shall not tell me; I do not want to have my remarks connected with the name; I think I know, sir, and that is the reason I ask you not to tell me. But I agree with you heartily, sir. While this is more or less of a new condition for the exchanges, I think our president will agree with me that it is time to exercise some censorship over the communications going out from our members in order to maintain our integrity.

The CHAIRMAN. I am glad to hear you express that opinion.

Mr. HAUGEN. Is it not customary for a member of the board of trade to discourage speculators?

Mr. MERRILL. Not for the houses which exist almost wholly for speculative purposes; we have cash grain houses, who do little speculating, and we have houses who do little cash-grain business and a large amount of business of a speculative nature; those people, of course, are imparting all the information they can bearing upon the questions connected with their business. As I understand it, the chairman does not refer to them, but to those who ought not to speculate or who are not in a position financially, or otherwise, to speculate.

Mr. HAUGEN. Do you often have customers in the country asking your advice as to hedging?

Mr. MERRILL. Oh yes, sir.

Mr. HAUGEN. As a general thing, is it not customary for the commission men or members of the board of trade to advise against pure speculation?

Mr. MERRILL. Yes, sir.

Mr. HAUGEN. That you would give them advice as to future delivery in the case of hedging, but outside of that the members of the board advise against speculation?

Mr. MERRILL. Our rule in my firm is to advise against speculation when it is simply and purely speculation, but always to invite hedging propositions, in order to eliminate speculation.

Mr. WHITE. I trust you will excuse me for referring to Mr. Merrill on the point of whether or not there has been any consideration given this matter of market letters, because I have no information that could be considered official.

The CHAIRMAN. I asked the question of the present witness, because being the president of the board of trade, the committee would like to have his opinion. Are there any further questions to be asked of Mr. White?

Mr. BURLESON. I would like to ask him one or two questions. Mr. White, if you sold a thousand tierces of lard for export

Mr. WHITE. Yes, sir.

Mr. BURLESON. And you wanted to hedge it upon your board of trade, under that contract how many grades of lard would be deliverable to you if the tender was actually made to you?

Mr. WHITE. Only one, a tender of only one grade. Prime western steamed lard, of choice quality.

Mr. BURLESON. You do not have a number of grades deliverable of different values, and the seller has the right to tender either one of those grades or all of them?

Mr. WHITE. No, sir; we have been very careful to keep up the grade. Mr. BURLESON. Now, is there any relation between the price of a future contract for the delivery of lard and the market price of lard, any relation between them?

Mr. WHITE. Yes, sir; they both move together.

Mr. BURLESON. They maintain a parity. The parity is maintained between the two; isn't that true? You say they move together; that is what I mean by parity.

Mr. WHITE. They move together, but subject to various influences. If the stock is heavy, the full carrying charge will exist. Say this is February, the cash price will be, with a heavy stock, as much lower than the May as it would cost to carry each article in the store until May.

Mr. BURLESON. I understand that.

Mr. WHITE. So, with that exception, they are the same.

Mr. BURLESON. But with that exception. But if there was a violent fluctuation of this margin, if it was frequently changing, it would cease to afford you protection as a hedge, wouldn't it? Mr. WHITE. If the cash and

Mr. BURLESON. If this margin between the price of the future contract and the market price of the product was constantly changing in a violent way, it would cease to be a protection to you?

Mr. WHITE. Well, it doesn't violently change in that way, as a matter of fact.

Mr. BURLESON. That is a matter of reasoning and you can reason it out.

Mr. BROOKS. Wouldn't it destroy the broad market that you spoke of if this speculation that you have been discussing is eliminated?

Mr. WHITE. Yes, sir; speculation, as I said before, enters into the commercial economy, and the real speculator helps to carry the stuff from the time of plenty to the time when it is wanted.

Mr. BROOKS. If you discouraged it you could have that use of the products on the market?

Mr. WHITE. Yes, sir.

Mr. HAUGEN. Is there any dealing for the future delivery of lard? Mr. WHITE. Yes, sir.

Mr. HAUGEN. To what extent do the consumers of lard or provisions avail themselves of the future market?

Mr. WHITE. You mean the buyers?

Mr. HAUGEN. I mean the hotel keepers and consumers in general, the smaller consumers of provisions?

Mr. WHITE. The retail buyers?

Mr. HAUGEN. Well, hotel keepers, and so forth.

Mr. WHITE. I never heard of it; I do not know why a hotel man would want to do that.

Mr. HAUGEN. They do to some extent.

Mr. WHITE. I do not know why a hotel man would buy future delivery; if he should do that, I should think he would have gone out of his province altogether. I know if I were in the commission business and received such an order I would not execute it.

Mr. HAUGEN. I was in Chicago in December, and in talking to a hotel man about the high prices, he told me he was not concerned about the high prices, as he had bought his eggs and lard in May for December delivery; he was paying then 26 cents for eggs and the market price was 35.

Mr. WHITE. He had probably made a contract in the country to be supplied with so many eggs in a week for so many months.

Mr. HAUGEN. I understood him to have bought on the board of trade for future delivery.

Mr. WHITE. Eggs are not sold on future delivery.

Mr. HAUGEN. I said his lard.

Mr. WHITE. Eggs are not traded in on the board of trade.

Mr. HAUGEN. But lard is.

Mr. MERRILL. Mr. Ward Ames, sr., of the Duluth Board of Trade, desires to say but a few words and file a brief regarding the matter before the committee.

TESTIMONY OF MR. WARD AMES, SR., OF THE DULUTH BOARD OF TRADE.

(The witness was sworn by the chairman.)

Mr. AMES. I have a brief which I desire to file, but in behalf of the Duluth Board of Trade I want to respectfully and earnestly protest against the passage of the bill, and as an exporter I want to state that it will seriously interfere with our export business, if not, I was going to say, ruin it. I have fully stated the facts in this brief.

Mr. MCLAUGHLIN. Is your board of trade unanimous in regard to the resolution you are presenting?

Mr. AMES. Yes, sir; I have a telegram from the president asking me to say for the board that any steps that would be taken to eliminate from the business the bucket shops would meet with our hearty approval, but that the selling and buying for future delivery were both the life of the business.

The CHAIRMAN. We understand that thoroughly.

Mr. AMES. One other item of interest would be the position that we occupy as exporters, and that is covered in that brief.

Mr. MERRILL. When I introduced Mr. Ames I did not do him the honor of saying that his firm is one of the largest, if not the largest, exporter of wheat in the Northwest.

The CHAIRMAN. We are very glad to have heard from him.

Mr. AMES. I appear before you as representing the Duluth Board of Trade and also appear in my own behalf as an exporter. Thirty years ago trading for future delivery was practically unknown in our market. At that time the volume of grain business in our country was small as compared with the present. At that time the maximum load on our Great Lakes was 18,000 bushels. To-day our large steamers carry 400,000 bushels, and this increase in tonnage fairly illustrates the increase in the grain business. It may seem strange to some of you gentlemen not familiar with the grain business, but it is nevertheless the fact that our present crops from the farm can not be handled without the present machinery of trade unfettered. It has taken these long years to develop our present system, and unless you can give us some equally effective way we must be allowed to trade in grain for future delivery or our commerce, so far as the grain business is concerned, will be ruined. The present system gives the farmer the whole twelve months of the year, or any one month, in which to market his crops. The exporter is able to find a market for a large portion of the grain before it is raised, so that when the new crop begins to arrive at the terminals it begins to move out and avoid congestion and slaughter of prices for the farmer.

36387-A A B-vol 2-10-33

Trading in grain for future delivery is the salvation of the farmer. As an exporter we are now having bids for grains to go out after the opening of navigation, and unless we have the right to sell for future delivery the export business is gone. We put out cable offers at night, subject to acceptance at a certain hour the next morning. If our offers are accepted we have sold something we do not own but will buy as soon as we receive our cable. We could not make an affidavit and furnish the same to the telegraph company that we owned the wheat when we filed the cablegram. When our receipts are free and we are buying faster than we sell abroad we hedge our purchase in some other market, say, Chicago. Now when we are putting out this hedge we can not make an affidavit that we intend to deliver that wheat in Chicago, for we may take off the hedge the next day. Some few years ago the Government introduced a new species of wheat into our northwestern territory through the Agricultural Department. They called it Durum wheat. Our millers do not look favorably upon this wheat and do not use it generally, preferring the old varieties, Blue Stem and Scotch Fife. This makes the Durum wheat almost altogether an export proposition. I maintain that we are doing a strictly legitimate business, benefiting the farmer, because we furnish him with the markets of the world for his product, and benefiting this country at large because we are bringing outside money into this country instead of swapping dollars among ourselves. I am not familiar with the cotton business but do know that the volume of grain business in this country amounts to several billions of dollars, and I urge you to think long and seriously before placing on our statute books any law which jeopardizes this volume of trade. I feel that this bill is inimical to the interest of our grain exchange and will seriously curtail our export business. For these reasons I beg of you to go slow in placing stumbling blocks in the way of its safe and sane handling.

(At 1 o'clock p. m. the committee adjourned to meet Tuesday, February 22, 1910, at 10.30 o'clock a. m.)"

COMMITTEE ON AGRICULTURE,

HOUSE OF REPRESENTATIVES,

Washington, D. C., Tuesday, February 22, 1910. The committee met at 10.30 o'clock a. m., Hon. Charles F. Scott in the chair.

The CHAIRMAN. The committee desires to proceed this morning with the hearings in relation to the grain exchanges, and if Mr. Merrill will present his next witness we will be glad to listen to him.

Mr. MERRILL. Mr. Chairman, our first witnesses this morning are from the Baltimore exchange; and the first one will be Mr. Snyder. director of that exchange.

TESTIMONY OF MR. JOHN W. SNYDER, OF BALTIMORE, MD.

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

Mr. SNYDER. Mr. Chairman, I am suffering from a severe cold and will necessarily be very brief. I had intended

The CHAIRMAN. Pardon me, I do not think the committee heard your statement to the reporter as to the organization that you represent.

Mr. SNYDER. I am a member of the board of directors of the Baltimore Chamber of Commerce, and president of the Hammond & Snyder Company, grain commission merchants and exporters. I had intended to make a little talk here, and I am very sure that you gentlemen will be much pleased not to have it, as I am suffering from a very severe cold. I want to iterate and reiterate what I have heard of the testimony before you by gentlemen from the different grain exchanges of the country. To my mind the evidence produced has been very strong and to the point. There has been nothing hidden simply because there has been nothing to hide. Our exchange, as an exchange, is against the bill that is now before you for the simple reason that if it were passed it would materially interfere with the proper conduct of our business. I brought with me on Saturday the 54th annual report of the Baltimore Chamber of Commerce, which I gave to Mr. Merrill.

Mr. MERRILL. It is here, sir.

Mr. SNYDER. And which we will file as part of our representations. As you will see, it is printed, giving statistics. It gives, in the start, the reason for the formation of what was then known as the Corn and Flour Exchange of Baltimore. In 1891 the title was changed to that of the Chamber of Commerce. There is but one of the incorporators now living. I have dog-eared several pages here for the ready reference of the chairman or any members of the committee, or for Mr. Merrill, referring to the by-laws, forms of contracts, the act of the legislature, and the act of incorporation. We have nothing to hide, but everything to expose in the conduct of our business, and that will all be found in the 54th annual report, which is our last report. I thought it was unnecessary to burden you with others.

I heard Mr. Fitch say on Friday with reference to the dealing in grain, that there is buying and selling of grain every hour of the day and every minute of the hour. That is correct. It is so on our exchange, and but for the advantages that we have on hedging overnight sales made at times to the other side, and made at times on this side, we could not conduct the business as successfully as it has been conducted. In fact, there are those of us who, if we have to do without this privilege of hedging, will have to go out of business; and we are now too old to get into other lines. It is therefore hoped that in going over this matter you gentlemen will readily notice the difference between hedging and rank speculation. The grain men as a class are not speculators. They are business men, and if I may be permitted to say so, business men of the highest type.

The CHAIRMAN. What would you define as the difference between hedging and rank speculation?

Mr. SNYDER. The rank speculator is a man who has no interest whatever in producing grain or in handling grain. A rank speculator from my standpoint is a man with more money than brains. The CHAIRMAN. To what extent does the rank speculator operate in Baltimore?

Mr. SNYDER. To a very limited extent.

The CHAIRMAN. Are there any rules that restrict his operations in any way?

Mr. SNYDER. No, sir. Anyone can deal through an accredited member of the Baltimore Chamber of Commerce. Any outsider can deal through a member of the Baltimore Chamber of Commerce; but