Mr. HAUGEN. Are there no storage charges?

Mr. SNYDER. Three-quarters of a cent; but when he puts it out he gets the three-quarters of a cent back. That follows the grain right along from one to the other.

Mr. HAUGEN. That is refunded to him?

Mr. SNYDER. The country shipper does not pay it.

Mr. HAUGEN. If he buys 10,000 bushels of corn, how much is he expected to remit?

Mr. SNYDER. If he buys 10,000

Mr. HAUGEN. The price being 50 cents a bushel.

Mr. SNYDER. He would have to remit the price and the commission charged.

Mr. HAUGEN. What are the charges?

Mr. SNYDER. Half a cent final commission, as of delivery there.

Mr. HAUGEN. Then what else?

Mr. SNYDER. Are there any advances on this?

Mr. HAUGEN. No.

Mr. SNYDER. Charge for elevation of one-eighth of a cent for each five days?

Mr. HAUGEN. One-eighth of a cent for each five days.

Mr. SNYDER. Or one-quarter of a cent for each ten days.

Mr. HAUGEN. There is one-eighth of a cent for elevation?

Mr. SNYDER. Yes.

Mr. HAUGEN. And that is all?

Mr. SNYDER. Yes, sir; but do not lose sight of the fact that these elevators are run at an expense. In our country there are public elevators for which there are established charges.

Mr. HAUGEN. Is that the only expense?

Mr. SNYDER. Yes, sir.

Mr. HAUGEN. That is all I want to know.

The CHAIRMAN. The witness will be excused.

Mr. MERRILL. Our next witness is Mr. Culver, of Toledo. Mr. Culver is chief inspector of grain in Toledo, and is the president of the Chief Grain Inspectors' Association of the United States. He is also familiar with the method of business there, and is the accredited representative of that exchange.

TESTIMONY OF MR. EDWARD H. CULVER, CHIEF GRAIN INSPECTOR, TOLEDO, OHIO, PRESIDENT CHIEF INSPECTORS' NATIONAL ASSOCIATION.

(Mr. Culver was duly sworn by the chairman.)

Mr. CULVER. Mr. Chairman, I am also the business manager of the Toledo Produce Exchange, in connection with my other titles. We want to file our objection to this bill, as we are the soft winter-wheat market of the United States, and I believe the only single-delivery market in the United States.

The CHAIRMAN. What do you mean by "single-delivery market?" That is a new term.

Mr. CULVER. I mean No. 2 red wheat.

The CHAIRMAN. You mean by that to say that your

vides for the delivery of a single grade of wheat?

contract pro

Mr. CULVER. The single grade of No. 2 red wheat, soft. It is made so by the fact that we are surrounded by the soft winter-wheat States

of Ohio, Indiana, Michigan, Kentucky, and Tennessee. The large millers of Knoxville, Louisville, Cincinnati, Columbus, Zanesville, New Philadelphia, and all the large milling centers do their principal hedging in our market, on account of their being soft winter-wheat mills, and they make such flour as the South requires for its hot bread. The CHAIRMAN. Is there a large amount of speculative dealing in your market, aside from the hedging operations?

Mr. CULVER. There is not, aside from the hedging operations. We call them investments.

The CHAIRMAN. Then, if the bills that we are considering would not interfere with your hedging operations, they would not materially affect your market?

Mr. CULVER. They would affect our market, Mr. Chairman, in this way: Large investors come into our market at the time of the softwheat movement, which is July, August, and September. Our mills all over these States have a limited capital. They have elevators, most of them carrying from eight hundred thousand to a million and a half bushels of grain. They have to borrow a great deal of money when the wheat is moving, and to insure their profit they sell the future against it, so called, to the hedge States on that wheat until they have placed their orders with the merchants throughout the South and Europe, and they then do what we call buying in their hedge and taking their profit in between in the manufacture of their goods. But as for small speculation, we have not anything of that kind. I have at this moment, Mr. Chairman, a telegram from a man who should have been here instead of me. It was utterly impossible for him to get away, owing to the fact that our clover-seed business at this time is very active and we are making our foreign deliveries.

I would also state that Toledo is the only future clover-seed market in the world. We are the clearing house for the clover seed of the world; and the central west, you no doubt are aware, ships this seed in there to be stored in the months of September, October, and November. It is then sold differently from wheat, as it takes odd months. It takes January, February, and March deliveries. I asked this gentleman for an expression of opinion, he being one of the largest commission men that deals in futures, I believe, in the United States, and also one of the brightest men. He has summed it up here in a telegram, saying that he could not be present himself, and I would like to read it and to offer it as evidence, as it clears up shortly and briefly very many points that have been under discussion here, and I believe will satisfy the committee and answer a great many questions that have not been answered in this matter. The CHAIRMAN. Without objection, the telegram will be read. Mr. CULVER. He gives me the name of "Big Chief." (Reading:) TOLEDO, OHIO, February 21, 1910.

Big Chief E. H. CULVER,

New Willard Hotel, Washington, D. C.: Grain contracts for future delivery. United States has no monopoly on trading in grain futures. Liverpool last year traded in 215,000,000 bushels of wheat futures. Actual deliveries on contracts there were only 1,160,000 bushels. London, Paris, Antwerp, and other European markets trade in grain futures. Argentine, our latest and almost our greatest grain competitior, is trying to develop a future market there. Winnipeg and other Canadian markets would expand rapidly if Congress should restrict our grain trade. Present system has been a great benefit to our country for many years. It may not be perfect, but do not confuse bets made in bucket shops or puts and calls with grain contracts for future delivery made upon legitimate boards

of trade.

Boards of trade are the grain markets of the world. Buyers and sellers, the farmers, dealers, millers, exporters, and speculators meet there every day in person or through brokers. They are not secret societies. Anybody can trade there. Millions of dollars are expended annually in gathering information regarding crops, supplies, and demand, present and prospective, and spreading it broadcast. Press associations keep the general public informed and the farmer gets it by phone and in the daily papers. Leading markets have continuous quotations posted wherever they are wanted for legitimate purposes. Bucket shops steal them; the information enables everybody to trade intelligently. It enables them to work upon a smaller margin than in any other business, directly benefiting both producer and consumer. Only an eighth commission is charged on futures and half cent on most cash grain. Boards are not trusts. Anybody can join if he has good reputation and some capital.

Grain contracts made upon regular boards are like any other to be filled in the future. There is no optional part except the day of delivery during the month specified. Delivery of the actual grain does not occur in every case, but it is intended when the contract is made. Sellers might be disappointed in their crops or find a better market elsewhere, and hence wish to cover the sale in the open market. Ninety-five per cent of the money transactions are settled through clearing houses with checks. The actual money seldom changes hands. In Liverpool, last year, only half of 1 per cent of the wheat futures traded in was actually delivered. Grain settlements are proper and legal. Supreme Court of United States so decided May 8, 1905, when Associate Justice Holmes said: "The sales in the pits are binding. A set-off is in effect a legal delivery. The fact is no more wonderful than the enormous disproportion between the currency of the country and contracts for the payment of money.' Speculation enters into every kind of business activity. Lazy money does not develop our country. Farmers take chances. Manufacturers, jobbers, and retailers all seek orders months ahead, and speculate upon the future demand. They watch the crop outlook, as do the railroads, and depend upon the boards of trade for most of their information. Speculation takes the crops when farmers are the most anxious to sell, and carries the surplus until wanted by millers, feeders, and exporters. Restrict legitimate speculation and you restrict the demand. There are two kinds of speculation, legitimate and illegitimate. One moves the crops, the other is mere gambling. There is as much difference between regular boards of trade and bucket shops as between national and faro banks.

Respectfully submitted.

R. BOY SOLOMON.

C. A. KING & Co.

The CHAIRMAN. You have had a great deal of experience in handling both ends of hedges, I presume.

Mr. CULVER. I have been in the business since 1878.

The CHAIRMAN. Have you ever known of a case in which a hedge that was intended to protect a miller, for example, or any other grain dealer from loss as a matter of fact has inflicted a loss upon him? Mr. CULVER. Yes, sir.

The CHAIRMAN. How can that happen?

Mr. CULVER. It can happen by corners in the grain that he is dealing in, which all markets are against, which all mills are against, and which all legitimate grain houses are against and are trying to eliminate.

The CHAIRMAN. In the cases which have come within your own observation, what was the occasion of the fluctuation which brought about the loss to the dealer?

Mr. CULVER. The first case that came under my observation was what was known as the "Harper corner." I was then the official representative of the Carrington and Casey people, who developed the Dakotas and built the first elevator inside of the harbor at Duluth. This wheat manipulation went on in Chicago, and they made No. 1 northern and No. 1 hard deliverable in Chicago. The first I knew of it was when I got a wire from Mr. Casey to report at Duluth and load out every bushel of No. 1 hard and No. 1 northern that he had

in his elevators there and take it to Chicago, which I did. It is a matter of history that the Harper concern went broke.

Mr. MERRILL. That was about twenty years ago, was it not? Mr. CULVER. A little over twenty years ago. I think it was about twenty-five or twenty-six years ago.

Mr. MERRILL. Yes.

Mr. CULVER. The next case was that of the Leiter deal. I had the pleasure of helping to break that man's back, and I was glad of it. While he was a beneficiary to the producer, yet he was a curse to the country, and a curse to the grain trade. We, in our little market, in our modest way, turned him over 14,000 bushels a day, and actually delivered it in Chicago, and made him pay cash for it, because he had upset the business world.

The CHAIRMAN. In both of these cases the unfortunate situation was brought about by a man who was merely speculating, gambling? Mr. CULVER. That is it exactly, Mr. Chairman.

The CHAIRMAN. And that is the occasion for the introduction of all these bills.

Mr. CULVER. Yes.

The CHAIRMAN. You do not believe that that is a good thing, do you?

Mr. CULVER. Mr. Chairman, while it may help to introduce these bills, I do not think that it is the intent of the chairman to father a bill that is going to paralyze the entire grain trade and make it almost impossible for the man with the small mill to do business.

The CHAIRMAN. Is it your opinion that it would paralyze the entire grain trade to cut out the purely gambling features of the exchanges? Mr. CULVER. Not the purely gambling features; no, sir.

The CHAIRMAN. That is the only thing that anybody is aiming at. Mr. CULVER. In your bill you say "all farm products." Our case in seed is almost identical with that of Mr. Ames. We have brokers on our floor that may have prospective seed sales in Germany, in Australia, in Turkey, in Russia, in England, and France. Our surplus has to go abroad. It is an expensive luxury, and the ordinary man would have to have millions of dollars to handle. We could not borrow a dollar of it if we did not have the future sale against it. A man will go to work, and he will offer this stuff over night abroad, and will get his return in the morning by ceble. For instance, he may have bargained for delivery up to 9.30, from his big seed warehouse, and they deliver it to him, and he ships the seed abroad to the other man and takes in his hedge.

The CHAIRMAN. I think we understand that. Have you ever thought about this question enough to have any clear idea in your own mind as to how the gambling might be eliminated and the hedging proposition still retained?

Mr. CULVER. It has been a study, Mr. Chairman, for a great many years, of our big thinkers, and the best men on our boards of trade and produce exchanges, as to how to eliminate that and to throw such safeguards and rules around the exchange and its members as to have it absolutely discontinued.

The CHAIRMAN. And what progress do you think they have made? Mr. CULVER. I think in our market we have made very fast progThe fact of the matter is, I do not believe a man can run a corner on our market. If there is a difficulty about whether delivery

ress.

has to be made, or does not have to be made, it is settled by our arbitration committee and our board of directors.

The CHAIRMAN. Do you have very much pure gambling on your board?

Mr. CULVER. No, sir; our board is more in the light of a hedging market for the soft-wheat millers and the seed men.

The CHAIRMAN. To what rule or rules of your exchange do you attribute the elimination of these gambling operations, if to any of them?

Mr. CULVER. Our board of directors foresaw years ago when these corners were run that it was disturbing the entire grain trade, and they got together and formulated some rule. Just what that rule is I can not tell you; I have not it with me. But I know this much: That they can not force a delivery beyond legitimate prices. You asked me with reference to corners, and I want to tell you of one in which a man was concerned who has been very much abused. I refer to Mr. Patten of Chicago. They claim that Mr. Patten ran a corner last winter in Chicago on wheat, and affected the prices all over the United States. I want to tell you of the conditions that existed in the soft-wheat markets at that time. There was an actual scarcity of soft wheat that put the market up where it was. When Chicago, under the Patten deal, closed, it was $1.24, I think; was it not, Mr. Merrill?

Mr. MERRILL. About that, I believe.

Mr. CULVER. Toledo closed for actual bids to feed our people in the State, and through the South, at $1.57 for the cash wheat. We did not have it in the States. We have been running behind on our yield for years, so much so that it is alarming our people all over the State, in Indiana, Michigan, and Ohio; and the same thing would apply to Kentucky and Tennessee.

Mr. SIMS, of Tennessee. I would like to ask a question, if I may. Mr. LEVER. I understood you to say a moment ago that through the operation of a rule of your board of trade you had practically eliminated the purely gambling transactions?

Mr. CULVER. Well, it may creep in to a certain extent through the big commission houses or the country dealer; but we would know nothing about it. When the grain is sold, in all instances, it contemplates the delivery of the stuff.

Mr. LEVER. But as a matter of fact through this rule you have practically eliminated the purely gambling transactions.

Mr. CULVER. Yes, as far as possible.

Mr. LEVER. Now, I want to ask this question: If you have been able to do that on your board of trade, is it not possible through like rules on other boards of trade, that the same process of elimination of gambling might be had?

Mr. CULVER. I will say this-it is only hearsay on my part, and would make bad evidence-that I know the Chicago board and all the other boards are working diligently to eliminate it and stamp it out.

Mr. LEVER. And you believe that it can be done through the exchanges themselves?

Mr. CULVER. I think it can be done and will be done by the boards themselves.