Annual Report
of the

FLORIDA CITRUS

EXCHANGE

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General Manager

1938-39

-

Annual Report

1938-1939

During the summer of 1938 the Florida Citrus Ex-
change purchased the building pictured above, situated
at 110 Oak Avenue. It was formerly used as district
headquarters of the Standard Oil Company. The Ex-
change had moved into this building prior to the opening
of the season now closing. The new quarters have
proved to be as desirable as originally anticipated. Closer
coordination of all departments has been made possible.
Annual outlay for housing purposes has been reduced
by this move about 40 per cent under the annual average
of the past decade.

FLORIDA CITRUS EXCHANGE

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OFFICERS, DIRECTORS AND HEADS
OF DEPARTMENTS FLORIDA CITRUS EXCHANGE
SEASON 1938-39

C. H. Walker'", President and Chairman of the Board .-----. Bartow
A. W. Hurley, First Vice-President ----___ Winter Garden
W. M. Moseley, Third Vice-President Fort Pierce
L. L. Lowry, Fourth Vice-President Winter Haven
C. C. Commander, General Manager Tampa
Fred S. Johnston, General Sales Manager .-. Tampa
L. D. Aulls, Traffic Manager Tampa
S. L. Looney, Treasurer-Comptroller Tampa
O. M. Felix, Secretary Tampa
Counts Johnson, Attorney --__--. Tampa

Sub-Exchange Director Address
Indian River H. G. Putnam Oak Hill
Florence W. C. Van Clief Winter Haven
Fort Pierce W. M. Moseley Fort Pierce
International -....--- L. L. Lowry Winter Haven
Lake E. F. DeBusk Gainesville
Lake Apopka.--_.--_. -_A. W. Hurley Winter Garden
Lake Region .----.F--- Fred T. Henderson Winter Haven
North Pinellas ---_ S. A. Whitesell, P. O. Box 179-----..-..... Largo
Orange J. C. Palmer Windermere
Pinellas John S. Taylor, Jr Largo
Plymouth Wm. G. Geier Windermere
Polk D. A. Hunt Lake Wales
Scenic C. H. Walker Bartow
St. Johns River_ ..--- R. J. Kepler, Jr DeLand
West Coast W. W. Raymond Alva
Winter Haven..----.--H. E. Cornell Winter Haven
*W. L. Tilden, Orlando, resigned as president and chairman of the Board on April
21, 1939. C. H. Walker, second vice-president, was elected to serve the remainder
of the term.
.. *..: *.

: .. .

FOREWORD

In contemplating the detail of the service performed by the Florida
Citrus Exchange as outlined in this report, it is important to observe
that these complete sales and industrial functions are performed at a
cost below the mere sales charges of competitive operators in the indus-
try. In other words, the grower-member of the Florida Citrus Ex-
change receives the sales service of the most extensive and productive
sales organization available in the industry at lower cost. In addition
he obtains as a plus value assistance in cultural, law, traffic and adver-
tising matters designed to protect and enhance producer interests. No
competition offers as much.
The Florida Citrus Exchange organization is owned cooperatively
by about one-third of the growers in the industry. Its concern in
industrial progress, therefore, on behalf of the grower is real and sin-
cere. Whether or not a matter will benefit the grower is the sole stan-
dard of evaluation governing Exchange support or opposition.
Broadly speaking, the organization platform for the industry in-
cludes

1. Preparation of the industry's products consistently meeting
uniform standards of grades, assuring trade and consumer
acceptance and confidence.

2. The equalization of freight charges so as to make possible a
balanced distribution to all markets available to Florida citrus
exploitation without carrier penalty.
3. Volume control of the crops in line with existing demand at
price levels permitting reasonable profit to producers and co-
ordinated with similar control measures exercised by other
citrus producing sections feeding American markets.
4. The development of by-products, extra-ordinary channels
of trade, plus the expansion of normal fresh fruit trade chan-
nels so as to increase the flow of Florida citrus through them.
5. Adequate research to determine additional uses and more con-
vincing sales and advertising material by means of which
Florida citrus demand may be increased.

Increased membership in the Florida Citrus Exchange, because of
the advantages gained through greater volume of membership and
fruit, would lower the cost of services performed still further and
strengthen the organization in its constant efforts to obtain stabiliza-
tion in the industry for the producers.
3

ANNUAL REPORT

SEASON 1938-1939

The season of 1938-39 oppressively illustrates the costly inadequacy
of Florida's citrus marketing machinery to accommodate at a profit
the increasing State production.
The industry is in the doldrums of constantly low price levels. It
is a situation warned against years ago by the Florida Citrus Exchange.
Then, as now, industrial organization, permitting the use of ordinary
sales fundamentals in marketing Florida citrus, was urged as an only
solution.
The Merchandising Problem
The problems of marketing Florida citrus fruit differ little, if at
all, from the basic problems faced in the sale of any other commodity
in volume production. Hundreds of successes-and failures as well-
in commerce have defined very clearly the fundamental merchandising
requirements for profit. They are three:
1. Prepare the product uniformly and attractively and with stan-
dards of quality consistently maintained proportionate to the
price levels sought.
2. Offer only those volumes of merchandise which will yield the
desired price levels, diverting to non-competitive by-products
channels or destroying any surpluses beyond these required
volumes.
3. Increase the demand through advertising intelligently pre-
pared and timed to meet sales requirements.
All successes in "big business" rest upon the operation of these three
fundamentals. And no one may deny that Florida citrus today is big
business-the biggest, other than sale of climate, in the State. As a
big business, therefore, success to the owner-producers of the Florida
citrus industry requires observance of these three basic factors.
Furthermore, it should be observed that no one of the three is suf-
ficient unto itself. Advertising a product which is poorly prepared,
meets no standards of quality or pack, is a waste of money and effort:
the temporary demand it stimulates disgusts the consumer and destroys
his confidence, producing a negative kickback. No matter how care-
fully the product may be prepared for market, if it is unloaded in
quantities beyond that which normally can be consumed, it cannot
bring the price desired. Obviously, the three are closely related and
interdependent.
Exchange Policies
It has been a realization of these fundamental truths which has
given life and action to the Exchange policy supporting the develop-
4

ment of their use in the marketing of Florida's citrus crop. It has
believed and still believes that voluntary cooperation of growers and
handlers in obtaining a common objective is the ideal manner in which
these ends may be gained.
Experience in the California industry, however, where grower co-
operation is far more advanced than in Florida, has demonstrated that
less than 100 per cent-practically unobtainable-grower cooperation
cannot handle the market control necessary. Leaders of the California
Fruit Growers Exchange, which controls an average of 75 per cent of
the oranges and 90 per cent of the lemons of that producing section,
frankly admit that Federal and state legislation has been indispensable
in the regulation of their crop so that it could be merchandised intelli-
gently.
With full knowledge of this situation in California, therefore, the
Florida Citrus Exchange has kept in the leadership of the creation and
improvement of legislation of this character, both Federal and State.
Progress is being made, however slowly, in the origination, refinement
and operation of these laws.

Control Through Government
The entry of agricultural crop control through governmental
agencies began with the creation of the AAA in 1933. This interfer-
ence with the "rugged individual" who persistently seeks to grasp a
real or imaginary advantage at the expense of the group came to be
regarded as wholly democratic. Control measures authorized by such
laws may be invoked generally only when desire for them is expressed
by 65 per cent of the growers and more than 50 per cent of the hand-
lers determined by volume. It represents a modern and effective
method of bringing the sale of an agricultural commodity in line with
the second merchandising requirement above described-that of vol-
ume control in line with existing demand.
The first and third merchandising requirements have been met by
the Florida citrus industry with reasonable competency for a number
of years. Either through application of State or Federal statutes, ma-
turity standards, package restrictions, the normal policing control of
unscrupulous operators, all designed to improve the product before it
is placed in the channels of trade, has been obtained. The third
requirement-that of increased demand-has been met through the
creation of a substantial advertising program which has been carried
on for the past four years.
In spite of improvements made from time to time in this legislation,
it has failed because it is incomplete. Obviously, here is definite proof
that observation of two of the fundamental sales requirements are use-
less without the third.
The problem, simply stated, becomes one of holding the frequent
production excesses of nature in line with the then existing market
demand so that producer losses will not be sustained. In other words,
crop proration is sought.
The economic and marketing advantages of relating supply to

demand in order to obtain a correspondingly desirable price are too well
known to be questioned. Frequently, however, full benefits of laws
seeking to create this advantage for the producer cannot be obtained
because of obstructions thrown in the way by self-seeking minorities.
These operators, possibly with sincerity, strongly oppose such measures
and are able to influence uninformed grower opposition by prating
of "constitutional rights of the individual." Nor is this minority
opposition limited exclusively to the Florida citrus industry.
In spite of it, however, legislative control of crop movements is
becoming more commonly used throughout the country. Apparently
it forms Florida's only opportunity to stabilize her citrus industry. It
is important, therefore, that the legal reasoning behind compulsory
prorate regulations be appreciated and understood. They have been
discussed ably by E. A. Stokdyk, economist of the University of Cali-
fornia. A quotation from his pamphlet*, originally written by Chester
Rowell in the San Francisco Chronicle, clearly illustrates the soundness
of prorate theory:

"It is all a question of "I" or "We." If there is danger of other people
drawing their money out of banks, "I" would be better off if "I" drew all
my money out first and put it in a box. But if "we" try that, we cannot
get our money, and it would do infinitely more harm if we did. So laws
have to be passed to prevent each of us from trying to do separately what
it would be self-destructive for all of us to do together.

"Similarly, among banks themselves. If one bank is in a specially for-
tunate position of liquidity or location, it might be an advantage to it sep-
arately to grant its depositors more privileges than banks generally should
give. It might thereby, if it were the only bank, secure advertising by
which it could later get business for itself, away from other banks. But
if one bank is permitted to do this, competition will compel others to try
it, and then none can do it. So again, a law has to be passed to prevent
any bank from doing separately what it would be destructive for all to do
together.
looking beyond this emergency to the permanent conditions to
follow, it should be recognized that the age of "I" is gone and the age of
"we" has come. The slogans of individualism no longer fit the facts. It
was once true that if each of us did what was best for himself the sum of
these separate goods was the common good. Competition was the life of
trade, and individual initiative, in the hope of personal gain, was the stimu-
lus. Small business sought to grow large and each ambitious employee
hoped to 'go into business for himself.' Because these things were once
true, our fathers formulated them into phrases, which we still echo."

Grade and Size Prorate Inadequate
After doggedly fighting the issue from July of last year, the Flor-
ida Citrus Exchange, assisted by the growers' organization, Florida Cit-
rus Growers, Inc., and the Florida Citrus Producers Trade Association,
gained the use of a Federal Marketing Agreement in the Florida citrus
industry. It obtained it, however, only with provisions for a grade

*Economic and Legal Aspects of Compulsory Proration in Agricultural
Marketing.

and size prorate. The futility of this type of prorate in operation
amply has proved the contention of the Exchange that a volume pro-
rate was necessary.
To prevent a costly recurrence of such inept and delayed handling
by Federal marketing machinery, the Florida Citrus Exchange has
joined with the growers' group in supporting a State Marketing Agree-
ment Act now being considered (May 25) by the State Legislature.*
It offers greater possibility of controlling crop movement so as to
benefit all growers than any bill yet designed or considered. Under
its provisions the majority of the industry will be able to control intra-
state movement in harmony with and similar to the control which
might be exercised over inter-state movement under the Federal Mar-
keting Act.
This State marketing pact will complete the structure necessary
legally to hold volume movements profitably in line with demand. The
efficient administration of this Act will convert the present attempts
to increase demand through advertising from waste to a profitable
investment. It will make worthwhile the industry's continued at-
tempts to improve its standards of grade and pack.
A Most Disastrous Season
Because of this failure of the industry to hold its volumes shipped
to market in line with available demand, the season no\v closing will be
recorded as one of the most disastrous in history.
No grower needs to be told that he has suffered loss of revenue
this year. His bank balance is too convincing a reminder of that fact.
The full extent of the loss of crop income generally sustained by the
industry and by the State can be appreciated only by a study of State
averages by varieties as recorded in auction sales.
Consider, for example, interior seed and seedless grapefruit packed
in standard boxes. The weekly all auction averages, brought back to
on-the-tree returns as recorded in the graph on the following page, show
that returns receded below the cost of production during October and,
with the exception of seedless grapefruit for about ten days during the
early part of November, never rose above that cost of production.
Indeed, seed grapefruit averages frequently fell far below the point
where they could yield any returns on the tree whatever.
A similar record of all auction orange sales averages packed in
standard boxes reveals heavy losses to the grower in this commodity
also. They have not been, however, as severe nor as continuous as
grapefruit losses. They have been relieved by the steady and profitable
rise since the Valencia movement started.
It is interesting to observe the infrequency with which Florida
on-the-tree price averages pass the tree returns to California growers.
Here is added proof of what Florida could do if the industry was or-
ganized to merchandise its crops (see graph, next page).
*Defeated by a 17-17 vote in the Senate May 26, after passing the House.

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Analyzing the situation from still another viewpoint, we find that
uncontrolled volume increases in the Florida orange crop today are a
far greater factor in determining profitable price levels than the in-
come of those engaged in industry-the ultimate consumers. Nor-
mally, increases or decreases in Florida orange volumes are absorbed
by the markets in direct ratio to their capacity to pay.
This has been true during the past ten years, with the exception of
the last two seasons. Note in the chart below that income of individual
workers has receded somewhat during the past two years but, because
of the tremendous increases, prices have fallen far more prcipitously.
It should be observed that the past two seasons record a departure
from the normal for the preceding eight years: as income declined,
price averages declined comparably regardless of minor crop volume
fluctuations.
Those declines were beyond the ability of the Florida citrus industry
to control: if people did not have money to pay for oranges they could
not buy them. During the past two seasons, however, they have had
money to pay for Florida oranges but the Florida industry has so mis-
handled its crop that it has failed to hold prices in line with income.

FI)RIDA ORANGE PRICES and WINDINTIAL INCOME

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A National Citrus Problem
In considering the economic advantages of holding volume in line
with demand it should be remembered that solution to the problem is
not found solely in the establishment of control in any one given citrus
producing section. It would be useless for Florida growers to cut
their orange shipments by one-third without a similar parallel action
in California. Obviously, the orange crop from that State is sufficient-
ly large to permit shipments which would more than offset any indi-
vidual restricted action on the part of Florida.
Similarly in grapefruit, Texas has grown to be almost as large a
factor in the grapefruit market as Florida from the standpoint of
volume. Under present conditions, Florida could withhold half her
crop, only to hand Texas growers an undisturbed marketing advantage
by just that much.
The problem of crop control, therefore, is one which must be
developed in each producing section and operated in harmony with
predetermined parallel action in all areas producing the commodity for
American markets.
The true significance of this condition is apparent upon examina-
tion of the total United States orange and grapefruit production
graphically illustrated in the charts below. Orange production has
increased from about 33 million boxes ten years ago more than double
to about 75 million boxes for each of the last two seasons. Grapefruit
reflects an even greater increase, from eleven million boxes to 41 million
-an increase of nearly 400 per cent.
Undeniably, the citrus marketing problem as related to volume
control is a national problem as well as sectional.

UNITED STATES CITRUS PRODUCTION
IltlON CRAPI rr /O ORANGES
U 'S ;RAPFRi T stzrt5cX (mwiArUD t miitmn ismmlrs.As)
nr,,ru~rwrus

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Furthermore, this sales problem is one peculiar to citrus, particularly
oranges and grapefruit. Competitive fruits reflect no such radical
increases as recorded in total citrus crops during the past twenty years.
Indeed, apples and peach production show declines. Other competi-
tive fruits, such as grapes, bananas, plums, pears, et cetera, have re-
mained almost stationary in voume.

Citrus alone stands as a major agricultural production phenomenon
of the past two decades. Note the illustrated contrast of these data
in the graph below:

UNITED STATES FRUIT PRODUCTION
Computed in pounds per capital; base: ear annual average period trom 1919.
PRODUCTION SR.AYW. YR.AYE. Y. AVY. S YR. AVE.
es.APR crAPA 19/9-23 /I24-2S 1929-33 /P934-39
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EXCHANGE SERVICE
The conditions under which the Florida citrus crop has been moved
during the past and preceding seasons have been discussed. It is a
record of distress which can be relieved by organization and coopera-
tion between growers and grower operators and between producing
sections.
It is a marketing situation, however, which has confronted all
operators in the industry alike. It will continue to do so. Only those
will survive and continue uninterrupted grower service who best are
able to get the market for the fruit handled at the least cost for the
service performed.
From the grower's standpoint, this reduction of service costs be-
tween the tree and the consumer has become an imperative economic
necessity. He must obtain as big a percentage of the gross delivered
return for his crop as is possible if he is even to come close to recovering
production costs.

Sales Costs Reduced
In recognition of the approaching necessity for better service at
lowered cost, the Florida Citrus Exchange some fifteen years ago began
to concentrate its efforts on the sale of fresh fruit for its members.
Concurrently, it began to withdraw from operations which had no
direct bearing on fresh fruit sales.
As a result of this policy, the cost of Exchange service has been
reduced steadily.* (See graph below '

EXCHANGE SERVICE CHARGES
Relred toJ oaJni vehas of frnH handild.
Keys P-private lds

SARl h-llk aa re vol in bl.
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*The retain fifteen years ago was 13c for Exchange services, 4c lor
advertising and an average of 3%c for sub-exchange services on both
oranges and grapefruit, making a total of 20%c. During 1938-39 the
retain on oranges and tangerines was 9c and on grapefruit was from Sc
to 9c, depending on price, with an average per box of 6.89c.
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The total cost of selling fruit for the season through April 30, 1939
was slightly in excess of 6c (see table below). Direct sales costs were
about 3c, with advertising, dealer service, inspection and field, law,
traffic and like departments accounting for most of the balance.
The detail of this information is available from an examination of
the following table:

FLORIDA CITRUS EXCHANGE
Revenue, Expenditures and Related Per Box Costs
September 1, 1938 through April 30, 1939
Monetary Per Box Selling Cost
Values (A) (B)
Revenue
Net Assessment from Sale of Fruit .............-- $45,448.72 7.91 6.38
Other Income ----......... 36,624.40 .63 .51
Total Revenue $492,073.12 8.54 6.89
Expenditures
Sales Department
Tampa $ 72,117.39 1.25 1.01
Northern Offices ...--..-....... 140,610.84 2.44 1.97
Total Sales 212,728.23 3.69 2.98
General Department
Advertising and Dealer Service ....---.......... 78,134.19 1.36 1.09
Inspection and Field ---............... ---........-... 43,876.81 .76 .61
Other Departments ---. 89,886.54 1.56 1.27
Total General 211,897.54 3.68 2.97

Total Sales and General Departments .-......... 424,625.77 7.37 5.95
Other Expense-Miscellaneous ------..... .....-... 15,322.82 .27 .21
Total Expenditures 439,948.69 7.64 6.16
Net Income for Period $ 52,124.43 .90 .73
(A) Based on 5,756,648 boxes on which retain was collected.
(B) Based on 7,139,732 boxes recorded as shipped.

Packing House Cost Reductions Necessary

These extensive reductions in the cost of sales operations are insuf-
ficient in themselves to provide some degree of relief to the grower. The
costs of picking, hauling and packing, together with other field ser-
vices, must be reduced in proportion.
Many associations have taken substantial strides in this direction
and are furnishing field and packing services to their grower members
at far less cost than in previous seasons. The use of more efficient
equipment, increased volume, improved management, et cetera, largely
have been responsible for association reductions.
In some instances, however, association costs for any of several
reasons which cannot be corrected may not be brought in line. It has
been the policy of the organization as a whole, therefore, to study each
individual situation on its merit and close the association by absorbing
its volume in other associations or merging it as a unit into neighboring

packing facilities. In every move of this character improved service
to the grower is the desired factor.
Furthermore, a steady rise of material and labor costs since 1934-3
has more than offset the reductions which efficient management has
been able to obtain since that time in the indirect and fixed charges
of the house.
For example, based upon the per box operating costs of- oranges
packed in standard boxes, eight large associations on which accurate
information is immediately available have seen material rise over
2 2c and labor increase I V2c-a total of 4.12c per box. Reductions
in indirect and fixed charges, to offset this increase, amount to but
3.58c per box-a net increase of .54c in packing oranges in standard
boxes (see table below). Similar increases may be noted on other
similar bases of comparison.
Here, again, a cash value of organization becomes apparent. An
unorganized industry is unable to resist the price increases of organ-
ized supply manufacturers and labor. By the same token, an unor-
ganized group cannot pass along to the trade and consumer such in-
creases as may be incurred.

CONSOLIDATED STATEMENT OF OPERATING COSTS
Eight Large Associations
Based on Oranges-Standard Boxes

Per Box Cost Net
Expense Item: 1937-38 1934-31 Increase Decrease Change

Material ..2.. .. 29.07 26.41 2.62
Labor (Direct) ..... 11.11 14.01 1.10
Other Direct (Pow-
er,, Light & Water,
Repairs, & Misc.) .... 2.12 3.31 1.19
Indirect ...-.... 4.12 6.18 1.66
Fixed .... 5....- .15 $.88 .73
Total ... 56.37 11.83 4.12 3.18 .14

Many houses are reducing grower operating costs still further by
the use of grove service departments. The association purchases and
operates for the benefit of its members spraying, dusting, cultivation
and other equipment. Some of the larger associations also have built
and are operating their own fertilizer and insecticide mixing plants.
This work, done under the immediate and constant supervision of
experienced horticulturists, has brought to the small grower service
and expert care at a cost otherwise available only in large grove oper-
ations. An additional advantage to the individual grower and to the
organization as a whole is the improvement which this class of service
provides in the quality of the fruit handled by the association. A
greater percentage of these crops grade out as number one quality and
are more uniform in character.

SALES AND ADVERTISING
The Florida Citrus Exchange for the present season through May 16
has handled a total sales volume 13.2 per cent greater than for the
same period last season. The comparative detail arranged by varieties
follows:

TOTAL EXCHANGE SHIPMENTS
By cars, rail, boat and truck, as of May 16.

SEASON Oranges Grapefruit Tangerines Totals
1938-39 .. 10,718 7,342 1,742 !9.RO2
1937-38 ... 11,148 5,156 1,186 17,490
Increase ... -------- .. .. ------- ..---- .. 2,186 5 6 2,312
Decrease ... 430
Percentage of Increase-13.2%

The slight decrease in oranges for the period will be more than offset
by the end of the season. Market conditions have made it necessary
to withhold shipments of Valencias for rising markets. The Exchange
followed this policy and today controls over half of the remaining
Valencia crop. It is handling these volumes satisfactorily at high price
levels.

Another factor which will increase shipments this season over last
considerably is the greater volume of late bloom fruit both in oranges
and grapefruit. This fruit will extend shipments probably through
July.

Private Sales Increase
The 2,312 car increase of total volume handled by the Florida
Citrus Exchange as of May 16 compared with the preceding season
was sold mostly at private sale. A total of 2.264, or 48.5 per cent,
more were sold at private sale over the total for the same period of
last year.

Auction sales, on the other hand, were increased only 665 cars, or
7.5 per cent, over the same period of the preceding season.

The detail of this substantial f.o.b. sales increase is listed in the
following table.

Auction and Private Sales Shipments
made by the Florida Citrus Exchange
as of May 16
(Carlots) Percentage
1938-39 1937-38 Increase Increase

Total Auction Sales ... .. .. ..... 9,499 .8,834 665 7.5
Total Private Sales ..... 6,931 4,667 2,264 48.5
Total Sales Through Sales Department ...--...16,430 13,501 2,929 21.7

It should be noted in studying these data that the total of 16,430
cars does not include sales made locally by associations, cannery sales,
government purchases, or tree sales. The lower total represents only
that fruit actually moved into interstate commerce by and through
the Sales Department.
Reliable estimates indicate that the total shipments through the
Florida Citrus Exchange at the close of the season will exceed 23,500
cars. No material difference, however, will be noted in the ratio of
increases obtained in private and auction sales.

Exchange Gets Premium
In selling fruit any legitimate operator can get the market for the
grades and sizes at the time the fruit is sold. Superior grade and pack,
extra sales service, reputation of brands and trade-marks-in other
words, all factors creating trade confidence-bring a premium above
the market and determine the character of a sales agency.
The only basis on which such comparisons may be made accurately
and in detail are from the public records of auction sales. Based upon
these data, a comparison of Exchange sales averages by varieties and
containers as compared with all competition, reflects just such a prem-
ium over the market. It should be observed that this higher average
return, while possibly not appreciable in percentages, represents a
weighted season average and for total volumes, therefore, amounts to
substantial total increases in returns.
Observe in the chart below that these premiums range as high as
eighteen cents per box as an average premium obtained by the Exchange
over all outside competition in the sale of pineapple oranges. Other
comparisons reflect similar favorable returns.

I I I I I I I
FLORIDA AUCTION AVERAGES BY VARIETIES
o., Exichage ompn-red wlh Compeitit Sale
I for eason 193849 through May 1, 1939.

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ST0U SDACE ST. DRPU E STO. SAUCE STO. SAUCE *RI RCE TOGSUE
ROURD ORAUESf PUIERIPVLEORANG VALENOAORANGESJ SEED GAIIFRUIT SEEDING GRAIPEI TAsM

I

In this connection, if it were possible to make similar comparisons
reliably on f.o.b. sales, it is believed that Exchange margins would show
up to even greater advantage. It is generally conceded that the Florida
Citrus Exchange receives the refusal of at least 75 per cent of the f.o.b.
business available to Florida fruit at given prices. Much of this business
is lost to competition because of the refusal of the Sales Department
to confirm sales on cars of members' fruit as long as there is a possi-
bility of getting even a nickel more.
This situation accounts for the fact that Exchange marks set the
standard for Florida fruit in practically all markets. Exchange quota-
tions, as quickly as learned by competition, are used as a basis from
which prices are cut in attempts to close the business.

Export Business Increased
Direct shipments to Europe from Florida in recent years have been
dangerous from an exchange and credit standpoint. Yet occasionally
during certain periods of the Florida season, opportunity for profitable
export of Florida citrus arises. Usually it is in direct proportion to the
availability and quality of crops from citrus producing sections which
normally feed European markets.
A marketing opportunity of this nature occurred during the
present season. The Palestine crop failed to give good satisfaction.
Spanish oranges, because of the war, were not available for shipment in
volume and the Brazilian crop had not matured sufficiently early to
interfere.
Maintaining constant touch with these conditions, the Florida
Citrus Exchange saw an opportunity to place substantial volumes at
export. The Sales Department appointed new brokerage connections
on the continent and completed arrangements whereby American cred-
its were established and payments made before the fruit left Florida
ports. In this manner one of the greatest risks of export business was
avoided and no losses were incurred. Frequently the averages for these
sales exceeded those of domestic markets for comparable grades and sizes
on the date of shipment.

Dealer Service
Advertising activities of the organization centered on converting
the demand stimulated by the commodity advertising handled by the
Florida Citrus Commission to Exchange marks and brands. This work
took the form of dealer service with the usual installation of displays
with accessory point-of-purchase advertising material. Where the
retail outlet was large enough and a sufficiently important buyer,
demonstrations frequently were made.
A total of 23 men were employed through the season on this type
of work. Several photographs of typical displays installed by these
men appear on the following page. It was not unusual for display and
demonstration work of this character to increase the sales volume

I

1.-Holbrook Market, 13640 Fenkell, Detroit, Michin. This demonstration
and display increased the week-end sale through this out-let 20 boxes of
Seald-Sweet oranges and 9 boxes of Seald-Sweet grapefruit to a total at
30 and 15 boxes of each variety. 2.-Ackerman Bros., Archer Avenue,
Chicago, reflects normal weekly sales of 25 boxes. This display increased
the turn-over to 60 boxes priced at 25c per dozen. Here was an lire
of 140 per cent. 3.-Seald-Sweet seed grapefruit demonstration booth Asea.
Market, South Bend, Indiana. 4.-DIsplay window of Seald-Bweet oranges
in the Arcade Market, South Bend, Indiana. 5.-This display at Wrigley's
Market, Grayton & Harper Avenues, Detroit, contains 22 boxes. It sold 35
boxes of Seald-Sweet oranges in a two-day period as against a normal sale
of five or six boxes. &--This display of Seald-Sweet seed grapefruit in the
Liberty Cash Grocery, Union Avenue store, In Memphis. Tennessee. sold
35 boxes in two days. Sizes were 54s and 468 mixed.

through the retail outlet serviced in this manner as high as 300 per
cent.
This display, demonstration and trade contact work was supple-
mented in selected markets by newspaper, spot radio and direct-by-
mail campaigns as circumstances required.

Trade-Mark Featured

All of this advertising, following the pol-
icy established by th Board of Directors
last season, concentrated upon the promotion
4. Z of the trade-mark "Seald-Sweet" as stamped
.us.- on the fruit. Typical and consistent use of
J this copy thought as featured in the advertis-
M r ing appears at the left.
This phase of the advertising work should
be thoroughly understood by our grower-members and by association
directors and managers. It is based upon the premise that the trade-
mark upon the skin alone can prevent substitution and provide identi-
fication for the consumer in these wrapperless days. To obtain full
benefit from the sales and advertising work of the organization, it is
strongly recommended that each association arrange its house operations
to permit branding the trade-mark on the skin of the fruit. The stress
of competition has created an increasing trade demand for fruit so
identified. The universal practice of this application throughout the
organization, plus a constant adherence to honest grading standards,
will do more than any other one factor to make possible the attainment
of even more satisfactory sales.
In this manner the product itself becomes its own' advertisement.
The customer is enabled to repeat the search for and purchase of sat-
isfactory quality by looking for the trade-mark. Finally, because of
the heavy total volumes handled by Exchange members, the effect of
such advertising could not be equalled in any manner by competitors.
Special Campaigns
Seed grapefruit comprises about 65 per cent of the Florida crop. It
is the only fruit which the canning industry can use successfully in
packing sections; seedless fruit sections disintegrate and become mushy
after canning. The rapid rise of Texas volumes, which are over 90 per
cent seedless, and the natural inclination on the part of the consumer
toward the purchase of foods requiring a minimum of preparatory
effort has swung demand to the seedless varieties. During the past
season seed grapefruit could not be sold at any price in some markets.
This condition left canneries as the only substantial outlet for 65
per cent of Florida's grapefruit crop. This supply was far in excess
of cannery demand and resulted in an average price level through the
season for grapefruit diversions to canneries netting on the tree less
than the cost of production. Frequently sales were made to canneries
by small growers and operators as low as 10c per field box.

There is a distinct danger to the entire grapefruit industry in the
sale of the raw product at such price levels to canneries. There is no
question but what canned grapefruit and grapefruit juice are frequently
directly -competitive to the fresh product. The canner who has been
able to obtain his raw product at such low prices acquires inventories
of finished goods which, because of competitive conditions in his own
field, are moved if possible at any price assuring a profit regardless of
the effect such low priced canned goods has on the industry as a whole.
Frequently during the season, No. 2 cans containing the sections of
about three size 54 grapefruit (approximately one pint in volume)
were retailed as low as 3 cans for 25c. Canned grapefruit juice was sold
as low in some instances as 5c for a No. 2 can.
It is quite natural that such a low priced product in the can would
have a direct and depressing effect on the fresh fruit market. It com-
pletes a vicious marketing circle, the net result of which as far as the
grower is concerned is disastrous.
Growers supplying canneries are not getting the price to which they
are entitled for their grapefruit. Because of this low price level and
the tendency of the canneries to cut each other's throats in the markets,
the canned market on grapefruit today (May 26) is considerably
below comparative tree fruits and juice. Note the contrast in the
table below.
Pineapple juice $1.05 f.o.b. lfacific Coast
Prune juice .925 f.o.b. Pacific Coast
Tomato juice .975 f.o.b. producing section
Grapefruit juice .50 f.o.b. Tampa
Note: Prune juice is packed in glass quarts only. Tomato juice is packed
in No. 1 tall 12-ounce cans. In each case prices have been adjusted to
correspond with the 16-ounce unit volume.
Pineapple fruit $1.40 f.o.b. Pacific Coast
Peaches 1.075 f.o.b. Pacific Coast
Pears 1.20 f.o.b. Pacific Coast
Plums .85 f.o.b. Pacific Coast
Grapefruit sections .75 f.o.b. Tampa
Canners owe it to the industry to get their price in line with com-
petitive canned fruits. They easily could pay 50 cents per box for
raw fruit and compete at the above quotations. Here, again, an or-
ganized industry could exercise some degree of control in a situation
which today means economic life or death, particularly to the seed
grapefruit grower.
The Florida grower recognizes the superior value of seed grapefruit.
He prefers it for flavor and richness of juice. In an effort to isolate
the reasons for this preference on the part of the trained palate for seed
grapefruit and to translate them into sales ammunition, the Florida
Citrus Exchange continued development work ably started by one of
its affiliated associations* and had comparative chemical analyses of
seed and seedless grapefruit juice completed.
This limited preliminary work was so encouraging that it permitted
*Domino Citrus Association at Bradenton, W. O. Kirkhuff, Manager.

the development of advertising material used in seed grapefruit cam-
paigns in several test markets. In some of these tests the trade and
consumer remained unresponsive because of the insufficient advertising
pressure put behind the product. In others, particularly where a motion
picture on the Florida citrus industry including a demonstration of the
superiority of seed grapefruit was used, it was found that demand for
Florida seed grapefruit could be developed and maintained.
This preliminary work was performed by the organization merely
to develop facts which might indicate a course which the industry as a
whole through its commodity campaign might pursue successfully.
If a fresh fruit market is to be maintained for seed grapefruit, it is
entirely probable that some use must be made in sales and advertising
of the fact that that variety is richer in the mineral salts responsible for
the health qualities of grapefruit.

Special display units were prepared by the Florida Citrus Exchange
for use by the dealer service organization in these seed grapefruit test
campaigns. Over a million folders were printed and distributed in
seed grapefruit boxes and direct to retailers who dropped them in con-
sumers' bags.
Seedless Valencias. Following the able lead of the California Fruit
Growers Exchange which advertised its Valencia crop in many national
publications featuring the seedless nature of the fruit, the Florida Citrus
Exchange printed about a million and a half red, white and blue strip
labels, featuring seedless Valencias. These were pasted on the lids of
each box and packed loose with the fruit by all associations which
could be persuaded to cooperate in this campaign. The loose labels
were used by the retailer in developing his own display signs. Trade
reaction to this campaign was very favorable.

LEGAL MATTERS
Another Exchange service to its members exists in the legal field.
The entry of government into controlling and operating the affairs of
agriculture, business and labor has brought about the enactment of
many laws which today require the constant attention of an attorney.
The law department of the organization during the past season
devoted much time and effort to obtain satisfactory clarifying inter-
pretation of the Federal social security and the wage and hour acts as
applied to cooperatives particularly. Early in the application of these
laws it became evident that the attitude of government officials was to
include as much of agriculture as possible. This policy was pursued
in spite of the obvious intention of Congress to exempt agriculture
from the provisions of both laws.
Under current rulings the individual farmer admittedly is exempt.
Cooperative associations of the same farmers who by themselves are
exempt are interpreted by the administrators of the law today to be
included in its provisions. It is contended that this inclusion of true
cooperatives is a violation of the fundamental principle of the law.
21

The obvious relief to which cooperative associations are entitled is
available only through the courts. It is quite probable that resort to
court action at the earliest practical opportunity will be taken. These
Federal laws, particularly the wage and hour act, are proving unneces-
sarily burdensome to the citrus industry. Labor itself is not receiving
the advantages intended by the spirit of the law and is as hard hit as
the grower or grower group employing it.
This very apparent desire on the part of some Federal agencies to
bear down on agricultural cooperatives is tending to offset and nullify
the work of older Federal agencies designed to bolster agricultural self-
help through cooperatives. The government itself by sponsoring these
conflicting units thus is working at cross purposes and its effects are
visible in the industry.
The law department also worked closely with the Florida Citrus
Growers Inc. in drafting desired legislation which was submitted to and
received the approval and support of the entire grower group. With
the exception of amendments designed to strengthen existing state
laws, the proposed new legislation has been designed to regulate and
assure orderly distribution of fruit in the primary channels of trade.
The intent and policy of this legislation, particularly the State Mar-
keting Agreement Act, has been discussed elsewhere.
The law department also devoted considerable time to legal matters
in connection with the development and patenting of the juice vending
machine.
TRAFFIC MATTERS
Transportation generally has been excellent during the past season,
both by rail and water. Rail carriers, in an effort to attract tonnage
from the boat lines, continued the free modified form of refrigeration
to eastern seaports. At the same time certain restrictions were removed
with reference to the manipulation of vents and plugs in transit. This
has been very beneficial to the service.
As a further incentive to attract fruit away from water carriers,
the rails arranged certain diversion privileges to the West out of Po-
tomac Yards. This aided Florida citrus distribution materially. In
addition, they inaugurated a fast three-day schedule to eastern seaports,
with the exception of Boston which continued on a four-day schedule.
This was in addition to the regular four-day schedule to these markets
which had been in effect up to this season.

Rates
At the beginning of the past season attempts were made to reduce
rail rates to the West. This effort again failed.
As an alternative, a new route and service has been opened from
Tampa by water to Mobile, thence by rail to mid-western markets.
This service affords a decided reduction in the total tariff plus refriger-
ation to these markets.

The initial shipments over this route reached destination in excellent
condition.

Southeastern Zone Adjustments
Zones and rates in the Southeast have caused the industry consider-
able concern in the past because the step-up in rates between progressive
zones was too great. This condition invited and made profitable a
system of bootlegging between zones. It also encouraged truck ped-
dlers to operate and flood the entire Southeast with third grade and cull
fruit to the detriment of carlot sales of the better grades. It also left
the way open for Texas to put her pink grapefruit into the Southeast
to such an extent that it was featured by the better hotels throughout
the entire territory.
The number of zones was increased and developed on a basis which
avoided any decided advance in rates from zone to zone. In addition, a
slight reduction into these zones generally was granted. It represents
an annual saving to the industry of several hundred thousand dollars.
In this adjustment Florida has taken a long step forward in correcting
the detrimental distributive conditions in the Southeast.

Containers
During the past year there has been a very determined attempt to
increase the stated tariff weights on Florida citrus, particularly in one
and three-fifths bushel containers. Hearings have been held in Cali-
fornia, Texas and Florida. As a final result, the Examiner for the
Interstate Commerce Commission found that no change should be made
for the present at least. He decided that carriers had not submitted
sufficient evidence to support their petition for the increase in weight.

Refrigeration Reparation Case
Favorable decision was made in the Refrigeration Reparation Case
over a year ago. Carriers, however, re-opened the case during the past
season and further hearings were conducted throughout the year. On
May 17 in Lakeland hearings were started for proof of loss before Exam-
iner Sharpe. On June 5 the final hearing and argument will be pre-
sented at Washington, D. C. before the Commissioner. If the industry's
traffic representatives are successful in bringing this case to a final
favorable conclusion, it will make possible a refund of approximately
$20,000 to Florida Citrus Exchange members.
The traffic manager of the Florida Citrus Exchange has represented
the organization in all of these traffic matters. While in many cases
the Exchange through its Traffic Department originated and pressed
to a final conclusion the improvements cited, by their very nature
these benefits must accrue to the entire industry as wll as this or-
ganization.
23

L

THE SEALD-SWEET VENDOR
The vending machine pictured above has been perfected in the laboratories of the
Ex-Cell-O Corporation, Detroit from the original developed by Tracy Acosta of New
Smyrna. This unit will be demonstrated in various cities throughout the citrus
belt during the early part of June. After thorough consumer tests, designed to
develop undiscovered weaknesses, it will serve as a production model for additional
machines to be built and serviced for the Seald-Sweet Sales Association, a subsidiary
corporation to the Florida Citrus Exchange organized for the purpose.
24

ACCESSORY DISTRIBUTION
Vending Machine. During the past season the Florida Citrus Ex-
change, through its subsidiary, the Seald-Sweet Sales Association, or-
ganized for the purpose, has acquired the complete rights to the Acosta
fresh orange juice vending machine. Through the excellent facilities
and engineering counsel of the Ex-Cell-O Corporation in Detroit the
machine has been brought to a state of commercial perfection. By the
time this report appears it will have been demonstrated throughout the
citrus belt.
This machine may revolutionize orange dispensing methods. It will
increase per capital consumption because it uses the two most potent
merchandising influences known to modern business-convenience and
price. It will offer at locations convenient to the consumer the juice
of a large orange, chilled, squeezed and strained before his eyes for sc.
Experience alone will tell what volumes of fruit can be moved
through batteries of these machines strategically located. At the mo-
ment, however, it is safe to assume a substantial consumer demand
which will absorb a large percentage of the organization's volume.
Furthermore, since the machine operates at retail and will recover
about $8.00 per average box of large sized fruit, it offers a possibility
of considerable profit to the organization.
An additional factor beyond any possible cash profit will develop
in the operation of the machines which will be decidedly valuable from
the standpoint of merchandising and fruit distribution. The machines,
controlled and operated by the organization, will render a buying sup-
port to Florida Citrus Exchange brands in the markets in which they
are operated.
For example, suppose that the organization servicing the machines
buys its fruit requirements at the market and through regular trade
channels. Such support directed to Exchange offerings in auction
markets would guarantee satisfactory support and top-of-the-market
sales. In private sales markets such buying power could be used with
the trade to absorb parts of cars which may not meet the individual
buyer's requirements.
If, on the other hand, experience points to the development of a
policy of purchasing all fruit supplies required by the service organiza-
tion direct from the packing house in solid cars of the sizes and grades
desired, the buying power created by the vendors would remain of equal
value to Exchange growers. Associations could depend upon measure-
able support for their fruit. Districts, which because of weather con-
ditions may be forced to pick heavily, will be relieved of these tem-
porary surpluses profitably and without danger to regular market
operations.
Regardless of the operating methods which may be developed in the
extended use of the machine, any plans devised will have as their ulti-
mate objective a direct profit to Exchange growers. The Seald-Sweet
vendor itself is fully protected by United States and foreign patents.
..'. f :
.* *
.: .* .* .. *.-.. .
**'* .* .'
.. -"** ". ,
** '. ...
.

These are owned outright by the Florida Citrus Exchange through the
Seald-Sweet Sales Association.
Under such circumstances, any profits which may be developed
and the benefits of the service or buying support of the machines will
belong to Exchange growers and be distributed to them in some equit-
able manner yet to be determined by the Board.
Orange Flakes. Work has been continued during the past season
looking to the completion of commercially satisfactory methods for the
production of orange flakes in the form of a dried breakfast food.
Using the facilities of the J. P. Devine Manufacturing Company of
Mount Vernon, Illinois, the commercial equipment necessary for the
operation finally was determined and some understanding of capacities,
unit costs in production, et cetera, was obtained.
Based upon the development of this information, it became possible
to determine the requirements of capital structure necessary to produce
the product in minimum commercial volumes. These estimates pointed
to a capitalization in excess of $250,000.
The completed study also indicated that the diversion of fresh fruit
per dollar of investment was considerably below that available in the
development of the fresh juice vendor. For that reason, the committee
of the Board decided to concentrate upon the development of the vendor
and release to outside interests the promotion of orange flakes. Several
contacts with interested parties have been made and it is probable that
satisfactory disposition of the product will be completed within the
next few months.
Concurrently with the granting of the patent on the production of
a breakfast food made from oranges, inquiries were received from many
sources for a supply of orange flour-the citrus ingredient used in
making the breakfast food. These inquiries wanted the flour in com-
mercial quantities for use as a flavoring in the manufacture of puddings
and other similar food items. Work is being continued in the facilities
of the Agricultural Experiment Station of the University of Florida and
under the excellent counsel of Dr. H. H. Hume and his staff.
Thus, it is quite possible that an additional by-product, unthought-
of when this work was begun, may be developed as a result of this re-
search for means by which surpluses may be diverted from fresh fruit
trade channels.

.-. ':. : : ...

.. .' ..
..... :. ...
'. :" "..* .'"..
.:.. .* .. ..*...

ADDITIONAL STATISTICS

CITRUS SHIPMENTS FROM MAJOR PRODUCING SECTIONS

Oranges, Grapefruit and Tangerines, in carlots as of May 20.

STATE 1938-39 1937-38

Florida (1) --....------ -- 93,632 74,909
California (2) -..-. 30,878 36,105
Texas (1) -....----...--. 27,227 18,936
Arizona (2) ............. .. 1,456 2,182
Others (2) ----........ ..... 231 226

TOTAL .......---....153,424 132,358

(1) Rail, boat, and truck.
(2) Rail only.

% INCREASE

25,0%

43.8
---------2
2.2

15.9%-

% DECREASE

14.5%

33.3

-- -

CALIFORNIA RAIL SHIPMENTS BY VARIETIES IN CARLOTS

As of May 20.

SEASON ORANGES

1938-39 30,046
1937-38 34,936

Decrease 4,889

GRAPEFRUIT

832
1,170

338

TOTALS

30,878
36,105

5,227

TEXAS RAIL, BOAT, AND TRUCK SHIPMENTS IN CARLOTS

As of May 20.

SEASON ORANGES

1938-39 6,266
1937-38 3,060

Increase 3,206

GRAPEFRUIT

20,961
15,876

5,085

TOTALS

27,227
18,936

8,291

FLORIDA RAIL, BOAT, AND TRUCK SHIPMENTS

Carlots by varieties as of May 20, entire State and Exchange movement.

Shipper Season Oranges Grapefruit Tangerines

Florida Total ..---------. 1938-39 60,530 25,447 7,655
1937-38 50,991 18,767 5,151

Increase 9,539 6,680 2,504
Exchange ..-...-- -......- 1938-39 11,233 7,761 1,758
1937-38 11,408 5,270 1,186

Increase ....... 2,491 572
Decrease 175 --

:- *".%2 7 : .
.. .. ........

.'
S* a *
*.
i *

Totals

93,632
74,909

18,723

20,752
17,864

2,888

EXCHANGE DISTRIBUTION

Summary of distribution as of May 20.

1938-39 1937-38 INCREASE

Number of States distributed to 44
Number Canadian Provinces entered 5
Total number markets entered 300
Number new markets entered 89
Total number customers sold 698
Number new customers sold 291

40 4
5
295 5
56 33
569 129
180 111

GOVERNMENT PURCHASES FOR RELIEF PURPOSES
As of May 20.

FLORIDA -....--......... Oranges 72 cars, Grapefruit 1,296 cars.
CALIFORNIA ...-.... Oranges 1,428 cars, Grapefruit 315 cars.
TEXAS-No oranges. 1,888 cars fresh grapefruit and 1,506 cars for processing.
ARIZONA-No Oranges. 132 cars grapefruit.

FLORIDA COMMERCIAL ESTIMATE 1938-39 AND SHIPMENTS

Rail, boat, and truck, indicating the number cars shipped through May 20, 1939 and
estimated balance to ship after May 20 as compared with the number cars moved
last season after same date:
Oranges Grapefruit Tangerines Totals

Commercial estimate-1938-39 _....64,000
Shipments-Sept. 1 thru May 20 -...60,530

Estimated to ship after May 20 .... 3,470
Shipped last year after May 20 -..... 4,101

27,950 7,675
25,447 7,655

2,503 20
1,277 0

SEASON AVERAGES

Following is the Florida, California, and Texas auction averages on standard boxes
to date as of May 20th, seasons 1938-39 and 1937-38:

VARIETY AND SECTION

1938-39 1937-38

Interior Oranges $2.02
Indian River Oranges 2.31
Interior Seed Grapefruit ..................-- ... 1.70
I. R. Seed Grapefruit 1.77
Interior Seedless Grapefruit .......-......... 1.75
I. R. Seedless Grapefruit 2.04
Tangerines-All sections 2.00

Oranges 2.72

TEXAS Grapefruit (Seedless) 1.88 2.14

... :" : *"-" ...
a
C *. .
.'.,
.' :'*:i.".. ".:* : : "''.'':"".
.. .. .. ....
*

99,625
93,632

5,993
5,378

STATE

FLORIDA

CALIFORNA

$2.36
2.52
2.14
2.26
2.28
2.70
2.48

3.17