PARAGRAPH 277-LEMONS.

f. o. b. to produce lemons in California. Since that time a complete investigation has been made of a large number of representative groves in California. As a result of that investigation we showed that it cost to produce on the average in California and load on the cars $1.888 per box, the total cost being approximately what was shown before the Interstate Commerce Commission, $1 a box, the cost of handling from the trees being 88.8 cents a box. That investigation was the most careful that has been made of any agricultural industry in this country or abroad.

Referring to the question that was brought up this morning of the method of selling fruit, 15 or 20 years ago the growers of California consigned their fruits to eastern markets. The markets were 2,000 miles or more distant, on an average. In handling their business at that distance it was impossible to make good advance arrangements, secure prompt collections, or make complete collections. It was impossible under those conditions for the growers to have proper care for their fruit in transportation, to see that the cars were properly ventilated, or to see that the fruit was in proper condition. It being located so far away and not being able to make these collections, they were obliged to organize an agency for the purpose of providing facilities through which they themselves could market their fruit. At the present time there is one organization in California of which I am manager-the California Fruit Growers' Exchange-which handles 75 per cent of the lemons grown in California and 65 per cent of all citrus fruits grown in California under the following conditions. The average stated this morning was 85 per cent, which is incorrect. There are 6,500 growers in the California Fruit Growers' Exchange. The growers formed a nonprofit corporation, and in the packing house which they provided assembled the fruit and prepared it for shipment. These organizations, of which there are about 115, have formed what is known as the California Fruit Growers' Exchange, which is an agency which provides the facilities through which these producers handle and market their own crops. The California Fruit Growers' Exchange, the central agency, furnishes bonded agents in the different markets of this country and of Canada, placing them under bond and under instructions. The shipper of the fruit utilizes those agents, dealing directly with them, the shipper himself determining the destination, determining the market, determining the diversions, determining the price which he is willing to accept for a car of fruit sold in any particular market. The California Fruit Growers' Exchange is the agent in providing the facilities for this cooperative nonprofit corporation, the exchange itself being a nonprofit corporation and acting for the growers at the actual cost.

Mr. POWELL. I wish to read at this point the reserved rights which the shippers have, the relations of which are defined in contracts between the California Fruit Growers' Exchange and the associations. They read:

The reserved rights of shippers. It is understood, however, that each shipper reserves to itself the right to regulate and control its own shipments, to use its own judgment, to decide for itself when and in what amounts it shall ship; to what markets it shall ship; where its products shall be sold, and except at auction points the price it is willing to receive; fully reserving the right of free competition with all other shippers, including other members of this organization, unhampered and uncontrolled by anyone.

PARAGRAPH 277-LEMONS.

That is the system of cooperation under which 95 per cent of the citrus fruits of Čalifornia are distributed to the markets of this country, the exchange itself never fixing a price, never determining the destination or the market or diversion or anything affecting the control of a car.

The CHAIRMAN. Your time has expired, but I want to ask you some questions. Some of the committee desire to hear you further on this trust question.

Mr. NEEDHAM. I think he ought to have 30 minutes.

The CHAIRMAN. The time of the other men was taken up in crossexamination. The committee desires to let Mr. Powell proceed further. Without objection you may proceed for five minutes.

Mr. McCALL. I would like to ask what proportion was sold under the reserved rights system

Mr. POWELL. All of it was sold under the reserved rights system. About 33 per cent of all the lemons that go out of California are sold at public auction, and about 65 per cent of all the lemons consumed in the United States are sold at public auction; under those conditions there being no way in which a price could be fixed except the price which the public is willing to pay.

Mr. HARRISON. At what cities are the lemons sold by auction? Mr. POWELL. Boston, Philadelphia, New York, Baltimore, Pittsburgh, Cleveland, Cincinnati, St. Louis, and New Orleans.

Mr. HARRISON. Are those markets governed entirely by auction sales?

Mr. POWELL. Yes, sir; the rest of the fruits in the other cities of the country being sold at private sale in open competition with imported lemons.

Mr. HARRISON. You tell us, then, that no California lemons are sold in the New York market except by auction?

Mr. POWELL. Not by the California Fruit Growers' Exchange. Our entire business is handled in New York by auction and in no other way. The same applies to all these other markets I have mentioned. In connection with this lemon industry the total consumption of lemons in this country represents about 12 lemons per year per capita, and a tax levied upon the people of this country of between 3 and 4 cents per year per capita.

The question of the use of lemons in hospitals was brought up this morning

Mr. PALMER. I do not understand that statement about the tax. Mr. POWELL. That is the tax that might be levied upon the consumer on account of his per capita consumption.

Mr. PALMER. Are you dividing the duties?

Mr. POWELL. The total population is about 100,000,000 people. Mr. PALMER. You are figuring on the duties collected?

Mr. POWELL. Yes, sir. It would be about 3 to 4 cents.

Mr. KITCHIN. You are adding 14 cents per pound on all lemons? Mr. POWELL. Adding 14 cents a pound on all lemons and dividing

it into the annual consumption in this country.

Mr. PALMER. Domestic as well as imported?

Mr. POWELL. Just imported.

Mr. PALMER. You do not mean that is the tax they pay?

PARAGRAPH 277-LEMONS.

Mr. POWELL. That is the theoretical tax they would pay if they paid the duty.

Mr. KITCHIN. But you just included imported lemons. If the tariff is doing you any good, this same duty must be added to the home production of lemons?

Mr. POWELL. The statement I wished to convey was this: The total number of lemons consumed in this country is about 1,280,000,000, which amounts to about 1 dozen lemons per individual per year. If the people of this country paid e duty on all lemons-not on imported lemons alone they would pay between 3 and 4 cents per capita per year.

The question of the use of lemons in hospitals has been brought up. I secured data recently from 15 of the leading hospitals of New York, and found that the total annual per capita consumption of lemons in these 15 hospitals is about a tenth of one lemon per year. I wish to speak of the distribution of the California lemon to show where it comes in open competition

Mr. JAMES. The production, you mean?

Mr. POWELL. I mean the total number of patients in these hospitals divided into the total number of lemons used in the year shows that they use in 15 of the leading hospitals of New York less than one lemon per patient per year.

The CHAIRMAN. You include the patients that come there for daily treatment?

Mr. POWELL. I took the total daily treatment of the hospitals for one year.

The CHAIRMAN. Of course, a large proportion of those patients do not live in the hospital at all.

Mr. KITCHIN. Don't you advertise there that California lemons. are a great medicinal fruit, and try to get people to use them because they have medicinal virtues?

Mr. POWELL. They are a very good tonic.

Mr. KITCHIN. Yes; so that if we reduce the tariff or remove the tariff, it will be removing the tariff from a necessary medicinal tonic? Mr. POWELL. The difference between the wholesale price and the retail price of lemons is about 10 cents a dozen for the wholesale price, and about 25 to 30 cents per dozen for the retail price. So the amount of duty, which is about 3 to 4 cents is not felt by the consumer where there is that great difference between the wholesale and the retail price. That is further borne out by the fact that in eastern Canada the retail price of lemons is identical with the retail price of lemons in the eastern part of the United States.

I wish to bring out especially the markets which the California lemons enter. The California industry has practically all of the markets west of the Missouri River and north of Houston, Tex. In the area between the Missouri and the Alleghanies the California lemon in all markets is in fierce competition with the imported lemon, and the California industry supplies about one-half of the total consumption and the imported lemon supplies about one-half. Mr. KITCHIN. How many people are engaged in this lemon industry in California?

Mr. POWELL. About 3,000 people on the ground and about 10,000 indirectly.

PARAGRAPH 277-LEMONS.

Mr. KITCHIN. Three thousand constitute the owners of the farms, the proprietors of the groves?

Mr. POWELL. Yes, sir.

Mr. KITCHIN. You say they have a monopoly of the territory west of the Missouri River?

Mr. POWELL. There is no competition with foreign lemons west of the Missouri River on account of the freight rate back.

Mr. KITCHIN. That territory west of the Missouri has a little over 30,000,000 people?

Mr. POWELL. About 18,000,000 people, as I remember it.

Mr. KITCHIN. About a third of all the people in the United States ? Mr. POWELL. I do not think as much as that.

Mr. KITCHIN. Call it 20,000,000.

Mr. POWELL. I do not think there are that many west of the Missouri River. I am not positive, but I doubt if there are 15,000,000. Mr. KITCHIN. Don't you think that is a very good thing, for 3,000 people to have 20,000,000 people absolutely dependent on them for lemons?

Mr. POWELL. Very good. About 20 per cent of our crop goes into that territory. Then in the territory between there and the Alleghanies we supply, in competition with the imported, one-half the lemons. East of the Alleghanies, where there are about 51,000,000, and running south as far as Houston, we supply, I suppose, about 15 per cent of the total consumption. In a city like New York the amount which the California industry supplies is not over 5 or 6 per cent per year.

The conditions in New York are something like this: In the spring of the year the imports come in in large quantities. During the summer the imports come in in large quantities, and California does not sell very much in New York, during this period because of the lemons from Europe; we sell possibly 1 per cent; sometimes less than 1 per cent, sometimes it gets up to 6 per cent, but usually it is 1 per cent or less of the total amount sold during those months. Now, in the fall months, when the Sicilian crop begins to drag and there are only the remnants of the Sicilian crop left, then the California industry is able to get into New York, and then we supply sometimes as high as 20 or even 30 per cent of the total amount sold, but it is only during the time when the Italian industry is dropping off, when the lemons are poor, when there are very few lemons on the market that California supplies any proportion of the total sale in New York, and it is in those months when there are almost no other lemons in New York except those sold by California that a somewhat high average for the California product is made.

Mr. HARRISON. You have divided the United States for marketing purposes into three zones?

Mr. POWELL. Yes.

Mr. HARRISON. How do your prices run in those zones?

Mr. POWELL. We get the lowest prices where we are in the fiercest competition with the imported product and where there are very large quantities on the market all the time.

Mr. HARRISON. That is in the zone between the Alleghanies and the Atlantic seaboard?

Mr. POWELL. Yes.

PARAGRAPH 277-LEMONS.

Mr. HARRISON. Then you get the next best prices in the region between the Alleghany Mountains and the Missouri River?

Mr. POWELL. Sometimes, and sometimes not. It varies. As a general thing we get a little higher price.

Mr. HARRISON. And then you get the highest price in the zone between the Missouri River and your territory?

Mr. POWELL. Where there is the least competition, because competition always determines in a broad way the general average price. Mr. HARRISON. Then it is true that in making up your price you take the price in New York and add to that the freight to the west, although you are shipping from the west to the east?

Mr. POWELL. We have no ability to object to the price in the west, the prices being determined by the number of lemons that are in competition in California, the exchange itself having no power to fix any price.

Mr. HARRISON. Some mysterious power does it, so it works out that way, doesn't it?

Mr. POWELL. The question of competition

Mr. HARRISON. The competition of the Sicilian lemon growers enables them on the eastern coast to get their lemons cheaper than the people in the west have to pay?

Mr. POWELL. Undoubtedly, because there are more lemons on the market.

Mr. HARRISON. You are manager of the California Fruit Growers' Exchange, are you not?

Mr. POWELL. Yes, sir.

Mr. HARRISON. And your predecessor was Mr. B. A. Woodford? Mr. POWELL. Yes, sir.

Mr. HARRISON. You testified a short time ago that 75 per cent of all the California lemons are now marketed through the California Fruit Growers' Exchange.

Mr. POWELL. Through the facilities which the exchange provides for the growers.

Mr. HARRISON. Through the California Fruit Growers' Exchange 75 per cent of the California lemons are marketed?

Mr. POWELL. Seventy-five per cent of the lemons that are grown in California are marketed through the facilities which the exchange provides.

Mr. HARRISON. We are talking about the same thing apparently. Now, Mr. Woodford, in 1909, in the case before the Interstate Commerce Commission, testified that only 62 per cent of the California lemons were so marketed. So, since you have become general manager of the exchange that has increased from 62 to 75 per cent ?

Mr. POWELL. Those changes took place before I became manager. Mr. HARRISON. So the competition among domestic producers is now between one great power of 75 per cent on one side and the smaller fellows who represent 25 per cent on the other?

Mr. POWELL. Those that represent the 25 per cent may be just as large as those who represent the 75 per cent, those in the 75 per cent being made up of growers having less than 10 acres as an average.