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Mr. Fitch. I would that I could answer.

Mr. BEALL. Well, is it a fact you can sit down with a piece of paper-

Mr. Fitch. You ask me how long it will prevail ?
Mr. BEALL. No; I say, how long has it prevailed ?

Mr. FITCH. Well, in the last two or three years the money is rolling toward the land.

Mr. BEALL. Well, don't you think it is about time for it to roll that way?

The CHAIRMAN. Don't go into that.

Mr. BEALL. You don't think, then, that in ordinary times—this may be an exceptional instance, the present condition—but in ordinary times and under conditions as they ordinarily exist, has the burden involved in these transactions in wheat fallen upon the producer of wheat?

Mr. FITCH. I can not see it that way. From the conditions existing as I know them, from having been an actual handler of wheats and grain, buying it from the farmers and marketing it in this country, I can see in the last thirty years where the burden has been on the producer; because he has at all times, on account of the progress made in the disseminating of news, values, everything of that kind, he has been in the position where he sells his grain to the best possible advantage. Of course there was a time when conditions were not so good. There was a farmer (a class) who was forced to sell his wheat the moment it came from the thrasher, and then there was a man (a class) that had a little money so that he could put his wheat away in the barn. But now they are all holders.

Mr. BEALL. We have the cotton men here, and a very able gentleman gave the opinion to the committee a few days ago that when the farmer sells upon a declining market the burden is placed upon him, but if the sale is made upon an advancing market it is distributed throughout the world and put upon all the consumers of the world. Do you think that any rule like that would be applicable to the grain trade?

Mr. Fitch. You will have to excuse me from answering that. I can not go into that. Mr. BEALL. Well, you have been very accommodating.

The CHAIRMAN. I would like to ask one or two other questions. Your position, both as an operator on the board of trade and an actual dealer, will enable you to answer this question: I should like to know in what way you would be obliged to readjust your business in case the future market should be eliminated from the grain business?

Mr. Fitch. You want my honest opinion? The CHAIRMAN. Yes, sir. Mr. Fitch. I believe that chaos in the business circles of this country pertaining to grain would result, and absolute chaos. I believe you would disturb something that has taken sixty years to get it where it is, and I believe that disturbing that, and with nothing and I say this with all due respect to you—and having nothing better to offer than you offer there, that absolute chaos would result. I have not taken issue with you upon the honesty of your intent. I have not taken issue with you upon the question that evils do exist. I have contended they do not exist to the extent that perhaps some of the gentlemen of your committee claim they do exist. I have not taken issue with you that perhaps some way should be found-you have done me the honor to ask if I could suggest any way to cure themI take no issue with you or with your suggestion that something might be done; but I say that the Scott bill, if it should become a law, would result in absolute chaos. You have asked me for my opinion. Maybe I have given it too freely.

The CHAIRMAN. Not at all. Nobody is more anxious to avoid chaos than the chairman of this committee. We are American citizens the same as you are, and interested just as you are in the prosperity of this country.

Mr. FITCH. I appreciate that you are, and that you have its welfare at heart.

The CHAIRMAN. And there is not a man here who would support a measure for a moment that he believed would inflict serious damage upon any legitimate business. I am glad you expressed your opinion

further. It will be admitted, of course, that wheat will be grown and it will be ground into flour and made into bread and bread will be eaten whether there is a future market in Chicago or not. I would be glad to find out just the practical changes that would have to be made in your business in the event of the elimination of that future market. Can you answer it by saying you would have to do business on a wider margin?

Mr. FITCH. I will say that to you right off at the jump. I will say that to you as a man who runs lines of elevators, who is interested in elevator property, and deals directly through his agents with the farmers, farmers that I have known for years, that haul their stuff to the elevators. I will answer that “Yes." I am not claiming that this system has not got somewhere in the structure, perhaps, something that we do not like; but we can not take that out until we find something to put in there to keep from pulling the structure down. Not only would we have to operate upon a wider margin, but we would have to reconstruct our financial arrangements in the West. I wish, sir, that you would ask, if you could get before you, a committee or a delegation of three or four of the bankers of the city of Chicago, or some of the western cities I could name, to come down here and talk to you regarding the financing of grain.

This system, faulty though it may be and having weak spots, is the very foundation that the financing is placed upon, and that is what leads me to say that in the disturbing of all these elements there can be but one result. I am not saying that the present system is absolutely correct and perfect. You never saw anything in your life that was perfect. Everything is more or less specked. As I told you this morning, we have seen bad legislators. We have seen bad all kinds of things. But if you attempt to disturb this system by not substituting something else that will take care of it, I reiterate, chaos in the business circles of the country will result, wherever it pertains in any way to the exporter. It will also reach the farmer and the grower of grain, the middle man, everybody. It will mean the disturbance of conditions that have existed for over sixty years.

The CHAIRMAN. When was the Chicago Board of Trade organized ?
Mr. FITCH. I think in 1848.
Mr. MERRILL. 1848 is correct.

The CHAIRMAN. And has the future system existed during that time, or was it a later development? Mr. FITCH. The future system has existed practically all that time. It has been a steady#. except the last year or two it has been a steady decrease. at may be a little information to you. Mr. LEVER. You mean in the volume of the transactions? Mr. FITCH. Yes. That can be explained, probably, Mr. Chairman, by the springing up of other primary markets. For instance, there is o with a clientele of its own. Minneapolis is now a primary market with a clientele of its own. There was a day when the parent institution practically stood alone. Mr. LEVER. How many grain exchanges are there in this country? Mr. FITCH. They have a list of them here, I think. Mr. LEVER. Will you put that into the record? Mr. FITCH. Yes; they can tell you. Mr. HAUGEN. Are we to understand that the expense incurred in unloading, in storing, reloading, reshipping, is a necessary expense? Mr. FITCH. Yes; that is an expense that is necessary. Mr. HAUGEN. That was a matter asked by Mr. Beall. Mr. FITCH. Wherever labor is, there is an expense. It takes labor to handle grain. Mr. HAUGEN. But the same expenses would be incurred if loaded and unloaded, shipped and reshipped at any other point? Mr. FITCH. Yes. At certain primary points they have transfer arrangements; where certain western roads do not care to have their cars go east there are arrangements for transferring the grain. That is without expense. Mr. HAUGEN. Where grain is stored in transit, the shipper has the benefit of the through rate 3 Mr. FITCH. The man that owns the grain—it all depends. Here I will give you an illustration. . I know what you mean. If John Jones of your town in Iowa shipped a car of grain to me and told me to sell it for his account—that is known as consignment business—I act as his agent. He tells me to sell the grain; he owns the grain until I sell it, doesn't he? Mr. HAUGEN. Yes. Mr. FITCH. All right. Then he gets the benefit of everything in rate and everything else. He has only subtracted from the total amount the charges specified and the account of purchase. But suppose he says to me, “What will you give me for a car of No. 3 corn on track at No, Iowa?” I say, “I will give you so much.” Then the corn is mine. I put it there. That is the way it is handled. Mr. HAUGEN. I am going back to your friend Smith again. Suppose the miller Smith orders, 10,000 bushels of wheat. The wheat is shipped to Minneapolis and then to Chicago and stored there for three months. Then it is reloaded and shipped to some point in the North. Now, does he get the same rate as if the wheat had been shipped from Minneapolis directly to whatever point that might be? Mr. FITCH. No; there will be a storage charge for taking care of it in Chicago. Mr. HAUGEN. There will be the terminal charges and what else? Mr. Fitch. There will be no terminal charge, but there will be insurance and interest, if he borrows money on it. Only such charges

as he himself instructed to have made. He may say, “I have no room for that in Springfield; so you store it in Chicago."

The CHAIRMAN. Is the railroad rate the same?
Mr. FITCH. Practically the same. It should be the same.
Mr. HAUGEN. Then that is the privilege of unloading ?
Mr. FITCH. Yes.

Mr. MERRILL. Explain to him that the through rate may be readjusted.

Mr. Fitch. The railroad rate may be readjusted any time within six months. It is practically a holding in transit privilege. Any time you could store that wheat again for five months.

Mr. MERRILL. In order that the record may be clear, kindly inform them that the rate for storage of wheat is three-quarters of a cent the first ten days or part thereof, and one-fortieth of 1 cent per bushel per day thereafter.

Mr. BURLESON. I want to ask one question, for evidently I did not understand him. You understand that the provisions of the Scott bill are directed against transactions where the seller has no intention of delivering and the buyer has no intention of receiving ?

Mr. Fitch. Yes, sir.

Mr. BURLESON. Such transactions repeatedly have been denounced by the Supreme Court of the United States as gambling transactions. Am I to understand you now to say that if such transactions were prohibited that the future contract system could not continue to exist?

Mr. FITCH. I did not say that.

Mr. BURLESON. If you do not say that, if the provisions of the Scott bill are directed exclusively at transactions where the seller has no intention of delivering and the buyer has no intention of receiving, will it hurt the future-contract system if the Scott bill becomes a law?

Mr. Fitch. You will pardon me if I say that you and I might be liable to differ as to an interpretation of the Scott bill; we might not agree.

Mr. BURLESON. Suppose we do agree on that proposition; suppose that is the only character of transaction that is embraced within the provisions of this bill.

Mr. FITCH. Yes, sir.

Mr. BURLESON. Suppose it is only transactions of that kind that are attempted to be prohibited. Do you say that it would destroy the future-contract system?

Mr. FITCH. Your intent might be all right and of the best, but I can not see how it would work.

Mr. BURLESON. Well, it is not a question of my intent. Suppose that was the only transaction that is prohibited, suppose that is going to be the effect of the bill; would it destroy the future contract system of the Board of Trade of Chicago ?

Mr. FITCH. I have answered that fully. I have stated what my opinion was, at the request of the chairman, should that bill be passed. I have gone as far as I desire to in going on record in an opinion of that.

The CHAIRMAN. If there are no further questions, Mr. Fitch will be excused.

Mr. Fitch. I thank you.

Mr. MERRILL. I will ask Mr. John L. Messmore, of the St. Louis Grain Exchange, to address you.

The CHAIRMAN. What phase of the question will he speak on? Mr. MERRILL. He was assigned the question of hedging more particularly, but he tells me that what he has to say will be somewhat more general in character.

The CHAIRMAN. We will hear from Mr. Messmore.

TESTIMONY OF JOHN L. MESSMORE OF THE ST. LOUIS GRAIN

EXCHANGE

(The witness was sworn by the chairman.)

Mr. MESSMORE. In behalf of the St. Louis Merchants Exchange, of which I have the honor to be a member and one of its directors, I desire to present the following facts to your honorable committee for your thoughtful consideration.

To pass a law abolishing the trading in grain for future delivery would be a calamity to the farmers, small grain dealers, commission merchants, and small millers. The grain trade of this country today is vastly different from what it was seventy-five years ago. Then the farmer who raised wheat took it to the nearest gristmill, had it ground into flour and gave the miller his toll. As the country grew and developed, our crops increased in size beyond our needs and we had to look to foreign markets to dispose of our surplus. The first exporters worked on a big margin-they bought the surplus grain at their own figures. Some of the early exporters in St. Louis told me that before trading in grain for future delivery became a custom, they made from 10 to 20 cents per bushel on every bushel they exported. Forty or fifty years ago St. Louis was the largest winter wheat milling center in the United States. At that time most of the wheat came to St. Louis in bags by steamboat. The arrivals on Sunday and Monday during harvest were enormous and the whole levee would be piled high with bags of wheat. On Monday mornings the millers would come down, see the big consignments, put their heads together and agree to stay out of the market until the congestion would force a decline of 10 to 15 cents per bushel. This condition of affairs soon became so intolerable to the commission merchants who had drafts on the consignments to meet that they formed a stock company with a capital stock of $200,000, which was considered a large corporation in those days, to take the surplus grain off the market until conditions adjusted themselves. This company was in existence two years when it was liquidated. Trading in grain for future delivery had developed, which steadied the market and there was no longer any need for the stock company.

The exporter of to-day works on a very small margin, frequently only 1 cent per bushel profit. The millers also work on a small margin. They are able to do this because they can protect their purchases or sales in the terminal or primary markets, by buying or selling the grain for future delivery. Last year the wheat crop in the Southwest was almost a failure. Numerous millers had to come to St. Louis for their wheat. Many of them could not take care of more than ten or twenty thousand bushels of wheat at a time; but they were anxious to buy supplies for six and eight months ahead. There were so many millers who wanted to do this at the same time that there was not

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