MARKETING
Without stopping to inquire the reasons, it may be recalled that there
are two rather distinct forms of trade, wholesale and retail. The
wholesale trade is conducted by three classes of persons: dealers or
merchants, commission men, and brokers. The dealer is one who buys the
goods outright and takes his own risk on making a favorable sale to
the retailer. The commission man is one who receives the goods, sells
them at such price as he may be able to obtain and remits to the
seller the amount obtained less expenses and his commission. The
broker is a man who effects a sale without coming in contact in any
way with the materials sold. A cheese broker, for example, receives
instruction from different factories to sell for them a certain
quantity of cheese of a given kind and quality each week or month as
the case may be. At the same time he receives from grocery stores
which retail cheese orders for various amounts, kinds and quality of
cheeses. With this information at hand, he directs the various
factories intrusting their business to him to ship the kind, quantity,
and quality of cheese required by his several customers. For such
service he receives a brokerage, which is less than that charged by a
commission man because he is not required to handle or store the
material.
Since the different farm products are purchased by different classes
of retailers, and since their handling and sale require different
facilities and special knowledge, there have arisen in the great
centers of trade different kinds of markets, each having its
particular facilities for the handling, care and sale, and each
conducted by commission men or brokers with a special knowledge of the
trade. Furthermore, certain cities have become, on account of their
favorable position--to mention but one reason--headquarters for
certain products or groups of products. Thus Petersburg, Virginia, has
the principal wholesale market for peanuts. Elgin, Illinois, has been
noted for its butter market. St. Louis is the leading mart for mules.
In a general way, the following five more or less distinct and
important classes of markets for farm products may be recognized:
Grain, Live Stock, Produce, Cotton and Tobacco.
METHODS OF TRADE
The brokers or commission men doing business in any one of these
markets usually form an association called a board of trade, chamber
of commerce or similar title for the purpose of assisting "each other
in the pursuit of common ends." The result has been uniformity of
methods and charges; but above all in importance, perhaps, has been
the definition of classes and grades of the products placed on sale.
The tendency is for the associations in the different cities to adopt
uniform rules for the grading of products, so that No. 2 red winter
wheat may mean the same thing in Toledo and New York; that the
quotation on prime beef may refer to the same quality of cattle in
Pittsburgh as it does in Chicago; and that No. 1 Timothy hay in
Baltimore and St. Louis may be alike. While the tendency is towards
uniformity, much yet remains to be accomplished. The shipper must be
on his guard lest he suffer loss through the variations in the
classification or variations in their interpretations on the different
markets.
There has grown up around these markets some agency which stands as a
disinterested party between seller and buyer impartially determining
the weight and in some cases the quality of the object under
negotiation. The State of Illinois employs agents who inspect all cars
of grain consigned to the Chicago market. These inspectors determine
the kind, grade and weight of the grain in each car. The car is then
delivered under seal to the purchaser. If either seller or buyer is
dissatisfied with the inspector's decision he may, by complying with
certain regulations, have this decision reviewed by a higher
authority. The decision of this higher authority is final and must be
accepted by both parties. Brokers selling grain in carload lots ship
the cars subject to the weight and grade as determined by the
inspector at Chicago. Grain of a specific grade may thus be bought in
Chicago or other great grain markets with almost perfect security as
to weight and quality by persons living in any part of this or any
other country. At Elgin the quality of butter is determined by a
committee appointed by the Board of Trade from its own members. In the
live stock markets, the stock yards company, in addition to furnishing
yards, shelter, food and water, acts as agent between seller and buyer
in determining the weight of the animals. The purchaser or his agent
must determine for himself the quality of the animals he buys.
GRAIN MARKETS
The Chicago and St. Paul Boards of Trade and the New York Produce
Exchange are the three great agencies for dealing in grain in the
United States. Buffalo, Duluth, Baltimore and Philadelphia are also
important markets. Adjuncts to these markets are the great terminal
elevators capable of holding almost indefinitely enormous quantities
of wheat and other grain. On the Pacific Coast all the wheat is
handled in the bags, as is the custom in the other markets of the
world. Canada and the United States alone have recognized the
principle that wheat and other grains will run like water, which has
been a prime factor in their competition with other nations.
Country elevators charge two cents a bushel for storage during the
first 15 days and 1/2 cent for each additional 15 days. The charge for
storage at terminal elevators for the first 15 days is 3/4 cent. The
farmer may thus store his wheat in an elevator in place of his farm if
he chooses so to do, although the wheat he thus puts in storage may
have been made into flour and consumed before he sells it. This may be
looked upon as a sort of intermediary step between storing wheat in
one's own granary and dealing in futures.
The country shipper pays 1/2 cent a bushel commission for the sale of
wheat. There is also a charge for inspection and insurance, and, in
case there is an advance payment, for interest. After five days there
are storage charges. This has given rise to the expression, gilt edge,
regular and short receipts, depending upon the length of time there
remains before storage charges must be paid. Every market has a grade
known as contract grade, meaning the quality that must be furnished
when wheat or other grain is sold without specifying the grade. In
Chicago No. 2 red winter wheat is the contract grade. Where grain is
sold or purchased by a broker, the brokerage is usually 1/8 cent per
bushel.
HAY MARKETS
At least twenty cities have adopted the rules of the National hay
association as to classes and grades of hay and straw. The southern
states constitute an important market for the hay of the north central
states, while Boston, New York and the mining towns of Pennsylvania
are important markets for the northeastern states. The size of bale
varies from 75 to 200 pounds. Small bales of 100 pounds each are
preferred in Baltimore, medium bales of 110 to 140 pounds in
Philadelphia, while New York and Boston usually deal in the larger
bales. The commission charges vary from 50 cents to $1 per car. In New
York, $1 pays all charges. At Chicago, $3 per car has been charged for
the inspection, divided equally between seller and buyer.
PRODUCE MARKETS
Every town of any consequence has its produce market. The South Water
street district in Chicago and the West Washington street market in
New York are noted for their extent and variety. There are also many
special markets for certain classes of produce. Thus Elgin, Chicago
and New York have butter exchanges. Wisconsin, Utica, Watertown and
Cuba (New York) maintain exchanges where cheese is placed on sale each
week during the manufacturing season. There is also a board of trade
for cheese in New York City. The prices quoted upon these exchanges
are made the basis of many transactions between buyer and seller, who
never enter these markets. Not only do buyers and sellers agree to
abide by the quotations of one or the other of these markets, but the
quotations are also used as a basis of settlement for milk furnished
the creamery or factory. These agencies are thus impartial arbiters in
countless financial transactions.
The rate of commission varies in different markets and for different
products. Generally, however, produce is handled on a 5% basis, but
for individual products which are especially bulky and difficult to
handle, such as cabbage, 10% may be charged. In some cases commission
is by quantity instead of on a percentage basis. Thus for potatoes the
commission is sometimes 10% and in other cases 4 or 5 cents a bushel.
LIVE STOCK MARKETS
While poultry and game, as well as the carcasses of the smaller
animals, may be handled through the produce markets, the large animals
require separate facilities. The United States is noted for its large
live stock markets and for the perfection and size of the packing
houses which have grown up about them. The most famous example of
these combined agencies is to be found at Chicago, but important live
stock markets are also maintained at St. Louis, Kansas City, Omaha,
Pittsburgh, Buffalo and more recently Fort Worth, Texas. The
commission charges vary from 50 cents to $1 per head for cattle and
from 10 to 25 cents per head for calves, sheep and hogs. In some
markets, the commission on hogs is 2% of the gross returns. When
located within 150 miles of a central market, it is customary to allow
50 cents per hundred pounds for cattle and 40 cents for hogs to cover
shrinkage, and cost of freight, yardage, food, bedding and commission.
It is possible for an owner to sell his own live stock in these yards,
but the commission man, because of his superior knowledge of existing
trade conditions, is almost universally employed. Firms which handle
cattle, sheep and hogs seldom sell horses. Although handled by
different commission firms, important horse markets are maintained at
Chicago and Buffalo immediately adjacent to the market for meat
animals. In New York the horse markets are in a different section of
the city, that for draft and common work horses on one street, while
the American Horse Exchange, located at another point, handles
high-class light horses. The usual custom is to sell horses at
auction, although they may be purchased at private treaty. In whatever
manner purchased, it is essential to understand precisely the
character of the guarantee.
COTTON, WOOL AND TOBACCO MARKETS
Because of their higher value per pound and the ease with which they
can be stored, cotton, wool and tobacco are dealt in somewhat
differently than other farm products. The two great cotton exchanges
are located at New Orleans and New York, the quotations on these
markets controlling the financial transactions in cotton throughout the
world. The principal wool markets are Boston, New York, Philadelphia
and St. Louis. The principal tobacco markets are at Richmond and
Danville, Va., Durham, N. C., and Louisville, Ky.
[Illustration: Mr. C. W. Wald, graduate of the Ohio State University,
farmer, formerly assistant horticulturist of the New Hampshire and Ohio
Experiment Stations, is shown above in one of the New Carlisle (Ohio)
greenhouses, in which three crops of lettuce occur in one bed. One crop
is ready to cut, another planted and a third in pots between the other
plants, to be planted in another bed when large enough. The net returns
from a quarter of an acre under glass has been greater than from 160
acres devoted to general farm crops.]
[Illustration: C. W. Zuck & Sons, Erie, Pa. One son was a student in
agriculture at the Pennsylvania State College. Father and three sons,
beginning six years ago with a run-down farm of 55 acres, have built an
acre of glass and a heating plant of 260 horsepower. During the period
they have spent $5,000 on the place and at the end of season they will
have very nearly cleared their improvements. "Tell the youthful
readers of your book to get as much education as possible and then go in
partnership with their fathers or brothers. If they do, success will be
theirs."]
The country shipper or the young farmer wishing to place his products
in the ordinary channels of trade must consider and determine among
other things the following: What cities have favorable markets for his
products; choose some commission man or broker to handle them;
calculate the expenses for freight, commission and other customary
items; familiarize himself with the rules for grading his products in
the market or markets under consideration; and determine what agency
there may be for protecting him as to the weight and quality when
sales are effected. Whenever practicable, a visit to the market in
question and a personal study of the conditions under which selling is
done will be wise. Having done so, and perhaps having made a number of
sales through these usual channels of trade, he will be in a position
to consider whether he may organize to advantage some more direct
method of getting his products to the consumer.