Commission and the Bureau of Markets from the books of the line elevator companies at the terminal markets and also (on country prices) from certain of the country elevators which had kept records of such prices. The bulk of the statistical material, however, was obtained from the returns to a schedule which was prepared and sent out by the Commission to some fifteen thousand country elevators.2 A copy of this schedule will be found in Appendix 2.

Approximately 10,000 returns to this schedule were received in all degrees of completeness and incompleteness. Line elevators made the most satisfactory returns, probably owing to the fact that the returns of line concerns were generally made by the head office of the company and that a business thus operated from a central office usually has comparatively good records. The independent and the individual mill-owned elevators made the most unsatisfactory reports, and the replies of the cooperative elevators were but little better than those of these two former types. Generally speaking, the books and records of the individually operated elevators were found by the Commission to be poorly kept. In the case of each of the more important types of elevators, however, the replies were sufficiently complete, accurate, and numerous to furnish an adequate statistical basis for conclusions with respect to most of the questions asked.

No

2 The Commission attempted to send the schedule to all elevators and warehouses. satisfactory lists of such organizations, however, were in existence at the time the schedule was sent out and the Commission's list was compiled from a variety of sources. including the lists of the Department of Agriculture, the Food Administration, the Grain Dealers' Journal of Chicago, the elevator licensing bodies of the various States, and the Grain Bulletin, a Minneapolis concern issuing a daily price card to country elevators.

CHAPTER II.

FUNCTIONS, AGE, AND DISTRIBUTION OF ELEVATORS AND WAREHOUSES.

Section 1. Functions of country elevators and warehouses.

ELEVATORS.-The farmer may sell his grain either in wagonload or carload quantities, the former method being by far the more prevalent. Depending upon local marketing conditions and the number of factors operating in the local market, he may sell his grains to any one or more of the following purchasers: Elevators, warehouses, track buyers, feeders, scoop shovelers, interior brokers, retailers, solicitors of terminal market grain dealers, and solicitors or buyers for mills and other converters. Of all these factors the elevators and warehouses are by far the most important, and owing to this fact they are considered first.

At the present time the primary functions of country elevators are two in number, and in the order of importance they are, first, the merchandising of grain, and, second, the warehousing of grain. Minor functions are, the elevating of grain for farmers and others, the cleaning and conditioning of grain either for the elevator's own account or for others, the handling of side lines, etc. In the early days of the elevator business the primary function of country elevators seems to have been warehousing-that is, the storage of grain in return for a fee. Merchandising, or the buying and selling of grain by the elevator for profit, was then of secondary importance, and even now it continues to be so on the Pacific coast.

In performing its various functions, the elevator becomes a very important factor in the marketing of grain. Most of the grain marketed at country points is bought by the elevators directly from the farmers for the purpose of resale. If, however, the farmer does not care to sell his grain immediately after harvest, he may store it in the elevator, for which service a fee is usually charged. In some cases the farmer may decide that he will ship his grain himself. In such a case the elevator perhaps elevates the grain and loads it into the car. Or, again, if the grain received by an elevator either for its own account or for that of farmers, contains an admixture of foreign matter the elevator, if it is equipped to do so, may clean the grain thus improving its merchantability.

In addition to handling grain, either as a merchandiser or warehouseman, many country elevators, and to a lesser extent warehouses, deal in various other commodities. These commodities, especially coal, feed and flour, seed, and lumber, are sold in large quantities to farmers, and numerous elevators also buy and sell wool, beans, poultry, eggs, potatoes, etc. So far as the elevator or warehouse is

Country mill and maltster elevators included.

See Ch. IV.

Some elevators, however, refuse to accept grain for storage.

engaged in these operations, it acts as an ordinary merchandiser, and such operations have no direct relation to the functions of the elevator in connection with the grain business.

WAREHOUSES.-The primary functions of warehouses, like those of elevators, are merchandising and warehousing, except that in the Pacific coast area their order of importance is reversed, merchandising being secondary to warehousing.

The reason that warehousing ranks first in importance on the Pacific coast is due to the methods of marketing which prevail. There the farmers, as a general rule, store their grain instead of selling it to the warehouse, receiving therefor warehouse receipts which they sell to various purchasers. The country warehouse receives a storage fee for its services. As regards secondary functions, neither loading for farmers nor cleaning is done by warehouses in this section, and side lines are handled to a relatively smaller extent as compared with other parts of the country.

In other sections than the Pacific coast the functions of warehouses conform more closely to those of elevators, and merchandising is of more importance than warehousing.

Section 2. Physical differences of elevators and warehouses.

A country elevator is a building specially designed for elevating, storing, and loading grain in bulk, in which form it is, handled throughout the operation. An endless chain of scoops carries the grain to the top of the building, from which it is spouted into a bin, where it is stored.

A country warehouse, sometimes.called a flat house, is usually nothing but a shed in which grain is collected and stored in the country. Almost any building will serve for this purpose, and in practice warehouses will be found which formerly served as barns, stores, etc. More often, however, the warehouse is constructed specifically for the purpose of handling grain. The construction of such a house usually differs radically from that of an elevator. The warehouse is usually a low building, which occupies considerable ground space as compared with an elevator, whose greatest dimension is usually height. In warehouses which handle grain in sacks, as on the Pacific coast, bins are not necessary, and the construction of the building itself does not in consequence require the strength and rigidity of an elevator. Warehouses handling grain in sacks are not, moreover, equipped with elevating machinery, as a rule. In fact, the sackhandling process may be entirely by man power, although some sack warehouses are equipped with power appliances, such as "pilers" for stacking the sacks of grain and with conveyors for carrying these sacks from one part of the building to another.

It is interesting to note that in some sections of the country, as in Minnesota, a few warehouses, as well as some elevators, receive grain in sacks, but empty the grain into bins and ship it in bulk. This, however, is exceptional. The other warehouses in the Central West usually handle grain in bulk, storing it in bins which have been constructed in the warehouse. A few of the warehouses are of crib construction.

8 This construction is described in Ch. III, sec. 1.

Both elevators and warehouses purchase grain chiefly from the farmers who haul it in by wagon. In some cases both buy grain from farmers in carload lots, as when a farmer has loaded a car to ship and has been later persuaded to sell it to the local elevator or warehouse.

Section 3. Bulk and sack handling.

BULK AND SACK AREAS.-Broadly speaking, elevators and warehouses are adapted to and are the results of two distinctly different methods of handling grain. In practically all of the great graingrowing areas of the Central West, the practice of handling grain in bulk prevails both in the country and at the terminal markets. While a number of warehouses are also found within this area, their total number is relatively insignificant as compared with the total number of elevators which are located there, and it seems probable that where they appear in this area they are, at least in part, relics of the days preceding the development of the elevator.

In the area to the westward of the great grain-growing States of the Central West and extending to the Pacific coast, however, the warehouse is much more important than is the elevator. The great bulk of the grain produced in this area is raised in California, Oregon, and Washington, all three of which are important grainproducing States. In these States the method of sack handling predominates and always has. The production of the other States in this group is relatively negligible.

While there is a large and important milling demand for wheat in these States, especially Washington and Oregon, a very large proportion of the grain grown, especially wheat, is exported.

HISTORICAL REASONS FOR SACK HANDLING.-Over 25 years ago attempts were made, particularly by the Northern Pacific and the Great Northern Railroads and the Oregon-Washington Railroad & Navigation Co. to handle grain in bulk in the Pacific Northwest section. Elevators were constructed and much of the grain was moved from interior points to the coast in bulk, particularly to the Portland terminal. This attempt at bulk handling, however, soon ceased and the elevators were either torn down or converted into flat warehouses. One reason for the failure of this attempt was that shippers refused to receive grain for export unless it was sacked. At that time, and earlier, the larger part of the grain shipped from Seattle, Portland, and Tacoma went to Europe, generally moving in sailing vessels around Cape Horn, a voyage both long and rough. Many of these vessels were tramp boats that had left European ports for the Orient, whence they crossed to the ports on our western coast picking up a cargo of grain for home. These vessels not being equipped for bulk handling soon found that the only safe way to handle the grain was in sacks. Otherwise there was great danger of the cargo shifting and the vessel failing to right itself. In addition, the trip through the Tropics overheated bulk grain, and after several disastrous experiences the insurance companies made their rates so high as to be practically prohibitive, and even in some instances refused to insure bulk grain at all.

A second reason for the failure of bulk handling was found in the fact that the farmers had grown accustomed to the use of sacks prior to railroad development, when shipments from the interior were

handled through river warehouses and river boats, neither of which was equipped for bulk handling."

In more recent years, when a desire was shown on the part of some for a reestablishment of elevators and the system of bulk handling, difficulties were encountered. Many farmers, accustomed to sacking, did not care to change. A lucrative business had grown up in the importation and sale of sacks and twine. In some instances the railroads were opposed to elevators, and the assertion is even made that the rental charged for sacks was made to vary inversely to the strength of the demand for elevators. Moreover, a "spread" had developed between the price of bulk as compared with sacked grain, the latter being from 3 to 4 cents higher. Furthermore, for a long time, terminal facilities for handling bulk grain were entirely inadequate.10

According to the information obtained by the Commission's agents, the revival of the agitation for the bulk plan of handling grain in the Pacific Northwest section has been largely due to the increase there of farmers' cooperative companies, which are generally favorable to this method, and to the abnormally high price of sacks resulting from war conditions.

ARGUMENTS FOR SACK HANDLING.-Broadly speaking, most of the arguments in favor of sack handling in the Pacific Northwest find their basis in the difficulties of changing the system rather than in the economic desirability of the one or the other method. The following are the principal arguments made for sack handling.

(1) Elevators have been tried in the past in the Pacific coast region and largely abandoned at a heavy loss to all interested in them.

(2) Sacked grain brings from 2 to 4 cents per bushel more than bulk grain. This difference in price is supposed to cover the value of the bag.

(3) With reference to the price of sacks, it is pointed out that the prevailing figure during the war was much above normal, and that this war price arose largely from the exceptionally heavy demand for sacks, the higher cost of importing, and the fact that jute was on the embargo list. Moreover, the high price of jute has been counterbalanced by the high price paid farmers for their wheat. It is therefore unfair to base any criticisms of sack shipments on the abnormal conditions arising out of and subsequent to the war.

(4) It is estimated that in the State of Washington alone there is somewhere between a million and a million and a half dollars invested in flat warehouses and their equipment. To scrap this property and substitute other equipment the initial cost of which would be greater would be a tremendous waste.

(5) Higher insurance is required on bulk grain.

(6) It is urged that prior to the war a large part of the export grain moved in sailing vessels, that can not go through the Panama

This preference on the part of the farmers, combined with the insistence upon sacks by the export trade, led the railroads to furnish them in many cases to the farmers. In the early nineties some of the roads actually gave sacks away and many later rented them at from 1 to 2 cents a sack upward. More often, however, the farmer bought his sacks from the warehouseman on credit, agreeing in return for the accommodation to sell all of his crop to the warehouseman or at least a sufficient portion to cover the cost of sacks supplied.

10 Cf. Howard T. Lewis, Elevator Movement in the Pacific Northwest, Jour. of Pol. Ec., Oct., 1916, p. 794. This study has been freely used in connection with this discussion.