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denominator are in determining the value of a fraction. Historically, demand came first, while production followed and grew to such proportions as was warranted by the demand. In modern times of enterprise, however, the chain of causation may be reversed, for by decreasing the cost of production a larger supply at a lower price can be placed upon the market, and in consequence of the lower price demand increases and more wheat is consumed. Communication and Transportation become an important factor in the price of wheat wherever the market has developed beyond the most limited local conditions. Prices that were formerly awaited for 2 or 3 months are now flashed by electricity over the whole world during the same day on which they are made. A favorable location is no longer an advantage in determining prices, for all markets are affected simultaneously by a change in either supply or demand. All improvements in communication and transportation resulting in a decrease of charges tend to lower the cost and increase the amount of production permanently, and hence they enable the producer to compete more successfully in the world's markets. If two countries have surplus wheat for export, a few cents more or less per bushel on the whole cost of moving may determine which country can sell at a price that will secure the trade. Ideally, the only difference of price which should exist between any two markets, or between what the producer receives for his wheat and what the consumer pays, is that resulting from transportation and commercial charges, and the cost of such manufacturing processes as the wheat may be put through. These are the only variations that should occur in the world price of wheat.

Competition and Price.—Competition is a powerful factor in determining the specific price paid for wheat, especially that paid to the producer. By means of competition, all charges incidental to moving wheat are kept at a minimum, while the price paid for the grain is kept at a maximum. For example, at Milton, North Dakota, a non-competitive point, 2 cents less was paid per bushel for wheat than at competitive points only 6 miles distant. When the local elevator systems combine against the interests of the farmer, the only effective remedy is

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for the farmers to combine among themselves and enlist the interest of the railroads. When the elevator systems also combine with the railroads, the farmer seems to be quite at their mercy. It is claimed that this condition of affairs is shown to exist by the recent investigation of the Interstate Commerce Commission, and that the elevators control prices. The only remedy would seem to be for the farmers to start independent elevators, and to secure the aid of law, if necessary, to get their wheat shipped to the primary markets, where competition has generally kept up the level of prices. The proof of the latter statement is shown by the fact that the primary market with the highest level of prices has secured the traffic.

Exportation and Price.—There is a tendency for exportation to decrease as population increases. When a country consumes all of the wheat which it produces, then its price of wheat is fixed within the country, provided there are no restraints to trade, and that the cost of production is not greater than the cost of importing grain. As soon as a country has a surplus for export, and receives more for exported wheat than the home price, plus the expense of exporting, exporting will increase, the home price will rise, production will increase, and the price is no longer fixed within the country. The country which buys the export may thus fix the price of wheat for the country which produces it, but such a price under normal conditions must always be higher than that which the producing country could possibly fix for itself, and consequently a benefit to the latter country. It is as a consumer of the world's surplus that England has held a position of such commanding importance in fixing the price of wheat. It has been asked whether the large combinations of grain interests can or do fix grain prices. The only conditions under which they could permanently do so in a large market would be that they have an approximately complete knowledge of the conditions of supply and demand, and that they would be far-sighted enough to fix the price in accordance with what it naturally should be under the existing conditions.

The Visible Supply and Price.—The consumers of wheat always have an advantage over the producers in that demand 13 /

never so tangible a factor as supply. There is always a large "visible supply" of wheat, for the grain consumed during the entire year is produced within a few months. While the American producers are now well able to carry their wheat, it is, nevertheless, still largely concentrated at the shipping points. Some of the reasons for this are the active competition of the primary markets to make sure of securing the grain by buying at once, the ample facilities for economically storing and handling wheat in great bulk at the terminal markets, and the presence of a class of men who, having capital and commercial capacity, have justified their existence by the manner in which they have handled the reserve supply. As all value is, in its last analysis, a subjective thing, the existence of this great visible supply must have the psychological effect of delaying, and perhaps lessening demand, and thus decreasing price. Since the producer has already thrown the wheat into the market, the distributer must either dispose of it at once, or, if he holds it indefinitely, run the risk of loss from depreciation as the next harvest approaches. This tends to put the consumer in a position to set the final price on wheat, a position that is further strengthened by the fact that competing wheat countries of the southern hemisphere throw their surplus into the world market about midway between North American harvests. Argentina has thus become notorious as a disturber of wheat prices, as have also Australia and India to a lesser -extent. \ During one-fourth of the year, three-fourths of the world's wheat supply comes upon the market. This results in a congestion of supply which exerts a powerful influence in determining the price for the remaining three-fourths of the year. While this tends to give stability of price, it favors the consumer and not the producer. An increase in the local consumption of wheat by milling is decreasing the visible supply. An import duty adds the amount of the duty to the cost of production, and consequently must raise the price of the wheat imported. In the following table are given the import duties on wheat and wheat flour in 1907 in the principal importing countries having such charges.1

1 Data furnished by U. S. Dept. of Commerce and Labor.

Wheat flour

Countries Wheat per bushel per bushel

Austria-Hungary $0.35 $0.82 Belgium free 0.10 France 0.36 0.55

Germany 0.35 0.66

Italy ..' 0.44 0.60

Spain 0.34 0.58

The Market.—Price is always determined in a market. The old proverb, "three women and a goose make a market," is true, assuming that the women possess some other commodities which they can exchange, for all the essential primary elements of a market are present, namely: A commodity; its owner; and one or more other persons, each of whom wishes to become the owner of the commodity by exchanging it for a quantity of some other goods. The primary origin of the "supply" and the "demand" is external to this market, which is merely the point where the forces of supply and demand meet and attain equilibrium through the exchange of commodities. A market increases in size, complexity and importance as these elements increase in number, as they are modified in form, and as consequent manipulations arise. We found a market at the center of each of the three concentric circles of distribution. The marketing or bargaining is early concentrated in the local market. The local market, so long as it is independent of larger markets, is so limited in all of its factors as to be easily known in every phase and violently affected by every local event of importance. The city market resulted from the conditions of supply and demand pertaining to a much larger territory, and is correspondingly more complex. It is not so violently affected by any single event as is the local market, and events tending to opposite results may offset one another. Prices are always a resultant of the forces or conditions of supply and demand that exist in the whole territory tributary to the market, and that have been there concentrated, directly and indirectly. Prices can no longer be predicted from a knowledge of conditions in any one locality. What is true of the city market is pre-eminently true of the foreign or international

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