Mr. FITCH. The authority is vested in the State R. R. and W. H. commission to change, but it has not been changed in years. It has been governed a great deal by a change in the wheat territory. For instance, as every student of wheat growing knows, the wheat belt is working farther north. Ten or fifteen years ago an immense amount of wheat was grown in northern Iowa and Kansas and Nebraska that is no longer grown there to-day: that is, the land that was then used for wheat is now used for corn and oats and barley, and the wheat growing has moved farther north. There has been a great increase in wheat growing in the British northwest.

Mr. MERRILL. In speaking of the grades of wheat, I want to have you tell the gentlemen that on delivery there may be No. 2 and No. 1, the No. 1 is always deliverable in all the grades, No. 1 red or No. 1 hard winter; and then comes the No. 1 northern. That makes five grades.

Mr. FITCH. I might state that No. 1 is also deliverable or tenderable on contract, but the State has never been able to find any of that.

Mr. LEVER. You always deliver the cheapest grade?

Mr. FITCH. That is most natural; yes. You fill your contract with the wheat that is bringing the smallest price.

Mr. LEVER. Would not the tendency be that the buyers would run away from that?

Mr. FITCH. Not particularly so. Every wheat we have, if on spot to-day, is above the May.

Mr. MERRILL. In order to get the record straight about the grades, the law of the State of Illinois prevents the changing of a grade during the movement of the crop. It has to be advertised for thirty days in advance of the movement of the new crop.

Mr. BURLESON. You say it frequently happens that when a merchant sells a contract on the board and sees an opportunity to make a more profitable deal, he buys the contract back without effecting an actual delivery upon it. Now, in what percentage of the transactions on the board of trade is settlement effected without delivery? Mr. FITCH. I have stated I could not answer that. I have stated that three different times.

Mr. BURLESON. You can not answer that?

Mr. FITCH. No.

Mr. BURLESON. You have no idea?

Mr. FITCH. I have no idea. There is no way of getting statistics. I answered the chairman so far as my personal business was concerned. I could tell about that, but I could not answer in regard to the other members.

Mr. BEALL. The business done on the Chicago Board of Trade is not limited to the State of Illinois, of course?

Mr. FITCH. No, sir.

Mr. BEALL. Members operating on that board have their correspondents scattered throughout the entire wheat belt?

Mr. FITCH. Yes, sir.

Mr. BEALL. Now, suppose that man at Springfield, to take an illustration, wants to buy 10,000 bushels of wheat and sends you the order, and you sell it.

Mr. FITCH. I don't sell it. I buy it for him.

Mr. BEALL. You buy it for him, I mean. Where is that wheat to be delivered; where is it deliverable?

Mr. FITCH. That is deliverable at Chicago, Ill., in public licensed storehouse; licensed by the State, provided by the State.

Mr. BEALL. Well, suppose the man who sells May wheat buys it in some other State than Illinois ?

Mr. FITCH. Yes, sir.

Mr. BEALL. How is it determined what wheat the seller, say, in Nebraska, delivers upon that contract? He would not send that wheat to Chicago?

Mr. FITCH. He would have to make a delivery and order it in the store, and take out from the elevator company a receipt.

Mr. BEALL. He could not send that wheat directly from some point in Nebraska or Minnesota to the miller in Springfield, Ill. ?

Mr. FITCH. No, sir; he could not. The delivery would have to be made, the trade would have to be made, and having been consummated upon the board, his delivery would have to take place there by the passage of a warehouse receipt calling for so many bushels of wheat; and then if the man in Springfield who had asked me to buy that 10,000 for him and I had done so, required that wheat in the mill at Springfield to grind, his orders would be as follows: "Please order out of store 10,000 bushels of No. 2 hard wheat that you are carrying for me. Ship to my order at Springfield." We would have the wheat ordered out and send him the wheat, with a draft attached, and clean it up.

Mr. BEALL. Is there any burden imposed on the trade by reason of the fact that the wheat would have to stop off at Chicago?

Mr. FITCH. No; there is no burden on the trade. Everything in the central part of the West is handled on transit propositions, and so the wheat carries the through rate to common points.

Mr. BEALL. Now, take this No. 2 red. That refers to a particular grade of wheat?

Mr. FITCH. Yes.

Mr. BEALL. Are there other different grades of the red wheat?
Mr. FITCH. Yes; there is No. 1.

Mr. BEALL. No. 1.

Mr. FITCH. There is No. 3.

Mr. BEALL. And No. 2?

Mr. FITCH. And No. 4; and then that comes in so bad that that is rejected. Those grades are determined by the State and they are determined by the condition of the wheat upon arrival. For instance, I have seen wheat arrive at Chicago and have handled it myself, that is graded "rejected," or "no grade." We go to look into it and perhaps we have a letter from the shipper saying it got mixed with barley or corn or this or that, and you could hardly tell what it was. It is graded "rejected." Very frequently we will run that through a cleaning house and separate that stuff and the owner of that stuff will sell his wheat at a higher rate and his corn at a higher rate, and we will thus make more money for him.

Mr. BEALL. Suppose the man in Minnesota gathers that actual wheat to fill that order. He buys it from different farmers?

Mr. FITCH. Yes, sir.

Mr. BEALL. And it is all mixed in together?

Mr. FITCH. Yes.

Mr. BEALL. And it comes in to Chicago and the final determination of the grade is made in Chicago?

Mr. FITCH. Yes; when a man ships to the Chicago market and puts his goods on sale at the Chicago market, that means that he buys by Chicago inspection and buys it by Chicago weights.

Mr. BEALL. You really keep in Chicago, then, a great deal of the actual grain?

Mr. FITCH. We carry great stocks of grain.

Mr. BEALL. That you can bring there without any additional burden being placed upon the trade?

Mr. FITCH. Yes, sir. I might say this, Mr. Beall, that the stocks of grain carried at Chicago are not as large, or in any other primary market are not as large, the last year or so, as they have been. That is purely on account of the farmer. He desires to be a carrier of grain himself. He is now so well fixed that he does not have to send his grain particularly to the centers to be financed; he can finance it himself.

Mr. BEALL. And he has his elevators and granaries at home

Mr. FITCH. We could have a decrease in Chicago of 20,000,000 bushels from what we have had before, and that 20,000,000 bushels spread around upon the farms of the country would be nothing.

Mr. BEALL. Suppose this condition should prevail: Suppose on every bushel of actual wheat that came to Chicago, the mere fact of bringing that imposed a burden upon that wheat of, say, from 2 to 3 cents a bushel?

Mr. FITCH. Well, I can not suppose a burden put on it unless you explain where it gets on.

Mr. BEALL. Well, let us compare Chicago as a wheat market with New York as a cotton market.

Mr. FITCH. But I have nothing to do with cotton. You must not lead me into the cotton proposition, because I shall refuse to answer. I am here to give you information about grain, but don't flash any

cotton.

Mr. BEALL. Well, I am going to flash some cotton and then you can refuse to answer if you want to. I am going to state the situation with respect to cotton in New York and ask you if such a condition prevails with respect to grain.

Mr. FITCH. I will do the best I can.

Mr. BEALL. The testimony before the committee has been that there is a tax upon every bale of cotton that stops in the city of New York of $1.50 a bale; that in order to get the actual cotton in the city of New York as a basis for fulfilling the contract in cotton they are compelled to pay $1.50 more than the cotton is worth elsewhere. Now, if such a situation as that should prevail in Chicago with respect to wheat-say a bale of cotton is worth on the average $60, and $1.50 per ton placed upon it would be about 24 per cent of its value-suppose a corresponding burden should rest upon the wheat that is actually brought to Chicago, with which you gentlemen would have to execute your deliveries; do you believe that under such a condition as that Chicago would be or could be a wheat market? I mean a special wheat market?

Mr. FITCH. Wheat will seek the most advantageous and highest market. Chicago has no burden of that kind.

Mr. BEALL. That would be an unnatural condition?

Mr.

Mr. FITCHн. Yes. Chicago has no burden of that kind. Wheat that comes to Chicago is attracted there by Chicago facilities. Merrill, or Mr. Foss, what is the total storage in millions that we have in Chicago?

Mr. MERRILL. Mr. Foss can answer that.

Mr. FITCH. It is over a hundred million, public and private, is it not? We have storage room in Chicago for over a hundred million of grain, modern, rapid-working houses, big, massive elevators, and you throw a string of cars in and they take the grain out before you can hardly see it.

Mr. BEALL. Can you tell me what would be a fairly normal amount of grain in Chicago?

Mr. FITCH. I should say at the present time, between four and five million of corn, say five million corn; I would hazard a guess that there will be fifteen to twenty million in May.

Mr. BEALL. There are certain risks in the conduct of operations in wheat?

Mr. FITCH. There are risks in every business.

Mr. BEALL. I understand. The farmer that plants the wheat and cultivates it and gathers it and thrashes it bears part of the risk, I would suppose; he bears the risk up to that time?

Mr. FITCH. Yes.

Mr. BEALL. From the time it leaves the farmer's hands until it is converted into something else, ceases to be wheat, the risk is still maintained, the risk that is involved in handling it. Where, in your judgment, is that risk placed; who bears the burden of that risk, under the system that prevails in your board of trade?

Mr. FITCH. The farmer's risk ceases when he delivers it to the country elevator in the nearest town. The facilities for handling the grain in the wheat-growing country, as I stated this morning, are almost beyond comparison.

Mr. BEALL. When you buy some wheat from a farmer, in determining what price you pay for that wheat, do you not take into consideration the risk that you as a holder of the wheat will have to bear in the future?

Mr. FITCH, Yes, sir.

Mr. BEALL. And does not that affect the price?

Mr. FITCH. No, sir. It would if we were without the present system that we have. As I stated this morning, the difference of opinion of all the people in the world has created a market, and by the creation of a market has made possible the system of hedging. You can always find a buyer or a seller. And therefore on account of the handler of grain-the same man you speak of—on account of his having that protection or insurance, on account of that existing system to fly to, he is able to handle that wheat on the smallest possible margin of profit. I would venture to say to-day-I remember, in fact, in my own connection I ran a line of elevators for years, something over a hundred country elevators, and year after year through the system of hedging, of buying our stuff at the station from the farmers and then shipping it to the centers, and, in cases, on to the seaboard and then across the. water into consumption, handling it clear through. we were able to pay continually, year after year, to operate those elevators, and take wheat, corn, and oats from the farmer on a margin of profit of one-half to 14 cents; and there are men in this room who

operate lines of elevators to-day and who handle cash grain that can verify what I say.

Mr. BEALL. Suppose you wanted to buy from the farmer wheat to be shipped to Liverpool. In fixing the price that you give the farmer for that wheat, you take into consideration the cost of exporting that wheat, do you not?

Mr. FITCH. Not always, for this reason. We sometimes get, as we have been the last year, upon what we call a domestic situation. No statistician so far has been able to fully keep time with the enormous increase in consumption. The increase in competition or decrease in production many statisticians have been able to tabulate and give you reliable statistics from time to time; but no statistician has ever marked time with the great increase in production, I contend. Therefore we are at times upon what we call a domestic basis in this country. We are there now. We have been there for the last year and a half.

Mr. BEALL. Well, is that the usual situation?

Mr. FITCH. No, sir; but it has been gradually growing year by year by year. Let me make you a prophecy based on my experience of years in the grain business. The day will come when we will be down here because it will be within our time when we will be arguing with Members of Congress-we will be here arguing to you that you have got to take that duty off of Canadian wheat, because we don't want to go hungry. We can see it coming. I am giving you my personal idea. If I were buying wheat at Dennison, Iowa, to-day, say, if I knew of some wheat out there to sell or a man would come to me and say "I have got 10,000 wheat" (I have a man that comes to me every year that grows corn on his own farm out there and had 150,000 bushels to sell after he uses all he needs for himself), the way I would do with the wheat, I should decide one of two things. I should look at Liverpool and look at the domestic situation, competition in our business is very strong, Liverpool not being so advantageous in price, not netting so much with ocean freight, insurance, and so forth deducted, as our domestic situation, perhaps this is No. 2 winter wheat, perhaps it is No. 1 hard, whatever it is I am in touch with the milling demand and I know the mills are paying so much for that wheat. I will buy that 15,000 bushels of wheat, or 10,000 bushels of wheat, or 25,000 bushels or 50,000 bushels, or 100,000 bushels, and let him load it on the cars, and I will give the farmer who puts it in the cars within 1 cent a bushel of what I get for it.

That is made possible by the system that is in vogue, because the minute I buy that 100,000 bushels of wheat I will sell it to somebody. You ask who-the gambler? I say no. I will sell it to somebody in this broad world who wants to buy on that day.

Mr. BEALL. Well, that wheat has got to be transported somewhere and be delivered.

Mr. FITCH. Yes, sir.

Mr. BEALL. Does not the burden of that transportation charge ultimately fall upon the producer of that wheat?

Mr. FITCH. The producer is the best fixed of any man that is a party to the wheat transaction from the time the seed goes into the ground until the flour is eaten, and I can sit down and figure it out at the present time.

Mr. BEALL. How long has that prevailed?

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