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THESIS FOR DEGREE OF M. HORT,
OTTO W. SCHLEUSSNER

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LIBRARY
Michigan State

University

by

4.

 
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THOSS

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SOME REASONS FOR RECENT ADVANCES IN, AND PRESENT
HIGH PRICES OF HORTICULTURAL FOOD PRODUCTS

(With a discussion of reasons popularly as-
cribed and of methods for lowering prices)

Thesis for Degrée of M. H.
O. W. Schleussner

1917

Note:=- War conditions or war measures were not taken into con-
sideration when this paper was prepared, as war had not been de-
clared. It is recognized that under its war powers the government
can and will do many things which are not possible under peace
conditions. No attempt has been made to discuss “war measures".
(1)

During the past six months this nation has been in the throes
of a food crisis, during which time the necessaries of life have
sold at prices which, generally speaking, have been without pre-
cedent since tie Civil War. Maine potatoes have sold in New York
City at $10.00 per barrel, Northern cabbage at $180.00 per ton,
and Northern onions at $15.00 per cwt. bag. Not only have these
great necessities of the poor man's table risen to these hitherto
unheard of prices, but other crops have moved at proportionate fige
ures. Apples have sold up to $7.00 per barrel for good stock, beans
(which are quite often used as a substitute for potatoes) have been
48.00 and $9.00 per bushel wholesale, wheat has sold over the $2.00
mark, and pork at as high as 16¢ live weight. This combination of
advancing prices has been so serious that we have had actual food
riots in the congested quarters of our great cities, the wrath of
the consuming population being directly chiefly at the high prices
of the great (and hitherto comparitively cheap) "stand-bys" ,-pota-
toes, onions, and cabbages.

The government generally, and the Department of Agriculture
particularly, has been deluged with letters and resolutions con-
cerning the food situation, and many reasons and remedies for the
present conditions have been offered. Not only have hundreds of
private individuals protested, but the public has been loudly
o lamoring for relief thru the press.

Acting without knowledge of the real causes contributing to
the present crisis, the general public has looked about for some
object on which to vent its wrath, and upon which to piace the
blame for conditions. And the speculator or middleman has, in large

measure, been held responsible, altho the farmer has come in for

censure as well. 403512

ed
(9)

The reason most universally ascribed for the high cost of
living is that either a gigantic food trust or monopoly, or a
series of slightly smaller trusts who possess a mutual understanding
on prices, have cornered the total available food supply of the U. S.
Usually these trusts are said to be composed of speculators, tho
sometimes they are alleged to be farmer's associations.

The fallacy of such reasoning is apparent when it becomes
known that competition in the fruit and vegetable business is re-
markably strong in all lines. This country is so0 vast, and the
source of supplies of even a single crop (such as potatoes for in-
stance) covers such a large area and traces back to such an immense
number of individual producers that effective monopoly and control
are a physical impossibility. Because of its very nature the business
of handling horticultural food products is comparatively disorganized.
The very largest firms in the produce business handle only a small
fraction of one percent of the business of the nation. Under such
conditions it is evident that no monopoly can exist on potatoes, for
instance, especially as all authentic reports agree in saying that
even at present the major portion of the nation's available supply
of potatoes is still in the hands of its original scattered producers.

Many people have even gone so far in their acousations as to
say that there has been widespread willful destruction of foodstuffs
by middlemen so that prices might be enhanced. These reports are
persistent, yet in spite of this, in all of the alleged cases brought
to the attention of the Department of Agriculture investigation has
yet to reveal a single instance of malicious dumping or destruction
of merchantable food. Intelligent second thought should show every-
one that economic laws would prevent such action. With no firm con-
trolling more than one percent of the entire crop, the commensurate

gain resulting to any one individual thru enhanced price due to the
(3) -
destruction of a single car of potatoes for instance, would be
negligible. Yet at present prices the destruction of one such carload
would mean that the owner would suffer a direct financial loss of
nearly $2000.00.

In the same category is the popular belief that the abuse
of storage facilities is the prime reason for high prices, and that
holders are keeping fruits and vegetables off the market until famine
prices prevail, when they will release them from storage. This reason-
ing utterly fails to take <dnto account the fact that even under most
favorable conditions the life of fruits or vegetables in storage is
limited to a comparatively short period of time, and that the hort-
icultural crops can not be held indefinitely but must be disposed
of within this limited time or heavy losses will result. Speculators
are well aware of this fact, and this alone tends to keep a fairly
steady and constant movement out of storage.

The foregoing are popular beleifs which are based on prejudice
rather than knowledfe. But there are reasons, and very real reasons
existing for the present high prices. These reasons are far too fun-~
damental to be cured by boycotts, trust prosecutions, and the like.

It is an undisouted fact that in its broadest sense the food
market is a world market. While the horticultural products are , as
a rule, more subject to purely local influences than the stuples,
the price-movement of even the horticultural products is strongly
influenced by certain world forces that have been very active since
the beginning of the war.

It is-unquestionably true that the commercial value of the
dollar has decreased materially since 1914 due to its loss of pur-

chasing power. Stastics show that there has been an increase of about

*8,500,000,000fn the quantity of money in circulation in the world

between July 31, 1914 and December 31, 1916 as follows:
(4)
In Millions

 

 

° July 31, 1914 Dec. 31,1916
Gold 8,500 9,000
Silver 5,000 3,000
Unsecured
paper 4,000 12,000

15,500 24,000 ©

The above figuressx are merely a rough estimate and do not in-
clude China and Japan.

As seen above, of the total increase almost $8,000,000,000.00
is comprised of the increase in the circulation of paper money in the
countries either engaged in or very greatly affected by the war. The
specific increases in paper money circulation from July 31, 1914 to
December 31, 1916 are as follows: -(#)

Great Britain 710,000,000.00

 

France 2,225,000,000.00
Germany 1,3354,910,000.00
Italy 358 ,290,000.00
Russia 2,976,495,000.00
Norway 29,715,000.00
Sweden : 44 ,425,000.00
Denmark 51,000,000.00
Holland 162,865,000 .00
Switzerland 50,095,000.00
Spain 78,860,000.00

$7 ,988,655,000.00

The result of this situation and this inflation has been to
inevitably cause a rise in the price of all of our commodities. This
rise in the price of our commodites was caused not only by the
increased circulation of money but in a large measure also by the
world-wide shortage of labor, which affected all commodities equally.
The labor shortage is of course largely due to th: withdrawal of
millions of laborers now serving in armies from the ranks of producers
to the ranks of consuv7ers. This condition is truly reflected by the

enormous advance in the index numbers of all commodity prices as

 

 

 

eSources of information include "Reports of the Lirector of the Mint",
Fisher "The Purchasing Power of Money" P237, Laughlin "The Principies
f Money” P387

#From The @nnalist Annual Review Jan. 8, 1917
(5)

published by the London Economist, which shows the following, taking

the general average from 1901 to 1905 as the basis of 100 :-

Date All articles Cereals and lLieats Other Food Products
1901--1905 100 100 100
1915--Jan 1 124.1 120 121

April 1 125.4 119 119
July l 121.3 116 115
Oct. 1 123.3 117 119
1914--Jan. 1 119.2 113 118
Apr. l 118 112 116
July l 115.9 113 115
Oct. l 126.4 129 135
191580Jan. 1 127.5 143 138
Apr. l 150.2 168 142
July l 147.7 164 142
Oct. l 151.6 162 157
1916-~Jan. 1 168.1 179 148
Apr.1l 1582.4 190 167
July l 01.8 oA 173
Oct. l Bot 04 1728

In the three reports prior to the opening of the war all com-
modity prices showed a steady decrease from their high points of
January first 1914, reaching the low point shortly before the opening
of hostilities. The advance which followed the declaration of war
was immediate and marked, being especially great in the case of
"Other Food Productsa"-- which classification consists very largely of
the horticultural food products. However, on the date of the last

available report (Oct. 1, 1916), the relative advances in"Aall Articles"
and "Cereals and Meats" was considerably in excess of the advance
in "Other Food Products".

We can thus see that the adwance in prices of horticultural
food products, in a broad general way, has been but a part of a
general advance in prices, and up to October 1916 was really not as
marked as the advance in the prices of other commodities.

No compiete or comparabie figures have been located that would
appty to conditions in the U. S., but The Annalist of March 3rd carries

a chart showing that the advance in all commodity prices from January

first 1914 to January first 1916 was expressable by an index number
(6)

of 120 on the earlier date as sompared to 180 on the later date, or
an advance of practically 50%. During the same period the advance in
the price of cereals was expressable in an index number of 22 as com~
pared to an index number of about 40 on the last date mentioned.

‘However, it was during the winter of 1916-1917 that the advance
in the price of horticultural food products was most marked. Bearing
in mind the fact that there has been a tremendous rise in the prices of
all commodities for reasons more or less attributable to the war, we
can now look for the especial contributing causes to the broad general
upward trend of all prices which caused the prices of all food stuffs
but especially of horticultural food stuffs, to soar like a sky-rockot
during the winter season of 1916-1917.

Strange as it may seem, the great majority of our consuming
public either does not know, or refuses to beleive, that an actual and
very great crop shortage occured in all our principal food crops in
1916. Every one of our grain crops showed a tremendous decrease in|
yield as compared to 1915, as shown by the following estimates of
praduction(1):-

Wheat 1916 639,886,000 Bu
1915 1,025,801,000
1914 891,017,000

Oats 1916 1,251,992,000
1915 1,549,030,000

Rye 1916 47,383,000
1915 54,050,000

Barley.1916 180,927,000
1915 228,851,000

Buck- 1916 11,840,000
wheat 1915 15,056,000
1914 16,881,000

Beans 1916 8,846,000
1915 10,321,000
1914 11,585,000
(1) From the U. S. Dept. of Arr. Monthly Crop Reporter Pages
128,129, & 151 December 1916
(7)

As compared with the previous year, therefore, we have a short-
age of 38% on wheat, 12% on oats, 135% on rye, 21% on barley, 22% on
buckwhbat, and 15% on beans. While it may seem at first glance that
the shortage on these great cereals should not necessarily affect
the prices of the horticultural foods, a marked shortage of any one
crop always affects all others because of the substitution (which
always occurs) of lower priced foods for those which happen to be
temporarily higher priced. A universal shortage of the staple cereals,
such as occured in 1916, would therefore affect the horticultural
food crops even tho there were normal crops of the latter. The redation
between the cereals and the semi-staple horticultural crops such as
potatoes, cabbages and onions, is quite important, for when bread
or flour is high priced the demand for potatoes is likely to increase
proportionately. This has been demonstrated particularly in Germany
which, prior to the war, always had an enormous surplus of potatoes.
But when grain imports were shut off and flour became high priced,
the @emand for potatoes increased so greatly that the demand was
far in excess of the supply.

Added to the shortage of the cereals in 1916 however, there was
an even greater shortage in the yield of the principal horticultural
food products. The final estimates of yields by the,.Bureau of Crop
ietimates in December 1916 showed the following (1):-

Appies 1916-- 67,415,000 Bbls.
1915-- 76,670,000

Peaches 1916==— 56,959,000 Bu.
1915-- 64,097,000

Pears 1916==- 10,337,000 Bu
1915-- 11,216,000

Cranberries 1916-- 415,000 Bbls.
1915-- 441,000
1914-—- 897,000

(1) From the Monthly Crop Reporter Dec. 1916, Pages 128,150, 73™
131, & 133
(8)

Potatoes 1916-= 285,437,000 Bu.
1915=<= 559,721,000
1914-—- 409,921,0C0

Onions 1916=~ 6,417,183 Bu
1915-= 7,663,712

Cabbage 1916<- 246,988 Tons
1915-= 670,651

zn the fruits, therefore, we have a shortuge as compared to
1915 of 13% on apples, 45% on peaches, 10% on pears, and 9% on
cranberries. Equally important is the fact that not only were the
crops short, but they were deficient in commercial quality showing
a decrease (see note #1) of 9.4% on apples, 7.4% on peaches, and
2.8% on pears, thus causing a larger amount of fruit not fit for
consumption and withdrawn from commercial channels, all of which factors
tended to increase price.

Of the great semi-staple horticultural products which appear on
the tables of the masses almost daily, the shortage of potatoe production
was 20% as compared to 1915 which was already a short crop, the cabbage
shortage reached the appaling figure of 64%, and the onion shortage
amounted to almost 17%.

It is therefore evident that even had financial and labor
conditions been normal, the crop shortages alone would have justified
a very mere noe Quite a serious advance would have been

his

inevitable on/account in the horticultural crops themselvees, even if

the grain crops had yielded normally.

Added to these shortages, during 1916 there has been the most
tremendous exportation of food-stuffs this country has ever ‘seen.
Few people realize that in 1916 we exported almost twice as much wheat
as in 1913 (the last year before the war), almost twenty times as

much oats, and that the value of all breadstuffs exported in 1916

was many millions of dollars in excess of twice the value of bread-

gtuff exports in 1915. This naturally made the shortage of breadst:: ffs
Note #1-.5ee page 133 Monthly Crop Reporter for pec 1914
(9)

in the United States more pronounced, and increased the demand for
vegetables and fruits.

In even greater measure have these great increases prevailed
in the exportation of dairy products. Our 1916 exports of eggs
exceeded those of 19135 by almost ten million dozens, our butter exports
in the same period increased eight times over, our condensed milk
exports over thirteen times, and cheese exports twenty five times.
During the same period our exports of meat products increased at the
rate of over $120,000,000.00 per annum.

The same condition also holds true of our strictly horticul-
tural foods. In spite of the crop shortage in 1916 we exported almost
as many apples in that year as in 1913, while the value of all fruits:
exported last year considerably exceeds the 19135 values. We do not

ordinarily consider ourselves a potatoe exporting country, yet our
1916 exports exceeded those of 1915 by almost one and a half million
bushels. The value of all vegetables (including canned goods) exported
last year was three times that of the 1913 figures.

The following figures show the remarkable expansion of exports
in food stuffs: (See note one)

Wheat

1913—=8= 99,508,968 bu,
1914--173 ,861,944
1915--205 , 829 , 820
1916--154 ,049 , 686

Oats
1913-- 5,274,623 bu.
1914=-—- 35,086,867
1915--104 ,549 , 204.
1916--101 ,411,259

All bvrdadstuffs
1913—= $£2035,391,856 .00
1914-= $510,580,875.00

1915-- %527,882,3£9.00
1916-- $471,932,210.00

Eggs —
Not 1914-- 21,019,166
= an 5
ote 1l--From monthly Summary of Foreign Commerce of US n

an nrc
(10)

Eggs (contd)
1915--22,323,145 Doz.
1916--28,266 ,443

Butter
1913-- 2,654,315 lbs.
1914-- 35,887,657
1915-= 63,227,575
1916-= 54,092,585

Condensed Milk

19135=8—= 16,475,782 lbs.

1914-— 22,831,904

1915<<8€ 75,691,206 | on
19186=-- 21% ,444,018

Cheese

1913=— 2,654,515 lbs.
1914-- 3,797,450
1915-= 85,227,375
1916<-=— 54,092,585

Meat Products (value)
1913-— $157,486,409.00
1914-- £137,737,493.00
1915-~ $259,039,556.00
1916-- $279,198,960.00

Green arples

1913-=- 1,920,221 bbls.
1914-— 1,541,561
1915-<=- 2,176,918
1916-= 1,670,545

All Fruits (value)
1913-- $32,913,445 .00
1914-- $26,060,089, 00
1915-- #36,926,567.00
1916-- $36,001,814.00

Potatoes
1913-{- 1,816,580.bu.
1914--2,714, 8556
1915=—= 5,900,149
1916==- 3,229,646

All vegetables, including canned goods (value)
1913-= $6,837,445,00

1914-- 8,755,755 .00

1915-— 12,815,644 .00

1916-- 18,555,044.00

In general, it can be said that the increase in tonnage of all
kinds of foods exported has shown a remarkably steady and almost
geometrical growth, all of which has profoundly affeeted the entire

food market in its broadest sense.
(11)

in the case of some particular crops, the export business has
had a very powerful effect on price advances. Tomatoes are one of
the few crops which gielded abundantly in 1916, showing an increased
yield of almost 50% as compared to 1915, or 1,369, 170 tons as compared
to 984,886 tony kK targe ‘percentace of this crop is canned, but the ex-
port demand for tomatoes has been so great that prices have advanced
by leaps and bounds, and supplies ars now very low. The situation
le aggravated to some extent by the great shortage in cans at the
present time, caused thru the enormous .demand for steel caused by the
war. Mills ars finding it almost impossible to secure the steel plates
which form the basis of cans. Consequently there is danger that
part of the tomatoe crop may be wasted in 1917 because of lack of
cans in which to piace it.

Another and very generally unconsidered factor in price advances
has been the increased buying power of the entire country, which
has in many cases resulted in greatly increased per capita con-
sumption, and in every case has resulted in higher prices. This is most
forcibly illustrated in the case of cantaloupes, a highly persihable
horticultural crop which is but littie affected by shortages in the
staples, for it is not used as a substitute to any great extent. The
early crop is produced almost entirely in a restricted area in the
Imperial Valley of California, which allows ideal opportunity for a
study of the marketing conditions prevailing with respect to this
crop.

In 1915 a crop of over 4800 cars was marketed with the greatest
difficulty, and at the end of the season had returned the growers
only about seventy cents per crate, on the average (See Note 2), or
barely the cost of production. The demand was hardly equal to the

Note #1--See page 136, Monthly Crop Reporter, Dec 1916
Note #2--See Dept of Agr. Bull. #401, Chart #1
(12)

supply. But in 1916, on the other hand, the country had reached
such a state of prosperity, and the buying power was so greatly
increased that an almost equally large crop, amounting to slightly
over 4500 cars, was harvested and marketed with no difficulty whatever,
and returned the grower $1.15 per crate. The demand was actually in
excess of the supply almost all of the season, for it seemed that every
one had mone¥ with which to buy cantaloupes and wanted them. As
cantaloupes from this section are rathor a semi-luxury because of
high prices, this condition is a very good index of buying power.
This abnormally high buying power which thus expressed itself
in increased denand for cantaloupes has been continuous throughout
the winter. While no accurate date are available, it is beleived that
the actual per capita consumption of food<stuffs was higher during
the winter of 1916 ( in spite of high prices) than ever before.
This is borne out to some extent at least by the fact that while
the potatoe crop was only 20% short in 1916 as compared to 1915,
figures published by the U. S. Department of Agriculture in a
special report of potatoe holdings as of January lst 1917 show a 40%
shortage as compared with the same date in 1916. When it is remember-
ed that the suppiy on hand at this date includes many millions of
bushels of seed stock which can not be used for the table in any
season, we see that the actual shortage of potatoes for use as food
is even greater than 40%, and indicates an actual greater per capita
consumption than in the previous year. Altho our exports of potatoes
doubled in 1916, the total number of bushels exported was,after all,
a small item as compared to the total crop, and the shoratge in the
holdings can not be attributed to this cause to any great extent.

The actual difference in bushels consumed per capita can not be deter-

mined with any great degree of accuracy, and may nof be very great,
(13)

but when the tremendous increase in the price of this commodity is
considered, the increased buying power is brought home even more
forcibly.

All reports which are available regarding the holdings of
commodities in cold storage indicate much the same thing, I.E. ,
shortages of actual supply which are far in excess of the actual
crop shortages which occured in 1916. A report as of April first
1917, issued by the Office of Markets and Rural Organization, and
which is the latest report available at the present time, shows
the following conditions obtaining on that date:-

Apples-- 42.5% short as compared to April 1 1916
Eggs-= 36.8% "_ "* " " fr oon on
Cheese-- 18.3% "  * " f" non of

Butter, on the other hand, shows a large increase in hold-
ings, amounting to about 80%, but this is a commodity which is almost
in a class by itself in that the price of buuter has little relation»
ship to the more important staple or semi-stapie food commodities.
Butter can hardly be used as a substitute for any of the other more
important articles of diet. However, it is understood that a large
portion of the holdings are under contract to foreigh purchasers,and
will be exported later.

The figures on apples show such a large decrease (42.5) in
stocks on hand as compared to the previous year, that the shortage
in production as compared to 1915 (13%) is overshadowed. When the
high prices are considered this demonstrates again the increased
consuming power of the country, while the shortage is in itself an
abundant reason for the present high price of apples, leaving out
df consideration entirely all other contributing causes.

In spite of the fact that all of the facts presented hereto-
(14)

fore are readily ascertainable, a large proportion of the consuming
public still continues to harbor the suspicion that trust manipulation
is at the root of the entire rise in prices. This impression seems

to linger in the minds of many even when all of the facts have been
drawn to their attention. The statement is constantly made that while
it may be true that all of these combined causes do justify higher
prices, the producer has received none of the increase, but that it
has all gone to middleman. The falsity of this assumption is shown

by the following table of farm prices paid to producers at harvest

time:
Aug.15 AUg,i8 Aug.15 Sept.1 Sept.l1 Sept.1
1914 1915 1916 ° #=1914 1915 1916
Appies per bu 68.6¢ 61.8¢ 80.7¢

Peaches per bu 105.0 85.4 114.9
Pears per bu 98.8 fA 8 109.0
Cabbage per cwt 174.0 161.0 226.0
Onions per bu. 137.9 86.3 133.5
Tomatoes per bp 92.5 66 .4 88.4
Beans per bu. 254.0 266.0 459.0
Potatoes per bu. 74.9 50.35 109.3
Sweet Potatoes bu 92.8 84.6 89.9
Figures taken from Monthly Crop Reporter of U. S. Dept. Ag.

It will be seen from the above that pricss to the farmer have
been on a relatively high level from the very beginning of the con-
suming period of the most important of last years horticultural crops.
The price of apples was approximately 30% higher than either of the
two previous years, cabbage was about 30% higher in price paid to the

e. ‘
farmer as well, beans were nearly double, potatoes were more tran

double the 1915 harvest price, while all other horticultural crops
 

(15)

reported have shown a marked increase in price over 1915, and a moderate
increase over 1914, which was also a high priced year for many articles.

It is an accepted fact that the price of an article (be it food
or manufactured) increases almost in geometrical proportion rather
than in actual ratio to a shortage existing in that article. There-
fore as the winter season progressed with consumption maintained at
its old levels~<or increased, the shortage grew more acute, and prices
went correspondingly higher. However, the farmers were benifited by
this even more than the middlemen, for a large proportion.of the
horticultural products available in this country was held in the
farmer's hands while stored. The year 1915 was also a fairly pros-
perous one, and farmers generally were largely in a sufficiently good
financial condition to be able to hold their stored goods for a rise
in price.

Altho it is not generally understood, advancing prices are
usually a cause for further advances, in and of themselves. This may
sound paradoxical, but it is unquestionably true. The psychological
effect of an advance in price on the public mind (especially a rapid
advance), is to make all peopje beleive the price is going still
higher. The tendency, therefore, is to increase punchases on a ris-
ing market, and this increased demand has the further tendency to
increase prices still more. In other words, there is a certain mon-
entum in advancing prices which usually carries them to levels for
which there is no real economic justification. We see this tendency
constantly in the stock market, where the general public seldom buys
when prices are low, but refrains from plunging until prices are at
or near the top. The very rapid advance in the prices of all food-

stuffs has caused many house-wives to become. afflicted with a species

of hysteria, and many of them have become hoarders of food, making
(16)

purchases far in excess of their normal or reasorable requirements.

This tendency for the momentum of advancing prices to carry
such advances beyond reasonable levels seems to be particularly notic-
able in the horticultural food products. The public seems to become
panic-stricken when supplies are short, and prices high; and the demand
increases rather than diminishes.

A striking example of this fact (tho it did not occur in con-
nection with a horticultural food) wasbbserved in Washington this past
winter. A rumor spread about that the supply of sugar was about to
be cut off, and in a short time it seemed that every housewife in town
had the news. Because of this rumor a "run" was made on sugar, and
became so serious that the next day the price was raised a cent in
an effort to reduce the demand temporarily. When this news of the
advance of a cent a pound taking effect in most stores was further
spread about, there was a veritable rush for sugar. The price rose
from seven and one half cents per pound to as high as fifteen cents
per pound, and the higher the local grocers put the price, the greater
was the demand. Many usually shrewd housewives purchased lots of one
hundred pounds or more at five cents above the usual market price. In
the course of a few days, when the housewives were “loaded up", and
the stocks depleted by the “run"were replenished by new shipments,
the price quickly dropped to normal again. This same tendency to become
panic stricken and rush prices to: extremes is apparent time and time
again on the fruit and vegetable market. It also works in the opposite
way, for in times of threatened over-suppiy the demand often seems
absolutely killed, as every one holds off for lower prices.

Some comptaint, which may seem reasonable unless carefully

studied, has been made because the prives of some of the various hort-

{oultural crops have not risen even in geometrical proportion to the
(17)
shortages existing in those crops. Some people have seen in this an
evidence on manipulation. However, the vital cause of money inflation
affects all crops equally regardless of crop shortages, and also the
great factor of substitution enters in and cannot be ignored.

Onions, for instance, are a crop in which the production was
more nearly normal than in either the cabbage or potatoe crops, for
instance. Yet the rise in the price of onions in the latter part of the
winter was quite as astounding as the bise in the price of these other
commodities.

This can be partially explained by the fact that the prices of
all foodstuffs, especially those belonging in a same general class
(such as cabbages, onions and potatoes), are interdependant to a certain
extent. All three of these vegetables compete for a piace on the daily
table of the masses. When the price of one is high, and that of
another is low, the low priced article is very widely substituted for
the high priced one. The increased consumption of the low priced
article will soon cause a great enough shortage in it to justify an ad-
vance in price. While this principie acts only in a limited field,
and is not always effective, it has the tendency to cause all the
semi-stapies to remain on a comparitive level as to prices.

° The orange growers of California recognize the importance of
this factor of substitution, as increased competition and heavy ship-
ments of strawberries, peaches, cantaloupes, etc. always have a d2press-
ing influence on the orange market; while unseasonably light ship-
ments of these commodities always make a more active orange market.
Though (as explained) the real reasons for prices advances in
horticultural products are fan different from those ordinarily ascribed
by the general public, the public has a large number of "sure remedies"
for the conditions now existing, which remedies are, of course, practic-

ally all based on false premises.
(18)

The most popular one advocated by the public for the "high
price evil" is to "put the trusts out of business and put some one in
jail". As there is no real trust existing in horticultural foods, it .
is obviously imposeible to "put the trusts out of business", and the
mere fact that a man 1s engaged in the wholesale fruit and vegetable
business is not yet considered sufficient cause for a jail sentence.

Almost equally porular is the derand that the government con-
fisceate all foodstuffs and distribute them. However, if there is an
actual shortage of supplies this will do little good, tho it has its
value as a war reasure in rationing an army or ever & whole nation
if necessary. However, many of the complainants under the present
system would find that rationing presnted more unsatisfactory situa-
tions than even the present conditions.

In the samé category is the demand that the government regulate
all prices, and set maximum prices at which foodstuffs are to be sold.
If such a step were taken, minimum euarranteed returns should naturally
he established as well, in order to compensate the grower for his
limited profits, and protect him against loss. For if the coneumer is
to be protected from too high prices, the farmer should be protected
from too low prices.

One of the silliest of all remedies for high prices of fruits
and vegetables, and yet one advanced as often as any other, is the
proposal to abolish all cold storage houses. Twin brother to this
proposal is the sursgestion that tiere be a prohibition by law against
holding any goods in cold storage over thirty days, and that violators
of this law be deemed guilty of a felony.

The authors of these proposals apparently do not realize that
cold etorage is one of the most potent factors in existance to-day for

lowering the cost of living-=- and making living more pieasant.While it
(19)
is true that if there wsre no storages apples would be very much
cheaper in the fall, this would simply mean that apples would be available
for only a comparatively short period, after which the supply would be
extremely light and prices so high that only the wealthy could afford
them. The result of the serious gluts cf each fall would be to quickly
drive many apple growers out of business, so that the supplies would
soon be diminished and in the course of a few years prices would be
at their old levels in the fall. Cold storage is a necessary factor
in the economic life of the nation. While it may be abused and put to
undesirable uses occassionaly, on the whole its benefits far outweigh
its burdens on the public.

Altho the causes of price advances on foodstuffs are far too
fundamental for any reduction in price to be obtained thru such actions
as trust prosecutions, boycotts, abolition of gold storages or other
popular so-called "remedies", nevertheless some improvement can be
secured thru intelligent government action tending to eliminate waste
and lost motion in our methods of distribution. Only thru a reduction
of the unsecured paper money supply and a great increase in crop
production can prices reach their old low levels; but a certain small
tho very d«finite and.decided saving can be secured thru other means.
However, we much not expect too much from government assistance, for
nothing can really change the workings of the law of supply and demand.

For some time past, distribution of fcod products which are
marketed nationally has been generally carried on in an unscientific,
unintelligent, and lax manner. Various shippers in different parts of
the country huve worked in complete ignorance .of each other's move-
ments, and often with disastrous results. Gluts in ons market and
comparative famines in another have been not uncommon.

The U. S. Office of Markets and Rural Prganization has made a
(20)
beginning ir rendéring assietance tc avoid suck conditions ty means
of its market news service on fruits and vegetables. Daily unbiased
telegraphiy/ intormation is furnished to growers, shippers dealers
and consumers of perishables. This information covers such pointes as
a complete daily report on the number of cars of certain fruits and
vegetables which move throughout the entire United States every twenty
four hours, together with a record of their various destinations. Also
the number of cars being held on track at important markets or diversior:
centers, the diversions made on rolling cars, the prices that growers
and shippers of these products are securing F.O.B. their station, and
the prices at which these same commodities are selling in jobbing lots
in the large consuming markets.

This service has been in cperation but two years, but has
demonstrated its usefulness beyond all dispute. Literally hundreds of
thousands of dollars have been saved to producers, and due to better
Gistribution consumers have been supplied with thousands of cars that
would not have been shipped had the service not been in operation.

One concrete example of its value will suffice. Prior to 1916
no crop of Texas onions in excess of 4000 cars had ever been harvested
profitably. When 4000 cars were shipped the balance of the crop was
usually allowed to rot in the fields for lack of a merket. In 1916
the news service was in operation and a crop of almost 5000 cars was
consumed at better average prices than many crops much smaller. than
that had returned in the past. A Congressman from Texas stated on the
floor of the house that this work had saved the growers of his district
one million dollars, while the consumers of bhe country were better
supplied with onions than ever before.

Such assistance as this means direct saving and the elimination

of waste, and does far more to reduce the cost of living (especially

as applied to fruits «end vegetables) than any amount of boycotts. To
(21)
date the work has been carried on on much too small a scale to be as
truly effective as it should he.

It should be supplemented by weekly or semieweekly news letters
addressed to consumers advising them regarding the articles which are
in most pientiful supply and therefore cheapest, thus stimulating
consumpt foraseieting the average citizen to secure the greatest value
for his expenditures.

Coupled with this work there should be careful studies of price
spreads existing between prceducer and consumer. Where these spreads
seem to be unreasonably large in proportion to the services rendered,
the producer shovld be informed and steps should be taken to assist in
avoiding such unreasonable charges.

‘Considerable loss also occurs at present because of the tendericy
of some producers to make little investigation regarding parties they
are doing business with and many cars are shipped on consignment yearly
to careless, inefficiert or even actually dishonest commission mer. Hcuses
of this class sometimes publish more attractive advertisements than do
reliable houses. The. grower has little time and less opportunity to
ascertain which house will treat him best, and often ships to the houses
with the biggest advertisements-- and regrets later.

A government liscencéesystem for commission merchants would
overcome this difficulty. The government could exercise strict super-
vision over liscenced commission houses, prescribe standard forms of
accounting for them to use, standard business practices to make them
efficient, and examine their books regularly to guarrantee their honesty.

In this connection standard rates of commission, and standard
auction chiarres should be prescribed for liscenced concerns in order to
prevent the overcharging and rebating which is now only too common.

Such action would do as much toward eliminating waste, inefficiency

and dishonesty in the handling of perishables as would actual governrert
(22)
participation in the businessand would do it at much less expense.

It is probably fair to say that any part of our present system
which breeds suspicion, distrust, delayed handling of horticultural
foodstuffs, and often-times unfairness if not actually dishonesty,is
a factor which breeds waste. Such a factor is our present method of
selling perishables on vague specifications and evbject to inspection
at destination.

It is not saying too much to state that under our present con-
ditions almost half of the fruits and vegetables which are sold subject
to inspection at destination (and by far the majority of allcars are
s0ld in this way) are rejected on arrival and adjustment in price must
be made,

This state of affairs has its basis in the fact that the grade
terms now in use in reference to fruits and vegetables have little or
no real meaning. A shipper may quote fancy apples, packing them accord-
ing to his idea of what the word "fancy" should mean, while the buyer
of these apples may have an entirely different conception of what
such a term should mean. Both may be acting in all honesty, but the
result of the divergence of opinion is that cars are too often rejected
on arrival, confidence is lost, and free distribution hindered.

In a great many cases deliberate advantage is taken of the loose
manner in which grade terms are used. On a falling marxet a buyer can
easily find fault with some feature of the pack of a car of almost
any horticultural product, and in many markeis it is the almost universal
practice to reject on technicalities when the market is "off". On the
other hand, many shippers undoubtedly grade and pack in a manner in-
tended to decieve, and do so deliberately, mulcting the buyer at every

opportunity.
All d@aifficulties of this nature could be obviated by the estab-
(23)
lishment @® of official government grades and standards which would
give a universal and stable basis for trading in horticultural food
products throughout the entire country. Certain states already have laws
of this kind established,prescribing standards, but as these apply
only on intra-state business, and the standards of the various states
aiffer, these state laws do not meet the requirements. Only a Federal
standard will give satisfaction, for the fruit and produce business
is never bounded by state lines.
Standards for containers should be adopted in the same manner

as standard grades.

| Even when standards have been adopted, however, a method must
be found for enforcing them, for the dishonest shipper or buyer will
still erdeavor to take advantage of them. For this reason a Federal
Inspection Service with representatives in all larse markets, should be
established as a suprlement to the standardization act. Disputes as to
grades should be submitted to the local inspectors, and their findings
should be accepted in a court of law as primae facie evidence of the
true grade of the article in dispute.

| With such a service, a stable basis for trading in fruits and
vegetables would be establighed, and shippers and buyers could proceed
with confidence that square dealing would prevail. The margin of gross
profit could be reduced by dealers, for allowances would no longer need
to be made either by shipper or dealer for fraud, deception or mis-
understanding at the other end. There would be less speculation if
opportunities to "crawl out" of a contract were reduced, and the public
would ultimately tenefit by reason of the reduced cost of doing busi-
ness.

In many of our large cities present terminal ‘acilites for handc-

“ling perishables are antiquated and inadequate. Much unnecessary

cartage is indulged in, and much undesirable rehandling of roods. Plans
(24)

are now under way in several markets to refie ve these conditions.

Organization and co-operation, both on the part of the growers
and consumers should not be overlooked as a means. of reducing excessive
overhead expenses. However, before entering into co-operative schemes,
those co-operating should be prepared to make some sacrifices, and
must not expect that co-cperation will be a cure-all which will auto-
matically solve all difficulties for them with no further effort on
their part. The opposite is only too often the attitude, and it should
be borne in mind that co-operation consists not merely of receiving
benefits, but also in serving for the common good.

Municipal markets, which are in the final analysis merely a
form of consumers co-operation, have been potent in many instances
in reducing the cost of the overhead in retail marketing. Patrons of
municipal markets, however, must be prepared to dispense certain ser-
vices which they now demand almost as a matter of course. They must
be prepared to look ahead and rlan to make their purchases for an
entire day at one time. They can not expect seceral deliveries of var-
ious small items at different times thru the day, they must get out of
the habit of telephonirg for a loaf of bread or a cake of soap or an
onion at any time with the expectation of having their rnseds supplied
by special ressenger. They can not expect to be granted liberal credit,
they must be willing to travel further than just to the corner. for
their wants, and they must he willing to make purchases in larger
quantities and less frequently than is now customary. In other words,

they must co-operate in rendering excessive service unneccessary. If

 

they will do this, the municipal marjet will save them much, as has al-
ready been demonstrated in many places.
All of these various reforms in distribution methods will accomp-

lish something toward reducing the High Cost of Living by means of

the elimination of waste and inefficiency. No one reform will do much
(25 }

by itself, but in the aggregate they would constitute an appreciable
saving by lessening the spread between the producer and consumer. Im-
provement of marketing conditions as regards fruits and vegetables
will come thru the bettering of the present system of distribution
in many comparatively small ways, rather than by a revolution in
method which will entirely overthrow our preserit system and substitute
& new one.

Even when all of these things are accomplished prices will
still be fairly high. The great fundamental causes of inflated currency,
short crops, shortage of labor, and huge exports due to ths Europeon
conditions will exert their influence for some time to come; and for
some time we must expect an era of fairly high prices on all foodstuffs.
We can only modify, and not radically change the present existing con-

ditions, until such time as the end of war in Europe will put us back

on our old basis.
 

 

 

 

 

 

(26)

SUMMARY

Unusually high prices are now in effect on all foodstuffs, es-

pecially horticultural foodstuffs.

The public generally,mistakenly beleives these high prices are

due to the following causes:

1. A food trust which is manipulating prices.

<. Wilful destruction of foods by middlemen to cause
shortage.

&. Widespread abuse of cold storage facilities. —
The above reasons are not correct, but are based on prejudice.
Actual reasons for high prices include the following:

1. Increase in the gold supply.

2. Inflation of paper money (the most potent cause of all)

5. General and worldwide rise of all commodity prices
(caused by 1 & 2) as shown by commodity index numbers.

4. Shortage in world supply of all foodstuffs.

5. Particularly great shortage in horticultural crops
in the U. S. during the past year.

6. Great increase in the exportation of foods.

7. Increasing buying power and consuring capacity of the

public.
High prices of perishables in the latter part of the winter were

especially due to

“1. Shortage in storage holdings.

2. Relatively high prices at harvest.

5. Psychological factor of increasing prices causing a
panicky condition and consequently still higher prices.

4. Inter-relation of crops causing the substitution of
certain crops for others in consumption in the early part of the

season.
(27)
Popular and erroneous remedies advanced for securing lower
prices are
1. Trust prosecutions.
2e Regulation of prices.
5. Abolition of cold storages.
Remedies which will actually assist in lowering prices are
1. More complete and general publication of crop
movements and market prices to aid in distribution.
2. Liscencing and supervision of commission men.
5. Establishment of official grades and standards.
4. Government inspection service.
S. Better terminal facilities.
6. The expansion of co-operation.
7, Municipal markets.

Conclusion: The reasons for the present price advances are so

 

fundamental that no measures short of stopping the war, reforming the
currency, and increasing production tremendously can bring pricés back

to their former pre-war levels.
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MICHIGAN STATE UNIV.

WOW USLMANION

293010691016