the flour in jute sacks by the lake boats because when paper sacks were used there was likely to be heavy loss from breakage. The carriers at Buffalo furnished the facilities for this repacking and unloaded and reloaded the flour without additional charge. On the other hand, on wheat shipped in to local millers they charged for unloading and storage and charged local rates when the Buffalo millers shipped flour to the East. In addition these western millers could even enter into local competition at Buffalo and undersell the local millers because they were allowed to bill in flour sold locally on the through rate and also given the repacking facilities free.17

Kansas City. It was testified at this 1901 hearing 18 that the through lines at Kansas City favored a few large grain forwarders, operating on a through rate basis, to the disadvantage of the local commission men and mill buyers. The following extracts illustrate this matter: MR. HAGERMAN. On the Missouri Pacific-what concern or concerns have the grain privileges there?

MR. TRICKETT. Hall & Robinson do the major portion of the export business; Greenleaf & Baker, at Atchison, Kans., operate in the domestic trade, as do Denton Brothers, of Leavenworth, Kans.

MR. HAGERMAN. Greenleaf & Baker and Denton practically divide the domestic business and Hall & Robinson attend to the export business?

MR. TRICKETT. Yes, sir.

MR. HAGERMAN. That is on the Missouri Pacific?

MR. TRICKETT. Yes, sir.

MR. HAGERMAN. Now, in the practical working of that system of having one concern or one man or company do the business upon a line of road, what has been your observation as to its effect and what abuses does it lead to?

MR. TRICKETT. The operations of these firms have excluded the Kansas City grain dealer from participating in the grain trade along that line-the different grain lines. * *

*

MR. TRICKETT. In former years it was the custom for grain purchasers to consign grain to this market, and for Kansas City grain firms to bid for grain in the country. There is practically no consignment business here to-day. All the grain that Kansas City receives it has to fight for, and in very few instances is a Kansas City grain firm able to successfully compete with these larger firms on the grain-producing lines.

MR. HAGERMAN. Suppose that a Kansas City firm gets it fixed some way so it makes up the arbitrary; what additional difficulty is there in dealing with this situation when some particular firm has all the grain privileges?

MR. TRICKETT. Regardless of concessions which he may receive from Kansas City, the firm operating on the through line is still able to control the business.

Commissioner PROUTY. What do you mean by that; that he can handle the grain better on the through rate than the Kansas City man can?

Mr. TRICKETT. Yes, sir; regardless of any concessions he might secure here or elsewhere, the firm operating on the through line is in a position to handle the business. They can go in the country and bid whatever is necessary to obtain the grain. Commissioner PROUTY. Then the necessary inference from that would be that they would have to make it some way in the rate, in addition to the arbitrary.

Mr. TRICKETT. Yes, sir. That is supposed to be the way they handle the business.

17 I. C. C. hearings, 1901, Rates on Grain and Products, Western Points to Atlantic Seaboard, pp. 56, 57, 58, 93, 100.

16 Pp. 183-187.

Commissioner PROUTY. Have you any figures to show what has been the growth of this wheat business and the proportions that Kansas City has received and the effect upon the market?

Mr. TRICKETT. It is not possible for us to determine the exact proportion of the wheat crop of the State of Kansas received at Kansas City. I have, however, taken the total receipts at Kansas City for a number of years and estimated the proportion of the wheat crop of Kansas that those figures represent. In 1893 we handled 69.1 per cent of the total wheat crop of Kansas, estimated as previously explained. In 1895 we handled 51.4 per cent. In 1896, when the trouble with the through lines originated, we handled but 25.1 per cent, despite the fact that with one exception the crop was larger that year than for five years previous.

Mr. DAY. Was that after the reconsignment was abolished?

Mr. TRICKETT. That was after the reconsignment was abolished: yes, sir. In 1898 we handled 47.2 per cent. In 1901, out of a crop of 90,000,000 bushels, the banner crop of the State of Kansas, we handled but 29.8 per cent, showing that our receipts have decreased regularly for a number of years, and especially since the establishment of the proportional rate basis and the operation of the larger dealers on the through grain lines.

EXPORT DIFFERENTIALS AND EXPORT RATES.-Differentials or arbitraries for specific markets and commodities have influenced the growth of grain centers in many ways.

A witness in testifying before the Industrial Commission (1901) asserted that as a result of competition the railroads had put freight rates into effect which favored the cities as against the country, the big shippers as against the small men, and sections which contain the large cities and have the main currents of traffic as against the sections that lie a little out of the central current, like New England.19 While this is a sweeping generalization, it is true that rates have been frequently adjusted on a preferential basis.

A long series of rate wars culminated in 1877 in the establishment of fixed differentials in rates from specified western territory to the North Atlantic ports. In this agreement of 1877 and in later agreements the Chicago-New York rate was made the basis. The amount of the charge under or over this rate is designated the differential and has been applied to the following territory: The section bounded on the east by a line drawn from Pittsburgh to Buffalo, on the south by the Ohio River, on the west by the Mississippi River, and on the north by the Great Lakes and a line drawn west from Chicago to Dubuque. Rates between points in this territory and New York City are based upon the Chicago-New York rate; that is, the rate between a given point in this territory and New York is either the same as the Chicago rate or a certain percentage of that rate. To other points upon the Atlantic seaboard, the rates have been higher or lower than that to New York by a given number of cents per hundred pounds.20

Report of the U. S. Industrial Commission, Vol. IX, p. 136.

* In the Matter of Differential Freight Rates, 11 I.C.C., 13; see also Fish, Atlantic Port Differentials, pp. 12, 13.

In addition to the differentials in the territory described above, shipments over the Great Lakes to the lower lake ports and thence to North Atlantic ports have been placed on an "ex-lake differential” basis.

The method of securing export rates prior to 1900 was brought out in the 1901 hearing," as follows:

At Kansas City there are numerous firms which send their business out via Galveston, others via Mobile, some via Chicago, some via Baltimore, and others by Norfolk or Newport News. All those firms are in there bidding for the grain, and the different lines find it necessary from time to time to make rates in order to carry the business by their rails. For example, a line leading from Kansas City to St. Louis in connection with some line leading to Baltimore would want to move a line of wheat. They would go into the market and find out what was being bid by Galveston shippers, by Chicago shippers, by Newport News shippers, or Mobile shippers. They would write to the road and say, here is the wheat and the price fixed by the other lines, and here is what we can pay for it in Baltimore. The difference approximates the rate. And in that way the roads would make the rate in order to get their share of the business.

The published rates for export grain have been largely determined with reference to foreign competition and ocean freight rates. They are distinguished from domestic rates in nearly all classifications and adjustments. Grain from the western primary markets can be exported to Europe or South American points either from the Gulf ports or through the Atlantic terminals, so that these routes have become competitive. Adjustment in the rates applying to one route has usually been counterbalanced by an adjustment applying to the other.

The railroads extending through the Mississippi Valley to the Gulf began to build up their traffic in grain about 1900 after the river movement had been practically abandoned. At first, in order to attract the traffic, these railroads made rates on export billing including elevation and other terminal services far below those in effect at Atlantic seaports. The grounds of defense for lower Gulf rates were (1) shorter haul from the grain fields, (2) absence of heavy grades, and (3) less expensive operation. The railroads running east to the various Atlantic ports, in order to protect their export grain traffic, adjusted their rates to meet those to the Gulf.

Since St. Louis, for example, is an intermediate point on routes to New Orleans from Chicago and Minneapolis on the north and from Omaha and Kansas City on the west, the grain freight rates (both domestic and export) from St. Louis have logically been proportions of the through rates from the more distant markets to the Gulf. The Omaha rate to New Orleans and the Chicago rate to New Orleans have been made on the St. Louis combination, this combination

I. C. C., "In the Matter of Rates, Facilities, and Practices Applied in the Transportation, Handling and Storage of Grain, etc."

being adjusted to the through rate from Omaha, Chicago, and other western terminals to the Atlantic seaboard.22

The 1919 export adjustments appear in the following table:

TABLE 22.-Export grain rates from 10 primary markets to 6 Atlantic and Gulf ports, in force Jan. 1, 1919.

Local rates applying from points of origin on shipments not entitled to reshipping rates.
Reshipping rate.

Through rate made on East St. Louis combination (domestic reshipping rate).

Through rate made over East St. Louis, using joint rate to East St. Louis and the 25-cent export ra'e beyond.

Rates apply on grain products and wheat.

Lake rates suspended in January. Rates named are those in force opening navigation as of Mar. 1, 1919. "Through rates made over East St. Louis, using joint proportional rate to East St. Louis and the 25-cent export rate beyond.

Through rate made over East St. Louis, using joint local rate to East St. Louis and the 25-cent export rate beyond.

Lake rates suspended in January. Rates named are those in force opening navigation as of Mar. 20, 1919. 10 Rates made on St. Louis combination.

11 Proportional rate on grain originating beyond.

Rates named apply on grain products other than on flour and are reshipping rates. Rates on flour are 1 cent per 100 pounds, lower to Boston and New York, but same as on grain products to Philadelphia and Baltimore.

13 Reshipping rate from St. Louis, for export.

The term "reshipping rate" as used in this table has reference to rates applicable to shipments originating locally at Milwaukee, Chicago, etc., as distinguished from through shipments from points beyond, or shipments which are held at those points under proper tariff authority and afterwards reshipped to eastern points. A "reshipping rate" is defined in Cairo Board of Trade v. C. C. C. & St. L. Ry. (46 I. C. C. 343), as follows:

A reshipping or rebilling rate is a proportional rate under which after a commodity has been shipped to a distributing market and unloaded for the purpose of storage or treatment in transit, the same commodity or an equivalent amount may be reshipped to final destination. There is close analogy between reshipping rates and transit.

22 See Transcript of Hearings Before Western Freight Traffic Committee, Interstate Commerce Commission, Dec. 10 and 11, 1918, pp. 33-36.

The foregoing table shows the present differentials whereby the reshipping rate to Philadelphia from Chicago is 1 cent and to Baltimore is 14 cents under that to New York and Boston. It also indicates the transit privileges effective at Minneapolis and Duluth. The only rate open to Omaha and Kansas City for exports through the Atlantic ports is a combination via St. Louis.

A conspicuous feature of the schedule is the low reshipping rate of 16 cents from St. Louis to New Orleans while the proportional from Kansas City to New Orleans is 25 cents. It will be noted that Omaha, Kansas City, and St. Louis are allowed substantially lower export rates to the Gulf ports than to the Atlantic seaboard. These are offset, to a varying extent, by higher ocean rates from the Gulf to Europe.

Duluth and Minneapolis are the only primary markets which are allowed export rates via the lake-rail routes which are substantially cheaper than the all-rail rates.

NORTHWESTERN TERRITORY.-In the northwestern grain-growing territory is included the principal spring wheat-growing belt and one of the most important oats-producing areas of the United States. It includes Minnesota, the Dakotas, parts of Iowa and Nebraska, and extends westward into Montana and Wyoming. The section is chiefly tributary to the Duluth and Minneapolis markets, but Chicago, Omaha, and even St. Louis also bid for the grain from this region. The principal market competition for northwestern grain is between Minneapolis and Duluth on the one hand and Minneapolis and Chicago on the other. Since Milwaukee for the most part has the same freight rates east and west as Chicago, it is linked as a market with Chicago. Minneapolis, because of its location between Chicago and Duluth (it is about 400 miles northwest of Chicago and 150 miles southwest of Duluth) forms a primary gateway for much of the grain moving east to or through its two principal rival markets. Accordingly, Minneapolis, because of its convenience both as a gateway and as a marketing point, demands transit and "proportional" privileges such as are enjoyed by Chicago, St. Louis, Kansas City, and other large reshipping centers. Moreover, as Duluth and Chicago are both intermediate markets for grain shipped via Minneapolis to eastern consuming and seaboard centers, the MinneapolisDuluth rate in relation to the Minneapolis-Chicago rate is of direct interest to Chicago, and the Minneapolis-Chicago proportional is of direct interest to Duluth. Both of these rates are considered parts of the through rates from producing points to eastern consuming territory.

In commenting upon the difficulty of making a final and satisfactory adjustment of proportionals and transit privileges in the Northwest the Interstate Commerce Commission stated in 1913: