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man and stockyards firms, as some would have you believe. I know that because I have discussed this with National President Simpson, and other men here know that our farmers are demanding that we protect these public terminal markets because they are the base of the establishment of price values.
Senator POPE. Has the National Grange taken any position on this legislation?
Mr. WARD. Yes; and they are ready to testify any time.
Senator CAPPER. I believe every national farm organization has approved this measure.
Senator NORRIS. Our next witness is Mr. Young, of East St. Louis.
STATEMENT OF FRANK B. YOUNG, MANAGER OF THE FARMERS
LIVESTOCK COMMISSION Co., EAST ST. LOUIS, ILL.
Mr. Young. Mr. Chairman and gentlemen, my name is Frank B. Young, manager of the Farmers Live Stock Commission Co., Inc., under the cooperative laws as a nonstock, nonprofit organization for the handling of livestock for its patron members and others on the central market and complying with the Capper-Volstead Act. I am also secretary of the Farmers Live Stock Marketing Association, an association of farmer owned and controlled cooperative livestock marketing organizations located on the principal Corn Belt central markets as follows: Chicago, St. Paul, Sioux City, St. Joseph, Omaha, Kansas City, Wichita, Denver, and St. Louis, handling livestock for more than 500,000 livestock producers.
I am making this statement in the interest of producers served by these cooperative organizations for fair practice in the operation of marketing places where producer-owned livestock is marketed. I am also speaking in behalf of the Missouri Farmers Association, of which Mr. William Hurst is president.
Senator NORRIS. I would like to interrupt you there. Mr. William Hurst is another man that this committee has been acquainted with for a good while. I would like to have you put into the record, if you know, and I presume you do, something about the organization of Missouri farmers of which he is the head.
Mr. Young. Mr. Chairman, the Missouri Farmers Association is without doubt one of the strongest farm organizations in any one State in the Union. They have a membership of around 40,000 members at the present time. They have activities in all livestock and poultry and farm-commodity endeavors. We have better than seven central cold-storage plants in Missouri where we handle poultry and eggs out of Missouri.
At Springfield, Mo., we have the largest cold-storage plant cooperatively owned, handling poultry and eggs, in the United States.
We handle more poultry and eggs out of Springfield, Mo., and that territory than Swift and Armour combined.
We have activities over the State that will run into a capital surplus of around $5,000,000 that is owned and controlled and operated by the farmers.
Their livestock industry is handled through three organizations directly in Missouri and one organization on the Chicago market. The Farmers Union at Kansas City handles the Missouri Farmers Association livestock at that point; the Farmers' Union at St. Joe
handles that at that central market, and the Farmers Livestock Commission Co. at National Stockyards handles any livestock going to the Chicago market handled through the Farmers' Union out on the Chicago market, all cooperatively owned and controlled by the farmers.
Senator CAPPER. I happen to know. I will say to Senator Norris, that I attended the annual meeting of the Missouri Farmers Association last fall.
Senator NORRIS. I have been invited to go several times but I was never able to do it, much to my regret.
Senator CAPPER. I hope you will go some time.
Senator CAPPER. I never saw anything like it before. It was the most impressive assemblage of farmers and farm folks that I have ever seen in that section of the country from any one State. They have come nearer, I believe, reaching the ideal of cooperative market
I ing than any other farm organization, and the businesslike way in which at that meeting they handled their activities and gave to that something like 6,000 farmers at that meeting from all over the Statethey gave a picture of the year's operations which was amazing to me. The practical, successful way in which they are now handling the cooperative movement was most encouraging, the most encouragement that I have gotten out of any meeting in that section of the country for a long time.
Senator NORRIS. I would like to ask this witness to tell us, if he knows, something about the financial operations of that organization.
Mr. YOUNG. The Farmers Livestock Commission Co. was started as a nonprofit organization, cooperatively, and we have built up a surplus working capital of $100,000 for the stability of the organization at the National Stockyards. In addition to that we have paid back a patron refund over and above actual operating expenses at right close to a million dollars over a period of 12 years. The livestock handled comes from 13 adjacent States to the St. Louis market, and we handle livestock for the Missouri Farmers Association, the Farmers' Union of Iowa, Kansas, Nebraska, Arkansas, Tennessee, Kentucky, Indiana, and Illinois.
Our operations are purely cooperative. We have no profits in our organization at all. Everything over and above actual operating expenses goes back to the patron members.
Senator FRAZIER. Whom do you sell to?
Mr. Young. We sell principally to eastern order buyers, because they pay the highest price for livestock. We do sell to the packer buyers on the central market if they bid the high dollar.
Senator NORRIS. I suppose you have your agent at the stockyards and he sells to anybody from whom he can get the most money?
Mr. Young. I will make this statement as a matter of record, and will say this--that we have found that on the St. Louis market, from a review of its operations since 1921-and that is when the Packers and Stockyards Administration went into operation—that the picture changed materially. In 1921, and up to and probably including 1925 and 1926, the operations on the St. Louis market, which is termed an order-buying market because there is more order-buying activity than there is packer buying, was a very active market. The packer buyers and their assistants would probably be the first on the market, as early as 6 o'clock in the morning, to find out where the good hogs were located in the commission pens on that market.
When the gong would ring at 8 o'clock there was a wild scramble to see who could get to the alley where the hogs were, for competitive bidding. As direct marketing increased over the country, that activity dwindled. In 1927, 1928, and 1929 the operations have almost entirely reversed themselves. The packer buyer at the present time is the last man on the market. The order buyers are slow in getting their orders, and our market starts on a draggy basis around 8 o'clock and by 9 o'clock the eastern orders are probably all filled, and then the packer comes out at a lower basis. The lower basis is principally to establish what is termed a “packer market”, and your Department of Agriculture marketing records will show that the packer buyer is the bearish buyer on our market every day, unless he does not have sufficient direct
hogs to keep him off the market. That is the only time he is an active buyer—if he does not have sufficient direct hogs to keep him in the kill.
The principal thing that we notice in this is that the market as it is established today governs the buying as established tomorrow in direct or concentration points, and the packer is the bear on the market today to establish what they term a “packer market” to buy at concentration points tomorrow. In our section they won't buy at concentration points against the high price paid on the market. They will buy against the packer's buy, and your packer buy on the market is figured on an average of all the hogs they buy that day thrown together, stags, sows, good hogs, and indifferent hogs, and your average made. Then that establishes a price for them to go to the country tomorrow for concentration point buying.
Senator NORRIS. Let me interrupt you there. They go to the country tomorrow, we will say. That means, or does it mean, that the buyer goes out in the country to buy his hogs and buys them on the basis of that market that was established at the central market place in St. Louis the day before?
Mr. Young. Positively.
Senator FRAZIER. What grade of hogs do they buy out in the country?
Mr. Young. They buy a good grade of hogs out in the country at established mine-run price on the market, and leave the poorer grade of hogs to come back to the central market to make the market for next day's operations.
Senator FRAZIER. You spoke of having cold-storage plants in your organization, owning cold-storage plants. Do you have any packing plants for slaughtering beef and hogs?
Mr. Young. No, sir. We believe that the packer has a place in the picture, but we believe that his place is not in depressing livestock prices.
Now, we are against the interior plants, to this extent: That if the interior plant will use his position for the benefit of paying the producer the proper price that he can pay the producer, all well and good, but where he uses his position as an interior plant to undermine the markets at the populous centers, to hammer down the price paid to the producer, then we think that he should be regulated to the point that he should pay a comparative price.
Senator FRAZIER. How long are you going to concede that they have a place in the picture, as long as they continue this method?
Mr. Young. They have a turning down place in the picture.
Senator FRAZIER. Well, they buy as cheap as they can from the producer and keep the price down, and then sell to the consumer, of course, at a high price. There is too wide a spread. You recognize that, do you not?
Mr. Young. The picture is very plain. The interior man buys on the basis of the central market closest to his establishment. Your basic price is established in Chicago and it moves down according to your central market. He buys at a lesser price, say the difference between his point in Chicago or his point in Omaha.
Then we are at a very great disadvantage, particularly in the Corn Belt, relative to the raw-material freight rate being higher than the finished-product freight rate; consequently hogs on foot will cost the freight rate at a higher rate going from the point of shipment to Chicago than they do as a finished product going into Chicago, but the minute you leave Chicago that reverses itself.
Senator FRAZIER. Of course, that is part of the packer system.
Senator FRAZIER. But it is part of the packer system. There is a place for it.
Mr. YOUNG. Positively. I will say that there are unfair practices carried on at these direct-buying or packer plants, and as a citation of that, they give a favored buyer in the country the privilege of shipping to them and, of course, this means slaughtered first-class hogs, and they will give him the privilege of taking today's market, if he so sees fit, or he can take tomorrow's market when the hogs arrive, if he so sees fit. It is an unfair practice for that reason and I will cite you an example that will prove it.
At a certain point in Missouri two truckloads of hogs left there, shipped by a favored buyer in that locality. Both truckloads were to go to a packing plant at St. Louis. Through error on the part of the transportation company one load of hogs was delivered to the packing plant and the other was delivered to the National Stockyards, consigned to the same packer. When they were unloaded at the National Stockyards this packer, because they were not delivered to his plant in St. Louis, would not accept them. These hogs were turned over to a commission firm and sold, and brought the top of the market for that day's sales. When the man in the country found out what they brought, he put in a claim with the transportation company for 15 cents a hundred. The market that day was 15 cents a hundred lower than the previous day's market, consequently he chose to take the previous day's market because it was higher. The unfair practice of giving him the choice of 2 days' markets, which cannot be done on a central market, netted that man 15 cents a hundred more than the hogs actually brought, and the transportation company had to pay it because they had erred in making delivery where they wanted the hogs delivered.
Now, there is another unfair practice in the receipts of volume at these plants or concentration points. Take, for instance, veal calves. Veal calves are quite an item in our market, because we have an order buy market and the order buyers buy there to ship these calves into New York and eastern points for slaughter, against packers that want to buy them for local kill, and shipping also. The St. Louis plant of one of the packers receives anywhere from 600,000 calves
the first 2 or 3 days of a week. On one particular day that I have in mind one of the St. Louis packer's buyer, who is also a buyer on the established veal-calf market, was very active and really bullish, and the fact of the matter is he raised our calf market that morning because of the bad weather and the lack of information that he could get from the direct plant. The market had not been established more than half an hour until he came into our office and asked us if we would relieve him of his buy of calves on our market today, because, through private sources, he had received information that they had received around a thousand calves direct, and he didn't want to be bullish on the market, but wanted to establish his price to pay for those calves at a lower figure. Certainly we did not release him. We made him take the calves that he had bargained for. Consequently, on that particular day, instead of being a bearish buyer he was a bullish buyer and the direct calves sold at a high price, much higher than they would have been if he had had the calves on hand when the market opened.
Those practices should be regulated, and the Secretary of Agriculture does regulate central market prices, and all we ask is that the same fair regulation be put into those places. We do not ask that the farmer be deprived of the opportunity of selling his stuff at home if he so desires. That is his privilege.
Now then, as to this western cattle situation, those boys are perfectly willing to take the experience of experienced and high-priced salesmen on central markets to establish a price for them to ship their cattle west on, but they do not want to come in and help maintain that. They get the benefit of the operation but they do not want to come in and help maintain that price structure. And it is unfair. However, we do not contend that they should be kept from selling their livestock at home if they so see fit, but we think they are very unfair in coming in and opposing this bill when they use the price structure to actually base their sales on.
We are personally of the opinion that if this legislation can be so enacted as to regulate the control of livestock at these concentration points, private yards, stockyards, receiving plants, or whatever you want to call them, they will raise livestock to the producer fully $2 a hundred, and I think we can give you figures that will prove that.
Senator FRAZIER. When the Stockyards Act was passed originally the packers got around it by establishing these direct markets. Do you think they will find some way to get around this law if we pass it?
Mr. Young. Well, they are just about as good at getting around as anybody I know of [Laughter). I have no fault to find with the packers. They are running their business on a business basis. The thing we contend is that the same regulations that we must sell by should be put into their plants that they must buy by. That is the thing that we are contending. There is an unfair advantage and a very unfair advantage now relative to the price structure. The Government recognized the price structure when the prices were fixed on Government basis. They took Chicago as a basis and melted that down proportionately as to south and west, according to the difference between Chicago and those points. Now, certainly, if they are going to ship more direct hogs into Chicago against your market, Chicago is not a fair price basing center, and it is going to get worse as the days go on.