of Trade is a producers' exchange and its body of members as a whole are interested in maintaining high prices at all times. This was the principal object for which the Board was organized and has been its aim for many years. But since the introduction of the hand separator and the growth of the "centralizers" the situation has changed considerably. These large producers are interested in maintaining low prices for the reason that the butter fat which they buy from the farmers fluctuates with the price of butter, and is contracted by them to be paid for on the basis of the Elgin butter quotations. In addition to this fact it is charged by the Federal Government, in the investigation that led to the issue of the decree already referred to, that the "centralizers" are also large buyers of butter produced by small creameries throughout the middle west. This is bought in the summer when prices are low and held in cold storage to be sold in the winter. They are therefore interested, it is charged, in maintaining low prices during the summer and high prices during the winter when many of the small creameries are shut down and production generally has fallen off. Whether or not this latter inference is correct, it is plain that the interests of these large producers who buy the butter fat on the basis of the Elgin butter quotations and dispose of it very largely at a cent or a cent and a half above the quotations of some eastern market, are opposed to the interests of the farmers selling the cream as well as to the interests of the coöperative creameries whose total profits go to the farmers and are dependent upon high prices for butter. These large producers have command of large amounts of capital and are therefore in a position to do a great deal of speculative buying in the summer. To the extent that this is done they are of course in conflict with the interests of the small creamery that must sell as a rule as the butter is produced. Thus it is seen that

the interests of the producers on the whole are in conflict with the dealers, and that the interests of certain groups of the producing class are also in conflict.

It is very difficult to determine just how far a quotation committee can fix prices above or below free competitive values. If it were possible to secure sufficient information concerning premiums paid by dealers, this might form a basis by showing how much too low the quotations of a middlemen's market are, or whether they are correct. As previously stated, premiums of a cent or more above the quotations are not alone paid for the reason that the dealer is anxious to get all the business he can, but for the reason that some butter has exceptional quality and will enable him to sell it at a high price and make a profit. Other considerations also enter in, such as risk and credit. Both of these items are expenses that can be paid for in the form of premiums. Paying for quality, risk, and credit, therefore, is the usual business practice in every trade and must not be confused with premiums paid by dealers without any regard to legitimate returns. Premiums of the latter type are paid because of the keen competition among dealers to secure the business of producers. According to the Elgin Dairy Report of September 14, 1903, premiums of from 13 cents to 12 cents were very generally paid at that time. Since that time they seem to have risen as high as three cents above the market price.1 The Elgin Dairy Report makes the statement that a man who pays a premium, even if he is a member of the quotation committee, pays that premium secretly, and is not going to make it public for the benefit of the quotation committee”. As the greater part of the trading is at private sale based on

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'According to a complaint made in the Elgin Dairy Report and copied by the New York Produce Review and American Creamery, Aug. 12, 1914.

quotations the pressure of the dealers is all one way and that is downward. This may be an unconscious effort on their part, or it may be deliberate action. Obviously, however, the quotations can not be depressed very much too low because the butter would not come to the city where abnormally low prices prevailed. This, however, could be avoided by establishing quotation committees in every distributing center and having agreements entered into by all of the committees on the question of prices.

Correct quotations are so extremely important to the trade and producers, because of the time saved to every person concerned in determining the price, that some method should be found by which they may be in true accord with the conditions of supply and demand, and not made to favor only one group of interested persons. Various methods have been tried in Europe. In Hamburg, Germany, the Association of Importers and Exporters was organized about 18881 with a view to quoting the real prices paid the producers. The plan was promised the support of the Schleswig-Holstein Creamery Association providing the dealers would in no case pay a higher price than that quoted by the merchants' association. The plan was not successful, for about 1890 the Creamery Association began selling part of its output “by auctions, and has since then maintained them in ever-increasing degree in spite of the natural opposition from the merchants, whose committee evidently consists of dealers only". In Hamburg, a committee of fourteen members consisting of eight wholesale dealers and six retailers quotes prices. But the producers were also dissatisfied, and "in 1907 the Creamery Association of Mecklenburg-Schwerin started a butter auc

1 All data on European markets are based on an article by J. H. Monrad in the New York Produce Review and American Creamery, March 3, 1915.

tion in Berlin and this greatly helped to steady the quotations as it did in Hamburg". In some places in Germany the municipal authorities have been represented on quotation committees. In Denmark, from 1894 to 1904, the quotation committee consisted of nine butter merchants and two agricultural representatives. In 1904, the producers withdrew because the quotations were too low and the dealers paid premiums. In November of the same year a remedy was sought in including the premiums. The quotations rose suddenly and this caused many complaints from England, but it was only a short time before premiums were again paid. In 1906, an agreement was reached between the producers and dealers by which the committee quoting prices was to consist of four representatives of the farmers and four merchants. In 1912, the farmers demanded that the chairman of the committee should be one of the merchants but should have no vote, thus giving the producers a majority. This caused a rupture and the producers started their quotations. Since then producers' and merchants' quotations have both been made and the two have probably a very healthful effect in arriving at a fair quotation.

Obviously the best way to establish quotations is to sell at an open auction providing that enough butter of all the grades is offered. This was formerly possible under the "call" in the exchanges but since the "contract system" has grown so extensively, the butter offered under the "call" is hardly sufficient to establish a representative price.

The task of quoting butter prices in this country now frequently falls to the lot of expert reporters who make it their business to gather all facts possible that may affect the butter market. The prices of sales under the "call" are taken into account as well as all prices made at private sales that can be secured. The reporter must be shrewd and skillful enough not to be unduly influenced by pessimistic

views of dealers who have entered into contracts with producers to pay for their butter at high premiums. If the market reporters perform their duties properly “they give no consideration whatever to opinions of policy-to any judgment as to what quotations should be in order to accomplish some supposed result in the future. They endeavor simply to dig out the fact of current values as governed by immediate conditions of supply and demand, and they give expression to these facts regardless of any opinion that they or others may have as to the effect upon future conditions. They believe that such an expression of actual trading values is the only logical regulation of normal market conditions, and the only judgment they use at all is in the interpretation of the evidence to determine the actual fact of current value. The quotations printed by them and furnished to other publications are not official in any sense; they are not arbitrary judgments as to what ought to be; they are to the best of their judgment and belief expressions of what is the current actual value as determined by passing conditions of supply and demand. The reporters do not stand at the throttle-they are simply acting as the steam gauge "."

1

COLD STORAGE

Since 1890 cold-storage warehouses have become an important part of the machinery of the butter market. Cold storage is to the butter trade what the grain elevator is to the grain trade. Like wheat, butter in large quantities is stored in the summer during the season of plenty for consumption during the winter when production has decreased. The movement of butter into and out of cold storage is shown by the following diagram: 2

2

1 New York Produce Review and American Creamery, March 3, 1915. From United States Department of Agriculture, Bureau of Statistics, Bulletin 93.