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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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growing crop to cover the value of the merchandise thus sold.
In such a case it was frequently the custom for the crop when
ready for market to be turned over to the merchant by the
planter, who received the difference between his debt and the
proceeds from the crop. The importance of the country mer-



MARKETING OF FARM PRODUCTS 39

chant as a distributing' factor in some regions is diminishing,
for he has been supplanted to a greater or less degree by-
dealers in special products.

Local buyers of special products. In the regions where
grain is a staple product the tendency has been for the store-
keeper to be displaced by the grain dealer and the local
elevator man. Among other examples of local buyers of spe-
cial produce are the California fruit packer, who buys from
growers; the egg and poultry shipper in the Middle West,
whose purchases are made from country merchants and who
ships by carload lots to wholesale dealers ; the San Francisco
wool merchant, who buys on the range and sells in the East;
the poultry packer in the North Central States, who buys live
fowls, slaughters them, and consigns to eastern cities ; and the
"track buyers" of watermelons in the region near San An-
tonio, Tex., of peaches in Georgia, and of hogs in the corn
belt.

Commission dealers. The commission dealer is the agent
through whom a large amount of produce is sold for farmers
or country shippers. The commission man usually repre-
sents the seller, but there are instances where he serves as
agent of the buyer, as in some sales of live stock to distant
buyers or in the purchase of Pacific coast hops for eastern
dealers.

In addition to serving as agent in making a sale, the com-
mission man may advance money to a producer or to a country
buyer, as when a live-stock commission firm loans money to
feeders or when a grain-commission firm supplies a local grain
dealer with sufficient cash to begin his season 's purchases. An-
other phase of commission dealing is that engaged in by rice
and cotton factors, who advance money on crop liens, and to
whom these products are frequently consigned to be sold on
commission. In some States, for instance in South Carolina,
banks are reported to be taking the place of the cotton factors
in making loans, and the presence of buyers and neighboring
mills enables planters sometimes to market their cotton with-



40 MARKETING OF FARM PRODUCTS

out the aid of factors. Another class of factors are those in
the Baltimore tobacco trade, who receive consignments, for in-
stance, from farmers in Maryland and Ohio, and who sell to
exporters.

Commission for selling.'^ Eates of commission for selling
fruits and vegetables may range from 5 to 10 per cent, of the
gross proceeds of sales. A cooperative organization of farm-
ers is sometimes able to retain part of this selling commission
for its own use. The members of one southern fruit associa-
tion paid for selling their products 10 per cent, of gross pro-
ceeds, of which generally 6 per cent, was given the northern
commission dealer and 4 per cent, was retained in the treasury
of the association. There are numerous other instances of
commissions based upon proceeds of sales, among which may
be mentioned the charges for selling rice at New Orleans and ^
clover seed at Milwaukee.

For selling grain and live stock at large markets the rates
of commission are based generally upon the quantity sold and
not upon proceeds of the sales. The rules of the Minneapolis
Chamber of Commerce fix the rate for selling wheat, barley,
or rye at 1 cent per bushel, corn or oats at one-half cent per
bushel, and hay at 50 cents per ton. These rates apply to
produce received under usual conditions. About the same
charges prevail in other large markets.

In the tobacco warehouses of Virginia and North Carolina
auctioneers' charges are determined by the number and weight
of piles sold, and the *' commission agents" who buy hops
for wholesale dealers are frequently paid from one-fourth to
one-half cent per pound.

Exporters. The exporter's business has some points in
common with that of the local buyer in domestic trade; both
classes of middlemen obtain their wares from sources rela-
tively near at hand, and sell them in a distant market, either
direct or through commission dealers. The exporter has to
keep informed not only concerning the commercial regulations

1 [Paragraphs from p. 162, here inserted.]



MARKETING OF FARM PRODUCTS 41

and market conditions of various countries, but also in regard
to freight rates along the various lines of transportation over
which his goods are apt to be carried. The fluctuations of
freight rates, especially by v^^ater, make the cost of transporta-
tion lowest sometimes over one route and sometimes over an-
other. In shipping wheat from Nebraska to Liverpool the
grain may be sent through one of eight or ten large seaports
ranging from Montreal around the coast to Galveston ; and at
a number of these ports tramp ships may be bidding against
the regular lines for cargo. In ease New York is selected
as the port of shipment, the grain may be sent thither direct
from Nebraska, or it may be transferred to a lake steamer at
Chicago, to be reloaded at Buffalo either on canal boats or rail-
road cars.

In the grain business of the Pacific Northwest and in the
cotton trade of the South it is not uncommon for the same
firm that buys from the farmer to sell to the European miller.
A grain exporter of Portland, Taeoma, or Seattle sometimes
owns as many as 200 warehouses at different country railroad
stations, and his agents at these stations buy direct from the
farmers and consign to the seaport; while in Europe agents
or correspondents of the same firm seek out buyers for the
grain. But east of the Rocky Mountains the exporter of
wheat, while he may sell through his representatives to foreign
mills or dealers, in many instances does not buy either from
the producer or the country grain dealer. His supply is often
furnished by commission men or large dealers.

In addition to the five classes of middlemen just discussed,
others of importance in the distribution of farm products are
the jobber, who buys and sells in wholesale lots, and the retail
dealer, the last of the series of middlemen who handle the
commodity on its way from the producer to the consumer.

Direct sales without aid of middlemen. Common in-
stances of the producer selling direct and delivering to the
door of the consumer occur in the marketing of milk, butter,
eggs, poultry, fruits, vegetables, hay, and other farm products.



42 MARKETING OF FARM PRODUCTS

Milk producers in the neighborhood of Erie, Pa., through their
organization, deliver milk direct to consumers. Numerous
poultry raisers sell exhibition stock direct to other poultry
raisers. Eggs for hatching are also sold in this way. Eegis-
tered cattle are often sold at auctions, held periodically by the
owners. Retail sales of fruit, vegetables, poultry, eggs, and
dairy products direct by producer to consumer are made also
in public market places.

In a sense, a mill or a factory may be regarded as a con-
sumer. An old instance of the producer selling in wholesale
lots direct to the consumer is that of the farmer taking his
grain to a near-by mill. A sale of sugar beets to a neighbor-
ing factory is another example of direct bargaining between
producer and consumer ; so is the sale and delivery of milk to
a creamery, apples to an evaporating establishment, and fruits
and vegetables to neighboring canning houses.

Selling at wholesale direct to consumer is illustrated also by
a plan recently adopted by wool growers of the northern
Eocky Mountain region. Large warehouses are established at
Chicago and Omaha to which wool is consigned to be sold by
the growers or their representatives. Manufacturers as well
as dealers are among the buyers, so that part of the sales are
made direct by the growers or their agents to consumers. Not
only are direct sales by producer to manufacturer made in the
warehouses, but on the range itself, for since the establishment
of warehouses manufacturers and dealers have continued to
send some of their buyers to the range.

One of the prominent woolgrowers of Wyoming reports that
since the establishment of the large warehouses prices on the
range have been much better. For the sake of supporting the
warehouses the stockholders agree to pay into the association
a certain percentage of their gross sales of wool, whether sold
on the range or in the warehouses. This method of support-
ing a cooperative institution is adopted also by the Georgia
Fruit Growers' Exchange.

Transfers through one middleman. A large number of



MARKETING OF FARM PRODUCTS 43

transactions are made in which only one middleman assists in
the transfer from producer to consumer. A common example
is that of the town merchant who buys produce from farmers
and sells it to consumers.

Among the other instances of a single middleman interven-
ing between producer and consumer may be noted the com-
mission man at a large market who receives consignments of
live stock from farmers and sells to packers ; the factor to
whom the planter consigns his rice or cotton and from whom
purchases are often made by millers; the warehouseman who
manages the sale of a Virginia planter's tobacco; and the
"line," or system, of elevators, which buys grain from farm-
ers and sells to millers. Pennsylvania tobacco is often bought
at the farm by a dealer who sells to manufacturers.

It is a common practice in a number of cities — for instance,
New York, Philadelphia, and Washington — for milk to be
handled by one middleman, namely, the city retailer, who
buys direct from the producer. A considerable part of the
supply of New York City is delivered at country shipping
points to stations or "creameries" owned by New York deal-
ers, who sell in the city at retail.

An organization which brings the grain producer nearer
the great mills is the farmers' elevator. The plan of its opera-
tion has some features similar to that of the wool warehouses
of Chicago and Omaha. Farmers cooperate in building an
elevator and in employing a manager.

Marketing through two middlemen. The intervention of
two middlemen between producer and consumer is a common
occurrence. The farmer may consign to a distant commission
man or sell to a local dealer, and the next transaction of the
series may be the sale to a retail merchant whose customers
are consumers. A common way of marketing live stock is for
the farmer to sell to a buyer who ships to a commission mer-
chant at a large packing center, where the animals are sold
frequently to packers. Fruits and vegetables are marketed
often through the aid of two middlemen, the city commission



44 MARKETING OF FARM PRODUCTS

dealer and the retail merchant. Two middlemen are involved
also in some sales of produce made by farmers ' cooperative so-
cieties; the first, unless the sales manager of a society be
classed as a middleman, being the wholesale or the commission
dealer, and the second the retail merchant.

The milk supply of Boston is distributed largely through
two successive middlemen, the wholesale and the retail dealer ;
and another series of two middlemen consists of the traveling
huckster in Massachusetts and elsewhere, who buys poultry
from farmers and sells to retail merchants. Hop growers of
the Pacific coast frequently sell direct to commission men who
buy for large dealers, and these dealers in turn make part of
their sales to brewers.

Transactions involving three or more middlemen. A
series of three middlemen may include, first, the local buyer
or shipper; second, the commission dealer or the wholesale
merchant ; and third, the retail merchant. Watermelons from
the region of San Antonio, Tex., are reported to be distributed
in considerable quantities through such a series of dealers.
Traveling hucksters in Missouri buy poultry from farmers and
sell occasionally to merchants or to commission firms, who in
turn include among their customers some retail dealers.
Apple dealers in this country purchase the fruit from grow-
ers and sell to United States agents of German importers.
The third in this series of middlemen is the retail dealer in
Germany.

In the sale of fruit by auction, as is common in large cities
east of the Mississippi River, the auctioneer is an additional
middleman. He may sell for a commission dealer to whom
the consignment may have been made by a country buyer ; and
the purchaser at such an auction may be a jobber, who in turn
sells to a retail merchant. Five middlemen are thus con-
cerned in such a transaction.

Another instance of a long series of middlemen may be had
in some exports of wheat from North Dakota to England.
The grain may be bought first by a country grain dealer, con-



MARKETING OF FARM RRODUCTS 45

signed to a middleman at Duluth, bought there by an ex-
porter, who in turn sells through his European agent to a
foreign grain dealer. The last of the series of transactions
may be the sale by the foreign merchant to the miller. Hay,
in many parts of the country, is frequently bought by a local
merchant who sells through a commission man to a wholesale
dealer. Or again, the commission man may sell to an ex-
porter who ships direct to an importer in Cuba, and one or
more additional sales may be made before the hay reaches the
last purchaser.

Onions raised in Kentucky are sometimes bought by a local
merchant and shipped to Louisville ; here they may be put in
sacks and consigned to a New York wholesaler or a com-
mission man, who in turn sells to a New York retailer. Eggs
and poultry frequently pass through the hands of at least four
middlemen.

The marketing of clover seed is an example of a transfer
from one farmer to another through a number of middlemen.
The first middleman may be an Indiana shipper who consigns
to a commission dealer in Toledo; here the seed may be pur-
chased by a merchant and shipped to a wholesale dealer in a
distant city; the last middleman in this course of distribu-
tion may be a country storekeeper or a city dealer in agricul-
tural supplies.

Terms of sales. Eeference is made in other parts of this
article to conditions affecting payments for produce. Cash
payments, as has been said, are most general, but when a
farmer is to make a delivery to a distant purchaser, it is often
the practice for the payment to be made by means of a draft
attached to a bill of lading. By selling for a definite price
fixed before the sale is made, the farmer knows at the time of
sale the exact amount he is to receive, but he may be at a dis-
advantage owing to lack of competition among buyers or to
his failure to keep posted concerning market conditions. On
the other hand, if he ships his produce to be sold on commis-
sion, he risks being disappointed with the proceeds of the sale.



46 MARKETING OF FARM PRODUCTS

Some of the disadvantages of selling at or near the farm are
being overcome by improved conditions which open to the
farmer other markets in ease the one at home is not satisfac-
tory. The use of the telephone enables him to know the latest
market news, and the service of a cooperative selling associa-
tion makes it easier for him to take advantage of favorable
prices in distant markets.

Some produce is sold in advance of the harvest; for in-
stance, in New York, Maryland, and IMichigan vegetables are
grown for canning houses under contracts made sometimes as
early as the preceding midwinter. The terms of these eon-
tracts vary. According to some of them the canner furnishes
the seed and fertilizer and agrees to make advances of money
during the season and a final settlement at the end. Con-
tracts providing for the sale of three successive crops at a fixed
price are reported to have been made in 1908 with some hop
growers of Washington and Oregon.

Cooperative selling associations. The number of farmers'
cooperative associations through which produce is marketed is
increasing continually. Various fruits and vegetables, grain,
tobacco, peanuts, rice, and other products are sold by the
agents of such associations. In the State of Colorado alone
there were in 1907 at least thirty-three such organizations and
the products handled by them included cantaloupes, peaches,
honey, potatoes, and miscellaneous fruits and vegetables. A
number of California associations have united to form larger
bodies through which sales are made, while the local organi-
zations pack and load the produce.

At least two produce exchanges have been conducted suc-
cessfully for a number of years by truck growers of the penin-
sula lying between the Chesapeake Bay and the Atlantic
Ocean. The cranberry crop is marketed largely through farm-
ers' organizations, and similar associations, too numerous to be
listed here, are improving conditions of marketing in other
parts of the United States. The extent to which the coopera-
tive movement among farmers is distributed may be illus-



MARKETING OF FARM PRODUCTS 47

trated by the apples from Hood River, Ore., wliieh are
marketed iu this way ; fruits and vegetables from Yuma Val-
ley, Ariz. ; celery from Florida, cantaloupes from Tennessee,
onions from central and western Texas, tobacco from Ken-
tucky, grain from Minnesota and North Dakota, rice from
Texas, peaches from Georgia, vegetables from Louisiana, and
various articles from jMichigan, in addition to a large number
of products from California.

Two of the important results of cooperation in marketing
have been the shipment of better grades of fruits and vege-
tables, and the command by the farmers of a greater influence
in the market on account of large quantities of produce being
controlled by a single authority.



FARM PRODUCTS AND CONSUMERS' PRICES

[The following passages are from the report of the Secretary of
Agriculture (U. S.) for the year 1910, pp. 9-28.] '

Production of 1910. Year after year it has been my privi-
lege to record ' ' another most prosperous year in agriculture. ' '
Sometimes the increased prosperity has been due to weather
unusually favorable to agriculture, sometimes to higher values
caused either by a greater yield or demand or by greater
money returns due to a scant production ; but usually the ad-
vance in farmers ' prosperity has been in spite of various draw-
backs. It would seem that this country is so large in extent
and has such varied climate, soil, and crops that no nation-
wide calamity can befall its farmers. Combined with this
strong position in agriculture, the nation may now begin to
derive increased confidence in its agriculture because of im-
provements that are permeating the whole country in conse-
quence of a grand movement sustained by the National Depart-
ment of Agriculture and the various State agencies.

Value of all products. Nothing short of omniscience can
grasp the value of the farm products of this year. At no time
in the world's history has a country produced farm products
within one year with a value reaching $8,926,000,000, which is
the value of the agricultural products of this country for
1910. This amount is larger than that of 1909 by $305,000,-
000, an amount of increase over the preceding which is small
for the more recent years.

The value of farm products from 1899 to the present year
has been progressive without interruption. If the value of
that census year be regarded as 100, the value of the agri-
cultural products was as follows :

48



FARM PKODUGTS AND PRICES 49

1899 100.0 190,3 124.8 1907 158.7

1900 106.4 1904 129.8 1908 167.3

1901 112.7 1906 143.4 1909 1S2.8

1902 119.1 1905 133. 1910 189.2

The value in 1910 is almost double the value of the crops of
the census year eleven years preceding. During this period
of unexampled agricultural production, a period of twelve
years during which the farmers of this country have steadily
advanced in prosperity, in wealth and in economic independ-
ence, in intelligence and a knowledge of agriculture, the total
value of farm products is $79,000,000,000. . . .

Rising yields per acre [Page 27]. Dividing the period
from 1866 to 1909 into four decades and a succeeding short
period of four years, the yield per acre of corn is shown by a
study made in the Bureau of Statistics to have declined 2.3
per cent, from the first decade to the second, declined 8.2 per
cent, from the second to the third, increased 7.7 per cent, from
the third to the fourth, and increased 7.1 per cent, from the
fourth decade to the succeeding four-year period.

For wheat an even better showing is made, since the figures
show a continuous increase in yield per acre, namely, 3.4 per
cent, from first decade to second, 3.3 from second to third,
6.3 from third to fourth, and 9.6 from fourth decade to final
four-year period.

For cotton, the first figure, 2.8, is a decline, but the rest are
increases, namely, 2.6, 3.8, and 0.3.

For tobacco, the first figure, 3.4, is an increase, the second
2.0, is a decline, the third, 5.2, is an increase, and so also is
the last, 9.7.

Similar facts are shown for six other leading crops, namely,
oats, barley, rye, buckwheat, hay, and potatoes. Not one of
the ten crops named declined in yield per acre from the third
decade to the fourth, while oats was the only one to show a
decline from the fourth decade to the last period of four years.

The evidence is very plain that the yields per acre of our
crops are now increasing, and if the facts were assembled in

4



50 FARM PRODUCTS AND PRICES

detail for the States, it would be found that the percentage of
increase in yield in many of them is greater than the percent-
age of normal increase in population ; that is, the increase by
births over deaths in the old native element. Such is the fact
with regard to wheat for the fourth decade, as compared with
the preceding one, in twenty-six States, and two of the States
are all but ready to join them. In fourteen States corn pro-
duction per acre has increased faster than the normal increase
of population and this is almost true of five more States. The
number of States in this list in the case of barley is 21 ; rye,
30 ; buckwheat, 19 ; cotton, 3 ; potatoes, 24 ; hay, 35 ; and more
or less States are almost ready to enter this list in the case of
all crops.

A demand that is more difficult to fulfil in production per
acre is for an increase that equals or exceeds the actual in-
crease of population, including the immigrants and that due
to the temporary high birth rate of the foreign born. But,
notwithstanding the fact that this difficulty is greater in the
United States than it is in all other countries that have prac-
tically ceased to take much new land into cultivation, many
of the States of this nation are each maintaining an increase
of production in the case of one or more prominent crops that
is greater than the actual increase of population. Ten States
are doing this in the case of corn ; for wheat the number is 22 ;
for oats, 16 ; for cotton and tobacco, 1 each ; for rye, 21 ; for
potatoes, 15 ; and for hay, 25.

We cannot look for any other result than that the yields per
acre of all our crops shall increase at an even faster rate in the
future, in view of the intense interest with which our people
are turning their attention toward agricultural improvement.
If there are certain forces at work which, if unchecked and
made more prevalent, will in the future compel us to bid
against the world for food, the counteracting forces have
nevertheless been already set in motion, with the promise of
increasing effect.

Farmer's share of consumer's cost [page 19] . High prices



FARM PRODUCTS AND TRICES 51

was one of the subjects oh' my annual report of 1909. It was
shown that for many years previous to about 1897, or a little
later, the prices of farm products received by farmers were
even less than the cost of production, and often little if any
above that cost, so that during a long period of years the
farmer was not thriving. It was shown also that in the up-
ward movement, which began about 1897, the prices received
by the farmer have advanced in greater degree than those re-
ceived by nearly all other classes of producers. That this
should have been so was merely a matter of justice to the
farmer to equalize the reward of his efforts with the rewards
in other lines of production.

Increase of beef prices. The price received by the farmer
is one thing ; the price paid by the consumer is far different.
The distribution of farm products from the farm to consumers
is elaborately organized, considerably involved and compli-



Online LibraryFrank Albert FetterSource book in economics, selected and ed. for the use of college classes → online text (page 4 of 30)