To Members: ILLINOIS GRAIN DEALERS 35 ASSOCIATION, Enclosed you will find report of the Advisory Committee of the National Association, on terminal conditions at Memphis, Tennessee. Please read it carefully. It should be of interest to every shipper of grain whether he ships to Memphis or not. You will notice that in selling to Memphis firms, you must depend entirely upon the facilities and responsibility of the firm to whom you sell. The letter from Secretary Greaves of the Merchants Exchange shows the benefits to be derived from Association work, and every dealer should give it their moral and financial support. For your information I will state that a few receivers of grain are said to be soliciting business from irregular dealers, scoopers, and Co-operative companies. We do not question their right to do this, but as such companies and combines, are generally understood to be organized to eliminate the regular dealer, (or so-called middle man), persons who accept their business are supposed to be in sympathy with their views. If this is correct they cannot be in sympathy with you, or your business. You must be the judge of this yourself. I give you below the names of parties supposed to be receiving such business: The foregoing policy undoubtedly rendered it difficult for the cooperatives to find a market for their grain and resulted in serious injury to the business of certain terminal market concerns who insisted on dealing with the cooperatives. This latter point is well illustrated by the following sworn statement of James R. Dalton: ESCHENBERG & DALTON, COMMISSION MERCHANTS, Chicago, Nov. 3, 1906. BY JAMES R. DALTON OF ESCHENBERG & DALTON, COMMISSION MERCHANTS, 803 ROYAL INS. BLDG., CHICAGO, ILLS. My first experience in the grain business was Manager of a Farmers' Elevator Co. in South Dakota nearly twenty years ago. At that time I had frequent calls from traveling men who represented commission firms in Chicago, Milwaukee, and Minneapolis. Any firm in any terminal market would have been pleased to get the account. Later I represented Rosenbaum Bros. of Chicago as a solicitor for four years. I traveled in Iowa, Minnesota, South Dakota, and made several trips into Wisconsin and Illinois. I called on all sorts of grain dealers indiscriminately, Line Houses, Independent Dealers, and Farmer Elevator Companies. I resigned my position with Rosenbaum Bros. and shortly afterwards made a contract with Gerstenberg and Kroeschell also of Chicago. I remained with this firm three years or until the firm of Eschenberg & Dalton started doing business, July 1, 1897. While with Gerstenberg and Kroeschell I covered about the same territory I had covered for Rosenbaum Bros. and was getting considerable business from the Farmer Elevator Companies. For my own firm (Eschenberg & Dalton) I traveled five years steadily and always called on the Managers of the Farmer Elevator Companies wherever found in my territory. We always enjoyed a nice business from this class of customers as well as from Independent Dealers and Line Firms. I am quite positive that I received business every year for In the matter of the relations of common carriers to the grain trade, I. C. C. Doc. Doc. 875, Vol. II. fourteen years from the Farmers' Organization at Rockwell, Iowa. This latter concern is considered the parent company in Iowa and is the one which most of the new Companies have patterned after. The documentary evidence which we have given the Commission will show that in August, 1904, the Iowa Grain Dealers' Association through their Secretary, George A. Wells, Des Moines, Ia. began a bull dozing, boycotting, and black listing fight upon us for the reason that we refused to stop handling shipments of grain and seed from the Farmer Elevator Companies which he named. As a result nearly all the so-called regular shippers we had in Iowa stopped sending us business at once. Well's influence even reached outside of Iowa into Minnesota and South Dakota, and he certainly can flatter himself in the fact that he accomplished his purpose. Prior to the Fall of 1904 my firm had a fine business coming from Iowa, I venture to say as good a strictly commission business as any firm on the Chicago Board of Trade. At that time there were very few Farmer Elevators in Northern Iowa (The section of the State which we covered) so consequently the great, great bulk of our business came from Independent Dealers. My firm was not then known in Illinois, only at a few points, and I will state positively that if it had not been for the quick organizing of Farmer Elevator Companies in Iowa the firm of Eschenberg and Dalton would not have made expenses and would probably been driven out of the trade. I do hereby certify that the foregoing statement is correct and true in every respect. (Signed) JAMES R. DALTON. [In ink.] (Signed) WM. EDGAR BAKER, Notary Public. The direct results of this boycotting of commission houses handling cooperative or farmers' elevator grain were not entirely satisfactory, however, since the policy caused one or two such commission concerns to do everything possible to foster the farmers' elevator movement. A good illustration of this is found in the case of the foregoing concern, Eschenberg & Dalton, now Brennan & Carden.36 When the regular" shippers boycotted this organization the firm met the emergency by sending one of their solicitors, Mr. E. G. Drum, into the field to organize farmers' elevators. "Drum was said to be," quoting from the interview with Mr. Brennan, "a whirlwind, a flame." He organized on the average 8 elevator companies in every 10 towns visited. In this manner the trade of the farmers' houses was turned to this firm, and it has been well maintained ever since. While the efforts of the regular country grain dealers against the cooperatives were undoubtedly a temporary handicap to the latter, the foregoing policy of interference was from every angle a shortsighted and mistaken one. In fact there is every reason to believe that it very greatly stimulated the development of the cooperatives, for in the action taken by the regular elevators to suppress the movement the farmers undoubtedly saw the confirmation of all, and in fact much more than all, that they had believed as to the prices they were paid for grain by the existing elevator concerns, and as to their methods and practices in general. In 1902 the first State farmers' grain dealers' association was organized in Illinois and was followed by the Iowa Association in 1904,37 and there are now several of these State associations. Since 1905 the cooperative or farmers' elevator movement has steadily advanced until, as indicated in a preceding chapter (Ch. II), At one time this concern and Lowell Hoit & Co. were the only Chicago receivers who would handle cooperative grain. C. G. Messerole, Testimony, op. cit., Sen. Doc. 278, p. 646. "Erdman, op. cit., Bulletin 331, p. 140. there is a considerable number of these elevators in nearly every important grain-producing State. Furthermore, as indicated by the figures of construction, this type is increasing relatively more rapidly than is any other (Ch. II, sec. 11). Section 13. Patronage dividend cooperatives. PROPORTION OF COOPERATIVES PAYING PATRONAGE DIVIDENDS.Although a serious attempt was made to do so, it has not been possible to ascertain anything definite with reference to the genesis of the truly cooperative or patronage dividend elevator, i. e., the elevator distributing its profits either in whole or in part upon the basis of the patronage afforded to it by its customers. Possibly the Rockwell elevator was of this type. Information obtained chiefly from the Northwest territory, where this type of cooperative, or farmers' house, is relatively important, indicates that the patronage dividend movement was a later development of the general farmers' elevator movement. Of some 1,800 cooperative elevators and warehouses reporting, 1,208 answered the inquiry as to the payment of patronage dividends (Appendix 2, inquiry 9). These 1,208 replies indicate that nearly 70 per cent of the elevators reporting themselves as cooperatives pay patronage dividends on some one or another basis. The number and percentage of houses paying patronage dividends in the various States and grand divisions appear in Table 23. TABLE 23.-Numbers and percentages of cooperative elevators and warehouses paying and not paying patronage dividends in specified States and grand divisions. Although the number of elevators reporting from certain of the States on patronage dividends is extremely small-i. e., in Wisconsin, Indiana, Missouri, Ohio, and Oklahoma particularly-an examina tion of Appendix Table 2 shows that these States in general also reported a very small number of cooperatives. For this reason, therefore, the small number reporting on patronage dividends in these States is not probably as inaccurate an index of the situation in such States as might at first appear to be the case. At the same time the smallness of the sample should be held in mind in considering the following discussion. VARIATIONS IN GEOGRAPHICAL DISTRIBUTION OF PATRONAGE DIVIDEND COOPERATIVES.—A careful examination of Table 23 will show that the States having the highest proportion of patronage dividend cooperatives tend to be located, with the exception of Ohio, west of the Mississippi River, and that the lowest percentages of such elevators tend to be reported in the States east of the Mississippi River. In other words, the patronage dividend cooperatives are chiefly located in the western and more recent grain-growing territory and comparatively few are found in the eastern and older grain territory. As reported to the Commission, less than 14 per cent of all individual cooperative elevators and warehouses in the United States, in 1917-18, were constructed prior to 1900, as compared with slightly over 86 per cent which have been built since that date.38 (Ch. II, sec. 11.) As already indicated, the general farmers' or cooperative movement did not probably assume very substantial proportions until at least the late nineties, and it spread apparently most rapidly in the area west of the Mississippi, which was less well supplied with elevators than the East. The patronage dividend movement coming at a still later date tended still further to concentrate itself in those States within this area, which were relatively recent grain-producing areas and the least supplied with elevators in 1900. This is roughly indicated by the following statement, which presents the proportion of cooperative elevators which pay patronage dividends in the 14 grain-producing States of the Central West in comparison with the proportion of existing elevators constructed prior to 1900. While the correlation is not very close, it appears that all those States reporting a less than average construction prior to 1900 also show, with the exception of Missouri, a higher than average proportion of patronage dividend cooperatives, while those States showing a higher than average percentage of construction prior to 1900, with the exception of Ohio and Nebraska, have a lower average proportion of this type of cooperatives. Cooperative lines are not considered, as their number is relatively insignificant and would only slightly alter the percentages given. CHAPTER V. THE PURCHASE AND STORAGE OF GRAIN. Section 1. Methods of sale by the farmer. In marketing his grain any one or more of at least four different methods are usually available to the farmer. He may dispose of it (1) by outright sale either to the country house or other local buyer, (2) by sale after storage in the local elevator or warehouse either to the house or others, (3) by sale on contract before actual delivery, or (4) by sale on his own account in the terminal market. The relative importance of these methods varies as between different sections and different States. The first method, for example, is the most important in the Northwest and probably all grainproducing States in the Central West, and the second in the Pacific coast area. An outright sale is, of course, the result of bargaining between the farmer and the local elevator or warehouse agent or other buyer, and the grade, dockage, and price are usually settled at the time of delivery. In many cases, however, the farmer does not desire to sell his grain immediately, either because he believes that the price will be higher at a later date or because of other reasons. Where this is the case the farmer may deliver the grain to the elevator to be stored until such time as he may decide to sell. Under these circumstances 1 the grade, dockage, and storage charges on the grain are fixed at the time of delivery at the elevator. The matter of price is left open, of course, until such time as the farmer decides to sell, although he may seek to obtain the promise of a premium. Contracts for the sale of grain in advance of delivery are likewise sometimes made by the farmer with the elevator or warehouse. Most often, perhaps, they are due to either one or the other of two conditions. Either the farmer finds himself in need of funds before he can make delivery of the grain or else he believes that prices are such as to warrant the sale, although he may be either unwilling or, if in advance of the harvest, unable to make delivery at the time. In other words, the farmer usually contracts with the idea of obtaining funds, as is probably most frequently the case in the Northwest, or else because he believes that prices will either be lower at the time of delivery or else will not have advanced. On the other hand, the elevator usually contracts with the idea of securing tonnage. Grain contracts between the farmer and the elevator may or may not specify the price. If the price is stated, the matters of grade and dockage only are left to be determined upon the delivery of the grain at the elevator. Should the grain delivered, however, fail to meet the specifications of the grade contracted for, the matter of 1 Except in the case of special bin storage subsequently discussed. |