We also do quite a good deal of storing for the farmers, and as our capacity is limited to probably 40,000 bushels, in order to take care of the grain as it comes in, it becomes necessary for us to ship out the farmers' grain before having purchased it; and in order to protect ourselves we naturally sell an option against it, and take our hedge off when the farmer feels disposed to sell it.

In regard to the speculation on the different boards of trade, we feel in our community that the speculator has a tendency to stabilize the market. He is willing to take our stuff when we offer it, and quite often industries are not in the market. We, of course, receive cash bids every morning the same as every other elevator, but quite often there are no bids on our cards from the industries, the bids coming in from the speculator; and I think that is one place where the speculator does us good and does the farmer good.

We are unable to sell our cash stuff and have any assurance of delivery because of transportation difficulties, which probably you all' know about. This season we have been rather fortunate in having what cars we needed most of the time. But ordinarily in making our purchases early it would be dangerous to sell our cash stuff because of the transportation difficulties.

I do not think I have anything else to add to that, except this: That the feeling generally in our community among those who know is that the board of trade is a good thing.

I am a good deal like the gentleman from South Dakota or Minnesota. I think you will find that more of the agitation against the board of trade or different boards of trade come from people who are not acquainted with its workings as a hedging proposition.

Mr. VOIGT. The people at large know that there is a large amount of gambling going on in these exchanges, and they have a suspicion that what that gambling costs comes out of their pockets.

Mr. MUNSON. I do not think that it does.

Mr. VOIGT. I think that a good deal of it does, and necessarily

must.

Mr. MUNSON. I was paying particular attention to your question! to some one else a while ago in regard to the loss sustained by the different transactions. There is not any monetary loss, because the same money just passes from one hand to the other; it is just simply a loss of energy, as I understand.

Mr. VOIGT. A loss of energy, my friend, is a monetary loss. Let me illustrate that to you. Suppose you had a hundred men and paid them $5 a day for digging holes and closing up the holes.. You would be out $500; you would be out the energy of those men, and when they get through they have accomplished nothing. That is a loss to the Nation. As I said before, if you insure a house for a thousand dollars, and that is the value of the house, and the house burns and you get our insurance money, you are nothing out. But if you were to burn down every house in the country on the same theory, it would impoverish the United States that much, would it. not?

Mr. MUNSON. Yes, sir; that is true.

Mr. VOIGT. Now, then, if you spend 25 cents for every bushel of grain in commissions, you have lost that vast sum of money, the energy represented by that vast sum, and the Nation at Large has nothing to show for it. That is the point I tried to make.

Mr. MUNSON. Well, I do not quite agree with you there. I think this: That the time that was devoted probably by these different parties in hedging or in trading could have been utilized for something that would have been produced. But as far as losing the money is concerned, it would be just a changing from one to another. If I would pay you a quarter of a cent for doing something for me, you would have the quarter cent and I would be worth that much less. But still the same amount of money would be in the country.

Mr. VOIGT. We would still have the same amount of money in the country, but the energy of these men in using that amount of money would go up in smoke, so to speak. When the year is up there is nothing to show for it."

Mr. MUNSON. That is true.

Mr. VOIGT. Except that you could claim that this so-called hedging insurance is paid for by that vast amount of money.

Mr. MUNSON. Yes.

Mr. VOIGT. Then the question arises whether the expenditure of that vast amount of energy is necessary to create this so-called insurance?

I take it from what you have said here that this hedging proposition, this vast amount of speculation, acts as a sort of buffer or shock absorber, if you please, between the seller and the ultimate consumer of the grain; that is, instead of a dozen men each standing a loss on a bushel of grain 2 cents-assuming that the market declines—you spread that loss over 100 men. That is the net result?

Mr. MUNSON. Yes. You do understand we use the hedge just simply as insurance, so far as we are individually concerned, in the local grain business-country elevators. But the speculator comes in where the industry leaves off. The speculator is willing to take out stuff and insure us against a possible loss. It is not a perfect insurance, because there is a danger of the spread widening between the option and the cash stuff. But it is the best insurance we have, and the speculator quite often is willing to do that thing that the industry is not willing to do-I mean by the "industry" the different product companies that consume our corn, particularly, and oats. We are not in a wheat country.

There is another advantage, I think, in the board of trade in this, that the quotations are before our farming community all the time. I come from a broom-corn territory. Arcola, Ill., at one time had more broom corn raised in its vicinity than any other place in the world. We have not any quotations as to broom corn. Our farmers are dependent absolutely on what the buyer sees fit to give them. They know nothing about what the world conditions are; they know nothing about what the conditions are anywhere. They are simply at the mercy of the buyer, and it is different with the grain grower, because he has these different quotations to keep him in touch with conditions and with the market.

Mr. VOIGT. You take the man who manufactures lumber; he does not enjoy this privilege of working?

Mr. MUNSON. I guess that is true.

Mr. VOIGT. He runs his own risk; so does the man who mines the coal, and so does the farmer who raises potatoes or stores eggs.

Mr. MUNSON. Are not potatoes quoted on the different boards of trade? I think they are.

Mr. VOIGT. They may be quoted, but I have never heard of men trading in future contracts on potatoes. I can see the difference between a man who has the grain and hedges the grain—that is, he wants to protect himself as to the price of that grain, but the man who merely speculates in grain has not any grain to protect.

Mr. MUNSON. That is true, but I really believe that he is a benefit to the producer in stabilizing the market at a time when the industries are out of the market. The industries are not in the market at all times, and by the speculator being there it gives us a market; that is what it does, at all times. He is willing to take this stuff and the manufacturer or industry is not willing to take it. He is simply willing to take the chance of either making something or losing something.

The CHAIRMAN. The question before the committee seems to be whether we can cut out some of the gambling in grain and still preserve a fluent market. Mr. Munson, the committee is very grateful to you.

Without objection, the committee will stand adjurned to meet at 9 o'clock to-morrow morning.

(Thereupon, at 7 o'clock p. m., the committee adjourned to meet to-morrow, Thursday. January 5, 1921, at 10 o'clock a. m.)

FUTURE TRADING.

COMMITTEE ON AGRICULTURE,

HOUSE OF REPRESENTATIVES,

Washington, D. C., Thursday, January 13, 1921.

The committee met at 9 o'clock a. m., pursuant to adjournment on yesterday, Hon. Gilbert N. Haugen (chairman) presiding.

The CHAIRMAN. The committee will come to order. I believe the first witness this morning is Mr. Johnson.

STATEMENT OF MR. J. R. JOHNSON, ALLEMAN, IOWA.

Mr. JOHNSON. Mr. Chairman and gentlemen of the committee, I am manager of the Farmers' Elevator Co., at Alleman, Iowa. I have been manager of this company since 1908. The first occasion when we had to use the future market was in the fall of 1914. A few of our people did not sell their corn in the summer, and the market broke pretty sharply in the fall, and some of them said they could not keep their crop over and put in their corn for the next year, and I told them if they wanted to bring the corn to our elevator I would keep it and find a future market and sell corn in that way. I did so at that time. It was about 60 cents per bushel then. It had been, in the summer, 60 cents to 65 cents a bushel, and we sold it later on for 75 cents. We hedged in the future market until next summer, when we sold our corn.

Now, we did not have any occasion to use that hedging feature again for some time. Last winter some people had corn on hand that did not want to sell and wanted to move it in the winter. So we stored the corn for them and bought on the future market, and when they sold we sold the future.

This last summer is the worst year we ever bought on the market. Some of our fellows thought that around a dollar and a quarter was a good price for corn, and they wanted to sell. When they sold their corn we sold December corn against it; and we sold some May corn against it. That is the only time we have sold. Otherwise we have always taken in their corn in storage and kept it, but last summer we sold on the future market. This feature is a benefit to us whenever we can not sell this stuff itself.

Mr. TINCHER. If you had not sold a future option, the farmers probably would have carried out the same transaction by selling the corn for future delivery. You do not know that you could not have sold corn for future delivery and got confirmation from a responsible firm?

Mr. JOHNSON. Yes; but there again is where the larger merchant comes in.