13. Show the activities of the United States Bureau of Markets in the matter of cold storage.

14. Suggest improvements in our cold storage situation.

QUESTIONS SUGGESTED BY THE TEXT

1. What per cent of the apple crop goes into cold storage? Of the butter production? Of farm egg production?

2. Prepare a chart showing total cold storage in your State, and classify this storage as to whether public, private, or combined public and private.

1. ARMOUR, J. OGDEN: People."

REFERENCES

"The Packers, The Private Car Lines and the

2. HOLMES, GEORGE K.: "Cold Storage Business Features." Bulletins 93 and 101, Bureau of Statistics, United States Department of Agriculture. Washington, 1913.

3. BELL, JOHN O.: "Reports of Storage Holdings of Certain Food Products," Bulletin 709, United States Department of Agriculture, Washington, 1918.

4. "Daily Commerce Reports," Washington, June 13, 1918; June 18, 1918. 5. " 'Reports of Massachusetts Commission on Cold Storage," Boston,

1912.

6. COOPER, MADISON: "Use of Cold Storage," 61 Cong. 2 Sess. Sen. Doc. 486, pp. 4, 5.

7. PENNINGTON, M. E.: "Changes Taking Place in Chickens in Cold Storage." ." Yearbook of Agriculture, Washington, 1907, p. 206.

8. LANE, CLARENCE B.: "The Cold Storage of Cheese," Bulletin 83; Bureau of Animal Industry, United States Department of Agriculture, Washington, 1906.

9. GRAY, C. E.: "The Keeping of Butter Made Under Different Conditions and Stored Under Different Temperatures," Bulletin 84. Bureau of Animal Industry, United States Department of Agriculture, Washington, 1906. 10. "Report of Massachusetts Commission on the Cost of Living," Boston, 1910.

11. GROESBECK, B. AND URNER, F. G.: "Economic Effects of Cold Storage Upon the Average Price of Eggs." Joint Committee Cold Storage Warehousemen and Affiliated Industries, New York, 1916.

12. JENKINS, W. C.: "The Truth About Cold Storage," National Magazine, August, 1911.

13. "Report of Investigation Relative to Wages and Prices of Commodities, Senate Committee on Wages and Prices of Commodities," 61 Cong. 1910.

14. "Findings of the Joint Select Committee of the 78th General Assembly of the State of Ohio, Appointed to Inquire into the Purchase, Storage, Sale of and Traffic in Food Products, Commodities and Supplies." Columbus, 1910. 15. "Report of the Industrial Commission," Washington, 1898-1902, Vol. 6, pp. 297–307.

16. Report of London County Council on Ice and Cold Storage," London, 1904.

17. Proceedings of the National Poultry, Butter and Egg Association” (Annual meetings).

18. "Proceedings of the American Warehousemen's Association" (Annual meetings).

19. FRANKLIN, I. C.: "The Service of Cold Storage in the Conservation of Foodstuffs." Yearbook Department of Agriculture, 1917, 363-371.

20. "Cold Storage in Canada," Labor Gazette (Canada), August, 1917; also International Review of Agricultural Economics, Dec., 1917, 53-66.

CHAPTER XV

AGRICULTURAL PRICES AND VALORIZATION

THERE is lack of agreement among men of affairs and among professional economists as to the factors which actually do determine price, or the factors which should determine price. As to the factors which should determine price there are, roughly speaking, two schools of thinkers, those who incline to the belief that prices should be artificially determined by some social authority, and those who incline to the belief that prices should be left to the play of economic forces of supply and demand. Price history, however, is a more fruitful field to explore at this point than is price theory. Do Agricultural Prices Fluctuate According to the Law of Supply and Demand?—The demand side of the market is difficult to trace, for the market reports now prove that the demand for staple products is never constant. The supply side, however, may be traced by tabulating the yields for a series of years. The question then resolves itself into this: Do prices go up and down as yields go down and up? Many tables of statistics have been published on this subject, but the figures collected and published by the federal government are doubtless most widely accepted.

The following diagram is a reproduction of one prepared by the Bureau of Crop Estimates, and covers crop yields per acre and crop prices for fifty years. This table shows strikingly that prices tend to advance when yields decline, and to decline when yields increase. Ten crops are combined, namely, wheat, corn, oats, barley, rye, buckwheat, potatoes, hay, cotton, and tobacco. Prices and yields of each crop are reduced to their percentage of the fifty-year averages (Fig. 46.)

Are Agricultural Prices Higher in the Spring than in the Fall?— In many popular discussions of the "middleman"-particularly in political campaign oratory-the middleman is pictured as storing or "hoarding" food supplies in the fall of the year, when they are cheap, and selling them in the spring when prices are high. Or, put in another way, the unhappy farmer must hurry his crop to market as soon as harvested in the fall, in order to pay his debts, and in this manner sells it at big sacrifice in price. Then, the story runs, this same farmer often is forced to buy back part of his supplies in the spring at a greatly enhanced price.

1 Monthly Crop Report, Washington, February, 1917, p. 16.

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One of those strange popular fallacies which persist through the years is this one that the price of the important agricultural products is lowest in the fall when the farmers sell the bulk of the crop. An interesting study of this subject was made by an economist, J. E. Pope, and published under the title, "Can the farmer realize higher prices for his crops by holding them?" 2 After studying the variation in the monthly prices of important agricultural products, the cost of storage, interest, shrinkage, loss and damage, and other expenses of holding the crops, he concludes that in the long run it will not pay the farmer to hold his crops.

FIG. 46.-Trend of farm prices and yield per acre of crops combined. 100 represents the average of 50 years, 1866-1915.

Further light is thrown on this question by an examination of the price ranges on the Chicago market of wheat, corn and oats for the past fifty years and more, taking into consideration the months when lowest prices were reached and the months when highest prices were reached. See charts in Appendix to this chapter.

Interpreting these charts, we find that in the case of wheat the high price of the year was reached in the six months following harvest in 24 years out of 51, and that the low price was reached 33 times in the six months following harvest. This indicates that a farmer would do about as well by selling his wheat at or near harvest time as by holding it for six months or over.

2 Quarterly Journal of Economics, Vol. 30, pp. 805–831.

SOME PRICE THEORY

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In the case of corn during 52 years, the low price was reached 45 times in the six months following harvest, and the high price was reached 19 times in the same six months.

In the case of oats for 52 years, the low price was reached 37 times in the six months following harvest, and the high price was reached 23 times in the same six months.

Some Price Theory. The generally accepted principle or theory of price is that supply and demand determine price. This theory generally presupposes the free play of competition. There can be no doubt that supply and demand are the basic factors in determining price. These are the most powerful and most permanent factors. Supply, however, may be temporarily cornered, or monopolized. Demand may be artificially stimulated. For the consumers' wants are based to a great extent on whims and fancies rather than on any rational consideration. Custom and bargaining power are two very significant factors in price making. That supply and demand are the basic factors in price fixing, however, is shown by our own economic history. Large yields have meant lower prices, and short yields have meant higher prices. Yet it is obvious that only within large limits do supply and demand fix the price. It may be said that supply and demand fix the upper and lower limit of price, and between these limits the actual price is set by other factors. Or, to put it another way, supply and demand stake out a prize ring, and within this ring other factors such as custom and bargaining fight out the actual price. Thus supply and demand may fix the price of the bean crop to the Michigan farmer between four dollars and six dollars a bushel. The actual price may be set at five dollars, especially if the farmers have a strong enough organization to bargain for themselves collectively. The power of the stronger bargainer to influence price is well illustrated by the story of General Grant, as told by himself, when he once bought a twenty-dollar colt for twenty-five dollars.3

3 "There was a Mr. Ralston living within a few miles of the village, who owned a colt which I very much wanted. My father had offered twenty dollars for it, but Ralston wanted twenty-five. I was so anxious to have the colt, that after the owner left I begged to be allowed to take him at the price demanded. My father yielded, but said twenty dollars was all the horse was worth, and told me to offer that price; if it was not accepted I was to offer twenty-two dollars and a half, and if that would not get him, to give twenty-five dollars. I at once mounted and went for the colt. When I got to Mr. Ralston's house, I said to him: 'Papa says I may offer you $20 for the colt, but if you won't take that I am to offer you $22.50, and if you won't take that, to give $25.'. . . I kept the horse till he was four years old, when he went blind, and I sold him for $20."—Grant, U. S., Personal Memoirs, 2 vols., New York, 1885, Vol. 1, p. 29.

In the organized markets, such as the grain exchanges, and cotton exchanges, the market price is set by a bargaining process, where both sides-buyers and sellers are fairly equal in strength and in knowledge of the supply and demand factors. But as the market becomes more decentralized, more local, and more unorganized, the factors of bargaining power and custom gain more importance and the limits set by supply and demand spread farther apart the ring becomes larger.

A "Just Price."-It is likely that the individual farmer's weakness as a bargaining factor in price fixing has given rise to considerable discontent and suspicion towards the market on the part of the farmer. He feels that certain "middlemen" who merely "handle" his product have grown wealthy. So the farmer comes to picture to himself an economic system wherein "big business" has waxed fat, in sloth and ease, by exploiting the farmer and keeping him toiling at his hard and strenuous tasks. Of course this picture leaves out of view the many "middlemen" who have failed in their enterprises and lost their capital, and also leaves out that other consideration, namely, that the successful "middlemen," surviving strong competition, do it by supplying a service. Some destructive agitators tell the farmers to abolish "big business." Some advisers tell them to organize, bargaining collectively, and thus conduct big business themselves. It is interesting to note in this connection that in western Canada where the farmers have scored such a success along coöperative lines through their United Grain Growers Company (see page 165) the consumers are already applying to these farmers such appellations as "big business" and "profiteers." It is no wonder, therefore, that in the existing confusion concerning price making and price ethics, more and more voices are being raised asking for governmental interference in price fixing or actual price fixing by the government. This demand for a "just price" is easy to comprehend. But "letting the Government do it" is a solution which may not be as easy and simple as many a person seems to think. Price fixing by the government as a war measure, but not as an economic measure, was thoroughly tested in the World War, by Germany, Italy, France, England, United States, and other countries. The policy was tried and adhered to, as part of the military strategy of the warring country. As an economic measure it was admittedly clumsy and wasteful, and did not result in "just prices"-prices

4 Debate in House of Commons, Ottawa; See Grain Growers Guide, Winnipeg, July 2, 1919.