f?? HD9030.9 7; ^-%r, U5/\5 \ (i ;--«>' 1«. .^"' ■ iiiifS ";?i>#Kr t i. ,^>... >* if*^^S;;w-i;i ? J'"is*':':.i. -ii-S>^ un «»«« Cornell University Library HD 9030.9.U5A5 1908d ""'iHlSlMiiii '"®P®'"'°"-Hearings before 3 1924 013 862 135' PEDERAU GRAIN INSPECTION HEARINGS (^ BEFORE THE I I S^V^ COMMITTEE ON AGRICULTURE AND FORESTRY UNITED STATES SENATE JANUARY 16, 1908, FEBRUARY 6, 1908 AND APRIL 2, 3, 4, AND 8, 1908 ON THE BILL (S. 382) TO PROVIDE FOR THE INSPECTION AND GRADING OF GRAIN ENTERING INTO INTER- STATE COMMERCE, AND TO SECURE UNIFORMITY IN STANDARDS AND CLASSIFICATION OF GRAIN, AND FOR OTHER PURPOSES WASHINGTON GOVERNMENT PRINTING OFFICE 1914 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013862135 FEDERAL GRAIN INSPECTION. Committee on Agriculture and Forestry, United States Senate, Washington, D. C, Thursday, January 16, 1908. The committee met at 10.30 o'clock a. m. Present: Senators Proctor (chairman), Hansbrough, Dolliver, Burnham, Perkins, Long, and Bankhead. The Chairman. The hearing this morning is on the subject of the bill (S. 382) to provide for the inspection and grading of grain enter- ing into interstate commerce, and to secure uniformity in standards and classification of grain, and for other purposes. The bill is as follows: Be it enacted, etc., That tlie Secretary of Agriculture shall organize in the Bureau of Plant Industry of his Department a section of grain inspection and grading, and shall, according to the rules of the civil service, appoint such ex- perts and other employees as may be deemed by him necessary to carry out the provisions of this act. . ' Sec. 2. That said Secretary shall also appoint, in accordance with the rules of the civil service, at each of the following cities, to wit : Portland, Maine ; Bos- ton; New York; Philadelphia; Baltimore; Chicago; Minneapolis; Duluth; Su- perior ; Kansas City, Missouri ; Saint Louis ; New Orleans ; Seattle ; Tacoma, and San Francisco, and at such other important centers of interstate trade and commerce In grain as he may consider necessary or proper for carrying out the provisions of this act, one chief grain inspector and such assistants as may be required to inspect and grade grains as herein provided. Sec. 3. That said inspector shall be paid a salary or compensation to be fixed by the Secretary of Agriculture, which shall correspond as near as possible to salaries and compensations paid other officers or employees of the Government performing- similar duties. Sec. 4. That the Secretary of Agriculture shall make all needful rules and regulations governing the Inspection and grading herein provided for. Sec. 5. That said Secretary of Agriculture be, and he Is hereby, authorized and required, as soon as may be after the enactment hereof, to determine and fix, according to such standards as he may provide, such classifications and grading of wheat, flax, corn, rye, oats, barley, and other grains as in his judg- ment the usages of trade may warrant and permit. In the Inauguration of the work herein provided he may, if in his judgment the best interest of trade and commerce In said grain require it, adopt the standards of classification and grades now recognized by commercial usages or established by the laws of any State or by beards of trade or chambers of commerce, and may modify or change such classifications or grades from time to time as in his judgment shall be for the best Interest of interstate and export grain trade. Sec. 6. That when such standards are fixed and the classlrication and grades determined upon the same shall be made matter of permanent record in the Agricultural Department, and public notice thereof shall be given in such man- ner as the Secretary shall direct, and thereafter such classification and grades shall be known as the United States standard. Sec. 7. That from and after thirty days after such classifications and grades have been determined upon' and fixed, and duly placed on record as hereinafter provided, such classification and grading shall be taken and held to be the standard in all interstate commerce in grain. . Sec. 8. That it shall be the duty of any railroad company, steamship company or other firm or corporation or private individual engaged in the transportation of grain destined to any State, Territory, or country other than that in which It is received for Inspection, or received from any other State, Territory, or country than that to which it is consigned, to notify the chief grain Inspector at the place of destination of any consignement of grain, within twenty-four hours after its arrival, that a shipment, cargo, or load of grain is in its, their, or his hands, and the place of destination of said grain. 4 FEDEEAL GRAIN INSPECTION. That It shall be unliiwfiil for any person herein named to willfully unload or olJierwise discharge any load, cargo, or consignment of grain which has been at any time during the period of its transit an article of interstate commerce and which has not been inspected in accordance with the provisions of this act, until the same has been Inspected as provided herein. Upon the receipt of such notice the said chief inspector shall cause the said grain to be inspected and graded in accordance with the classification and standards fixed by said Secretary, and to issue and deliver a certificate of Inspection showing such grade and classification in such form as may be pro- vided by rules prescribed by said Secretary. Sec. 9. That it shall be the duty of said inspectors to inspect and grade all grain which at the time of inspecting and grading of the same has been shipped from any other State, Territory, or country than the State, Territory, or country in which the same is inspected, or is intended for shipment Into any other State, Territory, or foreign country before the same is unloaded from the car, vessel, or other vehicle in which the same was or is being transported and to chargfe and collect from the owner thereof such fees for the- inspection of said grain as may be fixed by the Secretary of Agriculture, who shall have the power to fix the rate of charges for the inspection of graln'and the manner in which the same shall be collected, and which charges shall be regulated in such manner as will, in the judgment of the Secretary of Agriculture, iJroduce sufficient revenue only to meet the necessary expenses of the Inspection service, said fees to be covered into the Treasury of the United States as miscellaneous receipts, in the same manner as for other miscellaneous receipts. Sec. 10. That no inspector or deputy inspector of grain shall, during his term of service, be interested, directly or indirectly, in the handling, storing, ship- ping, purchasing, or selling of grain, nor shall he be in the employment of any person or corporation Interested in the handling, storing, shipping, purchasing, or selling of grain. Sec. 11. That any person interested in any consignment of grain inspected under the provisions of this act may appeal from an inspectior made by any assistant inspector to the chief Inspector at the point where such grain is inspected, and from said chief inspector to the Secretary of Agriculture. Said Secretary shall malie all needful rules and regulations to goveiu appeals. Sec. 12. That when any grain which having been inspected and certificate of Inspection issued hereunder is mixed with any other grain not inspected or with grain which has been inspected and certified at a different grade, tiie same shall not be shipped out of the State where such mixing is done witliout being reinspected and graded; any such person or corporation shipping such grain as aforesaid without reinspection shall be deemed guilty of a misdemeanor. Sec. 13. That the shipment or consignment of any grain aforesaid from any of the places mentioned herein to another State or foreign country without the same being inspected and graded as herein provided is hereby prohibited; but where grain has been once Inspected hereunder and remains unmixed with other grain the same need not be reinspected at the place from which it is exported : Provided, however, That said Secretary may at his discretion rein- spect any cargo of such grain before the same is exported. Sec. 14. That it shall be the duty of the inspectors and assistants to Investi- gate the handling and weighing of grain inspected by them, and to make such report thereon as the said Secretary may require; and It shall be the duty of every person or corporation weighing such grain to allow Inspection of such weighing and handling by said inspectors. Sec. 15. That any person or corporation who willfully does any act pro- hibited herein or who willfully refuses or neglects to do or perform the things required of him under the provisions of this act shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punished by a fine in a sum not to exceed 'five thousand dollars, or by imprisonment not to exceed one year, or by both fine and imprisonment. Sec. 16. That for salaries and for all other expenses In the city of Wash- ington or elsewhere deemed necessary by the Secretary of Agriculture to carry out the provisions of this act there is hereby appropriated, out of any money In the Treasury not otherwise appropriated, eight hundred and fifty thousand dollars. Sec. 17. That this act shall talie effect and be In force from and after the first day of January, nineteen hundred and nine. The Chairman. We have here a delegation from Boston. Several other boards of trade have proposed to appear. One 'ner thereof. That is on page 4, line 25. Does the word " owner " mean the owner of the car or steamship, or does it mean the owner of the grain? I think that ought to be clearly brought out, and if it means the owner of the grain, we would respectfully urge that a definition of ownership be placed in the act, so that there can be no possible doubt. Who is the owner of the grain? Is the bank which has advanced money on a bill of lading 'the owner? Is the holder of an order bill of lading the owner? It seems to me that ought to be brought out clearly, because we are now ■proposing to tax somebody, and as I have tried to show, that some- 10 FEDEEAL GEAIN INSPECTION. body ma}^ be taxed two or three timesj to pay for two or three inspec- tions, which are provided for by this bill. Senator Long. What do you suggest in that respect, as to the definition of the word " owner." Mr. Hammn. While the question of a uniform bill of lading is pending, I hardly care to make any suggestion. If a uniform bill of lading is enacted into law, giving a definition of the word " owner," I think the definition would answer your question; but until you determine the various rights, would be almost impossible to define the term " owner." As it stands now, I do not see how it could be defined. Under section 10 of the bill inspectors are prohibited from being interested, directly or indirectly, in the handling or storing of grain or from being in the employment of any person or corporation so interested. That of course would absolutely abolish all the systems of private inspection which are now employed over the country. That is, it would prohibit the boards of trade or the chambers of com- merce from doing this inspection, which in fact they are very largely doing to-day. Under section 12 a certificate is issued, and the unit of inspection, I Etssume, would be the carload, whereas the unit of distribution would be the 2-bushel bag. Here we have a system where the unit of inspection, is different from the unit of ordinary sale. That seems to me to be an incongruity, and it will be impossible to protect any consumer, if that is the purpose of the act, by a system of inspection where the unit of ordinary sale and the unit of inspection radically differ. In section 11 the subject of appeals is provided for, and any per- son dissatisfied — I think it says any person interested in a consign- ment of grain — may appeal. It does not, however, define the term "interested." Let us take this case: Supposing a man in Boston purchases grain for sale to some person in Liverpool, and the grain arrives. He has bought grade 3, for example. The grain arrives and is inspected at Boston, and it is also inspected in the West, we will say, and it passed as grade 2 in the West. It reaches Boston, and the Federal inspector says the character of the grain has changed, which often happens, and that it is now grade 3. The man has his contract. He has got to fulfill it. A ship is waiting for the order. He may have to pay what is called dead weight if he can not fill the order, and the ship sails without that part of the cargo. He may have to buy other grain at an enormous advance, and conceivably he may lose thousands of dollars by the transaction. He then appeals to the chief inspector and from the chief inspector, under the bill, to the Secretary of Agriculture. The Secretary deter- mines that the Federal inspection was wrong, and that that grain was grade 2 and not grade 3. Now, under the existing system of inspection, the Boston Chamber of Commerce would be reponsible in damages for the error of its inspectors, and it seems to me that herein is a radical defect in this bill. If you are going to have Fed- eral inspection, it seems to me that the United States Government should be responsible for the act of its Federal inspectors, for their errors of judgment. That responsibility now is imposed on local boards of trade, men who are in the busmess of inspecting ; and yet this bill would take away from the purchaser the right that he has FEDERAL GRAIN INSPECTION. 11 to hold the inspector personally responsible or the corporation inspecting his grain responsible for his loss caused by its error. Of course it may be that if you reach this result it would neces- sarily kill any such bill, because the Government would hesitate to assume this obligation; but it seems to me that if the Government is going to take the grain business and put it in a Government strait- jacket, if it is going to inspect the grain and take charge of it, it should Icgically undertake to assume, for any errors of inspection, the same responsijbility which the present private inspection of grain entails on the person holding himself out as a competent inspector. The Chairman. Is that responsibility of boards of trade often enforced? Do boards of trade frequently pay damages for the mis- takes of their inspectors? Mr. Hamlin. Mr. Morse, secretary of the Boston Chamber of Com- merce, can answer that. Mr. Morse. It never has occurred to any large extent. Fortu- nately the Boston Chamber of Commerce have never had to pay any large claims, because the inspection has been reliable. Otherwise we should find ourselves in the position of having to pay damages. Of course you must understand that a great many of the contracts are based on conditions of its arrival at Liverpool. All grain is perishable, com particularly, and oats very frequently. Mr. Hamlin. Under section 13 it is provided that the shipment or consignment of any grain from any of the places mentioned herein to any other State or foreign country without the same being inspected and graded is hereby prohibited. Now, of course, that to my mind shows the necessity of designating the places by the Secretary, spe- cifically, where inspection is to take place ; or it seems to me the bill should state that what was meant was the consignment of grain from, any of the places mentioned herein or designated by the Secre- tary ; because otherwise you could ship grain under this act from any place where there was not a Federal inspector; and if there was a Federal inspector you could not ship it. It seems to me that ought to be brought into harmony with the rest of the act. Then it further provides that where grain has been once inspected and remained unmixed with other grain, the same need not be reinspected from the place from which it is exported. Does the word " exported " there refer to the export trade, or does it mean that it does not need to be reinspected at the place where it leaves the initial State? It spems to me it is not clear in the bill. I suppose the term " export '' presumably means export to a foreign country. I think the Supreme Court has so ruled ; but whether this means that or not, it is impossible to tell from this bill. If it means where grain has once been inspected in the interior, then that it need not be reinspected on export, why the bill would be reduced to an absurdity, because grain often changes, it often deteriorates in transit. Corn often heats; and what would be the advantage of a Federal inspection if corn were inspected in Chicago, and then taken to Galveston, and there was an undue amount of moisture in it, and the corn had spoiled when it got to Liverpool, although it had been inspected at the initial point ? There- fore, in answer to Senator Perkins, I would say that if the bill does not provide for double inspection, it is absolutely useless. It would not be of the faintest information to anybody buying grain unless 12 FEDERAL GEAIN INSPECTION. they knew what its condition was when it started, and what its con- dition was when it arrived at destination. It is said that this bill is designed to furnish a uniform standard. I respectfully submit that the standard provided is not a uniform standard, and it can not be made so, because the climatic conditions vary so between different points in this country. Supposing the Secretary of Agriculture, under this bill, should say that export corn, to be of grade 2, for example, must not contain more than 15 per cent of moisture. That reallj^ would be necessary in exports through the Southern States. If it contained more than that the corn might spoil. Let us suppose that the Secretary should promulgate a rule that corn containing more than 15 per cent of moisture should be graded as No. 3, which we agree would be a proper rule for exports through Galveston and New Orleans; it is a perfectly well-known fact, however, that corn containing 2 per cent more could go through Boston with perfect certainty and safety. What would Boston have to do under such a regulation? It would have to extract that 2 per cent of moisture out of that corn or else it would be penalized by put- ting it in grade 3, although it really is grade 2. The cost of getting that moisture out would absolutely destroy any profit in the business, and it would only be profitable to go to the ports where the nominal standard actually complied with the real standard. Let us take another illustration: Supposing you had a rule that more than 15 per cent of moisture would put corn in grscde 3. The corn is graded, we will say, in Chicago. It must be placed, we will say, in grade 3, because it contains slightly over 15 per cent of mois- ture. Part of this corn goes to Liverpool through Galveston and it arrives there grade 3. Part of it goes to Liverpool through Bos- ton and it remains nominally grade 3, because the supposed regu- lation defines it as grade 3; but when it reaches Liverpool that corn which in Boston was grade 3, with 17 per cent of moisture in it, is grade 2 in reality, and is disposed of as grade 2 com, because when it reaches there it is in a proper condition for corn which is uni- versally recognized as grade 2. Instead of uniformity, a Govern- ment standard as proposed by this bill would produce hopeless con- fusion. If the proposed Government standard is binding on- the • seller, he would receive the price of grade 3 for corn really belonging to grade 2. Senator Long. As a matter of fact, grain which is exported is usually reinspected in Liverpool or foreign ports, is it not ? Mr.' Hamlin. Grain shipped from Chicago for export is always reinspected at Boston. The railroads employ the Boston Chamber of Commerce to do that work. The exporter also, if he desires, can obtain a certificate of the inspection, by paying for it to the Chamber of Commerce. Senator Long. Is the same grain reinspected at Liverpool? Mr. Hamlin. I understand that it is. Mr. Morse can correct me about that if I am wrong. _ ^ . Mr. Mouse. I do not know that there is any omcial remspection. Senator Long. The question I want to know is whether they take your inspections, which are made in this country, or whether they have inspections of their own. , Mr. Hamlin. I think they have inspections of their own. Mr. Eddy. They buy on inspection. They have their own inspec- tion, but they buy on our inspection. FEDERAL GKAIN INSPECTION. 13 Senator Long. Do they accept your certificates of inspection as final? Mr. Eddy. They do. Senator Long. But they also inspect the grain themselves ? Mr. Eddy. They have their own inspection, but they buy on our inspection. Senator Long. Suppose their inspection differs from ours ; then what ? Mr. Eddy. They have no claim on us, because they buy on inspection.' Mr. Hamlin. There is no question, I suppose, that there is some difference in grading and inspection of gram between different ports in the country. It is a question that depends largely on the judg- ment of the individual inspector, and as certain ports have a very high standard of inspection — Boston and New York having a very strict standard — if the Federal Governihent should adopt the high standard of certain ports and apply it to the whole country, it -might change radically the system of inspecting grain. On the other hand, if they adopted a lower standard, it would be pretty hard on ports that adopted a higher one to take away the trade benefits thai an inspection at New York or Boston would give. In that way it would take away largely the advantages that a board has -because of rigid inspection, and those advantages of course are very great. As I have stated, this act would prohibit so-called blind billing; that is, where the stuff is billed in the local trade, and a merchant does not know where it is going, and he bills it to some point, for instance, on the Boston and Maine Railroad, to Williamstown, and when it reaches that point he has determined where it is to go, and the bill of lading has a proper notation placed upon it, and it is then sent to the place where it is destined. I do not see how that prac- tice could be kept up under this bill, unless you have a Federal inspector at every little railroad station in New England; because grain is sent by carload to practically every railroad station in New England. This act,, as I have said, designates only Portland and Boston in New England. Of course the Secretary could, under the law, appoint other inspectors. To my mind this bill makes every railroad car a movable ware- house. It tries to keep the identity of every carload of grain, and it treats it practically as the Government treats imported merchan- dise which IS sent in bond, say, frou Boston to Chicago, with the cars sealed up. It does not pay the duty until it gets to Chicago, and Government inspectors have to watch it. You can not break the seal. It is a very formal process, putting the goods into the car and sealing them up. The railroad gives a heavy bond, and the releas- ing of the seal at the other end is another part of the process; and that is practically what this bill does to the grain business of this country. In my judgment it puts it in a strait- jacket, and it would cause such confusion that I believe the very people who advo- cate this bill would find that it would almost destroy the grain busi- ness of the country. It would not be possible to do business in New England under this bill. I believe it is a fair estimate to say that no fewer than 5,000 Government inspectors would be needed to carry out the inspection provided in this bill. Then, as I say, any violation of this act is punishable with fine oi; imprisonment, or both, in the discretion of the court; and I confess that I do not see how the shippers could do business. 14 FEDEEAL GEAIN INSPECTION, I think there is no question that it calls for double inspection, and if the Senate does not desire double inspection it should be made per- fectly clear in this bill. On the other hand, it does not provide for the double inspection of exports, the very point where a double inspection would be necessary to give the foreigner the slightest information as to the quality of the grain that is exported. Senator Pekkins. I understood you to say that it would also vitiate all State laws. Mr. Hamlin. I think so. Senator Perkins. In Minnesota they have a most excellent inspec- tion law, which meets the approval of not only the elevator owners, but also of the individual farmers. Senator Long. Do you understand that we have the power to viti- ate or abrogate State inspection for products transported within the State? Mr. Hamlin. Not products transported intrastate, but under this bill I think it would be very hard to determine exactly what the aim of the National Government is. I suspect that those who want the bill want all products ultimately destined for interstate com- merce inspected, but under this bill they would not get that. Senator Long. Is it not very necessary that we in passing the bill be somewhat definite and accurate as to just what we are intending to do under the recent decision of the Supreme Court ? Mr. Hamlin. I think it is absolutely necessary. ^ow, in answering the Senator about the Minnesota law, you know the legislature of Wisconsin passed a law intended to break into pieces the Minnesota law, which Wisconsin law was held unconsti- tutional by the United States courts. The claim was made that the Minnesota system of inspection was fraudulent and the judge prac- tically assumed that to be the fact, but he attached a memorandum later to his opinion that the charge of fraud was simply in the plead- ings, and that he had reason to believe that it was not correct. The act was held unconstitutional, however, on the ground that the State of Wisconsin deliberately attempted by the statute to impose a burden on interstate commerce. Senator Long. Will you refer to that decision? Mr. Hamlin. Yes. Globe Elevator Co. v. Andrew. (144 Federal Eeporter, 871.) Senator Long. From your examination of this bill, is it drawn in the interest of the producer of grain or the consumer, and which of them is it intended to protect? Mr. Hamlin. I should say that this bill was drawn, with all respect to the Senator who drew it, primarily to protect the farmer, but I do not believe it is going to give the farmer that protection. The claim is made, as I understand it, that the farmer sells his grain at a certain grade and price to the owner of an elevator, and that when it goes out of the elevator it may go out at a higher grade; that is, that there is some unfairness or some misjudgment in fixing the price at which he must sell. . „ , . Senator Long. On account of the lack of uniformity of the inspec- tion? , . , Mr. Hamlin. Lack of uniformity, if you call Jt that, or improper inspection. FEDERAL GRAIN INSPECTION. 15 It seems to me that the evil that the farmers complain of and wish to remedy is an evil that can best be met by the laws of the indi- vidual States. There is no question — and I have authorities to cite to this effect — there is absolutely no question that a State can enact inspection laws as to quality, as to quantity, as to measuring and grading; that it can even provide that no commodities shall be shipped out of the State in interstate commerce unless its police laws are carried out. The Supreme Court upheld a statute, I think of Virginia, where tobacco was forbidden to be shipped out of the State unless packed in a certain way, and the Supreme Court of the United States held that was constitutional. Senator Long. Will you also refer to that decision? . Mr. Hamlin. I will refer to that also. It is the case of Turner v. Maryland ( 107 U. S., 38) . The point I desire to make is Ihis, that under the Federal Consti- tution, the States never gave up to the National Government their right to enact inspection laws j that is, to determine as to the grading of merchandise, as to its quality, as to its weight, as to its gauge, as to its measure; that all those matters were reserved and remain in the control of the original States. In the great case of Gibbons v. Ogden (9 Wheaton 1, at page 201), Chief Justice Marshall stated that the power had never been given to Congress to exercise that branch of the police power covered by what we call inspection laws, but that the States reserved that right, and that furthermore, it was not a right derived from any power to regulate commerce. See also Patapsco Cuano Co. v. North Caro- lina (171 U. S., 345), and Plumley v. Massachusetts (155 U. S., 461), in which the court said that the States had plenary control as to inspection laws and that it was never intended that this power should be surrendered to the National Government. Senator Burnham. Of course, in the States there is no uniformity and nothing approaching it, is there ? Mr. Hamlin. Well, general uniformity ; with, of course, the varia- tions that we would always expect in individual judgment. I believe that if it were not for the recent interpretations of the commerce clause by the Supreme Court there would be no question whatsoever that the Federal Government has no right to interfere with the inspec- tion laws of the States, and that at the time Chief Justice Marshall delivered that famous opinion in Gibbons v. Ogden it was never thought that the commerce clause would be developed in the manner in which the necessities of the Government have, perhaps, required that it should be developed. We have, however, recent interpreta- tions by the United States Supreme Court of the commerce clause which may possibly be claimed to conflict with this right of inspec- tion, which the States have never given up. Of course it is clear that a State can not enact a law under the guise of an inspection law which really burdens interstate commerce. The State of Wiscon- sin did that in its grain-inspection law, which, as above stated, was recently held unconstitutional in Globe Elevator Co. v. Andrew (144 Federal Eeporter, 871). In this latter case the court expressed the opinion that the National Government has power to enact Fed- eral inspection laws, but the only point necessary to the decision was that the statute placed -a burden on interstate commerce and was therefore void. 16 FEDERAL GRAIN INSPECTION. The recent decision of the Supreme Court in the lottery cases (188 U. S. 321) of course has gone very far as to the measure of power ^ven to the United States over interstate commerce; but the deci- sion, as I understand it, was based fundamentally on the fact that the Federal Government would not permit the avenue of interstate com- merce to be used for the fraudulent purpose of evading State laws prohibiting lotteries. That is all that the court had to decide, although Judge Harlan, in the opinion of the majority, went further than that. A minority of the court, however, took the ground that the prohibition of lotteries was purely a. State matter, and that gen- eral police powers are not given to the Federal Government. I think that the majority of the court were of opinion that the Federal Gov- ernment has police power over Federal commerce. Assuming, how- ever, that the Federal Government has all the power over interstate commerce that any State would have over intrastate commerce, it would not have the power of abolishing interstate commerce, for no State would have >>uch power over intrastate commerce. The only ground on which this bill would be justified constitutionally, in my judgment, is that the National Government has the right to say that it will not allow grain to be transported in interstate commerce unless the shipper complies with certain conditions as to grading, etc., imposed by the Federal Government in this bill. That is the under- lying theory of this bill. The lottery case certainly does not decide that, and any such claim seems to be disposed of by the recent deci- sion of the United States Supreme Court in the employers' liability eases, decided January 6, 1908. (Howard et al v. 111. Cent. R. E.. Co. et als.) Senator Long. And that is the gist of the meat-inspection biU, is it not? Mr. Hamlin. That bill has not been passed on by the Supreme Court. Senator Loxo. It has been passed by Congress. Mr. Hamlin. There has been no judgment of the Supreme Court on that. Senator Loxo. Xo. Mr. Hamlin. That is what I assumed. The meat-inspection bill, to my mind, can perhaps be differentiated in this way, that Congress has the right to say that it will exclude from interstate commerce things that would destroy interstate commerce. It would have the right to say that diseased catle shall no be brought into interstate com- merce, because that is inconsistent with interstate commerce. It spreads disease. Congress would have the right to say that explosives should not be carried or that thej^ should be carried under rigid regulations. It might have the right to say, under the general police power, that diseased meat should not be transported, although I think that is a slightly different case. But, granting all that, I submit that the United States Government, under the commerce power, has no right to say to a shipper, " Unless you grade your goods as I shall determine, I shall prevent you using the avenues of interstate commerce." A State could not say that as to intrastate commerce. I grant that the United States has all the power over interstate commerce that a State has over intrastate commerce^ but no State could say to a producer, " If you do not do certain things, if you do not sell your goods at a certain price, I will prohibit you from manufacturing." That is clearly beyond the power of FEDEBAL GRAIN INSPECTION. 17 any State. So I say the Federal Government can not refuse per- mission to engage in interstate commerce unless the shipper will comply with certain conditions that have not anything to do with interstate com'merce. The grading of grain has nothing to do of itself with interstate commerce. It is not a question of protecting the health of the people of the United States, of protecting the morals of the people of the United States. It is purely a question of commercial standards, and it seems to me that the National Government has absolutely no power over that, because, as I said in the beginning, the United States Government has no power of inspection as a primary power. That was reserved to the States. It has incidental powers of inspection, growing out of the use of any other granted power, such as the power to regulate commerce ; but I contend, respectfully, that the power to regulate commerce is a power which can not extend to the determina- tion of the classification and the grading of articles of legitimate com- merce. Nor can Congress enact that if a shipper shall not comply with that classification and grading it will shut out interstate com- merce in such commodities altogether. I think that no decision of the Supreme Court has gone to any such length as that. The Government, to be sure, does classify goods in the import trade. It has that power, the power of inspection, the power of classification in grading, as you call it, but that power of inspection is purely incidental to the general power of taxation. Congress is given the principal power, that of taxation, and the power of inspection follows as an incident. The States, on the other hand, have the direct power of inspection, which, as Chief Justice Marshall says, they never surrendered to the National Government. The only power of inspection possessed by Congress in interstate commerce is that strictly incidental to the power to regulate that commerce. And it would seem to me that there is no decision of the United States Supreme Court warranting the claim that under the commerce regu- lating power the National Government has the right to tell the mer- chant that he must grade his merchandise. If it has that power, it could go into the States, for instance, and say that no cotton, boots and shoes, or general merchandise should be carried except under similar regulations. Senator Dolliveb. Do you mean to say that the Congress has. more power over foreign commerce than it has over interstate com- merce ? Mr. Hamlin. I should once have said that it had, but a majority" of the Supreme Court, in the lottery cases, has said that it has not. Senator Dollivbr. I understood you to say that the power of Congress over foreign commerce is incidental to the power of taxation. Mr. Hamlin. No ; I said that the power of the National Govern- ment to inspect and grade imported merchandise comes out of the power of raising revenue by taxation, the power of imposing import duties for revenue purposes. Senator Dolliver. That is not the power of taxation. That is the power of commerce regulation. Mr. Hamlin. I suppose you could put it on the ground of taxa- tion Senator Dolliver. The Democrats claim that the tariff is a tax, but we claim that it is not. .34503—14 2 18 PEDEBAL GRAIN INSPECTION. Mr. Hamlin. Well, I am a Democrat. I have just about finished what I have to say. I will say in answer to the question Senator Dolliver put, as to whether Congress has more extensive power under the power granted to regulate commerce with foreign nations than it has under the power granted to regulate commerce among the States, that the minority of the Supreme Court m the lottery cases held that Congress had a greater power over foreign commerce, because that related to the supreme sovereign power of the Government, whereas in interstate commerce it was a more restricted power, but the majority of the court stated— I do not think you can call it a decision, as it was not necessary to the determination of the case— through Mr. Justice Harlan, that the measure of the power of Congress over foreign commerce, commerce with the Indian tribes, and interstate commerce was precisely the same. I think that covers all I have to say on that question. In closing I would simply say that iu my judgment the bill should be perfected so as to state exactly what it does mean, exactly what kind of trans- actions in grain in a State are intended to be covered by this bill ; also to show clearly whether a double inspection is called for. To my mind it is clearly called for. If the intention does not exist, the bill should clearly express that contrary intention. Furthermore, if a double inspection, as Senator Perkins states, is not called for, the bill would be useless as to export business, because frequently grain changes between the initial and the terminal point of export. Finally, assuming the bill to be corrected, and to express specifi- cally what the fair intent is, I believe that such a bill could not be executed by the Secretary of Agriculture without an army of Federal inspectors. I believe 5,000 would be a conservative, estimate, and I can perhaps state a fact that will bring that out. There are from 60,000 to 100,000 cars of grain that arrive every year in New Eng- land. Under the present system of inspection less than 3,000 cars a year are actually inspected. That shows how little the custom of merchants requires that sort of inspection. Now, for 3,000 cars inspected, that requires how large a force of inspectors in the chamber of commerce ? Mr. MoBSE. Six or seven men. Mr. Hamlin. It takes six or seven men to inspect practically 3,000 cars at a very few inspection points. One hundred thousand coming into New England, at almost every railroad station in the six States, on a numerical basis would require 200 men, and I think that would be a ridiculously small number of Federal inspectors. You would require probaMy 1,000 men, because you take in all New England. A car of grain goes to Eichford, or to Providence, R. I., to Pittsfield, Mass., or to Calais, Me., and you would have to have inspectors there all the time, or you would have to hold that car until a Federal inspector could go there and inspect it. Then what becomes of the car demurrage? The railroad could not be expected, without some compensation, to treat that car as an elevator and allow it to stay' there until such time as the Federal inspector could be sent to inspect it. It seems to me that the bill is hopelessly complicated and in prac- tice absolutely impossible of execution. FEDERAL GRAIN INSPECTION. 19 Senator Perkins. As a matter of fact, it is a matter of indifference to the miller, in purchasing this grain, what another inspector says about it. He may want white wheat, Australian wheat, Sonoma wheat, or Chile wheat, and he wants to mix it, and he depends on his own judgment. I speak from practical standards, for I have built three large flour mills. Senator Hansbrotjgh. Do you think that under this bill a double inspection is required? Mr. Hamlin. Yes. Senator Hansbrough. Where do you find that? Mr. Hamlin. Take section 8, for example. The first five or six lines provide that it shall be the duty of a railroad company receiving grain to notify the inspector. Now, if you will turn to section 13, page 6, the shipment out of the State of uninspected grain is pro- hibited. So it must be inspected within the State. That is the first inspection. Then in the following lines of section 8 it also imposes a duty on the railroad receiving the grain, at the point of destination, to report within twenty- four hours. That would be, say, at Boston, if grain is shipped from Chicago to Boston. Line 11 says : " Upon the receipt of such notice the said chief inspector shall cause the said grain to be inspected and graded." That is line 11, page 4. Then in section 14, page 6, it is provided that it shall be the duty of the inspectors to inspect. It seems to me clearly that that points to a double inspection. If it does not, of course it would be perfectly easy to say so. Senator Hansbrough. The great difiiculty with the wheat raiser is that at present he is obliged to take the inspection of the local elevator man. Now let us reduce it to a small transaction. The farmer comes in with a wagonload of wheat. He has 80 or 100 bushels. Up in my country they haul 100 and sometimes 140 bush- els in one box, not in bags, but loose, and bring it to the elevator. It is there graded by the elevator man, and his inspection or grading must be accepted by the farmer or the farmer may haul his wheat away to some other elevator. Mr. Hamlin. He is of course in the power of the elevator man. Senator Hansbrough. Yes. Senator Bankhead. How many elevators have you in North Dakota, roughly speaking? Senator Hansbrough. I was thinking that over when the gentle- man was referring to the large number of inspectors. Eoughly speaking, I should say that we have 4,000 or 5,000 elevators in my State. Senator Bankhead. Then you would have to have 4,000 or 5,000 inspectors ? Senator Hansbrough. It is a question how much inspecting one inspector can do. Mr. Hamlin. I should like to amend my answer as to the number of inspectors required, and make it very much more than 5,000 for the whole country. Senator Hansbrough. I should say if you are going to inspect the grain at the initial point, if the Federal Government is going to inspect it, one inspector at each of the points would certainly be ample to begin with. Senator Long. At each town in North Dakota ? 20 FEDERAL GRAIN INSPECTION. Senator Hansbeough. At each town in North Dakota. There are from one to seven elevators in a town. My own judgment is that after the process was well under way you would not want as manj- inspectors as that. I think the question of grades would settle itself largely. You know the buyers and sellers have come to agree among themselves as to what the grades should be. Now, is there any reason why the purchaser and the Federal inspectors should not eventually agree as to what the grades should be ? Mr. Hamun. I am afraid there is a great difference in judgment. There is a difference between the southern ports, for example, and Boston. If I understand correctly what the f arnaer feels — and I am a farmer myself; I am a lawyer by avocation; farming is my vocation — -I think the farmer feels that he is obliged to sell to an elevator man, and, as you say, he is absolutely in the power of that man. He sells his grain, and it is graded as 3, but somehow or other when that grain comes to be sold again it has greatly changed in quality and becomes grade 2 during its course of transit. I think that is the gist of the feeling of the farmer, that he is defrauded. It is not lack of inspec- tion ; it is fraud. Senator Bankhead. Will not competition among buyers regulate that? Mr. Hamlin. I am afraid there is not much competition at an elevator. Senator Bankhead. Suppose there are five or six elevators. Senator Perkins. After listening to Mr. Hamlin, I should like to ask, if this is a good proposition for the grain grower, why is it not a good proposition for the cotton grower, the fruit grower, or the wool- grower in my State ? Senator Bankhead. Absolutely. Senator Hansbeough. In regard to competition, I will say that in the earlier days in my State of North Dakota there was competition among the elevators. We have not many mills in the State, and nowadays I think there is very little competition among the elevators, especially among what are known as the line elevators. You under- stand the distinction. Mr. Hamun. Yes. Senator Hansbeough. Those are the elevators owned by corpora- tions having their headquarters in Minneapolis, St. Paul, and Duluth. There is a competition as between the farmers' elevators — what have come to be known as the farmers' elevators — and the line elevators. There is pretty close competition there, but the farmers' elevators are not numerous enough to anywhere near handle the great crops that we have. The Chaieman. There is a delegation here from the Commercial Exchange of Philadelphia, and we can only remain here until 12 o'clock. Mr. Hamlin. If I may just add one sentence, when I said that the farmer selling his grain at grade 3 feels that the grade will change to grade 2, I do not mean to- imply any fraud in the elevator owner. That grain, when it gets to Duluth, may be cleaned, it may be fixed up, its grade — as is perfectly proper— may be raised, and that grain may go out as grade 2; but the point I make is that that is not going to help the farmer at the initial point. The fact that grain collected FEDERAL GRAIN INSPECTION. 21 at an initial point and sent to another point in the State may be cleaned and mixed with other grain to lift its quality so that it is changed in grade does not necessarily mean that the farmer has been treated unfairly. I think he is inclined to believe that he has not been treated fairly, but I think he is mistaken. I understand that in Pennsylvania and Baltimore and other points it is a common practice to mix western grain with the nearby grain to lift up its quality, which is a perfectly legitimate thing, so that the mere fact that the farmer sells grade 3, and it goes out as grade 2, may be an ordinary commercial transaction, and incidentally it would deprive him of any benefit that he could have from Federal inspection, because if they inspected it when it was grade 3 and -inspected it again in the elevator, after it was mixed with other wheat, so that it would be grade 2, that would not help the initial farmer. Senator Hansbeough. I do not think the average farmer expects to sell grade 3 grain at the initial point and secure grade 2 price for it. He is not that kind of a man. He is willing to take an honest grading and an honest inspection for his wagonload of wheat. He knows, as we all laiow, that the wheat is taken from a large number of farmers, that it is put through processes, that it is cleaned, scoured, and a whole lot of things done to it. It is made better of course. It is made more marketable and the grade is increased. Now, the farmer does not think he is being robbed especially in that. But where the trouble comes is that he has no remedy whatever as against the local elevator man who fixes his grade. Mr. Hamlin. I think he is right. Senator Hansbeottgh. And that is the kernel of this whole thing. Mr. Hamlin. But I say that the inspection laws of Dakota can be so framed as to absolutely protect that farmer without the need of Federal assistance, and that under the constitution of the State of North Dakota there is absolute power to say that not a bushel of grain shall be taken out of the State unless it is graded or measured or gauged in such manner as the sovereign power of the State shall determine. I think the farmer may have an honest grievance, and I think he believes that he is unjustly treated; but I think it is to his State, which has full power, that he should look for protection. I believe you can not protect the initial farmer by any interstate law, because that law can always be evaded by mixing and cleaning the grain at some central point where its identity is lost. Senator Hansbeough. It is mixed and cleaned at the elevator, and then it goes to the terminal elevator or to the miller's elevator, and there goes through other processes, and is mixed and cleaned in various places. Mr. Hamlin. Do not understand me to say that the farmer is ask- ing for more than he is entitled to. Senator Hansbeough. That is all he wants. Mr. Hamlin. I think he is entitled to that, but I think the State can give it to him, and if the United States tries to give it to him, it can not succeed. Senator Hansbeough. That is certainly the important part of this whole controversy. &2 FEDPIHAL GBAIN INSPECTION. Senator Long. And that is the purpose of this bill, as yoii under- stand it? Mr. Hamlin. Yes ; but that purpose it can not fulfill, because that is a State purpose. The Chairman. Gentlemen of the Philadelphia Commercial Ex- change, I am sorry our time is so short, but we can give you another day if you want. STATEMENT OF JAMES L. KING, ESft., PRESIDENT OF THE COM- MERCIAL EXCHANGE OF PHILADELPHIA. Mr. King. Mr. Chairman, and gentlemen of the committee, we • are simply here to register with you in a general way our objec- tions to this measure. It is unnecessary to go into the legal phase. That has been thoroughly covered by the gentleman from Boston. We are satisfied with his statement with relation to that aspect of the matter. We believe, in fact we know from our experience as business men, that this proposed bill would be very disastrous to the grain in- terests of the country ; not only to the grain men, but to the farmers as well, who are trying, as we understand it, to seek relief through this measure. Senator Long. Have you State inspection in Pennsylvania ? Mr. King. We have not. We control our inspection imder boards of trade. The Commercial Exchange of Philadelphia is a chartered corporation. Senator Long. A private corporation? Mr. King. Yes; chartered by the State. The judgment of all grain men is that the inspection as conducted by boards of trade has been in the past eminently satisfactory, both to the buyer and to the seller. For that reason we feel that there is no need at all for this measure. It is Government interference with private business, which can be best controlled by a corporation such as the one I have the honor to represent. Senator Perkins. As you can not have a full hearing to-day, I suggest that you send an official communication to the .committee, which may go into the record. Mr. King. We have the records of our exchange, showing what we have done in the grain business, and in the last three years there have only been about five complaints from abroad, and those com- plaints were on shipments of corn which went out of the port during the germinating season, and every one knows what will result from that. The question of the farmer at the point where he sells his grain is simply a business proposition. He takes his grain and sells it on its merits, and he wants to get all he can for it. In the eyes of the farmer everything he has is No. 2, and that is the way he generally counts it. The mixing of grain as carried on at the present time, is of great advantage to everyone. A few years ago, for instance, it was impos- sible to get for off-grade corn more than about 10 cents a bushel. It would hardly bring the freight to Philadelphia. To-day, by reason of the drying and mixing processes which have been introduced, the FEDERAL GEAIN INSPECTION. 23 receivers of the corn there are enabled to pay in the worst seasons anywhere from 28 to 35 cents a bushel for off-grade corn. With the character of the corn crop which has been raised in the United States for three or four years past it seems impossible to raise corn that is free of moisture. Mr. "Warner, chairman of our committee, will perhaps submit in detail such facts as are necessary, provided you have the time to give him a few minutes at this time. STATEMENT OF G. M. WARNER, ESQ. Mr. Chairman, what I have to say will only occupy eight or nine minutes. I ask your attention especially, first of all, to what Mr. King has said. I think Mr. Hamlin, of Boston, has brought out clearly the nature of this bill. In the first place, it seems to us to be a measure of paternalism, and necessarily we look upon it as more or less an interference on the part of the Federal Government with a business which has heretofore been conducted on lines of private enterprise, and which, as Mr. King has said, in our own city of Philadelphia has been eminently satisfactory. In the eleven years from 1883 to 1894, inclusive, we exported about 122,000,000 bushels of grain. From 1895 to 1906, inclusive, another eleven years, we more than doubled our exports, and they amounted to 275,000,000. The percentage of complaints in that business is so extremely small that we think any pressure that may have been brought to bear oti the Department at Washington by foreign consuls or others, making complaints of cargoes, is exceptional, and really not to be treated as any material argument in behalf of this measure. We think some complaints are inevitable, in relation to all grain that the farmer ships, and we do not think that the farmer can expect to be relieved entirely from some risk and trouble with his grain, just the same exactly as we ourselves have when we undertake to ship it. Now, in the last twenty-five or thirty years in Philadelphia we have carried on this business on a growing scale, and although I speak only for ourselves, I am sure the same thing is true of Boston and Baltimore and New York. The business has gone on increasing, of course barring years when exports fell off because of matters of price and unfavorable conditions. Now we ask, why must the Federal Government step in to interfere, or to impose upon private enterprise conditions which our friend from Boston said would not fail to be burdensome, and which will be practically prohibitive. I think the army of 5,000 inspectors, of which he spoke, would fall far beloW the requirements, and that his second estimate of 50,000, or I should say 75,000 men, would be much nearer the mark. We particularly ask you to consider the question of the interference and the burdens which this bill in its present shape would place upon the business of the country. I have a number of detailed objections or criticisms here relating to special points, which I do not^think I need take your time on, as to the phraseology of the bill. Our friend from Boston, Mr. Hamlin, has called attention to some of them, in which the bill is certainly defective. For instance, as I understand section 13 — I defer to the legal talent that may be present — ^it would permit. the shipment of a 24 FEDERAL GRAIN INSPECTION. cargo of 50,000 bushels of grain from Peoria to Liverpool via Phila- delphia, New York, or Boston without any inspection at the seaboard, but it would require inspection at the seeaboard if such a cargo waS shipped from St. Louisor Kansas City. The bill seems to be worded hurriedly, and these specifications as to where the Secretary of Agri- culture shall establish these centers of inspection, we would respect- fully submit, are quite indefinite and are entirely too lax. Then another point that I would like to reenforce, in addition to what my friend from Boston, -Mr. Hamlin, has said, is in regard to this matter of inspecting grain at small stations. For instance, we ship a carload of corn, say, from Peoria, 111., to Lancaster or Muncy, Pa., or to Middletown, Conn., or Fox Point, R. I. Now, how would it be possible for the Government to have enough inspectors to go around at those places ? It is simply a physical impossibility for the Government to maintain such an army of inspectors. Then, again, it seems to us that it confuses interstate commerce with intrastate commerce. It places one at a great disadvantage, but lays no burden upon the other. We think that on general terms the measure is one which is cal- culated, as I have already said, to interfere with private enterprise. It will tend to throttle the wholesome competition which now pre- vails between our different ports. It will tend to discourage enter- prise and to drive capital ovit of business. So far as we can learn, gentlemen, the State inspection is in many cases, I might almost sa^N', a melancholy failure. We think that the Minnesota State inspection has not at all been a success ; and in buy- ing corn and oats, for instance, from Illinois, as I bought corn yes- terday in Illinois, I did not depend solely on the Illinois State inspec- tion, nor do my colleagues here. We very frequently pay a private inspector to satisfy our needs. If we have such trouble as this with State inspections, what will it be when we have Federal inspection all over the country? We think that trouble would be greatly increased, and that the free movement of grain would be immensely hampered. The railroads would be tied up with their cars and the wheels of the grain business would be clogged, if not entirely stopped. That may seem extreme, but we can see no other issue to this matter in its present shape. I do not think that I need to detain the committee any further but we ask you to remember that enterprise thrives best without any governmental interference, and its troubles are best regulated by those wholesome conditions which govern the laws of trade. If a man finds his grain is not satisfactory, why, naturally, he will have to make it satisfactory. If the farmer, in North Dakota has wheat that is not what it ought to be to go to Minneapolis or Duluth for export, he will have to grow a different product. He will have to allow always for the changes of condition in that grain in transit. The farmer puts wheat in at Fargo, and it may be all right, but by the time it gets to Chicago or New York, conditions of moisture, or the varying conditions that affect it in a closed car, will make it quite a different article. About a month ago, for instance, I shipped from a point in Pennsylvania to Providence, R. I., a carload of corn. I bought this corn of a dealer, but the farmer who put that corn into the warehouse in Pennsylvania no doubt thought it was very good FEDERAL GRAIN INSPECTION. 25 corn, and he would be very much incensed if he thought any com- plaint was. brought against it ; but by the time it was in Rhode Island, although it was only nine days on the way, the corn was hot and entirely unmerchantable. Senator Hansbrough. Did not that change come about in conse- quence of the exposure it may have been subjected to; moist weather or something of that kind on the way? Mr. Warner. It came about because of the inherent dampness of the corn. Senator Hansbrough. Originally? Mr. Warner. Originally ; no doubt about it. Senator Hansbrotjgh. Could it not happen in the other way ? Mr. Warner. In which other way? Senator Hansbrough. By being exposed to moisture or some climatic changes en route. Mr. Warner. It deteriorated en route not because it suffered any particular change of climate en route, but because its inherent con- dition when it was loaded was of such excessive moisture that it could not be carried. If the farmer had kept it at home, he could have used it no doubt to good advantage. Senator Hansbrough. Suppose that originally the consignment of corn had been perfect in every way. Is it not possible that before reaching its destination it might have deteriorated ? Mr. Warner. I think not. That is not our experience. Senator Hansbrough. The complaint is that there is great dete- rioration in com and wheat from our ports to foreign ports, and that it arrives over there in a very bad condition compared with the condition in which it left here. Mr. Warner. Conditions governing ocean transit are somewhat different from those within our own States. But if the corn is loaded in good shape and if the conditions under which it is loaded into the ship are such as are favorable to it, the corn will carry all right. Senator Hansbrough. But if not, it might deteriorate ? Mr. Warner. Certainly. The Chairman. We have requests from Cincinnati and Baltimore bearing upon this matter. The request from Cincinnati came in by telegram last night. They want some days' notice, so we must have another hearing, and if this delegation from Philadelphia do not feel that they have had sufficient time, we will hear them at the adjourned meeting. Senator Hansbrough. Was it your intention to close these hear- ings to-day? The Chairman. No ; we will have to have another hearing. Senator Long. Mr. Chairman, I should like to call the attention of Mr. Hamlin to a bill and report of this committee made last year, which shows probably the views of this committee as to its power over matters of this kind. I do not mean that it expresses my own personal views. It is the bill S. 5945, and the report on it, at the last session, in relation to the inspection of "certain agricultural prod- ucts, including fruits, berries, vegetables, potatoes, melons, etc. I should like to submit it to him for such supplemental statement as he may choose to make. ■26 FEDEKAL GEAIN INSPECTION. The bill and report are as follows : [S. 5945. Fifty-ninth Congress, first session.] A BILL Providing for an inspection of certain agricultural products, and for other purposes. Be it enacted, etc.. That the Secretary of Agriculture be, and is hereby, au- thorized and directed, under such rules and regulations as he may prescribe, to examine and inspect at the place of final destination fruits, berries, vegetables, potatoes, and melons shipped from any State or Territory in the Umted States to the District of Columbia or any other State or Territory of the United States. The inspectors and subinspectors appointed by the Secretary of Agriculture to make such examination and inspection shall be located at as many of the cen- ters to which fruits, berries, vegetables, potatoes, and melons are shipped as may in the judgment of snld Secretary be practicable, jind it shall be the duty of said inspectors upon the arrival' at said centers of cargoes of fruits, berries, vege- tables, potatoes, and melons, transported thence from another State or Territory of the United States, to examine and inspect such cargoes or parts of cargoes HS the consignee or consignees thereof shall claim and so report to said inspector to be damaged o)- in bad condition, for the purpose of ascertaining whether the same is in marketable condition, and if in marketable condition, whether dam- aged or not. That it shall be the duty of the said inspectors to give to the consignee of such products a certificate in duplicate containing the result of such inspection, and the said consignee shall transmit to the consignor with his remittMnce of the proceeds of the sale of said products either the original or duplicate of said certificate. Sec. 2. That there is hereby appropriated, out of any money in the Treasury not otherwise appropriated, tie sum of twenty-five thousand dollars, to be ex- pended for all necessary expenses to comply with the provisions of this act under the direction of the Secretary of Agriculture. [Senate Report No. 4323. Fifty-ninth Congress, first session.] . The Committee on Agriculture and Forestry, to whom was referred the bill (S. 5945) providing 'for an inspection of certain agricultural products, and for other purposes, have had the same under consideration and report It back with amendments. The bill is. intended to prevent some of the fraud and imposition at present practiced upon growers and shippers of fruits, vegetables, etc., by consignees who claim falsely that shipments are received in a damaged or imperfect con- dition. The committee recommend that the bill be amended as follows: On page 2, line 13, after the word " certificate," strike out all the bill down to section 4. The committee recommend that the bill as amended do pass. Mr. Wakner. I should like to voice what I think is the sentiment of my colleagues, that if the Oovernment is going into the inspection of grain, why not cotton, why not California fruits, and other things of that kind? Senator Long. The bill we reported last year covers fruits and vegetables. Senator Hansbrough. I think if we should conclude to inspect grain, that we would get around after awhile to the other articles ii necessary. In other words, we would cross that bridge when we got to it. Mr. Warner. What condition do you think our commerce would be in then ? Senator Hansbrough. That is something that the gentleman and myself might perhaps discuss at great length if we had time. That is a big subject. Mr. Warner. We think the Government would have almost throttled the business of the country by that time. Senator Hansbrough. But because there is the possibility of in- specting fruit in California, that is no reason why we should not correct an evil in the grain business, if there is an evil. FEDERAL GEAIN INSPECTION. 27 Mr. Wabner. We ask you to consider very carefully that in apply- ing the remedy you do not make the case worse than it was before. Senator Hansbkough. It is not the purpose of any member of this committee or of my colleague who has offered this bill (Senator McCumber) to oppress anyone, but what we want to do is to do the right thing and the just thing. Mr. Warner. We hope we recognize that, and we do not want to arouse any sectional feeling as between the East and the West, because we think the interests of the grain men in the West are very largely identical with our own. We want good grain, we want to have everything moved to the mutual advantage of the farmer as well as of the dealer, but we think, as I say, that this bill is calculated to place an undue burden on commerce, in that it brings the Government into relations and duties with private enterprises which we think are unwholesome. We think we had better submit in writing more definitely our objections, and should like to have notification of your next hearing, so that we can be represented if necessary to do so. At 12 o'clock m. the committee adjourned. Committee of Agriculture and Forestry, United States Senate, WasTumgton, D. C, Thursday, February 6, 1908. The committee met at 10.30 o'clock a. m. Present, Senators Proctor (chairman), Burnham, Perkins, Long, McCumber, Simmons, Latimer, and Bankhead. Present also, John B. Daish, esq.. President of the Baltimore Cham- ber of Commerce, and of counsel for the Baltimore Chamber of Com- merce; Charles England, esq., president of the Baltimore Chamber of Commerce; Walter Kirwan, esq., of Baltimore, Md. ; J. Collin Vincent, esq., of Hammond, Snyder & Co., Baltimore, grain exporters ; James L. King, esq., president of the Commercial Exchange of Phila- delphia, and others. The committee thereupon resumed the consideration of the bill (S. 382) " to provide for the inspection and grading of grain entering into interstate commerce, and to secure uniformity in standards and classification of grain, and for other purposes." STATEMENT OF CHABLES ENGLAND, ESQ., PRESIDENT OF THE BALTIMORE CHAIOER OF COMMERCE, BALTIMORE, MD. Mr. England. Mr. Chairman, the gentlemen who are here desire to devote themselves to the practical side of this question, and, if it be your pleasure, we would like later on to submit a brief touching upon the legal and constitutional features of the matter. The Chairman. That may be done. Mr. England. I should like first to read the resolutions which were passed by the board of directors of the Baltimore Chamber of Commerce in regard to the bill which is now under consideration, S. 382 [reading] : BalTIMOKE CiIAMEKK of OOMJIEBeE, Office of the Secretaby, BaJHinorr. December 11, 1901. Copy of preaniijie and resolution adopted by t'ue board of directors at a meeting held on the above date, ^iz : 'Whereas It Is proposed that there shall be introduced in the United States Senate a bill " to provide for the inspection and grading of grain entering into interstate 28 FEDERAL GRAIN ISSPEOTION. commerce, and to secure uniformity In standards and classification of gram, and ^Ceas^'n KLofbe lost sight of that the marketing of t^^ surplus grain production of the country has been accomplished by merchants who have organ- ized and perfected Inspection departments under the '^'^ection of boards of trade, chambers of commerce, and commercial exchanges, and that the largest proportion of the grain trade, Irrespective of location, is opposed to any inter- ference by the National Government, and that any such practice will prove injurious to the best interests of all concerned ; and , , , 4.^ Whereas this chamber is opposed to the enactment of any such law for the following reasons : First. The enormous expense attending governmental inspection of gram. Second. The opportunity which it provides of creating a political machine, the experience with State inspection departments having proved unsatisfactory. Third. The unnecessary interference in the conduct of a business that has been established by merchants and can not continue to thrive under govern- mental Inspection, which would be without benefit to either the producer, ex- porter, handler, or consumer : Therefore be It Resolved, That this chamber hereby declares its belief that the Inspection of grain by the National Government at terminal markets would be detrimental to the agricultural interests and the grain trade of the country, and that it is absolutely and unalterably opposed to any attempt to exercise governmental inspection over grain. Mr. Chairman, I have prepared a statement covering what I would like to say on this matter, in order not to take up too much of your time, and I will, submit this for your future consideration. [This statement will be found at the end of to-day's proceedings.] But in doing so I would like to say that, confining myself to the Balti- more inspection department (with which I am most familiar, of course), the first grain, so far as records show, that was exported from the American colonies was shipped from the port of Baltimore about the year 1750, and since that time, with the exception of short periods during the Eevolution and the war of 1812, that business has continued and has grown with the development of the country. It is therefore useless to say that that record could have been maintained and the business held by our port if it had not been for the wisdom, the honesty, and the care of our merchants. We have always felt that proper methods of grading of grain, and liberal grading so far as reasonable, were matters upon which we were absolutely dependent for our business. We have stooji fairly and honestly as between the producer of the grain in this country and the foreign buyer. If there has been any bias in our department it has been, naturally, in favor of our own countrymen. Therefore we believe that no system can be devised which will supplant the one which we have had. The bill which is before you provides that no inspector shall be eligible for a position unless he has had three years' experience. We contend that three years' experience is not suflScient to make a compe- tent and capable grain inspector. Our chief inspector has been in service for thirty years, having worked up from a minor position jn the department to the position which he at present occupies. Our first assistant inspector has been in the service of the Baltimore Chamber of Commerce for twenty-five years ; and so it goes on. We find the greatest difficulty in obtaining competent men; and when we secure competent men we do not allow them to leave our service unless for some very special cause. Therefore, when the Government attempts to provide inspectors of three years' service, we believe they will be men of insufficient experience. This bill does not state how many will be required • but we grain men realize that grain must be inspected at every point FEDERAL GBAIN INSPECTION. 29 where it is handled if it is done under the Government. There will be an immense army of grain inspectors; and we believe that it will be simply a matter of impossibility for the United States Government to find competent men in the short time within which this bill may become effective to fill those positions. Furthermore, the bill provides for uniformity of standards. That subject has been discussed by grain men in this country for the past ten of twelve years; and the best-trained minds realize that under our varied soil, climate, and other conditions which obtain in this vast country absolute uniformity is impossible, and that a hard and fast fixed standard which the Secretary of Agriculture might establish would absolutely injure the grain trade of this country. To put it before you in as few words and as plainly as I possibly can I will simply refer to the selection of grain for milling and rye for distilling purposes. In the handling of rye for distilling purposes the conditions which determine its grade are quality and the dryness or condition of the grain. But the distiller while he will buy rye as No. 2 rye (which only refers to its quality and condition) , will pay a premium of from 5 tolO cents a bushel, as the case may be, for rye of a certain quality which will produce a certain class of goods, and that is equally true with the miller. I know in the handling of rye that those who make a specialty of furnishing rye to distillers carefully go through the different counties in Michigan, Wisconsin, and other Western States which produce a certain variety of rye, light-colored rye of thin skin, from which the distiller can obtain a larger yield and a better class of goods than he can from the dark-skinned rye, which the distillers claim contains a greater amount of fusel oil. I only mention this to show that if the grain must be handled abso- lutely upon a fixed grade the producers of that high-class grain will be deprived of the advance in price which they now obtain. That advance in price is greater in some years than others, according to the supply of the particular kind, and to a very large extent it will fix the price for all the grain of that class sold. That is equally true of wheat; Senator Latimer. I would like to ask one question right there, for information. Mr. England. Certainly. Senator Latimer. If the standard be fixed and that rye be classed as No. 2 rye, for instance, would that prevent the distiller from pay- ingi 5 or 10 cents more for it in case he wanted to ? Mr. England. It would not. Senator, if he could obtain it. As the business is now conducted, in addition to having the grades we have to select rye of the same grade; that is, the maximum and minimum of it. I can probably illustrate that by referring to cur- rency. If I want to buy a suit of clothes or buy something from my groceryman, if I have a Treasury note or a silver certificate or a ten- dollar gold piece either will serve me, but if I want to pay customs duties I must have the gold piece, no matter what it may cost me. Sometimes gold is at a premium, as we know — not frequently of late, but it has been. But that will perhaps illustrate the principle. There is a certain class of goods that must be had ; and if the grain is all inspected by the Government and thrown into elevators upon a uniform grade I do not see any possible way of segregating the different rye of the same grade.' 30 FEDERAL GEAIN INSPECTION. Senator Latimer. Tou do not make that clear. If you go to pay customs duties, of course you furnish the money that is demanded; by the customs officers. In this instance if the Government grades the rye and decides that a certain rye is No. 2 and the distiller wants a certain class of rye I do not see why he can not make the selection from the producer of rye just as he does now and let the Govern-' ment make the grade. I do not see how it could, interfere with his purchasing the class of rye that he wants. I do not see how the grading, in other words, would prevent his obtaining just what he wants. - Mr. England. In terminal markets, either interior terminal mar- kets or seaboard markets, the grain of the same grade is thrown together in the elevators. This bill provides that the Government inspector must be notified by the railroad company within twenty- four hours after the arrival of the grain. The railroad company is not going to hold that grain on the tracks for the owner of it to decide whether it is a selected character of a certain grade or the minimum quality of the same grade. It will go right into the ele- vator. Senator Latimer. One moment right there. Does the purchaser of rye for distilling purposes buy direct from the producer or entirely from the elevator? Mr. England. No, sir; not from the producer, but from middle- men, so to speak; and, you understand, the matter of grade really does not enter into it with him. If you require all that rye to be inspected by the Government, it will be thrown in with other rye of same grade unless the owner of it goes to considerable expense to hold it out and select it. I do not think there is a terminal mar- ket in the country that is equipped with elevator facilities to do that; neither have the railroads track room or yard room in which those cars can be switched out and handled in that way. Senator Latimer. You do not think, then, that an arrangement can be made by the purchaser of the grain by which he will secure, in the car or otherwise, the kind of grain he wants, so as to keep it from being mixed with other grain of inferior quality for distilling purposes ? Mr. England. It can be done, but at very great expense, which would probably make it prohibitive. The margin of profit on grain is so narrow that whenever you introduce any element of expense, even a trifle, it very often prohibits the business. Senator Latimer. I would like to have you clear up the difference between the present arrangement that you claim is beneficial ■ to the distiller and the condition that would exist under Government inspection. I do not get that point clearly in my mind. Mr. England. The bill requires that all grain shall be inspected by a Government inspector. Senator Latimer. Yes. Mr. England. That is compulsory. For instance, take Michigan rye. It may run to some market like Detroit and be inspected there and run into the regular Detroit grades. It would not be possible to get the identical grain out of the Detroit elevator if a distiller in the East or in Kentucky wanted to use that rye for distilling purposes. Senator Latimer. That is, under Government inspection ? FEDERAL GRAIN INSPECTION. 31 Mr. England. Yes, sir. Senator Latimer. How do you get it without it ? Mr. England. Without Government inspection? Senator Latimer. Under the present system. Mr. England. A great deal of that rye, probably 90 per cent of it, is not inspected at all ; it is selected. Senator Latimer. When? At what time? Mr. England. Either at one of the interior terminal markets or at one of the seaboard terminal markets or the market where it is con- sumed. In fact, sometimes a shipper will have a car of thait class of rye or wheat and he will ship it straight to a distiller or dealer who wants that class of rye or that class of wheat for milling purposes. Senator Latimer. Then he buys it direct from the producer ? Mr. England. He does not buy it direct. The producer will sell it probably to the middleman, and the middleman will probably sell it to the miller or the distiller without any regard to classification at all. Senator Latimer. But if the Government inspector inspects that car of rye and says it is No. 2, I can not see how it would affect the distiller in getting his supply of rye. Mr. England. Simply because if it came to the terminal market the railroads companies would insist that that grain should be promptly unloaded in an elevator or moved ; and, as I say, it would add to the expense of handling it, either in demurrage or in elevator handling. Senator Latimer. Do you mean to say that the Government inspector could not inspect it without its going into the elevator? Mr. England. I mean that when the inspection is arbitrarily fixed, the grain will go into the elevator and become mixed with other grain of same grade. It loses its identity. That is the diffi- culty. If you could see the business we do as we see it you would realize that it is the hardest thing in the world even now to select grain of a certain character to suit certain trades ; and yet it is that selection of the higher classes of grain that to a very great extent improves the market for all of the lower grades ; and if the grain is to be inspected promptly upon arrival and go into an elevator, it goes into the general stock and loses its identity. We feel that under this bUl we could not preserve the identity of grain as we do now, which is a very important matter. Senator Bankhead. Let me ask a question of you. I am not very familiar with this subject and I have not read the bill, but sup- pose a farmer in Michigan has wheat to sell. He carries it to an elevator in a wagon, does he not ? Mr. England. Tes, sir. Senator Bankhead. Does this bill provide that wheat shall be inspected from the wagon to the elevator by an inspector, or will it go into the elevator without inspection when the farmer carries it ? Mr. England. That is a question, Senator; I do not know how far the bill will go. It provides for inspection at any point which the Secretary of Agriculture may designate. Now, it is possible that the farmer may ask to have his grain inspected right from his wagon. He would have just as much right to have his grain inspected as I would to have mine inspected. 32 FBDEBAL GEAIN INSPEOTZOIT. Senator Bankhead. If that grain is not inspected at the wagon before it goes into the elevator and is mixed with everybody else's grain, how is the farmer going to get any benefit from this inspection ? Mr. England. The farmer will be paid by the warehousemen " according to the quality of his grain. If his grain is better than his neighbor's, and the warehouseman is a merchant and understands his business he will keep that grain separate, in a bin by itself, until he accumulates enough to make a carload. Senator Bankhead. I understood that the very reason for the introduction of this bill was that the farmer does not get a fair classi- fication of his grain when he carries it to an elevator, and therefore he must be protected by Government inspection in order that he may get a fair classification. Mr. England. My business does not, of course, fit me to speak exactly as to what is done at interior warehouses, but I believe this: Of course some warehouse people, like people in every other buiness, are disposed to take advantage, but I think they are the exception rather than the rule. But the farmer will bring in his grain, and, as I said before, if the grain dealer is a merchant and a man of good busi- ness experience he will put good grain aside for milling purposes and he will say to the farmer : " That is worth so much. You have cleaned it; it is worth so much more than your neighbor's grain." And therefore he will keep it separate and give the farmer more for it. Now, furthemore, as the terminal markets are able to handle the grain to the very best possible advantage, that fact enhances the value of the grain at the point of shipment, and the competition of the ware- houseman who may have an elevator a few miles down the road, where the farmer could haul his grain for a cent a bushel more, will force every man to pay the farmer the market price. As I understand from the western warehousemen, the interior shippers, the small ware- housemen, the competition forces them to pay the farmer the full value for his grain. Senator Bankhead. This is the point I want to get straight in my mind. I know nothing about the classification of wheat, but I do know something about the classification of cotton, and I think the principle is about the same. Suppose I am a farmer in Michigan. I carry my wheat into the elevator in town to be sold. There is some- body there to buy, of course. If the Government inspector there inspects and classifies and grades this grain, and I am paid for it according to that classification, and it goes into the elevator and is mixed with everybody else's grain, then when that grain reaches Chicago, for instance, is there not an inspection of it there ? Mr. England. Yes, sir; there is supposed to be. Senator Bankhead. So there are two inspections? Mr. England. Yes, sir. Senator Bankhead. Suppose the inspector at Chicago does not agree with the inspector up in St. Paul or at some other place. Sup- pose he puts a different classification on it. Suppose some atmos- pheric conditions during transit or something else should in his judg- ment change the classification, who is the loser? Mr. England. The owner of the grain. Senator Bankhead. The man who bought it at the elevator ? Mr. England. Yes, sir. FEDERAL GEAIN INSPECTION. 33 Senator Bankhead. I do not see how else it could be. Now, I understand — I may be mistaken; as I said, I have not studied this question— that you will have to have an inspector at evei-y elevator where grain is delivered under this bill, will ybu not? Mr. England. If the Secretary of Agriculture sees fit, and there will be a demand for it, of course. Senator Bankhead. That is the purpose of it ; it can not have any other purpose. Mr. England. Yes, sir ; I think that goes without saying. Senator Bankhead. I do not know how many elevators there are in the United States, but there are a great number of them, and I do not know at how many points wheat is delivered in the United States where it must be inspected under this bill. So I think it would take about 500,000 inspectors. Mr. England. I heard a conservative estimate given which placed the number between 45,000 and 50,000. Senator Bankhead. Oh, it would be more than that. There are more elevators than that in the country. Mr. England. Yes; perhaps there are. I do not think there are any statistics to show the number of elevators in this country. Of course. Senator, when you speak of cotton there is one element you ought to bear in mind, and that is that cotton does not deteri- orate as grain will. It is not subject to atmospheric conditibris, climate, etc. Senator Bankhead. I understand; but it has to be classed, and there are no two men in the country where cotton is brought in and sold that are competent to give it the same classification and the same grade. I think the same principle obtains there as here. A man in the South carries his cotton to market; he goes in on his wagon; he carries the cotton on his wagon; he carries it to the warehouse; there it is weighed, and lie takes a receipt and gets a sample. He then goes around among the merchants, the cotton buyers, with that sample, and exhibits it. The bu;fer classes it, and he has to sell according to that classification. Tkat is the only way in which he can dispose of his cotton. One buyer will put a certain grade on it, and will say : " This is middling cotton ;" " This is middling fair ;" " This is ordinary ;" " This is lo\fr ordinary," etc. If it is necessary in order to protect the wheat grower to pass a bill like the one we have here, with all this machinery and all these inspectors, I would like to know why it would not be fair and right to treat the cotton farmer in the same way. Mr. Daish. Senator, may I make a suggestibn, without inter- rupting you? The difficulty which you mention with respect to the classification is a little more than the mere classifi.cation, as I under- stand it. The farmer does not care whether his wheat is No. 1 northern or No. 2. It does not make any difference whether it is inspected by a Federal insjjector or a private inspector, or the inspec- tor of the board of trade. It is the dollars and cieiits that come from it that he is interested, in. Senator Bankhead. But those dollars and cents are measured by the classification. Mr. Daish. Not necessarily so; and I will citie you an actual in- stance of one of the States which some years ago prohibited tlie use S4503— 14 3 34 FEDEEAL GRAIN INSPECTION. of a so-called grain-tester in buying wheat. Formeiiy the buyer would take a small sample of wheat and see whether it would weigh 58 or 60 or 62 pounds to the measured bushel. After that statute was enacted the grain buyer did not say : " I will pay you 60 cents for this wheat if it tests 60 pounds, or 68 cents if it tests 58 pounds, or a premium if it is above the standard." The conversation was substantially this: " This wheat is not heavy." " Why," the farmer would say, "of course it is heavy; it is up to test," The statute prohibited the dealer from using the tester, but the farmer could use the tester by himself, and the price was made according to the result of the test. So, under this bill or any other measure of similar purport, if the elevator man buying from the farmer says : " This is No. 2 wheat, and I will pay you 85 cents for it," it is immaterial to the farmer ; because the elevator man may take the other horn, and say : " The Federal inspector says it is No. 1, but I will still pay you only 85 cents for it?' In other words, it is a question of barter, of dollars and cents, more than a question of the grade of the grain. Senator Bankhead. Then I do not see the object of this bill. Mr. Daish. The dealer may say : " If it is No: 2 wheat, actually, I am not going to pay any more than the No. 2 price for it, whatever your Federal inspector may say." That, I think, is the other half~ of the difficulty. Senator Bankhead. Who pays the inspectors under this bill? Mr. England. The owner of the grain will pay for the inspection, and of course that will come back on the farmer. It must take from him so much of the value of the grainr It adds cost to it, of course. Senator McCumber. Is not that the present system ? ' Mr. England. It is, yes, sir — with this exception : That the expense of the outward inspection is generally paid by the exporter. Senator McCtjmbee. But finally it comes on the farmer? Mr. England. I do not think cost of the outward inspection would. Mr. Vincent is here, and he is an exporter, and can tell you more about that. That is put on to the cost of the grain to the foreign buyer ; but it will be a multiplication of inspections. If there is an inspector at every point, which will very likely be demanded, the grain will be taxed wherever it happens to stop. Grain will start from a point in Minnesota, for instance, and go to Chicago, and it will be handled there probably without breaking bulk under the present system. I do not know whether, under this bill, it will have to be unloaded and put in an elevator or not. That is a question that I have heard raised by some people. But it would be inspected there; and after that inspection it might come on to a diverting point; it might come east to Altoona, say, on the Pennsylvania Railroad, or Green Springs, on the Baltimore and Ohio Railroad, and to meet the requirements of this bill that grain would have to be inspected there if it went to an interior point. There would be another inspec- tion; and as the railroad must notify the inspector within twenty- four hours, he can not tell whether that grain has been previously inspected or not; and to be perfectly safe he must reinspect it, and there is another item of cost. Now, that grain may go to an interior point for consumption, or may come to a seaboard-market for exportation ; and there is another inspection. It is very difficult to express an opinion as to how ar- FEDERAL GRAIN INSPECTION, 35 reaching that would be, and how much of a burden it is going to be upon a business with respect to which the whole desire of the trade is to handle it as economically as possible. Senator Latimeb. I understood you to admit that all these charges were taxed back against the farmer or producer, just as I suppose our expense of warehousing cotton would be taxed back. All the warehouse charges and the cost of selling and handling the cotton are charged back to the farmer. Mr. England. Certainly, Senator. The first inspection would be charged back to the farmer. The question as to who pays the expense of handling a product, the producer or the consumer, is one that has never been decided. The experts have for years discussed who pays the freight, the producer or the consumer. Senator Latimer. Can the elevator man, just like the producer of cotton, fix the price on my product? For instance, suppose I pro- duce cotton, or I produce rye or wheat, and I take it in my wagon to the elevator ; the elevator man fixes the price on it, fixes the grade, puts it in his elevator, and then sells it to some other man ; and he is responsible for the grade to the man to whom he has sold it. The natural tendency would be to grade it as low as possible, so that he would sustain no loss, and so that the profits would come to him, because he is interested ; would it not ? Mr. England. Yes, sir ; that would be human nature. But in order to hold his business, and to meet competition from his neighbor, who might only be a mile away from him on the same line of railroad, or perhaps in the same town, he would have to pay a fair price, for in most of the western towns where grain is sold there is more than one elevator. Senator Latimer. But he is working under the same rule ? Mr. England. But the competition is just as great at the point of origin as it is at the terminal market. Senator Latimer. Yes; but the same principle is involved in his business as in the other man's business. The question which arises in my mind is this : If the farmer has been particular as we have farmers in the South who are, in the raising of the cotton, in the gathering the cotton, in preventing trash from getting into it and the storm from beating it out, by keeping up with it as fast as it opens ; or in the case of wheat, if he prevents his wheat from staying in the field until it is damaged by rain, takes care of it and thrashes it out in good shape, and delivers it to the market, and it is going into an elevator to be mixed with other wheat — -the natural tendency of the elevator man, if he, fixes the grade, would be to fix it so that it would grade on an average with the other, and the farmer would lose all the care and pains that he has taken in handling his grain. We have the same thing in the South. They take our cotton that has been carefully picked and kept up with, and grade it down on an average with other cotton, and it is bought in the market, and the manufacturer gets the advantage. Mr. England. That condition is met in the grain trade by the handling I spoke of, of a high character of grain, by sample or de- scription in addition to the grade. We are not confined entirely to its grade in the handling. And as I said before, the higher price which is obtained for the higher class of grain enhances the value of the whole crop. There is not any question about that. 36 FEDERAL GBAIN INSPECTION. If there is nothing further, Mr. Chairman, I will leave ine matter with you. Senator McCumbee. Mr. Chairman, I desire to ask a few questions of the witness that will be pertinent to the bill itself. The Chairman. Certainly. Senator McCumbee. And if I get direct answers, my questiotois will be very brief. The Chairman. Certainly. Senator McCumber. I did not get your name. Mr. England. Charles England, of Baltimore. Senator McCttmbee. The resolutions which you have preseiited are the stereotyped resolutions that passed practically all the boards of trade in the great terminals, are they not? Mr. England. I think not, sir. While there is a similarity, I do not think they are in any sense stereotyped. Senator McCumber. Are they not in exactly the same words as the resolutions that passed other boards? Mr. England. No, sir. Senator McCumber. You think not ? All right. Now, you sp^ak of the enormous expense of grading grain. Why should there be any more expense under Federal inspection than under board-of- trade inspection and warehouse-commission inspection? Mr. England. In the first place, it would require a larger number of Inspectors. Senator McCumber. Now, just a mojMent. Why should it require a larger number of inspectors? Mr. England. Because, I think, if I were tfiigEigte'd in biisihfe^ in an interior market, or a point of shipment, I would ask the Govern- ment to station an inspector right in my elevator. I think I woiild have the same right to demand that as a man at a terminal market would. Senator McCumber. Have you read ove'r this bill? Mr. England. I have; yes, sir. Senator McCumber. Does not this bill provide that the inspector shall be only at such terminal markets as are mentioned, and also other important terminal markets? Mr. England. Well, every man Senator McCujrBEE. Does it not say " such others as may be authorized ? " Mr. England. Yes, sir ; but every man considers his own market an important one. Senator McCumbee. Yes; but it is not a question of wTiat the man considers. The bill provides for these appointments to be made at Portland, Me., Boston, New York, Philadelphia, Baltimore, Chi- cago, Minneapolis, Duluth, Superior, Kansas City, Mo., St. Louis, New Orleans, Seattle, Tacoma, San Francisco, " and siich other important centers of interstate trade and commerce in grain as he (the Secretary of Agriculture) may consider necessary or proper." Now, do not those words, " such other important centers of inter- state' trade and commerce in .grain," mean important centers of like character with these other cities? Mr. England. I think not, sir. Senator McCumbee. Is not that the Ifegal construction that would necessarily be given to it ? FEDERAL GKAIH INSPECTION. 37 Mr. England. It seemed to me it woi^ld givQ the Depai^tmeut a great djeal of latitvide, and it is. a, question whs^t is an important center. Senator McCumber. Suppose that at a center like Minneapolis Government inspection should be substituted ior the warehouse in- spection. Would it require 9(a.j greater force under. Federal insp.ec- tioi;i than under the present system at IVTinneapolis? Mr. England. Without knowing definitely in regard to their exact ^ystena at present, X should infer not. Senator McCttmber. I will state that I know the system to be that all cars of grain that come in there are inspected, and inspected before they are delivered. Can not national inspectors or Federal inspectors handle that wprk jugt exactly as well as the inspectors appointed by the warehouse commission ? Mr. England. They should do it; but the experience of men gen- erally is that a Government opoi-al does not work as hard and as long liours as an individual under cpmme.rcial control. Senator McGumbbr. That objection might be made against the Government doing anything — that its employees do not labor aS many hours. Mr. Daish. Will not the Senator permit Mr. England to give his other reasons ? The Senator interrupted him at his first reason. He has other reasons. Senator MoCxtmber. I stated when I first spoke that my questions would be pertinent to the bill, and called attention to ' Senator Bankhead. Well, Senator, it is not quite fair ^o require the witness to answer " Yes " or '' No." Senator McCumbek. I certainly will give the witness plenty of time. Now, the witness may give any other explanation in answer to my question. I simply wish to be fair to the chairman, and get through ; that is all. Mr. England. I was just going to add the further fact that the requirement that all cars must be reported for inspection within twenty-four hours after arrival would require a much larger inspec- tion force at every terminal market or point of shipment or point of diversion. Senator McCumber. Let me ask you this question right there: Is not that the identical law now in the State of Minnesota, and in Chicago? Mr. England. I would not like to say as to that. Perhaps the Senator is more familiar with those laws than I am. Senator McCtjmber. I know that the law of Minnesota requires the notice to be given immediately, or within twenty-four hours, just exactly the same as in this bill. I believe the same is the case in Chicago, but I will not state directly or absolutely as to that. Mr. England. I am not informed on that point. Senator McCumber. There is no difficulty in giving that notice, is there ? Mr. England. Our experience is that the railroad companies fre- quently have cars that will arrive sometimes forty-eight and some- times sixty hours in advance of their manifests, and they are not in every instance able to give notice within the twenty-four hours. Senator McCumber. They have knowledge when any car arrives, have they not ? 38 FEDEEAL GBAIN INSPECTION. Mr. England. They should have. Senator McCtjmbee. And as a matter of fact, do they not Ordinarily charge for the car being kept over twenty-four hours? Is it not almost a universal rule that an extra charge is made if the car is not unloaded within twenty-four hours? Mr. England. Yes, sir ; but that" time of service, or what we call car-service time, only dates from the time the railroad company is certain that the consignee of the car has been notified. Senator McCtjmbee. Is it not a fact that the railroad companies by their own rules provide, in nearly all the centers, that a charge of a certain amount will be made for each day after twenty-four hours? Mr. England. After twenty-four hours' notice. Senator McCtjmber. After twenty- four hours after the arrival and notice given? _Mr. England. No sir; after twenty-four hours' notice. A car might arrive on a siding in Washington and be here for a week — we haVe such instances — and the railroad company would only notify on a certain day; and the car-service time starts to run from the time that notice is given. Senator McCtjmbek. You say you have inspectors there who have been in the employment three years? Mr. England. I said thirty years. Senator McCtjmbee. Yes ; you said you required three years ? Mr. England. No, sir ; I said the bill required three years, and that we did not consider that a man of three years' experience had suf- ficient experience. Senator McCumbee. And the bill requires three years? Mr. England. Your bill requires that a man, to be an inspector, must have had at least three years' service. Senator McCtjmbee. That is, the chief inspectors, you mean ? Mr. Engt^nd. Yes, sir. Senator McCtjmbee. That does not apply to all the inspectors. Mr. England. We claim that a man can not become an inspector in three years. . Senator McCtjmbee. But this bill does not say that he shall not have any more than three years' experience, does it ? Mr. England. Certainly not; but I know that in our service we would not allow a man to be made an inspector in three years. We have apprentices, and they serve longer than that before they are made inspectors. Senator McCumbee. Is there any reason why the Department would not secure the very best inspectors, and those who have had the greatest experience as its chief inspectors ? Mr. England. They might do it. Senator McCtjmbee. Yes ; and the bill practically compels them to do it by stating that they must have at least three years' experience, does it not? , ,• -i ^ " Mr. England. It does; but we believe tne (jovernment would not be able to find enough men of three years' experience to fill these Senator McCumbee. To fill the positions that are mentioned here in the bill? i . ■, ^u . .i. Mr. England. As we understand that, those inspectors must be stationed at points which may be considered as important. PEDERA.L GBAIN INSPECTION. 39 Senator McCumbek. Yes — important centers of interstate trade and commerce, such as Kansas City, and San Francisco, and St. Louis, and Baltimore, and New York, and Buffalo — cities of that class ; that is what the bill states. You also state that there must be inspection at every point. Is not that statement absolutely against the provisions of this bill ? Mr. England. Not as we understand it. We believe that there will be a demand for inspection at all interior points. Senator McCtjmbek. Do you think there will be any demand in my State ? Mr. England. For inspectors? Senator McCumbee. Yes. Mr. England. I should imagine so, if your business is conducted there as it is in other States. Senator McCttmber. It is evident that you do not understand the method of doing the business in my State, or you would see very clearly that you would no more need inspectors at one point than you would need them on the farm. Now, please state to the com- mittee what you understand as uniformity of standard of grain. Mr. England. Uniformity of standard is a question that has beeii very much discussed, and I have never yet found any definite con- clusion upon it that will meet the conditions in all sections of the country. There was a congress held in Chicago, I think, about eighteen months ago, in which they sought to establish the uniform standards. They based those standards on an arbitrary test of moisture in grain. Senator McCumbee. As a matter of fact, they did adopt rules for a uniform standard, did they not? Mr. England. They did adopt rules to provide a uniform standard.' The moisture tests have been subjected to a branch laboratory of the United States Department of Agriculture which was established in Baltimore about a year and a half ago. The result of the Govern- ment's test shows that the arbitrary moisture test will work hardship to every producer of grain, for this reason : Take corn, for instance. Corn that is well matured will carry a larger percentage of moisture than corn which is not properly matured; and corn that is grown and matured may, we will say, carry (to illustrate) 18 per cent moisture and go across the ocean and be absolutely satisfactory to the foreign buyer, while corn apparently sound and possessing all other qualifications so far as we can judge, that is not quite matured, that has been met by an early frost, probably will not carry 15 or 16 per cent moisture. That has been demonstrated by the Govern- ment laboratory in Baltimore. Senator McCumbee. But you are losing my question. My ques- tion was for you to give a definition of what you understood to be imiformity of standard. Mr. England. Why, it would be to establish such a standard, so far as practicable, to be uniform throughout the country. Senator McCumbee. Does it not mean simply a uniformity of grade in certain sections of the country, covering certain species of grain in that part of the country ? Is not that what it means and is supposed to mean? Mr. England. It is supposed to mean that, but the same arbitrary, fixed standard would be made for the grain which is grown in Kansas and Nebraska as against that which is grown in Ohio and Indiana 40 FEDERAL GRAIN INSPECTION. mi grain wliich is grown on the seaboard; and while the grain may be of the same character, yet the same standard would not apply. _ Senator MgCtjmber. Cprtainly. Now, let me give you a statement in connection with a question. You understand, for instance, that we have a No. 1 and a No. 2 northern grade in Minneapolis, Duliith, and Chicago, do you not? Mr. Englai^d. Yes, sir. Senator McCumser. And you also understand that the same test of standard is not applied in Chicago that is applied in Minneapolis, do you not? Mr. England. The same requiremeiits. as to the grade ? Senator MoCtjmbee. Yes. In other words, we take No. 1 hard wheat in Minneapolis, and the system of Minneapolis will require that No. 1 hard wheat must contain a certain percentage of Scotch f^fe, and must weigh at least a certain amoimt per bushel, and must also have certE^in coloring. The standard of No. 1 hard in Chica,go provides for a different proportion of Scptch fife and a different weight. Would not uniformity of standard mean that No. 1 northern in Chicago and in Minneapolis should be the same, and not have two different systems to denominate the same grade of grain? Mr. England. It would provide that all wheat of that character coming from those particular localities should be graded uniformly. If they did not raise that wheat, thoiigh, in other sections, a different standard wouldi have to be made there. Senator McCumber. Certainly, but in attempting to fix a uniform standard would the Department be required to give the same stand- ard to blue-steni, for instancp, raised in Texas^ that it would in the State of North Dakota, if the analysis showed that they were not the same? Mr. Engi-and. They would certainly have to discriminate where conditions were different. Otherwise it would be a hardship upon the producers of certain sections. Senator McCrjinEK. Yes; and the Department could discriminate just as well as the board of trade; could it not? Mr. England. I question that, sir. Senator McCxtmber. Do you see any reason why it could- not? Mr. England. I think so, because the boards of trade have built up this business, laiowing exactly the production of every section, and knowing the buying demands of every other section. Senator McCumber. And suppose, overnight, that the Depart- !! ent, if this bill should become a law, should take your same inspect- ors immediately, and carry on the same com.i ercial grades that they have now, could it not be done just as well, and could not modifica- tions be made as occasion demanded? , u^ u ^ •+ Mr Encland. No, sir; we have our grave doubts about it. Senator McCumber. You do not think they could? Now, you spoke of rye distilling. I do not think you made that matter very clear to us. The purchaser of this rye for distilling purposes exam- ines it or inspects it in the car, does he not, m Baltimore, ordmanly? Mr. England. Do you mean the final purchaser? Senator McCumber. Yes. Mr England. Yes, sir. ,. Senator McCumber. If he finds it to be an extraordinary quality for distilling purposes, he will pay a higher price for it? Mr. England. Yes, sir. EEIX^RAL Gi^A^]^ INSPECTION. 41 Senator McCuMBEB. How is he prevented from doing that if, instead of your inspector inspecting and grading it, it is done by a Federal inspector? Mr. England. We believe that that rye will be inspected at inte- rior points, and come down there absolutely on its grade, or mixed "^ith other rye. Senator McCumbek. But I am supposing now that a carload of rye is in Baltimore, and a dig^tiller there wants it, no matter what the inspector has> said about it. Mr. EngixAnd. I question whether we could find enough cars under the proposed system to meet that demand ; because, as I said before, that rye must be kept separate from the farmer to the consumer. i^enator McCtraiBEB. Can it not be kept separate under one system as well as under the other? Mr. England. Np.f if it is arbitrarily inspected. This grain is practically not sold on grade ; it is sold upon its merits. Senator McCumbek. Very well. Do you not under stand that every carloa,d of grain, for iwstance, that arrives in Minneapolis is now graded and inspected by the warehouse commission of Minnesota ? Mr. England. I presume so. As I said before, I am not familiar with your system. Senator McGumbee. Do you not also understand that the millers who take quite a large proportion of that grain go to the cars with th^ir own inspectors, and, paying no attention to the Minnesota inspection, pay the price that they think the grain is worth? Mr. England. Minneapolis being a large milling center, the rail- roads no doubt have arranged for the handling of the freight business there and have provided track room and other facilities for that pur- pose, whereas in the ordinary market you would not find that. Senator McCumbee. Whether there is track room or not, can not the merchant's agent inspect where the Government can inspect, no matter where the car may be located at that particular terminal point? Mr. England. I think not in general markets. Probably that may obtain in Minneapolis. Senator McCtjmber. You say that there must be a multiplication of inspectors. You make that statement upon the assumption that it will be necessary to have inspectors at practically all the elevators, do you not? Mr. England. Yes, sir; and that is the general belief as to what this bill comprehends. I have heard the bill discussed not only in the East but in the West. Senator McCumbee. That is, a very little elevator in my State, for instance, where there are only sidings and nobody living there, would require a Government inspector? That would be your construction of the bill? Mr. England. The belief is that they would have a right to de- mand that. Why should they not have the Government care, if it is a Government care, just as much as a man in a terminal market? Senator McCumbee. I can explain that if you want it explained ; but I am here to ask questions, not to answer them". Mr. Daish. Senator, if it will not take too long, I would like to say that that very point has been very much discussed, and my information is that all of the business men figure that it would require- 42 PEDEEAL GRAIN INSPECTION. a large number of inspectors, certainly at every initial grain-receiv- ing point. If that is not the correct interpretation, I think it would save a great deal of time hereafter to be so advised. Senator McCumbee. I will put what I have to say in the form of a question, so that it can be answered, if possible, because I do not want to inject my own testimony into this matter. Do you not know that the Secretary of Agriculture has made an estimate of what the entire cost of inspection will be under this bill ? Mr. England. I saw it stated as a gross sum for an appropriation. I do not know whether that covers his idea of the entire cost or not. Senator McCumbee. And do you not know that he estimates $850,000 not only to cover all of the expenses of the inspectors, but also the expenses connected with the Department in overseeing them and in the work that is necessarily connected wjth it ? Mr. England. I think he is very much mistaken in his estimate. Senator Latimee. Just there, I should like to know what the esti- mate is of the cost that the farmer has to bear under the present system. If it will cost $800,000 to inspect under the Government, and the farmers will pay it, practically, what does the inspection cost now? Senator McCtjmbee. I can answer the Senator, if he wants me to ; or if the witness can give the information, I will be glad to have him do so. Mr. England. I can not tell in aggregate; it would be merely a guess if I tried to. Senator McCttmbee. I will state that I have the exact figures. They range all the way, under the inspection system at present, from 1 5 cents a car, which is the cheapest, up to 75 cents per car, which is the highest. Taking the number of cars that are inspected, it would average in the neighborhood of from 35 to 50 cents a car under Gov- ernment inspection. Senator Latimee. Now the total? Senator McCtjjiber. I say, the total, I think, would not be up to that amount. Senator Latimee. But about what, approximately? Senator McCttmbee. The Secretary of Agriculture thinks it will be much less than this amount, but he wishes to cover it all and to be certain he would have enough. Senator Bankhead. Senator, will you excuse me? You may be able to get a crochet out of my head. You introduced the bill, and of course you understand the purposes of it. I would like to Imow who you are trying to protect by the provisions of this bill. Senator McCumbee. Mr. Chairman, I was simply to ask questions, but if the Senator wants to ask me a question I will be pleased to answer it. • i. i- Senator Bankhead. I do, because I want to get straight on this thing. I think it is a pretty important matter. Senator McCumbee. I can see, Mr. Chairman, from the question asked by Senator Bankhead that he does not understand the system of handling grain in our section of the country. Senator Bankhead. That is exactly the point— I do not, and you do ; and I want you to tell me what it is, so that I can vote inteUigently on this proposition. FEDERAL GKAIN INSPECTION. 43 Senator McCumbee. I have stated that it was not necessary to have an inspector in my State. If there was now an inspector, for in- stance, in our State, it would make no difference, because the grain is reinspected at Minneapolis; and the inspection already given at the great terminals necessarily fixes the grades that must be given at the initial point Senator Bankhead. Yes ; I understand that. Senator McCumber. Because every bushel that is purchased at the initial point is purchased at a grade which the purchaser be- lieves he can get at the terminal point, and he will never purchase at a greater grade ; and if there are any doubts as to what grade he will get at the terminal point he will resolve those doubts against the seller, so. as to protect himself and be sure that he will get his grade. Therefore, having his grades fixed at the terminal point (which he declares to be erratic and uncertain and on the average under- graded) , he has got to undergi"ade the farmer's grain which he pur- chases, because he gets an undergrade at the great terminals, such as Minneapolis and Duluth. This fact is established by uncon- troverted evidence from the fact that the great terminal elevators ship out of each elevator from two to three times as many bushels of the high grades as they take in; and the lower grades, such as No. 3 and 4 and rejected, are entirely lost and are metamorphosed into the higher grades. So that the grades of the grain sold out at these great terminal markets like Chicago and Minneapolis are on the average one grade higher, at least, than the grade at which the same grade is bought in at the same points. Therefore the farmer sells his grain for No. 2 and 3 at the great terminals, and the terminals sell it for No. 1. If No. 1 is the honest grade, if we have Government inspectors that wiU enforce that hon- est grade and give No. 1, then the purchaser at the initial point will feel safe in giving the farmer the No. 1 grade. That is the only way that we can reach it. All is fixed by the grade given at the terminal market, and if that grade is a fair grade it reacts back, and the original purchaser gives the grade that is given at the terminal. Senator Bankhead. Then you assume that the Government inspec- tor who fixes the grade at the terminal point is going to give a higher grade than the commercial inspector would give ? Senator McCumbee. I certainly do, for it is proven absolutely that the grade given under the present commercial system is lower than the grade which the same grain receives when it is shipped out. Senator Long. And the Government inspector is more honest and capable than the private inspector? Senator McCumbee. He is equally honest, and not having -been appointed by this board of trade or Jby the system, his tendency as a result of his allegiance to resolve every doubt in favor of the appoint- ing power will not be exercised. Senator Bankhead. The point in this matter that is troubling me is how you are going to protect the farmer — and that is what we all are trying to do, you know, to protect the farmer. Senator Peekins. Mr. Bankhead, I am in favor of the farmer all the time ; but speaking from many years of practical experience as a mil- ler (I have built two or three flour mills), there is so much difference in the quality of the grain that when the farmer takes it to the elevator 44 PJiDEEAL GBAIN INSPECTION. at the home market and sells it, th^ price is fixed for him there. You way grade it, 20 times over, and; it is riot going to benefit him. It is the commercial agent that buys it, and the buyer that buys it from him. I haye had two fields of •wJaeat right alongside of each other, and I have given 3^ cents a hundred more, or 5 cents a hundred more, for the grain from one field than for that from the other, because one farmer cultivated his soil better; he turned dawn the sod; he kept ont the cheat and other vceedsj and I- gave him 5 cents a hun(&ed more for the grain, and I got ^^tter results out of my 9.our. That is the way it seems to me. Senator Bankhsad. The point I can not get straight in my hf ad is how you are going to. protect the farmer who delivers his wieat in the elevator up in Minnesota a hundred iniles or three or four or five hundred miles away, from a taill. He delivers it there, and it is sold to somebody. Somebody there buys. it. Senator Perkins. The price to the farmer is fixed there. Senator Bani^head. He sells it to somebody there, and it goes into the elevator, and from there" it goes dbwn to Minneapolis, and there it is inspected by this GLovernmftit inspector, and he gm,4ss it, as I uEiderstand. The only excuse for the passage of this bill, as. I understand it, is that if you furnish these Gtovernroent inspectors down at Minneapolis, you are going to induce the man at the initial point, up somewhere on the railroad, to pay a higher price, because he expects to get a higher price when the grain reaches the terminal piQi;at. Is not that the idea ? Senator Latimer. Then there is. one other point here that I would like to hear the Senator on as h^, proceeds. M the farmer is to be benefited by the care of his grain and by the proper cultivation of the soil, harvesting, it and threshing it out and getting it out of the weather, if he can be. encouraged in that by getting its. value from the buyer in the difference in price oyer the m&n, who d^es not take such good care, would it not stimulate the farmers to take better ca,?e ol the crops they are producing ? Sejiator McCtTMBER. If the f ai;m6r has No. 1 northern wheat, and he sends it to Minneapolis and receiyes No. 3 northern for well- cleaned, well-cared for grain, he is not going to take a great deal of trouble after that to care for and clean his grain, and he will ship i^ all in the state in which it comes from the separator. I expect to be heard myself later on, so I do not care about going into this mat- ter. I expect to be heard on this bill when these gentlemen get through. Senator Perkins. On this question, of the different grades of grain. Senator McCumber-^-you have given it a great deal of thought and consideration, and understand every phase of the matter — I 'want to ask a question. Suppose we take Puget Sound and San Francisco, to illustrate. We ship cargoes of wheat from there to Liverpool. We say it weighs so much per bushel. It may be Aus- tralian white wheat, or Sonora, or Chile wheals— these are the com- mercial terms we use for our classification on the Pacific coast. We have sold the grain at a price satisfactory to the purchaser, and drawn against it bills of exchange to which is attached the bill of lading; and when it reaches Liverpool the. consignees order another inspection, and pay no attention to what we have represented to them as the grade of the grain in California, Oregon, or Washington. Now, FEDERAL GEAIN INSPECTION. 45 with this bill help us in a case of that kind ? Can we hold them to the grade at which the Government inspectors haVe classed it? Senator McCumbee. If you have the grade placed on it at Pilget Sound to which it is entitled, and jotL sell that grade of grain, you can hold them then for that grade of grain, no matter what grade they put on it there, if your contract is to purchase the grade, and it has had a fair inspection. Senator Long. And the purchase is made at the point of inspec- tion. Senator McCtjmbek. At the initial point. Senator Long. At the initial point ; yes. Senator Perkins. I have know of a hundred instances where they say it does not come up to standard, and We call upon a com- mittee from the Chamber of Commerce or the Board of Trade in London or Liverpool, and we have to abide by what they say. _ Senator Bankhead. Is it not true that wheat frequently dete- riorates in transit ? Senator McCumbee. Certainly; but that depends upon whether the contract is to deliver a certain grade of a certain grain when it arrives, or whether they sell at the point of shipment a certain grain. Then you would be governed by the condition of that grain at the port at which it is shipped. Senator Simmons. Yoiir contention is that if the Government inspects it at the terminal point the purchaser will get a more favor- able and less interested inspection? Senator McCtjmbee. Yes — a perfectly disititerested inspection. Senator Simmons. Aiid in view of that he will give the farmer a more favorable grade? Senator McCttmbee. Certainly. The complaints which are made are made not only by the farmer but by the independent purchaser. The independent purchaser can not give the "grade that he believes the grain is entitled to, because he knows that he will not get that grade at the terminal point. What this bill is intended to do is to insure that the elevators that take in a certain number of bushels, for instance, of No. 2 northern wheat, will sell out about that m'any bushels, and that it will not all become No. 1 northern to them. Instead, it will come into the elevators aiid go out of the elevators at the same grade. Senator Simmons. That does not, however, affect the grade upon which the wheat will be sold at the terminal point. It will be sold upon its merits there? Senator McCumbee. It will be sold upon its grade, not upt)n its merits. The only cases in which it is sold on its merits is in thfe case that has been given by the witness here, where the distiller wants to buy rye of a certain quality, or where thie miller wants io buy wheat of a certain quality, and he will examine it and buy it Tiimself . That is true in Chicago; it is true, more or less,,in all the terminals. Senator Simmons. I did not understand you to say that the i]^lir- chaser will be compelled to buy it according to the inspection at the terminal point? Senator McCumbee. Oh, no ; the purchaser will buy at whatever he sees fit ; but where he contracts for a certain grade of grain, perhaps 90 per cent of that grain is sold under contract grade, and he th€ii*e- f ore must take the inspection gi-ade fhat is given on it. If you pur- 46 FEDEEAL GKAIN INSPECTION, chase 100,000 bushels of No. 1 northern grain to be delivered at Minne- apolis, and there are 100,000 bushels of grain of No. 1 northern grade in a certain elevator that are certified by the Department to be No. 1 northern, you have to accept that as your delivery there, although you may think it is No. 3. You buy the grade, and not the particular ^ain. Senator Perkins. I am like Senator Bankhead; I have not much sympathy with a man who sells long and who sells short. It is the farmer we want to benefit. Now, how is the farmer benefited after he has taken his grain to you, as commercial agent, and you put it into your elevator and he has gotten his price for it ? How is he benefited by it ? Senator McCtjmbee. Senator, let me answer that and make that clear. Suppose the farmer in the State of North Dakota who has No. 1 grade northern grain ships that grain to Minneapolis and receives No. 3 northern. Senator Perkins. But nine times out of ten does he not sell it right there ? Senator McCtjmber. Sometimes he does ; but the result is the same in either event. Let me make that clear: If he receives only No. 3 he has lost two grades, has he not? Now, suppose that the man who is buying at the elevator in the State of North Dakota knows that this man has No. 1 grain, but he knows that in Minne- apolis, where he must sell it, he can only get No. 3 — then he will pay the farmer in North Dakota for No. 3, will he not ? He will pay him for No. 3, and No. 3 only, whereas if he got his honest grade in Min- neapolis, and it was No. 1, he would pay the farmer for No. 1. Senator Bankhead. Senator, is it not true, then, according to your statement, that in order to protect the farmer and give him a fair grading and a price you will have to put an inspector at every elevator where it is delivered ? Senator McCtjmbee. No ; because, as I have stated before, the in- dependent buyers (who constitute the great number of buyers) will give the farmer the grade that they will get at the terminal, abso- Eitely and unquestionably. There is enough competition so that they will be compelled to do that. They will give the grade they get at the terminal, and the farmer will get the benefit of that grade. That is all. Senator Long. Have you State inspection in North Dakota ? Senator McCumber. Why, no ; it would do us no good. Senator Long. You have no State inspection ? Senator McCumber. No; because every bushel of our grain that is sold is sold abroad ; it is shipped out. Senator Bankhead. About what per cent of the grain in Minne- sota do you think is sent to the terminal points for sale? Senator McCumber. Oh, probably 75 to 90 per cent. Senator Bankhead. Do you mean to say that the farmer ships it by the carload ? Senator McCumber. Oh, .no ; he ships it directly. I thought you meant it went to the terminal points. Senator Bankhead. I mean how much of it goes to Minneapolis, for instance, from the farmer direct and is sold there by the farmer? Senator McCumber. In Minnesota perhaps not 10 "per cent; in my State, perhaps 30 per cent— 30io 40 per cent; perhaps 50. PEDEBAL GBAIN INSPECTION. 47 Senator Bankhead. That is what I supposed. Senator Perkins. As a general proposition, however, it is sold at the home elevator? Senator McCumber. It is sold at the home elevator, but all is sold in anticipation of what the terminal elevators will give them in grade; and therefore if we fix the grade for the terminal elevators we have fixed a certain grade for all that precedes the terminal elevators. Senator Perkins. In Oregon, California, and the State of Wash- ington nine-tenths of all the grain and wool and fruit is purchased from the community direct by the traveling agents representing different companies or warehouses. Senator Bankhead. That is just what I supposed would be the case here. Senator McCxjmbee. I wanted to ask the witness just one more question, Mr. Chairman. You stated, if I understood you, Mr. England, that there might be a multiplication of inspections under this bill — that is, it might be inspected at Minneapolis, again at Chicago, and again at an eastern point, if I understood you correctly? Mr. England. Certainly. Senator McCitmbeir. And that would add to the cost. Let me ask you if you have read the provision on page 6, which says : " But where grain has been once inspected hereunder, and remains unmixed with other grain, the same need not be reinspected at the place from which it is exported ? " Mr. England. The bill says it need not be. Every buyer Avill demand the last inspection, because grain is liable at all times to deteriorate in transit under atmospheric and other conditions. Senator McCumber. Do you not think .that from 15 to 20 or 30 cents a car is a mere bagatelle in the matter of the inspection of grain in comparison with its cost and that the buyer would be entitled to his inspection if he was willing to pay that small sum ? Mr. England. When you multiply that and take into considera- tion the number of cars inspected, it grows into an enormous sum. The man why buys from the farmer, as you stated a minute ago, will buy upon the terminal inspection. He will go further than that, and he will want that terminal inspection guaranteed by having an inspector at his own place. Senator McCtJMBEE. That is, you mean, he would like to do that? Mr. England. He would be very apt to try to do it. Senator McCumber. But I am speaking of this bill, and not what he might want. Those are all the questions I have. Mr. Daish. Mr. England, let me ask you a question. You are familiar with the so-called Uniform Grading Congress? Mr. England. Yes, sir. Mr. Daish. Did the recommendations of that congress intend to cover a uniform grade for a specific part of the country, or for the entire country, from what you know of the recommendations? Mr. England. No, they did not. Their intent was to provide grades for different sections of the country, so to speak, to meet the different requirements. 48 FBDEtlAL GBAIH INSPBCTlOlf. Mr. Daish. And the chief merit of grain was to be according to the amount of moisture, was it not, as you stated ? Mr. England. That was the determining test, in fact, under the suggesting of that grading congress. Mr. Daish. Have any considerable number of the boards of trade and chambers of commerce adopted the recommendation of the Uni- form Grading Congress? Mr. England. I am under the impression that some few markets did, but whether it has absolutely been put into effect or not I do not know. I think not ; I do not think it has become effective anywhere. Senator McCumbek. As a matter of fact, some few of the markets did try to work under it, did they not? Mr. England. They made the attempt, but I do not think they have succeeded. Senator McCuMber. And the reason it was not a success was two- fold, was it not? First, there was no power to enforce a uniform grading, and, secondly, there would be more money made out of the manipulation of the grades under the old system in the special market ? Mr. England. No, sir; that was not the reason. The Chairman. Have you anything further to state to the com- mittee ? Mr. England. There are several gentlemen here, Mr. Chairman, who would like to be heard. The Chairman. OUr time is practically exhausted this morning. We shall have to have other hearings. Mr. England. We are not through, Mr. Chairman. If you can ^ve us an opportunity we feel thiat it is an important matter, and yfk would like to state our side and get through with it. The Chairman. We will give you a further oppol-tunity, but I would be glad if you would preseiit as much as jpossible of your caSe in the sha,pe of briefs, in as condensed a form as you can. We will, however, give you a further oral hearing at another meetiiig — per- haps two weeks from to-day. Mr. England. These gentlemen here, Mr. Chairman, haVe prepared written Statements which they would be very glad to piit in, but the;^ would like to make verbal statements later. The Chairman. Vet-y well. You will have ample notice. Ytfct are right near by-p-in Baltimore. Mr. England. Thank you. The Chairman. And as far as the Philadelphia delegation is con- cerned, vou have had a partial hearing. You will have to wail and take your chance at some future meeting. We will give yoli notice, if you like. STATEMENT OF JAMES L. KING. Mr. King. We came to-day, Mr. Chairman, simply to reenf orce our previous statement. That is a matter of record, and We have pre- pared a brief, which I think you have. The Chairman. Yes. . . . . Mr. King. We are simply here to show our interest in this matter and to reenf orce our statement, and we thought we would coirie alid answer any questions that you might think jprOp'er to ask. The Chairman. You do not care, then, for any further hearing? FEDEBAL GEAIN INSPECTION. 49 Mr. King. I do not think it necessary to go into detail about the matter, with this exception : There is one point here that has been brought out with regard to the number of inspectors. I notice that sections of this bill provides " that it shall be unlawful for any person herein named to willfully unload or otherwise discharge any load, cargo, or consignment of grain which has been at any time during the period of its transit an article of interstate commerce, and Avhich has not been inspected in accordance with the provisions of this act, until the same has been inspected as provided herein." That I do not think coincides with my idea, and with the ideas of business men generally engaged in handling grain, or with the idea that Senator McCumber would give to the interpretation of this act to-day. That is our position in regard to that particular measure. We have nothing special to bring out at this time. We merely wish to say that we stand on the brief which has been filed with you, and we believe that this proposed measure would be very disastrous to the grain interests of the United States. I would like to file with you, Mr. Chairman, the resolution of the National Board of Trade stating their position as against this pro- posed bill, signed by Mr. Tucker, the secretary. The resolution above referred to is as follows : [Extract from the minutes of the thirty-eighth annual meeting of the National Board of Trade, held In Washington, D. C, January 21, 22, 23, 1908.] FEDERAL INSPECTION OF GRAIN. Whereas there are now pending in Congress bills authorizing the Secretary of the Department of Agriculture to establish a system of Federal inspection of grain intended to supersede the existing systems now controlled by the various States and commercial bodies of the country : Resolved, That the National Board of Trade hereby records itself as unalter- .ibly opiJosed to the Federal inspection of grain, believing that the pas^ge of any measure disturbing the existing systems of commercial inspection under which the grain trade of the country has been built up would be injurious to the best interests of the producer, dealer, and foreign buyer. True copy. Frank D. La Laune, President. Attest : W. E. Tucker, Secretary. Mr. England also submitted the following written statement, whicTj by direction of the committee is printed as part of the hearing : WRITTEN STATEMENT OF MR. ENGLAND. Mr. England. As far as records show, the first grain exported by the American colonies was from the port of Baltimore about the year 1750. From that time until the present day, with the exception of short periods during the Eevolution and the war of 1812, the move- ment of grain through that port has continuously kept up, and it is certain that this record could not have been maintained except by the energy and industry of the generations of grain merchants, who by their enterprise contributed so much to the general development of this country. It should not therefore be inferred that the method of handling grain at that port is entitled to unfavorable criticism, and if the practices obtained there which have been charged to the trade generally by the strongest advocates of government inspection of grain, the business rhust long ago have shrunken away instead of 34503—14 i 50 FEDERAL GRAIN" INSPECTION. Steadily keeping pace with the development of this country. What may be said in regard to Baltimore in this respect is true in principle of other terminal markets, and it is preposterous to assume that a com- bination could exist among the terminal markets, both seaboard and inland, to take advantage of the producers of grain, either in grades or by arbitrarily establishing any relative value for the various grades of grain. It does not require a' very high order of business intellect to appreciate that the aictive competition existing between markets, also among those doing business in the same market, will always insure as liberal grading as is possible, otherwise grain will not move to those niarkets; and the same form of competition must perforce narrow the difference in market value between the maximum and minimum quali- ties to the lowest workable basis. A moment's thought by a reason- able person brings conviction that the charge of unfairness by the pro- ducer and the demands of the foreign buyers for the highest quality or grade are absolutely incompatible, and show a lack of information, certainly on the part of the former, which should inspire all unbiased men to frankly consider this important matter, instead of using both extremes of the proposition as weapons to injure an important busi- ness which has been built up by patience and energy for the benefit of the entire country, and without which many of the grain producers of this country would to-day be in poverty, instead of enjoying the result of their toil and thrift. If it were possible for such an ideal condition to exist, for farmers to produce only perfect grain as to quality and condition, there would be no need of grades or grain inspection, but because Providence in His great wisdom sends sunshine and rain upon occasions not favor- able to all producers, or, on the other hand, farmers through indiffer- ence or other causes do not take advantage of every opportunity offered for the proper handling of their crops, it follows that in every season more or less grain of inferior quality comes upon the market, to be cared for by some one. To properly dispose of this class of grain it is necessary that it should be cleaned, dried, and mixed to a uniform grade, and the large warehouses or elevators at terminal markets have at considerable expense availed of every modem mechanical appliance whereby this beneficial work can be done at a minimum cost and in a manner not possible upon the farm. Such handling of the lower grades of grain enhances the value of the poorer qualities to the farmer, and without such methods a large percentage of the grain exported in ordinary seasons would be unfit for human food and would necessarily be kept upon the farm for cheaper uses. This method of handling the poorer qualities explains a misunder- stood fact in all markets, whereby under the most correct and upright methods the amount of the higher grades of grain shipped out can be much larger than the number of bushels of the same grades received from the producing sections. This entirely legitimate and proper com- mercial handling and disposition of the lower grades of gram is mani- festly in the interest of the producer, as is evidenced by the tact that since the adoption of modern grain-cleaning machmery and appli- ances for drying the value of out-of-condition grain m the terminal markets has relatively enhanced in comparison with that o± gram ot unquestioned quality and condition. • x ^ • i It is not uncommon in some seasons for grain to arrive at terminal jnarkets in such bad condition that the consignee has refused to accept FEDERAL GRAIN INSPECTION. 51 if from the railroad and thrown it back on its hands because of not sufficient value to defray transportation charges, whereas at present discounts on the lower grades practically represent only the cost of handling and artificially drying necessary to advance the quality and sufficient to meet grade requirements, or else, to put it in condition to stand ocean carriage. During the past season considerable dam- aged corn, known as " chocolate drops," because of its brown, dull color, has been handled through the driers at the port of Baltimore under the supervision of the inspection department and sold to European buyers by sample or specification at relatively good prices. It can not be supposed that this character of grain could be handled by a governmental inspection bureau, because its proper disposition requires the intelligent cooperation of the inspection department with the owner of the grain in order to properly handle and market a commodity which otherwise would have no commercial value and would be forced to remain upon the farm, and in many instances unused. Therefore the American farmer in this instance, as in many others, is a direct beneficiary of board of trade customs and inspections, while the foreign buyer stands ready to purchase a class of grain which would ordinarily have no standing under Federal inspection. While the formation and also the management of the inspection departments of terminal markets are similar, and are in fact founded upon the preambles to the by-laws of those institutions, which almost uniformly state that they are established for the purpose of inculcating just and equitable principles in trade, also to establish and maintain uniformity in commercial usage, in discussing this subject it will perhaps be best to confine myself to what I am most familiar with and as briefly as possible explain the rules and customs governing the inspection of grain at the port of Baltimore, which, however, as previously stated, do not materially differ from other markets. The chief and assistant grain inspectors of the Baltimore inspec- tion department are appointed and their salaries fixed by the board of directors of the Baltimore Chamber of Commerce, which board is duly elected from the membership of that body, and under its legislative charter must represent as fairly as practicable the various business interests of the chamber. By this provision the board is not the agent of any particular branch of the grain trade, hence, being unbiased, has the single object of promoting the trade of Baltimore, which can not be successfully established without due and proper regard for the interests of the foreign buyer of grain, as well as that of the small shipper at interior points, who is in fact the representative of the producer. The inspectors thus appointed are free from any influence on the pjart of the owner or custodian of the grain, and thereby in a position to impartially inspect and report upon the same. The rules provide that there shall be elected annually by the board of directors grain committees as follows: Wheat committee, corn committee, oats committee, rye committee, barley committee, and buckwheat committee. It is required that a majority of the members of these committees shall be identified with the business of receiving grain from interior points and the minority shall consist of representatives of the exporting and milling interests. As the 5!2 TEDEEAL GRAIN INSPECTION. receivers of grain practically represent the interior shippers, and through them the producers, if there is any bias in these committees „it will lean toward the producer by keeping the grades as far as •reasonable in favor of them. These committeemen are selected because of their experience and are regarded as experts in their several lines, hence the Chamber of Commerce avails itself of the intelligent service of men whose greatest desire is the upbuilding of the grain trade. These committees establish grades, and when ■necessary make changes therein, but only after thirty days' notice has been given to the trade, subject to the confirmation of the board of directors. A buyer or seller of grain in the Baltimore market who may be dissatisfied with the grading has the right to appeal, without cost, from the assistant inspector, who originally examines the grain in the car or vessel, to the chief inspector, from the chief inspector to the particular grain committee, and from the grain committee to the board of directors. As each is an independent 'factor, the appellant is guaranteed absolute fairness and iustice. The immense amount of work performed by these men oi expe- rience, who gratuitously and cheerfully give their time and best 'judgment, with the single desire to properly conduct an important department in connection with a great business, is a safeguard to every interest; and no reasonable person who looks carefully into this system of grading and the moral influence back of it all can in any manner criticise it or assert that any form of political inspection will be better for the American producer or the foreign buyer than that which is in vogue in the city of Baltimore. The bill under consideration does not definitely state where and at what points grain shall be inspected; hence if put into effect, in- spectors would be required at every point, either terminal or interior, where grain is handled, even in moderate quantities; and, in fact, in the grain producing and consuming States grain inspectors would probably be as numerous as are postmasters at the present time. Furthermore, the bill provides that the railroads shall within twenty- four hours after the arrival of the grain at destination notify the inspection department of the same. Should the grain have been inspected at point of shipment, or at some point en route, the deliv- ering railroad would not necessarily have knowledge of this fact, and in order to avoid the risk of violating the law, and also to pre- vent delay, each car would be inspected upon arrival at destination, regardless of previous inspection, and the claims for refund on ac- count of double inspection would be numerous, requiring a large clerical force in order to adjust claims growing out of the duplication of inspection at point of shipment, at various points en route, and at point of destination ; and a more chaotic business condition can not be imagined than that which is likely to result from the requirement that the railroads shall notify the inspection department of the ar- rival of the grain, it being a fact that cars of grain are often recon- signed or reordered in transit, and ownership frequently changes be- fore it reaches its ultimate destination under its traffic billing. Again, it is a known fact that the last buyer of any article will insist upon terms most favorable to his interests, and as the purchaser can not be forced to accept goods, only as he may desire, he will naturally insist upon the inspection most favorable to his own interests, re- gardless of any or how many examinations the car or vessel of grain FEDERAL GRAIN INSPECTION. 53 may have previously had, and the Government will unreasonably and unnecessarily collect the inspection fees from each handler of the grain from the time it becomes an article of commerce until it reaches the consumer or is loaded on the vessel for export to foreign country, and it is easy to appreciate the enormity of this repeated; tax, and that it will be a burden upon a branch of .business which should be fostered in every manner possible, rather than hampered, upon the pretext of a very few engaged in the business, many of whom make their demands through ignorance of commercial condi- tions at home and abroad or for selfish reasons. (The committee thereupon adjourned, to meet upon the call of the chairrrian.) Committee on Ageictilture and Forestry, United States Senate, Thursday^ April 2, 1908. The committee met at 10 o'clock a. m. Present: Senators Warren (acting chairman), DoUiver, Burn- ham, Burkett, Long, Money, Simmons, Gore. death of senator proctor. Senator Warren. Gentlemen, before we proceed, I would like to call attention to the fact that this is the first meeting this committee has held since the death of its late chairman. Senator Proctor. In the absence of the chairman, Senator Hansbrough, who is too ill to attend, I shall call the committee to order, and first call attention to the fact of the loss that we have suffered through the death of Sen- ator Proctor. I suggest at this time that Senator Dolliver and Sen- ator Money be appointed a committee to present in the meeting of the committee proper resolutions upon the death of Senator Proctor, to be spread upon the record of this committee. This meeting is one that the chairman of the committee. Senator Hansbrough, arranged some time ago in order that there might ap- pear 'before the committee men who are in the grain-shipping and , grain-handling business, and who have knowledge which the com- mittee desire to avail themselves of. Hearings were had earlier in the session, and testimony was taken of those who differ with the proposals of the bill. It is the desire of the chairman, Senator Hans- brough,, that the affirmative side of this question be heard fully knd, the hearings closed as soon as possible so that action can be taken; on the bill in time for its consideration by the Senate at this sitting session. Senator Hansbrough advises me that, in arranging for these hearings, he requested his colleague. Senator McCumber, to I notify all parties who have indicated a desire to be heard in behalf of the measure so that they could be present, and Senator McCumber, who has introduced this bill, will perhaps make a statement as to the object of his bill, and also give the names of those he desires to appear. 54 FEDEKAL GEAIN INSPECTION. STATEMENT OF SENATOR McCUMBER. Senator Waeeen. Senator McCumber, I am right in my under- standing, am I not, that the hearings that have been held heretofore this winter have been held_ upon one side of the question only ? Senator McCumber. Only upon the side of those opposed, and mostly representing some boards of trade. Senator, Warren. Of course the idea of the chairman has been that both sides will be fairly represented before we get through with the hearings. Senator McCumber. That is true. We have here some gentle- men who wish to be heard — Mr. B. E,. Beall, who is the secretary and manager of the Farmers' Terminal Grain Company, of Kansas City, Kans. ; Mr. J. A. McCreary, of Mason City, 111., the secretary of the Farmers' and Grain Dealers' Association of Illinois. We have Mr. Ballard, who is sent by the Merchants' Exchange of St. Louis, and also Mr. Greeley, of Chicago, and others. All of these gentlemen, I think, will be present here, and they represent the large grain dealers' associations; and also we have with us the president of the Ameri- can Society of Equity, and that society represents the Farmers' Asso- ciation, which covers all of our Northwestern States. Senator Gore. What is his name? Senator McCumber. Mr. S. D. Nelson; and there are also present gentlemen from my own State, who will speak of the interests there. I want to say in addition that those who wish to be heard in addition to those I have mentioned are Mr. J. M. Bradford, of Indianapolis, Ind., of the Indiana Grain Dealers' Association ; Mr. W. C. McFad- den, of Fargo, N. Dak., of the North Dakota Bankers' Association; Mr. J. W. McCardle, of Indianapolis, State tax commissioner of Indiana; Mr. C. S. Bushy, of Fort Wayne, Ind., of the Indiana Grain Dealers' Association, and also Mr. J. S. Kennedy, of Nebraska, of the Farmers and Grain Dealers' Association of Nebraska. Mr. Chairman, it would be impossible to state in very brief words the object of the bill, without gomg too fully into the injustices that we purpose to correct by the bill. I will state generally that, as every man on the committee knows, all of the grains in the United States are now sold at the great terminal markets by grades, and very little sold by actual inspection. The grades are fixed by the boards of trade or chambers of commerce at these great terminals or by State warehouse commissions. In every instance the grades are so made and changed from year to year and time to time that the benefits will inure mostly to the terminal purchasers, the men holding or owning the terminal elevators. The great grain interests at these terminals make up to a great extent the members of the several boards, so that the effect of it is that the purchasers not only fix the system of handling all the grains that are to be bought and sold at the terminal markets, but they directly or indirectly do the grading and inspection of the goods that they are purchasing. In other words, one of the interested parties to the purchase and sale of grain at the terminals determines the price which he will pay by fixing the grades. Senator Simmons. Is not that true of nearly every commodity that is sold on grade— cotton, for instance? EEDEKAL GRAIN INSPECTION. 55 Senator McCumber. I think it affects cotton the same, but not all commodities, such as fruits and many other things, that would not come under this rule at all. Senator Simmons. I say that are sold on grades. Senator McCumber. I have no doubt but what the same injustices are perpetrated to a great extent in the cotton trade. I am speaking now only of the grain trade. The result of this system is that at these great terminals, as I have already explained before this com- mittee, that grain coming in is, as a rule, always undergraded, and as it goes out it is overgraded. The records of the sales and pur- chases, shipping in and shipping out, at these great terminals will show, for instance, that there are about two and a half to three times as many bushels of the higher grade shipped out than are received in, and that all of the lower grades will be metamorphosed into higher grades. Senator McCtrMBEiR. I mean this : For instance, we will say there is tak^n into the elevator 1,000,009 bushels of No. 2 northern, 2,000,000 bushels of No. 3 northern, 4,000,000 bushels of No. 4 northern. When it comes out of the elevator there will be twice as many bushels of No. 1 northern and No. 3 and No. 4 northern will become No. 2 north- ern as it is shipped out — ^will be raised from one to two grades higher. Senator Long. Have those changes in grade been made without any treatment, as you might call it, of the grain, or has the grain during that time been treated in the methods in which they know how to treat it ? Senator McCumber. The only treatment of the grain is this : The grain, for instance, will be purchased as No. 2 or No. 3 northern. A certain amount of dockage will be taken out of it, which is fixed by the inspector. The dockage is assumed to be sufficient to take out all of the fouL stuff and all of the undeveloped kernels, we will say. Now, as it is being elevated, where it is taken in to the top of the elevators, it passes through a suction draft. The suction draft takes out the dockage, takes out all of the foul stuff and the undeveloped kernels. Senator Wakren. Takes out everything of that kind. Senator McCumber. Yes. Then it leaves the grade that it ought to have been graded in the first place, because if it is No. 2 northern gi-ain with the dockage out, then it should be No. 2 northern after that dockage had been taken out through the suction draft, because there is always a sufficient amount allowed for dockage, not only to take out the actual amount that is undeveloped arid foul, but also an additional sum sufficient to pay the cost of passing it through the suction draft. Now, that cost is only a mill or so a bushel. It amounts practically to nothing. Senator Simmons. When they buy they subtract so many pounds to represent this. Senator McCumber. Yes; and in addition to that under the sys- tem, as we can clearly show, the grain is absolutely undergraded. It does not receive its honest grade, independent of the mixing, and when it passes out it receives a dishonest grade as it is mixed. In other words, it is graded out of these elevators at a grade from one to two higher grades than it is entitled to, and as it is taken in it is graded a grade or one or two grades less than it is entitled to. " FEDEEAL GKAIN INSPECTION. Senator Long. Where is this done that you speak of— in Min- nesota? ^ Senator McCumber. In Minnesota and in practically all of the great grain centers where mixing is done at all, and where the iden- tical grain changes after it is placed in the elevators. benator Long. Do they have State inspection in Minnesota ? benator McCumber. They have State inspection in Minnesota— that IS under a warehouse commission— but, as I have had occasion to say before, their appointments in that commission are made pur- suant to the interests of the great grain influence, and I notice by a table which you already have before you^ that the amount of grain received into these terminals of higher grades is only about one- half of what is shipped out of the higher, and when you get to No^. 3 and 4 there will be six or seven times as many bushels of higher grade shipped out than are taken in. Senator Long. I did not want to ask any questions, because I understand that you are going to make a full statement to the com- mittee later on. Senator McCumber. Yes ; when we get through. Senator Long. The object of your meeting to-day is to have peo- ple heard from a distance. Senator McCumber. Yes. The object of the bill is to secure, first, uniformity of grades, then, second, honesty of grade and relia- bility of grade. We all understand — at least, those who are in any way acquainted with the grain trade — that every system in each of the great cities is wholly independent of any other system, and it determines what shall be No. 1, No. 2, No. 3, etc. So that if I raise upon a farm, we will say in North Dakota, three carloads of grain, I will send one carload to Minneapolis, an- other carload, we will say, to Superior, and another carload to Chi- cago. Each of those cities will have a different standard of grain for No. 2 northern, so the grain which I ship out from the same field, identically the same grain, will receive three different standards of grades at three different places, and therefore receive three different prices in the market. That is one of the objects of the bill — to avoid this and secure uniformity, as near as it is practical to secure ; the other object is to secure certainty and honesty in grades and reliability in them, so that the trade can depend upon it. The trade of the country now can not depend at all upon the verity of any certificate, and the shipments to the old country are such that we are losing many markets entirely, because it is stated that no dependence whatever can be placed upon the American grades, and this is shown by a letter which T have lately received from Mr. Patterspn, of the London Corn Exchange, in which he savs that the American grades will average from 4 to 5 cents a bushel less than the grades of the same character of grain from Argentine and from Canada, for the reason that they have no confidence in the American grades. Senator Long. Have they government inspection in Canada and the Argentine? Senator McCumbee. I do not know what the inspection is in either of those countries, but in every instance at least they have confidence in the grades. The trouble lies in the mixing of our grain, and putting all the poor grain in with the better, qualities. But T do FEDERAL GRAIN INSPECTION. 57 not want to take up time on this this morning, because there are other gentlemen here who desire to be heard. Senator Money. Where does the farmer come into this? Where does he sell his wheat ? Senator McCttmber. The farmer, wherever he may sell his wheat, receives a price which is fixed by the price of the grade of grain to which his crop is entitled at the terminal. Senator Lodge. That is, it should be? Senator McCumbee. It should be. Senator Money. Does he not sell his grain at the point of original shipment ? Senator McCumbee. Some do and some do not. In my country a great many ship directly. He sells at home to an independent buyer, and the independent buyer must buy that grain from the farmer at a grade which he feels certain he will get at the terminal. He grades it. But if he knows that he can not get a No. 1 or No. 2 northern grade for No. 1 or No. 2 northern wheat, he will only grade it at No. 3 and buy it at the No. 3 price. If he was certain that he could get a No. 2 northern price at the terminal, the honest grade to which it is entitled, he would then pay his No. 2 price to the farmer, so the farmer would, therefore, get the benefit of the honest grade. He does not now get the benefit of the grades his grain is entitled to. Senator Buenham. Something has been said here about the larger number of inspectors that would be required under this bill. Senator McCumbee. If yve take fifty of the larger cities the num- ber has been given as 150, deputies and all together, by the Secretaiy of Agriculture. I may be mistaken as to the exact number, but it is comparatively few ; it is not many. Remembering that this bill pro- vides for inspection and grading only at the great terminals, and I designate some, and considering that possibljr I may have left out something, that some new city will grow up and become ah im- portant terminal, or the grain may change from one center to an- other, it is left in the discretion of the Secretary of Agriculture as to whether and at what time the importance of ihe business would justify including other grading centers. There is nothing in the proposition that a great many are saying that the law will require an inspector at every elevator. It is only just the same as we have now. We would not need any more or less than we have now at the great terminals. Senator Money. It is not quite clear to me how grading at the terminals affect the price paid to the farmer. You state, and I have no doubt correctly, that he sells at the point of original ship- ment, and that the buyer there grades it himself. Senator McCumbee. That is, the independent buyer does. Senator Money. Any buyer who buys there? Senator McCumbee. Yes. Senator Money. He must grade that for himself, and he depends on his own judgment entirely. Senator McCumber. I beg to differ with you. He does not de- pend on his judgment at all. Senator Money. He has got to classify his grain in his hand, or however he does it. Senator McCumber. He has got to depend on his judgment what grade he will receive at the terminal. 58 PEDEEAL GKAIN INSPECTION. Senator Money. Exactly. When he examines his grain, he can make up his mind whether it is to be. classed as No. 1, 2, 3, or 4. Senator McCtjmbee. Yes. Senator Money. Then he at last risks his judgment, his inde- pendent judgment. Senator McCumbee. Of what the grain will grade at the terminal. Senator Money. Of course, with the uncertainty of what will happen at the terminal. We have the same difficulty in my country. Every farmer ships his cotton to the nearest station, and a great many sell right at the gin. The cotton buyer classifies the cotton, and he pays according to that classification. He has got to take his chances on the reclassification at the central point that it is shipped to. I do not understand how the reflex action can affect the farmer at all. Senator McCxtmbek. It will be simply in this way. I know enough about the grain trade, and I have talked enough with the independ- ent elevator buyers to know that as a rule they undergrade the farmers' grain when they buy it. That is, they undergrade it as to what in their judgment it is entitled to, because they say they know they can not get the grade it is entitled to at the terminal. Senator Money. You think that is the only reason they under- grade it? Senator McCtjmbee. Yes. Senator Goee. Is there enough competition among local buyers to make them put it up to the highest grade they feel sure they can get? Senator McCumbee. Oh, there would be if they could get an honest grade at the terminals ; that is, enough to get the best grade. There is in our section of the country enough to secure that. I believe the first witness will be Mr. Beall. STATEMENT OP MR, B. E. BEAIL, OF KANSAS CITY, KANS. Mr. Chairman, the a,buses practiced under the present system of grain inspection are almost too numerous to mention, but I will call your attention especially to a few specific instances, which will give you a fair idea of the position of the producers and indejjendent dealers who are not associated with or members of the different boards of trade. During the year of 19()<). u prcminent exporter had accumulated in his warehouse and elevators something like 30,000 bushels of wheat screenings, chicken feed, dirt, etc., which he attempted to mix with No. 2 " hard " wheat going from New Orleans to Europe for export, but on account of some difficulty with the inspector at that port, was prevented from doing so, but subsequently shipped all of RB. And he is one of the judges, and an interested party ? Mr. Beall. Yes ; boards of trade are invariably receivers and buy- ers of grain ; they do not produce it ; they have no interest whatever in the producer, so that under the present system the producer and shipper are compelled to consign their grain to market with the un- derstanding that the buyer is the sole judge of the grade. In other words, one of the litigants in the case also acts as the judge. This all appears to me as extremely unfair and unjust, and the only rem- edy possible is the enactment of a Federal inspection law, the em- ployees of which are appointed under civil-service regulations. With references to the exchanges at Galveston, New Orleans, Balti- more, Norfolk, Port Arthur, Pensacola, New York, Boston, Buffalo, Toledo, and Cleveland, the boards of trade themselves being the buyers and receivers, actually appoint and control the appointment of the inspectors in those markets, in addition to the committee of appeals of those various places being composed of their own members. FEDERAL GRAIN INSPECTION. 63 who are the buyers and receivers, so that in no instances where there is or is not State inspection at the present time, the producer and shipper absolutely have no voice whatever as to what his grain shall or shall not inspect. I notice in a statement made by Mr. Hamlin for the Chamber of Commerce for the city of Boston, that he contends that under Sena- tor McCumber's bill there would necessarily have to be an inspector located at all of the various points of destination for grain shipments in the New England States, and he says that under the present sys- tem there are immense quantities of grain going to the New England States that are not inspected at all. I beg leave to differ with Mr. Hamlin, as I believe that not less than 95 per cent of all the grain going to the New England States is inspected at some of the gate- ways through which this grain passes on its way to its destination. I Imow of no grain from the West that could possibly go to the New England States without having been inspected somewhere on the route at some of the gateways, such as Chicago, Cleveland, Toledo, Peoria, Philadelphia, Buffalo, so that it can not be said, in my judg- ment, that it would be necessary to have an inspector at these points of destination, as the grain will have been inspected, and if properly inspected, as it is contemplated that it would be under the proposed bill, it would not require an additional inspection if the identity of the grain has been preserved. I note that Mr. Hamlin has had a great deal to say with reference to grain getting out of condition in transit. In this I disagree with Mr. Hamlin, as it has been my experience, and the experience of a great many in the trade with whom I" am acquainted, that in almost all instances where grain is properly inspected in the first place it invariably goes through to destination in good order, but the grain that arrives out of condition is invariably grain that has been im- properly inspected originally. Senatbr Long. Do you mean to say that grain does not change its grade or condition in transit because of moisture ? Mr. Beall. I am coming to that now. It is true that grain will absorb more or less moisture, but if it did not contain more than a normal amount of moisture when the shipment was started, it will, like tobacco and other products, throw off whatever moisture it has taken on without any damage to the commodity. I note what Mr. Hamlin has had to say about the vast army of inspectors required under this bill. In my judgment there would be no more inspectors required than under the present system. Mr. Hamlin does not seem to be as familiar with the movement of grain as he should be. It is a fact that all grain shipments to market centers must move tinder the present transportation arrangements without any extra cost or expense for demurrage or on account of the routing than it would ordinarily require without inspection. For instance, all of the grain in the Northwest and Southwest, or, in fact, all grain originating west of the Mississippi Kiver, would natu- rally pass, whether for inspection or otherwise, through some gate- way like Minneapolis, Omaha, Sioux City, St. Joseph, Atchison, Leavenworth, Kansas City, Wichita, Winfield, Hutchinson, Topeka, St. Louis, Memphis, etc., where there are already inspectors located, and it appears to me that the same grain could be inspected equally "* FEDBBAL GEAIN INSPECHOlf. as cheaply under Federal inspection as it can under the present sys- tem, with the additional guaranty that it will be properly done, and done by disinterested parties, who have no interest whatever in the buying or selling of the grain so inspected, instead of under the present system, where the buyers have all to say as to what it shall grade. The cost of inspection under the present system is invariably charged back to the farmer or original shipper of the grain, and the producer or original shipper of grain never has, to my knowledge, objected to having his grain inspected, nor to the payment of the inspection charges. The cost of Federal inspection can not possibly be n.ore than the present cost, and under Federal inspection, as I understand it, the charges will be paid by the producer or original shipper, the same as under the present system, and they will be better satisfied, and there will be no objection to the payment of these charges, especially if they can be guaranteed fair inspection or service for which the charge is made. I also note what Mr. Hamlin has had to say with reference to uniform inspection. I do not understand that uniform inspection, under this bill, means anything except that No. 2 hard winter wheat must inspect the same in any part of the country, instead of under the present system it is inspected at every gateway, when one should be sufficient, if properly inspected in the first place. I do not under- stand that a standard for No. 2 hard wheat would be made to apply .to No. 1 northern, but that there should be a standard of No. 1 northern, and No. 1 northern should be the same all over the country alike, and so on, and that the different lands of grain should be graded and standardized. It is not a complex question, but a very simple one. The trouble is, under the present system it is so com- plex, and the construction that is being put upon it from day to day by the different inspectors in the different market centers is so elastic that it is utterly impossible for the shipper to send his grain to any place with any degree of certainty as to what it will grade when it gets there, and the different constructions that" are put upon it periiit of so many deductions in the price that it puts a burden upon him that is almost impossible to overcome. I believe that uniform grading of grain is as important now, and generally recognized by many as being as valuable to the grain busi- ness as maintenance of proper freight rates. This branch of trade is unquestionably materially damaged by the nonuniform^ methods now in force. Some argue that because the farmer sells to the dealer on view or by sample that he is not interested in any particular system of inspection. This is a very poor argument, for the buyer, who fixes the prices for the producer, is bound to be governed by what he can do in selling, and it all depends upon the uniforinity of the grades. The question has been asked, " How is this bill going to protect the farn-er who delivers his wheat in an elevator up in Minnesota two or three hundred miles away from some mill or grain market ? " I will answer that question by saying, for the informa- tion of the Senator, that the farmer is going to ship his own grain to market; he is doing it now; there are over 200 farmers and ele- vator companies located in the States of Kansas and Nebraska alone who are doing it, and why not give him a chance to do it ? Give him an opportunity to avail himself of the protection this bill will afford. FEDERAL GBAIK INSPECTION. 65 Of course if he does not avail himself of the opportunity he can blame no one but himself, and I want to assert at this point that the producers, small shippers, and millers, with but few exceptions, want this bill passed by Congress, and I dare say there has been not a single objection registered against this bill here by any of the hundreds of thousands of producers and small shippers not con- nected or associated with the boards of trade and commercial ex- changes, of which, as I have said, there are less than 4,000, and this will also apply to the mills, of which there are many more than 10,000 in the United States. Senator Gore. I do not understand what that 4,000 refers to. Mr. Beall. There are less than 4,000 grain dealers doing business on boards of trade who absolutely control the grain-shipping inter- ests of the country, and there are 10,000 mills and hundreds of thou- sands of producers. Senator Doliver. There seem to be some people running country elevators that are writing in against this bill. Mr. Beall. Oh, yes ; instigated by members of the board of trade, line-house people who are running this line of elevators throughout the country. We know where that influence comes from. No system of uniform grading of grain will ever entirely satisfy everyone in the business ; there will be differences of opinion in some cases; there will be cases where parties do not agree, but that is all the stronger reason why we should try and make rules to put in prac- tice' a uniform system. At the beginning of the grain industry in this country there was no urgent demand for an^ extensive system for classification, nor was it even thought at that time that there ever would be any such de- mand, but this, like all other enterprises that have sprung up in this country, has rapidly grown, until in a comparatively short time it has attracted attention in business affairs which is very noticeable every- where, and grain is not now, as it was then, produced for the ex- clusive use for the man or family, or use in some immediate locality in which it was raised, so that there was no great inconvenience caused on account of the absence of rules governing its inspection. Following the spread of this trade into localities where they had either failed to engage in the growing of grain or where for other reasons it was not produced, the necessity arose for some system to be employed by which an exchange could be carried on on a fair and equitable basis — one to be imderstood by both the buyer and the seller. For a long time it was suiEcient for all purposes to establish a custom of weights and measures for the various localities, but as trade expanded it became necessary to establish uniform weights and measures to govern trade in all parts of the country alike, so that under the present system of weights and measures it is understood to a certainty that when we sell a bushel' of wheat we must deliver 60 pounds and when we sell a bushel of oats we must deliver 32 pounds. Under the old grading of grain it was sufficient to say that it must be of a good merchantable qualitj, but it lat^r on became neces- sary to have a more definite classification of the different qualities by which the different standards according to their true value could be estimated, and the commercial trading could be enlarged so that 34503—14 5 ■ FEDIiB4.L G^&JTS INSPEOTIOH^, gome scale or rule cpuld be established by which different standijirds ot value could be measured according to their commercial worth, and out of this has grown the practice of judging and grading grain that has as many different rules as there are grain markets. Lrrantmg that it was a good thing to establish t]aese different rule^ tor the grading of grain in the different markets of the country, why woiild it not be better to further perfect these rules by a l^w pro- viding for uniform standards, with some provision for the enfprPie- ment of the law? If 60 pounds of wheat should be given and taken as a hushel of any grade, whether it be No. 1, No. 2, No. 3, or No. 4; if our No. 2 ' h^rd" wheat shoul4 have certain requirements, what argument could be advanced against this wheat so grading in any place? Senator Money. Does that secure uniiprmity of grade? You have inspectors everywhere. Will not the judgment of thesg i^- epectors vary as to quality? Mr. Beall. If the grain, as I understand it, is properly inspected, for instance, in Kansas City, loaded into a car and the car sealed, that inspection should carry that grain to any part of this country, as long as its identity is maintained. Senator Money. I understand that perfectly, but here is an inspec- tor who inspects a carload of wheat, we will say, and he says it is No. 2, and it goes a thousand miles off and another inspector inspecjts it and he says that that is No. 3. How are you going to put thiesie two minds on the same plane? Mr. Beaix. Because they are governed by the same set of rules of grading for inspection. Senator Money. How are you going to get the judgment the same in these two men? I have nothing to do with wheat, but I am a cotton raiser, and I know the trouble is that I find a man will look at some cotton and he will say that is grade so and so and is worth so many cents. Another man in the same little town will probably assure him that it is not that grade that the other man says, and yet they are both honest. Mr. Beall. But they are not guided by the same rules under th^ present system of inspecting cotton. Senator Money. There is no rule for the inspection of cotton. Mr. Beall. Don't they have some rule for classification of cottop on the different exchanges ? Don't the rules of the New Orleans Cot- ton Exchange require cotton must be up to a certain quality? Senator Money. Of course. That is their individual judgment 4own there, but I am talking about the buyer up in the country. Mr. Beall. Oh, yes. • . i, ^i. Senator Money. That is the point I am asking you, as to where the *''S-^'be°all^ Then I think I understand your question and will try '** Senator Money. How are you going to get a uniformity of judg- ment? ^ ' , » Mr. Beall. Jn the country? Sena-tor Money. Yes. i x ii, ^ tj! -i. ■ 4. ■ *i, Mr Beall Competition will regujate that. If it is a oertajfl^ +v,at fl certain nuality of whea,t will grade No. 2 and it goes to markgj all of the^eSors or dealers in grain at given points will know to PEDER^L GRAIN INgPEOTION. 67 a egvtainty, apd they will all understand that a grade of grain of a certain quality will grade, instead of as they do now, where they do not understand anything about it. Senator ^loNEY. Suppose it is thoroughly understppd what is re- quired of No. 2 or No. 1 at the ultimate point. That controls him apid he has gqt to know that. ■Mr. Beall. Yes. Senator SijEonet. Suppose it does, and suppose lie honestly intends to grade this wheat that he holds in his hand and his judgment is npjt like the judgment of the other. Mr. Beall. Goinpetition will make the judgment. Senator Money.' No ; I think it will not. Senator Buekett. Is not whpat graded by weight? The grading e ^84 pounds, we will say, to the bushel, and must have, we tfiII say, 70 or 80 per c;en,t pi SQqtch fij^e a,iid may cpi-regpond in th,e qthe,r resjpects. So ypu see that the same graiii, identically the same jgrain, if shipped at Miniieapolis wqiildgradp !No. ;l hard, find would i|iave tp be graded No. 2 hard in Chicago. Now, if you had exacjtly the s^me rule in Chicago ihat you had in li^n^eajpolis, jop wouid get pra,ctically the ^.ame grade, that is, by maJdug no mistake. Senator Long. Is the pr^ce pf tliese two grades the same? "° FEDEBAL GRAIN INSPECTION. Senator McCtjmbek. No; the price would less in Chicago, if it was No. 2. ' i- & 5 Senator Doluver. No element of freight enters into that? Senator McCtrMBER. No. Mr. BbaiX; It is lack of uniformity. Senator Monet. Lack of uniformity. Now, you say it has to be « o per cent of Scotch fife. How is that determined— by the eyes ? Mr. Beall. By the eyes. An experienced man can tell the Scotch nfe the moment he sees it. Senator Monet. That is the whole matter I have been trying to get information on. How are you going to fix the judgment of those men purchasing everywhere ? Senator McCumber. They may make mistakes. Senator Monet. I do not mean now to say that anybody will willfully fix a standard that he does not believe in. The cotton man does not do that. Senator McCumber. Ohj we can get it substantially accurate. There are aU degrees of difference between No. 1 and No. 2. No man can put his fiinger on the point from which the child changes from a child to a youth or a youth to a man, yet for all practical purposes we can divide people up into children, youths, and men. Senator Monet. I have had, in a little country town, a difference in the price of cotton per bale of $2 on my cotton, bid by half a dozen men who were just as honest one as the other, but it was a difference of judgment as to how that cotton would class. As I said, many things enter into the judgment, just as Senator McCum- ber very lucidly explained just now. Of course I do not intend to interrupt the examination. Mr. "Rtiat.t,. I think I will answer that a little further on. A great deal has been said about the impossibility of different in- spectors in different parts of the country agreeing upon the inspec- tion of a particular lot of wheat, and I would say that this is one of the greatest evils of the present system of the different States. The departments in these several States will not even agree when a car of grain is inspected at one point that it shall grade the same at another point in the same State, although the identity of the grain has been preserved, transported imder seal, which was broken in both instances by the officials of the same department, and with nothing whatever to show that the grain has in any way been af- fected while in transit. I contend that if a car of grain is inspected at Kansas City— that is, properly inspected — and the same delivered to some transportation company for delivery to some port, that the original certificate at Kansas City should not only carry it to any point in this country, but to any foreign port, and that under a iiroperly established uniform system of gracfing, to be done without prejudice by disinterested inspectorSj we would have the means of rehabilitating our trade, not only in the United States, but all parts of the world, and reestablishing confidence, and the standard of our grain would redound to the benefit of the producers of this country, instead of a loss to them of at least 10 cents per bushel, which they must suffer under present conditions. For instance, we will say a car of grain that has been inspected Bs No. 2 at Topeka, Kans. It is inspected by the State grain- jnspection department of Kansas, but they will not agree when that FEDERAL GRAIN INSPECTION. 69 car reaches Kansas City, Kans., 65 miles away, on the same inspection that it received at Topeka. Senator Long. That is done by State inspectors ? Mr. Beall. Yes. Senator Long. Are you sure they would agree if they were national inspectors ? Mr. Beall. The original inspection certificate at Topeka should carry the grain as far as it should ever have to go in this country, as long as the identity is maintained. Senator Long. So you think the judgment of this man that first bought should prevail, and that the law should not permit any inter- ference with that judgment even though that judgment is wrong? Mr. Beall. No ; you have the right of appeal at the time it was originally inspected, if there is any question about it, and let that be settled, once for all. Senator Money. Your explanation illustrates the difficulty of get- ting uniform judgment anywhere. Senator McCumbek. It is a uniform system, instead of a uniform judgment. Senator Money. You can get a uniform system and rule, to which eA'ery State and elevator and every board of trade man will agree, but you can not get a uniform judgment on anything, and there is where the difficulty with the farmer, in my opinion, lies. Of course I must defer my judgment to your experience and judgment. This is the first that I have heard of this bill, but these things naturally come up in the course of a hearing, and it is better to relieve my mind by inquiring now and trying to get all the information that I can. I have gained a great deal from Senator McCumber as it is, and also from the witness. Senator Long. When that car of wheat, inspected at Topeka, No. 2, reaches Boston, suppose somebody looking^ at that car came to the conclusion that it was not No. 2, what would you do then ? Mr. Beall. If the seller is satisfied with the inspection in the first place, the buyer is governed by the same rules that the seller is, and why should not the buyer be just as much satisfied? Senator Long. But when it reaches the buyer in Boston he makes up his mind that that is not No. 2, in his judgment, and what are you going to do about it ? Mr. Beall. He must take it and pay for it, and let that settle the question. You might go on forever, as they do under the present system. No one knows when it is going to be finally settled as to what grain will grade. ' Senator Long. So by law you could compel the Boston buyer to take the judgment of the Topeka inspector. Mr. Beall. Certainly I would, if it is properly inspected in the first place, unless he can show some good reason that this grain had not been properly graded. Senator Long. Would you, by law, make the price of No. 2 hard wheat uniform throughout the United States ? Mr. Beall. Oh, no ; that is a question of barter between traders. Senator Long. Certainly; and the Boston buyer may say, " I wiU not pay you the usual price for No. 2 wheat, because I do not be- lieve tliis is No. 2," and what are you going to do about it? Senator Money. He says to make hini take it. 70 FEOEBAL GKAIIsr IlirSPECTioN. Mr. Beall. If it is sold to go to Boston undei^ Federal inspection of. grain, that would g;overn. They sell it to the foreigner to-da;y under New Orleans inspection, and malse him take it and pay for it, and he has no recourse, and they load in screenings and dirt and Everything until we have got ourselves in such a shape that we can not sell wheat to Europe without doing it at a discount of 5 to l6 cents a bushel as against Argentine and Russian wheat. Senator Lokg. Which means that they will not take our inspection over there. Mr. Beall. Yes. Senator Long. They make their own inspection. Mr. Beall. They do it by making a discount on our inspection. Senator Long. Yes. Senator Doluver. Applicable to good and bad alike? Mr. Beall. On account of this present system we have got in such shape that we can not sell wheat to Europe except at a discount, be- cause of the mingling of the screenings and the low-grade stuff with the wheat. Senator Long. There, judgment as to the grade is different from the judgment of our inspectors? Mr. Beall. Why, certainly ; correctly so, too. Senator Long. If we had national inspection, you think that would fix it? Mr. Beall. I do not believe the elevator sj^stems would plug cars if we had national inspectors looking after it, and I think by the time some of them went behind the bars once or twice, they would not do it again. Senator Long. Your claim is that the State inspection is dishonest and corrupt in many States, and for that reason we ought to have national inspection? Mr. Beall. No; I do not claim that. I think that under, the present system it is so uniform, and that, the boards of trade have such control over the present system and State oflGlcials are so handi- capped by that control that they can not do their duty, first, to the people, and it must be to these dealers on the boards of trade, of which there are less than 4,000. Senator Bukkett. There is nothing in your bill, is there, that re- quires the inspection either at the beginning or at one end or the other? Mr. Beall. It must be inspected. Senator Burkett. At either terminal? For instance, let us take the Boston illustration. You say they must take it after inspection clear through. Is there a requirement in this bill to mate them take the Topeka inspection in Boston? , -j. • ,i ' -^ Mr. Beall. The only requirement, as I, understand it, is that it must be inspected, and when once inspected that is sufficient. Senator Burkett. Here is the whole business.- The same trouble comes with cattle, a6 to at which end the inspection should be. I can not see that there would be much advantage. Ot course, the wheat may change some in going from Topeka to Boston, something -may happen which if the man at Boston has to take the risk of wlien be buys at Topeka he is going to charge up to somebody. That is, he is going to charge that risk up to somebody. FEDEBAL GRAIN INSPECTIOK. 71 Mr. Beall. The risk is carried by the railroad company, if it is J>roperly inspected. Senator Money. This Government can not make a man live up to a Contract of that kind. Senator McCttmbee. Under the bill the inspection is required at the first great terminal, and that is all the inspection it will need. If it is inspected, we will say, at Minneapolis, and then goes to Chicago and then to Cleveland and these other places in the same degree, it would not be reinspected at every place as it would have to be inspected now, but the one certificate would go through to the end. Senator Long. A Boston buyer would take the Kansas City in- spection. Mr. Beall. He would buy on inspection. Under the bill it may be reinspected if there is any deterioration or something that would require reinspectian. Senator Long. At Boston? Mr. BeaIxD. Yes ; but it would not be unless there would, be soiiiB showing or necessity for it. The Department may reinspect, but is not compelled to. Senator Long. Can the buyer insist and secure a reinspection ? Mr. Beall. He seciu'es his reinspection at the place where inspec- tion is made by appeal. I have no doubt that he would have an ap- peal even to the proper inspector at the other point if it was necessary. Senator Long. That is the point. He may claim that the first inspection was wrong or that the wheat has deteriorated in transit. Can you not secure under your bill another inspection in Boston by Government inspectors? Mr. Beall. Certainly he could, but ordinarily the person Who buys it at Kansas City would take the chance of deterioration. He buys the grain as it is in Kansas City, aind it becomes his grain the moment it is shipped to him, and therefore if it was correct in Kansas City, the fact that it deteriorates on the journey would not affect his original contract with the Kansas City seller. Senator Buekett. None of this gbes to answer Senator Money's question as tb where the farlner comes in who hauls in a load of wheat to his local market and where he is going to be benefited. There is an elevator man there why buys the wheat of Farmer Smith or Farmer Jtones or somebody else, and he throws it all in together, and when it gets down to Kansas City or some other place, where there is an inspection made, the grade will be found, but Where is the benefit to the farmer ? Mr. Beall. The local buyer at the originating point buys that wheat, and pays for it, and fixes the price on it, and he can pay for it according to vphat he can do with his wheat when he gets it to Kansas Gily. If he can add 5 cents or 2 cents a bushel under this system more than he can uiider the present system, competition -will force him to pay that iliuch more to the farmer, because somebody else will have that advantage, and that somebody else will come in and say, " Well, I can make some money now out of the wheat business, because I know what it will grade at Kansas City." Senator Goee. The farmers can ship to the terminal points them*- selves. 72 ' FEDEEAL GBAIN INSPECTrON, Mr. Beall. In Kansas we have over 150 farmers' organizations ■where they are shipping to their own markets. There are over 200 elevators in Kansas and Nebraska that do their own shipping, and there are a number in Iowa and a greater number in North and South Dakota. Senator Gore. And there would probably be a good deal more with this system. Mr. Beaia. Yes; it would give them an opportunity instead of handicapping them as the present system does, so that they are afraid to ship. Under the present system the scheme is to make it so un- comfortable and so disastrous to the farmer that attempts to ship that he will be so dissatisfied with it that he will never make another attempt, and afterwards will ship his grain to the line elevator men. Senator Burkett. I have been through this, but I do not think you catch my point. Here is a thing that I have in mind. One man comes in and he has one kind of wheat. Another man comes in with another kind of wheat, say a poorer kind. The man who buys it puts it all together to make up his carload. Where is the farmer going to be benefited who brings in the good wheat? It is all- shipped out together, and it will grade only as good as the poorest of it. Where is the Ijenefit to the farmer ? If he has got a carload, I understand of course that he is the competitor with every elevator man. Every man is who has a carload of wheat, but he is not a competitor when he has less. There is not one farmer in forty who has a carload of wheat. Mr. Beau.. Oh, the most of them do nowadays. Senator Burkett. There is not one farmer in Nebraska in forty who has a carload of wheat. Senator Dollivek. How many bushels of wheat to the car? Mr. Beall. From 800 to 1,000 bushels. Senator Burkett. How is the farmer going to be benefited? Your bill is good, and the object of it is good, but Senator Money's question has not yet been answered. Mr. Beall. I think you misunderstand one thing about the han- dling of the grain at the original point. I do not understand that the buyer at this point will take a very poor grade of wheat and ppoil a mixture, mix up one and two different grades of hard wheat. Senator Burkett. Oh, of course I used extremes to illustrate. Mr. Beall. He would take that wheat and put it in a bin, and the No. 4 wheat he will put into another bin. As I said before, he will buy it and pay for this wheat on the knowledge of what he can do in the central market. If he can do better than under the present sys- tem he will necessarily pay more, because his competitor will pay more, and they will thereby push up the price for the farmer, and he will be directly interested and benefited in it, and there is no question about it. We must encourage the producer to continue to produce good merchantable grain, and the manufacturer to continue to manufac- ture good goods, which will be done by a uniform system of stand- ardization of all the different cereals, but this can never be done without eliminating the present irregular and nonuniform inspec- tion and establishing the grading of grain on such a uniform basis as to reduce it to as much certainty and common knowledge of the parties interested and have it as definitely settled as to the require- FEDERAL GEAIN INSPECTION. 73 ments of the different grades as is now the practice in our uniform system of weights. Since the establishment of uniform weights, about Avhich there was so much contention for so many years, we never hear of any trouble in that direction, except, possibly, as to the honesty and dis- honesty of the parties doing the weighing, so that this feature rarely ever enters into a transaction between the buyers and sellers of any commodity, except as to the honesty or 'dishonesty of the weighmaster, but under the present system of inspection, if the dealer is buying No. 2 " hard " wheat, and the grade is to be arrived at by the judgment of some one governed by the rules of some de- partment or exchange, who is only interested on the buying and receiving side of the question and has nothing whatever to do with the producing, originating, and the shipment of the product, and subject to the elastic construction that might be put upon it by the departments of some other locality or exchange, who are also inter- ested in like manner, possibly a thousand yards away, across an imaginary State line, I insist that he would naturally be compelled to add, besides a, reasonable profit, an additional amount to reason- ably insure him against probable loss in the juggling of such elastic views by the different interested departments, which, in 99 per cent of all cases, result to the advantage to the members of these various exchanges controlling the present inspection system and to the dis- advantage of the producer. Our present inspection system is controlled by approximately 4,000 or less dealers, who are doing business on the various boards of trade and who are not producers but receivers and buyers of the products of the United States, the producers of which number into the hundreds of thousands, and in Kansas alone I understand we have something like 80,000 or more farmers. It is true that boards of trade are banded together for the very purpose of controlling this business, while the farmers, producers, and small shippers of the country are unorganized ; yet it does seem to me that they should be considered whether they. are or not, and wbether or not they are represented here in an organized capacity, as is the case with the board of trade dealers, who are organized and who are so strenuously opposing this bill. There have been repeated meetings of the uniform grades con- gress, attended by representatives from State inspection depart- ments, commercial exchanges, and boards of trade, and it has not only been the general opinion at each of these meetings, but the opinion of every individual inspector attending them, that our pres- ent system is not only imperfect, but is not what it should or could be made; and what greater argument could we make than this in favor of uniform grading? At the congress in Chicago in December of 1906 there was a very complete set of rules adopted and recommended for passage; and while this applied only to the rules and did not prevent the ex- changes from putting an elastic construction upon them, yet it was a decided step in the right direction to remedy the evil complained of. It was a stand taken in the interest of adjusting an existing wrong. It was apparently as popular and welcomed as warmly as the proposition to regulate the discriminatory practices of our rail- roads. In fact, there was no argument advanced at these meetings 74 FEDEEAL GliAll>r INSPECTIOH. against the adoption of these rules, and this is another evidence of the value of uniform grading. This movement on the part of the various departments in this con- vention to get together on a Uniform basis soon gained wide circu- lation, and a decided opposition to it sprung up at the large centers with the result that at the next meeting of this congress in June or 1907 there was a complete backdown by the delegates to that congress. The influence that opposed the adoption of those rules is now at work apparently opposing Federal control and the establishment of uniform inspection by the Government. This is another very good reason, it appears to me, why we should have uniform inspection. With my experience in the grain business I can see no better reason for uniform inspection than that different markets have dif- ferent standards for the same cereal. I can readily understand why there might be a great deal of contention for different rules, different requirements, or different systems of inspection advocated by large and influential grain centers.^ I can also understand why the old system manipulators favored rebates and why the discon- tinuance of these privileges was so vigorously opposed by that ele- ment. I can understand also why this same element is so bitterly opposed, and why they are spending large sums of money to main- tain a lobby to oppose Federal inspection of grain. Uniform inspection of grain would be just to all and imjust to none. Then, is it not fair to assume that one would be as well satisfied if he knew he could as confidently rely on a staple aiid Uniform system of grading as he could on how many pounds he should receive for a bushel? Would not that in the end not only stimulate business between points in our own country, but reestablish and rehabilitate our standing, reputation, and business abroad, which is of necessity an important question? Would not the uniform inspection of grain eliminate the present element of uncertainty, the present speculative features that the dealers have to figure on to take care of uncertain and dishonest iiispection? I believe there can be rules established for uniform inspection ot grain so that it can be done vs^ith as much certainty and commofi knowledge, almost, if not quite, as the weighing of grain. I contend that the inspection of grain can be reduced to such a basis that there would be practically no variation, and if it is proper that the seller should abide by that or any other rule of grading it is also fair and proper that the buyer should be satis; fied. It simply means fair dealing to have uniform inspection; it means the elimination of favoritism at the haijds of parties who boii- trol the local systems; it means restored confidence in the business, with all features of uncertainty and classification wiped out ; and who can be injured if a square deal is given? Who is complainiiig about the trouble it will cause. Have yOU ever stopped to consider that carefully? It may injure some partiiJu- lar interest to be forced to abide by one riile or take one measure, bilt in the end it must be a wholesome thing for the business. Do yon knbw of anything more just or better than to be able to §» into any market and mj what you want, pay for it, and know to S. certainty that you are going to get it? I say what the business needfe is the elimination of favorites, and what we want in thie West and the grain-producing territory of this country is to be ablfe' to find the best market, where the best prices are obtainable, arid be able to ship our own product with soine degree of certainty, without being bur- dened with the present system arid with the knowledge that our grairi will l>e once inspected for good and all by disinterested parties, in- stead of, as I have said before, with a certain knowledge that we now have that one party to the transaction is to be the sole judge of what our grain is to grade, and, finally, thereby, fix our price to his own satisfaction, and in which we have absolutely no voice whatever. Senator McCtjmbee. I would like to have the witness now state with what society he is connected and what he represents. Mr. Beaix.. I represent the Farmers' Terminal Grain Company, at Kansas City, Kans., and the independent grain dealers of Kansas and Nebraska. Senator Long. Explain what these associations are and how many members they have. Mr. Beall. I can not tell you how many members they have, t should say there are at least 50,000 in each State. There are over 150 elevators and elevator companies in the State of Kansas that are now operating and doing business. > Senator Long. Belonging to your company ? Mr. Beall. Not to my particular company, but to the Independent Grain Dealers' Association. Senator Long. Who owns these companies? Mr. Beall. The farmers. Senator Long. In the different localities ? Mr. BiiALL. The farmers in the different localities OAvn these com- panies, and then these companies own stock in this Farmers' Termi- nal. Grain Company. Senator Dollr^ee. Are these cooperative companies, as a rule ? Mr. Beall. They are regular corporations organized under the laws of the State in which they are doing business. Senator Long. The farmers take stock in them? Mr. Beall. Yes. I know of some companies that have over 200 stockholders — 200 farmers in a local company, with $10,000 of stock. Senator Long. Each elevator is owned locally? Mr. Beall. Owned locally by a local company or corporation. Senator Long. And has no financial relation with an}' other cor- poration ? Mr. Beall. No. Senator Long. And this association that you represent is an or- ganization of these different local companies? Mr. Beall. You have got it right, and the same thing applies to Nebraska that applies to Kansas. Senator Dolltver. Do these local companies do any other local business besides buying grain? Mr. Beall. I think in some instances they handle coal and per- haps lumber. Senator Long. They come into competition with other elevators ? Mr. Beall. They come into direct competition with other elevators and grain buyers. Sienator McCumber. If you are willing to state it, I wish j6n would state to this committee what knowledge you have of foreign ship- 76 FEDEEAL GBAIN INSPECTION. ments and any reasons why the system has grown up of sending a poor grade across the ocean. Mr. Beall. The knowledge that I have is contained in a report which I obtained from the Interstate Commerce Commission. I will ask Mr. Greeley, who is present, if he has it here. Mr. Geeelet. Yes ; I have here the one that has the investigation at Chicago. Mr. Beau.. I know that American grain is discredited in Europe on account of my own investigation of the matter, and I will refer you now to what is said by Consul Thomas E. Wallace, in a report iroih Cref eld. He says : The grain dealers in northern and western Europe have been holding meetings, the principal purpose of which seems to be to take united action with regard to a change in the rules and methods of transacting business with the United States in their line, tind to correct abuses now exising in the same." The grain trade from the United States with this district has been declining; for some time, and if such dissatisfaction becomes general throughout Europe the losses to the people of America in this important branch of their export trade will be enormous. To gain some idea of the causes of the complaints regarding the grain exported from the United States I have made personal inquiry among the millers and dealers in these products, and am told that the conditions complained of here are the same all over Europe. The dealers say they have suffered excessive losses through the purchase of grain from America by its not grading up to the standard given in the in- spector's certificate in kind, quality, or condition when received. Wheat sold as good winter wheat and so certified to by the Inspector Is very often found to be new wheat mixed with old and often wormy wheat. Grain often arrives in very bad condition. Wheat purchased as new is found weevilly — very good wheat with badly damaged grain mixed with It. Corn Is started on the long voyage in an unfit condition and upon arrival is found spoiled. It is claimed that if corn is properly dried it will arrive In good condition ; that if shipped soon after being gathered it will spoil on the journey. They claim that at all times old corn should be mixed with new to insure its reaching the port of arrival in good condition. They say further that the American shippers well know these facts, but of late years refuse to take these precautions, and because of the rule that the inspector's certificate is final the purchaser is compelled to suffer the loss aris- ing from this negligence of the shipper. If the purchaser presents a claim for loss caused by grain received in bad condition, or of inferior quality from that certified to by the inspector, he receives no satisfaction from the shipper. TTNITED STATES ALONE TO BLAME. I am Informed that such conditions have been worse, that the purchaser here does not receive what he buys and that no reliance can be placed on the inspector's certificate. The result Is the miller has ceased to buy American grain for his mill and the farmer for" his stock. It Is further said that grain received from South America, Russia, or Roumania arrives in good condition, that received from the United States alone being bad. A general meeting of those engaged In the grain trade was held in 1905 by representatives from Holland and Gerihany. ~A meeting was held in London, in November last, in which appeared representatives from Germany, France, Holland, Belgium, Denmark, Italy, and England, Ireland, and Scotland, and BtlU another meeting was held on December 12 at Berlin. At all of these assemblies the principal topic for discussion was methods to correct the alleged abuses in the grain trade with the United States. There are many remedies proposed to abolish these alleged abuses. The Bhenish-Westphalian dealers want " rye terms " or " rye contracts " and Euro- pean arbitration ; grading for exports the same as grading for Imports ; grad- ing to be fixed for each year and to be communicated to the- European ex- changes, and minimum natural weight to be agreed upon. I am told that " rye terms " are as follows : " Slight dry warmth, through which the grain will not be affected, is no reason for objection. But the goods damaged through sea FEDEEAL GKAIN INSPECTION. 77 water or In any other manner shall be accepted by the buyer, but with a com- pensation for inferiority, which, through arbitration, shall be fixed on a basis of the contract price." From the sources of Information that I have so far been able to reach I learn that almost all the dealers demand that corn be sold upon the European " rye terms." All are agreed that the present system of inspection should be changed and that the inspector's certificate should not be accepted as final as to quality unless they are safeguarded.' Some say there should be guaranties for quality and quantity, that standards should be established for the new crop in America and samples be sent to Europe as a basis. COERCIVE MEASTJBES THREATENED. The dealers having radical or extreme views do not believe that an amicable settlement of the matter can be made with the shippers, unless coercive measures are used, and this is one of the reasons of the international character of these assemblies. It is said by them that some of the same conditions pre- vailed in the grain trade with Russia some time ago. The Russian dealers were invited to Berlin for a conference, but treated the action with indifference, whereupon the German dealers refused to buy any Russian grain, and in a short time Russia was asking for a meeting. The seriousness of this movement, threatening the loss of trade in this important branch of American exports, should not be underestimated. It ia general in its character and covers the countries buying about all of the surplus^ crops of the United States. The unanimity of sentiment expressed at these meetings indicates there must be good cause for complaint, and as representatives of nearly all nations of Europe are taking part in these assemblies and the meetings have become international in character,- it is time the American people, who are interested in this great and Important branch of the nation's industries and commerce, should take some action to preserve it from further losses. The questions involved in these disputes have become national in character, and the interests of the shipper should be held subordinate to the national industry in so far as national interests are involved. The moral question involved affects the char- acter of the whole American people as to the standard of honesty and integrity in business, and is of more importance to them than that of losses that may accrue to American trade. Now, I want to explain to you what " rye term " means. That means the European terms. That is what they are going to insist on, on buying this grain on their own inspection over there, instead of buying it on American inspection, as they do now and have done for all time past, and as long as it was all right and properly inspected and honestly done there was never any question raised about it. Senator Long. How general is the practice or habit of mixing wheat ? Mr. Beall. It is very general. Senator Long. How general is the practice of treating wheat, molded wheat and sprouted wheat, by machinery? Mr. Beall. That is the principal business of all these large ele- vators in the large market centers, to fix wheat up in such shape, polish it up, to take a bad musty lot of wheat and polish it up so that it fools the buyer and the defect in it can not be developed until it gets into flour and is cooked. They do not change the quality, but they treat it so as to fool the buyer and the inspector. Senator Long. Deceive the eye? Mr. Beall. That is the general practice. Senator Long. Is that practice increasing or decreasing in the trade? . , , . i mi Mr. Beall. I,do not see how it could increase very much. Ihere is very little room for an increase. Senator Long. Is this practiced by all elevator people ? 78 FBppiAL GB^IJJ JNSPECTipif. Mr. Beall. All eleva,tor people. Senator Long. Including your own company? Mr. Beall. We have no elevator. Senator Long. You have elevators out through the country ? Mr. Beall. No. We have no central elevator, and we have no c.Qji- trol over the country elevators. I do not Icnow what they do, byt that is not the general practice by the small country elevators, beca.use they have not the facilities for doing that treatment. Senator Gore. This bill makes no provision with reference to that evil? Mr. Beall. Except it requires that grain must be graded correc.tJ.y. Senator Goee. But if it f ools_ the inspector, that is a pretty hard thing to get over. Mr. Beall. There is a way of scientific inspection of grp,in that I think can bring out the question of whether it is good or b,^4: Senator Long. How far has that method of scientific grain inspec- tion been developed ? Mr. Beall. I can not answer that question. I understand there has been experimentation during the last year by the Agricultural Department. Senator Long. They are working at that constantly in the De- partment. Mr. Beall. I understand so, but I do not kno^f to yfh^t extei;L]t th^y have carried it out. Senator Bukkett. Who grades your wheat? Do you have a grade of your own? Mr. Beall. No ; the State of Kansas does the most of our inspec- tion, and the State of Missouri. Some of our grain arrives on the Missouri side and some on the Kansas side. Senator Burkett. Do you practice the same fraud that the other people do ? Mr. Beall. We sell our grain on the track. We do not operate an elevator or do an elevator business. We sell it right out in the cars as it comes in. Senator Burkett. Does your grain sell better, from your knowing that it will be graded at the same grade at which it comes in-? Gari you sell your grain at any higher price than the others can ? Mr. Beall. No; we have to take the market the board of trade fixes. Senator Burkett. Will not your grain get a reputation such that it will be worth more ? Mr. Beall. We have been hoping so, but we find that the influences exercised on the other side of 'the question are too strong for us so far. Senator Burkett. You take it in the car as it comes in and ship it out in the car and you do not unload or clean ? Mr. Beall. We sell it to the local mills. Senator Long. Has any of it been cleaned in the local elevators over the State before it comes to you ? Mr. Beall. I rather think so. Probably they have cleaners. Senator Long. They have these cleaners now and the machinery for treating wheat all over the country, have they not? Mr. Be^ll. You will find those mostly in the line houses. You will rarely find a clipping machine in the local farmers' independent elevators. ' FEDERAL GRAIJSr IJirSPEOTION. 79 Senator Long. What is a clipping machine? Mr. Beall. It is a clipping machine tUat will polish a grain of wheat like a billiard ball. Senator Dollfver. Take the whisl^ers off of it? Mr. Beall. Yes. Senator Long. Take the sprouts off? Mr. Beall. Yes; and the only way to deterjnine what it is is to get inside of it. Senator Money. Your concern has not ascertained yet .whether honesty is the best policy? Mr. Beall. Well, we are pursuing that policy. Senator Monet. You have not found out that it pays? Mr. Beall. It has not yielded a great deal of dividend, so fay. Senator Money. You think it is a good practice, at any ra.te ? Mr. Beall. We think so, and we are sticking to it yet for a >vhi,le. Senator Dolliver. I think the hour has come when we will have to suspend the hearings. The committee then adjourned until 2.30 o'clock p. m. AFl'ER recess. At the expiration of the recess the committee resumed its session. Present: Senators Dolliver (acting chairman), Burnham, Perkins, Burkett, McCumber, Money, and Gore. STATEMENT OF SAMUEL H. GREELEY, ESQ., OF CHICAGO, ILL- Mr. Greeley. Gentlemen, if you will pardon a personal reference to myself in an introductory way, I will state that for the past ty?enty-seven years I have been connected with the Chicago Board of Trade in the capacity of a commission merchant. During my experience there I became somewhat familiar with the operations, of the grain trade in that city. As a member of the board of trade I represent nobody but myself; but I have the distinguished honor of representing the two largest farmers' cooperative elevator asso- ciationg in the world — those of the States of Illinois and Nebraska, having an enrolled membership of about 65,000 men. It is a very difficult task indeed to appear before a committee to properly present the question which I have to present to you to-day. It is a question of the game in grain, and owing to the very intricate relationship of casla grain to trading in grain for future delivery, or what may be termed the speculative features of the market, it will be somewhat difficult to make known exactly and plainly to others not interested in the trade what I have to .state. Senator Perkins. If you please, Mr. Chairman, in order to com- plete your narrative of your business, Mr. Greeley, and what you are engaged in, and the elevators you represent, let me inquire what is the capacity of the elevators which you represent ? Mr. Gbeej^ty. I have never rhad the figures regarding the capacity of those elevators. I will, however, endeavor to approximately name it. Senator Perkins. I will lask you to furnish it later, so that the committee may have it, if you please. 80 FEDEBAL GRAIN INSPECTION. Mr. Greeley. The men whom I represent are stockholders in the farmers' cooperative elevators. Whenever there is any question which seriously affects large bodies of men, numbering m the thou- sands, it is generally the case that some relation exists between the State and the individual, or the individual and the State, by which either the individual usurps the right of the State or the State fails to perform a certain function for the individual. Wherever the State refuses to perform a certain function for the individual or the individual usurps the rights of the State, there is generally born a system of .special privuege. That sytem of special privilege constitutes in itself a monopoly, and the monopoly generally works to the hardship of the people. In the grain trade there exists a monopoly in the city of Chicago, the monopoly being the results of a usurpation of a public function by private individuals acting for their own interests in a private capacity against the interests of the public. Whenever we discover a disease there is a medical science often a cause for that disease in a germ. Wherever the germ is discovered it is almost certain that the disease prevails ; and wherever the disease is noticeable it is generally sure that the germ is existent. We have a disease and a germ, a cause and an effect. I desire to present the effect first, leading up to the cause. In order to go into the history of the inspection of grain in the Chicago market it is necessary for us to consider the effect produced in its large bearing among large masses of men and people and its general importance to the public. In order to do so, I wish to state that previous to 1887, when the interstate-commerce law was passed, the railroads were in the habit of giving rebates to grain shipjpers on various lines of road entering into Chicago. Fearing the effects of the interstate-commerce law they discontinued the rebates to indi- vidual shippers and selected one trusted rebater on each large sys- tem of road entering Chicago, it being the business of that large trusted rebater to haul that grain to Chicago and thus protect the railroads in the haul from the western points to the Chicago mar- ket. Ill addition to granting secret rebates they gave the men ele- vator facilities on these different roads, these elevators being the public warehouses for the transaction of the public's business in the Chicago Market. When the individual rebater became possessed of the public warehouse facilities he became possessed of an opportunity to merchandise grain in a public house without the payment of the storage which was exacted by him from the public, thus giving hini the advantage of the storage charge in the handling of grain through the public elevators. Senator Goee. Who owned those? Mr. Gkeeuey. Largely the elevator companies — ^in almost every case at that time. Senator Dolliver. With the railroad officials Mr. Greeley. With the railroad officials probably included in the division of the profits. That, however, I am not stating as a fact, having no knowledge on the point. Having possession of the public warehouse facilities, a system was introduced whereby those elevators would become profitable to the public warehousemen. The system was that if the grain entering the city could be bought on the basis of the lowest possible grade, FEDEBAL GKAIN INSPECTION. 8! put through private elevators, mixed, and put into public houses, and made the lowest of the improved grade in the public house, it would result to the benefit of the warehousemen in this way. It then became the duty of the warehousemen to continue the manu- factured grades of grain in storage, those grades, being made up of such a poor quality of the improved grade that the public would not desire to remove it from storage. The aim was for the elevator man to sell it ahead for future delivery at a premium ; and when the future delivery day came, when he was to deliver the receipts on his contract, the grain would be of such inferior quality (made from a manufactured article in what they term a " hospital " or private elevator) that the man who had bought the grain would, as we term it in the trade, " liquidate," or sell out. The elevator people stood ready to buy at the depreciated price, and would then resell for an- other deferred delivery to another speculative bull or bear. He in turn would pay a premium for that next deferred delivery, and thus a tax would be added to the grain for the privilege of buying that future. Thus was introduced an endless chain, from month to month, of forced liquidations on the part of the people who bought this grain. That went to such an extent from 1887 to 1893, and the depreciation of the grain by the forced liquidations of the speculative public be- came of such enormous importance, that corn on these western praries sold for 8 cents a bushel. I sold oats in the Chicago market myself for 13 cents and the best grade of corn for 19^ cents a bushel. That produced the panic of 1893; and it was all caused by half a dozen men in the city of Chicago. Then the people on these western praries all cried, " We will seat Bryan in Denver if we don't seat him in Washington." It was the cry of discontent. The purchasing power of the people had been impaired. Senator Dolliver. Do I understand that this stock of manufac- tured and inferior grain was kept there, practically the same mass of grain, to serve as the basis Mr. GKEEuiy. As a club to depress the values and drive out specu- lators. Senator Dollivek. Was it to serve as an instrument to offer deliv- ery on these speculative contracts ? Mr. Greeley. Yes, sir; it was. Senator Dollivek. The same pile of grain? Mr. Greeley. The same pile of grain, often, from year to year. Senator Dolliver. That is a very interesting statement Senator Perkins. Did not the weevil attack it ? Mr. Greeley. It might and it might not. If the weevil attacked it and got into it, they would deliver to the public just the same. Now let me continue this little discussion, so that I may keep the thread of it. The aim and object of the men in this combination is to make this grain of as low a grade as possible of the grade which is necessary for delivery— to make it not only low in grade but low in price; for the lower the price the less interest and insurance they have to pay to carry it themselves in storage pending the day of future delivery for which they have sold to the future speculator. The whole basis of the scheme of the conduct of the grain in the public elevators was a 34503—14 6 82 PEDEBAL GEAIN INSPECTIOlSr. depreciation of the price. The whole scheme was to buy the grain on the initial inspection froni the country shipper at the lowest possible grade at which they could buy it, and then, having made it into the manufactured article in the public house, to make the gain in the public house as poor a quality of the increased grade as was possible to make it, to continue its life in storage, to earn the tax from the future speculators who bought it. In other words, it was a pawn- broker's game, the holding of the grain in pawn subject to a tax which the speculative public had to pay. That system has one very important ally. The important ally is the inspection of the grain. Previous to the usurpation of the pub- lic facilities in 1890, or about that time, there was existent in Chicago a system of public warehousing of grain whereby the aim of the in- spection department and the aim of the public warehouse proprietor (he himself being not a dealer in grain) was to maintain a high standard of the grain in storage, in order that the public would buy the receipts of his elevator and keep the grain moving and attract it to his road and to his elevator, and thus furnish him with a large amount of storage. Now the system prevails that instead of increas- ing the standard and protecting the buyers and protecting the ship- pers who send the grain to market, the scheme of these men is to depreciate the initial inspection and to appreciate the "inspection of the poor grain into the contract grade in the public house. Senator DoLLr^EE. Who makes this initial inspection at Qhicago? Mr. GeeeiaEy. The State inspection department. Senator Dollivee. Do you claim that that is an unreliable insti- tution? Mr. Geeeley. I certainly do. Senator Dollivee. And who makes the inspection of this elevator grain ? Mr. Geeeley. The State inspection department. Senator Dollivee. It is the same inspection? Mr. Geeeley. The same inspection. Senator Peekins. Do the exporter and the miller purchase this grain on its merits, or on what it rates in the market ? Mr. Greeley. There is not a grain man in the world familiar with the Chicago market who will buy a public warehouse grain receipt, and remove that grain from storage under any circumstances without an absolute knowledge of the grain he is going to get from that ele- vator. The standards of the public warehouse receipts in Chicago are in disrepute simply on account of this system and the inspection department which places the value on those receipts. Senator Dollivee. You hold that those facilities for distributing grain have really become a hindrance to the commerce in grain ? Mr. Geeeley. They certainly have become a hindrance. In order lo show you the magnitude of the forces at work under this system in Chicago I have prepared and printed a list of the Chicago public warehouses in control of what we in Chicago term this trust in the public facilities. Every elevator in Chicago is under the control of this system, with a total of 21,000,000 bushels of storage capacity, with the exception of one elevator. Senator Dollivee. Why do you ca.ll it a trust? FEDERAL GEAIN INSPECTION. 83 Mr. Greeley. I call it a trust because they are in a trust; in a com- bination. The articles of combination I shall be pleased to read you if you desire to have them in this discussion. Senator Dolliver. I should like to have the whole thing. Mr. Greeley. The private warehouses in the control of this trust aggregate a capacity of 13,150,000 bushels. There is a total capacity of 34,150,000 bushels; that is, between one-half and three-quarters of the total grain-storage capacity of the city of Chicago is in the control of five men. The five men I shall be pleased to name to you, so that we may have no misunderstanding in regard to the system, the men that work it, and the condition that exists. I have handled tens of thousands of cars in the Chicago Board of Trade. I have stood in front of one sample table for seventeen years as a handler of grain. I have sampled hundreds of thousands of carloads on the floor and noted the inspection. And I am free to admit that there is not a grain merchant of standing who is not either friendly to or affiliated with this organization in Chicago who will state, either under oath or otherwise, that a public warehouse grain receipt under the management of this public-elevator trust and the State inspection department is worthy of the respect of any man in the trade. If millions of bushels are hoarded at market centers for the purpose of accumulating a storage charge by the collection of those storage charges from the people who buy grain for future de- livery, and the speculative public is constantly forcing liquidations at these future months when the time comes for the delivery of the grain, our contention is that it not only depreciates the price, to the profit of the trust (which is largely interested in the speculative market also, and- reaps a profit from that also) , but the tendency is to depreciate that large amount of the crop which never seeks the market and places values upon the crop of the entire country which does not leave the farm. I am told that in the case of the corn crop not over from 10 to 20 per cent of the crop ever leaves the farm. But the operation of this system tends to the depreciation of the entire values of the crops ; and it goes into the hundreds of millions of cents per bushel on that part of the crop which never seeks market. If this condition did not exist, and if we had a fair inspection and a fair warehousing of grain at the market centers, and independent custodianship of the grain in the public elevators, the confidence of the people would be so thorough in the management of the elevators and in the quality of the grain that these stocks would not accumulate at the market centers and would not be an advertisement to the world that Chicago is overstocked in grain and we are overproduced in crops. Then the world would take from those public elevators the accumulations as it used to before these men became enthroned there ; and the effect upon the speculative market (which is the great effect upon the market) would be that instead of the longs liquidating on account of the inferior load carried at the market centers the shorts would be obliged to cover, ,and the prices would be on the boom rather than on the decline on account of the effect of the accumulations, as now. Senator Perkins. You have anticipated what I was going to ask Sou. If I were a client of yours, or the client of any member of your [erchants' Exchange in Chicago, and should buy 10,000 bushels of "■* FEDERAL GBAIN INSPECTION. wheat for June delivery, when the time of delivery comes you have sold me something you have not got and something I do not want, but we settle on the difference; do we not? Mr. Greeley. That is entirely legal, and that is done to a large extent. Senator Perkins. Then the point that I wish to follow up is, How does Federal grain inspection prevent that or help the farmer ? Of course we are supposed to be here in the interests of the farmer alone, practically speaking. Our chairmaii is, I am sure, because he comes from an agricultural State. Mr. Greeley. The fact that two men make a contract, one buying a certain number of bushels of No. 2 red winter wheat and another selling a certain number of bushels of No. 2 red winter wheat, and the fact that that. grain is never delivered, but the difference is paid in the settlement of the contract, seems to me to have no bearing in a certain sense, but it has a bearing in another, because the_man who bought the grain for future delivery would be more likely to be the tirst to run from his contract or try to get out of it or try to liquidate it Jpe- cause of the fear that he would have that if the wheat were delivered it would be of this inferior quality which I claim exists in the public elevators. The parties to this arrangement in the public elevator system of Chicago are the Peavey Grain Company, the Central Elevator Com- pany, the Calumet Elevator Company, the South Chicago Elevator Company, the Armour Grain Company, and the J. Rosenbaum Grain Company. The firms which are intei;ested in these elevators, opera- ting as firms and not as elevator companies, but stockholders in each, and really the manipulators of both, are, in brief terms. Armour, Peavey, J. Rosenbaum, J. C. Shaffer & Co., and Bartlettj Frazer & Carrington. Every one of those men is a dealer in grain in a public elevator contrary to law, and is usurping Senator Dolliver. Contrary to what law ? Mr. Bartlett. Contrary to the laws of the State of Illinois. They are usurping the rights of the public by permission of a continuance of the system by the State officials of Illinois, whose duty it is to prosecute them. It is not a question as to whether or not they have the privilege so to deal in grain, because we hold a copy of the testi- mony in full which was sent up to the supreme court of the State of Illinois, the suit costing about $30,000, the money being spent by the board of trade to secure the decision that a public warehouseman could not be a grain dealer. This is a copy of the testimony [refer- ring to volume placed on committee table]. I have stated that these men deal in grain, and deal in such a way that it operates to the detriment of the shipper and to the detriment of the buyer and to the detriment of the speculative public, and that their ally and chief assistant is the State inspection department of Illinois. In order that you may be a little more certain in regard to those statements, and that my statement may not be the only thing you have on the point, I will read a few brief paragraphs which will only occupy two or three minutes. In testimony before Judge Tuley in the trial of the case to prevent public warehousemen from dealing in grain, the following testimony was given by Mr. Patten, who was then an independent FEDERAL GKAIN INSPECTION. 85 grain shipper. He has since become a member of the firm of Bart- lett, Frazer & Carrington, and is a member of the Chicago grain trust. His testimony before Judge Tuley, as an independent shipper of grain, reads as follows : About the time I speak of — This was from about 1890 to 1894^ I found difficulty in Becuring enough grain, and found elevator companies were going around amongst the tables bidding one-eighth to one-quarter of a cent more than the priqe bid in the car-lot market. They were giving up a portion of the storage. I also found they were willing to resell that gi'aln to me at a quarter of a cent less than they were paying for it. In the course of time I found I Couldn't buy anything in the car-lot market, and that I had to buy all my grain from the elevators. Then, again, in the course of time I found that I eoulda't buy anything from the elevator companies only when they pleased to sell me. I found that they were offering gi'ain in the Bast to my own customers at prices that they nsked me. There was no money in it for rfle to buy grain and resell It at the same price. It grew Worse from 1890 down to the time I quit the business. ThM-e is no car-lot trade left now. He also stated at the same trial (this is a continuance of his testi- mony) : •I said something about competition of elevators in the eastern markets. I was affected by competition to certain extent. The New England trade make a specialty of yellow corn. Now, here is the system : There are grades in our, market of 2 and 3 yellow. These elevator com- panies also had private elevators which were not under the control of the State inspection. They would buy both grades to go to store and sell the No. 2 grade yellow in New England. I noticed from the inspection sheets that these companies very rarely inspected any yellow corn out of store. It always comes out No. 2. And I noticed 1 had that competition to meet at the other end, from the elevator companies. In other words, they adulterated their goods, to be plain. They didn't give the trade East what they claimed to, although they gave them the inspection certificate of out inspection. What better authority could there be in the world than Mr. Patten, then a large shipper and now a public elevator man ? And Mr. Pat- ten has come to the conclusion that it is better to get into the eleva- tor business and rob the people than to stay out of it and be robbed by them. Also, in conjunction with that same feature, before the Interstate Commerce Commission, in this case, October 15 to November 23, 1906, Mr. John Stream, of the firm of J. C. Shaffer & Co. (or, rather, its manager), also stated: We generally buy grain on basis of futures. Now, that is all right. All grain trade as a rule, in its larger capacity, is regulated upon the course of speculation and the in- fluence of speculation. These men try to force speculation as the leading problem; and their larger profits are not on the grain that goes thro'Ugh these houses (a few millions), but upon the countless millions of forced liquidations and control of the market which they, having possession of the facilities, are able to turn either way to their own benefit [reading] : We generally buy- grain on basis of futures. Tho price of the future Is es- tablished on the floor and we base the price of the cash on the futures, so °^ FEDERAL GBAIH INSPECTION. fti^^^^Tv®""^ °"L?:'"^ ^^^^ *° ^^^ country any acceptance we get we sell for future delivery. When the grain comes In, If it grades— That means if it is up to contract^- we sell it out and buy back the future. There is a second chance for them. If it does not grade, we put it into the clearing house, and if we can ship it to better advantage we ship it without putting it into the public house. If we can not — That is, if it does not grade, and they can not ship it when they put It into the clearing house — we make it into contract grade and sell to a member of the board to go into a public house, immediately buying back our future. Now, gentlemen, there is the system. Senator Perkins. Admitting that all you say exists (which we are not prepared to deny) , will you be kind enough to explain how you think Senate bill 382 will cure these evUs ? Mr. Geeeley. I will try to get to that in just a moment, because it will assist me to continue right along. Senator Perkins. I do not want to disturb the continuity of your argument. Mr. Greeley. No; but keep that in mind, as I intend to take it up as the closing portion of my address. Senator Dolliver. Where does the man that actually wants grain in this country go to buy it? How does he get it out of the mess there in Chicago? Mr. Greeley. He does not take it, as a rule, if he can help it. Senator Doluvee. Yes ; but in the case of a man that is running a inill, and has to have wheat, where does he get it ? Mr. Greeley. He goes out of that crowd to get it; and they keep that grain there as a constant club to hammer the price down. Senator Dolliver. Would any evil happen to the wheat business and the legitimate wheat, trade if those speculative ventures in wheat were abolished altogether by Congress ? Mr. Greeley. Many benefits would arise if this condition were abolished, because buyer and seller alike would get fair play in the public warehouse system of Chicago ; and the control of public ware- houses would be taken away from the possession of the men who, by not having control of the facilities and the warehouse receipts and the complete ownership of the property, would not have the master hand in controlling speculation, and the character of the grade, and the character of the receipts in any form. It would be under inde- pendent custodianship. Senator Dolliver. There is a suggestioh made here to abolish the whole business, you know. Senator Money. Would you like to see dealing in futures stopped by law to-day ? Mr. Greeley, No, sir ; I would not. Senator Money. You would not ? Mr, Greeley. No, sir. I am opposed to the stopping of future trading in grain. I am never opposed to trading in grain futures, when a man goes on an open excliange, and one man buys a certain quantity for future delivery and another man sells it. FEDEBAL GRAIN INSPECTION. 87 Senator Money. Does that have any depressing effect upon the farmers? Mr. Greeley. No, sir; that has no effect upon the farmer. The evil is not in the contract made for the purchase and sale of grain. The evil lies in the preponderance of the opportunities which certain people have in the market of forcing those contracts, when they are made, either one way or the other. The evil is not in the contract itself, because that is legal ; the evil is in the condition that exists by the force and weight of the power of the men in control of the places where the contracts must be consummated, in forcing the ^alue of the grain. Senator Money. Does that evil injure the farmer? Mr. Geeeley. What evil? Senator Money. You are just talking about an evil among a cer- tain lot of dealers in grain. Mr. Greeley. Yes, sir; I claim that that injures the farmer. Senator Money. You claim that it does injure the farmer? Mr. Greeley. Yes, sir. Senator Dollivee. I had an opportunity last summer to investi- gate, in a lawsuit, the general character of these dealings in grain on the Chicago Board of Trade ; and I got the general impression, from the admissions and the trading cards that were put in evidence, that the whole business is a mere gigantic bucket shop in Chicago. Mr. Geeeley. Senator, just jot that down, and we will continue on the subject of the elevator end of the matter, and then we will take ,hold of that. I want to call your attention now to a decision of the supreme court in reference to public warehousemen dealing in grain. I am linking the great force that is at work for the depreciation of grain values with the State grain-inspection department as its ally. Let me finish in that connection, and show the illegality of the alli- ance; and then, if we wish to enter into the speculative feature, we will do so. There is the opinion of Judge Tuley, as a result of the evidence in that book — a trial in 1896 that cost $30,000 — which decides that a public warehouseman shall not violate the law and deal in grain. I hold in my hand the decision of. the supreme court which de- clares unconstitutional a State law which elevator men had passed at Springfield after Judge Tuley rendered his original circuit court decision. They jumped right down to Springfield and had a State law passed permitting them to do what the State courts said they should not do. But then comes in the supreme court, and declares that law unconstitutional ; it stands unconstitutional to-day. The supreme court decision is in this little pamphlet that has been published ; and I will just quote two minutes of it. This gives you a little clearer idea as to the views of the supreme court after hearing a large volume of evidence. Senator Gore. You say the supreme court had it published ? Mr. Geeeley. Yes, sir ; they had it published [reading] : The constitution declares that warehouses such lis defendsnits are licensed to carry on are public warehouses, and that it shall be the duty of the general assembly to pass all necessary laws to give full effect to that article of the constitution, which shall be liberally construed to protwt producers and shippers. °° FEDEEAL GEAIN INSPECTION. It does not say, " liberally construed to protect the warehousemen " [reading] : It is a firmly establishea rule that where one person occupies a relation iu which he owes a duty to another he shnll not place himself in any position which will expose him to temptation of acting contrary to that duty or bring his interest in conflict with his duty. This rule applies to every person who stands in such n situation that he owes a duty to another, and courts of equity have never fettered themselves by defining particular relations to which, alone, It will be applied. They have applied it to agents, partners, guardians, execu- tors, administrators, directors, and managing officers of corporations, as well as to trustees, but have nev-er fixed or defined its limits. The rule is founded upon the plain consideration that the one charged with duty shall act with regard to the discharge of that duty, and he will not be permitted to evpose himself to temptation- He shall not even be allowed to expose himself to the temptation— or be brought into a situation where his personal Interests conflict with Ms duty. Courts of equity have never allowed a person occupyiBg such a relatioh to undertake the service of two whose Interests are in conflict and then en- deavor to see that he does not violate his duty, but forbids such a course of dealing, Irrespective of his good faith or bad faith. If the duty of the defend- ants, as public warehousemen, stands in opposition to personal interest as buyers and dealers in grain storing tiie same in their own warehouses, then the law interposes a preventive cheek against any temptation to act from per- sonal interest by prohibiting them from occupying any such position. The public warehouses established under the laws are public agencies, and the defendants, as licensees, pursue a public employment. It is clothed with a duty toward the public. The evidence shows that defendants, as public ware- housemen storing grain in their own warehouses, are enabled to, and do, over- bid legitimate grain dealers by exacting from tibiem the established rate for storage while they give up a part of the storage charges when they buy or sell for themselves. By this practice of buying and selling through their own elevators the position of equality between them and the public whom they are bound to serve is destroyed, and by the advantage of their position they are enabled to crush out, and have nearly crushed out, competition in the largest grain market of the world. The result is that the warehousemen own three- fourths of all the grain stored in the public warehouses of Chicago, and upon some of the railroads the only buyers of grain are the warehousemen on that line. The grades e.stablished for different qualities of grain are such that the grain is not exactly of the same quality in each grade, and the difference in market price in different qualities of the same grade varies from 2 cents per bushel In the better grades to 15 cents in the lower grades. The great bulk of grain is brought by rail and in carloads and is inspected on the tracks, and the duty of the warehousemen is to mix the carloads of grain as they come. Such indiscriminate mixing gives an average quality of grain to all holders of warehouse receipts. Where the warehouseman is a buyer the manipulation of the grain may result in personal advantage to him. Not only is this so, but the warehouse proprietors often overbid other dealers as much as a quarter of a cent a bushel, and Immediately resell the same to a jwivate buyer at a quarter of a cent less than they paid, exacting storage which more than balances their loss. In this way they use their business as warehousemen to drive out com- petition with them as buyers. It would be idle to expect a warehousemen to perform his duty to the public as an impartial holder of the grain of the' dif- ferent proprietors if he is permitted to occupy a position where his self-interest Is at variance with his duty. Now, gentlemen, there we are to-day. I venture the assertion that 98 per cent of the grain coming into the public warehouses in Chi- cago goes inta the possession of five firms. Senator Dolliver. You say that is in violation of the laws of Illinois ? Mr. Greeley. It is in violation of the law. Senator Dolltvei!. Is there ;iny penalty attached to the violation of that law? PEDEEAL GBAIN INSPECTION. 89 Mr. Greeley. Yes, sir ; there is a penalty, as prescribed by statute. Senator Dolliver. Do you have any influence with the prosecuting attorneys there? Mr. Greeley. We have been to the prosecuting authorities, and I want to submit the evidence that we have taken up there. Now, the exil exists. Judge Tuley says so. The supreme court of the State says so. These grain men coming here say so, and I say so, as an in- dividual. I can bring here hundreds of rnembefs of the board of trade who are not connected with these men who will say so^repu- table business men — and I challenge any man in this country to state that a public warehouse grain receipt is clothed with any degree of honor whatever. No man will make the statement that it is, unless he is bereft of his reason. I remember the time when the public warehouse grain receipt was sought the world over — when independ- ent proprietorship existed — and when State inspection, without col- lusion with State officials, was honest. I want to show you now just one little expose that has occurred recently that shows the methods by which these men carry on -their business. It will be very brief, as I know you do not want very much of your time taken up with this kind of thing. Senator Perkins. Do you mean to say, sir, that a. storage receipt for a thousand tons of grain, or any other part of it, in a warehouse is not a negotiable instrument for value received? Mr. Greelef. It is a paper of depreciated value, in disrepute the world over. Senator Perkins. In California, if you have a warehouse receipt, the proprietor of the warehouse commits a penal offense if he does not deliver you the identical grain that you have stored there, subject, of course, to ravages of the enemies of the grain not covered by insurance. Senator Dolliver. Do you mean the identical grain or the identical grade of grain? Senator Perkins. They give you the identical grain--the very same sacks that you left there ; and there is a man in prison out there now because he failed to do that. (After an informal discussion:) Mr. Greeley. Now, as illustrative of the method : Mr. Patten says m his testimony that he was run out of business and that they adul- terated their goods. John Stream, the manager for J. C. Shaffer & Co. (one of the five firms operating these thirty millions of storage capacity) , says, in the quotation which I read, that they manufacture the grain into the contract grades ; and when it is too poor, if they are cleaning house and it is not a contract grade on arrival, they put it into a mixture and deliver it on to the public. Now, this is the way they do it: This is a report of a committee appointed by the board of directors of the board of trade relative to certain information Avhich was prev- alent regarding the J. Eosenbaum Grain Company, proprietors of public warehouses in the city of Chicago— or, rather, J. Eosenbaum was the proprietor, but his firm was also indirectly interested. Three or four minutes' reading may prove interesting. [Eeading:] Your committee finds that on August 4, 5, 7, 8, and 9 about 125 cars of wheat loaded from the Irondale elevator — ^" FEDERAL GKAIN INSPECTION. _ That IS the " hospital," where they manufacture the rot and put it into the public house- purporting to be No. 2 red winter wlieat and intended to be unloaded into Rocli Island elevator " B " — A public house — were "plugged" with screenings or very low-grade wheat. The quantity of such screenings or low-grade wheat in each car carried from less than 50 bushels I i^ bushels, according to the capacity of the ear; that the screenings were loaded on the bottom of the cars and covered with so large a quantity of good Wheat that about 100 cars were passed as No. 2 red by the State grain inspection ana the board of trade grain samplers before this method of " plugging " was aiscovererl : that of the cars so " plugged " about 60 were received and stored m Rock Island elevator " B " without protest from the superintendent thereof, and a like number (about 60) were returned to the Irondale elevator and taken back into that house, and from the bottom of the 60 cars so taken back into me Irondale elevator there was recovered about 10,000 bushels of " screenings." The evidence appears conclusive to your committee that the cars unloaded into Rock Island elevator " B " contained an aggregate of at least 10,000 bushels of " screenings " or low-grade wheat. Skipping over a little : Subsequent developments— the evidence having been procured entirely with- out the aid of the managers of the Irondale elevator — The hospital — shows that more than 20,000 bushels of these screenings, or low-grade wheat, were used and that instead of there being 17 or 18 cars " plugged " there were in the neighborhood of 125 cars " plugged." * * * Neither of these employees of the Irondale elevator had control of the loading of grain, other than to allow it to drop into a car when so notified from the loading floor and to drop only such grain from such scales as these instructions name. Each " plugged " car showed two drafts, one being the screenings or poor wheat in the bottom, showing about 10 per cent of the load, the other 90 per cent of the load being wheat supposed to pass the inspection department as No. 2 red. * * * The board of trade weighman was requested to make his reports show in a similar manner — that is, one draft Instead of two — but upon consulting his superior olflcer he was ordered to keep a memorandum in* his book showing exactly the number of drafts, etc., so that this committee was able by reference to the records of the board of trade weighing department to ascertain to a pound just how much of this so-called "dope" was loaded out during the five days mentioned. While both Forsaith and Bevan knew that these cars were being " plugged," they were simply following instructions of their superior officers ; and as Superintendent Sayre employed them, and they knew that he was cog- nizant of the " plugging," and both testified that it was a custom at the house not only to "plug" cars by cargoes," they were in no wise to blame, in the opinion of the committee, for this method of loading. Both Forsaith and Bevan were discharged on the Saturday afternoon follow- ing the discoverey of the " plugging," and on the afternoon of August 18, when the first committee having this matter in charge called on Mr. E. F. Rosenhaum for a statement, and he appeared before it, he stated that those men had been discharged for "plugging" the cars, but as the evidence developed your com- mittee was forced to the conclusion that these men were simply "scapegoats." Later on Mr. E. F. Bosenbaum appeared before this committee and qualified his statements as to the reasons for discharging these men in such a manner as to show that there was possibly other reasons for their discharge. * * * Rock Island " B," where the "plugged" cars were unloaded, is in the charge of one Peter McCarty, superintendent, who was appointed to that position in July when the house was declared regular, and had previously been a tally man holding about the same position as Forsaith at the Irondale elevator. * * * Your committee carefully examined the chief grain inspector, the supervising inspector having charge of the South Chicago district, and the assistant in- spector, whose duty it was to inspect the cars at the Irondale elevator. It also examined the board of trads sampling department chief, Mr. Kettles, and Wi FEDERAL GRAIN INSPECIlOH. 91 assistant, whose duty it was to sample the cars loaded at the Irondale elevator and ordered switched to regular houses. We find that about 100 cars of this "plugged" grain was inspected by both the departmerits ; that on the morning of the 9th of August the board of trade sampler examined about 19 cars that had been graded No. 2 red by the State grain department the previous evening, and found screenings in the bottom of 16 of these cars, and reported as soon as he could reach the city, to Mr. Kettles, the chief. Within a few minutes after he had made this discovery the assistant Inspector, Cartmell, of the State grain inspection department, was called upon to Inspect 10 more cars that had been loaded that morning, and found that 4 of these cars were " plugged." It de- veloped also before the committee that State Grain Inspector Z. L. Cartmell was discharged from the department in connection with this affair and that he Is at present making strenuous efforts to be reinstated. It was also shown that an employee of the Irondale elevator acted as " helper " to the State grain inspector, drawing samples with the tryer from various parts of the cars as directed by the inspector. On the morning of August 9, 1905, Louis D. Sayre, a son of Superintendent Sayre, who was also employed at the Irondale elevator, drew the samples for the State grain inspector, and at various times he had acted in this capacity. It is significant that screnlngs had been accumulating for two years at the Irondale house, and that about 50,000 bushels were on hand when Rock Island elevator B was made regular. You see, they had their private house where these screenings came. Then they went to work and got control of a public house. This accumulation was at Rock Island elevator B, a public house, made regular under the rules of the board of trade. Senator Gore. Were they accumulated in the Rock Island house? Mr. Greeley. No; they were accumulated in the Irondale house, in the hospital. [Reading:] It is significant that screenings had been accumulating for two years at the Irondale house, and that about 50,000 bushels were on hand when Rock Island elevator B was made regular, and. that an attempt should be made almost immediately to dispose of these screenings by first sending 150,000 bushels of good No. 2 red winter wheat to the Rock Island elevator B and then by en- deavoring to get more than 20,000 bushels of the screenings into the house by the " plugged " car route, with the brand of No. 2 red wheat on it, while it was worth about 25 cents per bushel less than that grade. This market has long suffered — That was not an isolated case — from a lack of public confidence in the integrity of the grades of grain held in public warehouses. While this committee has no substantial evidence to bring forward, it has been led to believe that practices, such as this report deals with, have not been confined to the Irondale and Rock Island " B " elevators. The unsatisfactory quality of grain offered shippers, when drawing grain from public elevators, has been the subject of much unfavorable comment for years. The mystery as to how such poor grain could have been inspected Into the houses Is possible of explanation if the " plugging " system has been in vogue in years gone by. Senator Money. "When did that committee make its report? Mr. Greeley. October 16,* 1905. Senator Money. And what committee was it? - Mr. Greeley. A special committee appointed by the board of di- rectors of the board of trade to investigate certain rumors in refer- ence to the conduct of public warehouses. Senator Burkett. What was the result of the investigation? Mr. Greeley. Two men were discharged at the elevator house. Senator Perkins. If we appoint Federal inspectors, which this bill proposes, will they be honest because they are Federal inspectors ? Mr. Greeley. Not necessarily ; no, sir. Senator Perkins. Then the same evil is liable to occur, is it not? °* FEDERAL GRAIN INSPECTION. Mr. Greeley. It is likely ; it might be. Here is the point benator Perkins. That is the reason why I would like to have you explain this bill when you reach it. Mr. Greeley. Just one more quotation, and then we will get to it. Senator Gore. Have the Federal inspectors at the packing houses proven more satisfactory than the State inspectors? (This question was answered later.) Mr. Greeley. The board of trade further says what I am about to read, in the report of a committee appointed one year ago, on ac- count of certain objections raised by myself and others to the con- duct of public warehouses. A special committee was appointed to investigate in reference to this same subject. This committee of nine members of the board presented a report, of which the following is a portion : The objection urged In the matter of the inequality of " in " and " out " in- spection and the risks thereby involved, we think, IS well tnken, but if the recom- mendatlons of your committee in their two J)reliminary reports of December 21, 1906, and January 7, 1907, are faithfully and persistently carried out, this objec- tion will largely disappear, except in isolated cases. In that connection, how- ever, It is proper to state that the cause of this inequality of " in " and " out " inspection probably is traceable to the fact that, as stated by Mr. James Patten from the rostrum at one of the public meetings in the visitors' room, hereinbe- fore alluded to, " 98 per cent of the contract grain put into public elevators iB put there, by the warehousemen themselves," and as also stated from the same rostrum at that same meeting, by Mr. Stream, representing Shaffer & Co., eleva- tors, that they make the grain no higher than is necessary to pass into the grade. Senator Gore. Then 98 per cent of it really goes in in violation of law, does it not? Mr. Greeley. It is all in violation of law. [Eeading:] Natural deterioration, therefore, is probably more than anything else respon- sible for this difference of opinion between the inspector who inspects the grain '• Into " the elevator and of the one who inspects it " out," the margin between the quality of the grain Itself and the minimum requirements of the grade given It being so slight as to leave no room for deterioration or for reasonable differ- ence of opinion between Inspectors. The grain is manufactured on such a low line of the contract grain necessary to fill the requirements that when the public gets it, if. it has at all deteriorated in storagej it deteriorates past the line (the grade), and puts a grade of gram onto the public which it ought not to receive. Now, with regard to the prevention of the matter : It is the duty, Under the railroad and warehouse law of the State of Illinois, and it should be the duty of every inspector to see that grain placed in a public house should be so mixed as that an average quality of the grade should be maintained in that elevator ; that the good grain of the grade and the poor grain of the grade should be so mixed that the average quality would be fair and reasonable. In days gone by, under independent proprietorship, and the public interests being protected, before the alliance between the inspection department and these elevators became a fact, any man could take a warehouse receipt and be assured of the fair average quality of the grade; and a warehouse receipt the world over was named with respect in any country where the grain was shipped. Now that has all been disabused, to the extent that five nien control 34,000,000 bushels of storage capacity in the city of Chicago, and their chief ally is the system of inspection of the grain. FEDERAL GKAIN INSPECTION. 93 Senator Dollivee. Who establishes the stajidards of grade? Mr. GRBEtET. The State. Senator Dolliver. This bill seems to authorize the Department of Agriculture to do that. Mr. Gkeeley. That is proper. Senator Money. In other words, it is a substitution of Federal for State inspectors. Mr. Gkeel>ey. Where do we come in? We are farmers. We are not here as a joke. We do not go and adopt resolutions — ^two or three of us — and say : " We will appoint ourselves a committee, and have some grievance, and go down to Washington and constitute ourselves somebody representing something." We had 1,800 men at Fort Dodge, Iowa, just wild on this subject, discussing it for hours. We took up every feature of it. We then adjourned over into Illinois and went to Bloomington, and we had a convention there with 900 men present; and almost the chief subject of discussion at both those meetings was the same proposition that we have here. These men are determined upon this subject. When they ship a car into Chicago the dominating force existing there is to undergrade that grain so that this trust may buy it at the depreciated inspection ; and we know it to be a fact, from the evidence which I have read, that when a man buys it and takes it out of storage he gets the de- preciated value of the improved grade to such an extent that he does not want the property, and he goes and buys it by sample on the track in the country. Senator Buekett. I do not Imow whether you mentioned this before I came in or not; but you made a statement to the effect that "We are farmers; we are not jokes;" and you spoke of how you had 1,800 of them. Of course you did not mean to say that you per- sonally are a farmer? Mr. Geeeley. No, sir ; I was with them. Senator Btjekett. I would like to have you tell just what you are, and how you do come to represent farmers. I take it that you are here in a representative capacity. I would like to have that appear, so that when the evidence is read by others that do not see you they will know who you arS. Mr. GsEEtEY. I fought this elevator trust for seventeen years. I have been defeated in the fight in every avenue where I have at- tempted to accomplish my purpose, that of securing an honest ware- housing of grain in the Chicago market. Senator Buekett. Where was it that you fought them ? Mr. Geeeley. In Chicago, on the board of trade. Senator Buekett. And you were acting in what capacity then? Mr. Geeeley. As a commission merchant — an independent commis- sion merchant. Senator Dollivee. Are there no commission merchants .in Chicago except yourself that take your view of it? Mr. Geeeley. Very few of them. You can find very few. Senator Dollivee. How do you account for that ? Mr. Greeley. They do not dare to do it. Senator Dollivee. There are thousands of them? Mr. Geeeley. Yes, sir ; but they have not the courage. Senator Dollivee. They are honest men, intelligent men? 94 FEDEBAL GEAIN INSPECTIOK. Mr. Greeley. These men are too powerful for them to fight. Senator Perkins. Is it not a fact that, as to most of the grain pro- duced by the farmers in the Dakotas and Kansas and other wheat- growing States, the farmer brings his wheat into the market and sells it according to the market value to the purchaser there ; and then he, in turn, deals with the elevators or with his agents in Chicago ? The reason I ask you this question is that that is the rule that prevails on the Pacific coast. For many years I was engaged in the milling busi- ness, and built some three fiour mills. One farmer would have a thousand acres of land here, and another farmer would have a thou- sand acres of land there ; and I would give one of them from 5 to 10 cents a hundred more for his grain than I would pay the other farmer, because I could make more flour out of it to the hundred pounds than I could out of the other. Pardon me for interrupting you; but what we want to know is this : This evil exists, undoubtedly, as you state it ; but will this bill benefit the farmer if it becomes a law ? Mr. Greeley. I will answer that to the best of my ability as we see it after very thorough discussion of it. Senator Burkett. Just to finish up upon the subject of your busi- ness, I want to get that into the record. Mr. Greeley. I am a commission merchant on the board of trade. Senator Burkett. What is the difference between you now as a commission merchant and before? Mr. Greeley. None at all. Senator Burkett. You are engaged in just the same business? Mr. Greeley. Just the same. I want to put myself right on that point, and I want to start in on that point when we finish this. I am a commission merchant in Chicago. I am allied with these farmers because I think the only hope of redress lies in the farmers' cooperative elevator movement in this country. I have tried by every other avenue, in grain associations, in various meetings and organizations, to get up a combined effort to attack this evil ; and I never yet found one that was successful. Now, I am an ally, as a conmiission merchant of the board, strange as it may seem, of the farmers' associations, to fight for the rights of the farmer for an honest market. Senator Dolltver. I do not think it is so strange. I think it is stranger that there are not more — ^that there is not a larger number of honest, upright, intelligent commission merchants who take the public into their confidence. Mr. Greeley. Well, they will not. Senator Burkett. Here is my object in asking: When this testi- mony gets cold, if someboch^ goes to read it in print, the suggestion may be thrown out that " Here is some man who is trying to use this thing for his own personal ends." I wanted to get in here the fact that you are a commission merchant, so that they will know that you do understand the matter, and will know just what relation you bear to this organization of farmers of which you speak. Mr. Greeley. I was invited by the farmers' associations to address them at their two conventions, and I gave them practically the same thoughts that I am expressing to you to-day. I have addressed many associations heretofore in a small way, and I found that these men were so deeply interested in the problem that they began to study it, FEDERAL GRAIN INSPECTION. 95 and they appointed committees to work upon it, and they have started an investigation. Tliey are now familiar with the court decisions; they are familiar with the practices, and they are modern. They are " in the game," and they have found out that the only way that they can get redress is for them to get control of the powers that give the other fellow his force. Therefore they want to go into the field of legislation, and they say that if this system is as bad as they claim it is and know it is there is a good chance for a trial of the Federal inspection system, and they will risk a Federal inspection as against a State inspection. Senator Money. Will you allow me one minute ? I do not like to interrupt a man who is speaking, especially when he is carrying on an argument ; but is it generally believed by the farmers of the coun- try with whom you have dealt that the Federal Government is more honest in its official action than the State government is, or will it be exactly the same? . Mr. Gkeeley. I feel, from my experience — and it is somewhat large, and I have talked with' a great many people upon the sub- ject — that in this particular instance, and not as a general proposi- tion, we could be no worse off under any circumstances, and we are arguing to the belief that we can be a great deal better off. ~ Senator Gose. Do you know whether the Federal inspection of the packing houses in Chicago has proved more satisfactory than State inspection? Mr. Gbeeley. Well, really, I hardly feel competent and familiar enough with the provision business to enter into that discussion. Senator Gore. I did not know whether you were familiar with that history or i^ot. It might be a parallel case. Mr. Gbeeley. To proceed a little to explain in regard to this bilL An evil exists. It is verified by any amount of testimony that you men will ever want, and we can obtain it. If it exists, then the propo- sion comes up as to whether this system of State inspection should be superseded by a national inspection. We claim, first, that a national inspection of grain under the sys- tem of civil service inaugurated by the United States Government has a chance of producing the result of the education on similar lines in all States of grain inspectors who will be under the knowledge, control, and direction of a uniform set system of inspection. People in general, the country over and the world over, receiving our cer- tificates, will have it made known to them that United States Gov- ernment inspection carries with it that kind of a description of each grade. That seems to be sensible and fundamental. We believe that instead of having an inferior quality of the men doing the inspectmg, a system of training and education will be inaugurated which will bear good fruit. ,l n „ We believe, secondly, that it will be more difficult to "fix" or influence inspectors if the authority is invested at Washington rather than at Springfield, if such '''fixing" or influence exists at the present time ; and whether it does or not, we believe it does. Thirdly, we believe that under a system of Government super- vision, which is regular and effective and along the same lines, a system may be introduced by the Government which will become, general at all market centers, whereby governmental tests and govern- mental examinations and the governmental stamp of approval and ^" FEDERAL GRAIN INSPECTION. education may be put upon the various kinds of grain raised in this country, so that the education and the stamp of approval and the KeXTstanT ^^""^ '^'^''^ ^""^ standing to the receipts which Senator McCumbek. Confidence, too? Mr. Gkeeley. Confidence, too. Senator Dolliver. Would you mind stating what effect this depre- ciation ot the grade of grain has had upon the foreign grain trade of the United States? Mr. Gkeeley. I have myself received letters from foreign grain men, men who have received copies of the circulars which at times I have issued in a small way to the trade, in which they have com- plained to me about the quality of American grain ; and I am very sorry I have not those letters so as to be able to produce them now. They have been received in days gone by, and I have not them on file, but T have had personal complaints made to me, and especially I had a letter from, I think, a German professor, a number of years ago, in which he wanted me to enlighten him more fully. He stated in that letter to me that it was notorious that the grain received from this country was of such good quality that their men were very much discouraged and disliked to take American grain. Senator Dollivek. In selling grain to Europe do we take it there, or do their people come here and buy it? Mr. Gkeeley. There are exporters in this country who represent the foreign houses. Those exporters buy the gr'ain here and ship it. .Senator Peke.in8. But the purchaser in Liverpool and London, Mr. Chairman, buys according to their grade, not ours. Senator Dollivek. Yes ; but do they buy this grain without looking at it? Mr. Greeley. It is customary now for men to do business largely by sample, and to avoid as much as possible buying by grade, if it: can easily be done so. The inspection of grain is in such awful, ter- rific disrepute that men are struggling all the time as to how they can send samples back and forth, and Senator Doliver. Would the man here proposing to sell in Eng- Jand send over the sample, or would the representatives of the English house have men here to examine the sample? Mr. Greeley. Why, sir, no man ever thinks of buying grain out of a public elevator or taking grain out of almost any place unless he has one of his private representatives at his own expense come up there and pay the bill and have the grain examined before it is loaded into the car or boat. We all have our own private samplers and in- spectors to watch the grain. We have to be on guard every moment. There is nothing about an inspection certificate in the city of Chicago but a huge joke. Senator Dolliver. Then who is it that is swindled by this depre- ciated grain, except the fellows that have bought it for future deliv- ery on the Chicago Board of Trade ? Mr. Greeley. Your farmers in the State of Iowa suffer every year, to the best of my belief, a depreciation of $250,000,000 in the value of their crops, from the simple fact of the existence of the poor grain (as small a quantity as it is) that is carried and hoarded m the Chi- cago public warehouses in this elevator and grain combine.. FEDE^L GBAIN INSPECTION. 9.7; Senator Doluvkr. If we should abolish gambling in this stuff there Mr. Greeley. You do not Avant to abolish gambling. You can, nqj;, gamble in grfiin on the bpard of trade if jon want to. Senator Dolmver. I tal^e a different view of that. M.T. Greeley. Well, all right. We will (iiscuss' that later, if, you choose. But Senator BtTRKETT. Are you going to tell, now, how the farmers are affected because these people load the grain after they buy; it ? TThey try to niakp, 2 bushiel^ out of 1 ; is not tha,t it? Mr. Greeley. I, suppose not a day passes in the history qf the Chicago grain market bpt what there are open, upon that day, at least 100,0(K|,000 to 200,000,000 bushels of open contracts. Senator Burkett. What is an open contract? Mr. Greeley. An open contract is a contract to deliver grain fpi^ future delivery. One party to the contract is the man that buys it ; the other party to the contract is the man that sells it. Now, that iS a contract. That is not a sale of grain until that grain is d^liver/ed. Then it becomes a grain contract. In thejneantime it is the contract it^elt Senator Money. Is it generally ever (^eliveped, at ^11,? Mr. Greeley. Oh, it is very often delivered. Senator Money. Yery often? Mr. Greeley. Yes; very often. Senator Money. But what is the rule? That is what I am. trying to gejt at. Mr. Greeley. The rule is that it shall be, unless it is settled and the, proper difference paid. Senator Money. Is not the rule, then, that the difference p^s^^? Mr. GkeeIiEY. Now, we are sidetracking. Let me s]iow you vshpre the farmer loses money. We will get intp the spepulative bu^iiiess, if- you want to, a little later on. The farmer has a crop subject to an increase in price, or a. dpcij^ase^ in price, according to what affects those open contracts of 1;50,PPO,0()0 bushels of grain. This is the way the game works : The, cpntra,ct8, must mature, and those contracts all have to be filled, by t^e delivery of a certain grade at a certain time in one of a certain number of warehouses made regular for the purpose. If thflse ^varehouseg con- tain a certain amount of grain of a cfix^ain, poor quality of, the gija^e necessary for delivery when you approach delivery day th§ buyers who have those contraijts bought— ^tfet is, who are on thi^ " bpugjit " side of the markets will, if they feiar the delivery of that ppojc gr^in to them, liquidate before the man who; has it sold vyiU' purchase, tq. cover his " short " sale. That throw;s. the weight of thfilarge^ aniaunt of speculative " long " interest on the market on tji^ selling,si,dp,; WJ^i as I tell you, month after month the preponderance of tlies, evidei^pe^.in this book shows that the liquidation of the "-long '"interest, fprping the decline in the market, is probable, rather than the cQ^^^ing.qt the " short " interest to increase the price. Senator Money. Now, you have got me afloat. Mr. Greeley. I have got you aflo^-t ? 34503— 14— -:7 98 FEDEKAL GKAIN INSPECTION. Senator Monet. I do not know what you mean by " liquidating long interest" and "covering short interest." What does all that mean? Mr. Geeei^y. I told you when I started out here, Senator, that I had the hardest story to tell you that a man can tell. Senator Money. Are there no plain words in the English language m which you can express yourself along this line ? Senator Perkins. If the Iowa farmers have lost the amount of money which you state, then they are mere speculators and gamblers. I have been led to believe that they produced the grain on the farm and took it to the market and sold it and got their money for it and put it into the savings bank. But, according to your statement, they must be speculators, selling " long " and selling " diort." Senator Dollivek. What I want to Know, is this: I am getting let- ters occasionally from the farmers myself. You are trying to correct this inspection, which you say, under this speculative situation, may be used to depress the market? Mr. Gkeeley. Yes. Senator DolIiIver. A great many people out in my section of the country say that the very existence of these gambling contracts is the basis of this evil, and that the board of trade is a bucket shop and nothing else. Mr. Grebuey. All right. I am perfectly willing to take that view of it, and I am not here defending the board of trade. I am defend- ing nobody. I am prosecuting somebody. Now, let me tell you, Senator, if you well permit the statement, with all due respect (and you are not at all to blame), that the fact that you do not understand this system and the terms which I use is no evidence that it does not exist. Senator Money. Not at all. What I wanted to ask was whether you could address my understanding in some language with which I am familiar. I never bought or sold anything " long " or " short " in my life. Mr. Greeley. Well, I can not speak of chocolate candy and call it grape fruit. Senator Money. What do you mean by "liquidating long? " Mr. Greeley. I mean selling out. Senator Money. Is " liquidating " selling out ? Mr. Greeley. It is a term used in the trade for selling out. Senator Money. What is "long"? Mr. Greeley. "A short covering" is a man buying in. A man that has bought something is forced to sell it out for fear of what he is going to get handed to him. Senator BTTRKErrr. He is " long," then, is he? Mr. Greeley. He is " long." Senator Burkett. Then he will be " short " when he sells ? Mr. Greeley. No ; he will be even when he sells. Senator Burkett. I do not wonder that the farmers get excited when you talk to them in that way. Mr. Greeley. I do not want to drag you men into this business. I do not want to get you mixed up in it. It is not necessary to make you thoroughly acquainted with every little feature of every kind of a game that is ever played. It is not necessary for me to tell you what a bucket shop is, if I happen to know, or to tell you what FEDERAL GRAIN INSPECTION. . 99 a trade in grain for future delivery is. We can discuss what we have before us. Senator Burkett. Let me ask you a question right there. You said that that grain never was delivered when they bought it. If it never is delivered, who is hurt if they are afraid they, are going to put some bran and dirt and one thing and another in it if it is de- livered ? There is nobody hurt but the gambler. Mr. Greeley. Let me tell you in a few words what I mean: I tell you that there are open contracts of 150,000,000 bushels of. say, wheat. There is 150,000,000. Call it that. Senator Doluver. That some man has offered to sell ? Mr. Greeley. That is bought. Senator DoLLmiR. That is bought? Mr. Greeley. Yes. Here is some other man that has 150,000,000 sold. That grain is bought for delivery this next May. This man !has it sold to that man. There is the way we stand with the con- tracts open on the board of trade. Senator Dolliver. What man? Mr. Greeley. This man that buys it, that bought this 150,000,000. Senator Dolliver. You do not know who it is? Mr. Greeley. It is not necessary, often. It may be bought by a merchant, a speculator, or anybody else. Senator Money. That is "long," is it? Mr. Greeley. That is " long." Now we are getting to under- stand it. Senator Money. Yes. Mr. Greeley. That is sold. Somebody else sold it. I do not know whether he has it or whether he has not it. He has a right to sell it, and the Supreme Court says so. Senator Money, that .is " short ? " Mr. Greeley. This man says he has right to buy it, "and the Su- preme Court says so. This man has a right to sell it. If it is never delivered, that is a legal contract, and the Supreme Court says so ; and it ought to be. Ihe fact that a delivery does not take place does not in itself make that an illegitimate contract. Those are legal contracts, declared so by the highest courts in the country. You may differ from me in opinion; however, I am right. [Laughter.] Those 150,000,000 are bought, and those 150,000,000 are sold. Now, we want to know what interest the farmer has in that condition on the market. If a man buys a certain amount that another man sells, there is no preponderance of the evidence in favor of one man being any worse off that the other in the speculative deal, nor the farmer, either. Whatever one man buys the other man sells. There is an equality on the scales, an equal purchase and an equal sale. Senator Burkett. There always must be, must there not? Mr. Greeley. There always must be. Now, it is a mistake to say that the farmer is ruined by trading in grain for future delivery, be- cause some man supports the farmer when he buys it if another man sells it "short." . Senator Dolliver. Do you regard that as a moral transaction? Mr. Greeley. I regard that as a moral transaction^as much so as any other. 100 FEDEEAL GRAIN INSPECTION. Senator Dollivek (continuing). If I should sit in a bucket shop in^ Fort Dodge and telegraph an order to you to sell 150,000 "bushels of wheat without expecting to ever receive it? Mr. Greeley. That does not make any differjence. I have a right to sell grain and not deliver it if I make up my mind that I want to get out of that contract. Senator Domjver. And the Government of the United States has the right to assess you on each transaction. Mr. Greeley. That is all right; but I am telling you what the Supreme Court says. Now let me tell you something: I am just as mijch a friend of the farmer as any man in this room. I am as closely allied with farmers' associations as almost any man in this room, and I have been fighting the farmer's battles for seventeen years. I am just as thorough a be- liever -in the fact that grain sold for future delivery is a laenefit to the farmer as you are that it is an injury ; and we wiU both come together some day, but we have not gotten to see it through the same eyeglasses. Now, let us get back to the question. Senator Perkins. An ey|il| exists; we will admit it. Will; this bill correct it? Mr. Greeley. I qlaim that it will? and, I ha,vei stated my reasons. We claim it will remedy the evil hy thp.e^Vi'^atioiii of the m^ and th^, system of civil service; that more cowpets&t. men will, be pbtaii^ed under the system of civil service, and, that tii^ appliances which will come under Government supervision and the reliability of the §tap4- ards throughout the country will be of such a n£^\ire t|ia|i it will insure more general confidence in the Federal inspection, and that the gen- eral tone of the Federal inspection will be such as to merit more uni- versal and national confidence in the property. Senator Perkins. One phase of this matter is that in section 2, in enumerating the cities, the bill goes on to provide that to carry out the provisions of the section, if it becomes a law, there shall be appointed one chief grain inspector an^ such assistants ag may be. required to inspect and grade grains as therein provided for. Will ijot tha,t neces- sitate a very large corps of assistant inspectors to, promptly inspect this grain? Where will it be inspected — ^t the inlUal point of ship- ment, or when it arrives in, Chicago, ov; th^^e oj^tljiey.qities? Mr. GflEELi^y. IJt prescribes there where it shall be inspect,^d-^a|i ^\^ inarket centers, I think. That is the only place, I believe, that grain is now inspected, SenatpE.PBEjKjN^., I w^U i^eadthe section, wit)i,your pei;mis^ifln, Mr. Chairman [reading],: Sec. 2. That said Secretary shnJI also appoiiit, iu ijccord^ncQ wij^li tlip riil§^ of the civil service, at each of the fpUowing cities, to wit, Portlaiw}, Majne; Boston, New Torlt, Philadelphia, Baltimpre, Chicago, ajLinneapolis, Duluth, Superior, Kansas City, Missouri; St. Louis, New Orleans, Seattle, Tacoma, arid San Francisco, and at such other imjiortaut centers of interstate trade and com- merce, in grain as he may consider necesssp.ry pr. proper for carrying out. the jirovisipns ot, this act, ov)^. chief, ^faiu iiisii^c.tor and ^uch, assistant's t^s may bi? required tp Inspect and grade grams as hereii> prpvided. What the committee want to know, I think, Mr. Chairj^i^ is vhfti will be, the expense, o:^ these inspectors, the njiml^M require^ etc., so, as tQ, know wh^jt expenp^ will he entailed uppii, tl^e f armprs f or.this purpose. FEDERAL GRAIN INSPECTION. 101 Senator McCumbee. Unless you want to get that information from this witness, I will state that I havte all of the data upon that point firom the Agricultural Department and can cover that matter fully myself. Senator Perkins. That will be better, then. . Senator McCumbek. And if you will just allow these gentlemen to finish their testimony on the points they wish to discuss, I can take up those points myself. Senator Mojtey. Mr. Perkins, I do not think there ought to be a very serious question about the expense, if we have it proved to us that it is a thing, first, that we have the authority to do ; and second, that it is better to have the United States take hold of it than to have the States have hold of it. Mr. Greeley. That is the point. Senator Monet. The cost of the inspection is paid out of the fees that are received. Senator McCumbee. The Agricultural Department has made a full investigation on that point. Senator Monet. I should like to hear from somebody frOin the Agricultural Departnient before we finish these hearings. I want these gentlemen to be heard, too ; but can we not have before us the Secretary, or Doctor Galloway, or somebody else down there who is familiar with this matter? Senator Peekins. Mr. McCumber will have them here later on ; ^io we will hear these gentlemen now, I suppose, Mr. Chairman. Senator McCumbee. I would like to ask this gentleman just one question, following your question, and that is as to whether or not, under Government inspection under this bill, it would be possible to take these screenings and have them graded as a higher grade than they actually were? Mr. Geeeley. Well, I will not say that it will not be possible. There might be an inefficient inspector at an elevator where that might take place, under Government supervision. Senator McCumbee. Would it be probable? Mr. Greelet. We would take the chance that it would be so. Now, we know that men are not infallible. These men have volumes of money. We can not tell how they use it. We are under the impres- sion that such things as stuffing a lot of screenings in a car and per- mitting them to go into a public elevator would not happen of a man's own volition ; and we do not know whether the United States would pick out men who would be any better than the State inspectors or not. Senator Monet. I can tell you ; I can answer that. The United States inspector would be not one bit better, because he would be the same man. These men are citizens of the United States. They ai'e all the same people; and they do not become any better becstuse they come under another form of government. Mr. Greelet. I think, however • Senator Monet. There is as much rottenness right now in all the Executive Departments here in Washington as anywhere on top of the earth. Mr. Greelet. I think the penalty would be likely to be ittore severe; and then, if there were a corrupt system, it would have tb 1)6 inaugurated at headquarters at Washington. 102 FEDEEAL GKAIN INSPECTION. Senator Money. We have been probing the headquarters here in Washington, and rottenness follows every thrust. I have been here thirty-seven years, and I know. There is official rottenness uncovered in the Government whenever we choose to investigate anywhere. It is not because we are worse than anybody else, but because we are just the same — neither better nor worse. And I want to say another thing, though it is not to the disparagement of the American peo- ple—that is seems to me that if you give the average American a chance to steal something from the public, he is going to do it. Mr. Greeley. Well, admitting that; admitting that the men are all on an equal basis with regard to honesty Senator Money. Just about. Mr. Greeley. Admitting that^ there is one thing in favor of this bill : The system is better. The establishment of the national classi- fication in grades is better. It gives a better description for the entire country of what is expected of the grade and unifies it under one classification rather than having it, as now, under the classification of the various States. Senator Money. Let me take one minute here. I do not want you to understand that I am trying to oppose your bill. On the contrary, if I had heard the gentlemen on the other side, I would have been just about as inquisitive on the subject as I am now. I am simply after information. Mr. Greeley. Yes, sir. Senator Money. You are strictly a business man. I can see that, because you present your views, if you will allow me to say so, with extreme clearness and force ; and I am very much impressed by what you say — by your knowledge of the subject and your manner of pre- senting it. You are a business man ; and you are looking at this mat- ter, are you not, strictly from a business standpoint? Mr. Greeley. I am looking at it absolutely, from a strictly busi- ness standpoint and the stan(5)oint of honesty and the standpoint of justice. Senator Money. I know. Now, have you ever thought for a moment about whether it is a sound public policy for the United States Government to interfere in business at all ? That is a matter that we have to consider before we can take any steps in a practical way. Mr. Greeley. I am a believer in the fact that the United States Government ought to handle a great deal more business than it does. Senator Money. And I believe that it ought not to handle any business, but should confine itself to government. That is what we disagree upon. Mr. Greeley. We can disagree, however, and still be friends. Peo- ple can have opinions tljat are not exactly alike. That is in line with human nature. That is why we are here discussing this bill. If we all agreed about it, it would have been passed years ago. Senator Money. Of course, even the judges on the bench differ. Senator Dolliver. What is there in this bill that confines the in- spection proposed to grain that enters into interstate commerce? I do not see any -provision of that sort in the bill. Senator McCtrMBER. Th£it is all we can inspect; it can only apply to interstate commerce. AGBICULTUEAL APPEOPEIATION BILL, 103 Senator Dollivee. I see nothing about that in the bill. Senator Peekins. It can not interfere with the grain that is han- dled in the State alone. It must be transported from one State to another, or through more than one State, of course. Mr. Greeuet. But it is not fair, because a system is as bad as this is to-day, to throw upon us men who come here to Washington the odium of saying that because this inspector is bad the other fellow is going to be just as bad. Senator Gore. If he has the same interests and the same tempta- tions he is apt to be similarly influenced ; but he might not be so bad. Mr. Greeley. The point is that we assume that the other system will be better because this is so bad; and you must prove that the other one will be as bad as this in order to maintain your position on that question. Senator Gore. Mr. Greeley, let me ask you one question: The supreme court of Illinois has decided that a public warehouseman must not be a dealer in grain ? Mr. Greeuet. Yes, sir. Senator Gore. Does Mr. Rosenbaum belong to a company or to a corporation that owns a warehouse or elevator? Mr„ Greeley. Yes, sir ; and violates that law. Senator Gore. Then he belongs to a grain-dealing firm ? He deals in grain? Mr. Greeley. Yes, sir. Senator Gore. And deals with himself? Mr. Greeley. Yes, sir ; but the supreme court has linked the two as one. There is no discussion in regard to that proposition now- — even by the elevator companies themselves — that the operating grain company and the operating elevator company are one. Senator Dolliver. Why do not these people, as a practical ques- tion, land in a court of justice, with a competent prosecuting attor- ney? Senator Money. I should like to see a prosecution in the city of Chicago by the State authorities. Mr. Greeley. Here is what they went into; here is what they vio- late ; let. me tell you something ; this will open up one new avenue of prosecution. Here is an agreement which they entered into here for this purpose (reading) : TBTJST POOLING AGREEMENTS — A MORE VILLAINOtTS COMPACT NEVER EXISTED — HERB ARE THE PARTIES CAUGHT WITH THE " GOODS." Peavy Grain Company, by Jame Pettit; Central Elevator Compauy, G. W. Patten, president; Calumet Elevator Company, G. W. Patten, vice-president; South Chicago Elevator Company, J. J. Stream, president; Armour Grain Com- pany, G. E. Marcy, president; J. Rosenbaum, by E. F. Rosenbaum (power of attorney). Every one of these concerns should be indicted and punished as provided by law. The prosecution should be criminal, not civil. All public warehouses in Chicago except one were involved in the following agreements to hold grain in Chicago, rob the public of storage, depreciate values, and generally debauch the grain trade. Senator Burkett. Who wrote that? Mr. Greeley. I did. Senator Dolliver. Why are they not prosecuted ? 104 FEDEBAL GBAIN IISrSPECTION. Mr. Gejieley. Let me show you what they did first, and th^n I will tell you why they are prosecuted. Here is what they did (readitig) : THE AnRElSMENTS. \ A trustee handled the daily reports, collected and disbvjrsed the earijings,. arbitrated disputes, etc. He received a salary and. was provided with officii help. Sixty per cent of the earnings was paid to the trustee and by hiin distributed pro rata to all parties to the agreement. No party to the agreement could, except under heavy penalty, remove gtain from the warehouse of any other party to the agreement and storie it in his, its, or their warehouse. 'All agreed to do all "lawful things" to prevent any "outside" Varehquse- man from removing grain from trust warehouses and storing it in warehoU^s Of said " outside " warehousemen. Should any " outside party " have withdrawn grain from the trust ho.uses aji^ stored it ^n his (outside party's) warehouse, "a memorandum of record" was provided for, and if said " outside party " wished to return similar grkin to any trust house it was provided that the trust house accepting such grain from ttfe offending " outsider " (unless he returns all he has taken out) shall not receive Its pro rata of the earnings^ Warehouses partially or totally destroyed by fire were to continue to draw their pro rata of earnings from the pool on such grain as had been withdrawn prior to the fire. Severe penalties are provided in case of violations of the agreement. Th6re is a combination that our attorney said was a Violatidii of the State laws and a penitentiary offense. If you want to know whait we did in regard to the violation, I will tell' ydu. Do 5^du wtot to hear what we did ? Senator Doixivee. I just want to know whether your district at- torney and your grand juries took action in this raSttdr. I w'ant 'tb know whether you expect us to furnish you with an inspector that iS less subservient to Ideal influence about these transactions than yOlfr State officials, your prosecuting attorneys, your griand juries, and your officers of law. Mr. Greeley. Your governor, your State's attorney, your railfCttd and warehouse cotnmissi on, arid your attorney-general all kiiew of that violation. Senator Dollivee. They are all under the influence of this style of doing business, are they ? Mr. Geeelet. They refused the prosecution; and when the case came up for grand jury investigation by the State's attorney, on the evidence to be submitted to the grand jury, there appeared before the State's attorney Mr. Percy Eckert, who is the law partner of Eoy West, who is the campaign manager for Mr. Deneen, who is governor of the State, who was nominated, and his nomination seconded by Jim Patten, of the grain trust. . Senator Dollivee. How long would one of our little inspectors last in an atmosphere of that sort? Senator Monet. I would like to ask another question. Senator DoLLmeE. I want this question answered. Senator Money. All right; excuse me. Senator Dollivee. What do you say to that as a practical question? How long would a salaried official last under influences that have corrupted your governor, your grand juries, your prosecuting atlor- ^ neys, and the whole business community of Chicago ? feoEbal geain inspection. 105 Mr. Geeeubt. I do not know how long he will last. I know he lasts a long time now ; and we want to take a chance on how long he will last. We are taking a chance with all you people. Senator Money. I would like to ask you this question, if you please : What steps have you taken personally to go before the grand jury and lay these things before them ? Mr. Geeemiy. I furnished the money, got up a collection, and secured the evidence. Senator Money. Did you go into the grand jury room and tell them that you were aware of a violation of law ? Mr. Gkeelby. No, sir. A man more capable than I of that pro- ceeding took the initiative — Mr. John Hill. Senator Monet. He went before them? Mr. Greeley. Yes, sir. Senator Money. And the grand jury examined him? Mr. Greeley. No, sir; he was never permitted to go before the grand jury. Senator Money. Can not a citizen go before a grand jury and tes- tify to a violation of law? Mr. Greeley. I do not believe he can. Senator Money. But the law gives him the right to do so. Mr. Greeley. Well, the law may give him the right, and the law prevents these men from dealing in grain, bvit you can not get it enforced. We have taken the evidence there. Senator Money. If you are going to have a Federal official there, you would have a Federal grand jury, would you not, and it would be composed of those same citizens ? Mr. Greeley. It is a violation, I believe, of the State law. Senator Money. But here are the same citizens on the grand jury for the Federal courts that make up the grand jury for the Stato courts, and if you get the same identical class of men that were on the last jury of that county in your Federal court, they would not allow anybody to go before them, either. Mr. Greeley. One other man and I are the only two men I ever knew that have attempted to get this evidence anywhere. I am not running the prosecuting department of the State of Illinois, nor the Federal Government, but I am coining down here to tell you some- thing, to see if you can not scare up some sort of a prosecution. Senator Money. Yes ; but we would like to have you go up there 'and attend to your own affairs, and wash your linen at home, and go before your grand jury, and insist upon your right as an American citizen to do it, as a citizen of the State of Illinois, and compel that frand jury to hear what you have to say as to the violation of the tate law. 'Mr. GrSeley. I am perfectly willing to do that at any time. Senator Money. I want to say that I am not fighting your bill. You understand that. Mr. Greeley. Certainly. Senator Money. If we have the case I have just supposed, of a Fed- eral grand jury, under the new law which you desire, and that in- spector acts just as the others do, who is going to take the bull by the horns there? Who is going before the Federal grand jury, which is going to be composed of the citizens of the State of Illinois ? Mr. Greeley. Well, you have got me. 106 FBDEEAL GBAIN INSPECTION. Senator Money. That is just it. I tell you, we can have all sorts of propositions for new legislation. I am getting to be like Henry Thomas Buckle, who says, in his "History of Civilization m Eng- land," that there is only one good law, and that is one that repeals an old one. Mr. Geeeley. Senator, the fact is that the matter is not prosecuted. I claim that there have been certain laws violated there in regard to the public warehousing of grain; and whether I do it or soniebody else, the question is if I am not responsible for not doing it, and somebody else may not be responsible with me, and so forth; and why do I not go home and do it. Senator Money. I do not mean, of course, you personally; but I mean that in the case of persons interested as you are among your- selves, it seems to me that you ought to make up some sort of a com- bination and put forward some of your members to go before the grand jury and make your complaint in a formal way, as you have undoubtedly the right to do ; and I want to tell you that they can not stop you. Mr. Geeeley. "We are getting ripe for that. We are getting ripe; and we are riper now right here in Washington than we ever were before. We are getting busy now with a view to doing something. We have the men behind us. They have become educated. These organizations have sprung up within the last four or five years. Most of these 65,000 men never Imew each other in the cooperative grain business and shipping business previous to that time ; and now we are getting up to where we understand things. Senator Money. It might strike some people that if you have exist- ing remedies on hand it would be well enough for you to utilize them before you ask for any new ones. Senator McCumbee. There are quite a number of witnesses here; and if we could keep right to the bill and its provisions, I think we would make better progress. Of course I presume that Mr. Greeley wanted to show first the injustices of the present system, and then to consider the bill, rather than to go into the politics of a State. Senator Money. Yes. Senator Dollivee. Who is the next witness ? Senator McCttmbee. I do not know that we have gotten through with this witness as yet. Mr. Geeeley. Gentlemen, I thank you for your courtesy and your kindness, and I do not desire to take up your time further; and I would not have taken it up in this way had not the conversation taken this turn. Senator McCumbee. I want this witness to complete his entire ar- gument upon this question, if it is possible. I made the suggestion so that we would not take up time on things that I know would not have a bearing upon the question whether this is a good bill or is not. Mr. Geeeley. It is really our part of the matter to show the abuses. Senator Money. That depends very much upon the antecedent probabilities of the case. In other words, a man with his mind trained like mine regards the United States as a great governmental machine for the transaction of business with foreign States, and so on, confining itself to certain enumerated powers, and doing no busi- ness whatever except that of government in the appointed way. I FEDERAL GKAIN INSPECTION. 107 have to have something more than a simple showing that this is a good bill. Mr. GeeeLcET. Grain is a United States proposition, Senator. Senator Money. No ; I deny that grain is a United States propo- sition. It is as well to say that matrimony is a United States proposi- tion, or that divorce is a United States proposition, or that assault and battery is a United States proposition, or that arson, burglary, petit larceny, and so on _ are United States propositions. That is, unfortunately, the tendency of many very good men, I want to as- sure you, who consider that this country is divided into States simply for the convenience of public administration, and who desire to carry everything into the Federal courts, and bring everything under the control of the Federal Executive and into the Federal Legisla- ture. That is a tendency that I should like to combat. But I do not want to say that I would array myself against a majority on such a measure that could properly pass and that would be of a great deal of benefit. All of these inquiries that I have made are those of a man who is unacquainted with the subject-matter under controversy, and who wants light. So you will have to excuse my bluntness. Mr. Geeelet. Oh, we are simply trying to get at the truth. Senator Money. That is what I want. I want the truth ; but I say this to explain some little slowness of mine, perhaps, in understand- ing .what this is about. Senator Doujvek. Who is the next witness ? Senator McCxjmbee. We have here Mr. Nelson, the president of the American Equity Society — the farmer interest. Senator Dollivee. Mr. Nelson, the committee will be very glad to hear you. Senator Money. I particularly desire to hear Mr. Nelson present his argument. We have been in session about four hours to-day, and I for one am not fit to stay here any longer, so I will ask you to excuse me. Senator Dollivee. Possibly we could take some other witness now. Senator Money. I should be very glad if Mr. Nelson could make his remarks when I could be present. Senator McCxjmbee. We have some gentlemen here from the board of trade of St. Louis, and I think one of the gentlemen wants to go to New York to-night: so that if we could have one of those gentle- men from St. Louis, whichever desires to be heard, Mr. Nelson could make his remarks later. Senator Dollivee. We shall be very glad to hear you, gentler en. STATEMENT OF T. R. BALLARD, ESa., OF ST. LOUIS, MO. Mr. Baixard. Mr. Chairman, in the first place, we are very pecul- iarly situated. The St. Louis market is under the supervision and inspection and control of two State departments. All the gram com- ing there is received for the St. Louis market either in East St. Louis or in St. Louis proper. Everything coming to East St. Louis is inspected by the State inspection department of Illinois, and every- thing coming to St. Louis proper is inspected by the State inspection department of our own State. There is a more or less conflicting condition all the time. Kansas City is situated practically the same way. However, I do not know how they get along. 108 FEDERAL GEAIN INSPECTION. Senator Dollivee. Are the nOrriinal standards of inspection the same in the two States? . Mr. Ballaed. No, sir ; n(3t exactly. There is some difference. In the case of wh'eat, for instance, I am not sure that the State of Illinois puts any test weight on No. 2 wheat. I think not. In Missouri the test weight must be S9 pounds. There is some difference in the inspec- tion in the case of oats and all the other grains. . So any grain that we get in St. Louis that is sold to go to East St. Louis, and gbes to the public elevators .there, must be reinspected. Consequently, thei-e is a double tax on the shipper in the inspection department. We have been interrupted a great deal in our own State by at- tempts at legislation to make matters harder for us. They have attempted to take control of all the inspection, the inspection all over the State, anywhere they choose, at public and private elevgitors, on the track, and at any other place that they deem advisable; and they have mkde it a penal offense in the last law they have passed for a man to weigh or issue a certificate of weight on anything that lie might have in his own warehouse or on the track. That is, if he had a wagonl'oad of grain and should weigh it and issue a certiflcEtte on it, the penalty for doing it, I believe, is $300 and a jail sentence. We took this matter before the courts and obtained an injunction, and on some other matters in connection with the bill we have de- feated the measure. Senator Peekins. May I ask if your State law makes it manda- tory to have all grain inspected ? Mr. Ballaed. Only the grain at theipublic elevators. When Sen- ator McCumber's bill was presented to us we called a meeting of the grain receivers and elevator men to discuss it; and after a thor- ough discussion a committee was appointed to draft the resolutions that were presented to the board of directors of the Merchants' Ex- change, which were passed, and which I will leave with the com- mittee. Senator Dolliver. Do you desire to have them printed as a part of your remarks ? Mr. Ballaed. Yes, sir. (The resolutions above referred to by Mr. Ballard are as follows:) Merchants' Exchange of St. Louis, St. Lonix, January 12, 1908. Messers. T. K. Baixabd, Thomas B. Teasi>ai.e, and Maeshall Hall, Committee. Gentlemen : Your report on tLe Federal inspection of grain was submitted to the board of directors to-day, and the following motion adopted: " That the report be referred back to the comihlttee, with instructions to call a meeting of all persons Interested in the Inspection of grain to ascertain their wishes In regard to Federal grain Inspection, the committee to report the result to the board oj directors." Yours, truly, Geo. H. Morgan, Secretary. St. Louis, Mo., January 20, 1908. To the President and Board ofDibectors. Gentlemen : Your committee appointed in connection with the question (\t Federal inspection of grain reports that, in accordance with the Instructloiis of the board, it has commuhicated with the Kansas City Board of Trade 'fthd a number of the grain dealers associations, whose repUcfs ai'e hereto attached and speak for themselves : FEDERAL GKAIN INSPECTION. 109^ Your committee recommends tlie acloptjon by tlie board of directors of the fpllbwing rejsolution : " That the uniform and correct grading of grain and the accurate weighing of,, same iu the Uuite the changes that should be made in Senate bill No. 382, which has been introduced in the United States Senate, by Senator aicCumber: Section 2 : That the chief grain inspector and his assistants shall be expert judges of grain and, shall pass a satisfaQtor^ examination as to their quallflca,- tibns in this respect before being appoli^tQd. Section 3 : That said inspectors shall give a good and sufficient bond tor the faithful performance of their, duties. Section 5 : That when it is proposed to modify or change any classification or g^^aji^ a day shall b? fixed for a public hearing, at which any person con- cerned in the proposed modification or change may be heard and that at least ten days' public notice shall be given of the time and place of said hearing ; and that if after said hearing it is. decided to make the proposed modification o^ change, at least sixty days' public notice shall b,e giveq of the date when said miodiflcation or change shall become effeptive. Section 8: That it shall be unlawful for any person, firm, or corporation en- gaged in the transportation of grain to make iany charge for holding grain for inspection, as required by the provisions of this section. Section 9 : That the word^ " economically administered " b^ inserted after the word " service " in line &, page 5,. Section 11: That instead of the final appeal from inspection being to the Secretary of Agriculture, it should be to a committee of appeals, each city or market where Federal inspection prevails to have its own separate committee of, appeals, composed of persons generally recogjiize.d! a,s expert judges of grain, b\j|; not connected vyith the Federal inspectiqii department; and preferably tiere should be a separate committee for each Ipnd of grain, so as to secure the highest type of expert service on appeals. Of course it would be ideal' if appointments to this committee of appeals were required to he made froqi nomi- nations by the boards of trade or similar organizations in the respective cities, but it is probably hopeless to expect that. Section 5: That a minimum as well as a maximum penalty should be pre- scribed. Eespectfully submitted. T. R. Balla^p, T^HOS. i^. 'CiSASDALS, A Majority of tJie Committee. Mr. Ballarp. I have a^sp with me, whjLch.I dgsirje.to leave witlji, the committee, a statement from Mr. Yager, the editor of the Modftffl; MUlfir. If you desire, I, will read. it. Senator Doluver. Yqu may, use your own pl^a;S)jre ajjout that. Mr. Ballaed. He wa^ asfeed toconie over hep^ and could nofc c^ijip, an4 he acidresged this comimunicatiop tp ipe apjjf asked me to, l^ax,e it" pi;es.^n,ted to the comijaitteQ. , ,^ , -^^ ,u ^ u ■ (Mr. Ballard thereupon ijead alpud to thie. corninitite^ the tollowmg letter:) TjHE MODISBN MlLIxERj St. Loufs, Mp., Mqrch 28, 19Q8. Mr. T. R. Ba,llabd, Merchants' Exchange, St. Louis, Mo. Dear Sir: I wish to call your attention to an effort made by this publication In September 1906, to ascertain the percentage of prominent, millers throughout 110 FEDEEAL GRAIN INSPECTION. the milling States of the United States who are in favor of Federal Inspection of grain. We sent out several hundred circulars to the best-known millers in the trade, and of the replies received, 61 per cent of the millers favored national grain inspection, 24 per cent were against it, and 15 per cent were undecided or did not care to express an opinion. From only one State (Minnesota) did the number of replies received show a preference for State or board of trade inspection. It is my opinion that if the millers to-day should vote on this matter Federal Inspection would carry by a very large majority, fully as large as indicated in our test made among the prominet millers. Some of the southern millers are opposed to this on the ground that it is taking away State rights. It was testified by some of the exchange representatives at the hearing of those opposed to national inspection in Washington recently that the demand for Federal inspection was confined to the three States of the Northwest. It seems to me that you would have the opportunity to testify to the fact that millers of the country are very much interested in this matter. If the Miller's National Federation should go on record, it is questionable which stand they should take, as some of the prominent millers of the federation are opponents of the proposed Federal inspection. Trusting that this will throw some light on the situation and be of some service to you, I remain. Sincerely, yours, C. M. Yagee, Editor. Senator McCumber. I wish you would allow me to break right in on this testimony, because it is important. Those 24 men that were opposed to it were all, or nearly all, opposed to it upon this ground (I read their replies myself), that it was introducing an element of politics into the inspection. As a matter of fact, the object of this bill is take it out of politics. The politics is in it now. So I think that if they had thoroughly understood it and had realized that it was aimed against the politics part of it, they would have wanted Federal inspection to get out of it the politics they have now. Mr. Ballaed. I have talked to some of the leading millers that come to our market, some of them from Louisville, Ky., and some from Nashville, Tenn., some from Cairo, and a great many of our own people— the Stanton & Taylor Milling Company, who are large millers, and the Plant Milling Company — and practically all of the large millers of our market, and they are all in favor of Federal supervision. Some of the same people were not in favor of it when the matter was first taken up by Mr. Yager. There has been so much evidence produced here along the lines which we would talk on, and which we confirm, especially by the gentleman from Chi- cago, that it is hardly worth while for me to t&e up the time of the committee further. Senator Dollivee. Have you a speculative grain market in Chi- cago? Mr. Ballaed. Yes, sir. We do not have the trouble, however, that Mr. Greeley speaks of in reference to warehouse receipts and grain in public elevators. An elevator receipt in our market at the present time is perfectly good at the bank. We know the kind of grain we have in the elevators. There is no combine of elevator men. There are a number of elevators there, and each one is inde- pendent of the others. They are always, at the present time, en- deavoring to have something good that they can deliver on con- tracts, and do so when the months come around for delivery. Prac- tically all the grain that is sold, especially the wheat that is sold from the elevators, is sold by sample. It must have the inspection, but the wheat is generally sold by sample. FEDEEAL GRAIN INSPECTION. Ill Senator Dollivee. Your main trouble is the conflict of the two States' jurisdictions? Mr. BaUjAed. That is our worst trouble at the present time ; yes. Senator Perkins. You stated that the standard was fifty-nine pounds to the bushel of wheat. Is it not usually sixty ? Mr. Ballakd. Sixty is the standard ; but No. 2 wheat can be No. 2 at fifty-nine pounds. Senator Perkins. This wheat that is placed in the elevators is graded when it goes in? Mr. Ballard. Yes, sir. Senator Perkins. If you want a certain grade of wheat, the mil- lers in purchasing wheat from the elevator company ^ or through you, buy according to their estimate of the value of the wheat; do they not? Mr. Ballard. Yes, sir. Senator Perkins. You have not stated your own views, sir, as to the advantage of this national inspection over the State inspection. Why do you approve of it ? Mr. Ballard. I believe that national inspection would have many advantages over State inspection, for the reason that it would be uniform and under civil-service reform. If the men all understood their business, a great many of the difficulties that now obtain would be removed. I believe that a warehouse receipt issued by authority of the United States Government would be as good in the bank where men want to carry their grain for money as any other security. Senator Perkins. Would not the same opportunity exist, sir, for the owners of the elevators to mix grain with cheat and chaff and inferior qualities under a national inspection as exist under a State inspection ? Mr. Ballard. I believe the percentage of opportunity to do that would be very much less. Senator Perkins. Of course, as I understand it, if this bill is passed, the Government would have no more control over the eleva- tors than the State inspectors now have. It is simply to inspect the grain in the elevators and give their certificate as to the grade of it according to the Federal standard. Senator McCumbee. And they would inspect it out if it went to another State. Senator Perkins. Of course we as your agents, as the agents of the people, have no object in view except to do that which we be- lieve is for the general public welfare ; and as you have shown your interest in this matter by coming up here and giving your testimony as practical, experienced business men, I look upon it as of very great value to us to guide us in legislation. ' Mr. Ballard. We feel that to have the grain of the United States graded under one system of inspection would be much better than to have State inspection in each different State where they now have State inspection, and the inspection that exists in other places where it is under the board of trade rules. There are only a few States, I believe, that have control of it. Evidently it would be a great benefit to the export trade to have the Government stamp on ware- house receipts, showing that a certain cargo of wheat or corn in- spected was No. 2 or No. 3, or whatever it may be ; and it would go a long way toward renewing the confidence that has been lost. 112 FED;^jt|A;.GEA^lir ISrSPECTip,JT. Senator Peei^ins, A^ I. stated spip^, time: sinc^, all qf. Dur. sliip- ments from the Pacific' coast— the States of Washington and Or^egpn and Califprnia — are made in burlap sacks, and bills of lading, are dfjawn against them. Much of £li3,t grain is purchased, perhaps, on private account of fi?T|is, and bills of lading are. drawn, against it. But when it reaches Liverpool, or London, or any of thie central grain depots in Europe, they are obliged to submit it to the boards of arbi- tration and inspection for the respective grain exchajiges. There- fore, would it add any to the value of our wheat? It would add to its uniformity ; I agree with you there. Mr. Ball4kd. Your wheat is in th€| original package ? Senator Perkins. Yes, sir. We have not a smgle elevator in Cali- fornia or Oregon. Tl^ere may hp some elevators now up in the Walla Walla Valley, but there is not a single elevator in California. It i§ all shipped in the original burlap sacks. We have not shipped any in bu^k. We tried it sonie twenty years ago, but it was not a success for many reasons. Mr. Ballakd. It is quite different with us. The whea|; is first bulked into an elevator ; different farmers bring in their wheat, and it all goes into the same eleya,toi;, into the san^p bins, in t^ie country- Senator DoLLmiB. Do they not undertakp tp, separate the gpod, \?heat from the b^d in the. country ? Mr. Ballakp, Usually they dp, but not always. I uspd^. tp run some elevators, and I nev^ attempted to keep tlie lower grades sepa.- rate — nothing but the t^egt. Senator PEEKiBfs. Wojild you mi^ the white wjieat, -syith Sonpra ^hpat and the other grades ? I do not ki>ow what your standards are. We have the Chile whea,t, the white whe^t, tJiP grades of Chile wheat, as we call it ; the grades of Australia wheat, No. 1 and Np, 2,; and: then we h^ve the Sonpra wheat, ^high, is, with us, a, round, hard berry. Mr. Ballaed. Spna.tor, we practically have no white wheat in St. Louis. We have what we call No. 2 red, which i% soft winter wheaJ;, and Senator Peekins. I understand that ; but our grades are. very difr ferent from that. Of course this bill-, if it befiara:e a, law, would only apply to grain in transit that is. shipped through in interstate. com- merce — grain that is shipped from one State to another St&te.or froiD; oi^e Territoi;y to another State to the point of destination. Hhere- fore, it would npt be such a hardship as our friend, Senator Money, would indicate it to be, or any infringement upon State rights. Mr. Ballard. None whatever. Senator Peekins. Because it would not affect any State law tiat now exists so far as it applied to your respective Statei Mr. Ballard. No, sir; it would have no effect whatever on any- thing, that, is shipped, say, in our State from* somewhere in the in- t^ipr to our own market in St, Louis. Spnator Peekins. You say you have been in the grain trade, for some twenty or thirty years ? Mr. Ballard. Yes, sir. Senator Peeking. And your opinion, and the consensus of* opinion of practical men, like yourself with whom you, have been associated; is that the enactment of this bill would be a wise provision ofilaw? Is that correct ? FEDERAL GEAIN INSPECTION. 113 Mr. Ballakd. I feel very certain that it would. Senator Gore. This would require some way of separating the wheat that was intended for local mills and that that was intended for foreign shipment, would it not? AV^heat, for instance, coming into St. Louis from northwestern Missouri, that was to be ground in the mills there, could not very well be mixed with wheat that came into St. Louis to be shipped abroad. Senator McCcmbek. It would be inspected just the same, for it would be interstate grain, because it came from another State. Senator Goke. I mean the same State, Senator. Say that it came from the northern part of Missouri. Senator McCumbee. It would not affect that, unless the parties themselves wanted it inspected under a Government inspection. Senator Gore. That is not the point, still. Mr. Baijjaed. You ask me whether this wheat that we received from northwestern Missouri or northern Missouri would not be used at home in place of being shipped abroad ? ' Senator Goee. No, sir. Suppose some wheat comes down from the northern part of Missouri that is going abroad and other wheat that is going to be ground in St. Louis. It is all dumped into the same elevator. Would not that bring about some confusion? Would it not require separate elevators somewhere? Mr. Ballaed. Not at all ; it would all go in the same bin. Senator Goee. You would not, under this law, have your Missouri wheat inspected that was to be Used in the State? Mr. Ballard. We would have it reinspected out, though, by the United States. Senator Gore. But not if it was not going out of the State? Mr. Ballaed. If it was for foreign shipment. If it was for the mills, it would not have to be ; no, sir. Senator Goee. You would inspect it out instead of inspecting it in?" Mr. Ballaed. We would inspect it out. If it stopped in St. Louis and went into a public elevator, and stayed there thirty days or six months, anything that went out to a mill would be reinspected out by the Missouri inspection department. Senator Goee. Yes. Mr. Ballaed. If it was to go to New Orleans, or New York Senator Goee. It would be inspected by the Federal inspectors ? Mr. Ballaed. By the Federal inspectors. Senator Goke. I see. It would be done by grading it out instead of grading it in ? Mi*. Ballaed. Yes. STATEMENT OF THOMAS B. TEASDALE. EStt., OF ST. LOUIS. MO. Mr. Teasdale. I simply want to say, gentlemen, that there has been a good deal said here in apparent derogation of boards of trado and merchants' exchanges; and that they are not all of them as black as they have been painted. At least, the St. Louis Merchants' Exchange stands for a square deal for everybody. They have e^ i- denced that by coming out flat-footed for Federal mspection, be- cause they think it is going to remedy and do away with some of the abuses that undoubtedly do exist in the grain business to-day. 34503—14 8 114 FEDERAL GEAIN INSPECTION. One of those abuses is the nonunif ormity of the grading of grain in this country. It has been asked here how that affects the farmer who brings his grain into the country station and sells it on view, or by selling to the little dealer at the country station. But how does the country shipper determine the price which he is going to pay the farmer? He looks at the market reports of 8t. Louis, Chicago, Kan- sas .City, or Minneapolis, whichever market he may be tributary to. He deducts from that price the freight, the commission he has to pay at the terminal market, the inspection charge, the weighing charge; and there is another deduction for probable natural shrink- age of the weight of the grain in transit. He also has to make up his mind what that grain will grade in that terminal market. Hav- ing all that inforniation, he knows what that grain will net him on his track; and he bids the farmer as much less than that net price as will afford him a fair margin of profit for shipping that grainl Therefore, you can readily see that if the dealer's price in the termi- nal market is reduced by reason of this irregularity in the inspection, or for any other cause, the price which he pays the farmer is corre- spondingly reduced. And, as one of the gentlemen preceding me has said, that price affects not only the grain which goes to the terminal market, but practically all of the grain that is sold by the farmer, because the price he gets on the farm for any other purpose- than market shipment is fixed by the price it is worth in the market. Now, with regard to uniformity of inspection : I have been in the grain business about thirty years. I think there has not been a year of that time that I have not heard talk of uniformity of grades ; but it has all ended in talk. I do not believe we ever will get uniform grades by the voluntary action of the various markets, because, while they may think it is a good thing as a general proposition, they do not seem to be able to agree upon the basis of uniformity. . I presume if any market could get all the other ones to agree to its grades they would come in and be all right. But you never are going to get uniformity of grades until it is imposed on all the mar- kets of this country by the highest authority— the Federal Govern- ^^^\\ ^^^ ^"^^^ if it were so that they could do it otherwise, there would be no authority, no power, to hold them to such an agreement in regard to those uniform grades. It is true that you can not get absolute uniformity, because the gram raised in various sections of the country has various and vary- ing characteristics. Senator Perkins. And, really, the wheat of the greatest intrinsic value IS that which will yield the greatest number of pounds of flour to the hundred pounds ? .^>^/■ ^^^f^'f- T¥^ ^^ perfectly true. There are different qualities I ; ^^ Mr. Messeeole. Yes, sir; and we have experience in St. Louis, because we ship there. Senator Peekins. And therefore you believe that the enactment of this bill as presented by Senator McCumber would in a great measure obviate these complaints? Miv. Messeeole. Yes, sir. Senator Peekins.' And the injustice that you think is done the producer ? Mr. Messeeole. Yes, sir. FEDERAL GKAIST INSPECTION. 157 Senator Dollivee. Mr. Messerole, it appears that in 1&07 the legislature of North Dakota made a memorial to the legislature of Minnesota complaining of the inspection in that State, and that the legislature of Minnesota appointed a joint committee to investi- gate the charges and to find a remedy for the evil, if one were neces- sary. This committee reported vindicating the integrity and effi- ciency of the Minnesota State regulations, and of course refusing to take any steps toward a remedy; but they sent a reply to the legisla- ture of North Dakota, which appears to be in the nature of a vindica- tion of the inspection methods of Minnesota. Mr. Messekole. That was a committee of representatives, you say, of the legislature ? Senator DoLLnTER. It was the response of the legislature of Minne- sota to a complaint from the legislature of North I^kota. Senator McCumbek. They stated that they gave it a better grade than it was entitled to, did they not, or something of thai kind ? Mr. Messeeoub. I can only say. Senator, in regard to that, that it assumes a little bit of the evidence which a man purporting to be a farmer from Minnesota has giten. I understood he was down here lobbying against the passage of a bill. I do not think he is a grain grower at all. Senator Dolliver. Do you refer to Mr. St&ples ? Mr. Messerole. No; I refer to Mr. Hall. I understand that he is connected with the dairy interests more than with the grain inter- ests. But he says that if the Minnesota inspection is good enough for Minnesotans, it should be good enough for Dakotans. If I know anything about the fundamental principles of our Government, one of them is that we should all have equal representation in mattefs in which we are all equally interested. Senator MoCtjmber. But your idea is that we can only get repre- sentation in the Federal Government which has jurisdiction over the whole subject-matter of interstate commerce. Mr. Messeroue. That, Senator McCumber, is the view taken by our people. On February 13 and 14 we held a two days' convention in the city of Fort Dodge. We had a representation of 1,800 men. After carefully considering and discussing this bill, and spending a great deal of time over it — it was a most important measure, and was given more attention than any other one thing in our convention — we unanimously voted favoring the bill, and passed resolutions to that effect. Senator Long. Without any amendment? Mr. Messerole. Without any amendment. Senator McCtjmbek. They aSked for legislation along the line of that bill, of course ? Mr. Messerole. They did not recommend any amendment. Senator Dourer.' This Mr. Hall, who testified before the House committee, seems, according to his statement, to have been identified with several farmers' organizations, such as the Farmers' Alliance, hail and fire insurance companies, and the State Agricultural So- ciety. ' He represents that the farmers of Minnesota secured the enact- ment of this grain-inspection law in that State in the year 1885. Senator Gore. Does he state whether he is an agriculturist or a farmer ? 158 FBDEKAL GRAIN INSPECTION. Senator Dollivek. He seems to be the vice-president of the Farmers' Home Mutual Tornado and Cyclone Insurance Company [laughter], a director in the Farmers' Township Mutual Hail As- sociation, president of the Farmers' Federation of Minnesota, and, as a member of the Farmers' Alliance, active in the enactment of the original law of 1885 in the State of Minnesota. Mr. Messerole. In speaking a little further about the present systems, in connection with and along the line of Mr. Greeley's tes- timony yesterday, I want to say that the courts have decided that the warehousing and inspection of grain shall be construed so as to pro- tect the shipper and the producer, and not the warehouse trust at terminal markets. Senator Gore. That is the law ? Mr. Messeeomi. That is the law. Senator Goee. You are satisfied that if you had had Federal in- spection your two cars that you shipped to Minneapolis would have been graded the same? Mr. Messeeole. I believe they would. Senator Gore. Senator Gore. But by reason of grading one Ifo. 3, which you think was really above its merits, and giving the other no grade, you would have made more than if they had given both of them the proper grade. No. 4— about a cent more? Mr. Messeeole. If the error was due to incompetency, and I got the benefit of it, that would not change my views upon this matter; because I would recognize at once that there was incompetency, and the next time I might get the worst of it; and there would be no certainty or anything like certainty about the grain business. The fact of the matter is, Senator Gore, that it is not the slight differ- ences that cause trouble in the grain business; it is the wide differ- ences. For instance, if I ship a car of grain to Chicago, and when I ship it I know that it is on a line between number three and num- ber four, and it happens to grade number four, I am not going to call then for reinspection, because I think then that the chances are that I may be wrong. But if it grades no grade, when I am satis- fied that it is number three, then I would call for reinspection, if I thought I had any show. But under the present conditions I do not think I would have ; because the men to whom I must appeal for a change in the grade are the same fellows who are responsible for the condition in the first place. Senator Goee. The men whose interests are in conflict with yours? Mr. Messeeoub. Yes, sir. Senator Peekins. In voicing the views of these organizations which jovL represent, you state unhesitatiiigly that they have dis- cussed it among themselves? Mr. Messerole. Yes, sir. Senator Peekins. And you believe it is the consensus of opinion among the farmers of Iowa, or a majority of them, that they fire in favor of this bill, do you ? Mr. Messeeole. Yes, sir ; I know that to be the fact. Senator Perkins. Ajid they have come to that conclusion after discussing it pro and con? Mr. Messeeole. Yes, sir; I have had a great deal of corre- spondence with the members who heard the discussion at Fort Dodge. We gave the matter a great deal of talk and a great deal of thought; FEDEBAL GRAIN INSPECTION. 159 and I went from there to the Bloomington convention a few days later, and the same thing was followed there ; and the same in Illinois. Senator Perkins. The reason why I ask you this question is that I feel that we are simply the agents of the people. As to any meas- ure that they have fully discussed and come to a conclusion upon, and that there is no division of opinion upon, it is our duty to regard their wishes so far as we can practicably do so. Mr. Messeeom!. I look upon the matter something in this light: It matters very little what my personal views may oe on this sub- ject, although I have had some experience; but I came down here to deliver this message to this committee — that our farmers have sent me here to let you people know that they favor the enactment of some legislation of this character. Senator. Perkins. Those opposed to it have been here, and have had their say about it; and they simply represent their own indi- vidual pecuniary interests and their own financial interests, as it were. When you come here from the producers, representing as many as you do in the great State of Iowa, it seems to me your state- ment carries great weight with it. Mr. MesseroiiE. I do not think there is any doubt that the injus- tice and inequalities of the present system are proven, to say noth- ing about those things which are worse than incompetency. Senator Perkins. Then the next proposition is this, Mr. Chair- man : If these evils exist, and it appears clearly to the committee is this the proper bill to remedy those evils? Senator DoUiiVER. Mr. Messerole was about to address himself to that point, I think. Senator Gore. Do you think that under this bill you could ship those two cars of corn to any terminal market in the country and be reasonably safe in the assumption that they would receive the proper grade? Mr. Messerole. I do; yes, sir. Senator Gore. And the same grade in one case as in the other ? Mr. Messerou!. Yes, sir. Senator Gore. And that would be a source of satisfaction to you ? Mr. Messerole. Yes, sir. I think it would prove in the end to work out a stable state of affairs upon which a grain dealer or a man acting in the capacity of an agent for the farmers could rely. Senator Gore. It would give confidence to the farmer that ships to those terminal markets, and to the foreigner who buys from them? Mr. Messerole. Yes, sir. Senator McCumber. Mr. Messerole, suppose you have a carload of grain which you ship from, say, Kansas or Nebraska, over the Mis- souri Eiver, and it is sold by the car there without being changed. It is then reshipped into Illinois. It is perhaps sold again. It is then reshipped down to New Orleans, and again resold, and shipped out of the country from there. What trouble, if any, would you find with reference to the grading and regrading of this grain? Would it be graded more than once? If so, where would it be graded; and what dangers would arise in the grading that would affect your interests? Mr. Messerole. It would be graded first at the initial point and at ■each succeeding point until it reached the destination, by a system of s 160 FEDERAL GKAIIJ INSPECTION. grading in which no two inspectors would grade it alike. That would be the result. Senator McCumbee. Then would not this produce such uncertainty on the part of the shipper of that grain that it would discourage him a great deal in giving fair grades to grain? Mr. Messeeole. It would, certainly. Mr. McCreery here has a case of just that character, which I will ask him to state, because it brings .that point out very clearly. Mr. McCeeery. Do you want me to state that now? Mr. Messeeole. Yes; I should be glad to have you state it now, because it comes in here. Mr. McCreeey. In that particular case, Senators, the shipment originated at Mason City, 111. It was composed of two cars of white corn loaded by us, both shipped to St. Louis, Mo., both inspected by the same inspector or under the same system of inspection. One graded No. 3 ^vhite, the other No. 2 white. That corn was forwarded on to Nashville, Tenn. There was no complaint in Nashville about the car that was graded No. 3 in St. Louis ; but discussion arose over the weights of the car of corn which was graded No. 2. I have the papers, the correspondence, and a draft refused by us, and so on, in my pocket. A discussion arose over the weights, and the reason assigned for the shortage of weight of this car in Nashville was that the com arrived in Nashville in heated condition. How could a car of No. 2 white com in St. Louis be graded "no grad*" in Nashville; I have those papers. Senator McCtjmbee. It would have to go down at least from three to four grades ? Mr. McCeeeey. Yes; it would have to go from No. 2, which is the best grade of corn. That is, it is the best grade that is handled. There is, I believe, a No. 1, but no one ever heard of a car grading No. 1. No. 2 is the highest that any corn grades. That was the best, then, that there is. We will say it might not have been the best grade of No. 2, but it passed in that class. It then went down past No. 3, past No. 4, and down into " no grade." Senatqr Dollivee. They claim that it became heated, do they not ? Mr. McCeeeey. How could it become heated in going from St. Louis down to Nashville ? Mr. Messeeoui. His contention is that the initial grading was wrong, either the one or the other ; that either the grade at Louisville or Nashville was wrong. Mr. McCeeeey. Senator, if it was No. 2 corn, the qualifications for No. 2 corn are such that it would not heat in going to Nashvilk, or it would not heat in going to New Orleans for that matter^ if it took thirty days. vSenator Goee. The best corn of that grade is heatproof, is it not ? Mr. McCeeeey. It is almost heatproof, because there is such a small percentage of moisture in No. 2 that it is impossible to get it in a heated condition within any reasonable length of time. Senator McCumbee. And that would make a difference of how much of the value of that cargo of corn? Mr. McCeeeey. I would say, going from No. 2 down to " no grade," at least 7 or 8 cents a bushel. FEDERAL GRAIN INSPECTION. IQT Senator McCttmber. Then the man that bought that No. 2 Mr. McCkeert. That was consigned to St. Louis. Senator McCumber. If he bought that as No. 2 he would lose about; 7 cents a bushel ? Mr. MoCkeert. Yes, sir. Senator McCumber. And that would tend to make him a little more careful about giving a grade of No. 2 if he really thought" that it was No. 2. Mr. McCreeey. Certainly; and right here is where the farmer comes in and is being injured by this loose system of inspection. Senator Gore. Did that No. 3 corn go to Nashville, too ? Mr. McCreert. Yes, sir. Senator Gore. How did it fare? Mr. McCreert. All right ; there was no question about it. Senator Gore. It held its grade ? Mr. McCreert. Yes, sir. I have this paper in my pocket, showing that there was no question about it. The point is this, gentlemen: That at one place or the other the inspectors undoubtedly were badly " off." Had there been Federal inspection, gentlemen, the com that passed the Federal inspector at St. Louis as being No. 2' grade, or No. 3, as the case might be, would have had the same grade down at Nashville. There is no question about that. Senator Doixiver. Will you yield to another of your colleagues, Mr. Messerole? Mr. Messerole. Yes, sir. Mr. Nelson. I want to call attention to a sample of No. 4 wheat taken from a car that arrived in Kansas City from Kansas, and a sample taken from a shipment of No. 2 hard wheat out of an elevator in Kansas City, and finally transferred at Buffalo to a canal boat for a Rochester mill, which graded No. 2 at Kansas City and at Buffalo. I forwarded the two samples to Senator McCumber, with the request that he submit the two samples to the Agricultural ' Department for examination; and I have their report showing that there was no difference in the value of the two samples. Senator Perkins. In the grading of this corn, it is evident from the illustration you have given, that there was either dishonesty, or incompetency, providing it was a fair grade ; or, in other words, that you had a fair sample of it. Mr. McCreert. They had the car, Senator. Senator Perkins. What is the usual custom in taking, samples ? Mr. McCreert. The usual custom is to take a trier — ^you under- stand what that is? Senator Perkins. Yes. Mr. McCreert. And go into the car, and the sampler is supposed to take samples from a number of different places. Senator Perkins. And mix them all up ? Mr. McCreert. And mix them all up, and make an average of the samples that he gets from the car and pass on them. Senator Perkins, My reason in asking the question was only to try to account for this, if I could, for some other reason than that of dishonesty or incompetency. We buy and sell copper and lead ores, you know, according to- that method of sampling, and the smelter has no difficulty in fixing their value. 34503—14 11 162 FEDEKAL GBAIN INSPECTION. Mr. McCreery. I shall be glad to talk more on this particular case when I come on. Mr. Messeeole. It has been contended, I understand, by some of the opponents of the bill that it would create confusion, and that re- inspection would be necessary at the point of destination. As I understand the purpose of the bill, it is to provide that the initial inspection would follow the car until the grain lost its identity, and in case of a disagreement there would not be anything to prevent the purchaser who might not be satisfied from calling for a reinspec- tion. Senator Perkins. It loses its identity as soon as it goes to the elevator, though, does it not? Mr. Messerdle. Yes, sir; it would lose its identity if they put it in an elevator ; but when it was passed out it would be reinspected. Senator McCumber. Under this bill it would have to be inspected while it was a subject of interstate commerce, and when it goes into an elevator it is not interstate commerce. Therefore the inspecting will be done in the car and from the car, either when it arrives from another State or when it is loaded into a car and started for still another State. So you see that all the inspection will be done out- side of the elevator. Mr. Messeeoo!. The present inspection at Chicago, which is our principal market, and upon wjiich we must depend at most times, is absolutely unreliable and without any stability whatever. As a proof of this, I want to tell you that in our country we have a va- riety of oats known as the Russian green oats; also an oat known as the Kershon oat. They are of a yellow variety. Those oats upon arriving at Chicago, no matter how sweet or bright or clean or nice they are, are invariably marked " stained and damaged " in the in- spection certificate; while an inferior quality of white oats might pass the inspection as No. 3 white, as compared with these yellow oats. Senator Dollivee. That is a fine piece of mere stupidity, I should say. Mr. Messerole. We have been contending with that condition for the last five years. In view of the fact that many foreign countries buy our grain,, and we are heavy exporters, we contend that it would be a good thing to offer them a definite basis on which thej' can base their Dusiness relations with us ; and we also contend that the Federal inspection would perform that service. Senator Peekins. That commends itself to me, Mr. Chairman, especially so as it has been stated by the gentlemen who preceded you, that they take the grade in foreign countries of the grain shipped from our markets here on the Atlantic coast and the Gulf. On the Pacific coast it is very different, or course, and therefore this is a revelation to me, and a very good one, too. It makes me feel tliat your advocacy of the measure has a great deal of merit from that standpoint. Mr. Messeeole. Is the remedy in this bill adequate? That is a question that might arise. I want to state to this committee that our people believe that this is a very good measure, and they have not a,sked for any amendments. They do not expect perfection, and if tliey find it to be faulty in some particular they are not going to complain about it. But they think, and they have said they think, FEDERAL GRAIN INSPECTION. 163 that it is a move in the right direction and will be much better than what we have at the present time. In view of the testimony as to the outrageous inspection at terminal markets, what evidence is to be more conclusive than that of the men who produce grain and ship thousands of cars of it, as testified to by the representatives of the several organizations? I am inclined to look at this thing somewhat with the idea of trying to find out where the opposition comes from. Senator Gobe. 1 should like to hear you discuss that point a little. Mr. MesseroIxE. It is very natural that a combination of grain dealers, such as we heard about here yesterday, and which I am firmly convinced exists — in fact, I know it does from my own personal ex- perience — should oppose this bill. It is also natural that an exchange having its rules framed up in its own interest should object to any in- terference with the carrying on of its business as it has planned it. But the farmers, in considering this bill, are looking at their own interests from the producers' standpoint. And I want to say that in making the canvass in Iowa, having intimate connection with a great many farmers' organizations in Iowa, Illinois, South Dakota, and Minnesota, I have yet to find the first farmer and grain producer who will say one word against this bill of Senator McCumbef 's. They all indorse it universally. Senator Gore. You feel sure that the farmers will not permanently, taking them one year in another, get more for the grain than it is worth ? (This question was not answered.) Senator Perkins. In other words, all the farmer wants is an honest, square deal? Mr. Messekom;. That is all they are asking for. The bill means, first, uniformity. Next, it mean civil service, which means educated inspectors ; and in my judgment that is the most important thing in the whole proposition — ^that it will result in the building up of a corps of inspectors who will be educated from a proper source. Senator Dolliver. I notice that one witness against the bill objects to it on the, civil-service ground, claiming with a good deal of vigor that an examination in geography and English grammar is rather a dim evidence of a man's qualification to inspect grain. (After an informal discussion among members of the ^committee.) Mr. Messeeole. It was admitted by Mr. Eeynolds, who I take to be a man of some prominence in the grain business of Indiana, before the Uniform Grade Congress in Chicago in 1906, that these evils exist; that there is no uniformity, and that the reason there is none is because men want to continue sharp practice. He admitted that, and yet he is opposed to this proposition. He wants to work out some reforms in their own organizations, but he says that he has no hope of accomplishing that. Senator Perkins. That is one of the wisest features in this bill^ that it is under the civil-service rules and regulations. Mr. Messerole. Exactly ; that is the way we look at it. Ant)ther thing that I regard in connection with the bill is this; That when a man is found dishonest, the Government will punish him for it, and they will be less liable to be dishonest. It will not be simply winked at, as is the case in Chicago and these other markets where they have been caught in the act, and perhaps have discharged a foreman under them somewhere and made a scapegoat of him, and 164 FEDEEAL GEAIN INSPECXIOST. that has been the end of it. I do not think that will be the case under this bill. People fear Government prosecution. It will inspire confidence among foreigners, because the reputation of the Govern- ment itself will be at stake in this matter. The official certificate will pass as good as coin. That is the way our people view the matter. I think, Mr. Chairman, that that is all I have to say, except to thank this committee for its courteous treatment and for the oppor- tunity of telling you what our people want. Senator Pekkins. That is a very interesting presentation of the case. Mr. FoEEiNG. I should like to ask Senator McCumber one question. There seems to be considerable opposition among the members of some of the exchanges to this bill on this point : If it should go into effect, what effect would it have on grain that is not interstate grain- that is to say, grain that is going into the elevator? Would not that all have to be kept separate in the elevator ? Senator McCtjmbee. No, not at all; because it is not interstate grain when it gets into the elevator. Mr. Fobbing. I understand that. Senator McCumbee. When it leaves the car it becomes intrastate^ grain. The only object of the bill is to secure, first, a just and proper inspection and grade when it arrives for the purpose of selling it; secondly, to see that a just and proper grade is placed upon it when it' starts out into another State, so that it will not defraud the consumer. We want to protect, first, the producer at one end, and then we want to protect the consumer at the other end, so that the one will seill the grade that he is entitled to, and the other will receive, when he purchases, the grade he is entitled to. As long as the grain is in the elevator it is not hurting anybody. We do not care what they do with it in the elevator. It is intrastate grain, and we can not control it if it is sold in that State from the elevator; we can not do anything as to that. But if it starts to defraud a person outside of the State from which it is shipped from the elevator, we want to reach it the saine as we reach articles under the pure- food law. Mr. FoEEiNG. But you do not quite catch my question. Senator McCttmbee. Perhaps not. Mr. FoEEiNG. The State of Pennsylvania raises wheat and raises corn. In the case of that grain going in an elevator there, would they be allowed to mix their grain in with the grain that came in from another State? Senator McCtjmber. Why, after it gets into the elevator the owner can do with it just as he has a mind to. Mr. Foeeing. But with that grain going out for export, the inter- state grain and the intrastate grain would all come in under the same inspection, if you had a Government inspector there to inspect it out. Senator McCumbee. No; the Government inspector would not^ inspect it in the elevator. The Government inspector would inspect it in the car. Mr. Foeeing. I understand that; but in the case of the grain going for export Senator McCirMBEE. Either in the car or the steamer or whatever* vehicle it is going in for export ; and the Government will put on itr the certificate to which it is entitled, either for reshipment into another State or for export to a foreign State. FEDERAL GRAIN INSPECTION. 165 Mr. FoEKiNG. Then your bill would not interfere with the mixing of Pennsylvania grain along with other grain going out ? Senator McCumbee. Not a bit. Mr. FoERiNG. That is, provided the grain from Pennsylvania was inspected by the commercial exchange inspection? Senator McCtjmbee. Yes. Mr. Foering. That is what I wanted to get at. My mind was not clear on that point. STATEMENT OF J. A. McCREERY, ESa., OF MASON CITY, IIL. Mr. McCreeey. I am manager of the Farmers' Grain and Coal Company at Mason City, 111., and am also secretary of the Farmers' Grain Dealers' Association of Illinois. Senator Dolliver. Will you kindly give us your views about thisi bill? Mr. McCeeeey. Yes. I should like to state first. Senator, by your permission, that in my first capacity I represent 90 farmers who own the farmers' elevator at that place, of which I haAe a picture here. Senator Peekins. What is the capacity of this elevator? Mr. McCeeeey. Fifty -five thousand bushels. In my capacity in the second instance I represent here and I am sent here by 25,000 farmers, who ask this body to give us Senator Peekins. How do these 25,000 farmers speak through you, sir? By resolution adopted by their organization? Mr. McCeeeey. In answer to the Senator, I will state that we recently held a State convention in the city of Bloomington thnt was attended by 900 delegates from these various local farmers' associa- tions, similar to the one of which I am manager. To make it clear I will say that they are local organizations composed of the farmers of the community who subscribed $50 or $100, as the case may be, to the stock, and created a fund of five, ten, or fifteen thousand dollars, and built these elevators for the shipping of their own gi-ain, and any other grain that they see fit to buy from those who are not mem- bers. The State convention was held in Bloomington on February 26 and 27. and was attended, as I said, by 900 delegates. At that convention, after discussing the bill under consideration, it was unanimously voted to indorse the bill or something in that line.. Senator Peekins. That is, a Federal, national inspection? Mr. McCeeeey. Yes, sir; a Federal inspection bill similar to this one. I think our convention, if I remember rightly, simply indorsed the McCumber bill, and they are asking (and that is what I am here for) — ^25,000 of them — for the passage of this bill at this session. I am a farmer. There has been quite a good deal of talk here about " where the farmer comes in ; " and there has been a lot of talk about wheat. I am from the great corn State of Illinois, and we have to do with corn as well as with other grains. Senator Dolltver. I hope your attention has been called to the fact that Iowa has passed Illinois on corn. Mr. McCeeeey. Yes — our sister State. Gentlemen, I do not feel that it is my place to discuss the merits or demerits of the McCumber bill. I am not an attorney. I am a farmer, and I am here to try to tell you what our farmers want along this line, and not to discuss the legality or the technicalities of this bill, or anything of that kind. I am not able to do that. 166 FEDEEAL GEAIN INSPECTION. We happen to be in a State that has State inspection. In the same State we have some other inspection, of which I am glad to produce a certificate. Part of our grain is graded under State inspec- tion ; part of it is not, even in the State. There is not any question in the minds of our people but what a standard established by the Government of the United States would be far superior to the standard established by some little merchants' exchange somewhere, or even by the State of Illinois. We feel, and our people say so, that the establishment of the standard by the United States would mean a great deal more; and we would have some satisfaction in the way of knowing, at least, that when it passed that inspector it meant something; and when we started a car of grain to Chicago we would know that it was to be inspected by Unole Sam, just the same as the meat. Instead of that it is inspected by what is known as a State inspection, which is nothing more nor less than the Chicago Board of Trade inspection, when jou come right down to the real thing. To show you gentlemen, if you will permit, that there is looseness in this inspection, I will state that solicitors from different markets call upon us and tell us to ship our corn to their market, because the inspection is easy. We go down to Memphis, and there is a Mem- phis certificate [producing certificate]. Here is one from Illinois, and here is a Baltimore certificate. A representative from a Baltimore house called on us just this last winter and said, " You had better ship your corn down to Baltimore, because the inspection is easy in Baltimore." If they let it be known that it is easy in Baltimore, or that it is strict in Baltimore, do you not see that they use that fact to get business? If there was Federal inspection in Baltimore it would not be any easier than the inspection in Chicago; nor would it be any harder. Another man will say, " Sell me your corn and ship it down to Buffalo; Buffalo has the easiest inspection that there is." Do you not see that if we had Federal inspection the inspection in Buffalo would not be any easier than it would be in Baltimore, nor would it be any harder? Senator Dolliver. What is the grade of this corn ? Mr. MoCreery. That steamer-mixed corn is a low grade of corn. That is, there is a discount on that, for it had to be dried and raised to what is known as mixed corn. I simply brought those certificates along to show you. Now, to go back, what constitutes the inspection in Cairo [reading] : Cairo. III.. .Mtijj 6. 1908: This certifies that there was iiisi)eeted this date err Xo. 3J3SS, I. C iind folmd to contain two yellow com. Inspected mid graded according to the instnictions and standards adopted by tlie directors of the Cairo Board of Trade. We have no fault to find with the inspection of that grade of com. That was a good grade. But suppose, now, that we sold this corn to the Halliday elevator? With all respect to the Hallidays, they are very fine gentlemen, but who constitutes the Cairo Board of Trade, or who forms the rules governing the grading in Cairo? The Halli- days help do it. Senator Dolmveb. Where are your State inspectors ? Mr. McCreeky. They do not have the State inspection now ; it is Cairo inspection. FEDEEAL GRAIN INSPECTION. 167 " Senator Dollivee. Does not the State inspection apply to all the corn marketed in Illinois? Mr. McCreery. No, sir. Decatur very recently adopted State inspection. We had Decatur inspection up to just a short time ago. Senator Doixiver. Is it voluntary with each to^vn to select the State inspection if it wants to ? Mr. McCreery. Yes, sir. As far as I know it is ; because Decatur just adopted State inspection very recently. They always had Decatur inspection before. There is Cairo inspection ; there is inspec- tion in each place for itself. It is not State inspection. That is the kind of inspection we are now getting. There are differ- ent inspections in the same State, so far as that is concerned. Take Baltimore, for instance [reading] : This grain is inspected and gnidert according to tlie iiistructious and standards adopted by the directors of the Baltimore Chamber of Commerce. Who constitute the Baltimore Chamber of Commerce ? The Balti- more grain men. Senator Gore. That is a sort of benevolent association. Mr. McCreery. It is just like the Cairo association. It is the Cairo grain men, and it is the Baltimore grain men that create that chamber of commerce. They fix the standard for the inspection, and the inspector inspects according to that. The point I wish to make with that is this : Suppose this car that went to Cairo was sold to grade No. 3, or 3 yellow, as the case may be — that would command a fixed price. But had it missed that, had il been what we call a " line grade," and had missed grade 3 and had been graded 4, there would have been a discount on it. For all prac- tical purposes, hov/ever, it would have been worth just as much as though it had passed as No. 3. And the danger is that these gentle- men working there as inspectors being under the Cairo Board of Trade, and the Cairo Board of Trade being controlled by and in fact being made up of the Cairo grain men, who buy this corn, it would be natural (I will not say that they would do it, but it would be nat- ural) for them to give the benefit of the doubt to the disadvantage of the shipper. (At this point, Mr. McCreery's statement not having been com- pleted, the committee adjourned until to-morrow, Saturday'. April 4, 1908, at 11 o'clock a. m.) Committee on AcEicrrLTURE and Forestry, United States Senate, Saturday^ April 4, 1908- The committee met at 11 o'clock a. m. Present, Senators Dolliver (acting chairman ) , Burnham, Long, Bur- kett, Bankhead, and Gore. STATEMENT OF J. A. McCREEKY— Continued. Senator Dolliver. Mr. McCreery, I think you Avere talking about the differences between the various grain markets owing to fluctu- ating schemes of inspection when we adjourned on yesterday. Senator Long. Before you take that up, you represent this com- pany to which you have referred? 168 PEDEEAL GRAIN INSPEOTION. Mr. McCkeeey. Yes; the company is composed of 90 men, who own the stock, and those men are farmers. , Senator Long. Fanners all over the State or m that locality? Mr. McCreery. In that locality, surrounding that town of Mason City, 111., where my home is. I am their manager. Senator T^ng. At that point? Mr. McCreery. Yes. Senator Long. Have you relations with similar organizations? Mr. McCreery. I am "also secretary of the State association of these farmers' companies. That is, the -Farmers and Grain Dealers' Asso- ciation of Illinois. I am the secretary. That represents 25.000 grain growers, and I am sent here at the request of that association to ask this body to give us some needed relief from the present system of gi-ading grain, which we believe this bill provides for. Senator Long. Grading and inspection. Mr. McCreery. Grading and inspection ; yes. Senator Long. Xow, for my information, and also, I think, prob- ably for the information of the committee, I would like to have you explain briefly 'your Illinois law on that question and its operation, - You have a State inspection law? Mr. McCreery. Yes. Senator Long. Explain that briefly. Mr. McCreery. To the best of my knowledge, the State inspector is appointed and controlled by the railroad and warehouse commis- sion. The railroad and warehouse commission is appointed l3y the governor of the State. Senator Long. How many commissioners are there? Mr. McCreery. Three. Senator DoLLivER. Who are they now? Mr. McCreery. Well, you have got me there. I can not give you their names. Senator Dolliver. Are they residents of Chicago? Mr. McCreery. The last man is Mr. D. A. Eckert. He is from- Chicago. Senator L)xg. They are appointed by the governor? Mr. McCreery. Yes. Senator Long. And they appoint a State gi-ain inspector? Mr. McCreery. Yes. Senator Long. Who appoints his deputies, or assistants? Mr. McCreery. The chief. Senator Long. He. appoints his own deputies? Mr. McCreery. Yes. Senator Long. Is he paid a salary by the State, or does he get fees for inspection? Mr. McCreery. He is paid a salary, if I understand it right; but of course shippers all pay so much on each car for the inspection. That goes into a fund, and as I understand it, that fund more than pays expenses. Senator Bankhead. Who is that paid to? Mr. McCreery. To the State. As long as we are on this particular phase, let me say that the farmers of the State went before the gov- ernor when the appointments were to be made. Senator Long. What governor? FEDERAL GRAIN INSPECTION. 169 Mr. MoCreeky. Governor Deneen. with a petition so voliuninous that it was almost necessary to haul it up there. In fact, I think it was hauled up there. That petition was signed by at least 10,000 farmers, and asked that a certain man, who is a farmer, be appointed on this commission. We thought in that way that we would be able, to a certain extent, at least, to control or get just inspection, taJiing it out of the hands of the grain monopoly of Chicagp. In- stead of getting that we got an appointee who is a Chicago grain man, Mr. Eckert. Senator Long. On the State board of inspection ? Mr. McCreeet. On the State board of railroad and warehouse commissioners. Senator Long. They also have to do with the regulation of the railroads of the State, do they not ? Ml'. McCbeeey. Oh, to be sure. I want to present in evidence what kind of inspection we have to-day. This matter I think was called for yesterday, and is part of the record ; but I should like to speak of it again, especially for the benefit of any Senators who were not here. Here are some papers concerning the two cars of com that we loaded and consigned to St. Louis, to a commision firm, which in turn sold them to another party. The inspection showed that one of these cars was No. 3 white and the other No. 2 white, according to the in- spector. These cars went forward to Nashville. Tenn., where another system of inspection is in vogue. One of the cars was reported con- siderably short in weight; the other car held out to our weight. By the way, the car grading No. 3 white holds out to our weights and the car that is graded No. 2 white in St. Louis is considerably short. We are contesting the matter and refusing a settlement on the cars. Here is the draft offered us in settlement, which we are refusing to accept, on account of the short weight of car No. 130039. They are contending that the car was short in weight on account of the condi- tion of the corn, and saying that it was " no grade " corn in Nashville. The car had passed the State inspector as No. 2 white at St. Louis. The Nashville inspector says it is " no grade," and the man corre- sponding with us says that this is the reason that it is short weight. Senator Bankhead. How can that affect the weight ? Mr. McCeeeey. I will read you the letter. Senator Bankhead. I do not care about that. Mr. McCkeery. Just a minute; I want to read you just what they say. Senator Bankhead. I can understand how one grade of com may be lighter than the other grade, but I can not understand how it would affect the carload weight very much. Mr. McCeeeey. I will tell you what they say, and I can read it for you if you want to have me take the time. Senator Bankhead. I do not care to have it read. Mr. McCeeeey. They say that the fact that the corn was out of condition would naturally result in its being short in weight. That is the gist of their letter. Senator Dolucvee. How do you know that it was not out of con- dition when it got to Nashville? Mr. McCeeeey. I do not know it. 170 FEDERAL GEAIN INSPECTION. Senator Dollivee. But you presented the case on the theory that it was not. Mr. McCreery. But I presumed that it could not be out of condi- tion if it was No. 2 white in St. Louis. Senator Dollivee. That depends on how long it was in transit, does it not? Senator Bankhead, It might have been leaked on ; it might have been wet, or a great many things might have happened. Mr. McCeeery. The records would show that. They always show it if the roof is leaking. What "we are contending on that point is that with Federal inspection, if it passed the standard as No. 2 white at St. Louis or No. 3 white, as the case might be, it should and would have been the same thing in three or four days' time (or a week's time, for that matter) over at Nashville, because if it was No. 2 white corn the standard for No. 2 white corn is such that it could not become " no grade " com in a week. Senator McCumbee. That is, it is in such condition that it could not depreciate? Mr. McCreery. No ; the standard for No. 2 is so high, and it con■^ tains such a small percentage of moisture, that it could not possibly deteriorate to " no grade " in that length of time. ' Senator Burkett. Referring to these individual cases that you speak of and some which were brought out yesterday, how frequently does a thing like that occur? For instance, you ship, I suppose, thousands of carloads of corn ? Mr. McCreery. Yes, sir. We ship — ^I should like to have this go in for your information — from 230,000 to 350,000 bushels of grain a year from this elevator. Senator Buekbtt. With about what percentage of that do you have trouble on the grading, the weights, etc. ? Mr. McCeeery. As far as such glaring differences as this are con- cerned, not very much. This is one of the extremes, of course; but we have a lot of trouble with the grading where the differences are not so wide as they are here. Senator Burkett. You have some where you have no trouble ? Mr. McCreery. Certainly ; yes, sir. Senator Burkett. What percentage of all your shipments, then- let us take it the other way — is there where you do not have any trouble with reference to the grading? Mr. McCeeery. Do you mean . where we are satisfied with the grade ? Senator Burkett. Yes; where you are satisfied with it? Mr. McCreery. I do not suppose it would exceed 50 per cent. Senator Burkett. You would say, then, that you are satisfied with the grading of 50 per cent of what you ship ? Mr. McCeeeey. Yes. Senator Burkett. And 50 per cent you are, in a greater or smaller degree, dissatisfied with? Mr. McCreeey. Yes. Senator Burkett. Does not that depend on the year ? Mr. McCreery. No, sir. Senator Burkett. For instance, I think it was three years ago, was it not, when we had the wet wheat out in Nebraska ? Mr. McCreery. Yes. FEDEEAL GRAIN INSPECTION. 171 Senator Btiekeit. And I know that we had a great deal of trouble with our grading that year. Everybody was fussing about the grade. I do not know whether it was three or four years ago ; but it was the year we had so much rain on our wheat after it got in the shock. We had a great deal of trouble about grades then. Of course I hear more or less of it all the time ; but that year it seemed to me especially so, because it depended on how much rain they had had in that particular section of the country, etc. Mr. MoCkeery. Yes. Senator Btjrkett. But you say there is not any difference; there is about 50 per cent of it that is unsatisfactory, taking one year with another ? Mr. McCKEEEr. You know it is a fact that in a year such as you speak of, when there is a large percentage of what I might term low- grade grain or damp grain going into the market, there is in my judgment a great deal of grain that is graded a grade lower than it actually is, because the preponderance of the arrivals are low grade. Senator Btjrkett. Yes; that was the trouble there. They would suppose that grain was lower grade than it really was. Mr. McCreeky. And lower than it would have been graded in what you might term an ordinary year. Senator Burkett. And they knew that on account of the wet weather they could make the people stand it — they could force a lower grade on them than they could if it had been a normal year. Senator Bankhead. I do not Icnow anything about your grain business. You are the manager for that company? Mr. McGreery. Yes, sir. Senator Bankhead. You own an elevator? Mr. McCreeky. No, sir. Senator Bankhead. You do not have any elevator ? Mr. McCreery. Yes, sir; the company owns an elevator. I do not. Senator Bankhead. That is what I mean. Your company owns an elevator? Mr. McCreery. Yes, sir. Senator Bankhead. The corn is carried to that elevator by the farmer? Mr. McCreery. Yes, sir. Senator Bankhead. By the wagonload? Mr. McCreery. Yes, sir. Senator Bankhead. Is each wagonload inspected? Mr. McCreery. No, sir; his grain is not inspected at all, except according to the Senator Bankhead. Is each wagonload graded, then? Mr. McCreery. Let me make that clear. Senator. Senator Bankhead. That is one thing I want made pretty clear, because I think it is very important in this connection. Mr. McCreery. Take my case as manager of the company, or the case of my competitor who owns the elevator himself ? Senator Bankhead. You have two elevators, then? Mr. MoCreery. Oh, there are three or four there. Senator Bankhead. Let us say half a dozen. Go on. Mr. McCreery. So far as any inspection goes, it is simply accord- ing to the judgment of myself or my competitor as to receiving that 172 FEDEBAL GRAIN INSPECTION. grain on the contract that we have made with that farmer. We do not have State or any other kind of inspection there. It goes to the terminals in Chicago, Peoria, St. Louis, Nashville, Memphis, New Orleans, or Cairo. Senator Bankhead. This is what I want to get at. (I do not know whether there is any sense in my proposition or not.) Mr. McCreeey. I shall be very glad to hear it. Senator Bankhead. The farmer brings the corn there in wagon- loads ? Mr. MoCebeet. Yes, sir. Senator Bankhead. It is classed as No. 2 white, or No. 3 white, as the case may be ? Mr. McCeeeey. Yes, sir. Senator Bankhead. You always put it in an elevator ? Mr. McCreeey. Yes, sir. Senator Bankhead. And mix it all up together ? Mr. MoCeeeby. No, sir. Senator Bankhead. You do not have to mix it when you put it in? Mr. McCeeeey. No, sir. Senator Bankhead. Do you mean that you put it in the elevator separated according to grades ? Mr. McCeeeey. Yes, sir. Senator Bankhead. You keep it separated in that way in the ele- vator as it is put in the wagon ? Mr. McCeeeey. Yes, sir. Senator Bankhead. You pay for that corn according to its grade? Mr. McCeeeey. Yes, sir; according to what we think it will grade. Senator Bankhead. According to what you think it will grade. What you want is a Federal inspector there, is it ? Mr. McCeeeey. No, sir. Senator Bankhead. Where do you want him ? Mr. McCeeeey. We want him in Chicago. Senator Bankhead. You do not want him locally there? Mr. McCeeeey. No, sir ; not at all. Senator Bankhead. I do not see how you are going to get any benefit from this bill, then. Senator Long. You do not want any interference with you and your customer, the farmer? Mr. McCeeeey. Let me explain that, Senator. Senator Buekett. Let me tell you about that; I fought that out here thfe first day. Here is where it is going to help the farmer: They can not get to inspect each load that the farmer brings; but when this elevator man buys that corn and sends it in down at Chicago or St. Louis, or wherever it goes, they can wheedle him up or down on that inspection. If they want to, their inspector will throw it down, say, to No. 3 instead of No. 2. He may have thought it would go as No. 2, and they may throw it down toNo. 3. This little elevator man cut here that is a buyer has to take the risk of that being done. It is done without any certainty, and it is done without sufficient restraint or enforcement' of law about it to make it any- where near certain and reliable. He has to take that risk; and ac- cordingly he bids down the farmer lower than he would otherwise; and in the end the farmer with his one load of corn bears the risk. Do you see ? FEDERAL GRAIN INSPECTION. 173- Senator Gore. You see, they have no standard. Senator Btjekett. Here is another thing that I want to tell you: Another man has wheat or corn. He goes to an elevator. He has a carload. If he thinks that the elevator man is buying on too big a margin, he can send that in himself; and he becomes a competitor with the elevator man. His competition, the competition of the few farmers that have enough grain to ship in carload lots, if there is only one elevator in the town, gives abundance of competition to keep that elevator up in price, provided the farmer that has a carload can send it to Chicago and feel that he will be treated reasonably well when his carload gets there. But the fact is that when this farmer ships in his one carload of wheat or two carloads of wheat once a year, the men down there know what he is, and they know that he is not coming back, and they do not care whether they treat him right or not; and he is absolutely sure to get a poor grade. Accordingly, that one farmer, although he has a carload, can not send that wheat in with any certainty of getting anywhere near a proper grade for it. So reliability of grading does affect the wagonload man, because it makes a certainty; and the risk is not shifted back onto him. Senator Bankhead. Do you not think that that difference in grade between different points will result in influencing the judgment of: this man who passes on it ? Senator Burkbtt. Yes; that is what has been said. The witnesses have said that here. Mr. McCreery. To continue along the Senator's thought^ Senator Bankhead. One question, and then I will not trouble you any further. In your town, do your merchants ever buy com from their customers when they come in — ^merchants who have customers out in the country ? Mr. McCreeey. What do you mean by a merchant ? Senator Bankhead. A man who sells groceries and drugs and everything of that kind. Mr. McCreery. No, sir. Senator Bankhead. They do not buy from farmers at all ? Mr. McCeeery. No, sir. . Along the line that I was proceeding on here, I will state that this company which I represent — I mean the local company, not the State association — these men who build this elevator, ship their own grain through that elevator if they choose so to do. For instance, Mr. Smith takes a carload of com to an elevator in which he is a stock- holder. We hold that carload of com for Mr. Smith or Mr. Jones, as the case may be, and send it to whatever market he desires it sent to. Then, if the inspection is not to be relied upon (which we con- tend that it is not, and think that we can prove that it is not, by^ these occurrences) , if Mr. Smith's carload of com proceeds to Chi- cago, and is graded No. 4 when it should be No. 3, he suffers the punishment, of course. Senator Gobe. Your idea is that the inspectors at Chicago are largely under the influence of the elevator and warehouse men and the board of trade ? Is that the idea? Senator McOpmber. They are the purchasers. Mr. McCreery. Senator, the inspectors are entirely under the con- trol (I must say it) of the grain combine of Chicago. Senator Gobe. Practically, the purchasers are the inspectors? 174 PEDEEAL GEAIN INSPECTION. Mr. McCeeeey. Yes, sir; practically the purchasers are the in- spectors. ■ Senator Gore. Here is a question: Do you think that the specu- lators, the purchasers there, would buy on the Government grade, if we had a Government grade ; or would they still insist on having their own grade? Mr. McCeeeey. I think they would buy on the Government grade. Senator Long. You do not mean that this inspection would be exclusive? You do not hope by this bill to do away with all State inspection? Mr. McCeeeey. Oh, no. We hope by this bill, Senator, to have an inspection department established to which we can go and get justice, where we can send our samples Senator Long. For instance, you do not expect by this bill to con- trol any shipments of grain — where do you live, by the way ? Mr. McCeeeey. At Mason City. Senator Long (continuing). From Mason City, 111., to Chicago, DL? Mr. McCeeeey. No, sir. Senator Long. You do not expect by this bill to control that ship- ment or have anything to do with the inspection of that grain ? Mr. McCeeeey. No; but we expect that the standard of grade will be so established by the Government that we will have some access to it, and know that we are getting a square deal under the State inspection. Senator Long. That is your purpose ? Mr. McCeeeey. Yes, sir. Senator Goee. If the Government grade should be finally accepted by foreign markets, of course that would force the home market to come to the same standard. Mr. McCeeeey. We are heavy shippers to New Orleans for export. Our grain goes down to New Orleans where it is inspected and graded according to the regulations of the New Orleans Chamber of Commerce or Board of Trade, whichever it is called. Senator Perkins. Why should the Government pay for the inspec- tion of the grain, instead of the purchaser or seller, as is now done? Mr. McCeeeey. We are not asking the Government to pay for it. Senator Perkins. This bill carries an appropriation. Mr. McCeeery. I do not know about that; but we are willing to pay just the same as we pay now under State or board of trade in- spection. We have to pay so much per car now. Senator McCumbee. Senator, this bill provides for the charges to be made to the owner or agent of the grain, the same as under the present system, and the charge to be made is just a sufficient amount to cover the expenses of national inspection. Senator Peekins. But you have provided, have you not, Senator, for an appropriation in this bill of $800,000 to pay the expenses of inspection ? Senator McCumbbe. Certainly ; but it comes right back again ; so that we simply have to have the money advanced. In other words, we have to put the men in the field, and we have to pay them by the month, or whatever the system may be; and then the money will be coming in at the rate of 15 cents for the carload, or 25 cents, as the case may be. FEDERAL GRAIN INSPECTION. 175 Senator Perkins. Why should not the same rule prevail in the case of this inspection that does with the port wardens, if you please, and some other Government officials on vessels? They charge the vessels a fee for their inspection of the cargo of the ship. It is the port warden who does that in the commercial ports, and the Govern- ment makes no appropriation for his support or pay. Senator McCumbee. That is because it was thought best to pay this money out directly. These men would be paid by the month by the Government, and then the fees would be covered into the Treasury. Senator Buekett. That is the latest policy. Everything is cov- ered in now, and in all the new laws your committee has provided for that. Senator Long. Section 9 of Senator McCumber's bill co^'ers that point. Senator Perkins. The Land Office fees, the fees which the regis- ters and receivers charge to the man who purchases land, are all turned in in that way. Senator Bdbkett. Your Appropriations Committee always insists on that being done. They think that everything should be turned in to the Treasury and paid out again. Senator Perkins. That is the right way. Senator Bankhead. You say there are two elevators in your town, so that there is competition ? Mr. McCrbert. Yes, sir. Senator Bankhead. Each one of your elevators has somebody to grade the grain that goes into the elevators, does it not? Mr. McCeeert. No, sir. Senator Bakkhead. Do they not grade it there at all ? Mr. McCreeey. We do not grade it, except simply according to our judgment. Senator Bankhead. That is what I am talking about. Mr. McCeeeet. There is no fixed inspection? Senator Bankhead. Would it not be fair to assume that the rivalry between those elevators would naturally affect the judgment of the man who did the grading, because he is in competition with these other men; and would he not be likely to say to the farmers, "you get the best classification at this particular elevator, better than you do at any pther," or, "The grade is a little higher," and aU that sort of thmg, and therefore it is to your interest to carry your grain to this elevator ? " I assume that that would be the way it would work out, as It does m every other business. The trouble comes when that gram gets down to Chicago. It is graded or classified there by somebody else who represents some other interest, and perhaps the grade is not quite as high as it was in the elevator where the compe- tition exists. Is not that a fair assumption ? Mr. McCeeeey. Yes. Senator Bankhead. And may not that be the reason why these different grades so often occur ? Mr. McCeeeey. No, sir. These men soon become accustomed to looking at this grain, and if they care to carry on that sort of adver- tising they soon pay for its continuance. Senator Bankhead. I do not know about that, but I am getting experience in cotton warehouses, and I know the farmer always 176 PEDEBAL GKAIN INSPECTION. carries his cotton to the warehouse where the report goes out that he gets a little the best weights and a little more painstaking care in getting out the sample, and all that sort of thing ; and I think human nature is the same all over the world. Mr. McCkeeey. In regard to the charges here is an account sale made back to us on these particular cars mat we were talking about. We paid ^0 cents f oi; inspection and 25 cents for. sampling. We are willing to do the very same thing under Federal inspection; We are not asking for anything else. We want it inspected by the Govern- ment, so that we will feel that we are getting an inspection that is entirely free from the influence of the purchaser. Senator Bankhead. One more question. This particular com- plaint that you make was in connection with the reshipment of a car of corn from Chicago to Nashville? Mr. McCebeet. To St. Louis. Senator Bankhead. Between those two points ? Mr. McCeeeey. Yes, sir. Senator Bankhead. Between Chicago and Nashville. Suppose you had a Government inspector at Chicago, and another Govern- ment inspector at Nashville (which you would have to have under this bill) , and their judgment differed as to the grade of this grain, and there was a charge made back against you — ^what "would you say about that ? Senator Buekett. They would not grade it differently. The one inspection goes clear through. That is the point. Senator Bankhead. Do you mean that the inspection at Chicago is going to hold at Nashville? Senator Btjekett. Yes ; but at Nashville they can not make your Chicago State inspection hold. That is exactly the idea in having Government inspection — so as to take it over the States. Mr. McCeeeey! Why would nt not carry to Nashville ? Senator Bankhead. Suppose the conditions are such that the grade of the com might change between two points? That is often the case. Suppose that load of corn was out on the road a month before it got there, subject to the vicissitudes of the weather? Mr. McCeeeey. It would be subject to reinspection under such conditions as those. Senator Bankhead. There are a great many conditions of that Icind, and there is a great deal of trouble ahead. Senator Long. You do not, by the this law, intend to compel a pur- chaser in Boston, for example, to buy grain on the Chicago inspec- tion, do you? Mr. McCeeeey. Certainly not, any more than we compel him to take a Chicago inspection now. When we sell a car or ten cars of corn to go to New Orleans for export, what do we do? We do not sell it at our Mason City inspection, nor do we sell it at Chicago inspection. We sell it to those people at New Orleans inspection. The New Orleans inspectors are controlled, largely by the receiving-interests in, say. New Orleans ; and if there is any question, the doubt will cer- tainly be resolved in their favor against the shipper. That would be natural, I presume. Senator Buekett. That is because you sell it that way; but wheii- you get your Government inspection, you can sell it by that inspec- tion ]ust the same as you sell inspected meat now. Take what they FEDERAL GRAIN INSPECTION. 177 call the rye inspection in Europe : They buy on rye inspection — ^that is, inspection over there. But when you get your Governpient inspec- tion, the object of it is so that you can sell it by inspection here and hare it go there. Is not that the idea of it ? Mr. McCSEERT. Well, either way. Senator Bubkett. Of course, it will depend on the contract. Mr. McCeeery. We are perfectly willing to make the contracts with our friends in New Orleans to sell them 10,000 bushels of No. 3 corn on the basis of Government inspection in New Orleans. Senator Gore. Corn originating in your part of the country would not be inspected anyway until it got to New Orleans, would it, unless it went by way of Chicago? Mr. McCreert. Not necessarily. Senator McCumber. You are not going to reship from the car? It would not be taken out of the car until it arrived ? Mr. McCreert. No. Senator McCrrMBER. It would not be inspected until it arrived in New Orleans anyway. ' Mr. McCreery. Our cars would go right through under the seals the agent placed upon them at Mason City and would never be opened until the injector opened them in New Orleans. Senator Bankhead. Do you not think some difficulty would arise because of the difference in judgment between the inspector at the point where you ship{)ed that grain and the inspector at New Orleans ? And if the result did not meet your judgment about the matter, do you not think these same contentions will arise that you have now ? Mr. McCreery. No, sir; I think we would have a more uniform and just inspection. Senator Bankhead. I think the only difference would be that they would be the paid employees of the Government. Senator Gore. It would be just like inspecting meat or anything else. Senator Bankhead. You would not have any recourse anywhere that I can see. Senator Gore. You could not make it certain that the different inspectors would take absolutely the same degree of care or pains in making their inspections. Senator Dolliver. Our meat inspection is not for a grade of meat, but is simply with a view tb its sanitary condition. Senator Gore. I understand that. You can not get, absolutely, infallibility of such judgments. There is bound to be a difference. Mr. McCreery. Let met try to explain that to you, Senator, in this way: We sell 25,000 bushels of corn. No. 3 or better, in New Orleans, on New Orleans terms. That means New Orleans grade and inspection. That inspection department is created by the New Orleans Board of Trade. The New Orleans Board of Trade is com- posed of the New Orleans men that are buying this grain. We sell that to grade 3 or better. New Orleans terms. If it passes the in- spector at New Orleans (who is under the control of the New Orleans grain men) as No. 3, it goes on the contract. If it does not, and he says it is No. 4, then we must accept the discount on it, or have it sent over to the drier, and have it dried, and stand the shrinkage, and let it go on the contract. Senator Bankhead. Yes; I understand that. 34503—14 ^12 178 FEDEEAL GEAIN INSPECTION. Mr. McCeeeet. Here is where we are punished : A car arrives there that is- what they call a " line grade," according to the inspector's judgment. He hardly knows -vwiether to say it is No. 3 or No. 4. It is so close to the line that divides them that he can hardly tell. Now, by which system will the farmer be protected ? By having a disinterested man say what grade that should be or by having a man say what grade it shall be who is appointed by the grain men at that inarket? We claim that a disinterested man in that case would be more likely to give us a fair and just decision on it than a man who is appointed by interested parties. Senator Goee. It would be like the case of law. There is no more fundamental principle in law than that the juries or jurors ought not to be interested parties. Mr. McCeeeet. The fact of the case is, gentlemen, that the men passing upon the grade of this grain at the expense of the farmer are directly influenced by the men buying the grain. Senator Dollivee. You will please proceed as rapidly as possible. We want to wind up this hearing very soon now. Mr. McCeeeet. Yes, sir. We are told that the Government has recently purchased some apparatus or other for the testing of grain in these markets, for grad- ing it, ascertaining the amount of moisture, and so on; but we find that these boards of trade do not adopt that apparatus. They are not using it. That operates to our disadvantage. Another thing is that under the present system of inspection, as was stated yesterday in regard to Kansas City, Mo., and Kansas City, Kans., an imaginary line changes the grade. For instance, in the case of St. Louis alnd East St. Louis — ^East St. Louis has one kind of grade, and just across the river St. Louis has another kind of grade; so that you do not know what you are going to get when your grain goes down there. If it is sold in East St. Louis it is grated according to East St. Louis rules. If it goes across the river, it is graded according to another set of rules ; and yet the two places are only a few hundred yards apart. Senator Goee. And the same car would grade differently in the two markets ? Mr. McCeeeet. Yes, sir. Senator Goee. Do those two different grades have different stand- ings in the market ; or would that corn bring the same in the market under either grade? Mr. McCeeeet. That would depend altogether on local conditions. It might go over across the river to some feeder, or something of that kind, and have a different value placed on it than it would if it was sold over on the east side of the river, going on through to Na^ville or some other point. Senator Goee. In consequence of the grade? Mr. McCeeeet. Yes, sir. Take Peoria, for instance: Peoria has State inspection. Chicago has State inspection. It is common gossip among grain men that what will pass for No. 2 corn in Peoria will not be better than No. 3 in Chicago. Yet it is all under the same inspector, or under the same department of inspection. It is not under the same man, of course ; but it is all under State inspection. We can ship a car of corn to Peoria that will grade No. 2 or No. 2 yellow. We can ship that same car to Chicago and it wiU be No. 3 or No. 3 yellow. ]?EDEEAL GBAISr INSPECTION", 179 Senator, Gore. How do you explain that? That relates directly to Senator Bankhead's question. Senator Bankhead. You would have that same trouble with Federal inspection, too. Senator Long. Right on that point is where I am disturbed about this bill as to what your purpose is with this inspection — whether you are going to have but one inspection and are going to force the buyer to take that inspection or whether you are going to have as many inspections as the buyer may wish. Senator Gore. I do not understand, Senator, that they can make them take any particular inspection. Senator Long. I want to know what the purpose of the bill is. _. Senator Btjrkett. You can not make a man take any particular, yardstick, either. Senator Gore. No. , Senator Burkett. But you establish a yardstick, and everybody has to use it. Senator Bankhead. All yard sticks are 36 inches long, however. It is not a question of that kind. Senator Long. That is not a question of judgment. Y''ou simply lay the yardstick on the cloth and measure it. Mr. McCreery. So will our No. 2 corn be No. 2 in either Peoria or Chicago. Senator Long. But it is a question of judgment as to whether it is No. 2 com or not. You haye to have the judgment of some man applied to that com in inspecting it and determining whether it is No. 2 corn or not. Mr. McCREERr. Let me explain that. Senator Long. That is the point. Mr. Creert. Let me explain that in this way: Men buying corn on the floor of the Chicago Board of Trade, corn that they are going to put in an elevator and keep,' will not accept the inspection on which it comes to them. They take it up and test it with an apparatus that they have, and see whether or not it contains the amount of moisture that it is supposed to contain to take that grade. Senator Long. You would not expect, by Federal law, to compel the buyer of grain in Chicago to accept Kansas City or San Francisco Government inspection, would you? Mr. McCreery. Oh, certainly not. Senator Long. You would not attempt to do that ? Mr. McCreery. No; I do not think so. Senator Long. So it would result in the inspection of the grain at the place of destination, would it not? Mr. McCreery. That would depend altogether on the contract between the parties. Senator Long. I understand. I am speaking of the practical oper- ation of this bill. You could not interfere with the contract, of course. Mr. McCreery. I do not think it would be fair. Senator Bankhead. Do you think you could came a contract with ..anybody to accept a classification of grain made a thousand miles away from the place of destination? I Mr. McCreery. Yes, sir. Senator Bankhead. You could not do it with me. Senator Gore. Is that done generally? FEDERAL GBAIK INSPECTION. Mr McCkEert. I do not think it is done generally; but let me say this (it happens to be along that line of thought and just came to me) : Men write to us and say : " Can you sell us so many thousand bushels of such and such a kind of grain? " Senator Perkins. Free on board ? ^ th m Mr. McCreery. Free on board the cars at Mason City, 111. They say : " We prefer to get it from you or at j&rst hand rather than take it from some house en route somewhere, where somebody has had a chance to mix it." We can sell a carload of com to them if We guar- antee it to be good, sound, dry com. Senator Long. Because of the reputation which you have? Mr. McCreeey. Because of the reputation which we have. Ko- body inspects it, so far as I can understand. Senator Long. They would rather have your word than some- body's else inspection? Mr. McCreeey. Yes; where it has passed through some partic- ular inspection department that is manipulated and controlled by somebody else. Senator Gore. Even after the Governm^ht had fixed the standard and fixed the grade of the grain a purchaser would' still be free not to pay the marltet price for that grain if he did not really think is meas- ured up to the grade it purported to be ? Senator Bankhead. But he has to inspect it when it gets there ill order to determine that. Senator McCtjmber. With the permission of the chairman, I should like to explain to Mr. Bankhead one matter in reference to compelliiig a person to pay for grain according to any particular grades, I will not say what the exact percenta,ge is, but we all know that probably more than 90 per cent of the wheat sold on the grain exchanges is sold by grade. A man in Boston purchases grain in- Chicago, and his con- tract is to purchase at the Chicago grade. If the Chicago ^ad'e is honest and free from fraud, he is bound to take that Chicago gtade whether he wants to or not. Senator Bankhead. Who is going to judge of that when it gets to Boston? Senator, McCumbbe. No matter whether it has deteriorated in its journey or not, he is compelled to take the grade at the initial point if he contracts for it at the initial point and the grade is free from fraud. Senator Goeb. He assumes the risk of the transaction? Senator MoCtjmber. Yes; he assumes the risk of the transaction. Senator Bankhead. That results in a lot more talk when it gets to Boston. Senator McCxjmbee. Yes. Neary every one of these cases will be cases where the purchase is at the principal terminal, and they pur- chase according to the grade at that terminal and take the risk. If it is graded fairly and' honestly, there is very Little risk whatever inland), because if it is graded as No. 2 northern wheat, that is, good, dry wheat, which can not deteriorate unless there is rain on it or something of that kind'. Senator Long. If there is rain on it, then whatT Senator McCumber. If there is rain on it, he takeS that risk. Senator Bankhead. The shipper does not take any risk* Senator Gore. The railroad would be responsible. FJiDERAi .GBAIJf IJiTSPECHOJir. 18 J. Senatpr McCumbeb. The railroad would be responsible if it did |iot conduct it properly and take care of it. But the moment it is ipbipped to the purchaser and put on board at Chicago f. o. b. it belongs to the purchaser, and he takes all the risk. Mr. MoCkeeby. The railroad then comes in, and is liable for delay in transit. We file claims against the railroads for delay in transit when the grain arrives out of condition as the jresult of leakj roofs, and so on. Senator Bankhead. You can throw a great deal of light on that subject by telling us how long it takes you to collect those claiiaas after yoiu file them against the railroads. Mr. McCreebt. No longer than it takes anybody else to collect a railroad claim. Senator Bankhead. It takes everybody that I know of down in my country from six months to two and a half years. But that does not enter into this matter. Go on ; I will not interrupt you further. Mr. McOeeeey. Another thing is that our grain is sent to those naarkets, and inexperienced men are grading it. I believe that under Govermnent inspection the Government inspectors would be required io pass some sort of an examiuatioin and show what they knew about grading grain before they could pass on our grain. Senator Gore. The present conflict in grades results partly from ignorance and partly from dishonesty ? Mr. M^^Okeeet. Yes, sir. A young fellow goes down there and passes upon that grain who is no more qualified to do that than I am to teach school. Senator Gqeb. I should like to ask you a question there. You said that both Peoria and Chicago had State inspection ? Mr. McCeeeby. Yes, sir. Senator Goee. And that No. 2 corn at Peoria will grade as No. 3 a^t Chicago? Mr. ^SISCeeeey. Yes, sir. Senator Gobe. Why is that? Mr. McCeeeby. I do not know why it is, unless the Peoria people desire to keep their inspection easy to attract business there. Senator BANKHEAn, That is it, of course. Senator Goee. Then it would be dishonesty rather than incona- petency ? Senator Btjekett. They use it for distillery purposes at Peoria. Mr. McCeeeby. Yes ; that is one reascm. They use it for distillery purposes. Senator Bankhead. They do not take the same care with that? Sienator Buhkett. It does not take as good corn to make whisky, fl|)parently, as it does to make flour. Mr. McCeeeby. I think this will regulate that matter to a certain extent. That same corn which goes to Chicago and is graded No. 3 upon arrival comes out over at the other, side of the elevator as No. 2. Senator Gobe. And they make a profit out of it as it passes through iha elevator. That is what I am trying to get at. Senator Bankhead. You do not mean to say that the elevator men ^e dishonest in that way, do you ? Mr. MoCkeeby. I do not say anythiaig aboiat d?*hPHes,tj. Senator Bankhead. You would not cail that anything else than ^shojiesty, would you? 182 PEDEEAL GEAIN INSPECTIOlir. Mr. McCeeeey. I say that when our car arrives there, the standard it has to pass is very high, and it only passes as No. 3 ; out when it is delivered out to an eastern buyer on the other side of the elevator, it goes out as No. 2. Senator Long. Has it been treated or mixed or cleaned in the mean- time? Mr. McCeeeet. I think not. Senator Bankhead. It just " shoots the chute." Senator Dolliveh. Have you ever examined the specifications for the grade standards in Illinois? Mr. McCeeeet. Yes, sir ; and I have a copy of them which I shall be glad to forward to this conimittee. I have not it with me. Senator Dollivee. Are they so drawn that the same interpretation would be put on them by the different people who would be called upon to administer them? Mr. McCeeeet. If the men administering them were competent men and were not influenced by anyone, they should be the same. Senator Dollivee. But are they so drawn as to be fairly open to an uncertain construction? Mr. McCeeeet. Oh, to a certain extent, of course, there is some latitude in a grade; I will admit that. There is some latitude. A given lot of grain might be a very good grade of No. 3 or it might be a poor grade of No. 3. Senator Dolijver. Mr. McCumber, will you see that there goes into the record a copy of the rules for grading in those various markets. Senator McCumbee. I think I can do that ; I will make an attempt to get them all. Mr. McCeeeet. There is just one other matter that I should like to speak of, and then I shall be through. Senator Long. Are the grades in Illinois fixed by the chief grain inspector or by the board of railroad commissioners, or who fixes these standards? Mr. McCeeeet. The board of railroad and warehouse commis- sioners are presumed to have control, of course, of the inspection department. They appoint this chief inspector, who appoints his deputies. Just how they all agree on these particular rules I am not able to say ; but that is the way it is done. Senator Goee. Here is a question that I should like to ask: Do you find that the farmers, in shipping from your part of the country to Chicago, can get as much as they could in the local market? Mr. McCeeeet. How do I understand that question, sir? Senator Goee. Suppose a farmer in your town should not haul his wheat to an elevator there, but should ship it to Chicago. Would he get as much in Chicago as he could get from a representative.of a Chicago elevator in your town? Mr. McCeeeet. Do you mean as much net? Senator Goee. Yes. Mr. McCeeeet. Of course I could tell you quite a long and inter- esting story along that line ; but I know you have not time to hear it. But I will say that that is what started these- farmers' organiza- tions. They did not feel that they were being paid as much as the Chicago and other markets justified; and they said: "We will ship our own grain." The commission men in Chicago said : " You will not, because we will not sell it for you." Then they said : " Well, we PEDBBAL GRAIN INSPECTION. X83 will build an elevator, and we will ship it through the elevator ; and then you can not help selling it for us, because we will have an eleva- tor the same as the other fellow." They did that, and the commission men said : " We will not handle it for you." And I refer you to the records in Springfield, in the attorney-general's office, for copies of those letters. Senator Goee. Could they be attached ? Senator McCumber. Can you get them? Mr. McCeeeet. Yes, sir; I can get them. Senator McCumber. I wish you would do it, and make them a part of your evidence here. Mr. McCeeery. All right, sir. Mr. Messeeole. Senator McCumber, I wish to say that those letters are included in the records of the hearings of the Interstate Com- merce Commission both in Chicago and in Des Moines. Senator Ogre. But they ought to be included in this gentleman's testimony where they can be found. Senator McCumber. They should be put into the record here. Mr. McCeeery. I shall be glad to furnish copies of them. Senator Dolliver. Then you went in and established a commission house of your own in Chicago, did you not ? Mr. McCreeey. No, sir ; we did not. Senator Dolliver. What did you do? Mr. McCeeery. Excuse me, Senator, for saying this. We did not know what to do. There were cars of corn that stood on the track in Chicago for days and days, and they could not be forwarded, and they would not sell them; the commission men refused to sell them. Why ? Now, if you want me to tell you why, I will do so. Senator Dolliver. Go ahead. Senator Gore. I should like to know what your opinion is. Mr. McCreeey. The reason that they did that was this : The " regu- lars," as they are pleased to term themselves, back in the country (what I mean by the " regulars " is not the independents, but the mem- bers of the Illinois Grain Association, if you want it in plain words) were wiring those commission men and sending them letters, and saying: "If you handle that farmer's shipment, you will never handle another car of our grain ; and we will see to it that all of our friends do likewise." The commission man was between two fires, so to speak; and he said: "The strongest force is opposed to the farmer, so we will throw down the farmer." Senator Gore. That was rather reversing the idea in the case of the wholesale man. Mr. McCeeery. And with that condition that we have passed through Senator Dolliver. How did you get through it ? li^. McCeeery. We got through it in this way : There were a few I conjmission men in the different markets that said, "A square deal is a square deal ; and those people that want the right to ship a car of com here and sell it are as mUch entitled to a square deal as anybody else, and we will sell it for them if we have to go out of business." And some of them have gone out of business. taJSenator Gore. And some of them have been able to stand the storm? Mr. McCreeey. Some of them have been able to stand the storm and are there fighting away yet. 184 FETOEBAL OBAIN INSPBCMON. Senator Long. You have thrown your business to those commissiou merchants ? Mr. MoCBEBRy. Certainly. Senator Long. They represent you ? Mr. McOeeery. Yes, sir; knowing that, gentlemen, as we do, by being through the fire, by having the grain and not knowing where to ship it, we do not feel that with that same class of people controlling the inspection department we are getting a very square deal on inspections. We therefore ask this Congress to give us some relief; and we are ready to furnish this committee or any other committee with all kinds of information along that line that they desire. Senator Gore. Then you ascribe the difference in net price to that combination rather than to freight-rate rebates ? That is what I want to get at. Mr. McCreert. Oh, certainly. Senator Bankhead. I do not think there is any doubt about the fact that every member of this committee wants to give you all the relief that can be had. The only question between us is whether this bill will do it or not. Mr. MoCreert. There is just one thing that I forgot, that I want to mention right there. Several times I have heard it asked here: " Where is the farmer going to be affected, or where is he hurt, in this particular arrangement? " This has been the custom all during this past winter in central Illinois, and I can furnish the proof for it if you desire to have it (I have not it here, but I shall be glad to send it i& you) . The custom has been that the^ain man at the local point abso- Mtely refused to make a price to the farmer on his com until that com had been sent forward and had been inspected, because he could not depend on the inspection ; he did not know what grade he was going to get. Senator Gore. Inspected where — at Chicago? Mr. MoOrecEry. At Chicago, or Peoria, or any other market that he saw fit to ship it to. They absolutely refused to make a price to the farmer until that com had arrived and had been inspected, and they knew " where they were at." (After an informal discussion:) Senator Bankhead. As I understand, in the case of these mer- chants in the small towns that sell goods of various sorts to their customers in the country, when they come in with a load of corn they are not permitted to make a bid on it if they want to ? Mr. MoCrbery. What would they do with it. Senator? Senator Bankhead. Could they not send it to the elevator lik© anybody else, and would not the elevator receive it in the same way ? Senator Dolliver. Senator Bankhead, they used to do that occa- sionally in Iowa ; and the elevator men responded in several cases by stairting a store, and rather discouraged that sort of thing. Senator Bankhead. That is all right; the more competition yoij liave the better. Senator Dolliver. The merchants did not seem to take it well. Senator Bankhead. I ask that question because that is the custor^ with us. Senator Gore. The merchant's grain had to go through the ele- vator, and the elevator man could put the screws on him. FEDEilA.L OEAIN INSPBCTIOlSr. 185 Mr. McCEEERi-. Senator, let me explain— I think I can do it in just a word — where that is wiped out in our section. Senator Bankhead. I should like to know why it is wiped out. Mr. MdCEEERY. For this reason : As a result of the farmers having these various local elevator companies for the shipping of their own grain the grain combine says, "We do not want that class of ship- pers in the market, and we will put them out." The combination is so very strong that the little merchant would not have much chance in bidding on a load and trying to sell it, simply because the price being bid by the grain combine is so high, trying to freeze out these independent, local companies, owned by the farmers themselves, that the merchant has no business in trying to buy the corn. Senator Bankhead. If I were a merchant in your town and one of my customers came along and sold me a wagonload of corn, 60 or 75 bushels, and I should send it to your elevator, would you not receive it ? Mr. McCeeery. Yes, sir. Senator Burkett. And he would pay you just what he would pay the farmer ? Senator Bankhead. I would collect my debt from him if he owed me one, and I would get his trade if I wanted it ; and I do not see wil^ that is not done. Saiator McCuMBER. They buy it directly. Senator Dollivee. Do you mean to say that the " old line " eleva- tors will pay more for the corn than it is worth ? Mr. McOsEEEY. Yes, sir. Senator Doudivek. To drive out the others? Mr. MgCeeeey. Yes, sir. Senator Peekins. That custom universally prevails on the Pacific coast, in Washington, Oregon, and California. The merchant buys from the farmer tiireet a?nd then ships it. As you say, then he gets his pay for what he has been giving the farmer credit for, Senator Bankhead. Certainly ; and he will pay him a little more for the com, too. Senator Peekins. Certainly. Senator Goee. That is like they handle cotton in the Sputh. Senator McCumbee. Have you anything further ? Mr. McCreaey. No ; unless there are some questions. Senator Goee. How long have they been paying more than the farmers will pay? Mr. McCreery. I. will answer that by saying this (at least this is usualljr the case; not always) : Immediately upon the talk of the oi^amzation of such a concern in a community, the grain trust puts the price up to more than they can pay and have anything at all for Hhe handling of it, to discourage this company coming in there and building their own elevator. If they insist in going on and building their own elevator, the trust wiU use their influence to try to keep them from getting a site. Then, if they are beaten there, and they still insist on going on and building an elevator, and they start in op- eration, the grain-trust people will keep the price just above what can 'be paid for it and have anything left for the payment of runnmg expenses. Thev will attempt to do that, with the thought m mand that they are going to .di-sband that company by either majjiug them 186 TEDEBAL GKAIST INSPECTION. pay more for the grain than it is worth, and losing money on it, or bringing all the grain to them and freezing out the independent concern, so that they will eventually be in control of it again. ' Senator McCumber. What they lose at that point they will make up at another point where there is no competition ? Mr. McCeeeey. Yes ; don't forget that, either. Senator Goee. Do the big elevator and warehouse companies in Chicago own the smaller ones scattered throughout the State ? Mr. McCeeeey. Yes, sir; and they will put the price up at one point where the farmers are trying to get what they ought to have. - Senator Goee. Have you had any trouble in getting the railroads to take the grain from the farmers' elevators ? Mr. McCeeeey. Oh, no; not after you get a site for the elevator. There is a great deal of trouble in getting your sites. Senator Goee. The reason I ask you that is that in Oklahoma the farmers built an elevator, and it stood for years, and the last time I was there it had never shipped a carload. Senator Doucjvee. If there is nothing further, we are greatly obliged to you, Mr. McCreery. Mr. McCeeeey. I thank you, gentleman, for the opportunity of , coming before you. I should like to ask the Senator before I leave in regard to what you want to go into the testimony — whether you wish me to send on copies of these letters which I spoke of, or whether you will take them from the records before the Interstate Commerce Commission. Senator Doluvee. We will examine the records of the Interstate Cbmmerce Commission. STATEMENT OF B. R. BEALL, ESft., OF KANSAS CITY, KANS. , The Chaieman. Before the next witness begins, Mr. Beall, you may have the privilege of making a stateinent if you desire. Mr. Beall. In connection with the statement that the last witness has just made with reference to the effort of farmers to establish their own commission house, I want to say that the fanners of the State of Kansas in 1905 organized a grain company to be located at Kansas City for the purpose of handling their grain. For the benefit of the Senator from Kansas, I will say that these gentlemen were composed of such men as W. T. Harris, of Solomon, president of the Citizens' State Bank there ; S. H. McCullough, a large farmer ; E. M. Black, down at Preston, and a number of other good men throughout the State. They organized this company and started doing busmess. Senator Long. What was the name of the company ? Mr. Beall. The National Grain and Elevator Company. They started doing business in Kansas City, Mo. The Kansas City Board of Trade (immediately passed a rule prohibitir^ its membeirs from (tradr ing with this company in any manner whatever, the penalty for doing so being expulsion from their board and the loss of something like $3,000 or $4,000 as the price of a membership. So that the farmers in Kansas shipped altogether to this company in Kansas City, Mo., about half a million bushels of grain, which they were compelled to forward on a declining market to other points for sale, at a loss of something like $15,000. The National Grain and Elevator Company are now suing the Kansas City, Mo., Board of Trade under the antitrust FEDERAL GKAIN INSPECTION. 187 law of that State for three times the loss they sustained, or about $45,000. Carr W. Taylor, of Hutchinson, represented the farmers in ihis case, together with Joseph P. Fontron, an old Hutchinson boy, whom perhaps you know. They are conducting the case for the farmers of the Kansas City company. This may be a little foreign to the case here ; but I wanted to men- tion it to show you the absolute control that the Board of Trade of Kansas City, Mo., have of that business, and how impossible it is for the farmers to do their own business, no matter how they may try to do it. Senator Long. Is that same rule still in force ? Mr. Beauj. No, sir. That rule since this suit has been commenced has rather died out under the advice of Mr. Hegeman. Senator Long. And the members of the Kansas City Board of Trade are now Mr. Beall. They are now handling the farmers' business. Senator Long. That is, handling the business of this company ? Mr. Beall. No ; not of this company. The company failed ; they lost all their money. Senator Long. What do you mean by the farmers' business? Do you refer to farmers shipping direct to the members of the board of trade ? Mr. Beall. Yes, sir. Their purpose was to crush this concern, to keep them from doing their own business, so that they could continue to control it as they have heretofore. Senator Long. When did this company fail? Mr. Beall. They have not exactly failed ; but their capital is gone, and they are out of business. They are not bankrupt at all ; they have paid aU their debts. Senator Long. But they have gone out of business ? Mr. Beall. They have gone out of business. This suit is now pending before the court in Jackson County, Mo. Senator Bankhead. Do you think a bill like this will in any way affect a situation like this ? Mr. Beall. I say, this is a little foreign to the subject here. I merely mention it to show you the absolute control that these boards of trade have, and are endeavoring to keep, by this inspection system and the other advantages that they now have. STATEMENT OF W. C. MACFADDEN, ESQ., OF FARGO, N. DAK. ' Senator Long. State your business, Mr. Macf adden. Mr. Macfadden. I am in the banking busmess at Fargo. I am cashier of the Commercial Bank there, and also secretary of the State Bankers' Association. It is in that capacity that I appear. Senator Long. Are you also in the grain business ? Mr. Macfadden. No, sir; I am not. '•Senator MgCumber. I think it is proper for me to state here that on account of the numerous and continued complamts, and the knowl- edge on the part of the bankers of the State of North Dakota of the injustices perpetrated upon their customers m the State, they ap- pointed a committee at their last annual convention in the State to mvestieate the grain-trade conditions at the terminals. That com- mittee made its report, and one of the members of that committee 188 PEIMJRAL GEAIN INSPBCiaOK^. was Mr. Macfadden; and he can give you some knowledge of the grain business in that section. Mr. Macfadden. I have a ijumber of copies of that report, birt % only have one here. Senator McCumbee. I will ask the stenogra,pher to put it in as a part of the proceedit^gs. ' (The paper referred to is as follows :) GRAIN INSPECTION AND GRADING. Report of committee of North Dakota Bankers' Association, November 2Jf, 1908. To members North Dakota Bankers' Association: Tour committee appointed to investigate tlie subject lOf grain inspection and grading as affecting tlie interests .of North Dakota Shippers met accordtog to arrangement at Superior, Wis., on the morning of September 27, and after a preliminary discussion as to the scope of the investigation proceeded to visit some of the terminal elevators in order to familiariize themselves with the method of handling grain -as it comes from the shipper. We found that grain is insipected, graded, and the dockage fixed by the fitate inspector under the rules of the Minnesota inspection board. The grain is then ordered into one of tlie terminal elevators and after being unloaded is elevated to the top of the ele- vator, vyhere it is weighed. During the process of elevation all grain is subjected to a suction draft, in order to keep the building free from dust (?). aaiis is an injustice to the shipper, as in our judgment all grain should be weighed immediately upon being unloaded and nothing should be taken from it before it is weighed. The amount of light grain and dirt taken out under the present method simply depends upon the force of the suction draft. We obtained a statement showing the grain of various grades shipped in ^and shipped out from one of the smaller elevators at the head of the Lakes duting a period of three months, the dockage actually taken out and the profit in mixing the grain so as to raise the low grade grain to that of higher grades. In our judgment a much smaller dockage is actually taken from the grain than that taken by the country elevator or fixed by the oflScial inspectors. We find that all of the dockage or screenings taken fBom the grain lias an actual value and believe the shipper should receive this value. This matter of docjiage is one that could so easily be remedied and the shipper given the benefit of the screen- ings actually taken from his grain, that the wonder is the present unjust custom of not only confiscating the screenings but in addition compelling the shipper to pay the freight on them to the terminal point, has been allowed to prevaij so long. We find that eastern millers want the grain as it comes from the farmer, and it is an injustice to the shipper and to the miller to prevent this, as is now done. The shipper must accept "the Inspection, rules and customs which have been forced upon him by the powerful combination of elevator and railway interest^, and the miller must take the grain that is offered him by the " grain trust," so called, and not in the condition as to mixing, that he wants. It. In examining the report above referred to, of grain received and grain shipped out of the terminal elevator we were able to get a report from, we found that during the three months covered the report showed the following grain received and shipped out : Grade. Receipts. Shipped out. ' No. 1 northern Bushels. ' 99,711.40 141,455.10 272,047.20 201,267.20 116,021.10 59,742.30, ButheU. 196,288.30 46?,'r«4.00 ■No. 3 213,459.a0 No. 4 None. Nograde ■^M. Rejected None. On hand (estiniated) 890,245.10 mis 1 890,affi.l0 PBDEBAL GRAIN INSPBCTIO-lSr. 18^ The screenings actually taken out of the' glTiin received averaged' three^qaar- ters of a- pound to the bushel. Fi-om our Knowledge of the doeltage taken at country elevators and also that fixed by the' official' iilspeetors at terminal points during the period named, we believe this dockage of tftiree-qtuai'ters of a pound SCtually taken from the wheat to have been very much less than that taken from me ffiipper or farmer. These screenings sold for about $8 per ton. After this doqkage of three-quarters of a pound per bushel was taken out the grain was sliit)ped out as clean grain without any dockage. What an eloquent story is told by the above figures. The fact that nearly 1'00;000 bushels more of No. 1 northern, the highest grade taken in, was shipped' out than was received, speaks so loud against the present system and rules of inspection that it is simply unnecessary to go on down the line and call your attention to the fact that nothing lower than No. 3 Wheat was shipped out. The profit in mixing the receipts of this elevator for the three months, as shown by figuring the cost of the grain received at the avei-age price of grain of flle various grades during the three months covered, and then figuring the value of the grain shipped out, on the same basis was $88,206.8B'; Ili order to arrive at the probable profits of this elevator, should be added the amount real- ized from the screenings, the charges for handling the grain and the proceeds of the sale of wheat and other grain takeil ftom the screenings, for we found that all screenings are carefully cleaned' over a'Ud' all good graih taken out, and that the good grain taken from the screenings is shipped out as screenings in ordter to avoid inspection and appearing in the amount of grain shipped out of the elevator. We are of the opinion that grain hospitals, either independent or in connection with terminal elevators, should be established' where shippers could have " off grade " grain cleaned or scoured at a reasonable cost before it is pffered for sale, the shipper to pay the expense and receive the benefit resulting jfirom such treatment of his grain needing treatment in a hospital elevator. We also favor the amending of existing laws governing the handiing of grain by terminal elevators so as to allows no more grain of a given grad'e to be shipped out than is taken in. Tour committee found much to criticise by visiting the freight yards, in the carel'ess manner In which cars are handled by the railroad companies, and the very poor class of grain doors used. The a'mount of grain lost by Ifeakage from cars and by the careless shunting and switching of ears in the- yards is very large. All of the foregoing are of course matters of minor importance as compare^ with the apparent combination of the railroad and elevator interests in foreiiig all grain received at terminal points to be inspected under Minnesota inspection rules. A competitive market was established under Wisconsin inspection at Superior. The Wisconsin law provides that the Grain and Warehouse Commis- sion shall consist of three members — one from Wisconsin, one from New York, and one from North Dakota. Tinder this law the shipper in this State has a representative on the board and the in-fluence of this representative can be of great benefit to our shippers if his duties are conscientiously performed. This board appoints all the inspectors and weighers and can see to It that inspection and weighing is honestly and properly done. Our shippers were undoubtedly greatly benefited during the time the Wisconsin inspection was in force, but by the apparent combined efforts of the interests above named this Wisconsin Inspection is inoperative and all grain received at the head of the Lakes must be Inspected by Minnesota Inspectors under Minnesota rules. The story of how the Wisconsin law was made absolutely Inoperatitve Is an Interesting one. The Duluth Board of Trade made a rule that no member of the Duluth board could hold membership in a similar organization within a hundred miles of Duluth. This was done to compel all grain men doing busi- ness at the head of the Lakes to confine their business to Duluth. Then all terminal elevators located in Superior suddenly were closed as public elevators and became private elevators, operated by individuals holding leases. As pri- vate elevators they were able to discriminate in the business offered them, and this discrimination took the form of refusing to receive any grain in- spected under Wisconsin rules and by Wisconsin inspectors. It does not require anything further to show you how Wisconsin inspection was put "down and out "■ and why all of our grain must now be graded, inspected, and weighed under Minnesota Inspection rules. Tour committee attempted to have a hearing with the Duluth Board of Trade and met with some of the officers and members of that board for this purpose. Exceptions were taken by members of the Duluth Board of Trade to the fact that Senator Hudnall, of Superior, Wis., had been Invited to be present at this 190 FEDEBAL GEAIN INSPECTION. meeting. Senator Hudnell had asked the privilege of speaking at our last asso- ciaticin convention on the subject of the grading and inspection of grain, and during the course of his remarks had made some statements to which the Du- luth Board of Trade had strongly objected. The object of your committee in having liim present at the conference with the board of trade was to get at the truth or falsity of the statements made to which exceptions were taken by the Duluth Board of Trade. Members of the board of trade absolutely refused to proceed with the confer- ence while Senator Hudnall was present, notwithstanding the fact that your committee stated if the conference could not proceed wliile he was present his statements would have to be accepted as facts by the committee. Objections were also made by members of the< board of trade to the stenog- rapher who was present at the request of your committee. Your committee withdrew from the conference for the purpose of considering the objections raised by members of the board of trade. Being present at the invitation of the board and feeling that our request to have Senator Hudnall present long enough to go over the statements made by him at our convention, to which exceptions had been taken by the board, was. not unreasonable, and also feeling that an effort was being made to throw sucli restrictions around the conference as would make it of no value whatever to the committee, it was finally decided that we would withdraw and not attempt to proceed further with the conference at that time. The committee thereupon retired from the conference. Pollovring this attempt at a conference with the Duluth Board of Trade your committee entered into correspondence witha large number of eastern millers. This correspondence was of considerable interest and disclosed the fact that the eastern millers can not obtain grain at Duluth except in the condition it is offered them as to mixing. They want a certain proportion of grain of good grades just as it comes from the shippers, but can obtain it only after it has been mixed and the higher grades reduced in quality. Your committee also asked for an interview with the Great Northern Kailway Company officials in order to request that the Great Northern elevator at Superior be reopened as a public elevator and that all opposition to Wisconsin inspection by the railway company be withdrawn. This interview was ar- ranged, and on Tuesday morning, November 13, Senator Cashel, Senator Young, and Mr. Macfadden, of the committee, met with Mr. Louis W. Hill, first vice- president ; Mr. B. Campbell, fourth vice-president, and Mr. Braaten, of the rail- way company, at the company's office in St. Paul. The railway company con- tended that it was absolutely impossible for a large elevator to operate under the Wisconsin inspection law, owing to the fact that the law made it possible that any shipljer or receiver of grain could demand of the elevator company a special bin and that a small amount of grain stored In special bins would com- pletely tie up the capacity of the elevator. It was also pointed out that shippers could demand both Minnesota and Wisconsin inspection on the same grain, and that while either Inspection would be satisfactory to the railway company, traffic was impeded and great annoyance caused where both inspections were demanded. Other objections were raised to the Wisconsin inspection law and the state- ment made that the Great Northern Railway Company would open its elevator as a public elevator just as soon as these objectionable features could be elimi- nated from the law. The proposition was also made by the railway company to lease any or all of their elevators at Superior to an organization of independent shippers to be formed In North Dakota or to include shippers of North Dakota, Minnesota, and South Dakota, on a basis of 4 per cent interest on the investment in the •elevator. The lease to be made for one year or longer with the privilege ol being canceled by the lessee at any time by giving thirty days' notice to the lessor railway company. This proposition to your committee seems to be a solution of many of the problems of correcting the evils and injustice now in existence in the handling of grain at the head of the Lakes, and your committee will now take up the matter of perfecting an organization to lease one or more of the Great Northern terminal elevators with the independent shippers of the State. By an organiza- tion of this kind the shipper can retain complete control of his grain. He can obtain the value of all screenings taken from his grain. The eastern miller can obtain grain in just the condition he wants it and a competitive market at the head of the Lakes can be reestablished. Your committee is of the opinion that the reforms outlined will be of material benefiit to the grain growers of the FEDERAL GEAIN INSPECTION. 191 State and will be a stepping stone to a better system of Inspection, viz Federal inspection, which would do away entirely with the many conflicting inspections established in the various States. Respectfully submitted. John K Cashel, George M. Young, F. W. Cathso, M. F. MuEPTiy, W. 0. MACrADDEN. Committee. Mr. Macfadden. Gentlemen, I prepared on the train coming down some notes; and if you will excuse me, I will read from my notes what I have to say. Two years ago the North Dakota Bankers' Association, believing that as an organization it could accomplish more in the line of prac- tical usefulness to the people of the State by taking up the matter of the grading and inspection of our grain at terminal points with the object in view of making an effort to bring about reforms in the methods known to exist at terminals than by directing its efforts along any other line, arranged for a discussion of the methods of handling grain by the terminal elevators and at that convention listened to advocates for the reestablishment of inspection of grain at Superior, Wis., under the laws of Wisconsin. At that time there was quite a fight on between the State of Wis- consin and the State of Minnesota to have grain inspected at Supe- rior, Wis., which is just across the bay from Duluth, so as to create there a competitive market and a competitive inspection. We be- lieved that by assisting in this effort we could create this competitive inspection which would be of benefit to our people. The numerous complaints of existing evils in the inspection of grain under the laws and rules established by the State of Minnesota make it quite evident to our people that a coihpetitive market and competitive inspection at Superior would be of great benefit to our grain growers. I take it for granted that you are all familiar with the history and details of the lon^-drawn-out contest by the people of Superior, Wis., to establish a grain market in that city and of the bitter fight they ran into when they attempted to get the necessary laws enacted by the legislative bodies of Wisconsin. The opposition to the enactment of laws necessary to establish State inspection at Superior, as you no doubt are awa,re, was openly led by the elevator and railroad interests, making it evident that they would do all in their power to prevent any interference with the methods then used in the handling of grain at terminal points under Minnesota inspection rules. Our people in Forth Dakota were practically ignorant of the meth- ods in practice by terminal elevators when our association took up the subject and appointed a committee to visit the terminals and make a thorough investigation of the subject. The report made by this committee and the publicity in this way given of the manner in which our grain growers are and have been for years systematically defrauded of a portion of the fruits of their toil, created something of a sensation throughout the State. And I have thought it might be of interest at this hearing to ^ve you the details of the handling of grain both at country and terminal elevators. The farmer has two ^options in disposing of his grain in North Dakota. He can haul it to 192 FEDEE4L eEAIN ENSPBCTIO'lir. the Bfearest country elevator and sell it oatrigMj oc he can lead it into ears either from, a loading platform or through a country elieyatoF and ship it to a commission firm at Duluth, Minneapolis, or Superior; our teSi-minal poiats.- I have included Superior, as the opposition to the establishment of a competitive market there and of competitive inspection under the laws of Wisconsin was withdrawn January 1 last, and grain is now inspected at Superior by Wisconsin inspectors, If the grain is sold to the country elevator, the buyer at the elevator fixes the dockage and grade, and the price is paid as per the list price stent the buyer from day to darf. The prices to be paid for thte different gradtes from day to day are fixed by a representative of all the companies doing business in tfete State. That is to say, if there are a dozen elevator companies with head- quarters in Minneapolis doing business in the State of North Dakota, they have one man who fixes the price that will be paid from day to day., and they all buy on the same basis, as per the list prices that he furnishes. The buyers of all companies are given the prices and notified of any changes from day to day from an office at some cen- tral point. For instance, a representative of the companies at Fargo receives notice of any change in the list prices and in turn ncAife^ all buyers in that territory, so that the list price is exactly the same at all stations. I noticed recently a criticism by one of the railroad and warehouse commissioners of Minnesota of the fact that North Dakota farmers and independent elevators were payittg the same prices and taking the same dockage as the line elevator biiyers. Do yoti know why tney do this and why they do not follow the markets and pay all that grain is worth ? I could cite you cases where inde- pendent buyers attempted to make their own prices as they thought the market would justify. The line elevators immediately put prices up higher than the market would stand at such stations and kept them there until the independent buyers went broke or sold out to them. Their profits at other stations soon make up any loss by acticm of this kind at one station. The dockage is fixed by the buyer by taking a measured sample of the wheat to be purchased and running it through sieves, which take out first the small seeds, flax and small or broken grains of wheat and afterwards any larger seeds or grain, such as barley, oats, and larger weed seeds. This dockage amounts to from 1| to 6 or more pounds per bushel, and is a total loss to the farmer and a source of profit to the elevator company, as it is all cleaned over and recleaned in order to separate all the different grains or seeds in it. If the farmer elects to ship his own grain, he either pays the country elevator so much to load it in car for him or loads it directly into a car from a loading platform and bills it to his commission firm. I might add here that it is the rule with all country elevator agents to arbitrarily deduct from weight of every wagonload of grain weighed by them 10 pounds. This is done under instructions from the traveling representatives, for the purpose of making the elevator hold out in weight. Senator MoCumbee. That is independent of the dockage ? Mr. MacfadOen. That is entirely independent. If a wagonlod,d of wheat weighs 50 pounds, and there are 50 bushels in 40 pounds, he calls it 50 bushels in 30 pounds, and so on. FEDEKAL GRAIK INSPECIION. 193 Grain shipped direct to a commission firm is inspected and the grade and dockage fixed by the inspector, and the- car is then unloaded at the terminal elevator and weighed. In unloading, the grain is dropped into a pit and from there elevated to the top of the elevator,' p^haps a hundred and fifty feet, where the weighing hopper is located. During the tiia© the gntin is Min0 elevated it is subjected to a suction blast, which tabes out all the light dust, straws, etc., or light seeds, etc., according tb the force of the suction drkft; a part of the impurities for which it has been already docked. Do you all understand what that suction draft is ? Senator Bankhead. Oh, I think so. Mr. Macfadden. To my own knowledge and by actual experience it is absolutely impossible to load wheat out of an elevator and unload it into another Duluth, Minneapolis, or Superior without a loss of from 1 to 3 bushels, which ca"n easily be accounted for by the fact that this suction blast is in force all the time the grain is being elievated into the weighing bin and that whatever is taken out by the suction blast is taken out before the grain is weighed. Senator Bxjrkett. That is done to make the wheat better, is it not,? Mr. Macfadden. No, sir. Senator Buekett. They all take out the dirt and the seed? ]^. Macpadden. The reason for doing that is that the insurance companies require it to be done in order to keep the house free from dust. Spnator Bukkett. Somebody has to do it. Mr. Macfadden. But that is no reason why the grain could not be weighed-jtist as it is unloaded from the car. It is not necessary to take out 10 pounds before it is weighted. Senator BuftKEir. What I was gbing to ask you is this : Somebody has to staiid that loss of the dirt? Mr Macfadden. There is no logs* Senator Buekett. Then what are you complaining about? Mr. Macfadden. Because the farmer loses it, ^nd the elevator takes it. He takes it out before it is weighed. Senator Bxjrkett. That is what I say; the farmer has to lose it. Who is the man that ought to lose for cleaning the wheat ? Mr. Macfadden. This is not cleaning the wheat. Senator Buekett. Then I do not understand your statement at alL I will take it all back. Senator Bankhead. I take back what I said, too. I thought I Und^stood it, but evidently I do not. Mr. Macfadden. Let us assume that a carload of wheat comes into a terminal elevator. The doors are open and the contents of the car. are dropped into a pit. If the wheat was weighed right there Senator Bankhead. It wbuld have all the impurities in it? Mr. Macfadden. It would have everything in it. The farmer has been docked for those, impurities. He get no pay for them. Senator Bankhead. He has already been docked ? Mr. MkcFADDEN. He has already been docked. That is, the dock- age is fixed. Senator Dolliveh. Then what is the objection to taking the im- purities out ? =t 34503—14 13 194 FEDERAL GEAIJir INSPECTION. Mr. Macfadden. They are taken out by the suction draft before the grain is weighed. Senator Bankhead. I thought you said he had already been docked in some other process. , Mr. Macfadden. I guess perhaps I have not made that as clear as I should. The car comes in, and it is inspected by the State inspector and the grade is fixed, and the amount of the dockage is fixed. That dockage may be a pound and a half, 2 pounds, or 5 pounds per bushel. Senator DoLLrvEB. Then do they make the dockage applicable to the net weight after this stuff is taken out? Mr. Macfadden. The car is weighed, and if the dockage has been fixed at a pound and a half per bushel, for instance Senator Dollivee. What I wanted to get atj to make it briefer, is this : The farmer is decked so much for this dirt ? Mr. Macfadden. Yes, sir. Senator Bankhead. Before it goes into the elevator? Mr. Macfadden. Before it goes into the elevator. Senator Dolliveb. When he sells it? Mr. Macfadden. When he sells it. Senator Long. It does not belong to the farmer any more? Mr. Macfadden. No. Senator Dollivee. Do they clean this wheat and get this stuff out and then apply this dockage, to what is left ? Mr. Macfadden. No. Senator Dollivee. Then I do not see what the trouble is. Mr. Beall. May I answer the question? I am somewhat familiar with the elevator business, and I think I can help my friend from Dakota if he will allow me. Mr. Macfadden. I shall be glad to have you. Mr. Beall. The systein is that a wagon load of wheat is brought in and inspected and docked a pound to the bushel. Mr. Macfadden. That is at the terminal. Mr. Beall. Oh, I thought you were referring Senator Dollivee. Go ahead with your manuscript, Mr. Mac- fadden. This question is too deep for us. Mr. Beall. The same thing applies at the terminal. The dock is made and the grain is weighed, and this dirt is taken out in the meantime. The grain is weighed and the dock is taken off of the net grain after it has been cleaned, so that it has been docked twice; and then the elevator man, after he goes through that process, turns right around and puts the screenings right back into the wheat again and ships it out. Senator Long. Do you mean that all of them do that, or it is done in some instances? Mr. Beall. That is the system. They all do it. Senator Bankhead. They are a bad set, evidently. A Gentleman. That is right. Mr. Beall. That is the system, and I know all about it. Senator Long. They do that under the rules or with the approval of the board of trade? Mr. Macfadden. Yes, sir ; they do that under the rules of the board of trade. Senator Peekins. Why should not this chaff and cheat and hay- seed that is in the grain be given to the owner of it ? FEDERAL GRAIN INSPECTION. 195 Mr. Macfadden. That is just the point we make, and is what we believe would be done if the inspection was made under Federal super- vision. Senator Perkins. It certanly does not belong to the elevator com- pany; it belongs to the owner of the grain. Mr. Macfadden. It is now taken by the elevator company. Senator Perkins. That is a dishonest method, it seems to me. He certainly is not entitled to it unless you sell it to him. Senator Burkett. That is a by-product. They take dirt out of cattle, too, and keep it and sell it. Senator Perkins. Everything that is taken out of the grain be- longs to the owner of the grain. Senator McCttmber. I think this witness will cover that point a little further along. Mr. Macfadden. Yes; I will cover that point further on. The point is that a certain amount of light-weight grain, straw, and dirt is taken out of this grain before it is weighed. That is the only point with reference to this. Senator Dolliver. Go ahead now, Mr. Macfadden. Mr. Macfadden. We do not believe that under Federal inspection and Federal weighing anything would be allowed to be taken out of a man's wheat before it was weighed. That is the point, and the only point. There is another thing with reference to this dockage : A shipper ships his grain to Duluth and pays freight on the whole carload there and the dockage is fixed and taken out and confiscated by the eleva- tor, and the farmer pays the freight on it to the terminal point, be- cause he is charged right back in his return for the grain for the amount of freight that has been paid on the whole carload. Senator McCttmber. I should like to say right here, to explain some testimony that was given by Mr. Beall in answer to a question of the Senator from Kansas, that after this dockage is taken out it is reseparated into different characters of grain, and the light kernels and what you call screenings do actually go back into the grain. It helps make the different grades of grain. Senator Perkins. But it does not belong to the elevator company. Senator McCumber. I know; and I am not saying that it does. The poorer stuff, the dust and dirt and weed seeds, and things of that kind, grass seeds, and so on, are generally sold to be ground into cattle feed, or something of that kind. Mr. Macfadden. Certain classes of the seed are sold. Senator Burkett. It goes into your No. 2 hard wheat ? Mr. Macfadden. Some of it does, and some of it is sold to manu- facturers of spices and is used in adulterating spices. Senator Dolliver. We will try to stop all of that. Go ahead with your manuscript now. Mr. Macfadden. By the two methods the farmer has of selling his grain he gets by the first plan the prices the elevator companies fix as the list prices after the buyer has deducted from the gross weight of his grain the dockage. It does the seller no good to make any in- quiry as to what he might be able to do at another elevator. They all buy on exactly the same basis and all have the same apparatus for determining the dockage and he gets the grade on his grain which the 196 ^ PEDEBAL GKAIN INSPECTION. buyer arbitrarily fixes by simply looking at the grain and testing its weight per measured bushel. The grade is fixed at the terminal by State inspectolrs in much the same way as it is at the country elevator — that is to say, simply by taking a look at the grain and testing its weight per measured bushel. A strong argument in favor of Federal inspection is that at termi- nal points, at least, inspectors would be on duty, trained by special courses of instruction and selected after civil-service examinations, who would be competent to make analyses of grain and determine to a certainty the milling value of the gf ain. At a Government experi- ment station and a^icultural college at Fargo the State has equipped a complete flour mill, and Professor Ladd, our State pure- food cwn- missioner and, professor of chemistry in the college, tells me that no reliable inspection of grain can be made without a knowledge! of chemistry and the apparatus necessary to determine the milling value of the grain. Professor Ladd is in Washington, I understand, and will be glad to present to you arguments long this line. We believe in North Dakota that with Government inspection at; terminal points State laws could be enacted to govern the handling of grain at the country elevators to at least some extent to conform to Government laws, just as we appoint a State scale inspector or sealer of weights and measures, for instance, to see to it that the scales used in the State are honestly adjusted. Under Government inspection we believe that the shipper would not be compelled to pay freight to the terminal point on the dockage in his grain and then have the dockage confiscated by the terminal elevator without reference to its value. I have seen wheat raised on land which had been seeded to flax the year before and which contained a large percentage of flaxseed, worth double the value of the wheat. The wheat would be docked, say, a pound and a half or 2 pounds for the flaxseed in it, the shipper com- pelled to pay the freight on the flaxseed in the wheat, and then have the flax confiscated' as dockage. We can see no good reason why the shipper ^ould not receive pay for the value of whatever is taken from his wheat as dockage as well as for the wheat itself, less a rea- sonable charge for cleaning. Nothing taken from grain as dockage by the terminal elevator is lost. The various kinds of seeds or grain are separated and sold on their merits, and even the fine dust collected by the dust collectors is sold for $9 per ton to firms using it in the manufacture of stock food. We do not believe that under Federal inspection rules the terminal elevator would be allowed to arbitrarily deduct from the weight of each car 30 pounds, as is now the rule under Minnesota inspection, and this after the grain has been elevated to the top of the elevator to the weighing bin, and subjected to a suction blast during the process of elevating. There could be no loss to the elevator in sim- ply running the wheat from the weighing bin to the storage bin. You will remember that back there we made the statement that they arbitrarily took 10 pounds from every wagonload that was weighed. In order to make their elevators hold out at the terminal elevators, they take 30 pounds from every carload ; but that is after the grain has been elevated. All they have to do is simply to pull the string and drop it into the bin,. Two hundred and fifty thousand cars are annually received and weighed into terminal elevators in Minnesota. Thirty pounds from FEDERAL GRAIN INSPECTION. 197 each car weighed does n^t look like a large loss to the individual shipper, but the total taken each year amounts to 125,000 bushels or $125,000 at present prices. How long would the law permit a grocer to openly sell 15J ounces of sugar for a pound or 35 inches for a yard? I cut the following from a Minneapolis paper yesterday. It is the answer to my question : SHORT MEASUEE A MINNEAPOLIS GROCEKYMAN 18 FINED A HUNDRED DOLLARS FOR CHEATING WAS ONE OF FOUR RECENTLY INDICTED THIS ONE PLEADED GUILTY. Minneapolis, March SI. Dan B. Wright, a grocer's clerk, was fined $100 and given the option of sixty days' imprisonment in the county jail for violating the provisions of the State law in regard to weights and measures. Sentence was imposed by Judge Andrew Holt Wright was one of four grocers indicted. Wright sold to George Mee a paper bag containing 10 pounds and 7 ounces of apples and represented that he was selling Mee a peck of apples. He was the only one of the four grocers and six dairymen indicted who admitted his guilt. And yet all over Minnesota and the Dakotas, when a country ele- vator buyer weighs a load of wheat, he gives the weight to the seller as 10 pounds less than it actually is, and the weighmaster, under Minnesota inspection rules, takes 30 pounds from every carload weighed by them. I could give you some interesting figures to show the profit to the terminal elevator in the matter of dockage, under the rules of Minnesota inspection, and of the profit to the same terminal eleva- tors in the matter of raising grain from the low to higher grades by the process of mixing, but I will not go into that. In 1906 the dock- age on wheat inspected into the Minnesota terminal elevators amounted to an average of 27 ounces per bushel, or a total of some- thing over 3,000,000 bushels of dockage on the total amount of wheat handled. Senator Buekett. Was there any more dockage than there was actual shrinkage ? All of this dockage is made for a shrink, is it not ? Mr. Macfadden. Yes, sir; why, yes. Senator Buekett. How do you know? Mr. Maceadden. I know from actual experience that the dockage at the country elevator is about three times what it is at the terminal elevator ; and I also know from my own knojvledge that wheat that is shipped out of Duluth without any dockage contains from half a pound to a pound of dirt. It goes out from there without any dock- age. You can take wheat that is shipped out of Duluth without any dockage right around on the other side and ask the inspector to inspect it in, and he will tell you that there is a pound or a pound and a half of dirt in it. The report of the railway and warehouse commissioners for Min- nesota for 1906 shows that very little more grain of the higher grades was shipped out of terminal elevators than was taken in. I have ab- solute evidence in my possession that it has been the custom for a long time in loading wheat out of terminal elevators to go to mills in the same city to bill it out a grade or two lower than it really is in order to help out the annual reports showing the amount of grain received into and shipped out of terminal elevators of the various grades. A will buy of B a hundred thousand bushels of No. 1 north- ern wheat in store, and the elevator in shipping it out will report a hundred thousand bushels of No. 2 or No. 3 northern loaded out. 198 FEDERAL GRAIN INSPECTION. All parties concerned understand the transaction and it cuts no figure to the mill buying the grain. Senator McOumber. They pay the No. 1 price ? Mr. Macfadden. They pay the No. 1 price. We knew that under Federal inspection rules no discrimination would be made in favor of certain terminals. At Duluth, under present rules, all wheat shipped out goes out without dockage. At Minneapolis it is absolutely impossible for an eastern miller or exporter to get any wheat out of the terminal elevators there with- out dockage. Why is this radical difPerence made between the two terminals ? Why are the rules not the same in both cities ? The reason for this is simply the influence that the millers in Min- neapolis have with the inspection department. That is a matter that is common- talk. Senator Bankhead. Eight there, let me ask you one question: Do you not think the Government "would be lucliy, if we appoint a whole lot of inspectors for this purpose, if these millers and buyers would not be able to speak to and influence them ? Mr. Macfadden. I suppose that is true. Senator Bankhead. We have that risk to run, of course. Mr. Macfadden. We have that risk to run ; but we would like to give them a trial. Senator Bankhead. My observation is that Government officials are no more honest than other people. Senator McCumber. I do not think you will find much complaint in the Post-Office Department as it is conducted throughout the United States. Senator Bankhead. We arrest their men every day in the year for stealing. Senator McCumber. There is comparatively little of that, though, as compared with any other business. Mr. Macfadden. There is very little, it is true. Senator Bttekett. I know; but that is a certainty. Everything there is just as certain as a weight. Where you want to compare is in the inspection going out, where judgment is required, where they can go up or down according to their judgment. Senator McCumbee. I will not take up this discussion now. I will take that up when I come to my own testimony. Mr. Macfadden. The greatest argument in favor of Federal inspec- tion is, of course, in the benefit to the foreign buyers and the con- suming public in getting uniform standards or grades. I went to Duluth last week hoping I might be able to get samples of grain of different grades as inspected into the terminal elevator and samples of the same grades as inspected out. I found it impossible to get the samples, for the reason that very little grain is moving just now. It's common talk in the grain trade, however, that cargoes of No. 1 northern wheat going out of Duluth would not inspect any better than No. 2 northern if it were going in. I have been told by eastern millers that if our wheat raised in North Dakota could be put in special bins in Duluth or Minneapolis, and delivered to them without being mixed or adulterated with other wheats, it would always bring a good premium. This also holds good with reference to the sale of our grain in for- eign countries. I read recently extracts from the Daily Consular FEDERAL GRAIN INSPECTION. 199 Eeport giving this mixing as the cause of the serious falling off in the demand for American wheat. This mixing causes a direct loss to the seller of grain of good quality wherever he is, for the price is fixed largely by the quality of the grain sold. Federal inspection would prevent this mixing, to the detriment of the American farmer and the benefit of the owners of the terminal elevators. Senator Perkins. Mr. Macfadden, you represent the bankers' asso- ciation of your State, as you said. This paper that you have read is the consensus of opinion of the bankers in relation to this subject- matter, is it? Mr. Macfadden. Yes. Of course I have not consulted with the other members of the committee that was appointed by the bankers' association. Senator Perkins. But your association considered the pending bill introduced by Senator McCumber ? Mr. Macfadden. Yes. Every meeting that has been held in the State by organizations of any kind, merchants' associations, or any other, has indorsed it. Senator Perkins. Do its provisions meet with their approval gen- erally ? Mr. Macfadden. I think so. I have heard no criticism indicating the contrary. Senator Dollivek. Are you familiar with the investigation of the terminal elevators in Minnesota, made In 1905 by the legislature of Minnesota ? Mr. Macfadden. No ; I was not familiar with that. Senator Dolmver. According to testimony taken by the house committee, that investigation was thorough and completely vindi- cated these elevators from these charges of dishonesty and thrift that your testimony seems to involve. Mr. Macfadden. That was a very easy matter, you know. The influence of the Minneapolis mills and the elevator companies there is powerful. Senator DouyivER. Is it so powerful as to entirely destroy the moral responsibility of the legislature ? Mr. Macfadden. Absolutely. Senator Dollivee. That is a bad atmosphere to send a civil-service inspector into. Mr. Macfadden. It certainly is. Senator Bankhead. I would not like to risk a Government in- spector in a crowd like that. Senator Perkins. I am surprised at your statement that the ele- vator companies arbitrarily retain whatever dockage they take off of the wheat. It may be flaxseed or hay seed or grass seed or weed seed; but whatever it may be they retain it without accounting for it to the farmer ? Mr. Macfadden. They arbitrarily retain it. Senator Perkins. Out west I have purchased thousands of tons of wheat; we have this suction fan which has been described by you, and we always give to the farmer what we took out of it. They took it home for chicken feed, and ground it up. Senator Dolmvee. Gentlemen, this is the only witness remaimng except our colleague, Senator McCumber, who desires to be heard this afternoon. We will resume the session to give him a chance to be 200 FEDEKAL GRAIN INSPECTIO-N. tcard, at fifteen minutes after 2 o'clock. I will ask the membersof the committee, in view of the Senator's special knowledge of the ques- tion, to give him an opportunity to speak to a full committee at fifteen minutes after 2 o'clock. (The committee thereupon took a recess until 2.15 o'clock p. m. of the same day.) AFTER RECESS. STATEMENT OF HON. PORTER J. McCUMBER, UNITED STATES SENATOR FROM NORTH DAKOTA. Senator McCumber. Mr. Chairman, I want to say in opening that it is my conviction that the farming community and the independent buyers of the States of Wisconsin, Michigan, Illinois, Minnesota, North and South Dakota, Iowa, Nebraska, and Kansas — great grain- growing States — are almost universal in their desire for legislation of this kind. When a great section of country like that has been demanding and insisting upon legislation along these lines, it is evident that there is something back of the demand. And when State legislatures and all tlie business organizations in a State appeal to Congress for relief against conditions which they say surround them and disastrously affect the markets of the products upon which they must live, they are, I say, entitled to a hearing in the only forum in which such hear- ing can be effective. I venture this suggestion — and I think the testimony here givenand the facts I can give will bear me out in this proposition — that the great farming communities selling grain in those sections do not, on the average, receive within one grade of what their grain is entitled to. They thereby lose the value of one grade in their grain. If the loss is one grade in wheat and there is no greater spread than 3 cents a bushel, 100,000,000 bushels would mean $3,000,000 for a section of country raising that amount of wheat. It may be said that we will produce from 60,000,000 bushels to 90,000,000 bushels of wheat a year in my State, and perhaps it will reach 100,000,000 bushels, as applied to all the cereals they will sell. That would be a loss of $3,000,000. Senator Perkins. How is it possible that they do not get the value of the grain when the farmers have a cooperative association and themselves send it to the markets? Senator McCumber. I will make that clear right here. Suppose there is a farmers' association in my State and they have an elevator. They ship from that elevator to Minneapolis, Duluth, or Chicago — wherever the place may be. The value they will get will be the value of the particular grade on that day at the terminal. Very well. If they ship a carload of No. 1 grain and get a No. 2 grade for it, and can get no greater grade than that, they will certainly lose the difference. Have I made myself clear? Senator Perkins. If they sell it on grade rather than on its intrinsic value. Senator McCumber. They can not sell it on intrinsic merits. All grain, almost exclusively, is sold by the grade. The proportion ihat is sold on its intrinsic merits is only the little proportion that the FEPBBAL GRAIN INSPEGtnON 201 miller may take, where you have mills enough to take up the grain, and there is not a single great terminal market in the United btates where they would take one-tenth of the grain. Senator Perkins. It was stated yesterday that the milter wQuW take No. 2 grain, so stated, but would pay No. 1 price for it. Dms not that neutralize your statement in a measure that the farmers are not receiving the value of the product of their labor ? Senator MgCumbee. Certainly not. The Senator did not .get m right idea from that testimony. The testimony as given was that the grain was taken in at the terminal elevators at low griade opd after it got into those elevators a higher grade was put upon it. Now, the miller is compelled often at certain seasons of the year to buy from the terminal elevators. They will sell only bj grade, but, as has been explained here, they may go to a miller in a large place and say, " Here, I want to make a record that I am not shipping out a greater amount of the higher grade than I am taking in, and if, therefore, I sell you some No. 1 such as I would sell to the community in general I want you to let me bill it out to you as No. 2, but for the No. 1 price." That is No. 1 grade made at the elevator. The farmer did not get No. 1. Senator Perkins. Suppose that Mr. Pillsbury, say, is buying a thousand tons of grain to manufacture into flour. It may be that 4^ or 4f or 5 bushels of wheat will make a barrel of flour. He does not care how you grade it. What he wants is the value to him. Senator McCtjmber. "WTiere he can buy it directly from the farmer. In a great many instances he may not buy wheait from the elevator, but when he does he is compelled to buy by grade. The elevator owner does not say to the nailler, " Come and look at this wheat and say how much you wiU give for it." The elevator owner says, " We have so many bushels of one grade and so many bushels of another grade, and the market value of those grades to-day is so much." Senator Peekins. You understand, of course, and those gentlemen who are practical farmers understand, that there are some grades of wheat out of 300 bushels of which you can make so much of one kind of flour and so much of another, and, therefore, the miller who wants to make a financial success of his milling business buys the wheat for what it will bring in flour to him. Senator McCumber. Where he can. But he can not always do that. Senator Perkins. Will your bill assist him ? Senator McCumber. Certainly. It will assist him in the fact that it will not pay to mix the grades unless you can get a higher grade by it. If there are a million bushels of No. .1 mixed with 3,000,000 bushels of No. 4 the Government would say that it should not be put out as No. 1. Now, I have stated what the loss is over these great States. Let me give you a table or two to verify my statement. I am taking at random some figures from the report of the weighmaster of the State of Minnesota. This report shows the receipts and shipments for the year ending August 31, 1901. There has been a change within the last two years to some extent under the methods that have been pointed out by Mr. McFadden. That would apply only to Minne- apolis, but substantially the same results apply to other terminals. 202 FEDERAL GKAIN INSPECTION. I will ibad only round numbers. Of No. 1 hard there were received 341,000' bushels; there were shipped out 1,000,000 bushels in the whole State of Minnesota. Of No. 1 northern there was received 10,000,000 bushels; shipped out 16,900,000 bushels. Of No. 2, north- em, there were taken in 7,000,000 bushels; there were shipped out 3,978,000. Now, notice that of No. 2 northern there were 7,000,000 bushels taken in and less than 4,000,000 bushels shipped out. In other words, the lower grade went into the higher grades and helped to make up these higher grades on the shipping out; that is to say, some of those 7.000,000 bushels of No. 2 northern went into the 1,000,000 bushels of No. 1 hard or the 16,000,000 bushels of No. 1 northern and brought them up above the other number. As to the poor grade, there were received 1,335,000 bushels; shipped out only 444,000 bushels; that is to say, three times as many bushels of the poor grade taken in as were taken out. Now, " ho grade " is worse than No. 4. Received in, 1,335,000 bushels ; shipped out only 344,823 bushels. . These figures, brought together, show results in brief, as follows : No. 1 hard — receipts, 341,567 bushels; shipments, 1,000,438 bushels. More than three times as much No. 1 hard was shipped out in those three years as was taken in. No. 1 northern — that is a very good grade of grain — receipts, 10,070,414 bushels ; shipments, 16,900,917 bushels. No. 2 northern — -receipts, 7,341,594; shipments, 3,978,311. No. 3 spring — receipts, 1,335,830; shipments, 444,041. It will be seen that of the higher grades the amount shipped out always exceeds by two or three times the amount taken in, while of the lower grades the amount taken in exceeds from two to three times the amount shipped out. No. 1 hard— receipts, 341,567; shipments, 1,000,438. No. 1 northern — receipts, 10,070,414 ; shipments, 16,900,917. No. 2 northern — receipts, 7,341,594 ; shipments, 3,978,311. No. 3 spring— receipts, 1,335,830; shipments, 444,041. Eejected — receipts, 256,063 ; shipments, 134,471. No grade — receipts. 1,335,521 ; shipments, 344,823. Senator Dolliver. Suppose the inspection of the grain going in were perfect, and the inspection of the wheat going out were perfect, would that fraudulent mixing of the grades Senator McCtjmber. Bring it up to that difference ? Senator Dolliver. Yes. Senator McCtjmber. No; it could not possibly be done, as any wheat grower will tell you. You may take a very good grade of No. 2 and mix it with a grade of No. 3 that would almost reach No. 2 and bring all into the No. 2 column, but no such great differences as are shown by these tables would be possible under any honest system of mixing. Senator Burkett. Do they not clean it after they get it in ? They take No. 3 and clean it, and it comes out legitimately as No. 2 ? Senator McCumbee. No; there is where I differ with the Senator. A little grass seed or a bit of chaff or a weed seed are not wheat. Those may be in the wheat, and the wheat may be of the very best quality. It may be a good No. 2 northern for instance. This does not atfect the berry. It does not affect the wheat. When they have FEDBBAL GEAIN INSPBC^TION. 203 docked for that stuff, there should be nothing in the residuum but the No. 2 northern. They have no right, justly, on account of the little weeds or something of that kind in the grain, that is eliminated %hile it is passing up from the basement to the top oi the elevator, to say that that which is taken out and which they have charged the farmer with, and they own themselves, shall be taken to degrade the character of the grain, which is of itself above reproach. Senator Perkins. I can not understand the relation of the State laws to this. The owner of the elevator owns the residue that comes out of the grain. As you say, there may be a good deal of first-class grain and a great deal of it may be undeveloped. Is that report from the State official records ? Senator McCumber. Yes. I will give no figures except those that are official. Senator Perkins. They are required by the State to be made? Senator McCtjmbee. Yes. Senator Doujvee. You say that that is often juggled by sales to millers at a fictitious rate? Senator McCumber. Yes. The Bankers' Association of the State of North Dakota, whose rep- resentative you have already heard, gave you the reasons why they made an investigation of these matters and has left with you the report of that committee. I will now take just one table from their report. They took for a single year (I think it was the year 1906) the weigher's report from a single elevator, and I want to give you the figures for three months' buying. Of No. 1 northern that elevator took in 99,000 bushels ; shipped out 196,000 bushels, or twice as much. They took in of No. 2 northern 141,000 bushels; they shipped out 467,000 bushels. They took in of No. 3 northern 272,000 bushels and shipped out 213,000. You will notice that the f act(3^rs of this item nearly balance. Now, where did they get the grain to make up the extra amount of the No. 1 and the No. 2, which is more than three times the amount taken in? Of No. 4 they took in 201,000, and shipped out none. Of "no grade " they took in 116,000, and shipped out none. Of " rejected "they took in 59,000, and shipped out none. Where did that grain go to ? It went into all of these higher grades. Senator Dollivbr. To dUute those higher grades ? Senator^ McCumber. Yes. You see that by no known honest sys- tem of mixing could it be possible to bring about that result. The total amount there was on hand was 12,733 bushels, and 10 pounds. The figures in detail are as follows : KECEIPTS. BusBelB. :No. 1 northern .^^'lll-f^ No. 2 northern 141, 455. 10 No. 3 northern 272, 047. 20 No 4 201,267.20 No'gr"ade~ ' "I- - 116,021.10 Rejected!:::: sq.tjzso 890, 245. 10 SHIPPED OTJT. No. 1 northern ^E^'S??'^ No. 2 northern 467, 764. 00 2Q4 PEOEHAL GEAIN INSPBCTIOH. Bush^, No. 3 213,459.30 No. 4 _ None. No grade None ^eje^ted^ None. 877,512.00 On hand, estimated 12, 733. £0 890,245.10 But that isnQt all. The profits of mixing at this eleAjator for three months, in addition to all their other profits, were $&S,720.69, at the rate of grain at that time. But even that is not all of their profits. You must add to that profit all of the grain that was taken out for dockage; so much a car- so much "arbitrarily," and the amount which was taken out in addition to that they sold, on an average of about $8 per ton- and this was charged against the farmer, although they owned it them- selves. Now, you will ask how the farmer will allow that; how it will be possible to impose on him in that manner. Why, the farmer has to sell his grain at the terminals, either directly or indirectly, and he has to sell it under such rules and regulations as ar& fixed by the boards of trade and the railway com- roissions at these terminals. Where they attempt to make sales independent of the rules and regulations at these terminals their grain may rot on the tracks. Senator Perkins. This applies only to grain in transit. Suppose the grain were stored in your local elevators at home and that this same evil exists there as to, the mixing of grain when it leaves the elevator for transit. It is inspected at Duluth or Chicago or the other elevator point, but the mixing was done at your oWn elevatdr. How does this bill prevent that? Senator McCumber. It will not prevent that, because it is not done. Senator Pbrkins. Do not the elevator men make advances on it and the farmer borrow money on warehouse receipts and hold the grain for better markets ? Senator McCwmber. Yes; but they ship it on. They do not hold it. They ^ive hiaa receipts for so many bushels of No. 1, or No. 2, or No. 3 grain. Their warehouse receipts show that. They do not return the identical grain, and their elevators are not of suflBcient capacity to bold all the grain that might come in. Senator Perkins. You have answered the question not as I hoped you would— that this would prevent them from taking advantage of the farmer in this local elevator. He has taken it to the local elevator, and has got his receipt for it, and so far as he is concerned that identical wheat is lost, because it is mixed with other wheat in the elevator and shipped to other points. Senator McCttmber. I will answer that on rather broad principles. We sometimes consider the little technical principles to such an extent that we lose track of general governing principles in trade re- lations. I think the committee will agree with me in this proposir tion, that the price of our product in this country is governed by the Liverpool price. We all agree upon that. Senator Perkins. That extends even to the Pacific coast. Senator McCttmber. Yes. TEDEKAL GRAIN INSPECTION. 20S Senator Perkins. In all the States west of the Rocky Mountains it, ia the Jjivecpool price that fixes the price there. Senator McCumbeb. Yes. In other words, the price at the place of consumption governs the price at the place of production. Senator Dolliveb. I have heard that disputed. Senator Perkins. It is true, nevertheless. Senator MoOnMBBit. Put it this way: When we- have a surplus for export Senator DoUiivEE. I ha^»e seen the papers qaoting prifees at CblQago and other places in the United States just a« diligently as we quote the prices at Liverpool, and I have read books sh'owing that it is not fixed at Liverpool ; that the price at Liverpool is not itself the nesult of the demand^ but of the prices generally th*oU§hbut the wcffld. Soiator McGuMBER. But really^ in whatever terms it may be stated, it is determined by the demand at the place of consumption. Now, we will aU agree in this proposition, that anything that tends to drive the price of the product downward, that tends to discredit it, either as to quality, character, or reliability of grade, will tend to depress the price. In other words, confidence in quality, character, and grade is the very life of trade; and distrust in aiay one of these three must necessarily depress the market. We do not buy a thing and pay the same pricef- mr it where we have doubts as to what we are getting or going to get as if we had no doubt. Now, if our exports of grain are so nianipulaited d.nd so adulterated that the London merchant or the Liverpool or European merchant will not pay within 5 or 6 or 8 or 10 cente a bushel for the American grain of a certain grade as he will for Canadian or Argentine grain of a like grade, we must admit that, reacting back, the loss will finally rest upon the producer, and the producer will receive that 6 or 8 or 10 cents a bushel less than he would receive if his grain were properly and honestly graded and there was no attempt to perpietrate a fraud upon the purchaser. Now, the same rule will apply in the United States. If the miller who wants to get a good grade of grain, and knows that either the Chicago requirements or the St. Louis requirements or the Minne- apolis requirements for a certain grade of grain are sufficient, that he would secure the quality of flour that he wants, he would be will- ing to pay what would be a natural market price for that grain, and, in fact, he would raise the price of that grain by taking it. But when he gets his grain, whether in the United States or in the foreign market, instead of getting a grain that comes up to the proper quality, he gets a grade far below it. When he gets a grade certified to as No. 2 northern and examines it and finds it No. 3 northern, while he might be held under the contract for that particular pur- ] chase, yet the next time he purchases he will only pay a No. 3 price • for No. 2 northern. The manipulator loses nothing, because he buys on a certain margin, and he will make just as much whether grain be low or high, whether the market price is d^ressed in the old country or not. It does not affect him, but it does affect the producer of grain. Senator Buekett. Then this question arises: If they are buying No. 2, and when it gets over there it is No. 3, how do you account for the fact that it is No. 3 coming in all the time and No. 2 going out? What is the use of calling it No. 2? 206 PEDEKAL GEAIN INSPECTION". ..Senator McCumber. There is the gist of the whole complaint. Thc; grain is taken in at the great terminal at less than an average of its true grade. Senator Burkett. And sold at less than its true grade? Senator McCumbee. No, sir; it is sold at a grade higher than its true grade. It is imported into the foreign country at a grade higher than its true grade, but when it gets there they do not pay a price according to the higher grade. Senator BuEKErr. They pay just what it is? Senator McCumber. Who gets the difference? The exporter and the man who, is operating the mixing elevator? In other words, there is a loss by both the producer and the consumer, because the producer does not get his honest grade and the consumer does not get the grade he contracts for at that time, and therefore does not contract for such afterwards. And that depresses the price of grain throughout the United States- Senator BuRKETT. But when that European buys it he buys it as nominally No. 2 and pay for No. 3 ? .Senator McGumber. Yes. Senator Bubkett. That same wheat ^oes through a middleman's hands. It is finally paid for, and that is the price which they pay out here to the farmer for it. Senator McCuhbee. No; it is not the price. Senator Burkett. The wheat is sold and it is manipulated, but it finally strikes its level on the other side, and that is what it is worth. ~ Senator McCumber. Well, let us see. Let us work that out. Suppose I have a carload of 1,000 bushels of wheat, worth $1,000 as No. 1 northern. It goes to Minneapolis, say, and it is graded as No- 2 northern, and I get only $970, or whatever the difference is — the 3 cents per bushel. Now, that same carload is taken into the elevator. The purchaser has bought it at a grade less than it is worth. He does not send that came carload on and finally sell it at the same grade abroad. He mixes that with 3 carloads of No. 3 or No. 4, and he ships that abroad (or to the consumer) as No. 1. He did not even pay for it as No. 1 in the first instance; but he has mixed it and sent it abroad. When it gets over there they will give only, we will say, a No. 2 price for it; but the shipper has got in three times as many bushels of No. 3 and No. 4. He has paid for the other stuff that he put into the No. 1 only 50 or 60 cents a bushel. Then the consumer over there refuses to pay the No. 1 price. He pays us a No. 3 price. That makes all of our No. 1 grain — what is really No. 1 grain — sell for what would naturally be the No. 3 price when you compare it with the No. 1 of other countries. Senator Dolliver. And that reflects back on all the No. 1 grade of stock in the United States? Senator McCumber. Necessarily. I wish to insert here another table, taken from the records of the weighing department of the State of Minnesota, showing the amount of each grade weighed in at, and the amount weighed out of, the ele- vator at Duluth during the years 1902, 1903, and 1904. FEDEEAL GRAIN INSPECTIOK. 207 The table is as follows : [rrom annual reports Minnesota chief gi'ain inspector tor years named, Duluth weighing department.] WHEAT. Grade. Year ending August 31- 1902. Reeeived. Shipped. 1903. Received; Shipped. Received. Shipped. No. 1 hard .... No. 1 northern No. 2 northern. No. 3 northern , Rejected "No grade 599,606 15,187,012 19,693,454 7,035,133 892,241 2,561,695 648,607 19,886,137 16,178,999 1,971,355 94,626 468,922 1,628,681 21,905,842 11,625,037 1,300,563 1,890,093 966, 170 1,746,712 23,606,721 7,638,201 297,794 77,624 112,840 90,643 12,401,897 10,296,172 2,616,066 2,360,302 2,586,843 109,628 18,217,789 6,723,732 a 283, 299 314, 139 256,943 d Spring. I have not the record for subsequent years, but this will answer the purpose. I especially call your attention to the fact that in 1902 15,000,000 bushels of No. 1 northern were received in and about 20,000,000 bushels shipped out. At the same time about 20,000,000 bushels of No. 2 northern were shipped in and about 15,000,000 bushels shipped out. In other words, about 5,000,000 bushels- of No. 2 northern changed immediately to No. 1 as soon as it entered into the elevator. But far more glaring will be the difference between the inloading and outloading in the lower grades. I have but to call your atten- tion to the No. 3 and "No grades." No. 3 shipped in about 7,000,000 bushels; shipped out about 2,000,000 bushels, or about three and one-half times as much received of this low grade as was shipped out. " No grade " shipped in about 2,500,000 bushels ; shipped out about 469,000, or nearly six bushels shipped in to one shipped out. What became of this extra 5,000,000 bushels of No. 3? They were inspected out at a high grade. That is true also of the " No grade." Here is a letter written by Kobert A. Patterson, chairman Euro- pean international committee on American grain certificates. He is an English miller and also president of the Corn Exchange of Great Britain and continental Europe. It is dated the 15th of February, 1908, and written from London. Senator Dollivek. To whom is it addressed ? , Senator McCttmbee. It is addressed to the President of the United States. The writer of it sends me a copy of it, and also a letter to me. I will now read the letter to the President. It reads : London Corn Trade Association, Exchange Chambers, 28 St. Mary Axe, London, E. C, February 16, 1908. Mk. President: I am instructed by the European international committee on American grain certificates to communicate to you the following facts : There has been for some years past a general consensus of opinion among European buyers of grain that the operation of the present system of certificating grain for export is increasingly unsatisfactory and that whatever may be its merits for the purposes of domestic 208 FBDBBAL GRAIN INSPECTION. trading, it no longer gives to European buyers the confidence and pro- teqtion which is necessary in a trade where the only guaranty for reliable quality and condition in exchange for buyer's money is a paper certificate. Formerly buyers in buying from the United States of America were able, as they still are in their dealings in grain with other exporting countries, to recover from shippers any damage they sustained owing to defects in quality or condition ; but since the in- troduction of the certificating system this is no longer possible. Even after its introduction, indeed until comparatively recent times, it was seldom found that any serious abuses arose, and trusting to their belief in the reliability of the grading system, buyers were willing to continue trading with America on less favorable terms than they de- majided elsewhere ; but Ti^hether from the increase of individual com- petition, or, ^what is probably more important, the rivalry between the older ports and their smaller and more recently established com- petitors, there seems little doubt but that the standard of grading has beeA lowered, either tepiporarily or, in some cases, permanently, in order to attract business from interior points ; and we in Europe feel that the burden of such departure from the more reliable and stricter method in force formerly has been borne chiefly by European im- porters, who, being far aWay, have no power of protecting themselves against errors, or worse, in the grading methods of recent years. The result is that American grain suffers as regards price when in com- petition with grain from other countries. The increasing dissjltisfsic- tion culminated some twelve months ago in a general request from the principal European grain centers that a conference should be sum- moned by the London Com Trade Association to consider the best measures to adopt in order to remedy the defects of the present sys- te^i of dealing in grain from the United States of America. The conference was held in London on the 8th of November, 1907, and was attended by delegates from all Europeto importing coun- tries. It was unanimously resolved that a conmiittee be appointed, consisting of seven members from the United Kingdom, and an equal number from other European countries (the latter being represented' as follows : Belgium 1, France 1, Germany 3, Holland 1, and Scan- dinavia 1), to suggest necessary improvements and to negotiate with American grain trade for their adoption. This committee met and drew up a scheme (a copy of which I have the honor to append) which was submitted to the principal grain associations of the United States of America ; but, which I regret to say, did not only prove unacceptable to the American exchanges, but even failed to draw any counter proposals from them. Indeed, the way in which this subject has been treated by some of the leading grain associations there would almost seem to indicate that there is no desire to recognize the undoubted fact that serious faults have arisen or that there is any need to amend a system which is respon- sible for abuses of which European importers universally complain. Traders here generally recognize that a reliable system of inspec- tion and certificating presents many advantages, but that to be thoroughly reliable, it must depend not only upon the expert Imowl- edge, integrity, and independence of the inspection officials, but that the rules for grading, by which these officials are bound must be uni- form, applying equally to every port, and should be generally known FEDERAL GRAIN INSPECTION. 209 ^ot only in the various American but also in the principal European gram centers, and that wherever possible from time to time type samples should be sent to our leading grain associations. This IS the system adopted by the agricultural department of His Majesty s Government in the Dominion of Canada, and has hitherto proved generally satisfactory. My committee observed with great satisfaction your reference to this important matter m your last Presidential message, and that there is before your Senate and House of Representatives at the present time a bill embodying some of the above suggestions. Whil^ they would, of course, have preferred to get their own suggestions accepted by American traders, they wish to be permitted to offer you their sincere congratulations and thanks for the steps you are taking to riemedy an undoubted evil, and to assure you of the warm support of the European grain trade in your efforts. I have the honor to be. Your most humble and obedient servant, EoBEKT A. JPattebson, Chairman Europecm Intemcttional Conmdttee on America/fh Grain Certificates. The President, White House, United ^States of Americg^ Washington, U. S. A. The letter which Mr. Patterson addressed to me personally is as follows : London Corn Trade Association, ExCHA^^GE Chambers, 28 St. Ma^y Axe, London, E. C, February 15, 1908. Sir : Understanding that yoji are in charge of the bill for egitablish- ing a system of grain inspection entirely controUipd by the Federal Government, I beg to inclose you copies of letters which, by direction of my committee, I am addressing to the President of the United States of America and to the Secretary of Agricultur,^, and would take this opportunity of assuring you of the warm support of the Eu- ropean grain importers, whom I have the honor to represent, who are very dissatisfied with the present sj^stem of inspection. I believe that great effprts are being made to persuade your Sena- tors and House of Representatives that the proposed change is not only unnecessary, but not generally desired, but I can assure you that unless some such change is made, and that shortly, your export trade will suffer severely. . i -t j* tt • European buyers have lost confidence in the reliability of United States certificates, and American grain consequently suffers in price, buyers giving a preference whenever possible to other gram, and only buying yours when compelled to do so, or at a reduction m price suf- ficiehtt in their opinion, to compensate them for risks they run m buying certificate final. I am also informed that the supporters of the present system allege that your farmers would suffer by th^ introduction of ap imploved (i. e., honest) inspection, because they would no Ipnger obtain from European buyers a premium oyer the price of. No. 2 '^ade ;|)r ^heir choice gi-ain. This contention is either frivolous 34503—14 ^14 210 FEDBEAL GEAIN INSPECTION. or it seems to admit that the European buyer is not, or should not be, honestly treated. By far the largest export trade is in No. 2 or lower grades, especially as regards corn, which, I understand, is particularly referred to, the proportion sold of anything higher in quality or grade being comparatively very small, so that farmers would not lose business from European buyers of the better qualities. On the other hand, even the present grading rules universally provide for No. 2 being sound, dry, and reasonably clean, and if these require- ments were properly fulfilled farmers' position should not be altered in any respect by the proposed change of the grading authority. Moreover, I do not believe that American farmers, dealers, or export- ers generally do or would wish to benefit by a system which would permit of anything but honest and straightforward inspection and certificating, and I am convinced that the proposals embodied in your bill are greatly needed in the interest of and would befor the (benefit of all honest traders and farmers in the United States of America. We only ask that we shall be put in no worse position as regards the grain we have to receive under certificates than the American trade, but under the present s}'^stem, while the European importer buys the same grades under the same rules for grading as the American buyer, it is a matter of common knowledge that the grain exported and certificated at shipping points is several cents a bushel inferior in value to that received by the American trader. I observe in your bill that no provision is made for the inspection of f:ain for foreign export, and to give any security or satisfaction to uropean importers such a provision seems absolutely necessary, and I would further suggest that the rules governing the grades should be permanent — that is, that the crop must fit the grading rules, and not the rules fit the crop. For example, if grain of any crop will not pass the standard of No. 2 as required by the rules, it must go on a lower grade, and not that, as frequently happens, the grading rules may be altered to suit the exigencies of the crop. This has been found practicable in Canadian government inspec- tion, and would doubtless be found equally so with you. Thanking you for your efforts in this matter, I am, sir, yours, truly, Robert A. Patterson, Chairman European International Gorrrndttee on American Grain Certificates. P. S. — If this letter will be of any assistance to you in putting forward the views of the European grain trade, you are at liberty to make any use of it you may think desirable. Senator McCumber, United States Senate, Washington, U. S. A. Now, I have another letter from Holland, and I have one from our consul at Marseille, which is also a very strong letter. The Holland letter reads as follows : P. J. McCumber, Esq., United States Senator, Washington, D. G. : During the last Berlin grain conference, held January 29 and 30 of this year by delegates of the German, Holland, and Scandinavian grain trade, the McCumber bill and the other bills of similar charac- FEDERAL GRAIN INSPECTION. 211 ter introduced into Congress were one of the chief subjects on the programme. The question of American grain inspection has been a very impor- tant one these latter years, and its having been a subject of the con- ference programme induces us to assure you of the sympathy that the proposed change in the inspection system has among the mem- bers of this association. During many years already the Aiiierican grain-inspection cer- tificates have been very unsatisfactory, and immense losses were caused to the buyers on this side by the careless inspection of Ameri- can grain ^hipped for export. It has been said by American oppo- nents of the bills mentioned above that the fixing of grades on better and higher standards would injure the export trade and that the European buyers will not buy anything but the grades which have always been shipped and to which they are accustomed. We want to energetically deny that anything like this is the case or may be expected when Government grain inspection will have been introduced. On the contrary, we think that a more reliable inspection will greatly benefit the American grain export trade. Many important firms in the importing centers on this side have absolutely given up importing American corn, taught by the experi- ence of several years, when a single parcel of this article, certified No. 2 mixed, sail mixed, etc., and still showing 30 to 90 per cent dam- age on arrival, caused a loss greater than the small gain made on many shipments together; they preferred to buy from Argentina, Kussia, and the Danube. A better inspection, however, and certifi- cates which give sufficient guaranty that the grade has really been given in accordance with the grain's quality and condition will induce these firms to take up the import of American corn again. We don't object to the export of inferior grain, but to the fact that the grades are not given according to the condition of the grain, sa that the certificates are entirely unreliable. Perhaps some buyers on this side want the inferior grain, but those who deal in the better qualities want to be sure that when they pay a better price for the higher grade the certificate gives them the guaranty to get this grade. Up till now this has not been the case, and it is quite evident that a more satisfactory inspection will be of great benefit to the trade. As soon as grades all over the United States are uniform and as soon as certificates of inspection will be reliable, the import of American grain will certainly increase again after the sharp decline which it has experienced. Uniform government inspection will bring a higher standard of export grain, induce the European importer to buy American grain • more freely again, and consequently greatly beoefit the honest American exporter at the cost of his dishonest competitor. It will greatly purify the trade and make an end to an unbearable situation. Yours, truly, Het Cobiitb van Gkaanhandelaren te Kotterdam. (KOTTERDAM COEN TeADE ASSOCIATION.) A. CoANEST, President. H. VON E.ANDEEYTH, Secretary. Kotterdam, February 20, 1908. 212 FEDEKAL GRAI^T INSPEC330N. The letter from the United States consul at Marseille is as follows: American Consular Service, Marseille, December W, 1906. Hon. Porter J. McCujibbr, United States Senate, Washington. Sir : Eef erring to your efforts during the preceding session of Con- gress to secure a satisfactory settlement of the grain-inspection prob- lem, I have now the honor to inclose for your information a report which I am sending to the Department of Commerce and Labor, which resumes facts ^previously brought to your attention, together with some probably new material. Respectfully, Robert P. Skinner, G onsul-General. grain-inspection methods. It is highly desirable that certain facts in regard to American grain-selling methods be given immediate and wide circulation and that something be done, either by action of Congress or by the con- certed action of American commercial bodies, to reform or rather standardize the system under which the great cereal-exporting busi- ness has been created. There is little popular knowledge in the United States in regard to the fact that wheat, corn, grease, arid similar products of American origin are not now sold abroad by sample, but by nominal grad^. The European buyer knows nothing of the merchandise whatever before it reaches his possession. He imports and resells various classes of merchandise the quality or grade of which is certified tq liiih, not by the merchant who has sold him the article, but by the official inspector of a board of trade or other equivalent body at the port of shipment. He pays for the goods before he receives them, and when the exporter in the United States delivers to him a certificate of inspection, declaring the goods to be of a given grade, he has no alter- native but to honor the drafts. The bargain is absolutely final upon the production to him of this certificate of inspectioji. Although no two ports in the United States may absolutely agree as to the descriptive terms to be applied to a given grade of wheat, although previous shipments may have been of obviously different quality, if the certificate deliA'ered conforms to the grade ordered, the buyer must accept delivery. These are " American conditions." The fact that for many years we have exported nearly all our surplus agricultural products under these conditions speaks well for American business methods, and the fact that these methods are generally . acceptable is of advantage to the people of the United States. Of Tate years the murmurs against this system have been increas- ing in Europe, and whereas a short time ago they took the form of isolated private complaints that goods did not always conform to the certified grade, thejr now take the form of organized protests, t have before me not merely private correspondence running through a number of years, but the recent proceedings of the London Com Trade Association and the proceedings of a delegate conference held on December 12 at the Berlin Bourse, the general tenor of which is that foreign importers are vexed with prevailing conditions in the TTnited States and are determined to force an improvement. At FEDERAL GRAIN INSPECTION. 213 these two conferences a great many harsh things were said iii regard t6 American certificates, and specific instances of irregularities w:ei^^ mentioned which I need not now repeat. The vital point which it will be well to separate from so much context is this : "Mr. Feiedbeeg (Hamburg). It is perfectly clear that if ap 4^^?^' lean inspector certifies we have iio right to doubt, or if we do W6 are asked, ' Why do you go on buying? ' I may assure this ijaeeting that a good many of uS ate not going on buying. We liave none oi this trouble in South America. For the general trade I think that therfe are respectable peofile enough in America and I ani wondering ^vhy tlley do not stop the glaring abuses that are complained of." It was the fact that not many year's ago the vast bulk of our grain exportations went forward from NeW York and that every year ^andard samples of cereals were sent out to European buyers, bear- ing the seal of the New Ifork coinmercial bodies which issued certifi- 9ates of inspection. Under such circumstances, when Iplurppfean buyers received a certificate frpiii New York stating that a certain cai-go afloat was of X quality they could refer tb their sample of this X grain, and there was at least a mora,l guaranty that sample and cargo would be alike. The practice of sending biit standard samples is no longer followed, while grain is being shipped under certificates of inspection froni Duluth, New York, Baltimore, New Orlea,ns, fral- veston, and probably elsewhere. In each port or place a comiiiercial Qifganiization assumes the right to issue certificates of grade and yet no two ports or places have agreed upon the text of the ternis which they use to describe the standard grades, let alone upon the grain itself. Nor is this all : I quote from the printed rules of a great board of trade : "The committee on grain shall have full power and authority to esstablish grades of grains and to alter and amend the same as may be deemed necessary or expedient." This instability is naturally one of the conditions of American busi- ness that is least acceptable to foreign importers, and what with rivalry between ports for export business it has created not only bit- ter feeling abroad, but definite differences in the prices at which grain of the same nominal grade is offered for sale at the different ports of shipment. There are "easy ports" and "good ports," and some- times the " easy ports " are penali2ied, as thus explained in a recent letter from an importer to an officer of an American commercial organization : " As you kno^v, at present exporters have great difficulty selling ori certificates, but where quality is reasonably assured they are willing to pay a premium over lower inspections. Newport News and Nor- folk were excluded on the London and Liverpool contracts because of last year's No. 2 corn shipments, while, as you know, your inspec- tion maintained a premium all last season over the Atlantic." No wheat importers desire to pay a premium here, or to exact a penalty there, based upon their appreciation of inspection methods. Wheat will fix its own price readily enough, and what the importer wishes to know, and has a right to know with as much certainty as attaches to any human transaction, is that No. 1 white winter wheat, for example, is the same kind of grain, whether it be inspected at Duluth or New Orleans. The importer insists that if the American Government, commercial bodies, and individual exporters have not 214 FEDERAL GRAIN INSPECTION. agreed upon the qualifications of various grains necessary that they may receive specific gradings, it is the result of their own negligence, very possibly encouraged in certain quarters by those who profit by this unsatisfactory state of affairs. The remedy sought is so easy of application and the demand for its application is so entirely reasonable that to the importer protracted resistance is incomprehensible. The proper remedy may be applied either by our Government or by the cooperation of our trade bodies. The starting point of the reform would be, naturally, the establishment of standard descriptions by law. This done, if the Government were charged with the issuance of inspection certificates, the service would be removed from local influences, and our so-called official certificates would be rehabilitated. If this very rational proposition be objected to, the surest means of effectively combating it would be the holding of a conference of American grain inspecting bodies for the adoption of grain standards and for the adoption of ways and means of draw- ing standard samples, to be deposited in American consulates at great European ports or to be issued upon demand to importers, and to provide for a board of inspectors, the members thereof to be trans- ferred at intervals and liberated from every form of local pressure. EoBEET P. Skinner, O onsvl-GeneraH. Marseille, December 5, 1906. Those letters that I have read represent, I believe, accurately the sentiment of the entire importing interest in Europe. You can naturally see that that sentiment is extremely hostile. It is shown by them and also by our consular reports that millers have ceased in some places to handle our grain and that that necessarily affects the price both on that side and this. Senator Perkins. Has the Argentine Republic an inspection system ? Senator McCumbee. I do not know; but they have a system that is satisfactory to the European people. Senator Perkins. And how is it about Canada ? Senator McCumber. In Canada they have an inspection system. Senator Money. I feel an interest in the question put by Seiiator Perkins. There would be little opportunity for a Government test in the Argentine, because the wheat is taken by large seagoing steam- ers, 1,200 miles from the sea. It is not shipped down to the coast and stored. So I would imagine that it is very difficult to secure inspection unless they have a peripatetic government inspector who goes around and makes the inspection. Senator McCumber. I can not give any idea of their system. Senator Perkins. The consular reports ought to show. Senator' McCtJMBER. Possibly they would. Now, how does that affect the exporter ? If it depreciates the price of our grain, it affects our exporters and our farmers. The question was put as to how those purchases are made. I want to say now that the foreigner is compelled to purchase on the Amer- ican inspection, and he takes all the chance; but if the inspection is correct and it is, say. No. 2 grain, which does not contain more than 15 per cent moisture, and is certified honestly as No. 2, instead of some- thing that contains 30 or 40 per cent moisture being certified as No. 2, Missing Page 216 PEDEBAL GRAIN INSPECTION. speedily pass tjie same that we may obtain relief from the injustice which we suffer under the present existing conditions." The following petitions have been received from the State of North Dakota, asking that all honorable means be used to secure the pas- sage of what is known as the McCumber Federal inspection bill; Farmers and citizens of Latosford, N. Dak.; farmers and citizens of Valley City, N. Dak.; local union American Society of Equity of Ward County, N. Dak.; farniers and citizens of Pingree _and members of American Society of Equity of North Dakota; fariAfirs ahd citizens and members of American Society of -Equity of New Eockford, N. Dak., and farmers and citizens of Sheyennfe, N. Dak. By the North Dakota Agricultural College: '■'■Resolved, That * * * the present system of juggling with grades and excessive dockagOj of mixing our hard wheat with inferibr grades, to the detriment of our farmers, calls for inspection far re- moved from local or State interest and from political manipulation. We demand that our wheat shall sell in the markets of the world upon its, merits, and that the farmer should receive for his product its full vAlue, less a reasonable commission for handling and transportation. McCumber Federal grain inspection bill meets the hearty approval of convention." By the Ward Coilntv (N. Dak.) Grain Growers' Association. Jan- uary 30_, 1908 : " Be it resolved, That we, the Ward County Grain Growers' Asso- ciation of the State of North Dakota, * * * heartily approve and indorse Federal inspection of grain as recommended by President Eoosevelt." By the Independent Grain Shippers' Association of North Dakota, January 15, 1908: " Resolved, That this association is in favor of passing a bill for Federal inspection of grain; that we faVor the passage of a bill pro- hibiting the dockage of grain ; that we favor a national law changing our present system of measuring grain by bushel to the hundred- weight." By the American Society of Equity of Pingree, N. Dak. : " Whereas we believe that the passage of said bill (grain inspection bill) would be for the interest of the farmers, therefore we, the mem- bers of the American Society of Equity,- in convention assembled, ask you to use your influence in the passage of said bill." The following are extracts from letters that I have received : From J. H. Fitzgerald, of Powers Elevator Company, Valley City, N. Dak. : " I am glad to note that you have introduced your bill for Federal mspection of grain, and hope you will succeed in having same passed at this session of Congress." From a fai-mer of Lidgerwood. N. Dak. : " Your bill introduced * * * providing Government inspec- tion for all grains inspected would be a farmer's request. I know our gram by just inspection would be graded large per cent better, and farmers would obtain higher prices for their grains. State grain inspection, as I have by actual practice experienced, has proved more or less fraud." FEDERAL GRAIN INSPECTION. 217 From I. H. Harris (grain elevator) , Bathgate, N. Dak. : 1 have been buying and shipping wheat for sixteen years and know that the Minnesota inspection is ranlf. They are holding u& up here in North Dakota for, I was going to say, a. million 6f dollars §ach year, although I have no figures to prove it. * * * I have f alked ^ith a great many private buyers and shippers of grain from North Dakota and with any amount of wheat raisers and farmers pxid I have never met one yet that was satisfied with the present Minnesota inspection. We feel that we are being unjustly taxed without representation." Jlxtract from letter from a commission firm in Minneapolis : " They have certainly tightened up on grades herCj but on account of the grades being so uneven there isn't a man livmg really coilld tell whether this sample of wheat would grade No. 3 or whether it would grade No. 4. To §how you how uneven the grades are here we had a sample of wheat from one of our shippers a few days ago. We took the sample to the inspectors; one called it No. 1, another called it No. 2, and the board of appeal called it No. 3, and theriefpre |here isn't a man living could tell what they are liable to grade your wheat when it arrives here." That is one of the men who buys. He does not say that he can not tell, but he says, he can not tell what he is going to get. From E. K. Bradley, Valley City (real estate) : "'There is widespread interest throughout the country in regard to this measure. I appreciate fully the necessity for the betterment of inspection laws and believe that the Governinent should tak^ entire charge of this matter. The writer ships 10 or 15 cars of grain each year and has been annoyed greatly through the unjust discrimi- nation and graft that exist in the inspection as now in force. From D. E. Morden, Wahpeton, N. Dak. (farmfer) : "We have known for years that we were not getting justice either in grades or weights when we shipped our wheat to Diiluth, Minne- apolis, or Superior. Consequently we have been compelled to sell our grain at home to the company elevators for any price they saw fit to give us. While aware we were at mercy of gang of speculators, were unable to find remedy- This I believe was one of the direct causes of discontent among farmers." From Eobert Fleming, Dresden, N. Dak. : "I think grain inspectors should be entirely free of all influence such as our State inspectors have to contend with. I have been piiying for twenty years and know the system can be improved upon by national inspection." Here is a letter from Tennessee — and I want to say, as to the South- ■ ern States that they are purchasers, and they make the same; com- plaint of the mixing of these grains, so that they can not get the wheat they want to purchase: TENNESSEE LETlTER. From Charles D. Jones (of Charles D. Jones Company), Memphis, ^»*' * * My greatest fear about this whole proposition is that too many Senators and Representatives will listen to the wail that 218 PEDEBAL GRAIN IN-SPECTION. will be raised by the big exchanges of this country, who are enjoying such great privileges under the present inspection system, and in listening to them will agree on compromise, which will not give this country relief to which we are entitled. " To my mind few things in way of legislation have been offered in our National Congress for years which would as directly benefit as many thousand people as will the administration of your proposed law. It is impossible for me to buy from any large center a No. 3 white oat and have accurate idea of what real quality I will get under that inspection. One imposition on buyer is that often they do not get a certificate of inspection, and it is an acknowledged fact that a great many shippers will quote, for instance, No. 2 white corn and nave no idea of shipping anything but No. 3 white corn. " Since last letter to you I have had great deal of correspondence with dealers all over the South and they all seem enthusiastic over your bill, and know that the Senators and Eepresentatives from Mississippi, Louisiana, Alabama, Georgia, Florida, North and South Carolina, and Tennessee have been written to regarding your bill and asked to support the measure." Now, here is something from Minnesota, where they say the farmers are satisfied. The first letter is not, however, from a farmer, but from Louis Hill, president of the Great Northern Eailway Com- pany. He has been corresponding with me about grain, in regard to a change in the system in the State of Washington, which some Senators seem to think is right. They are now agitating the question of Federal inspection in that State. MINNESOTA. From Louis Hill, president Great Northern Eailway Company, St. Paul: "A better inspection would certainly be a very good thing I should think for the Washington grain growers." From Minnesota Farmers' Elevator Association, by Burr D. Alton, president : Mr. Alton writes : " Would like to send message indorsing Federal gram mspection ; " that he is heartily in favor of it, but that his peo- ple are not quite educated up to it, and believes that major part of people who have considered the matter favor Federal inspection. He incloses resolution adopted by his association at meeting held March 3 and 4, 1908. Eesolution states: ''Resolved, That we recommend the enactment of a Federal-inspection; aw as introduced in Congress by Senator McCumber, * * * and that we specially call upon the Members of Mmnesota delegation in Congress to assist in the passage of such laws." NEBRASKA. From Trenmore Cone (Cone Grain Company), member of Ne- brask legislature : " The conditions which you state in the Senate apply to a very large extent at our terminal market at Omaha. We are robbed by the mixer, the mspector, and the weigher, with no ample protection"*' FEDERAL GKAIN INSPECTION. 219 de?Xb?:De™S;tT907*"' ^"^^'^ ^'^^ ^"^^^^ ^«"^P^"^' ^-■ ''Resolved, That it is the sense of this board that all grain-should be inspected and graded by the Federal Government, and when ex- prted should carry with it the seal and proper authority, so that it should have with it absolute confidence in every grain market of the world : Resolved further, That we heartily indorse Federal in- spection and call upon our Representatives in "Congress to do every- thing possible in their power to assist in passing such a bill." ILLINOIS. From Farmers' Grain Dealers Association of Illinois, Mason Citv» 111., March 19, 1908 : "■Resolved, That"we favor the inauguration of a system of Federal grain inspection and grading of grain along the lines provided for in the McCumber bill, and we call upon the Senators and Eepresenta- tives from the State of Illinois to bend every effort toward, securing the enactment of such legislation by Congress at an early date." KANSAS. Kansas Board of Trade, Kansas City, Kans., and the Farmers' Ter- minal Grain Company favor Federal grain inspection. The next letter I have is from W. C. Agee, of Birmingham, Ala. ALABAMA. W. C. Agee, of Birmingham, Ala., writes that the present system of inspecting grain throughout this country is corrupt and crooked as it can be, and it is a notorious fact that at practically no grain centers can we find an honest inspection of grain. We are sure that all reputable grain dealers and the farmers will welcome the passage of such a bill (Federal inspection bill). Senator Money. Is there any inspection system of any sort in Alabama ? Senator McCumber. I presume there is. The people there, how- ever, do not buy from Alabama ; they buy from the Central people. Senator Monet. But he speaks of a dishonest system. I do not believe there is any system. Senator McCumber. He says it is a notorious fact that m no grain centers can he find an honest inspection of grain. The next is from Florida. They are all dealers in gram extracts from whose letters I am reading: FLORIDA. From Baker & Holmes Co., John D. Baker, president, January 27, 1908 • "After reading this bill (Federal inspection bill) we feel more en- thusiastic over same than ever and we will refer it to the Wholesale Grocers' Association here." 220 FEDERAL GRAIN INSPECTION. From Baker & Holmes, January 20, 1908 : '! We wish to state emphatically that we will do whatever we can to aid you in the passstge of this bill, aiid if we can be of any service t9 you, let us know the nature of same. " We think this is a move in the right direction and it will be of great Benefit to those in the grain business, and we wish to assure you tMi ybu have our sympathy in ef^'^.Y ??!spect." Her6 is a letter from Mississippi, if you Would like to hear it. Senator Money. Yes;, I should be glad to hear it. Seriator McCtJMBEB. This is it : MISSISSIPPI. yrom the Gibsoi^ Grocery Company, January 18, 1908 : " W6 ta^e pleasute in recommending and indorsing your bill in ref- erences to the uniform system of grading grain aiid believe it shoptld kav^ the eridburdgetnent of evfefy holiest buyer ahd seller. Thfere is ribf one average buyer iii ten in this section of the cburiiry but tHdt has at soiiie time been imposed upon in this r6^i)ecii and ^ith rto recburi^ whatever." Senator Money. Where is that from? Senator McCumber. I have not noted the post-office, but the letter is from Mississippi. Ilere is anotheir letter from Mississippi: From Threefodt Brothers, Meridian, Miss., January 1, 1908 : " We note the bill offered iii regard to grain inspection aiid wish to cbmmerid ybu foi- this, and hope it Will b^conie a law, as the present condition of grain is very unfavorable, and detrimental to the dealers, as it is only occasionally that we get justice in accepting grain shipped by present certificates of inspection." NORTH CAKOLINA. From the Sanford Grocery Company, Sanford, N. C, January 11, 190§: "We feel that the passage of this bill (Federal inspection bill) would be one of th6 greatest improvements for the grain receivei;s in the various sections of the United States, and especially in southern States, that has ever happened, anc^ we desire to express our deep and lasting apf)reciation, etc. As a rtlle the grain received by southern dealers has fallen far short of thfe grade at which it was billed ; and as grain receivers we are always at a loss to know how to quote our trade h6re, untilwe have received the grain and inspected it our- selves. We feel that the passage of the bill.vrould greatly relieve the presfent situation, for if all grain is inspected by Federal inspectors we are confident we will get what our invoices cilll for. Under this law there will be less partiality and fewer discriminations in favor of the shippers and fairer and better treatment to the receivers at large and will place competition amongst shippers on a level.". From the Asheville Milling Company, North Carolina, January 10, 1908: "We are in hearty sympathy with your bill dealing with Govern- ment inspectors of grain and we have written to Senator Overman asking him to support it." FEDEBAL GBAIN INSPECTIO]:?^. 221 MISSOURI. From the Merchants' Exchange, St. Louis, Mo., February 7, 1908 : '•'■Eesolved, That the uniform and correct grading of grain and the accurate weighing of same in the United States are not only highly desirable but essential to the continued welfare and growth of our foreign and domestic trade, and can best be secured by Federal con- trol of the inspection and weighing. ^^Besolved, That the Merchants' Exchange of St. Louis favors th? enactment by the United States Congress of such laws as will place the inspection and weighing of grain under Federal control, under such conditions as will insure (1) uniformity of grading, so far as practicable; (2) the preservation of the individuality and the in- terests of the various markets which have been built up by their own efforts; (3) a square deal to all concerned." GEOKGIA. From I. H. Pitts & Son, Waverly Hall, Ga., January 18, 1908 : " We are writing to say our best wishes are with you in the passage of your grain-grading bill. Have written Senator Clay and Con- gressman Adamson to do all they can to help you." Frpm the Heard Grocery Company, January 16, 1908 : " We think th;s is a fiiie bill, and it is very necessary that it s|ifljil4 be passed. We certainly hppe you will be successful, and if there is anyone to whom w^ could write that would do any good, etc." From the Bainbridge Grocery Company, Bainbridge, Ga., January 10,1908: "Are glad to note that you have introduced a bill requiring Federal inspection of all grain. We wish to extend to you our hearty appre- ciation of your interest in this matter and urge that you use every effort to get such bill passed, as it has been a great imppgition on the South for the past several years. All the northern and western ship- pers seem to have the idea that they can dump anything they please on the South and force them to accept it." SOUTH DAKOTA. From J. E. Holter, Canton, S. Dak., March J, 1908 : "You are familiar with confusion now existing, yet it would be proper in me to point to conditions at our locp,! shipping points. No standard is in operation for grading; the buyer runs his hand into the grain, sifting it between his fingers ; he places an arbitrary grad? upon it by guess. The weighing is very irregular, and dockage is an ever- lasting contention, causing a mouth fight between seller and .buyer." SOUTH CAROLINA. " We have read with interest notice of ypur bill and wish to sav with jeference thereto that m our opinion the enactment of this bill means much to the South. We hope that you will become more and more determined to push this matter through, as you shall not only Serve our commendation, but of the whole South." ^ 322 PEDEBAL GEAIN INSPECTION. KANSAS. From letter of D. W. Troup, secretary of the Kansas Board of Trade, to Congressman Charles F. Scott, January 30, 1908: « * * * -^g pan readily see that the adoption of Federal inspec- tion of grain would take away from the interests that now dominate the grain trade of our country a weapon that gives them almost abso- lute control of the business, and that under the present system they enjoy advantages which they would not obtain under Federal inspec- tion of grain, and which is worth to them the difference between the Value of the grain now arriving at the market centers and the value of grain after having been received at market centers by these inter- ests of at least 3 to 5 cents per bushel. You understand that the value of grain under the present system into a central market must be at least 3 to 5 cents per bushel higher than that required by the same inspection department when it is loaded out of terminal elevators, and after having come in possession of the aforesaid interests. "It is the simplest matter possible to have uniform inspection of grain. "The only influence that is fighting Federal inspection of grain to-day, so far as I can find out (and I have been going into this matter very thoroughly) is the boards of trade, who are profiting by the manipulation of the grain products of this country. That is, 1 mean to say the boards of trade hereinbefore mentioned, all line house con- cerns and their adherents, and the different grain dealers' associa- tions, such as the Kansas Grain Dealers' Association of this State, and we sincerely hope you are not lined up and allied with these interests and will not use your influence for the defeat of one of the greatest bills that has ever been introduced in Congress for the benefit of the producer and to rehabilitate the grain trade between this country and Europe, and to raise our standard of value of Kansas No. 2 ' hard ' wheat abroad, where it has been discredited by manipulation to such an extent that to-day it is almost impossible to sell our wheat abroad so long as the foreigner is able to buy from South America, Kussia, and other competing countries. " It is just as important that we should have uniform inspection of grain and some guarantee from the inspection department after a car of grain is inspected that the certificate will carry it somewhere as it is that we have uniform weights, and that when we sell a bushel of wheat in Kansas we understand that we have to deliver 60 pounds, no matter whether it is in New York State, Missouri, Kentucky, or Florida." From the Grain Dealers' Association of Kansas, E. J. Smiley, sec- retary, December 9, 1907 : " The writer has given Federal inspection deep study and is almost convinced that such a measure will be necessary to secure uniform grades throughout the country. He has discussed the question of Federal inspection with the official members of this association and they agree that Federal inspection must come in order to protect the producer and local grain dealer against imposition by the large ele- vator owners." From the Beall Grain Company (B. R. Beall), Kansas City, Mo., September 4, 1907 : We sincerely hope that you will be successful in having passed by Congress this winter a bill establishing Federal inspection of grain, and Missing Page 2.24 FEDERAL GRAIN INSPECTION. place anywhere from 1 to 16 cents per bushel, until it falls into the hands of the trust exporter, when it is again inspected as No. 2 and sold for No. 2 at No. 2 price, the difference falling into the hands of the trust instead of the farmer and producer. " Therefore, by the very nature of existing conditions, the farmers and producers of this country can not hope to get just and fair treat- ment in the inspection of their grain, notwithstanding the fact that all inspection charges are at last paid by them. It, is a notorious fact that the standard of grain which is traded in to-day on the boards of trade is so low that there is not a miller in this country who would think of putting it into his mill or use it for the manu- facture of flour would be of incalculable benefit to the producers Qi this country and be the means of reestablishing the good name of America in all the world for her farm products, and thereby reap a reward in obtaining better prices. " Federal inspection should be under civil-service rules ; an inspector should know that the only requirement must be efficiency and du,ty ; he should not owe his position or the continuance of sam.e to any local political organization or board of tirade, as is the cage to-day. The inspection of grain and cotton should be uniform, at all points alike. A Federal inspection certificate should be as current as mojiey anywhere, not only in the United States but in all the world. It is a notorious fact that the different State inspection departments will not inspect a car of grain at one point in the State as No. 2 and guar- antee it to inspect No. 2 at another point in the State 75 miles dis- tant. Indeed, it is impossible to have a car of grain inspected in Kansas Gity, Kans., with any assurance or guaranty tha,t it will grad? the same at a point 500 feet away across the State line. Few people know this, perhaps, but it is a fact, nevertheless. I take it that under Federal inspection of grain and cotton that merchandising in tho^e commodities would not be, as it is to-day, so considered, and ^ in fa,Gt, the most hazardous of all lines of trade, but, on the other hand, coulcl be handled with safety. " Our Kepresentatives in Congress can not be urged too strongly upon the importance of Goyerntiiejit control of the inspection of many commodities, especially grain g,nd cotton, the same ag the Govern- ment inspection of meat. We must have it. The present system of inspecting grain and cotton to-day is the greatest weapoji in the hands of the grain trust, and it should and must be taken from them before the farmer will get justice." From J. W. Brafford, State grain inspector, Kansas City, Kap?. : " The markets should be compelled to take their hands off of the throat of the business, as far as manipula,ting the inspection of grain, reprdless of what it is; and to be prevented from so njanipulatrng it that it matters not whether the market breaks or raises if they .are able to order the grades tightened or loosened; they can ma,ke gqod on any feature of speculation they desire, and the balance of tlie trade, especially the producer and some more, are entirely at their mercy. There is no more justice, no jqiore reason, or excuse for the gv^t grain markets to dictate the different standards of grain and th^p construe the rules in grading it than there would be to permit the^ same markets to change the length of the y3rdstick, to increa,se or diminish the size of the stjindard bushel to suit their own cpnye^- iences and to make good oh bad guessing of the markeis." I have also some foreign comjJaints that I present: FEDEEAL GEAIN INSPECTION. nnfr FOREIGN COMPLAINTS. From Robert S. Patterson, chairman EuroBean oommiH^o -. Am^ican grain certificates (letter of Februfi^ ?ri908) European buyers have lost confidence in the reliability of United States certificates, and American grain consequently suffirs in price buyers giving a preference whenever possible to other grain, and onlv buying yours wLen compelled to do so, or at a reduction in pri(4 sufficient to compensate them for risks they run in buying certificate final." Mx. Patterson also writes at length to the President and also to Mr. Wilson, pointing out the dissatisfaction of foreign purchasers with American grain certificates, and the injustices they are suf- fering. His letter to the President I have already read, and I will now give his letter to the Secretary of Agriculture : London Corn Trade Association, London, February J5, 1908. Me. Secretary: By direction of the European international com- mittee on American certificates, I have the honor to inclose a copy of a letter I have addressed His Excellency the President, which I tMnk explains itself, and I have only to add that my committee, representing the European grain trade, desire me to say that they gladly welcome and warmly support such a measure as that now before Congress, by which the grading and certificating of grain, now in the hands of a number of various authorities, partly public and partly private, or at anjr rate in some cases open to the interfer- ence of private interests, will be transferred to a Government de- partment where we consider we may rely not only on its thorough impartiality, but on such complete uniformity of administration at all ports that European importers wUl get in future a thoroughly trustworthy certificate. In this belief my committee hope that you will succeed in getting your proposals accepted and that the results will prove generally acceptable to all honest dealers in grain. I have the honor to be, sir, your obedient servant, Robert A. Patterson, Chairman of the European Interruitional Gomvmttee on American Grain G ertificaies. Mr. Wilson, Secretary of Depairtment of Agriculture, Washington, U. S. A. European international committee re American certificates, January ^ 24, 1907. It was resolved : . „ , "H) That this European international committee calls upon the boards of trade and commercial exchanges of the United States of America and Canada issuing certificates, to draw up uniform rules te the grading of grain for export at all their various pori:s and gram Snters Xther, that the said certificating bodies are requested to send to this committee for agreement such rules properly authen- 34503—14 ^15 :226 FEDEBAiL GEAIW INSPECTION. Tticated. When mutually agreed upon those rules are not to be altered -unless by mutual consent. "(2) Tfeat should any certificating authority refuse or neglect to issue and act upon such rules for grading, this committee shall report same to the European associations with a view to exclusion of cer- tificates of said authority from the associations' contracts. '*(3) That the certificates of any railroad, elevator, or private trading company or person shall not be recognized. ■"(4) That this committee calls upon the above referred to certifi. ■eating authorities to ^end at the beginning of each season, samples representing the recognized grades of grain, to certain corn trade associations in Europe, such associations to be designated by the international committee. "(5) Th3,t if any buyer questions the correctness of the certifi- cate received he shall within ten days after final discharge of the shipment, upon payment of a fee of not less than £25, or more than £100 (the amount to be at th.e discretion of the appeal committee), have the right of appeal to a committee of five members elected by the executive of such of the associations in Europe as may be agreed upon with the said authorities issuing certificates. Should the appeal committee decide that the grain has been improperly certificated, it shall fix the allowance to be paid by seller to bjiyer. Fees and expenses to be paid by loser." From Mr. A. Coan, president of the Kotterdam Corn Trade Asso- ciation, in a letter of February 20, 1908 : " During many years the American grain-inspection certificates have been very unsatisfactory, and immense losses were caused to the bujrers on this side by the careless inspection of American grain shipped for export. Many important firms in the importipg centers on this side have absolutely given up importing American corn, taught by the experience of several years. A Tfettgr inspection, how- ever, and certificates w'hich give sufficient guaranty that the grade has been given in accordance with the grain's quality and condition will induce these firms tp take up the import of American corn again. We don't o1>ject to the export of inferior p"ain, but to t^e fact that the grades are not given according to the condition of the grain. Some buyers may want the inferior grain, but those who deal in the better qualities 'want to be sure when they pay a better price for the higher grade that the certificate gives them the guaranty to get this grade." FROM CONSULAR REPORTS. Consul-General Eobert P. Skinner, in report to Department of Commerce and Labor, December 20, 1906, states the dissatisfaction of forei^ countries with American grades, quoting London Corn Trade Association and conference held at Berlin, the general tenor of which is that foreign importers are vexed with prevailing condi- tions in the United States. Mr. Skinner says: Grmn-impection Tmthois. — It is highly desirable that certain facts in, regard to American grain selling methods be given immediate and wide circulation, and that something be done, either by action of Congress or by the concerted action of American commercial bodies, to reform or rather standardize the system under which the great cereal exporting business has been created. •" ' FEDEEAL GKAIN INSPECTION. 227 There is little popular knowledge in the United States in regard to the fact that wheat, corn, grease, and similar products of American origin are not now sold abroad by sample, but by nominal grade. The European buyer knows nothing of the merchandise whatever before it reaches his possession. He imports and resells various classes of merchandize the quality or grade of which is certified to him, not by the merchant who has sold him the article, but by the official inspector of a board of trade or other equivalent body at the port of shipment. He pays for the goods before he receives them^ and when the exporter in the United States delivers to him a certifi- cate of inspection, declaring the goods to be of a given grade, he has no alternative but to honor the drafts. The bargain is absolutely final upon the production to him of this certificate of inspection. Although no two ports in the United States may absolutely agree as to the description to be applied to a given grade of wheai;, althouglj previous shipments may have been of obviously different quality^ if the certificate delivered conforms to the grade ordered, the buyer must accept delivery. These are "American conditions." The fact that for many years we have exported nearly all our surplus agricul- tural products under these conditions, speaks well for American business methods, and the fact that these methods are generally acceptable is of advantage to the people of the United States. Of late years the murmurs against this system have been increasing in Europe, and whereas a short time ago they took the form of isolated private complaints, that goods did not always conform to the certified ^ade, they now take the form of organized protests. I havebefore me not merely private correspondence running through a number of years, but thie recent proceedings of the London Com Trade Asso- ciation, and the proceedings of a delegate conference held on Decern.-, ber 12 at the Berlin Bourse, the general tenor of which is that foreign importers are vexed vnth. prevailing conditions in the United States, and are determined to force an improvement. At these two con-- ferences a great many harsh things were said in regard to American eertifioates, and specific instances of irregularities were mentioned which I need not now repeat. The vital point which it will be well to separate so much context is this: Mr. Friedberg (Hamburg) : " It is perfectly clear that if an Amer- ican inspector certifies we have no right to doubt, or if we are asked, ' Why do you go on buying ? ' I may assure this meeting that a good nrnny of us are not going on iwying. We have none of this trouble in South America. For the general trade I think that there are re- spectable people enough in America and I am wondering why they do not stop the glaring abuses that are complained of." It was the fact that not many years ago the vast bulk of our grain exportations went forward from New York and that every year standard samples of cereals were sent out to European buyers, bear- ing the seal of the New York commercial bodies, which issued cer- tificates of inspection. Under such circumstances, when European buyers received a certificate from New York stating that a certain cargo afloat was of X quality, they could refer to the sample of this X grain, and there was at least a moral guaranty that sample and cargo would be alike. The practice of sending out standard samples is no longer followed, while grain is being shipped under certificates of inspection from Duluth, New York, Baltimore, New Orleans, 228 FEDERAL GEAIN INSPECTION. Galveston, and probably elsewhere. In each port or place a com- mercial organization assumes the right to issue certificates of grade and yet no two ports or places have agreed upon the text of the terms which they used to describe the standard grades, let alone upon the grain itself. Nor is this all. I quote from the printed rules of a great board of trade : "The committee on grain shall have full power and authority to establish grades of grains and to (Ater and amend the same as may be deemed necessary or expedient." This instability is naturally one of the conditions of American business tiiat is least acceptable to foreign importers ; and what with rivalry between ports for export business, it has created not only bitter feeling abroad, but defiiiite differences in the prices at which grain of the same nominal grade is offered for sale at the different ports for shipment. There are " easy ports " and " good ports," and sometimes the "easy ports" are penalized, as thus explained in a recent letter from an importer to an officer of the American com- mercial organization: "As you know, at present exporters have great difficulty selling on certificates, but where quality is reasonably assured they are willing to pay a premium over lower inspections. Newport News and Nor- folk were excluded on the London and Lfiverpool contracts of last year's No. 2 com shipments, while, as you know, your inspection maintained a premium all last season over the Atlantic." No wheat importers desire to pay a premium here, or to exact a penalty there, based upon their appreciation of inspection methods. Wheat will fix its own price readily enough, and what the importer wishes to know, and has a right to know with as much certainty as attaches to any human transaction, is, that No. 1 white winter wheat, for example, is the same kind of grain, whether it be inspected at Duluth or New Orleans. The importer insists that if the Ameri- can Government, commercial bodies, and individual exporters have not agreed upon the qualifications of various grains necessary that they may receive specific gradings. It is the result of their own negligence, very possibly encouraged in certain quarters by those who profit by this unsatisfactory state of affairs. The remedy sought is so easy of application, and the demand for its application is so entirely reasonable, that to the importer pro-i tracted resistance is incomprehensible. The proper remedy may be applied eithisr by our Government or by the cooperation of our trade bodies. The starting point of the reform would be, naturally, the establishment of standard descriptions by law. This done, if the Government were charged with the issuance of inspection cer- tificates, the service would be removed from local influences and our so-called official certificates would be rehabilitated. If this very rationed proposition be objected to, the surest means of effectively combating it would be the holding of a conference of American grain inspection bodies for the adoption of grain standards and for the adoption of ways and means ordra,wing standard samples, to be deposited in American consulates at great European ports, or to be issued upon demand to importers ; and to provide for a board of inspectors, tbe members thereof to be transferred at intervals and liberated from every form of local pressure. FEDERAL GEAIN INSPEOIMON. 229 AMERICAN QKAIN CERTIFICATES. Consul-General Skinner forwards from Marseille extracts from a report on grain inspection made by M. Lefebvre, a French delegate to the International Eeunion organized by the Corn Trade Association oi London. The consul writes. My attention has been called to a report presented to the Syndical Chamber of Grain and Flour at Paris by George Lefebvre, delegate to the International Eeunion organized by the London Com Trade Asso- ciation. This report has been sent to me by a prominent Marseille miller, and I take it that it stands for the sentiments of the trade in this city, which has not acted upon the subject as yet in an official manner, although at this port the great bulk of American hard wheat exportations are received. The report of M. Lefebvre is quite long, and I translate merely the salient passages, as follows : " I have the honor to render an account of my mission as your representative at the conference of November 8, organized by the London Corn Trade Association, for the purpose of considering final certificates covering grain exportations from America. The confer- ence was attended by not less than 45 members, whose opinions were, unanimous as to the necessity of reforming the actual system. Somei wished to anieliorate it and others to abolish it. Complaints were made of a detailed nature, which I have no need here to repeat, except as to two cases, which deserve to be set forth. " Complaint was made in regard to the delivery of hard winter wheat. No. 2, in which not only the old and the new crop were mixed, but in which there was to be found also a considerable quantity of seriously damaged wheat. From the American inspectors who de- livered the certificates the only answer received was this : ' We con- sider our principal duty is to secure the consumption of our crop.' Can caprice proceed to greater lengths ? " Com certified as No. 2, or ' sail grade ' (the quality capable of supporting a voyage in sailing ships), and which should have been able to endure a long voyage, arrived in a completely bad condition after a rather short journey. The complaint made was met by the reply that, ' It is the fault of the buyers who purchase during the months when corn germinates.' It seems, then, that it is always the buyer who is wrong, and that neither the seller nor the inspector can assume any responsibility. •'AMEEICAN INSPECTION SEKVICE CONDEMNED. " Mr. Montgomery, of Liverpool, speaking first, declared that the inspection service was badly established in the United States ; that the European buyer, renouncing any right of appeal as to quality when an inspector has delivered a certificate, thus constitutes the inspector and arbiter between the seller in America and the receiver in Europe; and vet this inspector may perhaps be incompetent or perhaps lack- inff in integrity The abuses concerning which complaints arise frmn all parts of Europe prove that the buyers must come to an under- i C:^;r,nr IT, order to determine the methods by which this business should be handled between America and the Old World. This con- ference is probably the first effort along these lines between the in- terested countries. 230 FEDEBAL GRAIN INSPECTION. "First of all, what is it that is called an 'official' certificate of in- spection as to quality ? This is a very broad definition. There is not in the trade any definition of the word ' official,' and in consequence every certificate of an inspector who holds an official position must- be accepted by the buyer. To demonstrate to what point this may lead us it has been pretended seriously by & seller in an appeal w;hich was made recently at Liverpool that a certificate of natural weight, written upon a half sheet of letter paper by a person who constituted fiimself a public officer (surveillant) at Montreal, was an official certificate within the terms of the contracts" What is the remedy? . The object of our desires is to obtain the grain of which we have need on the lowest possible terms, with reasonable guarantees as to quality and condition. In my opinion we can, if we unite, ourselves,, ffansform the conditions now prevailing; in place of saying in our contracts " certificate of inspection final as to quality," we might say : '* Certificate of inspection issued by such institutions as are approved by the Grain Association of — ■ ■- at the date of this contract, final as to quality." In this manner the commercial associations of feurope could definitely give or retire their approval to or from the inspecting, institutions of America. Before accepting any American ihspecting institution we might assure ourselves of its proper organization, requiring : (1) That the inspector named be a man capable. and worthy of exercising the functions imposed upon him. (2) That the inspector be remunerated for his services without regard to the fact that he has or has not passed upon grain which may be submitted to him. (3) That the rules which the inspector must follow be not changed without communication of the fact to bur associations. (4) That a committee named by the inspection institutions be charged to examine complaints made in a proper manner as to the delivery of certificates of quality, and that a compensation be paid from the inspection funds if the committee recognize that the inspect tor has been at fault. Our approbation of an American institution's inspection should be good for one year ; we should strike out of the list such as give rise to complaints, and in this manner create an emulation between them and guarantee ourselves against bad deliveries by the fear of radia- tion. We have seen recently the effect produced by radiation of the Norfolk and Newport News inspections. What would happen if we refused the inspections at Galveston or New York ? It is quite possi- ble for us, if we agree upon reasonable and moderate conditiohs, to force the American and commercial bodies to give to us sufficient guar- anties to enable us to obtain the quality of grain that we buy ; this is all that we ask. From Consul Thomas E. Wallace, in a report from Crefeld, Ger': many : "The grain dealers in northern and western Europe have been holding meetings, the principal purpose of which seems to be to take united acticin with regard to a chahge in the rules and methods of transacting business with the United States in their line tod to coi*^ rect abuses now existing in the same. FEDEEAL GKAIN INSPECTION. 231 1.<>1'J1^!.F'^''^ ^l""^^ ^^°"^ *^® United States with this district has. ITc 1 ^i^^^^^g ^or some time, and if such dissatisfaction becomes general throughout Europe the losses to the people of America in this. important branch of their export trade will be enormous. To gain some loea o± the causes of the complaints regarding the grain ex- ported from the United States I have made personal inquiry among the millers and dealers m these products, and am told that the con^ ditions complained of here are the same all over Europe." A resolution of international committee in regard to Americaa certificates, January 24, 1907, resolved to call upon boards of trade and commercial exchanges of United States and Canada to draw up, uniform rules for the grading of grain for export; that should certifi- cating authority refuse or neglect to issue and act upon such rules this committee shall report to the European associations with a view to exclusion of certificates of said authority. The first Secretary of Agriculture, Hon. Jerry Ilust, recognized the necessity of Federal inspection. He says: " Unquestionably some system of national inspection and grading under the control of the Secretary of Agriculture should be estab- lished in the interest of the grain growers, and would be, without doubt, in a very short time accepted and recognized in all the great market centers of the United States." FKOM NEWSPAPER ARTICLES. Grain Dealers' Journal of December 25, 1906, gives account of meeting of the Grain Dealers' National Association with a view to. establishing uniform grades of grain. In Ajoierican Cooperative Journal of March, 1908, is an account of meeting of Farmers' Grain Dealers' Association of Illinois. In that meeting it was resolved that " we favor the inauguration of a system: of Federal grain inspection and grading of grain along the lines pro- vided for in the McCumber bill, and we call upon the Senators and Eepresentatives from the State of Illinois to bend every effort toward securing the enactment of such legislation by Congress at an early date." In an address by C. G. Messerole, secretary Farmers' Grain Dealers Association of Iowa, quoted in American Cooperative Journal of March, 1908, he says that the only remedy for these multitudinous evils (referring to evils and injustices of present systems of inspec- tion) , as I have before suggested, is Federal inspection. I desire to further say what I have already said in a public address on grain grading: " I take at random a single year's report from the chief inspector of the grain and warehouse commission of the State of Minnesota. This report shows the receipts and shipments for the year ending August 31, 1901 : Receipts. SWpments.. 341,567 10,070,414 7,341,694 1,335,830 256,063 1,336,531 1,000,43a 16,900,917' 3,978,311 444,041 Rejected Nogfade. 134,471 344/833, 232 FEDEEAL GEAIN INSPECTION. "A glance at this table will show that there were three times as many bushels of No. 1 hard shipped out as were received into the elevators; that there were nearly twice as many bushels of No. 1 northern shipped out as were received in, while there were twice as many bushels of No. 2 northern received in as were shipped out. In other words, the No. 2 northern was converted into higher grades. Following further, it will be seen that there were three times as many bushels of No. 3 received as were shipped out, and that there were four times as many bushels of no grade received in as there were shipped out. That is, Nosi 3 and 4 grades to the extent of three- fourths in quantity took on higher grades. " Some one gained those grades ; some one lost. It is evident that the farmer lost if the ^ades which were shipped out of the elevators were correct. If the grades at which the grain was shipped out were false, then the consumer and the foreign purchaser lost. But the foreign purchaser in the end will pay no more for that wheat, though it is certified at a high grade, than it is actually worth for milling, and in the end the farmer is the one who loses. In other words, the pro- ducer loses whether the false grade is directly against him or against the consumer or foreign purchaser. " Is the producer the only one who is complaining against the present system ? Not by any means. INDEPENDENT BTTYEES. " The independent buyers at the country elevators dare not trust their own judgments on matters of grades. They are forced to resolve every doubt as to the grades against the producer in order to protect themselves against the erratic gradings at the terminals. In addi- tion to this, they must in many cases compete with the line elevators. They must sell their grain at the terminals to the same company whose agent may be purchasing at an adjoining elevator and whose interest it would be to eliminate them from the field of competition. They desire for the most part to give honest, straight grades to the farmer, and they want to be sure that they will receive the same kind of grades at the terminals. THE MILLER. " When we approach the miller, he makes the same complaint — no confidence in grades. He must in many instances purchase directly from the terminal elevators and must accept the mixture that has been concocted in those elevators, and he must accept the grades which have been placed upon the grain by the inspectors. He would prefer his grain direct from the farmer, at such grades as it is honestly entitled to receive, and then if mixing is necessary; he can do his own mixing according to the grade of flour he wishes to produce. THE FOREIGN PURCHASER. " But more important than all complaints is that made by the foreign purchaser. The price of our grain is fixed by the foreign demand. If that demand is strong, if the trade is freed from con- tention and disappointment, if our grades can be relied upon, no one will deny that it will add to the value of our products abroad and to the consequent legitimate profit of all persons interested in grain. Our consular reports, however, disclose a dissatisfaction and FEDERAL GEAIK INSPECTION. 233 condemnation on the part of foreign purchasers that are appalling. The mixture of grades, ineiRcient and fraudulent inspection, have seriously- depressed our trade abroad and have entirely destroyed it in some sections. A CHANGE DEMANDED. " If there were nothing in these complaints ; if they were imagina- tive only, still good business judgment would demand such change in the system as would eliminate them. But they are justified. The distrust may be greater than the facts will warrant in some few in- stances. But there are enough injustices and wrongs and frauds perpetrated to condemn it beyond immediate relief. " Most of the grain raised in North Dakota is marketed in Minne- apolis or Duluth. The Minnesota inspection department declares that it is looking carefully after the interests of the North Dakota wheat grower and local purchaser. It intimates that we ought to be thankful that we are in such kind and generous hands. Every man, however, who has given the subject the slightest consideration knows that their system is a system of unfairness and injustice. It has been condemned by the legislative investigation of the State which created it. Investigation committees from other States have again and again discredited it and condemned it; in every annual report that it has ever made, it has publicly pleaded guilty to discrimination against the grain producer. " So many wrongs had crept into the system that nine years ago the legislature of tlie State was compelled to order an investigation. NORTH DAKOTA INVESTIGATIONS. " Our State has attempted again and again to find some avenue of escape from the injustices perpetrated upon its citizens by the present system of handling grain at the terminals. " In January of 1889, a committee was appointed by the legislature to investigate the situation with a view to securing cooperation and suitable legislation in the State of Minnesota. This committee made a full report. It showed the wrongs that were perpetrated, but its plea to the legislature of the State of Minnesota was unavailing, and this very fact emphasizes the demand that there should be some forum in which the people of North Dakota, as well as the people of Minnesota, can be heard. ^ -, ■ j- j- " In 1903 our State, through its legislature, reported m tavor o± Federal inspection and grading as a remedy. This was repeated m 1905 and again in 1907. BANKERS' REPORT. " The subject was again taken up by the Bankers' Association of the State in November, 1906. That business men's organization, representing the banks wjiich furnish much of the money to move our crops, sent a subcommittee to the principal terminals where our grain is sold to thoroughly investigate the work of the &^eat eleva- tor -vstems That committee found that we were beaten m the Ztieroi dockage and in the matter of grades and that the inspec- tion rules and customs which had been forced upon us by a powerful comWnation of elevator and railway interests were detrimental to th? producer. They called attention to the report of the grain- 234 PEDEEAL GEAIN INSPECTION. inspection department concerning the receipts and shipments of a sin- gle elevator for only three months. This report speaks volumes. If one elevator is able to beat the producers out of $83,000. in three months, what losses necessarily result to all the producers from the same character of treatment from all of the great terminals in the country ? Receipts. Shipmentsi No. 1 northern. No. 2 northern- No. 3 northern. No. 4 No grade. . .• Bejected $99,711.40 141,465.10 272,047.20 201,267.20 118,021.10 58,742.30 Total On haJid (estimated). 890,245.10 $196,288.30 467,764.00 213,459.30 None. No4e. None. 877,512.00 12,733.10 890,245.10 " The profit in mixing of this elevator from three months, as shown, by their report, was $83,?20.69. There should be added to the amount realized from the screenings at $8 per ton." The question has been again and again asked me: Will Federal inspection be more honest; will it be more reliable? I answers tJnquestionably. Why? Because if we remove the incentive for injustice it will in most cases disappear. Under the present systeiii of appointment, whether under the State or under the board of trade system, political influence does cut an important figure. The great grain trades are interested particularly in who is the inspector, or chief inspector. Through their infiuence he is invariably appointed. He then appoints his own deputies, so that the force which does the inspection owe their positions to the men who purchase the grain- You, Senators, have heard the methods of manipulation that have gone on and how they are winked at by the inspection department. Now, would that be the case if we had Federal inspection? In the first place there would be no " influence " to be talsen into considera- tion. The inspector would be required by the Government to have two qualifications. First, honesty, and second, competency. He would have no one whom he would naturally feel like favoring, such as the man who puts him in his position. Most cases of what we call dishonesty in inspection are not cases in which these men are paid. I do not believe that there is much use of money. If I understand human nature rightly a mart might stretch a point to oblige a friend where he would not stretch a hair's breadth for a thousand or ten thousand dollars. It is that natural sense of gratitude, perhaps, which in all questions of doubt tends to bend a man toward the one who would be benefited by having the doubt resolved in his favor. There is the danger and the only danger. I do not think there is mtich danger in the matter of inspectors being purchased. There is another reason why we would have more competency and greater justice in the inspection if we had Federal inspectors. You have been given here the testimony concerning the mixing of screen- ings and the plugging of cars which was winked at by the inspection department. FEDEKAL GRAIN INSPECTION. 235 further some oA in.e«stefb,^te'L*l„?dT„t°be'X'SESEfe S that person for his position. ^cDpunhiuie to Again my obseryation is that the average man is ten times more frightened concerning the disobeying of Federal law than of State law. Men are afraid of the Federal courts. They have a fear of the power of the United States whenever the Government gets after a criminal. I believe that that will be a rather wholesome influence in the matter of securing a just inspection. Here is another reason which I will give why Federal inspection would be more competent and certain. First, the inspectors would be selected after an examination. There would be necessarily no political "pull" about that. They would be selected under competitive examination. After obtaining a competent man, he would be furnished with all the laboratory infor^ raation being obtained in every section of the country, in the labora-' tories of the Government at or near the point where he is stationed. That would assist him and will tend to make him an expert in time. Then after he becomes an expert he certainly would be much less likely to make mistakes in his inspection, assuming that much of the injustice is due to errors of judgment and not intentional errors. Again, in every commercial center they have at present an " elastic " system. It is rigid inspection at one season of the year and loose inspection at another season. It is rigid inspection when the grain is going into the elevators, loose inspection when the grain is going out of those elevators. It has been shown by testimony taken in Minne- sota by the legislature of that State that it has long been a cUSitom, and I think it is still a custom, to grade the grain very rigidly in the beginning of the season, resolve every question of doubt against the producer, and when, later in the season, the farmer has disposed of two-thirds or all of his grain, then the loose system is again udopted ; the grades become higher and better. Senator Monet. By what influence or how is that done? Senator McCttmber. By the influence of the boards of trade over the inspectors, who owe their allegiance to the boards of trade and who owe their positions to them. Other witnesses have given testi- mony, I think, on that question when you. Senator Money, were not here I -wish now to say a word about ineiUciency. A great many of the errors are due to inefficiency alone. I remember a short time ago of sending two carloads of grain from a farm I then owned m North Dakota No. 1 northern grain, raised in one of the good years. Not a drop of rain had fallen on that grain from the time it was cut until it was thrashed. It was put into two separate cars. It was froffl new land, broken for the first crop, and was free from weeds. It was very fine grain. One car was graded No. 1 northern, the other No. 3 northern, with at least three times as much dockage. There was absolutely no difference in these. , . ■■ » In another instance shipments graded up to the real grade. A farmer told me last fall of shipping 3 carloads of grain. Two car^ iS were shipped when the grain was in splendid condition and dry. Kolfor one car No. 2 northern; for the other car No, 3 northerm Thel the wet weather came on, and the balance of his grain was 236 FEDEEAL GRAIN INSPECTION. injured and sprouted ; got into bad condition. He was a shipper of grain himself, as well, and not having any place in which to store it, he thought he would send it on, not expecting to get for this grain any more than a low character of grade. He was surprised when he got his return to see that he received a grading of No. 2 northern for it. He absolutely received more money for that poor car of almost good-for-nothing grain than for some of his best grades. But these errors are almost always on the other side. Now, let us take Chicago. I was informed by a member of the Chi- cago Board of Trade that last fall during one of the busy periods one inspector inspected 240 cars in a part of a day. That required him to travel § miles to open those cars, walking up one side and down the other, and his earnings were $73, which went into the fund of the board of trade to pay the expense of the inspection. Every Senator must see that that man could not have made more than the slightest kind of a guess as to what the quality of that grain would be. In the northern part of the United States an inspector might go out when the weather is 20° below zero, and it would be almost impossible for him to tell what the quality of the grain is. But under a proper system enough time would be given to make an examination and a fair estimate could be made. So that you can see that Government inspection would be, first, more scientific; secoridj it would be uniform, which is very important; third, it would be unbiased, as a rule ; and, fourth, it would be carefully done. It has again been suggested: Where is the line of demarcation between grain products and other products? Why not have Govern- ment inspection of potatoes and fruits and cloth and everything else? Well, there is a vast difference. Senator Perkins. Take the raw materials, wool and cotton. Senator McCumber. Well, I believe it would properly apply to cotton. But other things are not graded by numbers, as No. 1, No. 2, or No. 3. We do not hear of No. 1 or No. 2 potatoes. All our grain, amounting in value to millions of dollars to the United States, is sold arbitrarily by the grade that is fixed upon it. We can not get any system by which the buyer and seller are brought together except that the buyer must buy by grade, and the only way he can secure an absolutely impartial and honest grading is that it shall not be made by either the purchaser or the seller. Again, we know, everyone knows, and this committee must believe, if they believe the undisputed testimony of the witnesses who have been before them, that in most of these grain centers this matter is governed by a clique of men. As to the handling of grain, they make such rules as will bring them the greatest amount of profit. The seller and the independent purchaser of grain, and the producer, are necessarily at their mercy. It also allows the purchaser to sit in judgment whenever there is a difference between him and the pro- ducer ; and that is unjust ih itself. There is another reason. Senators, why we should have Federal inspection for so important a product as all the grain of the United States, and that is this : When our forefathers established this Gov- ernment they intended to leave, and did leave, to the States all of the police power of the States — these powers that govern the rela- tion between men — ^but it was evident to them that every citizen in any State would have interests which would be outside of his State, FEDERAL GRAIN INSPECTION. 237 that he would have to ship his products outside of his State, and so it was wisely provided that the Federal Government should have con- trol over interstate commerce, so that it could protect the producer in every State against any action of hostile interests in another State to which he would be compelled to send the products of his labor. I as a shipper or producer in the State of North Dakota may be dissatisfied with the system in Chicago or St. Louis. I may say that that system is being operated in such a manner that it is detrimental to my interests. Now, there ought to be some forum in which I can be heard. I have no voice in what is being done in the State of Minnesota. I am interested in how my grain is handled in Balti- more. Baltimore has no interest whatever in me, the producer. There is very little grain raised in the State of Maryland. That State has no interest whatever in the State of North Dakota or in the State of Kansas. If the people of Maryland or of Baltimore can make regulations that will seriously affect the prices of our products in the European countries, there ought to be a forum in which I as a producer could be heard, so that if there is an injustice I could have some represent- ative to assist me in righting the wrong; and the only place to right that wrong is before the Federal Congress. I am a believer in States rights. I believe the State should exer- cise its full and complete jurisdiction within its limits, but that limit is right where the jurisdiction of the United States begins, and I be- lieve that the General Government should exercise its full limit of authority to protect the citizens of the several States in the shipping of produce upon which those citizens and their lives and prosperity depend. So I think, gentlemen, that we are entitled to come to the Govern- ment of the United States for relief when we show we have no other forum to which we can go for that relief. I think that I have pretty well covered the subject of uniformity, but I want to make that clear to any Senator who does not understand what that means in this bill. "We do not seek to have one standard of grain in the United States. There will be necessary as many stand- ards as there are distinct species of grain. But we can provide that grain growing in a certain section of the country and of a certain species will be graded the same, whether it is graded in Minnesota or in Illinois or in Louisiana ; that if I raise on a farm three or four car- loads of grain and I send that grain— say it is all Scotch fife or it is all blue stem— to three distinct centers of the grain trade it will have the same rating in one State as in the other; that if I send No. 2 northern it will be No. 2 northern in one place as well as in the other ^ A^Senator might ask me right here: « How could you secure that, inasmuch as the judgment of the different inspectors might differ as to whether it was No. 2 or No. 1? " That is not the trouble. It is not the honest difference of inspection that is creating any trouble. It is, first, the dishonest inspection; and, secondly, inspecting under different systems which would necessarily produce two different ffrades. For instance, if in Minnesota the requirement of the law las that the wheat should weigh so much to the bushel, that it Should be of a certain character, and should be clean and of certain Slor and that that should be No. 2, ajid if there should be a differ- ?38 PBDEBAL GRAIN INSPECTION. ent rule in Chicago as to what it should weigh and what should be its color in order to be No. 2 — you will see that I would get different prices for the same kind of wheat. Senator Perkins. It seems to me that we now understand this question pretty well. You have explained it very thoroughly. When the record is written up, a copy can be given to each Senator, and then Senator McCumber, if he finds it necessasfy, can supplement it. Senator McCtjmbee. There is only one other point which I wish to present. Mr. Foering gave his testimony here and stated that while he believed that uniform inspection could for all practical purposes be obtained, he was a little afraid to say that he was in favor of this bill. When questioned, however, his objection was that it had too much of one-man power in it ; that the Secretary of Agriculture shoiuld not have all power. I asked him who should have it, and he said several men. I say, in answer to that, that the Secretary of Agri- culture is not a specialist in grain grading and he would necessarily have to call to his aid to assist him in fixing grades the best experts which he could get in the United States. That he would undoubtedly do; so that there would be no danger whatever in that respect. Another question was as to whether the State inspection would be continued. My belief is that if we have a bill of this kind it will, by operation, discontinue the State inspection. First, because from 75 to 90 per cent of all the grain at these terminals is interstate grain, and it would operate upon them; and if the Government would establish a good system the State would ordinarily be disposed to discontinue the other. The second consideration is that every pur- chaser who wanted to secure an honest grade would invariably demand the United States grade. He would have more confidence in that. And the demanding of that grade would force all the others to adopt the United States standard, because the foreign purchaser would demand it. One word more. We are spep,ding $3,000^00 a year in inspecting the meat of this country at the great packing houses. That meat ^]jdustry is comparatively very small when placed side by side with the great grain industry of the United States. I believe that it bene- fits the packer a great deal more than it benefits the average stock producer. It gives him the assurance of a market in the old country Oy reason of the Government inspection and the confidence that federal inspection invariably carries with it. If we can expend that sum for the meat industry, we certainly can do this much for all the' Northwestern and other parts of the country iK^hich are demanding it; and if there are any interests that do not want it, there is no law on the face of the earth that will compel them to adopt it. But the farmer and independent grain dealer do want it. Most of the assumed objections to Federal inspection were set out in the form of questions in a circular issued by Mr. G. A. Wells, of Iowa, and reported in the January number of the National Hay and Grain Reporter. Mr. Wells, being intensely opposed to -Federal inspection, proposes a number of questions for answer. Everyone of these questions can be fully met, and I will insert them here, and my answers to them, which I had occasion to give at a previous time. He " Senator McCumber, of North Dakota, contends that terminal elevators ship out more grain of the higher grades than they receiye^ lind that the farmers are robbed accordingly, etc. FEBEEAL GEAIN INSPECTION. 239 ^_« I desire to offer the following suggestions for your consideration, I wUl take up these questions in their order. But first allow me to read* 'l^®*^^"^ concerning his first statement, which I have just h ^! J*' ^""T ^^^ terminal elevators ship out more grain of a high grade than they receive? His answer must be, yes ; many times ovir. 2. Ihen, it that is true, does not some one lose just what the ter- minal elevators make by this ? 3. If it is true, and the farmers and independent shippers or for- eign purchasers, or anyone who is compelled to purchase by grade are losers by this system, are they without any remedy ? 4. If they have a remedy, what is it? Certainly the power that profits out of their losses will never be the power that will institute a reform. Now, I will answer his question in detail. "(1) Would a Federal grain inspector be more competent in exer- cising his personal judgment than the board of trade or State in- spector, grain inspection being largely a matter of personal judgment, no positive scientific basis having as yet been established?" Answer. Yes; he would, for two reasons. First, he would be abso- lutdy free from that subtle influence which bends the mind naturally, and probably always, in cases of doubt toward the interest which has favored him with an appointment; second, because there is a scientific basis sufficient for the requirements already worked out by the Department, and he would be compelled to learn and to apply the information secured by the Department through its laboratories, which are being established over the country for the very purpose of determining character and grades. "(2) Considering the fact that grain does change in condition, as by the absorption or evaporation of moisture, etc., would not the same difficulty involved in such changing of conditions exist under Federal inspection?" Answer. Yes; there would always be some difficulty. Federal inspection would not prevent grain from absorbing moisture. But where Federal inspectors would find wet or heated grain, such grain would be certified for what it would be at the time and thereby pre- vent the frauds that are perpetrated under the present system by falsely certifying its condition. It may be further answered that if grain is actually of the grade certified— that is, if grain certified as Ko. 2 is actually of that grade— it will not contain sufficient moisture to deteriorate in transit. . , , , , ^ t.t o j? ■ "(3) Suppose a country grain dealer bought No. 3 corn trom a farmer and when it arrived at market is inspected No. 4 corn, both inspections being Federal, would the Government 'make good' or would it be considered as merely performing a governmental func- tion,' with no liability for damages?" W 1 1 1 4! A^iswer The supposition of this question evidences a total lack of information as to the intendment or effect of Federal inspection. The™would be no Federal inspection at the country markets Every- one knows thS the grades which are aUowed at the termmal markets are fhe^ades that govern the country buyer. If he knows he can Jet honlJ i-ades, then he will be able to give honest grades, able to fse S^wf jud^ent. Under the present system he never knows where he is it, but he does know that, on the whole, the chances 240 PEDEEAL GBAIN INSPECTION, are that his grain will be undergraded at the terminals and that con- sequently he must resolve every possible doubt against the producer. So, too, most purchases are made f. o. b., and the purchaser does not know what he will get under the present system until the grain arrives. The Government does not make good if you lose by having a counterfeit bill imposed upon you. But the fact that the Government prints the money to be used, carefully guarding it against counter- feiting, and places its seal upon it, and is constantly on the alert to detect and punish counterfeiters protects the whole people against being defrauded by it. , "(4) Could the foreign buyer hold 'Uncle Sam' responsible for delivery of grain of the quality represented by the Government seal of inspection ? " Answer. No; neither can he hold the seller unless he can prove actual fraud. He buys on our inspection certificates, and with the inspector's certificate against him here, the foreign purchaser would find great difficulty in establishing the fact that the certificate was fraudulent. So he never chances an action. " Uncle Sam is not responsible if a barrel of spoiled meat is shipped, but the fact that he has placed his seal upon our exported meats has given a confidence to the foreign purchaser and has meant millions of dollars annually to the meat industry of the United States. "(5) Federal inspection would have jurisdiction only w^th inter- state grain, while the present systems would no doubt still be main- tained, thus making a dual inspection, with double cost and endless complications." Answer. The present system would not be maintained for many reasons. Chief among them are, first, that 90 per cent of the grain handled at the terminals is interstate grain — either grain shipped in from another State or grain intended for shipment out of the State in which the terminal in located, and no one would attempt to maintain a separate system for the other 10 per cent; second, with the confi- dence that always follows Government certification, you could not get a seller to consent that his grain be graded by any other systeni, and you could not get a purchaser who wanted what he contracted for to purchase by any other system. "(6) The McCumber bill gives the Secretary of Agriculture prac- tically unlimited authority in the establishment of the proposed Fed- eral inspection of grain. Is this advisable ? " _ Answer. What authority would you take, from him -which the bill gives ? The principal authority is, first, to take the present commer- cial grades of grain and inspect and grade honestly and fairly under them, modifying them as experience and trade interests demand ; sec- ond, to secure greater uniformity ; third, to see that both the producer and the purchaser deal with the same grade of grain. I know of no power given that is not proper. "(7) Do we want a system established that, if it should prove im- practicable, can not be removed, but that would cost the farmers of this country a vast amount of money ? " Answer. By what process of reasoning can you imagine that Gov- ernment inspection would be impracticable? Why can not the Gov- ernment do just what boards of trade are doing? Why can not it fix grades just as well ? Why can not it do much better? There is every rEDBBAL GEAIN INSPECTION. 241 honesjy of grades be harmful ? Would any of these be impracticablS And to the extent that the Government would be able to secure these results, would it not be beneficial ? How would the Federal system injure the farmer? It is somewhat ridiculous to me to see the people who have for years systematically robbed the farmer out of the proper grades of his grain assume now to be the guardians of his welfare. "(8) Is it not a fact that there is an element of competition in the present system of inspection that accrues to the benefit of the farmer that would be removed by the Federal inspection ? " Answer. No ; it is not a fact that there is an element of competition in the present system that accrues to the benefit of the farmer. Cer- tainly, if there were, Government inspection would not take it away. You grade his grain by board or warehouse commission, and you Duy grain by the grade you have put upon it, and all that he can get is the exchange price and no more, unless in a few instances some local miller examining his grain will pay a few cents more a bushel than the grade which has been placed upon it. "(9) If in a general sense the profits in the present system of handling grain as between the farmer and the consumer are not excessive, how is ' Uncle Sam ' going to give the foreign buyer more value- for his money and at the same time give the farmer more money for his grain ? " Answer. The first answer is that the profits of the terminal ele- vator crowd are excessive. That does not mean that the general profits of the grain trade are excessive. Every grade that the grain takes on in the terminal elevator over and above that which was given it when it went into that elevator is an illegitimate profit. You ask what Uncle Sam is going to give. My answer is that Uncle Sam is going to give the farmer a better price by giving him the ^rade to which his grain is entitled. He is going to give the foreign purchaser the grade of grain which his contract calls for. The profit of under- grading the farmer's grain does not go to the trade generally. It goes to the individual or the set of individuals who own the ele- vator where it is metamorphosed into the high grades. The profits secured by imposing a low grade on the foreign pur- chaser under a high-grade certificate do not go to the farmer ; they go into the pocket of the one who has perpetrated the fraud, and every fraud perpetrated upon a foreign purchaser which condemns our ffrain in his market, and thereby diminishes the demand for American Irain necessarily lowers the price of grain and the purchaser must m M?'charl2'S. Hamlin, corporation counsel of the Boston Chamber of Coimnerce, appeared in opposition to this bill and made various obiections. I will briefly reply to them. . He claSns that as the bill does not provide for msipectors m every StSe in the Union, its effect would be unjust discrimination between §Stes Th^ biU provides for inspections at all great temiinal points This takes in the^great bulk of the interstate gram. The fact that 34503—14 16 242 PEDEEAL GBAIN INSPECTION. we may not be able to prevent all frauds, etc., that are purely intra- state certainly could not mitigate against the legality of a bill in- tended to prevent abuses at the great centers. .He also raises the objection that it would be impossible to carry out the provisions of this bill because it requires grain to be inspected before it is shipped. There is no such provision whatever in the bill. It requires grain to be inspected at the terminal point when it comes in from a f oreigii State before it is unloaded and while it is interstate commerce. If it is unloaded and mixed, and is reloaded into cars for" reshipment to still another State or foreign country, it requires it to be inspected again in the car before it starts. He also holds that under the provisions of section 8 grain would have to be inspected not only at its initial point, but at various points through which it passes from one State to another. The bill provides exactly the opposite and declares that if once inspected it need not be reinspected unless its condition is changed by admixture with other grades. In this it differs from the present system where, although not unloaded from the car, it might receive a half dozen different inspection certificates from different cities and States. He also objects to the bill on the ground that it would prevent private inspection. There is nothing whatever in this bill to prevent anyone from inspecting any grain that he desires to sell or to buy. The only limitation is that the officers of the Government doing the inspection shall be in no wise interested in the handling of grain. He also objects on the ground that great losses might be incurred by reason of grain deteriorating in transit. If that were true, Gov- ernment inspection would not affect it one way or the other. Gener- ally when a purchaser buys a grade of grain he buys with the idea of resnipment, and he knows that if the grain measures up to the grade that he wants he can safely ship it. It is only when wet or inferior grain, in the case of corn, is falsely certified to be dry or of a high grade that the great losses are incurred by reason of deterioration. There is nothing in this bill that prevents reinspection at any point along the line where the owner or purchaser desires it reinspected. It simply^ provides that if once inspected it need not necessarily be reinspected at each of the terminals through which it passes. His contention that it would require a great number of inspectors, and inspection would have to be had at every little shipping point in the country, is scarcely worthy of much consideration when one reads the bill wherein it is definitely stated that the inspection shall be only at these great terminal centers. I shall take up this objection to the constitutionality of the law at some other time. Two amendments have been proposed here by Mr. Nelson, repre- senting the Farmers' Equity Society. These amendments are, in substance, first, that wherever there is sufficient interstate business at any point to pay the expense of a Government inspector and the interests there demand a United States grade at that point for their internal trade, they be allowed to have it, they guaranteeing that there will be enough business to keep one there. I have no doubt that that would considerably increase the number. The other amendment is as to weighing, and that is that the Federal inspector at the point at which he is located, upon the demand of the FEDERAL GRAIN INSPECTION. 243 owner of the grain which he may or may not inspect, may also weigh it, provided the person requesting the weighing will furnish the neces- sary facilities for weighing the grain. No one could object to it if the people themselves wish it and are willing to pay for it. I am heartily in favor of it. Now, let me put in one little table that has been prepared by the Secretary of Agriculture, which will answer the question of the Senator from California [Mr. Perkins] as to the number of inspectors that would be required. .The table is as follows : ESTJMATKS. Baltimore, JId ■ $30, 000 Boston, Mass 20, 000 Buffalo, ;>f. Y 20, 000 Cincinnati. Ohio 25, 000 Chicago, 111 100, 000 Cairo, 111 5, 000 Decatur, 111 5, 000 Detroit, Mich 15, 000 Duluth-Superior 50, 000 Fort Worth, Tex 10,000 Galveston, Tex 20, 000 Indianapolis, Ind 10, OOO Kankakee, 111 5, 000 Kansas City, Mo 40,000 Louisville, Ky 5, 000 Milwaukee, Wis . 25, 000 Memphis, Tenn 15, 000 Minneapolis, Minn 75, 000 Mobile, Ala 5, 000 New York, N. Y 50,000 New Orleans, La 25,000 Nashville, Tenn 10, 000 Norfolk and Newport News, Va 10,000 Omaha, Nebr 15, 000 Pittsburg. Pa 10, 000 Peoria, 111 20, 000 Portland, Me 5, 000 Philadelphia, Pa 25, 000 Port Arthur, Tex 5, 000 San Francisco, Cal 15,000 St. Louis, Mo., and East St. Louis, 111 25,000 Toledo, Ohio 15, 000 Washington and Oregon 25,000 Wichita, Kans 10, 000 745, 000 20 grain-testing laboratories 100,000 Scientific assistants 75, 000 Total 820,000 Number of men, 650. Senator Btjrkett. Is that all you are going to say? Senator McCumber. That is all just now, unless you wish to ask me some questions about this bill. I think I can answer everything. The number of places that are estimated as being important places for inspectors is 34. They are given in detail in the table, which, as I say has been prepared by the Secretary of Agriculture The number of men which he says he would probably require would be 650. The entire expense would be $820,000. That expense would be paid by charging a certain specified sum for each car or cargo of grain 244 FEDERAL GRAIN INSPECTION. that is inspected, just a sufficient amount to cover the expenses. That answers the question as to the idea of there being so many men required. Senator Perkins. But those men could not be continually employed, and the result would be that when the harvesting was taking place and the grain coming to market it would require a very much larger number of inspectors than at other times of the year. Senator McCumbee. I think the grain moves sooner, however, at some seasons than at others. For instance, it will move in Texas sooner than it would move in a Northern State, and the Department could send inspectors from one State to the other. At any rate,' it will not cost any more than the present system, and will take no more men; Senator Perkins. The estimate is based upon an analysis of an annual salary. Senator McCtimber. Yes ; the inspectors are paid by the month. Senator Perkins. And the fees would be paid into the Treasury of the United States to the proper officials? Senator McCxjmber. Yes. I wish to offer one or two amendments. This bill, for instance, provides for an appeal to the Secretary of Agriculture. Senator Dollivee. Senator Perkins suggests that when we take the bill up we shall take the liberty of sending for you. Senator Perkins. Then we should take up the testimony given, which is very interesting and instructive. A copy should be furnished to each member of the committee, and at the proper time we should be convened in committee and should take up the bill section by section and consider any amendments Senator McCumber may wish to pre- sent, which could then be considered by the committee. Senator Dollia'ee. I will say to Senator McCumber that it will be necessary for the clerks of the committee to have reasonable time to arrange the data and prepare the bill for Convenient consideration. I suppose it will take them some days to do that. Senator McCumber. I wanted to call Mr. Shanahan, of the Bureau of Standardization of the Department of Agriculture, for the purpose Tof showing that this may be done and that we can arrive at a proper and uniform classification for the grading of the grain. Senator Dollivee. We can take the liberty of sending for him when we take up the bill. Now, on behalf of the committee, I desire to thank Senator McCum- ber and the witnesses who have come here in support of his bill for their attendance upon the sessions of the committee, and to thank the members of the committee for the attention which they have given to the subject, and I declare this meeting adjourned without day. Committee on Agriculture and Foeestet, United States Senate, Washington, D. (7., Wednesday, April 8, 1908. The committee met at 11 o'clock a. m. Present, Senators Dolliver (acting chairman) , Perkins, and McCuni- ber. FEDERAL GEAIN INSPECTION. 245 STATEMENT OF J. M. BRAFFORD, ESQ., OF INDIANAPOLIS, IND. Senator Doluvbe. You may proceed in your own way, Mr. Braf- ford. Please state your connection with grain selling and buying. Mr. Bkaffoed. Mr. Chairman and Mr. Senators, I have been in the grain business for sixteen years as a country grain dealer. I have been a buyer from the farmers since 1892. I have also been secretary for the Indiana Grain Dealers for the last three years. The country grain dealers have organizations, as you probably know, through the different States, and they employ a secretary, and we usually run our elevators in connection with them; and that is what I have been doing. The Indiana Grain Dealers for the last three years, in all their meetings, have taken action in the matter of grain inspection. They have passed resolutions indorsing Government supervision of grain — that is, they would like to have the Government standardize the grain and fix the grades of grain for interstate business, as. the States do now in the matter of fixing the amount of pounds that there shall be in a bushel of corn or a bushel of oats, so that the grades shall be uniform in all the markets, so that the inspectors in all the public markets shall inspect grain according to the same rules, and so that the same class of gram (the condition and everything else being equal) shall grade the same in all the markets. Our inspection from the farm is final. The farmer drives in with a load of grain, and we get up on the wagon and look at it, and say that we think it ought to be No. 3 corn, say, or No. 2 wheat ; and we pass it at that. We make him a ticket, and that settles that part of the contract. We pay for the grain according to that grade. Then when it comes to shipping it, we have to take the character of the grain, the weight of it, whether it is stained or not, or the con- dition of it, and figure what market to go to, because the markets vary so For instance, on oats, if it is white oats that we are ship- ping: there are about 52 different ways in the United States of inspecting No. 3 white oats. Each market will have a different weurht For instance, in the case of Baltimore, they take 22-pound oats as' No 3 white oats, all other conditions of the oats being equal, because they sell the oats down there by the measured bushel, and they want to buy them by weight, 22 pounds to the bushel and sell them out by measure, because they gam in that way. It takes more than a Winchester bushel of 22-pound oats, you can readily °°lfr"BB irroro They only have to .eigh that, Senator, to be No 3 Mr. BHArTORu. * I J enough— they must not be classification, 28 pounds is the weights Mr. Bkaitokd. Yes, sir Brafford a question JrS; SSSforLldS'the'Ution i. that in the San J„.,uin 246 FEDEEAL GKAIN INSPECTION. Valley and the Sacramento Valley, in California, 600 miles long, it is very hot ; the evaporation is very great ; the grain is very wet. "When it i$ purchased in the interior it is stacked. We have no grain ele- vators. It is taken down to Port Costa or San Francisco or Benicia and put into a warehouse ; and those grain sacks, containing 2 bushels of corn, will increase in weight from 1 to 3 pounds a sack, and still it is not musty, nor is the value of the wheat in any way depreciated. My object in making the statement is to ask whether the same influ- ence of moisture cute any figure here on the Atlantic coast ? Mr. BEArroED. Not in the case of grain. We do not get wheat dry enough to do that here, except in exceptional years. We have had one real dry year when our wheat would do that in Indiana; but ordinarily we have trouble to get it dry enough to go into tlie grade of No. 2 wheat. The explanation that you have given holds good in the case of clover seed. . We usually hull clover (this is getting away from the grain subject, however) when it is very dry. It is figured by clover warehousemen that if they will put that clover seed in the basement or in the first floor of their warehouses it will take on enough weight to pay the interest and the insurance. Senator Peeikins. So will our wheat. Mr. Brafford. Your wheat does the same thing? Senator Perkins. Yes; in the Sacramento and San Joaquin val- leys. I am thoroughly conversant with the conditions there, liecause I was a miller in the interior of the State for a time, and have been a shipper of wheat and an exporter of wheat at the seaports. Mr. Beaffoed. It will do that with clover seed in Indiana, but it does not do it with wheat. We have trouble there to get the wheat dry enough. Senator Perkins. And, Mr. Chairman, while you questioned the statement that I made the other day that they gave out the identical p-ain- Senator Dolliver. I did not question it, if you made it in a definite form. Senator Perkins. No ; but you made an interrogation point there, which seemed to show that you were somewhat of a doubting Thomas. As a matter of fact, I have stored grain at a place in Monterey Bay called Moss Landing, where we have given the farmers the same sacks that they put in, and the weight has increased so that it aver- aged two to three pounds to the sack. Mr. Brafford. Probably that is a fact. It happens so with clover seed, I know. That is one of the complainte that we are making. We think that No. 3 white oats should grade the same in all the markets that have to go to. . For instance, there are four or five gate- ways that have to go out of on the Atlantic coast here — ^Port Arthur, New Orleans, Newport News, Baltimore, New York, Philadelphia, and Boston. Senator Perkins. How far south do you ship grain for Port Ar- thur — from what Southern States? Mr. Beaffoed.> Quite a body of Kansas grain goes out through Port Arthur, near Galveston. Senator Perkins. Is it cheaper to ship that way ? Mr. Brafford. The rates are about the same from west of Kansas City. The railroad rates are just about the same from there as they are to the Atlantic seaboard. FEDEKAL GHAIN INSPECTION. 247 Senator Perkins. The rates of transportation from Port Arthur or Galveston to Europe are about the same as they are from the Atlantic coast ? Mr. BRAFJFt)RD. They are a little higher, but not very much. It amounts to practically the same. At least, it is cheaper to go out that way than it is to come east. The Illinois Central Railroad reaches up into Illinois, and takes about all of that grain to New Orleans out of central Illinois. In the case of the white oats, which we mostly ship, as I said before, there are a gTeat many different weights to make the grade. Of course it is .all taken at 32 pounds to the bushel ; but they will say perhaps 22 pounds, or 26 pounds, or 28 pounds ; and Philadelphia may say 28 pounds. Senator Doluver. To bring it within this No. 2 grade? Mr. Beafford. To bring it into the No. 3 grade. The No. 2 grade is higher than that ; but usually we can not reach the No. 2 grade. That is a grade that is not reached, as a rule, on our crops. No. 3 white oats and No. 3 corn are the commercial grades in the West. Of course those grades are supposed to make mixed corn in Baltimore, or No. 2 corn in Philadelphia, or No. 2 corn in New York. The elasticity of the grades is another thing. Here is a certificate for No. 4 white corn [producing papers]. There is a certificate in Indianapolis of corn that we bought in Indianapolis ; and their regu- lation says : " No. 3 mixed corn shall be mixed corn, may be slightly damp, and not clean or sound enough for No. 2. No. 4 mixed corn shall be mixed corn, and include all corn not good enough for No. 3 but good enough for warehousing." That means good enough to go to the warehouse and keep. There is a car of No. 4 white corn that went to Baltimore and graded " contract." It unexpectedly did that. We did not think it would. We thought it would take the grade of " steamer corn " in Baltimore. That is the second grade. But it graded No. '4 white corn. There are three cars that did the same thing. Baltimore did not have mAich corn then. Those cars graded No. 4 white corn, to our surprise, and made us more money than we anticipated. A little later on, when Baltimore becomes congested, under these same rules under which we buy in Indianapolis — there is a car of No. 3 mixed corn with an Indianapolis certificate to it. There is a car of No. 3 yellow corn with an Indianapolis certificate to it. There is another car of No. 3 yellow corn with an Indianapolis certificate to it. That goes to Baltimore, and all of those cars go to the drier. I mean by " going to the drier " that they are sent there to have the moisture taken out of the corn by drying it with steam to bring it up, they claim, to " mixed corn." In the early part of the season we could ship old corn which was damp and only good enough for warehousing, and it would grade " contract." A little later on, when they became congested, we would ship No. 3 corn, the best we could buy in southern Illinois and it would go to Baltimore and go to the drier. Senator Dolliver. ^Vhat does that prove? Mr Braffoed. It proves to us that that grain is not graded the cinme in Baltimore all the time, or else our man in the West is mistaken. Senator Doluver. Do they grade it by caprice, or according to tlip dictates of their local interests? , , . , , Mr BR4FF0RD. We hate to charge that the inspector there is influenced by the men that employ him; biit the chances are that mtluencea '^ jj^ ^ould come around the office there, and they 248 FEDEEAL GKAIN INSPECTION. would say: "Now, here, we are congested. We have two or three million bushels of corn here, and our elevators are full, and the boats are not coming in. It is going to be a considerable expense to hold this corn here in the elevators, and we will have to be careful about the grade." They might say that in his presence. They employ him, you know. ' They hire him. We pay him. They charge us for inspecting every one of these cars. We have nothing to say about the employment or the discharge of the inspector. We have to sell all of our grain .subject to his inspection — destination, weights, and grades being final. The European that buys it from the vessel has to do the same way. They buy it from "Baltimore, and his inspection and weights are final in Baltimore. Senator Dollivee. In making their contract for the shipment, they have no right to complain of his grading ? Mr. Beaffoed. They can complain, but they have got their con- tracts. If he was a good merchant, and they wanted to hold him over there so as to sell to him again, they probably would try to make some sort of a compromise. But the contracts are made on "sale terms." That means Baltimore weights and grades. The Europeans are in the same boat that the western fellow is. He is subject to the same inspector, without any say about it whatever; and that is why the European complains. I have a letter from John L. Griffiths, consul at London, that I wanted to show this committee. I will send it when I get home. I thought I had it among my papers, but it is not here. It sets forth that very fact. Senator McCumbee. What is the effect, in your opinion, of this (juiet suggestion to the inspector that they are liable to lose upon the immense amount of grain that they have on hand, by reason of there not being ready purchasers? Mr. Beaffoed. As I said in the beginning, Senator, it simply re- sults in this : A corn that we send in the beginning of a crop, when they need a lot of grain, will grade easily; and in a month or two from that time, when the market becomes congested, we can not make a better grade of grain grade at all. There is the evidence, right there, ifire are the sworn certificates from the Indianapolis inspector, and here is the report from Baltimore. Senator Peekixs. There is no climatic influence that would change the value of it, is there? Mr. Beaffoed. It might to a certain extent. Senator Perkins. They will probably claim that. They will tell you that the cli- matic influence changed that grain so as to change that grade that much. But No. 3 corn ought not to change that much. It ought not to do it. No. 4 corn might do it. No. 4 corn might get out of condition. Senator Peekins. It might heat ? Mr. Beaffoed. Yes, sir. Senator Dollivee. But in the case of your No. 4 corn the condi- tion seems to have improved. Mr. Beaffoed. Yes; it got better. The fact is (and here is the evidence of it) that there is one grade in all the markets in, and another grade out. That is a fact. They will not deny that. The Chicago people may say now that they do not do it; "but we have the evidence in the last four weeks that they do. If you have been in the milling business, you probably know something about it. FEDEKAL GRAIN INSPECTION. 249 Senator Perkins. I think, Mr. Chairman, that the gentlemen who have appeared here, have shown to us very conclusively that these discrepancies exist. The question is, what will change it? Will Government inspection change this condition? That is what we are more interested in knowing, in legislating, than any other ques- tion. That these discrepancies, this inequality of grading of grain, does exist, I think we have had ample evidence, Mr. Chairman. Have we not, in your opinion, had ample evidence to show that these discrepancies do exist at different points ? Senator McCxjmbee. I wanted to show by this witness, Senator, that the same conditions exist in Baltimore and all of these eastern markets, where you have already had testimony that they do not exist, that exist in the western markets; and I should like to have this witness cover the other eastern markets, so as to show that prac- tically the same conditions are in existence all over the United States. Senator Perkins. I had the impression that the inspector we had from Baltimore, and others from Philadelphia, had shown that; but it is quite proper and in line with our inquiry for that to be shown. Senator McCumbee. Yes; I should like to have this witness meet their testimony on that line. Senator Perkins. Certainly. Mr. Beaffoed. We have the same thing here in New York. Here is the inspection certificate of Indianapolis, and there is the inspec- tion certificate of New York, showing that the grades change — just exactly the same thing. Senator Dollivee. Do you want to have us print those certificates ? Mr. BEArroED. I can file them as exhibits. (The certificates referred to will be found at the end of Mr. Braf- ford's statement.) Mr. Beaffoed. As I was going to say about Chicago, Senator Perkins, three weeks ago a milling company of Monticello, Ind., which runs a large mill, bought in Chicago five or six cars of grain. They either bought the option and took delivery, or they bought the real grain from some firm there, and took a Chicago contract for No. 2 red winter wheat for market. They shipped that wheat to Monti- cello. They opened the cars and found it bin burnt and musty, and they could not use it. They resold those cars. They never unloaded them- they never broke the bulk. They resold those cars, and shipped them back to Chicago, and they graded No. 3 red wmter wheat. -10 Senator Dollivee. Will you state that again, please ( Mr Beaffoed. They bought this wheat in Chicago, and took a Chicago contract for No. 2 red winter wheat, and shipped it to Mon- Senator Dollivee. Accompanied by a certificate? . Mr Beaffoed. Accompanied by a Chicago certificate; yes, sir, tor No 2 red winter wheat— a certificate from their inspector. They opened the cars, and found it was bin burnt and musty. They resold the cars, never unloaded them, shipped them back to .Chicago, and the grain graded No. 3 red winter wheat, on account ot being ^'seSr Doi.S^?That last statement I do not understand. How did it grade? 250 PEDEEAL GRAIN INSPECTION. Mr. BEArroED. It graded No. 3 red winter wheat, one grade lower, on account of being bin burnt and musty. Senator McCumbek. By the same inspector? Mr. Bkaffokd. I would not say that it was the same man. Senator McCumbee. Not the same inspector, perhaps ; but the same inspection ? Mr. Beaffoed. The same inspection department. Senator Peekins. It made the trip down to Monticello and back again ? Mr. Beaffoed. And changed the character of its grade. Senator Peekins. Without changing the car. Senator Dollivek. They must have gotten it out of the elevator there that is used for local trade purposes. They got a delivery on the option, I judge, in that case. Mr. Beaffoed. I think that is what they did. I think they told me that they bought the option, and they delivered them out the wheat, and they took delivery on the option. Senator Dollivee. And that delivery was duly inspected and cer- tified? Mr. Beaffoed. Oh, yes. They give you a Chicago warehouse re- ceipt for it, and give you an inspection certificate. I saw that there were five cars of ^heat in Indianapolis last week shipped to George T. Evans & Son, millers there, that was bought for No. 2 red winter wheat — milling wheat — and it was bin burnt and out of condition. Senator McCumbek. They bought it for milling purposes ? Mr. Beaffoed. Yes, sir. How they settled it I do not know. I do not know whether they shipped it back or not. I had not found out when I left. Senator Dolucvee. What remedy has the buyer in such a case? Mr. Beaffoed. They claim that you could sue the Board of Trade of Chicago ; but who would go up there and do it ? They would tell you that you got what you paid for; that you bought No. 2 red winter wheat, and that is what you got. You say : " I did not-get it ; and it is bin burnt, and it is musty, and I can not use it for milling." You probably would have a recourse. Senator Doluvbe. I do not see how you would have recourse against the Chicago Board of Trade. You might have a recourse against the man you bought it from. Senator McCxtmbee. No; the man you bought it from simply agrees to give you grain that is certified at his market as No. 2 ; and he has given you that which is certified as No. 2. Senator DolijIvee. That is a swindle, of course ? Senator Peekins. Unless it could be shown by the owner of the wheat and the shipper of the wheat that en route it was bin burnt in the cars. Mr. Beaffoed. But, Senator, you know that that would not occur in two weeks. Senator Peekins. Hardly. Mr. Beaffoed. It would not happen at this time of year. Senator Peekins. It might have been sidetracked. I was only trying to qualify the charge that the chairman made, that that was a swindle. Senator McCumbee. Is it not a fact that No. 2 wheat, with the small amount of moisture that could possibly be in it, could not be bin burnt in a car ? FEDERAL GBAIN INSPECTION. 251 w|!- ?Sf not S?l™ ?4n°' " " "■' ''°- ^ '"«' '» *'■' pcSfe." '"'"'"'"■ " '' "" ""'J '™ wto e" ™te, it is 1,.,<,1, Mr. Bbapfoed. No teUo there who is a private inspector; and a great many Ss buy 7^'^Ll^Si'SrroZ''' ^^-'^^^^^^ ^^^* '^^ ^-^- shall beT^^ecft Senator Dollivek If they are certifying it out as No. 2 wheat, it Mr. Braffokd. The facts are just as I give them to you; but there IS no other place to buy red winter wheat right now. Chicago-hag the large stock. The mills that want to run have to buy wheat out of L-bicago, and they are practically at the mercy of Chicago We had the same experience in Toledo two years ago. A friend of mine shipped 25 bags of clover seed and sold all but 5 bags. He shipped those bags back without ever cutting the strings on them. They went into Toledo and graded " Rejected clover seed," on account of having dock seed in them and plantain and buckhorn and almost everything imaginable. He took it up with them and said, " Why, w.e bought that stuff of you for No. 2 seed, for prime clover seed, and then sold it out to the farms for that, and now you will not grade it back." They said, " Well, that is our shipping prime." They had a " buying prime " and a " shipping prime. Senator Dollivjee. That sounds like a swindle. Mr. Bkaffoed. That is a iact. New York and all the other export markets sell their grades final to Europe. I spoke about that a while ago. The inspector, while he is a sworn oflScial in all the markets, is employed and discharged by a subcommittee on all the exchanges that is usually made up of large dealers, and therefore they are directly interested. We feel that that is not quite right. For example, if you have a suit for damages in Indiana against a city or a village we do not allow a man that pays a cent of taxes to sit on the jury. Our sheriff goes to the country and subpoenas a venire out in the country, so that we do not get a taxpayer, because we feel that he is interested^ But there are these men who hire and discharge these inspectors who are to inspect all this grain, who make money out of it, and they are the men that are getting the benefit of this. Senator Doi/Livek. But that is not true in- Chicago. The inspec- tors there seem to be appointed by the State board of warehouse commissioners. Mr. Bkaffoed. I am sorry to say that those inspectors are a foot-ball of the governors out there a good deal of the time ;. and they are under the influence of the Chicago Board of Trade. 252 FEDERAL GEAIHr INSPECTION. Senator Dolliver. You do not mean to say that the governor of Illinois Mr. Beaffoed. I do not mean that; I mean the men he appoints, the three warehouse commissioners. I do not believe the United States Government would allow that. We never hear anything said about it in the case of meats. We have inspectors there at Kin- gan's ; and I never heard of a complaint about our Government meat inspectors there. Senator Perkins. The important point in this line for the benefit of the producer, the farmer, is to have a uniformity of inspection throughout the country. Mr. Beaffoed. Yes, sir. Senator Perkins. In every State there ought to be a standard of weights and measures and grades of grain that is recognized by all commercial communities. Mr. Beafford. That is exactly what we are asking for. Senator Perkins, and they claim that they will give it to us ; but they do not. These local influences that I have spoken of, in New York and Balti- more and these other markets, are so strong that they soon lose all their power. You have the idea exactly that we would like to see enforced. So far as the farmers are concerned, speaking for the small dealers, we are in the grain business to make money. If we start a number of cars to market, and we find them tightening up on us in the mar- ket, and we can not make the grade, we are not going to buy eight or ten more cars at the same grade and lose more money on them. We- have simply got to reduce the price to the farmer. It gets back to the farmer. We may get caught on ten or fifteen cars and lose our money. Senator Dolliver. In making your initial estimate of the grain in the country elevator, are you likely to discount the actual "grade of the grain so as to, upon the average, correspond to this handicap which you are likely to encounter when you get to the terminal ? Mr. Beaffoed. I say, we do do that in the end ; if we find we are going to lose money, we have to discount it. We do not in the begin- ning. The competition is so strong between the country dealers that we overreach ourselves, and we sometimes buy grain tJiat we ought not to buy. For instance, we have done that this year on corn. We bought com that was too wet to ship. Senator Doluvee. We do not suffer in the Northwest on account of that competition of the buyers. Mr. Beaffoed. You do not? Senator Dollivee. No. ^ . Mr. Beaffoed. I do not know how it is in Iowa. I am only speak ing about Indiana. Senator McCumbee. To explain one matter of which you spoke to me, and which you have not made cfuite clear, I think,^ to this com- mittee, let me ask this question : Is it a fact that in the competition, we will say, between Baltimore and New York, the time when you shipped them a very good grade of your No. 4 corn and got a grade of No. 3 corn was during one of these periods of contest, so that Balti- more could get grain and bid up a higher grade on it ? Mr. Beaffoed. Baltimore was short of corn at the beginning. They did not have much in stock. FBDEBAL GEAIN IJifSPEOTION. 253 Senator McCumber. Yes. Now, when Baltimore has succeeded in getting the grain started in that direction, and has loaded up rather heavily, and finds that she can not get an export i>rice to correspond with the grade, etc., that she has given, I want to ask joyi whether or not she then " loosens up," as we will call it, on her cer- tification, so that she will certify this No. 4 corn as No. 3 and pass it off on to the foreign purchaser at that higher grade, higher than it really is? Mr. BKAFroRD. The foreigner charges that, you Imow, Senator, We do not come in competition with that end of it; but that is the foreigner's side of it. In Mr. Griffiths's letter he mentions that. I have talked to a number of the New York exporters, and they claim that they are obliged to grade out a lower grade of grain at a- higher grade and sell it at a low figure to induce the Eureopeans to buy it. They say that they are all Jews over in Europe, and that they will not buy it unless they can buy No. 2 wheat at a No. 4 price. We -have not got that kind of Jews out with us. We think they are pretty good business men ; but that is the claim they make. Senator Doulivee. What effect does that have on the American price of wheat — to have the No. 2 wheat sold at a price that would naturally correspond with the No. 4 grade? Mr. Brafford. We feel that it depreciates the price of our wheat. Senator Dollivee. That is stated on the exchanges of the world, I presume, as the price of No. 2 wheat? Mr. Braffoed. Yes, sir ; and the European, until the last year or two, has imagined that we had a Government inspection over here. Our consuls have had trouble in explaining it to them over there. It is marked "official," and the European think it is Government inspection. The consuls have to tell them that it is private mspec- tion in America : it is not a Government inspection. Take the city of Toledo. In the year 1896 they made up theu- minds that they would raise the grade on red wmter wheat, and they raised It to 58* pounds without any notice whatever to anybody, sud- denly and when we started to ship the crop, we found that they required 58^ pounds for No. 2 red wheat. Senator McCumbbr. Before that it had been what? Mr. Braffoed. Fifty-eight pounds. Senator McCumber. They could do that overnight ^ Mr Bbafford. Yes, sir. So they went hrough the crop m that wav and there were a number of complaints about it and people Tefused to ship to Toledo; and the next year they. ]ust changed^ it r t +^ KQ nounds It is 58 pounds now. I only bring, that m as an Ssfance to^Zw the capricJof the markets and how they wi 1 do. if is Uke the railroads used to do. They, used to put m these mid- • ^f tnviffT" We would go to buy gram one week, and next week we ""^^Vlr.f^hat a competitor was paying 2 or 3 cents more than we ^"""i^ ^ nnd we wS figure it down and find that he had a special could pay ; ^^ V^\^°"'*:„if of a " midnight tariff." I am happy to rate somewhere, as ^ resim ot a g ^^^ ^^^.^^^ ^^^^^ ^^^ say l^^'^^^S^^^/eZ^^^ in the Central West We fellows much of any rebates give ^^^ g^^^^^ ^.^^ ^^^ ^^^^^ ^^^^^^^ ^^ ^^^ that are smaii m a j matter of shipi"^*^ ^fj^^e that that is true in some sections of the Senator Uou.rvEE. j. juv^g country, at any rate. 254 FEDERAL GKAIN INSPECTION. Mr. Beaffoed. I think it will hold good with us. It used to be that we could not get into the New England States or could not get into Pennsylvania to compete ; but we can now. Senator Peekins. Since we have empowered the Interstate Com- merce Commission and given them jurisdiction over the railroads, you think there are no more rebates? Mr. Beaffoed. I do not think there is much of anything in that line through our section. Senator Pekkins. You do not think there are special privileges extended to particular localities? Mr. Beaffoed. No, sir ; I do not believe there are. Senator Dollivee. I think the system of publicity of accounts has had mbre to do with that than the power to fix the rate. Mr. Beaffoed. I think the prosecution for giving rebates has stopped some of it. They are very particular now about that, you know. They are a little uneven yet about their elevation charges. They will discriminate as between one man and another in elevation charges in some cities, but they are putting them in more and more, and, making them even. I refer to the charge for elevation on grain, for unloading and reloading it. Senator Dollivee. Have you any further observations which you desire to submit to the committee ? Mr. Beaffoed. No; I believe not. Senator Perkins. You are familiar with this bill introduced by Senator McCumber? Mr. Beaffoed. I have read the bill through a number of times. Senator Peekins. Do its provisions generally meet the aproval of the farmers and producers in your State? Mr. Beaffoed. The grain dealers have been somewhat divided on the matter. I think 90 per cent of all the country grain shippers ate in favor of Government inspection or Government supervision of grain. A great many of them did not seem to want to go further than to have the Government pass a law standardizing the grades, and providing that they should have an inspector, something like national banks, to see that the different markets inspected interstate grain under those rules that Congress might set forth ; and they callea that "Government supervision of grain." Then a great many of them have gone further than that, and simply said that they want straight- out Government inspection. They want the Government to appoint the inspectors. We sent out a list on that subject to the Indiana grain dealers just before I left home. Senator Peekins. What percentage, do you say, are in favor of having Government inspectors? Mr. Beaffoed. This list'here in Indiana shows 80 per cent. Senator Peekins. Of the grain dealers? Mr. Beaffoed. Of the grain dealers. Senator Perkins. How does that compare with the producers — the farmers, the grangers? Mr. Beaffoed. Of course we do not reach them except through the farmers' congresses. The farmers' congress in Indiana have been passing resolutions favoring the Government inspection of grain- Senator Dollivee. There is a certain percentage of the elevator people who have more or less connection with the Chicago people, is there not? TEDEKAL GRAIN INSPECTION. 255 Mr. Beafford. They have printed a document, Senator McCuwi- Der, to which our name has been signed without our consent. They maintain a, lobby here in Washington, with a very shrewd lawyer at tJie head o± it; and they got out this Federal inspection of grain pam- phlet and put it in the hands of all the Senators and Representatives, and our name was signed to it without our consent at all. They never got the consent of a single officer. Senator Dolliver. Who is this lobby? Who do they represent? Mr. Braffoed. They represent the National Grain Dealers' Asso- ciation, composed almost entirely of the great exporters along the seacoast. Senator Perkins. What is the consensus of opinion of the manu- facturers and millers in regard to these Government inspectors ? Mr. Brafford. The Indiana millers passed a resolution unani- mously favoring Government inspection of grain at their last meet- in — Government supervision of grain; not inspection, but Govern- ment supervision. Senator Perkins. And that convention of millers generally repre- sented the consensus of opinion of manufacturers or millers through- out the United States? Mr. Brafford. Yes, sir. Senator Dolliver. 'We are greatly obliged to you, Mr. Brafford. Mr. Brafford. I am obliged to the Senators for letting me take their time. Senator Perkins. That is what we are here for, my dear sir. Of course where there is a conflict of opinion among different people, we have to sift the different statements and try to get down to what we think are the best interests of all concerned. (The certificates heretofore referred to by Mr. Brafford are as fol- lo"ws :) „ ,„ The Indianapolis Boaed of Teade, Office of the Inspectob of Grain, Indianapolis, Ind., Novem'ber 29, 1907. This is to certify that there has been inspected car No. 76927, Erie, new 4 white com. ^^ Geeiner, Chief Inspector. „,, Locust Point Elevator, 1™-^' J Baltimore, Beeember 12, 1907. Brie to The Baltimore and Ohio Railroad Company, Dr. 1,177.18 Kind of grain. Mixed corn, 1907 . Bate. Amount. n — ;g.83 Received payment for the company. ^ ^ ^^^^^^ ^^^^.^ The Indianapolis Board of Trade, Office of the Inspector of Grain, Indianapolis, Ind., November 29, 1907. ^■f^ that there has been inspected car No. 17275, M. K., new 4 This is to certity tnai i-"« white corn. Wm. Greiner, Chief Inspector. 256 PEDEKAL GRAIN INSPECTION. 1725] Locust Point Blbvatoe, Baltimore, December 16, 1907. M. K. T. to The Baltimore and Ohio Railroad Oompamy, Dr. Kind of service. Number bushels. Kind of grain. Rate. Amount. 1, 165. 10 2 white corn, 1907 a 4 $8.74 Keceived payment for the company. B. O. Claek, Cashier. The Ihmanapoms Boaed of Tbade, OlTICE OF THE INSPECTOR OP GBAIN, Indianapolis, Ind., November 29, 1907. This is to certify that there has been inspected car No. 65272, B. O., new 4 white corn. Wm. Geeinee, Chief Inspector. 65272] LoctJST Point Elevatoe, Baltimore, December 12, 1907. B. & 0. to The Baltimore and Ohio Railroad Company, Dr. Kind of service. Number bushels. Kind of grain. Bate. Amount. Elevator charges . . 1,170.00 Mixed com, 1907. - i $8.78 Received payment for the company. K. C. Claek, Cashier. The Indianapolis Boaed of Teade, Office of the Inspectob of Geain, Indianapolis, Ind., January 22, 1908. This is to certify that there has been inspected car No. 7577, N. C. R., 4 mixed com. Wm. Geeinee, Chief Inspector. New York, March 11, 1908. The Brafford Mies-Thomson Co., IndianapoUs, to Ely Bernays, Orain Importer, 120 Produce Exchange, Dr. > 03502. 1,283.52 bu. str. mixed, 68ie ^ $818. 50 Less freight paid 136. 80 681. 70 Tour draft 650. 00 Credit 31. 70 O, K.'ed. The Indianapois Boaed of Teade, Office of the Inspectob of Grain, IndiamapoUs, Ind., January 2i, 1908. This is to certify that there has been inspected ear No. 94365, P. R. R., 3 mixed com. For account of Brafford Files Grain Company. Wm. Geeinee, Chief Inspector. 94365 P. R. R. P. R. R. 4 corn. Power, Son & Co. Damp H loaded 1/30 FEDERAL GEAIN INSPECTION. 257 The Indianapolis Board of Trade, Office of the Inspector of Grain, Indianapolis, Ind., January 24, 1908. . This is to certify that there has been inspected car No. 11318, C. C. C, 3 high mixed corn. Wm. Gbeineb, Chief Inspector. New York, Fetruary 20, 1908. Messrs. Porlell & Kipp, to the grain comiidttee of the New York Prodiuoe Exchange, Dr. For cost of arbitrating claim with inspector, $2. Received payment for the committee. L, B. Howe, Secretary. No. 5969. (Across the face: Expense.) New York, February .19, 1908. Committee on grain of the New York Produce Exchange. AWARD. Forbell & Kipp v. Inspector in Chief. Case referred : Appeal for str. mixed corn on car 46057 C, at the West Shore Railroad, which was graded No. 4 corn by the inspector, Committee decide inspector sustained. Wm. H. Kemp, Chairman. Fees, $2, to be paid byTorbell & Kipp. New York Pboduce Exchange, New Torlc, March 12, 1908. Messrs. Forbell & Kipp, Produce Exchange. Gentlemen : The committee on grain have before them your communication of the 26th ultimo, and I am director to say in reply that all appeal cases are decided by a majority vote, and the award furnished you is the only document issued by this committee covering such cases. We can not deviate from this custom. Yours, very truly. Wm. H. Kemp, Chairman Committee on Grain. The Indianapolis Board of Trade, Office of the Inspector of Grain, Indianapolis, Ind., January 25, 1908. This is to certify that there has been inspected car No. 11581, C. H. & D., 3 Wm. Greiner, Chief Inspector. [Memorandum.] To Brafford, Files-Thomson Co., from Forhell & Kipp, 342 Produce Exchange, New York, March 6, 1908: We have this day sold for your account : N. Y. car. 71658 original. Grade. 11581 No. 4yeUowcom. Remarks. Erie. Price. 63 34503—14 n 288 F:6bMAL bitAik rN&pi!tii'iO]56 34 , 14 Do. 1,020 20 a Previously reported unloaded February 14. b Loss by drying. The Indianapolis Board or Trade, Office of the Inspector of Grain, Indianapolis, Ind., February 5, 1908. This is to certify that there has been Inspected car No. 10733, C. H. D., 3 yellow corn. Wm. Geeinee, Chief Inspector. [Memorandum.] Hammond, Snyder & Co., Baltimore, March 12, 1908. Messrs. Brafford-Files-Thomson Company, Indianapolis, Ind.: Below please find weights of grain received from you and for which account sales will be rendered as soon as possible : Original No. Bushels. Pounds. Freight. Grade. Remarks. 10733 899 26 $88.15 Str. mix, com Holding tor orders. 260 FEDERAL GRAIN INSPECTION. The Indianapolis Board of Tbade, Office of the Inspectob of Grain, Indianapolis, Ind., February 5, 190A This is to certify that there has been inspected car No. 46723, C. H. D| mixed corn. Wm. Gbeineb, Chief Inspector [Memorandum.] Hammond, Snyder & Co., Baltimore, FeTyruarp 28, 190^ Messrs. Bbaffobd-Files-Thomson Company, IndianapoUs, Ind.: Below please find weights of grain received from you and for which acco| sales will be rendered as soon as possible : Original No. Bushels. Pounds. Freight. Grade. Bemarks. '-^'.i^.. 1,171 34 S1U.82 Applied on contract. (The committee thereupon adjourned.) ti ::!!«) J Wm .jssiii m 1 'I -Ai V-:, ' III" iifii-t In Pi ■"ilBBIII!'!!"-' '