Trends in cooperative marketing of grain in the United States and Canada

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Trends in cooperative marketing of grain in the United States and Canada
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Christensen, Chris L ( Chris Lauriths ), b. 1894
United States -- Dept. of Agriculture
United States -- Bureau of Agricultural Economics
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If' I



.. ; T,,-

/ UNITED STATES DEfARTZTE.T OF AGRICULTURE
Bureau of Agricultural Economics



TRENDS IN COOPERATIVE MARIETING OF GRAIN IN
THE UNITED STATES AND CAMTADA

By Chris L. Christensen,
In Charge, Division of Coop-)erativ.-e Marketing.

An Address Before the Thir. SCssion of the Antrican
Institute of Coo-ocration, Z.orthw,,st2rn University,
Chicago, Illinois, Ju-e 20, 1927.



A permanent, prosp-erous grain-.ro'ducing iLdustry in the United
States required that the move.-.-,ent of -rain from farms to consumners take
place Fith profitable returns to the g--'ovwr5. There are to-o -,aces to
the problem of bringing abort this result One is to so -i!an -oroiuction
that consiuiers' de.-;'ans '-'ill Oe I.Ct as closel:- as -ossible with eraiin
of high quality -.nroluced. at a lo,7 cost "er bushel, asnd the other is to
secure maxiru.n returns for tie cro-) t'hen it i: -i-orL.ceC. Profits in
grain production in the lo.-- run, as3 in industries of all :iads, depend.
"uacn the close.ess .:ita *hich co-smi.Lers'1 .e'emand3 are forecrst, an.i the
closeness vi", -.-hich -roduction is bose. u-.on tle a.ntici ;.t.A reca-ire-
n.nts. t There is Tun:h to be said on the reductionn sid.. of this c1ynstion,
but in this t aner the major enmphasis -i.li be ;laced on that phase of
the marketingg prole.- which relates to the ;h.sical n'ovemcnt and dis-
tribution of the crone, once it has been producci. The drift of thought
in the -)ublic mind has bee:- in thiis Lirectioin. But we also need to
emw&asize the broader, vie.-moint thc-t rfficipnt gr?.in marketing
requires the laovemnent of grain to consur.erc at -prices that cill maintain
the grain-producing industry ur-on a penr ::ane.nt and profitable basis, and
this broader viet-mcint rrust inclu.ide other objectives than merely that
of narrowing the margin of marketing costs.

The Grain UIarkltinr- Structure

The structure of the grain market is so colossal and com.plicat-d
that failure to gras- the *-nmriantal -irincinles inolve< in the marketing
process is not un'sua.l. The niagnitu-CLe of the marketing machinery, of the
rail and water trans-jortation facilities, of the financial and other corn-
mercial agencies, whichh ore involved in t'he ovent of the hundreds of
%.1 ~ ~ ~ ~ 6 isto h oi
millions of bushels of 7-e-'at ard. other trains from the faris to the con-
sumers of the *.-orlC tcndu tc obsc-..re o. recognition of the eszentiz.l ser-
vices which are rendered, as th- gr-i" "'sS--s krou.i the channels of trade.

DOUMENTS6&


j _.DEPOSITOR_
1,jU S DEPOSITC)R''






.:
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A multitude of marketing services are required to place wheat
and other grain in the places, at the times and in the forms that best i
satisfy consumers' demands. The fact that these grains are not used as
they come from the farm, that the production period is short, that grain
is being harvested during several months in the area between Texas and i
Canada, and throughout the year in the different countries of the world, '
and that production is more or less localized in areas distant from con-
suming center, makes clear the necessity for a highly specialized system ;::0,
of marketing. These conditions require the provision of machinery for ,1
assembling, warehousing, processing, transporting, financing, standardita-iii:.'
tion and grading, risk bearing, distributing and selling.

Develo-xment of Present marketing Structure

In the early days in the Eastern United States the pioneer farmer
ras highly self-sufficient. He raised his v:heat, ground his own flour, .
and made his own bread. He laid by stores of wheat in his own granaries... ,i
in years of -lenty to meet requirements in years of scant production.
marketing process tas comparatively simple.

The grain marketing structure and problems with ahich we are
familiar cane with the development of the Middle West. Wheat growing
moved westw7ard to the fertile ?rairie.-of the Midwest and to the Pacificl::.,
Coast. Railroads ,.were built, inland water transportation was developed,
and harvesting machinery was perfected. The need for additional facUflttli-"i
and agencies to perform other services developed coincidentally with thwli" hl!...
expansion of the industry.

Simple loading platforms and. contry elevators were provided to
unload quickly and cheaply and to handle grain preparatory to loading it
into the cars for shipment. Railroads met the needs of grain producers
and built lines from grain--roducing sections to consuming centers or
seaboard points, established switching and loading service and developed : 'i
cars and motor equipment to trans-ort grain by efficient methods and-
direct rontings. Hills rere erected at advantageous points to convert _
wheat into flour. As the distance between farm and consumer widened,
additional agencies developed to facilitate the trading between farmers
and consumers. Central or terminal markets .7ere developed at strategic ;r
points. Grain exchanges facilitated trading. Warehouses for storing
supplies until needed, facilities for financing and transporting wheat
and other products, grading and inspection agencies, and market news
service we-ere all natural developments brought about by the agricultural i
and coa:.ercial growth of the nation.

:Historj of Farmer Elevator Development

As new grain--3roducing regions cere o-ened and railroads pushed

""4i~i








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out to serve the;'. nc. local c:.-itcl or in:enuity to -)rovicl: fi" ities
for ia Cl.in- *J ". ',.1 .v ilble. '_..zic ur c,*:pital v.ac n-ededJ. to bri.]:'.
elevc.to's. A ,resul'.t, lar'e co.: -. Cv.. v o C rc t i n f 'ro.. -. .l
..'...r-kcts ."-,e -"o:.e ., eac., of ,-i:h ..cci.ir-.,. elevatoM at ._'.'.. coun-..
:oints. These arc refe:-e'. to s line el vtor c'nes. This c-
velo---ent -ac.s esrcci.s .. nctic,'"_e in the.-'i... ....,:t n C.- :Aon .n ."
ies of (V-O-S i-ro estbi^.. by :il'c.,:)ois 2ill .nc. tcrriinall
grain co:./.-:.1ei z th iou'h.-out 7e';tern :.innrot.?., the DI:atc..3 Ont A ont'. ,'..
iuch1 the- szu,-e c.evyo-7..nt occurred, in earlier c'.s in Iowa., :il:i;ois
andcu. 'e So.th\vest.

TVhrn a,.ic,.lture be: 1.e ..cb:'ttc establis-cd. in t-.hcse r,-iions -nl
":roc6..cer!. -e're able to "Ln'.r, to -oble:.s other t cro-s, local
-&iLrktin,; condi-cio.-, t.egan to receive attention. DiJsatii&f.ction -ith
the -)rice policy, ,raci-vn, aa doc.:ir n nractic-.-M of line elevt-.cc de-
vclo-per to _..e -)oint of an'.c-or:is e ve.nr r,. even bitter ,,ccoition to the
existing "11te s.. .This .istatf-.ction was increase& by t'-he, deflation
folio 1'..e Civl T7J: and resulting$ loT; l rice for grain.

Th'e at:e. of th'e ':art of ...-icvltrkists to re. ierd t'-ese cor.-
cliti-jns IG.Ait~c. in .": or.' C.nIzation of .A< fr' elevator cozi-_a Z
d .:in "- "a.;, '"-rC "a z-..-. "
-.i.: L-e '' :ixt.es n.. Ii:on-.iout the deca'.c: 1L7" -o0 T---e f r. '
elevators :o.-.r./. *:.:- thi, s ".riod ,er-e not always 2ro.;"ly oSjni
In ..,-.ny c:..3 ac.eu'/u. ca-)ital "c.s not -v.ilJ.ble for oocratin)Y r,.'cs.
IT'-- : er,:.! eric:-..-d :1.- .-.rs c-'c aot obt-.inrK c.... petitionn -..-
t. -e -e,,.-...i -. 2.n....."? vew ry a:.c n. a_'-.. ....y,in .. ~ a r--.ult of '.is cor-
ix 'tson of c rc 1 -'.. t"he 'arrier elevator :,.ove.ent .:.aa, oy liO,
e'.-l i.t faced out of the -oict-.',e But to very definite res:Its .-a-r be
crf iite l to t s :cit o .ovo. .er:'-t: It ds.-ctratocL '-at far-ers coulCL
d" [,1( convincee(. '-"e .. tae ." "- "
d c, co ncc _-.e.. ct tU-, need'not sm'.:it to -:-.rtis ^ctory con-
citions in C::e .-:.ti._: of jr:: .; and it -rovided c. fund of-v-licble_
e;:::,erience fc' --s,-

Bet-ccen 1SS0 eand JO1..-, a second :,eriod of farmer elevz.tor
ac- :-vity _ld. tlhe interest of both ;r,:.i] -ro:.uc-rs ,r:d t..ose cn .,e? in
..... t- ... -, y. .A .l !ic..ICC., C 3" c O 0:! c
t c .. ..rkcti,; of .:_ t. 'r ..,r ,"li.-cc-, cco o `c
or:anizc.,tio.'- _:'o..,-;l, in l,.35, .'as lar" c:' res-onsi!e for t.e revival
of inLer-.st in Grain *:.:*c:n, this time l.-: of the c,:,-titi,.
Of f." ,a:' :. .s.. .. _l :.xic i _.-- ri- j.i ed _"3c1! '- -. -rescr-.ce of ,.:'-
aindRCeynen : ,_,i J --. .- -.', h ,1. been ..i.;i":.'cd thlo:.L the creation Pf a
Ie i l--.r:. o-,.:z .z.Lions cc.''.-t.i r.-f,.~-:'i'. %o ao !inc eiv .tor companies.
ra L---s felt 0._t tU.'.e cora.iics .'e in a ,o ttion to e:r:ct ic.vy toll
f ro.--^-*------- c'.j c rdi *t they *"ere i.n Ic:i -it:.: t:e rail ays,
': .ber de-lers, .",.-.lesale t:adc.e arf Lc-- .e...t co .ccr... to c:-.ct 12un-
"" "":YS1
reason%.lbc ":- i'Yt ro an airec: ..;. ic'>.le: .ccorrin;r,
,.l.< anO. aq lrt-o,:-. U '- ...
neu interest -,.., -:rous=_. in the c-:i.1...zon of far..iers elevator
co:: .anies. In lo -a a..onae, *2 ccC..?nies l '*ere foIV-. be"eon 1r5. .-.





'- S'K!
.... ... .. ... di

1903 and in :innesota 34 companies were operating in 1900. Other grain- :
p-roducing states experienced siu.ilar activity. ,,:,

The refusal. of commission companies to handle farmer elevator .
business, because of the threatened boycott, was particularly hard. on.
the farmers' com-panies. By 1904 only a small proportion of the farmers'
elevators wTh-ich had been organized during the -preceding 20 years was
still in existence, ..n that year trro commission companies selling grasal|..
on the Chicago Board of Trade announced that they could risk the dis-
pleasure of the grain trade by handling consignments for farmers'
elevators. This proved an incentive to renewed organization activities -::...
* and paved the way for the tremendous interest shorm in the formation of
farmerst elevators during the next 15 years. In this time several
thousand of these organizations were formed. The number of associatiloniQj^.
reporting to the United States Department of Agriculture in 1926 was ,,1 |
approximately 3,300, of which probably 40 per cent, in the viewpoint.t.
many persons, ere not strictly cooperatives.

Cooperative effort in grain zmarheting at nz points other thLan at :*l
local n:ar:ets has e:x-iressed itself in a -nuzber of ways during the last
15 years. The establishment of cooperative grain co.zission houses in ,.l
the terminal -larkets by farmers' elevators 7as one of the first vJYs.
The.-Equity Coo-oerative TxhGc ..ng esaab l.is4ed ia. 3,01g :c-as ..the first ...
There ar.e now several coo-erative coa.nission houses'operating in
terminal marketsts. The U. S. Grain Growers, Incornorated, organized
1921 v-as the first atte_: t to establish an extensive cooperative salesii|,:::
organization in thLe terminal rar.ets for farr.ers' elevators and farmer :"Il
consigners. The fozrnation of the Grain ".ar'.eting Corany, .August 1,
1924, rue an attempt to set u- and acquire bermina) -.aarket grain IH
facilities and sales organizations for faz:mers. III

Faz-mers' elevators, at coun"tr-y pointcj, in the marketing stpaocttur!!||lt
have e;.erted. c. decia.edly beneficial co- etitive influence in affordi.g
essential .ar.:etin service at cost. Better treatment in the matter of
grades, ";eights and. dockage is ailso credited. to their existence. While
thiey h?.ve acco-lished a great deal to solve local gain marketing prob- ...
lems, fear-ers' elevators can still further increase their op-erating ..,
efficiency. The sornd. b.asiness princ-.Jles that are essential to
efficient o-oration are o-ten not grasped.

Studiies of elevator 3-oeratio-in "-,~ disclosedd that there rere ma '"..
avenues of loss in the o-era'ion of farmers' elevators. On account of .
unit o-perations, li..ited ce-ital rocsource, c-nd the services they are
reciaired to f.z'._ish, they are often -aore s-c.sce:tible to losses than are
the Hliae sy,-tcr of elevators. Line e.levators, for example, have many
advantages, :rhich ::csv.t fro:. a larger aggregate business. They can
econom.ize on local managerial costs saeL employ th3 best available .






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management for general supervision and for the selling of grain. The
ownership of tcmnzinal facilities and better kno.7ledge of rrarket dc-'.nd3
enables them. tQ hold, mix, nnd condition grain and thus increase its
value in ways th-t are not open tc farmers' ecevitors operitcd is a
local unit.

The present trend seems to point towtvrds the federation of local
fr.-r.ers' elevatocrs for the purpose of routine to best rldvint-v-e, har.dlin-
risk problems fr:..i a i-rjup st-ndo-.,int, nrr-r-n.ing for terminal :'rehjusin.f.
and conditining service, furniGhin,- -.ccrcunting service, -nki n,-.-arkct
analyses, scllinz t, better -dvant.n-e, -ind rendering services in many
ways v.'ith the producers' interest in mind. This requires better iL-.erchan-
disinC of gri.in tD secure greater not returns to the grcwer, in 'idditi-.:n
to any su-all profits that may result from econcl-ies of large-scale opera-
tizn.

The develor.-.cnt of efficient central marketing, agencies under the
patronage dividcn:'. plan mir-ht eventually influence the hole tcmin".l
-.arketini- fielC in ..-uch the s-r.e manner that the farrier elevator move-
-:eant hs influenced country grain rarketin.. If such a rnover.cnt crystal-
izes, either through federation of strong local units or throug-h ether
forr.-s of organization thct vrould extend the markctinf service beyond the
.fnr.'ors' coopcr,-.otivo clevxt-or stncge, success vwill be dependent only upon
the ability of' such 'r(--ani-zaticns to mTaintain the s.rre high degree of
business efficiency that prevails un4.cr private operar-ticn of the sa'.,.e .I.r-
ket iechanisms.

The difference between r-rivate and c:.oerative rmar'.e:tinf is net
funr.ar.-entally in the s.ervicc ,crfcrP. o for the sarie essential :.k.rketing
services must be ren-.cre-'. in either cpst. Un'.cr private enterprise,
_nrfits for the '.-ne-rs nre the -riimary consideration, ar.d -rofitable mar-
pins a.re the chief interests, while ccopern.tive mnarketing by ,rc.lucers
must be funda-cntally intereste. in r'eaxjru'. net returns, whether this be
obtained by a reduction c-f rarcins, more even distribution to r.'-rkt, or
better adjustment cf su-nly to the demand.

The lrhoat PF.l Era

During the last seven years state-wide hea-t I.-rketinp ,.ssocil.-
titns cr wheat pc.:ls have been orfanizcA. in the nrincinal grain-prc.-oucin,
states, and in soi:e cases fec.erations :.-,f these associations have set up
sales agencies in the toriin.al markets. The first '-heat pool in this
country v'as orranizeL' in the St ate of 'Vashington early in 1920. The
WVashin;tcn '.nJheo.t Grw-.'ers' Ass:-ciation operatedthree seasons and sold
-.:r)xir.I:Ltoly 12,300,000 bushels of grain. The second cf the "heat po:ls
wuas also fcrrred in 1920 in Idaho. This v I's followed by other pools
in the i.orthv:est, an. later by sir:ilar organizations in the Mid',le








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West and Southwest. The pools formed in 1920, 1921, and. 1922 en-
countered declining prices and, because of conditions over which they
had. no control, several of them have ceased to operate.

Profiting by the erxerience of the earlier associations, many
pools formed a year or zro later corrected certain weaknesses, and, as
they were favored by more stable prices, they have succeeded in estab-
lishing themselves as important factors in the grain marketing structure
of this country.
:!
The nine associations which are active today are located in
North Dakota, South Dekota, Minnesota, Kansas, Colorado, Nebraska, ,"
Oklahom-a, Texas and Indiana. The -present tendency among the large-scale
r-heat pools is to spread out and.-undertake to serve members in adjoining. H.
states. The North Dakota association is soliciting members in iontana, '
and the Central States association, rith headquarters at Indianapolis, is
receiving members rho are residents of Ohio and Illinois.

Several of the associations haue arranged to control elevator
facilities for the actual handling of grain delivered by their members.
The 3TorbLh Dakota association !-aa acquired 17 country elevators, the
Central States Soft TMeat Growers' Association has obtained control
of a large cer-.inal -elevator in Inldianw-aclis,. aad the Kanwas, Q.kOna.o.,
Nebraska anmC Colorado associations havo united, in creating a subsidiary
conr n y, the Southr-est Coo-erative VTeat G'_'o.:'ers' Association, 7thich
serves as their sales agency and controls teri:.inal elevator facilities
at Leavenr-orth: azd Kansas City.

Perhaps the most iz.-portant accoz;lishz7.nt of the Vheat pool
movement is bhat it has aroused a more lively interest in grein market-
ing among far-:ers, grain maen, and the -,ublic in general. Activities
tIhich are od-ucatiorzL, i-.ch directt attention to existing conditions',.
are likely to .eet :ith so.-:e degree of response. It is not unreasonable
to conclude that such activities on' the part of the pools have brought
benefits to -rain producer.

In this brief ry- I have attea-.-.ptod to sum up the develo-anent
in this co-tntry. Lot us nior turn our attention to the accomflli:ahMents 4
of our Canadian Iciz-hbors.

The Coo-erative Elevator Movecaent in Canada

The t'ioneer farmers on Lhe Can,.icn .rairies er-.erienced Grain
:722ketin condition 3 aned -.roble-s si tilar to those found in the United
StaItes to-ard the end of tY'Re last cen-tury. Far-:.ers co-.il-dined that
privately-ormned elevator com-panies r-ere not paying as much as grain |
was corth in the terz.inEl .;ar:etc. It was also charged that elevator ;|







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col-i-r n.os ",:; ndcrdra("in ', tk.a' -:..- / ."< tak ..nz cxc ... d7.ck o..e n
that so-e e:.'r' not '- ii-J .j 1 "" 1 *

The r-arly coo-,crative ,-ffort -.c..n C'nr.di:n grain -roduc.-.rs "ere
Ln-.ost identical to th.re ,f t-., ::idcle ;mvt for...e.- in that th-.'-
F, s e n -ccI ,'' ...... o I et s
at the solution of u:e -rain f:.E... e problems by byo-.iCLir.. for famer-
o,-.:7 f1 .ciiii t- .. In ':.. 9, 2P .r;n.:-rs1 elev..tors ""er oier::ti.,: i
Oae.na.a. In s--)it-'- of an increase in n-..be" d a.ri, the ne,:t feu y.-'..*s,
mniost of t'"-.se in.:' ."enducnt!y o,-noC c" o -'-+tcc. fcinners' elevators failvJ.
becauLse trtey '.vero unable to co.-pete, in the -uirchase of Sr-in, rvith
stro:^ly o0g1.i ;: line elevator co.'-jrAnies anc. 'i!in; co:-..3.r-ie .-: 'cith
elevators at ..mny ts Cw-,-O.position to the f2-..:e-.s' el-voators in Co..*.,
r. ..e unJc'. States at c.t time, caae larpely f:..i Thes sources. It
"a.s heiL'1 3' f: r..t'e s n th at t-d cc .. a:sociations, T-ich ,.7ere -..?.... c .
inaCequc-.tely fin:-ncc., cold not comnpete in the u.i'cLm-..e of grain "'"
agencies v-:-icL couVl, o-,er;-. the ,.::et at points V.;A3are far.-.ers' ca.-?.:.ar .-
ies .aerat& n .. ._ce u-a rheir loss at -oi-tis here no such comaetitiens
existed.

H-iaving -.&ircovrepC. t-1.-.. local elevators <-'ere not likely to solve
"-..ei; -.y'obl.-E., 3n./.i?.: ..;.crs mae tro i.orton chWn-es in t' form
o their coo-:.rative Iagn marketing :.:ov,:.Ac-nt. first, they enterec. `.e
teniinal m ,-k..ut., eco d, m- _rZ'? ...a:,. rs elev...o'rs 't cot;::-
try p-oints e.aonr the line system.

The ..inLi-c'e CGr,..in ::c?-.-e, _-e: -ytinci-jal '._... grain mar-et,
had alr.ad_-. "ben t"-__ subject of :uch d.iscv.ssion. in F-,ricultural circles
of western Caca'.. ?'jners argued that the -:::'.7..n:;c "ras the meeting
place ,o. the c.. .t.. ;.. i .... o_ 7:estern C:..'. C n. the -nivota. -ooint
in the "*olf .:-r.... .-.... '.tLn. ?..t c "": 0 of th1e :'- :.ia- West. T-he" re-
enteC. tne fact t,:... this c(-"'; nization aiioodied only-jrivate comr::'nies
en.,.ce.L in th c.... of rc.> -hch fa:roers had. --cC.uoe&. The: also
clieved t'sr. cO1.i.-."o2-Li..s -er 'r:in. excessive .-rofits and ,.c:'z in a
-_ositio:-- tc c.nt--.ol the -.rics -ai for graio. .In .ach1 a ..aet r.rs
felt they could *;ot e. ect ."ei2 r eat:rent. In other .ord t'hey felt thcI
need of the 0` e .... in-ifluence "r.rugh cooperati.vo o:.- zation ia the
terminal ...?jr-:et.

Their ex-:.4rionce *-ith local 2'..pers' elevators :n6& the fln
of diis.iti.,a2.i.:n "-itht the ter a.l :..":'t situi n ex-res' 2. itself
ir 1.0'5 in th1 oa',:-, ":"-.on of fSsrrers& co::.'i -, ioL. c.-r-c.isuy, .0':.. as
,he Gr in C--o G-in n Cou....--; t o.era .e on ".- ,-.-:., .t, Grain 2:-
change. TPii t..s fac.i .f:l..'o1 ","i -s co:e.:ssion 7,c as d e "i F.'
to oeera.t2 i. the three .70 ;..z inces, l Znitoa, S..."--":ch>:-n Eand
Albert.r; it centered its activities primarily in oani`.'-ba.







- s ..


Soon after the formation. of the Grain Growerst Grain Commany,
there arose v rene-red demand for farmer-owned country elevators, Ex-
pu.rience hacL already shorn that individual local elevators could not
solve the problem, so consideration wras given 'to means by which a line
of elevators might be obtained to operate in the interests of farmers.
It was believed th.iat such an organization, linked up *;ith the Grain
Growers' Grain Compuany as selling agent, would be able to compete suc- ,
cessfully -,-.,ith the privately-orned line elevator and milling conrmoaies. '::
However, capital was not available among fanrers for such an undertalcing.
As an alternative, farmer-s requested the Governments of the three Prairir:'
Provinces to establish a line of elevators as a publicc utility. The
Governments of Saskatcheran and Alberta did not consider that this -as :0
the best way to solve the problems, so turned attention to other possie..
solutions, but the Mani i-oba Legislature agreed to the proposal. Accotdid
ingly, a line of about 170 country elevators "..as acquired and o-oerated: :'
for the tw7o seasons 1910-11 and 1911-12. At the conclusion of the sec...J
year's o-eration, the accumulated loss had amountede to several hundred,
thousand dollars and the Government decided to retire from the businessli
by leasing its elevators to the Grain Gro-;ers' Grain Company. In this' .t
ray the farmers' grain commission association acquired country elevators#

Follo-;ing the organization of the Grain Growers' Grain Company, ,:
the farmers of Saska.tciewYen, assisted financially by loans from- the :
Gover-nment of that Province, established the Saskatchewan 0oo-perative
Elevator Copanny, Ltd. in I-:10. Since the date of its fonration and
until its purchase by .the as.-a.tche-.n Thieat Pool in July 1926, the 1 lj
Saskatche.an Cooperative Elevator Company acquired 1451 country eleva- '
tors and teamninal elevators, vith capacity of more than 7 million bu- j
siels. In addition, terminal elevators cith another S million bushels .
capacity v'-ere o-oerated under lease. :

In 1913, grin producers in Alberta organized a third cooperative.i:i
line elev:-tor association n a basis si:iilar to that adopted in,,
Saskatcherar-; that is, the Governrient advanced 55 per cent of the ca5i- :
tal necessary for -the accr.isition of elevator facilities. In the case
of both Saskatche.-:an and Alberta., the Governr.ent loans *.-'ere on the basis
of 20 years ",-.ith lor interest rates; the total principal and interest -we""
repaid o-i the amnortiza.tio., -)lan.







-9-
In 1917, the AJlbrta Fan.rs' Coo-cra.tivo Lc--.tor Co.a-riny -.rd
thc Grain Gro.-\rs' Gra.in Co.:-p-'ny (for.. .'. in l0o) ,-ere c.-.lg ..'t:d undcr
thc n,.;we United Grain Grow:ers. Through successful vclo"...cnt this
coo-ra.tivc organization has acquired over 400 country elevators a.nd
operat.cz t..r.ina. elevators at the Great L.kcz and. Pacific -ports.

Since 1917, both of these coo--:..ra'tivc r:-.in oi'rg.iiz-'tions have
extended th.-ir activities to include conrX!ete facilities for the?
h.ndl.ing ,-.nd scaling of -r-.in fro.-. country cl.-w:vtors to c.x-ert .Cr.':s.
Both org-.rniza.ticns cstablishcc- co:raission dortncnts on th,. Winri-rc;
Grain Exch..ngc -.and secats core hold on the Chic:go Eo.rd of ir-.d-: -.n.
;:innc..polis ChvA;.rbcr of Cof.-...rcc. Subsidiary exporting co.-:.anics werc
oTwncd cd controlled, by c.-.ch. org-niz-.tior. The t-o or&'niz..tions -.co,.ircd.
about 900 country elevators and in addition -tx.-i;i-l elevators with a
c.pM.citv of :-p-?roxi: -,tely thirty million bushels. About 25 per cent of
the grain ._'.r c-t.,.d in C.r.s.dc. v:as h'-ud.l by those two co;.-_.ni.: s -chosC
co-.ibincd membership -.-:ou--itcd to about 53,000, In 1920, a -aajority of
the:i s .rcholders of the S.3:latch:,"n 2oo:.'rative Elevator Co,.----.n.r who
h:V.d jlso si-mned, v.cat -pool contracts requested th,- sa-le of their cc'.-1.'-r5s
facilities to the SaS.katch.Cvan Lcat Pool offici-a12 Iknown as Sakncatch.evn
Coo-'rantivo '.Tn.t Pr-oducers, Limited. United Grain Gro,.ers, ho-"cver,
continue to c-.:ra.te as such.

it i sicni fic:.nt that these t::o laIr.p fari.ers' coo--era.tive
grain orgi ionsdvelopein n, 3.nada during the last t.-enty years,
",o-ptcd. the gener--.l n.ethods of their -orivate co:r-oetitors, an.i did not
tST-ot to chi-'.nge the general system of ..xrrketinc. Because of this
fact they have recently been criticized by 2mny fa..nerzG in jester.
Canada -hro haIve t.,.r.-ied their attentionn to the _ooling nethod.. But,
during this time they,, have -one a great deal of educational corik nz.ong
far..ers in westernn CnaL. The- have not only advanced, the farr-ers'
k1nc,-lcdge of coo-c-rative principles ad ".actices, but h'-ve also tug:aGbt
the-m tlo regard the -roblem of cooperative .-rice ting from a regional
vie',woint rather t-han from that. of the loc1l elevator or cooEunity
v ev.-eoint. In addition, the' have trained a large nu-oer of gr.-.in
..Larketing s-eci-.lists and coo-_erative executives, man. of -hori a.re nox
a -art of the 'taff of the tiheat -ools.

The VThea.t Pool Er'. In C-.naan

The cooperaLtive :2ovceent in CnadCa. :ith v-hichi oe are :.iost
f0.2..iliar is the -.option -.nc. raid develo-r.'.nt of the -ooling method
of ..rketin$ duri:-.g the last three ya.rs. The Alberta ieat Pool, knon
as Alberta- Cooperative tThe-.t ProCucers, Lir-.ited, .ca.s incorporiat'.tC in
the Fall of 192. and began o-erations in October. The Sa3.:atch,.'an
a-& idLnitoba -.pools (incor-)ori-.cc. uric,.;:r th".- na-.es "Coopmrative Mheat




.. ... .. ...~i~'. i .. ,,,,"i..
-.. : :.:.;. :. :'
7 t!."






-10.
10O-

Producers, Liralited" prefixed by the n.:.es of the ?Provinces) began
operations in 1924. The roae year a central selling 2.gency (knoVn
offici-1ly ".a Canadian Cooperative -ncat Produ.cers, Limited) vas
established. to sell all grain received by the three provincial pools.

Atnroxirately th"irty-four million bushels of 1923 croap ere ..im
hca.ndled "by the Albert. ool1. ::ore th'.z S1,000,000 bushels were ,,
:._- ;imeh. b-- the t-ree )oGLs during t-c. cra-o -oear 192-25., -a d 'ro.- I
latelyy 212,000,000 bushels in 1925-26. The r:bcrship no\ exceeds'
140,000 "fnich is p-?roxic.tely 56 -per cent of the total f armers in .
the Provinces of i-caitoba, Sa.skatchev7-Mi anid Albert-..

From the Xoregoing "brief outline of the development of coo-)ern- v
tive grain -rheting in the United St-.tes ancL C-ri'da, it may be observet.C.'ii
,, ..4.m
that, lthcuh in e-ch country the ':ovaeent began aith the acquisitiOn, ;r
of local facilities, p-roducers in Canada later changed their vie--pon't ,
and directed' their efforts toc7rrd -erfecting coo-erative line elevateo
organi zationrc and terminal :.,.r.'kt operation. So ua.ch ea'n-hasis .-as bef. ,
laced on this latter develo-.::3nt that com-_ar.-tively feo people amo, ,
that Crnada once had % local elevator -2rogrvL. -ell under c*.-?y. This
change o- policy on the -'rt of Cziac!zn fa.-.ers laid the basis for .4:
L-nity -of action and reparec. thc ground for Cevelo-nicntscth.t hav, tuken:.
-)lace in recent -years. ,,.

Tha coo-er.ative line elevator -7'ove:-ent has been nore favorably
received rad h". rachecdl greater significance e in sa-.da, than in the
United Stc.tes. Again in recent years there pooling principle as applied.
to grain haseting ha&s been n-ore .idely :.ccepted. .,any hare questionedi.
vb, there hi.e been st-ch a difference in the rate of progress. A part'
of the azs..or is ,)roba.bly fcoun,& in the irhnrent p lysiczl conditions,
in govcra:-zent policies and. in ccon.oaic develo-ment in thc t-o countries* i
417
Different -iro&dction .and :arketin-c c:nd.itaens at different '
st-,ges of aegrizuitural develo-r.eint -irs risc to different :=.arleting .ij
s-,t,!..s. V.-ri-A.tions in t.tc a.o.'ts ar-c. LinC-s of gr.in -:roduced in ..
different sections.,, ;he :-.:znor in ",nich it moves s to -market, its uses, ...
and the rate of _LarkctinL by famcrs, .-.ve resulted in re-iona3l differ- I
ences in the marketingg mechani-=. and or:':ninri'ion. Changes Thich have ,
token ilaCg in f-.Yi-_in.G -:iacticts in dia'.ercnt sections and in different
st,-ages of our agricun.turl -.ro.ress -.e brc'&.t r.s.bout changes in the i2
-zarketing stricture. Te -use of 1., "-::veo.tcr "TCo:,'bines" illnst'r.'tes
this for it i.s bringing bout ")Cchange-c." --
L. U) .-- '>C :








- II -


The variation in -rocuction anc' ,^.rheting conditions in the
two countries has influencedL the t-)e of .,.ar..tinZ .>.'c,:i".'.'y i\.vel.:,_,'.
The Canadian cron, consistin-g a!-mo.ot -"xcuslvPy of -,ne v-'.ie-t',. of
hard s-pring -TheUt, i3 ;ro,.'n in one reioj., in ,,.ic'h production .ancl
mrarketinEg -ractices a'o t:1ta-u.?.7,dined. Tc-he bulk of the crop -mczzc.
through one city, anrid over o.i0 "ov.te to -astern and. export a i,,k: t .
It would see.i thuit this -ro, .c.ion-a^. r:-:t-outlet situation in
Canada -ould be conrucive to delojent of :a-';eLti'n .: .chi: -"_.'y ?-lIc-j
regional lines.

Thle carketig of the grain crY-) of the united S-c>.t.s, on Tho
other handi, :2reuents :!eny co-.rexiti.. nore in fact thac are usually
appreciated.

Some of the protl-ems to 16 aol-.ed, by those int-c:'ested in im-
proving the existing -ituation, are the remlt of ceor.. hlc condi-
tionr.s. The location of various -.)'oducing arca.s with res-pect to rnrket
outlets is a factor vThich influences the ch-,--racter of thc- local ar-i
central marketi,,- structure. In the South..est %.intor .7hcat region,
h eavyvlca' C.i ti',e .i:itvhils, -.-r
heavy local '.illin. 'vails, together sith extenr-Aive forvwarding of
sur-plus w.7heat direct fro.i local -oints to the C-ulf for ex'ort,
The s-oringc. heat region is further r:-..oved froi mill ar.?.d e-:ort outlets.
.1. ills centFer.d in i.inne.'.-olis absorb -.:ost of the sprin._ 'vh-eat, a-nd
space ,muEt be ?_-ov-de o o h'zld a. large -iart of the crop- for .Alling
during the enti':e Y-ear. At t.: of th Great Lakes, crc t'.
assembiinL of .iost of the duri-i -c_' s,-.ing i .heat, rye a:-.. flaz t..c.'o
place, for :-aovemcnt across the Lakes to :anrfactu'erc or for ex-.ort,
it was found necesrar;- to erect .c;,ehouss ca--able of handling; .Ouak
market loads duri.l-; '"he fall i,.-6. winter iuitil spring navi-ation ooeCr',..
With the dcvclo-:-,,ent of che:.-:- Lak; trc-/s--o-tation of grain, Buffalo has
ra-)idl,- beco,.-e im-oortn-rt ui. .li-i, center.

Climate and to-cgr&--hy are res-onsiibie for other differences be-
tween -aroducing areas. These conditions :-have :e*ltod in the -iroCuction
of rany different -in,'.s ai: var-ieties of gr-ain. he ,:Q.'ti-:i of the
of:r)ic)t:f byan Vnfe 'n exsec of.. -
*"beet cro-p in th.is country :'s greatly conlic.ted by the existence of
several distinct cla.ses tnC' :.M&;.' "arhietins. The Sc)th.est produces
largely a hard e v-inte 7heat; the .-ort:...st,"' a. hard rec. s-Dr'in, .-1he.t;
the Inter-.'iountd.im St3'.es of the :.or thr-czt, a soft ,white variety; th1-,
1. iddle Testern Se.teE, a soft red #ceat, within each of these p:ro.uc-
ing areas, aL..-,in., there ?.re diffe"enccs of variety. These different
kinds and va.rie-i' : fi-'. ''"r -y to difcre:n, 'ar.-ets,
"e~ c -.... Cr U.?3 to Ui"

The -,roblc.- is furt'ler co:--.ic:.te "by J-.iffe.e-ces in facilities
for'et- hadn atco'i.t-,:- points ."d if.-e o:elds o.f .. elains a. r t ofo
a:i-'l:ets. Th.-_e anc1.. ecr ,dif_ erences ha-e arri..en as a i-es\;..t c" more







-12-


than half a century of development and they must be recognized by those
interested in inmroving the existing, system of. marketing.

These geographical differences suggest that the development in
the United States perhaps has been a logical one at a certain stage in
our agricultural development but they should not prevent the develop- :
ment of more centralization in cooperative grain marketing machinery
in regions which produce the share grain and have similar market condi-
tions. .r1|

The differences in the two countries already discussed have a-
risen mainly out 'of differences in climatic and geographic conditions.*
They have resulted in the development of different types of marketing
agencies and in the creation of points of view which have assisted the
-developnent of Wheat Pools in Canada and hindered their development
in the United States. ..

The successful operation of terminal facilities by the cooperatil!i
line elevator companies in Canada p-oaved the way for similarly succes-nt4 ::i!
results by the Wheat Pools. American pool authorities have had no sflh '
background of experience and farmers have not learned of the possibilitieSi
in this direction. For these reasons the American pools failed to::pro'
vide these contact agencies and lost the revenue and support which it
was possible to derive from them.

Another feature contributing to the difference in degree of SU.l;,
cesss attained by the pooling movement in the United States and. Canada :"
has to do with the attitude of governments and the provision of grain
trade legislation. The experiment conducted by the M.'anitoba goverm.n..t
in the operation of country elevators, while in itself not successil,
nevertheless provided a string of country elevators for the farnmers *if
that province. It is questionable whether this development would haVe
taken place as soon as it did, had it not been for this significant
ex-eriment. This action encouraged cooperative line elevator organiza-
tion which in turn provided valuable experiences which were later used
by the Pools. .1
Th oaig of mneyby:he'v
The loaning of money by the provinces of Alberta and Saskatchewan it7
to their cooperative elevator companies assisted materially in the ac- "":
quisition of country and terminal facilities. Had these companies been 'P
required to rely up-)on capital obtained from their members, it is possible
that their development would d not have been as rapid or. their accoamplish 1
ments as great and the resulting effect on the attitude of farmers toward
future developments iaijht have been quite different. -"
::iit!
Nj+
ILK








-13-


Farmers of Western Canada found it es-:ecially helpful that their
grain legislation from the earliest dcvelopm.ent of ,7h,-at -oroduction
there, placed the marketing g of the crop. u-.,der the jurisdiction of
federal authorities. Uniform grain trade legislation has been adopted
and has done much to facilitate the development of large cooperative
organizations, inasmuch as trade practices have been standardized. As an
illustration of the effect on the recentt wheat :)oel movement, it is of
interest to note that uniform :-ates for the han(Iling cf carlot grc'in h-.-e
provided by the Canada Grain Act. This assisted the pools in drafting a
contract acce-otable to all elevator companies.

The credit structure of Canada has been ..a.ticaularly favorable
to the development of large-scale cooperative organizations. A branch
banking sy,,stem -prevails which enables the mobilization of larger *.-iounts
of credit than is possible where the banking sister, is one r:.ade up of
independent local unics, as in the United States. The farmers grain
marketing organizations have had little difficulty in obtaining the
necessary credit to insure the success of their operations. A feature
of the Carnadian Za.-,:ing Act which permits the e.:-ansion cf the circulating
medium to the extent of 15 per cen.t during the crop- handling season, also
facilitates th.e nove:.ient of the crop; and adds to the available credit
needed by the coop-)erative an0. private handlers of grain.

The effect of t.he successful operation of the Canada T1heat :Eard
of 1319 as had an i.:.ortant bearing on the org-nization an4, o-ercation of
the wheat pocls in Canada. In its .:sthod of doing business, the ,heat
Board was essentially cooperative in nature -nd instituted methods which
have since been adopted by th.e coo-..)eratire organizations. This is particu-
larly true of the contract -oith elevator co:.panies for the handling of
grain at elevator points. The p-resent .-hea.t p-ool contract is, in its
essential features, nodelecd after the contract drawn up a-nd success ..,ly
used by the heat Board in l1l9.

Different Viewrpoint Devdloned

The foregoing conditions have ._ded to favor the d,-relozment of
,Wheat Pools in Canada. Differernt, d c.-.evhat less favorable conditions
have -prevailed in the Unite. States in --.r.y cases. I-.x.ortant as ,..nhy of
these differences are, there is jet another of greater si-nificanc7 already
briefly referred to but worthy 01 further consideration. In the United
States, with the local elevator e.z the -unit, the co.iulty viewpoint
nas been developed. Far.-.crs have inver-,ed their .:onc.y in local organiza-
tion, and man-y of then a.rc- or '-i^.ve b `..r. directorss of the local elevator
comp-any and havw. te:2en more or less `rin.e i guidingg its destinies. Atten-
tion in the com-L.unity has f3cuser on its activities to the exclusion, in
many cases, of the larg-er field of grain -..arzeting. The local manager has
been -proud of his oositio;- and the autho-L-ity e::ercis G- in connection with








- 14-


his duties. It-has appeared that his interest rould be furthered by de-
veloping his organization strictly along cormnunity lines. Friendly rival-
ry has existed betaecn communities in striving to out do one another in
the support and conduct of a local enter-rise. These and other character-
istics have distinguished the develo-i.ent of local elevators in the United
States.

The development of Cooperative Line Elevators in Canada has pro-
duced a different vier/point. Shareholders in these organizations invest
their money in a provincial or interprovincial organization, not in a g
local elevator, although a local association ic formed wherever an elevator .
is acquired. The operation and managementt of .local elevators, however, is
under the control of the central organization. A local association acts "'
only in an advisory capacity and has no authority in the management of the '
locda elevator but the local association sends its re-oresentative to an-raL a "
and s-ecial meetings of he com-iany ih-ere he meets several hundred other :
delegates from widely scattered producing areas. In these meetings the. ;i
discussion, dealing as it does .ith a coz.pany of Provincial or interpro- l
vincial nature, directs the attention of delegates to this broader aspect i
of the subject. *]|

That there are unquestionably many arriu.ents in favor of the ..
local elevator -olicy c.do--ted i- theTUnited States is fallT appreciated. ,,,
It has been h.eld. by some th-.t the Anerica.n plan is more democratic and .,
better suited to the ideas of the -eo-ole and that the reason "7hy coo-et- iiiig
tive line elevator coa-nanies, although. experimented with in the -ast andz 4.
now being successfully operated in a coz'.naratively sallI way, have not
been generally endorsed is due mainly to this cause. There is merit in
this vie,-oint but there is also much to be said in favor of the Canadian
plan, "articule.rly '-hnn it has been ada-ted. to meet the competition of
the trade dtilch is similarly organized. However, the advantages or dis- ,:i;
advantages of th:e t-ro -)lans cannot be debated in this paper thich is &e-
voted to the discussion of what has taken place -and to analyzing some of 3
the effeccts of the policies eadoted in the t-eo countries. It is believed., 'd
hoevr, that uch of the difference in d"eree of accomplishment in the '1
two countries is due to the fun&n-icntal difference in vie:'-.oint ,ahich has
been dcoveloned over a -?erio. of more -han 20 years. .'!

Whether the -)ooling ,rinci-1e as now, a--lied to coo-perative mar-
keting of Grain r-ill be permanently acceptable to farmers has yet to be
determined. The significant points in the develo-ment of cooperative
grain r-arketing in these tro countries are that the Canadians have suc-
cessafully de-cloped large-scale organizations, regional and national in
scope, whereas in the United States our efforts in this.direction have .
been mu--ch less s3'cccssful. The cases it is believed, are traceable to :.
the differences already -pointed out and particularly to the characteristic i
famr-er-ccvator develo-_-_ent in the respective countries -hiich in this i|
countr:- has '.e. to the coru.ra.nity vie'n)oiut and ,7hich in Canada has led
A .








-15-


to the vie'.Tpoint of th-- .heat--roducing orrl. as a vhol.:.

It is not -iy -)ur-)ose in th-is -O-eer to offnr to 6rai-. produccrz
a ready-i:.ade cooDocrativ*. .iir,:otin& In. I do think, hce-ever, tha-t
r'e recognize thc nrced of ccntzalization in tihe control C.nl o-:.ra'-ion
of country annl tenw.inrl elevator facilities by :roducersf or- -nizo-
tionz and also tie dresira')ility;, front the sta:id.-:.int of, thle -1ro''-ic'rs,
of the influence of coo-.-ative o:j -wization in t distribution tr
se'.ling of Lrain. In th'es t7o respect. it sc-ms to mec that the pr''b-
lems of all coo-ierative r;rain marketirg c-.-.'nizatiois, v:hether they
operate as ar;.r elevators, as ,ol e.ssociation-, or as ti
corilrission agencies, are much the same. The objective- of all these
organizations is to scrvc the grain farmers. It should be obvious
that tha- cozn do this 1nost effectiveIy onl' *:.on.. ant ..r...s, ,r
sj., fro.:-. te.c cla'-h of er-or.nalities or differences in .-etho.:L,
arce forgotten. T-e tasl._ is large e:nouih to learc all the exDeri nce
and ability of .ll coo-).-,rativ..e %-o' -.s cn;.cd. in the ;.,arc:eting of g-ai-:.




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