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21.5 ounces per bushel in 1904, and 18.6 ounces in 1905. Eighteen grades of wheat were recognized in Minnesota in 1902. Wheat contracts well illustrate Gresham's law and the action of a double standard, inasmuch as that grade which is most abundant and cheapest in any one year becomes the contract grade for that year, and other grades are delivered only at a premium. The grade is always either understood or specified in contracts on the produce exchanges, and a contract cannot be settled except by a delivery of that grade, or of some higher grade. It is only in comparatively recent times that a contract can be settled by a higher grade, for this is now allowed in order to avoid “corners.” The Mixing of Wheat.—After grades became fixed, houses for cleaning grains and bringing them up to the standard were established. These branched out to include a system of mixing higher and lower grades of wheat to “bring the whole up so it would pass muster, according to the rules of the respective inspection departments for which the mixture might have been made.” Grades were thus manufactured. In New York, for example, there were two classifications of grades, one for delivery on the New York produce exchange, and the other for export, both under the same name. The mixing houses were private enterprises, and under no inspection. The practice increased the profit of the mixing house, but it lowered the grades of wheat. The mixer often makes a greater profit per bushel than the producer, and the business is so important that practically all terminal elevators in Chicago have their mixing houses. In running wheat of a high quality through the cleaning house, some of a lower grade is mixed with it in such proportion that the mixture barely passes the contract grade. Two cars of No. 2 wheat mixed with three cars of No. 3 may make five cars of No. 2 wheat. The difference in price between the grades may range as high as 15 cents per bushel. The mixing of wheat tends to fix its price to the disadvantage of the producer. In order to obtain a special quality of wheat, a premium must be paid for it. Export grain sold by sample commands a premium of from 1 to 4 cents per bushel over the speculative grades held in store in American grain centers. The benefit of this premium goes to the mixer and seller of the wheat, and not to the farmer. Wheat taken out of storage is not always of the same quality as that stored. The buyer who purchases in a territory where a low grade of wheat predominates is at a great disadvantage in competing with a buyer who purchases in a territory where the grade varies. Most of the mixing of wheat is done at the primary markets."

1 Emery, Speculation, p. 137.

The Advantages of Mixing Wheat are great, and perhaps more than counterbalance the evils resulting from the practice. Without the mixing of wheat, the farmer would be at a great disadvantage because the demand for off grades would cease. Legislative efforts have been made to stop the mixing of grain, but supervision by duly authorized inspectors is a more probable solution of the difficulty. Some elevators make an exclusive business of handling wheat that is shrunken, damp or injured, and work it up a grade by drying, cleaning and mixing. Damp wheat is turned over to them by the regular companies, who do not care to put it in their elevators.

Insurance.—There was insurance on goods in trust at least as early as 1704. On granary risks of stored grain the rate under the London mercantile tariff in 1877 was 0.76 per cent. After the fire at the King and Queen Wharf of that year, the rate was raised to 1.08 per cent. In recent years in the United States, a few companies are writing insurance on wheat in the stack or granary, upon which they charge a rate of 1 per cent per annum. Wheat in elevators at the local market is insured by most of the large fire insurance companies at a rate depending upon the construction and hazard of the elevator, and varying from 1.5 per cent to 3 per cent per annum. Grain in transit is insured under railroad schedule policies written by a syndicate of companies in New York. The rate upon this class of risks is from .60 per cent to 1.5 per cent, for it varies from year to year. The rate of insurance for wheat stored in elevators at the primary or seaboard markets varies from .50 per cent in modern elevators of steel and concrete construction to 3.15 per cent in elevators of other construction, according to type of construction and surroundings. In Canada, the law compels warehousemen to insure stored grain, and the average rate on grain in elevators is nearly 2 per cent.

* Industrial Commission, 10:cccxxi : cocxxix.

Marine Insurance of grain cargoes transported on lakes, rivers or oceans is obtainable. Losses on such transportation in American ships were so great during the winters of 1878 and 1879 that “many underwriters on either side of the Atlantic ceased to write them at any premium.” Thirty-five years ago the insurance rate on grain-carrying sailing vessels to Liverpool was 1.25 per cent from New York and 2.25 per cent from Montreal, and on steam vessels 1 per cent from New York and 1.25 per cent from Montreal.

Financiering the Movement of Wheat.—The large money centers are not as great a factor in the moving of the wheat crop as they were at an earlier date, for to a large extent the rural sections now do their own banking. The banking power has grown much faster than the increasing money requirements for moving crops. In 1890 the banking power of the chief grain states was to the money power required to move the grain crop as 4 to 6, and a decade later the ratio was as 7 to 6. The grain growing region now has sufficient capital to move the cereals from first hands and to start them well on their way through the commercial channels. A dealer furnishing money for about 175 country elevators in Minnesota and the Dakotas sends out $500 to $1,000 to each elevator, making from $100,000 to $150,000 sent out the first day. Cars are not obtained on this day, and perhaps 50,000 to 100,000 bushels are purchased. A sort of paymaster is located in the elevator towns, and these keep the principal informed as to the amount of wheat purchased daily, and as to the amount of cash that will be required the next day. Much of this cash must usually be borrowed, but warehouse receipts for grain already in elevators are good security on which an amount of money close to the cash price of the wheat can be borrowed from the country banker. There must be a car load of the same grade of grain before shipment can be made. When the grain does begin to move it takes several days for it to get to market, and five or six days’ receipts are often on hand before cash is realized. As soon as a car is loaded, the elevator man draws a sight draft on the commission house at the primary market for the amount that he borrowed from the country banker, attaches the bill of lading, and deposits the draft in the country bank as a cash item. Cables are frequently sent at night to every market of the world in order to sell wheat. What cannot be sold must be held, and future sales upon the speculative markets can be made as an insurance against loss from price fluctuations. The country banker sends the draft to his correspondent at the market, where collection is made. As soon as the wheat reaches the terminal warehouse, it is again available for a loan close to its market value. If the terminal factor is an exporter, he also attaches bills of lading to a draft drawn against the shipment, and his banker accepts this draft as cash at current exchange rates, which include interest on the money until the draft is paid. Outside of the money used by the railroads, it requires about $500,000,000 to move the grain crops. If the farmers do not wish to sell their wheat at once, they can place it in the elevator and receive a receipt on which they can borrow 90 per cent of its value from the banks. The Marketing of Wheat in Foreign Countries.—The characteristic feature of the wheat movement in the United States consists in concentrating the surplus for export. Only a few of the larger exporting countries resemble the United States in this respect. In the non-exporting and in the importing countries, the main problem is the distribution of the wheat among the population. In this case the entire machinery of marketing and transportation must be modified and adapted to the conditions peculiar to each country. In exporting countries, the wheat is bought by buyers who are either established at the local centers, or who travel through the country purchasing grain from farm to farm. It is only the larger grain centers of Europe which employ the economical American system of elevators in handling grain. RUSSIA.—In Russia, as is usual in foreign wheat producing countries, the machinery for buying, handling and transporting wheat is very imperfect. Where transportation facilities are adequate their use is expensive. On long distances railroad rates have been higher than in the United States. They have been estimated at 3 per cent of the cost of production. Russia is well supplied with rivers, and a decade ago the larger proportion of export grain was still moved by river and canal. The railways have now become a more important means of transportation than the rivers and other water routes, and they will

1 Industrial Commission, 6:135-137; 11:10-11.

doubtless be the great factor in the future development of the country. The construction of the trans-Siberian railroad has been considered as the initial step in the opening of extensive grain fields. This railway is about 6,600 miles long in its direct line. Earth was broken for its construction in 1891. The road has been completed, but “what this country can do in the way of wheat production is yet to be demonstrated.” On account of high freights, wheat cannot be shipped to the frontier by rail, and the surplus of Western Siberia does not get beyond the rural districts. Much of the grain from the western wheat lands of Siberia is carried by boat down the Irtish and up the Tura to Tiumen, from which place it is forwarded by rail to Russia. Some is also shipped east and west on the transSiberian railroad. In Russia, grain was formerly handled in sacks. There were no elevators at the country stations and the grain was much damaged from exposure to the elements. The same state of affairs existed at the seaports, where the grain was further damaged. Here an attempt was made to classify the grain according to its quality, but there was no machinery for cleaning it. Screenings were bought from the farmers and again mixed with the wheat. Various other extraneous matters were also introduced, such as manure, sand, and a species of grass, Kukal. The latter was in such demand at times as to bring a higher price at Odessa than rye. In 1888 the first warehouse with elevators was erected in Russia, and it did not pay expenses. Subsequently the Russian government assisted in erecting grain elevators on the American plan. These were mainly along the lines of the southern railway, and at Odessa and other southern ports. In 1895 there were 55 warehouses with elevators, having a capacity of about 8,905,000 bushels, and 221 warehouses without elevators, having a capacity of about 9,082,000 bushels. In 1898 over 50 per cent of the Russian wheat contained 2 per cent of foreign matter, and some of it contained as high as 12 per cent. No attempt at grading and inspecting the wheat has thus far been successful. It is mostly sold on sample in Great Britain, and there are frequent complaints of fraud. Some fruitless efforts have been made to get Russian wheat sold on a 5 per cent extraneous

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