"THE HOUSE WITH THE CLOSED SHUTTERS"
Knock, knock, knock! Who's there, i' the name of Beelzebub? Here's a
farmer . . .--_Macbeth_.
When wheat ceased to be grown for local needs and overflowed upon the
markets of the world, becoming a factor in finance, arenas where its
destiny was decided were established in the large centres of trade. In
these basins of commerce the never-ending flow concentrated and wheeled
for a short space before in re-directed currents it rolled on its way
to ocean ports. Here, according to the novelists, frantic men were
sucked into the golden eddies, their cries strangled and their fate
forgotten even as they were engulfed by the Leviathan with which they
adventured; or they emerged with eyes bloodshot, voices gone and
clothes torn, successful speculators of a day. Perhaps the general
reader is more familiar with these mad scenes of "The Pit," as the
trading floor is called, than with the steadily turning marketing
machinery of which they are but a penumbra.
The modern grain exchange is much more than a mere roulette wheel for
the speculator. Its real purpose is to provide a centre for the
legitimate trader. It is a great information bureau of world
happenings where every item of news concerning the wheat in any way is
gathered and classified--drouth, rain, frost, rust, locusts, hail,
Hessian fly, monsoon or chinch bug. In every corner of the earth where
the wheat streams take their rise, from green blade to brown head the
progress of the crop is recorded and the prospects forecasted--on the
steppes of Russia, the pampas of the Argentine, the valley of the San
Joaquin, the prairies of Western Canada and the Dakotas, the fields of
India, Iowa, Illinois and Kansas. Good news, bad news, the movements
of ships, the prices on the corn exchanges of London and Liverpool, at
Chicago, on the bourses of Paris, Antwerp and Amsterdam--all are
listed. With such a Timepiece of International Exchange ticking out
the doings of nations, both buyer and seller can know what prices will
govern their dealings. In office or farmhouse an ear to a telephone is
all that is necessary.
A grain exchange, then, is the market-place where grain dealers meet to
secure information and maintain regulations for the prompt performance
of contracts. The exchange organization does not deal in grain, but
has for its sole purpose the protection of those who do and the
facilitating of transactions; in other words, it is on the ground to
see that the grain trade is carried on in an honest and capable manner
and to punish offenders against proper business ethics and established
rules.
Its membership is composed of grain dealers doing business in the
exchange's territory--milling companies, exporting companies, line
elevator companies as well as independent dealers and "commission men."
Besides seeking a supply of wheat to keep their mills busy for the
season, the milling companies sell wheat. It is the business of the
exporters to make shipment to other countries. Wheat is sold to
exporters and millers by the elevator companies, who are interested in
running as much grain as possible through their elevators at country
points. The chief business of independent dealers is to handle wheat
that stands "on track," ready for shipment, either buying outright from
the farmer or handling it for him on a commission basis.
The "commission man" is in an especially good position to do a
clean-cut business. He assumes no burden of large capital investment
and operating expense, as do the elevator companies. His chief need is
a line of credit at a bank and from this he pays advances to his
clients, his security being the bills of lading of wheat consigned to
him. He does not need to buy or sell on his own account and, unlike
the exporter, he does not have to risk changes in freight rates or in
prices or make deliveries by given dates. As for the satisfactory
milling quality of the crop--that is something for the miller to worry
over. In order to do business it is necessary only for the commission
man to be a member of the exchange and to obey its rules.
For a long time Winnipeg has been known as the greatest primary wheat
market in the world. That means that a greater volume of new wheat,
direct from the producer, passes through the Winnipeg market than
anywhere else, not even excepting Chicago where the first grain
exchange to reach international development was established in 1848.
The Winnipeg market is fed by the vast wheat area of Western Canada and
frequently between two and three million bushels of wheat go through
Winnipeg in a single day. During the rush season sixty or seventy cars
of wheat leave Winnipeg for the East every twenty minutes of every
twenty-four hours. The freight boats on the lakes load 460,000 bushels
in three-and-a-half hours.[1]
It is interesting to note that nowhere else in the world is a great
public grain market like the Winnipeg market found located four hundred
miles away from the storage point where grain dealt in is kept for sale
delivery. Geographically Fort William and Port Arthur at the head of
the great lakes water route would provide the natural delivery point
for Western grain which has been routed eastward[2] and there the
location of the exchange might be looked for logically. It so happens,
however, that the eastern edge of the vast grain fields lies four
hundred miles west of the twin harbors, the country between not being
adapted for farming, and to avoid the delay of mail transit and to
operate the trading effectively it was necessary to locate the exchange
at Winnipeg, the great metropolitan railway centre where the incoming
grain concentrated.
In Western Canada the grain is stored in bulk by grades, thereby
cheapening handling cost. Unlike most countries--which sell grain on
sample--Western Canadian grain has been sold by grade. The inspection
and grading of wheat, therefore, is a very important factor in the
grain trade of Canada and is in full charge of Dominion Government
officials. Upon their verdict depends the price per bushel which will
be paid for any shipment of grain, market quotations varying for
different grades; whether stored, sold at home or sold abroad their
certificate of grade brands that particular wheat throughout. The huge
river of grain flows in upon them unceasingly; at times the inspectors
have to work at top speed to avoid being engulfed. The variety of
Nature's response to the growing conditions in changing seasons must
not confuse them from year to year; but with sharpened senses and sound
judgment they must steer a sure course through the multiplicity of
grades and grade subdivisions.
The thoroughness of the system adopted by the Grain Inspection
Department is shown by description of the work done at Winnipeg.
Offices and staffs in charge of deputy inspectors are maintained in the
different railway yards. They work in shifts night and day; for during
the mad seventy-or-so days in which the Western crop stampedes for the
lakefront there is no let-up to the in-rolling wheat-bins which come
swaying and grinding in over the rails like beads on a string--the
endless rosary of harvest thanksgiving. Wheat samples must be obtained
from each car and no train can be moved until a placard has been placed
at the end of it, reading: "Grain Inspectors have finished this train."
A fifty-car train can be sampled in about an hour and a half, which is
comfortable time for a change of engines and crews.
The sampling gangs work with all the precision of gun crews--each man
with a particular thing to do. One goes down the train, opening car
doors and leaving an empty sample bag in each car. Running up a short
ladder, the sampler climbs over the top of the inner door, which
extends above the "load line"; the standard sampler which he uses is a
cylindrical brass rod, so constructed that when it is "stabbed" to the
bottom of the car the grain which fills it is a correct sample of wheat
at every depth. Seven such samples are procured from different
sections of the car, and the track foreman, standing on a ladder,
watches these poured onto a cloth with an eye to detecting evidence of
"plugging" with an inferior quality of grain; these seven samples
having been mixed thoroughly, a canvas bag is filled from the result
and the two-and-one-half pounds which it will hold become the official
sample. The rest of the mixture is dumped back and the car resealed.
The foreman has filled out a sample ticket with car number, date, load
line, initials of sampler and any other notations necessary--such as
leakages, etc. His own name is stamped on the back of the ticket,
which goes into the sample sack. Copies of the way bills with full
information as to all cars, shipping points, consignees or advisees and
destinations are obtained from the railway yard office and these,
together with the samples, are sent twice a day to the Chief Grain
Inspector's office at the Grain Exchange.
Here the samples are inspected and graded in a room with special
lighting facilities. The grading is done only in broad daylight. The
quality of the grain, its condition and the admixtures are determined
respectively by judgment of hand and eye, by elaborate mechanical
moisture tests and by a sieving and weighing process. The whole sample
is examined closely for color, plumpness, weight, etc., in order to fix
its grade as No. 1 Hard, No. 1 Northern, 2 Northern, 3 Northern; 1 Hard
and 1 Northern must weigh at least sixty pounds, 2 Northern fifty-eight
pounds, and so on. Grades below these are set by the Grain Standards
Board. Damp or wet grain is marked "No Grade," which means that it is
considered unfit for storing and therefore has a lower market value.
Grain which is heated or bin-burnt is "condemned." If it is unsound,
musty, dirty, smutty, sprouted or badly mixed with other grain, etc.,
it is "rejected." Grain which, because of weather or other conditions,
cannot be included in the grades provided by statute is given a
"commercial grade."
It will be seen at once that here is work requiring great nicety of
judgment and that long experience is necessary to enable the grader to
reach his decisions quickly and accurately. When the grading is
completed the sample is placed in a small tin box and filed
systematically; it is supposed to remain thus stored until there is no
longer the possibility of a demand for re-inspection and finally the
samples are sacked and sold to the miller with the highest bid, the
money being paid to the Dominion Government.
Grade certificates, bearing the Chief Grain Inspector's signature, are
issued for each shipment and sent at once to the elevator company,
miller or commission agent to whom the car is consigned. These grade
certificates, together with the weight certificate and the bill of
lading, make the grain negotiable on the market; the dealer does not
see the actual grain, merely handling these papers.
If dissatisfaction with grade or dockage arises, the owner of the grain
or his agent can obtain re-inspection at the office of the Chief Grain
Inspector free of charge, and, if still dissatisfied, appeal can be
made to the Survey Board. This is a board of twelve men; the governing
rules and regulations are established by the Grain Commission. Six
members are recommended by the Winnipeg Board of Trade and two each by
the Minister of Agriculture in each of the three prairie provinces.[3]
The verdict of the Survey Board is final.
Now, back in 1905 the machinery for moving the crop upon its way was
little understood by the average Western Canadian farmer. The wheels
went around, gave a click and away went his wheat; but in approaching
it all with the idea of understanding everything he was in the position
of the small boy examining the works of a watch to see how it told the
time. He felt that he ought to understand what went on down at
Winnipeg; for of course where there were so many rules and regulations
to be broken there must be "funny work." It was the natural suspicion
of the man who lived much to himself in the quiet spaces, who could not
believe that grain dealers could be honest and build palatial
residences in Winnipeg while his own toil in producing the grain was
rewarded with a living only. It looked as if the roost was being
robbed and with his newborn initiative he wanted to find out how it was
done and who was doing it.
The satisfactory manner in which things are conducted in the grain
trade to-day is the result of long experience and gradual improvement
of conditions. It must be remembered that in the earlier days the
trade was not so well organized for efficiency and in 1905 when E. A.
Partridge began to probe for "plugging" he had a big job on his hands,
especially in view of the fact that he was treated for the most part as
a meddler who was not entitled to reliable information.
There are two ways of reaching a conclusion--one by approaching it
logically on facts laid down; the other by jumping to it across a
yawning lack of detail. At the end of his month of investigation the
farmer's scout had a regular rag-bag of material out of which to
fashion a patchwork report. A grain man might have condemned it as a
"crazy quilt" because bits of high color obtruded inharmoniously. But
if here and there an end was short or a bit of information on the bias,
it was because the "Farmers' Representative" had not been treated with
sufficient frankness. He had to make the best of the materials allowed
him and his natural tendency to bright-colored metaphor may have been
quickened. He hit out straight from the shoulder in all sincerity at
conditions as they appeared to him.
He thought he saw five companies controlling the exporting business,
and also their margin of profit, so that they were able to keep out
smaller dealers who might have the temerity and the necessary capital
to try exporting on their own account. He saw the smaller dealers in
turn stem-winding their prices by those of the exporters, controlling
the prices paid for street and track wheat throughout the country;
thereby, he reasoned, it became possible to set special prices at any
given point by the simple expedient of wiring the necessary
instructions to the operator at that point to pinch independent
competition. He saw elevator companies cutting their charges at
certain points to kill off competition from "farmers' elevators" which
sold to independent dealers. All this he was sure he saw.
The sampling appeared to be carried on in a systematic and satisfactory
manner. The grading, too, appeared to be uniform enough as regarded
the standard grades; but in the item of color there seemed just cause
for complaint. Lack of color, a trifling number of imperfectly formed
kernels or the suspicion of a wrinkle on the bran apparently doomed a
sample to low grade no matter how heavy and flinty the wheat might be.
This seemed scarcely fair to Partridge, who bore in mind that the sunny
seasons of past years had been succeeded by cloudier ones, the dry
autumns by wet ones and that with stacking discontinued and much of the
farmers' wheat left long in stock, bleaching was bound to follow. So
that if the Chief Grain Inspector were a "crank on color," he should
remember that beauty was only skin deep.
The fracture and microscopic and weighing tests seemed to be the only
reasonable tests which could be applied quickly; the milling test was
the only one which was absolutely correct. Any rapid eye test which
pretended to determine whether there was sixty-one per cent. or
fifty-nine per cent. of Red Fife wheat in a given sample struck the
Farmers' Representative as farcical; yet this was sufficient to make
the difference of a grade and sometimes a difference of seven cents per
bushel in the price obtained.
The whim of the Inspector likewise decided how many lean berries in a
plump sample would disqualify it for "plump" classification and how
many mature or defective berries among sound wheat, would disqualify it
from being classed as "sound." With a single concocted sample as a
basis of judgment Partridge considered that the grading of the lower
grades often was very unjust to the producer, especially to the owners
of plump frosted wheat; the process of concocting the basic sample was
very interesting; but the result was "a nightmare."
W. H. Gaddes, who had preceded him to Winnipeg, agreed with him in
this. Also, Mr. Gaddes denounced the Survey Board at that time as
unsatisfactory in its composition, open to suspicion in its findings
and in practice--so far as outsiders' wheat was concerned--simply a
machine to register confirmation of the Inspector's previous grading.
It was Partridge's belief that "many a fraud perpetrated in a line
elevator" was added to the "iniquities" of the Inspector, in whose
personal integrity he had every confidence. For this reason he was
inclined to be lenient with the hard-working and conscientious
officials of the Government. Nevertheless, it appeared wise that a
farmers' special agent be maintained permanently at Winnipeg to
safeguard the interests of the farmers, especially if certain powers
were allotted to him under the Inspection Act.
In making his report to the Territorial Grain Growers' Association
Partridge went into the whole situation as he saw it and particularly
was he outspoken in regard to "that House with the Closed Shutters," as
he called the Winnipeg Grain and Produce Exchange. In fact, his gas
attack upon the Exchange was ablaze with the fires of hostility.
And for the use of his reckless language Partridge was to be called to
account in due course.
[1] Although only about ten per cent. of the arable area in Western
Canada is under cultivation there are already 3,500 country elevators.
Terminal elevators at the head of the lakes with a storage capacity of
forty-four million bushels and interior Government terminals with ten
and one-half million bushels capacity are overflowing already. Wheat
exports of Canada have increased from 2,284,702 bushels in 1867 to
157,745,469 bushels in 1916. Per capita Canada has more railway
mileage than any country in the world.
[2] In early days nearly all grain was routed eastward via Winnipeg;
but with the development of the grain trade and the opening of the
Panama Canal some Western Canadian grain travels west and south.
Facilities for inspection and grading have been established at Calgary,
Superior, Duluth, Saskatoon, Moose Jaw, Medicine Hat and Vancouver.
[3] In 1905 three members of the Survey Board were recommended by the
Winnipeg Board of Trade and three each by the respective Departments of
Agriculture in the three Prairie Provinces.