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THE MARKETING OF WHEAT
The Rise and Progress of the Grain Trade of the United States is one of the greatest marvels of an age noted for its commercialism. Its entire history would form almost a complete record of the development of the American continent, for it was the major factor in the opening up of three-fourths of our settled domain. The pioneer husbandman formed the vanguard in the march of civilization. The first succeeding ranks were formed by the merchant. Then came in quick sequence the panoramic array of our ocean, lake and river fleets, of our canals, of our wonderful storage and transportation systems, and of our commercial institutions.
The cereal crop has been the distinctive feature of rural industry in the United States. Here, as in every agricultural community, the three concentric circles of distribution which arose were centered in the local market, in the city market, and in the foreign market. In the modern wheat industry, wheat farming is mainly for a commercial surplus. A minor portion of the wheat grown is consumed or retained on the farm, while the great bulk of wheat is poured into the streams of local, interstate and international commerce.
The major factor in that part of the cereal crop which figures in the internal trade and foreign commerce of our nation is composed of wheat. Much more corn than wheat is produced in the United States, but only a minor portion of this corn becomes a factor in its raw form in the domestic trade of the country, while a comparatively insignificant portion is exported. Less than 3 per cent of the corn grown in the United States in 1906 was exported, and only 25 per cent of that grown in 1905 found its way into the channels of domestic trade. For the last decade of the nineteenth century, the exports of wheat from the United States were over one-third of the amount grown, while those of corn were only one-fifteenth. For the year 1902, ten-seventeenths of the wheat grown, but only twoninths of the corn, was shipped outside of the county where it was raised.
Thus the per cent of wheat exported from the United States is five times as large as the per cent of corn, while the per cent of wheat shipped outside of the county where grown is nearly three times as large as that of corn. Wheat is the keystone in the arch of commodities which is buttressed on consumption and production, and which supports the great commercial superstructure that, with its many ramifications, unites into a threefold nexus of interests-rural producer and urban consumer, manufacturer and agriculturist, and the producers engaged in diversified extractive industries. The grain movement has a function in the national economy second in importance to that of no other factor in our agricultural life. Directly and indirectly, it is the chief feature in our commercial relations.
The Three Methods of Marketing Wheat utilized by the American farmer depend upon the amount of wheat that is grown. The largest farmers make a wholesale disposal of the bulk of their wheat, watching a good opportunity to sell, or employing agents to watch at the chambers of commerce or boards of trade of such primary markets as Duluth, Minneapolis and Chicago. A large class of less extensive growers obtain a price remarkably close to city quotations by forming close business relations with commission men at the large terminal points. By shipping their grain directly, they avoid the middleman charge of the local dealer. The great mass of smaller farmers sell to the local elevators. The profits of the local buyers, however, have quite frequently been scaled to the lowest notch by competition.
The Buyer of Wheat is always located within hauling distance of the producer's home. There are two classes of buyers, the local grain dealers and the dealers who represent the terminal grain buyers. The general policy of the railroads has been to rely upon these two classes of buyers to provide the country elevator facilities needed for receiving and shipping grain, and to enable them to do this promptly by furnishing them with adequate transportation facilities. The terminal grain buyers, controlling lines of hundreds of elevators, have been the most important factor in the producer's grain market. The local buyer is usually a dealer engaged exclusively in the grain business, but frequently, especially in Minnesota and the
Dakotas, farmers' associations provide themselves with storage and elevating facilities, !o their own shipping, and sell through commission merchants.
The Local Grain Dealers' Associations are one of the main features in the local elevator management.
The two great purposes that they have served were the improvement of the distributive system and the securing of justice for the country shipper at the primary markets. While the absence of these associations would have been a public misfortune to producer and consumer alike, there is much evidence that they have exceeded the limits of economic usefulness in some directions. It is for the courts to determine whether they have exceeded the legal limits of rightful association.
The Independent Grain Dealer has frequently served in a most useful capacity. He has generally had the sympathy and support of the grain producer. As a rule, his capital is small, his facilities for handling grain are not elaborate, and he is subjected to the fiercest of cut-throat competition. In spite of all of his disadvantages, however, he sometimes succeeds in maintaining himself for years, to the dismay of his competitors and to the profit of the wheat growing community in which he is located. Situated at some little railway station, and perhaps not even possessing an elevator, he keeps the price at the highest notch. This draws the grain from miles of the surrounding country, and it is even hauled past the elevators of the larger towns to the little railway station. The competitors of the independent dealer buy most of the grain, but the latter secures enough for a profitable business. If he happens to be hard pressed by competition, many of the farmers will sell him their grain, ey though his competitors are offering a cent or two more per
hel. The farmer can well afford to deal with such consideration, for he may secure several cents more per bushel on account of the competition which results from the independent dealer's operations. The combination, however, is often, perhaps usually, of such strength that it can stifle all competition. The larger interests endeavor to crush out the smaller ones, and the usual methods are employed. The rules of the association do not permit the farmer to consign his grain to a grain dealing firm in the primary market. Complaints have
been lodged against the associations of the various states because they attempted to compel the farmer to sell to their members. The association rules permit dealing in grain only by those who do a “regular and steady business of buying and selling grain.” A farmer who does not use the local warehouses or elevators, but shovels his wheat from wagon to car, is guilty of being “irregular," and he is known by the association as a “scalper.” Persons who take advantage of a good market by buying and shipping grain independently of the local elevator people are also “irregular." In both of these cases, the firms to whom the grain is shipped are irregular. In the main, irregularity seems to consist in not using the local shipping facilities, or in having dealings with people who do not use them. Cars irregularly loaded are systematically traced to their destination, and the names of the offending shippers and receivers are posted. Such persons are then made the subject of a systematic boycott by the entire membership of the elevator association. Even independent dealers who are fully established in the grain trade may become “irregular.' An independent dealer at Malcolm, Nebraska, shipped two çar loads of corn to an Illinois farmer for feeding. For this, he was posted as a scalper, although he had $15,000 invested in the grain business, and had been a dealer for seven years. A Malcolm member of the association had traced the two cars to Illinois, and offered corn to the farmer cheaper than it could be bought in Nebraska.' At Lakota, South Dakota, an independent elevator was built which incurred the displeasure of the line elevators. The merchants of Lakota decided to support the new elevator in order to help the farmers, but when the old line elevators opened general stores in Lakota and sold at cost all the goods that the merchants handled, the farme failed to support the merchants. Consequently, the independent elevator was compelled to give up business.
Railway Discriminations.—There are three ways in which the railroads can aid the elevator combination: By promptly supplying cars in the busy season; by refusing to grant sites for independent elevators along their lines; and by rebates. All of these methods have unquestionably been employed. The recent investigation by the Interstate Commerce Commission is said
1 Industrial Commission, 6:62.