Mr. TOPPING. I should think those people ought to appear themselves and defend their own cause.

Mr. HUTCHINSON. That is all.

Mr. TOPPING. I am not defending their interests.

Mr. Hocн. Mr. Topping, Mr. Moses is president of the Kansas Flour Mills Co., I believe?

Mr. TOPPING. Yes, sir.

Mr. HOCH. As I understand, he has a milling capacity of something like ten or fifteen thousand barrels?

Mr. TOPPING. I do not know just what the capacity is but it is around that number; yes, sir. It is over 10,000.

Mr. Hocн. Do you know to what extent he has hedged in his transactions or does he hedge as a matter of practice?

Mr. TOPPING. I do not think he hedges.

Mr. HOCH. Do any of the members of your association hedge? Mr. TOPPING. Yes, sir; a few of them. In the resolutions that were passed, there were six or seven in opposition to the vote.

Mr. Hocн. In your judgment, would it be possible to preserve a legitimate hedging system and at the same time eliminate the pure speculator?

Mr. TOPPING. Yes, sir.

Mr. Hocн. The man who sells shorts, for instance.

Mr. TOPPING. Yes, sir; I think it could be done.

Mr. Hocн. You think we could eliminate short selling, for instance, and at the same time an effective hedging system would still be possible?

Mr. TOPPING. I think it could be done. I would not know just how to work that out but I believe it could be done.

Mr. Hocн. If you prevent by some means a man from offering for sale this commodity in which he has no color of right whatever, would it not still be possible for men to hedge on the grain market? I am saying that in sympathy with the statement you make.

Mr. TOPPING. I think so.

Mr. Hocн. In other words, we do not need to destroy the hedging system in order to do away with pure speculation on the grain market.

Mr. TOPPING. I do not think you would, at all, Mr. Hoch.

Mr. HоCH. Are you familiar with what happened on the board of trade from the 1st of June until the 15th of July, when operations in futures were reestablished?

Mr. TOPPING. Yes, sir; in a general way.

Mr. HоCH. As I understand it, the board of trade was operating cash sales, the same as usual, from the time the Government guaranty ceased on the last day of May, and that futures were not permitted until the 15th day of July.

Mr. TOPPING. That is correct.

Mr. HOCH. Do you know what the fluctuation of the cash market was in that six weeks' period?

Mr. TOPPING. Very slight. There was a very slight fluctuation. Mr. Hocн. Is it not a fact that cash grain closed on the 15th day of July at the same price it opened on the 1st day of June? Mr. TOPPING. I think so, Mr. Hoch. There was a very slight difference anyway, if any.

Mr. Hocн. Do you know what fluctuations took place immediately after the 15th of July, or beginning on the 15th of July when dealing in futures was reestablished on the Chicago exchange?

Mr. TOPPING. Very heavy fluctuations from then on down to the present time.

Mr. Hocн. And futures were very much lower?

Mr. TOPPING. Very much lower than cash grain; yes, sir.

Mr. HocH. Have you any judgment as to whether the cash price tended to follow the lowering price in futures?

Mr. TOPPING. To a certain extent it was influenced by the option market and has gradually declined since that time.

The CHAIRMAN. Can you give the cause of the fluctuation? What caused that fluctuation?

Mr. TOPPING. Speculation, I should put it, Mr. Chairman.

The CHAIRMAN. How is the premium accounted for? If you recall, there was a large premium in cash wheat last fall. I believe it was up to about 13 cents on cash wheat.

Mr. TOPPING. You mean cash over the option?

The CHAIRMAN. Over the cash quotations.

Mr. TOPPING. Usually the cash wheat, under ordinary circumstances, is higher than the option market.

The CHAIRMAN. Is it not a fact that for a while wheat, we will say, was quoted at $1.60 and selling for $1.73, a premium of 13 cents? Mr. TOPPING. Yes, sir.

The CHAIRMAN. How do you account for that or how is that accounted for?

Mr. TOPPING. I would account for that because nobody wanted to pay the cash price for the option wheat. It was a depressing future. The CHAIRMAN. It was explained by one man that it was due to the shortage of cars and the shortage of wheat coming in at the time. Is there anything to that contention?

Mr. TOPPING. No; I do not think so.

Mr. Hocн. Mr. Topping, it has been contended here that bankers refuse to finance these transactions unless the protection of the hedge is afforded. Do you know, as a matter of fact, during the period of war control, whether bankers financed these transactions on the basis of the market which was very much higher than the Government guaranty? Is that a fact?

Mr. TOPPING. Yes, sir; the reverse is true to a great extent in the Southwest. Our bankers in the Southwest do not care to finance a speculator, and they would rather finance a milling concern that does not hedge its stuff than one that does.

Mr. HOCH. The testimony this morning was, I believe, that the grain market at times was 40 cents above the Government guaranty price.

Mr. TOPPING. It was.

Mr. Hocн. At that time, upon what basis did the banker finance those transactions-simply upon the basis of the Government guaranty or did he take into consideration the market price?

Mr. TOPPING. I think he took into consideration a great deal the financial situation of the miller himself.

Mr. HOCH. What I am getting at is, did he base his transaction and the matter of security solely on the Government guaranty price? Mr. TOPPING. Oh, no.

Mr. HOCH. If the banker is willing to do that where there is a spread of 40 cents, do you know of any reason why a banker should not be willing to finance a transaction where the only difference is a possible fluctuation in the market.

Mr. TOPPING. I do not think there would be any trouble in the world about financing your business whether you were an option trader or not, or a hedger.

Mr. WILSON. In buying your wheat down there in the Southwest from these farmers, upon what do you base the market price that you pay them?

Mr. TOPPING. In the Southwest it is based on the demand, whether it is export or whether it is domestic.

Mr. WILSON. I know that, but do you follow any other market at all in the prices you pay?

Mr. TOPPING. We follow the market as I say, either the domestic or the export makes your market.

Mr. WILSON. I understand; but, what I am getting at is, do you follow the Kansas City market or the Chicago market or the St. Paul market?

Mr. TOPPING. No; we do not follow

Mr. WILSON (interposing). Do you pay any attention to their quotations?

Mr. TOPPING. It is either Kansas City, Chicago, or the export market.

The CHAIRMAN. It is the cash market that governs the price.

Mr. TOPPING. Yes, sir. If the export market is higher than the Kansas City or Chicago market, that makes the market. If it is lower then the Kansas City or Chicago market makes the market. That condition fluctuates.

Mr. WILSON. Do you pay the farmers more than they can get for their grain in Kansas City or Chicago?

Mr. TOPPING. No; not more than they can get in Chicago or Kansas City less the freight, but they do get more for their wheat, proportionately, when exporters are buying, because our rates are built up in such a way that our wheat all goes to the Gulf, and it is higher proportionately through the Gulf than it is to go

East.

Mr. TINCHER. Does this ever happen, that cash wheat will go up to-day, for instance, and future options go down?

Mr. TOPPING. Well, it has done that, but not as a general rule. It very seldom does that. They usually work together pretty closely. Mr. TINCHER. If that does happen one day, there is some pretty rapid trading in futures the next day in Chicago, is there not? Mr. TOPPING. Well, I expect so.

Mr. HUTCHINSON. You said that your mills down there had about 200 elevators buying for the mills, did you not?

Mr. TOPPING. Yes, sir.

Mr. HUTCHINSON. If an Eastern mill bids to that elevator, they will sell to the Eastern mill, will they not?

Mr. TOPPING. They will sell anywhere; yes, sir.

Mr. HUTCHINSON. You are not confined to your mill.

Mr. TOPPING. No, sir.

Mr. HUTCHINSON. In other words, you have to compete with the world.

Mr. TOPPING. Yes, sir.

The CHAIRMAN. We are very grateful to you, sir.

Mr. SILVER. Mr. Chairman, we would like next for you to hear Mr. Eckhardt.

STATEMENT OF MR. WILLIAM G. ECKHARDT, DIRECTOR, ILLINOIS AGRICULTURAL ASSOCIATION, GRAIN MARKETING DEPARTMENT, 130 NORTH WELLS STREET, CHICAGO, ILL.

Mr. ECKHARDT. Mr. Chairman, my name is W. G. Eckhardt; I am the director of the grain marketing department of the Illinois Agricultural Association, and will appear here as their representative. This is a farmers' organization in Illinois with 105,000 paid memberships. It is an organization affiliated with the American Farm Bureau Federation, one of the State federations.

Mr. WILSON. Before you enter on your discussion, may I inquire whether you are related to B. A. Eckhardt or John W. Eckhardt, of Chicago.

Mr. ECKHARDT. I understand the families come from the same part of the Old World.

Mr. WILSON. I just wondered whether you were some near relation. Mr. ECKHARDT. No. I think we have somewhat different views regarding these matters.

Mr. WILSON. I do not know anything about the views of the other men, but I know them very well, and they are very high-class men. Mr. ECKHARDT. Mr. Chairman, if I may be permitted, I think I can save the committee's time by making my statement. I have some notes and will go through them as rapidly as I can, and then I will be glad to try to answer any questions that you wish to ask me, if I can answer them.

The CHAIRMAN. That is agreeable, I am sure.

Mr. ECKHARDT. I wish to state at the very beginning that I have given this matter some considerable attention. I am a member of the farmers' marketing committee of 17 who are making a study of the national marketing of grain. This committee has called before it some of the men whom we believe to be the best authorities on the grain business in America, with a view to getting information that will help and try to build up a farmers marketing organization or help correct the evils in the present marketing system.

I wish to state further that looking upon the exchanges or the boards of trade, I see two functions that it performs; the function of a place where buyer and seller meet, where grain grades are determined, and where deals for legitimate business are consummated as a high type of service. We look at it also, at least I do, in another way, that that part of the system whereby a tug-of-war exists between two tremendous gambling forces and the resultant of that tug-ofwar is the price determining factor, is fundamentally wrong. This price determining factor determines the labor return of one-third of the human race in this country. The farmer has done the work. He has taken the hazards of season, insects and all of that, and after a year is passed we see that price determined by a group of men-I will not try to name them. They have been described here before, but as we see it in our little country towns, watching the blackboard and betting whether that wheat goes up or down, we say that that is fundamentally wrong.

In analyzing this problem, I am going to call attention to some of the results. I do not know whether we can get hold of the causes. I have heard as able an authority as the president of the Chicago Board of Trade, whom I regard as a very high-class gentleman, and he was not able, to my satisfaction, to give me the reasons for certain things happening. I have heard as able a man as Julius H. Barnes, and I was not satisfied after hearing him that he had given us the foundation for these violent fluctuations and the price-determining factors.

It is well to remember that the turnover of the farmer is just once in a year and that with the hazards of season he probably has an average crop once in two years. The turnover of the dealer happens many times throughout the year.

The thing that the farmer wants is a stable market and not a fluctuating market. If I understand it, the thing that the speculator wants is a fluctuating market, a market that goes up and down.

Now, I find that I am not the only one who is not able to get satisfactory evidence of the causes back of this whole move. I find here, in a statement issued by the Federal Trade Commission, on December 20, this statement:

The commission has not had the opportunity to obtain directly the figures which would determine conclusively whether large transactions in futures of a manipulative nature have occurred. It has sought but has not been able to secure the cooperation of the officers and directors of the Chicago Board of Trade deemed necessary for the collection of pertinent information in this matter. The limited evidence available does not establish manipulation of wheat prices by large operators in futures. nor that the recent low average or downward trend of wheat prices, has been due to speculative manipulation. They state further:

The matter of future trading in grain is to be given extended treatment in a forthcoming volume of the report upon the grain trade.

Mr. MCLAUGHLIN of Michigan. When was that written?

Mr. ECKHARDT. December 13, 1920, and states "Release afternoon papers, Monday, December 20, 1920."

Mr. MCLAUGHLIN of Michigan. Is there any time of the year mentioned when that volume will be printed?

Mr. ECKHARDT. The date is not given. It merely states, "The matter of future trading in grain is to be given extended treatment in a forthcoming volume of the report upon the grain trade." It does not give the time.

I present that matter because I feel there is certain information I should have in my work, and that I am sure also would be exceedingly valuable to your committee in legislating on a matter that is as large as this matter is. We should know surely the truth underlying the entire matter.

Now, I said a moment ago that I would try to analyze this problem somewhat from results. If I saw smoke coming out of a building I might conclude that there was a fire within that building. I might have many other evidences to that effect, but that might be a rather harmless fire in that building, doing no great amount of damage. I am going to point to some things which to me seem like smoke.

I know that about two years ago some corn started from South America to be shipped to the United States. The market price of corn was $1.50 a bushel, approximately, at Chicago. Some dealers