The cost of food to the consumer is divided among the farmers on one hand and storage, manufacture, jobbers, wholesalers, retailers and transportation on the other. I believe these charges between the farmer and consumer fall into two distinct groups—the charges comprising the margin between the farmer and wholesaler which mainly concern the farmer, and charges between the wholesaler and consumer, which mainly concern the consumer. To establish this division, it is necessary to analyze shortly the datum point by which price is determined.
The diet of the American people from a nutritional (not financial) standpoint comprises the following articles and proportion:
| Wheat and Rye | 29.5% | ||
| Pork Products | 15.7% | ||
| Dairy Products | 15.3% | ||
| Beef Products | 5.3% | ||
| Corn Products | 7.0% | ||
| Sugar Products | 13.2% | ||
| Vegetable Oils | 3.6% | 89.6% | |
| All other, including potatoes | 10.4% | 100.0% |
The wholesale price of about 90 per cent of our food in normal times is only remotely de
termined by the cost of production, but mostly by world conditions. We export a surplus of most commodities among the 90 per cent and the prices of exports are determined by competition with other world supplies in the European wholesale markets. Those items in this 90 per cent that we do not export are influenced by the same forces, because in normal times we import them on any considerable variation in price and the wholesaler naturally buys in the cheapest market. Even milk is to a considerable degree controlled by butter imports in normal times. When we import butter it releases more milk in competition. This cannot be said to such extent of most of the odd 10 per cent, because they are largely perishables that do not stand overseas transport and consequently rise and fall more nearly directly upon local supply and demand. Some economists will at once argue that if prices are unprofitable to the farmer the situation will correct itself by diminished production and, consequently, a general rise in the world level of prices. In the abstract, this is true, but as a matter of fact the surplus which our farmers contribute for export is only a small portion of their total production or of the world pool, yet the total of the world pool operating through this minor segment makes the prices for a large
part of the farmers' commodities. Therefore, the effect in normal times of restriction in production in any one country does not affect price so much as theoretic argument would believe. The farmer must plant if he would live, and he must plant long in advance of his knowledge of prices or world production. He can make no contracts in advance of his planting, nor can he cease operations on the day prices fall too low. He is driven on, year after year, in hope and necessity, and will continue over long periods with a standard of return below rightful living because he has no other course—and always has hopes. He will vary fairly rapidly from one commodity to another—from wheat to other grains, for instance—but he mostly raises his maximum of something. In the long run of decreasing prices he would undoubtedly reach so low a standard as to cease production. Then comes a comparatively short period of higher prices in some commodity; production is again stimulated and followed by long intervals of low standards. As shown by the following table, on the whole, the farmer has not been underpaid during the war, but the currents again are turning against him.
It will be seen that the farmer enjoyed prices
equivalent to or higher than the general level up to the last six months. He is now, however, falling behind in some important products. Unlike the industrial workers, he is unable to demand an adjustment of his income to the changed index of living.
| Department of Labor Wholesale Index of All Commodities | Index of Prices at the Farm in Principal Produce States | |||||
| All Farm Produce | Hogs | Corn | Wheat | Cotton | ||
| Pre-war | 100 | 100 | 100 | 100 | 100 | 100 |
| First Quarter 1918 | 187 | 200 | 213 | 224 | 254 | 246 |
| Last Quarter 1918 | 206 | 204 | 223 | 220 | 258 | 246 |
| First Quarter 1919 | 200 | 202 | 225 | 228 | 264 | 215 |
| Last Quarter 1919 | 230 | 206 | 178 | 216 | 277 | 268 |
For the moment, what I wish to establish is only that the farmer's prices are not based upon any conception of the cost of production, but upon forces in which he has no voice. He can never organize to put his industry in a "cost plus" basis as industrial producers do, and remedy must be found elsewhere.