PARAGRAPH 277-LEMONS.

cost of packages, loading, etc., as well as the salary of the manager and office force, at $7,417.47 and the production from those 20 acres as 6,989 boxes. A simple computation gives us $1.06 per box as the cost of production in California. This figure, we believe, from our knowledge of conditions, is practically correct.

A statement made in 1910 contends that the cost of domestic production has increased to $1.83 per box, an increase of 75 per cent in three years.

FOREIGN COST.

As to the cultivation cost abroad we can only conclude, after inquiry and investigation from various reliable sources, that the statement made by Mr. A. F. Call, of Carona, Cal., when he appeared before the Ways and Means Committee of the Sixtieth Congress, is only slightly below the correct figure. Mr. Call, in answering a question of Mr. Fordney (p. 477, the tariff hearings, Wednesday, Nov. 18, 1908, stated that the cost of production in Italy was 75 cents per box. It appears from statements made at that hearing by Mr. Call and other members of his committee that they had arrived at this figure as cost on a computation made from figures given in a statement by a former resident of Italy, who, however, acknowledged in his statement that he was quoting the wage paid labor some 10 years prior to the date on which he made the statement. It is a well-known fact that labor at this time in Italy is paid more than twice the wage quoted at that time. We believe $1.10 per box foreign cost of cultivation is more nearly the correct figure. To this must be added about 55 cents per box for packing, freight, etc., to shipping point.

FREIGHT RATES.

There was much said at the hearings before the committee of the Sixtieth Congress in reference to the cost of transportation. It was shown that it cost much more to bring a box of lemons from California to New York than from Italy, but as at least 75 per cent of the Sicily lemons arriving at the seaboard are reshipped to the interior markets, an extra freight of 24 cents to $1.26 per box, carload rate, must be added to the cost at New York. This should be considered when comparing cost of the California product at interior points, viz: Buffalo, 24 cents; Chicago, 34 cents; Atlanta, 47 cents; Minneapolis, 56 cents; Omaha, 69 cents; Fort Smith, Ark., $1.10; and Denver, Colo., $1.26. Happily at this time there is little need for argument or difference of opinion on this item. Almost as soon as the rate of duty adopted by the incoming Congress will be in effect the producers of lemons in California will have a water rate for their lemons via the Panama Canal and should be able to deliver their fruit along the Atlantic seaboard at less cost than that of transportation from Italy to New York. The rate now in force from Italy to the United States is 374 cents per box, the steamship companies engaged in this traffic having advanced rates to this figure about December 1, 1912, from 30 cents per box.

DISTRIBUTION AND SALE OF LEMONS.

To better understand the conditions controlling the distribution and sale of the California lemons, it is well that the members of the Ways and Means Committee should understand that approximately 85 per cent of the California lemons are all marketed or sold through one agency; in other words, there is no competition between the California producers. Almost the entire production is turned over to one selling agency, and the only element in the trade that restrains or controls the price at which the fruit is sold is the price which imported lemons bring at public auction in New York City and New Orleans. While it is true that there are also a few California lemons sold at public auction in such markets as New York City, Baltimore, Boston and Philadelphia, it is only a small percentage of the quantity shipped from the Western coast. The greater portion of their production is sold to interior markets, and the methods there employed are different than those used in the sale of any other class of merchandise. If dealers in Minneapolis, Sioux City, Omaha, or other markets of that character, wish to buy a car of California lemons, there is practically only one source from which they can make the purchase, and that is the selling agency of the producers which is known as the California Fruit Growers' Exchange. This organization has brokers to represent them in every market in the United States. The buyer must go to this broker, and when he places the order and asks the price at which he can buy, the broker telis him that lemons are sold subject to the price ruling on the day of arrival. The buyer has no means of knowing in advance what he will be obliged to pay for the car of lemons. When the fruit finally reaches him the price is determined in this way:

PARAGRAPH 277-LEMONS.

The exchange agent has been notified by some district manager, or directly from the office of the California Fruit Growers' Exchange at Los Angeles, the price at which the car is to be sold. This price is determined by adding the freight from New York to the city where the purchase is made to the price at which lemons are selling at auction in New York. In other words, there is no competition from the West. The only competition in price of lemons is from the East. Therefore, the California producer can sell his lemons at Denver at a price which is equal to the New York selling price plus the freight to Denver. It will therefore be found that California lemons are sold at a higher price in Denver than Kansas City, while at Kansas City they get a higher price than at Chicago. At Chicago they get a higher price than they ask at Buffalo. The greater the distance from California, the cheaper the buyer can buy lemons grown in California. The method of selling foreign lemons is at public auction to the highest bidder, the price being regulated by the supply and demand.

DIVERSIONS.

Without doubt you will be asked to take the price at which California lemons are sold on the Atlantic coast as an evidence of the value of that fruit, and there is this, also, to be considered in that connection: The rate on lemons from California to all parts of the United States east of the Rocky Mountains is identically the same, about 84 cents per box. It is the practice of the shippers in California to ship thousands of cars of citrus fruit which have not been sold at the time the shipments are made. These unsold cars will be billed to the order of the selling agency at some point like Kansas City. Before a car so shipped reaches Kansas City an agent of the exchange may have sold that car at Indianapolis. Without any additional cost to the shipper the car is diverted and goes on to Indianapolis, where it is delivered to the buyer. Now it sometimes happens that a number of these cars may reach Kansas City, which is known as a diverting point, before they are sold. They may, in fact, stand several days on a track in Kansas City. They may then be forwarded to Chicago. They may stand some days on a sidetrack in that city. In the meantime buyers are taken down to the cars, which are opened and the fruit examined. If it can not be sold in Chicago, some of those cars may be sent on to Cleveland, where they are again held while they are shown to the buyers. If they can not be sold at Cleveland, the same process is repeated at Buffalo, or possibly Pittsburgh. Finally, when it is found impossible to sell this fruit at private sale because of its being in bad conditions or undesirable stock, those cars are sent on to New York, Baltimore, Boston, Philadelphia, or some auction market where they are sold at public auction.

Now, the railroad companies have handled cars so shipped many times, placed them on sidetracks, rebilled them, and finally brought them into New York at the same rate it would have cost the shipper had he sent the fruit direct or at the same rate it would have cost him to deliver the car in Kansas City or Omaha. Most of the California lemons sold on Atlantic seaboard are what we in the trade call "diverted cars." Sometimes they have been 30 days on the road before they reached the market; and the only reason for sending them on to the auction market is that the condition and quality of the fruit was not such that they could be sold to interior buyers at private sale. This explains the low price at which California lemons are oftentimes sold at auction on the Atlantic coast.

CALIFORNIA LEMONS BRING HIGHER PRICES THAN FOREIGN LEMONS.

When lemons are scarce, however, and good, fresh California fruit is shipped direct to New York City and offered at public auction, we find that that fruit invariably sells at considerably higher prices than imported lemons are being sold under like conditions at the same time. As proof of this statement we submit for your consideration results of different sales during the late summer of 1912 in New York City:

On September 13 cargo ex steamship Alice imported lemons were sold at public auction, the average price realized being $7.40 per box.

On September 18 cargo ex steamship San Guglielmo imported lemons were sold at auction, the average price being $6 per box.

On September 11 California lemons sold at auction averaged $9 per box. On September 17 the average was $9.75, and on the 18th and 19th $8.50 per box.

On September 25 three small cargoes of imported lemons ex steamships Duca d'Aosta, Laura, and Moltke were sold at auction, the average price realized was $5.50 per box. On September 25 California lemons averaged at auction $6 per box, and the same price at the sale of September 26.

PARAGRAPH 277-LEMONS.

During the month of September the lowest price at which California lemons of poorest quality were sold in New York was $4 per box, and the highest price realized was $10.87 per box.

LEMONS SHOULD BE ON THE FREE LIST.

Now, knowing conditions to be as we have outlined them, we as practical dealers in fruit wish to state most emphatically that there is no possible ground to just fy the present exorbitant rate of duty now in force. Even if you consider the question from à standpoint of "protection" without reference to the rights of the consumer or the question of revenue for the Government, the duty is prohibitive, and there would not be a box of lemons imported to the United States at this time if home production was sufficient to nearly satisfy the demand. California growers can produce a more salable lemon than is shipped to the United States from Sicily and at no higher cost delivered on the Atlantic coast. The difference in the price at which they can sell their fruit would alone insure them a reasonable profit. In previous arguments they have made much of the cost of production. They have stated repeatedly that it cost $1,000 per acre to develop a grove and bring the trees to the age when they will commence to bear lemons. The net returns to the grower of California lemons based on the cost of the land plus development must be very large. We base our judgment on the statement of Mr. G. Harold Powell (our p. 7, cost of domestic production), and the average selling prices of their product. We believe these growers are receiving unjust protection at the expense of the consumers.

It is generally conceded the world over that lemons are a necessity and not a luxury. We believe that in order for the masses to obtain lemons at a minimum cost that will produce a fair profit to the producer that importations should be increased, and there fore believe that the duty on lemons should be abolished.

Hoping the recommendation made will receive your consideration,
Respectfully submitted.

NEW YORK FRUIT EXCHANGE.

EUGENE M. TRAVIS,
WM. R. PRALL,

JOHN RIS, Jr.,

HARRY L. THOMPSON,

JACOB BECKMAN,

JAS. S. WILKINSON,

Committee.

JANUARY, 1913.

WM. A. CAMP, Ex officio.

TESTIMONY OF CHARLES M. STEWART, OF BANGOR, ME., REPRESENTING T. J. STEWART CO. AND HACKETT SHOOK CO., OF BANGOR, ME.

The witness was duly sworn by the chairman.

Mr. STEWART. Mr. Chairman and gentlemen of the committee, I come before you to-day representing the entire people of the State of Maine, and more particularly the manufacturers and laborers of a particular industry in that State, and the entire people of Maine from their standpoint as consumers of lemons. You gentlemen all, I think, are willing to concede that lemons are a necessity. There was a time even in my recollection when they were considered a luxury, but that time has long since passed, and medical science tells us to-day that lemons are a necessity in the treatment and cure of the sick.

Thirty to forty years ago I freely bought lemons, all imported, at 15 to 25 cents per dozen, according to size, and time of the year. Within the last two or three years I have paid 50 and even 60 cents per dozen for them in the city of Bangor in the State of Maine, where reside. Why? Because of the duty of 1 cents per pound imposed by the Payne-Aldrich Tariff Act.

PARAGRAPH 277-LEMONS.

Mr. NEEDHAM. Have you been across the line in Canada during that time?

Mr. STEWART. I have been across the line, but not to any great extent.

Mr. NEEDHAM. They have free lemons and free oranges in Canada?

Mr. STEWART. I could not tell you, sir.

Mr. NEEDHAM. Does not the consumer in Canada pay exactly the same as in the State of Maine?

Mr. STEWART. I could not tell you, sir; I have not been there. Mr. NEEDHAM. I should advise you to take a trip up there.

Mr. STEWART. Before I get through you may see that it is impossible for me to do so at present, for want of funds. [Laughter.]

Mr. NEEDHAM. Well, you can write a letter to a friend; it will cost you 2 cents.

Mr. STEWART. California claims the need of protection to maintain what they call an infant industry, lemon culture. In the life of a human being there are several stages, known as infancy, childhood, manhood, and old age, and sometimes we hear of second childhood; but I never yet have heard of second infancy. The infant period of the lemon culture in California I think has long since passed, and it has reached its manhood by this time, judging from the reports I have received.

Not more than 40 per cent of the lemons consumed in the United States are raised in California. California has a natural market for her entire production west of the Allegheny Mountains. Why impose a duty on lemons to protect the California lemon when the cost to land them on the Atlantic coast with the inland freight rate added will bring the cost to any interior point west of the Allegheny Mountains above what the Californians can sell for at a very large profit? But you have heard and probably will hear regarding lemons from others who are better prepared than I to give you the facts and figures regarding quantity raised, the cost of production, and the prices charged for them throughout the country. So I will turn my attention to an industry in the State of Maine-or which was there a few years ago; it is not there now-in which the manufacturers and laborers were vitally interested and which the duty on lemons has annihilated. I refer to the manufacture and exportation of the shooks from which boxes are made to pack lemons in in Sicily and ports on the Mediterranean for shipment to this country.

The State of Maine is the only State in the United States that has ever exported a cargo of such shooks into the Mediterranean. was a business that was promoted by my father in 1858, and from that time down until the passage of the Payne-Aldrich bill we were making shipments annually, reaching about 4,000,000 boxes in a single year at times; not every year.

When the Payne-Aldrich bill was passed we had contracts, as we frequently had, covering a period of two or three years. Immediately on the passage of that bill the foreigners endeavored to have contracts for future delivery canceled. We were able to prevent that, as our contracts were with responsible parties, and we held them to the shipment, so that after the passage of the bill in 1909 we wer ble to make a few shipments, but in 1912 not a bundle.

PARAGRAPH 277-LEMONS.

The CHAIRMAN. You mean to say that the increase of this duty on lemons wiped out this box industry in Maine entirely?

Mr. STEWART. Absolutely, sir. That business was bringing into Maine annually from $100,000 to more than $200,000, all foreign capital; not American capital; not 1 cent of it; all foreign capital; brought into the State of Maine and distributed there-after the stumpage to the land owner was paid-chiefly to laborers engaged in manufacturing and shipping those shooks. That money was brought into this country and remained here in circulation. Now, we get not $1 of it. We have had in all these years competition in the box business in the Mediterranean ports from Austria, but when this tariff act was passed the Sicilians and Italians became a little bit aggrieved at the treatment they were receiving here, and they said, "We will give the Austrians all of the business if you people in America are going to treat us this way and shut our trade out of your markets. We will not buy your shooks," and they have not done so

either.

Mr. FORDNEY. You have not shut out of our markets their products, because their importations last year were increased; including the years 1895, 1896, 1910, 1911, and 1912-their importations were greater in 1912 than in those years. So they were not shut out.

Mr. STEWART. Not shut out entirely; no, sir. But you put a duty on here that intended to shut them out if you could.

Mr. FORDNEY. In these years their importations increased and the value of the importations increased.

Mr. STEWART. Yes, sir.

Mr. FORDNEY. Then, how did that affect your box business, if their importations increased?

Mr. STEWART. I told you how it affected it. It has driven us out of business.

Mr. FORDNEY. But are you correct? Because their importations increased instead of decreasing.

Mr. STEWART. I am correct in telling you what they told me. Mr. FORDNEY. Ah, well; that is a different thing. You are blaming the Payne tariff law for it

Mr. STEWART. Because the people I have for customers tell me that the passage of the Payne Tariff Act is the reason they have for taking the action.

Mr. FORDNEY. My point is, when under the increased duty their importations increased and the value of the importations per box increased, how the law could have anything to do with it?

The CHAIRMAN. I want to say to Mr. Fordney that he did not catch the statistics I read this morning. I read into the record this morning some statistics which showed that the amount of lemons we had imported had fallen off very considerably since the passage of the PayneAldrich bill.

Mr. FORDNEY. I think I did catch it. I am speaking of the record as given in the statistics here.

The CHAIRMAN. These are all since the Payne-Aldrich bill was passed.

Mr. FORDNEY. In 1906 and 1905.