I ship grain 1,000 miles that I could better have sold 100 miles from my place. The CHAIRMAN. The feeling in general among grain dealers in my country is that exchanges are of great value. Mr. REYNOLDS. Yes, sir. The CHAIRMAN. And no one has gone so far as to say it would cripple them in their business. I believe hedging is of great value to the smaller farmer and dealer. I do not understand they would cripple the business entirely. Mr. REYNOLDS. I can not get away from that belief, Mr. Haugen. I have tried to conceive it. Mr. DICKINSON of Iowa. I would like to ask a question or two if I may, Mr. Chairman. The CHAIRMAN. Mr. Dickinson, the author of H. R. 14654, one of the bills, will ask some questions. Mr. DICKINSON. If we were to preserve hedging or future sales for 60 days but for actual delivery, don't you think the exchanges would be kept intact to perform the functions you have suggested? Mr. REYNOLDS. First I will say that I would extend the time for at least 90 days, because our periods of crop production are such that 60 days is too short. And we have transportation delays from West to East so that it takes too much time for only 60 days. They did function on cash grain for a while during the war, but it was claimed there that they always had behind them that governmental supervision that enabled them to do it. I do not know. Mr. DICKINSON. Government restriction of wheat ended May 30. Mr. REYNOLDS. Yes. Mr. DICKINSON. And future trading did not begin on the exchanges until July 15. During that time there was only a variation of about 7 cents a bushel in wheat. Mr. REYNOLDS. Yes, sir. Mr. DICKINSON. After future trading began there was a variation of more than 30 cents a bushel in two weeks. Can you explain that situation? Mr. REYNOLDS. Well, I can explain it probably in this way, or that situation is susceptible to the drawing of two conclusions: First of all it shaped the activity introduced into the market by the option. trading-and whether for good or bad let us not discuss. It avoids everything I have said might be dangerous in not being able to deal in any way except in cash grain. Up to that time we dealt only in cash wheat. After that time we introduced elasticity into the markets, and if the markets had gone up you will see what it would have done. There might have been some condition that would have brought it up. To the consumer, if it brings wheat down 30 cents a bushel, it is a good thing; but if it goes up 30 cents a bushel, he says it is bad and the farmer says it is good. I see a danger in dealing only in cash grain. There should be elasticity. I think when they had no option trading perhaps the stuff stayed nearer commercial prices, or, I mean, a commercial basis; and as proof of this it has not gone up to the old basis since. I can not believe that the Board of Trade was wholly responsible for it. I think that knowing everything else had to stick to a normal price it was naturally lower than the war time price. Mr. DICKINSON. Do you believe that a steady or a fluctuating market is best for producer and consumer? Mr. REYNOLDS. A stable market. Mr. DICKINSON. Do you believe in speculation in futures by which they speculate on 40 times the amount of actual stuff delivered is conducive to a steady market or a fluctuating market? Mr. REYNOLDS. I have to say that I do not know. I believe that the only answer any man can give you is that he does not know, because we have not tried it. Mr. DICKINSON. Do you believe that the Armour grain deal had a tendency to a fluctuating market when he bought wheat for Europe? Mr. REYNOLDS. Naturally, the exportation of wheat has a tendency to advance our market more than internal trade. As long as wheat is on our own shores it is here for our consumption; as soon as it leaves our shores and we get money for it, that has a tendency to strengthen what is back. Mr. DICKINSON. Are you acquainted with Mr. Barnes? Mr. REYNOLDS. Oh, yes; I was on his board. Mr. DICKINSON. Mr. Barnes said that the price of export wheat has a tendency to fix the price of wheat for local consumption. Mr. REYNOLDS. I think that has been Mr. Barnes's idea, but I have always claimed that in normal times the export price does not fix our local price. Mr. DICKINSON. You disagree with Mr. Barnes on that theory? Mr. REYNOLDS. I want to qualify that this much: War time conditions may warrant Mr. Barnes saying that. But in time of peace I do not believe the export price fixes the price of domestic grain. You must remember that 82 per cent of our corn never leaves the county in which it is produced, and that 92 per cent never gets out of the State in which it is produced. Mr. DICKINSON. Do you believe that cost of production is taken into consideration in the method by which the price of grain is fixed at the present time? Mr. REYNOLDS. No; because I do not believe the cost of doing business at the present time has any effect at all on anything. I can not conceive it. Mr. DICKINSON. You don't think it makes any difference whether the farmer makes money or loses money? Mr. REYNOLDS. Oh, no;. I do not go that far at all. I do say that all laws of comparative commercial values are suspended, and that you can not apply one single normal law we have learned to business at this time. That is the reason I said earlier in my statement that I believe the important thing now is time, that is the essence of the situation; and, by trying to pass laws which will not likely become effective or get into full operation or be understood before the situation naturally changes, you will not have a chance to properly try them out. Mr. DICKINSON. It is possible under the present system for a man of large means or credit to fluctuate the market up and down by buying futures, isn't it? Mr. REYNOLDS. I think that is accentuated for the moment by the nervous condition of the people. Everybody wants money out of what they have got. They can rely on money, but can not rely on anything else. Mr. DICKINSON. Wouldn't it be a good thing to limit the extent of the purchases of any one firm at any one time? Mr. REYNOLDS. I have always believed that would have merit. Mr. DICKINSON. Could you get this information on bids from anybody for actual delivery if future trading beyond 60 days were eliminated? Mr. REYNOLDS. I would have to answer that in this way, that I do not know. I have no very definite information about it. But we have at the present time a state of affairs that is very unusual. The consumer-and when I speak of the man in central Virginia who buys his feedstuffs, cars of corn, he is a consumer to uss-he is holding off from day to day until the last bushel is out of his granary because he thinks there are going to be lower prices. And he is justified in thinking it, because prices have been sliding for the last six months. I am afraid that state of affairs would exist to the exclusion of open bidding. Mr. DICKINSON. The present market conditions has a tendency to centralize markets. Mr. REYNOLDS. There is an open question as to whether grain needs to go to Chicago or not. There is an open question as to whether it needs to go to Omaha or not, beyond the amount for their own consumption. On the other hand, to what point should it go? It must go to some place, you know, between the producing period and the consuming period, and it is natural for it to get to the centers on account of railroad transportation. Mr. DICKINSON. Wouldn't distributing market centers instead of the present system of centralized markets be better? Mr. REYNOLDS. Aren't our markets at this time distributing markets? Suppose I go into the territory I live in and concede that to be a distributing territory, because there are so many millions of bushels of grain in that territory. There is an element that I can not control. Suppose I build elevators, yet I can not build transportation lines to meet the transportation needs. Transportation lines to carry merchandise to their natural centers are the natural trunk lines to carry grain back. Mr. DICKINSON. Isn't it true that speculation in futures is confined in one or two large centers, Minneapolis and Chicago principally? Mr. REYNOLDS. The transactions are, but if you will pardon me, I think there is more speculation to-day among farmers and small people sending in their orders than all others combined. Mr. DICKINSON. Suppose, instead of having these big centers in which speculation can take place, you had the market at Wichita, that Mr. Tincher spoke of, and the distributing markets out among the consumers. I suppose your Ballard firm are millers and consumers of wheat? Mr. REYNOLDS. Yes, sir. Mr. DICKINSON. Wouldn't that check the wildcat speculation that is now taking place at Chicago and Minneapolis, and would not it be an answer to your contention that you would not have bids that you could offer your patrons there a certain price on the morning they went to sell? Mr. REYNOLDS. I feel that it would be like the recent wave of crime that has gone over the country. I am afraid the thugs would soon congregate. Mr. DICKINSON. You spoke of some pernicious practices in speculation at this time. What did you have in mind?" Mr. REYNOLDS. Mainly that of men with money and without concern for their fellowmen or anybody else and who are willing to throw the weight of their money in there to produce more dollars to themselves. Mr. DICKINSON. Have you anything to say along the line that the present boards of trade have made any efforts to control the men you speak of? Mr. REYNOLDS. Yes; there have been all kinds of regulation from time to time. I am not conversant with them for the moment, but I think that 75 per cent of the members of these boards of trade do not go beyond reasonable limits. But along the line of the question of Mr. McLaughlin of Nebraska, to which I made answer, there is a difference in firms handling option business and handling cash business. There are a good many firms who formerly did nothing but option business, but who have gone into cash business. They do all branches. You can ship them cash grain and they will sell it next week, or they will take your option to buy or sell in the future. There are a few concerns in the country that have no interest in that, except orders they can get from their clients throughout the county. In order to get them they send out literature of very questionable character. And if I wanted to make one suggestion-and I would not like to have may name to it, because it might look silly six months from now-I think a careful censoring of market letters to the country would be a fine thing. A man who can write a fine high-sounding circular and send it out and tell you that to-day 35 boatloads of wheat left New York for Europe and that this is the time to buy and then 10 or 15 days from now he will advise you to sell wheat because 25 boatloads have arrived from Europe-using the same argument that he used last week to put the market up he now twists around to bring it down, is a bad thing. And the unplucked in the country, perhaps we among them, do not see the fallacy of the whole thing. Mr. DICKINSON. Then, in your judgment do not you believe there are enough pernicious practices in the marketing system to warrant this committee to try to do something? Mr. REYNOLDS. I grant you. Mr. DICKINSON. If you were permitted and the exchanges were permitted to deal in cash grains and in grain to arrive, could not you and they under those conditions continue for all the purposes you suggested? Mr. REYNOLDS. I would have to answer that question that I do not know. I do not know to what extent the maintenance comes from this source. I believe that the larger part of the maintenance and the inducement to the men that operate exchanges comes from option dealing. I am led to believe that. Now, then, I do not know. Mr. DICKINSON. I am willing to stop with that. Mr. REYNOLDS. I am led to believe that. But I would like to add what I have said before, I am afraid to try to substitute a cure that might be worse than the disease. Mr. HUTCHINSON. In reference to this literature sent out, you do not mean to say that the grain exchanges send out anything like that, do they? Mr. REYNOLDS. Oh, no. Mr. HUTCHINSON. Could we pass a law to prevent anybody from doing that? Mr. REYNOLDS. I do not believe it will ever be possible to conduct grain exchanges with all the facilities they demand without some central organization to do it. Mr. HUTCHINSON. You do not believe that this committee can pass a law to prevent anybody from sending out that kind of literature? Mr. REYNOLDS. I am glad I am not on this committee, because I can not see a way out for that now. Gentlemen of the committee, I am very much obliged to you. Mr. TINCHER. Mr. C. S. Barrett, president of the National Farmers' Union, was called away from town this morning by reason of sickness in his family, and he is likely to be absent indefinitely. He prepared a statement he would like to have put into the record pertaining to this matter. The CHAIRMAN. Without objection, it will be inserted. STATEMENT SUBMITTED BY MR. C. S. BARRETT, PRESIDENT NATIONAL FARMERS' UNION, WASHINGTON, D. C. The great staple crops of this Nation are controlled by a group of predatory gamblers who are mercilessly robbing farmers and city people alike. I am appearing before this committee to-day to urge Congress to wipe out this great evil. Organized speculation is a polite name for gambling. Gambling is merely one form of stealing; therefore, when we get down to brass tacks, speculation is just plain every-day stealing. Stealing is the acquiring of your neighbors' property without giving any return either in money, property, or service. Isn't that precisely what speculation attempts to do, and succeeds in doing on a scale which makes the professional gamblers and thieves look like pikers? The world has long suffered from the predatory parasites who call themselves speculators. but it remained for the nineteenth century to permit them to organize themselves into powerful "exchanges," so called and properly so, for they most successfully exchange their paper contracts for the hard-earned money of the general public. It does not matter whether it is cotton, or corn, or wheat, or oats, or pork, or coffee, or railroad and industrial stocks, the procedure is the same; the victims get paper contracts from the members of the "exchange" and the said members get the victims' money. The president of one of these gangs, operating in Chicago, plaintively complains that the attacks now being leveled at the "exchanges" are all based on the grievous error that gambling and speculation mean the same thing. These silk-hatted, frock-coated parasites have grown so powerful that they are able to hire the shrewdest and most able members of the Ananias club in the country to persuade the people, and especially legislators, that black is white that speculation is not only honorable but essential to the country's business-indeed that without it we would all go to the bow wows. Their success has been remarkable, not surprisingly so, in view of the number of fools in the world who labor faithfully and endure hardships in order that parasites may live in luxury and ease. Let us consider some facts and see if the obvious deduction can percolate into your brains. When a wheat crop of, say, 750,000,000 bushels, is bought and sold on paper contracts of the Chicago gambling hell 14 times over before a bushel of the crop has moved to market, how in the name of common sense can that help the wheat grower? He has 1 bushel of wheat to sell. The organized gamblers offer to |