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ADMINI S T RATI O N

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Class No U "5 lo ,.5

Book No CBS

Acc. No .5

Date V."SL.\.10

Digitized by the Internet Archive in 2013

http://archive.org/details/economicfinanciaOOcutt

PREFACE

This volume is written from the point of view of the middleman a? shipper or receiver of poultry and ega;s or in the capacity of both of th^se functions. The author recognize? that the railroad companies, trucking companies, other transportation mediums, cold storage warehouses, and financial organizations might be considered as middlemen, but his aim is to treat those problems of the specialist in these two products.

Problems which are the most conspicuous and needing serious thought are brought to the fore. Particular emphasis has "been given to the growth of the chain store and the cooperative movement. Some of th° problems discussed -each out beyond the scope of these two products, "but tne association of other food products under the same roof as in retail stores makes it necessary to touch upon th^se problems which have a common interest ^ith poultry and eggs.

An introduction which describes poultry and eggs, their production and where produced has been included that the reader might understand what the products are, also their source of origin.

9>A

PREFACE

A chapter is devoted to the essential economic principles which must be understood if the solving of any of these problems is to be made practical.

The industry as a whole has lagged far behind other industries in its development of proper accounting methods. The author has touched upon some of the gravest errors.

Retailers faults and problems nave been treated in a general way, since their existence is vital to the middlemen, also their problems .are somewhat related to the wholesalers.

The gradual change in the retail Dutlet from small stores to chain store systems has been progressing since 1900, but of considerable importance since the World War. Koet of the literature touching upon this change and itf effects i?5 to bp found in the produce papers. T'ne stabilization of the change has not been of sufficient duration to draw many conclusions.

J anu ary 1 9 28 .

Ernest Cutter.

OUTLINE OE GRADUATE THESIS

"Economic and Financial Problems of the Middleman in the Poultry and Egg Business."

PREFACE

Table of Contents Chapter I.

INTRODUCTION:

What poultry and eggs are,- Breeds or pedi- grees produced,- Producing sections,- Incidental to general farming,- Specialty farming,- Educational op- portunities,- Poultry diseases,- Seasonal production, - Preferred sections for production.

Chapter II. ESSENTIAL ECONOMIC PRINCIPLES:

Production as conceived by the economist, - Marketing,- Marketing methods -and the public's interest, - Marketing agencies.

Chapter III. PROBLEMS 0? ASSEMBLY:

Problems,- Competition among shippers,- Co- operative organizations have become a competitive factor since 1920,- Live shippers versus dressed shippers,-

Chapter III - Continued.

Competitive problems peculiar to the assembly of eggs,- Lack of cooperation from the farmer,- Lowering of assembly costs,- The complete utilization of all products purchased is highly essential,- Conclusion.

Chapter IV.

NEED FOB BETTER GRADING. STANDARDIZATION. PACKAGING AND PROCESSING;

Movement toward improvement,- Grading and standardization,- Packaging,- Processing of poultry,- Processing of eggs.

Chapter V. TRANSPORTATION PROBLEMS:

Many problems eradicated,- Railroad prob- lems,- Loss due to lack of proper terminals,- Motor trucks,- Boat transportation,- Delivery wagons and cara- vans,- Conclusion.

Chapter VI.

PROBLEMS OF TVHAT TO STORE AND WHBg TO STORE :

Purpose of storing,- The poultry flush, - The egg flush,- Problem of storing poultry for a profit,- Problem of storing eggs for a profit,- Changing condi- tions,- Proper storage facilities,- Lack of uniform cold storage lays,- The word "Cold Storage" creates suspicion in the consumer's mind.

Chapter VII. PROBLEMS OF DISTRIBUTION:

Introduction,- Distributing systems, - Problems of the large packers,- Problems of the in- dependent packers,- Too many middlemen,- Conclusion.

Chapter VIII.

THE MODERN MOjrajMBgT TO ELIMINATE THil MIDDLEMAN MP TO SELL DIRECTLY FROM PRODUCER TO C0N3UIIER :

Mutual confidence and efficiency neces- sary,- Causes of movement,- The farmers' obj ective in more direct selling,- The consumers are tending toward chain store patronage,- Effect of movement on middle- man,- Conclusion.

Chapter IX. THE COOPERATIVE ASSOCIATION:

The cooperative,- Are there too many shippers?- The Federal Government* s attitude,- Con- clusion.

Chapter X. THE MAgjgST AND PRICE MAKING:

Prices or quotations,- Objective,- Egg futures,- Statistics,- Dependency on private agencies, - The produce exchange,- The markets,- Market require- ment analysis,- Conclusion.

Cnapter XI.

FINANCIAL PROBLEMS:

Financial relation of shipper to the farmer,

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Chapter XI - Continued

"Requisites of successful snippers and receivers, - Sources of capital,- Distributor or receiver's financial relation to the jobber, retailer, hotel and institution supply houses and restaurants,- Conclusion.

Chapter XII .

CREDIT PROBLEMS:

The snippers' credit problems,- Tne receivers' credit problems,- The jobbers' credit problems, - Credit Problems of notel and institution supply houses, - Suggestive corrective solutions.

Chapter XIII.

ACCOUNTING PROBLEMS:

Modern business methods require better accounting, - Pederal Income Tax Law paves the way,- Heed of greater control,- Potential savings,- Intelligent conducting of business,- Uniform accounting system? for shipper, - More efficient systems for other distributors,- Tne sad plight of small retail accounting systems, - Existence dependent upon recognition of better accounting.

CHAPTER I

INTRODUCTION

What Poultry and Eggs A.re. Poultry is a general name for all "birds bred for the table or "kept for their eggs. The birds most commonly included under this designation are the common fowl, the pe^ fowl, the guinea fowl, the duck, the tur<ey, and the goose. ' The lay of the fore- going classes of poultry are known as eggs, but in tiiis study the commercial eggs are those eggs laid by fowl and to a much lesser degree those eggs laid by ducks and geese.

Breeds or Pedigrees. Produced* Tne most common egg- producing breeds in the United States are Leghorns and Iffinorcas, which lay wnite shelled eggs and are non-sitters. Rhode Island Reds, White Rocks, Barred Rocks, Brahmas, Wyandot tee and Orpingtons are best for general farm purposes. The^e letter breeds are sitters and. producers of brown shelled ea:gs. "

There are many other breeds that might be mentioned but are not so important commercially.

1 Winston's Cumulative Loose-leaf Encyclopedia, Poultry.

H il" ll II" il Ni II"

INTRODUCTION

Producing: Sections. The largest producing states "by sections are: the Middle West; Illinois, Iowa, Indiana, Minnesota, Kansas, Missouri, Nebraska, Kentucky, Michigan, Wisconsin, Ohio, and North and South Dakota: South; Texas, Oklahoma, and Tennessee: the Middle Atlantic States; N?"-T York, Pennsylvania, and Maryland: the New England States; Maine, Massachusetts, Vermont, and New Hampshire: the Pacific Coast States; California, Oregon, and Washing- ton: Rocky Mountain States; Utah, Idaho, and Montana. *

The Middle West produces the bulk of all poultry and eggs in the United States. The Middle Atlantic States and New England States are important factors in producing native products which find their market with- in a short radius. The Pacific Coast States and Rocky Mountain States are rapidly growing and are unique in that their production is more scientific, whereas the other sections tend toward general farm production. The South has a very promising future in production with the possibilities of shortening our storage season in these products.

Incidental to General Farming. The greater part of the production of eggs and poultry has been and is today a side line or an incidental part of the

» Yearbook of Agriculture 1926, P. 1157.

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INTRODUCTION

farmer's objective. Hence, these products were neglected.

Just why tne farmer should have given so little thought to the possibilities of producing poultry and eggs advantageously is a question. Rome of the possi- ble solution may be lack: of demand in poultry due to high prices to consumer, large margin between producer and consumer resulting in small returns to the farmer, poultry looked upon as a luxury, and consumed generally by the more prosperous or sick. If there were no great incentive to raise poultry, the production of eggs would suffer since one is dependent on the Other.

The World War brought about a great change in the paying prices to the farmer. These prices were maintained until about 1920, since then a small decline has taken place but sufficiently high to encourage profitable production. Keener competition among shippers has netted higher returns to the farmer than formerly, considering the decrease in value of the dollar. The result has been greater interest in poultry and egg farming by the general farmer. As a matter of fact the possibilities were so attractive as to develop specialists in poultry and egg farming.

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INTRODUCTION

Specialty Farming, Tne Pacific Coast States have taxen the initiative in this field on a large scale production basis. But instead of being satisfied with the returns as made through the usual marketing methods in which many email farmers were content, they p gw possibilities of large savings in performing their own assembling, processing, grading, packaging and marketing to the retail outlets.

The successful operation of the California Fruit drovers Association and other Pacific Coast States Cooperatives has suggested this form of organization for the poultry and egg producer so that there now exists the Pacific Egg Producers Association which is a consolidation of three other cooperatives. This organization is popularly known as P.E.P. and it cer- tainly has become a large factor in the industry.

New England las been slow to appreciate the possi- bilities in this form of specialty farming. But she is handicapped in not having a sufficient grain supply at hand so as to ma'ce the production as profitable as in those sections where grain is ^t hand. There is a decided advantage in New England in tne price? obtained for tne egg production over any otner section, but, not for the dressed bird. Yet the price advantage has possibilities worth looking into and some day may prove equally as

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I INTRODUCTION

profitable for New England poultry specialists.

The tendency in Hew England has "been to combine poultry farming with one or more other farm products as in apple and peach production, strawberry or asparagus raiser?, etc. Tne idea is more of an insurance against lean years and has good foundation since it is conducive to a more stable income.

"More farmers are interested in poultry, there is a tendency toward greater specialization in this phase of tne farm business and therefore toward larger flocks. Changes which nave taken place in production methods have been largely responsible for the increased size of the producing units by reducing the labor in rearing young stock and in caring for the laying flocks. The development of mammoth incubators, by means of which larger flocks of chicks of the same age could be produced; the use of stove brooders, which made possible the brooding of the chicks in larger units; and newer information regarding feeding and manage- ment have been tne principal factors working in this direction." '

Educational Opportunities, It is the duty of the middleman, coooerative association, or tnat body taking the farmer's products, to aid in educating the farmer. This aid may be by direct methods, such as installation of orivate laboratories for study and passing out educational information; or indirect by informing the farmers of sources

Yearbook of Agriculture 1926, P. 506-607.

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INTRODUCTION

of getting such information that is of value to him, also "by lending aid to these indirect sources that they may be able to get to tie farmer. The government, local, state or federal and colleges or universities are all carrying on educative programs.

The farmer must be encouraged to produce those birds which are best adapted to flesh products or just egg pro- duction or to a combination of both, whichever is deemed most advisable . He should be discouraged in the raising of unprofitable stock.

Particular strains have advantages over mongrel stock, such facts must be brought home to tae farmer.

Better housing conditions, clearer understanding of proper feeds, when to br°ed and what to breed, introduction of new vitality into the flocks, size of flocks, and other related oroblems.

The possibilities of greater savings may be obtained through economy in buying of stock, feeds and other supplies. The opportunities of securing greater returns is apparent through more efficient marketing methods and an understanding of the marketing machinery. A thorough knowledge of where to market the various products and when to market them is essential. The recognition of these ideals is p. requisite to success.

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INTRCDUCTION

The poultry farmer must grasp the need for hygiene in his flocks, that disease may "be kept at a minimum. Also, he should be familiar with the causes of these diseases, what they are, and how to cure them.

This problem of disease is very serious as shown in the disastrous results of 1924, when the public "became fully informed of its presence in poultry and practically "boycotted it for a time. The retailer, middleman and farmer, each in turn has suffered loss from this propaganda which could not have "been honestly suppressed, since the consumer's health might have "been at stake.

There are many detailed problems which could be brought out along these lines, but the purpose in mind is to show trie problem of enlighment which is necessary to overcome the inefficiency and haphazardness of the industry.

Education is the need to put the poultry and egg industry on a more scientific basis and thereby promote the growth of the producer.

Poultry Diseases. The poultry diseases are many and levy their tolls through epidemics as do those epidemics which affect the human race, but on a much greater scale than that of the human race.

The year 1924 was a year of poultry epidemics in the heart of proluction in the Middle West. As stated in the previous section, the fact was soon broadcasted to the public through newspapers, trade papers, and governmental

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IHTRODUCTIOJfS

agencies. Some state? went so far as to place embargoes on live poultry coming out of the affected area. New York was the first to place such an embargo, since it ie the largest consuming center of both live and dressed poultry in the United States. One can readily picture tne result.

There are many diseases such a? the roup, white diarrhoea, pneumonia, tuberculosis, and common colds which can be diagnosed and treated by cure or killing of the bird, but there are many diseases not understood. Sucn studies have necessitated government aid or agricultural college studies and snould be encouraged.

Seasonal Production, There is great need for the spreading of production by sections. This would bring into play the South and Southwest since these sections do produce and can produce poultry and eggs but not on such a scale as to equalize production in the United States throughout the entire year. To hope for this complete equilibrium would be folly, but to bring about an approximation to the desired state is nighly possible and desirable.

The egg shortage prevails from about September to January. In the years prior to 1917, the season was even longer. Tne result is high prices for fresh stock during the greater part of these months when cold storage eggs are used as a substitute. Would it not be better for the industry and the consumer to have a more uniform production?

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INTRODUCTIOX

If bo, the South and Southwest could be encouraged to fill the gap. What is true of eggs is true of poultry, except the season is different.

The "bringing in of this new production could not be done arbitrarily by such methods as forcing unprofitable producing sections from stopping production and commanding the South and Southwest to produce. It can be brought about by education of tne Southern farmer and encouraged by the government.

Some would prophesy an overproduction. Of course, it is not sound to say overproduction from an economic point of view, since it is not so, but it can be so if it is measured by tne profitableness of the entire crop to the producer. Even so, time will iron out this problem when the most efficient section will raise the poultry and eggs.

A' study of the progress made by the growers of green stuff in the Sbutn in shipping to Northern markets might be educational for those who would attempt to do the same for tne poultry and egg industry.

Preferred Sections for Production . S o me sections are much more adapted to producing certain breeds of poultry and eggs than others. The better sections should

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INTRODUCTION

"be studied =md encouraged to produce while the poorer sections should be educated to the better methods of production, which methods if not successful when applied should be discouraged from production in favor of some more favorable product which would be suited to that section.

The production of turkeys furnishes a very good example of this need. The Northern country; New York, Vermont, Minnesota, the Dakotas, Montana, Idaho, and the Canadian Provinces boarding these states produce the fancy turkey stock in North America. These turkeys are delicious in flavor, have better color, clearer white meat, fulfill fa.ncy stock requirements and command a premium over turkeys from other sections. Those tur- keys produced in Kentucky, Illinois, Tennessee, Okla- homa, Texas, Missouri, and other South Central states are well meated, not so good generally in appearance, l^ck the delicate flavor of Northern turkeys, but they are all marketable. These turkeys sell at a discount from Northern prices.

Th° consumer is not always aware of these facts as just mentioned, in fact the consumer ::nows nothing about the points of origin and are inclined to treat all turkeys alike and "buy at about the same price level. It is the wholesaler and some retail ere who are the judges and who t

11

INTRODUCTION

advantage of the differences in price.

This method of pooling the bulk of turkeys as "being from one section generally noted as Northern sections is detrimental to the superior bird produced in Northern sections, since the Northern birds are not as a rule given their credit by consumers who are in ignorance of the facts. Take the other side, those producers in the South- ern sections could possibly produce more turkeys at a profit if the publi c were not forced to pay Northern prices for Southern turkeys.

More honest marketing methods should be used by both middleman and retailer that both sections would get their due credit - the Northern sections for quality, the Southern sections for good turkeys at lower prices.

What is true of turkeys is true to a greater or lesser degree in other poultry products and eggs.

A study of these conditions by the government might show each section how to take advantage of their production and to utilize it to the best ad- vantage. Also the public might be more honestly en- lightened that they might get what they pay for. Such enlightment is bound to work out to the ad- vantage of th^ producer and consumer, even though the unscrupulous middleman or retailer is the loser.

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INTRODUCTION

The wide awake ani honest middleman wantfi more quality products, the consumer demand is pre- sent and such an attitude with its possibilities out- lined could help satisfy and further this demand.

The government should also encourage a study "by producers of climatic advantages, feeding ad- vantages and other possibilities, since all these have their respective bearing on the bird produced for market.

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CHAPTER II

ESSENTIAL ECONOMIC PRINCIPLES

Poultry and egg production wa? .and is to some extent today, carried on regardless? of its cost. This was due in part to the industry having been carried on a? a. supplement to general farming. Prior to the merging of agriculture into the modern commercialized agriculture, such haphazard production could have been continued. The advent of the twentieth century has been the turning point in the production of these two commodities instead of being confined to a narrow market, they have reduced costs and have stimulated wide markets therefor.

Since the World War, the possibilities of making the industry one for specialists has loomed large, and so today tnere is a tendency to calculate costs and produce for a profit. When the profit disappears or diminishes, production is affected and declines. The reverse is noticeable when the margin of profit is present or on the increase. The price of those grains usei for feeding is a major and influential factor of, production. If the price level of poultry products is low and grain is nigh, the farmer is very much inclined to sell his grain ^nd

v

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ISSENTIAL ECONOMIC PRINCIPLES

neglect his poultry production. It if very apparent that farmers are not producing promiscuously and are trying to conduct farming on a business like "basis.

Production. as Conceived "by the Economist. To create the need for the middleman in the dressed poultry and egg business, we must first have production. A glance toward the economic meaning of the word production shows that the thing produced must have the power or ability to satisfy a hum^n desire; if it does, it is a utility. Those essential acts of man which aid in the creation of utilities constitute production.

Utilities may be classified as (l\ elementary utility, (2) place utility, (3) form utility, (4) time utility, and (5) possession utility. '

It is very essential that a. correct understanding of the use of production as outlined here be conceived. We have long since passed beyond the stage of self-sufficing agriculture so it is necessary to eradica.te the ilea of production as being one utility created by the farmer. It would not be correct in our complex system of living, to say that a farmer satisfies a want by producing poultry, when dressed poultry is wanted one hundred miles or more away.

' MaOfclin, Theodore, Efficient Marketing for Agriculture, Chapter II P. 25.

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ESSEITTIAL ECONOMIC PRINCIPLES

Before this want is satisfied, the following utilities must "be fulfilled: the elementary utility created by the farmer, the place utility fulfilled "by transportation system, form utility completed by the packer, time utility provided "by storages, and possession utility ultimately furnished "by those marketing the products. One utility is as essential as the other.

To quote Macklin, "The real meaning of the term oroduction is the creation of all of tnese utilities. In other words, production consists of tae rendering of all those essentia] services on the part of farmers and of middlemen which actually bring into use the goods and services require! to satisfy the wants of consumers."' '

If a clear understanding of tae economic meaning of production, is comprehended, it is easy to fore- see how inevitable economic problems of one group creating a kind of utility cannot help but affect in- directly if not directly those of another group. An illustration is that poultry diseases among the flocks of the farmers are bound to affect the consuming public. The public will refrain from consuming poultry until such time as the disease dwindles and is forgotten. The reduction of consumption reacts on all the kinds of utilities .

• Macklin, Theodore, Efficient Marketing for Agri- culture, Cnapter II, P. 26, 27.

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ESSENTIAL EC ON OKI C PRINCIPLES

Marketing. To quote Kacklin: "Thus marketing as related to farmer? may be defined as the rendering of those essential services whicfi enable the consumer to utilize the products of farms. Abstractly marketing refers to the creating of place, form, time, and possession utilities. Concretely it means the rendering of no less than eight types of necessary services. These definite marketing services are:: (l) Assembling; (2) Grading and Standardizing; (3) Packaging; (4) Processing; (5) Trans- portation; (6) Storing; (7) Financing; (B) Assumption of Risk or Distribution." *

Market ing Me thods and the Public's Interest. The public is interested in all tne fundamentals of production and marketing insofar as their wants snail be satisfied as efficiently and economically as is possible. When the public discovers discrepancies in the consuming price levels due to inefficient production and marketing, it reacts and new problems arise to overcome these faults.

The general marketing methods are; (l) the regular marketing method, (2) the integrated marketing method, and (3) the direct marketing method.

Marketing Agencies. The public is interested

rJT^r' Ineodore- Efficient Jtark.ting for Agriculture. Chapter II, p. 23 og# »

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ESSENTIAL ECONOMIC PRINCIPLES

in marketing agencies to the point of demanding that agency which is most efficient. There are tnree to choose from, namely;- (l) the private marketing agency, (2) the cooperative marketing agency, and (3) the governmental marketing agency.

This country has had and nas a thorough ex- perience under private marketing agencies. The co- operative marketing agency has made tremendous strides forward in late years, particularly in the marketing of fruits. The success of this latter agency in the marketing of poultry and eggs "bids fair to become a greater factor than at present. The government in this country hgs not deemed it necessary to interfere as an agency as yet. The experience from this source is nil. Never- theless our government is active and particularly so in aiding the cooperative agency.

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CHAPTEF III

PROBLEMS OV ASREi'IBLY

Problems. There are many problem? perplex- ing to the shipper in his assembling which necessi- tates a great deal of analysis and study. The most important of which are; destructive competition among themselves, competition from the favored cooperative organization, competition from live poultry shippers, competition from egg hatcheries, lack of cooperation from farmers, problem of lowering assembly costs, and the utilization of all the product purchased.

Competition Among Shippers. The competition ??mong shippers has been destructive and very costly to the legitimate shipper.

Specializing in the shipping of poultry and eggs has developed within the past twenty-five years. The early pioneers have found the business very profit- able, many of them have developed into strong economic and financial organizations who are able to cope with any competitor. The prosperity of these early pioneers has led others to venture with the hope of waxing rich. This new group, consisted in great numbers of men wno were daring rather than practical. Most of these new venturers lacked sufficient capital to conduct this business success- fully.

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PROBLEMS OF ASSEMBLY

It is essential that a person or uersons who may enter this business have sufficient working capital to conduct a plant with at least a carload capacity output. The facts are that such capital is too often Lacking; yet thepe men have courage, if it may be so called, to go out and try to compete with those organized and not handicapped for equipment or finances. This class of shippers cause great disturbances while they start and ramble through to failure. They pay excessive prices to distract those shippers established in that territory. They create discontent among the farmers and shippers. They maneuver to draw in some backer, especially one from the East or centers of consumption, and eventually taice nim in tneir toll.

There is no doubt too much of this reckless, careless and illegitimate competition. The shippers should organize to keep within the law and yet die- courage puch upstarts.

The "Large Packer"" competition (Swift & Co., Armour & Co., Wilson & Co., Morris & Co.,, and Cudany Packing Co. When mentioning "Large Packer" in the following, it will mean this group.) is severe at times and creates hardsnipe to tne independents. These packers nave formed separate departments in

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PROBLEMS 0? ASSEMBLY

their organizations known as the produce department, wnich department handles "butter, cheese, eggs and poultry. Their supposed advantage is in economy of overhead, since they must have their plants and outlets for their meat products; why not add these other products with no relative increase in expense except those which are direct expenses? This argument is more tneoretical than practical, and perhaps a handy one to be used in some of their competitive methods. The "Large Packers" have many shipping plants which are scattered throughout the producing sections. Once they have selected a territory, they must see it developed successfully and in order to start it they will raise paying prices to the farmers to prohibitive levels. Their diversified "business and scattered plants in poultry and eggs can very easily take care of sue in losses as sustained "by this one plant until such time as they have that territory in hand. Such practices are not in harmony with our anti- trust laws, "but through diplomatic tactics they evade any charges of violations of the anti- trust law.

It is very evident that this competitive problem alone would warrant the existence of only those shippers who are exceptionally capable, have efficient plants and are financially responsible.

Cooper at i ve 0 r g an i z at i on s h-9ve become a Competitive Factor since 1920. The rapid rise and progress of co-

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PROBLEMS OP ASSEMBLY

operative organization? in other lines, particularly among fruit growers in California, ha? ^iven great impetus to the formation of similar organizations in the poultry and egg business.

Those cooperatives now in existence in this industry have not proven their worth as yet, but since there has been no severe reverses to dispell or undermine their foundation they are growing. They also are making the competition much more keener than heretofore, due in part to the very evident reaction by independent shiopers to boost paying orices to keep tne farmer happy and cause disconcert among the cooperatives. More will be said in a later chapter which is devoted to a discussion on the c ooperat ive .

Live Shippers versus Dressed Shippers. Another competitive factor not always severe but extremely so at times, is tne shipper of live poultry. There are times when the competition becomes so severe for the shippers who ship only dressed poultry, as to cause shutdowns in some plants -and a very reduced output in other plants .

The Jewish Holidays nave a direct bearing on the smooth or uneven tr^nd of the industry. Just prior to the observance of most of these holidays, poultry products are in great demand. This demand is for live stock only, which is handled by live poultry shippers.

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PB0BL33I8 OF ASSEMBLY

Many shippers specialize in dressed shipments only. This is also true of live shippers. Therefore, if the latter group desire the "bulk of receipts of all poultry to be marketed "by farmers, they must hid up the paying prices to abnormal figures. This is generally the situation.

The dressed poultry shipper is not in a position to meet this competition immediately since the dressed market is distinctly a separate outlet and the prices quoted there do not respond to these advances as rapidly as necessary, the normal demand of dressed poultry being unchanged and very likely to slacken on an increase in the orice level. With a drastic cut in dressed receipts, the market will again catch up with the live market.

The affect on the dressed shipper is quite pronounced at times since he cannot fill his batteries to capacity he must prorate overhead over a much lighter output until such time as the competition from live shippers slackens and the dressed market advances.

Some dressed poultry shippers have tried to overcome this temporary tie up or loss by shipping both live and dressed poultry, directing their attention to the most profitable outlet according to market conditions. This method has not proven so successful, most receivers of dressed poultry demanding it the year round and will not contra.ct with those shippers who will not conform to one method of snipping. These receivers have good reason for such demands since their most profitable time is

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PHOELEMS 01? ASSEMBLY

when dressed receipts shorten up on account of live shipments. If they lost this profit, their business would "be conducted at a loss or for nothing.

C ompet i ti ve Problems. ?<=cul iar to the Assembly of EggB Competition for eggs has similar features as those entering into the gathering of poultry since they are generally collected simultaneously. But there is one problem peculiar to eggs only in the competition from hatcheries for incubation purposes. This competi- tion is not so severe where those wno do the incubating run their plant in conjunction with their poultry and egg plants. It is in those capes where the hatcheries specialize in incubating only, since they have a tendency to pay premiums f or the fancy stock and leave the less desirable eggs for the shipper. The real bad feature here if -where the first hatching is- unsuccessful or the hatching is very late, this will draw fancy eggs which should be stored for later use for consumptive purposes. It is the Aoril and Fay eggs which are in favor for storage purposes, so it will be readily appreciated how close the?e two factors come together and are very apt to lap.

Lack of Cooperation from the Farmer. This is not unexpected since the raising of these products is only a small part of Pis duty and it is very difficult to

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PROBLElv'.S OF ASSEMBLY

convince him of the need of cooperation when it is not vital to him. The reverse is true in tne Pacific Coast section where there are specialists in poultry farming or raising.

The consumer is demanding a better grade of poultry and eggs. This demand will be curtailed at certain price levels which seems prohibitive to the consumer. In order that the shipper may supply this demand, he must either get more fancy products and reduce the undergrades or raise the price level that only those who will pay the higher prices will get tne fancy selected stock. It is not the wish of tne shipper to refuse business. Therefore, his solution must be in obtaining more 'igh quality products that may be marketed at a fair price level. Tne Pacific Egg Producers have felt this demand for better products and have been in a position to fill a part of it since they have a. mucn better control over the poultry and egg production. Their rapid growth can be attributed to the manner in which they have conducted the producing and packing of their products.

The shippers in the Middle 'tfest in particular have been trying to Till their part of the demand for better products by securing the aid of federal, state, and local governments, also the aid of agricultural colleges and private enterprises conducting educational programs. Such educational data coming from these sources will oe more

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PRCEBLBMS OP ASSEMBLY

readily lauded and accepted than directly from shipper? "because of a general feeling of suspicion toward shippers.

Many shippers have started hatcheries that they may furnish the farmers with better stock and increase the vitality of his flock.

There is an evident tendency to throw down tnese barriers of cooperation among farmers which is "bound to be beneficial to all.

Lowering of Assembly Costs. Competition nas been so severe that the snipper has "been forced to cut down expenses wherever possible, which is good for ef- ficiency. Assembly is expensive, yet the attitude of consumers, farmers and governments if such as to try and ignore the costs necessary. The saying of "What goes on in the dark", is very typical of the ignorance of '"hat does go on in the dark.

There is room for more scientific assembly and a consequent diminishing of the costs attributed to assembly. Earnest studies on the part of shippers are necessary. ""he following factors must be recognized: the elimination of tie less strategic buying stations; to select farming sections which are producing "better products with surpluses of these products to wa.rrTiit buying stations; to peek out that tendency where sane competition prevails to cover the right amount of

PROBLEMS OP ASSEI-3LY

territory from the central station; to avoid unnatural proportion of a farmers output; ani to minimize the capital expenditures for unnecessary equipment.

The Complete Utilization ^f All Products Purchased i s _H ighly E s sen t i al . There is a great economic waste in all food lines when food products go to waste. It is only since the Large Packers realized this that they found outlets in whion they could utilize every part of a steer or hog. The greatest loss in this direction in poultry and eggs is found in casualties while on feed and purchase of rotten eggs or incubator eggs. It is impossible to sell tne dead "birds or the rotten eggs for consumptive purposes, since it is illegal, yet they are used for fertilizer and cnemical purposes. The real objective should "be to cut down battery losses due to casualties and discourage the unscrupulous farmers, stores or natcheries from marketing rotten or incubator s^gs. The by-products as feathers and manure are sold but not always to advantage.

Con olus ion . It.woiild pay the shippers to educate

tnemselvep that they might analyze such subject matter as the foregoing suggestions, but in addition scrutinize by analysis his expense necessary and unnecessary for assembling that he may assemble his products as economi- cally as his competitor and know what is actually the facts rather than guess or estimate. Business is being

PROBLEMS OF ASSEMBLY

conducted ^nore scientifically in all lines today; it would "be to the shipper's advantage to work toward this end for his own benefit, as well as to disc our ag the suspicions of those who would like to know "What goes on in the dark", that thip suspicious group, might "be supplied with Tacts.

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CHAPTER IV

NEED FOR BETTER GRADING, S T AjJD ARD I Z AT I ON , PACKING AND PROCESSING

Movement Toward Improvement . The shippers have come to realize that the consumer is willing to pay a little more for products in other food lines wnere tney have improved the package and appearance of their products. The question arising in his mind is obvious; the shipper is now out to see what can be done.

Much has been done in grading, standardization, packaging and processing, yet, there is a tremendous field for bettering these steps, particularly in the first three.

There is at present a strong sentiment in favor of establishing of standards and grades both for tne middleman and retailer that the products may reach the consumer under tne particular standard or specifications set forth. This movement has been sponsored by Roy C. Potts, specialist in charge of the Division of Dairy and Poultry Products of tne Bureau of Agricultural Economics. He nas set forth a plan at the 21st annual convention of the National Poultry »nd Egg Association at Louisville, Kentucky an October 12, 1927. The suggestions or plan of Mr. Potts read as follows: '

Produce News, Saturday October 15,1927. Page 1 and 5.

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NEED ?CR BETTER GKABlftG , STAHDARDIZATIOH , PACKING- AITD PROCESSING

EL t The use of national grade? as a basis f or the purchase of egg? and poultry from the producer and the payment of price with a proper price differential between the grades.

2. Tne marketing of eggs and poultry through the various wholesale channels of trade on the basis of established national grades.

3. The ultimate sale of eggs and poultry to retailers and by retailers to consumers on the basis of established retail grades.'1

The plan a? set forth by Mr. Potts showed the need of standardization of grades and pack even though it met with tremendous opoosition among the wholesale trade. There was nothing accomplished for tne furtherance of the plan at this meeting. The solution as suggested by the trade in general was to let competition set tne standards since it has already broug.rt about a vast inrprovement in poultry and egg grading, processing, and packaging.

Grading jgnd standardization. The assembled products now introduced nave met with great success and increase! consumption of poultry and eg^s. The grave fault lies in the fact that such standards are entirely ignored so far as is possible by a great many shippers. There are many shippers who attempt to rsach or attain such st3ndards but fall short. The result h^s been tnat

-30-

HSKD ^0R BETTER GRADING , STANDARDIZATION, PACKING AND PROCESSING

a few dependable shippers have established "brand? and trade marks which they have standardized for quality and package. This latter group of shippers have never- theless profited "by their foresight and command a demand for their products not enjoyed by ot.ners, also, at the same time they have "been able to receive a premium in price that has paid them many times over for their extra effort.

There seems to be little doubt that as tine elapses, competition will inevitably bring a closer relationship among shippers on grading and standardization, which will be set forth in exchanges or association^. Once these ideal? have been attained by the majority of the shippers, what is there to prevent a certain few from trying to break down these standards by representing inferior grades, ae top grades, as is now done under the cold storage laws of the various states which are not uniform? There is need for enforcement through strict adherence to the regulations as stipulated by exchanges or federal govern- ment regulation. It is a matter of securing harmony ^sa^n^ all exchanges in such cases that the regulations be uniform in all states or letting the federal government step in.

There are shippers of extra fancy marks of poultry who grade ooultry into as many as seventy-four grades at a packing. On the other hand, many shippers will ship the same quantity out of similar territory under about fourteen grades. Such a discrepancy may mean nothing to the average

-31-

NEED FOR BETTER GRADING, STANDARDIZATION, PACKING AMD PROCESSING

person, but it does indicate that something is wrong. It neons that the shippers must get together to narrow down this extreme of grading methods to a closer point of uniformity, if he is to create a greater demand for his products.

What has been said about poultry may be said to be equally true of egg grading, except there are fewer grades. The exchanges and federal government have laid down certain grades which may be followed at the shipper's option.

Packaging. There can be little said for lack of proper packaging of poultry and eggs. The gravest error is on the part of a minority group of snippers who seem to feel that false representation of packages is to their selfish benefit. This theory has proven unprofit- able over a period of time, but there are always a suffi- cient number of buyers to enable tnis small group to exist.

The majority of all products marketed are put out under brands or marks which tne shippers aim to maintain on a uniform basis. It is very difficult for new brands or unreliable brands to make inroads into the market on top market quotations as secured by otner marks. Mever- tneless, buyers u?e quotations made to them to buy tne better marks by. Buying of this character tends to dis- courage the receivers who handle the better marks since

-32-

NEED FOR BETTER GRADING, STANDARDIZATION', PACKING AND PROCESSING

they cannot afford to meet competition whic.n offers inferior quality. Such buying methods should be dis- couraged, its eventual affects would not be beneficial to honest packs.

The new Llapes cup flats and a few other patented flats have greatly reduced the breakage problem in eggs.

The cartoning of eggs for retail use has presented a problem which can be solved if cost is ignored, but fince the cost factor is the more serious, it sti3 1 offers an opportunity for solving. The demand is for a fool-proof carton which can be sold for about one cent a piece .

Processing of Poultry. The past season has wrought a great cnange in th<=> processing of poultry products; packers nave improved their fancy stock and produced a larger percentage of fancy stock. This process, known as the wet pack or slack scald, nas saved thousands of dollars and also has turned losing plants into profitable ones.

There have been many opinions and views expressed as to the cause of poultry standards dropping in recent seasons. It is very probable that the major cause has been lack of stamina or vitality in the flocks. The feeding process had to be shortened which caused lack of feed quality in tne dressed birds, also the sudden

-33-

NEED FOR BETTER GRADING, STAHDAKDIZATI 05, PACKING AND PROCESSING

appearance of pin feathers which could not readily be removed "by the oil method of dry picking.

The first problem wa? to unearth the cause of this lack of vitality. Here is where the educational opportunity showed itself. It is "believed that the rapid growth of incubation has resulted in much poor incubation with its resultant poor chicks. Also the flocks were not revitalized with stock from outside as often as needed and the strains within were weaken- ed. Those interested set out to check the diseases apparent have discovered the base of the facts just noted. The results of their efforts have "been gratify- ing and shows what concerted efforts can io.

The second problem of pin featners has been partially remedied with tie solution of tne first, but since there have been steps under way to remedy tnis latter trouble which had already shown results, the movement has not been abandoned. Tne new process is far superior to the old method, but, it too has brought difficulties which can be made nil if due care is given, or serious loss if careless. The wise shipper will do well to analyze the defects in the new process, that they may be corrected and save him serious loss.

The old methods of scalding and dry picking nave evidently given way to a compromise of both which bids '"ell to replace the old for all time. There ie a saving in its use which has gone to the shippers, but once it is in national usage it cannot help but be )as?ed on in

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KEED FOR BETTER GRADING, STANDARDIZATI ON, PACKING AND PROCESSING

in part to the consumer in the form of "better products at tne same or lower prices.

The advent of the chain store into the meat and poultry business has created a new demand. Chain stores have experienced success in their field by converting all products possible into a form that they may be sold with the least possible wgste through shrink or deterioration. The idea has been conceived to apply this rule to poultry by discarding the entrails, heads and legs of the bird at the packing plant and wrap the chilled dressed bird in a sanitary wax paper, that it may be well preserved. The product would then reach the consumer untouched after packing, which is always desirable. The idea is novel and has met with favorable and unfavorable criticism. This is to be expected in any change which is so radical a deviation from the old method.

There are economic considerations which must be given first thought if serious damage to the industry is to be avoided. Consumption is bound to drop due to high price levels, also to deteriorated products. Botn of these factors are present in introducing tne new idea.

The cost of dressing the poultry at tne plants must be added to the price. Tnis cost is made up of shrink from entrails, nead? and legs, extra labor, and packaging. t.rot considering tne cost of packaging, it is very evident that the concentrated efforts of experts should create

-35-

NEED T?OR BETTER GRADING , STANDARD I Z AT I ON , PACKING AND PROCESSING

a paving in labor over that of the individual butcher, and a saving in tne utilization of entrails , etc . , by conversion at the plant into fertilizers, feeds ^nd other use 8. But the item of labor in retailing is considered a part of overhead and not directly applicable to the poultry and it is questionable as to whether it is correct to s-^y that the labor at tne plant would be a saving. The removing of the entrails, head* and legs increases tne net price about twenty- fire percent, but will not necessarily increase the net cost of the bird. Yet, tne consumer must be educated to this cnange in price with no material change in the cost per bird. It is this latter problem which is very apt to retard consump- tion disastrously for a time at least, until t.ney become accustomed to a higher price level and a smaller weight in the bird purchased. A gradual change by letting the chain store feel out its possibilities would oe more desirable and cause less immediate havoc to the industry, then, if it does not seem favorable, return to tne older met nod .

The consideration of quality is another vital factor, "any have advanced the theory that hogs, cattle, lambs, ve*3l and etc., come dressed witn entrails out, why not poultry? Poultry exoerts claim it is not practical since tne inside neat taints too rapidly unless chilled =md severe losses would result in deteriorated products; even though chilled, it must be keot so cnilled until in

NEED FOR BETTER GRADING, STANDARDIZATION, PACKING AND PROCESSING

the hands of the consumer. Will the consumer accept chilled products as fresh chilled or look upon them as cold storage and refrain from them in suspicion? The chain stores will say that they turn tne product over so rapidly that this will overcome the loss from deterioration. The whole problem is debatable, yet, offering a new field of venture with possibilities of succ ess .

Processing of Eggs. There is little processing necessary for eggs that reach the consumer in tne shell. The sterilizing or guaranizing or other processes in- tended for preservative features have made progress in tneir attempt to provide better eggs for the consumer in the months of light production. That is, the eggs are an improvement over the ordinary cold storage eggs not processed, but they do not accomplish what they purport to do, namely- to take the place of fresh eggs. There is need of more educating the consumer on the value of these processed eggs and a greater need of more uniformity of the better processes, that once naving acquainted the consumer with tne value, ne will not be supplied with inferior eggp.

The proper and only place to process the eggs and tne selection of only fancy fresh eggs for processing is highly essential. The egg snould be new and processed as near to the point of assembly as possible. The

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NESD ?0R BETTER GRADING, STANDARDIZATION, PACKING AND PROCESSING

processing does not improve the quality, it merely

attempts to preserve it. The distaste for storage eggs

may be greatly lessened if the process can he made

uniform and the public made to appreciate its real value.

The bulk of eggs consumed indirectly through bakers,

mayonnaise manuf actors, caterers, and otner miscellaneous

consumers, are processed e^gs. The eggs so marketed ore

egg yol'KS, egg whites or albumen, mixed eggs white and

yolks , dried yolk, dried whites or albumen, and dried

mixed eggs. Competition has forced this industry to

pack at the nearest point of production as may be possible.

The large breakers have their plants scattered throughout

the Middle '.Vest and Pacific Coast states, some have large

plants in China.

The consumption of egg products as has just been noted has seen tremendous growth. So great has the de- mand for undergrade eggs been that a very close price level is maintained during the breaking season with that price level of top grades. The breaking season runs in conjunction witn the storing season of shell eggs. This is beneficial to the snipper and consumer of fancy eggs. Previously a wide range was common and the better grade of eggs had to be^r the burden of disparity in price.

The keeping quality of these eggs when stored is good ond of much longer duration, thereby reducing the

-38-

NEED FOR BETTER GRADING, STANDARDIZATION, PACKING AND PROCESSING

vicissitude? experienced in the storing of shell eggs. It is this advantage, nevertheless, which may lead to undue speculation at times.

The breaker? and driers must endeavor to keep their margins of profits within reason if not forced to by competition, for many of their outlets are large and could very easily establish their own breaking plants if forced to do it.

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CHAPTER V

TRANSPORTATION PROBLEMS

Many Problems Eradicated,.. The rehab il at ion of practically all railroads since the 7/orld War has been so efficiently carried out that many old time problems have been eliminated. This is es- pecially true where there has been a lack of cars, delays in shipments, improper refrigeration and inaccuracies or lack of information on cars in transit.

Railroads are the most important unit in the transportation of poultry and eggs to the consuming centers, but it would be far fetched to say that the motor truck, "water transportation, and the old fashioned caravan or horse and wagon have no im- portant part.

Railroad Problems, It is only natural to treat the more important unit of transportation first. The reader must bear in mind that the problems to be touched on are those of the middlemen in the poultry and eg ; business, rather than those of the transporta- tion units.

Freight and express rates have always been a bone of contention with the industry. Competition has

-40-

TRAHSFORT AT I ON PROBL'SLIS

become so keen that it is a real argument in sight- ing advantages in freight or express rates from one territory over another. The freight differentials often times mean the selling of a plant's output at a profit or a loss.

The rates are computed according to the haul, its complication, and the value of tne product. They cannot be sgid to be unreasonable with these factors in mind and also considering the efficient service rendered in the past few years. Yet there are those who will pick the tariffs to pieces to secure advantages.

The more important economic problem lies in tne fact that this territory now shipping the bulk of tne products to the consuming centers are gradually populat- ing to the extent that they have less surpluses for shipping the eastern markets. Tne ever increasing de- mand and this gradual reduction of surpluses in tne present territory is constantly calling for the bring- ing in of new territory further west. It is possible that the time when this cnange will be felt is too far ahead to bring consideration here. Yet, it is evi- dence and mention is worthwhile. The rates further west are naturally higher, but those now shipping from the far western territories must absorb this additional rate to compete with tnose nearer the consuming centers. The time will come, however, when tne bulk of tnese products are very apt to come from this new territory

-41-

TRAiTSPORTATION PROBLEM

and at this point the rates can be passed onto the con- sumer in the form of higher prices, excepting pro- duction economies or changes in the value of the dollar which might overcome a higher price level.

Loss and damage nave been the cause of consider- able losses to both railroad and the middleman in tne past. The railroad claim departments could tell a woeful tale of the tremendous loss to shippers, re- ceivers and railroads. Tne carelessness, thievery, and inefficiency evident prior to 1922 has been rapidly declining. It is the middleman who must eventually pay for the claims in nigher freight rates, whether tnese can be passed on to the consumer is problemati- cal. The economic loss is tne re and should be eradicat- ed insofar as is physically possible.

The ambitious claim departments of railroads are striving to educate those shippers who are prone to good loading methods. Causes of losses and damage are analyzed to see if prevention measures can't be founded and a corrective attitude developed.

The Interstate Commerce Commission regulation, which

prohibits the settlement of claims on business seeking

reasons alone are gratifying. This leads to the payment

of right and honest claims and an investigation to

satisfy that the claims presented are rignt ani honest.

Tnis regulation is for the good of all concerned and should receive tne support of all nonest middlemen and

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TR /\I\TS? ORT .\T I OS PROBLEMS

railroads.

The less than carload shipments cause considerable losses which need attention. It might prove beneficial if shippers in this latter class would "be compelled to cooperate with railroads in these small shipments by proper packaging, and the railroad in turn, loai cars better.

Logo T)ue_ .to Lack of Proper Terminals. Sidings, s pur tracks, and terminals are a necessity. Most shippers of any size have one of th^pe facilities for their loading, thus saving cartage. Those shippers who have neglected this facility ar« at a decided disadvantage in meeting com- petition effectively. It is the receivers who have been negligent in providing these facilities for unloading their receipts. The receivers in most of the older cities nave been and to a large ex teat are nandicapped by having to pay cartage charges for nauling from the freight terminals. This situation has, and is causing considerable loss in service and direct expense, which can only be remedied by expensive removal programs or conversions of r°alty that such facilities may be added to tn^ir stores. The natural growth in BO/n° cities has demanded new locations for stores, and in many cases they have located so ^s to secure the railroad facilities. Tne problem has been, and is so serious that the federal government at Washington made a special investigation and submitted a report thereon as to

actual conditions. \ t i

' "Food Inv^e tigationj Report of The Federal Trade Commission on the Wholesale Marketing of Food, June 30,1919. Section 20, Terminals.

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TRANSF ORT AT 1 OH PROBLEMS

Boston and Chicago are two outstanding examples of the condition prevailing. The latter city especial- ly has twenty-five railroads with terminals, each line bringing in products with no central point of concentra- tion so that John Jones who might be fortunte enough to have a spur track can get the car onto his track and must need send a caravan across the city to the railroad terminal to unload the car. Boston has two poultry houses that are fortunate enough to have facilities to unload these cars with the aid of hand trucks which are pushed from the cars to the refrigerators, i distance of two hundred feet or more. The^e facilities are not al- ways open since a slight increase in shipments necessi- tates* carting of some cars.

The added co?t for cartage from freight terminals to the store is about twenty dollars per car of 20,000 pounds net weight, or in the case of eggs per 400 cases. If this is prorated over the entire shipment, it means a very small fraction of a cent p°r pound or per dozen, but in wholesaling this is quite a factor. When a car of poultry will average only about >150 to .£170 gross and a car of eggs $90 to $100 gross, one can readily see the percentage eaten up for cartage. With chain store competition forcing oat the smaller units, it is necess- ary to cater to the former in a wholesale way and in order to get their business, it is necessary to sell on a mere brokerage of one^quart er to a half-cent per

- 44

TRANSPORTATION PROBLEMS

pound or dozen, which means $50 to $100 on poul- try and $30- to $60 on eggs gross profit. Deduct $20 and there is little left on each car.

The tieups in traffic where trucks or caravans come from the terminals to stores is ridiculous at times and causes serious inconveniences in giving ser- vice to the trade. If these fa cilities as needed were had, such tieups would not interfere with the bringing in of the products on time.

Proper terminals which will enable the concentra- tion of all roads thereon and proper spur tracks and sidings for receivers are essential ana must be had. The advent of chain store power with their sidings, gives them an advantage in buying power over whole- salers. This factor alone needs serious consideration.

The fruit and vegetable trade of Boeton have just recently opend up their second terminal for receiving their products direct from cars. The railroads have been the factor in securing this much needed condition. One of the Boston railroads have be en making inquiries as to the possibilities of bringing the poultry and egg trade these same sort of facilities.

There is such a demand through necessity and an

interest by railroads and dealers in all food products,

that it seems inevitable that the day is not so far away

of

when the wholesale trade not only of Boston, but/other larger cities, will experience the change needed.

TRANSPORTATION PROBLEMS

Motor Trucks. The motor truck is indispensible in short hauls, both to the shipper and receiver.

The greatest obstacle to the shipper has been the sad condition of the country roads luring certain months of the ye-^r. Road conditions are rapidly im- proving so that time will eventually rectify this need.

The receiver finds the rate for expressing his products to retailers very high, so high, in fact, that this change will often be equal to one-half of the gross profit on the package or packages delivered. These rates should he lowered if they ire to be nearer the costs of deliveries of chain store systems to their stores.

Some receivers use their own trucks, but they are unable to use them as efficiently as would be the case if their volume going to certain territory wsre regular, and of sufficient amount to warrant regular trips. The chain stores can do this since their stores must, of necessity, order from the main warehouse.

Boat Transportation. This means of transporta- tion is too slow to be of any great saving, especially of the highly perishable fresh goods.

Boat transportation is a factor in importation and exports. Canned and dried eggs are imported from China, and frozen turkeys from Austria, Argentine, Australia, and Russia.

The tariff barriers 9re so high at times as to

- 46 -

TRANSPORTATION PROBLEMS

make it impossible to utilize this means of cheap transportation to full advantage.

Delivery Wagong -\n-}- Caravans. The oil fashioned delivery dragon h^s long since passed into obsolescence, but the caravan is still used to good advantage, particu- larly in congested traffic centers. This means of haul- ing goods from terminals to the dealers* stores is costly, and, as suggested in a previous section, it ie doomed to insignificance -"hen proper terminals and sidings are furnished.

Conclus ion. The middleman must endeavor to keep down freight rates to a level Which will not hamper ser- vice; he must be more efficient in loading that loss and damage will be minimized; he must use each car loaded to capacity that the minimum freight rates will be taken ad- vantage of; he must seek to avoid trucking charges to rail- road and from the railroad by erecting plants in the Test at sidings, ^n i securing sites for his stores in tne East on siding or spur tracks.

The notor truck must be used to capacity to secure as low transportation cost ae is possible, that distribut- ing to the small stores will be no more costly than that of the distribution by chain store warehouses to their stores. This is not absolutely possible, but it should be the ideal or standard set.

47 -

CHAPTER VI

PROBLEMS OP WHAT TO STORE AND WJOT TO STORE

Purpose of Storing, Eggs and poultry are stored that the consumer may have them in the season of short or inadequate production at a price which is reasonable and would not be possible were there no facilities for storage. The products are stored dur- ing the flush season when orices are low. The specu- lator take 8 this storage risk in anticipation of a profit when the product is consumed, otherwise, there would be no incentive to store.

The Poultry Flush. The poultry flush comes at varied times according to the kind and classes. The kinds are; chickens, fowl, roosters, ducks, geese and turkeys. The chicken flush may be classified as fol- lows: (l) broilers, from about July to October; (2) fryers, from September to December; (3) roasters, from November to December; (4) stags, from December to January; ^nd (5) capons, from January to February. Then a lull sets in and these stocks stored are gradually worked out until the influx of a new crop starting with broilers again in June or July.

"Fowl receipts run fairly e^en a good part of the year, the actual shortage coming on sizes at certain

-48-

PROBliaiS OF WHAT TO PTOKE AM) T"HE>! TO STO!RE times, although there are times when all sizes and grade? are 9hort. There is a demand for storing fowl surpluses when they occur. There is no definite time when the glut or low production may come, "but they may besummarized approximately as follows: (l) about January, February and March, 5 or 6 pound averages are stored for late spring and summer use; (2) the other sizes being stored principally when the glut is excessive and serious losses would result to shippers and receivers if they all tried to market the receipts for immediate consumption. There may be a temporary shortage in sight and the speculator decide? to take advantage of a possible advance for a short hold. He would then store or hold for this period.

The rooster surpluses occur after their usefulness for breeding purposes cease, which is in the late winter and spring months. This surplus so stored is consumed in conjunction with the short fresh stock in the other months .

Ducks and geese Tre stored from late spring to late fall for consumption during the rest of the poultry year.

The turkey surplus is that portion of the crop not marketed during November or December or which is marketed but conditions prevented receivers from disposing of it satisfactorily. Tne old toms or sometimes called Bulls are consumed during the year by hotels, restaurants, etc., but tne other turkeys find a very limited market gni are

-49-

PROBLBMS OF WHAT TO .STORE AND WHEN TO STORE often held until the following Thanksgiving and Christmas holidays when they again enter trade channels with the new crop.

The Egg Plush. This flush starts about the latter part of March, increasing in volume through April and May and gradually declining the latter part of May and June and generally ceasing about the latter part of July. In comparing experiences in the past, the start and finish of the flush will vary from two to four weeks.

It is during the shell egg flush that canned and dried eggs are stored, since these products are made up entirely of eggs.

Problems of Storing Poultry for a Profit . The section devoted to poultry flush has given a general idea of when these kinds and classes should be stored if conditions of the market warrant storing.

The multiplicity of classes and grades and sizes of poultry make it necessary that the middleman be an expert who is a,ble to analyze and study market conditions. In his analysis, he must consider the condition of the poultry in general and then each particular lot; tne consumption of poultry: the present storage holdings; price level; business conditions in general; employment in general; prices of otner food commodities that rr.ay be consumed 9S substitutes if urices of poultry are too high; .production; the receptive mood of the public toward poultry consumption ^t certain price levels; price of feeds;

50 -

PROBLEMS OF WHAT TO STORE AITD \VH3N TO STORE

condition of poultry on the farm; poultry population; possibili ties of importations; weather conditions with its affect on the crop to be marketed; general health of the country since poultry is an ideal dish for the sick; and many other factors "bearing on the industry.

The speculator or dealer who has considered the foregoing facts will then decide upon a price at \vhich he figures safe to store at, also how much quantity at this price. Too often those entering the speculation necessary to storing know little ani guess. Quite often they are lucky and profit and quite often they go wrong and lose. It is this latter class of people wno make it risky ani difficult for the expert to judge correctly, since these persons are inclined to bid prices up to levels not in harmony with the expert's views. Yet since this expert must store some poultry that ne may conduct his business. He also is forced to store under glut condi- tions which might load him with high cost poultry.

Government statistics, private statistics or esti- mates, and tr^de papers are source of information utilized more or less. The two latter sources are generally guess- es, opinions and propaganda, which ire very apt to lead to disaster if much faith is pinned to them. The government figures as issued daily, weekly, and monthly, are supposed to b^ accurate and so far as is known they are, with some corrections as noted on later reports published .

-51-

PROBLSMS 0? '.VKAT TO STORE AND WHEN TO STORE

The difficulty lie? in the fact that ta^se facts or figures are historical as must be the case, but in- stead of the figure "being given out periodically, why not get tnem out doily that violent fluctuations as occur at times, especially in eggs, would be avoided or minimized?

There is another difficulty that the government tolerates in compiling their figures is guesswork .and inaccuracies on the part of tnose agencies contributing the figures. Thether those agencies are careless or intend to mislead is open to debate. It is a fact that there is doubt as to the correctness of their statements.

■ any dealers are not canvassed by the government clerks for their private holdings which is important in street stocks and storage holdings.

The farmer is so superstitious that often he is found guilty of being one agency who intentionally gives out misleading statements, figuring he will lose out in tne price he receives if ne and other farmers give the accurate head count of poultry on tneir farms. It does not seem possible that such fallacy could exist witn its accompanying result?.

Changing condition? have upset the precedent of how storing .i^p been done with its results. The season of 1935 - 1926 has been disastrous for most poultry

- 52 -

PROBLEMS OF 'THAT TO STORE AND WHKN TO STORE

dealers, which is partly ciue to the storing on prece- dent, but largely to creating too large holdings at too high a price.

Experience has proven that even tne largest hold- ings on record have "been consumed at a price, before the next crop is ready to "be stored. In other words, to believe that excessive holdings will not be consumed "because they are larger than any previous year consider- ing natural increase in demand is misleading, the price level will govern the movement.

The problem involved in such cases is to store the larger holdings at lower price levels that a profit can be realized. Each year operators or dealers who have lost money the previous year are going to name their price or go without storing, yet, these very same men come back the next year enthused as to the prospects of the coming crop and forget what has just occurred. This change of mind is due to lack of experience, knowledge or weakness of mind. Just let propagandists start their machinery agoing for this class is always willing readers and listen- ers and are ready to act when the gong rings to start storing.

The conclusion must be th^t if one wants to store for a profit, he must analyze the situation as described and apply sound judgment with no guesswork, use his head and not his eyes and ears solely.

Problem of Storing E r gs for a Profit. ] nis

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PROBLEMS OF WHAT TO STORE AND WHEN TO STORE

problem is quite similar to those problems of poultry, insofar as facts and other available information are c oncerned.

The discrimination of the storing season on account of changing conditions in production has not been appreciated as much as should be. The change is not imbued in the minds of many old time dealers, even though they seem to recognize its presence. Havoc has been brought to those dealers in years that were profitable had they not clung to the old idea.

Changing Conditions^ The two previous sections have pointed to changing conditions which are always with the indue try. The dealers must recognize them if they are to operate successfully.

The storing of poultry is quite different than was the practice a few years ago. The new crop of broilers is in earlier and is of longer duration. This condition is true of the other sizes of chickens nmd must inevitably enorten the storing season.

There are few sizes of fowl which may be stored profitably since fowl is in fresh supply during the entire year. The supply does, however, shorten up at certain seasons at which time the frozen fowl must be used. The storing of the larger sizes prove the most profitable.

The surplus of turkeys from the Thanksgiving, Christmas and New Year holidays must be stored. Those

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PROBLEMS OF WHAT TO STORE AND WHEN TO STORE

speculators who do the storing are now confronted ^-ith an importation factor not seriously considered in past seasons. The quality of the stock imported bias "been ex- tra fancy since it comes in relatively soon after dress- ing. This is possible since Argentine and Australia are able to market their crops in our summer.

Tariff barriers are to be considered. Our largest importation of poultry consists almost entirely of tur- keys. Our price level has been low in the pnst season and even so, we have imported large amounts of turkeys duty paid to compete with our storage stocks. Our ex- ports of poultry are v°ry irregular and ar<= affected by general conditions across, since poultry is T.ore of a luxury in a country like England. Our poultry exports consist mostly of export sizes or what we call frying sizes.

Easy money tends toward fostering of speculation by cold storage warehouses. These cold storages are looking for business opportunities. Cheap and easy money condi- tions make possible extremely large advances by these in- stitutions for the storing of poultry ani eggs in their cold storages.

The evil, created by this z ealousn rtss Tor business, is to oer.mit many persons to speculate or gamble who are not legitimate dealers and have nothing to lose beyond a scant margin of five to ten percent of tne copt .and yet have everything to gain. It is not uncommon for clerks,

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PROBLEMS OF WHAT TO STORE A2JD TOEN TO STORE

salesmen or their relations, and porters to own egga and poultry which were bought for gambling purposes. This class of persons cannot place their holdings b^ck on the market in an orderly way since they are not accustomed to the actual handling of the commodities. The influence of holdings by these gamblers may cause an unwarranted panic or soft market which would not be warranted had the holdings been in the hands of those Vnose business is to market poultry and eggs.

Change in legislation relative to merchandising, coli storage rul ings , etc . , have distinct bearing on the business.

Changes in retail outlet? to more efficient re- tailers or chain ptore? ha? lowered the price level to the consumer. This has been possible by building up volume purchasing power , reduc ing distribution expense, and lowering the margins of profit.

The chain store outlet has become so important that their methods of merchandising eggs and their future merchandising methods of poultry must be taken into con- sideration when storing eggs and poultry.

Eggs have been successfully ussd as a booster in the chain store sales campaigns, so much po that it is not unusual to see their appearance on the ntae\ly circu- lar for weeks. Very often these salos are -it cost or at a ridiculous profit. In orier that one may comprehend what affect this has on the consumption of eggs,

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FROBLBMS OF THAT TO STORE A>TI> WHEN TO STORE

one must realize that the usual profit of the re- tailers of about 25$ goes directly to the consumer, the chain store being satisfied with a /jobber or middleman's profit. This form of merchandising has led to larger consumption than would be possible under our old system of distribution to consumer.

Proper Storage facilities. Tne storage facili-

ties now in use in most Large cities are efficient. The resulting loss due to improper refrigeration is negligible. The dealers should always take advantage of rate differentials, that one city, as Soston where storage services are under a monopoly, will not absorb the profit in storage charges. Cur freight service is excellent so that storing in large cities away from the home office of the dealer is not as risky as in the past.

Lack of Uniform Co id Storage Laws. The industry needs a uniform cold storage law on both poultry and eggs. Tne favorable laws of one state and the unfavorable laws of another cause considerable inconveniences and sharp practices among dealers which should be avoided. A shipper in Indiana nay ship a carload of eggs to Massachusetts which are cold storage under Massachusetts law. Tne receiver in Massachusetts is not aupposed to know the history of the eggs and sells them not marxed for cheap short held fresh eggs. The law s.iould be

PROBLEMS OP WHAT TO STORE AND WHEN TO STORE

Federal or abolished entirely in all states that all may trade freely and equally.

The word "Cold Storage" Creates Suspicion in the Consumer's L^ind. The notice cold storage stamped on an article or over it as required under the laws of various states, sets the buyer in a repugnant mood. Absence of fresh stock and fresh stock at abnormally high prices, sets the consumer to shopping. If he finds that he must go without the product or possibly avoid paying the excessive price, he will turn to cold storage eggs. Cold storage products are not popular.

If it were possible to compile the facts, one would be astounded at the quantity of cold storage eggs and poultry which enters consumptive channels for fresh. The public are happy and contented to pay the extra prices, which is generally set lower than would be possible were the product fresh. The consumer in igno- rance permits him to pay the retailer or jobber an extra profit for avoiding the lav: that the consumer's mind might be at ease.

There is a need for education among the consumers which will acquaint him with the food value and uses of cold storage products. Also he must be shown the necessity of storing to fill the gaps left open by un- derproduction which comes in certain times of the year.

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PROBLBMS OF WHAT TO STORE AND WHEN TO STORE

He must be made to appreciate the value it gives in aaking more uniform prices. It is not fair to the producer nor the consumer when these products are sold for fresh at near fresh orices. Such practices hurt consumption eventually, since the quality de- teriorates and they are suspicious of fresh stock for a time. The honest dealers are hard put luring this so-called oeriod of "Bootlegging of Eggs or Poultry." They must toe the mark of the law or risk hurting their reputation in a court action resulting from an infraction of the law.

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CHAPTER VII

PROBLEMS OP "DISTRIBUTION

Introduct ion. It is not a practical nor physical possibility that all poultry and eggs pro- duced by farmers be sold directly to the consumer. The farmer is too far apart from th° consumer that the latter might benefit by such direct buying. Therefore, it is much more economical to ship in car- lots. It is the middleman who must fill in this neces- sary service.

About ten years ago the average retailer was de- pendent upon the jobber or wholesaler who purchased in large quantities that the retailer might buy his re- quirements. In recent years the chain store movement has brought into play a cnange of buying habits. This ne,.v retail factor can buy direct the same as any whole- saler and naturally does insofar as it is best or con- venient. The chain store merchant does, however, buy some of his ne^ds locally, but only when the local market is lower than those markets at western points or when hip ^ptern receipts fall short of his demand.

Distributing Systems. The first factor in im- portance as a unit is the Large Packers (Swift & Co.,

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PROBLEMS OF DISTRIBUTION Armour & Co., Wilson ft Co., Morris & Co., and The Cudahy Packing Co.,) ' Tney nave their own packing plants, refrigerator cars, central market at. Chicago, and the branch houses qs points of distr ibution. These organizations fori a most complete and effi- cient system for distribution. The second important factor is the independent packer who generally phips ni? output under a contract with some receiver cr receivers located in large centers of distribution. The independent packer, who establishes nis own outlets at strategic points, or taken an ownership in- terest in such outlets, forms a third factor. The fourth cla?? of factors ip made up of those receivers who have outlets in one or more large cities and who own or contract directly or indirectly their own packing plants. The fifth class of factors is made up of small jobbers Who specialize in native products which are collected locally and sold locally. Tnie class ip limited to local distribution and collection. The sixth factor is found in the many cooperative organizations who have their own packing plants and an appointed agent for distribution. Sometimes they have their own selling agency, but more often an independent agency

' When speaking of Large Packers throughout this volume, one must think of those five packers enumerated above.

PROBLEMS OF DISTRIBUTION

is contracted with. The six factor? just enumerated have very similar outlets which =ire different only in size and quality of products demanded. The important outlets are made up of small retail stores, small and large chain store systems, lunches, hotel and restaurants, private and public institutions, caterers, clubs, boarding houses, ship chandlers, and all governmental agenc ies .

The larger chain, store systems as the Great Atlantic and Pacific Tea Co., the American Stores Co., the F.irst National Stores Co., Sanitary Grocery Co., Piggly Wiggly Stores, Inc., the National Tea Co., United States Stores Co., a.nd other large systems, have become so powerful that they can be very properly classed as a seventh factor in our immense distributing system. These factors in this latter group have their own outlets which is generally tne selling to the consumer. They do not have their own packing plants, depending entirely upon the first six factors mentioned for their supply. The fear of government intervention has retarded them in attempting to complete the directness of farmer to consumer.

Problems of _ the Large Packers. When the Large Packers had organized their packing plants for poultry and eggs, many independents felt that their prosperity would be doomed. This fear of the independents was not a.

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PROBLEMS OF DISTRIBUTION

vision unfounded for the competition of the Large Packers was severe and ruthless that they might make inroads in the business to support their plants. The independents did not seem to realize at the time that the Tickers too must make money and that their advantages were only mole hills made into mountains. Time has proven that those efficient independents can operate successfully and need not fear this angle of competition any more than that of other independents.

The Large Packer has his problems in the scarci- ty of good executives for managerial positions, in- efficient help, s tealing, to i suspicious public feel- ing as aroused through the Federal Trade Commission investigation. The most potential problem seems to be in the rapidly growing distribution at retail of meats, provisions, poultry, etc. by chain stores. Will the Large Packers operate all of their branch houses to advantage? It js very obvious that many of their branches will not be a paying proposition unless the other outlets as pointed out will have grown in their demands so as to keep th°se branches. Then it is very possible that these chain store systems will need outlets for surplus stocks and undergrade?, and might, as is true in The First National Stores of Boston, operate their wholesale departments. The out- look is not too bright with the rapidly declining de- mand for small independent meat shops.

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PROBLEMS OF DISTRIBUTION

The raising of capital by the Large Packers is not an e-3sy task. The investing public has absorbed more Packer securities than wished for. This is particularly true of the securities of Armour & Co., Wilson & Co., and Morris & Co. The securities of Swift & Co. , and The Cudahy Packing Co. , have been pay- ing interest anJ. dividends which yield far more than so called guilt edged securities of other large corpora- tions as United Fruit Co., and Woolworth Co. Tnis large yield is not indicative of a brisk demand for these securities as is general in a "bull market". The investor is discriminating and they have suffered not because they are not financially strong, but their out- look is not too promising and the setback suffered by the other three packers.

These Large Packing companies cannot be efficient distributing systems if the morale of help and stock- holders is low. This may Dp attributed in part to the financial troubles which have loomed with three packers. The banks are their backers, but their patience is limit- ed to the time when they can unload.

Problems of The Independent Packers. The in- dependent packer who depends upon outlets independent of his own organization must first establish a name for packing fancy poultry ond eggs. If he does not meet this requirement, his output will not return the

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PROBLEMS OF DISTRIBUTION

market price necessary for successful operation. Once he does establish a fancy pack, he must see that it is well distributed in each market to which it goes. Also, if possible, make it known in more than one market to avoid a disastrous market in one center of distribution.

The independent packer has less fear from the affects of chain store competition than the Large Packers. He can very readily adjust his output to the demand. Further, if he does not tie himself up to an expensive plant for distribution, which is quite often the case, he can ship direct to the chain stores.

Some independents have revived the early packer idea of establishing car routes for distributing their products. This idea has been abandoned by the Large Packers where they have established branch houses. There is no fixed investment and a very light over- head expense and can be abandoned immediately with- out loss.

There is a closer personal touch with the help and minor executives in the independent organ izat ion which is quite an advantage over the Large Packers,

The third, fourth and sixth class of factors are in quite the same position as of that group just cited and n°ed no further comment.

The fifth group or small dealers who confine their operations to native products are as a rule

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PROBLEMS OF DISTRIBUTION

limited in their collections and distribution, also capital, ^nd do not become very large factors. Their problems are due to the limitations just mentioned and the restrict°d production in their locaility.

Too Many Miillemen. Th e r e ar e too many mid dl e- men in both shipping and receiving of poultry products. The false impression that competition will secure the lowest possible prices is rapidly disappearing even among the laymen. The chain store patronage is acknow- ledgment of this. The inefficient distribution of poultry and eggs also proves that this contention is wrong.

The duplication of efforts 3.nd its accompanying ex- pense is not the most economical. This is what is going on all the time among wholesalers and jobbers. It is this waste which has in part made possible the rapid growth of chain store systems.

If the chain store systems were not in existence, a natural growth in business would halre come to the present middlemen, or permitted new ones to take up the increase. Since the reverse is true, the industry needs no new middlemen but fewer until such time as the chain store growth retaris or breaks down into smaller chain store units, also until such time as the other out- lets increase their demand to take up the slack result- ing from the lessened retailer' s demand. Then, as

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PROBLEMS 0? DISTRIBUTION

noted in a previous section, these chain store systems might go into the wholesale and jobbing business, directly or indirectly.

The stimulus for more "niddlemen is lacking with the outlook for a fewer rather than more, a consoli- dation of the smaller ones into a larger unit and the retr enchment of the larger ones. This coalition is apt to exist for many years to come. A reaction from one or a few large systems of cnain stores to many smaller systems of chain stores serving certain terri- tory is very possible. This would be beneficial to all. The chain store has seen the economic loss through duplication of effort. Their aim has been to place stores in strategic locations which would avoid dupli- cation insofar as is possible. This has not worked out quite as well as anticipated on account of competi- tion and consolidations. The middlemen should profit by their experiences in this direction by lessening the duplication of effort. This could be brought about by encouraging the small man to come to the market a.nd do his shopping, thus saving salesmen's salaries and random deliveries.

What is needed is a larger volume to each whole- saler ani a lessened overhead, both of which could con- tribute toward enabling the wholealer to sell at a smaller profit. That such a larger volume might be given to each dealer, some would have to close up or

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PROBLEMS OF DISTRIBUTION

institute a proration of business program. This is not possible under our system and not desirable since it too would lead toward monopolies. A real business depression among the wholesalers and jobbers with a resulting elimination of the weaker on^s is apparent and a good thing. It will encourage the stronger ones to exert themselves to solve their weaknesses and eliminate the weak ones. The wholesale grocers went through such a period which was more disastrous than anticipated. This should be a lesson for the whole- salers of poultry and eggs.

C onclusion. The highly complex system of distribu- tion as noted in the early part of tnis chapter, has brought three major problems to be solved; (l) less duplication of effort with its cost, and larger volume with the same overhead and if possible less overhead; (2) a reduction of the margin between producer and con- sumer, and (3) having solved these t^o problems, en- courage smaller efficient chain store units which can sell on a parity with the larger units, tnis would be more desirable to society.

mhe objective should be to counteract the modern mo%rement to eliminate the middleman and to sell direct- ly from producer to consumer, in its stead encourage thrift, efficiency, and a fair deal to the consumer and farmer.

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CHAPTER VIII

THE MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO SELL DIRECTLY FROM PRODUCER TO CONSUMER

Mutual Confidence and Efficiency Necessary, - Macklin says, "In any relationship the character of the party involved necessarily is of prime importance. Furthermore, dependable and efficient performance of the services which this relationship seeks to stimu- late is essential. In considering the necessary condi- tions for satisfactory working of a marketing system, there are two propositions which are axiomatic.

"First. - Mutual confidence must exist among con- sumers, farmers and middlemen regarding their respective interests and performances in the marketing scheme.

"Second. - Efficient rendering of essential market- ing services must "be continuous and dependable." *

To quote Macklin further, "In contrast to the essential conditions for the smo oth working of the market ing systems there are compli cat ing or disturbing outside forces which must not be confused with marketing itself. These forces may be summarized in three groups, all of which act literally as wrenches in the machinery of marketing. They are:

* Efficient Marketing for Agriculture, Macklin. Chapter I, P. 7.

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THE MODERN MOVEMENT TO ELIMINATE THE MIDDTJSMAN \ND TO BELL DIRECTLY FROM PRODUCER TO CONSUMER

"First.- The psychology of consumer.

Second.- The psychology of farmer?.

Third. - The motives and conduct of Middlemen. " 1

It is these disturbing outside forces which nave brought about the change of marketing factors and are disturbing the old system of distribution. The con- fidence of consumer and farmer has been upset by new conditio hp which will be brought out in this chapter. Since it would not be possible to sell all, nor the major part of poultry and eggs produced directly from producer to consumer, the subject must be construed to bring them together in a closer relationship. This closer relationship may be established through chain stores, roadside stands and cooperative associations.

Causes of Movement. The consumer would like to eliminate all middlemen and buy direct from tne farmer. This is somewhat typical of our firrt form of trade in agricultural products which was bartering one kind of product for another, the exchange being between two

' Efficient, Marketing for Agriculture, Macklin. Chapter I, P. 3.

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THB MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO SELL DIRECTLY FROM PRODUCER TO CONSUMER

producer? and two oon?umer?. It is impossible to fulfill this desire for all consumers. Our complex system of agriculture prohibits it. We can, however, attain this end for a small percent of all poultry and eggs sold whieh are sold through roadside stands.

The consumer is antagonistic to middlemen and retailers of food products. A cartoon illustrating this skeptism was published in an issue of The Country Gentlemen. The title was "What Happens in the Darx?" It showed a picture of a middleman paying $1.00 to the farmer, followed "by a dark space and then another picture of the consumer paying a retailer 33.00 for the same $1.00 purchase of potatoes. 1 This exaggera- tion is apparently the "belief of many consumers and quite naturally those persons' minds are poisoned to- ward middlemen and retailers. The facts are that under our old system of distribution, too great a disparity between prices paid tne farmer and tnose received from consumer took place. The c.nain store pioneers saw this and introduced the cha.in store systems now in existence. Most farmers nave the same attitude as pictured in this cartoon, so they welcome any deviation from the old system. The roadside stand and cooperative

Efficient Marketing for Agr i cul tur e, Kackl in, P , 19 . Eig . 1 .

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THE MODERN KOVEKENT TO ELIMINATE THE III DDLSEAN AND TO SELL DIRECTLY FRO:," PRODUCER TO CONSUMER

association? h-^ve be°n two instruments which have come into play in recent years to meet the farmer'? approval.

Too many inefficient and haphazard middlemen, who are p^r^pite? in the industry, are the main cause? for the large margin of profit. The duplication of effort in selling and distributing, duplication of overhead due to too many executives at large salaries, too many rented stores where leep would do, excessive refrigera- tion, light, heat, postage, telephone, etc., thrse make up the wastes which chain stores p^ve in part.

The shippers in the West have "been too greedy and unwilling to remove the mystery curtain which enabled him to make large profits. Hip greed alone will do more toward furthering the progress of cooperatives than any oth°r instrument of promotion. The margins of profit have enabled the continuance of many inefficient snip- pers which has aggravated the condition for efficient shippers, farmers and consumers.. The author hap in mind three particular c^pes where the concern? have proppered beyond all rea?onable expectations due to taking advantage a? ju?t -rentioned. Yet th°?e very concerns are the mopt staunch objectors to the cooperative movement, com- plaining of unfair competition. Their objections are legitimate in view of government aid toward the

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THE MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO SELL DIRECTLY TOOM PRODUCER TO CONSUMER

the cooperatives. But would there have been the neces- sity for cooperatives, had they given the farmer a square deal?

The talcing advantage of the farmer* s ignorance of marketing facilities, conditions and prices is rapid- ly on the wane, not because shippers have become con- scious stricken, but for the enlightment of the farmer through radio, automobile, telephone, telegraph, market reports by the government and private agencies. Is there any wonder that the farmer should fall prey to the oratory of unscrupulous cooperative promoters? Time should work out a happy medium between the extremes of unfair practice of the old system and the promises of cooperative demagogues.

Farmers should have been encouraged through educa.- tion to raise better poultry and eggs for which they should be amply c ompensa,ted. This belated movement is now progressing.

The transition of automobiles from luxuries to necessities has influenced the purchaser thereof to save on other purchases. Food products form a large percent of the household upkeep and have proven a source of possi- ble savings by better buying.

The lack of sufficient working capital by small re- tailers has humbled them in their buying. They feel obligated to the wholesalers who supply this deficiency

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THE MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO SELL DIRECTLY FROM PRODUCER TO CONSUMER

and pay dearly through premiums. The demands of the time are for email profits and quick turnover, such "buying will never permit retailers to come abreast to the times.

The retailers accounting system and stock control is pitiful. Some one must pay for the losses not de- tected. The keeping of records under the Federal In- come Tax Law has not proven the beneficial factor to small businesses that it has to the larger units.

The accounting systems and stock control of the middlemen have "been a hindrance rather than a help to more efficient distribution and the cutting down of costs. The Large Packers have done much "by the intro- duction of their systems toward aiding the middleman since he has copied many ideas and hired help educated along Packer lines.

The entire system of distribution as existed has been so inefficient, repugnant to public demands, and full of greed thst one wonders at its long life. The new movement is the inevitable extreme.

The ^^armer s_ Objective in More Direct Selling, - Farmers have always sold all the products they could sell to advantage locally. The great division of labor has made it necessary th?t the farmer produce surpluses which must of necessity be marketed through marketing channels. These channels as just discussed have not been

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THE MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO SELL DIRECTLY FROM PRODUCER TO CONSUMER

very satisfactory. Recent enlightment has led the farmer toward clearer thinking for his own betterment. The obtaining of higher prices was only a natural conse- quence and desire. To accomplish this purpose, there must "be less roundabout methods that he receive a great- er percent of the consumer* s dollar than heretofore en- joyed. The chain store systems, the cooperative move- ment, and the direct selling method through roadside stands has done much toward aiding both farmer and con- sumer.

The tendency of roadside stand development in California is discussed by Edward P.W.Atkinson of the Watsonville Register in a recent issue. 1 His state- ment follows, "Roadside marketing during 1926 is said to have reached the enormous volume of $100,000,000. In many cases the grower was enabled to dispose of his pioducts at a good profit to customers who came to his door.

In other cases he was able also to play the role of the merchant, buying commodities like any dealer, stocking his shelves with them, and selling them along with his own products. Even city merchants have found it to their advantage to open branch stores, housed in tents or cheap structures, along the highways.

• The New York Produce News, Roadside Markets aid Growers in The West, Provide Outlets for disposing of Much Produce. P. 1. October 8,1927 i?sue.

■r. r<

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TKE MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO SELL DIRECTLY FROM PRODUCER TO CONSUMES

"The roadside dealer hap as many potential customers as there are people passing in automobiles. In due time, however, he may be faced with some of the problems that confront the city merchant, one of which will be lack of suitable parking space in the vicinity, and another, if he does not own the property, will be increased rents. It will be only a question of time, further, probably when he will have to pay a merchandising tax." Ne^r England has progressed very extensively in this form of marketing and promises further development.

If the chain store should extend their boundaries to that role of shippers, they would be the only link connecting farmer and consumer. It is highly question- able as to who would be the benefactors. Chain stores are not conducted on philanthropic bases, the growth of only a few '"ould prove the out come.

The cooperative movement can do much toward help- ing the farmer if it will extend itself to get nearer to the consumer.

The Consumers are Tending Toward Chain Store Patrona This tendency is very emphatic in the industrial centers. The chain store has offered goods at reduced prices and nas stated that tneir prices were an inducement to the

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TKE MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO SELL DIRECTLY FROM PRODUCER TO CONSUMER

consumer to save the difference since tne consumer was to pay cash and carry their purchase. Thus the stores are often t nought of as cash and carry stores. The idea has proven a success and today tney nave ?rown into enormous systems. Their original idea of cash and carry- is retained in part only, since many store managers deliver and also give short time credit. The consumer has become so accustomed to the chain store patronage tnat it would be difficult to direct this class of consumer elsewhere to trade, except under the most adverse merchandising metnods. The chain store slogans are now service and quality at the lowest prices obtainable through tne tremendous buying power of the system.

The chain stores nave standardized brands and packages and plainly marked their values that all may be treated alike. This up and above board method has placed confidence in tne consumer whicn was lacking when patronizing the average old time grocer. The old time grocer might have a half dozen prices on the same identical commodity, when consumers friendly toward one another compared prices, the discrepancies were noted. The psychological effect would be to arouse suspicion among consumers.

The chain store nas also appealed to tne bargain

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THE MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO SELL DIRECTLY FROM PRODUCER TO CONSUMER

hunting nature of consumers through advertising mediums

which broadcast their sales. Each week "brings forth

certain items for leaders. These leader? are generally

priced near cost. The impression which has been created

on the housewife is convincing when one analyzes the results

that nave becn obtained.

The chain store has offered cleanliness and neat- ness which was plainly lacking in many old time stores. The general unsanitation among those stores offset the efforts of a few. The chain store has made it a part of their regulations that the condition be made uniform.

Correct and honest weight is supoosed to be found in chain stores which was a source of juggling for profits to many unscrupuluous merchants. Such a condition did exist but it was more exaggerated than called for. The effect was to indict all merchants as being in the same category.

The foregoing methods have so impressed the average patron of chain stores that their psychological action brings them to a chain store. It will be an arduous and heart breaking task to bre^k down this one barrier by a group or groups of small merchants.

Effect of Move Tent on Middleman. The middleman has been and will be a necessity in our distribution system. Whether he will be the large factor as in tne

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THE MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO HELL DIRECTLY FROM PRODUCER TO CONSUMER

past, is open for discussion and the awaiting of future developments. It is very provable that the future middleman must of necessity be a larger unit than has operated in the past. Much censure and criticism hap been placed on the middleman through a misunderstanding of his necessary services. Never- theless, much is fact and true and the middleman is facing trie day when his inefficiency will reflect its

COPt .

The jobbers in the grocery trade located at in- dustrial center? have already experienced cnaos as a result of cnain store compet it ion. The larger whole- salers nave been forced to enter the joboing trade on a large scale to take up the gap left open by tne smaller houses passing out of the business. What is true of groceries may pospibly be true of the poultry and egg merchant?. Even today the egg trade ie handled on a very reduced volume since chain stores have made serioup inroads into the business. The chain mea.t store will handle poultry, tneir success will affect the poultry middlemen likewise.

The Coolidge Administration seems to be favorable to large corporations. This has permitted such or- ganizations as may be national to grow unrestricted. Their methods could not be classed as ethical or fair

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THE MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO SELL DIRECTLY FROM PRODUCER TO CONSUMER

to small retailers, yet, they are permitted to go on without check. If this kind of ruthless competition is continued, which can be by national organizations, the smaller units of chain stores, and small stores must suffer. If these last two units suffer, it is inevitable that the receivers must take the consequences. It is possible that politics may undo some of those things already done. It would be well to maintain the backbone of American society - namely, the middle class of society.

Mr. J.H.Tregoe, no^ a past executive manager of the national Association of Credit Lien, contributed an article on Th<* Chain Store in the Credit Monthly of September, 1927, in which he believed that the well managed local store would not be destroyed. An excerpt of this article follows, "I strongly favor decentraliza- tion. I believe in the community merchant as a communi- ty asset. But although I have this conviction, I recognize that the retail merchandising field has been grpatly overdone, - that training in retail merchandis- ing has been sorely neglected, - and that we are now reaping a harvest of weeds from the tares sown in days when merchandising was easy and there seemed no urgent need for training people for the distribution field.

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THE MODERN MOVEMENT TC ELIMINATE THE 1HDDLSMAN' AND TO SFXL DIRECTLY FROM PRODUCER TO CONSUMER

"YiT e should not worry over the chain store. If we keep our heads and play our proper parts, the issue will be met satisfactorily and without too much con- solidation of distribution power in the hands of a few large corporations." *

This able man of wide experience Bees disturbing influences which will work out satisfactory to retailer and middleman in time.

Conclusion. The tendency to bring the product produced more direct to consumers eliminating all possi- ble exchanges cannot possibly come to the simple direct exchange of the consumer's money for the farmer's poultry and eggs, excepting for a very email percent which always has and probably will oe so handled.

This movement has brought about the establishment of a new and permanent factor, the chain store. Also, it has aided toward the development of cooperative associations and roadside stands.

The fear of retailers and middlemen should be cast off and substituted with * determination to over- come p^st. errors and serve the consumer more efficiently.

There is room for the existing efficient retail and middlemen agencies, chain stores, roaiside stands,

• Credit Monthly, Article by J.H.Tregoe, September 1927 issue, Volume XXIX, No. 9 .

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THE MODERN MOVEMENT TO ELIMINATE THE MIDDLEMAN AND TO SELL DIRECTLY FROM PRODUCER TO CONSUMER

and cooperative associations. It is up to each factor to play fair, ask for no special favors, and not to take advantage of unethical business practices.

The aim should be to establish mutual confi- dence among consumers, farmers and middlemen that efficient rendering of essential marketing services may go on undisturbed. The secondary factors which upset these requirements have had their day and should be shelved for better times.

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CHAPTER IX THE COOPERATIVE ASSOCIATION The Cooperative, The cooperative idea is not new nor untried, many other food lines nave adopted it, some have experienced great success, others with little or no success. Nevertheless, the cooperative nas progressed in recent years in all tnese lines which have adopted it.

The California Fruit Growers Exchange is one of the outstanding successes of cooperatives. Their objective is to obtain a better price for trie farmer than <-ould be possible tnrough the existing agencies. The extra price is supposed to be derived in savings due to reduction of overhead, operating expenses and dividends. These cooperatives have their own packing plants and collection facilities. Some have tneir own sales organizations, others contract with receivers for their output.

The late 3. Harold Powell said "Agricultural or- ganizations must be born of necessity- xxx farmers" business association cannot be formed without compet- ing with agencies already established, xxx Among farmers who under existing conditions are already pros- perous, the need of business organization is not usual- ly felt, even though the costs of marketing and the

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THE COOPERATIVE ASSOCIATION

extravagant profits of the middlemen or the rail- roads might "be greatly reduced. They must feel the pressue of need before they can launch a successful business association. xxx A cooperative organization is more difficult to manage than an ordinary corpora- tion. In the latter, the stockholders do not often take an active interest in its management because they are not experts in the business of tne corporation. They select a manager and hold him responsible for the development and execution of their policies, but when a farmer's organization is formed, the farmer is an expert in its affairs to a greater or less ex- tent, and he may feel that he is capable of handling the organization or, at least, of giving active ad- vice regarding the details of its methods. '

Mr. Powell states further, that the fundamental requirements for successful cooperatives include the following conditions: the area covered by the co- operative's unit must be restricted; the organization must be born of necessity; it must be cooperative in form; its members must have a common interest such as that of farmers in 9 farmer's organization; a member should have one vote or an adjusted number of votes, depending on the volume of business done through the organization; the members must be bound by contract to stand by the organization for a definite length of

♦ Marketing Foul try Products "by *Benj amih , p". 211 •

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THE COOPERATIVE ASSOCIATION

time; a capable manager must be employed. *

Exceptions may be taken to some of Mr. Powell* s views. Yet these facts may be gleaned from them. Cooperatives cannot successfully meet private "busi- ness competition in territories where there is no necessity of such an organization, since this particu- lar territory is well satisfied with their preeent re- lationships. The organization from its inception must be welcomed in general with cooperation. Also there must be an exceptionally capable man at its helm, one who understands not only business, but farmer psycholo- gy and the basic fundamentals of cooperative organiza- tions.

Supplementing tne foregoing, the farmer is look- ing for a little more than what he is getting. That is, he wants a part at least of the profit which has heretofore gone to the middleman.

Are Tnere Too Many Shippers? The farmer also has a decided advantage in a cooperative marketing association which could be utilized even though the necessity was not apparent. This advantage is express- ly true in the Middle West where the cooperatives have made only fair progress. Here also ie where the bulk of poultry and eggs are produced. Are there too many shippers? There are sufficient at least, here lies

a serious problem for the middleman which is malagous

♦ Marketing Poultry Products by Benjamin, P. 212.

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THE COOPERATIVE ASSOCIATION

to that of the receiver or jobbers in their al- ready existing competition from chain stores, as mentioned in Chapters VII and VIII. There seems to dp an abundance of snippers in the Middle West territory. Whether there are too many is problematical The facts are that there is excessive competition and duplication of gathering services which are costly.

The keen competition exercised at times gives tne farmers very nigh prices for his products, but when this competition has soent its force, tnese prices nave been lowered and a fair average is paid over a period of time. The more shippers there are, the more overhead tha-t has to be prorated over tne same volume of goods or nearly tne same. Host territories in the West are canvassed by shippers or their agents many times where one or a few trips would be sufficient. Take for example, the X, Y and Z. Co. shipping out of "Heroines, Iowa territory. Each one will duplicate the trips of the other in mucn of the territory. ^hree expenses, where one would suffice. A real efficient cooperative organization would very easily reduce the cost of assembly, providing it could secure trie cooperation of all farmers in that territory Is there not a wide margin made necessary by so many middlemen depending on territories for tne expanses, salaries, ^ni dividends? The chain store nas taken

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THE COOPERATIVE ASSOCIATION

advantage of the receiver's wide margin? due to duplication oF effort. The chain store system is private capital with one management and the co- operative does not function so smoothly, this may be the answer.

The cooperative is not a private enterprise in tne sense we think of the chain store system. The keen foresight of tne chain store magnates prevents him from being discouraged in tne system's infancy, at which time receivers would be only too glad to stifle his growth by price cutting. But it was the receiver's weapon which the chain store magnate has used and so the chain store has affected price cutting and has received its st-irt.

The shipper's position is somewhat analagoue to

that of the receiver, only his competition is not so

organized nor in perfect accord or harmony. The

shipper is using better foresight and meets cooperative

competition and at tirres bids it uo to the losing point

for cooperatives. This method is bound to retard tne

cooperative's growth and possibly in time stifle it.

The farmer is prone to what the snipper's motive is in

such metnods and gives nim ratner tnan the cooperative

the benefit of the doubt. Tne farmer is suspicious of

the shipper, but will place more confidence in nim

rather than in his own cooperative.

Unscrupulous promoters are always re^dy to take ad- vantage of cooperative organizations. T'iere is

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rJE COOPERATIVE ASSOCIATION

probably no greater obstacle to the progress of co- operative? than the very fact of lack of confidence. This lack of confidence has? "been created largely through such promoters just indicated. With these obstacles and advantages in mini, there are, never- theless, individuals who nave faith enough in the movement and farmers to go on organizing cooperatives in the Kiddle 'Vest. Some of these succepeful ones are in closely ielated lines as the Wisconsin Cneeee Producers and Land 0' Lakes Creameries Association, Inc . In the poultry and egg business we find the Missouri Farmer1 Association. There is room for both forme of organizations which if worked out to a desirable end, should leave the strongest shippers and cooperatives, the latter replacing the inefficient and weak shippers.

The Eeder al government ' s At titude. Politics have considerable bearing on the smooth operation of our marketing machinery and are now meddling by trying to legislate further aid to cooperatives.

The Republican party knows well that they .rust

try to keep the farmers of the Middle West happy and

content if they are to remain at the helm of our

national government. Yet President Coolid~e very

wisely vetoed the IfcNary-Haugen bill which would never

nave satisfied the purposes for which it was drawn.

This veto must be counteracted by some legislation

that will benefit the farmer or the Republican Party will be the sufferer.

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TTE COOPERATIVE a.^OC I AT I OK ■?,rhf?t constituted cooperative organization was clearly defined in The Capper- Volstead Law passed by Congress in 1922. This law provided for certain ppecific exemption from taxes and limited previous enacted A.nti- trust legislation to organizations otner than cooperatives as here defined. This legislation is apparently insufficient, hence to meet the furtner demands of farmers more must be done.

The department of agriculture has arrived at the conclusion that cooperative organizations fostered and aided by the federal government are the cure all for the farmers' ills. This is more political propaganda. Its results would be cnaos among middlemen, glso a complete confiscation of private property. The de- partment of agriculture has already undertaken to oe an unpaid salesman for tne cooperatives. Take tne c 9 c-e 0f the Land 0'La<e° dreameries Association, Inc., of Minnesota. This organization is permitted to use the deoartm^nt of agriculture's name in its advertising, stating that they, the Land O'Lakes Association, Inc., have the approval of tne United States Government stamped rignt on tne package of every pound of butter that goes out of their creameries bearing a certain score and it reacnep tne consumer with, tnis pcore. There is no private creamery in the United Rtatep

that would dare venture on such a proposition, why

should tney? Tnere ip no quantity of butter made that will

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THE COOPERATIVE ASSOCIATION

score 90 or 92 at the creamery and reach the con- sumer with the same score. If the Federal Government cermits this with butter, they will ilso do the same with poultry and eggs once standard? are accepted nationally.

An article written by Seymour H. Newman in tae Produce News, September 17,1927, brings out many good arguments and many poor one? on cooperatives. The impressive part which points out the evil of tne Federal Government's fostering of cooperative marketing .and its resultant confiscation of private property is quite interesting. He goes on to state that in only two other cases in American History have such radical steps been taken; one, "Aft or the Civil War the Govern- ment fr°ed all the slaves and deprived the owners of their property rights without compensation, because the system of slavery was a. sore spot in American life; the other, after the late war tne saloon business was abolished, Without re=oect to the property rights of the brewers, distillers and the saloon keepers, be- cause tne liquor business w^s deemed to be inimical to

the best interests of the country." ' Mr. Newman must bear in mind tint the government must first ban tne middleman and substitute the cooperative by force to bring about such a condition. This hardly seems f eas- able, but were it so enacted the crovernment should pro-

The Produce News, September 17,1927. Page 1 and 4

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THE COOPERATIVE ASSOCIATION

vide means of compensation as done with public utility enterprise? when taken over by municipalities . Our Eecleral Constitution specifically prohibits any sucn confiscation, however, and due care to private rights must be given.

There is no doubt that -where conditions demand it, cooperatives might be encouraged and brougnt into existence, but the government should not interfere by enacting further legislation to foster the cause. The economic advantages of cooperatives, barring personel, are sufficient to overcome middlemen competition.

The consumers in large industrial centers are pay- ing sufficient oremiums for farm products on account of tariffs without adding or encouraging inefficiency and its ultimate increase in costs, this the federal govern- ment will do if they legislate too far. Keep cooperatives free from politics and both middlemen and cooperatives will thrive to the benefit of farmer and consumer.

It is not equality nor fair play for a government to collect taxes from middlemen and by the use thereof foster those institutions which are their undoing if so aided .

Conclus i on. The cooperative problem is a serious one for the shipner and receiver and is bound to cause some loss of business, temporarily at least, to the middleman. But if the existence of both is left to be

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THE COOPERATIVE ASSOCIATION

solved by each in itself, without artificial aid or barriers as government interference or unfair price practices on the part of shippers, there is n reason why both cannot prosper to the advantage of farmer, middleman, cooperative and consumer.

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CHAPTER X

THE MARKET ANT) PRICE MAKING

Consumption and production normally depend upon price levels. When the price level is normally low, consumption increases and production decreases. When the price level is normally high, consumption decrsases ani production increases. Th ? shifting of price levels tenis to bring about an equilibrium. The stabilization of the price level benefits all. It should be toward this end that the middleman lend his efforts. The consumer and farmer will be more content, and the middleman and retailer will h^ve a more uniform volume.

Prices or Quotations. Prices may be determined for five different groups; (l) paying pric? to the farmer, (2) shipper* s price to the receiver, (3) re- ceiver's price t o whole? ^ler and jobber, (4)jobber's price to th° retailer or other esmi-whol es ale outlet, and (5) the retailer's price to the consumer. Each price has its effect on tint going before or after, therefore all price lsvels must be studied by the middleman that he may govern his buying or selling tendencies accordingly. E^ch group make their prices according to certain conditions existing at the time. It is the calling of

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THE MARKET AND PRICE MAKING keen .judgment on the part of the middleman to what is the proper price level that makes him a success or failure. If his judgment err? too often, he is bound to fail.

Ob.j ec t i ve . It snould be the aim of middlemen to stabilize prices of all factors tnat each group may profit to the extent of the service performed. This stabilizing point must of necessity yield a profit to the producer. The avoidance of wide price fluctuations will tend toward stability of the business.

Egg Futures . Fu tur e t r ad i n =■ c oul d be f ?r the benefit of those legitimate dealers who handle the actual commodity in sor.e stage o? the marketing scheme. The purpose or aim of tnos« entering into such tran- sactions must be in the main for legitimate purposes and not altogether for pure gambling motives, otherwise, trie economic aignificance is lost. Future trading should be used as an insurance against violent pric° fluctuations which might pro-ve disastrous. Hedging is the trade term.

The eg>; merchants were intitiatei into future trading in 1921 by the Chicago Mercantile Excnange. This new mechanism was welcomed by some as a. much needed device and a source jf stabilizing influences on -rice levels; others marked it as q. curse to the trade. Home of this latter ^rouo have since changed to tne

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THE MARKET AND PRICE MAKING

former, and vice versa.

The shipper and the storer of eggs are supposed to be the largest "benefactors of future trading. The former might assure himself of a profit on his pack of eggs when there is no ready buyer at a profit by selling e^gs for future delivery on the boar a and storing those eggs not marketed. The storer once hav- ing accumulated his holdings might find it aivisable to hedge his holdings for a profit or to stave off a serious loss. The actual use for th°se purposes is not up to expectations. First, the eggs must be stored at specific points or they will not be recog- nized for delivery purposes, and second, the trade is more inclined to gamble rather than to reason out its possibilities alon'j; the lines sug::est«d.

!£ost eggs used for delivery are in Chicago ware- houses. Those eggs which might be used for delivery at other points are not so used since it has not proven practical. The freight differentials, inspection for grading, and other red tape has deterred the merchants from taking advantage of the privilege.

It is possible that the argument of less ex- pense and the ease of marketing paper eggs has done more for the successful operation of the board as far ^s the Chicago Mercantile Exchange is concerned

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THE HMCEBT AID PRICE YAKI ftO

timn any other arguments . The lure o C possible profits with so little effort and expense has kept the mill going an! has proven very disastrous to many traders .

The future egg board has prospered through its brokerage fees, but at the expense 3f a gre<9t many legitimate dealer? Piace the public nas not partici- pated to the extent as enjoyed by grain, sugar, cotton and coffee futures. The actual deliveries of eggs made by short sellers to go directly into consump- tive channels was not 1% of the total transactions in any one year. The result is that for every profit made, someone hap to take a loss and in addition pay tne cost of doing future business through the brokerage exacted for the particular transaction. The actual profit or loss resulting from the deliveries of actual egg? is negligible. If the public in general does not partici- pate in these dealings that tney may be some of the shorn lambs, the burden naturally must be carried by those dealers who have as yet to see the folly.

The dealers must quiz themselves on this prob- lem of conducting a future board and let ermine its value or detriment to them. They must ask themselves such questions as: Has the board stabilized prices? Does tie quotations thereon represent true conditions and values or is it manipulated by a few? In it a

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TKE MARKS T UTD BRIBE MJCSIHG mere gambling device? If it is a -/ambling device or nearly po, cqn it "be corrected to perform its economic functions? Who sponsor it 9nd 7rno frown upon it? Why do they take their views Tor support or of objections? What has it done for ta° trade ae a w.nole since its start? The greatest evil lies in its gambling attraction which must be removed or it cnn be classed only as a parasite on the dealers in butter and eggs .

Statistics. Accurate and regular statistics as to production, shipments, street stocks, movements, in and out of storage, consumption, storage holdings and any other helpful data should "be made available to all. This is essential that these elements may be properly used for more accurate price making.

The federal government has furnisned some facts on daily strset stocks, daily movement in and. out of storage in ten large centers, also in eacn local market. The sa.m^ information is given weekly for twenty-six cities, but only monthly for tne entire country. The origin of production and the quantity produced is available after the news i? over and tne conclusion daciied upon.

The real need is up to tne minute information througn government a-enciss that the market will be quoted more scientifically. If such information ip

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THE xARKET A3JTJ PRICE MAKING to be made available, it will necessitate the co- operation of the farmer, shipper, railroads, ware- houses, receivers, jobbers and chain retailers.

Dependency on Private Agencies-. Tne bulk of poultry and eggs entering the Hew York or Boston Market is b^sed on the Urner Barry Price Current of New York. This is a private market information bureau which quote prices to the best of their ability. These quotations should be entirely reoresentat ive of actual conditions and not bi assd.

There seems to be a tendency at times for tnese quotations to be influenced by unscrupulous dealers by their reporting sales which are not representative of the true market as a whole, and yet influencing the quotations. The seriousness of such a fluctuation can only be appreciate! by those dealers affected. I t is highly important that this agency be fully informed and guided by the best available facts in determining their prices, since many millions of dollars of business are transacted on the basis of these quotations. The tr,;»de should have exchange committees for investigating ric« making by such private agencies so as to check up on tne accuracy or their quotations.

The Produce Exchange. The various exchanges lo- cated throughout the country make the rules an 1 set standards for trading in poultry and eggs as they do

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TffE MAHKBT AND PRICE MAKING for other food product?.

The exchange i? an organized mar'.-cet plaoe where individual? or their brokers may "buy and sell; it. promote? uniformity in custom? and usages; im- presses the trade with just trading principles; ails toward quick settlement of disoutes; disseminates valuable commercial and economic information; and suggests cooperation among it? members. The ful- fillment of the forgoing purposes of tne exchange are found wanting in many exchanges.

The Boston trade u?e the excnangs more for securing market Quotations, weather reports, market conditions, and receipts of Boston and other cities. The quotations made in Boston are not especially significant to receiver? of western poultry and eggs. They are very misleading and create suspicion among tnose so attempting to utilize them when buy- ing or selling. There is a great need of a more organized exchange which should aid toward placing business transactions on a more scientific b^sis. More accurate quotations would do much toward re- cognition of exchange quotations in preference to tnose of private agenciss.

A study of the precise functions of tne stock exchange? and an analysis or this study might do much toward bringing about more scientific produce ex- changes .

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THE MARKET AMD PPICE MAKING

The quotations of private agencies, produce exchanges and govern nent agencies are confusing at times and lack harmony. A closer relationship is to be desired.

The quotations of these various agencies are broadcasted daily over the radio, telegraph wires, telephone, newspapers and other news organs so that the consumer and producer are pretty well acquainted with prices and conditions as existing in the food markets.

The broadcasting of the market information has done much toward overcoming the unethical methods of some few middlemen in trying to keep such market in- formation covered up. It has put the industry on a higher plane for the cards are on the table and it is up to the consumer and producer to act accordingly.

The intricate communicating systems at the command of exchange members has done much to keep a better balance of supplies ging to the various markets of the coun ry. The price level of ea.ch market should be more uniform, the differentials being accounted for in difference in freight rates.

The Markets t » The important poultry and egg markets of the country are situated in the larger cities. These cities are generally a center of distribution for suburban and urban territories which are quite often heavily populated as Npw York and Boston.

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THE MARKET ANT) PRICE MAKING

The most important of the markets is Cnicago since many of the largest dealers in the country congregate or transact their business through there. Chicago is the great distribution center for tae United States since it is located at a very strategic point in the industry and is a railroad center. New York will run a good second witn its tremendous con- suming power accompanied with an immense distributing power.

An analysis of the centers of consumption and distribution would bring out 3 division similar in some respects to that territory served by the Federal Reserve Banks .and their subsidiaries.

Since Chicago ^nd New York are so important they must be considered jointly. Their quotations or prices are tne basis on which practically all poultry and eggs produced in tne Middle West are sold. In order tnat other centers may receive their supplies, they must pay on the basis of tnese prices, plus the freight differentials and sometimes a small premium. The majority of shippers know from experience that their products will bring just as much money on the average from receivers in other centers than New Yor< or Cnicago. Tnis knowledge has done much toward creat- ing a better equilibrium of supplies in all centers and prevents a glut at times in tne two large market? which would necessitate re shipment.

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THE MARKET AND PRICE MAKING

We have the facilities for quick communication but we must have more adequate facilities for obtain- ing greater accuracy through such aids as "better statistics, accurate movement of goods, market condi- tions, stocks on hand and graded and any other de- tailed information. This added information must be standardized and furnished by a recognized agency. The information should be made available so as to avoid creating extreme shortages or surpluses through unwarranted price fluctuations. Under the present system, the (Jovernment report might indicate a very large surplus of eggs or poultry over 9 year ago, this, might cause a serious price decline with its re- sultant losses. This severe decline will automatically induce a larger consumption which may be large enough to completely wipe out the surplus and even create a shortage by the time the next report is avilable. When the new report shows such a possible change, prices will react to higher levels. If this information were available from day to day or in shorter periods of time, such violent savings would be diminished and stabilize price levels.

It is not quite fair to use the following example, yet it gives the extreme which is a warning to the ever present danger in the indue try. The marketing of the turkey crop requires tremendous skill, capital, fore- sight, courage, knowledge, and a spirit willing to gamble. Wild guesses are made by private and govern-

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THE MARKET AND PRICE MAKING

mental agencies as to the prob-ble size of the crop. The author hap yet to see from experience the good derived from such wild guesses and misleading state- ments. There is grave narm in this forecasting. Therefore, it would be much better to le^ve the pre- dictions and estimates to individual dealers' unt ll such time ^s scientific steps are taken to gather better information. It might prove of interest to follow the trade papers and journals issued from about September to January and see how these sources of information judge conditions as compared with the actual outcome.

The marketing of the crop is a gamble from the start to the finish. Yet a more orderly procedure is highly desirable and very possible. Carloads of turkeys are routed to points never to be reached or if reached to be suddenly reshipped to other markets. This irregular method costs money through increased freight costs and possible loss through deterioration of quality. Turkeys are extremely perishable and must be handled rapidly. This haphazard and confusing situa- tion is re-enacted from year to year. It should be improved upon without further delay.

Market Requirement Analysis. There is no con- certed effort toward analyzing the needs of require- ments of each market nor when this is calculated to take them all in the aggregate.

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THE Iv'APKET AND PRIGS MAKING

The situation resolve 8 itself into custom. Each middleman sizes up what he thinks is best. This method has nevertneless worked out better than would be suspected. Would it not be more benefi- cial if such analysis were made and broadcasted?

The Boston market demands fancy l^rge brown eggs of good quality. The color must not be a grimy brown, but a good bright or reddish brown. New York prefers chalk white eggs of good quality. Havana, Cuba is governed largely by price. Con- certed effort couli. meet this varied demand much better than under pre°ent methods.

Take another angle, the snipper may be small with a -""ide variety of grades and sizes in his poultry and eggs. This shipper may snip in a car- lot way if his entire output were to 50 to one point, but cannot if he snould nave to meet market requirements as just noted, his premium to be obtained by selecting markets for each clap? of goods would be offset by the freight advance in less than carlot shipments.

The problem requires a ^tudy of "*rny Boston prefers a certain grade and New York another grade and wnat can be done to acquaint the consumer with the advantages of other grade? and quality. Frice has been the greatest inducement. It if possible that cooperative advertising might be used to great advantage that these neglected grade p =>nd sizes might be consumed to better advantage

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THE MAtfEET AND PRICB MAKING

than heretofore. Advertising has proved its worth among raisin and prune packers. *7hy not this industry ?

One of New England's chain store systems has taken advatange of the neglect of poultry sizes and has obtained success for themselves by securing public favor through lower prices with equal quality.

A little thought and reasoning has created greater value for dirty shelled, cracked, checked and jumbo eggs. The outcome has been the tremen- dous growth of what is known as the canned and dried egg business.

2 qnclusion. The middleman mu^t inevitably bring about a more scientific marketing scheme, bet- ter and more accurate market information, and more scientific price making. This is demanded of him by both consumer and producer that each may get greater value, also that the middleman reduce his margin for marketing.

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CHAPTER XI FINANCIAL PROBLEMS Financial Relations of the Shipper to the

Farmer,-. The middleman's financial problems may- be classed as direct and indirect. The direct ones are those which directly affect his own busi- ness, and the indirect those which affect him from without.

Since the shipper comes in direct contact with the farmer, he must of necessity be in sympathy with the farmer's financial problems and if possible lend his aid to him.

The shipper must be financially responsible if he is to be of service to the producers of poultry and eggs. It is this responsibility which nakes him so valuable to the farmer. It enables him to pay cash for all that he receives. But there is still a further aid which the shipper may be influenced in, that of enabling the farmer to secure funis for financing his farm and his crops. To loan the funds directly to the farmer is not conceivable, but he can do much toward fostering institutions and legisla- tion which are in existence or proposed. The shipper is a better business man than the farmer ani is in close touch with him which enables him to see the

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P I K AH 2 1 AT, PROBLEM S

farmer's financial need?. The shipper if 3lso a man of influence in his territory. This influence may extend politically, as well as in business. It seems that no one is better ea,uipped to aid the farmer in this direction than the snippers.

The Middle West politicians have been very successful in satisfying many of their demands for the benefit of farmers . This is especially true of the financial demands. The Federal Farm Loan Act jjf ? s an outcome of farm relief agitation. This act makes provision for the formation of agencies through which farmers owning land may obtain permanent capita.l and capital ror chattels at low interest rates. It does not, however, nelp the tenant farmer to become a land owner.

The financing of poultry flocks is largely done by the farmer, but if the industry expands in tne near future as in tne p^st, it would not be surprising to see loans male on flocks a.s is now done on cattle.

Many shippers finance the farmer at the start of their flocks by furnishing the b=ioy chicks. This has been a boon to farmers since it enables nim to get the start which might never have taken place witnout this aid. It is h^rd to conceive where any furtner financial aid on the oart of the snipper would benefit ei ther party.

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FINANCIAL PROBLEMS

Requisites of Successful Shippers and Re- ceivers,- To "be a successful shipper or receiver or "both, the individual or organization must first be able to finance shipments in carlo ts that he may be able to take advantage of carlot rates. The Large Packers will set a minimum of efficiency at which the independents may operate successfully. To be handicapped by lack of sufficient capital, will inevitably place a shipper below this minimum.

Experience has shown that this tremendous handi- cap has ruined many shippers in the large producing sections. The arguments set forth that inefficiency in the preparation of the pack, inefficient buying or inefficient merchandising methods have caused most failures is not altogether true. These are contribut- ing factors in that they might have led to losses, yetjhad the organization entered the business with sufficient capital, it would have been able to with- stand early losses which are not uncommon among new enterprises. Once these concerns find their stride they soon overcome the early defects.

Sources of Capital,- The capital necessary to develop the shipping business consisted in a large part of funds supplied by individuals to operate as individuals, partnerships or corporations. These individuals entered the field in its infancy and sub- sequently profited greatly. Their profits were re-

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F I NANC I AL P!> OBLELIS

invested. It hap only been in recent years that the general public has been permitted to join in ownership of such enterprises and now only through Large Packer securities. The innovation has not proven entirely successful, nevertheless, the capital so raised finances approximately one-third of the poultry and eggs marketed.

The independent packer still depends upon his own resources with a tendency toward encouraging the efficiency of his organization by incorporating it and offering part ownership through securities to tne employees. The corporate securities are nevertheless hell closely so that the public's participation is nil.

The industry is dependent for its capit3l from the oublic through Large Packer securities or through the Large Packers reinvesting their earnings, also upon those independents who furnish the capital out of their own personal, funds or the reinvestment of the organizations' earnings.

The past few years have proven none too success- ful for four of the Large Packers. The reverses suffered have been reflected in the declining market values of their securities. The ultimate loser must be the security holders, especially those wno nold the junior issues. Two of the Packers have held their own, but one has fell into disfavor through unsuccess- ful segregation of subsidiaries which w^s forced onto

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them by government action.

The Federal 'rovernment has been very antagonis- tic toward the Packers in the development and ex- pansion of their business. This nas hindered and re- tarded earnings. In addition, the public have looked upon the Packers with a suspicious eye. If a corpora- tion is to successfully operate and prosper, it must not be held in check by the two factors so indicated.

Investor sentiment toward Large Packer securi- ties is such as to make it almost impossible to success- fully float further issues of securities, particularly those of the group held in disrepute.

Such a condition among the Large Packer securi- ties is bound to cause a very irregular flow of capital from the investing public into those securities. The Large Packers paying dividends may pos ribly attract more capital, but it is more likely to come in the form of reinvestment of earnings. Those Large Packers who are not paying common dividends but earning them in part or whole may also reinvest earnings, but some are not able to even do this. The expansion programs are retarded, but not nearly so retaried as would bp ex- pected. The junior security holders have had to fore- go dividends that these expansion programs might be continued. It is very questionable as to whether the ultimate expansion or th<* sacrifice endured by junior security hollers is worthwhile.

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Mention has been made of the capital contribu- tion to operate the independent packers. The capital has been supplied by one or more individuals who are experts in the business. They have found it profit- able to leav*5 a l^rge percentage of the profits to accrue. The result has been the growth of a number of strong independents. But the tendency since 1920 has not be^n toward greater expansion, but no re toward a waiting policy. Profits have not been so large nor so regular.

Even though the attraction for new capital to the Large Packers or independent packers has not oeen good, the industry has not suffered for want of in- sufficient capital. This may be explained by forced sacrifices on the part of junior security holders that earnings might be reinvested in hopes of a brighter future or to stall off complete ruin which would re- sult, had they demanded or continued to pay dividends on these junior securities. The tremendous supply of capital and credit in this country since 1921 has forced the existing capital in the industry to remain since it could not be more profitably used elsewhere, other fields having had sufficient capital of their own. There has been millions of dollars of capital yielding no returns in other fields beside the packing industry, such as tne leather industry, textile industry, and others, they too have been waiting in hope. Also the immobility of the capital tied up in plants has de-

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FINANCIAL PROBLEMS

manded liquid capital to save it, or keep a market value for it. Their plants have no ready market. Those who have tried to market them have found them to go begging. Again, the smaller middleman is quite often content with a fair to good salary, even though his investment shows no appreciable return. He is nan li capped, but is unwilling to sacrifice his inde- pendence to become am employee for others. Another factor adding further capital is the ev^r present person who knows little about the business and desires to learn but with ultimate sorrow. Sixth, often times bankers must add capital to keep down their losses which 'would result if they discontinued further credit. Seventh, the most efficient are still able to show fair or good returns and pay themselves salaries. Can these factors continue to bring in new capital in- definitely?

There are other sources of capital which are ir- regular in amount and in time invested, but very essen- tial to the industry. The commercial bank has always been r^ 9dy to take on reliable accounts and furnish liberal lines of credit. Many banks prefer this particu- lar industry to others, because of the liquidity of the current assets.

The issuance of warehouse certificates for goods stored renders it possible to secure very large loans on merchandise stored. These loans may be obtained through the warehouse issuing the warehouse receipt,

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the merchant1 s bank , or through not? brokers when the amount in large. The liberality of these agen- cies at times if such as to often make a loan which will not only be 100^ of the cost of the mercnandise but in addition an amount which would be a good profit. It is common to find loans for 90'£ of the cost value. The situation has been aggravated by the zealousness on the p^rt of warehousemen to get business. It is not healthy ani is a detriment to thp legitimate de^l^r. Too much credit can be just as harmful as too little credit.

Some of the larger warehouses and packers sell their notes to note brokers in this way, securing am- ple capital which might not be secured through their banking connection because of the size of the institu- tion or the limitations set by the banking laws of certain states.

Some of the inadequately financed shippers se- cure advances from greedy receivers who h'-jve a strangle hold on them ani control their output. This practice is not desirable nor beneficial to the industry and should be discouraged. It does not encourage effi- ciency for either party. The primary motive of the party advancing the funds is ^°nerally selfish gain and to stifle competition for this pirticular shipper's output. Experience has shown that most shippers backed in this manner hive eventually failed.

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Another source of temporary capital may be from concerns dealing in other food products who may have surplus funds between the storage season and flush c?ason which may be utilized by a neighbor or associate who is in the poultry and egg business when th°re is a temporary demand for funds as Thanksgiving, Cnriftmas, New Year's, or faster. This practice should be frowned upon as very dangerous. Banks were created for such purpos es.

Those concerns which are incorporated often borrow from their officers or board of directors. This prac- tice may work out satisfactorily for temporary accommoda- tions, but should not be resorted to for permanent funds. It would be better in thp> latter case to issue more stock or other securities ^nich indicate it as a permanent part of the working capital, v/hen the organization is a proprietorship or partnership, the evil is not so great since it automatically becomes capital to the credit man, thus it may be utilized for liquidating in- debtedness. A more serious offense is the practice of borrowing by officers or directors of a corporation from the corporation for personal uses.

There is a very valuable source of raising funds for permanent capital purposes which has not been used extensively, yet, it is a highly desirable source. Why the middleman is suspicious of his trade or customers *nd they of him is a problem. Tne opportunity for a

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closer relationship in business through stock owner- ship by customers should not be ignored. It would prove'a mutual benefit. The Boston Wholesale Grocery Company of Boston, Massachusetts has demonstrated the possibilities of a. similar scheme. It is one of a very few old time grocery houses which Kav<=grown in the past ten years. Such a scheme does not success- fully forfeit the controlling interest by the middle- man. It is merely a scheme for reducing overhead, es- pecially selling expenses and bad debts, and passing the saving along to the retailer at a lower price and the showing of net profits on the basis of stock owner- ship.

Those middleman who neglect to use or through cause are unable to use any one of these sources of securing added capital are not able to compete on the same parity with tho°e who do utilize them. The nature of the business requires the tapping of tempo- rary capital at flush seasons, since it would not be good business to carry permanent capital which would suffice for the peak load in the flush season.

The normal capital requirements for ordinary turn- over would be sufficient for about four months. The capital requirements for the other eight months are abnormal and should be financed from sources of tempo- rary capital. The success of the business ie depen- dent upon very large turnovers with as little permanent

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capital, yet an amount which would be construed as ample by the trade.

"Pi etr ibutor' s or Receiver' s Financial Relation to the Jobber. Retailert| Hotel and Institution Supply Houses ^ind Restaurants. Over ninety-five percent of these two commodities are sold by the receivers on credit. The granting of this amount of credit requires additional capital which is measured by the volume of turnover and terms granted. Custom has made it neces- sary that certain lines of credit must be granted, the receiver indirectly aiding the financing of the ultimate buyer who generally demands credit. The following chapter will dwell more in detail the proTJems confront- ing credit granting and the basis or terms.

Those persons in the jobbing, retailing, lunch, restaurant ani other outlets are very often persons of little means and more or less ability, they are willing to pay the cost of securing credit and have so establish- ed a necessary relationship with the receiver.

2 onclusion. If the financing of poultry and eggs were placed on a closer to cash basis from farmer to con- sumer, we could materially cut down the margin paid be- tween farmer and consumer. The chain store has used the cash method of retailing, wnich has been the basis of their success. Someone must pay for the interest cost, the added accounting costs, the credit losses, and the cost of keeping a credit man or department.

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A large amount of capital now tied up in account? receivable could be transferred to more profitable uses. The tendency of tne industry is toward smaller profits, greater volume per business unit and a larger concentration of capital to each unit. Those business units desiring to ceep abreast of the times must strive to eliminate these wastes resulting from extensive credit granting and build up their capital investment that they :r.ay nandle sufficient volume which will yield a teturn on this investment .

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CHAPTER XII

CREDIT PROBLEMS

The Shippers' Credit Problems. The shippers who confine themselves solely to the shipping "busi- ness have very few credit problems since their customers are few and the turnover of theee customers is not large, particularly those to whom credit is granted. A fair percent of the goods shipped to re- ceivers is p-^id for by drawing drafts when the goods are shipped, which drafts are generally paid upon arrival of the goods. Sora^ of these drafts are drawn and accompanied by order bill of ladings, which practice eliminates the cr-dit risk. Those ship- ments made open involve a predit risk, which requires an analysis of the receiver's character and capacity. The mortality among the substantial receivers is low, therefore the risk is negligible. If the credit problems which arise from this point on to the consumer were no greater, the mention thereof would be uncalled for.

Those shippers who conduct a jobbing business locally, besides their shipping business, 'mve the added credit risk of r°ceivers and jobbers, which will be treated later. Also those shippers who advance

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fund? in the form of stock as baby chicks or in cash to farmers nave a risk which entails certain problems but of no great moment.

The Recei^ers'_ Credit Problem . Itisnecess ary t o draw an arbitrary line for each :lafs of credit granting even though many receivers -ire jobbers , hotel and institution supply houses and etc., since each particular group grants different terir.s of credit.

Tne receiver's main objective is to sell in car- lots or to break up carlot shipments into as lar^e a unit aa is possible to sell. As just noted, ne may 50 fur trier and take on added functions, but it is his functions in granting credit as a receiver that is of interest now. The usuall terms of credit are ten days to fourteen lays. Occasionally special term? are made for cash to ten day? or over fourteen days .

The receiver? eel] other receivers, jobbers, notel and institution supply nouses, chain store systems and other wnolesale consumers as lunch systems. The credit risk is varied with each group, the cecon.i and third group giving the greatest trouble since their particular class of trade brings a greater risk. It is these two groups who violate the usual terms most, and since they ixivolve a greater risk they should be granted terms nearer to cash. Competition has been and is so keen tnat it n^s not been possible to bring

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about this needed corrective. An analysis of character, capacity and capital iR essential here with greater stress on character ^nd capacity in the eve of jobbing houses and notel and institution supply houses since their accounts receivable is often very uncertain and their capital is largely tied up in this particular asset.

T.ne Jo_ bb er §J__C_r e 1 i t Problems . Wh en sp e 3 k i n g of j obb e r s , it i? customary to think of them es wholesalers catering to small retail stores, lunches and the like. Their credit problems have been made more serious pith the advent of cnain store competition. It n^s been made precarious in specific localities v:nich have gone strong for cnain store retailing. Tne terms of credit vary according to the commodity and persons securing the credit. Eggs are sold on much longer term? tnan poultry, "any jobbers have tried to place poultry on a cash to weekly basis, others have extended tne terms to a month. Eggs are soli on terms ranging from weekly to thirty, sixty -^nd ninety days. Tne old time grocer taking the longer terms.

The chain store systems have made serious inroads into the cash business of small retailers so that they have been content to conduct ? ere lit business rather than sacrifice their usual margin of profit to obtain some of tne cash business.

Too often these retailers depend upon tne jobber

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to finance their business outside of a few fixtures and some equipment which has little value when forced onto the market. This situation is quite general, particularly among the old line of trade, tne jobber must adjust his terms to suit the terms granted by tne retailer to the consumer. Tne payment of tne jobbers' bills depends upon the retailers' collections and if the retailer errs very much in granting credit, he is very apt to pass the loss onto tne jobber. The condition of tne jobbers' accounts receivable is not a nealthy one. It is only when a jobber discontinues business that the true collectibility of lis accounts receivable is realized. His accounts receivable are good a.s a going concern but subject to a drastic loss in case of liquidation.

The granting of credit to retailers has been nap- hazard and unscientific even among the Large Backers. Keen competition for business has been trie greatest setback toward placing credits on a sounder basis. The analysis of a retailer's standing for ere lit purposes is limited, capital is too often lacking, particularly working capital, capacity is too often medi ocre, hence character can be changed under forced circumstances wnich are very apt to develop in the cn^a^inx, retailing system. If a retailer has little or no caoital and on- ly mediocre capacity and is pent up by chain store compe tition, he may easily fail even though it is his last

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resort. The revolutionizing of the retailing of food products has been so rapid and impressive that the risk is hazardous and needs closer scrutinizing and the extension of shorter terms of credit with a lower limit of amount. Those credit men who fall prey to salesmen's hard luck stories of poor business and en- courage this situation rather than retard it, are bound to be the losers in the long run. One cannot help the situation generally by granting longer credits. The aim should be toward a cash basis.

The credit men of jobbing houses might help these retailers who grant credit extensively through co- operation. The average retailer is not a credit man nor a good collector and needs the experiences and ad- vice of actual credit men. Who can be of better counsel than the credit men of jobbing houses? Get together meetings should be beneficial and bring about a better understanding of one another. Credit may be for good or evil. It must not be abused and must be weighed that proper judgment may be exercised in its granting.

The jobbers also grant credit to small lunches, restaurants and boarding houses. The terms are supposed to be weekly, but since they run in competition with the hotel and institution supply houses, who give longer credits, they are very often prolonged into monthly accounts. The risk is great since character ani capacity are the only important factors up for consideration. The fixed investment is large and is generally only partially

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paid in with heavy mortgages or lease agreements covering the unpaid part. The payments on these latter liabilities qre often large and are prorated over many months. Here as in the cn.se of the honest retailer circumstances brought on by overhead and equipment payments may force composition settlements or bankruptcy which are unavoidable. Very often the nationality of the persons conducting this particular field of business is very important, since there is one particular class who are grave offenders of good business ethics.

The lunch, restaurant and boarding house busi- ness is largely a cash business, since tney are able to obtain such extreme terms of credit one may enter the business with a small capital., a sufficient amount to ma-:e a first payment on the equipment, rent and the first order for merchandise. After the initial ex- penditure, the credit is easily established and the jobber quite often becomes an unwilling creditor, spend- ing new dollars in hopes of getting back: old dollars. The very nature of the business should suggest a cash basis for business transacted with the jobber, yet the jobber falls a victim to competition in credit.

The business is really one for jobbing special- ists in lunch, restaurants and boarding house supplies and should be segregated from the other jobbing busi- ness. This latter group add a sufficient amount to

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trie price that the consumer buys credit in addition to merchandise. This is proper in view of the great risk.

■C red it Pr gjbl ems q f Jig tel _an d Inst itut ion Supply Houses. These houses are specialist in this business

and conduct their "business so as to orovide for long

credits and great risks. The terms of credit are generally

thirty, sixty and ninety days, out often times in tne

case of summer hotels when a. season is poor, tne credit

is extended to the next season.

There are orivate and government instituions, the latter risk is negligible, the former requires longer credit tnan the latter and somewhat more risk. The granting of credit to the private institutions requires an analysis of the three c's and a lot of patience. Many of these institutions have been in existence for years or the persons conducting tnem have been familiar to tne trade for years. Much capital is tied up wnich is costly, but a.s noted previously the business is so con- ducted as to provide for the service given.

Little can be said as to fctcw tiese terms snould be made ?r changed. The varying nature of each in- stitution may require different terms from tnose of otners, each case must be nandled separately. So long as these private institutions are willing to pay tie added cost of long time credit and generally keep down

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the loss from bald debts, it might be well to let the business work along, ai is, witnout farther criti- cism.

The notels furnish s problem both in ^erms of credit and in losses from bad debts. The losses ire not so frequent, but are large when they do come on account of the extended credit given. The year round hotels are the more stable and consistent payers. The summer hotels are not dependable for payments since tne seasonal aspect is very important in determining their successful operations. The investment by the hotels is large and very seldom provides enough for wording capital to be used for prompt payment of mer- chandise bills. This is true of the large hotels as well as the smaller ones. Whether a joint demand by the supply houses that the hotels pay nearer to cash would bring forth this needed * or king capital is questionable, it would be beneficial to botn parties.

The hotels which sublet their eating quarters to an outsider qre tne more precarious credit risks and cause the most trouble. The supply, houses who cater to tnese oersons on the same basis os they would the hotel, if it were to operate tne business, are culpable and open to reprimand, except that they nave the guarantee of tne hotel 30 subletting or some other responsible person.

The practice of carrying summer note!, accounts

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C RED IT PROBLEMS anticipation of the next season's "business. If the margin obtained warrants such a risk, it might be good business but it seems to the author to be a very loose and lax method of granting credit.

Su e s t i v e Corrective^ Solu t i on s Tne loss due to bad debts is great. The bad feature of a large percentage of tne losses is tie loss due to commercial crooks. The commercial crook is no more pardonable than tie ordinary common thief, yet the law gives him the benefit of all doubt and fails to punish nim com- mensurate with tne crime committed. Tnis is true of botn state and federal laws. Tnere has been and will be lawyers who would sell their soul for a miserable dollar, and so it if this despicable minority group, who encourage crooked clients to become worse crooks by counseling them that they may evade the law.

Thf National Association of Credit Lien have or- ganized a Credit Protection Department, whose main ob- jective is to ferret out tnese crooks, make examples of them and to discourage the practice. They have nade very good progress, ^>ut why not put teetn in our laws which will ^ive longer jail sentences? Also why pro- hibit tne credit men from publishing lists of merchants unworthy of ere lit?

The credit men should first organize as a body, that is combine the credit men of receivers, jobbers

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hotel and institution supply houses, and make rules for conducting the body. Also set forth the princi- ples underlying the organization.

One, if black lists in a modified form are good and essential, u?e them. It is for the benefit of the legitimate dealers, consumers and middlemen. The small- er the loss from bad debts, the greater the possibili- ties for operating the business on a. closer margin.

Two, no credit men should sit in retail associa- tion gatherings and be willing to give counsel.

Three, credit men should encourage the adoption of modern accounting systems, that the condition of a merchants business may be ascertained periodically.

Four, credit men should insist upon signed ac- curate statements from customers.

Five, they should not be influenced too much in granting credit by the sales department when competi- tion sets a hot pace.

Six, merchants should not be encouraged to conduct a business with insufficient capital.

Seven, merchants with a record should be black- listed unconditionally r,nd not encouraged to repeat their crime again.

Eight, terms of credit once granted should b° en- forced. It must be admitted that there are times when this would not be feasable and good judgment must pre- vail. This is the exception and should not be en- couraged beyond reason.

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Nine, credit men should come in closer contact with the persons to whom they grant credit. Also make at least an annual visit to see if physical condi- tions have changed for good or bad.

Ten, lend effort toward bringing the business nearer to cash.

Eleven, do not sell credit, sell merchandise. If it is the particular middleman's business to sell credit, make it pay. The l^rge losses which will in- evitably follow require it. This latter class of middlemen in not to be sympathized with, nor to be encouraged in their practices.

Twelve, discourage protective measures as the placing of mortgages on business stock and fixtures, the conducting of the business in another's name, also installing fixtures and equipment on lease or condi- tional sales agreements when they should be recorded in some public place. *

Thirteen, encourage more truth and frankness among credit men when divulging information.

If the foregoing ideas are to be practiced more, we will soon wipe out some of the greatest weaknesses of small merchants, lun ches , ho tels , and etc.

Prolonged credit is generally a detriment to the recipient, also the stepping stone to composi tion settlements or bankruptcy.

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■

CHAPTER XIII

ACCOUNTING PROBLEMS

Modern Business Methods Require Better Account- ing. It is very difficulty to "become efficient in a thing if a clear understanding of that thing is not grasped. One cannot hope to he efficient in business without a clear concise understanding of now it is conducted and its financial condition. There is no other way of determining this essential knowledge other than through a correct and practical accounting system.

Efficiency has forced businesses to be conducted scientifically. If a business man hopes to be effi - cient, he must surrender himself to scientific methods. These methods may be scientific salesmanship, modern arrangement of organization, modern accounting, etc.

Accountancy is the science of keeping business records. It is absolutely essential in modern busi- ness. Chaos will be the reward of large businesses who ignore its practical application. The advent of large corporations and trust with the participation of public ownership through securities made it necessary that some scientific scheme of record keeping be installed. The installation of practical and accurate accounting sys- tems by these larger units of business has enabled

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the management to keep control of the 0r3n.nizg.ti0n. This control has permitted the transaction of business on a small marginjsince the losses from theft, care- lessness, shrink and similar sou rc°s are xaown and can "ce eradicated immediately.

The food products "business has been conducted at a profit among middlemen and retailers because of the national lack of good accounting among them all. There- fore, they were on a parity. Honesty, integrity, alert and capable help were the advantages of one over another. Th<=» advent of the Large Packers was the first stepping stone toward good accounting. You will note, however, it is the concentration of capital which has brought this about. Those concerns in a similar busi- ness as the Large Packers were soon forced to adopt better accounting methods.

The coming of the chain store with its efficient accounting system bids fair to force the smaller re- tailers to take congnizance of the necessity of an accurate accounting system. Again it is the large corporation which sees the necessity of control.

The Federal Income Tax Law P^ves the "'ay. It is very probable that this law has done more toward the installing of better accounting systems than any other single act of man. Our federal law provides that all persons doing a certain amount of business or wno hr->ve a certain amount of net income must keep appropriate

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records which may be audited at the government's pleasure. Those of whom are aware of this law have done something in this direction, even though it might only be the taking account of stock of the in- dividual's net T'ortn at stated intervals and see how the result had been arrived at.

The corporate laws of many states also require corporate reports which stimulate the need of account- ing systems.

The larger corporations, partnerships, and in- dividual proprietorships have been spurred on by the federal government, mae so than the smaller business units since the task of checking all businesses would be folly. Therefore, the check: line ha? oeen drawn more to the larger units of business. The smaller concerns are, however, learning to sense their obliga- tion to the government in the matter of returns.

Need of Greater Control. Control is vital in this modern business world. The business man who feels competent enough to conduct a business without this factor of control is to be pitied. The future holds greater possibilities in this direction than was ever dreamed to be possible bac^ in 1890 to 1900. It ie this peculiar power which has made possible the tremendous growth of our chain grocery and meat stores. It is the lack of control that ip costing the small merchant his very existence in business, even though

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he as an individual is apparently watching all that is going on under the one roof.

Contrast food retailing today with twenty years ago. The advantage of large scale buying was possible then a.s now; the economy of distribution and reduction of overhead was possible then as now; men sought to expand or brancn out then as now: but the control made possible through present day accounting systems had not been conceived.

The general attitude of business men toward book- keepers or accountants placed this latter group as a parasite on business and an evil. 3usiness men could not see the possibilities in the man running the white collar position; confidence was lacking. It is only in recent years that some men of keener intellect have seen the possibilities through their own experience or education.

Potential Savings. Business men have failed to look ahead toward the potential s -wings by the adoption of proper accounting systems. Their greed and miserly attituie toward bookkeepers or accountants prevented them from grasping the opportunity of converting this present expense into a saving. It is true that these men were capable in their particular capacity as sales- men, buyers or managers and as a rule were not familiar with office work. It would seem tnen that tne burden should have been placed on the bookkeepers or accountants

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themselves. Such a view could not hold true, even the more aggressive type of accountants were turned down with their new ideas and when permitted to try them, the necessary cooperation from the management was not present. A s ad state of ignorance has pre- vailed. Would it not pay a "business man to spend twenty-five dollars for an extra clerk to control stock if he woul3 stop 1-aks which might cost fifty dollars? This they did not see. Even today many of the old schools are prone to the necessity of changed methods. It is safe to say that they must wake up or they will not have the privilege of affecting these potential savings. Competition has become so keen that business has and will find that it is these possi- ble savings which will determine whether a loss may be converted into a profit.

Intelligent Conducting of Business. It is diffi- cult to conceive the intelligent management of a busi- ness under the old system of bookkeeping. Costs were more to guesses, sales represented merely sales, shrinks and profits were thought of once a ye ar and then arrived at by opproximati ons , and the analysis of expense wa? farther to the thought. The net profit or loss waa the greatest interest. What went on in between had meant litiLe, at least their actions would have indicated it.

Our modern accounting systems provide ways and

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means by which the most minute operation may "be checked. The volume of sales, the cost of sales, the gross profit, the itemized expenses, miscellaneous income and charges and adjustments are presented for analysis. Stock records control stock, accounts re- ceivable ledger is controlled by a controlling account, the cash is deposited intact, and so one night go on with detail. The old timers wouli still be suspicious ani unconvinced, but necessity has brought it about and has proven its worth.

It would be difficult to cut down expenses if they were not known. It would be difficult to increase sal"? if the past records w«re not available ani so analyzed as to product, class, etc. The knowledge must be first made available, it can then be intelligently appl ied.

The recognition by colleges of the need for better education for business men will bring about bet- ter trained managers and executives. There is a larger demand than ever for college graduates. to enter ousiness. The application of their training to business is bound to improve business methods, particularly in the account- ing field.

Uniform Account in.; Systems for Shippers. It is very doubtful as to whether or not a uniform accounting system could be applied in a practical way to all snip- pers. The adoption of a. general working base or plan,

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however, is possible. The working out of the detail to suit the characteristics of each shipper's business should be left to an expert. The auditing of such a system of books would be easier and would ^ivo rriucri better results since the auditor would be familiar with the basic principle.

Tne larger shippers ha ye installed more up-to-date accounting methods and ideas. This has enabled ex- ceptionally efficient control over their plant, or plants.

The profit obtained for the poultry and egg business depends in a large measure to the increase in weight of flocks in batteries, a minimum output of undergr a.des, prevention against disease, minimum feeding costs and correct buying. It is absolutely impossible to watch these things unless proper and accurate records are kept.

Stress on the uniformity of the basic principles is important since most of the operators of importance have one or more branches. Unless adequate and uniform ideas are set forth for each plant, tne central office will be at a disadvantage in comparing results of eacii t)lant. ^\lso the economy of auditing similar record? is worth while .

The comptroller, accountant, auditor or other

office ma.n in charge should not be a man selected from

the ranks without tne fundamentals of accounting. The

man selected for the position must have training, those

who would let salary stand in the way of obtaining such Drooerlv Qualified men -ire tne losers. Tne details of

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ACCOUNTING PROBLEMS

the office, office forms, plant forms, credit grant- ing and financial problems are always changing and need gradual and constant changes to keep up-to- late. Unless the man in charge ie trained to meet changes and adapt himself to the newer ideas, he is a detri- ment to the shipper.

I'.ove Efficient Systems for Other Distributors, In order to differentiate between the systems used by the L^rge Packers, the author has used the words other distributors. The Large Packers nave installed very efficient systems which have functioned satis- factorily. It is a mystery why the other distributors have not copied, adopted or adapted similar systems for th°ir business. The answer may be that these in- dependents do not appreciate nor realize the value of such systems and are content to go on guessing.

It would not b^ fair to assume that all receivers lack proper checks on their business, but it is a fact that the percentage is so high that the seriousness of the situation should be brought to their attention.

The gravest errors occur in tne way that cash, stock and credits are handled. The industry as a whole has entirely too antiquated cash and stock systems. The handling of the accounts receivable and credits has improved.

All cash should be deposited intact daily. A stipulated amount, which might be adjusted to require-

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Bents, should "be the working fund. When the fund be- comes depleted to inefficiency, the vouchers should be written up in the cash book and a check drawn to the order of the company to replace the total of the vouch- ers so charged off. All payments over a certain sum should be paid by check, the form of which is immaterial but a voucher check in duplicate has proven vnry ade- quate and practical. The adoption of such a system would enable the treasurer or person signing the checks to check all payments with ease.

Any system installed for checking stock should be tied up with the general ledger in a similar manner as the accounts receivables are controlled by the con- trolling account. It would be no more difficult to find a needle in a hay stack than it would -ie to find such a system among the independents. The independents stock systems are crude. Frequently the proof is left to i9 shipper or other floor man who knows little about clerical work, let alon0 accounting. The average sys- tem operates on the idea that if you h-ive one hundred box^s of poultry in the morning an d sell fifty, you should have fifty on hand at the pnd of the day. Very true, but what if a double error occurs. Example, if only forty- eight were sold wd charged, but added as fifty and there was only fifty on hand at the end of the day. How is the discrepancy of two boxes to be detected? Also each box is marked with the weight of contents. Who is to detect the error or proof of

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weight?? Pome independents check weight, but tne figures they use in the check: are not proven. The situation is not nealtny, yet the owners seem to "be contented.

The accounts receivable and the handling of credits seem to 20 together in the smaller nouses. 1'ost houses nave devised a means of drawing off an abstract of the accounts receivable periodically for a proof an d a condition thereof. It i,s doubtful as to whether tne v)roof is always obtained. Tne more serious fault lies in the lax and loose appearance of the accounts due to poor credit granting or ineffi- cient collections, and open balances never to be realised by liquidation. Many accounts represent ab- solute dead losses never to be realized upon, under any circumstances. Other accounts will represent invest- ments by the independent in outlets which he must support financially through a continuous flow ;f merchandise or lose the entire account. Income taxes have been paid on profits which might nave been real losses had %tie dead and doubtful accounts be^n properly charged off rather than let them remain as misleading assets. Enough has been brought to indicate the deplorable condition existing in accounting systems of independents.

The Large Packers have attempted to keep abreast

of modern accounting and are profiting thereby. These packers could never have expanded nor remained in busi-

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ness as long as they have, if they had ignored the importance of a proper accounting system.

The Sad Plight of Small -etail i Accounting Systems. The retailer's greatest handicap is lack of knowledge of what is happening, he only knows what has happened. The future for the existing retailers is dependent upon their recognition of the necessity of keeping proper records systematically. Without this control, they cannot hope to compete intelligent- ly against their larger c ompet itors, such as the large markets an i chain stores.

Many attempts have been made to acquaint re- tailers with retail accounting systems, but to no avail. The failure to impress them is logical since they are not accountants and cannot acquire the know- ledge without training, also they are unwilling if not unable to pay an accountant to keep such records. Then more trained students enter the retail field, the situation will change for the better, but not until then. These students may be practically trained through chain ptore experience or by college training with the eventual acquisition of the business experience.

It is hopeless to point out the errors, but a few BUg estions for betterment may be helpful. Too many retailers are dependent upon giving credit to secure sal and upon r°ceiving credit to obtain m°rcnandise to be sold. Those who are of this group must place tneir busi-

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ness on a cash basis or near to cash that they may pay cash or near to cash for their merchandise, or they must raise more cash capital to carry the business as conducted. When bills owins the retailers and bills owing by the retailers pile up, confusion results. The loss of unpaid bills owed retailers and the duplicate payment of bills owed by them is very possible. Also the determination of net worth is impossible without a knowledge of bookkeeping. In order that this complica- tion may be simplified, the foregoing suggestions of placing the business nearer to cash or cash is essen- tial. The end of each week the incoming bills should be properly checked in against the receiving book re- cord and paid by check, which may be delivered the early part of tne following week. The cash collected should be deposited intact except for petty payments and pay- roll which should be properly recorded in a cash paid out book. The total amount of accounts receivable out- standing at the end of each montn should be determined. The inventory at the end of each month should be taxen. The payment0 for added equipment, withdrawals of capi- tal or for other than merchandise or business expenses should be separated. With the^e simple steps performed, the remaining task is easy, that of determine the net profit and net worth.

The net profit may be obtained by taking the in- ventory as of the First of the month, adding purchases of merchandise for the month as shown by the check book

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plus cash purchases as shown in cash payment memoran- da, from this total deduct the inventory at the end of the month. The result is the cost of all goods sold. The next step is to determine the net sales. Take the deposits male during the month for the account of the current month's business, add the total of all cash payments as shown in the memoranda book, from this total add or deduct the increase or decrease respectively in the accounts receivable at the end of the month over the first of the month. This will give the net sales. Deduct the cost of all goods sold from the net sales, the difference is the gross profit, from thip gross profit deduct all expenses paid out by check and cash as shown on the check book aid cash p?id out memoranda book. The result is the net operating profit or loss. Interest credited by the bank on bank statement is to be added to this, also any losses on account of bad debts must be deducted. The final result will be suffi- ciently accurate to determine the progress of the re- tailer's business and give him control 3f percent of profit realized on sales and cost percent to d .business.

An inventory of all the assets as of a definite date, less all liabilities will give the net worth. Also a similar inventory at anotha? date will ^ive the increase or decrease in-net worth, which may be the profit or loss for that period if no additions or withdrawals of capital are made.

The assets are generally cash in bank, casn in

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store, accounts owing retailer, notes owing retail- er, merchandise inventory, fixtures, equipment, and prepaid items. The liabilities are generally bills owing creditors, notes owing others, accrued expenses not paid and liabilities contingent upon certain events.

There are many details such as the selection of proper oooks, files and systematic filing of bills o-ving them and owing by them, whicn must be left to good judg- ment. Competition will bring about this needed change willingly or tnrough the experience of financia.l em- oar r ass men t .

Existence Dependent upon Recognition of 3°tter j^c_cqunt ingj^ Chain stores introduced better acc cunting and those 'vao nope to stay in business ^rith them must also improve their accounting systems. The chain store margin of profit is calculated upon scientific facts such as exact cost cf mercnandise to be sold, exact cost of operating business, volume anticipated througn experience, wholesale market trends, allowance for cut price competition, shrink, and fair returns upon invest- ed capital. Tnere is no groping about noping for the best, as aag existed, and is very common today.

This refinement of calculation based on facts and experience makes it impossible for tne sma] 1 merchant to add on the los° through heavy snrink due to waste and theft. His usual mark up on a hignpr cost than t na.t of

r

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ACCOUNTING PROBLSKS

chain stores would in itself yield a higher selling price than asked "by chain stores.

The small merchant has one exceedingly important advantage over the chain store if he will only secure conrol of his business as suggested under the pre- vious section. This advantage will offset the buying power advantage, namely personality. If he will con- tinue these two things, personality and control, the others will b^ easy to master.

The independent receivers and distributors must ignore and forget antiquated accounting and broaden their mind toward the accountant who will be an asset to them. It is very essential that the margin of profit must be reduced. Competition among themselves with packers and chain stores demands it. The reduction of the margin of gross profit is risky, particularly so when control is lacking, whereas control would make it possible to reduce or eliminate this risk. One can- not evade that loss or expense which is not known ex- cept through luck. Eusiness cannot be conducted with the hope of good luck. The middlemen are tending to- ward the real conception of middlemen, which is the filling in of the gaps in a marketing scheme. The compensation for this service will be relatively small considering each unit, but commensurate with the risk when volume and capital invested is considered. But this margin will not permit of any loss due to loop-

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holes from lax accounting methods.

The accountant? of the future in this industry- will "be appreciated and found to be vital to the "business. They will he better equipoed with knowledge, also with a freer hand to exercise that knowledge. College graduates wno understand accounting, economics, credits, collections, business English, psychology, business and office management, and finance will re- place the old time "bookkeepers3 with their meagre know- ledge of bookkeeping.

The employees who refuse to recognize this change which is now taking place and also refuse to °ee the possibilities in obtaining the right kind of office help, will be the employee of the modern employer.

A proper and practical accounting system is as vital to the efficient functioning of business as the brains are to the human body.

BIBLIOGRAPHY

Poultry Science Series by J9jr.es E.Rice, Editor, published by John Wiley & Sons, Inc., February 1,1923.

Efficient Marketing for Agriculture by Theodore Macklin.Ph.D. , published by The Macmillan Company, New York, September, 1921.

Marketing, Its Problems and Methods by C . S .Duncan, published by D.Appleton & Co., 1920.

Marketing Methods and Policies by Paul D.Converse, published by Prentice Kali, Inc., July, 1924.

Wholesaling by Theodore N.Beckman, Ph.D., published by The Ronald Press Co., September 10, 1926.

Yearbook of Agriculture 1926, published by The United States Department of Agriculture, November 1,1926, Government Printing Office.

Food Investigation, Report of The -Federal Trade Commission on the Wholesale Marketing of Food, June 30,1919. Section 20, Terminals.

Retail Selling and Store Management by Paul H.Nystrom, Ph.D., published by D.Appleton & Co., 1913.

Financial Organization by Moulton, published by The University of Chicago Press, December 25,1920.

The New York Produce News, Saturday, Oct ober 15,1927, Pages 1 and 6, also September 17,1927, Pages 1 and 4.

Roadside Markets and Growers in the West, Provide Outlets for Disposing of Much Produce, published by The New York Produce News, issue of October 8,1927.

BIBLIOGRAPHY

Winston'? Accumulative Loose-leaf Encyclopedia, subject Poultry.

The Chain Store by J.H.Tregoe, published by The Credit Monthly, (The National Association of Credit Men) issue of September, 1927, Volume XXIX No. 9.

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