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Dakotas, farmers' associations provide themselves with storage and elevating facilities, -To 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, even though his competitors are offering a cent or two more per bushel. 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 car 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.1 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 farmers 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.
to show that combinations between elevators and railroads have practically eliminated competition. Many of the railroad officials are stockholders in elevator companies.
The History of the Primary Market has been the history of the terminal elevator systems. In the control and operation of these systems lies the key to a proper comprehension of the functions of the primary market in grain distribution. The terminal elevators, operated on such a stupendous scale, receive, store and transfer all grain that flows from the local markets to the primary market. They contain by far the larger portion of the country's visible grain supply. The importance of a primary grain market like Chicago, the historic storm center of the competitive conflict for control over the Mississippi valley grain movement, is augmented by the fact that its supremacy as a distributing center for manufactures depends largely upon its capacity to command the agricultural products which are exchanged for the manufactured products. Herein lies the ultimate explanation of the consolidation of the distributive agencies engaged in the grain trade.
The Pacific coast warehouses, located on the railroads and rivers, are generally operated in the interest of milling, exporting or speculative dealers. In recent years, many farmers have shipped directly to the coast cities and placed their grain in storage there. Each farmer makes certain of securing the return of his own wheat by marking his sacks and piling them together, for the wheat, coming from the dry interior, usually gains enough in weight to pay for storage. The large wheat dealers of Portland and San Francisco have local buyers to represent them at the railroad stations and steamboat landings.
The Inspection of Wheat.—The rigid system of grain inspection and grading maintained by various states and trade organizations not only simplifies and facilitates the movement of wheat to a surprising extent, but it also tends to minimize fraud in the grain trade. In wheat inspection the greatest care and accuracy are always maintained. The procedure at Minneapolis is approximately as follows: One man, passing along the cars, records their numbers and initials, and takes note whether their seals have been tampered with; another man breaks the seals and opens the doors; the third man is the wheat expert who is the official deputy inspector of the state. Quick and keen from long experience, the inspector looks for foreign matter mixed with the wheat, examines the quality of the grain, and smells for smut. Sometimes the cars are loaded fraudulently by placing inferior wheat in portions of the car where the cunning shipper imagines it will escape detection. Such cars are said to be "plugged." The inspector thrusts a brass plunger deep into the wheat in different portions of the car and brings up samples for the purpose of discovering improper loading. The elevator and commission houses have a sampling bureau, representatives from which accompany the official inspector. The samples which they secure are marked with the number and initials of the car from which they were taken. At the opening of the chamber of commerce, these samples are set out in pans, and form the basis of the day's trading. The state secures complete records and samples of all cars inspected. These are kept until the grain has passed out of the market, so that any dispute as to the quality of the grain could be easily settled. After the inspector has finished his work, the cars are resealed with the state seal. The wheat is rarely delayed more than a day in the cars in which it arrives.
Should an inspector make a slight error in judgment, it might make a difference of a grade in wheat, and a gain or loss of $25 per car. In comparison with this, the cost of inspection is nominal. If there is dissatisfaction with the inspector's decision, appeal may be made to a state board which is especially appointed to hear such complaints. Unless the grade of the wheat is changed, the expense of the second inspection must be borne by the objector. In 1889, 30 to 40 cars were inspected in Minneapolis in an hour. A decade earlier 60 to 90 cars could be inspected in an hour, because the wheat was cleaner. The exporting of wheat from the interior of the United States involves from three to six inspections of any given lot of grain. At the six terminal points of Minnesota, Minneapolis, Duluth, St. Paul, St. Cloud, New Prague and Sleepy Eye, 125,564 cars of wheat were inspected "on arrival" during 1905, and for the same year there were inspected "out of store" 59,963 cars, and 19,692,490 bushels shipped in vessels. Out of 11,009 appeals coming before the Board of Grain Appeals on all grain, in 7,859 the decisions of the chief deputies were confirmed.
The Weighing of Wheat.—A few years ago the average weight of the loads weighed at Minneapolis was 20 tons. Now monstrous weighing machines weigh 50 tons at a time. Some states have a state weighing department. That of Minnesota, located at Minneapolis, has given service which steadily grows in public confidence and favor. In 1902, it employed 68 persons, and supervised weighing at 42 elevators and 17 flour mills, besides 4 feed mills, 5 oil mills, and 3 railroad yards. It weighed 233,127 car loads and 5,564 wagon loads, which included 152,810,383 bushels of wheat. The revenue was nearly $60,000, and the disbursements were about $4,000 more. It is the intention of the law that the service shall be self-sustaining. The department has also removed from the field a notorious class of men known as grain thieves. Only 81 errors were made in weighing 259,996 cars of grain, and 6,000,000 bushels of grain have been weighed with an average shortage of only 40 pounds per car.
The Commercial Grading of Wheat.—The value of wheat varies with its quality, and with the purpose for which it is to be used. In the school of competition, manufacturers of cereal products and large consumers of raw cereals learned that it is essential to know the relative values of different lots of grain. The experience of these men, aided by science, determined the kinds of wheat that are best adapted for various purposes, and the methods of distinguishing them. This was the origin of the commercial grades of wheat. The grading of wheat consists in examining the various lots or cargoes to determine their quality and uniformity, and in assigning them to the proper grades. The principal characteristics which aid in fixing the grade are weight per bushel; plumpness; soundness; color; and freedom from smut, foreign seeds and other matter, and from mixture with a different type of wheat. These characteristics vary so in degree and combination that they are not reasonably distinct, and consequently they are difficult of measurement and definition. Gradations are continuous, and if lines are drawn to mark the limits of the grades, it is difficult to determine the grades in cases close to the lines. Consequently, grade requirements have been couched in obscure and indefinite terms and phrases, and the responsibility for their interpretation has been left largely with the grain inspectors.