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Frank Albert Fetter.

Source book in economics, selected and ed. for the use of college classes online

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self well to the study of many of the forces which influence



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Figure 1. Production of eggs on a Wisconsin farm; percentages of the annual
total by months, five-year average.

prices. Irregularity of the supply, variation in the quality
of the product, and a highly elastic demand are characteristics
strongly accentuated in the egg market. The monthly dis-

25



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SEASONAL rRICE-VARIATIONS



tribution of the average annual production of eggs on a Wis-
consin dairy farm is shown in figure 1. The chart shows
the percentage of the year's egg production gathered in each
month in the year for five years. March and April were the
months of greatest productions. The production fell oflf
greatly during the summer months and reached its lowest level
during the winter months.

It is believed that this chart tells fairly well the story of
the irregularity of egg production on farms where the keeping
of poultry is primarily for supplying the wants of the house-
hold, and the sale of eggs more or less incidental.





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Figure 2. Weekly receipts and prices of "prime first" class eggs in the Chicago
market, Feb. 1, 1909 to March 20, 1911.

It is possible for the poultryman to control the ^^^ produc-
tion in such a manner as to secure a much larger proportion of
the annual product in the winter months, but the bulk of the
egg supply is not produced under these conditions. ... Egg
production is a widely disseminated non-specialized industry
and the supply is not likely to be appreciably influenced by
the conscious action of a few individuals.

The Chicago egg market. The supply of eggs upon the
Chicago market corresponds to these conditions of production.
In Figure 2 the solid black line represents the weekly supply
of eggs brought to Chicago, from February 1, 1909, to March
20, 1911. The supply of eggs reached the maximum in April
and May and gradually fell off until the end of the year.

The price of eggs on the Chicago market shows the influ-



SEASONAL PRICE-VARIATIONS 27

euee of the irregular supply. The black dots connected by
lines, in Figure 2, show the price of the best grade of eggs
for one day in each week.

The relation between the supply curve and the price curve
in this chart illustrates the influence of variation in the supply
upon the price of this perishable commodity. The fact that
the price of eggs in Chicago remained above 20 cents during
the periods of greatest receipts in 1909 and 1910 calls for




Figure 3. Storage of eggs by a Chicago firm; by months, in percentages of total

annoal storage.

some explanation. The elastic character of the demand for
eggs has already been mentioned. At a price between 20 and
25 cents eggs become an inexpensive substitute for meat, and
at the time of the year under consideration, weather condi-
tions are usually such that eggs can be put upon the market
in good condition. Under these circumstances the consump-
tion of eggs expands enormously.

The storage of eggs. The market is not entirely depend-
ent, however, at the period of maximum supply upon the de-
mand for eggs for immediate consumption. At that period



28 SEASONAL PRICE-VARIATIONS

many eggs are purchased and put in storage for use during
the period of scarcity of fresh eggs. The time of year when
eggs are put in storage by one Chicago jSrm is shown in Figure
3. Without question this speculative buying steadies the
price during the spring months of excessive supply, distributes
the consumption more evenly through the year, and secures
for the producers a higher return for their eggs than could be
secured without storage.

The stored egg is much less valuable in winter than is the
fresh supply. The lower price curve shown for a few winter
months in Figure 2 shows the prices of refrigerator eggs. It
will be noted that there was often a difference of 10 cents per
dozen between the price of fresh and of stored eggs. It should
also be noted that the price at which the refrigerator eggs
were sold was not very much higher than the price at which
they were purchased. There must, in the long run, be
enough difference to pay the actual costs of storage including
rent for the warehouse, losses due to deterioration, interest on
the money invested, insurance, and enough profit to induce a
business man to give his attention to this business instead of
doing something else.

The thing of first importance both to producer and to con-
sumer is an understanding of the proper methods of handling
eggs, proper methods on the farms, in the country stores, in
transit, in cold storage, in the shop of the city retailer and in
the homes of the consumers. Success in holding a part of the
eggs of the surplus season to meet the demands of the deficit
season is dependent upon proper handling at every point. It
is safe to say that more bad eggs reach the kitchens of Amer-
ica from other causes than from too great a length of time in
cold storage. Furthermore, many eggs that reach the kitchen
in good condition are allowed to deteriorate in a warm room
before the cook finds occasion to make use of them. There is
responsibility all along the line. Failure at any one point
spoils the egg.



SEx\SONAL rRlCE-VARlATIONS 29

The testimony before the Senate Committee relative to
foods held in cold storage was to the effect that eggs produced
during hot weather will not, even under most favorable con-
ditions, remain fit for use over three months, and that more
often in less than a month they are unfit for human food.
This is reason for not stofing eggs more than temporarily
during the hot months, but it does not give basis for legisla-
tion against the storage of eggs in the cool months of spring
to be kept over until the period of scarcity.

The risk is great in the storage of eggs, because of the fact
that the whole supply must be gotten rid of before the increase
in the supply of fresh eggs, or they may become almost a
total loss. Note in Figure 2 how the price of refrigerator
eggs fell, in February, below the price which had been paid
for them and then quotations ceased. This speculative fea-
ture is accentilated by the fact that the period of greatest
scarcity is followed so closely and so abruptly by the period of
maximum supply, and by the uncertainty of the time of this
change owing to the influence of the weather.

Another aspect of the storage of eggs worthy of considera-
tion is the relatively long time between the surplus period and
the period of scarcity. Vegetables may be stored late in the
fall for winter use, but eggs must be stored early in the spring
and kept through all the hot months. ...

The supply and the price of butter. The relation of the
supply to the price of butter on the Chicago market is shown
by Figure 4. The weekly supply is shown to range from
fifteen thousand to more than one hundred thousand tubs
per week. The months of June and July show the greatest
supply while the winter months show a scarcity of butter
coming into Chicago.

June and July are the natural months for storing butter.
From November to February is the period of short supply and
high prices. See figure 5. In order to utilize cold storage as
a means of equalizing the supply retailed to consumers,



30



SEASONAL PRICE- VARIATIONS



a maximum period of eight or nine months is none too long.
The demand for butter is relatively stable. Butter is con-
sumed from day to day with a high degree of regularity. To
meet the demand butter must be produced in fairly even
quantities each month in the year or the surplus of one season
must be stored to meet the shortage of another. In the one
case more feed must be produced and stored for purposes of





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Figure 4 (upper part). Butter, receipts and prices, Cliicago market; (lower
part) Cheese, receipts and prices, New York market; Feb, 1909 to Jan. 1911.



■winter dairying. In the other the cows may be allowed to
graze while producing the maximum supply of milk. The
cost of milk and butter is much lower where grazing is a large
factor in the food basis of the dairy herd.

If butter can be stored successfully, there can be little ques-
tion as to the economic gain resulting from its storage. If
there is any doubt as to the successful keeping of butter in
cold storage, great effort should be expended in the solution



SEASONAL PRICE- VARIATIONS 31

of this problem, rather than to abolish the storage of butter
during June and July for consumption in the winter months.
This is a matter of great moment to the butter producers of
Wisconsin. Without cold storage our dairy industry would
have to be reorganized. With the present system of storing
the surplus, the price of butter as shown in Figure 4, holds
steady at a fair price during June and July. Without cold




Figure 5. Cold storage of butter, by months, by one Chicago firm, in percentages
of total annual storage.



storage the supply would have to be reduced during that
period, or the bottom would go out of the market.

Any influence which retards the storing of butter during
the natural season of surplus production will increase the
price of butter during the winter months and give greater ad-
vantage to the manufacture of butter substitutes. Some of
the raw material for the manufacture of butter substitutes are
more abundant in the winter than in the summer months.
Butter substitutes are made of farm products. To dis-
criminate against them is to damage one class of farmers for
the benefit of another class. The substitute, however, should



32



SEASONAL PRICE- VARIATIONS



never be sold for butter. This much the dairyman has every
right to insist upon. The butter substitute should be sold for
exactly vrhat it is with its constituents marked on the label.
The butter substitute will continue to be a strong competitor
of the inferior grades of butter and may result in a wider
range in prices between first-class and the inferior grades
of butter than would otherwise exist. There is little competi-
tion between first-grade butter and the substitute. The re-



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Figure 6.



Milk brought to the Wisconsin University creamery, by months, in
percentages of total annual quantity, three-year average.



suit may be that the producers of low-grade butter will have
to improve their methods or change their occupation. In the
long run this will be a good thing both for the producer and
the consumer.

The supply and price of cheese. The price of cheese
shows but little variation during the different seasons of the
year. The supply, however, is produced in the summer
months, and the bulk of it reaches the market during the sum-
mer and fall. Figure 4 shows the receipts and the price of
cheese on the New York market for two years. One character-



SEASONAL TKICE-VARIATIONS 33

istic of cheese is that it improves with age and hence the price
of the stored product is higher than that of the fresh sup-
ply. This is illustrated in the chart where there are two sets
of price dots, in April, 1910, the upper being quotations for
old cheese, the lower for new. Contrast this with the situa-
tion on the egg market where the reverse is true. (Figure
2.)



liAKKETING OF FARM PRODUCTS

[Theke is here reprinted the greater part of a paper on "Methods
and Costs of Marketing," by Frank Andrews, in the Yearbook of
Department of Agriculture (U. S.) for 1909, pp. 161-172.]

Finding a market; selling in transit. One of the primi-
tive ways of finding a market is for the farmer to go with his
wares from house to house, or from store to store, making in-
quiry until a purchaser is found. An application of this
simple plan is made on a large scale in the marketing of live
stock. A car of cattle consigned from a Kansas shipping
point to Chicago may be unloaded and placed on sale at
Omaha or Kansas City. In case no sale is made at one of
these stopping places the stock is forwarded to Chicago.
This practice is common on most of the important live-stock
routes of the United States.

Grain also frequently changes hands at an intermediate
market through which it passes, and the cars thus sold may be
forwarded to destinations selected by the new owners. Regu-
lar quotations of prices are made at Chicago and other cities
for grain in cars billed through to eastern markets from ship-
ping points in the Middle West. "Wheat raised in the Cana-
dian northwest and shipped to the seaboard through North Da-
kota and Minnesota, for reentry into Canada by way of the
Great Lakes, often changes hands at Duluth.

Diversion of shipments. Another method of searching for
a market is that of diverting a consignment to a destination
other than the one first named in the shipping papers. An
illustration of this is the practice common in the grain ex-
porting business of the Pacific Coast. It is usual for a cargo
of wheat or barley sent from this coast to Europe to be con-

34



MARKETING OF FARM TRODUCTS 35

signed "for orders" to some port in the British Isles, as
Queenstown, Falmouth, or Plymouth, After the vessel
starts, the exporter tries to have a purchaser ready to bargain
for the cargo when it reaches the port of call. The voyage
around Cape Horn takes three or four months and this time
is allowed the exporter for finding a suitable market. On its
arrival at the port of call, the vessel receives orders as to the
port at which the grain is to be discharged.

A similar plan is followed in shipping fruit by rail from
California to the East. Two of the diversion points on these
routes are Council Bluffs, Iowa, and Minnesota Transfer, a
freight yard between St. Paul and Minneapolis.

Other important instances of this practice of diverting a
consignment en route are afforded in the movement of fruits
and vegetables from Southern States. A commission firm,
whose head office is in Pittsburg, distributes its marketings in
this way. On receipt of a telegram, say, from a Georgia ship-
per, announcing that he has a car ready to move, the head of-
fice of this firm decides at once the general direction for the
car to go. If the West promises the best markets for the
next several days, the shipper may be notified to consign to
Cincinnati, or if the car is to go to an Eastern city, the con-
signment may be made to Potomac Yard, a freight transfer
point on the Potomac River opposite Washington, D. C. At
each of these diversion points a representative of the commis-
sion firm opens the cars, inspects the contents, and reports the
results by telegraph or telephone to the Pittsburg office, which
is kept informed of market conditions in different cities. The
agent at the diversion point wall then receive orders as to the
final destination of the car. Among the diversion points
used for shipments of produce from the Southwest are Kan-
sas City, St. Louis, and Chicago.

Public city markets. Public market places are established
in a number of cities and towns and in these places consumers
may buy such articles as fruit, vegetables, dairy products,
poultry, and eggs direct from farmers as well as from dealers.



36 MARKETING OF FARM PRODUCTS

In recent years there has been a tendency in some markets, as
at Baltimore, Norfolk, and Washington, for practically all of
the stalls to be used by dealers, while the producers occupy
places along the neighboring sidewalks.

Market places are owned sometimes by city governments
and sometimes by private corporations. In Washington, D.
C, the largest markets are under private ownership, while in
Baltimore the largest markets belong to the city. In York,
Pa,, there is one market owned by the city and five by private
parties.

At some markets the only accommodations are those af-
forded by an open square, as one of the markets at Omaha,
Neb., and one at Richmond, Ind, ; other places have open
sheds, and still others are furnished with market houses.
Some of the most noted markets of the United States are held
under open sheds; the French Market in New Orleans and
Lexington Market in Baltimore are both of this type. Among
the numerous cities which have market houses are Pittsburg,
Pa., Mobile, Ala., Buffalo, N. Y., Erie, Pa., Salem, Mass.,
Washington, D. C, Richmond, Va., Norfolk, Va., and Balti-
more, Md.

The charges for space along the curb at some markets range
from 10 cents to 75 cents per day for each wagon, and by the
year from $10 to $50 or more. At Atchison, Kan., and also at
San Antonio, Tex., a charge of 10 cents a day is made for each
wagon occupying a place in the market, while at Buffalo, N.
Y., the rate for a one-horse vehicle is 15 cents and for a two-
horse wagon 25 cents per day, and at Norfolk, Va., these rates
are respectively 10 and 15 cents. At Richmond, Ind., and
Omaha, Neb., spaces in the market are sold at aucti(Wi to the
highest bidder.

Producers sell in large quantities to dealers and deliver to
commission men at public market places similar to the ones
devoted to retail trade, and in many of the retail markets
wholesale dealing is also done. The public market places of
Omaha, New York, and Denver are used almost exclusively



MARKETING OF FARM TRODUCTS 37

for wholesale trade, and so are wharf markets in Pittsburg,
Baltimore, and Washington.

Warehouses. Another institution which aids the producer
to dispose of his crop is the public warehouse. Illustrations
of this are afforded in marketing tobacco in Virginia and
North Carolina, wool from the northern Rocky Mountain
States, and to some extent rice in Louisiana and Texas. The
growers, or their representatives, with their produce, meet
the buyers at these warehouses. The method of operation in
Virginia may be illustrated by the conditions at Richmond.
The warehouses here are listed and market begins in the first
one on the list for a certain day. After sales have been made
in the first buyers go to the second, and so on throughout the
list. Planters arrange their tobacco in piles along the floor
of the warehouse, each pile being identified by a label or card
attached to it. As the piles are auctioned off each buyer has
some mark of identification attached to the pile purchased, and
a record is made by the warehouse authorities. On leaving
the warehouse the planter obtains his money from the ware-
house manager, who in turn makes up a bill against each buyer
for the total amount of tobacco he has bought that day.
After the last warehouse sale has been made the market is
continued at the Tobacco Exchange, where dealing is based
upon samples displayed there. The importance of this system
may be judged by the quantity of tobacco sold in these ware-
houses by farmers. The total sales by farmers at twenty-one
Virginia markets having tobacco warehouses amounted dur-
ing the nine months ending June 30, 1909, practically the
entire season, to 116,000,000 pounds; and in the fiscal year
ending July 31, 1909, the sales by planters in the warehouses
of forty-five North Carolina markets amounted to 142,000,-
000 pounds.

In selling rice at warehouses or on the New Orleans Board
of Trade, sealed bids are submitted by the buyers and the
sale is expected to be made to the highest bidder. In cities
as far west as Chicago it is a common practice to sell fruit in



38 MARKETING OF FARM PRODUCTS

warehouses wliieli may be owned by railroads and "used by
auction companies. A consignment of California or Georgia
fruit, for instance, will be sent to a commission merchant in
New York, who will have the fruit sold to his account by the
auction company.

Stock yards. The largest wholesale market places open to
the producers are the stock yards in such cities as Chicago,
Kansas City, Omaha, and St. Louis. Sales in these stock
yards may be made direct by the owner of the stock to the
ultimate purchaser, but it is customary for transactions to be
made through commission men.

Diflferent classes of middlemen ; traveling buyers. Selling
to buyers who come to the farm is practised to some degree in
many parts of the United States. Traveling hucksters in many
regions go from farm to farm gathering eggs, butter, poultry,
calves, and similar commodities, which they sell to shippers,
jobbers, or retail dealers. Agents of large merchants go to
farms on the Pacific coast to buy hops, to ranges in the Rocky
Mountains for wool, to plantations in Louisiana and south-
eastern Texas to bargain for rice, and to the orchards of the
apple-producing states east of the Rocky Mountains. The cat-
tle buyer also is a frequent visitor at many farms, especially
where stock raising is a secondary industry.

General merchants. One of the most important persons
in the distribution of some products is the merchant of the
town or the rural community. He is often the first receiver
of such products as eggs, farm-made butter, poultry, wool,
hides, and sometimes cotton, grain, and hay. It was the
custom a number of years ago, possibly more so than at pres-
ent, for a local merchant to credit a planter of cotton or rice
with supplies for a crop year, and to take a lien upon a



Online LibraryFrank Albert FetterSource book in economics, selected and ed. for the use of college classes → online text (page 3 of 30)