The High Cost 
 of Marketing. 
 
 ADDRESS OF 
 
 B. F. YOAKUM, 
 
 Chairman, St. Louis & San Francisco Railroad Co., 
 AT MEETING OF 
 
 Texas Farmers' Congress 
 
 At College, Texas, 
 
 July 26, 1911. 
 
JlJL 28 1911 
 
The High Cost of Marketing. 
 
 There are in Texas one and one-half 
 million people engaged in producing from 
 the soil. No other State in the Union is 
 making such rapid headway in agricultural 
 production. Therefore, Texas has more to 
 gain than any other State by improved con- 
 ditions in marketing. The farmers do not 
 get as much as they should for tlieir prod- 
 ucts, and-no one can improve this but the 
 farmers themselves. According to Govern- 
 ment reports, the producer receives 46 cents 
 for products of the farm for which the con- 
 sumer pays $1.00. It is not encouraging 
 to the young farmer boys to see that out of 
 every dollar being paid for the products of 
 the farm their share is only forty-six cents, 
 while the remaining fifty-four cents are dis- 
 tributed among others before these products 
 reach the consumers' tables. 
 
 Last year's agricultural products were 
 worth nine billion dollars to the farmers. 
 The Government used farm values in get- 
 ting figures for this total. Assuming that 
 the farmers kept one-third of the products 
 for their own use the consumers paid over 
 13 billion dollars for what the producers 
 received 6 billion dollars. The cost of 
 getting the year's products from producers 
 to consumers amounted to the enormous 
 
sum of 7 billion dollars. The real problem 
 to deal with is not high cost of living. It 
 is high cost of selling. 
 
 The industrial exports are increasing over 
 agricultural exports at the rate of seven to 
 one, because factory products are marketed 
 in a more businesslike way than farm 
 products. The United States is now ex- 
 porting two billion dollars' worth of goods 
 a year. In the last twenty-five years our 
 agricultural exports have increased sixty 
 per cent., while our commercial exports 
 have increased nearly four hundred per 
 cent. This is certainly a bad showing for 
 the farmers. It is plain that rural devel- 
 opment has not kept pace with manufactur- 
 ing and city growth. 
 
 There may be many reasons for this but 
 there is one which is more important than 
 all others. That is our long neglect of 
 the business side of farming. The late 
 S. A. Knapp, who had charge of farm 
 demonstration work in the Department of 
 Agriculture, and who had more to do with 
 the recent agricultural development in the 
 South than any one man, used to say that 
 one-eighth of successful farming required 
 scientific knowledge, that three-eighths was 
 an art and the remainder was simply busi- 
 ness. The business end of husbandry has 
 been sadly neglected, and that is the chief 
 reason why agricultural growth makes such- 
 a poor showing in comparison with other 
 national development. 
 
The farmers of this country, to receive 
 better prices, do not have to experiment 
 with untried theories. They only have to 
 copy what others are doing successfully. 
 For instance, the people of Denmark thirty 
 years ago received 12 million dollars for 
 their butter, eggs and bacon. Then they 
 began the organization of market societies. 
 Now the same character of products brings 
 in over 100 million dollars a year. Nearly 
 all their dairy products are marketed through 
 co-operative creameries and their egg export 
 societies have 25,000 members. There is 
 no such talk of high cost of living in that 
 little country because they have a system 
 of economical marketing. The farmers 
 there have organized under trust methods. 
 The commercial waste in the distribution of 
 farm products is reduced to a minimum. 
 They share in the profits of economical 
 marketing. 
 
 We know that all farmers are not able to 
 have their own creameries. Therefore a 
 community of farmers get together to build 
 and operate one for the convenience and 
 profit of all. The creamery is the concrete 
 unit around which will be constructed the 
 neighborhood co-operative market. Ad- 
 vanced methods in handling the business of 
 the farm are bound to come. What we 
 must realize is the cost of delay. We have 
 already waited too long. We should now 
 work for prompt improvement in marketing 
 facilities. All well managed creameries 
 
properly located are profitable. In most 
 cases the creamery is the first step in co- 
 operation or in neighborhood marketing. 
 Dairying is universal and creameries are 
 easy to operate. Co-operation in marketing 
 firuits, vegetables, grain, cotton and other 
 products is just as sure of success when 
 practiced under correct business rules. A 
 very little money will add to a cream- 
 ery facilitiv;S for making or storing of 
 ice so that it can be used by members. 
 Marketing of poultry and eggs is so impor- 
 tant to so many farmers that facilities for 
 the handling of these products will be added 
 to creameries and to other marketing plants. 
 
 The neighborhood market house will 
 become as important and as popular in 
 American life as the country school house. 
 Popular education has been the strongest 
 force in the development of America. These 
 neighborhood co-operative selling plants 
 will play almost as important a part in our 
 future as the free schools have in the past. 
 They will be of important educational value 
 as they will cause small farmers to make 
 close study and application of business 
 methods. 
 
 These marketing plants will be a great 
 benefit in improving methods of preparing 
 products for markets. Neglect to offer 
 products for sale in the most attractive and 
 salable conditions is the cause of great loss 
 to farmers. To illustrate, the manager of a 
 dining car line told me a few days ago that 
 
he buys about $40,000 worth of apples and 
 other fruit annually. He purchases his 
 apples in the States of Oregon and Wash- 
 ington, and sells them on his dining cars, 
 part of which run through the Ozark 
 Mountains of Arkansas and Missouri. He 
 said that there are just as good apples 
 grown in the Ozarks, but the owners of the 
 orchards do not sort and put them up in 
 as attractive packages for his dining car 
 tables. Therefore, he is paying to the 
 Oregon and Washington farmers high prices 
 for products which the Arkansas and Mis- 
 souri farmers could furnish. 
 
 Every producer of perishable foodstuffs 
 who has studied the question of cold storage 
 in the interest of both the farmer and the 
 public, knows that refrigeration has greatly 
 benefitted the farming communities in better 
 preservation and prices, enabling them to 
 sell their perishable products for better 
 prices, and saving them from decay upon 
 their hands. Cold storage is becoming a 
 matter of national importance and one of the 
 subjects to which the farming interests of 
 the country should give consideration. Cold 
 storage is so essential that all national or 
 state regulations should be carefully con- 
 sidered before the enactment of such regu- 
 lative laws as may be necessary to properly 
 protect the public welfare. 
 
 It will be urged by some city people that 
 the development of thousands of these farm 
 market places to the limit of their usefulness 
 
will result in damage to existing business. 
 This alarm is not warranted. Commerce is 
 always aided and not retarded by labor sav- 
 ing machinery and reductions in cost of dis- 
 tribution. Established commission houses 
 will then handle and deliver for the producers 
 on terms to be agreed upon. It is not pos- 
 sible to foresee the extent to which these 
 community marketing plants will grow and 
 develop. The Rochdale weavers in England, 
 in 1844, organized to buy for themselves 
 small packages of tea and sides of bacon at 
 lower cost and the system has extended to 
 include tea plantations in Ceylon and vast 
 establishments in other lines now doing a 
 combined business of a-half billion a year. 
 In England, Scotland and Ireland, there are 
 1,500 co-operative stores with a membership 
 more than twice as large as the population 
 of Texas — 8 million people receiving the 
 profits. They do a business of more than 
 500 million dollars a year. 
 
 American enterprise may be depended 
 upon to see that progress is made in the 
 right direction. These neighborhood mar- 
 keting establishments will place every 
 farmer with ten or forty acres on the same 
 footing as another with more land and 
 greater harvests. They will give to each of 
 these individuals greater independence and 
 their increased share in the proceeds of their 
 husbandry will enable them, through 
 abundant prosperity, to add to their comfort 
 and contentment. 
 
I have little patience with the work of 
 those busy people at Washington who are 
 trying to find out through commissions 
 and investigations as to what is best for the 
 farmer. If the Government will aid in 
 giving the farmer his proper share of the 
 fruit of his work, so that he will be able to 
 buy for himself the things which will make 
 his farm home the best for his family and 
 himself, then it will attempt something 
 worth while. The farmer is the best judge 
 of his own comforts. He will buy what he 
 wants if he has the money. He needs no 
 advice as to how to spend his money. 
 What he wants is a systematic plan and 
 aid in getting the proper price for his 
 goods. 
 
 The Government should assist in 
 finding a way for better farm marketing. 
 There should be a market bureau of the Ag- 
 ricultural Department devoted to accumu- 
 lating and distributing information on best 
 methods and best markets for selling. The 
 Government should spend some money to 
 demonstrate proper marketing, just as it is 
 doing in the development of good roads 
 work. The Good Roads Department has 
 been brought up to such a high state of 
 efl&ciency by Mr. I,ogan W. Page, Director 
 in Charge,: that it is now esimated that 
 there is being spent one million dollars a 
 day in the improvement of our public high-, 
 ways. This is good work. The Govern- 
 ment can demontrate proper market facilities 
 
just as it now demonstrates the values of 
 different soils for production. The Govern- 
 ment which maintains an expensive and 
 eflScient consular service to aid our export 
 trade can afford to expend a few dollars to 
 better the marketing of eggs so that millions 
 will not be destroj^ed every year because 
 they arrive at the city market in bad or half- 
 bad condition. The Government watches 
 over the purity of manufactured food prod- 
 ucts, and it is just as important to spend 
 money to find ways and means of decreasing 
 expense of distribution of products in order 
 to give the user better and cheaper food, 
 and the grower better and safer returns for his 
 work. This market department should be 
 broad enough to reach all the farmers of the 
 country. The Government should systemati- 
 cally trace the movement of all farm prod- 
 ucts to the place of final use and give the 
 country the information. It should give 
 the country the benefit of a thorough in- 
 vestigation of improved selling and market- 
 ing systems, including all means of dis- 
 tribution and handling. Results will be 
 immediate. The farmer will reduce his 
 selling cost when he learns in detail about 
 wagon haul costs, freight charges, cold stor- 
 age charges, distribution in cities, profits to 
 dealers, losses through deterioration, and all 
 things which enter into marketing expense. 
 As the selling expense decreases so will the 
 returns to the farmer increase and the cost 
 of living decrease. 
 
 8 
 
At present there are between 25 and 30 
 investigations going on in Washington, but 
 not one of them has anything to do with the 
 high cost of selling table necessities. No 
 one can foretell what the result of these 
 investigations may be in regulating com- 
 merce and co-operation. Business may be 
 surrounded by such restrictions that the 
 future growth of our industrial development 
 may be retarded so that it may seriously 
 affect the men who organize to sell agricul- 
 tural products. 
 
 Strong business combinations have grown 
 up in our country, in some cases probably 
 too strong for healthful conditions, but they 
 are the result of the work of business men 
 who have taken advantage of their oppor- 
 tunities for organizing their forces and 
 working for a common purpose toward good 
 prices, cutting out useless expenses in dis- 
 tributing their goods to the consumers. 
 
 I do not believe in combinations of capital 
 to a point of destroying competition. This 
 country has made the greatest record of any 
 country in the world under competitive con- 
 ditions. We can go on in our development 
 under the enforcement of the Sherman Anti- 
 Trust Law as we now understand it, and 
 which if enforced as construed by our high- 
 est court will prevent any destructive work 
 through any combination of interests. 
 
 Let us see how the annual output of your 
 business compares with the output of other 
 industries : 
 
The total business of the steel in- 
 dustry of the United States last year, 
 factory value, amounted to. . . $550,000,000 
 
 of oil 175,000,000 
 
 of lumber 1,200,000,000 
 
 of sugar..... 350,000,000 
 
 of tobacco 175,000,000 
 
 A total of $2,450,000,000 
 
 while the farm value of agriculture alone 
 the same year amounted to nine billion 
 dollars. Nine billion dollars is a big lot of 
 money. It is the one great item of our 
 national resource. In connection with this 
 great wealth producing business, it is cer- 
 tainly conservative, jQgured from any stand- 
 point, to say that on the nine billion dollar 
 farm value crop the producers should 
 receive two billion dollars more money than 
 they are now receiving. These two billion 
 dollars saved would mean to the farmers 
 a two billion dollar saving on a nine 
 billion dollar crop. When we discuss 
 figures so large they become mystifying. 
 The two billion dollars we could save by a 
 system of going more direct from the farm 
 to the consumer nearly equals the factory 
 value of all steel, lumber, oil, sugar and to- 
 bacco sold in the United States last year. It 
 is more than the combined revenues of 
 France, Italy and Germany. It is more than 
 double the yearly cost of running our own 
 Government. It means to the farmers a divi- 
 dend of more than two dollars for every min- 
 ute that has passed since the birth of Christ. 
 
 ID 
 
These strong so-called trust organizations 
 have taught us a lesson of distribution. They 
 have shown us that one executive head can 
 direct the distribution of a commodity where 
 under old methods it required hundreds of 
 men. Twenty years have changed our entire 
 system of distribution through organized 
 business combinations, except farm products 
 which are not handled under organization 
 until after they are sold bj- the producers. 
 
 Farmers are beginning to apply the meth- 
 ods of successful business institutions in the 
 distribution of their products. Some of these 
 young organizations are small and some are 
 large, but they are all struggling to com- 
 mercialize the handling of their products. 
 Within a few years we will have big results 
 from organized farm marketing, and our 
 farm products will be sold and distributed 
 under the same general combination of inter- 
 ests as other large businesses of the country 
 are now handled. 
 
 The farmers are vitally interested in 
 general prosperity. They are interested in 
 development and constructive legislation. 
 It is to the advantage of the 30 million 
 people engaged in supplying soil products 
 to feed the 60 million engaged in other 
 business to have these consumers able to 
 feed themselves and families with three 
 hearty meals a day. The producers want 
 them to take big market baskets to the 
 market places and carry them away full. 
 The producers want the thrifty housewives 
 
 II 
 
to be able to inquire at their market places 
 what fresh vegetables, meats and breads 
 they will have next day so that they can 
 prepare wholesome and bountiful meals for 
 happy, prosperous families. This is the 
 way to build up strong, resolute, red 
 blooded Americans and not through 
 the political clap-trap of the ambitious, 
 selfish politicians who are preaching new 
 theories of government without a thought 
 on constructive legislation. Getting back 
 to my subject : Consider the difference to 
 your business in feeding the balance of the 
 world as to whether the hungry woman 
 goes to market and must economize by 
 buying half what she would like to have 
 and that of the cheapest over-kept vegeta- 
 bles, or whether she buys bountifully of the 
 fresh and most wholesome food which you 
 produce. You are therefore just as much 
 interested in well-filled market baskets as 
 the manufacturer is in having a strong man 
 to fill each place on full time in his shop. 
 If a railroad train is abandoned it means 
 less coal for the railroad to buy, and it also 
 means less sale of coal by the producer. 
 The same principle applies to farming. 
 
 Formerly conservation as we understood 
 the term applied only to the natural conser- 
 vation of coal, timber, water power and 
 other resources, but it now exteuds to na- 
 tions — their strength, power and health — 
 and to industrial and commercial opportun- 
 ities. Conservation of the agricultural 
 
 12 
 
waste between the grower and the kitchen 
 is of greater importance than any other and 
 is the one most neglected. All farmers are 
 interested in the two billion dollars of an- 
 nual waste which can be turned into farm 
 dividends. 
 
 It is not my purpose to discuss Texas 
 political matters, but the railroads of Texas 
 are the servants of the people, and I feel 
 justified in referring to one matter. The 
 railroads are operated under rules and regu- 
 lations fixed by the Railroad Commission of 
 Texas in the interest of the public. 
 
 Every economic waste that can be cut 
 out means a step in the direction of better 
 service and lower cost of transportation. 
 
 Last season the Railroad Commission of 
 Texas reduced the rate on cotton equal to 
 about $750,000 on the three million bale crop. 
 If the railroads had increased their rates to 
 that amount, there would have been a feel- 
 ing that such an advance was unfair to the 
 shippers. Since this reduction in freight 
 rates of 23 cents a bale, the advanced report 
 of railroad operation in the State shows that 
 the Texas railroads paid out on personal 
 injury claims the last fiscal year over two 
 million dollars. 
 
 There is no data to establish exact sta- 
 tistics, but I have made diligent inquiry, 
 and from the best information obtainable 
 I find that the people injured by the rail- 
 roads do not receive more than one-half of 
 the money paid by the railroads for such 
 
 13 
 
accidents. The other half goes to lawyers, 
 court costs and witnesses, instead of to the 
 injured or their families. 
 
 At any rate, it is conservative to say that 
 $750,000 of these two million dollars is an 
 economic waste, and the people of Texas 
 are interested in all matters where money 
 is unnecessarily taken from the railroads 
 which are operated for the public and regu- 
 lated through state agencies created by the 
 people. To put it in another way, if the 
 $750,000 reduction in cotton rates last year 
 could be justified on its merits, and the 
 $750,000 which unnecessarily went to per- 
 sonal injury claim lawyers, etc., could have 
 been retained by the railroads, then a reduc- 
 tion of I ^ million dollars in freight rates 
 could have been made with no more loss to 
 the railroads. 
 
 This large amount of money being paid 
 out on personal injury claims, practically 
 half of which goes to lawyers, is permissible 
 under the laws as they stand today, but I 
 contend that this should not be, and that 
 the matter of compensation to lawyers 
 handling claims against the railroads, the 
 servants of the people, should be regulated 
 by a fixed fee or placed under the control 
 of the Railroad Commissioners to pass upon 
 each case, the same as they do upon each 
 case where compensation or regulation of 
 the railroads is concerned. 
 
 The earnings of the railroads of Texas 
 have been reduced until they are lower than 
 
 14 
 
they should be under a fair adjustment, and 
 lower probably than many people think who 
 do not study them. The Frisco lines in 
 Texas last year earned $12.24 gross for each 
 mile each day during the year, and their net 
 earnings were $1.77 per day for each mile. 
 The average gross earnings of all the roads 
 in Texas were $18.78 per mile per day, and 
 the average net earnings of all the roads in 
 Texas were $4.20 a day for each mile of 
 road operated in the State. 
 
 A mile of railroad cannot be built, bal- 
 lasted and equipped for less than $25,000 
 or $30,000. The average net earnings per 
 mile per day earned by the railroads of 
 Texas is not as much as the owner of a 
 good pair of mules and wagon costing 
 $1,200 would feel justified in taking for the 
 services of his team and driver a day, and 
 these railroads cost $25,000 to $30,000 per 
 mile. 
 
 This shows clearly that the railroads can- 
 not live and give the service that the public 
 requires without a better net return, which 
 must necessarily call for an advance in rates, 
 but I would prefer to see the remedy 
 accomplished as far as it can be through 
 economies without hurting the service rather 
 than through rate advances. 
 
 In conclusion, I want to say that the rail- 
 roads of the country are interested in pro- 
 duction and marketing, and are anxious to 
 co-operate with the farmers in every way 
 they can towards bringing around a better 
 
 15 
 
understanding and better feeling between 
 the two interests, which are natural partners, 
 and which should work together upon all 
 questions of common interest. 
 
 I want again to call your attention to the 
 fact that the biggest trust is yet to come ; 
 that is, the co-operative trust of the pro- 
 ducers who raise, own and sell foodstuffs to 
 the American people, with increasing ex- 
 portation to other countries. 
 
 [1339A] 
 
LIBRARY OF CONGRESS 
 
 M 
 
 .Mini 
 
 002 780 453 6 •