Section 14. Side-line business of country elevators.

EXTENT OF BUSINESS.-A considerable proportion of country elevators and warehouses transact a merchandising business in commodities other than grain, and these different commodities thus handled are commonly known and referred to in the trade as side lines and the business itself as side-line business. The extent to which the practice of handling side lines is prevalent among country elevators is indicated by the replies to the Commission's inquiry on this subject (Appendix 2, inquiry 16), which were made by 6,973 elevators in the 14 large grain-producing States of the Central West. Out of this number, 5,520, or nearly 80 per cent, reported the handling of side lines, as against 1,453, or slightly over 20 per cent, which did not engage in such operations. This appears from the following table, which presents the number and percentages of elevators of the various types which handle and which do not handle side lines, together with the average number handled in the 14 States which were separately tabulated by the Commission."

TABLE 59.-Number and percentages of elevators of different types handling side lines and average number handled per elevator in 14 principal grain-producing States.

TYPE VARIATIONS IN SIDE-LINE BUSINESS.-The average number of side lines handled by the different types of elevators tends to vary directly with the proportion of elevators of such types reporting the handling of side lines. This is more clearly shown by the following statement which compares the proportion of elevators of the five principal types handling side lines with the average number of side lines handled.

For States separately tabulated see Ch. II, sec. 5.

8 Disregarding cooperative line and all maltster elevators, the number of which is inconsiderable.

TABLE 60.-Comparison of the proportions of different types of elevators handling sides lines with the average number handled per elevator.

While practically 80 per cent of the elevators answering the Commission's inquiry regarding side lines are engaged in this business, barely 70 per cent of all the lines report operations of this character as compared with over 86 per cent of all individual elevators. All elevators dealing in side lines average about two and a half lines per elevator, but all types of line elevators handle only a little over two side lines per elevator, while all individual types combined handle nearly three. Similarly, all reporting elevators handle on the average about two side lines as compared with about one and a half for the line elevators and two and a half for the individual elevators.

The individual cooperatives lead both in the proportion of elevators handling side lines and in the average number reported. Over 90 per cent of such elevators handle side lines, and the average reported is 3.29 lines for those houses doing a side-line business, or 3.01 lines for all the houses of this type reporting. Commercial line elevators, on the other hand, rank lowest in the proportion handling side lines and in the average number of side lines handled. Slightly less than 70 per cent do any of this business, and the average number of side lines handled is barely two for such houses and less than one and a half for all reporting elevators of this type.

Section 15. Explanation of type variations in side lines.

COOPERATIVES.-The reasons for these variations, both in the proportion of different types of elevators handling side lines and in the number of side lines handled, is to be found in the particular characteristics and business methods of the different types.

The high percentages of cooperatives which engage in the handling of side lines and the high average number of lines handled by such elevators is due in large measure to the cooperative idea itself. There is every reason to believe that in many, if not most, cases the farmer stockholders, or patrons of the cooperative, wish to buy their coal, lumber, or farm machinery through their own organization. They are naturally inclined to feel that if cooperation is a good thing

in the handling of grain it is also a good thing in the purchasing of commodities. Both the stockholders and the management figure that they can save the middleman's profit and that the stockholders will thus get the goods cheaper, either at the time of purchase or ultimately through the distribution of the elevator's profits. These ideas have, moreover, been fostered, so the Commission is informed, by the promotion work of the cooperatives, a good deal of which has been devoted to the proposition that the cooperative elevator will not only handle the farmer's grain but will also supply him advantageously with other things which he requires. The handling of side lines has also, according to the information obtained, been advocated by the cooperative and other journals, and the farmers have been urged to handle side lines as an adjunct to their business and as an additional source of profit. The agents of the Commission were also informed by one of the large line operators that the cooperatives in the Northwest frequently employ two or more men and are, in consequence, often in a better position to handle this business than are those elevators employing a smaller force like the line companies.

Finally, by reason of the cooperative principle, the volume of sideline business transacted by a cooperative ought, theoretically, to be very much greater than the amount which would be handled by elevators of other types, and, other things being equal, this should result in its being done at a lower cost.

COMMERCIAL LINES.-In the case of the commercial-line companies, the situation is decidedly different than it is with the cooperatives. Although the latter, for reasons stated, are probably able to find a good profit in the side-line business, the commercial-line operators say that they do not find side lines particularly profitable. Where they are handled, it is claimed that it is chiefly or largely in order to help pay expenses. At certain line stations the grain business would scarcely justify the salary paid the agent were it not for the side-line business done. It is stated that at such stations side lines tend to keep the agent busy and enable the line company to pay him a living salary, which might otherwise be impossible.

The business of the line company is primarily grain merchandising, however, and this must not be neglected on account of any side lines. As a rule the line station employs but one, or at most two men. As these can attend to only about so many duties efficiently, either the handling of a considerable volume of business in one or two side lines, or the handling of a considerable number of such lines would be likely to necessitate, in many cases, the employment of additional help. The greatest demand for certain side lines, especially coal and lumber, comes during the busiest part of the crop yearfall and winter-when the full time of the manager is needed to attend to the grain business, a situation which always makes for the employment of an additional man.

An objection to the handling of a great variety of sides lines which is advanced by some of the larger line companies is the large amount of detail work which this throws upon the head office. The greater the number of side lines handled, the greater the volume of detail involved and the more difficult it becomes to manage the numerous stations satisfactorily.

INDEPENDENTS.-While a very much higher proportion of independents than of commercial line or mill elevators merchandise side lines, the prevalence of this business among such organizations is considerably less than it is among the cooperatives. While a definite explanation of the position of this type of elevators in the side-line business can not be given, several probable reasons may be advanced. In the first place, while the independent is like the line elevator, a purely merchandising proposition, it is entirely dependent upon local patronage for its existence and, unlike the line, does not secure its business from a number of localities. In consequence, it probably handles side lines with a view to accommodating its patrons to a greater extent than do the line stations. Again, it often has farmer stockholders and farmer connections, and in consequence inclines to a liberal policy in this matter. Custom and the age of the territory also play a part, probably, in this connection.

Moreover, as the independent elevator is in most cases locally controlled and operated, there is a certain tendency to expand its business. As elsewhere pointed out, the independent elevator often constitutes both the business and livelihood of some one or more persons or individuals in its locality and the natural result is probably that such persons in an endeavor to develop its business invest their capital in it instead of turning their profits into other channels of investment.

MILL ELEVATORS.-A somewhat higher proportion of mill elevators, both line and individual, than of commercial lines are engaged in the side-line business. Mill establishments also handle a higher average number of lines than does the commercial line house. Both mill types, however, rank much below either the independents or the cooperatives in the proportion of establishments handling side lines and also in the average number of side lines handled. The nature of the mill-elevator business, which, as repeatedly explained, is primarily to serve as a feeder for the mill, is probably sufficient to account both for the low proportions of these elevators handling side lines and the low average number handled. Since the mill elevator serves primarily as a source of grain supply to the mill, a large number of them either do not do any grain merchandising or are engaged in it only to a small degree, except in flour and feed (sec. 17). In so far, therefore, as this is the case, the number of mill elevators handling side lines is probably limited to merchandising elevators, and from the nature of the business it is not to be expected that the number of lines handled would be as great as in the case of either the cooperatives or independents.

Section 16. State variations in side-line business.

The following table shows the percentage of elevators handling side lines in each of the 14 States for which returns were separately tabulated, together with the average number of side lines handled both by elevators which report such business and by all elevators reporting:

TABLE 61.-Proportion of elevators in specified States handling side lines and average number handled per elevator.

The proportion of elevators of all types handling side lines ranges from about 55 per cent in Montana to about 94 per cent in Michigan. For all elevators reporting, the average number of side lines handled per elevator ranges from 1.37 per cent in Montana to 3.75 per cent in Michigan, and for elevators engaged in this business from 2.01 per cent in North Dakota to 3.99 per cent in Michigan. These variations are presumably due chiefly to the geographical distribution of the different types.

Section 17. Relative importance of different side lines.

RESULTS OF TABULATION.-Appendix Table 12 presents in detail for each type of elevator in the 14 States separately tabulated the proportions of those elevators handling side lines which deal in each of 13 specific lines.

Coal is reported by a far larger proportion of elevators than is any other side line, nearly 72 per cent of the elevators handling side lines reporting this commodity. Feeds are reported by 47.63 per cent of the elevators, flour by 32.43, building material by 18.80, and seed by 14.67. Fencing materials, farm implements, forage, live stock, fertilizer, country produce, merchandise, and beans follow in the order named. Each of these commodities, however, is reported as being handled by less than 7 per cent of the elevators handling side lines, so that the five commodities first mentioned are easily the most important.

TYPE VARIATIONS.-The distribution of the five principal side lines by type of elevator (excluding cooperative lines and all maltster elevators on account of scanty data) is as follows: