opening and closing inventories are disregarded in the computations for Chicago.*

Results of mixing operations in wheat at a Chicago elevator, 1913-14.

It is clear that this operator bought wheat of all grades, both spring and winter, and was able to deliver out practically the entire stocks as contract grades.

The combined results of wheat-mixing operations at Chicago in six private elevators (Irondale A, Santa Fe, National, and Calumet A, B, and C) for the successive crop years 1914-15, 1915-16, and 1916-17, and for one of these six in 1913-14, appear in Appendix Tables 13-16. These figures show that the total mixing operations in wheat of these elevators resulted in an outturn of 93.6 per cent of No. 2 winter wheat, as compared with 42.6 received, and an outturn of 90 per cent No. 1 spring wheat, as against 38.9 per cent taken in.

Minneapolis. A similar analysis was made of wheat-mixing results at the Minneapolis public elevators for five specified crop years and for the entire period (Appendix Tables 17-22). These figures indicate that mixing operations by the Minneapolis- elevators during this period were of comparatively less significance than at Chicago. Because of the predominant local milling demand for wheat in that market there is a large volume of selling by terminal elevators to the mills, often on type sample. In consequence, mixing is probably employed largely for the purpose of meeting milling requirements and less for raising the commercial grades and mixing to the bottom level of such grades. The shipping business in wheat at Minneapolis is small; and mixing operations of the sort last mentioned seem to be practiced more extensively in connection with the shipping business and are more characteristic of shipping markets. (Cf. Chap. I, sec. 2.)

Duluth. Similar mixing data to the above were procured at Duluth from the books of two elevator companies and are set forth in Appendix Tables 23-28.

There is no reason to believe that the inclusion of inventories would have altered to any marked extent the results shown.

The most conspicuous result of these operations over a five-year period at Duluth was the increase in the quantity of No. 1 northern spring wheat delivered on the outturn, as compared with decreases in the outturn of No. 2 and No. 3. Whereas 40 per cent of the receipts for the five-year period were No. 1 northern spring and 24 per cent were No. 2, the grain loaded out graded about 77 per cent No. 1 and 10 per cent No. 2.

Kansas City.-The records of receipts and shipments by five elevator companies at Kansas City (operating six elevators) furnished data for four crop years. (Appendix Tables 29-33.)

It will be noted from the figures in this analysis that although many varieties of wheat were handled through these houses there was a marked effort to turn out No. 2 hard and No. 2 red, presumably because No. 2 hard is a contract grade and both No. 2 hard and No. 2 red are commonly handled in the export trade. The figures for the four-year period showed about 49 per cent No. 2 hard in the outturn, as against 32 per cent of that grade received. There was a decrease of over 50 per cent in the quantity of No. 4 hard delivered out, as against the quantity received.

COMPARISON OF FOUR MARKETS.-From the data obtained it was possible to make a comparison of operations at the four markets on the basis of "contract grades"; i. e., No. 1 and No. 2 of certain varieties of wheat specified by rule on each exchange, and made deliverable on future contracts without discounts or premiums. The results in percentages appear in the following statement of "ins" and "outs":

Elevator "ins" and "outs" of all contract grades.

From this statement it appears that in Minneapolis, which is largely a sample market, wheat mixing to secure contract grades (considering the market as a whole) has not been extensive. In fact, it appears that for 1915-16 a lesser quantity of the two contract grades was shown on the outturn than was received during the year. possible reasons for this have already been discussed.

The

On the other hand, the elevators considered at Duluth, Kansas City, and particularly Chicago, have been able to deliver out a very much higher percentage of the upper.grade higher-priced wheat than they have received. At Duluth the outturn has frequently contained

over twice as much contract grade wheat as was taken in during the crop year. The figures tend to bear out certain allegations made with reference to the "manufacture" of contract grades at Chicago, since on the basis of all operations analyzed at that market, the "outs" for contract grades (Nos. 1 and 2) averaged 95 per cent of the wheat handled as against "ins" of those grades amounting to only 45.7 per cent of the total.

MIXING PROFITS PER BUSHEL.-The general results of mixing operations are fairly apparent from the comparisons of "ins" and "outs' already shown. Because of the labor involved, it was considered inadvisable to compute profits per bushel in more than two markets. This was done with reference to the Minneapolis and Duluth figures on all grades of wheat. Three different methods were employed to obtain representative prices to apply to the increase of outshipments for a given grade of wheat. Profits for a particular grade were calculated by multiplying the average annual price of that grade by the overage (excess of "out" over "in"). Losses were likewise

6

Prices were obtained in the following three ways: In the first, designated Method I, prices were arrived at for grades No. 1 hard, No. 1 northern, No. 2 northern, No. 3 northern, No. 1 durum, No. 2 durum, by taking the average of the mean daily prices for such grades as given out during the year by the closing quotations committee of the Minneapolis Chamber of Commerce. From the Daily Market Record, Minneapolis, the average prices of No. 2 northern and all of the grades not quoted by the committee were obtained, summated, and averaged for two days in each month of the year and the price differential between each of the latter grades and the No. 2 northern figure computed. These differentials were then applied to the closing quotations average price for No. 2 northern to get the average prices of the grades not quoted. All prices derived by this method are thus on the basis of closing quotations.

In Method II prices were obtained for each grade by taking the weighted average of all prices quoted for such grades in the Daily Market Record on two days (when possible, the 10th and 20th) of each month during the year.

Some exceptions to these methods may be noted. In 1913-14 receipts of No. 4 northern, No. 4 durum, no grade durum and western, were small and scattered. Prices for these grades as given in Method II are therefore arrived at by taking the average of all prices quoted in the Daily Market Record for such grades at any time during the year weighted by the number of cars at each price. To get the price of each of these grades on the basis of the closing quotations for use in Method I, the differential in each case was arrived at by comparing the average price of which the method of computation has just been set forth with the average price of No. 2 northern computed in the same way for the days on which quotations of the grades in question were available. These differentials were then applied to the closing quotations average price for No. 2 northern to get the price of the other grades in Method I. In 1916-17 there was a change from State to Federal grades during the year. The prices of these Federal grades were computed in Method I by taking the closing quotations of Nos. 1, 2, 3, and 4 dark northern, northern spring, and red spring, and for Nos. 1, 2, and 3 durum; to get the prices of the other Federal grades on the basis of the closing quotations the differentials were arrived at by comparing the average of all prices quoted in the Daily Market Record for such grades at any time during the month with the average prices of No. 2 northern spring, computed in each case for the number of days on which quotations of the grade in question were available. In every instance the prices were weighted by the number of cars. Price statistics in Method II were obtained for Federal grade by taking a weighted average of all prices quoted during the month for which they held. The net profits per bushel as determined by these two methods were strikingly similar, as will be shown presently.

However, to test the results more thoroughly another method has been tried, which may be called Method III, which was tried out in the three years 1913-14 to 1915-16. By this method the weighted average price of all grades quoted in the Minneapolis Daily Market Record was taken for two days a week, Wednesdays and Fridays, if possible. The spread on each day from the No. 1 northern price was determined and an average of these differentials made for the year. A yearly price for No. 1 northern was determined by averaging the daily prices and the prices of the other grades determined by adding or deducting the average yearly spread from the No. 1 northern price. In this way relatively heavier receipts either at the beginning or end of the year for a grade not continuously quoted was given no weight in the calculations. The results by this method show a striking correspondence to those obtained in the two outlined above.

Prices were computed for Duluth by Methods I and II only.

The per bushel profits on mixing wheat in Minneapolis and Duluth were thus found to be

determined by multiplying such a price by the shortage for that grade. The per bushel profit was derived by dividing the total profit by the "outs" or shipments. The detail for the various computations, as worked out for the Minneapolis elevators by different methods, appears in Appendix Tables 34-36. Averaging the results shown by Methods I and II of computing prices (footnote 6), the following were the per bushel mixing profits of the elevators at Minneapolis and Duluth which were studied (footnote 3).

Elevator profits due to mixing operations in wheat (all grades).

Assuming an average yearly per bushel profit of 2 cents on an elevator of 1,000,000 bushels capacity, valued at $1,000,000, handling 2,000,000 bushels of wheat, the gross yearly return from mixing alone would amount to $40,000, which would show a return of 4 per cent on the plant investment. This demonstration of the potential profits obtainable from mixing different grades of wheat conforms with the statements made to the commission's agents that millions of bushels of wheat are handled by shipping elevators each year merely for the mixing profits.

grain

It was stated by a Minneapolis elevator man, however, that mixing profits are not as great as might appear, "since competition for for mixing purposes forces buying prices up, while the millers discounts against mixed grain force the selling prices down." MIXING TO MAKE 66 CONTRACT" CORN.-With reference to operations in corn, figures were obtained from three Chicago private elevators for three successive crop years. The results appear in the following statement:

Results of mixing operations in corn by three Chicago elevator companies for the three crop years 1914-15 to 1916-17.

Results of mixing operations in corn by three Chicago elevator companies for the three crop years 1914-15 to 1916-17-Continued.

These computations show that in each of the crop years considered the three companies as a whole turned out a considerably larger proportion of No. 2 than they had received (disregarding inventories) and that on the average for the four years the outturn of No. 2 showed 62 per cent as compared with 39 per cent received.

ECONOMIC ASPECTS OF MIXING.-It appears that grain passing into a primary market under the present arrangements frequently takes one of two courses: (1) It is bought by a miller and adapted to the requirements of his grind, or (2) it is bought by a terminal elevator company, cleaned, conditioned, and mixed with other lots so that the outturn just meets the requirements of the higher grades with practically all premium attributes eliminated in the general mixture. This latter course the handling and mixing by a terminal elevator dealer has provoked considerable criticism. It is alleged that the only services of economic value which the private elevator can perform are (a) storage of excess supplies for subsequent distribution, (b) cleaning and conditioning to render the grain merchantable, and (c) direct transfer services to enable shippers to obtain weights and to effect transshipment from carrier to carrier.

This position was taken by an elevator operator in Chicago, who made the following criticism of mixing, when interviewed:

Q. What is your opinion on mixing?-A. The way I feel is that if the miller or consumer wants to mix grain, let him do his own mixing. He can do this and make the profit from it as well as I can. Here are three or four cars grading No. 2 red wheat, and if I see a car of No. 4 red wheat I could readily mix the No. 4 with the other wheat and make it all come out No. 2, but if I am doing business and am doing it straight I am not going to do this.

Q. Do you think that terminal elevator wheat will be discriminated against in favor of country run wheat?-A. Every time. I buy lots of grain out in Kansas City and I insist that it be country run wheat, because I know all elevator wheat in Kansas City is mixed.

It is also alleged-particularly of Chicago dealers that the possibility and practice of manufacturing" contract grades through mixing and conditioning give the elevator dealers who operate "regular" warehouses an undue advantage in the futures market and lead to manipulations in that market (see sec. 5).