(jW/ Class ^ AND Publishea by THE NATIONAL, CONFERENCE ox MARKETING AND FARM CREDITS Office of Secretary "Washington Building-, Madison. Wisconsin b 'i 'CU42S201 MAR 21 19i6 TABLE OF CONTENTS PREFATORY MATTER Page Title Page i Copyright ii Table of Contents iii Presiding Officers vii Officers National Conference viii Officers National Council ix Henry Wallace x Foreword xi PURPOSE AND SCOPE OF CONFERENCE Introduction 1 Address of Welcome Harry B. Miller, Chicago 4 ORGANIZING AGRICULTURAL COOPERATION Work of 1915 Meeting Chairman Frank L. McVey, Grand Forks, N. D 9 The Next Step The Rt. Hon. Sir Horace Plunkett, K. C. V. O., Dublin, Ire- land 15 The Kind America Needs Millard R. Myers, Chicago, 111 _ 2-5 In Wisconsin Charles A. Lyman, Rhinelander, Wis 39 The Business Side E. M. Tousley, Minneapolis, Minn 50 Attitude of Railroads , R. W. Hockaday, St. Louis, Mo 56 A Conservation Policy Gifford Pinchot, Milford, Penn 59 Work Among Jewish Farmers George W. Simon, Chicago, 111 -- 63 Relation to Trusts Samuel Untermyer, New York City 70 Cooperation at Work William M. Stickney, Chicago, 111 84 jv TAU 1,1-1 (M-' CONTENTS MAKKKTINO, THE FARM TKODUOT Page Economics oi- AcKS Tkouikms ok Ful U' (.^uowkus K. v.. Uauloy. Chicago. Ill l:>5 ^l.\UKK^l^(; Mhk in Nkw Enolanu >Vlllrid ^Vhoolor. Boston. Mass 141 l^isnuiurioN ok Whoi.k INIuk in Ouic.voo W. J. Kittle. Chicago. Ill 152 TlKMNO VOIATO L0S.>< INTO PUOKIT H. E. Horton. Chicago. Ill 158 THE STANDARDIZATION OF FAKM FUODUCTS I.VOISI.ATIOX KlMJ SrANlVVUnr/ATlON Charles McCartli:*-. Madison. Wis 167 MVKKKT OKAUKS and STA?!OAKnS Charles J. Brand. "Washington. l\ C 170 CHKRSK PrOUIvKMS .1. B. McCrcady. riyniouth. Wis ISl Bi riKK BKom.K^is C. F. 1.00. :\ladison. Wis 1S5 V^KAIN FKOUI KMS J. W. T. Ouval. Washington. O. C 191 Tiun lu.vs OK Grain Insckctoks H. F:. Emerson. Minneapolis. :^linu 199 WAUEHOVSIXO AND STANPABDIZATION OF FAKM FUODVCTS Sl'AlK WAKKHOI SINO ANO COTION Clarence Ousloy. College Station. Texas 209 AOMINISTKATION OK TkXAS LaW l^>od W. Davis. Austin. Texas 21*; WOKK OF Fakmkks' Uxiox Joe E. Ednuiudson. Fort Worth. Texas 22t> WARKHOI SINO ANP FmCK OK COTIVN Ernest M. l.oeh. New Orleans. T.a 2? t TABLJi; OF CONTENTS V ELEVATORS— LOCAL AND TERMINAL Page Ai>\Ai\'i'A(!KS OK Statio-TjIOKnsic Systiom J. C. F. Merrill, Chicago, 111 245 Farmkiis' Elevatou Movkmknt in United States Herman W. Danforth, Washington, 111 250 Local Wakkhoit.se Pkoulems G. W. Lawrence, Larned, Kans 259 A PitoDiKJEK's View ok Ratlkoads W. J. Ray, Colo, Iowa 260 Banks and Local, Elevatous H. J. Farmer, Alrlie, Minn 268 DiKKrCULTMOS OK STATE TeUMTNALS James E. Boyle, Grand Forks, N. D 26!) Problems of a Cooperative Terminal System J. M. Anderson, St. Paul, Minn • 283 Canadian Terminal Fiohts Geo. F. Chipman, Winnipeg, Manitoba, Can 290 RURAL CREDIT AIDS TO LAND PURCHASE Lessons kuom Ireland Charles W. Holman, Madison, Wis 301 Needed Legislation Harris Weinstock, San Francisco, Cal 32 i Farmers' Needs on Reclamation Projects F. H. Newell, Urbana, 111 337 Systeim Needed in West Elwood Mead, Berkeley, Cal 340 Aids for Landless Men John Lee Coulter, Morgantown, W. Va 353 PRESENT FACILITIES FOR LAND PURCHASE AND NEED OP LEGISLATION What Farm Mortciage Bankers Okfer F. W. Thompson, Chicago, 111 '. 363 What Natioi^al Banks Are Doing B. F. Harris, Champaign, 111 376 A Building and Loan Basis R. D. Kent, Passaic, N. J 380 Opportunity ok Outside Capital in Texas James E. Ferguson, Austin, Texas 389 Financing Farm Colonists Mrs. J. Haviland Lund, New York City 395 vi TABLE OF CONTENTS FINANCING FARM BUSINESS Page !MHU)KST10NS KOK IjKCUSI^VTION Myron T. Herrick, Cleveland. Ohio 403 Financing Amkiuoan I^vnh Ownfks David Lnbin, Rome, Italy 414 PhOVIDINC, CkKUIT Dl'UlNO PKOmCTlON Carl W. Thompson, Washington, D. C 41S Landlord and Tenant in Production in North Charles S. Adkins. Bement. Ill 433 Landlord and Tknant in Pkoih oiion in Soith Alexander E. Cance. Amherst, Mass 437 Landlord and Tknant in Production and Markf.timj ok Cotton W. B. Yeary, Parmersvill, Tex 452 Thk Tknant ok thk Noutu and Markktinc. ok Crops B. H. Hibbard. Madison, Wis 458 The Tknant of thk South and Markktino, ok Crops Carl Williams. Oklahoma City, Okla 4*53 Personal Crkdit ix>r Land Owning Farmers of the North Charles L. Stewart, Urbana, 111 ." 473 Personal Crkdit kor Land Owninc, Farmkrs of thk South Lindley M. Keasbey. Austin. Tex 484 INDUSTRIAL COOPERATION Work ok the Montcl^vu? CooPKUArivK Stork Emerson P. Harris, INlontoIair. N. J 497 OFFICIAL BUSINESS 1915 Report of Comjuttkk on Permanent Organization 504 1915 Rki'ort of Comauttee on Resolutions 50i> 1914 Report of Committke on Organization 511 1914 Report ok Committee on Rksolittions 51 'i ACCREDITED DELEGATES TO 1915 CONFERENCE 515 PRESIDING OFFICERS yii PRESIDING OFFICERS THIRD ANNUAL SESSIONS GENERAL MEETING — The Oreanization of Agricultural Cooperation, No- vember 29, 8 p. ni., Louis XVI Room. Frank L. McVby, chairman, The National Conference on Marketing- and Farm Credits; president, The University of North Dakota, Grand Forks. N. D. GENERAL MEETING — The Standardization of Farm Products, Novembei- 30, 9:45 a. m., Louis XVI Room. Kenton L. Butterfield, president. The Massachusetts State College of Agriculture, Amherst, Mass. Sectional Meeting — The Warehousing and Standardization of Farm Prod- ucts, November 30, 2 p. m.. Crystal Room. Clarence Ouslet, director. Department of Extension and Home Eco- nomics, The Agricultural and Mechanical College of Texas, College Sta- tion, Texas. Sectional Meeting — Rural Credit Aids to Land Purchase, November 30, 2 p. m., Louis XVI Room. John H. Worst, president. The North Dakota Agricultural College, Agricultural College, N. D. GENERAL MEETING — The Organization of Agricultural Cooperation, No- vember 30, 8 p. m., Louis XVI Room. Frank L. McVet. GENERAL MEETING — Rural Credit Aids to Land Purchase, December 1, 9:30 a. m., Louis XVI Room. David Kinley, dean of the Graduate School, The University of Illi- nois, Urbana, 111. Sectional Meeting — Marketing the Farm Product, December 1, 1:30 p. m., Louis XVI Room. B. H. HiBBARD, professor of Rural Economics, College of Agriculture, The University of Wisconsin, Madison, Wis. Sectional Meeting — Present Rural Credit Facilities in Aid of Land Purchase, December 1, 2 p. m.. Crystal Room. John Lee Coulter, dean, College of Agriculture and Director Experi- ment Station, The University of West Virginia, Morgantown, W. Va. GENERAL MEETING — Financing Farm Business, December 2, 9 :15 a. m., Louis XVI Room. Frank L. McVey. Sectional Meeting — Standardization and Marketing of Farm Products, De- cember 2, 1:30 p. m., Louis XVI Room. Herman W. Danforth, president. The National Council of Farmers' Cooperative Associations, Washington, 111. Sectional Meeting — Financing Farm Business, December 2, 1 :30 p. m., Crys- tal Room. James C. C.\ldwell, president, The First National Bank, Lakefield, Minn. Sectional Meeting — Standardization and Marketing of Farm Products, De- cember 2, 8 p. m., Louis XVI Room. MILL.A.RD R. Mi'ERS, editoi-, The American Cooperative Journal, Chi- cago, 111. BUSINESS MEETINGS — Frank L. McVey. viii GENERAL COiMMITTEEMEN GENERAL COMMITTEEMEN The National Conference on Marketing and Farm Credits Frank L. INIcVey, Grand Forks, N. D., cliairman, president University of North Dakota. Charles McCarthy, Madison, Wis., treasurer, chief Legislative Reference Library. Millard R. IMyers, Chicago, 111., assistant treasurer, editor American Cooperative Journal. Charles W. Holman, Madison, Wis., secretary National Conference on ftlarketing and Farm Credits. C. A. Lyman, Rhinelander, Wis., assistant secretary (by appointment), chairman Legislative Committee, Wisconsin Society of Equity. Frank P. Holland, Dallas, Texas, publisher Farm and Ranch and Hol- land's Magazine. Henry Wallace. Des IMoines, Iowa, publisher Wallace's Farmer.* John Lee Coulter, Morgantown. W. Va., dean of State Agricultural College, director Agricultural Experiment Station. Charles S. Barrett, Union City, Ga., president Farmers' Educational and Cooperative Union of America. Gifford Pinchot. Milford, Pa. L. D. H. Weld, New Haven, ^Conn., professor of business administration, Yale University. Lou D. Sweet, Carbondale, Colo., potato farmer. Herbert Quick, Berkeley Springs, W. Va., The Curtis Publications. E. P. Harris, INIontclair, N. J., president Montclair Cooperative Society. E. M. Tousley, Minneapolis, Minn. H. C. Sampson, Spokane, Wash., former secretary of the Northwestern Fruit Distributors. Clarence Poe, Raleigh, N. C, president Progressive Farmer Pub. Co. James C. Caldwell, Lakefield, Minn., president First National Bank of Lakefield, Farmer and Coiiperator. W. L. Ames, Oregon, Wis., president National Farmers' Congress. H. J. Hughes, Minneapolis, Minn., editor Farm, Stock and Home. H. J. Waters, Manhattan. Kans., pres. Kansas State Agricultural Col. Clarence A. Shamel, St. Joseph, Mo., editor The Profitable Farmer. H. E. Young, Chicago, member Executive Com. 111., Farmers' Institutes. L. S. Herron, Lincoln, Neb., editor Nebraska Farmer. Frank E. Long. Chicago, 111., publisher The Farmers' Review and the Stockman and Farmer of Pittsburgh, Pa. E. T. Meredith, Des Moines. Iowa, publisher Successful Farming. Thomas Cooper, Fargo, N. D., director N. D. Agr. Experiment Station. J. M. Caffrey, Franklin, La., sugar planter. George W. Simon. Chicago, 111.. Western Agent The Jewish Agricul- tural and Industrial Aid Society. H. W. Danforth. Washington. 111., president National Council of Farm- ers' Cooperative Associations. Arthur Capper, Topeka. Kans., president Capper Farm Journals, Gov- ernor of Kansas. * Deceased. OFFICERS .NATIONAL COUNCIL ix GENERAL AND STATE OFFICERS The National Council of Farmers' Cooperative Associations H. W. Danforth, Washington, III., president National Council. W. J. Ray, Colo, Iowa, secretary Farmers' Grain Dealers' Association of Iowa. J. W. Shorthill, York, Neb., secretary Farmers' Grain Dealers' Associa- tion of Nebraska. A. N. Steinhart, Bloomington, 111., secretary Farmers' Grain Dealers' Association of Illinois. H. J. Farmer, Airlie, Minn., secretary Farmers' Grain Dealers' Associa- tion of Minnesota. A. A. Lane, Sherwood, N. D., secretary Farmers' Grain Dealers' Associa- tion of North Dakota. J. T. Belk, Henry, S. D., secretary Farmers' Grain Dealers' Association of South Dakota. G. W. Lawrence, Larned, Kas., secretary Farmers' Grain Dealers' Asso- ciation of Kansas. 1^0 tfje illtmorp of our faittful ^ommtttrtman anb (So tDorkrr in tt)e abUancement of ^mrrtcan Agriculture ilenrp OTallace IBovn Maxtf) 19. XSZO ;©ifti Jfeliruarp 22. 1916 il^f toasi a farabe pionet r toijo bla5fb a trail to make easiier ttje lot of tfje glmerican fanner FOREWORD IN PRESENTING THIS VOLUME TO THE PUBLIC the committee believes that a new note has been sounded in the litera- ture of agricultural economics. In the three years of its existence the National Conference on Marketing and Farm Credits has interpreted the changing thought of Agricultural America. That thought, in those three years, has progressed from the individualistic viewpoint to the so- cial concept. This volume, perhaps, more clearly than any other current contribu- tion, voices the demand for cooperation among farmers in the sale of their produce and the purchase of their supplies, and advances the theory of state aid to farmers in the purchase of their farms. It was notable that the dominant thought of the last Conference centered on this need for the creation by the federal and state governments of a broad land policy. If the Conference discussions be any index of the public mind, the time is not far from us when America will grapple with the land question as a social issue, just as from the discussions of cooperation at this Conference, has sprung an agency whose purpose is the proper train- ing of the American farmer for self-help in his business operations. The committee regrets that it was not possible to print the discussions of the papers, but it has made arrangements whereby some of the dis- cussions will be given to the public in the near future. It has been able to present in this book a few of the addresses delivered at the Sec- ond National Conference on Marketing and Farm Credits, as well as those that helped make the Third Conference and epoch marker in agrarian history. MARKETING AND FARM CREDITS The third National Conference on Marketing and Farm Credits was held in Chicago, 111., November 29-30, and December 1-2, 1915, at the Hotel Sherman. The opening session began the even- ing of November 29 with Chairman Frank L. McVey presiding. At the roll call of states 42 were reported present at this session. What, who and why was this Conference, and as there had been two prior conferences, why a third one? The National Conference on Marketing and Farm Credits is an organization formed for the purpose of launching a move- ment to organize the agricultural interests of America for prac- tical work. "Better Business, Better Farming and Better Liv- ing," is the slogan. Elimination of the waste in marketing which now constitutes one of the largest factors in the cost of living and which also constitutes one of the most discouraging features of farm life is a prime purpose. To the men who are giving time and money to aid this move- ment, the term waste applies to every phase of production and distribution, from wasted effort on the farms, waste in the form of unmarketed products and waste resulting from inadequate banking accommodations for farm operators to the waste due to faulty packing and lack of standardization and the waste that occurs in transporting the products to market. And to these men the organizing of the agricultural interests of the country means the building up of the machinery necessary to eliminate or reduce waste of every kind. However, they do not purpose to take a leap in the dark. The have the experience of many European countries to guide them. They believe that what Germany, England, Scotland and Ireland have done, Amer- ica can do. They also believe that wihat these countries have found it necessary to do, America will find it necessary to do — if the farmers of this country are to be able to compete with the farmers of Europr I European countries have organized their agriculture and all the activities incident to th " andling of foodstuffs with dispatch 2 MARKETING AN1> FARM CRKDITS and yi>l without wasto. boi'ausc the war has foivod this step upon thoiu. Makiui? tho food supply moot tlio donuuuls, without oall- iug upou tiho rest of tho world I'or any oousidorablo quantity of oithor noooss{U"ios or oon\ forts, is a task to which Uorniau states- men, ooonomists and si'iontists have bent themselves with re- markable energy and amazintr sueeess. England, less dependent upon luMue ]n-oduetion, was late to see the importanee of this program, but by reason of eireunistanees has been foreed to adopt similar measures. Germany Has Mobilized Ag-riciilture (.un-nuiny not only is utili/ing every sqviare foot of ground available for agrieulture, but, through eoop^M-ativo methods, is assendiling and distributing agrieultural products with eeonomy and dispate:h, not alone to the army but to the eivilian popula- tion as well, (ireat Britain, after having permitted the deoad- enee of this fundamental industry through a long period of years, now is rapidly regenerating the ugrienlture of Ireland, 8eotlaiui and England, largely through cooperative methods whieh by eneouraging standardi/atiou of products nudvos eco- nomical and more convenient marketing possible. Tho end of the present world war will tind all Europe ofK- ciently organized for the production and distribution of food stutYs. Tho stern necessities of tlie nations engaged in war gave a groat impetus to this movement, and tho success with which the governments have boon able to make use of tho cooperative societies in assembling products o( the grade aiul quality re- qnired for tho army has constituted a practical denuMistration of the value of cooperation. The new methods, with their sav- ings of effort and money and with their ofticioncy and conven- iences, have come to stay. This et^cieucy acipiirod in time of war will remain when peace is restored. Tho .\morican farmer must be ready for this new order, else lie will bo at a disadvantage. With a few exceptions .An\erica has developed no marketing system worthy of the name. Agric\dture is almost unorganized, and marketing is still on the old basis wheiv waste exacts a tremendous toll. To prepare tho American farmer for the now order is the one groat object of the National ronforence on Marketing and Farm Credits. ORGANIZING COOPERATION 3 The Conference of 1915 did moi'e than disenss conditions. It considered how to do things more than what to do, and it discovered a way of doing them. The leaders in this movement are economists, bankers and head- ing farmers representative of every section of the United States. Among them are presidents of state universities and agricultural colleges, leaders in agricultural societies and well-known students of various phases of the problem of production and distribution. How to organize tlie agriculture of America was the great probn lem that came before the Conference this year. At the twoi previous conferences there was much discussion of what to do; At this, the third conference, attention was centered on how to do the things that all are agreed must be done. And from the Conference sprang an organization movement with a national headquarters, employing a corps of experts to be at the service of affiliating organizations, and to form coopera- tive societies in eomnuniities that need the service. MARKETING AND FARM CREDITS ADDRESS OF WELCOME IIaRKY B. MlULER Prosecutor for the City of Chicago First of all I desire to extend to the eluurmaii and to the dele- gates to this most important Conference, tilie sineei*e regrets of his liouor. tlie mayor, at not being- able to be here in person tonight. Those of you that are aequaiuted with the business of the city of Chicago know that right at this moment he is presiding over a rather turbulent council, and this matter is of so much import- iince that he thought it was utterly impossible for hiui to leave to come here. He wishes me, however, to express to you his most hearty, sincere Avelcome to the City of Chicago, and his fail- ui*e to appear lieiv in pei^son tonight will not in any way con- vey to you his lack of appreciation in your selecting the City of Chicago this time for your conference, or in his earnestness in ex- tending to you this welcome on behalf of the citizens of the City of Chicago. I siiid that we welcomed to the city this most important Con- ference, and I use those words "most important, " realizing just exactly what they mean and what they convey. T think, ladies and gentlemen, that a conference or convention of tliis nature is second to none in importance to any body of men and women that could possibly meet in a convention hall for the purpose of trans- acting business. AVe of the City of Chicago, the mayor and the people of this great city, feel honored that you have selected the City of Chicago this year as the place for holding this import^iut meeting. Chicago is a great and honorable city. It is the nmrketing place for all commodities; it is the central city of the United States. Here it is that the farmers send their grain;. here it is that the products of the soil throughout the entire western and northern and southern countries come from the farmei*s. Here it is where we mainifacture and sell back to you the things that yon need in getting the fruits from the ground and sliipping them heiv, and I think it is very appropriate and very benetiting in- deed that you have selected this great central market, the City of Chicago, as the place where you sliould deliberate over matters vof the most importance to the people of this country". HARRY B. MILLER 5, I know very little of the business that will come before your convention. I never had the honor of living upon a farm, and I lack that great distinction of being born on a farm; but still I realize to a certain degree and to a certain extent, perhaps not sO' much as you ladies and gentlemen do, the importance of the farm- ing interests of the United States. When we think that today the United States of America has a bumper crop, when I under- stand that the crop of 1915 exceeds that of any year for a number of years past, and then on the other hand see that the cost of liv- ing is so high, and that the people that consume this, the great consumers of the United States, with that great bountiful crop, are paying an exorbitant price for the necessities of life, this question, and I am sure it is a question which to a large extent will come before this convention, is one of the most vital questions of the day. You, ladies and gentlemen, who understand these things, have met here for the purpose of finding out why it is that this condition exists. And we are glad that you have come to this city, because we believe that here it is where you will find cooperation on the part of the officials and the citizens of this city. Here it is where you will find help on all sides to help you de- liberate and solve these great problems which you will be con- fronted with during the course of your convention. It is the desire of the mayor of this city and of the people of the City of Chicago, that your sojourn in our midst will be very pleasant to you, that the days you spend here may be a source of enjoyment, and may bring joy to you, and that the citizens of this city may treat you with such courtesy as it due you, so that when you leave the City of Chicago after your convention, that you will realize that you have the best wishes and best respects of the people of this city. I was very gratified, Mr. Chairman, when you read the lists of states to find that, according to my figures, there are only 6 states so far in which there is no delegate in this meeting. I think this is a wonderful gathering. I think that the people of the United States, the real produeei's of the United States, are represented in this gathering tonight, and I am glad as I am sure every citi- zen is glad that the real producers of the country, the men and the women that really give to the city population the necessities of life, have thought enough of the consumers to get together in a convention and to come from the 4 corners of this great country,, from places in many cases where it took you a day or more, and leaving your places of business and your homes for the one pur- j6 marketing and farm credits pose, for the doing of what? Of devising Avays and means whereby the great Auieriean piiblie through your deliberations and through your considerations and solving of these great prob- lems nuiy get the greatest satisfaction and the greatest happiness out of life. And we do indeed wish you God-speed in the great things that you will have before you in this convention. We know that what you do will only redound to the best interests and the benefit of the great public of this country. And therefore around your convention table in this convention hall, it is our sincere desire «nd wish that you may come to the conclusion, in a great many problems, which will bring the best results to the consumer of this country. ORGANIZING AGRICULTURAL COOPERATION THE WORK OF THE 1915 MEETING Chairman Frank L. McVey President of the University of North Dakota Every meeting makes a record of some kind, and it is the duty of the chairman to project the ideal of the meeting- in a clarion note. If he is not in harmony with the general purpose of those who attend, he cannot expect to do more than make discordant sounds for the listening world. Sometimes the chairman is so latitudinarian in his viewpoint that he touches all the keys and stops with a resultant sound so vast in volume that no specific note rings out clearly above the noise. In my capacity as chair- man of this Conference, I shall try to give evidence of such musi- cal capacity that the note of the opening speech may clearly indi- cate the purpose of the Conference. That note to express it in one word is cooperation, but a cooperation with the definite pur- pose of securing results in the marketing of farm crops and financing of farm operations. Agriculture and its needs are in the fore front of public discus- sion. "While it does not exactly share a place with the news of the war upon the front pages of our dailies, yet it does find a promi- nent place on the next page. Stupendous figures are printed every now and then of its vast importance. We are told that of the wealth produced in a given year, agriculture was to be credited for $9,000,000,000. Another feature of importance of this great occupation is that 36 per cent of the population is engaged in it or is supported by it. Despite this vast showing, agriculture, taken as a whole in this country, has not prospered. Here and there are exceptions to this statement despite the many activities ties that work to energize it and place it on a higher plane of operation. It is agreed that there must be changes and now it is pretty clear that the general features of these changes may be centered about three things : (1) better agriculture, (2) better markets and (3) better financing. The first of these, better agriculture, is fairly well taken care of through the work of the depart- ment of agriculture, in the activities of the many farming asso- ciations in the different states and by the training afforded in the schools and colleges of the country. But, it has been clearly 10 MARKETING AND FARM CREDITS shown that better agriculture depends upon an adequate system of tinanee. The fact of the matter is that the markets and the financing of agriculture remain about as they have been for the past quarter of a century. Improvements, of course, have taken place in the quicker transportation of products and in prompter financial service. Yet these have not touched the real problem. The farmer is still compelled to rely upon the market machinery, with which he has had little or nothing to do in the matter of its organization, to take the product to the consumer. Here and there standards of products have been worked out, but generally speaking, there are but few standards for the marketing of farm products. Disputes, misunderstandings and bad feeling natur- ally arise as a consequence. The problem of marketing, therefore not only includes the proper standardizing of the product and the placing of it in satisfactory carriers and containers, but it has to do with the transportation, the display in cities, the sale of the product and the accounting for moneys received as well. The railroads and terminal elevators have made advances in better handling facilities ; but the system of display of products is inade- quate and the farmer is constantly subjected to heavy charges of service for sale as the product moves on to the consinner. Bridging the Gap Between Farmers and Consumers Between the farmer and the consumer there is a great commer- vcial and financial gap. In the mercantile world this gap between the producer and the consumer is being bridged rapidly by the establishment of the necessary machinery of branches and agents. But, the fanner is playing the game alone and finds it increas- ingly difficult to protect himself against his own ignorance and ills isolation in the coimnercial world. The great industrial organizations have learned that coopera- tion between their different parts are absolutely necessary to their success. Thus, the producers of iron ore are organized for the transportation, smelting, manufacture and sale of their product to the consumer. ]Many other industries have foimd it neces- sary to do the same thing. Necessarily, agriculture with its many individual producers, occupies a very different position, but the dift'erence is not so great that the farmers cannot as a gi-oup profit by the lesson taught by the experience of these great industrial organizations. In foreign lands this has been done. One has but to point to the organization of agricultural activities in Den- FRANK L. McVEY n Tnark, Germany, France and Ireland to bring witness to the truth of this statement. It therefore is important that the farmer should come to a larger appreciation of the necessity of coopera- tion between the agricultural groups. Nor should political views be allowed to interfere in his attitude. It is not a qustion of socialism or individualism, of democracy or republicanism ; it is a question of efficiency and social betterment. Working- Out a National Org-anization Policy- Accepting such lessons as have been taught in the old world, the time for serious consideration of the whole problem is at hand. Agricultural difficulties are so far-reaching in their social effects that they must be worked at in a new light. It is time for a great agricultural society on a national basis to study and form- ulate the principles for the expansion of the nation's greatest business. How can individual farmers work with their neigh- bors ? How can neighborhood groups work with other groups of a similar character? The confusion of the present cannot con- tinue. This necessity of mutual understanding is not simply one confined alone to the agricultural group, but it has a far wider application as shown in the experience of England and France in the present war. The organization of agricultural groups under cooperative systems would mean a more adequate and systematic supply of food products in times of distress. Such an organiza- tion, hoAvever, will have the good will of all so long as it deals in generalities about the existing situation. But so soon as it may agitate for changes in the economic methods of distribution it will have the hostility of some of the adherents of present meth- ods. It, however, must be taken for granted that any change likely to modify situations will find obstacles in its path. There is still a third element in this problem to be considered. ' ' Financing the Farmer ' ' has been discussed by everybody nearly everj'where. Many suggestions have been made as to methods, but only a few feeble steps have been taken. Without question, no great industry can progress unless it has an adequate system of finance. The commercial world long learned this and the farmer must come into a clearer appreciation of its meaning. As yet, no plan has been attempted and no details have been made clear. It is now time that both be done. It will, therefore, be seen that a great problem of vast extent and an enormous difficulty exists in the marketing and financing of agriculture. 12 MARKETING AND FARM CREDITS What the First Conference Did It was this vast problem that was in the minds of those who* called the first National Conference on Marketing and Farm Credits. The first one was held in Chicago in April, 1913. The program was given over to the discussion of the general phases of marketing and financing of farm credits. It was the hope of those who called the Conference that by common council with each other, light might be thrown upon the ways of relieving some of the defects of the present methods of marketing farm products and financing farm business. The call for the Conference was generously accepted. The delegates were really laying a new trail in the economic woods of modem industry. In reality the purpose of the Conference was to bring about a readjustment of the farming population to harmonious relations with the indus- trial world. The first program dealt with the various aids to agriculture. After emphasizing the wastes in distribution, the sessions dis- cussed the existing types of organization and what they had done in their relation to markets and financing the farmer here and there. The last two sessions were given over to discussions of f aimi credit systems in vogue in different lands. Three years have passed since that meeting. It is difficult, however, to measure the work of that Conference. The inspiration given it by the chair- man, Colonel Frank P. Holland of Texas, assisted materially in its success. The idea of the first Conference was kept alive by the secretary of the Conference, Mr. Charles W. Holman, Dr. Charles McCarthy of Madison, Wisconsin, the interested coopera- tion of the farm papers of the country, and many individuals scattered through the land. Freedom of speech was maintained throughout and it was clearly demonstrated that there was a great interest in an important national problem. Cooperation Keynote of Second Conference Almost exactly a year later the second Conference was called.. Its keynote was ''Cooperation and the Need of Careful Considera- tion of the Eeports of the American Agricultural Commission,'^ which was then presenting the result of its studies in Europe to Congress for consideration. The outcome of this Conference was definite ajnd clear in the recommendation that a third Conference be called, a survey be FRANK L.. McVEY I3 taken of the cooperative agencies and an exhibit of containers be organized as the concrete features of the Conference. It is unfor- tunate that 2 of these suggestions have not been carried out. The declaration of war in August, 1914, with its accompanying demoralizing of financial matters, together with the absence of the secretary in Europe, as a special investigator for the federal ^oveimment dn the spring of 1915, prevented the financing and staging of the exhibit. The survey that was to be undertaken was much more extensive than appeared at the time of the Con- ference. Moreover, the lack of funds and the removal of the chairman of the committee, Professor L. D. H. Weld, to New Haven interfered seriously with the plans. Scope of 1915 Conference The program of this year, however, is so much wider and ex- tensive in its study of the situation, than in any previous year, that the disappointment and the failure j;o bring results in the two features just mentioned may be offset in its organization. The experience of the past 2 Conferences has much influenced '^its form and content. One of the things learned in the previous years was the extent and varied industrial conditions existing in the United States. It is a big country that we live in/ and what is true or what is needed in one part is not necessarily true or necessarily needed in another part. Moreover, it has been learned that there are more than one general class of farmers interested in these problems. Trite as this statement may be, nevertheless most of the discussions oi the past 10 years have taken it for granted that there was only one general class to be considered. Starting with these two simple propositions, the program has been built up. Thus, the two great topics of the meeting are "Standardization of Products" and "The Financing of Farm Business. ' ' The keynote is set in this, the first meeting, and then follow the three general meetings on ' ' Standardization of FaiTti Products" and the other two upon "The Financing of Farm Business. ' ' This is not all. In the analysis of the prob- lem, standardization of the great staples necessitates many meth- ods just as the problems of finance must include the needs of the men with land, the tenant of good standing and the landless man. Having thus set the discussion in the general meeting these topics are taken up specifically and in more detail in the section meetings, so as to emphasize the needs of the different parts of the country. 14 MARKETING AND FARM CREDITS Reaching to the Heart of American Life I cannot bnt assert that it is a great program that has been pre- pared for this Conference. It is full of real stuff that touches the problems of agriculture, and the Conference may well count itself fortunate in the many notable speakers who are present and in particular in the two distinguished gentlemen who have come far to give us the advantage of their wisdom and experience. In; Sir Horace Plunkett, we have the enthusiasm of the leader of a great cooperative movement in Ireland, and Mr. David Lubin,. the United States delegate to the International Institute of Agri- culture at Rome, brings us the interest of a prophet and the ex- perience of a wise man in the held of agricultural credit. Added, to these are others from many parts of the land. Delegates, too, have come from many walks of life. All of these come in the- spirit of helpfulness and determination to make this Conference successful in establishing a real beginning point in a New Agricul- ture. The union of the National Council of Farmers' Coopera- tive Associations with this Conference has added a new emphasis to the spirit of cooperation, which must be one of the great lessons of this meeting. In the final analysis, no one is going to solve the farmer 's prob- lem for him. He must do that for himself. Nor will he solve the great problem of marketing and farm credits by his clannish at- titude of class spirit. The problems are fundamentally economie and must be based upon sound principles of business and finance. Hence cooperation becomes the keynote, working as it does for re- sults in the standardization of products, and in the hopes for a system of finance that will do for farm business what the banks have done for commercial enterprises. The Beginning of a New Era Looking back at the results of this Conference after the f>assage of a quarter of a century, I think it will be possible for those of lis who are alive at that time to set it down as the beginning of new things. It will be more and more apparent as the 25 years grow to a close that we must rely upon the intelligence, wisdom and justice of men themselves to bring results in the New Agri- culture. The honor guest of this evening can look back to the beginning of cooperation in the land of his fathers. He can see Avhere the foundation Avas laid down and we in this meeting of SIR HORACE PLUNKETT I5, 1915 will catch anew the spirit of cooperation when we clearly apprehend its importance to the welfare of the nation. If all goes well, 25 years ought to see vast changes for the better. Agriculture financed on a business basis, marketing carried on to the advantage of bettering the producer and con- summer, economic waste reduced materially and all men open to wider opportunity and better conditions of welfare. So begins the Conference of 1915. To it I welcome you. Over it hovers the angel of freedom of speech and through it permeates the blessed spirit of fairness, justice and wisdom. THE NEXT STEP IN THE ORGANIZATION OF AGRICULTURE The Rt. Hon. Sir Horace Plunkett, K. C. V. 0. Founder and President The Irish Agricultural Organization Society; Former Minister the Department of Agriculture and Technical Instruction for Ireland, Dublin, Ireland TJie question upon which I have the honor to address you is one I have studied in its bearings upon your country and upon my own for six and thirty years. For the first 10 years of this period I was engaged in ranching and farming in Wyoming and Nebraska. I have continued to make an annual visit to those happy hunting grounds of my less serious days. During the quarter of a century which has since elapsed, my chief work — indeed my life's work — has been the organization of agriculture in the little island to which I belong, 4,000 miles away from the scene of your Conference. That work included 7 years dur- ing which I was the minister responsible for setting to work the Department of Agriculture and Technical Instruction of Ire- land, in the creation of which I had some share. But it is as an organizer of voluntary effort among farmers that I gained most of the experience which justifies me in taking part in your de- liberations. How Urban Thougfht May Menace Country Life This Irish- American experience induced me, an unhyphenated Irishman, to write dn 1910 a series of articles for The Outlook which were subsequently enlarged into a little book and pub- 16 MARKETING AND FARM CREDITS lished mider the title. The Rural Life Pi-obleui of the United States. To this work I venture to refer those who may eare for a fuller statement of my opinions than is possible "wdthiu the limits of this address. In it I traced the origin of the problem to the industrial revolution, which began at the end of the eigh- teenth ceutuiy in England. There the idea grew that the politi- cal and economic strength of countries depended alike on indus- trial development at home and commercial expansion abroad. This economic theory, which was probably true at the time in England, on account of her insular position, spread throughout the English-speaking world, where it has ever since led to the decline, mostly in luimbers but always in national position, of the agricultural populations and their industry. The city had been developed to the neglect of the country- and our civilization had thus become dangerously one-sided. I argued that in the interests of national well-being, it was high time for steps to be taken to counteract the townward which in some respects is becoming a downward tendency. I sketched a scheme of rural reconstruction which was being worked out in Ireland, where the solution of the problem of rural backwardness was found to lie in the reorganization of the farmer's industry and business upon cooperative lines ; and I described and recom- mended for adoption in the United States a new agency of social service, specially invented for the pui^pose in view, called th^ Agricultural Organization Society. The proposal may have been premature, but, in the last 5 yeai*s, thought upon the rural problem in the United States has advanced rapidly. When I ^\Tote, the conservation and country life policies of the second Roosevelt administration had given the first big impulse to the new agricultural thought. A good il- lustration of new interest in the farming indnstiy was afforded by the appearance of rural credits as a prominent plank in the platfonn of the three parties in the presidential election of 1912. I am afraid it was a case of window-dressing, if I may use an old- oountr^' political metaphor. In the following year the American Agricultural Commission toured Europe in search of informa- tion on coopei-ative organization and rural credits. I may note in passing that they spent in Ireland the greater part of the time allotted to the British Isles, and their report shows that the agricultural organization movement there had made a consider- able impression upon this veiy representative body of agrieul- SIR HORACE PLUNKETT 17 tural inquirers. But it is to the National Conference on Market- ing and Farm Credits that I look to give large practical effect to a rapidly advancing movement of thought which is demanding a solution for the problem of rural life in the United States. This estimate of the importance of the Conference is not an empty compliment in order to ingratiate myself with you. Your program (which in the form it has reached me was only provi- sional but will I presume be substantially adhered to) opens with a discussion of cooperative legislation. Then, after a de- scription of the work before the Conference by its chairman, the discussion centers upon the organisation of agriculture it being left to me to suggest the next step to be taken m the fur- therance of that object in America. I take it, as an indication of what is expected of me, that the next speaker at the first meeting, Mr. Millard R. Myers, a well- known student and organizer of agricultural cooperation, is to review the successes and failures of the American movement. The three following days are to be occupied in discussing a wide range of practical subjects, every one of which appears to me, as an old student of and worker upon agricultural problems, to be of real importance. But similar programs (though, I admit, never, from my point of view, quite so comprehensive or well ar- ranged) I have seen before, and in some cases, though not many, the practical conclusions arrived at have adumbrated a large advance in American agriculture. In no case have the practical results been commensurate with the excellent advice which has been given to farmers. Hour Strikes for Reorganisation of Agriculture I, of course, stand for a complete reorganization of agriculture upon cooperative lines and in theory I do not find any dissent from this view of the farmer's chief need. Yet I doubt whether it would be possible to prove that one per cent of the agricultural business of the United States was transacted by genuinely co- operative associations of farmers. This fact does not discourage me in the least. The time was not ripe until now for the first big movement in the desired direction. We may find that the next step in the organization of agriculture, which to me is the first really effective step cannot yet be successfully taken, but personally I am quite sanguine, from what I have learned from my American friends who are working in the same field with me 2 — M. F. C. 18 MARKETING AND FARM CREDITS for rural progress, that, with the assembling of your third an- nual congress, the hour has struck. My reason for this opinion is so largely a matter of instinct bom of experience that even a much fuller argument in support of it than time would permit would be inadequate. I am pro- foundly convinced that the slow progress which has been made in bringing your agriculture into line with an urban ci'vilization, which the great Republic of the West has achieved, is due to the tendency of all the English-speaking countries to apply ur- ban principles and urban methods to rural conditions. I could illustrate my meaning by a survey of the organization of agri- culture in the many parts of the United States where I know it by reading or personal observation. I find, in every kind of associated action by farmers, that, in most cases, the organiza- tion is on the recognized corporation plan. It is frequently called cooperative, but, even if some of the cooperative forms are observed, the spirit is lacking. In many cases, cooperative laws have been demanded and conceded but the bold Roman hand of the city lawyer is more evident than the horny hand of the tiller of the soil. Not long ago I was sent a copy of the Clayton Anti-Trust Act, Clause 6, which purported to give to cooperative associations of farmers immunity from the penalties inflicted upon '^combinations in restraint of trade". The clause was so drafted that any cooperative organizer could have told the legal luminary responsible for its terms that it would be in- operative. Misusing Term Cooperation Then again, the use of the word "cooperative" in the United States — and here I am afraid the department of agriculture is not without blame — has gone a long way to substitute bogus for real cooperation. But these aspects of the question must not be treated by me or I shall be trespassing not only on your time but on the province of other better informed and more competent authorities who are to address you. The one point I desire to emphasize is that all the splendid work which ds being done by farmers and for farmers to try and organize their industry so as to give it its proper place in the national economy must fail of its full purpose until cooperation — the vital principle of rural progress — is firmly established in the working lives of your rural communities. To all who have not labored in this field of social endeavor the difference between true and false cooperation seems SIR HORACE PLUNKETT 19 fanciful, theoretical and unimportant. Those who have so worked will know that never could it be more truly said : "Oh the little more and how much it is And the little less and what worlds away." What Was Done in Ireland I have been asked — and the request is in harmony with the intensely practical character of your program — that I should base any constructive proposals I have to make upon actual ex- perience gained in dealing with the rural life problem of Ire- land. In this way I can undoubtedly make my best contribu- tion to the thought of the Conference, but I must preface this part of my exposition with two observations. The Irish movement is the creation not of what the world calls practical men but of idealists. In the affairs of life it is always coming home to us that ideas are the most practical things in the world, and it is sober fact that the principles of agricultural development which underlie this work in Ireland ow e not only their theoretic acceptance but also their application to the farmer's industry to poets, writers of plays and students of philosophy and sociology as well as of economics. It needed these thinkers to see wherein the agricultural mind had failed to grasp its subordination to tjie mind of the city. It was these men who, desiring to render to the practical life of their country the services most needed in the circumstances of the time, dis- covered not only the fundamental principle of rural progress, which has now been embodied in a definite agricultural policy, but who also discovered a new working method and who de- signed a complete machinery for giving operative effect to that principle. And it is not only in the large grasp of situations arid in the establishment of guiding principles that the men of vision come down to business. It was a poet and an artist who first impressed upon the Irish farmers that they were the most important of the nation's manufacturers and, as such, that they were entitled to buy everything that they required for their in- dustry at wholesale prices just as he bought the brushes, paints and canvas required in his craft. This same man it was who first proclaimed that no nation could prosper which subordi- nated the interests of its producers to those of its distributors. The second preliminary observation is important, though some of you may say it is superfluous. I think it well, however, to anticipate the objection that the agricultural conditions of Ire- 20 MARKETING AND FARM CREDITS land and ot" the I'liitod States are so widely diit'erent that the praetieal exporionee. upon whioh .1 luaiuly rely for the detiiiite constnietive suggestions 1 have to make, is hardly relevant. I can only appeal to social workers to assent to the proposition that the Avidest diftVrenee between the physical, social and eco- nomic conditions only serves to emphasize the transcendent iiu- portance of the hniuan factor. It may be sometimes hard for the social worker in the modern city to realize this truth : there is no fear of his forgetting it in the country. Why the Irish Needed an Agricultural ProgTam Whatever may be tliought of the efforts which have been made to develoyt the agricultural industry of Ireland, the neglect of it Avill. when the rural problem has been generally i*ecognized and dealt with, be ivgaxded as the classic instance of the bad consequences of the industrial revolution. The lack of coal and iron and the possession of considerable agricultural resources made it obvious that the prc>sperity of the country must depend upon a sound and progressive agricultural policy. That, at any rate, was the view of a body of rural social workei*s who, as far back as the year 1889. set themselves to attempt a complete i*e- construction of the agricultural life of their country. Ireland was then in the throes of an agrarian revolution simi- lar to that which has taken pkice in almost eveiy other Euro- j>eaai country. After a contlict extending over' the lives of sev- eral generations it was becoming plain that the inevit-able con- cession must be made. The farm lands would have to be trans- ferred from the small boily of largely alien owuei^s to the large body of tenants who were mostly of the peasant class. At the present time this huge transaction, involving the use of British ei"edit to an aggregate amount of a billion doUai-s, is about one- half comx-»leteil. and so far as the tenure factor is concerned the agricultural problem of Ireland nuiy be said to be solved wholly in principle and largely in practice. We did not have to touch the question of tenure because it had been happily settled, but we had to tight against the gener- ally accepted view that once fnrmei"s held their laud upon satis- factory terms and conditions they could be very well left to look after their own business and neeiled no uu^re external help, offi- cial or voluntary, than the manufactuivrs or tradei*s of the towns. This view iguoivd the economic changes which were taking place, notably the development of rapid and cheap trans- SIR HORACE PLUNKETT 21 portation. The opening of the world market, as the economists called the result of the ever widening competition between pro- ducers and manufacturers, brought it about that farmers had to depend for their comfort and prosperity, quite as much as those engaged in other business undertakinlgs, upon a proper organiza- tion of their industry for production and marketing, as well as for the finances needed for both operation's. The Irish farmers Jiad, therefore, to be organized for the ad- vancement and protection of their interests. Defective as the old land system was, the estate gave a sort of corporate exist- ence to the tenants and when there was a good landlord, or even a good agent, their business was fairly well done. The land purchase scheme of the Britisji government, by buying out the landlord and treating each tenant individually as a debtor to the government for his land, abolished the only form of organiza- tion the farmers possessed. Hence, we had to think out a scheme for providing tens of thousands of small isolated farmers with some permanent form of organization which might in time lead to the establishment of the prosperous rural communities which should be the governing element in the Ireland of our dreams. Working out the New Policy You will see from this brief statement of the main facts that the government had swept away the agricultural economy of a country obviously depending for its prosperity on a well organ- ized agriculture and we had to build upon the ground thus cleared a new scheme of rural life. After a study of agricul- tural development extending over the continent of Europe, we adopted a fundamental principle of rural progress which is the distinguishing mark of the Irish agricultural policy. We ,held that if you would solve the rural problem you must approach it from three points of view. You must regard agri- culture as an industry, as a business, and as a life. To the in^ dustry must be applied the teaching of modern science, and that is the work of government and of educational authorities. Into the business must be introduced the methods practised by those engaged in every other occupation, and far the most important of these methods is combination, whenever things can be done more efficiently or more economically collectively than individ- ually. This, we hold, is the function of voluntary effort. It is work which cannot be done for the farmers, but must be done by them, and even the way in which they are to do it, of which I 22 MARKETING AND FARM CREDITS shall speak presently, eannot be taught to theui by governmeutal agencies. Similarly, the life of rural eouiuiunities uuist receive as much thought and eare as are lavished on the analogous prob- lems of eity populations. Unless these tliree things are done — unless the industry is made adequately productive, and. the business is economically and ef- ficiently transacted — unless, most important of all, life upon the farm is pi*ovided with the physical comforts, the social pleasures and the intellectual satisfaction which are needed as a counter attraction to the lure of the modern eity — neither the rural popu- lation nor the industry which feeds the nation will occupy the place which properly belongs to them in the national life. Such is the broad principle of Irish agricultural policy, with its threefold aim. As I have said, the tlu'ee lines of advance — which we may call the technical, the coiumercial and the social — nujst all be followed. The government must do all that is neces- saiy to teach the farmer to farm. To that end we secured ihe creation and the adequate endowment of a suitable department. For the organization of the business — and this is the part of the work with which you are chietly concerned and I am asktni to deal — we invented the new agency of social service which we named the Agricultural Organization Society. The sole func- tion of this instit\ition is to teach farmers how to combine for business purposes. But this apparently simple tiisk has to over- come the auti-agrieultural tendency, the character of which I have suflficiently indicated. In the urbanisation of all thought the townsman is the business adviser of the farmer, but in one vital matter the advice of the town misleads the country. "Big Business" has enthroned capital as the dominant factor in pro- duction. About the only form of combination inidei*stood in your" country is the capitalistic form. In the British Isles, as you knoM", the cooperative system had its origin. But at the time I am speaking of — 25 year ago — cooperation had gone little be- yond the elimination of middle profits in the purchase of the do- mestic requirements of industrial workei*s. The joint stock company plan, under w*hieli, as you know, all the profits and all the control of industries go to capital, held the field. f Why the Joint Stock Company Fails Now the corporation or joint stock company form of combina- tion is wholly unsuitable to farmers. When they eombdne their object is not to make out of the undertaking big pi-ofits for the- SIR HORACE PLUNKETT 23 capital invested, but merely to improve the conditions under which tjie participants conduct their own industry, the control of which they have no intention of giving up. For reasons you well understand — reasons both economic and social — they can combine successfully only under the cooperative system. But this system is necessarily somewhat more complicated than the capitalistic system, probably because it has to secure an equitable arrangement between a larger number of interests. Our farm- ers, of course, did not understand this and the available business advisers knew and preferred the joint stock plan. So did the lawyers, whose fees for organizing companies were generally out of all proportion to the trouble it cost them. For these reasons our newly invented organizing agency had to train field agents. These are called agricultural organizers and are virtually the agricultural counterparts of the efficiency experts who in recent years have become a very useful addition to commercial and in- dustrial life in the Umited States. So much for the principles and main working methods of our Irish movement. I now come to a very important question of procedure. Of the three reforms which, as I have said, have all to be undertaken before the rural problem can be solved, the first — and the one which is the foundation of the other two — is that which in other connections is more naturally placed second — the organization of business. Unless this order is observed the greater part of the work of the governmental and educational au- thorities in teaching farmers is wasted. Farmers will not invest more capital nor apply more thought and energy to production unless they are in a position) to reap the full reward of the im- provement in the quality and the increase in the quality of their product wliich is too often captured by the agencies of distribu- tion. It is also a matter of administrative experience that by far the best local agency for governmental and educational bodies to work with among fanners is a voluntary association of the latter for mutual business advantage. Nor until you have got people to come together in the business of their lives and have shown them that it is for their benefit to do so is it easy to organize them for the higher purposes of social and intellectual advancement. This business bond, we find in Ireland, overcomes the difficulties of racial, religious and political antagonisms, and I am convinced that it is the only solution to the difficulties which have been ex- perienced in organzing polyglot communities in some of your states. 24 MARKETING AND FARM CREDITS Irish Rural Problem a Universal One The rural problem, then, not of Ireland onl}^, but of the English-speaking world, is to be solved by treating it compre- hensively and giving precedence to a part of it which the whole trend of modern economic thought has emphasized in the cities but ignored in the country. The principle involved is, I think, correctly stated in our Irish formula, "Better farming, better business, better living, ' ' always remembering the working direc- tions that you must begin w'ith better business. All tliis I know is somewhat theoretical, and purposely so be- cause we are discussing principles worked out in Ireland, but ap- plicable to the very different conditions of your country. To show you, however, that there is some practical achievement at the back of our theories it will interest you to know that at The present time there are in Ireland slightly over a thousand agri- cultural cooperative societies of various kinds, with an aggregate membei'^liip of a little more ihan 100,000, the vast majority of whom are of the small farmer or peasant class, and that they are doing an aggregate business of some $20,000,000. It would be safe to say that a \ery much larger volume of agricultural busi- ness is done in a manner far more favorable to the farmer than would othenvise be the case, on account of the example set and the competition established by cooperative effort. I do not wish to exaggerate the importance of these results, but they cannot be fairly judged without taking into account ad- verse conditions under which they were achieved. In the first place, the trade opposition to any form of cooperation among fannei-s was far more powerful a quarter of a century ago than it is today. The agrarian conflict, with all the political and re- ligious strife that accompanied it, had made the task of the mis- sionaries of self-help peculiarly difficult. The chief opponents of cooperation, the small country tradei*s, had immense political influenportunities in the eomnuinity if' it dix's not develop a trade suttieiently strong to enable it to em- ploy a maivagvn-. a bookkivper and in most instiinees from one to^ tluw other pei">ple all of the time. Kegaixlless of the form of oi*g!unzation. farmers have learned that a retail soeiety eaunot do business at wholes^de priees and sueetvd. It ei>sts money to do the b\isiness and a neeesiSiiry mar- gin must be taken on the n\ereha,udise haudhHi to eover the in- teivst on the iuvestuunit and the expense of handling. Need of Business in Farmers* Societies. Farmei-s* organizations the Siinu" as any other organizations; n\ust run on business principles and take a margin lai*gt^ enough to guarantee sueeess. 1 estimate that at least 50 per cent of all etVorts at eivp^'i'^^tion among farmei's in their grain elevators. civameries, banks and stoivs undertaken during the past 15 veal's, have used the onlinary iHU-poration form of oi*ganization. Tliey have capitalized fnuu $o.OiX> to $7r>.lXXl have placed the par vahie of shaivs at tVuu $10 to $100 each and have sold the stoek to the faxmers in the community. In many eases they have taken in the people of the tow^l including the bankers and meivha.nts. ^lany of the farn\ei's who wen^ lai*ge pivdueers at the tin\e the s^x'ieties weiv oi'gani/ed aiv now rerired aaul have no grain or other farm pivduee to sell. ilost of the couvpauies. at least during the past 10 yeai-s. have made a tinancial success, thousjmds of them have accuuuilated MILLARD R. MYERS 29 good suri)lus and arc in, a. prosperous condilioii. I lor one am convdnced that it is possible for the farmers to organize in tho same way tliat all oilier business is organized and make a com- mercial success of the uiuiertaking. As final evidence in this argument I refer you to tho Farmers' Qnun Company a.t Syracuse, Nebi-aska, wiiic,h has been success- fully conducted on this plan for a cpiartcr of a century. The present manager has kept the position ol" manager lor 22 years. This illustration can readily be iiudtiplied by Inindreds of suc- cessful companies in the grain belt that, are organized on tlu; or- dinary corporation plan and that havi; ma(li> a success of their business. They 'have been able to meet competition; have forced the business to be handled on a close margin and have i)aid satisfac- tory dividends to the stockholdei's on the investment. Please note that I say *' these, companies have made a success financially of their undertaking." T desire now to call attention to the wejdtncsses which show up in time in the nuijority oL' these compajiies. The strong tendency of all farmers is to get away from the fimdamental purpose of their organizations, namely, to ^make a market. If they are very successful for a few years, they l)egin to accumulate a good sui-plus. The stock becomes an attractive investment from a dividend paying standpoint. The spcculatore buy it. By speculators I mean retired farmers, banJkei's and other conununity interests. Most societies have tried to protect against this in so far as possible by placing in the by-laws a limitation upon the number of shares that any per- son may own. As you all know some communities are blessed with large families and by the time the grandfather and grand- mother, the father and mother, all the children and grandc^hil- dren, uncles, aunts and cousins get the limit of shares you find large holdings in one family. The tendency to centralize owner- ship and control is almost too strong to be withstood. Whether this occurs or not just in this manner the large sur- plus is looked upon by the renter as having been brought about by an unjust profit. The competitor naturally argues that the farmers' company is taking as wide a margin as he is and points to the surplus to prove it. The result most naturally follows that the renter concludes that there is no difference between the f armere ' company and any other company ; that both are out for the profit they can make, and that it is up to him to sell his grain or other product in the best market he can find. As a cou^ 30 MARKETING AND i'ARM CREDITS sequence the farmers' cooperative company has little or no ad- vantage in its effort to secure trade from the farmer. The population of an agricultural community almost com-- pletely changes every 10 years. The active producer of today retires or moves away and the new farmers look neither back- wards or forwards; aaid thus the farmers' corporation, (so-called cooperative society,) stands to him and thus to the whole com- munity as a business enterprise run for profit and has no very decided advantage over the independent dealer or the line house operator. Meanwhile the stockholders are looking anxiously for large returns on their investment. They are perfectly willing to accept 100 per cent dividends if the company can afford to pay it. They t^ke pride in knowing that their original invest- ment of $50 is worth $100, and this tendency growing sti*onger and stronger changes the purpose of the corporation from that of making a 'market for the farmers of the community to that of making a margin for its owner. • Corporation Weak in Teamwork The second weakness of a corporation is its absolute inde- pendence of all other organizations. Its owners say ''We are making a success of this business here, let other men in other towns do the same." The cooperative spirit which should exist between different bodies of farmers operating to the same end is lost sight of. The managers and directors and the entire body of stockholders have a tendency to ignore all kinds of cooperative education. They feel that they are so well entrenched that they do not care for it themselves and they are just normally and nat- urally a business institution. The directors are afraid to take the interest they should take in a larger work for fear they will be criticised by the stockholders. It is needless to say that this attitude on the part of the indi- vidual society will greatly retard if not completely prevent any larger federation of the so-called farmers' cooperative societies. These weaknesses of the joint stock method of organization are so \dtal in their working that they practically destroy the funda- mental purpose of the organization and are therefore considered by the writer as wthoUy inadequate. We have said farmers' organizations must invest money, they must build and equip warehouses suitable to the business engaged in. They must employ a manager and develop a volume of busi- ness sufficiently large to pay a good man well. MILLARD R. MYERS 31 The corporation fails in the test of years to make a market. The partnership is thrown out without consideration chiefly be- cause it involves the feature of unlimited liability. The farmers are not willing to become responsible pei*sonally for the debts of the society. This brings us to a consideration of the coopera- tive system of organization. Rochdale System Good for American Farmers After years of careful study and observation both in Europe and America I am convinced that the Rochdale system of cooper- ation is best for American agriculture. In fact it is so well adapted to our needs that it fills every possible emergency. It is not only beautiful when considered by idealists but it is in- tensely practical when considered by business men. The aver- age agricultural business organization consists of from 100 to 150 farmers. While we will concede that it is better where possible to have these organizations composed entirely of pro- ducers I see no objection to allowing retired farmer or the friendly business man to own shares in a cooperative society. Under the Rochdale system each man will have one vote re- gardless of the number of shares he owns. This qualification guarantees the society against the control and manipulation of capital. So long as there are 3 members in the society and 2 of them are producers they will control the society even though each of them has but one share and the speculator has- 98 shares. For this reason there is no desire on the part of a manipulator to get control of a cooperative organization. The second provision is that only a fair legal rate of interest shall be paid on the capital invested. This is usually limited to 8 per cent or less, and in some states the limit is 10 per cent. This second qualification prevents the centralization of the shares. There is no very great incentive to purchase shares of stock that do not carry a vote with them and on w^hich you can- not receive more than the legal interest rate in the form of cash reitums. Third: After a surplus which will guarantee sufficient work- ing capital has been secured all other earnings are prorated to the members on a basis of their sales to the society or purchase from it. This division is usually made once a year inasmuch as in most business enterprises it is not convenient to take an inven- tory and determine the earnings oftener than once a year. In the creamery the same result is obtained by settling for the cream. 32 MARKETING AND FARM CREDITS once or tAnoe a luoiith after paying all necessaiy operating ex- penses. The result of this trade dividend is the wiping out of all unnecessary surplus and of giving to the persons who furnish the trade on which the profit was earned the full benefits of his trading. What a Kansas Society Did For Itself To nuike the value of this method clearer I tell the case of the Farinei*s' Grain Co. at Ensign, Kas., during the year which closed Jainiary 1st, 1915. The company made a profit of over $22,000. T^ey consigned a large volume of w^heat south. By the time it reached Galveston it had jumped several cents per bushel and fhe earning was very large. When the year was up the company paid interest on the money invested and then paid each stockholder an additional dI^o cents per bushel on his gi*aiu. In a properly organized cooperative society the shares are small enough that there is no renter within readi of the company who is not able to buy at least one share of stock and become a share- holder. This guarantees to him that his company Tvill pay him all his produce is worth on the nuirket. will operate economically and elficiently and at the end of the year will pay him an addi- tional premium, providing the company has any surplus to divide. The tendency of this fonn of organization is to extend its membei*ship to every possible customer. The benefit is so at- tractive that eveiy mau who can possibly do so wants to become a member. The plan is so equitable and fair that it appeals to eveiy fair-minded pei"son. The competitor finds no vulnerable point of attack. It is manifestly fair to 'the investor because he gets interest on his money. It is fair to every member be- cause he has as much of a voice in its management as any other member. It is fair to its patrons because each patron may be- come a share holder and thereby be guaranteed that his product wiU be sold in the best market of the world and that he will re- ceive the highest market price for it after the necessary operat- ing expenses have been deducted. The plan is democratic and the method is of the highest tA-pe of business practicability. Under this plan the patrons vrill not object if the society takes a sufficiently 's^ide margin to guarantee it against loss. If the market is precarious and the manager finds it necessary to exact a little more toll to insure the society against loss, the customer either will hold for a little later market MILLARD R. MYERS 33 or ih.€ will willingly accept the rule of the management because he knows that if the society makes a handsome profit on the busi- ness of the year it will come back to him as a dividend on his trade. Where the company is carefully managed it will be the rarest exception for it to be necessary to make up a loss. Should it be necessary to make up a loss for a society that is managed on the Rochdale system, it would need to be made up in about the same way that it is made up when the loss is sus- tained by a corporation or any other form of business enterprise. It may be done by assessment but more than likely it will be necessary to reorganize or at least canvass the membership and ask them to subscribe additional funds. The Rodhidale plan provides that a small portion of the earn- ings be set aside for educational purposes. The law under which most of itlie societies both at home and abroad operate allows a proportion of the funds of the local society to be invested in a wholesale society. This is also provided in the by-laws of each local organization. This enables the cooperatives to spread out and occupy in a competitive way the field in which they operate. Local Units a Necessity of Success Ths brings up the important question of expense. I have little use for the many efforts at cooperative organization so com- mon in this countrj^ where the individual farmer invests money in a manufacturing plant or a packing house or a wtholesale so- ciety of any kind located far away. In most instances he can- not be a patron of the enterprise himself and the ordinary cooper- ative benefits can never accrue to him. The single individual investor is too small a unit to be joined together at a long range successfully. Cooperation is essentially a home-grown plant. The farmers can cooperate with each other in shipping their livestock, butter, eggs, hay or grain. They can cooperate in forming a local society which will sell them the bulk of the farm supplies. They may occasionally here and there cooperate in organizing a general store but in this day of mail order competition and department store competition, this is a special proposition which the farmers are not able to handle successfully. But in lines which they use in bulk and under- stand thoroughly they are successful. After the local society is organized on the Rochdale plan and becomes a successful unit it is then an easy matter for these community units to federate with similar cooperative organiza- 3— M. F. c. 34 MARKETING AND FARM CREDITS ■tions in tllie same state or even in other states for forming a wholesale society. The investment in this case should be limited as also the voting' strength should be limited so that the control would remain with the local societies. A body of stockholders considering an investment of a thous- and dollars in a wholesale society or even a board of directors considering it would be able to analyze it carefully and thoroughly and even would be much more likely to succeed than the ordinary cooperative effort which is promoted by a few men who may be idealists or theorists without practical business training, or even dishonest stock jobbers. Under the Rochlale plan in the old country the wholesale society receives large sums of money called ' ' loan capital, ' ' pays a low rate of interest for it and loans it conservatively on good security. A loan which illustrates tjie strength of the coopera- tive wholesale society of Scotland was that made to the city of Glascow of $2,500,000 at the time the city purchased the street railway system. It is not a matter of securing money with them, for the reason that they are old and thoroughly reliable. The people have greater confidence in their stability than they have in private enterprises or even banks, and are more than likely to leave their money where it will bring 3 or 4 per cent interest and at the same time be working for their benefit. "Wholesale societies have invested immense sums in manufac- turing enterprises, such as flour mills, bake shops, shoe factories, pickling works, tea plantations, etc. In time the cooperative movement among the agriculturists of this country will no doubt develop to the same extent. The Educational and Propaganda Department There are 4 sources from which education and propaganda may come. The government, general publicity, outside coopera- tive influences and the farmers themselves. There are those who believe that our state government, or even our federal government tlirough their office of markets, have a constitutional right to organize cooperative societies. If this view is correct I have no doubt but what the country could be greatly benefited through this branch of our government. How- ever, personally I doubt the constitutionality of such work by MILLARD R. MYERS 35 the office of markets or even by the marketing department of state government. The man who has spent 25 years in building up a store, cream- ery or elevator feels that he is rendering a valuable service to the community, that Jie pays his proportion of taxes, is a good citizen and is entitled to the same protection that society ren- ders to other citizens. He does not feel especially patriotic when told the government is sending a couple of promoters in his community to raise money to establish a cooperative society,. the mission of which is to put him out of business. He would feel that he would be entirely justified in dodging his taxes if they were to be used against him in this way. I am not very enthusiastic for such aid at any time. Limitations of Government Aid No doubt the farmers in Arkansas are victims of a bad trad- ing system. Many well informed southern gentlemen contend that the tiller of the soil himself is hopelessly lost unless the gov- ernment assist Jiim in his need of credit and the proper selling and buying facilities. I am not going to argue this point but I am going to state- that the class of society that must be aided by government money will be a long time in developing the spirit of independence and^ self-reliance that is necessary for any man to have to achieve success. Only in the most extreme cases, therefore, would gov- ernment aid be justified. The government is entirely within its rights in making a thor- ough investigation of marketing systems and publishing bulletins showing exactly what is being done by cooperation. In this way they are disseminating a great deal of valuable information wholly within the province of the government. The cooperative movement, especially among the farmers, is receiving a lot of general publicity free today. The farm press, even the daily paper, is giving editorial space to the subject. This serves to acquaint the general public with the proposition,, but of course no papers of importance outside of those directly engaged in organization work are advocating any panticular- propaganda. While this general publicity is valuable it is of rather secondary importance. The examination of our Ameri- can movement will show few exceptions to the above rule. The American Society of Equity, which has stood about as; much punishment by its friends as any farmers' society in the 36 MARKETING AND FARM CREDITS histors' of the ropiiblic, is an example. It was started by a pub- lisher at Indiauapolis, Ind. Its purpose iu the begiuuiug was priuiarily to iret subscriptions to his paper. In an almost in- creditably short time the promoters succeeded in spreading the sentiment fi-om Dakota to Kansas and uniting more or less closely around their publication several huudved thousand farmei-s. The farmei*s were told to hold their wheat for $1 a bushel, their tobacco for so much a pound, likewise (their beans and other xu'oducts. It was fully intended, according to the literature which was sent out. that the law of supply and demand should become inoperative, that the farmer could hold his wheat and dish it out to a hungry public whenever it was willing to pay him $1 but not before. This was a beautiful theoiy and it is not strange that it ap- pealed to the large body of farmei's who were selling wheat for less than the cost of production. To any one familiar with con- ditions in Australia. Siberia and the rest of the wheat-growing -countries it is not any great surprise to learn that the society failed to control the price of wheat. They did not fail, however, in getting enough support to the central organization, which was collecting dues from each member, to make it very successful. Then came the struggle between the actual farmers who made up the organization and the outside cooperating intiuence which had established it. At their annual meeting at Indianapolis cert> of Wiseousiu ^VlnlKl probably pay for the eo^^t of eoustruotion. '2. The eoi^perative hiw, i-reateil in liMl, \vhieh at that time Nvas eonslJered to be the best in the bnited States. :>. The State Hoard o( rublie AtTairs. ereated also .in hUl, whieh has aideil in tlie anditiiiir of the aeeonnts of coopera- tive societies, iudped in the formation of UH'al aetivitaes of a eiv operative nature, edueated the piiblie as regards standard trrades. jvu'ks. brands and trademarks, investiiratod tlie eheddar cheese sdtnation and aided in the forn\ation of the Sheboypm Comity Cheese Produeers' Federation. .\ reeent ehaniro of state ad- ministration has resulted unfortunately in a serious eurtaibueut of the Nvork alone the lines numtioned. 4. The department of rural eeonomies in \9\\ and the depart- ment of eooperation and nuirketiuir in liVlo at the colloire of ag- rieultniv of the T'nivei'sity of Wiseons^in, A movement that eotdd nuike so etvditable a shoMUUir from a eooperator's standpoint, eould not do so without a stroui^ eentral oriranization. At Madison, the state headquarter^!, we have a secretary ^vho has an ottice ^vith modern appointmentis. sten- Oirraphers. and everythiui: in proper shape to carry on the ^vork. -He is a.lso the editor of our state paper called The Equity News. Theiv is a bus,iness department also, that in the 11 months pivst lias handled #l.lIOO.lXX> worth of business for Equity assix'ia- tions and other cooperative soivieties. This department has been in existence less than 'J years and d^vs not include the business activities of the Sheboyirau County Cheese Federation, the Door Comtty Fruit Association nor the other lartre fruit selling eoii- eerus in the state; but has taken in simply the Equity and a few Grange people who are selling their livestock, potatoes and hay cooperatively, and who are btiying their agricultural ivquiiv- nieuts through their purchasing agent. Policy as to Joint Piu'diasing The otncial policy of the Society of Equity does luu couiem- plate the purchasing of grvverit\fi and household gv'it.Hls by its menibei*s, AVe do not go so far as that. But liere is what we do say when a merchant complains because an Equity concern over in Plum Crivk. we will say. is buying giweries for its mem- bers: ''Air. Merchant, you know what happened in riiiui Ciwk Wfore the coi^perative sot»iety was organized," and the history of the ease probably was this, — that the local merchants there CHARLES A. LYMAN 41 had s(iiieezed the farmers sO' hard and for so many years, that when the farmers did get the machinery for purchasing agricul- tural requirements they went the limit and ordered their gro- ceries and household goods also. Under conditions such as these one feels the farmers were justified in their action. I have heard some of the farmers say to a merchant who opposed agri- cultural cooperation, something like this: "By the way, I be- lieve you own 160 acres out here in my township. You are farming and you are competing with me. Yet you say it's wrong for a group of farmers to buy their own requirements through their own organization." I do not know how weighty this argument may be, but I do know that there are hundreds of men in Wisconsin who have fine farms and who are benefiting by the rise in value of their land, and it may be an argument that is worth something after all. The Soeiety of Equity has no desire to cross swords with our agricultural college; it would prefer to lock arms with it and similar institutions ; for both have their fields of activity in which they can work to best advantage. There must be a coordina- tion of effort, however, and an intelligent appreciation of the problem of rural life as a whole. We are certain that peach growers this year were not so much interested in Bordeaux mixture when seeing piles of peaches rotting in their orchards ; how to get their fruit to the consuming public is what they want. Problems of marketing and distribution demand immediate at- tention and to this newer field we would respectfully refer the activities of our agricultural colleges. Need of Economic Education Is Great Wisconsin is justly famous for its pure-bred livestock and pedigree grains. In this field the university has done pioneer work. People come from every state in the union to buy Guernsey cattle in Waukesha county, because the farmers there have made a specialty of that breed. The average farmer in Wisconsin, however, is not selling pure-bred cattle iat a fancy price. He is hard pressed to secure enough cattle of any breed and when he sells, it is usually for what the local stock buyer is willing to pay. And so we feel that average farming condi- tions must be improved at the same time that our colleges are providing for the comparatively few who can now avail them- selves of the teachings of science. After all the welfare of the 42 MARKETING AND FARM CREDITS masses is what constitutes the welfare of the state. Not all of our half million farmers can receive technical training and some of them will have to be satisfied to sell their produce on the open market. If they did not and all raised Pedigree Barley and Number 7 Corn there would be an over-production of seed grains. Many people interested in agricultural cooperation are tak- ing the following view of the situation. They say: "In Wis- consin we have '200,000 operating farmers, — with their sons, reaching a total of 500,000 people. Only a few of us from the nature of things can ever attend the university or farmers' courses. If you could educate a thousand a year, which you cannot do at present, it will take 500 years to give us all an agricultural education. Most farmers do not keep hired men in the winter time — who will milk the cows while we go to Madison to study scientific farming? Even if our wives can milk we do not like to have them, and besides, who is going to take teare of the children when the women folks drive to the creamery with the milk?" There are thousands of farmers in Wisconsin who because of physical conditions are unable to leave home even for the 2 weeks' short course at the agri- cultural college. With many the expense of the trip precludes doing so, if for no other reason. The complaint is frequently made by professors in the uni- versity and by extension workers generally, that there are many communities in Wisconsin where the farmers are antag- onistic and are not willing to accept the teachings of science. I have replied to this criticism by saying that the farmers in these localities are not ready for the advanced scientific in- struction which our colleges are giving. I believe that it Avill repay an agricultural college many fold to understand that farmers will be quicker to apply scientific methods to their industry after they have learned the value of science in the conduct of their own business activities such as in cooperative creameries and cheese factories, and in associations organized for the purchase of their agricultural requirements. Why Cooperation Would Help Wisconsin To illustrate the value of an organization society in a state so essentially agricultural as is Wisconsin, I shall tell you as briefly as possible, of the effects of organization work in Ire- land. Mr. Holman and myself were fortunate in being able CHARLES A. LYMAN 43 to go to Ireland this summer and travel over that little country which is smaller than Wisconsin, with the agricultural organ- izers employed by The Irish Agricultural Organization Society, 'Or the I. A. 0, S. as it is commonly known, and which as you linow, was founded by Sir Horace Plunkett. During my rounds of inspection I visited a creamery in County Donegal in the northwest part of Ireland. There were about 1,500 members. I found them a happy and bright class of people, but they were not well-to-do in our meaning of the term. Nevertheless, they had a creamery that cost $10,000, modern machinery worth $2,000 more, a comfortable and attractive house for the manager, and the house and the creamery were built of stone on the surface of which Dorothy Perkins roses were climbing and growing in profusion. Everything was of a most substantial nature. A stone wall 2 feet in thickness was built around the front of the creamery and all around the manager's house; the entrance to the house was between high stone gate posts on which iron gates were hung in so substan- tial a manner that they will probably swing true for a hun- dred years to come; and in the creamery they were making absolutely splendid butter. Now, why were they able to do all this? Because the propa- ;ganda body, the I. A. 0. S., was watching over this society along with several hundred other creameries and because the organization society had employed the best dairy expert in the United Kingdom to advise them and to see that everything was going right. This expert does not do it all himself, — ^he^has a number of organizers working under him who travel around the country in Ford m;otor cars — but he draws plans for the creameries and he keeps in touch with all new improvements in the field of dairying, especially in Denmark and Sweden where most of their machinery is bought; and he not only tells the members what kind of machinery to get but he actually superintends its installation, and he will get down on his knees if anything is wrong with the slant of the floor, and he will correct the defect and see that everything is lined up properly. ,The cooperative creameries in Ireland are making better but- ter than we are making in Wisconsin. The best Irish butter is as good as the Danish butter, which is the finest in the w^orld; and the poorest over there is about as good as any you will get in this country. The success of these cooperative creameries is due to the fact that the farmers realize that suc- cess or failure is due to their own exertion ; that these are their 44 MARKETING AND FARM CREDITS own creameries and that they are going to get whatever profit there may be in the manufacture and the sale of butter; and since these are their own creameries tlie farmers are going to bring sweet milk every morning — as a matter of fact the milk is tasted, and if it is sour it is not accepted. How Ireland Improves Butter Standards An organizer working under the direction of Mr. Fant, the dairy expert, goes about his work in the following manner : He sees that the milk is properly weighed and tested for but- ter fat; he looks at the temperature of pasturization of the cream and the temperature of the cooling. He may get around at least once a week if the creamery is in its infancy. If it is a creamery that is known to be sound, he may drop in once or twice a month ; but even then he can tell if things are rimning properly because every day a sample is taken of that day's churning. The samples are not placed in a refrigerator but upon a table in the same room in which the churning is done. The organizer may come in 2 weeks, perhaps, from the time the samples are put there. He inspects each sample and it has got to be right and if it is not, he investigates and finds the cause. In the town where I live there is a proprietary creamery. It is a splendid creameiy and its owners are taking cream away from a large cooperative creamery located about 100' miles away. The reason they are getting the cream is be- cause they are paying higher prices for it than the cooperative creamery can afford to pay. The owners have the most mod- ern machinery; they know that the law says that they can put 16 per cent of moisture into the butter; and they know in this day and age, a person has got to get what he is entitled to or he might as well close down. I strongly suspect that the co- operative creamery is so afraid that it will exceed the 16 per cent limit of moisture, that a good deal of the time the mois- ture is down to 13 per cent. That means it is losing 3 per cent at every churning. But in Ireland, the organizer looks after things like this. He goes in to the creamery and says: ''What is the matter that you are only getting only 14 per cent of moisture in your butter?" And the buttermaker shakes his head and says: ''I don't know what the matter is but I can't get any more."" Perhaps it is a creamery that has been purchased from a pro- CHARLES A. LYMAN 45 prietary company, and very likely the organizer will say: "Why, that is a very old churn. There is no use in trying to use it. We have had 60 cases like that in Ireland and we find that we can't get the msoisture in properly, but I know the churn that will do the trick." And because the farmers have confidence in the judgment of the organizer there will be a meeting of the board of directors and the proper churn will be installed forthwith. Right Kind of Organizer a Necessity All this has a bearing on my subject because it is in things of this nature that the most effective organization work is done — the things that will build up a strong cooperative or- ganization. As far as we are able, our organization is sup- plying expert advice. In Wisconsin (as is done in Ireland) we try to secure as organizers men who can not only go out and make an appeal direct to the hearts and consciousness of farm- ers, arousing them to the need for organization, but men who combine the ability to speak convincingly and effectively with business qualifications as well. In a dairy state an agricul- tural organizer should know something about how butter is made, and how to keep books. He must have sympathy and appreciate the limitations of the manager's knowledge. He may inspect a set of books and find that things are all wrong, but he has a different viewpoint from that of state Inspectors and auditors, who may say when things are tangled up and look badly: "Shut up. Close down." The organizer does not say that; he says: "Your books are wrong. They are in a bad mess. Now let us sit down here and see if we can't find where the trouble lies." He straightens things out. He knows how and has the disposition to do so. He says: "I know 50 places where they have a certain system of bookkeep- ing and where the managers never have any trouble. You should install their system here." He should go around to a place like that every week, perhaps, for a while, and he should stay with that man over night and work during the evening hours and teach him how to keep books. Over in Ireland they have done all of these things and the result is that there are a thousand odd societies in Ireland that are efficient and splendid. Some of these things we have done in a measure in Wiscon- sin. All of them we hope to do in the future. We have 450 46 MARKETING AND FARM CREDITS local unions but about 70 only of these are incorporated. There are several reasons for this : one is due to the individual- istic attitude of the more prosperous farmers in the com- munity ; the other is due to the failure of so-called cooperative activities in the past. Why Organisation is Difficult "We are all familiar with the individualistic type of farmer. We have had a country of vast undeveloped resources. Men have said to themselves: "I did not plan to be a farmer. My father was a lawyer and my grandfather a judge ; but I believe if I get this piece of land, even if I don't know much about farming, I can at least hang on to it. I can get it cheap and I will do just as my uncle did in Ohio, — if I keep it long enough I can sell it for $150 an acre." I don't know how many of that class of farmers we have in Wisconsin, but I do know that in every township in the southern half of the state we find men of that character. These men have made their money not so much in the growing and selling of their crops as in the rise of value of their holdings, and the result has been that these people do not appreciate the situation in which the newer settlers find themselves, who must pay high prices for their land. This "selfmade" farmer is apt to say: "Why, I made good. Let the other fellow do the same." Quite fre- quently he is the chairman of the town board or one of the supervisors or holds some other position of influence in the community. Such men frequently are opposed to cooperation. They often injure it by the use of a shop-worn but effective stock phrase: "Cooperation is foolish, — it Avon't work." The second reason why it is difficult to incorporate as legal entities, as already stated, is because certain farmers organiza- tions started 40 or 50 years ago to do certain things cooper- atively without knowing the economics of cooperation. They had not heard about the Plunkett House organization in Ire- land; they had not heard about cooperation in Denmark and Germany, and the Eaiffeisen and Landwirtschaftsrat and the Schulze-Delitzseh. They went ahead bravely, blindly and made heroic mistakes. When I helped to organize an Equity local in Wisconsin, I tried to get my grandfather to join. He re- fused on the ground that he had lost several hundred dollars in a "cooperative" creamery, and some more in the Farmers' Alliance. He wouldn't listen to me at all. Do you know any- CHARLES A. LYMAN 47 body like that where you live? Of course you do. The kind of cooperation my grandfather knew was the cooperation that blazed its way across the continent, shot Indians from wooden forts, hewed down forests, and gathered together adventurers in caravan trains to cross the plains and deserts to California in '49. But the business cooperation our forbears knew was of a more hybrid nature. Any sort of a business arrangement could be called cooperative and this was true up to the year 1911 in Wisconsin when we secured our cooperative law. We now have a one-man one-vote proposition and no longer is it pos- sible for the owner of 10 shares and one cow to out-vote the farmer owning 10 cows and one share. I could tell you a good deal about our difficulties in Wis- consin and of our successes. I have a number of letters with me that I have received during the past 2 or 3 weeks from friends of mine, from managers of cooperative companies, livestock shipping associations and so forth. Time will not permit me to read them to you, but I have a half a dozen here that would absolutely stir you up to the need of agricultural cooperation, — letters that tell about the conditions that existed before the farmers organized; before the Equity came in, and before they organized and incorporated and before they could get their agricultural requirements at wholesale or could ship out their livestock and other products at a living price. I haven't time to go into this matter except just to mention it to you and to tell you that there is that feeling in Wisconsin. We are not a fraternal or secret organization. According to our constitution and by-laws, anybody who says he is in- terested in agriculture may join. We know in a movement like ours there are always the disgruntled, the idealists, the dreamers and the fellows with queer ideas ; and some of those people have come in. A farmer is not alwaj^s as discriminat- ing as he might be and sometimes he is carried away tem- porarily by unsound arguments put forth in orotund and pseudo-eloquent phrase by the camp followers and the hangers- on. We have got to bear this in mind, and it will take time and patience before we can get our entire membership think- ing along lines that will be entirely free from the criticism of the impartial observer. I know some people say that it is hard to organize the farmer; that it cannot be done. But we know that it has been done in other countries and is being done in the United States. The bureau of markets and rural organization at Washington has estimated that the total turn- 48 MARKETING AND FARM CREDITS over of agricultural cooperative organizations in 1915 will have amounted to $1,500,000,000. Development of Packmghouses The packing plant proposition is a later phase of cooperation on a somewhat larger scale. This is the way the movement for a farmers' cooperative packing plant started. A standing com- mittee on cooperative packing plants was appointed at one of our national conventions. This committee investigated several prop- ositions in "Wisconsin, and finally recommended that Wisconsin was ready. for a cooperative packing plant and urged that steps should be taken to establish one. A number of us thought that the farmers were not ready for such an undertaking. We felt that we did not have enough lo- cal activities incoi'porated, and had not yet developed sufficient business ahility to carr\' on an undertaking of such magnitude. Nevertheless, the sentiment was so strong for the inidertaking that in 1913 our ste handed over forever and for nothing to a lot of big special in- terests — the water trust which is now forming. We are going to have that fight again this winter. These men year after year have blocked the passage of that l)ill as they blocked the passage of the Ferris bill last year. We are going to have that fight up again this winter and I think we will put that bill through in spite of the representa- tives of the water power interests who are already in Wash- ington and who are going to stay there through the session. This fight, gentlemen, is not a fight for anything but just this : to see that the natural resources that God put on this continent of North America shall mainly go to the people of the United States and not to a few men who are plenty rich enough right now. I want your help. We not only want but we need your help to fight this fight through. It is going to be fought through, and it is going to come out in the right way. 62 MARKETING AND FARM CREDITS Conservation a Farmer's Problem Conservation is the farmer's problem as much as it is any- body's problem The farm question divides exactly along the 2 same lines with the general conservation problem itself. For years everybody in this country has been in favor of in- creasing production on the farm, and everybody ought to be. It is the "vvise and right thing to have happen. "We have spent more money on that thing in proportion to our population — I don't know how many times, more than any other nation' in the world. "We haven't got all the results quite, yet, but we have spent the money, at least. "We ought to have bigger production on the farm, and we are going to get it, but there remains behind exactly the same question as in the matter of the general conservation policy: for whose benefit mainly is the increase of production on the- farm to be? Now, if it is true — I have heard it said a great many times,, and so have you — if it is true or even in the neighborhood of the truth that the man on the farm gets only about half of the- money that the consumer pays for the farm products that ap- proximately half of the money on the way from the consumer to the producer drops out here and there along the road then there is a huge waste, and as long as that waste continues to be there it is obvious on the face of it that the man whose pro- duction has increased on the farm is not getting the benefit that he ought to get, is not getting his fair share of the benefit that he ought to get out of the better methods of farming. This country consists of consumers and producers. Every man is a consumer and every man is a producer, or, every man ought to be a producer. If each now shares in the loss from' the waste, each ought to have his share in the repair of the waste. And as I understndt it in its true aspect, the work that this conference has come here to take up is the question of so han- dling farm produce by a wise production, by standardization, by better methods of distribution, by better methods of faru> credit, by the general organization of the w^hole business on the- farm so that this gigantic waste which now exists shall be elim- inated, partly for the benefit of the farmer; partly for the bene- fit of the consumer; partly, also for the benefit of the men Avho ought to be benefited — and some of them ought not to be — who stand between the farmer and the consumer. GEORGE W. SIMON 63 I see no larger problem connected with agriculture in the United States than this We may have all the better farming you like on the farm, but until we have, in the language of Sir Horace Plunkett, better business on the farm as the first step toward better living on the farm, we shall only have used a very small part of our opportunity. I see this thing as the big- gest thing that can be done for what is fundamentally the most important part of the population of this country, and I con- sider it a high privilege to come here and get a chance to say this to you and to add that I hope in the future, as I have tried in the past, to do what little I can to help this work along. It is more worth while than any other thing that is to be done for the man who lives on the land in the United States. THE WORK OF THE JEWISH AGRICULTURAL AND INDUSTRIAL AID SOCIETY* George W. Simon Western Agent In discussing rural credit and rural cooperation, or rural progress in general, the average investigator or student of economics turns his attention to what is being done in Europe, Africa, New Zealand, or elsewhere, and is either unaware of, or he ignores entirely, what has been accomplished in this country. In fact, the European stamp of approval seems to be necessary on everything — from tenors and sopranos to cotton and potatoes — in order that it may gain popular favor here. Our American young men and women must first go to Europe to get their recognition and trade mark. Our cotton must first go to Europe to be worked in the mills there, and then be re- imported into this country in the form of woolen material. In the matter of rural credits there are some who firmly hold that, our people being different and conditions here being dif- ferent, we can not transplant to this country the European rural credit systems ; that it is impractical and even impossible. It might be of interest, therefore, and to some, even a revela- * Delivered before the second National Conference on Marketing and Farm Credits at Chicago, in April, 1914, in joint program with the Western Economic Society. 64 MARKETING AND FARM CREDITS tion, to learn that here in the United States the French Credit Fonder system, or long-term rural credit, has been in operation for the past 24 years, while the German Raiffeisen system, or short-term rural credit, was established in this country in 1909, and has been in actual operation since 1911. This work has has been done under the auspices of a philanthropic organiza- tion, subsidized by the Baron de Hirsch Foundation, namely the Jewish Agricultural and Industrail Aid Society, with which I have the honor of being identified. The Jew, as a class, has always been identified with com- merce and finance. Our experience has shown that by applying the same business principles to farming, he can make farm- ing pay in spite of the many drawbacks he has to overcome. There are now in the United States about 7,000 Jewish farmers. A few years ago our society estimated that the 3,718 farmers with Avhom we came in personal contact own 437,265 acres of land worth, approximately, $22,194,335, with an equipment worth $4,166,329. A Fund to Lend Money to Jewish Farmers The Baron de Hirsch fund was established in 1890, and from its inception has made loans to Jewish farmers in the United States at a moderate rate of interest and upon easy terms of repayment. The great increase in Jewish immigra- tion to this country naturally increased the demand upon the activities of the fund, and new and more urgent problems arose. In view of the growing importance of the agricultural phase of the activities of the fund, the board of trustees found it necessary to create a special organization for that purpose. Accordingly, in 1900, the Jewish Agricultural and Industrial Aid Society was incorporated. The chief object of the so- ciety is to render financial assistance to Jewish immigrants who wish to become farmers, or to enable those who are al- ready on farms to maintain their foothold. In view of the fact that our resources are limited, we do not, as a rule, make loans on first mortgages, but on second, and even third and fourth mortgages, supplemented sometimes by a chattel mort- gage or other collateral security. Loans are made either to- wards the purchase of a farm or its equipment, or both. Loans are like^^dse made to those already on the farm to en- able them to make improvements, to buy additional equip- ment or for like purposes. GEORGE W. SIMON 65 During the 14 years it has been in existence, our society has granted, in round numbers, 3,000 loans, aggregating $2,000,000. The loans are made at 4 per cent interest, on long-term mortgages, running on an average for 10 years. The terms of repayment are based largely upon the ability of the farmer and the earning capacity of the farm. The character of the farmer is taken into as much consideration as the real estate security. The proof of the soundness of our experiment is that, in spite of the inferior security which we accept, our losses, during the 14 years, were less than 21A per cent, and the repayments, 30 per cent. The payment to the society for the fiscal years ended December 31, 1913, amounted to $100,091.04 on the principal, and $30,292.18 in interest. Doing a National Work Our society made loans in 32 states and in Canada, thus our operations cover a much wider territory than that of all the European land credit banks combined. It proves that the rural credit system is practical and adaptable in every state of the Union. The time of free land being past, land is now a good security, provided we have good farmers on it. I be- lieve that land is worth as much as the^ man who is on it, and we do have some good men on our farms. Our experience has shown that, after receiving loans on second and third mortgages on easy payments, our farmers were stiU struggling against trying difficulties. There arose in our rural districts a new class of money lenders, who gradually preyed upon the farmers until they had them completely in their power. Sometimes they are the local storekeepers, sometimes ''just neighbors." Like the hookworm prevailing in the South, these money lenders infest the body of our farmers and sap all their energy and strength. To free the Jewish farming communities from these parasites, we de- cided to organize among them cooperative agricultural asso- ciations, by means of which the farmers could help one an- other. Pioneers in American Rural Credits Since 1910, when Ambassador Myron T. Herrick reported to President Taft upon the progress of rural credit in Europe and pointed out the comparatively abnormal conditions in the United States, the country is almost daily discussing 5— M. F. c. 66 MARKETING AND FARM CREDITS this problem, and there is hardly a periodical which has not had an article on the subject from time to time. In 1907, when our society first tackled the proposition, there was very little information on the subject. After consider- able study, our general manager, Mr. Leonard G. Robinson, arrived at the conclusion that the Raiffeisen system offers the best solution of the problem of short-term loans, and in 1909 he devised a modification of the German system to meet the demands of our farmers. A» pioneers in the field, we natur- ally encountered many obstacles, chief among which was the absence of legislation under which these credit unions could be incorporated. We finally concluded to organize them as unincorporated or voluntary associations, and in May, 1911, the first cooperative bank on American soil was opened. It was not very difficult to introduce these credit unions among our farmers, for we had already organized the farmers into local groups or societies. This we succeeded in doing through the activity of our educational department which is- sues the Jewish Far))icr, a monthly periodical published in Yid- dish, the editorial staff of which has charge of the extension work. The local societies were afterwards centralized into a Federation of Jewish Farmers of America. Through this federation we spread the gospel of cooperation and introduced the Raift'eisen system. We asked each group to subscribe to- gether $500, in shares of $5 each, and we then loaned them $1,000, that is, $2 for every dollar subscribed, at 2 per cent interest per annum. The small community noAV had $1,500 for their emergency needs. If a member of the community falls short of immediate funds, he does not have to borrow the money from his mercenary grocer or from the usurious money lender, but he can get it from his own community bank — from his fellow farmers Avho do not need the money just then, but may have occasion to use it later on. This community bank, or cooperative credit union, in the management of the affairs of which he has the same voice as any other member, regard- less of the number of shares held, charges him 6 per cent. The loan is granted for a period of not over 6 months and for a sum not exceeding $100. To date we have 18 of these banks in operation. Eight are located in New York, 5 in New Jersey, 4 in Connecticut, and 1 in Massachusetts. The 17 credit unions which were in oper- ation on September 30, 1913, reported a total membership of 517, and a capital of $9,165. Up to that date they had been GEORGE W. SIMON 67 in operation for a period averaging 13 months, during which time they had loaned out $73,624.66, or about 8 times their capital. Their net profits amounted to $1,317.93; that is, at the rate of I314 per cent on their original capital. How Credit Unions Operate The operation of our credit unions is simple. The by-laws are plain. The membership of the cooperative credit union is limited to the farmers residing within a small area, and is open only to members in good standing in the local Jewish farmers' association, which is itself a branch of the central organization, the Federation of Jewish Farmers of America. Every member of the local association can become a member of the cooperative credit union by buying at least one share. The 'par value of each share is $5. None of the officers re- ceives any remuneration for his services, except the secretary,, who is allowed a nominal recompense. The 17 banks had a total expense, in 13 months, of $726.93. The only loss sus- tained by any of the credit unions was a loss of $27.98 by the Credit Union of Colchester, Connecticut, through the failuire- of its depository, the First National Bank of Norwich, Conn. The benefits derived by our farmers from these rural credit systems are manifold. Our willingness to make loans on see^ ond mortgages to our farmers induced the local bankers to> make them first mortgages, where otherwise such were not available. In other words, we helped to discount the per- sonal qualities of the farmer, and gave him a strong moral support. The Credit Merchant Losing Out After the R.aiffeisen system was introduced among our farmers, they were released from the grip of the local store- keeper, and they were no longer obliged to buy from him fer- tilizer of an unknown quality, but they organized their ow» purchasing bureau through which they obtained direct fromi the factory fertilizer which had been tested by the local state experiment station. Moreover, they received credit for '€> months, and even a year, paying only 6 per cent interest for it. They obtained seeds from reliable s.eed houses which were true to their variety and quality. They purchased im- plements at wholesale prices direct from the manufacturer. 68 MARKETING AND FARM CREDITS 111 some parts of New York state the farmers found diffi- culty ill obtaining tire insurance, and were obliged to pay ex- orbitant rates. Having learned the advantages of coopera- tion, they decided to apply the principle of the credit union to this problem. They thereupon organized their o^^^l mu- tual lire insurance company, and the cost was reduced to a minimum. At the end of 9 months they had written insur- iuiee policies amounting to $654,000, the average rate to the farmer being 10 cents a hundred — which compares favorably with the old rate of $4 per hundred, charged by the indepen- dent companies. The tire loss during the tirst year was less than $1,000. It was estimated that the saving to the Jewish farmers who were connected with the mutual fire insurance company is not less than 4^35,000 in one year. Resides, the other farmers in the neighborhood obtained lower rates from the independent companies which felt the brunt of competi- tion. Whipping the Milk Dealers. In another locality the farmers had difficulty with the milk dealers, who generally cut down the price of milk in the sum- mer, and thus robbed the farmer of the little profit he can make while the cows are in pasture. Our farmers organized themselves together with their native neighbors, and for a week they started a ''lockout" and refused to sell milk to the dealers. They even spilled the milk over the field. At the end of a week a settlement was reached, and the farmers are now getting 5 cents -a quart the whole year roiuid. In another locality they even went a step further. They organ- ized a cooperative creamery and opened an agency in New York which receives the product fresh every day and de- livers it direct to the consumers. Their motto is : " From the producer to the consumer." Eggs are also handled in the :same manner. At the end of the year the profits will be di- vided as follows : 50 per cent to the farmer. '25 per cent to the consumer, and *25 per cent to a fund to be used for emergency needs and for the encouragement of cooperation. While our Jewish farmers have organized their purchasing agency more or less satisfactorily, their selling agency is not yet developed, firsts because our people are rather scattered, but secondly, and mainly, because their products are not stiindardized : and this is a problem which is hard to solve for .all groups or individuals. GEORGE W. SIMON (59 Caring- For Women's Interests The Avomeii on the farms were not left :out of considera- tion. In many places the local societies organized Jewish ladies' auxiliaries to help make the lot of the women on the farm more contented. Many a promising farm has to be sold because the women on it find rural life too monotonous, too barren, devoid of all amusement and recreation necessary to offset the day's drudgery. Many a young man |has to relin- quish a hopeful agricultural career because he cannot find a mate who would east her lot with him on a dreary farm. These ladies' auxiliaries are, therefore, a blessing to the farmer and his family. We must admit that the /women on the farms in this country have been neglected, and it is gratifying to note that our department of agriculture has established a rural organization service which is doing much towards brightening the lives of the women on the farm. Some people contend that farm credit differs essentially from commercial credit ; that the period of repayment of the loan must be longer; and that the farmer cannot make his turnover as quickly as can the merchant. While this is true asi far as the long-term loans are concerned, it is not necessarily so with the short-term loans. In 13 months the 17 credit unions, with a capital of $26,169.63, including the money which we advanced, loaned out $73,624.66. In other words, their capital made a turnover of 3 times in a little over a year. I wish to touch upon one more important point. Where we introduced our credit unions the local banker was in no way hurt, but on the contrary, he has profited by it. Farmers who never knew the significance of a bank account' learned its advantages and have increased the ,business of the banks, to a great extent. Legislation a Vital Need In conclusion I would say that the most important step necessary to further the movement of the agricultural co- operative icredit unions in this country is the enactment of proper laws in the different states, and legalizing of their in- corporation. I am glad to note that several of the states have already taken steps to ^mend their state laws so as to legal- ize the incorporation of credit unions. Our credit union in Massachusetts has the distinction of being the first in that 70 MARKETING AN>P FARM CREDITS state, and as a (matter of fact, the first legally authorized ■credit union among farmers in the United States. Our 8 ■credit unions in New York have already taken steps to incor- porate under the luew law recently passed by their state legis- lature. Furthermore, we need proper leadership. We need leaders, not from above, but from within. We need leaders in whom the farmers have eo'nfidence and .whom they can follow. Thus, our young graduates from the colleges can do much for our farmers and the country at large. Finally, the federal and state governments should throw off their fear of '.'paternalism" and "class legislation," and should treat the farmers as they treat the bankers and other legiti- mate businesses. After the proper laws have been adopted they should take, at least in the beginning, the leadership and initia- tive in establishing rural banks, and if necessary', in subsidizing these banks, for a time at least, so as to bring to the farmers, and through them to the country at large, immediate relief and to demonstrate the practicability of modern rural financing. We will then have developed a greater nation, built upon the foundation of sound rural financing. What our society could accomplish with strangers in a strange laud, and under adverse conditions, Avhat could not be achieved by the American farmers under proper guidance ? THE RELATION OF THE FARMER TO THE TRUST QUESTION* Samuel Untermter I expressed to your secretary my hesitation in accepting your invitation to address you on the ground that my views on the topic on which you have asked me to speak are likely to prove unacceptable to many of the members of this Con- ference. He assured me, however, that the purpose of the meeting was to be instructed upon all aspects of the questions involved and that you are not wedded to any given point of view. I am accordingly here to speak very frankly. *Delivered before the second National Conference on Marketing •and Farm Credits at Chicago, in April, 1914, in joint program with the Western Economic Society. SAMUEL UNTERMYER 71 The relation of the farmer to the trust question is of course one of the most direct personal and pecuniary interest and concern. If it can be made possible by the enforcement of existing law or by supplementary legislation to restore and maintain the free flow of normal competition and to so regu- late it by law as to prevent unfair and ruinous competition, the farmer will share with the rest of the community in the bene- fits that should flow from the reduced cost of living. It is not however with the relation that the farmer should hear to the trust question nor with his relation to the ques- tion as a consumer that I care particularly to deal. There is no occasion for extended discussion on that point. There can be no doubt as to what that relation should he. As the chief consumer of the country, it is manifestly in his interest that the value of everything he buys shall be fixed in an open and stable market where there will be no opportunity to levy tribute upon him. Ruinous cutthroat competition is no more in his interest or in that of any other class of the consumer community than is monopoly. It is an economic curse. It disturbs the natural currents of trade, leads to spasmodic peri- ods of over-production and under-production and consequent instability of prices and is the high road to monopoly. It is quite as important to regulate competition as to suppress mo- nopolies and trusts. The questions for discussion may be stated thus : What is the real attitude of the farmer as a producer to the trust question? Is it just sincere, consistent or public spirited. What should he his attitude both in his own inter- est and as a citizen? To these questions I answer, and shall endeavor to prove, that his attitude is unjust, inconsistent and unwise. This broad indictment is based upon (1) the drastic char- acter of the anti-trust laws in the farming states as applied to all forms of induetry other than farming; (2) the exemp- tions that have been engraften upon these laws in favor of the farmers; (3) the failure to enforce the laws against them in states in which the exemptions do not exist; (4) the attitude of their representatives in Congress and (5) the many open violations of the federal anti-trust law that exist by sufferance in the various forms of pooling and selling arrangements among the farmers in the different sections of the country. 72 MARKETING AND FARM CREDITS When Cooperative Laws Are Discriminatory As illustrating: these unfair discriminatory laws, that are sometimes cloaked under the euphonious disguise of "Cooper- ative laws for Marketing Farm Products," the Kentucky act of 1906 expressly exempts the growers of wheat, corn, oats, hay, tobacco and other farm products from the operation of its anti-trust statute and legalizes pools and selling agencies in the farm products. In California in 1907, and again in Colorado in 1913, laws were passed expressly authorizing pools, combinations and agreements that would permit of reasonable profits through co- operation and the elimination of competition. The license to discriminate in the enforcement of the federal anti-trust law in favor of the farmers is impliedly involved in the rider that was attached to the $300,000 appropriation of 1913 for the enforcement of the Sherman law, by the terms of Avhich the attorney general is forbidden to apply any part of the fund in the prosecution of — (b) Producers of farm products and associations of farm- ers wiio cooperate and organize in an eft'ort to and for the purpose of obtaining and maintaining a fair and reasonable price for their product. It is common knowledge that price-fixing agreements in the form of selling agencies are in active operation in intrastate and interstate commerce in farm products all over the coun- try, of Avhich those in cotton and fruits are conspicuous exam- ples. In a few staples, of which that of the cranberry groov- ers is the most generally cited, a virtual monopoly is main- tained in the form of a common selling agency which exacts for the growers whatever price they see fit to fix. In none of the states in which these combinations (all of which are within the condemnation of the Sherman law) are expressly legalized and exempted from the operation of the state anti-trust law, is there provision for their regulation by public authority. In none of them is any relief provided against their levying undue tribute except in the vague re- quirement that the combination may exact only reasonable profits — whatever that may mean in the absence of au execu- tive body to protect the public. The country is honeycombed Avith these pools, trade agree- ments and gentlemen's understandings under cover of selling SAMUEL. UNTERMYBR 73 agencies, trade associations, social clubs, information bureaus and innumerable other disguises embracing most of the de- partments of trade and industry. Every now and then the government pounces upon some unfortunate industry, like the members of the wire, Avindow glass, turpentine, bath-tub, straw-board, wood-pulp and wrapping paper pools, in a spas- modic and haphazard fashion, selecting its victims at ran- dom, collects fines from the little fellows and sometimes — generally unsuccessfully — tries to send them to jail — only to find them getting together again after the storm has blown over, but in a more elusive form as the result of their ex- pensive and uncomfortable experience. We all know that the dealers in anthracite coal in the larger cities agree on rates every year, which are publicly announced. There is no such thing as competition between them and the anthracite coal trust would not tolerate it. When in 1912 the government concluded to enjoin the west- ern railroads from advancing their freight rates it found no difficulty in making proof of the agreement, which had been negotiated and effected in open convention. The same is true of the passenger rates and time schedules between the great trunk line systems that are supposed to be competitive. It is generally conceded that there is a substantial profit in the present price of steel rails. Is there any competition in the price of rails or of any of the other staples in the steel trade as between the different manufacturers? All these arrange- ments are in plain violation of the Sherman law. But does any federal official attempt to enforce the law? Outlawry Logical Result of Unsound Economic Policy These are the daily object-lessons that tend to make of us a lawless nation. This anomalous condition of insubordination and defiance of law by our men of affairs to whom we look up as constitut- ing our best and most enterprising citizenship is the inevita- ble outcome of an unsound and destructive economic policy, from the effects of which the farmers by reason of their vast political power, are seeking to exempt themselves whilst im- posing that policy upon the rest of the country. The only possible excuse for such a position on the part of the farmer is that he, as the most valuable and the greatest wealth-producing and least-protected element in our industrial "74 MAUKKTIN\^ ANP FAKM CUKPITS lit'o. is ontitlod to oxiMuptions and immuiiitios at tho oxihm\so of the rest of tho I'oinniunity. Tt is not ii\toniiod horo to siiiTiTost that those trade arranuo- inonts shonld not bo pornvittod nndor irivon vostriotions. That question Avill be diseussed later. Hut 1 insist that if they are to eontinno inider the ban of the bnv. as they now are. that pro- hibition shonUi be generally applieable to all indnstries. in- elndinjr that of the fanner. There is no basie principle upon whioh any snoh exemption or disoriniination oan be jnstitiod. AVhy should tho ootton irro\vei*s be sntYored to oonibino in tho marketing of their prod- uct so as to regulate the prioe and output, whilst that right is denied to the mauufaoturei*s of cotton goods? Or why should not the eoal operators have the same privilege? Why have the cranberry growers been openly peruiitted to maintain a selling agiuicy in Now York City thi'ough which about 00 per cent of the product of the entire country is handled, whilst the milk dealers are sent to prison for doing the same thing? Surely such unequal onforconumt of tho law cannot bo in tho public interest. Where Farmers Are Inconsistent The injustice and inconsistency of the farnun's' attitude to Avhich I have referred consist in his insistence on denying to every other industry the right of cooperation to restrict com- petition whilst he iusists upon exemption for his own occupa- tion and is seeking to punish as crimes when committed by other acts which when perpetrated by him are not considered as inimical to tho public welfare. It is dit^cult To see in the mental processes that can bring about siu'h a result anything beyond the blindness of self-inter- est. It is not surprising that under such circumstances coiu'ts aud juries refuse to enforce the criminal provisions of this statute unless they tind proof of actual opprossiou or uufjiir business nu^thods accompauving the technical violations of the law. What. thou, should the farn\ors in all fainu^ss do in the eircumstauces? What should bo their attitude to the trust qtu^stiou? What is tho wise public policy? Is there any ten- able ground on which they should bo exempted from tho gen- eral rule? Should all arranginuents and devices for tvgulatiug prices and output between conipetitors. including those apply- SAMITEL UNTBRMYBR 75 ing to their own business, be forbidden? Or should they all be permitted? If the latter, should sueih peniiLssion he within given limitations and what should they be? The answers to these questions point the only just way of approaching and seeking to solve this problem. The discussion of this question involves only the various forms or temporary agreements and understandings between actual or potential competitors in a given industry, having for their purpose uniformity of price or regulation of output whether expressed through pools, selling agencies or otherwise. They are not usually in corporate form or represented by cap- ital stock. The proposal does not include any chmige in the existing pro- gram far dealing with the trusts and combinations that are in corporate form and with which the government and the courts have been mainly concerned except to render their prosecution and dissolution more effective. The impression that there has been anything like a general prosecution of unlawful combi- nations in the interstate commerce is a mistaken one. The suits that have begun are trivial in number and aggregate import- ance as compared with the known violations. They have been ■directed mainly against the more conspicuous consolidations that are in corporate form and the practical results have been negligible. Government Regulation Can Protect Public There are many reasons why the arguments for the suppres- sion and extermination of these trusts should not apply to the pools, agreements, understandings and price-fixing and out- put-regulating devices, provided the latter are placed under rigid government regulation and restriction as to the terms and conditions of the agreement so as to effectively protect the public against all danger of extortion or oppression. 1. The latter do not involve stock watering, exploiting the Investing public, change of ownership or closing of mills or factories. 2. There is not the same power or incentive to exact exor- bitant prices ; no excessive dividends are required to be earned on inflated capital to be used as a basis for unloading stocks at exaggerated prices and there is the constant peril of inviting new competition and thus disrupting the agreement. 76 MARKETING AND FARM CREDITS 3. The element of individuality is preserved; there is no permanency to the arrangement ; each of the parties must con- tinue to maintain his plant and selling force in condition to resume competition at any moment. He must accordingly avail himself of all new inventions. 4. There is a continuing competition in costs of production between the parties to the arrangement resulting in economy of manufacture and distribution and of general management, since each party secures the sole benefit of such economies. 5. There is not the inducement or opportunity for the acts of oppression that are practiced by the trusts in order to main- tain their supremacy. The interests of the latter are perma- nently and indestructibly merged whilst under these tempor- ary arrangements such acts of oppression are dangerous and unlikely. The friendly cooperators of today may be the bitter competitors of tomorrow. 6. They offer a means of escape from destructive competi- tion without driving competitors to combination with all its at- tendant evils. These arrangements should not, however, be longer tolerated in their present furtive unlawful form, whether they apply to the product of the farmer, the manufacturer or the middleman. They are a standing invitation to extortion and exploitation of the public and a menace to industrial freedom. There is only one way of exterminating them and that is by substituting in their place permissive public agreements that shall be subject to federal approval and supervision. What to Do With Trusts In dealing with the trusts an entirely different policy should be pui*sued. I favor their enforced dissolution and actual and complete segregation, as nearly as may be, into their original parts and the enactment of legislation that will ensure their being kept segregated. None of the plausible arguments that were urged in favor of their organization have materialized. The extermination of the vital element of individuality and the substitution of bigness and bureaucracy have more than coun- terbalanced their supposed advantages. They can hold their supremacy only when they virtually control the industry, and they can continue to control it only through imfair practices. It is to be hoped that this vexatious problem of subduing and eliminating the trusts is in a fair way toward eventual solu- SAMUEL UNTBRMYEIR 77 tioii and that we are at last within sight of industrial peace. True, little has yet been actually accomplished in the way of effective legislation, we are still as tightly as ever in the grip of the money trust and the laws now under consideration by Congress are as yet disappointing in that they do not ade- quately meet the situation. But the issues are framed in con- crete form and I am encouraged to believe that the long strug- gle between big business and the people is happily nearing its end notwithstanding the reports of the past few days from Washington to the effect that comprehensive legislation is to be postponed until the next session. The rumor is incredible. It would be the worst kind of po- litical blunder and almost a national misfortune if after all this agitation and investigation there is to be further delay in the settlement of this question. The reason offered in favor of the proposed action is the most conclusive argument against it. The obvious dictates of business sense and political expe- diency require that the agitation be ended. That can be done only by the enactment of the necessary comprehensive legis- lation. The other method serves only to prolong the existing uncertainty, unless the party in power intends to abandon its program and violate its campaign pledges, which seems to be the hope of the interests that are now urging delay. The same effort was made and the same ''public sentiment" was sought to be manufactured when currency legislation was under consideration. Fortunately the scheme did not work and we now know how absurdly the effect on business of the then pending legislation was exaggerated for the purpose of defeating the reform. Surely we cannot be so blind as to fail to detect the same influences behind this demand. If action is to be postponed the democratic anti-trust policy may as well be considered dead. Every congressional contest this autumn will be conducted on the plea that the election of the democratic candidates involves the reopening of the ques- tion, with its accompanying continuance of business unsettle- ment. It will also be urged that the party has no definite views on the subject and is incapable of framing intelligent legislation. These pleas cannot fail to be effective and may lead to the defeat of the party that frittered away its oppor- tunity to settle this question. There is nothing to be gained and everything to be lost both to the business community and to the party by such a procrastinating policy. 78 MARKETING AND FARM CREDITS Unless Congress now falters or permits its judgment to be beguiled by the same old false predictions of disaster that have so often in the past turned it from its plain path of duty into enacting mere palliatives instead of remedies we will soon have heard the last echoes of the conflict. An Absurdly Unequal Contest The contest seemed at one time hopelessly unequal. On one side are arrayed the most resourceful and powerfully en- trenched interests the world has ever known, a magnificently trained army with colossal stakes to protect and the single fixed purpose to retain its vast special privileges at all costs; on the other hand nothing but the disorganized hosts, appar- ently working aimlessly and at cross-purposes in the effort to batter down this citadel of entrenched power. The subject-matter of the contest is of exceeding intricacy and highly specialized, with well-nigh all the expert knowl- edge in the camp of the invaders upon the domain of indus- trial freedom. But the intuition of our people sooner or later penetrates beyond disguises and subterfuges into the economic truth of every proposition that affects them. It is an unfail- ing reliance and an endless source of wonder and admiration. We grope and blunder along in the darkness through difficult problems that we only half understand, but always into the light. And so within an incredibly short time since we began to realize our peril we find ourselves well on the way toward the solution of this problem that only a few years ago threatened to overwhelm us, if the President and Congress can only resist the subterranean influences that are being exerted from every direction to end the struggle in a series of weak compromises, resulting in colorless legislation that will settle nothing. Curbing Money Trust the First Step The first and an important step, but only one of many steps that we shall have to travel toward breaking the power of the money trust, has been accomplished in the enactment of the currency law. The money trust lies at the foundation of all our troubles with the trusts. It is the cornerstone upon which they rest. Its destruction is the only key to their solution. From it the other trusts and combinations radiate and on it they depend. They would disintegrate of their own topheavi- SAMUEL. UNTERMYER 79) ness but for the menace to new competition and the shield and protection against such competition that the money trust pro- vides. Business cannot be liberated so long as it is overshadowed by this octopus. Competition will not rear its head to give battle to the entrenched interests that are under the protect- ing wing of the men who wield this destructive power. No overt act is necessary on their part. The mere existence of the power is a continuing threat. So long as they dominate the sources of credit and can terrorize every new venture so long will it continue useless to attempt the emancipation of busi- ness. Disintegration of existing combinations will not in itself solve the problem. It must be supplemented by new compe- tition with fresh young blood and comparatively small begin- nings. That is not possible whilst the present concentration, of the control of credits continues in a few hands. All legis- lation must be directed primarily against its destruction and toward thus restoring freedom throughout the arteries of trade and finance. Our present predicament is aptly described in the report of the house committee on banking and currency of 1913 now commonly known as the report of the Pujo committee, in the fol- lowing words : "Far more dangerous than all that has happened to us in the past in the way of elimination of competition in in- dustry is the control of credit through the domination of these groups over our banks and industries." * * * "Whether under a different currency system the re~ sources in our banks would be greater or less is compara- tively immaterial if they continue to be controlled by a small group." * * * "It is impossible that there should be competition with all the facilities for raising monej^ or selling large issues of bonds in the hands of these few bankers and their partners and allies, who together dominate the financial policies of most of the existing systems. * * * The acts of this inner group, as here described, have been more destructive of competition than anything accomplished by the trusts, for they strike at the very vitals of potential competition in every industry that is under their protection, a condition which if permitted to continue, will render impossible all attempts to restore normal competitive conditions in the industrial world." * * * so MARKETING AND FARM CREDITS "If the arteries of credit uoav clogged well-nigh to chok- ing by the obstructions created through the control of these groups are opened so that they may be permitted freely to play their important part in the tinancial system, competi- tion in large enterprises will become possible and business can be conducted on its merits instead of being subjected to the tribute and the good \\ill of this handful of self-consti- tuted tnistees of the national prosperity.'' The democratic party is taunted on the one hand by the enemies of these reforms with unsettling business and shak- ing confidence in the stability of securities by the continued agitation of this subject. On the other hand the party is charged by the impatient radicals in its own ranks and in the ranks of the opposition parties with haviug made no headway toward destroying the existing dangerous conditions and that the various investigations and exposures that it has made have as yet no outcome other than the disturbance of business. In answer to our insistence that the mad gallop into the abyss toward which we were furiously driving has at least been checked, that moral standards have been raised and many objectionable methods abandoned in the tinancial world as the preliminary results of this agitation, the radicals challenge us to point to any case in which the grip of the money trust has been relaxed or its power weakened and we are bound to concede that no such results have yet been achieved. But the ground has been cleared and all the preliminary work has been done. Sighting Industrial Peace The public at last knows the facts and realizes the evils. It has located and diagnosed the abuses that so long eluded dis- covery and is thoroughly aroused and determined to extermi- nate them. Therefore I say we are in sight of industrial peace, since there remains now only the question of applying the appropriate remedies. We know that although our anti-trust law has been for 24 years upon the statute books in its present form, the evils it condemns have continuously grown and thrived until they have threatened the very existence of our institutions and that even now, .when the law in its present form has been enforced to the limit of its capacity as the result of an insistent public sentiment, the practical results fail to meet our needs. SAMUEL UNTBRMYER 81 We know that the legal machinery furnished by the act is defective and that the violations cannot be effectively reached, abated and punished without supplementing that machinery. We realize that our laws for the regulation of corporations are archaic and inadequate. They were framed before we Avere alive to the abuses that are sapping our industrial inde- pendence and at a time when the power of the special interests dominated our legislative bodies and dictated our laws to suit their purposes. We know that under the blighting influence of these laws and because of the absence of the protection to which we were entitled there has been foisted upon business and finance this concentration of the control of the credits of the country in a few hands that has come to be known by the mislead- ing name of the money trust and that has made these few men the masters of our financial destinies; that it has paralyzed initiative and destroyed independent action, that it constitutes today the most dangerous financial despotism the world has ever known and that if permitted to continue it will be de- structive to our progress. We recognize that in the train of these evils and as the result of this lawlessness, due to lack of law, have come cor- porate corruption, waste and irresponsibility that have blind- ed the moral perspective of the leaders and of their satelites in the financial world. All these things we know; but we do not know and it is not conducive to our peace of mind that we should know the extent to which we have been and are still being ruled and exploited, for the patience even of our people has its limits. We are intensely practical and so, without harking back to the mistakes 'or misdeeds of the past or wasting our energies in trying to settle scores with those who have brought us to this plight, our faces are set to the future to find a remedy that shall be so effective and all-embracing that the wrongs shall be undone and their repetition in the future rendered impos- sible. The people are not in quest of punishment or revenge. With a remedy in sight they are content to let bygones be bygones and to proclaim a general amnesty as to the past. Legislation Too Short-Sighted ■ The legislation now under consideration by Congress rep- resents a constructive policy. The main criticism of it is that it does not go far enough on the constructive side in the regu- 6— M. p. c. 82 MARKETING AND FARM CREDITS lation of eompotitiou in the direction to which I shall in conclu- sion now refer. The only aspect of the pendins: leirislation Avith which we have here to deal is that which relates to the various forms of cooperative arrangements for marketing- the products of the farms, factories and other industries. Under the pro- posed legislation they remain under the han of the law, are made more easily discoverable and are more severely pun- ished. They include farm products, as they should, if the prohibition of such agreement is to continue to be the policy of the government. They include also organizations of labor, Avhich I consider wrong. The statute was never intended to apply to them and there are other reasons that are to my mind conclusive in favor of their exclusion. But that is another story and one with which we are not now concerned. Enforcement of Law Imminent The time must soon come when with the aid of the In- dustrial Trade Commission the law, whatever it may be de- cided it shall be, will be generally and impartially enforced. This incredible situation of extending general imnumity to the farmers to violate the law whilst they are demanding and securing its enforcement against the industrial Avorld will not and slioidd not be longer tolerated. Agreements between competitors that have for their sole purpose the prevention of ruinous competition and the secur- ing of a reasonable profit should be made possible and lawful in all industries, subject to the approval and regulation of the new trade commission for which provision is made in the pending legislation. No one need become a party to such an agreement unless he sees fit to do so but competitors should no longer be compelled to ruin themselves and one another under penalty of being branded and punished as criminals. They will not do it, law or no law. The instinct of self-preser- vation will prevent it. This perverse policy will simply result in making of us a nation of In'pocrites and lawbreakers with a criminal code of honor in which nods and understandings will take the place of tell-tale writings. Every crossroads will have its "Gary dinners" at which "the state of the weather" Avill be the subject of discussion and which the law will never be able to reach. SAMUEL UNTERMYER 83 Regfulated Competition a Way Out Unrestricted ruinous competition should be superseded by regulated competition. The former inevitably leads to monopoly. The latter does away with the oppression of weak competitors and with every vestige of pretext for combination. The distinction between cooperation and com- bination is fundamental. The former is distinctly beneficent if so supervised and restricted that the levying of tribute upon the public is prevented. The latter is economically unsound and oppressive. Instead of the innumerable secret and unlawful arrange- ments that are now tolerated, under cover of which there is now taken from the people "all that the traffic will bear" it will be the duty of the parties to submit their agreement to the trade commission. The latter, with the aid of its expert accountants, will determine whether the conditions are reason- able and fair to the public, in the same way that the interstate commerce commission now determines the far more complicated question of rates. With such relief at hand public sentiment will support the rigid enforcement of the criminal law against all trusts and secret arrangements. I offer, as I have for the past 5 years repeatedly offered this program as an answer to your question of what should be the relation of the farmer to the trust question. It en- ables the farmer to retire with honor from his now indefen- sible position of using the brute force of superior numbers and political power to perpetuate an act of glaring and unprece- dented injustice upon every other industry, involving the most offensive form of class legislation, the constitutionality of which is subject to the gravest doubt. This is his opportunity to solve the problem. Will he be sufficiently wise, just and far-seeing to grasp it? S4: MARKETING AND FARM CREDITS COOPERATION AT WORK* W. M. Stickney Of Lowell Hoit & Company, Chicago. I take it that ' ' Cooperation at Work ' ' means getting down to business. It means the actual production or the actual buying and selling of commodities by cooperative organizations now in operation. If this brief outline is correct, then the topic is so broad that to touch it even here and there would take many hours and lead us into many countries. It is not my intention, however, to tire your patience by thresihing over too much of the straw which has been through the machine again and again. But no story of cooperation at work would be complete without some reference to the time and place where the practical ideas of industrial cooperation were first evolved, and where their application is now the mai'vel of the economic and social world. And neither would it be com- plete without at least a few hurried snapshots here and there to show the magnitude of this movement among the highly civilized nations of the earth. I assume that the delegates of this Conference are familiar with the scope of cooperative work in Great Britain, Ireland and continental Europe. To me it is a marvelous story, and the more I study it the more I am convinced that cooperation is a new religion in the trade and barter and conduct of mankind. To me it is more interesting than all the records of battles and sieges. Kings and governments come and go, armies win and lose and leave little or nothing for posterity, but this struggle of men to live without oppression or penury, with some decency and opportunity, is really the only struggle worth thinking about, for it includes all others, and remains when others pass. The Start in Toad Lane Practical, common sense cooperative work began in a little •old ramshackle building in a muddy street called Toad Lane, Rochdale, England, in 1844. Twenty-eight men, working in * Delivered before the second National Conference on Marketing and Farm Credits at Chicago, in April, 1914, in joint program with the Western Economic Society. W. M. STICKNEY 85 woolen mills for a wage that compelled them to live in poverty and destitution, made a solemn compact one gloomy November afternoon in 1843 to save 4 cents per week for one year, the money to be nsed to start some kind of an institution that would enable them to buy the actual necessities of life a little cheaper. These men were groping in the dark, but each man made good his contract, and after 12 months of self denial, saving a penny here and a penny there, they had in the treasury 28 pounds sterling, or $140, After renting the building mentioned and buying a few fixtures, they had $70 left to invest in a little- sugar, a little pork, a little jam and a little oatmeal. And sa the business was launched. They formulated a set of rules, however, that has caused the worid to make a beaten pathway to their door. These rules are today written wholly, or in part, in the by-laws of every strictly cooperative company no matter where it is organized, and they are also written into the cooperative incorporation laws of Wis- consin and other states. They are the commandments of this new religion in trade. They have revolutionized the business of empires and are slowly permeating every industry in the known world. This was 70 years ago, and the Toad Lane venture is now the largest business institution known to mankind — The Wholesale & Retail Cooperative Societies of Great Britain, The second year of its operation, 1846, it did a business of $3,500, with a net profit of $120. In 1912 it did a business of $614,427,000, with a net profit of $66,446,520. These profits, after paying interest on the capital stock, were returned to the patrons on the basis of patronage, and all told this institution has returned to its members and patrons over $1,100,000,000. This would have made 1,100 millionaires had the business been operated for private gain. This institution is both distributive and productive. Its: wholesale houses and manufacturing plants are to be fouaad im nearly every large city of England and Scotland. It owns the- largest flouring mills in Great Britain, owns steamship lines, teai plantations in Ceylon, grain elevators in the Canadian Nbrthr- west — ^in fact, the sun never sets on the purchasing stations and^ other interests of this mighty cooperative enterprise; That i? cooperation at work. 86 MARKETING AND FARM CREDITS British Fanners Follow Lead The farmers of Great Britain are now rapidly following the lead of the cities in cooperative organization. The British Ag- ricultural Organization Society was formed in 1901 for the pur- pose of helping to organize new societies and instructing new and old ones in good business methods and intelligent manage- ment. There are about 500 cooperative societies among the farmers of Great Britain, with a membei^hip of over 30,000, and doing an annual business of over $7,500,000. Many, if not all of them, do much business direct with, the consumers' coopera- tive societies in the cities. Germany Evolves Cooperation Strange it may seem, but almost the same ideas were being evolved in Germany at the time the pioneers were organizing at Rochdale. Francis Frederick Schulze in Saxony and Frederick William Raiffeisen in Rhinish Prussia were laying plans in 1845- 46 for starting cooperative bakeries and cooperative credit and purchasing associations among the people in their respective territories. Little was accomplished for a few years, and then the work grew almost, if not quite as rapidly as in Great Britain. In 1912 Germany had 28,141 cooperative organizations of vari- ous kinds, with a total membership of 4,579,740. Today the German farmers are so organized cooperatively that they are able to control all their agricultural operations from the pur- chase of everything which they msh to buy to the sale of their products to the consumer. In fact, almost everything which the German farmer does he does cooperatively, and this economic movement in the Empire has made a new Germany and brought prosperity, contentment and happiness where 60 years ago was poverty, destitution and discontent. All Europe Turning Cooperative What I have said of Great Britain and Germany is true in a measure of almost every country in Europe. Cooperation is at work everjnvhere. In France there are 2,975 cooperative organ- izations, with a membership of a little over 803,000, the annual business turnover being something like $55,000,000. In S\^^tz- erland there are something over 3,400 cooperative organizations, with a membership of practically the entire population. W. M. STICKNEY . gy Sweden has 3,362 cooperative societies of various kinds. Fin- land had but one cooperative society in 1901, and now has 1,100. Roumania has now about 2,100 cooperative credit associations, and 15 years ago there was not a cooperative institution in the country. Cooperation was unknown in Hungary in 1890, and today there are about 900 societies federated with a wholesale cooperative organization. Italy has a cooperative population of about 250,000, while Russia has 300,000 members of coopera- tive organizations. There are said to be over a half million members of cooperative societies in Austria, and more than 2,300 cooperative organizations in Holland. t A Light for Irish and Danish Farmers In the cooperative marketing of farm products, Denmark and Ireland stand head and shoulders above all others in the bril- liancy of their achievements and the permanency of results. Fifty 3^ears ago the farmers in both of these countries found themselves in a pitiable condition — worse than the farmers in any part of the United States ever were or ever dreamed of be- ing. They were destitute, despondent and hopeless, and there was nothing but poverty in sight. Up to 1880 Danish and Irish farmers had gone along in the same old way — small farms, small crops, small prices, discontent, discouragement, discord, disease, degeneration and decay. But a few rare spirits saw a vision and became convinced that farmers must combine and work together in order to prosper individually. A cooperative creamery was organized at Olgod in Denmark in 1882, and now there are over 1,300 of these creameries, exporting over a mil- lion dollars worth of butter every week. Denmark has 36 co- operative bacon factories, 510 cooperative egg testing associa- tions, 1,200 cooperative retail societies, 560 cooperative savings banks with deposits of over $215,000,000, also 519 cow testing associations and 1,260 cattle breeding associations. Denmark is about one-fourth the size of Illinois, and yet she exports an- nually over $90,000,000 worth of butter, eggs, cheese and meat ! From poverty and destitution 40 years ago it has come to be the richest country per capita in Europe according to its popula- tion, and 89 out of every 100 families own their own homes. And we behold today a new Denmark ! And we behold a new Ireland. No country could possibly be in a more pitiable condition a few years ago, and, yet today Ireland is commencing to blossom like a rose. In many parts 88 MARKETING AND FARM CREDITS it is said, to be as rich and prosperous now as the best portion of our own great Middle West. And this great regeneration has come about through the efforts of a band of cooperative mis- sionaries — Sir Horace Plunkett, a nobleman, Mr. R. A. Ander- son, a farmer, Mr. George W. Russell, the brilliant editor of the Irish Homestead, and Rev. Father Thomas A. Finlay, profes- sor of economics in the National University of Dublin. Each of these has been preaching the gospel of cooperation over Ireland during the last 20 years. It took 50 meetings, covering a period of more than a year, before these missionaries could get the farmers to organize a creamery. The first one was es- tablished in Limerick in 1889. It was a year before another one started. Today Ireland has nearly 500 cooperative cream- eries, 980 cooperative societies all told, with a paid-up capital of over a million dollars and an annual turnover of something like $12,000,000. And so we are told that the salvation of Ire- land is being worked out by a big cooperative scheme in which local societies, the wholesale society, the agricultural depart- ment of the government, the Irish Agricultural Organization Society, the Irish Homestead and the society of United Irish Women are all playing important parts. This is cooperation at work. Cooperation in Canada It is said there are about 2,000 cooperative organizations in Canada, the larger per cent of them being among the produc- ers of 3 of the northwest provinces. The Manitoba Grain Growers' Grain Association now has a membership of 12,000 farmers and more than 300 local associations ; the Saskatchewan Grain Growers' Association has a membership of 25,000 farm- ers, with more than 600 local associations ; the United Farmers of Alberta has 15,000 farmer stockholders and over 500 local as- sociations. In each of these 3 provinces there is also a cooperative eleva- tor company, organized for the purpose of looking after the marketing of grain at terminals and also direct to the consum- ers. The Grain Growers' Grain Company, with headquarters at Winnipeg, was organized 6 years ago. It now has over 14,000 farmer stockholders, a subscribed capital stock of $809,950, of which $645,361 is paid in. It has paid a 10 per cent dividend every year since it has been in business, and now has a surplus above all indebtedness of $183,000. It handled 30,000,000 bushels of grain last year, and did a business W. M. STICKNEY 89 amounting to $60,000,000. It operates an elevator at Van- couver, a terminal elevator at Fort William, a large flouring mill with an output of 2,500 barrels a day, together with sev- eral other industries. It owns a newspaper called the Grain Growers' Guide, a large printing establishment, and a seat on the Winnipeg Grain Exchange. I quote the following from a letter received yesterday, written by the editor and manager- of the Grain Growers' Guide. Speaking of the Grain Growers' Grain Company, he said : "To show you how the farmers look upon the company I might state that since November last the paid-up capital of the company has increased by $125,000, sent in by the farmers themselves. The Grain Growers' Grain Company has been a huge success since the day of its inception, and has resulted in forcing every other grain company in West- ern Canada to give better service to the farmers and better prices. It is no exaggeration to say that the farmers of Western Canada everywhere are today securing at least 5 cents per bushel more for their wheat than they would with- out the Grain Growers' Grain Company in the field. "Aside from the grain business the Grain Growers' Grain- Company has performed a tremendous service by opening a cooperative department through which it supplies lumber, fence wire, apples, fence posts, flour, feed, binder-twine and coal to farmers in carlots. The result has been, a great lowering in the price of these commodities. "The Grain Growers' Grain Company is the chief factor- in the great revolution which is now taking place in West- ern Canadian trade methods. ' ' Government Aid to Canadian Cooperators "In 1911 the Saskatchewan Cooperative Elevator Company was launched. The government of Saskatchewan assisted the farmers to secure the necessary capital at a low rate of inter- est, but the control and operation of the company is entirely in the hands of the farmers. None but farmers may hold stock, no farmer more than 10 shares, and no shareholder has more than 1 vote at a shareholders' meeting. Thus the con- trol of the company must remain always with the farmers. This company in the short course of its existence has erected 200 modem elevators through Saskatchewan, and thus pro- vided its farmer shareholders with an independent avenue no MARKETING AND FARM CREDITS through which to plaoe tlieir gram upon the markets of the worW. The paid-up capital of the Saskatchewan Cooperative Elevator Company is now over $350,000, its total ass-ets $1,709,487.57, and it has 13,156 shareholders. During the 2 years of its operation the company has handled nearly 30.000,- 000 bushels of the farmers' grain and its total profits have been over $220,000. ' ' In 1912 the farmers of Alberta organized the Alberta Farm- ers ' Cooperative Elevator Company. The government of Al- berta also assisted tlie farmers of that province in establish- ing their OAvn company, by enabling them to borrow the larger portion of their capital at a low rate of interest, but has no voice in the control or operation of the company. As with the other 2 companies, the shareholders in the Alberta company must always be farmers. The shares of this company are '$60 each, no shareholder can hold more than 20 shares, and no shareholder has more than one vote at any sliareholdere' meeting. Thus the control is vested forever in the farmers. Though less than a year in operation, the Alberta Farmers' Co- operative Elevator Company has erected and is now operating 50 elevators in that province, and has 5,165 shareholders. The paid-up capital is nearly $100,000 and the total assets $430,000. During the present grain season the company has handled 3,500.000 bushels of grain. Alongside each elevator is erected a warehouse for the handling of other commodities on the co- operative plan. "This brief story gives an idea of the magnitude of the busi- ness operations of the organized farmers of Manitoba, Sas- katchewan and Alberta. During the present grain season they Mill handle through their o■\^•ll companies with 48.000,000 to 50.000.000 bushels of grain, and in addition to securing much better prices for their farmer shareholders than they could have secured the old monopoly system, they will undoubt- edly ihave a net profit of $400,000. This money will not be used to enrich a few, but will be devoted to an extension of their operations in the grain business as well as in other fields, and in the prosecution of educational work and organization for the improvement of agricultural conditions. It is the aim of the organized farmers to extend their operations until every farmer is a shareholder, all the grain is shipped through their OAvn companies and also eventually to handle for their share- holders a large Ihie of staple commodities." W. M. STICKNEY 91 These are a few snapshots of cooperation at work in other lands. The reports of our consular officers show that coopera- tion at work is a success in every country in Europe. I have searched the records in vain to find a country where it has been tried and failed. The idea is broadening under every flag, and it is said today that more than 60,000,000 people in Great Britain, Ireland, continental Europe, Asia and America are directly interested in cooperative production and distri- bution. America Slow to Adopt Cooperation It may appear to some that we here in America have been ;a little slow in taking up cooperative work. It must be remem- bered, however, that this is practically a new country, with a territory equal to Great Britain, Ireland and continental Europe combined. Even here in the Mississippi valley men still live who braved the dangers and hardships of pioneer life in helping to push westward the frontier of civilization to the foothills of the Rockies. The ground upon which Chicago is now built was largely a swampy marsh within the memory of men living to- day. The pioneers who settled this western country were very busy men, looking after drainage and fencing, building cities and railroads, establishing churches and schools, and the work accomplished during the last 75 years might easily be consid- ered one of the wonders of the world. It is, therefore, but natural that cooperation as we know it, •was for a time neglected. There has been a mighty awaken- ing, however, within the last few years, and the American peo- ple are today brought face to face with the problem of a more economic distribution of all the products that come from fac- tory, farm and mine. This is the problem which brings the delegates of this conference together, and it is a question of vital importance to more than 100,000,000 people in the United States. Some of us, millions of us, believe that it can be brought about through a phase of economic and social devel- opment which is called Cooperation. Survey of American Movement There are said to be in this country something like 540 co- operative stores, 580 cooperative cheese factories, 1,800 or more cooperative cotton warehouses, 2,100 cooperative insurance companies, 2,250 cooperative creameries, and 2,900 cooperative 92 MARKETING AND FARM CREDITS graiu elevator companies. This, of course, is but a partial list^ as the United States Agricultural Department gives out the iu-- formation that there are in the United States somethinsr over (50,000 cooperative organizations all told. The cooperative idea has spread rapidly over the grain belt states of the Middle "West during the last 10 years 1 have been iu personal touch with this phase of cooperation at work, and it would seem appropriate to give a brief description of what has been accomplished. It would be impossible for me to descrilv this economic movement, however, if 1 were cou- tined to those organizations which are purely cooperative. Many of the associations which I shall mention are stock com- panies incorporated under the regular incorporation laws of the states in which they are located. Three or 4 states only, where there are any considerable number of farmer grain or- ganizations, have a cooperative incorporation law. In the other states a few of the companies are conducting their busi- ness on a cooperative basis, but are doing so through a "gen- tleman's agreement."' or by contract. It is readily seen, there- fore, that quite a percentage must still use the capitalistic form of incorporation or stay out of business. EtYorts were made 2 years ago to enact a cooperative incorporation law in Dlinois and also in Iowa, but they failed, possibly on account of the large number of old school politicians who still inhabit the leg- islatures of these commonwealths. But the handwriting is on the wall, and the time is certainly not far distant when every state will have a cooperative law similar to the one which "Wis- consin passed iu 1912. and which Indiana. "Washington and New York enacted a few months ago. Progress in Illinois Illinois has about 340 prosperous cooperative grain com- panies today where 10 years ago there were not over 22. and 15 to 20 new ones are being organized every year. The tinan- cial gain to the producers of this state has been enormous, niiuois raises not far from 500.000.000 bushels of grain each year, and probably sells about olX"). 000.000 bushels. Conserva- tive men estimate that this movement among the farmers of Illinois, commeuciug in 1902, has been the means of raising the price of grain at least 3 cents per bushel over the entire state. That is, the farmer is receiving 3 cents per bushel more for his grain that he would if there were no cooperative eleva- tor companies in the state, and 3 cents a bushel on 300.000.000 W. M. STICKNEY 93 bushels of grain means that $9,000,000 are left in the pockets of the Illinois farmers that would have been lost either in dis- tribution or otherwise. These figures do not include the profit on the coal handled by the farmer companies, and it is said that the retail price of this article has been reduced from 50 cents to $1 per ton. Many of them handle lumber, and the price of this commodity has been reduced from $2 to $10 per thousand. Many handle building material, and tihere has been a substantial reduction in the price of these commodities. This is also cooperdtion at work. And this is not all the story. A permanent advance of 3 cents per bushel in grain to the farmer means that at least $5 or more is added to the value of every acre of land where these conditions obtain. It means added value to every item of property of every kind in every community where there is a cooperative company. No one can safely estimate and but few can comprehend the enormous benefits that have been de- rived from this cooperative movement among the farmers of Illinois and other grain belt states during the last 10 years. The story of Illinois is the story of Iowa, and in a large measure it is the story of South Dakota, Minnesota, North Da- kota, Nebraska, and Kansas. Twelve years ago Iowa had less than 25 cooperative elevator companies, and today she has 360, Nebraska has something over 200, South Dakota about 225, Minnesota 260, North Dakota 285, and Kansas about 150. All have state associations of which the local companies are mem- bers, and all are working hand in hand for a greater measure of cooperation. There are also numerous cooperative grain companies scattered over Indiana, Ohio, Michigan, Wisconsin, Oregon, Oklahoma and Missouri. All told there are said to be over 2,900 of these organizations in the United States, with at least 375,000 stockholders. These companies are said to have an in- vestment of $30,000,000 and do an annual business of over $600,000,000. Careful men estimate that the grain growers of the Middle West are receiving a profit of at least $50,000,000 each year, due entirely to their organizations — that is, they are receiving enough more for their grain and buying their coal, lumber and other farm supplies enough cheaper to equal this amount. Say it is but $25,000,000 and still you have an enormous sum. But by far a greater benefit than the monetary side has come to the people of the grain belt states. Everybody is becoming 94 MARKETING AND FARM CREDITS a student of cooperation. "We think this spirit is of vastljr more benefit than the 25 or 50 millions of dollars. To be sure, the financial must go hand in hand with that larger benefit, but somehow and in someway a very wonderful change has come about. Few Failures in Grain Movement And these farmer grain organizations are a financial success. I venture the assertion that there is a smaller percentage of failures among these companies in the Middle West than there is in any other business, occupation or profession. I am famil- iar with the situation in Illinois and Iowa, where there are about 700 farmer companies, and I do not know of more than 4 or 5 organizations that have gone out of business during the last 10 years. Not over 1 or 2 of these were failures, the others having discontinued business on account of local conditions. This is a record to be proud of considering the opposition with which they have had to contend. In nearly every instance a. cooperative grain company has had to fight its way into ex- istence, and then fight afterwards for its very life. But this, is history. Everywhere cooperation has always been assailed by men who fatten on the evils which others are trying to cor- rect. The annual convention of each state Farmers ' Grain Dealers "■ Association is held during the winter months. Every farmer, every man connected with local companies, and everyone inter- ested in the principles of cooperation is invited and urged to attend. Printed programs are arranged and distributed over the state weeks before the convention meets. The best speak- ers that can be secured are engaged to deliver addresses on seeds, soils, grain raising and marketing, intensive farming, and on every topic pertaining to cooperative advancement. These conventions are usually in session for 2 or 3 days, and the attendance often reaches the 2,000 mark. The Social Element Finds Free Play At the annual stockholders' meeting of each of these local companies a speaker is usually secured to address the farmers on cooperative marketing and the science of agriculture. If these meetings happen to be held in the winter an indoor pic- nic dinner is often served in the town hall by the farmers' wives. The business session of the corporation is held in the W. M. STICKNEY 95 forenoon, and after dinner there is generally a program of music, recitations and addresses. During the summer and early fall hundreds of "farmer elevator picnics" are held. The programs consist of games, music and addresses on the topics most interesting to the family on the farm. It is these thousands of gatherings every year, together with the business experience acquired in .conducting the affairs of a corporation that are making the farmer a leader in the prog- ress of the West. In fact, so progressive has he become that he now owns his trade paper. The American Cooperative Journal, which is the official organ of the farmers' movement in all the grain belt states. What Will Future Bring? Will the producers be satisfied with what they have already accomplished? Civilization cannot stand still, and it must not go back. In 1908, George W. Perkins, in an address to the students of Columbia University, said: "It is almost heresy to say that competition is no longer the life of trade, but such has come to be the fact. The spirit of cooperation is upon us. It must of necessity be the next great form of business devel- opment and progress. ' ' Addressing the delegates of the National Grain Dealers' As- sociation at their annual meeting in Cincinnati, October 3rd, 1907, Honorable Martin A. Knapp, then chairman of the Inter- state Commerce Commission and recently chief justice of the commerce court, said: "I am one of those dreamers who be- lieve that the conditions of our modern life, brought about by our marvelous systems of transportation and communication, are not and cannot be adjusted to the theory that competition is the life of trade. I believe that somehow and in some way we shall and must find a method of transferring our whole in- dustrial and transportation agencies from a competitive to a cooperative basis." These are largely my sentiments, and I believe, too, that the future of agriculture in America depends largely on the future of this economic and social movement. No intelligent man would think of belittling the great work of our agricultural col- leges and experiment stations. They have performed a mar- velous service to mankind, and yet this cooperative movement among the fruit and grain growers of the West, and the cotton planters of the South, has done as much to make agriculture a 96 MARKETING AND FARM CREDITS science and a profession as all other forces combined. Theo- dore Roosevelt recognized the importance of this work when, on May 31, 1907, speaking' at Lansing, Michigan, on the anni- versary of the founding of the tirst agricultural college in the United States, he said : "A vast field is open for work by co- operative associations of farmers in dealing with the relations of the farm to transportation and to the distribution and man- ufacture of raw materials. It is only through such combina- tions that American farmers can develop to the full their social and economic power." The producers have so far done their part in the readjust- ment of economic conditions. They cannot, however, do for the consumer what he must do for himself. Cooperative or- ganizations — fruit growers, creameries, cheese factories, grain growers and vegetable growers — are waiting and ready to do business direct with cooperative organizations of consumers. Therefore, ^NFr, Consumer, in the parlance of the street, "It is up to you. Join Producer With Consumer Through Cooperation And here I reach the boundary line beyond which is forbid- den ground. But perhaps I may say that producers' coopera- tive organizations in the country and the consumers' coopera- tive organizations in the cities have so far helped each other never a whit. Consumei*s are not sufficiently organized in American cities to constitute a buying power — in fact, they are not organized at all. Here, in my estimation, is the key to the economic side of this entire marketing problem. One hundred cooperative grocery markets in Chicago, or any large city, under one management, would have a buying power, which, together with a more economic distribution, would re- duce the cost of table necessities at least 20 per cent, and would guarantee a fair price to every producers' organization with' which it did business. If this Conference will center all its influence and ingenuity for a time on the organization of cooperative associations of consumers in the cities in order that they may work directly with cooperative organizations of producers, I believe it will accomplish far more good than it can in any other way. Now is the time to act. Give cooperative marketing and the gen- eral principles of cooperation the stamp of approA'al, and then let us concentrate our energies upon the working out of some specific proposition. Cooperation in America is no doubt in W. M. STICKNEY 97 the kindergarten stage. Other generations will see unfold that greater development which we now can only picture, but it is our duty to prepare the soil for the harvest in the years to come, and "shame and disgrace will be ours if in our eyes the light of high resolve is dimmed." 7— M. F. C. MARKETING THE FARM PRODUCT THE ECONOMICS OF AGRICULTURE Carl Schurz Vrooman Assistant Secretary, The United States Department of Agriculture ''Agricultural economics," the topic assigned to me, is a pretty broad topic. It is not only broad, but long and deep — .so big a subject indeed that it gives me a lot of leeway in speak- ing to you this morning — which I mean to take. In thij regard I am a bit like Napoleon Bonaparte is said to have been in the matter of a treaty which he had under consideration. One of his secretaries came to him and said, ' ' Sire, there is an ambiguity in this document. I think we had better have it re-written." ' ' Leave it as it is, ' ' said Napoleon, ' ' or, if you are not sure that the ambiguity is there, put one in. "We may need it some time." I like the breadth of this subject because it gives me a chance to talk about most anything. Indeed, one or two points have occurred to me within the last hour that seem to me to be more important just now than any of the strictly agricultural economic questions, even more impor- tant just now than anything I might say to you on the question of marketing, though that is important indeed, and wiE be dis- cussed in due order. The annual agricultural output of this country is about 10 billion dollars. We hear a good deal about "big business" these days, but agriculture is the biggest business of all. And mind you this 10 billion dollars is merely the price the farmer gets. "What it costs the consumer, heaven only knows ! Now the trans- portation of 10 million dollars' worth of products is no small matter. What it costs very vitally concerns both producer and consumer. Even the cost of railroad transportation under ordi- naiy conditions is a serious matter, though I have read some very laboriously written documents written to prove the contrary. But now I want to call your attention to some freight rates that make the most extortionate railroad freight rates pale into neg- ligibility. A Real Marketing Problem Under normal conditions the average cost of transporting a bushel of wheat from New York to Liverpool is 4 or 5 cents. For the past year the cost of transporting a bushel of wheat from 102 MARKETING AND FARM CREDITS Ntnv York to Liverpool has averag>?d over 40 cents, an increase of over 1.000 per cent. There is a niarketiiisr proWeni for yon. Of coni'se, no department of this oonntry has direct control over freiirht rates on tlie liigh seas. Init the administration lias proposed a plan embodied in the so-called McAdoo Shipping Bill for enabling this countiy to secure an indirect control over such rates and to give it a five hand in shipping its prodncts to for- eign markets. I want every pei'son here this morning to realize how siguilicaut this bill is to the farmer and bnsiness man of this conntry. as well as to all American citizens, no matter whr.t their bnsiness. for this bill not only provides for the rehabilita- tion of the American merchant marine as a power in peace, but iUso carries a provision which is of the utmost importance from a naval standpoint, namely, that all the ships to be built or ac- quired by the government under this act shall be available as naval auxiliaries in time of war. We are told by some people that we do not need to do this ; that private industry and initiative will take care of the shipping problem. We have heard this for 50 years, and private in- dustry has done nothing about it. Last year the administration asked Congress to appropriate $45,000,000 for the purpose of buying or building a federal merchant marine to help dispose of our j> Inducts to foreign countries : but that bill was defeated by a pei*sistent tilibuster. aiul during the year just passed the Americaji people have pi\>bably lost more than $45,000,000 tlu'ough excessive freight rates or the lack of ships to carry their products to foreign nmrkets. If this measure had passed, we might have saved in one year more than the entire cost of the lleet contemplated. Take the matter of cotton. The cost of transporting cotton from New York to Liverpool has gone up 700 per cent, and yet there are business men in this country who take their cue from shipping interests located in New York and in foreign capitals, and ignore the primary necessity of the busi- ness of this country, namely, that we be able to carry our proti- ncts to the markets of the world without paying extortionate transportation charges. America Weak on Shipping- Matters Our complete dependence upon the ships of other nations to carry our produce to foreign markets has long put us in an inex- cusably weak and humiliating position. It was estimated by the congressional committee on merchant marine and tisheries that CARL SCHURZ VROOMAN IO3 this country pays annually between 200 million and 300 million dollars to foreign ships for carrying American freight. Ninety- two per cent of our ocean-borne freight is carried in foreign bot- toms. We cannot at one^^troke extricate ourselves from our pres- ent economic dependence upon foreign ship owners. The most we can do is to launch a new American shipping policy at once, and then push that until our independence in ocean transjjorta- tion is achieved. There are 2 possible ways of achieving this independence; either by granting generous subsidies of the people's money to various private shipping concerns, or by taking federal money and building or buying a fleet of merchant vessels to be owned by the federal government and either leased to shipping corporations or operated by the government itself. The first plan, of building up a merchant marine by subvention or subsidy, had the energetic support of various past administra- tions, but so bitterly and so persistently have the people of the country been opposed to this form of paternalism, that these measures have uniformly been defeated. Unquestionably, if we are to build up a merchant marine, it must be by some other method. The McAdoo Shipping Bill is the only bill yet proposed that is based upon sound economics, common sense and common justice, and it is the only bill that stands any chance of passage by this Congress. Since its defeat at the last session of Congress it has been carefully revised and improved in a number of essen- tial particulars. If you want reasonable freight rates, and ade- quate shipping facilities, get behind this administration's ship- ping bill. But if you like to pay 1,000 per cent increase on your freight rates, that is your privilege. Congress and the Grain Inspection Bill Another bill coming up before Congress deals with the question of grain inspection. I am a believer in a national system of fed- eral inspection, but I have looked into the matter very carefully and talked with some leading congressmen and senators and others, and my very decided impression is that it will be impos- sible during the next session to get through a bill providing for a complete federal inspection system, the kind I would like to see. But it will be possible, probably, if the friends of this movement get behind it, to put forward a federal supervision bill like the Moss bill. That is a step in the right direction ; a very large and important step. It does not go the whole distance, but it goes a 104 MARKETING AND FARM CREDITS part of the way, and as business men, as men who want to make some progress this year, and who hope to make more progress next year, let's take this up and get the very best bill we are capable of getting in the interest of grain standardization on a rational and just basis. You know as well as I do, that the present Interstate Commerce Commission is the result of a long series of congressional enact- ments, which gradually worked out the present system of federal regulation of railways. It would have been very nice if we could have gotten the whole thing at one jump, but, unfortunately, we are not built that way. We have to feel our way a step at a time and gradually perfect our legislation. And, therefore, I hope that those of you who like myself are in favor of federal inspec- tion of grain, when you talk with your congressmen or senators, will say to them, "If you can't get a complete bill according to the plans and specifications which we think are the correct ones, and can get one which will incorporate some of the things we are fighting for, get it, and we wiU have a basis to work on. ' ' The United States Department of Agriculture is as interested as you are in this great marketing problem. The federal depart- ment up to the last 3 years did very little with regard to market- ing problems, just as the state agricultural colleges of the country paid very little attention to marketing problems until very re- cently. But a couple of years ago Congi-ess passed a law provid- ing money for the creation of an ' ' Office of Markets and Rural Or- ganization" in the department of agriculture, and since then the department has been working hard upon a variety of problems in agricultural economics, among them taking up most of the prob- lems of marketing that you have been dealing with at this Con- gress. The farmers of the country are suffering from a stiff and cum- bersome system of distribution. Part and parcel with this gen- eral problem of distribution, or intimately related to it, are a whole brood of economic problems, each of which is of vital con- cern to the American farmer: The problem of how to grade farm products so as to get the highest price for the entire output ; the problem of how properly to pack and brand the shipments ; of how to select markets and make shipments ; of how to sell to the best advantage ; of how to sell cooperatively with other farmers ; of how to buy cooperatively ; of how to get better credit through cooperative effort — these are some of the problems that must be CARL SCHURZ VROOMAN 105 solved before we can boast that our agriculture is on a sound economic basis. New Forces at Work in Agriciilture The legacy of the century past to agriculture has been agron- omy — a vast but largely undigested and uncoordinated mass of information about how to grow things. Within the past 2 years there have been set in motion the forces that will, we believe, lib- erate to the farmers of the country this mass of largely inert knowledge and make it available for practical use. In those 2 years 2 things have been done by Congress which to my mind are equal in importance to all the other things that it has done for agriculture in the 50 years past: The passage of the Smith- Lever Bill and the creation of the office of markets and rural or- ganization. The Smith-Lever law virtually means the appointment of a deputy secretary of agriculture for each county in this land. It means that the department has at last got into personal touch with the farmers themselves. The creation of the office of mar- kets and rural organization means that the department has at last ceased to focus all its vast energies upon problems of production and is henceforth going to cope as successfully with the equally important problems of distribution. The woof to the warp of the marketing question is the problem of rural cooperation. The spread of the cooperative movement through the Middle West and on the Pacific coast has been encour- aging, but there are many difficulties that must be surmounted before the cooperative movement can have a free hand. For one thing the laws of many of our states are such as to impose unjust restrictions upon such organizations. Then too, this is a very in- dividualistic country, and it is a difficult matter to get the people, to do team work for the common good. You cannot make a rope out of loose grains of sand. Unless the farmers of this country support cooperation we shall not have cooperation. Policy of Government to Aid Cooperation The department is doing its utmost to foster the cooperative movement and to put it on a sound economic basis. We are trying to impress upon the farmers of this country the fact that the man who is too suspicious and short-sighted to cooperate with his neigh- bors in the pursuit of a common end, is going to be the loser in the 106 MARKETING AND FARM CREDITS long run. We are working along this line in all parts of tlie coun- try. "We find that in some localities the farmers are responding mag- nificently to this new movement, and in other localities they are not. And hence we are telling our county agents and our other men who go throughout the country that they must imbue the farmer with the spirit of cooperation. It is folly for us to dream beautiful dreams of national economic and social efficiency, un- less we are able, right in our ovm township and in our own comity, to get together with our neighbors, forget our suspicions of them, forget our little points of difference, and set to work for the common salvation, hand in hand and shoulder to shoulder. That is the spirit which will "^nn — and that is the onlij spirit which will win. The work that the federal department can do, the work that an organization like yours can do, is very important, but the greatest work must come from the people themselves — the initiative must come from the people. We cannot go out over the country and Prussianize the farmers, and roll them into little groups of co- . operative enterprises. What we can do is very important, but it is strictly limited. We are ready to cooperate with the farmer in promoting a scientific agriculture, in promoting a scientific system of marketing, and in building up a new situation in the rural districts of this country, based upon the great principles of brotherhood and cooperation — ^but we can only suggest and help. We are your creatures, your servant, your instrument. We can be of service to you, but the amount of ser\dce you get from us will depend upon the amount of energy, of intelligence which you yourself put into the great work of making of the New Agri- culture something more than a mere movement for the increase in the size of our crops, something more even than a gi'eat move- ment to increase the size of our bank accounts — a great movement which "udll mean to the coming century a rejuvenation of rural civilization upon a new basis. And if the farmers will get the economic and social conception of their mission and ours, the next 25 years will see in this country a degree of material prosperity that the world has never seen before. And that material pros- perity will be used merely as the foundations upon which to build a mental, social and spiritual prosperity, which after all, is the only thing that is really permanent, or that is really supremely worth our while. GEORGE P. HAMPTON 107 THE NATIONAL MARKETING PROBLEM George P. Hampton Managing Director, The National Marketing Committee and Editor of The Farmers' Forum I have come to this Conference, because I believe you Avould not have assembled here if you were not in earnest in your de- sire to aid in solving this great problem, and because I feel that among you may be found the master minds who will solve the problem, and because I feel I can present a few facts worthy of your consideration on the main factors that handicap the better distribution of farm products and some suggestions for increasing the efficiency of present distribution agencies, or per- haps I should say, those agencies which I believe can wield the most potent influences in securing the establishment of better marketing methods. In 1906, at the request of the national master and the executive committee, I attended the annual meeting of the National Grange at Denver, for the purpose of consultation on formulating the legislative program for the ensuing year. For some time past I had felt that the problems of distribution, as they affect the producers, were not receiving their full share of attention, ann that it was hopeless to expect any general increase in the farm- ers' prosperity until distribution was reorganized on a more equi- table basis. On this question as I presented it the officers of the National Grange were in complete accord, and at the request of the chairman of the executive committee I drafted the following section of the executive committee report : ' ' Distribution of Farm Products. ' ' ' ' The statement is frequently made in our farm papers that the most important econmic subject that confronts the farm- ers of America is 'scientific agriculture,' or, in other words, the science of making two blades of grass grow where one grew before. We disagree with their opinions. The great problems of production, not alone in agriculture, but in all lines of industry, have occupied by far the largest attention of the world for a long time. And these productive prob- lems, and scientific farming especially, will undoubtedly re- 108 MARKETING AND FARM CREDITS ceive iiicreasod attention. Xotwithstauding this inereasiugr in- terest in improving prodnetive methods, the progressive farmer no longer considers the question of how to produce more as heing nearly so important as the other great question. of how to keep for himself a larger share of the profits of what he has already produced. ' ' The great problem of this day and generation is distribu- tion ; equitable distribution or the 'square deal' (as Presi- dent Roosevelt has so happily phrased it). The producer and the consumer must be brought closer together, and the special privilege classes, who rob both, must be eliminated. Not until the 'square deal' is fully established and monopoly completely annihilated, can the question of production again attain to its naturally right position of first place. Until then, distribution must be oui- chief concern. ' ' This was unanimously adopted by the National Grange and subsequently endorsed by eveiy state Grange at their next fol- lowing annual meetings, and since then, with- increased emphasis, it has been the declared policy of the Grange. I am con^^nced that the thing-s of first importance in securing the quickest, most thoroughgoing, and permanent improvement in the distribution of fann products, are : 1. Remedial legislation. "What that legislation should be has, in the main, been made clearly apparent in the addresses and dis- cussions of this conference. 2. Higher efficiency in the existing educational and denoni- strational agencies, governmental and private, by means of a central agency, or clearinghouse, the main function of wliicli shall be to assist in coordinating the activities of the various agencies,. while leaving the independence of each unimpaired. 3. The development of effective team-work in the present agen eies for distribution of farm products, through a better under- standing of their right relation to the f)roblem, as a whole, and by demonstrating that the interests and profits of each will be best served by operating from the point of view of team work. Movements Should Be Coordinated The lack of effective cooperation of the many, very many,, agencies — governmental and private, national, state and local — now at work to improve marketing conditions, is the greatest de- fect in the present marketing situation. If these educational GEORGE P. HAMPTON 109 and demonstrational agencies fail to show efficiency in coopera- tion, and fail to set the example of high grade team-work, how can the rank and file of producers and consumers be expected to co- operate intelligently upon any broad lines? While such condi- tions prevail, the task of improving marketing conditions in any large way is well nigh hopeless. On the other hand, I can conceive of no more powerful inflvience to stimulate and speed forward the cooperation of producers and consumers in improving marketing conditions, than that offered by positive evidence that the most important of the various educational and demonstrational agen- cies are working together with their activities intelligently coordi- nated. The activities of these various agencies should coordinate as automatically and as freely as those of bankers in our banking system, while the independence of each should be just as surely maintained. To perform this function of a general clearing house is the central purpose of The National Marketing Committee. We realize, however, that with the growth of the work, an organiza- tion, bigger and broader in its scope, will be needed, and one of the main activities of The National Marketing Committee is to assist in securing the establishment on some broad plan yet to be developed, of a national council, or chamber of agriculture. With a national organization of undoubted representative strength, the important next steps of securing corresponding "clearing houses" in the various states and localities would fol- low naturally in due course. The getting-together in this way of what I may call the high- est forces of agriculture, is the first and most important step in improving marketing conditions, for it makes the accomplishment of all other steps easier. The present machinery of distribution can be geared up to a much higher condition of efficiency and much of the present enormous waste in marketing farm products eliminated by some remedial legislation, and by showing our bankers, merchants, and transportation managers, that the improvement of market- ing methods means increased profits for them. Their present several viewpoints of the marketing problem are wrong, and as T have come to see the problem, it is not so much a matter of edu- cating the producer and the consumer, as of educating the banker, merchant and transportation manager. Distribution of farm products is a question of team work, and the banker, merchant 110 MARKETING .VXD FAR:M CREDITS mill trnnsportation airotit nro important moiiibovs of the iuh'os- sijn'v toaui for otlioiont sorvieo. The main oauso of inotlii.'ioiu'y in prosont iwarkotini:: atroiu'ios is tJuvt the moiulvrs of tlie toain have failed to soo theiv risfht rela- tionship to the toain. or even to nvogiiize thoy nvoiv luoiubors of a toa.iu. Ivu'h has "irone it alone" seekinir only his own advan- ta4rv\ anvl >vith. at best, a piXM* iniderstandinir of the ritrhts of the other nuMnboi-s of the team. Sneli an attitnde. intentional or miin- tentional. is utterly destnietive o( team sueeess, and inevitably re- aets on every uuMuber of the team. It is written into the very nature of thinirs that in any group having a eon\mon purpose an injury to one is the eoneern of all. and_that in the long run all will go forwanl. or fall, together. Couseq\iently to aid in perfecting the team Avork of pivseut distributii\g agents is a very importaiu part of the work for better nmrketing. This phase of the problem is worthy of your most earnest study for I au\ sure you can appreciate the n\ighty power of the intlu- enees that will be brought to bear in solving the marketing ptvb- lems, if. with new view points, our bankers, merchants, and trans- port^nion mauagei'S can see clearly large pix'^tits to then\selves in laking hold of the work. Time will only permit me to bi'ietly in- dicate \\hat the view point and policy of these various agencies should be. Importance of Transportiition Agencies A low Ci>st. highly etticient transportation service is an abso- lutely necessary part of an economically so\n\d system for the marketing of farm pivduets. To render such a service is the na- tural function of the raili^oads. but this service will never be brought up to its highest state of efticiency until railroad mau- agei'S fully realize that the perfecting of the railroad's part in the developmont of better marketing, means increased dividends, and that the great dividend pnxiucer is naturally local fivight. The failuiv of the railroads to realize this has been one of the main causes of the evils in both production and distribution from which we now sutf er. The old raihvad policy of s;\criticing the short haul for the long haul, was destructive to the development of a national marketing system, but it Avas sound in its iV(,\>gnition of the supreme import- ance of freight as the reveinie producer. The error ^^'a« in the failure to see that the main function of the railroad was to serve tlie country through which it ran. and that in the long run kx^al GEORGE P. HAMPTON HI freif^ht must iuovitahly ho, the dividend producer. The failure to adopt a d(!V(!lopinent i)olic.y with this end in view has heen disas- trous both to the country and to the railroads. Tliat railroad managers do not yet grasp the full importance of the j)oli(ty of concentrating on the development of local freight is shown by the (vfforts made to increase j)asseng(!r rates and to se- cure increased revenue from the small package business. Both the passenger traffic and the small package traffic are natural freight i)roducers, and the greater the volume of both, the greater the volume of freight, and freight, I repeat, is tin; dividend pro- ducer for most of our railroads. Therefore, to develop local f r(!ight and increase dividends railroad managers should do every thing possibh; to increase the local passenger and small package traffic. The common sense way of doing this is to reduce the rates for l)oth to the lowest possible level, while at the same time giving to both the highest quality of service. A clear understand- ing on the part of th(! railroad manager as to the natural relation- ship of the small package business to tihe freight traffic will start railroads on a new policy of development, a development which will make them self interested workers for better marketing methods. Attitude of Merchant Class The attitude of merchants to the problem of distribution of farm products has been, generally speaking, that of merely dis- interested onlookers, but before any great advance in improving present marketing methods can be made, this attitude must be changed. And it will be changed quickly when merchants awaken to a realization that the right solution of the problems of marketing of farm products means greatly increased and permanent prosperity for themselves. On all sides we hear to- day of the tremendous boom in prosperity that is reaching into every section of the country and affecting all branches of busi- ness. And the solid sense of security that is felt in the stability of this prosperity is in the knowledge that the producers are prosperous and have money with which to buy freely. But there can be no surety of the permanence of this condition until the marketing of farm products is adjusted on a basis that insures the farmer getting at all times, and under all conditions, a just return for the sale of his produce. No time, effort, or money given to any cause is so sure a profit producer for our merchants, big and little, as that given to aiding in developing better mar- 112 MARKETING AND FARM CREDITS keting methads, for it benefits both tbe producer and the con- sumer, and increases the purchasing power of each. From the point of view of sound merchandising — and the marketing of farm products is merchandising — merchants gen- erally have had the wrong point of view, and consequently have followed the wrong policy in their attitude toward banks and bank credit. It is perfectly rational for the banker, per se, to follow the policy of forcing the interest rate up to high levels and to make every effort to maintain it there, but for the mer- chant such a policy is most irrational, for before all else, he is a boiTower, and his interest lies in securing the very lowest pos- sible interest rates. In a general way merchants know this, but in practice they invariably view banking through the eyes of the banker, that is, of the lender, and not as merchants, that is, bor- rowers. Thus, although merchants constitute a majority of the directors of most banks, their attitude as such is invariably that of bankers, and not merchants. If it were the fi-xed policy of our merchants always to study the credit system from the mer- chants' — the borrower's standpoint — many of our credit prob- lems would be easily solved, and particularly those that relate to the marketing problem. The perfection of the British com- mercial credit machinery is due to the fact that the British mer- chants have seen to it that the interest of the borrower has been as keenly looked after and safeguarded as that of the lender, the banker. That is to say, the British merchant is always a merchant, even when a bank director, and the view point, whether that of lender or borrower, makes all the difference in the results obtained. The merchant, the community, will pros- per most which, other things being equal, has the lowest interest rate and the best credit facilities. Banker Necessary Factor in Marketing The banker is also a necessary factor in the development of better marketing, and when the banker realizes that better mar- keting can be made a sure profit producer for banks, he will be the chief booster for better marketing. Banking can be con- ducted eitlier on the policy of charging all the traffic will bear, or of giving the largest possible service for the least money con- sistent with a reasonable profit. The first policy inevitably tends to high interest rates with a restricted volume of business, and the other to low interest rates with a large volume of busi- ness. Of course the banker adopts the policy which he be- DAVID FRIDAY 113 lieves will yield the greatest profit. Generally speaking the question has been decided in favor of the high interest rate, and may be said to have developed a state of mind that makes it al- most impossible for our bankers to see banking from the other point of view. But the other policy is the policy of some of the largest and most successful banks in the world. It is the policy which in general prevails throughout Europe, and it is the pol- icy our American bankers must adopt if they are to render the best service in the marketing of farm products and in improving marketing methods. A banking policy of reducing the interest rate as low as pos- sible calls for a higher order of banking than the opposite pol- icy, and requires greater alertness in serving the community. But it is the banking which develops the spirit that puts the right punch into all the activities that jnake for general pros- perity, and it is the banking which in the long run, in any agri- cultural community, will yield the greatest profit. It is the policy which will make the banker, of necessity, a booster for better marketing. It is a change that is sure to come with a better knowledge on the part of merchants as to their right re- lationship to banks, and those bankers will show their wisdom and foresight who take time by the forelock, and at once direct their energies to aid in the solution of marketing problems. THE ECONOMIC FUNCTION OF THE MIDDLEMAN* David Friday Professor of Political Economy, University of Michigan A lack of organization has long been recognized as the pe- culiar and principal weakness of the agricultural industry. Today, we have everywhere evidences that a consciousness of this lack has pervaded the agricultural classes, or at least the more intelligent part thereof and has aroused emotions charac- terized by a vividness and fervor that give the movement for rural organization many of the characteristics which we are ♦Delivered before the second National Conference on Marketing and Farm Credits at Chicago, in April, 1914, in joint program with the Western Economic Society. 8— M. F. C. 114 MARKETING AND FARM CREDITS •wont to associate with a religions crusade. The magazines, realizing the keen feeling that exists upon this subject, see in it a fertile topic for the exploitation of the magazine purchaser. The dispensers-for-a-price of ideas, commonly known as popu- lar magazine Avriters, are grasping the opportunity with avid- ity and the whole field of journalism confronts us with enter- taining and striking statements of the evils res-ulting from the lack of rural organization. The aspect of this that makes peculiar appeal to those of us who are city dAvellers is the necessity for organization in the matter of marketing the necessities of life. ^Ye are confronted by the statement that for every dollar, paid by the ultimate consumer, only 35 cents gets into the pocket of that producer who has dug it out of the ground; he, who has endured the groaning and the backache and the sweating of it all — the farmer. At the mere statement of this fact, we are expected to be transfixed with consternation. This question "of the division of the consumer's dollar into 65 cents for the handlers and 35 cents for the producers is the greatest financial issue of the age," we are told in a recent number of, what I have been pleased to consider, the leading farm journal in America. "It is also," the editorial continues, "the great moral issue of American agriculture for the present system of division is un- just and wicked." The 65 cents measures, as it were, the inequity of the system and of the age, while the 35 cents represents the justice embodied therein. A sorry showing in- deed for modern civilization as respects the market end of its doings and strivings. The worst of it is, we are told, that this thing has continued for a quarter of a century or more, and we have been sitting all unwittingly and unknowingly while the inequity has gradually grown and waxed fat. Agriculture is one of the industries, perhaps the one industry, that has produced no millionaires. Surely there are reasons for this and the reason, we are told, is the organization of the produce market — exploiting the great numbers, who stand at the initiation and at the termination of the industrial process, to the enriching of those who have interposed themselves be- tween the 2 ends. Government aid is being invoked and both federal and state governments are actively organizing bureaus for the study of the matter. It is demanded that they devise ways and means of substituting for the present sys- tem "Cooperative Organization," which shall reduce the cost of living to the consumer and raise the price of the farmer's DAVID FRIDAY 115 product — all to the redistribution of purchasing power, and to the increase of happiness. Need of Strong Men in Market Places The farmer is told that he has not lacked primarily in enter- prise and in intelligence in the field of production, that those who have the betterment of agriculture at heart "may talk 2 blades of grass until they are green in the face," but 'one strong man in the market place, showing how to get a fair price for one blade of hay will do us more good than a thou- sand men teaching the 2 blades of grass theory"; not the in- crease of quantity and improvement of quality of the product, but the proper marketing of the same is proclaimed as the dominant problem of the farmer. The middleman forms the special object of the anathemas of the reformers and the particular target of the rhetorical art- ists, whose pot-boiling activities serve to keep the emotional state at the proper temperature. It is he who interposes him- self between the farmer and the ultimate consumer and is di- rectly and immediately responsible for this wide difference of 65 cents that exists between the consumer's dollar and the pro- ducer's remuneration. "Parasite" is the favorite name ap- plied to him, and "non-producer" — one who lives and waxes fat by buying cheap and selling dear, by impoverishing the masses to the anihilation of happiness and comfort. For is it not clear to any one who will open his eyes that the potatoes that the grocer leaves at my cellar — that the eggs, the butter, the apples, are no whit different in size, or quality, or power of sustaining life, than they were when they left the farmer's hands? They are the identical products in no wise changed. Why, then, should I be asked to pay $1 for that which the farm- er has produced for 35 cents? The productive act was com- pleted when they left the farm and all the addition in price was not paid to support production, but to furnish pro.fit to middle- men. The remedy is obvious, we are told, and will present itself as soon as the situation is clearly understood. The middleman, through his close study of the market, through the exercise of his wits upon methods of jnanipulating prices, underpaying the producer, and overdharging the consumer, has succeeded in some manner in abstracting 65 cents of the value of the goods. He must be eliminated. What more obvious way of doing this 116 MARKETING AND FARM CREDITS present* itself thau orgauizatiou — orgauizatiou of markets? Let us substitute a single transaction for the 3 or even 5 tran- aetious of purchase and sale -^vhich we at present find consum- mated in bringing the jar of butter, the bushel of potatoes or apples, the dozen of eggs, from producer to consumer. To quote from a prominent daily newspaper, "give the farmer a parcels post to begin with, let him send his dozen eggs or his pair of chickens direct to the man who wants to eat them, or, at least, to the retail merchant, cut out the commission mer- chant, the wholesaler, and a few of the city parasites that live on the farmer." The elimination of the middleman has be- come a principle which seems to have all the importance in solving the industrial ills that vex humanity that the salvation of the soul had in old-fashioned Methodist doctrine. To any one who has observed these proposals for remedying the inequalities of the system, the feeling that even though the middleman were the black sheep that he is here painted, he should not be condemned without at least being heard; for we ought to make what defense we can for him before meting out his punishment, to the end that we may not act with undue severity in the matter. Is the Middlemaji aji Exploiter? Have we really discovered a great truth concerning the wastefulness of the present organization of industry? Per- haps. But oftentimes people imagine they have discovered such truths, when they have only made a shallow analysis of the situation and have not gotten at the true inwardness of the matter. Does the middleman perform any function among us except that of exploitation? Can his activities and his func- tions be dispensed with by merely passing the wand of organ- ization over the situation, or are his operations a vital portion of our whole industrial organization, without which it cannot maintain its present state of productive efficiency? And if. perchance, it be found that his function is an indispensable one in the modern organization of industry, then it behooves us to question closely whether conscious organization on the pai't of producers, state controlled organization even, will per- form those functions as economically as they are now per- formed: whether the producer and consumer can assume this function without detriment to other activities which the pro- ducer can never delegate to a separate class, as he has dele- DAVID FRIDAY HJ gated to the middleman the task of responsibility and risk of seeking out the consumer. To me the fact that only 35 cents of the consumer's dollar goes to the producer proves absolutely nothing with respect to the inequity of the middleman's profits or of the present sys- tem of marketing. It is a striking fact, without doubt, but so is the fact that I am able to buy sugar at 5 cents a pound, or that I buy a box of friction matches of a very superior grade for the trifling sum of 5 cents. These are startling facts of industrial attainment. But they are not iniquitous in the least. What is needed to pass intelligent judgment upon this whole situation is a careful examination of the entire process of in- dustrial organization for the purpose of seeking out the casual connections that exist between different activities and the total product forthcoming. It may be that the present methods of marketing may be found to be wasteful and that they may be found to be involving an undue amount of risk on the part of the middleman, that they may involve a useless duplication of effort, but let us not conclude hastily that the system needs changing and above all let us not inaugurate a new system of marketing and distributing the products of the farm until we have first sought out the things that are necessary and inevi- table for the unimpaired and effective working of the whole or- ganization. Then we shall be forewarned and shall not be dis- appointed if certain disagreeable facts and situations have to be faced later. Function of the Middleman What, then, is the function of the middleman? His func- tion cannot be understood apart from a discussion of the na- ture and organization of modern industry. First of all, our present industrial order is a cooperative order. We are not formally and consciously organized for purposes of coopera- tion, but each of us is engaged in the production of a compara- tively small number of things which, for the most part, are in- tended to satisfy the wants of others. This cooperation is ef- fected without conscious agreement. It is spontaneous, un- conscious — each man producing some commodity or service^ and exchanging it for the commodities and services produced by others. The farmer who is producing potatoes, wheat or meat, is cooperating, so to speak, with the producer' of furni- ture, clothing and farm implements. They are doing things lis MARKETING AND FARM CREDITS for oaoh otlior. This is the essential eharaeteristie of all eo- oporatioii. What is the advautagfe of this cooperative organization of industry? ^Yhy does not each individual in modern industry satisfy his oAvn wants? The answer is simple. This coopera- tion makes possible a subdivision of tasks resulting in a very high degree of specialization. This division of labor and the resulting increase in production brought about by specializa- tion lies at the very foundation of our etfectiveness in produc- tion. It is the secret of our modern productive etticiency. That we are etfective in turning our product is universally con- ceded. No other age has seen even the remotest approach to it. The production of all kinds of goods through the appli- cation of land, labor, and capital has been multiplied many fold, by increasing specialization and the resultant improve- jnent m technical methods, made possible through transport-a- tion and the organization of a world-wide market. But pro- duction does not consummate the industrial process. Goods are useless until they have been placed in the hands of those who are to consume them. This is the end of all productive activity, for the goods not consumed are wasted. But let us remember, too, that the consumer of a particular class of goods is in turn a producer who must likewise tind consumers for his product. "We have not cooperated until the products are placed in the hands of those who are desirous of consuming them. The cooperation between the farmer and the furniture- maker is not effected imtil the furniture-maker has placed his product in the hands of the farmer and vice versa. Goods must be gotten into the hands of the consumers before the co- operation and its resulting benetits in the way of increased product have served their purpose. A thousand bushels of wheat or of peaches have but little value to the farmer for pur- poses of consumption, beyond the value which he would de- rive from a hundred bushels. The tailor who spends all his time making frock coats and never wears one has derived no beneiit from his industry until those frock coats have gotten for him the means of livelihood. IVIiddleman Is Useful to Society Somehow the product of the various specialized producers in industry must be put in the hands of the consumer. This is effected in present-day industry through exchange. The seeking out of a consumer for the product of the producer and DAVID FRIDAY 119 the finding of the desired products for this same individual turned consumer must be the task of some one in industrial so- ciety. It would be possible, no doubt, for the producer to sally forth with his goods to seek people who had the goods that he wanted in return, but no one doubts that this would be a wasteful system. Just so is it possible for the farmer to seek out the consumer in the city, who desires his products, convey these to him by parcels post, but the most prosperous farmers that I have known would much rather pay a liberal portion of the price collected from the man in the city, than to dissipate their productive energies and assume the risks of seeking out the consumer. Likewise, when the farmer in turn becomes the purchaser, he is willing to pay handsomely in order to be re- lieved of the necessity of finding the various producers of the goods that he in turn desires to consume. This is the function of the middleman. And it is just as necessary a function, one just as indispensable to the effective organization of indus- try under this system of cooperative specialization as any other productive operation. Exchange, trade, commerce play an essential part in modern industrial society in that it makes pos- sible cooperation and specialization, supplying the process or system of processes whereby this cooperation is effected. The 65 cents which marks the difference between the price which the consumer pays and that which the producer receives is the amount which both these persons pay in order to be relieved from the necessity of finding the consumers for our goods, on the one hand, and the producers of the goods that we desire, on the other. In much of the writing on this subject, it seems to be abso- lutely unquestioned that the producer and the consumer, through conscious agreement, can eliminate the middleman to the promotion of economy. I quote from the report of the Massachusetts commission on the cost of living, dated May, 1910: ''It (the parcels post plan) will without doubt act bene- ficially to reduce the prices of many articles consumed or used in productive processes by the farmer. And it will thus reduce his living expenses and the cost of production of the products he puts on the market. In principle, the economy of the plan is heifond percDdventure. The only ques- tion is as to economy and efficiency in details of operation. No doubt many changes must be made in any foreign sys- tem before it can be successfully adapted to our needs, but 120 MARKETING AND FARM CREDITS tliat a plan of admiiiistratioii cau be mapped out after a fair trial, there is just as little doubt. The point that needs em- phasis is that the interest of the consumer of farm produce and of the farmer that produces it are one and the same in as far as a cheap distributed food supply is concerned. " The striking thing about the quotation is that its writer deems it superfluous to go to the trouble of demonstrating the "economy of the plan is beyond peradventure." It seems per- fectly obvious to him that a direct connection between producer and ultimate consumer -svill effect a cheapening of the food sup- ply. This is the ordinary way of regarding the matter on the part of the general public. Surely, they seem to reason, if one transaction of buying and selling be substituted for 3 or 5, and thus 3 or 5 profits be eliminated, the result must be in- evitably a beneficial one, because it is correspondingly cheap- ened. This is an agreeable fallacy, for its overlooks entirely the reaction on the field of production, for both producer and consumer. The process of seeking out and delivering goods from one of these parties to the other is one that is time-consum- ing, that involves considerable cost of labor and a large ele- ment of risk. This cost is one that is necessary, and inevitably connected with production, and is not one that depends to any considerable extent upon the present organization of the mar- ket. There is in the popular mind a serious lack of understanding of the difference between a gambling risk and a risk inevitably connected Mith production. CertaiQ risks, such as the likeli- hood of price changes for the wheat crop, produced during the previous summer, but not to be consumed for some 9 or 10 months, are inevitable and cannot be avoided by any or- ganization of industry. There is always serious risk of price changes on the produce market from time to time, which is quite as inevitable. Xo one knows better than the grower or shipper of melons, for example, what a tremendous change in price re- sults from a mere fall in temperature during the melon sea- son. Any separation of the market from the producer in time or space brings inevitable risks, and involves the expenditure of time and money : this expenditure is inevitable. Farmer May Not Be Able to Shoulder Distributive Costs It is open to serious question whether the farmer and the ultimate consumer can shoulder these costs and suft'er the bur- den of these disadvantages more cheaply than they are at DAVID FRIDAY 121 present being shouldered by the middleman. The act of pro- ducing is one which the farmer will never be able to delegate to a second party without ceasing to be a farmer. Every di- version of attention or productive effort or capital from the field of production to that of exchange must inevitably mean a lessening of efficiency in the productive field. And, further, the cheapening in the cost of distributing the product which is brought about by the diversion of such productive factors must be scrutinized closely to make sure that the loss in productive efficiency does not more than counterbalance the saving in dis- tribution. As was said above, the fact that only 35 cents of the consumer's dollar gets into "the pocket of the farmer is a striking fact, but not necessarily a proof of inequity or lack of economy. Middleman May Be Highly Efficient The remarkable thing is that the farmer has under the mod- ern system of organization of industry and because of it been able to develop such efficiency in production by being relieved of the necessity of giving his attention to the market, that he can produce for this aforesaid 35 cents and still make a much handsomer profit than his father, or his grandfather made who received 65 cents of the consumer's dollar in return for his product. And the more effective the producer becomes in his specialty, the less can he afford to spend his time in a field where he is not a specialist, — that of marketing, for Example, — and the greater is the amount of his product that he can eco- nomically jdevote to the support of the persons who take over the marketing function for him and for the consumer. The seemingly large profit of the middleman may be, there- fore,, merely a testimonial to the high productive efficiency of both producer and consumer, brought about by the extension of specialization in all fields of production made possible by the division of labor between farmer and middleman. Grant- ing that the function of the middleman is a necessary and pro- ductive one, what guarantee have we that the middlemen will be effective in the performance of their duties and will not take for themselves an unduly large share of society's product for the performance of this function ? Thus far we have depended upon competition both to select the most effective persons and to regulate the price which these shall receive for their services. Competition is essentially a selective process, and I am still of the opinion that there is no 122 MARKETING AND FARM CREDITS other agency that is likelv to equal competition in the efficiency of the selections made to fill the rarious posts in modern in- dustry. It may be, and no doubt is, necessary to determine consciously and formally by law the plane of competition. It is very surprisiug that more classes of middlemen have not long since been recognized as public servants and regulated accordingly, for unregulated competition does not guarantee the standards of right and -wrong that are to be observed. To bring competition to the proper plane it may be necessary to prohibit many practices at present indulged in by middlemen, but no other selective process is likely to succeed as well as the basis for selection. Monopoly and Middlemen Again, if monopoly has crept in, we have of course no guar- antee that the middlemen shall be either effective in the per- formance of their function or reasonable in their demands, and formal organization may be the only alternative. This question of monopoly must be carefully sheared apart from the question of the middleman's function. Much of the objec- tion to the middleman is grounded in the fact that he is com- monly supposed to get monopoly profits. This is a question quite apart from that of his function, and therefore outside the field of this discussion. Confusion as to What Are Profits Much confusion and misunderstanding has resulted from the use of the term profits, and in a failure to discriminate be- tween that part of the middleman's return which is really, profit and that which consists of wages or salaries, rent and interest. Professor Carver said recently that it seems to re- quire a surgical operation to get this distinction into the heads of some people. Wages and salaries, both of the middle- man's employes and of himself,' rent and capital charges are inevitable expenses no matter what sj'stem of distribution is employed. The middleman's profits proper as distinguished from these are his remuneration of the risk involved. Much of this in likewise inevitable. Competition naturally draws into this field those who do not shrink from taking risks as much as most of us, and if competition prevails this risk is very probably borne for less than the amount that most pro- ducers and consumers would demand for the same sacrifice. W. G. SCHOLTZ 123 The profits may, therefore, be lower than those that would be demanded by cooperative organizations who should render the same services and assume the same risks. For most of these costs can be dispensed with only by decreasing the quantity or lowering the quality of the services rendered. I have the fullest, sympathy with the desire to reduce the cost of every productive process through the removal of waste and inefficiency and through the devising of new methods. The productive process at present intrusted to the middleman deserves careful study to the end improving it. But, we must constantly keep in mind the possibility at least that the middle- man is performing a necessary on indispensable function more cheaply and adequately than it would be performed by con- scious and formal cooperation. The public mind is infested by an unusual number of agree- able fallacies. If these are to be eradicated, someone must state some disagreeable truths. WHY A STATE DEPARTMENT OF MARKETS? W. G. SCHOLTZ State Director Idaho Office of Markets I have been asked to tell why the Idaho legislature created a special state department to assist farmers in their commercdal problems, the scope of the law, what the department is endeav- oring to accomplish, and if possible draw some general conclu- sions of value to other states. The idea of securing the establishment of such a state depart- ment first came into my mind a half-dozen years ago while try- ing to work out my salvation on a sagebrush ranch on one of the irrigation projects of Southern Idaho. At every turn obstacles were encountered which I afterwards saw could have been avoided, had dependable information and advice been furnished, from a source in which the settler could place confidence. From this experience in the development of a farm home under most unfortunate circumstances, and my failures and successes in mar- keting farm produce both by the crate and the carload, was drafted the bill through which the last session of the legislature created the office of director of farm markets; and then the gov- 124 MARKETING AND FARM CREDITS ernor invited the author of the law to undertake 'the task of or- ganizing the department, in response to the solicitation of the farmers' organizations over the state. This undivided support of the producers over the state, right from the start, has been a great factor in enabling me produce such results as have already been secured. There are 3 distinct divisions in the law under which this department operates. In the first place there is the free state employment bureau, through which farmers desiring help, or farm laborers desiring work, are brought together without ex- pense to either party. This part of the work has already tuU}^ proven its worth in the few months it has been in operation, filling a need that cannot be supplied properly in our territory at least by the federal department of labor or any other mediiun. Putting People on the Land The second division in the department's work is a feature that really might be included in the duties of the immigration com- missioner in most states, but Idaho has no such official at this time. The duties under this di^^sion include the investigation of literature pertaining to colonization or settlement sent out of the state by promoters, real estate dealers, or others, and the warning of homeseekers against inaccurate or misleading state- ments, as well as the prosecution of wrong-doers when evidence shows that a homeseeker has been taken advantage of in any way. The state of Idaho, like the other states in the West, is suffer- ing at this time from the unf ortmiate promotion of a few yeai*s ago when many of the wrong t^^e of people were brought onto the land, settlers who were either unfitted for farming, or who through misrepresentation of conditions came onto the land with insutficient funds. This department is attempting to prevent the placing of any more misfits into the farming communities of the state, or the securing of immigration under any misrepre- sentation whatsoever. "We are working on the theory that the truth is good enough, and will, in the end, bring more settlers of the right type, if the homeseeker can only be satisfied that he is being given a true statement of conditions, without any exag- geration. An important feature in connection "s^-ith this division of the department's activity is the recei^'ing direct from OAvners de- scriptions of farm property for sale, and the maintaining of a properly classified list of such properties for the inspection of W. G. SCHOLTZ 125 prospective buyers. Through the operation of this land listing feature, the department is enabled to put prospective settlers directly in touch with the owners of many attractive holdings in all parts of the state which can often be purchased at figl^res that remove the incentive for going into undeveloped sections and tabing up raw land. Before placing the homeseeker in di- rect communication with these properties, however, we ascertain the present occupation of our correspondent, whether or not he has had any previous farming experience and if so how much and where, his preferences in the way of climatic conditions, acreage, type of farming, etc., also the number of children in Ms family and the age of each;, on account of the school and farm labor problem. "With these and other facts before us we are en- abled to put our correspondent in touch with such places as we feel ^vill make of him a contented and prosperous permanent set- tler (in case he decides to locate within our borders. This is the one most essential element in iimnigration and state develop- ment that has been overlooked too much in all parts of the ■country in the past — this human element — the character of the purchaser of land, taking interest in his future welfare as well as in his immediate investment. Helping the Farmer Sell His Produce The third and principal division of the Idaho farm markets law is the one concerning the better distribution of farm prod- ucts. This part of the work is, of course, the slowest to get fully under way, there being a great deal of preliminary work, organizing, surveying the field and mapping out of plans neces- sary before this feature of the law can be gotten into full opera- tion. Enough has already been accomplished along this line, however, to show the enormous possibilities for the future. The possibilities for usefulness of such a state department as this, both to producers and consumers, are simply immeasurable, and for this very reason my greatest temptation in this work is to attempt too much ; to spread my efforts so thinly over such a large number of projects that none of them will be properly covered. This danger will also probably be encountered in the development of market bureaus in other states, as in no section of America has consideration been given to distribution in pro- portion to production, the problems of marketing and rural or- ganization consequently having piled up to such an extent that when a department for their solution is established the office is 126 MARKETING AND FARM CREDITS deluged with a mass of problems all demanding solution at the same time. The avoiding of friction at this stage will require both diplomacy and good judgment in the selection of the lines of work first undertaken. Farmers Lack Self-Confidence One of the greatest handicaps to overcome is the fact that most farming comnumities lack confidence in their own ability to suc- ceed cooperatively in the marketing of their crops. They will work together in churches, social organizations, highway dis- tricts, etc., which shows that the cooperative spirit exists at least to some extent in most communities, but has not been fully de- veloped. One of the greatest opportundties for a state depart- ment of farm markets is the development of this confidence. How ? Through showing the farmers in each district what farm- el's in other sections of the country, similarly situated, have ac- complished. You can go into 9 out of 10 farming communities^ in almost any state, and present the most plausible theories and workable plans Avithout arousing sufficient confidence to get any sort of commercial organization started ; but go into those same communities, with the same plans exactly, pointing out to them some certain organization of fanners that is successfully operat- ing the plan and you will arouse their enthusiasm immediately. What the average farming community wants is concrete evi- dence of the possibilities and success of cooperative marketing. Here is one of the many opportunities presented to a state mar- ket bureau. "With a man at the head of the bureau who is con- versant with the various cooperative movements over the coun- try, concrete examples of successful organizations can be found that will be adaptable to the community needs of almost any marketing situation in any state. With the example of success placed before your district your task is half accomplished. The next thing is to discover or develop a leader to apply the plan. Very little can be done without leadership, and this leadership must almost invariably be developed among the farmers them- selves. On account of the fact that the director of farm markets in Idaho has to attend to many of the duties of a state immigration commissioner and a state commissioner of agriculture, besides helping the farmers solve their marketing problems, it has been impossible for me to consider the personal problems of the indi- vidual farmer to any great extent. If this individual work W. G. SCHOLTZ ' 127 could be provided for through a svifficient operating appropria- tion and the necessary additional help, it ought to by all means be taken up. But with a maximum number of duties and a minimum appropriation it is necessary to confine the work largely to community and state-wide problems, working along broad and fundamental lines, leaving the individual work for later consideration. As examples of what I mean by working along broad lines, and at the same time avoiding mere glittering generalties, let me mention some of the work undertaken in Idaho. Realizing the natural advantages of Idaho for dairying over most of the present leading dairy districts of the country and the consequent future possibilities of the industry, seeing the chaotic conditions existing at the time in most of the creameries and cheese factories of the state, the lack of uniformity of prod- uct, disorganized and wasteful methods of marketing the prod- uct, etc., I have organized a butter and cheese scoring organiza- tion, through which every factory in the state has an oppor- tunity to knpw monthly how their product compares with that on the market, and through the counsel of the judges they are shown how to overcome any faults. With a standardized, higher quality product a better market is assured; but in addition to this movement to imj)rove quality, the cooperative factories have been brought together into an organization through which supplies are bought together, markets being developed cooper- atively, uniform methods of accounting being installed, such of the product as goes direct to the retail trade being sent out un- der the same brand for all the creameries, etc. Through this organization it is hoped to develop and put the dairy industry of the state on a firmer foundation. In addition to this work in helping the factories already in operation, I have persistently kept on the trail of the unscrupulous creamery promoters who have been operating throughout the state, to prevent them from unloading on the farmers plants worth $2,500 for 5 to 6 thous- and dollars. The department has counseled with the farmers in dairy communities, helping them organize without the pro- moter, get better arranged and better equipped plants and for half the cost ! Crop and Market Reporting Service The crop and market reporting service instituted by the Farm Markets Department in Idaho is another instance of general rather than individual help. For example, let us take the po- 128 MARKETING AND FARM CREDITS tato oivp. At potato digging time this fall it was found that the large speculative buyei*? who in yeai*s past have been getting the bulk of the state's potato tonnage at their own tigiires weiv pay- ing only 45 to 50 cents per hundi*ed on the ground that the gov- ernment crop ivports showed that there wjts a big over-pwdue- tion of potatoes thivughout the United States this year, that even Idaho had a far big^r crop this year than last and that not over 50 cents per hundred could be expected this year. I saw that the growers over our state were being made the victims of a government potato civp reportiug sA'stem that was worse than worthless, in that the early and late potato crops weiv lumped together in their statistics, and that while the southern crop of early potlaying into the hands of the speculators. It is not for me to Siiy whether it is fraud or simply almost unbelievable arross isrnorance — the effect on the grower is J. W. STROUD 129 the same. I advised two years ago that the bureau of statistics could be transferred to Mr. Brand 's department where it belongs. What is true of our market reports on potatoes is true of other crops as well — and the work has hardly begun. But the possibili- ties for help in the dissemination of honest crop and market in- formation are simply enormous — and what is being accomplished in Idaho can be duplicated in any other state. If I had the time I would like to discuss with you the many thou- sands of dollars saved to producers and consumers through our ])ublic market work, how the work was started and what our plans are for the future along this line. The farther the work pro- gresses the bigger the opportunities develop. The state assistance in marketing idea has come to stay, and I am confident that with- in a very short time most of the states in the Union will be con- ducting such departments. I have been devoting much time during the past year to corre- sponding with governors of other states, as well as commissioners of agriculture trying to mold sentiment in favor of such state marketing assistants in other states. At this point I might state a fact which possibly some of you don't know — 13 states already have marketing bureaus ; in fact only yesterday we organized a national association of state marketing officials, from which you will probably liear more before the close of this conference. PERISHABLE PRODUCTS AND ASSOCIA- TIONAL SELLING J. W. Stroud Secretary, Ozark Fruit Growers' Association, Rogers, Arkansas I am to talk to you on the subject of cooperation and the system as adopted by the Ozark Fruit Growers' Association of Southwest Missouri and Northwest Arkansas in marketing highly perishable products. In order that you may better understand our system, I wish to state that for several years our growers were shipping strawberries in a small way, by local express, but the industry soon outgrew the demands and it became necessary to hunt more distant markets and carlot shipments were resorted to, which called into service the refrigerator car, and at this time 9— M. p. c. 130 MARKETING AND FARM CREDITS growers, not being able to load oars independently, M-ere brought into organizations. These local organizations soon discovered that they were competing against each other and the results were disastrous. It was almost impossible to make cash track sales ; also the in- dustry being in its infancy, there was no satisfactory system of grading, inspection or packing. About 12 years ago some of our best growers, seeing the needs of a better system of marketing, got together after hold- ing several preliminary meetings and arranged what is now known as The Ozark Fruit Growers' Association. This is a marketing agenc.y, incorporated under the laws of IMissouri, making first shipments in 11)04, and doing a successful and sat- isfactory business since that date. Essentials for Successful Agency In order for a marketing agency to be successful there must be first, the unit from which to build, -w-ihieh is the local asso- ciation. In our first year's experience Ave found it very hard to break away from the old, haphazard way of marketing, that of con- signments. Results were some better, however, than were re- ceived the year previous, which were about 75 cents per crate, for strawberries. While under cooperation an average of $1.10 was made, and since that time we have improved on our pack- ing system and inspection and by fair dealing with our trade, we have established a confidence that has enabled us to make almost exclusive cash track f. o.b. sales, and selling as high as $2.75 to $3 per crate. This association stands for a uniform pack and a uniform or standard package. We have established a system of grading our strawberries, which is known as the "field shed pack." Under this system of packing and grading each crate is almost as perfect and uniform as is possible to pack it. We have also now the uniform package or container, knoAAai to the trade as the "American ventilated crate" — standard dry measure, 24 quarts to the crate. In our first year's work we only had 30 associations affiliated with us in this system of marketing, but today we have almost 85 local associations who are loyal to our system and who are stockholders. Our membership numbers almost 5,000, includ- ing individual stockholders. In this number is included the J. W. STROUD 131 best fruit growers of the Ozark section of the country, as well as the largest peach orchard in the United States, the Arkansas Orchard Planting Company. Coming up from a few hundred car shipments the first year, we marketed this season in round numbers about 1,900 cars of highly perishable fruit and pro- duce for our members, paying to our growers in round num- bers about $700,000. Representation in the Markets One of the secrets of our success is brought about by placing the best and most efficient representatives we can secure in the best markets of the country, whose duty it is to make sales, col- lections, and look after the interests of the association in ad- justing any differences that may arise between the grower and the dealer, also to keep our main office fully advised daily of the market conditions. It is also our duty as a marketing agency to adjust any dif- ferences in the way of claims against transportation lines for our members. Our association is organized purely on a cooperative basis and not for the purpose of profit taking or declaring a divi- dend. We market the strawberries and blackberries on a 3 per cent commission basis. Peaches, apples, cantelopes, etc., are sold on a 5 per cent commission basis. Out of this fund are paid all the running expenses of the association, including the representatives, office 'force, general sales manager, tele- graph and telephone service. Now, the question might be asked, what are some of the benefits to be derived by cooperation. I will name a few : 1. It enables the small growers to ship in carlots. 2. It distributes the crop so as to prevent gluts in the mar- ket. 3. It enables the growers to establish a brand that will be known and sought in the markets, thus insuring better prices. 4. It makes possible better business methods in dealing with the fruit buyers, transportation companies, etc. 5. It provides better equipment for handling the crop. . • 6. It insures better care of the orchards. ' 3 Avoiding the Glutted Markets A benefit of cooperation that is most generally urged and is especially important Avith perishable fruit is proper distribu- tion of crops to prevent glutted markets. While the commis- 132 MARKETING AND FARM CREDITS sion men have a personal contact with the market and are in a position to place a given amount of the product at any point, to a good advantage they are not in a position to limit the amount that will be put upon the market and prevent gluts. The commission men themselves generally admit this. Unless your fruit passes through one channel, which has all information in regard to shipments, amounts going into different markets, and the conditions of these markets, you will never achieve success. As long as a number of different organizations are in the field working independently, you will always be work- ing at cross purposes and the results are sure to be disastrous. Your owTi competition will kill the price of your products and this is entirely to your own disadvantage with no corresponding ad- vantage to the people who buy and handle your products, as, owing to this competition there is always uncertainty with re- gard to cost of goods delivered, and each dealer is afraid that his competitor will be able to get the same goods for less money. He is, therefore, un^villing to take hold and push the business as it should be pushed ; and by this independent system, or lack of system, you would fail to hold your market to a cash track proposition. The result would be consignments, which means disappointments, heavy losses, and disastrous results. Cooperation further enables growers to make use of better business methods. It enables them to meet on equal terms, the men with whom they deal. Many people think that they lose their independence by joining an association, or marketing agency, of this kind, when it really is the only means of making them independent. The dealer is generally equipped with bet- ter knowledge of the market ; and he controls a larger business. This makes him relatively independent of any particular ship- per, unless the shipper is a very large one. For the grower to meet the buyer on equal terms he must know the condition of the market as well as the buyer knows it, and must control a busi- ness large enough to attract the interest of a large proportion of the trade. Accurate first-hand knowledge of the condition of the market can be secured only by having efficient representatives in the market. Large growers often have representatives in one or two of the largest markets, but it would generally have to be a very large grower who could afford representatives in enough of the markets to make him equally independent. An associa- tion, especially a large one, can have such representation in all J. W. STROUD 133 the markets reached by the crop, and the greater the association, the more market information can be afforded and the cheaper it comes to each grower. Thus, under cooperation the association can have a manager who thoroughly understands the markets in a general way. If it be perishable fruit, that is handled, the association can have men at all the important market centers the goods are to reach. Then, with all the growers and a good uniform pack behind him, he controls a business that demands respect and he should gen- erally be able to set the price. This is a day of cooperation. The very air itself is filled with the spirit of cooperation. Our banking institutions have their organizations, the largest business interests of our country have their organizations. Take the International Apple Shippers' Association ; the Western Fruit Jobbers ' Association, and the Na- tional League of Commission Merchants of the United States, all organized for their protection and benefit — so, why should not the farmer organize for his own protection? But, the average farmer of this country, is the hardest person to organize. He is the one who should be the first to organize and work through cooperation but is the last to see his own in- terest. As a class we are afraid of each other. Just let a far- mer, if you please, enter into a transaction or sell something from the farm and make a few dollars. All of his neighbors will know it before night. But let him meet with a loss and you never hear of it at all. Cooperation Endorsed by Town Business In the Ozark country where we operate, this system of cooper- ation is endorsed by our banks, our business men, our commer- cial clubs, and transportation companies. One of the aims of our association is to build up a business system which will be constantly reaching out and extending its means of distribution, thereby reaching many fields never en- tered before, directly, at prices which will greatly increase con- suniption, at a cost that will leave a good return to the growers. Until a few years ago there had never been a carload of straw- berries shiped into the Northwest direct from the growers until the Ozark Fruit Groovers' Association sent one of their represen- tatives into that section and began to work the trade, and to ex- pand the distribution of the products of the growers of the Ozark section. This could not have been done by a local unit or 134 MARKETING AND FARM CREDITS association as the expense would have been too great, but when borne by all, it was handled to good advantage. I am glad to state and to know that the spirit of cooperation is growing, and there is no doubt in my mind if all the fruit grow- ers of our country were organized and working together in har- mony through the proper channels that they would soon be the most prosperous class of people on the earth. We should cooperate to the fullest extent. I believe that the time will come and it should be soon, now, when all the most up- to-date growers will come into cooperation. A central sell- ing agency could be organized on a cooperative plan by enrolling under one management all organizations of the country shipping the same product at the same time : if peaches, all the peach growing districts ; if strawberries, then all the berry growers of the eountrj^ This central agency can obtain and give the asso- ciations daily information as to prices, number of cars shipped daily, number sold, number consigned, where the best demand is, what markets take most freely and any other information lead- ing to the protection of the markets as well as the growers. Successful and intelligent distribution is the key to success for the grower of highly perishable products. It is one thing to grow the fruit, and it is quite another thing to sell it. In sections of the country where a close, compact, cooperative association is organized and in working order, you will find an advance in land values, better homes, better financial conditions, and more interest taken in the care of the orchards and berry fields as a general rule. , R. E. HANLEY 135 GREATER COOPERATION AMONG FRUIT GROWERS* K-, E. Hanley Secretary-Treasurer, North American Fruit Exchange Unquestionably the greatest economic problem confronting fruit growing communities is that of marketing — upon the successful solution of which all other branches of the industry are entirely dependent. Experience has proven cooperation an absolute essential to success in meeting the marketing problem, whether that be confined to localities, to districts, within state lines or nationally. Local organization of fruit shipping interests is, of course, the initial step forward in the direction of that cooperative ef- fort having for its purpose the securing of greater net returns for products of the farm and orchard. To achieve much along the lines of that purpose it is very necessary that the local shipping association shall be composed of a majority, if not all, of the growers of the community in which it exists. Further and probably quite as important this local combination of interests must possess the unfailing and loyal support of its membership. Cooperative effort alone cannot be relied upon to secure for the association member that return for his products which shall be commensurate with his land investment, cost of material, of labor and his individual energy ; for that he is much dependent upon the efficient, business-like and economical management of the shipping association with which he is affiliated. In many instances the individual grower-member accepts too lightly his share of the duty of securing to his organization that character of direction and conduct of the affairs of the association necessary to successful operation. The result is that frequently the principles of cooperation are jeopardized and in instances have received serious setbacks through inca- pable or discreditable management. Some of the failures recorded among cooperative organiza- tions variously located can be attributed to the shortcomings of ♦Delivered before the second National Conference on Marketing and Farm Credits at Chicago, in April, 1914, in joint program with the Western Economic Society. loG MARKETING AND FARM CREDITS iiureliable employes earrying responsibility (often underpaid), and improper exploitation of these growers' associations by seltish interests among the officials in charge. Too often are the official positions of snch associations striven for, as are some political plums of the public employ, by men more concerned with their desire for selfish gain than for the furtherance of the welfare of their constituent growers. However, experience has shown this practice to be greatly re- duced by increased supervision of iutlividual members and by the elimination of salaries of all officers not devoting their ser- vices exclusively to their association. This has had the effect of attracting to those elective offices only men with upright un- seltish motives, who are more devoted to the interests of their neighbonng growere collectively than to individual gains. Essentials of Successful Fruit Growers' Association Some of the important requirements and functions of the suc- cessful cooperative fruit growers' organization include: 1. The absolute contidence and loyalty of its membership. 2. The control in its district of all or a good majority of the products produced and handled by it. 3. Its capitalization on a basis not requiring it to incur un- necessary indebtedness, and to become established as to credit so as to be able to secure loan accommodations, should that be necessary, without the expense of exorbitant interest charges. 4. The ability to procure for its own needs and those of its membership, supplies, packing material, implements, fertilizer, seed, nursery stock, etc., at low costs, quality considered, through purchases by contract and otherwise in large (juantities. 5. The maintenance of suitable and adequate facilities for the grading and packing of products of the membership along im- proved and economic lines. 6. Through rigid inspection and careful packing, together with the use of advertising judiciously, the establishment of a reputation for high quality for its products thus creating a dis- tinctive demand for its trade-marked brands among the whole- sale, retail, and consuming trade of the country. 7. Very necessary also is a reasonable control over the har- vesting of its growers' products so as to be able to regulate, as near as possible, distribution with a view of conforming to sup- ply and demand within the markets. When so much has been achieved by the local association it is confronted with the necessity of selling its output at profit- R. E. HANLEY 137 able prices — that function most important of all — turning into cash the results of great care, hard toil, and considerable ex- pense. It is at this point that many cooperative growers' or- ganizations, though they may closely follow the ideal in sev- eral respects, widely diverge as to marketing methods. How Selling Plans May Differ A review of some of the methods in vogue in various pro- ducing districts of the country should interest. Among them we find : 1. The consignment plan whereby goods are consigned with- out control direct to commission merchants with rebates on the receiver's commission that tend to maintain the shipping association. With limited tonnage and selections of thor- oughly dependable agencies this plan has some advantages. 2. Contract distribution by commission merchants who un- dertake disposal of entire crops, but who, because of reciprocal obligations among commission merchants of other markets, must necessarily reconsign at additional commissions, rather than effect outright sale to these dealers of a large portion of the products handled. 3. The direct marketing by the association managers by means of telegraphic and telephonic communication with car- lot buyers — a system conducted with some degree of success where the tonnage is limited and adjacent to important con- suming centers. 4. The employment of resident brokers among the markets open to the association, these agents being generally satisfac- tory where not dependent for a livelihood upon the good will of the trade and disposed sometimes to favor unscrupulous buyers at the expense of the shipping account. 5. The temporary employment for short time periods of local men selected from among the fruit growing communities and dispatched to the marketing centers to conduct carlot sales to wholesale dealers. It must be obvious that generally these men, lacking trained salesmanship, experience, knowledge of local trade conditions and familiarity with "tricks of the trade" are, and of necessity must be, at considerable disad- vantage in their selling operations. 6. The state-wide exchange plan contemplates concentration of selling efforts on the part of allied shipping organizations within the state through a central exchange or clearing house, 138 MARKETING AND FARM CREDITS thus by a combined tonnage securing the benefits of economy of operation, equitable distribution and the lessening of much wasteful competition. How the Exchange Plan Works in Citrus Industry Of thpse methods enumerated the exchange plan must ap- pear as that having the most advantages. We have but to look about to determine the effectiveness of such combinations of fruit growing interests. Let us first refer to California where exists the commonly ^.ccepted ideal growers ' marketing organization, the California Fruit Growers' Exchange, with headquarters at Los Angeles. The California Fruit Growers' Exchange is a cooperative body ^f approximately 6,000 fruit growers distributed among 117 local associations within the state. Through its strength of number and consequent tonnage shipped over a period of 10 months in a year this federation of growers is enabled to, and does maintain offices of its own in the principal marketing centers. This established selling force largely facilitates equitable distribution among the mar- kets and excepting a small percentage handled through auc- tion in a few of the largest cities, the fruit of the growers, members of the exchange, is disposed of through outright sale in carlots to local wholesalers, prices being governed practi- cally by supply and demand. The exchange is a formation of 17 district or sub-exchanges ■^comprising 117 local associations within the state, all operated on a non-profit cooperative basis and shipping collectively in a normal season about 20,000 carloads of fruit. It should be noted that the success of this organization is largely attributable to the thoroughness of this exchange's •selling organization and to the binding contract existing be- tween the association and its members, there being little oppor- tunity for digression on the part of the growers, a harmful practice so common to members of cooperative bodies in some states. Florida Follows California Method Li Florida may be found a somewhat similar organization of citrus fruit growers comprising 9 exchanges attached to which are about 60 local associations, but with less than 20 per cent of the state's crop under control. With this limited tonnage, R. E. HANLEY I39 moving as it does within a short period of the year, the Florida exchange is only warranted in operating but a few sales of- fices of its own, using principally for an outlet for the grow- ers' fruit the auctions of a few of the larger markets. Reverting to California we may note the success of fruit marketing interests in the operation of the California Fruit Distributors composed of 14 incorporated shipping organiza- tions operating 100 or more packing houses in the shipping and marketing of about 6,000 cars of deciduous fruits annually. Selling Northwestern Apples Extending our observations into the northwestern apple country we find that territory quite as progressive in the mat- ter of cooperative organization of fruit interests as in the effort to lead the country in the production of fine apples. In fact, control of 80 per cent of a normal season's crop of 12,000 car- loads of boxed apples there being divided between the North- west Fruit Exchange of Portland, Ore., with several subdivi- sions comprising numerous local units within the states of Ore- gon, Washington and Idaho, and the newly organized North Pacific Fruit Distributors, a coalition of shipping associations and individual shipping companies heretofore competing wtih one another. These references to a few of the larger organized shipping interests, most all of which have long since passed the experi- mental state are now accepted as substantial and successful in- stitutions, must be sufficient to indicate the success of coopera- tive effort along broad, extensive lines. While considerable organization exists, combination among fruit producing factors has not kept pace in that respect with other lines of industry. Yet much good progress is being lately made, thanks to greater assistance from state and federal depatr- ments devoted to agricultural pursuits. As regards modes of marketing we find to date but one sin- gle cooperative organization (The Exchange of California) suf- ficient in strength and tonnage to warrant the maintenance of its own selling machinery on a comprehensive scale — a trained and experienced sales force quite as essential to the effective selling operations of the important fruit shipping associations .as the large commercial establishment. Excepting the citrus fruit territory of California no fruit producing section extends its shipping period beyond a very 140 MARKETING AND FARM CREDITS foAv months of the yoai*. eoiisequoutly the ostablishmeut of any extensive sales force among the marketing oentei"s by the in- lUvidual eooperative association or exclianire is ahviously im- practical. Attempt to Orgfaime Nation- Wide Selling Agency It ^vas in recognition of tliis fact, and the great need by fniit shipping interests of marketing facilities better than those then available that measures -were undertaken in 1910 to cre- ate a central, country-wide selling agency with a corps of trained salesmen located in all the important consuming cen- ters. This force was to be used jointly by non-competitive cooperative associations and exchanges of good standing that would ship theii" products in consecutive season periods throughout the year. This concentration of selling etYort by important shipping- factors variously located from Florida to Oregon made possible the year round operation of a thoroughly organized selling force under the expense to the individual association only as actiu\lly used. This plan contemplated the operation of tlie forces at the marketing end under the direction of the individual associa- tion manager dnring his respective shipping season in the ex- ictitiou of sales ordei-s and acquiring authentic information of markets to facilitate cash selling and distribution. Tt Avas thus the North American Fruit Exchange, in reality an exchange of exchanges, was organized by horticultural in- terests of Florida. West A'irginia. New York and Oregon, and incorporated January, 1911. The exchange's board of directors included Messrs. K. IT, Parsons, president of the Rogue River Fruit .!c Produce Asso- ciation. IMedford. Ore.; W. F. Gwin, general manager of tlu* Northwestern Fruit Excihauge, Portland. Ore.; William Camp- bell, secretary and manager of the Virginias' Fruit Exchange, Oharlestown, West Virginia : Lloyd S. Tenny of Hilton. New Vork. general manager of the Florida Citrus League ; and E. P. Porcher. manager of the India River and liake Worth Fruit Association. Cocoa, Florida. This central sales organization operates district otVices in all important markets aiul from its general ot^ces at New York and Chicago constantly supervises the activities of this force which is under directions of the affiliated shipping associations. WILFRID WHEELER 141 MARKETING MILK IN NEW ENGLAND WlIiKUII) WlIEKIiKK Secretary, Massachusetts State Board of Agriculture The marketing- of milk in New England is practically a Bos- ton (luestion, as over 80 per cent of the milk shipped by rail is either consumed in Boston or distributed through it, therefore in analyzing this subject we shall have to keep in mind that Boston is the center of the industry. The history of the Boston milk supply is somewhat similar to that of many of our large eastern cities and a brief resume of it is necessary in order to appreciate present day conditions. Less than 50 years ago Boston milk was produced within 30 miles of the state house, and in fact some of it was produced within the present metropolitan district. Building operations and high land values, however, soon drove the milk farmers into new territory, and farms near the cities were reduced in size and began to produce products of higher value, such as vegetables and fruit, depending on the city stables for manure. But better transportation facilities by bringing in milk pro- duced at even greater distances, tended to keep pushing the dairy farmer further ;and further away, as the more distant producers on cheaper land and on soil in many instances bet- ter adapted to dairying and with cheaper labor were able to undersell the milk farmers nearer the city. These changes have been going on for years so that now Boston draws its milk supply from 7 states and a part of Southern Canada. In other words, outof 7,600 dairies supplying milk to Boston, only 1,300 are in Massachusetts, and the bulk of Boston's milk supply is coming from distances varying from 150-200 miles, and some of it from as -far as 280 miles away. What is true of Boston, however, is not so true of other cities in New England, for they are generally more accessible to the small (producer who can readily market his milk directly thus avoiding many of the complications which marketing milk in a large city creates. The same processes, however, which affected Bos- ton's supply are gradually affecting these other cities and it will not be long before they too will be drawing their supply from long distances. 142 MARKETING AND FARM CREDITS Geographically ]\Iassacliusetts is at a great disadvantage, as far as milk production is concerned. She is surrounded by large producing states whose products are freely accessible to her markets and whose soil conditions in many cases are far better adapted to dairying than her own, and added to this, Massa- chusetts has helped the destruction of her dair\' industry by saddling herself with a milk transportation law which atfects only her own dairymen. To complicate raattei*s still further, there periodically appears a batch of would-be legislators who in their own minds have settled this much-vexed milk question, and who from looking at the question from only one angle attempt to make laws absolutely impossible of enforcement, or else designed to bear down heavily on the IMassachusetts producer and without any prospect of increased financial return to pay for fads. Viewed as a whole. New England conditions have changed greatly in the past 25 or 30 yeai*s. Prior to the opening of the Boston market to the whole milk business there w^ere many cream- eries in New England, the total number being about 375. which' shipped their entire products as either butter or cheese. Western competition and better transportation facilities had their share in- reducing these to a small number, and where they were once inde- pendently owned they are now largely controlled by the great dairy companies. Like many other industries in our country, the creamery business in New England has come into the control of big business, and is now in the hands of 5 large companies, operating in separate territory and seldom crossing each other's lines. Production Still in Farmers' Hands At the present time, as in the past, the actual production of milk in New England is still in the farmers' hands. The small herd, ranging from 5 to 20 cows, is still the rule in New England. Dairying is not strictly a business by itself in New England, as the gi'eater part of our farmei*s combine some other activity with their dairies. ]\Iany farmers say that they keep their cows prin- cipally for the manure. ]\Iilk producing fanners might be- classed under 3 heads: 1st: Those producing under contract for large dealer. 2nd: Those producing near large towais or cities for smaller- dealers. WILFRID WHEELER 14^ 3rd : Those producing independently for their own customers. The great milk producing states of the New England group are Maine, New Hampsliire, and Vermont. The character of the soil, climatic conditions and the general training of the farmers makes for natural dairying conditions. New York on the west, is also a large producing state and her conditions are much the same as those of the 3 states named. That our farmers are not keeping as many cows as formerly is apparent from the following figures of the decrease of cows in the New England states during the last 10 years. The number of cows assessed in Massachusetts in 1905 was 181,920; in 1914, 147,209, showing a decrease in 10 years of 34,711 cows, or 19 per cent. The number of cows assessed in New Hampshire in 1905 was 113,712; in 1914, 86,438, showing a decrease of 27,274, or 24 per cent ; those assessed in Maine in 1905, 165,216 ; in 1914, 130,661, showing a decrease of 34,555 cows, or 20 per cent. Yet on the whole, our farmers are coming to realize the necessity of keeping cows of greater productivity than in the past and while the figures show a decrease in actual numbers, yet the fact that many cow-testing associations are being formed proves that results rather than numbers are being looked for. All interested in the farmer 's welfare are advocating the elimination of the boarder . cow and this propaganda is having its effect. While certain lo- calities are declining in the industry, certain other localities are . going into the business rapidly, and in most instances where in- creases are noted, this is due to the effect of local cooperative creameries or to an increase in price guaranteed by the dealers. The introduction of more pure-bred herds and animals of a higher productive capacity is having a marked effect in some places, while in others cows are being put back on the farms to assist in the ever-decreasing soil fertility supply. Cost of Production The almost utter lack of any system of bookkeeping on our farms has made it almost impossible to tell what milk has cost to produce, but based on investigations made by the Massachusetts Board of Agriculture, in Massachusetts about 5 cents a quart is as close a figure as can be arrived at, while for New England, in the report of the Boston Chamber of Commerce investigation, in which some 2,500 farmers were examined, estimates largely opin- ions were given varying from about 21/0 to 4 cents. A peculiar part of this testimony was the fact that with the higher produc- 144 MARKETING AND FARM CREDITS ilia: cow tlio oasts were tho heaviest. Sueh faetors as feed, labor and overhead oharg-es were eonsidered iu this analysis, due credit hoiuir jriven to e^lf and manure. One interestiuir featuiv was brought out by the investigation to the etTeet that farmei*s who were raisins: young stoek stated that theiv was no depreciation in herds. Avlnle the contrary was found where no young stock was raised. The use of luachinery in production, as milking machines, sep- arators, chiritiei-s. bottling machines, and the power for running them luis not made the great changes which bad been pivdicted, for while a large proportion of our farmers own and operate sep- arators, it dcx's not seem to have increased production materially, nor affected tlie costs. Discontent of Dairy Fanners FarnuM's have become dissatistied from numy causes, and un- less conditions can be nuiterially changed. New Kngland is bound to see a greater ivduction in her dairy interests. jMany have realized for a long time that there was no protit in the business, but as their farms are not adapted to otJier forms of agriculture, the problem that faces them is either to sell their fanus or stay on and run the chance of a better day. In order to get a fair idea of the processes throiigh which the milk of New England goes before it reaches the consumer's tiu 24 to 4^ hours old and to be from 3o to JHl hours old when it reaehes the eonsumer. The city delivery outtits of the deal- ers have changed a good deal of late yeai*s aitd while the hoi-se- drawn \ehiele still predeuiiuates in the family delivery, the mo- tor truck is largely used in wholesiUe deliveries. Thest^ givat eity plants of the dealers have in nmny eases involvtxl the expenditure of hundrt\is of thousjinds of dollars and most of them are built on modern sanitary lines. The com- panies controlling them are gtMuu'ally stoi'k companies, employ- ing the best ability and utilizing business nu^thods to the fullest extent. Besides the leasi\l car system, milk is handled by expri^ss com- panies at the general traftic rates, as excess baggage on pub- lished taritfs of the railroad, on tivlley cars in some sections, and by motor truck within 40 miles of large centers. The rates for the leased eai"s on a zone basis ai^e: 1. Zone on Boston and Elaine. 1 to "o miles, $125 per mile per year. 2. Zone Tii to 12o miles. $112. oO per mile per year additional to $125. 3. Zone 12l> miles and over, $75 per mile per year in addition to $237.50. Maximum chargt^ $18,000 per year. Miniuunu charge $5,000 per year. This is for passenger train service ; 25 per cent discoiu\t for fivight train service. The minimum load is tixed by the railroads, varying from 8.^^25 quarts to 12.000 quarts when an extra charge per qmirt is made for excess. On some roads the civam rate is 50 per cent higher than milk and while this is not trtie in all cases, attempts are Iving made by the raili\>ads to raise the price on ctvam. Systems of purchasing milk from the farnter varies with the location and generally depends upon the dealer who is operating in the territory. Some buy on a per can basis using the 8^^ quart can as the unit, and prices range from 25 cents to 45 cents. There is usuallv a ditfereuce between tlie s\nnmer and winter WILFRID WHEELER 147r prices. On the 100-pouiid basis rates vary from $1.10 per hun- dred pounds in June to $2.20 in December. In sonu^ cases bonus is paid for a good barn score. Another' method is that of butter fat basis plus skim milk, as for examj)kv one concern pays 1 cent per (juart for skimmed milk and pays for the fat at market rate which varies fi'om 25 to 39 cents per pound. Cream is generally purchased on a butter fat basis only. The wholesale price which the farmer receives for his milk varies froui 2^/2 cents per (juart in remote districts to 6 cents in certain sections near large centers where a high class milk is in demand. There has been so nnich sharp practice about paying farmers for their products that numy of the states have enacted bonding laws which provide that any dealer doing a milk buying business in tlie state shall furnish a bond satisfactory to the state official and this bond shall secure the prices paid for the milk purchased in the state. (Contracts, howevt^r, are made with the farmers varying from weekly to semi-annual payments and in many cases no contracts are made at all. An analysis of the various costs of each operation in the hand- ling of milk shows that collecting varies from .006 to .003. Country plant, when pasteurized in country 007 .004 Railroad transportation 005 .004 City plant — minus pasteurization 005 .013 Distribution — family trade 03 . 021/. retail stores 02 .009 " wholesale trade 005 . 01 1 Total Cost of Producing and Handling Milk Thus we see that the cost of milk handling and processing is; about 21/) cents; that the cost of distributing to family trade is. about 3 cents, and that to the retail stores about fi/o cents ; to the- wholesale trade '% cent. When we add the price paid to the farmer to this cost of handling and distributing, we have the fol- lowing cost of bottled milk delivered to consumers : Price to farmer 2y2 — 4e Processing 2l^ Delivery 3 8 — 91/.C- 14$ MAKKKTINO. ANP VWKM CUKPITS Ono big fju'tor whioh ontoi-s into the oc^t of doliverina: niilk in bottles is the lnvaka^\ which has to bo Kn-no by tho dealer. The extra eost of pasteuriziuir. while adding to the expense of pnx'essinir. has not uvaterially tignred in a rise of prioes as yet. Other ei^ts sneh ;vs ieing cans, handing \nilk at stations, hgher priivs of labor, depreeiation on cans, have all had their shan^ in the srenend pwbletu. and in eoniplaining alK>nt the high prices. eonsnniei*s are not apt to consider these caivfnlly enongh. Many attempts have been made to rednce the ci^st of fauiily distribntion. Municipal distribution has been snggi^sted : an- other suggi^stion is to organize one (.^^nvpany for this purpi^se alone, but as yet nothing has been done. The deaU^rs' objtv- tion to central plant delivery s<\mus to be based on the loss then» would be in teams and tinicks standing idle after they had made the etMitral delivery, also of the diftieulty of stacking the various sizevl containei"s; also that eustomei*s might not be able to get extra milk of the br;\nd they are usixi to; that the U>ss in Ixntles would be givater. and that theiv would be extrjv expense involved in eolUvting bills an*.^ soliciting trade. That many of thest^ objections might be removed by the dealei's stH^kiug to standardize containers and products, to centralize milk stations and in general to coopei^^te with each other d(.x»s not seem to have enteivd their minds. That dealers can iwiuce the cost of operating and distributing so that thert^ will be a largin* demand for clean, whole milk is certainly possible. Milk Still the Cheapest Food Consumption prices vary with the quality of the milk, although theiv is no standarvUzi\tiou by states or cities. In a few eases. dealers and pnxlueers near to the city are guaranteeing a 5 per cent milk for which they gi^t a high price. Oeneral prices rangt* around 8 to 10 cents for ordinary bottUxl milk to famil^v trade ; 6 to S cents for retail store tnule. and from 5 to 7 cents whole- sjvle. Cream, which is not sold on any standai\l basis ratxg^^s in l>rioe from oO to SO cents per quart to family trade; llo to oO cents to retail stoivs. and from 20 to 4- cents per quart wholesjde. As far as price is concenied. the consumer really has nothing to eomplain of: for did he but know it. at ptw^in^ prkts milk is the cheaptst and nutsi diijeatihle ftnnl than can bt> bought. If <*onsumers want fancier conditions in the production of milk WILFRID WI1EEL1<:R 149 llicy imisl, be ready lo pay for i1, aiul it is inevitable that the 1eiul(Miey oi" milk |)ri('es will be (ovvai'd a. liif«liei' lev(^l. Tilie raniier in Massacluiselts anyway must {jjet an average ol' 5 cents or better the year around lor his milk, ami while the time nuiy still l)e distant, sooniu- or latei- dairy farnuvrs will form an or- }»aniy.a.tiou strouj»' enough to demand it. It is safe to say that an. additional cent a (jnart on the price to tht; ra,rnu>r woidd do uuu-e to lu'lter dairy conditions than all lh(> i-estrictive legisla- tion thatiluis ever been passed. Undoubtedly with a I'ise in price a. much larger supply ol' milk would be produced and in order lo take care of it a. coucei'ted adv(>rtising caiupaigu on the Food value of milk will have to b(^ \indertakeu by dealers with the idea of increasing consumption. How Advertising' Can Increase Use of Milk As a, nuitter of fact such a. campaign should be undertaken any way as the consumption of whole milk is actually on the decrease, while that of cream has greatly iucreast'd. Many causes have helped in tlie decreasetl consumption of whole milk, among which are the lack of knowledge on the part of the consunu^r as to foo per cent. While there are no grades established for milk throughout New England and while the standards of butter fat and total solids vary in the different states, stall there is a highly organized system of inspection, especially by the state of Massachussetts as well as cities and towns all over New England, and certain Ikinds of inspection are done by the milk dealei-s themselves. This inspection might well be classed under 3 headings: 1. City inspection or laboratory work on the milk itself. 2. Country inspection by the agents of cities, towns, states, and by the government of farms and country shipping stations. 3. The more or less general supervision given to all this by in- spectors employed by the state. Boston maintains a corps of 8 inspectors who visit, in so far as possible, the 7,600 dairies from which she draws her milk sup- ply, and at the same time maintains an elaborate laboratory in Boston where analyses are made of the milk taken from farms, imilk stations, wagons and stores. The splendid supply of milk in many of the small cities and towns is entirely due to the work of these inspectors, of which there are about 60 in Massachusetts, and who, on their visits to farms supplying milk to their cities, have been able to get the farmers' confidence and by so doing to realize the benefit to all concerned in improving the milk supply of the state. Need of Tact in Milk Inspection Unfortunately, in Massachusetts at least, milk inspectors have, in many instances, by antagonizing the farmer, done mucfai to re- duce the quantity of milk produced and consequently the number of cows kept. That it is possible for towns to cooperate for better inspection iis proven by the work of 8 to\\Tis in the Metropolitan district, WILFRID WHEELER 151 Wellesley, lielmont, Canton, Frarainghara, Melrose, Xeedham, Weston and Winchester. These towns with, a combined popula- tion of 60,000 now maintain a cooperative laboratory for the pur- pose of making bacteriological and chemical tests of milk. A milk inspector is employed by the 8 towns, and in this way the inspection of dairies and monthly tests of milk can be made more cheaply and satisfactorily, as it pays the inspector to give his whole time to the work. Our farmers, like those of the rest of the country, are averse to cooperating in any movement which if condcted prop- erly would lead them forward to better things. Still there are some cooperative creameries in New England and in favored lo- calities they are doing fairly well. There seems to be a move- ment in Vermont to establish more of these cooperative cream- eries, as it has been pointed out to the farmers that it is a sui- cidal policy to sell their whole milk for less than the value of the butter fat it contains. Cooperation in cow-testing associations is growing but as yet no report has been received of any cooperative selling organiza- tion controlled by the farmer. That all kinds of unfair methods have been practiced on the farmer because he has not organized is true. He has had to ac- cept discriminatory railroad rates and low prices for his milk; has not received an adequate return when paid on a butter fat basis, has seen attempt at organization fail when persons sup- posedly trusty have proved unfaithful and while cooperation may solve this much vexed question, the difficulty lies in proving this to the farmer. In summing up the whole milk situation in New England, the factors which stand out most prominently in the marketing ques- tion are : The wide geographical distribution of the producers whose whole products come to one. market. The utter lack of knowledge of the costs of production by these same producers. Their utter lack of cooperation (to standardize their product) in production, shipping and marketing. The absolute control of the transportation of milk by the dealers using the leased cars and their further monopoly of the city markets by controlling the milk stations, and through the control of both trains and city delivery, their ability to dictate prices to the farmer. The lack of a definite grading and a standardization system. ]52 MARKETING AND FARM CREDITS THE DISTRIBUTION OF WHOLE MILK IN THE CITY OF CHICAGO W. J. Kittle Secretary, The Milk Producers' Association I come to you today representing 12,000 farmers, called dairy- men, with a capital invested equal to $300,000,000. This is the working, foundation of what I have to talk about this after- noon. These men are scattered over a territory reaching out about 100 miles in the surrounding country, in circumferenc? about the city of Chicago, and are shipping the product to the city of Chicago, that it may be distributed here. They repre- sent or control 375,000 cows and they must have these cows on their farms for several reasons ; but for 2 in particular, and I wish to take these up just a few moments later. Now, as to why these men here are in the milk business, first. They are tributary to a fine market here in Chicago. I do not mean to infer or say that they are within hauling distance of this great market of Chicago, which is probably the greatest mar- ket in the world. I do not mean to say that, when I say that they are on the threshold of that great market, — I do not mean that they are within hauling distance. But I do mean to say that we no longer count miles as to distance, but we count in hours, and this market is within a 3-hours' run of us, — this great city of Chicago. Chicago is within 3 hours' ride of the territory from which it draws its milk supply, for taking care of its people in their requirements. The first condition is this threshold proposition, and then the second is the taking care of the land. It is no longer doubted for a moment that if we let our land go without this fertilizer it will soon refuse to produce. We have thousands and thou- sands of acres in southern states that proves that and we have other thousands of acres in our own state of Illinois, that also proves that, — that where the cow is not there is no equitable product. I myself, am old enough to know and remember instances where we are not able longer to raise over 6 or 8, or a possible 10 or 12 acres of wheat on the finest land in my county. I recall just such a condition and that was some 35 years ago, while to- W. J. KITTLE 153 day, or 1914, on that same land they raised 40 bushels of wheat to the acre. No cattle, no manure ; no manure, no fertilizer. I will tell you why: Cows, manure; fertility and crop. No cattle, no manure; no manure, no fertility; no fertility, no crop. Thousands and thousands of acres south of here, south of us here between here and St. Louis, — thousands and thousands of acres down there are not producing more than 6 or 7 or 8 bushels of wheat to the acre. And why? No fertility. No cattle, no fertility. No cattle no manure ; no manure no fertility ; no fer- tility, 6 bushels of wheat to the acre. These are some of the reasons why we must have our cows up here, and where cattle are now commanding the attention of the whole world, and its. people are looking at them because of the fact, because the bet- ter cows will give more. milk — because of the fact there will be 2 calves worth $35 each at the end of 2 years, and the cow will still have as much value as though she were a steer and had been kept and fed for 2 years. Why Costs of Milk Production Are Rising They want her not only for the beef production, but they want her — they get out of her 2 calves and still have her to send to the market. Those are some of the things that make us stay in the dairy business here around Chicago. However, the high value of our land is causing the people to sit up and take notice of our immediate needs. And then we have to contend wdth the continued low prices of our produce, as just talked to you. The continued low price paid for our product is another thing that is causing the farmer to sit up and take no- tice of his business conditions. Better business methods are beginning to come to the farmer because of the fact that he is beginning to realize that he is losing money on the job, and he cannot continue to stay in the business unless more money is going into it for him. We all are trying to reach a better standard and it costs money to get to that stand- ard which they are now asking us to reach in our dairies, and yet the price to us on our product, has not advanced one-half a cent— one-half as fast as the standard has advanced. Milk that sold in Chicago at 8 cents — milk that is selling in Chicago at 8 cents today actually sold in Chicago 10 years ago at 8 cents a quart. There has been no advance in the retail price, and then when you undertake to show the cost of delivering it — the cost of delivery has increased and that cost does not come out of the i;>4 MARKETING AND FARM CREDITS meu who dolivor it to the (.'ousuiuor. but out of tho uVoii wlio iitand back of hiiu. and who produoo tho produot. What the Farmer Gets for Milk The avovngo prioo paid to tho faruior for his milk is 3 1-24 oents per quai't. I say that is the average prioo. All milk is de- livered and sold at the standard of 3.3. The city ordinanee re- (luires the basis of 3.3. and I tigiire that it is bought on the basis of 3.3. And that san\e milk is sold at 8 eents a. quart. We sell it for 3 1-'J4 eents a q\iart, and it is sold for 8 eents to the eonsumer. The farmers are beginning to realize and learn that unless they have eertain eonditions on their farms in regard to their dairy, tliey are shut out by this and that plant wliei-e they can deliver their pnuiuet and they are refused aeeeptanee of their milk. It was done very seriously last fall. These men weiv seoring their dairy so low that when tl\ey tig\ired the improve- u\ents and eonditioiis that had to be met their dairies are no longer a piMtit to them and they have to get rid of some of their stoek aaui buy Tiew. The eost is getting to be so lu^ny that the farmei'S are unable to bear it and meet it and make any- thing out of the proposition. Let me just tell you something: We have instanees of men who eoTue into our dairies on our farms and they ean often lind no exeuse whatever for tinding any fault with the farm or the dairy, and yet over in one eorner just beeause there isn't a window or some sueh thing, they often suggest that he must have the right kind of light and the right amount of light in his barn and he n\ust put in a window there. As a nuitter of faet that wiudow is not any more neeessary than it is in our houses, but we must do that or have tlie market shut our milk out. And we must b.ave siinitary milk stiH">ls and sueh things. Those are some of the things. All sueh foolish things are done by n\en and for the men who give them a job. and they think that they nvust make good in son\e way and report something wrong. They go into a barn and say to a man that owns the barn. "You haven't enough light in your barns for the eattle. ** and then the num turns to them and asks them how mueh light do we have to have. He says that he does not know, aiui then the farmer savs, "How do von know what I should do?" W. J. KITTLE 155 Intimidating the Farmer 'I'hese things are intimidating the farmer, because we know tlhat a repont like this will result in word coming to us from Chi- cago, saying that we must hold our milk home until we are in- structed by the board in Chicago to put our milk in again. I will go ini to see the authorities in Chicago and ask them what is wrong. He gets out his report to see 'w^hat was to be done there, ajid I show him that I have provided the windows re- quired in our barn, and he says, "I didn't unders)tand it, and you may go ahead," but I have been held out and I have lost tlie difference between what I should have made and what I have kept at home, and whidh I must dispose of as best I can. Those are some of the conditions we are meeting in Chi- cago, all the time. I am not saying that the men who boss these inspectors are entirely to blame, but I do say this, that incompetent men do the inspecting, and that sometimes gets us into trouble and is causing us more trouble all of the time, and we are suffering for it. The Chicago milk buyers are able to buy milk so low that they are able to sell it for 3 times what they pay for it. The producer must make his milk off land that costs from $150 to $250 an acre, and the interest on which is $12 an acre to start with. He must make that same milk from cows worth $100 each and feed them concentrated feed at a price of from $20 to $30 a ton. All this, to produce milk at $1.60 per hun- dred pounds. He gets $32 per ton for the product made by the use of feed that costs $35 to $40 per ton. I want to ask you this afternoon, if you (can do it? We cannot, and it is im- possible for us to make $32 a ton milk out of $35 a ton feed and continue. We cannot do it unless we have a side issue. Of course, they say to us, "You have all these side issues, fertilizer and young cattle to sell and hogs, etc." And so we do. If we did not we would have to leave the farm now. And men, I have this to say to you, that I have seen sale notice after sale notice all over the country down here, and every one of those bills say, "Having decided to quit dairying, John Jones will sell his farm." One man who is also a landlord and with boys in his home to help him in his work, sold out saying, "I cannot stand it any longer." He is quitting farming because he says, "I can no longer make $32 milk out of $35 a ton feed." These 156 MARKETING AND FARM CREDITS iu-e some of the eases 1 Avaiit to tell you about. These are some of the eauses. The Dairy Farmer's Dilemma And when men are unable to take eare of their boys, — what are tihey to do? There is a man seated in front of me this afternoon, who said he was unable to take eare of his boys without putting them into other jobs, and Avhen that eondi- tion happens, men. no wonder that boy drifts to the eity and the girls follow. I am not talking to you on this subject, just to be talking. I am putting to you, men, this afternoon, good, solid, hard, cold facts, and we are trying to right these conditions we have every day. The father and the son and the daughter and the mother, and all the rest of the family work from 4:00 o'clock in the morning luitil 8:00 or 9:00 o'clock at night, to produce and gather together the necessary feed, such as hay, grain, etc. to feed the cows and to care for them. They work thus together all year round, and at the end of the year, with combined econ- omy and labor, they Anil not be able to save enough money to just pay the daughter, if she sat at the typewriter for a year in some office. That is no exaggeration. I am telling you this afternoon that that is the case. Your daughter could make that amount of money sitting at the typewriter for the year, and yet, that whole family has worked from 4 :00 o 'clock in the morning to 8 :00 or 9 :00 o'clock at night to bring about the result she does by working from 8:00 in the morning to 4:00 or 5:00 o'clock in the evening. And she would have gotten the same amount of money for it I am telling you. Do you M'onder why they don't stay on the farm? I do not. Do you wonder why they try milking machines ? The state experimental stations have decided that no man can make a quart of milk, and get a profit out of it cheaper than at 5 cents a quart. No man can make a quart of milk and make a profit out of it on the farm unless he gets 5 cents for it. But we are not asking that. We are asking of the men who sell the milk that they divide "fifty-fifty" with us. We are asking for 4 cents. A speaker at this conference said that W. J. KITTLE 157 they got 4 cents in the East. Three and one twenty-fourth cents is what we got during the entire last year. Now, I am putting up to you this proposition this afternoon. All that we ask is one-half of what they are getting. The con- sumer pays 8 cents a quart, and we are getting 3 1/24 cents. We are asking for a "fifty-fifty" division. If they sell their milk for 7 cents, we are willing to take Si/o cents. But they ai-e not. They are selling it for 8 cents, and as has al- ready been told you this afternoon, the cheapest thing that goes on our tables today, is that quart of m!ilk at 8 cents a quart. No other article of food on the table, is as cheap as that is, or anywhere nearly as cheap as 8 cents a quart on this milk. Eight cents is the price it has sold for and has been sold for for 10 years, and' so, this afternoon we say that we are only asking for one-half of that. Dividing the Consumer's Dollar Think of it. Of the consumer's dollar, when we get 3 1/24 cents a quart, we get 27 cents of that consumer's dollar, and they get 73 cents. I do not know what it costs the Bowman Dairy Company or Borden to deliver their milk in the City of Chicago. I do not know that. I do know that it costs us far more than 3 1/24 cents to make our milk on the farm. I do not need to go into the figures and work it out for you. You know that; I know it. "We are willing to divide with the man who sells it at the other end of the route, and if he sells it for 8 cents, — if he can stand to sell it at 8 cents and deliver it at 50 per cent, we will try to stand the other 50 per cent. That is all we are asking. Dealers have overhead expenses. But the producer has not only his overhead expenses, but his basement expenses. He has all that and more, and at the end of the year he must have been very careful to get 3 per cent on his investment. 158 MARKETING AND FARM CREDITS TURNING THE POTATO LOSSES INTO FARM PROFITS H. E. HORTON Agricultural Commissioner, American Steel & Wire Company Standardization is the nubbin of marketing. Grading is un- satisfactory or impossible ^\'ithout the means of using the off" grade stock at a profit. The production of potato flakes and potato starch, solves the question of marketing. There is an erroneous opinion prevalent that new lands in the potato growing districts do not need fertilizers. I have traveled a number of times over the Michigan district and spent several years in the Wisconsin district and I have never seen any peculiarity in the light sandy loams that characterizes the potato growing districts that would except them from the necessity of using fertilizers. There are specially favored regions in the United States where the potato grows to perfection. At present, in all these localities, the production per acre of potatoes could be in- creased, and the quality, from the industrial standpoint, greatly improved: the first, yield per acre, by the intelligent use of fer- tilizers; the second, low quality, by plant selection or the intro- duction of new varieties. There is no good reason why these potato districts should be held back in their legitimate development that more corn may be grown in the corn belt. The great obstacle to potato gromng is ignorance — ignorance of production and possible industrial uses. Another serious obstacle to potato growing is the defective marketing systems. The root of the marketing question is grading or standard- izing, and the establishing and maintaining of a standard is only possible when there is a profitable use for stock which does not come up to the standard. Another obstacle to potato growing is the occasional abnor- mally big crop that is handled in a manner to demoralize prices and discourage the grower, A means for converting the ex- cess production of a year into non-perishable form will take care of the big year. H. E. HORTON 159 In the United States, economic thought has not grown to the point when an analysis of the uses, to which a crop is put, re- ceives deserved attention. Obviously the uses for potatoes are the table, industrial, and livestock feeding. A priori, there is no reason why more potatoes should not be used on the table. why high grade potato starch should not be made at home, and not imported, why feeding livestock with potatoes should not be a general practice. To learn of the opportunities connected with a big potato pro- duction it is only necessary to turn to Germany and study the production and uses of the potato crop. Area Devoted to Potatoes A careful census shows in one year in Germany the produc- tion of 1,579,533,333 bushels produced on 8,151,000 acres (the potato acreage in the United States in 1912 was 3,711,000 and the production 420,647,000 bushels, a little more than a quarter of the German production). In Germany potatoes occupy two-thirds of the total area given to tilled crops, and this means 12.3 per cent of the total area. Uses Made of Potatoes in Germany Economic studies in Germany are well advanced and a study has been made of the uses of potatoes. The following figures are very interesting and should be of great interest to every- one in this country interested in the production of this crop : 440,800,000 bushels of potatoes used on the table ; 91,833,333 bushels of potatoes made into alcohol ; 51,426,666 bushels of potatoes made into starch ; 191,013,333 bushels of potatoes used for seed; 646,506,666 bushels of potatoes used for feeding cattle : 157,953,333 bushels of potatoes lost (10 per cent of total production). The potato furnishes 25 per cent of the necessary food of the people of the German Empire. In the families of the German workingman "potatoes consti- tute 50 per cent of the food consumed. 160 MARKETING AND FARM CREDITS Dried Potatoes or ' ' Potato Flakes ' ' The drying- of potatoes is an almost imknoAvn art in the United States, while in Germany it is a well established, profit- of the largest markets in the United States. These were telegraphed each morning to the office in Wash- ington, where they were compiled and condensed and trans- mitted to the great producing sections for the particular crops included in the service. By night letter daily we secured from the great shipping areas reports as to carload movement and so far as possible the markets to which shipments were destined. This information was transmitted by telegraph to the repre- sentatives in the markets and was released by them. The rail- roads have cooperated most helpfully in this work. Those who participated in the experimental service during the sea- son have expressed themselves practically as a unit in favor of the continuation of the work and in commendation of its value. However, as I have previously stated, the ultimate good from work of this character can be realized only after standardiza- CHARLES J. BRAND 177 tion has been brought to a much more perfect state than is now the case. The preparation of standard grades for grain is handled by Dr. Duval of the Bureau of Plant Industry, who, I believe, is to speak to you, so I will not discuss this phase of standardiza- tion. We are studying the question of hay grades, butter grades, grades for livestock and meats, and are also making prelimi- nary plans for work in the standardization of wool grades. A large corps of investigators, 25 or 30 in number, are en- gaged in the investigation, preparation and distribution of various standards for cotton, including grade, quality, color, length of staple, etc. There were before the Congress at its last session, 2 pro- posals for national standardization relating to cotton and grain, requiring all of these commodities that are sold by grade and moved in interstate commerce to be according to the grades established by the federal government under the respective laws. Both bills passed the House of Representatives but were not reached in the Senate by reason of adjournment. Con- gress has also passed 2 laws known as the standard barrel laws; one covers apples and the other fruits, vegetables and other commodities. The former has been in effect since the first day of July, 1913, and the latter goes into effect on the first day of July, 1916. The latter has an interest that will appeal to you, due to the fact that it is based on the authority conferred by the Constitution on the federal government to fix standards for weights and measures. It is the first exercise of this power in many years for any purpose and the first exer- cise of it whatsoever for the purpose of standardizing con- tainers for specific products. I think we may look to an en- larged use of this constitutional power in the future. Other wastes and losses aside, I think it is true that the greater the accuracy of the standards by which products are sold, the smaller the margin between the jjrice received by the producer and that paid by the consumer. This is equally true whether the product passes to the consumer in a non-manu- factured state or in the case of products that must first pass to the manufacturer to be worked into consuming condition. When standards are honestly applied, cotton for which the producer receives, say, 10 cents, rarely costs the spinner as much as 11 cents, which would in most cases be sufficient to include transportation. Indeed, in cases with which I am per- 12— M. F. c. 178 MARKETING AND FARM CREDITS soually familiar, -where cotton mills are located iu cotton-pro- ducing territory, the margins are very narrow. In one case I have in mind, the cotton merchant acts purely as a factor and bills the cotton to the mill at just 50 cents a bale over what he pays the producei*. This is only one-tenth of a cent per pound margin. In the case of properly graded wheat, Professor Weld foimd in Minnesota that 90 per cent of what the miller paid went to the producer. As transportation must be paid, the total spread is relatively small. Ill products difficult of standardization, or at present sold in ungraded fashion, it is not at all unusual for 50 per cent of the consumer's j^rice to go to the intermediaries who accept the risk of handling such a product. In passing, it is only fair that credit should be given to the various groups of intermediaries in the handling of farm prod- ucts, who have worked out useful systems of grades for uumy products. Among these may be mentioned The National Poul- try, Butter and Egg Association, The International Apple Shippers' Association, the National League of Commission Merchants, The Western Fruit Jobbers' Association, and many other organizations, including cooperative producers' societies. The press of the produce trade has also helped the good work. Though exceedingly useful, the standards that have been elaborated by the trade leave much room for progress and the basis of that progress must be laid at the farm or very near to it. Complete and intelligent standardization of farm prod- ucts for market involves : 1. The planting of standard market varieties and the elimi- nation of many of the minor kinds now produced. 2. The standardization of methods of production. 3. Uniform methods of preparation for market. 4. The applying of standard grades for determination of qual- ity. 5. The use of standard packages and containers. Proper Gi-ading Reduces Wastes. It is in the long run almost suicidal for a producer or shipper to forward to the market ungi-aded products. To show you how great a voliuiie of ungraded fruit is sometimes shipped, I may sav that one of the investigators of the office of markets and rural CHARLES J. BRAND 179 organization found on the Chicago market, based upon observa- tions made between September 15 and December 5, that approxi- mately 25 per cent of the carload bulk arrivals of apples, amount- ing to about 350 carloads, and about 10 per cent of the barrel shipments, equal to 160 carloads, v^ere so low in grade and quality that they would not have reimbursed the freight charges had this kind of fruit been received in straight carload quantities. The shipment of poor qualities and ungraded product is ruin- ous to the whole market, both the good fruit and the bad. The most rapid development in the adoption of uniform grades and packages of fruits has been made in the states of the "West where population is sparse and distances from market great, with high accompanying freight rates. Under these conditions the shipper can afford to send to market only those qualities that will com- mand high prices. Here, too, other economic factors have forced organization in both production and distribution, and organiza- tion is one of the foundation stones of progress in the preparation and use of market grades and standards. Not the least important of the questions of standardization are those that relate to the packages themselves in which commodities are transported or sold. In order to get an accurate idea of the diversity which prevails in this regard, Mr. More, who is in im- mediate charge of the work in grades and standards for fruits and vegetables, has made a collection showing the sizes and types of packages and containers current in the trade. I assure you it is a motley horde, and it is in itself a complete argument for standardization. No consumer could ever hope to know what he is getting in quantity in buying grapes. New York has one set of grape baskets, Michigan another, and still other grape terri- tories other kinds. Some of them look very much like others, but contain less. Such confusion furnishes endless opportunity for manipulation and even dishonesty. In the case of strawberry boxes, not only is there exceedingly great variation in the cubic contents, but it is a common practice to repack from containers of greater capacity to those of less in distributing in and to the retail trade. Likewise, with peaches, the successful commercial orchardist packs his peaches in the 2-1, 2-2, and 3-2 packs accord- ing to the size of the fruit, particularly in the popular and gen- erally-used Georgia carrier baskets, and often when he buys his own fruit he finds that where he had packed as high as 36 to 45 in each of the 4-quart baskets, the retailer has repacked them so that he will buy from 19 to 25 peaches in the same basket. ISO MARKETING AND FARM CREDITS Standardization Proper Subject for Federal Leg:islation. Staiidai\liza.tioii of eoutaiuei's is a pix)per subjoot for federal le^slatioii under the wei^lits and measures power of tJie constitu- tion. As noted bet'ove. Congress has recently used this power iu establishing: the standard barrel for apples, eranlvrries and cer- tain other fruits and vegetables. By Airtue of tliis legislation the containers covei*ed by what is commonly known as the Tnttle bill became standards of measure with the Siuvie force and legal effect as the bushel. This act applies to intrastate as well as iu- tei*state commerce. Undoubtedly this barivl will i*eplace a large number of sliort measure packages which are \ised for potatot^s. truck crops, fi'uit and other things, and which vary in capacity from 2 bushels up to 10 or 11 pecks. The standardization of apple boxes, berry cratos and cups, and other containers is \m- der consideration, and we may look forAvard to progress with inf- erence to these. In some cases, even in the same state, there are dual standards applicable to the same products. In New York thei*e are 2 sets of standard grape baskets. Legislation has been placed on the books in a number of states, and is inider con- sideration in othei-s, particularly New York. ]Maine. Massi\chu- setts. Connecticut, Vermont and some of the "Western States which will tend to uniform trading in niuuei'ous pi\)ducts. The opportunities for standardization of grades and their ap- plication to products is givatest under conditions of oi'ganized pi\">duetion. Recipnxnilly. like"wise. the possession of standanls and gi-ades yields through better nuirket returns, the best divi- dends upon organization. The department of agricultuiv is Avorking earnestly upon many of the problems related to grades luid standards, and Avill Avelcome suggestions aJid assistance fivm producers, sliippei-s and others that Avill lead to further improve- ment along these lines. J. B. McCREADY Igl STANDARDIZATION AND COOPERATIVE MARKETING OF CHEESE J. B. McCready Manager, Sheboygan County Cheese Federation The method of organization, and the history of what led up to the forming of our federation was presented to you at your conference last year by our president, Mr. Krumrey, therefore it is needless for me to speak along those lines. Suffice it to say that we are now ihandling in the neighborhood of 7 million pounds of cheese annually, and are doing so on his tirst 1*J exhibits and 93.r> on the following 12 that represented his second year's work at this factory, and the same average score on the next 10 lots of bntter. Since each tub repivsented 1 month's ■work the bnter from this factory for IS ont of the last 22 con- secntive months was sut^ciently high in quality to meet the highest market requirement. The man who took charge of the factory tirst referred to received a score of less than 93 on 11 out of his tirst 17 tubs of butter with an average score of 93.9 for the 12 tubs entered from May, 1912, to April, 1913, be- sides making the tub of butter that was given 1 of the 5 state prizes awarded* at the annual convention last February. The man in charge of the third factory has made butter that for 2-t consecutive months has received an average score of 94.6. The highest score being 97 and the lowest 93.16 on the fii'st tub entered. The butter nuide by these 3 men is a credit to the dairy industry of that locality Avhere formerly a second grade butter was made. Others have made rapid progress by educating the farmers in better methods. An increase in quality from 92.66 to 95.S3 on butter representing 11 ditferent mouths is the record of one factory. The average score being 92.69 on the fii'st 6 exhibits and 94.51 on the last 5. Another factory in 6 Tuonths increased the quality from 90.83 to 95.33. The butter from 1 factory at the outset scoi*ed 93.66 and on the last 7 out of the IS months the score varied between 95.16 and 96.25. The following illustration represents 1 fac- tory 's output for 4 years : The average score on 12 exhibits made May, 1909, to April, 1910, was 93.97 ; for 1910 to 1911, 94.42 ; for 1911 to 1912, 94.66; and for 12 mouths. May, 1912, to April, 1913, an average score of 95.12. It is further known that the highest grade of butter now be- ing produced regardless of the kind of raw material that is received comes from territories where the following factors be- ing observed. 1. Every milk and cream producer is interested in the wel- fare of the local factory. 2. The income from the dairy receives first consideration, in C. K. lilOl*] ]^() otluM- words (Ijiiryiii^ is not n .side issiKi in J'lirin opciraiions. ;{. A \nrii;{\ miiidx'r ol' the farmers have u suitable place for eooliiifi: mid storiiijij IIk^ eroain. 4, The iivenifjce jxt vvut ol" rut in tlui eroam delivered ranges between ;>() .-md 10 |)er cent. f). All of llie creiiin prodiiced on the vjirious rnnns is d(div- ored at stated, rej^nhu- Jind Treipient irdn^'vuls. G. 11' the cream is coileeted by haulers the routes are not lonj? and a sullleiently number oi' trips are nuide each week to insure cream of j^ood (pudity. 7. (1rean» i-outes are iu)t eslablishcid in the territory that rifj^htfuily beloufjjs to llui ru'if^hboi'in^ creamery. 8. Quality nitluM- thnn cpiantity of butter receives first con- sideratioti. }). I'erl'iHit (H)operation between the factory owner or mau- ajjjer and the buiter maker with reference to the importance of receivinji: nothing but good cream. 10. It is imi)()sil)Ui to nuike good butter from tainted raw material. Where Improvements Must Be Made in n(>arly twery coimnunity u remarkable im[)rovenuMit can be brousi'ld about by a u?iited elVort in i)rodueing erciun con- taining be(\ve(Mi :U) iind 10 per cent butter I'at. This will result in a higher grade of butter being produced and a greater re- turn from Die d.iiiy. Among llu> ii(ivanl^ig(>s ni'c^: The ricluM- ci-e;im has a greater keeping cpuility; more skim milk is lol't at the farm for feeding purposes; there is less to ti'arisport; the cost of factory operations is decreased, and per- luils of i)asteuri/a(ion and the liberal use of a starter so essential in modern buttcr-nuUcing. The patrons of one eoiiperative factory in Wisconsin for the year li)l;i lost approxinvately t|>4,600 by producing cream test- ing nearly 'J;i per cent instead of HO per C(>nt. because the richer cream was not skiuniied, nearly 800,000 pounds of skim milk was hauled away from the farm. Its feeding value eoiild safely he estimated at 25 cents per 100 pounds. The cost of hauling tlie cream fi'om tlie farm to the factory was \]6 cents per hundred besides an increased los« of butter fat; and in- creased cost of factory operations. The loss in the quality of the butter could not be determined, but it is safe to assume that no suuill sum was lost. 190 MARKETING AND FARM CREDITS At the close of a recent meeting of the patrons of a coopera- tive factory where this subject was thoroughly discussed, sev- eral of the dairymen present agreed to skim cream to the de- sired richness and to do everything within their power to im- prove the quality of the cream. Farmers that are interested in cooperative creameries can do a great deal of good in improving the present system of collect- ing the cream. At present the best grade of cream in a large measure is being produced by the farmers that deliver their own product to the factory because they have a better op- portunity of getting in personal contact with the butter-maker. The next best system is where several farmers agreed to in turn deliver the product from all the farms. The cream hauling system as is now practised in several lo- calities is not conducive to the quality of the butter. The cream routes should not extend beyond the local territory nor should they be of such length that the first lot of cream col- lected at 7 a. m. is not delivered until late in the afternoon. All of the cream should be at the factory by noon in order that the butter maker may have a fair chance to handle the cream properly. Butter For Storage Must Be Improved There must be a united effort to improve the quality of the butter produced not only during the winter months, but dur- ing the summer months as well. In Wisconsin, fully one-fourth of the annual output of butter is made during the months of May and Jiuie and nearly one-half for the 4 months, May to Septem- ber 1st. Therefore the surplus of these months must be placed in storage until the season of shortage. Unless the butter placed in storage is of high quality it is impossible to expect that stor- age butter offered for sale during the winter months will be able to hold its ovra. in competition -with imported butters made in counries where the seasons are the reverse. The farmers can and will come to the rescue of the quality of the butter in order that dairying will continue to be a profitable industry. DR. J. W. T. DUVAL 191 ACCEPTABLE STANDARDS IN GRAIN Dr. J. W. T. Duval Crop Technologist in Charge of Grain Standardization Inyestigations, U. S. Department of Agriculture It affords me pleasure to discuss with you this afternoon the question of acceptable standards in grain. The grain business, in all of its phases, has assumed such immense proportions, that the demand for standard grades, that can be uniformly applied, has become almost universal. Acceptable standards must em- body some definite description of the more important factors taken into consideration in the grading of grain. These standards must be such that the producers,. the dealers, the consumers and all interested parties may know "the length of the yard stick ' ' by which the grade of the grain in which they are interested is to be measured. It is also essential that this measure be uniform and definite ; the same in Chicago, New York, St. Louis and New Orleans ; that it be applied on poor crops as well as on good ; that it be used in the same way from July 1 to June 30 ; and that it cover the export as well as the domestic trade. With grades a fluctuating proposition, varying in different mar- kets, and even in the same market at different seasons and under different conditions, the producer has no means of knowing when he is receiving the grade or the price to which he is entitled. Neither is the country elevator operator, who should have a thor- ough knowledge of the commercial grades, in a position to buy grain on its merits. Under a fluctuating system of grading, he is obliged to buy on the basis of average quality, leaving ample margin to fully protect himself against variability in grading at different points, and this margin must eventually come mainly from the producer, and especially from the producer of grain of high quality. Strong efforts are now being put forth in the movement for the production of more grain of better quality. If a farmer is to grow grain of high grade it is essential that he know the grade re- quirements, which he cannot do unless they are something definite and staple. Under a uniform system of grading, with the grades clearly defined, there is every reason to believe that that farmers 192 MARKETING AND FARM CREDITS will meet the requirements; but uot until the good grain com- mands the premium to which it is entitled. Basis for Standard Grades In fixing the standard grades for corn, whieli have been in ef- fect since July 1, 1914, it was the aim to provide definite limits for the more important factors wliich determine the quality and condition of any given lot of corn. The limits for color, moisture content, damaged kernels, foreign material, and cracked corn were definitely fixed in so far as it was possible to do so. In the fixing of grades for wheat, oats and the other grains, it is probable that the same general plan vnll be followed, with such modifications as the particular kind of grain may require. Moisture Content So much has been said at one time or another concerning the moisture content in grain that it would hardly seem necessary to discuss this factor to any extent. However, no discussion of standard grades would be complete if no mention were made of this. Perhaps the most important factor, is that, upon the degree of dryness, more than anything else, depends the keep- ing quality of grain in storage or during transit. This fact has been so strongly emphasized during the present season with a considerable percentage of our winter wheat and more than half of our oats badly damaged as a result of excessive moisture, that all must agree that no standard grades would be acceptable without a definite requirement as to moisture con- tent. The terms dry, reasonably dry, damp, wet, etc., are in- adequate. They leave too much room for a shifting of grade values. Grain that is dry to the seller is often damp or wet to the buyer. Perhaps never in our history has this been more strongly emphasized than with our present crop of wheat, and especially much of that which has been going for export. I shall not discuss the export situation in detail, but the matter is of such vast importance to our trade relations with foreign countries that duty demands that I present here a few facts with reference to some of our wheat that has been exported under a certificate of No. 2. It will be sufiicient to caU your attention to our analyses of samples from one lot or more than 70,000 bushels certificated as No. 2 hard winter. This lot of wheat showed a moisture content ranging from 13.7 per cent DR. J. W. T. DUVAL 193 to 16.5 per cent with an average of 15.1 per cent, under a pub- lished rule which provides that No. 2 hard winter w^heat shall be dry. It is not surprising that complaints are coming in from grain exchanges and American consuls in European coun- tries to the effect that wheat from the United States is arriv- ing in a heated, musty, and damaged condition. Neither is it surprising that a considerable portion of the great surplus of Canada's most excellent crop has been commandeered for use in Europe during a period when they have no time to barter in grain that arrives in bad condition. Wheat with 15.1 per cent moisture is in no sense dry, and it is practically as certain to go out of condition before it can be discharged at a European port as anything can be. Neither is such wheat entitled to a grade of No. 2, although it might possibly be squeezed into a No. 4. With a definite limit of moisture for the different grades such elasticity would be impossible. What the limits should be in standard grades I am not able to express, but based on the data now available, a maximum of 13 per cent is probably not far from correct for No. 2 win- ter wheat. Most of the corn grades cover a range in moisture content of 2 per cent, but with the small grains the range must be more restricted. Oats under normal conditions will carry less moisture than wheat. At present indications it does not appear that oats with a moisture content in excess of 12 per cent or at most 12.5 per cent should be permitted in a grade above No. 3 under the present classification, and that oats having a moisture content in excess of 14 per cent should right- fully be classified as sample. Foreign Material With respect to the amount of foreign material such as weed seeds, chaff, dirt, etc., standard grades should be more definite than under exisiting conditions. By way of illustra- tion, take the grades for wheat. Aside from the "dockage** system applied in a few markets to the grading of spring wheat, most grade rules provide that the wheat shall be clean or reasonably clean. What these last two terms mean I have never been able to accurately determine. I have my own ideas as to what should be classed as clean wheat, but it would seem that they do not correspond to the ideas of others, if inspection certificates serve in any measure as a basis for comparison. Investigations have shown that grades of wheat, under rules 13— M. F. C. 194 MARKETING AND FARM CREDITS specifying it "must be clean" show on actual analyses, weed seeds, chaff, dirt, etc. varying from a mere trace to 3 or 4 per cent. The terms "clean" or even "reasonably clean" must surely mean something more definite than that. Webster de- fines clean as being "free from dirt, filth, impurity, foreign or "undesirable matter." In rules for grades clean must neces- sarily mean something different, for no commercial grain is absolutely free from foreign matter, and no reasonable person would so contend. In many markets there is an unwritten rule that wheat with less than one-half per cent of foreign ma- terial shall be considered as clean. If this is a fair and rea- sonable interpretation, then it should be written into the rule so that all might know ; it is just as important to the man who is growing it, the country elevator man who is shipping it, or the man Avho is buying it, as it is to the inspector who does the grading. Equally indefinite is the phrase "not clean enough for No. 2." Rules governing foreign material in standard grades to be acceptable must be more clearly defined. They should either clearly indicate in terms of per cent the quan- tity of such material permissible in any given grade, or they should be based on a "dockage" system, such as is now ap- plied to spring wheat in some of the large markets. As I have publicly stated on previous occasions, the more I study the dockage system the better I like it. It affords an opportunity for more uniform grading in that it is not always easy to judge as to the quality of a given lot of grain carrying a con- siderable quantity of foreign material. Moreover, the pro- ducer or country shipper can determine such dockage in ad- vance of sale or shipment if he cares to do so, and can likewise remove such dockage if he finds it profitable to install the nec- essary cleaning machinery for that purpose. Ordinarily, cleaning can be done more economically at the elevator than on the farm. In some sections, especially in parts of Indiana and Michigan, a very commendable practice prevails in the cleaning of wheat as delivered at the mill or country elevator,^ the screenings being returned to the farmer. Inseparable Impurities A strictly dockage system, however, is not fully applicable in all cases. Such impurities as corn cockle, garlic, kinghead, etc., that cannot be satisfactorily removed from wheat by means of the cleaning machinery in common use, must, under DR. J. W. T. DUVAL 195 any system of grading, be given special consideration in that they seriously affect the milling value of the wheat even when present in small quantities. In addition to the assessed dock- age there should be a lowering of grade or a discount in price to compensate the miller for the extra expense in putting such wheat into suitable condition for milling. Moreover, the re- moval of such impurities by special cleaning machinery is ac- companied by a heavy loss of wheat. This can be more clearly expressed by referring to the analyses of a few representative samples of corn cockle screenings secured at country mills. The average of four lots of screenings showed 12.1 per cent com cockle, 11.1 per cent of other weed seeds and grains and 76.8 per cent of wheat. In a bulletin now on press, — Bulletin No. 328, — the effects of some of the more troublesome impuri- ties on the milling value of wheat are fully described. Mixtures of Varieties, Classes, and Kinds of Grain Closely allied with the so-called inseparable impurities are the mixtures of different varieties, classes, and kinds of grain. Rye often grows with wheat, sometimes as a volunteer, but more frequently as a result of impure seed, and occasionally rye is deliberately mixed with wheat, usually hard winter, for illegitimate profits. Millers all agree that rye in wheat in-^ jures the color of the flour, however not all agree as to the quantity of rye that wheat will carry without showing such injury. Our investigations have shown that the presence of rye in as small quantities as 3 per cent injures both the color and the texture of the bread, and that as little as 1 per cent is noticeable on color. It would therefore appear from the data now available that the maximum percentage of rye per- missible in grades of wheat should not exceed 1 per cent. A somewhat similar case is the mixture of Durum wheat with the other hard spring wheats. Within the past year, samples . from three different cargoes of wheat, certificated as No. 1 Durum, contained an average of 16.4 per cent of other spring wheats, and 4 per cent of weed seeds and other foreign ma- terial. It does not necessarily follow that the spring wheat was deliberately added even though the difference in price at that time would have made such a substitution highly profit- able. In fact, our investigations have shown that a consider- able percentage of Durum wheat is mixed with bluestem, velvet chaff, etc. when it eomies from the field. During the past 1'9B MARKETING AND FARM CREDITS Iharvest, head counts in 110 fields of Durum wheat showed that 13.2 per cent of the heads were of spring wheats other than Durum. Less than 8 per cent of the fields showed pure Durum and only 27 fields out of a total of 110 contained 95 per cent or better of Durum heads. But whatever these conditions, it requires a considerable stretch of the imagination to figure out on what grounds a grade of No. 1 Durum could be given to a lot of wheat which contained 16.4 per cent of other spring wheats, and 4 per cent of Aveed seeds and other foreign ma- terial under a rule reading "shall be * * * Avell cleaned ••^and be composed of Dunim * * * wheat.'"' I am certain 'thsbt under standards acceptable to the IT. S. Department of Agriculture No. 1 Durum wheat will not be allowed to carry ^such percentages of other wheats and foreign material. I mention this more particularly at this time in the hopes of •starting some movement for securing pure Durum wheat for .seeding next spring. Should grades be established before the anavement of another crop, it is evident that much of the wheat now sold as Durum would be classed as "mixed wheat./^ Damag^ed Grain Damaged grain offers perhaps the most serious difficult}^ in formulating acceptable standard grades. There are so many d'^rees and kinds of damage that an arbitrary line must be drawn as to what shall be classed as commercially sound and what shall be considered as damage. Many forms of damage '"however are partially covered by the weight per measured "bushel. But even this factor must be determined with con- ■ siderable care and according to certain prescribed methods if the results "are to be at all reliable. It is easy to make a dif- : ferenee in weight of one or two pounds depending on li&w the ttest ifcettle is filled. I[ sTiall not undertake to discuss grade requirements for {rosled, sprouted, immature, blighted, rust damage, etc., for these are factors dependent largely on weather conditions over which the farmer has no control. I wish to emphasize, how- 'ever, the stinking smut which may be present in wheat as smut iDalls, or as a mass of smut spores adhering to the brush of the kernel. In extreme cases the somewhat oily spores are pres- ent in such countless millions as to cover the entire kernel. This can be better understood when it is considered that a single smut ball is estimated to contain 3 million spores. DR. J. W. T. DUVAL 19X A few smut balls or spores impart a smutty odor to tlie wheat, and whenever this odor is distinct the wheat in my opinion should be classed as sample grade and discounted acQordingly. It requires a special washing treatment to make smutty wheat suitable for milling, and many of the small mills do not have such facilities. There is another reason for taking somewhat drastic action against smutty wheat in that this stinking smut yields readily under proper seed treatment. There is every reason to believe that within 5, or at most 10 years, stinking^ smut could be practically eradicated from the United States, if one of the treatments that have been recommended for so many years by the federal department of agriculture and the various state agricultural colleges and experiment stations were universally applied with proper care. When Will Standard Grades for the Small Grains be Fixed? With the corn grades now being applied to the second crop you are naturally interested to know when the department contemiplates the fixing of standards for the small grains. I regret that this is a question to which I cannot give you definite reply. As you are aware, our grain standardization investi- gations have not been limited wholly to the fixing of stand- ards, although much of the work done has furnished data that will serve admirably as a sound basis for such standards. The investigations have covered the harvesting and storing of grain on the farm ; the handling, storing, and grading of grain at country elevators and in the primary markets; the deterio- ration of grain during transit in cars and in transatlantic steamships; the milling value of different classes and grades of wheat ; the quality and condition of Argentine com imported into the U. S. — and various other problems covering every im- portant phase of the handling, storing, grading and transporta- tion of grain. Moreover, the mere fixing of grades and their adoption accomplishes but little in the absence of suitable au- thority to control their application. It is therefore only fair to state that personally I am strongly opposed to the fixing of stand- ard grades for additional grains until after the enactment of sudh legislation that will provide authority to insure uniformity of application, because without such legislation uniformity is impossible. As to what form such legislation should take, there is appar- ently an honest difference of opinion. Some prefer out-and-out 198 MARKETING AND FARM CREDITS federal inspection, while others believe that federal supervision will meet every requirement. Personally I stand committed to federal supervision, because I believe that it will afford every needed protection to the producers and consumers of grain, with the least possible disturbance of legitimate practices in the handling of our great crops of grain, and ^^ith a minimum ex- penditure of public money. Moreover, even with federal in- spection, it would be necessary to have a system of supervision, for without supervision it would be impossible to maintain uni- formity of application. Proposed Federal Legislation While it is not my function to discuss proposed legislation, it might not be out of place to summarize briefly the essential points of the grain grades bill, which, according to Congressman Ealph W. Moss, in a statement before the Grain Dealers' Na- tional Association at Peoria, will be reintroduced at the coming session of Congress. This bill provides the fixing of standard grades by the secretary of agriculture ; the licensing of inspectors for the grading of grain entering interstate or foreign commerce, and the revocation of such license in case of failure to grade grain correctly in accordance ^^dth the rules and regulations laid down by the secretary ; an appeal to the secretary of agriculture in ease of dispute as to the grade of any given lot of grain ; and •a general supervision of the inspection and grading of grain, with authority to publish the results of his findings. Should legislation along these or other lines, providing for a uniform and definite system of grading, be enacted at the coming session of Congress, I see no reason why standard grades should not be established soon thereafter. Such grades might not be com- plete in every respect, but the investigations would be continued with the view of making modifications in the grades from time to time as the best interests of the country might require. H. E. EMERSON 199 TROUBLES OF THE GRAIN INSPECTOR IN GRADING GRAIN UNDER PRESENT STAN- DARDS AND MARKETING METHODS H. E. Emerson Chief Grain Inspector, State of JVTinnesota In Minnesota up to the year 1877 there was little, if any, local or terminal grading of grain. The grading practice was of an individual and arbitrary character, the different grain buyers grading according to their individual judgments. There was no uniform effort upon the part of any association representing line elevator companies, millers or buyers, looking toward the estab- lishment of anything that might be called a set of grading rules, which would define the characteristics of the various grades of different grains. Up to this time this system of marketing and grading grain worked fairly well, because it was largely a matter of agreement between the producer and the buyer, and the volume of business was extremely small and was confined very largely to wheat. The raising of wheat 40 years ago was confined largely to the area tributary to the Mississippi river, and the primary wheat markets along this river at that time were among the most im- portant in the world. Among them were Winona, Wabasha, Lake City, Red Wing and Hastings, all in the State of Minnesota. Both mills and elevators were located at all of these points. Good crops and good prices gave this territory advertising that re- sulted in increase of population and expansion of the wheat rais- ing area. The result was the development of the milling industry at Minneapolis, largely developed and still largely maintained by the use of the magnificent water power at St. Anthony Falls. The ultimate outcome of this method of marketing and buying of grain was the formation of a Millers' Association, the organiza- tion of the Minneapolis Chamber of Commerce, the establishment of grading rules by the iMillers' Association, the ultimate reach- ing out into the countiy of better wagon roads, and the construc- tion of steam railroads. 200 MARKETING AND FARM CREDITS This developed the local warehouse on the different lines of railroad. These houses were owned and operated by the railroad companies, later by line elevator companies and today most of them are operated by independent, farmers ', cooperative elevator companies and line elevator companies, while a few of them are operated by mills throughout the state. Origin of Grain and Warehouse Law The development of large terminal markets and the demand for an impartial grading and weighing system was responsible for the enactment of a Grain and "Warehouse Law in our state which became effective June 1st, 1885. This placed the regula- tion of the grain business and the duty of establishing grades for grain, and required supervision over the weighing of grain at the terminals with and by the Railroad and Warehouse Commission. The Legislature of 1885, which passed the original act referred to, appropriated the sum of $1,000 from the revenue funds of the state for the use of the state grain inspection and weighing de- partments, and gave to the railroad and warehouse commission authority to establish fees for the inspection and weighing of grain. This original appropriation is the only sum ever paid into the state treasury for the use of that service from moneys de- rived by direct taxation. The department has been maintained continually for 30 years from the fees produced by the service itself. The railroad and warehouse commission established the Minne- sota grade rules and the rules for the operation of the inspection and weighing departments. These rules have not been materially changed, except to add to them to provide rules to govern in the grading of the different new varieties of grains that have been produced as the result of experiments conducted by the federal and the state agricultural departments and colleges. The essen- tials, so far as grading of wheat is concerned, remain the same now as then, but it is interesting to note that by the development of the country, attended with the clearing away of its forests and the breaking of its prairies, that while for the crop year ending Au- gust 31st, 1886, 38 per cent of the spring wheat inspected ''on arrival" graded No. 1 Hard and 35 per cent graded 1 Northern, compared with the crop year ending August 31st, 1915, only .8 per cent of the spring wheat graded 1 Hard and 22.6 per cent graded 1 Northern. H. E. EMERSON 201 Under our state law the local grain warehouseman must pur- chase his grain in conformity with the Minnesota grade rules, which have been legally established for the guidance of the state grain inspection department in determining its official grades at the terminal markets. These grade rules, formerly established by the Minnesota Eailroad and "Warehouse Commission each year, have since 1899 been established by an independent tribunal, known as the Minnesota Joint Boards of Grain Appeals, consisting of 6 members, all appointed by the governor. The grades are required by law to be established annually at a joint session of the 2 grain appeal boards of 3 members each and cannot be changed during the crop year, except by and with the consent of 5 of the 6 members attending a meeting which has been called and advertised for that purpose. Grain Inspection Works Under Civil Service Since January 1901 our railroad and warehouse commission has placed its grain department on a practical civil service basis, although we have in our state, no civil service law which has re- quired such an action. Appointments to grain inspectorships are made by the chief grain inspector, with the consent of the rail- road and warehouse commission, from the class of employes al- ready in the service in minor positions and then only after com- petitive examinations which actually test the practical knowledge of the applicant in the actual grading of grain. Many of the in- spectors on our force have been in the service for more than 20 years. The position of the chief grain inspector is in no sense political. His appointment is made by 3 members of the railroad and warehouse commission, who are elected by the people. It is true that he may be removed at will, but his selection by the board is upon the basis of competency as an administrative officer and as an expert in the grading of grain. 'The Minnesota State Grain Inspection Department is, therefore, not a political department and cannot be made a political football by changing administrations. "With this brief historical summary to establish in your minds the process of evolution of state grading in Minnesota, permit me to suggest that if the local warehouseman purchases grain on the basis of terminal grades, the grades in our state ought to be uni- form at all points, or reasonably so, as near as human judgment might determine. It likewise ought to be said that No. 1 Northern 202 MARKETING AND FARM CREDITS wheat so graded in Duluth, ought to be accepted at points down the lake and elsewhere as No. 1 Northern. As an illustration — a cargo going out from Duluth under a grade of No. 1 Northern should be and as a matter of fact is, deliverable in Chicago on that same grade, likewise at Buffalo or at New York. Minnesota grades have the distinction of being acceptable in Europe, and it has only been when grain delivered upon our state grain inspection certificates has been mixed with other grain in transit, that objection is raised by our export friends. It should be remembered, of course, that the authority of our grade rules reaches only to the confines of the state and we cannot regulate the grades beyond our own borders. Running Down the False Grades I presume as long as grain is to be handled in commerce and graded, that some shippers will attempt deception in the loading of their cars. We have found, as all other departments have, a certain percentage of ears received at our terminals that have been plugged, some apparently with an intent to deceive inspec- tors, and others accidentally so loaded. "We have found eases of deliberate and wilful intention of setting up cars where the plug indicated the use of a bag or a barrel to receive the inferior grain, the receptacle being removed after the loading has been completed. This kind of a set-up would leave a pocket of inferior grain sur- rounded by the main body of grain. We Ihave, in eases of the discovery of such plugs, graded the entire car upon the basis of the grade given to the poorest found in the car. This practice has been changed so as to require such cars, when found, to be graded No. Grade CC, sent to an elevator to be cleaned or handled, and if sustained on reinspec- tion and appeal, the department assesses an arbitrary fee of $5 per case. The physical condition of grain that is marketed and comes to our terminals for state inspection, presents about the only troubles of a state inspector in grading grain under present state standards. He is not concerned with the producer or the pur- chaser. He attempts, in our state, to stand as an unbiased ar- biter between the parties interested in the complex game of pro- ducing, marketing and consumption of grain. As a matter of fact, we are not confronted with any real serious troubles in the placing of our grades on grain. H. E. EMERSON 203 The various classifications of the Minnesota grade rules, which largely follow the standard grades that are fairly uniform in most of the grain producing states, made so through the efforts of the National Grain Dealers' Association and the Association of Chief Grain Inspectors, require that grades be provided for a large number of varieties of so-called spring wheats, different varieties of oats and barley, flaxseed and corn. In our markets, our grain inspectors must have a knowledge of the charaeteris- tiees of Scotch Fife, Bluestem, Marquis, Minnesota 169, Minne- sota 188, Durum, Preston, Humpback, Climax, Velvet Chaff, and other so-called varieties of spring wheat. Where Inspector's Duties End If the inspector exercises his judgment in the placing of his grades on these different varieties, he has done all that can be reasonably expected of him in the grading of wheat for com- mercial use ; and while the judgment of men may vary, as long as grain is to be graded in commerce in this way, if mistakes oc- cur a recourse should be had, and in our state is had, by a re- viewing body for a reinspection. Again, should the parties in- terested in a particular sample, car or cargo be still dissatisfied, in our state they have a final court of review called the board of grain appeals. To this board must be submitted all cases of disputes and the decisions rendered in such cases by the board €f grain appeals are final and conclusive upon all parties. Grain inspectors are never so well pleased as when the qual- ity of the crop is good. They are but human and naturally de- sire to give satisfaction and to receive approval for their official acts, rather than not to give satisfaction and have their acts dis- approved. Criticism is the same the world over whether it be directed against a public official as to his acts in grading grain, or against professional men in other lines of work. Under our ]\Iinnesota grade rules today we find this to be true. A sample may be submitted to an inspector who is a good judge of grain, — ^his verdict may be that the sample submitted ^vill grade No. 1 Northern. He may figure that it is a very poor No. 1 Northern, or as we say, the very lower edge of No. 1 Northern. That sample may in turn be submitted to another grain in- spector, equally as good a judge of grain as the first, and his de- cision may be that the sample will grade 2 Northern. He might say to you that it was an extremely good 2 Northern, and that there was a question in his mind as to whether or not it should 204 MARKETING AND FARM CREDITS be graded 1 Northern. In other words, it is the very upper edge- of the 2 Northern grade. It is not sufficient, in my opinion, for grades to be made, that a state department, a federal department, or an association grading gi*aiu at a large terminal market, might be able to follow in the application of those rules. If the grades so established are too numerous for the individual classitication and if the re- finement is carried to the extent that the grades are not practical in the country, it would mean that the producer who parts with approximately 95 per cent of his crop to the local warehouseman is going to be the loser. When he has made a delivery to the local warehouseman in the country, he usually has sold his grain outright. Grain inspectors, if they are competent judges of grain, can follow any set of grade rules, — primarily because they are trained judges of grain; secondarily because they have every" grading facility and tool and appliance of the profession at hand to assist them in the application of the rule. It necessarily follows that the buyer of grain at the local warehouse, handi- capped as he is by the lack of tools and appliances, handicapped further by the fact that he is rushed usually from daylight un- til long after dark in taking in his grain, cannot grade either as closely or as successfully as a terminal grain inspector. Minnesota Establishes a Laboratory In 1909 the Minnesota legislature permitted this department to assist in the equipment of a grain testing and a milling labora- toiy at the state college of agriculture, which is connected with our state university. This laboratory was made available to the state grain inspection department, the board of grain appeals and the railroad and warehouse commission and was used in milling and baking tests, and in chemical analysis of various samples of the different grains. Since that time the railroad and warehouse commission has provided a most fully equipped grain testing laboratory and milling department, which is used by both the inspection departments and the appeal boards. Milling and baking tests of grain are carried on by our state chemist daily and the work is carried on in conjunction with and as assistance to our grain inspectors. There is one feature of the marketing of grain that has not been touched upon very extensively, and that is the threshing operation. In my opinion, it would be far better for the thresher H. E. EMERSON 205 to place sieves in his separator in place of blanks and to deliver to the producer his clean grain separate from the various foul seeds, so as to make a complete separation of grains in separate lots, to be sacked and delivered to the man for whom he was threshing. JIandling Dockage Questions In the ordinary marketing of grain today in our country the farmer who raises grain with a pound or two dockage of the ordi- nary kind, which might consist of wdld buckwheat, pigeon grass, fine weed seeds or other foreign seeds and substances, is not only paying freight on that dockage, but he is giving the dockage away in addition. If this were collected for him at the time Iiis grain was threshed and delivered to him separately, it would give him something of a commercial value for the feeding of his stock and he would be ahead by marketing clean grain and would save the freight on the dockage. On the other hand, it is true that oftentimes dockage may be heavy on a particular carload of grain and that the dockage may consist of mustard seed, flax- seed or other seed that is valuable when it is present in an amount that would cover the cost of cleaning and leave a profit. In ,such cases the dockage is an asset and not a liability, because purchasers are many times found for such ears who will pay a premium therefor over the regular straight price for a given car of the same grade witihout such an excessive dockage. "Whether a market grades down for the presence of foul seeds and admixtures of other grain, foreign to the main body, or whether a market docks for such substances, is not material. The result to the producer is the same. He generally is the loser by permitting the shipment of his grain in a dirty condi- tion. Marketing methods in vogue in our state do not materially vary with the location. A large proportion of grain is threshed from the shock and is marketed just as soon after it is threshed . as possible. In many cases the grain is hauled direct from the threshing machine to the local warehouse. It is nearly all : sacked at the machine and taken to market in sacks. In some of the states grain is hauled in bulk in large wagons direct from the machine to the local w^arehouse where it is usually purchased by the local warehouseman, rather than being stored by the owner. 206 MAKKKTINO ANP FAKM CRKinTS It" tho local ninvkot at whioh tluji ^rain is prosontod for sale is a oompotitivo point aiul oompotition is \iuusually koon, wo have found it true that ^raiii bviyoi's \Yill fivquontly disivijard our terminal ^rade miles and will over grade or under dook in or\ier not to lose a onstoiuer's business. Many times we have found a Ux'al waivlionsenvan bnyinir jrrain on the baais of No. 1 Northern when he knew full well that the ijrain eould not pos- &ibl\- grade moiv than "J Northern at the terminal, but this is a condition which is not ireneral. The pwducer. after he has cleared his farm and has continued to raise wheat on the Siuue land without the pix»per fertilization or rotiUion of civps, tinds himself with wheat that is inferior, when it is iH^npared with the tii-st ctvps that he has taken, yet he may tigure. and we often times tind that he does believe, that the local buyer should give him a grade higher than that to which he actually is entitled. He dix^s not oompivhend that the deterioi*ation of his grain, results from his practice of farming, and the falling otY in the percentages of the higher grades, to Avhieh I have made reference, indicAtes cilianges in soil euudi- tions. a weakening of the land and the using of pooivr seed. This invariably results in the deterioration of the grain raised, yet at the same time the producer has not seemingly, until very ivivntly. i*eeognized the fact that this is curable only by per- sistent ivtation of civps and vHn-sistent fertilization. To conclude, the ivgnlatory methods of gitiin inspectioi\. to be beneticial to the producer, must be of a character that will per- mit the oixlinary average country grain buyer to apply the rules pi*esci*ibed and must be made with the idea of the protection of the producer, rather than for the benelit of elevator or milling companies. WAREHOUSING AND STANDARDIZA- TION OF FARM PRODUCTS STATE WAREHOUSING AND THE COTTON BALE IN THE SOUTH Clarence Ousley Director of Extension, A. & M. College of Texas Cotton does not differ from other staple crops and commodi- ties in respect to the advantages of proper warehousing and in- telligent marketing, but it presents the most interesting problem in the economics of American agriculture because cotton is our most valuable article of export, because it ranks among the world's chief necessities, because we produce two-thirds to three- fourths of the world's supply, and yet American cotton suffers more preventable waste and submits to more downright graft than any article of commerce. The chief dependence of the South and the nation's principal item in settling balances of trade, it should be the object of our greatest concern, but we handle it as if it were of little value, as if it were indestructible, and as if it were the common possession of all who may chance to touch it. By our methods of baling, compressing, marketing and trans- porting, the cotton crop of the South is subjected to a prevent- able waste of $10 to $20 a bale. On the normal annual produc- tion of approximately 15,000,000 bales, this amounts to a loss of $150,000,000 to $300,000,000 a year. In the first place the average "country damage" due to ex- posure in uncovered cotton yards, on compress platforms, at rail- road stations, and in the farmer's backyard, amounts to $2 a bale. Of course, not every bale suffers country damage but the $2 is the average computed by the United States Department of Commerce after careful investigation. The indiscriminate slashing of the bale for the purpose of sampling imposes a total cost of 100,000 bales a year, as computed by the department of commerce, kno^vn as the "city" crop, being the pluckings of the buyers and the stealings of a host of persons who hang about the yards and shipping points. Many buyers contend that but for the gain of the city crop they would be compelled to charge higher commissions or fees for services, and therefore that the city crop is not a loss to the producer. The answer to this is first that twice as much cotton is taken from the bale as is needed 14— M. F. c. •210 MARKETING AND FARM CREDITS for a logritimate sample, and soeoiul that tho miseellanoous sam- ples so eolleeted grade Unver than the orig-inal eotton ^vo\lld grade. It is at least fair to s;\y that the system of sampling tliei*efoi*e involves a. very decide*.! loss. The sampling of the bale I'eqnires also pateliiug at the eompress. and the ragged condition of the bale, as a consequence of the Siimpling and the patching, requires a higher rate of insurance. Another important item of loss is the ditference between the actual tare of the bale and the tare deducted by tiie buyers. The weight of bagging and ties does not, exceed '20 pounds, but the commercial dedtic- tion for tare is 6 per cent or oO pounds on the standarvl bale of 500 pounds. This means 10 pounds of eottou from every bale. Again, as -with the samples, the buyers contend that the profit iu tare enables them to handle the business at a smaller charge than they would be compelled to make if the tare were precise. As to this, I hold that the best way to do business is to do it frankly and in precise dealing. These indirect gains from ''trimmings" are a constant invitation to dishonesty. Another loss to the farmers is the inaccuracy, not to say dishonesty, iu gi'ading. Xot one farmer in a hundred is able to "class" cot- ton. It is sold upon the classification fixed by the buyer. The competition among bttyers is presumed to develop fair grading, but the presumption is shockingly disputed by expert investiga- tions by the bureau of markets in the states of Arkansas. Okla- homa, and Texas, which reveal differences on the Siiitie day and in the same market as on the s;ime day in different markets within each state of from GO cents to $2 a bale on the higher grade and from $5 to $30 on the lower grades. The only allow- able ditference for the same grade of i\>tton in 2 prinuiry mar- kets on the same day is the ditfercnce in freight to the port. It will be readily understood that under exceptional conditions a merchant buyer uuiy give a premium on a certain lot of cotton in order to collect a debt, but the variations disclosed by the bureau of markets are so numerous and so wide and so extended in area as to demonstrate clearly that in most part they are due to deceit, which is easily practiced when our farmei*s have not the infornuition necessjiry to classify their product. Forcing Sales Cause of Loss Another great cause of loss is the habit of forcing the entire crop upon the market within 3 or 4 months, or from Sep- tember to January, though 12 months are required for its CLARENCE OUSLEY • 211 consumption by the spinners. A record of cotton prices from the season of 1901-1902 to the season of 1914-1915 inclusive, compiled by M.r. Theodore Price of New York, shows that every spring during tbat period cotton sold at from 40 to 600 points, or from $2 to $30 a bale higher than in the preceding fall. Mr. Price deserilies this annual price phenomenon as the "Autumnal Dip" and attributes it, as 1 have intimated, to forcing the crop upon the market within 3 or 4 months. Another Cause of the ''Autumnal Dip" There is another very important factor in the "Autumnal Dip." It is the lack of adequate information concerning the rate of consumption by cotton mills in foreign countries. We publish in June of every year the cotton acreage in the United States; we publish the condition of the plant from month to month, and beginning in October we publish the output of the gins every month. These publications are made by the gov- ernment; they are as accurate as human intelligence can ap- proximate, and they are accepted by the trade as reliable. They are marked always by fluctuations in the price on the market accordingly as they are above or below the expecta- tion of cotton traders. By this means the government exhibits constantly, from the time the cotton is planted until it is put upon the market, all that miay possibly be known concerning supply. And this is a service that should be performed for the benefit of commerce. In fact before this information was pub- lished, the spinners and traders made their guesses as to the acreage, the condition of the plant, and the output, and con- sciously or unconsciously they guessed to their own advantage. The government service, therefore, has been valuable not only to honest traders but to producers in protecting them from mis- representations or the bad guessing of spinners and specula- tors. But, what is the other side of the question? What do we know about demand? Practically nothing. I agree that we cannot sell cotton except under the law of supply and de- mand, but I contend that we cannot fairly determine economic value without knowing demand as well as supply. Supply and demand constitute an economic equation, and any student of the high school will tell you that it will disturb an equation as much to slibtract from one side as to add to the other. If a new fact, exhibiting an increase of supply, should depress the price of cotton, then a new fact exhibiting an increase of de- 212 MARKETING AND FARM CREDITS Tuaud should advanoo the pvioe. and wo oaiuiot know the true price at a given time Mithoiit knowing demand at that time as fnlly as we knoAv supply at that time. More Information on Consumption Needed Now the government publishes an annual report of world consumption, but it is given out along in Februaiy afttr the farmers have sold their cotton, and is therefore of no value except by way of aduu^nition in determining the acreage for the ncAv year. During the last few years also, in response to representations made from the South, particularly by a con- ference of the cotton states governors in 1912, the Census De- partment is publishing monthly reports ot' American consump- tion, but American consumption is only one-fourth to one-third of world's consumption. Therefore we have only one-foiirth or one-third of the demand factor in om* equation. For the last few months the Department of Commerce, in response to an urgent appeal which I presented to Secretary ;^[cAdoo as a mat- ter of affecting bank loans on cotton, has been publishing from our consular agents reports of cotton consumption in a few of the foreign countries, but no report has come from Great Brit- ain, the principal cotton consuming country, because the spin- ners are unwilling to furnish it. Our consuls should be required to furnish intelligent estimates when they cannot obtain official information, but I fear they will not do so unless pressure is brought to bear upon the Department of Commerce by an of- ficial body of citizens like this, or unless there is a congres- sional mandate to do so. No etYort should be spared to ex- ploit deu\and as fully as we exploit supply. There are two chief elements in the problem of successful marketing, one is information and the other is packing. The information must be supplied by governmental agencies, be- cause the expense of gathering it in a world-wide market is beyond the resources of producers, but the packing is a matter of education among producers themselves, though it may be considerably bettered by appropriate legislation. In Texas we have inaugurated a rather ambitious reform in cotton handling and marketing. A special session of our state legislature in August, 1914, enacted a comprehensive statute providing the means of organizing mutual associations of farm- ers for the storage and marketing of their products, and pre- scribing a method of sampling cotton at the gin. The ginner CLARENCE OUSLEY 213' is required to take a sample from the bale before it is wrapped, and to issue a certificate under bond that the sample is a fair sample. The purpose of this requirement is two-fold. In the first place, it is designed to furnish a sample which will remove the necessity for cutting the bale. As I have explained, the cutting of the bale is the occasion for much waste and the ex- cuse for much graft. In the second place, the regulations of the state warc^house department, under the authority of this- statute, aim to prohibit careless packing, mixed packed bales, water packed bales, and dirt and trash, all of which though practised in small degree, discredit the American bale in for- eign markets and therefore impose a loss upon all American cotton. Ginners Oppose Gin Sampling Feature The gin sampling feature of the law has met with stout re- sistance upon the part of most ginners, because it requires some small trouble and a slight expense, and it has aroused opposition among buyers who are slow to acknowledge that present methods are at fault, and some of them contend that the gin sample lacks the gloss of the packed sample and there- fore does not represent the true value of the cotton. This con- tention is disputed by many expert and trustworthy buyers, and by experts who are not buyers and have no self-interest in the methods of sampling. As a consequence of adverse rep- resentations made by ginners and buyers, many farmers have been persuaded that the gin sample is a vexation and a loss and most cotton in Texas this year has been sold by the old method of bale sampling, though in many of the primary mar- kets the cotton sold is sold altogether upon gin samples, and both farmers and buyers are entirely satisfied. It remains to be seen whether the work of education can save this law from present opposition, or whether the imperfections which are common to every new measure of reform can be overcome in time to prevent reaction which might destroy the law or bring it into disrepute. But I am hopeful that with another year of demonstration our warehouse and gin department will be able- to make satisfactory demonstrations and to adopt rules and methods which will give that degree of popular satisfaction which is necessary for the enforcement of any law. In any case the agitation has been most wholesome and' highly beneficial to producers. It has brought public con- 214 MARKETING AND FARM CREDITS demnation upon many evil practices in the handling of cotton. It has accentuated the necessity for storage for j)rotection and for gradual marketing ; it has shamed and in large degree ar- rested much of the indiscriminate plucking at cotton and com- press yards ; it has brought our bankers and business men to an intelligent appreciation of theii' interests and the country's in- terest in protecting cotton from waste and graft; it has been one of the important factors in causing many cotton ware- houses to be erected where there were none before, and it has had no small influence in reducing the rate of interest charges by banks to, farmers for holding cotton against market depres- sion and congestion. Federal Aid to Marketing We may or may not have in our Texas warehouse and gin statute the state legislation which is needed, but we have made an approach to it, and I believe that we point the general di- rection of reforms that may be accomplished by state legisla- tion. I am not sure that national legislation can accomplish much of anything in respect to marketing, except to sustain, strengthen, and quicken the agencies for the gathering and dis- semination of information. I am far from saying that the government, either federal or state, can do no more than I have indicated, but I am confident that it should do the things that are manifestly needed before it ventures upon experiments. I rather believe, after considerable study and reflection, that our present need is not for new legislation but for education — edu- -^ation of both our statesmen and our producers in economic i;ruth. The government cannot become a selling agent; it -cannot valorize the farmers ' products ; it can only furnish such iservice as in the nature of things the producer himself cannot ■provide. And after that is done, the remainder of the problem is in the hands of the producers, and its solution is to be accom- plished by group action according to the sound principles and the approved practices of cooperative endeavors. And this is another matter requiring education, and very patient and painstaking education at that, for in this matter we encounter the inertia and the habit of generations of American citizens taught from their childhood to exalt individualism and to ra- frain from entangling alliances with their neighbors. Our producers have yet to learn that they can maintain their indi- vidualism, which I hold to be the prime factor in all human CLARENCE OUSLEY 215 progress, and at the same time can cooperate with, their neigh- bors for mutual profit. Why South is Backward I ask the privilege of saying a few words at this moment. From the excellent addresses to which we have listened, it might appear to the uninformed reader of these proceedings that southern farmers in contrast with northern farmers are incapable and untrustworthy, and that southern bankers and merchants in contrast with northern bankers and merchants are unscrupulous usurers and extortioners. I acknowledge that southern agriculture is backward compared with the ag- riculture of the Middle West and the North, but there is a rea- son for it. I beg to remind you that 50 years ago the South was required to pay the penalty of a grievous mistake which both the North and the South had made, in the introduction and maintenance of slave labor. As a consequence of the war between the states, the South was prostrate. The old system of slave labor was destroyed, and there was nothing at hand to take its place. Resources were exhausted and there was no capital and little energy to begin anew. The only basis of credit for operation was the cotton crop we intended to plant. That was the beginning of the crop mortgage system from which we are just now escaping. But our poverty was not the worst of our troubles. We were the victims of a mistaken partisan jiclicy which undertook to set the negroes above us, and we were plundered by carpet-baggers who seized our common- wealths and exploited us for unholy gains. All wise men, North as Veil as South, now deplore that monster political blunder. But for 10 years we were compelled to give our best thought, and in many cases our physical energies, to saving our civilization and for recovering our commonwealths from ignorance and venality. It took us another 10 or 15 years to get in a good humor about it, so that for 20 or 25 years the best thought of the South was given to social and political problems lying at the very base of our civilization. It was not until the Spanish-American war that the people of the United States realized that the South was no longer a rebellious section, but was in spirit and in deed a part of the Union. It was not until the administration of President McKinley that the last of the measures designed to coerce the South disapeared from the federal statutes. Since that time, the South has made 216 MARKETING AND FARM CREDITS wonderful progress iu all economic and industrial undertak- ings. Our agriculture has taken on a new form, and I feel war- ranted iu saying that no section of the world has made such progress as we liave made in tlie last 15 years. I am pleased to testify that our bankers and merchants during the last year or two especially have given themselves devotedly to the study and inauguration of credit reforms. The South last year for the fii*st time in her recent history fed herself, and her cotton was a profitable surplus crop. I beg you to believe that I am not speaking with any sectional feeling. I am only trying to state the truth of history so that you may understand why we have been backward and that we are now alert and moving for- ward. HOW THE TEXAS WAREHOUSE LAW IS ADMINISTRATED Fred W. Davis, Commissioner of Agriculture of Texas. There is no question today quite so important to the j^eople of Texas, and, indeed, of the entire South, as that of markets. The lack of anything like a concrete system cuts with the im- partial precision of a two-edged sword, in that it disarranges, if it does not actually discourage, production, and curtails con- sumption, thereby lowering the standard of living for both producer and consumer. It is not a new question in my state, though it has been the subject of acute agitation for a few years only. The much discussion it has evoked, both by the press and from the rostrum, if it has had the good effect of arousing statewide interest has not until recently succeeded in devising plans which promise to prove practical or satisfactory. I do not consider it my mission here to discuss the marketing as an abstract question, but will state that the first great cause of conditions, in Texas at least, has been the unwillingness of the growers to grant to any agency the necessary authority to successfully establish, build up and maintain trade relations. "Without a clear knowledge of trade conditions as they actually or should exist, face to face with so much speculative crooked- ness, much of which in fact they had been so long the victims, it is not surprising that the growers have hesitated to clothe FRED W. DAVIS 217 their chosen agents with the authority necessary to conduct a successful business. Again, it has been observed that in a ma- jority of instances in which sufficient power has been confided to their agencies it has been done under the stress of enthu- siasm and too much was exjjected in too short a time. Conse- quently, with the enemies of cooperation making flattering re- ports about what they were able to do — things that the trade agencies were unable to do — and with an "I told you so" air discounting cooperation, it was, in a measure at least, natural that the producers became discouraged, grew suspicious, the effort at organized marketing failed, and the growers returned to the same old system permeated with graft, and accepted the same old excuses. All of these efforts, however, are educa- tional and are not wholly lost. Each succeeding effort is usually stronger and more determined than its predecessor and the general public is in the meantime becoming more interested in general conditions and the urgent need of action. In Texas the work of the farmers' institute, the Farmers' Congress, the Farmers' Union, and many other forces, after a few years of active agitation, prepared the public mind for necessary legislation along the line of markets. About a year ago a called or special session of the legislature enacted a warehouse and marketing law, which became operative last June, and superseded an emergency law, previously enacted, which expired by limitation last September. It is well enough to remark right here that the most potential influence in the enactment of this law was the experience of the cotton pro- ducer in 1910, wben he realized approximately 15 cents a pound for his crop — high-water mark for several years — and in 1911, when his vastly larger crop brought scarcely more than half that price, netting him for his output much less than he re- ceived for his previous smaller crop. Subsequent experience proved that it was not nearly so much overproduction during this last-mentioned year as it was over-rapid marketing that brought about this collapse of price, and yet it was apparent that unless some radical change in the system of marketing was devised the experience of 1911 would be repeated and ag- gravated every year an average crop was produced. Tenants Complicate Problem The vast majority of Texas farmers, and probably farmers throughout the entire South, belong to the tenant-class. They are share-cropi:ers, croppers-on-credit or an advances by the 218 MARKETING AND FARM CREDITS landlord, banker or merehant. Avho must be paid as soon as the cotton can be put on the market. The problem involved Avas the tinaneing of the farmer on a plan by whieh his output eould be kept off a rush-market and fed to a demandiug-market. The warehouse and marketing law was the solution sought, and if you will bear Avith me for a few minutes I will endeavor to outline its provisions. The purpose of the Texas law, as stated in its enacting clause, is "to provide a system of state bonded warehouses and to afford a method of cooperative marketing for those en- gaged in the production of farm and ranch properties." Briefly stated, the law, which by its terms is to be adminis- tered by a board of supervisors comprising the governor, commisioner of banking, and commissioner of agriculture, sal- aried in their ofHcial capacities and therefore drawing no pay as supervisors, authorizes the charter of corporations which '"shall have the right to erect, pui-chase or lease and to operate warehouses, buildings, elevators, storage tanks, silos and such other places of storage and security as may be necessary for the storage, gradmg, weighing and classiticatiou of cotton, wool, wheat, corn, rice, alfalfa, fruit, silage and other farm, orchard and ranch products, and all weights, grades and classes shall be made in accordance with the standard of weights, grades and classes prescribed by law and by the board of warehouse supervisors.'* Enumerating the powers and duties of the board of super- visors it is provided that they shall •" control the administra- tion of this act and shall formulate and enforce necessary rules and regulations to eft'ectuate" its purposes. Among the powers stipulated is that of employing such experts, exaunn- ei*s, gin inspectors and clerks and any other needed service in carrying out the purposes of the law: and to a certain extent the board and the examiners appointed by it are clothed with inquisitory powers, being authorized to administer oaths. Charges for storage are made subject to limitation and regu- lation by the board of supervisors. Fixing Grade Responsibility Upon Ginners "With reference to public gins, all such, whether operated by individuals, partnerships, joint stock companies or cor- porations, are charged by law with a public use and must se- cure license from the board of supervisors to operate as such. FRED W, DAVIS 219 Every such gin is required, under penalties and a performance bond executed concurrently with the application for license, to take from every bale ginned by it 3 fair, true and correct sam- ples of cotton, 1 to be filed and preserved by it, and the other 2 delivered to the owner of the cotton, who, if he store the bale in the bonded warehouse, must deliver one to the ware- house manager to be preserved by him. The fairness and cor- rectness of these samples, guaranteed by the bond referred to above, is to be further certified by the sworn affidavit. Every bale ginned by a public pinner must be securely wrapped in a prescribed grade of bagging so as to completely cover the cot- ton, and each bale so permanently marked as to show by what ginner or gin it was ginned. If the owner stores his cotton in a bonded warehouse he must be given, as he demands, a negotiable or a non-negotia- ble receipt, both of which are specifically described. The re- ceipt must show on its reverse side all liens or encumbrances, if any, on the cotton. The bonded warehouse is required by the law to carry am- ple solvent insurance to cover all its storage. The bond of the Avarehouse is required to be conditioned that the corporation operating it will observe and obey all pro- visions of the law, and such other laws as mtay be enacted with reference to such warehouse, and guarantees that the said cor- poration will exercise ordinary care in the storage or sale (if sale is committed to it) of the product, and guarantees also the classification, weight, grades and measures made by it. Warehouses Are Audited by State Authorities The law also requires of the board of supervisors the exer- cise of strict supervision over such bonded warehouses and also semi-annual, and such other periodic examinations as it may deem proper, into the operations of all warehouse corpora- tions. Any number of persons not less than 3, who shall be resident citizens of Texas, may apply to the board for a permit to form a corporation — conforming the application to formal conditions prescribed by the law. Such permit being granted, any number of persons, not less than 10, at least 60 per cent of whom shall be engaged in agriculture, horticulture or stock- raising as a business, and no less than three-fourths of whom shall be resident citizens of Texas, may apply to the board of 220 MARKETING AND FARM CREDITS supervisors for a charter as public warehouseman. That appli- cation must contain the name of the proposed corporation ; the place or places where its business is to be transacted, and the location of its principal business office ; the purpose for which, it is formed; the term for which it is to exist; the number of its directors, -which shall not be less than 3 nor more than 25, and the names and residence of those selected for the first year; the amount of capital stock; and the application must be accompanied by the affidavit of 3 of such applicants that the capital stock is actually paid in, which capital stock shall in no instance be less than $1,000 divided into shares of $5. If any of same has been paid in other than cash, then a de- tailed statement as to the kind, character and value of the property sihall be made a part of the affidavit. Such corpora- tions are required by law to organize on the ''one-man, one- vote" basis in stockholders elections. Such application complying with these provisions and be- ing approved by the board, the secretary of state, on payment to him of a fee of $25, shall issue a charter, on which the com- missioner of banking shall issue a certificate authorizing such corporation to do business until the last day of March of the following year. In addition to the general powers of the board before set out, it is specifically required that whenever it shall have rea- son to believe that the capital stock of any corporation sub- ject to this law^ has become impaired, it shall require such cor- poration to make good the deficiency. It is authorized to ex- amine into and supervise the corporation's manner or method of doing business; require a compliance with laws and regula- tions, and if a corporation is found to be insolvent, or that its continuance in business will seriously jeopardize its cred- itors, it is made the board's duty to close such corporation and take charge of its eflPects as a preliminary to proceedings by the attorney general for the protection of creditors. The law contains many other provisions, but these are about all that are material to the purposes of this discussion. The products for the handling of which the organization of bonded warehouses is authorized includes, as has been noted, all of those of the farm, orchard or livestock industry, but it is deemed sufficient to discuss only cotton in this connection, as the efforts of the board have been thus far principally directed to the handling of that commodity. All other commodities en- titled to and receiving storage are entitled to the same service,. FRED W. DAVIS 221 -care, protection, classification, grading, weight or measure as the case may be. It has, however, issued since it came into existence a semi-monthly bulletin in which has been listed, free of charge, the various productions of the farms for sale or ex- change, and the articles desired to purchase by other farmers — a modest effort to bring buyer and seller together. With its main provisions thus set out, it will be seen that the object of the law is to afford the farmer the nucleus of a con- crete cooperative marketing system — an agency whereby he can escape the sacrifice of his produce — his cotton, in illustra- tion — by practically compulsory sale in order to meet his debts incurred in the process of production. Now, with the cotton crop made, the problem is, if it is a crop in excess of the demand, to keep the surplus off the mar- \et and in the equitable control of the producer, until it will bring its intrinsic value, and it must be worked out with the debtor-owner. His problem is to get the money with which "to pay his debts without sacrificing his cotton. Will Warehousing- Equalise Cotton Marketing? Are these two things possible under the system of state con- trolled bonded warehouses provided by the state of Texas. Answering frankly, I can only say that it is yet but an experi- ment of a few months trial, but I can give it as my opinion that if it receives the support and cooperation of the farmers of Texas, and equally efficient systems are adopted by the other •cotton states and they are supported by their farmers, tjiey most assuredly are. For the system, if it works out as designed, will do these things: It will eliminate practically every source of the farmers' waste. It will secure for the owner the proper ginning and baling. It will secure for the owner the true grading. It will prevent country and other damage to the cotton. It will provide the owner with insurance. And, finally, to enable the distressed owner to hold his cotton, it provides him with a uniform warehouse receipt, which, (if he desires it) is invested with the character of an "at sight" negotiable security, and on which he can raise money in any of the commercial centers of the country. 222 MARKETING AND FARM CREDITS In a nutshell, the tenant farmer — or any other cotton owner — under this system gets the benefit of regulated ginning, baling, sampling and grading in any event, and, besides the other ad- vantages named, a warehouse receipt he can negotiate at once as security for money with which to pay his debts, until, in a mar- ket fed to meet the exact requirements of the spinners, he can sell his stored cotton for its intrinsic value. The federal reserve banks, according to the secretary of the- treasury, stand ready to take our warehouse receipts as good se- curity at a low rate of interest, and our bankers generallj^ since this agitation first began, have been practically a unit in declar- ing that they have ample money, and are more than willing ta do the same thing. State Aid in Organizing Cooperatives The efi^orts of the board have been, as stated, confined princi- pally to the handling of cotton, although it is empowered to or- ganize warehouses for tihe handling of all farm, orchard and ranch products. The system went into operation in June, and the budget for this fiscal year provides for 2 managers, a chief clerk, a bookkeeper, a bulletin clerk, and an assistant, two steno- graphers, 4 warehouse examiners, and 6 gin inspectors. All traveling expenses, w^hen the travel is on warehouse business, are paid by the state. Since the law went into effect, 4091 gins have been licensed and about 2,000 have been inspected. We have found that the ginners, with few exceptions, notwithstanding an organized op- position by a few of them, have obeyed the law. We have char- tered 56 warehouse and marketing associations, and 114 w^are- houses are operating under the law. I am free to confess that our progress in the organization of w^arehouse and marketing associations has not reached our hopes, though it may be said to fairly meet reasonable expectations in view of all the attendant circumstances. It will be well for those whose first impression will incline them to challenge the record as unpromising, to reflect that it was only 3 months ago that the law came into full operation by superseding the emergency act; entirely too short a time in which to test the merits of any great enterprise under the most favorable condi- tions. Again, from the moment the law was mooted it encoun- tered the determined opposition of a most influential class — the ginners — who imagined it impossible to construct a law that FRED Wl DAVIS 223 would not seriously threaten their interests. But more than all else that operated to retard the organization of these institutions was the wholly unlooked for high price of cotton and cottonseed in the open market, resulting from the short crop — the shortest apparently since 1910 — which brought the curb demand to the supply. Changing a Social Order The experiment, as shown, is yet in the very first stages of its test, in its earliest infancy, and it would be unreasonable to ex- pect one involving such vast interests to blossom into a huge suc- cess with the first season. In the first place, the success of the plan depended, as it yet depends, upon the cooperation of the vocations — not only of the farmers, but of the bankers, mer- chants, and business men generally — and yet, it contemplates not only a radical change in a long established and crude, or rather arbitrary, marketing system, but the complete subversion of that system, and the erection upon its ruins of one that will be just alike to the producer and the consumer. Three years instead of the three months of its full operation, would be a more reasonable time in which to work out the problems involved. It is true that many ginners have yielded a reluctant obedience to the law, protesting their opposition to it, and openly sympa- thizing with the action of the individual members who took the constitutionality of the law into the courts.* Their objections, of course, were based altogether upon the regulations and restric- tions imposed upon their operation by the law. For example, they oppose the sampling provision of the law, and yet how the honest ginner is to be affected by it, no candid man who studies the requirement can possibly conceive. Surely the farmer, who must necessarily become the customer of the ginner, if the ginner is to have custom, is entitled to have his cotton honestly ginned, graded, and baled, and the gin samp- ling is the most vital thing recommended by government and other experts as the essential prerequisite to true grading. No honest ginner, so far as either the farmer or subsequent pur- chaser can understand, can reasonably object to certifying the samples as representative and fair, and that in the process of baling no foreign substance was introduced into the bale. The proper baling required by the law is of a certain class of bag- * Editor's Note: Since this paper was read the Texas Supreme Court has sustained the law in all its essentials. 224 MARKETING AND FARM CREDITS ging, to cover the entire bale, and it is not possible to under- stand how the honest ginner is to be affected if he computes but the honest profit on the cost of such bagging against the owner of the cotton. However, in referring to the opposition of the ginners in part explanation of why the process of organization has not been more rapid, I am not called upon to argue the mer- its of the ginners' objections to the law. Whether tenable or not, these and other objections were urged, and finally embraced in a legal proceeding challenging the constitutionality of the law. It can be readily perceived that such opposition must exert a a great influence on the public mind. More than that, the bare possibility of the law being held defective by the courts was bound to have a great influence in restraining willing parties from embarking in a warehouse business that might be neutral- ized by the decision of the courts. Another real reason for objecting to the law may be imagined from the fact that the ginners could easily discern the loss of a hitherto source of profit in the success of the proposed system. If a scheme can be devised by which the distressed farmer can hold his cotton, he can, by the same means, hold his cottonseed. Now, many of the ginners of the state — not all of course — have found a source of great profit in acquiring the seed at distress prices, after the ginning. What the Cotton Buyer Thinks About It Opposition has been encountered from another equally in- terested class — the financially interested '^ cotton-buyer" — the gentleman who stands on the curb and depresses the price of the staple to the extent of his ability, while he slashes the bale right and left for samples on which to make his own grading or classification, which samples are rebaled and sold. This source of profit amounts to millions annually. The occupa- tion of this "middleman" will disappear with the perfection of a cooperative marketing system, and hence his opposition is neither remarkable nor surprising. By far the most influential factor in retarding the work of organization, as mentioned before, is the unlooked for high prices of cotton and the unpreeedentedly high prices of cotton- seed that have ruled since the passage of the law. They dis- counted the present necessity of the warehouse, so far at least as concerned the first marketings of cotton. Almost coincident with the opening of the new season the "upward movement" FRED W. DAVIS ' 225 began, cotton soon soared to a compensatory price, and, by the time the season was half advanced it had almost touched, on many of the curbs of Texas the record figures of 1910. As a matter of fact, counting the phenomenal price he got for his cottonseed, the farmer realized on his output a better price than he got in 1910. So, at first blush it would appear that, so far as it might be used as a cotton marketing agency is con- cerned, the warehouse was little needed this year, and those interested in cotton took less interest in warehouse organiza- tion. Now, while undoubtedly the primary cause of high prices was the apparent certainty that the cotton yield would be cut to possibly low-water mark, I contend that the yet incom- pletely organized system bore a considerable part in their realization. As a means to that end it had most to do with creating the sentiment in favor of holding cotton for high prices, and this was bound to have a great effect upon indus- tries requiring cotton and those requiring the seed in the man- ufacture of by-products. To warehouse a considerable part of an undercrop would, perhaps, force fancy prices — something the manufacturer would avoid at all hazards. Accordingly I maintain that the warehouse system, by bearing a conspicuous part in forcing the at least compensatory price of cotton, has sustained its first test and demonstrated its utility as a market- ing agency. I have discussed the warehouse from the standpoint of cot- ton because, as I said, the board has confined its efforts prin- cipally to the handling of cotton. Is Cotton Marketing- Solved? Cotton should be the easiest of all crops to successfully market. When properly ginned and wrapped it is non-perish- able, if kept from the weather. Any amount of it can be put under one roof and it is not harmed either by excessive heat or excessive cold. It can therefore be put upon the market as the consuming world may demand. Another advantage in sell- ing cotton is the large unit value — the bale. One unit equals in value many units of corn and other agricultural commodi- ties. These advantages, coupled with the fact that it is the best collateral on earth, the South has but to find a means of connecting the abuses of the cotton trade to become the most favored country in the world. No other monej^ crop can com- 15— M. F. C. 226 MARKETING AND FARM CREDITS pare Avith it and it enters into all the fundaaneutal necessities and pleasures of life. It covers prince and pauper, feeds the hungry, heals the afflicted. It is very important as a food, medicine, clothing, photographing, printing. It is an absolute necessity in times of peace and war. This is the commodity in Avhich the South has a practical monopoly. AVe have but to reap what we sow and not leave it to others. I may add that though the warehouse is designed for the ac- commodation of other farm products, the tiine has not yet come to consider it in that connection, though the experience of this year proves that that time is nearer at hand than most people think. Though we have a small crop of cotton — but a big priced one — we have big crops of everything else, and diversi- lication has demonstrated that we can raise in prodigal abund- ance everything we have been importing from the other states — com, wheat, oats, barley — and many things most of the other states can not raise. "We have at last aroused our farmers to intensified and diversified farming, and the time is not far distant when with a perfected marketing system we will have all other states as far "skinned" in agriculture as we have in square miles, climates and varieties of soils and resources. WHAT THE NATIONAL FARMERS' UNION IS DOING Joe E. Edmunpsox National Lecturer, Texas Division of The Farmers' Educational and Co- operative Union of America It is a disappointment to me and I am sure it will be to others, that ^Ir. Barrett, the national president of our union, was un- able to be present. Mr. Barrett is more familiar with the na- tional aspect of the organization under discussion than I am. Perhaps I am more familiar than Mr. Barrett so far as the Texas field is concerned. I have a general knowledge of what the or- ganization has done and what it has tried to do and what it hopes to do throughout the country. Hence I would say that I feel I shall come far short, of discussing this subject as intelligently as Mi'. Barrett would do were he here. Before the Fanuei-s* Union came into existence as an organiza- tion the average farmer of the South was verj^ much dissatisfied JOE E. EDMUNDSON 227 with his condition in life. He realized that he had not been getting the value of what he produced. He felt that he was not responsible for this condition and was much inclined to lay the blame at someone else's door. He realized that he and his family would have to labor the entire year to grow a crop of cotton, and that he would have to sell this cotton crop immedi- ately upon gathering and often at a very low price. In fact, this type of man was unable to supply himself and family with their necessary wants and comforts. His children were not be- ing educated as they should be and their prospects in life were none too good. Such a condition led to a deep seated discon- tent. The great majority of the farmers realized, however, that they needed some form of cooperation, and they began to realize that in order to do what they would have to do they must or- ganize themselves. This led to the birth of the Farmers ' Union. After this organization came into existence we began to study the real condition of the farmer. We found that the farmer him- self is perhaps as much to blame as any other individual. So the organization of the farmers was begun in order to protect them. We have undertaken not only to conduct ourselves as mem- bers of that organization along the better lines by using better methods in preparing our products for market, but we have un- dertaken to do something that would affect the market itself. Giving An Impetus to Standardization It was the Farmers' Union that first discussed and passed resolutions looking toward the proper handling of cotton. The cutting of the cotton bale is one of the evils in the South. This cutting is a great waste. It is the source of what is called in the South ''the town crop". The buyers take handfuls of the cotton for sampling and later resell these samples in bales. This loss alone must total a million dollars every year to the southern people. The practice of cutting the bale also leads to much damage in the quality of the cotton baled, and makes a very ugly appearing product when offered for sale. The Farmers^ Union brought this matter to the attention of the public and conducted an agitation for reform. We have now a law in Texas known as The Warehouse and Marketing Law, which looks toward a correction of the evil and provides for adequate storage, and also affords a bonded security basis for cotton loans. 228 MARKETING AND FARM CREDITS AVe have also advocated the principle of a warehouse and con- tinual uiarketiuir of the cotton. AVe believe that is the only sensible way by which we could ever hope to have any say-so as to the price which cotton should bring. Take the world, and throw that commodity upon the world as a matter of fact, within 3 or 4 montlis time and it is unnecessary for me to sjiy the effect of that upon the connuunity. Hence, we have gone into this. We are advocating the erection and operation of warehouses for storing the cotton pnxluet. in so .far as the South is concerned. We have a number of warehouses conducted civ operatively. and it is eminently satisfactory in many cases. A Voice: You have more tlian 100. Air. Ednuiudson : Up until a few were destroyed by fire, we had something over 100. Mr. McCarthy: Is that in Texas? Mr. Edntundson : Yes. that is in Texas. Mr. :\lc Ca rt liy : Y on ha d 2 1 1 . Mr. Ednmndsou: Y'es. but I am not so familiar with the other Southern States, and that is why I regretted the fact that Air. Barrett was not here to take up this matter with you him- self. Mr. McCarthy : Now, in Texas does the warehouse contribute as a warehouse to the central organization? Mr. Edmuudsou : The warehouse itself does not. but the members of the organization, and who constructed the ware- houses contribute to the Central Organization. Mr. McCai'thy : We have this ditHculty in Wisconsin, that after the organization forms a creamery, then the men in the creamery get away. They don't belong to the Central Organiza- tion. Air. Ednmndsou : I see. Air. AlcCarthy : Do you have that coudiiiou there? All'. Edmundson: Y'es, we have had some trouble in Texas. AYe have had souie diftieulty along that line, but not as nmch as you people have had. The Chairman: Alay I ask you if your organization has so- cial advantages as well as otherwise ? Air. Edumndson : Y'es. it has the social feature. The Chairman: I ask you that because the Grain Men's As- sociations have a tendency to be largely social. All". Edmundson : AYell, that is not the ease here. JOE E. EDMUNDSON 229^ Cotton Grading Schools Mr. McCartihy : ''l"'h(3re are a lot of farmers belong-ing to the organizations in Wisconsin for that purpose. Now you just rnentioruid that you had organized a school for grading cotton. Will you kindly tell us just how you organized that, and just how you worked it out. 'J'^here are lots of things in the stand- ardization and grading that our society has nx)t taken hold of yet. I wish you would tell me just exactly what you have done along that line. Mr. Edmundson: Attention has been called to the cotton growing centers. The average farmer of the South doesn't know, or didn't know anything about the grading of cotton, and hence the Farmers' Union conceived the idea while Mr. Davis was one of the officials at that time. That school was organized — it was decided upon by the state officials of the organization at that time. Th(!y had throughout the jurisdiction of the membership, sent word or let it be known that a cotton grading school would be con- ducted and taught in the city of Dallas, Texas, and that the tui- tion for the attendance would be $15, I believe. That tuition went into a fund to defray the expense of the school, and pay the teachers, and so forth, and purchase samples together with cov- ering all the exp(;nses incidental to the school, etc. There was the tuition of $15 each for each in attendance. We were gratified by the number in attendance, many of them were farmer boys and many of them almost middle aged, and some beyond that. Expansion of Instruction in Grades of Cotton There was so much satisfaction in that that the spirit grew and spread throughout the state and they found that one school could not very well meet the requirements and they commenced to estab- lish other schools and other schools were organized in the same manner. Others are being conducted at Paris, Texas, Big Springs, at Ft. Worth, Houston, and at various other places. They have employed extra teachers in order to be in a position to teach each one that attended that growing school. They found that $15 tuition was just about enough to cover the expenses, inci- dent to the school, and employ teachers, etc. This having met with considerable approval, and the general public beginning to see the necessity of it, the colleges took up the 230 MARKETING AND FARM CREDITS teaching of the grading of the cotton, in the schools, which had some effect. However, the Farmers' Union, I believe, if I am not mistaken, was the first organization, the first body of men that ever under- took anything of that kind. Mr. McCarthy : What year did you start that ? Mr. Edmundson : The year, 1905. Mr. McCarthy : And how long a session each year. Mr. Edmundson : They generally ran in for about 60 days, I believe. Mr. McCarthy : Sixty days, did you say ? Mr. Edmundson: Yes, 60 days. Mr. Davis : You might also state, in that connection that the Union was instrumental in securing the grading of the cotton. Mr. Edmundson: Yes. I want to state that the Parmer's Union was really the pioneer or one of the pioneers in bringing about the influence that induced the United States Department of Agriculture to establish those samples of grading. Mr. Davis : That thought came about in our schools, you know. Mr. Edmundson : Yes. It came out in our schools. Cooperative Gins Mr. McCarthy : Mr. Ousley mentioned the fact that there was some cooperative ginning? Mr. Edmundson : Oh yes, sir. We have some cooperative gins there. Mr. Ousley : In Ellis county, to which I alluded, there are 27 cooperative gins, owned by these people. They make very hand- some profits and are owned by successful and thrifty business men, and they are men that belong to the Farmers ' Union — several of them, and others that are not members of the Union. There arc Farmers ' Union gins and there are farmers ' gins that are not members of the Union. Mr. Davis : Now, in 1906 or 1907 one company came to the ex- ecutive committee of the Farmers ' Union and they understood that we were already conducting cooperative gins. They proposed to take one of our men out of the business department and pay him and gave a certain per cent to the organization with the under- standing that they would furnish the gin at the same price as they sold it to the others. And that was the rule for 2 years. Mr. Edmundson: This had its organization after the Union was organized, and after they had organized that department. JOE E. EDMUNDSON 231 Now, Col. Ousley, they have a number of these in the western part of Texas. Mr. Ousley : And you might add, further, that there are somo cooperative cotton oil mills. Mr. Edmundson: Yes, that is true. At Wichita Falls the Farmers ' Union owns cooperatively the gin and the oil mill, and all those things. Mr. McCarthy : Are there any other attempts of your organi- zation to teach the grading of their products ? Mr. Edmundson : There has been but very little done in any other line. This is simply because cotton is the principal crop^ In fact, it is about the only crop that the farmer grows for grading purposes. Mr. Ousley : I have in my department an appropriation of $2,000 a year for that purpose. It is a very modest sum, for that purpose ; but we use what we have. Purchasing Supplies Jointly Mr. McCarthy : Now, I would like to ask whether the local or- ganizations, are doing anything in furnishing the farmers with their agricultural requirements, the machinery and the seed, and the fertilizer, etc., necessary to get that crop? I would take it from what I have learned that the farmer is a manufacturer. If he is a manufacturer, he is entitled to buy his agricultural re- quirements at the wlholesale price. I simply want to know whether you have gone into that at all or not. Mr. Edmundson : In some of the localities, the organization has taken that matter up somewhat, but as a general proposition, they contented themselves with discussing the marketing side, because that was the big problem and they have not solved it yet. Mr. McCarthy : But, how would you say about this, — that if that is the fair propositiop and we are willing to accept that, isn 't a dollar saved and in that way just as good as a dollar saved in any other way? Mr. Edmundson : Absolutely. Mr. McCarthy : It is just as good and it is worth one hundred cents on the dollar? Mr. Edmundson: Yes. There is still a great field to be worked on that line. Mr. Ousley: In the Southeast, the Farmers' Union principle activity is adapted to fertilizer. 232 MARKETING AND FARM CREDITS Mr. Edmundsou : It is also true with a good many others who are not of the Farmers' Union. I would like to make a remark in that connection. It is a mere matter of opinion but I think it worth while to state that there is a good deal of this education. I did not think that the farmer is entitled to wholesale prices in this way. I simply raise the question as to whether we had bet- ter discuss that. I\Ir. Lyman : You arouse antagonism, of course. Mr. Ousley: Yes you do. I have not encouraged that.' I thought it best to promote first, the selling end of it with the farmer, and then, when we get to that, it will be all right. Mr. Slocum (Mchigan). Twenty one years ago we organized a society in Michigan, and today we have 7,000 members in that organization. Now, I want to say that we make a line of de- marcation between the men — between the farmer and the others. The elevator and all that pertains to the farm product belongs to the farmer. We have, in the past 8 years, divided our work. We have devoted our work to solving the problem of the farmers of Michigan, This last year, we had over $8,000,000 worth of product. Now, your question that you ask, with reference to fertilizer, — I think you will find that Armour & Company, here in Chicago, will tell you that Michigan is the largest consumer of fertilizer that they have. It is all made by our own formulas. Several years ago we got a law through the legislature to estab- lish a faetoiy at Jackson, and we have made the Jackson state prison self-sustaining. This last year they have turned over a profit and it has paid all its own expenses. Everything that goes to the farm production should be bought in large lots by the farmers themselves, and as the little town learns that the town can successfully do business — as it learns that it can be successful only so long as the farmers who farm are doing so at a profit, they will join with us. The Chairman : How did you find the fertilizer men taking up that proposition? Mr. Slocum : How did we find it ? The Chairman : Yes, are they antagonistic to it ? Mr. Slocum : Not at all. When they begin to learn that you can give them a bigger order than the other fellows. The Chairman : I see. Mr. Slocum : We buy from Armour & Company and have each our own brands. I think now, — I presume that we have 25 ferti- JOE E. EDMUNDSON 233: lizer men from all over the United States coming to us to get our business, and I want to say that they are glad to get it. The Chairman : Well, you buy_ the chemicals and manufac- ture it according to your own ideas and according to your own tormula. Mr. Slocum : Yes, as to the requirements and needs of our soil. Different sections need different stuff, of course. Mr. Black: They speak of owning these gins cooperatively. Do they mean that strictly, or is that a stock word ? Mr. Ousley : Not altogether, Mr. Black. A few of these ware- houses and gins are on a mutual plan. Many of those are nov\r, however. They are cooperative, only in the sense of there being groups of farmers working together. Mr. Black : I want to say one word more. I have been a member of the Farmers' Union, and we are interested in the buy- ing of sacks. We probably buy a million sacks a year. We pro- ceed td have a pool at about the time we want to buy, and each one puts down absolutely what he will take, and we get our sacks at a remarkably low figure, just by doing that. Now I see that that cotton is put up in Jute there, and the presi- dent of the State Farmers ' Union, with two of the executive com- mittee, went down to Texas for the purpose of investigating cot- ton bags, and with a view to putting our corn in cotton bags, in- stead of jute, and now I am surprised to see the cotton bales put up in these jute bags. Mr. Ousley : Well, jute is cheaper. Mr. Ousley : Well, that has been agitated a great deal. The use of the cotton bag. Under the Act, the cotton bag is prescribed. That was put in there so that if the opportunity ever presented itself, when it seemed possible to use cotton bagging, it would be done, but this year they held cotton bagging at a higher value than at others. Usually, heretofore, they have been sold at around three or four, when cotton was worth twelve. All the low grade cotton came into demand this year. 234 MARKETING AND FARM CREDITS WAREHOUSES AS AFFECTING THE PRO- DUCTION, FINANCING AND MARKET- ING OF COTTON Ernest ]\1 Loeb President of The Board of Commissioners of The Port of New Orleans Of the agricultural products of the United States, cotton ranks •second in value, being exceeded only by the value of the corn crop. Corn is produced in every state of the Union while cot- ton is confined, with the exception of a very few bales, to the 13 Southern states. The center of this production in the United States is now near the point of the state boundaries of the states of Louisiana, Mississippi and Arkansas, located on the Mississippi River, approximately 225 miles in a radial line from New Orleans. Analogous distances of Galveston and Savannah are respectively 360 and 575 miles. In the process of marketing of cotton, the necessity for proper warehouse facilities begins from the time the lint is picked in the field and continues until it is delivered to the mill. Bulle- tin No. 227 of the United States Department of Agriculture esti- mates that in normal years there is a loss of from $30,000,000 to $75,000,000 from what is generally, though incorrectly, called "Country Damage", from which it will be seen that there is an ample need of adequate warehousing system for cotton similar to the present warehouses or elevators used in the marketing of the enormous grain crops of the country. In any system of warehousing, the producer is concerned only in the physical pro- tection of the cotton until it is delivered at the primary market, usually, as in the ease of cotton, a concentration and classifica- tion point. Up to this time the cotton has been under the control of the farmer and in spite of the fact that the southern cotton farmer has a virtual monopoly in the production of the great staple ne- cessity, which clothes a large part of the world, yet he has not profited by such situation as other monopolists do, but has on the contrary, managed to eke out of his monopoly a precarious and dependent living. The faulty marketing conditions under which the farmers have been laboring are that the crop which ERNEST M. LOEB 235 1;he mills require 12 months to consume, is sold by the producer within a few months. It is quite evident that if cotton continues to be forced on the market within a comparatively few months of each year, as at present there will not only be a material loss to the farmer, but the various branches of trade must be taxed in the effort to handle the crop. Why Cotton Should Be Warehoused It is particularly true that many of the farmers as well as dealers, suffer a great loss because they do not understand the importance of protecting and conserving cotton while it is wait- ing a fair market. Corn, wheat, hay, sugar, tobacco and all other products of the farm, are carefully and systematiclly prepared, inspected, graded and certified in accordance with es- tablished rules based upon sound and economic business methods. No agricultural product is less subject to deterioration and damage from exposure to the elements than cotton. As a di- rect result of these facts, no similar product is less protected from damage in its movement from producer to consumer. The enormous economic loss resulting to the Southern States from the present methods of handling cotton is receiving the attention not only of the farmers, the men of the cotton trade in general and the bankers, but of the state governments. A number of the Southern States have recently passed or are about to pass, warehousing laws designed to protect cotton from physical damage and at the same time to so safe-guard the cot- ton so as to render it sound collateral upon which the farmer can obtain money at a low interest rate. What Warehousing: Might Do for Cotton The value of a system of warehouses would have been ines- timable during the cotton panic of last year. As has been indi- cated, the functions of a warehouse are : First : It offers temporary storage facilities when the person owning the product is not in a position to store it himself. In the cotton business in normal years, this will cover the period from the time the cotton is ginned until it is sold by the farmer. It also provides the cotton dealer with a place in which to store his cotton from the time it is purchased until it is shipped. 236 MARKETING AND FARM CREDITS Second: The warehouse should furnish the owner of the- stored product a negotiable receipt. This receipt should show definitely what product is stored, the ownership, the amount of goods, the kind or grade, the condition, and the location of the warehouse. It should also show that the stored products are properly protected by insiu-anee. The legal holder of such a receipt would be protected as fully as if he had the goods securely locked in his own vault. Third: The warehouse provides a reservoir for surplus dur- ing years of over-production or ^ihen market conditions are very unsatisfactory. When there is a surplus of any product there should be some way of saving it until there is a better demand for it. In connection with the value of a negotiable warehouse receipt it should be said that proper state laws covering the issuance of the receipts are necessary. In order to be of greatest value the warehouse receipts should show beyond question the ownership of the product stored, and this accuracy cannot be accomplished unless the states in which the warehouse companies operate have laws that properly guard the issuance of receipts. The laws of Louisiana and the form of cotton warehouse receipt issued by this state, embody these important requirements. If the laAvs of the state in which the warehouse is located are such as to throw any cloud upon the title of the goods covered by the receipt, the receipt immediately becomes almost worth- less as collateral and defeats any efforts to borrow money at cheap rates from outside sources. In addition to enacting such laws as will guarantee effectively the integrity of warehouse receipts, it seems advisable for all states to adopt a law of uniform warehouse receipts. This law is now in effect in many of the states and has been approved- by the American Warehousemen's Association, and the Ameri- can Bankers' Association, and the American Bar Association, as being the best form in which laws can be made to protect both the owner of the goods and the lender of the *money against the receipts covering such goods. Why the Faxmer Must SeU Generally when the farmer has gathered his crop, it becomes necessary for him to turn it into money in order to 'pay his merchants who have probably advanced him on the crop, and who in turn have their obligations to fulfill. To obtain such ERNEST M. LOEB 237 necessary funds the cotton or a sufficient amount, must either be utilized as the basis of a loan or else be sold. The country today has generally no adequate and inexpensive warehousing facilities which issue dependable or widely current certificates of ownership. The farmer is therefore not able to realize the necessary funds with the cotton as a basis for security, or if able to do so, he has to pay so high a rate of charges and in- terest that the transaction is unprofitable. The result is that during the fall months when the farmer is compelled to sell his cotton, the supply exceeds the demand and as a result the price usually falls below the real value of the commodity. As has been pointed out, the remedy for this condition is a system of inexpensive warehouses operating under proper state laws, guaranteeing the certificate of ownership and if neces- sary, guaranteeing the grade and weight of each individual bale, as shown on the receipt. With such a receipt, the farmer can, with the impetus which the federal reserve law has given to banking facilities throughout the South and elsewhere, bor- row money necessary to meet his obligations, and, equally im- portant, borrow it at a low interest rate. While cotton is recognized as the best collateral, it will not be accepted by business men except under proper conditions. The bankers throughout the South generally, state definitely that they will advance funds on it readily and that it is pre- ferred to real estate as security. The difficulty with the farmer is that with the present credit sj^stem under Avhich he operates, he has mortgaged his crop before it is made, and usually at exorbitant rates of interest, not only for the money advanced but for supplies and material necessary in the making of the crop. While it is difficult to remedy this situation, it would be greatly improved by the establishing of a system of warehouses and encouraging farmers to store such cotton as is not abso- lutely necessary to settle their accounts. Unfortunately, the merchant is almost as helpless as the farmer. He advances supplies while expecting cotton to bring a fairly good price. In most cases he has purchased his stock on credit and cannot meet his own obligations until the farm- ers'^ accounts are paid. The effect of these conditions and the lack of warehousing facilities was reflected in the price of cotton during the latter fpart of 1914 when many farmers refused to sell their cotton with the result that the merchants, with the unusually low 238 MARKETING AND FARM CREDITS price prevailing, could not afford to close out the farmer to whom he advanced, for the reason that if the cotton was thrown on the market it would not have brought enough to settle his account. Whait Louisiana Has Done The state of Louisiana while it has not as yet passed a public warehouse law, has, however, provided through an agency of the state, — the Board of Commissioners of the Port of New Orleans,— at an expenditure of approximately $3,500,000, a state-owned and operated warehouse, which under a constitu- tional amendment to the laws of the state, can issue state re- ceipts for the cotton stored and which upon the payment of a slight fee can be certified to as to condition, grade and weight of the cotton, by the New Orleans Cotton Exchange. This warehouse is available to the farmers, not only of Louis- iana, but due to its advantageous location at the second port of the United States, offers inducements which more than com- pensate the slight increase in transportation costs that might be due to equivalent costs from any location to a nearer port. In any warehouse system storage costs must be a minimum ;■ insurance costs as low as consistent with economy of construc- tion; the financial facilities and responsibility of the ware- houses such that money can be obtained on the cotton at low interest rates. Owing to the permanency of production and consumption, locations, as indicated by the recent study of the cotton busi- ness made in connection with the erection of the publicly ownecf and operated modern warehouse at New Orleans, it is conser- vative to assume that the center of gravity of the business as a whole will not materially change, except as to location of mar- keting and routes of transportation. Because of the ramifica- tions of the cotton and other market connections of New Or- leans throughout the Mississippi valley, and abroad, it be- comes possible to handle and dispose of a larger number of grades of cotton in the New Orleans market, than in other markets of the Gulf coast and interior points. Manufacturing: Turned Southward The tendency of cotton manufacture in the United States is. toward the South, — in the world it is toward Japan, China and India. Such changes as have occurred or are now in process. iERNEST M. LOEB 239 are strengthening New Orleans both as a spot and future cot- ton market. Unmanufactured cotton is the largest item of ex- port of the United States, amounting in value for the year end- ing June 30th, 1914, to $610,475,301. This merchandise now moves over routes of least resistance, principally along the North and South lines of transportation, terminating at the port cities such as New Orleans, Galveston and Savannah. In the present general routine of marketing cotton, the ten- dency is to concentrate cotton by buyers in the interior who protect themselves in the future markets, such as New Orleans and Liverpool, and ship to the manufacturer on a through bill of lading. The future contract, however, protects the buyer in only one grade. A guaranteed state warehouse receipt not only enables the planter, buyer or manufacturer who owns the cotton to hold at the best strategic point for world marketing and finance his requirements at the lowest market rates for money, but gives him a speculative interest in any grade to which his cotton belongs. Cotton is as nearly non-perishable as any agricultural crop. By eliminating financial necessity on the part of the planter through a reduction of approximately 331/^ per cent in rates paid for monej'', there remains no reason for hurried, uneconomical marketing. As mentioned elsewhere. New Orleans should, after the be- ginning of operation of the warehouse plant and the Panama Canal, become the greatest spot cotton market of the world because of its strategic location in relation to the world's prin- cipal points of consumption, the Continent, the United King- dom, the Southeastern Coast States, New England, Japan and China. Simultaneously with the adoption of western methods, China probably will, because of the qualities of its labor, become one of the greatest cotton manufacturing countries. Considering Japan and China as cotton manufacturing countries, through the Panama Canal, New Orleans may become the geographical center for cotton distribution to manufacturers. Changing the World Center of Cotton Marketing In establishing the publicly owned and operated warehouses in the state of Louisiana, the Board of Commissioners of the Port of New Orleans among other aims had in view to make New Orleans a market of deposit similar in characteristics to the representative ports of Europe, — London, Hamburg and i:40 MARKETING AND FARM CREDITS Liverpool. New Orleans can sell to any eonsnnunir market in the world, it is an original port of shipment, — Liverpool, Lou- don. Hamburg and Havre are secondary ports of shipment and eaunot sell to each other or Amerieau mills without incurring an eeouomie loss. Because of the etiieieney resulting from consolidation and more complete organization of forces, the tendency of present ocean commerce is to use the fewest ports practicable to the exclusion or curtailment of other ports. This is exemplified in the relative volumes of business of the ports of New York. Boston, Philadelphia and Baltimore. A return of the approxi- mate equal division of commerce between ports in the same general section, is not to be anticipated. If present port con- centration in general localities is to continue, it is reasonable to assume that the greatest export and import ports of the Vnited States will be New York. New Orleans and San Fran- ciso, serving respectively the Atlantic, Gulf and Pacitic Coasts of the United States in export and import commerce. Recent port development in the United States has been stimulated by : 1. The demonstrated economics resulting from European port and harbor development which must, in competition, be established in the United States. 2. The construction of harbor facilities in advance of trade. 0. Competition between trunk line railroad systems neces- sitating individually owned terminals. ■i. Probable increase in ocean transportation through the opening of the Panama Canal. 5. The invention, improvement and use of freight handling machinery. The board of commissioners of the Port of New Orleans in carrying into actual physical etfeet the will of the people of Louisiana as expressed in acts of the state legislature and later ratified by vote of the people as an amendment to the Contitu- tion, instructed their engineers to so design and equip the publicly owned and operated cotton warehouses and terminal: 1. That the construction under the $8,000,000 expenditure available be a part of a comprehensive plan which could in the future be enlarged in storage capacity, terminal trackage and wharf area- 2. That such structures be at a minimum cost per bale of storage capacity commensurate with permanent construction, insuring the greatest possible protection from fire. ERNEST M. LOBB 241 3. That the structures be so designed as to plant to be operated at maximum earning capacity and therefore when not required for cotton to provide for the storage of coffee, sugar, sisal, rice, jute, tobacco and other standard package commodities. 5. That the structures and appliances be such as to permit of the receipt and handling of cotton and other commodities from vessels and for transfer to freight cars, as well as the re- ceipt and handling of cotton and other commodities from freight cars and the delivery to vessels, thus adapting the plant to a two-way operation. 6. That the plant be so designed as to be adaptable both to the present method's of inspecting, weighing and classing of cotton and such new methods of modifications as may be in- stituted, based upon the recommendations of the cotton ex- change and requirements of the cotton trade. 7. That the compartments be of such dimensions and the appliances of such design that flat as well as compressed cot- ton may be handled and stored economically. 8. That the plant be arranged for efficient handling of fac- tor's cotton, f. 0. b. cotton and through cotton. 9. That the plant be such as to serve the port of New Or- leans as a deposit market for the cotton supply of Europe as well as the United States. The operation of the public cotton warehouses and terminal will not in itself solve the marketing problem for the entire cotton section. It will materially assist the farmer in enabling him to obtain cheaper money, the banker in insuring the ab- solute probity of security for his money and the merchant in reducing the cost of handling. 16— M. F. c. ELEVATORS— LOCAL AND TERMINAL ' ADVANTAGES OF A STATE-LICENSED WAREHOUSE SYSTEM J. C. F. Merrill, Secretary, Chicago Board of Trade, Chicago, 111. Tihe question of goverunient owned storage has been promi- nently before the public of late, especially that for the relief of the cotton states. It is commonly desired by those sections of our country financially unable to provide it for themselves. "When financial stress occurs and becomes general, as in case of panics, collateral ordinarily entirely acceptable to bankers is not infrequently refused, because such loans would but rep- resent investment of their capital for the period covered by the obligation they secure. I once heard President Forgan of our City National Bank say that he would rather lend money on wheat collateral, if the wheat was hedged by a time contract, than lend it on govern- ment bonds ; that, in his experience, he had sold wheat for for- eign gold when he could not sell government bonds. Thus was made clear the fact that principal food necessaries, susceptible of safe storage, are more liquid than the most stable of securities. The inexorable need of food gives it a market which stocks and bonds do not possess. Before the question of government owned and government operated storage for soil products was even thought to be pos- sible, the advantages of state-controlled storage, operated by- individuals, was recognized by a galaxy of men whose ability in vital and fundamental service in this and in other respects: to Chicago in its infancy, has placed the city under everlasting- obligations to them. In 1823 Chicago had a population of 65 or 70. Twenty-five years later it had a Board of Trade, and 22 years still later,, it had state-controlled public elevators. Thus, not only were the people of Illinois benefited, but those of the entire Missis- sippi river and Missouri river valleys tributary to it likewise were given equal facilities at its great andl growing market place — Chicago. :24ti MARKKTING AND FAUM CREDITS Illinois Leads the Way The present Constitution of the st^te of Illinois was adopted by vote of the people in 1870. The thirteenth artieU^ of the "Constitution is as follows : iWaivhouses* See. I. All elevatoi"s \or storehouses where grain or other property is stored for a eonipensation. whether the property stored be kept separate or not. are declared to be public warehouses. Sec. 2. The owner, lessee, or manager of each and every pnfclie warehouse situated in any town or city of not less than 100.000 inhabitants, shall make weekly statements un- • der oath, before some ot^eer to be designated by law, and keep the same posted in some eonspieuous place, in the of- iice of such warehouse, and shall also tile a copy for public .examination in such place as shall be designated by law, which statement shall correctly set forth the amount and grade of each and every kind of grain in such warehouse, together with such other property as may be stored therein, and Avhat warehouse receipts have been issued, and are. at the time of making such statement outstanding therefor: and shall, on the copy posted m the warehouse, note daily such changes as may be made in the quantity and grade of grain in such warehouse; and the ditferent grades of grain shipped in separate lots shall not be mixed with inferior or suvHn'ior grades without the consent of the owner or con- :signee thereof. Sec. o. The owners of property stored in any warehouse, or holder of a receipt for the sanu\ shall always be at lib- >erty to examine such property stored, and all the books and records of the warehouse in regard to such property. Sec. 4. All railroad companies and other common cnr- riei'S on railroads shall weigh or measure grain at points nvhere it is shipped, and receipt for the full amount, and shall he responsible for the delivery of such amount to the owner or consignee thereof, at the place of destination. Sec. 5. All railroad companies receiving and transport- ing grain in bulk or otherwise shall deliver the same to any consignee thereof, or any elevator, or public warehouse to which it may be consigned, provided such consignee or the elevator or public warehouse can be reached by any ti*ack ■owned, leased or used, or which can be used, by such rail- road companies: and all railroad companies shall permit J. C. F. MERRILL 247 connections to be made with their tracks, so that any such consignee, and any public warehouse, coal banlc or coal yard, may be reached by the cars on said railroad. Sec, 6. It shall be the duty of the General Assembly to pass all necessary laws to prevent the issue of false and fraudulent warehouse receipts, and to give full effect to this article of the Constitution, which shall be liberally con- strued so as to protect producers and shippers. And the enumeration of the remedies herein named shall not be con- strued to deny to the General Assembly the power to pre- scribe by law such other and further remedies as may be found expedient, or to deprive any person of existing com- mon law remedies. Sec. 7. The General Assembly shall pass laws for the in- spection of grain, for the protection of producers, shippers and receivers of grain and produce. The general assembly in obedience to this mandate of the people in 1871 enacted — "An act to regulate public warehouses and the warehousing and inspection of grain, and to give effect to Article XIII of the Constitution of this State" — In force July 1, 1871. This law divides grain elevators into Classes A, B and C. Class A houses are limited to cities of not less than 100,000. Class B embraces all other houses in which grain is stored in bulk in which grain of different owners is mixed together. Public warehouses of Class C, embrace all other places where property of any kind is stored for a consideration. Arranging' For Grain Inspection The law provides that public warehousemen must advertise their rates of storage during first week of January, and that such rates so advertised may not be increased during the year. Under the provisions of the law such storage must be licensed by the State Public Utilities Commission of Illinois. They must also file a bond with the commission to be approved by it in a penal sura to be fixed by the commission. The law forbids dis- crimination and provides for the mixing of grain of the same grade, unless a special bin is arranged for by the owner of the gra,in. The same law in obedience to the same mandate provides for a state grain inspection department. 248 MARKETING AND FARM CREDITS Section 1-1 ol the law provides that it shall be the duty of the governor to appoint, by and mth the advice of the senate, a chief inspector of grain for the state. The said chief inspector shall have the power to appoint, upon the approval of the utili- ties commission, such suitable persons in sufficient number to act as deputy inspectors as may be necessary to properly carry on the business of the department. The law also provides for the appointment of a warehouse reg- istrar for the purpose of registering receipts issued by public elevators and concelling them when presented for cancellation preparatory to withdrawal of the grain from store ; also, keeping a record of the same, thus officially showing the quantity in store. Numerous minor yet important conditions are named in the law and in a supplemental "Act" in regard to warehouse re- ceipts, in force July 1, 1-907. This law, enacted nearly 45 years ago and in force during all of this time, placed the state of Illinois far in the lead of every other state. It has been substantially copied in some respects by other states, but none of them has laws so far reaching and complete. A portion of it, that part relating to common car- riers, was the substance of an interstate commerce act. When that law was enacted by Congress, this law had been in use more than 20 years and had passed the experimental stage. It was argued that what had proven good for the commonwealth of Illi- nois, would likewise be good for the nation. Public storage under this act has ranged in total capacity in the city of Chicago up to approximately 50,000,000 bushels. It is and from the first has been open to the public impartially and the proprietors under the law, as a matter of sound public pol- icy, as construed by the Illinois supreme court, may not store their own grain in mixture with that of the public. Its maxi- mum efficiency was, when the farmers were less able financially than now to hold their grain. They then sold freely immediately it could be delivered. At that time, prior to a decade and a half ago, the 50 millions capacity was, at times, scarcely enough. Now with twice the production in the territory tributary to this market, 14 millions answers the requirements reasonably well. This is in obedience to a prime order of nature, i. e. a movement along the lines of least resistance. At rates of storage in effect now and for some years past, the total yearly charge, should any grain remain in storage continu- uously for the year, amounts to 121/0 cents per bushel. Twenty J. C. F. MERRILL, 249 years ago when rates were higher it amounted to 18 cents per bushel. Against this, on the farm the storage charge is nil. Crib and other farm storage costs little, if the life of the stor- age be considered and it is worth nothing while empty. Thus, the farmer has the advantage to the extent of this storage cost.. Those to whom he sells in central markets can not escape the public elevator charge in holding surplus grain. What State-Licensed System Has Done The advantages of a state-licensed warehouse system to the great public of that section of our fertile Mississippi valley tributary to Chicago have long been demonstrated. It has served a large and general purpose; it has enabled the public to store grain safely in the care of a licensed and bonded cus- todian. It has facilitated the accumulating of round lots for lake shipments. It has provided means of doing this during months of closed lake transportation to gain the benefits of" lower water rates. It has also served those who have desired to place their grain where it could be utilized as highly ac-. ceptable collateral to bank loans. As against government owned storage it has saved the people from paternalism in gov-- ernment, preserving individual initiative thereby fostering the- creative in men and likewise tending to exclude dependence, thus preserving self-respect. True helpfulness resides in help- ing others to help themselves and not in paternalistic or gratui- tous assistance. State-licensed elevators have retained the benefits of com- petition in fixing their charges, storage being a commodity. At the same time they have protected the public against the- exactions of unfair rates besides possible loss of the property^ through utilizing privately owned and operated storage. 250 MARKETING AND FARM CREDITS THE FARMERS' ELEVATOR MOVEMENT IN THE UNITED STATES H. W. Danforth President, The National Council of Farmers' Cooperative Association Today the farmer fiuds himself in the uniqiie positiou of payino- exorbitant retail prices for everything he buys, and re- ceiving wholesale prices for everything he sells : of selling his products in a market open to the competition of the world and buying what he needs in a market protected against outside competition. "When land was cheap and the soil rich in plant food, farming was a simple process requiring fortitude, soli- tude, privation and hard manual labor. They were generally very poor and unable to finance their own farm operations, let alone the marketing end of them. The farmer paid little atten- tion to governmental matters. For over a century the United States government has fos- tered, nursed, and granted special privileges to manufacturing interests with practically no concessions to the a-gricultural in- terests of the country. Conditions in this day and age seem to suggest that fighting is essential to preservation of one's own, and yet if one loses in the struggle, he may be worse off than if he had passively submitted to the demands of the stronger. AYhen people are doing well enough, that is when they are not conscious of unjust exactions, and are making ends meet, they are not likely to be greatly concerned about the other elements of society who are reaping profits by means of legislative fav- ors. In the present state of society, and educated as it has been for so long a time, to believe that bounties and taxation for the profit of a class is beneficial to the whole of society, it will be necessary to organize and to educate oui*selves for pro- tection against the rapacity of the organized interests that at present dictate and profit by legislation. That the farmer has lagged behind in the great industrial warfare, is undisputed. This is due in great jiart to the nature of his business. He is a great individualist and has had little opportunity or time to study the complicated economic prob- lems involved in marketing. H. W. DANFORTH 251 Had it not been possible for the farmers to move west and take up new land when he had worn out and depleted the fer- tility of the old farm, he would have long ago succumbed to the inevitable, but now that the tide of emigration has reached the Pacific ocean, and he can not leave the worn out farm and move on to virgin land, he has discovered that he must now turn back and build up the old farm. He finds that it is no longer easy to make them yield a living equal to the needs of intelligent families. Over such a community general discour- agement has begun to brood. For several years we have seen a movement towards the city. Statistics show that the urban population is increasing much faster than the rural population, and the last eerisus shows less than 50 per cent of the people of the United States are living on the farms. The old people who cannot get away, settled down to end their days, as economically as possible, on their savings. In recent years, through the excellent work of the state imi- versities and the United States department of agriculture, the farmer is fast becoming an efficient producer. At the same time he realizes that to produce fine crops and let gamblers and speculators fix the price and get all the profits, is certain in the end to bring upon him crushing defeat. Marketing a Great and Serious Problem One of the great problems that the farmer finds it necessary to meet today has to do with the marketing of his crops. About the year 1888 or 1889, the farmer first began to realize that he was being robbed of his just profits through the exac- tions of the grain trust, the lumber trust, the coal trust and other combinations with which he had to transact business. Several of the large terminal elevators operating throughout the grain belt had purchased practically all the country ele- vators, and had organized one of the greatest monopolies in existence. The prices to be paid for grain were determined at headquarters and telegraphed to each of the small country elevators. The prices so fixed varied any where from 5 to 10 cents less than the grain was actually worth. It was this condition that prompted about 100 farmers in the little town of Rockwell, Iowa, in March, 1889, to meet and dis- cuss their troubles. The result of this meeting was to organize a company and raise sufficient money to purchase or erect their oWn elevator. This was soon aceomplisihed and the company lio*^ MARKETING AND FARM CREDITS began business. Following the example of the Rockwell com- pany, a number of new cooperative companies sprang up over the state until in 1904, fifteen yeai*s later, there were about 30 of them in Iowa. Likewise about 20 companies had been organ- ized in Illinois. Every one of these companies met with strong and determined opposition, not only from the grain trust, but the lumber trust, the coal trust, the railroads, and every other- combination with which they came in cont^ict. That these line elevators were certainly violating the anti- discrimination statute is evidenced by the following fact. At Hagar. a competitive point, wheat was quoted at 92 ceuts, corn 52, oats 35 : at Stratton, 15 miles east of Hagar, w.here there was no farmers' elevator, wheat was quoted at 87, corn 45, oats 31; at Foster, 15 miles north, at which point there was no farmers' elevator, wheat was quoted at 87. corn 47, oats 32. The Old Line houses, finding that they were losing trade and money, resorted to every device and scheme possible to put the farmers' companies out of business. They even succeeded in getting the railroad companies to refuse sites for the elevators on their rights of way. This was in the days of i*ebates, which was a great hindrance to the farmers until the passage of the Hep- burn bill in 1906. The passage of this bill was a Godsend to the farmers' elevator movement. Boycotting the Farmers The greatest opposition with which the farmei^s' elevator move- ment had to contend. Avas when the line elevators in about 1904, advised the commission firms of the various terminal markets, that if they continued to sell grain Shipments consigned from Farmers' elevators, they would be boycotted by the line and private elevators. This practically closed the markets, against all grain conung from farmers' companies. This condition was finally relieved when 2 commission firms, realizing the injustice being done to the cooperative companies, decided to receive their shipments and defy the grain trust. The fight, however, continued fast and furious. About the year 1902 or 1903 there were some 25 cooperative elevator companies in Illinois. Realizing that they were at a great disadvantage, for lack of united effort, a repre- sentative from each of these companies held a meeting at Spring- field, Illinois. Avhich resulted in the organization of the Farmers' Grain Dealers' Association of Illinois. They elected officers. H. W. DANFORTH 253 employed a secretary, adopted a constitution and hy-laws, and entered til-ie fight in earnest. About a year following this, the same thing was done in Iowa, and the state assordation of Iowa was bom. Since then state associations have been organized in Kansas, Nebraska, North and South Dakota and Minnesota. At tlie present time there are in Illinois, 305 Farmers' Elevator (Jompanies; in Iowa, 394; Minnesota, 345; South Dakota, 435j Kansas, 242 and Nebraska, 271. The total membership in these 7 states is approximately 275,000 to 300,000 farmers. Many farmers' elevator companies have been organized in Michigan, Montana, Washington, Ohio, Oklahoma, Wisconsin, Missouri, Indiana and Texas ; in all about 347 companies. These last named states, however, have not as yet organized state asso- ciations. About 3 years ago these state associations, realizing the advan- tage of a larger cooperation, each sent 2 delegates to a conven- tion which organized itself into what is now known as The Na- tional Council of Farmers' Cooperative Associations. This na- tional council is financed by contributions from the several state associations. Tumiiig Joint Stock Companies into Cooperative Societies Through a lack of proper cooperative organization laws it was necessary for practically all of the loeal elevator companies to organize under the regular incorporation laws of the several states, which makes them joint-stock companies, and not strictly cooperative. However, the majority of the companies through provisions in their by-laws and mutual agreement between the stockholders, are adhering as nearly to the cooperative plan as is possible. Realizing the necessity of organizing on a strictly cooperative J)] an, campaigns were started in the several States to secure the enactment of cooperative organization laws. After subduing the determined opposition of the politicians and other interests, prac- tically all of the states now have such laws. In Illinois there is a constitutional provision which provides that the owner of stock in the corporation should be entitled to one vote for each share of stock held. This provision has prevented the enactment of a strictly cooperative law in Illinois. At the last session of the legislature however, we succeeded in securing the enactment of a law which to a certain degree got around this 254 MARKETING AND FARM CREDITS provision by limiting the amount of stock to be held by any one • man to 5 shares. ^lost of the farmere cooperative elevator companies have a membership of from 75 to 300 stockholders, and they are gener- ally capitalized each at from $5,000 to $20,000. The shares of stock are usually in small amounts of from $25 to $50. While most of them were originally organized for the purpose of handling grain, many of them are now selling coal, lumber, tile and drilling material as a side line. It is of course impossible to estimate exactly the financial gain that has accrued to the farmer. Illinois raises on an aver- age 500.000.000 bushels of grain each vear and probablv sells- about 300.000,000 bushels. The statement was made some time ago by the secretary of the Farmers' Grain Dealers' Association of Iowa, that their coopera- tive companies handled about 115,500,000 bushels per year. Conservative men estimate that this movement has been a means of raising the price of grain at least 3 cents a bushel — that is, the farmer is receiving 3 cents a bushel more for his grain than he would have received if there had been no cooperative elevator companies in these states. In addition to this sa^-ing, large amounts are saved by the farmei-s' companies each year through the handling of sidelines, such as coal, lumber, etc. In addition to the profits before mentioned, we find better general conditions in many ways. There is constantly gi'omng a closer business relationship between the farmers and between the farmers and the consumers. A Power in Passing Needed Laws " ^ I am convinced that cooperation among the farmers has come to stay and no power on earth can stop the development of the farmers in all lines of industrial and commercial activities. Since the organization of our national council, many big ques- tions have been met and solved. Through the acti\'ities of our association needed laws have been enacted and the enactment of vicious laws prevented. The farmers ' cooperative elevator com- panies have long demanded the standardization of grades for all grain, and federal inspection of same. About a year ago corn grades were adopted and standardized by the United States government, and they have worked a remarkable change in the handling of this commodity. Any manager of a farmers' ele- H. W. DANFORTH 255 vator company can easily place a sample of com in its right grade with the assurance that if he has done his work carefully, it will correspond with the grading by the inspectors at the terminal point. Improving Quality of Grades The new system of grading has also had the effect of fixing a different price for different grades so that now the farmers who can deliver corn that will grade No. 2, will receive from 1 cent to 11/^ cents more than the man who delivers No. 3, and likewise No. 3 grade will bring more than the No. 4, and so on down the line with the different grades. This has resulted in the elimina- tion of a great economic waste. Under the old system of grad- ing, practically all farmei's harvested their com early, with the idea of having it contain as much moisture as possible. This of course made it a little heavier, and by marketing it early, they had the erroneous idea that they were receiving com prices for the surplus water. This of course was not the case. In al- most every instance, it is necessary for the millers and other in- dusties making use of it, to put the corn through driers and re- move the excessive moisture. As you can readily see this caused a large economic waste. It caused a large waste in other ways. Much of the grain that contained excessive moisture would heat in transit and go out of condition. This loss undoubtedly was charged back to the farmer. While I am on this subject, I want to say that it is my judg- ment that this question of waste, running all through the pro- duction and distribution of farm products to the consumer, is a very large factor in contributing to the high cost of living. Through lack of efficient management, lack of proper care in the selection of seeds, insect injuries, etc, causes a large waste. This fact is well evidenced by the work of an organization of 475 farmers in my home county, known as the Tazewell County Farm Bureau. This bureau employs a county agent at a salary of $4,000 per year. You are all no doubt familiar with his duties. Last spring he started a campaign to prevent the loss in oat yields resulting from smut. Many of the farm bureau members were instructed in treating their seed oats with what is kno"v\Ti as the formaldehyde treatment. When the oats were sown, small check plots were left. The famers kept complete records which were afterwards collected by the county agent. These returns made "256 MARKETING AND FARM CREDITS by the fariuei-s tJiemselves, showed that the increased fieUi of oats dire<^tly attributed to the eliTuiiiation of siuiit resulted in a saAing of $36,000 for that one year. This is a splendid example of what coiiperation among the farmers has aeeoniplished in the elimination of waste in produc- tion. An Experiment In Farm Management Through this fann bureau, 63 farms in Tazewell county were surveyed to detenuine the factoi*s that tix profits in farm manage- ment. Four experts fi-om the department of agriculture as- sisted these 63 fanners in keeping accounts covering the year's ■opei-ation. so as accurately to get at the exact facts. A significant analysis of all these records for the year ending Nov. 1, 1914, showed that there ai'e great differences between the incomes ou the farms investigated. The average labor income on the 63 farms was minus $9-1. In other words, after deducting from the gross income fi-om all sources, the actual operating expenses and interest at 5 per cent on the actual investment, the average farmer lacked $94 of re- ceiving anything for his o^^'n labor. The average of 9 of the better paying farms however, showed a labor income of $1,197, The factore that determined these differences are many. For instance, as an average of the 63 fai-ms, the livestock receipts for eveiy $100 worth of feed averaged only $90, while the average for the 9 better paying farms, the livestock receipts for every $100 worth of feed, was $144. My time is too short to go into detail, but suflSce it to say that this suiwey shows conclusively that imder the present system of farming, there is a large waste in produc- tion, and that if this waste is to be eliminated and farming made to pay, better methods must be adopted. This I believe can only be brought about through cooperation, and it is my firm belief that the farmers' elevator movement is teaching the farmer how to cooperate, and its advantages. Losses in Transportation That are Useless After the grain leaves tJie country elevator, we find a. very large waste resulting from ineflicient and careless practices of the railroads. A veiy large per cent of the cars used in ti*ansporting grain are unfit for the purpose, resulting in the loss of many bush- els of corn tlu'ough leaks in the ears. While it is true, many of H. W. DANFORTH 257 these elairns for leakaj^e in transit are ultimately paid by the rail- road eornpanies, the loss must he collected from either the con- sumer or the producer in increased rates. It seems that the railroad companies in the past, or at least up to the time of the establishment of the inter-state commission, have found it much easier to advance the freight rates rather than increas^i their net profits through efficiency. The railroads have been endeavoring to establish a principle that they must have the fostering care of the public, even at the exj^ense of agriculture, as was evidenced in their last att^impt to advance the freight rates on grain 5 per cent. Through the efforts of the National Council of Farmers' Cooperative Associations covering a jjeriod of about 6 months, the advance was denied. This victory alone saved to the farmers of Illinois approximately II/2 million dollars a year. The attitude of members of our association is, that if the railroad companies need a different revenue as badly as indi- cated in their petition for the advance, we hope that they will try cwiperation, and cut out the enormous leaks which have been very clearly pointed out to them in a repent decision of the Inter- State Commerce Commission. Another large waste is caused by the multiplicity of middle men and unnecessary and uneconomic expenses incurred by them. I do not want to be understood as saying that the middle man is not a necessity, but under our present system of marketing, and the ruinous competition, many more men are employed than are necessarj^ and cause a large breach in the price received by the producer and the price paid by the consumer. The consumer is guilty of contributing to this waste. He requires that everj'- thing be delivered at his door in expensive packages, and because of competitive conditions, we often see 4 or 5 grocery wagons from as many different stores, crossing and recrossing the same terri- tory. The farmers' cooperative movement is undoubtedly making much progress towards the elimination of waste in production and marketing; still, before the desired goal can be reached, it is neces- sary that the consumer must cooperate with the producer. Prosecuting Educational Work While the farmers have accomplished much through their co- operative elevator organization, they still have much to do. A constant educational campaign is being carried on through the different agencies. We own and publish The American Coopera- 17— M. F. c. 258 MARKETING AND FARM CREDITS five Journal, a publication devoted to the interests of the fanners' cooperative elevator movement. The stock in this journal is owned by the farmers. In many cases the local elevator com- panies subscribe for the journal for each of their stockholders. We hope some day that every farmei*s' elevator will be organ- ized and operated strictly on the cooperative plan. We have a legislative committee that is constantly on the watch. We have learned from experience that when legislation is wanted by the big interests, nothing is left to chance. They have pickets con- tinuously on guard, and send their ablest and highest paid men to get what they want. If we would protect our interests we should learn that money must be raised; and the ablest men connected with the farmers' elevator movement, men of the highest character and standing must be kept in attendance upon the legislature and Congress. So far, cooperative organization among farmers, has gained for them a greater degree of freedom and made for progress in many ways. But the American farmer is slow to adjust himself to new conditions. Lack of experience and a lack of the real cooperative spirit, and a disinclination to study seriously the problems presented, have been big factors in retarding coopera- tive organization. When we have fully acquired the real cooperative spirit we will produce better crops, build better and more storage facilities on the farm instead of trusting this to the speculators and gamblers in the large primaiy markets, adopt better methods of harvesting our crops, build better roads, supply ourselves with a better credit and marketing system. G. W. LAWRENCE 259 GRAIN, STORAGE, FARM-COUNTRY ELEVA- TOR. TERMINAL WAREHOUSE G. W. Lawrence Secretary, Farmers' Grain Dealers' Association of Kansas From the producers standpoint we ought to store the grain where it will tend to "Bull the Market." From the consumers standpoint we ought to store where it will tend to "Bear the Market". From the speculators standpoint the grain oug'ht to be stored where they can get the most complete knowledge of the supply, and enable them to best manipulate the market. From the millers' standpoint it ought to be stored where they can cheaply and easily secure their supply. So it will not be strange in discussing this question, if our ideas may differ. But to ar- rive at a conclusion that is miost beneficial to all concerned, I know of no better way than a comparison of ideas or a discussion of the question. First, I desire to express a negative proposi- tion and that is our local cooperative elevator companies are not the proper ones to store grain. "We are not organized for that purpose. "We have not that in mind when we employ managers, and very few of our managers are properly versed in the han- dling of options, nor have they time to devote to that line of thought nor the facilities to successfully conduct this line of bus- iness ; neither are our companies organized with sufficient capital. If the producers desire to handle the storage business on the cooperative plan, let them form organizations for that purpose. At the present time I believe that the most satisfactory place to store the larger part of the surplus grain is on the fm^m, and by the farmers. By so doing the farmer can market the grain at less expense, doing at least a part of it at the time of the year that work is not so pressing, and in many eases doing it with his own equipment and thereby not feeling the expense. There are exceptions to the above where a farmer is located so near market that he can dump his wheat in the elevator or when he is thresh- ing it at a time when he thinks the demand and the price is above the average for the year, or when the need for money is so great that it is a necessity to sacrifice time or grain to raise it. (A condition that we hope to see remedied by our rural credit sys^ 260 MARKETING AND FARM CREDITS toni.) Rut our idea is that if Ave can hold tho surplus of grain on tho farm until nooiiod, we will equalize the supply to the de- mand, thus establishing a more uniform and staple priee for the erop. Frequently we will save a back ihaul in freight, save our elevators from the straiij that we so often put upon them to care for our grain while we are forcing it on the market, relieve the situation freipiently when we have a scarcity of cars, save at least one commission and the added expense of storage at term- inal points. I do not wish to convey the idea that I am opposed to terminal elevators, because I am not, and as every one must admit, they are a necessity to the satisfactory Ihaiidling of the food products of our land, but I do think we have been forcing our grain on the terminal elevators too nuicli to get the best results to either the producer, the shipper of the consumer. RAILROAD PROBLEMS VIEWED BY THE PRODUCERS W. J. Ray Secretary. Farmers' Grain Dealers' Association of Iowa I will ask you to picture the present development of the United States in its relation to agricultural production and dis- tribution, to the manufacturing and mining industries, to the livestock industry and to the nuiny other resources possessed by our country which give employment and homes to millions. What if there had been no great networks of railways threading the country to form the arteries of distribution ? Would devel- opment have been possible- Undoubtedly the answer is, ' ' No. ' ' Therefore some people are inclined to feel that the railroads are the great benefactors of the people. Of course the railroads have given service ; but in every case the public has paid and paid a full price. So the matter reduces itself to a question .of fairness of rate for service rendered. The general public wants to know: Have freight rates and passenger fares of the past been adequate and sufficient for the railroads to meet maintenance expenses, to pay interest on all l>onds and other indebtedness, to aiford a reasonable rate to the investor, and to provide for development? The railroads W. J. RAY 261 have said that their revenues were not sufficient and in the past few years have asked for numerous increases in freight rates. The most important of these have been the eastern 5 per cent scale and the western general increase. Some 41 roads partici- pated in the request for increased freight rates in the western territory. Nearly as many joined in the eastern 5 per cent request. The territory covered by the proposed freight rate increase included the principal shipping sections of the United States and embraced the major part of the nation's shipping tonnage. Practically all shippers and state railroad commissions pro- posed the freight rate increases. They asked the Interstate Commerce Commission for suspensions and investigations. The suspensions were granted, the investigations were made and hearings were held by the Interstate Commerce Commission. The result was that freight rate increases were allowed as X)er request on about 50 per cent of the tonnage under the eastern 5 per cent case, after a second hearing. The disastrous effects of the European why- apparently had its influence upon this case. The greater portion of the proposed freight rate increases for the western territory were denied by the commission. The classes of tonnage of a special interest to the agricultural popu- lation involved in this case, embraced grain products and live- stock products. I shall now confine my arguments i)rincipally to grain production and shipments as I am more closely in touch with this product. Now, I believe that every type of occupation should derive a sufficient revenue from its operations to compensate it for the service it rendered the public. Upon that proposition I will call your attention to the following facts: The Interstate Commerce Commission in drafting their de- cision in the western case makes the following statement: "These railroads cannot exist unless rates are established which will yield a fair return upon their property. We must, therefore, in fixing these rates, have regard not alto- gether to any particular railroad but to the whole situation, and must consider the effect of whatever order we may make upon all these defendants." This statement is very clear in my mind of a fixed method of equity and legal adjustment of a disputed request. The rail- roads, in their plea for higher rates, cite us to the weaklings among their number and show that they are unable to meet their 262 MARKETING AND FARM CREDITS interest demands, to pay dividends, and that some are virtually insolvent, some are on the verge of being in bankruptcy; some are in the hands of reeeivei*s,, while the majority are a great financial success. Why Railroads Become Bankrupt The weakened condition financially of the bankrupt or i*e- ceivership roads conies from a variety of causes and has been proven from investigations seldom if ever to come from insuffi- cient revenue charges or lack of tonnage tendered them for ship- ment or passenger traffic. If you have followed investigations of the New York and New Haven Ky. by the government, also of the great Rock Island system. I believe you have Siitisfied yourselves that the financial depressions and downfalls of such roads come very largely from mismanagement, high finance manipulation by officers in authority at some period of time in the floating of bonds or other methods of watering stock. Hon. J. D. Hashagan, makes this statement that 25 per cent of the mileage in the western classification territory is in receivers' hands. Some of it due to financial juggling and trickery ; some to do^^^l right mismanagement, and some to other causes. If this be true, it is a deplorable situation. But must the shippers of this country and the public, be called upon to pay a high rate of revenue in order to place these poorly managed roads under the present condition, upon a soimd basis and, thereby, grant premium securities to the prosperous roads? Railroads are not in a singular class of depleted business and failure. We find them in all lines of business and industry, among manufac- ture, mining interests, fruit growers, farmers and agricultirr- ists, bankers, merchants, shippei^s and many other- vocations. It is said, from undisputed facts that there are at present 82 rail- road companiess. with a mileage of 41,988 and a capitalization of $2,264,000,000 in the hands^ of receivei-s ; in 1S94. June 30, there were 192 roads in the hands of i*eceivers that had a mile- age of 40.818. and a capitalization of a little more than 2 billion dollars. Considering the mileage and capitalization of all the railroads iu 1894, and comparing that mileage and capitaliza- tion with the mileage and capitalization now. 1894 was a worse time than now. The railroads, in petitioning for increased rates and fares, merely took advantage of an opportune time to force their point in making their application based upon a lean year in railroad traffic and transportation of tonnage and W. J. RAY 263 passenger traffic and of war conditions. Yet the evidence and data produced by shippers and protestants, experts and ex- jjert accountants from records of railroads, seemed to jjrove clearly to the commission that the major portion of the increased rates as proposed were not warranted. The commission states in the report of the western case that the carriers base their claims to additional revenue upon the grounds of their financial needs and the downward tendency of their net earnings in this western region and contend that com- modities singled out by them to bear the proposed increases are not now carrying their equitable part of the cost of transpor- tation. Fanners Contest Railroad Statements of Earnings Both of the contentions are traversed by the protestants, com- prising the state commissions of a number of states primarily affected and individual hsippers. Generally speaking, the pro- testants contend that the financial condition of the carriers does not warrant the x^i^oposcd increase in revenue; that the last fis- cal year was abnormal both in regard to transportation and to other branches of industry; and that in recent years the car- riers in large measure have built up their properties to a higher standard out of operating revenues, and have thereby produced a showing which in so far as it is unfavorable is in great meas- ure illusory. In general, it cannot be said that the protest- ants have alleged that conservation of the carriers' revenues can be effected by the practice of more rigid and appropriate economies, but rather that the carriers have realized and are realizing the benefit of adequate revenue; that their real net revenues have been masked by new methods of accounting ; that charging against income what is asserted to be a proper charge to capital and the practice in the past of conferring valuable concessions upon shareholders of railroads have resulted in an understatement of the real earnings of the carriers. Statistics and exhibits were presented in the western rate case hearing of some lines of industry to prove that the net revenue on invest- ment, service, etc., of the railroads were greater than on some other lines of business upon which increased rates were asked. For instance, testimony was given from government records that farmers' net revenue was less than 4 xjer cent. Other expert testimony showed like results and even a lower net revenue to the farmer or producer of grain and livestock, upon which the 264 MARKETING AND FARM CREDITS heaviest portion of freight rate increase was proposed and of wihich the commission denied an increase. It was further proved that the farmer pays the freight. In other words, all freight charges being deducted by the shipper from the pur- chase price of his grain and livestock, any increase in rates would depreciate the value of his products on a relative basis. Like- Avise if an increase on grain were permitted, it would have a like influence on the value of grain. Railroads Net More Than Fanners We people of the grain belt under western trunk line terri- tory, with data, figured on a relative basis as to railroads and producers of the great bulk of the food products of the coun- try. We found that the net revenue of the roads is nearly twice as great as that of the producers. We feel justified, therefore, in protesting the proposed freight rate increase. The freight on an 89 M car, loaded with coarse grain to maxi- mum capacity, shipped from central Iowa to Chicago, under the present rate, equals in freight charges $105.60. Seventy such cars in one train, Ayhich is not above an average train of loaded cars, equals $7,392.00, gross revenue. In the report of the Interstate Commerce Commission in the eastern case we find the following statment : "The records show that there are many unremunerative rates and unremunerative practices now in effect throughout the official classification territory; that a very substantial amount of service is performed without any charge what- ever, and that undue burdens are cast upon the carriers through various influences. We have had in this proceeding an opportunity to learn also to what extent and with what effect on their revenues abuses exist among the railroads be- cause of the treatment of one by the other in competing for traffic. The abandonment of unremunerative and waste- ful practices involves among other things the elimination of the free services and excessively low rates which represent in very many instances, the price a carrier pays for the large tonnage of influential shippers and result in making the carrier bear the geographic disadvantages of individual ship- pers and expenses properly a part of their manufacturing cost. The elimination of the preferences created by these means would give to the carriers very largely increased earn- ings and at the same time properly distribute the necessary W. J. RAY 265 burdens of transportation, so that those who get the service shall pay for it. * ' But following the suggestions made in the original report, the carriers could undoubtedly secure more additional net in- come than the amount estimated to accrue under the proposed horizontal rate increase, and far more than can accrue to them under the relief now accorded in the supplemental report. ' ' In following closely tihe investigations made by the Interstate Commrce Commission, and the govememnt, of the freight rates and the many phases of control, management and manipulation of the financial affairs of railroads, by such railroad companies, I am fully satisfied that railroads in dire need of assistance are usually responsible for their depression in some manner due to their negligence, rather than to lack of adequate revenue. If the farmer meets financial loss or suffers a lean year, which a great many in the corn belt will experience this year, he must suffer the loss, he has no recourse upon others. Thus it is with the manufacturer, the merchant, exporter, shipper and various other lines of business. No doubt some systems of railroads will of necessity be thrown into receivership, be re-organized, and, thereafter managed on a thoroughly conservative and legitimate basis, become a prosperous railroad system to the credit of its stock holders. Even though some of them have suffered a loss by mistakes of others. What One Railroad Earned Allow me to cite you to a late annual report of the Baltimore and Ohio railway which I believe to be a normal and average railroad system. The report shows that the equipment of the company on June 30tlh, 1915, consisted of 2,399 locomotives; 1,261 passenger cars ; 86,097 freight cars ; 3,163 work cars ; and 144 pieces of floating equipment. The total railway operating revenues were $91,815,797.34, a decrease of $7,348,212.63, or 7.41 per cent. The total railway operating expenses, were $63,925,507.74, a decrease of $10,477,880.78 or 14.08 per cent. The ratio of operating expenses to total revenues was 69.62 per cent, compared with 75.03 per cent, for the previous year. The net revenue from railway operations was $27,890,289,60, an increase of $3,129,668.15, or 12.64 per cent. The gross in- 2t36 MARKETING AND FARM CREDITS ooiue from the year's operation was suffieient to enable the eoin- pany to meet its tlxed and other charges, to pay the established 4 per cent dividend ou the pi'eferred stock and 5 per cent on the common stock and leave a surplus of $771,473.86. That is certainly an excellent showing, and would indicate that a moi'e careful and conservative method of management had been maintained than previous yeai*s, adding very materially to the net revenue, results. General reports of numerous railroads the past few months, as submitted show about such results as the above statement. Let us hope that fi-eight rates may soon become a settled situation, without an undue tax being placed upon tlie shipping public, and yet that such rates may be sufficient and remunerative to the railroad systems of this country. The present development and commercialism of this great country could not exist with- out railroads. The question of control, etc.. enters into the subject. Rail- roads were left alone so long without the public interfering in any manner with their operations and regulations, that they seemed to think the people of the country had no more right to ask for their legitinuite rights and protection against the manip- ulation of railroad operations than the public would have to a man's private property. Yet they were corporations serving the general public and dependent upon the public for their existence. 'We find, however, after many yeai*s of quietude in railroad operations and pi*ogi*ess, covering a period of time when many gifts, as contributions fronr municipal town, county, state and federal governments, in money and lands and bonds, etc., were bestowed upon railroads as an incentive for further development of railroad systems through the country, it became apparent that, through their management and operations, undue advan- tages were being practiced in some measure against the public. Investigations and regulations of railroad traffic and opera- tions were begun by states and state commissions. Practices of discrimination and rebating were found to pivvail between dif- ferent kinds of traffic, sometimes between different communi- ties and individuals at the same place of business. Agitation grew to a point of serious need, resulting in the passage by Con- gress in 1SS7 of the act to regulate conunerce. which carried its fii-st amendment in 1SS9, then again in 1902, known as the Elk- ins Act, then the Hepburn Act of 1906, which gi-eatly strength- W. J. RAY 267 ened the commission's authority and increased its membership. Some minor changes took place in 1910. What Is Its Remedy? A member of the Commission makes this statement — that, ''every step has been taken as based upon experience, gathered by investigation, upon dis(;losures, and, we may say, attempts to to regulate with, safety jand justice." I personally do not advocate government ownership of rail- roads. I doubt very much the practicability and feasibility of such a proposition. There no doubt would arise insurmountable difficulties when we get into politics with the management of railroads and the government placing millions of men as em- ployes, operating the 250,000 miles of railroads in this country. It appeals to me that regulation of tariffs, freight and passenger rates and overcapitalization by the Interstate Commerce Com- mission, or some such body as Congress delegates for that pur- pose, to be a much more practical method. I believe that the physical valuation of railroads should be established, and that procedure is now in progress interstate. I could only add in my opinion — railroads will always need government regulation of their operation, practices and tariff charges upon the public. It is human error to place an undue or over-tax against the other fellow for personal gain. It further appeals to me very forcibly that the public must use care and precaution to prevent a law being passed of fed- eral judiciary action, whereby claims and grievances with rail- roads by the shippers can and will be carried by such corpora- tions to Washington, D. C, which would entail more expense to the shipper than the payment of such claims or damages would amount to to the shipper or complainant. 268 MAUKKTINH^ ANP F.VU^l OUKPITS BANKS^THE CREDIT AND CAPITAL OF COOPER ATI\*ES U. J. K.VKMF.K Secretary. The Farmers' Grain Dealers* Association of Minnesota Wlioii wo started our littlo olovator .fit Airlio wo woiv not partioularly wbbod. Wo gt>t tiio sacks baok. Tho conditions \voi\^ snob tbat wo bavo dooidod to jn^ into tbo olovator business tor oursohosi. I was oUvtod tbo st^'ivtary. At tbo lirst mooting tbore woro bait' a do/ou mon ropr\^sontiug oonmiissiou bousos in Minneapolis present : and tboy all otYotvd to tinanoo us for t> per oont and lend us all tbo money wo wanted if wo would sell every bnsbel we bad to tbont. We did not take tboui up; instead we put our funds in a local bank on a system of dail>- Ivilaiut^ Wo made very satisfactory amininMuonts witb tbo bank and tbo autboritios bavo allowed us to draw on tbom almigbty bai\l at tiuu^ Out in Airlio we do not take our bats otT tbo way wo used to do in \ow York State wbon wo wont into tbo bank. Wo call tbo Invukor^ by name. So one day wbilo I was in our bank. Ed David. t5l\e prrNsideut, said : ' ' Tbo biiiik examiner was do^^^l beiv tbo otber day and bo Siud tlu>so o notes from your Airlio Ele- vator tbat tbo dilvctors bavo jrivon — Arot\'t tboy tbo same Air- lie Elevator notes t" "dust tbo siime. " 1 answvivd. lie sjud: *'You bavo gv>t - or o of tbom." In tbo meantime before we bad those $lo.000 of dirwtor notes tbe cvMupany bad borrowoil rigbt up to all tbat tbeir cbart*^r bad allowed tbom. It is a pivtty tigbt tix. but I Si\id: *'Ed, kx>k here: you know almigbty well if you over bad any irilt edsr^^ security in your bank tlu^so notes an^ it. Tbotv are i> men on tbeir security and onl\- 1 of tbom is not responsible and you do not need to tell me who ilie is."' That was so. yet there was that little bank oxanunor kickinsr on o little artlt edgv^ notes tbat tuiy one man acting as a sivurity could bavo paid in a pinch. But if the chairman ^^•as as well tixotl as ho is. and if he bad been do%m there and o^*e^vi^uvn his aciH>unt #400.00 no matter how arilt ed^^ he misrht K^, that president would have kickixi like ovorytbiuiT and would bavo wanted somotbing tixod riirbt aw;>v. Rut if be bad bad a t\oto of $rvOW witb P n\on on it he JAMES. 10. BOYI.E 269 would liiivc pjisscd oil Mint note bccauHci technically it wiis just as f»'oo(l Ji.s ^'•old ; but, nn oyv.v{\rn\'i \\\i\ could not f);iss. Now that is ji technicality iu hankirifr tJi;i(, I do not like. Any of you who hav(^ had anytliin^- io do with tlic banking business know that it is put over lots of times a^ud that tfu^ bank (ixarniucj- |)asses pa{)er tliat is not worth tlie i)a|)er tfu^ uotcis af(! wi-ittcni on. I believe in tju^ bank, I believe that the bank is the friend of the farituu'. Out our way the. bank eertairdy lias b(K!n, but there an; many tilings that have got to be adjusted before tlie bank becomes the working instrument Ihiit it could become for the dev(>hipm(>nt of the community. SOME DIFFICULTIES OF A STATE TERM- INAL ELEVATOR SYSTEM Jamks Fj. Hoylk Professor of Economics and Political Science, University of North Dakota, Grand Forks This is a pcH-uliarly diClicult (|uestion to discuss, owing to the place it occupies in tlie minds of oui- lai'tiiers. The farmers want state terminal elevators, and will very likely get them, not be- eausc the nuitter has been studied by them carefully and tiie evidence sifted. Their doctrine of state ownership in this field has become a "state of mind" with them, rather than a doctrine. Indeed, in some sections it has become a religion. Thus the Ca- nadian farmei-s in their famous siege of Ottawa in 1910, when presenting tiieir case to Premier Lauri(M', si)oke of the "mystery" and "secrecy" of the existing ternunal activities, of the "dis- trust" and "suspicion" which attacihed to these activities, and of restoring a. "feeling of trust and confidence in the minds of the western farmers" by means of governuu^nt elevators. Mr. F. W. Green, secretary of the Saskatchewan Grain Growers' Association, expressed the farmei's' sentiments at this Ottawa gathei-ing in these words: "We have the interior elevator system with all the un- eei'tainty oi' weight and grade, and the various tricks resorted to regarding car distribution, special binning and shipping; then we have th(^ grain exchanges with the gambling, price- fixing, problem-hedging, future selling, puts and calls, shorts 270 MARKETING AND FARM CREDITS and longs, ■with the bulls and bears. Then the difference of price betAveen Minneapolis an.d "Winnipeg, ranging from 10 to 15 cents a bushel for an inferior sample of wheat. This with their system of grading and sampling all forming part of a complex system more or less mysterious to our farmers, causing a serious state of suspicion and unrest which is an evil in itself, but none of these are responsible for more dis- trust and want of confidence than the inspection system in connection with our terminal elevaturs. All these being in- separable, each aifected by the other, and, as we think, vit- ally affecting the quality and price of every bushel of grain in the West. Our views, right or wrong, are the cause of our agitation and action." This same religious fervor for state terminal elevators finds expression among the members of the American Society of Equity of the Northwest and among other similar organizations in various sections. This condition exists in spite of the fact that 95 per cent of the grain reaching the terminals has already passed out of the ownership of the farmer, and hence the ter- minal elevators can only have an indirect effect upon him. This question of state-owned terminal elevators, indeed, seems to be but a part of the growing sentiment in favor of government- OAvned packing houses, canning factories, government banks, and government railroads. To the farmer no longer is it the simple business proposition of "What is it going to cost?" and "What is it going to accomplish?" Yet this plain business question seems to me to be the real issue. Relation of Question to the Grain Trade Wlien seeking a remedy for any supposed evil in our grain trade we must bear in mind the fact that our grain trade is on the whole on a fiercely competitive basis, conducted on narrow margins, and subject to world market conditions of supply and demand. To the disinterested observer, tracing the wheat and flour prices from farmer to consumer, there are apparent 7 in- teresting points of contact as follows: (1) local market; (2) terminal market; (3) foreign market; (4) the miller; (5) jobbers, wholesalers, and retailers; (6) bakers; and (7) trans- portation. Transportation is now conducted inider rates super- vised or fixed by public authority. The actiA^ties of millers, merchants, and bakers are substantially free from public con- JAMES. K. BOYLE . 271 trol. The foreign market is beyond our control. That leaves the local elevator and the terminal market. And of these two, the local elevator thus far has escaped with a minimum of regulation, but exactly here, according to the findings of the federal government, occur the biggest leaks between the farmer and the miller. The report of the secretary of agriculture, of October 24, 1914, on the prices of wheat, etc., (63 Cong. 3d Ses- - sion, House Doc. 1271) traces a bushel of wheat from the Kan- sas farmer to the Livei'pool market. After stating "that the farmers of Kansas, as a general rule, are obtaining all their wheat is worth," the report contains this observation: "The weakest link in the chain of marketing Kansas wheat is the country elevator. Compared with the value and difficulty of service rendered, the margin taken by the country elevator is perhaps larger than that taken by any other middleman in the marketing of wheat." The same report speaks of the termi- nal market in these words: "In conspicuous contrast with the country elevator situation is the great efficiency and highly organized method of operation of the terminal grain operators and exporters. In the case of the export trade especially the profits per bushel are extremely low considering the service rendered and the capital and risk involved." Tendency to Regulate Terminal System These terminal activities, it is hardly necessary to add, have been subjected, since the days of the famous case of Munn versus Illinois, to a constantly increasing degree of govern- mental regulation. Not only the methods but also the charges for the various services are as a general rule regulated by law or administrative order. And now comes the demand from the farmers and to some extent from the millers that we have government ownership and operation of the terminal elevator. Alleged Evils of Present System of Terminals. At each important terminal today we find one or more grain warehouses open to the public for storage of grain and known as a "regular" terminal elevator or public warehouse. Some of the alleged evils of our present system are attributed solely to this system of private-owned public warehouses. Other evils are related only in part to the terminal elevator, and in part to the inspection system. The gathering chorus of complaint may be said to be directed to the whole united system of terminal activi- 272 MARKETING AND FARM CREDITS ties, and the terminal elevator cannot be entirely dissociated from the rest. Here is a complete catalog of the alleged evils which I find in the various official and unofficial investigations of the ter- minal problem : inspection, dockage, screenings, shortage of good grades, overage of bad gi'ades, grade manipulation, shipping out more grain or better grain than received, lending out stored wheat, mixing, grain hospitals, too much spread, improper weighing, cleaning not sufficiently supervised, bleaching, storage and insurance rates too high, suction draft applied, competition wanting, monopoly, low prices, accumulation, of grain at ter- minals, warehousemen in dual capacity of custodians and mer- chants, commissions too high, scouring and bleaching, degrading our grain exports. And we must study state terminal elevators as related to these alleged terminal evils. To analyze these charges one by one would take too much time. The most serious of them may be considered at this point, and their relation to the proposed remed}^ of state ownership of the terminal elevator. Storage is a live issue because the crop is hurried to market as soon as harvested. The wheat crop alone averages over 700,000,000 bushels, and most of this crop is rushed off to the ter- minals within 90 days. There is not adequate storage on the farms, or at the local elevators, hence the great accumulation at the terminal in the crop moving season. Statistics from various markets are very striking on this point. It is needless to blame the terminals for this accumulation. Mixing of different grades of wheat is done by private elevators, but is forbidden by law in the public warehouses. Yet the con- troversy over mixing is one of the most serious issues now stirring the farmers. We have much conflicting testimony on this subject. A report of our federal government (Bulletin of the U. S. Depart- ment of Labor, Whole Number 130) contains these statements: "As the ordinary (country) elevator has only 6 or 8 storage bins, there is necessarily a mixing of grain as it comes from the farmers, wheat of like grade being stored together^; An ele- ment of profit to the elevator is the mixing of grain in such a way as to raise the grade of part of the wheat put into the mix- ture. For example, a quantity of wheat may be bought as No. 3 at a No. 3 price and mixed with fine No. 2 wheat in such a proportion that the mixture will retain a grade sufficiently high to be sold as No. 2. The grade of wheat may be raised by fanning out weed seeds and at the same time cleaning ouf JAMBS. B. BOYLE 273 chaff, thus raising the test weight. This mixing of wheat bought at different prices and the raising of the grade begins at the country elevator and is practiced to a greater or less ex- tent by every one handling the grain. * * * The millers complain of some of the practices of storage warehouses ; first, that of mixing wheat to raise the grade, which, however, is a charge that seems to apply about equally to all persons han- dling wheat ; second, and more important, is the complaint con- cerning the scouring of wheat. By scouring wheat the evi- dence of some of its imperfections, such as sprouts, mold, and smut are removed or disguised and unsound wheat is made to appear better than it really is. The miller prefers to have the grain come to him in its natural state, so that he can more readily see the character of the wheat that he is buy- ing." The state grain commissioners reported to Governor Burke of North Dakota in 1910 concerning mixing at Duluth as fol- lows: "The mixing of different grades as they are inspected in and the grades they finally take out, on our inspection, is unjust and works to the disadvantage of our state. ' ' Report of Canadian Commission In the 1906 Report of Canada's royal commission on the grain trade in Canada the subject of mixing is dealt with in theso words: ''We have had complaints of loss by the farmers owing to the alleged substitution of and mixing of grains with that which was special binned. To prevent this practice, we are suggesting an amendment providing for the keeping of samples of all such special binned grain. * * * y^Q also found from examination of arrivals of grain in Great Britain that the grain as received there contains too great a percent- age of foreign matter. It is quite evident to us that there should be a complete supervision of the cleaning operation of these elevators (at Fort William). We were convinced at the time of our inspection that many of the cleaning ma- chines installed in the different elevators have not the capac- ity nor are they of the proper type for cleaning the grain to grade. With regard to the quality of the grain itself we would say that while there is a possibility of elevator oper- ators mixing grain contrary to the Inspection and Sale Act, 18— -M. F. c. 274 MARKETING AND FARM CREDITS vre did not find in the grain to its ultimate destination in On- tario and Great Britain, that there "was anr serious com- plaint as to the quality of the different grades being materi- allv reduced; still in some cases samples "were produced to us that "would lead us to believe that there had been either manipulation or serious mistakes made some"where." Our industrial commission report claimed that the farmers ship grain in poor condition, so that cleaning and mixing are necessaiy before binning is possible. The Equity Cooperative Exchange in St. Paul reported to the North Dakota Board of Control (December 14, 191-i) as follows: '"In the first place, no public grain elevator should be in charge of a custodian "who deals in grain. He should simply be custodian. A public elevator should have "what is kno"wn as a cleaning house attached to proper bras so that grain may be properly cleaned, etc., and put into storage by the o"wner. The cost of operation should be the lo"west possible and -without profit — just enough to pay expenses. Every facility should be offered farmers to clean, clip, dry, sort, mix, or other-wise prepare their grain for market, the ser"vice performed being by one having no interest "whatever in any- thing but the performing of the service and the custodian- ship of the property. ' ' Conditions in Minnesota One of the most thorough investigations into the mixing problem was conducted by the "Works Grain Investigation Com- mittee of the ^Minnesota state senate in 1913. On the subject of cleaning, drying, and mixing gi-ain in terminal elevators, they report as follows : "Your committee investigated the cleaning, drj-ing, and niixing of grain as carried out in the terminal elevators. Tables submitted show that the terminal elevators shipped out in 2 years more No. 1 and- No. 2 wheat than they re- ceived. This result is brought about by improving and mix- ing the wheat. During some seasons a considerable quan- tity of wheat is received at the terminals containing a sur- plus amount of moisture. Such wheat is graded ' No Grade ' by the state inspection. After it is dried sufficiently it may be entitled to a higher grade. Again by mixing some No. 2 wheat with a sufficient amount of choice or premium No. 1 JAMBS. E. BOYLE' 275 the whole quantity will grade a medium or thin No. 1. A similar increase in quantity of any grade may be brought about by reducing the quality within the grade through ad- ditions of lower grade wheat. The possibility of mixing a certain amount of lower grades of wheat with higher grades increases the demand for and advances the price of the lower grades. 'No Grade' wheat frequently sells within 3 or 4 cents of No. 1, and the average price of the purchases of 'No Grade' by one terminal elevator company during the present season was 5% cents below No. 1. The same company pur- chased its No. 4 wheat at an average of 5i^ cents below No. 1. The possibility of improving and using these grains with higher grades undoubtedly was a factor in making these prices. That is, the value which wheat has for mixing pur- poses is paid for it by terminal elevator companies as well as miUers. Section 2053, Revised Laws 1905, as amended by Chapter 82, General Laws of 1909, requires any warehouse- man operating a terminal elevator to store grain in separate bins on the request of any owner or consignee, and requires the warehouseman, at the request of the owner or consignee, to clean, dry, mix, or otherwise improve the condition of or value of such grain and to deliver the same separately froTu the grain of any other owner or consignee, upon order. Therefore, any owner or consignee of grain, unless he is of- fered full f alue for that grain in its condition on track, may use the same facilities the elevators and mills have to clean, dry, mix and improve the condition of the grain. The fact that owners of grain seldom avail themselves of this privi- lege would seem to indicate clearly that buyers of grain at terminals pay the full value of that grain with reference to the possibility of improving it by drying, cleaning, and mix- ing. ' ' A committee of the l.Tinnesota house at the same time reported that the state should provide facilities for mixing grain until the farmers could cooperate and do it themselves. Mr. Henry Feig, supervising inspector of country elevators for the State of Minnesota, in a letter published in 1911, spoke of the effect mixing has on the price paid to farmers, in these words: "The mixing of grain in this manner is a benefit not only to those who mix the same, but it reflects itself back to the producer of low grade or No Grade grain. The process of 276 MARKETING AND FARM CREDITS mixing and cleaning makes it possible to raise the value of low grade or No Grade grain." The Canadian Eoyal Comjnission in 1906 reported that the price is not based on the poorest wheat in the grade. To quote : ' ' The argument is that the price of each grade is based on the lowest quality of that grade. This argument is not based on fact. The price of any grade is based on the result- ing average sample of all cars of each grade as they pass through the inspector's hands, and where the car of the high- est quality loses, the car of the poorest quality gains." Further evidence on this point is unnecessary. The law now provides for special binning whereby the farmer can get all the benefit of mixing. Yet the farmer does not use this priv- ilege. Is there any reason to suppose, therefore, that he would make extensive use of the mixing practice, even if he had a farmers" cooperative terminal or a government terminal? The farmer now has an adequate remedy in his hands for this al- leged evil. Inspection, Weig"hing, and Dockage Inspection as now carried on is done by the state, the inten- tion being to do impartial justice to the shipper and to the buyer and at the same time maintain the honor and prestige of the state's grain market or markets. Thus Minnesota in competition with Chicago, and Chicago in competition with the 2 ]\'Iissouri markets each seeks to maintain a market which will hold the shippers' patronage. Various official investiga- tions uniformly report the inspection to be inexpensive and fair to all. The most serious criticism of inspection is that it is now a matter of judgment only. To quote the federal government report on this (Bulletin Bureau of Labor Statistics 130) : "The states make provision for the grading and inspec- tion of grain for the convenience both, of the buyer and the seller. The fee for inspection provided by the law of Kan- sas is 1 cent per 1,000 pounds, minimum capacity of car, which fee in practice is paid by the shipper of the wheat. A fee of like amount and paid in like manner is charged for weighing. As already explained, wheat i« graded ac- cording to its weight, its soundness, its freedom from for- eign matter, and, recently, also by its color. The only cer- tain element entering into this grading is the test weight. JAMBS. E. BOYLE 277 The other elements are determined according to the judg- ment of the inspector. As a consequence there is much con- flict of judgment as to the grading of wheat. Inspectors disagree with each other and sometimes an inspector re- verses his previous grading, and there are frequent appeals from the decision of the inspector to that of the chief in- spector. So unsatisfactory is the present grading that there is a conflict between the Several states and one state will not accept the grading made by another state. It has been suggested that the disputes about grading, especially for shipments from one state to another, could be avoided by providing for inspection by federal authority. Such inspec- tion has been urged by many millers and grain shippers, who also urge that after inspection there should be no mix- ing of wheat of different grades. However honestly and carefully performed the inspection may be, still it is not a scientific test of the milling quality of the wheat. As be- fore stated, the gluten content is the element next to sound- ness considered in determining the price of wheat. Test weight, shape of berry, and color tend to indicate the amount of gluten in the wheat berry, but do not by any means determine it. Because of the crude tests applied in the present method of inspection a scientific laboratory test is coming into popular favor. In several of the large grain-handling cities there are laboratories devoted to a scientific ajialysis of wheat where samples can be submitted and the constituent elements of the grain carefully deter- mined. ' ' The Board of Control of North Dakota (1915 Eeport to Legislature) reached the following conclusion: "It is the opin- ion of the board that federal inspection installed on a prac- tical, efficient basis would give more uniform grades year in and year out and that there would be a general feeling of sat- isfaction among the producers in the knowlege that the gov- ernment was inspecting, grading, docking and weighing the grain. ' ' In any event, a state owned terminal elevator would not change the present methods of inspection, grading, and weigh- ing, A Kansas elevator in Kansas City, Missouri, would IJe subject to Missouri inspection, a Dakota elevator in Minnesota to Minnesota inspection, and so on. In other words, the mere fact of state ownership of the terminal elevator will have no effect on inspection, weighing, or dockage. 278 MARKETING AND FARM CREDITS Dockage is growing heavier from year to year, quite nat- urally, as the farmers' fields become fouler with weeds. And when the imperfect grains and foreign matter are removed from the grain an increasing amount of screenings is the re- sult. On these screenings the farmer has paid freight and suf- fered dockage, and he feels a grievance. Wliat is the remedy for this situation? Says the North Dakota Grain Commission in its report to Governor Burke, -'keep the screenings at home." This operation should be performed either on the farm or at the local elevator. Here again, it isi hard to see where a state owned terminal elevator would remedy the condition. Open, Competitive Market The North Dakota Bankers' Association in their meetings of 1906 and 1907, claimed the farmers of the Northwest were not enjoying an open and competitive grain market at the ter- minals. Similar claims were made to the industrial commis- sion in 1901 concerning the Chicago market. Have conditions changed since then? The federal government report on the Kansas wheat situa- tion (1914) spoke of the condition in these words: "The con- trol of the elevator situation by a few powerful companies is not an unusual one in the large wheat markets of the United States, and it is a question whether it is the ideal condition for the grain trade at large." * * * "No evidence was discovered" (concludes the report) "of collusion between large interests to restrain competition or to depress prices in Kansas City. In Kansas City 86 per cent of the terminal elevator ca- pacity is controlled by 6 firms, but these firms appear to be in competition with each other. ' ' On the whole, the grain business now is fiercely competitive, according to the findings of the federal Department of Labor Bulletin (Bureau of Labor Statistics 130). The situation is described in these words : " In a survey of the distribution of wheat and flour, three things are noticeable : the intensely competitive character of the business, the excess in the equipment for distribu- tion, and the desire for independence of the people engaged in production and distribution. If one farmer will not sell Ills wheat at the price offered another farmer will. Local dealers, jobbers, and millers bid against each other in buy- JAMES. E. BOYLE 279 ing and selling. Flour is made in the town of A and ship- ped by rail to be sold in the town of B, while flour made in B is sold in A. A grocer in the east end of town hauls flour across the city to a customer in the west end of town, and the grocer in the west end delivers to a customer in the east end. The Minnesota miller sometimes buys Kansas wheat, and the Kansas housekeeper sometimes insists on having Minnesota flour. And not only are the products crossing trails in distribution, but traveling salesmen of many mills and flour jobbers are duplicating their la- bors in the same territory. Beginning with production, there are more seeding and harvesting machines in the hands of farmers than would be needed if there were co- operation in production and each machine kept in opera- tion the entire harvest season. There are more elevators in the wheat area than are needed, each operating most of the time on less than its full capacity. In some sections there is needless duplication of railroad trackage. More grain jobbers and commission men are in the field than can find continuous business. It is asserted that the millers of the United States could grind all the wheat raised in the United States in 144 days. ' ' Apparently we are suffering from too much competition rather than too much combination. When grain prices are high, farmers are satisfied; when grain prices are low, they blame, to a large extent, the termi- nal elevators. Yet if the government would build a hundred terminal elevators and furnish free storage, it would likely not change the price of grain by one cent a bushel. World mar- kets, operating under known and anticipated conditions of sup- ply and demand, determine grain prices in the last analysis. All official investigations with which I am acquainted find the smallest margins and smallest leaks in the terminal elevators, and the biggest leaks and biggest margins at the local eleva- tors. Here, says the North Dakota Board of Control report : "In this transaction between producers and the buyer of the local elevator company, there is no third disinter- ested party to dock, grade or weigh the wheat or other cereals and thereby determine its actual weight or worth. If after a thorough investigation a practical system of in- spection and grading could be had for country elevators with proper supervision, in our judgment it would elim- 280 MARKETING AXD FARM CREDITS iuate 80 per eeut of the abuses now complained of by the farmers of this state." Government Owned Terminals Canada's experience with government terminal elevators is too short to prove anything, one way or the other. Canada went into government ownership of elevators under stress of ■i critical conditions none of which atfect us. namely: (1) lack of railroad facilities, both in railroads and care to move the crop; (2) great and sudden increase in wbeat acreage a thou- sand miles from the terminals; (3) lack of interior storage — in conjunction with distance from market and car shortage, making necessary the piling of grain on the ground ; {i^ two successive grain crops seriously injured by dampness. Canada has gone into the government elevator business to the foUoAving extent (^ according to the 191-4 report of the De- partment of Trade and Commerce, part V, grain statistics) : The Dominion terminal at Fort William cost $1,379,400.43 and has a storage capacity of 3.250,000 bushels. Interior stor- age at Moosejaw, cost $1,200,000; its storage capacity is 3,500,000 bushels. Interior storage at Saskatoon, cost $1,100,- 000; its capacity is 3,500,000 bushels. Interior storage at Cal- gary, cost $850,000 ; its capacity is 2,500,000 bushels. The total cost was $4,529,409.43. Total storage capacity, 12,750.000 bushels ; cost of erection, 35 cents a bushel. The cost of operating the Fort William elevator for one year (Oct. 16, 1913, to Aug. 31, 1914), not including interest on plant or depreciation, was $68,111.35. Most of the non-partisan investigations which I have been able to discover reach the same conclusions regarding govern- ment terminal elevatoi"s, namely, that the experiment is un- wise. The Royal Commission of Canada of 190ti has this to say on the subject : "Requests were made of us in the country that the ele- vators at Fort William and Port Arthur should be taken over and opei'ated by the government in vieAv of the fact that so many of them were operated by private corpora- tions interested in the grain trade. We also had a eom- mimicatiou from the department under date January 23, 1907, enclosing a petition of members of parliament ad- dressed to the right honorable the premier, requesting that we be instructed to specifically 'inquire into and report JAMBS. E. BOYLE 281 whether it is in the public interest that terminal elevators * * * continue to be operated by the common carriers or allowed to pass into the hands of or be operated by per- sons, firms, or corporations engaged in the grain business.' In reply to this communication we addressed to the Right Honorable Sir Richard Cartwright, minister of trade and commerce, a letter dated February 1, a copy of which is appended hereto. We can see no reasons for changing the conclusions arrived at at that time, and we believe if our recommendations are carried out they will give the public the same confidence and protection in the operation of these terminal elevators as if they were owned by the government. ' ' And in the letter to the minister of trade and commerce re- ferred to above, the commission says : "To prevent the evils that are made possible by the op- eration of terminal elevators under the present system, we do not think it wise to advise the government to go to the length of taking over the terminal elevators or of prohibit- ing persons engaged in the grain trade being interested in such terminals. We believe it is possible to obtain a good service from these elevators under the present ownership by having a more thorough system of supervision and con- trol." To the 800 farmers in 1910 Avho addressed him in favor of government elevators, Premier Laurier refused to commit him- self for or against the proposition, but he did say that this scheme did not go to the root of the problem. North Dakota has had 3 separate commissions to investigate the problem. The first, made in 1908, (Public Document, No. 37, 1908) recounted the familiar "evils," especially in the local elevators, and recommended among some 10 or 12 things, the leasing of terminal elevators at Minneapolis and one at the head of the lakes. The second, in 1910 (Public Document No, 26, 1910) after complaining of the usual evils of mixing, inspection, dockage, and local elevator abuses, recommended state-owned terminal elevators at Minneapolis and Duluth or Superior. The report also contains the usual booster state- ments that ' ' our state produces more wheat on the average than any other state in the union," and "our wheat being acknowl- edged the best in the United States, ' ' both of which statements are amiable errors. 2S2 MAKKKTING ANP FAUM OUKPITS The third repoi't, made in 1015 to the st^\te legislature by the moiuhevs of the state hoard of oontrol. after a thorough can- vass of the situation in Canada. North Dakota. ^Minnesota and Superior. ^Viseousin. eondemued in phiin hniguage the whoU^ proposition of state-OAvned tenuii\als. Enough Storage Space Already Tn no ease is it apparent that the evils eomplaiued of in our grain trade would be eured by state-owned terminal eleva- tors. 1 have tried to show this step by step. Henee the tre- mendous investment necessary to erect anything better than insignitieant storage houses l^the Canadian Dominion terminals cost oo cents a bushel to erect"* would likely prove a disap- pointment as well as a loss. Adequate storage exists at every terminal. A glance tlirough the pages of the American Ele- vator and Grain Trade of Chicago furnishes evidence enough of the growth of tenuinal elevator capacity as fast as the grain output increases. And accordu\g to our federal g'overnment investigation already cited, we have too many local elevators. Hence theiv is no pressure for more storage. Nor is there de- mand for cheaper storage, since terminal storage rates are regulated by the respective states. AVe can aiford to wait a while and watch Canada's experi- ence. It will be cheaper to get their experience than to pay for our own. Alivat.1%- I have heard run\ors from accredited sources that, bad politics is at work in these Dominion eleva- tors, tinding jobs for deserving politicians. And we may also wait a.nd watch the results of the public elevatoi*s at Seattle and New Orleans, and see how wisely these two cities manage to use the public funds. Present terminal elevators of modern construction ai'e of steel or concrete, and have a capacity of from ;> to 10 million bushels. To erect one of o million bush- els would cost the state a million dollars or more: a G-million bushel house — and this size is more economical to operate than a snmller one — would most 2 million dollai*s. If instead of spending S or 10 million dolhu*s on these terminal elevators the state would vnit the same money in good roads, it would confer a great benetit on the farmer, not only by helping liim to get his grain to market with a wider margin of profit to himself, but it would also cause a permanent ii\crease in the land values far in excess of the cost of the improvement. The whole commnnitv would be the beneficiaries of such a use of J. M. ANDERSON 283 public fniuls, il' these few millions of dollars be available for •expenditure. Thirty years ago, the railroads owned and operated the ter- minal elevatoi-s, for in no other way could adequate storage be found for iluvir grain shipments. Here also abuses of vari- ous kinds arose, but there also grew up adequate government supervision and control. Now the farmer wants more direct control ol' the grain trade, and he is entitled to it. But shall he proceed to get it along the lines of government ownership, or shall he rather proceed along the lines of self-help through cooperation? In short, shall he do as the orange growers of California hav(^ done, namely, organize his own marketing ma- chinery through cooperation? The'farmers' elevators are slowly, year by year, driving out the independent and the line elevators. And since self-help is always better than government subsidy, the farmers' coopera- tive terminal elevator is the next logical step. But even here the way of reform is beset with difficulties, for we read in a re- cent number of the Grain Growers' Guide of Winnipeg (No- vember 17, 1915), the official organ of the cooperative farmers of that section, that the farmers have failed to patronize the farmers' cooperative terminal elevator at Fort William. problems' of a cooperatively owned terminal system J. M. Anderson President, Equity Cooperative Exchange I represent here the Equity Cooperative Exchange which is a North Dakota corporation, incorporated under the laws of that state in 1911. Its capital stock is $50 a share. It has a paid-up capital now of $75,000. There are about 1,200 stockholders, all of whom are farmers. It's board of directors is made up of farmers, all of whom live on their farms with the exception of me. My entire tinie is given over to the management of the atfairs of the corporation. Our capital stock draws a dividend of 8 per cent a year. The balance of the net earnings is pro- rated back to the shippers of grain, so we hold that we are a co- operative organization. I might say also that our stockholders 284 MARKETING AND FARM CREDITS are entitled to only one vote to tiie man. regardless of the number of shares of stock that he holds. Such in brief is the nature of our corporation. We began bus- iness, the business of grain commission merchants, in 1912. in the cities of Minneapolis and Superior, AYisconsin. We handled during the first year of our business about 1,800,000 bushels of grain. The second year that we operated we handled about 3 million bushels and last year we handled about 5 million bushels. We have handled since the first day of August of this year, in other words, in -i months, we have handled about 61^ million bushels. So you see we are growing. We handle grain now at the rate of about 125.000 bushels a day. and our average daily balauces. our bank deposits, are about $130,000. Now. gentlemen, we have had some experience in the few years that we have been in the business. In the fii'st place, we have been charged with dealing in pei-sonalities and your secretary, when he wrote inviting us to come here to address this confer- ence, asked that we refrain from indulging in pei'sonalities, and the letters that we get from the different parts of the country asking us to come to address audiences usually carry ^^itll them that suggestion. Now, gentlemen, I assure you that it has been an unpleasant task to go out in the country" and deal in person- alities but we have had to do so as a matter of self-defense. Any respectable citizens could not permit themselves to be called the names that we who happen to be the officers of the Equity Ex- change have been called, and not go out in self defense. Interests Fight Equity Exchange When we began business in Minneapolis we were denied en- trance to the ^Minneapolis Chamber of Commerce, which is the board of trade in that city. I speak now of the Minneapolis market and the Duluth market, for those are the only 2 mar- kets on which we have had any experience. We were refused admission and the only thing left for us to do was to set up our tables, present our samples of grain and try to get buyers in that way, or to go back home and tell the fanners that we had failed in our efforts to establish a cooperative selling agency on the terminal markets of ^linneapolis and Duluth. And we chose the former course. We secured state inspection there in Min- nesota, set up our samples and attempted to sell our grain to the 4 large mills in Minneapolis. They never bought a bushel of grain from the Equity Exchange. We have buyers coming to J. M. ANDERjSON 285 our offices in St. Paul now asking if we have any grain for sale that is not mortgaged, and when we asked them why they ask that question they tell us that they have been told that all the grain that the Equity has is mortgaged grain and grain that has been stolen. And, gentlemen, in our efforts to establish a co- operative market on the terminals we have received no govern- ment protection in the hardships that have been worked upon us and what we are asking is that the government take charge of the big terminal markets and allow the fellows who want to sell grain to come there and sell grain without joining any chamber of commerce or any other organization. You can go to your local market out through the country and sell grain with- out joining the commercial club or the ladies' aid, can't you? Well, why shouldn't you be permitted to come to the large ter- minal markets and sell your grain without joining any board of trade or any other organization? And we hope that some day we can induce the federal government to prosecute the millers who are discriminating against Equity grain because the Equity organization is not a member of the regular board of trade. Why There is Discrimination Now, why don't they buy from us? "We haven't mortgaged the grain for sale. There are days in St. Paul when we have as much grain as you have here in the city of Chicago. There must be something in the minds of those men that kept them away from the Equity market, some selfish interest whatever that something is. Now who are our buyers ? We sell grain to the millers located out in Minnesota and Wisconsin and Iowa. We have millers of St. Louis on our market now buying grain. The day before I left, the day I left, day before yesterday, an exporter from St. Louis came to buy Equity grain. Whenever a new buyer comes to us we ask him why he comes. And they usually say, ^'We come to this market because we want to get the grain in its original state and the grain as it comes from the country, un- mixed," One miller told me that he wasn't permitted to come near the tables in Mjinneapolis where he could buy that grain. He said the only grain he could get was elevator grain. "Well, I said, ''why don't you want elevator grain?" He said, ' ' Because it has been mixed. ' ' 286 MARKETING AND FARM CREDITS If you will go on the Minneapolis market von will find that ele- vator grain sells from 1 to 2 and 3 cents per bushel less than grain on track will sell for because the grain on track has not been mixed. And one of the reasons that we want either government elevatoi-s or cooperative elevators on the terminal markets is to provide a place where grain can be stored and be assured that it "v^dll not be mixed while it is in storage. A DiiEcult Storage Problem There is the matter of storing grain. You can't store grain in the public terminal elevators where mixing is permitted without that grain depreciating in market value. And Avhat you want is elevators in which grain cannot be mixed. Then there is another phase of the storage question that is being debated very much in the spring wheat district of the Northwest, namely the selling of store wheat. In our agricul- tural college at Fargo, or under the supervision of that college, a number of experiments have been carried on for years to as- certain what it costs to produce wheat in the State of North Dakota. And Mr. Palmer, I believe, is the man having this in charge. Isn't that right, Mr. BoUey, Mr. Palmer? iMr. Bolle}': He may be given the summaiy of it, but they come from several sources. Mr. J. M. Andei-son : I think it was Mr. Palmer w^ith w^hom I spoke at any rate. Mr. Bolley : I presume that is right. Mr. J. M. Anderson: Mr. Palmer told us that the farmers in North Dakota should receive at least S6 cents per bushel for their wheat if they were to make any profit at all. Now, it isn't very often in North Dakota and Western Minnesota that the farmers receive 86 cents per bushel in their local mar- ket. They are compelled to sell at less, and one of the reasons why they are compelled to sell is that their debts mature in the fall of the year. They are paying, as w^as illustrated here by charts, all the way from 8 to 10 and in some places they liaA^e been paying 12 per cent interest, in North Dakota. There isn't very much inducement to those men to leave their wheat back home is the bins and pay interest on the monej^ which that wheat represents, pajdng 10 per cent interest and holding their wheat for higher prices. And for that reason we want a public storage system where these men can store their wheat and take their storage tickets to the bank as collateral security J. M. ANDERSON 287 and obtain money on them at the 4 or 5 per cent interest rates at which money can be secured on terminal warehouse receipts as collateral. Cooperative Ownership a Hope. Now, gentlemen, it may be that we can get those elevators through private initiative. In the state of North Dakota this matter has become a religion, as our friend, Doctor Boyle, with whom I formerly went to school, has told you. But North Dakota is just a great big farm, doctor; that is, all we have up our way is agriculture and good schools. And we believe that the state should experiment with seventy-five or a hundred thousand dollars in the establishment of a government .ele- vator in the terminal markets, if, for nothing else than to fur- nish a storage place for the farmers where grain cannot be mixed. Now, the matter of cleaning grain has been discussed here. Of course, the place to clean it is out at the local elevators. But most of those elevators handle in our state from 2000,000 to, in some instances, 400,000 bushels of grain each year ; and they haven't the room for cleaning. "We get grain on our tables in St. Paul that has a dockage of 10 or 12 pounds to the bushel, and in most instances we have to give that dockage away, whereas, if we had an elevator and could clean it there the dockage could be saved to the shipper. Mention has been made of the terminal elevators. "We have had some experience with the elevators in Minneapolis. In 1913 we received an order from the railroads in Minnesota for- bidding their cars to go to other points, to points located on other roads than their own. That is, if we sold a Great North- ern car to go to La Crosse, Wisconsin, located on the Burling- ton, that we Avould have to transfer the contents of that car to some other car. In other words, the Great Northern lines wouldn't let their cars go on. The only place where we could have a transfer made was in an elevator. We received some orders from all the railroads entering the Minneapolis market on the same day. ,We had some 75 cars on the Minneapolis market. We went to the elevators and asked them to transfer this grain for us, and they turned us down. Not a single car would they trans- fer. And there we were. It looked like a blockade. We telegraphed the situation to Senator La Follette at Washing- 288 MARKETING AND FARM CREDITS ton, "vvlio took tlie matter up with Commissioner jMarble, one of the best men that was ever a member of the Interstate Com- merce Commission. When Mr. Marble had heard the facts he sent an order to all of the railroads in Minnesota ordering them to let their ears go on as usual. I mention this because it illustrates that these public elevators are not always at the service of the gi'ain dealers, and not always at the service of the shippers. Problems of Finance Now, the matter of financing. We have had some experience in that line. When we started business in Minneapolis there was only one bank that would furnish us any money. Only one bank that would furnis'h any credit to the Equity, and that bank furnished $50,000. That was all that we could get anywhere. We had good paper. We had promissory notes bearing 8 per cent interest, carrying the name of the corporation, signed by its officers and endorsed by the directors on the back of the note, each director endorsing or signing as individual surety. We had $100,000 of that kind of paper, but no banks would take it. It was then that we moved to St. Paul. The St. Paul banks said, ' ' Bring your paper to us. If you will come to St. Paul to mar- ket your grain, we will finance you on that kind of security." We moved to St. Paul a year ago last August. We are borrow- ing from the St. Paul banks now in the neighborhood of $400,000 a day used in the financing of grain. This, briefly stated, gentlemen, has been our experience on the terminal markets. And, briefly stated, I would say this, that the federal government should take charge of the big terminal mar- kets and make them open markets, permitting anybody to go there and sell grain or buy grain or the product^ of grain. The federal government should see to it that it is unlawful to mix grain in any elevators. And I believe, too, that the federal gov- ernment should build at least one good sized terminal elevator at Chicago, Minneapolis, Duluth, and at some other grain mar- ket, just to give the fellow who is pinched by the other crowd an opportunity to come in and get his elevator service. Had there been such an elevator in Minneapolis at the time that we were denied elevator transfer privileges in ]\Iinneapolis, we would have felt a whole lot better, a whole lot better than we did. As it is, the federal government came to our aid through the order is- sued by Mr. Marble of the Interstate Commerce Commission. J. M. ANDERSON ^ 289 Warehouse Certificates Should Be Recogfuized By Federal Reserve System And, then, again, I believe that the federal government should accept the terminal warehouse receipts as collateral in the fed- eral reserve banks. They are accepted as collateral for loans in those banks at the present time, but the application for loans must come through some banker, and thus far we have been un- able to induce any bank to ask for loans from the federal re- serve bank. I wish it were possible for the farmers or credit associations or something that is under the control of the farmers to go to the federal reserve banks and get the money when the other banks have turned them down. What it Costs to Handle Grain in Terminals Just a word now in regard to the cost of handling grain on the terminal market. Through the interesting times that we have had in the Northwest in the past 3 years we have spent considerable money. Our little corporation had only $42,000 of paid-up capital on the first of August this year. We had a defi- cit staring us in the face of $33,000. That is, we were that far behind in the game. We have made as a net profit since the first of August over $40,000 in handling about 6 millions bushels of grain. ^ I believe that grain can be handled on the terminal mar- kets for less than a quarter of a cent per bushel as a commission leaving the other three-quarters to be rebated back to the ship- pers of grain. If that amount were saved by the farmers of North Dakota alone each year it would yield them over a mil- lion dollars as a net profit. Gentlemen, we are trying to solve these problems there on the terminal markets for ourselves. We are so well under way now that Ave believe we are -going to succeed. We are able to pay an accumulated dividend of 8 per cent now. And if that is the measure of success of the corporation you can. see that the Equity Exchange has been a success. We believe that in the very near future Ave will have provided a system of marketing whereby the farmers can control their grain while it passes from the farms to the mills. 19— M. F. c. 290 MARKETING AND FAR:M CREDITS THE GRAIN GRO\\'ERS OF WESTERN CAN- ADA AND THE MARKETING OF THEIR OWN GRAIN Geokge F. Chipmax Editor, Grain Growers' Guide The history of the organized grain growers of Western Can- ada is a record of struggle and achievement to bring about im- provements necessary to give the farmers a square deal in the grain trade. They have had to fight every inch of the way against the most powerful and best organized interests in Can- ada. Steadily, however, for the past 15 yeai-s they have made progress until today the grain growers' organizations of Manitoba, Saskatchewan and Alberta are one of the biggest factoi*s in the commercial, economic and political development of the Dominion. (Prior to 1900 there was no government regulation nor con- trol of the grain trade. The Canadian Pacific Railway which was then the only railway in Western Canada and the line ele- -vator companies had complete control of the marketing of the grain. All the country elevators were built on sites leased by the railway company and there was an agreement with the rail- way company that they would not furnish cars for the ship- ment of grain except to the elevators. The result was that the elevator companies had a monopoly and that they used that monopoly to oppress the farmers most shamefully. The farmer who hauled his wheat to the elevator was forced to accept the weight, grade, dockage and price that the operator might offer, and there was no appeal from the decision of the elevator com- pany. Many a farmer who saw himself robbed of from S cents to 10 cents a busbel on his wheat was informed that if he did not like the system he could haul his grain home again. This condition of affairs continued with little improvement until the year 1899. At that time in response to the protest of the western farmers the federal government appointed a royal commission to investigate conditions and to recommend legis- lation. As a result of the work of this commission the Mani- toba grain act was passed by the federal Parliament in 1900 for the res-ulation of the erain trade of Western Canada and a GEORGE F. CHIPMAN 291 warehouse commissioner was appointed to administer that act. Under the Manitoba grain act every grain company was li- censed and bonded for the protection of the farmer and pro- vision was made for the erection of loading platforms over which the farmers could load their grain into cars and become independent of the elevators. The loading platform provision, however, was a dead letter, because there was nothing in the act to compel the railway companies to supply cars to the load- ing platforms when the farmers required them. Farmers Organize to Secure Relief The Manitoba grain act of 1900 brought some relief, but the farmers saw that it did not break the monopoly of the eleva- tor companies and they determined to organize in self-defense. The Grain Growers' Organization was started in 1901 in Sas-V- katchewan and rapidly spread all over the 3 provinces^.* The associations were all organized in local groups with local officers and these again organized into provincial organizations , with provincial officers. Prom the time this organization be- gan the farmers made know, their demands to the Dominion, government in no uncertain sound. In 1903 the farmers' representatives waited on the lOttawa government and asked for amendments to the grain act giving the warehouse commissioner power to force the railway com- pany to build loading platforms and to supply cars to the farmers who required them. The elevators and the railway company were successful in opposing this demand. In 1906,. however, the Grain Growers' organizations had increased very- much in numbers and another delegation was sent to CM;tawa.. This time the government appointed another royal commission to look into the conditions in Western Canada. At the hear- ings of this commission the farmers piled up evidence show- ing the need of the loading platform which was finally recom- mended by the commission. Again at Ottawa in 1908 the or- ganized grain growers pressed their claims upon the govern- ment and at the conference in Ottawa at that time they were- opposed by the elevator interests, the railway interest and the- bankers' association. But so strong was the farmers' case that the government yielded to their demands. The grain act was amended so that the railway company was forced to build loading platforms wherever there were 10 farmers who wishedl tO) use it, and the .292 MARKETING AND FARM CREDITS a-ailway company was forced to supply cars for the loading^ platform as the farmers required them. A car-order book was provided at each shipping point in which every farmer requir- ing a car entered his name and the local elevator was allowed one ear in turn with the farmers. Heavy penalties were pro- vided against violations of the act, and from that time on there lias been very little trouble over the loading platform. The railway company did not accept the new order of things with- 'out a struggle, but after being prosecuted and fined for vio- lating the act they fell into line and gave little further trouble. Birth of a Central Selling Agency While the struggle over the loading platform was continuing the organized grain growers were pressing for improvements in other directions and steadily strengthening their organiza- tion. They found that men could not be made honest by law, •and, after careful consideration, they decided that the only vray to correct the evils of the grain trade was by going into the business themselves. As a result, the Grain Growers' Com- pany was organized in 1906 as a commission firm. It had very small capital and was not regarded seriously by the grain trade. In fact, the farmers' company was allowed to purchase a seat on the grain exchange without opposition. Business began to flow to the new company in considerable Volume and this aroused the antagonism of the organized grain trade who realized that the farmers' company must be nipped in the bud or it would be dangerous. The Grain Growers' Grain Company had announced its intention of distributing profits on the cooperative basis. The grain exchange seized upon this as a pretext and suspended the farmers' company from membership in the grain exchange in the first year of its operations. The bank with which the farmers' company was doing business, to make the funeral of the company complete, withdrew its credit. The farmers' business organizations of Western Canada at that time were nearly snuffed out. A 'number of farmers got together and by pledging all their prop- erty succeeded in securing sufficient credit to carry the small stock of grain on hand. The Winnipeg Grain Exchange which received its charter from the Manitoba legislature was brought to time in a differ- ent manner. The Manitoba Grain Growers' association, num- bering 6,000 or 7,000 farmers at that time, approached the GEORGE F. CHIPMAN 293'" Manitoba government and demanded that they come to the rescue. The government requested the grain exchange to re- instate the farmers' company, but without avail. The Grain Growers' Association continued its pressure on the govern- ment and finally the premier of the province served notice on the Winnipeg Grain Exchange that if the farmers' company were not reinstated to the full trading privileges of the ex- change he would call a special session of the legislature and cancel the charter of the exchange. Under this threat the grain exchange reinstated the farmers ' company and from that j time on the Grain Growers' Grain Company has been a mem- ber of the Winnipeg Grain Exchange. Finally arrangements were made with a small eastern bank by which the farmers ' , company was enabled to continue its business, and this bank! has continued since to finance the company. Breaking Exchange Monopoly At the next session of the Manitoba legislature the farmers- demanded amendments to the grain exchange charter which would break its monopoly and give the farmers better treat- ment. As a result the legislature amended the charter radi- cally. In fact the grain exchange refused to work under the new charter and has ever since operated as a voluntary or- ganization with no legislative charter, but they had learned their lesson and have never since attempted to expel the farm- j ers' company from their organization. But the organized elevator interests were not so easily dis- couraged. They established in 1909 a secret publicity bureau | in charge of an able writer. The purpose of this work was to- throw suspicion upon the men at the head of the farmers' com-] pany and bring about disruption and internal strife in the- farmers' organization. They purchased space in the farm pa- pers in which they published these articles. The Grain Grow- ers' Guide, however, exposed the plot of the elevator interests with the result that the farmers cancelled their subscriptions to the papers publishing these articles and in less than a monthi the whole publicity scheme was destroyed. The next attempt on the part of the elevator interests to de- stroy the farmers' company was in 1910. The commission rule- of the Winnipeg Grain Exchange was that every grain com- pany should charge 1 cent per bushel on all grain handled.. Suddenly this commission rule was suspended entirely and the- 294 MARKETING AND FARM CREDITS elevator companies set out to handle the farmers grain at i/'o cent and many of them handled it for nothing, the purpose being to draw the grain away from the farmers' company. At that time, however, the Grain Growers' Grain Company had thousands of farmer shareholders and had become the largest commission firm on the exchange. The company took a ref- d supplies. TVith such conditions sharpening the wits and developing. to> a high point, the business efficiency of the agricultural intei*est of competitive nations, theiv can be no doubt that it is time for the American people to consider the agricultural problem as hav- ing an aspect that is grave and of deep portent. It is time to take stock of our I'esources. It is time to depart from our char- acteristic habit of viewing national questions in a personal way and to consider what is to be done for the common welfare. This implies and necessitates change : and it seems to me that the basis of all this change must lie in a moiv normal and wholesome pol- icy of distributing of our present farm populatioi\. and the popu- lation that must become farmers, over the land. I cannot but think that whatsoever change or transformation that may come about in this gigantic etfort of America to idealize muscular con- trol, it must rest upon this needed readjustment, and upon the civation of social checks to prevent further maladjustment of our population to our land. The solution of the laud question is the root issue in national pi-eparedness for America, whether this prepaivdness be of a commeivial or military cast. It is the only possible way of building a high type of agricultural efficiency, the basic element of a nation's strength. Ireland — The Land and the People The history of Ireland is more closely associated with struggle for the land thtm perhaps is that of any other nation ; for, un- like their British neighbors, who have btvu a noted seafaring folk, the Irish have had a lesser gift for the st\i. They are pecu^ liarly a land loving people. And their traditions, bom of the imaginative temperament associate themselves Avith intense local ties and attachment to the soil. Their earliest form of organiza- tion, when history lifts the veil upon the primitive life, is one based upon clan aiul sept organization of the people and tenure of the land. It was the disruption of this type of organization and the sub- stitution for it of the Xorman feudal life, to be followed bv the CHARLES W. HOLMAN; 303 forcible eviction of Celtic peoples from their soil as possessors, and the later turning of them into tenants paying rents to alien owners, that began the story of Ireland's woes. It was continued oppression centering upon the ownership of the land and extending even to efforts on the part of England to extinguish language, custom and religion and industries that prolonged the struggle for 7 centuries. That struggle culmi- nated in the complete prostration of the country, and thousands of people died along the roadsides, because an iniquitous system of land tenure had developed a one-crop system and that one- crop system had failed ! That prostration is still known as the ' ' black famine ' ' of 1845- 49. It was followed by a series of years in which good crops would follow bad crops. In the years of good crops, the landlords raised the rents, and in the succeeding bad years, the tenants fell into arrears. It was inevitable that the tenants came to consider the landlords as typifying England; that discontent and hopelessness should quickly fire into sporadic rebellions. The tenant folk revolted. They burned the landlord's prop- erty and they assassinated the landlords themselves. Secret or- ganizations were formed which, in later years, flowered into the Agrarian revolution led in the name of the Land League, by Davitt and Parnell, and their associates. It was this pitiable plight of the Irish peasantry, together with their forcible resistance of the rent collectors and the evic- tion bailiffs that caused the English government at last to recog- nize the great injustice which had been done and to take steps leading toward a national restitution. But an idea of the depleted condition of Ireland even today is essential to an understanding of what the English govern- ment has done; why it was necessary and what are the results that we may expect. Ireland is a country of about the same size as the State of "Wisconsin. Because of this policy of oppression and the lack of landlord regulation, the extreme poverty of the population forced a decline from 8,801,827 in 1821 to 4,390,219 in 1911. There has also been a decline in the birth-rate and a decline in the size of the Irish families. In 1821, the average Irish family numbered 5.18, in 1911 it had decreased to 4,82. So from this very decline of birth-rate, we may glimpse the tragic economic pressure that caused the young people to go away. 304 MARKETING AND FARM CREDITS A Land of Empty Houses and Aged Men That exodus has left its mark upon the Ireland of today. The dilapidated house with the unshut door tells of those who once lived there but went out into the world. The empty home is the common sight, for the inhabited houses have decreased from 1,328,839 in 1841 to about 861,000 at the present time. There were 4,278,000 who went away in the period marked between 1851 and 1913. They were the best of the land — they were the young men and the young women. Behind them they left their country to be reckoned as the land of aged folk. For Ireland contains an abnormal proportion of the old. There are 203,000 persons, or 5 per cent of the entire population who are drawing old age pensions from the British government. These pensions are given only to persons of 70 yeai*s of age and over whose in- come is less than about $18 a year. What wonder is it that the liquor-selling public houses have increased in Ireland, when there are none left to support the widows. But how depressing to view the extraordinary increase of the small traders in the to^ns and of the traveling traders or peddlers in the country districts. In the face of this declining population, the trader class has increased from about. 71,000 in 1881 to 112,000 at the present time. Thus, you will see that the classes which bridge the gap between consumer and producer have been multiplying beyond the need of the country, and their increase has intensified the strain that is put upon the produc- tive occupations. In some cases this middleman class has ob- tained a strangle-hold on the farmers, getting them in debt, charging ruinous credit prices and Shylockian interest rates, earning for themselves the opprobrious name of "Gombeen" men.* How the Irish Use Their Land In England, the average size holding is 72 acres ; in Scotland, 177 ; in Wales, 67 ; but in Ireland, the average size holding is 33 acres. The land of Ireland is di\dded into very small tracts. It might be called a nation of little landers, because about half the occupiers live upon holdings that are 15 acres or under in size. Of the remainder there are 2 farms out of every 5 of between 15 * This name is derived from the Irish. "Gromb" means a fly, and 'een" is the diminutive. CHARLES W. HQLMAN 305 and 30 acres, while about an equal number vary from 30 acres to 100 in size. Qnly 11 per cent of Ireland's acres ever receives the point of the plow, and part of that is in meadow land. Permanent pasture comprises 50 per cent of the entire acreage ; the balance of the acreage is in woods, waste, bog, mountain and water. In some respects, Ireland might be compared with Texas or any western state ; for it is a country with a farm population con- centrated in some parts, but at the same time it has a ranching population, because the small farms are really small pastures, and the farmers of that country have gone in for the pasturing of their cattle, rather than the tilling of the land. At the same time, there is a maladjustment of the population to the land. In the western parts of the country, there is a serious congestion. There many families have found themselves located upon land that is insufficient, either in quantity of acres or in fertility of soil to support the population. Yet in these particular sections, occurs a most noticeable tendency to cut up the holdings still further. That brings about a peculiar situation, whereby a large proportion of the people in these dis- tricts are really farm consumers, because they must be supported from other sources than their holdings. They move annually from the western districts to the richer lands of Scotland and England, where they work on the big farms. They usually stay about 5 months of the year and come back to their little cab- ins Mdth their small hoards to spend the winter. The straggling crops which they have planted in those sections are cultivated by the women and the children, to be gathered by the men when they return. Problem of Expenditure in Congested Districts Like City- Laborers' Problem So we may see that in these districts, one has a problem in the disbursement of family funds, rather than in the increasing of family income ; for these people are in a position analagous to that of the wage laborers of our industrial centers. Their chief concern is getting enough money together for a living, then cutting the cost of this living down to a minimum. Hoav differ- ent is that problem from the one that faces the American farmer, who, because of the unformed, unorganized conditions, still has the problem of increasing his income and is not overly burdened with concern as to its expenditure. 20— M. F. C. 306 MARKETING AND FARM CREDITS Yet iu the ""Western AYoiid"'. as the natives eall that section, there is a keen hiiuger for land. Families aiv crowded on i*oek-ribbed. barren coasts ; one will pass holdings where attempt* have been made to build the land out into the sea. The sea- weed is gathered to build soil, and the kelp is burned to eke out family incomes. But the right to land. — to a piece of the land, — is clearly the strongest demand of the Irish heart, and the trag- edy of Irish life concerns itself largely with the leaving of the neighborhood .where the Irishman was born. On all side§ one is conscious of poverty, of depletion, of tilth and of ignorance. Such scenes strike one to the heart as the price. — the fearful price — tha^ Ireland has paid in her 7-cen- tury-old tight to regain possession of Celtic soil, to make a tii*st step toward national unity based upon economic freedom, and to seize a fighting chance for political autonomy. A National Dramatic Stnigg-le The griTU paradox is that Ireland has reached the depths of her shadowed valley and begiiu the long ascent toward the National Ideal. She has iv-gained the land : the people who were originally dispossessed have come into their own. As a re- sult, everywhere one may find the germ of change, of iv-awaken- ing; every whei*e one may sense the dawning of the Irish Renais- sance. We may indeed with some aptness, picture this right of the people as a national dramatic struggle in which the fight for the land is the enveloping action, while out of it, now that it is settled, have sprung 3 yottug. fighting forces, struggling with the Past. The first of these forces at the command of Yoimg Ii*eland, is the economic force. It is symbolized by the cooperative move- ment which has fiowered into over 1.000 oi*ganizations. repre- senting over 100.000 farm families. The second force is that movement to bring up the living standards of the Irish home. It concerns itself with the train- ing of Irish women in the household arts, in the reviving of an- cient industries and the application of modern methods to those arts which women were wont to follow. Technical instruction is furnished by the Congested Districts Board and by the De- partment of Agriculture and Technical Instruction, but the live, vital, fighting force, consists of the women of Ireland tliem- selves. who are organized under the name of The United Irish Women, to prosecute a pi*ogressive campaign of propaganda. CHARLES W. HOLMAN 307' This society sends oi-ganizers into the districts to do work that is complementary to the work among the men which is done by the organizers of the Irish Agricultural Organization Society — that splendid dynamic of the cooperative movement. The third force to fight the Past, has to do with the enlarge- ment of the ideals of Irish life, with the renewing of the foun- tains of inspiration, with the reviving of Irish customs and the Irish culture. In fact, it is this force that represents in a large measure the spiritual ideals implied in the other 2 movements. This work is carried on under the leadership and direction of the Irish Gaelic League, though associated with it are other movements, such as. the national drama movement. The forces of the Past so reluctant to loose their grip over Ireland, may be characterized as ignorance, dogma and graft. Ignorance leaves the people untrained to find a place for them- selves in the economic world. In fact, few of the immigrants of Irish birth who come to America, have any qualifications for life beyond their individual intelligence, and their quick intui- tion. Dogma is personified by the power the religious ma- chines have over the lives of the people. Graft has its outward front and shameless face in the political machine which, orig- inally built up on the basis of the land struggle, today is in the hands of what in 'the main is an avai-icious leadership. It is controlled by the middle men and the liquor sellers. It seizes every opportunity to strengthen itself at the expense of Irish political institutions and the cost of the British Crown. The interlocking of these 3 forces opposing progress is so in- tricate that it is difficult for one not Irish born to determine their beginnings, or to follow their windings through the mazes of Irish life. Their strength is great and they must be con- sidered, although they are retreating as the dawn breaks on Erin. How the Irish Land Policy Was Bom I would call your attention to the remarks of a few moments ago, where reference was made to the prostration of Ireland that followed the potato famine of 1845-49. In the period between the famine and the establishment of the Irish Land Court in 1881, a series of peculiar cropping years occurred. One or two good years would be followed by a crop disaster. One or two bad years would be followed by a good crop. Now in those days, the written contract was almost unknown.. The standards of living of the landlord class were rising and ;^08 MAKKKTING ANP FARM CUKPITS their costs givw highor as tho staiulanis ivso. ^-i tho hoavy hand 4:^t* tho rent ehargtn* was tVlt in the laiul. Tho ivnts woro raisod in tho goixi yoare, and in tho bad oivp yoai*s. tho tonants oould not paA" their rents, nor wonUi tho siioooodinjj: ijv^od years enaWe them to eatoh up. So it oamo alxnit that within a To or '20 year perioii. many tenants in tho riohov lauds wore so in arivai's that they eonld not pt^ssihly nnvt their debts to their landUvrds woro they to live a ireneration beyond their natural span of lite. Sneh a wndition of "raek-ront" was hard onongh to boar in tho Sonth and tho North, bnt in the West of Ireland, tho pliijht of tho tenants was pitiable indetHl. Tho ivaotion hnnight about ilestruetion of pi\^perty. neighborhiXHl rovolntions. and. in nnmy eases. ass*assinatious of tho landlords. It is not snrprisiuir that seoret bauds should liave boon formed for tho frtving of Ireland from the tyrant England, when England was symboliz^Hi by the looal landlord. Tho young patriots of that day soenred their training in tho "' hedge schools " taught by expunged priests, and it n\ay be surmistnl that here eonld be found brewing that great alliance which cemente<.l the Catholic chnrch to the Nationalist party and toived the issue into Parliament for land ivform. P'ighting with every implement at hand, these ardent parlia- mentarians tiually drove a broad axe into tho English conscious- ness which resulted in tho beginnings of ival legislation. Glad- stone at last gnispod tho principle that conciliation and rostitn- tntion alone c\>uld win Ireland for the British Kn\piiY. With that broad concept, and with his far vision, ho championed the first givat land reform law. introducing with it a principle of legislation that must sivm arbitrary and socialistic to tho Amer- ican who lias boon roared in tho shadow of our federal (.\>nstitu- tion. l.ator statesmen were to elaborate those laud laws until tho British lai\d policy for hvland has dovolopod into o bivad linos of effort. These linos concern thoiusolvos with: (1^ Caring for tho self-sustaining toi\ant ; (2) Caring for the nuoconomic tenant : and io"* Caring for tho agricultural laborer. At this point, we should ivmeniber that the term "self-sus- taining" or "000000110" farmer, as interpreted by English <\'Ouomists. is a man who lives on a farm of sut^icient size and fertility to support his family in comfort. An "economic" farm has been defined a little closer to include tho farnt that will actuallv irive a living to a small family. CHARLES W. HOLM AN 309 Caring for the Economic Tenant Willi (*liamct(!riNti(; liritisli policy, OladstoiK! w\t to work on l>l;iiis lo S('i1,l(! tlu! i(iiiii(Kiiat(! str-iiggle between landlords and ten- ants. Tlial, strufii'^ic! for yvnvH had (-onetMitratcd around the three tilings which are I'anious in Irish life, in Irish land struggle. They were : 1. 'V\w, (l(!sir(^ of the tenant for fixity of tiunire. TT(; wanted lo know that lu; good points. But I will give you the benefit of the criticisms which were made to me by the people who make their home in Ireland and apparently understand the situation, and some of the criticisms made by persons connected with the administra- tion of the acts. It was said that some occupiers have been placed upon land which was not sufficient in size or fertility to support them, while other occupiers have had enough land but were not provided with sufficient working capital to get the best returns. In the congested districts the tendency was noticeable for the people to depend too much upon the government doing things for them. There are also some obstacles. The tenants think that tar rates are a little high. The term "tenant" here should be ex- plained because the tenant-purchasers consider themselves ten- ants of the farm until they get their land paid out. This land is paid out upon an amortization plan, based upon 3I/2 per cent interest, as a rule, which requires from 65 to 69 years to obtain free title. Of course the farmers also complain of the rise of wage labor prices. They claim that it has risen over 300 per cent in the last four decades while the quality of the agricul- tural laborer of Ireland is said by them to be very inferior ta what it was in the past. Caring for the Agricultural Laborer We have seen how the government has cared for 2 important classes of its farm population. These 2 classes have secured all the available land, but there remains a surplus rural popula- tion in Ireland for whom there are no farms. This surplus con- stitutes the agricultural laborers of whom there are over 200,000 in that country. The policy of the government has therefore- shut off, for about 100 years, this class from becoming home own- ers. The rate of wages paid is so low that subsistence is the aim of that class. Between the employing families and those laborers there has arisen a kind of conflict by virtue of fact that, in the past, the farmers have housed and boarded, in the main, their help. The laborers have complained as to the character of the housing and of their insecure lot in life. In order to care for this class and put them in a position whereby they can bargain with the farmer on terms more re- sembling economic equality, an entirely different set of social leg- islation became necessary. It was conceived that if laborers^ cottages were built at convenient points and if to each of these 320 MARKETING AND FARM CREDITS cottages were attached a little plot of land for garden purposes, it would put the laborer in a position much better than he pos- sibly could be, under the old system of hiring out. Accordingly, Parliament has vested in the county councils the power to con- demn land for allotment garden purposes and to erect upon this condemned land substantial cottages. This work is now taking place throughout the country and the traveller is greeted by the pleasant sight of building activities which often means that the laborer will live in better quarters than his tenant employer. These houses are rented - by the county councils or by the urban and district councils as their agents, to the laborers at a cost which barely pays the interest and sometimes only pays for the upkeep of the places. Whether this policy will stem the industrial unrest of this class is doubtful. Already there are signs of organization. The In- dustrial Workers of the World have been busy among them and the government may soon have to cope with further problems. I would not claim that the British policy has been perfect 'either in its principle or its administration. There are still many unsolved questions. There will yet remain the question of the tendency to subdivide holdings when tenants have paid out their land. There will be continuous problems that arise from surplus population. But in a social sense, there are many good general results to be seen from this policy, chief among which is that it has made possible a self-help movement of an unpartisan character, that is flowering into a real Irish Renais- sance. Will Land Purchase Work in America If I should be asked whether the policy described would work in America, I should answer that there are sections Avhere no other policy except state aid could meet our problems. I believe that if this policy were thoroughly understood, it would find practically no objections by interests that are now lending money to farmers, by the owners of the land, or by the town population. It would certainly be a boon to the tenant who can only hope to pay out a farm by his annual rent. We should remember that the Irish system is based upon the idea of the rent payments being amortized through a long period to pay out the farm. Now America has tenant farmers for whom if such a pro- gram is not prepared, there are but 2 courses open; either they CHARLES W. HOLMAN 321 must continue to rent the balance of their lives on a status similar to the wage laborer, — or they must give up tenant farm- ing and go into other occupations. ''"let us remember that land purchase policies are not actu- ated by the desire of inflating land values or of permitting private individuals to profit, but they spring from the concep- tion that the normal adjustment of the population to the soil is the fundamental basis of social well-being. In this country, there is enough land unused to place every competent, land- less man upon a farm. Yet there is no more free land, nor have our states or national government appeared able to grasp the significance of the trend of ownership in this country of ours. American Land Question a Grave Concern How keen is the need of America to fix upon some broad governmental land policy may be instanced by calling your attention to a few of the perplexing questions which beset us as a nation. The drift toward a concentration of land owner- ship is alarming; already one-fifth of the total area of the United States is owned by less than 2,000 persons. The hold- ing of lands for speculative purposes has become an evil of menacing proportions. "We have also a rapidly growing tenant farmer class; every third farmer in America works another man's land, while in the 26 states that produce the greater por- tion of our grain, dairy, perishable products, and all of our cotton, a condition of land tenure has come about that im- perils the commonwealth. Nor should we be too optimistic as to the less populated, de- veloping sections of the country. In the Southwest, in spite of the greatest forced development of land sales to homeseek- ers, there are 2 tenant farmers who spring into existence for every 1 farmer who is able to purchase a home. When this condition is viewed in its relation to the speculative spirit, and when it is seen that in the richer farming communities, as in Illinois or the blacklands of Texas, the price of land has been arbitrarily raised so high that in most instances the profits of the farm will not pay out for the would-be purchaser, this ques- tion divides itself into 2 distinct programs with which our people must concern ourselves. On the one hand, the tenant farmer of the richer sections must settle on the newer and less expensive lands. On the 21— M. F. c. 322 MARKETING AND FARM CREDITS other, some sound policy of effecting a sale of the lands by the landlords and of turning these tenants into home owners, must be created. The condition becomes more grave when we reflect that the settlement policies of the national government and the states, as administered, have not been successful in creating farmers, but have been most successful in encouraging farm speculators. Also in the irrigated sections where government development has cost huge sums of money, it is now apparent that the gov- ernmental policy of turning people loose without further as- sistance than the placing of them upon an equipped farm or upon a farm equipped with water, is always inadequate and sometimes cruel. Without seeking to burden you by further portrayal of dis- tressing conditions, I am constrained to present to you one or two different aspects of the problem. There are sections, — • rich farming sections too, — where the farm population has reached its maximum and has begun to shrink. Here tenancy is growing rapidly indeed. There are farming sections that face a problem of a depleted and devitalized life. There is also growing up among us an oligarchy of the small towns who control the farm communities, both by virtue of land ownership and by the possession of a monopoly upon the credit facilities open to farmers. At the same time we must consider, when we view the landlord and tenant relationship, that in certain of the cotton states, the tenant has been removed from the his- toric position of being a tenant of the soil, to the the indefinable status of a "cropper" which, in reality, gives him about the same rights as a day laborer might possess. Immigrant Complicates Agricultural Problems Now there are other complicating features to the agricul- tural problem which necessitate our fixing upon a land policy. On the Atlantic seaboard, on the Pacific coast and along the Mexican border, the farmers find themselves face to face with a new condition. In the New England states, there has ap- peared an immigrant negro competitor of the Southern Euro- peans, who themselves are silently taking the place of the old New England stock. On the Pacific coast, the Jap, the Chinese and the Hindoo are assuming competitive relations with the native American farmers for the rent of the land. In the old Southern States, we have the inter-racial competition CHARLES W. HOLMAN 323 of negro and white man, and in the Southwestern 'States, a third element in the Mexicans, who, silently invading this country, are dispossessing both negro and native white farmers of the lands which they formerly rented. Such, briefly, are some of the manifestations of change in agricultural America. Such conditions open the great ques- tion: what shall this government do toward moving the im- migrants of other nations to the farms ? What machinery shall be created and how shall this machinery be operated? Basis for American Land Policy There can be no argument against the fixing of a policy. In- my own opinion, it must be based upon these assumptions : 1. That the free land is about gone. 2. That the shifting about of the peoples within our borders must inevitably grow less with the vanishing of the land. 3. That the farms of America should be owned by no one ex- cept those who farm them. 4. That land settlement involves too many issues of vital con- sequence to be conducted by private profit-seeking agencies. 5. That federal and state aid is the normal way of bring- ing about the needed readjustment of population to the land and the settlement of the land where there is no population. 6. That the responsibility of the state does not end with the placing of the tenant purchaser upon the land, even though the terms of the contract are for long-time purchase. I can con- ceive of no greater injustice to the tenant than for the govern- ment to adopt such a policy. A socially just method of adminis- tration will carry out a plan of assistance and instruction of the land purchaser in crop production, and possibly in the business side of marketing his crops and in the financing of his operations. This latter phase of advice may be in some sections better dele- gated to an extra-governmental agency, as it is done in Ireland, where the I. A. 0. S. acts as the organization to instruct, advise and inspect farmers' cooperative societies. 7. That a sound and sane basis of valuation of land should ac- company any scheme of state-aided land purchase, in order to prevent speculative attempts. Indeed this is at the very root of the evil in America, and should be undertaken, even though there were no demand for state aid. But with state aid, it be- comes imperative, else the owners of land would seek to ''water" their valuations in order to offset the proposed reductions in in- 324 MARKETING AND FARM CREDITS terest. Such valuation power should be vested in public val- uers, whose control should be exercised by governmental agencies not subject to local influence. The new-country custom of in- discriminate trading on rising land markets must be checked in order to bring the land back to its rightful use as a producer of wealth. Now, it is depressed or inflated in value by methods not less doubtful than the bucket-shop tactics of a few years ago. It is entirely likely that this needed reform may, after a care- ful investigation has been made, call for the doing away with the taxation of capital-valuation of land, and the substitution for it of income-valuation of land in the service of production, and of unearned increment taxation of land not in active use. Undoubtedly there are great lessons to be learned from the experiences of other governments; but I maintain that the ex- perience of Ireland has a direct application to the hope of America; because the Irish are so close in temperament to the prevailing American temperament, and the Irish plan has been worked out by a government whose ideals of personal liberty and social control are much the same as our own. NEEDED STATE LEGISLATION TO AID LAND PURCHASE Harris Weinstock Member California State Rural Credit Commission I have been asked to talk on the question of ''Needed State Legislation to Aid Land Purchase." This is a national Confer- ence, and I take it, proposes to deal with questions of national import, but being unfamiliar with the conditions that prevail throughout the Middle West, and more especially in the East, relative to land purchase, I cannot discuss the matter from as broad a point of view as may be desired. I must confine myself to dealing with the Pacific coast conditions, and more especially wiith the situation in California. Land Purchase Helped Ireland As is well-known, for many generations the peasantry of Ire- land was steeped in misery, wretchedness, poverty and degrada- tion, due to the prevailing system of large landed estates with HARRIS WBINSTOCK 325 absentee landlords and farm tenants. These tenants had long since discovered that the greater their thrift and industry, the better their husbandry, the more they increased their own bur- dens, because the rental value of the land was dependent upon its productive value and the more that the tenant made the land produce the more he increased his own burdens in the way of in- creased rent. This killed within him his ambition, and made him shiftless and thriftless, with all their consequent ills. As pointed out by Harold Barbour : ''The country has appealed to God, to the state, to humanity, for sympathy, for aid, for dollars, and had become a mendicant among the nations." And, as further pointed out by Myron Herrick, "Nearly one-half of the inhabitants of Ireland had emigrated beyond the seas and most of those who remained were living in mud huts, or squalid hovels, inflamed with mutinuous rage against the government. The blight of the farming classes was the most wretched of all, for on account of their crude method of cultivation and marketing, foreign competitors were under- selling them in the staple products for which the soil was best adapted and the meager gains was shared between the landlords and the 'Gombeen men.' " As you doubtless also know a decade or more ago there was enacted by the British Parliament what has since become known as the "Irish Land Bill," which created a Eoyal Commission, with power to appraise the large Irish landed estates with their absentee landlords, to buy these estates at the appraised value, plus 12 per cent bonus, to subdivide them, improve them, and sell them to the Irish peasants, the government advancing the peasants 100 per cent of the purchase price, allowing about 70 years' time in which to make payments, on the amortization plan, with interest on the deferred payments at the rate of 3V2 per cent a year, and in addition thereto, the government made personal loans to the tenants, on long time payments with low rates of interest, to enable them to purchase stock and imple- ments, and furthermore provided them with farm advisers, in order that they might be able to convert their pasture land into tillage. During the intervening decade, and directly as the re-, suit of this remarkable paternalistic legislation on the part of the British Parliament, a revolution and an evolution has taken place. Over 300,000 wretched, poverty-stricken, discontented farm tenants have been converted into over 300,000 landed 326 MARKETING AND FARM CREDITS proprietors, filled with, ambition and hope and thrift and in- dustry. Jails, that in the past have, been filled to overflow- ing with agrarian criminals have, as I have seen with my own eyes, been converted into school-houses, — intemperance has largely disappeared among the Irish peasantry, and peace, pros- perity and contentment prevails among them. What had been to Great Britain a serious and perplexing and menacing liability in the form of hundreds of thousands of discontented and em- bittered farm tenants have become converted into loyal and prosperous subjects. Ireland, from being the most poverty stricken and distressed land is today the most prosperous little country in alL Europe. The Irish tenant, per capita, is rapidly growing to be the richest tiller of the soil in Europe. Ireland, with its milk products, is rapidly driving out of the British market the thrifty, industrious Scandinavian milk producer. To those who say that legislation can be of little help to the tiller of soil and that governmental paternalism should be frowned down, because it tends to destroy individualism and personal initiatives, no more complete answer to their untenable criticisms can be offered than the object lesson which Ireland today presents to the world. Two Kinds of Paternalism It must be remembered that there are 2 kinds of paternal- ism, — a paternalism that helps and a paternalism that hurts. Any kind of paternalism that gives something for nothing and makes of the recipient a dependent is hurtful paternalism be- cause it tends to destroy individual effort, but the paternalism that brings out the best in the individual, that arouses within him ambition and fills him with hope, and that by extending a helping hand enables the recipient to stand firm upon, his own 2 feet, is a paternalism that should be aided and supported and encouraged. England, in all its history, has never enacted a piece of legisla- tion that has proven so helpful to the individual, so beneficent to the land, and so good an investment to the government as has the Irish Land BiU. In no other way could Great Britain have loaned its credit, as it has done in the case of Ireland, and re- ceived a greater compounded interest in the way of advancing the welfare of its people, adding to the strength and wealth of the nation and increasing the loyalty of its subjects as it has been able to do in the case of Ireland. Nor has this been in the nature HARRIS WEINSTOCK 327 of an act of charity upon the part of Great Britain towards its Irish peasantry, because the Irish peasant is expected to pay back at the rate of 100 cents on the dollar for everything that he has received. He must, in due course, return to Great Britain the money advanced in his interest, he must meanwhile pay the in- terest on the loan, and also the principal and interest advanced him as a personal loan, but he is permitted to do this on terms and conditions, that are no burden on G-reat Britain, and that make it possible and that bring out in his endeavor to return the advances made him the very best out of the stuff that God has put in him. Fortunately, the people of this country are not in the terrible condition in which were the people of Ireland, and yet, unless some radical legislation is enacted, our American farm tenants, — many of them — are rapidly drifting into that same condition. What the U. S. Commission on Industrial Relations Discovered Let me further emphasize what I have already said relative to the increase in farm tenancy by quoting from the contents of the report issued under the title ' ' Final Report of the Commis- sion on Industrial Relations for 1915." ' ' Tenancy in the Southwestern States is already the prevailing method of cultivation that is increasing at a very rapid rate. In 1880 Texas had 65,468 tenant famiKes, comprising 37.6 per cent of all the farms in the state. In 1910, tenant farmers had in- creased to 219,571, and operated 53 per cent of all farms in the state. Reckoning on the same ratio of increase that was main- tained between 1900 and 1910 there should be in Texas in the present year, 1915, at least 236,000 tenant farmers. "For Oklahoma we have not adequate census figures so far back, but at the present time the percentage of farm tenancy in the state is 54.8 and for the 47 counties where the tenancy is high- est the percentage of tenancy is 68.13. "Tenancy, while inferior in every way to farm ownership from the social standpoint, is not necessarily an evil if conducted under a system which protects the tenants and assures cultiva- tion of the soil under proper and economic methods, but when tenancy exists under such conditions as are prevalent in the Southwest, its increase can be regarded only as a menace to the nation. 328 MARKETING AND FARM CREDITS ' ■ The tenants having no interest in the results beyond the crops of the single year, the soil is being rapidly exhausted, and the conditions therefore tend to become steadily worse. Even at present a very large proportion of the tenants' families are in- sufficiently clothed, badly housed and underfed. Practically all of the white tenants are native-born. As a result of these con- ditions, however, they are deteriorating rapidly, each generation being less efficient and more hopeless than the one preceding. "The average interest paid on all farm loans is 10 per cent while small tenants in Texas pay 15 per cent or more. The average rate of interest on store credit is conseryatively put at 20 per cent and in many cases ranges as high as 60 per cent. "As a result both of the evils inherent in the tenant system and of the occasional oppression of landlords a state of acute un- rest is developing among the tenants and there are clear indica- tions of the beginning of organized resistance which may result in civil disturbances of a serious character. ' ' As the result of all the study and investigation and thought that I have been able to give to this problem of farm tenancy and absentee landlordism that has worked such havoc in other coun- tries and that is working such havoc in various parts of our own country, the conclusion has been_ forced upon me that there is only one agency that can bring about a remedy and that is the government itself, — either the state governments working within their own territories or the federal government, or both. Nor need the state or federal governments of this country do any pioneering work in solving the problems. The pioneering has already been done by Great Britiiin in the case of Ireland, by Germany in South Africa, and by Australia and New Zealand. We need simply profit by their experience and adopt their tried, tested and successful methods, adapting them to our American needs. Perhaps the best model for us to follow in making it pos- sible, more especially for the farm laborer and the farm tenant to become converted into a landed proprietor is that of New Zea- land. As pointed out by Myron Herriek: New Zealand Finds a Way Out "New Zealand has a governmental department supplied with a capital fund of 30 million dollars by the issue and sale of gov- ernment bonds drawing not to exceed -1 per cent interest. Sums not in excess of 71^ million dollars in any one fiscal year may be raised in this way for the operation of the office. The HARRIS WEINSTQCK 329 bonds are redeemed from a sinking fund created by contributions of one per cent of the principal of loans made from the proceeds of the bonds. "Loans to settlers may be for 10 years or under at 5 per cent per annum or for 361^ years repayable by a semi-annual annuity of 3 per cent. First mortgages are always required for se- curity ; three-fifths of the value is the very largest amount which may be advanced on any property." In Australia the system provides for the state buying the land that has been officially tested as to its quality, improving and subdividing it and selling it to the homeseeker, on a basis of a first payment of 5 per cent on the value of the land and a further first payment of one-third of the amount of improvements in the way of buildings, barns, stock, etc., made thereon, the balance is payable on the amortization plan at the rate of say 4 per cent interest, one-half per cent for cost of state administration and 1% per cent, annually on the principal, making an annual pa}''- ment in all equivalent to 6 per cent of the balance due for a period of 30 years, at the end of which time the debt has been wiped out. Progress in Australia Let me contrast the method of dealing with homeseekers, &ay in the state of California, with which conditions I am most fa- miliar, and the methods pursued in Australia, in order better to illustrate our unscientific American method with its disastrous results and the scientific methods pursued in the Antipodes and the successful results there obtained. The method of colonizing in California, in more recent times, has been for a group of capi- talists to come together, to subscribe to a fund, to buy a large body of raw land, to drain or to water it, as the case may be, to subdivide it and to sell it to homeseekers with say one-fifth down as a first payment, the balance payable in annual installments of 2, 3, 4 and 5 years, carrying from 6 to 8 per cent interest on the deferred payments. The theory of these capitalists has been that by such methods they could not only make a profit for them- selves, find homes for desirable homeseekers, but add also to the welfare of the state. Practically, these plans have worked out about as follows : A body of raw land would be bought, say at a maximum valuation of $50 an acre, the cost of draining or put- ting water on such land would add $50 more to the cost, making it worth say $100 an acre. The records show that to market such 330 MARKETING AND FARM CREDITS land to homeseekers involves an expense of an average of 30 per cent on the selling price. The capitalists would justly feel themselves entitled, considering the risks involved and the labor and energy required, to a profit of about 20 per cent on the selling price. This would bring up the selling price to the homeseeker to a minimum of two hundred dollars an acre. Alluring and attractive literature would be prepared, setting forth the de- lightful climatic and wonderful conditions of California and the unusual soil possibilities of the commonwealth. Clever and attractive salesmen would be sent out, more especially to the Middlewest States, and untold numbers of desirable home- seekers, having at their command all the way from $1,500 to $5,000 would be induced to come to locate on these subdivisions. They were made to feel that if they had enough money to make a first payment on the land and the land itself would do the rest, so far as future payments were concerned. These homeseekerS; as a rule, would consist of small farmers, professional men and small tradesmen, who were attracted by the salubrious climate of California, and by what they believed to bQ the great productive possibilities of California lands. Rural Development Arrested in California As a member of the California State Rural Credit Commission I attended numerous public hearings recently held in various parts of the state, in order that the members of the commission might at first hand get information concerning existing condi- tions and the need for a state rural credit system and state coloni- zation plan. The testimony gathered at the§e public hearings has made it plain that California, at this time, finds itself in a state of arrested rural development. Most of the large coloniza- tion schemes that have been brought into life in the last several years have resulted in the loss on the part of the capitalists of untold millions. Our attention was drawn to one California enterprise alone, in the Sacramento valley, in which the capitalists within 4 or 5 years, had sunk over $7,000,000. Out of the hundreds of most desirable settlers that had been brought to this particular colony, some of whom have lived there 1, 2, 3 and 4 years, the testimony was to the effect that over 90 per cent were unable not only to meet their annual obligations for payments on the land, but even the interest on such obligations, that their little all had been consumed, that they saw nothing but ruin HARRIS WEINSTOCK 331 staring them in the face, with the ultimate end of returning to the cities and joining the ranks of the unemployed. All this was the result, despite the fact that California soil is the richest in the world, that we have the finest climate in the world, that water for irrigation purposes is abundant, and that we have the world's greatest markets at our very doors, the hun- dred or more millions of consumers in America, to say nothing of foreign markets for California products, and despite the further fact that these settlers, as a rule, had body and brains and energy and character. The cause of the failure, therefore, was not the conditions in California nor the ability of the settlers, but was due to an in- sane and unscientific system. Contrast these methods and their results with the methods and results, for example, pursued in Australasia. In Australia, the state itself sends out its soil experts. When these experts find a body of suitable land the state buys this land at the lowest pos- sible price, drains or waters it, as the case may be, puts it into a tillable condition and sells it to selected colonists, at actual cost accepts as a first payment 5 per cent of the cost of the land, plus one-third of the cost of the improvements, with interest at 4 per cent on deferred payments, plus one-half per cent for cost of, state administration, plus ll^ per cent on the principal, making an annual payment of G per cent, which payment in 30 years wipes out the debt. In addition to this, the Australian state fur- nishes to the homeseeker a farm adviser, who keeps the settler from making the blunders of ignorance in planting the wrong thing at the wrong time in the wrong place. Now, contrast the difference in the possibilities of success between the Australasian homeseeker and the California homeseeker. The California homeseeker starts out with these disadvantages, — first, not being a soil expert, and the capitalists who promote the colonies not being soil experts, it is quite possible that both the capitalists and the homeseekers are deceived in the quality of the land, and that the settler finds himself in the possession of land unfit for the purpose for which it is intended ; secondly, the California home- seeker has paid a minimum of $200 an acre, including the cost of selling and the profits of the capitalists for land worth, in its raw state, say $50 an acre ; third, having no farm adviser to guide him and having little or no experience of his own, he is liable to plant the wrong thing at the wrong time in the wrong way; fourth, to win out, the land, especially during the first several 332 MARKETING AND FARM CREDITS years, must produce enough to enable him to pay, say a fifth of the purchase price, plus the maximum rate of interest on the de- ferred payment, plus enough to support himself and family. Experience has shown over and again that there is no land in California, or elsewhere, that can do this. The result is that having invested all his capital in his first payment and in his im- mediate requirements, when the day of reckoning comes to meet his second or later payments, he finds it impossible to do this, and he is then at the mercy of the owner, who, for a time may bear with him but who, sooner or later, is obliged to take back his land, while the settler finds himself penniless and homeless. Now, compare this situation with that of the Australian home- seeker. First, he is protected against getting unfit land, by vir- tue of the fact that the state itself has had the land examined by scientific men, and practically stands behind and guarantees it ; secondly, assuming that the state pays as much for the raw land as the private capitalist, say $50 an acre, and that it cost the state as much per acre to drain or water it as it did the private capi- talist, that would make the land cost the state $100. This would be the price paid by the homeseeker in Australia as against $200 an acre paid by the California homeseeker, the difference between the $100 and $200 an acre being the selling cost of 30 per cent on the selling price and 20 per cent profit on the selling price added on by the capitalists on the actual cost, so that in this thing alone the California homeseeker as compared with the Australian home- seeker starts out handicapped by paying $200 an acre for what, under the Australian system, would cost but $100 an acre ; third, Australia furnishes its homeseekers with farm advisers who take the inexperienced settler and teach him how to plant, what to plant, and when to plant it, and who, in due course, convert the untrained tiller of he soil into a scientific farmer ; fourth, in place of being faced with an annual payment for the first several years of say one-fiith of the purchase price of the land, plus a maximum rate of interest on deferred payments, the Australian homeseeker is called upon to pay only 6 per cent a year to cover interest and principal, and is never faced with any lump sum payment, as is the California settler. Defects of California Plan To make a still more striking comparison, let me present a con- crete contrasting illustration. Let us start out with a 20-acre pur- chase, on the theory that 20 acres intensively cultivated would HARRIS WEINSTOCK 333 support a family in decency, either in California or in Australia, and let us take in both instances settlers who have a fund of say $2,000 representing their lifes' savings. The California home- seeker would pay $200 an acre for such 20 aces, making his cost $4,000. The records show that it would cost him about $4,000 more for his house, bam, stock, team, implements and utensils, making in all $8,000. He would be called upon to make a fir&t payment of one-fifth on his land purchase, — that would be $800. This would leave him a balance of $1,200 with which to meet an investment of $4,000 for improvements. He would, therefore, have to pay the highest price for these improvements, if he could get them on credit, with top-notch interest rates, because of the slender financial foundation of $2,000 to carry a total investment of $8,000. The balance of $6,000 would be due and payable, more especially for the improvements, within a few brief years. Under the most favorable circumstances, it would be almost impossible for him to meet these obligations within the required time, and if he would be unfortunate enough to make serious mistakes in planting or in cultivation, or if he should meet with one or more bad years in the intervening period, in the language of the ^ ' Greek ' ' poet, ' ' He would be up against it ; " he would not only be at the complete mercy of his creditors but would find himself in such a hopeless condition fiziancially that there would be no alternative left for him other than to do what thousands of his predecessors were obliged to do, and abandon the whole thing and return to the city a wiser and sadder man. Advantages of Australasian Plan In contrast with this, the Australian homeseeker would be able to buy his 20 acres of guaranteed land at $100 an acre, involvmg a gross investment of but $2,000 for his 20 acres, on which he v/ould make a first payment of 5 per cent, equivalent to $100. Assuming that his costs for improvements would be just as great as for the California settler, say $4,000 and that he would be called upon to pay one-third as a first payment, amounting to $1,833. His total first payment, therefore, would be $1,433, leaving him out of his $2,000 a cash reserve fund of $566. Thereafter he would be called upon annually to pay say at the rate of 4 per cent interest on the balance, one-half per cent for state administration, and 11/2 on the principal, making 6 per cent in all, equivalent to $274 a year, or a little less than $23 a month, principal and in- 334 MARKETING AND FARM CREDITS terest. Furthermore, his farm adviser would guide, direct aud in- struct him in how to do scientific farming, and the great danger, as the result of ignorance, of becoming a failure, through lack of agricultural Imowledge, would be averted. Unlike the California settler he would not have staring him in the face a limip sum pay- ment impossible for him to meet. He would never have to pay move than $27-i a year, say for a period of 30 years, when his obli- gation would be wiped out, and so long as he could pay this ti'iiiing amount of $23 a month, he could never be dispossessed, and he would, therefore, be enjoying a peace of mind and a feeling of certainty in striking contrast to the constant anxiety and feeling of uncertainty tliat must fill the mind of the California home- seeker living under the conditions above described. Australian Plan Meets Criticism The only arguments that can be raised against the strife enter- ing upon the Australian plan are : first, that it would be likely to become a political undertaking to be managed and controlled by political hirelings, chosen because of their fealty to a political party and not because of their fitness, all of which would spell to the state inefficiency, incompetency, if not disaster ; secondly, the risk involved on the part of the state in the event of the home- seeker's default. So far as the first criticism is concerned, that of its likelihood of the control and management of such an undertaking getting into the hands of unfit political hirelings. I am free to confess that I should not advise a state colonization plan for any state that is still under boss rule, because the worst is likely to happen, and the criticism made would hold good. But in such states as have been able to unhorse the political boss, as happens to be the case in my o"svn state of California, there is no reason why the conduct and management of the state land colonization plan can- not be conducted as efficiently and as honestly as in Australia or elsewhere. For example, these very criticisms of possible politi- cal mismanagement were directed in California against the state engaging in the industrial accident insurance business. It was pointed out that the insurance commission, in all likelihood, would be political appointees, chosen because of services rendered to the party rather than because of their fitness and that such appointees woud be in no position successfully to compete with the scientifi- cally trained men managing the private stock insurance com- HARRIS WBINSTOCK 335 panies^ and ttat, therefore, the state would find itself hopelessly involved, with failure facing its efforts. It is quite likely that this dire forecast would have been fulfilled had California, for example, still been under the heel of the political boss, but living, as we do in our commonwealth, under the highest form of democ- racy, having the system of nominating primaries, enjoying thei privileges of the recall, the initiative and the referendum, we have been able to elect a fearless and an independent governor, who made his appointments on merit, and not because of political obligations. The result is that during the life of the state acci- dent insurance commission it has been able to do its business at a cost of about 10 per cent, whereas the private stock companies have expended for operations about 40 per cent. The difference in cost speaks most effectively for the honesty and high efficiency of its early critics. This saving of 30 per cent in the cost of operations in the state insurance fund has been divided between its policy holders and its reserve fund, and has been an effective object lesson that under a democracy pure and simple American states can and do conduct their public affairs as honestly, as effi- ciently and as economically as they are conducted in Australia and elsewhere. Now, so far as the second criticism leveled against a system of state colonization is concerned, — ^that of the risk involved on the part of the state, the answer is that in place of a system of state colonization proving a possible loss it has, in Australia especially, proven a decided source of profit to the state. For example, in New Zealand, one-half of one per cent is added on to the interest rate to cover the cost of state administration. The records show that it costs New Zealand 17 per cent, just about one-third of the charge made. This surplus of about one-third of one per cent profit to the state has not only paid any losses which might have been sustained, in the way of defaulting colonists, but has left the state a surplus fund of about one and a half million dollars since the system has been in operation. If, under the plan, the colonist should be called upon at any time to pay a large lump sum or forfeit his rights, there would be dan- ger of the state being obliged more or less frequently to foreclose, but in view of the fact that under the system the homeseeker is never called upon to pay more than an amount per year equal to 6 per cent on his liability, the likelihood of his ever defaulting on this small annual payment, as has been shown by experience, is 336 MARKETING AND FARM CREDITS extivnioly veiuote, and ovou if ho should default at the end of sov- ei-al years, the uiaviriu retained by the state of one-third on the uupi\>Yenieuts and 5 per eeut tii-st payment on the land, pins the aeeunuilated amortization payments on the part of the settler, plus the likelihood of an euhauoed value of the laud, is n\ueh move than enougli to seeuro the state ajrainst any pivbable loss. A Flea for State Colonization ]\ly plea. therefoi*e, is for state eoloni/.ation to be adopted by all states uhere the politieal system is as purely denux>ratic as it is today in the State of California. 1 believe that the adoption of a state eolouizatiou system will enable homeseekers to become successful fiu'mers. I believe that a state eolouizatiou system will briuir about a marked change in tlie existing couti'astiug situ- ation between Siiy California and Australia, which at present reads about S5 per cent of colonization successes in Australia and over 90 per cent failnivs in Cjiliforuia colonization. I believe that a state eolouizatiou system will prove the only effective cure for the growing evil iu our country of absentee landlordism imd farm tenancy, because it will enable the moi\; thrifty and industrious farm tenants who can Siive a few hundrevl doUai^s to Ivcome converted, as they have become converted m other lands, into landed proprietoi-s. with all the blessings that such landed proprietoi-ship means to them and to the nation. I Ivlieve that a state colonization plan means also couvei'tiug the farm laborer, who may have saved up a few hundred dollars likewise into a landed proprietor, under conditions that will in- sula his success. Today the amount of money i\eeded success- fully to tinance a modest farm is such that it would take on the pai't of the average farm laborer the efforts of almost a life time before he could accunuilate a sufficient sum with which to engage in such an undertaking, whereas under state colonization, if he has enough to make a 5 j)er cent payment on the purchase price of his land and one-thii'd of the cost of his improvements, he would get an iunuodiate footiiig, inider conditions that would carry with it hope and ambition, instead of fear and dread and anxiety, in the matter of meeting his obligations. It would, theivfoiv, seem that all who keenly realize the seri- ous menace hanging over this nation iu the form of steadily in- creasing farm tenancy, with all its consequent ills to the indi- vidual tmd to the nation, sliould enlist iu the cause of advocating F. II. NEWELL 337 state colonization and should devote themselves to the patriotic service of bringing about within their own states such a poli- tical condition and such strong public sentiment as will speedily lead to transplanting the Australian state colonization methods upon our own soil. NEEDS OF THE FARMERS ON RECLA- MATION PROJECTS F. H. Newell Professor of Civil Engineering, University of Illinois; Former Director of U. S. Reclamation Service Throughout the western i)art of the United States, and partic- ularly upon recently irrigated lands there exists a condition which demands attention. Although the number of farmers concerned may be small as compared with those throughout the east, yet the relative importance is great because these tens of thousands of irrigators form the mainstay of sparsely settled localities. Each state and community has need of these men. Its prosperity depends largely upon their success. If they are not able to maintain their families in comfort and attain a rea- sonable competence, the country will not receive nor keep the necessary population to maintain its progress. The United States has already invested over $100,000,000 in building large works for the irrigation of arid lands in each of 17 western states. In addition, other hundreds of millions of dollars have been expended by individuals and corporations in reclaim- ing similar lands. Hundreds of irrigation systems have been built consisting of thousands of miles of canals and distribu- taries. People have been attracted from all parts of the East and from foreign countries. They have settled upon or pur- chased the reclaimed lands and are endeavoring to make homes upon them. At the present time there is a large area of pro- ductive land, more or less fertile, with water provided for its irrigation, and there is a population upon the land with many workers available. It has been assumed in the past that hav- ing the land and the water, the people would flock in, as they have done, and that then the problem would be settled as the newcomers would follow the example of the earlier pioneers 22— M. F. c. 338 MARKETING AND FARM CREDITS and would immediately utilize the water in cultivating the lands. There was a fallacy in this assumption and a neglect to give full weight to the necessity of money or credit for carrying on the farm operations and for properly marketing the crops. Under the early pioneer conditions, there was little need for con- sidering the question of rural credits, as the miners or stock raisers in the vicinity purchased readily at high prices the pro- ducts of the pioneer farmers. With the larger influx of popula- tion, however, these local markets have been swamped and the thousands of farmers on the newly developed areas must com- pete practically in the markets of the world for the sale of their products. Luring- Settlers With Roseate Stories Most of the newcomers have been allured by glowing stories of possible success and have had the idea that the lauds would rapidly increase in value. Many of them have literally put do^\Ti their last dollar on making the first payment for the land and water, and do not have sufficient capital to provide suitable shelter for their family, much less to equip a farm and keep up operations for a year or two. The irrigation companies, the men selling the land, the local merchants and others are compelled to furnish credit and under the conditions prevailing have been tempted to charge exorbitant interest rates. Starting originally at, say, 6 per cent or 8 per cent, for deferred payments, with inability to meet these, the interest rate has been steadily raised to 10 per cent, 12 per cent or even more. Few occupations can stand this interest charge or can succeed on borrowed capital under these conditions. There thus arises an insistent demand for relief, and one which is worthy of consideration. The difficulty is obvious in that the men most needing the use of adequate capital to de- velop their farms have little real security to offer. They have usually agreed to pay prices for the undeveloped land so great that there is little hope of obtaining complete title unless the time and manner of payment can be made less onerous. Land prices have been raised through misapprehension of the amount of labor and money required to put the land into good, produc- tive condition. For example, it is not unusual to find that a farmer on these irrigated lands has promised to pay $100 per acre or even $150 or more. He may have paid dowTi, say, $20 per F. H. NEWELL 339 acre and is carrying the balance at, say, 10 per cent. To make this land productive, he mnst expend from $10 to $50 per acre in clearing and levelling it and another $50 an acre in 10 or 20 annual installments for the water, in addition to $1 or more an acre each year for operation and maintenance of the canals. Theoretically he should be able to obtain from $30 to $50 per acre annually from crops when produced, but it may be a number of years before this can be done. A Growing Class of Professional Pioneers It is of great importance to the state that this man who has made the effort, who has brought his family to the new farm, be enabled to stay. If he is driven out by misfortune and pov- erty, it may be difficult to secure any one to take his place. In any event it is a loss of time in securing a successor. On the other hand, if he is provided with money or credit too easily, or if he feels that some one has insured his success, there is a tend- ency to demoralization and to a slackening of effort on his part. This latter condition has defeated many well meant efforts to- ward direct aid to the settlers on the new lands. The equity or real ownership of the occupant of the farm is not sufficiently great at first to spur him on, and, having once broken the ties of the old home and moved into a new country, he is easily in- duced to make another and still another attempt and finally joins tlie class of those known as "professional pioneers." The problem is complicated by the fact that in these newly reclaimed areas there is not the pei-sonal acquaintanceship or neighborhood spirit which prevails in older communities and upon which cooperation can be founded. It has not yet been demonstrated that any particular crop is peculiarly adapted to the surroundings nor have markets been established. In other words, all of the bases upon which credit is usually advanced is yet to be established. There is thus the special problem of pro- viding needed facilities for the men whose guarantee of success is largely that of personal character rather than of established values of the lands and crops. 340 MARKETING AND FARM CREDITS THE RURAL CREDIT SYSTEM NEEDED IN WESTERN DEVELOPMENT Elwood Mead Professor of Rural Institutions, University of California One of the most important questions confronting this country is the creation of a land policy suited to conditions which have arisen in the last quarter of a century. Until recently it was our boast that any man who had industry and thrift could en- joy landed independence. That statement now needs to be qualified. The increase in the number of farm renters compared to the number of farm owners ; the colonizing of rural communi- ties with foreign born immigrants who can and do pay higher rents because they are content with a lower standard of living, and because they take no interest in or spend any money to se- cure good roads, good schools, or other matters that make men good citizens, are significant indications of the dangers to rural life which need to be removed. Other countries are confronted with the same problem ; many have gone far in its successful solution. In every case the foundation stone is a system of rural credits designed to enable men of small capital to buy and improve farms and thus be- come owners instead of renters. The West an Inviting Field for Rural Credit The Western third of the United States presents the most in- viting field in this country for the establishment of such a sys- tem and has greatest need for it. In this section millions of acres of irrigable land capable of supporting a dense popula- tion are either unpeopled and awaiting settlement or the settlers are having to undergo hardships and menaced with failure from causes that are removable and should be removed. High in- terest rates, the inability to secure money to make necessary im- provements of the land and the lack of direction and oversight of unskilled beginners, cause so many to fail before they get started that it is becoming an economic wrong and is not alone affecting the prosperity of western agriculture but of all related interests. ELWOOD MEAD 34X Irrigation works which have cost in the aggregate nearly $200,000,000 are financially unsuccessful because of delay in settling the land or because settlers are too poor to pay water charges. The nature of the obstacles that confront develop- ment, the hardships and losses of settlers in recent years are not understood by the country as a whole. The economic changes which have taken place in the last 15 or 20 years and the need of financial adjustments to conform to those changes are matters about which a wider knowledge is desirable. Up to a quarter of a century ago there was little need of capi- tal, or skill in agriculture, to enable men to acquire homes in the arid West. The settlers obtained the land as a gift from the government. The water to irrigate it was taken by means o£ ciheap ditches out of the mountain streams. Usually these con- sisted of nothing but a simple furrow built with the settler's OT\Ti labor. What is now the highest priced farming land in Colorado, and in practically every other western state was ob- tained from the government for nothing or purchased from rail- road land grants at from $2 to $5 an acre. To build ditches to water these lands cost only from $3 to $10 an acre; the man witih $1,000 to $2,000 had ample capital to acquire and improve a 160-acre farm. When 20 years ago John Brown, a farmer from Nebraska, went to Wyoming and bargained with parties building a small irrigation ditch to pay $10 an acre for a water-right to irrigate his 160-acre homestead, he was told by a neighbor that that price was prohibitive ; he could never pay it, and the best thing he could do was to jump in the river and end his troubles. The neighbor's view was governed by the fact that his water- right had only cost $3 an acre, and up to that time $5 an acre had been the maximum limit of cost. John Brown, however, did not drown himself ; nor did he fail. The whole debt for land and water was $1,600, and he had brought with him $1,000 cash. With that he bought a team, built a log house with timber cut from the public land, bought a few range cows and pastured them on the public domain with- out paying any rent. He helped build the ditch and so worked out part of the cost of his water-right. In 2 years he was out of debt, making money on his range cattle. It took him 10 years to level and prepare all of his 160 acres for irrigation, and the work was not done as it must be done today to enable settlers to succeed. 342 MARKETING AND FARM CREDITS In the last 15 veal's these natural opportunities have disaj>- peaivd. The free land that was easily irrigated is gone. The streams that eonld be diverted by simple channels have been ab- sorbed. To obtain water for irrigation, great rivers have to be controlled and tlood water eonserved by the building of eostly resei"\'oirs. The railroad lands that could once be obtained at from $2 to $5 an acre have passed into private ownership. In one way and another great landed est^ites control some of the best undeveloped areas. The actual construction cost of irriga- tion works built in the last 5 years varies from $30 to $100 an aci'e. Unimproved privately owned land under those works sells from $15 to $100 an acre. The John Bro\\'n that attempts to settle in the West today is confronted by far greater obstacles than the John Brown t^xf 20 yeai-s ago. The free timber that built his house, the free range that pastured his cows, lu-e the exceptions ratlier than the rule. The early settlers selected the land that could be irii- gated at lowest cost; the land that is left requires, as a rule, more work to prepare for irrigation and tJie work must be done better, because it must produce more abundantly than when land was free, and water-rights cost only a nominal sum. There are thousands of acres under costly irrigation projects where the average cost of leveling for irrigation is $50 an acre. The John Brown of today can not prolong this preparation over a period of 10 years. Interest charges, land and water-right payments nuike it desirable that he had it fully productive in the shortest possible time. The old individualistic development has disappeared, but we have not yet replaced it by the organiza- tion, the oversight and the capital needed to enable the settler of smaU capital to meet the new conditions. Irrigation Lajid Comes High There are few places in the West where improved irrigable land can either be purchased or raw public land improved for less than $100 an acre. To the cost of the land there has to be ;added the cost of a water-right, the cost of preparing the land for irrigation, the cost of uuprotitable cultivation for a year or two while the soil is being cultivated. The house, the fences, the implements, and the livestock, all needed to make it a going concern, involve an expenditure gi-eater tlian has been usually realized and greater than most settlei-s ai-e prepared to nu^et; ELWOOD MEAD 343 yet the larger part of this expenditure must be made immedi- ately because it is the only way in which he can make a living and pay interest on the cost. If the settler can once get his farm improved and productive and especially if he can have time enough in which to earn the money from the land, he nearly al- ways succeeds. The profits of intense cultivation are great and in some directions like livestock are continuous and reliable. What he needs and must have is capital or credit to improve, equip and stock his farm, so as to enable him to follow intensive sci- entific agriculture. The department of rural institutions in the University of California and the Rural Credit Commission of California are making a first-hand investigation of the cost of preparing land for irrigation, the cost of equipping a farm, of the time which it requires the average settler to make needed improvements, and the plight in which he finds himself when he makes the attempt without adequate capital and has to depend on existing credit facilities. The results already obtained show that many settlers with from $1,000 to $3,000 find themselves in debt and without credit before they have their land prepared for irrigation and are unable to go on because the commercial banks cannot lend money except on revenue producing property and no reliable land mortgage company will loan except on first mortgage se- curity. Some settlers are able to obtain money on their per- sonal credit, but in those cases the loans are usually for a short time with commissions for obtaining the loan and for its renewal and with interest rates varying from 8 to 12 per cent. The set- tler has therefore to pay interest rates above the profits of agri- culture and has always before him the ever impending menace of a mortgage foreclosure. The absence of adequate credit facilities, absence of organized oversight of settlement is an economic wrong to the settler in many ways. He needs livestock to consume his fodder crops and if he could purchase these he could often make money where he is now losing it. Instances were found where men last year sold their alfalfa for $1 a ton in the fields, wherein, if they had been able to buy livestock, it would have been worth $15 a ton. Scores of settlers were attempting to cultivate crops for which the land and climate were not suited and who had lost through mistakes, that intelligent oversight would have averted the money that would have pulled them through the critical period. 344 MARKETING AND FARM CREDITS Much Waste on Irrigation Projects No one can visit a developing irrigation district ^vithont real- izing the waste involved in leaving each individual settler to carry out his improvements without organization or expert di- rection. No beginner can level land properly — no individual settler can afford to buy the proper implements, and as a result each one of them wastes time, labor and money. Leaving each individual settler to buy the material for his house and arrange for its construction causes him to lose time that ought to be spent on cultivation, makes the cost more, and the result far less than if this was done under some comprehensive plan. This is being demonstrated in California, where Dr. Dwinnel is building houses, leveling laud and planting ali'alfa on a part of each farm before it is sold to settlers. Buying in large quanti- ties at wholesale rates, employing carpenters on contracts which let them work on days when they have nonregular employment elsewhere, he has actually fui*nished the material and built houses for less than the carpenters charge for their labor in deal- ing with the individual settler. In one district visited recently the fields were dotted with al- falfa st-acks. It was a picture of seeming agricultural pros- perity ; yet many settlers in that district were dead broke and in debt. They had spent all their money prepariug to grow alfalfa and there was no market for hay. If they sold hay they had to sell at less than cost. Fat cattle and fat sheep brought high prices and the profitable way of marketing their alfalfa was to feed it to cattle and sheep. But, as one settler expressed it, there was no use to talk to them about that because they had no money and not credit enough to buy a suit of clothes. One set- tler was financed by a local banker in buying 10 dairy cows. For the risk the banker charged him $10 a cow above the pur- chase price. He required the settler to give one-half of the re- turn from each cow. The settler paid a la"«wer $10 for prepar- ing a chattel mortgage; $4 for recording it. Hence, to begin with, he was loaded with $11.50 a cow above the cost price. Every good dairyman has to cull his herd; some of these cows were unprofiteilities in the United States are bad : it would not have occun*ed if they were all right. It confirms every thing that I and other men have been saying to the effect that American farm finance is basicly wrong. In North Carolina, according to ]Mr. John Sprunt Hill, the small cotton growei-s pay as high as 38 per cent interest a year on short-tei-m loans. If this be so in that state, it is true j^erhaps in other southern states. A sample list com- piled last month by the comptroller of the currency. Mr. John MYRON T. HERRICK 407 Skelton "Williams, from the books of a national bank in the West shows 174r cases wihere farmers were charged 10, 10, 600, 800, 1,600, 1,820, and 2,400 per cent interest a year. Regardless of how prevalent these extortionate practices may be, they are suffi- ciently numerous to prove, when taken in connection with the widespread demands for state aid, that a thorough reformation of farm finance is absolutely necessary in order to place Amer- ican agriculture on a proper basis. Two Elements in Farm Finance Farm finance includes both land and agricultural credit. Land credit rests, of course, upon getting money from the investing public. This money cannot be obtained at a fair rate unless there be sure methods of proving titles and easy procedure for recovering loans. Hence, the first requisite is the enactment of proper real estate laws. The Torrens' system has already been adopted by 12 states. If it were adopted by all the other states, much of the cost and difficulty in proving titles would be elim- inated. The commissioners of uniform state laws have pub- lished a model for a Torrens' act. The foreclosure laws in many states are faulty. If the redemption period were reduced to a reasonable time and if the procedure were simplified in respect to sale and confirmation after default, the heavy expenses and delays in collecting defaulted loans would of course be removed — and all this would tend to cheapen land credit. Some of the states already have good laws. The laws of all the states should be uniform. This is the main thing, since land credit must be standardized to be marketable. It is worse than useless to enact laws on land credit institu- tions before making these necessary revisions of the general real estate laws. To do so, would be like erecting a superstruc- ture upon a defective foundation. Legislation for land credit institutions ought not to be enacted in advance of laying this esential, statutory foundation for them. The land credit in- stitutions that are most needed in the United States are those for issuing bonds or debentures against farm mortgages. Aside from the totally unnecessary public or semi-public land credit banks, this country now has to perfection all other kinds of land credit institutions needed for farmland credit, except bomd and mortgage companies and landshafts. It has few of the first and none of the latter, and yet these are the only two concerns that should be allowed to issue bonds or debentures. The bond or de- 408 MARKETING AND FARM CREDITS benture is the only means by which long-term lending can be prac- ticed on a large scale, or by which land values can be mobilized. These 2 great ser^'ices are possible because of the simple fact that the investor may place the bond or debenture on the mar- ket and thus recover whenever he wishes the money invested in the mortgages, no matter how long may be the period of the loan. But to be marketable this instrument must of course be made safe and sound by legislation. The 2 master clauses in a good law for bond-and-mortgage companies are : (1) capital stock and surplus must be main- tained at a safe ratio to bonds or debentures; and (2) bonds or debentures in circulation must represent first liens on lands of adequate value and never exceed outstanding loans either in amount or in interest rate. One dollar to $20 is usually deemed a sufficient ratio. The capital stock is always required to be large enough to give the company a strong standing in the financial world. My opinion is that if Congress enacts a law, the minimum for capital stock should be $10,000,000. In none of the states should it be under $500,000. I do not believe that small companies could sell their bonds or debentures out- side their own localities. If they could not do so it would be useless to allow them to be chartered, because they would be unable to make many loans. There should be no hesitation in affording agricultural institutions of a size cemmensurate with its needs. A landschaft is a district created and officered under a spe- cial act or general law by the owners of the farms lying in the district. A landschaft has no capital stock. Consequently the limit to the issue of its debentures is determined by the value of these farms, and is usually 60 per cent of that value. A landschaft is verj'- similar to the drainage districts that exists in some of the states. For instance, an Illinois drainage dis- trict for agricultural purposes may be created and officered by landowners. These officers may assess benefits proportionately against the separate farms, and these assessments are an inde- feasible claim that is collected like taxes under the revenue laws; just so with a landschaft. The drainage district may is- sue bonds up to near the amount of the assessments; a land- schaft issues debenture up to the amount owning by borrowing members. The main difference is that the drainage district negotiates its bonds and uses the proceeds for drainage works, while the landschaft turns its debentures over to the borrowers to be used by them in raising money for individual loans. MYRON T. HERRICK 409 What Will Solve Land Credit Problem In brief, my idea of a solution of the land credit problem is the adoption of the Torrens' system, the revision of the fore- closure laws, wherever necessary, and the enactment of gen- eral permissive laws for bond-and-mortgage companies and land- schafts. The landschafts are a subject for state legislation only. Both the nation and the states, however, might enact laws for companies. The laws of the states ought to be uni- form so as to standardize bonds, debentures, and mortgages. The only kind of inspection or government intervention needed is that which is now provided for banks. The only regulations and restrictions should be those that would safeguard borrow- ers from oppression and investors from fraud and recklessness. This done, I believe that it would be possible to undertake the great enterprise of converting the $2,000,000,000 of farm mort- gages, which now exist, into long-term loans and that a flow of money could be directed to the land in sufficient volume and at fair interest rates to supply the needs of the landowners. tack of Organization Dang-er to Agriculture The solution of the land credit problem cannot, however, re- move all the difflculties that surround agriculture. The chief trouble with American agriculture is lack of organization. Aside from some notable exceptions in fruit and dairy regions, the farmers are not organized either industrially, commercially, or financially. They have no collective purchasing, marketing, or banking systems of their own. Each farmer relies upon himself for what he buys, sells, or borrows. As a consequence there are wastages and losses that seriously affect both pro- ducer and consumer, while the individual farmer is left at the mercy of any unconscientious person who wishes to exploit the exigency of his affairs. Particularly is this so wherever he has urgent need of money, as provided by the cases I have men- tioned. The American farmers are unexcelled in capacity, in- telligence, and education ; and they possess in fertile lands, nat- ural resources, personal qualifications, material conditions, and in all other respects everything that makes for agricultural prosperity, except organization. Moreover, they are the rich- est farmers in the world; their wealth in the aggregate and their combined earning power are almost beyond comparison. 410 MARKETING AND FARM CREDITS The American farmers perhaps own 45 billion dollars of property and this year raised 12 billion dollars of products. Nevertheless, they remain unorganized and allow this stupend- ous wealth and income, upon which the very existence of the nation depends, to lie scattered for all who wish to pick a profit from them. Practically no animal or vegetable product reaches the market, without some unnecessary sum abstracted from the I>roducer's or added at the consumers end of the deal, and the proceeds that are finally returned to the farmer are usually placed in some commercial bank to be used in industries other than agricidture. Since organization is the only thing the American farmers lack, it is this shortcoming that may logically be assigned as the cause of their troubles and distresses, their complaints against bankers and merchants, and their demands upon government for state aid. Unorganized farmers always have been and will be victimized and made the prey of their own necessities. But organized farmers are able to take care of themselves; and this would surely be the case with Ameri- can farmers, because they own and produce more than enough to make them absolutely independent and self-sustaining if they only would utilize it. Organization a Necessity The farmers in the United States ought to be organized from the plains to tidewater, but if they should attempt to do so, they would encounter legal obstacles, since the laws have not been framed with a view to agricultural organization. The only ways by which 2 or more x>crsons can unite for an economic object are the partnership, the corporation, and the association. A partnership is not intended for a numerous and fluctuating partnership, and so is of little use for farmers. A corporation is a joint stock company with a capital stock that is fixed by the charter, paid in at the start, and voted by the stockholders according to their shares, but owned by the company itself. As a great jurist once said, a corporation may be formed with- out a body to be kicked or a soul to be damned. Its prime purpose is the employment of capital and labor for paying div- idends to investors. Manifestly it is not intended for use where the capitalists, laborers, and investors are identical per- sons, as would be the case with organized farmers. An association is a voluntary union of persons under a plan that preserves the equality and personal responsibility of mem- MYRON T. HERRICK 411 bers. Usually a uiomber has only one vote, and this cannot be east by proxy. The liability assuined by nionibors may bo limited, unlimited, or contributory. Shares nmy or may not be issued. If issued, they are simply certilicates of deposit on which the credits may be withdrawn upon notice by holders. So the fund thus accumulated dill'ers from the cnpital stock of a corporation in that it is variable and is owned not by the as- sociation but by the contributing members. The shares may be paid in installments. Consequently, ^Yhile a corporation can- not begin without money an association can begin practically without a cent. It is because no money need be put up at the start and because nil money in is withdrawable that an as- sociation is more attractive than a corporation to small invest- ors. Moreover, the [)ei*sonal responsibility of the members ami their direct participation in the management make the asso- ciation peculiarly adaptable for those mutual relations and practices that constitute what is called cooperation. Cooperation Is Not Understood For these reasons the association is the best form of organ- ization for farmers. Tliei\> is no kind of business or finance that could not be conducted through an association, provided the members reside close enougli to its headquarters to take part in its atVairs; but legislators have not yet fully realized this fact. The association has been legalized for savings bank- ing, life insurance, the building and loan idea, and for a few other purposes; and in every instance it has proved entirely safe and wonderfully effective. Tiie world would be all the better if the association form and practices were more exten- sively adopted for economic objects. But generally speaking, the association has been relegated in the United States to so- cial, religious, eleemosynary, ctlucational, thril'l, and non-profit uses. Nearly every state (it is true) has a law on cooperative associations or societies, but the nuijority of these laws was framed on the postulate that the association cannot be used for profit-making, and that cooperation is a benevolent or altru- istic means for encouraging brotherly love among poor and in- dividually incompetent persons. This pitiably wrong idea has been written into the recently enacted laws on the so-called credit unions or coiiperative credit associations in Massachusetts, New York, North Carolina, Ore- gon, the Philippine Islands, Rhode Island, South Carolina, Texas, Utah, and Wisconsin, The error is responsible for the 412 MARKETING AND FARM CREDITS tax exemptions, the limitation of the interest rate on deposits or of dividends, and the various restrictions that have made those concerns worthless for farmers. Owing to these miscon- ceptions about cooperation and to the failure to grasp the fact that cooperation works best through the association, the prog- ress of agricultural organization has been retarded in spite of all the efforts that have been made for it during the past 5 years. A cooperative association may be defined as a voluntary union of persons for utilizing their collective energies or re- sources, or a part of them, under their own management in some economic enterprise carried on upon their common ac- count with a view to their mutual and individual benefit. A cooperative bank is an association with full banking powers that confines its credit facilities to members. Americans Cannot Look to Europe for Guidance It would be well for the states to recast their laws on coopera- tion and to enact new laws for economic associations and asso- eiational banks. Cooperation exists in such great variety that its definition is exceedingly difficult, so the word and its deriva- tives might be excluded from the statutes, except in the titles. Their absence would occasion no harm, because the practice of cooperation is automatic in a properly formed association. There is no European law that can serve as a model. We shall have to create anew. The American laws should provide for all forms of associations and permit their use for any kind of busi- ness or finance, banking included. Moreover, the Sherman act should be amended so as to permit combinations for agricul- ture, small industries, and the like. This is especially necessary for farmers, because agricultural organization depends upon the formation of systems of interrelated associations. But in all other respects the laws should be free of class legislation, special privilege, and tax exemptions and should also be avail- able for all. The workman, tradesman, and small industrial is as much in need of cooperation as the farmer. I submit the following program : An amendment of the national banking act so as to per- mit a national bank that confines its credit facilities to mem- bers to be organized as an association without capital stock. An amendment of the banking act of each state so as to permit any kind of bank that confines its credit facilities to members to be organized as an association without capital stock. MYRON T. HERRICK 413 An enabling and regulatory law by the nation and by each state, legalizing for economic associations whatever is lawful for corporations. A clause in such laws to permit combination among farm- ers ' associations and assoeiational banks, among associations organized for selling food and household supplies to mem- bers, and among associations organized by artizans for buy- ing on their common account the materials needed in their work or for selling their products. Legislation along these lines is all that is necessary for co- operation. After it had once been enacted, farmers, trades- people, small producers, and small consumers would here and there avail themselves of it. Their success would encourage others ; and then gradually but with ever increasing speed co- operation would spread in town and country throughout the land, just as was the case in Germany, Italy, France, and else- where after the laws on associations were put on the statute books. If societies or boards of earnest propagandists were formed to lend a hand, they could materially help the good work along. But it should always be borne in mind that co- operation rests upon the individual initiative and mutual self- help of the persons to be benefited, and that charity, state aid, or extraneous assistance of any sort would impair its effect. The fact should also be kept in mind that the agricultural as- sociations should combine. Detached and isolated agricultural associations could be only partly successful. The farmers ought to form great decentralized systems of interrelated na- tional, departmental, state, regional, and local associations. The growth, however, should be not from the top downward, but from the ground laterally and upward. Nothing should I)e forced or artificially hastened. The development should be natural and orderly, and each system should be based on local rural cooperative banks. The first step toward agricultural or- ganization is the formation of these basic units. We all know what these wonderful little concerns are, so there is no need of discussing details here. They may adopt any of the assoeia- tional forms. The investigation and study that I have made lead me, however, to favor the Raiffeisen society, as I have de- scribed it in my book on "Rural Credits." A Raiffeisen society localizes its operations to a small area, con- fines membership to mutual acquaintances, and imposes unlim- ited liability. It does not issue shares nor distribute dividends. 414 MARKETING AND FARM CREDITS Its aim is economy rather than gain. It limits profit-taking to its actual necessities and carries net earnings to an indivisible reserve. This reserve thus slowly accumulated takes the place of the capital stock and guaranty fund of a corporation, pro- tects members from liabilities, assures the financial standing of the association, and makes it a permanent institution in the neighborhood. This tyipe of associational bank is the best ever devised for stabilizing the rural population, for vitalizing the spirit of cooperation, and for enabling farmers to utilize their credit and other resources for their agricultural purposes. In my opinion thes closer a rural organization adheres to the princi- ples and practices of Raiffeisen, the more effective and lasting it will be. THE AMERICAN LAND OWNER AND HIS FINANCIAL NEEDS David Lubin Delegate from the United States to the International Institute of Agriculture at Rome German farmers, originally, were not brighter than the American farmers ; in fact, they were not nearly as bright. It is only now when they are operating under their effective eco- nomic systems that the German farmers have become bright, as bright as the American farmers, and very much brighter. In fact, they have become the brightest farmers in all the world. But we have not yet been told how the potential brightness of the German farmers became materialized into actual bright- ness. "Was it then the German farmers who invented and de- vised these effective economic systems and obtained their leg- islative enactment? No, it was not. They were devised and given legislative en- actment by the government. Why by the government? Be- cause it is a well known fact that farmers, as a result of their environment, are too conservative to devise systems or to pio- neer the way for teh adoption of changes in mode or method. The farmers the wrld over are the last to make changes in their style of garments, their mode of speech, or their opinions. No, the German farmers devised no such systems, nor did they pioneer the way for their adoption. DAVID LUBIN 415 They were devised and adopted for them by the power and far-seeing wisdom of their autocratic government. The rulers of Germany foresaw the tendency which the rising tide of so- cialism promised to lead up to; the socialism which was con- fined mainly to the urban population — to its cities; the social- ism that threatened the destruction of their political status quo. The government, therefore, sought a method for the control or eradication of this socialism, and it is believed that that method could be found in the strengthening of its conservative elements — its farming population. Under the belief that with the reinforcement of sufficient strength the conservative farmers would prove more than a match for the control of the socialist radical of the cities, the ruling power of Germany devised and enacted into law the economic systems of rural credits and marketing now operat- ing there. Experience has since proven that the rulers of Ger- many were in the right; for not alone does the present advan- tageous economic status of the German farmer, under these systems, hold in check the socialism and radicalism of the Ger- man cities, but it has also so strengthened Germany as to ren- der her almost invulnerable and invincible. The economic and political advantages of the German sys- tems of rural credits and marketings are so evident as to jus- tify the prompt and well-directed efforts of the American farm- ers for their realization. But is there not a break in the logic of these statements ? "We are told that these systems were devised and put into operation by governments; that farmers are too conservative to devise effective economic systems or pioneer them in these stages for their enactment. But we have also been told that the farmers rather than the legislators will have to devise them and pioneer the way, "get busy" for their adoption. So, then, we seem to travel in a vicious circle of contraries. The government can act but should not or will not; the farmers cannot but should. It is high time for such farmers to look about them and see what changes in economic methods have taken place since the last half of the nineteenth century. There is the telephone and the telegraph. In the sale of his annual 10-billion dollar production how much use does the farmer make of them in com- parison with other merchants who sell an equal amount of goods? "What are you talking about!" exclaims the farmer. "Do you take me for a merchant ? ' ' 416 MARKETING AND FARM CREDITS Well, if you are not sufficient of a merrpoartion. " nor can either of the 2 proposals be classed as "'wild socialistic schemes/* I'nder the Landsekaft rural credit systems he gives, say. S20,OOO worth of property, properly appraised, for a $10,000 K>nd, and so do all his neigh- bors. While the bond of a Landsehaft is not given on any special piece of property of that Landsehaft, each bond issued may only be upon the limit of the mortgage as permitted by the Landsehaft. It therefore follows that each farmer under the DAVID LUBIN 417 Landschaft law is iu reality only responsible for his own in- debtedness. This has proven to be the ease in Germany, where the Landscraft has been in operation during the past 152 years. As for the marketing or distributing system, that is in nowise a corporation. It is simply an organized semi-official nation- wide bureau, which embraces the services of agriculture that commerce receives through its boards of trades, chambers of commerce, clearing houses, etc. In other words, where the farmer now sees with his own 2 eyes, he will have added to his commercial vision the commer- cial sight of millions of his co-workers. If we were to strip mer- chants and financial men of this kind of knowledge, we would make commerce and finance as incoherent, as disjointed, as il- logical, and as uncertain as is the commerce of agriculture to- day in the hands of the American farmers. The business and commercial world would not tolerate for a moment the abroga- tion of their sources of wide range, commercial knowledge and its resultant activities, and it can be safely said that once adopted neither would the American farmer abrogate it. And the first step toward the materialization of the proposals before us is the awakening of the American farmers from their dor- mancy. They must rise, gather themselves together, put on the hiRrness, and exert their power by pulling thie car of prog- ress forward — whether uphill or downhill — ever forward. If they pull hard enough, and each one does his share, they are sure to reach the goal. Fanners Must Change Their Ways Unless the farmers change their economic conditions by means of sound and sensible methods they must expect others to step in and manage their affairs for them. This after a fashion is being done now and has been done right along. And as it continues it is quite likely to develop and accentuate pres- ent grievances. But in what must it all end? It must end in converting this American democracy into a full-fledged au- tocracy as surely as the present democratized power of Ger- many's farmers must in the end convert the German autocracy into a full-fledged democracy. "Eternal vigilance is the price of liberty." And, pray, what does that mean? Does "vigilance" mean that the citi- zen is to be on the constant lookout for foreign dreadnoughts and submarines ? No ; that is the function of the secretary of the navy. Does liberty mean the right to shout "Scoundrel" or 27— M. F, C. 418 MARKETING AND FARM CREDITS "Villain" at any and all in public life? No; that is license. Liberty means freedom — free, equitable action and free, equit- able reaction within the body politic, especially so in the eco- nomic life of the people. What now may be said of the "vigilance" of the farmers? How is it made manifest in the field of economics? Shall it merely be limited to shouting "Wall street?" Shall it not rather be in effective economic work? Each farmer should make it his business to start the ball roll- ing by sending on petitions and letters to members of both houses of Congress, and there should be thousands upon thou- sands of such petitions and letters from every section of the United States demanding, first, legislation for the national mar- keting organization, and, second, the adoption of the Land- schaft system of rural credits. Sending on petitions and letters to Congress, however, is only a beginning. The farmers, though, of course, perennially busy, need not expect "Wall street" to do this work for them. They must do it themselves. It is true that in Germany this work was done for the farmer by his autocratic government. But in this country, in this democracy, the American farmers will have to take the leading stand themselves if this work is to be done at all. And, be it understood, the duty to proceed should not merely be prompted by the desire for economic betterment, but also by the higher one of political betterment. PROVIDING CREDIT DURING PRODUCTION Carl W. Thompson Specialist in Rural Organization Office of Markets and Rural Organi- zation, U. S. Department of Agriculture The question of "Providing Credit during Production" is for the most part a question of farm loans based on personal or collateral security rather than of loans based on farm mort- gage security ; and likewise it is ordinarily a question of loans for relatively short periods of time — i. e., for periods of less than one year. The aim of this paper will be, therefore, to indicate the charges paid by farmers for loans on personal or collateral se- curity in various parts of the country, to point out the factors CARL W. THOMPSON 419 that cause variations in these charges, to show the relations of existing banks to this class of farm loans, and to consider cer- tain improvements that may be suggested in oonneetion with this phase of rural credits. From figures obtained by the office of markets and rural or- ganization of the United States Department of Agriculture bearing on charges for farm loans based on personal security, averages by states have been computed as shown in exhibit No. 1. It appears that the average total cost on such loans — in- cluding interest and all extra charges — ranges from less than 6^/2 per cent in the New England States to figures between 10 and 15 per cent or even higher in the Southern and Rocky Mountain States; that in those states of New England where the total cost is lowest — below 6i^ per cent — the average extra charge above the nominal rate is only about y^ of 1 per cent, and in the more highly developed farming regions of the corn belt, where the total cost ranges between 7 and 8 per cent, the average extra charge is less than 1 per cent. On the other hand, in those states of the South and AVest that have the highest averages for total cost, the average extra charge often runs as high as 21/^ and Sy2 per cent. j Middle West Interest Rates ! " In New York and Pennsylvania the average nominal interest rate is less than 6 per cent and the average total cost is 7 per cent. In Illinois the average nominal rate is 6.6 per cent and the average total cost 7.4 per cent. In these states, therefore, the average extra charge on personal loans is about 1 per cent. In Iowa and Wisconsin the averages for the extra charge are only four-tenths and five-tenths of 1 per cent, respectively, the nominal rate in Iowa being 7.5 per cent, with an average total cost of 7.9 per cent, and the nominal rate in Wisconsin being 6.5, with an average total cost of 7 per cent. One important factor which undoubtedly should be considered in looking for an explanation of the lower extra charges in Wisconsin and Iowa is the large percentage of loans in these states that is furnished the farmer by small local banks, as will be noted later. In North Carolina the average nominal rate is 6.6 per cent and in South Carolina, 8.3 per cent, showing a difference of 1.7 per cent. The average total cost, however, is nearly the same in these 2 states, being 10.2 per cent in North Carolina and 420 MARKETING AND FARM CREDITS 10.5 in South Carolina. The 6 per cent legal rate in North Carolina undoubtedly accounts for the low nominal figure re- ported for that state. Apparently the loan agencies of North Carolina make up in extra charges what they are not permitted to collect as interest. In Alabama the average nominal rate is 10 per cent and the average total cost 12.4 per cent. Alabama illustrates a section of the country where credit conditions are partly to be ex- plained by the prevalence of the system of advances to farm- ers by merchants, under which advancing system perhaps three- fourths of the farmers of that state still operate. Oklahoma appears to have the highest interest charge of any state, the average nominal rate being 12.5 per cent and the aver- age total cost 15.1 per cent. LOAIfS TO FARMERS ON PERSONAL SECURITY— AVERAGE RATES FOR INTEREST AND FOR TOTAL COST Geographic division and state New England: Maine New Hampshire Vermont Massachusetts Rhode Island . . . Connecticut — Middle Atlantic: New York .. New Jersey . Pennsylvania East North Central: Ohio Indiana Illinois Michigan Wisconsin West North Central: Minnesota Iowa Missouri North Dakota . South Dakota . Nebraska Kansas South Atlantic: Delaware Maryland Virginia West Virginia . North Carolina South Carolina Georgia Florida Average Average interest rate total cost 1 6.5 7.7 6.0 6.4 5.9 6.4 6.0 6.5 6.1 7.1 5.9 6.2 5.9 7.0 5.8 6.6 5.9 6.9 6.4 7.2 6.9 7.6 6.S 7.4 7.1 9.2 6.5 7.0 8.3 9.2 7.5 7.9 7.7 8.8 U.O 11.8 9.8 10.6 8.S 9.3 7.5 3.8 6.0 6.2 6.0 7.0 6.3 8.2 6.2 6.9 6.6 10.2 8.3 10.5 9.6 11.8 9.2 11.4 CARL W. THOMPSON 421 LOANS TO FARMERS ON PERSONAL SEOURITT-AVERAGE RATES FOB INTEREST AND FOB TOTAL. COST— Continued Geographic division and state East South Central: Kentucky Tennessee Alabama Mississippi West South Central: Arkansas Louisiana Oklahoma Texas Mountain: Montana Idaho Wyoming Colorado New Mexico Arizona Utah Paciiic: Washington .... Oregon California -r- Average Average interest rate total cost 1 7.3 8.8 8.1 9.9 10.0 12.4 8.7 10.8 9.9 12.4 9.0 11.1 12.5 15.e 10.2 12.2 11.1 12.1 10.4 11.5 10.2 11.0 10.6 11.5 11.4 13.8 10.0 11.1 8.8 10.4 9.8 11.4 8.4 9.G 8.4 9.4 ^ Average of estimated total cost, including "discounts, bonuses, commissions, any other extra charges," as reported by correspondents. and Averages for interest charges and total cost have also been computed for subdivisions within states, following the plan of the bureau of crop estimates of dividing each state into 9 dis- tricts. This makes possible a comparison of loan conditions in the different parts of a given state. In Iowa the district averages for total cost for the 3 northern districts, reading from west to east are 7.9, 8.2, and 7.8 ; for the 3 central districts, 8.2, 7.4, and 7.4; and for the southern districts 8.7, 8.2 and 7.2. It will be seen that in general the lowest averages are found in the eastern districts, and the highest averages in those farthest west. The widest variation is from 7.2 to 8.7 or 1.5 per cent, as between the southeastern and southwestern districts. The higher rates of western Iowa conform to the general upward movement in interest charges as one goes from east to west across the country. The apparent exception noted in the northwestern part of the state, which is tributary to Sioux City, illustrates the tendency toward lower rates in the prox- imity of financial centers. In Nebraska, the district averages are as follows: In the North (reading from west to east), 10.2, 10.4, and 8.8; in the 422 MARKETING AND FARM CREDITS central districts, 10.6, 8.9, and 8.3 ; and in the South, 10.4, 9.9, and 8.3. Reading the eastern districts together we have (from north to south) 8.8, 8.3 and 8.3, while the western districts show 10.2, 10.6, and 10.4, the widest variation being from 8.3 to 10.6 or 2.3 per cent. Nebraska illustrates forcibly the effect of climatic conditions, especially rainfall, in relation to farm- ing and to credit conditions. In Minnesota there is a variation in the district averages for total cost from 6.9 per cent in the southeastern district to 11.4 per cent in the north central part of the state. Such a comparison indicates clearly the effect of temperature and soil conditions on farming and credit condi- tions. SHORT TIME LOANS TO FARMEES ON PERSONAL SECURITY— PER CENT DISTRIBUTION OF REPLIES RECEIVED ACCORDING TO INTEREST RATE REPORTED Geographic Division and State New England: Maine New Hampshire Vermont Massachusetts .. Rhode Island . . Connecticut Middle Atlantic: New Tork ... New Jersey . . Pennsylvania East North Central: Ohio Indiana Illinois Michigan Wisconsin West North Central: Minnesota Iowa Missouri North Dakota South Dakota Nebraska Kansas South Atlantic: Delaware Maryland Virginia West Virginia . North Carolina South Carolina Georgia Florida Per cent of total number of replies showing an interest rate of — 5% 7.1 10.5 4.S 5.1 16.7 12. S 3.3 4.6 0.6 0.5 0.5 O.i 0.3 0.4 0.4 2.9 0.8 6% 7% 8% 9% 10% 11% 12% 13% or over 78.3 8.7 8.7 2.2 2.2 85.7 7.1 89.5 90.4 4.8 83.3 16.7 88.2 93.8 1.0 83.3 84.6 1.9 0.6 61.5 20.3 14.8 37.6 31.2 26.1 0.5 39.0 57.1 1.6 0.3 1.3 24.1 64.5 3.2 2.3 0.5 4.1 6.9 44.9 28.1 15.7 0.5 1.6 8.7 13.5 41.8 6.2 28.4 1.0 8.8 28.0 63.4 11.0 20.8 63.4 0.3 2.7 T.5 1.2 5.7 1.7 29.5 4.0 57.3 1.6 29.6 3.2 43.6 2.7 18.3 1.0 1.8 8.2 40.7 5.0 42.9 0.4 0.4 0.4 1.4 6.0 66.5 4.9 19.7 0.4 0.7 100.0 94.3 2.9 82.6 4.1 9.9 0.8 1.7 90.2 2.0 S.9 2.6 75.7 4.7 14.8 0.7 2.0 1.4 0.7 3.0 S2.8 4.0 7.1 3.6 O.T 5.1 51.1 2.9 18.2 1.5 U.7 8.8 3S.6 9.1 47.7 2.3 2.3 CARL W. THOMPSON 423 SHORT TIME LOANS TO FARMERS ON PERSONAL SECURITY-PER CENT MSTRIWnON OF REPLIES RECEIVED ACCORDING TO INTEREST RATE K EPORTED— Continued Geographic Division Per cent of total number of replies showing an interest rate of— and State 5% 6% 7% 8% 9% 10% 11% 12% 13% or over East South Central: 45.0 27.9 2.1 4.0 1.3 0.4 4.0 5.0 7.1 4.1 1.4 4.0 "i.s 2.3 1.3 2.1 1.9 6.3 2.5 8.0 17.7 34.3 36.0 36.5 61.1 7.2 56.0 4.4 12.1 2.7 3.8 12.8 12.3 4.3 30.8 50.0 29.6 57.3 42.6 1.2 2.3 2.0 0.5 4.0 0.4 2.0 1.3 2.1 2.8 12.5 i.3 9.9 11.8 26.7 33.8 26.2 90.2 29.4 44.9 69.9 37.3 64.6 55.3 42.4 31.9 30.8 25.0 42.0 29.3 17.7 0.6 0.7 1.0 2.2 0.8 1.3 8.9 10.6 5.7 8.5 15.4 3.7 0.6 17.2 5.4 19.4 6.6 58.7 20.3 12.8 29.2 48.9 ^.1 6.3 21.0 '7!i 2.3 8.3 Mississippi ■ West South Central: 2.7 1.0 2.7 28.2 6.3 Mountain: 4.2 5.5 New Mexico 6.4, Utah Pacific: Washington 1.2 The reports on interest rates for each state have also been distributed so as to show the relative number of reports for each rate as indicated in exhibit 2. This illustrates in another way the degree of variation in interest charges within different states, also showing in each case the prevailing rate. What Causes Variation in Interest Charges? Let us now consider the more important factors which cause variations in interest charges, especially as between different localities or regions of the country. These may be summarized as follows : 1. Climatic and soil conditions. 2. Character of farming and farm population. 3. Distance from financial centers. 4. Character of accessible financial agencies. The effect of climatic conditions on interest rates is illus- trated by the figures already shown for Eastern and Western Nebraska. The contrasts noted within that state apply gen- 424 MARKETING AND FARM CREDITS erally as between the sections of the corn belt having relatively adequate rainfall, and the semi-arid country farther west. The effect of differences in temperature and soil conditions on in- terest rates is shown in the comparison made between Southeast- ern and North Central Minnesota. There is no factor affecting interest charges on farm loans which is of greater importance than the character of farming and farm population. The best credit will always be extended to those farming regions where the farmers are known to meet their obligations regularly and promptly. This means that the advantages will rest with agricultural areas where the charac- ter of the population is well established and where a regular farm income is afisured from year to year. Preference will therefore be given to areas of a fairly stable as against a shift- ing or migratory population, since the dependability of borrow- ers can be most satisfactorily determined through experience and personal connections of long standing. Preference will also be given to areas of diversified agriculture as against one- crop territory, giving the "feed-food-and-cotton farmer" an advantage over the one-crop cotton farmer, and favoring the mixed grain and livestock farmer generally as against the wheat or other single grain crop farmer. Too much emphasis cannot be laid on the character of the farming population and on the importance of approved systems and methods of farm- ing, yielding dependable incomes, as a necessary basis for fa- vorable credit conditions, whether for personal or mortgage credit. Distance from financial centers clearly affects charges on farm loans. The figures for interest rates show a definite upward tendency as one proceeds outward from any of the important financial centers. How to overcome in some measure the handi- cap that mere geographical distance thus imposes upon the more remote farming areas of our country is one of the most difficult problems in rural credits. Another factor of far-reaching importance in its relation to the charges made on farm loans is the character of financial agencies supplying such loans. Let us note especially the part played by existing banks in this connection. Exhibit No. 3 shows the estimated total short time loans supplied to farm- ers in each state by existing banks ; and also the amounts fur- nished by national banks and by banks other than national. CARL. W. THOMPSON 425 SHORT TIME LO'ANS TO FARMERS MADE BY BANKS Geographic Division and State United States Geographic divisions: New England Middle Atlantic East North eCntral. West North Central. South Atlantic East South Central West South Central. Mountain Pacific New England: Maine New Hampshire Vermont Massachusetts . . Rhode Island . . . Connecticut Middle Atlantic: New York . . . New Jersey . Pennsylvania East North Central: Ohio Indiana Illinois Michigan Wisconsin West North Central: Minnesota Iowa Missouri North Dakota ... South Dakota . . . Nebraska Kansas South Atlantic: Delaware Maryland Virginia West Virginia . North Carolina South Carolina .. Georgia Florida East South Central: Kentucky Tennessee Alabama Mississippi Estimated total amount (Thousands of dollars) Per cent of loans made by — All banks West South Central: Arkansas Louisiana Oklahoma Texas 1,600,970 16,890 67,400 S2S',030 583,120 151,220 76,530 204,310 86,650 93,820 5,000 1,050 7,010 2,370 80 1,380 ^,990 7,480 35,930 43,600 64,930 138,140 3.31,580 44,780 79,120 187,070 67,040 46,070 40,480 S>,60O 83,740 6,260 18,470 29,770 8,310 21,280 19,820 41,430 5,810 29,200 23,560 15,250 8,520 10,960 12,360 51,260 129,730 National banks 765,290 8,500 47,770 141,210 2461,600 47,150 30,080 137,700 52,270 58,920 600 3,360 2,280 10 1,300 17,750 6,240 23,780 22,130 29,050 72,560 7,590 9,88) 32,480 72,230 18,610 23,340 14,260 47,990 87,780 1,450 6,440 14,220 1,990 8,900 5,500 7,080 1,570 16,940 5,710 5,240 2,190 4.010 33,260 96,550 Other banks 844,680 8,300 19,630 183,820 341,430 104,070 46,460 66,610 34,380 39,900 4,140 360 3,650 90 70 80 6,240 1,240 12,150 21,470 35,880 65,580 25,990 34,900 46,640 114,840 48,430 22,730 26,220 37,610 44,960 4,810 12,030 15,550 6,320 12,380 14,390 34,350 4,240 12,260 17,&50 10,010 6,330 7,070 8,850 18,010 33,180 National banks 47.5 50.3 70.9 48.4 41.9 31.2 39.3 67.4 60.3 57.5 17.2 65.7 47.9 96.2 12.5 94.2 74.0 83.4 66.2 50.8 44.7 52.5 22.6 S.l 41.1 38.6 27.8 50.7 35.2 56.1 45.7 23.2 34.9 47.8 23.9 41.8 27.7 17.1 27.0 58.0 24.2 34.4. 25.7 35.5 32.4 64.0 74.4 Other banks 52.5 49.7 29.1 56.6 58.1 68.8 60.7 82.6 39.7 42.5 82.8 34.3 52.1 3.8 87.5 5.8 26.0 16.6 33.8 49.2 55.3 47.5 77.4 77.9 58.9 61.4 72.2 49.3 64.8 43.9 54.3 76.8 65.1 52.2 76.1 58.2 72.3 82.9 73.0 42.0 75.8 65.6 74.3 64.5 67.6 35.1 25.6 426 MARKETING AND FARM CREDITS SHORT TIME LOANS TO FARMERS MADE BY BANKS— Continued. Geographic Division and State Mountain: Montana . . Idaho Wyoming . . Colorado . . New Mexico Arizona Utah Nevada Pacific: Washington Oxegon California , Estimated total amount (Thousands of dollars) Per cent of loans made by — All banks 20,300 13,290 10,010 19,910 4,500 6,350 7,010 5,280 •24,510 17,020 52,290 National banks S,640 7,090 8,400 13,880 3,820 2,400 5,090 2,950 7,800 8,370 37,750 Other banks 11,660 6,200 1,610 6,030 680 3,950 1,920 2,330 16,710 8,650 14,540 National banks 42.6 53.3 83.9 69.7 84.9 37.8 72.6 55.9 31.8 49.2 Other banks 57.4 46.7 16.1 30.3 15.1 62.2 27.4 44.1 68.2 50.8 27.3 It appears that the banks of the United States furnish ap- proximately $1,610,000,000 in short time loans to farmers, of which national banks supply $765,000,000 and banks other than national (state, private, and savings banks, and trust compa- nies), about $845,000,000. This means that our 7,420 national banks furnish 471/2 per cent and our 18,456 other banks supply 521^ per cent of the total short time bank loans to farmers. The relative importance of national banks as compared with others in relation to short time farm loans varies considerably in different parts of the country. In New York national banks furnish almost three-fourths of the total short time farm loans from the banks in the state, while other banks supply a trifle more than one-fourth. Similarly, in Pennsylvania two-thirds of the farm loans on personal or collateral security are made by national banks and one-third by other banks. Where National Banks Do Not Dominate Farm Loans On the other hand, in "Wisconsin onl}- 22 per cent of the farm loans from banks are supplied by national banks and 78 per cent by other banks. In Michigan, less than 23 per cent is loaned by national banks and more than 77 per cent by other banks. In Missouri less than 28 per cent of these farm loans are furnished by national banks and more than 72 per cent by other banks. In Minnesota, national banks supply 41 per cent, while other banks furnish 59 per cent of these loans to fanners. In Iowa less than 30 per cent of the bank loans to farmers on CARL W. THOMPSON 427 personal or collateral security are made by national banks, more than 61 per cent being supplied by banks other than na- tional. The Iowa banks supply farmers with short time loans amounting to more than $187,000,000, this amount exceeding by a considerable sum that supplied by the banks of any other state. Iowa is fairly honeycombed with relatively small stock sav- ings banks, the state law authorizing such banks to be incor- porated with a capital of $10,000. These stock savings banks furnish fully one-third of the total short time bank loans of the state made to farmers. In typical states of the old cotton belt we find that by far the largest portion of short time farm loans is made by banks other than national. Thus in South Carolina over 72 per cent of sucJi loans are made by banks other than national and less tha 28 per cent by national banks. In Georgia almost 83 per cent of the loans are made by banks other than national and about 17 per cent by national banks. In the states of Tennes- see and Mississippi, national banks supply only about one- fourth, while other banks furnish three-fourths, of such loans. In Alabama and Louisiana national banks furnish less than one- third and other banks fully two-thirds of such loans. On the other hand, in Oklahoma the national banks furnish almost two- thirds, and other banks one-third, of such loans, while in Texas national banks supply three-fourths of these short time farm loans and other banks about one-fourth. In nearly all the Rocky Mountain States the relative importance of national 'banks is considerably greater than that of other banks. In Utah, 73 per cent of the loans are from national banks and "27 per cent from other banks. In Colorado 70 per cent are from national banks and 30 per cent from other banks. In Wyoming 84 per cent are from national banks and 16 per cent are from other banks. In general, our data point to the conclusion that in the older cotton growing states, as well as in the grain growing sections of the country, a considerably larger portion of the loans fur- nished to farmers during the period of production are supplied by state, private and savings banks and trust companies, than by national banks, while on the other hand, in the cattle terri- tory, including Oklahoma, Texas and the Rocky Mountain states, by far the larger portion of the bank loans are furnished l)y national banks. They also show that for the country as a 428 MARKETING AND FARM CREDITS whole a larger portion of the loans on personal or collateral se- enrity are furnished by state, private, and savings banks, and trust companies than by national banks. Keen Need for Improvement in South and West The charges on short time loans to farmers, as cited in the earlier part of this paper, clearly indicate the need for improve- ment, especially in the South and West. There are the sections where local capit-al is relatively scarce and where there is the greatest need of connecting the farmer with outside or distant sources of capital. Improvement in loan facilities, therefore, should include proper encouragement for the creation of insti- tutions for the accumulation of local savings. And it should also include a better means of contact between the farmer and outside or distant sources of capital. Our federal reserve system will undoubtedly serve as an im- portant step in connecting farmers with outside capital, espe- cially because of the opportunity afforded for the discounting of agricultural paper. At the same time, it is clear from the study of present sources of short time loans to farmers that there is a large portion of our farming population that is not in a position at present to take advantage of the federal reserve system. It seems especially important that the benefits of the discount feature of the federal resei^ve banks should be so ex- tended as to be within reach of farmers near to^^^lS and villages where no national banks can now be profitably organized. Un- less other smaller banks can be induced to come into the federal reserve system, it may be found advisable to permit national banks to create branches, without capital stock, in the smaller to-s\nis and villages. The encouragement of suitable savings institutions for the better accumulation of local capital might well be left to the several states. .Aside from a proper adaptation of such local savings banks as are now found in large numbers in certain regions, especially in Iowa and New England, it would seem that each state should provide a law permitting the organization of cooperative credit associations. Thus far credit union laws have been enacted in 7 states, as follows: Massachusetts (1909), Texas (1913), Wisconsin (1913), New York (amended 191-4), North Carolina (1915, South Carolina (1915), and Oregon (1915). These associations are designated ''Cooperative Credit Associations" in Wiscon- sin, and ''Credit Unions" in the other 6 states. CARL. W. THOMPSON 429 Twenty-six credit iinions have been organized under the statute of Massachusetts. These, however, are nearly all found among the working classes in towns or cities. Only one credit union has been organized among farmers in Massachusetts. The Jew- ish Agricultural and Industrial Aid Society has organized 18 credit unions in this country, including 8 in New York, 5 in New Jersey, 4 in Connecticut, and 1 in Massachusetts. This society is attempting to have its associations in New York re- organize under the amended law of that state. I have no knowl- edge of any credit associations organized in Texas, Wisconsin, Oregon, North Carolina or South Carolina. In formulating a state law with reference to cooperative credit associations, it appears that existing statutes for such states as Massachusetts, New York, Texas, Wisconsin, Oregon, North and South Carolina could all be modified to advantage in order to meet the needs of rural conditions. While most of these statutes have been framed with the apparent intention of serving the needs of rural personal credit, they have all been patterned in the main on the Massachusetts law, and are better suited to the needs of the working classes in towns or cities than they are to the needs of farmers. Improvements of Existing Laws Needed. In the existing statutes there are 3 requirements, especially, which could be modified to advantage : 1. All of these laws make it necessary to organize the local associations with capital stock, 2. The placing of deposits with associations is limited to members. 3. The funds of the associations are restricted to indi- vidual loans. It would seem that the 3 provisions above mentioned should be modified as follows: 1. Cooperative credit associations should be allowed to or- ganize either with or without capital stock. 2. Such associations should be permitted to receive de- posits from anybody, whether a member or not. 3. The associations should be allowed to employ their funds collectively for common agricultural needs such as collective purchasing. 430 MARKETING AND FARM CREDITS It is believed that farmers in certain localities eonld be in- duced to organize cooperative credit associations on the strength of such liability as they would be willing to assume, without contributing anything for capital stock. Among work- ers in cities who receive wages periodically, the plan of having shares of stock presents no hardship or handicap. Among farmers whose income is seasonal and whose interest in organ- izing is mainly as borrowers, associations without capital stock might serve the purpose better. There appears to be no reason why the deposits with such an association should be restricted to members. There might be in a given neighborhood a number of people who Avould be willing to deposit funds with such an association, but who have no special reason to become members of the association. If co- operative credit associations are to succeed they should have the advantage of all the deposits which they can obtain. The importance of allowing a cooperative credit association to use its funds for common agricultural needs as well as for loans to individual members cannot be over-emphasized. There are many Avays in which an association as such might use its funds collectively for common agricultural purposes, as illus- trated in the case of collective purchasing. The statute should therefore be so drawn as to permit an association to use its funds in this way if it desires to do so, as Avell as to make loans to individual members. Whenever borrowers desire to form guarantee associations to endorse the loans of members, proper encouragement should be given for this purpose. Such associations might prefer to omit the deposit feature noted above, but be similar in other respects to cooperative credit associations. There is other desirable legislation of great importance to the farmer and which directly affects his means of obtaining credit. Examples of this are found in such laws as would have a bearing on the standardization of grain and cotton, the ware- housing of these products and the encouragement of uniformity in warehouse receipts. All such matters are important in de- termining how far the farmer can utilize his products to ad- vantage as a collateral for loans. Safe Farming Essential to Credit Aside from improvement in financial agencies, whether under state or federal law, and aside from other legislation affectin£? opportunities for farm credit, it should be remembered that CARL W. THOMPSON 431 auTtliiug- tending to improve the status of the farmer and his farming is of vital importance in its relation to rural credits. "We need to keep clearly in mind in all rural credit discussion that a stable sj'stem and method of farming is a necessary basis for favorable credit conditions ; and that the personal character and business ability of the farmer himself, as well as his method and system of farming must necessarily be considered. In fact, everything that leads to better farming will also be help- ful in improving farm credit. This means that all the work of the various experiment stations, state departments of agricul- ture, agricultural schools and colleges, and of the United States Department of Agriculture, should contribute, at least indi- rectly, toward the betterment of rural credits. In closing permit me to repeat certain conclusions set forth in this paper : 1. It is clear that unreasonable charges prevail in many lo- calities, especially in the South and West, in connection ^dth farm loans on personal or collateral security, and that there is therefore need for improvement in the present facilities for providing the farmer with credit during production. 2. The opportunity for farmers to obtain connections with outside or distant capital should be improved through an ex- tension of the rediscount service of the federal reserve system to smaller towns and villages — possibly by permitting national banks to establish branches. 3. Financial legislation is needed in the several states to pro- vide for suitable local savings institutions and for cooperative credit associations among rural borrowers. These cooperative credit associations should be permitted to organize either with or without capital stock; they should be allowed to receive de- posits from anyone whether a member or not ; and they should be allowed to devote their funds to common agricultural pur- poses, such as collective purchasing, as well as to make loans to individual members. Proper encouragement should also be given borrowers desiring to organize guarantee associations to endorse the loans of members. 4. While certain forms of specific financial legislation, both by federal and by state governments, appear desirable in the interests of improved rural credits, it should be remembered that the problem also involves the question of the character of the farming population and its system and method of farming, and that all improvements along such lines contribute to the so- lution of the problem of rural credits. 432 MARKETING AND FARM CREDITS THE LANDLORD AND TENANT IN PRO- DUCTION IN THE NORTH Charles S. Adkins President, Illinois Livestock Breeders' Association I am a tenant fanner myself and I have been occupying a farm of 560 acres in Illinois for a good many years and have lived on the same farm for 23 years, making my bread and butter there. The man with whom I am in partnership in the stock busi- ness and the production of hay, grain, etc., has been in business with me for 23 years, and we have never had a scratch of a pen in any way in the way of a contract between us. We have talked over things for 23 years, and have put into effect a sys- tem and plan that is mutually fair to both of us, and then we proceeded upon that basis and system of cooperation for the mutual advantage of us both, and with the end in view of main- taining the farm so that our posterity might reap the benefit of it and go on living and prospering after we have retired to some other country. And in addition to that, I have participated in the affairs of my community the same as has any other citizen and I be- lieve that I enjoy the distinction of being the only farmer that was ever speaker of the house in the Illinois legislature. So you will pardon me in referring to myself in informing you in what capacity I daily operate wihen I am at home and you will judge for yourselves as to whether I am competent to discuss the matter under discussion or not. The landlord and tenant proposition in the com belt, of which, of course, I am most familiar, includes a large part of Illinois, Indiana, Ohio, Iowa, Kansas, Nebraska, Dakota and Minnesota. About a little less — I don't know the exact figure — but a little less than 50 per cent of the farms is occupied by tenant farmers. A great number of the people operating the land are tenant farmers. Now, there are different classes of landlords. Speculation and Rise of Land Valuation We have, first of all, a factor that has been a very active one in the last 25 years. In 25 years in the com belt in Illinois, the CHARLES S. ADKINS 433 fair value of land has increased from along about, from $18 to $45 an acre, up to about $175 to $250 per acre. So that the speculators — the speculative landlord has been a very large factor in retarding the development and advance- ment of agriculture in the corn belt here. You can see from this, and very clearly, that buying land in Illinois 25 years ago was a rather good investment. The joint farm next to me was bought, less than 30 years ago, at $18 an acre, and that same farm can now be sold at $200 an acre. That permits, in a great many instances, of rather heavy wa- tering of the stock. Now, I do not believe that there is a stock company or a transportation company in this country, or a manufacturing company or establishment in the land, that could have anything like that much water — that could have knocked the bung out — that would not have had to run their water in with a spiggot that fast. I think that they would have had to knock the bung out to have watered it as much as the land has been watered in that length of time. Now, that class of men has been a detriment to the farm interests, and to the landlords' interests, and to the general public's interest, during all these years. Why? Because the speculator has bought the land without any view of ever making it the source of an income, as far as its producing power was concerned. Why? He bought it purely on specu- lation. While he was holding that land he was mining it for all it was worth and for everything possible to get out of it. He would employ a tenant in many cases, and in a certain per- centage of the eases, without any idea as to that tenant's quali- fication for maintaining the soil, or for that tenant's qualifica- tions or adaptability for that community,— to help build up the community, but simply as to his power to mine the soil and get the most possible out of the ground for that present year, be- cause of the fact that he wanted to have all that he could get out of it while holding that land for speculation, and in turn, turn around and dump it on some other men for a large profit when he got through with the land. Two Types of Tenants Now, there are the 2 classes of those tenants. One class grows very little, for the standard of their living is very low. He cares very little for the standard maintained in his household. 28 — M. F. C. 434 MARKETING AND FARM CREDITS He gets along and gives his family very little sehooUng ad- vantage. I know Avhat I am talking abont because 1 have a neighbor today who has o sons, the same as I have, and out of those 5 sous, not one passed the third grade in sehool. The oldest son, who is going out to do for himself today, can- not write his own name, — and is a young man 25 years old. But that tenant farmer has sacrificed every comfort for the purpose of wrenching from the soil all the money he could get, and in turn buy the farm. In the course of a few years he will have it all right, but he has paid too big a price. Now% that tenant looks out for his own financing. He finances his own business on his own basis of his own business ability and energy, and he does not ask anything of anyboci>'. That man has 20 head of horses, the best in the community, and if he wants to buy a team of horses and does not have any money, his credit is always goart of the community in which they live. They participate in all the affairs of the com- munity. There is a class of us that there is not a public enter- prise that comes along that w*e do not take hold of it and be- come a factor in shaping the affairs of that community. As an illustration, we adopted the idea of having a high school district in my community not long since. I refer to our connuunity. because that applies all through the corn belt. We have a lot of absentee landlords there. So that the children of that community, and who grew up in this connuunity would be eligible to that institution and go through our high schools, the tenants who believed in building up citizenship and who CHARLES S. ADKINS 435 are permanent fellows and expect to remain in that community, got out and put their shoulders to the wheel to bring about that condition which we wished. Absentee Landlords Fight Progress The absentee landlord came in in most instances, and, fig- uratively speaking, put a gun to this man's head and said, "do not do this." But we got together and brought about this result. That is one of the common things we have to con- tend with in the community. The absentee owner is not in favor of these things, and we also have this class of tenants. But there are other kinds of landlords. Take, for instance, the man I am in business with and have been for a long time. I got married and moved on his farm on a Thursday and on Sunday morning he introduced me to a 4 mule team and 160 steers. That was 25 years ago. He has a splendid farm and he was raised on a farm and lived on a farm all his life and operated one all his life. It is a stock and grain farm. I had not been able to buy my teams and he arrived at it in that way, and I find that there are a large number of men who own land in the North who are that class of landowners and that take great pride in their farm matters. They see some fellow like myself, who is am- bitious and able to do things, and they take him up and go along and give him a show. In my instance, he said, "I have the cattle to take care of and I will turn you over the teams and let you raise this corn and give you 121^ cents a bushel to raise it. I will pay all the expenses of repairing the harnesses and keeping up the teams, and you furnish the labor." So I have the cattle until the time to put in the crops and then when I have gotten the crops in and in the shock, I go on feeding the cattle. In about 2 or 3 years I got too rich to do that and then I bought my own teams and went into partner- ship with him, as I have told you. But we have a large number of men in this country who are land owners, and who are interested, not only in the present income, but in the lands being in such condition, that is, poster- ity may get something from it, and they take the matter up with their tenant, and if the tenant hasn't sufficient capital to take care of it, and has not his own livestock, and if his tenant is not 436 MARKETING AND FARM CREDITS of such a financial standing that he is able to carry it, the land- lord backs him and furnishes the money to do this. And as they go on on that basis, which is fair and equitable to each of them, and then they cooperate with a view of carrying out that system of cooperation or that plan, and to the mutual advantage of each of them, and to^the upbuilding of the farm. Now, that is the other class. Then we have still another class of landlords: They live on the very small farms, and they attempt to retire and live off of the income of those farms, and they are the poorest class of ten- ants, and landlords that we have, because they are both grabbing off all they can get from the farm, and they are choosing the hardest way to live. The result is that all 3, the landlord, tenant and the farm, grow poor together. Now, it seems to me that the problem that is broached and the problem that we will have to take cognizance of is this: You have a great, national conference called here, with a view of doing what ? Shortening the distance between the farmer and the consumer. That is what it all means. There has been a tendency in the past, — and I haven 't heard it touched on in any of these meetings, — that affects this system of landlord and ten- ant, — that we may better this system and may establish a system in this country. It vitally affects it, and in turn affects the conditions of agriculture in this country. It is this : A Poverty of Remedies In the last 30 years, as I have already stated, as a speculative proposition, land has been a very desirable thing to buy. We have bankers, manufacturers and professional men, and the other fellows that have come back to the farm with their money — looking for a safe investment for their capital. They have in- vested it in the land. Banking concerns, in times gone by, took the farmers' money and bought the land with it. That is aU legitimate, we are not criticising it. Buying it and having the money placed out at work, and with the increase in the price of land the com belt, it has brought an enormous income, and added to their resources until there is a large amount of this land that has fallen into the hands of those fellows. The Right Kind of Competition That is competition, and it is legitimate competition, and we are not criticising any man for seeking and finding a safe in- ALEXANDER E. CANCE 437 vestment for his earnings. That competition is keen today, and he has become a competitor with what would be the real farmer of the country, for the soil. Now, of all the remedies that I have ever heard proposed to make it easier to reach this end that you are talking about financiny — ^to become a landholder — it does not seem to me that I have ever heard a reasonable and feasible proposition submitted. I have had a great deal of experience in legislative matters in my state, and I have had an opportun- ity to confer with the lawyers of great business interests, inter- ested in my state, especially with the transportation lines, and I think the tendency is in the right direction today to bring about a proper condition in this country, and instead of having a land- less people, we will have a land-owning people. Instead of 1,500,000 on this land, we will have less than 50,000 in the next 30 years, if the present tendency goes on as it has. Let us bring about a change. FINANCING LANDLORD AND TENANT IN PRODUCTION IN THE SOUTH Alexander E. Cance Professor of Agricultural Economics, Massachusetts Agricultural College The claims of the author of this paper to discuss expertly the landlord and tenant problem in the South are based on 3 separate investigations made for the University of "Wisconsin, the United States Census Bureau and the United States Immi- grant Commission, into the landlord and tenant situation in JMississippi, Texas, Arkansas and Louisiana. Moreover, a 3 years' residence in the Eastern South and a number of visits to- almost every portion of the cotton kingdom gave him an oppor- tunity to know the South somewhat intimately. These studies were made in the field going right through the cotton row and over the actual plantation on foot and mule-back, visiting the tenants and the small owners as well as the large planters on their plantations and in their homes. While some of the facts presented may be a few years old, the author has kept as closely in touch w;ith the situation as possible and speaks with some as- surance on all points offered for consideration. 438 MARKETING AND FARM CREDITS A Southern AgTicultural Problem In some respects, it is very difficult to generalize on southern conditions, because these conditions vary a great deal in differ- ent parts of the South. The problems of the so-called "bot- toms" and "black lands" are very d;ifferent from the problems of production in the uplands. The weevil country and the im- mune sections of the South differ greatly in this aspect of the cotton situation. In many instances, different parts of the same county bring to light very different problems. Nevertheless, everywhere in the South, there are some points of similarity. In the first place, the system of land tenure which provides for landlords and tenants in production is common everywhere. In the second place, the one-crop system is almost universal in the cotton belt and pretty general in the regions where rice, sugar and vegetable crops are raised. All over the South, th/cre are renters, croppers and small owing operators. In the third place, the use of credit obtained from various agen- cies is almost universal in crop production. The crop mortgage to secure advances of supplies ;is general and the rent lien is a feature of agrarian legislation in the Southern States. There are other points of similaritj^ but these, perhaps, are sufficient to show that there is a southern problem. Economic Characteristics of Cotton Cotton is the all-important crop and cotton has certain inher- ent characteristics: (1) It is a 13-months crop, which really re- quires 150 to 170 days of actual labor at more or less regular in- tervals throughout the year. (2) Cotton is a poor man's crop. It requires verj^ little capital and a small acreage per fam{ily. (3) It will stand a great deal of abuse and neglect but it will respond marvellously to intelligent cultivation and careful man- agement. (4) It is not a heavy yielding crop. As grown, a good average yield is one-half bale per acre, somewhat more than the United States average. A good crop is 6 to 10 bales per mule and often a two-mule farm produces less. A fair gross retam is $300 to $600 per mule, but the variation in returns is tremen- dous. (5) Cotton has very good marketing characteristics. It is easily stored, handled in comparatively large units and divided readily, is in universal demand and can be moved with little loss. (6) It is an excellent basis for credit since it does not deter- iorate, is a good insurance risk, and can be quickly turned into ALEXANDER E. CANCE 439 liquid capital. Nevertheless, except iii rare cases, it is very much easier to get an advance of money on a growing or unplanted crop of cotton that it is on baled cotton ready for market in a farm storage or warehouse. From the beginning, cotton has been ra|ised under a one-crop system, a system that has de- stroyed the land, discouraged the home-builder and kept large sections of the South in permanent poverty. I need not say that a one-crop cotton system cannot sustain itself permanently. Fertility is exhausted ; rotation of crops is not possible ; livestock finds little or no place in the scheme ; no source of current income is provided ; a self-sustaining ag- riculture cannot be practiced and years of trial have proved the inability of the system to build up permanent, intelligent, and prosperous rural citizenship. Forms and Extent of Tenancy In this day of our Lord, there are, from the southern farmers ' standpoint, 3 methods of land tenure — ownership, rent-tenancy, and share-cropping. There are 4 common methods of working the soil open to the landlord, — with his own family, wdth wage hands, by means of croppers or by renting to tenants. The wage hands receive a. money wage weekly, monthly or yearly with some variations in detail. The cropper furnishes nothing but his labor, and receiives one-half of the proceeds of the crop, his house rent, garden, etc., as his wages. The renter in the up- lands of the South may be an independent manager and capital- ist, just as we find him in the North. In the alluvial cotton re- gion, he is only another sort of laborer, with a mule and wagon of his own. There are all sorts of local and incidental modifi- cations of these systems but the general relations are as stated. In the so-called Southern States, there are 3,097,547 farmers. Thirty-one and seven-tenths per cent of them are croppers or renters on shares ; while 14.6 per cent are tenants for cotton or a fixed rent. One and three-tenths per cent are a combination of cotton and share, and, 49.8 per cent are owners. In Mississippi, a typical southern state, there are 274,382 farms. One-third (33.6 per cent) of them are operated by their owners and two- thirds (66.1 per cent) by tenants, of whom two-fifths (38 per cent) are cash tenants and three-fifths (59 per cent) are either croppers or share renters. Tenancy is increasing throughout the South; in some states very rapidly. 440 MARKETING AND FARM CREDITS A very large percentage of these are one-crop farmers ; a great many of them are speculators either in land or in cotton. From 90 to 99 per cent of the one-crop farmers, excepting always those of foreign antecedents, are borrowers. Where there are tenants there are landlords. There are at least 2 distinct classes of these — those who live on their own plantations and direct their farming operations, and those who live in town, either near the plantations or at some distance, and earn their daily bread as lawyers, bankers, merchants, doc- tors, preachers or railroad men, and look upon agriculture as an incidental source of revenue rather than an investment to be taken seriously. The indifference of certain southern planters is amazing. I could name instances in which planters had not visited their plantations, a few miles distant, for years. Even those who are most optimistic must concede that nearly all the croppers, white and black, are ignorant and unambitious, that comparatively few of the renters have sufficient capital and enterprise to carry on production intelligently and scien- tifically, and that many of the small landowners are not ad- vanced agriculturists. Until within recent years, although we have had agricultural preachers and prophets without end, very few of the southern planters gave much heed to their say- ings. No attempt is made to diversify crops or introduce new systems of agriculture unless the farmers are driven thereto by the boll weevil or the low prices of cotton. Other facts which greatly complicate the whole productive problem are that renters and croppers are a shifting and often a shiftless class, that very few of their tenant leases or rent contracts run for longer terms than 1 year, that even under the very best conditions one-third to one-half of the tenants move every year. A third complication is racial. In the black lands, the ne- groes outnumber the white tenants. In the uplands, there are more whites. In any case, there is little or no affiliation be- tween them. Borrowing for Production is Chronic Borrowing is an old habit in the South. Before the war, land was not of much value, but planters operated on the security of their slaves, and cotton factors were willing to make ad- vances on the prospective shipments of cotton. After the war, land was still valueless but the slaves were gone. Nobody had ALEXANDER E. CANCE 441 enough ready money to make a crop or pay wages. For this reason, the planter offered a share of the crop as wages and pro- cured money for current expenses by giving a mortgage on the growing or unplanted crop. A few cotton growers have been able to pay off their first mortgage and save enough to pay running expenses 9 months in advance, but ever since 1865, the ordinary cotton grower has been one lap behind. The mortgage has been paid only by giving another mortgage to pay the first one. In the autumn, he borrows for the winter, in the spring he arranges a loan to carry him through the fall. Cotton is a staple easily and generally raised, but the yield and the price fluctuate greatly. The cotton grower is something of a speculator and he doesn't catch up. The southern tenant borrows to pay for making a crop. His advances are for meat and meal, mules and mule feed, to- bacco, molasses and general living expenses, A great many loans are for $50 or less. Perhaps $100 to $200 will cover the individual loan of most of the renters or croppers for a year. Since the loan is necessary to the making of a crop, and since the crop is harvested only in the fall, the loan must be made in the spring for a period of 6 to 9 months. If any renter desires funds for buying stock, it is probably necessary that the loan should be for a term of 2 or more years. Nevertheless, the ordinary method in many sections is to buy mules on time in the spring, and let seller recover them in the fall. Bases of Credit The fundamental bases of credits are the ability and the willingness to pay. Money should be invested so as to pay back both interest and principal. In other words, any loan should be for productive purposes. A loan for consumption cannot pay for itself. Payment must be made from some other productive enterprise or from previously stored-up capital. A productive enterprise is a good investment provided the bor- rower is willing to pay. A borrower should be honest, in- dustrious, sober and enterprising. On the other hand, if the enterprise is speculative, the risk is great and, consequently, the interest or rather the insurance charge to the renter must be high. If the loan is not for pro- ductive purposes, the security offered must be very good, both in property and in personal integrity. Unfortunately, a large percentage of southern farmers is weak on both scores. First, 442 MARKETING AND FARM CREDITS they are not personally men of high productive capacity, in- tegrity or enterprise. Second, with ordinary methods, cotton growing is not uniformly productive and the borrower has few chattels and little or no real estate to offer as security. It must he said that commercial loans in the South bear a comparatively high rate of interest. In fact, the interest rates increase as one moves southward from Washington to Texas. Eight per cent per annum is at present considered a fair com- mercial rate. Loans to land-owning farmers of the better sort average from 10 per cent to 12 per cent near and west of the Mississippi river. Loans to croppers and renters and land- owners of the more ignorant and shiftless sort run from 10 per cent or 12 per cent or 20 per cent or more per annum. In many instances, these rates are exorbitant; in others they represent only a reasonable interest for the great risk incurred. The Tenant is a Poor Credit Risk The croppers are a shifting, roaming set ; both white and black are usually unreliable and, of course, have no property and are utterly dependent upon the crop of the present year and the credit extended to them for support. In the rich bot- tom lands, they always work under an overseer upon a crop that is always in the control of the landlord, and which is planted, cultivated and picked under supervision. The mules are owned and fed by the landlord; the day is begun and ended under the orders of the landlord; the tools, the cabin, the fuel and the necessities of life are provided and super- vised by the landlord. The cropper depends on his landlord for food, for shelter, for a doctor, for a lawyer, for a school, for labor. He works about 160 days in the cotton field, gets a settlement about Christmas time, giving him one-half of the crop and seed minus his living expenses and interest, and then he moves on. Of course he is a poor subject for credit. In the bottom lands he goes to the planter, who is his commissariat, his banker and his employer. If he is in the uplands, he goes to the sup- ply merchant who takes a mortgage on his ungrown crop. "Whether he works much or little he gets a living and usually he gets a living only. To him the planter makes advances usually in food and clothing, but sometimes in cash. What the planter charges for the supplies advanced depends on the planter's conscience. Some charge 25 per cent some 50 per ALEXANDER E. CANCE 443 cent, some 100 per cent or more oyer cash prices and some add m the date at the head of t,he column when making up the yearly account. Whatever the planter charges, he has a good many bad accounts. These, of course, the honest cropper must pay. The halver of the uplands and the poor lands may be black or he may be white but 90 to 1 he is abject, shiftless, hopeless, frequently drunken. He has no credit capacity and very little productive ability. No one except his merchant would ad- vance him anything. The only security he can offer is his pros- pective crop or perchance the name of the landlord who "stands" for him. The renters are in a little higher class. The share renter probably has a mule and a wagon ; a few of them have harnesses and plows and perhaps a little household furniture. The cash tenant may add another mule and once in a long time a cow and perhaps a pig. In the bottom lands there is comparatively little difference between the dependence of the cropper and the renter. With the exception of the fact that the renter may use his own mule as he pleases, he is as much under the super- vision of the landlord as is the cropper. His chances of profit- ing by his crop are greater than the chances of the cropper. On the other hand he risks more. In the uplands the renter has a little more independence. In fact, the cash renter of the upland South is in much the same social and economic position as is the small landowner. Few of the renters are very intelligent. Comparatively few are ac- quiring land. Not many of them are progressive. Credit for Crop Making Universal Practically all renters seek credit. They can offer as se- curity a chattel mortgage on their tools, mules and other live- stock, if they have any. Of course they, too, may give a crop mortgage. The renters usually seek advances from the coun- try merchant who provides them with their livelihood during the crop-making period, furnishes their seed and mule feed, and takes a second lien on the crop. The first lien is a land^ lord's lien for rent. In order to supply the renter with cash or supplies, the merchant must go to the local bank or to his factor. In either case, he becomes a sort of middleman be- tween, the banker and the producer. As a middleman, he takes whatever toll he can, charging not only a comparatively high 444 MARKETING AND FARM CREDITS interest rate running from 10 per cent to 20 per cent per an- num, but also a bonus or additional charge for making a loan. This sometimes increases the rate on small loans to 50 per cent per annum. A very frequent method is to charge 10 per cent tlat, whether the loan runs for 3 months, 8 months or 1 year. There is no doubt whatever that in a great many instances the merchant takes an unfair advantage of the renter and charges him outrageous rates of interest. A further complication of the situation is that the planter is frequently a ginner, mill owner and merchant. Consequently, he receives his profits not only from the plantation but from the store, the gin or the cot- ton mill. For this reason, of course, it is for his interest to charge as much as he can for supplies, and pay as little as he can for cotton in addition to obtaining as high a rental as com- petition will allow. The Land Owner and Credit The land owner is nearly always a borrower whether he be a large landlord of the alluvial region or a small operating farmer of the uplands. In some states probably 50 per cent to 80 per cent of the loans secured by owners come from the banks. In recent j^ears a very much larger number of owners apply to local banks for the necessary cash. The owner needs money for current running expenses, for seed, for fertilizer and for household supplies. If he has a commissary he needs money to pay for the supplies he keeps on hand. A great many farm- ers buy mules and farm machinery on credit, and of course a small number at least borrow for permanent improvements, for building barns, levees, roads, drains, and the like. All evi- dence goes to show that the capable and progressive land-, owner is able to secure money on better terms than the renter. It is evident that the best farmers pay slightly more than the rate charged for the best commercial loans, but it may be said that few loans are made for less than 10 per cent. It is cus- tomary also for banks to take the interest from the principal, when the loan is made. The poor small landowner is in much the same situation as the renter. Such is the situation as regards tenancy and production in the South. Looking at it from the standpoint of the lender of money, it is my firm conviction that 10 per cent to 20 per cent of the farmers of the South are hopeless credit risks. Any- body can get credit in the South, provided he pays enough for ALEXANDER E. CANCE 445 it. But this big minority of all the farmers does not deserve credit from the standpoint either of integrity or of productive capacity, from ivillingness to pay or ability to pay. For this reason, in many, many instances rates of interest are very high, and banks are unwilling to make loans for the length of time necessary to produce a crop. It is very hard, for example, to get money from August to January. National banks are permitted to discount farmers' notes for a term of 6 months; but 6 months is too short a time, for many are not o^^mers and renewals cost money and trouble. The Money Lenders Force the Continuance of Destructive One-Crop System Few banks and few merchants are willing to lend on security other than chattel or crop mortgages and a crop mortgage must be based on cotton. This unwillingness to loan on other than a cotton basis fastens upon the South perpetually the one-crop system. It prevents diversification of crops and introduction of livestock, the growing of products that will give a return to the farmer throughout the year. In many instances it has given the country merchant the ownership of vast tracts of land upon which the former small owners are now eeking out a miserable livelihood as tenants, hopelessly in debt, always at least 9 months behind. There are more evils in the situation than I have time to mention. These evils have a different complexion in different parts of the South; but most of them find their cause in the one-crop system, the crop mortgage, the supply merchant, the short-term tenancy, and the ignorance and shiftlessness of the tenant class. Picture the renters of the Eastern Cotton Belt, say northern Georgia or South Carolina, moving from one plantation to an- other in great numbers in January of each year. The proces- sion is usually led by a worn-out mule or decrepit horse haul- ing a broken-down wagon, driven by a worn and tired woman surrounded by several poorly clad, poorly fed children. The wagon is loaded with an old mattress, a few chromos, 2 or 3 broken chairs, a rusty stove, and a few odds and ends of house- hold utensils. Behind the wagon follows a toil-worn man, ragged, unkempt, discouraged. He is probably leading an emaciated cow. This cow and the mule and the few household utensils represent his sole belongings. He is moving from one 44G MARKETING AND FARM CREDITS defeat to another. He has probably been moving in this ^va^' for 20 years. He g:ets no farther ahead and he can scarcely lose ground. The saddest part of it all is that this is a white family, onr own kith and kin. Under different eireumstances, they wonld be as strong and healthy and wholesome citizens as any in our commonwealth. As it is, they are poor, ignorant, hopeless. That they have the making of tine men and women, I can testify from a dozen instances, bnt the system keeps them down in what might be the most productive region of the United States. Some Demonstarted Facts in the Situation 1. The all-cotton farm is less profitable than the food, feed and cottc\n farm. 2. The all-cotton farm is less safe as a banker's risk. 3. Bankers will actually lend to owners and renters on bet-. ter terms if the risk is safer, i. e. on the food, feed and cotton enterprise. ■1. Under this system the operator can pay eash for his sup- plies and save 10 per cent to 30 per cent on his usual supply bill, or bill for ''advances." 5. That the operator will need much less cash for supplies is proved by Italians. Swedes, Genuans and other foiviguei's in many parts of the cotton kingdom Avho are raising cotton prof- itably. 6. ^Merchants on the whole would rather sell for cash. 7. The rent may still be paid in cotton, or a cash rent given based on cotton. S, The merchant is in the grip of the lender as well as rhe farmer. Signs of Hop€ Nevertheless there are some signs of hope. 1. What the foreigners can do and are doing : buying land — obtaining credit — lessening supply accounts — shaping the pol- icies of the state — exhibitmg the virtues of honesty, frugality, industry and desire foor education. 2. Some banks lending to tenants for cash, as a line of credit. 3. In boll wevil-ridden districts like Southwestern Missis- sippi, hogs, cattle and diversification have come ui. The Nat- chez slaughter house buys this stock and has been building for years : it cannot i*each completion. ALEXANDER E. CANCB 447 4. Some splendid examples of rural leaders — planters, lec- turers and demonstrators, fine women may be seen in the cot- ton land. 5. The young people are giving demonstrations of community organization, productive capacity and cooperative enterprise. Some Remedial Measures The remedies we offer may be disappointing to those who look for some panacea. There is no panacea. There are no 1, 2 or 3 pieces of legislation or projects of statesmanship that can bring peace and prosperity to the rural South. There must be an awakening along the whole line, the changes must be fundamental and the kingdom of righteousness must arise within the South. In the first place, education ; a more enlightened educational system, both rural and agricultural, is needed. A regime of compulsory education must be inaugurated. Only 44 per cent of Texas children are in school. The percentage of illiteracy among the whites of the rural South is hopelessly high. Among the negroes it is appalling. For years, 2, 3 or 4 months of vol- untary school attendance has been considered sufficient in the cotton states. Very little attention has been given to agri- cultural education. We need an educational awakening in the South, such an awakening as is taking place in North Carolina^ for example. Second, the South needs a more progressive agriculture. This means diversification of crops ; the introduction of a gar- den on every tenant farm ; the growing of quick money crops, crops that the farmer can turn into money before the cotton is harvested ; the introduction of livestock — hogs, cattle, mules ; better farm management, the organization of the farm in such a way that there will be a balance between the money crop of cotton and the food crops, hay, grain and the like. The chief agencies in promoting this progressive agricultural develop- ment are going to be the county agents and farm demonstrators throughout the South. These men are going to introduce a new spirit into agriculture by teaching the farmer on his farm, and the boys and girls in the schools, the right methods and a broad outlook ; they are going to free the South from the slav- ery of cotton and crop mortgages. 448 MARKETING AND FARM CREDITS Community Action Needed Third, eommimity spirit and enterprise. The most signifi- cant rural movement in the United States today or in the world, for that matter, is the movement toward community enterprise, the organization of agriculture. The demonstration work so splendid and so significant in the South, the cattle tick eradi- cation by counties, the boys' and girls' clubs, the community organization, and the community spirit are the hope of agricul- ture in the future. Once the banker and the farmer can get to- gether so that the banker sees that the farmer's prosperity is vital to the bank, when the merchant prays for the tenant and ceases to prey on him, because his eyes are opened, when town and country can meet in harmony, then southern agriculture will come to its o^yTi.. Pix>gress must be by communities rather than by individuals. Foimh, cooperative organizations: (a) for livestock improve- ment, for alfalfa raising, for cotton, breeding, etc. ; (b) for creameries, ginneries and the like; (e) for warehousing and the sale of cotton and other crops: (d) for obtang to find the source of the trouble the southern producer is having, and desire to find him a remedy for them. There are 2 systems of renting. But before going further, will say I will only discuss that part of the subject which has to do with cotton, because cotton is our main crop, and must be until our seasons and climate makes radical changes, and because all other crops depend upon cotton money for their sale or use. One of the systems of renting is that in which the tenant furnishes everything but the land and gives the land- lord one-fourth of the cotton and seed or one-fourth of what they bring. The tenant under this system usually does the selling and most generally divides his crop between cotton and com to suit himself. The other plan is for the tenant to fur- nish nothing but the labor and each receives one-half. In this case the landlord sees after the selling or does the selling him- W. B. YEARY 453 self, sometimes with the knowledge of the tenant and most frequently without his knowledge. This class of tenants is as a rule, less intelligent than the former; for this reason a certain class of landlords prefer to rent to them. They will buy more from the commissary, can be fooled more easily and can be managed or forced to do the landlord's bidding. Allow me to digress a little at this point to explain that but few speakers before the public seem to realize why the South has such a large per cent of tenantry as compared with other sections. It is because there is no money in hiring hands to make cotton. This being the case a man wdth more land than he can cultivate with his own family rents it out. Occasionally one will find a section of the country where ignorant labor can be employed. I mean ignorant in the way of education or any thing else except how to make cotton, labor that can be driven. Such frequently the best cotton producer, but it can be beaten out of its toil. But few men would rent their land out to others to manage if they could hire hands and come out ahead. Yet if this condition existed the tenant would soon be a home-owner. The Tenant Starts in Debt The tenant, and most of the medium-to-small landowners are in debt to start with and must make some arrangements for for food and clothing while making the crop. If the tenant, or landowner, is known to be honest, industrious and economical, he can, in some sections, buy supplies from the merchants or borrow a small amount of money from the bank without giv- ing security. Otherwise, if he buys an implement he gives a note for it with a mortgage on it and a mule, cow, hogs or cot- ton; or he gets his landlord to sign the note as security for him. In either case the debt is due when cotton is picked or as it is picked. The mortgage may be to one merchant for the first bale, to another for the second and third bales and so on. As the first bale is picked, the debt against it is expected to be paid, and so on. If the landlord "stands" for the supplies, he holds first lien, over any one else. The banking rate of interest is high in the South, also the profits on supplies are enormous; but neither are too high for the risk taken. The banks are not making vast fortunes; in fact their profits are in notes carried over from one year to another and they hardly know whether they have made a clear 454 MARKETING AXD FARM CREDITS profit or not. The merchants are in the same shape. Statistics bear this out by the mercantile failures in the South. Still statistics do not approximate the real condition. There is hardly a retail merchant who sells goods on time who has been in shape that he could close up and pay out in the past 10 years in the cotton districts. The wholesale houses know this and can not afford to close them out. Of course, this condi- tion compels the wholesale houses and manufacturers to add sufficient extra profit to cover these risks. No one is to blame for these extortionate rates. The retail and wholesale mer- chants and country banks would be glad to have their busi- ness made more safe and charge a less profit but they can not under present conditions. The Banks Borrow Money to Lend Money The banks, like the merchants, borrow money during the spring and summer from their Eastern connections to loan to their customers to make crops. All of the interest a bank charges is not profit as it would be if the bank's customers were depositors. It must be remembered that most of the bor- rowers never have a deposit in the bank. They borrow enough money to pay for a mule, an implement or some feed and never see another dollar until the crop is gathered, then they take the cotton tickets to the bank or merchant holding the mort- gage and pay their debt or as far as it will go. Very few get out of debt, and they have next to nothing to buy winter clothes with or other necessities. Frequently one ^vill get his crop gathered before some neighbor who has a large crop or has had some sickness and will take his children and gather for his neighbor to get money to buy clothes and school books. There is no fault, in general, that can be laid upon any one or any class. The tenant, although poor or ignorant on any and all other lines, is most usually an expert at preparing, cul- tivating and gathering a cotton crop. I know of 2 men who have been employed by the national government for many years as experts in seed breeding and such work who have become landowners or in the actual work of managing farms, who say the average tenant is an expert in the production of cotton. They did not think so a few years ago. The above conditions relating to farmers and other interests will not be such a mvsterv when it is undei-stood that the W. B. YEARY 455 average cost of producing cotton, basing wages at $1 per day, is 50 per cent higher than the average selling price. In other words, the producer of cotton works for about 50 cents per day. This price is not the highest price the consumer of cot- ton is willing to pay for it ; but is the lowest he can get it at. We throw 12 months supply of cotton on the market in from 3 to 4 months and ask the consumers what they will give for it, or say to them, "Here it is; give us all you can for it." Does any one expect it to bring half its value ? Would any thing else that is for sale bring half its value ? If a trainload of shoes, clothing, implements, automobiles or anything else were thrown on the market in this way to pay for their mak- ing would any one expect them to bring half their value? There is no use for you to study any other feature of agricul- ture or rural conditions imtil this evil is stopped. It is the breeder of all others ; its cure will cure all others. There are several interests that oppose the South in pric- ing her cotton. How they do it can be best explained by fol- lowing the line of production to its end. After the bale of cotton is ginned and ready for the market it generally goes to the streets. Here it is cut open on one or both sides, and about a poimd of cotton is taken out to find the grade. Frequently from 2 to 6 buyers look at it, and each one makes a new cut. This gets the covering or bagging about destroyed. Finally one buyer bids 5 or 10 cents per bale higher than the others and takes the cotton. These buyers get their limits to pay for cotton from the exporting firm in some city whom they are working for. These limits are furnished every few minutes by wire or phone. Sometimes half a dozen buyers in a town will agree on how close to their limits they will pay, thus getting the cotton for less than the market price. Part of this loose cotton, taken as samples is taken by the one who buys the cotton, the rest is stuffed about the bagging which finds its way into what is known as "the city crop'' later on. It is partly taken out by the local cotton yard and the balance and a good lot more is taken out when the bale gets to the compress, where the ties are cut and the bale is compressed to about double its gin density. Here patches of the previous year's bagging are put on and in the holes cut in the covering to make up the loss made by taking the cotton out and enough extra to amount to 8 or 10 pounds more. On account of the worthless covering and the dirt and trash that sticks to the bale the spinner deducts this amount more than the actual tare. 456 MARKETING AND FARM CREDITS This extra amount is put on to equal the amount the spinner is known to deduct. Remedies Should Begin at the Gin From these transactions it can be seen that our cotton should be treated like cotton is in other countries. It should be pressed to its necessary density at the gin, a sample taken out of it before pressed and the bale completely covered with a lighter but safer covering and sold with a certain uniform tare. Presses are built for this purposes and cotton so pressed and wrapped is worth a premiiun OA^er the present way; but if a gin installs such a press the opposition gets busy. The buyer docks the bale 50 cents or $1 and thus kills the gin. He is of course upheld by the compress man, and, consequently, no progress can be made along this line. If the farmers could sell to the spinner direct, that is all that patronized such a gin, they could force the change : but from the explanations of how the farmer is tied up, you will readily see how impossible it is unless an association were formed in some way to handle the crop in place of the way it is. You can see where the govern- ment could do a great deal towards standing off this opposition. Fear Prevents Organization A great many people are afraid to attempt an organization of the producers of cotton on account of the opposition. "While fruit growers and other producers whose products are not dealt in on the exchanges have organized and are successful, they are confident, from past experiences, that the speculative and other interests would find some court that would assist in the destruction of the organization. They point to the action of Congress in the Clayton bill, in which an effort was made to give agriculture permission to organize without violating the Sherman Anti Trust Law. The best that could be had was per- mitting labor and agriculture to organize provided they did so icifhout a capital or not for profit. Such legislation does not look good to farmers. It does not look as if Congress had enough interest in agriculture to oppose the interests that are preventing their prosperity. Cotton, like all agricultural products which are dealt in on the exchanges, is easily affected in price by organization of the pro- ducers. Any movement which aids the producer to organize or hold in an organized way, helps the price. This is seen every few W. B. YEARY 457 years. During 1909 and 1910, some southern speculators made an effort to get in control of sufficient cotton to be able to dictate the price. The price the year before they began and the year after they quit was about 9 cents. The 2 years they operated averaged 14i^ cents, although they never owned more than 300,000 bales at any one time. As you know they were indicted for advancing the price of cotton in restraint of trade, thus vio- lating the Sherman Law. A cotton growers' association was started during 1912 and op- erated through 1913 with similar results as to price and method of destruction. Many think, or profess to know that the specu- lating and cotton interests were the cause of their indictments. This fall we have an example of the effect of aiding the pro- ducers in marketing. When the crop opened up the price ran around 8 cents for some time, then Secretary McAdoo placed $30,000,000 in the reserve banks to be loaned to the farmers to hold their cotton, and announced that he would furnish more if necessary. Consumers of cotton, also speculators of the board, be- lieved the farmers would borrow it and hold for a fancy price. Consequently, many spot cotton consumers and future cotton dealers became "bulls" and began buying heavily which ad- vanced the price rapidly to 12 cents and better. At this point the country merchants and banks advised their customers to sell in place of borrowing and holding, which they did. When this was discovered the future dealers sold out and took their profits and the spot men quit buying, with the result that the price dropped rapidly. I mention these incidents to show how easily the price can be made profitable and practicably stable. You mil understand when any thing of this kind is attempted it will be opposed by all interests that now have any dealings with, cotton unless it be the spinner. I am informed that he would rather have a stable market for his raw material. Other Enemies of Cotton Producers AUow me to state that the retail and wholesale merchants, also the country banks, are enemies of cotton in so far as holding it off the market; because they owe debts that are pushing them and unless the pressure is taken off from them they must oppose holding. Buyers and speculators are enemies to cotton because to make any beneficial change will injure their business. Many banks, especially city banks, are interested in some way with 458 MARKETING AND FARM CREDITS the exporters of cotton and oppose any change, because it would interfere with the exporters' business, consequently their own. Many country banks are similarly tied up. As to rural credits; the farming class only desires a business system of selling their products so they can i\ay out a debt, not one that will enable them to borrow money and get deeper in. THE TENANT OF THE NORTH AND THE MARKETING OF HIS CROP B. H. HiBBARD Professor of Agricultural Economics, Vniversity of Wisconsin Since the first count of tenants wa^ made, in ISSO. the number, •and the proportion, in the Northern States has been on the in- crease. In 18S0 there were 2 farms out of every 10 in the North Central States in the hands of tenants ; in 1910 three out of every 10. In the "West the proportion of tenants has not in- creased so rapidly. In the East it increased from ISSO to 1900 and during the next decade sliowed a decline in favor of owner- ship. Perhaps the increase in tenancy in the North Central States from 20 per cent to 30 per cent may not look so very, very alarm- ing since the latter figure is low enough to suggest a thorough- going predominance of land-owning farmers. But on closer study the case does not look so flattering. The North Central Strifes is a big section of country, in fact over a tifth of the area and almost a third of the population of the United States is here included. Here is found a third of all the farms and half of the land values. Almost half of the horses, cattle, and machin- ery are found here while two-thirds of the grain and hay crops of the country are produced ui these 12 states. Were the 30 per cent of tenant farmers spread evenly over the entire area of these states their presence would not attract a very great deal of attention, but such is not the case. They are congregated very thickly in certain parts of the territory, and are therefore quite spai-sely distributed in other sections. For example there is a wide range between the -il per cent of tenants in Illinois and the 14 per cent in Wisconsin, even though B. H. HIBBARD 459 the states do join. Likewise there is a great contrast between the 38 per cent in Nebraska and the 14 per cent in North Dakota. To what can such wide variations be due ? First let us notice the tendency of the renter to gravitate toward the land high in value. For example, the average value of land in Illinois is over 3 times as great as that of North Dakota and the proportion of tenancy corresponds very closely with the respective valuations, there being about one-third as large a share of farms rented in North Dakota as in Illinois. But the same situation can be found without going so far. Here in Illinois can be found as striking contrasts as anywhere in the country. For example, in the very choicest part of the state is a block of 14 counties in which at the last census the land was reported at upwards of $150 per acre. In this area were to- be found as many tenants as land-owning farmers in 1900, while during the next 10 years the tenants increased 10 per cent and the land-owning farmers decreased in like proportion. Tu one of these counties there are more than 2 tenants to 1 farmer own- ing his land. In contrast to this a block of 19 counties may b,e found in another part of the state where the land is valued at but one-third as much per acre. Here the tenants are about one-half as numerous in proportion to the number of farms, and the rate of increase less than half as great as in the other group. Large Holdings Increase Tenancy Again the sections of the older states in which the size of farms seems to be on the increase show also an Increase in the number of tenant farms. For example, in the group of counties in Illi- nois in which the value of land is so high the farms are not only large but tend to become larger. In the region of lower prices the size is not so great and the increase is not pronounced. The explanation of the greater prevalence of tenancy on large farms is the same as on land high in value per acre — the difficulty in obtaining the money for the initial payment enabling the buyer to borrow the balance. It takes $10,000 to make a 50 per cent payment on a farm in Central Illinois, while one-fifth that amount will make a similar payment on the average farm in cer- tain other counties. That the investment is as good a one on the high priced farms as on those low in price does not alter the case so far as the young man without money is concerned. It may be that the ownership of a railroad is more desirable from the standpoint of profitable investment than the ownership 460 MARKETING AND FARM CREDITS of farms of any size or value, but even so relatively few men will buy railroads. A man may within a period wbich. does not look altogether discouragingly long amass $2,000 needed for the pur- chase of the farm smaller in size and lower in value while he may be altogether unable to see in his imagination the time when he can caU himself the owner of a farm worth $20,000, Hence the majority of the logical ownei's of such land either turn their at- tention to some other kinds of work, or they settle down to a term of tenancy in hopes of buying land in some part of the country where it costs less than in their neighborhoods. It may be of interest to look a little more closely at the tenancy situation in the outlying portions of this big section of country. In Northern "Wisconsin and Minnesota a considerable part of the Dakotas, and the western parts of Nebraska and Kansas the pro- portion of tenants is decidedly low as compared to the rest of the district. The most important reason for this is undoubtedly the fact that throughout this long stretch of country land is cheap. Anyone owning a farm in the ^dcinity of great areas of unused land, held ready for sale at 10, 20 or 30 dollars per acre is well aware that his unearned increment is not greatly augmented by the annual rental income from his farm. Land is not rentable in the neighborhood where selling values are so low as to enable the man with a few hundred dollars to become a farm owner. The instinct to own land is strong and few Americans have thus far become farm tenants from free choice. In the Da- kotas and further west the presence of government land has pre- vented the growth of tenancy. It is popularly supposed that the period of taking land under the Homestead Act was mainly past some 25 years ago. As a matter of fact there was never another 5-year period during which as much land was taken up by home- steaders as from 1909 to 1914. All of these homesteads count as farms and wherever they are numerous, help to hold the number of rented farms down. Type of Farming Influences Tenancy Tenancy is influenced greatly by the type of farming. The tenant flourishes in connection with crops that can be put in, harvested, and sold within the year. This is necessarily true in a countiy where leases are in the majority of cases for one year only. He keeps fewer cows, raises fewer horses, and has a smaller acreage of perennial crops, such as fruit or hay than has the farmer who owns the land. Tenants raise vegetables of the B. H. HIBBARD 461 annual kind, even such a thing as asparagus, needing care for a few years before yielding returns is not produced by tenants to any great extent. In a similar manner the tenant raises the live- stock which corresponds to his period of tenure. He is short on cows but has his full quota of hogs. He can raise and market the hogs within a year. So far as cows are concerned he is pre- vented from doing much on account of the general lack of barn room, pasture, fences, and the like. Even though he should have a fair equipment in one place he is doubtful about what he will find on the next one he occupies. There are a few interesting exceptions to the general rule that tenant farmers do not go into the dairy business; where the prevailing type of farming is dairying, a system of tenancy has developed suited in a very good manner to it. It is called the stock-share plan, by which farm owner and the ten- ant are virtually partners, each owning a half interest in the dairy herd. This gives a stability and permanence to the ten- ant system which can hardly exist where the farm owner has no interest in the equipment of the farm. Of course this plan is by no means confined to one state or one group of states. It is be- coming the most usual type of farming in the distinctive dairy district of Wisconsin, and is making much headway in Iowa and Minnesota. Nevertheless, in all the western country, and over the greater part of the East, tenant farms are not so well equipped with buildings for livestock as are other farms. Again tenants do not go into livestock raising because they are young men with little capital, and cannot raise the necessary money for such an investment. The greatest of the evils of tenancy centers around the short- ness of the time for which the tenant remains on a given farm. According to the last census report the tenants of the country remain on a farm between 2 and 3 years. This is not long enough to permit the tenant to become rooted to the soil, or at home in the community. Long Leases Versus Long Tenure As a remedy many are advocating the long lease and pointing to England as the classic land for that arrangement. To begin with, there are not many long leases in practice in England. There are, it is true, many instances of long tenure — quite a dif- ferent thing. But England has a tenant class; a class who ex- pect to remain tenants always; we do not Jiave such a class. 462 MARKETING AND FARM CREDITS Hence our tenants do not always want a long lease, since they are so often just ready to buy for themselves. But of far more con- sequence is the fact that the farm owner does not want to lease for long period since his farm is nearly always for sale and the sale would be interfered with greatly by a 5-or 10-year lease. Our landlords are as a rule speculators to a greater or less de- gree, and so long as this continues to be the case the long lease will not appeal to them. Tenants are too transient to build up the best of credit rela- tions. They do not have enough property to furnish the best of security from the banker's standpoint. Hence they are largely dependent on friends or on the owner of the farm they occupy for the needed credit. No safe generalization can be made concerning the status of tenants in regard to credit beyond the undoubted fact that a great many farm owners have abund- ance of credit due .to the mere matter of farm ownership, while tenants have to show that they are **good". Often a signer is required, while as a rule the amount of credit over which they have command is strictly limited; they are subjected to special scrutiny. The mere fact that tenants are so often on the move makes them weak bargainers. In a survey of a district in Minnesota it was found that but a quarter to a half as large a proportion of tenants as landowning farmers belonged to cooperative or- ganizations. In such a case they were getting their marketing facilities at second Jiand and exerting little influence over them themselves. Tenants Are Non-Cooperators Among the cooperative elevators of Iowa, located in districts where the farmers are half tenants, and where tenants sell decid- edly more than half of the grain shipped, but one-fourth of the members of the companies are tenants. Thus three-fourths of the elevator shares are in the hands of men who own land, while the tenants selling more grain than all of these hold but one- fourth of the shares. Not only are the tenants in the hands of their landowing neighbors so far as the management of their land is concerned, but where the farming population is half ten- ants, with less than a quarter of them in a marketing organiza- tion it means strength to the line-elevators and all other private undertakings of the kind and weakness to the tenants and hence to the whole farming group. If ever the tenant class become CARL WILLIAMS 46^ more stable with respect to length of residence, or better yet, should a greater proportion of landowning farmers develop ont of the tenants of today, this weakness due to the transient stay of the tenant in a neighborhood may pass. So long as condi- tions remain as they are the tenant is a weak link in the chain. It is not so much that a company of landowning farmers impose on the tenants as that the tenants contribute so little strength to the marketing movement. In the first place they ' ' dump ' ' their produce because of lack of credit ; in the second place they dilute the strength of the farming community. Where the tenants are more numerous than the landowning farmers this is almost a fa- tal weakness since one of the fundamental principles of success- ful marketing organizations is stability of membership. There cannot be stability of membership where the majority of the log- ical members are on the move 4 times a decade. THE TENANT OF THE SOUTH AND THE MARKETING OF HIS CROP Carl Williams Managing Editor, The Oklahoma Farmer and Stockman The subject is the Tenant Farmer of the South, and the con- ditions surrounding Ihini in marketing his crop, and I can de- scribe that in 30 words. I am irrepressibly reminded of the one-legged man who w^ent out one evening and got drunk and he, on his way home that night, got his wooden leg into a hole and walked his other around himself all night; all the time Avondering why he did not get home. Now, that, my friends, is exactly the condition of the south- ern cotton farmer. He is going around and around himself and w^ondering why he does not get anywhere, and the reason for it, I shall attempt to bring forward right now, I want you to get the importance to the South, of cotton. It is the one crop in the world for which nature has no sub- stitute. Within the last 100 years it has risen to a financial rank which surpassesi that of any other commodity in its production, distribution, manufacture and final delivery in the form of finished products to the consumer. 464 MARKETING AND FARM CREDITS The food of the world is necessary; but cotton is ahead of food in its demand for liquid capital. Iron and steel affect the imagination to a superlative degree because of the visible mag- nitude of the industries which are required to provide them. But iron and steel i:ank far below cotton in their demands on the world's credits, in the number of people engaged in pro- viding them and in their universal importance in the world's trade and its use therein. Here is a world wide business in a product whose raw value annually is not far from $1,750,000,000, and whose manufac- tured value is 2i^ times that sum. In the United States alone the average annual value of the raw cotton grown and sold is more than $600,000,000. It is the financial mainstay of the Southeastern quarter of our country; yet, so far as the cotton farmer himself is con- cerned, he is far worse off than if he did not grow it ; not be- cause it is cotton, but because of the financial system which has grown up around that crop and which directs the average annual profit obtained from its production into the hands of others than the men who are at the foundation of this great worlds business. If all farm crops were grown and marketed on the system by which cotton is raised, and sold, the agricultural districts of America would be well on the way toward bankruptcy within 2 years. Cotton a Good Collateral Cotton is king, they say. Cotton is gold, they say. And their sayings are true. Under the system developed by those who control the cotton markets machinery of the world, this crop is unimpeachable collateral anywhere. A bale of cotton can be sold for a price in any city in the world. Money can be borrowed on it at practically its face value and at the low- est rate which prevails in the money markets of the country. Banks compete with each other for cotton paper. Cotton con- tracts are as liquid as stocks and bonds, and their speculative value is so certain that in years gone by, contracts for 30 bales have been sold and bought for every bale that was actually sold and delivered. But all this comes after the cotton has passed entirely out of the hands of the farmer who grew it. Before that time its value is based largely on the need of that farmer, and on the CARL WILLIAMS 465 greed of the man with whom he is forced to deal. Cotton is again the one crop of the world which is bought and paid for before it is raised. The cotton farmer is practically always in debt : not because of his own inaptitude, but because of a finan- cial system, which actually takes away his profit before he earns it. I think I can make this clear: The average cotton farmer is a tenant farmer — often a shiftless tenant farmer; because a man who is lacking in hope and ambition is the only man who would willingly submit to the conditions which are imposed on him by the small financial powers of his neighborhood. Forcing Tenant to Grow Cotton He comes into a community with a few mules, a wagon or 2, some household goods and some farm machinery, and rents a little land. He is told by the landlord that he must grow cotton because and once again I use the expression — cotton is the one crop of the world which can be neither stolen, wasted, eaten, sold nor given away without the landlord knowing all about it. Through a cotton crop the landlord is certain of his rent. This tenant has little or no money. If he had he wouldn't be where he is. He goes to the country storekeeper for sup- plies and a credit is arranged, based on the number of acres this tenant will put into cotton. The country storekeeper also knows that cotton is collection insurance. This credit is a necessary thing for the tenant farmer ; but the goods which he gets are charged him on a time-price basis that is anywhere from 10 to 140 per cent more than the cash price in the same store for the same article. Since the average store credit is given only until cotton-marketing time and runs on the aver- age for only about 4 months, it does not take an expert ac- countant to figure out the interest rate per annum which the tenant cotton farmer is thus forced to assume in order to make his first crop. Mr. Clarence Poe, who recently collected time-price statistics from a number of Southern States, estimates that the average interest charge per annum, in the form of time-prices in the tenant farming districts of Texas, is 81 per cent; South Caro- lina, 73; Alabama, 78; Mississippi, 68; Tennessee, 65; Georgia, 68; North Carolina, 62; Virginia, 54; Arkansas, 90; Louisiana, 61. Is it any wonder that the cotton farmer is often in the 30— M. F. c. 466 MARKETING AND FARM CREDITS hole at the end of his season's operations? How mudh chance has any man to borrow money at such rates and earn a profit through its use ? How Banks Rob the Tenant However, if this tenant farmer of our is a good tenant farmer he may not have to buy supplies at any such remarkable prices as these. He may be able to pay cash. If his mules are young and his wagons new and his farm equipment fairly complete he can borrow from the bank. The bank is always glad to make good loans — at a price. The bank will lend him $200 on 30 acres of cotton — estimated production, 10 bales; estimated value $600 — will take a mortgage on the cotton crop and on all the mules and wagons and farm equipment, and will charge a merely nominal sum for the accommodation — anywhere from 12 to 40 per cent for a 4 months ' loan. The interest, of course, is discounted in advance, so that the borrower may actually get for his 4 months' use as much as $188. The note which is signed bears no interest rate whatever, which is sometimes a convenient thing in those states whose laws insist that the max- imum contract shall be 10 per cent. That these figures are not exaggerated is well enough shown by the recent statement of John Skelton "Williams, comptroller of the treasury, who pointed out that, in one southern state which I could name and in which there are 350 national banks, 300 of those banks received an average interest rate of 10 per cent or more on all their loans. More than that : ' ' There were 131 banks which reported that they charged a maximum rate of interest ranging from 15 to 24 per cent; 67 banks whose maximum rate ranged between 24 to 60 per cent; 22 banks which charged between 60 and 100 per cent; 18 banks whose maximum was between 100 and 200 per cent and 8 banks which owned up to having charged maximum rates between 200 and 2,000 per cent. Most of these disgraceful and unprecedented rates were for comparatively small loans and to people who could least afford to pay them. If these are the sworn records of national banks for the year 1915, what do you think of the state and private banks that are even less carefully supervised? Can the tenant cotton farmer earn a profit for himself under these conditions? CARL WILLIAMS 467 Where the System Pinches Hard But this is not all. His credit account at the store is due to be paid November 1st — in some cases October 1st, in the far South. His note at the bank is made due and payable at the same time. The moment the cotton is picked these loans are called, and this action again causes the cotton farmer a loss which in itself is enough to cut all the profit from his year's operation. There is more injudicious and hurried marketing of cotton than of all the other crops combined. Within 3 or 4 months the entire production passes from first hands. The spinners' demands dur- ing September, October and November are soon satisfied, but the farmer does not withhold his offerings. The landlord, the banker and the storekeeper are clamoring for their due. Like any other product, cotton, if it is to sell at its natural value, must be sold as the demand calls for that sale. The farmer's credit matures in October, The merchant, who is carried by his bank and by the jobber from whom he buys, finds his own bills maturing at the same period. When the cotton is picked and baled there is heard over all the Southland the call of the creditor for cash. And so the farmer's cotton is hurried to market, not because of any special disposition on the part of the storekeeper or banker to oppress, but because of the economic system which has grown up in the cotton country and which does not recog- nize cotton as collateral for loans until it is out of the farmers'' hands and into those of the speculator who fattens at the ex- pense of the tiller of the soil. The time when the cotton farmer must pay his bills is the an- nual "low" in the cotton market. A look at the market rec- ords for any year since 1900 — ^I do not happen to have them any farther back than that — ^will show that there has been a range of from 2 to 7 cents a pound in the prices offered during the year. It will show, further, that the low point of the year, on the average, has come within the first week in November and that it has been caused by the huge amount of distress cotton which had to be thrown on the market by southern farmers in order to pay their pressing bank and store debts. Then, every year of the past 14 without exception, this annual slump has been followed by a nice rise in price as soon as the market had absorbed the heavy and sudden supply. And the speculator, who could always horrow money at from 3 to 8 per cent with which to buy and hold this cotton while the 468 MARKETING AND FARM CREDITS farmer could not borrow at all, is tlie man who reaps this por- tion of the profit from the farmer's operations. Mind, you, the same banker who charged the cotton farmer at the rate of 60 per cent a year on his summer loan, and who took a mortguge on everything that the farmer had in or- der to secure it, and who calls in that loan as soon as the cotton is picked and ginned, thus forcing the farmer to sell it, will promptly loan the speculator buyer of that same cotton its full face value at 8 per cent and will finance that buyer's operations for 2 or 3 months on this reasonable rate of interest. And this, too, in spite of the fact that the banker knows every atom of the cotton farmer 's business, and knows little or noth- ing of the cotton buyer nor of bis financial responsibility. When Cotton Becomes True Collateral '' Cotton is King, " they say. And their saying is true. The trouble lies not with the cotton, but with the handling of it. Cotton is subject to damage by fire, by water, by weather; it can be sold anywhere for cash. As a result, when this cotton is picked and ginned the mortgagor must get his hands on it at once in order to protect his investment. The moment he gets it, or the moment it is sold by the farmer, it goes into a bonded warehouse at gin or compress or concentration point, where it is guarded and insured and otherwise protected until its safety is made certain. Then, and not until then, does it become collateral with char- aeter on the markets of the world. The banker knows that the cotton is good, but he does not know that the farmer is good, and hence the present evil in the matter of early marketing. As if all this were not enough, still another toll is taken from the meagi-e income of the cotton farmer by his own lack of knowledge of the quality of his cotton. The various cotton buyers in the small towns in the South make a brave pretense of buying on grade and of paying more for cotton of good qual- ity than for cotton not so good. Any cotton merchant will ac- knowledge, however, that most of his country town purchases are made on a basis of quantity ; not quality. In the words of Charles J. Brand, "A bale in town is a bale to be sold; and the buyer knows it.'' Their chief concern is apparently not to pay the market value of the cotton, but to pay as little as they can get the farmer to let loose of it for. As a result of this one fact, instances are on record in my own CARL WILLIAMS 469 state where 2 bales of the same grade in the same town on the same day, brought prices which varied as much as $19.25 a bale. This particular price variation occurred at Magnum, Oklahoma, on November 7, 1912, and, though it is exceptional, it well illustrates the possibilities which lie in the methods of cotton marketing which have prevailed in the South since cot- ton first became a money crop. A Helpless Class Growing More Helpless The southern cotton grower is today in the hands of his com- mercial enemies. Conditions are apparently growing worse; not better. Tenancy is increasing ; not decreasing. One man from my state, ordinarily one of the most level-headed of our students of farm affairs, said recently, ''There is no solution. The concentration of land ownership and of monetary control will continue until our common people will have reached the present condition of European serfdom." Tenancy is increasing, and with that increase there is found another increase in the class of tenant farmers who feel that they are being ground under the heel of oppression. They know that they should not be asked to pay 40 per cent or more on chattel loans. They know that they should never be asked to pay from 50 to 100 per cent advance in price on supplies at the store merely because they cannot pay cash, and they are rebelling more and more against the prevailing custom which says that they must raise cotton because it is the one crop of all crops which neither can be eaten nor stolen nor given away before the landlord and the banker and the country store- keeper and the cotton buyer have each taken a bit out of the proceeds — and when these portions are taken there is usually nothing left. And so the tenant skins the land and runs down the place and robs the landlord whenever he can and sneaks away in the middle of the night to avaid paying his store bill. And so the landlord, the merchant and the banker — these 3 — ^knowing that they face heavy losses at the hands of the shiftless ten- ants, put up the prices of all commodities, including that of money, in an effort to discount these losses and so make the ul- timate profit for which all of us are striving in our business op- erations. It's a terrible circle of discontent which is gradually becom- ing a storm center for radicalism in all its forms, and the mut- 470 MARKETING AND FARM CREDITS terings of the storm can even now be heard by those whose ears are attuned and whose minds are keyed with sympathy and un- derstanding. I would not sound this somber note did I not believe that the dawn of a new day is at hand. I do not agree with my friend who think that European serfdom is in prospect for the com- mon folks of America. There is always justice in the mass when time is a factor. Community thinking always results in community power. And there has never been a time in these United States when so many men of all classes and kinds and occupations gave community thought to a single problem as at this day and hour when the evils which strike at the root of America's farm prosperity have forced themselves on the at- tention of the people at large. "We are not all agreed on a remedy, nor do I believe that any remedy, taken by itself alone, will ever solve the problem. Community thinking, however, and the composite action which always follows that thought as surely as day follows night, will in time make of the southern tenant farmer a man whose value to the community will be measured only by his value to him- self. Where the Responsibility Bests There is real encouragement in the changing trend of thought among those who financially control the tenant farmer's des- tiny. Some of them are coming to see that, while all classes are at fault, including the farmer himself, a greater responsibility rests on the folks who own the land and lend the money and furnish supplies than on the tenant who farms the land. They may be no more to blame than the farmer himself for the finan- cial evils which affect so great a stretch of God's fair country; but they are coming to see that the possession of money or of the things which money will buy, always brings power and that, along with power, comes a great responsibility to use it rightly ; not only for the accretion of greater wealth and still more power, but also for the benefit of humanity and for the devel- ■opment of the community in which they live. Needed Remedies by Legislation Legislatively speaking, there are some things which we of the Southwest believe to be necessary for the development of farm prosperity in the southern cotton sections. The first is a state CARL WILLIAMS 471 anti-usury law, uniform, if possible, in all the states, which will reach both banker and country storekeeper on a fair basis that will admit of its full enforcement. Anti-usury laws of to- day are dead letters in the Southern States. Such laws will re- strict credit ; but they will also cheapen credit, even at the ex- pense of driving out of business those smaller country banks whose owners insist that they cannot earn a profit on less than an average interest rate of 15 per cent a year. The second is a graduated land tax which will make it less easy for the absentee landlord to control vast bodies of agri- cultural land with profit for himself and penury for his tenant people. The third, and this directly affects the cotton marketing sys- tem which we have discussed, is a uniform bonded warehouse law in each of the Southern cotton states, with a uniform ware- house receipt which shall be, and can readily be, regarded as Class A collateral in any money market of the world. Then the cotton farmer who is today forced to sell his cotton on a low market to cover his 40 per cent summer loan can store his own cotton for a nominal charge per month and use his warehouse receipt as collateral for the 8 per cent loan which is today so readily given to the cotton buyer whose warehouse facilities are organized. The only important things today standing on guard to bar the cotton farmer's entrance to financial freedom are the facts that he deals in small lots and that his so-called warehouse receipt is considered of no value because of the lack of safeguards which would be thrown around it. Need of Cooperation in South This warehouse law, or some other law dealing with special phases of the same subject, should also provide for official cot- ton classers at every ginning center, and thus give the farmer an official opinion concerning he grade and class of his own cotton before he is forced to meet and bargain with the buyer who so easily bests him in their dealings of today. To encourage cooperative organizations in southern states; to continue our present campaign for diversification in the South, that the living may be made at home and the production cost of cotton thereby lessened; to work for a system which will postpone the time of maturity of cotton debts and give the farmer himself more time in which to turn around after his crop is ready for market; to insist on a revision of our country 472 MARKETING AND FARM CREDITS school curriculum until it shall furnish a country education for country boys and girls and so the better prepare them for the country life which 99 per cent of them are predestined to lead ; to establish a national rural credit system which will make it more easy for men to' purchase and to pay for their own homes; not one of these things, alone, will solve the problem. There is no panacea for poverty, either in country or in the city. All of these things, however, together with other remedial measures which are sure to come out of the combined community thought of the country will, in my belief, bring a composite solution which will lift the whole agricultural South to a higher level. Legisation alone will not do it; for the enforcement of law depends too much on the spirit of the people. Agitation will not do it; for out of agitation often comes a horde of other evils which are worse than those they attempt to displace. Education, in time, is more likely to be the certain permanent cure for every ill of the body politic ; for the people of a state or of a nation, when they know what they want, can get that thing, regardless of opposition, if thej^ want it enough to work for it as well as to talk about it. These 3 things, education, agitation, legislation, will serve any rightful purpose for which we intend them ; but the great- est of these is education ; not for the banker alone, nor for the storekeeper, the landlord and the cotton buyer; but for the cotton farmer himself most of all, that he may see the heights above him and may be moved to climb instead of sitting inert in the valley below and deluding himself with self-pity into an attitude which is not helpful to the community welfare. CHARLES L. STEWART 473 THE LAND OWNING FARMER OF THE NORTH AND HIS NEED FOR PERSONAL CREDIT Chaeles L. Stewart College of Commerce and Business Administration, University of Illinois About 70 in every 100 farmers in the North own some of the land they farm. Sixty of the 70 own all they farm. Their farms average 124 acres of which 81 are improved. Twelve per cent of the northern farmers own about half of the land they operate. Their farms average 223 acres, and 159 are im- proved. On the average, the land owning farmer of the North owns about 120 acres, two-thirds of which is improved. There are approximately 2 million such farmers. Relation of Mortgaging to Personal Credit Two in every five of the land owning farmers of the North operate land encumbered by mortgage. This fact, however, does not indicate that they have no short-time indebtedness in addition. Personal credit is as indispensable to the 875,000 northern owners with farm mortgages as to the 1,200,000 own- ers free from mortgage encumbrance. Mortgage indebtedness and personal indebtedness are but the 2 parts of the whole agricultural debt. A restriction or modi- fication affecting mortgage credit will have an effect on personal credit, and vice versa. Legal restrictions on the power of banks, national and state, to loan on farm mortgage security, are found throughout the North. In North Dakota, for instance, it is estimated that the power to loan on real estate is about $5,000,000. The farm mortgages in effect total about $50,000,000. Under such cir- cumstances banks loan on the personal note of the farmer, hav- ing the note secured by a mortgage on his land. As a result of this indirect practice, the statistics of personal indebtedness are inflated. "What is more important, the rates on loans made personal in this way are higher. In order to understand the need of the northern land owning farmer for personal credit, we must consider the things for which he has to pay out money. 474 MARKETING AND FARM CREDITS The Objects of Personal Credit Personal credit is sought by northern farmers for meeting a larger or smaller proportion of the expenses of making the crop, of running the household, of purchasing stock and equipment, and for meeting the other temporary financial demands of farm- ing. Let us analyze the nature of these demands, and see what changes have been taking place in them. Not least important in the items of farm expense are the taxes and other forms of assessments for the support of local institutions, such as churches, fairs and the like. Both taxes and assessed contributions have risen in the country, and no- where is the burden greater than in agricultural communities of the North. The payment of wages to farm hands has assumed growing importance as a cause of borrowing. In the first place, wages have risen. In the second place, payment in produce has largely disappeared. Finally, farm hands are not letting credits gi'ow on the books of their employers so much as they used to do, but instead are depositing or otherwise making use of their wages. The amount of labor used on the farm has not decreased, though the increased employment of labor-saving machinery might lead one to think so. In the United States, as a whole, there was a falling off between 1900 and 1910 in the number of acres cultivated by an individual in agriculture. One person handled 82 acres in 1900 and onlj^ 71 in 1910, a decline of 13 per cent. Considering improved land alone, a single individual handled 40.4 acres in 1900 and only 38.7 in 1910 — a decrease of 4 per cent. It appears, therefore, that the use of machinery has not reduced the amount of labor necessary. All factors considered, the farmer has to give more attention to his labor account. This means that most farmers have to borrow money to pay the hands before the crop is sold. Operating oMTiers of the North sometimes have other opera- tors handling a part of their land. In 1900 approximately 25 per cent of the farms rented in the North were owned by men possessing 2 or more farms. It would not be safe to assume that the percentage is smaller now. Most owners of two or more farms are not operating a farm themselves. Some are, however, and these, probably more than non-operating owners, stand financially behind the tenants or managers on their land. This is especially true where the owner is helping a son, son-in- law, or other favored person to get a start. Until financially CHARLES L. STEWART 475 established, such, operators have to depend -apon. the owner for help to meet current expenses as well as the expense of equip- ment. Some lines of farming require such cooperation between owner and tenant as a regular thing. In dairy regions share tenancy requires a constant investment by the farm owner to the extent of one-half the stock, except work animals, and also puts the owner under the necessity of paying half the current expenses, except labor and board. The managerial system re- quires a large investment on the part of the owner as well as a constant and heavy demand for current expenditures. These demands for advances to tenants and managers require an in- creasing amount of personal indebtedness. Machinery Purchase Introduces New Type of Credit The purchase of implements and machinery for the farm an owner operates or for the farm he helps another to operate frequently creates a large demand for loans. Farm machinery is usually owned privately, though an increasing amount of it is cooperatively owned. Machinery owned by farmers is in- creasing in variety of forms and has not been growing cheaper in any great degree. The value of implements and machinery per acre increased from 50 to 65 per cent in the Northern States between 1900 and 1910. This is due not only to the greater value of field machinery, but also to the greater utiliza- tion of automobiles, gas engines, tractors, engine-driven ma- chines, grain dumps, and the like. Cooperative ownership is appearing among farmers operating farms of the medium size. Traction engines, grain separators, and shellers are the princi- pal machines owned cooperatively. Since these machines are often bought on the joint note of the cooperators, we have here as in cooperative organizations for some other purposes, a form of collective security given by American farmers independent of European models. The purchase of machinery on credit has been increasingly significant in the North. The use of mineral fertilizers has been mainly confined to the eastern group of the states under consideration. The spread of county agricultural organizations will doubtless result in in- creased expenditures throughout the entire North. Where pro- moted by the county or district agents, cooperative purchase of fertilizers is becoming an important part of the cost of farming. The expense of putting up buildings on farms has been in- creasing. Considering farms of all operators the value of build- 476 MARKETING AND FARM CREDITS ings per acre of improved land in 1910 ranged from $9.51 in the North Central States west of the Mississippi river to $46.37 in New England. The increase over 1900 was between 50 and 60 per cent. The value of buildings per acre is much higher in the case of farms operated by owners than in the case of farms run by tenants. The percentage of difference was 60 per cent in 1900 and 70 per cent in 1910. The land-owning farmer is subject to considerable expenditure, therefore, whether put- ting or maintaining buildings on the place he operates or on the farms he has others operate for him. It should be noted that the growing expense connected with farm buildings is not due solely to better equipments. The price of lumber rose fully a third during the last 15 years. Though substitutes have been employed in the place of lumber, it has been impos- sible to keep the cost of material down. The labor entering into the cost of construction has been more expensive in recent rears, especially if brought out from town. In some respects, however, the structures are better. Urban ideals of construct- ing dwelling houses have influenced farmers in many parts of the country, resulting in more expensive homes. All of this means that when a farmer puts improvements on his place, he is likely to need a greater extension of credit than in the past. Buildings, implements and fertilizers, though often the occa- sion of short-time credit transactions, ordinarily assist produc- tion over a long period. In this respect they are to be con- trasted with the items connected with household supply and the supply of other commodities. Oil, for instance, has been as- suming greater importance in recent years in the list of the farmers' regular expenses. The cost of living is higher for the farmer as well as for others. These developments mean that the farmer must obtain more credit for current accounts. Livestock requires special consideration in any study of per- sonal credit among northern farmers. The value of livestock on the farms of operating owners in the North increased about 50 per cent between 1900 and 1910. The incidental expendi- tures eonected with the keeping of livestock — veterinary charges, the purchase of prepared feeds, the carrying of insur- ance, and the replacement of dead animals — all tend to swell the farmer's expense account. High prices prevail not only for power animals, but for milch cows, breeding stock, and feeders. Farmers feeding stock must borrow at every turn, in their pur- chase, feeding and care, and in their disposal. Cooperation has helped somewhat to facilitate the disposal of livestock, but ex- CiTARLES L. STEWART 477 cept for a little cooperative o^vnership of breeding stock has not done so much with their purchase and feeding. We may draw 3 conclusions from what has been said. In the first place the items of expenditure leading to personal credit have been growing and bid fair to continue to grow. In the second place, these items arise more continuously through- out the year. In the third place, cooperative enterprises need credit facilities and are able to provide superior security. The Farmer's Income and the Personal Loan Period, The more diversified the farming practice the greater the probability of an income at frequent intervals. There are very few farms, however, that have a regular income. The returns from marketing milk, cream, and poultry are subject to less fluctuation than the returns from almost any other farm prod- ucts. But the milk producer will fijid his butter and cheese bringing their income chiefly during the summer, and the poul- try farmer will market his eggs mainly in the spring. The grain products which figure most prominently in northern ag- riculture are usually marketed at the close of the harvest sea- son in the fall. This is especially true of threshed grains. Bulletin No. 183 of the University of Illinois agricultural ex- periment station, just off the press, indicates that it might pay better to hold wheat and oats a few months after threshing. In the case of corn, according to the bulletin, it is best to market before the shrinkage has gone too far. The cattle raised in the North are mostly disposed of during the late summer and fall, sheep in the summer, and hogs in the winter. It is obvious, therefore, that even the farmer with diversi- fied operations does not have much income from the early part of the year until the latter part of the summer. The periods of heavy borrowing are from April to August and from No- vember through December. A desire to repay the spring loans may be more or less responsible for the heavy sales of small grains at threshing time. Some lenders pay too little atten- tion to the significance of maturity dates to farmers. The more thoughtful lenders to grain farmers, however, have the notes fall due in January or February, so that the farmer will not feel the pressure of settling at threshing time. The holding of small grain on the farm may be expected to increase. During recent years as much as 6 or 8 per cent is sometimes held on the farm for a year. There seems to be no 478 MARKETING AND FARM CREDITS reason for thinking that holding for such a long time will in- crease. But the farmers may be expected more generally to hold their grain for a period of a few months. Better roads, cooperative storage elevators and warehouses and other such factors are favorable to this development. The farmer is en- titled to such freedom in this matter as the proper adjustment of the terminating period of his loans will give. From the point of view of rural finance, the development of scientific agriculture means that more investments must be made whose effects on production spread over a number of years. Such investments properly placed are well made even if the place must be mortgaged to get the means. Since Amer- ican farmers are reluctant to mortgage their places and since the restrictions on mortgage loans limit the volume of mort- gages, we may expect many of these improvements to be made by means of personal loans. Such loans, though they are tem- porary, need to have their terminating time carefully adjusted. Otherwise, the advantages of scientific agriculture will be lim- ited to farmers who need to borrow least in order to install the desired equipment. Respecting the period for which personal loans to farmers are made, it appears that it is longer than the period for which personal loans are made to other classes. Moreover it appears to be growing longer. If those in charge of funds subject to short-time ending choose to favor the more rapidly turning of non-agricultural loans, they may impede the progress of north- ern agriculture. The Sources of Personal Credit The main sources of short-time loan funds in the Northern States are the banks, merchants, and neighbors. The prac- tice of bori'owing from life insurance companies against accu- mulations on policies — a practice inimical to the interests of the farm mortgagor in times of financial stringency — seems not to be established among farmers. Borrowing from neigh- bors has practically disappeared from communities well sup- plied with banks. Local general merchants carry the accounts of farmers on their books for varying periods of time. In newer parts of the North and more or less in other parts, the merchants re- quire note security for book accounts. In some cases the goods are sold at a higher price because sold on credit, while the CHARLES L. STEWART 479 note requires the payment of interest at rates abnormally high. One reason why farmers persist in buying on book credit when they know it to be somewhat to their disadvantage is that they are thereby enabled to keep their credit at the bank unim- paired. Under such conditions it is hard to get concerted ac- tion on the part of farmer customers in opposing unfair prac- tices by these merchants. Without a concerted effort affecting similarly all the stores in the community, competition can hardly be relied upon to lower prices. Mail order purchasing has an influence toward freedom in this respect, whatever else may be said about it. On the whole, it is easy to overstate the seriousness of the sins of local merchants in the rural commu- nities of the North. In backward parts, however, it is possible to find some evils of this kind. The book credit extended by repair shops, veterinary physi- cians, family doctors, dentists, and the like, while no small item, works to the disadvantage of farmers in very few rural communities. Buying Machinery on Time There has been a growing practice on the part of local deal- ers in implements and machinery to accept farmers' notes which the wholesalers or manufacturers are prepared to as- sume. The notes are drawn so as to bear interest bofth before and after they mature. They are made for amounts based on the quoted price. If one chose to pay cash, however, he would be able to get somewhat of a discount. Nevertheless, this practice has many things in its favor, some of them from the farmer 's point of view. The rates on the loans are usually the same as those prevailing at the local banks. The farmer feels free to buy more than if he had to consult the banker about it. The dealer is able to reduce the proportion of bad debts by putting note security behind a portion of his time sales. The manufacturer is usually able to grant credit for a longer period than the local banker can. In case the ma- chiQery should be thrown back on the creditor, the manufac- turer would be able to get more out of it than local creditors could. Cooperative farm machinery societies frequently pur- chase their outfits by this kind of credit arrangement. Book credit to farmers for the purchase of machines seems to be undergoing a revolution. The automobiles have stimu- lated cash purchases in a manner quite unprecedented. Gas 480 MARKETING AND FARM CREDITS tractors are being sold in much the same way. The result is to increase borrowing at the expense of book credit. This is due to decreased purchases of other farm machinery on the one hand and the growing habit of cash purchases on the other. To be contrasted, with the local general merchant and the implement dealers in their methods of supplying farmers with credit are the factors, or commission merchants. The latter have a practice of furnishing farmers with funds for definite purposes. When livestock is concerned the money is to be used for purchasing lean stock and for getting it into a condi- tion for marketing. The loan is on a note secured by a chattel mortgage. Often the commission house makes arrangements with the railroads so that the freight may be paid at one time from the place where the stock is first bought directly to the yards where the stock will be sold, with stop-over privileges of several months at the point nearest the farm. Some well estab- lished commission firms trace a large part of their profits to loan transactions. The factors receive the farmer's notes and are able to discount them at the metropolitan banks. The transactions can be arranged with maturity dates coming at intervals frequent enough to enable the factors to get the best short-time rates at their banks. To the farmer the program offered by the factor is simple and complete, and it enables him to use his bank credit for other purposes. Bankers Dominate Northern Farm Credit Significant as these various agencies for dispensing credit to farmers may be, the fact still remains that over half the credit business of farmers is cared for by bankers in the typical parts of the North. The bankers affording credit to farmers have sometimes been accused of discriminating against the farmers. Some forms of alleged discrimination are not really discriminative. Because a bank chooses to specialize in a class of business that is non-agricultural is no evidence of discrimi- nation. Specialization by individual banks in one line or an- other cases no reflection on the other lines. Even so, on this basis, it would be hard to say that the farmers are discrimi- nated against. Perhaps more banking institutions have their doors open to farmers than do not, and the farmers constitute only about a third of the persons engaged in gainful pursuits. Another form of discrimination is said to lie in the fact that banks are insufficiently abundant in number in some parts of CHARLES L. STEWART 481 the agricultural North. If a system of branch banking pre- vailed in the United States, localization of banks would be a ground for charging discrimination. It is only natural, how- ever, that banks should be far apart in parts of the country ag- riculturally under-developed. That some banks have an aversion to agricultural loans is not hard to explain. There are seasonal aspects of the farmer's banking that mark it as peculiar. Relatively little borrowing is done by northern farmers from January to April and in September and October. In the second place, farmers want their personal loans to run longer than other bank patrons, as a rule. "While this means a smaller amount of negotiation by the bankers to place their money, it often means that the bank- ers must pass by other patrons whose more rapidly moving businesses would enable them to pay higher rates on loans run- ning for shorter periods. In the third place, the farmers usually repay their loans at the time of the year when bankers must handle low rate commercial paper, if anything at all, to occupy their funds until the new demand arises from the farm- ers. In the fourth place, farmers frequently do not have de- posit checking accounts, but deposit on time so as to get a little interest. In all these respects, the banking practice of the merchant, salaried, and professional classes has points of su- periority over that of the farmer. By way of conclusion from this survey of the sources of per- sonal credit, it can hardly be doubted that the farmer feels that in too many cases there is an objection on the part of the banker to lending him money beyond a certain amount. In many cases, doubtless, it is to the farmer's interest that it should be so. The farmer is interesting himself in the credit devices of implement dealers, commission houses, and others, feeling that through making use of them he' will "not impair his credit at the bank," or that he will be able to "use his bank credit for other purposes." In the second place, it must be agreed that there are districts in the North where the rates on personal loans are strikingly high. These high rates, how- ever, are largely accounted for by elements of risk which can only be eliminated by the population becoming more stable, by farming methods being standardized, by local capital being accumulated, and by soil and climatic conditions being more successfully coped with. In the third place, taking the North as a whole there seems little reason for arguing that there should be more organizations for dealing in personal farm 31 — M. F. C. 482 MARKETING AND FARM CREDITS credits. The number of existing sources of credit is adequate in all but a few districts. Some Constructive Proposals The banks could do, and are doing much to remove the criti- cism directed against them. There is much to be done yet by bankers in cooperating with cooperative organizations. The existing cooperative organizations of farmers are not com- petitors of the banks. They can give security of an extraordi- narily good character. The banks might well try to give them especially good terms. In the second place, bankers should take more care to put the dates of maturity where the farmers will be compelled to make the least modification in their pro- gram of marketing. In the third place, the banks should study farm investments, cooperating with farmers in the keeping of books. To bring this about it is necessary that more scientific studies be made in typical areas. It is equally necessary, how- ever, that the local banker have more intimate knowledge of the farms of his community than is derived while traveling at a 30-mile clip in an automobile. There is a need, on the other hand, for the farmer to know more of the fundamental principles of banking in relation to his business. Another source of help in solving the problem of personal credit for the northern farmer is the legislator. The federal reserve act enables banks with a capital of $25,000 or more to take advantage of the federal rediscount system. A bank having rediscount privileges may send to one of the twelve regional banks any amount of notes, drafts, and bills of ex- change. Such paper, when agricultural in character, can be handled by any of the regional banks, in an aggregate amount equal to the percentage of its capital stock to be fixed from time to time for each federal reserve bank by the federal re- serve board. The banks with a capitalization less than $25,000 are state and private banks. They are about half of the banks in the Northern States. It has been suggested that rediscount privileges might properly be extended to banks having less than $25,000 capital. Objections to sudh a step become greater as the minimum is lowered, especially if put lower than $10,000. But the admission of smaller banks to rediscount privileges would be beneficial to agriculture in the districts newly opened or rediscounted is almost insignificant. The 6 month maximum CHARLES L. STEWART 483 period for which agricultural paper may run will doubtless prove to be too short, and may have to be raised, at least for a certain proportion of the loans. Exemption laws in some cases increase the risk to the lender by making it easy for a borrower to evade the payment of his debts. Such exemptions aften breed carelessness and extrava- gance on the part of some borrowers. The repeal of mortgage tax laws or their modifications so as to avoid double taxation may enable some loans to be made on mortgage security that are now made as personal loans, to the detriment of the borrower. Special loan companies, such as cattle loan banks, are re- stricted in their ability to incorporate in many states. Per- haps a federal incorporation of such banks would help to stim- ulate the breeding and feeding of livestock in the country. It seems unlikely that a separate system of banks is needed to furnish the northern farmer with personal credit. Legisla- tion should be passed permitting the organization of coopera- tive credit societies if the farmers want them. Whether they will be organized depends upon a number of considerations. Ft^rmers will hesitate to form such societies because of aversion to the liability, the publicity of financial standing, the mutual spying, and the demand on time involved. With country bank- ers in a position to learn and sympathetically to cooperate with the business of farmers, there should be little occasion for bolt- ing on the part of farmers. It should be easier for the bankers to get into close and help- ful relations with farmers than for farmers to develop a system of cooperative personal credit institutions. In most parts of the North the farmers would prefer to be spared the necessity of going outside the sphere of their chosen occupation. 484: MARKETING AND FARM CREDITS THE LAND-OWNING FARMER IN THE SOUTH AND HIS NEED FOR PERSONAL CREDIT LiNDLEY M. KeASBEY Professor of Institutional History, the University of Texas I am not going to give the address that I was going to give this afternoon, because we did much more important things, it seems to me, this afternoon, than to listen to addresses. I can not tell you how deeply I have been impressed by this meet- ing, for all through this meeting, in the atmosphere, has been that sort of cooperation, that old clan spirit that used to pre- vail in the heroic age. And when one has lived these so-called competitive days, which are really coercive, struggling and striving for cooperation, to see a body of men from all over this country and Canada get together, striking that one essen- tial note, cooperation, with all its chords and modulations, is indeed inspiring to one who imbibed the spirit 20 odd years ago as a student in Germany. "While in Germany I had the great good fortune for 3 years to study in the seminary of Professor Knabb. That seminary devoted itself entirely to the study of the land conditions of Germany and there, as an enthusiastic youth, I became more and more imbiaed with the splendid spirit of cooperation which I have found so wo- fully lacking in this great country of ours. Now that the not • of cooperation has struck, I know that it is going to resound »down this country of ours,- and after this mieeting I am going :;awa,y with full hope in my heart to the South, which has become jXDJ adopted country, and where cooperation is just beginning to sliow itself about the dark era of slavery. In looking back over the history of the world, we find that human beings have organized themselves, or been organized in only 3 ways. They Ihave been organized along cooperative lines — and when civilization started that was the origiaal sys- tem. When the land was free and unproductive, power counted in the world. We have the great clan days of the he- roes, when personal labor, personal power, muscular and men- tal, counted. Then we reckoned our fellows in terms of brave men and wise men. These brave men and wise men cooperated for the good of their elan. Then eame what I call the proprie- LINDLEY M. KEASBEY 485 tary period of civilization, when the land became appropriated by the feudal lords, or the landlords, and thereupon coopera- tion, such as remained, became an involuntary cooperation, and the coercive system of society ensued. Then the commercial era offers great possibilities, and that was the incentive of the market and the knowledge of marketing. Everybody was told to toe the mark and start fair; that competition would bring us equality and democracy. This competitive age of commercialism we have run through very rapidly in this coun- try of ours, and find ourselves face to face with another co- ercive age, not feudal coercion this time, but financial coer- cion. This competitnon has been succeeded in this country by coercion, and the coercion is now exerted not by landlords, as in the first instance, but by those who control the money of the country. Now that this, second coercive age is to be su- perseded by a new age of cooperation, a cooperation where all may have and lend money, the great social age that is coming before us, therein, I say, lies my great hope. But, in the South, where I have gone to take up my permanent residence, I find things in such condition that we need the message of co- operation more than any other part of the United States where I have lived. Now, in looking over these conditions in the South, I was called upon by the editors of the "New Republic" in New York to write as far as I could what the conditions were that now prevail in the South. I wrote this short paper in the "New Republic" of September 11, and I will read from it, in order that you may see just about where we are in the South- land today. Cotton Basis of South 's Problem Now, I say, "Cotton is the single cash crop, and therewith also the chief agricultural export, of the South. Add to this the fact that the supply of cotton is financially controlled not at the centers of exchange but at the actual course of supply, and you have in sum the essentials of the existing circulation. How this situation has come to exist is still an untold story. The end of it all — the fact that financial control has succeeded in fastening itself upon the cotton-producing states of the South — is evident on all sides. There are statistics also, and practical experience besides. These exhibit certain salient features, such as absentee landlordism, the tenant system, and 486 MARKETING AND FARM CREDITS SO forth. I shall not attempt to tell the story myself, since there are others much better qualified. Among these is the Hon. Joseph T. Holleman, of whom the Atlanta 'Constitution' says, 'Probably no man is better posted concerning farm con- ditions in the South. ' ''According to Mr. Holleman the situation has come about in this way: When the Southern soldiers returned to their homes after the Civil War, they had nothing but their land. Fortunately in every town and village there were a few men who kept up their financial connections with the North. It was these men who saved the situation, by buying goods on credit and selling them out to the farmers again on credit. Under an arrangement of this sort the southern farmers had to buy everything that they needed, not only seeds and agri- cultural implements, but also food for themselves and for their negro employes. Naturally the men engaged in this sort of business began themselves to accumulate land, by foreclosure, or by outright purchase. These men are today the large land- owners and the large cotton producers of the South. 'In every county you will find them,' Mr. Holleman says. 'They own the banks, the fertilizer plants, the oil mills, the warehouses and the big supply stores, and all the important lines of busi- ness. They sell the farmer his agricultural implements, his fertilizers, his mules; all that he and his laborers wear, and all that he and his laborers eat. They also represent non-resi- dents, who own large tracts of land, and they control these lands and dictate what shall be planted on them. They are also in politics, they are members of the legislature, they are active in all elections, they have candidates for all the county offices, they help elect the mayors of their towns, the solicitors of the city courts, the solicitors general, the county judge, the judges of the superior court, the congressmen, the governors, and the United States senators.' "In this trenchant analysis of the existing situation, Mr. Holleman shows us quite clearly there are 3 classes concerned : free farmers, tenant farmers, and absentee landlords. As for the first of these, according to our authority, 'they are not more disturbed by the war in Europe than they would be by an eruption of the Volcano Vesuvius. Nor are they concerned as to whether they can sell their cotton crop. If they get the price they want, they sell it. If not, they pile it up under the oak trees in their front yards and let it stay there.' Thus, as Mr. Holleman savs, 'we need not concern ourselves greatly LINDLEY M. KEASBEY 487 about the real farmers, the independent farmers of Georgia and the South, They have demonstrated the fact that they can take care of themselves, in good times and in bad times, in times of peace and in times of v^ar.' Nevertheless, we should concern ourselves seriously about their decline as a class. 'There are still such farmers left in Georgia and the South, 'but says Mr. Holleman, 'you can count them in each county on your 10 fingers.' So it is everywihere over the cotton-produc- ing area. Even in the state of Texas free farmers are becom- ing fewer and further between. Altogether, according to Mr. Holleman 's estimate, they number possibly 10 per cent of the farming population of the South, Tenancy Alarms Georgia Thinkers "As for the second class, that is increasing so rapidly that from statistics of the United States census Mr. Holleman shows: 'In 27 Georgia counties there are 51,033 farm homes; 34,429 of these farm homes are occupied by tenants, and 16,604 are occupied by owners. In other words, nearly 70 per cent of the farms are occupied by tenants. These are the farms that are producing the cotton.' Of the remaining 30 per cent, according to Mr. Holleman 's estimate, 10 per cent are occupied by independent farmers, this leaves 20 per cent unaccounted for. These 'are occupied by owners that are small farmers who have never reached the point of independence and who follow exactly the same system of farming that is followed by the 70 per cent making up the tenant farmers.' Take Texas as an example of the new Southwest. In his preliminary re- port to the United States Commission on Industrial Relations, Special Investigator Charles W. Holman asserts: 'There are more than 235,000 tenant farmers in Texas. ' ' ' Startling as they seem, these figures are fully corroborated by Commissioner Calvin of this state, who has gathered to- gether the statistics and worked out some calculations on his own account. According to Mr. Calvin, 'In 1910 there were all told 415,838 fanns in Texas; of this number 195,863 were operated by owners and 219,975 by tenants, or 46 per cent by owners and 52.6 per cent by tenants.' Assuming that farms operated by tenants have gained since 1910 at the same rate as between 1900 and 1910, Mr. Calvin calculates that on April 15, 1915, they must have outnumbered farms operated by own- ers by 35,040. Thus taking Georgia and Texas as opposite ex- 488 MARKETING AND FARM CREDITS amples, evidently the tenant farming situation is pretty mncli the same all over the South. The Tenant of South a Submerged Class *'At one time, in discussing Mexico, President Wilson refer- red to the down-trodden people of that country as the sub- merged 85 per cent. 'Well,' says Mr. Holleman, 'we have this submerged class in our own country, but you will notice I have raised the percentage. I put it at 90 per cent. About 10 per cent of our farmers iare independent, 20 per cent are small white farmers oAvning their lands, and 70 per cent are tenant farmers. ' "That these conclusions are in no sense extravagant is evi- dent further from the findings of the federal commission. Says Special Investigator Holman on this subject: 'The time has come for the people of this government to realize that its land inheritance is slipping away, and that ownership is becom- ing concentrated into the hands of a limited number of indi- viduals. Moreover, the tendency toward further concentra- tion is evidenced on all sides. At the same time tenants who farm the majority of the southern farms — that constitute over half the farms of the nation — are being reduced to the statute of wage laborers. In the Southwest the condition has become particularly acute, with the rapid increase of tenant farmers over home-owning farmers, and an accelerated ten- dency toward land ownership.' "It is this last — the concentration of land ownership in the hands of outsiders, so to speak — that is fundamentally respon- sible for the existing situation. ' If, ' ]\Ir. Holleman writes, ' one of these owners lives too far away to look after renting and to attend to the gathering of the crop and the collection of rent, some local man is an agent for the purpose. This local man is certain to be one of the prominent business men in the city, the town, or the village nearest the farm. This local agent, of course, looks first to making a good rent contract for the owner. When that point is accomplished, then he sees to it that, in some way or other, the handling of all the cotton produced on that farm should come through his store or his bank. He sees to it that all the fertilizers that are brought for this farm, all the mules that are purchased for this farm, all the mules that are purchased and all the farming imple- ments that are used on this farm, and that all the supplies to LINDLEY M. KEASBEY 489 the tenants on this farm, are handled by him. His only idea is to make the farm produce cotton, and he will attend to every- thing needed on the farm, get the rents for the owner, and make a commission, or a sales profit, on everything that is bought for the farm or sold from the farm. ' As for those that live close at hand, in the cities and towns of the South, they are business men for the most part, ' bankers, merchants, own- ers of oil mills, cotton factories, fertilizer plants,' and so on, as Mr. HoUeman says, together with 'rich. lawyers and wealthy physicians, superior court judges, members of Congress, and other classes, whose business training and business enterprises are based solely on cotton. They know that real farming can- not be conducted by them. ' To become real farmers these men would have to 'go out in the country, live on the farms, and look after the cultivation of the land, the growing of grain and hay, the raising of livestock. This sort of farming re- quires constant and intelligent attention. Cotton farming on be done by any sort of a poor white tenant and any sort of a negro. All these poor tenants and negroes need is to have a little direction from town in the spring time, and arrangement by which all they eat, and all their stock eats, is furnished to them. Then they can produce the cotton and carry it into town in the fall, where the lord of the manor will be ready to take it, sell it, pocket the lion's share, and let the poor white tenant and negro tenant have just enough to keep him alive until next year's crop comes in. These men give no thought to the building up of the land but milk it from year to year for every ounce of cotton it will produce. This being the case, the single-crop system is evidently not the result of shiftless- ness on the part of the farmers; on the contrary, the single- crop system appears to be imposed from above by the absentee landlords." Cotton Crop of South Controlled by Oligarchy The foregoing statements, based upon observed facts, sup- ported by official figures, and issued in all temperance by those best qualified to speak on the subject, substantiate the conclu- sions from which I set forth : The cotton crop of this country is controlled, and that, too, at the source of its supply. Not, as it should be, by the staple growers themselves ; nor yet, as it might be, by the federal or state governments concerned; but, as it certainly should not be, by a comparatively small 490 MARKETING AND FARM CREDITS group of individuals composing the so-called cotton oligarchy of the South. The interests of these individuals are not in the first instance agricultural, they are fundamentally finan- cial, and from the standpoint of the staple growers, altogether alien, if not actually foreign in character. Thus, in the last analysis the situation seems to resolve itself into a clear-cut issue between financial exploitation on the one hand, and ag- ricultural production on the other. The natural resources of the South are such as to stimulate productive activities, not only along agricultural, but also along industrial and commer- cial lines. Under our existing exchange system, however, there is a condition precedent to be considered: in order to undertake productive activities it is necessary to secure capital cheaply and reasonably. Yet the available capital appears to be exclusively controlled, and those in control seem inclined to exploit. Hence the existing deadlock between exploitation and production, resulting in the single-crop system and the financial oppression of the South. Evidently to break this deadlock a twofold campaign is required — a negative campaign against exploitation, and a positive campaign for production. In Texas both these campaigns are already inaugurated, along what seem to me the correct strategic lines, under the able leadership of Governor Ferguson, or Farmer Jim, as he is popularly known. The first thing necessary in the negative campaign is to disrupt the financial oligarchy; this done, the productive resources of the state will be opened to all the in- vestors of the financial world. Such was the underlying pur- pose of the Gibson insurance bill, which failed unfortunately in the last legislature. But, as I understand it, the ill-fated Gibson bill was only the first gun in this negative campaign against exploitation; others will soon be fired that will fetch their mark. But suppose, after the oligarchy is disrupted, the exploiters should reorganize their financial forces along national or su- pernational lines? In such case it would be necessary to bring forward and strengthen the fiscal forces of the state. Governor Colquitt's plan in this connection was to establish a state agricultural bank, which should land its funds directly to the staple growers against cotton as security. The diflSculty is that no single state is strong enough financially even to regu- late, much less to control the cotton situation of the entire South. Nor is it necessary for any state to proceed single- handed. That is the function of the national goveirnment. LINDLEY M. KEASBEY 491 and the federal reserve act explicitly provides for just such a contingency. One of the prime features of this act is to mo- bilize federal funds and place them where they are most re- quired. Education of Exploited Is Needed But to proceed against the exploiters is only one part of the proposed campaign. To attack, and even overcome the finan- cial oligarchy, is not of itself enough; it is necessary also to educate and organize the exploited. In Texas particularly, whose population is composed of so many diverse and in some eases discordant elements, it is not enough to relieve the people from the pressure of exploitation; they must be educated also, and organized along productive lines, in order that they may be able to take advantage of their m;agnificent natural re- sources. Like the negative campaign against exploitation, this posi- tive campaign for production is also inaugurated in Texas, and well on its way under the able administration of Governor Ferguson. In the first place there is the tenant farmer's plank in the governor's political platform, which has since become incorporated in the laws of the state. According to this statute no landlord is entitled to more than a third of the cotton or a fourth of the corn, and bonuses are strictly ex- cluded. So the tenant farmer has now at least a chance to succeed. In the second place there are the rural school law and the compulsory educational bill, which not only render it possible, but even make it obligatory for the children of the country districts to attend school. It will be interesting to observe how these laws operate when it comes to cotton-picking times when the children are required in the fields. Then again, diversified farming is not only encouraged, but also materially aided by both state and federal educational agencies; indus- trial enterprises are already instituted, transportation facili- ties are being extended throughout the state, and from these commercial expansion is destined to proceed. Now, with the negative campaign against exploitation I shall save nothing to say in these few remarks with which I am to conclude. What 1 am interested in is the positive cam- paign for agricultural production. 492 MARKETING AND FARM CREDITS Analysis of Production Now, if you will permit me a moment or two of economic analysis, production is carried on by productive powers. There are only 2 fundamental productive powers. One is personal power, labor, muscular and mental, and that is the only pro- ductive poAver that belongs by natural right to man. That is a power which is intrinsic. It gets at the man himself. The other fundamental productive power is the physical power which is derived from the land, and that physical power again is mechanical and generative in character. Now, as the good philosopher Luke said, ' ' Let labor max M-ith the land so that the land and the labor shall build together." But under our com- mercial system there is a third power which we call capital. So far as I am able to analyze it, capital consists of 2 phases, or 2 parts, like 2 sides of a shield: On one side capital is selling power and selling power is embodied in goods and in services. On the other side of the shield, capital is pur- chasing power, and purchasing power is embodied in coin and gi-eat instruments. Now, in order to increase the selling power of the southern farmer, a number of courses or lines are neces- sary' to be pursued. In the fii'st place, to increase selling' power diversification is in order and diversification is a very difficult thing in the South. You cannot diversify in the cot- ton belt ; you cannot diversify in the rice belt, and there are other states of the same kind where diversification would be absurd. It is just as absurd to diversify in the cotton belt as it would be to go to Burgundy and say, ''Pull up these vines." Diversification is very limited through the South be- cause of the cotton belt and other belts. To the extent that diversification is possible, that, of course, will increase the sell- ing poAver. Selling power will be increased again by stand- ardization, and generally through these cooperative movements which we have been speaking about today ; cooperative market- ing, cooperative credit and the cooperative warehouse, and re- ligion and the rest. But my subject was not increasing the selling power, but how are we going to provide for an increase of purchasing power on the part of the land owning farmers of the South. According to Mr. HoUeman's estimate, these land-owning farmers of the South constitute 30 per cent. Ten per cent of these are absolutely independent and 20 per cent are depend- LINDLEY M. KEASBEY 493 ■ent. It is really for this 20 per cent of dependent land owning farmers that our help is required. Now, if you could conceive of the system of exchange in the form a great wheel, you would find that at the hub of this wheel is the financial center. So (far as the South is concerned the hub of our wheel of exchange is in New York, because we do our financing through the East, The spokes of this wheel constitute the agricultural periphery, as it were. Along the ■spokes of this wheel from the tire, we will say, to the hub, you should conceive of a series of reservoirs or standpipes. Now, capital in the form of purchasing power, coin and credit, con- stitutes one fluid fund. The heavier part of that fund, the coin, will sink to the bottom; the lighter portions, the credit, will rise to the top. Under our commercial system the money, the purchasing power flows in easily from the southern agri- cidture periphery toward the financial center in New York, and certain amounts of this purchasing power are stopped and are held by these storage tanks, or standpipes all along the way. This fluid fund flows naturally from the agricultural periphery to the financial center, but this fluid fund or purchasing power does not flow in the opposite direction toward the agricultural periphery. In other words, the fluid fund will flow down hill to the financial center but it will not flow up hill toward the agricultural periphery. The result is that we, in the South, have to pump this fluid fund up, and we pump it up with high rates of interest, commissions and fees of all kinds. Capital must be made to return from the financial center to our south- ern agricultural periphery. Cooperative Credit Is Necessary Now, how can it be made to return to the agricultural peri- phery? It cannot be made to return under our existing profit system. It is not profitable to bring this capital back to the South except when the interest charges are practically pro- hibited. "We shall have to introduce a new principle to bring this capital from the East, or the center, to the South, or the periphery, and that new principle is the principle which we have been emphasizing here in this meeting. That is the prin- ciple which was established in Germany with the Landschaft and with the Raiffeisen credit bank; that is, the principle of service rather than of profit. The only question is, who shall render this service? Now, the ideal way of having this ser- 494 MARKETING AND FARM CREDITS vice rendered would be through these cooperative credit unions. Therefore, I agree thoroughly with Mr. Herrick, that the ideal way is to establish these credit unions of the agricul- tural periphery and through this ser\'iee system draw the cap- ital out from the financial center to the agricultural periphery. But the difficulties in our way in the South are, at the present time, almost insurmountable. In the first place, we have the racial difficulties. We have there, farmers in Texas, whites, negroes and Mexicans. Cooperation under these conditions with racial lines between is very difficult in- deed. To confine ourselves to whites entirely, there again you have colonies of the different nations, Germans, Swedes, Bo- hemians and the rest. Cooperation here is difficult, wherever these national lines overlap. What we should do would be to encoiu'age cooperation and the establishment of these credit imions throughout the South. But it may be that for the present we shall have to have this encouragement from the government. I can conceive of state laws whereby the state banks shall be encouraged to provide such cooperative facilities. Such was the idea of our recent governor, Colquitt, in the matter; to allow tJie state banking system of Texas to provide these agricultural banking facili- ties. The other way is to have the national government lend us assistance by this modification of the national banking law that was spoken about this morning. And. while I have not made up my mind on the subject at the present time, I am pro- visionally inclined to believe that help for the South must come primarily through the national government. The national government has provided for years for the delivery of letters, and now packages, of all kinds, to the personal address of the farmers through the rural free delivery system. Surely, such an organization as that ought to provide a similar means to bring the farmers together in some kind of a great organization and thus help them to band themselves together into credit unions which will provide them with the necessary purchasing power to carry on their productive acti\'ities. It is along these lines, along the lines of cooperation, state aid, and national aid, that I think the solution of our serious problems in the South will be found. INDUSTRIAL COOPERATION OFFICIAL BUSINESS WHAT WE ARE TRYING TO DO WITH THE MONTCLAIR COOPERATIVE STORE* Emerson P. Harris President, Montclair (N. J.) Cooperative Society From the producer who desires to sell, to the consumer who desires to buy, the channel would seem to be direct, down grade and short, and it goes without saying that in the interest of the producer, the consumer and society in general, this should be so. But, an analysis and examination indicate that this channel has been deflected and dammed to the cost and detriment of both producer and consumer and there is a very general suspicion that this is due to the fact that the traffic is in alien hands, hav- ing no interests in the producer or the consumer. Not that we employ any malice or conspiracy on the part of the middle man who is in possession of the machinery of distribution, for he, like you and ime, is engaged in making an honest living by methods which he inherited but did not create. Nevertheless, the chan- nel seems to have become twisted and tortuous for no apparent reason, except to collect tolls and since we cease to worship at the shrine of competition which we expected to protect all our interests we are increasingly ill at ease and to this fact is due the growing belief that the initial steps in distribution should be controlled by the producer and the final steps by the con- sumer, each serving his own' best interests. There may well be some tunnelling and dredging to make straight and free this channel, but with the producer working from his end and the consumer from his, the tax will be slight in proportion to the great gains in prospect. When a statement has been made showing the enormous ex- pense of transferring the commodities from producer to the consumer only half the story has been told which constitutes the problem of the consumer, for his indictment against the present system relates as much to its failure to perform its proper service as to the excessive expense. There are believed to be valid reasons why the consumer has a right to look to the distributive system to aid him in making such selections of products as well as so guaranteeing quality as to give him the maximum value for his money. * Delivered to the second National Conference on Marketing and Farm Credits in Chicago, April, 1914, in joint program with the West- ern Economic Society. 32— F. F. C. 498 MARKETING AND FARM CREDITS The consumer, especially in America, is much more able to turn effort into dollars than to turn dollars into satisfactions. Dr. Dole in his recent book, ' ' The Burden of Poverty, ' ' estimates that the poor at least waste one-tenth of their income by the se- lection and purchase of foolish things which do them no good. Higher up in the economic scale the waste is undoubtedly much greater, and surely the pure food problem is a part of the dis- tribution problem, for the product is stopped in transit to be packed or prepared and is frequently debased and even poisoned. A Competitor for Middleman No one expects to eliminate the useful service performed by the middleman, but that that service can be performed more efficiently and economically there is no doubt, and there is the further question whether the initiative and control of that func- tion should not be taken over by those most interested, namely, the producer and consumer. Have we not too easily assumed that the only incentive for the performance of this service is that of profit to the middle man ? It is not novel to assume that this service can be successfully performed without the incen- tive of middleman profit. Distribution is already carried on in this country under the initiative of the producer as, for instance, the shoe manufacturers, who conduct their own retail stores and various other producers who operate in similar ways. Whether this is more efficient than the present profit-to-middle-man meth- od we do not here discuss, but merely point out the possibility. Distribution is also successfully carried on with the initia- tive wholly in the hands of consumers, as illustrated by a turn- over of $600,000,000 per year by the English Avholesale stores. This distribution is initiated and managed wholly by the con- sumer, no profit maker whatever intervening between, for in- stance, the tea estates in Ceylon, the plantation in Austria or the factory in Manchester and the final consumer in the remot- est part of Great Britain. Based upon what is being done by producers in this country, for example, the California Fruit Growers' Exchange and the North Pacific Fruit Distributors as told in these meetings by Mr. H. C. Sampson, and various farmers' organizations in dif- ferent parts of the country, showing the successful management of the initial steps of distribution by the producer, and what I have just mentioned as being done jin England, which is also successfully performed in various other European countries and EMERSO'N V. HARRIS 499 the promising attempts at consumer cooperation in this country, are not these facts sufficient to justify the conclusion that distri- bution should be taken over by the producer in his own interests and by the consumer in his own interests — each working in his own field? It is the consumer end of this problem to which I wish to in- vite your attention for the short time remaining at my disposal. Notwithstanding the large, and we believe unnecessary, ex- pense of distribution, the fact remains that the local dealer, especially in food products, makes on the average a small profit for long hours of hard work. This does not prove anything about the 'economy of the system which the local dealer reaps, in fact, it indicates the reverse, for competitors appear as rapidly as the last one assumes that he can make a bare living. In other words, local retailing is a function which behaves very much like natural monopolies in which competition does not cure, but rather aggravates the evils from which the consumer suffers. The Chances of Success But in view of the small profits made by the experienced dealer, how can a group of consumers who are wholly inexperi- enced hope to step in and perform the same function at a sav- ing ? Is it reasonable to expect that volunteer directors, elected by the cooperative society of consumers can succeed and help the consumer when the local dealer can only keep his head above water ? But this is exactly Avhat is being done by some millions of plain working people across the Atlantic. The situation, however, does emphasize the obstacles in the way of initiating cooperative buying, but the hope that this can be done to the great advantage of the consumers is based not only upon the fact that it is being done already, but upon the important further fact that the consumers' store has a simpler and easier task be- fore it than has the dealer for profit, provided the consumers co- operative society is fully aware of the important advantages to be gained by cooperation and is based on a membership of loyal cooperators. When I say that the cooperative society has a simpler task I mean that certain expensive things incident to private merchan- dizing can be eliminated from the work of the consumer-owned store. Under our present system of aggressive or pushing distribu- tion of products, there is expended for advertising, soliciting and 500 MARKETING AND FARM CREDITS other sales promotion expedients more than 10 per cent of the retail price, much of which is unnecessary from the consumers' standpoint. In other words, if consumers volunteer to serve themselves and commit themselves to their society, it is not nec- essary to spend money advertising nor soliciting them. This great expense of bringing the customer to the store can practic- ally all be eliminated from the cooperatively managed store. The 2 billions or so spent in this country annually for adver- tising, persuasive salesmanship, etc., could be largely eliminated if distribution were in the hands of the consumer. This vast expenditure has undoubtedly been constructive and wise, up to this time, but from the consumers' standpoint is, as now con- ducted, wholly waste. When the pull of the consumers' need is substituted for the push of the profit-making distributor, publicity and sales meth- ods will be revolutionized. Then again, the ordinary dealer is subject to losses due to miscalculation as to supply. This, too, can be eliminated when consumers are disposed to act together dependably. The changed attitude of the store keeper would cause him to buy to serve the consumer, instead of buying to sell. He would give reasonable but not excessive service, cut out the solicitor and reduce the cost of delivery by one-half. These expenses, therefore, incident to push, risk and profit for which the consumer now pays dearly, could largely be eliminated by the substitution of the cooperative buying system which has proven so successful in European countries. What is Done at Montclair At Montclair 363 consumers are organized on the Rochdale plan. These consumers owning the store in shares of $10 to $200 each, having one vote only, capital receiving only simple interest and all gains divided among consumer members. But cooperation is only the frame work and will never be made successful without efficiency in store administration, and as indicated above, efficiency from the consumer's standpoint means something more and different from efficiency from the merchandizers standpoint, for the purpose of cooperative buying is to enable the consumer to get his supplies at the lowest cash wholesale cost, plus only the necessary expense of handling and bringing it to his kitchen. EMERSON T. HARRIS 501 Buying and store efficiency must, therefore, be taken up in as thorough a fashion as these things are handled in the most up-to-date manufacturing plant. "A Bonus" Delivery System At Montclair we have made some progress in this direction. The most notable thing we have done is the bonus delivery sys- tem, which enables the store to give satisfactory service at about, one-half the cost of the usual practice in what is called "free delivery. ' ' The plan is simply to give our members at the end of each 3 months a delivery bonus or discount. This dis- count we placed at 5 per cent. The member who has carried all his goods home gets the whole 5 per cent in cash. Other members get the 5 per cent minus what it has cost the store to give each member delivery service. That is, if a member has a delivery bonus discount of $10 and the wagon has called at hi» house, say, 30 times, and it is found that each call of the wagon has cost the store 10 cents, then 30 times 10 cents or $3 is de- ducted from the $10 delivery bonus and the balance paid in cash, which in this case amounts to $7. It is not the purpose of this system to compel people to carry home their goods when it is inconvenient for them to do so, but to encourage care and fore- sight in so ordering as to necessitate the fewest calls of the wagon consistent with the convenience of the member. Thus the housewife has the incentive not furnished by the ordinary so- called free delivery to exercise the same care that she would if the delivery service were at her own expense, as, of course, it is in either case. This system, it will be noted, makes for equity as well as economy, for the poor woman around the corner does not pay, perhaps, 10 or 15 per cent on the price of her goods to- pay for the carelessness of the housewife who requires several deliveries a day. When consumers understand this principle and find that all can get reasonable service without any expense in excess of the usual free delivery and that those who exercise care reap the benefit therefrom both the equity and the economy of the plan commend it to the thoughtful. Then, of course, we sell wholly for cash, thus eliminating ex- penses and losses incident to the credit system. 502 MARKETING AND FARM CREDITS Cutting Down the "Peak Load" Another thing the consumer-owned store can do is to consid- erably level down the service needs of the store so as to avoid wihat the electricians call the "peak load". To illustrate this, we found our force exceedingly busy on Saturdays. The sec- retary sent a circular requesting all members to place their or- ders Friday so far as possible, and immediately the Friday bus- iness was so increased that it substantially equalled that of Sat- urday, greatly facilitating the work and enabling us to close at the proper time Saturday evening. We are now asking our members to place orders for staples and heavy goods, so far as convenient, early in the week. This again will even up and save excessive clerk hire. Of course, meats and vegetables must be delivered Saturday, but many other articles can as well be ordered early in the week. We are also undertaking to make the store serve as a clearing house through which our membei's can order in quantity such things as apples, flour, potatoes, etc., having them delivered di- rect from the car and in this way a material saving is made to the consumer. We anticipate that the society may be able in some cases to get things direct from farmers through parcels post by ordering .through the store. The cooperative society need not feel wholly committed to the store system but is engaged in moving products from the producer to the consumer at the lowest possible cost and serv- :ing the consumer in every possible way. When the machinery for the final steps of distribution is owned by the consumers and managed by their hired represen- tative, a long step has been taken toward the complete solution of the pure food and correct measure problems. The manager of the consumer owned store has no incentive to illegitimately cheapen anything, for no one connected with the cooperative store makes any profit or has any interests to serve other than those of the consumer. A Real Step Forward Adam Smith has said that the only way to balance supply and demand and to arrive at the correct price is by haggling be- tween seller and buyer. Perhaps this is so, but when this hag- gling is carried on across the counter between the housewife and EMERSON V. HARRIS 503 the storekeeper in individual bargaining, the housewife is at a great disadvantage and is engaged in an undignified and diffi- cult business. The housewife is comparatively uninformed and will seek in buying, by playing hide and seek with bargains, to beat the dealer at his own game. In cooperation there is a remedy, for the haggling is removed from tihe counter and is conducted by the manager in the pri- mary markets under conditions which nearer approach equality of terms on the part of the buyer and seller. The consumer, therefore, can rest assured that his interests, both regarding cost and quality, are served better than he him- self could serve them and his mind, or rather her mind, is set free to give attention to matters other than cost and honesty of quality and measure, and when the pull of the consumer's need has been substituted as an incentive for the push of the dealer's profit, peaches will not be fed to hogs in Connecticut and vege- tables rot on the ground on Long Island, while thousands with- in a hundred miles are in need of these things. Our real incentive in Montclair is that of laboratory work, helping to tunnel mountains between producer and consumer, to work out methods which will reduce the cost of necessities to the consumer by at least one-eighth and insure purity and full measure. We hope to do this not mainly for the advantage of our own members, or even our own community, but to prove that the great principles which have been so successfully carried out in the old world can be applied under metropolitan condi- tions in the new, and to help bring to pass that condition in which the joy of work will be increased by the certainty of turn- ing the wages of work into the maximum of that which will supply the needs of the worker. 504 MARKETING AND FARM CREDITS REPORT OF THE COMMITTEE ON PERMA- NENT ORGANIZATION (Adopted by vote of delegates) I. Agricultural Organizations Your committee on permanent organization after careful consideration respectfully recomemnds to this Conference : That the chairman of the Conference appoint a committee of 10 who shall meet as soon as practicable after the adjournment of the Conference and proceed at once to organize an American Agricultural Organization Society. Such committee should have power to create sub-committees to represent the various interests that from time to time will ally themselves with the Agricultural Organization Society. Such committee shall start a campaign to put the Agricul- tural Organization Society on a permanent financial basis, to seek representative membership from various societies, organ- izations, and in general to work out plans to put such society on a permanent democratic basis. Such society shall have for its purpose : (1) To examine into the methods of production and distri- bution of farm products with a view of evolving a system of greater economy and efficiency in handling and marketing the same. (2) To encourage and promote the cooperative organization of farmers and of those engaged in allied industries for mutual help in the distribution, storing, and marketing of produce ; for the economical transfer of agricultural produce from the pro- ducer to consumer, for, in short, the efficient organization of the business of agriculture. (3) To supply instructors and lecturers upon the subject of cooperation among farmers, auditing and accounting experts and legal advice in matters relating to organization. (4) To issue reports, pamphlets and instructions which will help in spreading knowledge of the best means of rural better- ment and organization. (5) To organize and cooperate with central bodies and local branches of societies or other associations, for the promotion of "better farming, better business, and better living." (6) To encourage and cooperate with educational institu- tions, departments, societies, educational centers, etc., in all OFFICIAL BUSINESS 505 efforts to solve the questions of rural life, rural betterment and agricultural finance and marketing and distribution of produce and the special application of the facts and methods discovered to the conditions existing among the farmers of America and to the solution of the problem of increasing cost of living. (7) To investigate the land conditions and land tenure with a view to working out better, more equitable and fairer sys- tems of dealing with this problem so vital to the social and the economic well-being of the country. (8) To call from time to time such conferences or conven- tions as will carry out the above mentioned objects. II. A Permanent Open Forum Your general committee on organization and federation was charged with a duty by the delegates who attended the 1914 conference with formulating a plan of permanent organization for the continuance of this conference as an open forum and for federating with it existing agencies brought into existence for purposes of open discussion of those subjects that have to do with the great agricultural problems of America. Your committee has been at work during the past 18 months, carefully canvassing the field and studying the complex prob- lems associated with agriculture, and it now begs leave to sub- mit to you a plan for the permanent organization of the con- ference. Your committee recommends that the National Conference of Marketing and Farm Credits be continued on its present basis as an open forum of discusion of the problems that sur- round the production, distribution and financing of the Amer- ican farm and the American farm products. Your committee recommends in this connection the following: That the control of the Conference be continued by the gen- eral chairman of this Conference appointing a central commit- tee of 20 men ; and that there sihall be associated with this general committee a state director from each state, who shall serve in an advisory capacity. Your committee recommends that these state directors be selected by the delegates from each state represented at this conference, and that the elections of said delegates be made by the state delegates present, and that the nominations be presented at one of the business sessions before adjournment. Your committee further recommends that the order of retir- ing the general committee be determined by the committee it- 506 MARKETING AND FARM CREDITS self after it has been completed by the present permanent chairman, Frank L. McVey, Lon D. Sweet, Frank P. Holland, Herbert Quick, Henry Wallace,* E, P. Harris, John Lee Coulter, E. M. Tousley, Charles W. Holman, H. C. Sampson, M. R. Myers, Charles McCarthy, Charles S. Barrett, Clarence Poe, Gifford Pinchot, James C. Caldwell. L. D. H. Weld, REPORT OF THE COMMITTEE ON RESOLUTIONS (Adopted by vote of delegates.) In the preparation of resolutions, the committee has in mind the purposes of the call for the Conference. The many opin- ions held of problems pressing for solution have made it im- possible to include the content of all resolutions offered to the committee. This Conference, however, consisting of represen- tatives from 44 states, the District of Columbia, and from Canadian provinces, presents its views for public consideration under the head of marketing, conservation, rural credits and congratulations. I. Marketing op Crops The immediate needs in respect to better marketing are standardization and information, to the end that a trade clas- sification as to pack or grade may mean the same thing in one market as another and that farm products may be intelligently priced and distributed. a. Standardization. We believe that under the interstate commerce clause and the weights and measures clause of the federal constitution, Congress has ample powers to prescribe standard packs and grades of all farm products both in coun- try and city districts, and we recommend that the United States Department of Agriculture through such agencies as may be provided be authorized to evolve from the best business practices and to establish by such means as may be devised, standards of measure and quality for all merchantable farm * Deceased February 22, 1916. OFFICIAL BUSINESS 507 products. We recommend that Congress immediately provide by law for federal inspection of commodities of large volume, such as grain, hay and cotton, whereas such inspection is now conducted under state law or under rules of commercial bodies, to the end that by such future inspection all the classifying and grading of articles of interstate or foreign commerce may be made uniform. b. Information. Accepting as we do the trade law of sup- ply and demand as universal and inexorable, the Conference approves the employment of governmental agencies in the col- lection of seasonable information reflecting the acreage, condi- tion and output of farm products; and we urge greater effort and, if need be, more generous expenditures in order that such reports and estimates may be more accurate. But we insist that equal energy be employed by the governmental agencies in collecting and disseminating corresponding seasonable in- formation covering the manufacturing, commercial and other trade conditions which reflect the rate of consumption of each given farm product. We recommend that the bureaii of foreign and domestic com- merce and the office of markets be provided with the necessary means and be required to cooperate in the collection and dis- semination of information which will enable the producer fairly to price and wisely to distribute his products. We recommend that this information be furnished while the farmer has pro- duce to sell and not after he has sold it to organized traders and speculators who under present conditions are enabled to prosper unduly at the expense of the farmer. c. State Market Commissions. In view of the fact that mar- ket commissions are rendering valuable service to producers and consumers in broadening markets, in aiding the producer to secure a compensatory price for such products, and the work of such marketing commissions can be greatly aided and pro- ducer and consumer still further benefited by increasing the number of such state marketing commissions, the National Con- ference on Marketing and Farm Credits hereby strongly urges the states in the union, which have not yet created a marketing commission, to do so at the earliest time in the interest of their own producers and consumers as well as in the common interest. d. Terminal Markets. We recognize that the practices common in many of our terminal markets have caused a great deal of dissatisfaction among producers, and a consequent shat- 508 MARKETING AND FARM CREDITS tering of coafidence even in the worthy agencies of distribu- tion. The National Conference on Marketing and Farm Credits, therefore, places itself on record as favoring federal legislation for interstate shipments, which will require commis- sion merchants and any other receivers of farm products on consignment, to keep a uniform system of accounts giving each shipment a number in rotation, showing date and from, whom received, date of sale, name of purchaser and price ; to forward a transcript of the entry promptly to shipper; and to keep all such records open at all times for examination by the shipper, or any state or federal official. In our opinion, the proper administration of this legislation can only be accomplished by stationing federal inspectors at all the large terminal markets. II. Rural Credits a. Aid and Direction in Reclamation. Conditions have arisen in certain sections of the United States in recent years that are retarding rural development and making it more and more difficult for farmers of small capital to become owners of the land they cultivate. These conditions include higher prices for land in private ownership, higher cost of irrigation, higher cost of living, higher wages and larger outlay to improve and equip farmers. The influence of such conditions is shown in the falling off in land settlement in certain sections of the coun- try and in the increasing number of failures among these set- tlers. It is shown in the other sections of the country by the decreasing number of farms cultivated by their owners and by the colonizing of rural districts with people who are able to pay higher rent because they will accept a debased standard of living. We believe that the remedy for these conditions existing in the irrigation sections is to be found in legislation by the states, or by the nation and the states, which will provide money to be loaned settlers to aid in the preparation of public land for cultivation and for the purchase of such privately owned land to be resold to settlers under methods and conditions similar to those now in successful operation in Ireland, Australia, New Zealand and other countries. As such legislation would involve a radical departure from past methods and policies and as the systems of other countries OFFICIAL BUSINESS 509 would have to be modified to conforai to our needs and condi- tions, the first step toward the inauguration of such legislation should be comprehensive investigation of the subject. This Conference, therefore, favors and recommends to Con- gress the appointment of a commission of 5 members to inves- tigate the methods and results of land settlement in certain sections of this country where settlement of cut-over lands, drainage of swamps lands and irrigation must be undertaken; and also the causes and results of tenant farming in the entire country; and to prepare a report with recommendations as to measures needed to remove the obstacles to acquiring farms and the modifications needed in the successful land settlement sys- tems of other countries to ensure their effective operation here. b. For Banking Facilities. There are 118 bills or more for rural credit systems before Congress at the present time. Many of these bills contain wise provisions that should be enacted in the laws of this country. We are confident that with the undoubted sentiment for credit better credit facilities expressed in no uncertain tone by the farmers of this country, Congress will enact at this session some legislation along the line of rural credit. But this Conference goes on record as en- dorsing only such legislation as will provide for the soundest valuation and the most careful maintenance of true educational values, and only such legislation as is based upon self-help, careful auditing, a sound amortization plan, and the coopera- tive principle of organization for rural credit banks. Such a rural credit system should be created to aid : 1. Tenants who are in need of working capital and who are willing to form approved cooperative organizations under which moderate credit may be safely extended; 2. Tenants, who have reached a financial condition which makes the purchase of land a safe risk but who require larger loans and longer time than they can secure under the existing commercial credit conditions ; 3. Land owners who desire to add permanent improvements without impairment of working capital. We oppose any legislation that suggests the wholesale dis- tribution of government funds or the loaning of government credit, in such a way as to encourage land speculation, or land investments which the business experience of our people has shown to be hazardous. This Conference, therefore, strongly endorses a practicable plan for rural credit. It just as strongly protests against any 510 MARKETING AND FARM CREDITS plan that will end mainly in real estate speculation and in- crease in land values to the disadvantage of actual settlers. Any plan adopted for aiding settlers by a better system of rural credit should be preceded by an effective plan for pre- venting the increase of land values that otherwise is certain to deprive the settler of intended aid. This is done in Ireland and elsewhere by fixing in advance the prices at which land shall be sold by owners. It is done in Victoria, Australia, and elsewhere by government purchase and resale to settlers. It might perhaps be done by an unearned increment tax on bene- fited lands. Whatever method may be adopted on investiga- tion, we consider that this object of preventing speculation and providing that the actual settler rather than the speculator, or so-called ''investor" shall have the full advantage of improved credit, is the most needed preliminary step in a program of rural credit, reclamation and land settlement. We recommend that this Conference be represented at Wash- ington this coming session of Congress, in the presentation of this phase of rural credits to the proper committee. III. Accommodations and SER^^CE The Third National Conference on Marketing and Farm Cred- its here have enjoyed the hospitality and excellent service of the Hotel Sherman, and extends thanks for the many favors extended by the management. To the officers and committee on organization this Conference extends thanks and congratulations upon the great success of this Conference. And in this connection the Conference recog- nizes the high grade of service of the secretary, Charles W. Hol- man, and his assistants, in bringing the Conference to a success- ful conclusion. In the opinion of your committee the chairman of the Con- ference should be instructed to send a telegram of good wishes to the sponsor of the First Conference, Hon. F. P. Holland of Dallas, Texas. 1 H. W. Danforth, Chairman. Charles McCarthy. Elwood Mk^vD. Clarence Ousley. H. W. Tinkham. Frank L. McVey, (Ex-officio.) Charles W. Holman, (Ex-officio.) OFFICIAL BUSINESS 511 WORK OF 1914 SESSIONS At the Second National Conference on Marketing and Farm Credits, held in Chicago, April 14-17, the delegates passed, by unanimous vote, the following report of the Committee on Permanent Organization : After a survey of the problems, both local and national, your committee recommends : (1) That the work of this body should be perpetuated un- der the name of the National Conference on Marketing and Farm Credits. (2) That the chairman of the business sessions be instructed to appoint a general committee of not less than fifteen mem- bers whose personnel shall be of a representative character. This committee should have powers : (1) To increase its membership according to the needs of the work to be done. (2) To create such subcommittees to represent the various interests that from time to time will ally themselves with the National Conference on Marketing and Farm Credits. (3) To work out a scheme of membership representation among the various societies, organizations, institutions and individuals that are admitted to membership, and a suitable membership fee for each of the parties here referred to. (4) To begin a constructive educational program for the improvement of the standards of farm products and for the assisting of farm producers to perfect the necessary organi- zations for the carrying out of this plan in the most business- like way that is possible for each organization. (5) To look into the feasibility of holding an all- American standardization exhibit at the time of the third conference, and to be given the power to act. (6) To determine the time and place of the Third National Conference on Marketing and Farm Credits. The authority granted this general committee and its sub- committees should expire at the end of the Third National Conference on Marketing and Farm Credits. Respectfully submitted, Frank L. McVey B. F. Harris Charles McCarthy John Graham Brooks Lou D. Sweet J. C. Caldwell Charles W. Holman. 512 ]MARKETING AND FARM CREDITS Report of Resolutions Committee In addition the delegates passed, with only two dissenting votes, the following report of the committee on resolutions: "Your Committee on Resolutions respectfully submits the following : (1) Whereas, The Sherman Act as it is now construed i^ a serious menace to progress of organization and confedera- tion; and, Whereas, The farmers and the other cooperative organi- zations do not wish to be lawbreakers, neither do they wish for special exemptions of any kind; and, Whereas, They wish legislation which will not hinder or forbid such legitimate organizations and which will prevent unfair practices by all organizations as well as protect such organizations from unfair discrimination and practices di- rected by great or small combinations or dealers. Therefore he it resolved, That this Conference hereby demands from Congress legislation which will properly modify the exist- ing Sherman law to the end that this proper and reasonable pro- tection and regulation be extended to cooperative organizations, whether they be of consumers or producers, and to the end that such organization be fully protected and encouraged thereby. (2) Resolved, That it is the judgment of the Conference that Congress should appropriate liberally for the mainte- nance of the office of markets, and further that the said office of markets should employ at the earliest possible time, special- ists charged with the duty of ascertaining all facts pertaining to the marketing of all farm products, particularly perishable products, having in mind an early plan for the proper prepara- tion for market, shipping, inspection and selling of the said products, and that as early as practicable special attention be given to the investigation of the feasibility of placing federal inspectors of perishable products in the principal markets and transportation centers also that this office be urged to cooper- ate with the various state departments of agriculture. (3) Resolved, That we urge all farmers and other coopera- tive organizations to join us by sending delegates on a proper representation basis as determined by our permanent com- mittee, to our next conference in order that all cooperators will eventually be joined in some kind of a national permanent federation. OFFICIAL BUSINESS 513 (4) Resolved, That this conference hereby requests all transportation bodies to extend the work now done for greater production to an equal effort toward standardization and mar- keting, and that these transportation agencies be invited to cooperate with all future efforts of this conference in this di- rection ; we hereby urge such agencies to federate their efforts and organize de.iinitely for this purpose. (5) Resolved, That the question of holding the Conference at the San Francisco Exposition be referred to the committee on permanent organization which has already been charged with the duty of passing upon the time and place of the next meeting. (6) Whereas, The United States Commission on Industrial relations has indicated the intention of looking into the farm labor problem ; Therefore he it resolved, That this Conference urge tihat the said commission make an exhaustive investigation of both farm labor and farm tenancy problems, particularly in their relation to the more business-like production and distribution of farm products. (7) Whereas, The educational institutions of the various states of the United States States have during the past decades given most of their attention to the problems of production insofar as they have interested themselves in agriculture ; and, Whereas, The problems of marketing and farm credits have now come forward as questions of great national importance, causing great public concern; Therefore he it resolved, That the Second National Confer- ence on Marketing and Farm Credits urges upon the afore- said educational institutions the desirability of giving these subjects a place in their courses of study and be it further resolved that we urge legislative bodies to liberally support the effort to establish this new work by reasonable appropria- tions of the public funds. (8) Be it resolved, And it is the sense of this body, that the campaign for the standardization of packs, packages, carriers, etc., should be immediately taken up and the various interests employed in promoting this work be solicited to cooperate in forwarding this work and in forwarding an ail-American standardization exhibit, (9) Resolved, That this Conference urge upon Congress ac- tion upon the question of rural credit; this action should be 33— M. F. c. 514 MARKETING AND FARM CREDITS taken, however, with care and deliberation. Great interests which have already controlled the marketing of industrial se- curities are now striving to gain control over rural credit. Again we recognize that any system of bonding on a long time basis must be based on the soundest valuation and maintenance of agricultural values. Any hasty or wild-cat exploitation will only hurt in the end ever^^ effort to promote an efficient system of agricultural credit. Amortization schemes must be carefully tested in order that they do not prove detrimental to true cooperation, which is only successful the world over when based upon self-help, careful auditing, valuation and sound business methods; we favor the basic cooperative principles in dealing with the question of farm credit, as well as in all other matters of farm organization. (10) Resolved, That we heartily endorse the passage by several legislatures of true cooperative laws based upon the one man, one vote basis, and urge upon the members of this Congress the necessity of promoting such laws in every state of the union. We hereby endorse the cooperative plan of marketing goods and urge upon our legislatures proper legislation for the en- couragement of such organizations, the protection of them against unfair discrimination and upon the business of pro- ducers, and also such survey of state markets and market con- ditions, and the furnishing of such information by marketing commissions or otherwise, as will adequately help in the work of such true cooperative organizations. Whereas, The national government and the various state governments now expend large sums for the collection and diffusion of information showing the quantities of farm pro- ducts raised by American farmers, i. e., to the question of sup- ply, but have given little attention to the question of location and extent of demand. Therefore le it resolved, That the Conference urges the de- sirability of the collection and diffusion of similar information showing the demand for these products both in this country and abroad. J. C. Caldwell, Chairman, Charles McCarthy JouN Lee Coulter John Graham Brooks A. W. Sanborn. ACCREDITED DELEGATES 1915 CONFERENCE Alabama McLane Tilton, Jr., Pell City; banker, secretary, Alabama Bankers' Association. Max Bleiberg, Cullman ; farmer. Emmet A. Jones, State Capitol, Montgomery ; chief of Markets Bureau, representing the State of Alabama. Arkansas W, S. Goodwin, Warren; lawyer, and member of Congress,. Seventh District of Arkansas. J. "W. Stroud, Rogers; farmer and fruit grower, secretary, Ozark Fruit Growers' Association. California Elwood Mead, State University, Berkeley ; professor of Rural Institutions, member of state rural credits commission. Harris Weinstock, 525 Market St., San Francisco ; California state market director, California state rural credits commission., Canada G. G. White, 1079 McMillan, Winnipeg; lecturer, Manitoba Agricultural College. R. M. KiNziE, Winnipeg; farmer, Manitoba Grain Growers' Association. W. J. Black, 22 Victoria St., Ottawa Economic and Develop- ment Commission. G. F. Chipman, Winnipeg, Manitoba; editor. Grain Growers' Guide. George Popper, Toronto, Ontario. H, S. Arkell, Department of Livestock, Ottawa, Ontario. F. C. Hart, Parliament Buildings, Toronto ; Department of Ag- riculture. J. H. Hare, 2 St. Clair Ave., Toronto; livestock branch, De- partment of Agriculture. 516 MARKETING AND FARM CREDITS James W. McG-uyor, 12tli St., Brandon, Manitoba; farmer. J. W. Rutherford, Department of Natural Resources, Cana- dian Pacific Railway, Calgary, Allwita; superintendent of agri- culture, Canadian Pacific Railway. V. Winkler, Manitoba ; minister of agriculture of Manitoba. W. E. CoLBORNE, 812 Sommerset St., Ottawa, Ontario ; farmer, Colorado Russell H. Forbes, 804 First National Bank Building, Den- ver; newspaperman; Colorado Fruit Growers' Auxiliary Com- mittee. Frank N. Briggs, Cor. IStb & Stout Sts., Denver; president Interstate Trust Company, representing state of Colorado. W. M. Lampton, 221 Equity Bldg., Denver; general freight agen,t D. & R. C Ry. ; representing the State of Colorado. Charles L. Hover, Longmont ; farmer, representing the State of Colorado. Lou D. Sweet, 516 Equity Bldg., Denver; farmer, Colorado and National Potato Associations. Delaware H. Hayward, Newark ; dean and director Department of Agri- culture, Delaware College. District of Columbia Carl Schurz Vrooman, "Washington; farmer, assistant secre- tary United States Department of Agriculture. Paul H. Moncure, Washington ; United States Bureau of La- bor Statistics. J. W. T. Duval, United States Department of Agriculture, Washington. C. W. Thompson, United States Department of Agriculture, Washington ; Office of Markets and Rural Organization. Grosvenor Dawe, 3203 19th St. N. W., Washington; editor and speaker. George P. Hampton, 36 Bliss Bldg., Washington; editor, Farmers' Open Forum, The National Marketing Association. Florida L. C. Williman, Tampa^ C. O. Holmes, Bristol; cooperataoai and colonization, repre- senting' the State of Florida ACCREDITED DELEGATES 1915 CONFERENCE 517 Georgia F. J. Mebriam, 116 East Hunter, Atlanta; publisher, South- western Ruralist. Dan G. Hughes, Capitol, Atlanta; assistant commissioner of agriculture. Southern Conference for Education and Industry. Idaho r N. A. Jacobson ; fruit grower, representing the State of Idaho. HoNORE Tamming; reporter. Gr. R. HiTT, Boise ; State Banking Department. W. G. ScHOLTZ, Boise; state director of farm markets, repre- senting the State of Idaho. T. A. Mauritzen, Bliss; farmer, Bliss Farmers' Grange. Illinois E. B. Kilmer, 1001 Schiller Bldg., Chicago; salesman, the Pfauder Company. E. M. Schalck, 1722 N. Mozart St., Chicago; assistant to state entomologist, representing the State of Illinois. Percy L. Perry, 145 S. D. Hall, University of Chicago, Chi- cago; student. Albion W. Small, University of Chicago, Chicago ; professor of sociology. Will A. Butterfl, Jr., 5729 Cornell Ave., Chicago; publish- ing, representing Mt. Vernon College, Ohio. E. A. Heald, Canton; vice-president, Canton National Bank. Christian Gross, 6107 Kenwood Ave., Chicago. F. A. Pearson, Urbana ; instructor in Illinois Agricultural Col- lege, University of Illinois. A. M. Ten Eyck, 111 S. Main St., Eockford; county agricul- tural agent, "Winnebago County. S. A. Mason, Bloomington ; Illinois Farmers ' Institute. Albert E. Guge, 1102-15 E. Washington St., Chicago ; organ- izer, secretary-treasurer, Social Service Association. Ealph Allen, Delevan; farmer, Illinois Farmers' Institute. A. Suhring, Peoria; manager. Farm Loan department, Dime Savings & Trust Co. G. G. Happing, Havana ; farmer. John Western, 717 Oakton, Evanston ; fruit grower. S. Liph, 1258 Taylor St., Chicago ; teacher. 518 MARKETING AND FARM CREDITS William Geweke, Des Plaines ; fruit gardener, Fruit Garden ers' and Farmers ' Association of Cook County, Illinois, J. C. Jones, Ridge Farm; farmer. Ridge Farm Farmers' Ele- vator Company. Richard Pride, Chicago ; editor, American Elevator and Grain Trade. Charles N. Haskins, 3032 Ellis (Groveland) Ave., Chicago; lecturer, publisher, salesman, organizer and teacher. The Service Union and The Joy Service. Eli Beers, 4147 Langley Ave., Chicago. F. W. BousKA, 2037 Continental Commercial Bldg., Chicago ; expert in buttermaking, American Association of Butter Manu- facturers. 0. B. Thompson, 4800 No. Lawndale Ave., Chicago. D. T. Richie, 1437 Higihland Ave., Chicago. B. B. Herbert, 4620 Ravenswood Ave., Chicago; editor and publisher, National Government, representing Lincoln Memorial University of Cumberland Gap, Tennessee. R. "W. Leatherbee, Green Bay Road, Lake Forest ; farmer. Edward K. Slater, 700 So. Clinton St., Chicago; with Blue Valley Creamery Company, National Dairy Council. Millard R. Myers, 230 So. La Salle St., Chicago ; editor, Amer- ican Cooperative Journal. Roymayne Armstrong, 178 North Taylor Ave., Oak Park; stenographer. Myrtle Rogers-Myers, 178 N. Taylor Ave., Oak Park. C. A. Warner, 20 W. Washington, Chicago ; chief industrial agent, Adams Express Company. L. T. Jonas, 104 B. Broadway, Centralia; lawyer and grain dealer, L. H. Jonas & Company. Henry A. Goetz, 830 Oakdale Ave., or 714 McCormick Blvd., Chicago. Fred H. Rankin, College of Agriculture, Urbana; professor, University of Illinois. Edward A. Brown, 72 West Adams St., comptroller of Chi- cago Elevated Railway ; New York University, New York City. H. A. Dooley, Des Plaines; Agricultural Department of St. Mary's Teachers' School. Richard E. Moss, 7334 Yale Ave., Chicago ; farmer, La Salle Extension University. George W. Simon, 706 W. 12th St., Chicago ; western agent, The Jewish Agricultural and Industrial Aid Society, and The Federation of Jewish Farmers of America. ACCREDITED DELEGATES 1915 CONFERENCE 519 L. P. Bacon, 1115 Railway Exchange, Chicago ; assistant gen- eral colonization agent, The Atchison, Topeka & Santa Fe Ry. W. J. Carmichael, 906 So. Goodwin, Urbana; instructor and investigator in Animal Husbandry, University of Illinois. Ella R. Meissier, 3843 W. Adams St., Chicago. H. E. Monroe, 415 Villa St., Elgin. F. L. Petty, 1522 Michigan Boulevard Bldg., Chicago ; editor. Farm and Home. E. LovEJOY, 4130 Calumet Ave., Chicago ; railway mail service. T. R. Hawks, 6442 Cottage Grove Ave., Chicago ; printer, T. R. Hawks Company. W. R. Blackwelder, Chicago ; state home visitor for children. S. C. Vandenburg, 910 Gait Ave., Chicago. James A. King, 3135 Wilson Ave., Chicago ; managing editor, The Farming Business, W. D. Boyce Company. Miss F. Aparetta Voorhees, 2040 Sherman Ave., Evanston; accounting. MiNONA S. Jones, 3532 Ellis Ave., Chicago ; writer, speaker, and organizer for "votes", The Tomahawks. P. R. Robinson, 5714 Blackstone, Chicago. George F. Fullvik, Rockford; farmer, Winnebago County. F. I. Mann, Chicago; farmer, Illinois Farmers' Institute. J. B. Lawson, 547 W. Jackson Blvd., Chicago. John E. Barrett, Prairie View; farmer, Lake County Farm Implement Association. DwiGHT Sanderson, 1109 E. 54 Place, Chicago. William Dighton, 712 N. Stole, Montieello; banker and farmer. Marion Gallup, 510 East Water, Pontiac; retired farmer, The Farmers' Grain Dealers' Association. B. P. Harris, Champaign ; farmer and banker. L. L. Lower, Campus; farmer, Gleaners' Association. A. C. Rice, Jacksonville ; farmer and banker, president Grain Dealers' Association of Illinois. J, A. Henebry, Plainfield ; Plainfield Grain Company. William M. Stickney, 52-54 Board of Trade, Chicago ; grain commisiisoner, Lowell Hoit & Company. William H. Bush, 1538 N. State St., Chicago. E. J. DowiE, La Salle Station, Chicago; special agent of traffic department, New York Central Line. Charles R. Longfelder, Mt. Vernon; livestock and grain, Longfelder Brothers. 520 MARKETING AND FARM CREDITS John C. Clair, Chicago; industrial and immigration commis- sioner, Illinois Central Railroad. Eugene F. McPike, 1200 Michigan Ave., Chicago; secretary, American Railway Perishable Freight Association. Arthur E. Swanson, Chicago ; instructor, Northwestern Uni- versity. F. H. Newell, 1109 California St., Urbana; civil engineer, University of Illinois. Emil Keller, Fairburg; Strawn Farmers' Elevator Company. W. C. Farlon, Augusta ; farmer and stockman. Charles E. Bentlet, Michigan Boulevard Bldg., Chicago; farmer. H. E. Young, 5812 W. Circle Ave., Chicago ; farmer. James Atkinson; editor. Homestead. W. T. CORNELISON, Peoria; grain dealer. "W. E. Lagerquist, 31 W. Lake St., Chicago ; professor of eco- nomics, Northwestern University. Graham Taylor, Chicago; minister and social worker, The Survey. Charles E. Reed, 17 Chalmers Place, Chicago ; social worker. J. Ralph Pickell, 327 S. La Salle St., Chicago; editor. Price Current Grain Reporter. Charles L. Stewart, ^09 Commerce Bldg., Urbana; instruc- tor, University of Illinois. Frank M. Chase, care Prairie Farmer, Chicago ; assistant edi- tor, Prairie Farmer. Franklin M. Perry, 6239 Kimbark, Chicago ; merchant. William W. Clery, 226 S. La Salle St., Chicago ; architect. W. F. Bennett, 192 Clark St., Chicago; business manager, National Poultry, Butter and Egg Association. Herman W. Danforth, Washington; farmer. National Coun- cil of Farmers' Cooperative Association. Charles Larson, 1741 N. Kimball Ave., Chicago. Thomas S. Hiles, 746 No. Parkside Ave., Chicago ; merchant. J. H. Finland, Marquette Bldg., Chicago; investment. B. W. McCullough, 76 W. Monroe St., Chicago; secretary, National Implement & Vehicle Association. Richard L. Crampton, 208 S. LaSalle St., Chicago ; secretary, Illinois Bankers' Association. P. C. Allen, Ransom; manager of the Farmers' Elevator Com- pany. ACCREDITED DELEGATES 1915 CONFERENCE 521 L. W. Armstrong, 10 So. La Salle St., Chiicago; representing Convention Bureau, Chicago Association of Commerce. Charles E. Snyder, Chicago ; editor, The Farmers ' Review. F. H. HiGGiNS, 500 North Dearborn St., Chicago; editor, The Farming Business. Roger Patterson, Durand; farmer, H. W. Hanson, 112 W. Adams St., Chicago; secretary-treas- urer. Farm Mortgage Bankers' Association of America. J. D. Larson, 234 Albert Ave., Roekford. W. F. Handschin, 702 S. Elm St., Champaign ; on staff of ag- ricultural college, University of Wisconsin. George N. Coffey, Urbana ; assistant state leader for county advisors. A. R. Mann, Ithaca, New York ; teacher, New York State Col- lege of Agriculture. August Geweke, Des Plaines ; truck gardener. J. D, Jarvis, 4025 N. Kevdale Ave., Irving Park; advisory expert, department of dairy and creamery implements, The De Laval Separator Company. J. T. Graves, 5707 Blackstone Ave., Chicago, Jesse L. Ruble, 221 East Ontario, Chicago, Herbert W. Mumfore, Urbana ; chief of Livestock Illinois Ex- periment Station, Agricultural College of University of Illinois. Charles E. Eckerle, 120 Humphrey Ave., Oak Park ; general organizer of farmers' cooperative companies, American Coopera- tive Journal, H, B, Reid, 1010 Advertising Bldg., Chicago, assistant editor and advertising manager, The Shepherds' Journal, Lewis L. Holladay, 109 N. Dearborn St., Chicago; consulting engineer. Joseph A. 'Donnell, 154 W, Randolph St., Chicago ; attor- ney at law, farmers in Michigan (Benton Harbor). Otokar L. Prohaska, 1053 Milwaukee Ave,, Chicago ; chemist. H. E. HoRTON, Chicago ; Agnieultural Commissioner, American Steel and Wire Co, Indiana Edward L, Tanner, Plymouth ; Edgerton Manufacturing Com- pany. William A. Barrower, Oakland ; farmer, Livestock Shipping Association, George Weymouth, Spencer ; editor, Farm Life, D. L, Mabbett, Colfax; farmer and feeder, representing the State of Indiana. Lewis McNutt, Brazil, R. R. No. 2 ; farmer. 522 MARKETING AND FARM CREDITS William O'Keefe, Plymouth; farmer, representing the 13th Congressional District of Indiana. A. A. Gast, Akron ; farmer. Horace G. Miles, Danville ; farmer. H. L. Keed, R. R. No. 6, Logansport ; farmer. Sam B. Woods, Crown Point ; farmer, Charles N. Williams, 150 East Market St., Indianapolis; president, Farmers' Trust Company. C. A. Dunkelberg, 2401 Fairfield Ave., Fort Wayne ; manu- facturer and farmer. T. L. Wheeler, Huntington; editor. The Farmers' Guide. Iowa R. A. Pearson, Ames ; president of Iowa State CoUege. Ira p. McVicker, Eagle Grove; farmer. Grain Dealers' Co- operative Association. W. J. Ray, Colorado; secretary of Farmers' Grain Dealers' Association of Iowa. John U. Surface, Mason City; farmer, Farmers' Grain Deal- ers' Association. I. N. Baughman, Marseilles ; agricultural manager. Alson Secor, Des Moines ; editor. Successful Farming. E. L. Johnson, Waterloo; banker, Leavitt & Johnson Trust Company. H. J. Hinbregtre, Hull; manager. Farmers' Cooperative As- sociation. Frank A. Cooley, Fort Dodge; grain commissioner, Lowell Hoit & Company. A. B. HoLBERT, Greeley ; horse importer and breeder, farmer. Dan G. Stites, Fort Dodge ; banker, Webster County Trust & Savings Bank. E. T. Meredith, Des Moines; publisher. Successful Farming. NoRRis A. Brisco, Iowa State University, Iowa City ; professor of economics, and head of Department of Economics, Commerce and Sociology. D. P. HoGAN, Massena ; banker, representing the State of Iowa, and also the Rural Credit League. S. J. CocKLiN, Washington ; loans and real estate. Orville Lee, Sac City ; representing 60th District of Iowa. W, H. Arney, Marshalltown ; banker and farmer. J. F. EiSLE, Malcom ; farmer. Charles Shade, Rock Rapids ; First National Bank. A. J. Cole ; physician, representing 10th District of Iowa. ACCREDITED DELEGATES 1915 OONPERENCE 523 Kansas W. C. Landson, Salina ; editor, National Field, Salina Union, Kansas Division Farmers ' Union. G. D. EsTES, Stafford; grain and stock, Farmers' Grain Deal- ers' Association of Kansas. Chester A. Leinbach, Orange ; farmer, representing the State of Kansas. G. "W. Lawrence, 903 State St., Larned; secretary, Farmers' Cooperative Grain Dealers' Association. E. J. LiNscoTT, Holton; farmer and banker, representing the State of Kansas. A. H. Plumb, Emporia ; president. Mutual Banking and Loan Association. Clyde W. Miller, Miller; farming and stock raising, Kansas State LivestO'ck Association. C. D, Resler, Chanute; farmer. W. R. Webb, Bendena; farming and stock raising, represent- ing Governor Arthur Capper of Kansas. J. C. Bergner, Pratt ; farmer, representing the State of Kansas, governor appointee. P. H. MuHAN, Tampa ; banker, representing the State of Kan- sas. Mrs. W. R. Webb, Bendena ; farming and stock raising. George E. Putnam, 1502 Massachusetts, Lawrence ; instructor in economics. University of Kansas. George C. Tredick, Kingman ; breeding Holsteins. M. M. Jardine, Kansas Experiment Station, Manhattan ; dean of agriculture, and director of Kansas Experiment Station, Kan- sas Agricultural College. L. W. Moody, Emporia ; Kansas Rural Credit Association. Charles Dillon, Topeka; managing editor. Capper Farm Papers. Kentucky F. F. Gilmore, 41 Main St., Louisville ; publisher, Kentucky farming. Erbie Lee Harrison, State University, 287 S. Lime St., Lex- ington; president. Farmers' Union, Kentucky Division. J. W. Newman, State Capitol, Frankfort ; commissioner of ag- riculture. 524 MARKETING AND FARM CREDITS Michigan James N. MIcBride, E. Lansing; farmer, Michigan State Mar- ket Director. R. G. HoopiNGARNER, Crystal Falls ; county agriculturist, Iron County. N. W. Stuart, Clarksville ; farmer, representing the State of Michigan. A. B. Graham, Adrian ; general farming, representing Michi- gan. "W. A. Hedrick, East Lansing ; teacher. C. J. Monroe, South Huron ; farming and banking, State Hor- ticultural Society of Michigan. "W. E. Sheldon, Letehfield ; manager of creamery, representing Michigan. John I. Gibson, 447 Wealthy, Grand Rapids ; secretary, "West- ern Michigan Development Bureau; representing Michigan. Eban Mumpord, 408 Genesee, Lansing ; state leader of county agricultural agent work, Michigan Agrieutlural College. Grant H. Slocum, Gleaner Temple, Detroit; publisher and secretary, The Gleaners. G. E. Prater, Jr., Paw Paw; manager. Farmers' Association, representing State of Michigan. M. Hartman, Grand Rapids ; agricultural and industrial agent, Grand Rapids and Indiana Railway. Maryland W. H. Manss, Baltimore ; development. Massachusetts Warren Dunham Foster, Boston; department editor. The Youth's Companion, homestead commissioner. F. K. Leatherbee, North Falmouth ; farmer. Wilfrid Wheeler, 136 State House, Boston ; secretary, Massa- chusetts State Board of Agriculture, representing the State of [Massachusetts. Ken yon L. Butterfield, Amherst; agricultural education, rep- resenting the State of Massachusetts, and Massachusetts Agri- cultural College. Alexander E. Cance, Massachusetts Agricultural College, Am- herst ; instructor, representing the State of Massachusetts. ACCREDITED DELEGATES 1915 CONFERENCE 525 Minnesota J. C. Caldwell, Lakefield ; banker, representing Minnesota. H. E. Emerson, St. Paul; chief grain inspector, representing State of Minnesota. H. J. Farmer, Airlie; farmer, State Farmers' Grain Dealers' Association. L. J. Bricker, St. Paul; general freigiht agent, Northern Pa- cific Railway. D. E. WiLLARD, 313 Northern Pacific Railway Bldg., St. Paul ; development agent. J. M. Anderson, 209 Pioneer Bldg., St. Paul ; president, Equity Cooperative Exchange. Daniel A. Wallace, 51 E. 10th St., St. Paul ; editor, The Farmer. D. M. Frederickson, Phoenix Bldg., Muineapolis ; lands. E. Dana Durand, University of Minnesota, Mlinneapolis ; pro- fessor of agriculture and economics, representing the State of Minnesota, and the University of Minnesota. James A. Jeffrey, 901 Fidelity Bldg., Duluth ; land commis- sioner. E. M. TousLET, 3649 Park Avenue, Minneapolis ; editor and lec- turer on cooperation, Right Relationship League. Clayton L. Malaise, 518 Pioneer Bldg., St. Paul ; farm land investments, John Marshall Company. T. A. Hoverstad, Soo Building, Minneapolis ; a^icultural com- missioner, Soo Railway. Grant Van Sant, St. Paul ; farm mortgages. Van Sant Com- pany. Mississippi James A. Hearn, Hattisburg; agricultural agent, Queen and Crescent Route ; Queen and Crescent Route. Missouri Philip H. Hale, 3550 Vesta Ave., St. Louis ; editor. National Farmer and Stock Grower. R. W. Hockaday, 1526 Railway Exchange Bldg., St. Louis ; in- dustrial commissioner, M. K. & T. Ry. P. M. Jeffords, 1145 Aubert Ave., St. Louis ; M. K. & T. Ry. C. B. MiCHELSON, Frisco Bldg., St. Louis; marketing agent, Frisco lines. 526 MARKETING AND FARM CREDITS Claeence a, Shamel, St. Josepii ; editor, profitable farming. Walter W. He.u), St. Josepli (U. S. A.) ; banker and farmer, representing Missouri Bankers' Association as chairman of agri- cultural commission and Interstate Agricultural Congress of St. Josepli, Missouri, as chaixman of Executive Committee. Samuel D. Groner, 403 College Ave., Columbia; teacher, Uni- versity of Missouri. Nebraska J. W. Wilson, Stromsburg; banker and farmer, representing Nebraska. George B. Wellock, United Farmers' Eural Credit Associa- tion. D. M. Mx^TiN, Norris City; farmer, State Farmers' Institute. C. J. Warner, Waverly, farmer; treasurer. Rural Credit As- sociation of Nebraska. Lucien Stebbins, North Platte ; farmer. R. V. McGrew, Naponee; president. United Farmers' Rural Credit Association of Nebraska. Walter G. Silver, 16th and Hamege Sts., Omaha ; vice presi- dent, City Trust Company. David Hanna, Wood Lake ; ranchman and banker. Nevada Fulton H. Sears, Fallon ; farmer. New Hampshire M^VRY W. Anderson, 824 S. Halsted St., farmer. Andrew L. Felker, Concord ; farmer, commissioner of agricul- ture, representing the State of New Hampshire. New Jersey Robert D. Kent, 150 Boulevard, Passaic ; banker. New Mexico B. C. Hernandez, Santa Fe; congressman at large to the 64tb. Congress, representing New Mexico. ACCREDITED DELEGATES 1915 CONFERENCE 527 New York D. G. Mellor, 51 Broadway, New York ; manager, food prod- ucts department, Wells Fargo Express Company. Seth J. F. Bush, 732 Granite Bldg., Rochester; president and general manager, Eastern Fruit and Produce Exchange; horti- culturist. Marc W. Cole, Albion ; farmer, representing 25 unincorpor- ated cooperative societies in New York. G. N. Lauman, Cornell University, Ithaca ; on staff of Cornell University; representing the State of New York and Cornell University. T. S. "Welsh, 2605 Grand Central Terminal, New York ; agri- culturist, New York Central lines. Haviland H. Lukd, Hotel Albert, New York ; secretary. North Carolina William R. Camp, West Raleigh; chief, division of markets, representing State of North Carolina. North Dakota Frank L. McVey, University of North Dakota, University; president. University of North Dakota. Charles C. Connolly, 122 W. 7th St., Devils Lake ; farmer, representing the State of North Dakota. Frank Sanpord, Valley City ; farming and stock raising, rep- resenting the State of North Dakota. J. H. Worst, Gardner Hotel, Fargo ; president, agricultural college, North Dakota Agricultural College. James E. Boyle, University of North Dakota, Grand Forks; professor of economics and political science, University of North Dakota. H. L. BoLLEY, 1002 7th St. N., Fargo ; North Dakota Experi- ment Station, North Dakota Agricultural College. Charles Aofedt, Fordville ; real estate dealer, vice president, Farmers' and Merchants' State Bank of Fordville. Ohio Ralph R. Snow, Engineer's Bldg., Cleveland; lawj^er, Cleve- land Chamber of Commerce. F. Myers, Ashland ; manufacture of Myers pumps. Daniel Harpster, West Caro ; farmer. 528 MARKETING AND FARM CREDITS J. H. Habpster, Millersburg ; farmer, Grange Holmes Com- pany. A. F. Bell, Union County, Indiana, College Comer; farmer, representing the State of Indiana. F. C. Johnson, Springfield; manufacturer, American Seed- ing Machine Company. J. T. Falconer, College of Agriculture, Columbus ; instructor. Paul C. Vogt, Ohio State University, Columbus; professor of rural economics. Arthur Emery, 605 W. Central Ave., Toledo ; statistician and merchandizer. E. S. Todd, 216 E. Church St., Oxford ; professor of economics, Miami University. L. B. Dunham, Cleveland Chamber of Commerce, Cleveland. Myron T. Herrick, Cleveland ; banker, former U. S. ambassa- dor to France. Oklahoma Carl Willl4.ms, Oklahoma City ; editor, Oklahoma farmers and stockmen. W. L. Carlyle, Morrill Hall, Stillwater ; dean of agriculture, director of experiment station ; Oklahoma Agricultural College. Oreg"on Hector MacPherson, 2750 Orchard St., Corvallis; teacher. The Oregon Agricultural College. Pennsylvania E. S. Bayard, Pittsburgh; The National Stockman & Farmer. W. H. Tomhave, 504 So. Allen St., State College ; professor of animal husbandry, Pennsylvania State College. GiPFORD PiNCHOT, Milf ord. Pike County ; forester. Rhode Island H. W. Tinkham, Warren ; farmer. Howard Edwards, Kingston; president, Rhode Isand State College. John S. Murdock, Providence ; lawyer. ACCREDITED DELEGATES 1915 CONFERENCE 529 South Dakota Lewis Kilker, Britton; farmer, Fanners' Cooperative G-rain Company. C. L. Datson. Sioux Falls ; publisher, South. Dakota Farmer. Isaac Lincoln, Aberdeen ; farmer, representing Soutli Dakota. Charles A. Johnson, Fairfax ; banker and farmer. George W. Fischer, Redfield ; secretary, The North West Land & Home Bankers' Union. Tennessee A. J. Morgan, Knoxville ; dean, agricultural experiment sta- tion. J. H. S. Merone, Nashville ; treasurer, Nashville, Chattanooga & St. Louis Ry. ; Nashville, Chattanooga & St. Louis Ry. L. P. Bellah, Nashville ; general agent, Nashville, Chattanooga & St. Louis Ry. William A. Schoenfeld, University of Tennessee, Knoxville ; specialist in marketing and rural organizing, University of Ten- nessee, and United States Department of Agriculture. Texas Walter G. Verhalen, Marshall ; fruit grower. Standard Orch- ard Company. E. B. Spiller, p. 0. Box 3717, Fort Worth; secretary and general manager, Cattle Raisers' Association of Texas. LiNDLEY M. Keasbet, 43rd and Duval Sts., Austin ; professor, University of Texas. J. E. Farnsworth, Dallas ; vice president, Southwestern Tele- graph & Telephone Company. Nat Wetzel, 606 Frances Ave., Houston. Fred W. Davis, 1200 Blanco, Austin; commissioner of agri- culture, warehousing and marketing of Texts products. Clarence Ousley, College Station ; director of extension, Ag- ricultural and Mechanical College of Texas. Joseph E. Edmondson, Fort Worth; organizer, Farmers' Union of Texas. James E. Ferguson, Austin; governor of Texas, farmer, banker. Church Bartlet, Marlin. 34— M. F. c. 530 MARKETING AND FARM CREDITS H. C. POE. B. CUMMINGS. C. C. McDonald. F. H. Thaman, Alte Loina ; land development, Galveston County Business League. Vermont J. B. Wilbur, Manchester ; farmer. Virginia L. H. Barger, Shawsville ; farmer, representing the State of Virginia, G. W. KoNiER, Richmond ; commissioner of agriculture. Washington Clark G. Black, Pomeroy ; grain farmer, representing the State of Washington. West Virginia Herbert Quick, Berkeley Springs, West Virginia; farmer, writer. The Curtis Publications. C. A. Pierce, Kindswood ; fruit grower, West Virginia State Department of Agriculture. H. W. Williams, State Department of Agriculture, Charles- ton ; commissioner of agriculture. John Lee Coulter, Morgantown ; dean of College of Agri- cutlure, representing the State of West Virginia. Wisconsin M. S. Dudgeon, Madison ; librarian, Wisconsin Library Com- mission. W. L. Ames, Oregon; farmer. Farmers' National Congress. B. W. Utman, Hudson ; business and farming. H. E. Miles, Racine; National Association of Manufacturers. J. F. Dixon, Kilbourn ; general merchant. Alfred F. Schmidt, North Crandon ; farmer. North Crandon, Wisconsin, Grange No. 61. ACCREDITED DELEGATES 1915 CONFERENCE 531 Henry Krumrey, (Senator), Plymouth; farmer, president, Sheboygan County Cheese Producers' Federation. G, A. ScHULTZ, Adell ; farmer, The Sheboygan County Cheese Producers' Federation. Gus. Brickbauer, Elkhart; farmer, The Sheboygan County Cheese Producers' Federation. R. B. Mel VEST, Glenbeulah; farmer, The Sheboygan County Cheese Producers ' Federation. George B. Robertson, Marinette, Farmers' Saving & Trust Company. Edward A. Fitzpatrick, 610 Leonard St., Madison ; secretary for the promotion of training for public service. J. W. Hicks, Prentice; lawyer, Wisconsin Potato Growers' Association. H. MuLBERGER^ Watcrtown ; vice president. Bank of Water- town, Wisconsin. J. B. McCready, Plymouth; cheese salesman, The Sheboygan County Cheese Producers' Federation. B. H. HiBBARD, 2235 HoUister, Madison ; agricultural econom- ics, University of Wisconsin. Charles McCarthy, Legislative Reference Library, Madison. John R. Commons, University of Wisconsin, Madison. Ellis Monroe, 644 Frances Street, Madison ; student. Charles W. Holman, Madison ; secretary, The National Con- ference on Marketing and Farm Credits. R. M. Rutledge, University of Wisconsin, Madison; assistant in agricultural economics, University of Wisconsin. J. R. Wheeler, Columbus; banker. Agricultural Commission of American Bankers' Association. I. M. Wright, Waukesha ; farmer. Wyoming Henry A. Knight, Laramie ; dean of agricultural college ; di- rector, experiment station, University of Wyoming. John B. Kendrick, Cheyenne ; governor. The United States at Large David Lubin, Rome, Italy; United States International In- stitute of Agriculture. ^•'^-^ I DD.J^'IC -j£ — i~~t0it LIBRARY OF CONGRESS DQDEt>71773S ^mM ki