RULE 3. Card bids.-The acceptance of a card bid shall carry with it a full acceptance of the written and printed conditions contained therein.

RULE 4. (a) Confirmation.—It shall be the duty of both buyer and seller, on day of trade, to mail, each to the other, a confirmation, in writing (the buyer a confirmation of purchase, and the seller a confirmation of sale), setting forth the specifications as agreed upon in the original articles of trade. Upon receipt of said confirmation, the parties thereto shall carefully check all specifications named therein and upon finding any differences, shall immediately notify the other party to the contract, by wire, except in the case of manifest errors and differences of minor character, in which event notice by return mail will suffice.

(b) When a trade is made through a broker, it shall be the duty of the broker, on the day of trade, to send a written confirmation to each of the principals (to the buyer a confirmation of sale, and to the seller a confirmation of purchase), setting forth the specifications of the trade as made by him. Upon receipt of said confirmations the parties thereto shall carefully check all specifications named therein, and upon finding any differences, shall immediately notify the other party to the contract, by wire. In default of such notice by wire the contract shall be filled in accordance with the terms of the confirmation issued by the broker.

(c) All sales by telephone shall be confirmed on date of sale by both buyer and seller.

(d) When either of the confirmations contains provisions at variance with the conditions expressed in the card bid, or other written or printed bid, the provisions of the said card, either written or printed, bid shall govern, except when both parties to the contract shall waive the irregularity by signing the confirmation, in which event the confirmation thus signed shall be understood to express the terms of the

contract.

RULE 5. Time of shipment or delivery.-In making contracts, a specific time in which shipment or delivery is to be made shall be mentioned. Any given number of days shall mean calendar days excluding date of sale in which to load and ship grain to apply on a sale for shipment, or to deliver at the agreed destination, grain sold for delivery.

The word ship when used in the rules shall mean that shipping instructions shall have been filed with the railroad company by the shipper.

Grain to apply on a sale for shipment must be actually loaded, and billing instructions must be furnished the railroad company in accordance with the custom then in vogue at the shipping point.

When the words immediate, quick, and prompt are used the following meanings shall be implied: "Immediate," three days; "Quick," five days; "Prompt," ten days.

Where no specifications as to time of shipment are named in the contract, prompt shipment shall be implied.

First half of the month shipment shall be construed as meaning the first 15 days, including February, and last half of the month shipment shall mean the remaining days.

RULE 6. Billing instructions.—(a) In case grain is sold for three or five days' shipment, the buyer shall furnish billing instructions by wire, unless said instructions were embodied in the original articles or trade.

(b) The buyer shall be allowed three calendar days within which to furnish billing instructions on sales for deferred shipment, and must furnish the said billing instructions any time after three days, when requested by the seller. Should the buyer, after the expiration of the allotted three days, fail to furnish shipping instructions on demand, the seller shall have the right to elect either to ship the grain to the postoffice address of the buyer or to cancel the contract outright; 24 hours' notice having been given by the seller of his intention and election.

Shipping directions furnished by the buyer before the expiration of said 24 hours must be accepted by the seller.

RULE 7. Incomplete shipments.-When the seller finds that he will not be able to complete a contract within the agreed limit, it shall be his duty at once to advise the buyer by mail, telephone, or telegraph, whereupon it shall be the duty of the buyer at once to elect either to buy in or to cancel the deficit, or, with the consent of the shipper, to extend the contract to cover the said deficit.

If the seller fail to notify the buyer of his inability to complete his contract, as above provided, the liability of the seller shall continue until the buyer, by the exercise of due diligence, can determine whether the seller has defaulted, when the buyer shall immediately (a) agree with the seller upon an extension of the contract to cover the deficit, (b) cancel the contract outright, or (c) buy in the deficit for the seller's account.

RULE 8. Incomplete delivery.-When the seller fails to complete a contract for delivery within the agreed time, it shall be the duty of the buyer immediately to extend, buy in, or cancel the deficit, said deficit to be determined by the quantity already weighed up, plus sellers' weights or estimates on shipments arrived but not yet weighed. Wherever sellers' weights or estimates have not been furnished on shipments not yet weighed, it shall be the duty of the buyer to estimate the weight, for the purpose of fixing the deficit.

RULE 9. Demurrage. The seller shall be liable for any demurrage charges accruing on grain billed to "shipper's order," when such charges can be shown to have accrued by reason of the inability of the buyer to get possession of the bill of lading whenever said bill of lading is necessary to furnish disposition.

RULE 10. Sample grain.-It shall be the duty of the seller of grain by sample to furnish grain fully up to sample. The word "Sample" used in this connection shall mean a portion of the shipment, or of the lot from which shipment is to be made, and must represent the identical grain shipped or to be shipped. The words "Type sample" shall mean sample of like character but not necessarily identical in all respects with the grain shipped or to be shipped. Shipments rejected on account of quality shall be compared with the sale sample, by either the inspection committee or some other duly authorized or agreed committee of the market in which such rejection is made, and the finding of said committee shall be final. Should the finding be in favor of the buyer, the buyer shall at once notify the seller, by wire, and it shall be the duty of the seller to make satisfactory adjustment with the buyer within 24 hours, at the expiration of which time, if not adjusted, the shipment shall be subject to the order of the seller and it shall be the duty of the buyer to buy in, cancel, or extend the defaulted contract and notify the seller of his action. Should the buyer and seller fail to arrive at a basis for adjustment that would enable the buyer to handle such grain not up to sample, and should said grain be finally rejected, it shall be the duty of the seller promptly to reimburse the buyer to the full amount of money advanced on such a shipment so rejected.

RULE 11. Loading minimum.—It shall be the duty of the seller to load cars in accordance with the rules and regulations of the initial railroad and to assume any loss resulting from the nonobservance of such rules and regulations.

RULE 12. Telegrams and telephones.-The sender of a telegram or telephone message shall prepay the charges.

RULE 13. Acceptances.-Telegraph and telephone acceptances of letter and card bids for "track grain" must reach the office of the bidder within the limit specified therein. Wire bids and quotations shall specify time limit for acceptance.

RULE 14. Surplus grain.-Surplus grain shall be taken to account by the buyer at the current market price on the day after the last car is unloaded.

RULE 15. Interior shipments.-Grain sold on the basis of "Regular market terms" can not be forwarded to interior points by the buyer, without the consent of the seller, and the same rule shall apply to "Terminal market sales" that do not contemplate public official weights and inspection.

RULE 16. Invoice.-It shall be the duty of the seller to mail to the buyer; or such other consignee as may have been previously designated by the buyer, an invoice, giving the initial and number of the car, kind and grade of grain, actual or estimated weight (state which), price, contract on which shipment is to apply, amount of draft drawn, and railroad routing.

RULE 17. Bills of lading-Bills of lading attached either to invoices or to drafts shall be original and negotiable, and in conformity with the specifications of the contract on which the shipment is to apply, and shall be signed in ink. Any loss resulting from irregular or incorrect bills of lading shall be paid by the seller.

RULE 18. Overdrafts.-When, for any reason, an overdraft has been made on grain shipments, and has been discovered before the draft is paid, the buyer shall elect either to pay the overdraft for account of the seller, or to request the seller to reduce his draft to the proper amount. In the event that the buyer elects to pay the overdraft for account of the seller and in cases where drafts are so paid, and an overdraft is not manifest until an account current is rendered, the seller shall reimburse the .buyer on demand for the full amount of said overdrafts.

RULE 19. Balances.-Any cash balances accruing to the seller on a contract shall be promptly remitted when said contract is complete.

RULE 20. Margin on drafts.--Where sales are made on destination terms, it shall be the duty of the seller to leave ample margin on his drafts to provide for possible discrepancies in weights and grades.

RULE 21. Arbitration. (a) Where differences between members of this association or between a member of this association and a member of an affiliated association can not be amicably adjusted, said differences shall, at the request of either party,

be submitted to the arbitration committees of either this association or the State or local association of which either one or both parties may be a member, except in cases where the disputants mutually agree to exchange arbitration, in which event this association will recognize the validity of such exchange arbitration.

(b) The decision of an arbitration committee of this association shall be final, except as provided in Article IV of the Arbitration Rules.

(c) Either party may appeal from a decision of the arbitration committee of a State or a local association to an arbitration committee of this association, except as provided in Article III of the Arbitration Rules.

RULE 22. Car lots of grain and assorted feedstuffs.-These rules shall also govern transactions in feedstuffs in straight car lots, and grain, feedstuffs, and flour in assorted car lots. By feedstuffs is meant all animal feed that is derived from or is a product of grain.

RULE 23. Weights and inspection of grain sold destination terms. (a) On grain sold track-loading station, or delivered basis destination terms, it shall be the duty of track buyers, receivers, millers, and consumers of grain at points of destination where no regularly constituted rules and regulations are in effect, first, to obtain the consent of seller to make such delivery, and then furnish to the seller sworn or public certificates of weights and grades, giving the post office, date, name of elevator, mill, or warehouse where weights were obtained; name of the weighmasters' employer, name of the weighmaster, location or description of leaks, if any, the seal record, the railroad agent's written acknowledgment of said leaks or other bad-order conditions, when and where the grain was unloaded, and the original paid freight bill on grain sold delivered.

(b) On a sale shipper's weights and grades it is understood shipments must be made by the seller from his own stations, or from stations that operate under the same tariff rates, regulations, and conditions, and he must furnish the buyer sworn certificates of weight attached to draft or invoice, unless otherwise agreed at the time of sale.

RULE 24. Grain shipped from terminal or interior markets.-When grain is sold by telegraph, telephone, or mail, by receivers or distributors, located in terminal and interior markets, it shall be understood and agreed that the public weights and grades of the market from which the grain is shipped shall govern.

RULE 25. Terminal market sales.—Sales made out of any terminal market for a specific number of days' shipment shall be filled with shipments from the point from which sold, unless otherwise agreed or understood at time of trade.

RULE 26. Off grades.-It shall be the duty of receivers, track buyers, and distributors of grain on regular market terms, to notify sellers of any failure to grade, so that he will receive such notice within 24 hours from date of inspection. The buyer then shall either apply the grain on contract at ruling market difference on day of arrival or let the notice to seller be by wire, of that date, giving the condition of the grain, stating whether unloaded or still on track; whereupon it shall be the duty of the seller receiving such notice to wire disposition at once. Off-grade grain sold for account of shipper shall not apply on contract.

RULE 27. Routing on grain sold delivered.-Grain sold delivered shall be deliverable via any line at the discretion of the seller, unless otherwise agreed at time of sale. When such shipments are routed by the purchaser, the carrier becomes the purchaser's agent, and the seller's liability ceases when he furnishes bill of lading in accordance with the purchaser's instructions.

RULE 28. Routing of grain sold track. Grain sold track the original point of shipment shall be routed in accordance with the billing instructions furnished by the buyer.

RULE 29. Alteration of contract.-The specifications of a contract can not be altered or amended without the expressed consent of both the buyer and the seller. (This abolishes the custom of "silence confirms.")

RULE 30. Stored grain. Grain stored in terminal regular elevators can not be applied on sale for shipment except by consent of the buyer.

RULE 31. Seller's inspection.-Grain sold for delivery, seller's inspection, shall be covered by an inspection certificate of the grade contracted. The submission of a certificate of a lower grade to apply on a contract for a higher grade shall be authority for the buyer to sell the grain, represented by such certificates, for the account of whom it may concern, and proceed to buy in, extend, or cancel the original contract for account of the seller, notifying him at once of such action.

RULE 32. Carload.-A carload shall consist of bushels, as follows: Wheat, 1,100; shelled corn, milo maize, kaffir corn, and feterita, 1,100; ear corn, 700; rye, 1,100; barley, 1,250; oats, 1,600: Provided, That where rules of carriers, lawfully on file with the Interstate Commerce Commission or State railway commissions, provide for

minimum carload weights in excess of the above, such minimum weights shall constitute a carload within the meaning of this rule.

RULE 33. Grain in transit.-Grain shipped prior to the date of sale can not be applied on contract without the buyer's consent.

RULE 34. Size of cars when bushels sold.-When bushels are sold and the size of cars to be loaded is not mentioned by the buyer, it shall be the privilege of the seller to load cars of a size suitable to his convenience; he, the seller, to answer to the railroads for the fulfillment of their minimum weight requirements.

RULE 35. Term “24 hours."-The term "24 hours." as used in these rules, shall be construed to mean 24 hours, including Sunday or legal holiday.

Section 2. Mixing and conditioning by terminal elevators.

THE MIXING PROCESS.-Practically every private terminal elevator company engaged in buying and selling grain makes a practice of mixing, cleaning, and conditioning the various lots of grain purchased in order (1) to secure the screenings; (2) to improve the quality; and (3) to take advantage of the latitude within the requirements of each standard grade by mixing large quantities of grain to the bottom level of such requirements. A large Duluth operator stated that blending and conditioning (including cleaning and mixing) during the years 1900 to 1914 was the most important source of profit to the private terminal elevator. A Minneapolis company estimated that their gross profits on mixing under prewar conditions had averaged 14 cents per bushel.

The different grades of grain are frequently mixed in railroadoperated elevators, under the supervision of the local inspection department, with a view to releasing additional bin space for storage. But this practice under railroad operation appears to have little or no direct relation to merchandising profits and is necessarily more restricted than the mixing operations of private commercial elevators.

The process of mixing in the Chicago market was explained before the Interstate Commerce Commission in 1906 as follows:

Commissioner PROUTY. When you mix oats, what is your purpose in mixing the oats? You want to take a poor grade and make it better. What is the trouble with the poor grade? Is it too light?

Mr. BEVAN. Too light and bad color.

Commissioner PROUTY. What do you do―take good oats and mix with the poor? Mr. BEVAN. Exactly.

Commissioner PROUTY. And you try to get enough good in to bring up the quality? Mr. BEVAN. Exactly.

Commissioner PROUTY. To what extent is it possible to do that? Take a thousand bushels of what you call poor oats. You want to bring those up to what grade? Mr. BEVAN. You can mix in about 25 per cent of poor oats with 75 per cent good oats.

Commissioner PROUTY. And produce the same grade that the good oats were at the start?

Mr. BEVAN. Yes, sir.

Mr. MARBLE. That really lowers the market value of the oats, but keeps them within the limits of the grade?

Mr. BEVAN. Within the limits.

Mr. MARBLE. And skins the grade?

Mr. BEVAN. I do not know about “skinning.”

Commissioner PROUTY. Don't oats sell by grade?

Mr. BEVAN. Some do, and some by sample. We sell all of ours by sample. Commissioner PROUTY. After you have mixed those oats, if you take a sample, will that sample sell for as much as a sample of the good oats before they were mixed? Mr. BEVAN. That is up to the buyer.

Commissioner PROUTY. Well, as a general proposition?

1 Op. cit., S. Doc. No. 278, p. 788.

Mr. BEVAN. Yes, sir.

Commissioner PROUTY. They do sell for as much?

Mr. BEVAN. Yes, sir.

Commissioner PROUTY. So you gain the difference between the difference in the market price?

Mr. BEVAN. You must make something or there is no use being in the elevator business.

Commissioner PROUTY. Is that the main thing in the elevator business, bringing up grades?

Mr. BEVAN. I think so.

As another instance of mixing and conditioning, a certain car of wheat was bought "on-track" at Indianapolis (in 1918) for $2.07 per bushel. This wheat had been graded No. 3 because it was slightly smutty. The grain was run through a cleaner, which removed the smut, and was then mixed with a high grade No. 2. It thus became part of a lot which was sold for about $2.17. The loss in weight from scouring did not seriously cut down the profit.

Mixing may be performed either within the elevator or in the process of loading out. One elevator operator stated that under conditions prevalent several years ago in loading lake vessels he frequently added several thousand dollars to the profit on a cargo by skillful manipulation of the various streams turned into the loading spouts. At one time in Chicago it was customary for shippers loading a vessel to gradually increase the mixture of low-grade grain until the stream would scarcely make the grade specified. Frequently they were stopped by the inspector and required to run the entire cargo over again. There was a continuous effort to keep the quality of the shipment down to the lowest level allowable, i. e., to "skin the grade.

"

RESULTS OF MIXING WHEAT BY PRIVATE ELEVATORS.-With a view to ascertaining the results of mixing operations by terminal elevators data were obtained from certain elevators at Kansas City, Chicago, Minneapolis, and Duluth. Such data were obtainable from certain houses for a five-year period (1912-13 to 1916-17), from others for only four of these years, and from others for only three years.3

Chicago. The Chicago terminal elevator companies-especially those operating public warehouses have regularly mixed the receipts at their private plants for the purpose of turning out contract grain, i. e., grain deliverable on future contracts. An experienced trader and officer of the board of trade has estimated that over a period of 10 years (prior to 1918) fully 90 per cent of the stocks in the public warehouses were "manufactured" in this way. The extraordinarily favorable mixing results obtained in 1913-14 by one large operator appear in the following summary. Since figures by grades could not be obtained for all stocks in the elevator the

Figures were secured in Minneapolis from the State railroad and warehouse commission, giving the "ins" and "outs" of wheat by grades for the public warehouses in Minneapolis, some 30 in number. (In 1912-13 there were 30 public elevators in Minneapolis; in 1913-14, 28; 1914-15, 31; 1915-16, 30; in 1916-17, 25. In this last year is included the Equity Elevator in St. Paul.)

In Duluth similar figures were taken from the books of two terminal elevator companies (Globe and Consolidated). These data were for wheat of all grades for the five crop years 1912-13 to 1916-17, inclusive. In Chicago the figures used were secured by agents of the Bureau of Markets. Data were obtained for wheat from J. Rosenbaum's Irondale A for four crop years, and from Armour's Santa Fe and BartlettFrazier or the Central Elevator Co. operating the National and Calumet A, B, and C, for three years. Figures on corn were obtained for the four crop years beginning 1913-14 from J. Rosenbaum and for one house of Bartlett-Frazier. Corn figures from Armour's Santa Fe were for the three years beginning 1914-15. In Kansas City, data on the mixing of wheat were obtained from five terminal elevator companies operating six houses-viz, the Murray, Wabash, Kansas City Southern, Kansas-Missouri, the Milwaukee, and Chicago Great Western.