The CHAIRMAN. Your articles of incorporation authorized the buying and selling of grain?

Mr. MIDDLETON. Yes, sir.

The CHAIRMAN. And does not specify exactly how that shall be done?

Mr. MIDDLETON. That is true.

The CHAIRMAN. There is no violation of the articles of incorporation unless you are specifically prohibited?

Mr. MIDDLETON. When you incorporate you can incorporate a clause that will prohibit trading in futures, and then if you incorporate that, your manager or your board of directors will be held accountable.

The CHAIRMAN. Did your charter contain such a clause?

Mr. MIDDLETON. It did formerly, but, as I stated, our stockholders voted at an annual meeting to grant the board that privilege, and, of course, it was taken up with the State auditor and we were clear on that so far as our law was concerned.

Mr. LEE. What are you doing now? Are you using the hedge?
Mr. MIDDLETON. We are not.

Mr. HUTCHINSON. As I understand, Mr. Middleton, you are not opposed to the hedging power and to the legitimate buying and selling of grain.

Mr. MIDDLETON. Under present conditions; that is, under the present marketing system.

Mr. VOIGT. When you had that loss of 20 cents a bushel, why could you not have sold that grain for 90 days delivery and delivered it in the meantime and saved yourself that loss.

Mr. MIDDLETON. Well, do you realize that that future delivery proposition is not always available? There are times when you can not find a buyer for the actual cash stuff, as long as the exchange is varying the way it was at that time. At that time, as I stated to you, the spread between cash and future was varying. It was going up and down daily, and we could not get buyers for the cash grain without taking an immediate loss.

Mr. VOIGT. When you sell this grain on a hedge, are you not obliged to deliver the actual grain in settlement of that hedge when settling time comes?

Mr. MIDDLETON. If you can; but if your grain is in the country and your elevator is, say, 500 miles from the exchange you have dealt through, and your railroad company absolutely refuses to furnish you cars, how are you going to deliver the cash grain?

Mr. VOIGT. Suppose you sold on 90 days delivery; could you not get cars in that time?

Mr. MIDDLETON. There are men in my neighborhood who started last April trying to sell their corn and deliver it to our farmers' elevator-members of my home company. Those men were unable during that time to get their corn in. A large number of farmers did get their corn in, but there were a large number who were absolutely unable to get their corn in until November, 1920, after the market had gone below the $1 mark. Their corn was shelled and taken to market then.

Mr. VOIGT. Do you mean this, that they could not get railroad transportation, or what?

Mr. MIDDLETON. Our elevator company could not get transportation for grain to ship out of our territory sufficient to handle the supply; only enough to move a few cars of grain a week. The elevators remained full practically the whole summer.

Mr. VOIGT. Do you mean to say that there would be a period of 90 days, a continuous period, when you could not ship a car of grain? Mr. MIDDLETON. No. We might ship a car, now and then, each week, but we had a volume of grain there of possibly nearly 700,000 or 800,000 bushes to ship out. We would ship out, maybe, two or three cars a week, and then there were periods when we did not ship a car a week. There was one period of 10 days when there was an embargo on and the railroads would not drop a car off to a farmer elevator along the whole system of the railroads that we are located on. Those cars were all taken through to other sections. We were not able to move a car during a period of 10 days. At other times we would get a car now and then, and could load that much of the supply, but that did not amount to anything. Say there would be a farmer in shape to shell his corn, and he would bring in his corn, and it would fill up our space. But there were other farmers all around who wished to unload and they could not do it.

Mr. McKINLEY. Isn't the only way to prevent gambling in grain simply to have a farmer, when he wants to sell, to come in to you, as agent, and for you to tell him, yes, you bring in your corn, and when I can get a car I will ship it on to the broker, and he will sell it to the man who wants to use it, and then when I get the returns back I will give you the money?

Mr. MIDDLETON. Well, there are farmer elevators that handle it that way.

Mr. MCKINLEY. Isn't that really the only way you can prevent gambling in grain?

Mr. MIDDLETON. Well, in the true sense, perhaps that is true; that it takes that element of chance out of it, if you want to put it that way.

Mr. HUTCHINSON. Are you buying corn now?

Mr. MIDDLETON. Our firm is buying corn, yes.

Mr. HUTCHINSON. What do you pay for it now?

Mr. MIDDLETON. The last I had word from our manager it was in the neighborhood of 48 cents a bushel, I think.

Mr. HUTCHINSON. Forty-eight cents a bushel, do you say?
Mr. MIDDLETON. Yes.

Mr. HUTCHINSON. Do you know what the freight rate is from your elevator to Chicago?

Mr. MIDDLETON. I could not tell you right now.

Mr. HUTCHINSON. You are perfectly safe to buy corn at 48 cents A bushel and sell it in Chicago at 77 cents for next year, aren't you?

Mr. MIDDLETON, If this corn would grade at that 77 cents a bushel grade for corn, yes. But you know there is a difference.

Mr. HUTCHINSON. There isn't very much difference in the grade, possibly 2 or 3 cents a bushel now and then. For instance, you are buying corn in Iowa now at 48 cents a bushel. Do you know that the carrying charges and interest and everything else is figured the option?

Mr. MIDDLETON. Yes.

Mr. HUTCHINSON. In other words, there is about 7 or 8 cents a bushel between cash corn to-day and July corn?

Mr. MIDDLETON. What is that?

Mr. HUTCHINSON. So a man is perfectly safe to buy July corn if he expects to receive corn, even if he is gambling?

Mr. MIDDLETON. There is a heavy percentage of moisture at this time of year, and we will be compelled to hold that corn that we are buying for some time.

Mr. HUTCHINSON. Do you have a drier in your elevator?

Mr. MIDDLETON. We have not.

Mr. HUTCHINSON. Don't you think that would pay?

Mr. MIDDLETON. Our laws are such that 70 pounds for ear corn is a standard busel in Iowa. The corn we are buying to-day is mostly ear corn. We have to put that in a crib until we get at least a carload. There is constant evaporation of moisture, if you have a good drying crib, which we have.

Mr. HUTCHINSON. Do you put it in cribs now?

Mr. MIDDLETON. Yes, sir.

Mr. HUTCHINSON. Around your elevator?

Mr. MIDDLETON. We have a crib that is a scientific drying or ventilating system, or that has that system in it, so as to dry the corn as quickly as possible through natural means.

Mr. HUTCHINSON. You take this corn in from every farmer at a certain price?

Mr. MIDDLETON. Yes, sir.

Mr. HUTCHINSON. Your price is fixed at which you buy the corn, and when you sell it you divide up among the farmers from whom you received it the dividend or whatever it is?

Mr. MIDDLETON. Yes; we have a cooperative system of distributing earnings. We give so much to capital and then so much is given to the individual farmer. We take a good safe margin-and I will be glad to explain that to you if you wish me to do so.

Mr. TINCHER. I do not know of any proposed legislation to affect that.

Mr. HUTCHINSON. Well, I wanted to show the situation, that it was perfectly safe to take an option.

The CHAIRMAN. Mr. Hutchinson, if the future price is 77 cents, and it takes about 30 cents a bushel to handle corn in Iowa now, there isn't very much margin there.

Mr. VOIGT. Freight and everything, do you mean?

The CHAIRMAN. Yes; all charges. It is about 70 cents a bushel to pay everything, adding a fair profit for handling.

Mr. MIDDLETON. I can explain our profit proposition so that you can all understand it, if you wish. We pay our stockholders the legal rate of interest on their stock, on the money that they have invested in our company, and it is 8 per cent in Iowa.

Mr. HUTCHISON. Well, then, it is not a coopérative society but a stock company.

Mr. MIDDLETON. We have a cooperative law in Iowa which provides that we may raise our capital by selling stock. We allow our stock the fixed rate of interest, the legal rate in Iowa, 8 per cent. Then whatever is earned above that goes back to the men that furnish the business to the company.

Mr. MCKINLEY. How do you take care of the 20 cents a bushel loss that was referred to by the former witness?

Mr. MIDDLETON. That is charged to profit and loss. We have had that to do a time or two.

Now, Mr. Chairman, if there is anything further that you or the other members of the committee wish to ask I will be glad to do the best I can to answer.

The CHAIRMAN. The committee is grateful to you, Mr. Middleton. Mr. MIDDLETON. I thank you for the opportunity to be heard. (There is printed as follows a telegram giving the information requested of Mr. Middleton:)

L. DICKINSON,

House of Representatives, Washington, D. C.

Have been away.

Hedge of 20,000 bushels June 1st, at $1.751, closed out June 16th at $1.48 and $1.471.

A. L. MIDDLETON.

Mr. SILVER. Now, Mr. Chairman, we would next like to have heard Mr. C. H. Hyde, of the Farmers' Union of Oklahoma.

The CHAIRMAN. The committee will be glad to hear Mr. Hyde.

STATEMENT OF MR. C. H. HYDE, OF THE FARMERS' UNION OF OKLAHOMA, ALVA, OKLA.

The CHAIRMAN. Mr. Hyde, kindly give your name, state whom you represent, and your residence.

Mr. HYDE. I am a member of the Oklahoma Farmers' Union and the National Wheat Growers' Association.

Mr. Chairman and gentlemen of the committee, the farmers in the southwest are opposed to future trading as a whole. A few grain dealers deal in that way-that is, not dealing in futures but in socalled hedging, but they are very few. A very small percentage, especially of cooperative elevators, or farmer elevators in the Southwest, follow the plan of hedging. We have had at the town that I live in-and I have been connected with the management of the concern for 10 years—a farmers' elevator for upwards of 22 years, and we have never hedged, as they call it, on a bushel of grain that we bought.

Farmers believe that speculative sales do not work for the benefit of producers. They believe that there has been a movement, by concerted action on the part of those that have dealings on the board of trade, to force the market down early after the harvest season, on account of the credit conditions the most of the farmers, growing cereals as well as cotton, having to sell their crops immediately. The credit conditions are such that they must sell immediately. They believe that at times a concerted action is made by speculators who actually want the grain, but by selling a great quantity of grain even the deal may be made among themselves, and yet it has a tendency to force the price down. The farmers have to sell because they do not have the credit to carry their crop over. Speculators get the crop and the price goes up after it has left the hands of the producer. On the other hand, the consumer is not benefited by the

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temporary reduction in price, and the speculator has made his money in the increased price that the grain sells for after it has left the producer's hands; and the same is true as to cotton.

We have in Oklahoma cooperative elevators as well as other elevators. The most of our towns have a farmers' elevator. As Mr. Middleton said, our dividend is principally a patronage dividend. It makes no difference to a cooperative elevator whether grain is bought on a 20-cent margin or a 50-cent margin because all the profit will go back to the men who furnish the grain regardless of what they received for it at the time they delivered it. The additional profit, representing the difference between the cost or amount paid to them at the time the grain was taken and the amount that they receive is really just a part of the purchase price, though they do not receive that latter amount until after the close of the year's business. Hedging may be necessary-not future trading but hedging may be necessary as an insurance under the present system. But it is hoped by our farmers that the marketing system may be so revised that it will be unnecessary to carry this insurance. The rate seems high, and it is believed by our farmers that we ought not to have a marketing system by which it is necessary to carry the insurance.

In speaking for the Oklahoma farmers, I want to say that we have something like 18,000 members of Farmers' Union, and the National Wheat Growers' Association had, at their last meeting, over 100,000 members; and at both the State and national meetings of the Farmers' Union and of the Wheat Growers' Association, they went on record as opposed to future speculative trading. That is the feeling, I think, through the Southwest generally among the farmers.

Mr. TINCHER. Do you know how much wheat Mr. Armour is reputed to have sold last summer at the time they broke the wheat market?

Mr. HYDE. No; I do not. I do not know the amount of trading that is done on any of the exchanges. I am a member of a committee before which the president of the Chicago Board of Trade appeared, and he spoke to us for a couple of hours. We asked him the direct question: How many bushels are actually delivered for sale at the Chicago Board of Trade? His reply was that he could not answer. He expressed a willingness to help us all that he could and to give us all the information he could. I asked him the question direct if he could tell us, for instance, or if he could get for our information, the number of bushels of wheat that were sold futures and cash on the Chicago Board of Trade the preceding day. He said "I could not do that." I asked him if they did not have a record thereof. He said, "No; it is a matter between the individuals, and there is no record made of those dealings." I asked the question a second time, "Do you mean to say that you do not know the actua number of bushels of wheat futures and cash that are sold on the Board of Trade in Chicago?" And he replied, "We do not." Mr. HUTCHINSON. When was this?

Mr. HYDE. This was either at a meeting we had on the 5th or 6th of November or else it was at a meeting we had on the 13th of De cember, last past.