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 inspectors 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 ones 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.
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.
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.