PARAGRAPH 277-LEMONS. As fully 75 per cent of the Sicily lemons are shipped inland, the additional freight rates add to their cost, as is shown by the following illustrations: Cost of production in Sicily.... Picking, packing, transportation, and other charges, about.... Minimum cost price abroad. Freight to New York.. Incidental charges at the port of New York, about.. Total cost laid down in New York.. Cost in Buffalo, N. Y... Chicago, Ill... $1.10 .55 1.65 .37 .07 2.10 2.34 2.44 2.57 Minneapolis, Minn.. 2.66 Omaha, Nebr.. 2.79 Fort Smith, Ark. 3.20 Denver, Colo.. 3.36 The cost of California lemon production in 1907, as given by Mr. G. Harold 1.06 .30 Cost laid down in New York...... 1.36 Cost laid down (via rail rate of 84 cents a box from California) in Buffalo, Chicago, Atlanta, Minneapolis, Omaha, Fort Smith, and Denver..... 1.90 Allowing the cost of production of the California lemons as claimed in 1910 to be 1.83 Freight to New York via Panama Canal (as estimated)........................ We have a cost laid down in New York of... .30 2, 13 as against a cost of $2.10 for the Sicily lemons under a no-duty law. This slight disadvantage against the California lemons is more than overcome by the extra price at which they sell on the New York market. On the following pages we show: First. That the duty on lemons is no longer necessary as a protection to this industry. Second. That a lemon trust is extorting excessive profits from the people. Third. That the American people are being heavily taxed for the benefit of a favored few in California. Fourth. That California lemons invariably sell at a higher price than imported lemons. FORMER AND PRESENT CONDITION OF AMERICAN INDUSTRY. When growers attempted to produce this fruit for commercial purposes, there were a number of years wasted in costly experiments. We can not better describe conditions than by quoting from G. Harold Powell's "The Status of the American Industry" (a pamphlet reprinted from the Yearbook of Department of Agriculture for 1907). "In the early days of the industry there were no precedents to follow that were applicable to the handling of the lemon in California. The pioneer growers made many mistakes. Each step forward in the culture of the groves and in the handling and shipment of the fruit was gained by costly experience. Groves were located in unsuitable places, on frosty areas, or uncongenial soils, in localities dependent upon PARAGRAPH 277-LEMONS. an inadequate supply of irrigation water, or on soil that was overcharged with alkali. The growers had to learn about the handling of the soil, the irrigation and fertilizing of the crop, and the maintenance of soil fertility by cover crops and other sources of humus. The methods of pruning have only recently begun to emerge from a chaotic condition." The conditions now are and have been for a number of years entirely changed. The production of lemons in California has proved to be an unusually profitable occupation, and increase in production has been more rapid than even the most optimistic had reason to believe possible. The demand for California lemons is and has been for a number of years greater than the supply, and the only reason, as Powell states in his report to the Department of Agriculture, that the industry has not grown more rapidly is because the nurserymen were not for a number of years able to supply the demand for young trees. It is interesting in this connection to compare the production of California lemons with the importation of foreign lemons. PRODUCTIONS AND IMPORTATIONS. We find in the season of 1898-99 California produced 281,736 boxes of lemons, while we imported 1,907,119 boxes; in 1899-1900 California produced 451,464 boxes, while our importations were 1,768,031 boxes. Since that time the production of California lemons has steadily increased, while the quantity imported remained about the same until the last two years, when there has been a considerable decrease. The figures above quoted are taken from Powell's report to the Department of Agriculture, Yearbook for 1907. The study of a table contained in this report shows that the importation up to 1907 was only once in excess of 2,000,000 boxes, while it has usually been around 1,850,000. The records of the New York Fruit Exchange show that the importations of 1909 were 1,965,000 boxes, with California production 1,915,000 boxes; in 1910 importations 2,100,000 boxes, California production 1,530,000 boxes (the California crop having suffered injury that season which reduced the quantity produced). In 1911 for the first time in the history of this industry the California production was in excess of the importations. You will find that there were imported that year 1,830,000 boxes of lemons, while California produced 2,273,000 boxes. Again, in 1912 the California crop was injured by frost, and the quantity produced was less than that of the year before. Our importations for that year were 1,812,000 boxes; California's production 2,000,000 boxes. CONSUMPTION. It will be seen that the normal consumption of lemons in this country is now approximately 4,000,000 boxes. The importations have never been but slightly in excess of 2,000,000 boxes. The increase of production in California has kept pace with the increased consumption until the last three or four years, when a large number of young trees have come into bearing, and the quantity produced in that State has been largely increased. MISLEADING STATEMENTS AT HEARING OF 1908. There were, at the special session of Congress, which was responsible for the PayneAldrich bill, so many inexact and misleading statements made as to the condition of this industry that we deem it necessary to explain to you the actual conditions existing. We believe that the advance in duty placed on lemons by the PayneAldrich bill placed an additional burden upon the consumers of this fruit. When products of any character can be sold to the consumer at attractive prices a much greater quantity is consumed, and we, as fruit dealers, are interested in this aspect of the case. COST OF DOMESTIC PRODUCTION. There has been much written and a great deal of testimony has been submitted to Congress at different times in reference to the cost of production both at home and abroad. For the most accurate and comprehensive report in this connection we again refer to Powell's report, "The Status of the American Lemon Industry, Yearbook for the Department of Agriculture for 1907." And in this connection we wish to draw to the committee's attention the fact that this report was made by Mr. Powell when he was an employee of the United States Government and had no reason for making anything but an accurate, honest statement to the department which he was serving. On page 356 from the "Reprint from Yearbook" he gives the annual cost of maintaining a bearing lemon grove of 20 acres, including all expenses, packing of fruit, PARAGRAPH 277-LEMONS. cost of packages, loading, etc., as well as the salary of the manager and office force, at $7,417.47 and the production from those 20 acres as 6,989 boxes. A simple computation gives us $1.06 per box as the cost of production in California. This figure, we believe, from our knowledge of conditions, is practically correct. A statement made in 1910 contends that the cost of domestic production has increased to $1.83 per box, an increase of 75 per cent in three years. FOREIGN COST. As to the cultivation cost abroad we can only conclude, after inquiry and investigation from various reliable sources, that the statement made by Mr. A. F. Call, of Carona, Cal., when he appeared before the Ways and Means Committee of the Sixtieth Congress, is only slightly below the correct figure. Mr. Call, in answering a question of Mr. Fordney (p. 477, the tariff hearings, Wednesday, Nov. 18, 1908), stated that the cost of production in Italy was 75 cents per box. It appears from statements made at that hearing by Mr. Call and other members of his committee that they had arrived at this figure as cost on a computation made from figures given in a statement by a former resident of Italy, who, however, acknowledged in his statement that he was quoting the wage paid labor some 10 years prior to the date on which he made the statement. It is a well-known fact that labor at this time in Italy is paid more than twice the wage quoted at that time. We believe $1.10 per box foreign cost of cultivation is more nearly the correct figure. To this must be added about 55 cents per box for packing, freight, etc., to shipping point. FREIGHT RATES. There was much said at the hearings before the committee of the Sixtieth Congress in reference to the cost of transportation. It was shown that it cost much more to bring a box of lemons from California to New York than from Italy, but as at least 75 per cent of the Sicily lemons arriving at the seaboard are reshipped to the interior markets, an extra freight of 24 cents to $1.26 per box, carload rate, must be added to the cost at New York. This should be considered when comparing cost of the California product at interior points, viz: Buffalo, 24 cents; Chicago, 34 cents; Atlanta, 47 cents; Minneapolis, 56 cents; Omaha, 69 cents; Fort Smith, Ark., $1.10; and Denver, Colo., $1.26. Happily at this time there is little need for argument or difference of opinion on this item. Almost as soon as the rate of duty adopted by the incoming Congress will be in effect the producers of lemons in California will have a water rate for their lemons via the Panama Canal and should be able to deliver their fruit along the Atlantic seaboard at less cost than that of transportation from Italy to New York. The rate now in force from Italy to the United States is 37 cents per box, the steamship companies engaged in this traffic having advanced rates to this figure about December 1, 1912, from 30 cents per box. DISTRIBUTION AND SALE OF LEMONS. To better understand the conditions controlling the distribution and sale of the California lemons, it is well that the members of the Ways and Means Committee should understand that approximately 85 per cent of the California lemons are all marketed or sold through one agency; in other words, there is no competition between the California producers. Almost the entire production is turned over to one selling agency, and the only element in the trade that restrains or controls the price at which the fruit is sold is the price which imported lemons bring at public auction in New York City and New Orleans. While it is true that there are also a few California lemons sold at public auction in such markets as New York City, Baltimore, Boston and Philadelphia, it is only a small percentage of the quantity shipped from the Western coast. The greater portion of their production is sold to interior markets, and the methods there employed are different than those used in the sale of any other class of merchandise. If dealers in Minneapolis, Sioux City, Omaha, or other markets of that character, wish to buy a car of California lemons, there is practically only one source from which they can make the purchase, and that is the selling agency of the producers which is known as the California Fruit Growers' Exchange. This organization has brokers to represent them in every market in the United States. The buyer must go to this broker, and when he places the order and asks the price at which he can buy, the broker tells him that lemons are sold subject to the price ruling on the day of arrival. The buyer has no means of knowing in advance what he will be obliged to pay for the car of lemons. When the fruit finally reaches him the price is determined in this way: PARAGRAPH 277-LEMONS. The exchange agent has been notified by some district manager, or directly from the office of the California Fruit Growers' Exchange at Los Angeles, the price at which the car is to be sold. This price is determined by adding the freight from New York to the city where the purchase is made to the price at which lemons are selling at auction in New York. In other words, there is no competition from the West. The only competition in price of lemons is from the East. Therefore, the California producer can sell his lemons at Denver at a price which is equal to the New York selling price plus the freight to Denver. It will therefore be found that California lemons are sold at a higher price in Denver than Kansas City, while at Kansas City they get a higher price than at Chicago. At Chicago they get a higher price than they ask at Buffalo. The greater the distance from California, the cheaper the buyer can buy lemons grown in California. The method of selling foreign lemons is at public auction to the highest bidder, the price being regulated by the supply and demand. DIVERSIONS. Without doubt you will be asked to take the price at which California lemons are sold on the Atlantic coast as an evidence of the value of that fruit, and there is this, also, to be considered in that connection: The rate on lemons from California to all parts of the United States east of the Rocky Mountains is identically the same, about 84 cents per box. It is the practice of the shippers in California to ship thousands of cars of citrus fruit which have not been sold at the time the shipments are made. These unsold cars will be billed to the order of the selling agency at some point like Kansas City. Before a car so shipped reaches Kansas City an agent of the exchange may have sold that car at Indianapolis. Without any additional cost to the shipper the car is diverted and goes on to Indianapolis, where it is delivered to the buyer. Now it sometimes happens that a number of these cars may reach Kansas City, which is known as a diverting point, before they are sold. They may, in fact, stand several days on a track in Kansas City. They may then be forwarded to Chicago. They may stand some days on a sidetrack in that city. In the meantime buyers are taken down to the cars, which are opened and the fruit examined. If it can not be sold in Chicago, some of those cars may be sent on to Cleveland, where they are again held while they are shown to the buyers. If they can not be sold at Cleveland, the same process is repeated at Buffalo, or possibly Pittsburgh. Finally, when it is found impossible to sell this fruit at private sale because of its being in bad conditions or undesirable stock, those cars are sent on to New York, Baltimore, Boston, Philadelphia, or some auction market where they are sold at public auction. Now, the railroad companies have handled cars so shipped many times, placed them on sidetracks, rebilled them, and finally brought them into New York at the same rate it would have cost the shipper had he sent the fruit direct or at the same rate it would have cost him to deliver the car in Kansas City or Omaha. Most of the California lemons sold on Atlantic seaboard are what we in the trade call "diverted cars.” Sometimes they have been 30 days on the road before they reached the market; and the only reason for sending them on to the auction market is that the condition and quality of the fruit was not such that they could be sold to interior buyers at private sale. This explains the low price at which California lemons are oftentimes sold at auction on the Atlantic coast. CALIFORNIA LEMONS BRING HIGHER PRICES THAN FOREIGN LEMONS. When lemons are scarce, however, and good, fresh California fruit is shipped direct to New York City and offered at public auction, we find that that fruit invariably sells at considerably higher prices than imported lemons are being sold under like conditions at the same time. As proof of this statement we submit for your consideration results of different sales during the late summer of 1912 in New York City: On September 13 cargo ex steamship Alice imported lemons were sold at public auction, the average price realized being $7.40 per box. On September 18 cargo ex steamship San Guglielmo imported lemons were sold at auction, the average price being $6 per box. On September 11 California lemons sold at auction averaged $9 per box. On September 17 the average was $9.75, and on the 18th and 19th $8.50 per box. On September 25 three small cargoes of imported lemons ex steamships Duca d'Aosta, Laura, and Moltke were sold at auction, the average price realized was $5.50 per box. On September 25 California lemons averaged at auction $6 per box, and the same price at the sale of September 26. PARAGRAPH 277-LEMONS. During the month of September the lowest price at which California lemons of poorest quality were sold in New York was $4 per box, and the highest price realized was $10.87 per box. LEMONS SHOULD BE ON THE FREE LIST. Now, knowing conditions to be as we have outlined them, we as practical d 'alers in fruit wish to state most emphatically that there is no possible ground to just fy the present exorbitant rate of duty now in force. Even if you consider the question from a standpoint of "protection" without reference to the rights of the consumer or the question of revenue for the Government, the duty is prohibitive, and there would not be a box of lemons imported to the United States at this time if home production was sufficient to nearly satisfy the demand. California growers can produce a more salable lemon than is shipped to the United States from Sicily and at no higher cost delivered on the Atlantic coast. The difference in the price at which they can sell their fruit would alone insure them a reasonable profit. În previous arguments they have made much of the cost of production. They have stated repeatedly that it cost $1,000 per acre to develop a grove and bring the trees to the age when they will commence to bear lemons. The net returns to the grower of California lemons based on the cost of the land plus development must be very large. We base our judgment on the statement of Mr. G. Harold Powell (our p. 7, cost of domestic production), and the average selling prices of their product. We believe these growers are receiving unjust protection at the expense of the consumers. It is generally conceded the world over that lemons are a necessity and not a luxury. We believe that in order for the masses to obtain lemons at a minimum cost that will produce a fair profit to the producer that importations should be increased, and there fore believe that the duty on lemons should be abolished. Hoping the recommendation made will receive your consideration, NEW YORK FRUIT EXCHANGE. EUGENE M. TRAVIS, JOHN RIS, Jr., HARRY L. THOMPSON, JACOB BECKMAN, JAS. S. WILKINSON, Committee. WM. A. CAMP, Ex officio. JANUARY, 1913. TESTIMONY OF CHARLES M. STEWART, OF BANGOR, ME., REPRESENTING T. J. STEWART CO. AND HACKETT SHOOK CO., OF BANGOR, ME. The witness was duly sworn by the chairman. Mr. STEWART. Mr. Chairman and gentlemen of the committee, I come before you to-day representing the entire people of the State of Maine, and more particularly the manufacturers and laborers of a particular industry in that State, and the entire people of Maine from their standpoint as consumers of lemons. You gentlemen all, I think, are willing to concede that lemons are a necessity. There was a time even in my recollection when they were considered a luxury, but that time has long since passed, and medical science tells us to-day that lemons are a necessity in the treatment and cure of the sick. Thirty to forty years ago I freely bought lemons, all imported, at 15 to 25 cents per dozen, according to size, and time of the year. Within the last two or three years I have paid 50 and even 60 cents per dozen for them in the city of Bangor in the State of Maine, where I reside. Why? Because of the duty of 13 cents per pound imposed by the Payne-Aldrich Tariff Act. |