MZ7 « HD9284.M2r'""'"'""""-"'"^ I 3 1924 013 840 271 The Cost of Marketing Eggs in 1917 Including a BRIEP of the pertinent facts; a compila- tion of the FACTOKS OF COST; the cost of TYPICAL OPERATIONS, and some gen- eral information about the crop. Prepared at the request of Mr. HORACE C. GARDNER for the UNITED STATES FOOD ADMINISTRATION By PAUL MANDEVILLE Chicago, Septemher 1917 The writer endeavors to make the simplest statement that will at the same time give a correct view to one outside the egg trade. A perfectly simple table of costs cannot be made, for reasons mentioned in the brief. "While the subject is before the public, members of the trade are sometimes asked for facts that are common Knowledge within the trade and an orderly arrangement of same may prove convenient also for their reference. (^^^j^^f» BRIEF It is the general belief of experienced men in the egg business that reasonable economy of operation has been attained. The trade have on the whole been open to new ideas, and few lines have attracted so many experimental movements as the egg business. If prac- tice in this line may be found backward compared with other lines of merchandising, it is due rather to a lack of standards in operation and to some extent also to a lack of standards in equipment and supplies, than to any backwardness in trying out new ideas. The distributor of eggs who is strong enough to con- trol his own retail outlets and who receives direct regular shipments from country storekeepers probably has as direct and economical a method of operation as can be devised for eggs. Egg preparations are not commonly sold for household use and marketing eggs in the shell is a merchandising operation. The large number of factors liaaking up the total cost of handling eggs suggest that short cuts would be profitable. Many are tried every year and in the spring such plans are successful to the point of cutting out most of the distributors' profits. But for eight months, from June to February, experience and facili- ties seem to count for more. The class of so-called pure speculators are for the most part keen observers of the market and serve a useful end in their way; taken as a class, their profits are largely offset by their losses and their expenses are small compared to the value of a season's crop of eggs. There has been and is a lack of accurate crop infor- m^ation available to the rank and file of the trade. Comprehensive aid in this direction by the government would lessen the speculative risk and in the same degree would lessen speculative losses, which must now be counted as an expense on the business. The cost of assembling and distributing eggs eannnot be reduced to a table which is applicable to the whole country; it is a local problem everywhere. There are common factors in the cost of getting eggs to con- sumers in the larger markets, which may be tabulated, but these costs vary according to the volume of busi- ness running, the season of the year wherein it affects the cost of grading, the distance from market, and climatic hazards. At some seasons the losses due to climatic hazards are almost negligible, and costs, like- wise quotations, can be reduced to variations of one- quarter cent per dozen. At other seasons the climatic element is the foremost factor in the cost. The factors of cost mentioned herein are not so many middlemen. Two or more operations are usually conducted by one operator and the several functions overlap in practice. Factors of Cost and Typical Operations Figures Apply to One Oas©— 30 Dozen of Eggs 1— ASSEMBLING. a— The Cost of Gathering and taking the eggs to town is still saddled on the farmer as a chore in most states and in outlying districts where the cost of collection is regarded as too high. The advantages of collection are a better average handling of the eggs, more frequent and more regular gathering. There may also be some sav- ing in cost where farms are close together and where flocks are large. On the whole, however, collecting from the farmers as a business must be regarded as an expense justified in the higher market value of the product. The cost varies according to season and volume from 20e to 40e a case. b — The Container consisting of cases and fillers is now, as a rule, built light and at low cost with the idea of discarding in the distributing market. The eggs may be transferred from one case to another several times, and the case accepted by the railroad as standard is capable of several times shipping without seriously impairing its carrying efficiency. Containers that are shipped to distant markets are seldom returned and have small salvage value, the cost is nearly absolute — for domestic cases 17c to 22c. One set of fillers and flats therefor costs 10c to 14c. c — The First Grading, accounting to and paying of farmers varies greatly according to season and volume. Wken eggs are collected systematically, there is less opportunity for deception as to freshness and the custom is to receive the eggs without grading. Typical costs of receiving and paying for eggs according to grade at a town store are 15c to 30c per case. (Compare Sale Costs, factor 4-a). d — Shipping to Concentration Point is largely a fac- tor of sale (factor 4-b) and of transportation (factor 3-a) but includes also delivery to the depot and from the depot to the packing plant about 5e per case. e— The second Grading at Concentration point may consist merely of lifting covers, recapping (new excelsior flat and new top fillers, etc.), and re- packing any damaged cases, 3c to 5e per case. Or it may involve thorough grading, repacking for storage into several grades, candling, etc., which may represent a labor cost of 10c to 18c a case. 4 FACTOES OF COST f — Shipping to Central Market is a transportation factor usually involving only labor of loading oars, cost of dunnage, ear bracing, etc., Ic to 3c per case, (see factor 3-b). g — To the above may be added in some instances Receiver's Cost at central market. Where the receiver sells to a distributor, add cartage 3e and handling charge 5e per ease. The remainder of the receiver's cost is a sales factor. 2— DISTRIBUTING. a — ^Delivery to Jobber is generally effected by team or auto -either direct from team track or from receiver's store. Large distributors may have their own side track. The cost of delivery to jobber is 2c to 5c per case. b — The Final Grading and cartoning may be done by, the jobber or by the retailer and varies in cost according to the character of grading which has been done at the source, and to the degree of deterioration in transit, etc. At sgme seasons the eggs may not even be candled. Coft 5c to 25e per case. (Losses due to rejection in cand- ling are considered with factors in group 5). c — The Cartons for a case of eggs cost 24c to 36o. d — ^Delivery to the Retailer is also a sales factor (4-b), the salesman often traveling with and de- livering the eggs. The cost of straight delivery in large cities in one to five case lots is 10c to 25c per case. e — ^Delivery to the Consumers in dozen lots, where a regular trade has been established and the route is compact, costs 40c to 60c per case. Where deliveries are made with other groceries to close- up trade the cost may be reduced. See also Sales Factors (4-a). f — ^Export Cases are seldom used at first packing. Eggs intended for export are repacked into heavier eases and fillers. Cost of export cases 30e to 40c; export fillers 15c to 18c per set (for one case). The salvage in the original container, which is discarded, is little more than the cost of sorting and marketing. The cost of grading for export is similar to "Final Grading" (fac- tor 2-b). 3— TRANSPORTATION. a — Typical freight To Concentrating Point 5c to 15c per case. b — Freight to Central Market varies widely. Typical car lot freight from a packing point in Iowa to Chicago or from Indiana to New York is 15c to 35c per ease. c — Typical freight From Central Market to tributary market 5c to 15c per case. NOTE: — During the winter and until the market declines to spring level it is common to ship by express which raises the cost of a, b and c two to three times. FACTORS OF COST a-Freight to central market may be divided when eggi are stored in transit. One function of the warehouse is to afford an opportunity for divert- ing reserves late in the season to the market firit to become exhausted, and in a movement of this kind eggs may be shipped back over much the same route whence they originated. 4— SALES COST. a— Buying eggs direct from farmers or selling them direct to consumers in dozen lots are similar transactions, involving a cost from 20c to $1.00 per case. Gash sales on bargain days at de- partment stores, etc., may easily be reduced to the lower figure, while personal attention re- quired by the salesman in a high-grade neighbor- hood store may cost the higher figure. b — Purchase or sale in case lots costs 10c to 30e. e— Purchase or sale in jobbing lots (20 to 100 eases) costs 5c to 20c per case. d — Sale in carlots costs 3c to 10c per ease. The above sales costs do not include delivery and handling but represent that portion of the cost which is sometimes figured as "overhead" — getting the buyer and seller together. 5— CLIMATIC LOSSES AND LOSSES DUE TO EXPOSURE AND CARELESS HANDLING. These losses are represented by price reduction due to general deterioration or to shrinkage from rejections in candling. a — Climatic Losses vary in the extreme, depending not only upon the state of the weather but upon the condition of flocks and hardiness of the egg. Climatic losses are minimized in April owing to a large volume running, frequent gathering, cool weather, hardy eggs, etc. Typical losses in April from this cause 5c to 15c per ease; typical losses in August, where eggs are not under re- frigeration, dOc to $2.00 per case. b — Losses Prom Exposure are usually the result of ignorance and often are not recognized, as, for example, from exposure to sunshine and heat when eggs are displayed in a store window; ex- posure to rain when the farmers are bringing them to market; dampness in cellars; musty odors from old fillers, etc. Losses from exposure are diflficult to reckon in dollars and cents. A carload of eggs may become musty from fre- quent changes due to opening and closing car in hot weather, causing condensation and dampness from contact with the warm moist outside air. When the dampness is followed by heat, a ear may depreciate $2.00 to $3.00 a case in transit and while awaiting sale. Typical losses from ex- posure are 5c to 30c per ease, and where eggs are properly handled and well protected, losses due to exposure approach nil. FACTOES or COST c — ^Freezing is another loss of this class. A frozen egg usually splits wide open and becomes a leaker. It occurs in severe weather when losses therefrom are sometimes considerable. Typical losses due to freezing are 10c to 60c per case. d — A frequent cause of depreciation is rough hand- ling which results in broken shells and, what is often quite as serious, broken down contents. The content of an egg is delicately formed and has a definite structure which breaks down when roughly handled, causing the egg to become watery. Typical losses from this cause are 5e to 25e per case and when a shipment is badly shaken up may amount to much more. e — ^Against saving from exposure and careless hand- ling must be placed the cost of protection, such as cold storage, refrigerator cars, dunnage, extra packing, preservatives, etc. 6— STORING. a — The larger Cold Storages charge 30c to iOc per case for the season ending January 1st. It is customary to quote a monthly rate on eggs stored in the summer and fall for short term. The usual charge for three months is 20c per case. Warehouses in the South, in the West and in smaller cities sometimes charge higher rates up to 60e per case, for season. b — Eggs are also Held On Track awaiting clearance on a glutted market and it is sometimes found profitable to stand a charge of $20.00 to $30.00 a car or 5c to 7o a case rather than to unload. e — Storing Eggs in Iiiquids is now rarely practiced commercially. At home and in small quantities it costs anywhere from 30c to 60c a case, accord- ing to the price which druggists charge for the liquid. 7— MARKET CONTROL. This factor of cost is most difficult of all to reduce to a figure. It consists of: a — Information. Trade papers and ordinary corres- pondence by mail and telegrams keep the widely scattered trade in eggs informed. Associations have recently adopted a liberal policy of collect- ing and disseminating information. The Bureau of Markets at WiasMngton, D. 0., has been a recent aid. b — There have been attempts to Regulate By Law certain abuses or assumed abuses in the business, some of which have been helpful, but nearly all of which have been the occasion of upsetting to some extent the established channels and creating new channels of trade, and this always results in an expense for the time being. c — ^Prices are controlled By Speculation, sometimes meaning the legitimate provision in advance of requirements by established trade and some- times meaning pure speculation. A Pure Spec- ulator who deals in carlots, buying and selling from the regular trade adds 15c to 25e a case to the cost, representing the cost of assembling his FACTORS OF COST line added to the cost of disposing of it. On the face of it where the same car changes hands a number of times it would appear that unneces- sary expense has been added to the cost of the eggs, but an analysis of this cost is not con-^nc- ing. When a car has once been inspected and its quality has become known in a central market, it is always cheaper to deal in the same car or block of cars than to inspect a new line, and as a result certain particular Hues of eggs become current in the speculative trade, and the ups and downs of the market represent both profits and losses on these particular cars; meantime the bulk of the reserves in storage are held by the regular trade and do not share in this expense. TYPICAL OPEKATIONS Freight varies with the class of service and the distance from market. In the following examples the farm Is assumed to be located in a small town in south- western Iowa and the consumer in Chicago. Only one freight is shown, being the combination of rates to concentrating point and from concentra- ting point to Chicago. Likewise cost of grading, wherever done, is combined. 1— COST OF MARKETING A CASE OF FRESH EGGS IN FEBRUARY. The first run of fresh eggs in the winter appears, as a rule, on a declining market and the most important object is to get the eggs to market quickly. It is common to ship by express, to consign without previous sale and to sell out all receipts daily, getting them so far as practicable into immediate consumption. Second- hand containers are customarily used. The quality is good and candling is generally dispensed with. The only concern is to see that none of the old crop is mixed with the new. Principal losses are from freezing and breakage. Typical costs of the various stages are: Per Case Container ?0.20 First buyer's gross profit 10 Concentrator's gross profit 05 Freight (if express 90c) 44 Receiver's gross profit [05 Sale and delivery to distributor ! .08 Labor, grading 07 Shrink In grading .' ." |o5 Cartons ][] ]^q Wholesale distributor's gross profit !..!!!!! AO Sale and delivery to retailer ' ' 15 Retailer's gross profit ]\\\ IgO Sale and delivery to customer ,',', "go ?2.79 2— COST OF MARKETING A CASE OF FRESH EGGS IN APRIL. In the spring the supply exceeds the demand and the quotation is governed by the interest shown in storing eggs. The run is so large that undergrades, not desira- ble for storing, are a large factor in the supply for immediate use. These undergrades consist of slightly dirty, undersize and cheeked (slightly cracked) eggs The quality of all receipts is good. Daily variations in the quotation are only fractions of a cent per dozen Country storekeepers and even farmers are shipping TYPICAL OPERATIONS direct to neighborhood stores in the large cities and there is a tendency to cut out as many middlemen as possible. Eggs are featured at this season by the re- tailers and are often sold at cost. In all classes of the trade, profits are smaller, but the volume of business is larger. Typical costs of the various stages are: Per Case Container $0.30 Collection (If not collected, add 10c to first buyer and 10c labor and shrink grradlngr- Grading is frequently omitted however) 20 First buyer's gross profit (see Collection) 05 Conftentrator's or receiver's gross profit 10 Freight 35 Sale and delivery to distributor 07 Labor, grading (usually sold ungraded) Shrink in grading (usually sold ungraded) Cartons (use limited in April and May) Wholesale distributor's gross profit 05 Sale and delivery to retailer 10 Retailer's gross profit 15 Sale and delivery to consumer 50 SI 87 3— COST OF IVLA.RKETING A CASE OF FRESH EGGS IN JUNE. With the advent of warm weather it becomes neces- sary to pay more attention to the use of proper facili- ties and proper handling. The farmer is usually paid on a "loss-ofE" basis and according to quality. Such eggs as are stored have to be carefully candled and only the very best are desirable. Candling also is necessary at point of distribution. The neighborhood store finds it diflB.cult to obtain satisfactory quality direct from the farmer or country merchant, and has no outlet for a shipment unsuited to its trade. The wholesale distributor becomes once more a useful factor. Typical costs of the various stages are: Per Case Container $0.30 Collection (If not collected, add 10c to first buyer and 15c to labor and shrink grading) 25 First buyer's gross profit (See Collection) 05 Concentrator's or receiver's gross profit 10 Freight 35 Sale and delivery to distributor 10 Labor, grading 15 Shrink in grading (See Collection) 10 Cartons 30 Wliolesale distributor's gross profit , 16, Sale and delivery to retailer 25 Retailer's gross profit - 60 Sale and delivery to consumer 60 $3.30 4— COST OF MARKETING A CASE OF FRESH EGGS IN AUGUST. The first run of the second crop begins to appear dur- ing and after the harvest season. Nights are cool, flocks get more or less grain feed from offal of the harvest and the general quality of eggs that are well cared for improve. There are hot weeks, however, and sometimes extreme losses result. The trade are compelled to ex- ercise the greatest care in buying. There is a wide range in the quotation, often as much as $4.00 to $5.00 per case. Part of the finest selections from August receipts are stored for fall use. At the same time the total production falls below consumption and the trade begins drawing upon reserves stored in the spring. The 9 TYPICAL OPERATIONS following costs apply to No. 1 fresh eggs of the best average quality, to obtain which it is necessary to discard more worthless eggs and to sell the various undergrades at a greater discount than in June. Typical costs of the various stages are: Per Case Container (once used) ?0.20 Collection (If not collected, add 10c to first buyer and 20c to labor and shrink grading-) 30 First buyer's gross profit (See Collection) 10 Concentrator's or receiver's gross profit 20 Freight (if express 90c) 39 Sale and delivery to distributor 10 Labor, grading 15 Shrink in grading (See Collection) 50 Cartons 30 Wholesale distributor's gross profit 25 Sale and delivery to retailer 25 Retailer's gross profit 60 Sale and delivery to consumer -60 $3.94 5— COST OF MARKETING A CASE OF FRESH EGGS IN OCTOBER. There is keen competition for the last of the fall lay and the fresh egg market advances in proportion to the decreasing receipts. As the advance in price is an annual occurrence, there is a tendency to take profit by holding back the crop at every stage in its movement beginning with the farmer. As a result current re- ceipts of fresh eggs in October are badly mixed with held stock. The stale eggs when sorted out are often of less value than good storage eggs. Strictly fresh meantime command a high premium and the range in the quotation is correspondingly wide. The movement being small, the cost of handling per case increases. Typical costs of the various stages are: Per Case Container (once used) $0 20 First buyer's gross profit 30 Concentrator's or receiver's gross profit. . . 20 Freight (if express 90c) ' " '44 Sale and delivery to distributor 15 Labor, grading on Shrink in grading cc Cartons ' gS Wholesale distributor's gross profit." .'.'.' 30 Sale and delivery to retailer 9k Retailer's gross profit ' ' 90 Sale and delivery to consumer .........'.'.[ !60 $4 39 6— COST OF MARKETING A CASE OF FRESH EGGS GATHERED AND STORED IN JUNE WITHDRAWN AND SOLD IN SEPTEMBER. ' This is the typical "summer storage." Eees ao- pearing on the market in June are the last of the spring lay are not as good keepers and are as a rule marketed before the April eggs are withdrawn. An ^nr^!""" i.°°T,f "^"""^S extremely warm weeks in summer when the supply of good fresh eggs is badly curtailed and first-class trade is suppUed with Aprils Typical costs of the various stages are: Container Per Case Collection (If not collected "add 'I'liA "t^" 'fi^V V ^^-^^ mr.r^, '''^.*° '^""^ andlhriSk^gJadinl)*"^^' *'"y^'- ,„ ConoentritoX^.''°^^ ^""-"^^ (See Collectfon) ! i ! ! g? Frefght receiver's gross profit. ..;.;. "q ;35 10 TYPICAL OPERATIONS (continued) ' Storage 20 Interest and Insurance 19 One carlot sale 08 Sale and delivery to distributor 10 Labor, grading^ 15 Shrink in grading (See Collection) 20 Cartons (use of cartons for storage eggs is limited, in September) Wholesale distributor's gross profit 35 Sale and delivery to retailer 25 Retailer's gross profit 60 Sale and delivery to consumer 60 $3T82 7— COST OF MARKETING A CASE OF FRESH EGGS GATHERED AND STORED IN APRIL, WITHDRAWN AND SOLD IN NOVEMBER, Ttis operation is typical for two-thirds of the eggs vphieh are placed in storage, the heavy storing being in April and May and the greatest scarcity being in November and December, On account of the good quality of April eggs, the candling loss is less than if candling Junes. The distributing trade, however, are accustomed to taking more profit and not in- frequently an exorbitant profit. The practice is not altogether a fault of the trade, but is encouraged by consumers insisting upon getting more fresh eggs than are to be obtained. Five cents a dozen ($1.50 per case) fairly represents the extra profit over the wholesale market still commonly taken either by the wholesale distributor or by the retailer or between them, in the sale of the best storage eggs for fresh, or as just eggs. Typical costs of the various stages are: Per Case Container $0.30 Collection (If not collected, add 10c to first buyer and 10c to labor and shrink grading) 20 First buyer's gross profit 05 Concentrator's or receiver's gross profit 10 Freight 35 One carlot sale 98 Storage 30 Interest and Insurance 49 Sale and delivery to distributor 10 Labor, grading (both into and out of storage) 25 Shrink in grading (See Collection) 20 Cartons (often sold loose) 30 Wholesale distributor's gross profit (See Retailer's profit) 30 Sale and delivery to retailer -io Retailer's gross profit (not including any market profit or loss. The extra profit is sometimes taken by the wholesaler, as explained above the table.) 2.10 Sale and delivery to consumer -pO J5.97 8— COST OF REPACKING A CASE OF EGGS FOR EXPORT. The unusual conditions in Europe have greatly stimu- lated the demand for eggs from the United States and Canada to supply a deficiency in England. Prior to the war this movement was spasmodic and was not reckoned as a factor in the market. Export eggs are packed in cases heavier than the standard domestic ease in order to withstand the pressure of being loaded on shipboard by means of a canvas sling or net, and the pressure of a shifting cargo. It is customary also to use heavy white pulp fillers instead of domestic strawboard fillers and the eggs are candled at time of repacking. Typical costs, based on the use of finest April storage at mark, are: 11 TYPICAL OPERATIONS Per Case New containersi $0.53 Extra padding 03 One cartage J3 Loarding cars (including dunnage) 02 Labor, grading and repacking 16 Shrink in grading 20 Supervision and overhead 10 $1.07 THE EGG CROP The consumption of eggs in the United States ■ is approximately one egg per day or one case per year per capita, there being 360 eggs in a case. A handy rule for reckoning the weekly egg consumption of a^y_ given locality is to double the population and divide by one hundred, which results in about the number of cases consumed weekly taken the year round. The production of eggs is well distributed throughout the country, and in this respect differs greatly from tobacco, rice, citrus fruits and other localized crops and the problems of distribution are correspondingly different. An outline the shape of an egg, placed over the map of the United States with Chicago in the center, the point of the egg resting on Scranton, Penn- sylvania, the southern limit including Tennessee and the northern limit Lake Superior with the butt of the egg cutting Kearney, Nebraska, approximately bounds the states and the Province of Ontario whei'ein eggs are produced in as large or larger numbers than they are consumed. An exception is found in some parts of Texas and Oklahoma not included in the oval. Eggs are universally consumed in the United States and less than one per cent of the crop is exported. The product- ion, therefore, is approximately equal to the consump- tion which may be roughly divided into: One-third consumed on the farm; one-third consumed in small towns; leaving one-third of the crop for the large markets. Of the third which comes to market about one-fifth or twenty per cent goes into cold storage at some stage of the movement and it will be observed that this represents not to exceed six or seven per cent of the whole crop. The last mentioned fact is exceedingly important and must be constantly borne in mind when considering the influence of supply and demand upon prices. A re- duction of five per cent in a season's production or an increase of five per cent in a season's consumption of eggs would result in an extreme lowering of reserves unless counteracted by an adjustment to higher prices, and the reverse holds true of an increase in produc- tion or a decrease in consumption. With this fact in mind the sensitive movements in the quotation will be readily understood; also the highly speculative nature of the business of storing eggs. There are two seasons of production, which broadly speaking include the spring season from January to June inclusive and the fall season August to October inclusive. These periods vary somewhat owing to climatic and local influences and overlap, so that there are only four to six weeks in the year when the supply of strictly fresh eggs approaches nil. This period lies between the first of November and the 15th of December. 12