The Bismarck Tribune Newspaper, April 24, 1923, Page 8

PAGE EIGHT “A = & “fHE BISMARCK TRIBUNE * ing System of The Northwest _| TUESDAY, APRIL 24, 1925 .~ Chart No. 1 showing the average price at Minneapolis fo r 29 consecutive crop years, from 1885-86 to 1913-14, on the first day of each month for Onions, Apples, Potatoes and No. 1 Northern Spring Wheat, as shown by Minneapolis Daily Papers and Daily Market Record This Chart shows in a striking manner the fright- ful decline in the price of onions, apples and potatoes every year on the average for 29 years during the first half of the crop year, as compared with the last half of the crop year, and the heavy loss suffered by the pro- ducer of onions, apples and potatoes whose necessities _ compelled him to market these products during the first half of the crop year. The Chart also shows that the producer of No. 1 Northern Wheat who, cither from choice or necessity, marketed his wheat every year for 29 years immediate- ly after harvest, received as good a price (cost of carry- ing even on the farm considered) as if he had sold every year for 29 consecutive years on June Ist during the period of the lightest crop movement. Two-thirds of the wheat crop in the Northwest is marketed in the months of September, October, November and Decem- ber. This very heavy marketing, however, taking many years together, has no depressing: effect upon the price of wheat during that period, as the chart shows. The “futures” markets, or the system of, buying and selling wheat for “future delivery” in the leading grain exchanges is the cause of the comparatively high price level of wheat during the heavy crop moving pe- riod. If the system of “future trading” were seriously injured or destroyed by adverse legislation, no doubt there would be a severe decline in the price of wheat during the first half of the crop year as compared with the last half, as has been the case for many years with onions. apples, potatoes, ete. The Joint Commission of Agricultural Inquiry ap- pointed by Congress states in their report published in 1922 as follows: “About 70 per cent of the wheat and a large pro- portion of the coarse grains as well as of cotton are re- ceived at the terminals in the first half of the year fol- lowing the making of the crop. This fact is thought by JUL. AUG $40, “JUL 1 AUG] SEP.1 OCT! NOVI DEC] JAN] FEBI. MARI APRI MAY ‘JUND THESE 29 YEARS WERE NORMAL YEARS PRECEDING THE WAR SEP1 OCT NOV DECI JAN FEB. MARI APRI MAY.1 JUNI JULI H $130 4120. $40 JULI. many to afford opportunity for speculators or convert- ers to buy the crop at a low price, hold it through stor-_ age operations, and later to sell in a higher market. The general impression prevails that prices of farm products during the last half of the crop year are gen- erally higher than in the first half, allowing for the charges for storage, interest, and other costs that at- tach after the crop is in second hands. A number of, studies have been made to determine the truth of this matter. These studies indicate rather conclusively that over a period of years under the existing system of grain marketing the farmer who has sold his crop soon after harvest has come off quite as well as the farmer who has held his grain and sold in the last half of the year.” " “It seems altogether likely that the co-operative as- sociation cannot succeed as a holding corporation for the purpose of withholding the crops from the market to establish an artificiq] price. The attempt to accumu- late and hold a sufficient proportion of the crop to af- fect the price involves speculative risk wholly outside of those of the normal business operations, and may result in losses as well as gains and might well result in in- creasing the price fluctuations from which the farmer now suffers rather than in diminishing them.” : No system of “co-operative orderly” marketing of wheat on a “pooling” plan with 5 year contracts with the farmers, could possibly produce a better “level” of prices during the crop year than now results from the system of “future trading.” Co-operative “orderly”: marketing of onions, apples and potatoes might im- prove tHe price level of these commodities throughout the crop year, as shown by Chart No. 1, to the great ad- vantage of the producer of these products whose ne- cessities compel him to market his crop shortly after harvest. CASH VALUE OF NO. 1 DARK NORTHERN. WHEAT FROM JAMESTOWN, N. D., AT MINNEAPOLIS, MARCH 20, 1923, $1.24 PER BUSHEL et FARMER AT JAMESTOWN, NORTH DAKOTA, WOULD RECEIVE. IN CASH FROM LOCAL: FARMER Chart No. 2! OR LINE HOUSE ELEVATOR $1.05 PER BUSHEL, ' This Space Represents the Farmer’s Share of the Terminal Prite. Local elevators gross buying margin 7 cents r_bushel Rallroad freight charge to Minneapolis 12 cents per bushel CHART NO, 2—This chart shows in a striking manner the cash value at Minneapolis‘on March 20, 1923, No. 1 Dark Northern Wheat of the quality produced around and shipped from Jamestown, N. D., and stations in that vicinity, having a freight rate to Minneapolis of 12 per bushel on wheat, and the manner in which this cash value-at Minneapolis would be distributed. This chart shows that of the Minneapolis price the farmer would receive at the farmers co-operative or line house local elevator at James- town, N. Dak., $1.05 per bushel — that the farmers or line house local elevator would receive 7 cents per bushel, the present gross buying mar- gin, that the railroad would receive 12 cents per bushel for transporting this wheat to Minneapolis; these three amounts added together equalling the cash value of 1 Dark Northern Wheat of that quality at Minneapolis on that date, based on the closing cash prices. Those who might think that the 7 cent gross margin taken by the farmers co-operative local elevator is large, should remember that this * * seven cents must cover the following items: First, this 7 cents is divided up as follows: The farmer elevator companies allow 5 cents of this to. cover the local expenses at the station and 2 cents to cover the terminal expenses at Minneapolis. The 5 cents for local expenses must cover the salary of the elevator manager, the local taxes on the elevator, the repairs to the elevator, the gasoline used by the engine, losses in grades, insurance on the elevator and the grain in the elevator, freight on the dirt or dockage in the grain shipped, interest on money borrowed, etc. Whether the 5 cents is suf- ficient to cover these items and show a reasonable profit on the investment depends largely on the volume of business handled and on the efficiency ot the manager. 3 * The recent report of the Federal Trade Commission on Country Grain Marketing states that the gross buying margin of No. 1 Northern Wheat at farmers’ co-operative elevators during the five crop years from 1912-17 was 6.39 cents per bushel and that the gross buying margin of “line” elevators at country stations during the same period was 5.39 cents per bushel. ‘ It is a well known fact that local elevators at country stations, ewing to competitive conditions, tend to over-grade the grain they pur- chase, and for many years the records of the State Inspection Depart. ment show that the country elevators show a loss of grades at the ter- minal market,— that is, that year after year the grades allowed to the farmer at the country station by the local elevators are higher than the Out of every 100 cents paid in 1921 by the housewife for bread, grades secured by the local elevators when the grain arrives at Minne- apotis and Duluth. s lige allowed for terminal-expenses is intended--te!-cover. the comyi of 1% cents per bushel charged by the STARS SION mer’ at Minneapolis for selling the wheat on its arrival*at: Minne- apatls, also 14 cent per bushel charged by the dealer in “futurég’?- who . buys and sells the wheat futufe as.a hedge ‘for the-farmer’s elevator com- pany also the State weighing and inspection fees, ete; ,. For the 1% cents commission, the:cash grain commission merch . must not only sell the wheat for the best possible’price but he must keep.” 4 the farmers elevator constantly advised as to values at Minneapolis and __ | _-$ther terminal markets, and must call for re-inspection’ dnd appeal when ie considers that the’ grain is not correctly graded. Grain contmission ' merchants usually supply the farmers elevator companies with the money with which to buy the grain, and at rates of interest lower than the ele- vator company would be required to pay elsewhere. These commission merchants are licensed by the Railroad & Warehouse Commission of . Minnesota, and heavily bonded for the protection of the shipper. The dealer in “futures” charges 14. cent per bushel for selling the “future” as a “hedge” for the farmers elevator company, “carrying” this hedge unti) the cash wheat arrives at Minneapolis and is sold, and then “puying in” the hedge. 2 c A wheat grower in the Northwest has mary methods of marketing open to him. He can sell his. No. 1 Northern Wheat to the local farmers elevator or “line house” elevator for cash, in which case he would re- at ceive the Minneapolis or Duluth values less freight and 7 cents, the gross : buying margin at the elevator. ! “Or he ‘can store the wheat in-the local elevator and secure, an ad- ra vance of 75 per cent of its value from the local elevator company at.-a ~' very reasonable rate.of interest — at present. about 6 per cent. Or he'can load his wheat into a:car himself and ship it to, Minneapolis. to any licensed: ani i the grain dealer and Alou 1 bonded grain commission merchant ‘to be sold “on. . > arrival,” and*he: will ‘then secure the full’ Minneapolis market price, leas. U \ ler & freight, 144 cents commission, and the fees charged by the State of Minfiesota for inspection and weighing. Or he can have the local elevator load his wheat into a car, and in.. North Dakota, South Dakota and Minnesota, at present the maximum charge permitted by law is 2 cents per bushel. In this case he avoids the trouble of loading his own car and receives the full Minneapolis mar- ket value less 2 cents per bushel local elevator charge, freight, 114 cents commission, and state inspection and weighing fees. Or if he wishes to store his wheat at Minneapolis he can have his wheat placed in any one of 32 large public terminal elevators, having a. total storage capacity of over 38 million bushels. His wheat will be inspected or graded into these elevators by State or Federal inspectors, will be weighed in and out by State Weighmen, and will be inspected out by State inspectors. These public terminals are heavily bonded, and the maximum legal charge they can make is 114 cents per bushel for elevating into the elevator and later loading out, and 15 days’ storage. After 15 days the maximum charge permitted by law is 1-30th of a cent per bushel per day. The farmer would receive a terminal warehouse receipt in this case, and this form of “collateral” is so valuable that he could borrow probably 90 per cent of its value at the lowest going rates of interest. The farmer who holds his wheat on his farm “speculates” upon it. That is, he runs the risk of a loss through a fall in the price or the chance of a gain through a rise in the price. . This speculative risk is not lessened by “pooling.” Farmers who “pool” their wheat simply enter into a “joint speculation.” A 100 per cent poofing plan is.a 100 per cent speculative plan. Instead of speculating’ on his own wheat a farmer who “pools” his wheat simply turns it over to others to speculate with. A farmer considering signing a five year pooling contract might do well to first inquire as to the results secured by those who, have joined “wheat pools” in the Northwest during re- cent years. * . ’ together only received three and four-tenths cents, the balance or ninety-six and six-tenth cents being. shared by the wheat .grower, the railroads, the baker and the bread retailer.. (See Page Agricultural Inquiry of the U. What Other Farm Product of the Northwest 209, S: Congress, published in is Marketed with Such Low: P Vol. 4 of the report of The Joint Commission of 1922.) . Cos t and High Efficiency as is Grain? * r ' i 4]