The Nonpartisan Leader Newspaper, May 27, 1918, Page 15

Headed for Public Ownership of Mills : Covernment Investigators Are at Work Among the Flour Makers of the - Northwest —Will Put a Tight Check on Unfair Profits Washington Bureau, Nonpartisan Leader FLYING squad is out in the Northwest investigating * for "the enforcement division of the food administration, just how the flour millers are obeying the rules laid -down for them by Uncle Sam as to bookkeep- ing and profits during the war. John G. Dudley, W. H. Buck and James Witkowsky are the men from the Wash- ington office of the enforcement division, and George C. Mortlock, chartered accountant for the milling division of the food administration, is from ° the New York office. Thus far they have visited some of the big flour mills in Minnesota, North Dakota and Montana, . and have looked in upon some of the smaller mills ;in the same territory. They have about the same relation to the millers that postal inspectors have to the postal service—they are finding out who is violating the terms of the federal milling license. These rules were based on the so-called milling ~"agreement, made by the food administration with the millers. The fundamental in this agreement was that the millers should not make a profit of more than 25 cents, net, on a barrel of flour. PROFITS TOOK A GREAT LEAP Alfred Brandeis of the enforcement division, di- rectly in charge of the field work, points out that the recent report by the federal trade commission on flour millers’ profits did not deal with present conditions, but with the five-year period which ended when the agreement between Mr. Hoover and the millers took effect. When the report of the field force now at work is made, and statistical reports for the first year under the licensing agree- /ment are summed up, the country will be able to see to what extent the millers have been brought within control—how profits have been regulated. This recent report on milling profits showed: “That the net profits made by millers increased from 11 cents a barrel in the crop year of 1912- 1913, to 52 cents a barrel in the crop year 1916- 1917. The gross profits of carlot distributors in- creased from 22 cents a barrel in the calendar year 1914 to 55 cents a barrel in the calendar year 1917. The gross profits of small lot jobbers in- creased from 52 cents a barrel for the calendar year 1914 to 86 cents a barrel in the first half of 1917.” That shows that the miller made about four and two-thirds times the net profit on a barrel, a yesr ago, that he was making five years ago. And the carlot shipper was making two and a half times his earlier gross profit, while the small lot jobber was content with two-thirds more than before. “The average cost of production of a barrel of flour for mills covered by the investigation,” says the federal trade commission, “increased in the ‘crop year 1916-1917 over the preceding year, due mainly to the increased cost of wheat. SPECULATIVE PROFITS ON FEED “Operating profits per barrel as shown by their records increased nearly 175 per cent and their rate of profit on investment increased more than 100 per cent. The increase in profits was due in part to the increased value of unsold stocks car- ried over from the preceding year and disposed of on a rising market, and also to speculative profits on feed, the prices of which increased greatly dur- ing the year.” The federal trade commission calls attention to the fact that under the present regulations, millers are allowed a maximum profit of 50 cents a ton on feed sales, equivalent to about 1.7 cents per barrel of flour, additional to the profit of 25 cents a ton which is permitted them. As seen by the commis- sion, the present licensing system has “the in- herent weakness of not encouraging efficiency in production, and of affording unpatriotic millers temptation to dishonesty in cost accounting, dif- ficult to detect or prevent.” It was this “dishonesty in cost accounting” which Dudley, Buck, Witkowsky and Mortlock have been sent West to detect. Meantime, what about the third element in the flour milling triangle—the special commission named by Food Administrator Hoover to revise the system of regulation of the flour and feed milling business ? o3 o o 2 H,HIRAM THERE'S UR PROFITS! That commission, headed by Chairman Taussig of the tariff commission, was expected, on May 6, to be ready to report within a week. It had argued over all the data contained in the report df the federal trade commission quoted above, and all‘the reports, reliable and unreliable, thus far made to the enforcement division by the flour millers them- selves. It had looked over the stacks of complaints on feed prices and flour milling profits, sent to Uncle Sam by farmers and stockmen. It appeared to be on the point of reaching a decision which would set a uniform price for flour, at the mill, based on the cost of wheat at that point. If such a decision is rendered, then the big and efficient mill, such as the Washburn-Crosby and the Pillsbury plants at Minneapolis, would be able to get a larger profit per barrel than any other mill. Because the country must have all the flour that can be produced, the price must be high enough to pay a profit to the least economical mill. The big mills, operating at less cost per barrel, will make generous profits. EXCESS PROFITS TAXES TO GO UP But Uncle Sam is not, in the long run, gomng to let the big millers get away with anything to which he can lay fair claim. Excess profits taxes are going up, the signs in congress indicate, and in due time the big millers will have to disgorge most of the additional profits that any such scheme of price-fixing would give them. The margin be- tween the whole of their excess profits and the part that congress will take away from them by tax- ation will serve as the bait to high efficiency in operation. True, the farmers from whom the excess profits in feed are taken will not get the money back; the government will get it. But if the “flying squad” from the enforcement division shall find that under the present regula- tion the millers are “doctoring” their cost accounts, the new regulations will have to provide some scheme of checking up that brand of thievery, and slowly but surely the government will increase its control of every detail of the operation of the mills. Finally, of course, we shall come to complete public control, which means public owrership and oper- ation. —Drawn expressly for the Leader by Congressman J. M. Baer Gamblers and pr;lfiteers -early in the war wrapped themselves in the flag and yelled in chorus, “You’re a traitor if you touch me.” They couldn’t fool Uncle Sam. He has put experts to work to find N A o B AT T T A mene PAGE FIFTEEN . out what makes the wheels go round.