N7 AS J9I3 New York State College of Agriculture At Cornell University Ithaca, N. Y. Library HD9007.N C 7A n 5T9 n i9d l,yUbrary Some market problems, 3 1924 013 852 672 STATE OF NEW YORK A/7 DEPARTMENT OF FARMS AND MARKETS /)- 5~" DIVISION OF FOODS AND MARKETS /fi^aC DR. EUGENE H. PORTER, Commissioner ALBANY Some Market Problems BY DR. EUGENE H. PORTER Commissioner of Foods and Markets / Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31 92401 3852672 SOME MARKET PROBLEMS* Dr. Eugene H. Porter Commissioner of Foods and Markets Some of the matters that are forcing themselves upon our atten- tion at the present time, and which concern not only dwellers in the city but those who live in rural districts, are questions, it seems to me, primarily belonging to the domain of economics. They are, in a large sense of the word, marketing problems; and if we are to attempt any solution of these vexed questions, it should be, it seems to me, after we have become possessed of the essential facts and the underlying principles that dominate the science of economics as applied to marketing. We speak glibly enough of the science of marketing. There is no such thing to-day as a scientific knowledge of marketing operations. It is one of those matters that has been delayed as to investigation and decision. There is, perhaps, no other subject of such vital inter- est to all the people of our Nation as that which pertains to the marketing question, and it is not strange that this should be so. In the early days, marketing for the farmer was a simple mat- ter; he was sufficient unto himself and for his family. He sup- plied his own wants; his purchases were few. There need be, in those early days, no particular investigation to determine facts. He was, then, really an independent farmer, because he could live his own life in his own way and care little for the outside world. But as time has gone on and our country has developed, and systems of distribution have grown up, the farmer has lost his former independence and is now one of the most dependent of mankind. So the simple form of bartering has given way to-day to a most complex system of the distribution of commodities. When * An address made before the New York State Agricultural Society, Albany, January 14, 1919. 2 we consider that commodities traded and dealt in are the sur- pluses of millions of farmers in this country gathered together little by little, made up of a great diversity of products, differing in quality, differing in value, in various kinds of packages, grown at certain seasons in one part of the country and another time in other parts of the country ; that the harvests are generally con- centrated over a few months of time, and that all of these com- modities must be gathered together in some way and then redistributed among the millions of consumers, we get some idea of the vastness and difficulty of the problem of marketing. In the largest sense of the word, marketing is a part of the costs of production, because to the consumer the cost of produc- tion on the farm — which may be said, in a general way, to be indicated by the price paid to the farmer — is increased to the consumer by the cost of distribution, or the real cost of market- ing. Those two costs added together are the real costs of marketing, and they apply with ever-increasing force to the purse of the consumer. There have been in the past, and there are now, a great many statements made by men interested in this problem — made no doubt honestly and sincerely, but without adequate knowledge of the questions under consideration and, therefore, misleading in character, and failing to arrive at any satisfactory or legitimate conclusion. So this morning I want to take up for discussion a few of the things that pertain to marketing, and to throw such light as I may be able upon some of tbe difficulties with which we are confronted. First of all, I want to say just a word con- cerning what the State Department of Foods and Markets — the head of which I happen to be at the present time — is trying to do. We have only had about six months to get our machinery in operation, and in the face of the great field to be covered and the difficulty of the problems to be met, Ave have gone as far and as fast as judgment dictated. First, as to the problems in New York City, which concern the activities particularly of the New York office. New York City to-day, as we all know, is the greatest city in the world. Its problems are the greatest, and the difficulty of solving market- ing problems in such an enormous metropolis as New York is almost beyond comprehension. Fourteen hundred carloads of commodities reach New York every day, at 127 terminals. They are taken care of by 4,000 wholesale distributors and by 60,000 other distributors more or less retail in character. Four hun- dred thousand men are employed in the distribution of these com- modities, and they are distributed among eight to ten million consumers. And this great quantity of food must be taken care of with regularity and with speed every 24 hours. The question in New York, as it is elsewhere, is a better dis-. tribution of food. How is that to be achieved? The wholesale business of New York, or the wholesale quarters, are those located downtown near the wharves, near Fourteenth Street, in the Bronx, in Harlem, and at Wallabout Bay. It is a question whether some of these wholesale centers are at present adequately located. In fact, we know they are not. But around these centers, and par- ticularly in the lower part of the town, are gathered all the whole- sale markets for all commodities, and the tendency of all these interests is to gather together in some one place. New York, as we know, was built on the theory that the traffic would be across- town, and so the avenues occurred at intervals of long blocks. The traffic was not supposed, in those days, to run north and south. The result is a few avenues in that great town and a clogging of the ways, so that all these goods have to be transported up and down the very few avenues that New York affords run- ning north and south. There is waste undoubtedly in the methods of distribution. And yet when we come to a study of the system that exists, the quantities of food that are handled, the disadvantages under which these commercial men work, we are forced to the conclu- sion, no matter what we may have heard as to the general ineffi- ciency of the methods employed — if we are honest in our conclusions — it seems to me we are forced to say that in general the system now in vogue in New York is wonderfully efficient. I do not mean to say by that, or to be understood, that there are no weaknesses or defects to be remedied. There are, and many of them, and the problem before us is how to remedy those defects, but not a problem of how, by violent revolution, to over- turn and to remove one system entirely and substitute another for it. It is a question of taking up one matter at a time and solving that particular problem step by step, until we have a gen- eral betterment of conditions existing. That, it seems to me, is the question before us. I have established in New York a market news report, so far as the. appropriation at my disposal would allow. I am issuing that report weekly, and it has grown now so that it includes the leading commodities on sale in the New York markets. That report is sent to the master and secretary of every grange in the State, the president and secretary of every dairymen's league in the State, to every farm bureau, to all co-operative associations, and to all farmers who desire to receive a copy of it. I hope, in the near future, to be able to publish a semi-weekly report and,, if possible, after that, a daily report for the benefit of the farmers of the State. I have established also a service of grievances. What the farmer in the country dreads most and, perhaps, has the most fear of is what is to befall the goods that he ships to an unknown party in New York. When they leave his hands in the car in the country, as a general rule he has no knowledge of the man to whom they are consigned; he has never seen him and knows very little about him, and he feels that this man at the other end of the line has the absolute power to dispose of them as he will, make such report as he pleases, and return such amount of money as he sees fit to him. He wonders whether the honesty of that man is beyond reproach. And I am sorry to say that sometimes the honesty of the gentleman in question has not been what it should be. Such a condition of affairs, from a business stand- point, ought not to be tolerated. No man should be obliged to send the stuff he has for sale to another man without a clear knowledge of the conditions surrounding the transaction, and some means of information, from a disinterested source, as to what happens to those goods when they reach New York or any other center of distribution. So I am sending out notices to the farmers of the State, and all other shippers for that matter, that if they will send to my New York office an account of the trans- action, the date of its shipment, number of the car, character of the goods, the quality, the name of the man to whom they are consigned, and all the data that go with the shipment of the particular commodity involved, I will have an inspector present when those goods arrive, to determine their condition, to find out what is done with them, to know what they are sold for, to ascer- tain the date of sale, and to be ready to make a report on that transaction to the shipper in the country if he desires it. That is one of the things that perhaps you know has been advo- cated from time to time as a matter of Federal or State super- vision, and it seems to me I may add, in passing, that it is eminently desirable that some method of inspection, either by the State or the Nation, should be devised for the benefit of the ship- pers of commodities to New York. I have established a bureau of transportation, which investi- gates the nonarrival of cars when demanded by shippers, delay in transit, mishandling of goods — all those matters that pertain to transportation, for which I have a specially trained corps of inspectors. I have established a bureau of service with the information bureau, which is prepared to answer all inquiries that farmers may make. For example, if a man has cabbage in the State and he writes in to know when he shall ship the cabbage, what kind of cabbage should be sent, what men in New York are handling cab- bage, and all those questions which pertain to that particular com- modity. All those questions, and others similar, my men in New York are now prepared to answer. I might say in regard to market reports — to run a little ahead of my story — that the question of furnishing an adequate sys- tem of market reporting is one of the vexing problems of the systems existing. Market reporting has been a thorn in the flesh for years. It has been done in various ways. It has been done by committees of exchanges; it has been done by making a rec- ord of sales; it has been done by committee meetings behind closed doors, and it has been done by independent and private reporters of markets. The objections to sales lists made up by commission houses are natural enough, that they are the most interested parties. If they are wholesalers, it is to their interest that commodities should be underquoted. If they are jobbers, 6 selling to retailers, it is to their interest that the prices should be overquoted. And while it does not necessarily follow that self- interest will betray every man into a dishonest statement, the temptation is there and should be removed. So we come down to the independent reporting of prices cur- rent, as they are termed. There we run up against another diffi- culty — the great and inherent difficulties in the way of getting the tone of the market, the atmosphere of the market, and deter- mining by a sort of sixth sense what the real prices are for that day on a certain commodity. It is no easy thing. It requires as much training, and as long experience, as any course at any university, and I want to say 'to you, gentlemen, it is much more strenuous and wearing. So in undertaking to send out a price list of our own, it was only after we had obtained men fitted for the situation and had tried them out, that we ventured to send out any price list at all. In regard to New York City I might add just a word, that I am mapping the entire city, dividing it into wards and districts, and that I am putting on this map the exact location of every spot where food is dealt in. These maps are being colored so that in every ward, and every district, the nationality that inhabits that particular ward is indicated. New York is made up of a lot of little nations, and the food that one nation desires is not the food that another nation desires; if we are to begin a plan for the successful distribution of food in New York, the map that I have spoken of is one of the first and essential steps. To pass from that to a bureau of co-operation: I will only recite the table of contents of my last bulletin, Foods and> Mabkets. I haven't time to discuss co-operation ; it is a subject by itself. There is a " Foreword " in this bulletin from which I quote a line or two: Co-operation is the keynote of twentieth century activity. In co-operation with our allies, the world war has been won. Co-operation in the industrial world has led to the successful operation of gigantic enterprises and it has brought about collective bargaining and the improvement of the condition of industrial workers. Co-operation is the keynote of twentieth century activity. In co-operation there are a large number of enterprises that have been conspicuously success- ful. The main and ultimate purpose of co-operation is to make the producer master of his own business. For many weary years he bias received the wages of a laborer. The time has come when he may secure the profits that justly belong to him, through a proper grading and marketing of his products. In order to bring this about, the producer must become a busi- ness man, and learn how to do business along co-operative lines. The co-operative organizations that he creates must be built upon those solid principles of co-operative business effort that experience has proved abso- lutely reliable. The contents of this bulletin are as follows: The A B C of Co-operation. Why Co-operation Is the One Solution of the Farmer's Problems. Touchstones for Determining Readiness of Communities for Co-openation. How Co-operative Associations may be Incorporated. Incorporation and Liability. Specimen Forms of Co-operative Contracts and Rules. Advantages in Thorough Business Organization. Co-operative Associations Organized by the Division of Foods and Markets. • Sheep Breeders' Co-operative Associations. The Co-operative Lamb Club. Associations Incorporated Prior to Passage of Article 13-A. Bibliography on Co-operation. This will give some idea of what we are trying to do along the line of co-operation. In regard to the examinations of food in our bureau of food standardization : In co-operation with the United States Depart- ment of Agriculture, with its bureau of chemistry at Washing- ton, we are laying out a plan of systematic investigation along pertain definite lines of the foods sold in this State and I have already, in a conference with Washington authorities, arranged ■for co-operation and work with the State and Federal inspectors, and with the State and Federal laboratories. In the year to come I am confident we shall be able to do much more along the line of investigation and standardization of the foods that we have to buy, than has ever been done before. Now just a word as to markets: There is so much to say about markets that it is hard to determine what points to take up. Let us take up, for example, the country points of sale and the defects. Now the farmer can sell his goods directly to the •consumer; he can sell to the country store; he can sell to ship- pers at his local marketplace. If he undertakes to sell direct to the consumer in these days, it means that he must either establish a connection between himself and certain people in the nearest ■city, or truck his goods in. It is apparent, upon a survey of the situation, that such a method as that is only applicable to a com- paratively few farmers. It is impossible for all the farmers sur- s rounding any city to establish points of marketing contact with the consumers in a satisfactory way. That, of course, leads up again to the consideration of so-called farmers' markets, which has been advocated by a great many as one of the main solutions, of this marketing problem. Well, let us see how that works out. Let us take, for example, a good sized city of a million or two of people. Let us take New York. Now, only 10 per cent, of the food consumed in New York City comes from New York State. To say the least, I was astonished when I discovered that fact. A few years ago I supposed that the farmers of up-State furnished New York City with everything she had, and when I discovered that New York City was only dependent upon ua- for 10 per cent., I was amazed. But that is a fact. With all the millions of tons of food that come into New York, what percentage can be brought in by individual farmers so situ- ated that they can meet at some marketing center in New York and then distribute it to the consumer that happens to come ? The proportion is so infinitesimal that it would take a row of figure* in decimals to indicate it; it is absolutely infinitesimal. When we establish a farmer's market, there is a farmer's side to that. He has to leave his home sometimes in the early evening of the- night before, and having reached his market and taken his posi- tion, if a jobber or retailer comes to his cart or his truck or his. wagon and offers him a reasonable price for the entire contents of that truck, the farmer is going to sell at once, because he is making one transaction ; he is receiving cash for the entire load ; he is relieved of the necessity of staying there until, perhaps,, sometimes, the next morning; and long before the average con- sumer thinks of getting out of bed the farmer is on his way home- with his entire truckload sold. As to the consumer : We hear a great deal about the consumer's demanding markets frequented by farmers, for the purpose of selling to the consumer certain kinds of commodities at reduced prices. And there are a great many consumers who cherish that as one of their fondest and dearest hopes for the ultimate reduc- tion of retail prices. What does the consumer do about it? The facts of the case are that the consumer does not do anything- about it. He talks about it and points out what the advantages, of such a project are, but when once a market of that kind has been established, it is to other markets that the consumer hies himself with great and increasing speed. He does not go to the farmers' market. Investigation has shown, in several cities, that there are only two classes of people that go to farmers' markets, where they have been established. One class is made up of those who go in their automobiles, who have servants at home to do the work ; and the other class is made up of the very poor, who come to the market with baskets on their arms. The great middle class, so to speak, for convenience, prefers to go to the corner grocery, to the retail store, because they don't have to neg- lect their family duties; they haven't servants to leave behind. The grocers have telephones, they, have a credit system, they have costly showcases, and they have a special delivery which brings the goods to the door any hour or minute the consumer sees fit to demand. So the consumer, as a rule, does not sup- port these markets, for the reasons I have enumerated — and one other reason, that the commodities dealt in by the farmers' markets are few in number. They must be. They are limited to the things the farmer raises on his farm in the neighborhood of certain cities, such as beans, sweet corn, potatoes, and cabbages. How many consumers would like to throw a bag of potatoes over the shoulder and go home with it ? It is a perfectly respectable pro- cedure, but there seems to be in the minds of some a prejudice against it. Those are some of the reasons why farmers' markets, as such, have not, in these later days, been successful. And while I have enumerated some of the defects, that is no reason why we shoidd not attempt, and attempt strenuously and earnestly, to establish a farmers' market in every locality where we think there is any chance of making it a reasonable success. In small towns through the State — and I am making a survey of every city and town above 2,000 — in every one of those towns where it seems to be possible by co-operative effort — that is, by the effort of the consumer on the one hand and the producer on the other — to bring about such an understanding, so that the consumer can have ready access to the market, we are attempting this work. In these smaller towns, which are different in their social conditions 10 sometimes from the larger cities, it seems to me it is possible to bring about a condition of affairs so that markets of that kind will be beneficial to both the producer and the consumer. I believe we ought to try it out, although we know perfectly well that the tendency of these later days is not toward marketing of that sort. As to prices of farm products: It has been stated that the farmer receives 35 cents on a dollar. Is it true? Is it true that the farmer only receives 35 cents out of every dollar that he has paid for the commodities that he sells? Only 35 cents? Well, true or not, you and I have read that in agricultural papers, and in the daily press, and in magazine articles, by men who are sup- posed to know. We have read that for years. And we have believed it. I did ; I believed it. And I got very hot under the •collar about it, too. And I am not sure yet but what that heat was somewhat justified. But as I stated at the beginning of this little discussion, as I have gone into the matter, the statement that the farmer receives only 35 cents out of every dollar is not justified by facts. And it is the facts of the case that we are after. Now it is true that the farmer, for certain commodities, certain of his products, receives only 33 1/3 per cent To give a concrete illustration: Out in Minnesota, where lettuce is raised, only ten miles from Minneapolis, the farmer receives only #3 1/3 per cent, of the retail price, and it goes through only one middleman. But in butter, figured in butter fat, the farmer receives 77 cents on the dollar; livestock, 58 cents on the dollar; wheat, 90 cents on the dollar. Those are different figures, and an average estimate of what we receive for all products sold is without weight and without value. The question is, What percentage do we receive for each commodity that we sell? That is the real question before the house. And that brings up again, in passing, the question as to how much the middlemen take away from the farmer. To go back to the lettuce proposition — because most of these perishable commodities have to be sold quickly, a special system is necessary to dispose of them immediately. Such commodities bring the least percentage to the farmer, even though, as in the case of the lettuce, they go through the hands of one middleman, that is, the retailer. The butter sent from Minnesota goes through the hands 11 of four middlemen, including the transportation company, and brings back to the creamery, tbe original seller, 11 per cent, of the buttefe price. So in general I may say, in passing, that the presence of one or two or more middlemen seems to have very little influence on the final cost to the consumer or the percentage of the price that the farmer receives. In my studies of this question, I have been obliged to go to men much wiser than myself; to retailers and wholesalers, farmers and milk men, and butter men, and wheat men, to find out when and how I could better the situation. The question is, what is to be done ? How are you going to do it ? And last and most important, who is going to do it ? The consumer thinks that somebody, some time, somewhere, somehow, is going to reduce the retail price of the articles that he buys. I can tell the con- sumer that that is never going to be done in any such way as that. It is going to be when the consumer himself rises to his duties; it is when the transportation companies face the difficulties, when the system of commercialism in New York faces the difficulties, and when the producer himself takes hold of it in a scientific way, then we will begin to come to a new era and a new method of distribution of commodities. It has been said that we are reaching a reconstruction period, when we shall all be made over as to our aspirations, our ambi- tions, and our business methods. " I don't expect to see much change," Said Hiram Green to me; '* We're quite a set and stubborn lot, We human beings be. We get our learnin' mighty slow, And just about the time A fellow knows what's good: for him, He's gone long past his prime. The war will change a lot of things, But I 'low Treadwell Pew Will slip a couple of bad eggs in Just like he used to do, As soon as we lick Germany. I don't know as I should say 'Twill be a mortal sin, perhaps, But it's Treadwell's way." ;