This increase in margins shows vividly in the higher priced foods, for instance, pork products. If we take hogs at the railway station over the great hog states contiguous to Chicago as a basis, we find:
| Six Months | Price of Hogs in Principal States Per 100 Lbs. | Price of Cured Products to Consumer 100 Lbs. Hogs | Margin Between Farmer and Consumer |
| 1914 | $7.45 | $18.97 | $11.52 |
| 1919 | 16.27 | 37.33 | 21.06 |
| 1920 | 15.37 | 37.71 | 22.34 |
Thus, while the farmer has gained about $7.92 in his price, the margin has increased by $10.82 to the consumer and, incidentally, during the last year since food control restraints were removed, the consumer has paid $.30 more while the farmer got $.90 less. These instances could be greatly multiplied.
It is unfortunate that our national statistics do not permit a complete analysis of the distribution of margin between all the various groups in the chain between the farmer and consumer in different commodities. It would be helpful if we could take the farmers, railways, manufacturers, wholesalers and retailers, and determine what proportion each receives.
These margins between farmer and consumer
are made up of a necessary chain of charges for transport, storage, manufacture and distribution. The great majority of citizens who are engaged in the processes that go to make up this portion of food costs are employed in an obviously essential economic function, and they do not approach it in a spirit of criminality, but as a very necessary, proper, and honorable function. They have, since the European War began, rather over-enjoyed the result of economic forces that were not of their own creation. That a considerable margin is necessary to cover the legitimate costs of, and profits on, distribution is obvious. The only direction of inquiry is how they can be legitimately minimized. These margins, starting from the unduly high expense of a faulty system, have increased not only legitimately, due to increased transportation, labor, rent, taxes, and increased interest upon the large capital required, but they have, except during the period of control, increased unduly beyond these necessities. There are two general characteristics of this margin that are of some interest. In the first instance, all of the transport, storage, manufacture and handling is conducted upon a basis of cost plus either fixed returns or, as is more usually the case, a percentage of profit upon the whole cost of operation. Any
distributing agency ceases to operate when it does not secure costs and a profit. Consequently, all those links put up a resistance to a curtailment of the margin which the farmer is unable, except by absolute exhaustion, to put against reduction of his price levels. If rapid falls in food prices occur, the farmer, at least in the first instance, has to stand most of the fall because he cannot quit. The farmer's costs of production relate to a period long prior to the fall. Thus, if wages are due to fall as a result of a fall in food prices, the farmer is always selling on the old basis of his costs. The farmer has but one turn-over in the year. The middleman has several and can thus adjust himself quickly.
Second, the custom of many of these businesses is to operate upon a percentage of profit on the value of the commodities handled, even after deducting all their increased costs, interest or other charges. When we have rising prices, therefore, a doubling of prices, for instance, tends to double profits on the same volume of commodities handled. In a rising market, competitive pressures are much diminished and the dealer can assess his own profits to greater degree than usual. While the packers make a profit of, say, two cents on the dollar value of commodities, it represents double the
profit per pound over pre-war, even after allowing such items as interest on the larger capital involved.
Reductions of the Margins