run largely with reference to supplying the grinding requirements of one or more mills. The individual cooperative is a single elevator or warehouse operated or owned and operated by grain producers and engaged in buying and selling grain. It differs from the independent in the fact that the latter is not operated, or owned and operated, by producers. On the other hand, the individual mill, like the mill line, is usually concerned largely with supplying mill grinding requirements and only incidentally with buying and selling grain for profit. In some cases the individual mill elevator does no merchandising whatever. It is, however, a single unit and not like the mill line house one of several operated by a single organization.

Commercial line elevators are relatively most important in Nebraska and the four Northwestern States, and independent elevators in Iowa and Kansas and the States east of the Mississippi. The cooperative type is most important in Iowa, Kansas, Nebraska, Minnesota, Montana, and North and South Dakota. Mill line elevators are relatively most important in Oklahoma, Kansas, and Missouri, and individual mill elevators in Missouri and east of the Mississippi in Indiana, Ohio, Wisconsin, and Michigan.

An outstanding development in the marketing of grain in recent years has been the entry of the farmer into the elevator business, as shown by the growth in the number of individual cooperative elevators organized by farmers and used by them in marketing their grain.

The average country elevator is of wood construction, most frequently the cribbed type, with a capacity of between 25,000 and 26,000 bushels. About one-half of the country elevators are equipped with cleaning machinery, and slightly less than 80 per cent handle other commodities than grain. The five principal side lines so handled, as indicated by the proportion of elevators reporting their handling, are, in order of importance, coal, feed, flour, building material, and seed.

On the average the country elevator buys slightly less than 100,000 bushels of grain annually, of which about 36 per cent is wheat, 31 per cent oats, 24 per cent corn, 7 per cent barley, and 2 per cent rye. The average individual cooperative elevator, however, buys annually about 153,000 bushels, the individual mill elevator 113,000 bushels, and the independent elevator 103,000 bushels. The commercial line and mill line elevators, on the other hand, buy on the average only about 77,000 and 79,000 bushels, respectively.

About 70 per cent of the grain shipped by country elevators goes to terminal markets (those markets receiving annually more than 1,000 cars of country grain) and about 7 per cent to smaller markets (those receiving less than 1,000 cars annually). The local mills absorb 131 per cent of the country elevator shipments and interior brokers 6 per cent; about 2 per cent goes to feeders, and approximately the same proportion to miscellaneous purchasers. Of the grain shipped to specified markets, about 71 per cent is sold on consignment, the balance being sold "to-arrive or on-track" to representatives of these market organizations.

About 40 per cent of the elevators and warehouses generally hedge their grain, another 10 per cent hedge it a limited extent, while

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about 50 per cent report no hedging. The proportion of elevator hedging in the various States varies directly with the proportion of consignment sales reported, and also directly with the extent of commission-house financing of country elevators and the proportions of line elevators reported. Hedging is usually done in the markets to which the grain is generally shipped.

A study of the profits and losses in one section of four line elevator companies on grades, dockages, and weights for three years (1914-15 to 1916-17) revealed the fact that these companies lost on grades but profited on dockages and weights, incurring a loss in profits so far as grades, dockages, and weights are concerned. This does not mean, of course, that the entire business was conducted at a loss, but relates only to the three items in question. The elevator companies selected were picked as fairly representative of that type of house in that section, and while no similar statistical study was practicable for other types of houses, it is reasonably deducible that these others have had a similar experience.

Though country elevators obtain funds from numerous sources, the major portion of the financing of elevators is done by local banks, commission houses, and the head offices of the line elevator companies. Line elevators, of course, procure the great bulk of their funds from their head offices, and the individual elevators are financed chiefly by either the commission houses or the banks. Commission-house financing is of great importance in the four Northwestern States. A considerable amount of such financing is also done in Wisconsin, Illinois, and Missouri. In the other principal grain-producing States it is unimportant. The average maximum amount of borrowing per elevator in the crop year 1913-14 was $12,301 and in the crop year 1916-17, $17,309. The average rate of interest reported in both years was slightly above 7 per cent. Practically all elevators reported that they borrowed money to some extent.

The general indications are that competition in buying grain in the country is keen, especially that of the mill and cooperative elevators. The mill elevators bid for grain largely to supply the grinding requirements of the mill, and frequently do not in consequence calculate upon a merchandising profit as do the other principal types. The frequent opposition of some farmers to the line-elevator companies, their friendly attitude toward the cooperative elevator, and the inducement of stock or patronage dividends, places the latter in an advantageous position.

Competition in country grain buying affects all phases of the business. Not only grain prices, but also grades, dockages, elevation and storage charges and side lines, become subject to competitive influences, including agreements and understandings among the elevators. Country grain buying appears to be often affected by these agreements and understandings, which are not peculiar to any one type of elevator, though the cooperative elevators appear less inclined than the others to enter into such arrangements.

Respectfully,

VICTOR MURDOCK, Chairman.

HUSTON THOMPSON.

WILLIAM B. COLVER.

NELSON B. GASKILL,

JOHN GARLAND POLLARD,

COUNTRY GRAIN MARKETING.

CHAPTER I.

ORIGIN AND SCOPE OF GRAIN REPORT.

Section 1. The report as a whole.

ORIGIN OF INQUIRY.-This inquiry had its origin in connection with the general food investigation made by the Commission, but was later continued as a separate inquiry, the Bureau of Markets of the Department of Agriculture cooperating.

In the division of the work between the Commission and the bureau it was finally arranged that the bureau should study country marketing conditions in the territory tributary to Chicago; that the Commission and the bureau should, in conjunction with each other, examine terminal marketing conditions in Chicago; and that the work as to the other terminal markets and grain-producing areas should be done by the Commission alone.

STUDY OF THE GRAIN TRADE.-In the investigation of grain exchanges and grain marketing the Commission and the Bureau of Markets made a careful and extensive examination of all the processes involved in carrying the grain from the producer to the manufacturing consumer and wholesale and export distributor. No attempt was made to study the marketing process beyond these stages, for obvious reasons. Grain that has been converted by a miller or by a maltster, or a feed manufacturer, is no longer grain as such, but a derivative or mixed product thereof, in fact, a different commodity. To have studied the marketing of grain by the distributors to the retail trade (wholesalers) would have necessitated an examination of the system of wholesale feed and seed distribution, and, similarly, the study of the grain movement beyond the exporter would have involved a study of grain importation into other countries. No one of these matters was regarded as being within the scope of this investigation.

DIVISIONS OF REPORT.-An analysis of the foregoing process of distribution from the producer to the manufacturing consumer and wholesale and export distributor naturally falls into four main divisions: (1) Country markets and country marketing; (2) the terminal markets and the terminal cash grain business; (3) the costs and profits of the present marketing system; and (4) future trading operations and their effects. Each of these main divisions is susceptible of further subdivision, and each of these latter divisions must be further subdivided before a complete picture of the complex machinery of grain marketing can be presented. In this volume and those which follow there will be given a comprehensive survey of this mechanism and the cost of its maintenance.

PERIOD COVERED BY THE INQUIRY.-The period covered by this inquiry is, roughly, 1912 to 1918, inclusive. For various reasons the grain investigation did not get fully under way until the late fall of 1917. The field work was practically closed at the end of 1918, although some field work was done in 1919 and 1920. A considerable amount of data was also obtained by correspondence during both of these years. The work in 1919 and 1920, however, was chiefly in the way of checking the results obtained and bringing material other than schedule matter up to date as nearly as possible.

On the other hand, the schedules and questionnaires sent out by the Commission in most cases covered only the five crop years, 1912-13 to

1916-17.

The reasons for neither obtaining nor attempting to obtain statistical information by schedule of a date later than 1916-17 are to be found in the situation arising out of Government price fixing and control. The abolition of trading in wheat futures, the regulations of the Chicago Board of Trade and of other exchanges and of the Food Administration with reference to future trading in coarse grains, the licensing of dealers, the fixing of wheat prices, Government control of transportation, Food Administration regulations with reference to wheat substitutes, together with purchases of the Grain Corporation and the various milling regulations, so disturbed the normal operation of the grain trade mechanism that any statistics secured during the war period would have been practically valueless for the permanent solution of problems of grain marketing. Such data would have recorded merely war conditions, and any studies based thereon would, in effect, have constituted a discussion of the Government control of the grain trade during the war and its results. Since Government control was expected to be a temporary affair, there was every reason to believe that with the complete abolition of such restrictions as were imposed as a result thereof. the grain trade would revert to practically the system of marketing employed prior to 1917 and that the war-time period would merely constitute an interlude in the normal operation of the grain mechanism of the United States. For these reasons it appeared that the statistical studies and the conclusions based thereon would have practically as much validity for the solution of grain-marketing problems as though the statistics in question bore a later date.

GRAINS COVERED.-The grains selected for study were the five principal small grains-wheat, corn, oats, rye, and barley. These grains are extensively raised in the United States, and they are also those which are most extensively traded in at the various important organized markets or exchanges.

Sec. 2. Scope of country marketing volume.

SUBJECT MATTER.-The present volume deals with country markets and marketing, the first of the four principal divisions of the report enumerated above. It describes the purchase and sale of grain at country points, and also the various conditions and circumstances affecting this trade. Since the country elevator is the predominating factor in country purchasing, the bulk of the material presented herein deals with the processes of handling grain by various types of country elevators.

Charges frequently have been made of monopolistic control of country markets by combinations of country elevators; of price cutting and of price agreements; of undergrading, underweighing, and overdocking; and of various unfair trade practices. The necessity of hedging by country elevators has been the subject of much dispute as well as the margin of gross profit exacted by such elevators. Country elevator operators maintain that they work on an extremely narrow margin, while the producers and their supporters state that the margins are entirely too wide. All these and many other charges, questions, and subjects of dispute have been carefully examined into by the Commission, and for the most part the results are presented in this volume. Hedging is so related, however, to the whole system of future trading that the general question of its desirability has been reserved for the volume dealing with that subject. The question of the profits of country elevators has likewise been reserved for subsequent discussion. To determine the total per bushel handling charges involved in the marketing process from the producer to the manufacturing consumer or wholesale and export distributor, the costs and profits of all middlemen, both country and terminal dealers, have been considered together.

INTERVIEWS.-The information used in preparing this volume on country marketing was obtained primarily from three sources, i. e., interviews, correspondence, and statistical data; the last obtained by questionnaires or taken directly from the books of the various concerns by agents of the Commission and the Bureau of Markets. The interviews were divided into three classes:

(a) Interviews with the operators of cooperative, independent, and mill-owned country elevators. Agents of the Commission visited approximately 175 elevators in the States of Minnesota, North Da kota, South Dakota, and Montana,1 and representatives of the Bu reau of Markets visited about 90 elevators in the States of Illinois and Iowa.

(b) Interviews with various line elevator operators in the terminal markets.

(c) Interviews with parties not operating country elevators but closely affiliated therewith, such as various grain commission firms handling country elevator shipments, etc.

CORRESPONDENCE.-Probably the most illuminating source of information as to country marketing methods was the correspondence of the line elevator companies. The agents of the Commission examined the files of some 15 line elevator companies, making copies of the letters covering a wide variety of subjects, such as competitive methods, grades, dockage, prices, margins, hedging, etc.

STATISTICAL DATA.-Data on country prices, margins, grades, dockages, and weights were taken directly by representatives of the

1As the Commission desired to ascertain conditions in the four northwestern States as accurately as possible and as the expense precluded visiting more than a small number of elevators relatively, it was necessary to secure as representative a group as possible. For this purpose the number of elevators visited in each state was determined accord ing to the number of elevators in that state compared with the total for all four states. This number for each state was then distributed according to the proportion of elevators of each type within the State, mill, cooperative, independent, etc. Finally, in order to check as accurately as possible, competitive conditions, points were selected in each of the four States which had one, two, three, four, and more than four elevators at a

station.