GRAIN MARKETING.

By ROBERT MCDOUGAL, of Illinois.

Recently published Government figures disclose that the present value of farm properties in the United States approximates $78,000,000,000. In 1901 the then statistician of the Department of Agriculture published in a leading American periodical a statement that the then value of farms of our country had attained the prodigious sum of $16,000,000,000. The increase for the 20 years is fabulous and incredible on any other authority than the Government itself.

We are met here in the time of a price recession such as our country has seen but a few times in 100 years. We are in the midst of an economic depression, the most serious the world has seen, following a war the greatest the world has known. And we are here to consider not what temporary makeshifts, but what fundamental changes, if any, are needed in our institutions and policies to bring about permanently better conditions. Old methods and policies will be challenged. New methods and policies will be proposed. Some proposals will have merit. Some will doubtless be fraught with danger. Let us be wise enough to accept all that is sound in the new proposals and at the same time hold fast that which is good in the old institutions.

I realize, as you do, that the grain trade has been considered in all times and in all countries a matter of grave public concern. The Chicago Board of Trade is an old institution which I am proud to represent before this conference. In our long experience in grain marketing we have learned that you can not separate the marketing problem from the production problem. Hence we are interested in both. We know as an absolute certainty that if the growers of the grain prosper we can prosper with them; but if the growers of the grain suffer, we suffer with them. Hence we are interested in a better and more prosperous production system.

The Government figures tell us that the average farmer raises but 27 bushels of corn to the acre, which does not mean prosperity for the average farmer. Neither is it efficient production from the standpoint from the country at large. The average wheat farmer is producing only 14 bushels per acre, which does not indicate either prosperity or efficiency. It is the man who is above these averagesand these are low averages-who is prospering as a producer.

We agree with a statement of the Hon. H. C. Taylor, now Chief of the United States Bureau of Markets, who has recently expressed his belief that "90 per cent of what the farmer can now do to improve his marketing situation consists in adjusting his production to the demands of the market." Economic laws, particularly the law of supply and demand, like other natural laws, can not be controlled by statute.

In the very short space of time at my disposal I can touch but briefly on the part the board of trade has played in solving our production and marketing problems. Omitting many things of fundamental importance, therefore, and putting before this conference those things which are of more immediate concern to you, I will limit my discussion of the attitude of the board of trade toward the four matters of (1) production, (2) the cooperative elevator, (3) the farm-bureau movement, (4) the marketing of the grain.

1. Production and a permanent agriculture.-We favor a scientific agriculture, based on a 50-year program, rather than on any hand-to-mouth adjustment to meet temporary troubles. We are interested in a permanent agriculture in the best sense of the term. Such a permanent agriculture is based on soil maintenance and on crop production. And quantity and quality crop production is based primarily on crop rotation and seed selection. And in this field of production the board of trade, following a policy of enlightened self-interest, has done a notable work. Our Federal Department of Agriculture and our 48 State colleges of agriculture, now the best in the world, have laid and are laying solid foundations for an enduring agriculture, for better production, by spreading the message of better live stock and better varieties of grain. We have cooperated in this good work and helped put across the message. It is only necessary to mention the many thousands of dollars we have put into the world's greatest agricultural exhibit, namely, the International Live Stock Show and the Grain and Hay Show. The cumulative effects of these exhibits in promoting better quality in live stock, hay, grain, and seeds is beyond calculation. We claim that our cooperation with agriculture in production is of real and substantial help both to the farmers and to ourselves. In short, it helps us prosper together, and both of us are benefited thereby.

2. Attitude of the board of trade toward the cooperative elevator movement. The board of trade has played a very important part in promoting the rapid spread of cooperative elevators throughout the grain belt by maintaining an open market in which farmers' elevator companies might compete on equal terms with individual dealers and line elevator companies. It was the timely action of certain members of the Chicago Board of Trade that prevented the new and struggling farmers' elevators, some 20 years ago, from being entirely snuffed out by a combination of so-called "regular dealers." Leaders of the farmers' elevator movement in Iowa, Illinois, Nebraska, and elsewhere are aware of these facts, even if the general public is not. Now 56 per cent of all grain received at Chicago comes from farmers' elevators. The largest cooperative elevator company in North America has a membership on the Chicago Board of Trade and does a heavy hedging business in this market. (I refer to the United Grain Growers of Canada, whose export company holds a membership in the name of President T. A. Crerar.)

The attitude of the board of trade is that those country elevators which are most efficient, whether farmers' elevators or independent elevators, should get the business, and will in the end get the business. Any company of sound character and good financial standing can secure membership privileges in the board of trade if it will agree to obey the rules.

3. Attitude of the board of trade toward the Farm Bureau movement. The board of trade looks on the Farm Bureau movement as the greatest forward step taken by American agriculture in the last 40 years. The board of trade helped start this movement and feels considerable pride in its rapid growth to power. The first Farm Bureau in the United States, Broome County, N. Y., recently celebrated its tenth birthday, and the speaker of the day pointed out how the financial cooperation of the Chicago Board of Trade with the

agricultural and other local interests initiated this movement successfully and put it on its feet. In this way the crop-improvement committee of the board of trade was a sort of grandfather to the Farm Bureau movement. A cash grant of $1,000 was made to each of the first 100 farm bureaus formed, beginning with the one in New York State and spreading to Iowa and other Middle Western States. The board of trade took no part in controlling the Farm Bureau, shaping its policies, or keeping any strings tied to it of any kind. I point with pleasure to this Farm Bureau movement, not so much because of our financial investment in it but because of the vision which was back of our activities. We know that we have among our membership agricultural statesmen of the highest ability who may be counted on to see those things and to do those things which will make for a better and more profitable agriculture. Our hope is now that the Farm Bureau movement, local, State, and national, may have leadership equal to their great responsibilities and worthy of the great trust reposed in them.

4. Service of the board of trade in grain marketing.-For more than 60 years, through panic, through wars, through good times and through bad, the board of trade has maintained a constant market, open every business day of the year. In the face of competition from the near-by terminal markets and the rapidly growing grain-using industries at interior points, Chicago is still receiving some 400,000,000 bushels of grain a year. This makes this market easily the largest grain market in the world.

We claim that grain is now handled through the Chicago Board of Trade and the organized grain exchanges at a lower "middleman's toll" than is handled any other agricultural product. This is due to the use of future trading. And future trading makes hedging possible. And hedging is the means whereby handlers of grain insure themselves against price changes and hence can and do work on the lowest margins of any middleman. The commission for handling cash grain is 1 per cent. The cost of buying and selling for future delivery is one-fourth of a cent a bushel.

The board of trade makes use of the force called speculation by harnessing it, putting it to work under definite and known rules. It is therefore the speculator, the willing risk taker, who makes hedging possible by creating a wide continuous market. The effect of this hedging process and this wide speculative market is to stabilize prices. Witness, for instance, the recent formation in Europe of markets for future trading in foreign exchange in order to stabilize the prices of foreign exchange. Witness the drop in prices in America of hides, wool, and tobacco, none of which had the support or stabilization of future trading and all of which fell in price much faster and much further than did wheat or corn or oats.

Organized speculation on the grain exchanges means that rules have been made for avoiding the abuse of this vast power. The period of our grain-trade history before we had organized speculation, notably from 1790 to 1850, was one of frequent and erratic price fluctuations, sometimes as much as 25 cents in a day; it was a period of rumors of all sorts with no machinery to prevent, control, or correct rumors; it was a period of frequent corners by powerful specu

A com

lators who found little difficulty in manipulating the price. parison of the 60 years just preceding the beginning of the organized exchanges with the last 60 years, and especially the last 20 years, of board of trade history shows how great progress has been made in actually preventing a few powerful interests from dominating the market, in curtailing rumors, and preventing price manipulation. Any unbiased witness, familiar with all the facts, must admit that the board of trade has very creditably improved conditions and at least partially solved some very difficult problems. It is now working with the newly created joint conference committee on grain-exchange practices to eliminate all abuses which are humanly possible to eliminate. This committee, representing agriculture and the grain trade, is composed as follows: Chairman, Clifford Thorne, of Chicago; secretary, L. F. Gates, ex-president Chicago Board of Trade; G. W. Lonsdale, Kansas City; F. B. Wells, Minneapolis; J. M. Mehl, acting for C. H. Gustafson, president of the United States Grain Growers (Inc.), Chicago; J. W. Shorthill, secretary Farmers' National Grain Dealers Association, Omaha.

As we have worked with farmers in the past in solving production problems, so now we hope to cooperate with this farmers' committee in solving marketing problems. Very frankly, gentlemen, you do not realize the difficulties encountered, the honest efforts made, or the achievements reached by the board of trade in solving past marketing difficulties.

Those who are acquainted with board of trade history intimately for the past 30 years have only praise to offer for the long years of effort made by the board, and finally successfully made, to have the transportation of grain free from rebates and special privileges and the storage of grain in public terminal warehouses open and public, in fact as well as in name. The present system of weighing and storing grain in Chicago under board of trade rules is the result of many years of steady growth from a very unsatisfactory system to a system which is now considered fair and satisfactory to both buyers

and sellers.

Since the consumer's needs and ability to buy must determine the rewards of effort in agriculture, any increase of costs in intermediate handling must affect the producer unfavorably, and, conversely, any saving in such costs will reflect to the benefit of the producer. The board of trade, with consideration for these facts, has from the beginning favored and has contributed liberally to the campaign in behalf of a deep waterway from the Lakes to the seaboard via the St. Lawrence. The transportation saving to the American farmer because of such an outlet for his export surplus of grain will be a material factor in permitting him to compete with producers in other surplus countries during the period upon which we are entering.

In conclusion, the board of trade itself is merely the product of commercial evolution-from the early days of inefficiency and low standards of business ethics-to the modern institution of high business efficiency and high code of business ethics. It is ready and anxious to keep abreast of every move which will increase its service to its patrons and to the country as a whole.

92640-H. Doc. 195, 67-2——7

COOPERATIVE MARKETING.

By J. M. ANDERSON, of Minnesota.

I have prepared a written speech. Practically all that I have typed has been said, not only once but twice and some of it three or four times, so I shall not attempt to follow my written speech. I once heard a story about how different nationalities, people of different nationalities, left a train. An American, for instance, when he reaches his point of destination, gets up, takes his grips and off he goes. An Englishman, when his train gets to its destination, picks up whatever he has and looks around to see whether or not he has left anything, while a Scotchman picks up all of his belongings and then he looks around to see whether or not anybody else has left something. I want, in my 10 minutes, to try to pick up some of the things that have not been said in so far as I can and to give expression thereto.

I have heard these rumors, as have been referred to by our friend from Louisiana, that this was a picked crowd, and then it would be steam-rollered, and that we would not get what we are after, but I know one thing that I am going to get at least and that many of you will get under our five-minute rule. I am going to have the privilege of saying whatever I choose to say, and just what resolutions this meeting will pass depends upon how we vote. And, as I understand it, Mr. Chairman, we are privileged to vote just as we see fit. And there is a little instrument here that records whatever is said, so that they will at least have a record of the speeches whether they are printed or not, and I hope they will review those records and listen to them if their patience can endure.

Now, I represent an institution that markets grain and live stock. Our business runs into $30,000,000 to $50,000,000 a year, depending on the prices of what we receive for the products that we handle. Our main difficulties have been finances. We operate on the terminal markets of Minneapolis and Duluth. We have had some difficulties with the grain exchanges there, it is true, which I do not care to review at this time. We have not been members largely because of the rule of those exchanges which prohibits the rebating of net earnings. Now, it is our belief that cooperative institutions should be permitted to enter these terminal markets, be given a membership on the grain exchanges and rebate their earnings as they see fit. We have had both State and National legislation on this, and it remains for us now to try out that legislation. In regard to finances, we have received some Government assistance. We have received assistance from the War Finance Corporation, and I want to indorse the sentiment expressed by the gentleman from Oklahoma as regards to the operation of the War Finance Corporation. It has done a lot of good, not only in the assistance that it has given toward marketing of farm products, but also in the assistance it has given to the little banks out over the country in taking in for discount and rediscount the papers of the farmers in those localities. I believe in the collective marketing of grain. I believe that grain should be stored in large quantities; it is a product that lends itself to that method of marketing, stored in large quantities and processed, made ready for manufacture otherwise, and sold absolutely to the