We also have another class of traders in Kansas City; that is, what we call a "spreader." That is, when the movement is very heavy and the market lags down and almost goes to pieces, this spreader will buy in Kansas City and sell in Chicago, and thus lighten the situation, taking this off the market in Kansas City and selling it in Chicago, because he knows he can ship it to Chicago at a profit. That is why we need the spreader and the speculator, to take these hedges at that time.

Last Monday in Kansas City we had 268 carloads of corn. The demand for corn in Kansas City for local consumption is about 15 or 20 cars a day. Somebody must take that corn to keep the price from going very low. The price, as I remember, did not vary from onehalf to a quarter of a cent from Friday to Saturday. There are a lot of cattle feeders who want this corn. They come in there and buy this corn, and the spreaders buy the futures, and the speculator, who simply thinks corn is going to sell at 80 cents, buys it, and that enables the elevator man to buy No. 3 corn at 60 cents and sell it at 65 cents, and, taking the moisture out, it will make No. 2 corn. If he does not sell that corn in Texas, he can deliver it to the future market. In the meantime he can go to the bank and borrow 95 per cent of the value of that corn until he is ready to ship it on.

We feel that this bill would make it dangerous to be in the grain business in Kansas City. The elevator man would pursue the same policy, except that he could not hedge. He would have to stand on it, not hedging. He would have to have two or three times the profit he is now getting, because he would not be able to handle more than half the business, because his financial standing would not admit of his borrowing more than two-thirds of the value of that grain-in some cases not more than half the value because the bankers would have no means of disposing of the grain promptly if the man could not pay his loan; and in the course of time the business would resolve itself into about for or five firms carrying on the grain business, and the smaller grain dealer, who promotes competition and keeps up the price and makes possible the handling of grain at a profit of a half or a quarter of a cent a bushel, would be eliminated, and the same condition would prevail as prevails in live stock.

The CHAIRMAN. How long have you been operating in Kansas City? Mr. DAVIS. Personally I have been a member of the chamber of

commerce since 1896.

The CHAIRMAN. Has speculation increased or diminished during that time?

Mr. DAVIS. Of course we have always made contracts. We have had no regular future trading until in the neighborhood of ten years ago; and trading, of course you understand, depends largely on conditions, whether there is a crop failure or some unusual disturbance in the country. But as a general proposition our trade is increasing. The CHAIRMAN. Well, that is natural; but I am referring particularly to the purely scalping operations are they increasing in proportion or out of proportion to the actual transactions on the board?

Mr. DAVIS. Why, I would say about in the same proportion. It takes all kinds of business to make the general business run smoothly.

The CHAIRMAN. Would you care to give an estimate of the amount of purely speculative business that your firm handles as compared with its total volume of business?

Mr. DAVIS. Well, our firm handles a great deal of business through the markets of Chicago, St. Louis, and Minneapolis. In the Kansas City market we handle hedges and we handle some country trade; I imagine our country trade would probably be in the neighborhood of 15 per cent of our total business in futures.

The CHAIRMAN. Is it true that the speculators, as a rule, take the hedges?

Mr. DAVIS. Yes; the speculators and spreaders; they are the only operators, except in the instance of the millers.

The CHAIRMAN. Theirs are the only operations or transactions whereby a grain dealer who wishes to sell and the miller who wishes to buy would not offset each other?

Mr. DAVIS. Because they never want it at the same time. For instance, the grain dealer, in all probability, would place his hedge at the opening, of course, anywhere from 9.30 until 11 o'clock, and the miller, as I understand it-if I am not mistaken in the exact figureshas until about 1 o'clock to answer on his cables, which gives him an opportunity to select a weak spot in the market to place his hedges. There are times when the millers are out of the market for two or three weeks at a time, when there is absolutely no demand for flour or when the price of wheat is too high and they are waiting for a lower price; if we did not have the future market so the elevator men could buy the wheat and sell it, that would be unfair. If the elevator men could not buy a hedge, they would have to wait until the demand for the cash article came up. When the miller wants it there is a great demand for it, but when he don't want it he won't have it at any price.

Mr. BURLESON. I understand Mr. Merrill is going to appear before the committee next week.

The CHAIRMAN. Yes.

Mr. MERRILL. The president of the Chicago Board of Trade, Mr. A. S. White, will be our next witness. I would like to say to the gentlemen of the committee that Mr. White is distinctly a provision exporter; he is not identified with the grain trade; therefore he will not be competent to answer some of the intricate questions you might ask relating to grain. I would suggest that such questions be left to be propounded to Mr. Cushing, of New York, or Mr. Snyder, of Baltimore, or to myself, when I appear next week.

Mr. A. S. White, president of the Board of Trade of the city of Chicago, and of the firm of A. S. White & Co., was duly sworn. The CHAIRMAN. Mr. White, you are a dealer in what?

Mr. WHITE. Provisions. Mr. Chairman and gentlemen, my knowledge of board of trade affairs is more or less general; my own special business is in provisions, and, bearing in mind, sir, the question which you put to Mr. Fitch yesterday, which, if I remember rightly, was: "Is there any reason why there should be future trading in provisions or in pork

The CHAIRMAN. That does not apply to beef, was my question. Mr. WHITE. Well, I will therefore state very briefly the relation which trading in futures bears to that particular branch of business. The principle is the same, and it is equally important, as it is in grain, to have a constant, active, open market, in which the manufacturer,

the merchant, the exporter, and the speculator may trade at the price which is established by supply and demand; a market whose quotations are widely disseminated, so if there should be any effort on the part of an individual, corporation, or a coterie of individuals to influence the market unduly, upward or downward, it would attract a large number of buyers or sellers, as the case might be, and thus equalize values in accordance with natural conditions. As an example, as it relates to the provision market, let us take the case of a packer who, in a moderate way of business, is operating in Illinois, in Iowa, or at some other outside point, when hogs are being freely marketed, say killing 2,000 a day, his daily sales of the product at such a time do not amount to more than half of what is being laid down in the cellars, so that his stock is rapidly accumulating, and as he can not then sell an increased quantity to jobbers and merchants in the South or the East he has come to the point where he feels that the risk is greater than he is warranted in taking, and he must therefore curtail his buying of hogs or shut down his factory; but he has the Chicago quotations before him. We will suppose that this is in the month of December or January, and he finds that the price for May delivery in Chicago is some 35 or 40 cents per hundred pounds higher than the price, or the immediate delivery price, and he figures that he can make a little money; so instead of shutting down he wires into Chicago and sells some lard and meats for May delivery there. His banker, knowing that he has the stuff sold, is willing to extend or even increase his loans, so he is enabled to go on buying hogs and working his factory instead of being shut down. He now has two strings to his bow; he can wait until May comes around, ship in his products to deliver on his contracts in Chicago, or, as not infrequently happens, in forty or fifty days conditions have changed, the receipts of hogs have become smaller, and in consequence the southern merchants are more confident buyers, and he sees that the price for the spot stuff is within 5 or 10 cents of the May delivery which he originally sold at 40 cents over; he therefore turns around and sells, say, 100,000 pounds of meats to go direct to the South, and at the same time buys in those 100,000 pounds for May delivery in Chicago, to take care of his contract there; he is saving something in the expense of carrying to May, something in the expense of shipping and delivering in Chicago, and he thereby nets 25 to 30 cents per 100 pounds more than if he had sent that identical stuff into Chicago for delivery, therefore making a profit of $250 to $300 more on every 100,000 pounds that he can so dispose of.

Now, let us look at the other side. As exporters, we make offers every day to England and in the north of Europe, subject to a reply— I should say offers that are based on the closing prices in the Chicago market subject to a reply before the opening of the market the next morning. When we receive orders for immediate shipment or irregular shipment, and the stocks are plentiful, we can execute those orders and buy without any reference whatever to the future market, except to the extent that the packers who are selling them always base their selling price upon the May or whatever future month it may be; but if we receive an order to buy meats for shipment spread over two or three months, then we have to protect ourselves by making a purchase for future delivery in the pit. For example, in the fall months, say September and October, the north of Europe

and Scandinavia are pretty considerable buyers of short, clear sides for shipment and spread over the winter months. If we should receive an order to-day for 600 boxes of those sides for shipment. 200 boxes in November, 200 in December, and 200 in January, we should buy 300,000 pounds of short rib sides for January delivery; when November came around-the receipts of hogs at that time having been larger and the several packers in Chicago, or other parts of the country having the meats for sale, and we can get them for immediate shipment-we would then buy 200 boxes to provide for our November shipment and buy 100,000 pounds for May delivery, that 100,000 being the same weight as the 200 boxes, and so on until we had completed the contract. When stocks are large, particularly in the winter time, in a season when there is an abundant supply of hogs, and there is consequently a carrying charge covering storage, interest, and insurance, the full carrying charge, we frequently buy a considerable quantity of lard which we ship to our Liverpool house and sell an equal quantity of May delivery against it. We are thus in a position where we can offer to Liverpool lard for arrival on certain dates, as it is required, and as we sell 250 or 500 tierces in Liverpool, we buy that 250 or 500 tierces for May delivery to provide for the fulfillment of our contract in Chicago.

The CHAIRMAN. Who is the other party to such a transaction? A speculator pure and simple?

Mr. WHITE. It may be a speculator who sells that to us, it may be a packer, I can not tell; I never know who in the pit makes the sale except the broker with whom I am doing business.

The CHAIRMAN. If you will pardon me I will make this suggestion: These matters have been before us for several days and the committee, I think, understand pretty well the practice of hedging and the necessity for it.

Mr. WHITE. Well, I will eliminate that.

The CHAIRMAN. So that what we would like now is to have your judgment or opinion upon the purely speculative features of your business and its relation to entirely legitimate transactions.

Mr. WHITE. I will endeavor, sir, to make that clear, because I feel that the trading for future delivery is of the utmost importance to the provision trade. I think it is necessary to have a wide market, a broad market, in which there is plenty of trading, a place where buyers and sellers, be they in Chicago, or any part of this continent, or in Europe, can, through their representatives, meet and trade. The prices of that market are published and they are watched closely by producers, manufacturers, merchants, exporters, importers, and bankers on two continents. You can pick up your morning paper, whether you be in Chicago, New York, Liverpool, London, or Antwerp, and find the Chicago prices, but if anything is done-which I believe that bill which you read yesterday would do-to end that trading in future delivery you would not be able to find or to learn anything more about the wholesale prices of provisions than you can to-day concerning the value of beef. I would like to say here, sir, and I say it unqualifiedly, that there is nothing that stands between the provision trade, along with the great hog industry of this country, and complete domination by a few large concerns, nothing that stands between them and conditions that obtain to-day in the beef and cattle trade that you referred to, except having an open, broad, active

market for trading in future delivery, as well as for immediate delivery on the floor of the exchange.

The CHAIRMAN. Why, as a matter of fact, has that market never been established in the matter of beef?

Mr. WHITE. Beef, I presume, does not lend itself to that very well; it is a more perishable article. We trade in cured meats; they have to be fully cured.

The CHAIRMAN. You do not trade in cured meats except of the hog, do you?

Mr. WHITE. The hog only.

The CHAIRMAN. Isn't corned beef relatively as staple an article as pickled pork?

Mr. WHITE. The corned beef is a staple article, but the amount of that made and sold is but a very small percentage of the beef business; it is made by taking portions of the meat that are less desirable, like the plates and briskets, like a by-product.

The CHAIRMAN. Do you think that the future market in pork has resulted in placing that commodity on any different basis, as regards the connection between the consumer and the packer, than exists in regard to beef?

Mr. WHITE. Yes, sir; the fact that there is a trading for future delivery makes the price of it public; it is easy for a great number to trade, and it keeps the trade alive; whereas, if there was no such market hundreds would be worked out of the business and it would be in the hands of a few, just as the beef business is.

The CHAIRMAN. On the assumption that there is a packing trust— without committing you to that proposition one way or the otheryour judgment is that such a trust has less control over the pork products than over the beef products.

Mr. WHITE. I know it is alleged that there is a beef trust, but of that I have my doubts.

The CHAIRMAN. I was not asking you to commit yourself on that proposition; I was just asking your judgment as a provisioner, whether the alleged packing trust has less control over pork products than it has over beef products? I ask that question for this reason: A moment ago you said that in your judgment if we did not have a broad market created and the speculator in provisions we would very soon, you thought, be in the hands of a great combine on all these things. We have that broad market in pork products, and I desire your judgment as to whether we are in the hands or out of the hands of this big combine as to those products?

Mr. WHITE. Yes, to a very considerable extent, and if it was not for that trading the conditions would be the same in the provisions as they are in the beef business.

The CHAIRMAN. Including pork?

Mr. WHITE. The smaller people would gradually be dropping out. The CHAIRMAN. In what line of provisions is there the most active speculation?

Mr. WHITE. In lard, pork, and side meats; more, I think, in lard and side meats, because pork is gradually becoming an article of lessened consumption.

Mr. LEVER. Is it a fact that your quotations of futures largely control in making the price for the hogs, on the one hand, and on the other