545,248
783,207
282,457

52,436
124,981
57,665
11,614
37,635
53,858
25,247

1,083,143 1
3,685,781
1,216,005
180,021
972,384
1,790, 774
601,599

1,520,257
7,545,853
4,438,194
331,603
1,009,721
3,435,724
3,000,157

38> 621
306,452
1,331
941,374
305,211
1,271,270
846,997
2,070,655
755,481

21,814
181,938
540
576,119
192,818
642,121
402,546
1,053,285
383,053

4,602
41,320
295
119,472
44,661
180,954
128,483
363,239
166,164

603
6,042
42
14,613
5,109
20,653
13,477
30,813
12,615

11,602
77,152
454
231,170
62,603
427, 512
302, 491
623,318 ,
193,649

49,260
301,583
665
797,635
328,188
1,227,625
665,211
1,783,684
810,069

1,504,431
1,832,307
1,496,883
1,373,311

819,043
950,487
679,910
595,886

218,714
253,629
228,281
217,818

16,408
19,662
19,373
15,879

450,266
608,529
569,329
543,728

1,491,816
1,387,938
1,266,733
1,292,119

1,378,091
850,562
1,305,108
2,232,774

699,946
384,450
687,714
1,113,244

266,185
196,955
234,990
392,816

15,574
14,527
21,016 l
34,235

396,386
251,630
361,388 ;
692,479

1,518,947
1,327,605
1,839,030
2,336,363

167,060
240,030
72,278
449,866
87,906
49,599
99,361
26,645

69,509
106,500
29,920
200,027
44,360
24,935
51,224
11,898

33,975
43,084
14,152
79,658
16,249
9,811
13,170
4,095

3,000
3,040
1,264
7,106
1,502
843
1,184
521

60,576
87,406
26,942
163,015
25,795
14,010
33,783
10,131 1

99,261
178,346
33,947
179,294
45,409
17,208
64,286
23,160

264,747
366,778
909,272

138,128
140,656
452,856

42,910
38,472
138,868

4,782
4,219
12,581

78,927 |
83,431
304,967 1
1

206,135
217,577
766,551

Maintain:
Idaho....... . . .
Wyoming___
Colorado.......
New Mexico.
Utah._______
Nevada......... .
Pacific:
Washington...




4

52584A
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100

AGRICULTURAL INQUIRY.
Sheep

and

G o ats

on

F arm s

in t h e

U n it e d S t a t e s .

D. C., June 15, 1921.
The Bureau of the Census, of the Department of Com
merce, announces,
subject to correction, the following preliminary figures from the 1920 census
of agriculture for the United States, with comparative figures for 1910.
W a s h in g to n ,

Sheep and goatg on farms in the United States, 1920.and 1910.

Sheep on farms Jan. 1,1920, total number______________________ 34,984,524
Lambs under 1 year of age_______________________________ 8.931,705
Ewes 1 year old and over________________________________ 23, 462,689
826,373
Rams 1 year old and over________________________________
Wethers 1 year old and over______________________________ 1,494,032
Unclassified____________________________________________
269,725 •
Sheep on farms Apr. 15, 1910, total number_____________________ 52,447,861
Spring lamb6___________________________________________ 12,803,815
Sheep born before Jan. 1, 1910____________________________ 39,644,046
Goats on farms Jan. 1, 1920, total number______________________ 3,426,506
Kids under 1 year of age, raised for fleeces_________________
530,763
Goats 1 year old and over, raised for fleeces________________ 1,569,834
All other goats---------------------------------------------------------------- 1,325,909
Goats on farms Apr. 15, 1910_________________________________ 2,915,125
The num
ber of sheep on farms In the Un'ted States on January 1, 1920,
according to the Fourteenth Census, was 34,984,524. The number included
8,931,705 lambs under 1 year of age, 23,462,689 ewes 1 year old and over,
826,373 rams 1 year'old and over, and 1,494,032 wethers 1 year old and over.
The num
ber of goats reported for the same date was 3,426,506, including
530,763 kids under 1 year of age, raised for fleeces, 1,569,834 goats 1 year of
age and over, raised for fleeces, and 1,325,909 other goats—goats and kids of
all ages not kept for their fleeces.
COMPARISON WITH 1010.

The number of sheep reported at the census of 1910 was 52,447,861, but the
change in the date of enumeration from April 15 in 1910 to January 1 In 1920
must be taken into account In making any comparisons between the two years.
The 1920 census, taken as of January 1, was too early to include any spring
lambs, while the 1910 census, taken as of April 15, included 12,803,815 lam
bs
born between January 1 and April 15, 1910. On the other hand, the sheep
enumerated as of January 1, 1920, Included large numbers of animals destined
to be slaughtered or marketed before April 15.
The relative importance of these two factors resulting from the change In
the date of enumeration varies from State to State. In some States the num
ber
of lambs born during the first three and one-half months of the year w
ould
greatly exceed the number of sheep and older lambs slaughtered or sent to
market, while in other States the num
ber of sheep slaughtered during this
period might almost offset the number of lambs born.
Taking as a bas s of com
parison the sheep reported in 1910, exclusive of
spring lambs, the figures for the United States as a whole show a decrease of
4,659,522 sheep betw
een 1910 and 1920. The actual decrease, however, after
due allowance lias been m
ade for sheep slaughtered as well as for spring
lambs, is considerably more than this, but less than the difference betw
een
the total number of sheep reported in 1910 and the number in 1920.
The total number of goats reported at the 1910 census was 2,915,125. As
com
pared with this figure, the num
ber of goats reported for 1920 represents
a nominal increase of 511,381. The actual incrense, after making allowance
for the change in date of enumeration, is doubtless considerably less than that
BANK OF IMPORTANT STATES.

Six States reported m
ore than 2,000,000 sheep on farms for January 1, 1920.
as follows: Texas. 2.552.412; California. 2.400,151; Idaho, 2,356,270; Ohio,
2,102,550; Montana. 2,082,919; and Oregon, 2,002.378.
The States reporting the largest numbers of goats were Texas, with 1,706,606;
New Mexico, with 226.862; Arizona, with 161,124; Oregon, with 133.685; Ar­
kansas, with 123.800; Missouri, with 121,012; and California, with 115,759.
These seven States are also among those reporting the largest numbers of
goats kept for fleeces.



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Number o/theep and goat* on/arm* in the United State*, by geographic division* and State*: 19t0 and 1910.

S e po fa sJ n 1,1930.
h e n rm a .
Divide** or SU te.

Ooats on farms Jan. 1,1990.
Sheep on
(arms Apr.

530,763

1,560,834

1,325,909

2,915,125

430,672
1,844,057
9,542,234
5,065,009
2,513,553
2,496,221
2,193,657
22,770,291
5,592,167

6,033
7,064
33,550
150,011
229,338
325,698
1,966,931
451,607
256,274

3,215
373
6,109
17,914
2,556
8,918
377,320
67,257
47,101

629
733
11,478
58,181
12,498
19,984
1,112,699
193,174
160, 458

2,188
5,958
15,963
73,916
214,284
296,796
476,912
191,176
48,715

3,195
7, £88
35,059
113,215

206,434
' 43,772
118,551
32,708
6, 789
22,418

476
3,574
124
1,296
116
447

930,300
30,683
883,074

2,580
642
3, *42

187,475 ,
8,034 :
15,029 ,
15,606
8,380

3, 909,162
1,336,967
1,059,846
2, 306, 476
929, 783

4,027
7, 872

6,615
14,932 i
14,446 '
0,822 !

637,582
1,145,549
1,811,268
293,371

R am s
1 year old
and over.

Wethers
1 year old
and over.

34,984,524

8,931,705

23,462,689

826,373

1,494,032

Geographic divisions:
New England...............................................
242,706
Middle A tlantic...........................................
1,100,864
East N orth Central. . ............................
5,073,005
W est North Central...................................
4,940,408
8outh Atlantic.............................................
1,214,163
East South Central....................................
1,318,349
W est South Central...................................
2,889,258
Mountain........................................................| 13,179,463
Pacific.............................................................
5,026,308

51,015
262,612
1,338,844
1,532,471
182,302
195,095
707,669
3,341,964
1,319,833

178,657
728,752
3,375,553
3,190,395
929,248
1,017,315
1,668,126
9,017, 221
3,357,422

7,908
31,483
124,084
109,495
54,008
63,786
58,512
270,663
106,434

5,126
78,017
234,524
72,410
44,770
42,153
455,051
319,312
242,619

90,049
20,257
47,088
11,896
1,814
7,553

3,967
861
I,895
692
104
389

400,402
7,773
320, 577

14,000
3X3
17,100

186
65,631

.536,023
1,336,429
463,725 |
152,832
420, 122 I
183, 902
354,391
808,734
111,696 ■
346,543

42,623
19, 298
20, 766
28, O
i’5
13,372

136,685
359, 754
314,127
75,812

II,073
26,121
32,786
6,955

New England:
Maine......................
.......................... I
............................ ;
New Hampshire..
Vermont.................
............................
............................I
Massachusetts___
Rhode Island........
............................
Connecticut...........
............................!
Middle Atlantic:
............................
New York..............
New Jersey.......... .
............................
Pennsylvania____
............................j
East North Central:
............................!
Ohio........................
............................I
Indiana..................
Illinois....................
Michigan................
............................:
W iscon.sin..............
............................
West North Central:
............................1
Minnesota.
Iow a................................................................ .
Missouri.
North Dakota.

]

Digitized by

n
o

.

.

\
]
1

AU other
goats.

211,101
198,647
1,276,231
737, (W4
332,445

I
23,660
6,291
12,940
4, 748
684
2,692

119,471 I
28,021
62,756 1
IS, 880 I
2,736
10,842

1,795 ;
612 ,
833
1,544 |
134
208

,
152,124 I

578,726
10,471 I
511,667
2,102,550
643, &
S9
639,819 i
1,206,756 I
479,991 '

.

509,061
1,092,095
1,271,616 i
298,912 !

QI QI
O

MS 359 |

.

.

.

.

351,691 |
691,288 I
910,257
209,323 ,

1 The United States total includes 909,725 sheep not classified by age or sex.
W yom ing, 62,860; Colorado, 54,022, and Arizona, 83,681.




Total.

.

12,200

.

.

.

.

1,553
0.
\0H
2,4St
2,715
10, 526
121,012
1,250

62
283
61
149
22
52

6

14 1
127 I

12

234

.

88
394
1,781
3,654
192

!

.I
!
1

292 j
413 1
12,385
80 ,

This number is distributed by States a-*/ 1Uows: Nebraska,

365
209
37
1,109 ,
88
381

582
495
261
1,251
106
500

308
15
410

3,082
26
38

2,145 !
615
3,198

3/475
574

398
1,078
4,810
4,303
859 '

.

758
1,808
51,745
149

35,637;

i

.
I
!
I

j

aa
.&o

3,541
fi, 400
3, 932
657
1,133

5,379
7,290
12,435
5,080
4, 875

1,695 '
8,275
56,882

4,588
20,664
72,415
1,074

1,021

.

Florida, 3,836; Idaho, 29,800;

101

c§
FT

.

i
!
j

15,191o.

INQUIRY.

52,447,861 I 3,426,506

Ewes
1 year old
and over.

AG ICU R
R LTU AL

Ooats
1 year old
and over,
raised for
fleeces.

Lambs
under 1
year of age.

United States...

Ooats on
farms Apr.
16,1916.

K ids
under 1
year of age,
raised for
fleeces.

Total.1

Number of sheep and goats on farms in the United States, by geographic divisions and States: 1910 and 1910—Continued.

O

to

Sheep on farms Jan. 1,1920.

Division or State.

Kansas..........................

Digitized by

n
o

c§
FT

South Atlantic:
Delaware........................................
Maryland........................................
District of Columbia..................
Virginia..........................................
West Virginia..............................
North Carolina............................
South Carolina..............................
Georgia............................................
Florida............................................
East South Central:
K entucky......................................
Tennessee...................................... .
Alabam a........................................
Mississippi.....................................
W est South Central:
Arkansas........................................
Louisiana.......................................
Oklahoma......................................
Texas...............................................
Mountain:
Montana.........................................
Idaho...............................................
W yom ing.......................................
Colorado.........................................
New Mexico...................................
Arizona...........................................
U ta h .'.............................................
Nevada...........................................
Pacific:
Washington...................................
Oregon............................................
California.......................................




Sheep on
farms Apr.
15,1910.

Goats
1 year old
and over,
raised for
fleeces.

5,040
2,501
6,937

3,188
619
907

1,296
799
1,626

556
1,083
4,404

2,337
3,290
8,847

11
43

51
190

556
1,202
129
47
55
513

1,847
3,341
290
175
281
6,323

29
640
7
6,723
2,460
23,493
31,730
110,148
39,054

88
1,182

804,873
610,360
214,473
37,559
187,644
113,701

91
873
7
9,126
7,003
23,912
31,952
110, 4&4
45,890

7,327
5,748
35,019
24,750
89,616
47,371

6,532
4,730
9,964
20,927

1,363,013
795,033
142,930
195,245

35,045
73,228
104,1 8
113.277

1,298
7,139
190
291

4,409
13, 782
956
837

29,338
52,307
103,002
112,149

29,869
43,560
79,347
45,871

5,104
7,271
3,230
42,907

3,821
18,365
3,327
429,538

144,189
178,287
62,472
1,808,709

123,800
91,249
45,276
1,706,606

4,713
165
8,766
363,676

15,121
904
23,611
1,073,063

103,966
90,180
12,899
269,867

58,294
57,102
25,591
1,135,244

1,468,732
1,789,631
1,331,436
876,416
1,172.525
531,818
1,231,341
615,322

32,736
53,634
48,758
25.084
28,345
37,880
25,162
19,064

72,051
36,756
10,087
13,165
63,647
59,411
27,670
36,575

5,380,746
3,010,478
5,397,161
1,426,214
3,346,984
1,226,733
1,827,180
1,154,795

1,282
1,515
1,501
28,688
226.862
161,124
29,512
1,123

184
200
277
1,398
34,655
22,803
7,510
230

601
615
334
4,995
97,478
71,138
17,596
417

497
700 *
890
22,295
94,729
67,183
4,406
476

5,045
5,719
2,739
31,611
412,050
246,617
29,014
4,849

438,571
1,302,142
1,616,709

10,573
32,941
62,920

22,666
115,982
103,971

475,555
2,699,135
2,417,477

6,830
133,685
115,750

656
25,867
20,578

2,119
09,690
58,640

4,055
8,110
36,541

8,621
185,411
138,413

Ewes
1 year old
and over.

Hams
I year old
and over.

Wethers
1 year old
and over.

867,036
540,583
361,102

232,274
296,833
116,986

600,767
195,546
231,523

16,219
5,902
7,439

17,776
6,665
5,154

611,264
293,500
272,475

3,220
103,027
10
345,151
509,831
90,556
24, 294
73,415
64,659

703
13,031

129
3,895
2
15,656
15,722
5,214
1,954
7,407
4,029

57
621

7,806
237,137

41,061
82,858
17, 459
4,627
13,274
9,289

2,331
85,480
8
286,070
392,790
65,562
16,293
44, 795
35,919

2,364
18, 461
2,321
1,420
7,939
11,587

707,845
36-}, 19ft
81,868
164,440

88,452
59,922
15,187
31, 534

583,997
281, 774
51,728
99,816

28,864
17,770
4,989
12,163

100,159
129,816
106,871
2,552,412

22,352
22,522
29,896
632,809

68,882
81,658
70,428
1,447,158

2,082,919
2,356,270
1.832.255
1.813.255
1,640,475
881,914
1,691,795
880,580

509,400
446,449
379,124
844,568
375,958
169,224
407,622
209,619

623,779
2,002,378
2,400,151

151.969
551,313
616,551

1

G oats on
farms Apr.
15, 1910.

Rids
under 1
i year of age,
raised for
! fleeces,
i

Lambs
under 1
year ofage.

Total.

W est North Central- Continued.
South D akota...............................
Nebraska........................................

Goats on farms Jan. 1,1920.

Total,

All other
goats.

103

AGRICULTURAL INQUIRY.

An examination of the Statistical Abstract of the United States and of the
reports of the Bureau of Markets from time to time will show that the estimates
that are made of the number euch year between census periods are generally
excessive and necessarily are mere estimates. The most accurate figures,
therefore, are those issued by the Bureau of the C
tensus. Any deductions
drawn from the estimates of the Bureau of Markets from the years closest
to the census dates should at least be m
odified accordingly. The estimates are
doubtless the best that can be made from the data obtainable, and what I
say Is not said In a spirit of criticism, but merely to point out the fact.
The figures obtained from the markets as to the number Inspected at the
slaughtering establishments under Government Inspection afford the best
barometer of the live-stock supply converted Into meat.
Seventh. I submit herewith a statement taken from the Interstate Commerce
Commission’s summary of freight commodities statistics of Class I roads for
the quarter ended March 31, 1921, showing the revenue freight originating and
the revenue freight carried in the western district by Class I roads, by
number of carloads and the number of tons of the different commodities. As
explained, this shows the Importance of the live-stock business. It should be
stated In this connection that the ton-miles are 'not given, because this record
is not now kept in the reports given to the Interstate Commerce Commission.
The statement does not therefore show the relative services performed, which, by
reason of the longer distance movement of live stock than the average, is
greater than the relative number of tons and carloads.
As stated by me in oral argument, the agricultural producer always pays the
freight on his articles deducted from the account sales, and all of the com
­
modities which move to him as a matter of common knowledge come with the
freight added. This table will enable one to observe, therefore, the quantities
that are moved where the freight is added and which the consumer has to pay.
This would Include agricultural implements, vehicles, and all of the other
commodities which the farmer consum
es. From this it results that the in­
creased rate of freight during and since the war is a double burden upon
agriculture. The statement is as follows:
Summary of freight commodity statistics of Class I roads for the quarter ended
Mar. SI, m i .
(Class 1 roads are those having annual operating revenues above $1,000,000, western district; average num­
ber of miles of road operated, 131,751.81.]
Revenue freight origi­
nating on respond­
ent’ s road.

Total revenue freight
carried.

Commodity.
Number of I
Number of Number of
Number of
tons (2,000 I carloads.
tons (2,000
carloads.
pounds). |
pounds).

reoD u cra o r

a o r ic u l t u b k .

Wheat..
C orn....

O
ats.......................
Other grain...................
Floor and meal............
Other m ill products___

Hsy, straw, and alfalfa..
Tooacoo.................... .
Cotton..

Cotton seed and products, except oil.
Gtros traits........................................
Other fresh fruits...............................
Potatoes.............................................

Otherfresh vegetables....................

Dried fruits ana vegetables................
Other products oi agriculture............
Total.

109,642
93,481
29,044
27,430
57,566
42,086
71,556
1,513
37,810
32,834
12,588
11,172
26,097
13,122
3,832
22,905
593,378

nODTTCTS

or

182,341
133,494
41,810
42,126
84,736
61,971
96,735
2,417
71,086
46,367
49,969
34,795
56,774
47,501
11,765
38.343

4.393,801
3,624,976
994,751
918,333
1,615,604
1,031,314
925,568
21,102
517,416
797,341
220,175
178,058
475,775
163,200
111,216
681,601

!
|
I
1
!
I
I
I

16,670,231 I 1,002,230

7,264,858
5,017,303
1,390,272
1,369,981
2,399,542
1,518,258
1,257,284
36,115
1,015,937
1,136,390
864,642
530,157
1,032,422
606,437
329,595
1,022,180
26,791,373

ACTUALS.

Hensan auto.
d
UBlffe.
Freeh tMe&s............................

O th er paefciiif boose products..




7,914
121,906
16, 834
122,502
30,886
13,228

91,085
1,421,335
167,316
1,137,905
401,656
229,063

I
I
I
I
1

10,661
144,870
23,883
136,335
34,939
18,501

1
,
j
1

123,701
1,696,136
245,881
1,270,975
457,393
318,761

D igitized by L . o o Q

le

104

AGRICULTURAL INQUIRY.

Summary o f freight commodity statistics o f Class I roads for the quarter ended
Mar. 31, 1921—Continued.
(Class I roads an three having annual operating revenues above $1,000,000, western district; average num­
ber of miles of road operated, 131,751.81.|
Revenue freight origi­
nating on respond­
ent’s road.

Total revenue freight
carried.

Commodity

Number of Number of Number of Number of
carloads. tons (£000 carloads. tons ( 2,000
pounds).
pounds).
produ cts

of

a n im a l s —

c o n tin u e d .

4,361
9,260
4,443
1,442
4,218
7,267

48,798
107,178
59,781
25,079
99,008
176,453

3,755,970

400,180

4,629,144

6,585
266,970
8,274
7,897
30,622
1,865
118,338
28,198
1,511
8,891
3,015

251,207
11,856,137
254,462
397,709
1,657,184
80,193
5,437,231
1,022,558
51,861
231,295
130,618

10,973
455,601
16,339
12,427
43,457
5,088
154,237
56,957
3,170
16,866
13,246

427,777
20,337,642
606,501
646,229
2,223,961
216,268
7, GO), 351
2,037,201
110,281
445,388
545,000

21,370,4.55

788,361

34,496,619

153,105
22,121
59,866
112,073
6,291

4, K12, 853
70s, aw
2,069,364
3,207,322
137,543.

170^92
34,883
83,930
254,663
10,203

5,326,972
1,133,528
2,890,643
7,286,321
226, 179

353,456

Total..

33,550
74,245
38,631
7, 812
59,013
93,759

482,166

EgRS.........................

Biutor and cheesc................
W ool..........................................
Hides and leather................
Other products of anim als.

2,967
6,613
3,009
521
2,495
3, 713
332,588

Poultry....................................

10,935,112

554,571

16,863,643

124,830
5,082
14,308
55
1,909
2,175
13,466
2,854
10,077
20, 420
16, 874
7,194
8,121

3,581.452
149, S28
436,756
851
85,311
85,249
409,330
9X, 399
195,219
773,218
582,702
181,327
150,697

240,595
10,571
32,681
191
4,835
11,669
63,401
9,753
25,447
33,561
26,823

6, S47.60C
313,163
978,443
4,476
217,461
447,55*'
2,219,494
369,932
509,112
1,271,224
933,191
338,945
218,985

13,953
11,302
21,860
3,282
3,328
23,798
7, 479
2,979
8,109
672
9,603
94,447

206,496
80,598
234,879
34,239
67,486
725,550
193,812
74,290
255.737
11,975
224,292
2,150,658

26,573

183,956

428,177

10,990,351

860,531

22^392,761

3,605,873

105,173,540
4,405,31*

PRODUCTS OF M IN E S .

Anthracite coal............................
Bituminous coal..........................
C o k e ................................................
Iron ore..........................................
Other ores and concentrates..
Base bullion and m atte...........
Clay, gravel, sand, and stone.
Crude petroleum........................
Asphaltura....................................
Safi...................................................
Other products of mines...........
Total..
PROD UCTS OF FORESTS.

Logs, posts, poles, and cord wood................................
Ties...........................................................................................
Pulp wood..............................................................................
Lumber, timber, box shocks, staves, and headings.
Other products of forests..................................................

M ANU FACTURES AND M ISCELLAN EO US.

Refined petroleum and its products.................................... .
Vegetable oils.................................................................................
Sugar, sirup, glucose, and molasses......................................
Boats and vessel supplies..........................................................
Iron, pig and bloom.....................................................................
Rails and fastenings.....................................................................
Bar and sheet iron, structural iron, and iron pipe...........
Other metals, Dig, bar, and sheet.......................................... .
Castings, machinery, and boilers............................................
Cement..............................................................................................
Brick and artificial stone............................................................
Lime and plaster...........................................................................
Sewer pipe and dr&intile...........................................................
Agricultural implements and vehicles other than auto­
mobiles ........................................................................................ .
Automobiles and autotrucks....................................................
Household goods and secondhand furniture......................
Furniture (new )............................................................................
Beverages.........................................................................................
Ice......................................................................................................
Fertilizers (all kinds)...................................................................
Paper, printed matter, and books..........................................
Chemicals and explosives...........................................................
Textiles.............................................................................................
Canned goods (all canned food product?)............................
Other manufactures and miscellaneous................................
Total.
Grand total, carload traffic..............................
Merchandise—all less than carload freight.
Grand total, carload and less than carload traffic.




2,189,765

63,722,119
3,102,595

12, M2
11,564

415,18}
252,180
384,869
83,494
104,677
810,273
263; 878
249,481
487,061
47,044
476,462
4,149,584

32,804

35,642
7,839
5,208
26,448
10,250
9,909
15,821
2,351

19,597

06,824,714

D igitized by L . o o Q

l(»,S78,6Sf

le

AGRICULTURAL INQUIRY.

105

The C h a i r m a n . Mr. Mercer, we will be glad to hear from you.
STATEMENT OF ME. J. H. MERCER, FARMER, TOPEKA, KANS.

The C h a i r m a n . Mr. Mercer, give your name to the stenographer
for the benefit of the record, and your residence and occupation.

Mr. M e r c e r . J. H. Mercer, Topeka, Kans. Occupation, farmer. I
am here as a representative of the National Live Stock Shippers'
League and also the Kansas Live Stock Association, which is a stockfarmers’ organization of our State of 15,000 members. What little 1
will call the commission’s attention to will largely relate to the live­
stock situation, it being so related, however, to ail agricultural mat­
ters that it is realy representing the entire agricultural situation.
Of course. I will not go into matters as to transportation, like Judge
Cowan has, but I want to tell you my views affecting the agricul­
tural and live-stock industries of our country, and especially of our
western country.
I am not going to discuss at length the freight-rate question. We
came out of the war with a railroad situation, as presented by the
carriers, in a deplorable condition. That propaganda was spread
throughout the entire coui '
T ’ ippened to be present when the
railroad heads appeared
committee of the Senate and
illustrated that situation; and by reason of that situation the present
law was passed in response to the appeal o f the railroad heads for
help. I recall a statement then made that if the Government did
not come to the aid of the carriers that the transportation industry
of this country would break down; that their credit was gone and
they needed capital. And I remember very distinctly their claim
that they needed money with which to build 800,000 freight cars with
which to transport the traffic of this country.
Now, gentlemen, this Congress did come to their relief and passed
a law which, to my mind, is bad.
I do not believe that the railroads of this country have any more
right to come to Congress and ask it to guarantee them an earning
on their business than the farmer o f this country has. I am' not
here to-day appealing to you to do that, although 1 know the farmer
is in a much worse condition to-day than the railroads of the country
were a year ago. We do not ask that. We do ask, however, that you
undo some things that have been done, and the law referred to by
Judge Cowan is one of them.
I would much rather see this Congress abolish the Interstate
Commerce Commission law and do away with it entirely and turn
the railroads of this country loose to go back to where they were
before there ever was an Interstate Commerce Commission than to
see the situation go on as it is to-day. The commission’s hands
are tied. There is no question about that. The commission held
hearings in a case pending before them relating to the reduction of
rates on live stock. The case was heard at Denver and at Chicago.
The examiner who heard that case recommended to the commission
that the rates be reduced. The industry of the country is still suf­
fering, as it was at that time, but there has been nothing done, nor,
in my judgment will there be anything done unless the carriers
themselves concede to the reduction being made, because it is no




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trouble under the present law for them to show that they are not
making anywhere near the earnings on the business that the law per­
mits them to make. So I say that that is worth while being con­
sidered. I want to bring to your attention, if you do not already
know it, that instead of wanting 800,000 cars to move the traffic of
this country, I presume there are that many cars setting idle on the
side tracks of the carriers in the United States, to-day.
That is about all I want to say about the railroad situation.
Although I want to illustrate this by saying that at the time the
increase of rates was allowed a year ago, and to concede, for the
sake of argument, that they were reasonable then, which we con­
tended that they were not, they are unreasonable to-day as relating
to agricultural products, because the value of agricultural products
have been cut more than half in two since that time.
A year ago when these rates went into effect, a certain brand of
cattle, known as the Belle Brand of cattle from Texas, that were
shipped in to our State for grazing purposes, sold on the market at
Kansas City for $15.25 a hundred on the 22d day of July. On the
26th day of July of this year that same identical brand of cattle,
owned1by Landergin Bros, of Amarillo, Tex., grazed in the same
pastures, weighing about 70 pounds more to the head, sold for $7.50
a head. So you may see what the reduction is in the price of meat
animals.
F u r t h e r m o r e , th e c o n s u m in g p u b li c is n o t g e t t i n g a n y t h in g like
t h e f u l l m e a s u r e o f th e b e n e fits o f t h e t e r r ific o n s la u g h t in r e d u c ­
t io n in p r ic e s t h a t th e fa r m e r is u n d e r g o in g .
Representative T e n E y c k . What is the cost of transporting

those cattle on the railroad ?
M r . M ercer. D o y o u m e a n a h u n d r e d ?
R e p r e s e n t a t iv e T e n E y c k . Y e s , p e r h u n d r e d .
Mr. M e r c e r . Well, I will give you the cost from

the shipping point
in Kansas to the market. I will give it on the minimum weignt of a
car of 22,000 pounds. From Eureka, Kans., where these cattle were
loadedj to the Kansas City market the rate, plus the war tax, is $48.72,
but prior to the advances $26.75 per car.
Representative T e n E y c k . On the car?
Mr. M e r c e r . A car; that is, plus the war tax. Of course, the war
tax is 3 per cent.
Representative T e n E y c k . Well, that carload contains 11 tons and
costs you $48.72 transportation charge. That is very small in propor­
tion to the amount of shrinkage, from $15 a hundred to $7.50 a hun­
dred, isn’t it?
M r . M e r c e r . Doyou mean as to the value of these cattle?
Representative Ten Eyck. Yes.
M r . M e r c e r . We are not here contending that the whole thing lies
in the railroad rates of the country. I said that 1 was not going to
discuss it from that viewpoint, Congressman.
Representative T e n E y c k . Mind jou, perhaps your railroad rate
ought to be decreased; but the question that the commission is inter­
ested in is where the difficulty in connection with this matter lies and
why this situation exists and what we can do to readjust conditions.
Mr. M e r c e r . Transportation costs is one of the great elements (hat
enters into it, you understand. The same cattle had paid two rates




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from the breeding country of the Southwest—first, to the Amarillo
country, as was illustrated here by Judge Cowan, and then on to
Kansas, and from Kansas to the market. Now, probably the rates on
those cattle, all told, from the starting point to the market would
be around $11 a head.
Understand, the cost of production enters into the live stock. I f
the net earnings on the business could be maintained along with the
increase of freight rates that would be all that the producer could
ask for. And what I wanted to illustrate in bringing that to your
attention was this, that though that rate was reasonable at the time
it was put into effect it is unreasonable now because of the great
slump in values.
We can not understand why the prices o f agricultural products o f
this country have been reduced the way they nave when there is no
overproduction in this country with live stock. But everything pro­
duced on the farm has been cut in two in price and more.
Now, we think that Congress could do something along this line
for relief.' And let me illustrate what I mean by this. I don’t
think that Congress should enter into the fixing of prices at all. I
am opposed to anything of that kind, but we think that some sort
of a propaganda should be sent out over the country similar to that
which was sent out by the Food Administration, as ‘to the necessities
of the country, as to what the people should do, and as to what we
should produce. When the propaganda was sent out during the war
it was responded to in almost every particular.
Now, we think that the most unfortunate thing that befell the
farmers o f the country was the fact that the Food Administra-.
tion ceased to function when the war closed. The propaganda that
was started here in Washington for lower living costs amounts to
nothing, gentlemen, only the lowering of the prices of the farmers’
product. I challenge anyone to show me where living costs, in the
West, at least— I am not conversant altogether with the eastern situ­
ation— have been reduced, where any of the necessary living costs
have been reduced in any manner since the armistice was signed.
Now, I heard the discussion this morning by the lady as to cost
of living. Gentlemen, the retail business of this country is holding
its prices up on the war level. Why? They are doing it to save
themselves, because they are doing no business. The people out our
way are not buying anything except what they have to right now.
And why? Because you take away the purchasing power of our
farmers, you destroy business, and that is what is causing paralysis
which exists in business all over that western country, and, I pre­
sume, up this way, too.
Some people have said the farmer “ made tremendous profits dur­
ing the war.” We will admit thev made some profits during the
war, but the cost of production followed right along with their
prices. Now. that cost of production is remaining up m a measure
to-day, and especially everything that has to do with fixed charges.
They are much the same to-day as they were during the war. And in
connection with freight rates, higher now than before and during
the war, and there are other things that are higher now also.
With regard to yardage and commission charges relating to live
stock, Congress can do something to help by regulation. We do not




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want to see industries of this country destroyed. No one wants that.
JBut I want to say to you, gentlemen, that unless something is done to
stimulate the live-stock industry in the United States you will see
less live stock in this country in the next two years than any of you
men who are anywhere near my age have ever seen, because the men
engaged in that industry can not keep it up. They are having to quit.
Some one else will come in, it is true, but not in sufficient numbers to
keep up sufficient production for the people, and the poor people of
this country can not eat meat when it will be too scarce and the price
too high.
The rate of interest in our country has increased about 30 to 35
per cent since the close of the war. We used to borrow plenty of
money at
and 7 per cent. I have spent my entire life, up until a
few years ago, farming and raising and feeding hogs and cattle. And
I have borrowed lots of money. I borrowed money, at around 6£
and 7 per cent. The prevailing rate in our country was from 6 to 8
per cent prior to the war. Many of our stockmen are trying to save
themselves to-day and are paying 10 per cent, and commissions be­
sides, in order to get the loan. Now, then, if Congress could do some­
thing to help our banks to provide some means, by authorizing the
War Finance Corporation to function in that capacity, it will be a
benefit. But this relief wants to reach the banks in communities
where the industry is carried on.
Now, you take a man who has a cowherd, for instance. If that
man is forced to liquidate and pay .his debts to-day it would entirely
wipe out his business, whereas if that man could be extended credit,
even though that security will not be in line with what might be
classed as sound by some bankers, in a few years’ time, gentlemen,
this man will be back on his feet again.
All live-stock prices to-day are below the prices of a general aver­
age of 10 years previous to the war, excepting hogs. Prices of hogs
in the last two or three months have advanced about $2.50 a hun­
dred, and that puts the price a little above the average of a 10-year
period previous to the war.
The price illustrated just a moment ago is indicative of every sin­
gle, solitary kind of live stock that is sold on the market. Especially
the common kind is considerably more than cut in two.
Take what we call canner cows, that really ought to be kept on the
farm yet a while, but are forced to be shipped because our people
have got to have some money. I have seen some sold on the Kansas
City and the Wichita market in the last 60 days for a cent a pound,
hardly enough to pay the freight.
The C h a i r m a n . Mr. Mercer, are you under the impression that
generally speaking the cattle receipts are now abnormally large!
Mr. M e r c e r . N o , sir, Mr. Chairman, the receipts at seven or
eight of our packing markets which reflect the situation in this
country, are about 800,000 head less during the seven months’ period
of this year than the same period last year, and last year there was
a considerable reduction in receipts under the year previous.
The C h a i r m a n . Well, does that indicate that people have been
forced to sell their cattle to get credit to carry them ?
M r . M e r c e r . Absolutely so. There are two reasons for it, Mr.
Chairman. One is that cattle can be liquidated into cash. You can
send cattle to market and get the cash for them. Farmers have to
have something to live on and to pay their taxes with and other debts.



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The C h a i r m a n . Well, if receipts have fallen off, that does not in­
dicate that anybody has been forced to sell cattle in larger quantities
than normally.
Mr. M e r c e r . Well, Mr. Chairman, it indicates that they are quit­
ting the business. That is what I want to illustrate to you. They
are quitting the business. Now, take the calf receipts. Go back over
a period of years and take the supply of calves at markets, the normal
supply of calves that were shipped from dairy cattle, etc. In the
last two years the shipment of calves to market has more than
doubled. That indicates that they are doing away with their herds
because they can not keep them, they can not hold them.
The C h a i r m a n . Well, they were not doing away with their herds
in 1919, were they?
M r. M e r c e r . They commenced to, yes, sir. The prices of cattle
commenced to go down in June of 1919.
Senator C a p p e r . Are the breeding animals still going to market?
Mr. M e r c e r . Oh, yes; lots of them. .Yes, Senator, lots of them
are going to market. It depends, of. course, a good deal on the
banker, whether he can tide the cattleman over with a loan. The
cattlemen, and especially the large producers of cattle, are very
heavy borrowers. And if a banker has to have his money, why the
cattleman is compelled to make some arrangement, either to get
his money some place else, or ship his cattle.
I do not want to leave the impression with you gentlemen that
there is very much of that being done right now. I think that there
is a tendency throughout the entire western country to help save
these herds as much as possible, and I think the banks are making
every effort they can. In fact, I know the banks are taking this
position, which they have to take to save themselves. There are
many of these herds on which they hold mortgages, that would not
pay the debt, and there is nothing back of it to pay the debt, so the
banks are doing all they can to hold them and let them work out,
which is the only thing for them to do. I f they were forced to
liquidate there would be a good many banks, in my judgment, that
would have to close their doors; that is, if they complied strictly
with the laws.
Senator C a p p e r . Mr. Mercer, aside from the present emergency, I
would like to ask you what your view is as to the need of an interme­
diate credit system, between the short-time commercial paper we now
have, and the long-time farm loans—an intermediate credit system
that will provide funds for the farmer and the stockman for a period
of one, two, and three years ?
Mr. M e r g e r . Well, it is needed, Senator, very much. It is needed
now more than ever before to take care of the breeding cattle espe­
cially. Loans are made by the banks, under the banking rules and
laws, for about a six months’ period. Well, it takes about three years
to produce a steer. We will say it takes an average of three years.
Of course when a man starts a cow herd he probably, to begin with
at least, has a pretty fair understanding with his banker or the loan
agent that he will extend that paper.
Now, then, sometimes it has been known, and especially in the latter
part of 1919, which you referred to, that thousands of herds were
shipped to market; tney were absolutely compelled to ship them to




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market to liquidate and raise money with which to meet the debt.
The banker in ordinary times renews that paper. But now we have
largely to appeal to our reserve system, whereas it used to be that we
had corresponding loan companies in the East that took care of this
paper, but now the reserve bank handles these loans and might call
them. They must consider them good. I don’t know how exten­
sively they are doing it now, but I Know they did do it a year or so
ago m our district. I don’t think they are doing much of that now,
because they probably have got their paper better secured than they
had when this collapse came. But this herd may not be worth the
purchase price now. For instance, gentlemen, it used to be the cus­
tom if a man had a fair credit and owned a farm, or had a good many
other assets, that he could borrow the purchase price of his cattle from
a bank. I borrowed the purchase price of many herds of cattle my­
self from the banker that I did business with.
Well, now then, in 1919, if I had gone out and borrowed the pur­
chase price of a herd of cow.s I would have had to pay about $100 to
$125 a head for them, on the general average of an ordinary grade
breeding herd. To-day those cattle will sell from $50 to $65 a head;
that is, the best class. So you see the collapse that has come in the
value of those cattle has destroyed all the equity that I might have
had in them. But., now then, if that banker will hold on to that
loan—carry that man on—with the increase in the herd, and because
of his activity and his determination to go through with it and come
out, that loan will be good after a while, but now it might not be.
The C h a i r m a n . Do you think that policy is being generally fol­
lowed by the bankers now?
Mr. M e r c e r . I think they are doing everything they can; yes.
They are out in the western country. I think the loan organizations
and the bankers are using every effort they can to help the situation
out there. The only great trouble, gentlemen, in our country, and in
the Southwest, that 1 am familiar with, is the fact that the bankers
have not the money; and, as I say, the reserve system’s rules are, we
think, pretty rigid.
For instance, I saw a statement here not long ago going out from
our district which said, “ You are to make no loans on agriculture
unless you take a property statement—a rigid, careful property state­
ment—of all the borrower has, on all loans from $500 up.” Now,
then, I don’t know how familiar you men are with the farmer’s life,
but I want to say to you that that pretty near exempts him from
borrowing money from a bank that has to use the reserve bank for
rediscounting small loans.
The C h a i r m a n . I would like to see a copy of that circular, because
it is my impression that the rules of the Federal Reserve Board do not
require a property statement in case of a loan which amounts to less
than $5,000.
Mr. M e r c e r . I s a id from $5,000 u p .
The C h a i r m a n . I thought you said $500.
Mr. M ercer. Yes; I meant from $500 up. Yes, sir; $500 up.

Representative

T en E yck .

I s it $500 or $5,000?

Mr. M ercer. N o; I meant $500.

The C h a i r m a n . I would like to see a copy of that circular.
Mr. M e r c e r . I will get it. Mr. Chairman, and send it to you. I
do not have it with me, but I will get it and send it to you. They



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may have changed it, however, by this time; but I saw and read the
circular.
Senator C a p p e r .. Mr. Mercer, have you had any suggestions from
the bankers out in "that country as to how the present credit situation,
could be bettered?
M r. M e r c e r . Well, the only suggestion, 'Senator, that I have had
from the bankers is this, that if they could provide some means to
get cheap money, without such rigid requirement as to securities,
and get help through that channel, they could handle the situation;
and I think that is really the solution of it, so far as money is
concerned.
• The bankers of most communities are the progressive business men
of that community and have the welfare and the progress o f the
community at heart and can take care of the local situation much
better than can those who are far away from the community. O f
course, they can not handle the community affairs, so far as the
quantity of money is concerned, because the banks are limited, and
especially the country banks are usually of small capitalization.
They have got to have some place to send this paper.
I recall the bank out at Sitka, Kans., with which you are familiar,
Senator Capper. That is a little shipping station out there of a few
hundred people. There is a lot of cattle and wheat raised out there,
and also a lot of other j^rain. The president of that bank told me
that he had obligated himself on paper, by indorsing, to the extent
of two or three hundred thousand dollars, outside of his bank, and
that he had even mortgaged his own ranch in order to get funds to
loan and take care of the people of his community, the citizens
around there—the smaller farmer that could not go out and borrow
money because he did not have the assets to put up for security. And
that is indicative of the situation in a lot of western localities where
they are far out from the central banks. And this bank, gentlemen,
can only go so far.
One o f the very largest bankers in Kansas City told me the other
day that he had mortgaged his ranch—a very large one—for a good
many thousand dollars; and he said, “ I mortgaged it to get funds to
take care of lifelong customers of this institution. They have not
got the credit now, nor have they the assets back of them to make
the loans that thev need.” And that is the situation, gentlemen.
Representative T e n E y c k . I deduce from what you say that credit
to-day is not so much needed in the cattle industry to promote sales,
or even for foreign trade, as it is to give to the cattle owners—the
raisers o f cattle—sufficient funds to hold their cattle so as to keep
in the business. Is that your idea ?
Mr. M e r c e r . That is m y id e a .

The C h a i r m a n . In connection with the statement that you made a
moment ago with reference to the requirement of the Federal reserve
banks, that a financial statement accompany the loan where it is
over $500, I want to read the regulation of the Federal Reserve
Board, which requires among other things the following:
A recent flnancinl statement o f the borrower must he on file with the member
bank in all cases. Except * * * if * * * the aggregate of the obliga­
tions o f the borrower rediscounted and offered for rediscount at the Federal re­
serve bank by the member bank is less than a sum equal to 10 per cent o f the
paid-in capital o f the member bank and is less than $5,000.




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Now, the effect of that apparently would be to require a financial
statement only in such cases where the amount borrowed by the
cattleman from the member was in excess either of 10 per cent of
the bank’s paid-in capital or in excess of $5,000.
Mr. M e r c e r . I understand, Mr. Chairman, that is all right; but
isn’t also authority given the district managers and governors to
install any sort of rules they might deem advisable as to the conduct
of their own institutions ?
The C h a i r m a n . Well, I think it would be rather unusual for a
Federal reserve bank to make any different requirement.
Mr. M e r c e r . Well, I will send you the letter and you can read it
for youreelf, Mr. Chairman. I read the letter and I know where I.
can get it, and it was an instruction to a member bank of the tenth
reserve district. It was a few months ago that I read this letter.
And this banker told me then:
Now, that eliminates us handling paper o f farmers that we know, because
they can not comply with that, they can not give such property statement
They are already borrowed up to their capacity. And the statement would
show that that loan was not justifiable under the regulation.

I don’t know whether that prevails in other districts or not. You
understand that we feel that the Federal reserve system is all right
if the bank conducted for the benefit of the community in which
it is located. We do feel that there has been too much of a tendency
to drift this money eastward. The Government itself does that, no
doubt unintentionally, but it has happened, and I will illustrate
to you what I mean by that. They borrow money and they loan
money to the Government, and in that way have drawn throusands
and thousands of dollars from territories that needed the money.
For instance the rate of time deposit money is from 3 to 4 and
maybe 4^ per cent in some instances. The Government issued a
call for a loan, and they issued certificates guaranteeing them 6 per
cent. We know that there were very few business men but what go
and draw out their time deposits from the bank and loan it to the
Government. And by doing that they draw the deposit from that
institution, and the money from that community.
The C h a i r m a n . Well, that is a perfectly sound surmise, but it
does not jibe with the apparent fact that the time deposits of the
banks have during all of this period increased and are still increas­
ing, in spite of the fall of demand deposits.
Mr. M e r c e r . They are not in our country. Deposits are not in­
creasing anywhere in the West, I do not believe. Where are they
increasing in the West, west of Chicago?
The C h a i r m a n . Well, I think they are increasing everywhere.
M r . M e r c e r . D o y o u m e a n t h a t t im e d e p o s it s a r e in c r e a s in g in th e
b a n k s a ll o v e r t h is c o u n t r y ?
The C h a i r m a n . Time deposits, yes; take the country over, con­

tinue to increase, notwithstanding the fall in the demand deposits
that has taken place during the last six months.
Mr. M e r c e r . Well, I have not looked up any data on it lately.
Representative T e n E y c k . What reserve bank is this y o u are
speaking of?
M r. M e r c e r . The tenth reserve district. Kansas City.
Representative T e x E y c k . That can be ascertained.




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Mr. Mekceb. I want to say to you, gentlemen, that there should be
some consideration given to this by Congress in some way. I don’t
know whether you realize the situation or not. I want to say to
you that men are preparing now—I am speaking now of men of
means, men that own their land, men that nave not lost their land
but have lost everything else—to make arrangements to let their land
lay idle. Why? Because they have lost their surplus money. I
could name a dozen men that Senator Capper would know who
have told me that they do not intend to turn a furrow this fall, to
put in a bushel of wheat, or farm in any particular next year; mat
they have already taken off their men and put their macmnery and
things away and will let their land rest a year or so, until this thing
readjusts itself. That is going to produce a shortage in this coun­
try, and. naturally, you are going to get a condition of higher living
costs. So anything that can be done to stimulate the situation should
be done. The values of the product of the farms should be brought to
somewhere near the level of what other things are, and unless that
is done we are going to see some bad conditions in this country.
You can not ship certain agricultural products at all to-day. The
overhead expense m moving these products to market is beyond what
the products will bring. I know of a thousand bushels of oats which
were offered in our State the other day, and not very far from the
market, for shipment. The agent, under a rule of the railroad com­
pany, required the advance ox the freight. And the farmer got to
figuring what his oats would bring in the market, and he figured
up the freight rate and the commissions and other items that remain
just what they were during the war, and he concluded to take 10
cents a bushel for his oats »thome and sold them at home and left them
at home. They were not shipped. And it is questionable, gentlemen,
if the oats had been shipped, whether they would have paid the
freight and the overhead expenses.
Now, that same rule applies to com. Com districts that produce
more com than they can take care of can not ship the corn to any
place. The people can not pay the price to feed it, and the result is
that it is going to waste and will go to waste. I don’t think I am
exaggerating at all when I say that there have been millions of tons
of hay last year that have gone to waste in the State of Kansas
because they could not move it. The price that they were receiving
for products such as hay, second-grade grain, and things of that kina
were so low that after paying the commission charges and the freight
and storage charges, etc., it would not pay the cost of shipment. And
the result is that it is wasted.
I know of one man that went out into northwestern Kansas, where
we raise a lot of alfalfa, to buy alfalfa to ship to Illinois, where they
do not raise much hay. He could buy alfalfa out there for $3 or $4—
for pretty near any price. But when he came to bale it and put it
on board the cars and ship it to the point in Illinois where they
wanted it, it would cost tne customer over there from $22 to $27
a ton after everything was paid. So the hay was not sold. And the
same thing is true in eastern Colorado and all through those North­
western States.
Now, gentlemen, that is not picturing the conditions any worse than
they are, because it is the situation as it is at present. And as I said
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in the beginning of my statement, we are not here asking you to guar­
antee any earnings on this business, although we have just as much
right to come to this Congress and plead for a guaranty for a reason­
able earning on the business as any other industry in the world. But
we do ask that there be something done in improving other condi­
tions so as to help this industry, and if you do not it is going to
perish.
I f there are any questions that you wish to ask, I will be glad to give
you any information I can. I have gone over this hurriedly. I have
not pictured this situation any worse than it is, and our farmers are
very, very much discouraged. They are saying very little, but they
do not know why they should undergo such conditions when they
have to walk up here to the store and pay such high prices for ma­
chinery. or things of that kind.
The C h a i r m a n . We will now hear from Mr. A. C . Williams, of
Fort Worth, Tex.
STATEMENT OF MR. A. C. WILLIAMS, ASSISTANT TO THE PRESI­
DENT OF THE TEXAS & SOUTHWESTERN CATTLE RAISERS’
ASSOCIATION, FORT WORTH, TEX.

Mr. W i l l i a m s . I try to be an optimist at all times, but, frankly,
gentlemen. I can see little ground for optimism just at this time
regarding the future of the cattle business. I had not expected to
have the privilege of appearing before this committee, and therefore
have no prepared statement to file. I desire to refer briefly to some
of the more important problems confronting the cattle raisers of the
Southwest.
The organization which I represent, the Texas & Southwestern
Cattle Raisers’ Association, was organized in 1877. Among its mem­
bership are the leading stockmen of Texas, Oklahoma, New Mexico,
Colorado, Arizona, ana Kansas. This territory is often referred to
as the “ live-stock breeding ground of the United States,” and does
furnish a large per cent of the steers that go to the pastures and feed
lots of the Northwest, Middle West, and great corn-producing States.
Thus it will be seen that the live-stock industry of the Southwest is
the most important factor in the Nation’s meat supply.
A striking feature of the movement of cattle in Texas and adjoin­
ing States during the past few months has been the sacrifice sale and
slaughter of valuable breeding herds that represented the work of a
lifetime of careful breeding and herd management. That sacrifice has
been caused by the inability of the owners of the herds to secure ade­
quate loans through the usual channels. You are perhaps not famil­
iar with the fact that the average stockman operates on such a large
scale and is forced to borrow suoh large sums in times like we are
now passing through that the capital and surplus of his home bank
is not large enough to permit it to meet his needs. He must there­
fore go to the large banks and loan companies at the central markets,
like Fort Worth, Kansas City, St. Joseph, St. Louis, and Chicago,
for a loan. For several months these large institutions have been
holding practically all of their borrowers to bare living expenses
and have declined to make new loans. Thus many men who have
ample security and ordinarily do not require large loans find it dif-




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. ficult to secure funds needed to properly conduct their business, and
are frequently forced to sacrifice valuable breeding stock and imma­
ture calves and steers.
The situation has become so critical that our executive committee
at its recent meeting appointed a committee to come to Washington
and endeavor to secure some measure of financial aid through the
War Finance Corporation. In order to conserve the breeding herds
of the Southwest, which were threatened by a drought and financial
stringency, the War Corporation in 1918 established a cattle loan
agency at Dallas, Tex., to make loans, through the banks or direct,
on breeding herds where the owners were unable to secure funds
through the usual channels. It is the consensus of opinion that con­
ditions at this time warrant a revival of that plan. Since arrival in
Washington we have been convinced that some measure of relief can
come through the Kellogg bill if that measure is properly and liber­
ally administered. Fearing that anv fight to secure an amendment
to permit direct loans might delay the passage of the measure until
after the summer recess of Congress, and believing that its early
passage may prove of great assistance to the agricultural interests
of the country, we have concluded not to insist upon the amendment
at this time. I desire to say, however, that I do not believe the meas­
ure of relief needed will come through any agency which does not
provide a means of making direct loans to worthy men who have
ample security and are unable because of the present stringency to
secure needed loans through the usual channels.
To prove that this sacrifice of breeding herds will, if continued,
seriously affect the future meat supply o f the Nation, I sent a ques­
tionnaire to prominent stockmen in touch with the situation asking
them to give certain information. I ask them first whether it was true
that the owners of breeding herds were finding it difficult to secure
loans to help carry on their business, and the answer without excep­
tion was “ \es.” Their replies indicated that there has been a heavy
forced sale of valuable breeding cattle and immature calves and
steers that are needed on the range to consume the surplus of grass
and forage that will be wasted. I am convinced by information in
our office and replies to this questionnaire that the number of cattle
in Texas and adjoining States at this time, compared with the aver­
age for the past six years, represents a shortage of approximately
30 per cent on breeding cows, 50 per cent on aged steers—we refer to
a steer that is 3 years old or over as an aged steer—
33^ per cent on
2-year-old steers, 25 per cent on yearling steers, and there will be
a much greater shortage of calves if the present heavy movement con­
tinues. The records at the Fort Worth market show that while there
has been a large decrease in receipt of grown cattle during the first
seven months of this year there has been an increase of about 35 per
cent in receipts of calves.
The C h a i r m a n . Does that allow for seasonal fluctuation? My
recollection is that the receipts of calves vary widely from year to
year at certain periods of the year.
Mr. W i l l i a m s . Range conditions in our section have been un­
usually good this year, which under normal conditions would mean
that many stockmen would hold their calves to consume the surplus
of grass and enhance in value. The movement indicates forced




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liquidation. Even men who happen to be fortunate enough not to*
have excessive loans at the banks—and there are few of them, are
forced to ship their calves to get money for operating expenses.
There is not the slightest doubt in my mind that there has been a
heavy forced liquidation of breeding cattle from our territory. A
man came to my office last week and told me that he had a loan with
a large bank in Dallas for in the neighborhood of $60,000, secured
by cattle worth on the basis of present values around $80,000 to
$100,000. Notwithstanding the fact that the bank could take that
loan to the Federal reserve bank, only about three blocks away, and
discount it, they urged him to pay. Their only excuse was that they
wanted to lighten up their loans, and the best way to do so was to
collect some of the largest ones. Now unless that man can place
his loan elsewhere, and that will be very hard to do, he may be forced
to sacrifice his cattle. When a man is forced to ship immature cattle
to market, it not only hurts him financially, but it has a direct effect
upon the value of all other cattle on the market that day.'
The C h a i r m a n . It is quite possible to get an entirely erroneous
impression from the citation of individual cases. How prevalent do
you think the citation to which you refer is?
Mr. "W i l l i a m s . I know of numerous other cases just like the one I
spoke of. It is so prevalent that it has already resulted in a great
sacrifice of breeding and immature cattle from our territory.
T h e C h a i r m a n . I d o n o t q u e s t io n y o u r s t a te m e n t, b u t h o w do y ou
r e c o n c i le th e p r o p o s i t io n t h a t m e n a re b e i n g f o r c e d t o s e ll c a t t le th a t
a r e n o t im m a t u r e , w it h t h e f a c t th a t y o u h a v e s t a t e d t h a t t h e re­
c e ip t s a r e le s s t h a n n o r m a l ?

Mr. W i l l i a m s . The receipts are less than norma] because the sup­
ply of cattle in the country is less than normal. The receipts at 69
leading markets of the United States for the first six months of this
year are approximately one and a quarter million below the cor­
responding period of last year. The receipts last year were below
the year before. According to your line of reasoning that would
mean I am wrong.
Remember this, that in 1918 and 1919 certain southwestern and
northwestern cattle raising States suffered from severe droughts,
which is forced heavy liquidation of all classes of cattle from those
sections. The drought in the Northwest was followed by severe
winter weather which caused the shipment of additional thousands
of cattle to market which would have been kept on the ranches but
for the shortage of feeds. Remember also that large numbers of
cattle were being brought into the United States at that time from
both Canada and Mexico, and instead of receiving cattle in large
numbers from Mexico we are now exporting thousands o f cattle
weekly for immediate slaughter, the ranges of that country having
been depleted of cattle by droughts and followers of the various war­
ring factions.
The C h a i r m a n . It is your judgment, then, I take it, that the re­
duction of cattle marketed is a reflection of the reduction in herds.
Mr. W i l l i a m s . Yes; forced liquidation has been going on for
several months. It is m y judgment that the true situation is not
reflected in the statistics given out by the Bureau of Crop Estimates
and the census reports.




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The C h a ib m a n . There is quite a wide discrepancy, as I recall,
between the census figures and the Department of Agriculture fig­
ures, which indicated that the Department of Agriculture figures
were very much too high.

When was this conversation that you referred to regarding this
$50,000 loan?
Mr. W i l l i a m s . About the first of last week. I have had very
similar conversations with many other men.
The C h a i b m a n . Has there been any change in policy on the part
of the banks down there with respect to making loans in the last six
months?
Mr. W i l l i a m s . No improvement in the situation. Officers of some
of the banks and loan companies have recently stated to me that
they would make a few loans to good men under proper conditions.
I asked them what they considered proper conditions, and they said
loans backed by plenty of security. But under the present deflated
values few men can give the margins of security demanded.
The C h a i r m a n . What is the ordinary margin that they require
now?
Mr. W i l l i a m s . Well, the War Finance Corporation loans made in
1918 on cattle required a margin of 25 per cent. That was about in
line with margins demanded by conservative bankers at that time.
The C h a i r m a n . Is a larger margin required now ?
Mr. W i l l i a m s . Well, they might say they do not, but the values
>laced on the stock are so low that the margin required is much
arger than that. I would say they now require in the neighborhood
of about 33£ per cent, and even greater in many cases.
The C h a i r m a n . Then you would not agree with Mr. Mercer’s state­
ment that the banks are extending themselves as far as they can to
meet the situation?
Mr. W i l l i a m s . Many banks have already extended themselves as
far as they can, and that is back of the trouble. The truth of the
matter is some of them went just a little too far; but many did not,
I think, go far enough in trying to take care of their customers.
The C h a i r m a n . I gather from your statement that the failure of
the banks to loan is a matter of their indisposition and not their
inability ?
Mr. W i l l i a m s . I think it is principally their inability, because
of the fact that their surplus ana capital is so limited they can not
make loans large enough to meet the needs of the average stock­
men, and he must go to the larger institutions at the central markets.
The C h a i r m a n . D o you think that the position of the larger banks
in Dallas, for instance, or Kansas City is a matter of inability or a
matter o f indisposition?
Mr. W i l l i a m s . In many instances it is a matter of inability and
in many instances it is a matter of indisposition. I have been told
by many men that when they applied to one of the larger banks and
loan companies for loans and offered plenty of security they were
advised, “ We are very sorry, but we are not making any new loans
now.”
The C h a i r m a n . That is a very strange state of affairs, because, if
my recollection is correct, the probabilities are that at the present
moment, at least, the banks in Dallas and the banks in Kansas City

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are very much less extended than the banks in the country, because
they have liquidated to a much grekter degree than the country
banks.
Mr. W i l l i a m s . That is true of the banks in Dallas and the other
large cities, but the Texas city banks do not handle as much cattle
paper as you would think. Dallas is in the edge of the cotton belt,
and the banks there do more mercantile and cotton loan business.
There are a few banks in Fort Worth that do quite a bit of cattleloan business, but they are not in position to extend much relief to
the cattle business at this time.
Senator C a p p e r . The situation in the country banks is still as tight
as it was?
Mr. W i l l i a m s . Yes; in the cattle-raising sections. There will be
some relief in some sections as a result of the sale of wheat. Much
money is coming into the panhandle of Texas from the sale of wheat,
but in view of the fact that the larger banks at the market centers
hold mortgages on their live stock the stockmen are not in very
good shape to secure accommodation from the local banks.
Live-stock values are approximately 50 per cent of what they were
12 to 18 months ago. I f operating and marketing expenses had
dropped accordingly, the live-stock producer woula not be in the
critical position we now find him. But with his stock worth approxi­
mately what they were 10 years ago, his expenses have increased
about as follows: Railroad freight rates approximately 67 per cent;
yardage and commission charges at markets 50 per cent; interest rates
2 to 4 per cent; general ranch operating expenses 10 to 15 per cent;
and very substantial increases in county, State, and national taxes.
Senator C a p p e r . What is the legal interest rate now of the stock­
men of Texas ?
Mr. W i l l i a m s . We have a maximum legal rate in the State of
Texas of 10 per cent. The great volume or the cattle loan business
in Texas is now carried at tne rate of about 9 per cent per annum,
discount every six months. Some banks and loan companies are
charging 10 per cent, six months discount. Many also charge
brokerage.
Senator C a p p e r . What is the brokerage usually ?
Mr. W i l l i a m s . Around 2 per cent. I do not care to mention any
names, but I was recently reliably informed that many reliable cat­
tlemen in New Mexico whom I know have been paying at the rate
of 10 to 12 per cent per annum, discount every six months, with 2
per cent brokerage every six months. No man can expect to profit­
ably continue in the cattle business long and pay such exorbitant
rates. They are paying it in the hope that immediate relief may
come from some source.
The C h a i r m a n . If the situation is as you say it is, and there is
any relief in high prices, relief will come eventually.
Mr. W i l l i a m s . There is another angle of the business to which I
want to call your attention. The per capita consumption of beef
in the United States decreased from < pounds in 1910 to 56J pounds
8
in 1920.
The C h a i r m a n . What year?
Mr. W i l l i a m s . 1910 to 1920.
The C h a i r m a n . I think your figures on that are wrong.




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Mr. W il li a m s . I think you will find them substantially correct.
You probably confuse the consumption of all meat with beef. I am
quoting beef only. That decreased consumption has been due to about
three principal causes:
First. Patent medicine advertising, which caused many people to
believe that meat eating caused all their aches and pains. W h ile the
purpose of this advertising was not to discourage meat eating but to
encourage the use of the particular medicines named, the campaign
has, I believe, seriously affected meat consumption. There should be
some means of protecting any industry froih such unfair business
methods.
Second. When the Food Administration inaugurated the “ meatless
days ” during the period of the war, manv patriotic persons did not
know that baby beef, cow meat, and much of our best meat did not
meet the exacting requirements for Army, Navy, and export purposes,
and they therefore considered it their patriotic duty to abstain from
meat eating. Meanwhile the dairy interests and manufacturers of
various so-called meat substitutes took advantage of every opportu­
nity to encourage the use of their products. Their efforts to develop
their industries along broad clean lines were legitimate, but some of
their campaigns which reflected directly or indirectly upon meat as a
healthful and wholesome food were unfair and illegitimate. War
campaigns for the substitution of other food products for meat
were augmented by bulletins issued by the United States Department
of Agriculture. It seems proper, therefore, to suggest at this time
that the department should issue such bulletins and other literature
as will again make known to the houseiwives of America the true
food value of meats.
Third. One of the most serious factors affecting meat consumption
has been our expensive system of distribution—the growing spread
between the prices received by live-stock producers and the prices
paid by consumers for meats.
Senator C a p p e r. What is the cause of that spread ?
Mr. W i l l i a m s . The butchers claim that high wages to meat cutters,
high rents, and other expenses have substantially increased their
overhead expenses. While there has been some reduction in retail
meat prices within the past few months, the reductions have not been
in proportion to the reductions in wholesale meat prices or prices
received by the producers. They made high profits during the period
>f the war and are not satisfied with prewar rates of profit.
Senator C a p p er. Haveyou m a d e a n y in q u ir y a s t o tn e c o s t o f m e a ts
to the c o n s u m e r h e re in W a s h in g t o n s in c e y o u n a v e b e e n h e r e ?

Mr. W i l l i a m s . That is one of the purposes of mv visit. I came by
Chicago, and after leaving here expect to visit Philadelphia and New
York for the purpose of making some inquiry into the wholesale and
retail meat trade. We have been waiting about a year for a report
of an investigation conducted by the Department of Agriculture;
but due to the fact that the report will cover the year 1919, I am
afraid the data will be ancient history before it is given out and due
to changed conditions will not present the condition of the trade at
this time.
Representative T e n E t c k . I f you have been looking into the prices
charged by the retailers in these different cities you speak of, what




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conclusions have you come to? Can you make any statement as to
what you found ?
Mr. W illiam s. I would not care to make a statement at this time
on that, because the classes of meat and prices have varied so in the
different shops that it would require a lengthy statement to prop­
erly present the matter. It might be interesting and of some value
to you, but I haven’t the data in shape to present it iust now. I may
be able to do so before the hearings are finished. If I do, I will send
it to you.
The C h a i r m a n . We would be very glad to have the data if you
can put it in such shape that it can be presented.
Senator C a p p e r . Y o u say the price to the consumer is wholly out
of relation to the price which the producer receives?
Mr. W i l l i a m s . Yes: the reduction that the retailer has made is
not in line with the reauctions that have been made in the wholesale
prices of meats and the prices received by the producers.
The Chairman. Is that true as to the wholesale price, as compared
with the price of the animal ?
Mr. W i l l i a m s . I don’t believe it is. I think the wholesale price
has been about in line.
Senator C a p p e h . Y o u think a lot o f the profiteering, as you call it,
is on the part of the retailer rather than the packer?
Mr. W illiam s. Yes. A great many have felt that the packers
made more money than they claimed in their published statements,
but the wholesale prices of meats keep pretty well in line with prices
paid the producers. The new “ packer regulation ” bill will make it
possible for the Secretary of Agriculture to keep a line on the whole­
sale meat trade.
I don’t like to use the word “ profiteer ” in referring to the retailer,
but I will say the spread between wholesale and retail prices is too
large. Many newspapers would like to have a story in which a rep­
resentative of the live-stock producer charged the retailers with being
profiteers, but too much publicity of that kind would probably result
in one of the periodical “ buyers’ strikes,” which hurt the producers
more than they do the wholesalers and retailers of the products.
Representative Ten Eyck. I deduce from what you have said in
relation to the number of cattle that are now going on the market, so
many less than under ordinary conditions, that ought to raise the
price to the producer and the packers’ price ?
Mr. W i l l i a m s . Yes; ordinarily that would happen.
Representative Ten Eyck. Do you think the whole reason that is
not accomplished under those conditions is due to the spread of this
propaganda that you have referred to?
Mr. W i l l i a m s . T o some extent that is true. High retail prices
of meats and forced liquidation by the producers have also been im­
portant factors.
Representative Ten Eyck. Your forced liquidation is not keeping
the cattle from being put on the market.
Mr. W i l l i a m s . The forced liquidation puts on the market a class
of meat which is not needed bv the trade, and naturally that sur­
plus—a surplus of any class of meat, must have a bearing on the
price that is paid for all classes.
Representative Ten Eyck. By having poor meat put on the mar­
ket, or a meat that is not really ready for the market, the result is




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a lowering of the prices on that meat, and the other would naturally
fall with it?
Mr. W i l l i a m s . That is true.
The C h a i r m a n . Mr. Williams, have you made a comparison of
the drop in prices of the different grades of cattle ?
Mr. W i l l i a m s i No, sir; I have not. But I can get some data for
you on that subject if you desire it.
The C h a i r m a n . Well, offhand, is it your judgment that the drop
in prices of the lower grades of cattle were relatively greater than
upon the higher grades?
Mr. W i l l i a m s . That is true on what we call sacrifice cattle.
The C h a i r m a n . A canner cow ?
Mr. W i l l i a m s . A “ canner cow” may be an animal poor in flesh
but of excellent breeding, that would if kept on the ranch produce a
calf that would be worth at this time around $15. Such a cow in
thin flesh, reaching the market when the run was heavier than the
trade needed, would not net for the owner any more perhaps than
the value of a calf. The sacrifice of such cows, that are needed to
restock the ranges of Texas and the Northwestern States, is an eco­
nomic loss to the Nation. When you face the fact that we have a
shortage of about 30 per cent of the normal supply of breeding stock
in Texas and adjoining States, and that the growth and develop­
ment of that territory depends largely upon the live-stock industry,
you must realize that it is a serious matter.
The C h a i r m a n . Getting back to the credit situation once more,
I suspect that is the crux of the situation.
Mr. W i l l i a m s . I th in K i t is.
The C h a i r m a n . And perhaps the export situation.
Mr. W i l l i a m s . Exports do not enter into the problem so much
just now. The foreign demand for meat is being supplied from
South America. The quantities of meats in storage in the United
States at this time are below storage stocks of this date last year.
A better system of finance would stop the shipment of a large per
cent of the stock now going to market, and I do not think we would
have any large quantities of beef for export.
The C h a i r m a n . Consumption is not normal.
Mr. W i l l i a m s . That is true.
The C h a i r m a n . What I was getting at, however, on the credit
proposition, is this: I am interested to know whether, in your judg­
ment, the difficulty lies in the fact that the resources of the banks
are insufficient to cope with the situation, or, on the other hand, lies
in the fact that the banks were unable to rediscount their paper, and
consequently to extend themselves as far as they would otherwise?
Mr. W i l l i a m s . I think in the majority of cases the resources of
the banks are not sufficient to extend the credit.
The C h a i r m a n . I think that is the situation, particularly in the
cattle sections. The information that we have snows quite clearly
that the cattle sections of the country have been the hardest hit
by price reductions. It is altogether probable, notwithstanding the
fact that the country banks in the cattle sections are more extended
than they are anywhere else, that the credit situation has been worse
in the cattle sections than in any other part of the country’.
Mr. W i l l i a m s . What has been said of the difficulty in financing
the cattle business is also true of the sheep industry. Many cattle



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and sheep-producing sections produce no other commodities to
speak of, and when they go down everything in the territory goes
down with them.
The C h a i r m a n . That is typical of the whole situation with a onecrop country, whether it is cattle, sheep, or cotton; a one-crop
section of the country is very much worse off than a diversified sec­
tion o f the country.
Representative T en E tck . Is it your idea that the supply of
cattle to-day on the hoof is not large enough to warrant assistance
in export trade; that we would be better off if we supplied the neces­
sary funds to retain those cattle at the present time with the present
owners rather than efndeavor to assist export ?
Mr. W i l l i a m s . O f course, an export demand would probably stim­
ulates values, but if financial aid was extended stockmen of the south­
west and northwestern sections, who need cattle to restock their idle
ranges, it would certainly bring about improved conditions. The
cattleman with idle pastures is just like a factory without material
to manufacture its products. With loans available buyers would
soon be at the markets buying the sacrifice cows and immature steers,
and there would be an improvement in values.
Representative T e n E t c k . I am talking from an economic stand­
point, whether or not it would be better to assist the owner to hold
his cattle and let the natural consumption take up the surplus and
thereby raise the price, rather than to stimulate the price from the
other side by giving credit to them for export, and thereby get the
cattle raiser to sacrifice his cattle ?
Mr. W i l l i a m s It would be better, I think, for the cattle raisers,
.
and for the Nation, to furnish them such financial relief as will
enable them to conserve their breeding herds.
Representative T e n E t c k . That is what I wanted to bring out as
regards your impression.
The C h a i b m a n Is there anything further, Mr. Williams?
.
Mr. W i l l i a m s . Another factor is the need of a reasonable tariff
on live stock, meats, and hides. A great many cattlemen who would
otherwise remain in the business are selling their herds because they
believe this country is on the verge of being flooded with meats from
foreign countries, where unquestionably cattle and sheep can be
>roduced cheaper than in this country, because of their low-priced
ands, peon labor, low tax rates, low transportation costs, and low
living standards.
Substantial importations of meats and enormous quantities o f
hides have entered our markets during the past year, seriously
affecting live-stock prices. Figures prepared by one of the largest
packing companies indicate that the value of a hide represents about
15 per cent of the value of the animal. The packers take the value
of the hide into consideration when buying an animal. Due to ex­
cessive importations of hides the American hide market has been
demoralized for several months. A steer hide that was worth around
$25 to $30 a little more than a year ago is now worth about $4 or $5.
There has not been a corresponding reduction in shoes, leather goods,
etc.
A prominent cattleman told me of thi* experience recently. lie
called at the shoe store in his home town to price a pair of shoes o f

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a well-known brand. The price was $12, which he considered too
high. The next day he went to his ranch. Soon after arrival he
told the ranch hands to kill a nice calf for beef and to be very careful
not to damage the hide. He called the hide dealer at a near-by town
and learned the best price he could get for this good calf hide was
75 cents. Now, that cattleman would have to sell about 17 good
calf hides to receive enough money to buy a pair of good calfskin
shoes and pay the war tax on them. Less than one-fourth a hide
and very little workmanship were required to make this brief case,
but that case cost a few days ago $15— about the amount a cattle
-or
raiser would receive to-day for 20 calf hides. I can not agree that
there should be a tariff on leather, shoes, etc., if a tariff is placed on
hides. It is quite evident that the cost of hides is a small item in
connection with the cost of shoes, leather goods, etc.
Representative T e n E y c k . The question is: Why are hides so low,
when shoes and bridles made of the leather that comes from those
hides are as high as they are?
Mr. W i l l i a m s . I think some interesting things could be developed
along that line, which the people are entitled to know. I would like
to see this committee look into that matter.
Summarizing, it seems to me the principal needs of the live-stock
industry at this time are:
First. A better system of financing which will provide a method
of making? loans on breeding stock for from one to three years’ time,
on the basis of reasonable values, and at just rates of interest. Under
present financing systems the producers are called upon to pay in­
creased interest rates at times when they can least afford to pay
same. Quite often the increase of 2 to 4 per cent in the interest rate
changes a small profit to a loss.
Second. A substantial reduction in railroad freight rates. I know
no good reason why the railroad companies should be protected
from the process of deflation to which all agricultural, commercial,
and industrial enterprises have been subjected. It is my opinion
that with capable and economical management a lower scale of
freight rates would produce a fair return on the invested capital or
true valuation of the railroads. Reductions in rates should revive
many enterprises which have been throttled by excessive rates and
greatly increase the volume of railroad traffic. A continuation of
present rates must result in decentralization of the meat-packing
business and numerous other great industries.
Third. Reductions in marketing costs. The legislation recently
enacted will give the Secretary of Agriculture authority to investi­
gate the reasonableness of most of the charges at the central markets,
and to order such reductions as he may consider proper.
Fourth. A better system of distribution, which will bring about
a reduction in the spread between the prices received by live-stock
producers and the prices consumers must pay for meats and
other live-stock products. The recent legislation gives the Secre­
tary of Agriculture authority to supervise the business practices of
the' wholesale meat trade. Frequent investigations of the retail
meat trade, judicious publicity and bulletins designed to encourage
better business methods would no doubt help to correct many exist­




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ing retail trade evils and reduce the spread between wholesale and
retail meat prices.
Fifth. Protection from unfair competition. Carefully prepared
bulletins and other forms of publicity setting forth the true food
value of meats would encourage meat consumption and prove help
ful to the industry. Such publicity has been issued by the Govern­
ment in connection with other products. The live-stock industry
should in someway be protected from unfair publicity by manu­
facturers of so-called meat substitutes and patent medicines.
Sixth. Seasonable tariff duties on live stock, meats, hides, wool,
etc., which will prevent tax-paying American producers from being
forced to compete in our home markets with products from foreign
countries having cheaper lands, pauper labor, lower transportation
rates, lower taxes, and lower living standards. As a result of heavy
importations of meats and hides during the past year, millions of
dollars which should have been paid to American producers and
remained in American channels of trade to help relieve the present
financial stringency have gone to help develop the business of com­
petitors in foreign lands.
Mr. C o w a n . In connection with Mr. Williams’s testimony I would
like to read a statement in regard to the excess of imports over
exports. I got the chief clerk of the Census -Bureau to get this
information for me, and I have the original papers here to show.
In 1919, 572,537 cattle imported more than exported.
In 1920, 492,289 more head of cattle imported than exported.
In 1921,184,301 more head of cattle imported than exported.
These are for the fiscal years.
Last year we became for the first time a greater importer of meats
than exporters.
The C h a i r m a n . When you say meats, are you referring to slaugh­
tered animals or cattle?
Mr. C o w a n . I am referring to fresh meats, cattle, beef, and mut­
ton.
Mr. W i l l i a m s . I think it will be found that a large percentage of
the imports was mutton.
Mr. C o w a n . I will furnish these statistics for you. I am merely
calling vour attention to these figures at this time.
Mr. C h a i r m a n . We have the figures.
Mr. C o w a n . They are among the figures I will submit.
Mr.-W i l l i a m s . Judge Cowan, isn’t it also true, or rather, don’t
you think it probably true that the actual imports of cattle from
Mexico during the periods which those figures cover, were perhaps
slightly larger than shown?
Mr. C o w a n . That might be, because they were not all inspected;
nobody knew how they came. But this mainly represents importa­
tions from Canada to'the Chicago market, where a great decline in
1921 was manifested, because of the lessened price of cattle in 1921.
The C h a i r m a n . I s that in numbers or dollars?
Mr. C o w a n . This is in cattle, the number of head of cattle. The
value I would not want to undertake to state, but it is not very
important.
....................
In regard to the bankers, I would like to ask Mr. Williams if it is
not a fact that the bankers of Fort Worth and other bankers would




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tell anybody that comes in that they were loaned right up to the
handle, and deposits are declining, and they can not’ make new loans ?
Mr.-W i l l i a m s . That is what I understand.
Mr. C o w a x . Everybody is told that. Now isn’t that the case at
Kansas City?
Mr. W i l l i a m s . That is true, yes sir.
Mr. C h a i r m a n . Well, that was true six months ago; I don’t believe
it is true to-day.
Mr. C o w a x . Absolutely so, Mr. Chairman.
Mr. W i l l i a m s . Yes.
The C h a i r m a n . They make that statement, but my guess is that
the Kansas City banks and the Fort Worth banks are not extended
to-day.
Mr. W i l l i a m s . I do not make this as a statement of fact, but merely
my own opinion, that you will find that the deposits have substan­
tially declined in both of those cities in the institutions that handle
cnttle paper. Furthermore, a large per cent of the cattle loans are
handled by loan companies which do not have general deposit
accounts but sell their paper.
Mr. C o w a n . The deposits, Mr. Chairman, have very greatly
declined in the Dallas and Fort Worth banks. I have talked with
such men as Mr. Connell, Mr. Van Zandt, and the officers of the
First National Bank and the Drovers’ National Bank of Kansas
City, and many banks over the country, and we have the evidence
that was produced before the Interstate Commerce Commission as
to the financial condition in Denver, and all the stockmen and bank­
ers concurred in that statement, that the banks are simply unable to
make new loans on account of the very large amount of old paper
that they had to carry and the decrease in the available deposits.
Now I am not talking about your time deposits. They are a very
small part of the deposits in the bank.
Mr. Chairman, I would like to file, for the purpose of informa­
tion, for this record, the testimony given in detail at Denver by Mr.
Fred Warren, the son of Senator Warren, who runs the business in
Wyoming, as to the conditions in the State of Wyoming.
Also the testimony of Dr. S. W. McClure, formerly secretary of
the National Wool Growers, and a man of encyclopedic knowledge
on the subject o f the entire intermountain and northwestern country
and the wool and sheep business.
And also the testimony of Mr. Charles Collins, a large ranch owner
of Denver.
Now, this testimony is by men who are actually in the business,
with complete knowledge of it, and shows the entire situation as it
existed on the 1st day of June, when they testified. And I have
had transcribed already in part the testimony, and will have the
balance transcribed upon the record which I would like to file, as I
think it will be a valuable matter of information, as it was the sworn
testimony of these men, who have very complete knowledge of the
subject
The C h a i r m a n . Without objection it may appear in the record.
Mr. C o w a n . I can not furnish it to-day, but in the course of a very
short time I will furnish it, along with the statistical data which I




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have secured since I have been in Washington, made up by the Cen­
sus Bureau and experts of the different departments.
(The testimony of Mr. Warren, Dr. McClure, and Mr. Cowan,
together with the statistical data, all of which is to be furnished by
Mr. Cowan, will be inserted.)
The C h a i r m a n . I f there is nothing further, we are very much
obliged to you, Mr. Williams, and to you also, Judge Cowan.
The commission will take a recess until 10 o’clock to-morrow
morning.

(Thereupon, at 5.45 p. m., an adjournment was taken until 10
o’clock a. m. of the following day, Thursday, August 11,1921.)




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AGRICULTURAL INQUIRY.
THURSDAY, AUGUST 11, 1921.
C ongress of t h e U n it e d S t a t e s ,
J o in t C o m m is s io n o f A g r ic u l t u r a l I n q u ir y ,

,

Washington D. C.

The C h a i r m a n . Mr. Doak, the commission will hear you for about
10 minutes, if you proceed now.
STATEMENT OF W. B. DOAK, MEMBER OF THE FARMERS’ UNION,
CLIFTON STATION, VA.

Mr. D o a k . The Federal farm loan act made two efforts at financing
land, diametrically opposite; the one, the American cooperative, the
other the joint-stock bank, organized for private profit. Now, we
have in the system 4,000 national farm-loan associations of some
200,000 members. Of the twenty-four or twenty-five million stock
in the 12 land banks. $18,000,000 is subscribed By the loan associa­
tions, which can only lend for refunding or productive and prescribed
purposes. We have in the same deal the joint-stock bank, with no
restriction whatever as to the amount, place, or purpose of the loan.
It may be argued that the $10,000 limit in the cooperative is right
or is not. It may be too little. I think it is. The majority o*
farmers think it is altogether too small to .finance American agri­
culture at this time, in view of the fact that our loans have doubled,
according to the last census. Instead of paying off our farm debt
during the war we have doubled it. The farm debts have increased
largely, both in number and amount, and for that reason and for
other good reasons the limit is small. It was small then, and rela­
tively much smaller now.
No Congressman can argue that we should have limited the loan
in the cooperative association to $10,000 where the association as­
sumed iO per cent liability, where there was greater security other­
wise, and should have turned loose a bunch of bankers under the
joint-stock banks to lend without limit any amount of money to
anybody for any purpose.
By the way, it is in direct conflict with the time-honored policy
of Congress, which I believe is right, that the public domain, as
contradistinguished with the British policy in Australia, and the
Spanish policy in South America, whereby they leased or sold im­
mense quantities of land at a nominal price or rental. The policy
in this country has been to divide the public domain into small or
family-size farms. That policy is wise and right.




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There was once an honest Englishman, W. E. Gladstone. In his
speeches on the Irish land question, which, by the way, I think are
the ablest in the English language, he makes two statements in re­
gard to land. He says that “ land is one of the things which does
not permit of indefinite expansion.” And the other, that “ one man’s
possession of land is the other man’s exclusion,” and for those two reasons a monopoly in land is the most vicious of all monopolies.
I made the accusation that the joint-stock land-bank clause of the
Federal farm loan act was the most vicious piece of pro-trust legis­
lation in the history of Congress. That was my honest opinion about
it—for this reason, it has the special privileges of exemption from
taxation without restrictions which are-necessary to make it serve
the majority. It enlarges and encourages landholding. Now, the
statement went through, the United States Senate Banking and Cur­
rency Committee, Senator Capper, and it was absolutely wrong, that
their loans were limited to $40,000. As a matter of fact, there is no
limit in the act itself to the amount of money that may be loaned by
joint-stock banks. A ruling of the board put on a limit of $40,000
and was very wise, but suppose that board is changed? I under­
stand one member of the board thinks of resigning now. Another
member’s time expires next year. A change of one member on that
board and it would probably recall that order. There is nothing in
the world then to prevent that act being allowed to finance a giant
landholding corporation, a million-acre estate.
I
want to make one comment upon this Federal reserve system.
My Literary Digest told me that they had loaned in financing the silk
trade $448,000,000, I believe it was, an average of $10 a pound for
raw silk during 1920, when they were at the same time telling you in
. Texas that they could not pay 10 or 12 cents a pound for cotton,
when they could not finance wool that we had in warehouses in Vir­
ginia at even 15 cents a pound. Just where, did they get that or other
money ? I may be wrong, but the Comptroller of the Currency says
$1,000,000,000 was being loaned at 20 per cent. Meanwhile four New
York banks had taken more out of other regional banks than many
States. Now, my Bible tells me that usury is a crime.
He that putteth n ?t out his m
<
oney to usury nor tnketh reward against the
innocent. (Psalm xv, 5.)
For the love of m
oney is the root of all evil. (I Tim. vi, 10.)
And Jesus went into the temple of God and cast out all them that sold
and bought In the tem
ple, and overthrew the tables of the money changers.
(Math, xxi, 12.)
We have made it a den of thieves. (Math, xxi, 13.)
And when he had made a scourge of small cords, he drove them qut of the
temple. (St. John ii, 15.)

Statements have been made repeatedly by officials who ought to
know, that they were allowed to take this money from farming
States, usury furnishing the motive power and our Federal reserve
system the vehicle.
The Chaibman. A Federal reserve bank?
Mr. Doak. Well, the national bank. All the banks in New York
City, practically, are under the Federal reserve system, practically
all. Of course, the State banks come in in the West, but I take it
that practically all in New York City are under the Federal reserve
system, and it is in violation of law. Nearly all States in the Union
have usury laws.




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Representative S u m n e k s . Well, the Federal reserve system does
not have to do with or does not have control over the amount of in­
terest that the member banks may charge. Those things are under
the regulation of the State law. There have been enough things
charged to these poor fellows without holding them responsible for
interest.
Mr. D o a k . D o you mean to argue to me that the Federal reserve
system has nothing to say about who they extend credit to, or how
much they were allowed to charge! Have they got to pinch every
farmer and small business in the United States because a bunch of
blooming speculators in silks or gambling stocks are able to pay 20 or
100 per cent for money? Why shouldn’t they restrict their credit!
Why shouldn’t they say: “ You can not have money at all at any
price from any bank in the Federal reserve system for gambling” ?
Representative S u m n e rs. That is a different proposition.
Mr. D o a k . There was enough money put into the silk trade to
finance all the cotton and wool in the United States in 1920. Japan
got an average of over $10 a pound for raw silk and invested onetenth o f the money in wool and got a better textile and took it over
there. I am here to tell you that Gov. Harding has not got sense
enough to deal with the Japs; he may be able to deal with us. He
and Secretary Houston did hit us a hard below-the-belt lick in this
deflation.
The C h a ir m a n . Without objection the commission will take a re­
cess until 10 o’clock to-morrow morning.
(Whereupon, at 4 o’clock p. m., an adjournment was taken until
10 o’clock a. m. the following day, Friday, August 12, 1921.)
91341— 22—v o l 3----- 9




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AGRICULTURAL INQUIRY.
F R ID A Y , AU G U ST 18, 1981.
C o n g r ess o f t h e U n it e d S t a t e s ,
J o in t C o m m is s io n o r A g r ic u l t u r a l I n q u ir t ,

Watfvington, D. C.
The joint commission met, pursuant to adjournment taken on
yesterday, at 10 o’clock a. m., in room 70, Capitol Building, Repre­
sentative Sydney Anderson (chairman) presiding.
The C h a ib m a n . The commission will come to order. The com­
mission this morning will hear W[r. Fred J. Lingham, o f the Federal
Milling & Elevtor Co., o f Lockport^ N. Y.? who was formerly head
of the milling division o f the ( 0QdJL3minjstratio#.
Mr. Lingham, the commission would like to have you discuss in
general the spread between the price o f wheat and the price o f flour,
the various elements that are involved in that spread, and the com­
plications o f the marketing machinery used in the sale, manufacture,
and distribution o f wheat flour.
STATEMENT OF UK. HIED J. UNGHAX, FEDERAL KILLING ft
ELEVATOR CO., LOCXPOBT, H. T ..
Mr. L in g h a m . Mr. Chairman and gentlemen o f the commission, I
came down without any formal statement prepared, not knowing just
what information might be wanted, excepting that I realized that
naturally ybu would want to'know the general reasons for the
spread between the farm producer and the actual consumer.
One reason for the big spread to-day is, of course, the high freight
rates. I have prepared a small table giving these freight rates, in
bushels. For instance, the rate from Edgeley, central North Dakota,
on wheat to the seaboard is 44.4 cents per oushel; from Goodland,
Kans., on the Colorado-Kansas State line, it is 47.1 cents per bushel.
Of course, I just have taken typical points; all points in the above
States would not be .the same.
D om estic freight rates per bushel to Nete York d tp , Aug. 10,1921.
Wheat.

Central North Ttakota (Edgeley)......................................... ....................

Orate.
44.4
29.7
47.1
33

Com.

Oats.

Oentt.

Oentt.

41.44
43.96
30.8

23.68
15.84
26.12
17.6

The above figures do not lnclnde any commissions, handling, or transfer
charges. Rates for export lire 3 cents less from the Northwest and 4 cents less
from the Southwest per 100 pounds.
131




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Now, when you realize as regards the price o f wheat, which is what,
I presume, you want me to cover, the price which the farmer gets
is the value at the seaboard for export less freight. So long as we
have exportable surplus o f wheat, that exportable surplus makes the
price for wheat, in a general way.
Senator L e n r o o t. By that do you mean the Liverpool price?
Mr. L in g h a h . Y es; the Liverpool or seaboard prices are practically
the same after allowing for ocean freight. We have to compete with
Australia and India at times, so the Liverpool and seaboard price
makes the price for the country as a whole. .
On the 9th, which was Tuesday last, No. 2 hard wheat was worth
about $1.40 at the seaboard. That amount is not exact, because o f
variations in grades, but about $1.40. That means that the freight
from the western part o f Kansas was taking about one-third o f the
final selling price.
Now, in saying that I do not attempt to say at all that freight rates
should be reduced; 1 don’t know. I think that is something only a
freight man is competent to pass on. '
Senator L e n r o o t. In that connection, can you tell us what the pre­
war freight rate Was from the same points?
Mr. L in g h a m . The prewar freight rate would have been about
half.
Senator L e n r o o t. About 17 or 18 ?
_
Mr. L in g h a m . I forget the exact figures, but I think about half.
The C h a ir m a n . It would have been more than half.
. Mr. L in g h a m . A s a matter o f fact, the prewar rate to Buffalo was
then 11, and now it is 24, so it was less than half.
Senator L e n r o o t; Ate these all rail rates you are giving, or lak e a n d
r a il?

Mr. L in g h a m . These are all rail.
Senator L e n r o o t. How about the lake and rail rates?
Mr. L in g h a m . I do not know just how the water rates compare,
but they would be very little less; probably not more than 2 cents
less, when you include the transfer charges necessary. When you
bring the wheat from Kansas City and attempt to ship over the
Lakes, yon bring it from Kansas City to Chicago, and the north­
western wheat to Duluth, and at Chicago or Duluth transfer to boats,
and the transfer charges are high at both ends. I do not mean to say
unreasonably high; I do not know. The charges are higher than the
water freight itself, in many cases.
Senator L e n r o o t. H o w many transfers do you include; more than
at Buffalo ? I mean the actual transferring o f the grain.
Mr. L in g h a m . Well, in starting from Kansas City, you bring your
wheat to Chicago- — _
Senator L e n r o o t (interposing). Is that an actual transfer o f
grains, as a rule?
Mr. L in g h a m . You mean at Kansas City?
Senator L e n r o o t. No ; in Chicago.
Mr. L in g h a m . Yes; to go by water.
Senator L e n r o o t. Into the elevators and out?
Mr. L in g h a m . By the water route?
Senator L e n r o o t. N o ; you are giving a rail route.
Mr. L in g h a m . Oh, I thought you meant by lake and rail.




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Senator L e n r o o t. No ; all b y rail.
Mr. L in g h a m . Then there is no transfer.
Senator L e n r o o t. Then if you ship b y lake and rail, what do
you do?
Mr. L in g h a m . Then you bring the wheat in cars from Kansas City
to Chicago, afid then you have to have an arrangement for assembling
wheat in cargo lots. In other words, it is impossible to bring in
straggling cars o f wheat and dump it into a boat. You can understana how that is.
Senator L e n r o o t. Well, it goes into an elevator.
Mr. L in g h a m . Yes; it goes into an elevator, and we as millers, or
those who have the grain at Chicago, must arrange for storage room,
which is more than the mere'transfer. In other words, he must have
enough storage room arranged for there to assemble a sufficient quan­
tity o f wheat for a cargo, as it is called, or parcel. Then when the
wheat comes down the lake it must be insured, whereas by rail it does
not have to be insured. You take some chance o f loss by shortage
by boat, more than you do by rail.Now, at Buffalo, there again you must arrange for a transfer from
the Boat to the cars. Then, again, in transferring from the boat to
cars in Buffalo you have to transfer in bulk and arrange to take it
out of that bulk in a quantity that you can unload into your mill. In
other words, we might unload 100,000 bushels from a boat into an
elevator in a day in Buffalo, but we could not take that 100,000 bushels
into our mill. We have not the unloading facilities, and practically
no mill has. So there again there is a charge for storage as well as
of transfer.
Representative S u m n e rs. N o w , in the practical operation o f the
business do you buy in the interior and go through this procedure, or
is not the wheat assembled at Chicago by merchants to distribute and
redistribute at Duluth and at Buffalo ?
Mr. L in g h a m . A t Buffalo, say ?
Representative S u m n e rs. Y es; to be redistributed at Buffalo.
Mr. L in g h a m . Well, to answer your question directly, we buy no
wheat in Chicago ourselves, for the reason that the so-called contract
grades o f wheat in Chicago are not the kind of wheat we want. We
nave tried at times to go oack into the country. I have made trips
out there myself and tried to buy from country points. That has not
been found entirely practicable, for the reason that the small country
elevator perhaps has one car or five cars to-day, when perhaps we
have made no flour sales, and therefore do not want to buy to-day.
Then the one car or five cars he may have to-day may not be the
character o f wheat we want. It may be a yellow-berry wheat, which
we do not want to buy. So it is very difficult for us—I might say
impossible for us—to buy directly from the interior country point on
a practical basis, much as we would like to do it.
Representative S u m n e r s. You h ave to go to the country elevator
and look for the wheat?
Mr. L in g h a m . What we are doing this year is going to Kansas
City. We place a man in Kansas City to buy for us to-day whatever
number o f cars we may say o f the kind o f wheat we want.
Senator L e n r o o t. On sample?




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Mr. L in o h a u . A ll on sample. We buy nothing on grade in Kan­
sas City. As the wheat comes into Kansas City and the sample is
shown on the floor he goes around and chooses the kind we want.
Senator L e n r o o t. O f course that makes it more expensive to you,
where you buy on sample, than if you bought on contract?
Mr. L i i n o h a m . Yes; but if we bought on contract we might get
wheat we could not use.
Senator L e n r o o t. Y es; I understand; but it does add to the ex­
pense.
Mr. L in o h a u . Y es; it adds to the expense, but it is a necessary
expense.
Senator L e n r o o t- What proportion o f wheat is bought on sample,
roughly, and what proportion on contract?
Mr. L in o h a u . I would not like to make a statement-----Senator L e n r o o t (interposing). I would not expect you to be accu­
rate; just approximately.
Mr. L in o h a u . A s nearly as I could answer, I would sa y prac­
tically all the wheat being fciought out o f Kansas City to-day is bought
on sample—practically tul o f it.
Senator L e n r o o t. When you buy on sample, how do you hedge
against that; do you turn in as nearly as possible what the graae
would be on contract?
Mr. L in o h a u . In the first place, we try to buy wheat as we sell
flour. That puts us even on the market, o f course.
Senator L e n r o o t. So in that case you would not hedge at all?
Mr. L in o h a u . We would then not hedge at all, because we would
be even as to purchases and sales. Now, it so happens that to-day
we can not sell as much flour as we must have wheat coming to
keep the mills in operation. In other words, if we wait until we sell
the flour and then d u v the wheat it would be perhaps two or three
weeks or a month berore the wheat cot through, ana our consumer
would not wait for us. So we are hedging. We are hedging largely
in Chicago, realizing that we are hedging or selling wheat in Chicago
which is not like the wheat we are buying.
Senator L e n r o o t. But you get as near to it as possible?
Mr. L in g h a m . O f course, you can not ordinarily use the wheat you
buy in Chicago; you have got to buy or sell so many bushels o f Sep­
tember or December wheat, for instance.
Senator L e n r o o t. Are they not in grades there?
Mr.

L in q h a m .

N o.

Senator L e n r o o t. Not at all ?
Mr, L i n g h a m . N o ; there is a rule that various grades are deliver­
able in the different markets. For instance, in Chicago any o f the
following grades are deliverable at the option of the seller:
GRADES OF WHEAT DELIVERABLE IN CHICAGO ON “ FUTURE CONTRACTS.”
No.
No.
No.
No.
No.
No.
No.
No.

1
1
1
2
2
2
1
2

dark hard winter wheat.
hard winter wheat.
yellow hard winter wheat.
dark hard winter wheat.
hard winter wheat.
yellow hard winter wheat.
red winter wheat.
red winter wheat.




No.
No.
No.
No.
No.
No.
No.

1
1
1
2
2
1
2

northern spring wheat.
velvet chaff wheat.
dark northern spring wheat.
dark northern spring whent.
northern spring wheat.
red spring wheat.
red spring wheat.

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Also, some o f the lower grades o f wheat are deliverable on these contracts at
(jwctfied discounts. In Minneapolis the following grades o f wheat are deliverNo. 1 dark northern spring wheat.
No. 1 northern spring wheat.
No. l red spring wheat.

No. 2 dark northern spring wheat.
No. 2 northern spring w heat

Other grades deliverable at specified discounts.

Senator L e n r o o t. I supposed selling future delivery was on spe­
cific grades.
The C h a i b m a n . N o; that is the exact trouble with the proposition.
I f a m ill could hedge on its grain and then when it bought in its
hedge could elect to take the wheat desired instead o f selling its
hedge, it would mean something; but as it is, because the miller can
not be certain o f being delivered a millable grade o f wheat on the
hedging contract, instead o f selling his wheat, he must take in the
hedge.
Senator L e n b o o t . Then, as a matter o f fact, you expect, when buyingon grade, that you will get the lowest grade?
Mr. L in g h a m . When buyifig on grade we expect to get the lowest
uality o f the contract grade bought; and in hedging we simply hope
lat the Chicago—if we are hedging there—will run parallel with
the cash wheat. In other words, we hope that if we buy wheat at
$1.50, if that should go down 25 cents, we hope Chicago will go
down the same, so that where we will have lost 25 cents on our cash
wheat purchase we will have made that 25 cents on our Chicago
hedge. And, o f course, it acts in the reverse way—that if the cash
wheat goes up and we make 25 cents on the cash wheat, then we will
have lost that 25 cents on our hedge. ‘ In other words, we do not
hedge to make money; we hedge as an insurance against loss.
Senator L e n r o o t. Does it sometimes occur that the lower grades
.................
go '
’ - ’ •’
’
—
For instance, within the last
month in Minneapolis cash wheat sold at 75 cents over their option.
When we buy, while we hedge to minimize our loss, we realize that
there is little chance o f its being a sure insurance against loss.
Senator C ap p er. Would it be helpful toyou , and would it facili­
tate your business, if the grain growers o f Kansas and other Western
States would organize in a large way cooperatively and furnish you
their grain through one large general sales agency?
Mr. L in g h a m . I will answer that in perhaps an indirect general
way. W e would like to buy just as directly from the producer as
possible. A ll mills, I think, are in that position. It is going to be
very difficult, I believe, for the farmers to work out a selling organi­
zation where their expenses o f handling the business will be much,
if any, lower than the present expenses between the producer and the
consumer.
Senator C ap p er. That would then be in favor o f a movement in
that direction, would it not?
Mr. L in g h a m . Well, our preference would be to buy from the
producer; but practically I question whether that movement is going
to be a success. That would be my answer.
Senator C ap p er. What would enter in the way o f a movement of
that kind? What objection do you see? What difficulties would
they meet?

S




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Mr. L in o h a m . Y o u are going to have large expenses in doing t h e
business. For instance, Ih a ve a miller fnend in Kansas who has
a lot o f elevators in the country. He told me last year that it was
costing him considerably more to buy his wheat through his own
country elevators than that same wheat would net him on the Kansas
City Board of Trade, the reason being that the movement o f wheat
to those country elevators was not large enough to take care o f the
fixed expenses o f keeping those elevators open. O f course, again,
the movement to those elevators might be large enough so that he
would have a very small cost.
Senator Capper. But in the instance I cite, you would not be
dealing with the small country elevator; you would be-dealing with
the one general sales agency representing a great many grain
growers. Now, would not that remove some o f the difficulties you
speak of?
Mr. Linoham. We would be very glad if that can be brought
about.
Representative Sumners. Speaking of your country elevators and
the expense o f their operation, is it not necessary, in order to avoid
storm damage and the deterioration o f the grain, to be able to put it
into an elevator reasonably close to the place o f production; to make
my question clear, can you during the period o f grain thrashing,
without having to provide an enormous unnecessary transportation
facility—unnecessary in ordinary times—move that grain to the
great concentrating elevators at the terminal market?
Mr. Linoham. 1 believe that wheat should be stored as near the
point o f production as possible. Does that answer your question ?
Representative Sumners. That answers my question; yes, sir.
Mr. Linoham. I believe it should be stored as near the point o f
production as possible, for the reason that when you have it back at
the point of origin you have a wider choice as to where that wheat
may be shipped, and you can ship it—assuming that you are a
farmer or a country elevator man—you can ship it then to the market
paying the highest price at the moment.
Representative Sumners. As Senator Capper has in mind, if
you had a number o f these elevators sufficiendy large to handle
enough grain to justify their administration and the assembling at
some particular central point—not the grain, but samples of the
grain, or a description o f the grain by grade, so that buyers could
resort to that place without having to scour the country—would such
an arrangement be feasible from an economic standpoint and from
an economical standpoint? '
Mr. Linoham. Well, last week a man in charge o f one o f our
mills—we have a mill in Ohio—wanted to do a similar thing. The
country around there had some off-grade corn at times; he wanted our
permission to send out samples o f that corn, or rather o f cracked corn
and corn meal made from this off-grade corn, and sell it on sample. I
said, “ Theoretically it is all right, but you send out those samples
broadcast, and one man will buy and the other ninety-nine people
might come in and want it, and you will have to say, ‘ It is sold.’
Now, that is somewhat different from your proposition, because
your idea would be that these hundred or thousand country elevators
would send samples, possibly to Chicago, and they would only sell




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through the Chicago office. I think that would be practical, but it
is possible to-day.
Representative Sumnebs. Yes; it is possible-----Mr. Linoham (interposing). We will buy from any country
elevator on a sample o f the individual car, and will be very glad to.
Representative Sumnebs. But the difficulty, unless there is some
affiliation of country elevators, would be that no individual elevator
could afford to maintain a place in Chicago to which buyers could
resort, nor could they, perhaps, maintain the necessary office force
and the necessary expert service in order to be able to deal satisfac­
torily either for their clients or satisfactorily from the standpoint
of the miller who desires the service.
Mr. Linoham. That is true, but the country elevator to-day can
send his samples to a grain man in Chicago.
Representative Sumnebs. Oh, yes.
Mr. Linoham. He can do that to-day.
Representative Sumnebs. Yes.
Mr. Linoham. And I believe it will be found by experience that
he can do that to-day as cheaply as he may be able to ao it through
that office.
Senator Lenboot. Does he do it, as a matter o f fact, now ?
Mr. Linoham. I do not believe he is doing it to any large extent.
I do not know to what extent it is being done.
Representative Ten E tck . Would you be able to purchase any bet­
ter through the country elevator if the Government would establish
grading o f wheat as regards the various varieties, with a certificate
setting forth the moisture, the dockage, and the foreign material?
Mr. Linoham. We have that to-day.
Representative Ten E tok. No ; from information I have gained
elsewhere, especially on spring wheat, we have a governmental grad­
ing, but it is not graded in accordance with the berry o f the wheat.
The grade is given in accordance with the foreign material and dock­
age and moisture, which governs the grade of the wheat. Now, I
am asking whether you could buy better from the country elevator
if the wheat was graded on the berry alone, and a certificate given
setting forth the moisture o f that wheat and the dockage and the
foreign material; then you would know exactly what that wheat
was; you would know tne seed o f the wheat; and you would know
the grade o f the wheat itself.
Mr. Linoham. Possibly I should answer your question this
way-----Representative Ten E tc k (interposing). Am I right in my con­
clusion in the difference in the way the wheat is graded to-day,
especially the spring wheat?
Mr. Linoham. I am going to satisfy you by my answer. I was,
some years ago, chairman o f the Millers’ National Federation Com­
mittee on grain grades. I worked for something like two years,
spending a good deal o f my time in Washington at my own ex­
pense—or the expense o f the organization—O f course, I had no pay
whatever—working for Federal grades, hoping that we then would
be able to buy on grades, as you have outlined. But there is such
a wide difference in the quality o f the wheat throughout the same
section, or in some instances even from the same farm, that we are




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buying very little on grade. Now, if what you Bay would be possible,
I would say yes. The situation is, however, that the official descrip­
tions of various grades o f wheat go into minute details in describing
the character o f different wheats.
Representative M ills. May I ask a question—I am not a farmer,
the way the rest o f these gentlemen are, so please be a little ele­
mentary with me. As I understand Senator Capper’s question, he
proposes, through a cooperative agency large enough to deal directly
with the millers, to avoid the process o f selling in the open market;
is that your understanding o f the question?
Mr. Lingham. That is my understanding.
The Chairman. Able to deliver a given kind and character of
wheat, and a given grade at a given time and given place.
Representative M ills. Let me ask you first, if that is the case,
who would finance the carrying o f that wheat until the time that
delivery came?
Mr. Lingham. The farmer’s organization naturally would.
Representative M ills. Would that be a very heavy financial bur­
den requiring a large capital?
Mr. Lingham. 1 es, sir.
Representative M ills. Let me ask you a second question: As far
as the milling industry is concerned, it buvs wheat m advance, does
it not, months in advance, contracting for future delivery?
Mr. Lingham. They do at times, but, generally speaking, mills
buy for current requirements—I think in a general way muls as a
whole are not buying beyond their expected requirements to keep
their mills in operation.
Representative M ills. N o; but you misunderstand me entirely.
The mills do not wait until the crop is ready for market to do their
buying?
Mr. Lingham. May I ask if you have the idea that the mills as a
whole do buy awav ahead ?
Representative M ills. I had an idea that they bought a reasonable
time m advance, so as to know where they stood. I did not suppose
they bought from day to day.
Mr. Lingham. Oh, yes; we buy from day to day. We have to-day
standing orders in Kansas City to buy so much each day, and the
same thing in Minneapolis.
Representative Mills. Exactly. How far ahead do you do that?
Mr. Linoham. We only buy enough ahead to keep a flow coming
to keep our mills in operation.
Representative M ills. Do you contract at all for future delivery?
Mr. Lingham. To-day not at all.
Representative M ills. I am not asking about to-day, but I will
sav as a normal proposition.
Mr. Lingham. I will say, since the war we have not. I should
say some few mills may have bought ahead, but they are subject to
losses.
Representative M ills. How far ahead would you buy ?
Mr. Lingham. We will not buy a bushel-----Representative M ills (interposing). Suppose you buy to-day,
when will it be delivered—to put it in a different form?
Mr. Lingham. Any wheat we buy to-day we hope will be in in
two weeks.



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Representative M i l l s . In two weeks?
Mr. Lingham. Yes, sir.
Representative M ills. And that will represent the maximum of
time, under normal conditions?
Mr. Lingham. What do you mean by normal conditions—pre­
war conditions?
Representative M ills. Let us say prewar conditions. You have
been buying from day to day because you have been buying on a
falling market.
Mr. Lingham. The fact is that in our wheat buying we pay no
attention to price conditions except possibly as to so-called pre­
mium conditions for various grades o f wheat and for. different de­
liveries.
Representative M ills. It does not take any great amount o f wis­
dom to see what actuates you. I am asking you, under normal con­
ditions, how far do you buy ahead?
Mr. Linuham. It would depend entirely on whether we could sell
flour ahead.
Representative Sumners. Under the ordinary procedure, you sell
your flour in advance, when you can?
Mr. Lingham. When we can we will sell up to 60 days’ delivery.
Representative Sumnebs. And then when you do not have wheat
you hedge; you buy a hedge against the sale?
Mr. Lingham. Yes, sir.
Representative Sumners. And then you go on the market and buy
the wheat, contracting for its arrival at your mill at about the time
when you want to begin to grind up that lot o f wheat into flour
sold?

Mr. Lingham. Yes, sir.
Representative M ills. That is what I assumed to be the ordinary
procedure. Now, that certainly extends over a period o f two weeks?
Mr. Lingham. Oh, sir, we can not sell our flour to-day for two
weeks ahead. We would if we could. But the consuming public-----Representative M ills (interposing). We can not base any perma­
nent condition on a temporary situation. Senator Capper’s suggestion
was to have a permanent organization through which the millers
could deal with the farmers. You understood that he proposed to
build up, in the next six months, a more or less permanent proposi­
tion; isn’t that so?
Mr. Lingham. I understand some plan or plans have been under
wav.
Representative M ills. What I was getting at—of course, if the
wheat is not bought for future delivery and the farmer can finance it,
I do not see that the suggested system offers any particular advan­
tages over the present system; in other words, it seems to me the
proposed system offers about the same advantages that the present
facilities do. I do not know whether you get my point. I personally
can see some great advantages to the farmer in having an open mar­
ket by which his price is fixed by the economic law o f supply and
demand, and that there consumers can buy for future delivery at
prices regulated by the economic law o f supply and demand for fu­
ture delivery. But, o f course, if there is no real demand for future
delivery, it seems to me that you could do business just as well in




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dealing with farmers and elevators and buying wheat as you wanted
it on the basis o f delivery in two weeks.
Mr. Linoham. I believe, sir, I did not get the trend o f the informatiton you wanted before. As a matter o f fact, at times milla do
buy anead. Their buying is very largely dependent on their sales of
flour, and in prewar times it was nothing unusual to sell bakers and
dealers three or four months ahead.
Representative M ills. I am connected with a concern that is a very
large user o f wheat, and I know that we buy a good supply o f wheat
ahead o f time, and if we expect a rising market we are very careful
to buy ahead.
Mr. L in o h a m . You must be in a cereal business.
Representative M ills. And when you inform me that mills nor­
mally buy two weeks ahead as a regular thing you changed my con­
ception o f the business.
Mr. Linoham. I thought you were asking about the present year. I
assume you are connected with a cereal company?
Representative M ills. Yes.
Mr. Linoham. As a matter o f fact, in a cereal company you have &
much wider margin o f profit than we do in the mills. I know that
is the custom o f cereal companies, but mills as a whole do not do it.
Representative T en E tck . Let me ask you what is the practice;
is it not the practice of the flour mills, as a rule, to speculate in
purchases a long time ahead?
Mr. Linoham. No ; decidedly no.
Representative Ten E tck . Your idea is this, that they buy a cer­

tain time ahead to give them a constant flow in accordance with their
sales?
Mr. Linoham. Yes, sir.
Representative Ten E tck . And if their sales are a long time ahead,
they buy wheat a long time ahead and hedge on that?
Mr. L inoham . Y ou are correct, as a general policy.
Representative T en E tck . The miller who buys a long time ahead
and is a speculator is liable to go broke?
Mr. Linoham. Yes; you are right.
Representative Ten E tck . Ana the fellow who is not a speculator

does not buy ahead, as a rule?
Mr. Linoham. You are correct
The Chairman. You may proceed, Mr. Lingham.
Representative Sumners. Mr. Chairman, before he leaves that
question I would like to ask him a question. You said, I believe, you
spent about two years trying to work out grades o f wheat?
Mr. Linoham. Yes, sir.
Representative Sumners. So that mills could buy on that grade
and get delivery o f the grain they bought and grind it into flour?
Mr. Linoham. That was our object.
Representative Sumners. Now, why didn’t you do it; and how far
did you succeed?
Mr. Linoham. My work largely ceased when the grain grades bill
was passed by Congress, which gave the Department o f Agriculture
authority to go ahead and establish the grain grades under certain
specifications. Now, we millers are somewhat disappointed in the
fact that it has not Men possible to establish specifications for grades




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which would insure our getting the particular kind of wheat we
wanted. There are some grades that do reasonably assure us a
quality; for instance, No. 1 dark northern.
Eepresentative Sumners. That is sufficiently descriptive o f the
kind of wheat so that you can depend upon buying by grade!
Mr. Lingham. Yes; but we would not thing o f buying just No. 2
northern wheat or No. 1 northern wheat.
’
Representative Sumnehs. W hy!
1• ’
Mr. Lingham. Because we would not be sure lhat Ihewheatwas
hard enough for our particular use.
i
Representative Sumners. Would it be possiblfe'td put in a : sub*grade there specifying the element of-hardness!
Mr. Lingham. That is where the “ dark” corned in, if it is that, .
^ JRegresentataive Sumners. That is a description o f a ^radfe,
Mr. Lingham. Yes; that is a description o f a grade; an official
grade.
Representative Sumnerb. Now, from your practical experience
and knowledge o f the requirements o f mills, would it be possible to
establish grades, even though you should have to have 10 or 15 or 20
grades which would sufficiently describe the bulk o f the wheat, s6
that a miller could purchase by a grade and know what hie was get­
ting, and know that he would get the wheat to grind up into the
kind o f flour that he had contracted to sell!
Mr. L in g h a m . I am afraid not. They have to-day 8 0 grades.
That is, it runs from 1 to 5 northern, and dark northern, and hard,
and red, and soft, and durum, and so far they have not been able
to establish grades, with a few exceptions, on which we could buy.
Representative Sumners. When your buyer goes in to sample a
lot of grain, he has in mind the kind o f wheat he wants!
Mr. L i n q h a m . Yes, sir.
Representative Sumners. Now, why could you not write the de­
scription o f that wheat; condense the description o f that wheat into
a grade term !
Mr. Lingham. It looks easy. And perhaps one difficulty1is that
the characteristics o f different grades are different in different years.
For instance, this last year wheat in Kansas City, No. 2 dark, hard,
has actually sold for more than No. 1 dark hard, because largely or
the gluten characteristics in No. '2 as compared with No. 1 Then
there is some o f the so-called bleached wheat, which has been rained
on in the-field, which would be more desirable in some respects than
the so-called perfect berries, and we are paying a premium on pait
of this so-called bleached wheat, compared with more perfect or
normal softer wheat.
Representative Sumners. I will not take up any more of your time
on that subject.
Mr. Lingham. I am here for your convenience.
Representative Sumners. This was a matter o f which I desired
information personally, and I will not take any more o f your time
or the time o f the committee.
The Chairman. You may proceed, Mr. Lingham.
Representative M ills. Let me take up a question with you upon
which the chairman enlightened me, but I would like to get your opin­




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ion about it. Speaking again from the depth o f my ignorance, I as­
sume that these gentlemen who want to abolish the great exchanges
and have the fanner harvest and store his wheat and deal directly with
the miller—assuming that that idea was aimed at—first, would it
help the consumers represented by the millers, and in the second
place would it benefit the fanner! I would like to have your
opinion about that.
Mr. L in o h a m . I believe it would hurt both.
Representative M i m a W hy!

Mr. L in o h a m . I f we could not hedge wheat, we would be afraid
to buy, and if we were foroed-----Representative M i l l s (interposing). Explain that, w ill you,
please: just deal with the elementary process here o f what would
take place; assuming that there was no free and open market, but
that the fanner stored his grain in his own elevator and you had
to buy from him !
Mr. L in o h a m . In .other words, if there were no hedging m arket,
which would result if there were no exchanges.
Representative Muxs. That would be my idea. I do not see
how you could, if you do not buy and sell from day to day in a place
where there is always a market obviously there can be no hedging.
Mr. L in o h a m . We would then be forced into speculation it we
wanted to keep our mills in operation.
Representative Mnxa. Now, tell me why.
Mr. L in o h a m . Because, supposing we could not hedge to-day—
we would reauire to-day in our little Dusiness perhaps 100,000 bushels
o f wheat to now to our mills that we can sell as flour as milled from
day to day. Now, if we could not hedge that 100,000 bushels, we
would have to take chances on it, wouldn’t we, in the market!
Representative M hjls. Yes; it seems so to me.
Mr. Linoham. It is as'simple as A , B, C. Now, the result would
bethat we would minimize that flow to a greater extent than we do
to-day.
Representative M ills. You would buy from hand to m outh!

Mr. L in o h a m . Even nearer from hand to mouth than we do to­
day. We are down pretty near as close as we can be and keep it
coming. But we know we are not as close as we would be if we had
to take all chances on the market. Then we buy also directly from
the farmers at the mills, who unload into our mills directly from the
wagons. To-day we never refuse wheat from a farmer, because to­
day we can turn around and hedge, but if we could not hedge and
thought the market was going lower than it is to-day we would be
foolish to buy from the fanner.
The Chaihman. You would have to buy and sell entirely on the
basis o f orders?
Mr. Linoham. Yes. To-day in buying our wheat from farmers
we pay no attention to the orders or the current market conditions.
We simply balance what we call our “ over and short,” and if we have
a little wheat on hand we hedge against it.
Representative M ills. I have, gathered since I have been down
here that some fellows here are under the impression that if the
farmer can get away from the exchanges and store in his own ele­
vators that he can then control the price. Now, let me ask you about




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that He obviously can hold a part o f this year’s crop until next
year if he has the financial means to do it. But next year’s crop
comes along and will have to go on the market or be held, and in
three or four years will not the farmer find- himself governed by
the economic, ordinary law o f supply and demand?
Mr. L d t o h a k . Let me answer that question. Suppose the farmers’
organization has 200,000,000 bushels o f wheat that is held at the
end o f the crop year. What can he do with it? He can not eat it;
he must dispose o f it. In other words, I fully agree with t o u t
position. I do not believe the farmers can control the price o f wheat.
I know we can not control theprice o f flour.
Representative T e n E t c k . Bight there, let me ask you a question:
Of course, it would be impossible, from my standpoint, for the mill
to buy direct from the farmer and do away with any intermediate
organization, due to the fact that we are exporters o f wheat. The
European countries are not going to come over here and go out to
the farmer and buy his wheat.
Mr. L in g h a m . No, sir.
Representative T e n E y c k . There has sot to be an organization
to assemble wheat and buy wheat and redistribute it to the various
purchasers, either domestic or foreign. But the difference is—and
what Senator Capper, I imagine, is endeavoring to do is to eliminate
the larae corporations who are out for financial gains, who become a
part o f the great spread between the cost o f production and the cost
to the consumer. Now, if the farmer cooperated, and had a cooperat­
ing organization to take the place o f these corporations and the
commission men, would the farmer be in a better position as re­
gards the disposition o f his grain, and in a better position as regards
the price for which he sells it? He could decide as regards whether
or not he would sell it in Europe or in the United States, instead o f
selling it to the corporation who, later; on, decide where they will
distribute the grain and haw, and at what prioe. In addition to that,
we have had in the past great speculators in grain. There is a bill
now pending in Congress, or has been passed, to prevent that. What
we want is a natural flow o f grain in a business way without specula­
tion, but in a way that the farmer will get the lu ll return on hfe
product. Do you think that the cooperative organization, acting as
commission men to-day, could take the place o f these other men in
that particular class o f business?
Mr. L in g h a m . Y es; I think so. And I personally do not b elieve
that the farmers’ cooperative movement along the lines now pro­
posed, o f gathering the wheat and marketing it themselves,'is g o in g
to succeed.
Representative T e n E t c k . I do not know whether you refer to
Senator Capper’s idea or not, but is it not possible that a cooperative
organization working along the right lines can succeed? The citrus
fruit growers in California have succeeded very well.
M r. L in q h a m . E xcu se m e ; are you re fe r r in g to th e citru s fr u it
growers as a coop erative m ovem en t?
Representative T e n E t c k . Yes.
Mr. L in g h a m . I do not believe that they try to control prices.
Representative T e n E t c k . I have not said that the farmer will

control the price, only to this extent, that he will.cut out the profits




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o f this so-called middleman, and thereby get a larger return on his
sales and control distribution, which will have a tendency to keep
prices more on a level.
Mr. L in g h a m . A few years ago we tried to cut out the middleman
in Kansas City. We went out there and bought an exchange mem­
bership for the definite purpose of keeping out tht middleman. ,But
in a year or two, o r five years, conditions came around so that we
rwere not buying, any wheat in Kansas City; Then we had a heavy
expense on our hands to maintain that membership, and later we
Aold it. So we have about come to the conclusion that we can not
save money by “ going around ” the present grain->selling veustom
rand organizations by ourselves. Our. interest would be identical
With-the farmer, you understand.
Representative T e n E t c k . That is , you started at the other aid ?
M r. L

in o h a m .

Y e s , sir.

. Representative T e n E t c k . But you are not organizing at the end
through which you are proceeding, .therefore* you oould not deal
with them through an organization. You had to deal with them
through the exchanges, and naturally yon would fail* because you
had 99 per cent o f the business conducted in a different way than
that in which you were trying to do -it, and that generally meets
■with failure.
Mr. L in o h a m . Well, if the farmers’ organization can be organised
to bring us into touch with them, we will be pleased.
Representative T e n E t c k . You think it would be beneficial then
i f they can make it go!
Mr. L i n s h a m . I f they can, and if they can conduct their business
cheaper than the present cost o f getting wheat to us.
: Thfe C h a ir m a n . Let us see now if we can. set to the practical
points o f the price o f wheat without so much talk.
Mr. L in o h a m . The only practical point I have touched on is the
freight rate. In round figures it is about one-third at the seaboard.
Then come the commissions, and transfer charges at terminal
^markets. But they are comparatively small. I f we buy wheat on
track at Kansas City or Minneapolis, we figure it costs us 2 cents,
including commission and transfer charges, to get it through. I
.question whether that could be minimized much. It might, perhaps,
be cut down a half cent by smaller commissions.
Then, o f course, when you come to the flour, the consumer, yon
come to the cost o f making a barrel o f flour and distributing.
R ep resen ta tiv e T e n E y c k . May I a sk one qu estion th ere, Mr.
C h a irm a n ?

The C h a i r m a n . Yes.
Representative T e n E t c k . You have given the cost o f railroad
transportation to the seaboard. You have not as yet given the cost
o f transportation to (he mills, as I understand it, and I would also
like to know where the greatest percentage o f the flour is now milled
in the United States.
;
Mr. L i n o h a m . Well, t o answer your first question, as to the freight
to the mills, I have taken here the through'freight from points of
origin to the seaboard.
Representative T e n E t c k . Yes.
Mr. L in o h a m . That would include the freight to the mills as
wheat, and the freight on the product to the seaboard.




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Representative T en E y c k . Oh, I see; yon are not going to include
that then in the cost o f your flour?
'
Mr. L in g h a m . Oh, no; that is included in here.
The C h a irm a n . I s the price o f flour based on the actual cost of
the freight to the milling point or on the cost o f freight at the sea­
board?
Mr. L in g h a m . O f course, the cost o f flour at the mill is based on
the freight to the mill. Then the selling cost o f the flour is based
on the freight from the mill to destination, you see.
The C h a ir m a n . I was just getting at whether you had a special
rate at New York for selling flour on the basis 01 what the freight
actually was. .
Mr. L in g h a m . I just took New York as the selling point and
Minneapolis for the milling point. The rate to New York from Min­
neapolis is 29.7. This, of course, would cover the full transportation,
excepting handling or transfer charges.
I forget your second question.
Representative T e n E y o k . Where is the greatest amount o f flour
produced; in what locality ?
Mr. L in g h a m . In Kansas and the Northwest. The Northwest, I
should say, first.
Reprecentative T e n E y o k . The most o f the flour is produced in
the Northwest?
Mr. L in g h a m . Produced in Minneapolis; yes. Minneapolis is still
the biggest m illingpoint in the country.
Representative T e n E y c k . W ell, your first answer answers my
second question in a way, since the m igh t that you charged on the
original bushel o f wheat will not be again charged in the cost o f
milling the flour.
Mr. L in g h a m . Yes; that made your second question immaterial.
Representative T e n E y c k . Yes.
Mr. L in g h a m . But when you get to trying to figure the spread
between the cost o f wheat to the mill and the cost to the consumer, it
is going to be very hard to name any figure. That must include not
only the cost o f manufacture and distribution, but it must include
the materials you get from your offal. In a general way the cost
of a barrel o f flour is figured by taking the price o f wheat and
multiplying by the amount o f wheat used.
The C h a ir m a n . There is inserted at this point a letter and memo­
randum received from Mr. Lingham after he testified, giving more
detail as to the yield o f flour, as follow s:
F io t s a l M n x & E l e v a t o b 0 0 . (T n A ) ,

H Sydnkt A nderson, M.C.,
ou.

Lookpart, N. 7 ., August 26, 1921.

W ashington, D. C.
• Dea6 M b. A ndkbson : Flour yields: In your investigational work you could
tadoubtedly get considerable information from the United States Department o f
Agriculture Bulletin No. 857, and especially from the tables on pages 11, 12,
and 13.
As the bulletin. is, o f course, quite technical, I have made up a statement
which would realty be the result o f these findings by the Department o f Agrtxnlture when put into more easily understood figures, as attached hereto.
I presume it is only natural that a man not in the milling business believes
that a barrel o f 196 pounds o f fancy so-called “ fatally flour ” can be made
from, say, 280 pounds o f wheat. The fa ct is. o f course, that the 280 pounds of
Wheat will make practically 196 pounds o f a so-called “ straight,” but this is not

91341—22— vol 3------ 10




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a flour that would be at all satisfactory to the family trade or to the hlgh-clasN
bakeiy trade for making bread.
These figures in the bulletin mentioned are, I believe, about as nearly correct
a s any figures you could get, and, using these figures, it would require over 400
pounds o f wheat to make a barrel o f fancy bread flour or a so-called 70 per cent
patent
O f course, all mills have different ideas as to percentages o f various grades
o f flour they make. Flour is made as low as 50 per cent patent, or even lower,
and some mills put out so-called fancy flour as high as 85 per cent patent, or
even more than that, but the figures used cover an approximate range a s used
by some high-class mills.
The tabulation as attached hereto covers more especially bread flour made
from hard w heat The flour made from soft wheat would be quite different,
but I will not attempt to give a tabulation on' th a t as It would probably only
confuse, excepting that I might say that quite a large part o f the soft wheat is
ground into a “ straight ” grade and used for pastry and similar purposes.
Yours, truly,
F b e d J. L i n g h a m .
WHEAT REQUIRED TO MAKE “ STRAIGHT ” FLOUB.
[Dept, o f Agr. Bulletin 567, p. 11, Og. 8.]

Basis 56 pounds to 57 pounds wheat extraction is, under Department o f A gri­
culture Investigations, 69.4 per cent, requiring 282.4 pounds wheat.
Therefore, from 282.4 pounds o f wheat the products will be 196 pounds o f
straight flour, 82.4 pounds o f mill feed, and 4 pounds o f invisible loss in m illing.
WHEAT BEQUIBED TO MAKE A BABBEL OF FANCY FAMILY BREAD FLOUR.
I f it requires 282.4 pounds o f wheat to make 196 pounds o f straight flour, t t
would, o f course, require 408.4 pounds o f wheat to make a 70 per cent patent.
Then this 403.4 pounds o f wheat would be divided:

Pounds.

Fancy dear/used for mixing with rye flour (35 percent)...........................................

Approximate
prices Aug.
10, l « l . i

1M

M . 83

7. as
4. as

70

14
Total flour...................................................................................................................
Imrtnlhln Wan (ahmit)............................................................................................ .............
Tnftal , , , , , , ....... ............. . . . .

,.

380
118
S.4

403.4

1 Prioee named are oarload lota Boston rate of freight In 88-pound cotton sacks.

Representative Muxs. When yon take it to-day, where do yon get
o ff; can yon do it that way f
Mr. L i n g h a m . Well, there is snch a wide range between different
kinds o f wheat and different kinds o f flour, sir.
Representative M i l l s . Take any one, for example, will you ! I
will tell you why I want this: Because there is in the record to-day
by a representative, I think, o f some o f the farm organizations an
estimate o f the spread, and he did not differentiate, as I remember
the record, between different classes o f wheat or different
of
flour. He took an arbitrary kind o f wheat and figured 5 bushels, as
I remember, to the barrel o f flour, and figured the rarmer got approxi­
mately $6, and that, expressed in terms o f loaves o f bread sold to
the consumer, made the cost $26. That is in the record to-day, and
I thought it would be just as well if you gave us some actual figures
rather than to deal with generalities.



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Mr. L in o h a m . Before giving an y figures I would like to show
just a very rough chart here that will explain the difficulty o f that
somewhat. In round figures, suppose we figure 270 pounds, or 4|
bushels. A mill can make 200 pounds o f flour o f various grades from
270 pounds o f good, heavy wheat, say No. 1 grade.
Representative M il l s . Two hundred pounds?

Mr. L in g h a m . Y es; 200 pounds o f flour from 270 pounds, say, o f
No. 1 northern wheat. Then, he has 70 pounds o f by-product as
feed. A year ago we were getting around $40 to $60 at tne mill for
that by-product, o f various grades, a ton—call the average $60—that
is, $2.50 per hundred.
Representative M i l l s . Why d o y o u give us fig u r e s o f a year ago?
Mr. L in o h a m . I wanted to show the difficulty o f figurine. Teat
70 pounds was neting us $1.75 for the 70 pounds o f the feed by­
product. To-day we can n6t get over $17 per ton, or 85 cents per
hundred, which is only netting us, say, 59 cents. In other words,
our by-product to-day o f 70 pounds o f feed is netting us about $1.16
less. As a matter o f fact, the spread is even greater.
Representative Ten E tck . How much a carload is that, delivered
from Buffalo to Albany?
Mr. L in o h a m . I did not get your question.
Representative Ten E tck . What is the rate on that feed?
Mr. L in o h a m . To New York, including the freight tax, $5 per ton.
The C h a ir m a n . From Lockport?
Mr. L in o h a m . Yes; or Buffalo.
Representative Ten *Etck. I thought the carloads to-day were
quoted at $24.50, middlings or bran.

Mr. L in o h a m . I thought you asked for the freight rate.
Representative Ten E tck . You said $17 f. o. b. Buffalo.
Mr. L in o h a m . I w as bringing to the net bulk per ton, New York,
which is delivered in New York-----Representative I'en E t c k (interposing). $5 added to $17, in ac­
cordance with that, would give you $22.
Mr. L in o h a m . But you have to take out the cost o f the sack.
Representative Ten E tck . You did not figure on the cost then o f
the sack?
Mr. L in o h a m . N o; I am bringing it back to the net bulk at the
mill. The cost o f your flour varies with the cost o f the by-products.
Then you take that 200 pounds o f flour that you have got from your
270 pounds o f wheat, and you have got a straight flour which I nave
often compared to “ whole” milk. Now, you can take a bottle o f
whole milk and divide it into any number o f grades. You take off
10 per cent o f the bottom o f the milk, and you have improved the
balance; you take off, say, 40 per cent more, and you nave made
cream. Now, in the same way you take the 200 pounds o f flour and
take out 20 pounds o f the low grade, and you have made the balance
improved flour; you take out another 40 per cent, or 80 pounds,which,
as you know, is a flour that you would not use in your homes; it
is only used in rye-bread mixtures. But you take out that 40 per
cent, and you have still a richer grade. O f course you will under­
stand, any grade or several grades o f milk can be made from whole
milk, and likewise a large number of grades o f flour can be made
from the same wheat, and no two mills make their flour identically
the same.



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Representative M ills. No ; but is there not such a thing as an
average grade o f flour1 Now, instead o f the variations, could yoii
!
not give us some average grade o f flour, and then give us the cost of
the wheat and the cost o f the flour and tnen the selling price!
Representative Ten E tck . Mr. Mills, he is a m iller; why not let
him tell us what he is paying for his wheat and what he is selling his
flour for?
Representative Muxs. That is his private business. I would like
to know the cost o f the average grade o f flour—what the post of the
wheat is and the cost o f the flour, and then what the selling price is.
But I am not asking him to give the prices at his mill, but to tell the
general average.
' Mr. Linoham. Frankly, I would have to answer that I do not
know what we are paying for wheat. I have not been buying the
wheat, so I could not answer it that way.
Representative Ten E tck . That is the kind o f information we
Want. I f you can tell us what is the cost o f the wheat and the cost
o f the flour and what is the selling price o f the flour, that is the
information we want.
Representative M ills. You can trace the wheat on the market
to-day, and take the price o f the wheat and at the same time the price
o f a barrel o f flour as o f the same day, and then trace the intermediate
stages for us. Couldn’t you do that?
Mr. Lingham. Yes, sir.
Representative Ten E tck . He can tell that, because he sells his
flour on the basis o f the cost o f the wheat.
*
Mr. Lingham. Yes: I can tell that. Say the wheat on the basis of
$1.50, and I can take that and trace it through for you.
Representative M ills. Is not wheat much lower than that to-day !
Mr. Lingham. Soft wheat is lower than that. Our hard wheat is
costing us more. I do not remember reallv what it is. Do you
remember, Mr. Anderson, the track price in Minneapolis?
The C h a i r m a n . N o; I think possibly we have got it here some
place within a day or two.
Representative Ten E tck . W ill you not submit for the record
actual information along that line?
Mr. Lingham. I will be very glad to give you any information I
can.
Representative Ten E tck . We are going to get it from some place,
whether from you or somebody else; this commission is.going to
get the information, because tnat is the only way the commission
can make an intelligent report; we do not want it about your milling
business in particular but about the milling business in general.
Mr. Lingham. Any information I can give you I will be only too
glad to give you. I am down here for that purpose. But I do not
want to give you information which might look definite, but which
might be very misleading.
Representative Ten E tck . No ; we do not want that.
Mr. Lingham. No. But on the 9th our prices in Boston on car­
load lots o f flour on the arrival draft for various grades of flour
made from the same wheat was all the way from $10.35 to $4.75.
They were various grades o f flour made from identically the same
wheat. That range was from $10.35 to $4.75, and the $4.75 flour




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was the hardest flour to sell. W e probably would have to cut it to
$4.25 to get rid of it, and possibly not sell it then.
Representative M i l l s . Then the figtfres which the gentleman gave
us as to the number of loaves of bread were misleading, to say the
least?

Mr. L i n o h a m , They amounted to nothing, sir.
Representative Ten E tck . You are not indicating or stamping the
barrel of flour or the ingredients in the barrel o f flour, so the public
would know what they are purchasing?
Mr. Linoham. I attended a conference in Washington some few
years ago before the Department o f Agriculture, before Dr. Alsberg,
when a committee was named for the purpose o f standardizing flours,
and I believe I may say they gave it up as an impossibility. Flour
is sold, as a general rule, on a guarantee that if it does not suit a
consumer the mill w ill take it back. We happen to make a very fancy
flour, and we go after the trade that wants that kind o f flour. An­
other mill will make a flour not quite so good,, or perhaps another
mill will make a better flour and go after trade accordingly.
Representative Ten E tck . Do you make one kind o f flour?
Mr. Linoham. We are making 10 different grades o f flour, 7 of
these being made from the same wheat, in other words, from hard
wheat. Then we make three other grades from soft wheat.
I would be very glad to give figures o f cost based on any wheat
price.
Representative Ten E tck . Do you sell a particular brand of flour
under a certain name, like Pillsbury’s Best, or White Chief, or some­
thing o f that sort?
Mr. Linoham. Yes; our leading brand happens to be Lucky, and
we have, perhaps, 20 other brands.
Representative Ten E tck . What is Lucky selling for now in
Boston ?
Mr. Linoham. On the 9th it was $9.85.
Representative Ten E tck . In carload lots?
Mr. Linoham. In carload lots on arrival draft.
Representative T en E tck . What did you say this wheat was cost­
ing you, approximately, at the present time ?
Mr. Linoham. I do not remember the price; I have not been
handling that. It is all handled on the mechanical basis. We get
the market on it each night-----Representative Ten E tck . Well, in a general way?
Mr. Linoham. I do not care to give it, because I might give you
a very misleading statement. I do not want to give a figure too
high, and I do not want to give one too low. I f you could get the
price o f wheat in Minneapolis I can give you the price from that For
that particular purpose I think any figure would do. You are not
investigating our price here.
Representative Ten E tck . Oh, no.
Mr. Lingham. What you want is some basis-----Representative Ten E tck . But we have got to obtain, approxi­
mately, the cost o f wheat to-day, with the approximate cost o f the
flour to-day, so as, as Mr. Mills suggested, to check up this farm
organization that has made a statement regarding the cost o f wheat
and the cost o f flour.




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Mr. Lingham. Well, of course, they went away beyond a reason­
able basis when they went into that.
Representative Ten Eyck. We can not assume that until you have
disproved their statement by figures in a regular way.
Mr. Lingham. I mean, when they went into the cost of the bread.
As I understood you to say, sir, they gave the cost of wheat in bread.
Representative M il u . Yes; they estimated it.

The Chairman. This was substantially the proposition. Say a
farmer was getting $1 a bushel for his wheat. It takes 5 bushels
o f wheat to make a barrel o f flour—it is really about 4J, but we will
say 5 bushels. There is $5 worth o f wheat in that flour, which to­
day is selling at $10.50 a barrel. There is a spread o f $5.50 between
the fanner and consumer.
Representative T£n Eyck. Those are only approximate figures
that the chairman is giving now.
Mr. Lingham. I understand. Mr. Chairman, have you got Min­
neapolis September wheat there?
The Chairman. Chicago September wheat, August 10, was $1.22.
Representative Ten Eyck. One dollar and twenty-two cent wheat
in Minneapolis would be what in Buffalo ?
Mr. Lingham. There is a premium over that contract grade for
milling, and I am trying to think what that was.
The Chairman. This is the Chicago price.
Mr. Lingham. You have not got the Minneapolis price there?
The Chairman. Yes. September wheat, Minneapolis, on August
10 was $1,29$.
Mr. Lingham. Cash wheat was selling at about 25 cents over the
September option for immediate delivery. We figure it costs us 16
cents to get that wheat into our mill. To be exact, it is 16.1 cents,
but I will call it 16 cents. That is to get it as tar as Lockport.
That would have made the cost o f wheat to us $1.70.
Now, I will take the figure as
bushels. A big proportion o f the
mills ngure they can not make a barrel of flour under 4 bushels
and 40 pounds.
Representative Ten Eyck. Four and two-thirds is about the aver­
age?
Mr. Lingham. Yes, four and two-thirds. Now, if you use that
figure o f four and two-thirds—and a good many more figure four
and two-thirds than four and one-half—that would mean $7.92 for
the wheat. Very few mills to-day are able to make flour and dis­
tribute it under $1.25 a barrel.
Representative M ills. W hy do you say “ distribute it” ?

Mr. Lingham. To sell it through their salesmen.
Representative M i l l s . In that $1.25 you are including everything,
are you not? You are including your manufacturing cost, and you
are including your selling expenses?
Mr. Lingham. Yes, sir; everything—interest-----Representative M i l l s . At the mill or at the point of d eliver ?
Mr. Lingham. That would include everything but the freight and
the package.
Representative M i l l s . That includes interest too ?
Mr. Lingham. That would include the interest you would pay on
drafts on wheat—not interest on your investment.




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Representative T en

E

tck.

151

Does that take care o f your overhead?

Mr. L in g h a m . That takes care o f the overhead, but not any profit.
Representative M ills. Except interest?
Mr. L ingham . Y es; we do not figure interest on the investment.

Representative T e n E t c k . D o any mills mill their flour at 75
cents I What would you cut out to bring the cost o f milling o f flour
down to 75 cents a barrel ?
Mr. Lingham. I wish we knew ; we would cut it out.
Representative M ills. What did you say it was selling at in Bos­
ton to-day, your standard brand?
Mr. Likoham. Nine dollars and eighty-five cents.
^Representative M ills. And it costs you, according to those figures,
Mr. Lingham. I wish that were true. But you understand, that
standard brand is only a part o f that 200 pounds; the balance o f it
is sold at $7.25 and $4.75. That is what raises that price so. In
other words, this cost here of, say, $1.25, and your freight to Boston
of 55 cents—
—
Representative M ills. Makes $9.72?
Mr. Lingham. Nine dollars and seventy-two cents, less the value
of the by-products, 72 cents, or $9 for a “ straight” grade of flour.
Senator Lenhoot. I have been away, but I am very much con­
cerned about this. You gave $7.92 as the total cost o f a barrel of
flour?
' Mr. Lingham. I was assuming that our price o f wheat was $1.70,
sir.
' The Chaibman. I f we use Minneapolis in this particular calcula­
tion, your calculation would be out o f line, because at the present
time the Minneapolis price is out o f line by several cents. It is
higher than Kansas City and higher than Chicago.
Mr. Lingham. ' Kansas City is underselling Minneapolis to-day by
•bout $2 a barrel.
The Chaibman. W ell, it (Might to be. The September wheat price
in Kansas City is $1.11, and it is $1.29 in Minneapolis.
Senator L e n b o o t . W ell, this $7.92 is based o n $1.70 wheat, is it?
Mr. Likoham. Yes, sir; that would be the wheat cost on the basis
of 4 } bushels.
Senator Lenboot. For wheat that will produce one barrel of flour?
Mr. Lingham. That will produce one barrel o f so-called “ straight ”

grade, not a patent, and the straight grade is a grade that families
will not use.
Senator L enboot. Very well. Now, what else w ill that produce?

Mr. Lingham. That produces 80 pounds of mill feed, and that is
worth to-day—call it $18 a ton at the mill. That would be 90 cents
a hundred, which would be 72 cents for the 80 pounds. That would
bring it down to $9 at Boston.
Senator Lenboot. That would make your cost $7.92?
Mr. Lingham. $9.72 less the value o f the offal, about 72 cents, or
$9 net in bulk, or $9.22 in 98-pound cotton sacks, and we are selling
that grade o f flour at $9.05 in 98-pound cottons.
Representative M ills. I thought you said $9.85.
Mr. Lingham. $9.05 for straight; you have not figured the patent,
you see. We are selling the straight at $9.05, but that is not a grade




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that families will use, you understand. The grade we sell to families
is $9.86.
Senator Lenroot. What do you get for that barrel o f straight
flour?
Mr. Lingham. Just let me answer the other question first, if I
may. I f we figure that on the basis o f $1.70 wheat, it would figure
$9 Boston in bulk, or $9.22 in cotton—that is, 98-pound cotton sac&s—
Boston, for straight-grade flour.
Representative M ills . What does that sell for? That is what
I would like to know.
Mr. Lingham. We are selling that at $9.05. The competition
to-day is very keen.
Senator Lenroot. Your wheat costs you $7.92 on the basis o f $1.70,
does it?
Mr. Lingham. Yes, sir; and the manufacturing and distribution
cost—that is, manufacturing and selling—$1.25, 55 cents for freight,
22 cents for the cotton sacks per barrel.
Senator L e n r o o t . Well, we will take the bulk— even $9 . What do
you make that, $ 9 .7 2?
Representative M ills. I make that $9.72, which makes his net cost
in Boston $9 in bulk.
Mr. L i n g h a m . And w e are selling it at $9.05 in 98-pound cotton.
Senator Lenroot. You are making about 5 cents a barrel?
Mr. Lingham. The fact is, we bring down this $1.70 cost somewhat
by using some Kansas wheat, so that the $9.05 is showingus to-d a ywell, I assume it is showing us 15 cents a barrel profit. We would be
very glad if it is.
■ Senator Lenroot. Have you gone into the elements that make up
the $1.25 manufacturing and selling cost?
Mr.. L i n g h a m . I have not those figures, sir. I could not give you
the details, because'I do not know them.
Senator Lenroot. But how do you arrive at the $1.25 ?
Mr. Linghai*. Simply from our books and expenses. O f course,
we total all expenses.
Senator Lenroot. What time is that based on?
Mr. Lingham. Every month.
Senator Lenroot. This month, last month, or when?
. Mr. Lingham. Month before last it was over $1.25. I do not know
what last month was.
Senator Lenroot. Are those total expenses measured by your pro­
duction or by your sales?
Mr. Lingham. Measured by production, and we run full time.
Senator Lenroot. That is, you run at peak of production?
Mr. Lingham. Yes, sir; in our Lockport mill, and this is figured on
our Lockport mill.
Senator Lenroot. Now, can you tell me what your manufacturing
and selling cost was before the war?
Mr. Lingham. When we got started in business 14 years ago we
could do this same manufacturing and distribution at 40 cento.
Senator Lenroot. Now, what elements enter into that difference?
You say you have not the figures, but you probably have in mind the
general factors that enter into it.
Mr. L i n g h a m . O f course, our wages are considerably more than
double what they were at that time.



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Senator L e n r o o t . Have you reduced 'wages recently?
Mr. L in o h a m . We have only very slightiy, for the reason that the
mill employees did not go up to the very high wages o f other indus­
tries. Our men stood with us very loyally, and we have thought it
only right under those conditions not to cut them just the minute we
could.
Senator L e n r o o t. I s that tru e o f the m illin g in d u stry in g en era l?
Mr. L in o h a m . I think that is true o f the milling industry; yes.
Men stayed with us at $5 a day that could have gone to neighboring
plants at $7, $8, and $10 a day. They had been with us for years, ana
so we felt that we should take care o f them, and we are just now be­
ginning to cut a little.
Representative T en E t c k . But this increase, Senator, is 300 per
cent.
Senator L e n r o o t. I f your wages d id not increase proportionately
to the general increase in wages, where does this increase come in?
Mr. L in g h a m . I th in k y ou m isu n d erstood m e ; I sa id th a t was a
decided in crease.
Senator L e n r o o t. But I said
Mr. L in o h a m . O f course, if

proportionately to the others.
we had increased in proportion to
other industries, we would have had to put our prices away up still
further.
•
Senator L e n r o o t. Well, wages did not increase over 100 per cent,
did they ?
Mr. L i n g h a m . Oh, I have given you extreme figures; I have given
you here the high wages o f to-day as compared with 14 years ago.
Our wages in that time have gone up more than 100 per cent. We
were hiring men at that time at $1.50 that we are to-aay paying $4
and $4.50. You asked if we were cutting wages, and I answered that
we had not to any extent.
Senator L e n r o o t. Well, what proportion o f the production cost is
ascribable to labor?
Mr. L in o h a m . I do not know, sir; I have not the figures. We
naturally leave that to the accounting department. What we are
interested in is the total cost each month.
Senator L e n r o o t. Why, it is very easy to determine what\your
pay roll is, is it not? And that is one item o f expense, and you must
nave it right before you in arriving at this $1.25.
Mr. L in g h a m . The accountants nave, sir; but I have not analyzed
that.
To go on before we leave this cost o f flour—this $9.20. I f you
gentlemen want to get any place and find what the cost o f flour is,
you have got to know the percentage o f patent made by each mill
and the percentage o f the low grades, which are by-products.
The C h a ir m a n . There is inserted here a letter received from Mr.
Lingham after he testified, relative to the cost o f flour, as follow s:
Federal M u x and Elevatob Co. (In c .),
Loekport, N. Y., August VI, 1921.
Hon Sydney A nderson, M. C.,

Washington, D. G.
My D eab Mr. A nderson : Figuring cost o f flour: Possibly a tabulated state­
ment Showing the figuring o f the cost o f a barrel o f flour would be more under­
standable than the statements made before your commission. I therefore In­
close statement herewith showing the figuring o f the cost o f a barrel of
“ straight ” grade o f flour, and also the cost o f a barrel o f 70 per cent patent.




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154

O f course, yon will understand that It Is entirely Impossible for any person to
figure the cost o f tbe flour made by any mill, unless they know all the details
o f cost entering Into the question at the moment o f figuring.
For instance, a man figuring cost must kn ow : The cost and proportion of
■each kind o f wheat used in the wheat mixture. The actual yield being ob­
tained b j the mill from such mixture.
The current manufacturing and
selling c o s t The price obtainable for each by-product.
The above factors are changing so constantly that a mill manager out of
-touch with all the above conditions, even for a day or two, is not in position
to figure the cost o f his own mill product
I t very often happens, for instance, that feed sells at a higher price in
one part o f tbe country than another, because o f some local conditions existing
a t the time.
One mill may be using a very high grade o f wheat which might make a bar­
rel o f flour out o f only 4 bushels and a half. Another mill might, for some
good reason, be using lighter weight but possibly stronger wheat, but which
would require 5 bushels or more to make a barrel.
Any such figures, therefore, as those Inclosed, can only be considered as
Illustrative and o f a very general character.
There Is, o f course, a very wide range In prices between different charac­
ters o f wheat, as for Instance, last evening Minneapolis Dark 1 Northern
would cost us here as high as $1'.69, while we could buy soft winter wheat at
about $1.20, but o f course the two wheats are used for making entirely different
.characters o f flour, the spring wheat for bread, and the soft wheat for pastry
flour. A s a matter o f fact, the pastry flour last evening was selling $2.55 per
barrel under the bread flour.
Yours, truly,
,
F r e d J. L i n o h a m .

Cost o f flow , “ straight ” or 100 per cent grade.
i(Bajris: W heat, fl.T O per bashel a t m ill; 2 8 0 pounds o f wheat per b arrel; value o f fted
(the by-product) $18 per ton t. o. b. m ill: manufacturing and selling cost, $ 1 .2 5 per
b arrel; invisible loss, or shrinkage, 4 pounds per barrel.]

3 8 0 pounds (4 } bushels) wheat at $1.70 per bushel________________________ $7.92
Manufacturing and distribution cost_______________________________________
1.25
Total gross cost______________ __________________________________________
(jess selling cost o f feed {the by-product) bulk at mill, 80 p o u n d B , at $18
per ton (90 cents per 100 pounds)__________________________ j ____________
Cost per barrel o f straight grade o f flour in bulk at mill__________

9.17
.72
8.4 5

To get selling cost there would have to be added freight from mill, cost of
.containers, and profit.

Cost o f fanoy fam ily or bakery short patent flour.
ffB asIs: 7 0 per cent p a ten t: 25 per cent first clear, $ 6 .5 0 ; 5 per cent low grade, $ 3 .5 0 :
cost o f “ straight
grade flour In bulk (see previous exhibit) $8 .4 5 .]
N otb .— J he “ F irst cle ar," “ Low grade,” and “ Feeds ” are alw ays sold a t the best
.obtainable prices ( t h e ; are the by-products and therefore are not flgurable as to their
-own cost) and the prices obtainable for these by-products control the cost o f the Short
Patent, In connection with cost o f wheat and manufacturing and selling costs.

Oo8t 100 per cent “ straight ” flour per barrel_______________________________$8.45
Value 25 per cent first clear at $6.50 (see above)________________ $1.625
V alue 5 per cent low grade (or second clear) at $3.50 (see
above) ----------------------------------------------------------------------------------------------. 175
Total value o f the 80 per cent hy-products___________________________

1 .8 0

■Cost o f the remaining 70 per cent_____ : _____________________________________
_
Making cost o f 100 per cent o f the 70 per cent grade, per barrel_________

6.6 5
9 .5 0

To get selling cost there would have to be added freight from mill, cost
•of containers, profit




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155

Senator L e n r o o t. But you have given your straight flour—every­
thing goes into the flour in this figure you have given except tne
Mr. L in o h a m . Well, I have taken out the feed.
Senator L e n b o o t. I say, everything goes into the straight flour
except the feed, and you nave given us the feed separately, so that
yon nave given us that $7.92 as the cost o f the wheat to the mill?
Mr. L in o h a m . Yes, sir. But, o f course, that is a grade that the
average family consumer will not use. O f course, when you come to
figuring the Boston market price o f flour you could not use the
straight grade, because it is only the bakers—and I might say not the
best bakers—that use that grade. The better grade o f baker will
use a flour that we make at 20 cents more, and a still better baker
uses our regular family flour, which is $9.85.
Senator L e n r o o t. In other words, the price o f a particular flour
does not necessarily mean the same thing as the sum o f a patent and
a lower grade ?
Mr. L in g h a m . It nets the m ill the sajne.
Representative T e n E t c k . They raise one flour, and they decrease
the other, and that is why I say if we carry the straight flour right
straight through we will get the proportionate cost o f any other
grade o f flour in the market.
Mr. L in o h a m . In other words, every night in arriving at the price
of our Lucky flour we get the cost o f the wheat, add the cost o f manu­
facture, and deduct what we can get for the by-products, which is
feed and low grade and first clear, and the result brings the price o f
the short patent, as we call it
Now, it we could get as much for first clear as We can get for
short patent, and for low grade as much as we can get for short
patent, then we could sell tne short patent at the same price as the
straight, and we would. But low grade is very hard to sell. I
imagine that since I left home on Tuesday night they have had to
cut the price o f low grade to possibly $4. Tnat would mean that
even if wheat had not advanced it would advance the cost o f our
short patent. I f they found they could get $6 a barrel, they would
have reduced it.
Senator

L e n r o o t.

You

Sell

to whom?

You sell to the bakers, you

said?
Mr. L in o h a m . We sell to the bakers and to the family trade, both.
Senator L e n b o o t. Y o u sell direct to the retailers then? '
Mr. L in o h a m . We do to a very large extent, to a much greater ex­
tent than the average mill.
Senator L e n b o o t. Have you given the committee any knowledge
i may have as to the margin bitween your price to the retailer and
retail price?
Mr. L in g h a m . I do not know what it is to-day, sir. I know this,
that at home we figure in a general way that we can buy from our
retailer our own flour delivered at our own home cheaper than we can
send a truck from the mill to the house.
Senator L b n r o o t. Have you general knowledge that the retailer’s
margin on a staple product is comparatively small ?
Mr. L in g h a m . I should say that the retailer to-day is probably
not getting over 80 cents to $1.50 a barrel. I could not say, because
I have no definite knowledge.

S




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Representative T e n E t c k . In barrel lots?
Mr. L in g h a m . No; that is in sack lots, per barrel. In other
words, I think without any question a lot o f eight-paper-sack flour
is being sold at 10 cents a sack profit.
Representative Ten E tok . There is one other question I would
like to ask you as to this wheat that was laid down to you at $1.70,1
think you stated. Have you any idea what the fanner on the farm
receives for that wheat?
Mr. L in g h a m . I do not; no.sir.
Representative T e n E t o k . The reason why I asked that question
is this: There was a statement made here some time ago as regards
what a representative o f a farm organization said in relation to the
spread between the selling price o f the wheat and the cost of the
barrel o f flour to the consumer. I believe that when he used that
comparison he used the figure that the fanner sot for it and not the
figure at the elevator. Am I not correct, Mr. Chairman?
The C h a irm a n . Yes.
Mr. L in g h a m . O f course, he was showing the spread between the
producer and the consumer, so perhaps he was right in doing that
Representative T e n E t c k . That is what he represented, so , of
course, he took it from the soil rather than after it had gone through
two or three hands.
The C h a ir m a n . Now, these figures that you have given us are
apparently on the basis o f extraction o f a No. 1 wheat, weighing 58
pounds?

Mr. L in o h a m . Yes, sir.
The C h a ir m a n . O f course, if you were using a lighter weight
wheat it would take more bushels to make the same number of
pounds o f flour ?
Mr. L in o h a m . Oh, yes; if we use a light-weight wheat w e allow
five or six bushels to tne barrel.
Senator L e n r o o t . Mr. Lingham, what makes the market price of
flour?
Mr. L in o h a m . The cost o f the wheat, p lu s the cost o f conversion
and distribution.
Senator L e n r o o t. That is true now, o f course. Is that true on a
rising market?
Mr. L in g h a m . Yes, sir. Mills generally go u p and down with the
market every day.
Senator L e n r o o t. I s not the natural tendency with that business
just as it is with any other, if there is a great demand, to get what
the traffic will bear?
Mr. L in o h a m . I would say that when there is a large demand for
flour the mills get a better margin than when the demand is veiy
low, because when the demand is very low they very often sell at a
considerable loss. It is safe to say that a big proportion o f the mills
in this country for the last six months have sold under cost. Figures
show that the flour production last year was something like 25 per
cent below normal.
Senator L e n r o o t. You do not mean at a loss that would not have
prevailed if the plant had not operated? You take overhead into
consideration in that statement?
Mr. L in g h a m . In other words, they sold at a loss to prevent a
still larger loss by shutting down.



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157

Senator L b n b o o t. Could we h a re a better distribution that w o u ld
avoid a great deal o f this freight? In other words, take your m ill.
Does it enter into a territory a long distance from your mill, and
do other mills enter into your territory and thus add to the general
average o f freight cost and make it greater than if the mi flu sup­
plied their own natural territory ?
Mr. L in g h a m . I think mills are supplying their own natural ter­
ritory. The flow of wheat is from the West to the East. When we
had only our Lockport mill we never pretended to send flour back
of Buffalo. W e happen to be 25 miles east o f Buffalo. W e did to a
small extent ship into Buffalo, but very little. We must ship down­
stream. The Minneapolis mills and the Kansas mills are snipping
downstream, and stopping off in our market and selling. W e are
on the stream o f the wheat, so to speak, taking the wheat up and
turning it into flour, and sending it on downstream as flour. So
competition, I believe, forces the economic movement o f wheat.
Senator L e n r o o t. Your competition, except for deep-water trans­
portation, is confined to competition within your natural territory?
Is that true?
Mr. L in g h a m . No ; our competition comes from, you might say,
all mills-east o f the Rockies. We compete very hard for business
with Minneapolis mills and with Kansas City mills at home and
east o f us.
Senator L e n r o o t. I can see that that would be true, but take the '
mills west o f you, we will say. You do not compete with them,
because the flow is to the east?
Mr. L in g h a m . We compete.with them so far as they ship e a s t.
Senator L e n r o o t. I mean, so far as you ship west?
Mr. L in g h a m . Oh, n o ; the freight makes it impossible.
The C h a ib m a n I O f course there is a back flow o f flour into the
country that is west o f the Mississippi River, for instance. There
are no m illing facilities to amount to anything in the inter-mountain
territory, for instance.
Mr. L in g h a m . Oh, yes; quite large. But there is a movement o f
flour there, shipped perhaps from the Northwest, because they do
not raise the kind o f wheat there to make hard-wheat flour or to
make a spring-wheat flour. And, o f course, the mills in Minneapo­
lis ship all the way to the Pacific coast and even to Honolulu. But
that is because those sections do not raise the kind o f wheat they
want.
Representative T e n E t c k . Taking two mills o f the same size and
the same class, is there any advantage in being located in the West
and make long shipments on delivery in flour over a mill that makes
its long shipments o f wheat and short shipments o f its product?
Mr. L in g h a m (drawing a diagram). We will say here is the coun­
try. Here is Minneapolis. They have the advantage over us that
they can cover this whole territory; in fact, they ship down South,
and to some extent to the coast. The movement of wheat is also
south, to some extent, as well as east. Now, they can cover that
whole territory. Now, we are down here at Buffalo—
-the Lakes come
down here this way [indicating] and Buffalo is here. We can only
ship in that small part o f the territory. .[Indicating.] In other




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AGRICULTURAL INQUIRY.

words, they have the advantage o f a very much larger territory than
we have.
Representative T e n E y c k . Y o u do not quite get my question.
Mr. L in g h a m . Possibly I was going to answer you.
Representative T e n E y c k . Perhaps I did not make it plain. My
idea is that with these mills of the same size and o f the same class
one w ill have the advantage over the other, due to freight rates—
one located at Minneapolis and one located at Buffalo, but both
selling in the New York market. One has the advantage o f the short
haul of the grain, but has to pay for the long haul o f tne flour. The
other has the long haul o f grain and the short haul o f flour.
Mr. L in g h a m . That is a difficult question to answer. I think that
as a whole the railroads are trying to make the freight situation at
the one point the same as at tne other; although I will say for the
northwestern railroads that they do openly, and perhaps properly,
favor their northwestern mills. In other words, they are trying to
build up the Northwest, and the Kansas railroads are trying to build
up their section as a milling section, because it is o f very decided
advantage to a country to have mills there. They make the by­
product.
Representative T e n E y c k . Is it of any particular advantage to
the mill to be located there? You are working on an uneconomic
basis if you are building up a place that is not economically located.
Mr. L i n g h a m . Well, we have the advantage at Buffalo o f being
nearer our consuming trade, and when wheat comes down the Lakes
by water at a proper freight rate we have a slight freight advantage
under Minneapolis. O f course, at times that water rate goes very
high, which takes away that advantage.
Representative T e n E y c k . Why is that?
Mr. L in g h a m . Supply and demand for tonnage on the Lakes.
Senator L e n b o o t. But you always have some advantage in ship­
ping a barrel o f flour in the form o f wheat to Buffalo ? That is, it
costs less to ship enough wheat to make a barrel o f flour to Buffalo
than it does to snip a barrel o f flour to Buffalo ?
Mr. L in g h a m . N o; the situation there is the same, because, of
course, if you ship flour you only ship 200 pounds, while if you ship
wheat you have to ship 280 pounds. That would give them, on the
face o f it, an advantage. As a matter o f fact, their feed consumption
is also largely in the East; and so. while we ship 280 pounds o f wheat
they ship 200 pounds of flour and 80 pounds o f feed.
R ep resen tative T e n E y c k . T h e y have th e sam e ton n age?
Mr. L in g h a m . The tonnage is the same.
Senator L e n b o o t. The tonnage would be the same, but

the char­
acter of the product is such that your rate is necessarily cheaper on
tiie grain than it is on the flour for the same tonnage.
Mr. L in g h a m . Well, no----. Senator L e n b o o t. It must be.
Mr. L in g h a m . A s a matter o f fact, the general rates are about
half a cent a hundred less on wheat than on products.
Senator L e n b o o t. I s that all?
Mr. L in g h a m . There are points in Ohio and Indiana where there
are exceptions, where the difference runs as much as 3 cents, but that
is very exceptional. That is by rail, you understand.




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Senator L e n h o o t . D o you happen to know the rate on flour from
Minneapolis to Buffalo and the rate on wheat from Minneapolis to
Buffalo;
M r. L in g h a m . N o , s ir ; I h ave n o t those fig u res, b u t th ere is n o t
over h a lf a cen t difference.
The C h a ir m a n . I s it not a fact that wheat is milled in transit on

through rates without any difference at all ?
Mr. L in g h a m . Yes; and when we mill that wheat in transit w e
pay the flour rate from Minneapolis.
Senator L e n r o o t . I can see that. As a matter o f fact, it costs
very much more to transport a ton o f flour than it does a ton o f
wheat?
Mr. L in g h a m . There is a greater risk , o f course.
Senator L e n r o o t. And there is more cost in handling it?
Mr. L in g h a m . Yes; but the railroads have been gradually coining
to the basis o f either equality o f all-rail rates or about one-naif cent
difference between the grain and the products rate. That is not
true o f the export flour from Buffalo. They have very low export
wheat rates in effect from Buffalo to the seat>oard.
Senator L e n b o o t. I know that. A ton o f flour is worth a good
deal more than a ton o f wheat; is there no distinction made on that
ground?
Mr. L in g h a m . The railroads do n ot make i t ; no.
The C h a ib m a n . Is there anything further, Mr. Lingham ?
Mr. L in g h a m . I do not know o f anything further, Mr. Chairman.
If there is any question I shall be glad to try to answer it
Representative T e n E t c k . I have one other question with relation
to the shipment o f flour and wheat: Do they both use water trans­
portation equally, or is there a tendency for one to use it more than
the other?
Mr. L in g h a m . When it com es to water transportation the rate on
wheat is lower than on flour, because there you get the advantage
of bulking. You see, you just pour it into a vessel. On the other
hand, when you bulk the wheat you have the transfer charges at
both ends.
Senator L e n r o o t. I was thinking o f part water transportation
when I asked my question.
M r. L in g h a m . I th o u g h t y ou referred p u rely to railro a d s.

Senator L e n b o o t . I could not understand how that could be so
in connection with that lake transportation. So you do have that
advantage in manufacturing at Buffalo over the Minneapolis mills, do
you not, when you take water transportation in both cases?
Mr. L in g h a m . I will say that we should have an advantage there.
It has so happened that recently the water rates have been so high
that very little has moved down. Then, too, we are buying very
JiMe by water, because we can not buy by water on sample; we must
buy by grade at Duluth, and we prefer to go into Minneapolis and
buy the actual grades from the country receipts.
Representative T e n E t c k . But there is no hesitancy on the part
of the Minneapolis mills to use water for the transportation o f
flour any more than they would for the transportation o f wheat to
the east?
M r. L in gh am . N of th ey d o use w a ter. T o w h a t ex ten t to -d a y , I
do not know .




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Mr. L i n o h a m . I do not know to what extent they are using it. The C h a i r m a n '. I desire to submit for the record a statement shov­
ing the cost o f making and distributing flour. This statement pur­
ports to give the cost o f making and distributing a barrel of flour
under three headings—general expense, selling expense, and milling
expense.
COST OF MAKING AND DISTRIBUTING FI/)UR.
GENERAL EXPENSE.
Stationery and office expense_______________________________________________$0.0160
Telephone and telegraph___________________________________________________
.0220
Interest and discount_______________________________________________________
.0800

Bad accounts-------------------------------------------------------------------

.0 0
02

B e n t _________________________________________________________________________
Administration_____________________________________________ r _i._____________
General expense_____________________________________________________________

.0070
. 2460
. #230

Total___________________________________________________________________

.4032

BELONG EXPENSE.
Salaries and commissions__________________________________________________ fO. 1370
'Traveling _____________________________________________________________________
. 0750
A d vertisin g __________________________________________________________________
.0080
Delivery expense____________________________________________________________
. 0470
Miscellaneous selling expense_______________________________________________
.0080
Total___________________________________________________________________

. 2750

MILLING EXPENSE.
In su r a n c e ___________________________________________________________________ $0.0280
T a x e s1 ______________________________________________________________________
. 0160
D epreciation_________________________________________________________________
.0780
. 0220
Miscellaneous milling------ ----------------------------------------------------------------------------L a b o r ________________________________________________________________________
.3400
Power and light---------------------------------------------------------------------------- ,---------------.(B00
Repairs and upkeep__________________________________________________________
. 0520
Laboratory expense_________________________________________________________
. 0076
Total------------------------------------------------------------------------------------------------------

.8936

Total all expenses____________________________________________________

1.2700

The C h a ir m a n . I f there is nothing further, we are vary much
obliged to you, Mr. Lingham. The commission w ill take a recess until
2 o’clock.
(Thereupon, at 12.35 o’clock p. m., a recess was taken until 2
o’clock p. m.)
AFTER RBGBSS.

(A t 2 o’clock p. m. the commission reassembled, pursuant to the
taking o f recess.)
The C h a ir m a n . The commission will come to order. We will
hear Mr. H. P. Strasbaugh, president o f the National Cannon’
Association, who is here to give us such information as he desires to
place before the commission.
Mr. Strasbaugh, w ill you please give your full name to the reporter,
and the name o f (he organization wnich you represent ana your
residence?
* T h is does n o t include Federal Uxea.




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161

I

STATEMENT OF HE. HABBY P. STBASBAUQH, PRESIDENT OF THE
NATIONAL CANNEBS’ ASSOCIATION, ABERDEEN, MD.
Mr. S tr a sb a tjg h . Mr. Chairman and gentlemen o f the commission,
my full name is Harry P. Strasbaugh; my residence i$ Aberdeen,
Ma. I am president o f the National Canners’ Association. Anything
I may say will be from an individual standpoint, however, because
I have not been authorized by. my board o f directors as to what I
shall say, and what I shail say will depend largely upon what you
ask me to say or what you indicate you want.
The C h a irm a n . We would like to. have you te ll us how you get
the farm product and what you do frith it and the costs and extent o f
the distributing processes, so far as they can be stated.
Mr. S tr a s b a u g h . The canner purchases, as a rule, the raw stock
from the farm or grows it himself on his own farm or in his own
orchard. A great many canners grow & large percentage o f the
product that they can.
The method o f purchasing c o m } peas, and tomatoes is by contracts
which are made with the farmer in the first part o f the year, during
the months o f February, March, and A pril; and at harvest time
those crops are harvested and hauled to the cannery, and the canner
puts them in cans and hermetically seals than, and those products
are preserved for consumption possibly 5 years or 10 years later,
if it is necessary to keep them so long.
The C h a ir m a n . Do these contracts that are made with the farmers
stipulate an agreed price in advance or is it a proportion o f the gross
pricereceiveaby the association?
Mr. S tr a s b a u g h . I did not hear quite a ll o f that.
The C h a ir m a n . I say, do the contracts with the farmers provide
for a stipulated price in advance o f production or do they depend on
the price which the canner gets?
Mr. S tr a s b a u g h . The usual form o f (Contract is a given price per
ton for the product after the product is delivered to the cannery.
That was entirely the custom in the prewar period. O f coarse, since
(hat time there nave been various methods o f purchasing raw prod­
uct during the canning season, and in a good many cases during the
canning season they go out and buy for cash. Sometimes they do
ship by freight to the cannery, and sometimes they get it by deliver­
ing it direct. The canner is anxious to return to prewar conditions
as soon as possible, and will eventually return to the custom o f
baying a field o f tomatoes at a given price per ton for delivery during
the canning seasonjln August and September.
The C h a ir m a n . That is to say, that the canner undertakes to insure
his supply by contract with the farmer in advance ?
Mr. S tr a s b a u g h . That is the custom.
The C h a ir m a n . A s to the price paid to the farmer, what was that?
Mr. S tr a s b a u g h . Depending almost entirely on the prospective
demand, the price o f cases and cans and labels. Almost every canner
usually arranges with the farmer to pay just as much as he can in
order to insure a sufficient acreage to run his plant to the full capacity
during the expected packing season.
The C h a ir m a n . Is the National Canners’ Association a distribut­
ing organization ?
9 1 3 4 1 — 2 2 — v o l 3 -------- 1 1




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I

Mr. Strasbaugh. N o, air.
The Chairm an. It is just sim ply an organization o f canners?
Mr. Sthasbaugh. Merely an organization o i canners, with no idea
o f arranging prices or controlling prices or having anything what­
soever to do toward die making o f prices o f canned product or raw
stock or anything else.
Representative M ills . W hat is the purpose o f the association?
Mr. S t r a s b a u g h . The purpose o f the association is to better condi­
tions in the canning business as an entirety. F or instance, to pack m
more sanitary^ product; to discover more scientific methods o f can­
ning; more scientific methods o f handling the canning industry as a
w hole; but with no idea whatsoever o f controlling pnces or regulat­
in g prices or intimating what prices should be paid in any way
whatsoever.
Since its organization in 1907 the National Canners’ Asssociation has been
working for the best interests o f the consumer o f the products o f the industry,
thereby endeavoring to popularise ctyuted foods and materially increase con­
sumption through the merit o f the same.
.
This organization has no capital stock, nor is it organised for profit I t don
not produce, buy, nor sell.
Its principal efforts have been directed on the lines o f scientific research. It
owns and conducts its own research laboratories in Washington, officered by men
well recognised in the scientific world. The findings o f the laboratory are t a r ­
nished to nonmember canners as well as to members. It has also established
and financed separate scientific research at Harvard University under the direc­
tion o f the national research council o f the National Academy o f Sciences. It
has established independent researches at the University o f California and
Leland Stanford University and is at present making arrangements which con­
template a considerable enlargement o f scientific research for the benefit o f tte
industry.
I t has established a raw-products research bureau, and through this bureau
and the executive officers o f the association some o f its accomplishments have
been—
1. Agricultural cooperation.
2. Cooperation with State agricultural colleges.
3. Cooperation with the Department o f Agriculture.
Other accomplishments are—
4. Cooperation with State legislatures for the purpose o f securing the mast
advanced sanitation laws.
5. Cooperation with the Forest Products Laboratory in securing Improved
shipping boxes.
& Safety devices.
7. Aiding and assisting the enactment and enforcement o f the food and drugs
act
8. Establishing uniform cost-accounting systems so that Individual canners
can each Intelligently ascertain his own costs.
9. Insurance.
- ' ' ;
10. Efficiency o f the industry., ,
1L It has Increased the enefgy Of «ffort among canners.
During the war some o f its activities were—
1. Encouragement o f the largest possible production.
2. Assisting in the allocation o f milk for the Arm y, Navy, Marine Corps,
and Red Cross until the Government was able to create a proper agency to handle
the same.
3. Rendering ail possible assistance to the Army and Navy and food boards in
locating immediate food supplies.
4. Contributing its scientific laboratories for collaborative purposes.
It requires, under its present by-laws, that the members o f the association
shall agree to produce a wholesome product from wholesome raw stock in a
sanitary plant conducted in a sanitary manner. Its by-laws provide for the
expulsion o f members who do not comply with these sanitary requirements.

The C h a ir m a n . Does the association do anything in the way
relating output to market?



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Mr. Strasbaugh. I did not quite hear the question.
The C h a irm a n . I sa y , does th e association d o a n y th in g in the
way o f relatin g o u tp u t to m ark et o r d ire ctin g th e cfistribu tion of
the product?
Hr. S t r a b b a t t g h . No, sir; nothing whatsoever.
The C h a irm a n . It is a w e lfa re association e n tire ly ?
Mr. S tr a sb a tjg h . Absolutely; yes, sir.
Representative Mnxs. Do you exchange information as to market
conditions?
Mr. Stbabba'uqh. No, sir.
Representative Mills. Do you exchange information as to prices!
Mr. Stha8baugh. No, sir.
Representative M ilxjs. You do not furnish information as to the .
prices or marketing conditions to any o f your members ?
Mr. Sthabbaugh. No, sir; we never have, sir.

The C h a ib m a n . Can you give us any information as to the methods
of distributing canned products?
Mr. S th a sb a u g h . The canner accumulates the raw stock and cans
it in times o f plenty, and in season, to distribute it in times o f de­
mand. The cannier, as a rule, disposes o f his canned foods through
the merchandising brokers in different cities o f the United States.
The custom o f that broker is to visit the grocery trade, or wholesale
grocery, in some sections o f the country; or chain stores, and he
makes sales to the grocer and to the distributors, sending the order
in to the canner for confirmation, and after confirmation tne product
is shipped accordingto the memorandum or selling contract which
he sends in there. Then the foods are shipped in accordance with
this memorandum o f sales, and contracts to the buyer, who, in turn,
settles for those goods usually in 10 dayB ; sometimes 30 days; and
sometimes 60 days; but the majority o f canned foods are sold subject
to 14 per cent discount if paid in 10 days.
The-wholesale grocer, m turn, distributes these goods to the re­
>
tailer, and the retailer distributes to the consumer.
The C h a ir m a n . Can you give us any figures as to the spreads
that occur in these various steps as to prices o f the product?
Mr. S tr a s b a d g h . There is a wonderful variation in the spread,
depending upon the location o f the distributor, and also the dis­
tributor’s opportunity for business so far as volume is concerned.
Some o f the smaller retailers will, for instance, sell a can o f toma­
toes for several cents a can more than the chain stores, or more than
a large retailer; possibly for the reason that he does not sell as
many; the volume o f his business is not so much, and his propor­
tionate expense o f handling them per can is more.
Representative M i l l s . Has your association ever gotten up any
figures as to prices, for instance, that the fanner receives for his
product—the farm prices? Mr. Strasbaugh. No, sir; our association has always endeavored
to avoid prices in any way whatsoever.

Representative M i l l s . Have you ever gone into the question of
freight rates?
Mr. Stbasbatjgh. We have a traffic committee that follows the
freight conditions from time to time, whenever there is necessity for.

a hearing, but we have never done very much in the freight direc-




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tion, however. The freight conditions, however, are seriously affect­
ing us at this time and very seriously affecting the consumption of
canned foods. For instance, the freight rate from Aberdeen, Md., to
Baltimore is something like 19$ cents per hundred per carload, and
say, about 27 cents per hundred for less than carload. The rate
from Aberdeen to Tampa, Fla., is $1.60 per hundred in carloads.
With these excessive freight rates, it naturally puts us out of
business in Tampa, Fla. After the freight rates are added, to the
cities in Maryland and Delaware, the price is s& excessive that we
find we are not distributing anything like as many canned foods in
that direction, or to any of those distant points, as we did before.
Eepresentative M ills. In presenting your case, I presume, you
got your facte together and presented them to the Interstate Com­
merce Commission, o r .to the railroads, with a view to obtaining
reduced rates?
Mr. S tr a s b a u g h . Y o u sa y you su p p ose w e h a v e done th a t already?
Eepresentative M ills. Have you done that?
Mr. S tr a s b a u g h . Mr. Berry, o f Reed, Murdock & Co., o f Chicago,
has attended one or two hearings on traffic in Chicago recently—
within the last six months, but 1 do not think that he nas presented
any definite claims as yet, sir.
R ep resen tative M il l s . I n connection w ith these fig u res, h ave you
gon e in to th e q u estion o f th a p rice p aid to th e fa n n e r an d th e cost
o f ca n n in g, an d th e p rice p a id b y th e u ltim a te con su m er, and the
p ercen tage o f th e fr e ig h t rate to th e to ta l cost to th e con su m er?
. Mr. S tr a s9 A u g h . I have given considerable consideration to that

particular item o f freight, and if we were to consider the freight on
the iron ore to the furnaces, and from the furnaces to the steel mills,
and from the steel mills to the tin-plate factories, and from the tin­
plate factories to the can shops, and from the can shops to the can­
nery, and from the cannery to the distributor, and from thence to
the retailer I would imagine that about half of the price—certainly
from 33$ to 50 per cent o f the cost o f the canned foods would have
been paid in freights by the time these canned goods reach the ulti­
mate consumer, because we have paid freight directly and indirectly
about six or seven times. And tnat, naturally, under present condi­
tions, is a large factor in increasing the cost o f the can o f corn or
the Hawaiian pineapple or California peaches to the consumer.
Although the boat rates from California at the present time are con­
siderably lower than the rail rates, and the' seaboard cities in the
East have the benefit o f a very much lower rate on that account.
But then just as soon as you. commence to distribute from the Atlan­
tic seaboard cities to the inland cities, then you commence to pile up
the freight again.
The C h a ir m a n . You are not able to give us any figures at all as
to the spreads in price as between the consumer and the farmer ?
Mr. S tr a s b a u g h . Only in the way o f percentages. I would say that
the freight paid is five or six times, as I have explained, and would
certainly equal from one-third to one-half of the ultimate cost to the
retailer.
The C h a irm a n . Can you give us any idea as to what makes up the
other two thirds of the cost ?
Mr. S tr a s b a u g h . The cost o f the product, the cost o f canning that
product, and the cost of employees, drayage, and distribution.



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The Chairman. Can you give us any accurate figures o f percent­
ages that illustrate the various amounts o f those costs ?
Mr. Strasbaugh. Well I can give you the cost o f a case of cans.
The Chairman. Very well, do that.
Mr. Strasbaugh. The empty cans in a case at the present time
would cost 75 cents, laid down at the canner’s factory.
The Chairman. How does that compare with the cost of cans in
1913, or thereabouts?
, Mr. S tra sb a u g ^ I am figuring cans at $25 per thousand, as against
a mice for cans iiPl913 o f $14.75.
The Chairman. W hat difference is there in the price o f the case?

Mr. Strasbaugh. Cases during the prewar period—the No. 2 cases,
for example, and that is a fair example, sold for 7} cents each; a
ear ago they sold for 23 to 25 cents each. These same cases can

Jbought at the present time for probably 11$ to 12 cents each.
e

The Chairman. Take, for instance, a case o f corn. What is the
price o f corn now by the case at the factory ?
Mr. Strasbaugh. I would say a dollar a dozen; $2 a case of 24
cans.
The Chairman. How does that compare with 1913 ?
Mr. Strasbaugh. It was $1.70 a case in 1913.
The Chairman. That is a difference o f about 30 cents a case ?
Mr. Strasbaugh. Yes, sir.
The Chairman. It is higher now than it was in 1913?
Mr. Strasbaugh. Yes, sir.
The Chairman. I s that on the basis o f this year’s .pack or last
year’s pack?

Mr. Strasbaugh. That is on the basis o f this year’s pack. Last
year that same com was $2.70 a case; in July, 1920, it was $2.70 a
case; in January it was $1.70 a case.
The Chairman. It is a little higher now than it was in January,
then ?
Mr. Strasbaugh. Yes, sir.
Senator Lenroot. What do you give as the difference in the case
and can now and before the war—75 cents a case ?
Mr. Strasbaugh. In the prewar period it was 7$ cents; a year ago
the same case sold for from 23 to 25 cents.
Senator Lenroot. You gave the case and can now as 75 cents?
Mr. Strasbaugh. Yes.
Senator Lenroot. What was the price o f the case and can before
the war?
Mr. S t r a s b a u g h . What year d o you want?
The Chairman. 1913.
Senator Lenroot. That is what the chairman asked, 1913.
Mr. Strasbaugh. In 1913 the price o f cans was $17.25. That was
1} cents—24 cans to the case—42 plus 8, we will say 50 cents a case,
in 1913.
Senator Lenroot. As against 75 cents now ?
Mr. Strasbaugh. Yes; those are approximate figures, gentlemen.
Senator Lenroot. Oh, I understand; I do not expect to get it
entirely accurate.
Mr. Strasbaugh. I am just figuring this offhand. I will be very
glad to give you a brief later on those costs.




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The C h a irm a n . We will be very glad to have it. Now, can you
've us any information as to what a case o f corn was sold for by
e wholesaler in 1913 and 1920 and now ?
Mr. S tr a s b a u o h . Well, I imagine every wholesaler varied some­
what as to his handling charges, depending upon his overhead, and
I could not give you the exact figures o f any wholesaler, but the
wholesaler as a rule has handled canned foods on a very close marin. In the last year I know he sold a great many at anywhere from
5 cents a dozen to $4 a dozen o f some products Iras than the cost.
Senator L e n r o o t . Y ou have given the presem price as $2; 75
cents o f that’is for the case and can. Now, will you tell us about the
other $1.261
Mr. S tr a s b a u o h . In order to give you anything intelligent in
regard to that, I would have, to submit you a brief, because there
are a number of items that come in there: The cost o f the com, for
instance, at $20 a ton; the com would be from 60 to 70 centB per
case; that would be paid to the grower for the corn. Suppose we
say 70 cents. Now, labor would probably be 30 to 35 cents a case;
say 35 cents.
Senator L e n r o o t . That is direct labor, I take it?
Mr. S tr a s b a u o h . Direct labor in the factory; yes, sir. Now, there
are such items o f overhead qs insurance, coal, and maintenance of
machinery, and such as that.
Senator L e n r o o t . N o w , would you wish us to understand that 25
cents covers all overhead, insurance, taxes, and profits?
Mr. S t r a s b a u o h . No, sir; I would not.
Senator L e n r o o t. Then I would like to go back to the other ques­
tion ; you are selling it for $2 ?
Mr. S tr a s b a u o h . Yes; approximately, I would say.
Senator L e n r o o t . That 25 cents a case-----Mr. S tr a 8 b a u q h (interposing). Yes; at the present time where a
man is selling at $2 a case I do not believe he has any profit in it
In fact, I think he has 10 or 20 cents a case loss. And he might have
30 cents a case loss if he has a short pack this season and is short
of goods.
senator L e n r o o t . In other words, you would have us understand
there is no profit at this price ?
Mr. S tr a s b a u o h . Absolutely no profit at present prices. There are
losses to the canner.

S
?

Representative T en E yck . H ow many cases do you make out of a
ton of corn?

Mr. S tr a s b a u o h . About 30 cases is an average estimate.
Representative Ten Eyck. About 30 cases ?
Mr. S tr a s b a u o h . Yes, sir.
Representative T en E yck . H ow large are your containers?

Mr. S tr a s b a u o h . I am talking from the standpoint o f corn, which
is in a No. 2 can and holds about 19 ounces; 19 or 20 ounces, total net
weight of contents.
Representative Ten Eyck. What is that in liquid measure?
Mr. S tr a s b a u o h . I have never noticed that; I could not answer
that question, sir. I have handled canned com a great many years,
but never compared it with pints or quarts. But 1 would say prob­
ably not more than a pint and a quarter; 16 ounces to a pint, ana this
is 19 ounces—about a pint and a quarter.




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Representative M ills. What do these two cases sell fo r; what does
the wholesaler sell it fort I suppose that varies with the freight
rate?
Mr. Stbasbaugh. It varies; for instance, we can ship to some points
much cheaper; from Baltimore to Philadelphia is-----Representative M ills (interposing). What does the wholesaler sell
it for?
Mr. Strasbaugh. He has his dravage and freight, I suppose, and
figures 10 per cent on that, after he has paid his freight and drayage.
Representative M ilm . You do not know what it is selling for to­
day, do you?
Mr. Stbasbaugh. I am not in position to give you the prices o f the
wholesale grocers o f the United States; no, sir. I have no way of
getting them.
Senator Lenroot. Do you know what it is retailing for?
Mr. Stbasbaugh. I would say probably 10 cents a can; $2.40 a
case. Probably if you take it in lots-----Senator Lenboot ( interposing). That can not be. Do you mean
to say that between your factory price and the retailer’s price there
is only a margin of 40 cents a case ?
Mr. Stbasbaugh. I mean to tell you, sir, that com to-day is selling
at $2 a case in the Delaware and Maryland factories.
Representative Milus. And retailing in Washington at $2.40?
Mr. Stbasbaugh. Yes; I was told this morning it was retailing at
10 cents a can at the chain stores, by Mr. Hunt; that is at the chain
stores. There is no delivery, o f course, in that. The chain stores
do not deliver.
Representative Sumners. Are those prices that you have given the
normal prices j do those prices indicate the usual margin of profit,
or the spread in prices of the canned goods in this country ?
Mr. Strasbaugh. No, sir; that is the conditions that have been
governing the canner in the last 9 or 10 months. In the pre-war
period-----Representative Sumnebs (interposing). The same conditions gov­
ern the retailer.
Mr. Stbasbaugh. I think I said before you came in that the same
product that sells for $1.70 a dozen in Delaware in carload lots
would retail in the prewar period at 10 cents a can, and in some in­
stances three cans for a quarter. That is, in near-by cities, like Phila­
delphia and New York. Now, if that product was shipped to Pitts­
burgh it might be more. On the other hand, the canner o f the Cen­
tral West would probably take care o f the Pittsburgh business, and
it would probably be sold on the same basis. But in these times,
gentlemen, the canner is selling his product below cost.
Senator C appeb. Due to oversupply, or what?

Mr. Strasbaugh. It is due to overproduction, or-underconsump­
tion, or deflation, or the lack o f capital and the need of money in
the canner’s business; the financial condition o f the canner in the
last year. A t the beginning o f the war the canner was requested to
pack as many canned' foods as he could pack, because it was neces­
sary to have canned foods in order to help win the war. Unfortu­
nately, the canner was told that he was sure to be given profit on
his canning, and the Cesult of that was that in some sections some




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canners paid almost any price for raw stuff. For instance, canned
tomatoes which sold in tne prewar period for $10 or $12 per ton
were bid up as high as $60 a ton. The result was that the cost of
packing was excessive in a majority o f cases during the war. The
'Army and Navy commandeered about 20 per cent o f the com , and
45 per cent o f the tomatoes packed during the war. When the
armistice was signed, it left the Government with probably 1,000,000
cases o f tomatoes and 2,000,000 cases o f com on its hands. About
six months after the armistice those tomatoes and corn and some of
the peas and other products were marketed from house to house at
11 cents it can for tomatoes that cost the Government $1.90 a dozen.
The canner was left with some of his pack still unsold, and he could
not sell his product at 11 cents a can, competing with these retail
rices of the Government. And the result was that he was carrying
is pack at a loss which would bankrupt some o f the canners.
Representative Ten Eyck. What did you pay for your com in

E

1913 f

Mr. Strasbaugh. Com in 1913 sold as low as 55 cents.
Representative Ten E tck . Fifty-five cents for what?
Mr. S tr a sb a u g h . A dozen, or $1.10 a case.
Representative Ten E tck . I know, but how much a ton?
Mr. S tr a s b a u g h . The raw corn?
Representative Ten E tck . Yes; the raw corn.
Mr. S tr a s b a u g h . I would say about $10 a ton, sir.
Representative Ten E tck . Ten dollars a ton, did you say?
Mr. S tr a sb a u g h . Y es: $ 1 0 o r $ 1 2 a ton .
Representative Ten E tck . I notice here that com cost you 2$
cents a can, and the spread between the cost or the sale price to the
farmer, and the selling price to the chain stores, which is the most
economical way of distribution, is four hundred times more than the
farmer gets for it.
Mr. S tr a s b a u g h . Y es; but loo k at the w ork and th e can.
Representative Ten E tck . I understand that; I am merely getting
at the spread.
Mr. S tr a sb a u g h . Yes.
Representative Ten E tck . Now, if that* is true, we could add a
couple hundred more times spread into the ordinary grocery store,
could we not; they must get at least 15 cents in the ordinary store?
Mr. S tr a s b a u g h . I w ou ld sa y s o ; 12$ to 15 cents.
Representative Ten E tck . Now; at the time you were paying $10

a ton to the farmer, you were getting a little better price-----Mr. S tr a sb a u g h (interposing) . When we were paying $ 1 0 a ton
to the farmer we were getting a little profit out o f the canning busi­
ness; to-day we are not
Representative M ills To-day you are paying 2$ cents a can for
your com and losing money?
Mr. S tr a s b a u g h . Yes, sir.
Senator Lenroot. Was there a large overproduction during the
war?
Mr. S tr a sb a u g h . Yes; there was considerable.
Senator Lenroot. How did that come about?
Mr. S tr a s b a u g h . There was considerable overproduction, but the
difficulty that the canner experienced generally was the trouble that




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confronted the wholesale grocer when sugar broke from 224 and 30
cents a pound down to 15 cents, and 10 cents, and 7 cents, and 6 cents,
and rice and coffe and almost every other commodity that was in the
wholesale grocer’s warehouse depreciated accordingly. The result
was that since last August until about 60 days ago it has been almost
impossible to sell the wholesale grocer a couple thousand cases o f
corn, whereas in the prewar penod he would be glad to purchase
10,000 or 15,000 or 20,000 cases o f com . But when the wholesale
grocer lost money on the declining price o f sugar, then the canner
was unable to sell his product at cost or anywhere near cost. For
example, corn which cost $1.30 a dozen back in 1920 was marketed at
as low as 75 cents; some o f it was marketed and sold as low as 75
cents a dozen.
Senator L e n r o o t. There has been more corn canned since money
has become easier all over the country. The grocer can buy some
food for less, and is buying some for less, such as canned com, for
example, which is getting back nearer to the cost o f replacement.
Com that cost last year $1.30 will cost this year close to $1.10 or $1.20
to pack this year. Now, the canner that is selling com at $2 is pay­
ing less now. I f this is a poor pack, he will find that he is selling a
lot o f com at $2 that cost nim $2.30 to pack, as against $2.60 a case
a year ago.
Representative S u m n e r s. When you figure the cost o f packing,
you estimate some interest on your investment, and overhead, and
everything o f that sort?
M r . S tr a s b a u g h . Most undoubtedly; yes.
Representative S u m n e rs. So you have less loss o f profit in keep­
ing your plant going, even if you lose— Mr. S tr a s b a u g h (interposing). I f we keep our plant closed for
a season our loss is heavy in the deterioration and depreciation o f
the machinery^ and rust, and so on.
Representative S u m n e rs. And you have lost customers, too, I
suppose?
M r . S t r a s b a u g h . S ir ?
Representative S u m n e r s . You have lost your
Mr. S tr a s b a u g h . Yes; and lost our trade

trade, too?

also. But notwith­
standing that, there would not be, I would say, over 50 per cent the
pack o f com this year, and not 60 per cent o f the pack o f tomatoes
on account o f these conditions and the inability o f the canner to
finance himself, because he has been broken down last year when he
could not market his'goods.
Representative M i l l s . D o you think the wholesale grocer was
very heavily stocked in the first half of 1920?
Mr. S tr a s b a u g h . Yes; I think he was.
Representative M i l l s . Y o u think he was pretty well loaded up?
Mr. S tr a s b a u g h . Yes, sir.
Representative M i l l s . N o w , was he loaded up when the armistice
came?
Mr. S tr a s b a u g h . I think fairly well, sir; yes, sir; at the high
prices.
Representative M i l l s . During the period o f expansion and specu­
lation, you think the wholesale grocer was doing what everyDody
else did, buying on a rising market with a view to higher prices
later on?



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Mr. S tr a s b a u g h . Well, I suppose he acted like the ordinary hu­
man business man in that case.
Representative Muxs. Do you think that is the condition to-day!
You suggested there had been a change 60 days ago. Do you think
to-day he has largely disposed o f his surplus product on his shelves?
Mr. S tr a s b a u g h . Yes; I think he has, and disposed o i it at a severe
loss, especially in canned foods.
Representative M i l l s . Yes; I think that is true; but do you think
he has reached a place where he is going to buy ?
Mr. S tr a s b a u g h . Yes; in canned goods he has begun to buy.
Representative M i l l s . He has begun to buy ?
Mr. S tb a sb a u g h . Yes; in small quantities, compared with his pur­
chases previously. He is buying a thousand cases where he bought
5,000 cases before. Six months ago he would buy only 50 cases; the
same man that is buying a thousand cases to-day. I think eventually
the condition will right itself; and as soon as we right ourselves to
the prewar condition the canner will function properly. He is not
able to function this year because last year he had his money all
tied up and could not pay his bills; he could not pay his growers. I
know o f canners that sacrificed corn last year at 80 cents a dozen to
pay their growers that cost them $1.30 to pack. They did not sell it
all at that price, but they had to sell sufficient o f it to pay their bills,
and in some cases it took everything they had; in some cases not quite
all. But every canner got his proportion o f that loss.
Senator L e n r o o t. D o I understand that the canners last year were
not able to secure a normal line o f credit, or do you mean that hy
reason o f a lack o f market they required an abnormal line o f credit
and were unable to get it ?
Mr. S tr a sb a u g h . On account o f the cost o f packing last year,
which was as high last year, or higher—equally as nigh as at any time
during the war period—it took $1.30 to finance the packing of a
dozen cans o f corn, whereas in the prewar period 60 cents a dozen
would have done it. Then, when the wholesale grocer made his loss
on sugar he refused to buy the product from the canners, because he
felt tnat he could not afford to do it, and the canner who canned held
these canned goods himself, which ran into millions o f dollars, which
promptly under ordinary circumstances would have been distributed
throughout the United States, and the money would have come back
for them. The result was that that gave the canners o f this country
the requirement o f a considerable amount o f money—more than they
ever required before—because they could not convert their product
into money. And when you went to the bank to borrow money,
every time you approached a banker you heard the same story about
credit. But I do not think any canner was able to borrow enough
money to carry his product until he could get not a profit but nis
replacement value.
Senator L e n r o o t. Was that due wholly to the lack of credit or
was it due to the uncertain market and the uncertainty o f the hazard
of credit? In other words, was there a shortage o f credit, assuming
there was no question about the surety ?
Mr. S tr a s b a u g h . I think there was a shortage o f credit.
Senator L e n r o o t. Y o u think there was a shortage o f credit every­
where?




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Mr. S t b a s b a u o h . Yes; and I think it was brought on in that way;
we could not distribute any o f our goods from August on. And the
result was we had to carry that large load, whereas ordinarily it
would have been distributed to the different cities in the> country,
and the money returned. But tight money was the trouble.' That*
was not only the trouble with the canner, but every time you ap­
proached a banker you were told how impossible it was to get money.
And it was hard to get money on any security, even on warehouse
receipts. I tried to get some money in Philadelphia on warehouse
receipts, and finally succeeded, but I had difficulty in borrowing
money on a warehouse receipt, something like $20,000.
Representative Sumnebs. Did the banks seem to have any trouble
in rediscounting their paper at the Federal reserve banks?
Mr. Stkasbauoh. Yes; we got our share o f that talk, that we could
only rediscount so much, or certain percentages. And, o f course, the
rates were higher.
Senator Lenroot. That did not apply in the New York district,
did it?
Mr. Strasbaugh. Oh, yes; we could not borrow all the money we
wanted last year.
Senator Lenroot. You are not referring to the progressive rate,
are you?
Mr. Stbasbauoh. No, sir; I don’t 'think it was raised in the Rich*
mond district. I don’t think it was ever above € per cent.
Representative M ills. You were not referring to the progressive
rate, but simply to a raise in the rediscount rates ?
Mr. Strasbaugh. Yes, sir.
Representative M ills. Let me ask you if you have disposed o f your
surplus product?
Mr. S t r a s b a u g h . No, sir; we still have some of it; 40 per cent,
possibly.
Representative M ills. But the balance has been liquidated?
Mr. Strasbaugh. Liquidated at a very heavy loss to the canners.
Senator Lenroot. Is your hold-over any more than normal now ?
Mr. Strasbaugh. It is little more than normal, but we have more

than normal conditions to contend with, and that makes it seem
more, for the reason that the wholesale grocer is not buying in the
same quantities as he bought before.
Senator Lenroot. In other words, you are holding more than you
did before?
Mr. Strasbaugh. Yes, sir.
Representative M ills. H ow does that $2.40 a case compare with
the price in 1913?
Mr. Strasbaugh. The lowest price in January, 1913, for com was

55 cents a dozen, or $1.10 a case. But that was exceptionally low at
that time.
Representative M ills. Was that at the factory?
Mr. Strasbaugh. That was at the factory.
Representative M ills. What would it retail for at that time, do
you suppose?
Mr. Stbasbauoh. Possibly 55 cents at the factory—the wholesale
grocer would probably sell it at 70 cents, and it would probably re­
tail at 10 cents a can, or three cans for a quarter.




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Senator Capper. Could you handle that product profitably at 55
cents?
Mr. Strasbaugh. No, sir; there was some condition at that time,
or lack o f demand at the time, that made it sell at 55 cents per dozen
*or $1.10 per case—about 65 cents would give the canner a reasonable
profit in the prewar period when the market remained practically
stationary. I f there was a 5-'cents fluctuation it was considered a
bier fluctuation.
Senator Lenroot. How long will a pack keep ?
Mr. Strasbauoh. Some canned foods have been opened after they
have been kept 40 years and declared good by those who examined
them.
Senator Lenroot. Let me ask you this, then: How long is it con­
sidered safe to keep them ?
Mr. Strasbaugh. Just as long as the can will remain intact and
keep the contents free from air. Now, during the war we got into
inferior tin, just as we got into inferior things everywhere, which
were made by people wno did not care. Ana I do not think the
kind o f tin we got during the war would keep as long as the tin
we got in the prewar period. But ordinarily a can o f tomatoes or
com could be kept and would be good after four or five years. I
have kept them m my own house that long and eaten them at my
own table without any thought o f injury to the person who ate it.
It depends on how you keep them; whether you keep them in the
dry and whether they are kept in a moderately tempered room or
in a heated room.
Senator Lenroot. After it has been kept for that length o f time
is it more difficult to sell ?
Mr. Strasbauoh. I think everybody prefers this year’s pack in
preference to last, to the extent o f 2 or 3 cents a dozen. But I doubt
whether you and I could tell the difference in the taste.
Senator Lenroot. That is what I mean; could you tell in any way?
Mr. Strasbaugh. I think a can o f com is about as good when it is
four or five years old, if it has been kept properly and in a proper
place.
Senator Capper. Have your labor charges been reduced this year!
Mr. Strasbaugh. In the few canneries that are operating, which
started to operate in the last few days around my place, they are
paying 30 to 35 cents an hour, as against 40 and 50 cents an hour last
year. But the laboring people have not made up their minds that
they want to do much work at that figure. When canned foods are
advancing, as they say—for instance, I saw an article in a Baltimore
paper the other day by a housewife about every article o f food
going up in price again; she talked about wages going down and
all kinds o f food going up. These people do not understand that
it was down so low that everybody was selling away below cost
in order to get money to exist. And now when we are coming back
to nearer the cost, it is going to compel, not high prices, but enough
to pay at least expenses, but high when compared with the previous
prices.
Senator Lenroot. Do you think canned foods, at the retail end of
the line, generally speaking, did come down proportionately?
Mr. Strasbaugh. Proportionately to the manufactured cost?




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Senator Lenroot. Proportionately to the wholesale cost, did the
retail price come down, generally speaking?
Mr. S tr a 8 b a u g h . I tnink the retail price was a little slower in
coming down than the wholesale price, and a little slower- than the
canners’ prices; but the retailer is down to-day.
Senator L e n r o o t. Is he down on canned foods?
Mr. S tr a s b a u g h . Yes, sir.
Representative M i l l s . He fought a little harder before coming
down ?
Mr. S tr a s b a u g h . I did not understand you.
Representative M i ll s . He held out a little longer before coming
down ?
Mr. S tr a s b a u g h . He held out longer, because I don’t think he w as
pushed as hard for money.
Senator L e n r o o t. He might not have taken his loss.
Mr. S tr a b b a u q h . He m ig h t n o t ; he m ig h t have g o t ou t on h is
h old in gs b e fo re sto ck in g up w ith - new goo d s.
Representative S u m n e rs. During this period of low prices that
you have been referring to, when you were not able to sell at the
cost o f production, and were compelled-to carry over a considerable
part o f your pack, do you know whether or not there was any gen­
eral pressure from the banks that held the piper of the canners to
force liquidation? Was there anything unusual about it ?
Mr. s t r a s b a u g h . I do not think there was in our district, sir;
not in the State> o f Maryland and around Baltimore and around the
Eastern Shore; not to any great extent. I think the difficulty that
the canner faced was that he could not borrow quite enough money
to pay off his growers and pay his bills for the. 1920 pack.
Representative S u m n e rs. I f he had been able to borrow enough
money—what he then considered to be enough money—would ne
then nave increased his pack above what his pack turned out to be?
Mr. S th a b b a u g h . I th in k h e w ou ld h a v e pack ed m ore g ood s th is
year, sir.

Representative S u m n e rs. What effect would that have on condi­
tions with the canner?
Mr. S tr a s b a u g h . I think that would have the effect of holding
the market very much more steady 12 months hence—within the
ne?t 12 months.
Representative S u m n e rs. Your judgment is that by reason o f in­
ability to pack the normal amounts there will be a greater rise in
prices than if you had been able to use all'your machinery and pack
normaljhr?
Mr. S tr a s b a u g h . I think undoubtedly so. I think a number of
canners did not pack this year, because they could not arrange their
finances. And another thing, there is a lot o f fruit that will not go
into the cans this year, because o f the frost early in the season and
various freezes throughout the country; that is true in this section
of the country, and I think California also was affected likewise.
Senator L e n r o o t. Let me see if I understand your answer to Mr.
Sumners. You say if there had been a larger pack last year-----Mr. Strasbaugh (interposing). I understood he said this year.
Representative S u m n e rs. No ; last year.




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Mr. Strasbaugh. The canner did not feel the stress o f money so
much until he tried to pay for his packing.
Representative Sumnebs. In 1920?
Mr. S tr a s b a u g h . In 1920.
Representative S u m n e rs. By reason o f that an d the stringency in
the money market you were not able to put in the full pack this
year, 1921?
Mr. S tr a s b a u g h . On account o f the experience o f last year, not
being able to sell the product, and not being able to borrow enough
money, he could not hold this product and Borrow money to finance
this year’s pack.
Representative M ills * And that is the reason that he could not
sell last year’s pack?
Mr. S tr a s b a u g h . Yes, sir.
Representative M i l l s . It was not shortage o f credit?
Mr. S tr a s b a u g h . Y es; but if he could have borrowed money and
kept his product', in keeping with the situation that he had to face,
he could have packed.
Senator L e n r o o t. D o I understand if there had been a larger
ack it would maintain a higher level o f prices; is that what I unerstood you to say?
Mr. S tr a s b a u g h . Well,* I do not quite understand you on that,
sir. I f you will repeat that, please.
Senator L e n r o o t. A s I understood your answer to Mr. Sumners
you stated if there had been a larger pack this year, or last year,
it would have tended to maintain a higher price, or stability of

S

price?

Mr. S tr a s b a u g h . Not higher price, but more stability in price.
I referred to the abnormal prices last year. For instance, -we packed
the normal pack last year, but could not market it.
Senator L e n r o o t. I understand.
Mr. S tr a s b a u g h . I meant our inability to pack now. We are
going to pack probably 50 per cent or 60 per cent o f the normal
pack.
Senator L e n r o o t. When do you begin financing for this year’s
pack?
M r . S t r a sb a u g h . T h e b eg in n in g fo r corn and tom atoes is in
A u g u st.
Senator L e n r o o t. This month?
Mr. S tr a s b a u g h . Yes, sir.
Senator L e n b o o t. D o I understand that you are talking about

the difficulty o f financing last year or the difficulty o f financing
now ?
Mr. S tr a s b a u g h . I am talking about the difficulty o f financing
now, and that it is deterring a lot o f canners this year, because they
are already carrying a large load.
Representative M i l l s . Didn’t you tell me you had pretty well
disposed o f stocks and liquidated this loss?
Mr. S tr a s b a u g h . In the last 60 days probably 40 per cent of that
stock has been disposed of.
Representative M ills. You could get all the money you want
now?




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Mr. Strasbaugh. Yes; but it was necessary to tell our growers
in February and March what we could do in order to grow this
crop.
Representative M i l l s . I understand.
Representative T e n E y c k . In other words, you worked about six
months ahead f
Mr. S tr a s b a u g h . Y es; it requires the time to grow the product
The Chaibman. A s to the crop marketed throughout the year, is
that carried by the wholesaler; who carries the pack after it is
packed, the canner or the wholesaler?
Mr. S t r a s b a u g h . That varies somewhat every year; that is, it
did in the prewar period, sir. Usually the wholesale grocers carried
it, but in the last six months or a year the tendency o f the wholesale
grocers has been to let the canners carry all the product, and to buy
only as he wants it, and in small quantities, winch is contrary to
what the custom was in the prewar period, when the grocer was able
to finance himself properly. In those cases the canner would usually
sell all his pack within 90 days after it was produced, and a good
many sales were made in that way.
The Chairm an. It was sold for forward delivery?
Mr. S tr a s b a u g h . A great many canners sell that way; sometimes
75 per cent o f it is sola for forward delivery, sometimes six months
prior to the production o f the product
Senator L bnroot. When the canner sells his produet to the whole*
saler, does that protect him against price throughout the year, as a
role?
Mr. S tr a s b a u g h . No, sir; there has been very little o f that
Senator Lckroot. I understood that was a common practice.

Mr. S tr a s b a u g h . No, sir. It might be with a few corporation*.
I don’t think the canners in the East have ever done that to any
extent
Senator L e n b o o t. What inducement is there to the wholesaler to
bny for a year; is he speculating?
Mr. S tr a s b a u g h . T o a certain ex te n t business is more o r less specu­
lation.

Senator Lenboot. I am not speaking o f it in that line. _
Mr. S tr a s r a u g h . He buys for a certain trade, for his customers,
from year to year.
Senator Lenboot. And he assumes that he will get that same price
at the end o f the year to compensate him for carrying it over?
Mr. Strasbaugh, He assumes, from the crop outlook and his own
judgment, that he had better buy. And if he considers the situation
is such that he had better buy he makes his contract accordingly.
The canner, on the other hand, agrees to take the crop from a
grower—for example, 600 acres or 1,000 acres—and he takes all the
crop on that acreage, whether he gets a half yield or a full yield or
a bumper crop; the canner must make his contract to take tne yield
of the entire acreage, and the canner takes that chance.
Senator Lenroot. He gets it at the same price?
Mr. S t r a s b a u g h . A t tne same price.
Senator C ap p er. D o transportation rates figure much in the busi­
ness?
Mr. Strasbaugh. Tremendously so ; yes, sir.




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Senator C affes. I s there much complaint now by the canners as to
the transportation rates f
Mr. Strasbaugh. I think everybody feels that we are paying too
tnuch for transportation rates and that it lessens the consumption of
canned foods in distant cities that much,
Senator Capper. I understand now the growers are receiving lesB
ffaoney and that labor has been reduced to some extent and you are
getting a less price from the wholesaler; all the other factors in the
canning business have been reduced except transportation charges,
which are the highest they have ever been.
S en ator L en r o ot . W h a t d o you p a y fo r la b o r?

: Mr, Strasbaugh. A t the present time, as I said, they are paying
jProm 30 to .35 cente an hour.
Senator Lenroot. What was it before the.war?
Mr. Strasbaugh. From 18 to 20 cents— in some cases 15 cents— just
■for. ordinary labor. Now, to the skilled machinists who work on the
•closing machines and on the boilers and on the process kettles we pay
jnore than that. It is usually $200 or $300 for a season. The canning
season lasts, for com and tomatoes, about six weeks, and the average
running time is 800 hourfe. A com factory is not run more than 300
furors a year.
.
• E ep resen tative T e n E y c k . W h a t o th er th in g s do y o u m anufacture
;in th em ?
.
r,
.

Mr. Strasbaugh. Nothing.

Eepresentative

T en

E yck.

In the meantime

does

the

factory

,close dow n ?

Mr. Strasbaugh. A corn factory cldses down; a pea factory closes
.down. i O f course, a fruit factory catches the various {varieties, of
iruit in a season.
- Eepresentative T en E tcK . Can you use the various pieces o f ma­
chinery on the canning o f fruits?

.. Mr. Strasbaugh. Yes.;, on canning fruit, but you can not on peas
jind tomatoes.
The CiiAiRM AN. You do uae part of the same .machinery on corn
that you'do on peas, do you not?
Mr. Strasbaugh. Yes; if you have a corn plant and a pea plant
jadjoining, the closing apparatus could be slipped and used from one
plant to the other.
. The Chairman. They have a plant in my own town where they
pack both peag and corn, and my opinion is they use a great deal of
jnachirtet-y for the two processes; that a good deal o f the machinery
is the same.
Mr. Strasbaugh. What commodities?
The Chairman. Corn and peas.
Mr. Strasbaugh. I do not know what machinery would be the
*ame on com and peas until you get to the closing machine. The first
machine is the separator on peas, and for com it is the com huskers.
The Chairman. O f course they are not the same.
Mr. Strasbaugh. And you run from the separators to the graders.
The Chairman. But for the canning process they are practically
the same ?
Mr. Strasbaugh. The actual cooking process is the same; yes.
But there are very few canners that pack both, com and peas in the




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same factory. They have separate process kettles; they usually have,
on account of the expense o f conveying the product to the kettles
from some distant point, which would be the same as you would have
to ship the products from one place to: another.
Senator L e n r o o t . What territory will a.factory cover?
Mr. S t r a s b a u g h . So far as the raw stock is concerned ?
Senator L e n r o o t . Yes.
Mr. S t r a s b a u g h . The average corn factory will probably have
corn hauled within a radius of 5 miles. A pea factory may some­
times have peas come for 10 or 20 miles, where they hull the peas,
and ship the shelled peas for 10 or 20 miles to the cans.
Senator L e n r o o t . I s railroad transportation ever used in shipping
the product to the factory?
Mr. S t r a s b a u g h . Not peas or corn, because they would heat in
transit, and would spoil. Tomatoes are sometimes shipped by rail
or boat to the canning factories. Georgia peaches are sometimes
shipped from Georgia to Baltimore, and are canned there. Also
some few pineapples are canned in Baltimore.
Senator L e n r o o t . Your conclusion is that we can not find anything
wrong in the business from the standpoint of the producer or
consumer ?
Mr. S t r a s b a u g h . There is absolutely nothing wrong except the
abnormal conditions that prevail. Give us prewar conditions—let
competition prevail in the distribution, and give us sufficient money
to run our business conservatively, and we will function just the
same as we did formerly and serve the consumer just as well, and
I hope better, than before.
Senator C a p p e r . And you need lower transportation ?
Mr. S t r a s b a u g h . We do, and to get a fair price for our canned
foods. When canned foods get beyond a certain price per can
some people do not purchase the produot as freely as if they were
a cent or two lower per can. And a change in the freight rate would
tend to lower the prices.
Senator L e n r o o t . Do you believe that transportation rates should
be reduced ?
Mr. S t r a s b a u g h . I can not for the life o f me understand why
transportation rates should be the exception in not being reduced;
if everything else is to be reduced, why not transportation rates?
Senator L e n r o o t . We will all agree on that. But can you suggest
how it can be brought about, and why it should be done ?
Mr. S t r a s b a u g h . Well, sir; we have a tremendous problem on our
hands, how to lower the price o f our product, canned goods. I would
be afraid to undertake to tell the railroads how to reduce their rates.
Representative T en E tck . D o you think the railroads are having
as much trouble as you are ?

Mr. S t r a s b a u g h . I think they have ten times as much.
Senator L e n r o o t . The point I was getting at-----Mr. S t r a s b a u g h (interposing). I am thankful the canners are not
as bad off as the railroads are.
The C h a i r m a n . I f there is nothing further you want to suggest,
we are very much obliged to you.
Mr. S t r a s b a u g h . I thank you very much, gentlemen, and if there
is anything further you wish at any time I would be very glad to
give it to you.
9 1 3 4 1 — 2 2 — V O L 3 -------- 1 2




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a g r ic u l t u r a l ik q x j ib y .

The C h a ib m a n . What we would like-to get is the price paid by
the canners to the producer for the raw product, and the price re­
ceived by the canner, and the intermediate costs; and if you can rive
us the price received by the wholesaler and the retailer, we will be
very glad to have that too, covering 1913-1920, and the present
situation.
Mr. S tb a sb a u o h . The price paid for the raw product to the grower;
and the price received by the canner?
The C h a ib m a n . T es; and a ll the in term ed iate co sts, la b o r, over­
head, etc.
Mr. S tb a sb a u o h . In other words, you want the canners’ cost of
packing?
The C h a ib m a n . Yes; and the price o f the wholesaler and re­
tailer, too.
Mr. S tb a sb a u o h . That, I am afraid, I can not furnish you; I
haven’t any records about that. You want 1913?
The Chaibman. Yes; and 1920, and the present situation; if you
can give it for 1921,1 would like to have it.
(The information requested was furnished by Mr. Strasbaugh, and
is printed in full, as follow s:)
In submitting these estimated costs, please note variation in selling prices, as
there Is always more or less fluctuation in market. Range o f prices has been
much more extreme during the abnormal period during and since the World
W ar. The prewar period prices for canned foods were much more stable,
fluctuation not nearly so violent and prices paid the growers and orchardmen for
fruits and vegetables for canning purposes were much less variable.
The price paid to growers in 1913 for sugar corn was $9 per ton and seed
furnished free by the canner.
In 1920 the canner paid $20 to $25 per ton
and free seed. This price range is always arrived at between canner and grower
in view o f prices o f other farm products produced by growers, such as hay,
grain, potatoes, etc.
The canning industry o f the United States produces 5,000,000,000 cans of
foods, value $500,000,000, annually, packed in about 4,000 factories, owned by
about 3,000 individuals, located in every State and Territory o f the United
States, from Porto Rico to the upper point o f Alaska and also in H aw aii.
Canadian canners draw m uch'of their supplies from the United States.
The only authentic list o f canners published in the United States is that
published by the National Canners Association in their Canners’ Directory.
These canners use 5,000,000,000 cans o f all sizes from the baby condensed milk
to the 5-gallon cans holding products to be recanned and bottled later in the
season. The average price o f cans is $30 per thousand.
Over 200,000,000 boxes or cases are used as containers for these cans when
filled.
Over 5,000,000,000 labels are used by the canners o f the United States.
In the corn pack alone there are over 6,000,000 pounds o f sugar used annually.
Canners o f peas and baked beans use approximately 6,500,000 pounds o f sugar;
and in fruits, Jellies, and Jams the amount o f granlated sugar used will run into
immense figures. One-half million barrels o f sugar will hardly supply the
canners’ wants.
(The canner lost heavily last season on account o f the de­
cline in sugar from 22 } to 30 cents per pound to 6 to 7 cents per pound as at
present.)
Salt is also used in large quantities, nearly as much as sugar.
Glass jars and bottles are used, also millions o f pounds o f nails.
Cannery equipment will run into hundreds o f millions. W ages paid out by
canners can be figured in millions.
The laboring man, or the man who labors, or rather the man who wishes to
earn money by laboring can ill afford to condemn or disapprove o f the canning
industry. The consumer who studies economy and convenience and health
products can not afford to overlook the contents o f the hermetically sealed can
which had been sterilized by heat.




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The canner and the fanner are almost Inseparable; it is difficult to say where
one leaves off and the other begins. The same laws and regulations should be
framed to apply to one a s they govern the other. Therefore, any regulation
granting privileges to the farmer and withholding like privileges to the canner
is detrimental to the termer eventually, because the canner’s losses are re­
flected eventually to the farmer, as he sells the bulk o f his product in many
States to the canner. The farmer, assisted by nature, produces; the canner,
wee removed from nature, preserves the farm product by artificial heat so that
it may remain on the pantry shelf until the requirements o f the housewife may
demand its use. Canned foods, hermetically sealed and scientifically prepared,
will keep for generations.
It has been estimated that there is invested in canneries and canning-machinery plants over a h alf billion dollars. It is also estimated, and the figures
are approximately correct, that the shrinkage in cannery products alone, super­
induced by deflation, indicate a loss to the canner aggregating from $100,000,000
to 1200,000,000 in the last 12 months. Depreciation o f canneries nnd plants mak­
ing canning-house machinery can be conservatively put at 50 per cent less than
valuation o f a year ago, nnd possibly in some cases depreciation o f 75 per cent
would not be an extreme estimate.
The canners were sorely tried and met with heavy financial losses on account
of the inability o f the wholesale grocer to function properly on account o f losses
in sugar on account o f the collapse In sugar prices in the early stages o f the
deflation period, and on account o f enforced deflation the canner could not
market his normal pack o f 1020 except at demoralized prices, 30 and 40 per cent
below cost, largely on account o f the grocer’s credit being restricted as well as
the canner's.
In 1920 the canner found his costs at peak prices on account of the situation
as explained. The canners were unable to pay growers oft times their labor, as
well as their can and supply bills, according to usual custom. The canner was
almost invariably told by his banker that it was impossible to obtain sufficient
money to take care o f his requirements even at any rate o f Interest There were
many cases when canners could not obtain loans when their warehouse stocks
more than justified double the amount sought. In addition to this, frequently
the canneries and the machinery were unencumbered, but this did not aid the
canner in securing the loan required by the necessity o f the situation.
There were cases, in fact, at one time when Liberty bonds were offered In
fair-sized amounts as collateral, and even with such security the canner was
nnable to borrow sufficient to meet his requirements.
This explains the selling o f canned foods In many cases from $1 to $3 and $4
per case less than 1920 packing costs in many instances. The consumer was
supposed to be benflted by these temporary declines, but in the majority o f cases
there was quite a stretch between the canner's price and the consumer’s price on
account o f violent fluctuations and forced sales by canners in order to obtain
sufficient money to meet incoming bills overdue.
Notwithstanding this situation, on account o f increased freight rates begin­
ning in September, 1920, tin cans were listed during the first quarter o f 1921 at
prices higher than In 1920, and even at prices higher than were quoted at any
time during the war period. Cans were never advanced in price during the war
period in keeping with the advances in the price o f labor which is necessary in
producing 1 ton o f steel. The cost o f labor required to produce 1 ton o f steel in
the prewar period, we are told, was about $14. This labor was advanced to as
high as $40 per ton o f steel before the period o f reduction.
No. 2 cans sold during the prewar period for about $14.75 per thousand; they
advanced to about $25 per thousand prior to September, 1920, and since that time
to January 1 and during the first few months o f 1921 the price for No. 2 cans
ruled at about $28.75 per thousand. I f cans had advanced In proportion to
labor, they would have advanced to $40 per thousand, but such was not the case.
Therefore, it was not to be reasonably expected that cans could decline in keeping
with the decline in labor and other commodities.
Freight cars are employed from time to time in the various movements o f iron
ore from the mill, coal, coke, and the various shipments o f the intermediary
products, including tin cans to the canner’s factory. High railroad wages,
therefore, compelled high prices for canned products. Changed classification o f
canned foods has always tended to increase the prices o f canned foods to the




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ultimate consumer. The recent advance in canned foods toward a nearer figure
to replacement values Is on account of canners having satisfied claims against
them o f various kind but at terrifflc losses, and now since such indebtedness has
been liquidated there is an advance in prices, though by no means near equal
to 1920 costs for most canned commodities, and in many cases not yet near the
1921 replacement estimated costs.
This condition o f low market was evidently the result o f deflation and not the
result o f oversupply had conditions -throughout the United States continued
normal. This has been proved by the later rally in canned-foods prices toward
replacement values. These fluctuations brought about in this way will show
you that it is impossible to follow the average shipments o f canned foods from
the canner to the consumer. These fluctuations naturally compelled losses to
the distributors and the variation o f percentages in selling price above and
below cost while these sacrifice foods were being distributed to the consumer.
It is easy to imagine, however, that retailers are basing their present prices
on to-day’s higher market for fear o f their inability to replace present holdings
even at present below 1921 costs. I do not suggest this in any way o f criticism
o f the distributor. H e is only one o f the more or less affected either advan­
tageously or otherwise by deflation and tight money.
Deflation brought losses to those who needed to borrow, but deflation did
not affect the canner or distributor who did not have to sell or borrow in order
to obtain immediate funds for immediate requirements, and in addition to
this, the few who had reserve funds or were. favored with ample loans of
credit or who stood close to able financiers were in position to profit by the
situation by buying the canners' products fa r below cost, with every reason­
able assurance that everything must sooner or later return to normal basis
and believing that no product could long continue to sell below cost of pro­
duction. It might also have been conjectured that the canner's financial posi­
tion would not permit him to pack more than half the normal supply in the
season o f 1921, and this would be productive o f high speculative prices on
account o f scarcity superinduced by the prospective short pack o f 1921.
The only recommendation that I would make is that the canner be gov­
erned by the same laws as obtained by the farmer, for the canner and farmer
are closely allied; the same consideration should be given the canner as the
farmer in regard to loans o f credit; that is, ample loans based on the canner’s
total assets, so that he may be able to produce at a reasonable profit and may
be unhampered by tight money, which means forced sales frequently fa r below
cost.
I would also recommend encouragement o f unhampered competition among
distributors so that violent fluctuations will be superseded by the law o f supply
and demand. I f this is done, in a few years the canning industry w ill again
regain the foothold and will again occupy a prominent position in a large
share o f the production o f foods for the consumers’ use.
Cost o f packing oom , Townsend, 1913.
Cans and c a se s_____________________$ 0 .4 5
Raw c o rn ___________________________
. 27
Labor--------------------------------------------------. 14
Miscellaneous supplies— labels, su­
gar, seed, fuel, etc_______________
. 0425
Maintenance ana repairs, and de­
predation on p la n t______________
. 02
Interest_______________________ ______
. 03
Leaks and swells____________________
.0 1
Insurance___________________ ________
. 0125

Taxes________________________________$ 0 .
General expense.
Brokerage____________________
Office expense and salaries„ ________________________________
Freight and exp ress.
Sanitary machine le a s e ___ _______
Per c a s e ____________________
Per dozen___ - ______________________

005

.01

.0 3
.0 5
. 0225
. 005

1 .0 9 7 5
.5 4 8 7 5

Cost o f packing, 1913, Townsend, S0.54875 per dozen.
Selling price In 1918 ranged from 55 to 7 2 ) cents per dozen.
Paid growers for raw corn, season o f 1918, $9 per ton, delivered factory.
Seed corn w as furnished growers by canners n e e of expense to grower, In addition to
above prices paid fo r raw corn.




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Cott of packing oom, 1910.
Price per dozen.

Mocrnt
Pleasant.1
Cans................................
Cases...............................
Raw stock..........................
Seed....................................

Labor..................... .......

Otoenl expenses.............
Miserilaneous supplies.. .
Maintenance ana repairs.
Coal..........................
Suzar and salt...................

Utah.....................

Machine rentals..............
Insurance...........................

10.3176
.0071
.3751
.0233
.1657
.0325
.0078
.0232
.0078
.0787
.0477
.0051
.0266

Price per dozen.

Town­
send.*
SO. 3200
.1001
. 2076
.0074
.1657
.0292
.0027
.0149
.0116
.0696
.0466
.0045
.0311

Mount
Tow n­
Pleasant.1 send.*
Taxes...........................................
N. C. A. inspection..................
N. C. A . advertising.................
Aberdeen office expense..........
Leaks and swells.......................
Interest.......................................

SO.0033
.0100
.0190
.0500
.0020
.0835

10.0017
.0100
.0150
.0500
.0010
.0457

Brokerage (estim ated).............
Discount (estim ated)...............
Labor shipping (estim ated )...

1.2720
.0300
.0150
.0075

1.1844
.0300
.0150
.0075

1.3245

1.2369

1Mount Pleasant, Del., factory: C o t ol packing. 1830, t M H i par dosen; paid growers lor raw cam.
season of 1920, tM per tan, delivered at factory; sold 40 percent of lVXcorn at DOoents to SI per dasen.
1 TnwBMOd, Del., b etn jr: Cost of packing, 1100, U .2 M par d a m ; paid growers t o raw com, season
0(1920, CO per too, delivered at factory; sold 50 percent of 1920 corn at B0 cent* to t l par doten.
. Seed corn was furnished growers by canner tree of expense to grower in addition to above prises paid
lor raw com.

Btttm ated cost o f packing com for teuton 19tl.
Cans-----------------------------------------------------* 0 .3 2 7 0
Cases.
. 0671
Raw stock________
. 2751
Seed__________ . . . .
. 0233
Labor_____________
. 1257
General expenses._____
. 0325
Miscellaneous supplies
________________
.0 0 7 8
Maintenance and repairs__________
. 0232
Coal_______________
. _____
0078
8 o g » and sa lt__
. 0287
. 0377
. 0051
Machine r e n ta ls;
Insurance_________
. 0260

Taxes_________________________________$ 0 .0 0 3 3
N. C. A . inspection and ad vertising.
, 0060
. 0500
Aberdeen office expense___ ________
Leaks and swells___________________
. 0 020
Interest______________________________
.0 8 8 5
Tbtal (per doaen)__________
Brokerage (estim ated)_____________
Discount (estim ated)______________
Labor shipping (e s tim a te d )-..:___

1 ,1 8 2 0
.0 8 0 0
.0 1 6 0
. 0075
1 .1 8 4 5

Coat o f packing, estimated, 1921, $1.1845 per dosen.
Growers being bald for 1921 raw corn, $ 2 0 per ton, delivered a t factory.
Seed corn furnished growers by canner free of expense to grower in addition to a bora
prices paid fo r raw corn.
Forward selling .price, 85 cents to f l per dosen for standard corn.
Forward Bellini price, 85 cents to $1 to $ 1 .1 0 ner dosen for fextra standard.
Forward selling price 85 cents to $1.10 to $1.25 per dosen for fancy.
Prices are dependent upon canner and reputation o f brand.

Senator L e n r o o t . I would like to ask you one question. Can you
tell us what proportion o f the product is secured through contracts
with the growers before planting?
Mr. S tb a s b a u g h . In the prewar period I would say certainly
three-fourths; in the present period, this year, I would say less than
one-fourth.
Senator L e n b o o t. That is because o f the canner being unwilling to
make the contract?
Mr. S tb a s b a u g h . I w ou ld n ot say u n w illin g .
Senator L e n b o o t. Not able to.
Mr. S tb a s b a u g h . I would say his inability.
Senator L e n b o o t. Not on account o f the grower’s unwillingness to
make it if he could?
Mr. S tb a sb a u g h . The canner could not see how he could contract
at a price that would pay the grower even cost for his raw products
this year and produce enough to get out whole on it, and for that
reason the canner withheld.
Representative T en E t c k . That was in January and February?
Mr. S tb a sb a u g h . Yes, sir; and March.




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STATEMENT 0 7 MB. C. J. FAWCETT, OF CHICAGO, ILL., PERTAIN­
ING TO THE SHEEP AND WOOL INDUSTRY OF THE UNITED
STATES.

Mr. F a w c e t t . Mr. Chairman, and gentlemen, I am appearing as
director o f wool marketing o f the American Farm Bureau Federa­
tion, and assistant general manager o f the National W ool Ware
House & Storage Co., a growers wool marketing agency, and a
farmer and wooLrrower in a small way in Iowa.
It must be evident that the live-stock industry in :the United States
is in a critical condition, o f this commission would not havft been
created. And I am very sure that if any doubt was in the mind of
any member o f this commission as to the critical Condition through
which the live-stock industry is passing at the present time, suf­
ficient evidence has been presented to dispel any such ideas.
It is needless to say that the eyes o f the agricultural industry are
on the results o f this commission, and, Mr. Chairman, I am going to
present some statistics and some figures that I wish to read into the
record. W ill that be satisfactory!
The C h a i r m a n . Yes, sir.
Mr. F a w c e t t . It would be appreciated if the commission would
feel free to interrupt me at any time and ask questions upon any
subject presented, as it is a failing o f mine (or an inability) to
make matters clear; and in presenting the few ideas that will be
included here, our purpose and object is to present accurate figures
and statistics that will oe o f value and a guide to the commission in
its deliberations.
The C h a i r m a n . Are you going to deal with the wool-pooling
corporations}
Mr. F a w c e t t . That is one o f the points I was going to touch
upon, yes, sir ; not as to wool, but the sheep industry as a whole,
and what we have to say will not be lengthy.
While the same conditions exist to a degree in all branches of
the live-stock industry, and a description o f one covers largely condi­
tions o f all other lines, there is a different angle to each and to secure
a fair idea o f the present condition o f the sheep and wool industry
and wherein it differs from other lines o f live stock, a brief review
o f conditions dating back to the war id necessary.
Wool occupies a unique position as compared with other agricul­
tural products in that our annual production is around 300,000,000
pounds, or approximately 50 per cent of our consumption. And wool
is practically the only agricultural commodity that is not exportable.
We produce near one-tenth the world’s supply and consume onefifth, therefore, we are dependent each year upon foreign production
for the equivalent of our production. Unfortunately for the wool­
growers our industry occupies a unique position in another respect
in that our product, wool, being one o f the most needed commodities
in the proper equipment o f an army, was commandeered by our
Government in the spring of 1918, not at the then prevailing market
value, but the value as of July 1, 1917, and the woolgrower was
denied the increase in value o f his commodity caused by the war­
time conditions that was enjoyed by practically every other industry.
Senator L e n r o o t. What was that p rice?




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Mr. Fawcett. The price at which the Government took it over?
Approximately 33$ per cent over the prewar prices.
Senator L e n r o o t . Would you g iv e t h e p r ic e s ?
Mr. FAWCETT. On quarter-blood combings a range o f 60 or 65
cents, according to the shrinkage thereof, and on three-eighths
combing 65 to 70 cents.
There are approximately 21 grades o f wool.
Senator L e n r o o t. Was or not that a p retty fair p rice?
Mr. Faw cett. Yes, sir. Approximately 33| per cent over prewar
prices.
.
Senator Lenroot. You are criticizing the Government for the price
it paid?
. \
. 1, •
*
Mr. F awjcbtt. Absolutely not.
Senator Lenroot. Perhaps I misunderstood your statements..
Mr. F a w c e t t . I am simply stating the position the wool industry
occupies, compared with other agricultural commodities; The cbmparison is carried forth.
The Chairman, How long was this price.control maintained?
Mr. F awcettt. H ow long wastheprice control:maintained ?
The C hairman. Yes..
Mr. Faw cett. Until the. fall that the:armistice was signed—about
November 11. The War Industries Board, went out o f existence on
January 1 following the armistice. . .
Representative Sum nebs. When the control board went out o f
operation were you left with a considerable stock o f wool on hand ?
. Mr. Faw cett. Yes, sir. The Government had on hand at the date
of signing the armistice approximately 450,000,000 pounds o f im­
ported wools.
■. ■ , '
Representative S u m n eb s. No ; that was not my question. You said
the Government commandeered this wool. Do you mean that it took
the wool that you produced up to the time that the control board went
out o f operation in January ?
. Mr. Fawobtt. I t took the one crop, the spring d ip o f 1918. That
was all; just the 1918 clip.
Representative Ten E tck . You spoke o f having on hand wool that
the Government imported. Did the Government import wool to this
country fo r its use?Mr. F aw cett. Tremendous quantities^
Representative Ten E tck . D id it import.more than it needed?
Mr. F awcett. Yes, sir.
Representative Ten E tck . Did it import more than its usual im­
portation o f wool?
Mr. F a w c e t t . A great deal.
Representative Ten E tck ; And it left that stock o f wool in the
country after the war was over?
Mr. F a w c e t t . Yes, sir; approximately 450,000,000 pounds.
The Chairman. What did you say—33J per cent over the prewar
price?
Mr. F a w c e t t . Previous to our entering the war.
The Chairman. It had raised in prewar, price to that ?
Mr. F a w c e tt. Yes, sir. The 1917 price was approximately 18 per
cent less than the price at which the Government took over the
domestic clip in April, 1918, and previous to that the same grades of
wool that I have been quoting were selling around 44 cents up to 50.




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Senator Lenboot. You say at the prewar price an increase o f 33}
per cent. Now you say previous to commandeering.
Mr. Fawcett. Previous to our entering the war.
Senator L bnboot. Not previous to our commandeering; that is,
it was previous but not immediately previous?
Mr. Fawcett. When I say-----Senator Lenboot. When did they commandeer it?
Mr. Faw cett. In April.
Senator L enboot. O f what year?
Mr. F a w o e t t . O f 1918, and set the values at the July 1, 1917,
price.
The Chaibman. The values on July 1, 1917, were evidently very
much higher than they were July 1,1913,1914, and 1915?
Mr. F awcett. Yes, sir.
The Chaibman. I should say approximately 100 to 125 per cent?
Mr. F awcett. No, sir.
The Chaibman. On the basifr g f .the 1918 products the latter half
o f 1917 there was an increase in the price to—I can not give you the
absolute prices—of 175 per cent, based on 1918?
Mr. Faw cett. May I ask your authority ?
The Chaibman. I presume these are tne figures taken from the
Bureau o f Labor Statistics index.
Mr. Fawcett. My opinion, representing the woolgrowers selling
agency who last year handlea approximately one-tenth o f the total
domestic production, is based on sales rather than statistics, sales of
similar grades o f wool we have handled in years past; but in making
the comparison o f value at 38£ per cent the basis o f estimate was pre­
vious to our entering the war, or previous to July 1,1917.
Senator Lenboot. That was not a normal situation. You must
admit the prices previous to our entering the war were compara­
tively higher than nonbal?
Mr. Fawcett. Yes, sir; relatively high.
Representative StrMNxss. Can you put in any figures for 1913?
They will speak for themselves.
Mr. Fawoett. I have a table here but it does not go back that
far. However, the present market value is about 75 per cent o f the
prewar average; and when I say prewar in this case, I mean before
the World War. Quoting from sales made by National W ool Ware­
house & Storage Co., quarter-blood o f the 1913 clip was selling Janu­
ary, 1914, at 2&i cents per pound. The same grade to-day has a value
o f about 18 cents and is now selling at that.
Senator Lenboot. It is not quite fair to use the prewar basis in
one case, and prewar in another case meaning another thing, is it?
Mr. Fawcett. I grant you that statement, and we do not have any
desire in the presentation o f this brief to have a double meaning
or misstate the facts, which I think will be demonstrated before we
finish this statement.
The Chaibman. You mean then the wool price to-day is below the
wool price in 1913?
Mr. Faw cett. You are singling out a year which is below.
The Chaibman. I say 1913,1914 or 1915 ?
Mr. Fawcett. Yes.
The Chaibman. I would be very glad if you would produce any
figures which will show that. You need not do it now. Admitting




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185

what you say is true as to purchasing value, in absolute figures those
we have do not sustain it.
Mr. F a w c e t t . Permit me to refer you to the report o f the Taft
Tariff Commission in 1910, which gives the 9 pounds o f medium
wool which was used in the manufacture o f a choice worsted suit,
which was given as 25 cents per pound. I have just received sales
for something over a million and a quarter pounds o f wool o f similar
grade last week, and these grades were from 18 cents to 23$ cents.
Twenty-three and one-half cents I think was the highest.
The C h a i r m a n . Has there been any drop in wool prices recently ?
Mr. F a w c e t t . Yes. sir.
The C h a i r m a n . Tne figures I based my statement on do not come
down later than May o f 1921.
Mr. F a w c e t t . I feel very confident that these figures will bear in­
vestigation, because possibly no better criterion to the present market
could be given than this recent sale o f a million and a quarter pounds
of wool last week which embraced the majority o f the main grades
as we grow them in the mid-west and. Western States.
Senator L e n r o o t . Was that sale lower than the prevailing market?
Mr. F a w c e t t . N o , sir.
Senator L e n r o o t . It was made at the market price ?
Mr. F a w c e t t . At the present market value. For instance, in this
sale were three sales o f Iowa o f three-eighths staple, 1920 clip, which
is a very good grade o f combing wool. You understand, I presume,
the distinction between combing and clothing is in the length o f the
staple, and the combing is o f sufficient length to comb ana spin for
the purpose o f manufacturing worsteds. This sale o f Iowa threeeighths combing ranged from 22.3 cents to 23 cents.
Representative T e n E t c k . Before we get too far away from the
other questions that I asked you, I would like to have you tell us
how the Government proceeded to get rid o f this importation o f wool
that they brought into the country? Can you- tell us how that came
in competition with the American-grown wool ?
Mr. F a w c e t t . Yes, sir. The amount so held was approximately
425,000,000 to 450,000,000 pounds. This was mostly o f the lower
grade wools, such as South American No. 3’s, 44’s to 46’s in spinning
terms. There was no provision, as I understand, at that time for
disposing o f Government-owned commodities other than immediate
disposition—dumping on the market. The outcome o f that was ob­
vious. It would practically ruin the market. In Chicago a meeting
was held at which the speaker was present. Thirteen States were
represented. We petitioned the Government to place this wool on
the market in the installment plan—so much per month—in order
that the market might be fed and not crowded—nor forced. This
was granted, and it has been disposed o f in that manner since. I
think at the present time it is reduced to approximately 40,000,000
pounds.
Senator L e n r o o t . What was the amount held at the time o f the
armistice ?
Mr. F a w c e t t . About 450,000,000 pounds.
Senator L e n r o o t . And we consume about how much ?
Mr. F a w c e t t . We consume about 550,000,000 pounds. I think
last year about 550,000,000 pounds—something like that.




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a g r ic u l t u r a l in q u ir y .

Senator Lenboot. A little over a year’s supply, over our own do­
mestic production ?
Mr. F a w c e t t . You mean the Government’s holdings}
Senator L e n b o o t. Yes.
Mr. F a w c e t t . N o . The Government’s holdings were 450,000,000
pounds, and we annually consume something like 550,000,000 pounds.
- Senator L e n b o o t. We annually produce more than the Govern­
ment had on hand?
Mr. Fawcett. No, sir.
pounds annually.

O ur production is around 800,000,000

Senator L e n b o o t. I s there any fault to be found with the Govern­
ment’s marketing o f its wool?
Mr. F a w c e t t . It seems to me that the Government has been en­
tirely reasonable and complied with the request o f the woolgrowers
and the industry, as far as it is possible; and I might state further
that at the urgent request of some o f the woolgrowers’ associations
the .monthly sales have been postponed from time to time by reason
o f our requests, and for other reasons.
. It should be borne in mind that the majority o f this wool was of
the lower grades, class 44’s, 46’s—very little above 56’s, possibly.
Representative S u m n eb s. What use did that Government wool go
into, and was any o f it exported ?
' M r . F a w c e t t . Was any o f the wool the Government owned ex­
ported?
Representative S u m n e b s. Yes.
-.. Mr. F a w c e t t . I think not a pound.
Representative S u m n e rs. What uses did it go into ?
Mr. F a w c e t t . I f it w a s true to grade it would be for the purpose
-of carpet manufacturing-—lower grades, and the lower grades of
■cloth in which 46’s spinning quality could be used.
Representative S u m n eb s. T o what extent did that wool come in
competition with the bulk o f the wool produced by American
.growers?
Mr. F a w c e t t . It would come in competition with quarter blood
-jtnd below.
- Representative S u m n eb s. What percentage o f the total American
■production Was a quarter and below?
Mr. F a w c e t t . Understand, in answering that, the answer to this
-question will be based on the percentage o f quarter and below that
our firm handles, and we probably are as representative a firm as
there is. I would say that 33^ per cent o f the 25,000,000 pounds that
we have handled from possibly 10 States was quarter and below.
• Representative S u m n eb s. Does that particular wool going on the
the market in the way in which you have indicated cause a greater
.-spread in the-price o f the different grades o f American wool than
would ordinarily be found in the American market?
Mr. F a w c e tt. It would seem so, for this reason, that the price
paid on-these Government auctions for a certain grade of wool
would govern the price paid for a similar grade o f wool sold else­
where.
Representative S u m n eb s. Did it do it, in fact?
Mr. F a w c e t t . It h ad every evidence o f th a t effect.




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Eepresentative S u m n e rs. Does the lower grade o f wool o f Amer­
ican production that you speak o f come from a particular section, or
does it come from different clips ?
Mr. Fawcett. It is caused by crossing black*faced rams o f a
Down breed, which you are aware are the mutton breeds, and ap­
proximately 65 per cent o f our domestic production to-day is o f
the medium wools; or, in other words, indicating a cross with the
Down breeds. And, therefore, the per cent o f qne wools seems to
he rapidly decreasing as far as domestic production is concerned.
This will apply, in a large measure, to New Zealand also, as will
he indicated by the hundred million pounds o f New Zealand lambs
imported into the United States in 1920. The New Zealand people
have found that the American market makes a veiy convenient
output for their frozen lamb and mutton, and therefore they .are
using the Down rams, mostly of the Hampshire breed, for the pur­
pose of producing mutton.
Representative S u m n e rs. Right at that point, not leading too far
affield; do you happen to know what per cent o f American mutton
consumption is produced in this country?
Mr. F awjceit. Last year about one-tenth o f our consumption was
produced in foreign countries.
Representative Sumners. Was that a normal percentage ?
Mr. Faw cett. Abnormally large. Never before has there been a
like amount of foreign mutton.
Representative Sumnbrs.. Have we had any exportations o f mutton
on the other hand?
Mr. Faw cett. No, sir.
Senator Lenboot. I f that be true, that we had an abnormal impor­
tation, does that mean that there was not as great slaughter in our
own country?
Mr. Faw cett. I think at nine o f the principal markets the num­
ber of sheep slaughtered in 1920 was 35 per, cent more than that o f
1916, or possibly above normal.
Senator L e n r o o t . H o w do you account for that? Was there also
an abnormal consumption o f mutton?
Mr. Faw cett. Yes.
Senator Lenroot. I f we slaughtered 35 per cent more *nd imported
more, hoyr does that come about ?
Mr. Faw cett. The price that the grower received last year—in
1920—would not indicate there was any increase in demand other
than a decrease in price would warrant or justify.
Senator L e n r o o t. I do not think that you follow me. I f we
slaughtered 35 per cent more than normal and also imported more
than normal, do you mean to say that our consumption was at least
40 per cent more than normal?
Mr. Faw cett. Our consumption evidently was more than normal,
because of the decreased price. Whenever we make a decrease, in
price it is generally followed by an increase in consumption, is it
not?
Representative S umners. Did beef and swine decrease in price as
relatively as mutton decreased?
Mr. Fawcett. H ie decrease was greater, I would say, because
of .this fact: That the mutton products did not enter into theimpor-




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tations during the war. Mutton as a meat is not exportable. There­
fore the price o f mutton was not as high relatively during the period
o f the war. Therefore the decrease was possibly not as great.
Representative T e n E t c k . I s mutton used as a substitute for other
meats?
Mr. F a w c e t t . Yes, sir; as far as domestic consumption is con­
cerned, but not for export.
Representative T e n E t c k . Y es; that is what we are talking about,
because we slaughtered more and imported more, and undoubtedly
that was the cause.
Mr. F a w c e t t . Absolutely.
Senator L e n b o o t. I understood there was a light production in
beef. Do you think that our meat consumption was less last year?
Mr. F a w c e t t . I am not posted on beef. However, I understand
that there was less beef killed, less number o f pounds o f beef killed,
last year.
The C h a ib m a n . I happen to have here the figures o f consumption
o f mutton and lamb for the United States by years. 1920 compara­
tively was higher than any prior year until you get back to 1914. It
is higher than it was in 1919; higher than it was in 1918—very much
higher than it was in 1918, and still higher than it was in 1917. So
that you are apparently correct there.
Senator L e n b o o t. That is mutton and beef combined.
The C h a ib m a n . Mutton and lamb.
Representative S u m n eb s. Proceed, Mr. Fawcett.
Mr. F a w c e t t . Take the cotton market for an illustration, which
was governed by supply and demand, and that advanced near 300
per cent while tne price o f wool was set at approximately 40 per cent
over prewar values. Mutton and lamb by its very nature was not
meat that could be used for export purposes to feed the armies;
therefore, it shared to a less degree in the increase in values enjoyed
by other meat products. Therefore, the sheepman having been
depied war-time profits to a large degree, upon both wool and mutton,
is therefore less able to withstand^ the terrible calamity that has
fallen on all branches o f the live-stock industry. While there is a
degree o f satisfaction in being immune from accusations o f profiteer­
ing during the war, such realization does not relieve the financial
situation we are facing to-day.
There are other things that should be mentioned that contributed
in a substantial way to the present condition of the wool and sheep
industry. A severe drought existed in practically all range States in
season o f 1919, which was followed by one of the worst winters in
history. Feeding began in October and lasted until late in the
spring o f 1920. Feed bills were in many instances five times as great
as normal. This was followed by a 50 per cent lamb crop by reason
o f severe weather and poor condition o f breeding stock.
The result was that flocks were mortgaged from $6 to $12, the
average being about $8.50 in the spring o f 1920. Yet they were not
discouraged for they had every reason to expect a fair market price
for their 1920 clip o f wool. But something happened to the wool
market in June, 1920, before the 1920 clip was moved. On about
June 20,1920, or immediately after the Federal Reserve Board issued
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the wool market ceased to function and scarcely a pound o f domestic
wool changed hands from that date until about January 1 , 1 9 2 1 .
Many causes, none o f which relieved the situation o f the woolgrower,
may be named for the paralysis of the wool market, such as our
Government entering the domestic market in competition With
growers, with approximately 4 5 0 ,0 0 0 ,0 0 0 pounds of low grade im­
ported wools on nand at close o f war, which had a very detrimental
effect on wool values; the importation duty free o f 4 2 7 ,0 0 0 ,0 0 0
pounds o f foreign wool and 100,000,000 pounds o f frozen lamb and
mutton in 1 9 2 0 ; the low rate o f exchange provided the foreign pro­
ducer a bonus of from 2 0 to 3 5 per cent above the market price re­
ceived by the domestic grower; so-called suspension o f buying by the
>ublic from manufacturers or wool which resulted in large cancel­
ation o f cloth orders then held by woolen mills.
The last named reason though greatly emphasized is not born out
by the statement o f the Bureau of Markets, as this department makes
the statement that the consumption o f wool in 1 9 2 0 was normal,
or 5 8 0 ,0 0 0 ,0 0 0 pounds.
I f such be the case, we are forced to the conclusion that the woolen
mills found practically their entire needs in stocks already on hand,
and in imported wools to the total neglect o f domestic clip of
1920; for a large per cent, perhaps 50 per cent o f the 1920
clip, which was produced at a cost o f 45 cents per pound exclusive
of marketing ana carrying charges which amount to about 7 cents
per pound, is yet in first hands. The condition was so serious that
on December 10, 1920, representatives o f woolgrowers appeared be­
fore the Ways and Means Committee o f the House o f Representatives,
in an effort to secure protection from the importation, duty free, o i
foreign wools, in the* form o f a temporary embargo or an emergency
tariff. It took the form o f the emergency tariff, which had a very
stormy career, and did not become a law until May 27, 1921. The
bill was delayed intentionally or unavoidably until 225,000,000
iunds more of foreign wool was imported irom January 1 to
ay 1, in addition to the 427,000,000 pounds imported in 1920.
Representative T e n E y c k . What year is it that you refer to ?
Mr. F a w c e t t . The present year, 1921. The bill was delayed from
December 10, 1920, until May 27, 1921. In that time, or a period
from January 1, 1921, until May 27, 1921, there was 225,000,000
pounds o f foreign wool added to the 427,000,000 pounds imported
m 1920.
Representative S u m n e r s . Have you the quantities of importation,
montn by month, there ?
.
.
.
Mr. F a w c e t t . I have not got it in this brief, but we have it from
the Bureau o f Markets. It averaged 1,000,000 pounds each day for
a greater part o f the time from January 1 to May 27, 1921. These
figures were taken from the Bureau o f Markets, due to difficulty o f
obtaining figures on importations, and they are the most accurate
we can get.
Senator L e n r o o t . Have there been any importations since the
emergency tariff?
Mr. F a w c e t t . From May 9 till July 2 there were, I think,
9 ,0 0 0 ,0 0 0 pounds. I have that and it will appear later. This was
mostly all No. 3 wools. I am not saying all.

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The Chairm an. Carpet w ool!
Mr. F aw cett. Yes, sir. The term “ carpet wool,” Mr. Chairman, is
deceptive.
The C h a ir m a n . I understand that; bnt that is the term ordinarily
used.
Mr. Faw cett. Yes, sir; because much wool that is imported as
carpet wool steps up a grade or two and becomes clothing wool when
it sets to the manufacturer.
A ll o f this 650,000,000 pounds o f wool came in absolutely free of
duty, while the manufacturers o f our product were protected by a
35 per cent ad valorem duty upon the importation o f foreign manu­
factured articles. This we claim is unjust discrimination against the
producer that can not be justified. W hy should we, as producers, be
compelled by law to market our product in an open market and
buy the articles manufactured therefrom on a protected market!
Yet that is what we have had to do since March 1, 1913, and will
virtually have to do the same thing if the Fordney tariff bill in its
present form becomes a l*w. Just such unjust discrimination as
this is exactly what is creating so much unrest and dissatisfaction
with governmental affairs.
Representative S u m n e rs. What is your objection to this Fordney
tariff b ill! Does it not give enough protection?
Mr. Faw cett. W ill you allow me to delay answering that until we
get later on inthe discussion?
Representative S u m n e rs. Yes, sir.
Mr. F a w c e t t . Briefly summing up the situation, our industry in
the range States is bankrupt is forced to liquidate at this time, for it
is estimated that 80 per cent o f the range sneepmen have far greater
liabilities than assets, based on present-day market values.
To add to the burden we nave, including the 1921 clip, about
1,010,000,000 pounds o f wool now on hand in the United States, or
about 18 months’ supply.
The Tariff Commission in its recent report, which is now avail­
able, gave the cost o f running ewes on the range in the year 1919 as
$8.54, and on that basis the cost o f range wools was given as 45 cents
per pound, exclusive o f freight and marketing charges. The same
report places the cost o f running ewes on the range in 1920 as
$8.40, a reduction o f only 14 cents per head; therefore the cost of
producing the present clip o f wool would be little less than in 1919, u
most o f the expense o f producing the 1921 clip was incurred in
season o f 1920.
Below is listed values o f similar grades o f wool as o f June 1,1920,
and June 1,1921:
Jane 1,1920.'June 1,1021.
CtnU.
85-40
Im :




Cent*.
3S-37

74-78
65-66
5&-60
46-48
36-96

28-30
23-24
22-25
16-18
10-12

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191

These quotations are taken from sales o f Ohio and Iowa wools o f
same grade and shrinkage upon given dates made b j the Ohio Fleece
Wool Growers’ Association ana the National W ool Warehouse &
Storage Co.
These prices, I might say, are based on Boston market prices, or
the prices at which the grades are selling to the mill, and from those
prices o f 10 to 12 cents, or 16 to 18 cents, should be deducted the
cost o f marketing, which is about 6 cents at the present time, in
order to arrive at the amount that the grower is receiving.
The C h a ir m a n . Is th a t g reater th an it w as th ree to five y ea rs a g o ?
Mr. F a w c e t t . Yes, sir. I will come to that presently. The finan­
cial conditions existing in the West are causing* liquidation o f the
ewe stock. The ewe lambs instead o f being retained in the breeding
flock to replace the old ewes are being slaughtered to meet pressing
financial obligations. In this way the working capital o f the pro­
ducer is being destroyed, for the range is o f no use without ewes to
stock it. A manufacturing establishment may, if by reason o f no
orders for its manufactured articles, close down entirely and then
open at a future time with its capital stock intact, suffering only a
temporary loss, but the live-stock man can not shut down his plant.
The stock must be fed and cared for, and the expense goes on just
the same. He can not stop producing. The extent o f this liquida­
tion o f ewe lambs may be found by considering the receipts of sheep
and lambs at the principal markets the first six months o f the pres­
ent season, which number 1,397,844 greater than in the same period
of 1920. The situation is even more gravei than first consideration
of these figures would indicate—to which I believe you will agree—
for the liquidation in 1920 was 35 per cent greater than normal, and
statistics through a period of years show a decrease in number aver­
aging about one-half million head annually.
Representative S u m n e r s . And these lambs are a small per cent of
the"ordinary lamb crop?
Mr. F a w c e t t . Yes, sir.
Representative S u m n e r s . H o w does it compare at the present
time?
Mr. F a w c e t t . I have recently been in North Dakota, South Da­
kota, Idaho, Wyoming, and Montana, besides the fleece-growing
States, which are east o f that section. We found very, very few
bands o f yearling ewes. I could not give you the exact statistics, but
in a recent meeting o f woolgrowers in Idaho there was but one band
of ewes represented in that body o f growers under 5 years old. A t
5 years o f age on the range a ewe is getting pretty far along. O f
course they can go in the com belt and they are good for a year or
more by reason o f better feeding, but about one or more years and
their usefulness will be passed.
Representative L e n r o o t. Does or not the destruction o f the range,
tmder our present homestead stock range law, have something to
do with that?
Mr. F a w c e t t . In 1917; yes. Since 1917; no. The range has had
a tendency to increase rauier than decrease since 1917. In the 17
years preceding the war the number o f sheep on range decreased
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There is another phase o f this subject that should not be over­
looked. It seems to be a well-laid plan of nature for the range,
because of its adaptability for production o f growing stock, to fur­
nish feeding lambs and steers to consume a large portion of corn
and other grains raised in the corn belt. Iowa depends on the range
for approximately 60 to 65 per cent of her feeding lambs and abont
40 per cent of the feeding steers. It is a well established fact that in
order to maintain the fertility o f our corn-belt farms stock raising
and feeding is an absolute requirement. Thus the far reaching
effects o f this liquidation will be seen.
The sheep and wool industry of our country is swiftly following a
course which? if followed to its natural conclusion, will mean that
our people will be compelled to rely on foreign production in excess
of 400,000,000 pounds o f wool, and our entire supply of mutton annu­
ally, and the bill to foreign producers will be around $250,000,000
each year.
But we have no notion of sacrificing our industry, and we expect
from this commission recommendations that will greatly assist in
arresting the downward course now being pursued.
Senator C a p p e r . Do you not think the same condition exists with
reference to the cattle situation?
Mr. F a w c e t t . Yes; I think it does, but I am not so familiar with
the cattle situation.
Now, we come to remedial suggestions. In making these remedial
suggestions, and suggestions they are, I am reminded of the old adage
that “ It is easier to tell 20 what were good to be done than to be one
of the 20 to follow mine own teachings.” And these suggestions are
made after being in contact with the growers in the West and the
whole United States and are made with a view of furnishing you
with information that may be of value to you as a safe guide in your
deliberations.
We propose to begin right at home and reduce the cost o f produc­
tion so far as is within our power. This was not possible to any
extent in the season o f 1920, for cost of labor and provisions were not
reduced. This is possible now to some extent. Herders are now get­
ting around $60 per month and board, whereas one year ago they were
commanding close to $100 and board: The range conditions are
excellent, indicating a light feed bill this winter.
There are two conditions upon which the future of the industry
largely depends, over which we have absolutely no control, and they
are “ money rates ” and transportation rates. The present freight
rates on wool from Boise, Idaho, to Boston, and on sneep from tnat
point to Chicago market are as follows:
Wool in baps, minim um weight 2-1,000 pound*, from Boise to Boston.
1920

1917
$1.98
475.20

83L60

Senator C a p p e r . Is the rate still the same?
Mr. F a w c e t t . Yes, sir; generally speaking. There is a case being
tried in Salt Lake City now. They applied in June and the case is
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1917
Price per pound....................................................................................................................
Pounds required to pay for car.........................................................................................
Per cent of value for oost of transporting.......................................................................

SO 60
.
792
3.3

1920
SO 231
.
3,540
14.75
447

The price in 1917 was 60 cents and in 1920 was 23 J cents; and from
that will have to be deducted the transportation o f $831.60. It would
be about 35 per cent of the 1917 price—a little less than that.
Sheep, minimum weight 23,000 pounds, from Boise to Chicago.
1920
Freight rate per hundredweight.............
Oost of transportation of 1 car.................
Price per hundredweight....................
Pounds required to p a ; for 1 car............
Per cent of value of cost of transporting

11.37}
*316.25
16.87}
4,600

.20

Percentage increase of value carriers get over 1917,235.

Representative S u m n e r s . Have they made an application for
reduction o f rate because wool is about to be shipped through the
Panama Canal?
Mr. F a w c e t t . Yes, sir. Three of the transcontinental railways
have made application to the Interstate Commerce Commision for
privilege to reduce rate on wool in the grease in bales or in sacks
from Portland, Oreg., to Boston, which is now $1.66£ by water, to
the relatively low rate of $1.35 by rail, while the rates of interme­
diate points from Idaho and Nevada are as high as $3.05 to $3.75.
It would seem if increased business is so valuable to the rail­
roads as to justify a reduction in transcontinental rates on wool ship­
ments from $1.65 to $1.35 £er hundredweight while intermediate
point rates are as high as $3. (5, that in order to compete with water
transportation a reduction in freight all down the line will be in
order and will increase volume of business proportionately. Wool
from Boise, Idaho, may be shipped to Portland, Oreg., a distance of
400 miles, rebilled from that point to Boston by rail at less cost than
from Boise direct to Boston. Is this reasonable? Is it just?
It is very clear that while such fixed items of expense enter into
cost of marketing agricultural products, a prewar condition can
not be realized.
Senator L e n r o o t . Suppose that they do not get that business, and
it is transported by water, can thev carry goods from the interior
as cheaply as if they do get the business ?
Mr. F a w c e t t . I f they can make a profit on that-----Senator L e n r o o t . Well, they can not.
Mr. F a w c e t t . Well, what is the object of competing?
Senator L e n r o o t . Here is a business that has an overhead expense—
I am not speaking of this particular situation—and it can do a third
more business at practically no additional overhead expense.
Mr. F a w c e t t . Then they are not operating at a loss when they are
operating that way. My contention is that if they will reduce their
rates they will get so much more business that the return will be
greater.
91341— 22—V L3------13
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Senator L e n r o o t . That is always greater where it is not at the
peak. But in a time like this, is that true ?
Mr. F a w c e t t . It seems to me there is another viewpoint to that.
In order to transport this wool from Portland to Boston we have to
concentrate 300 ton cargoes; otherwise it goes to New York and is
rebilled to Boston. It seems to me that they are taking advantage
of us in this way: Wool from Boise, Idaho, may be shipped to Port­
land, Oreg., a distance of 400 miles, rebilled from that point to
Boston by rail at less cost than from Boise direct to Boston.
Senator L e n r o o t . Right there, on this excessive cost of transpor­
tation, which is our greatest problem, the owners of the railroads
feel that they are in as great distress as you are, do they not ?
Mr. F a w c e t t . I do not believe that our industry is overcapital­
ized.
Senator L e n r o o t . But they are not getting a return on that, are
they—on their value?
Mr. F a w c e t t . Yes, but it is not admitted that the valuation is accu­
rate.
Senator L e n r o o t . No, but cut the valuation in two.
Mr. F a w c e t t . I believe you will find the Oregon Short Line which
transports this wool has shown tremendous profits.
Senator L e n r o o t . Some of them d id .
Mr. F a w c e t t . A s well as the Union Pacific.
Senator L e n r o o t . I am speaking o f the railroad situation gen­
erally.
Mr. F a w c e t t . Yes; but is it fair to make the Oregon Short Line
charge excessive rates for our wool in order to make up the earnings
of the New Haven?
Senator L e n r o o t . Absolutely not. But I understood you were
speaking generally of transportation rates.
Mr. I a w c e t t . In that respect I am.
Senator L e n r o o t . Well, then, I will get back to the other question,
that the railroad is entitled to such rates as will pay operating ex­
penses at least.
Mr. F a w c e t t . Yes. We believe in a “ live and lei live” policy.
Senator L e n r o o t . And until recently they have been operating at
a deficit, have thev not?
Mr. F a w c e t t . Why?
Senator L e n r o o t . I do not know, but I am asking about the fact.
Mr. F a w c e t t . Yes.
Senator L e n r o o t . N o w , I am going to ask you why?
Mr. F a w c e t t . It might not be well to express an opinion, but it
does seem to me it is because of an overcapitalization.
Senator L e n r o o t . That has nothing to do with it when they are
operating at a deficit.
Mr. F a w c e t t . It has to do with the capitalization.
Senator L e n r o o t . When they are not earning enough to p a y an y
dividends? They are operating at a deficit?
Mr. F a w c e t t . So are we. There was a time we were all operating
at a profit. Let us return to it.
Senator C a p p e r . I read a statement in the Post this morning that
the June reports show that the earnings were 3 per cent on the com­
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Senator L e n r o o t . Yes, sir. That is 3 per cent on $19,000,000,000.
That would be about 6 per cent on half of that. We are all for a
very drastic reduction in the rates. Is it fair for us to ask the rail­
roads to conduct their business at a loss I
Mr. F a w c e t t . No, sir. But thev were able to take care of that
previous to the war on normal conditions, were they not ®
Senator L e n r o o t . Certainly.
Mr. F a w c e t t . Well, would they not be able to take care of it again
if we could restore normal conditions? That is the theory I am
getting at.
Senator L e n r o o t . Do you advocate cutting of railroad wages to
prewar conditions, because that is the largest item o f operating
expense?
Mr. F a w c e t t . It seems to me if we are to revert to prewar condi­
tions it is nothing more than proper and right that labor should re­
vert to prewar conditions.
•
Senator L e n r o o t . In other words, make the cut all along the line?
Mr. F a w c e t t . Yes, sir.
.
Senator L e n r o o t . But you must admit that we can not consider
reduction of rates without considering how expenses are going to be
reduced.
Mr. F a w ’ c e t t . I believe labor has taken one cut.
Senator L e n r o o t . Yes; but it is still 1 00 per cent over prewar
prices.
Mr. F a w c e t t . Yes. However, our sheep herders are down to pre­
war prices. Let them do the same and we’ll all be on an equal basis.
In the purchase of practically every article of food or wearing ap­
parel the toll of excessive transportation is reflected in the cost
thereof.
Live-stock commission charges for selling on the market is an­
other item o£ expense that has been increased about 50 per cent and
still continues to exact far too great a portion of the consumer’s
dollar. These with terminal, yardage, inspection, and numerous
other costs are fixed, and the producer has absolutely no voice in the
matter or power to reduce such costs.
The reduction in interest rates and adequate financing is required
if this industry is to again be solvent. The Federal reserve system has
failed in a large degree to afford the needed support to agriculture
in an emergency situation. The 90-day clause in the first place makes
the system unworkable in the case of live stock. Even with the re­
discount privilege for a similar period, which is optional with member
banks, the time is insufficient to render substantial aid to live-stock
loans. The Federal reserve system has, in the opinion of the stock­
men, operated very much as ordinary banks; urging loans when all
were loaning, calling loans when all were doing the same thing, and
in a time of financial stringency favoring short-time loans where
turnovers were rapid. An urgent appeal was made by wool men in
June, 1920, for assistance from the Federal reserve system in financ­
ing loans upon wool secured by licensed warehouse receipts. They
gave us a ruling that receipts would be acceptable collateral for re­
discounting through u^ual channels for a period of 90 days, with
privilege of rediscounting for a similar period and that such loans
would Be nonaccumulative. However, such ruling was subject to the




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approval of the district governors, and we find that less than 10 per
cent of the warehouse receipts ever found their way to the Federal
reserve system.
We do not mean to infer that the failure of the Federal reserve
system to furnish live-stock men needed assistance in a period of
financial crisis is due entirely to the indisposition of those in charge.
The condition is set forth and explained very clearly by a letter just
received from a banker in the heart of a range section. With your
permission, I will read a portion of this letter pertaining thereto.
This relates to securing loans through the $50,000,000 live-stock
finance corporation pool just organized in Chicago and New York,
but inasmuch as loans secured through this medium must conform to
the rules and regulations of the Federal reserve system, the same
condition applies to both.
So far as this section is concerned, I do not see that it will afford much relief,
as you will note that all roans must conform fully to the requirements of the
Federal reserve banks. Take ourselves—as yon know the legal amount that we
can advance any one firm or Individual !s 10 per cent of our capital and surplus,
or $6,500; the industry needs an agency that will finance lines larger than the
ordinary country bank can handle. This business has been taken on by the
live-stock lonn companies, but since they are out of the market it seems to m
e
that some other workable agency should be devised. Evidently, the stockgrowers' finance corporation does not fill the bill, because it requires the in­
dorsement of a bank, and banks, of course, can not indorse an illegal loan. If we
make these loans as agents for the cattle loan company, the industry is charged
with the extra tariff that the lonn company requires.
I will be glad to learn how this is working out. The plan and organization
appear to be designed to relieve the pressure on the big outfits and leave the
small rancher w th a one-liand outfit to sweat out his problems between the
local hank and some other agency that Is indnoed to carry his loud. From
the standpoint of the Industry as a whole, it seems to me that the end of the
business really needing the help is such as I have In mind—men who actually
know the practical side of product'on and will be a cred t to the industry 25
years hence if they can he permitted to weather this storm. There are thou­
sands of these nren in the West who control water and grass and have the
nb lity. but whose herds are in Jeopnrdy on account of tile money pressure.
These are the people to look to for production, and if there is any assistance
to be meted out it ought to be made available to them.

There appears to be a missing link between the western live-stock
grower doing business with his country banker with small capitali­
zation and the Federal reserve system. As in the case just cited,
the rule of the Federal reserve system would limit the loan to any
one individual to $6,500, and a great number of customers of this
bank run in the thousands of head of sheep. Therefore, if they are
to secure substantial loans, they are compelled to go to the live­
stock loan companies or the banks of the larger cities, and whenever
this is done, the interest and commission is so excessive as to seriously
impair their chance for moving the tremendous financial burden
that now is threatening their very existence.
If the live-stock grower is to secure from the Federal reserve
system the financial assistance that is necessary for the successful
operation o f his business, and that the Federal reserve s y s t e m in­
tends he shall have, there must be some intermediary organiza­
tion through which these loans may be secured, and the time of the
loan, if relief is to be given to the live-stock man, must be increased
to 25 to 30 months.
As was explained by this banker, the system as it now works is
designed to relieve the pressure on the big outfits and the big banks,



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and allow in g the small banks and the smaller outfits to work out
their own salvation.
There is something wrong with the system. It would appear en­
tirely advisable for at least one member of the Federal Reserve
Board to be a representative of agriculture, one with sufficient ex­
perience and close relation with the agricultural and stock industry,
to pass intelligently on loans and means of financing live-stock
"rowers.
The C h a i r m a n . Is that limit of loan a rule of the Federal reserve
system or is that a law ?
Mr. F a w c e t t . The law.
The C h a i r m a n . So that if there is any blame there it is on us
and not on the Federal reserve sj'stem ?
Mr. F a w c e t t . Yes, sir.
Senator L e n r o o t . I would like to ask if it were not a law, would
not the tendency be for the big fellow to get all the accommodation
and the little fellow none at all ?
Mr. F a w c e t t . I do not see how you figure it. It seems to me he
would be in position to make a loan to the little fellow as well as
the big one.
Senator L e n r o o t . But, is not the tendency for the big man to get
more accommodation?
Mr. F a w c e t t . Yes. sir.
Senator L e n r o o t . It has to be divided among the customers ?
Mr. F a w c e t t . Yes. But there is a difference in the interpretation
of “ little ” in this case. A bank would call a man who owned 3,000
sheep a small operator. What would he benefit with $5,600 ?
Senator L e n r o o t . Here is a small bank; isn’t it desirable for that
small bank to extend loans to as many people in that section' as
possible ?
Mr. F a w c e t t . Yes. sir.
Senator L e n r o o t . Without a limit, the bank could lend it all to
one.
Mr. F a w c e t t . Generally they like to accommodate all of their
customers.
The C h a i r m a n . H o w do they arrive at the limit to begin with?
Do they limit it on the basis of the capital they actually have? I
would think that the banks are not big enough.
Mr. F a w c e t t . There it is. There is a missing link between the
local bank with a limitation of 10 per cent of the capital—and this
bank is as large as a great many of them—and the Federal reserve.
The C h a i r m a n . That leads us directly to the proposition of the
branch bank, and nothing else, where you can get the assets of the
big bank with the little bank as an agency.
Mr. F aw ’ c e t t . But you have to deal direct over the head of the
little bank.
The C h a i r m a n . But if you have a branch bank-----Mr. F a w c e t t . This bank was capitalized at $50,000 and surplus of
$15,000.
The C h a i r m a n . I f you were operating under a branch bank, that
would not apply.
Representative S u m n e r s . The chairman means a branch bank is
part of a system with a million-dollar capitalization, we will say,




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that simply the branch that runs out into that community the limit
would not apply.
Mr. F a w c e t t . May I ask what per cent of the banks are in the
system ?
The C h a i r m a n . About 11,000 out of 30,000 are in the reserve
system.
Senator C a p p e r . D o you not think that, generally speaking, the
banks, whether they are big or little, have loaned every dollar each
one had to loan ?
Mr. F a w c e t t . Yes; although we find the time deposits in certain
sections are increasing. It seems that we need a little confidence
instilled in the American people in order that they iar loose from
those time deposits. But, generally speaking, the banks in the West
are loaned to the limit.
Senator C a p p e r . I do not think the banks are subject to any criti­
cism. They have gone to the limit. Our banks in Kansas have
loaned every dollar that they are allowed to loan.
Mr. F a w c e t t . But you will see that this makes necessary the use
of live stock loan companies. And you know just as well as I do
that whenever you are forced by your local bank to go through
other channels and to live-sto«k companies, and through them to
the Federal reserve system, the interest and commission are exces­
sive.
Representative S u m n e r s . Your position is that in case of an emer­
gency such as we have now, when your little banks are extending,
the man behind the bank who has good collateral to put up, and
manv somewhere else who would be glad to take the investment, he
woyld have to recognize a dependable avenue to make the loan.
He finds himself unable to make the loan because he has to go
through this exhaustive channel. I think that is one of the defects.
In going through the financial situation, whatever we have— we have
got to find a route around these little banks.
Mr. F a w c e t t . I agree with you, and therefore it seems to me
there must be some intermediary organization through which these
loans can be secured.
Representative S u m n e r s . I want to ask you about the collateral
you put up. I f you have these sheep already heavily mortgaged,
in many cases beyond their possible value, where can you find any­
body who has money to loan who would loan on such collateral ?
Mr. F a w c e t t . It would not be safe banking to do so.
Representative S u m n e r s . Are these people seeking financial relief
in your communitv able to tender unmortgaged security?
Sir. F a w c e t t , in many instances they have mortgaged to the
limit of safety, but in some cases they have succeeded in freeing
the wool from encumbrance.
Representative S u m n e r s . D o you have difficulty in getting money
on wool ?
Mr. F a w c e t t . Yes, sir; and have had for a year.
Representative S u m n e r s . Can you not make arrangements with
your bigger banks in the cities by which they could take a mortgage
"on this wool and redis ount with the Federal reserve bank?
Mr. F a w c e t t . The larger banks generally prefer to loan their
money on quick turnovers. For instance, there are plenty of bonds,




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as Swift and Armour, on which there is a quick turnover. This
wool loan is for a long while, and it is not looked upon with par­
ticular favor when it has been held by a grower selling agency, for
the banker knows that the selling agency is not going to make any
money on it, if the wool is held by a speculator; as a rule a specu­
lator can get all the money he wants, because the banker is satisfied
that a reasonable amount and sometimes an excessive amount of
profit is being made from it. Therefore, we find a large amount of
banks prefer to finance the speculator rather than the grower.
Representative S u m n e r s . It would seem they financed the wool to
be held at these places where the profits were.
Mr. F a w c e t t . It would look so. From 1920 to the present time we
have experienced a great deal of difficulty. What few have reached
the Federal reserve have been asked for individual insurance poli­
cies and various requests that have made it impracticable, and such
practice is killing the warehouse receipt proposition.
Representative S u m n e r s . What bank serves vour territory?
Mr. F a w c e t t . Well, we do business in practically all the Western
States and we deal with practically all banks in the West.
Representative S u m n e r s . I say what Federal reserve bank?
Mr. F a w c e t t . We do business in practically all the Federal re­
serve districts west of the Mississippi River.
Representative S u m n e r s . Is there any difference in policy among
these reserve districts?
Mr. F a w c e t t . There has been considerable difference. However,
at the present time I think I am in position to say that the attitude
is more uniform and also more lenient.
Representative S u m n e r s . More favorable now ?
Mr. F a w c e t t . I believe I am in position to say that.
Representative S u m n e r s . When did that condition first manifest
itself?
Mr. F a w c e t t . I should say, without giving the exact day or date,
the 1921 wools; warehouse receipts covering 1921 wools—we are just
fairly under way with those.
Representative S u m n e r s . What relationship does that change of
policy have to prices?
Mr. F a w c e t t . I can not connect the two.
Representative S u m n e r s . Are they still on the decline—I mean ex­
change quotations?
Mr. F a w c e t t . I would say that last week’s sales were somewhat on
the decline.
Senator L e n r o o t . H o w do you account for that in view of the fact
that the tariff has almost stopped importation ?
Mr. F a w c e t t . Senator, the effect of the tariff on the domestic wool
industry is reduced to the vanishing point. In other words, it is of
no avail when we have 18 months of wool on hand.
Senator L e n r o o t . I do not see how that could be, because from a
mere speculative standpoint if we have a high tariff on wool and we
have a surplus for 18 months, we know that from that time on we
only produce half of what we need. I can not see where that has
resulted in a declining market.
Mr. F a w c e t t . The reason given by those best acquainted with the
situation is that the passing by the House of the Fordney tariff bill




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in its present form was the cause of a drop in the price of wool of
possibly 2 cents a pound.
Representative S u m n e r s. How did that happen? Do you mean on
account of the reduction of the higher rate in the emergency bill ?
Mr. F a w c e t t . Because it affords practically no protection to the
domestic woolgrower.
Representative S u m n e r s. What is the ad valorem?
Mr. F a w c e t t . The provision is 25 cents per clean pound, which
would be approximately the equivalent of the old Payne-Aldrich
11 cents per grease pound. And the manufacturers’ compensatory
duty is levied on that 25 cents per clean pound basis. After that is
provided there is a provision limiting any duty to 25 per cent ad
valorem, which reduces the protection to approximately 5 or 6 cents
on the medium wool which constitutes auout 65 per cent of our
domestic production.
Representative S u m n e r s. In the ultimate working out of the tariff
bill that is now pending do you have a 35 per cent ad valorem pro­
tection ?
Mr. F a w c e t t . Thirty-five per cent ad valorem maximum, which
takes away two-thirds of the protection provided in the 25 cents per
clean pound duty.
Representative S u m n e r s. If the 25 cents per clean pound duty
obtains then what would be its equivalent in ad valorem tax ?
Mr. F a w c e t t . It is according to the grade of wool. Fifty per
cent shrinkage wool 25 cents per clean pound would be 12$ cents per
grease pound, and that grade of wool is probably worth 18 cents per
pound to-day.
Representative S u m n e r s. Under ordinary prewar conditions, at
what price can the American wool-producing industry thrive? At
what price per pound ?
Mr. F a w c e t t . I did not get that.
Representative S u m n e r s. Under prewar conditions at what price
per pound for wool can the American wool industry proceed at a
reasonable profit ?
Mr. F a w c e t t . Be produced at a reasonable profit ?
Representative S u m n e r s. Yes; under prewar conditions. Assume
that we are returning to the general level of prewar conditions and
assuming that we reach that level of prewar conditions, then what
price would the American wool producer have to receive for his
wool in order to stay in the business at a reasonable profit?
Mr. F a w c e t t . Our cost of production is not complete for 1920.
To the best of our knowledge at the present time-----Representative S u m n e r s. Normal conditions.
Mr. F a w c e t t . We are estimating that the present cost of pro­
duction is somewhat reduced from 1920 costs.
Representative S u m n e r s. Well, I do not want that. I am referring
to the pre-European war condition.
Mr. F a w c e t t . I grant you that is the question I am trying to
answer.
Representative S u m n e r s. It is normal conditions I am speaking of.
Mr. F a w c e t t . Our cost is going to be reduced (the running cost)
about one-fourth of 1919, which will indicate that we must have
26 cents per pound net to the grower, to make a reasonable profit.




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Senator L e n r o o t . Assuming that the conditions were now on the
level that they were before the European war?
Mr. F a w c e t t . Yes. sir; 25 to 26 cents per pound.
Senator L e n r o o t . What were you getting back there ?
Mr. F a w c e t t . In 1910 we got 25 cents.
Senator L e n r o o t . Even then do you think you were producing a
lot of profit ?
Mr. F a w c e t t . That depends on the mutton, or the lamb. The
cost divided by the Tariff Commission is 48 cents and 52 cents,
roughly speaking.
Senator L e n r o o t . What do you think the cost will be for this year ?
Mr. F a w c e t t . Next year’s clip ?
Senator L e n r o o t . Yes.
Mr. F a w c e t t . Of course you understand this is an estimate. I
would estimate that the 1922 clip will dost from 26 to 27 cents.
Representative S u m n e r s. Then a reasonable margin of profit—
you would have to get a reasonable margin of profit?
Mr. F a w c e t t . The cost of marketing is 6 cents added to that.
Senator L e n r o o t . To bring it to Boston?
Mr. F a w c e t t . Yes, sir.
Senator L e n r o o t . Without any profit to the grower?
Mr. F a w c e t t . Yes, sir.
Representative S u m n e r s. H o w much would you have to add to the
figures there in order to give the grower a reasonable profit ?
Mr. F a w c e t t . About 40 cents per pound on the Boston market.
Senator L e n r o o t . That is in the grease, is it ?
Mr. F a w c e t t . In the grease; yes, sir.
Snator L e n r o o t . And the ordinary rate is about between 8 and 9
cents in the grease, in the specific rates ?
Mr. F a w c e t t . In the specifics on the 50 per cent shrinkage 12£
cents.
Senator L e n r o o t . Is that what you figure the shrinkage now—50
percent?
Mr. F a w c e t t . We figure the shrinkage to-day less than we did at
the time of the Payne-Aldrich bill. That was 66{j by reason of the
wool being imported in the natural state. Now, by reason of that
joker in the Payne-Aldrich bill permitting the skirting of wool the
wool has been imported in a much lighter state, and the fact of the
matter is that the wool imported now averages around 48 shrinkage
instead o f 66§.
Senator L e n r o o t . N o w , what is the price of equivalent wool im­
ported now, not speaking of carpet wool, but equivalent wool, which
you say will cost vou 33 cents ?
Mr. F a w c e t t . Recently about half a million pounds of full blood
was laid down at Boston at 22 cents. The 9,000.000 pounds that was
imported from May 9 to July 2, according to the Bureau of Markets,
averaged a trifle over 16 cents per pound at Boston. Now, for the
domestic grower to compete with that the cost of marketing, 6 cents,
should be deducted, which would mean that the western grower to
compete with that would receive 10 cents net at the ranch.
Senator L e n r o o t . N o w , you say there has been a decline in pro­
duction. I quite agree with vou about this joker in the Fordney bill,
but we must admit when the fordney emergency tariff went into effect




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we had free wool; and even assuming that we only had a protective
tariff of 7 cents instead of 12$ cents on the grease wool, I do not see
why there should be a decline as against 7 cents protection on the
previous bill.
Mr. F a w c e t t . I believe I can explain that. The rate of exchange
allows the foreign producer to produce from 25 to 35 per cent advan­
tage over the American grower. The British issue price was 31 cents
a pound, which reflected a profit to the grower. Can we compete
with them when it costs them $2.50 to run a ewe a year, and allow
them a premium as well, and will cost us twice that amount under
normal conditions?
Senator L e n r o o t . That same condition prevailed at the time the
emergency tariff bill went into effect. You were meeting this flood
of foreign competition then ?
Mr. F a w c e t t . During the period of the war and subsequent----Senator L e n r o o t ( interposing). No; I am speaking of imme­
diately before the emergency tariff went into effect.
Mr. F a w c e t t . This decline we speak o f now has existed since
June, 1920.
Senator L e n r o o t . I know, but you say it is declining still. I am
trying to get at why it is still further declining.
Mr. F a w c e t t . I can only answer that as it was answered before.
This decline has only been 2£ cents per pound, possibly, and that was
caused perhaps by the prospect of getting access to more imported
wool at little or no extra cost. To establish my point, when the
emergency tariff was threatened to be effective it seemed to have a
strengthening effect on the wool market.
Senator L e n r o o t . Was there an advance?
Mr. F a w c e t t . A little more movement.
Senator L e n r o o t . Where do you think the wool market would be
to-day except for the emergency tariff ?
Mr. F a w c e t t . I can not answer that, and I hate to think, because
these South American wools can be imported and laid down in Boston
to-day for 15 and 16 cents per pound.
Representative S u m n e r s . Let me see just a minute. You say you
would have to get 40 cents in Boston to get the cost of production,
cost of transportation, plus a reasonable profit; is that right ?
Mr. F a w c e t t . Approximately so.
Eepresentative S u m n e r s. Thirty-five to forty cents.
Mr. F a w c e t t . Y o u understand that these figures are an estimate.
We have the 45-cent cost per pound approximated by the Tariff Com­
mission, and we have 1920 cost of running ewes within 14 cents of
knowing for 1919, so that we can estimate very closely the cost of the
1920 clip, which is now being marketed. But with respect to the 1921
clip it is speculative.
Representative S u m n e r s. Do you regard this cheap price from
South America as a temporary price? Those people under an im­
proved world condition probably would put that price up.
Mr. F a w c e t t . No. sir: we regard that as a permanent price, by
reason of their cheap land and cheap labor.
Representative S u m n e r s. Then, if your figures are correct, it seems
that you are engaged in an industry that must have practically a
100 per cent protection.




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Senator L e n r o o t . One hundred and fifty per cent.
Representative S u m n e r s. At least 150 per cent. I am putting it
conservatively. You must have more than 100 per cent protection
in order to be able to go along. Even if the South American wool
should go to 20 cents a pound, then.you would have to have 100 per
cent protection, would you not?
Mr. F a w c e t t . I f the manufacturers have to have 140 per cent-----Representative S u m n e r s. I am not arguing the question, I am just
trying to see what shape the industry is in, what the relationship of
the industry is to the general situation.
Mr. F a w c e t t . We expect to decrease our cost of production. We
expect the foreign cost of production to increase through a period of
time.
Representative S u m n e r s. I asked you that question a moment ago,
and you said that you did not expect it to increase.
Mr. F a w c e t t . We do not expect it to increase to our equivalent.
Representative S u m n e r s . I did not ask you that.
Senator L e n r o o t . He asked you as to the relative increase.
Mr. F a w c e t t . Probably I answered that not as I intended to
answer it. We expect the Australian wool to increase somewhat,
because o f their lands being taken up for grain farming, nnd some­
what in New Zealand, and to a degree in South America, but we ex­
pect that to be very gradual.
Representative S u m n e r s . Yes. Now, then, what do you figure to
be the future of the sheep-growing industry if, for instance, the
Congress should not grant you, say, more than 50 per cent protection
instead o f 100 per cent ?
Mr. F a w c e t t . We expect to go as far as we can, and we will be
forced out of business when our assets fail.
Representative S u m n e r s. Now, I ask this question, and I do not
ask it in any spirit of cruelty at all.
Mr. F a w c e t t . I appreciate that.
Representative S u m n e r s. I f you are engaged in an industry that
can not operate with even a 50 per cent protection, does not that sug­
gest the possibility that that industry, so far as this country is con­
cerned, is one not well placed? I am not making a statement at all
now, I am just trying to get your view about it.
Mr. F a w c e t t . I do not agree with you. Congressman.
Representative S u m n e r s. I do not make the statement. I ask the
question of you. for your judgment.
Mr. F a w c e t t . The articles that we purchase should, if the manu­
facturers enjoy equal protection with tne producer of raw materials,
decrease accordingly.
Representative S u m n e r s. Suppose the manufacturer only enjoys
a protection of, say} 35 per cent ad valorem on his goods?
Mr. F a w c e t t , we will be in position to operate cheaper, because
the articles we buy will be obtainable cheaper.
Representative S u m n e r s. I do not want to go too far into that;
I simply want to inquire into the economic stability of the woolgrowing business of this country.
Mr. F a w c e t t . It is not stable, and there is no degree of stability
under the present conditions.




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Representative S u m n ebs . If you could reduce your interest rate,
your hazards in marketing, and things of that sort, then I assume
you would be able to produce cheaper?
Mr. F a w c e t t . Yes; I presume so.
Representative S u m ners . What does the average sheep man have
to pay on the money that he borrows, including brokerage and
commission and trimmings generally?
Mr. F a w c e t t . In the West I would say 9 to 10 per cent; in many
cases 12. Am I right, Judge Cowan?
Mr. C o w a n . Nine per cent besides commissions. The man in
charge of a loan company out there testified before the commission
that it was 9 per cent, and then the smaller loans 10 per cent.
Mr. F a w c e t t . Yes, around 10 per cent in the sections of the West
that I have been in lately. The prevailing prices are around 10
per cent, and in many sections a bonus.
Senator L e n b o o t. Sheep will always be raised to a certain extent
for the mutton value, with wool as a by-product anyway, will they
not?
■M F a w c e t t . To a degree, in the corn-belt States, where they
r.
are used as scavengers. It is estimated by the Department of Agri­
culture, and this estimate was carried on when the appeal went
forth to increasa both wool and mutton—it was carefully estimated
that the number of sheep produced in the corn-belt States could be
increased 150 per cent without misplacing other live stock, if there
was any degree of stability in the industry. It has been a hit-andmiss proposition. I mention that simply to illustrate our possibilities
if we had a stable market and were assured of a reasonable profit in
pursuing the industry.
Representative Su m n eb s. Is it more profitable to raise a mutton
breed of sheep on the range than the wool breed, under ordinary
conditions?
Mr. F a w c e t t . That would vary so, Mr. Congressman, with
conditions. We have certain range conditions that are particu­
larly adapted to the fine wool sheep, and by reason of the
brush or dry weather, and the necessity of herding in large
bunches no other breed except the fine wool breeds are
practical. Again, we have in the irrigated sections of Idaho
luxuriant feed, and there we find it practical to raise the mutton
breeds as they will not herd well in large flocks, and they must have
more abundant feeds than the fine wool breeds. The same will
apply in the corn-belt States. The popular breeds there seem to be
the breeds more particularly adapted to mutton.
Now, Mr. Chairman, I have four other points that I would like
to present, and I will make this as brief as possible. Shall I delay
until to-morrow, or go ahead now %
The C h a ib m a n . I think we will have to finish it to-night. I do
not believe we will be able to get the commission together to-morrow
morning. I have not sent out any notice, and it would be very diffi­
cult.
Mr. F a w c e t t . The fourth suggestion—and this is the one that the
grower himself may enter into—is a better system of marketing our
agricultural commodities.
It is a well-known fact that all of the efforts of agricultural
colleges and the various extension organizations have teen along




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205

the line of increasing production and economy of production, but
nothing has been done in regard to the economical distribution of
agricultural products until late years. Perhaps the methods of
distributing wool are more inadequate than the distribution of any
other agricultural commodity. The sole market and method of
distribution of domestic wool clip of the United States has been
through 500 speculators. Wool to be properly marketed must be
graded in broad commercial grades as recognized by the wool trade
and marketed to the mill consumption through a period of time.
Wool is sheared from the sheep in a very few weeks but consumed
by the mills throughout the whole year. During this period of
preparation for marketing the commodity must be financed. Gen­
erally speaking, it has been financed by speculators who have taken
in many cases excessive profits in so doing.
The American Farm Bureau Federation has done considerable
work along the line of more economical distribution of wool to mill
consumption. This is done through growers selling agencies operat­
ing at concentration points now numbering eight, which handled
approximately 50,000,000 pounds of the 1920 clip. The principle
upon which this method of marketing is established is based upon
commodity financing secured by warehouse receipts and prepared
for market by efficient selling agencies. The wool is held by the
grower and marketed direct to the consumer with one fixed commis­
sion which is made at approximate cost of handling. In this man­
ner the grower is assured of the full market value for his commodity
and is also assured of a larger portion of the consumer’s dollar
without increasing the retail price of the finished commodity to the
consumer himself. The plan is not based on hoarding a needed com­
modity, neither is it based on controlling the commodity for the pur­
pose of regulating the price, but for the purpose of shortening the
route from the producer to the consumer. This is certainly a justifi­
able movement.
In order to successfully accomplish this the commodity must neces­
sarily be financed. I f financed by the grower, the financial burden
is scattered over a broad area, as in the case of the firm with which
I am connected as assistant general manager. We have at the pres­
ent time approximately 35,000 consignments of wool in our cars, and
practically all are financed by the growers or their local or corre‘ spondent banks.
There seems to be a disposition on the part of the large bankers
and large banking interests to favor commodities being financed in
the hands of speculators rather, than in the hands of growers. Is
there any logical reason why the grower should be denied the privi­
lege of financing his own product while it is passing through the
marketing stage! It seems to me that this is a saving that will be
not only advantageous to the producer but to the consumer. There­
fore, in our efforts to work out a more economical system of market­
ing, we need the support of the Federal reserve system in commodity
financing upon warehouse receipts as collateral. This is one of the
suggestions, that there should be a more favorable attitude upon the
part of the Government and the Federal reserve system upon this
method of financing, and that Government licensed warehouse re­




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AGRICULTURAL INQUIEY.

ceipts covering unicumbered agricultural commodities should be
recognized as acceptable collateral for rediscounting.
The fifth suggestion we would make is a national law permitting
cooperative marketing of agricultural products.
In a number of States we have a well-organized system of cooper­
ative live stock shipping associations, which have given very satis­
factory results in the way of efficient transportation of live stock to
market. In some of the exchanges we have cooperative commission
concerns; although many of the live-stock exchanges refuse mem­
bership to such organizations.
In this we are not asking for any power to control or regulate
price of our commodity, neither are we asking for special favors,
but we are asking for a Federal cooperative marketing law; we are
asking for the privilege of marketing our commodity in the most
economical way possible, thereby getting the producer and consumer
closer together.
The sixth suggestion, a just tariff and equal protection for the
woolgrower against foreign competition, that is accorded the manu­
facturer of our commodity. We have had in the past various tariffs covering the wood schedule,
but have never had protection to a significant degree.
In the Payne-Aldrich bill,-which was in force previous to 1913
the tariff on wool was placed at 11 cents per grease pound and the
compensatory duty to the manufacturer of our comomdity was built
upon such a tariff. A provision was placed admitting foreign wools
in a skilled condition, and still the duty of 11 cents per grease pound
was applicable.
The result of this to the domestic woolgrower was to decrease the
protection from 11 cents per grease pound duty to approximately
6 cents to 7 cents, for by the skirting process* the clean content
was increased from 33J per cent to' as high as 65 per cent; yet the
manufacturer of our commodity enjoyed a compensatory duty which
was fixed upon the full 11 cents per grease pound duty, and in addi­
tion thereto a substantial ad valorem duty as protection.
In the Underwood tariff bill that went into effect March 1, 1914,
and was effective until May 27, 1921, wool was placed on the free
list, while the manufacturers of wool were protected by a 35 per
cent ad valorem duty.
We maintain that this is an unjust discrimination against the pro­
ducer, as previously stated.
And now let us look to the Fordney tariff bill that is now before
Congress ns to its effect upon the domestic wool producer.
From May 8 to July 2, according to the Bureau of Markets,
9,277,614 pounds of wool were imported into this country at a cost
to the importer at port of entry of a fraction over 16 cents per grease
pound. The provision in the Fordney tariff bill in its present form
provides for 25 cents per grease-pound duty, which if applied to the
wool in question would mean on the basis of 50 per cent shrinkage,
a duty of 12£ cents per grease pound. However, the proviso in its
present form limits the protection to 35 per cent ad valorem duty,
which, if this wool is of 50 per cent shrinkage, will decrease the duty
to 4.6 cents per pound, instead of 12$ cents per pound, which appears
on first reading.




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207

The C h a ir m a n . I s this carpet wool a heavy shrinking wool?
Mr. F a w c e t t . The carpet wool in itself is not a heavy shrinking
wool. It is a rather light shrinking wool. Of course, we are not
able to tell exact grades of those 9,000,000 pounds. But 50 per cent
is a very fair estimate of the shrinkage of the wool, and also 16
cents is a very fair estimate o f the cost of imported wools at Boston.
But what of the compensatory duty to the manufacturer? The
rate provided in section 1108 upon woven fabrics is 30 cents per
pound of wool contained therein. Ir applied to this wool it would
lie the equivalent of an ad valorem duty of approximately 100 per
cent, while the grower’s protection is reduced to the vanishing point
by the 35 per cent ad valorem clause. I might add that he has a pro­
tection duty in addition to the compensatory duty of 30 cents.
Representative S u m n e r s. They give the protection duty to the
manufacturer and then give him a compensatory duty and multiply
it three or four times.
Mr. F a w c e t t . The tariff bill in its present form is an insult to the
intelligence of the domestic wool grower, a mirage on the horizon
of the sheep range, and I, for one, refuse to believe that such was
the intention of the Ways and Means Committee. It is stated that
the application of the wool tariff is the most difficult of all tariffs
to understand, and we prefer to think that it was an oversight rather
than intentional.
The C h a ir m a n . It took them an awful long time to “ oversight ”
it, if that is what they were doing.
Mr. F a w c e t t . The cost of running a ewe and her lamb until mar­
keting age in Australia is approximately $2.50. The transporta­
tion from Australia to Boston is about the equivalent to transporta­
tion costs from Montana to Boston. It is very plain to be seen that
we must have adequate protection equaling the difference in cost of
production between the foreign and domestic wools if our standards
of living and the value of our lands are to be maintained. I f no
protection is afforded we must lower our plane of living to that
of foreign competitors, and the value of our lands must sink to
that of foreign lands. And what is more dangerous, the standard of
thinking will also be lowered in proportion.
Suggestion sixth is for a just tariff.
We are not asking a protection in the form of a tariff that will
work a hardship upon the consuming public. It is our contention
that a great deal of misinformation is abroad as to the relative cost
of raw material compared with the finished article, as pertaining
to wool: and its manufactures.
An extensive investigation made by the Taft Tariff Commission
in 1910 in regard to the cost of the raw material, the finished prod­
uct, and each step in the manufacture thereof, and inasmuch as no
similar investigations have been carried on since that date, and the
present value of wool in the grease is somewhat less than the market
at the time of the investigation, the findings are very pertinent to
the present situation. A copy of this report tracing the raw mate­
rial to the finished product m the form of a choice worsted suit of
clothes is submitted herewith.




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The case cited is that of a suit made from fancy worsted cloth sell­
ing in 1910 at $15.39 net, wholesale, and retailed at $25. The cost
of each major process and its relation to the final retail figure was as
follows:
Percent
Amount. of total.
Wool...............................................................................................................................................

<2.46
1.3S
1.14
.93
.28
2.77
3.74

12
.1

1.91
1.07
7.69

law
.»
4.00

10
.0
1
2

.M
16.90
5.30
8.30
450
£.40

The C h a ir m a n . N o w , right on that point. I understand that,
after the Ways and Means Committee had determined what sort
of a duty it was going to put on raw wool, the Tariff Commis­
sion worked out the differentials in the Fordney tariff bill.
Mr. F a w c e t t . I understand as much. I fail to reconcile that with
the report recommending the tariff levied on the clean content duty,
and at the raate of 33 cents per clean pound. I fail to reconcile tne
two. But I agree with you, Mr. Chairman. I was so informed.
Briefly speaking, the wool entering into this suit of clothes retail­
ing at $25, wholesaling at $15.39 was 9 pounds, valued at 25 cents per
pound, or $2.45 for tne wool entering into this choice worsteid suit
The cost of every item is contained in this table. The grower received
10.64 per cent for the wool entering into that suit of clothes. The
resent price of that same grade of wool is below the 1910 price,
ou can be the judge as to the present retail price of the choice
worsted suit that was at that tinre retailing for $25.
Representative S u m n e r s. N o w , under your contention of the com­
pensatory duty which will be levied under the pending bill, how
much compensatory duty would be allowed to the manufacturer?
Mr. F a w c e t t . The rule that used to be in vogue was 4 to 1, but I
see that at present they take a basis even in excess of that, of 4J
or 4}. I would not be sure whether it is 4$ or 4J to 1. But the
Tariff Commission finds that 9 pounds of grease wool will manufac­
ture 3$ yards of cloth. So you can see that possibly both are very
much higher than is actually the case.
Representative S u m n e r s. What I am trying to find out is this:
With 9 pounds of wool at the present value, and the tariff schedule
provided in the Fordney bill in operation, how much protection
would the grower get, arid how much compensatory duty would the
manufacturer get?
Mr. F a w c e t t . The compensatory duty should be simply the equiva­
lent-----Representative S u m n e r s (interposing). I mean under your con­
struction of the provisions of the pending bill.
Mr. F a w c e t t . My construction of that is that the manufacturer
gets the compensatory duty based on 25 cents per clean pound.

?




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209

Representative S u m n e r s. No; I am just using these figures now,
these 9 pounds. Just give the amount. What is your contention as
to the protection which the grower would get on that 9 pounds,
and what the compensatory duty would be ?
Mr. F a w c e t t . Lnder the present Fordney bill?
Eepresentative S u m n e r s. Yes; the pending bill. How much pro­
tection would the grower get, and how much compensatory duty
would be allowed the manufacturer ?
Mr. F a w c e t t . That is a mathematical problem. I can get it, how­
ever.
Representative S u m n e r s. Well, if it takes long to figure it, pass it.
Mr. F a w c e t t . It is according to the shrinkage of the wool. At 50
per cent shrinkage the grower would receive 35 per cent ad valorem
duty or 5.6 cents per grease pound. The manufacturer would re­
ceive, under section 1108, 30 cents per clean pound, or $2.70. He
would receive 30 cents per clean pound of the wool entering into the
3J yards of cloth.
Representative S u m n e r s . The grower would get 5 cents?
Mr. F a w c e t t . Yes; he would get 45 cents plus.
Representative S u m n e r s: Well, you use 5 cents and 45 cents, and I
do not know what you mean.
Mr. F a w c e t t . The protection that the 35 per cent proviso would
allow the grower on 9 pounds of wool shrinking 50 per cent and
valued at 25 cents would be 8.7 cents per grease pound.
The C h a ir m a n . Well, is that 9 pounds of grease wool in the suit
of clothes, or is it 9 pounds of clean wool ?
Mr. F a w c e t t . Nine pounds of grease wool in a suit of clothes.
Representative S u m n e r s. H o w much would the total be? How
much would you get on that?
Mr. F a w c e t t . The grower would get 87 cents.
Representative S u m n e r s. Then, how much would the manufac­
turer get, and how much would be his compensatory duty under
your construction of the bill ?
Mr. F a w c e t t . Under section 1108 he would get 30 cents, which
would be $1.35.
Representative S u m n e r s. He would get $2.70 compensatory duty ?
Mr. F a w c e t t . I fail to figure it any other way.
The C h a i r m a n . What is it, he gets 23 cents a pound of clean con­
tent, or 25 cents ?
Mr. F a w c e t t . Thirty cents. The compensatory duty is 30 cents.
The C h a ir m a n . Well, if 9 pounds of grease wool shrinks 50 per
cent he would only have 4$ pounds clean in the suit.
Mr. F a w c e t t . Yes.
The C h a ir m a n . Four and one-half times 30, then, you would think
represented compensatory duty?
Mr. F a w c e t t . All right; what about his protective duty?
The C h a ir m a n . He is not talking about that. He is talking about
compensatory duty.
Mr. F a w c e t t . $1.35.
Representative S u m n e r s. He would get $1.35, and the grower
would get on it what?
The C h a ir m a n . Forty-five cents.
Mr. F a w c e t t . No; 50 cents.
91341—22— VOL 3------14




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AGRICULTURAL INQUIRY.

Representative S u m n e b s . All right, now we have got it. That
is all.
Mr. F a w c e t t . Therefore, instead of the 33 cents per grease per
pound duty that the wool growers are asking, representing an addi­
tional cost to the consuming public of $7.50 per suit of clothes, as some
of the rabid newspapers represent, it would really not increase the
cost price of a suit of clothes but little over $1 if the suit of clothes
was made of pure virgin wool; and if made of 30 per cent to 60 per
cent o f shoddy, as a large percentage of the suits are. it would repre­
sent much less. We want the consuming public to know the exact
relation that raw material bears to the finished.
Suggestion seventh is the enactment of the truth in fabric law,
roviding for the compulsory branding of commodities manufactured
rom wool as to content.
The term “ all wool ” is deceptive, as was demonstrated by the
Federal Trade Commission in nine hearings in June, 1920, as to the
improper use of terms signifying and leaaing the public to believe
that the commodity so labeled contained all virgin wool, and has been
used to deceive the public. In each of these cases the Federal Trade
Commission found unfair practices and orders were issued to desist.
Some startling facts have been revealed in the investigations per­
taining to this truth in fabric law now before Congress. In the years
1915, 1916, and 1917, the last date obtainable, there was more wool
shoddy manufactured in the United States each year than there were
pounds of scoured virgin wool produced. While some o f this is
exported, it gives an idea of the magnitude of the shoddy industry
and the extent to which the consuming public is led to believe that
they are purchasing commodities made from virgin wool when a
large percentage of shoddy or reworked wool is contained therein.
The manufacture of shoddy probably reached its zenith in 1917,
when 184,000,000 pounds was manufactured, according to statistics
obtained by the Federal Trade Commission, and net profits ran as
high as 73 per cent from the manufacture thereof. Is it any more
than just that the consuming public should be apprised of the con­
tent of the articles they are purchasing ?
A referendum was recently taken by the American Farm Bureau
Federation upon this measure. The result was (and only a partial
vote was polled at the time of making estimate) 97,000 votes in favor
of the enactment of the “ Truth-in-Fabrics ” law by this Congress,
and 471 against, which shows the public’s attitude toward this meas­
ure; yet the bill has been introduced twice and is yet without action.
Gentlemen, there is one thought I wish to leave with you, and that
is this: That when the agricultural industry sustains a loss in excess
of $4,000,000,000 the purchasing power of the largest group of con­
sumers was impaired to just that degree and we can never get the
business of this country on a firm foundation and again enjoy normal
prosperity until the agricultural industry is prosperous.
Assuring you of the desire of the American Farm Bureau Federa­
tion, the farmers’ organization, to assist and support you in your
worthy efforts, I thank you, gentlemen, for the time given.
The C h a i r m a nWe are very much obliged to you, Mr. Fawcett.
.
The following statement from the National Wood Growers’ Asso­
ciation is inserted in the record at this point, as it has a bearing on
the subject of Mr. Fawcett’s discussion:

?




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211

S a l t L a k e C it y , U t a h ,

To

July 27, 1921.

th e C o m m is s i o n o f A g r i c u l t u r a l I n q u i r y ,

Washington, 1). C.
; Having been Informed that the questions of marketing and of
agricultural credits would come before your commission during the week of
August 2, the National Wool Growers’ Association submits the accompanying
statement of conditions and suggested remedies for your consideration.
G e n tle m e n

w o o l,

m a r k e t in g

.

Action suggested.—No. 1: It should be rnnde possible for a woolgrower hold­
ing a warehouse receipt for unencumbered wool to.use such a receipt as col­
lateral at his own bank without having the amount so secured included in his
regular line of credit from such bank. No. 2: Greater confidence in consign­
ment of wools (in preference to sale at home) should be established by pro­
vision for examination of accounts aud books of concerns receiving the con­
signments. In the case of houses that also speculate in the same commodity at
the same time, the provisions of the Federal warehouse act should be made
obligatory.
A 1.—Over one-half the wool produced in the United States comes from 17
'0.
Western States, In which sheep are largely or chiefly raised under range condi­
tions. For the marketing of the wool produced, no such system has come into
operation as applies in the marketing of grain’ or in the marketing of sheep or
lambs. For the main part the wool is sold at home to traveling representatives
o f eastern concerns that operate chiefly on a speculative basis. In doing busi­
ness in this manner, the clips, which vary from 5,000 to 100.000 pounds and •
over, are sold as a whole. The best of them contain three or four different
grades and a larger number is common. This system is an obstruction to the
education of the producer in respect to the grade, shrinkage, and quality of the
different classes of wool contained in his clip. It is still generally ndhered to
largely for financial reasons. The growers, as a rule, are compelled to market
their wool in accordance with their necessities rather than in accordance with
their Judgment. The local banks are accustomed to receiving the proceeds of
wool sales at shearing time to apply upon the liquidation of Indebtedness in.cur red during production.
In general the banks have not been Inclined to encourage their clients to con­
sign their wools to recognized marketing centers for more orderly and profitable
distribution. The banks have experienced great difficulty in the handling of
paper secured by stored wools. The 00-day limitation on such negotiable paper
is inadequate for the requirements of the situation.
.Vo. 2.—The principle of selling wool by consignment Is generally recognized
but financial conditions hinder more general practice along that line. To some
extent, confidence in the consignment method has been impnired by unsatisfac­
tory results. It has been felt that there Is no safeguard for correct returns
other than is insured by the integrity of the house handling the consignment. .
Since a good many of the houses receiving the consignments are also speculat­
ing in wools on their* own account, it is not surprising that this feeling exists.
It would certainly seem to be to the advantage of all concerned that the houses
receiving consignments and at the same time acting as speculators should be
required to handle their consignment business in accordance with the provi­
sions of the Federal Warehouse Act.
m a r k e t in g

sh eep and

lam bs

.

Action suggested.—Encouragement of cooperative buying by consumers.
The difficulties of satisfactory marketing of sheep and lambs are by no means
so great as exist in the case of wool. The principal difficulty at the present
time arises from the great discrepancy between the producer’s price and that
paid by the consumer. Progress Is being made In cooperative selling and buy­
ing of feeder lambs, but the extremely high cost of meat distribution still goes
on. It is highly desirable that there should be greater activity by governmental
departments in educational and demonstrative work for consumers upon the
advantages of cooperative purchase. This would not need to take the form of
governmental activity In business but through distribution of information, the
development of a favorable sentiment and necessary demonstration, great ad­
vantage could be obtained for consumers, and in large part the gap between the
producer and the ultimate buyer could be bridged.




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AGRICULTURAL INQUIRY.
LIV E -STO C K CREDITS.

The possible emergency und permanent measures for Improvement of live-stock
finances were fully set forth in statements submitted by the National Wool
Growers’ Association to your commission under date of July 15. At that time
one point of great value for present needs was overlooked.
Action suggested.— No. 1 : Providing immediate loans on real estate. No. 2:
Eligibility to Federal Reserve System of 30-months’ paper secured by breeding
stock. No. 3: Relief from the JO per cent borrowing limit in the case of small
banks through the operation of branch banks.
No. 1.—The present extreme distress of Western woolgrowers could t>e miti­
gated greatly by provision for immediate loans on real estate. Eighty per
cent of range sheep owners would be found in bankruptcy to-day If payment
were demanded on outstanding paper. The wur-time profits were properly rein­
vested in the sheep business, but the extreme exjienses involved to prevent losses
during the winter of 1019-20 and the following demoralization of tl’e 1920 und
1921 wool markets have compelled even the wisest sheepmen to borrow heavily.
The banks are needing payment of these loans, which payment can not possibly
be made from the sheep themselves. The majority of these debtors have lauds
which are very lightly mortgaged, if mortgaged at all. They greatly need the
facility for borrowing upon these lands to repay pressing loans and also to
obtain the longer termed loans which they must have in order to keep going
unt.l their breeding flocks can work out of present indebtedness.
The present limit of $10,000 is wholly inadequate for this service. Also, the
limited funds now available for the Federal land banks are altogether too
small to furnish the necessary service.
• The available funds for loaning by the Federal land banks should be greatly
extended and the limit of $10 IK ) removed.
K
No. 2.—This matter was fully presented on pages 8 and f) of the statement
submitted on July 15. Since that date the Stock ({rowers’ Finance ( ’orjioiation 1ms announced its readiness to handle live-stock paper. It is advised by
the corporation that all loans must be in the form eligible for rediscount by
tl’e Federal reserve banks. It is also stated that if found satisfactory loans
“ will be extended or renewed for periods of six months or less, not exceeding
a total length of time of 30 mouths from tlie date of the loan."
If it is possible for tlie Federal reserve system to undertake the carrying,
of paper Fecured by breeding stock for a period of 30 months to relieve the
present emergency, it would seem that the same method of relief should be
made permanently available. When the next stress comes valuable time will
necessarily be lost and the distress increased by necessity for reorganization
of another corporation to perform a service, the machinery for which should
be continuously available.
No. 3.—Financing of sheep and wool production Is greatly hampered by the
ru’e limiting a single borrower to 10 per cent of a hank’s capital and surplus.
We do not question the wisdom or safety of this rule. The trouble arises from
the small capitalization of the banks with which sheepmen logically do busi­
ness. It is natural and desirable that a sheep raiser should obtain his finances
through his local bank. The majority of these local banks in the sheep raising
territory are capita'ized at from $25,000 to $100,000. The amount they can
legally allow the average sheepman is wholly inadequate to his needs in times
of stress.
The operation of branch hauks would give to country borrowers access to the
larger resources of the State banks anti thereby through home connections render
possible the obtaining of cred t in necessary amounts.
Very respectfully.
N a t i o n a l Woot. G r o w e r s ' A s s o c i a t i o n ,
I’.y F. R. M a r s h a u . , Secrrtari).

We will now adjourn until Monday morning at 10 o’clock.
(Thereupon, at 5.30 p. in., Friday, August 12, 1921, an adjourn­
ment was taken until Monday. August 15, ]021, at 10 o’clock a. m.)




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AGRICULTURAL INQUIRY.
M O N D A Y , A U G U S T 15, 1921.
C
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C

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o n g r e s o f t h
s
m

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A

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i t e d

o r i c u -t

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Washington, D. C.
The joint commission met. pursuant to adjournment, at 10 o'clock
a. m. in the hearing room of the commission in the Capitol, Repre­
sentative Sydney Anderson (chairman) presiding.
The C h a i r m a nThe commission will come to order. The com­
.
mission this morning will hear Mr. Martin F. Amorous, of Mari­
etta. C a.
i
Mr. Amorous, you may proceed.
STATEMENT OF MS. MARTIN F. AMOROUS, FARMER, OF MARI­
ETTA, COBB COUNTY, GA., E. F. D. NO. 4.

Mr. A m o r o u sMr. Chairman and gentlemen, 1 have no hesitation
.
in asking for some of your valuable time, because I believe that this
commission is willing to welcome any suggestion given by the hum­
blest citizen of this country, with the great object in view of adding
to the information which when finally totaled from all parts of our
land may aid in solving the difficulties and very trying problems
which confront the Nation. And perhaps you will permit me to say
at this point that there is no commission which has a harder or
bigger duty to perform than the one on which because of your pecu­
liar fitness you gentlemen have the honor to serve.
I am engaged in farming in Cobb County, Ga. I do not present
myself as a “ know it all” ; my excuse for responding to your sum­
mons is rather after the order of an “ elder statesman,” that per­
chance from my experience of many years I may contribute some­
thing from history, hoping it may be of value to us all.
The disorder in our economic life now spreading all over our
country, threatening the living of all our people, is not due to any
natural cause. Fundamentally we all derive our living through labor
from nature by agriculture and commerce.
Money as the mill to which we must take our corn to grind has
taken too much toll. The farmer is “ busted ”—and I refer more
particularly to the cotton farmer; and when I use the word “ farmer ”
I use it because I am one myself.
I repeat, the farmer is “ busted,” his merchant is crippled, his bank
a cold-storage house for frozen credits. That is about the clearest
wav I can put the situation.
That money is taking too great a toll is illustrated by the case of
a Negro farmer who placed a wagonload of tobacco in a warehouse




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and some time thereafter ordered its sale. When the account was made
up the Negro owed the warehouseman 54 cents. The warehouseman
said to the Negro, “ Mose, just bring me a chicken the next time you
come to town. In about two weeks the Negro came in and he had
two chickens. He said, “ Boss, here’s your chickens.” The ware­
houseman said, “ But, Mose, you only owe me one chicken.” The
Negro replied, “ Yes, Boss, I know dat; but I brings another wagon­
load of tobacco.”
We must all admit that disaster exists in our economic life. Mr.
W. P. G. Harding, governor of the Federal reserve system, wrote:
The living of all begins with the fanner, and anything that affects his buying
power is soon reflected in the business of the merchant and the manufacturer.
The farmer should be aided and stimulated to the full measure of his harvest

Now, gentlemen of the commission, what I have to say and any
comments I may make are along the line of proving my theory that
the cause of our economic failure is due entirely to money taking too
much toll from trade and industry.
Never in the history of the land has any nation suffered a business
depression following a season of bountiful crops. There can not be
an overproduction of any commodity essential tor the living of man,
unless you measure it by money.
The need of man is a living—food, clothing, and shelter. These
three things, all and each, being the product of labor, comprise the
real wealth of a people.
In the organization of society, to labor in the pursuit of a living
there are but two systems, namely, the system of agriculture and
the system of commerce. The first is the actual producer and the
second is the exchange, barter, or distribution of one man’s product
with the other.
Following these primary and natural lines, there is no reason
why the people of this country should ever have a business depres­
sion—unless we suffer a famine of our crops. Hence there is no
fundamental cause for the depression now spreading over this coun­
try, threatening the living of all the people, in a land of plenty.
The statement that we must suffer for bread because the people
of Europe have lost their buying power is neither sound nor true.
George Washington and our forefathers proved this even while at
war, and during a period when they had less real wealth than we
have to-day. Hence, as all we can get from Europe is gold, and
as we can not eat gold, nor is gold raiment, nor will gold keep the
rain out of our houses, wherein can we be in need of more gold from
them?
Currency was introduced into society as an instrument of com­
merce. Various articles were used in the primitive exchange o f prod­
ucts, from cattle to salt, and metals finally became the more popular.
During the administration of President Cleveland we adopted a
standard and fixed the unit dollar at 25.8 grains of gold—this being
fixed by “ fiat ” of Congress. At that period we were debtors to for­
eign countries to the extent of $2,500,000,000 in gold, and while it was
argued against the adoption of a gold standard “ that it would be a
physical impossibility for this country to ever produce $2,500,000,000
m gold the favorable argument was made that it could be paid off
with 32,000,000 bales of cotton, and the sustaining argument was that




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having a monopoly of cotton if the Government would take over
the cotton crop, handling it as a merchant, charging a reasonable
price to foreign countries, that debt could be paid off with 18,000,000
bales o f cotton, and the South could be pushed up to produce it in
one year.”
We thus, by legislation, added a third system to the science of
political economy, and really limited agriculture and commerce and
all their expansion and development to the amount of available gold
and credit based on gold.
Gov. Harding in his book on the finances and policies of the
Federal reserve system lays down this truism, “ that no matter how
desirable a continued expansion of trade and commerce may be it
must accommodate itself to the amount of capital and credit avail­
able.” That at this time is limited to $2,500,000,000 to $3,000,000,000
o f gold, that we now have in this country.
It soon developed that with the limited supply of gold this great
Nation could not develop but a small portion of its resources; nor
could it continue the necessary amount of commerce for an increasing
population. So in an effort to provide a greater credit of capital
than our stock of gold supplied, we adopted the Federal reserve
system of banks. In this act, the Congress implied an elastic system
of currency equal to all the needs of agriculture and commerce. That
was the fundamental intention of that law.
It had the indorsement in these essentials of many eminent
financiers. It began business in 1915 with a capital of less than
$100,000,000 all subscribed by member banks, which are limited to
receive 6 per cent on its earnings, all other earnings going to the
Government as a franchise tax, and to surplus account. While no
limit was fixed for it, of an amount that it might retain as a surplus,
the law did provide that—“ one-half of the net earnings shall go to
a surplus fund of the bank until it will amount to 40 per cent of
the capital stock.”
This surplus to-day is $202,000,000, or 200 per cent of the paid-in
capital stock. It further provided, that “ the net earnings going to
the Government can be used in the discretion of the Secretary of the
Treasury to supplement the gold reserves, or be applied to a reduc­
tion of the bonded indebtedness of the Government.
The last report of the Federal reserve banks shows $2,400,000,000
o f earning assets, which, at the late rate of 7 per cent, would show
$168,000,000 interest earned last year on its $101,000,000 of capital.
With this statement of facts it is apparent that this “ expansive
currency system ” has also the power to contract the currency and
retire money from its only public use, circulation. Money has no
value to man except as a circulating medium. And the continued
expansion and increasing development of trade and industry can
peach a height that the functioning of the Federal reserve banks
will of itself pull them down—the greater the loans and discounts
and corresponding increase in deposits requiring the retirement of
gold as reserves.
Senator M c N a r y . Let me ask you a question right there: Are you
reading from a speech made by somebody or is it something you have
prepared?
Mr. A m o r o u s . It is from something I have written, though I am
quoting from what Mr. Harding and others have said.




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Senator M c N a r y . I was wondering whether it was your own state­
ment or something that somebody else had said or written.
Mr. A m o r o u s . Yes, sir; this is something that I prepared. But
these figures came from the Federal reserve bank reports. I might
explain that I am not here to criticize Mr. Harding, or the Federal
Reserve Board, or anybody else. But personally I had an inter­
view with Mr. Harding last October, in which I outlined a forecast
of conditions that were coming according to my view—that if cot­
ton were sold at 20 cents a pound it would impoverish the South, and
if the individual farmers withheld their cotton from the market it
meant bankruptcy for the merchants and the banks. And while
on that subject I might say that Mr. Harding thought I was “ unduly
alarmed.” He said that within 30 days cotton would advance in
price, the fanners would sell a part of their crop, pay off their debts,
and everything would go on all right. That was a difference in judg­
ment, that is all. I have no doubt he was sincere in his belief, so
that any reference I may make to anybody is not personal, is not
meant as a personal criticism. I am willing to grant that every­
body else is as honest as I am. I only claim that nobody is more
honest than I am.
Monev has no value to man except as a circu­
lating medium. You gentlemen no doubt understand what I am
leading up to, which is that the cause of our depression is due
entirely to money taking too much toll out of trade and industry.
I may be getting a little far off the particular subject, but will come
back in the end to the argument to sustain my position.
As you gentlemen well know, if you go to a bank and borrow
$1,000 you give vour note and take it over to the receiving teller
and deposit it. The statement of the bank for that day will show
an increase in loans and discounts of $1,000, and an increase in
deposits of $1,000, and an increase in reserve of $80, being 8 per
cent, without using a single dollar of cash.
The C h a i r m a nThat increase in reserves of $80 would not be
.
held in the bank's vault. That would be $80 held as a reserve by
the Federal reserve bank, I suppose?
Mr. A m o r o u s . Y o u may be more correct than I on that, but the
member bank must hold a certain percentage of reserve, sometimes
7 per cent or 8 per cent or 15 per cent, according to how near the
bank is to the reserve center.
I think, however, the exact amount is really immaterial, for the
principle I am trying to lay down is that they have to provide a
reserve or a “ hoarding.”
The C h a i r m a n . That is true; but I think it would be wrong for
the impression to prevail that that reserve is held in the vault of
the bank, because it is not. It is a reserve held now in the Federal
reserve bank.
Mr. A m o r o u s . There is some reserve they must retain themselves.
The C h a i r m a nA. member bank is not required to hold any reserve
at all in its own vault if it is a member of the Federal reserve system.
Mr. A m o r o u s . The point is that a reserve must be maintained
against deposits. It is done without the depositor paying a single
dollar of cash in the bank in the case I have mentioned.
Senator L e n r o o t . They have $80 that could not be utilized?




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Mr. A m o r o u s . It is hoarded. That is the point—that legitimate
operations will cause the hoarding of money m that way, thus con­
tracting the circulating medium.
The C h a i r m a n . I think that statement would have been true under
the old national banking system, but I doubt very much if it is true
under the present system.
Mr. A m o r o u s . Mr. McFadden told me that if all of the banks of
the country—I believe some 20,000 or 30,000 of them—were to comply
with the requirements of the Federal reserve system we would not
have any money in circulation.
The C h a i r m a n . I think there must be some misunderstanding of
the situation.
Mr. A m o r o u s . Inasmuch as there is only $3,000,000,000 of gold
in this country, and the Federal reserve bank is collecting interest
on $2,400,000,(XX), it is plain to see that it is only a question of time
when all the real money will be owned by the Federal reserve bank.
I mentioned that to a banker the other day and told him it was
only a question of time when thev would get all of the money, and
he replied “ They have it all now.
Representative

S um ners.

Do you m?an owned or held?

Mr. A m o r o u s . I will give you a little concrete illustration of what
happened in 1915 and you will see the point I am making. While
it is true that the member banks have from $15,000,000,000 to
$17,000,000,000 of loans and discounts, earning $1,200,000,000 to
$1,360,000,000 in interest each year, it is also possible for the Federal
reserve bank, acting as a “ kitty,” to in time hold all the banks’ gold,
as gold is not being produced as fast as they are gathering it in on
discounts.
Senator L e n r o o t . Y o u mean by that simply that the expansion of
credit could reach such an extent that if we restricted the circulat­
ing medium it would impair the reserves?
Mr. A m o r o u s . No ; the Federal reserve banks will have it all.
The C h a i r m a n . I f you mean gold they have it all now, practically,
haven’t they ?
Mr. A m o r o u s . That is, all the real monev, gold.
Representative S u m n e r s . But as credits were contracted they
would withdraw the reserves from the Federal reserve bank?
Mr. A m o r o u s . I am not a banker, but a farmer. I am looking at
the situation from the point of a man up a tree, a man on the farm.
Representative S u m n e r s . When a bank makes a loan it sends a
certain amount o f money on hand to the Federal reserve bank to be
held as reserve ?
Mr. A m o r o u s . Yes, sir.
Representative S u m n e r s . Until it gets to the point where, you say,
the banks can not loan any more money, because it has no more money
to loan. That is your theory ?
Mr. A m o r o u s . Yes, sir.
Representative S u m n e r s . But as the loans began to contract would
not they begin to draw down the reserves ?
Mr. A m o r o u s . Not necessarily.
Representative S u m n e r s . Why not ?
Mr. A m o r o u s . The reserve increases.




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Representative S u m n e r s . Not when they contract their loans.
When a loan is paid off at a bank, then it is entitled to drawn down
some o f this reserve.
Mr. A m orou s. That is true. They could get continual credit at the
bank for rediscount; yes, sir.
The C h a ir m a n . You may proceed with your statement.

Mr. A m orou s. That money is taking too much toll from trade and
industry is borne out by the statement of the Federal Reserve Board,
page 68, and I am quoting from their book:
That a charge to depositors on checks of 10 cents per $100 upon the business
handled by the Federal reserve banks last year would have cost commerce and
industry $135,000,000.

That is more than the capital of the Federal reserve bank, that
amount charged in one year.
The C h a irm a n . In your argument you are making no distinction
whatever between deposit currency, credit, and asset currency or
gold currency. That distinction is absolutely essential in order to
arrive at any conclusion at all with respect to the Federal reserve
system. The statement you have just made illustrates that fact—
the exchanges that are accomplished by deposit currency through
checks is probably as much as 25 times as great as the exchanges
effected by money currency.
Mr. A m orou s. Yes. You see my point is to show what money has
taken from trade and industry; they have not left them the “ quid
pro quo ” from the products o f exchange; they have taken it all in
through this system.
The C h a irm a n . Y o u are undertaking to do that on the basis of
money currency, omitting the factor, which is the biggest factor in
the equation, of deposit currency,, check currency.
Mr. A m orous. That is all true, but it is not necessary for me to
develop that in order to prove the proposition I have laid down—
the proposition of what has caused our decline. The lifeblood of
commerce has been hoarded in the banks, taken from legitimate trade
and industry, legitimately taken from commerce.
Senator L e n r o o t. Take your own illustration, of a man borrowing
$1,000, which is placed to his credit. Deposits are increased by
$1,000 and loans and discounts are increased by $1,000. Do you as­
sume that that $1,000 stays in the bank to the man’s credit?
Mr. A m orou s. Very often it is not there at all.
Senator L e n r o o t. But you assume that the credit stays there?
Mr. A m orou s. Yes, sir; he checks against it from time to time.
Senator L e n r o o t. O f course. But assume that that deposit is
immediately drawn down to the extent of the loan.
Mr. A m orous. Not always.
Senator L e n r o o t. Often.
Mr. A m orous. Suppose you wanted to borrow about $60,000. They
would take a note from you for about $70,000 and charge you the
legal rate of interest, which is 8 per cent in our State—Georgia—on
the $70,000, but would give you authority to draw on only $60,000.
That is, they give a credit of $70,000, but you must promise not to
draw down more than $60,000.
Senator H a r ris o n . Is that the practice in the State of Georgia ?




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Mr. A m o r o u s . Yes, sir; but they learned it from somebody else.
In 1915, “ to move the cotton crop,” Mr. McAdoo deposited
$15,000,000 o f Treasury money in the Federal reserve banks of Rich­
mond, Atlanta, and Dallas. They, in turn, deposited this money
in the member banks, which member banks loaned it at 6 per cent
to individuals—and that is a reasonable rate o f interest, 6 per cent—
taking their notes and indorsing them they got $15,000,000 more
from the Federal reserve bank. That they repeated again and again
until they had loaned out $125,000,000 at 6 per cent, or 48 per cent
was earned on the original deposit o f $15,000,000. Like a game of
poker, when one man wins all the money the game stops. Money
as a mill is taking all the corn for toll.
And, gentlemen of the commission, if all the money in the country
were handled at one time in the same way it would only take two
years for the banking interests to own all of it—48 per cent in one
year would approximate 100 per cent in two years.
The statement made by the Federal reserve banks shows that they
had a little less than $100,000,000 when they started—around $90,000,000. In six years, according to the last statement issued a few
weeks ago, they had $202,000,000 of surplus and $42,000,000 of “ re­
serves for franchise taxes.” And they had expended $18,000,000 in
buildings. Their overhead expenses were about 20 per cent of the.
earnings since they were organized. You will see at that same ratio
it is only a question of time when they will have all the money we
have in the country, gold being the only money. They have, I think,
now $2,500,000,000 of actual gold in the Federal reserve banks. Of
course, for some of that they have notes out against it. I think, ac­
cording to the last statement, they had 83 per cent as against cir­
culating notes.
Those who questioned the bankers’ statement that they have no
money to lend, with these facts before them, can have no doubt of
its truth. They have told us that right along.
Senator H a r r i s o n . I s that true now ?
Mr. A m o r o u s . N o , sir; not now, but it is discriminatory in a way.
In December of last year I went with a farmer with his warehouse
receipts for 28 bales of cotton, when he wanted $60 with which to pay
his taxes, and they would not lend him a dollar on it.
Representative S u m n e r s . What did they say?
Mr. A m o r o u s . They said they did not have the money. I went to
the head of the Federal reserve bank in Atlanta about it. and he said,
“ Martin, you can go and tell any one of the bank presidents ”—and
I knew them all— that we will lend them all the money they want
on agricultural paper.” So the first bank president I struck I men­
tioned it to him, and he said, “ Yes, Martin, I know that; but the rate
o f interest they charge us robs us of all profits in the transaction,
and we can not do it.”
Senator H a r r i s o n . What is the interest charge?
Mr. A m o r o u s . Eight per cent, limited by the law of the State.
Senator H a r r i s o n . What did the Federal reserve banks charge?

Mr. A m o r o u s . I a m p r e t t y su re i t w a s 7 p e r c e n t a t th a t tim e .
I b e lie v e t h e r e a re c e r ta in p e n a ltie s in r e g a r d to m e m b e r b a n k s,
t h a t t h e y h a v e to p a y a c e r ta in la r g e r a m o u n t a f t e r t h e y r e a c h a
c e r t a i n a m o u n t o f d isc o u n t.




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Senator H a r r is o n . It is a progressive rate ?
Mr. A m o r o u s . Something like that.
Representative S u m n e r s . Did those banks claim they had gotten
into a position where the progressive rate of interest had begun
to operate ?
Mr. A m o r o u s . No; they did not say that, but that they could reach
that point.
Representative S u m n e r s . What is your judgment about the situa­
tion? Was the progressive rate about to come into effect or did
they not want to lend the money ?
Mr. A m o r o u s . My judgment is that they did not have the money,
that they told the truth about the situation. The banks in the South
had loaned about $200 for each bale of cotton that was grown, and
that bale of cotton was only worth $50. Their only means of get­
ting the money back was through the sale of the cotton by the farmer
who grew it. They did not sell the cotton. It is said there are
500,000 bales of cotton in the farmers’ hands now, and they won’t
sell it to pay their debts.
Senator S I c N a r y . Y o u mean more than 5 0 0 bales, do you not?
Mr. A m o r o u s . Oh yes; 500,000 bales. There are $471,000,000 of
loans and discounts in the banks of Georgia now. The farmers owe
.the retailer, and I do not believe the retailers averaged over 10
per cent in collections last year. The fertilizer companies are in
something like the same boat. The American Chemical Corpora­
tion collected 32 per cent last year, and they have the merchants
between them and the farmer in most cases. The Armour people
collected about 25 per cent of their debts last year. So that the
means of repayment is not there. The loans made are at the rate
of $150 a bale more than the cotton will bring as it stands to-day.
They loaned at the rate of about $200 a bale on the crop grown.
Senator L e n r o o t . Then, instead of the banks making all tne money,
they stand to lose a lot of money?
Mr. A m o r o u s . The farmer invested that $ 2 0 0 a bale in mules from
Missouri, corn from Iowa, wheat from Minnesota, automobiles from
Detroit, and fertilizer from New York and Boston. That is about
the way they stand on that $200 a bale loaned the farmers, and it
is not there.
Senator H a r r is o n . Of course, when the farmers borrowed that
much money on a bale of cotton the cotton was selling at a very much
higher price ?
Mr. A m o r o u s . It was selling at 45 cents a pound at that period.
One bale of cotton would have paid the loan.
Senator H a r r is o n . And the price of cotton afterwards went d ow n ?
Mr. A m o r o u s . Yes, sir.
Senator H a r r is o n . The head of the Federal reserve bank at At­
lanta told you they could loan member banks all the money they
wanted on argicultural paper?
Mr. A m o r o u s . Yes, sir.
Senator H a r r i s o n . And you went back to the member banks and
they said that was true but that the rate was so high they could not
make anything out of it?
Mr. A m o r o u s . Yes, sir.




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Senator H a r r i s o n . Because of the progressive rate. And of
course they had to indorse the paper they discounted at the Federal
reserve bank?
Mr. A m o r o u s . Yes, sir.
Senator H a r r i s o n . That was the reason why the farmers could not
get money at that time ?
Mr. A m o r o u s . Yes, sir; that was it at that particular time. It
was also true, while I have seen it stated otherwise, that the banks
would not let fanners have as much credit as they would manu­
facturers or even speculators. The farmer never had his collateral
in the same shape for pledging it as the manufacturer did. He did
not have his product in a warehouse or an insurance receipt for it.
There are a good many reasons why the banks could not give them
credit. As to the banks in the south, their proper function is to
furnish money to make the crop with, and they then have no money
to lend on the crop when gathered. It has been the custom for
vears that they would have to go to New York—before we had the
'Federal reserve bank system—to borrow money on customers’ paper,
whatever amount they could use, for moving the crop as we call it.
With the organization o f the Federal reserve system those banks
were limited to their discounts to the Federal reserve bank in their
district. Theoretically they can borrow anywhere—from any other
member bank for instance—but practically the rate being fixed so
that they can have no profit in it, they do not do it unless forced to
do it by circumstances. I believe Atlanta did borrow from Cleve­
land and Buffalo. There may be a lot of money up here at the
season in the year when it is wanted there, but they can not very well
get it on account of the fixed rate of interest.
The C h a i r m a n . But they have been getting it ?
Mr. A m o r o u s . Yes. sir; but under the stress of circumstances, like
the rabbit climbing a tree—they are “ obleeged ” to do it.
Senator L e n r o o t . Is not it a fact that the banks were too liberal
when they loaned $200 a bale on cotton ?
Mr. A m o r o u s . Well, it was not the opinion of anybody that they
were loaning too much. For instance, the president of one of our
biggest banks addressed a meeting of farmers at our State capitol,
in connection with the secretary of agriculture of our State, and other
prominent men, telling them to hold their cotton for 50 cents a
pound. He was as loud in telling them that as anybody else. I said
to this president:
This farmer tolls me he lielil his cotton for
him to ilo it.

HO

cents

n

pound because you told

The president of the bank said:
Y**s; I did. And who would ever hnve thought cotton would jfo below 50
cents ti pound?

Senator L e n r o o t . Then botji the bank and the farmer were specu­
lating upon the price of cotton, were they not ?
Mr. A m o r o u s . While that may be true, about speculation, we have
got to treat conditions. For instance, if you gave your child a
dollar and he went out and spent it all for candy, are you going
to call in a doctor when he gets sick or let him die?
Senator M cN a ry . What is you remedy for this situation?




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Mr. A m orou s. May I finish up that suggestion and then take up
the matter of the remedy I recommend ?
Senator M c N a ry . All right.
Mr. A m orou s. I did come up here in October and suggested this
remedy to Mr. Houston and Mr. W. P. G. Harding:
If cotton is sold for 20 cents or less It means impoverishment of the South
and if individual farmers withhold their cotton from the market it means bank­
ruptcy for many merchants and banks, therefore the welfare of the people
demands a practical remedy to prevent a catastrophe, and I suggest the fol­
lowing as the only remedy I can conceive of that will relieve the situation:
1. That the Government, through the Federal reserve and local banks, loan
or advance 25 cents per pound, basis middling.
. 2. That the Government has the right to esell this cotton for not less than
40 cents per pound.
3. The Government is guaranteed by the borrower the right to limit his acre­
age of cotton for 1921.
4. The Government to receive a reasonable interest and a commission for
selling.

I laid down the proposition that the banks were the real owners.
Senator M cN a ry . The result of that proposition would be that the
Government would pay 40 cents a pound for the cotton and own it!
Mr. A m orou s. Let me develop that a little bit for you.
Senator M cN a ry . That is the way it would work out.
Mr. A m orou s. The banks really owned all the cotton. That is what
I claimed at that time. They, had advanced $200 a bale, and it was
worth then 20 cents a pound, and while the farmer did have possession
r
of it is was open to the speculative price on the New York Cotton
Exchange, and its value was decreasing every day on the exchange.
I said if this policy were pursued it would stop speculation and they
could sell the cotton through one agency, all that the market needed,
and they could get 40 cents a pound for it. That was the same argu­
ment that was used to sustain favorable action on the gold standard
in Mr. Cleveland’s time. It was not anything new in that particu­
lar. and I claimed that other countries were doing it for their
products.
The C h a irm a n . That was simply a scheme for the Government to
take the cotton and hold it and distribute it at a fixed price, on thetheory that it had such a monopoly of cotton that it could sustain
the price on that basis. Otherwise the Government would have had
to hold the bag for any loss sustained.
Mr. A m orous. The chief concern of government should be the
condition of the people. Would not it be better to do. even if they
had to risk a loss on some of it, that the money would be paid out
among the people and be circulating? It could not be any loss, as
it would be in the hands of the people, and it is much less a loss to
them than if it is hoarded in bank.
The C h a irm a n . What do you think the corn farmers, and the
wheat farmers, and the vegetable farmers of the country would say
if we held up the price of cotton to 40 cents a pound, and the price of
other things went down below the prewar basis?
Mr. A m orou s. Mr. Houston asked me that very question; and I
said—
Mr. Houston, in asking that the cotton farmer be stabilized I ask that you
restore the buying power for the man who is the customer for wheat and corn.
On the other hand if you were to stabilize the wheat and corn fanner, you
would not provide a compelling customer for the cotton. But if they will




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come to you asking for a reasonable- loan, I would ask the same thing for
them. The United States is In the banking business, through the Federal
Reserve System, and if they will come to you, and ask for a reasonable percentage
o f the cost to produce it, and if he is a good moral risk, and gives you good
collateral, why of course lend it to him.

I think it is most important for you to spend every dollar in the
Treasury, if the people are thereby saved from bankruptcy and
starvation.
The C h a i r m a n . The fa c t th a t y o u c o u ld n o t g e t u p th e p r ic e is
s h o w n b y th e fa c t th a t th e b a n k lo a n e d th e m $200 a Dale a n d s t ill
t h e p r ic e w e n t d o w n ?
Mr. A m o r o u s . Eighty

thousand bales of cotton were sold to
Czechoslovakia at 58 cents a pound, delivered there. Mr. Frank
Inman told me it cost 2$ cents to 3 cents a pound to deliver it. That
was 55 cents a pound, say, f. o. b. on this side.
Senator H a r ris o n . When was that ?
Mr. A m o r o u s . Along about October. I only got that from the
newspapers. But I know they only paid 10 cents a pound for the
cotton. So the exporter got atiout 40 cents a pound, and the Govern­
ment War Finance Corporation helped them finance the transaction.
I myself saw in the papers where $2,000,000 was paid on that.
Senator L e n r o o t. D o you know that European prices have fallen
the same as ours ?
Mr. Am orous. That is very likely; yes, sir; or to some extent at
least. And freights have fallen.
Senator L e n r o o t . Not to some extent, but it is shown that prices
in Europe have fallen to about the same degree as in this country.
Mr. A m o r o u s . But I was answering the question propounded by
Chairman Anderson. I say practically you could have gotten all
you wanted at that price. Cotton is raised in other countries, and
about 3,000,000 bales of cotton are grown in the East Indies, but
it is not a direct competitor with American cotton. It is a very
short staple cotton, an unclean cotton, and it is not taken up by the
English mills on the same basis as the American cotton.
Senator L e n r o o t. Why shouldn’t we stabilize the price of wheat
and corn the same as you request a stabilization of the price of cot­
ton. if we are to go into that subject?
Mr. A m orou s. 1 have no objection to that if it will save the people
from bankruptcy and starvation.
Senator L e n r o o t . What are we going to base it on ?
Mr. A m o r o u s . What d o y o u m e a n ?
Senator L e n r o o t. Are we to have an artificial price ? I f the Gov­
ernment pays 50 cents a pound for cotton and $2 a bushel for wheat,
how is it to do it?
Mr. A m o r o u s . Y o u may not agree with this view, but I claim that
cotton is a better asset to issue currency on than even bonds. The
history of the cotton business is that from 3,000,000 to 5,000,000 bales
of cotton from October to June go all over the world simply on
bills of exchange:
Senator L e n r o o t . Your remedy is to further increase the volume
of currency, is it not?
Mr. A m o r o u s . That was the intention of the people that adopted
the Federal reserve bank bills, sir. They are greater than I, but all
the authorities on finance for ages back nave claimed that we should
have a currency that could carry the products of the country.




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Senator L enroot. I f we increased the currency enough our money
would have about the same value as the German mark has to-day,
would it not?
Mr. A m o r o u s . Well, I claim also, and I think trade and commerce
shows it, that there is no value in money other than its exchange
value. Chairman Anderson might go down here to some store, right
with the money he gets from the Government as his pay, and pay
$10 for a hat, and Mr. Lee might take money received from the same
source and go down to a store and pay $5 for the same kind of hat.
It is simply a matter of the exchange value of the money for prod­
ucts. There is no intrinsic value in the gold dollar.
The authorities, even Prof. Fisher, of Yale, agree to that general
proposition. I saw in the paper sometime ago where Prof. Fisher
proposed to establish the dollar. He also made the statement that
our dollar at a certain period of time, two or three years ago, was
only worth 46 cents in trade, and 66 cents at another time. It may
be worth a dollar now; I do not know. Mr. Samuel Gompers or
Secretary Wilson, I believe it was, came before the Congress and
said the gold dollar was wortli only 33J cents, and the Congress evi­
dently believed it, because they complied with what he wanted, for
they added to the wages of the men they represented.
So where is your authority to say that our dollar has ever been
worth $1 intrinsically? The Congress declared that 25.8 grains of
gold should be a dollar, and that is all it has ever done. I f this Con­
gress declared there would be a loan of 25 cents per pound on cotton
it would pass current all over the world for more than 25 cents.
So you can do more with cotton than with gold. Isn’t that true.
Senator Lenroot ?
Senator L enroot . N o ; I think not.
Mr. A m orou s. Well, of course, you know the old saying, “ Many
men o f many minds.” The ideas I have on this subject are that if
you want to stabilize the dollar, as Prof. fisher w
’ants you to do,
that dollar when stabilized will not create another dollar, but if you
stabilize “ the man ” he will create another bushel of wheat or a barrel
of flour or a bushel of corn or a bale of cotton, which is best for the
people; you are doing an act of “ stabilizing” that is more definite
and valuable to all the people than in attempting to stabilize the
dollar.
The fact that a bank with $100,000 capital will earn $8,000 does
not mean that they have created that much more money, but they
have taken it from some other community. Man by labor does
create products: these produces are the only wealth.
I am not surprised that you do not agree with me. My environ­
ment, of course, has not given me an opportunity to learn a good
many things that other people, perhaps, know; but these are mv
views, based on experience.
To get back to my point which I am trying to prove, that the
cause of our depression is money taking too great a toll out of trade
and industry, I will mention, in the matter of cotton, a man who
was worth property clear of debt $125,000 in January, 1920. He
made 1,000 bales‘of cotton. The expense necessary for the produc­
tion of those 1,000 bales of cotton swept that farm, cotton and every­
thing else, from under the owner’s feet. He is now a clerk in a store
in Jacksonville. Fla.




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Another man in Georgia made 480 bales of cotton, and he owned
his farm and was known as a capitalist. He lost $50,000, and he can
not pay his debts by selling his cotton and his farm.
Another little neighbor of mine, who bought his place a little over
a year ago—or nearly two years ago now—and had a new house on it,
and paid about $8,000 for it, including 32 acres of land—which he
»ut in his wife’s name when he bought it—was swept off of his
eet last year, and his horse was sold for $5. He is now working in
a barber shop in Atlanta.
These are just a few that I might mention, but they are types of
conditions that you can find around generally.
Senator L e n r o o t . What did it cost last year to grow cotton, I
mean in actual money outlay ? I do not mean including interest upon
value o f farm, but the actual cash outlay.
Mr. A m o r o u s . The Government made an estimate—and I do not
know how they made it nor upon what it was based—that the cost
was 37 cents a pound throughout the territory. But I know that a
neighbor of mine by the name of Norton spent $4,000 in cash—and he
had the money in bank—for fertilizer and labor alone. The great
majority of farm hands in Georgia did not earn $1.25 a week. That
is absolutely true. A great many of them were advanced $ 8 or $10 a
week, but their share of the crop did not pay over $1.25 a week.
At Woodstock, Ga., a merchant who had not collected last year
more than 10 per cent, is keeping up all the families around him
that he can. in one case there are three grown-up young men and
the father and mother. They own their own place, but it is mort­
gaged. They owe him on their purchases last year. But he is ad­
vancing them at the rate of $3 a month each, $15 for the entire
family, out of his store, for everything they have to have—clothing
or anything they need more than they raise themselves—for horse­
shoeing and anything they have to expend money for. So he is
crediting them at the rate of $15 a month for the five of them.
In another case there is a family of a man and his wife and five
children, and he is crediting them $50 for the entire season.
Gentlemen of the commission, those are merely types that we find
here and there and everywhere.
And let us look at the picture on the other side. There is a dry­
goods merchant in Atlanta who gave $107,000 of cash bonuses to his
clerks after paying their salaries during the year. That was $107,000
more money tlian a million farmers earned net last year in Georgia.
I saw a letter addressed to Congressman Lee just now. It was too
long for him to read and he handed it over to me. It was from a
farmer, telling of his condition, and of the starvation conditions
under which they are making their crops, and the story is that the
merchants are going to take everything from them this year—even
com, potatoes, and all. This farmer asked Mr. Lee to see if he
could not get a law passed so that they could not force a man to pay
his 1920 debts and to put 4 per cent interest on the notes. Tney
have taken a lien on everything he raises.
Gentlemen o f the commission, everything these families raise this
year must go to the merchant, the whole 100 per cent that they raise.
And they already owe the merchant on last year’s purchases.
Senator L e n r o o t . When the cotton farmers borrowed $ 2 0 0 a bale
on cotton, what did they do with the money ?

S

91341— 22— VOL 3--------15




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Mr. A m o r o u s . I thought I mentioned that they sent it to Iowa for
corn, to Minnesota for Hour, to Detroit for automobiles, to Missouri
for mules, and to New York, Boston, and Chicago for fertilizer.
That is what they did with the money.
Representative S um n ers . Your statement is not exact, is it. that
they borrowed that money on the bales of cotton. You probably
mean that they accumulated debts during the year which were the
equivalent to $200 for each bale of cotton grown.
Mr. A m o r o u s . Yes, sir; that is my statement. They had borrowed
during the year $200 on each bale produced. And that is what the
debt must be paid from, from the cotton produced.
Senator L e n r o o t . What was the cost of production of the $ 2 0 0 bale of cotton?
Mr. A m o r o u s . A neighbor of mine who produced 16 bales of cot­
ton was at an outlay of 50 cents a pound. The Government estimate
was 37 cents per pound.
Senator L e n r o o t . H o w much was it for the bale ?
Mr. A m o r o u s . Well, call it 4 0 cents a pound and 5 0 0 pounds to the
bale, and you have $200.
Senator L e n r o o t . You do not contend that 4 0 cents a pound is the
cash outlay, do you ?
Mr. A m o r o u s . I do not know how the Government make up the
outlay, but that is the statement. It is the most difficult thing I
know of to keep an exact account of these matters. I have tried to
keep books of farm work, and have found it a most difficult matter.
You can not tell in advance what it is going to cost you; you can tell
a year after a thing has been produced.
Now, gentlemen of the commission, if you will permit me I will
proceed along this same line.
Senator L e n r o o t (presiding). Very well; you may continue your
statement.
Mr. A m o r o u s . The disorder in our economic life threatening the
living of all our people is easily traceable to the loss of the buying
power of the farmer. A financial writer in New York said “ hard
times ” will be over when you bring down the price of labor and the
price of all commodities in line and in balance with present prices
of farm products. His mistake is that when you get all these things
down to that cheap price the farmer will not nave the dollar to
buy the cheap things. That is the situation. But it has got to come
from him before we will have any revival in business. I make the
prediction that we will have no end to “ hard times ” until the farmer’s
buying power is restored.
I can trace the situation all the way through from the farmer to
the retailer, and the retailer, to the wholesaler, and the merchant
and the banker. Everything—debt is being extended until next fall,
under what is called the “ frozen-credit ” system. Some people say
next fall everything will be all right. The reason why we say in
the fall business will be better is because then we know the farmer
will sell his crop, pay his debts, buy more things. But he did not do
it last year, and he will not be able to do it this year. How can we
hope f o p any revival under these circumstances? It is all “ op­
timism.” Optimism won’t furnish us coal or food this winter.




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Representative S um ners. Y o u do not expect the Congress at this
session to constitute cotton the basis for the issuance of currency,
do you ?
Mr. A m orou s. N o ; but I have the suggestion here of how the Con­
gress can help the farmer to help himself.
Representative S u m n ers. Y o u are confronted b y a serious situa­
tion, in fact a crisis, in Georgia ?
Mr. A m orou s. Yes. sir; and in the whole South.
Representative Sum nebs. A s far as I am concerned I would be
very much more interested at this particular time in having you
address yourself to some practical remedy, practical from the stand­
point o f legislative possibility.
Senator H a r r is o n . Yes; give us your suggestion along that line,
because we must go pretty soon.
Mr. A m orou s. I thank you for your suggestion. There is one
more point and then I will go to it. I f the Congress should enable
the farmer to get 40 cents a pound for his cotton, it would not in­
crease the cost of a cotton-made dress, or a cotton-made shirt, or a
cotton-made pair of socks. I have here the prices for cotton and
for 2-40 yarn per pound from 1914 to 1919 :
Cotton
per
pound.
J9H...............................................
1915...............................................
19)6................................................

10.0750
.118*
.1725

2-40 varn |
|
P«r
,
pound.

Cotton
per
pound.

$0.38 1 1917..............................................
.50
1918..............................................
.85
1919..............................................

2-40 yam
per
pound.

10.3013
.3100
.4000

90.90
.95
2.50

There is no relation whatever to the price the farmer received for
his cotton; I mean there is no relation between what the farmer
received for his cotton and what the consumer had to pay for his
cotton-made goods.
Senator H a r r is o n . What was the lowest price you had there for
yam?
Mr. A m o ro u s . Thirty-eight cents a pound.
Senator H a r ris o n . And what was the highest price ?
Mr. A m o ro u s . $2.50 a pound.
Senator H a r ris o n . And what was the lowest price paid for cotton ?
Mr. A m o ro u s . It was cents a pound in 1914 and 40 cents a pound
in 1919. You can not use it relatively, by percentages, because it
does not work that way.
Senator H a r r is o n . I see.
Mr. A m orou s. I suggest, for instance, that the Federal land banks
were organized for the purpose of enabling the farmer to make
improvements-----Senator H a r r is o n (interposing). All these applications are being
taken care of now, are they not?
Mr. A m o ro u s . I understand no.
Senator H a r ris o n . D o you know of any people who want loans?
Mr. A m o ro u s . Yes, sir; but not any great number of them. I
understand that there were $250,000 applied for in one Congress­
man’s district, and they could not get but $2,500 in all. I say you




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would do no violence to the act if the Government would take over
the mortgages, and, instead of waiting to sell the land bank bonds,
issue against these land mortgages land bank notes of $5 or $10 each.
How would it hurt? The carpenter will take them; the bricklayer
will take them; the grocer and merchant will take them. They are
simply like the Federal land bank bonds; you may have to retire
them, but it is simply a $5 bond that has got to be sold.
Senator L e n r o o t. Would you make them legal tender?
Mr. A m orou s. Yes; and make them worth on the basis of what is
behind them.
Representative F u n k . When the fanner makes his loan at the
Federal land bank, he gets his draft or some evidence of money, and
then he deposits it in his bank, and he can draw it out in $5 bills.
Mr. A m orou s. Yes.
Representative F u n k . I do not see any help then in the suggestion
you have just made.
Mr. A m orou s. Only this, they have no funds to loan now. They
can't sell the bonds.
Senator L e n r o o t. What do you think would be the effect of that
on the things the farmer has to buy? I f you should do that, what
would be the effect on the things the farmer has to buy ?
Mr. A m crou s. Senator, my theory is, as I said, that all money is
just a medium of exchange.
Senator Lenro<it. But the more money you have the more things
will cost.
Mr. A m orous. Not necessarily.
►
Senator L e n r o o t. Suppose we have to-morrow $10,000,000,000 in
$10 bills-----Mr. A m orous (interposing). Senator, as a matter of practical fact,
would you not rather have a steak at a dollar, if you have the dollar
to pay for it, than to have the steak worth 25 cents, and you not be
able to get it ?
Senator L e n r o o t. That is a different matter. I f what you sug­
gest were done, would it not increase the cost of the things the farmer
has to buy ?
Mr. A m orous. N o, sir.
Senator L e n r o o t. Y ou , yourself, just suggested it.
Mr.. A m orou s. No: I was illustrating that—just using it as a mat­
ter of exchange. What do you care what it costs-----Senator L e n r o o t (interposing). That is not the question. Sup­
pose we issue to-morrow $10,000,000,000 in $5 and $10 bills, would not
the price, in dollars, of everything that the farmer has to buy in­
crease ?
Mr. A m orous. I would not care, if I could improve living.
Senator L e n r o o t. That is not the question. Do you think it
would ? The question is not whether you care or not, but the ques­
tion is. Do yon think it would ?
Mr. A m orous. No, s ir ; in the first place, you wouldn’t do that.
Senator L e n r o o t. Never mind that. I asked you a question. Do
you think it would ?
Mr. A m orous. Oh, I don’t know. The hardest word in the English
language is “ I don’t know.” I tell you, I don’t know. But I claim
it would not make any difference what the value in money itself




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was; it is a matter of exchange in trade if you get what you want
for it.
Representative S u m n e r s . Your position is that if you can not get
the regular money you would rather have the $ 5 note you speak of?
Mr. A m o r o u s . Yes; I think that is the wav to do it. What good is
the Federal land bank to these people? They have only the right
to borrow money; they have the security anti need the houses and
barns. Federal land-bank notes will get them the improvement and
put labor to work.
Senator H a r r i s o n (interposing). Theoretically you think the Fed­
eral land bank is all right?
Mr. A m orou s. Yes, sir.
Senator H a r r i s o n . It is beautiful ?
Mr. A m o r o u s . Yes, sir.
Senator H a r r i s o n . But if you can not get the money to put into
it-----Mr. A m o r o u s (interposing). No.
Senator H a r r i s o n . And right now they have a demand for money,
and can not get the money ?
Mr. A m o r o u s . I understand they have applications for $500,(KK),<)00.
Senator H a r r i s o n . They have applications for $5(K).0()(),()()0.
Mr. A m o r o u s . That is what a Congressman told me.
Another suggestion I have: For the farmer to aid himself, and in
fact, and never need to come back to Congress for any assistance, is
to create an association of farmers of commodity-selling associations,
after the California plan, provided they warehouse their products
and issue insured warehouse receipts of integrity for their products.
You require them to go into an association to borrow money from
the Federal land bank, and you can put the farmers into an associa­
tion of this kind. I understand it is done in Denmark, and they
have stabilized their whole country there; they‘have stabilized the
farmers. Recollect, I claim you can not stabilize business in this
country unless you stabilize the farmers.
Senator L e n r o o t . They can do that now.
Mr. A m o r o u s . They have done it. I understand, to some extent, in
Mississippi, and have organized in Texas and Oklahoma, and so on.
Senator L e n r o o t . You mean, by a voluntary act ?
Mr. A m o r o u s . Yes: but it can be assisted by the Government.
Senator L e n r o o t . In what way ?
Mr. A m o r o u s . Y o u have a lot of demonstration agents in Georgia,
for instance. I f they were to canvass this matter with the farmers
they would join quicker and get into these associations.
But you are obliged to stabilize the farmer before we can have a
return to prosperity again.
I would do another thing for the Federal reserve bank system now.
I would issue all mongy under the direction of this system, and I
would pay back to the banks all the capital stock, and in that way the
Government would own exclusively the Federal reserve bank system.
It would be less harmful to the people for the. Government to
“ profiteer ” than for the banks to profiteer. It would lessen taxa­
tion that much each year. You can do that without doing any vio­
lence to the system and still continue the member banks as they are
now until Congress should see fit to make other changes.




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I claim, and lay it down as a proposition, that we will not get rid
of having these depressions every three or four years as long as we
have this money system, or these money systems, we have now. We
will have to make a change in our money system before we can cure
that.
Representative S u m n ers. L?t me ask you: In 1914, when things
closed down, did or did not the clearing house associations and bank­
ing associations throughout the South issue what they called “ white
currency” and relieve the situation?
Mr. A m orou s. Yes; it was done. In-clearing, however, they set­
tled in sets between themselves on the clearing-house certificates if
thev did not have the money.
Now, our business in 1914 was about $100,000,000,000 clearings
through the exchanges. Experience shows that it would take 5 per
cent in cash to settle the differences. In 1919, it was at least twice
as much, due to expansion and development, and it took $10,000,000,000 to clear; we did not have the money. Those are the things
that lead me to believe it is what broke us down.
That Europe did not take our goods did not break us down; we
export only about 7 per cent of our manufactured and agricultural
products. It is true it is larger in some products, but it amounts
to 7 per cent in all. Ninety-three per cent of what is produced in
this country is consumed here at home. And nobody can tell me that
if I can sell 93 per cent of my manufactured or agricidtural goods
I have got to go into bankruptcy because I have got to carry the
other 7 per cent through to next season.
Representative S u m n e r sThat is true as of certain commodities,
.
but if prices of certain commodities of which a very large percentage
goes in‘ o export breaks down does not that necessarily affect the
whole fabric of om business? Take cotton, for instance. .
Mr. A m o r o u sThe United States mills did not take as much as
.
they ordinarily do, and they will take less from* now on. That is
true, because there isn't anything left the producer to buy with: after
the farmer sells his cotton at present prices he has not enough left
to buy a cotton shirt. And conditions will gef worse, and people
will be out of employment, because they can not buy.
I heard of a city in our neighborhood of 6,000 families being
fed by the city, and yet there is $6,000,000 in cash in one bank in
tha* city.
The settlement of the Allies requires Germany to pay $60,000,000,000 in gold, when there is only $8,000,000,000 in gold in the. whole
world, and there isn’t a single dollar of gold in the German Empire.
They will have to dig iron, coal, potash, and other products and
exchange if with the man or the country that has the gold. If they
have to exchange 1 ton of iron for a gold dollar, they will do it in
competition with the man in the country that gets $20 a ton. That
settlement with Germany in that way will enslave the labor of the
world for years to come. I am mighty glad to see we are not mixed
up with anv settlements in connection with it. It might pay us, if
we cor-ld. to wipe off the $10,000,000,000 they owe us, because there
isn't but $8.000.000,000 in the world, and they can never pay it in
gold. It took us over 100 years to accumulate three billions of gold,
and at that ra*e it will take Europe 300 years to accumulate
$ 10,000,000,000.




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Senator L e n h o o t. D o I understand you that the American people
should continue to pay $500,000,000 interest on the European debt
and also pay the principal ?
Mr. A m orou s. No ; if it had been me, I would not have issued a
single bond.
Senator L e n r o o t. N o ; but we have issued them.
Mr. A m orou s. I know, and we sold $24,000,000,000 of bonds to the
people, and the people did not have the $24,000,000,000 to pay for it,
and we gave the money to the people to buy our bonds, and that is
the way they got it to loan to us.
Representative S u m n ers. But we went in debt for all that money
and issued our bonds. The European people will have to pay that
sum or, if we forgive the debt to us, our people must pay it.
Mr. Amorous. All right ; I am telling you, however, our condition.
I am telling you the condition o f the people.
Senator L e n r o o t. You think it would be better for the Govern­
ment to pay that itself and cancel the debt to Europe?
Mr. A m orou s. N o ; I am only quoting vou and using the argument
that has been stated that it is necessary for us to rehabilitate Europe
before we can have prosperity in this country. I deny that. Tne
statement is made that we have produced so much money, so many
billions. It would have paid us to let them keep that ten billions.
Theoretically, I would not mix up in that German situation; I would
rather live isolated.
Senator L e n r o o t. Let me ask you, Do you think that era of ex­
travagance and speculation that everybody got into could go on
indefinitely ?
Mr. A m orou s. Senator, practically you had, as we all had, a full
dinner pail with high prices. Now, with more gold in the country
and lower prices we haven’t got a full dinner pail.
Senator L e n r o o t. The people had more than a full dinner pail ?
Mr. A m orou s. I think, of course, a full dinner pail is better than
what we now have.
Senator L e n r o o t. Do you think there was just a full dinner pail,
and no extravagance on the part of our people generally?
Mr. A m orou s. I don’t see now that would have broke us down as
to this point. I f you get a good trade out of me, I am hurt indi­
vidually, you see. but there isn’t any reason why all the people should
be penalized for the extravagance of the few. Everybody was not
extravagant. I know' of a man with a salary of $3,000, who kept an
automobile and servants in his house; I know of another one nearby—
in fact, in the same apartment, whose wife and children did all the
work, and he kept no automobile, and yet he is out of a job to-day,
and the man that had the automobile and servants is still drawing his
$3.000—the other man is out of a job.
Senator L e n r o o t. Do you think a man that borrowed $200 a bale
on cotton was not extravagant?
Mr. A rm orou s. No. sir.
Senator L e n r o o t. Y o u don’t think he was?
Mr. A m orou s. No, sir; they invested it all in the production of the
crop; they invested $720 for two mules—
Senator L e n r o o t (interposing). But somebody got the $720 for
the two mules?




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Mr. A m o r o u s . Yes; the man in Missouri got it.
Senator L e n r o o t . H o w about the man in Missouri, did he get more
than his share?
Mr. A m o r o u s . I say that too much money has been taken out of
trade and industry. A man on a farm earned, or got, $ 1 .2 5 for a
week’s work on the farm, and when he had to get a man to shingle
his house on his farm it cost him $ 1 5 .5 0 a day for that work; and
that is taking too much toll out of industry.
Senator H a r r i s o n Let me get straight what you mean by isola­
.
tion; do you think we could have ordinary'prosperity in this coun­
try if we lived among ourselves, and would not sell anything to
foreign countries at all, or have no trade relations with the foreign
countries ?
Mr. A m o r o u s . Yes; if it is necessary to do it.
Senator H a r r i s o n . How would you go about that; keep down our
manufactured products! and sell nothing abroad, and raise only
enough for our own people ?
Mr. A m o r o u s . No, Senator; you misunderstood me. I was refer­
ring to the statements that are broadcast that “ only bv rehabilitating
Europe we will get our prosperity back.” I say, I deny that. I
quoted the other extreme to make that point.
Senator H a r r i s o n . But to sell our surplus products, if we raise
surplus products?
Mr. A m o r o u s . Yes.
Senator H a r r i s o n . And we are bound to sell our surplus manu­
factured goods, if we make surplus goods?
Mr. A m o r o u s . Yes, sir.
Senator H a r r i s o n . And we can not have prosperity unless we Jo
that ?
Mr. A m o r o u s . Yes, you know that this country itself did not
consume its normal amount of products this year.
Representative S u m n e r s . I f this country can live by itself, why
can not the South live by itself? You have the coal and iron and
agricultural products, and cotton, and everything like that.
Mr. A m o r o u s . Our control of a system of commerce is done from
Washington, by the Constitution, and we can not-----Representative S u m n e r s (interposing). They do not force you to
ship your stuff in interstate commerce.
Mr. A m o r o u sN o; what I mean is we have to have a money
.
system. They do not permit us to use our own money system; the
Constitution forbids it, and Congress will not allow us to have our
own money system. I was only referring to the statement that “ we
have to rehabilitate Europe before we can have prosperity in this
country.” I say it is more important to rehabilitate the United
States first than it is for the United States to rehabilitate Europe.
Representative S u m n e r s . H oare you going to rehabilitate the
w
South, if their markets, the markets of Europe are close to 5 0 or
6 0 per cent of the chief product of the South?
Mr. A m o r o u s . That is not literally true.
Representative S u m n e r s . I beg pardon; it is literally true.
Mr. A m o r o u s . They have taken a portion of that 5 0 per cent, and
it can be furnished to them.




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Representative S u m n e r s . Y o u assume that rehabilitation of
Europe is something that can be dispensed with, and still our
country be prosperous. I want to know how we can be prosperous,
if the part of the world that takes 50 or 60 per cent of our chief
product ceases to purchase.
Mr. A m o r o u s . It is a merchandising proposition. I f you give
me sufficient capital to carry my stock I can dispose of that any­
where, if I can carry it long enough, and give sufficient credit.
Representative S u m n e r s . You have cotton in Georgia that you
can not mqve. What good does borrowed money on unsalable goods
do to a man who can not move them ?
Mr. A m o r o u s . It wouldn't do h im a n y good.
Representative S u m n e r s . That is what I thought.
Mr. A m o r o u s . And the merchants down there, the hardware men,
and the other merchants, are not buying any stuff now. I f they
need anything they buy each other's stocks. The drummers that
came down there, with their axes, and the U. S. M. cartridges, and
so on, from Bridgeport, Conn., went back without any orders. The
drummers came down there, but could not sell anything; they had to
go back without orders. '
Representative S u m n e r s . Our drummers are coming back in the
same way from Europe; they are in the same fix.
Mr. A m o r o u s . Yes; I- am not big enough, and I have not had
experience enough to tell you what you can do with the whole situa­
tion. I just presumed to be able to say what could be done with the
cotton farmer to rehabilitate him and restore his buying power.
The means of doing that is up to you gentlemen.
Representative S u m n e r s . In doing that, it seems to me you should
not overlook the importance of Europe as a buyer.
Mr. A m o r o u s . Not necessarily. But in putting your own house in
order you do not have to disorder your neighbor s house. In fact,
it is not the proper thing to do.
Senator L e n r o o t . What you want to do is to have the American ,
people, at their expense, rehabilitate the cotton farmer?
Mr. A m o r o u s . N o , sir; the proposition I had in October, Senator,
is not the proposition now. It would not cost the American people
a dollar to do it, either. It does not cost the consumer anything;
it does not make them pay higher prices for cotton-made goods.
Senator L e n r o o t . The Government is to buy that cotton at 40
cents a pound and sell it this fall at 20 cents; if that should be done,
who pays the bill ?
Mr. A m o r o u s . The proposition I argued in October— and I am
not going to delay you with any argument on that now, although I
think it is sound—would have saved this country from starvation.
Representative S u m n e r s . But here comes the man who has the
wheat to sell, and he says he has the staff of life; a man can patch
his shirt, but he has to have something to eat.
Mr. A m o r o u s . Give it to them also.
Senator L e n r o o t . In other words, you want the Government to
issue promises to pay-----Mr. A m o r o u s (interposing). I think what you want to do to
help the whole country is to give the Federal land bank proposition
some money.




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Representative S u m n ers . You are getting somewhere now.

Mr. A m o r o u s . And also put the wheat fanner and the cotton
farmer and all into a cooperative selling proposition. They are the
basis of living for all in this country, and until you do that we will
have no return to prosperity in this country.
I thank you very much, gentlemen. I think I have said everything
I can say on this subject.
Senator L e n r o o t . If it be true that this great drop in prices is
world-wide, would you still say it was due to our financial system?
Mr. A m o r o u s . No, sir; I think those things are local to qach nation,
so far as that is concerned. I have a copy of Mr. Harding’s book
on the functions and premises of the Federal reserve system. He
gave it to me last October. He makes the statement that the fanner
should be aided and stimulated to the full measure of his harvest.
He is, to my mind, the commanding figure in finances in this country
to-day—in the world—because he is the representative of the United
States, being the head of the Federal reserve system, and his word,
laid down for the financial improvement of the people, should com­
mand the attention of Congress. He does not use the word “ money.”
but if money is necessary, he says, “ Aid artd stimulate the farmer.”
He says that should be done, “ so that agriculture shall not languish.”
And full production is of more value to the people as a whole than
lesser production. They told the people to cut production down 50
per cent in order to get higher prices. It has been cut, but the price
is not coming up with the restricted production. But they did not
do it for that purpose. They did it because they could not supply
the men to make the crop. One man by the name of Bean had six
men running plows last year, and this year he is running a plow him­
self, and he has sold off his other mules for what he could get, and
he is plowing what he can himself, but has nobody working for him
this year.
Senator L e n r o o t . Is that not going to tend to increase prices to
the farmers in the end ?

Mr. A m o r o u s . The price does not make so much difference. In
1914 he got 5 cents for cotton, but that price paid all -the farmers’
debts.
Representative S u m n e r s . Y ou did not get that all the year o f 1914.
Mr. A m o r o u s . It was 7i in December. Mr. Candler, you know,
when cotton was 5 cents offered to loan 6 cents a pound on 1,000,000
bales and then the prices went up.
Representative S u m n e r s . And then they organized a sort of a
cotton poll about that time also. But the truth was there was a sort
of a buyer’s strike at that time, and you could not sell it. But in
January it went up to 26 cents.
Mr. A m o r o u s . Yes, sir. And then the exchanges were closed, and
then when they opened up it broke 2 cents a pound.
Representative S u m n e r s . When was it you went to these banks in
Atlanta and tried to get some money ?
Mr. A m o r o u s . In December.
Representative S u m n e r s . 1920?
Mr. A m o r o u s . Yes; last December.
Representative S u m n e r s . It w a s 7 per cent then, w a s it?
Mr. A m o r o u s . Seven per cent the Federal reserve bank was
charging member banks; yes, sir.



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Representative S um ners. November 1, 1920, they took off their
progressive rate, so there was no progressive rate when you went
there to that bank?
Mr. A m orou s. I saw the statement made here by Mr. Williams
that there was a refund back also. I saw it in the papers.
Representative Su m ners. Yes.
Mr. A m orou s. That is what the President told me, that they had
only 1 per cent profit.
Senator L e n r o o t. In other words, your bank could not do busi­
ness on a profit of 1 per cent ?
Mr. A m orou s. It could not; it would stretch their rediscount abil­
ity too much to make it, and they had to take care of their regular
customers.
I claim that a bank is a public-service corporation, just like a
railroad, and if the Government is furnishing them the money to
make a profit off the people, I think they should function always
uniformly. We require the railroads to do it, and the Government
does not support the railroads—they are now, under the stress of
circumstances, but we will have no return on tonnage until we get
normal production on the farms.
The C h a irm a n . Do you think the Federal reserve bank rates
should be such as to enable the banks to make a profit on the money
they borrow from the Federal reserve banks?
Mr. A m orou s. Well, if necessity alone makes demand for money,
no matter what the rate is, the loans will expand if necessity exists,
and I think that is the main movement to most people; the necessity
will make the borrow.
The C h a irm a n . I supposed the principle was that the rate at the
Federal reserve bank would be slightly above the market rate; if
it was not so, you would have constant expansion of loans merely
for the purpose of making a profit, whether the banks or industry,
or the condition of industry, justified an expansion or not.
Mr. A m o r o u s . I have had an experience on that, and the most
money I ever made was when I borrowed money at 18J per cent,
and i made a profit on that. I lost my investment when I borrowed
money at 5 per cent. The rate is not what makes it profitable.
Representative Sum n ers. Are you sure of that?
Mr. A m o r o u s . N o , sir; not altogether.
Representative Su m n ers. You were probably engaged in some
highly speculative business when you borrowed money at that rate?
Mr. A m o r o u s . I bought a home for $ 2 ,5 0 0 . . And the rate I paid
altogether amounted to 18$ per cent. I borrowed it through a build­
ing and loan association. I afterwards sold it for more than $ 5 0 ,0 0 0 .
Representative S u m n ers. It was speculation.
Mr. A m o r o u s . It was a home, and I lived on it 2 9 years. I bought
it for a home. The matter of the rate is not so important.
Representative Sum n ers. Your position is not, however, that the
people should pay that high rate?
Mr. A m o r o u s , The injury to the people is the profiteers. There
was a merchant in Atlanta who bought sugar for 12 cents and sold
it for 16 cents, and he was condemned to prison for two years for
“ profiteering,” for making too high a percentage. But these banks
made from l<k) to 200 per cent; did they profiteer ?




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The C h a i r m a n . Which banks are you talking about; the Federal
reserve bank?
Mr. A m o r o u s . Yes, sir.
The C h a i r m a n . I f they had made less profits on'the amounts
which they loaned to the member banks, and the member banks
loaned to the people who wanted it, the credit would have been very
much more restricted than it was.
Mr. A m o r o u s . The injury I see about that is the great amount
they have piled up in that bank, taking it from circulation. That
is the injury to the people. They injure the people in the gross
amount.
The C h a i r m a n . They do not take it from circulation, and they
issue Federal reserve notes in relation to the increase of loans ana
discounts.
Mr. A m o r o u s . There was $17,(K ),000,000 out one year in loans
K
and discounts in the Federal reserve member banks.
The C h a i r m a n . In member banks?
Mr. A m o r o u s . Yes, sir.
The C h a i r m a n . Do you think Federal reserve currency ought to
keep pace with their loans and discounts and be of the same volume?
Mr. A m o r o u s . Yes: I think when a farmer grows a bushel of
corn or a bale of cotton that he creates a debt against the people
and that money should be created to enable the exchange of his
products with other people, and the Government itself maintains
the right to create monev. I think they should create the money
to do the business of this country, and it should be based on the
quantity of products.
The ( ’ h a i r m a n . It is.
Mr. A m o r o u s . N o , sir; it is based on the three billions of gold
we have. That is the joker in the Federal reserve system. It can
expand ten or twelve times beyond the amount of gold we have.
It is a good system otherwise; otherwise it is fine. I think we ought
to continue it, but we ought to withdraw the gold limit.
The C h a i r m a n . What w o u l d y o u make the basis o f currency then?
Mr. A m o r o u s . Products. If we need an elastic currency to ex­
pand, we need it when the commerce of the country needs it. We
need to issue it in quantity up to the value of products.
The C h a i r m a n . Well, if the business of the country i s such that
the normal expansion of the banks is not sufficient, they borrow from
the Federal reserve banks, and that rediscounted paper becomes the
basis of Federal reserve notes, so that Federal reserve notes do ex­
pand in direct relation to the business of the country.
Mr. A m o r o u s . But it is based on our gold; it is limited by the
amount of gold we have. Mr. Anderson, we can go a certain limit,
or a certain distance, in having gold as the limit, but we have got
to get additional gold if we keep up the expansion and developm ent
of industry equal to that we had in 1919. Then the 40-per-cent
clause cuts down the amount in circulation, and our busines has
grown to such an extent that it went faster than the production of
gold. That is what broke us down, in my opinion. Now, I could
not go into that, because I did not study out a financial system for
the Government, so I am unable to answer any questions on that.
I can tell you the effect of our present system, but what the effect o f




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a changed system would be, I don’t know. But we do have to have
an clastic currency when needed by commerce, as was announced
when that was adopted, but when you limit it to gold, you are limit­
ing the entire activity of industry to quantity of gold.
Representative S u m n ers. Is not your difficulty due more to the
lack of facility, more the difficulty of petting money to the farmer
who has a good basis for a loan, than it is due to the difficulty of a
lack of circulating medium ?
Mr. A m orous. I claim that practical business shows in commerce
that money is a boat, a railroad train, and a warehouse.
Representative S u m n ers. Yes.
Mr. A m orou s. It is the life of commerce; it is the lifeblood of com­
merce. • You have got to have that if you are going to do business.
Representative S u m n ers. But you must have a track on which to
run your railroad or a stream in which to float your boat?
Mr. A m orou s. Yes; but if you withdraw all your trains from your
road----Representative S u m n ers (interposing). What has been with­
drawn?
Mr. A m orous. In the Federal reserve system you have withdrawn
and hoarded all the real money we have got.
Representative S um n ers . You have got the trains then o f the
Federal reserve system.

Mr. A m orous. Y o u have taken the trains off the Southern Rail­
road-----Representative Su m n ers (interposing). When you went to At­
lanta you found a man who had a good basis for credit ?
Mr. A m orou s. Yes, sir.
Represeptative Su m ners. But you did not have an avenue through
which the man could get to the money; though the money was there?
Mr. A m orou s. I wrote a little skit on the money, which I will
read to you, if you would like to have it. [Readihg:}
Pursuit o f living and happiness Is a duty imposed on us by our Creator.
A living is neiessary to maintnin life.
Happiness is necessary for us to desire to live.
Labor gives us a living.
The absence of a policeman in the Garden of Eden made labor a necessity
to live.
Police means order.
Order is necessary for the happiness of the individual.
Order is government.
Government is to protect and aid the individual in the pursuit of orderly
happiness.
People lived, labored, and thrived before the days of money.
They bartered and they traded with the baker, the butcher, and the brewer.
They increased their kind and they spread everywhere and into distant
lands. And yet, exchanging, bartering and trading, they used the elephant
and the camel, and their kind, spread everywhere, should eat and be happy.
Then It came a time that in the exchange, it was too burdensome for the
camel and tbe elephant to render to each his due.
Another vehicle or beast of burden was necessary to life of all kinds. Then
came the vehicle of exchange money.
Ages pass and we are to-day in a land of plenty, many have a surplus,
others o f their kind need this surplus in their living. They that need are
distant— equal distribution to them that need requires only a vehicle to
carry to them that they may live.
Disorder reigns In all the lands.
The government functions, provides the vehicle, money, all that need are
’ applied and order is restored among all the people.




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The disorder in cotton threatens the living of many people; its equal dis­
tribution to those in need is retarded.
The kinil in the distance who need have not the price to bring to then).
Hence disorder is spread over all the land of plenty.
The government, the power of order, must act and provide the vehicle of
equal distribution, money, that our kind that need may be supplied, and
happiness reign in all the land.

That is what I think of money and its proper use.
The C h a i r m a n . They have created money in France and Germany
without any relation whatever to business and business requirements;
they have done it in Austria, and they have done it in Hungary;
do you think they are any better off than we are?
Mr. A m o r o u s . I don’t Know. My opinion is Germany will control
the commerce of the world without the use of the gold dollar in their
currency. That is my opinion.
The C h a i r m a n . I will venture to say that when they arrive at
that point they will have a currency based upon gold.
Mr. A m o r o u s . Mr. Anderson, if Europe was to pay us ten billions,
for instance, which is owing us, they would have no gold. There is
only eight billion in the world. All Europe will abandon the use of
gold for currency. That is my prediction as a prophet. Why
should they continue ? I f we were to put all the gold on a steamer
and send it to England and it was sunk in the ocean, would we
starve ? I say not. I say we have a wise Congress that knows what
the Constitution says they shall d o: they would create money. I can
go to the bank in Atlanta and give my note for $1,000, and they will
give me $1,000 for it. I f I take a Government bond for a thousand
dollars there, they will eive me $800 for it.
You could just as well put 10 grains of gold in a dollar by fiat of
the Government as you can put in 25.8 grains by fiat of the Gov­
ernment.
It is the thing you use to trade with as to what you can exchange
it for. You go into one store down here, and they charge you $10
for a hat, and Congressman Lee will go into another store and get
one for $5. Your dollar was worth 50 cents; the unit of value was
the hat; your dollar is worth what a bushel of wheat is—what you
can do with it and how much you can get of the kind of thing you
want in exchange for it. The only use for it is for an exchange of
roducts. It is only used as a medium. You get $10,000 as a Memer of Congress; your redeemer is not Congress; your redeemer is
not the Treasury. You go to a hotel and pay $200 a month for food
and lodging; Congressman Lee takes his money and goes to another
place, and for the same month he pays $100. You both have your
money, but yours was a 50-cent dollar. I was only using that as a
simile of the way we do business. It is not what we really have;
there is no intrinsic value in the money; values are relative in ex­
change. We issue billions of dollars of money—the Government
does—on less than the amount of gold we have. You have twentyfour billions in bonds to be paid in gold, and you have not the gold.
You never had it, and the people never had the money when they
took those bonds. You printed it and gave it to them.
The natural law of supply and demand regulating prices has been
destroyed by legislation m our copyright and patent laws, protectivetariff laws, interstate commerce law, Federal reserve bank law, pro­
hibition law, Sherman antitrust law, and others.

E




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I want to thank you, gentlemen, for your indulgence and kindness
in listening to my individual views about this matter just as it
occurred to me in my daily occupation in life. I appreciate very
much the kindness arid courtesy.
The C h a i r m a n . We are very much obliged to you. The commis­
sion will now take a recess until 2 o’clock this afternoon.
(Whereupon, at 12 o’clock and 20 minutes p. m., the commission
stood on recess until 2 o’clock in the afternoon of the same day.)
AFTER RECESS.

The commission resumed its session at 2 o’clock p. m., pursuant to
the taking of recess.
The C h a i r m a n . Mr. Dumay, we have not many members of the
commission here, but if you do not mind speaking for the record we
shall be glad to hear you. Please state your full name and whom
you represent.
STATEMENT OF HE. ALONZO H. DUMAY, PRESIDENT FIRST NA­
TIONAL BANK, WASHINGTON, N. C., REPRESENTING NORTH
CAROLINA BANKERS’ ASSOCIATION.

Mr. D u m a y . My name is Alonzo M. Dumay. I presume that I am
here representing the North Carolina Bankers’ Association. I am
president o f that association, and also president of the First National
Bank o f Washington, N. C.
I regret very much, Mr. Chairman and gentlemen, that I could
not have a stronger representation here from the North Carolina
Bankers’ Association. I intended to, but I did not have the time to
get them together. There were one or two that would have come,
but unforseen circumstances came up which prevented their coming.
The two men whom I wanted to represent the North Carolina
Bankers’ Association could perhaps present this matter to you in a
better shape than I can. I really do not know what I was invited
here to testify about. I had some correspondence with Congressman
Ward in regard to the interest rates charged by the Federal reserve
bank, hoping that there might be something done to have that rate
reduced., believing that that would be a great benefit to business
along all lines.
I do not know whether this is a matter I should discuss as a banker,
because as I understand the national bank law it was not made for
the banks: it was made for the people. It was not made for the
purpose o f permitting the member banks to make a profit out of the
Federal reserve bank, and neither was it made for the Federal reserve
bank to be a profit-making institution. Therefore it seems to me
that the matter ought to be discussed from the business man’s point
of view instead of the banker’s. I will endeavor to give you my
ideas as a business man as to why the reduction of the interest rate
of the Federal reserve bank would be a benefit to business, stabilize
business, and give people confidence.
Of course, I understand that conditions vary in the several Fed­
eral reserve districts. The district in which I am, the fifth, is the
only one I know about; I do not know the conditions in the other
districts.




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I believe that if you will investigate you will find that as soon as
the Federal reserve bank raised its interest rate the price of Liberty
bonds decreased. I think that can be substantiated. That in itself
meant a loss of millions of dollars to the people of the country. I
l>elieve that if they had maintained their rate that they started on of
4 per cent, based on Government securities, it would in some measure
have kept the bonds nearer par.
The C h a irm a n . Is it not a fact that the bonds actually hit the bot­
tom during the period when the 4 per cent rate was in effect ?

Mr. D u m ay. Yes, sir; I think that is so.
The C h a i r m a nThen the mere fact that the discount rate on bank
.
paper with Government bonds as collateral was low does not alto­
gether account for their failure to maintain their value ?
Mr. D u m ay. It was this way, sir. A great many of those bonds
were held by people who were compelled to borrow on them. When
we had a 4 per cent rate, based on the 4 per cent bond, you might
say as preferential security, a man could carry those bonds without
any loss, but as soon as that rate was raised he went to a loss at once.
Representative S um ners. The chairman’s statement was that the
shrinkage in the bonds preceded the increase of the discount rate. Is
that a fact ?
Mr. D u m a y . No, sir; I do not think so.

Representative S u m n ers . You misunderstood the chairman’s state­
ment then.
Mr. D u m ay. Perhaps I misunderstood the chairman’s statement,
but I think I can substantiate that, sir. I have here the discount
rates of the Federal reserve bank, and also a partial statement of the
prices of bonds; I did not get the full list. The bonds in January,
1920, showed a very good price.
Representative S u m ners . What was the price?
Mr. D um ay. Take the first 4’s, for instance, 94; second 4’s, 92;
third 4’s, 95; fourth 4’s, 93; and Libertys were 99.84.
Now, the Federal reserve bank put into effect on January 5 a dis­
count rate of 4.75 per cent based on Liberty bonds or Victory notes.
Representative S um ners . What was the rate just before that time?
Mr. D u m ay. The discount rate was 4.50 per cent. That was on
December 15. On April 25, 1919, the rate was 4.25 per cent. In
April of 1920 Liberty bonds were at a lower rate than they .were in
January.
Representative S um ners . D o you mean a lower rate or a lower
price ?

Mr. D um ay. A lower price. On April 20 the Federal reserve bank
put the rate up to 5$ per cent on Liberty bonds. It shows, to my
mind, that it was the cause of the reduction in the price of Liberty
bonds.
The C h a irm a n . Have you made a comparison of the prices of
Liberty bonds during this period with other things which would
indicate-----Mr. D um ay. They did recede in price.
The C h a ir m a n . And prices in general receded during the same
period ?
Mr. D um ay. Yes, sir.
The C h a irm a n . I s it not just possible that the recession in price of
Liberty bonds was a reflect of general price conditions, including




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the price o f industrial stocks, rather than the result of the increase
in the discount rate ?
Mr. D r m a t . The position the country bank was placed in, in
North Carolina, when they put the rate of discount up to 6 per cent
on all classes of securities was this: It almost prohibited a bank in
the State of North Carolina from making any loans at all, because
they could not come out even on it.
Representative S u m x e r s . Making any loans on what? On any­
thing ?
Mr. D u m a t . On anything.
Representative S u m x e r s . Y ou mean when they increased the rate
on the Liberty bonds they also put the rate up to 6 per cent—the
general rediscount rate?
Mr. D u m a y. Yes; they put their rate up; on June 1 ,1920, they put .
their rate up to 6 per cent.
Representative S u m x e r s . From what?
Mr. D u m a y . From 5£. That rate is maintained to-day; it has never
been reduced since that. time.
Representative S um ners . Well, how do you people operate your
banks down there, and how do you avail yourselves of the rediscount
privileges under those conditions?
Mr. D u m a y . Why, at the present time there is no bank that would
borrow money from the Federal reserve bank at the 6 per cent rate to
reloan, because if they did, they would have to charge usury. There­
fore. we are almost prohibited from borrowing for loaning purposes.
The banks are in this position: The first of the year 1920 the banks
had plenty of money on hand. They extended credits liberally to
their customers. The slump of prices of farm products, which is our
mainstay in our section, was such that hardly anybody was able to
pay their bills at all. Our deposits did not increase, and we had
these loans on hand that we could not carry very well without calling
on the Federal reserve bank for renewals constantly. Therefore, the
banks were not making these loans from a matter of choice; it was
a matter o f necessity. It did not make much difference what the
Federal reserve bank charged, they had to make the loans to protect
' themselves. They could not collect their notes that they had out, and
it was a matter of sink or swim. It would not have made any differ­
ence if the Federal reserve bank had charged them 15 per cent; they
would have had to pay it just the same.
The C h a irm a n . Well, if the rate had been 4 per cent instead of 5$
per cent, you would have loaned more money, would you not?
Mr. D u m a y . Well. I do not know that a prudent bank would have
done so under those conditions, because they were loaded up to the
guards anyhow.
Representative S u m ners . When the rate was increased to 6 per cent
and the renewal time came, was the effect of that increase to cause
the banks to call their loans?
Mr. D u m a y . Yes. sir.
Representative S um ners . It would seem to me that would be the
inevitable effect.
The C h a irm a n . But how do you reconcile that statement with the
fact that the loans of the Federal reserve bank nevertheless contin­
ued to increase and did increase until along in December, 1920?
01341—22—voi. 3------1(5




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Mr. D u m ay. I do not quite catch your question.
The C h a irm a n . How do you reconcile that statement that the
effect of the increase in the discount rate was to compel the bankers
to call their loans with the fact that the loans and discounts of the
banks during the period of the last six months of 1920 continued to
increase notwithstanding the higher discount rate?
Mr. D um ay. A great many banks had to do that to protect them­
selves on their deposits. As their deposits decreased their reserve
funds became depleted, and they had no other place to go to except
the Federal reserve bank. That is where the Federal reserve bank
saved the day, by being in a position to loan the bankers money to
take care of their decrease in deposits. Pretty nearly all the banks
in our section lost deposits heavily, and could not collect their loans,
and because of that we were compelled to go to the Federal reserve
bank.
The C h a irm a n . I know; but I was not speaking about the loans
of the Federal reserve bank, but the loans and discounts of the mem­
ber banks increased during this same period.
Mr. D um ay. That was caused by the decrease in deposits, largely.
There were very few banks, as I understand it, who made additional
loans beyond what they had on hand at that time. They merely re­
discounted paper they had on hand at that time.
The C h a irm a n . But I say, the loans o f member banks to their
customers during this period, when you say the effect o f the high
discount rate was to cause the member banks to call their loans,
were actually increasing instead of decreasing.
Mr. D um ay. The banks did try to call them, but they were unsuc­
cessful in doing so. We reduced our loans very little. We made
the effort to do so, but we failed. And then, in the face of decreasing
deposits, we were often compelled to go to the Federal reserve
banks to get help to take care of the decreased deposits.
Representative W a rd . I f I may be allowed to interrogate the
witness: Your State rate is 6 per cent, is it not?
M r. D um ay. Yes.
Representative W ard. And the banks charge you 6 per cent ?
Mr. D u m ay. Yes, sir.
Representative W a rd . You then, of course, can not lend any money
which you borrow as a member bank from the Federal reserve bank
without violating the State law, can you?
M r. D u m a y . N o, sir.
Representative W a rd . You can not make anything on it?
M r. D um ay. No, sir.
Representative W a rd . When the rate was
per cent, you were left

a margin of 1J cents?
Mr. D um ay. Yes, sir.
Representative S um ners. Did they have that rate on general com­
mercial discounts?
Mr. D um ay. They did have it previous to this depression. They
loaned money there in November. 1917, at 3^ per cent.
Representative S u m n ers. That was the general rediscount rate?
Mr. D um ay. Yes, sir.
Representative S u m n ers. Of course, people must at times borrow
money, and the banks should have some profit, not only for the over­




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head but to take care of the element of risk incident to the fact that
they borrow the money and guarantee the payment and loan it out
again. Have you got a system down there of brokerage charges for
getting loans which indirectly permits a higher interest rate but does
not violate the letter of the law ? How do you get around it ?
Mr. D c m a t . There is no way that we can get around the usury law.
Our State courts have decided that any charge made is usury.
Representative S u m n ers. Whether you call it a commission or
what not?
Mr. D u m a t. You can not call it anything.
The C h a irm a n . Is the maximum rate in your State 6 per cent?
Mr. D u m a t. That is it. There is no way that a bank can get
around the usury law, that I know of. You can not call it brokerage,
you can not call it service, you can not call it anything. The Supreme
Court has decided it is usury if you charge a man more than 6 per
cent.
Representative S u m n ers. So the effect of this situation has been
practically to shut you people out from the facilities of the Federal
reserve system ?
Mr. D um ay. Absolutely. There is' not a prudent banker in the
State of North Carolina that would borrow a dollar from the Federal
reserve bank at 6 per cent now if he did not have to. But we have to
do it; our necessities compel us to do it.
Representative S u m n ers. T o take care o f outstanding loans and
existing conditions ?
Mr. D u m a t. That is it. In our little bank we only have $100,000
capital and $100,000 surplus and undivided profits. We are carrying
with the Federal reserve bank to-day $300,000, and we have not been
able to get it down since last March; we can not collect our loans.
That is the position we are inland that is the position of 90 per cent
of the banks in that community to-day. We can not possibly make
a dollar; we are losing on the business. During the last six months
we did not make anything like the profit that we should have made if
things were easy. The tighter money gets the less money we make,
under existing circumstances.
Representative W ard. What have you to say as to the justification,
from its standpoint, of the Federal reserve bank making this charge?
You are not a Federal reserve bank man, I know, but have you any
suggestion upon the question of whether they are bound to charge 6
per cent and ought to ?
Mr. D u m a t. They absolutely should not charge 6 per cent. It was
not.the intention o f the law, as we all understand it, for the Federal
reserve bank to be a money-making institution. They have been a
great money-making institution; their balance sheet will show that
they are the greatest money-making institution, based upon legiti­
mate business, that there is in the I nited States to-day.
Representative Sum n ers. Of course that is already in the .record.
But they claim that the system ought to charge a little more for re­
discount privileges than is charged ordinarily by rediscount banks.
In other words, they get all the rediscount business, and become a
hank o f rediscount.
Mr. D u m a t . Take, for instance, the placing of the fourth Liberty
loan, which has nothing to do with this------




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Representative S u m n e r s Let us stick to this proposition, without
discussing what anybody said about banks placing loans. This is,
I think, one of the most vital things connected with this whole investi­
gation.
Mr. D u m a y . I fully agree with you on that.
The C h a i r m a n . N o w , let us get to w h y you think the Federal re­
serve bank is not justified in charging the rate of 6 per cent.
Representative S u m n e r s . What have vou to say on that point?
Mr. D u m a y . I do not think they are justified m doing it.
The C h a i r m a n . Why n o t ?
Mr. D u m a y . Because it makes money too hard for the people to
get. That is the reason. A bank is not going to go out and borrow
money at 6 per cent and loan it at 6 per cent.
The C h a i r m a n . Well, if you make a rate of 4 per cent, for in­
stance. on paper secured by Government obligations, naturally the
profit in borrowing it at that rate and loaning it at a greater rate
would induce an expansion of your loan account with the member
banks. Xow, that can not go on forever, can it?
Mr. D u m a y . Well, there are times when banks should not borrow
any money at all. There are times of the year when we have plenty
of money and have money to loan without borrowing at all. There
is hardly any prudent banker will go to the Federal reserve bank to
borrow money to reloan or go to anybody else.
The C h a i r m a n . This was the situation when this rediscount rate
was raised. Banks all over the country were extending their
loans: many of them were becoming very, very much extended.
Prices were going up. There was a great spirit of speculation and
extravagance all over the country. Some time or other that expan­
sion or extension had to stop ?
Mr. D u m a y . Certainly.
*
The C h a i r m a n . If you do not stop it by increasing the rediscount
rate, how would vou stop it ?
Mr. D u m a y . That is a hard question to answer. This high rate
charged by the Federal reserve bank in our district did not take effect
until very shortly before prices of commodities decreased.
The C h a i r m a n . They began to raise the rates in December, 1919,
didn't they? They raised them slightly in December, 1919, raised
them asnin in April, and then again in the latter part of May, 1920?
Mr D u m a y . On December 15, 1919, the rate, based on Government
securities, was 4i per cent. On member banks’ collateral notes and
customers' notes secured by War Finance Corporation bonds it was
5f per cont. I do not know why that difference was made. Bank
collateral notes secured by eligible paper, 4} per cent. That was De­
cember 15, 1919.
January o. 1920, the same rate applied—4J per cent.
January 23, 1920. there was another rate sheet came out: Eligible
paper.*6 per cent. That was when they put it up; they put it up
from 4 J per cent to 6 per cent.
The C h a i r m a n . That was on member banks’ collateral notes?
Mr. D p m a y . On member banks’ collateral notes secured by eligible
paper. Secured by Liberty bonds or Victory bond notes, 5J per cent.
The C h a i r m a n . That was in January, 1920?
Mr. D u m a y . January 23, 1920, was the date.




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The C h a i r m a n . That was considerably previous to the time prices
began to drop?
Sir. D c m a t . Our prices began to drop on agricultural products
in the latter part of August, when we opened our tobacco market.
That was when we got the first blow.
The C h a i r m a n . August, 1919?
Mr. D u m a y . 1920.
The C h a i r m a n . I f the interest rates had stayed at the low point,
at the point they were in 1919, would the banks have gone on ex­
tending further loans, becoming more and more extended, and if the
price drop had come just the same, as the result of a falling off of
consumption and a falling off of exports, would not the result have
been much worse than it was?
Mr. D u m a y . I do not think it would, sir, because the banks were
borrowing in the latter part of last year and the first part of this
year from necessity. They were not making any new loans. None
of the banks down in our section of the country made any new loans
during that period. I f they borrowed more money than they had
during the middle of 1920, thej did it to protect themselves, not to
loan to the customers. They just simply used the paper that they
had already loaned on.
The C h a i r m a n . I am trying to get at the theory of the proposi­
tion. You make the general statement that the policy of adopting
a discount rate of 6 per cent is wrong. Now, then, the only way I
can find out whether it is wrong or not is to try to find out what
would have happened if it had not been done.
Mr. D u m a y . That we do not know.
The C h a i r m a n . Maybe we can make a pretty good guess. Gen­
erally speaking, this is true, is it not, that if you have a low redis­
count rate the tendency on the part of the member banks would be
to rediscount paper and borrow for profit?
Mr. D u m a y . Yes, sir; under ordinary circumstances that would
be so. But it would not have been so during, I might say, the last
six months.
The C h a i r m a n . The last six months of 1920 ?
Mr. D u m a y . Yes; and the first six months of 1921. I do not be­
lieve that any prudent banker would voluntarily have increased his
loans.
The C h a i r m a n . Then, in your judgment, the situation would have
been in that case that loans and discounts would have fallen off
just as they did anyhow, and prices would have fallen off just as they
did anyhow, but the rate of interest which the member banks would
have had to pay on rediscounting paper would have remained at a
low point?
Mr. D u m a y . I t h in k so.
Representative S u m n e r s . It seems to me that in considering this
whole proposition there are two phases. One is whether or not the
increase of the rediscount rate was justified at the time it was im­
posed. O f course, that is a matter of history, and involves simply
the proposition of whether or not it is to be criticized. The more
important thing about the whole matter, it seems to me, however, is
that under the existing conditions of the country, having stopped this
inflation, if the Federal reserve bank system ought not bv the rpdn**-




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tion of the rediscount rate to enable these member banks to begin to
function to take care of the pressing necessities o f the people.
The C h a i r m a nMr. Dumay say they could not have taken care
.
of them any more, because even if the rate o f discount had been low
they would not have extended their loans and discounts. But, of
course, they could not take care of the people who wanted loans and
did not have them unless they loaned more money.
Representative S u m n ers. The chances are. it seems to me, that,
perhaps, the community loan would not have great increased, pro­
vided the banks had made some new loans. For instance, if a bank
had loaned some money on good securities, would it not have enabled
the farmer to pay his debts, to settle his doctor bill, and the doctor
to settle up with the bank, and so on? And the total of the com­
munity's outstanding debts might not have been increased, even if the
banks had not been paralyzed by this rate. I am not sure about
that.
*
Mr. D um ay. That is the idea I have of it, sir, exactly. I believe
that if the Federal reserve bank had reduced its rediscount rate it
would have given the people confidence as much as anything else
and started the wheels of business moving around. I f a man comes
into your bank and you tell him he can not get any money, because
you are loaned up to the limit and because money is costing so much
you can not afford to lend it to him, it keeps many a man from pay­
ing his debts. I have known that to occur in many cases where a
fellow had the money to pay his debts and would not do it because
he did not know what was going to happen.
The C h a irm a n . Let us analyze that. Apparently farm prices
began to fall before wholesale prices and retail prices after wholesale
prices. The principal thing that the farmer complained about was
not only that his prices were being brought down but that retail
prices did not come down in proportion. Now, if you had reduced
the rediscount rate in June, 1920, for instance, and as a result of
that you had brought about some revival of business, would not the
effect have been to arrest the downward movement of wholesale and
retail prices, and thus to retard the coming together of these prices
upon a reasonable basis of margin?
Mr. D u m ay. It would not have done so unless there had been an
appreciable amount of loans collected or banks’ deposits increased,
because I am sure that no prudent banker would make additional
loans under existing circumstances and could not afford to have
done it.
Representative Sum ners. Assuming that it would have had some
effect in retarding the decrease in wholesale and retail prices, if at
the same time it would not have created so low a level for agricul­
tural commodities, which they would have had to go down to meet,
it would seem to me we would have had, perhaps, a more desirable
situation, in view of the existing debts in this country, national and
private, than if we had put all aebts to an extraordinarily low level.
Mr. D u m ay. It is going to operate this wav, if that rate continues.
It is going to operate in a way to keep the bankers from extending
credit.
The C h a irm a n . Why?
Mr. D u m ay. Because they can not break even on the proposition;
they will lose money every’time. You must have some margin of



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profit if you take care of your risk and your overhead. You can not
borrow money at 6 per cent and loan it at 6 per cent.
The C h a irm a n . Well, generally speaking, the country over, that
is not the situation, is it?
Mr. D u m a y . It is so except in a very few States. South Carolina
has an 8 per cent rate. They can go to our Federal reserve bank and
make 2 per cent.
The C h a irm a n . And they evidently have done so.
Mr. D u m a y. Yes; surely they have. However, I do not think that
their loans to-day reflect a profit. The large amount of commodities
held in South Carolina is because of the large amount they are carry­
ing with the Federal reserve bank.
The C h a irm a n . N ow , if your theory of this thing is right, the fact
that you can not loan what you borrow fr.om the Federal reserve bank
at a profit retards loans in North Carolina, it would seem to follow
that in South Carolina where the rate is 8 per cent it would not have
that effect. The fact is that the loans and discounts of the North
Carolina banks since 1914 has increased 194 per cent, and the loans in
South Carolina have increased 166 per cent. So that although in
South Carolina they could have charged a higher rate of interest
than you could charge, they still were not as much extended as you
were.
Mr. Dumay. That is true.
Representative Sum n ers. N ow , it may be just the opposite is shown
by that; maybe it is shown that if the people could get some money
they could keep their industries active and reduce their debts.
The C h a irm a n . I am taking his theory for what it is worth; I am
trying to see whether it develops in line with what actually occurred.
Apparently it does not.
Representative Su m ners. I think my statement explains how it
happened.
The C h a irm a n . Well, you are theorizing about it.
Mr. D u m a y . It is a matter for theorizing, anyway, I guess. I am
only giving you my individual position in the matter. I know very
well that I would not borrow a dollar from the Federal reserve bank
at 6 per cent unless I had to do it.
The C h a irm a n . Is it not the very theory of the Federal reserve
system that a bank is not supposed to borrow from the Federal re­
serve bank unless it has to?
Mr. D u m a y . Well, that is one reason that the Federal reserve
banks were created, I presume, to take care of emergencies. I do not
take it that the Federal reserve bank was created for a member bank
to make money out of it.
The C h a irm a n . Assuming that that is the case, the normal dis­
count rate would be a rate slightly above the market rate for money?
Mr. D u m a y . It might be a less rate through the Federal reserve
bank.
The C h a irm a n . It is not in any other country in the world, and
it was not in this country up to the beginning of the war.
Mr. D u m a y. Y o u will find that when the Federal reserve bank
raises its rate of discount the money centers will just go them one
better. I f you put it on that basis, there would be no end to where
the rate would go.




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The C h a i r m a n . That is not demonstrated by the Federal reserve
bank here or by banks in other countries. For instance, the redis­
count rate of the Bank of England all through the period o f the war,
when interest rates were at the highest, was constantly above the
market rate for money, and so the Federal reserve rediscount rate
here was, until the war, above the market rate for money.
Mr. D ijm a y . I was not aware of that fact.
The C h a i r m a n . Of course the minute you put the rediscount rate
below the market rate you invite the banks to borrow money from
the Federal reserve bank for purposes of profit, which you yourself
say is not the purpose for which it was created.
Mr. D u m a y . Some of our neighbors had occasion to borrow money
in New York. I have never done that. What money I have bor­
rowed since the Federal reserve bank has been in existence I bor­
rowed from the Federal reserve bank. But they had to pay 7 and
7$ per cent for money, and some of them as high as 8 per cent. The
Federal reserve bank rate in this district was 6 per cent. That is the
reason I ventured the assertion that money would, as a rule, be
above the Federal reserve bank rate. I base It upon that proposition
entirely.
The C h a i r m a n . Normally’ it is not. It has been in this country
ever since the beginning of the war, and in my judgment that fact
is responsible for a good deal of the trouble we have had. A good
deal of the expansion that took place in 1919 was due, in my judg­
ment, to the fact that the war finance of the Government and the
necessity of borrowing monev necessitated keeping a low rate of
interest on loans by the Federal reserve bank, and that brought
about the period of speculation that we had in 1919. I f it had been
possible early in 1919 to raise the discount rate, that period o f expan­
sion probably would not have occurred. It was not possible, be­
cause the Government was undertaking to sell those loans at a rate
below the market, and it could not be done unless the rediscount
rates were also below the market.
Mr. D um ay. I made that statement based upon the facts that I
knew; that was all. I do not pretend to keep up with financial
affairs. I am down in the country, you know. I have no doubt your
statement with regard to that is correct, and I only speak from cir­
cumstances that I know myself.
The C h a i r m a n . I do not want to be misunderstood myself, and
am not assuming that the policy of continuing the pressure of
high discount rates all through the period of the last six months of
1920 and the first six months of 19*21 is necessarily sound.
Representative W a r d . Y o u have made an interesting suggestion
here, Mr. Chairman, and something that is new to me, that it was
never contemplated that the member banks should borrow money
from the Federal reserve bank for the purpose of lending it to the
customer to make a profit on it. I f a bank wants to lend money to
me and the law of North Carolina says it shall not charge me more
than 6 per cent, and it has to go to Richmond and borrow it at 7
per cent, it is something like the case of that frog in the well that
jumps up 1 foot at night and drops back 2 feet in the daytime, and
the proposition is, what time will he get out ?




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The C h a i r m a n . It is a question whether the market rate follows
the rediscount rate or whether the rediscount rate follows the market
rate.
Representative W a r d . It presents one proposition that can not be
denied, that the Congress would be compelled to put some regulation
upon the Federal reserve system that would force a different policy
in North Carolina from that adopted in Texas, where the maximum
rate is 10 per cent, as against G per cent in North Carolina, for to
leave the Federal reserve system to arbitrarily enforce the same
regulation or the sam# policy in two States would seem to me to leave
the low interest rate State absolutely behind in the race of life.
Representative S u m n e r s . I f the present policy is maintained, if the
present high rediscount rate is continued, North Carolina will have
to increase its interest rate or reconcile itself to the fact that it is
largely shut off from access to the facilities of the Federal reserve
system.
Mr. D u m a y . We have certainly tride to do that, sir, but we meet a
frost every time .we try it.
Representative W a r d . A frost that gradually changes into snow.
The C h a i r m a n . I can see that the limitation you are confronted
with in the matter of the interest rate is too great, even in normal
times. A margin of 1 per cent would be a very, very high margin
between the Federal reserve bank rate and the market rate for money.
It unquestionably would discourage borrowings on the part of the
banks, when thev ought to be encouraged.
Mr. D u m a y . We can not do business on a 1 per cent margin,
taking into consideration the risk.
Representative S u m n e r s . Of course, when you have got consider­
able local deposits and you only have to borrow enough to main­
tain your reserves you can afford to borrow enough to keep up your
reserve, depending upon the reloaning of your deposits, I presume,
for your profits; and if you can get a margin of 1 per cent you will
get it back?
Mr. D u m a y . Oh, yes. You see, when your reserve is depleted in
the Federal reserve bank you do not pay a 6 per cent rate; you pay
an 8 per cent rate. They charge you 2 per cent above the regular
discount rate for the amount depleted in your reserve fund. In
addition to that, they will only loan for 15 days at a time and on
bankers’ collateral notes secured by eligible securities or Government
bonds. That is another hardship. However, that is a regulation, I
presume, and they think it advisable.
The C h a i r m a n . It is a matter of la w , not of regulation.
Mr. D u m a y . I did not know that that was so.
The C h a i r m a n . I might say that when the Federal reserve bank
act was first passed it contained no provision at all for loans on the
paper o f member banks collateraled by eligible paper or Government
bonds. That was a policy adopted, as I recall, about 1917.
Mr. D u m a y . We have been carrying with the Federal reserve bank
for almost a year a large note that we have renewed every 15 days
at 6 per cent. That amounts to more than the 6 per cent rate; that is
compound interest every 15 days. That is the way it works out.
However, as a banker I am jnaking no protest at all. I f it is their
regulation or if it is the law, we certainly have to do it.




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I f there could be some way a rra n g e d whereby the Federal reserve
bank could lower its rate and still keep the banks from borrowing
money from them for speculative purposes it would be the thing
to do.
The C h a i r m a n . They tell us they tried to do that in 1919, and
every effort was made by the Federal reserve banks and the Federal
Reserve Board to discourage the speculation that took place in 1919.
Banks were urged to make loans with great caution, »nd all that
sort of thing, but it did not work. And with this expansion con­
tinuing and the reserves of the Federal reserve banks gradually
going down they found themselves confronted with the necessity—
I am telling you their story now—of taking some other action to
stop the expansion and speculation that was occurring all over the
country. That was the begining of the adoption of the higher redis­
count rates.
Mr. D u m a t . Member banks are restricted to 10 per cent of their
capital and surplus in making loans, and there are mighty few banks
which will violate that restriction. It seems to me there could be
some plan adopted whereby the Federal reserve banks could con­
trol the matter of banks borrowing from them for speculative
purposes.
The C h a i r m a n . Do you think it would be preferable to set up
somebody in the Federal reserve bank as arbiter, to arbitrarily pass
on the question of whether a bank should have a loan or whether it
should not have a loan, or it would be better, on the other hand,
to regulate it by a rediscount rate which applies to everybody in the
same way?
Mr. D u m a t . I should think it would be better, if it could -be done,
to have some regulatory force in the bank to control the speculative
feature.
The C h a i r m a n . I have a notion that if we had somebody in these
Federal reserve banks undertaking to pass on loans which member
banks should have, determining that one loan was speculative and
another one was not, that they would not take certain paper for
rediscount because it was speculative and they would take other paper
because it was not speculative, the banks would be the first fellows to
object.
Mr. D u m a t . They do that right now, sir; they will not take paper
based upon real estate security.
The C h a i r m a n . Well, that is because the law will not permit
them to, not because they have somebody to decide that.
Mr. D u m a t . They will not take notes secured by any stocks or
bonds, outside of Government bonds.
The C h a i r m a n . That is because the law prohibits it. The law
itself adopted that policy, but you would set somebody up there to
use his own judgment over the iudpnent o f the bank as to what
loans the bank should make and what loans the bank should not
make.
Mr. D u m a t . Well, I did not mean the view the bank would fake
itself of regulating the loans, but to pass upon whether the bank
was entitled to additional credit for its self-protection rather than
for speculation. That is my idea about it.
The C h a i r m a n . Does not that involve in itself a determination of
the character of the member banks’ transactions? It comes right



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back to the same point either wny. Either the Federal reserve bank
has to take the position that it will regulate the volume of redis­
counts by rediscount rates or else it has got to take the position that
it is going to set itself up as the arbiter of the question wherever it
believes that rediscounts ought not to be granted. And it seems to
me that, take it by and large, the first is preferable, because it leaves
the management of the banks to the bankers and leaves the question
to him to determine whether he wants a rediscount or not.
Mr. D u m a y . The increase of the rates will effectually stop the
banks from borrowing money except in cases of distress. Where a
bank gets in distress they have to pay whatever is required of them;
the country bank would not voluntarily pay a higher rate of interest
than they can get on loans. On the other hand, they might be called
upon to pay a higher rate to protect themselves.
The C h a i r m a n . I s there not something rather receptive in that
suggestion, in view of the fact that the bank, of course, does not bor­
row from the Federal reserve bank the amount which it is loaning to
its borrowers, but only borrows the proportion of the loan which is
necessary to maintain its reserve ? Is not that true ?
Mr. D u m a y . Yes.
The C h a i r m a n . I have asked you enough questions. I did not
want to stop you from presenting any matter that you have in mind,
Mr. Dumay.
Mr. D u m a y . N o , sir; I do not think of anything further.
The C h a i r m a n . The commission, I think, appreciates the diffi­
culty that confronts you in the fixed maximum rate of interest that
the bank can charge—a situation that probably does not exist in
many States.
Mr. D u m a y . We are in a very unfortunate position—there is no
question about that—and we can not help it. We have tried our best
to remedy it, but we have been unsuccessful in doing so.
The -C h a ib m a n . , We are very much obliged to you, Mr. Dumay.
Mr. D u m a y . You are entirely welcome, sir; and I appreciate being
called if I have done any good.
The C h a i r m a n . Now, Mr. Mosher, we will listen to you for a
while, and you can tell us what happened in the ninth Federal re­
serve district.
STATEMENT OF MB. CURTIS L. MOSHER, ASSISTANT FEDERAL
RESERVE AGENT AND SECRETARY OF THE BOARD OF THE FED­
ERAL RESERVE BANK OF THE NINTH FEDERAL RESERVE DIS­
TRICT, MINNEAPOLIS, MINN.
Mr. M o s h e r . Mr. Chairman, I want to be just os brief as possible,
and I do not want to burden your record with unnecessary material;
and if you will ask me such questions as you choose to ask, and on
which you would like information, I would be glad to answer; or if
you would like to have me go ahead and outline what has happened
m the ninth Federal reserve district I can proceed and do that.
The C h a i r m a n . I f you will proceed and outline what has hap­
pened in the ninth Federal reserve district you may do so, and then
the members of the commission can ask you questions and draw out
any additional statements they desire.




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Mr. M o s h e r . I presume this commission is fully advised of the
situation with which the Federal reserve bank has to deal in the
ninth Federal reserve district. In the first place, we have in our
district 3,863 banks. Two thousand two hundred and twenty-eight
of those banks are ineligible for membership in the Federal reserve
system, for the reason that they are State banks and have not suffi­
cient capital; they have not a sufficient amount of capital necessary
to establish a national bank at the same point, and therefore there
is no opportunity for those banks to come into the Federal reserve
system until their growth is sufficiently advanced through capital to
the required point.
We have 1,016 members out of the 3,863 banks, and those are the
onlv banks, of course, of which I speak.
The C h a i r m a n . H o w many of those banks are State banks?
Mr. M o s h e r . One hundred and thirty-four of the member banks
are State banks, and 882 of the member banks are national
banks. The growth of the State bank membership has been very
satisfactory.
I think the clearest way of stating our situation in the ninth
Federal reserve district is to go back a little bit, to the fall o f 1918.
That was the last crop liquidation we had. In that year the crop
came on in good shape; it was a good crop; railroad facilities were
adequate, and the crop moved very promptly to its markets. There
was nothing to interfere with the free and natural flow o f the crop
to the terminals, and at the end of the year, although our rediscounts
had been up to $97,000,000 on the 13th of September, 1918, they were
down again to $3,500,000. In other words, there had been the
seasonal demand that was contemplated bv the law; the seasonal
demand had come and gone, and the liquidation had occurred, and
coincident with the liquidation there was a reduction of the
$97,000,000 in rediscounts—which had been reduced by some almost
$94,000,000.
In 1919 when the crop came on with the fall seasonal demand—and
that is the big demand, as you know, in our district—we encountered
in the first place a serious railroad situation—a very acute railroad
situation; a very acute car shortge. I was a member of the committee
which bombarded the railways and Interstate Commerce Commission
with requests for cars for tlie purpose of moving our grain to the
terminals, and they did the best they could do for us, but at best
the supply was decidedly unsatisfactory7 and insufficient.
We had at the same time an exceptionally early winter, and the
result was that the country roads were blockaded before the crops
had reached the shipping points. The result of that was that
liquidation did not occur at the usual time—that is to say, from
the 15th of September on through the late fall.
By the first of October the movement o f grain in our territory
ought to be in pretty good swing, and by the middle of October it
ought to be in full swing, and by the end of the year it ought to be
pretty well along.
Representative S u m n e r s . What do you mean by pretty well
along—if it will not interrupt you ?
Mr. M o s h e r . I mean to say that the harvested grain should have
reached the terminal markets by the end o f the year, in usual
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The C h a i r m a n . At least 65 o r 70 per cent o f it s h o u ld be in by
that time?
Mr. 'M o s h e r . Yes: it should be in and on its way to the consumer,
or to the mills, as the case might be.
But that did not occur, as I said, in 1919; and it was not until
February 2, 1920, that any liquidation began. Then it was small
and only temporary. At the end of the month of January, 1920,
our bank carried an overload of $65,657,534 of credit. That was a
phenomenally large amount for that period of the year. It was
the first time that we hid ever gone over the first of the year with
an abnormal load o f unliquidated paper.
There have been only two montlis in the 20 months since then in
which the total rediscounted paper in our bank was less than at the
end o f February. There was some reduction to the end of March,
and some reduction from the end o f March to the end of April. At
the end of May the $65,657,534 of rediscounted paper with which we.
started the year had arisen to $86,469,575.
Representative S t j m n e r s . H o w much had the rediscounts been re­
duced ?
M r . M o s h e r . They had increased from $65,657,534 to $86,469,575;
that was to the end o f April. At the end of May they were $95,174,813; at the end of June they had arisen to $96,313,706, as compared
with the $65,657,534 at the beginning of the year.
A t the end of August they had risen to $101,197,483; and at the
end o f September they had risen to $103,854,376. And late in
November, near the end of the month, it had risen to $129,000,000.
That was the high point reached last year. From the high point in
November down to the end of the year there was some liquidation.
The liquidation from the high point to the lowest point this year
amounted, in round numbers, to $44,000,000. None of it came from
agricultural sections or from member banks in those sections. When
I say none of it, I speak in a broad wav. What I mean is that that
liquidation is traceable to other sections, which I will mention in a
moment and show the figures.
Now, if we go to the other side of this sheet, we find the loans at
the end of the year to the 16 large banks in St. Paul and Minneapolis,
which do a large banking business with the country banks—banks
belonging to the 2,228 banks which can not take membership in the
Federal reserve system and get money in that way. Their borrow­
ings from us at the beginning of 1920 were $56,965,000. That figure
rose at the end of October to $70,380,000. But from the end of
October to the end of July of this year the total was reduced to
$33,628,000. And there, you see. is where the contraction in our
loans occurred. In other words, the larger city banks were the
sources from which this liquidation was mainly obtained.
Now. there are some other figures in connection with that that are
extremely interesting. I have had our own statisticians in our office
examine the books of those banks. I wanted to see exactly where
the funds they had borrowed from us had gone. They found this
situation: Those same banks had. on October 20, 1919. loans to
country banks and bankers outstanding of $37,240,767; and they had
deposits, or compensating balances from country banks of $98,116,456. But on August 11 of this year—this was a special investiga­




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tion that I had made just before I came down here—their loans to
country banks and bankers were $76,704,711; but the deposits from
country banks were $45,413,102; and the relation was, with October,
1919, as 100, on August 11, 1921, it was 205.9; but their deposits had
shrunk, taking October, 1919, as 100, to 46.3. So it is evident, tak­
ing the figures from January to August—on January 1, 1920, they
had $43,424,852 of loans to country banks and bankers, and on
August 11, 1921, they had $76,704,711—that they were loaning more
heavily all the time during that period. That is to say, throughout
the full course of this year down to date, instead of being able to
obtain a reduction in the amounts due from the country banks and
bankers, those amounts actually increased; on the other hand, the
amount of deposits from the country banks W as decreasing, so that on
August 11, 1921, it was $45,413,102.
The C h a i r m a n . Which would indicate a large liquidation in city
loans ?
M r . M o s h e r . Y e s ; a n d t h a t is in d ic a t e d b y a n y a m o u n t o f c o lla t­
e r a l e v id e n c e , th a t th e m e r c h a n t a n d w h o le s a le r w a s liq u id a t in g his
in d e b t e d n e s s w it h h is c i t y b a n k , a n d th e c it y b a n k s w e r e red u cin g
b o r r o w in g s f r o m us.
Representative S u m n e r s . Where did the wholesaler get his

money i
He g o t it b y c o lle c t io n s .
Representative S u m n e r s . I f it happened that the country banks
borrowed money, and that borrowed money, through the process of
payment to the city creditors, was tumedin to the city creditors and
the city banks and they liquidated their indebtedness in that way,
that was money borrowed primarily by the country banks?
Mr. M o s h e r . I would not be able to express an opinion about that.
I f that was true I have not noticed it in our district. I have not
noticed that, but I know that the larger houses, the larger machinery
houses, and the wholesale houses, were perhaps a little quicker to
sense the drift of things than the smaller houses and the country
merchants and farmers were. Certainly, they began to see signs of
stringency some time ago, and wherever it was possible for these
larger houses to get a little money they got it, and wherever it was
possible for them to reduce their inventories they reduced them, and
they were in a position at the beginning of this year to reduce their
bank obligations.
Representative S u m n e r s . They could not, having their goods
scattered throughout the country on credit with their customers—
-I
do not see how they could liquidate, unless they collected from their
country customers, and the country customers probably got the
money through rediscounts by the country banks.
M r . M o s h e r . Of course it can not be overlooked that liquidation
was not entirely suspended at the banks, although it was exception­
ally slow, (train was being sold very slowly, and at intervals. The
facts, so far as we can arrive at them, are these. The agents for the
city merchants were very active, and as the farmer sold his grain,
and delivered it to his local elevator, in the smaller cities, the local
machinery man and the local grocer were pressing him for money,
and those men were being pressed for money by the city collector, and
M r. M o s h e r.




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in that way money was collected in. Perhaps the country bankers
were not as alert as they should have been, and did not press their
customers as hard as they should, or as hard as they might have.
Possibly they were a little more considerate and did not apply the
>ressure. However, that money came in, and the wholesalers colected up, and the liquidation was through commercial channels, and
not through the country banks.
Representative S u m n e r s . It seems to me in this liquidation which
took place in the city, they cleaned the country out of all the money
they could get—I do not say this in criticism—and left the country
merchants holding the sack. They got all the money that had been
sent out by rediscounts through the Federal reserve bank. I do not
see how it could be otherwise, if the country banks did not have it;
the grain was sold, the money was not on deposit in the country
banks. The money was drawn from the country into the city. The
city rediscounts went down and the country rediscounts went up.
Mr. M o s h e r . H o w would it have been drawn into the city ?
Representative S u m n e r s . It was drawn into the city first by pur­
chases made by country people and the payments of their accounts
to their merchants; payments of accounts to their merchants which
did not have to clear through the banks; the city merchants in turn
sent the money to the city banks for deposit there, and they, in turn,
reduced the rediscounts at the Federal reserve bank.
M r. M o s h e r . That would turn the money to the city, if the money
was borrowed from the Federal reserve bank and loaned to the coun­
try banks, and the man in the country who paid his merchant who
had borrowed money from the bank-----Representative S u m n e r s (interposing). Yes.

f

M r . M o s h e r . A n d th e n h e w o u l d , in t u r n , p a y h is w h o le s a le r , a n d
so f o r t h .
Representative S u m n e r s . Yes.

Mr. M o s h e r . I think if that was the general policy, we would have
had some evidence of it.
Representative S u m n e r s . How could it be otherwise?
Mr. M o s h e r . Of course, there was a certain amount of liquidation;
liquidation was not entirely suspended, even though the grain did not
come in promptly. A good deal of grain came in, as a great deal of
grain comes in every fall: and the country merchant was undoubtedly
very alert, and he pressed the people for collection of their accounts
and probably collected considerable sums which did not go through
the bank at all. Grain is a cash commodity in our country, and
they would probably market a load of grain, and then probably pay
the merchant, and the merchant the wholesaler, and the wholesaler
would liquidate his indebtedness.
Representative S u m n e r s . 1 es ; I think that is what happened.
M r . M o s h e r . But it did not reach the banks. There wasn’t any imrovement in bank deposits, and there wasn’t any payment of loans,
lost o f our paper is made to come due at the crop-moving time.
That is our one pay day in the grain country. I think there are
some reasons why liquidation has been very slow in the Northwest.
It was very easy" in 1918.
In 1919 there were some very unusual conditions. The car shortage
was one; tbe weather condition was another: and the blockade of

S




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ttin country roads was another, which delayed the nornfal processes
of liquidation. By a combination of those delaying processes we
worked along from week to week, thinking that liquidation was about
to occur, but it did not occur, and spring came, and by that time the
price situation became rather unsatisfactory and the farmers who had
borrowed at their banks rather freely at the period of high prices
became worried about their notes, but they did not want to sell at
those prices, and that still further tended to hold back this crop, with
the hope that prices might improve. But it did not improve, and it
was only comparatively recently—I should say within three or four
months—that there has been any disposition on the part of those who
were holding back supplies of grain to market that grain and turn it
into cash.
I think this is an element in the situation which is not well under­
stood, and which is a little hard to analyze. The current crops have
been very economically handled.
Representative S u m n e r s . That is true all over the United States.
Mr. M o s h e r . Because the farmers have not gone to the banks as
freely as formerly. Yet that proves that the farmer has drawn on
some of this grain, the same as he would draw on a savings account.
I f he was pressed for money, he would go and take a load of grain to
his town and sell it, and so in that way he would dribble it out.
And so, while there has been a little liquidation from day to day, it
has not been enough to reflect itself in the deposits in the country
bank or in liquidation there, or in an improvement of their city
balances.
The C h a i r m a n . One of the phenomena that I have not seen any
explanation of is that during the last six months particularly, when
demand deposits have been falling off considerably, time deposits
have been continuing to rise in almost a normal way.
M r . M o s h e r . I don’t think they have been so seriously interfered
with. Of course, some peculiar conditions develop in communities
like North Dakota, where money has been withdrawn by outsiders,
and that has tended to embarrass the banks in certain localities.
Whatever checking account the farmer had, if he did not replenish
it may have been improved by cashing a certificate of deposit, but
he would, if he had any money, put most of it into a C. D., and the
farmer would hesitate a lot before cashing a C. D. There has been
some of that done.
Representative S u m n e r s . What is a C. D. ?
Mr. M o s h e r . A certificate of deposit. I could give you some
figures, if you would like to pursue that to see what the course of
those figures has been.
The C h a i r m a n . We would be very glad to have them.
M r . M o s h e r . 1 was very much interested in obtaining from the office
to-day by wire a tabulation of the figures as of June 30,1920, which
is a date that we can compare with some of these other figures,
the total loans and discounts of nonmember banks. The loans
ind discounts of national banks on that date were approximately
$598,000,000. The loans and discounts of State banks and trust
companies were $690,000,000. The borrowings of national banks at
the Federal reserve bank—national bank and State bank members
of the Federal reserve bank—were $84,664,000. The borrowings of




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State banks from their correspondents and from all other sources
were $83,831,000. And it indicates that the percentage relation of
the borrowings of member banks from the Federal reserve bank was
almost exactly the same relation that has been maintained by non­
member banlcs borrowing from entirely different sources, because
with loans and discounts, which are relatively about the same, the
borrowings are reasonably close together.
Representative S u m n e r s . I s not that what you would expect?
M r . M o s h e r . I would not expect any great difference. I think the
pressure is evenly enough distributed so that you could see that result.
The borrowings by the banks in the Federal reserve system was
paralleled by a group of nonmember banks that were not in the
Federal reserve system at all. And if that is the total of obligations
for borrowed money in both the national and State banks, it is safe
to add ,$20,000,000—1 think that is very conservative—borrowed
by officers of the banks for the customers of their banks. I f that is
correct, and I think it is, the figures show that these banks are carry­
ing an overload at the present time of $188,495,000. That is the
money they have brought in from some source—the Federal reserve
bank, the city banks, and other sources—to take care of these stock
and grain customers. And it represents an exceptionally heavy load,
which has got to be cleaned up before these banks are free and have
funds again to function in tne normal way. That, I think, is our
roblem now, to get these banks in a position to take care of the
usiness in their communities, and then a more normal situation will
come and the grain men and the live-stock men can be assisted in
the normal way.
Representative S u m n e r s . What are the people doing with their
new crop ?
Mr. M o s h e r . It is a little too early to say. There is a very con­
siderable movement to market, I think.
. Representative S u m n e r s . H o w much of the old crop is there
remaining on hand?
M r . M o s h e r . There is considerable. There is some rye and some
com and considerable other grain.
Representative S u m n e r s . What is happening to your live stock up
there ? Is your she stuff and young stun and immature stuff put on
the market to any considerable degree?
Mr. M o s h e r . I am sorry to say that in the early summer they mar­
keted some of it. South St. Paul got a good many calves and pigs
that were not fully matured.
Representative S u m n e r s . D o you not regard that the necessity of
keeping those cattle and those pigs on the farms is a far greater
necessity than the necessity of liquidating the loans in the banks?
Mr. M o s h e r . Absolutely; our D ank h a s never held a n y differently.
The C h a i r m a n . There has been a very strong contention here that
a very great restriction of credit h a s taken place, particularly in the
agricultural sections, and that a different policy has been adopted
with respect tQ agricultural loans and industrial loans. Can you
throw any light on that subject from the standpoint of the ninth
district?
Mr. M o s h e r . I have heard that criticism very frequently, Mr.
Chairman, and the book to which I have referred you was written in

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response to questions of farmers at some o f their conferences, some
of which were quite large and most of which I attended. 'Hie ques­
tion came up, Why are you restricting credit? Where is this restric­
tion of credit? Get it out in the light, so that we can identify it
Surely, if you go back to February, 1920, to a total of $65,657,000 of
rediscounts in our district, and which is $84,804,000 now, and in the
interval between went as high as $129,500,000, there is no evidence
there o f a restriction of credit.
And in that connection it is interesting to take up another situa­
tion. In the ninth district the main business is agriculture. Now,
if there were a disposition in that reserve bank to loan too freely to
commercial business—I mean what is commonly called “ big busi­
ness”—it would be interesting to find out what those loans were.
In Minneapolis we have the grain and flour milling business, and
the banks m Minneapolis notified the grain and milling trade that
they would appreciate it if they would stay out of Minneapolis and
leave their lines of credit intact-----Representative S u m n e r s (interposing). I did not quite get that.
Mr. M o s h e r . They notified the grain and milling firms that they
would very much appreciate it if they would leave their lines of
credit in Minneapolis and St. Paul banks intact, and do their
financing, as they easily could, in the East, and in the bill market.
And they responded very nicely, and the amount of credit they sought
there was very small.
Representative S u m n e r s . Why did they make that request ?
Mr. M o s h e r . Because they foresaw that the $78,000,000 loaned to
the country banks and bankers would not likely be reduced, but that
probably it would be increased; and to prevent a feeling by the
country banks-----Representative S u m n e r s (interposing^). They wanted to hold their
resources to take care of the local situation ?
M r . M o s h e r . Locally in the district. The grain and milling trade,
had always done its financing largely in the open market; their credit
is very, very strong, and, ordinarily, they can obtain money in the
East and in the bill market, and they go to where the money is
easier than in our country, and there they get it at a less rate.
I do not know where there is any business of any magnitude until
you get to the copper sections in Michigan, and I never have seen
any of that paper in our bank. Gov. Young told me we have had
some of the smaller companies that were not so strong as the old
companies.
In northern Minnesota we have some enterprises up there like the
iron mines and the steel mill at Duluth, but I have never seen any of
that paper in our bank. Their financing is done some other way.
Then you go on to Butte, where they have the smelting and
mining interests, but their financing is handled similar to that of the
milling interests. I do not think we have ever had any of their
paper in our bank.
The C h a i r m a n . Is not the condition of that bill market reflected
at all in the banks?
Mr. M o s h e r . Not to any extent. Minneapolis furnishes some
market for bills, but it is not large, and is mostly commercial paper.
These industries have the open market where they can dispose or their




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259

bills in order to finance themselves. The industries in the Black Hills
are financed in much the same way. We never see any of that paper
in our bank.
The live-stock interests at Sioux City and South St. Paul have a
close relation to the live-stock industry in our district, but we never
see that paper in our bank, although it is afloat in our city. It is
sometimes purchased, because the packer paper is considered good
anvwhere.
So when you get right down to it, the business of any magnitude
that we have a chance to finance is the farming and stock raising busi­
ness. I have frequently said that, anybody can take our statement on
a Saturday night and show that 90 per cent o f our last week’s busi­
ness was in farming and stock-raising paper. That is shown by these
figures here o f July 30. Our loans to the only banks in the district
which are located at the points where they would have opportunity
to get any commercial business of importance are St. Paul, Minne­
apolis, and Duluth, and the loans are $36,328,000; but on August 11—
40 days, later, these same banks had loaned the country banks and
bankers $76,000,000—$40,000,000 more than they had borrowed from
us. I think that is quite conclusive proof of where that money has
been loaned, and that what funds they took from us were not for com­
mercial accommodation, but were switched to the country banks and
that those banks, many of which were not able to get into the Fed­
eral reserve system directly, have gotten assistance indirectly from
the member banks.
The C h a i b m a n . I suppose the rediscount rates were increased
throughout the ninth district, as they were in all others; did those re­
discount rates have any effect in compelling a liquidation of the
loans ?
Mr. M o s h e r . I do not know that all of the officers of our bank
would agree with me, but I am absolutely convinced that they had
no effect whatever. They had this effect, that would be susceptible
of proof, that our fractional advances may have given warning of a
coming stringency, and some people might have borrowed a little less,
and in that case they might have had some effect. But the country
banker who needed the money, if the pressure from his farm cus­
tomers was keen, what difference does it make whether the money
was 5£ or 6 per cent?
The C h a i r m a n . I f it did not have effect, why was it put on ?
M r . M o s h e r . It had an effect sentimentally. When the warnings
were given, as early as 1915, that the resources of the district must
be carefully conserved in order to take care of agriculture, it was a
warning to the people that money was not easy. To those who were
wise it was just a caution signal. Now, whether Gov. Young would
agree that it was more than a caution signal, I do not know. He
might not agree with me on that. He might say that the rate would
accomplish a considerable reduction in the rediscounts. I can not see
it myself.
Representative S u m n e r s . The legal rate in your territory is con­
siderably above 6 per cent?
Mr. M o s h e r . Yes; in all the States.
Representative S u m n e r s . The contractual rates is what I mean.




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AGRICULTURAL INQUIRY.

M r . M o s h e r . Yes; the contract rate. I can submit to this commis­
sion, Mr. Chairman, a schedule of the dates and degrees in which our
interest rate has been progressed.
The C h a i r m a n . I think that is important.
Mr. M o s h e r . Perhaps you already have it. You have an average
of the agricultural rates?
The C h a i r m a n . I think I have the annual report of the bank,
which, of course, shows the interest up to January 1, 1920.
M r . M o s h e r . Yes.
The C h a i r m a n . I do not know that it shows the average rate. I
presume it does.
Mr. M o s h e r . The point I am getting at is, I do not recall any
instance in which our rediscount rate has been higher than the rate
to an agricultural borrower in any part of our district, unless it be
that some good farmer in the home section of your State should go
into a bank and borrow money on a straight note and get the money
there at 6 per cent.
The C h a i r m a n . I think that is very doubtful, because when I was
at home in May the banks were making few loans at less than 7 per
cent. The rates were then increasing.
Mr. M o s h e r . The advance in the discount rate, therefore, if that
is true—and it is true—has been no hardship.
The C h a i r m a n . Y o u d i d n o t h a v e t h e p r o g r e s s iv e r a t e in o p e r a t io n
in y o u r d is t r ic t a t a n y t i m e ?
Mr. M o s h e r . We did not have

the progressive rates at any time.
It has been our policy to try to control the very rapid expansion of
loans. You can see now rapidly they advanced when they went up
from $65,000,000 to $129,000,000 from us alone, to say nothing of
the local advances. I f that had continued at the same rate it would
have been very serious. It looked very serious as it was for a while.
The C h a i r m a n . Was the continuance of that possible—the expan­
sion and increase of rediscounts and loans, was not that the real rea­
son for increasing the rediscount rate ?
Mr. M o s h e r . I think it might be said—I speak for our bank only—
that when we advanced the rate we advanced it very gradually, and
that each of those advances was accompanied by a statement calling
attention to the serious condition, and urged that every possible pre­
caution be taken to conserve our resources, so that the farmer and
stock raiser might be accommodated with credit. And yet, in spite
of that, the expansion of loans was very much greater than many of
us wanted to see.
I think, Mr. Chairman, I might file with the commission a photo­
stat copy of our circular of December 19, 1919, and also a copy of a
similar circular of August 4, 1920.
The C h a i r m a n . Without objection, they may be read into the
record.
(The circulars referred to are as'follows:)
F e d e b a l R e se b v e B a n k o f M in n e a p o l is .

To a il banks and tru st companies in Fe d eral reserve d is tric t No. 9:
T h e a d va n ce In th e d iscou n t ra tes o f th e F e d e ra l reserv e b a n k o f Minne­
a p o lis is a n oth er w a rn in g to b a n k ers and th e gen era l p u b lic th a t th e resources
o f th e F e d e ra l reserve system a re n o t u nlim ited . I t is m y sin cere hope th at tb«
sign ifican ce o f th is a ction w ill b e u n derstood and th a t it w ill n o t b e necessary
to a ga in a d v a n ce th e ra te s a t a la te r date.




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261

T b e first w a rn in g w a s issued in O ctober, 1915, and h as been rep eated a t
v a r io u s in te rv a ls s in c e th a t date, b u t tb e a ction taken b y tb e F ed era l reserve
b a n k h a s n o t been given sufficient atten tion o r possib ly It h a s n o t been p rop erly
u n d e r sto o d .
T h e re so u rce s o f th e F ed era l reserv e system w e r e in ten ded f o r th e benefit
o f c o m m e r c e and Industry. I t w a s n o t th e p u rp ose th a t th ey b e u sed to stim u­
la te th e in vestm en t m ark et o r to en cou ra ge and su p p ort sp ecu la tiv e m ovem ents.
T o t h is d a te com m erce a n d in du stry h av e receiv ed exten siv e benefits, both
d ir e c t a n d in d irect, fr o m th e F ed era l reserv e banks, w h ich w ill, o f cou rse,
co n tin u e th e ir esta b lish ed p o licy and ta k e ca re o f a ll th e legitim a te and
r e a s o n a b le req u irem en ts o f business, in clu d in g a g ricu ltu re.
I t is q u ite evid en t, th a t th rou gh th e e x tra v a g a n ce o f in d ivid u a ls a n d th e in ­
d is c r im in a te exte n sio n o f cr e d it b y ce rta in b a n k s f o r in vestm ents and sp ecu la ­
tiv e p u rp o se s, th e reserves h eld b y th e F ed era l reserve b a n x s h a v e been
used th ro u g h a n in d ire ct p rocess f o r p u rp oses oth er than th ose in ten ded and
a u th o r iz e d b y la w . T h e exten sion o f cr e d it f o r specu la tiv e p u rp oses is n ot
con fin ed to sto ck s a n d b on d s alone, b u t su b sta n tia l a dva n ces h av e been m ad e
to e n c o u r a g e th e m ovem en t o f land, and f o r sp ecu la tion in com m od ities. T h e
F e d e ra l re se rv e b ank o f M in n ea p olis, in com m on w ith oth e r reserve banks, h as
u sed e v e r y p reca u tion to elim in a te su ch u se o f its fa c ilitie s , b u t In directly
th ese cr e d its h a v e been exten d ed, w ith th e resu lt th at an u n w a rra n ted o v e r­
ex te n sio n o f cre d it e x is ts a t th is tim e o v e r th e cou n try a s a w h ole. I f th is
co n d itio n is p e rm itted to con tin u e it w ill in tim e w o rk a sev ere h ard sh ip upon
everyon e.
E x p e rie n ce d b a n k ers a re cog n iza n t o f th e rea l situ a tion and a re con fin ing
th eir a d va n ces in a cco rd a n ce w ith sou n d a n d p ru d en t b a n k in g ju dgm en t.
C erta in banks h av e n ot e x ercised p rop er d is crim in a tio n and a re a ccu m u la tin g
loa n s that d o n ot h elp th e gen era l situ a tion . S u ch b a n k s a re dep en d in g on
so u rce s other than th e F ed era l reserve b a n k f o r a ssista n ce in th e e v en t o f an
em ergency.
S u ch a ssista n ce is, o f cou rse, secu red in d irectly th rou gh th e
F ed era l reserve b an k and th is w a rn in g is issued p a rticu la rly to b an ks th a t are
fo llo w in g th is co u rs e a s a rem in d er to th em o f th e u n w isd om o f dep en d in g
u pon tb e F e d e ra l rese rv e b a n k f o r In d irect su p p ort th a t it w ou ld n o t b e per­
m itted b y la w to e x ten d d ir e ctly to its ow n m em bers.
T h e F e d e ra l reserve b an k w ill th orou gh ly in vestiga te a ll a p p lica tion s fro m
m em ber banks. I f th e proceed s o f such red iscou n ts a re to b e used, either
d ire ctly o r in d ire ctly , f o r pu rposes oth er than th ose intended b y la w , such a p p li­
ca tion s w ill n o t receiv e fa v o ra b le a ction.
T h e F e d e r a l reserve b ank is com p elled to con sid er n o t a lon e w h eth er paper
offered f o r red iscou n t is e ligib le, but w h eth er the pu rposes beh in d th e a p p lica ­
tion f o r re d isco u n t a re in co n fo rm ity w ith th e la w and w ith its p u b licly an ­
nounced p o lic y . I t is v e ry d esira b le th at a ll banks, both m em ber and nonm em ­
ber, c a r e fu lly a n a ly ze th eir loa n s nnd d iscrim in a te in th e exten sion o f cred it,
d is co u ra g in g b o rro w in g fo r nonessentials and req u estin g th eir cu stom ers to
clean u p th e ir old in debtedness b e fo r e in cu rrin g n ew ob liga tion s. M an y loa n s
w hich a r e n o t in them selves ob je ctio n a b le w ill be fou n d upon a n a ly sis to be
u n n ecessa ry a t th is tim e, and w h ile the stra in upon cre d it con tin u es b orro w in g
for su ch n o n e ssen tia ls sh ou ld b e v ig o ro u s ly d iscou ra ged .
A f a i lu r e to fo llo w th is p o licy is v e ry lik ely to resu lt in p la cin g th e bank
involved In th e e m b a rra ssin g position o f b ein g com p elled to ex p la in to b orrow ers
who d e s ir e fu n d s fo r n ecessa ry com m ercia l and in d u stria l pu rposes th a t it is
unable t o a ffo r d them reasonable su p p ort becau se o f th e fa c t th at its dep osits
have b een lo a n e d in to o la rg e a m easu re f o r sp ecu la tiv e pu rposes.
T h e r ig id restriction o f loa n s to th ose w h ich a re a ctu a lly n ecessary in ord er
to p r o p e rly su p p ort co m m ercia l business, in du stry, and a g ricu ltu re o f the ninth
district c a n in n o w is e harm any ex cep t th ose w h o b y reck less ex p en d itu re o f
both th e ir fu n d s and th eir cre d it h av e en cou ra ged in flation . Such a p o licy is
essential a n d n ecessa ry i f th e presen t strain on cre d it is t o be ch ecked b e fo r e it
results in w id e sp re a d in ju ry to a ll b usin ess a nd to in divid u als.
T h e F e d e r a l reerve bank is con v in ced o f th e ab olu te n ecessity o f pruden ce,
caution, a n d w is e discrim in a tion in both th e exten sion nnd the use o f cred it.
T o u r s , respectfu lly,
R. A. Young,
D ecem ber

Governor.

18, 1919.




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AGRICULTURAL INQUIRY.
F e d e r a l R e se r v e B a n k o f M in n e a p o l is ,

A ug utt 4, 1920.
To a ll member banks:
D u r in g the pa st n ine m on th s th e F ed era l reserve b ank o f M inneapolis has
been u n der an u n u su a lly h eavy stra in in m eetin g the dem ands that have
arisen th rou gh th e n ecessity o f a id in g th e p rod u ction a n d d istrib u tion o f agri­
cu ltu ra l p rod u cts, th e ra isin g a nd m a rk etin g o f liv e stock , and th e com m ercial
a ctiv itie s in con n ection w ith these operation s. T h is b a n k w a s ab le w ith ou t out­
s id e a id to m eet the dem and s w h ich h av e a risen u ntil J a n u a ry 1 o f th e current
yea r. S in ce th a t d a te it h as been an a lm ost con tin u a l b o rro w e r fr o m other
F e d e ra l re se rv e b an ks in o r d w to m ain tain its leg a l reserve, and its borrow ings
h av e ranged in am ou nts o f $1,000,000 to $25,000,000.
E rro n e o u s im pression s a s to th e fu n ctio n s o f a F ed era l reserv e b an k seem to
e x is t a m on g som e b an ks a n d in th e m inds o f th e b usin ess p u b lic. Prim arily
th is is a reserve in stitu tion . I t w a s n ot th e in ten t o f th e la w th a t w e should
finance con tin u ou sly a n y p a rticu la r in d u stry, b u t ra th e r it w a s th e p u rpose o f
th e la w th a t the red iscou n t fa c ilitie s o f th is F e d e ra l reserv e b a n k sh ou ld be
used f o r sea son a b le dem ands, such a s th ose a ris in g In pla n tin g o r h a rv est time,
o r d u rin g th e e x 's te n ce o f an em ergency. T h is b ank h as ex p erien ced sin ce its
org a n iza tio n th e dem ands a risin g o u t o f th e m ovem en t o f s ix crop s, a n d it has
fu n ctio n e d sm ooth ly , p rom ptly, a n d sa tis fa cto rily , g ra d u a lly in crea sin g its
a d v a n ce s to m em ber banks fro m A p ril to S eptem ber o f each y e a r a n d expe­
rie n cin g prom pt liq u id a tion w ith th e m ovem en t o f th e c r o p to m arket in Octo­
b e r and N ovem ber. In the fa ll o f 1919, h ow ever, la rg ely b eca u se o f unforeseen
tran sp orta tion difficulties, an em ergen cy w a s crea ted b y th e s lo w m ov in g of
traffic. T h e cu stom a ry liq u id a tion in O ctober, N ovem ber, and D ecem b er d id not
o ccu r, and a s a result o u r resou rces h av e been fre e ly used b y a la rg e n u m ber o f
m em ber banks d u rin g a p e rio d o f m ore than a year. T h is in stitu tion h a s dem­
on stra ted d u rin g th is p eriod its a b ility to fu n ction s a tis fa cto rily f o r th e benflt
o f a g ricu ltu re , com m erce, and in d u stry and to m eet th e em ergency t h a t existed.
O ur a b ility t o m eet th is cr e d it situ a tion w a s d u e in n o sm a ll w a y t o th e close
co o p e ra tio n betw een th is In stitu tion and its m em ber b an ks a n d th e r e a d y w ill­
ingness o f th e la tte r to w ork in a cco rd w ith th is b ank in e lim in a tin g capital.
Investm ent and sp ecu la tiv e loans, and lo a n s based on n onessentials. T h is bank
d esires to th ank its m em bers f o r th e coop era tion a n d a ssista n ce th u s a ffo rd e d .
A t th is d a te a ll in d ica tion s p oin t to g ood cro p yield s. W h ile it is n o t expected
th a t fa r m p ro d u cts w ill m ove to m arket a s ra p id ly a s in a n orm a l y e a r , there
a re assu ra n ces that th e m ovem ent w ill b e b etter than th a t o f la s t fa ll. Bankers
w ill have first c a ll u pon th e proceed s o f th e shipm ent o f th e new c r o p and the
m ovem en t o f liv e stock th is fa ll. I f th ey d o n ot secu re sufficient liq u ida tion
fr o m th e ir cu stom ers t o retire th eir ob lig a tion s w ith u s and w ith t h e ir city
corresp on d en ts and b u ild up s tron g er reserves, w e feel th a t th ey w ill b e remiss
in th e d n ty th at rests u pon them in p rep a rin g f o r th e a g ricu ltu ra l a n d liv e­
s to ck requ irem en ts o f th e com in g year.
A t th is tim e it a p p ea rs h igh ly desira b le th a t th e F ed era l reserve b a n k should
m ake p ro v isio n fo r th e fu tu re by th e red u ction o f th e volu m e o f cre d it extended
to its m em bers, and th ereby in su re its a b ility to m eet the dem a n d s th a t will
resu lt fro m th e p la n tin g a n d h arvestin g seasons o f th e com in g y ea r.
W e prop ose esta b lish in g a ccu ra te record s o f th e shipm ent o f a gricu ltu ra l
and live-stock p ro d u cts from each section o f th is d is trict to th e m arkets.
W h en these p ro d u cts have m ov ed w e sh a ll in sist upon liq u id a tion fr o m every
m em ber bank in th is d is trict th a t h as h ad o cca s io n to u se o u r rediscoun t
fa c ilitie s , a n d it w ill be on ly u n der unu su al circu m sta n ces th a t m em ber banks
w ill be w a rra n ted in m a k in g a p p lica tion s fo r red iscou n t d u rin g th e period
betw een cro p m o v in g a n d sp rin g plan tin g. T h is sh ou ld n ot in flict a h ardship
upon n ecessa ry b usin ess, a g ricu ltu re, o r in du stry, a s w e fe e l th a t w ith good
cro p s th e resou rces o f o u r m em ber banks w ill b e sufficient to ta k e c a r e o f
th e requ irem en ts o f such b orrow ers d u rin g the w in te r m onths.
U nusual in du cem en ts a re su re to b e offered to a ll b a n k s to gra n t a ccom m o­
d a tio n s to b o rro w e rs fo r loa n s o f a ca p ita l, specu la tive, o r in vestm ent nature.
N evertheless, w h ile th is strain a n d th e Inflated co n d ition o f cre d it continues
it is u n m ista k a bly app arent th at m em ber banks in th e ninth F ed era l reserve
d is trict sh ou ld co n tin u e th eir p o lic y o f con fin in g th eir loa n s to sh ort-tim e obli­
ga tion s, and even u n der th is p o licy th e cre d it exten d ed sh ou ld am ou nt on ly to
th a t w h ich is n ecessa ry to a id th e p rod u ction , m a n u fa ctu re, and distribution
o f n ecessa ry g o o d s a n d com m od ities.
Y ou rs, resp ectfu lly,
R . A . Y oung,

Governor.

C ircu la r N o. 218.




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263

The C h a i r m a n . The figures from which you read may also be
inserted in the record.
(The figures referred to are here printed in full, as follows:)
T w in C ity member bank loans to and deposits from country banks.
Loans to
country
banks and
bankers.
Oct. 20.1919.............................................................................
Ian. 1.1980................................................................................
Oct. XL 1980..............................................................................
Jan. 1.1921................................................................................
A n (~ ll, M S I. ,

......

....................................

S37.240.767
43,424,952
78,017,477
75,372,457
1 76,704,711

Relative
to Octo­
ber, 1919,
as 100.
100.0
116.8
209.8
202.2
205.9

Deposits
from
country
banks.

Relative
to Octo­
ber, 1919,
as 100.

$98,116,456
84,750,994
62,255,584
55,853,771
45,413,102

100.0
86.4
63.5
56.9
46.8

i Estimate, based on returns from banks wblch, on the earlier dates, bad 75 per ccnt more o! such loan and country-bank deposits In the Twin Cities.

Borrow ings o f State banks in M innesota, N orth D akota, South D akota, and
M ontana on Feb. 21, 1921, and June 30, 1920.

Feb. 21,1821.

Minnesota, notes rediscounted and bills
payable.............................................................

June 30, 1820.

Increase in borrow,
ings on Feb. 21,
1921, over June
30,1020.

*29,807,405. M

$17,044,000.00

19b 141,182.00
• 1,524,370.71

11,040,000.00
1,666,000.00

20,665,552.80

12,715,000.00

Rediscounts.................................................

12,601,263.82
4,496,686.50

7.664.000.00
4.092.000.00

Total...........................................................

17,007,930.42

11,756,000.00

5,341,930.42

Montana, bins payable.....................................

13,177,316.73

9,001,000.00

3,486,316.73

Orand total...............................................

80,748,205.80

61,206,000.00

29,542,205.86

North Dakota:

Total...........................................................
8outh Dakota:

112,763,405.94

7,950,552.80

Representative S u m n e r s . I want to ask you if it is not your
judgment as a banker that when a country is in a condition we are
in now, notwithstanding the fact that discounts are large, that it
would be better to extend new 'credit where the individual loan is
sound, and put the communities into productive activity more nearly
approximating their capacity, than to adopt the opposite policy?
Mr. M o s h e r . I think I should want to answer that question in a
rather cautious way, with the object, simply, of not wanting to be
misunderstood. ‘ I would not feel any hesitancy in saying that there
has not been any time since the beginning of the war when credit
has not been extended fully and freely by our bank.
Representative S u m n e r s . I am not speaking of that.
Mr. M o s h e r . I had a purpose in making that statement first. On
the premise of that statement, I think it is very fair to ask the
question if, when our course has been to extend to the farmer and
stockman all the credit that he required, while cautioning him all
the time to cut his requirements down, and keep his requirements
down as low as possible, whether, after he has borrowed as heavily




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as he has, and has become involved as deeply as he has, whether we
are going to help him by loaning him any more money.
Representative S u m n e r s . N o w , let us take a concrete example.
Take a farmer in the corn belt who is already pretty well loaded
up. He knows where he can buy, if he can borrow the money, some
live stock to which he can feed his corn, and keep himself and his boys
busy. Now, that is one side of it. I f he is not given this accom­
modation and enabled to purchase the live stock which he can feed,
this immature live stock will go to slaughter, and he and his boys
will be sitting around this coming winter doing nothing, when they
might be feeding those animals, putting fat on them and increasing
their value, and increasing the Nation’s food supply. Those situa­
tions can be multiplied by the thousands, and I suppose the hundreds
of thousands in the United States right now.
Mr. M o s h e r . Mr. Sumners, the Federal reserve act especially ap­
plies now to a situation of that kind, and it is possible to rediscount
paper for the purpose of taking care of live stock that is being
matured.
Representative S u m n e r s . That question is not directed to the
Federal reserve system especially-----Mr. M o s h e r (interposing). The point I desire to make is this: I
think it was in the House, when the bill was under consideration,
that that particular expression was placed in the bill; a provision,
or amendment, was placed in the bill allowing the rediscounting of
paper for the purpose of making it possible to feed and mature
live stock, and that amendment was specially placed in die act, so
that it was possible to rediscount paper based on that sort of
transaction.
Representative S u m n e r s . Take a different situation: Here is a
ranchman who has a debt which is very heavy. He has some shestuff and calves that he could sell, and reduce the amount that he now
owes; of course, he has an overhead and operating expenses. I f he
could get some more credit he would be able to keep the cattle on
the ranch, for which he has proper grass and feed. It would post­
pone for a while this time of payment, but would increase the possi­
bility of it. It seems to me a situation o f that sort should be taken
care of.
Mr. M o s h e r . There are some situations of that sort that do arise.
They arise in our district quite frequently, and when you come to
consider them you will find, as is ordinarily the case in regard to the
maturing of the 2-year-olds on the ranch, that you become involved
in a situation that takes about 26 months. Tlie provisions of the
Federal reserve act make it impossible to rediscount paper for that
length of time, and if he can get credit at his local bank or else­
where for some time, the Federal reserve bank may be able to take
care o f it during the last six months if it is a proper obligation and
comes within the proper definition of eligible paper. As a purely
personal idea I have had the thought in mind that there should tie
some method of taking care of that sort o f thing. Not by the Federal
reserve bank, possibly, but maybe in the Federal farm loan bank, by
which a man who has stock and who is thoroughly experienced and
used to the stock business could take 2-year-olds and handle them and
mature them for the market if there were some way for him to obli­




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gate himself to pay in 24 months or 26 months. I happen to know
of cases in Montana, where there is plenty of land ana good grass
and ample feed, where such conditions arise. Ordinarily in nprmal
times, before this great pressure came on, the local bankers were quite
friendly to a situation of that sort. Of course, a local bank does not
have to make all its loans eligible for rediscount at the Federal
reserve bank. They could take a loan on this young stuff, and when
that loan came up to where it had only six months to run, as I said,
they could then, if it became proper paper to rediscount, rediscount
it with the Federal reserve bank, provided it complied with all the
regulations. There is a lot of tnat paper. It- would be a very
interesting subject to study as to whether there should not be broader
operations to foster a situation of that kind.
Representative S u m n e r s . It seems to me the pressure to require
rediscounting and reduction of outstanding loans would tend to de­
stroy efficiency and reduce the productive energy of the country, and
would work against the very thing that we hope to reach, the condi­
tion of a more general-----Mr. M o s h e r (interposing). I doubt if the directors of the ninth
Federal reserve district would father any policy that would tend to
force farmers to liquidate against their own best interests. That is,
I mean, a policy wnich would tend to force them to sell and limit
their production—for the sake o f liquidation—the development of
young live stock and immature stuff. I think the policy of our
directors would be to foster and help the development and growth
of that business rather than to force the farmers to sell that kind
of stock to liquidate their indebtedness, if possible for them to do so.
They come from every part of the Federal reserve district ; there is
one from Michigan, two from North Dakota, one from Wisconsin,
and one from Montana, and four from Minnesota, all parts of the
district, and I know when they get together—and I have opportunity
to know, because I am secretary of the board—they discuss tnese very
questions, of how they can encourage and assist these farmers in
these very things.
I know that not long ago we were very much concerned about wool.
It was a very serious problem. Out in Montana there is a great deal
o f wool grown, as you know, and the wool buyers were there when I
was out there, but before I left there was not a wool buyer left in
Montana or a place where a man could go to market his wool. It is
a very serious proposition for a man to grow his crop, and come up
to the marketing period and then find tnat there is not any market
for it. They simply could not sell it. Perhaps there were other
situations in the country that were similar. Perhaps cotton had some
of the same sort of a problem. And when agricultural prices and
farm produce began to drop, the farmers had their troubles. Here
was a -farmer who had a debt which it would take 100 bushels of
wheat to liquidate, and to-day he could not liquidate it except with
200 bushels of wheat. That is naturally very serious.
Representative S u m n e r s . I know the delicacy and difficulty in
handling the situation. But it seems to me. in view of the statements
that have been given out by the Federal Reserve Board cautioning
the people, at least indirectly—in view of those statements, and in
view of our present situation, that you gentlemen might now begin
to give out some statements on the other side of this proposition.




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Mr. M o s h e r . Speaking for our district, 1 do not think any pessi­
mistic statements have issued from our bank. In fact, I think the
toneiaf our statements has been that we are working out of these
difficulties. It is going to be very slow, and it is going to require
good horse sense, and everybody must economize and put his shoulder
to the wheel, but we will eventually work out. I know that the chair­
man recently issued a statement in which he expressed himself
definitely as being o f the opinion that these are temporary difficul­
ties that are ahead of us. There is in the Northwest great possibili­
ties of prosperity, and I believe in it.
Representative S u m n e r s . And the quicker you can get the people
to believe in it the quicker it will be here.
Mr. M o s h e r . Yes; and there are out in that country great tracts
o f fertile land, and there has not been much inflation. I suppose a
man could go into North Dakota and buy land to-day at what it was
worth three years ago. That same is true in some parts of Montana,
and in a great part of South Dakota, except in the southern part,
where it was affected somewhat by the land boom in Iowa. But a
man can buy land very much cheaper there than he can buy in Iowa
or Indiana, and there isn’t any reason to believe that those opportuni­
ties are going to be neglected forever. Somebody is going to get
those lands. I t seems to me the best thing to do for a period of pros­
perity is to get rid of these figures over here [indicating].
Representative S u m n e r s . Provided you do not get rid o f your
“ she ” stuff and young stock ?
Mr. M o s h e r . I do not think our bank will countenance any situa­
tion of that sort. We want our cattle. Our live-stook situation is
serious. Montana is short 225,000 cattle.
Representative S u m n e r s . I think it would be wise to increase those
figures, and keep those cattle on grass.
Mr. M o s h e r . A t the present time there is no provision whereby
we can furnish the money to restock Montana with cattle and redis­
count the paper with the Federal reserve banks. As I said before, it
is a two-year proposition, usually, and the Federal reserve banks can
not handle it. I think it would be a profitable-thing to do. I think,
so far as our directors are concerned, they would like to do all they
can for the agricultural situation, but there is no provision of law
that would permit us to take care of that kind of a situation, unless,
as I mentioned before, we could take care of the last six months of
theperiod, by taking the paper and rediscounting it at that time.
The C h a i r m a n . I s the Federal reserve bank borrowing now?
Mr. M o s h e r . We are borrowing $10,000,000 from other Federal
reserve banks.
The C h a i r m a n . That is less than you were borrowing a month
ago?
M r . M o s h e r . Slightly less ; yes.
The C h a i r m a n . Senator Capper, do you wish to ask any ques­
tions?
Senator C a p p e r . Do you think now that the intermediate system
that the chairman speaks of could be handled through the Federal
reserve banks?
M r . M o s h e r . I w o u l d e x p r e s s a n o p i n i o n as I e x p r e s s e d it b e fo r e ,
p e r s o n a lly . M y p e r s o n a l o p in io n is t h a t I d o n o t t h in k th a t it is
a p p r o p r i a t e t o p u t l o n g c r e d it s in t o th e r e s e r v e b a n k s . I d o n ot




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267

think that it is well for you to mix your long and your short term
business, especially when you have two separate and distinct mecha­
nisms, one especially created for the purpose of handling long-term
credits and tne other definitely and especially created to cate for
nothing but short-term credit.
Senator C a p p e r . I believe that the chairman suggested that the
local banks should handle this, so far as the dealing with the bor­
rower is concerned; but I am wondering whether the Federal re­
serve banks or the farm loan banks would be the best channel of dis­
posing of that paper.
M r . M o s h e r . Well, a question of that sort could be determined, of
course, after a consultation and discussion among the executives of
the Federal reserve system. What their judgment might be I would
not be able to tell you? of course.
As a personal opinion, 1 rather think in our district the opinion
would be that’we would prefer that we should remain in our appro­
priate field of short credits, and would not care to engage m an
entirely different program.
Senator C a p p e r . The Farm Loan Board, of course, has the advan­
tage of dealing every day with the problem of agricultural credits—
that is. they touch the farmers and stockmen.
Mr. M o s h e r . They deal with purely agricultural credit.
Senator C a p p e r . In a way that the Federal Reserve Board does not,
and in that respect there would be some advantage to having it han­
dled through the Farm Loan Board, because it has a local organiza­
tion in every farming community of the country. That would be
almost necessary in any proposition of this kind.
M r . M o s h e r . Well, the Federal reserve bank has no organization
outside o f its own head offices and the branches. O f course, it has
members, but the Farm Loan Board—1 mean from the standpoint
o f real effectiveness—is_able to get more accurate information at the
present time. Whether the same relation could be built up by the
Federal reserve bank is a question that, I think, should be studied
with great care.
Senator C a p p e r . To my mind this question of intermediate credit
for the producer is a big problem, not only now with the agricultural
credit, not only so far as this present emergency is concerned, but as
a permanent proposition.
I have talked with the State bankers out in our country and
Federal reserve bankers, and they all admit that there is a place there
that is not taken care of by the present banking system.
Mr. M o s h e r . It is a pretty big question and would require a great
deal o f careful study and careful consideration before anyone could
determine, I imagine, what would be the logical or appropriate
thing, but I quite agree that there seems to be demands for a certain
kind o f credit—very insistent demands—I know that I run across
them every time I go out among farmers—that the law does not
permit us, does not permit the Federal reserve banks, to cover with­
out altering a mechanism that has been very carefully constructed
and which does not provide for that kind of credit.
Possibly there are other and better ways that could be developed
after close study of the problems than by transferring it to the
Federal reserve banks.




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Senator C a p p e r . There is a strong objection here in Washington
and in the country generally to creating any new governmental agen­
cies, and in working out this problem of intermediate credits it seems
to me that we ought to try to make use of the machinery that we now
have.
M r . M o s h e r . I should think that we can. Perhaps your own sug­
gestion that the farm-loan system, which devotes itself entirely to
agricultural production, with its corps o f appraisers and investi­
gators in the field constantly, and with very intimate connection with
all phases of that question, would be a more appropriate sort o f body
to supervise things of that sort than the Federal reserve system,
which by the law has other credits to take care of, not only agricul­
tural credits, but commercial and industrial as well.
The C h a i r m a n . I f there are no further questions, we are very
much obliged to you, Mr. Mosher.
(Whereupon, at 4 o’clock and 35 minutes p. m., the commission
udjourned to meet at 10 o’clock a. m. Tuesday, August 16,1921.)




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T U E SD A Y , AUGU ST 16, 1921.
Co n g r e s s o f t h e U n it e d S t a t e s ,
J o in t C o m m is s io n o f A g r ic u l t u r a l I n q u ir y ,

Washington, D. C.
The joint commission met, pursuant to adjournment taken on
yesterday, at 10 o’clock a. m., in room 70, Capitol Building, Repre­
sentative Sydney Anderson (chairman) presiding.
The C h a i r m a n . The commission will come to order. The com­
mission this morning will hear Mr. C. H. Gustafson, president of the
United States Grain Growers (Inc.).
Mr. Gustafson, will you give your name and the organizations
which you represent and your address to the reporter, so that we
may get it into the record f
STATEMENT OF MB. C. H. GUSTAFSOH, PRESIDENT OF THE
TOTTED STATES GBAIH GEOWEES (INC.), AND DIEECTOE
OF HABKETI1TG OF THE AMEBICAH FABM BUBEAU FEDEEATION, CHICAGO, ILL.

Mr. G u s t a f s o n . Mr. Chairman and gentlemen of the commission,
mv name is C. H. Gustafson. My home is in Lincoln, Nebr.; my
office is in Chicago, 111. I am president of the United States Grain
Growers (Inc.); also director of marketing of the American Farm
Bureau Federation.
The C h a i r m a n . Mr. Gustafson, you are, I think, in a general wav
familiar with the investigation which the commission is making. 1
would be very glad if you would develop in your own way informa­
tion that you think wifi be helpful to the commission in arriving at a
conclusion with respect to the matters that it is considering.
Mr. G u s t a f s o n . Mr. Chairman, I prepared a statement that I had
expected to have read into the record if I had been unable to come.
I do not think it is worth while this morning to take up your time
by reading that statement, and my oral statement will be very brief.
I think more detailed information, probably, will be brought out by
questions asked by the members of the commission, and I am willing
to answer any ana all questions that I possibly can.
Hie United States Grain Growers (Inc.) is the result of the recom­
mendations made by what is known as the Farmers’ Marketing Com­
mittee of Seventeen. This committee was appointed last fall Dy tho
American Farm Bureau Federation. Its membership was composed
of representative farm leaders, from among the largest farm organiza­
tions in the United States. After seven months of careful investiga­
tion and hearings and information gathered from all parts of the world
as to conditions of marketing, as to results of farmers’ organizations
260



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and cooperative marketing schemes, the best that the committee
could get out of the different organizations was crystallized into a
recommendation which was adopted or approved at the national
meeting held in Chicago April 6, 7, and 8.
The C h a i r m a n . 1920?
Mr. G u s t a f s o n . This year, 1921.
The C h a i r m a n . In 1921 ?
Mr. G u s t a f s o n . Yes, sir. At this conference were 103 delegates
selected by the leading farm organizations of some 25 of the main
grain-proaucing States of the United States. A board of 21 directors
was selected. On this board of directors of the United States Grain
Growers (Inc.) are representatives of the leading farm organizations
and marketing organizations.
The plan provides for complete handling of the farmers’ grain from
the farm to the miller and tne exporter. It is a nonstock, nonprofit
organization, incorporated under the laws of Delaware, and any
farmer, any producer of grain, or any owner of land receiving grain
rent is eligible to membership. The membership fee is $10, and that
entitles one to a membership for life. There are no other assessments;
can be no other assessments. With that membership the farmer and
producer is requested and obliged, if he joins, to sign a 5-year con­
tract with the United States Grain Growers (Inc.) to deliver to it all
grain that is shipped out of the community where it is produced—
not the grain that he uses for seed or feed or what he might market
to his local mill for local consumption.
The purpose of our organization is to handle the grain all the way
from the local elevator or terminal through a national sales agency.
The local cooperative elevator is the foundation of this whole plan,
and a contract is also signed with those elevators that all grain de­
livered to those elevators by our members is in turn shipped to us
by such elevators.
We are a nonstock, nonprofit concern and intend to do business at
cost. If there are any profits accruing, they will be prorated back;
but our purpose is to sell grain to the best advantage and deduct the
handling charges and return to the producer the full amount received.
In connection with this plan we contemplate some financial ar­
rangement, which is very necessary, and wnich the farmer is very
much in need of at this time, so that we may be able to more orderly
market the grain than is the case at the present time.
There is nothing in this plan of a socialistic nature, and we ask for
no privileges of any kind, either through State legislatures or Con­
gress. We ask for no appropriation of Federal or State money of any
kind. It is strictly a farmer-owned and controlled cooperative move­
ment. We ask no favors. We do not ask that our competitors step
out of the way. We intend that this shall be an honest competition
with the present system, which is not satisfactory to the producer.
We do not ask Congress or a State legislature to legislate anybody
engaged in such business out of existence. If our system is not
able to compete with the present system, that will be our lookout,
and we Will not succeed If, on the other hand, our system succeeds,
and is better, more economical, more satisfactory to the producer,,
then we claim it is the right kind of competition of which we boast,
so much in this country.




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271

The C h a i r m a n . Let me ask whether you expect to sell grain
through the channel of the exchanges, or direct to the mills}
Mr. G u s t a f s o n . There are many details of this plan that are not
permanently worked out, Mr. Chairman, and we will sell to the best
advantage. Ultimately, of course, we do not expect to have to sell
through existing exchanges. But at the present time it might be­
come necessary to use those facilities, provided we are permitted to
do so. However, with our present arrangements we would not be
admitted to membership to any of the exchanges, with a cooperative
arrangement retained. In fact, I have applied for membership
on an exchange and have been turned down on that account.
I do not know, Mr. Chairman, that I have any further statement
to make at the present time. I have briefly outlined the plan, and
would welcome questions to further develop the plan.
The C h a i r m a n . H o w much grain, approximately, will your con­
tracts call for this year ?
Mr. G u s t a f s o n . Why, we are just starting, and the membership
drive has just recently commenced. We nave to-day something
over 4,000 farmers signed up, but we have just started, and in some
of the States we have not started at all as yet. We are getting ready.
The C h a i r m a n . Your organization is not complete then, from the
standpoint of contracts with the farmers ?
Mr. G u s t a f s o n . No, sir; just the main part of it is more or less
completed. But the membership drive is just started, hais only
started in a few States.
The C h a i r m a n . In your investigation preceding organization of
the United States Grain Growers (Inc.), did you get any figures
tending to show what the cost of marketing grain through existing
agencies is ?
Mr. G u s t a f s o n . I do not have, I believe, exact figures, but we
found very unsatisfactory conditions. At least, the farmer feels
that way about it. We found that 72 per cent of our grain, as an
average, is marketed within 90 days from harvest time. We found
that grain is sold and resold about 50 times on the Chicago Board of
Trade. In other words, there is three times as much gram as is pro­
duced in the world sold on the Chicago Board of Trade in a year.
We do not believe that that is economical; we do not believe that
that is to the best advantage of the producer or the consumer.
The C h a i r m a n . Did your investigation tend to show whether the
economic cost of this sale on the exchanges was borne by the pro­
ducer or by the occasional speculator on the market ?
Mr. G u s t a f s o n . We think the producer is the goat all the time.
We think “ Jones pays the freight.
Senator M c N a r y . Has not that situation been cured so far as it
can be legislatively, by what is known as the future trading act,
which I signed as one of the conferees of the Senate yesterday, and
which will probably become a law during to-day ? I think you were
at the hearings in the Senate.
Mr. G u s t a f s o n . We do not -know how much that bill will cure,
and as to the United States Grain Growers (Inc.), we do not care
very much, because we do not feel that it will be a permanent cure
anyway. And we do not feel that we would like to leave the market­
ing of our products to these people any longer. I made a statement
just before you came in that we are not asking for any class legisla­




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tion or any class favors of any kind, or appropriation of public
moneys of any kind. We are strictly a farmer-owned organization.
Senator M c N a r y . What is the organization ?
Mr. G u s t a f s o n . The United States Grain Growers (Inc.).
Senator M c N a r y . Growing out of the committee of seventeen ?
Mr. G u s t a f s o n . Yes, sir.
Senator M c N a r y . Under this bill you seek to be denominated a
contract market by the Secretary of Agriculture and to get on the
exchange ?
Mr. G u s t a f s o n . Well, we probably will; I don’t know.
Senator M c N a r y . Y o u are purely cooperative?
Mr. G u s t a f s o n . We are intending to be purely cooperative.
Senator M c N a r y . And are intending to prorate the profits to your
members ?
Mr. G u s t a f s o n . Yes, sir.
Senator M c N a r y . And pay dividends ?
Mr. G u s t a f s o n . Yes, sir.
Senator M c N a r y . D o you pay commissions ?
Mr. G u s t a f s o n . We call that prorata.
Senator M c N a r y . There is a decided difference, so far as that goes.
I do not want to go back over this, but I am somewhat interested in
view of the long hearings we have had in the Senate. You say you
do not care for further legislation ?
Mr. G u s t a f s o n . Well, sometimes I feel this way about it: Let
these people go the limit, until they arouse the farmers to the necessity
of helping themselves. There is no remedy like that; the farmer
helping himself is the best remedy.
We do not want to discredit or discourage legislation, but the
United States Grain Growers (Inc.) is not asking for class legislation.
The only thing we do ask is that the farmers be given tne same
opportunity as anybody else; that is, that no obstacle be thrown
into the way of a development of this cooperative idea. And when
we ask for that we ask it for all the people, and not for the farmers
alone. And when we ask for any legislation that will promote
cooperation, we want the consumer and we want every citizen of the
United States to have the same opportunity as the farmer to get
any such legislation or to be under such arrangements. We are
absolutely wanting to play fair and be unselfish in that matter.
Representative F u n k . Does your plan for the marketing of grain
provide for an advance to the owner of the grain ?
Mr. G u s t a f s o n . Yes, sir; as soon as we can make the necessary
financial arrangements, we propose to advance what will be con­
sidered safe.
Representative F u n k . That is, on some sort of a warehouse cer­
tificate or receipt ?
Mr. G u s t a f s o n . Yes, sir.
Representative F u n k . Or some such scheme as that ?
Mr. G u s t a f s o n . Yes, sir.
Representative F u n k . Which the owner of the grain can take to
the bank, or some other place, and put it up as collateral ?
Mr. G u s t a f s o n . Yes, sir.
The C h a i r m a n . You expect that the farmer will do the financing
of his own receipts, or that this financing will be done through an
organization which you will establish ?




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Mr. G u s t a f s o n . Ultimately we hope that the farmer will be able
t o arrange for his own financing and be independent along those lines,
a s are other large interests and producers, such as large manufac­
turing concerns, which have satisfactory finances which they can
always rely upon. Ultimately we hope the farmer may make the
same arrangement for himself.
T h e C h a ir m a n .
Mr. G u s t a f s o n .

Y

ou

m e a n t h e in d iv id u a l f a r m e r ?

Yes; cooperating together in some organization.
This can very readily be done, Mr. Chairman, if the fanners will get
together. It would not be a very large effort for each one.
Representative F u n k . I s it the idea that this grain will remain on
the farm, or can it be collected at some terminal point ?
Mr. G u s t a f s o n . I am not so strong on keeping the grain on the
farm. I think it is a pretty hazardous undertaking. At the present
time we contemplate collecting into our local elevators what the
farmer has to sell. Understand, under this arrangement the farmer
does not have to sell until he gets ready; he will sell whenever he
wants to sell, and will not be compelled to sell until he gets ready
to sell.
Representative F u n k . He can select the market for himself, and
can take the price on any given day ?
Mr. G u s t a f s o n . Yes; but when he does sell he sells through the
organization.
R e p r e s e n t a t i v e F u n k . Of c o u r s e , i t w o u l d b e im p o s s ib le t o k e e p
e a c h p a r t ic u la r g r a in o w n e r ’s g r a in s e p a r a t e ?
Mr. G u s t a f s o n . That is not necessary.
Representative F u n k . Well, it could not be

done as a practicable

proposition, on a large scale ?
M r. G

u stafson .

N o ; i t w o u l d n o t b e p o s s ib le .

Representative F u n k . Then, of course, there must be some method
o f determining the grades ?
M r . G u s t a f s o n . Y e s , sir.
Representative F u n k . That

can be taken care o f at the terminal
markets.
Mr. G u s t a f s o n . We hope so.
Representative F u n k . But I am interested in finding out how you
determine the grade at the country station.
Mr. G u s t a f s o n . That is determined by the buyer; by the elevator
manager, as it is now. He determines the grade now, and he will
continue to do so.
Representative F u n k . But where it is loaded not through a n
elevator you have some scheme of that sort ?
Mr. G u s t a f s o n . There is i^ery little o f that being done, and we
do not encourage that. We encourage the building and maintaining
of cooperative elevators at all points.
Representative F unk. And the grade assigned by the managers
of the local elevator will be the grade------

Mr. G u s t a f s o n (interposing). Yes; that is the way it is now.
Representative F u n k . For the purpose of ultimately determining
the pro rata share of each grain grower’s grain, or determining what
he will be able to borrow ?
Mr. G u s t a f s o n . That is being done now, and that will be con­
tinued.
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Senator McNary. Does your association advance money on a grain
pool to the members ?

Mr. G u s t a f s o n . The grain pool is optional. We d o not urge it.
Anyone desiring to pool may do so, and the idea of the pooFer is
that part of the money shall be advanced, and then the money will
be paid when the ultimate sale is made. Our organization permits
that, but it does not urge it.
Senator McNary. All sums are returnable to the members, except
that which is used in the management of the organization ?

Mr. G u s t a f s o n . Yes; and that will be very economically done,
because there is no capital stock to pay interest on.
The C h a i r m a n . When the fanner sells to the United States
Grain Growers (Inc.), at what price does he sell?
Mr. G u s t a f s o n . At the market price. To make it plainer, he
sells to the local elevator the same as he does now, receiving the
regular price. Then at the end of the year the local elevator will
return his pro rata share.
Representative Funk. The deal is closed immediately, just as
soon as the accounts are obtainable ?

Mr. G u s t a f s o n . Yes; just as it is now. However, we hope to
make the necessary arrangements to encourage the farmer not to
dump at certain periods of the year so much grain on the market
and get it out of nis control and out of his hands and into the hands
of the speculator and manipulator.
The C h a i r m a n . If the exchanges were abolished, as I suppose is
ultimately involved in the success of the cooperative plan, now will
the price De fixed ?
Mr. G u s t a f s o n . Well, they will not be abolished for a Ions time.
We hardly can expect that this will be adopted by all the producers,
and as long as it is not, the exchanges will be m existence. And
should they be abolished, we hope we will find a way out of it by
that time; but they will not be abolished for a long time to come.
The C h a i r m a n . What you expect to do is to set up a system of
marketing in competition with tne exchanges ?
Mr. G u s t a f s o n . Yes, sir.
The C h a i r m a n . Which, in the long run, will develop into a ques­
tion of whether the exchange method or the method you are proposing
is the most economical method from the farmers’ standpoint ?
Mr. G u s t a f s o n . Then, if we should get all the business we would
become the exchange, because we are selling to the consumer and to
the mills and to the exporter, and perform all the functions and duties
or all the work that they are now doing. But it will be a long time,
I imagine, before that would happen; but if it does happen, what
would be wrong with it ?
The C h a i r m a n . I am not assuming that anything would b e wrong
with it. I am trying to get at the operation of the thing. I assume
that in the adoption of a plan of this sort you have undertaken to
take a long look ahead ?
Mr. G u s t a f s o n . Yes.
The C h a i r m a n . And see, so far as it is humanly possible, the ulti­
mate outcome of the proposition. I do not just get what you mean
when you say that the United States Grain Growers (Inc.) will
become the exchange, because I assume that one of the objects of
this arrangement is to reduce the number of intervening buyers and




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speculators whose trading now goes to make the market price, and
when you reduce that number of traders or speculators it seems that
the pnce would be made on the basis of a smaller number of sales.
Mr. G u s t a f s o n . W e l l , w h o s h o u ld m a k e th e p r ic e ?
The C h a i b m a n . I do not know.
Mr. G u s t a f s o n . Why, I expect the consumer; but he does not
make the price now. The exchanges are making the prices to suit
themselves, which we do not think is the right system. And there is
interference with the law of supply and demand, and we fed that if
this was done right the law of supply and demand would govern, and
it is the only law in the ultimate end that we can rely on anyway.
The C h a i r m a n . That is to say, the number of consumers in the
market, and the demand which they represented, in its relation to
the supplj would make the market price, just as it does on coal, or
on anything else ?
Mr. G u s t a f s o n . And handling world products, as we expect to do,
which are produced all over the world, we would continue to be in com­
petition with the outside world anyway, and we would have to rely
on the demand. If we were the only exchange that was handling
grain in the United States, we would absolutely have to rely on the
demand for that grain and sell accordingly.
The C h a ib m a n . That is to say, you would have to market the grain
at such times and in such quantities as the supply necessitated,
keeping in mind that you had to sell the entire crop every year ?
Mr. G u s t a f s o n . With this plan of ours goes also an information
department, through which we expect to gather crop and market
conditions in our own way from all over the world, and try to give to
the producer a more correct interpretation of those figures and con­
ditions than they are getting at the present time, which we think
will be helpful to the farmer in judging when to sell. And the
reports which we get at the present time are not satisfactory to the
farmer, and the farmer does not rely on them like he should. He
does not get the information that makes it possible for him to be a
good business man in judging what he should sell.
Now, this is not an experiment, gentlemen. It might be in a
national way, but it is not in a local or a State way, because we have
had cooperative elevators for some 20 or 25 years, and they have
been a wonderful success. In the last year or two they have been
in bad, just as many of the other elevators are; many of tne privately
owned and line elevators have been in bad for the last two years, ana
so have the cooperatives. But although they have been in bad,
there are not many of them that are intending to quit.
Efforts have been made to extend this local cooperation to the
terminal markets, and progress has been made, and some success has
been obtained.
I am very familiar with the marketing of live stock, if I may men­
tion that in connection with this matter.
Representative S u m n e b s . Before you g o to the subject of' live
stock, I would like to ask you some questions about the grain market­
ing proposition.
M r . G u s t a f s o n . I w ill c o m e r ig h t b a c k t o t h a t . I w a n t t o s a y
th is, t h a t w e a re n o t j u m p i n g in t o t h is w it h o u t s o m e e x p e r i e n c e a l o n g
th e lin e .
I s p e a k o f t h is liv e - s t o c k m a r k e t in g p r o p o s i t io n b e c a u s e I
w a s c h a ir m a n o f th e c o m m i t t e e - t h a t o r g a n iz e d it , a n d p r e s id e n t o f




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the association up until the 13th day of April of this year. On April
1, 1917, we opened a cooperative live-stock commission company at
Omaha, giving the regular service and charging the regular com­
missions and paying the regular salaries for the hired help necessary,
and it was a nonstock, nonprofit concern; there was no interest to
pay on the investment, and at the end of the year we prorated back
to the customers the profits, or the savings, rather. Of course, the
first few months it was a losing proposition, because the opposition
was very bitter. I might state that we applied for membership on
the live-stock exchange, but we were tumea down. But before the
end of the year we had accumulated savings enough to prorate back
38 per cent of the commissions charged; at the end of the second year
we prorated back 46 per cent of the commissions charged; and the
last two years we have prorated back half of the commissions charged;
and this year the prospects are, if we continue as well from now on as
we have the first part of the year, we will do even better.
The C h a i r m a n . Did any part of the prorate represent increases in
markets ?
Mr.

G u s ta fs o n .

No, sir; it is strictly commission.

The C h a i r m a n . Strictly a commission proposition ?
Mr. G u s t a f s o n . Strictly commission. We charge the same com­
mission as the other firms. There are 51 firms in the yards besides
ours at Omaha. We also have branches at St. Joseph, Mo., and Sioux
City, Iowa. But it is strictly the commission that is prorated back.
In other words, if you pay us $15 for the selling of a car of live stock,
in the last two years you would have received back $7.50.
Now, that is a nonstock, nonprofit concern, and our salesmen get
a regular salary, and so do our hired help. There is no prorating or
commissions or rebates to our help of any kind, and tne necessary
expenses are deducted and the producer gets the balance.
Senator L e n r o o t . H o w did you get your capital ?
Mr. G u s t a f s o n . We did not need any. We needed a little, and
we borrowed $1,000 to establish an office and buy a typewriter and
a deslc.
Senator M c N a r y . Are yours purely cooperative members or patron­
age members ?
Mr. G u s t a f s o n . They are members of farmers’ organizations and
farmers’ associations, tne Equity, and so on.
Senator McNary. D o you do business with any patrons outside
of your membership ?

Mr. G u s t a f s o n , ies; anybody that wishes to do business with us.
Senator M c N a r y . Do you prorate your commissions to them too ?
Mr. G u s t a f s o n . No; why should we?
Senator McNary. I want to get the relation between the patron
and the member. How do you do that ?

Mr. G u s t a f s o n . Which?
Senator M c N a r y . Your dealings with the patron who is not a
member ?
Mr. G u s t a f s o n . He is welcome to come to us if he wants to.
Senator M c N a r y . But you do not prorate your commissions to
him?
Mr.

G u s ta fs o n .

N o.

Senator M c N a r y . What advantage does he derive from being a
patron of your association ?




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Mr. G u s t a f s o n . He generally gets converted and becomes a
member of the organization.
Senator L e n r o o t . So until he does become a member he is the
same as any other man ?
Mr. G u s t a f s o n . Yes, sir.
Senator M c N a r y . So he is simply a patron until he does become a
member ?
Mr. G u s t a f s o n . Yes; he has no privileges or rights as a member
until he does become a member.
Senator M c N a r y . Are your particular clients the packers; the
five big packers?
M r . G u s t a f s o n . Y e s , sir.
Senator M c N a r y . You sell your live stock to them?
Mr. G u s t a f s o n . We sell practically all of our fat live stock to them.
Senator M c N a r y . And dx> you do any feeding ?
Mr. G u s t a f s o n . Some of them do.
Senator M c N a r y . D o you do any feeding yourselves ?
M r . G u s t a f s o n . N o , sir.
Senator M c N a r y . Only marketing ?
Mr. G u s t a f s o n . It is strictly a marketing company.
The C h a i r m a n . Do these packers discriminate in any way against

you?
Mr. G u s t a f s o n . No, sir; they have played fair with us all the
time.
Senator L e n r o o t . They did from the start ?
Mr. G u s t a f s o n . Yes; in fact I inquired whether they would before
we started, and they said they would. The stockyards, the same
way. They could not afford to do otherwise.
Representative F u n k . What percentage of the business transacted
in Omaha—the commission business—is done by your organization ?
Mr. G u s t a f s o n . When we started there were 51 firms on the yards,
and I think they are all there, as I remember. The last report I had
was a monthly report, and we had sold 262 cars more than the next
highest firm—such firms as Clay, Robinson & Co.—and we had sold
262 cars more in our business than they had; than the next Nearest
firm. Our business runs into $40,000,000 or 850,000,000 a year.
Senator L e n r o o t . What territory do you cover ?
M r . G u s t a f s o n . We draw from Nebraska, Kansas, Missouri, Iowa,
South Dakota, Wyoming, Montana, and Colorado.
Senator L e n r o o t . A very large territory.
Mr. G u s t a f s o n . And a little from southwestern Minnesota.
The C h a i r m a n . D o you h a v e a commission agency at South St.
Paul?
Mr. G u s t a f s o n . No; there is a similar one there, but we are not
connected with it; there are two, in fact, one called the Equity
Cooperative Exchange and the other a Farm Bureau commission
company.
Tne C h a i r m a n . Are they admitted to the live-stock exchange at
St. Paul?
Mr. G u s t a f s o n . I am not sure of that now. I think you had some
legislation up there last winter on that subject.
The C h a i r m a n . We had some legislation on the subject, but I was
not sure whether it would be adopted without a contest in the courts.
I did not know whether they were admitted or not.




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Mr. G u s t a f s o n . I don’t know. Now, in addition to making
application for a membership on the live-stock exchange at Omaha,
I applied at St. Joseph and Sioux City, and they turned us down.
We were turned down because we were a pro rata organization. We
have been discriminated against by these people very bitterly, but
we pay very little attention to it. Sometimes some of their members
have tried to do business with us, and they have been fined for doing so.
Senator M c N a r y . If you prorated your commissions and not
your profits, they would not be fined for that ?
Mr. G u s t a f s o n . I don’t know. We haven’t any profit.
Senator L e n r o o t . What is the difference ?
Senator M c N a r y . There is considerable difference. The com­
mission is a profit for doing business on the board.
Mr. G u s t a f s o n . That is all w e d o .
Senator M c N a r y . I asked you whether you prorated your com­
missions and expenses, distinctly apart from the profits ?
Mr. G u s t a f s o n . We haven’t any profits.
Senator M c N a r y . There are three or four different kinds of
cooperatives.
Mr. G u s t a f s o n . That prorate the profits ?
Senator L e n r o o t . Y o u prorate the commissions that you have
charged ?
Mr. G u s t a f s o n . Yes, sir; we prorate the commissions which we
have charged.
Representative F u n k . The sum that is prorated is what is left
after the expenses are deducted ?
Mr. G u s t a f s o n . Yes; if you were to pay us $15, for instance, for
selling a car of live stock, at the end of the year we find it has cost
$7.50 for that, and we pay you $7.50 back.
Representative F u n k . And that is profit ?
Mr. G u s t a f s o n . We call it savings.
Representative F u n k . D o your members consider that they get
any advantage by using your agency other than through the pro
rating of the profits ?
Mr. G u s t a f s o n . N o ; other than this: We are getting a lot of infor­
mation and will be getting together on a larger scale further on. But
financially there is no other advantage.
Representative F u n k . What I mean is .salesmanship and higher
prices.
M r . G u s t a f s o n . We have continually watched our salesmen and
compared their sales with the sales of the yard, and we find we are
always up to the others, and once in a while ahead of them, so our
salesmen make as good sales as anybody. We have been watching
that.
Senator L e n r o o t . Will you tell us what the objections of the live
stock exchanges were; because you prorated your profits?
Mr. G u s t a f s o n . The objections are these, I think, that we have
demonstrated that it can be done for much less money than the
old system, and they do not dare come out and compete with us on
the old idea. That is the objection.
Senator L e n r o o t . On the grain exchanges, we were told they
were intending to prorate according to the business done; that is
not this case with your organization F
Mr. G u s t a f s o n . That is the case with the live stock.




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Senator McN ary. They do not prorate on the grain; that is the
difference.

Mr. G u s t a f s o n . We feel that there can be money saved in handling
live stock, and there can be money saved in handling other farm
products. I know there can.
It does not make any difference to the United States Grain Growers
whether you are a fanner, or a man who rents his farm on grain rent,
or whether you are a Democrat or a Republican or a Methodist or a
Presbyterian-----Senator L e n r o o t . Or not a member o f any other organization ?
Mr. G u s t a f s o n . N o , sir; but a grain producer who raises grain,
or receives grain rent.
The C h a i r m a n . Your membership then is based on individuals,
and not on cooperative organizations ?
Mr. G u s t a f s o n . Absolutely.
Representative S u m n e r s . What is the advantage which you would
be able to derive from a membership in these live-stock exchanges ?
Mr. G u s t a f s o n . Well, there are certain accbmmodations there that
would be available that we had to go out and get for ourselves; such,
for instance, as the docker. They have an official docker; they would
not even permit us the use of that service, though we offered to pay
for it, so we had to arrange for our own docking. There are other
advantages. And, by the way, they are not permitted to do business
with us; we can not buy and sell stockers or feeders to them. The
rules will not permit them to do that. If we were members of the
stock exchange, we would do that. But they are not allowed to play
with us at alL
Senator L e n r o o t . I s it one of their rules that no cooperative
organization can be a member of the live-stock exchange ?
Mr. G u s t a f s o n . If it is a patronage dividend-paying organization
it can not be.
Senator L e n r o o t . That is irrespective of whether the dividends
are confined to the members of the association or not?
Mr. G u s t a f s o n . It does not make any difference, or did not at
that time.
Senator L e n r o o t . Does it now ?
Mr. G u s t a f s o n . I don’t think so. I don’t think there is any
change.
Senator L e n r o o t . And that is in their rules ?
Mr. G u s t a f s o n . Oh, y e s .
Senator L e n r o o t . Have you a copy of those rules ?
Mr. G u s t a f s o n . I h a v e t h e m in m y o ffic e .
Senator L e n r o o t . Will you send us a copy of them ?
Mr. G u s t a f s o n . Yes, sir.
The C h a i r m a n . I think I have a copy of them here. Senator.
Mr. G u s t a f s o n . N o w , I made application for a membership on the
Omaha Grain Exchange, and there was the same trouble there; on
account of being cooperative and paying patronage dividend we were
refused membership.
Senator L e n r o o t . You said it was cooperative; cooperative and
distribution of earnings. I can not see the difference, Mr. Gustafson,
between an ordinary dividend to cover profits and the ordinary com­
mission firm that is in the form of a corporation and distributes its
dividends to its stockholders.




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Mr. G u s t a f s o n . Well, I don’t think they would permit either one,
and we are not ready to change our ideas and rules to conform to their
rules.
Senator L e n r o o t . N o ; I was getting at whether there was any
basis or reason in their discrimination.
Mr. G u s t a f s o n . It is simply this, that they do not want to recog­
nize .our way of doing business.
Senator L e n b o o t . In other ■words, they are afraid you w ill get the
business and throw out the commission firms ?
Mr. G u s t a f s o n . We generally d o where we d o business in a busi­
nesslike manner.
Representative S u m n e r s . Do you have an organization in your
live-stock business which extends down to the community, so that
the communities themselves have live-stock shipping associations
and through which they may assemble their live-stock in carload lots!
Mr. G u s t a f s o n . Yes; in many communities there are such
arrangements. In others there are not, and the farmers simply get
together with their stock.
Representative S u m n e r s . Is it the disposition of the communities
to organize once they have begun to use this service ?
Mr. G u s t a f s o n . Oh, yes; there are organizations springing up
now.
Representative S u m n e r s . That works better, I assume, than
where you have a number of live-stock producers in a community
shipping independently ?
M r . G u s t a f s o n . It does facilitate the handling of it very much.
Representative S u m n e r s . If some of the gentlemen who come
from that territory do not want to ask further questions about the
handling of grain, I would like to ask some questions. I am not
from the grain section, however.
Mr. G u s t a f s o n . I might add, in connection with this United States
Grain Growers (Inc.) marketing agency, that they are now develop­
ing a live-stock marketing agency also, through a committee of 15,
which has been working for about six months, and is still working
and making progress.
Representative S u m n e r s . In your live-stock distribution, do you
undertake to route these animals ready for market to the markets
where they are in best demand ?
Mr. G u s t a f s o n . Well, not to a great extent, but if we become
organized nationally, that is one of the objects we have in mind.
We do once in a while divert shipments from Omaha to St. Joseph,
for instance, if it is advisable to do so; but not a great, deal of tnat
is being done yet, because it can not be advantageously done until
we have a national organization.
Representative S u m n e r s . No; I appreciate that.
Mr. G u s t a f s o n . N o , sir.
Representative S u m n e r s . N o w , coming back to the marketing o f
grain, you start in with your local elevator as a unit?
Mr. G u s t a f s o n . That is the foundation; that is the unit which we
start from.
Representative S u m n e r s . And when the grain is brought into the
local elevator by the several fanners in a community it is graded,
and goes into tne bin or compartment where grain of that grade is
being kept ?



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Mr. G u s t a f s o n . Yes; as it is being done now.
Representative S u m n e r s . Some of the millers who have been before
the commission have stated that they are not able to buy grain on
grade for grinding in their respective mills, because of the fact that
from the miller’s standpoint there is so much difference in the grain
of the same grade. If that is true, how are the millers able to select
the grain after the grain has been confused and mixed in the local
elevator, ami then, I assume, mixed further in the terminal elevator ?
Mr. G u s t a f s o n . I understand that the big mills have their
analyzers to determine certain districts in the country where prefer­
able wheat can be gotten, and that they make a very decidea effort
to get that wheat year after year. I think that is true of Kansas
and other States, where the Minneapolis millers have found by
investigation that certain communities produce desirable wheat. I
am not a miller and can not go into the technical part of that.
Representative S u m n e r s . You stated a moment ago that there is
sold in Chicago on the future board three times the amount in bushels
of grain each year produced in the world.
Mr. G u s t a f s o n . That is what our investigators found, that were
working with the Committee of Seventeen. We had several very
high-type men doing that work.
Representative S u m n e r s . What is the charge made by the members
of the exchange, per 1,000 bushels, for handling a transaction of that
kind?
Mr. G u s t a f s o n . I don’t know what the exact charges are. I wish
it was possible for this commission, however, to tell the world what
they are.
Senator L e n r o o t . Y o u mean you do not know the commission
per 1,000 bushels ?
Mr. G u s t a f s o n . At Chicago ?
Senator L e n r o o t . Yes.
Mr. G u s t a f s o n . I don’t remember.
Representative F u n k . Y o u are speaking, Mr. Sumners, of a cash
transaction, or an option deal ?
Representative S u m n e r s . I assume the commission is the same.
, Representative F u n k . N o ; cash transactions at Chicago are 1 per
cent.
Representative S u m n e r s . What are they in a future transaction ?
Representative F u n k . I think one-eighth.
Representative S u m n e r s . One-eighth of 1 cent per bushel.
Representative F u n k . Yes.
Representative S u m n e r s . Of course, somewhere down the line
somebody has to pay that enormous hedging charge.
Mr. G u s t a f s o n . We think the producer does.
Representative F u n k . On an option transaction it is like a kitty
in a game of cards; thev keep taking it down, and keep putting in
money all the time.
Mr. G u s t a f s o n . What we farmers and producers can not under­
stand is why it is necessary to speculate and gamble, if I may use
that term, with the farmer s products. Why is that not done with
shoes, ana farm implements, and groceries, and things of that sort ?
Why pick out one product ? We can not understand why, if it is a
good thing with the grain, why not do it with shoes, and farm
machinery, and sell it fifty times before the consumer gets it.




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Representative S u m n e b s . Some of the millers h&ve testified that
in doing their business they sell their flour in advance of the grinding
of the wheat into the flour which is to be made. After having sola
the flour, it is then necessary for them to buy a hedge on some future
board to be certain that they will make a manufacturer’s profit.
Mr. G u s t a f s o n . We producers do not feel that the present custom
and arrangement for handling our grain is proper; we do not feel
that it is the only possible way of doing it, any more than I felt when
I was a little boy that binding grain behind the reaper was the only
way to be followed in doing that work. And since then we have
developed several useful inventions that have done away with that
method. It is just possible that some arrangement might be devel­
oped in handling the farmer’s grain which is better than the present
system; iust because it is the custom or system, we do not think it
is the only way to do it. And we feel there is need of improvement
in the marketing line as much as there is need for improvement of
anything in this line.
Representative S u m n e r s . You feel, I assume, that the violent
fluctuations in prices resulting, as I understand you gentlemen claim,
from speculation on the future boards, has a tendency to demoralize
the market and make economical distribution more difficult than it
would be without those influences in the market.
Mr. G u s t a f s o n . We feel that it is only to the advantage of the
unnecessary middleman, or a lot of unnecessary middlemen, and is
of no advantage to the consumer.
Now, as to the cost of handling our products, I assume that the com­
mission has been overloaded with testimony of that kind. It would
be consuming time to go over that again. I might say, however,
I made some personal investigations, if you will permit me a moment.
I think it was some time in 1918 that I was in Kansas City on some
marketing work, and then made this little observation. Wheat
at that time was selling at about $2. That was about twice the price
that wheat was before the war. In the same time crackers had
risen four times the former prices. In other words, they had beat
wheat twice. During 1918 I purposely went to one of the best eating
houses in Omaha to eat a meal—to buy a meal, and see what the
middleman was getting. It so happened that I picked on potatoes
as a demonstration, and I bought a naked potato; just a plain baked
potato, with no butter on it, or anything. I thought the price was
excessive, so I bought a second potato and paid for it and put it in
my pocket, and then I went over and had it weighed. I happened
to think that possibly it might lose some of its weight in baking, and
so I investigated the Government bulletins and found that it was
such a small fraction or per cent that they did not even consider it.
But I allowed 5 per cent of loss in baking. Then I called up a commis­
sion house and found out what potatoes sold for delivered at that
hotel, and found they were delivered for $1.25 a bushel on that day.
But the potato I bought cost me at the rate of $36.75 a bushel.
Representative S u m n e b s . The commission has had lots of testi­
mony along that line. I think you can give more valuable testimony.
Mr. G u s t a f s o n . Pardon me just a moment, Mr. Sumners, 1
bought some breakfast sausage in a cafateria, and that is supposed
to be one of the cheapest places to eat. I bought two portions of
sausage, and when I went out I wrapped one portion in a.newspaper




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and took it with me and went over to the drug store and weighed it,
and found that it would take a little more than 11 live hogs to pay for
one hog made into that kind of sausage.
Representative S u m n e r s . The commission has lots of testimony
on that line, Mr. Gustafson, from people who are less expert on
other subjects than you are, and I would like to have some informa­
tion from you.
Mr. G u s t a f s o n . Those are the things that have started us to
thinking, and we are thinking of remedying them. My suggestion to
this commission—if I may make a suggestion—is that by all means
do not permit the putting of any barriers into the wav of a develop­
ment of cooperative bargaining and cooperative marketing, because
it comes nearer, to my way of thinking, of solving these hard prob­
lems than anything I know of. And especially when we do not ask
for any favors, except to be permitted to develop this system.
Representative S u m n e r s . To make it entirely clear in the record—
I think perhaps you have already made it clear—you are not engaged
in a fight against the middleman, nor asking for any special privileges;
you are omy asking for the opportunity of putting your plan into
operation and then letting the middleman or anybody else who can
meet that competition ana stay in business, stay in business, and if
he goes out, let him go out because the system that he is following is
the more expensive ?
Mr. G u s t a f s o n . Yes, sir.
Representative S u m n e r s . That is your suggestion?
Mr. G u s 't a f s o n . Yes,'sir. And pardon me for making another
suggestion. I do not think that this commission could render any
greater service to the American people than to give the information
to the people how some of these things are being manipulated and
handled by the so-called business men of this country. If this com­
mission has the authority to get that information to the people,
it will certainly make them sit up, I think, and take action.
Representative S u m n e r s . The American people, I think, know
that pretty well; what they would like to know is some better way
of doing it.
Mr. G u s t a f s o n . Well, if you give them the actual conditions as
they are on the boards of trade ana on the stock exchanges and things
of that kind, I think it is going to create a public sentiment all over
the country that will soon find a remedy.
Representative S u m n e r s . I am interested in the statement you
made, that the farmer retains title to his commodity.
Mr. G u s t a f s o n . Yes, sir.
Representative S u m n e r s . And that you have in contemplation
that he will make his own financial arrangements ?
Mr. G u s t a f s o n . Yes; through organizations; not as individuals,
but through organizations; through advances by local banks, or
other local arrangements.
Representative S u m m e r s . It seems to me that if the individual
farmers make their own financial arrangements—if it is not made
through the general system, that you pretty largely put it beyond
your power to more systematically and more evenly distribute this
wheat, o f which you say 72 per cent goes on to the market in 90
days, because when his loan is called, the wheat is called.




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Mr. G u s t a f s o n . Surely, and that is what we object to, and for
that reason we want to make our own arrangements that we can
rely on, as do other interests, such as the manufacturers, without
naming any in particular. They hare their finances arranged, and
they can use that money as long as they need it. That is what the
farmer needs to do. If ne had that arrangement, he would not have
to market 72 per cent of his grain within 90 days of harvest time. He
has his obligations to meet, and he can not renew them, and therefore
he must sell his grain to meet his obligations.
Representative S u m n e r s . Do you make the sales from samples of
the grains from the several elevators, which samples you assembled at
some particular place ?
Mr. G u s t a f s o n . Well, we will make them in any way that suits the
buyer.
And another interesting thing that the committee of 17 found
was the back haul—the hauling to and fro in this country was very
expensive, and our investigators found it amounted to from 5 to 7
cents a bushel. We found that wheat was shipped from Nebraska,
for instance, and was shipped to Chicago, and from there to Minne­
apolis to be ground into flour, and then the flour was shipped back to
Nebraska and sold.
Representative S u m n e r s . What amount of back haul did you find ?
Mr. G u s t a f s o n . A large amount.
Representative S u m n e r s . Of the grain itself ?
M r . G u s t a f s o n . Of th e g ra in ' it s e lf.
Representative S u m n e r s . Your idea is to* make possible the mov­
ing oi this grain from the country elevators to the place where it is
needed for consumption ?
Mr. G u s t a f s o n . A s directly as possible, is our intention; and it
can only be done by a national agency.
Representative S u m n e r s . You want to avoid the necessity of
having this grain hauled from the original station to the terminals,
and then back again into the same territory ?
Mr. G u s t a f s o n . Yes, sir.
Senator McNary. Will you pardon me, Mr. Sumners ?
Representative S u m n e r s . Certainly, Senator, you go ahead; this
is in your country anyway.
Senator McNary. The witness has made an interesting statement
that 72 per cent of the grain moved within 90 days of harvest time,
due to the farmers’ necessity of having the money to meet their
obligations in the fall. I have seen statistics covering a period of
years, showing that the difference in the prices of the first 90 days
and the prices in the following May, June, and July, is absorbed by
storage, and shrinkage, and loss, due to varmints, etc. That table
has been repeatedly shown. I am asking you if you have given
study to that proposition, that the farmers could carry their grain
in large amounts, or that the farmers who have carried their grain
into May, June, or July, or the man who has bought that gram in
the fall and carried it over has profited by carrying that wheat;
have not those elements I have mentioned absorbed all the profits
and taken all the spread between the price in the price in the fall and
the price the next summer out of it ?
Mr. G u s t a f s o n . Some of them are becoming millionaires.




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Senator McNary. That is not the question; there are lots of
millionaires being made in other ways.

Mr. G u s t a f s o n . Pardon me, Senator, y o u asked me whether they
profited. I say they do.
Senator M c N a r y . Have you given the matter any thought that
the fanners would not profit in tne long run, if they had all tne credit
in the world ?
Mr. G u s t a f s o n . Our object is to induce the farmer to keep it on
his own farm, in order to get an orderly distribution.
Senator L e n r o o t . The Senator’s question is, if the fanner h a s kept
it on his own farm, has he made money in the long run, by keeping it,
instead of selling it in the first 90 days ?
Mr. G u s t a f s o n . In many cases he has, and he has escaped the
stigma of having some one holding a club over him.
Representative S u m n e r s . If a few farmers hold their grain and the
majority do not, and this glut goes on the market, you may have an
upset market. Suppose, m a given year you produce 14 months’
supply of wheat, a bumper crop; if one farmer carried his entire crop
over, then he comes into the competition with next year’s crop; but
if you have a cooperative organization, you-----Senator McNary (interposing). Your nedging is your remedy there.
Representative S u m n e r s . My own judgment about hedging is, if
I may express my judgment, that hedging has more influence in
destroying the stability of prices than any other feature of the future
board transaction, for the reason that a man who has bought a hedge
has cut himself off from loss if grain goes down and from gain if it
goes up. If all who own grain would lose if the price went down, the
price would be relatively stable after the crop had come “ in sight,”
and enough had been sold to indicate the judgment of the trade as
to the value of that crop.
Mr. G u s t a f s o n . I a m in fo r m e d t h a t th e h e d g in g p r iv ile g e s b e in g
u sed th e la s t t w o y e a r s h a v e c a u s e d m o r e e le v a t o r s t o lo s e m o n e y
th an a n y t h in g else.
Representative S u m n e b s . The parity is not maintained, because

spots will not follow futures as certainly as in the old days, when
spots yielded without resistance to futures.
Senator L e n r o o t . Mr. Gustafson, if you were a miller, would you
pay as much for grain if you could not protect yourself by a hedge;
wouldn’t you naturally, when you had to look forward to the milling
of your flour—would not the natural inclination be to pay a smaller
price and save yourself ?
Mr. G u s t a f s o n . Under the present arrangement, I suppose I
would do what the miller is doing. But we do not believe it is the
best way, and we are going to try a different way, and do it in the
way we can to get more for the grain.
Senator L e n b o o t . D o you think a miller under the conditions
to-day could sell under contract his flour for the future ?
Representative S u m n e r s . And not buy a hedge t
Senator L e n r o o t . N o ; could any miller make contracts for future
delivery of flour ?
Representative S u m n e r s . I do not know whether he could or not.
Representative F u n k . I s it any more necessary for a miller to do
that than it is for an iron mill man to do it ?




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Mr. G u s t a f s o n . It is just a system we have gotten into, gentle­
men, that we do not seem to be able to get out of.
Senator L e n b o o t . But is not the situation to-day such that the
miller could not make a contract for future delivery, any more than
the iron mill man could make one?
Representative S u m n e b s . Senator, they do make them.
Senator L e n b o o t . Not under the present conditions.
Representative S u m n e b s . Do you mean you could not sell a con­
tract for the future delivery of flour six months from now ?
Senator L e n b o o t . If you can find anybody to make a contract
with.
Representative S u m n e b s . What is t o prevent him making a c o n ­
tract now?
Senator L e n b o o t . Who will buy the flour ?
Representative S u m n e b s . Of course, he can not, if he does not
have somebody to buy the flour.
Senator L e n b o o t . Not under the conditions such as we have
now. On a rising market you can do it.
Representative S u m n e b s . Yes; or on a stable market.
Senator L e n b o o t . Yes; on a stable market he could do it.
Senator C a p p e r . Mr. Gustafson, is there any legislation pending
in Congress at this time that you have in mind that will be helpful
to agriculture ?
Mr. G u s t a f s o n . Yes; I think your so-called Capper-Tincher bill
is all right.
Senator C a p p e r . That, I think, has been finally disposed of. The
conference committee has agreed on the measure, I believe. Are
there any others ?
Mr. G u s t a f s o n . Yes; we would like now to get the decks clear,
so that we can develop this idea of cooperation to the fullest possible
measure without being subject to any penalties, as long as we do
not ask for any privileges that we are not willing to give to all the
people. Now, I understand you have a bill up, but I have not fol­
lowed it very closely, that contemplates doing something of that
kind.
Senator C a p p e b . Do you have in mind what it is ?
Mr. G u s t a f s o n . The Capper-Volstead bill, I believe.
Senator C a p p e b . Y o u have that in mind ?
Mr. G u s t a f s o n . Yes, that is the bill I mean, though I don’t know
what form the bill is in now. But understand me correctly, we are
not asking for any class privileges for the farmer. If we ask for the
idea of cooperation, we want all the people of the United States to
have the same right.
Senator L e n b o q t . Let me ask you, in that respect, the one thing
that has been held up to us on this cooperative deal is the raisin
growers’ association, which it is claimed is a complete monopolyNow, do I understand that your view is that we could repeal the
Sherman Antitrust Law ?
Mr. G u s t a f s o n . No; I am opposed to any trusts or combinations
which are detrimental to the welfare of this Nation.
Senator L e n b o o t . Suppose the raisin growers have a complete
monopoly—I am not saying they have, absolutely—what is the
difference between the raisin growers position with cooperation or
with a monopoly ?




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Mr. G u s t a f s o n . They are not the same thing at all.
Senator L e n r o o t . But I am assuming now that the result is the
same.
Senator McNary. They are a monopoly if they have done any­
thing to increase the prices to the producer. That is all a monopoly
does.
Mr. G u s t a f s o n . Would it be wrong to tiy to increase prices to
cover cost of production at this time, and besides, prices may be
helped by other factors than monopolistic practices.
Senator McNary. Following Senator Lenroot’s question, let me
ask you if you are in favor of a monopoly ?
Mr. G u s t a f s o n . I am not in favor of monopolistic practices.
However, as farmers produce all foodstuffs and raw material for
clothing, they violate no law or do anything against the welfare of
the people when they distribute these commodities in an orderly
way. You see, they not only have in their possession the 51 per
cent but the entire 100 per cent, and rightly so, for if each person
produced these essentials for himself, society as now organized
must fail. So to save our social fabric and civilization, the farmers
have been called upon to produce food and fabrics, and it is only
logical to look to them for our source of supply.
Senator McNary. What is the difference in the organization-----Mr. G u s t a f s o n (interposing). What is the purpose of all organiza­
tion if it is not for the betterment of the members of the organization ?
It is not the purpose of the producers to organize in cooperative
organizations to increase the prices to the ultimate consumer. I do
not know of any such efforts among our grain growers whatever.
Senator McNary. And to make it less expensive to do the business,
and to divide the profits ?
Mr. G u s t a f s o n . Yes, sir.
Senator McNary. I am interested in the Capper bill. There is a
revision which has been tacked on by the Senate committee which
have discussed with Senator Capper and others. Perhaps it is
more of a legal question than an economical one. But is there any
effort now by the Government or the States to hinder or destroy co­
operative organization ?
Mr. G u s t a f s o n . I am not a lawyer, nor a lawmaker, but I wish
this commission—I would suggest to this commission that they go
into that matter thoroughly ana find out what legislation is necessary
and recommend to Congress such legislation.
Senator McNary. I gathered from your statement here that you
hoped tliis commission would recommend the Capper-Volstead idea.
M r. G u s t a f s o n . I did not quite finish my statement in reply to
Senator Capper. I do not think I made that statement that way.

{

Senator McNary. I wanted to clear it up in my own mind.

Mr. G u s t a f s o n . I do hope you will enact some legislation that will
make it possible for us to cooperate. I think I made a statement at
the opening of this meeting, when Senator Capper was not present, to
that effect.
The C h a i r m a n . In connection with Senator McNary’s question,
are you familiar with the prosecutions at various places, and some
of them have been brought to a conclusion, against some of the
cooperative milk associations 1




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Mr. G u s t a f s o n . Yes; we are expecting that if this idea of co­
operative marketing advances, that we will be attacked in every way
possible. As long as we are not asking for privileges, we hope that
we will be protected. That is all we ask for.
Representative F u n k . Let me ask you: If the Sherman antitrust
laws should be repealed, do you think there is any danger of a mo­
nopoly being created in grain, which is a world-wide crop?
Mr. G u s t a f s o n . No ; but I am not in favor of repealing the
Sherman law.
Senator L e n r o o t . Coming back to the raisin growers’ association—
and I am not saying it is a monopoly, but it comes nearer to what
I desire for an illustration, because it is not like grain; assuming that
a cooperative association in raisins can secure and does secure an
absolute monopoly, is it your opinion that it should not be subject
to the Sherman law ?
Mr. G u s t a f s o n . To have a monopoly is not necessarily harmful
to the public, as is illustrated by such natural monopolies as watei
power and water supplies for cities, and such generally recognized
monopolies as telepnone lines, electric car lines*, and others of like
nature. ’However, monopolistic or harmful practices ought to be
checked; I don’t care who tries it.
Senator L e n r o o t . Whether a producer or manufacturer, or who
he is?
Mr. G u s t a f s o n . I d o not believe in harmful monopolistic practices.
Senator L e n r o o t . N o w , there is a very clear distinction between
an absolute monopoly and partial restraint of trade. A partial
restraint of trade, we will all jgrant, I think, may result from coopera­
tive associations, and yet it is to the benefit oi the public that they
be permitted.
Mr. G u s t a f s o n . Y o u take some of these European countries, where
it has developed, and it has brought benefit to the whole nation.
Senator L e n r o o t . I am trying to get at your view, whether there
is any place in a cooperative association where we should permit the
Sherman law still to apply.
Mr. G u s t a f s o n . Well, in order to intelligently answer these several
questions it would be necessary to know just what all the laws are,
and what the rules are at this time. I do not know that I could
answer that question directly. However, I do want to say that I
want laws preventing powerful monopolistic practices. I do not care
what they are; even if the fanner should want to do so, I am opposed
to it. And I have been a farmer all my life. But I am opposed to
harmful monopolistic practices. I do think this, Senator, that there
are a lot of people unduly alarmed about what the farmer is going to
do when he gets organized.
Senator L e n r o o t . So far as your organization is concerned, a
monopoly would be absolutely impossible in grain.
Mr. G u s t a f s o n . In grain and live stock and dairy products it can
not be done. Of course, you take some certain fruits and vegetables
that are limited in production, and there is a possibility of a monop­
oly, possibly.
Senator C a p p e r . Are you familiar with the bill as it passed the
House and is now before the Senate, the cooperative marketing bill ?
Mr. G u s t a f s o n . N o ; I have not paid any attention to it lately,
Senator. I do not know what shape it is in. A year or two ago I




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was interested, but I have been so busy with other matters I have
not paid any attention to it.
Senator L e n r o o t . Assuming that the bill is finally passed to
relieve cooperative organizations from the restraints of the Sherman
law except where there is an actual harmful monopoly, what would
you say about it?
Mr. G u s t a f s o n . Oh, I think that would b e fair, wouldn’t it?
Senator L e n r o o t . That is what I am asking.
M r . G u s t a f s o n . H o w e v e r , I w o u l d lik e t o s e e t h e p r o p o s e d la w
b e f o r e I a n s w e r e d d e fin it e ly t h o s e q u e s t io n s .
Senator C a p p e r . Have you any suggestions as to the transporta­

tion problem, Mr. Gustafson ?
Mr. G u s t a f s o n . That is a matter that has got to be gone into
pretty carefully, but we do feel that the high rates for transportation
at the present time are very detrimental to the producer. We find
that we can not ship certain products very far before the cost of
transportation equals the price we get for them. The farmers feel
that transportation charges are entirely too high at the present time.
However, that is a thing that ought to be gone into quite carefully.
I do not know what the conditions of the railroads are, what money
they need to have. I think possibly, for the best interests of the
whole Nation,' that a reorganization of our transportation systems
would be a good thing, but that is a pretty big job. I think there are
duplications that are unnecessary, and I do think there are a number
of trains running back and forth that are not hauling nearly their
capacity, which makes it very expensive, and there is a lot of waste
along that line.
Senator L e n r o o t . Y o u say your relations with representatives of
the packers are entirely harmonious and they are treating you fairly.
We have just had up wnat is known as the “ packers’ bill.
Have you
anything to^ay about that phase of it ?
Mr. G u s t a f s o n . I only want to repeat what I tried to say once or
twice this morning, that if this commission has the power to give to
the public some information regarding the cost of handling our
products between the producer and the consumer, I do not care
whether it is farm products or machinery or what it is, that would be
one o f the greatest services you could render to the country.
Senator L e n r o o t . That we expect to do, of course.
Mr. G u s t a f s o n . If you could show to the American people what
it costs to handle the grain between the man down on tne farm and
you that eat it in town, or wherever you eat it, and the same way
with dairy products and live-stock products, I thinkyou will render
the greatest service that you possibly could render. We never get the
facts; they are so hard to get.
Senator L e n r o o t . If the commission should find that the greatest
spread of all is between the wholesaler or commission man and the
consumer, through the retailer, do you think that knowledge would
tend to make the people correct the condition themselves through
more economical buying ?
.Mr. G u s t a f s o n . Yes; to some extent I think it would. However,
as a people we are very extravagant, we are very easy going, and we
are looking for accommodations, and we certainly pay for them. But
those people that do want to practice economy could do so if they
had a netter system.
91341—22—VO 3-----19
L



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The C h a i r m a n . We are very much obliged to you, Mr. Gustafson,
I am sure.
Mr. G u s t a f s o n . I thank you very much, gentlemen. I would like
to say, Mr. Chairman, that at-any time there is any further informa­
tion I can give you, I shall be very glad to do so.
The C h a i r m a n . Mr. Funk, the commission will be glad to hear
you now.
STATEMENT OF ME. EUGENE D. FUNK, FABMEB, SHIRLEY,

ILL.
Mr. F u n k . Mr. Chairman and gentlemen, my name'is Eugene D.
Funk, and my post office address is Shirley, 111. I live on and operate
my own farm. For 20 years past I have been endeavoring to increase
the quality and to increase tne quantity of the com crop .per acre for
the Central West. We are to-day cooperating with the United States
Department of Agriculture and the Illinois College of Agriculture, as
well as with several other States and institutions and investigators, in
an investigation of various diseases that are affecting the com fields
in the United States. These diseases are now reducing the annual
crop yield on an average of at least 20 per cent of what they should
yield with com free of these diseases.
There are 35 acres on my farm known as the Government plots.
These are devoted entirely to the study of this com disease. Farmers'
Bulletin No. 1176, Department of Agriculture, Washington, D. C.,
and the report entitled Com Disease Investigation, Illinois Farmers’
Institute, Springfield, 111., are devoted to this study and can be se­
cured by anyone for the writing. I submit copies of those to you,
*’
'*
'
members of the committee care to
infected by these diseases I have
During the late war President Wilson and Mr. Hoover requested
me to serve on the Wheat Price Fixing Commission, and later I was
appointed as one of the advisory committee for both the food and
agricultural departments.
I wish to say that my experience during the war and my subse­
quent study of agriculture permits me to present to you this thought,
tnat a very large percentage of the people who live within the con­
fines of the large cities do not realize the importance and have only
a remote idea of what this Nation’s agricultural resources means to
them and to future generations.
Our cosmopolitan magazines and newspapers too often point to
the suggestion that the farmer’s lot is merely to “ sow ana reap.”
The intricate working of the fields of agriculture is not apparent to
the casual observer as he looks out o f the window of tne passing
train, or even when he comes in his auto to the wayside inn and asks
the good housewife for a quart of pure milk or a dozen eggs to take
home to his city roost.
I have drawn here a sketch of an average field in the Central West,
a com field or oats field or wheat field of 40 acres. And I am wonder­
ing how many of the members of this commission have ever thought as
toTiow far a farmer would travel in producing a 40-acre field of corn.
I have figures here to show that in going back and forth over this
field in the different operations, nine of them, he travels approxi-




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AGRICULTURAL, INQUIRY.

291

mately 971 miles during the season to produce 40 acres of com and
gather the crop. I will give you these figures for the record.
The Chairman. Without objection they will be inserted in the
record.
(The statement referred to is here printed in full, as follows:)
T es
im
a
cross
field.

■OOA
J
Breaking stalks, previous crop,

126

x 3 rows.

165
Flowing grou n d (12-inch plow ),
Disking grou n d (8-foot disk ),

O

1 ,320

8
.,

165

Harrow (12-foot harrow),

110*

Planting (2 rows, 7 feet), i y ?

190

Harrowing (12-foot harrow ),4 ? ? ? .

110

<

x 4 ____

1,501
190
3 ,8 8 4

- = 971 m iles for 40 acres, or 24.3 m iles for 1 acre.

Mr. F unk. That our agricultural situation is a subject for very
serious consideration is not, in my opinion, due primarily to the effect
of the “ after-the-war” conditions, nor is it due to any one particular
cause, but may be traced to a collection of causes, no one of which in
the eyes of those who do not dive deeply enough into this matter of
investigation, may appear to them as the prime evil of the whole.
I desire to compliment you, Mr. Chairman, and your commission,
for taking up at this period of our country’s history some of these
most intricate and important problems before it is too late. I have
been requested through your secretary to come here and discuss with
you the present conditions relative to the cost of growing a crop of
com.
First, let it be understood that no farmer can produce a maximum
crop of com, or for that matter, no crop can be successfully and
im without a proper balanced plant food for his soil
If his soil or his seed is infected or is deficient to the
extent that his crop fails of 20 per cent of its maximum yield, that
farmer is wasting or losing 20 per cent of his energy during the entire
year, and this lost production must add that much more to the cost
of that which he is able to harvest.
Many farms are so reduced in soil fertility that it is next to im­
possible to realize a fair and profitable crop, even though the price
of the harvested grain is beyond the limit which the consumer is
able to pay. The abandoned farms of New York and other States
reflect in a measure what I am now trying to present to you. Outside
capital must come to the farmers’ rescue before they will again be




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292

AGRICULTURAL, INQUIRY.

cultivated and cropped. The cost of production enters into the
growing of com or oats just the same as the cost of manufacturing
any article used by man. Kailroads, steamboats, automobiles, shoes,
clothing, the building of a house, all are figured on the basis of the
cost of production, and our Government is and our laws should be
based on the legitimate protection of those who produce, and they
should receive the cost of production plus a reasonable profit for the
finished product.
The thinking farmer realizes that he is not alone in his trouble at
the present time in endeavoring to get from under the burden of
higher cost of producing crops. He does feel, however, that the
present conditions point to the fact that something must be done to
relieve him or he will soon be obliged to leave his farm, and allow
nature to cover his fields with daisies and dandelions.
• I have brought with me, Mr. Chairman, a number of letters,
affidavits, sworn statements, and telegrams from actual bona-fide
farmers, land owners, and tenants, whim I wish to present to you to
prove the conditions existing in Illinois at this time. Some of these,
Mr. Chairman, I will not take the time to read but will ask permission
to have them printed for your later consideration.
The Chairman. Without objection, that may be done.
Mr. Funk. Some of them I want to read to you as showing the
cost of production of com. I shall confine myself largely to com, as
you have requested.
I would like to state at the outset that but a small percentage of
farmers are in the habit of keeping books, a strictly, carefully com­
piled set of books. Their income does not enable them to employ a
bookkeeper, and their own time does not, as a rule, allow them to
make out a carefully compiled set of books. But there are a few
eople who have undertaken to find out the cost of producing a
ushel of com, or what it costs to produce a crop of com on an acre
of ground, and I have quite a number of these statements here. I
will read just one or two, and then pass the others over.
Here is one submitted to me by Mr. Edward Peterson, of Wheaton,
111., for the crop of 1920. In this statement he has itemized man
labor, horses, equipment, interest, buildings, rent, manure, seed,
tractors, oil, insurance, weighing, kerosene—those items are included
in his costs.
Now, as to his receipts. He uses his com stalks; that is, after his
com has been gathered in the field he uses his corn stalks for pasture.
He has allowed a price for his pasture. He has also, apparently,
according to this statement, fed some of his grain to his stock before
it was ripe. I see he has here 4 tons of green corn, and then he gives
figures on the com that he finally gathered. This is a report on 33$
acres of land. There was a total yield of 1,467 bushels, at a total
cost of $1,369.20, or a cost per acre of $40.88, and a cost per bushel
of 93 cents. The gross income shown is $1,041.25, with a loss of
$327.95.
The Chairman. Does that represent a 1920 operation?
Mr. Funk. Yes, sir. I will not go into detail with all these others.
(The statement referred to is here printed in full, as follows):

E




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AGRICULTURAL INQUIRY.

Ed. Peterson, Wheaton, III.; 1,404 bushels husked com; 4 tons green com; equal to
1,467 bushels com.
[Corn:

A 33i; termNo. 384; yield 1,467; yea 1920-21.]
cres,
r

Items.

Total.

Per cent. Per acre.

Per
bushel.

expenditures .

............................................. . , , ,

Manure.................................
Tractor. 4 hours..................................................................................
OiL...........................................................................
...........

14
26
6
1
1
21
26
1

3

15.59
10.89
2.49
.49
.30
8.39
10.76
.49
.12
.02
.24
1.07

1,369.20

Buildings

$187.16
364.93
83.30
16.43
10.00
281.01
360.39
16.25
4.00
.69
8.06
35.96
.05
.97

10
0

40. S8

1

S . 13
O
.25
.06
.01
.01
.19
.24
.01

.0
1
.02

.03
.93

REVEKUE.
17.00

2 .0
00

1,004.25
TotaL.........................................................................................
Cost......................................................................................................

1,041.25
1,309.20
327.95

The Chaibman. May I ask if you have any statements there which
take the other end of the proposition and undertake to show what the
return to the farmer was on the operation of his plant as a plant,
as distinguished from an attempt to get at the cost per bushel ?
Mr. F unk. Yes, sir; I have some reports on that, taking it as a
farm, which I will submit a little later. . I am confining it now
strictly to corn. I will lead up to that.
Here is the statement of Mr. C. A. Hunt, of Morris, 111., for the
crop of 1920. This covers 40 acres, at a total cost of-----The Chaibman (interposing). May I say, Mr. Funk, that I think
those figures are already in the record. They were submitted by
Mr. Silver in connection with his statement.
Mr. F unk. All right, sir. I shall not read that.
Here is one from Mr. Fred R. Taylor, of Rossville. I am only
going to give you one of his, for 1919, although he has given me the
records from 1913.
The Chaibman. We would be very glad to have them all, if they
> back as far as 1913. You might just insert them in the record,
assume they are self-explanatory ?
Mr. F unk. Yes, sir; they are.

f




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AGRICULTUBAL INQUIBY.

(The statements referred to are here printed in full, as follows:)
Cost account o f 40 acres com , 19X0, by C. A . H unt, Morris, IU.

Hr fr
os >
h rs.
ou

Man*

Operation.

h rs.
ou

Plowing......................................................................................
Disking, twice...........................................................................
Harrowing (3)...........................................................................
Planting.....................................................................................
Rolling........................................................................................
Cultivation (3)..........................................................................
Weeding ana mowing..............................................................
Manurenauling.........................................................................
Husking.....................................................................................
Seed, 6 bushels, at S3 per bushel...........................................
Shelling, including coal or gas, at 2} cents per bushel____
Hauling to market...................................................................
Interest on land and equipment, at 6 per cent, land
valued at $250 per acre, equipment at 91,500, for a
period of four months.......................................................... .
Tax.............................................................................................. .

Horses.

Amount.

520

130
50
25

$84.50
32.50
16.25
0.90

20
0
10
0

2
2
2
0

44
’ 60
280

140
30
40

1.0
10

63.00
7.60

2.0
20

10
2

12
0

4ft. 00
18.00
40.50
22.50

50

630.00

8 .0
60

Total cost.........................................................................
Coet per bushel, $0.60.
Cost per acre. $27.29.
Yield at 45 bushels per acre, 1,800 bushels, at 50 cents per
bushel.......................................................................................
Value of fodder, at $2 per acre............................................... .

1,091.65

$900.00

A.0
00

Loss.

980.00
11L65

Man labor, per hour...
Horse labor, per hour.

.1
0

Cost o f growing 10 acres com , 1919; account kept by Fred R . Taylor, Rockville, IU.
[Folio, field D.

Total yield, 525 per acre, 52.5 bushels.]

T cost.
otal

P acre.
er

Operation.
Manhours.

Horsehours. Value.

Value.

Value.

$1.09
.94
. .28
.30
.23
.71
.88
.68

11.6
12.5
3.0
1.6
2 .4
3 .8
4.7
3.6
1&5

$2.67
2.88
.69
.$7
.55
.87
1.06
.83
2.42

5.26

55.3

12.73
5.28
3.41
.70

$10.88
9.38
2.81
3.00
2.25
7.13
8.81
6.75

P
6
19
23*
18
52}
192}

116
125
30
16
24
38
47
36
105

$26.68 1 7 9
28.75
2.5
6.90
.75
33.68
.8
5.52
.6
8.74
1.9
10.81
2.35
8.28
1.8
24.15
S. 25

52.51

29
25

553

127.19
52.51
34.13
7.00
3.00

I
l
1
............. 1
..............
1J bushels seed com, at $6....................

Manhours.

19.25

Horsehours. Vatne.

.SO

!

223.83
7.50
8.70

2146
•75
.87

24a 03

24.02

1

262.50
22.47

25.25

1

26150

36.25

i

1
............. ...............
Returns to renter, 262.5 bushels ccn»,
at $ 1 ......................................................
Returns to land owner, 262.5 bushels




i

.89
2.2$

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295

a g r ic u l t u r a l , i n q u i r y .

Mr. F u n k . Referring to the question you asked me a little while
ago, I have here a number of sworn affidavits, one of which I will read.
Tne others are similar. [Reading:]
T o whom it may concern:
I w ish to h ereb y state that I am th e ow ner o f a farm o f 240 acres in O w ego T ow nship,
L iv in g s to n C ounty, 111., w hich is operated b v a tenant on th e share-rent basis. I
r e c e i v e as m y portion of th e crops one-half o f tn e corn, on e-h alf o f the oats, and $8 per
a c r e fo r th e pasture land. D u n n g th e season 1921 there w ere grown on this farm 100
a c r e s o f c o m , 90 acres o f oats, a n d SO acres o f h ay and pasture land. T h e acre y ield s
w e re as follow s: Corn (estim ated), 35 bushels per acre; oats (actual), 34 bushels per
acre.
1 estim ate the value o f m y land at $325 per acre. T h e average assessed value o f land
i n m y tow nship in 1920 was $44 per acre. T h e tax on this land for 1920 was $1.6658
p e r acre. Considering this investm ent on the basis o f m y estim ate o f value at 6 per
c e n t p e r annum , m y share o f th e crops, on th e basis o f present m arket prices a t m y
lo ca l elevator— co m , 43 cents per bu sh el; oats, 24 cen ts per bushel— netted m e a loss
o f $14.83 per acre.
J. B . H a b d in g .
S u b scrib ed and sworn to before m e this 8th da y o f August, 1921.
D o r r i s W o l f f , Notary Public.

There are a number of those.
The C h a i b m a n . Very well, you may insert them in the record.
(The statements referred to are here printed in full, as follows:)
T o whom it may concern:
I wish to h ereb y state th at I am a farm er operating a farm o f 240 acres in E ppords
P o in t Township, LivingBton C ounty, 111. O n this farm I grew 120 acres o f c o m , 100
acres o f oats, and 20 acres o f h a y and pasture during th e season o f 1921. M y acre y ield s
w ere as follow s: C om (estim ated), 50 bushels per acre; oats (actu al), 20 bushels per
a cre.
T h e cost o f prod u cin g these crops has b een : C om , $10.97 p er acre, 22 cen ts per
b u sh el; oats, $8.40 p e r acre, 42 cen ts p er bushel.
T h e p rod u ction cost does n ot in clu d e interest on m y in vestm en t in land and im ­
p rovem en ts. I estim ate th e valu e o f m y farm a t $300 per acre. T h e tax on this land
tor 1920 was $2 p e r acre. Considering this in vestm ent on th e basis o f m y estim ate,
a t 6 p e r c e n t per annum , th e crop w ill n et m e a loss o f $17.33 p er acre.
W . S. H o l m es .
S u b scrib e d and sworn to before m e this 9th d a y o f August, 1921.
L o u is W o l f f , Notary P u b lic.

To whom it may concern:
I w is h to h ereb y state that I am the owner o i a farm o f 320 acres in Saunem in T o w n ­
ship, LivingBton County, 111., w h ich is operated b y a tenant on th e share-rent basis.
I r e c e iv e as m y portion o f th e crops one-half o f th e co m , two-fifths o f th e oats, one-half
o f th e w heat, $5 for the h ay, and $7 per acre for th e pasture. D uring th e season 1921
there w e re grow n on this farm 120 acres o f c o m , 80 acres of oats, 40 acres o f w heat, and
80 a cre s o f n a y and pasture. T h e acre yield s were as follow s: C om (estim ated), 25
bush els per acre; oats (actual), 36 bushels per acre; w heat (actu al), 21.5 bushels per
acre.
I estim a te th e valu e o f m y land at $300 per acre. T h e tax on this land for 1920 was
$2 per a cre. Considering this in vestm ent on th e basis o f m y estim ate of valu e at 6
per ce n t p e r annum , m y share o f th e crop, on th e basis o f present m arket prices at
m y lo ca l elevator— co m , 43 cents per bushel; oats, 26 cents per bush el; ana wheat,
$1.07 p e r bushel— n etted m e a loss o f $13.52 per acre.
H . J. M eis, Pontiac, III.
S u b scrib ed and sworn to beforr m e this 9th d a y o f August, 1921.
C. R . T om b a u g h , Notary Public.




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AUBIOULTUBAL INQUIRY.

To whom it may concern:
I wish to hereby state that I am the owner of a farm o f 120 acres in Esmen Tow nship.
Livingston County, 111., w h ich is operated b y a tenant on the share-rent basis. I
receiv e as m y portion of th e crops one-half of the co m , one-half of the oats, a n d ( 6 per
acre for th e pasture land. During th e season 1921 there were grown on th is farm 54
acres of c o m , 62 acres of oats, and 4 acres of hay and pasture. T h e acre y ield s were as
follow s: Cora (estim ated), 40 bushels per acre; oats (actual), 30 bushels per acre.
I estim ate the value' of m y land at $300 per acre. T h e tax on this land for 1920 was
$1.40 per acre. Considering this investm ent on the basis of m y estimate of va lu e at 6
p e r cen t per annum , m y share of the crop , on th e basis of present market p rices at my
loca l elevator— c o m , 45 cen ts per bush el; oats, 26 cen ts per bushel— netted m e a loss
o f $13.14 per acre.
M . W h al en .
Subscribed and sworn to before me this 9th day of August, 1921.
D . E . M y e r s , Notary Public.

To whom it may concern:
1 wish to h ereby state that I am the ow ner o f a farm o f 155 acres in E pp ards Point
Tow nship, Livingston County, 111., w hich is operated b y a tenant on the share-rent
basis. I receiv e as m y portion of the crops one-half o f the c o m , and $7 p e r acre for
the pasture land. During the season 1921 there were grown on this farm 82 acres
o f corn, 60 acres of oats, and 13 acres o f hay and pasture. T h e a cre-yield s were as
follow s: Corn (estim ated), 35 bushels per acre; oats (actu al), 30 bushels p er acre.
I estim ate tne value of m y land a t $300 per acre. T h e tax on this lan d for 1920
was $1.14 per acre. Considering this in vestm ent on the basis of m y estim ate o f value
a t 6 per ce n t per annum , m y share of the crop, on the basis o f present m arket prices
a t m y local elevator— corn, 43 cents per bushel; oats, 26 cen ts pier .bushel— n etted me
a loss of $13.06 per acre.
W m . S hafer.
•Subscribed and sworn to before m e this 8th da y o f August. 1921.
E . G . S m i l a r , Notary Public

To whom it may concern:
1 wish to hereby state that I am the owner o f a farm o f 160 acres in O w ego Town­
ship. Livingston C ounty, 111., w hich is operated b y a tenant on th e share-rent basis.
I receive as m y portion of the crops one-half of tn e c o m , one-half o f th e oats, and
$6 per acre for the pasture land. During the season 1921 there were grow n on this
farm 75 acres o f c o m , 55 acres of oats, and 30 acres o f hay and pasture. T h e acre
y ield s were as follows: Com (estim ated), 40 bushels per acre; oats (actu al), 39 bushels
per acre.
I estimate the value o f m y land at $200 per acre. T h e average assessed value of
land in m y tow nship in 1920 was $45.33 per acre. T he tax on this land for 1920 was
$1.75 per acre. Considering this investm ent on the basis of m y estim ate o f value at
6 per ce n t per annum , m y share o f the crop, on the basis of present m arket prices
a t m y local elevator— corn, 41 cents per bushel; oats, 26 cents per bushel— netted
m e a loss o f $6.51 per acre.
G e o r o e R eitz .
Subscribed and Sworn to b efore m e this 9th d a y o f August, 1921.
J o h n D u f f , Notary Public.

To whom it may concern:
I wish to h ereb y state that I am the ow ner of a farm o f 200 acres in O y e g o Town­
ship, Livingston County, 111., w hich is operated b y a tenant on the share-rent basis.
I receive as m y portion of the crops one-naif of the co m and $5 per acre for the pas­
ture land. D uring the season 1921 there were grown on this farm 106 acres of com,
66 acres o f oats, and 28 acres of h ay and pasture. T h e acre yield s were as follows:
Corn (estim ated), 35 bushels per acre; oats (actual), 35 bushels per acre.
I estimate the value of m y land at $250 per acre. T he tax on this land for 1920
was $1,279 per acre. Considering this investm ent on the basis of m y estimate of
value at 6 per ce n t per annum , m y share o f the crop, on the basis of present market
prices at m y local elevator— co m , 43 cents per bushel; oats,26cent8 per bushel—netted
m e a loss of $11.16 per acre.
R obert H

ughes.

Subscribed and sworn to before me t h i s ------ d t y o f August, 1921.
C. A . R o l u n , Notary Public.




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AGRICULTURAL INQUIRY.

'2 9 7

To whom it may concern;
I wish to h ereby state that I am the owner of a farm o f 200 acres in R ooks Creek
Township, Livingston C ounty, 111., w hich is operated b y a tenant on th e share-rent
basis. I re ce iv e as m y portion o f th e crop* one-half o f th e corn, two-fifths o f the oats,
and $6 p e r acre for th e pasture land. D uring th e season 1921 there were grown on this
farm 78 acres o f corn , 90 acres o f oats, and 32 acres o f h ay and pasture. T he acreyields w ere as follow s: Corn (estim ated), 40 bushels per acre; oats (actual), 25 bushels
per acre.
I estim ate the valu e o f m y land at $250 per acre. T h e tax on this land for 1920 was
$1.75 p e r acre. Considering this in vestm ent on the basis o f m y estim ate of value a t
6 per c e n t per annum , m y share of the crops, on the basis of present m arket prices a t
my local elevator— c o m , 45 cents per bush el; oats, 26 cents per bushel— netted m e a
loss of $11.11 per acre.
C h as. F ib n h o ld , Pontiac, III.
Subscribed and sworn to b efore m e this 9th d a y o f August, 1921.
J. W . L y o n , Notary Public.

To whom it may concern:
I wish to h ereb y state that I am the ow ner o f a farm o f 320 acres in Owego T ow nship,
IivingBton County, 111., w hich is operated b y a tenant on th e share-rent basu>. I
receive as m y portion o f th e crops one-half of th e co m , one-half of th e oats, one-half
of the wheat, one-half o f the h ay, and 50 cents per acre for th e pasture land. D uring
the season 1921 there were grown on this farm 120 acres o f corn, 80 acres o f oats, 45 acres
of wheat, and 75 acres of h a y and pasture. T h e acre y ield s were as follow s: Corn
(estimated), 35 bushels per acre; oats (actual) 40 bushels per acre; w heat (actu al).
20 bushels per acre.
I estimate the value o f m y land at $250 per acre. T h e ta x on this land for 1920
was $2 per acre. Considering this investm ent on th e basis o f m y estim ate of value
at 6 per cent per annum , m y share o f the crops, on the basis of present m arket prices
at m y local elevator— corn, 43 cents per bush el; oats, 27 cents per bu sh el; and w heat,
$1.05 per bushel— netted m e a loss of $11.36 per acre.
J. T . M o n tu n a s e , Pontiac, III.
Subscribed and sworn to before m e this 9th day of August, 1921.
J. R . T om b a u g h , Notary Public.

To whom it may concern:
1 wish to h ereb v state that I am th e owner o f a farm of 160 acres in P on taic Tow n­
ship, L ivingston County, 111., w hich is operated b y a tenant on the share-rent basis.
I receive as m y portion o f th e crops one-half of the corn, $5 for the hay, and $4 for
the pasture p e r acre. D uring the season 1921 there were grown on this farm 75 acres
of corn, 59 acres o f oats, and 26 acres o f h a y and pasture. T h e acre-yields were as
follows: C o m (estim ated), 35 bushels per acre; oats (actual), 40 bushels per acre.
I estim ate the value o f m y land at $325 per acre. T h e average assessed value of
land in m y tow nship in 1920 was $46.25 per acre. T h e tax on this land for 1920 was
$2.07 p e r a cre. Considering this investm ent on the basis of m y estim ate of valu e at
6 per ce n t p e r annum , m y snare of the crops, on th e basis of present m arket prices at
my local eleva tor— c o m ,”43 cents per bushel; oats, 26 cents per bushel— netted m e
a loss o f $15.33 per acre.
Jo h n Y o u n g .
Su bscribed and sworn to before m e this 8th day o f August, 1921.
J o h n S. M a r s h a ll , Notary Public.

Mr. F u n k . I have another set of detailed accounts for raising corn
on seven fields on two farms in Lee County, 111., on which cost records
were kept for the year 1920. I do not suppose you care to have me
read them.
The C h a i b m a n . Y o u m a y s u b m it t h e m f o r th e r e c o r d .




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298

AGRICULTURAL INQUIRY.

(The statement referred to is here printed in full, as follows:)
Detailed cott o f ratting com on teven field* on two farm t in Lee County, III., on which
cott records were kept fo r the year 1910,
F ie ld N o. 3 L ; 35 acres; y ie ld , 1,620 bushels:
$20.00
5 bushels se e d ......................................... ............................................................
236 hours m an la b or............................................................................................
79.36
551 hours h o n e ......................................................................................................
167.80
12 hours tractor.....................................................................................................
13.42
H usking la b o r........................................................................................................
109.08
T a xes........................................................................................................................
44.10
M achinery ex p en se..............................................................................................
36.64
Interest on investm ent in la n d ........................................................................
420.00
Total c o s t.............................................................................................................
890.40
Cost per acre...........................................................................................................
25.44
Cost per b u sh el.....................................................................................................................-5 4 ft
F ie ld N o. 5 L ; 7 acres; y ie ld , 300 bushels:
59 hours man la b or...............................................................................................
$18.26
159 hours hom e labor..........................................................................................
48.42
u bushels se e d ......................................................................................................
5.00
H usking la b o r........................................................................................................
20.20
R e n t..........................................................................................................................
84.00
M achinery exp en se.............................................................................................. .............8.37
T otal co st.............................................................................................................
184.25
Cost per a cre...........................................................................................................
26.32
Cost per b u sh el..................................................................................................................... . 61-iV
F ield No. 6 L ; 33 acres; y ie ld 915 bushels:
190 hours m an labor.............................................................................................
958.82
504 houre h o n e la b or...........................................................................................
153.49
15 h o u n tractor la b or..........................................................................................
16.77
4.3 bushels se ed ....................................................................................................
17.20
H usking labor........................................................................................................
61.61
R e n t..........................................................................................................................
396.00
M achinery expenses............................................................................................
31.41
Total cost.............................................................................................................
735.30
Cost per a cre ..........................................................................................................
22.27
Cost per b u sh el.......................................................................................................................80ft
F ield No. 7 L ; 7 acres; yield , 350 bushels:
79 hours man labor...............................................................................................
$24.46
161 h o u n h o n e la b or...........................................................................................
49.02
7 h o u n tractor labor............................................................................................
7.83
1 bushel s e e d .........................................................................................................
4.00
T a x e s ........................................................................................................................
8.82
M achinery expenses............................................................................................
7.33
Interest on in vestm en t.......................................................................................
84.00
Total cost............................................................................................................
185.46
Cost per a cre ..........................................................................................................
26.49
Cost per b u sh el..................................................................................................................... .53
H ogged o ff; n o expense for husking.
F ie ld No. 8 L ; 20 acres; y ie ld , 400 bushels:
M anure.....................................................................................................................
$45.00
61.62
199 h o u n m an labor...................................................'........................................
450 h o u n horse la b or...........................................................................................
139.81
33 h o u n tractor labor..........................................................................................
36.89
3 bushels s e e d ........................................................................................................
12.00
T a x e s........................................................................................................................
25.20
M achinery expenses............................................................................................
20.92
Interest on in vestm ent.......................................................................................
240.00
T otal cost.............................................................................................................
581.44
Cost per acre...........................................................................................................
29.07
Cost per b ush el................................................................................................................... 1.45
H ogged o ff; n o exp en se for husking.




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299

a g r ic u l t u r a l in q u ir y .

Field N o. I B ; 15 acres; y ie ld , 600 bush el:
F a ll plow in g...........................................................................................................
239 hours m an labor.............................................................................................
590 hours horse la b o r..........................................................................................
2 bush el seed.................................. ........................................... ...........................
M a ch in ery expenses............................................................................................
T a x e s ........................................................................................................................
In terest on investm ent.......................................................................................
T o ta l cost.............................................................................................................
C ost per a cre...........................................................................................................
C ost per bushel......................................................................................................

930.00
84.25
92.66
9.00
28.53
44.70
187.50
476.64
31.77
. 79-A

F ield N o. 2 B ; 7J acres; y ie ld 375 bushels:
282 h o u n m an labor............................................................................................
460 hours hom e labor..........................................................................................
1 b u sh el se e d .........................................................................................................
T w in e ........................................................................................................................
M ach inery expense..............................................................................................
T a x e s ........................................................................................................................
Interest on investm ent.......................................................................................

999.44
72.25
4.50
4.00
22.11
22.35
93.75

T otal cost.............................................................................................................
Coet per a cre ..........................................................................................................
Cost per bush el......................................................................................................

318.40
42.45
.8 5

T ota l acres in all fields...............................................................................................
T o ta l yield (bu shels)...................................................................................................
T otal cost.........................................................................................................................
Average coet p er acre..................................................................................................
A v e n g e cost p e r bushel.............................................................................................

124}
4,560
93,371.89
927.08
9 0 .7 3 ^

Cott o f growing com.
FIELD A , 20 ACRES, 1913.
Total yield.
Operation.

Date*

Mac
hours.

i

Tottt!..................... ' .....................

Land rental, 20 acres,
a t*.




Value.

151

87.50

485.75

i

Horae
hours.

Value.

!
14.83
15.70 ........... i.............
3.40
2.35
3.46
7.10
5.05
6.70
48.59
87.50

331

boxbels, at

Man
hours.

48*
157 •
34
23.50
34.50
71
50.50
67

111

Hwwnrt cultivation____

Twtoe^lO pounds, at

Value.

339}

May 14-18...
May 24-38...

S u n t ft-lS

Horse
hours.

S3.20
8.06
1.53
2.12
2.08
6,40
4.55
6.70
52.86

17|

aSr?

Value.

Per acre.

136.09
1.03

1

6.88

1
I

10.00
160.00
314.00

1

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300

AG&ICTJLTTTKAIi INQUIRY.
Cost o f growing com — Continued.
FIELD F., 6.31 ACRES, 1914.
Total yield.
Operation.

Per acre.

Date.
Man
hours.

Horse
hours.

Value.

Man
hours.

Value.

Horse
hours.

I6j

$3.03

->7J

$5.78

2.65

$0.48

9.15

$0.92

5!
6
6J

1.04
1.0#
1.14

23
12

2.30
1.20

.91
.95
1.03

.16
. 17
.18

3.64
1.90

.36.19

8
104
19
31

1.60
2.10
1.50
3.80
8.68

16
21
15
8
62

1.60
2.10
1.50
.80
6.20

1.26
1.66
1.19
3
4.91

.25
.83
.24
.60
1.37

2.53
3.32
2.37
1.26
9.82

.25
.33
.24
.13
.88

111

Apr.30-May
1.
May 2 -1 3 ....
May 13.........
Planting pumpkins.... May26-Juno
1.

Value.

23.97

214}

/ 21.48
} 17.56
\ 23.97

3.78

7
\

Picking seed..................

Sept. 11-16..
Nov.11-12...

Total....................

/
33.99 \

3.40
3.78
7.1&
8.00
.38

45.45
Seed, 48 pounds, at
*2.80.

Value.

2.40
2.55

17.11

21.45

3.40

129. 45
100.88

aa si
15.96

28.57

.............

15.96

108.00

Summary:
180 bushels corn, at
$0.60.
1,430 ears seed corn,
at $1.50.

.40

100.88

4.K

1

FIELD A, 20.74 ACRES, 1914.
Plowing..........................
Harrowing.....................
Planting.........................
Harrowing corn............
First cultivation...........
Second cultivation...,,
Third cultivation.........
Fourth cultivation......
Picking seed..................
Husking.........................

Apr. 25-30...
May 4-5........
May 5-6
May 13
May 27-28...
June 2-3.......
June 12-15...
June 19-20..
Sept. 11-12..
6ct.20-Nov.5

!I
43$
35J
2SJ
24*
9
112

$10.23
2.43
2.48
1.13
7.83
7.05
5.70
4.95
1.80
26.92

197J
47
27*
25
87
70J
57
49$
8
221

$19.87
4.70
2.75
2.50
8.70
7.05
5.70
4.95
.80
22.10

343}

70.52

790*

79.03
70.52

5»1

Total....................
Total labor cost .
Seeds, 3 bushels,
pounds, at $2.80.

$0.49
.11
.11
.05
.38
.34
.28
.24
.08
1.29

16.51

9.53
2.26
1.32
1.20
4.18
3.39
2.76
2.39
.34
10.65

$0l»
.23
.13
.12
.42
.34

3.37

2.73
.65
.66
.30
2.091.69
1.37
1.19
.43
5.40

38.01

181
3.37

149.55
165.92
8.80

8

.as

.34
.O
S

LT
O

7.18
8.00
.42

9.82




*07

387.60

18.66

7.50

Summary:
646 bushels corn at
$0.60.
500 cars seed, at
$1.50.

.47

334.39

.36

j
402.85
............. 334.09

'

=

t
1

1
1

68,76

1

1*43
16.07

I
........... !..............

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AGRICULTURAL INQUIRV.

301

Cost o f growing com — Continued.
FIELD A , 18.74 ACRES, 1915.
[Total yield, 1,016 bushels; per acre yield, 54.21 bushels.]
Total yield.
Operation.

Date.

Man
hours.

j Horse
Value. 1hours.
$10.65
3.85
3.00
2.15
5. 70
6.60
4.50
4.20
36. 76

531
191
15
10}
28}
33
22}
21
147
Total.....................

3501

1
i

77.41 ,

Value.

Value.

Horse
hours.

185}
6
.H
60
41*
57
66
45
42
309

$15.58
6.80
6.00
2.15
5.70
6.60
4.50
4.20
30.90

2.84
1.03
.80
.57
1.57
1.76
1.20
1.12
7.84

$0.57
.20
. 16
. 11
.31
.35
.24
.22
1.96

9.91
3.63
3.70
1.14
3.14
3.52
2.41
2.25
11.20

$0.99
.36
.32
. 11
.31
.35
.24
.23
1.12

$54*

85.43
77.41

18.73

3.82

40.40

4.03
3.82

Value.

162.84
7.80

i

pounds, at $0.5.

i
1
1

Per acre.
Man
hours.

|

'

7.85
. 41

9.57
149.92

,51
8.00

Total....................

16.77
.30
FIELD D, 27.6 ACRES, 1916.

D
isking............

$5.90
14.30
4.35
3.60
9.50
8.40
7.80
8.50
1.70
29.50

Total....................
Total labor cost..
Paid cash for husking..
Machinery use..............
4 bushels seed, at * 4 ...

$11.80
26.60
7.45
3.60
9.50
8.40
7.80
8.50
2.55
17.20

93.55

Plowing....................
Harrowing................
Planting. ..................
First cultivation___
Second cultivation..
Third cultivation...
Fourth cultivation..
Harrowing corn___
Husking....................

103.40
93.55

1 .0
00

24.60
16.00

Total....................
Cost to renter for each
acre be receives.........
Cost per bushel on
y w o of 1,060 bushels
oo37.6 acres..............

247.55
17.94
.46
FIELD A , 20.74 ACRES, 1917.
_______

nfrfrfnif

................

*10.90
3.20
2.60
2.70
1.80
6.05
5.60
5.80

...........
.............

H oiking.........................
i

Board for

h sk fa
n er

IS pounds seed at
O
,

5

38.65

i
.........

$19.90
6.40
5.20
2.70
3.60
6.05
5.60
5.80
22.40
77.65
38.65
58.60
9.00

i

i _ _ _

183.90
7.50
11.00
202.40

Cost per acre far rent19.51
Cost

per bushel to




I

.36

D ig itized by L . o o Q

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AGRICULTURAL INQUIRY.

302

Cost o f growing com — Continued.
FIELD E, 37.4 ACRES, 1IU.
Por acre.

Total yield.
Operation.

Date.
Man
hours.

Value.

Plowing, disking, and

Horse
hours.

Value.

Man
hours.

Horse
Value. hours. Value.

149.56
4.75
2.50
13.75
12.51
10.20
72.45

$156.63
7.60
8.00
3100
20.00
16.30
103.40

165.72

332.95
165.7?
33.04
43.00

i
.............1
..............

I
Cost to renter for each

|

£74.71
30.73

Cost per bushel to ren*
.55
1

Y ie ld of 2,090 bushels on 37.4 acres; 1,045 bush els to renter.
F ou rth cro p from clo v e r .
•

O at s tu b b le ground.

Mr. F u n k . I also have a number of letters from gentlemen relative
to the condition the farmers are in in Illinois, but I am only going to
read one of those (reading):
1. W h at is you r nam e and age and exp erien ce in farming?
M y nam e is H en ry E. Schm iedeskam p. I am a law yer b y profession, a graduate
o f the U n iversity o f M ichigan, residing at Q u in cy, 111., of the age of 42 years. Prior
to becom ing a law yer I was a ctiv e ly engaged in farming for som e 15 years in Adams
C ounty, and have since leavin g th e farm been closely con nected w ith farm ing as die
ow ner o f farms and engaged in th e a ctiv e operation of th e same through a superin­
te n d en t or manager. M y father and 1 are n ow engaged in general farm ing about 3
m iles south of Q uin cy, ow ning 146 acres of land of the value of about $300 per acre.
W e e m p loy a superintendent on a salary of $57 per m onth and a com m ission on net
profits of 10 per cen t additional. W e are engaged in general liv e stock and grain
farming and are w ell eq u ip p ed for that purpose with plen ty of sheds and shelter for
cattle and liv e stock and for our hay and grain. W e purchase cattle in the fall and
feed our roughage to them in the winter tim e, selling them in th e spring to feeders
w ho feed them corn and fatten them . W e also raise about 100 hogB per year, raising
tw o crops of hogB each year w hich w e mature at about 200 pounds and usually sell
on th e August and A pril markets. W e also raise sheep and sell the lambs on an early
June market.
2. W hat is the cost o f you r equ ip m en t and the kind o f eq u ip m en t?
O w ing to the high price of farm m achinery, w e purchased ou r farm machinery
second-hand at p u b lic farm sales, and b y using good ju dgm en t obtain ed a good line
o f a ll kinds o f farm m achinery at q u ite reasonable prices, at a bout 50 per cen t of the
new price. T h e cost o f our eq u ip m en t in the w ay of liv e stock and farm implements
is a b o u t $5,000.
3. W h a t percentage o f you r im provem ents d o you consider necessary each year
to k eep same in repair and allow for deterioration?
A b o u t 8 per ce n t on im provem ents.
4. W hat percentage of cost of equ ip m en t is necessary for proper m aintenance and
deterioration?
A b o u t 15 per cent.
5. W hat are you r principal cropB?
C om , wheat, oats, h ay, soy beans, a ll of w hich is fed in to liv e stock except the
wheat, nothing b ein g sold off the farm that can b e fed up in to liv e stock.
6. W hat is tne total cost of production per bushel, ton, or pou nd ?




D ig itized by L . o o Q

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AGRICULTURAL INQUIRY.

303

T h a t varies. T h e cost o f production w ould b e a bout 20 p er ce n t leas this year
than last year, ow ing to low er labor coet on farm. T he fix e d cost, such as interest,
taxes. repairs, e tc ., has increased the past year rather than dim in ish ed. W e p a y a
rental o f $12 per acre as an oiganization to ourselves as the owners of the land in figuring
cost of prod u ction . For exam ple, our w heat crop this year w ill average a b ou t 20
bushels p e r acre. T he w heat is already sold on J u ly m arket a t w hat w ill n et $1 a
bushel a fter paying m achine thrashing charges. T h is w ill leave a bout $20 per acre
for th e w heat land. T h e rental cost of the land b ein g $12 per acre, it w ill cost at
least $10 per acre to sow and harvest the wheat, so that the wheat at $1 per bushel has
been raised at an actual loss. T h e oats is now selling around 30 cents per bushel.
Our oats this year w ill m ake about 30 bushels per acre, w h ich w ill m ean a considerable
losB on th e oats land, as the land w ill n ot p a y the rental value of the land. Our on ly
opportu nity to m ake a n y m on ey w ill b e ou t of the corn, w hich b y feedin g the same
into hogs w ill p rob a b ly make us.som e profit, b u t our farming operation for this year
will b e co n d u cte d a t a loss of a t least $1,000.

The C h a i r m a n . Mr. Funk, do you think it would be safe for us o r
for a business man to base any conclusion on those figures ?
Mr. F u n k . Yes, sir; I do. I am not submitting anything here
but what I feel is correct. I have thrown out a good many that I
did not think were valuable.
The C h a i r m a n . 1 may be in error about it, but it seems to m e the
statements that are made there are of a rather indefinite character.
However, you may proceed.
Mr. F u n k . They do not appear so to me. [Reading:]
7. H ow are you r products marketed, direct, sold to local buyer, or through coopera­
tive association?
Sold to local bu yer.
8. H ow d o the prices obtained for products this yea r com pare w ith th e p rice you
received for th e same products during th e period extend ing from 1908 'to 1913?
The prices o f farm products are about th e same as th ey were at that tim e.
9. W hat is th e relative p rice of you r products to-day com pared w ith th e necessities
you b u y for the operation o f you r farm as com pared w ith tne price of same articles
during th e period 1908 to 1913?
The p r ice for the things w e b u y on the form has m ore than dou bled.
10. A re y o u ab le to get sufficient cred it to successfully con d u ct you r business?
Yes. B ecause o f our general standing in the business w orld, w e ourselves have no
trouble g e ttin g w hat cred it w e need. W e are personally interested in a num ber o f
banks as direcror or stockholder, and this of course gives us an advantage over th e
average farmer. In fact, our capital is such that w e do n ot need to borrow . Our
experience, how ever, b ein g a ctiv ely engaged in the banking business w ould in d i­
cate that th e average farmer is having considerable d ifficu lty obtaining sufficient
credit to co n d u ct his business and is required to market his product frequen tly at a
loss b eca u se of in ab ility to obtain credit. H ow ever, in this western Illin ois cou ntry,
we do n o t con sider that the main d ifficu lty is credit. I t is pu rely an econ om ic diffi­
culty d u e to the in ab ility to b u y the supplies for th e farm at a price w hich w ill enable
the farmer to form at a profit. Also, because of high freight rates, expenses of market­
ing, u nstable market, and lack o f a w orld market for all products, the A m erican
former is ra p id ly b ein g driven in to bankruptcy.
It is e co n o m ica lly im possible for the average farmer to exist or to survive this
period o f adju stm en t u n til either th e price of the things that h e buys com es dow n
or the p r ic e o f th e things h e has to sell goes up. T h e trade balance is all against the
former. I t is m y ju d g m en t as a lawyer, banker, and form er that at least 20 per cen t
of the form ers o f tn e M id dle W est w ill b e bankrupt at th e end o f th e n ext tw o years
unless a b e tte r system o f m arketing can obtain , so that th e Am erican farmer has an
opportunity to sell h is products at a better advantage on the w orld m arket. W ith
the G overnm ents o f E ngland, France, Ita ly , and other European countries a cting as
a purchaser for their peop le, the little in d iv id u a l farmer has n o ch an ce to com pete
on the w o rld m arket w ithout som e defin ite organization to sell his p rod u ct as one
organization to th e b u y in g organization o f E ngland, France, Ita ly , or Austria.
11. W o u ld y o u favor a lon ger term o f cred it through th e Federal reserve banks to
formera, e x te n d in g same u ntil th e form er can m ake a turnover o f th e particular crop
financed?
Y es, a lo n g conservative lines. I w ou ld b e in favor o f th e Federal banks exten d in g
credits t o th e loca l cou ntry banker, so that h e in turn m ight exten d cred it to his




D ig itized by L . o o Q

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304

AGRICULTURAL INQUIRY.

farm er custom er. I t is m y ju dgm en t o v e r y e a n o f exp erien ce that th e local country
banker is th e friend o f th e fanner and that h e is d oin g all h e can to extend credit to
h im ; b u t in order to d o this h e m ust b e ab le to rediscount his farmers’ notes to better
advantage to th e Federal reserve banka.
12. U nder present con dition s and prices w ill y ou b e a ble to m eet your necessary
cost of production , overhead expenses, and taxes?
N o, n ot b y $1,000 on our 146-acre farm.
13. D o y o u know w hat percentage o f you r crop is necessary to pa y the transportation
o f your crop ?
I t takes about 15 cen ts per bushel to pa y the expense of freight and marketing od
m y wheat. I re ce n tly sold m y wheat in June on a future J u ly market a nd therefore
kn ow e x a ctly w hat I am talking about.
14. H ave you been unable to dispose of your crops at a tim e when prices were
satisfactory because you cou ld not get necessary carq for transportation?
N ot on the grain markets, b u t on liv e stock markets I have lost as m u ch as $3 per
hundred on hogs because of in ab ility to get cars.
15. W hat rem edy w ould y ou suggest to alleviate and h elp the present deplorable
con d ition s?
I t is m y ju dgm en t that either through private capital or through Government
agency, an exp ort trade corporation should be organized with representatives in the
w orld markets to sell the product o f the organized Am erican farmer w herever it can
b e sold in any part o f the world to the best advantage. Just as our manufacturers
have their representatives in various parts of the world, so the Am erican farmer, who
is the largest taxpayer in the nation, should be en titled to the support, th e counsel,
and the a d vice of the National Governm ent in m arketing his product. It is the
understanding of the writer that the Italian and Austrian G overnm ents h ave their
representatives on the Chicago market w ho b u y for their governm ents d ir e ct, who in
turn sell to the people of their country.
W hat ch ance has tho little in divid u a l farmer w ith that k in d of com p etition ? The
prin cip le of co lle ctiv e bargaining has been recognized w ith reference to labor and
m ust De recognized in a larger w ay than ever before w ith reference to th e fanner.
T h e organized farmers of the country must h ave an opportu nity to m arket th eir product
co lle ctiv e ly as an organized agency and sell it at best advantage on the w orld markets.
I w ould also suggest that gam bling in grain and the products w h ich the farmer sells
should b e prohibited b y law. A farmer m ay ever so carefully calcu late general
con ditions, say, for instance, on the wheat market. H e m ay take th e Government
estim ates on acreage or probable acreage; h e m ay m ake all of his plans and calculations
on th e basis o f w hat an in telligent business m an w ould consider fairly accurate infor­
m ation, and then sudden ly the bears on the board of trade b y m anipulation m ay just
at the tim e w hen the farmer is required to m arket his product, or w hen h e has it
already on the railroads for market, sudden ly drop the price 1 0,15, 20 cen ts per bushel
and w ipe ou t his entire margin of profits before his grain can reach the markets. The
manufacturers are all thoroughly organized in their trade associations and h old up the
p rice o f their com m odities to protect them selves both in their purchases and their
sales, b u t the Am erican farmer has no organization to d o this. W hether w e like it or
not, som e organization of this kin d is absolutely necessary to protect the farmer, and
m anipulation of grain markets m ust b e prohibited b y law. In other words, the
Am erican fanner m ust have a standardized market, a stable market, and the law of
su p p ly and dem and m ust b e perm itted to control.
H . E . Sc h ie d k s k a m p .

That is just one letter out of a whole satchel full I have at the
hotel, but I do not want to bother you with any more.
The Chairman. If you have other letters that you think it is
desirable to file, they can be inserted in the record without reading.
If you think that is sufficiently indicative of the situation-----Mr. F unk. Yes, sir; that is sufficient as far as that point is con­
cerned.

Along the line of what Mr. Schiedeskamp has discussed in his
letter above, I received a telegram from a bank where I live this
morning, since I came into the room. I will read that. I might
make the explanation that I went into the bank the other day to
get some money to come down here, and I mentioned to my banker
that I was coming here. It seems he thought the matter over after
I left there, and sent me this telegram:




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AGRICULTURAL, INQUIRY.
H on. E u o e n b D . F u n k ,

B lo o m in g t o n , I I I ., August 15, 1911.
•

Care Frank H . Funk, M. C., Washington, D . C.
We understand you are in W ashington to use y ou r in flu ence w ith congressional
committee to reliev e financial con dition s of farmers. W ish to advise y ou that farm
mortgages in Central States h av e m ore than d ou b led in past eigh t years over same
previous period. Large num bers o f tenant farmers and landowners w ith in cu m ­
brance are b e in g financial ruin. A great m any w ill b e com p elled to q u it form s
this fall. BankB are getting n o liqu idation , con sequ ently can m ake few new loans.
Vitally necessary that y o u use you r in flu ence to relieve con dition s at an early date.
F i r s t T r u s t & S a v in g s B a n k ,
W . J. C a r t e r , Vice President.

Here is another one from a gentleman in Omaha, Nebr., that also
came just this morning:
O m aha, N e b e ., August 15, 1921.
E. D. F d n k ,

Care Frank H . Funk, Congressman, Washington, D . C.
What our agriculture needs is n ot that the farmer has additional facilities for in ­
creasing his indebtedness b u t that artificial handicaps be rem oved so that there is a
possibility o f profit in his vocation. There has been none during last 25 years and
arm mortgage indebtedness in the best States o f the co m belt has been greater each
succeeding year since 1896 and at a constantly increasing ratio, as neither State nor
Federal authorities h ave ever m ade a rational or sincere effort to secure am ount of
farm mortgages at any- period.

Mr. F u n k . Please note, Mr. Chairman, that last sentence.
telegram continues as follows:

The

There is no w ay to estimate total increase. H ow ever, as Nebraska has less farm
mortgage indebtedness per acre and the ratio of increase since 1913 has been less than
that o f adjoining States, it m ay lie taken as a conservative basis upon w hich to m ake
estimate for cou n try at large. Official figures for 1916 are n ot available, b u t om itting
these, the increase in Nebraska farm mortgage indebtedness during six years, 1913
and 1920. in clu sive, is approxim ately $160,000,000, or an increase of over $1,300 per
farm throughout the entire country. O w ing to war restrictions on buildings and
meager n et farm returns the deterioration o f perm anent im provem ents on farms of
the country have b een more than enough to offset all additions thereto.
During last 20 years th e num ber of peop le on farms has constantly been decreasing
and the percentage of returns am ong those rem aining has been increasing. Present
labor and m arket conditions are adding a tremendous im petus to b oth these tendencies.
As according to figures furnished b y Departm ent of Agriculture, both as to yield and
farm prices, i t w ould require three national w heat crops like that of 1920 or th e entire
grain raised in eigh t State3 like Iow a to p a y -wages of railw ay em ployees for a single
year, w h y sh o u ld not farm abandonm ent con tin u e? N othing less than a reduction
of railway rates and railw ay wage3 equal to the advan ce m ade in each since armistice
will ch eck th e grow ing depression in agriculture. Farmers are ju stly dem anding that
labor on farms shall receive remuneration equal to that in other industries.
W illiam Stu ll .

A second telegram from Mr. Stull, which is as follows:
O m aha, N e b r ., August 16, 1921.

E. D. F u n k ,

Care Fran k H . Funk, if . C.,
Washington, D . C.
Please a d d to m y yesterday telegram that it w ould require an am ount of m on ey
equal to th e ir total mortgage d e b t to bring back and maintain vii]gin fertility to
American farms. T h e farm is a factory con verting th e elem ents into foodstuffs.
What is th e valu e of a factory that after 50 years a ctive operation, declaring no d iv i­
dends a n d p a y in g its operatives less than a livin g wage, finds itself in such con dition
that to a v o id b a nk ru ptcy it m ust increase its bond ed indebtedness?
W illiam St u l l .

I have jotted down here a few items. I understand you are asking
for suggestions, and I have headed these items “ Constructive criti­
cisms and suggestions.”
The C h a i r m a n . We w ill be very g la d to have them.
91341—22—VOL 3-----20



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Mr. F unk. Railroad rates are. too high in proportion to the prices
received for grain. It costs 47$ cents per 100 pounds, or 28$ cents
er bushel, to ship wheat from Funk s Grove, 111., to New York
ity. It is costing the farmer from $1.05 to $1.07 per bushel to
produce the wheat at an average of 18 to 20 bushels to the acre, as I
am able to show by figures submitted, and he is receiving at his station
from $1 to $L.10 per bushel for his wheat.
The freight rate on com is also 47J cents per 100 pounds, or 26.6
cents per bushel, and we are offered 43 cents for our com at a pro­
duction cost ranging from 53 cents, on an average yield of 50 busnels
per acre, to $1.45 on an average of 20 bushels to the acre.
Oats are the same rate as com and wheat to the seaboard, 47i cents
per 100 pounds, or 15.2 per bushel, and oats are worth 25 cents per
Dushel, cost per bushel, 21 cents, or $8.61 per aicre, on a yield of 40
bushels per acre.
These figures are not estimates; they are actual figures submitted
to me by Mr. Harry Gehring, Galesburg, 111., on July 11, 1921.
The cost of farm labor in 1920 in our section was about $80 per
month, including board. The cost of farm labor to-day in our
section is on an average $70 per month and board. The selling price
of our oats in 1920 was 50 cents per bushel, and figuring a man’s
wages at $80 per month it took 160 b u s h e ls of oats to pay one man’s
wages for a month. This year, 1921, we are getting 25 cents for our
oats, and we are paying our men $70 per month, or they are costing
u s $70 with board, and it requires 240 D ushels of oats, as against 160
last year, to pay one man’s wages for one month.
For com m 1920 we were receiving $1.50 a bushel. We were
paying $80 per month for men, and it took 54 bushels of com to pay
one man’s wages for one month. This year, 1921, we are getting 43
cents for our com, paying $70, and it takes 163 bushels of com to
pay a man’s wages for one month.
In July, 1920, 1 bushel of com would buy 5§ gallons of gasoline.
Now a bushel of com buys 2J gallons of gasoline.
Last year it took 6 bushels ofcom to buy a ton of soft coal. To-day
it requires 16 bushels of com to buy a ton of soft coal that is priced
at $1.50 per ton lower than it was last year.
Last year it required 2b bushels of com to purchase a 48-pound
sack of flour, at $2.25. To-day it takes 5$ bushels of com to buy
the same sized sack of flour at $2.65.
Last year in McLean County, 111., a farmer could get a pair of good
shoes for 10 bushels of com. To-dav he must give 20 bushels of
com for shoes of the same quality, although shoes are lower in price
by about $3 per pair.
Last year a farmer could get a pair of shoes for one cowhide.
To-day it takes one cowhide to pay for half soles and rubber heels
on his old shoes. To buy new shoes requires 5 cowhides, or 23 calf
hides.
Last year a farmer could buy a good suit of clothes for 50 bushels
of com, $65. To-day it requires 90 bushels of com to buy a suit of
like quality, at a price of $45. Clothes are made of wool. Perhaps a
better comparison would be the pounds of wool necessary to buy this
suit. Now, it requires the price of 180 pounds of wool to buy the
same suit of clothes, which means the clip from about 20 sheep, and
yet, I am told, a suit requires only about 3 pounds of new wool.

E




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Last year the farmer bought 100 pounds of binder twine with 19$
bushels of oats. To-day the price of 100 pounds of twine equals the
price of 55 bushels of oats.
Last y e p a set of farm harness cost an equivalent of 70 bushels
of com , with harness at $90. To-day it requires 130 bushels of com
to pay for the harness at $65. The price nas gone down.
Last year 5 bushels of com paid for 10 pounds of good bacon.
To-day it takes 12 bushels of com for 10 pounds of bacon.
Last year a Fordson tractor could be bought for 707 bushels of
com. To-day it requires 1,840 bushels of com to get one, and yet
the tractor has been reduced $260 below what it was last year.
Last year 500 bushels of oats paid for a binder; to-day it takes
800 bushels of oats. The price for the binder in 1920 was $250,
and in 1921 it is $200.
Last year a Ford auto cost the farmer 560 bushels of com, and
they were selling Ford autos in our territory at $728.46. To-day
he must give 1,129 bushels of com for a Ford, and the price has
been reduced to $564.85.
Last year a Buick car cost 720 bushels of wheat. To-day it will
require 1,434 bushels of wheat. The Buick last year was $1,800,
and this year $1,650.
Last year it took 20 bushels of com to buy 100 pounds of sugar.
To-day you can get 100, pounds of sugar for 12$ bushels. •
I would like to take’ this opportunity to make a few remarks
relative to the Department of Agriculture. For many years the
Department of Agriculture has been attempting to give to the public
reports or forecasts of the probable yields of our crops—wheat, oats,
and com. In looking over its reports, I have found that many of
its forecasts have been too high. If such was the case only occasion­
ally I might not criticize; but it does seem to me that at present its
method used in making crop forecasts could be improved upon so
that its reported estimates would be nearer the actual yield than
they have been. I think there should be something done to correct
the present system.
The present method gives the speculator an opportunity at the
psychological period, when it is to his advantage, to “ bear the
market.
Just about the time the farmer puts his grain on tKe
market, or just previous to that time, those figures are published,
and the speculator takes advantage of them. No doubt the specu­
lator is aware that for years these statistics have been too large and
he takes advantage of that fact.
Representative F unk. I presume you come to the conclusion th a t'
they are too high by comparing them with the census reports, which
in a great many instances are much lower than the figures published
by the Bureau of Crop Statistics of the Department of Agriculture ?
Mr. F unk. Yes, sir. We have no other way of gaming any
knowledge, except by referring to such reports.
Here is another suggestion, on the possibility of opening up foreign
markets and the necessity of having some Knowledge of the pro­
duction of grains in foreign countries. It would seem to me that
through our consuls, or through either the Department of Agri­
culture or the Department of Commerce, we should have a man
located in every foreign country who could keep us directly in touch
with agricultural conditions in that country. We have nothing
of thatidnd at present, as I understand it. My observation of these




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consuls in foreign countries, whom I have visited in the past, leads
me to believe tnat many of them are not in a position to furnish us
with sufficient information.
The Chaibman. Heretofore we have had to rely very largely upon
the crop statistics of the different countries ?
Mr. F unk. Yes; but you get them about three years after the crop
has been consumed.
The Chairman. I was about to say that the machinery of the for­
eign countries for gathering statistics has not been very satisfactory.
Mr. F unk. No, sir.
Another suggestion: In the past the Department of Agriculture has
given attention almost entirely to proauction. Farmers dre now
asking for assistance in marketing their products. A farmer should
be able to follow his finished product, not only to the wholesale mar­
kets, but to the consumer, ana he is entitled to information as to why
the consumer pays so much more than the producer receives for his
grain and his live stock.
I heartily agree with the gentleman who preceded me and who
referred to cooperative marketing. His argument was sound and
logical.
One thing more about the Department of Agriculture, which affects
large interests.
We have one man appointed as Secretary of Agriculture. He has
under him men known as chiefs of bureaus in various subdepartments.
The Secretary and practically all of those chiefs are obliged to be in
Washington most of the time. From my experience and observation
as a member in 1917-18 of the National Agricultural Advisory Com­
mittee I believe that a similar advisory committee could be of very
great assistance to the Secretary of Agriculture. Such committee
could be composed of men who would be located and live throughout
the different States—not necessarily one from every State, but, say,
24 men from different sections of tne country. These men would, m
a way, be advisors to the Secretary of Agriculture. They would be
in a position to receive first-hand information from their respective
communities and could report from time to time to the Secretary;
also they could assist in keeping farmers better informed regarding
National and international agricultural policies and conditions.
Furthermore; if a congressional committee felt that it needed advice
and definite information as to agricultural affairs in different sections
of the country, it could call on such men at any time. I believe that
there are public-spirited men in the United States who are qualified
and who would gladly serve as such an agricultural advisory.
It is a deploraole fact which exists that present conditions prevent
surplus American crops reaching foreign markets without great loss
to the producer. In the name of modem civilization the famishing
millions of Europe and Asia should be saved from starvation ana
that speedily.
I do not know that I have anything further, Mr. Chairman.
The Chairman. We are very much obliged to you, Mr. Funk, I am
sure.
The committee will take a recess until 10 o’clock to-morrow
morning.
(Thereupon, at 12.55 o’clock p. m., the commission adjourned to
meet at 10 o’clock a. m. to-morrow, August 17, 1921.)




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AGRICULTURAL INQUIRY.
W EDN ESDAY, AUGUST 17, 1821.

Congress of the U nited States,
J oint Commission of A gricultural I nquiry,
W

a

s h

i n

g

t o

n

,

D

.

C

.

The joint commission met at 10 o’clock a. m., pursuant to adjourn­
ment on yesterday, in room 70, the Capitol, Hon. Sydney Anderson
(chairman) presiding.
The C hairman. The commission will come to order.
Mr. Campbell, the commission will hear you first this morning,
and you may state your name and whom you represent for the
benefit of the record.
STATEMENT OF HE. MHO D. CAMPBELL, COLDWATEB, MICH.,
PRESIDENT NATIONAL MILE PBODTJCEBS’ FEDERATION AND
DIBECTOB OF THE NATIONAL BOABD OF FABM ORGANIZATIONS.

Mr. Campbell. I might also say that I am connected in a personal
way with the grange, and have been for 35 years, and am a member
of the Farm Bureau. I have been also requested by Mr. Charles
Barrett, president of the Farmers’ Union, to speak for that organ­
ization.
I realize, Mr. Chairman, that there are many things being asked
for by the farmers—through individual organizations, perhaps, and
through their Congressmen—that can not D harmonized nor, per­
e
haps, granted. I am not going to discuss them in detail. There are
some things, however, that we believe as farmers are fundamental
and that snould be granted.
The cooperative-marketing bill or bargaining bill that we have
been asking for for some years is now before the Congress. It has
passed the House of Representatives for a second time. At the last
session it was so amended in the Senate that it was much worse than
no bill at all as far as the farmers were concerned.
The Volstead bill has been considered by a subcommittee of the
Judiciary Committee of the Senate, and has been entirely changed
by that subcommittee in its report to the full committee. They strike
out all after the enacting clause—of the Volstead bill. I mean—and
substitute a bill of their own that is, to our minds, very much worse
than no bill at all. And we are sincerely hoping that the Congress
will not pass that bill, and much prefer to remain in the condition
we are now in than to have the bill as recommended by the subcom­
mittee o f the Judiciary Committee of the Senate, or if we can not
get the relief we so much need and want.
There is an entirely mistaken idea on the part of many Members
of the Congress and the public generally about the farmers’ request




309

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for this kind of legislation. As they construe the request, the farmers
are asking for some special relief, for some special favors not
granted to other branches of industry. That is a great mistake.
Discrimination against the farmer started with the passage of the
Sherman antitrust law in 1880. It was not intentional that it should
be discriminatory against farmers, but it so operates. The Clayton
Act of 1914 undertook to exempt agriculture and labor from the oper­
ations of the antitrust law, and the Clayton Act still stands upon the
statute books.
The discrimination that was against the farmer through the enact­
ment of the Sherman antitrust law was that the farmers could not
have any medium whatever of relief, nor any method by which they
could cooperate, while it gave to every other industry ample means
of cooperation through the corporation, a wonderful medium.
During the past year the farm stuff that was produced and sold
from the farms o f this country did not aggregate over $5,000.000,000—that is, products other than live stock—and probably about
$3,000,000,000 o f live stock were sold, as closely as it could be esti­
mated.
O f course, the total value of the live stock upon the farms of the
country was near $8,000,000,000, but that included all cattle that
had been kept and were being kept, such as cows, etc., that are kept
from year to year, and horses and other live stock that are kept over
from one year to another.
The Secretary of Agriculture estimates that $9,000,000,000 of prod­
uce was grown on the farms of this country during the past year,
but that estimate includes all that was fed to animals upon the farms
and all that was consumed by farmers’ families as well as that which
was sold, so that we have approximately $5,000,000,000 worth of
produce sold and $3,000,000,000 worth of live stock sold.
The C h a i b m a n . Y o u are referring now to the crop of 1920, are
you?
Mr. C a m p b e l l . Yes; to the crop of 1920. And it will be less
this year, considerably less. And that is without any medium what­
ever, such as a corporation, through which it can be sold coop­
eratively.
Let us turn over the leaf and see what has been done in the line
of manufacture. The products o f manufactures in this country dur­
ing the last year—and, for that matter, the year before and for three
or four years before that—have not been less than $50,000,000,000 a
year.
The C h a i r m a n . Let me ask if you are including in that estimate
the cost of raw material or including only the value added in the
process o f manufacturing?
Mr. C a m p b e l l . Well, probably, if we should add the cost o f all raw
material and the selling value as the products went from the fac­
tory door—the finished product—it would amount to more than
$50,000,000,000. But I think, Mr. Chairman, the value would not
be as much as $50,000,000,000 without the cost of raw material in­
cluded.
The C h a i b m a n . The real comparison there would be the value
added by the factory rather than the total cost of the manufactured
product ?




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311

Mr. Campbell. Yes. And, as you no doubt understand, these are
estimates. Take the city of Chicago, for instance, and I noticed the
other day a press report from that city which claimed that the
manufactures produced within that city were $6,500,000,000 a year—
an amount almost equal to the entire products sold from the farms
of the country during the last year.
These are astounding figures, and practically all those products
are sold under the corporation plan, all the manufacturing industries
of the country are incorporated and follow the corporation practice
in the sale of their products.
The corporation is the medium we are all in favor of. It up­
builds our country. But the farmer can not use that medium. His
property is in 6,400,000 units, and they have been nailed down by
the Almighty, are spread over an area o f 3,000,000 square miles,
and are there fore all time—and it would be, as I said before, a
sorry day, in my opinion, for this country if by any process or any
means they could or, if they should, be run into corporate molds
the same as other classes of business. The preservation of our coun­
try, the future existence of this Republic, in my opinion, depends
upon keeping these units out in the country, the farm people out on
the land and prosperous.
And, gentlemen of the commission, what we want is power to sell
our products collectively. And we want to do it unhampered. We
do not want to do it with the threat and menace constantly over us
that we are violating the law.
Gentlemen, I do not want to take too much of your time, but I do
want to analyze a thing that is pertinent, that is xight before the
Congress at this time, and the one thing that the farmers of this
country are absolutely united upon, no matter where they may be
toiling in this great land; and every farm organization, so far as I
know is backing it. That is the bill that is now before the Con­
gress and that will next be heard in the 'Senate. Mr. Volstead intro­
duced the bill. We had a similar bill before the Congress at the
last session, but it was so amended in the Senate, as I have stated,
that it was not acceptable and none of the farm organizations nor
any of the farmers, so far as I know, want it in that amended form.
The farmers of the country do not believe that they are violating
the law; it is not that they want to violate any law, but they do not
want the menace o f the threats that are being made against them
from all over the country, through middlemen wherever middlemen
are touched or hampered in any way in their autocracy over farmers’
affairs at this time.
I perhaps have seen more of the situation along this line in the
country than many others, because, as president of the National
Milk Producers’ Federation for the last five years, I have been
through these various fights that the farm organizations have had
in an effort to sell their milk collectively. The public press has been
used. It is more generous now to the farmer than it was in years
gone bv, and because I think the public press is becoming informed
more fully and generally of conditions. But I see that Senator
Walsh in his analysis of the Volstead bill, as contained in the report
of the subcommittee to the full Committee on Judiciary o f the
Senate, cites the milk producers—and I want to take up a very perti­
nent thing he has discussed, because I know that legislators gen­



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312

erally want to get at the right of a thing and want to get at the
facts as they exist. He says that the grain growers and the cotton
growers, and so forth, need have no fear; that they could not form a
monopoly. Now, gentlemen of the commission, I do not like the ap­
parent cunning or that statement. Apparently it was made for the
purpose of appeasing the grain growers of the country and the stock
raisers of the country in order to get their support of the amended
bill that the subcommittee has prepared. As a matter of fact, there
is not a farm organization in this country that would not be men­
aced by the amendment that the subcommittee has prepared, not
one; there could not be. I do not mean to say that they could all
be convicted. No; they could not be be convicted, but if it should
become a law it would Ibe a menace.
Senator L e n r o o t . Will you read the amendment?
Mr. Campbell. Yes, sir; I have it here. The subcommittee of the
Committee on the Judiciary of the United States Senate had under
consideration bill H. R. 2373 and recommended the following as a
substitute:
AN ACT To authorize association o f producers o f agricultural products.

Be it enacted by the Senate and House o f Representatives o f the United
States o f Am erica in Congress assembled, T h a t person s en gaged in th e produc­
tion o f a gricu ltu ra l p rod u cts a s fa rm ers, pla n ters, ran chm en, d a iry m en , nut or
fr u it g ro w e rs m ay a ct tog eth er in a ssocia tion s, corp ora te o r oth erw ise, w ith or
w ith ou t ca p ita l stock, in collectiv ely h an dlin g and m a rk etin g in In terstate and
fo re ig n com m erce such p rod u cts o f p erson s so en gaged and in p rocessin g or
p rep a rin g such p rod u cts f o r so m a rk etin g th e sam e. Such a s so cia tio n s may
h ave m a rk etin g a gen cies in c o m m o n ; a nd such a ssocia tion s a n d th e ir members
m ay m a k e th e n ecessa ry con tra cts and agreem ents to e ffe ct su ch purposes:
Provided, however, T h a t su ch a ssocia tion s a re operated f o r th e m u tu a l benefit
o f the m em bers th ereof, a s such prod u cers, and co n fo rm to on e o r b o th o f the
fo llo w in g re q u ire m en ts:
F irst. T h a t n o m em ber o f the a ssocia tion is a llow ed m ore than on e vote
because o f th e am ou nt o f s to ck o r m em bership ca p ita l he m a y ow n th e r e in ; or
Secon d. T h a t th e a ssocia tion d oes n ot p a y d iv id en d s on stock o r membership
ca p ita l In e x cess o f 8 per centum p er annum .
And provided furth er. T h a t the a ssocia tion sh a ll n ot d ea l in p r o d u c ts o f non­
m em bers to (in am ou nt grea ter in va lu e th an such a s a re h an dled b y it for
m em bers.
N oth in g h erein con ta in ed sh all b e deem ed to a u th orize the crea tion of, or
attem pt to crea te, a m on opoly , o r to exem pt any a s socia tion org a n ized here­
u nder fro m any proceedin gs in stitu ted u nder th e a ct en titled “ A n a ct to create
a F ed era l T r a d e C om m ission, to define its p ow ers and du ties, and f o r other
pu rposes, ap p roved S eptem ber 26, 1914,” on a ccou n t o f u n fa ir m eth od s o f com­
p e tition in com m erce.

The Chairman. Here is a copy of their recommendation if yon
wish to have it before you, Senator Lenroot.
Senator L e n r o o t . I thank you.
Mr. Campbell. And I have Senator Walsh’s analysis. Here is his
language:
In asm uch as it Is u tterly im possible to esta b lish a m on opoly o f a n y o f the
o rd in a ry fa r m p rod u cts— cereals, cotton , liv e stock , etc.— an in h ib ition o f mo­
n op oly m ust be u n ob jection a b le to the p rod u cers o f such. M oreover, you r com­
m ittee is en tire ly satisfied th at they h av e n o d esire o r pu rpose to establish a
m on opoly. W h y an y on e shou ld insist, u nder these circu m sta n ces, on the en­
actm en t o f a la w w h ich . In term s, w ou ld a u th orize them to d o so, you r com­
m ittee finds it im possible to u n derstan d—




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In other words, appeasing that class and saying, in effect: “ We
would not harm you ”—
I t Is p o s s ib le , how ever, to esta b lish a m on opoly w ith resp ect to fa rm p ro d ­
ucts w h ic h ca n be p ro d u ced p rofita b ly on ly in a v e ry lim ited area , o r in the
case o f h ig h ly p erish a b le produ cts, like m ilk, w hich w ill n ot stan d shipm en t lpn g
distances. I t w o u ld n ot b e in the p u b lic in terest, y o u r com m ittee b elieves, to
perm it a ll p rod u cers o f m ilk w ith in th e area fro m w h ich on e o f o u r grea t
cities, i s supplied to effe ct a sin gle orga n iza tion h a v in g thus a m on opoly w h ich
might o r m ight n ot b e u tilized to e x a ct e x to rtio n a te p rices o f consum ers.

In other words, during the three days I stayed with that com­
mittee and listened to the statements that were made he constantly
used as an illustration the situation right here in Washington. He
said, in substance, “ Suppose the Maryland people over across the
line have a milk producers’ organization and the Virginia people
have another, both selling milk here in Washington. And suppose
these two organizations should unite in one organization. Do you
want that kind of monopoly ? ” He kept asking the question: “ Do
you want that kind of monopoly ? ” That was the query he pro­
pounded time and again. We answered by asking a question:
“ What kind o f a monopoly do you mean. Senator? T)o you mean
that that alone would be sufficient to condemn it, that they should
unite their forces? ” He would not answer. He simply used the
word “ monopoly ” constantly—monopoly monopoly, monopoly.
He wanted to know whether such a monopoly, or possible monopoly,
should be left in a position where it could not be proceeded against.
But he would not say whether it was a good monopoly or a bad
monopoly.
I know he asked me when I was before the subcommittee in
substance: “ Mr. Campbell, do you want a monopoly ? ” I said in
substance: “ Possibly in the sense you imply, no; but if it is in the
sense that we can reduce the price of milk to the customer and
improve the price to the farmer by cutting out a considerable
amount of the middleman’s expense, unnecessary costs both to the
farmer and the consumer, yes.” But Senator Walsh would not
tolerate that proposition; he would not discuss it for a moment,
and he does not discuss it here in the subcommittee’s report.
Here you have a territory that supplies Washington that is not
15 miles in all probability away from your city, a territory that is
no farther distant than that supplies the city of Washington with
milk. Just beyond there are unlimited quantities of milk. The New
York Dairymen’s League ship milk into New York City from a
distance of 500 miles. Why, gentlemen of the commission, within
50 miles o f Washington there is enough milk to supply 5, yes 10,
cities o f the size of Washington.
We asked, in substance: Do you mean to say that there must be
two separate orgapizations maintained in your community, with
all the consequent overhead expense and duplication of routes and
costs and expenses of various kinds, including depots, sets of officers,
additional delivery wagons and drivers, and so on? And do you
mean to say that if the production and delivery of milk were under
one organization and there was only one milk wagon going down,
one street or going to a tenament house with milk there would not
be a reduction in expense to the producer and consequent reduction
in price of milk to the consumer? Do you mean to say that if a




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vast portion of the present expense could be done away with the
farmer would npt get a better price for his milk, a living price, and
the consumer at the same time furnished milk at a fair and proper
price ? And if these expenses could be cut down, as they could and
would be, and the farmer would receive a fair price for his milk,
do you mean to say that it would do any harm to the consumers of
milk or that it would be in fact a monopoly? Who is there who
should not wish to see production and delivery costs cut down as
much as possible, to the end that the producer may receive a fair
price for what he produces and the consumer furnished products
at as low a price as possible consistent with the cost o f the service
rendered? But Senator Walsh would not discuss this question
at all. He flew into a rage and said it would be a monopoly, and
continued to say monopoly, monopoly, monopoly.
What we say is this—and as president of the National Milk Pro­
ducers’ Federation I challenge proof to the contrary: That we are
selling cooperatively practically one-half of the farm products of
this country that are sold cooperatively, perhaps $500,000,000 in
value, not collectively but as units, 40 or 50 different units, and
wherever we can get control we are reducing the price to the con­
sumer, because we are cutting out these multiplie'd and extravagant
expenses.
Now then-----Senator L enroot (interposing). Let me ask you this: How do you
reduce the price to the consumer, if you do ?
Mr. Campbell. Through several means. In the first place, it in­
creases our quantity. We are producing more milk than can be con­
sumed in the country, by far. And I will say this—and I challenge
Senator Walsh or any other man in the United States to name a
single place or time within the last five years where through farmers’
cooperative organizations milk has been sold by farmers at an in­
ordinate price or unreasonably enhanced price, or, in fact, at any
pricp above what it should be sold for. There is happening right
now in the city of Chicago another illustration, and I want to repeat
it because you will probably hear it commented upon on the floor
of the Senate. We have been through a continuous fight in Chicago.
It started three or four years ago. Our people were arrested and
thrown into- jail. We have stood in the front-line trenches in the
fight for cooperative bargaining in this country. I sat for days and
days in Chicago while they were trying to impanel a jury to try the
farmers there three years ago. And if I am not taking too much
o f your time I want to tell you just a little about that matter, be­
cause it is only one of the many instances the farmers have gone up
against.
Some farmers that supplied milk to the city of Chicago, none of
them living in Chicago and but few, if any, residing in Cook County.,
met in a little church in the city and talked over what they thought
would be a fair price for their milk. That is all they did. There
were 100 or more of them present, and they talked the situation over,
and each man present expressed his opinion. They finally left the
matter to a committee or to their officers to make the best bargain
they could with the dealers. All they did was to express their
opinion as to what they thought would be a fair price for their
product—and I forget what it was now, but at any rate it was way



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below the cost of production. Those men were indicted in the city
o f Chicago for that act. Their meeting had been 4»eld there in the
■city and there they were indicted. And they were haled into court,
and after 18 months or more they were put on trial. I was present
and attended that trial, not as a witness but as an interested ob­
server and listener. They were several weeks—I have forgotten the
number of weeks, but perhaps seven Greeks—getting a jury to try
those men. The district attorney and his assistants would ask each
man drawn on a panel with a view to sitting on the jury certain
questions, and no man was allowed to sit on the jury unless he was
a married man and had a family and bought milk of those that came
in from outside the city. I f he had any relatives that were engaged
in farming he was stricken off. A juror had to be that far from
every possible interest or connection; in other words, their interest
had to be as far as possible removed from anything connected with
the farmers’ side of the matter. Those farmers were tried by people
who were buying milk from the farmers being tried, and who. quite
naturally, wanted to get cheap milk; men who had families to sup­
port, and who needed milk for that purpose? and who had no rela­
tives that were farmers or interested in farming.
Finally they got a jury made up largely of laboring men—a class
o f men particularly interested in getting milk as cheaply as possible.
Those farmers were tried before that jury, but what was the result?
The jury brought in a verdict, I think, within 30 minutes after the
case was submitted to them, and that verdict acquitted every man
indicted.
Senator L e n r o o t . What was the defense?
Mr. C a m p b e l l . The defense was that those farmers were produc­
ing milk and selling it far below the cost of production. They did
not deny that they nad met together and talked over and discussed
what they thought was a fair and reasonable price for them to get
fo r their product.
S e n a t o r L e n b o o t . D i d t h e y a d m it t h a t t h e r e w a s a m o n o p o l y
e x is t in g ?
M r . C a m p b e l l . T h e r e w a s n o m o n o p o ly .
Senator L e n b o o t . That was their defense—that there was no mo­

nopoly?
M r . C a m p b e l l . Yes, sir. But the charge was that there was a
conspiracy to enhance the price of milk.
Senator L e n r o o t . I want to say preliminarily that I do not be­
lieve the Senator [Mr. Walsh] objected or woula object to what you
explain you are trying to accomplish; but, on the other hand, the
bill as it passed the House expressly permits, does it not, a monopoly,
cxcept as the Secretary of Agriculture may regulate prices?
Mr. C a m p b e l l . Yes; I am inclined to think that might be true—
I mean, it might permit what you perhaps would call a monopoly.
Senator L e n b o o t . I am speaking of not what might result from
it; but the bill does permit a monopoly, does it not?
Mr. C a m p b e l l . It d e p e n d s u p o n what a m o n o p o l y is.
Senator L e n r o o t . Well, we will say a monopoly as well defined
in the law.
Mr. C a m p b e l l . I do not know about that.
Senator L e n b o o t . Attempted monopoly is very much in the twi­
light zone, but a monopoly as such is definitely and clearly defined.




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Mr. C a m p b e l l . Well, a public service corporation is a monopoly in
a city.
#
Senator L e n r o o t . Certainly; and so is the holder of a patent—he
has a monopoly.
• Mr. C a m p b e l l . Yes, sir; he has a monopoly.
Senator L e n r o o t . Assume that here is an agricultural product
that might in some particulars become a monopoly ?
Mr. C a m p b e l l . All right; let us assume that; but I do not admit it.
Senator L e n r o o t . That is what I mean.
Mr. C a m p b e l l . But it is not a monopoly. Take Senator Walsh’s
contention: Is it a monopoly because I find out that my milk
driver-----Senator L e n r o o t (interposing). Let us take another case: Let us
take one that comes to us the most frequently, that of the Raisin
Growers’ Association.
Mr. C a m p b e l l . All right.
Senator L e n r o o t . I do not know what the fact is, but let us assum
e
that the Raisin Growers’ Association becomes a complete monopoly,
possibly on account of the restricted area in which raisin grapes m
ay
be grown as the situation now exists, although I am not saying that
is a fact. The Volstead bill as it passed the House would remove
that association from the category of a monopoly and would relieve
it from any of the penalties of the antitrust law.
Mr. C a m p b e l l . No ; I beg to differ with you on that, as I heard
all that argument.
Senator L e n r o o t . It would remove it from the Sherman antitrust
law.
Mr. C a m p b e l l . No.
Senator L e n r o o t . Well, that is what I want to get at.
Mr. C a m p b e l l . I would like to tell you about it if I can do so and
not take too much of your time.
Senator L e n r o o t . I am not asking for the fact, but I am assuming
for the sake of the argument that the raisin growers will in the
future be able to effect a complete monopoly.
Mr. C a m p b e l l . Oh, well, if that could be true, yes; I admit that.
Senator L e n r o o t . Then, do you think that the Congress should
give a privilege to create a monopoly to one class of people when it
makes it a criminal offense for others to do the same thing? That is
what is troubling the most of us here in Congress.
Mr. C a m p b e l l . I wish I might illustrate that point. Here is an
airplane. You have a law against tresspass in this country, have
you not?
Senator L e n r o o t . Yes.
Mr. C a m p b e l l . It is a general law. There is a general law against
trespassing on real estate. Every airplane that flies over this city
commits a great many trespasses in every flight that it makes.
Senator M cN art. Theoretically, under the common law, but----Mr. C a m p b e l l (interposing). Yes, sir; theoretically.
Senator MoNahy (continuing). But not so in fact.
Mr. C a m p b e l l . Very well, that is just as far-fetched as this law
against the farmer, exactly as much. I know exactly about the
raisin growers’ situation—well, I do not know all about it either,
except as I heard about it—and I am not defending a monopoly
either in the case of the raisin growers or anyone else, but I w
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to say that Mr. Preston, who sat by the side of Senator Walsh all
those three days, is attorney for the raisin packers of California, the
very fellows that crushed the raisin growers out of existence, and
through whose efforts the raisin business there went down and down
and down for years. Those packers were getting their raisins
cheaper and cheaper until the price dropped down to about a cent
a pound, and the raisin-grape growers were quitting business, and
their vineyards were being extinguished.
Then this other organization grew up, but it is not such as we ask
for. It was a regular corporation, and they sold stock to bankers
and everybody. We do not want anything of that kind at all. The
raisin business of California is intrastate anyway, being within the
boundary of California. And they defy any law the Congress may
enact, as far as they are concerned, because they are all in Cali­
fornia. _ But the facts are, if you will read the story of President
Giffen and others, and it is a wonderful story, that there are ‘ ,000,000
2
acres that can be put into raising grapes, and yet there are only
300.000 improved. But I am not talking about that.
Senator M c N a r y . Let me get a picture of what is in your mind
which will clearly indicate to us your view of the character of the
matter you are discussing. Let us take what are called Italian
prunes, where grown in a limited district—and this is assumed, be­
cause they can only be grown in certain pnrts of the West. They
are picked in the fall and packed and remain in storage indefinitely
without deterioration. After those prunes mature they are brought
in by farmers to cooperative organizations and pooled. The prune
grower receives some percentage, perhaps 75 per cent of their value,
in the fall. The manager of the organization may see that the mar­
ket is low, but he knows some of the prunes must "move, but he holds
them until December or perhaps January and sells them to one indi­
vidual, we will say; but he keeps them back, and by the process of
keeping them back the price steadily increases, and finally they are
all sola in bulk at a miicn enhanced price over what they would have
brought in the fall if they had gone immediately into the channels of
commerce instead of being pooled. Do you think that is a monopoly ?
Mr. C a m p b e l l . That might b e a monopoly.
■ Senator McNary. Is that something that ought to be legislated
against ?
Mr. C a m p b e l l . I think possibly this bill would provide for it,
absolutely would provide for it.
Senator McNary. There is no question but what that situation
could not have been reached by the Volstead Cooperative Act.
Mr. Campbell. Why not?
Senator McNary. Because, as I see it, the case I have cited is an
infringement upon the Sherman Antitrust Act.
Mr. C a m p b e l l . Why does not the Capper-Volstead Act cover it i f
any law covers it?
Senator McNary. Because it permits it.
Mr. C a m p b e l l . Have you read Mr. Volstead’s reply to Senator
Walsh’s statement?
Senator McNary, No ; I have not.
Mr. C a m p b e l l . I wish you would read that.
Senator McNary. That is